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Carpenter v. Kilborn

Decided: October 17, 1932.

LELAND P. CARPENTER, PLAINTIFF-APPELLANT,
v.
HARRY M. KILBORN AND WILLIAM H. DANE, INDIVIDUALLY AND AS PARTNERS TRADING AS DANE & COMPANY, DEFENDANTS-RESPONDENTS



On appeal from the Essex County Circuit Court.

For the appellant, Louis Auerbacher, Jr.

For the respondents, Whiting & Moore.

Brogan

The opinion of the court was delivered by

BROGAN, J. This is an appeal from a judgment of nonsuit in the Essex County Circuit Court.

Plaintiff below sued to recover moneys deposited by him with Dane & Company, a stock brokerage house. There was deposited with the defendant below the sum of $1,000 in cash, the sum of $1,030 realized from the sale of securities owned by the plaintiff, and one hundred and sixty-eight shares of Kraft-Phoenix Cheese Corporation stock which, it is alleged as of October 23d, 1929, had a money value of $11,572, so that in all the plaintiff had a credit of $13,602 with the defendant. The shares of stock lodged in the account were the property of one J. W. Jones and were added to the plaintiff's account in the brokerage house to strengthen it.

The plaintiff carried on a more or less active trading account. During the time of the account between the parties a sharp falling off of values and prices took place in all securities. The net result was that the customer's cash margin was wiped out, as indeed was $3,000 of the value of the shares of stock placed with the broker as collateral security.

The plaintiff sued out a complaint on three counts. First, that the dealings between the parties constituted an

unlawful transaction since they transgressed the provisions of the Gaming act of this state, known as "An act to prevent gaming." 2 Comp. Stat., p. 2623. The second count is based on the theory of trover and conversion, and the third upon the theory that the plaintiff was damaged because of the defendant's failure to live up to instructions and sell out the securities before a loss was incurred. The trial court nonsuited the plaintiff.

The appellant now makes two points. First, that the court below erred in granting motion for nonsuit and, secondly, that the transaction comes within the interdiction of the Gaming act.

It is plain that the motion for nonsuit was properly granted as to the first count because the evidence clearly does not bring the transactions complained of within the ban of the Gaming act. While the dealings between the parties constituted speculation in stocks upon margins yet it has not been shown nor could it be fairly inferred that the securities purchased on margins were not intended to be treated as the property of the customer. This was not a transaction dealing in differences between prices but an outright purchase of securities for the account of the customer which securities were paid for by the customer partly in cash and partly by the credit extended to him. To argue in the face of a margin account of over $13,000 that there was absolute disproportion between the amount on hand to the customer's credit and the amount of securities purchased against that account is to fly in the face of the facts in the case. The plaintiff below admitted that his margin ran from ten per cent. to thirty per cent.; ten per cent. when securities were low, thirty per cent. when securities were high. That the customer was speculating is manifest, but from this fact no one can justify the conclusion or even the inference that it was a dealing in differences.

The case upon which the appellant relies (Flagg v. Baldwin, 38 N.J. Eq. 219, 277), has this to say: "The act is not intended to interfere with ...


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