Barrell v. Newby
Decision Date | 05 January 1904 |
Docket Number | 990. |
Citation | 127 F. 656 |
Parties | BARRELL et al. v. NEWBY |
Court | U.S. Court of Appeals — Seventh Circuit |
On July 17, 1901, plaintiffs in error began their action at law to recover judgment for certain moneys claimed to have been advanced by them for defendant. An answer was filed to which a demurrer for want of facts was addressed. On the overruling of the demurrer plaintiffs declined to plead further, and the court entered the judgment to reverse which this writ of error was brought.
The complaint, in 14 paragraphs, and the answer, in 1, occupy 50 odd pages of printed record. A comparison of these pleadings with a synopsis thereof, presented in the brief of one of the parties and not questioned in the brief of the other, leads us to adopt the summary as complete and accurate.
'The complaint, in its several paragraphs, in one form or another avers the following substantive facts:
'To this complaint the defendant, after averring that all and singular the fourteen paragraphs of complaint referred to one and the same transaction, set up as a defense that the plaintiffs' claim arose out of the following facts, and not otherwise.
'First. That on and prior to the 7th of May, 1901, plaintiffs were stockbrokers, engaged in buying and selling stocks on the floor of the New York Stock Exchange, with their principal office in the city of Chicago.
'Second. That on and prior to said 7th of May, 1901, one Newton Todd was a stockbroker in the city of Indianapolis, engaged in buying and selling stocks for his customers.
'Third. That on said date this defendant ordered said Newton Todd, as such broker, to sell for him one hundred shares of the common stock of the Northern Pacific Railway Company on the New York Stock Exchange for the price of $145 per share; that he was not then the owner of such shares, but expected and intended thereafter to purchase the same at a lower price in time to close the transaction, 'which fact was well known to said Todd and to the plaintiffs.'
'Fourth. That such sale was what is familiarly known among stockbrokers as a short sale, which is executed under the usages and customs of stockbrokers in the manner following, that is to say: If the broker accepts such an order, he at once proceeds to execute the same by selling the amount of stock ordered to be sold on the floor of the New York Stock Exchange; that by the established rules, customs, and usages of the brokers in dealings on said New York Stock Exchange, stocks so sold, in the absence of an express agreement to the contrary, must be delivered on or before the hour of 2:15 o'clock on the next succeeding business day; that after the broker has thus sold said stock it then becomes his duty to borrow the number of shares of the stock so sold for the benefit of his customer, and to deliver the same to the purchaser under such sale; that it is the further duty of such broker to keep such stock borrowed until such time as the customer shall see fit to purchase and furnish such broker with the stock, to be delivered to the person from whom he has borrowed the same, unless such broker shall find it impossible to continue the borrowing of such stock, and gives his customer notice thereof; but such duty on the part of the broker is always conditioned upon the fact that the customer shall, upon reasonable notice and demand, from time to time deposit such sum or sums of money with such broker as will fully protect him from all danger of loss or harm by reason of the increase in the market price of said stocks on said New York Stock Exchange.
'Fifth. That at the time of giving such order, and at all times thereafter, the defendant had in the hands of said Todd moneys and other securities which afforded him ample protection in the execution of such order, in the borrowing of such stocks, and in carrying them.
'Sixth. That thereupon said Todd accepted said order, and in his own name, according to the established usage and customs among brokers ordered the plaintiffs to sell said one hundred shares of stock of the New York Stock Exchange at $145 per share, he not then owning said stock, but expecting to buy the same at a lower price in time to close the transaction, as was well known to the plaintiffs.
'Seventh. That the plaintiffs accepted said order, executed the same, borrowed the stock, and paid $100 borrowing charges.
'Eighth. That thereafter, by reason of the rapid advance in the price of the stocks, the plaintiffs were required to advance and pay, and did advance and pay, in the purchase of said stock, for the purpose of delivering the same to the person from whom they had borrowed it, the sum of $55,500 over and above the amount received by them on such short sale, and the further sum of $2 for revenue stamps, and that for their services they were entitled to a commission of $25.
'Ninth. That it is the universal rule, custom, and usage among brokers dealing with each other, in the first instance to look to the other broker engaged in the transaction for the performance thereof and for their damages in event of nonperformance.
'Tenth. That on the 10th day of May Todd informed the plaintiffs that he had acted as broker for the defendant in the transaction.
'Eleventh. That after Todd had thus informed the plaintiffs, and after the plaintiffs well knew that Todd, in ordering the sale of such stock, was acting as agent for the defendant:
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