W. Union Tel. Co. v. Sweeney , 106 S.W.2d 663 ( 1934 )

On Rehearing, Pulliam Co., brokers, were carrying 100 shares of General Motors Stock for the plaintiff H. B. Sweeney on margins. By the negligence or failure of the Western Union Telegraph Company promptly to deliver a telegram notifying Sweeney of a demand for additional margins, the transaction was closed out on September 13, 1932. The plaintiff Sweeney instituted this suit against the Telegraph Company to recover $402.50 damages, the amount remaining after deducting $12.50 left of the original margin. The sum sought to be recovered embraces the initial payment, purchase charges, commissions, etc.

The defendant entered a general and special denial of liability, and alleged its negligence, if any, was not the proximate cause of the plaintiff's loss, and that he negligently failed and refused to mitigate, or lessen, his damages, although he could have done so entirely by reinstating his contract, or repurchasing like stock at a price even less than that at which his stock was sold.

The trial was before the court without a jury, and at its conclusion a judgment was rendered in favor of the plaintiff for $402.50, with interest, etc. The Telegraph Company appeals, assigning many errors and briefing five propositions thereunder. These will now be considered.

Obviously this opinion is being written in the light of the plaintiff in error's motion for rehearing, and after a re-examination of all the contentions presented in the original briefs. The result of such reconsideration is that this court now reaches a conclusion different from that expressed in the original opinion. It, therefore, becomes necessary to state the reasons — drawn from the undisputed facts of the record — which impel us to these conclusions.

On September 6, 1932, the plaintiff purchased, through his brokers, Pulliam Co., 100 shares of General Motors stock at $18.50 per share. It was a marginal deal in accordance with a contract entered into between the brokers and the plaintiff. The sum of $415 was deposited with the brokers, the same to cover initial payment, purchase charges, commissions, etc., on the transaction. These latter items amounted to $37.50, making the total cost of the stock $1,887.50. This amount, less the $415, left the sum of $1,472.50, which the plaintiff agreed to pay thereafter in installments at the rate of $76.63 per month, beginning October 6, 1932, with interest, etc. The contract obligated the plaintiff to maintain a margin of 10 per cent., or more, on the purchase price without regard to the maturity dates mentioned in the contract. This portion of the contract reads as follows: "Notwithstanding the agreement of Buyer to pay for said securities in installments at times provided for in this agreement, the Buyer agrees that if at any time during the life hereof, the market price of any security or securities as purchased herein shall depreciate Ten (10) or more per cent below the total Time Purchase price agreed to be paid by the Buyer, or if any securities deposited as part payment thereof, or to protect any contract or part of a contract, shall depreciate Ten (10) or more per cent below the market value on to the date of deposit, Pulliam Company shall have the right and option to demand from the Buyer a sum satisfactory to said Pulliam Company, and which said sum the Buyer agrees to pay to Pulliam Company on demand, and when so paid by Buyer shall be credited to the amount of interest charges unpaid, if any, and the balance upon the amount of the total time purchase price unpaid. In the event of the failure of the Buyer upon any such demand being made, to forthwith pay to Pulliam and Company, the amount demanded by Pulliam Company, Pulliam Company may at the option of Pulliam Company and without notice to Buyer, cancel this purchase agreement and terminate all rights, if any, as Buyer as contained herein."

Pursuant to the above provision, and in view of the depreciated market value of the stock on that day, the brokers, on September 13, 1932, at 8:54 a. m. wired Sweeney as follows:

"Further sharp decline in market necessitates your forwarding Three hundred dollars to protect contract advise by wire.

"[Signed] Pulliam Company." This message reached the telegraph office at Knox City at 10 a. m., and was delivered to the addressee at 1 p. m. Sweeney wired Pulliam Co., at 1:12 p. m. the same day the following message:

"Mailing check this eve sell this contract when it reaches nineteen.

"[Signed] H. B. Sweeney." The telegram was received by Pulliam Co., eighteen minutes after the stock market had closed, and the 100 shares of stock had been sold at $15 per share, or $1,500. The stock transaction being thus closed out, the brokers rendered Sweeney a statement of his account, which, after deducting purchase charges, etc., showed him to have a remaining equity of $12.50 from his original deposit or margin.

Pulliam Co., received the check and telegram. In response to the latter they wrote him two letters on the same day, September 13, 1932, advising that his contract had been closed out, and suggesting that the same could be repurchased at the same price, or for less. In one of the letters they stated: "Upon receiving no response to our telegram with reference to additional payments for the protection of your contract, when General Motors declined to such a price that on further decline your equity would have been completely wiped out, contract was closed out at the market and statement covering same is herewith enclosed." Following this statement with optimistic trade talk that the "market is unquestionably headed upward," the brokers made the further suggestion: "If you would care to enter into another contract for the purchase of General Motors we believe * * * the same can be executed at about the same figure at which this contract was closed out, or even a lesser figure. We will watch the market and phone you when the time arises and you can then decide as to whether or not you care to have contract executed for this same stock or for other issues which may at that time be more attractive."

In the second letter of that date, Pulliam Co., after stating some details as to the time of sending message, etc., and the necessity under prevailing market conditions of closing him out, informed Sweeney that: "If the price of General Motors had declined to a lesser figure than that at which your contract was closed out a greater loss would have been incurred, as you would have had no equity remaining. As written you * * * we can in all probability within the near future, perhaps just any day, execute another contract for you at such a price that there will be no loss entailed * * *."

On the following morning, September 14, 1932, Pulliam Co., called Sweeney over long-distance telephone and informed him he could buy the General Motors stock at $14.75 per share. While testifying Sweeney gave the following answers to questions propounded to him:

"Q. You could have bought it back next morning. How much could you have bought it back for? A. 14 3/4

"Q. Why didn't you do that? A. I didn't want to take another chance. * * *

"Q. You could have bought it back the next morning and saved a little money, couldn't you? A. Yes, sir.

"Q. You could have bought these identical 100 shares of stock, or some just like it, and you didn't do it because you were afraid of the market — and you could have bought it back at 14 3/4 — that is $25.00 less than they sold you out for? A. Yes, sir.

"Q. If you had bought it at that time you would not have had any damages? A. No, sir. If I had bought back and sold on September 25th I would not have had any damages."

This character of testimony is accentuated by an agreement of the litigants incorporated in the statement of facts, and reading as follows: "It is agreed by and between the parties of this suit that after Mr. Sweeney learned that his contract had been sold for $15.00 per share, that he could have repurchased 100 shares of General Motors for $14.75, either on the 14th or several days thereafter, and that Mr. Sweeney did not re-purchase the stock because he considered the market too unstable; and further, that he requested the brokerage company, Pulliam Company, to return the $300 previously sent to them on the 15th (13th) day of September, 1932."

The General Motors stock thereafter advanced and the stock sold on the market September 25th at $19 per share. The case will be disposed of on the theory that the Telegraph Company was negligent in the transmission and delivery of the original telegram.

Under the foregoing uncontroverted facts, we are of the opinion that the plaintiff failed to prove any damages proximately caused him by the defendant's negligent delay in the delivery of the telegram. Considering the duty resting upon the plaintiff under the circumstances, the rule for measuring the amount of his damages, if any, is clearly stated in 62 C.J. p. 245, as follows: "Notice to Put up Margin. Where a broker has closed out plaintiff's margin transaction because of defendant's negligence in delivering a message requesting additional margins, the measure of damages is the difference between the price at which the deal was closed and the price at which plaintiff could have reinstated the transaction within a reasonable time after notice that it was closed."

The rule as just stated is taken from the opinion by the Supreme Court of Kansas in Maddux v. Western Union Telegraph Co., 92 Kan. 619,141 P. 585. The rule is there applied to a particular state of facts showing its special application to the facts in the instant case. Further the principle, or rule, is one of general application, and is stated in 13 Tex.Jur. p. 99, as follows: It is a fundamental rule that one who is injured in his person or property by the wrongful or negligent act of another, whether as the result of a tort or a breach of contract, is bound to exercise reasonable care and diligence to avoid loss or minimize the consequences of such injury; he must protect himself from the injurious consequences if he can do so by ordinary effort and care and at a moderate expense."

The authorities cited in the text as announcing this rule are numerous, and the principle is elemental, entering into many damage suits. In this connection we call special attention to Western Union Telegraph Co. v. Peter Neylon (Tex. Civ. App.) 160 S.W. 991; Western Union Tel. Co. v. Kitchen (Tex. Civ. App.) 257 S.W. 690; Wright v. Bank of the Metropolis,110 N.Y. 237, 18 N.E. 79, 1 L.R.A. 289, 6 Am. St. Rep. 356; Baker v. Drake,53 N.Y. 211, 13 Am.Rep. 507.

The opinion in the Maddux Case is based on facts identical in legal effect with those in the instant case. There the plaintiff purchased 10,000 bushels of corn for future delivery, the market declined, necessitating an additional margin of $300, as in the instant case. The broker wired for the additional margin, but the telegram was delayed, resulting in the closing out of plaintiff's contract. The following market day the corn could have been purchased for less than the price at which the contract was closed out. The plaintiff refused or failed to repurchase or reinstate his contract. He did, however, call on his brokers for a statement of his account with the view of suing the Telegraph Company for reimbursement. The court, after reviewing the facts and stating in substance the fundamental rule of preventive measures where one is injured by the negligence of another, concluded that inasmuch as the testimony showed that the plaintiff could have repurchased the contract in question on the following market day at a price less than that for which it was sold, and failed to do so, no damages resulted to him by reason of his failure to receive the telegram.

In the instant case it is undisputed that Sweeney not only could have repurchased the stock at a saving after receiving notice it had been sold, but he refused to reinstate the contract or repurchase the stock after being requested to do so by his brokers at a time when the stock was selling for less than when his contract was closed out. Hence, any loss that may have accrued to him is not to be attributed to the defendant's delay in delivering the telegram, but rather to his refusal to repurchase the stock, or his election to withdraw from the market, the effect of which was to render it impossible for him to thereafter be in a position to obtain future profits should the stock rise on the market, thereby affording him an opportunity to recoup his losses already sustained when the delayed telegram was sent him. He could not thus withdraw from the market and save his money in the event the market continued to recede, and later sue the Telegraph Company for speculative profits in the event the stock rose on the market.

Let it be assumed that Sweeney began his speculation, or for the first time attempted to purchase his stock on September 13th, when he received the delayed message. Suppose he had then wired his brokers $300 cash, with directions to buy General Motors stock at $15, and sell it at $19, and the message was not delivered in time to enable the brokers to execute the contract at $15 per share on that day, but on the following day, and for several days thereafter, the same stock was available at $14.75 per share. Could it be said with any degree of logic or reason that Sweeney would have been damaged by the delay in delivering the telegram? We think not, and yet the same principle is involved under the facts of this case.

In his testimony he admits that if he had re-entered the market and made the purchase he would have lost nothing on the sale of his stock at the rise of the market on September 25th, and the trial court, in substantiation thereof, made the following finding: "I find as a matter of law that the plaintiff H. B. Sweeney could have, within 3 or 4 days after his stock was sold out, repurchase the same at from $15.00 per share to $14.75 per share, but failed to do so, and if he had bought the same and held such stock until along about September 25th, 1932, he would have made enough to offset his loss."

This finding, of course, is unchallenged in the record and is borne out by the undisputed facts.

Further, it is apparent that if the plaintiff had received his telegram promptly and sent his marginal check in time to have prevented the sale of the stock in question, and he had thereafter withdrawn from the market when the price was $14.75 per share, his loss would have been $25 greater than indicated by the evidence in this record. On the other hand, if he had repurchased the stock at $14.75, retained it until September 25th, and then sold it for $19 per share, his profit would have been $25 greater than it would have been had he received the telegram promptly and put up the additional margin in response thereto. In the light of the subsequent market developments, Sweeney, by the repurchase of the stock, or reinstatement of his contract, would have re-established his status quo, which if maintained until sale on the 25th of September would have meant an actual gain of $25. According to the testimony, he concluded to take 50 shares of the stock, but immediately countermanded the order and directed the return of the $400. Thus, in the light of the surrounding circumstances, plaintiff viewed the market as unpropitious and concluded to avoid the risk of additional loss.

Further, it is elemental that the loss which the plaintiff is attempting to recover was occasioned by his previous investment or speculation in the stock market, and by reason of the decline in values. This loss, except the "out" commission, had occurred before the suit message was ever sent. Such previous loss was the sole occasion for the sending of the telegram requesting additional margins. And the plaintiff's refusal under circumstances to reinstate the deal, or purchase the stock at the depreciated price and hold the same for the possible advance, which he could not be certain of, is, in our judgment, the sole proximate cause of his not being entitled to the speculative future profits due to the rising market. There was no possibility of his thereafter being able to recover his losses on a rising market, if any. As a net result of the failure to deliver the telegram promptly to Sweeney on September 13th, he received $15 per share for his stock, whereon on the following, and several days thereafter, it was worth only $14.75.

The testimony does not show that had Sweeney elected to reinstate the contract, or replace the stock, the brokers would have charged an additional "in" and "out" commission, but had they done so that would have only been an item of damages under circumstances entitling plaintiff to recovery and could not effect the disposition of this appeal, or the legal principles involved. However, on his election to forego future speculations or investments in the market, there arose no occasion for the collection of such commissions.

As before stated, when one is threatened with damages by reason of the misconduct of another, he is required to exercise reasonable care to avoid the consequences of such neglect. The rule is stated by Chief Justice Pleasants, in the case of Western Union Telegraph Co. v. Kitchen (Tex. Civ. App.) 257 S.W. 690, 693, as follows: "No rule of law is sounder in principle nor more firmly fixed by the decisions than that which requires one who is threatened with damage by reason of the negligent conduct of another to exercise reasonable care to avoid the consequences of such negligence. This rule is applicable in cases of contract as in cases of tort, and has been uniformly applied in suits for failure to deliver a telegram." (Citing many authorities.)

This rule was followed by our Supreme Court in an opinion by Chief Justice Gaines in Western Union Telegraph Co. v. Jeanes, 88 Tex. 230,31 S.W. 186. See, also, Western Union Telegraph Co. v. Williams,57 Tex. Civ. App. 267, 122 S.W. 280.

Under the foregoing authorities and the testimony, it appears that the plaintiff, although under the legal duty to do so, failed, as a matter of law, to exercise reasonable diligence and effort to prevent or mitigate his damages. He suffered none as a proximate result of the delayed telegram. The facts of the case have been duly developed.

The judgment of this court on a former day of this term is set aside, and the judgment of the trial court is now reversed and here rendered for the appellant. It is so ordered.