Aubin v. H. Hentz & Co.

• Decision Date: 07 May 1969
• Docket Number: Civ. A. No. 68-584.
• Citation: 303 F. Supp. 1119
• Parties: George J. AUBIN and Cameron E. Aubin, his wife, Plaintiffs, v. H. HENTZ & CO., a partnership; the Coral Gables First National Bank, a Florida banking corporation, Defendants.
• Court: U.S. District Court — Southern District of Florida

303 F. Supp. 1119

George J. AUBIN and Cameron E. Aubin, his wife, Plaintiffs, v. H. HENTZ & CO., a partnership; the Coral Gables First National Bank, a Florida banking corporation, Defendants.

Civ. A. No. 68-584.

United States District Court S. D. Florida, Miami Division.

May 7, 1969.

Ronald A. Shapo, of Pallot, Poppell, Horwich & Goodman, Miami, Fla., for plaintiffs.

Richard R. Booth, of Aronovitz, Zinn & Silver, Miami, Fla., for Hentz.

Myers, Kaplan, Porter, Levinson & Kenin, Miami, Fla., for defendant Bank.

Order on Motions for Summary Judgment

ATKINS, District Judge.

This cause came before this Court pursuant to motions by both plaintiffs and defendants for summary judgment. Decision has been rendered on all motions except those by plaintiffs George J. Aubin and Cameron E. Aubin and defendant H. Hentz & Co. pertaining to Counts I and II of the complaint. This order contains the decision on these counts.

Count I of the complaint alleges that in January and February, 1963, H. Hentz & Co. was acting in a fiduciary capacity for plaintiffs for the purchase and sale of stocks. During this period a bank twice loaned plaintiffs money on the written representation of defendant Hentz that it would deliver stock from plaintiffs' account, at their request, to secure such loans. The loans have not been paid by plaintiffs and defendant Hentz did not deliver the stock to the bank. Plaintiffs now seek a decree that the bank be required to obtain its satisfaction from defendant Hentz or in the alternative a judgment against Hentz for the amount Aubin must pay to the bank.

This relief is sought on the theory that defendant Hentz violated Title 15 U.S.C. § 78g(c) in its dealings with the bank. The statute prohibits a stockbroker from directly or indirectly arranging for the extension or maintenance of credit to or for any customer.

The application of § 78g(c) has been thoroughly briefed by both parties. It is apparent from recent decisions that this application is broad. Serzysko v. Chase Manhattan Bank, 290 F.Supp. 74 (D.C. N.Y., 1968); Moscarelli v. Stamm, 288 F.Supp. 453 (D.C. N.Y., 1968). However, a broker's liability for violation of this statute is not absolute. It is subject to traditional tort concepts of causation and contributory negligence. A plaintiff's instigation of or willful participation in a violation may preclude his recovery.

Defendant Hentz alleges that it did not violate § 78g(c). It points out that its only action concerning the loans was to write the bank letters at Aubin's request confirming his direction that certain stock be transferred as collateral. Hentz did not suggest that Aubin go to the bank or, under any definition of the word, "arrange" for the bank loans. These facts are well established.

Regardless of Defendant Hentz' innocence in view of these facts there remains a vital question which is unresolved. That is whether the stock which Hentz agreed to transfer to the bank was encumbered at the time the...