Balfour Maclaine v. National Exchange, Inc., Civ. A. No. 87-6184.
| Decision Date | 20 April 1988 |
| Docket Number | Civ. A. No. 87-6184. |
| Citation | 697 F. Supp. 835 |
| Parties | BALFOUR MACLAINE, INC. v. NATIONAL COIN EXCHANGE, INC. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Abraham Reich, Philadelphia, Pa., for plaintiff.
David Marshall, Norristown, Pa., for defendant.
The plaintiff brought this action to recover $66,558.20 it claims the defendant owes it as a result of plaintiff's trading silver futures on defendant's behalf pursuant to a commodity account. The defendant has filed a counterclaim alleging that the plaintiff not only breached certain fiduciary obligations it owed to defendant while acting as its agent but also omitted certain material facts and made certain material misrepresentations and is, therefore, not only responsible for the $66,558.26 but in fact owes defendant $40,000.00. The case was tried to the court sitting without a jury.
The court makes the following Findings of Fact:
1. Plaintiff, Balfour Maclaine, Inc. ("Balfour"), is a New York corporation with its principal place of business located at Wall Street Plaza, New York, NY 10005.
2. Balfour is a brokerage firm which is authorized to trade in, among other things, commodity futures.
3. Balfour also acts as a "futures commission merchant" ("FCM"). For the purposes of this action, we define a futures commission merchant in accordance with the Commodity Exchange Act as follows:
The words "futures commission merchant" shall mean and include individuals, associations, partnerships, corporations, and trusts engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market and that, in or in connection with such solicitation or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to bargain, guarantee, or secure any trade or contracts that result therefrom.
7 U.S.C.S. § 2.
4. Defendant, National Coin Exchange, Inc., ("National Coin"), is a Pennsylvania corporation, with its principal place of business located at 129 W. DeKalb Avenue, King of Prussia, Pa. 19406.
5. National Coin is in the business of buying and selling precious metals, including silver.
6. Robert Euler ("Euler") is President of National Coin and is its Chief Executive Officer in charge of its day-to-day business.
7. Euler has been involved in the silver futures market for 10 years. Euler has a screen in his office which quotes the actual performance of spot silver at any given time during market hours. Euler uses this screen to keep in daily contact with the spot silver market.
8. In 1980 Euler, on behalf of National Coin, opened a corporate commodity account with Clayton Brokerage Co. of St. Louis, Inc. ("Clayton").
9. In opening the account with Clayton, Euler, on behalf of National Coin read and signed a "Customer Risk Disclosure Statement." That statement was furnished pursuant to Rule 1.55 of the Commodities Futures Trading Commission. The statement provided, inter alia:
Euler testified that at the time he signed this statement, he was aware of paragraph three and appreciated the risk involved.
10. In 1980, Euler and National Coin traded silver futures through Clayton and lost money in doing so.
11. In October, 1983, Euler opened a personal commodity account with Clayton. Euler indicated on his Customer Application that, at the time, his annual income exceeded $50,000, his liquid net worth exceeded $100,000, his other net worth totalled $300,000 and he owned real estate valued at $900,000. Euler once again read and signed a "Customer Risk Disclosure Statement" which contained the identical provisions noted in Finding of Fact # 9.
12. In October, 1983, Euler traded silver futures through Clayton and again lost money in doing so.
13. Between 1983 and 1987, Euler did not trade in silver futures.
14. In 1987, Clayton was sold and its accounts were transferred to other brokerage houses, including Balfour.
15. Reg Regis ("Regis") had been employed by Clayton for a number of years prior to the time it was sold in February of 1987. After Clayton was sold, Regis joined Balfour where he was employed as a broker.
16. Euler testified that "some five to six months prior to April, 1987," Regis, on behalf of Balfour, contacted National Coin and Euler by telephone. Euler testified that during the telephone conversation, Regis told Euler that he (Regis) would like to do commodity business with Euler. Euler testified that he responded that he was not interested in doing commodity business at that time.
17. Euler testified that Regis continued to phone Euler on a monthly basis to see whether Euler was interested in buying silver futures. Euler testified that each time he told Regis that he was not interested in buying silver futures but that Regis should call when the market becomes "bullish".
18. Regis testified that the reason he contacted Euler was because he wanted to reactivate old Clayton brokerage accounts and he knew that Euler had experience in the commodities market as evidenced by National Coin's 1980 corporate account with Clayton and Euler's 1983 personal account with Clayton.
19. On or about April 3, 1987, Regis sent National Coin and Euler new account forms to complete and customer agreements to sign to authorize any transactions through Balfour.
20. Euler testified that on the morning of April 24, 1987, Regis called Euler and told him that "the precious metals market is very hot ... looks like old times ... many longs ... market is going up ... July silver contracts are as hot as a pistol ... you had better come to Balfour's branch office quickly."
21. Regis testified that between 1:45 and 2:00 p.m. on the afternoon of April 24, 1987, Euler came to Balfour's branch office.
22. Regis testified that when Euler arrived at Balfour's offices, Euler told Regis that the condition of the silver market reminded him of the long lines of the silver bull market of 1980-81 and that he (Euler) expected the price of silver to go up.
23. On the afternoon of April 24, 1987, Euler hurriedly signed a number of documents to authorize transactions on behalf of National Coin through Balfour. Among the documents which Euler signed was a Customer Application. The Customer Application, inter alia, stated:
I represent to BALFOUR MACLAINE, INC. that I recognize that futures trading involves a speculative activity in fast moving, highly leveraged markets where prices are subject to sharp fluctuations which may result in a severe loss of my capital. I agree to be responsible for making all final decisions as to transactions effected in my account and understand that each order I enter to buy or to sell must be complete as to Commodity. Quantity and Price, unless I have granted signed trading authority to another party to make these decisions for me. I am willing and able to assume the financial risks and other hazards of futures trading, and in consideration of your carrying this account, I agree that I will in no way hold BALFOUR, MACLAINE, INC. responsible for losses incurred through following its trading recommendations or suggestions.
24. On the afternoon of April 24, 1987, Euler, on behalf of National Coin, also signed a Commodity Customer's Agreement which provided, in part:
BMI Balfour will not be responsible for delays in the transmission of orders due to a breakdown or failure of transmission or communication facilities, or any other cause or causes beyond its reasonable control or anticipation.... Customer recognizes that trading in commodity interests involves speculative activity in fast moving, highly leveraged markets where prices are subject to sharp fluctuations which may result in a severe loss of capital. In consideration of BMI's carrying this account, Customer agrees that Customer will in no way hold BMI responsible for losses incurred through following its trading recommendations or suggestions since Customer must make all final trading decisions. Paragraph 5.
25. Paragraph 15 of the Commodity Customer's Agreement signed by Euler on behalf of National Coin provides that Balfour was entitled to be reimbursed by National Coin for legal fees and expenses if it was required to file suit against National Coin.
26. On the afternoon of April 24, 1987, Euler, on behalf of National Coin, also signed a "Risk Disclosure Statement", the provisions of which were identical to those contained in the two previous Risk Disclosure Statements Euler had signed in 1980 and 1983. See Finding of Fact # 11 27. Euler testified that he did not read any of these documents prior to signing them on the afternoon of April 24, 1987. He testified, however, that he understood the contents of each of the...
To continue reading
Request your trial
-
Merrill Lynch Futures, Inc. v. Sands
...in that the investor's experience and the nature of the investments in question must be considered. See Balfour Maclaine v. National Exchange, Inc. , 697 F.Supp. 835, 844 (E.D.Pa.1988). Merrill Lynch adduced evidence at arbitration showing that the information the broker withheld lacked mat......
-
Merrill Lynch Futures, Inc. v. Sands
...in that the investor's experience and the nature of the investments in question must be considered. See Balfour Maclaine v. National Exchange, Inc., 697 F.Supp. 835, 844 (E.D.Pa.1988). Merrill Lynch adduced evidence at arbitration showing that the information the broker withheld lacked mate......