Schofield v. Jackson , 99 Conn. 515 ( 1923 )

The complaint describes the transaction of February 27th, 1920, as an order by the plaintiff to the defendant to buy for the plaintiff's account seventy-five shares of Ayer-Kempton stock at $60; and alleges that the defendant did not in fact buy any Ayer-Kempton stock for the plaintiff's account. The theory of the cause of action alleged, is that because the defendant did not buy the stock when ordered to do so, it had no right to charge the plaintiff's account with the purchase price, and no right thereafter to apply the plaintiff's cash margin and collateral in satisfaction of the debit balance thus created. Skiff v. Stoddard,63 Conn. 198, 26 A. 874, 28 id. 104.

The defendant's answer and counterclaim describes the transaction as of an entirely different character, as a purchase of the stock by the plaintiff directly from the defendant; and the court so finds the fact.

If this finding stands, as we think it must, it is apparent that the court did not err in giving judgment for the defendant on the issues raised by the complaint and the denials of the answer.

The plaintiff excepts to the finding that the transaction in question was one of purchase and sale between the parties, but the evidence annexed to the exception fails to support it. It appears from findings not excepted to, that defendant was under contract with the Ayer-Kempton Corporation to market an entire new issue of one thousand shares of preferred and two thousand shares of common stock; that the defendant was selling the stock to customers at prices fixed by the defendant, and that the plaintiff knew that the stock was not listed on the market, but was an original issue the sale of which the defendant was promoting. And the written memorandum which the plaintiff received and offered in evidence as Exhibit A, was a memorandum of a sale directly from the defendant to the plaintiff. It appears that the plaintiff made no objection to the memorandum, or to the statements of account thereafter rendered from time to time, as the reply admits. It is true that the plaintiff testified that his verbal order of February 27th was in form an order to buy the stock for his account; but the court was not bound to accept that statement, in view of the other facts showing that the plaintiff must have understood that he was buying, and had bought, part of an original issue of stock which the defendant was marketing.

The remaining questions in the case relate to the judgment for the defendant on its counterclaim. The counterclaim and the judgment, which allows interest on the debit balance of the plaintiff's account from February 27th, 1920, proceed on the basis of a present sale of the stock to the plaintiff on that date. Other terms of the transaction appearing from the defendant's Exhibit 2, signed by the plaintiff, were that all securities from time to time carried in the customer's account or deposited to protect the same, might be loaned or pledged by the defendant without further notice to the customer. The transaction differs from the ordinary margin purchasing contract, in that the defendant was bound to effect a valid present sale of seventy-five shares of Ayer-Kempton stock, instead of purchasing it for the plaintiff's account. After effecting the sale, the rights and duties of the parties were substantially the same as if the stock had been purchased on a margin for the plaintiff's account.

The principal controversy is as to whether a valid present sale was effected on February 27th, 1920. As the stock was not to be delivered at once, but to be carried on the plaintiff's account subject to sale or delivery on demand and payment of any balance due on the price, the defendant was not bound to have a certificate for the stock transferred into the plaintiff's name, for that would have made it impossible for the defendant to loan or repledge the stock without procuring a new assent and endorsement from the plaintiff. The defendant was required to do no more than to make a constructive delivery of seventy-five shares from itself as vendor to itself as pledgee. In order to do that, it must, on February 27th, 1920, have been the owner of seventy-five shares of Ayer-Kempton stock which it had a right to sell to the plaintiff. That is to say, it must either have owned a certificate or certificates covering seventy-five shares which it was free to sell and deliver to the plaintiff, or it must have been, by contract or otherwise, in a position to at once acquire or perfect title to seventy-five such shares independently of the consent of any other person; and it must thereafter at all times be in the position of a pledgee carrying seventy-five shares, though not necessarily the same seventy-five shares, for the account of the plaintiff subject to sale on request or delivery on demand and on payment of any balance due on the price. On compliance with these conditions, it would have the right to require the plaintiff to maintain a sufficient margin, and in default thereof to sell the stock and apply the proceeds to the credit of the plaintiff's account.

The defendant specifies several blocks of Ayer-Kempton stock which it claims to have been in a position to sell to the plaintiff on February 27th, 1920, and to deliver on demand and payment at any time thereafter; but we deem it unnecessary to refer to more than two of them.

It is found that on February 27th, 1920, the defendant had a certificate for fifty-four shares in the name of one Stempel, which was delivered by Stempel to the defendant to cover the balance of his account in view of insufficient margin under an agreement that the defendant could use the stock as it chose, either retaining it as collateral or selling it to make good Stempel's margin. This stock was pledged by the defendant with Stoneham Company as collateral for a loan, and remained so pledged until the loan was paid and the stock sold for the account of the plaintiff in January, 1921.

It is also found that the defendant's contract with the Ayer-Kempton Corporation provided that defendant should receive, as a bonus for placing the whole issue of three thousand shares of common and preferred stock, two hundred and fifty shares of common stock, and for placing any number of shares less than the whole an aliquot part of two hundred and fifty shares. The defendant claimed that on February 27th, 1920, sufficient of the common stock had been sold and transferred to customers, so that there was then due to the defendant from the Ayer-Kempton Corporation fifty shares of common stock. The court refused to so find and the defendant has excepted. The evidence certified on this exception consists of the testimony of the defendant's bookkeeper, supported by the defendant's ledger, Exhibit 1, that on February 27th, 1920, six hundred and seventy-four shares of the common stock had been sold and transferred to customers; and the testimony of W. A. Jackson that fifty shares of common stock was then due him on the contract on stock that had been fully paid for. No conflicting evidence is certified under this exception, and the evidence appears to be undisputed and based on books kept in the ordinary course of business. We think the finding must be corrected to show that fifty shares of common stock was by contract due the defendant from the Ayer-Kempton Corporation on February 27th, 1920; and it being further found that no bonus stock was issued to the defendant until May, 1921, when seventy-five shares were so issued, it seems that the defendant was on February 27th, 1920, in a position to sell to the plaintiff, and at all times thereafter was in a position to deliver to the plaintiff, seventy-five shares out of this bonus stock and Stempel stock.

It is assigned as error that the court, in its memorandum of decision, held that the burden of showing that the defendant did not have the stock was on the plaintiff, and since the counterclaim alleged a different transaction from that alleged in the complaint, we are of opinion that the court erred in so ruling. But the case is so clear on the finding as corrected, that the error was harmless. Thus corrected, the finding fully supports the judgment on the counterclaim.

The conclusion we reach makes it unnecessary to determine whether or not the defendant Bull was a partner in Jackson Company.

There is no error.

In this opinion the other judges concurred.