Remar v. Clayton Securities Corporation, Civil Action No. 7496.
| Court | United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts |
| Citation | 81 F. Supp. 1014 |
| Docket Number | Civil Action No. 7496. |
| Parties | REMAR v. CLAYTON SECURITIES CORPORATION et al. |
| Decision Date | 07 January 1949 |
81 F. Supp. 1014
REMAR
v.
CLAYTON SECURITIES CORPORATION et al.
Civil Action No. 7496.
United States District Court D. Massachusetts.
January 7, 1949.
Harry B. Zonis, Paul T. Smith, and Manuel Katz, all of Boston, Mass, for plaintiff.
Nutter, McClennen & Fish and Robert W. Meserve, both of Boston, Mass., for defendant Clayton Securities Corporation.
WYZANSKI, District Judge.
This is a motion by Clayton Securities Corporation that the complaint against it be dismissed.
According to the complaint, plaintiff, a Massachusetts citizen, was a customer of defendant Clayton, a Massachusetts corporation. Clayton was a broker or dealer who transacts a business in securities seemingly through the medium of a national securities exchange.
June 11, 1946, plaintiff owned 100 shares of National Skyway Freight, 25 Textron Incorporated warrants and 100 shares of Hytron Radio and Electronic Co. having an aggregate market value of $2,250. It does not appear whether these securities were registered on a national securities exchange but I assume they were.
Clayton advised plaintiff to purchase other securities. To accomplish that end plaintiff paid Clayton $1,028.84, and Clayton arranged for plaintiff to borrow $5,000 from the Montpelier National Bank upon the basis of plaintiff's promissory note secured by the securities just named and, it seems, by 50 shares of Federated Department Stores which plaintiff bought through Clayton for $3,833.18 and 200 shares of R.K.O. warrants which plaintiff also bought through Clayton for $2,145.65. These last two securities were bought with the proceeds of the $5,000 loan. It does not appear but I assume that these securities were registered on a national securities exchange. All the transactions referred to in this paragraph occurred in June 1946.
December 9, 1946, at Clayton's instigation, plaintiff gave the bank an additional promissory note for $3,783.41. It does not appear whether additional security was given for this note. And it does not appear — although perhaps it may be inferred — that plaintiff transferred the proceeds of this note to Clayton.
Between September 1946 and July 31, 1947, the bank and, according to the complaint, Clayton sold all the securities that have been mentioned and, it seems, applied the proceeds to the two notes held by the bank. This left a deficiency of $1,707.72 due on the notes for which in a state court proceeding the bank is now suing plaintiff.
Plaintiff's contention is (1) that the two loans made by the bank were in violation of Regulations T and U promulgated by the Board of Governors of the Federal Reserve System under the authority conferred by § 7(a) of the Securities and Exchange Act, Act of June 6, 1934, c. 404, 48 Stat. 886 et seq., 15 U.S.C.A. § 78g(a); (2) that Clayton's activities in arranging for these loans violated § 7(c) of that Act as amended, 48 Stat. 887, 15 U.S.C.A. § 78g(c); (3) that plaintiff has been damaged by the loss of the $2,250 securities he originally owned and the $1,024.84 he paid out of his own
I. The first question is whether, if the facts are as alleged, Clayton violated the Securities and Exchange Act.
Section 7(a) and (b) of the Securities and Exchange Act, 48 Stat. 886, 887, 15 U.S.C.A. § 78g(a) and (b) gave to the Federal Reserve Board — now the Board of Governors of the Federal Reserve System, see § 203(a) of Act of August 23, 1935, c. 614, 49 Stat. 704 — authority to prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security registered on a national security exchange. Pursuant thereto, the Board issued and from time to time amended Regulation T affecting brokers, dealers and others, and Regulation U affecting banks.
If the facts are as alleged, the credit transactions between plaintiff and the Montpelier National Bank involved a violation by the bank of Regulation U as it stood in 1946 because the bank knowingly extended for the purchase of securities credit in an amount greater than was warranted by the regulation. But the difficult point is whether it was unlawful for Clayton to arrange that transaction. In coming to this point the approach must begin with § 7(c) and (d) of the statute, 15 U.S.C.A. § 78g(c) and (d). The former is directed at dealers and brokers; the latter at all others. In each case what is made unlawful is (1) to extend or maintain credit or (2) to arrange for the maintenance of credit — in...
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Franklin National Bank v. LB Meadows & Co., No. 69-C-160.
...1961) (15 U.S.C. § 80a-36); Osborne v. Mallory, 86 F.Supp. 869, 879 (S.D.N.Y.1949) (15 U.S.C. § 77g); Remar v. Clayton Securities Corp., 81 F. Supp. 1014, 1017 (D.Mass.) (15 U.S.C. § 78g). See also Maher v. J. R. Williston & Beane, Inc., 280 F.Supp. 133, 137 (S.D.N.Y.1967) (15 U.S.C. § 78o(......
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Galella v. Onassis, No. 70 Civ. 4348.
...depended "upon the promptness of transmission." Ibid., p. 230, 39 S.Ct. 68, 71. 44 Accord, e. g., Remar v. Clayton Securities Corp., 81 F.Supp. 1014, 1017 (D. Mass.1949) (Wyzanski, J.); Phillip Metropolitan Colored Methodist Episcopal Church v. General Cas. Co. of Am., 86 Ohio App. 261, 89 ......
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Brown v. Bullock
...154 A.L.R. 1285, certiorari denied 1944, 323 U.S. 737, 65 S.Ct. 36, 89 L.Ed. 590; Remar v. Clayton Securities Corp., D.C.Mass.1949, 81 F.Supp. 1014, 1017; Appel v. Levine, D.C.S.D.N.Y.1948, 85 F.Supp. 240; Hawkins v. Merrill, Lynch, Pierce, Fenner & Beane, D.C.W.D.Ark. 1949, 85 F.Supp. 104,......
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Stern v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 78-1377
...or Restatement rationale and had its genesis, so far as Section 7 is concerned, in Remar v. Clayton Securities Corporation (D.Mass.1949) 81 F.Supp. 1014. In Remar, the Court, paraphrasing § 286 of the Restatement, declared "that where defendant's violation of a prohibitory statute has cause......
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Franklin National Bank v. LB Meadows & Co., No. 69-C-160.
...1961) (15 U.S.C. § 80a-36); Osborne v. Mallory, 86 F.Supp. 869, 879 (S.D.N.Y.1949) (15 U.S.C. § 77g); Remar v. Clayton Securities Corp., 81 F. Supp. 1014, 1017 (D.Mass.) (15 U.S.C. § 78g). See also Maher v. J. R. Williston & Beane, Inc., 280 F.Supp. 133, 137 (S.D.N.Y.1967) (15 U.S.C. § 78o(......
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Galella v. Onassis, No. 70 Civ. 4348.
...depended "upon the promptness of transmission." Ibid., p. 230, 39 S.Ct. 68, 71. 44 Accord, e. g., Remar v. Clayton Securities Corp., 81 F.Supp. 1014, 1017 (D. Mass.1949) (Wyzanski, J.); Phillip Metropolitan Colored Methodist Episcopal Church v. General Cas. Co. of Am., 86 Ohio App. 261, 89 ......
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Brown v. Bullock
...154 A.L.R. 1285, certiorari denied 1944, 323 U.S. 737, 65 S.Ct. 36, 89 L.Ed. 590; Remar v. Clayton Securities Corp., D.C.Mass.1949, 81 F.Supp. 1014, 1017; Appel v. Levine, D.C.S.D.N.Y.1948, 85 F.Supp. 240; Hawkins v. Merrill, Lynch, Pierce, Fenner & Beane, D.C.W.D.Ark. 1949, 85 F.Supp. 104,......
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Stern v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 78-1377
...or Restatement rationale and had its genesis, so far as Section 7 is concerned, in Remar v. Clayton Securities Corporation (D.Mass.1949) 81 F.Supp. 1014. In Remar, the Court, paraphrasing § 286 of the Restatement, declared "that where defendant's violation of a prohibitory statute has cause......