
    HARRIS v. TUMBRIDGE.
    
      City Court of Brooklyn; General Term,
    May, 1879.
    Stock Brokers.—Usage.—Appeal.—Amendment.—Principal and Agent.—Ratification.'
    A broker who has purchased stocks under a certain arrangement, cannot, without his principal’s knowledge or consent, under any usage or custom not known to the latter, or with respect to which he has not contracted, make a sale of the stocks so bought which would depart from the arrangement.
    While a custom may be binding among brokers who are familiar with it, and who deal with each other on the faith of that which is known to all, the same rule will not apply to a stranger who was not cognizant of that custom.
    A ratification by a principal of a sale of stocks by a broker must be unequivocal in its character.
    On an appeal a complaint may be directed to be amended so that its statements shall conform to the proofs and the finding of the jury.
    Appeal by defendant from a judgment, and from an order denying a new trial.
    This action was brought by Sarah M. Harris against William Tumbridge to recover damages for a violation of duty as her broker.
    The defendant was a broker and dealer in New York city, doing business under the firm name of Tumbridge & Co.
    The plaintiff, in September, 1877, received by mail circulars purporting to be sent by the defendant, assuring her of great profits in speculating in stocks, and describing various methods of so doing. Under the head of “straddle contracts ” one of the circulars was as follows : “Theseare by far the safest form of privilege, and when the selection of the stock is left to us, we will guarantee that in a stock we select the fluctuations will aggregate at least eight per cent, on a sixty-day contract, costing $400 ; and in case this does not occur, we will guarantee no loss except commissions.”
    A few days thereafter the plaintiff sent the defendant the following letter:
    “ Tumbridge & Co.,
    ‘ ‘ Sirs:
    “ Inclosed you find draft on New York for $425, to invest in a sixty-day straddle contract; under your guarantee that in the stocks you select for me the fluctuations will aggregate at least eight per cent., or else you will refund the cost of contract.
    “ I have invested twice (in 1874), and lost my money each time.
    “Hoping for better success under you-r guaranteed arrangement, I would try again, if safe. But if I do not understand this new arrangement of yours aright, and there is any danger whatever that I will lose the $400, then do not invest it at all, until you can inform me, for I have borrowed the amount from bank, and would not be able to meet payment soon as due.
    “If I do understand right, that you will refund the price of contract (less commissions), then please invest the amount without delay, and do the very best you canfor me now ; and in case of success of your selections in stoclcs to my profit, your orders from this locality will be numerous.”
    In answer to this letter the plaintiff received the following from the defendant:
    “ Dear Madame :
    “ Your favor, 11th inst., to hand, inclosing ck. for $425. We do not see how you can lose anything on such an arrangement as we propose, viz. : we guarantee that in the stock selected for the straddle, there will be an aggregate fluctuation of, at least, eight per cent., and we feel very sure that we shall not be called on under that guarantee, if we may judge by the past, because we are careful to select only the most active stocks, and should now select Lake Shore, or West. Union, as being the most likely to pay the best, and show the widest fluctuation. The past 60 days, these stocks would have paid you $1,800, and we see no reason why they should not move just as much the next 60 days ; we were not able to secure the contract to-day, and thought we would ask you which stock you would prefer the contract on. We think one of these, the best, at present, but there is considerable demand for them, just now ; we think you have selected a good time for operations, and that your investment will pay handsomely.”
    To this letter she responded by telegraph : ; “ I leave the selection with you.”
    In reply to this she received the following notice and letter:
    “ Your favor at hand per wire. We hand you notice of purchase of straddle on 100 shares Lake Shore & Mich. So. R. R. at 62M for 60 days, fluctuations guaranteed.
    " Awaiting your further favors, we are,
    “ Respectfully,
    “Tumbridge & Co.”
    “ Office of Tumbridge & Co., 50 Broad St., ) New Yoik, Sept. 14, 1877. j “ Miss Sarah M. Harris :
    “We have this day purchased for your account straddle contract on one hundred shares, Lake Shore & Mich. So. R. R., at 62M and 62M 60 days, which contract we hold, for closing, and in the absence of any further instructions from you, we will exercise our best judgment in closing at the most favorable time.
    “ Paid $425.00.
    “ Tvmbridg-e & Co.”
    On the day following defendant claimed that he sold one hundred shares short against the straddle at the same price it was bought for, and testified that he sent a letter to plaintiff informing her of the sale, which she answered, but her letter had been lost. He claimed to have done this in accordance with a custom among brokers to use a straddle in that way. But the plaintiff denied that she ever received the letter notifying her of the sale, or answered it. The judge charged the jury in respect to this- custom, that while it might be binding among the brokers who were familiar with it, and who dealt with each other on the faith of that which was well known to all, the same rule would not apply to a strahger who was not cognizant of the custom.
    After the letter of Sept. 14, the plaintiff claimed there was no communication from the defendant until the end of the sixty days, when she received a letter from him which stated as follows : “Against your contract Str. 100 Lake Shore 62% and 62% which expires to-day, we are short of the stock at 62% and will remain so for a while longer, having obtained an extension of the contract, believing that very soon we shall be able to cover the short sale at lower price.”
    To this plaintiff replied, “For what length of time did you obtain the extension of the contract? And, did you operate so as to secure the 10% per cent, advance in the Lake Shore stock, last montli ?
    “Let me know by return mail, for my bank note will have to be attended to soon, in some way, and it will be easier for me to get it renewed, if I can tell just what is being done. Trusting you, I await your answer.”
    
      Subsequently the defendant claimed to have closed out the contract, leaving the plaintiff in his debt to the amount of $9, but she never received any answer to this letter, and prior to the bringing of this action was unable to obtain any further statement or accountfrom him.
    From the day of the purchase of the straddle, September 14, the stock advanced until October 12, when it reached 73%. During the whole period of sixty days, covered by the contract, the stock at no time fell below the purchase price.
    On the trial, the plaintiff’s counsel moved to strike out certain allegations in the complaint which did not appear to accord with the facts, but the court declined to allow it.
    The jury rendered a verdict for the plaintiff for $600, and the defendant appealed.
    Other material facts sufficiently appear in the opinion.
    
      Brewster Kissam, (McGregor Steele, attorney), for defendant, appellant.
    Where a judge leaves it to a jury to infer a fact not warranted, it is error, and a new trial wall be granted (Gale v. Wells, 12 Barb. 84; Harris v. Wilson, 1 Wend. 511; Story v. Brennan, 15 N. Y. 524; Milbank v. Dennistoun, 21 Id. 386). The general usages of trade, the common habits of the particular business and the special mode of dealing between the parties, govern the duties required of the agent as to diligence and skill, and not what another person in the same line of business would have done under the same circumstances (Story on Ag. p. 234, § 185 ; p. 245, 199). Where an agent has used reasonable diligence and skill he is not liable for accidents or losses, or damage happening without his fault (Id. p. 235, § 188; Millbank v. Dennistoun, 21 N. Y. 386; Heinman v. Heard, 50 Id. 27; 1 Wait Actions & Defenses, 241, 243, and cases cited). Plaintiff must affirm the transaction in whole or repudiate it in whole (Story Ag. 310, § 250). The respondent ratified appellant’s act in making the short sale of the stock by her silence, and, therefore, he is not liable (Id. p. 298, § 239 ; Id. p. 304, § 243; Id. p. 317, § 258; Commercial Bank v. Warren, 15 N. Y. 577; Meehan v. Forrester, 52 Id. 277; Hawley v. Keeler, 53 Id. 114; Sturgis v. New Jersey Steamboat Co., 62 Id. 625). She must be regarded as consenting to its purchase according to the custom of brokers (Horton v. Mangan, 19 Id. 170). The motion for a new trial, because the verdict is contrary to law, raises all questions that could have been considered on a motion for a nonsuit, or a motion to direct a verdict for appellant (Wehrum v. Kuhn, 34 N. Y. Super. Ct. 336; Halpin v. Third Avenue Railroad Co., 40 Id. 175; Wehle v. Haviland, 4 Daly, 550).
    
      F. A. Ward {Frank A. Irish, attorney), for plaintiff, respondent.
    Defendant was bound not only to good faith, but to at least such skill as is ordinarily possessed by brokers in the same business (Heinman v. Heard, 50 N. Y. 27). And the question whether he exercised such skill is a question of. fact for the jury (Story Agency, 183, 186). Defendant was bound to wait at least a reasonable time for a fluctuation in the price (White v. Smith, 54 N. Y. 522). The proper measure of damages is the profit plaintiff would have made if defendant had acted honestly and properly (Id.). If defendant had no discretion then he converted the privilege and is liable for the enhanced value of the stock within a reasonable time after the conversion (Baker v. Drake, 66 N. Y. 518).
   Neilson, Ch. J.

The plaintiff’s letter and the defendant’s reply constitute the contract. The terms proposed and the money sent by her having been duly accepted, it only remained for the defendant to carry out the arrangement in good faith, and with reasonable care and skill. It would seem that the plaintiff understood and appreciated the peculiarly safe method of dealing in stocks, which the defendant had commended in prior publications ; the straddle contract, combining the advantages of a put and also of a call. By that method the customer’s profit was supposed to be secure if the stocks fluctuated either way in the market. The only doubt was whether the particular stocks chosen would rise or fall, no matter which, during the term. That the stocks known to be active in the market would fluctuate more or less during the sixty days was pretty certain, but much depended on the selection to be made. In an instance like this, where the defendant guaranteed that fluctuation, it was proper that he should have, as he claimed to have, the choice of the stock. Some prior publications put in evidence, and the contract in this case, proved that the defendant made that guaranty only on that condition. In his letter of acceptance and in reply to plaintiff’s proposal, the defendant mentioned two kinds of stock favorably, and gave the plaintiff the choice, but in her answer she leaves the situation or selection to him. He acted on that, and in the form of a straddle contract purchased one hundred shares of Lake Shore at 62% for sixty days, and sent her the usual notice.

The care and skill due from the defendant was discussed at the trial.

That care and skill could be taxed only at the opening and at the close of this business. It is easy to see just where the skill would be useful. In view of his guarantee, the right to select the stock, properly • reserved by him, was conceded to him, as it required some knowledge of the history and condition of stocks; of the causes, often slight, by which they might be moved, and of the devious ways, plans and purposes, the contentions and combinations of those who controlled the stock market. So, too, some professional knowledge might be exercised in the final disposition of tile contract. But beyond that, and from the beginning to the end, the duty which rested on the defendant was very simple, only that which is recognized by every faithful agent or trustee.

But it was claimed on the trial that directly after the making of the straddle contract, the defendant had another transaction with the plaintiff; that he sold on her account one hundred shares of stock short. It was not claimed that the plaintiff had given any order for that sale, or that any express authority for it could be found in the original contract. But it was claimed that the plaintiff had ratified the sale by her acquiescence. With that view an attempt was made to show that, directly after the sale of the one hundred shares short, the defendant had sent her a written notice of it by mail, and had received from her a reply. Her alleged reply was not in court, the letter having been lost. The plaintiff denied having received such notice of the sale, and also denied ever having sent an answer tó any such notice. Witnesses who were experts were then called to show that in the course of business brokers do and may make such short sales on the security of an existing straddle contract. They stated, in substance, that to do so would be operating, for the customer according to usage and custom. Other witnesses think that would be bad management. We are of opinion that the defendant, standing in the relations he did to the plaintiff, could not, without her knowledge or consent, under any usage or custom not known to her, or with respect to which she had not contracted, make the short sale on her account, and thus depart from and work out a modification of the arrangement. In this connection it may be said that, if consistent with the written contract, the usage or custom is useless; if not thus consistent, it is illegal and dangerous. It may be observed, also, that in the instances referred to by witnesses, where brokers made short sales, operating against a straddle contract as if under the usage or custom suggested, those brokers may have been acting in pursuance of the express directions of their customers, or been possessed of instructions to act as they might think best; and that it does not appear that in those instances the brokers had guaranteed the fluctuation in the market prices, by which the accruing profit was to be determined. We think, therefore, that the learned presiding judge was quite correct in his instructions to the jury touching that usage or custom, a thing, if in the trade well known and respected, yet too novel and local to have general significance ; and that he was also correct in the disposition he made of the questions raised upon the correspondence had when the sixty days’ term expired.

The defendant’s letter, stating that he was short of the stock, and held Lake Shore at 62M as against her contract, and had obtained an extension, though, perhaps, sufficiently clear if written by one broker to another, was not so clear and explicit as to apprise one of the uninitiated of its whole meaning. It was not equivalent to saying: “Tour straddle contract and your one hundred shares Lake Shore sold short, using that contract as marginal security; I require protection, and though I have obtained an extension, it behooves you to determine what steps you will take or whether you will let both drift down the tide together.’ ’ She testifies that she did not understand his letter in the sense given to it by the learned counsel for the defendant; and her letter in reply, written at the time, tends to prove that she did not. It could not, therefore, be inferred from that correspondence that she knew the stock had been sold short on her account, or that she intended to ratify that sale. It has been justly said, Ratification is an act with knowledge, and must be unequivocal in its character” (7 Hill, 132). We are also of opinion that the instructions given to the jury were sufficiently favorable to the defendant, and that the requests' to charge were answered in the like spirit. None of the exceptions were well taken. The judgment and order appealed from are affirmed with costs.

Reynolds, J.

I concur. We agree that the complaint, so far as respects the statement of the original contract, should be conformed to the proofs and the finding of the jury, and it may now be so amended.  