Court Opinion

ID: 5208052
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:06:37.590146+00
Date Added: 2024-06-11T08:27:19.474362
License: Public Domain

McLaughlin, J. (dissenting):
This is an appeal from a judgment in favor of plaintiff in an action for conversion. The defendants are stockbrokers and on the 19th of November, 1900, one Earle Carley had three speculative accounts with them, designated respectively “ Earle Carley Account,” “ Earle Carley Short Account ” and “ Earle Carley Special.” On that day Carley requested defendants to purchase for him certain stocks on margin, which was done, and notice given to him. He then requested that such purchases be carried by defendants under the name of “ Earle Carley, Trustee.” This the defendants absolutely refused to do, or to carry any such.account on their books, and it was then agreed, as the court has found, that the said purchase and future purchases for that account “ should be. carried on by the defendants with Carley personally and individually” in an account designated “Earle Carley No. 2.” In payment of the margin for the first purchase in the “Earle Carley No. 2” account,' Carley gave a check of plaintiff’s for $2,500, payable to Carley and indorsed by him. He testified that when he delivered this check to one Hamill, who represented defendants, he said to him, “ Now you can see whose account that is. There is the check,” but this is denied by Hamill. In December, 1901, all Carley’s accounts except “Earle Carley No. 2” required further margins, and upon Carley’s failure to make the required advances the defendants proceeded to close out his accounts. He then, for the first time, insisted that the “Earle Carley No. 2” account was a trust account for plaintiff, and that the defendants had no right to sell the stocks held thereunder, or to consolidate that account with the others. The defendants, notwithstanding, sold the stocks and paid over to him the balance, after combining all four accounts, of $1,048.54, Carley giving a receipt releasing them from any claims he might have, especially any in connection with the four accounts, and “ ratifying and confirming all acts heretofore done by said firm in respect to the closing of the said several accounts with them and the sale and disposition of the various securities by them for the aforesaid several accounts.” The' plaintiff subsequently brought this action for the conversion of the stocks held by defendants under the “ Earle Carley No. 2” account. The trial court found that the defendants knew, or should have known, that Carley was carrying *668this account as trustee for plaintiff; that the stocks were plaintiff’s property, and he was, therefore, entitled to recover on the basis of the highest price of the stocks within thirty days after the sale; and gave judgment for the plaintiff in the sum of $3,146.47, with interest, from which defendants appeal.
The defendants purchased .the stocks for Carley. They refused absolutely to deal with him as'trustee. They dealt with him only as principal. This was understood by him and the defendants. He gave all the orders for buying or selling stocks; managed all the accounts as he saw fit, and on one occasion, at least, transferred stocks from the “ Earle Carley Ho. 2 ” account to one of his other accounts. These facts are not disputed and the court has so found. The first check for $2,500, signed by plaintiff and payable to Carley’s order, was no notice whatever to defendants of plaintiff’s inter-' _ est; on the contrary,- the presumption was that the check belonged to Carley, inasmuch as it was made payable to his order. (Timpson v. Allen, 149 N. Y. 513.) Hor do I think that Carley’s statement, when he turned over the check —■ assuming that it was made ■—■ was sufficient notice to bind the defendants. This is not a case of trust relationship at all, so far as defendants were concerned. In opening the. account and thereafter making purchases for it, Carley was, as between himself and, this plaintiff, his agent, but as to the defendants, he was a principal. They had refused to and did not deal with him in any other way.' The notices of the purchases and sales of securities were sent to Carley and by him sent to plaintiff without the knowledge of defendants. These showed that the account was in Carley’s individual name and the plaintiff made no objection to it, nor did he in any way suggest to the defendants until after the. accounts were closed that that account belonged to him or that he had any interest in it. The court has found as a fact that he had no talk with the defendants until after the accounts were closed and the balance paid to Carley. Having acquiesced in the arrangement, neither plaintiff n'or, Carley is in a position to claim against defendants that ■ the Ho. 2 account could not he charged as a personal account of Carley’s when otherwise the rights of the defendants would be prejudiced. And it appears, when the stock was sold, the defendants’ claim against Carley on the other three accounts would not have been satisfied if the Ho, 2 account *669had not been closed. The defendants, having been permitted and induced to act and deal with Carley in ignorance of the plaintiff’s interest or rights in the transaction, • had the legal right to insist that the entire dealings should be closed as if Carley only had been interested. The plaintiff permitted Carley to act, not as an agent or trustee, but as an individual without disclosing his true position, and the defendants by reason of that fact had the right to hold him to the position he was permitted to assume as regards any claim made by plaintiff growing out of the transaction. As was said in Read v. Jaudon (35 How. Pr. 303): “ The case in this regard is like that of principal and agent where the agent is permitted to act and does act in his own name without disclosing his agency. In such case he may be treated as principal and the right of set-off and all other equities attach as if he were in fact the principal and alone interested in the transactions, and although the principal may step in and assert his rights he will be held to take the place of his agent, and to have no other rights than those which his agent cbuld have enforced had he been principal instead of agent.”
Hot only this, but Carley could at any time have authorized defendants to sell the stock which had been purchased for the “Earle Carley Ho. 2” account. This fact is conceded. Therefore, when he accepted the proceeds of the sale and signed the receipt, he expressly ratified the sale, and whether or not it be held that plaintiff might maintain an action to recover the proceeds of the sale he certainly cannot maintain an action for conversion of the stock. The court found that, “ at the time of the said payment to Carley and at the time of the delivery of said receipt and release, there was no termination of any trusteeship or agency in said Earle Carley, if any existed,” having previously found that such trusteeship did exist.
There is no legal ground upon which the judgment can be modi-, fied as directed by a majority of the court. The stocks were sold for $2,546.47 above all amounts owing to defendants thereon. After deducting the deficit from the other three accounts, $1,048.54 was paid to Carley. This payment can only be charged against the plaintiff on the theory that the stocks were legally sold. If they were converted by the defendants, then the plaintiff is entitled to recover the full amount found by the trial court, for the payment to Carley was entirely unauthorized,
*670■ But the whole judgment is wrong. The facts found show there is no legal foundation for it. A stockbroker, even in these times, has rights which the courts -will recognize and enforce. It. takes something more than a statement “ How you can see whose account that is.' • There is the check,” to make defendants liable to a third party of whom, at the time the statement was made, they had never heard, knew nothing, and when they had unqualifiedly refused to deal with any one except the party making the statement. Ho one would seriously contend that, if there had been a loss in this account instead of a profit, upon the facts here set out the plaintiff could be held liable therefor. The method adopted by the plaintiff was a convenient one for taking whatever profit was made and escaping liability in case of loss.
■ The judgment appealed from should be reversed and a new trial ordered, with costs to appellants to abide the event.
Ingraham, J., concurred. •