Porter v. . Wormser

Andrews, J. This action is brought to open and review an account between the parties, commencing July, 1878, and ending August, 1879, of transactions in the purchase and sale of stocks and government bonds. The defendants were stockbrokers, and also dealers in government bonds on then own account. They purchased and sold upon the orders and for .the account of the plaintiff from time to time during the period mentioned, stocks to a large amount, upon which the plaintiff realized a profit of $30,000 or thereabouts, which was credited to him by the defendants in his account. The particular transaction between the parties, which is the subject of controversy upon this appeal, originated in an ex-ecutory agreement made on or about the 22d of May, 1879, for the purchase by the plaintiff of the defendants of $1,000,000 United States four per cent bonds at the average price of about 103T9y, and the sale of bonds to that amount by the defendants on account of the plaintiff on the 13th, 14th and 15th days of August, 1879, at an aggregate sum, which, after charg *441 ing interest on the purchase-price at the rate of three per cent per annum, and commissions on the sale, and crediting the July coupons, was $24,637.55 less than the sum the plaintiff was to pay for the bonds under the agreement of Hay. previous. This sum the defendants charged to the plaintiff in their account as the loss sustained by him in the transaction, and the right to charge this loss to the plaintiff is the only point now in controversy. The written evidence of the contract for the purchase of the bonds is contained in several sale notes delivered by the defendants to the plaintiff, dated the 22d and 23d of Hay, 1879, commencing “ Sold to D. H. Porter, Esq., by I. and S. Wormser,” and specifying the amount of the bonds sold, the, price, and stating that they were to be carried by the defendants for sixty days at three per cent interest per annum. Contemporaneously with the several transactions the cashier or bookkeeper of the defendants entered in their book of sales of bonds a statement, under appropriate headings, of the name of the plaintiff as buyer, the dates, the amount, the description and the price. These entries followed an entry of a sale to another person, in which the bonds sold to him were described as four per cent C’p. B’s,” and the bonds sold to the plaintiff were described in the entry by the abbreviation “ do.” written under the preceding description. On June 20, 1879, just prior to the departure of the plaintiff for Europe, the defendants gave to the plaintiff a writing, by which they agreed to carry the bonds, if not sold at the expiration of the sixty days’ arrangement, for “ further thirty days ” at three per cent interest per annum. The plaintiff in his complaint impeaches the item in the account of $24,637.55 first, upon the ground of fraud of the defendants, actual and constructive, in the origin of the transaction, by reason of which the plaintiff alleged, he was entitled to, and did, immediately on learning the facts, on the 6th day of September, 1879, rescind the contract of purchase; and second, that the sale of the bonds on his account on the 13th, 14th and 15th days of August, 1879, was unauthorized and constituted a breach of the defendants’ agree *442 ment to carry the bonds for ninety days, which time did not expire until August 21,1879. There is no suggestion in the complaint of any objection to the charge in question, except upon the grounds just stated. The plaintiff failed on the trial to prove the fraud alleged in the complaint. The evidence shows that the transaction was, in its origin, an executory agreement by the defendants, as vendors, to sell to the plaintiff, as vendee, $1,000,000 of government bonds at the prices mentioned in the sale notes, and to carry them for the time and at the rate of interest specified. The allegations of fraud were not only unproved, but' were disproved, and the first ground alleged in the complaint for impeaching the account may be dismissed without further consideration. Upon the facts hitherto stated, the sale of the bonds on the 13th, 14th and 15th days of August, 1879, was unauthorized, and furnished no foundation for charging the plaintiff with the difference between the purchase-price of the bonds and the amount for which they were sold. The plaintiff at the time of the sale was not in default. The contract to carry had not expired, and the sale cannot be regarded as the exercise by a vendor of personal property of a right to resell on account of the vendee, and to charge the latter for the loss, for the plain reason that such right in any given case does not come into existence, and can be exercised only after default by the vendee. (See Dustan v. McAndrew, 44 N. Y. 72; Mason v. Decker, 72 id. 595; 28 Am. Rep. 190.) If, therefore, there were no facts in the case except as so far stated, it would follow that the item of $24,637.55 should be expunged from the account. But the defendants rely for their authority for the sale of the bonds prior to the expiration of the time for which they were to be carried, and before the plaintiff was in default, upon a “ stop order,” so called, given, by the plaintiff on the 20th of June, 1869. This was. an order, in writing, directing the defendants to sell for account of the plaintiff and at his risk “ $500,000 United States four per cent bonds at 103, ex. July coupons and accrued interest; $500,000 do. at 103-¿- *443 do. do.; or at your (their) discretion, ‘ stop order,’ §500,000 United States four per cent bond at lOOf, ex. July coupons and accrued interest; $500,000 do. at lOOf- do. do.” The construction of this order presents one of the principal questions in the case. When this order was given, the contract made in Hay for the purchase and sale of the bonds had not matured and was still in full force. The market price of government bonds had declined, and the plaintiff was about leaving New York, where he resided, for Europe. He procured the extension of the time for which the defendants were to carry the bonds, as before stated, and concurrently therewith gave the “ stop order” in question. It is not controverted that the order related to the same bonds which the plaintiff had previously contracted to purchase. The definition of a “ stop order ” was given by Nathan, one of the defendants, in his evidence on the trial and was not controverted. He said, “ the meaning of a ‘ stop order ’ is to await a certain figure, and whenever this figure is reached, to stop the transaction by then selling or buying, as the case may be, as well as possible,’ ’ and was explained by another witness as follows, “ for instance, if you give a stop order at 109 or 110, you must sell as soon as the stock or bonds have sold at that price by some one else. If you «can sell at that price you must do it, but if you cannot, you must sell at whatever the price is after they have sold at that price.” The market price of government bonds continued to decline after June 20, and on the 13th of August they sold at the Stock Exchange for 101. This was the fiat price, carrying the accrued interest from July 1, when the last due coupons were payable. The defendants thereupon on the same day, acting upon the assumption that the “ stop-order ” price for $500,000 of the bonds, viz.: “ lOOf ex. July coupons and accrued interest,” had been reached, sold $200,000 of bonds on account of the plaintiff at 101. The next day (Aug. 14), government bonds sold at the Exchange for 10Of, and the defendants on the same day sold $300,000 of bonds on account of the plaintiff at 101 and lOOf. On the 15th of August they sold the remaining $500,000 at *444 lOOf, which, was the lowest market price of the day. The defendants construed the “ stop order ” as requiring them to .sell when the market price of the bonds should decline to 101-|- or 101J without the July coupons, or if sold after July 1, when the market price should equal 100j- and 100J plus the accrued interest from that date. The plaintiff on the other hand insists that the “ stop-order ” price referred to the flat price, and that the words “ex. July coupons and accrued interest,” mean “ without taking the July coupons and the accrued interest into consideration in fixing the price; that is when the bonds were selling for 100|- (or 100^) flat, as it is called.” It is apparent that the authority of the defendants to sell the bonds under the “ stop order ” did not become operative until either the upper or the lower limits fixed therein were reached in the market, and that it did not authorize a sale at any intermediate price. The latter proposition, however, is subject to the qualification resulting from the technical meaning of the words “ stop order,” as explained on the trial, that after a sale of similar bonds in the market in a transaction between third persons at the “ stop-order ” price, the power to sell under the “ stop order ” would immediately attach, and the defendants might then proceed to sell the bonds at such price as could be obtained, either above or below the price limited. It seems to be a decisive reason for rejecting the construction of the “ stop order ” insisted upon by the plaintiff, viz.: that the bonds were to be sold when they declined to 100J and 100£, or in other words, that the flat price was intended, that such construction deprives the qualifying words “ ex. July coupons and accrued interest” of any significance. A direction to sell at 100|-or 100j-, without more, would have expressed the exact meaning which the plaintiff attributes to the whole phrase “ 100-J or 100J ex. July coupons and accrued interest.” It is not we think difficult to understand the general purpose of the plaintiff in adding the words “ ex. July coupons and accrued interest ” to the price named in the order. This purpose plainly was to qualify the limit of lOO^or lOO-j-, so that the power of sale should not become operative until the bonds should sell for *445 these prices without the July coupons and without the accrued interest, or in other words, not until they had fallen to 100-J and 100J, the seller reserving the July coupons and the accrued interest. A sale of bonds “ex. July coupons,” means a sale reserving the coupons, that is, a sale in which the seller receives in addition to the purchase-price, the benefit of the coupons, which benefit he may realize either by detaching them or receiving from the buyer an equivalent consideration. In this case the bonds not having been sold until after July 1, the plaintiff presumably had the benefit of the coupons falling due on that day, and they were credited to him in his account. A sale at 100|- or lOCtj- with the accrued interest added -is precisely equivalent to a sale at 100|- or 100-j-, the seller reserving the accrued interest. In the one case the seller would receive the accrued interest as a part of the price of the bonds, and in the other he would retain an interest in the bonds, and the transaction would ordinarily be adjusted either by the seller cutting off the current coupon and retaining thereout the amount of interest accrued at the time of the sale, or the buyer, on delivery of the bonds, would pay the seller an equivalent amount in addition to the purchase-price. We think the first descending limit of the “ stop order ” was reached when government bonds of the description embraced in the contract, had sold in the market for a flat price, which after deducting therefrom the accrued interest, would leave 100£. The further point is taken by the plaintiff, that the limit of the “ stop order ” had not been reached August 13tli, when the first sale of $200,000 of bonds was made, assuming the defendants’ construction of the order to be the correct one. The lowest price for which government bonds sold on that day, according to the evidence, was 101. The highest of the descending limits in the “ stop order ” was 100£ and accrued interest from July lst¡ The accrued interest on government bonds from July 1st to August 13th (the day of the sale) was a very little less than one-half of one per cent, and by this difference the limit had not been, reached. The question therefore arises as to the effect of this transaction upon the rights of the parties. *446 It is important to bear in mind the relation in which the parties stood to each other at this time and the capacity in which the defendants were acting in making the sale. The defendants were vendors of the bonds. But in executing the authority conferred by the “ stop order ” they were agents of the plaintiff. They had no right to sell the bonds as vendors, until some default had occurred on the part of the plaintiff, but in selling the bonds they did not assume to act by virtue of any right as vendors, but only as agents under the “ stop order.” The sale when fully completed, in accordance with the order, would necessarily determine the state of the account between the parties, and show the loss or profit on the transaction. But this does not alter the fact, that in making the sale the defendants assumed to act as agents of the plaintiff under the “ stop order,” and not as vendors or owners of the bonds. It is the case then of an agent authorized to sell property for his principal, making a sale not strictly within his authority. Such a transaction gives the principal a right of action against the agent for any damages sustained by the former from the agent’s act. But if no damages have resulted nothing can be recovered, because both wrong and damage must occur to sustain the action. In this case not only were no damages shown, but on the contrary it affirmatively apjjears that the plaintiff was not injured by the sale on the 13th. On the next day (the 14th) government bonds declined in the market to- 100-| and the “stop order’’ limit was then reached, which entitled the defendants to sell the whole $1,000,000 of bonds, and they then proceeded to sell on the 14th and 15th of August the remaining $800,000. In Gruman v. Smith (81 N. Y. 25), which was an action by a broker to recover an alleged balance on a stock transaction, ascertained by a sale of stock without notice to the customer,, it was held that the plaintiff was entitled to recover such balance, subject to a counter-claim for any damages resulting to the defendants from the unauthorized and irregular sale, but that the customer could claim no greater benefit than would *447 have accrued to him if the sale had not been made. (See also Capron v. Thompson, 86 N. Y. 418; Story on Agency, §§ 222, 236.) It is further claimed that the sale of the bonds should have been made at the Stock Exchange, whereas they were sold between the calls at private sale. It is not claimed that they were sold under the market price. On the contrary they were sold at as high, and some of them at a higher price than similar bonds brought at public sale on the 14th and 15th. The “ stop order” contained no direction as to the manner of sale, and an agent authorized to sell the property of his principal, may, in the absence of special restrictions, sell in any usual or ordinary way. It'was shown that the bulk of sales of government bonds were made outside of the public board, at private sale, and nothing having been shown to impeach the fairness of the sale in question, the fact that it was a private and not a public sale was not a ground of objection. (See Pollen v. Le Roy, 30 N. Y. 549; Crooks v. Moore, 1 Sandf. 297; White v. Kearney, 2 La. Ann. 639.) It is claimed, however, that the defendants were themselves the purchasers of the bonds, and that the transaction was void for that reason. The principle is undeniable that an agent to sell cannot sell to himself, for the obvious reason that the two relations of agent and purchaser are inconsistent, and such a transaction will be set aside without proof of fraud. The claim that the defendants purchased the bonds themselves, is based upon certain notices in writing, sent by the defendants to the plaintiff, of the several alleged sales, headed “ Bought of D. M. Porter, Esq., by I. and S. Wormser,” containing a statement of the particular amount of bonds sold and the price and accompanied in each instance except one, by a letter signed by the defendants, referring to the notice inclosed. The defendant Hath an testified that the bonds were sold by the defendants, between the calls, at the offices of the different dealers in government bonds, and there is no evidence to the contrary, except the notices referred to, which the witness said, in answer to a general question, represented the transaction therein referred to. It is insisted that these notices, which the counsel characterizes *448 as “ purchase notes,” conclusively determine the point that the defendants were the purchasers of the bonds, and that parol evidence was inadmissible to show that they sustained any other relation to the transaction, or that in fact the bonds were sold to third persons. We think the defendants were not precluded from showing the real transaction, and that the rule that parol evidence is inadmissible to change or vary written contracts has no application. The notices were simply reports by an agent to his principal of his proceedings in the execution of the agency. The plaintiff impeaches the agent’s transaction, because upon the face of the reports the agent appears to have undertaken to execute an agency to sell, by selling to himself. It was, we think, admissible for the defendants to show the actual transaction, and that by mistake or inadvertence it was misrepresented in the written advices. The plaintiff was not prejudiced by the mistake, and the proof simply relieved the defendants from the charge of misconduct in executing the authority intrusted to them. But the plaintiff raised on the argument another question which, if it had been properly raised on the trial, would not be free from difficulty. It is now claimed that the original transaction in Hay, 1879, was the purchase and sale of coupon, as distinguished from registered bonds, and that the sale made by the defendants of $200,000 of bonds, August 13th, on account of the plaintiff, was of registered bonds, and that at least a portion of the bonds subsequently sold were of the same character. The sale of registered bonds it is insisted was not a sale of the same kind of bonds which the plaintiff bought of the defendants, or which they were by the “ stop order ” authorized to sell, and that the order, therefore, has never been executed, and that, except on the basis of such execution, no loss can be charged to the plaintiff. In respect to the character of bonds, contemplated in the original agreement of purchase, whether registered or coupon, the oral negotiation and the sale notes, gave no intimation. The evidence is that there was no specification of the particular kind of bonds in the oral negotiation, but simply an agreement of the plaintiff to buy, and *449 of the defendant to sell $1,000,000 four per cent government bonds, and the sale notes described them with no greater particularity. It was probably not at the time deemed material to which of the two descriptions of bonds the contract related. The evidence is that registered and coupon bonds have the same market value, and the reports of sales at the Stock Exchange, introduced in evidence, while they show fluctuations in the price of the same description of bonds on the same day, and also that registered bonds sometimes sold higher and sometimes lower than coupon bonds, they do not contradict the oral evidence. The defendants, however, entered the transaction in their books as we have stated, and in their account credited the plaintiff with the July coupons, and the plaintiff in the “ stop order ” refers to the bonds as coupon bonds. There is force in the claim that the contract of purchase, although indefinite when made, was made definite by the subsequent acts of the parties. The only evidence in respect to the character of bonds sold under the “ stop order ” is contained in the advice of the sale of $200,000 of the bonds on the 13th of August, in which they are described as registered bonds, and which concludes, “ shall endeavor to sell remaining 300 M.” The other advices refer to bonds sold without specification, whether registered or coupon. Upon these facts the court is asked to reverse the judgment on the ground that a sale of registered bonds was not a sale of the plaintiff’s bonds and furnishes no basis for charging him with any loss in the transaction. But this point was not raised by the pleadings or by any exception, nor so far as it appears was it suggested until the argument of the appeal. The plaintiff, before the action was commenced, had knowledge of all the facts bearing upon this question. He sets out in his complaint the particular grounds of objection to the account, but gives no hint of the objection now taken. He was silent upon this point during the progress of the trial. He made no requests for findings designed or calculated to raise this question. His requests for findings in respect of transac *450 tions subsequent to the original purchase were made with exclusive reference to the claim put forth in his proposed conclusions of law that the August sales were void, first, because they were not made at the price or prices limited in the “ stop order; ” second, because not made at the Stock Exchange; and third, because the defendants were the purchasers, or, having so represented themselves, were estopped from alleging to the contrary. Under these circumstances we are of opinion that the plaintiff is not in a situation to raise the point now suggested. The plaintiff further insists that the original contract of pur. chase was void by the statute of frauds, there being no note or memorandum of the contract signed by him. This ground was not taken in the complaint, and was raised for the first time in the requests for findings. The complaint in substance alleges the existence of a contract for the purchase of the bonds, and seeks to avoid the loss charged thereon on the ground of fraud in the inception of the contract, and be-' cause the sale under the “ stop order ” was made in disregard of the price limited therein. The general rule is that the defense of the statute of frauds must be pleaded, except where the complaint on its face discloses a case within the statute. It cannot be doubted that if the defendants had brought an action to recover a balance claimed to be due on the contract for the purchase of the bonds without disclosing whether the contract was oral or written, the plaintiff would have been bound to plead the statute to avail himself of its protection. The plaintiff having become an actor, and brought an action to impeach the account on grounds which implied the existence óf a formal contract, is not in a position to question the validity of the contract under the statute. (See Cozine v. Graham, 2 Paige, 177; Vaupell v. Woodward, 2 Sandf. Ch. 143; 2 Story’s Eq., § 755.) This conclusion renders it unnecessary to determine whether the various writings put in evidence are sufficient to satisfy the requirements of the statute, and constitute a note or memorandum of the contract signed by the purchaser. These are the principal questions in the, case. We find no *451 error in the record, and the judgment should therefore be affirmed. All concur. Judgment affirmed.