Thomson McKinnon Securities, Inc. v. Hardy Warehouse, Inc.

562 So. 2d 990, 1990 La. App. LEXIS 1411, 1990 WL 69698
CourtLouisiana Court of Appeal
DecidedMay 23, 1990
DocketNo. 88-1396
StatusPublished
Cited by2 cases

This text of 562 So. 2d 990 (Thomson McKinnon Securities, Inc. v. Hardy Warehouse, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Thomson McKinnon Securities, Inc. v. Hardy Warehouse, Inc., 562 So. 2d 990, 1990 La. App. LEXIS 1411, 1990 WL 69698 (La. Ct. App. 1990).

Opinion

FORET, Judge.

This is a suit on open account instituted by Thomson McKinnon Securities, Inc. against Hardy Warehouse, Inc., seeking the balance due on a commercial hedge account opened by defendant. Defendant filed a reconventional demand seeking damages resulting from unauthorized and unethical transactions allegedly entered into by plaintiff through its commodities broker, Dick Johnson. The trial court rendered judgment in favor of plaintiff on its main demand and denied the reconventional demand and third party demand filed by defendant. Defendant has appealed, raising four assignments of error.

The dispute in question centers around transactions made by defendant on the commodities market through the Chicago Board of Trade on September 13, 14, and 15, 1983. Plaintiff acted as commodities broker for the transactions in question, all of which were conducted at the instance of defendant’s employee, Harold Hardy, Jr. At the close of business on September 15, [992]*9921983, defendant’s account showed a debit balance of $13,355. Subsequent thereto, defendant made a payment of $4,000, thus reducing the balance owed to $9,355.

On appeal, defendant raises the following assignments of error:

1. The trial court erred in granting judgment in favor of plaintiff.
2. The trial court erred in finding that plaintiff did not commit any unauthorized and unethical transactions by liquidating defendant’s account in a manner inconsistent with defendant’s specific instructions.
3. The trial court erred in awarding attorney’s fees under R.S. 9:2781 when there was a genuine and legitimate dispute involved in this case.
4. The amount of attorney’s fees awarded by the trial court pursuant to R.S. 9:2781 is excessive.

ASSIGNMENTS OF ERROR ■ NO. 1 and 2

In its first two assignments of error, defendant contends that the transactions in question were not authorized by defendant and accordingly, the trial court erred in granting judgment in favor of plaintiff. Alternatively, defendant states that the account in question is a “non-discretionary account,” and hence plaintiff was unable to engage in discretionary trading without prior written authorization from defendant. Because such written authorization does not exist, defendant therefore maintains that the transactions in question were unauthorized and, accordingly, defendant is not liable for the amount sued upon. The trial court’s reasons for judgment in reference to the issues cited above are excellent and are hereby adopted and set forth below:

“The record shows that Hardy is a family-owned corporation which is in the business of buying, drying, storing, and selling rice and soybeans in the Jefferson Davis Parish area. Harold Hardy, Sr. is President, Harold Hardy, Jr. is Vice-president, and David Hardy is Secretary-Treasurer. In addition to being Vice-president, Harold Hardy, Jr., was in charge of buying and selling beans from the farmers and was also in charge of the commercial hedge accounts.

“In 1981 he was authorized and did open a commercial hedge account with Thomson McKinnon in its Lake Charles office. In this connection Mr. Hardy executed several documents, copies of which were introduced in evidence, consisting of a Customer’s Agreement (D-4) and a Risk Disclosure Statement and Commodities Hedge Letter (P-1 in globo).

“Hardy’s dealings with plaintiff concerning this account was with its employee Richard “Dick” Johnson (Johnson), who is a Commodity Account Executive for Thomson McKinnon.

“The crucial period concerning this account which precipitated this litigation involves the dates of September 13, 14 and 15, 1983, and in particular the date of September 15, 1983, and the instructions given Johnson by Hardy on this date.

“However, before discussing the issues and evidence it is necessary to define certain terms used by the parties in this highly technical and specialized business which definitions the court has gleaned from the record.

“The Commodities Account in question is a non-discretionary account which means that the broker must have approval from the customer in order to make trades in the account. ‘Bought long’ means the customer has purchased certain contracts, and ‘sold short’ means the customer has sold certain contracts. A ‘spread position,’ also known as a ‘straddle,’ means that at the same time, a customer purchases certain contracts (bought long) and sells (sold short) an equal number of contracts. If the market goes up he gains on the ‘longs’ and loses on the ‘shorts,’ thus holding his position relatively stable. To ‘leg out’ of a spread means to liquidate one side of the spread without simultaneously liquidating the other side. A ‘day trade' means that the customer gets in and out of the market the same day without carrying his position overnight. The sale or purchase of soybean future contracts is done in one thou[993]*993sand bushel quantities. For example, the language ‘S 20 JAN Beans 908’ means sold short 20,000 bushels of January soybeans at $9.08 per bushel.

“Hardy signed a commodity hedge letter which allowed it to sell and purchase future contracts at a reduced margin requirement and to maintain a lower margin requirement. In order to obtain these benefits Hardy had to agree that all orders given for the sale or purchase of future contracts would represent sales or purchases against a corresponding quantity of purchases or sales of physical grain or future contracts bought or sold simultaneously in different months or markets.

“Hardy also signed a risk disclosure statement acknowledging that trading in commodity futures contracts is a risky business which can result in substantial losses due to the nature of the market.

“As noted above, the critical period involves the dates of September 13, 14 and 15, 1983, and specifically the instructions given Johnson by Hardy concerning the trades made on September 15.

“Except for what were the specific instructions given Johnson by Hardy on September 15, there is very little dispute as to what transpired. The documents introduced in evidence and the testimony of Hardy and Johnson indicate that on September 13 Hardy bought long 50 JAN beans and sold short 50 MAY beans. This was a spread position. At the close of trading on this date the account showed a credit balance of $2,396.00.

“On September 14 there was quite a lot of trading in the account. Part of the spread put on the previous day was liquidated by legging out one side of the spread. At the close of trading the account now showed a debit balance of $13,476.20, which means Hardy suffered a loss of $15,-872.20.

“On September 15, at 9:31 a.m., Hardy called Johnson authorizing him to purchase 20 JAN Beans which Johnson did at 9:38 a.m. This was a day trade. Hardy had a quote machine at his office which allowed him to follow the market. Since the market was going against him he called Johnson at 9:51 to get him out of the market. Johnson does not deny that Hardy told him to get him out of the market. What is in dispute is the specific instructions which Hardy gave Johnson to accomplish this. Johnson testified that he called Hardy back to get some clarification since Hardy was in a spread position. He wanted to know whether Hardy wanted to take it off as a spread, or to leg out of it as he had done before.

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Bluebook (online)
562 So. 2d 990, 1990 La. App. LEXIS 1411, 1990 WL 69698, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thomson-mckinnon-securities-inc-v-hardy-warehouse-inc-lactapp-1990.