Conklin v. Raymond

Houghton, J.: This action is for the- conversion through wrongful sale of stock which the plaintiff asserts belonged to him and which the defendants were carrying on margin. The plaintiff claims to have dealt with the defendants through [664] one Earle E. Carley. Carley was a member of the stock brokerage firm of Carley, Rosengarten & Carley, and'had had extensive dealings with the defendants. Prior to the purchase of the stock in controversy Carley had three separate accounts with' the defendants known respectively as .“Earle Carley Account,” which to the knowledge of the defendants belonged to the firm of Carley, Rosen garten & Carley, and “ Earle Carley Special Account ” and “ Earle Carley Short Account,” the two latter belonging to Carley individually. On the 19th day of November, 1900, Carley requested the defendants to open another account and to . purchase for him 500 shares of stock on margin, which the defendants assented to, and on Carley’s direction they purchased 100 shares of Consolidated Gas stock and notified him that they, had done so. Carley then requested that they open the account in his name as “ trustee ” and upon the defendants saying that they wanted no such account as that upon their books, he told them he did not care what it was called so long as it was understood that it was not his own but belonged to another man. Thereupon the defendants designated it as “E. E. Carley Special No. 2 Account ” and transferred to it the 100 shares of Consolidated Gas stock which had been purchased," and Carley gave them plaintiff’s check payable, to. himself for $2,500, remarking that the defendants1 could see for whom the account was opened. Thereafter 200 shares of New York Central .stock were purchased and placed to this account, an additional 100 shares that had been by mistake placed in that account being transferred to one of Carley’s individual accounts. The Consolidated Gas and New York Central stock was the only stock in the “ Carley. Special No. 2 Account ” up to the time of the sale, except that inters mediate 100 shares of Amalgamated Copper stock had been purchased and sold at a loss. The “Carley Special No. 2 Account” always showed a profit. About the middle of December some of Carley’s other accounts showed a loss, and on all three of his other accounts defendants demanded additional margin, which he did not pay. Defendants thereupon notified Carley that they would sell out all of his accounts, including the “No. 2,” unless the margin was ■ forthcoming, and Carley then told them that they must not sell the stock they were carrying in the “ Earle Carley No. '2 Account,” for those purchases were made on behalf of plain [665] tiff, and they could not apply the profit in that account to any deficiency in his other accounts. Notwithstanding this notice, the defendants transferred the stock and margin of the “ Earle Carley Special No. 2 Account,” or the “Earle Carley No. 2 Account,” as it was variously called, to the “Earle Carley Account,” which belonged to the brokerage firm of which he was a member and which had sustained the largest loss, and sold all of the stocks of all the accounts, realizing from the “ Earle Carley Special No. 2 Account,” which belonged to the plaintiff, a profit of $2,546.47. After paying all that Carley owed on ■ all his accounts, there was left a balance of $1,048.54, which the defendants insisted upon paying over to Carley, and which he finally accepted and receipted for. The agency of Carley was not formally terminated when this payment was made to him, and although he protested that the money belonged to the plaintiff, he finally accepted it. The trial court gave plaintiff judgment for the full amount, without any deduction for this payment. There are two distinguishing features which seem to me to fasten liability upon the defendants, and which distinguish the case from that of Timpson v. Allen (149 N. Y. 513) and Read v. Jaudon (35 How. Pr. 303), upon which appellants rely. The first is that the stocks were not purchased by Carley. for his general account or placed in his general account, but were kept apart in one of his separate accounts. The second is that, conceding the remark made by Carley when he handed defendants plaintiff’s check, that they could “ now * * * see whose account that is,” the defendants had actual notice before any sale of the stock that that carried in “ Special No. 2” belonged to the plaintiff. It is true that the defendants refused to carry an account in Carley’s name as '“ trustee.” They were content, however, to carry a separate account by a separate designation. There was, at least, notice to them that the stocks being purchased for the “No. 2 Account ” were not purchased by Carley generally. They were paid on-that particular account by separate payment all the margin they, required. They never demanded any further margin for that account, but only for Carley’s other accounts. They had neither bought any more stock nor foregone any further margins on Carley’s other accounts because of the “ No. 2 Account.” Their posi [666] tion was not changed in the least by the fact that the “ Ro. 2 Account” was opened, and they'never suffered any loss on account of it. Before they had changed their position at all, and before they had suffered any loss whatever that they would not otherwise have suffered from Carley’s other accounts, the defendants admit they were notified that they must not take the surplus in the “Ro. 2 Account” to meet any deficiency in any of the other accounts. Rotwithstanding this notice they transferred the “ Ro. 2 Account ” to the Earle Carley account to cover the deficiency existing therein. If the plaintiff had intrusted to Carley $2,500 for the purchase of stock on margin and Carley had bought stock for his general account and had mixed the stock and the money with his. own the situation would have been entirely different, and the defendants would have been justified in saying that he could' not sort out' particular stock and claim it belonged to somebody else, and thus stop its sale for the purpose of meeting any deficiency on the general account. I think the judgment was right, except that Carley’s agency not having been terminated I think the defendants should have been ' credited with the $1,048.54 which they paid to him, notwithstanding what took place at the time of-the payment. It is true that Carley protested that the money did not belong to him, but he was still plaintiff’s, agent. The release which Carley gave, in view of what took place when it was delivered* did not operate to wholly extinguish the plaintiff’s claim. It was only an individual release by Carley and the defendants had ample notice that Carley did not pretend or assume to give any release in behalf of the plaintiff. On the contrary, he told them that notwithstanding the release which he was giving, Conklin would hold 'them liable. Actual payment to an agent stands on somewhat different footing from the taking from him- of a release in behalf of his principal. The utmost that can bo done is to give defendants- credit for the payment and compel the plaintiff to look to Carley for the money which he received. , The judgment should be modified by deducting -therefrom the sum of $1,048.54,- with interest from the 12th day of January, 1901. and as so modified affirmed, without costs of appeal to either party. Laughlin and .Scott, JJ., ■ concurred; Ingraham and McLaughlin, JJ., dissented.