Everett J. Horton & Co., Inc. v. Grinnell

• Citation: 199 A. 315
• Decision Date: 13 May 1938
• Docket Number: No. 7912.,7912.
• Parties: EVERETT J. HORTON & CO., Inc., v. GRINNELL.
• Court: Rhode Island Supreme Court

199 A. 315

EVERETT J. HORTON & CO., Inc.,

v. GRINNELL.

No. 7912.

Supreme Court of Rhode Island.

May 13, 1938.

Exceptions from Superior Court, Providence and Bristol Counties; Walter Curry, Judge.

Action in assumpsit on the common counts by Everett J. Horton & Company, Inc., against Frank F. Grinnell to recover $900.38 for services rendered. On plaintiff's exception to decision for plaintiff for $22.11.

Exception sustained and case remitted to the superior court, with direction to enter judgment for plaintiff for $900.38.

Littlefield, Otis & Knowles and James B. Littlefield, all of Providence, for plaintiff. McKiernan, McElroy & Going, Peter W. McKiernan, John C. Going, and John S. F. McKiernan, all of Providence, for defendant.

CAPOTOSTO, Justice.

This is an action in assumpsit on the common counts in which the plaintiff claims $900.38 from the defendant for services rendered. The case was tried before a justice of the superior court sitting without a jury who gave decision for the plaintiff for $22.11. The case is before us on the plaintiff's exception to this decision and on certain other exceptions taken by it during the trial.

The plaintiff is an investment corporation unconnected with any stock exchange. In addition to its regular business it also undertakes to act as agent and adviser, when so engaged by a customer, in the purchase and sale of securities through stockbrokers connected with the various stock exchanges.

In the spring of 1935, the defendant was trading with the plaintiff in unlisted securities for cash. He was also buying and selling securities listed in the stock market "on margin" through the office of Hornblower & Weeks in this city, hereafter referred to as Hornblower, in which field the defendant had been operating for some 30 years. In May of that year, Roy W. Cole, a representative of the plaintiff, in talking with the defendant, expressed the opinion that the latter was paying too much interest, at the rate of 5 1/2 per cent., on his account with Hornblower, and suggested that he might be able to secure better terms elsewhere. The defendant, being of the same opinion, asked Cole to "look into it." Shortly thereafter Cole recommended that the defendant transfer his account to Harris, Upham & Co., hereafter referred to as Harris, a brokerage house of Wall Street in the city of New York, which would carry his account at a rate of interest not to exceed 4 per cent. The defendant personally investigated the standing of this firm and, finding it a brokerage house "in very good standing," he decided to transfer his account from Hornblower to Harris. It is important to note at this point that the defendant exercised his own judgment in all his dealings with Hornblower, and that Harris was strictly a commission house and carried out orders on the sole judgment of its customers.

Everett J. Horton, an officer of the plaintiff corporation, testified that on May 16, 193'5, the defendant came to his office and said that he had decided to transfer his account to Harris and that he wanted the plaintiff to manage that account for him; that the defendant at that time signed a letter addressed to Harris in which he said, "* * * herewith is letter addressed to Hornblower & Weeks instructing them to deliver to you upon payment of the debit balance, the securities now carried on my account, * * *" and that to his, Horton's, recollection, he had no conversation with the defendant on this occasion about the terms under which the plaintiff would manage the defendant's account with Harris.

On May 23, 1935, the defendant signed a "Customer's Agreement" with Harris, which contains many provisions not pertinent in the instant case. Under this agreement, Harris was to send all statements to the defendant "Address —Tiverton, R. I." The defendant's account was duly transferred from Hornblower to Harris, and the latter firm immediately began to buy and sell securities for that account upon orders from the plaintiff, which in turn acted in such matters solely on the judgment of Horton. Statements of this account were regularly sent by Harris and received by the defendant in Tiverton.

Horton further testified that in a talk with the defendant at his, Horton's, office in July, 1935, he explained to him three ways in which the plaintiff might be compensated for its services in managing the defendant's account with Harris, the most simple and economical one being a charge of one-eighth of a point or 121/2 cents a share "in and out," meaning a charge of that amount on the purchase or sale of each share of stock or other security. The defendant, according to Horton, made no protest against the one-eighth point charge on purchases, but thought the plaintiff should waive the one-eighth point charge on sales, to which Horton replied that one-eighth of a point on both purchases and sales "was the arrangement we had with all of our other customers doing business with us on this basis, and that is the way we would do business with him, or not at all, we would make no exception to Mr. Grinnell." Although Horton did not remember what answer the defendant made, the evidence is clear that from the time of this conversation in July, 1935, until the plaintiff and defendant severed relations, on or about March 31, 1936, when the defendant again transferred his account to Hornblower, Horton continued to use his sole and independent judgment in dealing with the defendant's account with Harris.

The transcript is full of details relating to the numerous transactions in connection with defendant's account with Harris. The sum total of these transactions is that when defendant's account was transferred from Hornblower to Harris in May, 1935, the defendant's equity in the account was $16,945.57, and that when the account was again transferred from Harris to Hornblower, in March, 1936, this equity had increased to $41,559.49. There is' no dispute on this point.

The defendant in his testimony claims that he never agreed through Horton to pay the plaintiff any compensation for its services in managing his account; that he did not have any conversation with Horton in July, 1935, respecting the plaintiff's compensation for such services, although he frequently visited the plaintiff's office and talked with Horton on other matters during the time that he had his account with Harris; that his first information of any claim for compensation by the plaintiff, on a basis of "one-eighth going and coming" on his account with Harris, came from Cole, when, in July or August, 1935, the latter delivered to him, at his home in Tiverton, some securities that he had purchased "over the counter" from the plaintiff; that his reply to Cole was: "Nothing doing, Mr. Cole. I am paying the regular commission on this stock I am buying and selling in New York, and I don't propose to pay two commissions. * * * Rather than to pay two commissions I will change it (his account) back to Hornblower & Weeks again"; and that Cole replied: "Forget it." The defendant's wife testified to the same effect respecting this conversation with Cole.

The defendant further testified that his understanding with Horton from the very beginning was that George G. Bass of the Harris firm, whom he did not know until he called on him in New York in November, 1935, would have the "discretionary control" of his account with Harris, and that in his talk with Bass in November the name of Horton was not even mentioned. On this point, Horton testified that, as he generally carried on the defendant's business with Harris through Bass, he gave the defendant a letter of introduction to Bass in November, 1935. The defendant makes no reference to this letter in his testimony.

Bass's deposition was taken in behalf of the plaintiff in New York on July 8, 1936 after due notice to the defendant, who did not appear at the taking of the deposition, either in person or by counsel. In this deposition, Bass testifies that he met the defendant in November, 1935, when the defendant called at the office of Harris with a letter of introduction "dated November 14, 1935, from Everett J. Horton, treasurer of the plaintiff, who personally gave our firm the orders for the sale and purchase of securities for Mr. Grinnell's account"; that he had a short general conversation with the defendant in which the latter "expressed himself as very well pleased at the way Mr. Horton and our firm had conducted his account and hopeful that we would continue to do as well."

After an extended examination of the defendant, the trial justice was apparently in doubt as to just how or when Bass was given "discretionary control" over the defendant's account, for almost at the very end of this examination we find as follows:

"The Court: What I am trying to get at is, where did this authority of giving Mr. Bass discretionary power first originate? Who first thought of that?

"Witness: It was me that thought of that authority.

"The Court: You mean by that, you suggested to Mr. Horton, or to Mr. Cole, that Harris-Upham Company should have this power?

"Witness: No, Mr. Bass should have this power.

"The Court: Mr. Bass?

"Witness: And my reason for that was, as I told you, I couldn't be located. Sometimes those things (fluctuations in the value of securities) happen within an hour, or two. That was the practical way to do it. I was satisfied for him to do it"

The testimony is undisputed, in fact it was given by an employee of Hornblower who was called as a witness by the defendant, that it is customary with stockbrokers to do business with their customers in one of three ways. First, on a cash account, the securities being usually "taken up" by the customer in two days;...