Mintz v. Hornblower & Weeks

• Decision Date: 16 April 1936
• Docket Number: No. 7165.,7165.
• Citation: 83 F.2d 32
• Parties: MINTZ v. HORNBLOWER & WEEKS.
• Court: U.S. Court of Appeals — Sixth Circuit

83 F.2d 32 (1936)

MINTZ v. HORNBLOWER & WEEKS.

No. 7165.

Circuit Court of Appeals, Sixth Circuit.

April 16, 1936.

Milton Schmidt, of Cincinnati, Ohio (William Henry Gallagher and McLeod, Fixel, Abbott & Fixel, all of Detroit, Mich., on the brief), for appellant.

Edward T. Kelley, of Detroit, Mich. (Monaghan, Crowley, Reilley & Kellogg, of Detroit, Mich., on the brief), for appellee.

Before HICKS, SIMONS, and ALLEN, Circuit Judges.

HICKS, Circuit Judge.

Suit by appellee, stockbrokers, against appellant, to recover $19,038.70, with interest, balance due upon guaranties alleged to have been made by him of the brokerage accounts of Beatrice Mintz Fink and S. Lemberg. Appellant denied liability and pleaded a set-off of (1) $37,695.66, being the amount of alleged usurious interest charges made by appellee against him; and (2) $9,410.79, a balance which had been used by it in reduction of the amounts claimed on the Fink and Lemberg guaranties.

At the close of the evidence each party moved for a directed verdict. The court sustained appellee's motion and denied that of appellant.

In 1928 appellant transferred his brokerage account from the J. S. Bache Company to the Detroit office of appellee; the latter paying some $800,000 in exchange for his securities. At about the same time trading accounts were opened by appellant with appellee in the name of Beatrice Mintz (later Mrs. Beatrice Mintz Fink), a daughter of appellant, and in the name of S. Lemberg, his half sister.

The alleged guaranties upon which appellee brought suit are printed in the margin as Exhibits A and B.¹

Under the rules of the stock exchange, a customer buying and selling through a broker was required to put up with the broker a margin of security, ranging at times from 20 to 33 1/3 per cent. of the amount which he owed the broker. When the securities declined in value below the specified percentage of the amount he owed, the broker was then entitled to sell them to protect himself. Avoiding unnecessary detail, it is sufficient to say that all three accounts were for the most part undermargined from the 1st of January, 1930, until the securities in each were sold by appellee on May 27, 1930. When the proceeds of the sale were allocated, the Beatrice Mintz Fink account owed appellee $27,756.58; the S. Lemberg account owed $692.91; and appellant's individual account had a balance of $9,410.79. Giving appellant credit for his balance upon the Fink and the Lemberg indebtedness, there was due upon the guaranties, if valid, $19,038.70, which with interest was the amount of the recovery against appellant.

It is urged that the Lemberg guaranty was without consideration, but there is substantial and uncontradicted evidence to the contrary. The Lemberg account being undermargined, on April 23, 1930, appellee called upon her for additional collateral, which she could not put up, and, for the purpose of obtaining more time for her, appellant requested appellee to accept his guaranty and carry the account for a while until it could be adjusted. Appellee did accept appellant's guaranty (Exhibit B), and in reliance thereon carried the account for 34 days, or until May 27, 1930, when it was closed out.

Forbearance is a consideration. Restatement of the Law of Contracts, § 75. In view of the fluctuating condition of the market, as indicated by the record, we cannot say as a matter of law that the extension was unreasonably short.

Appellant contends that the Fink guaranty (Exhibit A) was invalid because appellee was pledged thereby to transfer from the Fink account to appellant's account 2,000 shares of Reynolds Spring and 100 shares of Manhattan Electric Supply. The basis for the proposition is supposed to rest in the sentence, "In making this entry transfer the new balance together with all securities long to my account. * * *" (Italics ours.) It is conceded that these securities were never transferred, but in our opinion this neglect did not nullify the "unconditioned" guaranty incorporated in the last sentence of the instrument. The two obligations are unrelated. The instrument is neither indefinite nor uncertain. The guaranty does not depend upon the transfer, which, if it had been made, would have amounted to no more than a book-keeping entry. We are controlled by the instrument, and are unauthorized to write a nonexistent provision into it.

Appellant urges that the transfer was important. It was probably not very important to him, because there is substantial evidence that, as a matter of fact, appellant owned all three accounts. He was given statements of the Fink account monthly, and, of course, knew that the Reynolds Spring stocks and Manhattan Electric Supply stocks had not been transferred but remained in the Fink account until it was sold out. He never complained of the failure to make the transfer, but the consequences of the failure, whether of great or small moment, do not justify an unauthorized interpretation of the guaranty.

There was no error in the denial of appellant's motion for a verdict upon his claim of set-off or recoupment for usury. It is undisputed that one of the duties of appellee was to furnish the money with which to carry appellant's stocks. Richardson v. Shaw, 209 U.S. 365, 374, 28 S. Ct. 512, 52 L.Ed. 835, 14 Ann.Cas. 981. To meet his requirements in common with those of its customers generally, appellee had to...