Margin

See "Gambling Contract."

A sum of money, or its equivalent, placed in the hands of a stock broker, by the principal', or person on whose account a purchase of stock or commodities is to be made, as a security to the former against losses to which he may be exposed by a subsequent depression in the market value of the stock. See Markham v. Jaudon, 49 Barb. (N. Y.) 462. A sale on margin is a sale on time of stock value before the time of final payment, the buyer is called upon to advance more margin. The effect of the contract is that the broker, upon the performance of certain conditions by the customer, will buy and hold a certain number of shares, and in case any advance accrues and is realized by a sale, made under the authority of the cu.stomer, he shall enjoy the benefit of it, and in case a loss ensues, the broker having performed the contract on his part, the customer shali bear it; Markham V. Jaudon, 49 Barb. (N. Y.) 464; Baker V. Drake, 66 N. Y. 518, 23 Am. Rep. 80. Stock purchased on a margin instantly becomes the property of the customer, with all future dividends and earnings, and the client is entitled to the possession of it upon paying the purchase money with commissions; Markham v. Jaudon, 41 N. Y. 235, 247, 267, 258; Baker v. Drake, 53 N. Y. 211, 216, 13 Am. Rep. 507. It was settled in New York by the leading case of Markham v. Jaudon that a purchase of stock on margin by brokers to be carried for the customer in their own name and with their own funds, creates the legal relation of pledgor and pledgee, and that a sale, not judicial, or upon notice and demand for payment of advances and commissions is a wrongful conversion. This doctrine was finally distinctly reaffirmed in New York; Gruman v. Smith, 81 N. Y. 25; and in other states; Baltimore Marine Ins. Co. V. Dalrymple, 25 Md. 269; Esser v. Linderman, 71 Pa. 76; and apparently in England; 5 Bligh N. S. 165, affirming 3 Sim. 153. See Dos Passes, Stock Brokers 112, where many other cases are cited. The pledgee is not liable for neglect to sell the stock where it depreciates in his hands or even becomes worthless, if he has not been requested to sell or refused to transfer the stock for that purpose; O’Neill v. Whigham, 87 Pa. 394; Howard v. Brigham, 98 Mass. 133; nor is he liable if the pledge be stolen without negligence on his part; Abbett v. Frederick, 56 How. Pr. (N. Y.) 68; and a stock broker is not liable where spurious securities are purchased for a customer in the regular course of business, if he sells such and in consequence refunds the purchase money, he can recover it from his customer; 15* M. & W. 308, 486; 8 C. B. 373. It thus appears that one purchasing stock on a margin is in all essential parts the owner of the stock, entitled to the advantages and subject to the responsibilities of that relation. A speculative contract for the purchase and sale of stocks on margin is not invalid as a gambling transaction; Richter v. Poe, 109 Md. 20, 71 Atl. 420, 22 L. R. A. (N. S.) 174; Rice v. Winslow, 180 Mass. 500, 62 N. E. 1057; Post v. Leland, 184 Mass. 601, 69 N. E. 361; Peters v. Grim, 149 Pa. 163, 24.Atl. 192, 34 Am. St. Rep. 699; Hallet v. Aggergaard, 21 S. D. 564, 114 N. W. 696, 14 L. if he availed himself of the broker's credit and facilities for borrowing on the stocks themselves; Winward v. Lincoln, 23 R. I. 476, ei Atl. 106, 64 L. R. A. 160. An intention by the parties to engage in a gambling transaction may be inferred where the party making the purchase never calls upon the party ordering the purchase for the purchase money, but only for margins; Jamieson v. Wallace, 167 111. 388, 47 N. E. 763, 59 Am. St Rep. 302. The provision of the California constitution invalidating contracts for the sale of futures is held to apply to a sale of stock on margin; Cashman v. Root 89 Cal. 373, 26 Pac. 883, 12 L. R. A. 611, 23 Am. St Rep. 482. See FtrrtJREs; Stock; Wageb.,

Asumof menoy, or its equlyalent, placed in the hands of a stockbroker by the principal or person on whosa account the purchase is to be made, as a security to the former against losses to which be may be exposed by a subsequent depression in the markei value of ths stock. 49 Barb. 468.

s In a brokers contract for the sale of stocks: security against loss on the part of the agent, — money or other property, i' Additional collateral security against loss to the broker, while he is carrying stock for his employer. 11 See Futures; Option; Wagering.