Ling v. Malcom

• Decision Date: 04 January 1905
• Citation: 77 Conn. 517,59 A. 698
• Parties: LING v. MALCOM et al.
• Court: Connecticut Supreme Court

59 A. 698

77 Conn. 517

LING

v. MALCOM et al.

Supreme Court of Errors of Connecticut.

Jan. 4, 1905.

Appeal from Superior Court, Hartford County; William S. Case, Judge.

Action by Robert A. Ling against George I. Malcom and others for damages for alleged unauthorized sale of stocks carried for the plaintiff upon a margin. Verdict and judgment for plaintiff, and appeal by defendants for alleged errors in the rulings and charge of the court and in denying defendants' motion for new trial for verdict against evidence. Reversed.

The complaint in this action is as follows:

"(1) The plaintiff, on or about January 1, 1903, contracted with the defendants for a commission to be paid to them to purchase for him shares of stock in certain corporations as he might direct, and to obtain for and loan to him such sums of money, in addition to the amount deposited by the plaintiff with them, as should be necessary to pay for said stock as purchased; the plaintiff then agreeing to furnish such additional security as they might require as collateral for such loan.

"(2) The defendants thereafter purchased for the plaintiff shares of stock as follows: [describing stocks].

"(3) In compliance with said agreement, the defendants advanced and loaned to the plaintiff, and on his account, sums of money from time to time amounting, in the whole, to the sum of——— dollars.

"(4) The plaintiff then pledged and delivered to the defendants, as collateral security for such loan, in addition to the stocks so purchased, the following: [describing them].

"(5) The defendants accepted said bond and stocks as collateral security, as afore said, and it was then and there understood and agreed between the defendants and plaintiff that if, at any time, the defendants desired further security for or payment of said loan, reasonable notice should be given the plaintiff, and he should have a fair opportunity to furnish additional security, or pay said loan, before such pledged securities were sold or in any manner converted by the defendants.

"(6) On the morning of June 10, 1903, the defendants advised the plaintiff by letter, received in due course of mail, that they required additional security for said loan to be deposited with them on or before the commencement of business on that day.

"(7) The plaintiff, on the same day, and before the commencement of business, delivered and pledged to the defendants, as such collateral security, twenty-seven shares of the stock of the National Fire Insurance Company, of the value of nine thousand dollars, which the defendants then and there accepted through their agent, Niles P. Hough, and then and there agreed to continue said loan to the plaintiff, and not to sell or dispose of said pledges, securities, or any part of them without reasonable notice to the plaintiff, and giving him a full and fair opportunity to pay said loan, or make other provision in regard to the same.

"(8) Notwithstanding said agreement and the pledge of said additional collateral security, the defendants, on the same day, without notice to the plaintiff, sold said collateral securities so pledged by the plain tiff, and converted the amount received therefor to their own use, and then returned to the plaintiff said twenty-seven shares of stock of the National Fire Insurance Company."

The defendants, by their answer, admitted that they purchased said stocks, and advanced money from time to time for the plaintiff;" that plaintiff pledged therefor the stocks and the bond described in paragraph 4, and that they were accepted by the defendants; and, in effect, denied the remaining allegations of the complaint.

Upon the trial to the jury the plaintiff offered evidence to prove these facts: The defendants were stockbrokers and members of the New York Stock Exchange, with a branch office, under the charge of Niles P. Hough, at Hartford, connected by private telegraph and telephone wires with the New York office. About January 1, 1903, the plaintiff, who resided in Hartford, entered into a contract with the defendants, by which, upon plaintiff's orders, they were to buy and sell stocks for him upon the New York Stock Exchange, they advancing 90 per cent. of the purchase price and the plaintiff the remaining 10 per cent. in cash or good collateral securities. The defendants were to hold the stocks so purchased in pledge, as security for their advancements; were to call for no other deposit of cash or collateral thereon, nor hold him in default unless and until his deposit in their hands should depreciate to within 3 or 4 per cent. of the market value of the stocks involved, in which case the plaintiff was to have ample notice and opportunity to make either in cash or good collateral the further deposit demanded of him, and only upon his failure to respond thereto and make the necessary deposit were the defendants to secure themselves by a sale of the pledged securities. The defendants were to receive one-eighth of 1 per cent. commission on the par value of stocks bought and sold, and interest at the rate of 6 per cent. per annum on money advanced. Having theretofore made and kept good the deposit required by said arrangement upon purchases made by defendants, and having, on June 4, 1903, been called upon by the defendants for a deposit of $3,000 to protect his margin, the plaintiff informed Hough that his account seemed all right as the market then stood, and that, if any fluctuation in values called for such action, he would make his account good. Hough replied that that was all right. In the afternoon of June 9th Hough notified the plaintiff that, unless he deposited with him additional margin to the amount of $10,000 before the opening of the stock exchange at 10 o'clock the next morning, the defendants would protect their account by selling out his pledged securities upon the opening of the market on said June 10th, and that formal notice would come by mail, which written notice the plaintiff received shortly before the opening of the stock exchange the next morning. When Hough gave such notice on the 9th, the plaintiff proposed that he would put up as collateral, and in satisfaction of the defendants' demands, 27 shares of the stock of the National Fire Insurance Company of Hartford, and asked Hough if that would be acceptable security, and was told it would be all right. On presenting said stock the next morning the" plaintiff called Hough's attention to the fact that it fell short of $10,000, being of the value of about $8,500. Hough said it was near enough, and received and accepted it in full satisfaction of the demand for margin. At plaintiff's request Hough immediately telegraphed the defendants that said stock had been turned over to him, and shortly before 10 o'clock received an answer that the stock was not acceptable, and demanding $10,000 In cash before the opening of the stock exchange, in default of which they would sell his stock for their protection, which message was immediately given to the plaintiff, who was still in Hough's office. The plaintiff declined to make any other deposit, and protested against the threatened sale of the stocks. The defendants, at the opening of the stock exchange on that day, sold the stocks held by them, excepting that of the collateral securities referred to in paragraph 4 of the complaint. They returned to the plaintiff three shares of the stock of the Wells Fargo Company, a $1,000 Hartford, Manchester & Rockville Tramway Company bond, and $155.54 in cash. Before 11 o'clock the sale was reported to the plaintiff at Hough's office, and said National Fire Insurance stock was offered back to him, which he refused to take. On the 13th of June the market value of the stocks so sold was about $7,000 more than at the time of said sale. During the remainder of the month of June the plaintiff was pecuniarily unable to repurchase said stocks at any price at which they were purchasable in the market The defendants claimed to have proved that by their agreement with the plaintiff he was required to keep his 10 per cent. margin good upon notice, and that the notice he...