Fiedler v. Allen

CONREY, P. J.

On December 27, 1926, the J. E. K. Financial Service, Inc. (hereinafter called Financial Service), as principal, and the American Surety Company of New York, as surety, executed on behalf of said Financial Service a broker’s bond as required by section 5 of the Corporate Securities Act as amended in the year 1925 (Stats. 1925, p. 967). The bond was executed for the calendar year 1927. During the period of the transactions referred to herein, said Financial Service was engaged in business as a licensed broker in this state, and said undertaking was in force. This action was brought to recover judgment under and within the terms of said undertaking.

On September 30, 1927, the defendant Allen qualified under appointment as receiver of said Financial Service, and under permission duly given he was made defendant in this action. Judgment was entered against the Surety Company alone in the sum of #3,090, plus #30.21 costs. The judgment is silent concerning any right of action of plaintiff against the receiver. From that judgment the Surety Company prosecutes this appeal.

[624]

The conditions of the undertaking were such that if the principal, and any and all agents and employees representing such principal, should comply with the provisions of said Corporate Securities Act, “and shall honestly and faithfully apply all funds received, and faithfully and honestly perform all obligations and undertakings, in the purchase or sale of securities by said broker, his agent and employees, . . . then this obligation shall be void; otherwise to remain in full force and effect”.

The liability sought to be enforced herein arises out of the alleged conversion by Financial Service of three $1,000 bonds of the Meriondale Electric Company. On August 22, 1927, respondent entered into a contract in writing with Financial Service whereby Financial Service was employed as respondent’s agent for the purchase of certain shares of stock of sundry corporations. As a deposit on the purchase of said securities respondent delivered to the broker said three Electric Company bonds, which were thereupon given a “loan value” of $2,256. The contract was upon a printed form, and on the face thereof it was stated that the employment “shall be governed by the conditions printed on the reverse side hereof”. Those conditions were printed in a series of numbered paragraphs, one of which reads as follows: “(6) It is further agreed that in case any securities are deposited with the agent by the principal as security for the performance of this agreement, the agent may pledge such collateral or securities to the extent of its interest therein, or to the amount advanced by it for the account of the principal on such collateral or securities.”