Stibbard v. Owen

FEAD, C. J.

Defendants are stockbrokers in the city of Detroit. On November 15, 1921, plaintiff opened an account with them. He deposited 11,500 shares of Eureka Croesus stock as collateral for the purchase of an additional 4,500 shares on margin at 46 cents per share. The stock rapidly depreciated in price. Plaintiff appreciated that the stock was volatile, and on November 21, 1921, voluntarily and without call from defendants deposited with them 200 shares of Utility Compressor stock, and on November 26, 1921, $800 in cash as additional collateral to protect his account. The Eureka Croesus stock was then selling at about 30 cents per share. The price continuing to decrease, on January 14, 1922, the defendants, without notice to plaintiff, sold 16,000 shares of his stock' at 18 cents to 19 cents per share to pay his debt to them of about $2,800.

Two days after the sale plaintiff demanded of defendants that they reinstate his account, and upon their refusal he commenced this suit for the value of the stock and money he had pledged with them, upon the theory of conversion. The case was tried before the court without a jury, and defendants had judgment. Plaintiff recognized defendants’ right to sell his stock to protect themselves, but his claim was that in arranging the account it was agreed between himself and defendants that he would furnish further collateral whenever defendants should call for it. This action is founded upon the theory that the sale amounted to a conversion because defendants sold without notice to him and demand for further margins. Defendants’ claim was that:

“I told Mr. Stibbard that under the terms of our contract, which is sent out on all invoices, that he must abide by them and live up to them without a call from us for margin. It was up to him to watch his margin at all times and come in when it was necessary, as he knew it would be.”

The invoices received by plaintiff contained, in small print, the provision that defendants could sell, for their . protection, at any time and without notice or demand for margin. Plaintiff said he had not read this clause.

In his findings of fact the court found that the defendants’ version of the agreement for additional margins and sale was established. This finding was sustained by the testimony. Consequently defendants had authority to sell plaintiff’s stock without notice to him to protect themselves on his account.

Plaintiff further urged that the total value of his pledged property in defendants’ hands was $4,884 and his debt to defendant $2,859.32, and, because of the discrepancy, the margin was ample and the sale was not justified. Two thousand dollars of this margin was represented by 200 shares of Utility Compressor stock. The evidence of value of the Utility Compressor shares was - based upon subscriptions taken by the corporation in a sales campaign in which it was trying to finance itself by sale of shares. It was not shown that there was a market for this stock.

It is well known that the margins required by brokers vary with the character of the securities dealt in, the state of the general and particular market, and other factors. There was no testimony from brokers or others familiar with the business to indicate that the margin remaining at the time of sale was sufficient, according to recognized custom, to require defendants to continue the account. In’the absence of such testimony, the court cannot say that defendants’ action was not justified.

In view of the findings of the circuit court and their legal effect, it is not necessary to discuss plaintiff’s other assignments.

The judgment is affirmed.

North, Fellows, Wiest, Clark, McDonald, Potter, and Sharpe, JJ., concurred.