Bailey v. Babcock

Mr. Presiding Justice O’Connor delivered the opinion of the court. Plaintiff brought an action of trover against the defendants, stockbrokers, claiming that they had converted to their use plaintiff’s 200 shares of common stock of the Utility and Industrial Corporation. The defendants filed a plea of not guilty, and there was a jury trial which resulted in a verdict and judgment in plaintiff’s favor for $4,300, and the defendants appeal. Plaintiff’s theory of the case was that the 200 shares of stock were bought by the defendants for him, that he tendered them the balance due and demanded the stock but that the tender and demand were refused. On the other hand, defendants’ theory was that they had, at plaintiff’s order, bought 100 shares of other stock at $66 a share; and that they were entitled to hold the 200 shares of stock until plaintiff had paid for the 100 shares. The record discloses that plaintiff had been buying stocks through the defendants, brokers, who were carrying the stocks on a margin of 50 per cent, and on Saturday, August 3, plaintiff telephoned the defendants and requested them to buy for him 100 shares of stock of the Chicago Corporation at $67 a share. This stock apparently could not be bought on Saturday for $67 a share, and it is agreed that the stock was not purchased on that date. The evidence further shows that over Sunday plaintiff became interested in the Utility and Industrial Corporation stock and on Monday morning when he got to his office he called up defendants ’ representative and inquired whether defendants had bought the 100 shares of Chicago Corporation as ordered, and upon being advised by defendants’ representative that the stock had not been bought, plaintiff requested that the order be canceled, which defendants agreed to do, and thereupon plaintiff requested defendants to buy 200 shares of the Utility and Industrial Corporation, which they also agreed to do. The testimony as to what was said at this telephonic conversation is somewhat variant but not materially so. Plaintiff testified, “I called him (Mr. Lundborg) promptly at nine o’clock on the Monday morning following Saturday, August 3, 1929. ... I talked to Mr. Lundborg and told him that I had changed my mind, I would like to buy Utility Industrials instead of Chicago Corporation, and asked'him if the Chicago Corporation order had been executed, and he said, ‘Well, I don’t think so, but I will find out.’ I says, ‘Well, be sure to find out please and I will hold the ’phone. ’ Mr. Lundborg left the ’phone and in a short while returned, and says, ‘Tour Chicago Corporation has not been purchased and I have cancelled it.’ I says, ‘All right, instead of buying Chicago Corporation for me then I want you to buy instead of that 200 Utility Industrials. ’ ’ ’ Lundborg testified that he was employed by defendants and that about 11 o ’clock on the morning of Saturday, August 3, plaintiff placed an order with defendants to buy 100 shares of Chicago Corporation at $67. The stock was then selling at $70; that “The next conversation I had with Mr. Bailey was on August 5,1929, in the morning. This conversation took place about ten minutes after nine. Mr. Bailey called on the ’phone . . . and asked what Utility Industrial was selling at. I called out to the Chicago Board marker and he replied, ‘56%’ and I told Mr. Bailey . . . Utility Industrial Corporation was selling at 56%. Then Mr. Bailey asked me if the Chicago Corporation order had been purchased yet, and I told Mr. Bailey, ‘Just one minute, while I look at the Chicago Board.’ I left my desk and ran about ten feet to the Chicago Board and I saw one sale of Chicago Corporation marked up at 69 and ran out to my ’phone immediately and told Mr. Bailey that I did not think it had been bought. It was marked up now at 69. Mr. Bailey told me to cancel the order to buy Chicago Corporation and enter an order to buy 200 Utility Industrial at the market, and I wrote out the order, ‘ Cancel buy Chicago Corporation at 67 open and buy Utility Industrial common at market, ’ I wrote this out as I spoke to Mr. Bailey on the ’phone.” The evidence further shows that shortly thereafter defendants bought the 200 shares of the Utility stock and plaintiff was advised of that fact by telephone. And there is some evidence that sometime during that day Lundborg telephoned plaintiff that the 100 shares of Chicago Corporation had also been bought. The next day, August 6, plaintiff received from defendants, by mail, two communications, one showing that they had canceled the order for the 100 shares of Chicago Corporation, the other that they had bought the 200 shares of Utility stock. Some time later on defendants advised plaintiff that they had also bought the 100 shares and that they had been in error in notifying him that this order had been canceled. The evidence further tends to show that plaintiff did not want the 100 shares of stock and that defendants were advised of this fact; that plaintiff ought not to be held on account of defendants’ mistake. A few days later plaintiff called on the defendants .and stated that his banker had advised him to see some member of the firm about the matter and he took the matter up with Mr. Rushton, a member of the firm of brokers. The evidence shows that plaintiff had with him at that time three documents he had received from the defendants concerning the transactions, one of which was that the defendants had canceled the order for 100 shares. Mr. Rushton stated that apparently there was a mistake and asked plaintiff to leave the papers and he would look into the matter and in a few days would advise plaintiff and return plaintiff’s papers to him. The papers were left and apparently Mr. Rushton looked into the matter and returned two of the papers but did not return the document which stated that the order for 100 shares had been canceled, as he had agreed to do. Lundborg further testified that on .August 6, after the purchase by the defendants of the two stocks, .he again talked with plaintiff over the telephone and that plaintiff said that if there was a mistake like that he felt Babcock and Rushton should go along with him; that just at that time he did not feel that he should be required to put up the full 50 per cent margin to carry the 300 shares of stock and I told him that I would check up with Mr. Eushton in view of this state of affairs and see if we could not carry the full 300 shares on a third margin rather than to require a 50 per cent margin on 200 shares of Utility Industrial as it would require the same amount of money practically in either case. And there is evidence tending to show that subsequently defendants reduced the margin requirements to one-third. Lundborg further testified that the first time plaintiff ever'told him he would not be responsible for the Chicago Corporation stock was when Lundborg called plaintiff for additional margin in October, 1929. This was denied by plaintiff. Defendants offered a great deal of other evidence showing the method by which they transacted business in the purchase and sale of stock. The court at first sustained plaintiff’s objections that this was immaterial, but later some of this evidence was admitted and we think erroneously so. While it is a general rule of law that a broker is the agent of the customer in the buying and selling of stock and is required only to use ordinary care and intelligence in the execution of orders, yet that principle has its limitations, and if a broker makes a mistake in informing his customer as to what has been done in a particular situation, and the customer then changes his position on the faith of the broker’s statement and acts upon it, the broker cannot afterwards deny the correctness of the statement. Meyer on Law of Stockbrokers and Stock Exchanges, pp. 293, 294. That author announces the rule as follows: “If the broker transmits a statement in which, through a clerical error, a more favorable price is reported than that at which the order was actually executed, he is entitled to send a duplicate corrected statement, provided that the customer has not changed his position on the faith of the original statement. In such a case the broker is not estopped to deny the accuracy of the statement first sent. However, if the customer has changed his position on the faith of the broker’s statement and acted upon it, the broker will subsequently be estopped to' deny its correctness.” This law is applicable to the facts in the case before us. If the defendants made a mistake in advising plaintiff that the 100 shares of Chicago Corporation had not been bought, and it is clear that they did make such mistake and plaintiff, acting on such misinformation, ordered the defendants to cancel the order for the Chicago Corporation stock and to buy the Utility stock, then the defendants will not be permitted to endeavor to avoid the consequences of their own mistake. All of the evidence shows that plaintiff, on Monday morning, informed defendants that he was interested in buying the Utility stock and. in canceling the order for the Chicago Corporation stock. Lundborg was clearly told this and, if the Chicago Corporation stock had not then been bought, to cancel the order and buy the Utility stock; and then Lundborg, after investigating the matter to ascertain the facts, advised plaintiff that the Chicago Corporation stock had not been bought; that the order was then canceled and the order for the Utility stock given. A memorandum of these two orders was written out by Lundborg and is óf much more evidentiary value than his testimony to the effect that he did not think the Chicago Corporation stock had been purchased. Plaintiff’s order to buy the Utility stock was upon the express statement of Lundborg, defendants’ representative, that the order to buy Chicago Corporation stock had been canceled. If defendants made a mistake either in notifying the plaintiff that the first order was canceled when it was not, or in purchasing the Utility stock without having canceled the order for Chicago Corporation, the mistake was the defendants’ and they should not be permitted to avoid liability by simply explaining how their mistake occurred. Plaintiff changed his position on the information given him by defendants, and under the law they must stand the consequences of their mistake. Complaint is made of remarks made by the trial judge concerning certain witnesses and evidence offered by defendants, and some of the complaints would be justified were the evidence offered material and competent; but this evidence was all to the point that the defendants had exercised reasonable care in endeavoring to carry out plaintiff’s orders. Under the facts in this case, we hold that that evidence was incompetent, therefore the remarks of the court would not warrant us in reversing the judgment. Complaint is made that the court erred in refusing an instruction requested by defendants on the question whether after the 300 shares of stock were bought by defendants, plaintiff had not ratified the purchase of the 100 shares of Chicago Corporation. The refused instruction is as follows: “The court further instructs the jury that if you believe from all the evidence in this case that plaintiff assented to the purchase of any stocks or securities by defendants for plaintiff’s account, then you are instructed that plaintiff is liable to defendants for the amount of the purchase price of such stocks or securities so purchased, if any, even though such stocks or securities were purchased without a previous order from plaintiff to defendants or after plaintiff had given defendants or their agents, instructions to cancel such orders, if any, previously given, and even though defendants, by the exercise of reasonable skill and diligence, could have made effective any cancellation order previously given by plaintiff to defendants or defendants’ agents.” We think it obvious that this instruction was properly refused. It is misleading and confusing and not based on the evidence in this case. By it the defendants sought to have the jury told that plaintiff would be liable to the defendants for the amount of the purchase price of stocks or securities, “even though such stock or securities were purchased without a previous order from plaintiff to defendants.” Of course the evidence all shows that there was a positive order to buy the 100 shares, and it is elementary that it is not error to refuse an instruction which is not based on the evidence in the case but contrary to it. The defendants’ evidence by which it is shown, as they apparently contend, that plaintiff ratified the purchase of the 100 shares of stock, is slightly more, if anything, than a scintilla. We think substantially all the evidence shows that throughout plaintiff was repudiating the purchase by the defendants of the 100 shares of stock. It is not every slight error that warrants the reversal of a judgment. On the merits of this case, under the law and the evidence, we are clear that justice has been done, and the judgment of the circuit court of Cook county is affirmed. Judgment affirmed. McSurely, J., concurs. Hatchett, J., dissents.