Court Opinion

ID: 6236112
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:32:54.785688+00
Date Added: 2024-06-11T08:58:03.296397
License: Public Domain

Mr. Justice Gordon
delivered the opinion of the court,
Were there any point raising the question of the legality of the transactions between the parties now before us, we must needs give this case but short shrift; for the evidence clearly reveals the fact, that the money claimed in this suit is the product of certain successful adventures in stock gambling. According to the statements exhibited by the defendants, the value of the stocks alleged to have been bought and sold for and on account of the plaintiff, amounted to some $20,000. Eor these .stocks he paid not one dollar in money, and the only consideration of value which passed between the parties was the assignment of a four thousand dollar bond, which was executed by Johnson to the defendants, as collateral security, not for the stocks, but for certain margins by them advanced for him, and which bond afterwards, on settlement, was reassigned to him. Payment for these stocks was not required; the sale of them was a -mere pretence; not a single share was either tendered or demanded’; Johnson’s dealings were solely on margins, and for this purpose alone was the credit of the defendants loaned to him.
*45No authority is needed to show that courts of justice will not lend their aid to enforce a contract such as that above stated. Nevertheless, since the parties themselves have refused to raise the question of the legality of this transaction, I cannot see how we can convict the learned judge of the court below of error for not doing that which he had no opportunity of doing. Had the defendants chosen to confess judgment, I suppose the court could not have refused to enter it; and so, if the defendants refused to avail themselves of a defence which they might have had, the court cannot be blamed for not forcing it upon them.
We are thus forced to take the case as we find it, and to treat the transactions of these parties as lawful and valid. Our first inquiry, then, is, whether the instructions of the court as to Gil-bough’s agency, were or were not correct ? For whom was Gil-bough operating ? Who was his principal, and to whom did he account? The letter of introduction of May 16th, which-Johnson bore from the defendants to Gilbough, of itself answers these questions. “This will introduce you to Mr. John R. Johnson, of Downingtown. Any orders he may give you, please execute on our account, and advise us.” His orders were to be executed for them; on their, not his, account, and they were to be kept advised. The reason for these instructions is obvious: Johnson was their customer; they were brokers in West Chester, and in order to conduct the business in which Johnson intended to engage, it was necessary that they should have a correspondent who was a member of the Board of Brokers in Philadelphia. Hence it was, as we find by the subsequent dealings of the parties, that Gilbough obeyed the instructions of Gheen, Morgan & Co. to the letter. He fulfilled Johnson’s orders in the purchase and sale of stocks, but he reported to Gheen, Morgan & Co., and made his calls upon them for the necessary margins, and they, in turn, reported to Johnson and made their calls- upon him.. Gilbough never recognised Johnson as his principal, and if he in anything obeyed the orders of Johnson, it was only by reason of the previous instructions of Gheen, Morgan & Co., and thus Johnson’s orders were, in effect, the orders of that firm.
But again, the defendants, in their accounts,- treat the plaintiff as dealing directly with themselves. He is charged with the stocks, commissions and interest, and he is credited with the proceeds of the sales. In these accounts the name of Gilbough nowhere appears, and whatever he may have received for his services, he received from the defendants, and not from the plaintiff. After thus assuming the responsibility of this whole business, they cannot ignore Gilbough’s agency and cast the responsibility of it upon Johnson, simply because, in pursuance of their instructions, Johnson’s orders were obeyed in the sales of stocks. These orders may have some force, as bearing upon the question of Gilbough’s negli*46gence, but not otherwise; and even as to this, they amount to no more than if given directly to the defendants. On this branch of the case we have no fault to find with the rulings of the court.
The final, and only remaining question for consideration is the answer to the defendant’s fifth point. The court was asked to charge, that if, in pursuance of a call for margins on stock sold for and on the order of the plaintiff, he deposited money or securities to be applied in that way, there could be no recovery for the amount of the margin so deposited and applied. The answer was, “ this point is true, unless it appears that the money was lost through the negligence of the defendants, or an agent employed by them about the business.”
This answer assumes that there was evidence sufficient to charge the defendants with negligence in the conduct of the plaintiff’s business. We are obliged to say that we have not been able to discover any such evidence. According to the evidence of Gilbough and the statement of the defendant in error, four hundred shares of Iiestonville had been sold short, on Johnson’s account, to Bond, Moxey & Co., to be delivered within sixty days, seller’s option, at $35 per share. As this stock soon after commenced to rise in the market, Bond, Moxey & Co. made a call upon Gilbough for margin, and he, thereupon, deposited with them some $2500. For the amount of this margin, lost through the failure of the firm above named, this suit is brought. There was nothing irregular in the transaction itself; it was quite proper, under the circumstances, for the one party to call a margin and for the other to furnish it. It was only by thus meeting the call for margin that the contract upon part of Johnson could be maintained, for, as he had no stock, he could'not meet the emergency by a tender. Had, then, Bond, Moxey & Co. remained solvent the transaction would have been unexceptionable, though the margin had all been consumed by the rise in the price of the Hestonville stock. Thus, the matter resolves itself into the question, whether tbe defendants were responsible for the insolvency of Bond, Moxey & Co.; ought they to have provided for a contingency such as this ? In this transaction it was their duty to exercise reasonable care, such as a prudent man would exercise in and about his owm business. Did they or their agent exercise such care ? There does not appear to be any evidence to the contrary. For all that appears, these parties were perfectly good when the contract was made and the money, for the margin, deposited with them. As matters then stood, it does not appear that there was the slightest degree of imprudence in trusting them with this amount of money, and the more so as the balance on the contract was then in their favor. It is true, according to the testimony of Mr. Maris, Gilbough might have called for a counter-deposit; he says, however, that when the contract has been running for some time, and there is a balance in favor of one *47party or the other, the party in whose favor the balance is, will frequently call for a margin without making a deposit himself. He further says, that if stock is sold on seller’s option, and the stock advances, the purchaser will, in that event, call a margin in order to insure a delivery of the stock at the end of the time. It would thus seem, that these deposits are intended to insure an execution of the contract, and not to provide against the contingency of insolvency, and that, ordinarily, these calls are made by the party in whose favor is the balance. Following this general custom, Bond, Moxey & Oo. called a margin, and it was .regularly met by Gilbough’s deposit. To say, under such circumstances, that he should have required security, for the return of the deposits, from a firm in full credit, would be to say that he must have exercised a degree of care which would be equivalent to an insurance against possible loss. This, however, is asking too much of an agent. The law implies a promise from brokers, bankers, or other agents, that they will severally exercise competent skill and proper care in the service they undertake to perform, but it neither implies nor requires more than this: Wingate v. The Mechanics’ Bank, 10 Barr 108.
The judgment is reversed.