
    William C. Hurt, Respondent, v. Abraham P. Miller and Nathan J. Miller, Partners as Miller & Company, Appellants.
    First Department,
    July 15, 1907.
    Principal and agent — unauthorized sale by stockbrokers — measure of damages.
    A stockbroker'.who purchases for a customer a contract for the future delivery of cotton cannot apply the margin put up on that transaction upon a prior indebtedness which was disputed by the customer, and the sale of the contract under a claim that the margin thereon was exhausted by reason of such application is unauthorized.
    But when the customer, by immediately notifying his brokers that he will hold them legally responsible, determines upon his line of conduct, he cannot measure his damages by the highest market price attained by similar contracts within a period of two weeks after the unauthorized sale; this, because he cannot speculate at the expense of his brokers, but is only entitled to the highest market price attained within the reasonable time which was necessary to enable him to determine upon his line of action.
    The question of reasonable timo is for the court when the facts are undisputed. McLaughlin and Clarke, JJ., dissented, in part, with memorandum.
    Appeal by the defendants, Abraham P. Hiller and another, partners, etc., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 28th day of April, 1906, upon the verdict of a jury rendered by direction of the court after a trial at the New York Trial Term.
    
      Charles E. Rushmore, for the appellants.
    
      William King Hall, for the respondent.
   Laughlin, J.:

This was an action by a customer against a firm of stockbrokers to recover damages for an unauthorized sale of a contract for.the delivery of cotton at a future date. Pending the appeal the original plaintiff died, and the action has been revived and continued in the name of this ancillary executor. . .

On the. 9th day of December, 1903, the defendants purchased for the plaintiff, on the Mew York Cotton Exchange, a contract for the delivery in the month of March thereafter Of 500 bales of cotton at 12.3 cents per pound. The plaintiff at that time owed the defendants a balance of account on former stock transactions. The plaintiff advanced $1,000 as margin on the new purchase, but the defendants, without authority, credited the $1,000 to the plaintiff’s existing account with them, thereby appropriating part of it to the payment of the old indebtedness. The next, day, December tenth, the market price of March cotton took a downward turn, and on wiring theplaintiff, who resided in Tuskegee,. Ala., for further margins, a'nd not receiving a remittance, they sold the contract at twelve and fifteen-one-hundredths cents per pound, upon the theory that plaintiff’s margin was exhausted, which would, have been the fact were they justified in thus appropriating part of the $1,000 to the payment of the old indebtedness, but otherwise not. The plaintiff had not conceded his liability for the balance of account claimed by'the defendants, and it is quite, clear that he advanced the money as margin on the new contract, and that the appropriation of part of it- by the defendants to the payment of his existing indebtedness to them was. unauthorized. The sale of the contract was, therefore, unauthorized. On the sanie day, and immediately after selling plaintiff’s contract, the defendants wired him : “Sold five hundred' March twelve fifteen on stop:” The defendants showed that plaintiff, in his former dealings with them, had directed them generally' to sell when" his margin was exhausted, and that the' stop order mentioned in the message, had reference to that .authority'.. Upon receiving notice of the sale plaintiff wired-defendants the same day: “ Replace cotton. I sent no order stop at twelve fifteen.” To this defendants, replied the same day : “ Too late. Your cotton was closed when margin exhausted as. per previous message.” Plaintiff replied to this message on the same day: “ 1 do not understand why this contract was closed. Margin was .not exhausted. I want my. contract back.” The deferidants Wired in reply to this on the same day as follows : “You wrote tis distinctly months ago when niafgiii exhausted we should have closed contracts. Your margin was exhausted when we sold cotton. Mow do you want us to buy you back five hundred March cotton, If so glad to buy it, Answer quickly.” The plaintiff did not reply to this by Wire, but - .on the same day wrote the defendants as follows i

í! I cannot at all understand why you closed my March contract today. You bought at 12.30 and covered without instructions at 12.15. I had placed to your credit as margin $1,000. You wired you closed on stop. If you had any stop order from me there certainly is a grievous mistake, as' I sent none. You say margin was exhausted. I do not see how you arrived at this conclusion. The only way I can see that you decided margin was exhausted was that when you.received tliis $1,000 as margin on this contract yon appropriated a part of it to pay yourself a balance you claim against me. If this i's true, if you'did this, you did not notify me of it and left me under the impression I had $1,000 margin. You wired this morning for additional five hundred March, then quoted here at 12.19. I could seé no immediate necessity for sending it just then, but wired you on further decline ‘ Will send margin asked.’ A few minutes later next cqll here I saw March was 12.13. _ Immediately I had bank to wire you $500' additional margin.' After-•wards I received your telegram saying you .had sold five March at 12.15 on stop. Mow, gentlemen, is tills the manner to treat a customer?" Have you no regard whatever for his interest? I claim I hold a contract with you for five March bought at 12.30, and when the time comes I shall request you to cover the same.”

On the twelfth day of December the defendants replied to this letter* reiterating their claim that plaintiff had authorized them to sell when the margin was exhausted and asserting that they supposed that he intended to pay them the money he owed them and that they had acted in what they deemed to be his interest and closed the letter as follows : “ You treated us very, badly before, to say the least of. it, and we will thank you now to kindly place your business somewhere else in the future,” Two days later the plaintiff replied to this letter, insisting that defendants had not given a-satisfactory reason' for closing his ■ contract and that the only future transaction he would -have with them “is the settlement of this contract. * I assure you it will not rest here, if there is-any law by. which you can be reached.” The plaintiff testified that he had access to the market quotations on cotton at Tuskegee and that quotations were received there every fifteen or twenty minutes on each market day; that he knew the fact from day.to day that the market was. going' tip from December tenth until the;twenty-fourth :of December, and testified that on the- twenty? fourth day of December “ the market had a great rise. On that day I cannot say exactly that I had concluded. that the market had reached the top, but it looked to be about as if it got. high enough,” ' and thereupon^ he wired the defendants, “ Sell five. March to cover,’? to which defendants replied, “You have no March to sell. Reported sale of five at 12.15 on December 10th.” The transactions ' between the parties consisted of telegrams and letters, the material parts of which -have been stated. According to a stipulation-in the record, the market price for March cotton- closed on December tenth at 12.-20-21. - The highest price on the eleventh was 12.42; on the twelfth, 12.50;. on the fourteenth, 12;43; on the fifteenth, 12.46 ; on the sixteenth, 12.46; on the-seventeenth, 12.80; on the eighteenth, 13.04; on the nineteenth, 13.25 ; on the twenty-first,. 13.17; on the twenty-second, 13.47; on -the twenty-third, 13.69, and on the twenty-fourth, 13.81,' The court rilled, as-matter of -law, that the plaintiff was entitled to recover, the highest price at which, similar contracts-sold on' the market On the twenty-fourth day of December: W e ai-e -of opinion that this, was error, The plaintiff-, failed to show a single, fact or circumstance indicating-that he required, any time for deliberation, to determine what action to take with respect - to the unauthorized' sale of bis. contract by the defendant's.: The facts being undisputed, the question .of. reasonable, time for the customer to decide what action to take concerning a conversion of his stock or unauthorized sale of a contract by brokers, becomes a question of law for the decision of tlie court;- ' The defendants evidently acted in. good faith. Upon learning that .plaintiff repudiated their sale of the contract,, they immediately offered to .repurchase a similar contract, and probably, could have purchased at twelve-twenty, the price at which the market closed that day. He, therefore, required no time to raise funds, for they were apparently" willing to repurchase without further margin. His letter to them of December tenth, the day on which his contract was sold, shows that he required no further time to determine what course to take, and that he had then . determined upon a, course, which was that he would not buy any further contract or authorize them to replace it, but that he intended to speculate at their expense by holding them to the contract and in damages for the difference between the price they received on the sale and the price at some indefinite-future time when he should decide to sell the contract. The reason for the rule giving a customer a reasonable time after an unauthorized sale of stock .by brokers, assuming that it applies to an unauthorized sale of such a contract, within which to determine what course to pursue, and for giving him the. highest market price at which the. stock is sold within-' "such reasonable time after the unauthorized sale (Griggs v. Day, 158 N. Y. 1; Wright v. Bank of Metropolis, 110 id. 237; Baker v. Drake, 53 id. 211; Burhorn v. Lockwood, 71 App. Div. 301), cannot avail the plaintiff on the facts of this case to warrant a recovery for the highest market price of similar contracts "within"the period of two weeks after the unauthorized sale, for, as has been observed, he determined upon his course of conduct" immediately, and required no time either to consult counsel, to watch the market or to raise funds. -The negotiations between the parties were practically terminated by the letter of the defendants to the plaintiff and his answer to them on the fourteenth, which probably reached them by the sixteenth. We are of opinion that the plaintiff could hot speculate on a rise of the market, after this period, at the expense of the defendants, and that his damages should. be considered fixed by the highest" market price between the tenth and sixteenth, which was twelve-fifty on the twelfth. Unless, therefore, the plaintiff is willing to stipulate to reduce the recovery to-$875 and interest thereon, the amount to-which he would have been.entitled upon the basis of twelve-fifty, the judgment should be reversed" and a new trial granted, with costs to the appellant to abide the event.

It follows that the judgment should be reversed and_.a new trial granted, with costs to the appellant to abide the event, unless the plaintiff shall- stipulate within ten days to reduce the recovery to- $875 and interest thereon, and if he shall so stipulate, the" judgment is modified accordingly, and as modified - affirmed, without costs. • '

Ingraham and Scott, JJ., concurred; McLaughlin and'Clarke, JJ., dissented. .

McLaughlin, J. (dissenting):

I dissent. Plaintiff was entitled to the benefit of his contract. He waited fourteen days, which, under the facts set forth, was not ail unreasonable time. He has recovered no more than he is entitled to, and for that reason the judgment and order1 appealed from should be affirmed. ■

Clarke, J., concurred.

Judgment reversed and new trial granted, with costs to appellant to abide event, unless plaintiff stipulate within ten days to' reduce recovery to $&75 and interest; in which event the judgment is modified accordingly, and as modified affirmed, without costs.  