I dissent. While I essentially agree with the factual and legal presentation in the majority opinion, I disagree with the result reached. I would reverse and award judgment to plaintiff, but only for the damages incurred as of January 31, 1975.
The question presented on this appeal is whether a stock sale transaction is void, and unenforceable against the defendant customer, when the plaintiff brokerage firm is in technical, nonwillful violation of Federal Reserve Board regulation T. The regulation provides that in a special cash account a creditor may sell a security for a customer provided the security is either held in the account, or the creditor is informed that the customer or his principal owns the security *124and the creditor believes, in good faith, that the security is to be promptly deposited in the account.
In the present case the defendant was a sophisticated trader in securities and was also a registered representative. In 1974 he had actively traded Medtronic stock, having bought or sold between 60,000 and 80,000 shares using between 15 and 20 firms to conduct the trades. Defendant maintained a "delivery-versus-payment” special cash account with plaintiff, using a bank as a clearing agent to accept delivery of sold stock for transmittal to plaintiff.
On January 10, 21 and 23, 1975, defendant directed plaintiff to sell a total of 4,000 shares of Medtronic stock for his account. The record is somewhat unclear whether defendant was "short” or "long” in Medtronic at the time he directed plaintiff to sell the shares, but the majority, exercising its function as fact finder, has treated the transactions as "long sales”, i.e., that plaintiff owned the securities when they were sold. Nevertheless, the majority concludes that plaintiff was in violation of regulation T because "there is no indication of any agreement that the security was promptly to be deposited by defendant in his account.” It is upon this basis that the majority concludes that plaintiff may not recover any of the $52,019.44 it sustained as damages when defendant failed to deliver the stock.
The "per se unenforceable” rule announced by the majority places the defendant customer in the enviable position of "heads-I-win, tails-you-lose” criticized by Judge Friendly, dissenting in the no longer valid "Pearlstein I” (Pearlstein v Scudder & German, 429 F2d 1136, 1148). If the Medtronic stock had gone down, instead of up, defendant could have purchased replacement shares in the open market at a reduced price, delivered them to plaintiff, and realized his profit. He would not even have had to touch his own shares assuming, as the majority has, that defendant was "long” when he directed plaintiff to sell. On the other hand, since the Medtronic shares went up, instead of down, defendant is now free to claim that he need not deliver the shares, and plaintiff cannot collect damages for replacing those shares at a higher price, because plaintiff cannot establish an "agreement that the security was promptly to be deposited by defendant in his account” and was therefore in technical violation of regulation T. I do not share the majority’s view of this result as affording the parties equal status before the law.
*125I would hold that the technical, nonwillful violation of regulation T does not operate to divest plaintiff of its entire cause of action (see Weis & Co. v Offenberger, 31 Misc 2d 628; Fisch v Banks, 58 Misc 2d 839). The damages should be the difference between the sale price on the respective sale dates, and the price on the date when plaintiff should reasonably have bought in, and thereby mitigated the resultant damages (see Billings Assoc. v Bashaw, 27 AD2d 124; Merrill Lynch, Pierce, Fenner & Smith v Jordan, NYLJ, April 12, 1978, p 10, col 3; Merrill Lynch, Pierce, Fenner & Smith v Jordan, NYLJ, April 9, 1979, p 14, col 2). Since SEC rule 15c3-3(m) requires a buy-in "within 10 business days after the settlement date”, I would fix that date as January 31, 1975 (the final buy-in date for the January 10 transaction which had a settlement date of January 17).* The reason I would not extend the buy-in dates further is that plaintiff had real or constructive notice, as of January 31, that defendant did not have Medtronic stock to deliver. It would have been unreasonable for plaintiff to have bought in 2,000 shares on January 31, because of the default oh the first sale, and then waited until February 11 and February 13 to close out the January 21 and January 23 transactions. In these circumstances, the transactions all having been in Medtronic, Inc. shares, the first default should serve as a notice of probable default in the subsequent transactions. After January 31, 1975, plaintiff should no longer enjoy the benefit of the majority’s treatment of these transactions as "long sales” (see Naftalin & Co. v Merrill Lynch, Pierce, Fenner & Smith, 469 F2d 1166, 1176-1178, 1181-1182).
In conclusion, I observe that even under Pearlstein I (supra) the plaintiff herein may have been able to collect the measure of damages which I believe to be appropriate. In a footnote to the majority opinion in that case (429 F2d 1136, 1141-1142, n 9) the court stated: "Several cases cited by defendant deal not with the investor’s right to recover for the broker’s failure to sell unpaid-for securities after seven days, but rather with the broker’s right to sue for the original contract price after plaintiff has failed to tender payment and the broker has accordingly sold the securities on the investor’s account [citing Federal and New York State cases]. Pearlstein does not contest his liability for the original contract price, but rather *126seeks to limit his loss to that which he would have sustained had defendant sold the bonds after seven days.”
If this approach were to be applied to the case at bar, it would support a holding that defendant herein is liable for the damages sustained by plaintiff resulting from defendant’s failure to deliver the 4,000 shares of Medtronic stock, limited to the loss plaintiff would have sustained had plaintiff "bought in” on January 31, 1975, i.e., within 10 business days after the settlement date of the first transaction (SEC rule 15c3-3[m]). I would reverse and grant judgment to plaintiff.
Fein and Lupiano, JJ., concur with Bloom, J.; Birns, J. P., and Lane, J., dissent in an opinion by Birns, J. P.
Judgment, Supreme Court, New York County, entered on April 14, 1977, affirmed. Respondent shall recover of appellant $75 costs and disbursements of this appeal.
Plaintiff’s violation of SEC rule 15c3-3(m) (failure to buy in on time) cannot divest plaintiff of a cause of action, and resultant damages, which had accrued prior to plaintiff’s first violation of the rule.