Cashman v. Root

Citations

• 89 Cal. 373
• 12 L.R.A. 511
• 26 P. 883
• 1891 Cal. LEXIS 825

Syllabus

<p>Constitutional Law—Sale of Stocks on Margin—Void Contract with Broker. —An agreement between a stock-broker and his customer, by which the broker agreed to purchase stocks for his customer, charging the customer with commissions and the interest on the money advanced, and holding the stocks as security until their sale, the customer simply receiving or paying the difference between the buying and selling values of the stocks, is a contract for the sale of stock on margin, within the inhibition of section 26 of article 4 of the constitution, and is void.</p> <p>Id.—Action to Recover Property Conveyed in Trust. — The customer may maintain an action to recover property conveyed by him to secure the broker for advances made by him under such agreement, without the repayment to the broker of such advances.</p> <p>Id. —Relation of Broker to Customer — Evasion of Constitution — Illegal Intent. — The prohibition of the constitution cannot he evaded by interposing the broker between the seller and purchaser of the stocks; and although for all ordinary purposes the stock-broker purchases stock as agent of his customer, and then holds the stock as a pledge to secure the debt, yet if by their agreement the customer is enabled to purchase stock on margin, the agreement is within the prohibition of section 26 of article 4 of the constitution; and the fact that the broker did not himself sell to the customer, hut was only the instrument through whom the illegal end was accomplished, would make no difference, the broker being privy to the design.</p>