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Miller v. Eisele

Decided: September 27, 1933.

BERNARD MILLER, PLAINTIFF-APPELLANT,
v.
JOHN L. EISELE, FREDERICK EISELE, EDWARD A. EISELE, NATHANIEL KING AND ARCHIBALD GOLD, CO-PARTNERS, TRADING AS EISELE & KING, DEFENDANTS-RESPONDENTS



On appeal from the Essex County Circuit Court.

For the appellant, Schotland & Schotland.

For the respondents, Lum, Tamblyn & Colyer.

Perskie

The opinion of the court was delivered by

PERSKIE, J. This appeal brings up for review a judgment on nonsuit granted by the court below. The evidence presented at the conclusion of the plaintiff-appellant's case disclosed the following situation: The plaintiff-appellant (a customer), who, for sake of brevity, shall hereafter be referred to as Miller, brought suit against the defendants-respondents, who shall, also for sake of brevity, be hereafter referred to as brokers, for moneys alleged to be due him from the brokers. The suit was based on two counts. The first count was for the sum of $15,527.40, which, in substance, Miller (customer) claimed was improperly charged to his account because he was in nowise liable therefor, and which he paid, under protest, and without prejudice, as a result of being threatened that unless he paid the sum of $40,050.52 (the item of $15,527.40 being a part thereof) the brokers would sell his stock on the open market and apply the proceeds thereof toward the liquidation of his alleged indebtedness to them. The second count was for the sum of $54,251.28 and was based, in substance, on the claim that the brokers by reason of an unauthorized sale and conversion of one-half of his securities on November 13th, 1929, in order to satisfy an unanswered demand for additional margin, which demand, it is alleged, would have been unnecessary had the brokers not improperly charged his account with this item of $15,527.40.

Miller had been a customer of the brokers for some time prior to 1928. William Lehman was what is termed in the stock brokerage business, as a confidential or customer's man, and was employed by the brokers. On September 19th, 1928, Miller and Lehman entered into a partnership arrangement, in writing, to deal in stock, excepting a few stocks which were

not included and which belonged to Miller, personally. The former agreeing to supply the funds and the latter the experience. As a matter of fact they had some dealings under the same terms beginning with June, 1928. On September 6th, 1928, they divided some of their profits. Miller testified that the brokers knew of his arrangements with their Mr. Lehman. He told them so on two occasions, once to their Mr. Gold and once to their Mr. King, both members of the brokerage firm. The account under which Miller and Lehman operated with the brokers, under the arrangements above set forth, was designated as account No. 366. This arrangement continued up and until July 12th, 1929. Miller, desiring to go to Europe, says that he insisted upon a dissolution of his arrangement with Lehman. He so advised Mr. Gold. The latter told him to go to see Bill -- meaning Lehman -- and he did so, and said to him: "I intend to go abroad, and before I leave I would like to wind up my affairs because if anything happens to me abroad I don't want my family to be tangled up in the stock market." Whereupon Miller and Lehman went to the bookkeeping department of the brokers and straightened out their account. As a result of a request for a writing to verify this adjustment Lehman gave Miller the following writing:

"(Letterhead)

EISELE & KING, UNION BUILDING, Clinton Street, Newark, N.J.

July 12/29.

Dear Barney:

I understand you are leaving for Europe Monday. Let it be understood that all securities namely 144 Con. Gas 230 Texas Corp. $6,000 in cash 300 Houston and 200 Lambert are held in your account.

In the event that we sell 300 HO and 200 Lambert the profit or loss assuming in to be divided equally between you and myself. I have no interest in your holding 144 Con. Gas 230 Texas Corp. or 6,000 cash.

I am responsible for interest charges on HO and Lambert 50% and also interest in dividends 5% of Lambert. I will take care of note held at Vailsburg Trust Co. to the amount of $4,000 which you are 50% responsible to me.

Bon voyage.

Yours,

WM. L. LEHMAN."

On July 16th, 1929, Miller sailed for Europe. On or about July 18th, 1929, William Lehman opened a new account with the brokers, under the name of "Barney Miller, Special, Acct. No. 1053" and the said Lehman continued to trade thereunder until October 23d, 1929. There was no trading during the interval between July and October, 1929, under the account No. 366. Miller denied the right on the part of Lehman to open this special account No. 1053, or to trade thereunder for his benefit. Miller returned from Europe in September, 1929. He received a call for margin. He called on the brokers for an explanation, saying that since he had not himself done any trading on this account, or as he claimed, authorized anyone to do so, he could not understand the reason for the call for additional margin. He was told his account was short. He asked leave to have his personal accountant go over this account. This was granted. Thus his accountant, Mr. Victor Beckreck, audited his account and it was ascertained that there had been transferred to his account No. 366, a debt arising in special account No. 1053, in the sum of $15,527.40. Lehman admitted that the latter item was his and was not chargeable to Miller. Despite this Miller was told that he would either put up additional margin or he would be sold out. He put up some additional collateral and caused an account with a broker, Ira Haupt, to be transferred over to the brokers-respondents -- as a result of which they received $4,000 above what they paid for it on the transfer. The market kept going down and shortly thereafter, October 30th, 1929, and on November 12th, 1929, more margin was demanded and because of his inability to supply same, one-half of all his

holdings, with the exception of forty shares of one stock, were sold on November 13th, 1929, resulting in an alleged loss to him in the sum of $54,251.88. This despite the protests of Miller and his threat that he would hold the brokers accountable for any loss that might result by reason of the sale of these securities. The evidence of Miller's accountant tended to justify the conclusion that if the item of $15,527.40 had not been included in account No. 366, there might probably have been no necessity for the sale of the securities.

Miller's debit balance on November 13th, 1929, was $86,325.74 and the market value of the securities as of the same day was $108,645. If we add $15,527.40 to the debit balance there is still left $6,791.82. On December 21st, 1929, Miller closed out his account by paying the brokers the sum of $43,050.54, under protest, and without prejudice, in order, as he says, to obtain the return of his collateral.

At this posture of the case a motion for a nonsuit was made and allowed. We think that this was error. The court has held: "That it is entirely settled that the motion to nonsuit admits the truth of the plaintiff's evidence and of every inference of fact that can be legitimately drawn therefrom, but denies its sufficiency in law; and where the evidence and the inferences reasonably arising therefrom will support a finding for the plaintiff, the motion for nonsuit is properly denied." Goodyear Tire Co. v. Gallagher, 108 N.J.L. 543. In the case of Finnegan v. The Goerke Co., 106 Id. 59, the late Chancellor Walker, relying on the case of Bennett v. Busch, 72 Id. 240, held:

"* * * where fair-minded men might honestly differ as to the conclusions to be drawn from facts whether controverted or uncontroverted, the question at issue should go to the jury * * *," although the opinion of the judge upon the evidence might be otherwise.

We are of the opinion that the following are some of the questions of fact which presented themselves at the conclusion of the case. (a) Did the brokers know of the arrangements existing ...


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