
    Frank M. Gillett et al., Resp’ts, v. William I. Whiting, App’lt.
    
    
      (Court of Appeals, Second Division,
    
    
      Filed June 3, 1890.)
    
    Stock broker — Sale of stock carried on margin — Notice to customer.
    Where stock brokers purchase and hold stock for a customer on margins subject to his order, the customer undertakes to make good his margin within a reasonable time after notice to do so, and if this is not done the broker can sell upon giving reasonable notice; but if the broker sells without a demand to supply additional margin or notice that a sale will he made, the sale will be wrongful and operate as a conversion of the stock.
    Appeal from a judgment of the general term of the superior court of the city of New York, affirming a judgment entered upon a verdict at the trial term of that court.
    
      Joseph A. Shoudy, for app’lt; Ira D. Warren, for resp’ts.
    
      
       Reversing 14 N. Y. State Rep., 726.
    
   Haight, J.

This action was brought to recover losses which the plaintiffs claim to have sustained by reason of certain stock speculation by the defendant. The plaintiffs as brokers pur-1 chased for the defendant, upon his order, 200 shares of stock, he delivering them $400 as a margin. Subsequently the stock was sold resulting in a loss over and above the margin paid by the defendant, which loss is sought to be recovered in this action.

In submitting the case to the jury the defendant’s counsel requested the court to charge that in case the plaintiffs sold the stock without notice to the defendant as to the time and place of sale, by doing so they violated their duty to the defendant and converted the stock to their own use. The court refused to charge as requested and an exception was taken by the defendant It appears to us that this request was proper and that the charge should have been made.

The relation existing between the defendant as customer and the plaintiffs as stock brokers was that of pledgor and pledgee. The plaintiffs had undertaken to purchase and hold the stock for the defendant subject to his order. The defendant had undertaken to make good his margin within a reasonable time after notice to do so; and, if this was not done, the broker could sell upon giving reasonable notice. But if he sold without a demand to supply additional margin or notice that a sale would be made, the sale would be wrongful and operate as a conversion of the stock. Markham v. Jaudon, 41 N. Y., 235 ; Stenton v. Jerome, 54 id., 480; Baker v. Drake, 66 id., 518.

In this case there is no claim made that it was a custom of the plaintiffs’ office to sell without notice, which was understood by the defendant. The learned -general term was of the opinion that the fact of conversion did not go to the whole damages asked by the plaintiffs, but entitled the defendant to a reduction of the plaintiffs’ damages by the amount proven to have been suffered by the defendant from the sale at the particular time when it took place; and that no such amount was proven. We do not understand this to be the law. This action was based upon performance of the agreement by the plaintiffs in which they undertook to carry for the defendant the stock purchased, and if instead of performing the- contract on their part they converted the stock to their own use, they have no ground of complaint or cause of action against the defendant. This is not a case in which the customer is suing the broker for damages he has sustained by reason of a conversion of the stock by the broker, as was the case in Baker v. Drake, 53 N. Y., 211.

In this connection it may not be necessary to discuss the evidence bearing upon the matter embraced in the -request to charge, and we shall but briefly allude to it. The plaintiff Mills, upon his direct examination, stated that they repeatedly sent to the office of Scannell Brothers, where the defendant's headquarters were supposed to be and where he said he would 'be, that he must come up to the office' and put up more money, for the plaintiffs would not carry the stock on their own money; that not hearing from him, they sold out the hundred shares of North Western stock ■ at a loss of $775.

It subsequently appears that this sale took place on the 19 th day of October; that the remaining hundred shares of Ohio Southern stock was held until the 28th day of January, 1885, when it was sold. Upon his cross-examination he testified that the request for additional margin was after they had sold the first stock, and that that was the only request the witness made personally.

The witness Smith, who was plaintiff’s book-keeper, testified that the defendant told him to send notices for him to Scannell Brothers; that after the stocks had depreciated in value, and before the sale, he sent notices to him at Scannell Brothers calling for additional margin. On his cross-examination he testified that he did not deliver the notices himself; that he gave orders with regard to the delivery of them. He further stated, however, that on one occasion the defendant came into the office to see how his account stood and that it was the witness’ recollection that this was prior to the sale of the Northwestern stock; that after the sale of the Northwestern stock he showed him the account again showing a deficiency; that he asked the defendant if he would give some more margin; that he asked him twice; that he supposed the first time was about the 15th or 18th of October; that that occurred at the office. He further testified that he did not send the defendant any notice in reference to margin on the Ohio Southern stock; that it never required any more margin; that it was taking the two stocks together that showed a deficiency on account of margin.

It will be observed that it does not distinctly appear from this testimony that the demand for additional margin was made before the Korthwestern stock was sold, which is the stock upon which the loss to the plaintiffs resulted. Mills’ request was after the sale and there is no evidence showing that the notices ordered to be sent by the witness Smith were ever, in fact, delivered, and as to his personal interview he does not appear to be clear in reference to the time, but supposes it was about the 15th or 18th of October. These notices and interviews pertain to additional margin and not a word appears in reference to any notices that the stock would be sold. The defendant testified that he received no notice of sale or demand for additional margin. It consequently appears that the jury might have found that the notice mentioned in the request was not given.

It is claimed on the part of the respondent that after the sale of the stock the plaintiffs made out an account, presented it to the defendant, that the defendant accepted it and agreed to pay the amount, thus ratifying the sales as made. If this was true, it would be a complete answer to the error pointed out in the charge of the •court. But we are unable to see how we can determine whether or not this claim is true in fact. It is true that the plaintiff, Mills, and his bookkeeper, Smith, testify that the account was presented and the defendant promised to pay; but the question of credibility is involved in the testimony of a party, making a question of fact for the jury. The defendant denied that he ever promised to pay the account; that at the time he saw the plaintiff he had not received an account of the sale of the stock, but subsequently it was forwarded to him from St. Johns; that Smith met him downstairs after he got the account, and that he did not remember whether Smith made the statement sworn to by him or not; that he would not swear as to that. The plaintiffs asked the court to submit to the jury the question as to whether the defendant promised to pay, after knowledge of the transaction, which was done, thus treating the question as controverted, and we are unable to see how we can regard it otherwise upon this review.

It follows that the judgment should be reversed and a new trial granted, costs to abide the event.

All concur.  