Burdette v. Maryland Casualty Co.

THE COURT. This is an appeal by the defendant from a judgment in favor of the plaintiffs in an action brought upon a statutory bond executed by defendant under the Corporate Securities Act covering Paul E. Williams Company, of Washington, during the year 1930. The contention of the appellant is that the evidence is not sufficient to support the judgment in favor of the respondents.

The evidence shows that Paul E. Williams Company, a Washington corporation, was doing business in California in 1930; and defendant, Maryland Casualty Company, on March 4, 1930, executed a bond in its behalf in compliance with the California Corporate Securities Act, the bond covering the balance of the calendar year 1930, and terminating December [1831],1930. It was conditioned that the principal should strictly comply with the provisions of the Corporate Securities Act and should “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 agents and employees; and further shall pay all damages suffered by any person damaged or defrauded by reason of the violation of any of the provisions of said Act, and acts amendatory thereof and supplemental thereto, now and hereafter enacted”.

The evidence further shows that Paul B. Williams Company, a Washington corporation, was engaged in a brokerage business in San Francisco, and in August, 1930, made written contracts with the respondents to purchase securities for the account of respondents, payable part in cash and the balance in installments, the securities to be held as collateral for the balance of the purchase price; that the Paul B. Williams Company was not a member of the stock exchange, and carried marginal accounts in its own name with stock exchange members. There was no segregation of its customers’ accounts in its dealings with stock exchange members. The evidence shows that the respondent J. W. Burdette entered into a written contract at San Francisco, California, with Paul B. Williams Company, a Washington corporation, August 6, 1930, for the purchase of certain securities by the Paul E. Williams Company, payable part in cash and the balance in twenty equal monthly installments thereafter. Under the terms of the contract J. W. Burdette paid to Paul E. Williams Company, a corporation, the sum of $2,052.58 in cash. The evidence further shows that respondent Agnes Beattie made a written contract at San Francisco, California, with Paul E. Williams Company, a Washington corporation, on August 7, 1930, and another on August 14, 1930, under the terms of which contracts said plaintiff Agnes Beattie delivered to the Paul E. Williams Company certain securities for resale, the proceeds to be applied on the account of the purchase of securities as set forth in the aforesaid contracts. The Paul E. Williams Company thereafter sold these securities for $3,295.77 and credited her account with this amount. Thereafter Paul E. Williams Company advised the respondents that the purchases of securities had been made as agreed.