Skiff v. Stoddard

• Decision Date: 30 June 1893
• Citation: 63 Conn. 198,26 A. 874
• Court: Connecticut Supreme Court
• Parties: SKIFF et al. v. STODDARD.

26 A. 874

63 Conn. 198

SKIFF et al.

v. STODDARD.

Supreme Court of Errors of Connecticut.

June, 1893.

Case reserved from superior court, New Haven county.

Suit by Paul C. Skiff and others against Ezekiel G. "Stoddard, trustee, for leave to redeem certain stocks, Facts found by a committee, and reserved to this court.

J. W. Ailing, J. H. Webb, H. C. White, O. S. White, L. M. Daggett, H. G. Newton, E. B. Gager, W. H. Williams, D. Strouse, G. D. Watrous, and E. G. Buckland, for petitioner.

H. Stoddard and J. W. Bristol, for defendant.

PRENTICE, J. H. H. Bunnell and C. W. Scranton, under the name of Bunnell & Scranton, were for more than 20 years bankers and brokers, having their office in New Haven. In their banking department they received deposits and conducted a private banking business in the usual manner. In their brokerage department they bought, sold, and exchanged stocks, bonds, and other securities, or evidences of title to personal property of various kinds, upon their own account and for others, upon commission, after the usual custom of stockbrokers in this state and the state of New York. By far the largest part of their business consisted in executing the orders of their customers to buy and sell upon margins. Many persons so dealt with them, and among them were the plaintiffs. The firm and its individual members also dealt in the market upon their own account. May 16, 1891, Bunnell died. Four days later his surviving partner made an assignment in insolvency of the partnership estate, and likewise of his individual estate. The defendant is the trustee upon both estates, which are now in process of settlement. At the time of the assignment Bunnell & Scranton, by reason of the orders of their margin customers and of their own margin dealings, were in some manner carrying various stocks and securities. A few of them were in their own hands, others in the hands of pledgees from them, and others still in the hands of their New York agents, who held them as security for advances to the insolvent firm. The firm kept an account with each of their customers, in which they charged the purchase price of all stocks and securities ordered by them, the commission thereon, interest on debit balances, and credited the selling price of what was ordered sold, margins paid, and dividends received. A settlement of these accounts, after crediting to each customer the market price of stocks and securities not closed out, shows a credit balance to the plaintiffs. These customers we will, for convenience sake, call "creditor customers." A like settlement shows that other customers, whom we will call "debtor customers," were indebted to the firm. Before this final credit is made, the accounts of all save one or two customers show an apparent indebtedness. The stocks and securities of the various kinds carried as aforesaid were not sufficient to fill the orders of all the firm's customers. The plaintiffs desire to pay their debit balances, and redeem the stocks and securities which they have ordered bought. The defendant contests their right so to do. They have, therefore, united in the present action, which is amicable in its character, for the purpose of obtaining the advice of this court upon the questions which relate to the contention between the several plaintiffs and the defendant.

The record sets out in full the details of the dealings of each customer, the state of his account at the time of the assignment, the various kinds and amounts of property called for by his orders, the kinds and amounts of property carried by Bunnell & Scranton as the result of these orders, and the manner in which that property was holden in subpledge. We are not asked to determine all the questions which might, upon the facts, arise between the plaintiffs themselves. As between themselves, they profess to be able to make a satisfactory distribution of the property which may fall to their share, and the burdens it must bear. We are therefore left to the consideration of those questions only which grow out of the rights or interests of the trustee as against the plaintiffs. These questions relate (1) to the plaintiffs' claimed right of redemption; and (2) to the conditions, if any, upon which redemption may be made.

Since the appointment of the trustee most of the stocks and securities which were being carried by Bunnell & Scranton have, pursuant to an agreement made by the parties in interest, been sold and turned into money, which is now held in lieu of the property sold, and under the same conditions. The questions presented by the record relate to the situation as it was when Bunnell & Scranton assigned, and we shall treat of the facts as they then were, and as they, in legal contemplation, continue to be. The mode of dealing between Bunnell & Scranton and their customers, and by Bunnell & Scranton in the execution of the orders of their customers, is set out in the record, with a careful attention to detail, as follows:

"The course of business of said Bunnell & Scranton in receiving and executing orders from customers was as follows: The customer desiring to deal in stocks or other property was required to sign and deliver to said Bunnell & Scranton an order, upon a printed blank, supplied by said Bunnell & Scranton, of which the following is a copy:

'"Banking House of Bunnell & Scranton. New Haven, Conn.,——18—. Please——for my account and risk ——shares——. Order good until countermanded. It is agreed that Bunnell & Scranton have the right to dispose of, without notice, all stocks, bonds, petroleum, and grain purchased or sold on margin, whenever said margin is reduced to two per cent.————.'

"When the customer's order to purchase or sell had been executed in the manner hereinafter stated, Bunnell & Scranton sent him a notice, advising him thereof, upon a printed blank, of which the following are copies:

'"Office of Bunnell & Scranton, No. 108 Orange St., New Haven, Conn. New Haven,——,18—. Mr.——. Dear Sir: We have this day bought for your account and risk——. Yours, respectfully, Bunnell & Scranton.'

'"Office of Bunnell & Scranton, No. 108 Orange St., New Haven, Conn. New Haven,——,189. Mr.——. Dear Sir: We have this day sold for your account and risk——. Yours, respectfully, Bunnell & Scranton.'

"If the customer desired the delivery of the certificate or other proper evidence of title to the property ordered to be purchased, such certificate or evidence of title of such security or property was obtained by the firm, and delivered to him, upon payment to them of the purchase price and commission. If the transaction was to be upon margin, then the customer giving such order was required to place and keep with the firm cash or securities equal to a stipulated per cent. of the par value of the securities or property ordered by such customer to be bought, which deposit was called a 'margin.' When stocks were ordered to be purchased upon margin, the certificate or other evidence of title of the property thus ordered to be purchased was not delivered to the customer, but was held and made use of as hereinafter set out. It was understood between the customer and Bunnell & Scranton that the certificates of the property should not be delivered to the customer until the price thereof, with interest thereon and commission, was paid. It was also understood that Bunnell & Scranton might, under certain circumstances, sell the securities thus carried to protect themselves from loss. Subject to such right, it was agreed that the said brokers would carry the property for the customer at the risk of such customer, and that they would sell the same forthwith, upon the order of the customer, and account to him the proceeds; or, upon payment in full of the purchase price of said property, and all sums due for interest and commissions, that they would deliver to said customer a certificate or other proper evidence of title to said property. This is the usual agreement between brokers and their customers when stock is dealt in upon a margin.

"When the said firm of Bunnell & Scranton continued in business they never failed to respond to any order or request to deliver or sell certificates of stock or other property which they had purchased for their customers. They received for their services as brokers one-eighth of one per cent. of the par value of the security bought or sold, and received no other profit from the transaction. They kept an account with each customer, on which he was credited with all cash payments, including payments by way of margin, and with the proceeds of all sales, less commissions, and with dividends when paid upon stocks carried for him, and was charged with the full price of securities ordered and carried, with the commissions added and with interest on such price. All orders for the purchase or sale of stocks (except as may hereinafter appear) were executed by said Bunnell & Scranton through Prince & Whitely and W. S. Lawson & Co., two firms of brokers and members of the stock exchange in the city of New York; and this fact was well known to the plaintiffs and to the customers generally of Bunnell & Scranton. Such orders were so executed in the following manner, to wit: Said firm of Bunnell & Scranton were required to place and keep in the hands or under the control of said Prince & Whitely and Lawson & Co., respectively, money and marketable securities, by way of margin, in amount equal to a stipulated per cent. of the par value of the securities ordered by said Bunnell & Scranton, and bought or sold through said New York brokers, respectively. The margin required by Prince & Whitely was ten per cent., and that required by Lawson & Co. was five per cent. Thereupon said Bunnell & Scranton, when they received orders from their customers to buy or sell securities or other property, ordered by telegraph Prince & Whitely or Lawson & Co. to buy or sell on the account and at the risk of Bunnell & Scranton the various...