Krinsky v. Whitney

54 N.E.2d 36, 315 Mass. 661, 1944 Mass. LEXIS 648
CourtMassachusetts Supreme Judicial Court
DecidedMarch 27, 1944
StatusPublished
Cited by12 cases

This text of 54 N.E.2d 36 (Krinsky v. Whitney) is published on Counsel Stack Legal Research, covering Massachusetts Supreme Judicial Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Krinsky v. Whitney, 54 N.E.2d 36, 315 Mass. 661, 1944 Mass. LEXIS 648 (Mass. 1944).

Opinion

Ronan, J.

This is an action of contract in five counts to recover from the defendants the losses that the plaintiff alleged were sustained by him on account of fraud and breach of contract by the defendants arising out of a margin account which he had with the defendants. The first count alleged that the defendants had failed, neglected and refused to close out the. plaintiff’s account when he demanded that they do so on February 4, 1930, at a time when he had a large equity in the account, that they did not close out the .account until October, 1930, and that in consequence thereof the plaintiff incurred a great loss. The second count is identical with the first except that the time of the plaintiff’s demand is stated to be April 1, 1930. The third count alleged that the defendants, in violation of their agreement with him not to sell his securities without giving him notice, sold some of his securities on January 31, 1930, and Febru[663]*663ary 1, 1930, without first giving the plaintiff notice of said sales. The fourth count was on an account annexed and the fifth count was for money had and received. Both of these counts sought to recover the money and the value of the securities that the plaintiff had transferred to the defendants while he was dealing with them as a margin customer. The jury returned verdicts for the defendants on the first three counts. The judge at the close of the plaintiff’s testimony directed the jury to return verdicts for the defendants on the fourth and fifth counts.

There was evidence from which the following facts could be found: The plaintiff opened a margin account in August, 1929, with the defendants by depositing $9,000. He was told by McCarthy, the defendants’ customer’s man, that it was the practice of the defendants not to sell out a customer without first giving the customer notice and enough time to take care of the account. In response to a margin call in August, 1929, the plaintiff reduced his indebtedness to the defendants by selling some of his securities. On September 7, 1929, he received a margin call for $10,000 in cash or securities. Within a few days he saw the defendant Whitney and told him that he thought he would close out the account, but Whitney said that, as the plaintiff was in a position to put up as collateral the securities that the plaintiff had in a trust which he had created, the defendants would not sell him out, that they would accept the securities as cash as of the market of the day they were received by the defendants, that they would protect the plaintiff, and that they would not sell any of the securities he delivered to them without first getting in touch with him. Whitney checked off certain securities on the plaintiff’s margin account which he told the plaintiff to sell, which the plaintiff did on September 12, 1929. Whitney advised him to consult with McCarthy who would take care of him, and not to overload his account. Thereafter the plaintiff delivered fourteen different securities to the defendants from September 12, 1929, to November 6, 1929. All these securities were delivered as collateral security to the margin account. The plaintiff also paid the defendants $5,000 on November 9, [664]*6641929. After the talk with Whitney on or about September 12, 1929, the plaintiff continued to trade actively on the margin account, and up to December 31, 1929, there were one hundred six orders to buy or sell, all of which were signed by the plaintiff except thirteen. The plaintiff gave no orders after January 1, 1930, and the account became inactive. The plaintiff received many margin calls in 1929 and always met them by depositing either cash or securities as collateral or he talked with Whitney or with McCarthy and the latter told him to forget them. He saw Whitney on November 13 or 14, 1929, and told him that he had no more securities to put up and offered notes secured by real estate mortgages, which the defendants later refused to accept and returned to the plaintiff. He got monthly statements from the defendants. His indebtedness to the defendants at the end of October, 1929, was $150,229.44, although it was $122,815.48 at the beginning of the month. The plaintiff’s account was in a critical condition on October 16, 1929, and the defendants called for $40,000. The plaintiff made a substantial deposit of securities on October 18, 1929, and on October 24, 1929. He received another margin call on October 26, 1929, for $23,000 to which the plaintiff responded with a check for $7,500 which was returned “unpaid” by the bank upon which it was drawn. Further securities were delivered to the defendants on November 4, 1929, in response to a margin call on November 3, 1929, for $10,000, which was repeated on November 4, 1929. He made his last delivery of securities on November 6,1929. On November 7,1929, he received another margin call. He sent the defendants three checks, two of which were dishonored. In reply to a special delivery letter stating that if he did not give the defendants $20,000 in cash “before 9 a.m. November 11th” it would be necessary to close his account, the plaintiff sent them a check for $3,500. The plaintiff made sales of securities which reduced his indebtedness to the defendants to $88,774.55 at the beginning of December, 1929. Whitney wrote him on December 9, 1929, that there was an equity of only $2,600 when $32,000 was required for an adequate margin, and that unless his account was satisfac[665]*665torily protected by noon on the next day “we shall proceed to liquidate the account.” As a result of a conference with Whitney, the plaintiff sold certain securities, thereby reducing the debit balance to $70,500. The plaintiff did not respond to a call on December 20, 1929, for additional margin of $15,000. He was advised by the defendants on December 31, 1929, that unless the account was properly protected by January 2, 1930, they would proceed to liquidate it. The plaintiff conferred with Whitney. Whitney on January 9, 1930, wrote the plaintiff advising him to protect the account if he could by putting up a margin of twenty-five per cent if he was able to do so or to secure a bank loan, or to make a partial liquidation of the account. On January 31, 1930, the account continued undermargined, and Whitney on that day and on February 1, 1930, sold securities and credited the plaintiff’s account with $57,296.79. The value of the securities still in the account on February 4, 1930, was $16,437.50 and the balance due the defendants was $13,231.52, leaving the plaintiff with an equity of $3,205.98. The plaintiff ordered the defendants to close out the account when he conferred with Whitney on February 4,1930, protesting the sales of his securities, and asserting that Strickland, the plaintiff’s cotrustee, had not instructed Whitney to sell as Whitney had stated in his letter of February 1, 1930, to the plaintiff. The plaintiff made a similar demand on April 1, 1930, to close out his account but the account was not closed until October, 1930, and on April 2, 1931, a check for $522.99 representing the credit balance and interest was received and cashed by the plaintiff.

We adopt the order followed by both parties in presenting -the case to this court. We first consider the rulings directing verdicts for the defendants on the fourth and fifth counts. We assume that the plaintiff was entitled to show that he relied upon the statement of Whitney that if the securities in the trust were delivered to the defendants they would not sell out the plaintiff, at least not without previous notice of such sale, and that Whitney did not intend to keep this promise; and we disregard the denial of Whitney that such an agreement was made and the finding of the auditor that

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Cite This Page — Counsel Stack

Bluebook (online)
54 N.E.2d 36, 315 Mass. 661, 1944 Mass. LEXIS 648, Counsel Stack Legal Research, https://law.counselstack.com/opinion/krinsky-v-whitney-mass-1944.