Hoogewerff v. Flack

Jones, J., delivered the opinion of the Court. This case was instituted by the appellee against the appellant in the Superior Court of Baltimore City upon a declaration consisting of the common counts and a special count as follows: “For that the defendant was and is a stock broker, and on or about the — day of August, 1903, agreed with the plaintiff to purchase for and deliver to the plaintiff two hundred shares of the stock of the Amalgamated Copper Company at the price of $53 per share and the plaintiff delivered to the defendant the sum of $5,800 with which to make said purchase as part payment of the purchase price, to wit, $10,600, and the plaintiff stood and has always been ready and willing to turn over and deliver to the plaintiff the balance of the sum necessary to pay in full for said shares of stock, to wit, the sum of $4,800 upon their purchase by the defendant, but the plaintiff says that the defendant has neglected and refused to deliver, to the plaintiff the shares of stock purchased or to be purchased by him and has utterly failed to comply *380 with his obligation under said contract whereby the plaintiff has been much damaged and claims $8,000 damages.” The appellant pleaded non-assumpsit, and not indebted, and three additional pleas to the special count in the plaintiff’s declaration. The first of these traversed the said count. The other two are summarized in the brief of the plaintiff as follows: “(2) that defendant was not a stock broker in the city of Baltimore, nor a member of stock exchange in said city, and was not a member of the stock exchange in the city of New York; that Amalgamated Copper stock was not dealt in at the Baltimore exchange and had to be bought, as plaintiff well knew, through a broker who was a member of a stock exchange in some other city where said stock was dealt in; that accordingly defendant placed plaintiff’s order with E. N. Morrison & Co., members of the New York stock exchange; that from time to time E. N. Morrison & Co. in accordance with the rules of said exchange, called upon defendant for certain sums of money as “margins” on said stock, whereupon defendant called on plaintiff for such sums, and at once on receipt thereof paid the same over to E. N. Morrison & Co. and that defendant never received any sum or sums from plaintiff other than those so as aforesaid paid over to Morrison & Co.; and (3) that the alleged contract was not a genuine purchase and sale, but merely contemplated a settlement of differences, and that all money received by defendant was by him applied to the purpose for which plaintiff had delivered it to him.” In his replications filed thereto the appellee traversed these special pleas and issue was joined thereon. The trial of the case resulted in a verdict and judgment against the appellant (defendant below) and he has brought this appeal. The questions presented for decision here arise upon two exceptions—one relating to the action of the trial Court in ruling upon the admissibility of evidence—the other to the rulings upon the prayers. There can be but little difficulty in disposing of the question raised by the first exception. It arose upon the offer in evidence by the plaintiff, in the course of the trial, of a ledger kept by the brokerage firm of E. N. *381 Morrison & Co. and certain accounts therein pertaining to dealings of the appellant (defendant below) with that firm. The appellant was being examined as a witness on his own behalf and upon cross-examination frequent references were made by the examining counsel to the book in question. Before the conclusion of the cross-examination the same was suspended, and a clerk in the employ of E. N. Morrison & Co. was called by the appellee as a witness with the view of laying a foundation for the offer in evidence by the appellee of this ledger and the accounts. This witness was asked. “State whether the book marked Ledger No. 5 Morrison & Co. which I hold in my hand was the official ledger of the firm of Morrison & Co.” Answer. “It is one of their books. Q. Is it one of their official ledgers showing transactions in their business? A. Yes sir; we call all the ledgers official. * * Did you make any of the entries? A. I doubt if you will find my handwriting in that book once. Q. What was your business? A. I was in the front office getting business, and I was in charge of the margins. Q. Do you understand the business of this company? A. Yes sir. Q. Do you understand these accounts? A. Yes sir. Q. Do you know that Mr. Hoogewerff (appellant) carried an account there? A. Yes sir. Q. What account is this on page 10 if you know? A. The account of S. E. Hoogewerff. Q. Is that a general or special account or what? A. That is no special account at all; he had no special account. Q. What was this account? A. His regular account, and he had an account No. 2. Q. And the account No. 2 was found on page 580? A. Yes sir. Q. You are familiar with that account? A. Yes sir.” The record then states “The plaintiff thereupon offered in evidence the ledger mentioned in evidence and the following accounts therein.” To this appellant objected and his objeo tion was overruled and the evidence admitted. The witness then upon cross-examination by appellant’s counsel was asked if he had anything to do with the making of entries in that book and answered “No;” that he might have put some entries in it when some of the other book-keepers were sick but it was *382 not his regular work. He was asked further what he knew about the correctness of the book and said he could only say the books were balanced up at certain periods and they were proved; and then what he knew as to the correctness of the charges or the crediting of the various items between the two accounts of the appellant, and said that he knew nothing of that; that appellant may have given an order on one account arid it may have been credited on another; that as far as that went he did not recollect it; or he (appellant) might have told them “to put this on the wrong account;” he could not remember. It will be observed that the ledger in question and the entries therein were offered and admitted-as original and substantive evidence of the facts indicated by these entries. The foregoing statement of the testimony, preceding and introducing this offer of evidence, is sufficient to make manifest the error of its admission. The entries in the ledger were not, or were not shown to be, original entries. The witness did not make them nor see them made, and expressly dis1 ' claimed any knowledge or recollection that would enable him to speak of their correctness but on the contrary suggested how they might be inaccurate. The principles, regulating the introduction of evidence of the character of that here in question, and determining its admissibility, have been so frequently explained and applied in our decisions and are so familiar in the text-books- that it is unnecessary to restate them here. Their application in sustaining the view we here express in ruling upon the exception, we are considering, will be sufficiently enforced by a reference to the cases of Owings, &c., v. Low, 5 Gill & John, 153; Lewis v. Kramer, &c., 3 Md. 265; McCann v. Sloan, 25 Md. 575—588. We cannot regard the admission of this evidence as non-reversible error as we understand the appellee to argue. It is very evident that the appellee thought that the entries in question afforded inferences going to the vital questions in the case; and, assuming them to, have been properly in the case, they were, certainly, from the appellee’s standpoint, not unimportant in view of the issues that had been made up under *383 the pleadings. The appellant questioned the accuracy of the entries—certainly did not admit that they correctly represented the facts. He explained how he was without efficient means of contradiction because all of his own memoranda relating to the subject of the entries had been destroyed in the fire which had recently reduced to ruin a large section of the city of Baltimore, Under the circumstances the appellant could properly insist that the evidence in question sought to be offered against him, should be so offered under the safeguards which the law wisely provides shall attend the introduction of evidence of this character, unless he had, in some manner, waived his right in this regard, or estopped himself from asserting it. It seems to be supposed that he waived this right because he had brought the book into Court and submitted to be questioned in regard to it in the cross-examination. If he was responsible for the physical presence of the book in Court he did not offer it in evidence, and could not have done so, against objection, without laying a proper foundation therefor. In his examination in chief as a witness there was no attempt to use the book nor any entry in it as evidence; and as far as appears from the record, as soon as the offer was made to introduce the book and its entries as evidence per, se the appellant’s objection was made. It is further, argued that appellant ought to be held as having waived objection to the admissibility of the evidence in question because of the reference to, and use made of, certain entries in the book in question by his counsel. But this was after the book had been admitted in evidence against the objection of the appellant; and was apparently in the way of rebuttal. The appellant had the right then to make reference to any proper matter of rebuttal afforded by the entries and cannot be held to have forfeited any other right because of exercising this. If the matter made use of by the appellant in this connection was not competent evidence in the cause it could have been excluded by seasonable objection. The ruling of the Court below in the first exception must be reversed. *384 Now remains the excéption to the ruling upon the prayers. The plaintiff offered four prayers and the defendant (appellant) three. Of these the Court granted the first and third of the plaintiff’s and rejected the second and fourth. The third of the plaintiff being granted in connection with the third of the defendant’s as modified by the Court. The defendant filed special exceptions to the first and third prayers of the plaintiff which were overruled. The Court granted the first prayer of the defendant, rejected the second and modified the third arid granted it as modified. The first prayer of the appellee after its preliminary recitals is as follows “and requested the defendant to purchase for the plaintiff two hundred shares of the capital stock of the Amalgamated Copper Company, at and for a price not exceeding $53 per share, with the understanding and agreement that if the stock was so purchased at said price for the plaintiff, that the plaintiff should pay on account of said purchase price the sum of $2,000 and make such other payments from time to time as might be required by the defendant until said stock was fully paid for; and if the Court, sitting as a jury, shall further find that the defendant did on or about the 7th day of July, 1903', notify the plaintiff that he had purchased said stock at said price, and that the plaintiff, on or about the 7th day of July., 1903, paid on account of said purchase price to the defendant the sum of $2,000 and thereafter made payments on account of said stock as demanded by the defendant amounting to $5,800; and if the Court shall further find that after making said payinents the plaintiff called for the delivery of said stock to him and held himself ready and willing to pay the balance in full, with interest thereon for said stock at the price at which it had been purchased and that upon said offer the defendant declined or for any reason refused to deliver the stock to the plaintiff, then the plaintiff is entitled to a verdict of $5,800 with interest, in the discretion of the Court.” The appellant filed special exceptions to this instruction assigning as one of the grounds therefor that there was, in the cause, no^legally sufficient evidence that the stock in question *385 was to be paid for in installments as the prayer assumed. The prayer was clearly obnoxious to this objection. The theory of the plaintiff (appellee) as to the transaction, between him the defendant (appellant) was that it was an outright purchase of the stock that the appellant was to make with a view to an actual delivery thereof to him (appellee) when he should pay the purchase price of the same. The theory of the appellant was that it was to be a purchase upon margin and not intended to be consummated by a delivery of the stock; but, in the parlance of the stock exchange, by a “settlement of differences” which is now well enough understood not to need to be here explained. Theappelle’s narr. affirmed that the appellant “agreed with the plaintiff to purchase for and deliver to the plaintiff two-hundred shares,” &c. In support of his theory and the averment of the narr. the appellee’s testimony as a witness in his own behalf, was that on the 6th of July, 1903, he was at the office of the appellant in Baltimore City where he was led to believe, from what he saw, and from his interview with the appellant, that the latter was carrying on a brokerage business, and while he was looking over the stock board that was up in the office having upon it quotations of the prices of stocks, &c., the appellant asked him what he (appellee) liked on the board, to which the latter replied that he liked copper; and followed this up by saying to appellant “if copper gets down to 53 I want you to buy me a couple of hundred shares,” to which appellant replied “all right” and the next day sent him a letter that the stock had been bought and asked in the letter for a payment of $2,000 “on account” for which the appelleesent a check; that further payments were made to the appellant upon calls made by him as follows: July 16th, 1903, $1,000; 23rd of same month, $1,000; 23rd of October following, $1,000; and a payment of $800, the date of which appellee was unable to give. The appellee was asked by his counsel the direct question whether he had had any talk with the appellant before the stock was bought “as to how much money he (appellant) wanted” the appellee “to pay on account.” To this *386 appellee replied “that was not mentioned.” His attention was also called, by his counsel, to the plea of the appellant to the effect that the stock was to be bought on margin and asked what he had to say about that, to which the answer was, “there wasn’t a word mentioned about that.” Now this evidence' of the appellee, taken by itself, in proof of the contract between him and the appellant, and to support his construction of it, and his theory as to the transaction in controversy, makes the contract one in which the appellant assumed- the obligation to make an actual purchase of the stock named, at the price named, for account of the appellee; and when he had done this and reported it to the appellee he would have had the right to call upon the latter for an immediate payment of the purchase price—or at least to call for payment to be made within a reasonable time. The appellee would have been under a corresponding obligation to take and pay for the stock upon receiving notice of its purchase and the readiness of the appellant to deliver it. The appellee, as a witness, gave no other testimony, in chief, nor did he offer any otherwise, of any usage or custom or of anything to give to the contract any other effect. Upon cross-examination the appellee testified that he had had, previous to the transaction in question, with the firm of McDonald & Hoogewerff, a brokerage firm, of which the appellant was ^ member, other dealings in stocks—once in Steel and twice in Amalgamated copper—the description of stock which was the subject of the contract here in controversy—and in all of these instances the deals were carried by margins and finally consummated by a settlement of differences without any delivery of stock being made or called for. It also appeared that at the time of the order of the appellee to the appellant the stock ordered was selling above 53—the figure at which it was to be bought. There was testimony on behalf of the appellant that the contract between him and the appellee was one to purchase the stock in question on a margin contract to be consummated as the other contracts, mentioned by the appellee in his cross-examination, had been. The fact then that the payments *387 thereunder were called for and made, as they are shown to have been, from time to time, went to support the theory of the appellant as to the nature of the transaction in question and was contradictory of the contract which the appellee’s testimony had tended to show. The instruction granted by the Court in this first prayer of the plaintiff deprived the appellant of the proper effect of this fact in the case upon his contention, because putting it to the tribunal that was to pass upon the facts to find that the plaintiff “requested the defendant to purchase for the plaintiff * * * stock * * * at and for a price not exceeding $53 per share, with the understanding and agreement that if the stock was so purchased at said price for the plaintiff, that the plaintiff shall pay on account of said purchase price the sum of $2,000 and make such other payments from time to time as might be required by the defendant until said stock was fully paid for,” was to instruct that, contrary to the fact of the payments for the stock having been made in the manner they were, going to support the contention of the appellant as to the character of the transaction in question, there was evidence to bear out the assumption that the plaintiff had made the payments in exact accordance with the terms of the contract and according to his strict contractual right. This was done too by importing into the contract between the parties terms which upon the plaintiff’s testimony and from the plaintiff’s standpoint were not in it; and which he did not, in his testimony, claim to be in it; but which, it may be said, he repudiated. For the reason given the special exception to the plnintiff’s first prayer should have been sustained and the prayer refused. It is not open to other objections urged against it. It was framed upon a proper theory for a case such as this and it cannot be said that the Court ought to have refused it for a want of evidence otherwise than has just been indicated. The appellant was not employed in the capacity, simply, of an agent to negotiate a contract between the seller of the stock and the appellee. He undertook to purchase the stock and when this was reported to the appellee, and he was called *388 upon for payments on account of the purchase price this carried with it the obligation, assuming the transaction to be a bona fide one, according to the theory of the appellee, “to have at all times in his name or under his control the shares purchased or an equal amount of other shares of the same stock and upon receipt of the amount due him thereon to deliver the shares to the client or to sell them as the client may direct and account to him for the proceeds.” 26 Am. & Eng. Ency. of Law, 1057; Rosenstock v. Tormey, 32 Md. 169. While the appellant could, under the circumstances indicated in his pleadings and in his proof, rightfully employ in the purchase of the stock, the agencies that he did, so as to fix upon the appellee the obligation to take and pay for the stock so purchased, when called upon to do so (32 Md. 169, supra), he could not, because of having employed such agencies in making the purchase, relieve himself of the reciprocal obligation to get and keep control of the stock so as to be able to deliver the same to, or dispose of it according to direction from the appellee when the purchase price was paid and the stock demanded, if we assume the truth of what the appellee affirms in his pleadings and which he offered evidence to support —the weight of the evidence being for the tribunal trying the facts. We do not agree either with the contention that the prayer in question states incorrectly the rule of damages in a case such as this. Here again must be assumed as true the matter affirmed in the appellee’s pleadings and in the evidence he adduces in support thereof, then we think the fair rule applicable to the right of a plaintiff to a recovery in a case of this character is stated in the authority just quoted, 26 Am. & Eng. Ency. of Law, 1066, as follows: “Where a broker does not obey his client’s orders in making actual sales and purchases, but reports to him fictitious transactions, the client may recover from the broker any money or other securities deposited as margins or any payments made to the broker in settlement of such transactions.” There can be no difference in principle between a loss occurring to a client from conditions described *389 in the foregoing quotation and one occurring from a report to the client which leaves him under the belief that the stock has been purchased and is under the control of the broker employed when in fact it is under the control of others of whom the client knows nothing. In this case this latter condition was alleged and evidence offered designed to show it the weight of which, we may again repeat, is for the tribunal that tries the facts. We do not understand the case of Dutch v. Warren, cited in Moses v. McFerlan, 2 Burr. 1010, and in Murphy v. Barron, 1 H. & G. 258, to have been adopted in this State as to the point to which it was cited. That case however was unlike the one at bar in that the transaction there was a direct transaction between vendor and vendee. We do not mean therefore to express any opinion here as to the authority of that case in a state of facts such as formed the basis of the decision therein. It is not perceived how the hypothesis of fact in the appellee’s third prayer could form a basis of recovery for the plaintiff. From what has already been said in passing on the first prayer the appellant had a discretion to purchase the stock in question, as he did, through the agencies he employed and in his own name—and he did not need the knowledge, consent or subsequent ratification of the appellee to so purchase. The appellee’s order for the stock was without restriction as to the purchase of the same except as to price; and under the authority of Rosenstock v. Tormey, supra, the appellant had the discretion to execute the order as he did and there was no failure of duty in that regard. What appellant was responsible for was the control of the stock after the purchase was made. Such liability as attached to him arose from his not having control of the stock when it was demanded. As he had on him the risk of giving control of the stock to Morrison & Co. instead of retaining it himself it made no difference whether he paid over to that firm the monies he received from the appellee “as and when” payments were made to him by the appellee or not. If he had with Morrison & Co. all the *390 time the transaction' was in progress sufficient to his credit to protect the stock with them and could have delivered the stock when called for his duty in that regard would have been performed; and he would have had the right to protect himself by calling upon the appellee for the necessary or proper amounts to that end, as the occasion arose, without immediately paying them over as the prayer by its terms required. For the reasons assigned the third prayer of the plaintiff ought to have been refused. (Decided June 20th, 1905.) The reasoning leading to the conclusion, reached in regarcL»-' to the appellee’s third prayer will require the affirmance of the rejection of the appellant’s second prayer. That the appellant exercised the discretion he had, as to making the purchase of the stock in good faith and paid over the monies received from the appellee to Morrison & Co. did not, upon the assumption made in passing on other propositions, of the- truth of what is affirmed in the pleadings of the appellee, relieve the appellant of liability for not having control of the stock so as to deliver it when the price was tendered and the same demanded. In other words a broker cannot, in the circumstances indicated, make a contract through a sub-agent which will in all respects be binding upon his customer; and at the same time shift to the sub-agent, to the relief of himself therefrom, the obligations, nor any of them, that the contract imposes upon him. •We see no objection to the appellant’s third prayer as modified by the Court. It follows from the foregoing expression of views that the judgment below must be reversed. Judgment reversed with costs to the appellant, and new trial awarded.