Cordova v. Barnum

The plaintiff was a stock broker, and brought this action to recover of the defendant a balance of account representing the losses upon the purchase and sale of certain stocks made by the plaintiff at the request of the defendant and upon a margin.

The transactions and the amount due the plaintiff upon them were established by the evidence, and the judgment should be affirmed, unless errors to the prejudice of the defendant were committed upon the trial.

It appeared from the evidence that during the pendency of the stock transactions in question, the defendant assigned to and deposited with the plaintiff fourteen shares of the Arms Horse Palace Car Company's stock to protect plaintiff from loss on the stock transactions. The defendant’s speculations were unfortutunate, and he finally gave plaintiff an order to sell out at the best lie could get, and plaintiff did so. The plaintiff still holds the Horse Palace Car stock.

The defendant asked the court to hold or to instruct the jury that the plaintiff could not maintain this action without showing that he had used all reasonable means to realize upon the fourteen shares of stock which he held as collateral; that it was plaintiff’s duty to advertise and sell it, and credit defendant with the proceeds or to return it to defendant before this action was brought. The court refused to hold as requested. The defendant offered to prove the value of the fourteen shares of stock; the plaintiff’s objection to such proof was sustained.

In these rulings no error was committed. The plaintiff held the fourteen shares of Horse Palace Car stock as collateral security to protect him from loss. There was no special agreement that the plaintiff should first realize upon the collateral before bringing an action against the defendant to recover the debt due him, and, therefore, the plaintiff was not required to realize upon the collateral before resorting to this action. Butterworth v. Kennedy, 5 Bosw., 143 ; South Sea Co. v. Duncomb, 2 Strange, 919; Lawton v. Newland, 2 Starkie, 72; Emes v. Widdowson, 4 Car. & P., 151; Elder v. Rouse, 15 Wend., 218 ; Colebrook on Collateral Securities, 136; Jones on Pledges, § 590.

The defendant offered to prove by a witness that it was the custom of stock brokers when collateral security was put up as a margin and the account became reduced sufficiently to jeopardize it, to advertise and sell the collateral security and to charge his customer with the balance, and that such was the usage of the plaintiff known to the defendant at the time the margin was put up, and at the time of closing the account.

The court was justified in sustaining the objection to this offer because the plaintiff sold out defendant’s stocks upon defendant’s express order, and not to protect himself because of a shrinking or exhausted margin. Whatever the custom of brokers may be while the speculation is pending, it can have no application to the broker’s right to recover what is due him after he has carried his customer’s stocks as long as requested, and finally sold them pursuant to his express order.