Case Name: Nathaniel Leslie Carpenter, Joseph N. Carpenter, Atmore L. Baggot and Sterrett Tate, Plaintiffs, v. Frederick Augustus Heinze and Carlos Warfield, Defendants
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1914-07
Citations: 86 Misc. 553
Docket Number: 
Parties: Nathaniel Leslie Carpenter, Joseph N. Carpenter, Atmore L. Baggot and Sterrett Tate, Plaintiffs, v. Frederick Augustus Heinze and Carlos Warfield, Defendants.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 86
Pages: 553–558

Head Matter:
Nathaniel Leslie Carpenter, Joseph N. Carpenter, Atmore L. Baggot and Sterrett Tate, Plaintiffs, v. Frederick Augustus Heinze and Carlos Warfield, Defendants.
(Supreme Court, New York Special Term,
July, 1914.)
Contracts — agreements — performance of — corporations — pleading — counterclaim.
^y the terms of an agreement between plaintiffs, a firm of stockbrokers, and defendants, which grew oiit of certain transactions in'the buying and selling of the stock of a mining company and of two other corporations, defendants agreed to take over 60,800 shares of the mining stock held by plaintiffs at an agreed price, in blocks for future delivery, the whole delivery ex tending over several months. Defendants also agreed to “ clean up and settle ” an account standing on the books of a brokerage firm in the name of one of the defendants and another. Defendants deposited 15,600 shares of the mining stock to secure performance of their part of the contract. Later the stock of a newly organized ■ mining company in the same amount was substituted with the same force, and effect as the original deposit. One of the defendants took and paid for the 60,800 shares, as agreed, and then took up the matter of adjusting the broker- ' age account. Upon the refusal of defendants to pay the balance alleged to be shown against them on the books of plaintiffs, an action was brought to foreclose a lien upon the 15,000 shares of ■stock. Upon a consideration of the evidence, held, that plaintiffs were entitled to judgment as demanded in the complaint, subject to the deductions agreed upon, and that the counterclaim of defendants should be dismissed.
Action to foreclose a lien.
Blandy, Mooney & Shipman (Edmund L. Mooney, of counsel), for plaintiffs.
Stanchfield & Levy (Max D. Steuer, of counsel), for defendants.

Opinion:
Ford, J.
This suit is to foreclose a lien upon 15,000 shares of Ohio Copper Mining Company stock deposited with plaintiffs to assure performance of a certain agreement dated April 17, 1909, made between plaintiffs and defendants. That agreement grew out of transactions in the buying and selling of stock of the former Ohio Copper Company and also the stock of at least two other corporations.
The plaintiffs are stockbrokers. Of that firm Mr. Baggot was the one who had personal charge of the transactions in question. His original customer was one Lamar. Certain sales and purchases were made by plaintiffs on behalf of Lamar down to March 13, 1909. The defendant Warfield then came into the account. He was vice-president of the Ohio Copper Company, of which the defendant Heinze was president. Afterwards Lamar dropped out of the account and the defendant Heinze assumed his responsibility in that regard. " Trading " was for a time very active upon the " curb," and during that time many thousands of shares of ' ' Ohio ' ' changed hands. The plaintiffs admit that they were the brokers through whom the extraordinary volume of trading in ' ' Ohio ' ' was effected. There is no doubt that a " campaign " in " Ohio Copper " was skillfully inaugurated and adroitly conducted, but there is dearth of proof that plaintiffs were cognizant of its details. At the end of the " campaign " both plaintiffs and defendants found themselves in trouble. The plaintiffs held 60,800 shares of " Ohio," and the defendant Heinze who concededly was " behind Ohio," found himself in danger of having that large block of stock unloaded on the market. The testimony is not entirely clear as to which side made the first overtures for peace, but the fact is that they did come together and executed the agreement of April 17, 1909. By the terms of that agreement the defendants agreed to take over the 60,800 shares of " Ohio " held by plaintiffs at an agreed price, in blocks for future delivery, the whole delivery stretching over several months. In addition the defendants agreed to " clean up and settle the account now standing on the books of Carpenter, Bag-got & Go. in the name of Carlos Warfield and David Lamar, the said account, subject to adjustment at that time, being hereby assumed by F. Augustus Heinze and Carlos Warfield." The defendants deposited 15,000 shares of Ohio Copper Company stock to secure performance of their part of the contract. Later the stock of the newly organized Ohio Copper Mining Company in the same amount was substituted with the same force and effect as the original deposit. The defendant Heinze took over and paid for, at the agreed price, the 60,800 shares of " Ohio " and then took up the matter óf adjusting the brokerage account of the books of Carpenter, Baggot & Co. The immediate cause of this controversy is the refusal of the defendants to pay the balance shown against them on the books of the plaintiffs. Their refusal is based upon several grounds. Not only do they refuse to pay the balance, but they set up a separate defense founded upon duress and a counterclaim based upon false representations. As to the alleged duress and false representations I have little difficulty. Essential elements are obviously lacking in defendants' case upon both grounds. These having been thus eliminated, we return to the discussion of the account. Defendant Heinze contends: 1. That the plaintiffs have failed to prove any part of their affirmative case; 2. That the defendants' alleged assumption of the account is null and void, because there was no account to be assumed. As to these contentions, the whole series of events leading up to the commencement of this action and the books, letters, records and other papers and documents introduced in evidence and used upon the trial, and, particularly, the contract of April 17,1909, between plaintiffs and defendants, show that there was a real account and the only privilege remaining to the defendants was to go over it with a " fine tooth comb " and dispute any and every item in it which was not bona fides. That the defendants have done with this result. .
I am of opinion that the commissions claimed by the plaintiffs should be reduced by the amounts of commissions charged on the failed trades, including the 35,800 of March eighteenth and nineteenth; the 35,000 shares originally sold to defendant Heinze; the 8,800 shares of March twenty-second or thereabouts, and the final 60,800 shares which the defendant Heinze took over and paid for pursuant to the contract of April 17,1909. By consent the revenue disbursement on these failed trades is also to be deducted. The trades on behalf of the plaintiff Atmore L. Bag-got individually have given me no little trouble: I have not disregarded the strict accountability to which a broker is held in dealing with his customer's stock; but Mr. Baggot who had personal charge of the Lamar, Lamar and Warfield, and Heinze and Warfield account from the beginning to the end, took the witness chair, subjected himself to examination and cross-examination and testified, in effect, that what he did in respect of his trades in " Ohio " was with the knowledge and consent and even at the solicitation of his customer Lamar. The way in which the account was conducted naturally gives rise to a strong suspicion as to its bona fides. Nevertheless, Mr. Baggot from the witness chair gave a version of the transactions quite reconcilable with all the other evidence in the case. On the other hand, defendants called no witness who had personal knowledge of the transactions which culminated in the account. It seems that Lamar was within reach, at least for the purpose of taking his deposition. The broker Rothenberger was concededly in the city, and he surely could have thrown a strong ray of light upon some obscure phases of this case. No explanation was made by the defendants for their failure to produce' these witnesses upon the trial, both of whom had intimate personal knowledge of the transactions. Nor did the de fendants call the defendant Warfield, who, represented by counsel, appeared and actively defended. So, in my view, the weight of evidence is on the side of the plaintiffs, and I conclude that the trading of Mr. Bag-got in " Ohio " was no breach of any duty he owed his customer and the couple of thousand dollars profit he made in the trades are lawfully and rightfully his. The double commissions on the Borg and Weil cancellations ($634.75) should be deducted. The counterclaim will be dismissed and judgment will be given in favor of plaintiffs as demanded in the complaint subject to the deductions indicated in this memorandum and as agreed upon the oral argument.
Judgment accordingly.