UNITED STATES SUPREME COURT DECISIONS ON-LINE

A stockbroker received orders by telegraph from his principal to sell certain securities belonging to the principal in his hands and invest the proceeds in certain other securities named in the order at a fixed limit. When the telegram arrived, the order might have been executed that day, and the securities ordered could have been bought within the limit. The principal was in the habit of dealing with the agent in that way, the agent executing the orders, making advances when necessary, and charging the principal with commissions and interest. At the time when this order was received, the principal was indebted to the agent for advances, commissions, and interest about $4,000 more than the value of the securities in his hands; the broker did not execute the order, did not notify the principal by telegraph that he declined to do so, and made no demand for further advances, but notified him of his refusal by a letter written on the day when the order was received, but received by the principal clubjuris

Page 129 U. S. 194

two days later. The securities which had been ordered sold depreciated below the prices at which they could have been sold on that day, and those which had been ordered bought advanced, so that they could have been sold at a large profit. The broker sued the principal for advances on an open account current and interest and commissions. The principal set up as a counterclaim the losses from these sources

Held:

(1) That the broker was bound to follow the directions of his principal or give notice that he declined to continue the agency.

(2) That this notice should have been given by telegraph, and that the delay caused by using the mail alone was inexcusable under the circumstances.

(3) That in the absence of a special agreement to the contrary, it was the principal's judgment, and not the broker's, that was to control.

(4) That the broker was liable for all the damages which the principal sustained by the refusal to change the stock, both on the stocks ordered sold, and those ordered purchased.

The measure of damages in stock transactions between a stockbroker and his principal, in which the principal suffers from the neglect of the broker to execute orders, either for the sale of stock which he holds for the principal or for the purchase of stock which the principal orders, is not the highest intermediate value up to the time of trial, but the highest intermediate value between the time of the conversion and a reasonable time after the owner has received notice of it, in this respect disregarding the rule adopted in England and in several of the states in this country and following the more recent rulings in the Court of Appeals of the New York.

The case is stated in the opinion.