Berry v. Chase

• Decision Date: 11 June 1906
• Citation: 146 F. 625
• Parties: BERRY et al. v. CHASE.
• Court: U.S. Court of Appeals — Sixth Circuit

146 F. 625

BERRY et al. v. CHASE.

United States Court of Appeals, Sixth Circuit.

June 11, 1906

Leopold Lehman, for plaintiffs in error.

T. K Riddick, for defendant in error.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

LURTON Circuit Judge, .

The plaintiffs below were a firm of stockbrokers engaged in business in New York. The action was brought to recover an alleged loss arising upon a sale and purchase of Northern Pacific stock by direction of a firm of stockbrokers doing business at Memphis under the firm name of Schloss, Miller &amp Malone. The defendant W. J. Chase is sued as the undisclosed principal for whom the Memphis brokers acted. There was evidence tending to show that the plaintiffs sold on March 30, 1901, on a New York Exchange, 25 shares of Northern Pacific stock for and on account of Hogan & Co., a firm of Memphis stockbrokers. There was also evidence that before delivery Hogan & Co. dissolved, Hogan dying. Their unfinished business was transferred to the firm of Schloss, Miller & Malone. May 8th and 9th there was a great flurry in Northern Pacific stock, and plaintiffs called upon Schloss, Miller & Malone to deposit $20,000 to protect their previous short sale. Instead of doing this, they directed plaintiffs to buy on the market 25 shares against the 25 shares sold. This was done, at $325 per share. The difference between the price at which plaintiffs had sold and at which they bought was $5,762.50. This loss was realized May 9, 1901, and Schloss, Miller & Malone notified. Thereupon they notified plaintiffs that their principal was the defendant, W. J. Chase, and asked that the matter be taken out of their account and charged against W. J. Chase. Although thus notified, some time in May or June of 1901 that Schloss, Miller & Malone claimed to be acting for the defendant, Chase, and although requested to take the trades out of the account of Schloss, Miller & Malone, and charge the loss up to a theretofore undisclosed principal, plaintiffs did not do so, and in October of 1901, the account being still unsettled, they claim to have assigned the claim as a claim against Schloss, Miller & Malone to one John P. Darwent, with the right to bring suit in their name against said Schloss, Miller & Malone, or any undisclosed principal they might have. In November following Darwent elected to sue Chase, and this suit was started.

Jacob Berry & Co. had no reason to suppose that Schloss, Miller & Malone were not dealing for themselves, or, if they did, they had no knowledge of the undisclosed principal until after they had realized the large loss for which they sue. But the law is that, when there is an undisclosed principal behind, he may be made liable, although he was never given credit by the seller, provided the circumstances are not such as to make such a result unjust or inequitable. But one who has dealt with an agent cannot upon discovery of an undisclosed principal hold both the agent and the principal liable. He must choose between the two, and an election once made he must abide by it. Mechem on Agency, Secs. 695, 696, 698, 700; Fradley v. Hyland (C.C.) 37 F. 49; Tuthill v. Wilson, 90 N.Y. 423; Silver v. Jordan, 136 Mass. 319; Ahrens v. Cobb, 9 Humph. (Tenn.) 643; Curtis v. Williamson, 102 B.L.R. 57; Smithurst v. Mitchell, I El. & El. 622.

At the close of the plaintiffs' evidence, and after the defendant, W. J. chase, had testified, but before the defendant had notified the court of the conclusion of his evidence, the trial judge stopped the case, and instructed the jury to return a verdict for the defendant. Exceptions were duly reserved. The ground upon which the instruction was based was, as stated by the trial judge in his charge, as follows:

'Two questions present themselves to my mind that bar the plaintiffs' right of recovery. The first is that this stock was not bought at the direction of Mr. Chase. Schloss, Miller & Malone directed the buying of that stock at their motion. The second is, it is a Tennessee contract. Mr. Chase made his contracts and agreements here with Hogan & Co., and their contract was assumed or transferred by some process to Schloss, Miller & Malone. So far as Mr. Chase is concerned, he had no further connection with any brokers, or any contracts except to sell that stock, and if they sold it themselves, and it went to New York, it would be a New York contract between these brokers and the New York brokers, but as between Mr. Chase and the New York brokers it is a Tennessee contract, and, being a Tennessee contract, all that is necessary under the law of Tennessee to avoid liability is to show by the proof that one of the parties to the transaction treated it as merely dealing in futures, in which the party bought or sold, but was not to deliver or receive, and in this case I shall hold the plaintiff has no right of action. That being so, I direct you, gentlemen of the jury, to return a verdict for the defendant.'

For the plaintiffs in error, it is now insisted that the court erred in taking the case from the jury, and that there was some substantial evidence upon which the jury might reasonably have found that Schloss, Miller & Malone were authorized to buy as they did 25 shares of Northern Pacific stock on May 9, 1901, for account of W. J. Chase, and also some evidence that the contract was not a Tennessee but a New York contract. An attentive consideration of the evidence leads us to an agreement with this contention.

In passing upon a motion to instruct a verdict it is not the province of the judge to weigh the evidence. In Mt. Adams v. Lowery, 74 F. 463, 477, 20 C.C.A. 596, we gave elaborate consideration to the difference between the function of a judge when acting upon a motion for a new trial because the verdict is against the evidence and a motion to instruct for want of evidence. In the latter case we said:

'His duty is to take that view of the evidence most favorable to the party against whom the motion is made-- to direct a verdict-- and from that evidence, and the inferences reasonably and justifiably to be drawn therefrom, determine whether or not, under the law, a verdict might be found for the party having the onus. If not, he should, upon the ground that the evidence is insufficient in law, direct a verdict against that party. That there is a mere scintilla of evidence is not enough to prevent the withdrawal of the case from the jury. Such evidence is insufficient in law because so insufficient in fact.'

This has been many times reaffirmed and applied by this court. Travelers' Ins. Co. v. Randolph, 78 F. 754, 24 C.C.A. 305; Standard Acci. Co. v. Sale, 121 F. 666, 57 C.C.A. 418, 61 L.R.A. 337; Shugart v. Atlanta, etc., Ry. Co., 133 F. 505, 66 C.C.A. 379.

If we look to the evidence tending to show that Schloss, Miller &amp Malone had authority from the defendant to sell and buy 25 shares of Northern Pacific stock on the Exchange in New York for and on account of the defendant, Chase, we find: (1) That either Hogan & Co., stockbrokers at Memphis, or Schloss, Miller & Malone, who succeeded to their unfinished trades or deals with or in behalf of Chase, did sell on or about March 30, 1901, 25 shares of Northern Pacific stock at 94 and a fraction. (2) Whether the alleged sale of such shares were made by Hogan & Co. or by Schloss, Miller & Malone is not clear. So far as it is of importance, there was a question for the jury as to whether the sale was made by the one or the other. There was evidence that Chase sold to Hogan & Co. 25 shares of that stock at 94 and something. This Chase testified to. He also swore that when he did he had no such shares, and had no...