Nash v. J. Arthur Warner & Co.

• Citation: 137 F. Supp. 615
• Decision Date: 30 December 1955
• Docket Number: 52-2,Civ. A. No. 52-1,52-3,52-4.
• Parties: Dennis H. NASH, Sr., et al. v. J. ARTHUR WARNER & CO., Inc., et al.
• Court: U.S. District Court — District of Massachusetts

137 F. Supp. 615

Dennis H. NASH, Sr., et al. v. J. ARTHUR WARNER & CO., Inc., et al.

Civ. A. Nos. 52-1, 52-2, 52-3, 52-4.

United States District Court D. Massachusetts.

December 30, 1955.

Harry Finn, Finn & Crane, Boston, Mass., for plaintiffs.

Spencer Pinkham, New York City, Joseph J. Gottlieb, Edward F. McLaughlin, Jr., Boston, Mass., for defendants.

WYZANSKI, District Judge.

1. These are four related actions, filed January 17, 1952. Like Carr v. Warner, D.C., 137 F.Supp. 611 (to which reference will be made from time to time hereafter) each of these actions is alleged to be based upon § 17 of the Securities Act of 1933, 15 U.S.C.A. § 77q, §§ 10(b) and 15(c) of the Securities Exchange Act of 1934, 15 U.S.C.A. §§ 78j (b), 78o(c), and rules and regulations of the SEC adopted thereunder, and each of them, in general, follows the pattern of the complaint in the Carr case. Jurisdiction to hear this controversy likewise is asserted to rest upon 15 U.S.C.A. § 78aa.

2. Here as in the Carr case the defendants include J. Arthur Warner & Co., Inc. and J. Arthur Warner individually. The relationship of Warner and the partnership of which he was a member, and the corporation of which he was a stockholder are set forth in that opinion and need not here be repeated. Defendant William V. Barnstone in the four cases now under consideration occupied a position precisely analogous to that which Thayer occupied in the Carr case, — in short, he was a salesman, first for the partnership, and later for the corporation. He had been specifically directed not to take any discretionary power from any customer; and if any of the four plaintiffs in these four actions did give him such power under any circumstances, neither the partnership nor the corporation knew or reasonably could have known that such authority had been orally given to one of their salesmen by one of their customers. That is, the situation was one where none of the written records of the corporation or the partnership either showed, or gave rise to inference from which a reasonable person would conclude, that any of the four plaintiffs here involved had vested discretionary power in Barnstone.

3. Although Barnstone was named as a defendant in these four actions, he is now dead. No representative of his estate has been substituted as a defendant. As against Barnstone, judgment cannot be entered regardless of the merits of the controversy. Hence the actions of the plaintiffs with respect to Barnstone are dismissed with costs.

4. The four plaintiffs in these four suits may be briefly described individually.

5. John P. Nash, who died a resident of New Hampshire in 1951, is here represented by his executor, Francis B. Nash. John owned and operated a successful plumbing contracting business in Nashua, New Hampshire. Though he had little formal education, he had, prior to meeting Barnstone, bought and sold securities through a stockbroker, had borrowed money from a bank, and had pledged securities as collateral for a bank loan.

6. Francis B. Nash, a brother of John, had attended public school to the sixth grade. He is an electrician who did electrical work in connection with the installation of oil burners, and did other work for his brother John. His capacity to understand accounts is shown by the detailed records which he kept in his own books and by his preparation of income tax returns for himself and other members of the family. These records and returns comprised detailed information of exactly the type requisite for proper accounting under the federal tax laws. Moreover, Francis kept virtually daily contact with the newspaper reports of the prices of securities.

7. Margaret B. Nash, the sister of John and Francis, left her affairs entirely to her two brothers, John and Francis, to be managed. She relied exclusively on them.

8. Dennis H. Nash, Sr., now dead and represented by his executor, Francis B. Nash, was the father of John, Francis, and Margaret. He was a day laborer. He relied exclusively upon his sons for advice in the management of his investments, and he and they commonly acted in concert, each fully disclosing his situation to the other.

9. In 1942 Barnstone called upon the Nashes at their home and from 1943 until February 1949 called upon them two or three times a month. He represented himself as a salesman for J. Arthur Warner & Co., asserted that he was selling, or perhaps more correctly acting as agent for the sale of, railroad bonds. He also said on later occasions that he acted as a salesman with respect to stocks. After some other visits, and about March 1943, Barnstone persuaded some members of the Nash family to invest some money in stocks. According to the recollection of Francis B. Nash, Barnstone said "he was going to make a lot of money for me and everything would be wonderful if I would give him some money, etc. to buy some stock from him." In so far as it is a question of fact, the Court concludes that Francis Nash's recollection of this conference is not precisely accurate, and that it is much more probable than not that Barnstone merely suggested that if the Nash family bought their securities through him as a salesman of J. Arthur Warner & Co., they would be likely to make money. Moreover, in so far as it is a question of fact, the Court concludes that these statements were not regarded by any member of the Nash family, nor relied upon by any member of the Nash family, as a representation...