Dancy v. Hayward, Vick & Co. , 1905 La. App. LEXIS 118 ( 1905 )

MOORE, J.

Defendants are cotton brokers with whom the plaintiff; had transactions concerning the buying and-selling by the former, for the account of the latter, cotton for future delivery to the extent of ioo bales. The initial transaction was on the 25th January 1904, defendants, on that day, selling for account of plaintiff 100 bales for July delivery. Thence followed a series of buying and selling of “hedging” and of “margining,” of profits and losses, with the result that upon the close of the market on Saturday Feby 6th 1904, plaintiff had to his credit, on the books of defendants, a balance of $870.00; that “deal,” as the parties term transactions of this character, being closed.

On the following Monday, (Feby 8th,) plaintiff purchased for defendant’s account, and as per his instructions, 100 bales “July contract,” at 13.96 cents. Upon the close of the market on Tuesday, (Feby 9th), prices had fallen to such an extent that plaintiff’s credit balance of $870.00 had been reduced to $415.00; his 100 bales July contract at 13.96 cents still being carried.

On the morning of Wednesday Feby 10th, and within a few minutes prior to the opening of the Cotton Exchange wherein these transactions were executed, the defendants demanded of plaintiff an additional margin or deposit of $750.00, threatening that if this deposit was not made at once, to “close him out” immediately the the exchange was opened; that is to say to sell the xoo bales at the opening figure or first call of the exchange, at 9.15 o’clock that morning.

Plaintiff protested against such action; pleaded for a delay until the opening of the' banks at ten o’clock that morning, when, as the evidence shows, he could have gotten the amount demanded; and, finally, when this delay was denied him he instructed them to put in a “stop order,” which means that the cotton be not sold until the price falls to a figure to be fixed and determined on between the parties and within the bounds and limits of the protection of the “margin” in the defendants hands. His protest was ignored; his request for delay until the open'ng of the banks refused and his instructions for a “stop order” ignored, and immediately at the first call of the exchange at 9.15 o’clock that morning he was “sold out” at 13 cents, that being still within $265.00 of a balance margin to his credit

Within a few minutes after this deal was closed out, about 15 minutes thereafter, the market began to rise, closing on that day at 13.79 cents, and, though subjected to much fluctuation during the period of trading, the price never fell again to 13 cents, at which figure it was at first called when plaintiff was sold out.

On the following day, Thursday,, Feby. nth, the price rose from 13 :79, at which it closed on the day previous to 14:80 cents, the price at which is shown plaintiff could and would have sold the cotton.

If the cotton had not been sold out, over the protest of plaintiff, at the time it was and had been sold at the time plaintiff would have directed it to be sold, the latter’s profit would have been $900.00, less a charge of $10.00 for brokerage, leaving him a net profit of $890.00. It is for this latter amount plaintiff seeks to hold defendants responsible.

The sole defense set up by the answer to plaintiff’s petition is that there existed a distinct and definite understanding and agree-nient between the parties to the transaction that plaintiff was, at all times during the continuance of his dealings with defendants in these transactions, to deposit with defendants and to maintain in their hands a margin of $750.00 in cash for every 100 bales transaction so as to protect them against any loss which might result from a fluctuation of prices; that the maintenance of this margin was the condition precedent to defendant’s obligation to keep open the transaction' and to abide plaintiff’s will and pleasure as to the period of “closing out”; that as the plaintiff had not maintained that margin on the opening of the market on the morning of Wednesday, the 10th of February, and had, when requested to put it up, failed so to do, they were at liberty under the terms of this agreement as well as by the custom of the trade to at once sell out the cotton and close the account, and that they did so, with the result stated.

This defense would unquestionably defeat plaintiff’s right to recover if it were sustained by proof. But it is not. On the contrary, the defendants themselves, when testifying in the cause, admit that no such understanding or agreement existed.

The excuse which they assign in their testimony for their action in closing out the transaction was that arriving at their office early on the morning of Feby. 10th and being then advised of the condition of the Liverpool market, which showed a decline, they resolved to close out all “small accounts,” among which they classed plaitiff’s account, unless more margins were obtained, that as plaintiff did not put up any more margin, (he then had up a margin of $415.00) they, therefore, closed out his account at the first figure at which the market opened.

It does not appear that any other “small account on defendant’s books, which were similarly conditioned to plaintiff’s account, was closed out by failure to put up an additional margin, nor is it shown to what figure defendants had reason to believe, and did believe, the New Orleans market would drop, except that, as testified by defendant’s marginal clerk: “We figured on the market opening lower than it did.”

In our ’opinion, the reason assigned for their action does not relieve them.

If an agent insists upon acting on his own judgment and against the wishes and protest of his principal in a matter in which the latter is concerned he must take the consequences of his judgment proving erroneous.

If action based thereon should he prejudicial to the interest of his principal the agent is responsible for all loss thus occasioned.

There was no necessity for the precipitancy of action which characterized the closing out of this account. The evidence does not disclose that any one in this line of business, save the defendants, had reason to believe and did believe that the maAet would drop below 12:47 Percent to which point the plaintiff was margined up. Under the maxim of the law to the effect that “what is not proven does not exist,” we say that no one else b'ut the defendants, entertained any such belief.

Here it will be perceived that although the market for “July contracts” opened on the morning of Feb. 10th, 96 points lower than the price paid by plaintiff two clays previously for July delivery, nevertheless there yet remained in defendants hands after the 13 cents mark was reached, and at which price the cotton was sold,- a sum sufficient to protect defendants to the extent of a still further fall of 53 points.

No evidence has been adduced to show warrant or justification for a reasonable belief that upon the opening of the market, at thirteen cents, on the morning, of February 10th, a -further decline was probable from the existing conditions or was generally anticipated, or that if such decline was probable, or was generally anticipated, the decline would necessarily be so sudden and rapid that this contract could not have been closed out at a figure within the protection of the margin; nor is it even shown that at the opening of the market that day, the defendants, influenced -either by the then existing conditions or by the general belief that the market would decline below the opening quotation, (13 c), entertained any belief that the drop would be greater. Nothing transpired at the opening of the market to influence them in this matter. They had resolved • before the market opened to close out the account upon the opening of the market; they “figured on the market opening lower than it did.” But notwithstanding the market opened above what they “figured” it 'made no change in their resolution formed before the market opened. As we have stated the price never went below 13 cents, nor did it remain there beyond the “first call/’ then it began to rise and finally reached 14:80.

December 11, 1905.

We think the case is entirely with the plaintiff, and so thought our esteemed brother of the lower Court who gave judgment-in his favor for the amount sued for.

The judgment is affirmed.