Kennedy v. Budd

The action was brought to recover a balance due to the plaintiff upon closing out a stock account between the plaintiff’s testator and the defendant. The case is presented to us upon a bill of exceptions; the plaintiff having, with great care, inserted only so much of the evidence as is necessary to show precisely the rulings made, and the questions which are sought to be presented upon the appeal. This mode of preparing the case for review by the appellate court cannot be too highly commended. It relieves the court from the burden of examining a great mass of testimony in which, far too often, the questions sought to be raised are covered up, and presents the case for decision clearly and plainly. It is to be regretted that this manner of preparing cases, when the only question involved is one of law, is not more often resorted to.

Harvey Kennedy & Co., who were stockbrokers, began in the year 1887 to buy stocks for the defendant upon a margin advanced by her. Stocks were bought, with more or less frequency, down to the 8th day of October, 1888, at which time the last purchase was made. Harvey Kennedy, the broker, died in December, 1889; but the transaction does not seem to have been actually closed out until some time in 1892, when the plaintiff, as executor of Harvey Kennedy, upon notice to. the defendant, sold out the stocks, and demanded of the defendant payment of. the balance due as the result of the operation. Upon her refusal to pay, this action was brought. As the result of the action, the court ordered a verdict for the defendant, and from the judgment entered upon that verdict this appeal is taken. The verdict was ordered upon two grounds: First, that the claim was barred by the statute of limitations; and, second, that

It appeared that, when the purchase of stocks for Mrs. Budd began, Harvey Kennedy was doing business under the name of Harvey Kennedy & Co., and that at that time he actually had partners interested with him. During the dealings with Mrs. Budd, however, the partnership ceased to exist, but nevertheless Kennedy continued business under the name of Kennedy & Co.; and it is insisted by the defendant that in so doing he rendered himself liable to punishment under section 363 of the Penal Code, which provides that any person who transacts business, using the designation “& Company,” or “& Co.,” when no actual partner or partners are represented thereby, is guilty of a misdemeanor. The defendant claims that as such a mode of transacting business is a crime, under the statute, the court will not, as a matter of public policy, permit one engaged in business thus contrary to the statute to maintain any action upon a contract thus made by him in defiance of tne law. This statute has been regarded by the courts as a highly penal one, and it will not be extended to any case not clearly within it. Wood v. Railway Co., 72 N. Y. 196 . The object of the statute is to protect persons giving credit to fictitious firms on the faith of the fictitious designation, and it is not needed to protect those who obtain credit from such a firm. For that reason it has been held that, where a firm thus carrying on business "gave credit to one who dealt with it, it was not precluded by the fact that the designation was fictitious from bringing an action to recover the amount which was due to it from the person to whom it had thus given credit. Gay v. Seibold, 97 N. Y. 472 . Within the authority of this case, the objection made by the defendant, that the plaintiff should not recover because Kennedy was engaged in business under a fictitious name, was not well taken.

A more serious question, however, arises upon the plea of the statute of limitations. The transaction between Mrs. Budd and Kennedy, as it appears from the case, was that Kennedy, at her request, bought stock for her upon margins, which she paid, and that he paid the balance due upon the stock, above the margins advanced by her, and held the stock as security for those balances. The claim of the defendant is that upon each purchase of the stock she became liable to pay to Kennedy the amount which he advanced to complete the transaction, and that a cause of action accrued to him at once for the amount so advanced. She says that, as the cause of action accrued immediately upon the advance of the. money, the six-years statute of limitations began to run, and that consequently, as this action was begun more than six years after the last transaction was had, the right to recover was barred by that statute. Whether this position is well taken, or not, involves an examination into the nature of the contract between the parties, which quite clearly appears from the evidence spread upon the record. It was the ordi

The case of De Cordova v. Barnum, 130 N. Y. 615 , 29 N. E. 1099 , is not adverse to this conclusion. In that case, instead of putting up a margin to protect the broker from loss, the customer had deposited shares of stock in the place of margin, upon the purchase of other stock of another kind. The stock, which had been bought for speculative purposes,, had been sold, and the action was brought by the broker to recover the balance due to him upon the close of the transaction, which, of course, had resulted in a loss to the customer. It was claimed that the stock put up for a margin should have been sold before the action was brought for the balance, but the court held that as to that stock the parties occupied strictly and only the position of pledgor and pledgee, and that it was not necessary to sell the pledge before suing for the amount of the debt which the pledge was given to secure. The distinction between the two cases is obvious, and it is quite clear that the ruling in that case has nothing to do with the relations of the parties connected with the stock purchased for speculative purposes.

For these reasons the judgment must be reversed, and a new trial granted, with costs to the appellant to abide the event. All concur.