Gheen, Morgan & Co. v. Johnson

• Decision Date: 07 May 1879
• Citation: 90 Pa. 38
• Parties: Gheen, Morgan & Co. <I>versus</I> Johnson.
• Court: Pennsylvania Supreme Court

90 Pa. 38

Gheen, Morgan & Co. versus Johnson.

Supreme Court of Pennsylvania.

March 24, 1879.

May 7, 1879.

March 24th 1879.

Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, WOODWARD, TRUNKEY and STERRETT, JJ.

Error to the Court of Common Pleas of Chester county: Of July Term 1877, No. 13.

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Charles H. Pennypacker, John J. Pinkerton and Wayne MacVeagh, for plaintiffs in error.—In view of the fact that Gheen, Morgan & Co., living at West Chester, gave a letter of introduction and of guaranty for Johnson to Gilbough, and did nothing else except receive advices of the transactions, while Johnson managed his own transactions with Gilbough personally, it is confidently submitted that the relation of principal and agent existed between Johnson and Gilbough to precisely the same extent and with precisely the same consequences as attached to the same relation between Gheen, Morgan & Co. and Gilbough, and that there could be no responsibility on the part of Gheen, Morgan & Co. to Johnson for any default or negligence on the part of Gilbough.

In these transactions, Johnson unquestionably had two agencies employed, and it is not very important which is considered the principal agency, and which the ancillary or sub-agency.

As matter of fact, it is believed that the testimony proves Gilbough to have been the principal agent of Johnson in these transactions, and Gheen, Morgan & Co. only the ancillary agents; but as Gheen, Morgan & Co. were first employed, in order of time, it cannot make any difference, even if they are regarded as the principal agent, and Gilbough as the ancillary or sub-agent; for the doctrine is as well established as almost any legal doctrine can be established, that the first agent employed is not responsible for any alleged negligence of any ancillary or sub-agent employed by him about the same business, with the knowledge and recognition of the common principal: Story on Agency 247, 274, 407, 474; Whart. on Agency, sect. 247. There was not sufficient evidence to justify the submission to the jury of the question whether the deposit of margin by Gilbough with Bond, Moxey & Co., or the failure to exact a counter-margin, when the stock in question was rapidly advancing and the balance of the contract was largely in their favor, was, or was not, an act of negligence. The loss on the margin deposited with Bond, Moxey & Co., was an incident of the sale of the stock to them. There was no evidence in the cause that Gilbough committed any error or neglected any duty. His action was in conformity with the custom in making stock contracts. The defendants were entitled to an affirmance of their fifth point.

William B. Waddell and P. Frazer Smith, for defendant in error.—Gheen, Morgan & Co. were the agents of Johnson, and Gilbough was acting for them, as he was a member of the Board of Brokers in Philadelphia, and defendants were not. The relation of the parties is shown at the outset by the letter of introduction of May 16th 1876.

Gilbough followed explicitly the directions contained in this letter. He regularly advised Gheen, Morgan & Co. by telegraph and letter, of all that was done. His correspondence was exclusively with them, and they advised Johnson by letter. Gheen, Morgan & Co. opened an account current on their books with Johnson, showing the purchase and sale of stocks, and the profits arising therefrom were carried into their cash-books. These accounts were furnished by Gheen, Morgan & Co. to Johnson. Gilbough at no time furnished Johnson with any accounts, but always accounted to Gheen, Morgan & Co. for all profits on his transactions in Johnson's stocks.

Anong these credits was the item of "margin deposited with Bond Moxey & Co." This deposit was made by defendants. Bond, Moxey & Co. called on Gheen, Morgan & Co. through Gilbough for margins, and they were put up. Gheen, Morgan & Co. failed to require a margin from Bond, Moxey & Co., although, by the rules of the board, either party could call for margins at any time. Had Gheen, Morgan & Co. required margins from Bond, Moxey & Co. this loss would not have occurred. Gilbough discovered his error, and saw the force of this mistake when the market broke, for he then called upon Bond, Moxey & Co. for margins.

The object of margins being to secure the dealers from loss, it was the duty of Gheen, Morgan & Co. to protect their principal by requiring from Bond, Moxey & Co. a deposit or margin. They were bound to consider the contingency of a failure on the part of Bond, Moxey & Co. They knew the extent of their purchases, and therefore their greater liability. The measure of duty in this case was ordinary and reasonable care, and therefore what was negligence was a question for the jury: Philadelphia City Passenger Railway Co. v. Hassard, 25 P. F. Smith 367. So where the standard of duty is a shifting one: Glassey v. Hestonville Passenger Railway Co., 7 P. F. Smith 172. Where a higher degree of care is demanded under some circumstances than under others — where both the duty and the extent of its performance are to be ascertained as facts, the jury alone can determine what is negligence, and whether it has been proven: Chrissey v. Hestonville Railway Co., 25 P. F. Smith 83. Such being the law, the learned judge very properly left all the facts to the jury to determine the question of negligence.

Mr. Justice GORDON delivered the opinion of the court, May 7th 1879.

Were there any point raising the question of the legality of the transactions between the parties now before us, we must needs give this case but short shrift; for the evidence clearly reveals the fact, that the money claimed in this suit is the product of certain successful adventures in stock gambling. According to the statements exhibited by the defendants, the value of the stocks alleged to have been bought and sold for and on account of the plaintiff, amounted to some $20,000. For these stocks he paid not one dollar in money, and the only consideration of value which passed between the parties was the assignment of a four thousand dollar bond, which was executed by Johnson to the defendants, as collateral security, not for the stocks, but for certain margins by them advanced for him, and which bond afterwards, on...