Lazare v. Allen (20 A.D. 616, 1897)

Bradley, J.:

; The defendants were brokers in the city of New York, doing busi7 ness in the firm name'jof Henry Allen &" Co., -The plaintiff became, their customer in a transaction by which 300 shares of the capital stock of the Louisville and Nashville Railroad Company were sold short on his account, ajbout September 12, 1893 (200 of the shares at 54f, and 100 shares, at 54¿), on a margin, for which the plaintiff deposited with the 'defendants' $1,000.

This was a speculative venture of the plaintiff, to be consummated by buying in the stocks, through the agency of the defendants, uppnthe direction of the plaintiff. They by their relation to the business undertook to obey his orders in that respect if he kept them protected by a sufficient fund to adequately cover the margin. It was within the contemplation of the parties to the contract that if the plaintiff, upon reasonable notice, should faff to do so, the defendants would be at liberty to; purchase' on his account for their own protection. On September twenty-sixth the plaintiff sent his order to the defendants to make the purchase of the stock to cover the sale short "before mentioned. The price of the stock had then fallen to fifty-one arid one-half on the market. A purchase at that price would have given the plaintiff a profit of $925. For the alleged failure of the defendants to obey that order the plaintiff seeks to recover as damages that sum, together with the,amount so deposited ■ with the defendants as margins. Upon such a state .of facts the plaintiff would have been entitled to recover the amount claimed. (Campbell v. Wright, 118 N. Y. 594; Rogers v. Wiley, 131 id. 527.)

But on the part of the defendants it is claimed that the plaintiff was in default in not furnishing money to make good and take care of the short sale; that as a consequence they had, on September twenty-second, bought in the stock on the plaintiff’s account at fifty-six, which purchase left to his credit only, sixty-four dollars and thirty-five- cents, and that he was entitled to recover only that amount. The purchase was made without any order from the plaintiff, and to support it as made on his account it was essential to the defense that it be made to appear that there was occasion to call upon the plaintiff to make further deposit for. the protection of the defendants, and that he failed to do so after having reasonable notice prior to the purchase to funish the money. (White v. Smith, 54 N. Y. 522.) This was the implied provision of the contract pursuant to which the sale of the stock short made by the defendants was to be taken care of by them on the plaintiff’s account and for which they remained responsible until the short sale was covered by purchase. There were no special stipulations in the arrangement between the, parties to take the transaction out of the general rule applicable to such ventures as between a principal and his broker’s agency.

On the part of the defendants evidence ‘was given tending to prove that on September eighteenth the' price óf Louisville and. Nashville Railroad Company’s stock ranged from fifty-three afid three-eighths, the lowest, to fifty-six at the highest; and that-on that day the plaintiff was informed by the defendants that the stock had advanced' to fifty-six, and that they would have to have more money immediately on that account or they could not carry it any longer; that the ¡plaintiff neither put up .any more money nor promised to do so; that on the next day the price, of the stock ranged from fifty-four and onedialf to fifty-five and one-eighth, and .Qfi September twentieth from fifty-four and' oneffourth to fifty-five; and that on each