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of the Binghamton Trust Company, a banking corporation organized under the laws of the state of New York. The certificate representing these shares was upon that day surrendered to the corporation, and in its place two certificates were issued, one of which was for 20 shares and named the plaintiff, Ray M. Gaffney, as the person entitled thereto. This certificate was issued without the knowledge or authority of the plaintiff. On the same day a broker named Klages told the plaintiff that he had sold the 20 shares to one Frederick M. Weed, and requested the plaintiff to sign his name below a blank assignment, which appeared in print on the back of the certificate, in order that he might make a delivery to Weed. The plaintiff signed as requested, and upon the same day the certificate was delivered to Weed, who paid Klages $3,000 therefor. The certificate remained in the possession of Weed until his death, and is now in the possession of the defendant as the executor of his will.
On April 9, 1909, the Binghamton Trust Company had become insolvent, and the superintendent of banks of the state of New York upon that day took possession. Its liabilities proved to be far in excess of the amount of its entire capital stock, and accordingly the superintendent of banks assessed all the stockholders of record for the full amount of their statutory liability. The stock delivered to Weed had never been transferred to him upon the books of the bank. Consequently the name of the plaintiff still appeared thereupon as the owner, and he was accordingly assessed as one of the stockholders of record. He resisted payment of the assessment on the ground that he had never been the owner of the certificate, either legally or equitably. In an action brought against him to recover the amount of the assessment, it was held that, irrespective of the ownership of the stock, this plaintiff, as stockholder of record, was liable for the assessment. Richards v. Ackerman, 175 App. Div. 746, 162 N. Y. Supp. 657; Aff., 223 N. Y. 721, 120 N. E. 874. The plaintiff paid the judgment rendered against him, and thereupon brought this action to recover the amount so paid from the estate of Frederick M. Weed. After a trial of this action before the court without a jury, the complaint of the plaintiff was dismissed, and from the order of dismissal this appeal was taken.
Chapter 241 of the Laws of 1905, by section 315 thereof, imposed a tax upon all sales, agreements of sale, memoranda of sales, or deliveries or transfers of shares of stock in any corporation. Section 323 of the same law provided as follows:
"No transfer of stock made after June first, nineteen hundred and five, on which a tax is imposed by this article, and which tax is not paid at the time of such transfer, shall be made the basis of any action or legal proceedings, nor shall proof thereof be offered or received in evidence in any court in this state."
These sections were in force on January 20, 1909, when the certificate in question was delivered to Frederick M. Weed. The Court of Appeals, in construing the language quoted, has definitely held that in any action based upon a transfer of stock the failure to pay a tax is an affirmative defense, and that in such an action the defendant
must allege nonpayment in his answer and establish nonpayment by a preponderance of the proof. Bean v. Flint, 204 N. Y. 153, 97 N E. 490. The defendant in this action disputes liability solely upon the ground that a stock transfer tax was not paid when the plaintift indorsed the certificate and the same was transferred to the intestate of the defendant.
[1, 2] The plaintiff proved without contradiction that the certificate was indorsed in blank by the plaintiff; that it was delivered to the intestate of the defendant; that he paid $3,000 therefor; that the certificate remained in his possession until the time of his death; that it is now in the possession of the defendant. This was sufficient evidence to create liability on the part of the defendant in favor of the plaintiff, if the evidence was competent. Johnson v. Underhill, 52 N. Y. 203. It was competent under the authority of Bean v. Flint, supra, unless at some time during the trial it appeared that the tax had not been paid. No testimony or other direct evidence was given to establish nonpayment. For proof thereof the defendant relied exclusively upon the fact that the certificate, neither upon its face nor upon the back, bore the stamps required to be used when stock is transferred, and asks us to infer from their absence that the tax was never paid.
The inference might be drawn, were it not for the fact that section 315 of chapter 241 of the Laws of 1905 did not provide for the affixing of such stamps to a stock certificate where the assignment thereof is made in blank. The section reads:
"The payment of such tax shall be denoted by an adhesive stamp or stamps affixed as follows: In case of sale where the evidence of transfer is shown only by the books of the company the stamp shall be placed upon such books; and where the change of ownership is by transfer certificate the stamp shall be placed upon the certificate; and in cases of an agreement to sell or where the transfer is by delivery of the certificate assigned in blank there shall be made and delivered by the seller to the buyer a bill or memorandum of such sale to which the stamp provided for by this article shall be affixed."
The transfer in this case was clearly one where the transfer was made by the delivery of a certificate assigned in blank, so that the transfer tax stamps should have been placed, not upon the certificate, but upon a memorandum of sale made to accompany the delivery thereof. No proof was introduced to show that a memorandum of sale was or was not made, or that stamps were not affixed to such memorandum as required by law. Therefore there was no proof that the tax had not been paid, which rendered the evidence of ownership by the intestate of the defendant incompetent. The plaintiff was therefore entitled to judgment. The judgment should be reversed, and judgment entered in favor of the plaintiff.
Judgment in favor of the defendant reversed, and judgment directed in favor of the plaintiff for the amount demanded in the complaint, with interest, and costs to the plaintiff. This court disapproves that portion of finding 16 which finds that the tax required to be paid on transfer of stock, under section 270 of the Tax Law (Consol. Laws, c. 60), was not paid, and also finds as facts the requests of the plaintiff to find which the trial court refused to find. All concur.
(192 App. Div. 257)
LIPKIEN et al. v. KRINSKI et al.
(Supreme Court, Appellate Division, First Department. May 28, 1920.) 1. Trial 165-Motion to dismiss admits truth of plaintiffs' testimony. For purposes of motion to dismiss the complaint after trial, the court was bound to accept as true the facts to which plaintiff's testified. 2. Brokers 8 (3)-Evidence held to show relationship of stockbroker and client between firms.
In suit by one firm of stockbrokers against another to obtain an accounting for certain marginal transactions in stocks, evidence held to show that the relationship of broker and client existed between the two firms, and that plaintiffs did not merely clear through defendants.
3. Brokers 6-Stockbrokers were brokers as to other firm acting for customers in buying stocks carried on margin.
Defendant firm of stockbrokers acted as agents for plaintiff firm in marginal transactions, though plaintiffs may have been acting in behalf of their own customers in purchasing and carrying the particular stocks involved.
4. Brokers ~37-Stockbrokers merely clearing for other brokers acting for customers may be compelled to account.
If defendant stockbrokers were clearing for plaintiff brokers, who in turn were serving their own customers in the particular marginal transactions pursuant to which moneys were paid to defendants, nevertheless defendants may be compelled to account to plaintiffs.
5. Brokers 37-Stockbroker receiving customer's money for purchase of securities may be compelled to account.
Where a customer deposits moneys with brokers to be used in the purchase of securities on margin, a fiduciary relationship arises between the parties, entitling the customer to require the brokers to account in equity for money received.
Appeal from Special Term, New York County.
Action by Samuel Lipkien and Jack Goodney against Joseph Krinski and Harry E. Krinski. From a judgment dismissing the complaint after trial, plaintiffs appeal. Judgment reversed, and new trial granted.
Argued before CLARKE, P. J., and LAUGHLIN, SMITH, PAGE, and MERRELL, JJ.
Philip C. Samuels, of New York City, for appellants.
MERRELL, J. This action is to obtain an interlocutory judgment requiring the defendants to account for certain transactions wherein said defendants acted as stock brokers for the plaintiffs, and to whom plaintiffs had paid certain moneys for the purchase and carrying of stocks on margin for plaintiffs' account.
The complaint alleges the copartnership of the plaintiffs and that of the defendants, and that the latter were engaged in the city of New York as stockbrokers in buying and selling stocks, bonds, securities, and commodities upon margin and otherwise; that between the 28th day of May, 1918, and the 19th day of December, 1918, the plaintiffs employed the defendants as such stockbrokers to purchase certain stocks and securities for the plaintiffs, and as margin upon such purchases the plaintiffs deposited with the defendants
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divers sums of money and securities in excess of $2,000, upon defendants' agreement to purchase such stocks and securities, and to carry the same for the account of the plaintiffs; that the account was conducted in the name of S. Lipkien, one of the plaintiffs; that pursuant to such employment the plaintiffs did, during said period, from time to time, order and direct defendants to buy for their said account certain divers stocks and securities, and that defendants reported to plaintiffs, and claimed that they had purchased such stocks and securities pursuant to plaintiffs' orders, and claimed to have and hold the same in their possession for plaintiffs' account; that subsequently the defendants reported to plaintiffs, claiming that they had sold for the account of the plaintiffs certain of said stocks and securities.
Upon information and belief, the plaintiffs further allege that the said claims of the defendants that they were carrying said stocks and securities and that they had advanced the necessary balance for carrying the same for the plaintiffs was untrue, and that certain stocks not ordered by the plaintiffs were charged to their account, with certain interest charges therein, which were not due from the plaintiffs; that prior to the commencement of this action plaintiffs demanded of the defendants an accounting of all their transactions for and in behalf of the plaintiffs, which the defendants refused. to make. Thereupon the plaintiffs demanded judgment that the defendants account to them for the moneys and stocks received by defendants from the plaintiffs, and that the defendants render to plaintiffs a full and complete account of their transactions and dealings with and in behalf of plaintiffs, and that the plaintiffs recover of the defendants the moneys and property found their due upon such accounting, together with interest thereon.
The answer puts in issue all of the allegations of the complaint, and for a distinct and separate defense and counterclaim the defendants allege that the defendant Harry S. Krinski and one Benjamin Krinski were the copartners constituting the firm of Krinski & Co., conducting a stock brokerage business at No. 20 Broad street, in the borough of Manhattan, city of New York, and that on and between May 13, 1918, and December 19, 1918, the plaintiff Samuel Lipkien had an account in his individual name with the said Harry S. Krinski and Benjamin Krinski, and deposited with said Krinskis divers sums of moneys, certificates, stocks, and securities as collateral for moneys expended by them on his account in the purchase of stocks, certificates, and other securities on the order of the plaintiff, Samuel Lipkien, and that said Samuel Lipkien, through one of the defendants, Joseph Krinski, Benjamin Krinski, and one Louis Gilbaugh, acting as brokers for him, ordered the sale and purchase for him, respectively, of certain stocks, certificates, and other securities which the said Harry S. Krinski and Benjamin Krinski bought and sold and carried under the account of said plaintiff; that daily reports were made by said Krinskis to the plaintiff Samuel Lipkien in writing of purchases and sales made by them for the
account of said plaintiff; that the said plaintiff Samuel Lipkien failed and neglected to advance sufficient moneys to cover margins on the purchase of stocks and other securities upon his account, and that there is a balance due said Krinskis from said plaintiff of $122.97, for which defendants demand judgment against the plaintiff.
The allegations of defendants' separate defense and counterclaim are put in issue by plaintiffs' reply thereto. The action came on for trial at Special Term, and at the close of the plaintiffs' case, upon motion of the defendants, the learned court dismissed the complaint, whereupon judgment was entered in favor of the defendants. and against plaintiffs, dismissing said complaint, together with costs in favor of the defendants and against the plaintiffs.
In granting defendants' motion to dismiss, it may be inferred from the remarks of the court that it doubted whether a fiduciary relation could exist between brokers, and that the court desired the submission of authorities in support of plaintiffs' claim. The court, however, stated that it appeared that the real purchasers or sellers of the stock were customers of the plaintiffs, and that the plaintiffs had transactions executed by the defendant, and a situation entitling the plaintiffs to require an accounting by the defendants was not presented.
 An examination of the evidence leads me to the conviction that the court erred in thus disposing of the action. The only evidence given was the testimony of the two plaintiffs, and for the purposes of the motion the court was bound to accept as true the facts to which they testified. By the testimony of the plaintiffs it appeared without contradiction that the plaintiffs were copartners engaged in the brokerage business in the borough of Manhattan, city of New York, under the firm name and style of Goodney & Lipkien; that the plaintiffs were acquainted with the defendants, and that said defendants were copartners in the business of buying and selling stocks, bonds, and other securities; that in the month. of May, 1918, the plaintiff Samuel Lipkien called upon the defendants and inquired of the defendant Joseph Krinski as to what he would charge the plaintiff to carry his stock on margin; that Krinski told him to give him additional margin, which he did, giving him some money to open the account and to buy and sell stock; that subsequently, whenever the defendant bought stock and wanted more money, or when stock went down in price and the defendant wanted more money, the plaintiffs gave it to him.
The plaintiffs produced, and there were offered and received in evidence, eight checks drawn by the plaintiffs under the firm name and style of Goodney & Lipkien, some of which were payable to the order of the defendant Joseph Krinski, and others to the firm of J. Krinski & Co., and which were indorsed by the payee, and most of which were ultimately indorsed by the firm of Krinski & Co., covering various sums of money paid by the plaintiffs to the defendants for and on account of the purchase of said stocks and to cover margins thereon. Said eight checks aggregate the sum of