SEAMAN, Circuit Judge
(alter stating the facts as above). This suit arises out of transactions between the parties, in the well-recognized relation of broker and purchasing customer, for obtaining shares of stock as ordered, on margins furnished by the customer, to be held by the broker for the customer’s use and benefit; and the only question presented for review is whether performance on the part of the [534]*534broker is established by the facts preserved of record. The brokers, A. D. Nast & Co., sued as plaintiffs to recover of Katz (plaintiff in error) as defendant-purchaser therein for alleged default in the contract, and the issues were tried before the court (upon stipulated waiver of a jury), resulting in findings of specific facts, upon which such recoveiy was awarded; and the ultimate facts so found, whereon the judgment must rest, are these in substance: (1) The shares of stock in controversy were ordered by the defendant, as alleged, with a satisfactory deposit of- funds for margin, to be purchased by the brokers for the defendant’s ownership and use. (2) Such shares were promptly purchased by the plaintiffs on the New York Stock Exchange, through their New York brokers, in the customary methods of the Exchange. (3) The large order thus filled, was for 500 shares of so-called “Atchison stock,” classified on the Exchange a"s “Clearing House stock,” and the'purchase was made in the course of various purchases and sales of such stock by the broker during the day, whereof adjustment was made, in conformity with the well-recognized custom of the Exchange, by setting off one deal against another and making delivery of and payment for balances of shares thus reached in the transactions of the day, resulting in an actual delivery of only 300 shares of such stock; and that the only evidence preserved of the purchase was “entries to that effect upon the books” of the brokers. (4) The other order in suit was for 200 shares of North American Company stock, known as “nonclearing house stock,” which was purchased and received by the New York broker “and charged to plaintiff’s account,” but “the stock represented by such certificates was not kept and retained” and “was sold and disposed of long prior” to the alleged sale closing out the defendant’s purchase, as hereinafter mentioned. (5) Several months after the defendant’s orders were placed (and while he was absent from home in Europe) the market price of both stocks had fallen, so that the depreciation had exhausted his deposit for margin, and the plaintiffs cabled him to forward $5,000 additional margin, which he failed to remit. (6) Thereupon the plaintiffs caused sale to be made (on the New York Exchange) of an equivalent number of shares, and their depreciation amounted to a net loss of $3,754.66 upon the defendant’s orders, in excess of his margin credit.
The findings included, as well, extended recitals of the methods of dealing in stocks on the Exchange and of the business therein conducted by these brokers, including large purchases and sales of “Atchison" stock” for other customers during the pendency of the defendant’s contract, whereby the amount of such shares on hand “was constantly shifting,” together with statements that “there is no evidence expressly or affirmatively to show” that either of the class of shares purchased for the defendant was on hand or under control of the brokers, so that “they could have delivered to defendant on demand” an amount thereof equal to his orders. In reference to the purchases of stock upon the Exchange, it is neither questioned nor questionable that each was a valid contract of bargain and sale between the brokers engaged therein; and the customer is not concerned with the method of settlement for purchase money thus adopted, so long as his order is [535]*535filled, nor are the circumstances stated deemed material, except as they show the amount of shares actually delivered to the broker on each occasion. Nor is it questionable that the defendant was in default under his contract through his failure to remit the additional margin required, and thus liable for the loss above stated, provided the purchase of stock so made completed performance of the undertaking on the part of the plaintiffs up to such alleged default. For solution of the issue of law, therefore, the nature of the contract in suit and obligations assumed by the plaintiffs must be ascertained.
Whatever may appear to be the difficulty in its interpretation, due not only to the various relations arising between the broker and customer in carrying out the contract, but to inharmonious decisions thereupon in various jurisdictions, we believe the rule recently applied in Richardson v. Shaw, 209 U. S. 365, 371, 374, 28 Sup. Ct. 512, 52 L. Ed. 835, to be applicable to the case at bar, and that the doctrine of that case — approving in terms the interpretation of like contracts adopted in the earlier leading cases of Markham v. Jaudon, 41 N. Y. 235, 239, and Skiff v. Stoddard, 63 Conn. 198, 26 Atl. 874, 28 Atl. 104, 21 L. R. A. 102 — must govern this court in settlement of the inquiry.
[1] The obligation on the part of the broker and his relation therein to the customer are thus established, substantially as follows: That, upon acceptance of the customer’s order and deposit of margin for a purchase of stock, the broker undertakes (a) to advance the purchase money required in excess of the margin and promptly obtain the stock so ordered; (b) to carry and hold such amount of stock, in his hands or under his control, as the property, at the risk and for the sole use of the customer, ready for delivery upon his order, so long as the margins required by tlie broker are kept good; and (c) to make delivery thereof to the customer on payment of his advances (less any dividends paid on the stock), interest thereon, and commissions accruing to the broker; or (d) to sell the shares upon order of the customer and account to him in like manner for the proceeds.
[2] The relation thus fixed between the parties, when the purchase is made, is that of pledgor and pledgee in reference to the stock, and not that of debtor and creditor in such transaction ; and, while, tlie property right of the customers must he preserved, the certificates— as “not the property itself, but the evidence of property in the shares” —may he treated as interchangeable in the hands of the broker, so that an equivalent amount of shares under his control meets the requirements of the contract. See, also, Rothschild v. Allen, 90 App. Div. 233, 86 N. Y. Supp. 42, affirmed 180 N.Y. 561, 73 N. E. 1132.
Although the above-stated general doctrine in reference to the contract is not directly controverted on behalf of the plaintiffs (defendants in error), we believe both contentions of counsel in support of tlie judgment to be inconsistent therewith. These propositions are, in effect: First, that neither the rule referred to nor the contract in suit, in view of the well-known methods of dealing on the Stock Exchange, intends or requires an equivalent amount of shares to be actually carried, either in the hands of the broker or directly under his [536]
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SEAMAN, Circuit Judge
(alter stating the facts as above). This suit arises out of transactions between the parties, in the well-recognized relation of broker and purchasing customer, for obtaining shares of stock as ordered, on margins furnished by the customer, to be held by the broker for the customer’s use and benefit; and the only question presented for review is whether performance on the part of the [534]*534broker is established by the facts preserved of record. The brokers, A. D. Nast & Co., sued as plaintiffs to recover of Katz (plaintiff in error) as defendant-purchaser therein for alleged default in the contract, and the issues were tried before the court (upon stipulated waiver of a jury), resulting in findings of specific facts, upon which such recoveiy was awarded; and the ultimate facts so found, whereon the judgment must rest, are these in substance: (1) The shares of stock in controversy were ordered by the defendant, as alleged, with a satisfactory deposit of- funds for margin, to be purchased by the brokers for the defendant’s ownership and use. (2) Such shares were promptly purchased by the plaintiffs on the New York Stock Exchange, through their New York brokers, in the customary methods of the Exchange. (3) The large order thus filled, was for 500 shares of so-called “Atchison stock,” classified on the Exchange a"s “Clearing House stock,” and the'purchase was made in the course of various purchases and sales of such stock by the broker during the day, whereof adjustment was made, in conformity with the well-recognized custom of the Exchange, by setting off one deal against another and making delivery of and payment for balances of shares thus reached in the transactions of the day, resulting in an actual delivery of only 300 shares of such stock; and that the only evidence preserved of the purchase was “entries to that effect upon the books” of the brokers. (4) The other order in suit was for 200 shares of North American Company stock, known as “nonclearing house stock,” which was purchased and received by the New York broker “and charged to plaintiff’s account,” but “the stock represented by such certificates was not kept and retained” and “was sold and disposed of long prior” to the alleged sale closing out the defendant’s purchase, as hereinafter mentioned. (5) Several months after the defendant’s orders were placed (and while he was absent from home in Europe) the market price of both stocks had fallen, so that the depreciation had exhausted his deposit for margin, and the plaintiffs cabled him to forward $5,000 additional margin, which he failed to remit. (6) Thereupon the plaintiffs caused sale to be made (on the New York Exchange) of an equivalent number of shares, and their depreciation amounted to a net loss of $3,754.66 upon the defendant’s orders, in excess of his margin credit.
The findings included, as well, extended recitals of the methods of dealing in stocks on the Exchange and of the business therein conducted by these brokers, including large purchases and sales of “Atchison" stock” for other customers during the pendency of the defendant’s contract, whereby the amount of such shares on hand “was constantly shifting,” together with statements that “there is no evidence expressly or affirmatively to show” that either of the class of shares purchased for the defendant was on hand or under control of the brokers, so that “they could have delivered to defendant on demand” an amount thereof equal to his orders. In reference to the purchases of stock upon the Exchange, it is neither questioned nor questionable that each was a valid contract of bargain and sale between the brokers engaged therein; and the customer is not concerned with the method of settlement for purchase money thus adopted, so long as his order is [535]*535filled, nor are the circumstances stated deemed material, except as they show the amount of shares actually delivered to the broker on each occasion. Nor is it questionable that the defendant was in default under his contract through his failure to remit the additional margin required, and thus liable for the loss above stated, provided the purchase of stock so made completed performance of the undertaking on the part of the plaintiffs up to such alleged default. For solution of the issue of law, therefore, the nature of the contract in suit and obligations assumed by the plaintiffs must be ascertained.
Whatever may appear to be the difficulty in its interpretation, due not only to the various relations arising between the broker and customer in carrying out the contract, but to inharmonious decisions thereupon in various jurisdictions, we believe the rule recently applied in Richardson v. Shaw, 209 U. S. 365, 371, 374, 28 Sup. Ct. 512, 52 L. Ed. 835, to be applicable to the case at bar, and that the doctrine of that case — approving in terms the interpretation of like contracts adopted in the earlier leading cases of Markham v. Jaudon, 41 N. Y. 235, 239, and Skiff v. Stoddard, 63 Conn. 198, 26 Atl. 874, 28 Atl. 104, 21 L. R. A. 102 — must govern this court in settlement of the inquiry.
[1] The obligation on the part of the broker and his relation therein to the customer are thus established, substantially as follows: That, upon acceptance of the customer’s order and deposit of margin for a purchase of stock, the broker undertakes (a) to advance the purchase money required in excess of the margin and promptly obtain the stock so ordered; (b) to carry and hold such amount of stock, in his hands or under his control, as the property, at the risk and for the sole use of the customer, ready for delivery upon his order, so long as the margins required by tlie broker are kept good; and (c) to make delivery thereof to the customer on payment of his advances (less any dividends paid on the stock), interest thereon, and commissions accruing to the broker; or (d) to sell the shares upon order of the customer and account to him in like manner for the proceeds.
[2] The relation thus fixed between the parties, when the purchase is made, is that of pledgor and pledgee in reference to the stock, and not that of debtor and creditor in such transaction ; and, while, tlie property right of the customers must he preserved, the certificates— as “not the property itself, but the evidence of property in the shares” —may he treated as interchangeable in the hands of the broker, so that an equivalent amount of shares under his control meets the requirements of the contract. See, also, Rothschild v. Allen, 90 App. Div. 233, 86 N. Y. Supp. 42, affirmed 180 N.Y. 561, 73 N. E. 1132.
Although the above-stated general doctrine in reference to the contract is not directly controverted on behalf of the plaintiffs (defendants in error), we believe both contentions of counsel in support of tlie judgment to be inconsistent therewith. These propositions are, in effect: First, that neither the rule referred to nor the contract in suit, in view of the well-known methods of dealing on the Stock Exchange, intends or requires an equivalent amount of shares to be actually carried, either in the hands of the broker or directly under his [536]*536control, for delivery to the customer’s order, and that the sole obligation incurred by the broker (after purchase) was to “be prepared to deliver the amount to his customer whenever he should call and pay the cost”; or, second, that actual holding of the stock, if needful, presumptively appears from the express finding of purchase, and neither the above-mentioned recitals therein as to the evidence and want of evidence on that question nor the testimony preserved in the record can disturb the judgment.
[8] 1. The interpretation sought under the first contention would deprive the contract, as we believe, of its essential characteristic, as an actual purchase of the stock by the customer with the so-called margin serving for purchase money, and thus leave the transaction as a mere item of debit and credit between broker and customer, with no-’ feature of present ownership of the stock. If not, in such view, a contract of wager over the rise or fall of market values — of credit to-the customer’s account for higher rates and debit for losses — it cannot be doubted that no ground would exist thereunder for either of the distinctions above stated, creating the relation between the parties of pledgor and pledgee, and not that of debtor and creditor. Purchase by and continuous ownership in the customer require possession, actual or constructive, of certificates for the shares, the only recognized muniment of legal title to stock; and we believe the contract in. suit must be so defined, requiring the brokers to have and retain the-amount of shares purchased for the customer, within their possession or control during the pendency of the contract, to meet their undertaking. Neither personal obligation and ability on the part of the brokers to purchase shares in the market when called upon, nor credit to that end upon their books in favor of the customer, constitutes performance of such contract. When the customer becomes owner of the-stock, his property right, in the absence of default on his part, cannot rightfully be disposed of by the broker, and stands unaffected by solvency or insolvency of such broker holding the stock; and this, as-before stated, notwithstanding the rulings (a) that the broker is free (owing to the nature of the shares) to dispose of any stock held by him, so long as he retains a sufficient amount thereof for delivery to-the pledgor, and (b) that stock held for his pledgor may be repledged by the broker, for his personal benefit, to the extent of his interest therein. Richardson v. Shaw, supra.
In reference to the rule cited by counsel as to bank funds- — that the banker is not required to keep on hand the aggregate amount of bank deposits subject to check — the relation between banker and depositor is well settled as that of debtor and creditor in such deposit, so that the illustration is deemed without force in the case at bar. We are of opinion, therefore, that no definition of the contract is authorized to relieve-the plaintiffs from entire performance in conformity with the -foregoing rule, and that, however technical the requirement may appear to be in the case of shares readily obtainable in the open market, the judgment is .unsupported without facts tending to prove both purchase and holding of stock for delivery under the contract.
[4] 2. The remaining contention, as to the effect of the findings., of fact, is untenable in its postulate that any presumption of delivery [537]*537.and holding, which might otherwise arise from the finding of purchase of the stock, is not overcome by other facts found by the trial court. It is expressly stated, as findings of ultimate fact, that only 300 shares of Atchison stock were received by the brokers (out of 500 ordered by the defendant), and that the 200 shares of North American stock purchased for the defendant “was not kept and retained” by the brokers, but “was sold and disposed of by them long prior” to alleged default upon the part of the defendant. Under facts thus found (appearing in the testimony on behalf of the plaintiffs), no basis is furnished for the assumed inference of fact from the purchase, of continuous possession of the stock, even by way of prima facie proof upon such issues raised by the pleadings.
Moreover, these findings are special, not general, and must be read as an entirety for any needful deductions of fact not stated in terms. Although wanting in precise statement of ultimate fact — containing summaries of the testimony and statement of matters as not “expressly or affirmatively shown” — we believe the findings to be conclusive of these ultimate facts: That the brokers neither received nor held any shares of stock, in their hands or under their control, as the property of the customer, in either purchase made by them, as found; that each of such formal purchases of stock, however consummated, was entered into on the part of the brokers, without either vesting title to the shares in the customer, or intention to that end; and that the sole purpose and effect of their transaction throughout was to create the relation of creditor and debtor between broker and customer, with reciprocal accountability for like amount of shares or their value. In other words, the transaction on the part of the brokers made the purchase their own; not that of the customer, and was in contravention of their contract in suit, as well pointed out in Richardson v. Shaw, supra, 209 U. S. 379, 28 Sup. Ct. 512, 52 L. Ed. 835, in approval of the quotation from Skiff v. Stoddard, supra.
Whatever may be the difficulty imposed upon the broker in performance of his undertaking as above defined, and whatever the practice among brokers in respect thereof, we are of opinion that no other interpretation of the contract in suit is authorized, and that for want of performance thereof on the part of the plaintiffs below, the judgment in their favor is erroneous.
The judgment of the Circuit Court, therefore, is reversed, and the cause remanded, with direction to enter judgment upon the findings in favor of the plaintiff in error, as defendant below.