
    Emile G. Des Jardins, Appellant, v. Walter B. Hotchkin and Joseph H. Stoppani, Copartners, Composing the Firm of Stoppani & Hotchkin, Respondents.
    First Department,
    February 3, 1911.
    Principal and agent stockbrokers — impeaching account stated — burden of proofs- failure to execute orders — purchase on margin through other brokers — ratification.
    A plaintiff suing stockbrokers to open an account stated between them upon the ground of fraud on the defendants' part and mistake on his own part is under the burden of impeaching the account.
    It is the duty of a stockbroker to purchase, obtain possession of and hold securities ordered by his customer, subject to the right to pledge them for advances made by him in excess óf the margin furnished by the customer.
    Hence, a customer may impeach the account of his stockbroker by showing that . instead of purchasing and holding the stock himself, he. as the customer of another firm, bought the securities on a margin through that firm, for the securities were subject to the right of the latter firm to pledge them for advances made to the plaintiff’s broker.
    Where the orders of a customer are not executed by a stockbroker he is accountable for the moneys or securities in his hands and cannot escape liability by - showing that if the orders had been executed the securities or money would have been lost.
    A customer by accepting a checkin settlement of an account stated by his stockbroker does not ratify his unauthorized acts in failing to purchase the stock where the broker expressly represented that he had executed the orders.
    
      Appeal by the plaintiff, Emile Gr. Des Jardins, from a judgment of the Supreme Court in favor of the defendants, entered .in the office of the clerk of the county of New York on the 15th day of October, 1909, upon the decision of the court rendered after a trial at the New York Special Term dismissing the complaint.
    
      Edmund F. Harding [ William P. Maloney with him on the brief], for the appellant.
    
      Wilfred H. Warner, for the respondents.
   Laughlin, J.:

The defendants were stockbrokers and the plaintiff was their customer. On the 5th day of April, 1905, plaintiff opened an account with the defendants by depositing with them $500 for the purpose of speculating. in stocks on margins, and he subsequently made additional deposits with them aggregating $2,000. From, time to time he gave them orders to purchase and to sell securities and they reported the execution of his orders. On or about the 22d day of May, 1905, they rendered him a statement of his account showing that they held no securities for him, but owed' him a balancé of $4.92, for which amount they gave him their -check which he' accepted and used. Prior to that time he had requested them, to give him the names of the parties with whom they were dealing on his account and they had refused the information. He brought this action to open the account on the ground of fraud on their part and mistake on his part, on the theory that their reports of the execution of his orders were all fictitious and that he is entitled to an accounting for the balance of the money which he deposited with them. The trial court found, .that the defendants duly executed the plaintiff’s orders and that the rendition of the account and the settlement by check on the 22d day of May, 1905, constituted an account stated and settled and'closed the account. The plaintiff duly excepted to these rulings.

The burden was on the plaintiff of impeaching the account, but this he did by showing that the defendants did not directly purchase or obtain possession of any of the securities which he ordered them to purchase for his account, and that they did not personally or directly execute any of the transactions. It appears that the defendants were members of the Consolidated Exchange. They claimed to have turned the orders all oyer to the firm of Quinlan & Co., who were not members of either the Consolidated or the Stock Exchange, but had relations with some members of the Stock Exchange, through whom they could execute orders on that exchange. The defendants had a marginal stock account in the came of the defendant Stoppani with said firm of Quinlan &' Co., and all orders executed by that firm for them were executed for the account of Stoppani and, therefore, none of them, if executed ' through that firm, was executed for the account of the plaintiff. Moreover, it was not shown that any of the orders were actually executed even by the.firm of Quinlan & Co., and it would not have availed the defendants if they had been so executed, for it was the duty of the defendants to purchase and obtain possession of- and hold the securities for the plaintiff subject to their rights as brokers to pledge the same for advances in such manner that he could return them, and this they did not do. If purchased through .Quinlan & Co., as claimed, they became subject to the right of that firm to pledge them for other advances on that account. The rule is well settled that where orders by. a customer' are not executed by stockbrokers, they are accountable-for the money or securities in their hands, and they cannot escape this liability by showing that if the orders had been executed the securities or money would have been lost. (Haight v. Haight & Freese Co., 112 App. Div. 475 ; affd., 190 N. Y. 540; Prout v. Chisolm, 21 App. Div. 54; Sweeney v. Rogers, 10 Daly, 469; Dos P. Stockb. [2d ed.] 206, 207, 210, 211, 212.) The defendants led the plaintiff to believe and by then-reports to Him they expressly represented that they had directly executed /che orders for his account, and, therefore, it cannot be claimecj' that there was any ratification of their unauthorized acts by hi,m.

Tjc follows, therefore, that the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.

j Ingraham, P. J., McLaughlin, Scott and Dowling, JJ., concurred.

jJudgment reversed, new trial ordered, costs to appellant to abide / event.  