
    Seth W. Peckham v. Ketchum, Rogers & Bement.
    1. Where a broker is instructed to purchase, as such broker, for the plaintiff, a specified number of shares of the stock of a corporation named, and he accordingly contracts to buy the specified number and receives a certificate of stock regular in form and issued by the proper officer of the corporation for the specified number of shares, receives payment therefor from his principal and makes payment to his vendor, and such certificate proves to be valueless and not to represent actual stock, such broker, where he has acted in good faith and according to the customary course of business among brokers in such cases, is not liable to his employer for any damage resulting to him from such transaction and purchase.
    
      2. It will not affect the question of such broker’s liability that the shares he so bought were transferred to him by the vendor on the books of the Company, and by him transferred to his principal, and that he did not disclose to the vendor his agency in the transaction—that being according to the established and customary course of business in such transactions.
    (Before Hoffman and Moncrief, J. J.)
    Heard, October 21;
    decided, December 17, 1859.)
    This action comes before the Court upon an agreed state of facts, submitted pursuant to section 372 of the Code.
    On the 14th of June, 1854, the plaintiff called at the office of Ketchum, Rogers & Bement, bankers and stock brokers, and asked them if they had any shares in the New York and New Haven Railroad Company for sale. They said they had not, but would, if desired, buy some for him, that day, at the Brokers’ Board. He ordered them to buy for him ten shares, at a price not exceeding $87 per share.
    The same day they sent to the plaintiff the following memorandum :
    “June 14, 1854.
    ■“ 10 shs. N. Y. & N. H. R. R., a 86i,.............. $865 00
    “ Corn’s,...................................... 2 50
    “ Seth W. Peckham. $867 50”
    He sent them his check that day for the $867.50, and they stated that they would transfer the stock referred to in the memorandum into his name on the books of the Company that day, but the certificate would not be ready until the next day. The next day they delivered to him a certificate in due form for ten shares of said stock, signed by Robert Schuyler, the Transfer Agent of said Railroad Company, who was the proper officer to issue the same.
    The firm of Ketchum, Rogers & Bement, after receiving the plaintiff’s order, and on the same day, bought ten shares of one Charles Graham, who in fact had no stock, but had, in good faith, made a contract with Moses Allen for the delivery of ten shares that day.
    Graham, on making the contract with defendants’ firm, went to the office of the Railroad Company, and, with the consent of its officers, transferred ten shares on its books to defendants’ firm, who were thereupon credited on said books with ten shares, and ten shares were charged to Graham’s account. This being done, the defendants, with the like consent of the officers, transferred ten shares to the plaintiff, to whose account they were credited on the books of the Company, and the certificate which the plaintiff received was made out and delivered to him. ■
    Graham stood debited with the ten shares on said books until June 22, when it was balanced by a transfer to. him, by Allen, of ten shares.
    The certificate issued and delivered to the plaintiff did not represent actual stock, and was valueless. The defendants’ firm, on receiving the certificate for the ten shares which they delivered to the plaintiff, paid Graham for the ten shares.
    In purchasing from Graham and taking a transfer of the ten shares to themselves, and on receiving the plaintiff’s check, the defendants’ firm acted in good faith “in the mode usual and customary among stock brokers in the city of New York, among whom it is not usual to disclose the names of their principals to persons with whom they dealt.”
    In due time, after discovering that the certificate received by him did not represent actual stock, the plaintiff tendered a return thereof to the defendants, and demanded from them a repayment of the money he had paid to them therefor; with which demand they refused to comply.
    The question submitted was: Is the plaintiff entitled to recover anything, and,-if so, how much, from the defendants ? If entitled to recover nothing, judgment was to be rendered for the defendants,- with costs; which costs, the parties by. agreement inserted in the submission,-were adjusted at $100.12.
    
      John S. Jenness, for plaintiff.
    I. The vendor of chattels impliedly warrants' that the article sold is substantially what it purports to be, where the vendee had no opportunity for inspection. (Long on Sales, 204; Jones v. Bright, 5 Bing., 533; Shepherd v. Kain, 5 B. & A., 240; Henshaw v. Robbins, 9 Metc., 83; 1 Parsons on Contracts, 465, and note; Gallagher v. Waring, 9 Wend., 20; S. C., in Error, 18 id., 426; Lightbody v. Ontario Bank, 11. id., 9; S. C., in Error, 13 id., 101.)
    
      The certificate given to the plaintiff in this case turned out to have been issued without authority, by the Transfer Agent, in excess of the capital stock of the Company. It was, therefore, void stock. (Mech. Bank v. N. Y.& N. H. R. R. Co., 3 Kern., 599.)
    II. The defendants were, in this transaction, the plaintiff’s vendors.
    1. Graham cannot be held to be plaintiff’s vendor. Mo privity whatever existed between them; he sold directly to the defendants, and cannot be deprived of any defenses or counterclaims he may have against them.
    
      2. Defendants were not brokers in this transaction.
    A broker is a mere negotiator between other parties. (Pott v. Turner, 6 Bing., 702, 706.)
    He never acts in his own name, but in the names of those who employ him. (Baring v. Corrie, 2 Barn. & Ald., 143, 148, 149; Kemble v. Atkins, 7 Taunt. R., 260.)
    He is not intrusted with the possession of goods, and is not authorized to buy or sell them in his own name. (Baring v. Corrie, supra)
    
    A broker becomes a factor when he buys or sells in his own name, or is empowered to obtain possession of what he buys. (Story on Agency, §34, and note; 1 Bell Com., 386, 478; Kilby v. Wilson, Ryan & Moody, 178; Kemble v. Atkins, supra; Short v. Spackman, 2 Barn. & Adol., 962; Waring v. Mason, 18 Wend., 425; Jones v. Littledale, 6 Adol. & Ellis, 486.)
    TIT. An agent, who really is employed as such, and is known to be employed and acting as such, is, nevertheless, liable as principal, unless he disclose his principal at the time of his contract. (Story on Agency, § 267; Waring v. Mason, supra ; Mills v. Hunt, 20 Wend., 431; 2 Kent Com., 630, 631; Franklyn v. Lamond, 4 Com. Bench, 637.)
    IY. The liability of defendants has been affirmed by express adjudication in similar cases. (Jones v. Ryde, 5 Taunt., 488; Lamert v. Heath, 15 Mees. & Welsf., 486; Mitchell v. Newark, 10 Jur., 318; Westropp v. Solomon, 8 Com. Bench, 345; Brown v. Boarman, 11 Clark & Finnelly, 1; Jones v. Littledale, supra)
    
    Y. The circumstance that such worthless stock passed current in the market without suspicion is only material upon the question of defendants’ care and diligence as agents.
    
      "VI. The general custom of stock brokers not to disclose the names of their principals, even if established, (which it is not,) by no means implies a custom that in such cases stock brokers are not subject to the legal liabilities which flow from their assuming to act in their own name. The latter custom is not found, and could not be legally sustained. (Magee v. Atkinson, 2 Mees. & Welsf., 440; Mills v. Hunt, supra.)
    
    
      Francis N. Bangs, for defendants.
    I. The foundation of this suit is a contract by which plaintiff emplojmd defendants as brokers. The obligations of defendants under this contract were to use good faith and due diligence and the usual methods of accomplishing the object directed. Unless the case states, what it does not state as matter of fact, bad faith, fraud, want of diligence or neglect of the ordinary mode of dealing, no reason for a recovery is shown.
    II. The use by' the defendants of their own name in making the purchase, was not an act of either bad faith or negligence, nor did it convert them from brokers into principals as against plaintiff.
    1. This was the usage of that business. Of this usage plaintiff was bound to take notice. (Bayliffe v. Butterworth, 1 Exch. R., 425; Mitchell v. Newhall, 15 Mees. & Welsb., 808.) It was therefore one of the terms of their employment that they should use their own names. (Sutton v. Tatham, 10 Adol. & Ellis, 27.) And it was a part of plaintiff’s contract that he should indemnify them against any liability incurred by them for him in that employment. (Westropp v. Solomon, 8 Common Bench, 345; Kemble v. Atkins, 7 Taunt., 260; Child v. Morley, 8 Term R., 610.)
    2. If it was one of the terms of the employment that the defendants should make such a contract as would give plaintiff a remedy against the vendor for any defect in the stock, the case does not show that such remedy against Graham is impaired or impeded by the purchase in the name of the defendants.
    III. The case shows nothing else which the Court can say, as matter of law, was a neglect of any duty incumbent on defendants as brokers.
    
      What duty can the Court say they ought to have performed before paying the money to Graham ? They could do no more than ascertain Graham’s title. They could ascertain this only by evidence. This evidence would consist of acts, declarations and entries of the Company’s officers.
    If the Company gave effect to Graham’s act of transfer by entering the defendants as stockholders to the extent of the stock transferred, then the defendants had the evidence of an act, declaration and entry of the Company’s officers and agents. This was the highest and best evidence they could obtain.
    It is submitted that the Court may safely say, as matter of law, that these brokers were justified in paying over the money to the vendor upon finding that the Company acknowledged his title and his conveyance as valid.
    IV. The recovery does not depend upon the question w'hether the stock was or was not genuine. In Mitchell v. Newhall, (15 Mees. & Welsb., 308,) the broker bought a letter of allotment, under instructions to buy shares; yet in that case and in Lamert v. Heath, (15 Mees. & Welsb., 486,) it was held that the fair construction of the order was for the jury; that they ought to say whether the principal had not ordered the thing which the broker bought.
    V. The authorities cited by the plaintiff’s counsel are either inapplicable or sustain the defense. But few of them present questions between a broker or other agent and the person employing him.
   By the Court—Hoffman, J.

The plaintiff applied to the defendants to purchase from them ten shares of the stock in question. Being informed tiiat they had none to sell, the plaintiff then distinctly employed them as brokers to purchase for him that amount of shares.

The contract between the plaintiff and defendants, therefore, was, that they were to buy the stock from some third party for his account. He gave them the money to fulfill this contract, and they, in effect, paid that money to the seller of the stock.

The plaintiff dealt with the defendants as stock brokers, and was bound by those customs which prevailed in relation to that species of business. (Horton v. Morgan, 6 Duer, 56; affirmed on appeal, 19 N. Y. R., 170.) The Court above say, “thepractice at the Stock Board, by which the brokers only, and not their customers, are known in their dealings with each other, was not unreasonable, and the plaintiff, by directing this purchase to be made, must be understood as consenting that it should be done in the usual manner.” The case before us states, that in making such purchase from Graham, and in causing or permitting the ten shares to be transferred to them before calling upon the plaintiff to pay, and in receiving said check from plaintiff, Ketchum, Rogers & Bement acted in the mode usual and customary among stock brokers in the city of Eew York, among whom it was not usual or customary to disclose the names of their principals to persons with whom they dealt.

This is sufficient to establish a special custom, although it is in proof, also, that some brokers make use of what is called “purchase notes,” in which the purchasers and seller’s names are inserted.

This custom, then, of which the plaintiff is to be assumed to have had notice, puts him, I think, in the same position, as in the case of a contract made distinctly with one as the agent of a known or disclosed principal. (Rathbon v. Budlong, 15 John. R., 1; Mauri v. Heffernan, 13 id., 58; Ex parte Hartop, 12 Ves., 352; Lewis v. Nicholson, 18 Queen’s Bench R., 503.)

Eo rule of law,” says Lord Eldon, “ is better ascertained, or stands upon a stronger foundation than this, that where an agent names a principal, the principal is responsible, not the agent, but, for the application of that rule the agent must name his principal as the person.to be responsible.”

A party who deals with another, or employs another avowedly as an agent, to make a contract with some one who he consents shall remain unknown at the time, cannot have a better right against the agent than if the principal had then been disclosed. The employment, with the presumed knowledge of the custom, is equivalent to á consent.

The leading case of Westropp v. Solomon, (8 Common Bench R., 345,) cited by the plaintiff’s counsel, appears to me hostile to his claim. The plaintiffs were brokers, and were employed by the defendant to sell certain scrip, which turned out to be invalid. The certificates were such as to deceive everybody who dealt with them. There was no fraud or negligence on either side. Still they were invalid. The brokers paid the purchase money back to the vendees, as also a certain sum which, under rules of the Stock Exchange, had been prescribed to be paid in such cases. They then sued their principal, who paid into Court the purchase money but contested as to the additional sum. The defense was sustained.

The Court say: “ It seems to be agreed that when a principal

employs an agent, the former is bound to indemnify the latter, in respect of all payments which may be made by him in the due course of his employment. The agent may recover moneys so paid under a special count stating a promise to indemnify, or under a count for money paid. The vendees were entitled to recover back the money paid for the stock.”

I do not think that the employment of the defendants, in this case, can justly be treated as an employment to purchase genuine stock, to the extent and import of making them guarantors of the validity of that which they should purchase. It was rather to purchase what in the market was passing as stock of this description. (Lamert v. Heath, 15 Mees. & Welsb., 486.) Then the rule of indemnity to the agent when the principal is a seller, involves the exemption of the agent from responsibility, when, under similar circumstances, the principal is the purchaser.

Again, an agent employed to purchase a commodity of a particular character or quality, is only bound to use all the circumspection and diligence which a prudent purchaser himself would exercise. The nature of the article, the opportunity of detecting the defect or inferiority, with proper diligence, are elements in every case of this description. (Mainwaring v. Brandon, 8 Taunt., 202; Van Alen v. Vanderpoel, 6 John. R., 69; Liotard v. Graves, 3 Caines’ R., 226.) The defendants could not be held responsible under this rule.

Judgment should be rendered for the defendants with the costs as adjusted in the submission, viz., $100.12.

Judgment ordered accordingly  