Rosenstock v. Tormey

Miller, J., delivered the opinion of the Court. This action was brought by the appellee, against the appellant and Louis Rosenstoek and Jacob Hoflin jointly. The latter was returned non est, and the case proceeded against the other two. The declaration contains the common counts in assumpsit, to which the general issue was pleaded. The cause of action, according to the testimony offered by the plaintiff, arose thus: The plaintiff' ivas a stock broker, doing business in the city of Baltimore, and on the 4th of October, 1866, Nathan Hoflin, who, for some time, had been dealing with him in a similar way, under the name of J. Hoflin, came to the plaintiff’s office and ordered him to buy one hundred shares of Illinois Central railroad stock on the joint account of J. Hoflin and his two co-defendants. The plaintiff immediately, and, as ho states, according to the course of trade and the regular custom of the business, wrote to his correspondents, Dibble & Cambloss, brokers in New York city, directing them to purchase, and they accordingly bought the stock at $128 per share, and he paid them the purchase money ($12,825) therefor. The defendants failed to pay hinq and subsequently, on the 16th of April, 1867, after notice to the defendants, and according, also, to the due course of trade and the custom of the particular business, he directed Dibble & Cambios to sell the stock in New York, and it was there sold by them and brought but $11,400. The plaintiff now seeks to recover the difference between the amount thus paid in the purchase and that realized from the sale of the stock. Before examining the questions raised by the exceptions, we deem it proper to state generally the legal relations, duties and obligations of the parties growing out of this order, and what was necessary to be done in its execution, and the subsequent sale of the stock, to entitle the plaintiff to recover under the pleadings in this case. Assuming, for the present, that Hoflin was duly authorized to give the order for and on behalf of the defendants, the plaintiff thereby became and was constituted their agent to execute it, and if) by reason of — 178 — its due execution, he expended money and incurred loss, he can recover it back from his principals under the count for money paid by him for them at their request. This is the sole count in the declaration relevant to the case as now presented, and only by sustaining that count can a recovery be had. The order is general in its terms not directing the purchase to be made in any particular place or mode, and not containing any restrictions as to price. We are, therefore, of opinion the plaintiff had the right to make the purchase, as he alleges he did, in New York, through correspondents, brokers or sub-agents, residing and doing business in that city. He must show, however, that the stock was actually purchased under his directions, by his New York agents, at its fair market price, on the day of purchase, and that he actually paid the purchase money therefor. Having thus made the purchase and expended his money, it was his duty to notify his- principals of the fact, and request them to receive the stock and pay him the price he had paid for it, with usual and reasonable commissions for making the purchase. At the time of this notice, he must show he was in a condition to deliver or transfer the stock by having the certificates, ©r other proper indicia of title actually in hand, or in the hands of his New York agents, ready to be delivered or transferred to the defendants. Upon receiving this notice, it was the duty of the defendants to pay for and receive the stock, and on their failure to do so, the plaintiff had, in our judgment, the clear right after a reasonable time, and after giving notice to that effect to the defendants to direct it to be sold in New York, and upon showing, by legal and competent proof, that it was actually sold by his agents, either at public sale in market overt, or at a sale publicly and fairly made at the stock exchange or stock board, or a brokers’ board, where such stocks are usually sold, at its fair market ■ value, on the day of sale, he is entitled to recover from the defendants the amount, if any, of the resulting loss. In a transaction so conducted and carried out, we discover nothin»; — 179 — illegal or contrary to public policy; it is but the proper execution of a legitimate business order for the purchase' of a valuable commodity, a common article of sale in the market, out of which legal rights and obligations arise which Courts of Justice will sanction and enforce. Usage and custom of trade and business have been relied on by the plaintiff, who, in his testimony, says that in this transaction he had done all that was usual and customary in the purchase and sale of stocks, and had followed therein the due course of trade and the custom of the particular business of buying and selling stocks on orders. In a recent case decided by the Court of Exchequer, in 1869, (Maxted vs. Paine, 4 Law Reports, Court of Exch., 210,) some very forcible and pertinent observations on the subject of usages of the Stock Exchange were made by Baron Cleasly. “I do not wish,” says he, “to be understood as expressing an opinion that the plaintiff would be bound by any usage which a Court of Law would consider unreasonable. I think, on the contrary, he would not, unless he had actual notice when he authorized the contract to be made, of the particular usage. A man may, of course, if he thinks proper make a contract with any stipulations in it which are not unlawful, as for instance, that he will not enforce it without the authority of some particular officer or committee; but such a usage would not; I think, bind a person having no connection with the Stock Exchange and no actual knowledge of its usages, simply because he employed a stock-broker, to contract for him even though it was within the authority of the broker to make the contract on the Stock Exchange. It is true the jobber contracts with the broker according to the usages of the Stock Exchange, but if he knew and he generally does know that the broker was contracting for an outside principal, then he could not say as against that outside principal the contract is an act which according to our usages cannot be enforced. It seems to me that in the proper view it is a question of principal and agent, and what is the agent’s authority. If the principal forbids — 180 — the broker to bargain for him according to the peculiar usages of the Stock Exchange, and limits his authority to specified contracts, the broker could not bind him to a contract to be performed according to those usages. But if he does not limit his authority then there is an implied authority to deal according to the usages of the Stock Exchange. But this, like other implied authorities, would be limited to such usages as are not unreasonable. Being implied by law it is in' that way limited by the law; the law does not imply a contract or authority with terms which it regards as unreasonable. The members of the Stock Exchange if they enter into ordinary contracts with strangers, cannot by their usages make the law inapplicable to them ; rather the law as superior must apply to them and it recognises the usages as modifying the authority but only so far as are reasonable. The contract having been made both parties are bound by it, not by the usage of the Stock Exchange, but by the power of the common law, and the usage of the Stock Exchange is properly introduced for the purpose of showing the manner in which the contract may be performed.” So, in the case before us, the usage or custom of the particular business of buying and selling stocks on orders, in which the plaintiff was engaged may be properly introduced for the purpose of showing the manner in which the order he received from the defendants may be performed, but not to imply an authority to execute it in a mode which the law would regard as unreasonable. The order is given to a stock-broker to purchase certain shares of a particular stock by parties not shown to have had actual knowledge of any peculiar usage or custom of his business, and whilst the •law will allow custom and usage to regulate its execution in the reasonable mode we have indicated, it will not permit the '.defendants, by the force of any such custom or usage, to be bound by a merely fictitious purchase or sale, such for instance as one not bona fide and actually made, but pretended to be effected by mere entries upon books and accounts between the plaintiff and his New York agents. "We now proceed to consider the questions raised by the exceptions. — 181 — 1st. It is quite unnecessary to decide in this case whether contracts for the sale of railway shares are within the Statute of Frauds, and must be proved as required by that Statute, because the plaintiff’s case does not rest upon the enforcement of any such contract, or upon the count for goods sold and delivered, but upon the fact that he, as their agent, had expended money upon the defendants’ order and at their special instance and request. The Court was therefore right in permitting the evidence objected to in the first exception to go to the jury under the fifth count of the declaration and the defendants have no ground of complaint that their second prayer was confined to the count for goods sold and delivered. 2d. By the second exception a question, not vital to this case, but important as a matter of practice, is presented. The plaintiff proved that, when Hoflin gave the order, one of the defendants, the appellant, was standing immediately behind, near enough to hear when he instructed the stock to be charged to the three defendants. To the admission of this or any other statement of Hoflin to bind them, the defendants objected, upon the ground that proof, Constituting him their agent, with authority to bind them, should be first given before such statements were admissible or receivable in evidence. But the Court admitted the statement, upon the undertaking and offer of the plaintiff’s counsel to follow it up with the requisite proof of such agency. It has been held, in a series of decisions by this Court, that evidence relevant and pertinent to the issue is to be admitted without reference to the order of its production; the particular order in which a party may choose to introduce his proof being a matter for his exclusive consideration. Whatever inconvenience this practice may sometimes occasion, it has become too firmly settled to be now disturbed. It is also a settled rule of practice, where evidence which, per se, may be irrelevant, but which may become material if followed up by proof of other circumstances and facts, material and competent, with which it may have an important connection, for the Court to accept — 182 — the assurance of counsel that it will be so followed up, and permit it to go to the jury; and if the assurance is not fulfilled, .then, on application of the opposing counsel, to direct the jury not to regard it. But this is a rule which, from its liability to abuse, ought not to be enlarged. Experience has convinced us that verdicts are not unfrequently rendered under the influence of irrelevant testimony, admitted upon the unfulfilled assurances of counsel, honestly acting upon information or instructions of their clients that it will be made relevant and material by other testimony to be subsequently produced, notwithstanding the positive instructions of the Court, after-wards given, that it must not be regarded. Juries are not always composed of men who either can or will divert their thoughts from such proof, and prevent it from having any influence upon their minds. It would, in our judgment, have been a better and safer practice if the Courts had, in all cases, required proof of this character to be preceded by that in connection with which it would become important and material, and we are not disposed to extend the rule beyond what is demanded by express adjudications. Wo are not aware of any decision that has applied. the rule to a case where declarations or acts of agents are offered for the purpose of binding their principals. On the contrary, it is plainly said, in Marshall vs. Haney, 4 Md., 511, that the declarations of an agent are not admissible to bind his principal under any circumstances until the agency is first clearly established, and.the language of the Court, in Atwell vs. Miller, 11 Md., 359, is to the same effect. It is conceded, of course, that, to entitle the plaintiff to recover in this action, there must be proof that Hoflin was duly authorized to give the order and direct the purchase on the joint account of the defendants. This authority or agency need not be proved by writing; it may be inferred from facts and circumstances, from the permission and acceptance of his services, and subsequent adoption and ratification of his acts, will suffice. But, before his admissions, declarations or acts were admitted to — 183 — bind the defendants, we think the Court should have required the production of some proof tending to show the existence of such agency or authority. The failure, however, to do so, is not, in this instance, ail error requiring a reversal of the judgment, because we are of opinion there was some evidence adduced tending to show the agency, and fully sustaining the refusal of the Court — which is the subject of the fourth exception — to exclude Hoflin’s statement, on the ground that no such proof had been given, and the defendants were not, therefore, in fact, prejudiced by the ruling in the second exception. 3d. The third exception was taken, as we understand it, exclusively to the admission of the letters of Dibble & Cambloss, the New York brokers and agents of the plaintiff, to prove the purchase and subsequent sale of the stock. In admitting these as evidence for that purpose, an error, material and fatal to the judgment, was committed. We have already said that, whilst it was competent for the plaintiff to execute the order and enforce his rights by a purchase and sale of the stock in New York, yet he must establish these facts by legal and competent proof. Without an express agreement to that effect, no usage or custom of trade can be allowed to override the plain rules of evidence, and give to the mere letters of a broker, stating his accounts of purchases and sales, the force and effect of records or judgments importing absolute verity, or impart to the unsworn statements they eontain the same eiScacy as if made under the sanction of the oaths of the writers, with opportunity of testing their truth and accuracy by a cross-examination. The plaintiff’s own letter, written immediately upon receiving the order directing the New York brokers to buy, was admissible to prove that he was prompt to take the necessary steps to execute the order, and gave proper directions to that end; but it would violate cardinal rules and principles of evidence to receive their letters to him to prove, as against the defendants, that the slock was actually purchased and sold in New York. — 184 — These brokers should have been brought to the stand as witnesses, or their testimony taken under a commission. These letters ought, therefore, to have been excluded, and being excluded, the defendants’ fifth prayer would have been correct, inasmuch as the plaintiff himself testified he had no knowledge of the purchase or sale of the stock, apart from these letters. ,4th. If the purchase in the mode we have pointed out had been established by competent proof, the plaintiff was not bound to make an actual tender of the stock to the defendants. We have said it was sufficient.if he notified them of the fact of the purchase, and had certificates of the stock, or other usual evidences of title thereto, in his own hands, or in those of his New York agents, ready to be delivered or transferred to the defendants upon their tender of payment therefor. Nor was it necessary that the subsequent sale upon default should have been made at a public sale or at a public stock board, and at no other place.t A sale, publicly and fairly made, at the stock exchange or a stock board or at a brokers’ board, where such stocks are usually sold, would have been good. In Dalrymple’s Case, 25 Md., 242, it was held that a sale at the brokers’ board, publicly and fairly made by the pledgee of stock, under authority from the pledgor to sell upon default, without further notice, was legal and valid. There was, therefore, no error in the rejection of the defendants’ third prayer.' Their sixth prayer was also properly rejected, because there was in evidence to the jury the positive testimony of the plaintiff, that he had Cactually paid to his New York agents the $12,825 for the stock, which he had directed to be purchased under the defendants’ order. 5th. It is not necessary to decide whether upon the evidence which the Court admitted, the instruction granted at the instance of the plaintiff was' correct, because, as we have shown, there was a fatal error in admitting in evidence the letters objected to, which constituted the only proof of any. — 185 — purchase or sale of the stock. It is apparent this instruction must fall with the rejection of these letters. If, upon another trial which will be awarded, the plaintiff can establish by legal proof this purchase and sale in the mode before stated, in addition to the testimony now decided to have been legitimately admitted, there will be no difficulty in framing ail instruction, which will properly present the law of his case, in accordance with the views expressed in this opinion. (Decided 25th February, 1870.) Judgment reversed and new trial awarded.