Busch v. L. F. Rothschild & Co.

• Decision Date: 13 May 1965
• Citation: 259 N.Y.S.2d 239,23 A.D.2d 189
• Court: New York Supreme Court — Appellate Division
• Parties: Samuel Harry BUSCH and Rose B. Busch, Plaintiffs-Respondents, v. L. F. ROTHSCHILD & CO. and Leonard Heine, Defendants-Appellants.

Page 239

259 N.Y.S.2d 239

23 A.D.2d 189

Samuel Harry BUSCH and Rose B. Busch, Plaintiffs-Respondents, v. L. F. ROTHSCHILD & CO. and Leonard Heine, Defendants-Appellants.

Supreme Court, Appellate Division, First Department.

May 13, 1965.

Joseph L. Fishman, New York City, of counsel (Moses & Singer, New York City, attorneys), for appellants.

Harold N. Kaufman, New York City, for respondents.

Before BOTEIN, P. J., and VALENTE, McNALLY, STEVENS and STEUER, JJ.

STEUER, Justice.

Defendants appeal from an order denying their motion for summary judgment. We believe the motion should have been granted.

It appears that the plaintiffs had a margin account with defendants, stockbrokers. In March 1962 there were in the account 50 Rapid American bonds, together with other securities. On March 8, according to plaintiffs, they gave an order over the telephone to the defendant Heine, who was the customer's man handling the account, to sell these bonds and 300 shares of International Paper stock, also in the account. According to plaintiffs, Heine accepted the order to sell the International Paper stock (which was in fact sold) but he refused flatly to accept the order to sell the bonds. According to plaintiffs there was no further discussion on the subject, and neither then nor at any prior time was there any intimation why such an attitude would be taken. Some three months later, and after the market price of the bonds had decreased materially, plaintiffs made complaint. Defendants denied receipt of the order.

For the purposes of this motion the version claimed by the plaintiffs will be deemed to be the fact. Further, we will not consider defendants' defense of ratification. A stockbroker is an agent for the customer. Unless he accepts the agency he has no duty to execute any order and may refuse to do so (Meyer, Law of Stock Brokers and Stock Exchanges, changes, vol. 1, p. 249). The relationship is not changed by the fact that there is a margin account. The duty in such case is to give prompt notice that the order is refused.

There are few cases where a broker refused a particular order from a customer who has an account with him, but such as there are support the conclusion stated. In Galigher v. Jones, 129 U.S. 193, 9 S.Ct. 335, 32 L.Ed. 658, the plaintiff broker received an order to buy certain stocks and to sell others from a customer with whom he had a margin account. The order came by telegram. Plaintiff's office was in Salt Lake City; the customer resided in Virginia City. Plaintiff decided to refuse the order and wrote a letter to that effect. The court decided that he had not given prompt notice of his refusal--that he should have taken the same means to advise as the customer did in giving the order, namely, telegraph. The court said:

'A broker is but an agent, and is bound to follow the directions of his principal, or give notice that he declines to continue the agency. * * * The plaintiff should have given prompt notice that the objected, and declined to make the change. Telegraphic communication was used by the defendant, and no reason appears why the plaintiff could not have used the same.' (pp. 198-199, 9 S.Ct. pp. 336, 337.)

It would follow that had prompt notice been...