Allen v. McConihe — 36 N.Y. St. Rep. 262

Majority

p. 262

Frederick P. Allen, Assignee, App’lt, v. Isaac McConihe, Resp’t.^[1]

(Court of Appeals, Second Division,

Filed February 24, 1891.)

Headnote

Stocks—Measure op pamageb Fo:q disregard op orders to sell.

O. 0. & Co., stock brokers in Troy, purchased certain stock through their N. Y. agents for defendant upon a margin. Defendant gave the brokers orders to sell at a price fixed, which they disregarded, although the shares could have been sold for that price at any time between August 15th and 20th. Subsequently O. 0. & Co. failed, and their N. Y. agents, to whom they were indebted, and who did not know the defendant in the transaction, closed out the stocks at a lower price than that fixed. Held, that defendant’s measure of damages was the difference between the price he fixed and that at which the N. Y. agents sold.

Appeal from a judgment of the general term of the third judicial department, which affirmed the judgment entered on the report of a referee.

p. 263

From. May 1, 1883, to October 7, 1887, Ó. Parish Ogden, John F. Calder and Grouverneur Ogden were partners under the name of Ogden, Calder & Co„ doing business as stock brokers at Troy, ISf. Y. During this period the firm had been accustomed to accept the orders of the defendant for the purchase and sale on the Mew York Exchange of stocks and bonds. The purchases were always made and carried on margins usually equal to ten per cent of their market value. The firm had no connection with the stock exchange, but made its purchases and sales through Work, Strong & Co., brokers in the city of Mew York, who bought and paid for the stocks ordered and carried them on margins for Ogden, Calder & Co. The Mew York brokers did not know the defendant or that he was interested in any of the transactions, and he was not informed that the stocks ordered purchased by him were not paid for by Ogden, Calder & Co., but were carried by the Mew York brokers on margins and held as security for whatever might be due them on general account from the Troy firm. About May 31, 1887, Ogden, Calder & Co. delivered to the defendant a statement of the account between them made up to that date, which showed the amount due from him to them and that they held for him, among other securities, 600 shares of Manhattan Consolidated stock. On the loth of August, 1887, the defendant directed Ogden. "Calder & Co. to sell 300 of the Manhattan shares for $111 per share. The shares could have been sold for that price at any time between August 15th and 20th, when they fell in the market and did not again sell for as much until after October 11th of that year. Ogden, Calder & Co. neglected to sell as directed and did not notify the defendant of their neglect until August 29, 1887. On the 31st of that month Ogden, Calder & Co. rendered a statement to the defendant showing the securities purchased by them for him, the amount due them on account, and that they had sold on the 29th of the same month (pursuant to his direction given on that date) 100 Manhattan shares for $109.75 each, and had on hand 500 shares.

The referee found that the defendant never assented to, waived or acquiesced in the failure of the firm to sell as directed.

October 7th Ogden, Calder & Co. made a general assignment for the benefit of creditors to the plaintiff, and on the 10th, 11th and 13th of that month Work, Strong & Co. sold the 5Ó0 Manhattan shares at ninety-seven dollars 'each and credited the avails to Ogden, Calder & Co., whose assignee in turn credited them to defendant.

This sale was made without the knowledge of defendant, and he was not at that time in default with the Troy firm. January 31, 1888, the plaintiff rendered an account to the defendant, showing that $8,841.86 was due from him, which the referee found to be correct, less $4,200, the difference between the price of 300 Manhattan shares at $111 and $97, with interest from August 16, 1887, which was allowed the defendant, and judgment ordered for plaintiff for the remainder. .

(7. B. Wellington, for app’lt; J. K. Long, for resp’t.

Ogden, Oalder & Oo. undertook upon a sufficonsideration, by way of commissions paid and margins furnished, and to be furnished, by the defendant, to carry the shares and sell them as directed, or deliver to him certificates for them on payment of their purchase price. This promise the plaintiff admits that his assignors broke by refusing to sell 300 shares for $111 each on the 15th of August, 1887, as directed, and in permitting Work, Strong & Co. to sell them in October following for $97 each on account of an indebtedness owing them by Ogden, Oalder & Oo.

The referee allowed the defendant as damages for the breach of this promise $14 per share, the difference between the price at which they should have been sold August 15th and the price at which they were sold in October.

The general rule for determining the amount of damages recoverable for the violation of a contract or the breach of a duty, is that-the injured party is entitled to such as are the natural (or to be apprehended) direct and immediate results of the breach. Griffin v. Colver, 16 N. Y., 489 ; Hamilton v. McPherson, 28 id., 72; Hadley v. Baxendale, 9 Exch., 341; May on Dam., 10.

This rule is subject to the qualification that if the person injured thereafter negligently suffers his loss to be enhanced, the increase so occasioned cannot be recovered from the person who first violated his contract or duty, and in some cases it is incumbent on the person damnified to take such active measures as he reasonably may to minimize the damages naturally flowing from the breach. Hamilton v. McPherson, 28 N. Y., 72 ; Johnson v. Meeker, 96 id., 93-97 ; Suth. Dam., 148; 1 Sedg. Dam. (7th ed.), 56; May on Dam., 86.

These rules are not questioned by the learned counsel for the plaintiff, nor does he deny that the damages recovered were the natural direct and immediate result of the failure of Ogden, Calder & Co. to sell the shares on the 15th of August as directed, and of their assignee’s permitting them to be sold in October following, but he contends that the defendant was not entitled to this measure of damages, because when he learned on the 28th day of August that his instructions to sell had not been executed, he did not notify Ogden, Oalder & Co. that he abandoned all claim to the shares and held them responsible for their value, and cites as authority for his position Whelan v. Lynch, 65 Barb., 326 ; reversed 60 N. Y., 469 .

In the case cited the plaintiff consigned wool to the defendant for sale, and on the 26th of October, 1864, directed its sale at the market rate, which instruction the defendant disregarded, and on the 24th of April following the plaintiff gave the defendant this notice: “ In as much as you failed to sell my wool when you received orders to do so, you can do with it as you please; I withdraw from the matter and look to you.”

In April, 1867, an action was begun to recover the value of the wool (it not having then been sold) and it was held that its market price when the order to sell was given or in a reasonable time thereafter 'for effecting a sale was the measure of damages.

p. 265

In that case the plaintiff sought to recover the full value of the wool, the title to which was originally in him, and not the difference between the price on different dates.

In the case at bar the defendant never held the legal title to this stock, and there was no way in which he could sell it, except through his broker's, without paying its purchase-price, taking the certificates and then selling them, which he was under no obligation to do for the protection of his defaulting agents. The shares were held by Work, Strong & Go. as security for any indebtedness of Ogden, Oalder & Co. to them, and the latter firm had the legal right to sell the shares at any time after August fifteenth and before the former firm exercised their right to sell them for their own security. Had the defendant’s • agents exercised their right they would have avoided the loss occasioned by the further decline. This is not a case of the failure of an agent to obey a direction to sell shares or chattels, the .legal title to which is then, and after notice of the agent’s neglect to sell remains in the principal, in which case the latter should either sell the property within a reasonable time or permit his agent to sell, so as to render the loss as slight as possible.

The learned referee adopted the correct rule of damages. It appears from the plaintiff’s bill of particulars and from the evidence that October 1, 1887, the defendant was credited by Ogden, Oalder & Co. with $750 dividends received on 500 Manhattan shares, three-fifths of which, $450, it is said by counsel, arose from the shares in dispute, and it is urged that if the plaintiff is chargeable with the shares at $111 each, as of August 16,1887, he is entitled to all dividends thereafter declared. This is quite apparent, but the difficulty of correcting the supposed error in this court is in the rule which forbids it to look into the evidence for errors or reasons for modifying or reversing a judgment, and the referee not having found that this credit arose in part from a dividend on the disputed shares, and not having been asked so to find, the alleged error, if any there be, cannot be here corrected. For the same reason we cannot modify the judgment by allowing the plaintiff $56.25, which he asserts should be allowed him as the usual commissions for selling the shares if he is to be charged with their value.

The judgment should be affirmed, with costs.

All concur.