Court Opinion

ID: 5182367
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:43:50.606267+00
Date Added: 2024-06-11T08:26:37.190772
License: Public Domain

Patterson, J.:
I concur in the conclusion at-which the court has arrived respecting the rejection by the referee of evidence offered by the defend*335ant, tending to show that the plaintiffs did not perform their full duty as brokers with reference to the bonds and stocks bought by them for the defendant, but I do not concur in the views expressed in the opinion of the court, nor in the inference to be drawn from them, respecting the general question of what constitutes a conversion by a broker of stocks and bonds bought by him on margins for a customer. In such transactions-the broker is under no obligation to purchase or take title to shares in the name of his customer. He may buy and take title in his own name and need not keep his customer’s stock separated from his own. (Horton v. Morgan, 19 N. Y. 170.) He may even sell the shares he bought for his customer without being chargeable with' a conversion (Caswell v. Putnam, 120 N. Y. 153), provided he keeps, subject to the order of his principal, an amount of stock of the same kind, equal to that purchased for his principal. The effect of1 these decisions is that the broker may use in his own business shares purchased on margin and held by him for advances, and he is bound only to be ready on demand to give his customer his shares or an equal number. He cannot, of course, purchase after a demand and speculate on his customer’s speculation, but he must always be in readiness with shares actually available in the course of business for delivery from the date of the execution of liis customer’s order. That does not curtail liis right to use the shares in his business and until demand is made.
What is meant by the phrase “ having always in his possession ? ” I do not understand it to be that he must have a certificate of shares in actual and continuous physical possession, hut that he must have shares always under his control, so that when, in due course of business, he is called upon, he can deliver without going into the market to buy. He does not convert the stock of his customer simply by using it in the ordinary way in which brokers conduct their business by borrowing money to carry all their customers’ stocks, pledging and repledging even in bulk from time to time according to the custom of their business and as the necessities of their transactions may require, and to enable them to hold the shares, so long as they have shares under their control and available to perform their specific contracts with their customers when called upon to do so. But the offer of the defendant is broad enough even to *336cover this view of the broker’s relation .to his client. The words used in the offer are the same words employed by courts in speaking of the duty of brokers, and should' be construed in the same way. I, therefore, concur in the reversal of the judgment.
Judgment reversed, new trial ordered before another referee to be appointed in the order entered hereon, with costs to appellant to abide event.