Court Opinion

ID: 5500770
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:59:08.108998+00
Date Added: 2024-06-11T08:33:55.536468
License: Public Domain

Learned, P. J.
(dissenting.) The question in this case seems to narrow itself down to one point. The plaintiff was dealing in stocks through defendants as his brokers. By the terms of the agreement he was bound to keep with them 20 per cent, margin. He had sold through them 1,000 shares of Delaware, Lackawanna & Western stock “for the short account” at 120. On the 9th of August, 1882, defendants telegraphed plaintiff: “Send more margin, or advise us what to do.” On that day the stock was 143. Plaintiff answered: “Buy 2,000 at market, and stop loss with margin either way.” Defendants responded at once: “Don’t want to carry D., L. & W. on six points margin. May not be able to stop it. If it goes up, will buy in your stock when present margin is about exhausted. ” The plaintiff’s margin would be about exhausted when the stock should reach 149. A letter was written by defendants to plaintiff on this same day, stating the matter substantially as in the telegram, and asking if this met his approval. On the 10th of August the plaintiff and one of the defendants met in Saratoga, and had a conversation. There is a conflict between them as to what took place. Since the verdict of the jury, we must take the plaintiff’s version as correct. It is as follows: He complained to Mr. Wiley that the firm had not bought the 2,000 shares, and said: “If you want more margin I can give it.” Mr. 'Wiley advised him to stay short; saying: “I do not want to carry this stock and be long of it for anybody.” The plaintiff said to him: “Your telegram said that if the market went up you were going to cover my shorts. That would bring it up to 49 or 50. I do not want to leave it in any such position as that. If 1 am liable to be closed out here within a day or two, or where it gets there, I want to know it.” Mr Wiley replied: “We will carry the stock for you until you can get out all right. I had rather do it than buy it and be long of it at that price.” On the strength of this conversation the plaintiff avers in his complaint that defendants agreed to carry and keep good plaintiff’s said short sale and contract in such stock as long as plaintiff pleased. The learned justice who tried the action held that this conversation was not *625binding as a contract, for want of a consideration; but that it was a waiver by defendants of their right to a margin for the time, and that they could not go on and purchase to recover until they had given plaintiff notice to furnish the requisite margin. It will be seen that neither the complaint nor the plaintiff’s testimony states in terms any waiver of the right to require a margin. Both the complaint and the plaintiff’s testimony aver an absolute contract and promise on the part of defendants to carry the contract as long as plaintiff pleased, or at least till he could get it out all right; so that, if the complaint and plaintiff’s testimony are true, the defendants would never have any right to close the contract against plaintiff’s wishes, whether they demanded further margin or not; at least until plaintiff could get out all right. This, it would seem, would be when the stock dropped to 120. That appears to be the price at which plaintiff had sold the 1,000 shares short; and therefore the promise of Mr. Wiley, according to plaintiff, was that defendants would carry the stock until it should fall to that point, if plaintiff wished. Now, the learned justice held that the agreement was void for want of a consideration, as it was a mere naked promise on defendant’s part, for which plaintiff paid or parted with nothing. But he held that this was a waiver of the right to demand a margin until such right should again be obtained by another demand; so that the learned justice construes this conversation as if Mr. Wiley had said: “You need not send away any margin until further notice.” That is not the agreement, as plaintiff testifies. He says' that Mr. Wiley promised: “We will carry the stock for you until you can get out all right. I had rather do it than buy it, and be long in it at that price.” If defendant had bought the 2,000, they would have been entitled to call for a large margin from plaintiff. Bather than buy at that price these 2,000 shares, for which plaintiff would have had to advance a margin, the defendant Wiley agrees absolutely to carry the stock until plaintiff can get out all right, which is equivalent to saying “until the stock falls to 120,” if we are right in understanding that to be the price at which the transaction began. Then Mr. Wiley, as plaintiff testifies, said further: “If it should go up to 149 or 150, we will not close you out. We will carry the stock for you until you can get out all right. We will work it out for you, and you will yet make money.” Such language as this did not mean simply that defendant waived the demand for a margin already made, but might renew the demand the next day. It meant an absolute prom se to carry the stock, and work it out. And the reason is explained by plaintiff when he testifies that Mr. Wiley’s previous advice had proved incorrect, and therefore that Mr. Wiley may have desired to save plaintiff from loss. Now, it is undoubtedly true that an absolute agreement to carry the stock, to work it out so that plaintiff would make money, might carry by implication a waiver of the existing demand for a margin. But it included much more; and, if the whole agreement be held void for want of a consideration, on what principles can it be held valid as to a waiver implied in it? This statement of the conversation appears in plaintiff’s copy of a letter to Mr. Wiley, August 16th, (which defendants deny having received.) The plaintiff says in that letter that Mr. Wiley “said if I would stay short of it, you would take care of it for me until I could get out all right; and that I would make money by so doing. Belying on this, I went home satisfied.” That is, the plaintiff relied on defendants’ promise that they would take care of the stock until he could get out all right. If the understanding was that plaintiff was to advance the necessary margin when called on, the defendants would not be taking care of the stock for him. And that letter in which plaintiff repudiates a purchase made for him the 15th does not place such repudiation on the ground that there had been a neglect to call.for a margin, but on the ground of the promise to carry the stock. At the time of the conversation the plaintiff was under obligation, by the terms of the agreement with defendants, to send more margin. If defendants had said to him, *626“You need not send the margin” till we notify you again, and plaintiff .had waited for such notification, very possibly that would have been a waiver by defendants of their demand for margin, so that they could not have closed out the transaction until they had made another demand for margin. But instead of that the defendants, as plaintiff says, made a general promise to carry the stock for him until he should get out all right. If this was not binding because without consideration, we cannot substitute a different agreement,—a mere waiver which might be binding.