i i r I i ! i fe mm hi 1 ■ W I Oil (Qortttll Haw ^rtyool iCibratg KF1071.B C sT" U, " VerSi,yL " ,rary miiiK ™? e on ,he law of stock brokers. 3 1924 "018 "643"' 167 The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018643167 A TREATISE ON THE LAW OP STOCK BEOKEES. BY ARTHUR BIDDLE and GEORGE BIDDLE, OP THE PHILADELPHIA BAR. PHILADELPHIA: J. B. LIPPINCOTT & CO. 18 82. Copyright, 1882, by J. B. Lippincott & Co. TO GEtJEGE ,W. BIDDLE, THIS BOOK IS AFFECTIONATELY DEDICATED, BY THE AUTHOES. PREFACE. The transactions growing out of the sale and hypothecation of the securities dealt in at the Stock Exchange already form, both in their number and .magnitude, one of the most im- portant branches of business 1 carried : :qq iri^-great commercial centres, and the questions arising out of .them are subjects upon which the lawyer is almost daily called upon to advise. Several excellent works have been written on kindred sub- jects, which, however, have been devoted rather to the character of such securities, and the obligations they impose upon the corporations issuing them, than to the law governing the parties buying and selling them. In the present work the authors have attempted to discuss the law relating to the agents in these transactions, — stock brokers and their cus- tomers, — and the character of the thing sold, so far as it relates to questions arising out of sales of it. ARTHUR BIDDLE, 221 South Sixth Street, Philadelphia. GEORGE BIDDLE, 208 South Fifth Street, Philadelphia. TABLE OF CONTENTS. PAET I. THE STOCK BROKER. CHAPTER I. PAOB Description of the Stock Broker 33 CHAPTER II. The Stock Brokee and the Stock Exchange .... 43 Section I. — Description of the Constitution and Nature of the Stock Exchange 43 § 1. The London Stock Exchange ..... 44 § 2. The American Stock Exchange .... 49 Section II. — The Clearing House ...... 55 " III.— Effect of the Rules of the Stock Exchange . . 65 " IV. — Terms of the Trade used on the Stock Exchange . 69 CHAPTER HI. The Stock Broker and his Principal 75 Section I. — Creation of the Agency 75 " II. — Scope of the Stock Broker's Authority to Act 85 " III.— Execution of Authority 100 § 1. General Rules , 100 § 2. Liability of the Stock Broker to his Principal . . 106 7 TABLE OF CONTENTS. § 3. Liability of the Principal to the Stock Broker 1. General Rules .... 2. Advances and Disbursements 3. Commissions ..... § 4. Stock Broker's Lien .... Section IV. — Dissolution of the Stock Broker's Agency 1. By the Broker .... 2. By the Principal 3. By the Mere Operation of Law . PAET II. THE SALE. PAGE 107 10? 110 116 118 122 122 123 123 CHAPTER IV. Relation op the Stock Broker to Third Parties . . . 129 Section I.— Stock Broker's Relation to Third Parties, ordinarily 129 " II.— Stock Brokers and Stock Jobbers . . . .132 CHAPTER I. The Thing Sold at the Stock Exchange 139 Section I. — Under what Species of Property Securities Sold at the Stock Exchange are Classed 140 Section II. — Negotiability of these Securities .... 148 " III.— Incidents attached to the Thing Sold . . . 174 CHAPTER II. The Contract of Sale. . \ 182 Section I. — The Necessary Ownership by the Parties in the Thing Sold 182 Section II — The Mutual Assent of the Parties to the Contract 190 " III.— The Price . . . * . . . . .193 CHAPTER III. Effect of the 17th Section of the Statute of Frauds on the Contract 194 TABLE OF CONTENTS. "V PAGE Section I. — What Contracts are within the 17th Section of the Statute 195 Section II. — What Securities are " Goods, Wares, and Mer- chandises" within the meaning of the 17th Section . . 197 Section III. — Earnest, Payment, and Acceptance . . . 204 " IV. — What is a Sufficient Memorandum in Writing . 205 " V. — Who is an Agent duly Authorized . . . 206 CHAPTEK IV. Effect of the Statute of Mortmain on the. Contract . . 207 CHAPTEK V. Effect of the Fourth Section of the Statute of Frauds on the Contract 214 CHAPTEK VI. Effect of the Usage of Trade on the Contract . . . 215 CHAPTER VII. Relation of the Vendor and Vendee after the Contract . 230 Section I. — Relation of Vendor and Vendee after an Executed and Executory Contract of Sale 230 Section II. — Specific Performance ...... 234 § 1. English Cases 235 § 2. American Cases 247 CHAPTER VIII. Completion of the Contract, or the Delivery of the Thing Sold 258 Section I.— The Vendor 260 § 1. What the Vendor must Deliver . . . .261 § 2. The Implied Copdition attached to the Delivery by the Vendor 262 § 3. The Manner of Effecting the Delivery . . .266 Section II.— The Vendee 281 § 1. Acceptance and Payment 281 § 2. Registration 283 10 TABLE OF CONTENTS. CHAPTER IX. PAOI Avoidance op the Contract 287 Section I. — Avoidance of the Contract by Fraud, etc. . . 288 § 1. Fraud 288 § 2. Mistake 288 § 3. Failure of Consideration 289 Section II. — Avoidance of the Contract by Illegality . . 290 § 1. Contracts Illegal at Common Law because in Restraint of Trade 290 § 2. Contracts Illegal because in the Nature of Wagers . 296 I. Where the vendor, at the formation of the con- tract, has not the goods in his possession, nor a reasonable expectation of getting them, but con- templates an actual unconditional delivery . 302 II. Where the vendor, at the formation of the con- tract, contemplates a symbolical, but not a manual, unconditional delivery . . . 302 III. Where the parties, at the formation of the con- tract, contemplate an actual delivery, but con- ditional as to time 309 IV. Where the parties, at the formation of the con- tract, contemplate no actual delivery, but re- serve the option to do so or not . . . 310 V. Where the parties, at the formation of the con- tract, contemplate no delivery at all, but only a settlement of the difference in prices . . 313 PAET III. THE PLEDGE. CHAPTER I. Formation of the Pledge 322 Section I. — Who may Pledge 322 " II.— The Subject-Matter of the Pledge . . . .337 " III — Manner of Effecting the Pledge . . . .338 TABLE OF CONTENTS. 11 CHAPTEE II. PAGE Effect of the Pledge . 339 Section I.— The Pledgee's Title in the Pledge . . . .340 " II.— The Pledgee's Eight to Enjoy the Use of the Thing Pledged 342 § 1. Pledgee's Eight to Vote, collect Dividends, Coupons, etc 342 §2. Pledgee's Eight to Sell the Pledge . . . .343 § 3. Pledgee's Eight to Sub-Pledge or Eehypothecate . 353 I. When securities have been deposited as collateral for the payment of a debt, with the right on the part of the pawnee to sell or otherwise dispose of the same in the event of the non-payment of the debt, and the pawnee repledges the secu- rities to a third party for an advance to him- self, can the original pawnor, the debt remain- ing unpaid, treat the contract of pawn between himself and the first pawnee as at an end, so as to bring an action of detinue or trover against the second pawnee, without tendering the amount of the debt, for which the security has been given ? 354 II. If the contract of pawn between the first pawnee and the original pawnor is not at an end in the event'of the former thus rehypothecating the security deposited with him for a debt of his own, is it, at all events, such a breach of the contract of pawn that an action for damages will lie against the first pawnee, at the hands of the first pawnor, and can the original pawnor, on tendering the amount of his own debt to the second pawnee, obtain possession of the subject of the pawn ? 364 CHAPTEE III. Avoidance of the Contract of Pledge 370 12 TABLE OF CONTENTS. PAET IT. REMEDIES OF THE PARTIES FOR A BREACH OF THE CONTRACT OF SALE. CHAPTEK I. Eememes of the Parties against Each Other, op Creditors against the thing itself, and of the parties against the Corporation for Refusing to Transfer Stock on its Transfer Books 388 Section I. — Remedies of the Parties against Each Other . . 389 " II. — Remedies of Creditors against the Thing itself . 391 " III. — Remedies of the Parties against a Corporation for not Transferring Stock on its Transfer Books . 393 1. Where the company acts on a forged transfer, and issues a certificate which a bona fide purchaser subsequently buys . . . 405 2. Where the transferee purchases stock, and takes a forged power to transfer to the com- pany, and gets certificates issued to him by reason of the forged power . . . 407 3. Where the transferee bargains for stock, and refuses to take the certificates till registered in his name, and the company issues certifi- cates on the faith of a forged power of trans- fer presented by the seller .... 410 CHAPTER II. Measure of Damage for the Breach of the Contract of Sale and Pledge 413 Section I. — Measure of Damages where no Consideration has passed 414 Section II. — Measure of Damages where the Consideration has passed 416 TABLE OF OASES. A. & T. Co. v. Commonwealth 180 Abinger, Bulteel v. 334, 336 Ackerman v. 6mott 84 Aokley, McDowell v. 67 Acraman v. Cooper 146, 391 Adams, Brown v. 376 Adams, Hunt v. 278 Adams, 1ST. P. E. B. Co. v. 174 Adams, Thompson v. 52, 69 Albrecht, Duncuft v. , 146, 199, 239 Alexander v. Brame 213, 336 Alexander, Dunmore v. , 191 Alford, Knapp v. 128 Allaire v. Hartshorne 373 Allen v. Dykers 103, 363, 419 Allen v. Hearn 298 Allen, Hyatt v. 179 Allen v. Kinyon 424 Allen v. Pegram 145 Alley v. Hotson 128 Allison v. Wilson's Ex. 213 Alton & S. E. E. Co., Eyder v. 176, Alvord v. Smith 298 Ammant v. N. Alex. Turnpike Co. 392 Amory, Harvard College v. 84 Anderson, Hodson v. 128 Androscoggin E. E. Co. i>. Bank 342 Anglo-American Tel. Co., Simm v. 157, 407, 411, 412 Appleby, Pickering v. 146, 198 Archer, Upton v. 274 Arents v. Commonwealth 168 Arey, Hinkle v.- 34 Argenti, Hyatt v. 353 Armistead, De Begnis v. 115 Armstrong v. Toler 107, 112, 113, 114 Arnold v. Bank 393 Arnold, Chauncey v. 277 Arnold v. Buggies 146 Arnott v. Pittston 295 Arthurs, Cramer v. 213 Ashby v. Blackwell 410 Ashe v. Johnson 250 Ashford, Home v. 296 PAOB Ashhurst v. Given 333 Ashton v. Atlantic Bank 324 Ashton v. Dakin 303 Ashton v. Lord Langdale 210, 213 Aspinwall, Commissioners v. sl65 Aston, In re 105 Atkins, Kemble v. 34, 40, 91 Atkinson v. Atkinson 269, 273 Atkinson v. Brooks 373 Atkinson, Magee v. 46, 96, 131 Attorney-General v. Bouwens 159 Atty.-Genl., Marsh v. 213 Aucompte, Cockerell v. 88 Aurora City v. West 168 Austin v. Curtis 373 Austin v. Gillaspie 250 Ayres v. Harness 274 B. Babcock, Stephens v. 100 Babcock v. Thompson 298 Badger, Prickett v. 116 Bahia & San Francisco Ey. Co., In matter of 405, 416 Baker v. Drake 353, 419, 420 Baker, Glynn v. 158 Baker, Mack v. 372 Baker, Tarlton v. 298 Baldwin, Bryan ». 351 Baldwin v. Commonwealth 250 Baldwin v. Williams 146 Ball v. Dunsterville 82 Ball v. Gilbert 298 Ball, Paul v. 142 Ballard v. Burgett 360 Bank, Androscoggin E. E. Co. v. 342 Bank, Arnold v. 393 Bank, Ashton v. 324 Bank, Bank of Kentucky v. 399, 401 Bank, Bayard v. 323, 331 Bank v. Boyd 423 Bank v. Brays 180 13 14 TABLE OF CASES. Bank, Bullard v. Bank v. Burr Bank v. Carrington Bank v. Chambers Bank, Coles v. Bank, Conant v., Bank v. Cook Bank, Cross v. Bank, Davis v. 177 266 372 373 393 178 338, 342 271 393 Bank v. Dubuque R. R. Co. 348 Bank, Dutton v. 376 Bank v. Evans Charities 395, 404 Bank, Fisher v. 375 Bank, Foster v. 393 Bank, Grant v. 178 Bank v. Hall 277, 328 Bank v, Hammond 278 Bank, Hutchins v. 145, 147 Bank, In re, etc. 242 Bank v. Kortright 156, 178, 276, 393, 419 Bank, Laird v. 177 Bank v. Lanier . 154, 177 Bank v. Leavenworth 373 Bank, Lee v. 374 Bank, Leggett v. 178 Bank, Lockwood v. 177 Bank v. Lowry 328 Bank v. McCleod 85, 90 Bank v. MoDougall 302 Bank v. McElrath 374 Bank, McNeil v. 359, 362, 374 Bank, Mathews v. 153, 155, 156 Bank v. Minot f 348 Bank, Moodie v. 155 Bank v. New England Bank 95 Bank v. N. Y. & N. H. E. E. Co. 149, 396 Bank of Commerce's Appeal 375, 401 Bank, Phelps v. 179 Bank, Plymouth Bank v. 178 Bank, Pollock ». 248, 410 Bank, Pratt v. 410 Bank, Presbyterian Congregation v. 178 Bank, Purchase v. 249 Bank v. E. E. Co. 156, 168, 277, 372, 374 Bank v. Eeese 417, 419 Bank, Eeese ». 178 Bank, Bex v. 83, 393 Bank, Eobinson v. 242 Bank, Sogers v. 177, 179 Bank, Eoyer v. 373 Bank, Sabin v. 179 Bank v. Schuylkill Bank 399 Bank v. Smalley 178 Bank, State v. 174, 176, 180 Bank, Stevens v. 851 Bank, Stracy v. 893 Bank, Torrey v. Bank v. Trenholm Bank, Vansands v. Bank, "Wallis v. Bank v. 'Waltham Bank v. Welch Bank v. Williams Bank v. Wilson Barclay, Hamonds v. 348 94, 105, 364 178 123 142 373 376 266 118 Barclay Coal Co., Morris Eun Coal Co. v. 291, 295 Baring v. Corrie 34 Barkman, Bertrand v. 373 Barnet, Van Hook v. 273 Barnewell, Henderson v. 34, 95, 206 Barnum v. Munn 267 Barr v. Schroeder 128 Bartholomew, Drybutter v. 144 Bartlett v. Drew 179 Bartlett, Walker v. 172, 269, 284 Bassett, Granger v. 180 Basten v. Butler 112 Bates v. Ins. Co. 176 Bates v. Wiles 423 Baud v. Fardell 84 Bay, Coddington v. 373 Bayard v. Bank 323, 331 Bayley v. Wilkins 111, 218 Bayliffe v. Butterworth 94, 224 Bean, Jenners v. 373 Beckendorff, Musgrave v. 419 Beeker v. Vrooman 112 Beers v. Crowell 200 Beetston v. Beetston 113 Belfield, Bradford v. 333 Bell, Bowlby v. 199, 283 Bell, Catlin v. 85, 96, 100 Bell, Mocatla v. 107, 131 Bellas v. Mo.Carty 329 Belote v. White 336 Beltzhoover v. Darragh 330 Bemis, Howe v. 350 Benedict, Bigelow v. 311, 318 Bennett v. Hull 197, 369, 382, 417 Bennett, Work v. 362, 382, 417 Benoit ». Conway 123 Bentley, N. A. Col. As. Co. v. 393 Bercich«. Marye 424 Berger v. Duff 334, 336 Berger, Stahl ». 275 Bernard, Coggs v. 356 Bertram v. Gfodfrey 87 Bertrand v. Barkman 373 Betterbee v. Davis 282 Beverley v. Lincoln Gas Co. ' 83 Bianchi v. Nash 286 Biederman v. Stone 109 Bigelow v. Benedict 311, 818 TABLE OF CASES. 15 PAGE Bigelow, Orr v. 178 Biggs, Bex v. 82 Birch, Walker v. 122 Bird, Meadows v. 373 Blackburn v. Schbles 123 Blackmore v. Shelby 187 Blackstone v. Buttermore 128 Blackwell, Ashby v. 410 Blake, Cole v. " 286 Blanchard v. Stevens 372 Blane, Grizewood v. 314 Blane, Sayles v. 285 Bligh v. Brent 142 Blood v. Goodrich 276 Bloodgood, Kane v. 180 Blyth v. Carpenter 387 Board man v. Gore 278 Bodenhammer, Newsomv. 383 Bohlen's Estate 336 Bond, Clough v. 330 Bond, Conkey v. 90 Bonsall, Kirkpatrick v. 312 Booth v. Fielding 95 Boston, King v. 112 Boston Water-Power Co., Sewall v. 410 Bourne v. Seymour 89 Bouvier, Smith v. 302 Bouwens, Attorney-General v. 159 Bowden, Goodwin v. 128 Bower v. Jones 116 Bowlby v. Bell 199, 283 Boyd, Bank v. 423 Boylan v. Huguet 146, 386, 387, 391, 423 Boyson v. Coles 90 Bradford v. Belfield 333 Bradley v. Holdsworth 142, 199 Bragg v. Fessenden Brainerd v. N. Y. & N. H. E. E. Brainerd, Sewall v. Brame, Alexander v. Brancker, Parker v. Brandt, Sharman v. Brass v. Worth Brays, Bank v. Breedlove v. Johnson Brenizer, Morrow v. Brent, Bligh v. Breton v. Pierce Brewster v. Hartley Bridge Co., Ellis v. 266 Briggs, Oriental Steam Co. v. 245 Brightwell v. Mallory 174 Brinley, Jones v. 140 Bristowe, Coles v. 47, 48, 133, 134, 222 Bristowe, Grissell v. 41, 48, 134, 222 Brockway, Chappell v. 293 Bromley v. Coxwell 100 272 Co. 168 174 213 120 96,97 345 180 278 213 142 372 338 Bronson's Ex., Newton v. 336 Brookman, Eothschild v. 90 Brooks, Atkinson v. 373 Brooks v. Martin 114 Brooks, Watts v. 118 Brown v. Adams 376 Brown v. Coal & Nav. Co. 180 Brown v. Croft 118 Brown v. Duncan 112 Brown, Fisher v. 423 Brown v. Johnson 280 Brown v. Leeson 297 Brown v. McGran 86, 120 Brown v. Speyers 302 Brown v. Thompson 298 Brown v. Turner 72, 298 Brown v. Ward 346 Brown v. Williamson's Ex. 333 Brua's Appeal - 298, 305, 309, 317 Brundage v. Brundage 179 Bryan v. Baldwin 351 Bryan v. Lewis 185, 186, 302, 351 Bryce, Canaan v. 107, 112, 115 Buckeridge v. Ingram 144 Budd v. Hiler 336 Bullard v. Bank 177 Bulteel v. Abinger 334, 336 Bunn v. Eiker 298 Bunting, Somerby v. 202 Burgett, Ballard v. 360 Burns v. Lynde 273 Burr, Bank v. 266 Burroughs v. Eichmond 174 Burslem, Pidgeon v, 118 Burt, Durant v. 114 Burt v. Dutcher 419 Busk, Pickering v. 84, 94, 262 Butler ». Basten 112 Buttermore, Blackstone v. 128 Butterworth, Bayliffe v. 94, 224, 343 Butterworth v. Kennedy 343 Buttrick v. Holden ' 332 Byers v. McClanahan 274 Byrne, Ward v. 295 C. E. & B. Co. v. A. & G. E. E. Co. Calais Steamboat v. Van Pelt Caldwell, Nauman ». Caldwell, Weightman v. Cambers, Knight v. Cameron v. Durkheim Campanari v. Woodbury Campbell, Cockran v. Campbell, Pym v. Canaan v. Bryce 424 332 419 200 113 304 128 94 319 107, 112, 115 16 TABLE OF CASES. PAGE Capp v. Tophani 110 Capper, Reeves v. 383 Capper, Rex v. 142 Oappur i). Harris 236 Carlisle, Commonwealth v. 294 Carpenter, Blyth v. 387 Carpenter v. R. R. Co. 180 Carpenter, Sea v. 116 Carriger v. Whittington 128 Carrington, Bank v. 372 Carroll, Gainsford v. 414 Carter, Whitwell v. 298 Cartwright v. MoCoofc 424 Cason v. Cheely 197 Cassard v. Hinman 302 Cassiday v. McKenzie 124 Cassily, Cummins v. 272 Catlin v. Bell 85, 96, 100 Caulk, Moody v. 422 Cauty, Stewart v. 217 Cease, Pickering v. 318 Cedar County, Clapp v. 168 Chambers, Bank v. 373 Chapin v. First Univ. Soc. 333, 335 Chapman v. Morton 286 Chapman v. Shepherd 108 Chapman, "White v. 112 Chappell v. Brookway 293 Charlaron v. McFarlane 278 Charmley v. Winstanly 123 Chase v. Westmore 121 Chauncey v. Arnold 277 Cheely, Cason v. 197 Chester Glass Co. v. Dewey 266, 269 Child v. Morley 46 Chitty, Fjilkeron v. 142 City v. Lamson 168 City of Dubuque, Gelpcke v. 167, 174 City of New London, Society for Savings v. 168 City of Ohio v. R. R. Co. 180 Clapp v. Cedar County 168 Clark, Cofield v. 424 Clark, Commissioners v. 167 Clark v. Flint ' 247 Clark v. Foss 302, 318 Clark v. Gibson 297 Clark v. Lee Co. 168 Clark v. Mfg. Co. 168 Clark, Petrie v. 373 Clark v. Pinney 415 Clark, Tainter v. 336 Clarke, Dixon v. 282 Clarke ». Iowa City 174 Clarke v. Janesville 168 Clarke, Smith v. 168 Clegg v. Townshend 100, 110 Clendaniol v. Hastings 275 Clough v. Bond Coal & Nav. Co. u. Brown Cobb v. Doyle Cochran v. Retberg Cockerell v. Aucompte Cockran v. Campbell Cockran v. Irlam Coddington v. Bay Coddington ■». Paleologo Cofield v. Clark Coggs v. Bernard Coker, Hitchcock v. Colburn, Long v. Cole ■». Blake Cole, Ins. Co. a. Cole v. Milmine Cole, Olivierson v. Cole, Young ■». Coles v. Bank Coles, Boy son v. Coles v. Bristowe Coles v. Trecothick Coles, Wells v. Colket v. Ellis Collamer v. Day Collinson v. Lister Colt v. Netterville Colvin v. "Williams Combe's Case 330 180 372 280 88 94 94,95 873 280 424 356 291, 296 81 286 146, 203 302 72, 298 85, 93, 264 393 90 47, 48, 133, 222 95 142 66 298 329 198, 236 200 336 Commander, Gourdin v. 278 Commercial,- etc. Co., Treasurers. 251 Commissioners v. Aspinwall 165 Commissioners v. Clark 167 Commonwealth, A. & T. Co. «. 180 Commonwealth, Arents v. 168 Commonwealth, Baldwin v. 250 Commonwealth v. Carlisle 294 Commonwealth v. Hunt 296 Comstock, "Willoughby v. 346, 350, 352 Conant v. Bank 178 Conbam, Mores v. 356 Conkey v. Bond 90 Conner, Gibson v. 873 Conway, Benoit v. 123 Cook, Bank v. 338 Cook, Cropper v. 91 Cook v. Helms 378 Cook, Merchants' Bank v. 342 Cooke v. Davis 812 Cooke, Freeman v. 403 Cooke, Mussell v. 198, 201, 205 Cookson, Duke of Somerset v. 234 Cooper, Acraman v. 146, 891 Cooper, Davidson v. 270 Cooper v. Phibbs 289 Cooper v. Ray 388 Copeland ■». Ins. Co. 90 Corrie, Baring v. 34 TABLE OF CASES. 17 Cortelyou v. Lansing 1 PAGE 419 Cottle, Hammon v. 100 County, Johnson v. 168 Couturier, Hastie v. 188 Covill v. Hill 360 Cowell, E. JR. Co. v. 180 Cowles v. "Whitman 249 Cowling v. Cowling 140 ,141 Coxwell, Bromley v. 100 Craig v. Vicksburg 168 Cramer v. Arthurs 213 Credit Foncier Co., Crouch v. 148 156 158 160 170 Creed, Lightfoot v. 109 111 Crocker, Smith v. 272 Croft, Brown v. 118 Cropper v. Cook 91 Cross v. Eglin 88 Cross v. State Bank 271 Crouch v. Credit Poncier Co. 148 156 158 160 170 Crowell, Beers v. 200 Cruikshank v. Duffin 324 Crull v. Dodson 198, 201 205 Crutcher, Williams v. 278 Cud v. Butter 235 Cummins v. Cassily 272 Curran v. State 179 Curry v. Woodward 180 Curtis, Austin v. 373 Cushman v. Hayes 350 Cushman v. Jewelry Co. 353 Cushman v. Thayer Mfg. Co. 156, 249 D. Da Costa v. Jones 297 Dails v. Lloyd 110 Dakin, Ashton v. 303 Dalbiac, Bailway Co. v. 393 Dalrymple, Ins. Co. v. 346, 347, 350 Dane, C. & G. E. E. E. Co. v. 310 Daniell, Gwillim v. 89 Darragh, Beltzhoover v. 330 Dartmouth, Howe v. 84 Daubigny v. Duval 355 Davenport v. Sleight 273 Davenport, Telegraph Co. v. 340 Davidson v. Cooper 270 Davidson, Way v. 383 Davies, McCombie v. 355 Davis v. Bank 393 Davis, Betterbee v. 282 Davis, Cook v. 312 Davis, Entwhistle v. 212, 213 Davis v. Funk 352 Davis v. Haycock 390 Davis, Owen ». Dawson, Pothonieru. Day, Collamer v. Day v. Holmes Day v. Swift De Begnis v. Armistead De Berenger, Bex v. De Bernardy v. Harding De Haven, Euchizky v. 114 121 298 227, 273 883 115 296 116 61, 115, 307 317, 383 330 283 172 100 282 De Haven v. Williams De Medina, Stephen v. De Pass's Case De Tastet, Webster v. Dean v. James Deares, Heger v. 336 Deas, Thorne v. 122 Debouchout v. Goldsmid 90, 92 Deere v. Lewis 424 Delafield, State v. 91, 168 Delamater's Estate 140 Dennison, Exparte 385 Dennison, Wilson v. 336 Denny v. Hamilton 391 Denny, Lyon v. 275 Denton v. Livingston 391 Derby v. Gallup 424 Derby, Eyerson v. 298 Devin v. Himer 277 Devisme, Nightingal v. 140 Devoss v. Eichmond 168 Dewees v. Miller 297 Dewey v. Chester Glass Co. 266, 269 Dexter, Johnson v. 344 Diamond v. Lawrence Co. 164, 166 Dick v. Page 126 Dickinson, Fletcher v. 844 Dickinson v. Lilwall 123 Dickinson, Smith v. 274 Dickson v. Hamer 273 Dickson's Executor v. Thomas 61, 115 306, 317, 383 Diggle v. Higgs 298 Dixon »■ Clarke 282 Dixon v. Ewart 124 Dixon v. Yates 232, 259 Dodge v. Tileston 112, 116 Dodson, Crull v. 198, 201, 205 Doloret v. Eothschild 237, 246 Donald v. Suckling 354, 357, 361, 864, 369 Doolittle, King v. 373 Dorriens v. Hutchinson 48 Dotterell, Gosden v. 140, 141 Douglass, Hunt v. 336 Downes v. Boss 197 Downing v. Potts 175 Dowson v. Gaskoin 141 18 TABLE OF CASES. Doxey v. Miller Doyle, Cobb v. Drake, Baker v. 353, Drew, Bartlett v. Drew v. Munn Drury v. Poster Drybutter v. Bartholomew Dryer v. Lewis Dubuque, Gelpcke v. Dubuque E. B. Co., Bank v. Duff, Berger v. Duffin, Cruikshank v. Duguid D. Edwards Duke of Somerset v. Cookson Duncan, Brown v. Duncan v. Hill Duncan v. Hodges Duncan v. Jaudon Duncuft v. Albrecht 146, Dunkley, Goswell v. Dunmore v. Alexander Dunsterville, Ball v. Durant v. Burt Durant v. Iowa Co. Durkee v. Stringham Durkee v. Vt. Ct. Ey. Co. Durkheim, Cameron v. Dutcher v. Burt Dutton v. Connecticut Bank Duval, Daubigny v. Dwight, Thayer v. Dykers, Allen v. 103, E. Eagle Ins. Co., McCulloch v. Eagleton v. Gutteridge East India Co. v. Hensley Eaton, Mewburn v. Eaton, Perkins v. Eckstein v. Eeynolds Edminston v. Wright Edwards, Duguid v. Edwards v. Hall Edwards v. E. E. Co. Edwards, Eobinss. Ege, Miller v. Egerton, Mcllvaine v, Eglin, Cross v. Eickel». Meyer Elliott, Good v. Elliott v. Merryman Elliott, Payne v. Elliott, Tenant ». Ellis v. Bridge Co. JBllis. Colket », 48, 298 372 419, 420 179 126 278 144 424 167, 174 348 334, 336 324 90 234 112 215 278 832 199, 239 95 191 82 114, 168 168 117, 212 117 304 419 376 355 883 363, 419 191 270 92 136, 318 298 282 110 90 213 197 96, 97 329 802 87 116 297 829 146, 391 113 266 PAGE Ellis, Eyles v. 282 Ellis, Wilkes o. 34 Ellis's Appeal Elsee«. Qatward 325 122 Elwes, Forrest v. 416 Ely v. Sprague 180 Emott, Ackerman v. 84 English, Huntington E. E. Co. v. 415, 417 ,213 Entwhistle v. Davis 212 Essex & C. Co., Sargeant v 178 Evans v. Hudson Bay Co. 178 Evans, Legg v. 355 Evans, Texira v. 270 Evans v. Wain 53,91 ,228 Evans v. Wister 63, 68 215 Evans v. Wood 244 Evans Charities, Bank v. 395 404 Ewart, Dixon v. 124 Ex parte Dennison 385 Ex parte Kerwen 276 Ex parte Marnham 314 Ex parte Mather 112 Ex parte Mathew 178 Ex parte Pyke 113 Ex parte Willcocks 342 Ex parte Young 316 318 Eyles v. Ellis 282 F. Fairlie v. Fenton 96 Fairmaner, Webb v. 280 Fall, Johnson v. 297 Fancourt v. Thome 353 Fardell, Baud v. 84 Fareira v. Gabell 107, 115, 308, 317, 383 Farnsworth v. Garrard 112 Fay v. Wheeler 204 Featherstonehough, Hill v. 118 Fellows v. Harris 378 Fenouille v. Hamilton 373 Fenton, Fairlie v. 96 Ferguson v. Paschall 251 Ferree, Mt. Holly Co. v. 156 Fessenden, Bragg v. 272 Field v. Kinnear 415 Field v. Sawyer 118 Fielding, Booth v. 95 First Univ. Soc, Chapin v. 333, 335 Fisher v. Brown 423 Fisher v. Essex Bank 375 Fisher v. Fisher 353 Fisher, Leavitt v. 156 Fisher v. Marsh 96 Fisher, People o. 295 TABLE OF CASES. 19 PAGS Fisher, Shaw v. 239 Fisher v. Taylor 333 Fitch, Knight v. 113 Fitch, Sewall v. 197 Fitzsimmons v. Woodruff 286 Fletcher v. Dickinson x 844 Fletcher v. Marshall ' 106 Fletcher, Volansi). 168 Flint, Clark v. 247 Fohes, Leach v. 248 Foil's Appeal 252 Forrest v. Elwes 416 Forrest, North v. 203 Forshaw, Haines v. 325 Foss, Clark v. 302, 318 Foster v. Bank 393 Foster, Drury v. 278 Fowler v. Hollins 34, 35 Fox v. Mackreath 85, 90 Frampton, Percival v. 372 Franklin Ins. Co., Sargeant v. 175 Frazier v. Hilliard 187 Freedm. Sav. & Trust Co., Talty v. 361 Freeman v. Cooke 403 Freeman, By. Co. v. 168 French v. Bamge 424 Friend, Wheeler v. 297 Frontino, etc., Gold Co., Hart v. 406, 411 Frost, Gibbs v. 278 Fulkeron ». Chitty 142 Fuller, Pierce v. 293 Fulvey v. O. & H. E. B. Co. 423 Funk, Davis v. 352 Furness, Faine v. 372 G. Gabell, Fareira v. 107, 115, 308, 317, 383 Gainsford v. Carroll 414 Gale v. Keed 291 Gallup, Derby v. 424 Gardener v. Pullen et al. 236 Gardner v. Gardner 82 Garrard, Farnsworth v. 112 Garrard v. P. & C. E. B. Co. 329 Garwood, Moore v. 168 Gascoyne, Langford v. 330 Gaskoin, Dowson v. 141 Gatward, Elsee v. 122 Gauger, Gilbert v. 309 Gaussen v. Morton 128 Geisse, Walker v. 373 Gelpcke i>. City of Dubuque 167, 174 Gennett, State Ins. Co. v. 374 German Ass. Co. v. Sendmeyer 276 Gething, Mumford v. 296 Gibbs v. Frost 278 Gibbs, Whittemore v. 200 Gibson, Clark v. 297 Gibson v. Conner 373 Gilbert, Ball v. 298 Gilbert v. Gauger 309 Gilbert v. Iron Co. 175 Gillan, Phene v. 387 Gillaspie, Austin v. 250 Gillett v. Peppercorne Gilmore v. Woodcock 84,90 298 Gilmour v. Supple Gilpin v. Howell 102, 104, 385 232 , 386, 387 Ginter, Kent v. 422 Given, Ashhurst v. 333 Girard, McCulloch v. 319 Glyn v. Baker 158 Glynn, Morris v. 211, 212 Godfrey, Bertram v. 87 Goldner, Hammick v. 267 Goldsmid, Debouchout v. 90 Gooch v. Holmes 204 Gooch, Nicholson v. 68 215, 298 Good v. Elliott 297 Goodfellow, Ins. Co. v. 178 Goodrich, Blood v. 276 Goodwin «. Bowden 128 Goodwin v. Hardy 179 Goodwin ». Eobarts 97, 162, 169, 171, 172 Gordon «. Strange 282 Gore, Boardman v. 278 Gorgier v. Mieville 159 Gosden v. Dotterell 160, 169 140, 141 Goswell ». Dunkley 95 Gouldsbury, Hudleston v. 140 Gourdin v. Commander 278 Go wen, Pan coast v. 63 Graham v. Holt 273 Graham, Maddoz v. 168 Graham v. Ogle 275 Granger v. Bassett 180 Granger, Hudson v. 124 Grant v. Bank 178 Gratz v. Bedd 179 Graves, Horner v. 292 Gray, Hinde v. 296 Green v. Price 293 Green, Storm v. 424 Greening v. Wilkinson 416 Greenlow v. King 348 Greenough v. Wells 336 Gregg, Morgan v. 419 Grenaux v. Wheeler 373 Griffen, Vawter ». 200 Grissell v. Bristowe 41, 48, 118, 134, 222 Grizewood v. Blane 314 20 TABLE OP CASES. Guerriere v. Peile Gutteridge, Eagleton v. Gwillim v. Daniell PAGE 193 270 Hackett, Mercer Co. v. 163, 164, 172 Haines v. Forshaw 325 Haines, McKenney v. 423 Hale, Jefferson v. 423 Hall, Camden Bank v. 277 Hall, Edwards v. 213 Hall, Holland v. 112 Hall, In re 393 Hall v. Ins. Co. 178 Hall, Bobarts v. 373 Halliday v. Holgate 366 Hallock v. Conn. Ins. Co. 191 Hamer, Dickson v. 273 Hamer v. Hathaway 424 Hamilton, Denny v. 391 Hamilton, Fenouille v. 373 Hammic v. Goldner 267 Hammon v. Cottle 100 Hammond, Bank v. 278 Hamond v. Holiday 116 Hamonds v. Barclay 115 Hanford v. McNair 276 Hannay, Petrie v. 114 Harding, De Bernardy v. 116 Hardy, Goodwin v. 179 Harmstead, Wallace v. 275 Harness, Ay res v. 27 4 Harris, Cappur v. 236 Harris, Fellows v. 373 Harris v. North Devon Ey. Co. 241 Harris, Tisdale v. 146, 201, 203, 204, 205. Harrison v. Harrison 416 Harrison, Jackson v. 81 Harrison, Sheffield Gas Co. v. 240 Hart v. Erontino, etc., Gold Co. 406, 411 Hart v. Middleton 280 Hartley, Brewster v. 338 Hartley v. Kice 297 Hart's Case, Musgrove & 47, 390 Hartshorne, Allaire v. 373 Harvard College v. Amory 84 Hasbrook v. Vandevoort 342 Hasket v. Wootan 298 Hastie v. Couturier 188 Hastings, Clendaniel v. 275 Hatch, Wicks v. 352 Hathaway, Hamer v. 424 Haven v. Grand June. B. E. Co. 168 Hawkins, Jocelyn v. 280 Hawkins v. Kemp 834, 336 Hawkins v. Malthy Hawkins v. Eutt Hawley v. James Haycock, Davis v. Hayes, Cushman v. Hayes v. Eiddle Hayes, Stone v. Hayes, Wood v. Hearn, Allen v. Heath, Lambert v. Heath v. Silverthorn Hefferman, Eodriguez v Heger «. Deares Helm v. Swiggett Helms, Cook ■». Hemphill's Appeal Henderson v. Barnwell Henkel v. Pape 48, 136, 222, 245 282 334, 336 390 350 90 362 298 192, 263, 290 343 90 336 178 373 84 34, 95, 206 191 Hensley, East India Co. v. 92 Hervey, Simms v. 277 Heseltine v. Siggers 168, 183, 199, 231, 233 Hibblewhite v. McMorine 82, 185, 186, 187, 267, 270, 802 Hicks, McKee v. 273 Higgin, Young v. 280 Higgins v. Moore 91 Higgs, Diggle v. 298 Hight v. Eipley 196 Hildreth, Kimball v. 383 Hildyard v. South Sea Co. 157, 410 Hiler, Budd v. 336 Hill, Covill v. 360 Hill, Duncan v. 215 Hill v. Eeatherstonehough 118 Hill v. Simpson 825 Hilliard, Erazier v. 187 Himer, Devin v. 277 Hinde i>. Gray 296 Hinde v. Whitehouse 34 Hinkle v. Arey 34 Hinman, Cassard v. 302 Hinton v. Pinke 142 Hippie, Petillon v. 298 Hitchcock v. Coker 291, 296 Hitchcock, Wood v. 286 Hoag, Sawyer «. 179 Hodge, Hoit v. 298 Hodges, Duncan v. 278 Hodgkinson v. Kelly 218 Hodgson v. Anderson 128 Hoit v. Hodge 298 Holbrook v. New Jersey Zinc Co. 394 Holcomb ». Holcomb 833 Holden, Buttrick v. 832 Holdship v. Patterson 833 Holdsworth, Bradley v. 142, 179 Holgate, Halliday v. 866 TABLE OF CASES. 21 PAGE Holiday, Hamond v. 116 Holland v. Hall 112 Holland, Savings Institution v. 373 Holland, Shaw v. 414 Hollins, Fowler v. 34, 35 Holmes, Day v. 227, 273 Holmes, Gooch v. 204 Holmes, Spooner v. 168 Holt, Graham v. 273 Home v. Ashford 296 Horner v. Graves 292 Hotchkiss v. Oliver 187 Hotson, Alley v. 128 Houghtaling v. Marvin 128 Howard v. Tucker 110 Howarth, Mixer v. 196 Howe v. Bemis 350 Howe v. Dartmouth 84 Howe v. Starkweather 144, 391, 392 Howell, Gilpin v. 102, 104, 385, 386, 387 Howell v. B. B. Co. 180 Hubbersty v. By. Co. 393 Huddell & Seitzinger, In re 372 Hudleston v. Gouldsbury 140 Hudson v. Granger 124 Hudson, Winfield v. 68 Hudson Bay Co., Evans v. 178 Hughes, Bann v. 81 Hughes, Whittlesay v. 336 Huguet, Boylan v. 146, 386, 387, 391, 423 Hull, Preston v. 274 Humble v. Langston 267, 270, 284 Humble v. Mitchell 146, 199, 269 Hunt v. Adams 273, 296 Hunt, Commonwealth v. 296 Hunt v. Douglass 336 Hunt v. Bousmanier 117, 128 Huntington E. E. Co. v. English 415, 417 Huntress, Inhab. of So. Berw. o. 277 Hurley, Bobinson v. 343, 347 Hutchins v. Bank 145, 147 Hutchinson, Dorriens v. 48 Hyatt v. Allen 179 Hyatt ■». Argenti 353 Hyde v. Woods 43, 50, 69 Hynes v. Bedington- 84 In re Aston 105 In re Hall 893 In re Huddell & Seitzinger 372 In re London, etc., Bank 242, 244 In re Marquis of Hertford 181 In re Mercantile Credit Association Co. 105 In the matter of the Bahia & San Francisco By. Co. 405, 416 Indiana v. Sprague 164 Ingram, Buckeridge v. 144 Ingram v. Little 272 Inhabitants of S. Berw. ». Huntress 277 Ins. Co., Bates v. Ins. Co. v. Cole Ins. Co., Copeland ». Ins. Co. v. Dalrymple Ins. Co. v. Gennett Ins. Co. v. Goodfellow Ins. Co., Hall v. Ins. Co., Hallock v. Ins. Co. v. Ins. Co. Ins. Co., Isaacs v. Ins. Co. ii. Le Boy Ins. Co., Luling v. Ins. Co., McCulloch v. Ins. Co., Eogers v. Ins. Co., Eudolph v. Ins. Co., Sargeant v. Ins. Co. , Shipman v. Ins. Co., Tayloe v. Iowa Co., 'Clarke v. Iowa Co., Durant v. Irlam, Cockran v. Iron Co., Gilbert v. Iron Co., Isham v. Iron Co., Newberry v. Irwin, Seiple v. Isaacs v. Ins. Co. Ish v. Crane Isham v. Iron Co. Isherwood v. Whitmore Ives, Phillips v. 176 146, 203 90 346, 347, 350 374 178 178 191 90 280 180 176, 180 ' 191 374 393 266 179, 376 191 174 168 94,95 175 144 374 91 280 126 144 282 297, 298 Jackson v. Harrison 81 Jackson v. Plank Boad Co 180 Jackson, Bichardson v. 286 Jackson, Eoberts v. 116 Jackson, Sinclair v. 333 384, 335, 336 James, Dean v. 282 James, Hawley®. 334, 336 Jamison, Pearson v. 334, 336 Janesville, Clarke v. 168 Jarvis v. Eogers 122-, 360, 361 Jaudon, Duncan v. 332 Jaudon, Markham v. 225, 338, 353, 379 419, 420, 422 Jefferson v. Hale 423 Jefferson, Mills v. 134 Jeffries, Montriou v. 112 Jenners v. Bean 373 22 TABLE OF CASES. Jessop v. Lutwyche Jessop, Powell v. Jewelry Co. , Cushman v. Jocelyn v. Hawkins Johns v. Johns Johnson, Ashe v. Johnson, Breedlove v. Johnson, Brown v. Johnson v. County Johnson v. Dexter Johnson v. Fall Johnson v. Mulry Johnson, Shepherd v. Johnson v. Stear Johnson v. TJnderhill Johnson v. Wilcox Johnston v. Usborne Jones, Bowers. Jones v. Brinley Jones, Da Costa v. Jones v. Littledale Jones v. Powel Jones v. E. E. Co. Jones, Eeddick v. Jones v. Smith Jones v. Williams Josephs v. Pebrer Judges, State v. K. Kane v. Bloodgood Karnes v. E. E. Co. Keating v. Wilson Keeler v. Taylor Kelly, Hodgkinson v. Kelly, Neiler v. 102, 146, Kemble v. Atkins Kemmil v. Wilson Kemp, Hawkins v. Kempson v. Saunders Kennedy, Butterworth v. Kent v, Ginter Kentish, Sanders v. Kerwen, Ex parte Keyser's Appeal Kid v. Mitchell Kilner, Tempest v. Kimball v. Hildreth King i7. Boston King v. Doolittle King, Greenlow v. King v. Paterson King, Stapleton v. King v. Wilson 118 199 353 280 145 .250 278 280 168 344 297 197, 206 416 356 341 128 217, 341 116 140 297 96 118 176, 180 373 332 332 112, 117 228 180 179, 180 390 294 218 350, 385, 387, 391, 417, 418 34, 40, 91 319 334,336 290 343 422 416 276 333 424 193, 199 883 112 373 348 180 424 168 Kinnear, Field v. Kinyon, Allen v. Kirkpatrick v. Bonsall Kitchen, Eobinson v. Knapp v. Alford Knight v. Cambers Knight v. Fitch Knipe, Ogle v. Knowles, Lawrence v. 415 424 312 106 128 113 113 140 283 Kortright, Bank v. 156, 178, 276, 393, 419 Kost, Wheeler v. 341 Kuhn v. McAllister 146, 391 L. Laird, Union Bank v. Laishley, Steers v. Lambert v. Heath Lamberton v. Windom Lamson, City v. Lane v. Melville Lane, San Antonio v. Lang v. Smyth Langdale, Ashton v. Langford v. Gascoyne Langston, Humble v. Langton v. Waite 90, Lanier, Bank v. Lansing, Cortelyou v. Lardner, Murray «. Laussatt v. Lippincott Law, Sloo v. Lawrence v. Knowles Lawrence Co., Diamond v. Lawson, City v. Laytin, Osgood v. Le Eoy v. Globe Ins. Co. Leach v. Fobes Leavenworth, Bank v. Leavitt v. Fisher Lee v. Bank Lee v. Smead Lee Co., Clark v. Lee Co., Thompson v. Leeson, Brown v. Legg v. Evans Leggett v. Bank Lehman v. Strassberger Leonard v. N. Y. Co. Levan, Sigfried v. Levitt, Raymond v. Lewis, Bryan v. Lewis, Deere d. Lewis, Dryer v. 177 106 192, 263, 290 344 168 197 168 160, 171 210 330 267, 270, 284 91, 101, 104, 131, 384 154, 177 419 168, 338 95 333 283 164, 166, 242 168 179 180 248 373 156 374 378 168 168 297 356 178 113 191 275 294 185, 186, 302 424 424 TABLE OP CASES. 23 PAGE PAGE Lewis v. Littlefield 298 McConnell v. Murphy 89 Lewis, Morris Canal Co.,*. 168 340 McCook, Cartwright v. 424 Lewis v. Mott 360 361 McCulloch v. Eagle Ins. Co. 191 Life Ins. Co., Rossiter v. 94 McCulloch, Girard v. 319 Lightfoot v. Creed 109 111 McCullough, Piatt v. 336 Lightner's Appeal Lilwall, Dickinson v. 340 McCullough, Eankin v. 345 123 McDaniels v. Manf. Co. 343 Lincoln Gas Co., Beverley v. 83 McDonald, Stalker v. 373 Lindo, Smith v. 118 McDonald, Startup v. 281 Linley, Taylor v. 213 McDougall, Bank v. 302 Lippincott, Laussatt v. 95 McElrath, Broadway Bank «. 374 Lister, Collinson -u. 329 McParlane, Charlaron v. 278 Littell, Wallis v. 319 Mcllvaine v. Egerton 302 Little, Ingram v. 272 McGran, Brown v. 86 120 Little, Williams v. 373 McKee «. Hicks 273 Little, Wilson v. 176 350 McKeen, Vicksburg B. B. Co. ). 178 Littledale, Jones v. 96 McKenney v. Haines 423 Littlefield, Lewis v. 298 McKenzie, Cassiday v. 124 Littlefield, Williams v. 121 McKinnel v. Bobinson 107 112 Livingston, Denton v. 391 McMorine, Hibblewhite v 82, 185, 186, Livingston, Miller v. 116 267 270 302 Lloyd, Dails v. 110 McNair, Hanford v. 276 Lobdell v. Stowell 419 McNeil v. Tenth Nat. Bank 153, 359, Lockwood v. Mer. Nat. Bank 177 362 874 Logan v. Musick 309 Maddox v. Graham 168 London, etc., In re 242 ,244 Magee v. Atkinson 46 131 Long v. Colburn 81 Mallan v. May 293 Lorymer v. Smith 186 302 Mallory, Brightwell v. 174 Lowe v. Thomas 140, 141 Maltby, Hawkins v. 48 136 222 245 Lowe, Torrington v. 131 136 Manly, Thayer v. 419 Lowry v. Commercial Bank 328 335 Manning v. McClure 373 Lowther v. Lowther 90 Manf. Co., Clark v. 168 Ludwick, Beitenbaugh v. 419 Manf. Co. , McDaniels v. 343 Luling v. Atlantic Ins. Co. 176 180 Manf. Co., Warren v. 112 Lutwyche, Jessop v. 118 Marblehead Ins. Co. , Quiner v 273 Lyman, Naglee v. 373 Marblehead, Quiner v. 269 Lynde, Burns v. 273 Margitson, Simpson v. 280 Lyon v. Denny 275 Markham v. Jaudon 225, 338, 353, 377, 379 419 420 ,422 Marnham, Ex parte 314 Marquis of Hertford, In re 181 Marsh v. Atty.-Genl, 213 M. Marsh, Pisher v. Marsh, Stearns v. 96 350 MacDowell v. Ackley 67 Marshall, Pletcher v. 106 Macgruder, Biggs v. 204 Marshall «. Button 78 Mack v. Baker 372 Martin, Brooks v. 114 Mackreath, Pox v. 85, 90 Martin v. Terrell 298 McAllister, Kuhn v. 146 391 Martin, Warner v. 94 McArthur v. Seaforth 416 Marvin, Houghtaling v. 128 McCallan, Mortimer v. 130, 137, 186 ,302 Marye, Bercich v. 424 McCarty, Bellas v. 329 Mason, Valette v. 373 McClanahan, Byers v. 274 Master v. Miller 270 McCleod, Bank v. 85, 90 Mather, Ex parte 112 McClellan, Bozetu. 353 Mathew, Ex parte 178 McClure, Manning v. 373 Mathews v. Bank 155 156 ,172 McCollum, Porter v. 168 Maus v. Worthing 272 McCombie v. Davies 355 Maxted v. Paine 41 136 ,223 24 TABLE OF CASES. May, Mallan v. 293 May v. Quimby 373 Mayor v. Reynolds 83 Mayor v. Till 83 Meadows v. Bird 378 Mearns, Robinson v. 298 Melville, Laneu. 197 Mercantile Credit Association Co., In re 105 Mercer Co. v. Hacket 163, 164, 172 Merchants' Bank ■». Cook 342 Merry, Nickall v. 47, 136 Merryman, Elliott v. 329 Messick, Roxborough v. 373 Mewburn v. Eaton 48, 136, 318 Meyer, Eickel v. 116 Meyer v. Muscatine 168 Meyers v. Perigal 209 Meyers v. R. R. Co. 168 Miami Co., Moran v. 168 Middleton, Hartu. 280 Middleton, Poole v. 243 Mieville, Gorgier v. 159, 160, 169 Miller, Dewees v. 297 Miller, Doxey v. 298 Miller v. Ege 829 Miller v. Livingston 116 Miller, Master v. 270 Miller v. R. & W. R. R. Co. 168, 174 Miller ». Race 148, 164 Mills v. Jefferson 174 Milmine, Cole v. 302 Milne, Walker v. 209, 211 Minot, Middlesex Bank v. 348 Minot v. Paine 179 Mitchell, Humble v. 146, 199, 269 Mitchell, Kid v. 424 Mitchell v. Newhall 192, 218, 263 Mitchell, Pray v. 203 Mitchell v. Reynolds 291 Mixer v. Howarth 196 Mocatta v. Bell 107, 131 Mollett v. Robinson 91, 96, 97 Montriou v. Jeffries 112 Moody v. Bank 155 Moody v. Caulk 422 Moore v. Garwood 168 Moore, Higgins v. 91 Moore, Wiley v. 275 Moore, Wilson v. 825 Moran v. Miami Co. 168 Mores v. Conham 856 Morgan v. Gregg 419 Morgan, Scarfe v. 119 Morley, Child v. 46 Morris,' Duffin v. 824 Morris v. Glynn 211, 212 Morris, Poirier v. 872 Morris, Tyrrell v. 324 Morris v. Wallace 84 Morris Canal Co. v. Lewis 168, 340 Morris Run Coal Co. v. Barclay Coal Co. 291, 295 Morrow v. Brenizer 213 Morse v. Royal 90 Mortimer v. McCallan 130, 137, 186, 302 Morton, Chapman v. 286 Morton, Gaussen v. 128 Morton v. Perry 142 Morton, Williamson v. 324 Mosby v. State 274 Mott, Lewis v. 360, 361 Moulton, Wheelock u. 145 Mount, Ry. Co. v. 393 Mount, Woolcott v. 424 Mt. Holly Co. v. Ferree 156 Moxey's Appeal 53, 67 Mulry, Johnson v. 197, 206 Mumford v. Gething 296 Munn ». Barnum 276 Munn, Worrell v. 81, 276 Murphy, McConnell v. 89 Murphy, Sheppard v. 222 Murray v. Lardner 168, 338 Muscatine, Meyer v. 168 Musgrave v. Beckendorff 419 Musgrove & Hart's Case 47, 390 Musick, Logan v. 309 Mussell v. Cooke 198, 201, 205 Myers v. T. & C. R. R. Co. 168 N. N. A. Col. Ass. Co. v. Bentley 393 N. B. A. Co., Swan b. 370 N. Y. Co., Leonard v. 191 N. T. &N. H. R. R. Co., Brainerd «. 168 N. Y. & N. H. R. R. Co., Mechanics' Bank v. 149, 396 Naglee v. Lyman 873 Naglee v. Wharf Co. 376 Nash, Bianchi v. 286 Kauman v. Caldwell 419 Neiler v. Kelly 102, 146, 162, 350, 385, 887, 891, 417, 418 Nelson, United States v. 278 Nelson v. Wellington 844 Netterville, Colt v. 198, 236, 276 New Alex. Turnpike Co., Ammant v. 892 New Jersey Zinc. Co., Holbrook v. 394 Newberry v. Iron Co. 374 TABLE OF CASES. 25 PAGE Newbold v. Pritchett 142 Newbould, Wheeler v. 344 Newhall, Mitchell v. 192, 218, 263 Newsom , Bodenhammer v. 883 Newton v. Bronson's Ex. 336 Nicholls v. Eosewarne 181, 372, 392 Nicholson v, Gooch 68, 215, 298 Nicholson, Stuart v. 291 Nickall v. Merry 47, 136 Nightingal v. Devisme 140 Noakes, Warwick v. 283 North v. Forrest 203 North v. Phillips 305, 317, 383, 415, 417 Northrup v. Shook 33, 38, 376 Nourse v. Prime 102 Noyes, Pitkin v. 197 Nunn, Drew v. 126 Nutter v. Stover 373 Nutter, Winchester v. 297 Nutting, Wellman v. 107 Nyce's Estate 84 O. Ocmulgee Mills, Phillips v. 302 Ogle, Graham v. 275 Ogle v. Knipe 140 Oliver, Hotchkiss v. 187 Olivierson v. Cole 72, 298 Organ, People v. 272 Oriental Steam Co. v. Briggs 245 Orr v. Bigelow 178 Osgood v. Laytin 179 Overseers of the Poor v. Sears 175 Owen v. Davis 114 Owen v. Perry 277 Owen v. Kouth. 416 Page, Dick v. Paine «. Eurness Paine, Maxted v. Paine, Minot v. Palmer, Parker v. Pancoast v. Gowen Pape, Henkle ». Parke, Vaux u. Parker v. Branker Parker v. Palmer Parker, Sparling v. Parsons v. Webb 126 372 41, 136, 223 179 286 53 191 333 120 286 207 90 Paschal], Ferguson ». Paterson, .King v. Patterson, Holdship v. Paul v. Ball Payne v. Elliott Pearson v. Jamison Pebrer, Josephs v. Pegram, Allen v. Peile, Guerriere v. Pennock, Wilson v. People v. Fisher People v. Organ Peppercorne, Gillett v. Percival v. Frampton Perigal, Meyers v. Perkins v. Eaton Perry, Morton v. Perry, Owen v. Persh o. Quiggle Peters, Swift v. Peterson, King v. Peterson, Wagner v. Petillon v. Hippie Petrie v. Clark Petrie ■». Hannay Phelps v. Bank Phene v. Gillan Phibbs, Cooper v. Phillips v. Ives Phillips, North v, Phillips v. Ocmulgee Mills Piatt v. McCullough Pickard v. Sears Pickering v. 'Appleby Pickering v. Busk Pickering, Cease v. Pidgeon v. Burslem Pierce «. Breton Pierce v. Fuller Pinto v. Santos Pinke, Hinton v. Pinkerton v. R. B. Co. Pinney, Clark v, Pitkin i). Noyes Pittston, Arnott v. Plaice v. Bussell Plank Boad Co., Jackson v. Plumer, Taylor v. Poirier v. Morris Pollock v. National Bank Poole v. Middleton Porter v. McCollum Porter v. Viets Porter, Wells v. Pothonier v. Dawson Pott a. Turner Potts, Downing v. PAGE 251 180 333 142 146, 391 336 112, 117 145 193 336 295 272 84,90 372 209 298 142 277 419 372 180 419 298 373 114 179 387 289 297, 298 305, 317, 383, 415, 417 302 336 403 146, 198 34, 94, 262 198, 318 118 372 293 100 142 423 415 197 295 324 180 33 372, 410 248, 410 243 168 315, 319 186, 302 121 33 175 26 TABLE OF CASES. Powell v. Jessop Powell, Jones v. Prall v. Tilt Pratt v. Machinists' Bank Pray v. Mitchell Prentice v. Zane Presbyterian Congregation v. Preston v. Hull Price, Green v. Price v. Price's Heirs Prichard v. Prichard Prichett, Newbold v. Prickettn. Badger Prime, Nourse v. Pullen, Gardener v. Purchase v. Bank Pyke, Ex parte Pym v. Campbell Quiggle, Persh v. Quimby, May v. Quiner v. Marblehead Ins. Co. E. Eace, Miller v. Eamge, French v. Eankin v. McCullough Eann v. Hughes Eay, Cooper v. Baymond v. Levitt E. E. Co. v. Adams E. E. Co. 11. Bank E. E. Co., Brainerd v. E. E. Co., Bridgeport Bank v. E. E. Co., C. E. & B. Co. v. E. E. Co., Carpenter v. E. E. Co., City of Ohio?). E. E. Co. v. Cowell E. E. Co. v. Dane E. E. Co., Edwards v. E. E. Co. i). English E. E. Co. v. Fulvey E. E. Co. , Garrard v. E. E. Co., Haven v. E. E. Co., Howell v. E. E. Co., Jones v. E. E. Co., Karnes v. E. E. Co. v. McKeen E. E. Co., Mechanics' Bank v. E. E. Co., Miller v. PAGE PAGE 199 E. E. Co., Myers v. 168 118 E. E. Co., Nat. Bank v. 168 , 372, 374 165,328 E. E. Co., Pinkerton v. 423 410 B. E. Co., Eoss v. 251 203 E. E. Co., Eyder v. 176, 180 373 E. E. Co. v. Schuyler 151, 374, 398, Bank 178 401 270, 274 E. E. Co., State v. 180 293 E. E. Co., Ward v. 410 142 E. E. Co., White v. 168 142 E. E. Co., Willis v. 400, 403 142 Eailway Co. v. Oalbiac 393 116 Ey. Co., Durkee v. 117 102 Ey. Co. v. Freeman 168 236 Ey. Co., Harris v. 241 249 Ey. Co., Hubbersty v. 393 113 Ey.. Co. v. Mount 393 319 Ey. Co., White y. 166 Eedd, Gratz v. 179 Eeddick v. Jones 373 Eedington, Hynes v. 84 Eeed v. Gale 291 Eeed v. Warner 90 419 Eeese v. Bank 178 373 Eeese, Bank of Montgomery t . 417, 419 269, 273 Eeeves v. Capper 383 Eeitenbaugh v. Ludwick 419 Eetberg, Cochran v. 280 Bex v. Bank 83, 393 Eex v. Biggs 82 Eex v. Cappur 142 148, 164 Eex v. De Berenger 296 424 Beynolds, Eckstein v. 282 345 Eeynolds, Mayor v. 83 81 Eeynolds, Mitchell v. 291 383 Eeynolds, Tread well v. 286 294 Eice, Hartley v. 297 174 Eichardson v. Jackson 286 342 Richmond, Burroughs v. 174 168 Eichmond, Devoss v. 168 . 156,277 Eickey v. TenBroeck 424 424 Eiddle, Hays v. 383 180 Eiggs v. Macgruder 204 180 Biker, Bunn v. 298 180 Eipley, Hight v. EoDarts, Goodwin v. 97, 162 196 310 169, 170, 197 171 415, 417 Eobarts ■». Hall 373 423 Eoberts's Appeal Eoberts v. Jackson 340 329 116 168 Eobins v. Edwards 96,97 180 Eobinson v. Chartered Bank 242 176, 180 Eobinson v. Hurley 343, 347 179 Eobinson o. Kitchen 106 178 Eobinson, McKinnel v. 107, 112 149, 896, Eobinson v. Mearns 298 403 Eobinson, Mollett v. 91, 96, 97 168, 174 Eobinson v. Smith 878 TABLE OF CASES. 27 Bodriguez v. Hefferman 90 Rogers v. Huntingdon Bank 177 Rogers v. Ins. Co. 874 Rogers, Jarvis v. 122, 360, 361 Romaine v. Van Allen 419 Rosewarne, Nicholls ■». 181, 392 Ross, Downes v. 197 Ross v. Union Pacific R. R. Co. 251, 253 Rossiter v. Life Ass. Co. 94 Rothschild v. Brookman 90 Rothschild, Doloret v. 237, 246 Rousmanier, Hunt v. 117, 128 Routh, Owen v. 416 Rowley, Shaw v. 268 Boxborough v. Messick 373 Roy, Cooper v. 388 Royal, Morse v. 90 Royer v. Bank 373 Rozet v. McClellan 353 Ruchizky v. De Haven 61, 115, 307, 317, . 383 Rudolph v. Ins. Co. 393 Ruggles, Arnold v. 146 Russell, Plaice v. 324 Russell, Stray v. 49, 136 Rutt, Hawkins v. 282 Rutter, Cud v. 235 Rutton, Marshall®. 78 Ryan, Turbeville v. 274 Ryder v. Alton & S. R. R. Co. 176 Ryerson v. Derby 298 a. Sabin v. Bank 179 Safferty, Tompkins v. 68, 132, 229 Salmon, Taylor v. 90 Sampson v. Shaw 294, 298 San Antonio v. Lane 168 Sanders v. Kentish 416 Sanderson v. Walker 90 Santos, Pinto v. 100 Sargeant v. Essex & C. Co. 178 Sargeant v. Franklin Ins. Co. 175, 266 Saunders, Kempson v. 290 Saunders, Smart v. 121 Saunders, "Walpole v. 297 Saunders v. Weber 336 Savings Institution v. Holland 373 Sawyer, Field v. 118 Sawyer v. Hoag 179 Sawyer v. Taggart 303, 318 Sawyer & Hamilton «. Taggart 303 Sayles v. Blane 285 Scarfe v. Morgan 119 Scholes, Blackburn v. 123 Schroeder, Barr v. 128 Schuyler, N. Y. & N. H. Co. v. 151, 874, 398, 401 Schuyler, White v. Sea v. Carpenter Seaforth, McArthur v. Sears, Overseers of the Poor v. '•Sears, Pickard v. Seiple v. Irwin Sendmeyer, German Ass. Co. v. Sewall v. Boston Water-Power Co. Sewall v. Brainerd Sewall v. Fitch Seymour, Bourne v. Shankland's Appeal Sharman v. Brandt Shaw v. Fisher Shaw v. Holland Shaw v. Rowley Shaw, Sampson v. Shaw i). Spencer Sheffield Gas Co. v. Harrison Shepherd, Chapman v. Shepherd v. Johnson Sheppard v. Murphy Shetucket, Stoddard v. Shipman v. ^Etna Ins. Co. Shook, Northrup v. Sigfried v. Levan 249 116 416 175 403 91 276 156, 410 174 197 89 833 96,97 239 414 268 294, 298 154, 227, 331 240 108 416 222 180 179, 376 33, 38, 376 275 Siggers, Heseltine v. 160, 168, 183, 199, 231, 233 Silverthorn, Heath v. 343 Simm v. Anglo-American Tel. Co. 155, 157, 407, 410, 411, 412 Sinimsi). Hervey 277 Simpson, Hill v. '325 Simpson v. Margitson 280 Sims, Wiltshire v. 91, 193 Sinclair v. Jackson 333, 334, 335, 336 Sleight, Davenport v. 273 Sloo v. Law 333 Small, Stanton v. Smalley, Bank v. Smart v. Saunders Smead, Lee v. Smith, Alvord v. Smith v. Bouvier Smith v. Clarke Smith v. Crocker Smith v. Dickinson Smith, Jones v. Smith v. Lindo Smith, Lorymer v. Smith, Robinson v. Smith v. Thomas Smith v. Tracy 302 178 121 373 298 302 168 272 274 332 118 186 302 61, 115 94, 262 28 TABLE OP CASES. Smyth, Lang v. 160, 171 Society of Savings v. City of New London 168 Solomon, Westrop v. 225, 264, 290 Somerby v. Bunting 202 South Sea Co., Hilyard v. 157, 410 Southard v. Steele 272 Sparling v. Parker 207 Speake v. United States 278 Spencer, Shaw v. 154, 227, 331 Speyers, Brown v. 302 Spooner v. Holmes 168 Sprague, Ely v. 180 Sprague, Indiana v. 164 Spratley, Watson v. 199, 211, 214 Stahl v. Berger 275 Stalker v. McDonald 373 Stanton o. Small 302 Stapleton v. King 424 Starkweather, Howe v. 144, 391, 392 Startup v. McDonald 281 State v. Bank 174, 176, 180, 271 State, Curran v. 179 State v. Delafield 91, 92, 168 State, Mosby v. 274 State v. R. K. Co. 180 State v. The Judges 278 Stear, Johnson v. 356 Stearns v. Marsh 350 Steele, Southard v. 272 Steers v. Laishley 106 Stephen v. De Medina 283 Stephens v. Babcock 100 Stevens v. Bank 351 Stevens, Blanchard v. 372 Stewart v. Cauty 217 Stockholm v. Stockholm 191 Stoddard v. Shetucket 180 Stone, Biederman v. 109 Stone v. Hayes 90 Storm v. Green 424 Stover, Nutter v. 373 Stowell, Lobdell v. 419 Stracy v. Bank 393 Strange, Gordon v. 282 Strassberger, Lehman v. 113 Stray v. Russell 49, 136 Stray, Taylor v. 49, 92, 111, 117 Stringham, Durkee u. 212 Stuart v. Nicholson 291 Suckling, Donald v. 354, 357, 364, 369 Supple, Gilmour v. 232 Sutton d. Tatham 42, 86, 216, 225 Swan v. N. B. H. Co. 270 Swift, Day v. 383 Swift v. Peters 872 Swift v. Tyson 872 Swiggett, Helm v. 178 T. FAOE Taft, ToAAv. 247 Taggart, Sawyer et al. o. 303, 818 Tainter v. Clark 336 Talty v. Preedm. Savings & Trust Co. 361 Tarlton v. Baker 298 Tatham, Sutton v. 42, 86, 216, 225 Tayloe*. Pirelns. Co. 191 Taylor, Pisher ». 333 Taylor, Keeler v. 294 Taylor v. Linley 213 Taylor v. Plumer 33 Taylor v. Salmon 90 Taylor v. Stray 49, 92, 111, 117 Telegraph Co. v. Davenport 340 Telegraph Co., Simm v. 175 Tempest v. Kilner 193, 199 Tenant v. Elliott 113 TenBroeck, Eickey v. 424 Terrell, Martin v. 298 Texira v. Evans 270 Thayer V. Dwight 383 Thayer Manf. Co., Cushman v. 156, 249 Thayer v. Manly 419 Thomas, Dickson's Exec. v. 61, 115, 306, 317, 383 Thomas, Lowe v. 140, 141 Thomas, Smith v. 61, 115 Thompson v. Adams 52, 69 Thompson, Babcock v. 298 Thompson, Brown v. 298 Thompson v. Lee Co. 168 Thorne v. Deas 122 Thorne, Pancourt v. 353 Tileston, Dodge v. 112, 116 Till, Mayor v. 83 Tilson v. Warwick 83 Tilt, Prall v. 155, 328 Tippetts «. Walker 142 Tisdale v. Harris 146, 201, 204, 205 Todd v. Taft 247 Toler, Armstrong v. 107, 112, 113, 114 Tomlinson v. Tomlinson 207, 209 Tompkins v. Safferty 68, 132, 229 Topham, Capp v. 110 Torrey v. Bank 348 Torrington v. Lowe 131, 136 Tourne, Vance v. 416 Tousley, Wilkinson v. 298 Townshend, Clegg v. 100, 110 Tracy, Smith v. 94, 262 Treadwell v. Reynolds 286 Treasurer v. Commercial Coal Co. 251 Trecothick, Coles v. 95 Trenholm, Bank v. 94, 105, 364 Trevor v. Wood 191, 192 Trye, Williams v. 298 TABLE OF CASES. 29 PAGE Tucker, Howard v. 110 Turbeville v. Ryan 274 Turner, Brown v. 72, 298 Turner, Pott v. 33 Tyrrell v. Morris 324 ^ Tyson, Swift v. 872 u. Underbill, Johnson v. Union Pacific B. E. Co. , Boss v. United States v. Nelson United States, Speake v. Upton v. Archer Usborne, Johnston v. V. 341 251 278 278 274 217 Valette v. Mason 373 Van Allen, Bomaine v. 419 Van Hook v. Barnet 273 Van Pelt, Calais Steamboat Co v. 332 Vance v. Tourne 416 Vandever's Appeal Vandevoort, Hasbrook v. 333, 335 342 Vanduzer, Ward v. 112 Vansands v. Bank 178 Vaux v. Parke 333 Vawter v. Griffen 200 Vicksburg, Craig v. 168 Viets, Porter v. 315, 319 Volans v. Fletcher 168 Vrooman, Beeker v. 112 w. Wagner v. Peterson Waite, Langton v. Walker v. Bartlett Walker v. Birch Walker v. Geisse Walker v. Milne Walker, Sanderson v. Walker, Taylor v. Walker, Tippetts v. Wallace v. Harmstead Wallace, Morris v. Wallis v. Littell Wallis v. Manhattan Bank 419 90, 91, 101, 104, 131, 383, 386 172, 269, 284 122 373 209, 211 90 90 142 275 84 319 123' Wain, Evans v. 91, 128, 228 Walpole v. Saunders 297 Walsh v. Whitcomb 128 Waltham, Bank v. 142 Ward, Brown v. 346 Ward v. Byrne 295 Wardi>. B. E.'Co. 410 Ward v. Vanduzer 112 Warner v. Martin 94 Warner, Beed v. 90 Warren v. Manf. Co. 112 Warwick ■». Noakes 283 Warwick, Tilson v. 83 Water-Power Co., Sewall v. 156, 410 Watson v. Spratley 199, 211, 214 Watts v. Brooks 118 Way v. Davidson 383 Webb v. Fairmaner 280 Webb, Parsons v. 90 Weber, Saunders v. 336 Webster v. De Tastet 100 Weightman v. Caldwell 200 Welch, Bridgeport Bank v. 373 Wellington, Nelson v. 344 Wellman v. Nutting 107 Wells v. Coles 142 Wells, Greenough v. 336 Wells v. Porter 186, 362 Wentworth, West v. 419 West, Aurora City v. 168 West v. Wentworth 419 Westmore, Chase v. 121 Westropp v-. Solomon 225, 264, 290 Wharf Co., Naglee v. 376 Wheeler, Fay v. 204 Wheeler v. Friend 297 Wheeler, Grenaux v. 373 Wheeler v. Kost 341 Wheeler v. Newbould 844 Wheelock v. Moulton 145 Whitaker, Wilson v. 415 Whitcomb, Walsh v. 128 White, Belote v. 336 White v. Chapman 112 White v. By. Co. 166 White v. Schuyler 249 White v. V. & M. E. E. Co. 168 Whitehouse, Hinde v. 34 Whitman, Cowles v. 249 Whitmore, Isherwood v. 282 Whittemore v. Gibbs 200 Whittington, Carriger v. 128 Whittlesay v. Hughes 336 Whitwell v. Carter 298 Wicks v. Hatch 352 Wilcox, Johnson v. 128 Wildman v. Wildman 142 Wiles, Bates v. 423 30 TABLE OF CASES. Wiley v. Moor 275 Wilkes v. Ellis 34 Wilkins, Bayley v. Ill, 218 Wilkinson, Greening v. 416 Wilkinson v. Tousley 298 Willcocks, Ex parte m 362 Williams, Baldwin v. 146 Williams v. Bank 376 Williams, Calvin v. 200 Williams v. Crutcher 273 Williams, De Haven v. ,330 Williams, Jones v. '332 Williams v. Little 373 Williams v. Littlefleld 121 Williams ». Trye 298 Williamson v. Morton 324 Williamson's Ex., Brown v. 833 Willis v. Darby K. K. Co. 400, 403 Willoughby v. Comstock 346, 350 Wilson, Bank v. 266 Wilson v. Dennison 336 Wilson i>. Keating 819 Wilson, Kemmil v. 319 Wilson, King v. 168 Wilson v. Little 176, 350 Wilson v. Moore 325 Wilson v. Pennoek 336 Wilson v. Whitaker 415 Wilson's Ex., Morris ». 213 Wiltshire v. Sims 91, 193 Winchester v. Nutter 297 Windom, Lamberton v. 344 Winfield v. Hudson 168 Winstanly, Charmley v. 123 Wister, Evans v. Wood, Evans o. Wood v. Hayes Wood v. Hitchcock Wood, Trevor v. Woodburn, Campanari v Woodcock, Gilmore v. Woodruff, Eitzsimmons v. Woods, Hyde v. Wood's Appeal Woodward, Curry v. Woolcott v. Mount Wootan, Hasket v. Work v. Bennett 362, Worrell v. Munn Worth, Brass v. Worthing, Maus v. Wright, Edminston v. Tates, Dixon v. Toung v. Cole Young, Exparte Toung v. Higgins Zane, Prentice v. 53, 68, 215 244 362 286 191, 192 128 298 286 43, 60, 69 326, 361 180 424 298 369, 382, 417 81, 276 345 272 110 232, 259 85, 93, 264 316 280 373 STOCK BEOKEES. STOCK BROKERS. PART I. THE stock: broker CHAPTEE I. DESCRIPTION OP THE STOCK BEOKEB. Definition of a stock broker . 33 Bemarks of Brett, J. . . . 35 Brokers primarily .... 34 Bemarks of "Woodruff, J. . . 38 Additional functions of stock Brokers of city of London 39 34 Stock brokers in the United Bemarks of Mr. Bell . . . 34 40 Broker cannot be agent of both The Stock Exchange . . . 40 parties to the contract . . 34 Effect of the rules of the Stock Distinction between stock and Exchange on non-members 41 35 42 A stock beokee 1 is an agent who, usually in his Definition own name, makes a contract on behalf of his principal broker, for the purchase or sale of stocks, scrip, debentures, bonds, and other like securities, receiving a compensa- tion in money therefor. 2 Strictly speaking, a broker is a mere negotiator, 3 who brings the parties together to make bargains and 1 He is a trader within the Bank- ner, 6 Bingham, 702; see r also, rupt Act, Tayler». Plumer, 3 M. & Story on Agency, § 28. S. 562. a See Northrop v. Shook, 10 2 See the definition of a broker, Blatchford C. C. E. 243. by Tindal, 0. J., in Pott v. Tur- 3 33 34 THE STOCK BROKEE. [PAET A broker, primarily, is simply a mere nego- tiator or mid- dle man. Stock brokers have addi- tional func- tions added to their busi- Eemarks of Mr. Bell. Stock broker cannot be agent of both parties to the contract. sales in matters of trade and commerce, 1 and is for many purposes treated as the agent of both parties. 2 But gradually the broker has by commercial usage come frequently to undertake the further office of making and executing the contract in his employer's, 3 and even in his own name, to the buyer. 4 In this latter instance he is entrusted with the possession and disposition of his employer's property, and is thus enabled by his own agency to give a good title in it to the buyer. Perhaps it would be more accurate in such a case to call the agent a factor instead of a broker, for he more nearly resembles the former than the latter. Indeed, as has been remarked, 6 " the character of fac- tor and broker is frequently combined; the broker " having possession of what he is employed to sell, or " being empowered to obtain possession of what he is " employed to purchase. Properly speaking, in these " cases he is a factor." The stock broker comes under this latter class of brokers, 6 having generally confided to him the control of the securities he is about to sell for his employer, as well as having imposed upon him the duty of accepting the delivery of those he has pur- chased for him, and being the only person known to third parties in the transaction. 7 The broker is never the agent of more than one of the parties, unless notice to that effect be given. 8 1 See Powler v. Hollins, 7 L. E., Q. B. 0. 623. 2 See Hinde v. Whitehouse, 7 East, 558; Hinkle v. Arey, 27 Maine, 362 ; Henderson v. Barn- well, 1 Young & Jarvis, 387 ; Ben- jamin on Sales, p. 203. * Baring v. Corrie, 2 B. & Aid. ■137 ; Kemble i>. Atkins, 7 Taunton, 260. * Powler v. Hollins. 6 By Mr. Bell, in his Commen- taries, 1 Bell Com. 366, § 409 (4ed.). 6 An auctioneer is not a broker, "Wilkes v. Ellis, 2 H. Bl. 555. ' Lloyd's Paley on Agency, IS ; Pickering v. Busk, 15 East, 38. 8 Story on Agency, g 81. CHAP. I.] DESCRIPTION OF THE STOCK BROKER. 35 It is essential to an exposition of the questions and cases arising out of the transactions on the Stock Ex- change, to understand the difference between the char- Distinction • • p t -iii i between a actenstics of an ordinary mercantile broker, who is a stock broker mere negotiator, and a stock broker. The latter is in- nar y broker. deed a broker; but under the usages of business in England and in this country, and probably every- where, where Stock Exchanges exist, he is something besides. As between him and his principal, he acts in the relation of agent, and, as such agent, may receive the property purchased, or, in case of a sale, he may make the delivery of the property sold. He may take the formal title of the property purchased and convey that formal title to a purchaser, without his prin- cipal's ever being known in the transaction, to third parties. And in all transactions conducted through the medium of the Stock Exchange, the stock, broker becomes, as regards third parties and those dealing with him in the Exchange, a principal purely. His character of agent, so far as his own liability in the transaction is concerned, is not recognized, and he is bound on all such contracts made by him as though he were, in fact, the principal himself; and he may be sued either at law or in equity as if he were the actual owner of the property he contracts to sell or the ulti- mate purchaser of what he intends to buy, which is, of course, not the case with mercantile brokers. An ex- cellent exposition of the character of a broker, simply, Fowler v. is given in Fowler v. Hollins. 1 - lo1 1,IS ' " Properly speaking," said Mr. Justice Brett, " a Remarks of " broker is a mere negotiator between the other parties. Brett. 1 L. R., 7 Q. B. C. 616. 36 THE STOCK BKOKEE. [part I, If the contract which the broker makes between the parties be a contract of purchase and sale, the prop- erty in the goods, even if they belong to the supposed seller, may or may not pass by the contract. The property may pass by the contract at once, or may not pass until a subsequent appropriation of goods has been made by the seller and has been assented to by the buyer. Whatever may be the effect of the contract as between the principals, in either case no effect goes out of the broker. If he sign the contract, , his signature has no effect as his ; but only because it is in contemplation of law the signature of one or both of the principals: no effect passes out of the broker to change the property in the goods. The property changes either by a contract which is not his, or by an appropriation and assent, neither of which is his. In modern times, in England, the broker has undertaken a further duty with regard to the contract of purchase and sale of goods. If the goods be in existence, the broker frequently passes a delivery order to the vendor to be signed, and on its being signed, he passes it to the vendee. In so doing he still does no more than act as a mere intervener be- tween the principals. He himself, considered as only a broker, has no possession of the goods, no power actual or legal of determining the destination of the goods, no power or authority to determine whether the goods belong to the buyer or seller, or either ; no powers, legal or actual, to determine whether the goods shall be delivered to the one or be kept by the other. He is throughout merely the negotiator be- tween the parties. And therefore by the civil law CHAP. I.] DESCRIPTION OF THE STOCK BEOKEE. 37 " brokers were not treated as ordinarily incurring any "personal liability by their intervention, unless, per- " haps, there was some fraud on their part :" Story on " Agency, § 30. " And if all a broker has done, be " what I have hitherto described, I apprehend it to be " clear that he would have incurred no personal liability " to any one according to English law. He could not " be sued by either party to the contract for any breach "of it. He could not sue any one in any action in " which it was necessary to assert that he was the owner " of the goods. He is dealing only with the making " of a contract, which may or may not be fulfilled, and " making himself the intermediary passer on, or carrier, " of a document, which may or may not be obeyed " without any liability thereby attaching to him towards "either party to the contract. * * * If goods have " been delivered under a contract so made and a de- livery order so passed, still he has had no power, " actual or legal, of control, either as to the delivery or " non-delivery, and probably no knowledge of the de- " livery, and he has not had possession of goods. * * * " But then in some eases a broker, although acting as " an agent for a principal, makes the contract of pur- chase and sale in his own name. In such case he " may be sued by the party with whom he has made " such contract for a non-fulfilment of it. But so also " may his undisclosed principal. And although the " agent may be liable upon the contract, yet I appre- "hend nothing passes to him by the contract. The " goods do not become his. He could not hold them, "even if they were delivered to him, as against his "principal. He could not, as it seems to me, in the 38 THE STOCK BROKER. [part I. Northrop v. Shook. Remarks of Judge Woodruff. " absence of anything to give him a special property in " them, maintain any action in which it was necessary " to assert that he was the owner of the goods. The " goods would be the property of his principal. And " although two persons, it is said, may be liable on 'the " same contract, each as sole contractor, yet it is impos- " sible that two persons can each be the sole owner of "the same goods; although the agent may be held " liable as a contractor on the contract, he is still only " an agent and has acted only as an agent." The difference between a person who acts simply as a broker and one who conducts the business of stock brokerage, as now conducted, is fully stated in JSTorth- rop v. Shook. 3 " I have," said Judge Woodruff, " said on a former ' occasion, cited to me on this trial, that, in such trans- ' actions as these, the actor is not a mere broker. I 'think so still. It is not a part of the duty or ' authority of the mere broker to make the purchase ' and sale in his own name. He is but a go-between ' or negotiator between two principals. It is not a part ' of his duty or office, as a mere broker, to pay the ' price, or to assume any liability therefor. He binds 'his principal, or, oftentimes, both of the principals ' in the transaction, by his memorandum. He is, in ' short, a mere agent, acting by authority of another. ' And these same observations are true of other agents. ' It is, however, equally clear, that agents may make 'themselves liable on the contracts which they in 'fact make for others, either voluntarily or by not 'disclosing their agency. It would, nevertheless, be 1 10 Blatchford C. C. B. 243. CHAP. I.] DESCRIPTION OP THE STOCK BROKER. 39 "true, that their act of purchase and sale would be "in execution of their authority as agent, and their " principal would and must so treat it. They do not "cease to be agents therein, because they go further " than, as agents, they were bound to go, and add their " personal liability, in order to aid in the transaction. " As between them and their principal they act in the "relation of agents. So, they may, by express au- " thority, or, it may be, by authority implied from the " usages of trade (when such usages exist), receive the "property purchased, and be themselves the instru- "ments of making delivery, when they make sales; " and, by consent of the principal, they may take formal "title and convey that formal title to the purchaser, "and may. even convert the transaction, as between " them, into an agreement for a speculation in stock in " the name of the agent, for the account of his prin- cipal. While all these may be superadded to the " duty and authority of a mere agent to buy and sell, " there still remains the substantive fact, that, whatever " effect these other attending circumstances may have, " between him and his principal, as the result of the " payment by himself, or of his taking title, the actual " agency for his principal is not withdrawn from the " transaction." The calling of a stock broker is a licensed vocation Brokerage, a open to all persons not laboring under any legal dis- cation open ability ; in short, any one capable of making and ° a ' enforcing a legal contract may become one. Brokers of the city of London, up to the year 1870, Brokers of were under the control of the city corporation, and a London. series of acts were passed defining and regulating their 40 THE STOCK BROKER. [PART I. conduct. 1 By them, brokers were required to give a bond and take an oath, the form of which, prior to the year 1818, is given in Kemble v. Atkins, 2 and the new regulations imposed in that year can be seen in " Kussell on Factors and Brokers," in the Appendix. 3 But by the London Belief Act of 1870, most of these powers were taken away, the rules and regulations being no longer enforced by the corporation, and the bond no longer required; and brokers are now only required to be admitted by the corporation, while a list of brokers is kept from which any one may be expelled for certain offences in the mode pointed out by the act. 4 stockbrokers In the United States, stock brokers are governed to in the United , , • ,i • n .i • it i states. some extent in the exercise of their calling by various statutes in the different States, 5 relating to them; but chiefly by regulations of their own making, in the fol- lowing manner : It has been customary for stock brokers, in large commercial centres, to establish associations called, in The stock Great Britain and the United States, Stock Exchanges, Exchange. . . , ., with a convenient place for carrying on the business of brokerage, under regulations made by themselves. These associations have proved of such commercial stock Ex- value, and the Stock Exchange is so convenient and usual me- useful an institution, that it has become the almost sole dium for the t n ,i i i i i» j i medium for the purchase and sale of stocks, govern- 1 See Statutes of 6 Anne, c. 16 ; -275. 10 Anne, c. 19, s. 121 ; 57 George 6 See 1 Purdon's Digest, pp. 179- III., c. 60. 182; II. Revised Statutes of New 8 7 Taunton, 260. York, 1004 (Banks & Bros'. 6th 8 See, also, Cavanagh on the Law ed.) ; General Laws of California, of Money Securities. p. 904, art. iii. n -i -n broker not not necessarily become a member of any Stock Ex- necessarily a change; though in that case he may either employ stock Ex- members of the Stock Exchange to transact his busi- CM " S " ness there for him, or carry on his operations outside of it altogether, with non-members. Such persons, Effect of the i t '.,.,,. , , , 5 „ , Stock Ex- though governed in their dealings by the law of the change land relating to stock brokers, are not necessarily brokers" non- affected by the regulations or usages of the Stock Ex- hereof™ change to a greater degree than any other class of non-members of that body. But where a person em- ploys as his broker a member of the Stock Exchange, he is presumed in law to be affected with knowledge of all the usages of the Exchange, so far as they are reasonable, and he is, in any questions between him- self and third parties, growing out of his broker's con- tracts in the Stock Exchange, on his account, bound by them. 1 Hence a non-member of the Stock Ex- change, who deals through a member, is affected with knowledge of its regulations. Moreover, the rules of Customs of the Stock Exchange have, in many cases, from its change are being the sole medium of stock transactions, passed denceofcom- into general commercial usages, and have so come to ^agl^ possess the binding force of general commercial custom. And hence, even as between a principal and his 1 Grissell v. Bristowe, L. E., 4 C. P. 87 ; Masted v. Paine, L. E., 6 Exch. 132. 42 THE STOCK BROKER. [PART I. broker, the reasonable regulations of the Stock Ex- change may, as commercial customs, be binding upon both, though the principal have no actual notice of them. 1 What is "reasonable" cannot be determined or defined by any legal rule, but is a matter for the determination of the court, having regard to the gen- eral effect of the custom in question, upon the mer- cantile community. A stock broker is obviously governed in his trans- action by his obligations to his employer and third parties, as well as by the regulations of the Stock Exchange. He may therefore be conveniently con- sidered, — I. With reference to the Stock Exchange. II. With reference to his customer or principal. III. With reference to third parties. 'Sutton o. Tatham, 10 Adol. & Ellis, 27 [1839]. CHAPTEK II. THE STOCK BROKER AND THE STOCK EXCHANGE. PAOE SECTION I. — CONSTITUTION AND NATURE OF STOCK EXCHANGE. Definition 43 Its establishment in London . 44 Its nature and constitution . 44 Sales thereon 45 Account days 46 Method of dealing .... 46 Jobbers' 46 Passing a name 47 Tickets passed 47 Buying in ; selling out ... 48 Continuing shares .... 48 Backwardation and contango 48 Non-current securities ... 48 American Exchanges ... 49 Philadelphia Board of Brokers 49 Membership or seat on the American Exchanges ... 49 PAGE Cases discussed 50 Method of dealing on Amer- ican Exchanges 53 Ordinary sales and special bar- gains 54 SECTION II. — THE CLEARING HOUSE. Definition 56 Its modus operandi . . . 57-61 Legality of deliveries at . . 61 SECTION III. — EEEECT OE RULES OF THE STOCK EXCHANGE. On non-members 67 discussed 67 SECTION IT. — TERMS OE THE TRADE. SECTION I. DESCRIPTION OP THE CONSTITUTION AND NATURE OP THE STOCK EXCHANGE. The Stock Exchange, in its present form in England Definition of -.iT-r-io ,1^-, ! i theStockEx- and the United btates, may be denned to be a voluntary change, business association or club, formed by its members for the purpose of buying and selling stocks, etc., among each other, either as principals in their transactions, or as agents acting for outsiders of the association, and having a code of laws regulating 'the admission, con- duct, and expulsion of its members. 1 The idea which is at present conveyed by the words 1 See the definition in Paterson also that of Miller, J., in Hyde v. on the Stock Exchange, p. 26 ; "Woods, 4 Otto, p. 523. 43 44 THE STOCK BKOKEK. [PAET I. " Stock Exchange" was not conceived at any one dis- EstaUish- tinct period, but has been the result of circumstances Exchanges and business necessity ; and Stock Exchanges have been circum- the gradual growth of upwards of a century in Eng- land and America. We shall first examine as briefly as possible the nature and constitution of the London Stock Exchange, and then that of those in this country. § 1. The London Stock Exchange. The origin of In London, when dealings in stocks began to be the London ■ i -i • , , t p j_"i j. stock Ex- considered an important part 01 mercantile transac- ; "" tions, the stock brokers, who had hitherto met each other in the streets or wherever they could, began to meet regularly in an apartment of the Bank of England, and removed subsequently to a house hired by them for the special purpose of dealing in secu- rities, and a small admission fee was paid by each stock broker. It became, however, impossible to carry on successfully such an institution, for numbers of per- sons became members who were of doubtful reputation. In 1801 a number of brokers formed the conception of the present association, and organized themselves into a business club, an entrance and an annual fee being paid by each member, whose admission was carefully scrutinized by a committee, and having a set of rules drawn up to regulate the business conduct of each per- son while a member of the association. Constitution The London Stock Exchange, says Mr. Cavanagh don stock in his work on the Law of Money Securities, 1 now xc ange. cong j stg f tw0 distinct bodies : 1. The shareholders or proprietors, who own the building where business is 1 See p. 515. CHAP. II.] STOCK BKOKEB, ANT) STOCK EXCHANGE. 45 transacted, and who are interested as members of a joint stock undertaking; and, 2. The subscribers, or persons generally described as members of the Stock Exchange, or of the house, who transact business. A person desirous of being elected as a subscriber or mem- Admission to T i • t • <» • the Stock ber, is obliged, before his application for election can Exchange. be entertained, to give security, three existing members becoming his sureties, in a limited amount, for the meeting of his engagements during three years, and then an election for his admission is held by ballot. Every year a re-election takes place, though almost always the member, if his character is not doubtful, is re-elected. When elected, a member pays an entrance fee and an annual subscription, but has no vested in- terest in his membership beyond the right of exercising his employment, etc., during his membership, and cannot dispose of it on leaving the association. A regular list is kept of the securities commonly sold List of tne •i-r-iniT-ii i-i securities on at the London Stock Exchange, while particular rules the market. govern the production of any new securities put on the market. Two kinds of established securities are quoted on the official list, — the current and the non- current ; the former being those for which there is an active market, and the latter, for which the market is not active. In both the active and non-active securities the sales Sales made are made "for money," or "for the account." In the 7ft™°ac-'' former case, the broker pays the money down and gets count " an immediate delivery or transfer of stock. In the latter case, the contract is for a future delivery, which is made on a subsequent day, called the " settling" or " account" day, when the contract is completed. If no 46 THE STOCK BKOKEK. [PAET Account days. Method of dealing on the Stock Exchange in London. Jobbers. Illustration of dealings. time is mentioned, it is understood that the delivery is to be on the account day. For government Consols there is one account day in each month, and two ac- count days for other English and foreign stocks and shares ; and where a new security is put on the market, an account day is arranged upon for it. The method of dealing followed in the London Stock Exchange differs from the system pursued in America or the continent of Europe. In all operations in stocks, the members dealing divide themselves into two classes of operators, known as jobbers or dealers, and brokers. The former class are intermediaries between the buy- ing and selling brokers, acting on their own account, while the latter act as the agents of their respective principals in the transactions, but deal with the jobbers in the ordinary relation of seller and purchaser. Both are actually members of the Stock Exchange, and tech- nically speaking stock brokers, but dividing themselves into these two classes for each stock transaction. After the transaction is completed, the jobber may then act as a broker in another operation, and vice versa; but a stock broker cannot act in both capacities in the same transaction. The transaction is executed as follows. A broker desirous of executing a commission goes to a jobber, and asks him to name a price. The jobber, if assenting, will name two prices, one at which he binds himself to sell, and one at which he binds himself to buy. The broker then discloses his intention of buying or selling, as the case may be, and usually does not dis- close his principal. 1 A memorandum is then* made of 1 See Child v. Morley, 8 Term Keports, 610; Magee v. Atkinson, 2 M. & W. 440. CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 47 the sale by each, party in his book, and usually a bought and sold note is given by each to the other. The jobber is then at liberty to resell the shares if he has purchased, or buy shares from some other broker or jobber to complete the contract if he has sold, and frequently the original number of shares sold by a broker is split up into smaller lots before the shares are finally all taken up by one or several brokers. 1 The contract of sale remains in statu quo till the " name Name day or day" or " ticket day," which is the day before " settling day," when the buying broker is obliged to "pass a Passing a name," which may be either that of his principal or of some one else put forward by him, to the jobber. This is done by his giving the jobber a ticket bearing the name of the ultimate transferee intended, and the price at which the sales were effected, together with the broker's name. The ticket or tickets are then passed Tickets on till the selling broker gets them, who is bound to accept the names offered, unless he can show some good reason why he should not, as, for example, fraud, or where the name of the transferee is not that of a person sui juris, etc. 2 The broker passing on the name is bound to pay the purchase-money to the original seller. 3 A contract is thus constituted between the original seller and the ultimate buyer, enforcible at law. 4 It makes no difference whether the price on the ticket differs from that at which the shares were origi- nally sold, the difference being paid or received by the "jobber" in the transaction, and this is a mere adjust- 1 See Coles v. Bristowe, 4 L. R., s See Rules of London Stock C. A. 3. Exchange. 8 See Nickalls v. Merry, 7 L. R., * Musgrove and Hart's Case, 5 E. & G., App. 530. L. R., Eq. 193. 48 THE STOCK BEOKEK. [part Buying in. Selling out. Continuing shares. Backwarda- tion and con- tango. Sales of non- current se- curities. ment of prices which does not affect the original seller. 1 On " settling day" the seller gives up his stock to be transferred, and ten days are allowed by the rules of the Stock Exchange for this. If the shares are not given up, the purchasing member may " buy in" shares to the amount of the contract, which is done publicly on the Stock Exchange, and the member, through whose default this has become necessary, is compelled to make good any increase in the price paid on such purchase, together with the commission of the broker buying in. Similarly, if the price be not paid to the holder of the shares, he may " sell out" and claim from the de- faulting buyer the difference or diminution in price caused by his neglect, besides a commission for selling out. 2 It often happens that the broker desires to " con- tinue shares," or to postpone the day of payment or delivery, and this may be done by the payment of a premium, called in the seller's case " backwardation," and in the buyer's " contango." When the name is passed, the jobber is released from any liability in the matter. 3 Sometimes the broker comes to an under- standing without the aid of the jobber, and in the case of foreign or provincial stock the broker has to seek out one who deals in it. In the transactions in securities that are non-current the' broker usually applies to the jobber, who, however, does not make an offer till he has found some one who is willing to buy or sell. 1 See Newburn v. Eaton, 20 L. T. 449. 2 See Dorriens v. Hutchinson, 1 Smith, 420. 8 Grissell v. Bristowe, L. E., 4 C. P. 36 ; Coles v. Bristowe, L. E., 3 Eq. 257, 3, c. 388 ; Hawkins u. Maltby, L. E., 4 Ch., App. 200. CHAP. II.]. STOCK BKOKEE AND STOCK EXCHANGE. 49 When the price is paid or ready to be paid, the selling broker hands over to the buying broker or brokers, genuine transfers and certificates, with the rights and interests which they convey; but it is not' considered to be the duty of the vendor's broker to pro- cure a registration of the transfers, which devolves on the purchaser, who, however, might have the right to call on the vendor to get him to concur in the purchase. 1 § 2. The American Stock Exchange. The Stock Exchange in the United States had much Origin of the • • i n Stock Ex- the same origin as that in London ; as, for example, change in in Philadelphia, about the beginning of the present The Phiia- century, "the first place of meeting appears to have Exchange? " been in the Exchange Coffee House in Second Street, " where, in one corner of a room, used by merchants " and others as a common rendezvous at certain hours " of the day, the brokers met to deal in stocks, bills "of exchange, and promissory notes." The scene of operations was then changed from one place to another, till the occupation of the present building of the Stock Exchange. The Stock Exchanges in America are entitled the Stock Exchange, 2 or Stock and Exchange Boards, 3 and are unincorporated associations, whose real estate and other property are usually vested in trustees selected by the members. The membership is somewhat different from that Themember- in London. A person desiring to become a member* s ip ' 1 Taylor v. Stray, 2 C. B., N. S. Stock Exchange. 175 ; Stray v. Eussell, 1 Ellis & 3 See Constitution and By-Laws Ellis, 888. of San Francisco Board. 2 See Constitution and By-Laws * The applicant must be of legal of Philadelphia and New York age. 4 50 THE STOCK BROKER. [part I. Admission by purchase of seat. The "seat," or member- ship. Hyde v. Woods. makes his application to the proper officers of the Stock Exchange, and an election, usually by ballot, is held for his admission, if there be a vacancy in the member- ship, which is often exclusively in the charge of an elective committee. In the event of his being elected, a fixed initiation fee is then paid. His membership is termed a " seat," which, as the membership is limited, has a moneyed value. In case there is no vacancy, he may purchase a seat from some member desirous of quitting the Stock Exchange. But he does not, by the purchase, acquire any right to membership in the Ex- change until he is duly elected, when he pays a small initiation fee. An outgoing member of good financial standing may dispose of his membership, for its market value, to any one desirous of entering the association, subject to the nominee's election as a member. Upon" the death of a member his seat is sold, and the pro- ceeds,, after his debts to members are paid, pass to his executors ; and upon the insolvency of a member his seat may be ordered to be sold by the Stock Exchange, when the proceeds are first applied to satisfying his debts to members of that institution. The member thus has . a vested interest in his seat, but holds it always subject to his debts to the association and to his fellow-members. The following cases are illustrations of the legal nature of a " seat" on the Stock Exchange in the United States. In Hyde v. Woods 1 the nature of membership in the Stock Exchange was discussed at some length by Miller, J., in the Supreme Court of the United States. Art. 15 of the Constitution of the Stock Exchange 1 4 Otto, 523. CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 51 of San Francisco provided that "in sales of seats for " account of delinquent members, the proceeds shall be " applied to the benefit of the members of this Board " exclusive of outside creditors, unless there shall be a " balance after payment of the claims of members in " full." A member became bankrupt, and assigned his seat to be sold and to have the proceeds distributed among his creditors in the Board. His creditors out- side of the Exchange contended that such a distribution of the proceeds constituted a preference under the Bankrupt Act, and was void. The question here arose, whether the stipulations in the by-laws of the Stock Exchange, making the " seat" first liable to creditors inside of the Stock Exchange, were valid as against outside creditors, and whether it constituted property subject to attachment and execution at the suit of any creditor, whether a member of the Stock Exchange or not. In deciding the distribution among the creditors in Remarks of the Exchange to be valid, Justice Miller said, " There ' " is no reason why the Stock Board should not make " membership subject to the rule in question, unless it "be that it is a violation of some statute, or of some "principle of public policy. It does not violate the "provision of the bankrupt law against preference of "creditors, for such a preference is only void when " made within four months previous to the commence- "ment of the bankrupt proceedings. Neither the "bankrupt law nor any principle of morals is vio- lated by this provision, so far as we can see. A "seat in this Board is not a matter of absolute pur- " chase. Though we have said it is property, it is 52 THE STOCK BROKER. [PART I. " encumbered with conditions when purchased, without " which it could not be obtained. * * * It never was " free from the conditions of Article 15. * * * That "rule entered into and became an incident of the " property when it was created, and remains a part of "it into whose hands soever it may come. As the "creators of this right — this property — took nothing " from any man's creditors when they created it, no " wrong was done to any creditor by the imposition of " this condition. * * * It is said that it is against the " policy of the bankrupt law, against public policy, to " permit a man to make in this or any other manner a "standing or perpetual appropriation of his property " to the prejudice of his general creditors ; and it is to " this point fhat the numerous authorities are cited. " They all, however, relate to cases where a man has " done this with property which was his own, — prop- " erty on which he himself imposed the direction, or "the encumbrance, which impeded creditors. It is " quite different where a man takes property, by pur- chase or otherwise, which is subject to that direction " or disposition when he receives it." Thompson v. In Thompson v. Adams, 1 a similar rule existed in the J\ rl sun ^ Philadelphia Stock Exchange, and a member purchased a seat with money advanced to him by C, his partner's brother, for the purpose, but without notifying the Stock Exchange that he had not paid for it out of his own money, or that he was not the real owner thereof. Upon the dissolution of the partnership, he gave C. a bill of sale of the seat, also without notifying the Board thereof. At his death, he was indebted to members of the Stock 1 7 "Weekly Notes of Cases (Phila.), 281. CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 53 Exchange, and the proceeds of the sale of the seat were claimed by them, and by C, who held the bill of sale for it. The Supreme Court of Pennsylvania held that the constitution and articles of a voluntary association such as the Stock Exchange were a law unto its mem- bers, and that C.'s claim, as equitable owner of the seat, against the members, could not be supported, as he was a stranger to the association, while the legal owner, as a member, was subject to its regulations. " The seat " was not property," said the court, " in the eye of the " law, * * * but was the mere creature of the Board, " and of course was to be held and enjoyed with all the " limitations and restrictions which the constitution of " the Board chose to put upon it." Substantially the Pancoast ». n . , , , 1 • t\ Gowen et al. same question was decided by the same court in .ran- Moxey's Ap- coast v. Gowen, 1 and later in Moxey's Appeal, 2 and in wL'ter »„ "Wister v. Evans. 3 It may therefore be considered as vans- established that a " seat" is held subject to the restric- tions placed upon it by the Stock Exchange creating it. There is in many of the American Stock Exchanges a trust or insurance fund established, out of which the family or legal representatives of each member are, on his death, entitled to receive a fixed sum.* The rules of the Exchanges regulate the admission of members, the assessments to which they are subject, the rate of their remuneration, and their expulsion in case of insolvency. The method of dealing in the American Stock Ex- 1 5 "Weekly Notes of Cases phia Exchange in book of Rules ; (Phila.), 36. Trust Fund in books of Eules of 2 9 ibid. 441. s 1 ibid. 182. New Tork and San Francisco Ex- ' See Gratuity Fund of Philadel- changes. 54 THE STOCK BROKEK. [PAET I. Method of dealing in American Stock Ex- changes. Sales. For cash. Sales regular way, or in the ahsenee of any agree- ment. Sales on time, or by a special agreement. changes is much less complicated than in England. Certain hours are set apart for the transaction of business, and the day often divided into sessions or sittings of the Board. A " regular list" of stocks and bonds, etc., active in the market, is called once or oftener at each session, and during the calling, the shares or securities are bought or sold. There is also frequently, as in New York, another list, with certain stocks upon it, called, and the lists may be re-called, according to the, rules of the association. Certain rules regulate the placing or "listing" new stocks or secu- rities on the regular list of the Exchange, which, how- ever, vary in the different Stock Exchanges. During the calling of- the stocks at the sessions of the Board, a member, desirous of executing a con- tract, makes a bid, or an offer to either buy or sell, as the case may be, certain shares of stock, or bonds, etc., and if any one desires to close with him, he ac- cepts the offer and the bargain is made. A bought or sold note containing a memorandum of the sale may then be exchanged, and often by the rules of the Ex- change the sale is recorded in books of the Stock Exchange. The sales are for " cash" or " regular way," or "on time," or in some cases for "the ac- count." Sales for cash need no explanation, as the thing is paid for and delivered in a short time. ■ In sales " regular way," or in the absence of any special agreement, the security is deliverable the next day, at or before a designated hour, unless the day be a holi- day, when the delivery takes place on the following day. In sales on time, or by a special agreement, the security is deliverable at the time specified, unless that CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 55 be a Sunday or a holiday, and then the delivery is on the preceding day ; usually, in Philadelphia and New- York, the time does not exceed sixty days, and in San Francisco, it does not exceed ninety days. In New York, there is under certain circumstances Sales for the . , . account. an account day fixed for sales in government securities, which is the fifteenth and thirtieth of each month. 1 In general, the delivery is effected either by the Delivery. vendor handing the vendee broker a stock certificate, or other evidence of the security, with a power of at- torney irrevocable, to transfer, executed in blank by the person in whose name the security is legally regis- tered ; and in certain cases the selling broker is com- pelled, by the rules of the Exchange, to guarantee the power of attorney, as in Philadelphia ; or else to cause an actual transfer to the vendee broker to be made. 2 In the New York Stock Exchange, the buyer may demand an actual transfer on the books of the company ; and in Philadelphia, either party may do so ; and usually where the delivery is by certificate and blank power of attorney, the buyer may insist on having the certificates in not more than one hundred shares each. 3 SECTION II. — THE CLEARING HOUSE. Much of the business of stock brokers in respect to The Clearing the delivery of shares of stock is carried on through the instrumentality of an institution which is termed the Clearing House. In order, therefore, to have a 1 See Eules of New York Stock different Stock Exchanges. Exchange, p. 66. 8 g ee R u i es f New York and 1 For deliveries when the transfer Philadelphia Stock Exchanges, books are closed, see Eules of the 56 THE STOCK BROKER. [PART I. thorough and accurate knowledge of their business, it will be necessary to clearly understand the operation and effect of the Clearing House with respect to stock transactions. We shall give a detailed account of the Clearing House, the more so, as questions concerning the Clearing House and its legality have lately arisen in Pennsylvania, and it is manifest from the language used by the court in passing on those questions that they have failed to comprehend its effect or modus operandi. In considering the Clearing House we shall endeavor, firsts to define it, as briefly as we can; and then, to describe somewhat more at length its modus operandi. Definition of The Clearing House may be defined to be a bureau House. ' or agency, established by the members of the Stock Exchange for those stock brokers who are members of it, and who may choose to avail themselves of its use ; where a sheet containing the account of the purchases and sales of stock and the prices thereof, made by each of such stock brokers, and maturing during that day, is sent, and which, by the mutual assent of the buying and selling stock brokers, is elected and authorized by them to act as the common agent of each, both in bal- ancing their respective accounts in their several trans- actions in stock maturing during that day, and the prices for the same, and also in accepting and making for each, a symbolical, actual and legal delivery of the shares of stock sold by each respectively, together with Explanation the payment therefor: by setting off the number of of the modus -in operandi of shares of stock due to and from each stock broker, as the Clearing , , , . House. shown by their respective accounts. Where a sheet of each such stock broker balances exactly, that is to say, where the number of bought shares equals the number CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 57 of sold shares, as well as the prices therefor, then the delivery is complete and the. account is closed up ; but where the total number of bought shares exceeds the total number of sold shares, or vice versa, then the account is balanced by the Clearing House as far as possible, and the balance of stock due to him from it, or from him to it, is either paid to him by some other stock broker, directed thereto by the Clearing House, acting as his receiving agent, or by him to some other broker, being directed similarly by the Clearing House, acting as the agent of that other broker; and the balance in money resulting from the different prices of stock is paid over by the different parties in the same way. Though the idea of the Clearing House is nothing idea of the new, since it has been used for a long time both by House not the banks in respect to their cheques, and also by rail- road companies, who have a sort of Clearing House, where the different exchange tickets over each other's lines, which are sold by them severally, are cleared, it will be best, perhaps, in order to comprehend clearly the nature and legal effect of this institution, in regard to transactions in stocks, to describe its modus operandi somewhat at length and to give an actual illustration. ACCOUNT OF A. & CO. "WITH THE CLEARING HOUSE. PENNA. B. B. CO. SHABES. No. of Shares. From Whom. Amount. Certifi- cation. No. of Shares. To Whom. Amount. Certifi- cation. 200 600 300 200 200 V. & Co. X. &Co. Y. &Co. Z. &Co. Balance. 13,300 33,250 19,800 13,200 13,400, V. & Co. X. & Co. Y. &Co. Z. & Co. 100 100 500 700 L.&Co. M. & Co. N. & Co. B. & Co. SueC.H. 6,650 6,650 33,250 46,225.67 174.33 L. & Co. M. &Co. N. & Co. R. & Co. 1400 • 92,950 1400 92,950 Chart of Clearing House. 58 THE STOCK BEOKEE. [PAET I. The above chart is a Clearing House sheet, and the meaning of it is as follows : Suppose A. & Co., being stock brokers and members of the Stock Exchange, are employed by B. & Co., C. & Co., D. & Co., and E. & Co. to sell 1400 shares of stock— 100 for B. & Co., 100 for C. & Co., 500 for D. & Co., and 700 for E. & Co., — and suppose A. & Co. are handed by these parties respectively the number of shares which each is desirous of selling. At the same time S. & Co: desire A. & Co. to buy 200 shares of the same stock for them, T. & Co. desire A. & Co. to buy 500 shares of the same stock, Q. & Co. desire A. & Co. to buy 300 shares of the same stock, and B. & Co. desire the same parties to buy 200 shares of the same stock for them. Now it will be observed here that, ordinarily, A. & Co. would have eight distinct transactions in stock at the least to execute, 1400 shares of stock having to be sold for different parties by them, and 1200 shares of stock having to be bought for different parties by them. Ordinarily, this would therefore necessitate at least eight deliveries of stock to be made in these trans- actions (and possibly many more), as well as payments of large amounts of money for these deliveries. As- suming the stock to be that of the Pennsylvania Bail- road Company, which is probably worth $65 or $66 a share, 1 nearly $200,000, or its equivalent, thereabouts, would have to be used in these transactions made by this one firm alone, and 2600 shares of stock would also be required to effect the various deliveries. Now by using the agency of the Clearing House all these 1 October, 1881. CHAP. II.] STOCK BKOKEK AND STOCK EXCHANGE. 59 transactions between the brokers may be accomplished by about 200 shares of stock and by the employment of about $175. Therefore in transactions ordinarily amounting in number -with regard to shares of stock to 2800, and with regard to money to $200,000, the actual money used by the brokers among each other is reduced to less than $200, and the actual shares of stock also to less than the same figures. Before the Clearing House was established in Phila- delphia, stock brokers made use of a system of due bills, which economized money and stock to a certain extent, as is done now in New York. As soon as the aforesaid firm of A. & Co. have , bought and sold these shares at the Stock Exchange, they make up what is called the Clearing House sheet as shown above. The figures on the extreme left under the words " number of shares" indicate, with the exception of the last line, the numbers of shares •they have bought for their customers. The letters in the column immediately on the right of the aforesaid figures represent the brokers from whom they have bought them at the Stock Exchange. The figures under the word " amount," again, to the right of this column, represent the amounts of money severally paid for the purchase of the above shares. The letters under the word " certification" represent the signatures or certificates of the brokers from whom they have purchased, to the effect that the transactions are correctly stated on the Clearing House sheet. The remaining half of the Clearing House sheet rep- resents, on the other hand, the sales for their cus- tomers, and is arranged in the same manner as the 60 THE STOCK BROKER. [PART I. purchases. It will be observed that A. & Co. have sold 200 shares more than they have purchased, there- fore the sheet does not balance on both sides, and in order to make it balance, they add 200 shares to the number of shares purchased, making the pur- chased and sold shares thus balance. In adding this balance they will of course have to add the price to the several amounts of the purchased shares. Now probably the different lots of these shares have been sold at different prices, so that A. & Co. cannot choose any particular price which will be equal to the prices paid for each of them respectively ; therefore a price is selected as near as possible to the average price of the market value of the shares sold during that day. We have said that this price is selected ; but it would be more proper to say that every day there is a ficti- tious price fixed upon by the Clearing House as near as possible to the probable opening value, in even numbers, of the stock to be sold or maturing during that day. This value is fixed upon by the Clearing House for each stock at or just after the opening sales. Now this fictitious value may be either more or less than the market value; therefore, as A. & Co. have charged the Clearing House with 200 shares to bal- ance their sheet, the same firm must either pay to or receive from the Clearing House the difference be- tween the total amount of the various sums of money received as the product of all the actual sales on this Clearing House sheet made by them, and the total amount of money paid by them for the shares they have actually purchased, plus the amount they have charged the Clearing House with as the price of the CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 61 200 shares balance. In the example given' this dif- ference will be found to be $174.33, and this is added to the- amount of money they have received for their sales. The number of shares bought, now balance with the number of sold shares, as well as the prices. This sheet is received by the Clearing House, and as far as the bought and sold shares balance, they are set off against each other, and the balance of the 200 shares is directed by the Clearing House, as the agent of some buying broker, to be delivered by A. & Co. to him; and A. & Co. pay the Clearing House $174.33, which is the difference aforesaid. The legality of deliveries through the agency of the Legality of Clearing House has been questioned in Pennsylvania, House le- 1 1 V BT1 GS and the Supreme Court of that State have held that such deliveries are fictitious transactions and void by the common law of Pennsylvania, being a mere settle- ment of differences. 1 If, however, we examine the re- lation of the Clearing House to the buying and selling brokers carefully, it will not be difficult to see the untenability and fallacy of such a proposition, and moreover it is clear from the language used by the Supreme Court, in passing on this question, that it failed entirely to understand the nature and modus operandi of the Clearing House. The Clearing House is the agent of both of the parties, and where a selling broker sends to it his ac- count of sold shares, the Clearing House in such a case is authorized by the buying broker to accept such shares, and if such an account were to contain nothing 1 See Kuchizky v. De Haven et (Phila.), 109; Smith v. Thomas, al, 10 "Weekly Notes of Cases 10 ibid. 112. 62 THE STOCK BROKEE. [PAET I. but sold shares, the Clearing House, as the agent of a buying broker, would simply direct the selling broker to deliver the shares to his (the Clearing House's) principal; but where the account contains bought as well as sold shares, the Clearing House then, acting as agent of both of the brokers, sets off one transaction against the other. This the principals themselves might, perfectly legally, do, and, consequently, it is obvious that their agents may do the same. In fact, the sheets sent to the Clearing House by the different brokers are substantially nothing but bills of sale made by them, and made to them, and sent to their common agent the Clearing House. When the transactions balance, there is but little difficulty ; and the question in regard to the illegality of these transactions of the Clearing House seems generally to have arisen, in the minds of some people at least, where the bought and sold shares do not balance in the respective sheets of the different brokers. It has been fallaciously argued that here is a proof that the whole transaction is a mere settlement of differences, since the brokers' them- selves do not receive or deliver any stock or money, with the exception of the before-mentioned small amount of stock they deliver, and the small amount of money which they pay. But this difficulty is at once removed by a very cursory examination of the position of the brokers delivering or receiving the aforesaid balance of money and stock. The broker delivering, thus, the balance, is acting under the direction of the Clearing House, which acts as the agent of the re- ceiving broker, or vice versa. For instance, where the accounts of any two stock brokers at the Clearing CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 63 House show 200 shares purchased by one of the other, and 100 shares sold, vice versa, there is a balance of 100 shares. The Clearing House then says to the vendor of the 200 shares, " We accept on behalf of " the vendee of the 100 shares his 100 shares, we set " off the 100 shares he is to receive against the 100 " shares he has sold you, and so far the transaction is "complete: now you have purchased of him another " 100 shares, and we, as your agent, will then direct " the same broker, as vendor, to hand them over to you, " and the payment will be made in the same way. As " his agent, we have accepted the 100 shares you have " sold him' ; as your agent, we have accepted the 200 " shares he has sold you ; 100 shares have been set off, " and now we tell him to deliver the other 100 to you, "the payments when not balancing being similarly " made." Such a transaction is eminently legal and real. Suppose there had been no Clearing House in this last case, but that the buying and selling brokers had come to each other, after the close of the business day, and one said to the other, " You owe me 200 "shares of stock; I owe you 100 shares of stock, " which may or may not have been sold at different "prices. Now instead of your sending to me 200 "shares and my sending to you 100 shares, simply " send to me 100 shares, the rest of our transactions " balancing, and if in balancing there is a difference " in the prices, we will adjust that difference." No one will deny that such a transaction is perfectly legal, and if such a transaction is perfectly legal if done by principals, it is certainly legal if performed by their agents, or if performed by their com- 64 THE STOCK BEOKEE. [PAET I. mon agent, as in this instance, viz., the Clearing House. One word with regard to the customers of the brokers. They are not in any way affected by the Clearing House. The Clearing House simplifies merely the transactions of the brokers as between each other. In the case supposed, A. & Co., for in- stance, might deliver the 1200 shares to their cus- tomers out of the 1400 shares they have received from their other customers, and deliver the 200 balance to the broker whom the Clearing House points out. And they might deliver the price or value received for the shares to be purchased, in payment, as far as possible to their other customers; and this would economize money and stock, viz., since 1400 shares of stock and $100,000 of money would be used by brokers and cus- tomers, instead (without the Clearing House's aid) of $200,000 of money and 2600 shares of stock, at least; and if the shares were frequently resold, it would be necessary to use hundreds of thousands of dollars. As one share is equivalent to and as good as another, this can very readily be done, and saves the loss of allowing a large number of shares to lie at the office of some company waiting for registration, and money drawing no interest. It will be observed also that shares can only be cleared at the Clearing House because one share is as good as another. "Where a hundred brokers have sent in their respective sheets, the Clearing House may possibly direct a delivery of the balance to be made from one broker to another, with whom the former has had no transaction. But this is perfectly legal. The Clearing House has accepted all the shares the selling CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 65 broker has sent to it on his Clearing House sheet, or bill of sale, as the agent of the buying broker or original vendee, and requests the former, the vendor, to deliver the balance to some other vendee, the shares having been subsequently resold by the original vendee to a sub-vendee ; and so, if the price or payment of ' the difference in. money is given, to a broker whose sheet shows him entitled to it. The term, settlement of differences, is an incorrect expression, used with reference to the Clearing House delivery. It can never be a settlement of differences. And it may be said that all the transactions effected through its instrumentality must be valid, for it is obvious, if a single incorrect or invalid sheet is sent in to it, it will render incorrect all other sheets which are in any way connected with the sheet this par- ticular broker has sent in. Sometimes the broker may use shares of his own, to make deliveries before he gets those of his customer ; but where a broker uses his own shares in completing the transaction, he loans them temporarily to the vendor, for he can never use them for his customer's transactions, as his own ; not being allowed to sell or buy as sole agent between the two parties to the sale ; and so with the purchase money. SECTION III. — EFFECT OF THE RULES OF THE STOCK EXCHANGE. As members of the Stock Exchange expressly agree, Effect of on their entering it, to conform to and abide by its members, rules, they are legally bound by them, so far as they are not against public policy ; but where the interests 5 66 THE STOCK BROKER. [PART I. of non-members, such as principals or creditors, are concerned, somewhat difficult questions may arise. The law merchant in most cases assumes, as already stated, that one dealing with a stock broker is bound by the current mode of dealing, that is to say, in making his contract with the broker, he does so, subject to all ex- isting reasonable rules and usages of the trade. 1 When, therefore, an outsider employs, as his brpker, a member of the Stock Exchange, he contracts with him subject to the known and reasonable usage of the trade prevail- ing at that place, as well as subject to the reasonable rules of the Stock Exchange, and that, probably, whether he himself is aware of the rules or not. With regard to the case of creditors, non-members, it follows that as the broker is governed by the rules of the Stock Ex- change, the broker's creditors, in other transactions with the broker, are affected also by them ; the rules to bind, however, must always be valid and reasonable. A few cases will best illustrate the principles of law on this subject, and what have been considered valid rules. Coiketa. The following case of Colket v. Ellis 2 is an illustra- tion of a custom that is binding on brokers where both are cognizant of a usage. Here the Court of Common Pleas at Philadelphia, held that a custom among brokers to sell stock de- posited as collateral security for a call loan, at the Board of Brokers {i.e., Stock Exchange), on the failure of the borrower to pay on the day, on which the de- mand was made, was not illegal, as between the parties familiar with that mode of dealing, the custom not being invalid in se. 1 See Story on Agency, £ 60, etc. 2 82 Leg. Int. (Phila.), 82 [1881]. Ellis. CHAP. II.] STOCK P.KOKER AND STOCK EXCHANGE. 67 As illustrations of rules binding on non-members, Effect of • i ■ k i i t rules on non- where there is a relationship of debtor and creditor members. existing between them and the stock broker, in conse- quence of transactions other than sales at the Stock Ex- change, the cases of Moxey's Appeal, 1 and MacDowell Appeal. 8 v. Ackley, 2 may be cited. " *£*£» In Moxey's Appeal, 3 it was held that the constitution Moxey's and articles of the Stock Exchange of Philadelphia were a law unto its members, and that it was perfectly competent for such an association to make a regulation to the effect, that if a suspended member failed to com- ply with all his contracts his seat should be sold, and the proceeds distributed among his creditors, members of the association ; and that, though such a regulation gave the members of the association an advantage over other creditors, they had a right to stipulate for it. In MacDowell v. Ackley, 4 in 1865, plaintiff became a MacDowell member of the Stock Exchange. In 1875 the Exchange "' ° ey ' passed an amendment to its constitution, providing for a gratuity fund, from which a sum of $2000 was to be paid to the representatives of every full member on his decease; and a full member was to be one owning a seat, whether suspended or not. M. paid up certain assessments for the formation of the fund. Subse- quently it was provided that any suspended member, who should fail for three months to pay certain dues and assessments on account of the fund, should cease to be a full member for this purpose. There was no evidence to show whether M. knew of this amendment 1 9 Weekly Notes of Cases 3 9 Weekly Notes of Cases (Phila.), 441. (Phila.), 441. 2 8 ibid., 464. * 8 Weekly Notes (1880), 464. 68 THE STOCK BROKER. [PART I. Evans v. Wister. Nicholson v. Gooch. Tompkins v. Safferty. or not. M., having been in arrears, was suspended, and the court held, that having subscribed to the con- stitution and by-laws he was bound by them. In Evans v. Wister, 1 the court held, that a seat in the Philadelphia Board of Brokers was a mere license, created merely and existing by the rules made in re- spect to it, to which each entering member subscribes, and not subject to attachment at the hands of outside creditors of that body. In these cases, we thus see, that the courts have held, that the sale of a seat on the Stock Exchange being a mere license, on the bankruptcy or insolvency of a member, a distribution of the proceeds, according to the rules of that body, among his creditors, members of the Stock Exchange, in preference to his outside creditors, is not an invalid preference within the mean- ing of the Bankrupt Acts. But suppose a rule of the Exchange authorized the officers of that body to take possession of the other property of a bankrupt or insolvent, and distribute it among his Exchange creditors before any of it was dis- tributed among his outside creditors, in other transac- tions, not connected with the Stock Exchange. The question arose in Nicholson v. Gooch, 2 but the case turned on another point. In Tompkins v. Safferty, 3 however, the question was decided. Here C, a member of the Stock Exchange, being unable to meet his engagements, notified the sec- retary. By the rules of that association the defaulter ceases to be a member and his estate is distributed by 1 Weekly Notes (Phila.), 181. 2 5 El. & Black, 999. a L. R., 3 App. Gas. 213. CHAP. II.] STOCK BEOKER AND STOCK EXCHANGE. 69 the official assignees of the Exchange. C, becoming insolvent, handed over possession of his estate, £5000, to them, stating that he had no other creditors except- ing those in the Stock Exchange. In an action by the assignee in bankruptcy to recover this sum of money so paid, the court held, that what C. had done was an act of bankruptcy, a cessio bonorum, and that the money so paid created an invalid preference over his other creditors, and that such a rule of the Stock Exchange was only an honorary regulation, and not binding on outsiders. The reader is referred further to the cases of Hyde Hyde v. v. Woods and Thompson v. Adams, quoted on a former Thompson v. page, as illustrations of the same principle. SECTION IV. TEEMS OF THE TEADE USED ON THE STOCK EXCHANGE. There are, as in all professions, a peculiar set of Terms of terms used by stock brokers in their dealings, which it is necessary to insert in the description of the Stock Ex- , change, for it would be impossible fully to comprehend the cases relating to the subject, without understanding the terms used in the transactions of stock brokers. Account, The, consists of three days, viz. : -con- tango day, the name day, and the settling day. Account, Sale foe. A sale for the account is a contract of sale to be performed on a future day, called the account day. Account Day, is the regular day or days in each month, on which, in England, established securities are to be received and paid for. In England there is one account day in each month for government stock, 70 THE STOCK BROKER. [PART I. and two for other English and foreign stock and shares. Allotment, consists of a certain specific amount of scrip, or number of shares. Allotments may be issued of scrip, before the company is formed, and of scrip and shares after it is formed. Backwardation, is the seller's postponement to deliver shares, with the consent of the buyer, upon a payment of a premium to the latter. Bear, is one who contracts to sell securities for fu- ture delivery, expecting to profit by a fall in the market. Blind Pool. See Pool. Bonus, is a premium or fee given to do, or to omit to do, something. Bull, is one who buys with a view of gaining by a rise in the market. Buyer's Option. See Option. Buying in. In the London Stock Exchange, if shares sold are not within a certain time transferred, the buyer may " buy in" the shares or securities from other dealers in the Exchange, up to the amount of his bargain, and claim the difference or loss, if any, from his seller. Call, is an option to claim stock at a fixed price on a certain day. Calls, are assessments on shares of stock, usually for unpaid instalments of the subscription thereto. Carrying Stock. Where a broker purchases and holds shares of stock, in his own, or his principal's name, and on behalf of his principal, before the prin- cipal advances him the money with which to do it, he is said to be carrying the stock for his principal. CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 71 Contango, is the postponement of payment by the buyer of stock on the payment of a premium to the seller. Contango Day, is the day to which contracts for contango are postponed. Continuation, is the agreement to postpone a set- tlement until the next settling day. Dealer. See Jobber. Flat, without interest. Where stocks are bor- rowed by a broker to make his deliveries, he usually deposits the market value of the stock with the lender, who ordinarily allows the current rate of in- terest on the deposit until the stock is returned. Where the stock is scarce and its use is valuable, or where for any other reason the lender refuses to allow interest on the deposit, the stock is said to be borrowed "flat." Jobber, is the intermediary acting between brokers on the Stock Exchange. The term is probably peculiar to the London Exchange. Lame Duck, is one who is unable to meet his con- tracts in the Exchange, — an insolvent. Long, to be, is to own stock, or to hold contracts for the purchase of stock, bought to sell at an advance. Making a Price, is the jobber's naming two prices to the broker, at one of which he binds himself to sell, and at the other to buy. Man of Straw. See Name. Margin, is a collateral security, usually in money, deposited with a broker to secure bim from loss on con- tracts entered into by him on behalf of his principal. Money, Selling for, is a contract of sale, where 72 THE STOCK BROKER. [PART I. the money is paid down and the stock delivered at once. Name, Passing a, is the forwarding of a name by the buying broker to a jobber, of a person agreeing to sell or take shares of stock as the ultimate buyer. The transferee of shares, on which unpaid calls are still due, is personally liable for their amount. A broker or jobber may therefore refuse to deliver such shares to a person not sui juris or to an insolvent, because in such case the liability of the seller for the calls would still remain. Where the buying broker forwards a name of a person not responsible, as that of the purchaser of the shares, in order to avoid personal responsibility for unpaid calls, such a name is said to be that of a " man of straw." Name Day, is the day preceding settling day. Novation, is the substitution of one contract for another. Omnium, is stock ; see Olivierison v. Coles, 1 Starkie's Eeports, 496 ; Brown v. Turner, 7 Term Eeports, 630. Option, signifies, in America, a right or privilege to receive or deliver a certain number of shares of a speci- fied stock on a certain day at a certain price, with or without interest. In England, it signifies the right to buy or sell at a future day at a certain price, or to do neither. Option Account Day, is the day before account day or name day. Option Money, is booked at the time the transaction is effected, and paid on settling day. If the price be the same at the expiration of the option time as that CHAP. II.] STOCK BROKER AND STOCK EXCHANGE. 73 originally fixed, the person paying has the right to declare whether he bays or sells, or does nothing. Pool, is a copartnership temporarily formed for stock operations, usually in some specific stock. Put, is an option to deliver stock or not on a certain day at a certain price. Put and Call, is an option to claim or to deliver a certain stock at a certain day and price. Regular Way (in America) , is a sale with delivery and payment on the following day. , Scrip, is an agreement by a company to pay interest or dividends, or to issue stock or bonds. The word is usually applied to the certificate, in which the agree- ment is contained. Seller's Option. See Option. Selling for Money. See Money. Selling out, is the right the holder of shares con- tracted to be sold has, if he is not paid on a certain day, , to sell them out in the Exchange, and claim any loss or difference from the buyer. Settling Day, is the day on which the accounts are settled up and the contract completed. Share, is a certain proportion of interest of the capital or stock of an incorporated company, being the smallest fraction into which the stock is divided, and entitles the holder to receive dividends when declared, and to the other privileges that appertain to a corpo- rator. Share Warrants. By the Companies Act of 1867, 30 and 31 Vict. c. 131, sections 27-36, compa- nies, whose capital consists of stock, or fully paid-up shares, are authorized to issue, under certain condi- 74 THE STOCK BEOKEE. [PAET I. tions, share warrants, transferable by delivery if drawn to bearer, or, if not, by endorsement and de- livery. Shave, is a premium paid for an extension of the time of delivery or payment, or for the right to vary a stock contract in any particular. Shoet, Selling, is making a contract to deliver stock, one does not own. Speead Eagle, is where a broker buys a certain stock at seller's option, and sells the same at seller's option within a certain time, on the chance that both contracts may run the full time and he gain the differ- ence. Straddle, is a put and call. Ticket, is the slip containing the ultimate buyer's name, which is issued by the purchasing broker, or the broker for whpm he is acting, and duly passed on, on name day, to the seller. Ticket Day, is the name day. Ultimate Buyeb oe Puechasee, is the name of the person actually buying or selling stock which is forwarded on the ticket. Wash. Where a broker receives an order to buy and also an order to sell the same number of shares of the same stock, he is bound to execute both orders separately to the best advantage of each principal. Where, however, he simply transfers the stock from one to the other principal and retains the difference, the operation is said to be a " wash," which is invalid. CHAPTEE III. THE STOCK BROKER AND HIS PRINCIPAL. PAGE SECTION I. — CKEATION OF AGENCY. Preliminary remarks ... 75 Who may be stock brokers . 76 Married women, lunatics, etc. 76 Any man sui juris may be principal 78 Married women at common law 78 By statute. Feme sole traders. 79 Infants, lunatics, drunkards . 80 Appointment of agent by natural persons 81 Appointment by artificial per- sons 82 Corporations 82 Municipal corporations ... 83 Trustees 84 SECTION II. — SCOPE OF AUTHORITY TO ACT. Cases discussed 85 Ambiguous terms 87 Meaning of "about," "more or less," etc 87 Adverse interests of stock broker to principal .... 89 Washing 90 Pledge 90 Statute in Pennsylvania . . 91 Sale 91 Payment 91 Price 92 Condition of genuineness in sale. . 92 Warranty in sale 94 Delegation of authority ... 94 Deviation 96 Liability to third parties . . 96 Public agents 97 Illegal transactions .... 100 SECTION III. — EXECUTION OP AU- THORITY. I. General rules 100 Skill and diligence . . . .100 Accounts 100 Pledge, return of identical shares 100 Cases discussed 101 Penal act in Pennsylvania . 104 II. Liability of the stock broker to his principal . 106 III. Liability of the principal to the stock broker . . . 107 1. General rules .... 107 2. Advances and disburse- ments 110 Cases discussed .... Ill 3. Commissions .... 116 Cases discussed . . . .117 IV. Stock broker's lien . . . 118 SECTION IT. — DISSOLUTION OF AGENCY. 1. By stock broker. . . .122 2. By principal 123 3. By mere operation of law. 1 23 By death 124 At common law .... 124 At civil law 124 Cases discussed .... 124 SECTION I. CREATION OP THE AGENCY. A MEMBER of the Stock Exchange, when acting as Preliminary a broker, has been defined to be an agent, 1 and it is proposed in this chapter to define the position occu- 1 See supra, page 33. 75 76 THE STOCK BROKER. [PART I. Who may be stock brokers. Stock broker not neces- sarily a mem- ber of the Stock Ex- change. Any man sui juris may be a member of the Stock Ex- change. Married women. Feme sole traders. pied by him to his principal, or, as it is usually termed, his customer. A member of the Stock Exchange, when acting as a broker, makes a contract for the purchase or sale of securities for a principal. It is obvious, then, that no one not sui juris, or able to make a legal -contract, can be a stock broker. Thus, neither married women, as a general rule, infants, nor lunatics can exercise this call- ing; but beyond this legal disability, every one may become one. As already stated, however, a stock broker is not necessarily a member of any Stock Ex- change, but can only become so on being duly elected into such a body. Any man of good character and sui juris is generally eligible for membership of the Stock Exchange, unless its membership be full, or some other rule of that body prove an obstacle. If elected, he may, in America, continue his membership so long as he conforms to the rules. The Stock Ex- change, however, may, as it is a voluntary association, impose, by rules, restrictions on the eligibility of ap- plicants, 1 and thus, as to future members, upon the terms of membership itself. There is no legal reason to prevent women, if sui juris, from acting as stock brokers ; but it has not yet ever been customary to admit them to any Stock Ex- change. A married woman could not, of course, unless constituted a feme sole trader, act as an agent. A feme sole trader was a term originally applied to 1 See Rules and Regulations of London Stock Exchange, p. 18 ; Constitution and By-Laws of the Philadelphia Stock Exchange, p. 24; Constitution and By-Laws of the San Francisco Stock Exchange, p. 10 ; Constitution and By-Laws of the New York Stock Exchange, p. 18. CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 77 the wives of mariners who by an old custom of the English law were allowed to make binding contracts notwithstanding their coverture. But the power of married women to enter into business and to make bind- ing contracts of a general character, notwithstanding their coverture, has been greatly extended in America by the statutes of the various States, as for instance in New York and Pennsylvania. Under the act of May 4, 1855, 1 in Pennsylvania, as well as under similar statutes in most of the States, a married woman may enter into any business and make all contracts apper- taining to such business, and in New York she may hold, convey, sue and be sued for, her separate prop- erty as if feme sole? How far, if cohabitation should still exist, in most of the States the consent of the hus- band would be necessary to a married woman's carry- ing on a separate business, is, perhaps, a point of some doubt, since it does not seem specifically provided for by any statute. But if a married woman should, with the consent of her husband, or in case of deser- tion or any of the other categories pointed out by the statutes, without his consent, choose to carry on the business of a broker, and qualify herself to do so in the manner required by the feme sole trader statutes, she would undoubtedly be able to make all contracts appertaining to that business, and to bind herself, as well as her principal, by her agencies. It does not, however, follow that even a feme sole trader can always bind herself or her principal by any contracts she might make. It has been held in some 1 Acts of 1855, p. 430. * Eev. Stat. N. Y., vol. 3 (6th ed.), p. 159, art. 6. 78 THE STOCK BROKER. [PART I. How far a States that a feme sole can only validly contract in or traaer°can about the business carried on by her, and that a "" ua promissory note given by her, outside of, or not con- nected with, that business, is void. Unless therefore stock brokerage was the business specially carried on by a feme sole, she might be legally incapacitated from binding herself or her principal in a stock contract, or one arising out of a stock transaction. Of course in those cases where the contract of the feme sole is valid, 1 she may sue and be sued with regard to her separate estate as though sui juris, though the name of the husband is usually joined in the action, to conform to pre-existing usage. "Who may be A^ n y one capable of making a legal contract may do principals, or J ... customers, so by an agent; 2 and therefore any one sui juris may become the principal or customer of the broker, and sue or be sued both on the contract made through his broker with third parties, as well as on the contract between himself and the broker. Married At the common law the contract of a married woman common law. is absolutely void, and the only redress is an appeal to her husband's sense of right; 3 nor is the contract one which can be ratified at her husband's death, but is void ab initio. 4 ' In England and America, however, of late years a series of statutes have greatly enlarged her powers of making contracts when living separate from her husband, and even, in some States, when living with him, with regard to her separate estate, as in New York. How far, then, married women may become 1 See Rev. Stat. N. Y., vol. 3 545. (3d ed.), p. 159. * See Benjamin on Sales, Book 2 Story on Agency, \ 6. I., chap, ii., American and English ' 2 Marshall v. Button, 8 T. R. Notes. CHAP. III.] STOCK BROKER AND HIS PEXNCIPAL. 79 the principals in stock transactions, depends upon the general principles just laid down. In his work on Agency, Section 6, Judge Story liemarksof says, " But where a married woman is capable of doing " an act, or of transferring property or rights with the " assent of her husband, then, perhaps, she may, with " the assent of her husband, appoint an agent or at- " torney to do the same. So with regard to her sepa- " rate property, she may perhaps be entitled to dispose " of it, or to encumber it through an agent or attorney ; " because in relation to such separate property she is " generally treated as a feme sole. I say perhaps, for " it may admit of question." Where a married woman may, by recent statutes, Married contract with the assent of her husband, she may with statute. his assent authorize an agent to do any administrative act. But where she has authority by statute to do an act, as, for instance, to sell personal property, while she herself can, of course, make a valid transfer of it, and thus complete an executed sale, it by no means follows that she can bind herself by an executory con- tract, to sell it. This would involve a general power on her part to bind her separate estate by contract, which, we have just seen, has been questioned. It follows, therefore, that it is doubtful whether she can authorize an agent "to make an executory contract for her, as, for example, to sell securities. Such a contract, as well as one to purchase, would probably be at the broker's risk. But a married woman, with her husband's assent, may employ a broker to sell her own securities at a stipulated price, or to invest her own money by the 80 THE STOCK BROKER. [PART I. purchase of securities. And where the securities or money are furnished to the broker, he would probably run no risk in selling them. In some of the United States, as in Pennsylvania, there are various acts (see Act of 29th February, 1872, Section 1, 1st April, 1874, Section 1, 18th March, 1875, Section 1) permit- ting a married woman to "sell and transfer" certain securities without the consent of her husband and as if a feme sole. The words of all these acts are " sell and transfer." It is probable, however, that these words only allow a married woman to make an executed sale, but not to make an executory contract to sell which would be enforced. If this view be correct, a married woman in Pennsylvania cannot be a principal in a stock transaction, unless where the same is an executed one, — that is to say, where the broker is merely em- ployed to complete the sale. In other words, it is always at the broker's risk if she act independently as a principal in any stock transaction. (™? e T s ° le With regard to feme sole traders it is probable that in most of the United States the same rule applies. A feme sole may undoubtedly make a binding contract in regard to any business which she is carrying on. But unless it can be shown conclusively that the stock transaction in which she undertakes to act as principal, is in fact incident to the business" carried on by her, it will not follow that she possessed the legal capacity to make it. And to ascertain whether, in fact, the transaction was incident to her business, would involve a question of law in every case. Prima facie, there- fore, a broker would have to act at his own risk also if his principal were a feme sole trader. With regard to CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 81 infants, their liability is somewhat different from that infants, lunatics, of married women, as their contracts are voidable only drunkards. and may be ratified when they come of age, and is substantially the same as other persons' not sui juris. 1 The agency of the stock broker may be created Appointment • ill- • • • tit °f a g en cy- either by a direct contract m writing, as by deed, or otherwise, or verbally, without any writing f or it may- arise indirectly by implication. 3 It has indeed been By natural often asserted that the creation of an agent should be per ' directly by deed ; but such a rule, if it ever existed, is now obsolete. 4 Where, however, the stock broker is Authority to required to execute a sealed instrument, his agency sealed instru- must be created by an instrument equally solemn. 6 The usual method of transferring stocks, etc., in America, is for the principal to give the stock broker an irrevocable power of attorney in blank to transfer the same, so that this question is not of such moment as it might otherwise have been. It arises, however, where a broker has been verbally instructed to purchase stocks which are carried by him in his own name. When a principal directs the sale of such securities, it is usually by parol, and in the absence of any decision it may be inferred from the nature of the transaction, that a verbal instruction to sell stock belonging to the customer and allowed by him to stand in the broker's name, is valid, since it is undoubtedly valid as to third parties on the doctrine of estoppel. The question as to how far a stock broker can fill up 1 Benjamin on Sales, chap. ii. notes. 2 Long v. Colburn, 11 Mass. 97. 6 Coke Litt. 40 J; "Worrall v. 8 Bann «. Hughes, 7 Term Kep. Munn,-1 Selden, 229 ; Harrison v. 350. Jackson, 7 Term Eep. 207. 4 See the two preceding cases in 82 THE STOCK BEOKEB. [PAET I. Power of at- a power of attorney in blank will be discussed later. 1 ''""" cy " But the stock broker may sign any unsealed instru- ment though the creation of his agency was by parol, Authority to as for instance, where the Statute of Frauds requires execute un- , . . . sealed instru- the instrument to be in writing to bind the party, the agent may be authorized to sign without any writing, unless the statute expressly says the authority must also be in writing. 2 The question as to how far an in- strument, bad as a deed, may be held valid as a simple instrument, is treated of by Judge Story in his work on Agency, section 49 of the text, and in the notes thereto. When the principal is present when the deed is signed by the stock broker, and cognizant of its import, it would probably be looked upon as if the principal had signed it himself. 3 Appointment By the old rule of the common law, the agent of by artificial J ... persons. a corporation received his appointment through the instrumentality of an instrument under seal, on the ground that no creation of agency by a corporation was binding, which was not evidenced by an instrument under the seal of the corporation. But latterly this rule has been considerably relaxed, and now an agent or stock broker may receive his authority to act on behalf of a corporation, by either direct authority, or indirectly by implication 4 when his acts are ratified by the corporation, and the stock broker's acts are the acts of the corporation, for the breach of which an action will he on the implied promise. 5 « 1 See infra, in chapter, on the Gardner, 5 Cush. (Mass.) 483. completion of the contract. * See Dillon on Municipal Cor- 2 See Story on Agency, \ 50. porations, \\ 459-461 ; Green's * Ball v. Dunsterville, 4 Term Brice's Ultra Vires, p. 356 ; Story Kep. 813 ; Hibblewhite v. McMo- on Agency, i Till! i i Pennsylva- doctnne, and hold that money so advanced may not be ma opposed recovered by the agent, as in the cases of Fareira v. sal doctrine-" Gabell, 2 Smith, Exc. v. Thomas, 3 ;Euchizky v. De gSSS?"' Haven;* and these cases are the more remarkable, Smith u. because in Fareira v. Gabell something very like a Ruchizky u. binding charge was given to the jury to find the con- De Ka ' v ' em tract a gambling one, and in the other two cases the jury found both the contracts bona fide, and the Su- preme Court, only, held them to be gambling, on an apparent misconception of the real facts. In the case of Euchizky v. De Haven et al, it is Principles to be noticed that the court laid down the somewhat In Euchizky singular proposition that, where a stock broker carries v ' De Haven - stock for his principal, the broker is the real principal in the transaction, and the speculation is in the collat- 1 See De Begnis v. Armistead, 10 z 8 Norris (Pa.), 89. Bing. 107 ; Canaan v. Bryce, 3 B. '10 W. N. C. (Pa.) 112. & A. 179. ■ i 10 W. N. C. (Pa.) 109. 116 THE STOCK BROKER. [PART I. eral security or margin, and not in the original trans- action at all; and, therefore, all such transactions being invalid, the agent is engaged in a wagering contract on his own behalf as principal, and cannot recover from his accomplice (ordinarily his real principal) the money advanced him. Commissions. 3. The broker is also entitled to a commission, or such reasoaable compensation as either the rules and customs of the trade, or express agreements with his principal, may have fixed upon, as an equivalent to the principal, for his services, 1 and it may be said that where the Stock Exchange has fixed a certain rate of compensation, that will be considered as prima fade the rate agreed upon. Perhaps where there is no rule on the subject, or no agreement, the court may arrange what is the proper compensation for the broker to receive. 2 But to entitle the broker to his commissions, he must have performed faithfully and fully the whole contract, 3 except where he is prevented from so doing by his principal's fault ; 4 for if he has been guilty of great negligence, or gross misconduct, or unskilful ness in the performance of his duties, he cannot recover his commissions, but will even become liable to his princi- pal for the amount he has lost by his bad conduct. 6 Where a broker has received an order, which is subsequently countermanded by his principal, and which having already executed in part, the non-exe- 1 Eickel v. Meyer, 3 Campb. 412 ; * See De Bernardy v. Harding, Roberts v. Jackson, 2 Stark. 199. 8 Exch. 822 ; Prickett v. Badger, 2 See Bower v. Jones, 8 Bing. 1 J. Scott (N. S.), 296. 65 j Miller v. Livingston, 1 Caine, 6 Hamond v. Holiday, 1 C. & P. Bep. 349. 384; Dodge v. Tileston, 12 Pick. 8 Sea v. Carpenter, 16 Ohio, 412. 328. CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 117 cution of it would be of great damage to him, the rule of law would probably be, that he would have the right to go on and charge his principal for the whole contract, plus his commissions, as in the case, for in- stance, of Taylor v. Stray, 1 we have recently referred to. Taylor v. Perhaps the rule of law on the subject may be thus stated: when the broker has performed part, and is placed in such a position that he will suffer injury if he do not go on, he may recover a commission for the whole, and where he can stop and claim a part com- mission without any detriment to himself, and his principal rescinds his order, his duty is to stop ; or, in other words, where the broker acquires a power coupled with an interest in the transaction, his principal must pay for the whole. 2 The opinion of the court in Durkee v. The Central Durkee v. Vt Ot "Rv Railway Company of Vermont, 3 was to the effect, that Co. a broker is not entitled to a full commission, where he has not performed the full service required of him ; but he is entitled to compensation, by way of a quan- tum meruit, in proportion for his services rendered, where the order is countermanded, unless the party employing him reserved the right to recall his order, or there is some well-known usage of the trade to that effect, which the court will not, however, assume to be so until it is so notorious as to be universally recog- nized. It is perhaps hardly necessary to add, that where the contract is illegal the broker cannot get his commissions, as where, in the case of Josephs v. Pebrer, 4 pebrer. S *' 1 2 C. B., N. S. 197. Peters, 1. 8 See the reasoning in the great s 29 Vermont Eep. 127. case of Hunt v. Kousmanier, 2 * 3 B. & C. 639. Mason, 244; 8 Wheaton, 174 j 1 118 THE STOCK BROKER. [part Field v. Sawyer. "Watts v. Brooks. Lutwyche. the broker was employed to sell the stock of an illegal association. For fraud to his principal, in any transaction, the stock broker forfeits all his commissions. 1 In England, in the case of Field v. Sawyer 2 the court held, that a broker could not recover his. commissions unless he. be a sworn broker, though in "Watts v. Brooks 3 they said that if the broker had actually made disbursements he could recover them, whether he were a sworn broker or not. In Jessop v. Lutwyche 4 the court held, on demurrer, that a plea to the effect that the broker was unlicensed, was bad. Where a broker is an executor, it has been held, that he cannot charge double commissions, both as executor and as broker. 5 Definition of lien by Grose, J . § 4. Stock Brokers' Lien. A lien of personal property has been defined by Grose, J., in Hamonds v. Barclay, 6 to be " a right in "one man to retain that which is in his possession " belonging to another, till certain demands of him, "the person in possession, are satisfied." It is not our intention, here, to go at great length into the his- tory and law of liens. That belongs more appro- priately to the author of a book on agency, and the reader is referred to the work of Story on Agency, for an elaborate discussion on the subject, in chapter xiv. "We shall here give an outline of the law of the hen 1 Brown v. Croft, 6 C. & P. 16, note ; Hill s. Featherstonehough, 7 Bing. 669. 2 5 C. B. 844, note A. 8 3 Vesey, Jr., 612. * 10 Exch. 614 ; see, also, Pid- geon v. Burslem, 3 Exch. 470; Smith v. Lindo, 5 C. B., N. S. 587. 6 Jones v. Powel, 6 Beavan, 488. 6 2 East, 235. CHAP. III.] STOCK BEOKEB, AND HIS PRINCIPAL. 119 of brokers on the goods or securities of their principals. It is to be borne in mind that, as the trade of stock brokers is carried on chiefly by the deposits of margin, or collateral security, by the principal, it is not so necessary to discuss at length the law of liens, since the right of lien is usually settled by express contract, or by implication from the custom of the trade, 1 which latter is usually the case, and that part of a broker's business will be discussed later, under the head of Pledge, Part III. Ordinarily a lien is the mere right of detention of Lien ordi- i t narily. the goods till the price, or advances and disbursements, are paid, and factors and brokers have a lien on goods, when purchased, for the moneys paid and liability in- curred by them in respect to such purchase ; and, unless the usage of trade or the particular agreement or course of dealing between the parties varies this right, they are not bound to part with the possession of the goods, or to deliver them, or to ship them subject to the abso- lute control of the principal, until they are reimbursed or secured for such advances and liabilities. 2 Fre- quently an important question arises how far a stock broker or factor can sell the goods, after notice to his principal, for advances and disbursements ; for it is to be remembered that, though ordinarily the lien, unlike the pledge, cannot be sold by agents, yet factors consti- tute one of the exceptions to the rule, and it is also to be borne in mind that as a stock broker is not a broker in the ordinary sense, but rather a factor, being the consignee of securities, which generally in the United 1 See remarks of Alderson, B., 270. in Scarfe v. Morgan, 4 M. & "W. 2 Story on Agency, \ 374. 120 THE STOCK BROKER. [part Remarks of Story, J., in Brown ». MoGran. Parker v. Branoker. States have been known as merchandise : Merx quic- quid vendi potest, and usually having all the indicia of ownership, and being never able, without an under- standing, to be the agent of both parties, he therefore may be considered to be rather governed by the gen- eral common law regulating factors. 1 With regard to factors, Story, J., in Brown v. Mc- Gran, 2 said, "Wherever a consignment is made to a "factor for sale, the consignor has a right, generally, to " control the sale thereof, according to his own pleasure, " from time to time, if no advances have been made "or liabilities incurred on account thereof; and the " factor is bound to obey his orders. This arises from "the ordinary relation of principal and agent. If, " however, the factor makes advances, or incurs liabili- " ties on account of the consignment, by which he ac- " quires a special -property therein, then the factor-has " a right to sell so much of the consignment as may be " necessary to reimburse such advances or meet such " liabilities ; unless there is some existing agreement, " between himself and the consignor, which controls or " varies this right ; * * * and in no case will a factor " be at liberty to sell the consignment contrary to the " orders of the consignor, although he has made ad- " vances, or incurred liabilities thereon ; if the con- " signor stands ready, and offers to reimburse and " discharge such advances and liabilities." In the case of Parker v. Brancker, 3 the court held the same principle, and said, a factor could sell, for advances 1 A stock broker is not probably a factor, within the meaning of the various factors' acts passed in England, and in the United States, unless mentioned specifically. * 14 Peters, 494. 8 22 Pick. (Mass.) 40. CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 121 made, the goods, at a fair market price, though below that at which the consignor gave instructions to sell. In England the contrary doctrine has been held, 1 Contrary but Gibbs, C. J., made 2 an exception, where goods de- England, posited as collateral security were concerned. "Un- m ade P by n " doubtedly," said he, " as a general proposition, a right GlW)8 ' °" J ' " of lien gives no right to sell the goods. But where " goods are deposited, by way of security, to indemnify " a party against a loan of money, it is more than a " pledge. The lender's rights are more extensive than " such as accrue under an ordinary lien in the way of " trade. These goods were deposited to secure a loan. " * * * I think, therefore, the defendant had a right " to sell." The factor, it has been said, however, can- not retain or sell more than sufficient to meet his ex- penses, when demanded by the principal, though, perhaps, he might retain the whole till his debt was paid. But, be this as it may, the owner can always dispose of the property subject to the lien, and this is a persona] privilege of the party himself, who is en- titled to it, and cannot be set up by any third person, against the principal, either as a defence or as a right of action. 3 No lien can arise, where the right of lien would be Lien must be inconsistent with the contract made by the agent with w^ththTcon- his principal, as where the goods or securities were to principal! the be delivered and payment made on a future day, 4 or held subject to the order of a third party, or given as I Smart v. Saunders, 5 M. G. & s Story on Agency, \ 372. S. 895. * Chase v. Westmore, 5 M. & S. II Pothonier v. Dawson, Holt's 180; Williams v. Littlefield, 12 N. P. 383. "Wend. 362. 122 THE STOCK BROKER. [PART I. security for another debt. 1 A person cannot, of course, acquire a lien on goods, founded on an unlawful con- tract, or upon his own misconduct or fraud. 2 Liens can Usually a lien can only attach to certain and liqui- only attach J J * on iiqui- dated demands, and not to those which are only ascer- dated de- . . „ , „ mand. tamable through the action of a jury. stock broker It not unfrequently happens that a stock broker banker™ 68 performs to a very considerable extent the duties and functions of a banker, and in such cases, his rights to lien will be governed by the laws relating to bankers on this subject. 4 The broker's right over securities deposited with him as collateral, will be considered hereafter, under Pledge, Part III. SECTION IV. DISSOLUTION OF THE STOCK BROKER'S AGENCY. The authority of the broker to act may be termi- nated, by the stock broker, by the principal, or by the mere operation of law. Dissolution 1. The stock broker may dissolve the agency by of agency by .. i i • i ojj the stock renunciation, and this may take place either when he has not executed any of the conditions of the contract, or only a part of them. In consequence of this the principal may receive some injury, and in such a case the broker is liable in damages to him for what he has suffered, provided the agency was undertaken for a valuable consideration. 8 If, however, it was merely 1 Jarvis ». Rogers, 15 Mass. 389 ; * See Story on Agency, . Granger, 5 B. & A. 27. * See Story on Agency, 488. MW.&S. (Pa.) 282. 487- CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 125 was held, that the acts of an agent or attorney, done after the death of his principal, are binding on the par- ties, when he was , ignorant of his death. Rogers, J., Remarks of ... Sogers, J. said, " It is conceded that the death of the principal is " ipso facto a revocation of a letter of attorney. But " does it avoid all the acts of the attorney intermediate " between the death of the principal and notice of it ? " * * * But, if this doctrine applies, why does it not " apply to the case of factors, foreign or domestic, to " commission merchants, to supercargoes, and masters of " ships, and to various other agencies which the neces- " sities of commerce may require ? In the case of a "foreign factor, for example, has it been supposed "that his acts, after this implied revocation of au- thority, are void? Cases of this kind must often " have occurred, and it would astonish the mercantile " world to be informed that the factor was liable on a " contract made in the name of his principal, because " he was dead, a fact of which he was ignorant, and of " which he could not by any possibility be informed, " or that the merchant who was trusting his goods on " the credit of the principal was to be cast on him who "may have been of doubtful solvency, for payment. " Can it be, that a payment, made to an agent from a " foreign country, and from one of our cities to the " Western States, employed for the special payment of " collecting debts, is void, because his principal may " have died the very day before the actual receipt of " the money ? That a payment may be good to-day " or bad to-morrow from the accidental circumstance of " the death of the principal, which he did not know, " and which by no possibility could he know ? It 126 THE STOCK BROKER. [part Dick v. Page. Remarks of Scott, J. Ish v. Crane. Holding of Sutliffe, J. Distinction between acts necessarily done in prin- cipal's name, and in that of agent, made in Ish v. Crane. Drew v. Nunn. . " would be unjust to the agent and unjust to the debtor. " In the civil law, the acts of the agent, done bona fide " in ignorance of the death of his principal, are held " valid and binding upon the heirs of the latter. The "same rule holds in the Scottish law; and I cannot " believe the common law is so unreasonable, notwith- " standing the doubts expressed by Chancellor Kent in " the second volume of his Commentaries, 646." In Missouri, in Dick v. Page, 1 in speaking of the hardships of the rule of the common law, Scott, J., said, "To hold that this transaction is void would " shock the sense of justice of every man, and we can- " not be persuaded that a principle which would pro- "duce such a result should be applied to the facts " which exist in this case." And in Ohio, in Ish v. Crane, 2 Sutliffe, C. J., after a very copious review of the authorities, held, that, though generally the death of the principal was a revocation, ipso facto, of the agency by operation of law, yet a bona fide transaction done by an agent, and not necessarily in the name of the principal, after the death of the principal, but in ignorance of the event, and within the scope of his authority, was valid and binding on the representatives of the principal. It will be seen that in this case a distinction was taken between the case where the act was necessarily done iu the principal's name, and where it was required only to be done in that of the agent alone. In England, in the late case of Drew v. Nunn, 3 how- ever, Brett, L. J., seemed inclined to modify the strict 1 17 Mo. 284. a 8 Ohio, N. S. 521. 3 19 Amer. Law Reg. 98. CHAP. III.] STOCK BROKER AND HIS PRINCIPAL. 127 English rule, though the point was not decided there by him, but "was merely obiter. He said, "Sup- Remarks of "posing * * * a principal holds out a person to be " his agent, and then of his own accord withdraws the "agency. As between the principal and the agent " the right to bind the principal has ceased, and then " the agent does a wrongful act* by acting with a third " person as though the authority continued ; neverthe- " less, if the agent has been held out as having author- " ity to the third person, and the latter acts with the " agent before he has received any notice of the au- "thority having ceased, the principal is still bound, " upon the ground that he made representations upon " which the third person had a right to act, and can- " not retract from the consequences of those represen- tations. * * * Therefore, in my opinion, although " the lunatic recovers his reason, he cannot, after his "recovery, any more than if he had never been a " lunatic, say that an innocent person, who acted on " representations made before lunacy, had not a right " to do so. A difficulty, no doubt, arises in stating a "general principle applicable to such cases as these, " but, for my own part, although it is not necessary to " decide the question to-day, I should think that the " same rule would apply in the case of the principal's " death as of his lunacy ; and that if representations " made by a person during life were acted upon after "his death by an innocent third party, without any "knowledge of the death, the principal's executors " would be bound." It may, in conclusion, be remarked, that in England there are several statutes relating to the revocation of 128 THE STOCK BROKER. [PART I. Old English agency by death, which greatly modify the old Eng- rule modified ' . . „ _„ „ __ TT . by statute lish rule; as, tor instance, the act ot LL . Kelly, 19 Sm. (Pa.) 408 ; but see, contra, Boylan v. Huguet, 8 Nev. 345 ; Kuhn v. McAllister, 1 Utah, 273 ; Payne v. Elliott, Re- porter, May 26, 1880, p. 678. » 1 R. 1. 165. * Humble v. Mitchell, 11 A. & E. 205 ; Pickering v. Appleby, 1 Comyns,353; Duncuft v. Albrecht, 12 Simons, 189. 6 Tisdale v. Harris, 20 Pick. (Mass.) 9; Baldwin v. Williams, 3 Mete. 365. In New York the statute employs the words " things in action" ; Rev. Stat., Edmonds's edition, 140; and in Florida and Mississippi the words " and per- sonal property" are added. See Ins. Co. u. Cole, 4 Fla. 359 ; Rev. Code, c. 60, Art. 1, of Miss. 6 Paterson on the Stock Ex- change, p. 22. ' See Green's Brice's Ultra Vires, p. 145. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 147 tive enactment. The power to issue preference stock has- also been claimed to exist from the power of a corporation to borrow money, and to secure such bor- rowed money by a certain pledge of income, it being contended, that the issuing of preferred stock is in theory, as in practice, a mode of borrowing money, as distinguished from the ordinary hazard attendant upon ordinary shares of stock. 1 /Scrip is merely the evidence of an agreement to Scrip, issue shares or stock, and may be classed within the same category as stock, and is a chose in action. 2 It is often issu'ed by projectors of companies, and entitles the holder to become a co-proprietor of the future company, and his liability will depend principally on the engagements he has entered into with the pro- jectors. And sometimes it is issued, after the company is formed, instead of allotment of shares ; though what such a contract is, is not clearly understood. It must presumably be determined by the terms under which the scrip is issued, read in connection with the con- stating instrument of the corporation. 3 Bonds, whether coupon or registered, are also choses Bonds, in action, and are direct obligations in writing, signed and under seal, to pay certain sums of money, at a certain time and out of a designated or specific fund, and with a penalty attached in case of non- payment. 4 Debentures are written and usually sealed obliga- Debentures. tions to pay a certain sum out of the assets of 1 Green's Brice's Ultra Vires, p. 426. 147, note. * See Green's Brice's Ultra Vires, 2 See opinion of Shaw, P. J., in p. 149. Hutchins«. Bank, 12 Mete. (Mass.) * See Hutchins v. Bank, supra. 148 THE STOCK BROKER. [PART II. property, or out of a specified part of them, and creating a lien or charge on them. 1 SECTION II. — NEGOTIABILITY OF THESE SECURITIES. It is important to see whether, or, if so, how far, any of these securities may be negotiable, or pass from hand to hand freed from the equities of the former holder, for of course the fact of their negotia- bility would greatly enhance their commercial or Notes to Mil- market value. In the notes to Miller v. Race, quoted quoted by ' by Blackburn, J., in Crouch v. Credit Fonder Co., 2 J., in Crouch a safe test with regard to the negotiability of such EouoierCo. instruments is laid down. " It may," said he, " there- fore be laid down as a safe rule, that where an " instrument is by the custom of trade transferable, " like cash, by delivery, and is also capable of being " sued upon by the person holding pro tempore, then " it is entitled to the name of a negotiable instrument, " and the property in it passes to a bona fide transferee " for value, though the transfer may not have taken " place in market overt. But that if either of the " above requisites be wanting, i.e., if it be either not " accustomably transferable, or though it be accus- " tomably transferable, yet if its nature be such as " to render it incapable of being put in suit by the " party holding it pro tempore, it is not a negotiable " instrument, nor will delivery of it pass the property " of it to a vendee, however bona fide, if the transferor " have not a good title to it, and the transfer be made " out of market overt." 1 See ante, note 8, page 147. 2 L. R., 8 Q. B. Cas. 374. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 149 In England, shares of stock, as we shall see, 1 do Negotiabn- b ' ' . „ ity of certifi- not pass from owner to owner by a delivery of the cates of certificate with a power of attorney annexed ; 2 so that stock. the question which we are about to discuss must be confined to the American cases. In Mechanics' Bank v. New York & New Haven Mechanics' , Bank v. New E.. R. Co., 3 it appeared that the company was required York & New . . .' rr „ , . , , • , Haven E. R. by its by-laws to transfer stock on its books, and to Co. require the former certificate of ownership to be sur- rendered prior to the making of such transfer, and the issue of a new certificate. The company established a transfer agency, making its president the agent, with the proper powers. He, however, fraudulently gave to one Kyle a certificate in the usual form for eighty-five shares, when the latter owned no stock, nor had any standing on the company's books in his name, nor had surrendered any certificate. The plaintiffs, relying on these certificates as valid, made a loan to Kyle, taking the certificates, with a power of attorney to transfer, as security. The corporation subsequently refused to transfer, and in an action against them, the court held, that, the certificates not being negotiable, the plaintiffs did not acquire any rights against the company, the certifi- cates being void. Comstock, J., in a learned opinion, said, " It seems to me, therefore, that we are brought Kemarks of " directly to the question, whether certificates of stock ° ' " in the defendant's corporation are to be regarded as " negotiable instruments, in the sense of the commer- " cial law, so that by their endorsement and delivery 1 See following pages. N. S. p. 699. 2 See 12 Amer. Law Register, » 3 Kernan (N. Y.), 599. 150 THE STOCK BROKER. [part II. ' to a purchaser in good faith, a title to the stock they 'profess to represent may be acquired, although in ' the hands of the vendor they are spurious and void, ' and although the company itself has never recog- ' nized the transfer. This question, I think, must be 'answered in the negative. They contain, in the 'first place, no words of negotiability. They de- ' clare, simply, that the person named, is entitled to ' certain shares of stock. They do not, like nego- ' tiable instruments, run to the bearer or to the order ' of the party to whom they are given. They com- ' mence, it is true, with the words, ' be it known,' but 'such words have no tendency to show that they ' possess the quality claimed for them ; a phraseology ' quite similar may be found in bonds and other in- ' struments which no one ever thought to be nego- ' tiable. But, aside from the absence of any language ' of these certificates which can impart to them a ne- ' gotiable character, both the laws of the corporation ' and the certificates themselves contain special re- ' strictions, which seem to me to put this question at ' rest. I do not suppose that a corporation, without 'something extraordinary in its charter, can place ' such restraints upon the sale of its stock, that the ' individual holder may not transfer as good a title ' in equity as he himself possesses by any mode of ' assurance good upon general principles of law. But 'if a natural person has an undoubted right so to ' express the terms of his obligation that it shall not 'be negotiable in the commercial sense, or in any ' sense which can give to the purchaser a title superior ' to that of his vendor, I see no reason to doubt that I CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 151 "corporations possess the same right. Has the de- " fendant so expressed it in these certificates of stock ? " I think it has. It has distinctly declared, both in " its by-laws and on the face of the certificates, that " shares can be transferred only on the books, and on " the surrender of the evidence of the owner's previous " title. If an illustration were wanted of the value " of such a restriction, it is furnished in the present " case. But, whatever its value, the restraint is lawful " in itsel/, and one which the corporation had an un- " doubted right to impose. I do not say that it pre- " vents the owner of stock from selling his shares by " an outside transfer, so that the vendee will acquire " in equity his own rights ; but to say that the holder "of a false and fraudulent certificate, by endorsing "and delivering it to another person, can create a "title hostile to the corporation itself, would be to " deny to the restriction any meaning or effect what- " ever." After an elaborate review of the. cases, the learned judge concluded he was supported by them. In New York & New Haven E. R. Co. v. e. e. Co. ». Schuyler, 1 the by-laws of the corporation were sub- ° uy er ' stantially to the same effect as in the previous case, and an issue of spurious stock was had by persons held out as their agent by the company. One of the principal questions in the case was, whether certain persons, who, holding genuine certifi- cates of stock, which had been, however, held to be worthless because of a subsequent transfer, at the company's agency, to bona fide purchasers of the same shares of stock, by the party to whose credit it 1 34 N. T. 30. 152 THE STOCK BROKER. [PART II. stood on the books, had a title superior to those sub- sequent bona fide purchasers ; and, if so, whether the company are liable to them for allowing the transfers on their books without demanding a surrender of the outstanding certificates. Opinion of With regard to this the court said, " Where the " stock of a corporation is by the terms of its charter " or by-laws transferable only on its books, the pur- " chaser, who receives a certificate with the power of " attorney, gets the entire title, legal and equitable, as " between himself and his seller, with all the rights "the latter possessed; but as between himself and " the corporation, he acquires only an equitable title, " which they are bound to recognize and permit to be " ripened into a legal title, when he presents himself, "before any effective transfer on the books has been " made, to do the acts required by the charter or by- " laws, in order to make a transfer. Until those acts " be done, he is not a stockholder, and has no claim " to act as such ; but possesses as between himself and "the corporation, by virtue of the certificate and "power of attorney, the right to make himself, or "whomsoever he chooses, a stockholder. * * * The " stock not having passed by delivery of the certifi- " cate and power of attorney, the legal title remains " in the seller so far as affects the company and sub- sequent bona fide purchasers, who take by transfer " duly made on the books, and hence a buyer in good "faith, who takes a transfer in conformity to the " charter and by-laws, permitted to be made by the " authorized officer of the corporation, becomes vested " with a complete title to the stock, and gets all the CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 153 " rights and equities of the holder of the certificate of " the stock itself. What other rights and equities he " may possess is another question ; but if the trans- " feree has taken in good faith and for value, the stock " is gone, and beyond his reach, and beyond recall by " the corporation. * * * The non-production and sur- " render of the certificates at the time of the transfer, " is not fatal to the title of the transferee," etc. In McNeil v. Tenth National Bank, 1 the plaintiff, McNeil v. ' r ' National owning certain shares of stock, delivered the certifi- Bank, cates with an assignment in blank, and power of attorney, to certain persons, as security for a loan, who without any authority sold it to a bona fide purchaser for value, and the question was whether he could hold out against the original owner, and it was held the original owner could not dispute the title of the purchaser. Rapallo, J., said, " It must be conceded, Remarks of " that as a general rule applicable to property other apa °' "than negotiable securities, the vendor or pledgeor " can convey no greater right or title than he has. " But this is a truism predicable of a simple transfer " from one party to another where no other element " intervenes. It does not interfere with the well- established principle that where the true owner "holds out another, or allows him to appear as the "owner of, or as having full power of disposition " over, the property, and innocent third parties are "thus led into dealing with such apparent owner, " they will be protected. Their rights do not depend " upon the actual title or authority of the party with " whom they deal directly, but are derived from the 1 1 Sickles (N. Y.), 325. 154 THE STOCK BROKER. [PART II. Shaw v. Spencer. Remarks of Poster, J. Bank v. Lanier. " act of the real owner, which precludes him from " disputing, as against them, the existence of the title "or power, which through negligence or mistaken " confidence he allowed to appear to be vested in the' " party making the conveyance. * * * The true point " of inquiry in this case is, whether the plaintiff did " confer upon his broker such an apparent title * * * " as will thus estop him from asserting his own title "as against parties who took bona fide." 1 In Shaw v. Spencer, 2 it was held, that, where a certificate of stock in a corporation in the name of A. B., as trustee, is by him fraudulently pledged for his own debt, and accepted without inquiry, and the pledgee, after notice, voluntarily pays an assessment on the stock to one of the cestuis que trustent, as treasurer of the corporation, in the presence of the other, the cestuis que trustent are not estopped from recovering the value of the stock ; and Foster, J., in speaking of the habit of brokers to transfer stock with powers of attorney in blank, said, " The fact " that it is usual for dealers in stock to take certificates " with blank transfers upon them and to fill them up " with the names of the purchasers, was wholly im- " material. Such a practice, as we have already " observed, does not make the shares negotiable, and " the purchaser whose name is written into the trans- fer must always derive his title immediately and " solely from the stockholder of record." In the Supreme Court of the United States, in Bank v. Lanier, 3 Davis, J., said, " It is in obedience » See, also, 29 Sickles, 223. > 100 Mass. 382. 3 11 Wallace, 377. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 155 " to this Requirement (i.e., of transferring) that stock Remarks of " certificates of all kinds have been constructed in a "way to invite the confidence of business men, so "that they have become the basis of commercial "transactions in all the large cities of the country, "and are sold in open market the same as other " securities. Although neither in form nor character " negotiable paper, they approximate to it as nearly " as practicable." In Mathews v. National Bank, 1 the bank loaned Mathews ». money to one C. upon the security of a certificate of Bank, really two shares of stock in a railway company, altered, however, by the debtor so as to read two hundred, after C. had procured it from the company to be assigned to the bank as collateral security. Upon the payment of the debt the cashier of the bank signed a blank assignment on the back of the certificate, supposing it to be genuine, and C. sub- sequently conveyed it to the plaintiff as collateral. The court held, that the latter, as a bona fide pur- chaser for value, could compel the company to com- pensate him for damages. 2 In Pennsylvania and New Jersey the same rule is recognized; Thus, in Moodie v. Bank, 3 and in Prall v. Tilt, 4 it Moodie v. was held, though the securities were not negotiable, PraiiV Tilt, yet an innocent purchaser from one who had all the muniments of title in him, should not suffer, though 1 14 Amer. Law Eeg. 153. case in text. 2 See also Simm v. Telegraph 8 3 "W. N. C, Phila., 118. Co., 20 Amer. Law Register, 159 ; * 28 Eq. Eep. (N. J.) 479. see, also, note of Eedfield, J., to 156 THE STOCK BROKER. [PART II. such person had wrongfully parted with tKe certifi- cates of stock. The reader is also referred to the following cases in the note. 1 The principle derived from a perusal of these cases, is that in no case have certificates of stock, with an assignment in blank and power of attorney to trans- fer, been regarded by any of the courts as negotiable instruments, — that is to say, in the same sense as bills or notes ; but that where a man puts these securities into another's hands, and gives him the complete indicia of ownership over them, then such a person will be estopped subsequently from disputing the title, which he has either imprudently or negligently placed in the power of another. It has indeed been thought by a few persons, that Mathews v. the decision in Mathews v. Bank has extended to an Bank. alarming extent the doctrine of the negotiability of these securities ; and Judge Redfield, in a somewhat singular note to that case in the American Law Register, 2 and Mr. Lewis, in. his book on the Law of the Stock Exchange, in which he sympathizes with Judge Redfield, lament the extent to which the doc- trine of negotiability has been carried in Mathews v. Bank, and consider the decision in the case as untenable, Judge Redfield even going so far as to assure the reader, in the opening paragraphs of his 1 Mt. Holly Co. v. Ferree, 2 right, 22 Wend. 348 ; Cushman v. Green (N. J.), 117 ; Crouch -a. Thayer Manf. Co., 76 N. Y. 365; Credit Foncier, etc., L. R., 8 Q. Sewall v. Water-Power Co., 4 B. 374 ; Bridgeport Bank v. R. Allen, 277. R. Co. 30 Conn. 231 ; Leavitt v. » 14 A. L. R., note 162. Fisher, 4 Duer, 1 ; Bank v. Kort- CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 157 note, that it would be "difficult to maintain the ar- " gument in its application to the facts of the case, "without recognizing certificates of stock endorsed " in blank, or with powers to transfer, as negotiable "paper in the fullest sense." We are, however, of the opinion, that Judge Redfield's and Mr. Lewis's apprehensions are not justified, by the- judgment in the case, for the opinion of the court in Mathews v. Bank has not at all extended the negotiability of certificates of stock with blank assignments, beyond that maintained by any of the cases cited in the text. The principle decided by Mathews v. Bank is that a corporation which has accepted and acted upon a forged transfer of its shares, and issued a new cer- tificate, or filled up a blank assignment on a forged certificate, which a bona fide purchaser subsequently buys, is liable to such purchaser, either by way of estoppel, or otherwise, for the value of his shares, as the purchaser acts, not upon the faith of the forged transfer, but on that of their certificate. This prin- ciple is fully settled in America, 1 where the delivery of stock by a power of attorney in blank to trans- fer, with the certificate, is looked favorably upon as well as in England, when the assignment is properly executed. 2 Bonds, known simply as such, as, for example, Bonds, ordinary or registered, are not by the common law or by law merchant negotiable instruments, and deben- Debentures. tures viewed in the " light of choses in action," savs ,, _ . . , . ? -r -, „. 'J Briceon Mr. Brice, m his treatise on ultra Vires, page 163, vitro, vires. 1 See 37 Georgia, 515, and the P. W. 76 ; Simm v. Anglo-Ameri- preceding cases in the text. can Tel. Co., 20 A. L. K. 159, and s Hildyard ■». South Sea Co., 2 note by Mr. Bennett. 158 THE STOCK BROKER. [PART II. Glyn v. Baker. Holding of Le Blanc, J. are non-negotiable, and therefore assignable in chan- cery only, and taken subject to equities. 1 But of late years it has become customary to issue peculiar kinds of bonds, as coupon bonds, and deben- ture bonds payable to bearer, or order; and the ques- tion is, how far these may be negotiable instruments. In England, in the case of Glyn v. Baker, 2 says Blackburn, J., in Crouch v. Credit Foncier Co., 3 " the ' form of the East India bond was that the East ' India Company acknowledged to have received of ' W. G. Sibley 100£, which the Company promised ' to repay to Sibley, his executors, or assigns, by en- ' dorsement. It was, therefore, in form a promissory ' note for value received, payable to order, and, had ' it been signed as such by an agent of the East India ' Company, would have been negotiable. But it was ' a bond under the seal of the East India Company, ' and Le Blanc, J., said, ' It is clear that no action ' could have been brought on this bond but by Sib- ' ley the obligee, or in his name ; or, if he died, in ' the name of his executors.' There was no evidence ' in the case that such bonds were negotiable. " The alarm occasioned by this decision was so great ' that within a month afterwards an act (51 Geo. III. c. 64) was passed to make East India bonds negotiable 'like promissory notes. It seems not to have oc- ' curred to any one that it could have been said that ' this was already done by virtue of the Statute of ' Anne, the promise in writing being signed by the 'East India Company's seal. This seems a strong 1 Green's Brice's Ultra Vires, pp. 123-129. 2 13 East, 509. ■ L. K., 8 Q. B. C. 381. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 159 " authority for saying that instruments under the seal " of a body corporate are not exceptions from the " general rule laid down in Byles on Bills, p. 67, n., " 10th ed., that ' at common law bills of exchange and " promissory notes, being simple contracts, cannot be " under seal, at least so as to retain their negotiable " qualities.' And it certainly is very desirable that it " should not be left doubtful on the face of an instru- " ment whether it is a covenant or a promise." In Attorney-General v. Bouwens, 1 it was found Attomey- i ■ i t t-» • t-w ■ i i Generals. in the special verdict, as to Kussian, Danish, and Bouwens. Dutch bonds, that those securities have always been dealt with as transferable within England by de- livery only, that it was not necessary to do any act out of England to render such a transfer valid, and that the bearers of the bonds have always been treated and dealt with by the agents of the three sovereigns as entitled to the money payable under the bonds, and the court held the bonds transfer- able in England, so as to render the executors of the holder liable to probate duty in respect of them. In Gorgier v. Mieville, 2 where the King of Prus- Gorgie™. sia caused bonds to be issued whereby he declared himself and his successors bound to every person who should for the time being be the holder of the bond, for the payment of the principal and interest in the manner there pointed out, and which were proved to have been sold generally on the market, and passing from hand to hand, like exchequer bills, at a variable price, according to the state of the market, the bonds were held to be negotiable instruments. So in Hesel- 1 4 M. & W. 171. 2 3 B. & C. 45. 160 THE STOCK BEOKEE. [PAET II. tine v. Siggers, 1 Spanish bonds were treated as passing by delivery. LangB. In Lang v. Smyth/ the plaintiff placed in the hands of his agents certain Neapolitan bonds, with coupons, or receipts for half-yearly interest, payable to the bearer of the coupons, the coupons referring to a certificate, which gave the holder the option of con- verting his bonds into the funded debt. The interest on these coupons was paid to the holder of them, without the production of the certificate, though the bonds were never sold without the certificate on the market. The plaintiff having the certificates, his agent pledged the bonds fraudulently to the defend- ant as security for a debt, and the lower court left it to the jury to say whether the bonds without the cer- tificates were negotiable, and, the jury finding they were not, the court on appeal upheld their verdict. Gorgieru. Blackburn, J., 3 observed, in criticising Gorgier v. M!i6villc quoted by Mieville, " We have no intention to throw the least Crouch 11 ™ 111 "doubt on this decision; but we do not think it cier d Coi Fon " " applicable to an English instrument made in Eng- " land ; and we express no opinion as to what might " be the law as to obligations made by subjects abroad, " which, by the law of the country where they were " made, are negotiable in that country." Crouch«. Crouch v. The Credit Foncier of England,* as Credit Fon- , b ' cier Co. reported, is as follows. In May, 1869, the defendants, a limited company, registered under the act of 1862, sold to M. a document under the seal of the company 1 1 Exch. 856. » Crouch ^.'Credit Foncier, L. E., 1 7 Bingham, 284. 8 Ex. Q. B. C. * See preceding note. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 161 and signed by two directors and the secretary. It was numbered and. headed with the name of the company, and called " Debenture," and proceeded, "the company hereby promise, subject to the con- " ditions endorsed in this debenture, to pay to the " bearer £100 on the 1st of May, 1872, or upon any " earlier day upon which this Bond shall be entitled " to be paid off according to the conditions, and in- "terest at 8 per cent., on the 1st of November and "the 1st of May in each year; and also a further "sum of £10 by way of interest or bonus, at the " same time the principal sum is paid off." By the conditions endorsed, a certain number of the bonds were to be drawn for twenty-one days before the days for the payment of the half-yearly interest, and any bond drawn was to be advertised and paid off with the interest and bonus due, the bond being given up, and no further interest being payable. In July, 1869, the bond was stolen from M., and in October, 1871, the number of the bond was drawn. At the end of 1871 the plaintiff purchased the debenture from 8., who had since absconded. The defendants, having notice of the robbery, refused to pay the debenture to the plaintiff, and he brought an action, alleging that he was the lawful bearer of the debenture. It was admitted on the trial that similar documents had been treated as negotiable, and also that the plaintiff had taken his title from the thief, and the jury found that the plaintiff had given value for the debenture without notice. The court held, Blackburn, J., de- livering the opinion, that the contract contained in the conditions prevented the debenture from being a 11 162 THE STOCK BROKER. [part II. Goodwin v. Robarts. Remarks of Cockburn, C.J. promissory note, even if it had been under hand only, and that it was not competent for the defend- ants to attach the incident of negotiability to such instrument, contrary to the general law, and that though the custom was to treat them as negotiable, it was of recent origin and not the law merchant, and that made no difference, since such a custom, even though general, could not attach an incident to a con- tract contrary to the general law. From this last case Mr. Brice, in his work on " Ultra .Vires," edited by Mr. Green, on page 164, though he admits the cases are conflicting, concludes that it is substantially settled that debentures are not negotiable at law in England. In criticising this case, however, in Goodwin v. Robarts, 1 Sir Alexander Cockburn, C. J., said that the reporter assumed from the notes of the judge, that evidence of the fact that similar instruments had been considered negotiable by usage had been offered on the trial, whereas that was not so, nor was any express admission to that effect made; "but it was "said that these instruments being only of recent " introduction, it followed that such custom, to what- " ever extent it had gone, must have been recent too. " Urider these circumstances the court held, that while "it was incompetent to the defendants, as an in- " dividual company, to give that, which was not a " negotiable instrument at law, the character of ne- gotiability by making it payable to bearer, the "custom could not have that effect, because, being " recent, it formed no part of the ancient law mer- 1 See infra, page 169. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 163 " chant. * * * We cannot, however, concur in think- " ing the latter ground conclusive. While we quite "agree that the greater or less time during which "a custom has existed may be material in deter- " mining how far it has generally prevailed, we cannot " think that, if a usage is once shown to be universal, " it is the less entitled to prevail because it may not "have formed part of the law merchant as pre- viously known and adopted by the courts. * * * " The judgment in Crouch v. The Credit Foncier Crouch «. " may well be supported on the ground that in that cier. " case there was substantially no proof whatever of " general usage. We cannot concur in thinking that " if proof of general usage had been established, it " would have been a sufficient ground for refusing to " give effect to it, that it did not form part of what " is called the ' ancient law merchant.' " It may be remarked that the American courts, as Opinion of for instance the opinion of Grier, J., in Mercer Co. v. Mercer Co. v. Hacket, infra, 1 shows, place their decisions on this subject chiefly on the ground of usage and the " law merchant." In conclusion, we cannot therefore absolutely say that in England the courts have resolved these secu- rities to be at law non-negotiable as yet. " The weight of authority must, however," as Mr. These secu- Brice observes, " now be considered to be in favor of abiTatefuity " the proposition that such instruments are in equity, ln ng an ' " at least, negotiable free from the equities primarily " attaching to them," and the reader is referred to his work for the authorities on that point. 2 1 Page 165. 2 Green's Brice's Ultra Vires, 164 THE STOCK BKOKEK. [PART II. In America the subject may be considered by a number of decisions as settled, and tbe following rule Negotiable at adopted, viz. i 1 that any obligations properly issued, lawinAmer- . . . . . . , ica. either by any public or private corporation, and made payable to " bearer" or " order," or otherwise having the properties of negotiability, and passing by deliv- ery, are negotiable, even though under seal. And this conclusion seems to have been reached by the courts, chiefly, because they considered that the neces- sities of mercantile and commercial methods of deal- ing demanded that such instruments should be treated as negotiable. Diamonds l n Diamond v. Lawrence County, 2 however, the Lawrence J Co. Supreme Court of Pennsylvania held that such coupon bonds had not the quality of commercial paper in that State, but the purchaser took them subject to equities, and the coupons subject to the same equities. It may be remarked that the court added, they dif- fered from all the decisions, on this subject, but were re- solved to stand alone on this .point ; and the reasoning of the learned judge, Woodward, J., who delivered the opinion of the court, is not very convincing or clear. 3 Mercer Co. v. I n Mercer County v. Hacket, 4 on an appeal from the decision of the Supreme Court of Pennsylvania, the Supreme Court of the United States refused Diamond v. to follow the decision in Diamond v. Lawrence Co., Lawrence _• . Co. not foi- but held such coupon bonds, payable to bearer, ne- gotiable, and that the corporate seal upon them made no difference. Grier, J., said, "We have decided 1 Indiana v. Sprague, 18 Cent. to Miller v. Race, 1 Smith's Lead- Law Jour. 127. ing Cases, 7th Amer. ed., 808. ' 37 Pa. 353. * 1 Wallace, 83. 8 See this case referred to in notes CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 165 "in the case of Commissioners of Knox County v. Commission- " Aspinwall, 1 that where the bonds on their face im- wall quoted. " port a compliance with the law under which they Grier, r j! ° f "were issued, the purchaser is not bound to look "further. The decision of the Board of Commis- " sioners may not be conclusive in a direct proceeding "to inquire into the facts before the rights and in- " terests of other parties had attached ; but after the " authority has been executed, the stock subscribed, " and the bonds issued and in the hands of innocent " holders, it would be too late, even in a direct pro- " ceeding, to call it in question. * * * This species of " bonds (coupon bonds payable to bearer) is a modern " invention, intended to pass by manual delivery, and " to have the qualities of negotiable paper ; and their " value depends mainly upon this character. Being " issued by States and corporations, they are necessa- " rily under seal. But there is nothing immoral, or " contrary to good policy, in making them negotiable, "if the necessities of commerce require that they " should be so. A mere technical dogma of the courts " or the common law cannot prevent the commercial " world from inventing or using any species of secu- " rity not known in the last century. Usages of trade " and commerce are acknowledged by courts as part " of the common law, although they may have been " unknown to Bracton or Blackstone, and this mal- leability to suit the necessities and usages of the " mercantile and commercial world is one of the most " valuable characteristics of the common law. When " a corporation covenants to pay to bearer, and gives 1 21 Howard, 545. 166 THE STOCK BROKER. [part II. Diamond v. Lawrence Co. opposed to all the authorities. a bond with, negotiable qualities, and by this means obtains funds for the accomplishment of the useful enterprises of the day, it cannot be allowed to evade the payment, by parading some obsolete judicial decision, that a bond, for some technical reason, cannot be made payable to bearer. That these securities are treated as negotiable by the commer- cial usages of the whole civilized world, and have received the sanctions of judicial recognition, not only in this court, 1 but of nearly every State in the Union, is well known and admitted. "But we have been referred to the case of Diamond v. Lawrence County for a single decision to the con- trary. The learned judge who delivered the opinion of the court in that case says, 'We will not treat these bonds as negotiable securities. On this ground we stand. All the courts, American and English, are against us. We know the history of these mu- nicipal and county bonds; how grand jurors and county commissioners and city officers were moulded to the purpose of speculators ; how reckless railroad officers abused the overwrought confidence of the public, and what burdens of debt and taxation have resulted to the people. A moneyed security was thrown upon the market by the paroxysm of the public mind.' " If this decision of that learned court was founded on the construction of the constitution or statute law of the State, or the peculiar law of Pennsylva- nia as to titles to land, we would have felt bound to follow it. But we have often decided that on ques- 1 White v. Ry. Co., 21 Howard, 575. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 167 "tions of mercantile or commercial law, or usages " which are not peculiar to any place, we do not feel "bound to yield our own judgment, especially if it " be fortified by the decisions of ' all other English "and American courts.' These securities are not " peculiar to Pennsylvania. * * * Although we doubt " not the facts stated as tp the atrocious frauds which "have been practised, in some counties, in issuing " and obtaining these bonds, we cannot agree to over- " rule our own decisions and change the law to suit " hard cases. The epidemic insanity of the people, " the folly of railroad ' speculations,' are pleas which " might have just weight in an application to restrain " the issue or negotiation of these bonds, but cannot " prevail to authorize their ' repudiation, after they " have been negotiated, and have come into the pos- session of bc&iafide holders." In Gelpcke v. City of Dubuque, 1 the Supreme Geipckeu. Court of the United States again held, that munici- pal bonds, with coupons payable to "bearer," have, by universal usage and consent, all the qualities of com- mercial paper, and will entitle the party recovering on the coupons, to the amount on them, with interest and exchange at the place where by their terms they are made payable. And, finally, in Commissioners v. Clark, 2 the prin- Commission- . i P .1 a . ™ i ers v. Clark. ciples oi the foregoing cases were again affirmed. These decisions, then, seem to establish without doubt the negotiability in the Federal courts of these kinds of bonds, to the same extent as promissory notes and bills of exchange; and the reader is re- 1 1 Wallace, 175. 2 94 U. S. Eep. 278. 168 THE STOCK BEOKEE. [PAET II. ferred to the cases in the note, which are to the same effect. 1 Coupons. The following propositions with regard to coupons have been laid down by Mr. Ashbel Green in his note to Brice's Ultra Vires, page 179, viz. : 1. That coupons may be dissevered from the bonds and be sued upon as separate instruments by the holder, although he be not the holder of the bonds. 2 2. That coupons thus dissevered have the like qualities of commercial paper as the bonds to which they are attached. See the cases to note 2. Scri P- Certificates of scrip in England and America are issued by public and private associations, which are publicly sold in the open market, and, usually, pass by mere delivery 3 from hand to hand, and do not re- quire any formal transfer or stamp. 4 Sometimes these 1 Myers v. York & Cumberland Wend. 256 ; Smith v. Clarke, 54 E. B. Co., 43 Me. 232; White v. Mo. 58; Clarke v. Janesville, 10 V. & M. E. E. Co., 21 Howard, Wise. 136 ; Clapp v. Cedar County, 575; Moranu. Miami Co., 2 Black. 5 CI. (Iowa) 15; Maddox v. Gra- 722 ; Meyer v. Muscatine, 1 Wal- ham, 2 Mete. (Ky.) 56 ; Devoss v. lace, 384 ; Thompson v. Lee Co., Eichmond, 18 Gratt. (Va.) 338. 3 Wall. 327 ; Aurora City v. West, » Bank v. E. E. Co., 8 E. I. 375 ; 7 Wall. 82 ; Clark v. Lee Co., 20 Spooner v. Holmes, 102 Mass. 503 ; Wall. 583; Durant v. Iowa Co., Murray v. Lardner, 2 Wall. 110; 1 Woolw. 72 ; King v. Wilson, 1 Thompson v. Lee, 3 Wall. 327 ; • Dillon, C. C. E. 555 ; Miller v. E. City v. Lamson, 9 Wall. 477 ; San & W. E. E. Co., 40 Vt. 399; Bank Antonio v. Lane, 32 Texas, 405; v. E. E. Co., 8 E. I. 375 ; Haven v. Johnson v. County, 24 111. 75 ; but Grand June. E. E. Co., 109 Mass. see Meyers v. E. E. Co., 43 Me. 88 ; Society for Savings v. City of 232 ; Arents v. Com., 18 Gratt. 750. New London, 29 Conn. 174; State * See the cases referred to in the v. Delafield, 8 Paige, 527 ; Brainerd preceding note, and in the note to ■v. N. Y. & H. E. E. Co., 25 N. Y. Green's Brice's Ultra Vires, p. 177. 496 ; Morris Canal Co. v. Lewis, 1 * See Ey. Co. •». Freeman, 2 Man. Beasley, 323 ; Winfield v. Hudson, & Gran. 606 ; Heseltine v. Siggers, 4 Dutch. 255 ; Craig v. Vicksburg, 1 Exch. 856 ; Volans «. Fletcher, 31 Miss. 217; Porters. McCollum, 1 Exch. 20; Moore v. Garwood, 4 15 Ga. 528; Clark v Mfg. Co., 15 Exch. 681. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 169 certificates are agreements to give, under certain cir- cumstances, stock, or bonds, and sometimes mere shares of stock. Possibly certificates of scrip for shares of stock are not negotiable at present; but Certificates where the agreement by the association on the certifi- bonds usually cate is to give bonds to the holders, and the certificates neg0 la pass by delivery by a general custom of the market, there is ho doubt that they would be negotiable in- struments, certainly in the United States, in analogy to the cases above cited, relative to debentures. In England, in the case of Goodwin v. Robarts, 1 Sir Goodwin ». Alexander Cockburn, C J., in a very able opinion, held, that scrip, issued by the Russian government, by the" agent in England, by the terms of which the holder was to be entitled, on payment in full of the instalments due from him, to delivery by the agent of definitive bonds of that government, on their arrival in England, and which, by the usage of bank- ers and brokers, was transferred by mere delivery, passed a good title to a bona fide 'holder for value without title, and was negotiable. It may be added that in this case all the instalments were actually paid up to give a good title before the present holder got the scrip. It was contended in a very able argu- ment by Mr. Benjamin, Q. C, that a promise to pay money was distinguishable from a promise, like this, to give a bond only, and therefore the case was not governed by Gorgier v. Mieville, 2 which was merely a Robarts not promise to pay money ; but the House of Lords held able* from " the distinction, though ingenious, not to be sound. Mieville? 1 L. E., 10 Exeh. Cas. 337 ; L. ! Supra, p. 159. E., 1 A. C. 476. 170 THE STOCK BROKER. [part II. Remarks of Lord Hath- erly affirm- ing Goodwin v. Robarts. Crouch v. Credit Fon- der Co. Distinction of Black- turn, J. Lord Hatherly said, in affirmance of the judgment of Cockburn, C. J., in the Exchequer Chamber, the only difference from Gorgier v. Mieville, is that " in that case the court had to deal with the bonds them- ' selves on which the Prussian government was bound ' to make payment ; in this case we have to deal with 'an instrument which entitles its holder to receive ' those bonds, all the payments having been made at ' the time when it was handed over. Can there be 'any rational distinction between these two docu- ' ments ? or, as Mr. Baron Bramwell put the question, ' if a broker was alike to go into the market with a ' portion of this scrip in one hand and a bond in the ' other, and sold both, could you hold that there was 'a substantial or rational distinction to be drawn 'between the right of a person who so acquired, 'according to the practice of the Stock Exchange, ' the one document, and the right of a person who ' in the same way acquired the other ?" It has been stated that the instalments were fully paid up ; but had that not been so, the case might also have been decided in the same way, and Lord Selborne remarked that even in that event he would have had no doubt of the matter. It will be remembered that all the English cases we have cited, in which the question of negotiability at law of bonds or scrip was involved, have been cases of foreign bonds or scrip, except that of Crouch v. Credit Foncier, 1 where it will be remembered that Blackburn, J., took a distinction between " English " instruments made by an English company in Eng- 1 See p. 160, supra. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 171 " land," and " a public debt created by a foreign or " colonial government, the title to portions of which "is by them made to depend on the possession of " bonds expressed to be transferable to the bearer or " holder, on which there cannot properly be said to be "any right of action at all, though the holder has "a claim on a foreign government." But of these cases, coming within the latter category, the judges, both in the Exchequer Chamber and on appeal, have said, in Goodwin v. Robarts, that it made no differ- Goodwin v. Robarts. ence whether the contract be considered a foreign or English contract, since if it exists at all it must " not " depend on what might be its negotiability by the " foreign law, but on how far the universal usage of " the monetary world has given it that character here." " The question," says Tindal, C. J.,. in Lang v. Smyth, Remarks of " is not so much what is the usage in the country in Lang v. t •, , • ' . ■, Smyth, whence the instrument comes, as in the country quoted in "where it passed." 1 Bobarts. Where the certificates of scrip are for shares in- stead of bonds, as, for instance, railroad scrip, we believe there are no decisions directly on the question of their negotiability, and it is perhaps doubtful if such certificates could be held to be negotiable; scrip for bonds is a mere agreement to give a security for money to bearer, and cannot logically, as we have seen, be distinguished from the security itself; but certificates of scrip for shares are but agreements to give a thing, not specific or certain in value, not in itself negotiable ; and it might be asked, how then can the agreement to give it be negotiable ? 1 Goodwin v. Robarts, p. 169, supra. 172 THE STOCK BKOKEK. [PART II. With regard to shares, it has been held that every holder of a share, where the name was left in blank, though he omitted to register as a shareholder, be- came, by the mere act of purchasing the shares and holding the scrip certificates, liable for calls, and bound to indemnify the former holder. 1 The mere fact, too, of passing by delivery cannot serve to make them negotiable, like bills of lading, and they are only quasi negotiable. Still, if it could be proved that there was a universal usage to consider them as negotiable, it would be, in our opinion, difficult to say why they should not be so considered, according ^rcerCo.v. to the principles of Mercer Co. v. Hacket, and Good- Goodwin v. win v. Robarts. And again, there is another strong argument in favor of the negotiability of certificates of scrip "to bearer," which is that the first purchaser, taking them to bearer, would be estopped from saying they were not so, as he bought and sold, knowing they passed " to bearer," and could consequently not invoke equities against a subsequent holder. In concluding this subject, we must observe that we cannot agree with those lawyers who, like the judges of the Supreme Court of Pennsylvania, and Eedfield, C. J., 2 of Rhode Island, would restrain the negotiability of these instruments in the face of the necessities of trade, and think that the enlarging the negotiability of commercial instruments would be greatly to the detriment of either the security or hon- esty of the community, and we will end by quoting 1 See Walker v. Bartlett, 18 0. B. a See his curious note to Matthews 845 ; De Pass's case, 4 Do G. & J. v. Massachusetts Bank, in 14 Amer. 544. Law Begister, p. 153. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 173 the remarks of Cockburn, C. J., in Goodwin v. Kob- Remarks, of 7 < Cockburn, arts, on this subject. "The universality of a usage c. J., in i Goodwin v. "adopted between buyers and sellers is conclusive Eobarts. " proof of its being in accordance with public conve- " nience ; and there can be no doubt that by holding "this species of security to be incapable of being " transferred by delivery, and as requiring some more " cumbrous method of assignment, we should mate- " rially hamper the transactions of the money market "with respect to it, and cause great public ineon- " venience. No doubt there is an evil arising from " the facility of transfer by delivery, namely, that it " occasionally gives rise to the theft or misappropri- " ation of -the security to the loss of the true owner. " But this is an evil common to the whole body of " negotiable securities. It is one which may be in a " great degree prevented by prudence and care. It " is one which is counterbalanced by the general con- venience arising from facility to transfer, or the "usage. would never have become general to make "scrip available to bearer, and to treat it as trans- " ferable by delivery. It is obvious that no injustice "is done to one who has been fraudulently dispos- sessed of scrip through his own misplaced confi- " dence, in holding that the property in it has passed "to a bona fide holder for value, seeing that he him- " self must have known that it purported, on the face "of it, to be available to bearer, and must be pre- " sumed to have been aware of the usage prevalent " with respect to it in the market in which he pur- " chased it. Lastly, it is to be observed that the " tendency of the courts, except only in the time of 174 THE STOCK BROKER. [PART II. "Lord Holt, tas been to give effect to mercantile "usage in respect to securities for money, and that " where legal difficulties have arisen, the legislature " has been prompt to give the necessary remedy, as "in the case of promissory notes and of the -East " India bonds." Coupons. SECTION" III. — INCIDENTS ATTACHED TO THE THING SOLD. With regard to bonds or debentures, being simple obligations to pay money, there is little peculiar, and nothing need be said. With respect to coupons, we may say that, when detached from the bonds, they are still liens, and that, whether the holders are entitled to payment in the order the coupons fall due, or to a pro rata distribution, 1 and also that they bear interest from the date of demand of payment and refusal. 2 Coupons and bonds, may be transferred either to bearer, when negotiable, as we have seen, or, when not, subject to the equities of the former holders. One of the most important incidents attached to shares of stock in a trading or mining company is Transferable their transferability, or the right of the owner to ity of shares . . of stock. transfer tnem to some one else freely at the market value. 3 For one of the peculiarities of these securi- ties is that the owner may transfer to whoever he likes, as no election to membership is necessary. Interest. Transfer of bonds. ' Miller v. K. & W. R. R. Co., 40 Vt. 399 ; Sewall v. Brainerd, 38Vt.,364. 2 Clarke v. Iowa City, 20 "Wall. 583 ; Gelpcke v. Dubuque, 1 "Wall. 175; Burroughs v. Richmond, 65 N". C. 234; N. P. R. R. Co. v. Adams, 54 Pa. 94 ; Mills v. Jeffer- son, 20 Wise. 50. 8 Brightwell v. Mallory, 10 Ver- ger, 196 ; State v. Bank, 10 Ohio, 91. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 175 Thus, in Overseers of the Poor v. Sears, 1 Shaw, Remarks of ' Shaw, C. J. C. J., said, "In all bridge, railroad, and turnpike " companies, in all banks, insurance companies, manu- facturing companies, and generally in corporations " having a capital stock and looking to profits, mem- " bership is constituted by a transfer of shares, accord- " ing to the by-laws, without any election on the part " of the corporation itself." ,The method of transfer will be treated of infra, in Chapter VIII., in the chapter on the Completion of the Contract. The owner of a share has also the privilege of Voting. voting at the elections of officers held by the cor- poration, and this also passes to his transferee, not being a personal privilege. Since, as no election to membership in public or trading corporations is necessary, the transferee of stock must of course be entitled to all the privileges of the transferor. 2 The owner or his transferee of the shares, it also Calls. may be said, is liable to assessments or calls, when it is proper for the company to make them. We shall not go into this subject or that of subscriptions here, as ^that does not, except indirectly, affect stock brokers, whose duty is prima facie only to sell, and who may never own a share of stock ; but it concerns rather their customers, and for this subject the reader is referred to Green's Brice's Ultra Vires, or Angell & Ames on Corporations. The owner or his transferee has also a right to Dividends. 1 22 Pick. (Mass..) 122. Ins. Co., 8 Pick. 90; Downing v. 1 See Gilbert v. Iron Co., 11 Potts, 3 N. J. 66. Wend. 627 ; Sargeant v. Franklin 176 THE STOCK BROKER. [PART II. Declaration of dividends, Pledge. Lien of cor- porations on shares. Bates v. Ins. Co. dividends on his shares, which are the general di- vision, among the shareholders, of the profits of the company in proportionate shares, and which can only be so declared. 1 The declaration of dividends is dis- cretionary with the directors, and while they act in good faith the courts will rarely interfere. 2 In analogy to the sale of stock, the owner or his transferee may also pledge it, and the transfer of the legal title is not inconsistent with a pledge of it. 3 The subject of Pledge will be considered hereafter under that head. 4 A word may be said with regard to the liens that may be held on these securities. A joint stock cor- poration has no implied lien upon the shares of stock of a shareholder, which may have been transferred by him as security for any demand against him, and consequently, though they may have a demand against one, they are compelled, notwithstanding such indebtedness, to enter on their books such a transfer of the stock, or become liable to an assignee for a refusal to do so ; unless, indeed, there may be a provision in the charter respecting such a transfer or indebtedness. Thus, in Bates v. Ins. Co., 5 the company refused to transfer unless the' assignee would pay the debts of the assignor, and the court held, that the assignee could recover the money, since the corporation were not authorized to make such a demand. 1 Jones v. R. R. Co., 29 Barb. 353 ; Ryder v. Alton & Say. R. R. Co., 13 111. 516. a State v. Bank, 6 La. 745 ; Lu- ling v. Ins. Co., 45 Barb. 510. 3 See Wilson v. Little, 2 Comst. (N. Y.) 443. 1 See Part III. 6 8 John. Cas. 238. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 177 But where there is a provision in the charter that the corporation may make such a lien, the above rule would not hold. Thus, in Rogers v. Huntingdon Bank, 1 it was en- Rogers v. ° ° Huntingdon acted that " no stockholder indebted to the bank, shall Bank. " be authorized to make a transfer, or receive a divi- " dend, till such debt shall have been discharged," or security to the satisfaction of the directors given therefor. A shareholder, indebted to the bank on a discounted note and an instalment on the stock, gave one power of attorney to receive dividends in his own name, and another to transfer the stock to the plaintiff, who had placed in the hands of an at- torney a sum to pay the instalment. The instal- ment was paid. The court held, that the plaintiff was not entitled to a transfer of the stock, nor to a return of the instalment. Tilghman, C. J., said, . "The words" of the act "embrace all debts, and Remarks of "there is good reason for extending them to all. c!j. man ' "When the directors discount a note of a stock- holder, they know that his stock is liable, and, " therefore, may be less attentive to the sufficiency of " the endorsers. The endorsers, too, have an interest " in the lien of the bank, and it may be presumed " that many persons have been induced to endorse, on " the strength of this lien." 2 There must, however, appear an express and clear provision of their rights to this lien. Thus, in Bullard v. Bank, 3 and in Bank v. Lanier, 4 liSt**" i 12 S. & E. (Pa.) 73. s 18 Wall. 589. 2 See, also, Union Bank v. Laird, ' 11 Wall. 369; but see Lock- 2 Wheat. (U. S.) 390. wood v. Mer. Nat. Bank, J. R. 308. 12 178 THE STOCK BROKER. [PART II. Bank v. Lanier. Vansands v. Bank. it was held, that a national bank, though having a power to regulate the transfer of its stock, could not create a lien by a by-law on the stock. But in Vansands v. Bank, 1 where a certificate declared the holder entitled to a certain number of shares " transferable at said bank only by him or his " attorney on the surrender of this certificate, subject, " nevertheless, to his indebtedness and liability at the " bank, according to the charter and by-laws of said " bank," the court held, that the last clause referred only to the mode of transfer, and did not mean that the lien must be one provided for by the charter and by-laws ; but that the bank had a lien on the stock, though none was expressly given by any by-law, and the charter provided that the stockholders might establish by-laws and regulations for the well order- ing of the concerns of the bank, and made the stock transferable according to the rules so prescribed. 2 To discuss the interpretations that the courts have placed on the various charters, or by-laws, with re- gard to their right of lien, would not be appropriate here, and would be a mere recital of a voluminous list of cases, and the reader is referred to some work on stock and stockholders for that, as well as to the following cases. 3 1 26 Conn. 144. ! See Vicksburg R. R. Co. v. McKeen, 14 La. An. 724; Conant v. Bank, 1 Ohio St. 298 ; Helm „. Swiggett, 12 Ind. 194. 'Hall v. Ins. Co., 5 Gill, 484; Beese v. Bank, 14 Md. 271 ; Grant v. Bank, 15 S. & E. 140; Ins. Co. v. Goodfellow, 9 Mo. 149; Leg- gett v. Bank, 26 Barb. 326 ; Pres- byterian Congregation v. Bank, 5 Barr, 345; Evans v. Hudson Bay Co., 7 Vin. Abr. 125, pi. 2; 1 Strange, 645; Plymouth Bk. v. Bank, 10 Pick. 454; Bank v. Smalley, 2 Cowen, 770 ; Bank v. Kortright, 22 Wend. 348; Ex parte Mathew, 5 De G. M. & G. 837 ; Orr v. Bigelow, 20 Barb. 21 ; Sar- geant v. Essex & C. Co., 9 Pick. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 179 It would seem that though a corporation may have Lien of cor- ° x porations on no lien on the shares of stock of a shareholder, un- dividends, less specially permitted by proper authority, yet it may have one on dividends, if they have notice of a transfer, when the dividends are already declared. But in Eogers v. Huntingdon Bank, cited above, 1 the Rogers ». company were held obliged to make the transfer when the last instalment was paid, and the assignee to be entitled to the dividends thereafter made. With regard to creditors' and shareholders' lien, Lien of cred- lt01*S OI COF~ Mr. Green remarks in his note to Brice's Ultra Vires, poration. page 139, " Dividends improperly declared and paid Mr. Green in " may be recovered back. The assets of a corporation Brice's Ultra " are a trust fund for the payment of its debts, and Vtre8 ' "its creditors have a lien thereon and the right to " priority of payment over its stockholders. Where "property of a corporation has been divided among " stockholders, before its debts have been paid, a judg- "ment creditor, after return of execution unsatisfied, " may maintain an action in the nature of a creditor's "bill against a stockholder to reach what was so re- " ceived by him. It is immaterial whether he got it "by fair agreement or by a wrongful act." 2 A shareholder in a corporation has no legal title to the property or profits of the corporation until a division is made or a dividend actually declared. 3 But 202 ; Sabin v. Bank, 21 Vt. 353 ; Sawyer v. Hoag,- 17 "Wall. 610. Shipman v. ^Etna Ins. Co., 29 s Goodwin v. Hardy, 57 Me. 143 Conn. 245. Minot v. Paine, 99 Mass. 101 1 See page 177.. Phelps s. Bank, 26 Conn. 269 2 Bartlett «.Drew, 57 N. T. 587 ; Karnes v. R. E. Co., 4 Abb. Pr., see, also, Osgood v. Laytin, 3 Keys, N. S. 107 ; Hyatt o. Allen, 56 521 ; Gratz v. Redd, 4 B. Mon. 178 ; ST. T. 553; Brundage v. lb., 1 Curran u. State, 15 How. 304 ; N. Y. Supr. Ct. (T. & C.) 82 ; 180 THE STOCK BROKER. [PART II. a dividend declared of the earnings of the company becomes thereupon the individual property of the stockholder, to be received by him on demand. It is a severance from the common fund of the company of so much for the use and benefit of each corporator in his individual right, which may be demanded by him, and if refused become the subject of an action for money had and received to his use. A dividend de- clared, becoming the individual right of the stock- holder, is thereafter held as a trust fund that cannot be devoted to other objects; and, accordingly, the action of assumpsit lies to recover the dividends as a debt due from the corporation to the individual stock- holder, after demand of payment. 1 The dividends must be general, so that each stockholder will receive his proportionate share, and the directors have no authority to declare a dividend on any other principle. 2 The declaration of dividends is discretionary with the directors of the corporation, and so long as they act in good faith the courts will not interfere, even though they may deem their judgment erroneous. 3 Curry o. Woodward, 44 Ala. Le Roy v. Globe Ins. Co., 2 Ed w. 305. Ch. 657, the Vice-Chancellor was 1 Granger v. Bassett, 98 Mass. of opinion that a bill in equity 462;Stoddardi>.Shetucket,34Conn. would lie to recover possession of 542 j Kane v. Bloodgood, 7 John. Ch. the money as a trust fund. 90; Carpenter v, R. R. Co., 5 Abb. 2 Jones v. R. R. Co., 29 Barb. Pr. 277; Jones v. R. R. Co., 29 353; Luling D.Atlantic Ins. Co., Barb. 353 ; Howell v. R. B. Co., 51 45 Barb. 510 ; A. & T. Co. v. Corn- Barb. 578 ; King v. Paterson, 5 monwealth, 3 Brews. 366 ; State v. Dutch. 82 ; Jackson v. Plank Boad R. R. Co., 6 Gill, 363 ; Ryder v. Co., 2 Vroom, 277 ; Brown v. Coal R. R. Co., 13 111. 516. & Nav. Co., 9 Pa. 207 ; E. E. Co. » State v. Bank, 6 La. 745 ; Ely v. v. Cowell, 28 Pa. 329 ; Bank o. Sprague, Clarke, Ch. 351 ; Karnes Brays,4H.&J. 358; State d.E.E. v. R. E. Co., 4 Abb. Pr., N. S. Co., 6 Gill, 363; City of Ohio v. 107; Luling v. Ins. Co., 45 Barb. E. E. Co., 6 Ohio St. 489; and in 510. CHAP. I.] THE THING SOLD AT STOCK EXCHANGE. 181 In England stock may now be charged with judg- stock subject ment debts 1 and taken in execution, 2 and its transfer by statute. may be stopped by a stop order 3 and restraining order, 4 and a distringas. 5 And in America various statutes have been passed with reference to the modes by which stock may be reached by judgment and other creditors. 1 l & 2 Vict. 110, \\ 14, 15. 3 Daniell'sChanceryPrac.,c.37. See Nicholls v. Rosewarne, 6 C. B., * 6 Vict. c. 5, s. 4. N. S. 480. 5 5 Vict. c. 5, 525 ; In re Mar- 2 1 & 2 Vict. 110, % 12. quis of Hertford, 1 Hare, 584. CHAPTER II. THE CONTRACT OF SALE. Parties to the contract PAGE 182 SECTION I. — THE NECESSARY OWN- ERSHIP BT THE PARTIES IN THE THING SOLD. Stock brokers may make a valid sale 183 Contract of sale not for a spe- cific article 183 Contracts for future delivery . 185 PAGE Contracts are for a thing in esse. 188 SECTION II. — THE MUTUAL ASSENT OP THE PARTIES TO THE CONTRACT. Illustrations of this principle . 190 Contracts by post-office . . . 190 Contracts by telegraph . . . 191 Mutual assent with reference to thing contracted for . . 191 SECTION III. — THE PRICE. Parties to the contract. In all the sales at tlie Stock Exchange, the parties to the contract of sale are either principals represented by stock brokers, or are such brokers, themselves act- ing in the capacity of principals; and as, under the head of principal and stock broker, we have examined the necessary qualifications that each of such parties must possess to make a valid contract, it will not be needful here to consider the legal status of the parties to the contract. In this chapter, then, we shall con- sider, first, the necessary ownership of, or dominion over, the. thing sold by the parties to the contract ; secondly, their mutual assent to the contract; and, thirdly, the price. SECTION I. — THE NECESSARY OWNERSHIP BY THE PARTIES IN THE THING SOLD. The rule of the common law is, that nobody but the ownership at... , , . common law. legal owner or his representative can make a valid con- 182 Rule as to ownership at CHAP. II.] THE CONTRACT OF SALE. 183 tract of sale. 1 There are, however, certain, exceptions to this rule, as in the case, in England, of sales made in market overt, and in the sales of negotiable secu- rities, which pass by delivery f and so factors, stock brokers, pawnees, and public officers, 3 may give a good title to the thing sold, although they have no legal ownership in it, but hold it only in their custody, sub- ject to their principal's orders. Where, then, the au- stockbrokers 13 ■. may make a thority of the stock broker to sell is legally constituted, valid sale. he is enabled to make a valid contract, and to pass a legal title to the purchaser in the thing sold. Some' few of the contracts of sale at the Stock Ex- change are immediately followed by a delivery of the article contracted for, and the whole transaction exe- cuted on the spot; and of such a transaction nothing need be said. But the great majority of contracts of majority of sale at the Stock Exchange, both in England and in f sale at the the United States, are made for a future delivery ; and c han g e are this kind of contract demands considerable attention, ^livery!" 6 It is to be observed that the contract of sale at the Contract of Stock Exchange is never, or very rarely, a contract specific arti- for the sale of a particular article, or specific chattel, c e ' but merely for one of a designated class of articles, and that any one of the class will satisfy the conditions of the contract. Thus, in Heseltine v. Siggers, 4 where the declaration Heseitine v. stated that the plaintiff " bargained with the defendant lggers " " to buy, and then bought from him, and the defend- " ant then agreed to sell, and then sold, to the plaintiff, " certain foreign stock, to wit, 28,000 Spanish stock," 1 Benjamin on Sales, p. 7. 8 Ibid., p. 14. 1 Ibid., p. 12. * 1 Exch. Rep. 856. 184 THE STOCK BROKER. [PART II. Judgment of Parke, Ti., and Pollcck, C. B. Distinction between a contract of sale of a spe- cific chattel and stock. Contract of sale execu- tory. etc., the defendant refused to deliver the bonds, and the plaintiff, who, after his purchase, had sold the stock to another person, was in consequence obliged to purchase the bonds at a loss. The plaintiff offered in evidence a stamped sold note, but there was no evi- dence of any bought note. The defendant contended that the declaration being formed on an agreement to deliver bonds, the plaintiff was bound to prove that property in the specific bonds had passed to the plaintiff. But the court, Parke, B., and Pollock, C. B., held, that the words "bought" and "sold" must be construed with reference to the subject-matter of the contract, and as meaning an agreement to buy and sell ; and that a contract for the sale of stock, exchequer bills, and securities of that description, in which the prop- erty passes by delivery, differs from the sale of a specific chattel, since the delivery of any stock, etc., would satisfy the contract. Now, there is this distinction, to be observed between a contract of sale of articles of this description, and contracts for the sale of a specific chattel, that, in the latter case, when a bargain has been made, the title of the property may pass at once, as between the vendor and vendee, without any reference to the delivery at all ; while in the former, there is nothing but an ex- ecutory agreement to deliver a specified amount of indefinite parts of a certain class, and which, never becoming definite till some delivery is had, no title can pass to the vendee until the delivery. In the former case, then, as, something remains to be done by one of the parties before a title to the thing contracted for CHAP. II.] THE CONTRACT OF SALE. 185 can pass, the contract of sale can never be an executed contract until a delivery or setting apart by the vendor. Sales at the Stock Exchange are, as we have seen above, usually sold for a future delivery, and it fre- Sales for a i pip i* e f uture deliv- quently happens that at the time 01 the formation 01 ery. the contract the thing to be sold is not in the pos- session of the vendor, but the contract is merely an executory agreement to deliver. In the well-known case of Bryan v. Lewis, 1 Lord Bryant Tenterden held, that if goods be sold, to be delivered at a future day, and the seller has not the goods, nor any contract for them, nor any reasonable expectation of receiving them on consignment, but intends to go into the market and buy them, it is not a valid con- tract, but a wager on the price of the commodity. This severe doctrine of the common law has, however, since been exploded, and a stock broker may legally contract to sell stock, etc., to be delivered at a future day, which is not in his possession nor under his control, and which he may not have any reasonable expectation of getting, at the time of the formation of the contract. Thus, in Hibblewhite v. McMorine, 2 it was held, that Hibbiewhite a contract for the sale of fifty shares of the Brighton Railway Company, to be transferred, delivered, and paid for at a future day, the vendor not having the shares in his possession at the time of the contract, nor yet any reasonable expectation of getting them, other- wise than by purchase after the contract had been made, was valid. Parke, B., said, " I have alwavs en- Remarks of Parke B "tertained considerable doubt and suspicion as to the Bryan V " correctness of Lord Tenterden's doctrine in Bryan v. &£t Criti " 1 Ey. & Moo. 386. 2 5 M. & W. 462. 186 THE STOCK BROKER. [part II. Lorymer v. Smith. "Wells v. Porter. Remarks of Alderson, B. Remarks of Maule, B. Bryan v. Lewis. Mortimer v. McCallan. Hibblewhite v. McMorine followed. " Lewis : it excited a good deal of surprise in my mind " at the time, and, when examined, I think is unten- able. I cannot see what principle of law is at all " affected by a man's being allowed to contract for the " sale of goods, of which he has not possession at the " time of the bargain, and has no reasonable expectation " of receiving. Such a contract does not amount to a " wager, inasmuch as both the contracting parties are " not cognizant of the fact that the goods are not in the " vendor's possession. * * * There is no indication in "any of the books of such a doctrine having ever " been promulgated from the Bench until the case of " Lorymer v. Smith, in the year 1822 ; and there is no " case which has been since decided on that authority. " Not only, then, was the doubt expressed by Bosanquet, " J., in Wells v. Porter, well founded, but the doctrine " is clearly contrary to law." Alderson, B., said that he was of the same opinion, and that such a principle " would put an end to half " the contracts made in the course of trade ;" and Maule, B., said, " I have always considered the doctrine laid " down in Bryan v. Lewis as contrary to law, and most " inconvenient in practice : and I have often heard it " spoken of with great suspicion, both by lawyers and " mercantile men, upon both grounds, — as against law, " and against all mercantile convenience. It was with " great surprise I heard so accurate a lawyer give utter- " ance to a doctrine so evidently erroneous." So, in Mortimer v. McCallan, 1 the court overruled the doctrine laid down in Bryan v. Lewis, and followed Hibblewhite v. McMorine, holding, that the possession 1 6 M. & W. 68. CHAP. II.] THE CONTRACT OF SALE. 187 of the required stock at the time of the transfer was quite sufficient, and that the Act of 7 Geo. II. did not apply to such a case, where the party really meant to carry out his contract. So, in Frazier v. Hilliard, 1 it was held, that if a Frazier v. ' Hilhard. vendor sell a thing, not his own, and subsequently acquire title to it before the contract is repudiated by the vendee, the property vests in the purchaser. And again in Hotchkiss v. Oliver, 2 it was decided, that, in a Hotchkiss «, contract of "sale or return," the fact of the vendor having no title at the time of the contract of sale, but only acquiring one afterwards, before the buyer had allowed the time to elapse for returning the goods, could not set up in the defence as failure of considera- tion in the original contract, in an action for the price. The subject will be further pursued in the chapter on Wagers. Having seen that the contracts of sale at the Stock Exchange are usually of an executory character, and that the sale is equally valid, whether the thing con- tracted for is, or is not, in the possession, or under control, of the vendor, at the time of the formation of i m P ort . an t to determine the contract, it is important to determine whether the whether the . . . . , contract of subject oi the contract is, or is not, in esse at the for- sale is for a mation of the contract of sale. or not. As is well known, the subject-matter of a contract Explanation of sale of personal property may be for a thing actually contracts o7 existing, or for a thing that has ceased to exist, or which has not yet come into existence, at the time the contract was formed. 1 2 Strohh. 309. Blackmore o. Shelby, 8 Humph. a 5 Demo, N. Y. 314 ; see, also, Tenn. 439. 188 THE STOCK BROKER. [PART II. First class. Hastie v. Couturier. Second class. Third class. Contracts of sale at the Stock Ex- change are for a thing It is not necessary to give an illustration of the first class of contracts, and the case of Hastie v. Couturier 1 is an example of the second class. Here a cargo of corn, loaded on a vessel, still on the seas, was sold, and afterwards it was discovered that the corn, becoming heated, had been discharged at an intermediate port: the court held, the sale was properly repudiated by the purchaser. Examples of the third class are cases where a man sells supplies of milk not yet milked ; or cheese not yet made; or different crops not yet sown or grown; or the sale of a mere contingency, like the venditio sp&i of the Romans. Under what class of these executory contracts, then, do the contracts on the Stock Exchange fall ? It is submitted that all the contracts of sale at the Stock Exchange are for a thing existing at the time of the formation of the contract. The contracts of sale at the Stock Exchange are usually contracts for a future sale of bonds, shares of stock, and scrip. In the sale of bonds and shares of stock, little need be said, for it is obvious that in the case of a bond, the purchaser buys the present right in the vendor of an obligation to be paid money at a future certain day, and as soon as the bond or symbol of the vendor's title to such right is legally delivered to the purchaser, the contract between the parties is at an end. And so the sale of a share of stock, being ex- ecuted, vests in the vendee the present right the vendor has of a share or proportion of the interest of the con- cerns of the company, and the contract, the sale being ^Exch. 102; 6 H. L. C. 673. CHAP. II.] THE CONTKACT OF SALE. legally completed, is then at an end, for there is no further contract of warranty. The only difficulty that could arise in the mind of any one is the contract for a sale of scrip, which some people have supposed to be a contract for a sale of a thing not in esse, being, as it is, a sale of a promise to deliver shares or bonds in the future. But this is very clearly a misapprehension of the meaning of the contract, and this is imme- diately' seen, when it is considered what is sold. The company, in the first instance, only sell an existing right, or option, or promise, which becomes executed when it is sold and symbolically delivered ; and sub- sequently the same is resold. No executory promise of the sub-vendor is made. He merely sells the interest or title he has in the promise made to him by the company ; and, consequently, so soon as such vendor validly completes the sale by delivering up the symbol of the interest or title he has in such a promise, the contract, as between the vendor and vendee, is terminated. Of course the vendee is left to his rights at law or equity against the company, but, in the absence of a guaranty of the vendor, which is never given, he has none against the vendor. The vendor simply sells a promise made to him, and when he has completed the sale of it, has nothing more to do with it. The distinction between a sale of a thing in esse, and of a thing not in esse, is most important, because, in the former case, the seller of stock or scrip performs his contract by a legal delivery of the cer- tificates or indicia of title, while in the latter, the sale could not be completed till the thing contracted for had sprung into existence, and had been delivered. 189 190 THE STOCK BROKER. [part II. Mutual assent of the parties. The contract must be mu- tually formed. Contracts effected through the agency of the post. SECTION II. — THE MUTUAL ASSENT OF THE PARTIES TO THE CONTRACT. The assent of the parties to the sale, that is to say, of the buyer and seller, must be mutual with regard to the terms of the contract of sale. In the sales at the Stock Exchange, as in all others, there must be a mutual assent of the parties to the terms of the contract. With respect to contracts that are made by the members of a single Stock Exchange, where the stock brokers deal directly with one another, exchanging bought and sold notes, and, on some Ex- changes, even inscribing the terms of each contract in an official registry kept for that purpose, there can be no great danger of the parties to the contract mis- taking each other's intentions in regard to the sale; but where a stock broker is given an order to execute on a foreign Stock Exchange, which demands the employment of another stock broker living at a dis- tance, and the necessity of communicating with him by letter or telegraph, the mutual intent of the parties to the contract may not be so clear, and we shall sub- join a few cases, to illustrate the questions that might arise in such cases, and the rulings of the courts upon them. With regard to contracts effected through the agency of the post-office, the general rule is, that the letter must be received and assent given to its contents before the bargain is struck. The assent may be express, or implied in various ways. The offer is kept open, however, or supposed to be constantly repeated, till the letter, or some other communication, arrives. If the CHAP. II.] THE CONTRACT OF SALE. 191 letter is delayed by the sender's fault, the time is ex- / tended till its arrival, and the acceptance is complete , on the posting of the second letter, notwithstanding delay, if the letter has been not wrongly addressed j 1 but the letter must be placed in the post-office within the proper time. 2 In Trevor v. Wood, 3 the transmission of the letter Trevor v. nn • ^ 1 Wood. was said to be sufficient to make a contract, because an overt act. In Hallock v. Conn. Ins. Co., 4 it was decided that Hallock ». . Conn. Ins. the contract arises when any overt act takes place, Co. which may be as various as the terms and form of contracts, and then the acceptor cannot overtake or countermand by telegraph his letter mailed. 5 In McCulloch v. Eagle Ins. Co., 6 the letter recalling McCuiioch the offer to accept was written the day after the accept- Co. ance; the first contractor, before he got the second letter, but after the posting of it, agreed to go on, and it was held, no contract. But this is opposed to all the American and English authorities. 7 In Dunmore v. Alexander, 8 the acceptance and re- Dunmore v. traction arrived at the same time : held, no contract. exan er ' Contracts may also be made through the agency of Contracts by tclf TO. Till the telegraph, as well as that of the post. There is, however, a difference between the agency of the post- office and a telegraph company; for in the former case, the post is the common agent of both parties, standing 1 Leake on Contracts, 18. N. Y. 644. 2 Stockholm v. lb., 32 Md. 196. ■ 1 Pick. (Mass.) 283. 8 36 K. Y. 307. » Tayloe v. Eire Ins. C o.. 9 How- * 2 Dutcher (N. J.), 268. ard, 390. 5 See Henkel v. Tape, L. R., 6 8 9 Shaw & Dunlop, 190. Exch. 7 ; Leonard v. N. Y. Co., 41 192 THE STOCK BROKER. [part II. Trevor v. Wood. Mutual as- sent with reference to thing con- tracted for. Lambert v. Heath. Mitchell v. Newhall. in the same relation to each; but in the latter, the tele- graph company is only the agent of the party employ- ing him, and in order to make it a valid agency of communication between the parties, there would prob- ably have to be an express or implied agreement by both the parties to the contract to that effect. It was held in Trevor v. Wood, 1 that the fact of one of the makers of the bargain using the telegraph raised an implication that that was to be the agency employed. It is also necessary that the parties should mutually assent with respect to the thing contracted for, and whether there is such assent is a question for the jury. Thus, in Lambert v. Heath, 2 the plaintiff instructed his brokers to buy " Kent Coast Railway scrip," and they made a bargain for the purchase, but the scrip was repudiated by the company, who alleged it had been issued by the secretary without authority. In an action by the principal to recover what he had paid the stock brokers, it was held by the court, that the question for the jury was, whether this was the only scrip answering to that name on the market at that time, and not whether it was good scrip or not. So, in Mitchell v, Newhall, 3 where the stock broker, on being ordered to purchase fifty shares, purchased certain letters of allotment, that passed on the Stock Exchange as shares, there being no shares on the market, it was held, the jury might find this a good fulfilment of the contract, it being in evidence that these letters of allotment passed on the Stock Exchange as shares. 1 36 N. Y. 807. 1 15 M. & W. 486. » 15 M. & W. 308. CHAP. II.] THE CONTKACT OF SALE. 193 In Tempest v. Kilner, 1 a contract for the sale of Tempest v. shares in a projected railway company was held to be satisfied by a tender of letters of allotment, where from the circumstances the jury might have inferred that the letters of allotment passed on the Stock Exchange as scrip, and, therefore, that the parties might reason- ably have made the contract with reference to such letters, and that consequently there might be a breach of contract before a single share had been really issued. SECTION III. — THE PRICE. The agreement with respect to the price, also, must The price, always be mutual, and, as we have already seen, the price of these securities must be money, and the stock broker has no authority to barter or exchange them. 2 1 3 C. B. 249. 258 ; Guerriere v. Peile, 3 B. & a Wiltshire v. Sims, 1 Campb. Aid. 616. 13 CHAPTEK III. EFFECT OF THE 17TH SECTION OF THE STATUTE OF FRAUDS ON THE CONTRACT. Introduction 194 Statute considered only with reference to Stock Exchange securities 195 Division of chapter .... 195 SECTION I. — WHAT CONTRACTS ARK WITHIN THE 17TH SECTION. Stock Exchange securities not within the 17th section of the statute in England . . 196 Rule in America 196 SECTION II. — WHAT SECURITIES IN PAGE AMERICA ARE QOODS, WARES, AND MERCHANDISES. Cases discussed 197 SECTION III. — EARNEST, PAYMENT, AND ACCEPTANCE. Cases discussed 204 SECTION IV. — WHAT IS A SUFFI- CIENT MEMORANDUM IN WRITING. Cases discussed 205 SECTION V. — WHO IS AN AGENT DULY AUTHORIZED. Cases discussed 206 statute of 29 Verbal contracts for the sale of chattels were much Charles II. c. 3. modified by the passage of the statute of 29 Charles II. c. 3, commonly known as the Statute of Frauds, and frequently the question has arisen with regard to the sale of shares, etc., as to whether they are embraced within the 17th section of this statute. This point is especially important to determine, as the Statute of Frauds has not only been enacted in England, but substantially the same statute has also been enacted in the majority of the United States. The 17th section of the English statute runs as follows : 194 CHAP. III.] EFFECT OF STATUTE OF FRAUDS. 195 " And be it enacted, that from and after the said nth section ' of the Stat- "four and twentieth day of January (a.d. 1677), no uteof J \ Frauds. " contract for the sale of any goods, wares, or merchan- " dises, for the price of ten pounds sterling, 1 or up- " wards, shall he allowed to be good, except the buyer " shall accept part of the goods so sold, and actually " receive the same, or give something in earnest to bind " the bargain, or in part payment, or that some note or " memorandum in writing of the said bargain be made, "and signed by the parties to be charged by such " contract, or their agents thereunto lawfully author- ized." In our examination of the Statute of Frauds, we statute of do not intend to consider it with reference to its effect sidered with on chattels generally, but we simply shall review those securities' cases that have arisen on, and are peculiarly appro- g^ckE**-- 6 priate to, the securities sold at the Stock Exchange. change. In our consideration of the statute, it will be conve- nient to see, first, what contracts in securities are within Division of the 17th section ; secondly, what securities are goods, ° ap er merchandises, etc. ; thirdly, what is earnest, payment, acceptance ; fourthly, what is a sufficient memorandum or note ; and, fifthly, who is an agent duly authorized. section i. — what contracts are within the 17th section of the statute. The words of the statute, " contracts for the sale of " any goods," etc., have been variously interpreted in England, and indeed it is perhaps difficult to determine 1 In New Hampshire the value where the statute exists, $50; in' is $33.33 ; in Maine, $30 ; in New Vermont, $40. In Pennsylvania York, Connecticut, and Massachu- and Rhode Island this statute does setts, and most of the other States not exist. 196 THE STOCK BROKER. [PART II. Act of Lord Tenterden. The Stock Exchange se- curities not within the 17th section, in England. In America, contra. Mixer v. Howarth. Remarks of Shaw, C. J. Hight v. Ripley. whether they refer to executed contracts of sale or those merely executory. The subject was, however, set at rest in England by the act of Lord Tenterden, known as the Act of 9 Geo. IV. c. 14, s. 7, to the effect that, " the " act shall extend to all contracts for the sale of goods " of the value of ten pounds sterling and upwards, not- " withstanding any goods may be intended to be de- " livered at some future time, or may not at the time " of such contract be actually made," etc., and it was decided that this section was to be construed as in- corporated within the 17th section of the Statute of Frauds. As, however, the English courts in their later decisions have held, that the securities sold at the Stock Exchange are generally not within the meaning of the 17th section of the Statute of Frauds, it is not necessary to notice this last act further. In America, where numerous judges have held that bonds, shares, etc., are within the purview of the 17th section of the statute, the courts seem to have reached the conclusion, that the words " contract for sale" mean an executed or executory contract. In Mixer v. Howarth, 1 Shaw, C. J., said, " When " the contract is a contract of sale, either of an article " then existing, or of articles which the vendor usually " has for sale in the course of his business, the statute " applies to the contract, as well as where it is to be " executed at a future time, as where it is to be executed " immediately." In Hight v. Bipley, 2 Shepley, J., said, " It may be " considered as now settled, that the Statute of Frauds 1 21 Pick. (Mass.) 205. 11 19 Maine, 137. CHAP. III.] EFFECT OF STATUTE OF FRAUDS. 197 " embraces executory as well as executed contracts for " the sale of goods." 1 In Johnson v. Mulry, 2 in New York, it was at- Johnson v. Mulry. tempted to be shown in the argument that the words of a New York statute, to the effect that a contract for the sale of stock * * * "shall be void, or voidable, " for want of any consideration ; or because the non- " payment of any consideration ; or because the vendor " at the time of making such contract is not the owner " or possessor of the certificate, or certificates, or other "evidence of such debt, share, or interest," repealed the words of the Statute of Frauds, relative to having such a contract reduced to writing. But the court said, " The statute" (i. e., the one relative to stock) " simply "provides that neither a written or verbal contract " shall be void," for certain reasons, and held, that it did not in any way abrogate the necessity of reducing a contract for the sale of stock to writing. SECTION II. — WHAT SECURITIES ARE "GOODS, WARES, AND MERCHANDISES" WITHIN THE MEANING OF THE 17th SECTION. The decisions are conflicting, as to whether shares, bonds, etc., shall be considered as included within the meaning of the words "goods, wares, and merchan- " dises." We shall first give the English decisions, with those of the American that have adopted the view of the later English cases, and then the cases contra. 1 See Sewall v. Fitch, 8 Cowen, U. C. K. B. 124 ; Cason v. Cheely, 215; Edwards u. E. R. Co., 48 6 Georgia, 554; Pitkin v. Noyes, Maine, 379 ; Bennett v. Hull, 10 48 N. H. 294. John. 364 ; Downes v. Ross, 23 2 4 Robertson, 401. Wend. 270; Lane v. Melville, 3 198 THE STOCK BEOKEE. [PAET H. The earlier English cases were inclined to consider that the words " goods, wares, and merchandises" in- cluded shares and bonds, etc. Musseii v. In Mussell v. Cooke 1 (a.d. 1720), A. agreed with the defendant's broker for £5000 of South Sea stock, and the broker, according to the usage, entered this agree- ment in his pocket-book. It was contended, that this stock was not within the meaning of the statute, as that, at its passing, there was no stock in being but East India stock, and that, for only about £300,000, and lodged in a few hands; and that anyhow this entry was sufficient, on account of the usage, and was also the same as if the party had made it. The Stat- ute of Frauds was pleaded, and, though the case turned on the plea being not sufficient, the Lord Chancellor thought that the plea was well taken. Cmiiu. Dod- In Crull v. Dodson, 2 also, where there was a trans- action in South Sea stock, the court held the bargain to be within the statute. pokering v. In Pickering v. Appleby, 3 the court were equally pp e y ' divided on this subject, six of the judges holding one way, and six the other. Colt v. Net- In Colt v. Netterville, 4 the plea of the statute was 1 pry ill G overruled, the Chancellor saying that the act of 13 & 14 Car. II. cap. 24, declared that no one should be liable to bankruptcy in respect of their having East India stock, so that stocks, or the dealing in them, would not make a man liable to bankruptcy, nor did they seem to be " wares, goods, or merchandises" within the in- tent of that act ; and, at all events, " the plea is not 1 Precedents in Chancery, 583. » 1 Com. Eep. 354. 8 Select Cases in Chancery, 41. * 2 P. "W. [1725] 307. CHAP. III.] EFFECT OF STATUTE OF FRAUDS. 199 " well pleaded, because the bill says that the plaintiff " did pay 6d. as earnest, and the plea only says, that " the defendant did not receive or accept it as earnest ; " now it is not material how or in what manner the " defendant received or accepted it, but how the other " paid it." In jEumble v. Mitchell, 1 with regard to this subject, Humble v. Lord Denman, C. J., said, " It appears that no case has Kemar k s ' f "been found directly in point; but it is contended ^fgfj" "that the decisions upon reputed ownership are ap- " plicable, and that there is no material distinction be- " tween the words used in the Statute of Frauds, and in " the Bankrupt Act. I think that both the language " and the intentions of the two acts are distinguishable. " * * * Shares in a joint stock company like this are " mere choses in action, incapable of delivery, and not " within the scope of the seventeenth section. A con- " tract in writing was therefore, unnecessary." This decision was of shares in a joint stock com- pany, and the courts in England have applied its principle to other securities. Thus, in Heseltine v. Siggers, 2 the court held, that Heseitine v. certain Spanish stock or bonds were not within this statute. So it was held, in Tempest v. Kilner, 3 in Bowlby llSS!*"' v. Bell, 4 in Bradley v. Holdsworth, 5 and in Duncuft v. %$** "' Albrecht, 6 that a sale of railway shares was not within Bradley v. J Holdsworth. the meaning of the act. Duncuft v. Albrecht. And in Watson v. Spratley 7 and Powell v. Jessop, 8 Watson v. Spratley. 1 11 Ad. & El. 205. 6 3 M. & W. 422. •Powell v. 2 1 Exch. 856. « 12 Simons, 189. Jessop. '30. B. 249. 7 10 Exch. 222. *3C.B. 284. 8 18 C. B. 336. 200 THE STOCK BROKER. [part H. Beers v. Crowell. Vawter v. Griflen. Whittemore v. Gibbs. Colvin v. Williams. shares in a mining company, on the cost book prin- ciple, were held not within the act. In England, therefore, the law may be considered as settled upon this subject. In the United States, the different States do not appear to entertain harmonious views. In Beers et al. v. Crowell, 1 the court seemed to be inclined to follow the reasoning of the later English cases, and held, that at all events Treasury cheques were not within the meaning of the statute. In Vawter v. Griffen et al., 2 the Statute of Frauds of that State omitted the words " wares and mer- chandises" after the words " goods" of the English statute of Charles II., and the court said that the change in phraseology between the two sections made no difference in the legal effect, for the word " goods" would include "wares and merchandises," and that they would adopt the principles of the present English law, and held promissory notes not to be within the statute, and that, seemingly, bonds, stocks, and shares also were not. In Whittemore v. Gibbs, 3 it was held, in New Hampshire, that a promissory note was not goods, wares, or merchandise within the statute. The following States have laid down, or incline towards, a contrary principle. In Maryland, in Colvin v. Williams, 4 in 1810, the court held the sale of bank stock to be within the statute, but gave no opinion. 1 Dudley (Ga.), 28 ; see, also, "Weightman v. Caldwell, 4 Wheat. 89, note. 2 40 Indiana, 593. ' 4 Poster, 484. 4 3 H. & J. 38. CHAP. III.] EFFECT OF STATUTE OF FRAUDS. 201 In Tisdale v. Harris, 1 in 1838, the question came Tisdaie«. Harris. up before the Supreme Court of Massachusetts, as to ■whether a contract for the sale of shares in a manu- facturing company was within the statute. The case was heard before the decision of Lord Tenterden, in Humble v. Mitchell, and the Chief Justice, Shaw, con- sidered the question as unsettled in England, and quoted Mussell v. Cooke, 2 and Crull v. Dodson, 3 approvingly, as the "better opinion," but said, "Supposing this a " new question now for the first time calling for a con- " struction of the statute, the court are of opinion, that " as well as by its terms, as its general policy, stocks "are fairly within its operation. The words 'goods' " and ' merchandise' are both of very large significa- " tion. Bond, as used in the civil law, is almost as "extensive as personal property itself, and in many " respects it has nearly as large a signification in the "common law. The word 'merchandise,' also, in- " eluding in general objects of traffic and commerce, " is broad enough to include stocks or shares in incor- " porated companies. There are many cases, indeed, " in which it has been held in England, that buying "and selling stocks did not subject a person to the "operation of the bankrupt laws, and hence it has " been argued that they cannot be considered as mer- "chandise, because bankruptcy extends to persons "using the trade of merchandise. But it must be " recollected that the bankrupt acts were deemed to be " highly penal, and coercive, and tended to deprive a "man in trade of all his property. But most joint . 1 20 Pick. 9. 2 Prec. in Ch. 533. 8 Sel. Cas. in Ch. 41. 202 THE STOCK BROKEK. [PART II. Somerby v. Bunting. ' stock companies were founded on the hypothesis, at ' least, that most of the shareholders took shares as ' an investment, and not as an object of traffic. * * * ' These cases, therefore, do not bear much on the gen- ' eral question. The main argument relied upon by 'those who contend that shares are not within the 'statute is this, that the statute provides that such ' contract shall not be good, etc., among other* things, ' except the purchaser shall accept part of the goods. ' From this it is argued, that, by necessary implication, ' the statute applies only to goods, of which part may ' be delivered. This seems, however, to be rather a 'narrow and forced construction. The provision is ' general, that no contract for the sale of goods, etc., ' shall be allowed to be good. The exception is when ' part are delivered ; but if part cannot be delivered, ' then the exception cannot exist to take the case out 'of the general doctrine. * * * There is nothing in ' the nature of stocks or shares in companies, which ' in reason or sound policy should exempt contracts in 'respect to them from those reasonable restrictions, ' designed by the statute to prevent frauds in the sale ' of other commodities. On the contrary, these com- ' panies have become so numerous, so large an amount ' of the property of the community is now invested in ' them, and as the ordinary of property, arising from 'delivery and possession, cannot take place, there 'seems to be peculiar reason for extending the pro- visions of this statute to them." In Somerby v. Bunting, 1 the court considered the law in Massachusetts settled, but said, "the words of 1 118 Mass. 285 [1874]. CHAP. III.] EFFECT OF STATUTE OF FEAUDS. 203 "the statute have never yet been extended by any " court beyond securities which are subjects of common " sale and barter, and which have a visible and palpa- " ble form ;" and held an oral agreement for the sale of an interest in a patent, before letters were obtained, not to be a contract for the sale of " goods, wares, and " merchandise." In Alabama, 1 a case arose, in which the Statute of Case in Aia- Frauds was involved; the question apparently being whether a promissory note fell within it, being under $200. But the report is nearly unintelligible. In Connecticut, in North v. Forrest, 2 the question North v . was, whether a discharge from a contract for the sale of stock which had not been in writing, was a suf- ficient consideration to support a new contract, and the - court held, that as the first contract was within the statute, it was a nullity, and was not a good con- sideration for the second promise. In Ins. Co. v. Cole, 3 in Florida, the statute included ins. Co. v. the words "personal property," as well as "goods, "wares, and merchandise," and* the court held that the former words included shares of stock, but thought that the latter words did not, following the later Eng- lish cases. In Pray v. Mitchell, 4 in Maine, the doctrine of Tis- Pray v. dale v. Harris 6 was followed. Mitche11 - In Mississippi, the words "personal property" are included in the act. In New York, 6 the statute reads "goods, chattels, 1 29 Ala. 294. * 60 Maine, 430. 1 15 Conn. 400. 6 20 Pick. 9. 5 4 Florida, 359. e 4 Kobertson, 401. 204 THE STOCK BROKER. [part II. Case in Ver- mont. Riggs v. Macgruder. and things in action," and shares of stock are con- sidered as included within the act. In Vermont, 1 apparently, shares of stock come within the purview of the Statute of Frauds. In the Federal Court, in Riggs v. Macgruder, 2 in the Circuit Court of the United States, Thurston, J., held, that the sale of notes of a private bank was within .the Statute of Frauds. Tisdale v. Harris. Gooch v. Holmes. SECTION III. — EARNEST, PAYMENT, AND ACCEPTANCE. In Tisdale v. Harris, 3 it was contended by counsel, there was a part performance and part payment, but the court said that, as these occurred since the action had been brought, they could not be relied on to show a cause of action when the action was commenced. In Gooch v. Holmes, 4 A. agreed with B. to pay him a certain amount for a quantity of bank bills, which were then in C.'s hands subject to D.'s order, and B. procured and delivered to A. the order of D. on C. for the bills. A. got the order, but never presented it, nor received the bills, and the court held, this was not an executed sale, but a contract of sale within the statute. Hathaway, J., said, that the evidence in the case failed to prove a sale and delivery. " According "to the facts presented, the whole matter remained in " contract. It was something to be done ; nothing was " completed ; the bills might have been taken on ex- " ecution as the plaintiff's property. * * * They might " have been presented to the bank and redeemed ; they " might have been stolen, or lost, or destroyed, before 1 Fay ». Wheeler, 44 Vt. 292. J 2 Cranch, R. U. S. C. C. 148. 8 20 Pick. 9. * 41 Maine, 523.. 205 CHAP. III. J EFFECT OF STATUTE OF FRAUDS. "the defendant could have presented the order, or # " before he received it." SECTION IV. — WHAT IS A SUFFICIENT MEMORANDUM IN WRITING. In Mussell v. Cooke, 1 A. agreed with B.'s broker Musseii v . for £5000 South Sea stock, and the broker, according to the usage, entered the agreement in his pocket-book. The case turned on the sufficiency of the plea, but the Chancellor thought the memorandum not sufficient within the statute. In Crull v: Dodson, 2 the defendant, a, broker, having Cruii v. Dod- stock of the plaintiff, was told to sell, when it reached 200, and the broker told the plaintiff he had sold to several parties at that price, and showed entries in his books which looked as if made at a subsequent period, after a rise in, the stock. "The court was of opinion " it was a fraudulent transaction, and that on the sale, " if such there was, he should have taken earnest ; for " it has been determined here that such a bargain is " within the Statute of Frauds, and without earnest, " only nudum pactum." In Tisdale v. Harris, 3 the defendant had agreed ver- Tisdale v. bally to transfer shares in a company to the plaintiff, ams ' and wrote a letter to an agent to make the transfer to the plaintiff's name, and transmit the certificates to the defendant. The plaintiff's agent signed a memoran- dum agreeing to pay when the defendant should fur- nish the certificates. It was held by the court, that the contract was not in writing on the defendant's part. 1 Prec. in Ch. 533. 2 Sel. Cas. in Ch. 41. 3 20 Pick. (Mass.) 9. 206 THE STOCK BKOKEK. [PAET II. SECTION V. — WHO IS AM" AGENT DULY AUTHORIZED. Johnson v. In Johnson v. Mulry, 1 it was held, that an entry Mulry. made by the clerk of one of the parties in a book, which the defendant, on seeing, pronounced all right, but which neither party signed, was not sufficient to satisfy the provisions of the statute. Henderson v. In Henderson v. Barnewell, 2 the parties contracted in presence of the broker's clerk, who brought them together on the Exchange, and one, in the hearing of the other, dictated the terms of the agreement; and it was held in the Court of the Exchequer, that the agency of the clerk was personal, and that neither an entry in the broker's books nor a note signed by him was sufficient, since the agency was personal. > 4 Bobertson (N. Y.), 401. * 1 Y. & J. 387. CHAPTEK IV. EFFECT OF THE STATUTE OF MORTMAIN ON THE CONTRACT. The question in England . . 207 Review of authorities . . . 207 Rule of Lord St. Leonards in Myer v. Perigal .... 209 Rule of Knight Bruce, V. C, in Ash ton v. Lord Lang- dale 210 Rule of Parke, B., in Watson v. Spratley 211 Rule of Sir John Romilly in Norris v. Grlynn not fol- lowed 212 Rule of Page Wood, V. C, in Entwhistle v. Davis . . . 212 The question has often been raised in England whether shares of stock fall within the meaning of the Statute of Mortmain. In Tomlinson v. Tomlinson, 1 in 1823, a testator Tomlinson «. Tomhnson. directed certain canal shares to be transferred to cer- tain charitable uses. The shares had been declared to be personal estate by Act of Parliament, and trans- missible as such, and Sir John Leach held the chari- table bequests of the testator void, and contrary to the Mortmain Act. No opinion in this case is reported. In Sparling v. Parker, 2 the question was, whether Sparling v. shares in a gas-light and a dock company, which pos- ar er * sessed land for the purposes of their undertaking, were within the Mortmain Act of George II., and the court held, they were not. Lord Langdale, M. E., said, " A Remarks of " shareholder in one of these companies, whether incor- dale, M. R. " porated or not, has a right to receive the dividends "payable on his share ; i.e., a right to his just propor- 1 9 Beavan, 459. a 9 Beavan, 450. 207 208 THE STOCK BEOKEE. [PAET II. "tion of the profits arising from the employment of " the joint stock, consisting partly of land ; and he has " a right to assign his share for value ; but whilst he " continues to hold his shares, he has no interest or " separate right to the land, or any part of it. He is, " indeed, interested in the employment of the land, " but he cannot proceed against the land directly, for " anything which is due him, or make any part of " the land his own, for the purpose of satisfying any " demand which he may have as shareholder. He is " not in the situation of a mortgagee, who has a direct " interest in the land, which he can make absolutely " his own by foreclosure, or of a tenant in common, or "joint tenant, who may make a part of it his own in " severalty ; and if, upon a dissolution or determination " of the joint concern, he can become an owner of any " part of the land, it is only upon a new transaction, " and by acquiring a new title as purchaser. Upon his " death, nothing descends upon his heir, and his legal " personal representatives do not acquire any share or "interest in the land different from that which the " shareholder possessed. * * * But no case has deter- " mined, that such as those now in question are within " the meaning of the act ; and on the whole I am of " opinion that a shareholder in such joint stock com- " panies as those which are now under my considera- ' " tion, is not, in that character or right, entitled to any "such estate or interest in land, as falls within the "true intent and meaning and the operation of the " Mortmain Act of George II." It is to be noted that, in this case, Lord Langdale said there was no case the other way. Tomlinson v. CHAP. IV.] EFFECT OF MORTMAIN ON CONTRACT. 209 Tomlinson, the preceding case, was not referred to, and we believe was not at that time reported. In Walker v. Milne, 1 Lord Langdale again laid Walker «. Milne. down the same principles, and even went further, holding that dock and canal shares and bonds secured by an assignment of the rates were not an interest in land within the Statute of Mortmain. He said, that in the decision of the preceding case, he had not been aware of the decision of Sir John Leach in Tomlinson Tomlinson v. ' v. Tomlinson, but doubted whether that fact would have altered his opinion. In the well-known case of Myers v. Perigal, 2 it was Myers v. held, that a bequest of shares in a bank stock, whose enga ' assets, by its deed of settlement, were deemed personal estate, and consisted of freehold and copyhold estates, and money lent on such estates and leasehold heredita- ments, was not within the meaning of the Statute of Mortmain. The Lord Chancellor St. Leonards said, " There is Remarks of " no doubt, that wherever anything savoring of realty Leonards. " in a will is given to a charity, the legacy is within "the prohibition of the Statute of Mortmain. * * * " The true way to test it would be, to assume that there "is real estate of the company vested in the proper " persons under the provisions of the partnership deed. " Could any of the partners enter upon the lands, or " claim any portion of the real estate for his purpose ? " Or if there was a house upon the land, could any two " or more of the members enter into the occupation of "such house? I apprehend they clearly could not; " they would have no right to step upon the land ; their 1 11 Beavan, 507. ! 2 De G. M. & G. 599. * 14 210 THE STOCK BROKER. [part II. Ashton v. Lord Lang- dale. Remarks of Knight Bruce, V. C. " whole interest in the property of the company is with " reference to the shares bought which represent their " proportions of the profits. No encumbrancer of any " individual member of the company would have any " such right. In short, a member has no higher in- " terest in the real estate of the company than that of " an ordinary partner seeking his share of the profits " out of whatever property those profits might be found " to have resulted. If he die at one particular time, he " will leave the same interest in the partnership prop- " erty, although they may consist of real estate at one " period and not at another. The quality of the part- " nership property can neither alter its destination, nor " the quantum of a member's interest. Upon all prin- " ciples, therefore, I think it is perfectly clear that this " bequest is not within the statute." In Ashton v. Lord Langdale, 1 the same principles were laid down with reference to railway and canal shares, scrip and debentures, not mortgages ; but contra, as respects mortgages of such companies. The Vice-Chancellor, Knight Bruce, said, "With " regard to the mortgages of the undertakings and of " the tolls, these interests proceed directly from the " corporation, and appear to me to constitute a ' charge " or encumbrance affecting lands, tenements, or other " hereditaments,' or some estate or interest therein. " In my opinion they do directly and immediately " charge hereditaments, viz., the tolls, if not the land " itself, by use of which the tolls are obtained ; and if " so, they are within the words of the 3d section of the "act ;" and he said he must overrule the opinion of the 1 4 De G. & Sm. 402. CHAP. IV.] EFFECT OF MORTMAIN ON CONTRACT. 211 Master of the Rolls (Lord Langdale) in Walker v. Walker*. v a / Milne over- Milne, ruled. In Morris v. Glynn 1 (1859) , Sir John Komilly, M.E., Moms .. held, that shares in the Khymney Iron Company, formed for the purpose of manufacturing iron, obtained from its own estates, were an interest in land within the act. The Master of the Rolls drew a distinction be- Rule of sir tween the case where the object of the partnership was niy, m.r. a dealing with the land itself, and where it deals with other matters, to accomplish which land is held by it, but merely as an accessory to it. But it is doubtful Rule doubt- whether his decision is a sound one, or the distinction at all valuable, as the real distinction, evidently, is, whether any shareholder has an interest in any aliquot portion of the land, or merely in the profits arising from the land. Thus, in Watson v. Spratley, 2 Baron Parke said, Watson v. " If the purser of the mine, who had himself the let or Remarks of "grant of the mine, had the mine, and the machines ai " " and plant, vested in him, in trust to employ the ma- " chinery in working the mine and making the most " profit of it, for the benefit of the coadventurers, who " were to share the profit only, such interest was trans- ferable by parol, and might be bargained for by " parol. " If he held the mine in trust for himself and the "coadventurers present and future in proportion to " their number of shares, then there was a direct trust " in the realty ; for the right to get the minerals was " a real right, and could not be granted without deed, "etc." 1 27 Beavan, 218. » Page 214, infra. 212 THE STOCK BROKEK. [PART II. The rule laid down by Sir John Romilly is thus seen to be evidently untenable, and was deviated from by Lord Hatherley (then Vice-Chancellor Page Wood) Entwhistieu. in the following recent case of Entwhistle v. Davis 1 Davis. (1867). Here, shares in the British Land Company, whose business was to purchase and improve lands, selling and letting them, and in the National Freehold Land Society, established for " raising by subscription "a fund out of which any member should receive the " amount of his share for the erection or purchase of "a dwelling-house, or alter real or leasehold estate," were held not to be within the purview of the mort- main statute of 9 George II. c. 36. The Vice-Chancellor, Page Wood, said that he felt compelled to differ from the conclusion reached by the Rule of Sir Master of the Polls in Morris v. Glynn, 2 and thought iiiy in Mor- that, as in the case at bar, the shareholders only took not^foiitwed. the money arising from the profits of the land, and had no direct interest in them further than this, and since there was not a word in the charter of either company giving any shareholder an aliquot portion of land, but merely profits, the shares were not within the contemplation of the act. Durkee v. In Durkee v. Stringham, 3 certain parties associated themselves together for the purpose of raising money to be employed for the benefit of the members, in purchasing land, building mills, etc. It was provided in the articles of association that the shares should be transferable by assignment, and should be treated as personalty, and the court held, that each share in such 1 L. R, 4 Eq. Cas. 272. s 8 Wise. 1. 2 27 Beav. 218. Stringham. CHAP. IV.] EFFECT OF MORTMAIN ON CONTEACT. 213 a company was an interest in land, but cited no cases in support of its opinion, nor, indeed, did it endeavor at any length to reason the matter out. The decisions, as will be seen, are somewhat at vari- ance. But we think the reasoning of Lord St. Leon- ards, in Myers v. Perigal, of the Vice- Chancellor, Myers ■». Knight Bruce, in Ashton v. Lord Langdale, and of Ashton v. Page Wood, V. C, in Entwhistle v. Davis, conclu- Entwhistien. sive, and the rule laid down by Parke, B., in Watson Watson v. v. Spratley, the correct test for these cases. 1 prat ey ' 1 See, also, Morrow v. Brenizer, H. 61 ; Taylor v. Linley,, 1 Giffard, 2 Eawle (Pa.), 188 ; Allison v. Wil- 67 ; Edwards ■„. Hall, 6 De G-. M. son's Ex., 13 S. & E. (Pa.) 330; & G. 74; Alexander v . Brame, 30 1 Cramer v. Arthurs, 7 Barr, 165 ; Beav. 153. Marsh v. Atty. Genl., 2 Johns. & CHAPTEE V. EFFECT OF THE 4TH SECTION OF THE STATUTE OF FRAUDS ON THE CONTRACT. Rule settled by casea under I "Watson v. Spratley .... 214 former chapter 214 | It would be useless to consider at length, whether the securities sold at the Stock Exchange are an interest in land within the meaning of the 4th section of the Statute of Frauds, as the question is substan- tially set at rest by the decisions in the preceding cases. We shall, however, refer our readers to the case of "Watson v. Watson v. Spratley, 1 where the question was argued at considerable length, and where it was determined that shares of stock were not an interest in land ; Martin, B., giving an elaborate opinion, in which Parke, Alderson, and Piatt, BB., concurred., 1 10 Exch. 221. 214 CHAPTER VI. EFFECT OF THE USAGE OF TRADE ON THE CONTRACT. Customer bound by valid rules of the Stock Exchange . . 215 Duncan v. Hill . ..... 215 Sutton v. Tatham .... 216 ' Semble, principal need know of the existence of the rule 217 Illustrations of valid rules . 217 Hodgkinson v. Kelly .... 218 After-made rule not binding . 225 Westropp v. Solomon . . . 225 Distinction between rules bind- ing on non-members and binding on members . . . 226 Illustrations of invalid rules . 227 The contracts on the Stock Exchange are, like any Contracts on i ,• T! ^e Stock other contracts, made subject to the peculiar valid Exchange and reasonable usages of the trade, and rules of that to the usages institution, existing at the time of the formation of ° the contract. These usages and rules are very nu- merous, and the following cases are illustrations of what the courts have held to be valid and reasonable rules and customs, and what have been considered not to be, in transactions between non-members dealing with stock brokers. In Duncan v. Hill, 1 the broker had become in- solvent, and, by a usage of the Exchange, his accounts were closed on the quotations of that day, and it was found that his principal was indebted to him, for which debt he brought suit. Blackburn, J., said, that " for Remarks of "any loss incurred by the agent, by reason of his J. "having entered into such contracts, according to " such rules, unless they be wholly unreasonable, and Duncan v. Hill. 1 L. R., 8 Ex. 242, reversing case in L. R., 6 Ex. 255; and Nicholson v. Gooch, 5 Ellis & Blackburn, 999. See, also, Evans v. "W ister, 1 Weekly Notes, 181. 215 216 THE STOCK BROKER. [PART II. "where the default is without any personal fault of " his own, he is entitled to be indemnified by his prin- " cipal upon an implied contract to that effect. But it " is argued that where the agent, as in this case, is "subjected to loss, not by reason of his having en- "tered into contracts into which he was authorized " to enter by his principal, but by reason of a default " of his own, — that is to say, as in this case, by reason " of his insolvency, brought on by want of moans to " meet his other pecuniary obligations, — it cannot be " said that he has suffered loss by reason of his having " entered into the contracts made by him on behalf of "his principal; and consequently there can be no " promise which can be implied on the part of his " principal to indemnify him, and in the present case " there certainly was no express promise to that effect. " * * * The plaintiffs' insolvency was, so far as regards " the defendant, entirely the result of their own default. " We think there is no implication of law to force upon " the defendant an obligation to indemnify the plaintiffs " in such a case." Sutton v. In Sutton v. Tatham, 1 a person employing a broker to sell shares, directed him, by mistake, to sell two hundred and fifty instead of fifty, and the broker con- tracted with another broker for the sale. Subsequently the shareholder, discovering his error, asked the broker if he could rectify it, but was told it was too late. By the rules of the Stock Exchange, in transactions of this kind no principal is named, and if the vendor does not, complete his contract by a delivery, the purchaser may buy the requisite number of shares, and hold 1 10 Adolphus & Ellis, 27 [1839]. CHAP. VI.] EFFECT OF USAGE OF TRADE ON CONTRACT. 217 the vendor liable for the loss if he sustains any. The shareholder's broker paid the loss the purchaser had sustained, and sued the vendor for the loss. Held, that he could recover. Lord Denman, C. J., said that if a person employed one who was notoriously a broker, he must be taken to authorize his acting in obedience to the known usages of the Stock Exchange. Littledale, Patteson, and Coleridge, JJ., concurred. In Johnston v. Usborne, 1 the defendant, a corn mer- Johnston v. chant in Ireland, instructed his factor and del credere agent in London to sell oats of a certain quality on the defendant's account, and the factor sold them in his own name, but, proving of an inferior quality, he was compelled to pay the difference to the vendee. In an action against the vendor to recover the difference, the defendant objecting to the broker's having sold in his own name, and so incurred the liability, it was held, that a custom of London, to show that a factor was warranted by such instructions to sell in his own name, was admissible in evidence. In Stewart v. Cauty, 2 in an action for the non- Stewart*. acceptance of railway shares, which by the contract Cauty ' (made at Liverpool through brokers) were to be deliv- ered in a reasonable time, a written rule of the Liver- pool Stock Exchange, stated to be acted upon by all Liverpool brokers, to the effect that "the seller of " shares was in all cases entitled to seven days to com- " plete his contract by delivery, the time to be com- " puted from the day on which he was acquainted with " the name of his transferee," was held admissible, on an issue, whether the plaintiff within a reasonable time 1 11 Adolphus& Ellis, 549 [1841]. '8J1.& "W. 160. 218 THE STOCK BKOKER. [PAKT II. Mitchell «. Newhall. Bayley v. Wilkins. Hodgkinson v. Kelly. was ready to make the transfer ; though it was not in evidence that either of the principals or their brokers were members of the Liverpool Stock Exchange. In Mitchell v. Newhall, 1 the plaintiff, a broker on the Stock Exchange, received an order to purchase fifty shares in a foreign railway company. At the time no shares were in the market, it not being yet established, but letters of allotment for the shares being then on the market, which were commonly bought and sold on the market as shares, the plaintiff bought a letter of allotment for fifty shares; and it was held, that it was competent for the jury to find this a good execution of the order. In Bayley v. Wilkins, 2 A. employed a broker, a member of the Exchange, to buy shares for him. At the time of the purchase, a call had been made on the shares, but was not then payable. The seller paid the call to enable the transfer to be made, and the broker, who by the rules of the Stock Exchange was per- sonally responsible for it, paid the money. Held, that the broker could recover from A. the sum so paid. In Hodgkinson v. Kelly, 3 A. bought through a broker, of a jobber, on the Stock Exchange, certain shares, and subsequently B. sold to another jobber, shares in the same company at a lower price for the same settling day. The company stopped payment in the mean time. On the name day, according to the usage of the Stock Exchange, the name of A. was given to B. as the purchaser of B.'s shares, and B. ex- ecuted a transfer of the shares to A., and delivered it 1 15 Meeson & Wellsby, [1848]. 308 "18L.J..C. P. 273; 7C.B.886. 8 L. E., 6 Eq. Cas. 496. CHAP. VI.] EFFECT OF USAGE OF TEADE ON CONTRACT. 219 with the certificates to A.'s broker, who paid him the price for which B. purchased at, and A. subsequently repaid his broker and took the certificates and transfer, but did not execute the transfer, and never had it registered. Owing to the insolvency of the company, B. was compelled to pay calls, and brought an action against A. to recover the money so paid. On behalf of B. it was contended that he was not liable, as he had never accepted B. as his vendor, and had, therefore, no contractual relation with him, but that his name was given to B. by a custom of the Stock Exchange, which it was not proved he was aware of. The court, however, held, that the acceptance of the certificates of the shares and the transfers was an acceptance of the contract, and that A. was liable to indemnify B. against all the consequences springing from the ownership of the shares. The opinion of the Master of the Bolls, Lord Romilly, in this case is an instructive statement of the law on this peculiar method of dealing at the Stock Exchange of London, and we shall quote certain pas- sages. "When a man," said he, "sells or buys shares Opinion of " through his broker on the Stock Exchange, he enters iii°y, m.bT " into an implied contract to sell or buy according to " the custom and usages prevalent in that body. For "instance, in this case, it was strongly argued that " there was no privity between the plaintiff and the de- " fendant, that they personally entered into no contract " with each other, and that neither authorized any agent " to enter into a contract with the other. The Stock "Exchange, with its ramifications, is the only body 220 THE STOCK BBOKEB. [PAET II. " through which stock, shares, and the like, can be " bought or sold by the public. No doubt A. may "enter into a contract with B. to sell shares to him " without the intervention of the Stock Exchange, but " such transactions are of very rare occurrence, nor do " I remember to have met with one which has been " made the subject of any decision in any court of law "or equity. The invariable, or almost invariable, " practice is, to buy and sell through the medium of " the Stock Exchange ; and unless the shares can be " so bought and sold, they are not considered to be in " the market. The question, then, is, what is the nature " of the contract, which a man enters into, when he " directs shares to be bought or sold through the in- " strumentality of the Stock Exchange ? The answer, " in my opinion, is a very plain and obvious one : he " undertakes to buy and sell according to the practice " and usage of the Stock Exchange, assuming of course " such practice and usage not to be illegal. That prac- " tice and usage may, I believe, be stated to be gener- " ally to this effect : The broker instructed to buy shares " enters into a contract with a jobber, who undertakes " to deliver, on a particular day, a certain number of " shares, at a specified price ; the jobber then buys those " shares at any price he pleases from another broker, " who is instructed to sell shares, and this other broker " contracts to deliver these on the day specified ; when " the day arrives, the names of the seller and purchaser " are exchanged, an instrument of transfer is presented " to the person who instructed the broker to buy, who "accepts the shares, and thereupon the transaction, as " between the seller and the buyer, is complete ; while it CHAP. VI.J EFFECT OF USAGE OF TBADE ON CONTEACT. 221 " is in progress the broker is liable to the seller to pay " him the price at which the shares were sold to the "jobber, the jobber is liable to pay that price to the " broker, and, on the other hand, the broker instructed " to buy the shares is liable to pay the jobber, and the " person who instructed the broker to buy is liable to " pay him the price for which he agreed to purchase " the shares from the jobber ; when the day arrives and " the names are exchanged, all the prior steps and lia- " bilities are overlooked, and the seller of the shares " transfers them to the buyer, and the money is paid. "I can see nothing illegal or immoral in the trans- " action ; it is the regular recognized course ; it is what " all persons who have recourse to the Stock Exchange "submit to; they enter into a contract, not with a " specified person, but with a person whose name is to " be disclosed afterwards when the transaction is com- " plete. It is not, as has been supposed, that the seller " of the shares constitutes an agent to find out, and " enter into a contract with, some particular buyer, or, " on the other hand, that the buyer does the same as " to the seller, but both parties agree to be bound by " the usage of the Stock Exchange, which binds both " parties from the beginning, but which leaves each of " the parties to the eventual contract, ignorant of the "other, till the day arrives, and the instrument of " transfer is executed. It was put in the argument, as " resembling a contract by which A. sells to B., B. to " C, C. to D., and D. to E., and at the request of B., " C, and D., A. executes the transfer to E. ; but, in " truth, this does not appear to me to put the case suf- " ficiently high ; it is, in my opinion, an engagement 222 THE STOCK BEOKEK. [PAET II. Sheppard v. Murphy, Grissell v. Bristowe, Hawkins v. Maltby, ap- proved. Coles v. Bristowe. " entered into by A. on one side, and E. on the other, "that through the instrumentality of certain other " persons, whoever they may be, certain shares shall be " sold and bought, and they undertake to complete the " contract with the other person, whoever he may be, " who buys on one hand and sells on the other. It is " a transaction regulated by a particular practice, having " reference to contracts of this description only, a prac- " tice long subsisting, recognized by courts of law, of "which all parties are cognizant, and from which " neither party can recede. It is obvious, also, that it " is founded on common sense and common honesty, for " it is of no sort of importance to A. to know, to whom " his shares are transferred, nor is it to B., to know " from whence the shares come. It is a machinery by " which A. sells to B., and they are, in fact, in law " and equity, the ultimate contracting parties. When, " therefore, the transaction is complete, the necessary " consequences flow from it, of which one is, that the " buyer must indemnify the seller from all the conse- "quences flowing from the ownership of the shares "subsequent to the transfer." His lordship referred approvingly to Sheppard v. Murphy, 1 and Grissell v. Bristowe, 2 and Hawkins v. Maltby. 3 In Coles v. Bristowe, 4 the plaintiff contracted by his broker, on the Stock Exchange, for the sale of shares in a company to the defendants, who were jobbers for a future day, called settling day. The jobbers, on name day, before the settling day, in ac- 1 1 Ir. Eep., Eq. 490; 16 W. E. 948. * L. E., 3 C. P. 112. S L. E., 3 Ch. App. 188. * L. E., 4 Ch., App. 3. CHAP. VI.] EFFECT OF USAGE OF TRADE ON CONTRACT. cordance with a custom of the Stock Exchange, gave to the vendor's broker the names of several different persons, as ultimate purchasers, to whom the shares were transferred in different parcels. The brokers of the vendor had deeds of transfer executed by him, and on settling day handed them with the certificates to the jobbers, who then paid the price agreed upon. In the mean time the company had stopped payment. The several transferees had, through their brokers, paid up the purchase money to the jobbers, but had not yet received the deeds of transfer, and the plain- tiff, whose name remained on the list of shareholders, was obliged to pay calls on the shares. On a bill filed against the jobbers for an indemnity, the court held, that the contract must be interpreted by the rules of the Stock Exchange, and that after the jobbers had paid to the vendor his purchase money, and given the names of the transferees to the vendor, who had executed transfers which the transferees' brokers had received, the liability of the jobbers was at an end. In Maxted v. Paine, 1 the plaintiff sold through his Maxted ». brokers on the Stock Exchange, inter alia, ten shares in Overend, Gurney & Co., Limited, to the defendant, a jobber, who, on the "name day," passed a ticket to the plaintiff's broker having the name of one Goss as ultimate buyer. No objection being made to the name, the plaintiff executed a transfer to Goss of the shares, but the transfer was not registered, and the plaintiff's name remained on the books as shareholder. Subsequently, it was found that the brokers named on the ticket as Goss's brokers had been instructed to buy 1 L. R., 6 Ex. 132 [1871]. 223 224 THE STOCK BROKER. [PART II. by one Spry, and had, in fact, largely bought for Spry, as undisclosed principal, and the ten shares had been delivered to them as part purchases, but Goss's name had been passed in pursuance of Spry's instruc- tions, and by an arrangement through which Goss, who was a " straw man," allowed his name to be used. The purchasing brokers, as well as the defendant, were ignorant of the arrangement; but no objection was taken to the name within the time limited by the rules of the Exchange therefor. The plaintiff was com- pelled to pay calls, and, being unable to recover from Goss, he proceeded against the defendant. The court held the action not to be maintainable, it being obvious that everything had been done for completing the transfer, so far as the defendant was concerned; ac- cording to the rules of the Stock Exchange. Lord Blackburn said that in the present case, since the defendant had completely fulfilled his contract by passing a name in on the name day, really issued by a member of the Stock Exchange, he was not liable for any mistake or misconduct on the part of the issuers of the ticket, not having been applied to within the time limited by the rules therefor. Cock- burn, C. J., thought that, as Goss was the ultimate purchaser within the meaning of that term as applied on the Stock Exchange, the question was no longer an open one. Bayiiffeu. In Bayliffe v. Butterworth, 1 the defendant, who Butterworth. . . , . resided at some distance from Liverpool, authorized the plaintiff, a broker there, to sell for him certain scrip shares. The plaintiff sold them to C, another 1 1 Exch. 425. CHAP. VI.] EFFECT OE USAGE OF TRADE ON CONTRACT. 225 Liverpool broker, who, the shares not being delivered on the day agreed on, bought others at the market price, and claimed the difference between the contract price and the market price. The plaintiff, having paid this difference, brought an action to recover it. On the trial it was proved to be the usage at Liverpool for the brokers to be responsible to each other on these contracts, and that the plaintiff knew of the usage, Semb i et - ltis The court held the defendant was liable; and semble ^g t ^g" al bv Parke and Eolfe, BB., that it was immaterial principalis J aware of whether the plaintiff was aware of the usage or not. 1 usage or not. In Markham v. Jaudon, 2 plaintiff employed de- Markhams. fendants to purchase stocks for him upon margin, he agreeing that all transactions in stocks should be in every way subject to the usages of defendants' office. In an action for a conversion by an alleged sale, with- out notice, of the stocks purchased, defendants offered to prove that it was the custom of their office to sell, on account of failure to furnish margin, at the Stock Exchange without giving notice to the customer of the time and place of sale, and the court on appeal . held, overruling the court below, that such evidence was admissible, as such an agreement was not opposed to public policy. But if the rule of the Stock Exchange be not an Rule not existing one, at the time the contract is entered upon, made^er it is not binding on non-members. t e oontract - Thus, in Westropp v. Solomon, 3 A. employed B., a "Westropp ». broker and member of the Exchange, to sell for him certain paper purporting to be scrip in a projected 1 See Sutton v. Tatham, 10 A. & 2 41 N. Y. 235. E. 549. • 8 C. B. 345. 15 226 THE STOCK BROKER. [PART II. Distinction between rules binding on members and non- members. railway company; subsequently B. sold these certifi- cates of scrip to C. and handed over the proceeds to A. It was then found that the scrip was forged, and B. was called upon, pursuant to a resolution of the Stock Exchange, then passed, to pay C. on an agreed- upon value for the scrip. In an action against A. by B., the court held, inter alia, that A. was not bound by the terms of a resolution that was passed after the formation of the contract, however such a resolution might bind a member. The preceding case suggests the distinction between rules that may be binding on members alone, and those that may be binding on members and on non-members alike. A rule to be binding on a non-member must be such a one as is reasonable, though he might be bound, whether he was aware of its existence or not; but a rule can never be reasonable that violates any right the law gives him, or that in any way tends to violate the obligation of his contract. Thus, as was held in the preceding case, it is obvious that an after- made rule can never bind a non-member, for he can never know how he is contracting, though such a rule might very Well bind a member, who must respect all the laws of the association he is a member of. The foregoing case is a good illustration of this principle, and the reader is also referred to the case of Tompkins v. Safferty, quoted on page 68, as another excellent example. The following cases are examples of rules and customs which have been considered as violating the require- ments of public policy and morality, and unreasonable with regard to a non-member. CHAP. VI.] EFFECT OF USAGE OF TRADE ON CONTRACT. 227 In Shaw v. Spencer, 1 a certificate of shares of stock Shaw v. r iij Spencer. standing in the name of A., as trustee, was pledged to secure his own debt, and the court held, that the pledgee was put on his inquiry by the notice of the trust, as the trustee had prima facie no right to pledge thus for his own debt. Evidence was offered of the existence of a custom that it was common to issue certificates of stock in the name of one as trustee, when there was in reality no trust, and that therefore the pledgee was not bound to take notice of the trust expressed on the transfer. But the court said that this had no legal bearing on the question. The circumstance that stock certificates issued in the name of one as trustee, and by him transferred in blank, are constantly bought and sold in the market without inquiry, is unavailing. A usage to disregard one's legal duty, to be ignorant of a rule of law, or to act as if it did not exist, can have no standing in the courts. In Holmes v. Day, 2 it was held, that a usage among Holmes v. brokers to buy stock for their customer deliverable in sixty days at buyer's option, and then to purchase themselves stock at thirty days, and deliver it at the end of the sixty to the customer, at an increased price and interest, with commissions, was a bad custom, and the customer, in the absence of knowledge of it, was not bound. Morton, J., said, " There are many, forcible objections Remarks of " to its validity ; but a conclusive one is that it is ° r ° n ' " against sound policy and good morals. It authorizes " the broker, in his discretion, to disregard his instruc- " tions, and, instead of acting solely in the interest of 1 100 Mass. 382. [1866]. » 103 Mass. 306. 228 THE STOCK BROKER. [PART II. " his principal, to speculate upon the transaction for "his own benefit. It creates in the, agent an interest " adverse to his principal, and is inconsistent with his " duty and the obligations which the law imposes upon "him when he enters into the contract of agency. " Such a usage, unknown to the principal, cannot be " supported." Evans v. j n Evans v. Wain, 1 M. & Co., brokers in Philadel- Waln. phia, sold certain stock for the plaintiffs, through the agency of W., another Philadelphia broker, by the defendants in New York. On W.'s failing, the de- fendants only remitted the stock after deducting the amount of W.'s own indebtedness to them. The de- fendants offered to prove that it was a custom among stock brokers, when dealing with stock brokers of other cities, to put all the transactions between them into one account, and to remit or draw for the general balance. This the court below refused to admit unless it was proved that the plaintiffs knew of the existence of such a custom, and charged the jury that if they believed that the stock sold by the defendant belonged to the plaintiffs, and that the defendants were aware of that, and knew that the order to sell was given by the broker, W., they could not credit W. with his own in- debtedness to them and remit the balance, but must, after deducting their commission, remit the rest of the balance to the plaintiffs. Williams, J., in deliver- ing the opinion of the court, affirming the court below, Remarks of said, " Nor was there any error in rejecting the offer. '•"*** The defendants did not receive the stock from "him (W.), and they were not bound to account to 1 21 P. P. Sm. (Pa.) 69. CHAP. VI.] EFFECT OF TJSAGE OF TRADE ON CONTRACT. 229 " him for the price for which it was sold. * * * But " if the defendants had received the stock from W., " knowing as they did that it belonged to the plaintiffs, " they would have no right to apply the proceeds " arising from its sale to the payment of W.'s indebt- " edness. If there is a custom among stock brokers, " when dealing with others, to appropriate money be- longing to the principal to the payment of his " broker's indebtedness, the sooner it is abolished the " better : mains usus est abolendus. A custom so in- " iquitoUs can never obtain the force or sanction of the " law, and the marvel is that it should be set up as a " defence to this action." 1 1 See, also, the case „. a ins v: Safferty, L. B., 3 App. Cas. 213. CHAPTEK VII. RELATION OF THE VENDOR AND VENDEE AFTER THE CONTRACT. PAGE SECTION I. — RELATION OF VENDOR AND VENDEE AFTER AN EXE- CUTED AND EXECUTORY CON- TRACT OF SALE. Executed contracts . . . . 230 Executory contracts .... 231 Rule in Dixon v. Yates . . . 232 Contracts sometimes for spe- cific securities 233 SECTION II.- -SPECIFIC PERFORM- ANCE. Duke of Somerset v. Cookson 234 Specific performance for exec- utory contracts 235 \ 1. ENGLISH CASES. Rule deducible from the older cases 238 Duncuft v. Albrecht . . . .239 Distinction between govern- ment bonds and shares of a private company .... 239 Sheffield Gas Co. v. Harrison . 240 Hawkins v. Maltby .... 244 Principles deducible from the preceding cases 245 \ 2. AMERICAN CASES. Ross v. Union Pacific R. R. Co. Dictum of Miller, J. . 251 Foil's Appeal, Pennsylvania . 252 Remarks of Paxson, J. . . . 252 Principles deducible from the cases on this subject . . . 253 Executed contract of sale. SECTION I. — RELATION OF VENDOR AND VENDEE AFTER AN EXECUTED AND EXECUTORY CONTRACT OF SALE. It is important to know what the relative position of vendor and vendee is after the contract of sale, but before any delivery of the securities is made. It is well known that contracts of sale are of two kinds, executed and executory. An executed contract of sale is where a man buys a specific thing, as an ear-marked bond, or share of stock, and nothing remains for the vendor but to de- liver, whereby the vendee owns the thing sold abso- lutely after the contract; and if it be lost or stolen, the latter is the loser; or, if it be not delivered to him, he has several remedies for the failure to deliver; 230 CHAP. VII.] RELATION OF VENDOR AND VENDEE. 231 as, for instance, lie may bring an action of trover, or a bill for specific performance, etc. An executory contract, on the other hand, is, where Executory J contract of something remains for the vendor or vendee to do sale. before delivery, and constitutes only an agreement to sell, and it does not become an executed contract of sale until something further is done by the parties. If in this condition of things the article contracted for be lost, or stolen, or destroyed, the loss falls, not upon the vendee, but upon the vendor ; and if the vendor fails to make a delivery, the only remedy the vendee has, is an action for the breach of the contract. Thus, for instance, where a man contracts to sell fifty shares of stock, this is an executory contract, since any fifty shares of the stock in question will satisfy the terms of the sale. So, where one buys a certain quantity of gr,ain in a field, uncut, this is also an executory contract ; and in neither case will the con- tract become executed until the article or commodity stipulated for be separately ascertained, or ear-marked in some way; as if, in the former case, the stock broker should set apart a particular certificate for fifty shares of stock, or, in the latter, the grain should be cut and the stipulated quantity set apart and stored for delivery. Thus, in Heseltine v. Siggers, 1 the court said that Heseitine ». a contract for the sale of stock, exchequer bills, scrip, and securities, which pass by delivery, differs from a contract for the sale of a specific chattel, inasmuch as a contract for the sale of the former would be satisfied by the delivery of any securities of the same kind. 1 1 Exch. 856. 232 THE STOCK BKOKEK. [PART II. Dixon v. Tates. Remarks of Parke, B. G-ilmour v. Supple. And it is to be observed, tbat it is not necessary, as formerly, to pay tbe money presently to make the contract complete, for the modern rule is, that the promise to pay constitutes the consideration. The rule with regard to sales has been stated in Dixon v. Yates, 1 by Parke, B. "I take it to be clear," said he, " that by the law of England the sale ' of a specific chattel passes the property in it to the ' vendee without delivery. * * * Where there is a sale of goods generally, no property in them passes ' till delivery, because until then the very goods sold ' are not ascertained. But where by the contract itself ' the latter thereby agrees to take that specific chattel, ' and to pay the stipulated price, the parties are then ' in the same situation as they would be after a de- ' livery of goods in pursuance of a general contract. ' The very appropriation of the chattel is equivalent to ' delivery by the vendor, and the assent of the vendee ' to take the specific chattel and to pay the price is ' equivalent to his accepting possession. The effect of ' the contract, therefore, is to vest the property in the ' bargainee." And again in Gilmour v. Supple 2 the rule was laid down in the same way. " By the law of England, by " a contract for the sale of specific, ascertained goods, "the property immediately vests in the buyer, and a " right to the price in the seller, unless it can be shown " that such was not the intention of the parties." This was pronounced by the present Lord Blackburn to be " a very accurate statement of the law." With regard to the seller's rights, it is to be remem- 1 5 Barn. & Adol. 313. 2 11 Moore, P. C. C. 566. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 233 bered that he may maintain an action in trover against the buyer until the latter fulfils all the conditions of the contract, even after delivery, as the title has not passed, and the loss by fire, etc., falls on the vendor. As where A. sells some Pennsylvania bonds to B. and delivers them at a certain price, B. to deliver to A. certain Reading bonds at a given price in three days, and B. fails to do so. Here no title in the latter bonds passes till B. performs his part of the contract, though A. has delivered the Pennsylvania bonds ; and A. may maintain trover against B. for the bonds delivered by him. There are also manv sales of an executory character, Conditional ^ ill sa ^ execu " such as conditional sales, where the buyer has the option of delivering or not, etc., and of course in such cases the sale does not become executed till the election is made, and the goods set aside, separated, or ear- marked in some way. Having thus seen the distinction between these two kinds of contracts of sale, it will be observed that nearly all the sales at the Stock Exchange are of the latter character, and an illustration may be seen in the case of Heseltine v. Siggers, 1 quoted on a former page, Heseitine v. it being extremely rare for a stock broker to buy or lggers " sell specific shares of stock, or scrip, or bonds. It may, however, happen that under certain cases Contracts ■ I i i n *n •. i ,i n sometimes the sale may be tor a specific security, and therefore f 0r specific executed; as where the stock broker contracts for all seounties - of the stock of a certain corporation. Here the prop- erty at once vests in the buyer, because, the vendee having a right to every share of that stock, the goods 1 1 Exch. 856. 234 THE STOCK BROKER. ' [PART II. are sufficiently ear-marked. So where the stock broker contracts for all those certain shares then in B.'s hands, it being ascertained how many he has, the goods may then be said to be ear-marked, because nothing remains for the seller to do but deliver, the setting apart being sufficiently made by the use of the word " all." It is true the seller may subsequently purchase more stock of the same kind, but his duty then is to separate, if necessary, the second lot from the first, on the principle that if goods once set apart become subsequently mixed, the loss, if any, falls upon the vendor. Seeing then that in the vast majority of sales at the Stock Exchange the contract is an executory one for an article not at the time specifically determined, the question has arisen as to whether the buyer shall ever have a remedy against the seller other than the ordi- nary one by an action at law for damages. And this leads to the consideration of the doctrine of specific performance with relation to securities sold on the Stock Exchange. SECTION II. — SPECIFIC PERFORMANCE. Bin for spe- Before entering into the discussion of specific per- ance lies for formance, it may be remarked that, in a sale of a contract of chattel or thing, specified or ear-marked, a bill for specific performance will lie where there is not an equivalent or adequate remedy at law. Duke of Thus, in Duke of Somerset v. Cookson, 1 where Somerset v. Cookson. the Duke of Somerset, as lord of the manor of Cor- bridge, part of the estate of the late Earls of North- 1 3 P. Wa. 390. CHAP. VII.] RELATION OP VENDOR AND VENDEE. 235 umberland, was entitled to a remarkable altar-piece of silver, as treasure trove, which had been sold, by some one who got possession of it, to a goldsmith, it was held, that a bill of specific performance would lie, as it was not merely the intrinsic value of the chattel that Lord Somerset desired. In analogy, then, to this case, though in the absence of direct authority on the subject, there can hardly be any reasonable doubt that a court of equity will decree specific performance in reference to a transfer of stock, when there is no adequate remedy at law. Though persons have doubted it, the courts have uniformly granted this equitable remedy where they thought there was not a sufficient remedy at law, making no distinction between this and any other species of per- sonal property. 1 With the assumption, then, that the rule is settled Specific per- • i i '11 i ■ •/> i t n forcnance of with regard to a bill lying for the specific delivery of an executory things personal, we shall proceed to examine the de- sale, cisions on the subject of specific performance relative to stocks and similar securities. § 1. English Cases. • In Cud v. Eutter, 2 the Lord Chancellor, Parker, Cud v. Rut- afterwards Lord Macclesfield, overruling the lower court, refused to decree specific performance in rela- tion to a transfer of South Sea stock. In this case the defendant, in consideration of two guineas paid down, had agreed to transfer one thousand pounds' worth of South Sea stock, at a fixed price, at the end 1 See following cases in text. 2 1 P. Wm. 671 ; better reported in 5 Viner, Abr. 538. 236 THE STOCK BROKER. [PART II. Colt v. Net- terville. Cappur v. Harris. Gardener v. Pullen et al. of three weeks. The plaintiff on that day demanded the stock and offered to pay the price, and on the defendant's declining to transfer the stock, but offer- ing only to pay the difference in price, the plaintiff brought a bill to have the stock assigned. The court below ordered a specific performance, but the Lord Chancellor reversed this decree, on the ground that the agreement to buy was -a purely executory one, for a thing not specific, and there was, in addition, a sufficient remedy at law. "This differs," he said, "very much from the case of a contract for land, " some lands being more valuable than others, or, at " least, more convenient than others, to the purchaser; " but there is no difference in stock. One man's stock " is of equal benefit and convenience as another's." In Colt v. Netterville, 1 Lord King overruled a de- murrer to a bill for specific performance of stock, on the ground that something might turn up of peculiar hardship in the case. In Cappur v. Harris, 2 it was held in relation to contracts for South Sea stock, " First, that if a con- " tract be executed, a court of equity will not unravel " or break into it ; secondly, if it is only executory, " and a man comes to have it carried into execution, " there a court of equity will not aid the plaintiff, but " leave him unto such remedy as he can have by law." In Gardener v. Pullen et Phillips, 3 the defendant Pullen lent the defendant Phillips three shares of stock on a memorandum in writing to reassign such shares on demand. Phillips neglecting to do so, the plaintiff 1 2 P. Wm. 305. 8 2 Vernon, 394. Bunbury, P. 135. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 237 and he executed a deed poll to Pullen, whereby Phil- lips and the plaintiff became bound in a penalty that Phillips should reassign the shares on a certain day. The shares were not retransferred, and Pullen brought an action against Gardener, Phillips being bankrupt. Gardener, losing the action, filed a bill, offering to pay the cost of the stocks at the time of the loan, they having risen in value, and the court decreed that Gar- dener should transfer the stock, and subsequent divi- dends, or have his bill dismissed with costs. In Doloret v. Rothschild, 1 the defendant contracted Doloret v. Rothschild. to grant a loan to the Neapolitan government in con- sideration of a certain annual sum to be paid by that government, called Neapolitan Rentes, or Neapolitan stock. This stock was brought by the defendant into the market in the manner usual in cases of public loans ; and the mode in which he disposed of it, was by selling scrip receipts, which were issued to the pur- chasers on their paying ten per cent, on the amount of the stock. In these scrip receipts it was expressed, that on payment of the balance, on or before the 1st of February, 1823, the bearer would be entitled to that amount of stock. The defendant purchased some of the scrip certificates, but failed to pay the balance in the proper time. A bill was filed to compel the de- fendants to issue the certificates on tender of the bal- ance, but on a demurrer, the court thought it too late, time being of the essence of the contract ; but Sir John Leach was of the opinion that a court of equity could decree specific performance, on the ground, that the bill asked for a delivery of certain certificates, and a 1 1 Simon & Stuart, 590. cases. 238 THE STOCK BROKER. [PART II. judgment in money, in such a case, might be of no value to the plaintiff, since the value of the judgment would depend only on the personal responsibility of the par- ties, while the actual certificates gave a claim on the government itself. It is to be observed, here, that the bill asked for the delivery of certain certificates of stock in defendant's possession to confirm a title, and not for shares of stock ; at all events, it was distinguishable from Cud v. Rutter, where no such particular case of hardship is reported. Ruiededu- The rule, then, deducible from these cases, most of the older them early ones, seems to be that a decree for a specific performance of a purely executory contract will not lie where an action and judgment at law will put the plain- tiff in substantially as good a position as the actual transfer of the stock. In Cud v. Rutter, the defend- ant offered to pay the difference in price, and an equiv- alent amount of stock could have thus been purchased at the Stock Exchange by the plaintiff without any loss to himself. But in Doloret v. Rothschild, the dictum of Sir John Leach indicates, that, where a mere money judgment would not practically put a buyer of shares in as good a position as their actual delivery, , a bill in equity would lie. And it is obvious that wherever shares of stock, contracted for, cannot readily be purchased in the market, a case arises, where a mere judgment for damages is not the equivalent of the transfer of the shares, and does not put the purchaser in as good a position as their actual delivery. Hence, following the reasoning of these early decisions, we see, in the later ones, a tendency of courts of equity CHAP. VII.] RELATION OF VENDOR AND VENDEE. 239 to interpose to enforce a specific performance of a con- Tendency of tract for the purchase of shares, on the ground, that cases is to de- C1"GG SrfPClDC when the shares of a company are limited in number, a performance party may suffer a great damage by a breach of the e cutory con- contract not capable of being compensated in damages traots ' alone. In Duncuft v. Albrecht, 1 where a bill was filed for Duncuft ». • i Albrecht. specific performance in reference to shares, the court allowed it, the Vice-Chancellor saying, " I agree that " it has been long since decided that you cannot have " a bill for the specific performance of an agreement to "transfer a certain quantity of stock. But, in my " opinion, there is not any sort of analogy between a Distinction . ~ „ i i p i made be- " quantity of 3 per cents., or any other stock ot that tween stock " description (which is always to be had by any person the govern- "who chooses to apply for it in the market), and a ^ares*" "certain number of railway shares of a particular " description, which railway shares are limited in num- " ber, and which, as has been observed, are not always " to be had in the market ; and as no decision has been " produced to the contrary, my opinion is that they are " a subject with respect to which an agreement may be " made which this court will enforce." Having seen now that a bill to enforce the specific performance of the stock contract, even though it be executory only, will lie, we shall proceed to examine some cases as illustrations of the general principles already indicated, which guide the courts in interfering to compel such specific performance, or in refusing to do so. In Shaw v. Fisher, 2 the plaintiff employed a broker jft*™*' 1 12 Simons, .189. * 5 De G. M. & G. 596. 240 THE STOCK BROKER. [PART II. to sell railway shares, and the broker employed an auc- tioneer who sold them to the defendant. Subsequently the defendant employed the same auctioneer to resell the shares, and the vendee's name was handed in by the auctioneer to the plaintiff for a deed of transfer, which was thereupon executed, conveying the shares to the vendee, who, however, refused to get registered as a shareholder. A year after this, calls being made on the plaintiff, he brought a bill to force the defendant to fulfil his contract ; but the court held, that it would not lie, as the plaintiff, having executed the transfer to the subsequent vendee, had put an end to the privity of contract between himself and the defendant. Sheffield Gas j n Sheffield Gas Company- v. Harrison, 1 where there Co. v. Ham- r •' ' son. was a contract by the defendant to take shares in a joint stock company and to execute the deed of settle- ment under which it had been formed, and by which the person so executing it became a partner, it was objected that this was a bill to compel a person to become a partner, which could not be enforced specifi- cally. The argument on the part of the plaintiff was that joint stock companies of this kind differed from ordinary partnerships, and that as the responsibility for calls was a personal one, which attached to the vendor of shares, so long as his name remained on the company's share register he was entitled in equity to compel a vendee to have his name substituted, and to sign the deed of settlement, even though he should afterwards sell and retransfer. The bill was, however, dismissed, on the ground that it sought to compel the defendant to become a partner. 1 17 Beavan. 294. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 241 The Master of the Rolls said, " It is a contract to Remarks of . i tne Master of " become a partner in a partnership, of which, accord- the Roils. " ing to the terms of the deed, the defendant could " cease to be a partner in fourteen days. * * '* To " specifically perform a contract of this description " would be simply nugatory." How far the reasoning upon which the decision Effect of the • t ^ t> principles de- in this case proceeded, is applicable to the case of tided in the existing joint stock companies, especially in America, case, may admit of considerable doubt. Such companies may all be defined to be partnerships with limited liability, though differing in essential respects from such companies as the Sheffield Gas Company, — created under a deed of settlement, — which resemble more nearly the " limited partnerships" created and authorized by the statutes of several of our States. 1 In them, a partner cannot assign his shares unless the assignee becomes a party to the partnership articles, and is approved of by the remaining part- ners. But, if applied to the shareholders of all corporations, this reasoning would prevent a court's compelling, in any case, a specific transfer to, or acceptance of, shares by a vendee, and it will prob- ably be necessary to restrict it in the manner just indicated. In Harris v. North Devon Railway Company, 2 the Harris ». directors had the authority, on non-payment of calls, s^iway Co. n to sue for. them, or forfeit, and sell out, the shares. They proposed to a shareholder, to relieve him from further liability, on his consenting to an absolute 1 See Act of June 2, 1874, and Laws of Pennsylvania, 1874, p. 271. its Supplements, in Pennsylvania ; * 20 Beavan, 384. 16 242 THE STOCK BEOKEE. [pAET II. forfeiture, which he did, but, subsequently finding out that he was a person of means, before the final steps were taken, the directors refused to complete the contract., The court refused to compel them to do so, on the ground that they were trustees for all the shareholders, and were bound to use their dis- cretion for all, and if they found, before the trans- action was concluded, that it was not for the benefit of all that the man should be released, they could retract, and further there was no valuable considera- tion. This decision was by Sir John Eomilly, and its reasoning proceeds, not so much on the contract itself, as on the power of the directors to make it, at least so as to exclude the subsequent exercise of the discretion by law vested in them. EoMnsonv. In Robinson v. Chartered Bank, 1 the question Bank. arose, as to whether a bill would lie, to compel the bank to approve of a transferee, who in all other respects was a fit person, excepting that he was the nominee of a rival bank, the directors having, under the bank's charter, to approve before the transferee could become a shareholder. The Master of the Rolls overruled the demurrer to the bill, thinking the directors were bound to use their discretion reasonably, but did not state whether there was in the case sufficient ground for them not to give it, but he said he would abide the result of the issue of the cause. in re London In In re London, etc., Bank, 2 A. contracted to buy shares in a company, after a petition had been presented for winding up, but before it had been .ad- 1 L. E., 1 Eq. Cas. 32. ' L. E., 1 Ch. App. Cas. 433. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 243 vertised, and in ignorance of the fact, and the Court of Appeals reversed the decision of Lord Romilly, M. R., who had placed the purchaser on the register. Turner, J., said, " These shares were not transferred Remarks of "into the name of the purchaser. The transactions " were in this respect incomplete, and, under the cir- " cumstances of this case, I do not think a court of " equity could or would compel the purchaser to com- " plete them, and to register the shares in his name." In Poole v. Middleton, 1 by the deed of settlement of Poole v. a joint stock company, it was provided that " no share- " holder should be at liberty to transfer his shares " except in such manner as a board of directors should " approve." A shareholder had contracted to sell his shares, and the court held, that he must specifically perform by executing the transfer, though the directors refused their consent. The Master of the Rolls said, " What then is there to deprive a shareholder of his "right to give another his power of receiving divi- dends, or his liability to any debts which may be " incurred by the company ? The clause does not say " that no shareholder shall be at liberty to enter into " any contract for the sale of his shares, except with "the consent of the directors. * * * But a transfer "necessarily infers that a prior contract had been " entered into, and then the clause says that the trans- " fer shall not take place, except in such manner as " the board of directors shall approve. I do not say "whether the plaintiff will become a shareholder, " unless they approve of the manner in which the " transfer is made, etc." 1 29 Beavan, 646. 244 THE STOCK BROKER. [PART II. Evans v. Wood. In re Lon- don, etc. Evans v. Wood. In Evans v. Wood, 1 A. sold to N., a jobber, in the Exchange, and B. purchased from N., five shares in a company. N. gave A. the name of B. as purchaser, according to the usage of the Exchange, and B. got an executed transfer from A., and the purchase money- was paid. B. was prevented by accident from having the registration made till the company had stopped payment. The company was wound up, and the liqui- dators registered all the transfers at the office, but refused to register B. It was held, that A. was en- titled, on a bill in equity, to a decree against B. for calls, and indemnity against future calls, and also that where the directors had a discretionary power to refuse objectionable transferees, in the absence of evidence of an objection to him, it was to be presumed the directors would have registered him. On comparing this case with In re London, etc., Bank, quoted above, it must be observed that in that case no steps had been taken to complete the contract to buy shares. It was a mere executory contract; while in Evans v. Wood, all the steps necessary, so far as the parties to the contract were concerned, to make it an executed one, had been completed. The five shares contracted to be sold had been ascertained and ear-marked ; the transfer was executed by the vendor, and the purchase money paid. The court, therefore, did not there interfere to compel specific performance of an executory contract. The contract had become an executed one, and the court merely compelled both parties to give full effect to it, as between each other. 1 L. E., 5 Eq. Cas. 9. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 245 In the same category falls the case of Hawkins v. Hawkins «. ° J Maltby. Maltby. 1 Here the plaintiff sold forty shares on the Stock Exchange by his broker to a jobber, and the defendant subsequently bought from the jobber, by a broker, one hundred shares, and his name was given the plaintiff, as the purchaser of forty shares. The plaintiff executed a transfer, and gave a deed of transfer, the consideration being left blank, to the defendant. The brokers filled in the consideration, and the defendant got the transfers, which he never executed, but kept them, though without repudiating the transaction. An order was made for winding up, and the court held, there was a contract between A. and B., and decreed, that the defendant specifically perform the sale and register of the transfer. And in Oriental Steam Co. v. Briggs, 2 the court said, where there is a clear contract to accept shares, and the remedy is shown to be inadequate at law, the court will decree specific performance, but where, as in the case at bar, there was a doubt as to the contract to accept the shares, and the inadequacy of the legal remedy was not clearly made out, and there was an unexplained delay of two years, the court would allow the demurrer to the bill. The principles deducible, therefore, from the Eng- lish authorities, of which the cases above quoted are leading instances, are : I. As a general rule, courts of equity will interfere Principles to compel specific performance of contracts for the frompreced- sale of shares of stock, or of other securities sold at mg cases ' the Stock Exchange, where there is no adequate 1 L. R., 6 Eq. Cas. 505. a 2 J. & H. 625. 246 THE STOCK BROKER. [PART II. remedy at law, or where such remedy will not put the party suing in as good a position. II. That an apparent distinction has been drawn between contracts for the sale of public stock and for the sale of shares of a private corporation, to the effect that, in the latter class of cases, a specific performance of the contract might be ordered, because the shares are not always to be had in the market, while in the case of government securities they could always be purchased. But the reasoning in these cases shows that this distinction is only one of degree, and that it does not exist, in principle, between the two classes of securities ; but that where public securities are not to be had in the market, or where, for any other equita- ble reason, an action at law would not put the party injured, in the same position, a court will grant relief of this character in the case of government securities, as well as of others, as in the case of Doloret v. Roth- schild, 1 above quoted, where Sir John Leach, although he refused on other grounds the relief prayed for, inti- mated that in such case a bill would lie. III. That with regard to contracts which, although originally executory, have been so far performed as to become executed, courts of equity will compel an en- tire specific performance of the contract so as to give full effect to it as between the parties to it. It must be admitted that, in principle, no distinction has been drawn, in regard to specific performance, be- tween those sales of securities which are simply execu- tory and those executed. In either case, where there is no adequate remedy at law, the courts have inter- 1 1 Simon & Stuart, 590. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 247 vened, or have held, that, in the absence of any- other equitable objection, a bill would lie: while, where a specific security had been sold, and the remedy at law was entirely adequate, the reasoning adopted by the courts would leave the parties to it. § 2. American Cases. We shall now proceed to examine the cases in the United States on the subject of the specific perform- ance of contracts for the sale of stocks and securities which will illustrate the principles already laid down. In Clark v. Flint, 1 a person had agreed, for a Clark v. valuable consideration and in writing, to hold a chattel subject to the order of the plaintiff. But he sub- sequently assigned it to another, with notice of the ■ agreement, and the court held, that the plaintiff could maintain a bill against the assignee for specific per- formance. Here the plaintiff only had a remedy at law against parties who were insolvent. In Todd v. Taft 2 (1863), it was held, that a bill in TodcU.Taft. equity would lie for the specific performance of an agreement to transfer certain shares of a corporation upon the maturing of a note, without days of grace, given for the price thereof, although, owing to a mis- take in the phraseology of the agreement, payment had not been offered until the last day when it would have been due, had the note been drawn in the usual form. Time was not of the essence of the contract, as shown by the circumstances. The court here took a distinc- tion between an executory and an executed contract. " It is true," said Dewey, J., " as contended in behalf Remarks of Dewey, J. 1 22 Pick. (Mass.) 231. 2 7 Allen, 371. 248 THE STOCK BEOKEE. [PAET II. Leach v. Eobes. Pollock v. National Bank. " of the defendant, that no legal transfer of this stock " to F. was effected by this contract, and the defend- " ant remained the legal owner of it. It was only an " executory contract by T. to convey the stock upon " certain conditions. But, practically, as regards F., " it created all the liability on his part to make the " payment therefor that would have attended a pur- " chase and transfer of the stock. It was to be his "upon the payment of a certain promissory note, " which he had given to the defendant. * * * It is to " be dealt with in equity much like the case of a sale " of stock, absolute on its face, but in fact designed to " secure the payment of a certain sum of money upon " a future day certain, where a bond or other paper "writing is given by the vendee, undertaking to " transfer the shares to the debtor upon payment at " the day named of the sum stated." In Leach v. Fobes 1 (1858), owing to a compromise with reference to a will, there was an agreement to transfer shares, and the court held, a bill for specific performance would lie, as there was not an ade- quate remedy at law. Here the bill prayed for a conveyance of land as well as a transfer of stock, and the court, without deciding whether it would have lain, had it asked for the transfer of shares alone, said that the prayers of the bill would be granted when the same bill asked for both. In New York, the subject is settled in the same way. Thus, in Pollock v. The National Bank, 2 it was held, that where a bank had permitted a transfer of 1 11 Gray, 506. * 3 Selden, 274. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 249 stock owned by a stockholder upon a forged power of attorney, and had cancelled the original certificates, it might be compelled to issue new certificates, and if it could not do so, to pay the value thereof. In Purchase v. Bank, 1 the court held, that after Purchaser an assignment of the bank stock, the bank, upon the application of the owner, was bound to permit a transfer to be made on its books, and issue new certificates, unless restrained by a court of competent jurisdiction. In White v. Schuyler, 2 it was held, that a specific "Whiten, performance of an agreement to transfer stock may be decreed, where the contract is clear, and the value of the stock very uncertain, so that a judgment at law will not compensate. In Cushman v. Thayer Manf. etc. Co., 8 P., the plain- Cushman v. tiff's husband, executed without a consideration an Manf. Co. assignment to the plaintiff, and delivered her the cer- tificates. Subsequently P. for a valuable considera- tion executed a transfer of the same shares to B., and had a transfer made on the company's books to him, B., however, having notice of the prior assignment to the plaintiff. By the rules of the company, no transfer is good unless the old certificate is delivered up to be cancelled. The plaintiff subsequently presented the certificates and demanded a transfer, and the court held, that a bill would lie to compel a transfer to her. In Cowles v. Whitman, 4 A. agreed with B., that Cowies v. A. in B.'s name should subscribe for five shares of stock, of a new bank, about to be distributed, and all 1 3 Kobt. 164. 3 31 Sickles, N. T. 365. 2 1 Abb. P., N. S. 300. * 10 Conn. 121. 250 THE STOCK BROKER. [PART II. Austin v. Gilkspie. Ashe v. Johnson. Baldwin t>. Common- wealth. the shares allowed on such subscription beyond what B. could pay for, should be paid for by and belong to A. A. subscribed in B.'s name for five shares, which were accordingly allotted, the first instalment being paid by A. B. then declared her inability to pay for any, and A. paid the remaining instalments, and brought a bill against B.'s administrator for specific performance, and the court allowed the bill to lie, saying this was a trust for A., which it was the province of a court of equity to enforce. In North Carolina, in Austin v. Gillaspie, 1 it ap- peared that A. had agreed, conditionally with others, to subscribe a certain amount to the stock of a company, and B. and C had agreed with him, in writing, that, if he would do so unconditionally, they would each take one-fourth of the subscription off his hands, and A. accordingly made the subscription. The court held, that a bill for specific performance would lie to execute the sale in accordance with the agreement. In Ashe v. Johnson's administrators, 2 the court de- clared that in a question of the specific performance of a contract, shares in a recently chartered railway stood on a very different footing from government stocks in England. In Kentucky, in Baldwin v. Commonwealth, 3 the Legislature by an act directed the commissioners of the sinking fund to sell the stock owned by the State in a turnpike company, and the latter, having adver- tised, made a conditional acceptance of a bid which 1 1 Jones, Eq. 261. » 2 Jones, Eq. 149. » 11 Ky. Rep. 417. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 251 was offered, and verbally directed their agent to notify the bidder of their action, which being done, the bidder accepted the terms, and so notified the com- pany. On a bill filed by the latter, the court held, inter alia, that the contract was completed when the notice of acceptance was accepted' by the board of commissioners, and that, although the act confer- ring on the commissioners the right to act had been repealed, yet a bill would lie to compel the specific performance of the contract ; as the repealing act, if applied to the contract which had thus been called into existence, operated to violate its obligations, which was forbidden by the Federal Constitution. In Ferguson v. Paschall et al., 1 the bill was dis- Fergusons missed for multifariousness, but Scott, J., said, " It ^. Dictum of "seems to be now settled, though it was once held Scott, J. "otherwise, that in general a specific performance "of a contract for the transfer of stock will not be " decreed." In Treasurer v.- Commercial Coal, etc. Co., 2 a court Treasurer v. f t .f> n „ Commercial oi equity decreed the specific performance of a con- Coal Co. tract to transfer shares of mining stock, owing to their fluctuating value, and the difficulty of finding out what the proper measure of damage was. In Ross v. Union Pacific R. R. Co., 3 there was a Ross ». Union contract to build a railroad and furnish materials, Co. etc., and the work was to be paid for in United States bonds, and in bonds and stock of the company. The plaintiff did a small amount of work, and, after making arrangements to do more, their contract was 1 11 Mo. 267. * 23 Cal. 390. 3 1 Woolw. C. C. Rep. 26. 252 THE STOCK BEOKEK. [PART II. declared forfeited, and a new arrangement made by the defendants with regard to the bonds, in payment of the second contractors, which would of course inter- fere with any rights to them the plaintiffs might have. An injunction was asked to restrain the issue and de- livery of these bonds to the second contractor and for specific performance. The court, Miller, J., said that in any view the contract was but an executory one, and that a bill would not lie, for this, as well as for other reasons. But speaking of the specific perform- ance in reference to transfers of stocks, etc., he said that government bonds were" like public funds in England, and might be bought in the market, and therefore a court of equity would not interfere to compel specific performance of a contract to transfer them ; that as to railroad bonds and stock, he was in doubt as to whether the distinction drawn in England would prevail here, but that he thought it was not a just one, where they could easily be procured in the market, but the point was not necessary to be. decided in the case. In Pennsylvania, there is no case exactly in point. Foil's Ap- In Foil's Appeal, 1 Paxson, J., said, where a bill was Remarks of presented to enforce the specific performance of a Paxson, J. trans f er f stoc ^ } « xhe avowed object of the pur- " chase of the stock and the filing of this bill, was to " get the control of the bank for G. and his friends. "* * * The general rule is that equity will not " enforce specific execution of a contract relating to "personal chattels. * * * This is especially true of "stocks and public securities which have a known 1 36 Legal Int. 495. CHAP. VII.] RELATION OF VENDOR AND VENDEE. 253 " market value. The disappointed purchaser can go " into the market and purchase a corresponding num- " her of shares of the same stock. * * * j know of " no instance in this State, in which a court of equity " has decreed specific performance of a sale of stocks. " * * * But we need not pursue this subject further, " as the case in hand turns upon a different principle. " While the legal right of the complainant to buy up " sufficient of the stock of this bank to control it in the " interest of himself and friends may be conceded, it " is by no means clear that a court of equity will lend "its aid to help him. * * * This purchase has not " even the merit of being an investment on the part " of the plaintiff." This review of these American cases seems to afford American us the same general principles as the English cases, the same gen- These cases, like the English, have drawn a distinc- pie S aTthe" tion between the case of public, or government stocks, En s llsh - and the shares of private corporations, by dicta, though they have never positively decided that relief would not be granted in the case of public stock, for in Ross v. Northern Pacific R. R. Co. the case turned Koss ®- Northern upon another point. ' Pacific R. R. It may also be added with regard to railroad shares that there is no difference in principle between them and shares in any other kind of company. It is true that Miller, J., in his remarks in Ross v. the Railroad Company, 1 might be supposed to inti- mate this; but this is but a dictum, and the ques- tion whether other similar shares could in that case have been had in the market was not discussed; while 1 1 Woolw. C. C. Eep. 26. 254 THE STOCK BROKER. [PART II. in North Carolina 1 relief in regard to such shares was granted. It is true that, in Foil's Appeal, Paxson, J., did say- that there was no case in Pennsylvania that had de- creed a specific performance of stock ; but that case went off on another question, the court refusing to enforce a man's agreement where it was avowed that the only object was to control the corporation, that being clearly a case for an action at law. That case, therefore, does not militate against the general rule. Result of A cursory examination of these decisions undoubt- tne review of ^ the eases. e dly presents difficulties. In many cases there ap- pears to be drawn, as in the early English cases, a distinction "between an executed contract of sale, as where the vendor has delivered certificates of stock to the vendee, with a blank power of attorney, and nothing but the actual transfer of names to be regis- tered, and where the vendee has no indicia of title, but prays the aid of a court of equity to carry out the contract. So the case, where the vendor has no more of the stock contracted to be sold by him than the actual amount covered by his contract, appears, as amounting to an executed contract, to differ, in the eyes of judges, from where the vendor, having more of the stock than that contracted to be sold, has yet not set aside any specific part to the vendee. In other cases, however, of merely executory contracts, where an action at law was obviously inadequate, the courts, as has been seen, have compelled the vendor to transfer the very shares which are the subject of his contract. It must be admitted that in all those cases 1 1 Jones, Eq. (N. C.) 261. CHAP. VII.] RELATION OF VENDOE AND VENDEE. 255 where the vendor, at the time of the contract, or at the time of the filing of the bill, possesses a sufficient number of shares of the stock in question to satisfy the terms of the contract, the distinction between an i executory contract, where only so many shares are contracted to be sold, and an executed one, where the certificate is actually ear-marked and set apart by the vendee, appears to be an idle one. An analysis of the decisions shows that this is not the principle upon which they ultimately turn. And if, where a man possesses stock of the kind which he has agreed to sell, we apply the maxim that equity will consider as done x that which should be done, and presume the vendor to have set apart for the vendee a proper portion of the stock to satisfy his contract, the contract will then fall into the category of an executed sale, where the courts have felt no difficulty in decreeing specific per- formance. - But where the person contracting to sell the stock does not at the time possess any such stock, as in the case, for example, of all short sales, there is no in- stance of a court's having entertained a bill for spe- cific performance, which would amount to ordering the vendor to go into the market and buy the shares in question for the vendee, — a decree which in many cases would be nugatory. In such a case the only remedy is an action at law for damages. We may safely say, therefore, that a court of equity will not entertain a bill for the specific performance of a con- tract for the sale of stocks or securities, excepting where there actually exist, in the possession, or under the control, of the vendor, at the date of the contract, 256 THE STOCK BROKER. [PART II. or, at all events, at the time fixed for its completion, securities of the kind in question to an adequate amount, which the court can properly assume to have been the actual subject-matter of the contract in ques- tion. Subject to this limitation, the distinction, on this question of specific performance, between exe- cuted and executory sales, though often alluded to, appears from a review of the authorities, both Eng- lish and American, to be unsubstantial and to afford no criterion in arriving at a correct result. We have thus reviewed the English and American cases upon this subject, which, if we regard only the dicta and expressions of opinion of individual judges, seem often to darken rather than enlighten the prin- ciples involved. And, undoubtedly, the attempt to draw general deductions from the peculiar circum- stances of. particular cases, has led many persons to suppose that equity, instead of differing merely in de- gree, differed arbitrarily in principle, in affording re- lief in regard to different kinds of personal property. But the real difference between a contract for the sale of a specific chattel and a contract to sell railway shares, or grain, or oil, is this. In the former case there is always a specific chattel which constitutes the subject-matter of the contract ; in the latter there may or may not be any article or commodity under the vendor's control, or in his possession, the whole or any part of which a court can lay hold of as and for the subject-matter of the contract, as where a contractor sells short, without having any of the se- curities or of the commodity contracted to be sold, belonging to him. In such a case, of course, a court CHAP. VII.] RELATION OP VENDOR AND VENDEE. 257 of equity cannot intervene. And, in dealing with those cases where the vendor has the stock or com- modity in question, and the court therefore has a proper subject-matter to deal with, we have seen, that where the stock can. readily be bought in the market, and the vendee's remedy at common law in damages is complete, equity will not interfere. But where a court of equity has within its reach a proper subject-matter, as to which specific performance can be decreed, and no adequate remedy at common law exists, then the decisions do not appear to disclose any difference between dealing with these securi- ties and with any other kind of personal chattels. 17 CHAPTER VIII. COMPLETION OF THE CONTRACT, OR THE DELIVERY OF THE THING SOLD. PAGE Different meanings of the word "delivery" 258 Meaning employed here . . . 260 SECTION I. — THE VENDOR. Division of the subject . . . 261 J 1. WHAT THE VENDOR MUST DELIVER. j|2. IMPLIED CONDITION ATTACHED TO THE DELIVERY BY THE VENDOR. Cases discussed 263 Reclamations at the Stock Ex- changes 264 Security delivered must be marketable 265 Implied warranty of vendor's title 266 \ 3. MANNER OF EFFECTING THE DELIVERY. Transfer 266 Registration 266 Vendor's duties, prima facie . 267 PAGE Calls 267 No form of transfer legally necessary 268 Transfer usually under seal, so by by-laws of corporations . 268 Transfers in blank 269 English and American cases discussed at length .... 270 Clearing House delivery . . 279 Time 280 Leap-year 280 Month 280 Day 280 Hour 280 Place of delivery 281 At common law 281 By rule of the Stock Exchange. 281 SECTION II. — THE VENDEE. \ 1. ACCEPTANCE AND PAYMENT. Price 282 Registration 283 Different meanings of word " der livery." After all the terms of the contract of sale have been completed on both sides, or when the contract of sale has been executed, the duty of the vendor is then to deliver. It is especially necessary to caution the reader against confusion by reason of the various senses in which the word " delivery" in this relation has been employed. Mr. Benjamin, in his excellent work on Sales, remarks, at page 629 : 258 CHAP. VIII.] COMPLETION OF THE CONTKACT. 259 "First. The word delivery is sometimes used with "reference to the passing of the property in the " chattel, 1 sometimes to the change of the possession "of the chattel. In a word, it is used in turn to " denote transfer of title, or transfer of possession. "Secondly. Even where 'delivery' is used to sig- its different • f i n r> • mi i c ii meanings ex- " nify the transfer of possession, it will be found that plained by " it is employed in two distinct classes of cases, one m iii in Sis" "having reference to the formation of the contract, sales. 011 " the other to the performance of the contract. When "questions arise as to the 'actual receipt' which is " necessary to give validity to a parol contract for the " sale of chattels exceeding £10 in value, the judges " constantly use the word ' delivery' as the correlative "of that 'actual receipt.' After the sale had been "proven to exist, by delivery and actual receipt, " there may arise a second and distinct controversy " upon the point whether the vendor has performed " his completed bargain by delivery of possession of " the bulk to the purchaser. " Thirdly. Even when the subject under con- sideration is the vendor's delivery of possession in "performance of his contract, there arises a fresh "source of confusion in the different meanings at- " tached to the word ' possession.' In general it " would be perfectly proper, and even technical, to " speak of the buyer of goods on credit as being in "possession of them, although the actual custody "may have been left with the vendor. The buyer "owns the goods, has the right of possession, may 1 As, for instance, in the opinion B. & Aid., at p. 340. of Parke, B., in Dixon v. Tates, 5 260 THE STOCK BROKER. [PART II. Meaning of word "deliv- ery" as em- ployed here. "take them away, sell or dispose of them at his " pleasure, and .maintain trover for them ; yet, if he "become insolvent, the vendor is said to have re- "tained possession. Again, if the vendor has de- " livered the goods to a carrier for conveyance to the " purchaser, he is said to have lost his lien, because " the goods are in the buyer's possession, the carrier "being the agent of the buyer; but if the vendor " claim to exercise the right of stoppage in transitu, " while the carrier is conveying them, the goods are " said to be only in the constructive, not in the actual, " possession of the buyer." Having seen the various interpretations which have been given the word, it is intended here to treat the word as meaning such a transfer of the evidence of the possession of the thing sold at the Stock Exchange as will defeat an action for non-delivery brought by the vendee. The word as meaning the transfer of the evidence of the title of the thing sold from ven- dor to vendee only, has been considered in the dis- cussion of executed and executory contracts. The word as meaning the transfer of the title or pos- session so as to defeat the creditors of the vendor, will be treated of later under the head of Avoidance of the Contract. The subject may be conveniently divided into two parts : the duties of the vendor in delivery, and the duties of the vendee in accepting the delivery. SECTION I. — THE VENDOR. Vendor's . duty to de- It is apparent that the duty of the vendor is only prima fade, prima facie to deliver, since the vendee may become CHAP. VIII.] COMPLETION OF THE CONTRACT. 261 insolvent, or a creditor of the vendor or vendee may stop the goods in transitu, and the courts may enjoin the vendor from delivering. The subject of stoppage in transitu may be examined in any work on sales, 1 as the securities sold at the Stock Exchange do not differ from other chattels in the application of these rules of law, and cases rarely occur affecting the stock broker ; and we confine ourselves here to the exam- ination of what may constitute a valid delivery of the thing sold in the sense in which we use the term here. In examining the vendor's duties, we shall con- Division of rider,— subjecL § 1. What the vendor must deliver. § 2. The implied condition attached to the delivery by the vendor. § 3. The manner of effecting the delivery'. § 1. What the Vendor, must Deliver. It has been more than once remarked that, in the sales effected at the Stock Exchange, it is very un- usual for a contract to be made for a specific bond or share of stock, and consequently, as we have seen, a delivery of any share or bond of the kind con- tracted for will sufficiently fulfil the condition of the contract, so as to make it a valid execution of it. There must, however, always be a delivery of strictly the same kind of stock contracted for, for in no case will another kind make a valid delivery. 1 E.g., the very valuable work of Mr. Benjamin on Sales. 262 THE STOCK BROKER. [PART II. § 2. The Implied Condition attached to the Delivery by the Vendor. stock broker A stock broker does not, as a rule, warrant the an express value of the thing sold as being either legally issued or of a pecuniary value; certainly not, unless ex- pressly authorized to do so by his principal, for there is no usage of trade authorizing a stock broker to war- rant the thing sold. 1 But although there is no express warranty of value given by the stock broker, there is Always an always an implied warranty of genuineness in the ranty of title, thing sold ; that is to say, that the thing sold is in truth and in fact what the contract calls for, and which may be conveniently called an implied war- ranty or condition of genuineness, which must always exist in all sales ; or, in other words, the buyer in all sales has a right to get what he bargained for, whether it be totally valueless or not. Thus, for example, if scrip or stock of a particular kind be dealt in at the Stock Exchange which turns out thereafter not to have been properly or legally issued by the corporation issuing it, the broker is not liable to a vendee to whom it has been delivered, even though it should prove valueless. Where, however, the broker delivers without his knowledge forged cer- tificates, the vendee has a right to recover from him the value of genuine certificates of the same kind. Cases, of course, may be imagined, where the two classes thus indicated run into each other, as where an officer of the company issues a security without authority, and the company subsequently repudiates ,it. But in these cases the question is purely one of 1 Pickering v. Busk, 15 East, 38 ; Smith v. Tracy, 36 N. Y. 79. CHAP. VIII.] COMPLETION OF THE CONTRACT. 263 fact: " Was the intention of the parties, as interpreted " by their contract, to purchase the thing or security " in question, or not ?" This, of course, is a question for the jury. Thus, in Lambert v. Heath, 1 the plaintiff bought Lambert v. through a stock broker certain " Kentish Coast Rail- " way scrip," signed by the secretary of the railway company. This turned out to have been a fraudulent issue, the secretary signing without authority, and was repudiated. In an action to recover from the defendant the price paid him for the scrip and his commission, the court held, it was a question for the jury to say whether the plaintiff intended to buy this particular scrip. Alderson, B., said, " The question Remarks of "is simply this: was what the parties bought in the " market ' Kentish Coast Railway scrip' ? It appears " that it was signed by the secretary of the company ; "and if this was the only Kentish Coast Railway "scrip in the market, as appears to have been the " case, and one person chooses to sell and the other to " buy, that then the latter has got all that he con- " tracted for. That was the question for the jury." In Mitchell v. Newhall, 2 the defendant gave the Mitchell u. plaintiff, a broker, an order to purchase fifty shares in a foreign railway company. At that time no shares were in the market, but there were letters of allotment, which were usually sold as such on the Stock Exchange. The plaintiff bought fifty of these allotments ; and the court held, it was for the jury to say what the nature of the order was, and that they might hold this was a good execution of the order. 1 15 M. & "W. 486. s 15 M. & "W. 308. 264 THE STOCK BROKER. [part II. "Westropp v. Solomon. Young v. Cole. Implied condition of genuineness. Reclamation of contracted the Stock Exchange. In Westropp v. Solomon, 1 a stock broker employed by A. to sell stock in a projected railway company, handed the proceeds to A., and afterwards, the cer- tificates turning out to be forged, was obliged by a rule of the Stock Exchange, subsequently made, to pay the value of genuine certificates to the purchaser. It was held, that the stock broker could, at least, recover from A. the proceeds so paid. In Young v. Cole, 2 plaintiff sold for the defendant four Guatemala bonds, which being unstamped were unmarketable ; whereupon the plaintiff refunded the money and sued the defendant for the money, and the court held, that he could recover. The principle deducible from these cases then is, that in all sales at the Stock Exchange there is an implied condition of genuineness, i.e., that the article delivered must be what was contracted for, and that where the thing delivered is the only thing known on the Stock Exchange, and usually passes there as what the buyer named, it is for the jury to say whether he meant to buy it or not ; but that when there are genuine and spurious shares on the market, the buyer will be supposed to have intended to buy the genuine, and a delivery of the spurious shares will not be good. Most of the Stock Exchanges have rules upon the subject of reclamations by their members for irregu- larities in the delivery of securities. These rules are all to the effect that such reclamations will not, where .they do not affect the validity of the stock, but merely its currency, be considered after a limited J 8 M. & G. & S. 845. » 8 Bingham's New Cases, 724. CHAP. VIII.] COMPLETION OF THE CONTRACT. 265 period, usually from five to fifteen days. A rule of Rules re- • i • i ■ it -ii i • t i speoting rec- this kind is undoubtedly binding upon the members lamations, of the Exchange, and might probably bind their i n g. principals, as rules reasonable and proper under the circumstances. Subject, however, to such existing regulations, it may be said that where a broker buys a stock in the Exchange he is entitled to have de- livered to him a certificate of stock or a security not security de- merely legally valid, but one which at the time of bein^i™ 118 ' delivery passes current, and is in all respects mar- marketable, ketable. For example, a company may begin, bona fide, to illustration issue certain additional stock, the legality of which ° pnnQ1J) e ' may be disputed by other shareholders. In such a case, recently, 1 an injunction was obtained at the in- stance of a shareholder, restraining the company from proceeding with the issue, and, the company having closed its transfer books, the question arose in several of the Stock Exchanges, whether certificates dated after the issue of the stock in question had begun, could be used in making deliveries of this stock in the Stock Exchange. No adjudicated case on the subject, it is believed, exists ; but the views generally adopted by the Stock Exchanges were, that certifi- cates whose currency was, by reason of their date, rendered questionable, could not be used to make a delivery, whether they were, in fact, actually valid or not, as that was a question that could only be passed on by a court of law ; and that all persons making reclamations within the time allowed by the rules of the Exchange, could return such certificates 1 Northern Pacific Railway Company. 266 THE STOCK BKOKEK. [PART II. and require the redelivery to them of certificates in all respects marketable. Should certificates of stock turn out to be actually invalid, for any reason, there is no doubt that either the brokers or their principals could return them and demand the delivery of valid certificates or their value, whether the reclamation were made within the time allowed by the rules of the Stock Exchange or not. No rule, impairing such a right on the part of the vendee, would, it may be safely asserted, be upheld as a reasonable one, by a court, rsmtyof ven- There is also, of course, always an implied warranty dor's title. f ^e Y en( l or ' s title in the thing sold. § 3. The Manner of Effecting the Delivery. ' The method employed to give complete and absolute title to the securities, registered or not negotiable, sold at the Stock Exchange, is by a transfer and registra- Vendormust tion. And though the courts have held that the the usual owner of shares may really hold them without any tnie. ene certificate at all, and the company be bound to respect his rights, 1 still it is usually the duty of the vendor to deliver the certificates or evidences of ownership to Vendor need the vendee. But it does not follow that the vendor, not have - , . vendee's to effect a delivery to the vendee, must cause the register. vendee's name to be put on the register of the cor- poration, as well as to make him a transfer of the stock, etc. 1 Bank v. Burr, 24 Me. 256 ; Chester Glass Co. v. Dewey, 16 Bank v. "Wilson, 24 Me. 273 ; Ellis Mass. 94. See, also, the rules, as v. Bridge Co., 2 Pick. (Mass.) 243 ; to delivery, of the New York and Sargeant v. Ins. Co., 8 Pick. 90; Philadelphia Stock Exchanges. CHAP. VIII.] COMPLETION OF THE CONTRACT. 267 Prima facie, the vendor's duties are at an end when Vendor's du- re, i i . n 11 11 p ' leS P r ^ ma he offers, and, if accepted, then actually transfers to fade at an the vendee, the legal evidence of the title to the se- indicia of curities he has sold him, there always being an im- are'deiivered plied warranty that the vendor's title to the thing t0 vendee - sold is good, and the vendor can have his name put on the register when he likes. As, for instance, in Munn v. Barnum, 2 it was held, Munn v. . . . » Barnum. that mere readiness to transfer will be considered suf- ficient, and an actual transfer is not necessary, where the purchaser declines to pay the price. The usual method of effecting the transfer is simply "What deiiv- iii • r> /> i er y neeessar y to hand the vendee the bond, or certificate of stock, to make. sold, with a proper power of attorney to have it transferred to his name. But this is not necessary, for it is conceived that any other manner of showing a readiness to transfer would be sufficient. But where there is any custom of the trade, of course that must be strictly followed; as, for instance, where the vendor's duty is, by a rule, to have the vendee's name put upon the register, he must do so. The title to many kinds of stock renders the pos- Calls, sessor of the shares liable to calls or assessments ; and with regard to the delivery, it is a little embarrassing to see how far the vendor is bound to give the vendee a title clear from all existing calls. It is, in the absence of express agreement, to be naturally presumed that the vendee is to get a deliv- ery of the thing sold, freed from any liability to the company which did not actually exist at the time the 1 See Humble v. Langston, 7 M. v. Goldner, 11 M. & "W. 849. & W. 200 ; Hibblewhite v. Mc- 2 24 Barb. (N. T.) 283. Morine, 6 M. & "W. 517; Hammic 268 THE STOCK BROKER.. [PART II. Shaw v. Rowley. No particular mode of transfer le- gally neces- sary. Transfer usually un- " der seal by by-law of company. contract of sale was made ; and in Shaw v. Rowley, 1 it was held to be a good offer of delivery, though the seller had not paid up intervening calls, as he might have done so at the moment of making the transfer. But with regard to calls made after the contract of sale and before the delivery, the case is not free from doubt. Perhaps the safer rule would be to allow the liability of either of the parties to be gathered gener- ally from the agreement of the contract of sale, and to say that, in the absence of any stipulation to the contrary, the transferee is entitled to a transfer, freed from all liability to pay existing calls. With regard to the payment of calls after the transfer and before registration, see infra, under Registration. We have said above that no particular mode of making the transfer is legally necessary, and a writ- ten order, or even verbal, would theoretically be suffi- cient from the principal to enable the stock broker to convey the certificates to the vendee, or even have them registered in the vendee's name at the office of the company. Generally, however, it is a by-law of the company that the transfer of names or registra- tion must be made under seal, and then the stock broker is compelled to give a certificate of stock, etc., with a power of attorney to the purchaser to have it transferred to his name. It is very inconvenient to have a deed made out in full at each sale by the parties, as frequently shares pass through a dozen hands before they are registered again, and to hand them up after sale for registration would cause great loss to the owner, as they could not 1 5 Eailway Cases, 47. CHAP. VIII.] COMPLETION OP THE CONTKACT. 269 be used in trade during the time taken for registra- tion ; and, therefore, in several of the United States it has been found convenient by stock brokers Transfers by • i • nr> power of at- withm the last few years to effect the conveyance or torney, in transfer of shares from one party to the other by the broker's handing the certificate of shares to the buyer, together with an assignment in blank and power of attorney to transfer from his principal, usually on the back of the certificate. And the vendee, then, on handing this to the corporation, gets the shares trans- ferred to his name. Where it is not necessary that the assignment should be under seal, as in certain cost book mining companies in England, 1 in which the shares are transferable without the intervention of any sealed instrument, but simply on the receipt of a letter signed by a shareholder directing the transfer, and leaving blanks to be filled up by the agent, and in Massachusetts, where under the general law no seal is necessary to the transfer, 2 and where the courts have held that a person could hold shares without any cer- tificates, 3 and in fact anywhere, where the corporation does not demand that the transfer should be under seal, such a method is perfectly valid. But where it is a rule of the corporation that the transfers should be under seal, it has been objected that such transfers are invalid, because a deed signed in blank by the vendor cannot be legally filled up by the vendee. In England, this strict common-law rule that an agent must receive his powers under seal to legally 'Walker «. Bartlett, 18 C. B. 15; Quiner v. Marblehead Ins. 845. See Humble v. Mitchell, 11 Co., 10 Mass. 476. Ad. & El. 205. 8 Chester Glass Co. v. Dewey, 2 See Atkinson v. lb., 8 Allen, 16 Mass. 94 ; 8 Pick. 95. 270 THE STOCK BROKER. [part II. Texira v. Evans. execute an instrument under seal is now in full force, and therefore such transfers as these would be there considered not valid. It was, indeed, attempted by Lord Mansfield, in Texira v. Evans, 1 to relax this rigid rule of the common law, but it was unsuccessful, and, after holding its ground for over fifty years, HibMewhite was finally overruled by Parke, B., in Hibblewhite v. MeMorine. -,.-,,.„ v. McMorme. 2 ' Davidson v. Again, in Davidson v. Cooper, 3 Texira v. Evans was declared bad law, and later, in Squire v. "Whitton, 4 the House of Lords held, that a bond executed with the obligee's name in blank, and filled in by an im- plied authority, was void in law and equity. In Swan v. N. B. A. Co., 5 Baron Parke held, that an instrument under seal executed in blank by the plaintiff and afterwards filled up by an agent, de- riving his authority by parol, in fraud of third parties, was void, though the plaintiff had been guilty of cul- pable negligence. In America, in the great Stock Exchanges, 6 the custom is to effect transfers of stock in this manner. But the law is by no means uniform in the United States on the subject of these transfers or deeds in blank, and it becomes, therefore, our duty to give a resumi of the cases of the various States on this subject. A majority of the States 7 incline to the common- Swan v. N. B. A. Co. 1 Cited in Master v. Miller, 4 T. K. 320. 8 6 M. & "W. 216. » 11 M. & W. 793. * H. L. C. 333. 6 8 Jurist, N. S. 940 ; see, also, Humble v. Langston, 7 M. & W. 617; Eagleton v. Eagleridge, 11 M. & W. 465. 6 New York, Philadelphia, and San Francisco. ' See, on this subject, the excel- lent note of Mr. Bichard S. Hun- ter, to the case of Preston v. Hull, to be found in 12 Amer. Law. Beg., N. S. 711, from which the follow- ing cases and the text are in the main taken. CHAP. VIII.] COMPLETION OF THE CONTRACT. 271 law rule, but by a large minority it is rejected. Hesi- tating between the mischiefs that might ensue from too bold an innovation upon the common law, and the evident injustice of allowing obligers to escape from the consequences of their acts, the courts in those States which reject the strict doctrine, have de- parted from it only so far as it was necessary in the premises. Distinctions have been taken between a bond and a conveyance ; between a piece of paper signed and sealed, and a bond or deed in which some essential part was wanting ; between express and im- plied authority ; between authority to fill up a given name or a fixed sum, and authority to insert the name of any one at all, or for an amount to be determined by the agent. Nor have the decisions in individual States been consistent. The fluctuations of judicial opinion, as 'evinced in the number of cases doubted and overruled, are very noticeable. In such a chaos of conflicting authorities, perhaps it will be best to give the law of the different States seriatim, stating as far as necessary the law of each case. Arkansas, Illinois, Georgia, Kentucky, Massa- chusetts, Mississippi, North Carolina, Tennessee, and Virginia follow the old English rule of the common law, and, while at periods the courts have been in- clined to relax it, the later decisions have fully restored it. In Arkansas, in the leading case of Cross v. The Cross v. state State Bank, 1 a bond was executed with a blank for the sum, and filled in without express authority, and the court held, that the writing was not, nor could be, 1 5 Pike, 525. 272 THE STOCK BROKER. [PART II. Maus v. "Worthing. Bragg v. Fes- senden. Ingram v. Little. Remarks of Nisbet, J. Cummins v. Smith v. Crocker. a deed, except when made by an agent under seal, and here the American decisions were reviewed. In Illinois, in Maus v. Worthing, 1 written authority was given to sign a surety's name to an appeal bond ; but, the court said, "the rule of law seems well "settled that an agent or attorney cannot bind his " principal by deed, unless he has authority by deed " to do so." Breese, J., said, in dissent, " The rule as "laid down appears to me destitute of any good " reason, and altogether too technical for this age." In Bragg v. Fessenden, 2 an agent, according to a written request, executed an appeal bond for his prin- cipal, and a regular power of attorney ratifying his action was afterwards filed, under seal ; but the court held, that the original deed was void, and qwzre whether the ratification could date back. In Georgia, in Ingram v. Little, 3 the court held, that a deed executed in blank and filled up by an agent appointed in writing not under seal, was void. Nisbet, J., said, "We put our decision upon the "authority, conceding that the books in England " and in this country are in distressing conflict, and " with some misgivings whether reason and common " sense do not condemn it." In Kentucky, in Cummins v. Cassily, 4 the court said, " Can an agent, without authority, under seal, "bind his principal by a sealed instrument? The " unbroken current of decisions is to the contrary." In Massachusetts, in Smith v. Crocker, 5 which was 1 8 Scammon, 26. J 11 111. 544 ; see People v. Organ, 27 111. 27. » 11 Georgia, 174. 4 5 B. Monroe, 75; see Southard v. Steele, 8 Monroe, 435. 6 5 Mass. 538. CHAP. VIII.] COMPLETION OP THE CONTRACT. 273 followed in Hunt v. Adams, 1 the name of a surety, Hunt v - Adams. after he had executed a bond, was filled up m the body of the bond by an agent appointed by parol. The decision turned entirely upon the immateriality of the addition. But in Burns v. Lynde, 2 it was Bums v. decided, that " filling up a blank form of a deed exe- " cuted by the parol authority of one who had signed "and sealed it, will not make it a valid convey- " ance, unless the instrument be redelivered." In this case the Massachusetts decisions are shown to be con- sistent, and in accordance with the common law. But in Day v. Holmes, 3 the practice of transferring Day v. stock by blank assignment seems to have been recog- nized. But the assignments of shares in a corporation under the Gen. Sts., c. 60, § 13, need not be under seal. 4 In Mississippi, a blank bond sealed and afterwards filled up by a parol agent, was held void, in Williams Williams v. v. Crutcher; 5 and in Dickson v. Hamer, 6 the Chan- Dickson v. cellor said he was constrained to follow Williams v. am<1 Crutcher. In North Carolina, the law was settled in Graham Graham v. v. Holt, 7 in which a sum left, in blank in a bond was afterwards filled up by an agent, whose authority was not under seal, and the court, disapproving of Texira v. Evans, held it void. 8 In Tennessee, a blank paper signed and sealed, 1 6 Mass. 619. 6 5 Howard, 71. 2 6 Allen, 305 [1863]. " Freeman's Ch. 284. 8 103 Mass. 306. ' 3 Iredell's Law, 300. « Atkinson V. lb., 8 Allen, 15; " McKee y. Hieks, 2 Dev. 379; see, also, Quiner v. Marblehead see, also, Davenport «. Sleight, 2 Ins. Co., 10 Mass. Kep. 476 ; 8 Pick. D. & B. 381 ; Van Hook v. Barnet, 95. 4 Dev. Law, 272. 18 274' THE STOCK BROKER. [PART II. Preston v. Hall. Upton v. Archer. Byers v. Mc- Clanahan. with verbal authority to fill up as a bond, was held void after the blanks were filled up. 1 In Virginia, the authorities were carefully reviewed in Preston v. Hull, 2 where the court came to the con- clusion that a bond executed by two persons in the bond, where the name of the obligee was to be in- serted, and delivered, in this condition, to one of the persons by the other, with verbal authority to borrow money upon it, and to insert the name of the person from whom the money was obtained in the blank as obligee, was a mere nullity, and not the deed of the person delivering it, and Texira v. Evans was disap- proved of. The following States incline towards the English doctrine, without positively laying it down : In California, in Upton v. Archer, 3 it was held, that a deed in due form, but with the grantee's name after- wards filled in by an agent, without an authority under seal to act, was void. In this case, though de- cided under the Statute of Frauds, the counsel relied upon the common-law doctrine, and the reasoning of the court would seem to imply that they upheld it. In Ohio, a blank paper was signed and sealed, and a money bond written over it by an agent appointed verbally, and the court said, " an authority to fill one " particular blank falls far short of an authority to "make an entire deed." 4 In Maryland, in Byers v. McClanahan, 5 a case similar to Ayres v. Harness, the court held the bond 1 See Smith v. Dickinson, 6 Humph. 261 ; Turbeville v. Ryan, 1 Humph. 113 ; Mosby v. State, 4 Sneed, 324. 2 12 A. L. R.,N.S. 699. • 41 Cal. 85 [1871]. 4 Ayres v. Harness, 1 Ohio, 368. 6 6 G. & J. 250. CHAP. VIII. J COMPLETION OF THE CONTRACT. 275 void, but decided that a subsequent acknowledgment by the grantor of his hand and seal constituted a re- delivery. In Delaware, the distinction is taken between an implied and express authority, and in Clendaniel v. ciendaniei ». Hastings, 1 it was held, that an authority merely im- plied to fill in the blanks in a bond already executed did not bind the obliger. In Pennsylvania, the decisions are conflicting, and the earlier decisions support Texira v. Evans. 2 In Wiley v. Moor, 3 the obligers signed and sealed Wiley v. a piece of blank paper, and left it with a judge to be filled in as a bond, and it was held binding, and Texira v. Evans followed as good law; and to the same effect was Graham v. Ogle. 4 But in a later case, Graham ». that of Wallace v. Harmstead, 8 the court held, that Wallace «. no authority to fill up a deed could be implied. Gili- arms ea ' son, J., said, " There is no instance of an implied " agency to alter a deed. Texira v. Evans can be "supported, if at all, only upon the ground of an " estoppel by an act in pais." In Lyon v. Denny, 6 where the owner of stock ex- Lyon v. ecuted and delivered to a friend a power of attorney, enny * with the certificates authorizing the person therein named to transfer to , with the understanding it was to be used with reference to a particular creditor of the friend, whose name was afterwards inserted by him, the court held, that in any view the authority of the agent was exhausted by the insertion of the first i5Har.408. "17S. & E. 438. 2 See Sigfried v. Levan, 6 S. & * 2 Pa. 132. K. 308 ; Stahl v. Berger, 10 S. & E. s 3 Harris, 468 ; 2 Barr, 194. 170. 6 38 Pa. 98. 276 THE STOCK BEOKEE. [PAET II. German Ass. Co. v. Send- meyer. Ex parte Kerwen. Hanford v. McNair. Bank of Buf- falo v. Kort- right. Worrell v. Munn. name designated, that the creditor had paid his debt, and that the principal was entitled to a return of the stock, notwithstanding that the agent had transferred it to secure other debts, by erasing the first name and inserting another. In the German Union Building, etc. Association v. Sendmeyer, 1 however, the court expressly held, that the delivery by an owner of stock of a power of at- torney to transfer, executed in blank, with the certifi- cates, is evidence of an implied authority to fill up the name of an attorney and make the transfer, where there is a valuable consideration, ■ In New York, the decisions are not harmonious. In Ex parte Kerwen," a blank for the amount in an appeal bond was filled in, after execution, by an agent verbally appointed, and held valid. But in Hanford v. McNair, 3 a very strong case, the agent was authorized in writing to enter into a con- tract for the purchase of lands, and, having made the contract under seal, and had it ratified by the princi- pal, it was held void. The only exception to the strict rule " is where the agent affixes the seal of the prin- " cipal in his presence and by his direction."* In Bank of Buffalo v. Kortright, 6 the Court of Errors declared this to be law in New York. Here the court held, that proof as to the usage of transfer- ring stock with blank powers was admissible, and that a blank power of attorney to transfer was good, by usage and otherwise. It may be added, that Hibble- white v. McMorine had not yet arisen. And in Wor- '- 50 Ta. 67. 2 8 Cowen, 118. » 9 Wend. 54. * See, also, Blood v. Goodrich, 9 Wend. 68 ; 12 Wend. 525. 6 22 Wend. 848. CHAP. VIII.] COMPLETION OF THE CONTRACT. 277 rell v. Munn, 1 it was held, that if the instrument executed by an agent derives its validity merely from the seal, it is void ; but if good without seal, it will be binding as a parol contract. In Chauncey v. Arnold, 2 where the blanks were chaunceya. never filled in, the deed was held void ; but see the rno ' opinion of the court. The point may perhaps be considered as doubtful in New York. In Iowa, there is a strong dictum by Dillon, J., in Simms v. Simms v. Hervey, 3 against Texira v. Evans. But DevinJ. in Devin i>. Himer, 4 an express authority to insert a grantee's name, followed by ratification, was held binding ; and in Owen v. Perry, 5 the court held, that Owen «. a written authority would be sufficient, though the deed was to be filled up to any one. In Connecticut, the point does not seem to be directly ruled, but the inclination of the courts is towards Texira v. Evans. In Bridgeport Bank v. R. R. Co., 6 a blank power Bridgeport of attorney accompanying stock was filled up, and Co. the court held it valid under the New York law; but Ellsworth, J., intimated the Connecticut law would be the same. In New Jersey, the case of Camden Bank v. Hall 7 Camden does not seem decisive, as the circumstances of the case might amount to a redelivery. In Maine, parol authority to fill in any instrument under seal is sufficient. See Inhabitants of South inhabitants, Berwick v. Huntress. 8 Huntress. 1 1 Selden, 239. « 25 Iowa, 412 [1868]. 2 24 N. Y. 330. 6 30 Conn. 231. s 19 Iowa, 273. ' 2 Green, 383. * 29 Iowa, 298. 8 63 Maine, 89. 278 THE STOCK BROKER. [PART II. Boardman v. In Alabama, in Boardman v. Gore, 1 there was a GorG. case of implied authority to fill in the obligee's name, but the bond was payable to " , or bearer," and the insertion was hardly material. Gibbs v. j n Qibbs v. Frost, 2 an express authority was held sufficient, and Texira v. Evans is quoted as authority. In Texas and Indiana, the statutes abolishing seal, and in Louisiana, the peculiar system of the State, would be probably fatal to the common-law rule. In the latter State, appeal bonds filled in, after execu- tion by the sureties, have always been held binding. 3 In South Carolina, the courts explicitly sustain Texira v. Evans. All the cases appear to be those of express authority ; but the reasoning of the judges goes the full length. 4 Finally, the Federal courts now lean towards Texira v. Evans. Speake v. I n Speake v. The United States, 8 it was settled that United r ' states. an express parol authority to alter a sealed instru- United states ment could be shown; but in United States v. Nelson, 6 v. Nelson. it was held, by Marshall, C. J., "with much doubt," that no implied authority will be sufficient. Drury v. J n Drury v. Foster, 7 although the decision turned upon a personal incapacity, the court intimated that otherwise a deed filled in by a parol agent would be valid, adding that, "Although it was at one time 1 1 Stew. 617. Rich. 497 ; Duncan ». Hodges, 4 2 4 Ala., N. S. 720. McC. 239. It was intimated that 8 Breedloveu. Johnson, 2 Martin, in the last case a blank piece of N. S. 517 j State v. The Judges, 19 paper signed and sealed is utterly La. 179 ; Qharlaron v. McFarlane, nugatory. 9 La. 230. & 9 Cranch, 28. * Bank v. Hammond, 1 Rich. « 2 Brock. 64. 281 ; Gourdin v. Commander, 6 ' 2 Wallace, 24. CHAP. VIII.] COMPLETION OP THE CONTRACT. 279 "doubted whether parol authority was adequate to " authorize an alteration or addition to a sealed instru- " ment, the better opinion at this day is that the power " is sufficient." It may be added, that all the cases agree that if the instrument under seal be filled up in the presence of the grantor and with his consent, it will be binding upon him. Hitherto we have examined those modes of delivery The clearing of transfers which are made directly by the stock ery. broker, but, as has already been stated in a former part of this work, the larger proportion of the daily deliveries of stock at some of the Stock Exchanges in this country are made through the Clearing House, which is an office or bureau where the amount of shares of stock to be delivered to and by each broker in the transactions of each day is ascertained by ex- amining and balancing the several accounts of each one. This is a direct delivery through the interven- tion of a third agency, and the method by which it is effected is fully described in detail in Part I., Chap- ter II., Section II. 1 The vendor must also be ready to deliver the docu- Time. ments of title at the time stipulated for, or in the absence of any stipulation, according to the custom of the trade or the rules of the Exchange in such cases ; and it is always a question for the courts to determine upon, the usage being a reasonable one. Where the time is fixed in the contract itself, its construction is, of course, a matter of law for the courts. 1 Page 55. 280 THE STOCK BROKER. [PAET II. With regard to " leap-year," in England, see the first volume of the English Revised Statutes, page 4. " Month" in The word " month" in mercantile transactions is transactions, generally understood to mean a calendar month, and the court will look into the transaction to see if that was not the intent. 1 ■■ Month" in j n stock transactions, generally, the word " month" slock triinb- actions. would probably be interpreted as meaning calendar month, 2 though perhaps in England, where there are account days of a fortnight each, the word " month" might mean a lunar month, or twenty-eight days, when equivalent to two accounts. 3 Days. Where days are counted to ascertain the time for delivery on a time contract, they are counted as con- secutive days, and include Sundays, 4 unless the con- trary be expressed. A usage of the trade or rule of the Stock Exchange is, however, always admissible in evidence to show a different rule, 5 and probably where there are several days allowed for the delivery, the count must be made exclusive of the day of contract. £°Paieo g io°g n o. Tllus > in Coddington v. Paleologo, 6 on a " deliver- ing on April 17th, complete 18th May," the court was divided whether the vendor was bound to commence on April 17th. Hour. The hour up to which one can deliver on the last day agreed upon by the contractor, is discussed in 1 See Simpson v. Margitson, 11 * Brown v. Johnson, 10 M. & "W. Q. B. 23; Webb».Fairmaner,3M. 331. & W. 473 ; see also 13 Vict. c. 21, 5 Cochran v. Eetberg, 3 Esp. b. 4. 121 ; Webb v. Eairmaner, 3 M. & 2 See Hart v. Middleton, 2 C. & W. 473; Young v. Higgin, 6 M. & K. 9. W.49; Isaacs o. Ins. Co., L. E., * Jocelyn v. Hawkins, 1 Strange, 5 Ex. 296. 446. • L. E., 2 Ex. 193. CHAP. VIII.] COMPLETION OF THE CONTRACT. 281 Startup v. McDonald. 1 [Respecting the place of de- startup ». livery, probably that usual in like cases is the proper pi aoe . place ; certainly in the absence of agreement. It is, however, to be observed that the foregoing Regulations ,, , , -n °f stock Ex- remarks, as well as the cases quoted to illustrate change on them, are applicable only where the usage in refer- ence to these subjects is not expressly defined by the regulations of the S,tock Exchange where the trans- action takes place. Most of these particulars are specifically fixed by the rules of the London Stock Exchange, as well as of the chief American Ex- changes ; and in the latter every member is required to have a place of business in the vicinity of the Stock Exchange, where all notices required by the rules of the Exchange can be served, and where, probably, de- liveries to a member, not effected through the Clearing House, would, prima facie, have to be made. 2 SECTION II. THE VENDEE. The duty of the vendee is to pay the price agreed upon and accept the thing sold, and, where it is necessary, he must have his name placed upon the register. § 1. Acceptance and Payment. The vendee, by accepting one mode of delivery without objection, as by receiving a certificate of stock accompanied by a power of attorney to transfer, executed in blank, thereby waives his right to insist upon another, as, for example, an actual transfer. 1 6 M. & G. 593. Philadelphia Stock Exchange, Art. 2 See Rules of New York Stock vi. $ 4, p. 43 ; of San Francisco Exchange, pp. 20-45, etc. ; and of Board, p. 25, etc. 282 THE STOCK BROKER. [PART II. Price. Tender. Medium of payment. With regard to the price, the vendee's duties re T semble those in any case of sales of personal chattels. "We shall, then, merely lay down a few principles. As we have already seen, this is prima facie an abso- lute cash payment, or sometimes may be a conditional payment by checks or notes. In sales of this kind credit is very unusually given, and never without express stipulation. There are certain rules in some of the Stock Exchanges regulating the method of payment, but, in the absence of such, the payment must always be cash, or a tender of cash made, equal to the price, though the actual money need not be produced. But there should be an opportunity for the seller to count the money, 1 which will be sufficient. The tender for more than enough is good, 2 but a tender will not be valid for less than the amount ; 3 and the tender must be unconditional. 4 Where, however, a peculiar mode of payment is agreed to by the vendor, as, for instance, where the agency of the post is employed, the vendee has sufficiently complied, even though the money never reach the vendor. Ordinary caution should be used, and perhaps it would be requisite for the vendee to have the letter placed in the post-office itself, 6 or even registered ; certainly if he were in the habit of ordinarily doing so. The proper medium of payment is, in England, either in pursuance to the statute of 3 & 4 Will. IV- ' * Tsherwood v. Whitmore, 11 M. & W. 347. 2 Dean v. James, 4 B. & A. 546 ; see Betterbee v. Davis, 3 Campb. 70. a Dixon v. Clarke, 5 C. B. 865. 4 Eckstein v. Reynolds, 7 Ad. & E. 85. 6 Hawkins «. Rutt, Peake, 186 ; see, also, Gordon v. Strange, 1 Ex. 477 ; Eyles v. Ellis, 4 Bing. 112. CHAP. VIII.] COMPLETION OF THE CONTRACT. 283 ch. 98, in notes of the Bank of England, payable to bearer, so long as the bank is solvent, for sums in excess of five pounds, 1 or in silver for certain sums, and over that in gold, 2 and in the United States there are three media — United States paper made legal tender, gold coin for certain amounts, and silver for smaller, for which the reader is referred to the acts of Congress. At the common law, the tender was required to be made in foreign coin legally current, or in current money. 3 Frequently the medium of payment is regulated by the rules of the Stock Exchange, which then govern members, and, unless held by a court to be unreasonable in their character, those acting through them. Thus, payment in current bank notes, or in due bills of banks belonging to the Bank Clearing House, is allowed. 4 And, perhaps, if any papers are Papers, to be prepared, it would be the duty of the vendee to have them ready. 5 § 2. Registration. The prima facie duty of the vendee is to have his name placed on the register by himself or attorney, and in England there is a stamp duty on a power of attorney for this purpose, 6 though if a rule of the Stock Exchange existed to the effect, the vendor would have to have it accomplished for him. 1 Warwick v. Npakes, Peake, 68. Exchange, Article xiii. \ 2, p. 47. . 'Coinage Act, 1870, sec. 4. 6 See Lawrence v. Knowles, 5 3 See Bac. Abr., Tender, B. 2 ; 5 Bing. (N. C.) 399 ; Bowlby v. Bell, Reports, 114. 3 C. B. 692 ; Stephens v. De Me- * See rules of N. Y. Stock Ex- dina, 4 Ad. & El., N. S. 422. change, and of Philadelphia Stock 6 27 Vict. c. 18. 284 THE STOCK BROKER. [part II. Implied warranty to save vendor harmless. Walker v. Bartlett. Humble v. Langs ton. It is, however, optional with the vendee when he will have it done; but, after a valid tender of the securities and acceptance, if he negligently or wilfully do not have his name placed upon the register, he is responsible for any loss that may occur to the vendor in consequence of his failure to do so. In other words, he makes an implied warranty to save the vendor harmless for any fault of his in not registering when he should have done so after the transfer. Thus, by the Act of 8 & 9 Victoria, c. 16, § 15, the vendor remains liable for calls until the registry of the vendee's name is made. In Walker v. Bartlett, 1 the owner of five hundred shares in a cost book mine, in which the person regis- tered is liable to calls, sold his shares to the defendant, and delivered him a paper addressed to the secretary of the mine, requesting a transfer to the transferee, but leaving his name in blank, and with a blank acceptance on the part of the transferee. The defendant did not get registered, and, in an action brought by the plaintiff for money spent to his use in the payment of calls, the court held, that the defendant was not bound, as it appeared clearly by the terms of the contract, it was not necessary to fill up the blank and get registered unless he liked ; but that if, for his convenience, he did not, he was bound to indemnify the plaintiff for the calls he had paid. In Humble v. Langston, 2 the facts were as follows. The plaintiff contracted with the defendant, through their respective brokers, for the sale of thirty shares in a railway company. There was no time mentioned for 1 18 C. B. 844. * 7 M. & W. 517. CHAP. VIII.] COMPLETION OF THE CONTRACT. 285 the completion of the contract. On the 3d of March, the defendant wrote requesting the plaintiff's brokers to "dispatch the thirty shares forthwith," and they re- plied, " We send you the transfer of thirty * * * shares in blank," and the purchase money was paid. Calls were subsequently made, and the plaintiff, being still registered, was compelled to pay. In an action against the defendant for an indemnity against present and all future calls, it was held, however, that under the cir- cumstances there was no implied obligation to indem- nify against all subsequent calls. This decision was, however, based upon the fact, that the conveyance or transfer in blank was not a valid one; and that the plaintiff might have insisted on a valid deed of convey- ance, if he had desired, but that he was content with what he got ; and the law raised no implied promise to indemnify. It is to be noted in this case that the plaintiff asked to be indemnified against all future calls, that is, longer than he might be beneficially in- terested. In Sayles v. Blane, 1 Coleridge, J., followed the opin- Sayies v. ion of the Court of Exchequer in Humble v. Langston. Here, also, the transfer was in blank. It is difficult to distinguish, in principle, the pre- ceding case of Walker v. Bartlett, from the case of Humble v. Langston, and this the court, in the former case, admitted. Still, the facts did differ, since in Humble v. Langston a deed of transfer was necessary, though not in Walker v. Bartlett; and, besides, the plaintiff in Humble v. Langston asked to be indemni- fied longer than he was beneficially interested, and this 1 14 Q. B. 205. 286 THE STOCK BKOKEK. [part II. is a very important distinction. It may be added, under this general head, that by the common law it is a mooted question whether the buyer could demand a receipt for money; 1 where, however, the buyer gives one, it is not necessarily an acceptance of the transfer, but will perhaps become so if he do nothing further within a proper time. 2 With regard to where there is a usage of the trade on this subject, see supra, page 215. 1 Cole v. Blake, Peake, 179 Kichardson v. Jackson, 8 M. & W 298 ; Wood v. Hitchcock, 20 Wend, 47. 2 Parker v. Palmer, 4 B. & A 387 ; Chapman v. Morton, 11 M. & W. 534 ; Fitzsimmons v. Wood- ruff, 1 N. Y. S. C. 34; Treadwell v. Reynolds, 39 Conn. 31 ; Bianchi v. Nash, 1 M. & W. 545. CHAPTEK IX. AVOIDANCE OF THE CONTRACT. PAGE Division of chapter . . -. . 287 SECTION I. — AVOIDANCE OF THE CONTRACT BY FRAUD, ETC. \ 1. FRAUD 288 \ 2. MISTAKE 288 \ 3. FAILURE OF CONSIDERA- TION 289 SECTION II. — AVOIDANCE OF THE CONTRACT BY ILLEGALITY. \ 1. CONTRACTS ILLEGAL AT COMMON LAW, BECAUSE IN RESTRAINT OF TRADE . . 290 Cases discussed 291 Corners illegal 294 Restraint in respect to time . 295 \ 2. CONTRACTS ILLEGAL BE- CAUSE IN THE NATURE OF WAGERS 296 Wagers at common law . . 297 Wagers by statute . . . • 298 Act of Sir John Barnard . . 298 Act of 23 & 24 Vict 298 Act of 8 & 9 Vict 299 Wagers in the United States . 299 Divisions of subject .... 299 I. Where the vendor, at the formation of the contract, has not the goods in his possession, nor a reason- able expectation of getting them, but contemplates an actual unconditional de- livery 302 Cases discussed 302 II. Where the vendor, at the formation of the contract, contemplates a symbolical, but not a manual, uncon- ditional delivery of the goods 302 Cases discussed 303 Pennsylvania cases . . . 305 Pennsylvania cases doubtful 308 III. Where the parties, at the formation of the contract, contemplate an actual de- livery, but conditional as to time 309 Cases discussed 309 IV. Where the parties, at the formation of the contract, contemplate no actual de- livery, but reserve the option to do so or not . Cases discussed 310 V. Where the parties, at the formation of the contract, contemplate no delivery at all, hut only a settlement of the difference in price Cases discussed 314 Principles deducible from the foregoing cases . . . 318 310 313 Contracts for the sale of securities made at. the Division of Stock Exchange may be avoided — first, by fraud, mis- take, or failure of consideration ; and, secondly, where, the contract is tainted by illegality, and therefore void- able as being against the law. 287 ' 288 THE STOCK BROKER. [PART II. SECTION I. — AVOIDANCE OF THE CONTRACT BY FRAUD, ETC. Fraud. With regard to the first of these heads, the same law that is applicable to sales of any other chattels, is applicable to the securities sold at the Stock Exchange ; and therefore this part of the subject will require but brief notice, as few cases have arisen under it relating especially to these securities. § 1. Fraud. Fraud de- Fraud is difficult to define, and perhaps the word may be best understood by looking at its legal effect on the contract ; and it may then be defined to be some ground for setting aside the contract, upon the discovery, and in consequence, of an intentional and successful artifice causing an injury, practised by one of the parties without the knowledge of the other, and which was essential to the formation of the contract. Fraud makes It will be seen that the presence of fraud does not contract only voidable. make the contract void, but only voidable at the elec- tion of either the vendor or the vendee, as the case may be, who shall be discovered to have been injured. In order to render fraud an efficacious means of avoiding the contract of sale, it is obvious that the party must have been deceived, and that the party de- ceiving must have done so intentionally, and that there must be evidence of injury resulting from the fraud, otherwise it is of no avail. We have come across no cases of fraud under the statute of Elizabeth which turned on the avoidance of the sale of these securities. § 2. Mistake. It is obvious that, in order to make a valid contract of sale, the minds of the contracting parties must meet, CHAP. IX.] AVOIDANCE OF THE CONTRACT. 289 and contract certainly with reference to the thing to be sold. If there has been a wrong impression on the part of one of the parties at the formation of the con- tract, it frequently may be set aside, for this reason. The common maxim of the law is that a mistake of law is not a ground for avoiding a contract, though this must be somewhat modified, and it is now settled that some mistakes of law as well as of fact are grounds Mistake of for avoidance. It is difficult, perhaps, to distinguish certain cases, exactly between the kinds of mistakes of law which will ^"avoids constitute a ground for rescinding a contract and those the eontract - which do not. Perhaps the best explanation is that of Lord Westbury, in Cooper v. Phibbs. 1 "It is said," Remarks of he remarked, " ignorantia 'juris haud excusat, but in bury in "that maxim the word jus is used in the sense of phibbs."' " denoting general law, the ordinary of the country. " But when the word jus is used in the sense of de- moting a private right, that maxim has no appli- cation. Private right of ownership is a matter of " fact ; it may also be the result of matter of law ; but " if parties contract under a mutual mistake and mis- " apprehension as to their relative and respective rights, " the result is, that the agreement is liable to be set " aside as having proceeded upon a common mistake." § 3. Failure of Consideration. Another ground for setting aside the contract is where the thing sold is not what the buyer desired to purchase. Thus, as has been above remarked, on the subject of the guaranty of genuineness, the buyer is entitled 1 L. R., 2 Eng. & Ir. App. 148. 19 290 THE STOCK BKOKEK. [PAKT II. to receive valid certificates of stock, and not forged ones, 1 and he is also entitled to get back his money, where he has subscribed in a projected railway, which is abandoned; 2 though, as has been observed under the condition of genuineness, there is no failure of consideration, 3 when he gets what he contracted for, but it proves to be worthless. SECTION II. — AVOIDANCE OF THE CONTRACT BY ILLEGALITY. The most numerous class of decisions certainly, and probably the most conflicting that have been given, with reference to the securities dealt in at the Stock Exchange, are those relating to the avoidance of the contract of sale in consequence of its being tainted by some kind of illegality. Contracts' The cases on this subject have all arisen upon the gal because question, first, as to when, and how far, contracts are of trade^or v °id because they tend in some way to hamper or re- tonsactums. st " ct or otherwise injure trade and commerce, in which case they are termed contracts " in restraint of trade ;" and, secondly, whether particular contracts do not in- stitute wagers, which, though not originally voidable at the common law, are now made so by statute in England, as well as in most of the American States. § 1. Contracts Illegal at Common Law because in Restraint of Trade. As just stated, a contract is said to be in restraint of trade when, in the opinion of a court, it will, if carried 1 Westropp v. Solomon, 8 C. B. ham, 5. •845. s Lambert v. Heath, 15 M. & W. 1 Kempson v. Saunders, 4 Bing- 487. CHAP. IX.] AVOIDANCE OF THE CONTRACT. 291 out, be of detriment to the material well-being of the county or community, or it is in any other way against public policy. In the leading English case of Mitchell v. Reynolds, 1 Mitchell ». the following rules were laid down by Parker, C. J., Kules of which, with some modifications, have been frequently Parker > c - J - upheld : that voluntary restraints of trade by agree- ment by parties were either — first, general, and in such cases void, whether by bond, covenant, or promise ; whether with or without consideration, and whether of the parties' own trade or not ; or, secondly, particular, and these latter were either without consideration, in which case they are void by what sort soever of con- tract created; or with consideration; in this latter class they are valid when made upon a good and ade- quate consideration, 2 so as to make them proper and useful contracts. 3 In Morris Run Coal Co. v. The Barclay Coal Co., 4 Moms Run several coal companies, of Pennsylvania entered, in Barclay Coal New York, into an agreement to divide two coal re- °" gions of which they had the control; to appoint a committee to take charge of their interests, and to decide upon all questions, and to appoint an agent at Wilkesbarre. The coal mined was to be delivered through him, and each corporation to deliver its pro- portionate share at its own cost in the different markets at such time and to such persons as the committee might direct, the committee to adjust the prices, rates, 1 1 P. Wm. 181. s SeeStuartu. Nicholson, 3 Bing. 2 Overruled in Hi tchcocku. Coker, N. C. 113; Gale v. Reed, 8 East, 6 Ad. & El. 438, as to adequacy of 83. consideration. * See 68 Pa. 173. 292 THE STOCK BROKER. [PART II. etc. It was also agreed that each of the five companies could only sell coal to the extent of its own proportion- ate share, and they agreed to be governed by the rules and regulations of the committee in their sales. It was held by the court, that this agreement was against public policy and void, and also within a statute in New York making it a misdemeanor for " persons to " conspire to commit any act injurious to trade or com- " merce." Remarks of I n delivering the opinion of the court, Agnew, J., said, quoting Parker, C. J., that to obtain " the sole " exercise of any known trade in England is a com- " plete monopoly and against the policy of the law. A " reason given is ' the great abuses the voluntary re- " straints are liable to, as, for instance, from corpora- "tions, who were perpetually laboring for exclusive " advantage in trade and to reduce it into as few hands " as possible.' In reference to a contract not to trade " in any part of England, it is said there is something " more than a presumption against it, because it never " can be useful to any man to restrain another from " trading in all places, though it may be to restrain " him from trading in some, unless he intends a mo- " nopoly, which is a crime. * * * The result of those" . cases " in which particular restraints in trade have been " held to be valid between individuals is that the re- " straint must be partial only, the consideration ade- " quate and not colorable, and the restriction reasonable Tindai, c. " upon the last requisite. Tindal, C. J., remarks in «. Graves™ 6 * " Horner v. Graves, 1 ' We do not see how a better test quoted. it can ^ e applied to the question, whether reasonable or 1 7 Bingham, 743. CHAP. IX.] AVOIDANCE OF THE CONTRACT. 293 " not, than by considering whether the restraint is such " only as to afford a fair protection as to the interests " of the party in favor of whom it is given, and not so " large as to interfere with the interests of the public. "Whatsoever restraint is larger than the necessary " protection of the party can be of no benefit to either. " It can only be oppressive, and, if oppressive, it is in " the eye of the law unreasonable. What is injurious " to the public interest is void upon the ground of pub- " lie policy." Many cases have been decided as to what is a rea- sonable restriction and what is not, and is therefore void, but two only may be referred to as illustrations. In Mallan v. May, 1 a covenant not to practise as a Maiian v. dentist in London, or in any of the places in England or Scotland where the plaintiff might have been practising before the expiration of the term of ser- vice with them, was held to be reasonable as to the limit of London, but unreasonable and void as to the remainder of the restriction. So, in Green v. Price, 2 a covenant not to follow the Green v. perfumery business in the cities of London and West- minster, or within the distance of six hundred miles therefrom, was good as to the cities, and void as to the limit of six hundred miles. The reader is also referred to the cases of Pierce v. Pierce v. Puller. Fuller, 3 and Chappel v. Brockway. 4 An important chappei». principle stated in these cases is, as to contracts for TO0 way " a limited restraint, the courts start with the presump- tion that they are illegal unless shown to have been 1 11 M. & "W. 653. » 8 Mass. 223. 2 13 M. & W. 695. * 21 Wend. 158. 294 THE STOCK BROKER. [PART II. Keeleru. Taylor. Common- wealth v. Carlisle. Remarks of .Gibson, J. Sampson v. Shaw. Agreement to make a "corner" il- legal. Raymond v. Levitt. made upon adequate consideration and upon circum- stances both reasonable and useful. In Keeler v. Taylor, 1 Woodward, C. J., said, the general rule is, that all restraints of trade, if nothing more appear, are bad. In Commonwealth v. Carlisle, 2 Gibson, J., said, " I " take it, a combination is criminal whenever the act " to be done has a necessary tendency to prejudice the " public or to oppress individuals by unjustly subject- "ing them to the power of the confederates, and "giving effect to the purpose of the latter, whether " of extortion or of mischief." The principles of law enunciated in these cases are of general application, and embrace contracts made at the Stock Exchange, as well as others. Whenever, therefore, the performance of such con- tracts may affect, or tend to affect, injuriously the general or commercial interests of the community, they have been held to be illegal. In Sampson v. Shaw, 3 it was held, that an agree- ment to make " a corner" in stock, by buying it up so as to control the market, and then purchasing for future deliveries, is illegal, and the parties thereto are not partners ; and any one of said parties who has authorized the others to use his funds already in their hands to carry out the agreement, cannot recover any amount actually appropriated according to its terms, but can recover, in an action for money had and received, any balance not so expended. In the recent case of Raymond v. Levitt, 4 decided 3 Sm. (Pa.) 468. 1 Briglitley's Rep. 40. » 101 Mass. 145. « 13 Cent. Law Jour. 110 [1881]. CHAP. IX.] AVOIDANCE OF THE CONTRACT. 295 in the Supreme Court in Michigan, a contract was entered into between different parties for the. purpose of controlling the wheat market, for what is called the " May deal," with a view of forcing up prices, and producing what is understood as " a corner," and thereby compelling parties, who had contracts to fulfil, to purchase the wheat at a higher price in order to do so. Campbell, J., said, " The object of the ar- Remarks of "rangement between these parties was to force the amp e ' " fictitious and unnatural rise in the wheat market for "the express purpose of getting the advantage of " dealers and purchasers whose necessities compelled "them to buy, and necessarily to create a similar " difficulty, as to all persons who had to obtain or " use that commodity. * * * That such transactions " are hazardous to the comfort of the community is "universally recognized. This, alone, may not be " enough to make them illegal. But it is enough to " make them so questionable that very little further Morria Kun " is required to bring them within distinct prohibi- g e- 9 0- "■ " tion." He held, on the authority of the Morris Eun nott *■ Pitts - "* ton; and Coal Co. v. Barclay, 1 Arnott v. Pittston, etc., 2 and Peoples. -r» i tt i t On its face. of the execu- In Ellis's Appeal, 3 the court held, that where an Ellis , g executor, in fraud of the trust under which he held the A PP eal - stock, and as collateral security for his own debt, trans- ferred the stock to one having notice of the fact that the stock was the property of the borrower's testator, and actual knowledge of the fact that there were other executors who did not join in the transaction, the pledgee was possessed of sufficient to put him upon in- quiry, and in the event of his omitting to do so, he could not be deemed a bona fide holder for value, and would be decreed to return the stock discharged of the lien of his advances. And, generally, where either the pawnee has actual notice that the executor is not acting in good faith, or has notice of facts which would put a reasonable man on inquiry, as, for instance, from the course of his dealings with the executor, the law will presume knowledge on his part of the fraud, so far, at 1 See Hill a. Simpson, 7 Vesey, Hare, 93 ; Wilson v. Moore, 1 152. Mylne & Keen, 337. 2 See Haines v. Forshaw, 11 3 8 Weekly Notes, Phila. 538. 326 THE PLEDGE. [PART III. Sub-pledgees. How far af- fected by pledgee's actual notice. Wood's Ap- peal. least, as to found a civil proceeding to fix the pawnee with the amount of the advances. The power of the executor, however, over the assets, if he be acting in good faith, is plenary, and extends to stock or securities which have been specifically bequeathed to a legatee, though in this case it is usually safer to have the assent of the legatee to the hypothecation given, as the ex- . ecutor may have done some act amounting to an assent to the bequest. 1 If, then, an executor may pledge the securities of an estate, and a mortgagee is safe in advancing money on them, provided he has no notice of fraud, how far is a sub-pledgee safe in advancing on stocks registered in the name of an executor ? Of course where the original pledgee's title is good there is no difficulty. But where the first pledgee is affected with actual notice of fraud, the question has arisen how far the title of a sub- pledgee, without notice, is affected by the character of the transaction between the executor and the first lender. It has been argued, strenuously, that in all such cases the original pledgee can transfer no better title to any one than he himself possessed ; and that if his title was bad, every subsequent bailee or transferee must take subject to the equities of those interested in the estate. In Wood's Appeal, 2 however, this view has been overruled ; and it was held, that where one of four executors had pledged certain certificates of stock, registered in his name as executor, with a firm of 1 See 1 Amer. Lead. Cas. in Eq. 95. 1 92 Penna. Eep. 379. CHAP. I.] FORMATION OF THE PLEDGE. 327 brokers, as security for his own personal debt, ac- companied by a blank power of attorney executed by him as acting executor, — and these brokers, in turn, sub-pledged the stock to persons who advanced money on them, without notice of the fraud, — the title of the sub-pledgee was good, and that the remaining execu- tors could not recover the stock until the advances made thereon were paid. " An executor," said Judge Remarks of , . . Turnkey, J. Trunkey, " holds under a trust ; he is the minister or " dispenser of the goods of the defendant. He has " the same property in the personal effects as the de- " ceased had when living. * * * Co-executors are " regarded in law as an individual person ; and the " act of any one of them, in respect to the adminis- " tration of the effects, . is deemed to be the act of .all. "* * * An exception to this general power will be " found in those cases only when collusion exists be- " tween the executor and the purchaser. That the ex- " ecutor may waste the money is not alone sufficient to " invalidate the sale : it must further appear that the " purchaser participated in the devastavit or breach of "duty in the executor. Thus, when the person to " whom the executor passes the property knows that " the executor is acting in violation of his trust and in " fraud of those interested in the due administration of " the assets, the fraud vitiates the transaction, and the " attempted transfer is void. * * * The fact that the " legal title to the stock was known to have previously " been in the executor, and that the title of the holder " purported on its face to have been derived from him " in his representative capacity, will not raise a sus- " picion, nor put a purchaser on inquiry, for the reason 328 THE PLEDGE. [PART III. " that it is the executor's primary duty to dispose of p™ii v. Tilt " the assets and settle the estate (quoting, also, Prall v. "Tilt 1 ). We think the Master was right in holding " that the same principle which prevails in the case of " an absolute owner applies in the case of an executor " who invests the owner with entire ownership. " The defendants had a right to infer that McDowell "& Wilkins (the first pledgees) were owners of the " stock, although the certificates showed title in Charles " S. "Wood (the testator), and the blank powers and as- " signments were signed by George R,. Wood as acting " executor. They found McDowell & Wilkins clothed " with an apparent ownership. The testator had given " George R. Wood the strongest confidence in making " him the executor of his will, thereby investing abso- " lute power in him to sell and transfer the stock in the "line of his duty." a broker may The doctrine enunciated in this case makes it safe, loan to third generally, for a banker or broker to loan to third par- a pledge of ties, upon a pledge of securities registered in the names securities p \, -i -, i ,. » registered in oi executors, where he has no notice of any circum- name, e where S stance which would put him on notice of fraud. But tice'of any° *his doctrine is subject to another important limitation, fraud. fa^ although an executor has prima facie aright to who is also a transfer, yet where he is made by the will a trustee, as trustee, has ,, . ,. , . . no implied well as an executor, no implied power on his part to pledge, after transfer exists, after a sufficient period since the death riod r aftTr tes- of the testator has elapsed to raise a presumption of tator's death. the payment f a H JghtS. Commercial In Lowry v. The Commercial and Farmers' Bank, 2 Bank.*" ' decided by Chief Justice Taney, stock stood in the 1 28 New Jersey, Eq. 70. 2 3 Amor. Law Journal, 111. CHAP. I.] FORMATION OF THE PLEDGE. 329 name of an executor. The bank allowed him to transfer it and receive the proceeds. The stock had been bequeathed by the will to the executor, in trust, to pay over the dividends, etc., to certain cestuis que trustent, and the transfer was made eight years after the testator's death. The court held, that after a lapse of eight years, the bank was bound to presume , pay- ment of the debts of the testator, and that no implied power to sell, therefore, existed. The bank was com- pelled to make good to the cestuis que trustent the stock transferred. It is obvious, then, that even since the decisions in Wood's estate and the other cases referred to in con- nection with it, a person lending on stocks or securities held by executors ought to make inquiry as to the date of the testator's death. If a comparatively short time has elapsed, — less, for instance, than two years, — an implied power exists to sell and to pledge for the pur- poses of the estate. And so long as the lender has no reason to suppose that the money is borrowed for any other purpose, he is safe in loaning on such securities, either directly to the executor, or to third parties. But if the testator has been dead for several years, or there are any other circumstances which would lead to the belief that the loan is effected for other than the legiti- mate purposes of the estate, 1 the loaner lends at his peril. Co-executors _ . n . n . it. usually re- It must be added, that co-executors are regarded in gardediniaw law as one individual, and in most transactions any of vidua! 1 " *" 1 Miller v. Ege, 8 Barr (Pa.), Lead. Cas., Eq., 4th Am. ed. 59 ; 352; Bellas v. McCarty, 10 "Watts, Garrard v. P. & C. E. E. Co., 5 13 ; Collinson v. Lister, 7 De G. M. Casey (Pa.), 154. & J. 634; Elliot v. Merryman, 1 330 THE PLEDGE. [pakt ni. Langford v. Gascoyne. Bemarks of Sir William Grant. Kemarks of Lord Cotten- ham in Clough v. Bond. them can act for all. " It is well settled, in general, " that the act of one co-executor binds all the others, by " reason of the confidence reposed in them individually, " in consequence of which each has full power over the " assets." x But where both executors join in the ad- ministration of the assets, it has been held, that each is responsible for their safe keeping ; as, for instance, where a deposit of money with a banker is made in the name of two executors, a release by one cannot discharge the banker. 2 In Langford v. Gascoyne, 3 Sir William Grant laid down the rule as being, " in all cases, that if an exec- " utor does any act by which money gets into the pos- session of another executor, the former is equally " answerable with the other ; not where' an executor " is merely passive by not obstructing in receiving it." And in Clough v. Bond, 4 Lord Cottenham, following this case, said, that a co-executor, if without necessity "he be instrumental in giving to the person failing "possession of any part of the property, he will be " liable, although the person possessing it be a co-ex- " ecutor or co-administrator." Where therefore several executors have joined in a deposit, or pledge, it is very doubtful whether the pawnee can safely return it with- out a receipt or release from all at least of the acting executors. The proper rule would be, on the return of the securities hypothecated by, several executors, for an advance, to retransfer or redeliver to all, or else to require a joint receipt or acknowledgment from all. 1 Beltzhoover v. Darragh, 16 Serg. & Eawle (Pa.), 329. 8 See De Haven «. Williams, 2 Weekly Notes, 295. » See 11 Vesey, 333. « 3 My. & Craig, 496. CHAP. I.] FORMATION OF THE PLEDGE. 331 We now pass to the case of trustees. The power Power of r . trustees to of trustees to hypothecate, or otherwise deal in, trust pledge. securities held by them, differs, as has already been stated, from that of executors. The duty of a trustee is, primarily, to hold. No power, therefore, to sell, still less to hypothecate, is implied in a trustee, except- ing in the case of assignees for the benefit of creditors, or in bankruptcy, whose duty is, of course, to dis- tribute. Consequently he has no power to sell, except Trustee has where expressly authorized by the instrument creating power to sell Or pl6d°"6. the trust. 1 The stock broker, therefore, or other pledgee, becomes the pledgee at his own risk, if there is anything to put him upon notice that the subject of the pledge is property held in trust, and he is bound to make inquiries of a trustee always in dealing with trust funds. Thus, in Shaw v. Spencer, 2 where a certificate of Shaw ». stock standing in the name of " A. B., as trustee for pencer " C D.," is by him pledged to secure his own debt, it was held, that the pledgee was put upon notice and received the pledge at his own risk. In this case it was objected, upon the argument, that there was no one of whom the pledgee could inquire with regard to the right of the pledgeor to effect the pledge, but the fraudulent trustee. Foster, J., said, "The objection Remarks of. " that in the present case the only persons of whom ° ster ' J ' "inquiry could have been made were 'the trustees "who committed the breach of trust,' is sufficiently " answered by the words of Sir John Bomilly, Master Sir John " of the Bolls, in a recent and leading case. ' With qu^jdf 1 Bayard v. The Bank, 52 Penna. '=» 100 Mass. 382. Rep. 232. 332 THE PLEDGE. [PART III. Jones v. Smith. Duncan v. Jaudon. A broker taking a pledge from a trustee, as such, is af- fected with notice. "respect to the argument that it was unnecessary to "make any inquiry, because it must have led to no " results,' he says, ' I think it impossible to admit the " validity of this excuse. I concur in the doctrine of " Jones v. Smith, 1 that a false answer, or a reasonable " answer, given to an-inquiry made, may dispense with " the necessity of further inquiry,' but I think it im- " possible beforehand to come to any conclusion that a "false answer would have been given, which would " have precluded the necessity of further inquiry. A "more dangerous doctrine could not be laid down, "nor one involving a more unsatisfactory inquiry, " namely, a hypothetical inquiry, as to what A. would " have said if B. had said something other than what "he did say." 2 So, in Duncan v. Jaudon, 3 the court held, that a person lending money to a trustee on a pledge of a trust con- sisting of stocks, etc., and selling the same for the re- payment of the loan, is responsible to the cestui que trust, where the certificates of stock show on their face that the stocks are held in trust, and the loan is appar- ently for the trustee's benefit. If, however, the stock broker or pledgee makes inquiry and is deceived by the trustee, the former will not be held responsible to the cestui que trust} Any one therefore advancing on a security registered in the name of a person as trustee, takes it with notice of everything he could have ascertained by examining the trust deed. Knowledge or assent on the part of 1 1 Hare, 43. ! Jones v. "Williams, 24 Beavan, 62. » 15 Wallace, 165. * See Buttrick v. Holden, 13 Met- calf, 355 ; Calais Steamboat Co. i>. Van Pelt, 2 Black, 372. CHAP. I.] FOEMATION OF THE PLEDGE. 333 the cestui que trust in most cases is insufficient to render the advance safe, as many trusts are created to exclude discretion on the part of the cestui que trust, as, for example, those for married women, and " Spend- thrift Son Trusts," 1 as they are sometimes called, and others, where the object of the tnust would be defeated if the assent of the cestui que trust could authorize a pledging or dealing with the security. Where power to hypothecate is expressly given, as, Where sev- 6P£Li. tXUSTGGS for instance, where trustees are empowered to carry on have power a business, all the trustees must join, unless otherwise must join directed by the deed of trust. "While one executor may bind his co-executor, there is no such thing recog- nized as an acting trustee. A person therefore ad- vancing to trustees must take the obligation, or at least act with the assent, of every trustee, 2 or he may become a pledgee at his own risk. Nor can one of several trustees delegate, by power a trustee can- , . n °t delegate of attorney or any other instrument, to his co-trustees, his authority or any of them, or to an agent, power to act for him in ministerial the trust in any matter involving discretion, which a pledge of security, of course, always does. 3 - Delegatus non potest delegare, is the rule applicable 1 These trusts are peculiar to some Serg. 405; Sinclair v. Jackson, 8 States, and have not generally been Cowen (N. Y.), 544; Sloo v. Law, sustained in England. See Fisher 3 Blatch. C. C. 471 ; Chapin v. v. Taylor, 2 Eawle, 33 ; Holdshipo. First Universalist Society, 8 Gray, Patterson, 7 Watts, 547 ; Ashhurst 575 ; Holcomb v. Holcomb, 3 Stock- v. Given, 5 Watts & Serg. 323; ton (N. J.), 281 ; Lewin on Trusts, Vaux v. Parke, 7 ibid. 19; Brown p. 298. D.Williamson's Ex'rs, 12 Casey, 3 For the proposition that a power 338 ; Shankland's Appeal, 11 of sale necessarily involves discre- Wright, 113; Keyser's Appeal, 57 tion, see argument of Sir Edward Penna. 236. , Sugden, in Bradford v. Belfleld, 2 Vandever's Appeal, 8 Watts & 2 Simons, 264. 334 THE PLEDGE. [PABT III. Power of executors and trustees to sell or buy. Executor, prima facie, may sell. to trustees in all, excepting mere ministerial acts, such, as pledging a specific security for a specific advance, which has been determined upon beforehand. Where this appears in the letter of attorney, the mere duty of depositing the securities mentioned, with the pledgee, upon receiving the amount named, may be delegated to a co-trustee or an attorney in fact. But where the power of attorney on its face assumes to delegate any discretion to the agent, it is ipso facto void. 1 A person therefore advancing to trustees who have power to borrow money should see that they all join individu- ally in executing the power of attorney to transfer, or, if any one act through an attorney in fact, the letter of attorney should purport to contain no delegation of discretion, but merely authorize the agent to perform the ministerial act of executing the transfer. We proceed, in this connection, to say a few words about the power of executors and trustees to sell assets held by them, as securities of this description are con- tinually the subject of purchase and sale. The power of executors to sell is implied by law, apart from any express power in the will, because, as already stated, it is their duty to collect the assets for payment of creditors and distribution among those entitled. A purchaser therefore is safe in receiving securities registered in the name of an executor or ad- ministrator, unless some special instance should exist 1 See Hawkins v. Kemp, 3 East, 410 ; Bulteel v. Abinger, 6 Jurist, 410 ; Sugden on Powers, vol. i. * p. 222 ; Berger v. Duff, 4 Johnson's Ch. (N. T.) 869; Sinclair v. Jack- son, 8 Cowen, 575 ; Hawley v. James, 5 Paige, 487 ; Pearson v. Jamison, 1 McLean, C. C. 197, and other authorities, infra, on power of trustee to delegate a discretion to sell. CHAP. I.] FORMATION OF THE PLEDGE. 335 to lead him to infer fraud, or unless such a long period has elapsed since the death of the decedent as to lead to the inference that his debts have been paid. But in Lowry v. The Commercial Bank, 1 the court held, Lowry «. that where eight years had elapsed since the death of a Bank, testator, a bank was negligent in allowing the executor, who it appeared from the terms of the will was also appointed a trustee, to allow a transfer of stock stand- ing in his name. Judge Taney, who delivered the opinion of the court, held, that after the lapse of such a time the bank was bound to presume that all the testator's debts had been paid, and that even an ex- ecutor after that period had no implied power to sell. •The powers of a trustee to sell depend, as his power Trustee, to pledge, upon the instrument creating the trust. If cln^otieiT' it contains no express power, the trustee cannot deal with the assets, excepting under an order of court. And, where such an express power does exist, all the existing trustees must join in the sale. The trustees, moreover, must act jointly. It is not Trustees sufficient for them to act separately, 2 if the separate in- jSi^tiyf* struments executed by each do not show an intention on the part of each to concur in the joint act of all. Failure on the part of all to join may be fatal to the title of the purchaser. 3 And it is not competent for one trustee to delegate to an agent, or even to his co- trustees, power to act in the sale, unless it appear, on the face of the letter of attorney, that the sale, and the terms of it, have been decided upon by the former, and 1 3 Am. Law Jour. 111. 3 Sinclair v. Jackson, 8 Cowen, 1 See Vandever's Appeal, 8 543 ; Chapin v. First Universalist Watts & Serg. 405. Society, 8 Gray, 583. 336 THE PLEDGE. ' [pAKT III. the agent is clothed with the authority only to perform the mere ministerial duty of carrying it out. Indeed, it is a safe rule for the purchaser to refuse taking any transfer unless executed by the trustees in- dividually. 1 In regard to the delegation of discretion by trustees, it has been argued that a difference exists between those cases where the trustee's power is coupled with an interest, and where the trustee is by the trust deed given a mere naked power to sell. Delegation of j n ^he case of a power coupled with an interest, it trustee s au- r r ' thority where hag been said that the trustee may delegate his dis- there is a . . power cou- cretion by reason of the interest vested in him. But interest. unless this rule be restricted to those cases where the donee of the power is, in fact, the beneficial owner, so that his interest and power, combined, invest him with complete control over the property, the cases do not bear out this distinction. A delegation of discretion has been pronounced void in many instances, where the power of discretion in the trustee has been coupled with an interest. 2 1 Bulteel v. Abinger, 6 Jurist, Hughes, 39 Missouri, 20 ; Saun- 410, and authorities infra, under ders v. Weber, 39 California, 287 ; following note. Bohlen's Estate, 75 Penna. 304. 2 In the following cases, where Por cases of naked power, see Wil- a power was coupled with an in- son v. Denison, 1 Ambler, 86; terest, a delegation of discretion by Heger v. Deares, 2 Johnson's Ch. the trustee to an attorney or agent 154 (Ch. Kent) ; Berger v. Duff, 4 was held void. See Combe's Case, Johnson'sCh. 369; Tainteri;. Clark, 9 Eep. 75 6 (a.d. 1612) ; Bulteel v. 13 Metcalf, 226 ; Pearson v. Jami- Abinger, 6 Jurist, 410; Hawkins son, 1 McLean, C. C. 197; Hunt v. Kemp, 3 East, 410 ; Sinclair v. v. Douglass, 22 Vt. 130 ; Newton Jackson, 8 Cowen, 575 ; Hawley v. v. Bronson's Ex'rs, 13 N. Y. 587 ; James, 5 Paige, 487 ; Greenough v. Wilson v. Pennock, p Ca. Pa. 239 ; Wells, 10 Cush. 571 ; Budd i>. Hiler, Piatt v. McCullough, 1 McLean, 3 Dutcher, 43 ; Belote v. White,2 C. C. 69. Head (Tenn.), 703 ; Whittlesay v. CHAP. I.] FORMATION OF THE PLEDGE. 337 The power of a trustee, or other person acting in a fiduciary relation, to purchase securities, can, so far as the stock broker is concerned, only practically come in question where a person presents a check or draft drawn by him in his character of trustee, etc., for pay- ment of securities purchased by him. In such a case the broker has direct notice that the money belongs to the cestui que trust, and there is little doubt, if the se- curities purchased were not directed to be registered in the name of the- person buying them in his fiduciary capacity, that the broker might be held liable for the money, thus misapplied. Where, however, the secu- rities purchased are directed to be registered in the name of the trust estate, it is conceived that the broker could not be held responsible for receiving payment in this manner, even should it turn out that trust funda had been misapplied. It is the safer rule for the broker to decline receiving payment in any way which necessarily puts him upon notice that the moneys paid do not belong to the customer. SECTION II. — THE SUBJECT-MATTER OF THE PLEDGE. Nearly all personal property may be the subject of What may a pledge by the owner, or by one by him duly author- ized to do so ; and it may be said that bonds, scrip, mortgages, debentures, shares of stock, and nearly all choses in action capable of assignment, may be pledged by one authorized to do so. 22 ties 338 THE PLEDGE. [PAKT III. SECTION III. — MANNER OF EFFECTING THE PLEDGE. Delivery of The thing pledged must always be delivered 1 either manually 2 or symbolically 3 by the pledgeor to the pledgee. Pledge of Where the property passes merely by delivery, as securities. coupon bonds, scrip, and a few peculiar kinds of shares, the pledge is effected by simply handing the thing to the pledgee, since, as these are negotiable, the holder Pledge of is prima facie the owner. With regard, however, to non-nego- . . . tiabie securi- other choses in action which do not pass by mere delivery, the title to them must be transferred to the pledgee in the mode required by law to pass title to the particular property, in each case, made the subject of pledge. As regards registered bonds, — i.e., bonds registered in the names of the holders on the books of the company issuing them, — and shares of stock, the title is in the former case ordinarily transferred by the pledgeor having the bonds registered in the pledgee's name at the transfer agency, and in the latter, by the pledgeor handing the certificates of stock to the pledgee, with a power of attorney executed in blank, to trans- fer ; and the pledgee may or may not have them regis- tered in his name : as indeed also, in the case of bonds, the same thing may be done, and frequently when no actual transfer is made the company is notified of the intended pledge.* ' Murray v. Lardner, 2 "Wallace, 235. 110. * See 2 Kent, Com. p. 578, note d 1 Brewster v. Hartley, 37 Cal. 15. (12th ed.) j Bank v. Cook, 4 Pick. " Markham v. Jaudon, 41 N. T. (Mass.) 405. CHAPTEE II. EFFECT OF THE PLEDGE. PAGE 839 Division of chapter SECTION I. — PLEDGEE'S TITLE IN THE PLEDGE. Pledgee registered as share- holder in joint stock com- pany 340 Pledgee liable as ordinary- bailee for care, etc. . . . 341 SECTION II. — PLEDGEE'S RIGHT TO ENJOY THE USE OF THE THING PLEDGED. J 1. PLEDGEE'S EIGHT TO TOTE, COLLECT DIVIDENDS, COUPONS, ETC. Pledgee may collect dividends, coupons, vote, etc. . . . 342 \ 2. PLEDGEE'S BIGHT TO SELL THE PLEDGE. When and how pledgee may sell 343 PiOE Pledge of commercial paper 344 Sale by judicial process . . 344 Sale without the aid of a court 344 Public sale 345 Cases discussed 345 Eight of pledgee to bid at sale 347 Special agreement .... 348 Example of, in note .... 349 Demand and notice .... 350 Cases discussed .350 Sufficient notice 351 Cases discussed 352 \ 3. PLEDGEE'S RIGHT TO REHY- POTHECATE. Subject divided into two heads 353 I. Cases under first head, in England and America, dis- cussed 354 II. Cases under, second head, in England, discussed . . 364 Donald v. Suckling .... 364 Keview of the principles on pledgee's right to sub-pledge 368 In this chapter we shall examine, — Section I. The pledgee's title in the pledge. Section II. The pledgee's right to enjoy the use of the pledge. § 1. The pledgee's right to vote, collect dividends, coupons, etc. § 2. To sell the pledge. § 3. To sub-pledge Or rehypothecate. 339 Division of chapter. 340 THE PLEDGE. [PART III. SECTION I. — THE PLEDGEES TITLE IN THE PLEDGE. Pledgee's title. Title of pledgees reg- istered as shareholders in a joint stock com- pany. As we have seen, a pledge of negotiable instruments, like coupon bonds, scrip certificates passing by deliv- ery, and the like, is effected by handing the pledgee the instruments, and he becomes then, as regards third parties, the legal owner of them, if nothing more be done. 1 In the case of registered bonds and shares of stock, the pledgee gets the legal title only when a transfer into his own name is made properly on the books of the company; 2 and, while he merely holds the certificates of stock with a power of attorney to transfer executed in blank, his title is only an equi- table one. 3 When the pledgee holds the legal title in his own name, there is little doubt that in the United States, as well as in England, he is liable to the company for calls, or any other obligations of a stockholder, and continues so liable until his name is properly taken off the register of shareholders. There are, moreover, in many of the States of the Union, peculiar personal liabilities, of a more or less onerous character, which a shareholder in a joint stock company, especially manu- facturing or improvement companies, may incur, such as back wages of operatives, or corporate debts con- tracted without compliance with certain statutory regu- lations. These liabilities attach to the ownership of the stock, and, generally, irrespective of the capacity in which the person holding the legal title owns it. 1 Morris Canal & Bank Co. v. Lewis, 12 N. J., Eq. 323. 2 Telegraph Co. v. Davenport, 7 vOtto, 369 ; Roberts's Appeal, 4 Nor- ris (Pa.), 84. 8 Lightner's Appeal, 1 Norris (Pa.), 301. CHAP. II.] EFFECT OF THE PLEDGE. 341 For the theory on which these ioint stock companies Share- • '' L holders in are organized is, that the shareholders are all partners joint stock . , .. , .,. p , -i companies in the common enterprise, whose liability tor debts is are partners. limited by statute only, either to the par value of the shares held by them, or to some further ascertained sum. And, as a trustee or other person acting in a fiduciary capacity, who carries on business for his ces- tuis que trustent, either by himself or in partnership with others, cannot do so without becoming personally liable for debts contracted in the course of business, so the only limit of his liability as shareholder in a company is the statutory one of the par value of the shares held by him. This reasoning, of course, ex- tends to pledgees, whenever they allow themselves to be registered as shareholders, since they hold them- selves out to the world as partners, although, as be- tween themselves and the pledgeor, the latter may be liable for calls, etc., just as the trustee may look to the trust estate for indemnity against loss incurred by him in the course of his duty. A pledgee, therefore, by registering stock hypothecated with him in his own name, incurs all the liabilities of a shareholder. He obtains, on the other hand, a recognition by the com- pany of his title as a shareholder, which they are thereafter estopped from disputing, even if it turn out that the certificate of stock was forged, or that the transferor, if a trustee, or agent, etc., had no authority to transfer off the register of shareholders. 1 The pawnee is bound to take ordinary care, and is Pledgee re- responsible only for gross neglect; for the bailment ordinary ** is beneficial both to the debtor and creditor. The ai ee ' 1 Johnson v. Underhill, 52 N. Y. 203 ; Wheeler v. Kost, 77 111. 296. 342 THE PLEDGE. [PART III. pawnee, upon delivery to him, has a special property in the thing pawned, and if it be not injured by use he may use it. 1 Pledgee, when legal owner, may exercise all rights of owner con- sistent with the terms of the pledge. Ex parte "Willcocks. Merchants' Bank v. Cook. Pledgee of stock may vote, collect dividends, etc. SECTION II. — THE PLEDGEE'S EIGHT TO ENJOY THE USE OP THE THING PLEDGED. § 1. Pledgee's Right to Vote, Collect Dividends, Cou- pons, etc. "When the pledgee has the registered bonds or cer- tificates standing in his name on the books of the company, absolutely, without any notice to its officers that he is not the actual owner, or when he holds negotiable securities, he may, being the legal owner, exercise all the rights of such an owner, consistent with the terms of the pledge. Thus, in Ex parte Willcocks, 2 the court allowed the pledgee to vote on the pledged stock only so long as it stood in the pledgeor's name in the books of the com- pany. And in Merchants' Bank v. Cook, 3 the court did not allow the pledgee to vote, because notice was left with the company stating the existence of the pledge. The pledgee may, moreover, in the absence of any express or implied condition to the contrary, collect coupons* or interest, and draw dividends, 5 accruing in money on the security pledged, accounting for them on the final settlement of accounts between himself and the pledgeor, and, in short, exercise all the privileges 1 2 Kent, Com. 579 (12th ed.). a 7 Cowen, 402. ^ • 4 Pick. 405. * See Androscoggin E. E. Co. v. Bank, 48 Maine, 335. 6 Hasbrookw.Vanderoort, 4 Sand- ford, 74. CHAP. II.] EFFECT OF THE PLEDGE. 343 of a real owner, not inconsistent with the terras of the pledge. 1 He would not, however, without special au- , thority from the pledgeor, be entitled to convert into > money, scrip of stock, dividends, or any other incre- ment in the security pledged not accruing in money, since this would amount to a sale of a chose in action made the subject of pledge, which, except on non- payment of the advance, is contrary to the terms of the contract. § 2. Pledgee's Right to Sell t/ie Pledge. In the event of the debt not being paid at the time Pledgee's designated in the agreement, the pledgee may either the pledge, sell the pledge by a judicial foreclosure and sale, which involves a proceeding at law, and notice (by service of legal process) to the pledgeor, or at least what is in law deemed the equivalent of notice ; or, without proceed- ing at law, he may, on demand and reasonable notice, sell the pledge at a public sale, not judicial ; or if there be a special arrangement between the parties, the pledgee may sell according to its terms. Or, finally, he may proceed in an action at law against the debtor personally, and not sell the pledge at all; as in Robinson v. Hurley, 2 where it was stipu- Bobinaonu. Hurley. lated that should the note pledged as collateral " not be promptly met at maturity," the pledgee reserves " the right and privilege of" disposing of the pledge at private sale, the proceeds to be applied to the satis- faction of the debt, and the balance to be paid the 1 See Butterworth v. Kennedy, 5 Silverthorn, 39 Wise. 147 ; Rev. Bosw. 143; see, also, McDaniels Stat. N. Y., 5th ed. v. Manf. Co., 22 Vt. 274; Heath v. 2 11 Iowa, 410. 344 THE PLEDGE. [PAKT III. Pledge of commercial paper. Sale by judicial pro- cess. Sale without the aid of a court. Johnson v. Dexter. pledgeor, and the court held, that it did not require a sale at the maturity of the note. In the case of commercial paper, held as collateral security, it has, for obvious reasons, been held, that the pledgee cannot sell, but must collect at maturity. 1 Where the pledge is sold by a judicial sale, with the aid of a court of equity, the transaction is simple, and no cases need be cited for illustration. But where the sale is effected without the aid of a court, either publicly or privately, the questions arising as to the rights of the parties become somewhat more compli- cated, and will require consideration. In all cases, however, where it is possible to make a sale of the pledge without the aid of the court of law, it must be remembered that the securities pledged must, if negotiable, have been actually delivered, or, where not negotiable, the certificates, or other muni- ments of title, with a power of attorney to transfer, have been handed, to the pledgee when the hypothe- cation was effected ; for in those cases where the cer- tificates are handed over to the pledgee without being accompanied by a proper power of attorney, the aid of a court must, in every instance, be invoked to effect a sale. As, for instance, in Johnson v. Dexter et al., 2 where, when the loan fell due, it was discovered that the power of attorney to transfer had been severed from the certificate without the knowledge of the pledgeors, who, however, on being informed of the fact by the ■ J See Elctcher v. Dickenson, 7 Allen, 23; Nelson v. "Wellington, 5 Bosw. 178 ; Wheeler v. Newbould, 16 N. Y. 392; Lamberton v. Win- dom, 12 Minn. 232. 2 2 McArthur, 530, Supreme Court District of Columbia. CHAP. II.] EFFECT OF THE PLEDGE. 345 complainant, refused to re-execute another power; on a bill and answer filed, the court decreed the sale of the stock to be made, and the proceeds applied to liquidate the defendant. Humphreys, J., remarked, that the machinery of a Remarks of court of equity was the only method possible to enforce J. such a transaction ; the defendant could repossess him- self of the certificates, it was true, but not without paying the debt. It was the defendant's duty to en- dorse the collateral security properly when passed to raise the money ; and, when informed of the mistake, he should have corrected it ; and if he would not do so, the court, considering that to be done which ought to have been done, would decree a sale. The sale, when made without the aid of a court, Sale without must be public, and a question has arisen as to what cess must be constitutes a public sale. The Stock Exchange usually nariiy.' constitutes the best mart for the sale of any security there dealt in, and is now practically the only one for many securities. It is not, however, public, in the strict sense of the word, — only its members, and not the general public, being admitted to its sittings. A Public sale, sale at auction, on the other hand, constitutes, in a literal sense, a public sale. In Rankin v. McCullough, 1 Edmonds, P. J., said, Rankin v. " But the objection as to the place where the stock Remarks of ' " was sold was well taken. The sale at the Board of p. j.° n s ' " Brokers has often been held not to be such a public " sale as is required in such cases." In Brass v. Worth, 2 Brown, J., said, "The sale, ^ s th 8 - which the defendants made of the plaintiff's stocks, Remarks of Brown, J. 1 12 Barb. (N. Y.) 103. » 40 Barb. (ST. Y.) 648. 346 THE PLEDGE. [PAKT III. Brown v. "Ward. "Willoughby v. Comstock. Pire Ins. Co. v. Dalrymple. Remarks of Bartol, J. Brown v. "Ward quoted. was not public. It was essentially private. The Board of Brokers is an association of dealers in stocks, and is not open to the public. None but members are allowed to be present at the meetings, except upon invitation." In Brown v. Ward, 1 Hoffman, J., held, that a public sale in New York may be held at the Merchants' Ex- change, as a custom has grown up which is sanctioned by the courts, on demand and notice of the place of sale, and that any other mode of sale must rest upon express agreement. Although in Willoughby v. Comstock, 2 Nelson, C. J., held, that inasmuch as there were no restrictions as to the place of sale, and the pledgeor had been notified of the place of sale, and made no objections, he was estopped from afterwards setting up that the Board of Brokers was not a proper place of sale, there being no usage to the contrary. But in the State of Maryland a contrary doctrine has been established, and in Maryland Fire Ins. Co. v. Dalrymple, 3 Bartol, J., said, "It was contended " * * * that the sale must in all cases be made at " public auction, and that a sale at the Brokers' Board " would not be legal ; and some decisions in New York " were cited in support of this view. In Brown v. " Ward/ it was said that ' a custom has grown up (in "New York), and been sanctioned by the courts, of " selling stock at the Merchants' Exchange.' There " is no evidence of any such custom in Baltimore, and, "considering the requirements of the law, and the 1 3 Duer (ST. Y.), 660. * 3 Hill (N. Y.), 389. » 25 Md. 265. < Supra. CHAP. II.] EFFECT OF THE PLEDGE. 347 " reason and nature of the transaction, we are of the in Mary- land, sale at " opinion that the most proper and suitable place for Board of r r r r Brokers held " a sale of stock is at the Board of Brokers. There is to be a public "the stock market, — the mart to which vendors and " purchasers resort, by their agents, to buy and sell " stock, where competition among bidders is most apt " to be found ; such sales are.public, and unless there " be, in the particular case, some ground for impeach- " ing their fairness, we are of opinion they are reason- able and ought to be supported." 1 At a judicial sale, at a time and place and with the Bight of J r pledgee to notice ordered by a court, there exists no reason why bid at sale. the pledgee should not bid at the sale with the public. But it has been decided in the case of a sale, even though public, made by the pledgee on his own respon- sibility, that he cannot, in the absence of a special stipulation to. that effect, become the purchaser of the security pledged with him, on the ground of his in- terest as a prospective buyer being inconsistent with his duty as a pledgee. Thus, in Maryland Fire Ins. Co. v. Dalrymple, 2 Md. Fire ins. Co. v. Dal- Bartol, J., said, " But, as we have seen, the defendant rympie. "became itself the purchaser of the stock, and the BartoT J.° " question arises, what was the legal effect of the pro- " ceeding? Did it amount to a valid and effectual sale " so as either to vest in the defendant as purchaser an "absolute title, or to operate as a conversion of the " property, break up the bailment, and the relation of " bailor and bailee between the parties? The doctrine "that trustees, executors, administrators, and others 1 See, also, Eobinson v. Hurley, 11 * 25 Md. 265. Iowa, 413. . 348 THE PLEDGE. [part in. Middlesex Bank v. Minot. Bank v. Du- buque K. B. Co. Special agreement. Private sale. "holding fiduciary relations are incompetent to pur- chase the property held by them in trust, is well "settled. 1 * * * The sale of the pledge by the de- fendant to itself was contrary to the faith of the " bailment, forbidden, as we have shown by the citation " from Story, by the common law, and might be treated " by the bailor, at his election, as a tortious conversion " of the property. In this case, no such election was " made by the plaintiff. There was no transmutation "of title or change of possession, and the sale being "inoperative to work a conversion, the relation of the " parties remained unchanged thereby. The defend- " ant remained in possession of the stock as before, in " the same manner as if the sale had been attempted, " and both in fact and in contemplation of law the "bailment continued. This point was decided in " Middlesex Bank v. Minot. 2 That decision was fol- " lowed by the Supreme Court of Iowa in The Bank "v. Dubuque RE. Co." 3 Hence it has become usual, in most cases of ad- vances on collaterals, to make an express stipulation * that, in case of failure to pay the advance at the time specified, the pledgee may sell the securities pledged at public sale, and may, at such sale, become the purchaser himself. It is obvious that, in the case of securities not well known or current on the market, such a power is essential in order to enable the pledgeor to protect his loan. Where the parties agree to a private sale, in case 1 Story, Eq. r a power of attorney to sell, etc., and to do whatever in his discretion might be necessary in the business, with power of substitution. W. employed defendants as stock brokers, depositing with them a margin, with authority to sell at public or private sale, in their dis- cretion, without notice, the stocks they were carrying for plaintiff, whenever the margins should fall below five per cent. The court held, that defendants might sell at the Board of Brokers without notice, when they exercised a sound discretion, and they believed the state of the market justified it. 1 See "Willoughby v. Comstoek, » 39 Pa. 243. supra, p. 846. » 62 N. Y. 536. CHAP. II.] EFFECT OF THE PLEDGE. 353 In Hyatt v. Argenti, 1 it was likewise held, that Hyatt •». when securities are deposited as a pledge, the pledgeor may agree with the pledgee to waive a notice of the time and place of the sale, and the courts will be gov- erned by the conditions of the agreement. 2 In accordance with this rule, it has, recently, been usual to insert in notes given for advances on the pledge of collaterals, a stipulation that, on failure to pay, the pledgeor may sell without notice, as will be seen in the form given supra on page 349. The legal expenses are borne by the pledgeor, and deducted from the amount returned him. 3 § 3. Pledgee's Right to Sub-pledge or Rehypothecate. The question, whether a party, with whom an article has been pledged as security for the payment of money, has a right to transfer his interest in the thing pledged, subject to the right of redemption in the pawnor, to a third party, is of considerable importance; and, in order to give a complete answer to it, it will be neces- sary to consider two categories under which it will be seen that it necessarily falls. I. When securities have been deposited as collateral for the payment of a debt, with the right on the part of the pawnee to sell or otherwise dispose of the same in the event of non-payment of the debt, and the pawnee repledges the securities to a third party for an advance to himself, can the original pawnor, the debt 1 3 Cal. 151. Cushman v. Jewelry Co., 76 N. Y. 2 See Baker v. Drake, 66 N. Y. 365 ; Fancourt v. Thome, 9 Q. B. 518; Markham u. Jaudon, supra; 312. Bozet o. McClellan, 48 111. 345; 3 See 2 Kent, Com. 578 (12th Am. Fisher v. Fisher, 98 Mass. 303; ed.); 29 Leg. Int. (Pa.) 366. 23 354 THE PLEDGE. [PART III. Donald v. Suckling. Distinction between lien and pledge. remaining unpaid, treat the contract of pawn between himself and the first pawnee as at an end, so as to bring an action of detinue or trover against the second pawnee, without tendering the amount of the debt, for which the security has been given ? II. If the contract of pawn between the first pawnee and the original pawnor is not at an end, in the event of the former thus rehypothecating the security de- posited with him for a debt of his own, is it, at all events, such a breach of the contract of pawn that an action for damages will lie against the first pawnee, at the hands of the first pawnor, and can the original pawnor, on tendering the amount of his own debt to the second pawnee, obtain possession of the subject of the pawn ? I. In considering this question, it must be borne in mind, as remarked by Cockburn, C. J., in Donald v. Suckling, 1 that we are not dealing with the case of a lien, which is merely the right to retain possession of the chattel, and which right is immediately lost on the possession being parted with, unless to a person who may be considered as the agent of the party having the lien for the purpose of its custody. There is a great difference in this respect between a pledge and a lien. The authorities are clear that a right of lien, properly so called, is a mere personal right of detention, and that an unauthorized transfer of the thing does not transfer that personal right. The cases which estab- lished, before the Factors' Acts, 2 that a pledge by a i L. R., 1 Q. B. C. 618. 2 See the English Factors' Act of 6 Geo. IV. eh. 94, s. 2, and the amendment of 5 & 6 Vict. c. 39, as well as the acts in the several States of the Union, which have been moulded on this act, as in New York, Pennsylvania, Massa- CHAP. II.] EFFECT OF THE PLEDGE. 355 factor gave his pledgee no right to retain the goods, even to the extent to which the factor was in advance, proceed on this ground. In Daubigny v. Duval, 1 Buller, J., puts the case Daubignyv. on the ground that " a lien is a personal right and " cannot be transferred to another." In McCombie v. McCombie v. Davies. Davies, 2 Lord Ellenborough puts the decision of the Kemarks of court on the same ground, saying that " nothing could borough. " be clearer than that liens were personal and could " not be transferred to third persons by any tortious " pledge of the principal's goods." In Legg v. Evans, 3 an action of trover was brought Le sg v - against a sheriff of Middlesex to recover some pic- tures, who justified under an execution, to which plaintiff replied by setting up a lien on the goods, and the replication was held good on demurrer. Parke, B., is reported to have said, " If we consider Remarks of Parke B. " the nature of a lien, and the right which it confers, "it will be evident that it cannot form the subject- " matter of a sale. A lien is a personal right which " cannot be parted with, and continues only so long " as the possessor holds the goods. It is clear, there- " fore, that the sheriff cannot sell an interest of this "description, which is a personal interest in the "goods." The effect of the civil law is thus stated bv Story Remarks of J J Story, J. in his Treatise on Bailments, s. 328 : " It enabled the '" pawnee to assign over or to pledge the goods again, chusetts, Ohio, Rhode Island, etc. ; p. 17, and succeeding pages, see, also, a discussion as to what 1 5 T. R. 606. agents are within the meaning of 2 7 East, 6. these acts, in Benjamin on Sales, '6 31. & W. 36. 3d Amer. ed., with American notes, 356 THE PLEDGE. [PAET III. Coggs v. Bernard. Remarks of Lord Holt. Mores v. Conham. Johnson ■■ Stear. " to the extent of his interest or lien on them ; and " in either case the transferee was entitled to hold the " pawn until the original owner discharged the debt "for which it was pledged. But beyond this the " second pledge was inoperative and conveyed no title, " according to the known maxim, nemo plus juris ad " alium transferre potest quam ipse haberet." In England, it is held, that the contract of pledge, when perfected by possession, creates an interest in the pledge which may be assigned, and the original pawnor cannot claim the thing pawned from the transferee without a tender of the payment of the debt to the pawnee. In the celebrated case of Coggs v. Bernard, 1 Lord Holt said that a pawnee " has a special property, for " the pawn is a securing to the pawnee that he shall " be repaid his debt, and to compel the pawnor to pay "him." In Mores v. Conham, 2 the court said, the pawnee will be responsible if he misuseth the pawn ; " also " he hath such interest in the pawn as he may assign " over, and the assignee shall be subject to detinue if " he detains it upon payment of the money by the owner. In Johnson v. Stear, 3 one Cumming, a bankrupt, had deposited with the defendant two hundred and forty-three cases of brandy, to be held by him as a security for the payment of an acceptance of the bankrupt, discounted by the defendant, and which would become due on January 29, and in case such 1 2 Ld. Raymond, 916. ? Owen, 123. « 15 C. B. (N. S.) 330. CHAP. II.] EFFECT OF THE PLEDGE. 357 acceptance was not paid at maturity, he was to be at liberty to sell the brandy and apply the proceeds to the payment of the acceptance. On the 28th January the defendant contracted to sell the brandy to a third person, and delivered him the dock warrant on the 29th, and on the 30th the third person got possession of the brandy. In an action of trover, brought by the assignee of the bankrupt, the majority of the court held (Erie, C. J., Byles and Keating, JJ.), that the plaintiff was only entitled to nominal damages, on the ground " that the deposit of the goods in ques- tion with the defendant to secure repayment of a loan to him on a given day, with a power to sell in case of default on that day, created an interest and a right of property in the goods which was more than a mere lien ; and the wrongful act of the pawnee did not annihilate the contract between the parties, nor the interest of the pawnee in the goods under the contract." From this view Williams, J., dis- sented. In the late case of Donald v. Suckling, 1 after very Donald ». elaborate argument, it was held by the court (Mellor, Blackburn, JJ., and Cockburn, C. J., Shee, J., dis- sentiente), that, when debentures had been deposited as security for the payment of a bill of exchange, with a right on the part of the depositee to dispose of them on the non-payment of the bill when due, and the pawnee pledged it to a third party for an advance of money, the original pawnor, the bill still remain- ing unpaid, could not, without having first tendered the amount of the bill to the second bailee, maintain 1 L. E., 1 Q. B. C. 585. 358 THE PLEDGE. [PAET III. an action of detinue against the latter for the recovery of the debentures. Remarks of " Story," said Blackburn, J., " in his Treatise on Blackburn, ., J. " Bailments, s. 327, says, ' But, whatever doubt may " be indulged as to the case of a factor, it has been " decided, that is in America, that in case of a strict "pledge, if the pledgee transfers the same to his " own creditor, the latter may hold the pledge until "the debt of the original owner is discharged.' In " Whitaker on Lien, published in 1812, p. 140, the " law is laid down to be that the pawnee has a special " property beyond a lien. I do not cite this as an " authority of great weight, but as showing that this "was an existing opinion in England before Story " wrote his treatise. * * * Now, I think that the sub- " pledging of goods held in security for money, before " the money is due, is not in general so inconsistent " with the contract as to amount to a renunciation of " that contract. There may be cases in which the " pledgeor has a special personal confidence in the "pawnee, and therefore stipulates that the pledge " shall be kept by him alone ; but no such terms are " stated here, and I do not think that any such term " is implied by law. In general, all that the pledgeor " requires is the personal contract of the pledgee that " on bringing the money the pawn shall be given up " to him, and that in the mean time the pledgee shall " be. responsible for due care being taken for its safe " custody. This may very well be done though there " has been a sub-pledge." In the United States, the point has not often arisen, as in nearly all the cases relating to stocks, etc., the CHAP. II.] EFFECT OF THE PLEDGE. 359 security pawned was either negotiable, and passed by delivery, or the pledgee, in the case of non-negotiable securities, held a bill of sale of the goods, and all the necessary indicia of ownership, sufficient to give a good title, so that the point in the cases has been, not whether the sub-pledge terminated the contract of pledge between the original parties to it, or was a breach of it for which an action for damages lay, but whether a party, who places in the hands of another all the necessary indicia of ownership over property, will not be estopped from setting up his title, when it has passed into the hands of a bona fide purchaser for value ; and whether such a bona fide purchaser does not, on the doctrine of estoppel, get an absolute title, in the case of a sale, or at least a good title, in the case of a pledge, till a tender of his own debt is made. And the courts have held that, when a pledgee has the power of giving a good title to a vendee or pledgee, the original pledgeor cannot dispute an innocent ven- dee's title, and that he can in no case get back the securities from an innocent pledgee, without tendering the amount of the debt. Thus, in McNeil v. Tenth National Bank, 1 where McNeil v. the pledgeor had deposited certificates of shares with tionai Bank. a bill of sale, Rapallo, J., said, " The true point of Remarks of " inquiry in this case is, whether the plaintiff did " confer upon his brokers such an apparent title to, " or power of disposition over, the shares in question, " as will thus estop him from asserting his own title, " as against parties who took bona fide through the "brokers. Simply entrusting the possession of a 1 46 N. Y. 325. 360 THE PLEDGE. [PAKT III. " chattel to another as depositary, pledgee, Or other " bailee, or even under a conditional executory con- " tract of sale, is clearly insufficient to preclude the 1 " real owner from reclaiming his property, in case of " an unauthorized disposition of it by the person so Baiiard v. "entrusted (Ballard v. Burgett 1 ). The mere posses- cited. " sion of chattels, by whatever means acquired, if there "be no other evidence of property or authority to sell "from the true owner, will not enable the possessor to Remarks of « give a good title. Per Denio, J., in Covill v. Hill. 11 Demo, J., in ° ° ' ' Coviii ».Hiii, " But if the owner entrusts to another, not merely the quoted. , . " possession of the property, but also written evidence, " over his own signature, of title thereto, and of an " unconditional power of disposition over it, the case " is vastly different ;" and it was held, that the inno- cent pledgee for value was protected, jar™ v. In Jarvis v. Rogers, 3 the certificates of the stock of Rogers. „ a company had, by a vote of the company, been made transferable by endorsing the name of the person to whom they were issued on the back, and one of the company, holding such certificates, endorsed his name on it and pledged it as collateral security for a debt. The debt was paid by his friend, who secured the cer- tificates, and subsequently repledged them, as security for his own debt; and the court held, that a bona fide creditor might lawfully hold them against the original owner, until the debt for which they were pledged should be paid. Lewis v. In Lewis v. Mott, 4 one Brown placed certain securi- ties in the hands of Howe as collateral to two prom- 1 40 N. Y. Rep. 314. » 13 Mass. 105. ■' 4 Denio, 823. * 36 N. Y. 395. Mott. CHAP. II.] EFFECT OF THE PLEDGE. 361 issory notes. The notes not being paid in proper time, Howe assigned them with the securities to Varnum, who subsequently without notice, the debt still not being, paid, had them sold at public sale, and bid them in himself. Brown offered to pay the debt, but made no tender, and the court said, " It must be conceded Remarks of "that Varnum, by the purchase of these securities " from Howe, acquired the lien and interest of Howe, "whatever that may have been; and the plaintiff's " assignee, to have entitled himself to a redelivery of " these securities, must have tendered the amount of " the lien. There was simply an offer to pay Var- "num the amount due upon those notes. It was " unattended with any tender of the amount due, and " was insufficient to extinguish the lien and thus en- " title Brown to the return of the notes." In Talty v. Freedman's Savings & Trust Com- Taity«. parry, 1 the court held, that a bona fide purchaser of savings'^ 8 securities held by a stock broker as collateral, would rust Co ' not be compelled to give them up without a tender of the amount due on the pledge. The court approved the ruling in Lewis v. Mott, Jarvis v. Rogers, and Lewis v. Donald v. Suckling, supra; and Swayne, J., suggested v . Ko'gers, that there was a question as to whether the bona fide suckling, purchaser for value did not hold the security abso- a PP rove "- lutely ; but expressed no opinion on that point. In Wood's Appeal, 2 already discussed, it was held, "Wood's that one who had placed all the indicia of ownership in a bailee's hands would be estopped from setting up any title against an innocent third party, who had 1 3 Otto (U. S.), 821. s 8 W. N. C. 441 ; 92 Penna. 379, quoted and discussed, supra. 362 THE PLEDGE. [PART III. "Wood v. Hayes et al. Remarks of Shaw, C. J. Work v. Bennett. purchased from the bailee for a valuable consideration. We may conclude, then, that a bona fide holder or depositee, for value, will in no event be compelled to render the pledged property back to the original pawnor without a tender or payment of the amount of the money which the pledge was given to secure. 1 In Wood v. Hayes et al, 2 it was held, that where a broker has bought stock for another with money advanced by himself, and holds it in his own name, he may pledge it to a third party to secure his own debt, so long as the advances made by him have not been paid or tendered, without subjecting himself to an action. Shaw, C. J., said, " The doctrine of trover " does not apply. A. advanced the money to buy the " shares for account of B., and held the shares in his " own name. It stood on the footing of contract. The " contract was strictly conditional, to deliver so many " shares on payment of so much money. The money " was never paid, and the title to have performance " never accrued." In Work v. Bennett, 3 however, stock and bonds were delivered by the plaintiff to the defendant as collateral security, which the latter sub-pledged for a debt of his own, and the sub-pawnee sold it without notice to the original pledgeor. Here the court held, that the pledgeor need not make a tender before the bringing of an action of trover for damages, as there had been a wrongful conversion by the defendants in sub-pledg- ing to the sub-pawnee, and by the latter in selling them without notice. The court, however, said expressly, 1 See McNeil v. Tenth National * 15 Mass. 375. Bank, 46 N. T. 325. » 70 Penna. 484. CHAP. II. J EFFECT OF THE PLEDGE. 363 " Had the stock and bonds, which were the subject of Remarks of • the court. "this action of trover, remained unconverted in the " hands of the defendants, the plaintiff could not have " recovered without a tender of the amount of the debt " for which they were then pledged, or proof of pay- " ment of such debt." And they allowed the pledgee to set off against the damages the balance due them for their advance, with interest. In New York, however, in Allen v. Dykers et al., 1 Allen v. a stock broker borrowed some money of B. on a promissory note, the note stating that there had been "deposited with them" (the brokers making the advance) , " as collateral security, with authority to "sell the same on the non-performance of this " promise, two hundred and fifty shares North Amer- "ica Trust and Banking Company's stock. Sale to " be made at the Board of Brokers. Notice waived, " if not paid at maturity." The pledgee rehypothe- cated the stock, and in an action of trover against the pledgee by the original pledgeor, after the note fell due, Wilson, C. J., said, " The defendants being Remarks of ill- ii. i Wilson, C. J. stock brokers and dealers in stock, their counsel " offered to prove on the trial that it was the usage, " when stock was transferred to such dealers by way " of collateral security, not to hold it specifically, but "to transfer it by hypothecation or otherwise, at " pleasure, and, on payment or tender of the money " advanced, to return an equal quantity of the same "kind of stock; also, that this usage was general, "and known to the agent who made the loan in 1 3 Hill (N. Y.), 593. 364 THE PLEDGE. [pabt IK. Merchants' Bank v. Trenholm. Donald v. Suckling. ' question. The object of the offer was, to lay the 'foundation that the usage should be regarded as 'incorporated in, and forming part and parcel of, 'the agreement; thus making the latter import a ' consent on the part of the plaintiff, that the de- fendants might use the stock during the running ' of the loan the same as if they were the absolute ' owners. It is not necessary to determine what effect ' would be due to such proof in the case of a simple 'pledge as collateral security, without any further ' agreement. Possibly the known usage in like cases ' might be considered as attaching itself to the trans- ' action, and constituting a part of it. But where ' the parties have chosen to prescribe for themselves ' the terms and conditions of the loan, they must be ' held to abide by them ; and we are especially bound to refuse effect to any general or particular usage 'when in direct contradiction to the fair and legal ' import of a written contract." In Merchants' Bank v. Trenholm, 2 it was held, that trover would lie against a pledgee, being a factor, or his sub-pledgee, without notice, though he pledged but up to his lien. II. We now pass on to the consideration of the second category, which the question of the right to sub-pledge may be considered under: namely, con- ceding that the contract of pawn is not broken by the pledgee's sub-pledging, is this such a breach of the contract as to permit an action for damages to lie by the pawnor against the original pawnee ? In Donald v. Suckling, 2 this point was not decided, 1 12 Heisk. (Tenn.) 520. a See L. E., 1 Q. B. C. 585. CHAP. II.] EFFECT OF THE PLEDGE. 365 the court confining itself to the question, as to whether the sub-pledge was such a total termination of the contract between the pawnor and pawnee as to allow an action of detinue to lie against the sub-pawnee, the debt still being unpaid, and the pawnor making no tender of the amount to the sub-pawnee. Cock- burn, C. J., however, said, " I think it unnecessary Eemarks of " to the decision in the present case to determine c. J. ' "whether a party, with whom an article has been "pledged as a security for the payment of money, "has a right to transfer his interest in the thing "pledged (subject to the right of redemption in the " pawnor) to a third party. I should certainly hesitate "to lay down the affirmative of that proposition. "Such a right in the pawnee seems quite inconsistent "with the undoubted right of the pledgeor to have "the thing pledged returned to him immediately on " the tender of the amount for which the pledge was " given. In some instances it may well be inferred "from the nature of the thing pledged — as in the "case of a valuable work of art — that the pawnor, " though perfectly willing that the article should be " entrusted to the custody of the pawnee, would not " have parted with it on the terms that it should be " passed on to others and committed to the custody of "strangers. * * * I am of opinion that the transfer " of the pledge does not put an end to the contract, "but amounts only to a breach of contract, upon " which the owner may bring an action, — for nominal " damages if he has sustained no substantial damage ; "for substantial damages if the thing pledged is " damaged in the hands of the third party, or the 366 THE PLEDGE. [PART III. Remarks of Mellor, J. Remarks of Blackburn, J • Halliday v. Holgate. "owner is prejudiced by delay in not having the " thing delivered to him on tendering the amount for " which it was pledged." In the same case, Mellor, J., said, "I think that " when the true distinction between the case of a de- " posit by way of pledge of goods, for securing the " payment of money and all cases of lien, correctly so " described, is considered, it will be seen that in the " former there is no implication, in general, of a con- " tract by the pledgee to retain the personal possession " of the goods deposited ; and I think that although he " (the pawnee) cannot confer upon any third person " a better title or a greater interest than he possesses, "yet if, nevertheless, he does pledge the goods to a " third person for a greater interest than he possesses, "such an act does not annihilate the contract of " pledge between himself and the pawnor ; but that " the transaction is simply inoperative as against the " original pawnor, who, upon tender of the sum se- " cured, immediately becomes entitled to the posses- " sion of the goods, and can recover in an action for "any special damage which he may have sustained " by reason of the act of the pawnee in repledging " the goods." And Blackburn, J., said that in England there were strong authorities that the contract of pledge, when perfected by delivery of possession, created an interest in the pledge, which might be assigned. In Halliday v. Holgate 1 (1868), A. deposited scrip certificates with the defendant as collateral security for a loan, and, on his becoming bankrupt, the de- 1 L. R., 3 Exch. 299. CHAP. II.] EFFECT OF THE PLEDGE. 367 fendant sold out the scrip, without demand or notice, to repay to himself the debt. The creditor's assignee, without making a tender, brought an action of trover against the defendant, and the court held, that the action would not lie. Willes, J., said, " It has been Remarks of . •. ■. Willes, J. "argued that the plaintiff is at any rate entitled to "nominal damages, for that a conversion was com- " mitted by the sale of the certificates. That sale, it " is contended, had the effect of putting an end to the " bailment of pledge ; the property of the pledgee was " thereby determined, so as to enable the assignee to " say that at the moment when the sale took place he " became entitled to the certificates by virtue of the "general property which was then revested in him. " This reasoning proceeds upon a somewhat subtle and " narrow ground, for it is admitted that the assignee " could only claim nominal damages. But we cannot " arrive at the conclusion that he is so entitled with- " out getting rid of the case of Donald v. Suckling, "supra. * * * There are three kinds of security: — " the first, a simple lien ; the second, a mortgage, " passing the property out and out ; the third, a se- " curity intermediate between a lien and a mortgage, "viz., a pledge, where by the contract a deposit of " goods is made a security for a debt, and the right to " the property vests in the pledgee so far as is neces- " sary to secure the debt. It is true, the pledgeor has "such a property in the article pledged as he can " convey to a third person, but he has no right to the "goods without paying off the debt, and until, the " debt is paid off the pledgee has the whole present " interest. If he deals with it in a manner other than 368 THE PLEDGE. [PART III. " is allowed by law for the payment of his debt, then, " in so far as by disposing of the reversionary interest " of the pledgeor he causes to the pledgeor any diffi- " culty in obtaining possession of the pledge on pay- "ment of the sum due, and thereby does him any " real damage, he commits a legal wrong against the "pledgeor. But it is a contradiction in fact, and " would be to call a thing that which it is not, to say " that the pledgee consents by his act to revest in the "pledgeor the immediate interest or right in the " pledge, which by the bargain is out of the pledgeor " and in the pledgee. Therefore, for any such wrong " an action of trover or of detinue, each of which "assumes an immediate right to possession in the " plaintiff, is not maintainable, for that right clearly " is not in the plaintiff." Review of We are now in a position to consider the principles on the pied- upon the subject of the right of the pawnee to sub- fub-pMge. ° pledge. And while it is obvious from the foregoing cases that the sub-pledge by the pawnee to a third party of a pledge of collateral security does not, cer- tainly in England, ipso facto terminate the contract between himself and the original pawnor, so that the latter cannot bring an action of trover or detinue for the goods, without first tendering a payment of the debt which they were originally pawned to secure, yet the right of the pawnee to rehypothecate, with- out a special contract to that effect, has not, either here or abroad, been recognized or sanctioned by law. If on payment or tender of the debt the goods or securities be not returned, an action of trover or deti- nue will lie. And in those cases in which in Eng- CHAP. II.] EFFECT OF THE PLEDGE. 369 land it has been held, that trover or detinue will not lie against the pledgee for having parted with the possession of the goods pawned, unless a tender of the advance on them be first made, it will be observed that the court nowhere justify, as legally proper, the action of the pledgee, but merely decide that for technical legal reasons an action of this character will not lie unless at the time of bringing suit the plain- tiff has an immediate right to possession ; which, of course, the pawnor never has without a tender of the debt. It is, on the contrary, treated as a breach of the contract of pledge for which the original pawnor " can "recover in an action, 1 for any. special damage which " he may have sustained by reason of the act of the " pawnee in repledging the goods." In most of the States of the Union, this technical rule has not been followed, "and in Pennsylvania, as we have seen, 2 an action of trover has been held to lie against a pledgee, presently on his parting with possession of the securi- ties pledged, for the actual damage sustained by the pawnor, the debt and interest due the pledgee being first deducted. The authorities in New York, and in Tennessee, also, regard rehypothecation as illegal. In certain States there may be statutory regulations on the subject, and in that case the above can have no application. Thus, in Pennsylvania there is a penal statute on the subject of rehypothecation, and forbidding it, though no cases have as yet arisen on the construction of this statute, and it is impossible to state its effect. 1 See opinion of Mellor, J., in 2 In Work v. Bennett, 70 Penna. Donald v. Suckling, supra, p. 366. 484, supra. 24 CHAPTEK III. AVOIDANCE OF THE CONTRACT OF PLEDGE. PAGE Various ways of avoiding the contract of pledge .... 370 Contracts made on Sunday . 371 Contracts made by one not having authority to do so . 371 Contracts avoided by failure of consideration 371 Pledge for a pre-existing debt. 371 England 372 America 373 Fraud 373 Security transferred as pledge not according to the rules of the company issuing it . . 374 PAGE Contract of pledge avoided by pledgee doing some act in- consistent with the contract. 376 Contract avoided by the pledgeor 376 Markham v. Jaudon .... 376 Remarks of Hunt, J. . . . 379 Law in Pennsylvania . . . 383 Return of identical shares pledged 384 Cases discussed 384 Mortgage of stock .... 387 Peculiar loans secured by bonds 387 Various ways of avoiding the contract of pledge. The contract of pledge may be avoided in various ways, as, for example, by the contract being made on Sunday ; by the fact of the parties making it having no authority to do so; by there being no consid- eration to support it, or an illegal consideration ; by the pledgeor retaining such a possession of it as to make it void under the Statutes of Elizabeth; by the pledgee doing some act in respect to the pledge inconsistent with his interest in it; by the sale of the pledge on the part of the pledgee, after proper demand and notice ; by the pledgeor's not fulfilling the conditions of the contract of pledge, for a breach of which it was agreed the contract was to be at an end ; by the pledgee paying the debt, which the pledge is given to secure ; and by the pledgee return- ing the pledge to the pledgeor. 370 CHAP. III.] AVOIDANCE OF CONTKACT OF PLEDGE. 371 The rule as to contracts made on a Sunday now Contracts of pledge made generally is, that, if executory, they cannot be en- on Sunday, forced ; but that, if executed, they cannot be ripped up by the parties, but remain binding, so that if the pledge be made on a Sunday and executed, the par- ties will usually be -bound by the contract of pledge. The reader is referred on this subject to the elaborate article in the 19th American Law Register, page 137, for the effect of legal acts performed on Sunday. Pledges are voidable when the parties have no Contract of right to make them. With regard to the case where by one hav- the parties making the pledge d6 so in excess of their thfrity'to'do authority to act, the reader is referred to page 322 of so " this work, where he may find discussed the subject of, who may legally pledge ; and with respect to the case of a corporation acting in excess of its authority in effecting a pledge, he is referred to page 82, upon the subject of ultra vires. The case of pledges effected by persons having no title has already been discussed in relation to re- hypothecation, and the character of the title taken by the pledgee, whether innocent, or affected with notice. 1 Pledges are also avoided when given for a bad Contract of > - pledge consideration. Where the security is given to secure avoided be- an illegal or void contract, the same rule will apply bad consider- as we have stated before on page 287, under Avoid- ance of the Contract of Sale. The question has also very frequently arisen, as to Pledge of se- cunties given whether a pledge of securities is voidable for a want to secure a of consideration, on the ground that it was created debt. 1 Supra, p. 353. 372 THE PLEDGE. [PART III. English cases. Percival ». Erampton. Remarks of Parke, B. Poirier v. Morris. Remarks of Lord Camp- bell, C. J. American cases. Rule of the Federal courts. The States that adopt the rule of the Federal court's. only to secure a pre-existing debt owed by the pawnor to the pawnee. In England, it is difficult to find any authorities directly on the subject. In Percival v. Frampton, 1 Baron Parke, though he thought there was consideration in the case, said that the " replication would be sustained if that were not " so ; for if the note were given to the plaintiffs as "a security for a previous debt, and they held it " as such, they might properly be stated to be the " holders for valuable consideration." Alderson, B., concurred. In > Poirier v. Morris, 2 Lord Campbell, C. J., said, that the Poirier Freres were holders for value, and that the debt due from certain parties to them was ample consideration to make them so. "I can see " nothing in this part of the case to vary it from the " ordinary rule where a bill is received by a creditor " as a security for an antecedent debt." In America, the cases are conflicting. In the Federal courts, the question is finally set- tled, that a deposit of security for an antecedent debt constitutes the holder, a holder for value. 3 The following States adopt the ruling of the Fed- eral courts : Massachusetts,* Rhode Island, 6 Connec- 1 2 C. M. & R. 180. '2E.&B. 89. s National Bank v. R. R. Co., 14 Blatch. 242; In re Huddell & Seitzinger, 14 Amer. Law Rev. 503, overruling Mack v. Baker, 5 Weekly Notes (Phila.), 212; Rail- road Company v. National Bank, 12 Otto, 14; Swift v. Tyson, 16 Peters, 1. 1 Blanchard v. Stevens, 3 Cush. 162 ; Breton v. Pierce, 2 Allen, 14 ; Paine v. Eurness, 117 Mass. 290. 6 Bank v. Carrington, 5 R. I. 616 ; Cobb v. Doyle, 7 R. I. 550. CHAP. III.] AVOIDANCE OP CONTRACT OP PLEDGE. 373 ticut, 1 probably Vermont, 2 New Jersey, 3 Illinois, 4 Missouri, 8 Indiana, 6 California, 7 Texas, 8 Georgia, 9 probably Mississippi, 10 South Carolina. 11 The following States adopt a contrary view, and The states hold a holder of securities, pledged for an antecedent a contrary debt, is not a holder for value : , New York, 12 Penn- sylvania, 13 Maine, 14 probably New Hampshire, 15 Ar- kansas, 16 Ohio, 17 Wisconsin, 18 Kentucky, 19 Alabama, 20 probably North Carolina, 21 Tennessee. 22 The authorities on the foregoing principle are re- viewed elaborately in the American Law Review, 23 in a note to In re Huddell & Seitzinger, by one of the authors of the present work. The contract of pledge may also be avoided, qua the contract third parties, by the fraud of the parties in effecting trJal. g. Hall, 37 Conn. 213. 2 Atkinson v. Brooks, 26 Vt. 569 ; Austin v. Curtis, 31 Vt. 64 ; Bank u. Leavenworth, 28 Vt. 209. * Allaire v. Hartshorne, 1 Zab. 665. I Manning v. McClure, 36 111. 490. 5 Savings Institution v. Holland, 38 Mo. 49. » Valette v. Mason, 1 Sm. 89. ' Kobinson v. Smith, 14 Cal. 94; Naglee v. Lyman,. 14 Cal. 410. 8 Grenaux v. Wheeler, 6 Texas, 515. 9 Gibson o. Conner, 3 Ga. 47 j Meadows v. Bird, 22 Ga. 246. 10 Fellows v. Harris, 12 S. & M. 462. II Bank v. Chambers, 11 Eich, 657. 12 Coddington v. Bay, 20 Johns. 636; Stalker v. McDonald, 6 Hill,' 93. 13 Petrie ■„. Clark, 11 S. & E. 377 ; Walker v. Geisse, 4 Whart. 258 ; Eoyer v. Bank, 4 W. N. C. (Phila.) 86. 14 Nutter v. Stover, 48 Me. 163. 15 Williams v. Little, 11 N. H. 66 ; Jenners v. Bean, 10 N. H. 266. 16 Bertrand v. Barkman, 6 Eng. 159. 17 Eoxborough v. Messick, 11 Ohio St. 172. is Cook v. Helms, 5 Wise. 111. 19 Lee v. Smead, 1 Mete. 628 ; May v. Quimby, 3 Head, 96. 2° Penouille v. Hamilton, 35 Ala* 319. 21 Eeddick v. Jones, 6 Ired. 107. » King ». Doolittle, 1 Head, 77 ; see, also, Prentice v. Zane, 2 Gratt. 10 Blatchford, C. C. R. 243. CHAP. III.] AVOIDANCE OP CONTRACT OP PLEDGE. 377 part of the business of a broker, strictly as such, to purchase stock or other securities for his customer until the latter furnishes him with the money to do so. Under existing commercial usage, however, both in this country and in England, the broker frequently obtains the money by rehypothecating with third parties the stock purchased for the customer, charging the amount thus obtained to complete the purchase, as a loan by himself to his customer, and the customer appears on his books as his debtor for that amount. The stock is entered to the credit of the customer; and this is done whether the stock is actually trans- ferred on the books of the corporation into the cus-^ tomer's name, or not. The customer then owns the stock ; so that if the broker resells it at a higher , price the customer gets the profit. But as the broker is obliged, by the rules of all the Stock Exchanges, to become personally responsible to the person in the Exchange from whom he buys or to whom he. sells the stock, he requires, before executing an order of this kind for a customer, that the latter should de-< posit with him, either in money or other securities, a certain amount, usually a certain percentage of the market value of the stock bought on the customer's account. Should the market value of the stock change, as if, for instance, in the case of a purchase the market price should fall, the broker on a resale would primarily lose the difference in price. This loss, being, as between himself and his principal, charged to the latter, is deducted from the deposit with the broker. If, after a fall in the value of the stock, the customer still desires the broker to hold it 378 THE PLEDGE. [PABT III. on his account, he is usually requested by the broker to deposit an additional margin to secure the latter against possible loss by a still further fall. When the customer makes these successive deposits of money or securities, he is said to keep his margin good. And on a resale of the stock, a loss or gain in the price is debited or credited to the principal, and after this is settled the margin is then returned to him; the usual transaction in the case of loss being to deduct it from the margin and return the customer the balance. Now, it is very obvious in the case just put, that the stock itself, purchased on the account of the customer, as well as the margin, is his property, and that they are both held by the broker as a pawnee to secure his advances, which he, the broker, has made to the customer in order to purchase the stock. If the stock itself should rise greatly in price, and its value exceed the advance made by the broker to the customer to purchase it, it would con- stitute itself a sufficient collateral security without any other margin. Consequently, in all transactions of this kind, the customer, or principal, is to be re- garded as the owner and pledgeor of the stock pur- chased for his account, as well as of such additional securities as he may deposit as collateral for the ad- vances made to him by his broker to purchase the stock in question. And it is a consequence of this contract of pledge between the principal and his broker, that the broker may demand payment of his advance. Usually, of course, the broker only demands additional margin to secure himself against CHAP. III.] AVOIDANCE OF CONTRACT OF PLEDGE. 379 possible loss, but his right is to demand the whole advance ; and unless this is paid or secured to the broker's satisfaction, he may, upon a sufficient notice and demand, terminate the pledge by selling the stocks purchased, as well as any additional collateral securities hypothecated with him. The case of Markham v. Jaudon 1 is an excellent Markham v. Jaudon. illustration of this kind of transaction, and of the re- lation of the parties in it to each other. The plaintiff instructed the defendants, stock brokers, to purchase certain stocks, he depositing a margin equal to ten per cent, on the value of the stocks to be kept good by him, and the defendants to hold or carry the stocks in their own name for him, .and subject to his order. The defendants, on a change in the market value of the stock, requested the deposit of a further margin, and, on the plaintiff's failure to supply it, sold the stock without notice, and he brought suit to recover for this conversion of his stock. It was contended, that there was not a relation of pledgeor and pledgee established between the parties, but that the agreement to carry stock existed by force of a mutual and de- pendent contract : the defendants' agreement to hold the stock being dependent on the plaintiff's agreement to supply the margin ; and that when the plaintiff failed to do so, the defendants' contract was at an end, and they were at liberty to sell the stock without notice. But the court held, that the relation of pledgeor and pledgee did exist, and refused to admit evidence, that it was a custom of the trade so to sell i 41 N. Y. 235. 380 THE PLEDGE. [PART III. "without notice, as such a custom was unreasonable, and thus contrary to law. Hunt* 3 j f Hunt, C. J., in an elaborate opinion, analyzing the relation of the parties to each other in such a con- tract, said, "An analysis of the contract in question " and a separation of the powers and obligations of " the parties thereto, will enable us the better to de- "termine its character. The customer employs the " broker to buy certain railroad stocks for his account, " and to pay for them, and to hold them subject to his " order as to the time of sale. The customer advances " ten per cent, of their market value, and agrees to " keep good such proportionate advance, according to "the fluctuations of the .market. * * * I state, the " following, as the result of the agreement : " The broker undertakes and agrees — " 1. At once to buy for the customer the stocks " indicated. . "2. To advance all the money required for the " purchase beyond the ten per cent, furnished by the *' customer. " 3. To carry or hold such stocks for the benefit " of the customer so long as the margin of ten per *' cent, is kept good, or until notice is given by either " party that the transaction must be closed. An ap- preciation in the value of the stocks is the gain of " the customer, and not that of the broker. " 4. At all times to have in his name or under his "control, ready for delivery, the shares purchased, " or an equal amount of other shares of the same " stock. " 5. To deliver such shares to the customer when CHAP. III.] AVOIDANCE OF CONTRACT OF PLEDGE. 381 " required by him, upon the receipt of the advances " and commissions accruing to the broker ; or, " 6. To sell such shares upon the order of the cus- " tomer, upon payment of the like sums to him, and "account to the customer for the proceeds of such " sale. " Under this contract the customer undertakes — " 1. To pay a margin of ten per cent, on the cur- " rent market value of the shares. "2. To keep good such margin, according to the " fluctuations of the market. " 3. To take the shares so purchased on his order, " whenever required by the broker, and to pay the " difference between the percentage advanced by him " and the amount paid therefor by the broker. " The position of the broker is twofold. Upon the " order of the customer he purchases the shares of "stocks desired by him. This is a clear case of " agency. To complete the purchase, he advances " from his own funds, for the benefit of the customer, " ninety per cent, of the purchase money. Quite as " clearly, he does not, in this, act as an agent, but as- " sumes a new position. He also holds, or carries, the " stock for the benefit of the purchaser, until a sale is " made by the order of the purchaser, or upon his own " action. In thus holding or carrying, he stands, also, " upon a different ground from that of a broker or " agent, whose office is simply to buy and sell. * * * " In so doing, he enters upon a new duty, obtains " other rights, and is subject to additional responsi- " bilities. * * * The substance of the first branch of " the transaction is this : The plaintiff calls upon the 382 THE PLEDGE. [PART III. " defendants, who are brokers, to purchase for him " certain shares of railroad stock, and furnishes them "with $1000 for that purpose, agreeing to pay in- " terest on advances they shall make in the purchase "and commissions. The defendants make the pur- " chase, having themselves advanced ninety per cent. " of the purchase money. They bring to the plaintiff " the certificates of the stock thus purchased by him " and for him, and deliver them to him as the owner " thereof. He thereupon hands them back to the de- " fendants, to hold as security for their advance on "the purchase, with interest and commissions. If " these precise forms had been observed, no one would "deny that the redelivery of the certificates would "have constituted a strict formal pledge. In my " opinion, the transaction, as it took place, amounted "to the same thing. To have delivered the certifi- " cates to the plaintiff, and that the plaintiff should " then have returned them to the defendants, to be " held by them as security for the advance in their "purchase, would leave the parties in precisely the "same situation as if the defendants had returned " them for that purpose ; the form of a delivery to " the plaintiff being waived by agreement of the par- "ties. * * * In my judgment, the contract between " the parties to this action was, in spirit and in effect, " if not technically and in form, a contract of pledge." Upon a similar state of facts, the Pennsylvania Worki>. courts, in Work v. Bennett, 1 held the transaction to be a pledge, which had, however, been broken by the pledgee's parting with the possession; though in an 1 70 Pa. 484. CHAP. III.] AVOIDANCE OF CONTEACT OF PLEDGE. 383 action of trover, against him, for the stock pledged, he Later cases ' ° : , , inPennsyl- was allowed to deduct the amount of his advances and vania op- intef est ; but in later cases, they have decided similar earlier decis- , ,. i i , r t_t l ions of that transactions, as a whole, to be gambling ones, on grounds state. which have already been discussed at length, and the reader is referred for them to North v. Phillips, 1 Fa- reira v, Gabell, 2 Dickson's Executor v. Thomas, 3 and Buchizky v. De Haven, 4 and the remarks upon them. 5 When the pledgeor tenders the amount of the debt Tender of in full with interest, this ends the pledge, ipso facto,^ with interest, and he can bring an action against the pledgeor for its ends thf con- return in the modes already pointed out. 6 traot ' And so, finally, when the pledgee returns the pledge to the pledgeor, this usually terminates or avoids the contract of pledge, as, for example, in the cases of Day Day v. Swift, v. Swift, 7 Kimball v. Hildreth, 8 or Bodenhammer v. Hiidreth, ' Newsom ; 9 though sometimes the pledgeor is made the m ° r e " New- custodian of the property as a servant only of the som " pledgee, 10 or the pledge is given back for a special pur- pose to the pledgee ; as where a bond was given back, at the pledgeor's request, to get it exchanged for some stock. 11 At the avoidance or termination of the hypotheca- tion, the security pledged, as above stated, must, if not sold, be returned to the pledgeor. The question then arises as to whether the pledgee is obliged to return 1 8 Norris (Pa.), 250. 9 5 Jones (N. C), 107. ' 8 Norris, 89. 10 Way v. Davidson, 12 Gray, 3 10 "Weekly Notes of Cases 465; Eeeves v. Capper, 5 Bing., (Phila.), 112. N. C. 54. * 10 ibid., 109. u Hayes v. Eiddle, 1 Sanford 6 See pp. 302-318. (N. T.), 248; see, also, Thayer 6 See supra, page 376. v. Dwight, 104 Mass. 254 ; Cooper ' 48 Maine, 368. v. Eay, 47 111. 53. 8 8 Allen, 167. 384 THE PLEDGE. [part III. Return of identical shares. Langton v. Waite. the identical security pledged. As most securities are not ear-marked or otherwise distinguished from others of like kind, it would seem that the return of any shares of the same kind as those pledged, to the pledgeor, is sufficient. In Langton v. Waite, 1 A. & B., stock brokers, bor- rowed, on behalf of the plaintiff, a sum of money for a term of three months, from the defendants, also stock brokers, upon the security of certain shares of stock, which were transferred to the name of one of the de- fendants' firm. Before the end of the term, the plain- tiff, having contracted to sell the stock, applied to the defendants for a retransfer of it, tendering the amount of the debt in full, . with interest. The defendants, having sold the stock, refused to return it, or similar shares, alleging that the loan was made for the full term, and the plaintiff, in consequence of the refusal of the defendants, was obliged to go into the market and buy other shares, at -a loss to himself, to complete his contract of sale. At the expiration of the term, the defendants, having bought other similar shares at a lower figure, tendered the amount of the security to the plaintiff. A rule of the Stock Exchange, to the effect that, " In all cases of loans on the deposit of security, " the lender is bound to return the identical securities " deposited, unless it be otherwise stipulated at the time " of making the loan. But this liability does not apply " to a member who has taken in stock or shares, upon "continuation at the market price," was offered in evidence in an action by the plaintiff to recover the amount of profit realized by the defendants from the 1 L. R, 6 Eq. C. 165. CHAP. III.] AVOIDANCE OF CONTRACT OF PLEDGE. 385 use they had made of his stock ; and the court held, that the rule was conclusive on the subject ; that the pledgee was bound to return the identical shares pledged, and that, the sale of the pledge being a wrong- ful conversion, the plaintiff was entitled to recover. The court said further, that an alleged custom for a pledgee to sell pledged stock was in direct opposition to the express rule, and also, that the pledgee had no right at law to sell the stock, citing Ex parle Dennison. 1 Deimlson. In Gilpin v. Howell, 2 Bell, J., who delivered the Gilpin v. opinion of the court, was of the opinion that a pledgee of stock, transferred to his name, was not obliged to re- turn the identical shares, but had a right to do what he pleased with them, provided he always kept an amount of the same stock on hand equivalent to the pledge, and was always ready, on demand and payment in full of the loan, to retransfer it to the pledgeor. In Neiler v. Kelly, 3 in an action of trover by the Neiier v. pledgeor of stock to recover for a wrongful conversion by the pledgee in selling the same without notice to the pledgeor, the debt being due and unpaid, Shars- wood, J., said, "The defendants below were at no Remarks of "time under any obligation to deliver these stocks j. " and bonds specifically to the plaintiff. He never " had put himself in a position to demand them before " the bringing the suit, or up to the time of trial, by " tendering or offering to pay the amount of his in- " debtedness to the defendants. Had the action been " detinue or replevin, he must have failed entirely. " * * * Where a plaintiff seeks to fasten a responsi- 1 3 Vesey, 552. 2 5 Pa. <&'.. • 69 Pa. 409. 25 386 THE PLEDGE. [PART III. Gilpin v. Howell ap- proved. Boylan v. Huguet. Remarks of Whitman, J. Langton v. Waite not necessarily inharmoni- ous with the " bility for more than the usual measure of damages, " he must also fasten upon the defendants the duty or " obligation to deliver, specifically, the stock or secu- rities at some particular time, and their refusal to "fulfil that duty, non constat, that upon a demand " and tender the defendants would not have been "able to deliver to the plaintiff similar stocks and " securities, as, according to Gilpin v. Howell, 1 they " might well do." In Boylan v. Huguet, 2 it was held, that, in the ordinary transactions between principals and brokers, the former were not entitled to receive the identical shares purchased on their account by the brokers, and that the brokers were acting within the terms of their contracts with their principals so long as they were ready to deliver, on demand and payment, certificates representing the requisite number of shares. Whitman, J., said, "So long as he (the " broker) held a certificate or certificates representing " the requisite number of shares and was prepared to " deliver them on payment and demand, so long was "he within the terms of his contract; and though " he might have used and re-used the identical certifi- "cates received on filling Boylan's (the principal's) "orders, mixed them with others, destroyed them " even, there was no conversion until he, or, as in this " case, his voluntary assignees, refused to deliver upon " demand." The case of Langton v. Waite, it will be observed, really turned on the express rule of the Stock Ex- change, but it must, according to the principles of the 1 Supra, p- 386, 5 8 Nevada, 345. CHAP. III.] AVOIDANCE OF CONTRACT OP PLEDGE. 387 foregoing cases, have been decided the same way, had foregoing CSAS6S. there been no such rule, as the pledgees evidently did not keep on hand a sufficient number of shares to satisfy the amount of security deposited on demand and payment of the loan. So that, notwithstanding the dictum of Malins, V. C, this case cannot be taken to militate against the other foregoing cases. In England, and in those States of America, where Mortgage of , „ stock. mortgages may be made of personal property, mort- gages may also be made of shares of stock and bonds, by making an absolute transfer to the mortgagee. 1 In this case it may possibly be that the mortgagee would be obliged to return the identical shares mort- Return of . . identical gaged. But we confess we do not see any imperative shares, reason for that, any more than in the case of a pledge of stock, nor why the mortgagee should be held liable for not returning the identical shares of stock, pro- vided he return stock, equally good, of the same char- acter as that mortgaged, and always keep enough of such stock on hand to satisfy the amount mortgaged. 2 Sometimes loans are secured by a bond, conditioned Peculiar lofLns secured to replace the amount of stock at the date agreed by bond, upon, and for the payment of interest, and here the creditor would only be entitled to the same amount of stock as that borrowed, with interest, etc., and not necessarily the market value on the day the loan expires. 3 1 Phene v. Gillan, 5 Hare, Rep. 1. Ian v. Huguet, 8 Nevada, 345. 2 See Gilpin v. Howell, 5 Pa. 41 ; 8 See Blyth v. Carpenter, L. R., Neilgr v. Kelly, 69 Pa. 409 ; Boy- 2 Eq. 501. PART IV. EEMEDIES OF THE PAETIES FOE A BEEACH OF THE CONTEACT OF SALE. INTRODUCTION. .The general law as to remedies for a breach of the contract of sale, in relation to the securities sold at the Stock Exchange, is not different from that as to any other kinds of chattels or choses in action. 1 There are, however, a few principles of law that relate par- ticularly to daily transactions in these securities, and the results arising from them, and with a review of the cases relating to these we shall close this treatise. Division of We shall consider first the remedies of the parties Part IV. against each other for a breach of the contract of sale or pledge, as well as the remedies of creditors against the security itself; and also the remedies of the parties against a corporation for refusing to transfer stocks on its transfer books. And, secondly, we shall treat of the proper measure of damage in these cases. 1 The subject of remedies for cussed in Benjamin on Sales, pp. breach of contracts of sale is dis- 616-755. 388 CHAPTEE I. REMEDIES OP THE PAKTIES AGAINST EACH OTHER, OP CREDITORS AGAINST THE THING ITSELF, AND OF THE PARTIES AGAINST THE CORPORATION FOR REFUSING TO TRANSFER STOCK ON ITS TRANSFER BOOKS. PAGE SECTION I. — REMEDIES OP THE PARTIES AGAINST EACH OTHER. Relief in equity 389 Relief at law 390 The actions 391 SECTION II. — REMEDIES OF CRED- ITORS AOAINST THE THING IT- SELF. Cases discussed 391 SECTION III. — REMEDIES OF THE PARTIES AGAINST THE CORPORA- TION FOR REFUSING TO TRANSFER STOCK ON ITS TRANSFER BOOKS. Transferor and transferee . . 393 Restriction by corporation on transfer 393 Effect of certificate issued by corporation, ordinarily . . 394 Effect of certificate issued by agent,* fraudulently, for his own benefit 394 Cases discussed 395 Certificate only secondary evi- dence in Pennsylvania . . 401 Bank of Commerce's Appeal . 401 Effect of certificate issued by agent acting fraudulently for benefit of company . . . 402 Cases discussed 403 Negligence 403 Questions arising on forged powers of attorney . . . 404 Division of subject .... 405 1. Where the company acts on a forged transfer, and issues a certificate which a bona fide purchaser subsequently buys ■ . . 405 2. Where the transferee pur- chases stock, and takes a forged power to transfer to the company, and gets cer- tificates issued to him by reason of the forged power . 407 3. Where the transferee bar- gains for stock, and refuses to take the certificates till registered in his name, and the company issues certifi- cates on the faith of a forged power of attorney presented by the seller 410 Principles deducible from the cases cited under the fore- going heads 410 SECTION I. — REMEDIES OF THE PARTIES AGAINST EACH OTHER. Formerly, in the case of both executed and execu- tory contracts as to chattels, the only remedy through the intervention of the courts for a breach of the con- 389 Relief in equity. 390 REMEDIES FOE BREACH OF CONTRACT. [PART IV. tract, was an action at law, but, as we have seen, 1 the courts will now frequently, in the case of executed contracts, grant relief by compelling a specific per- formance, where there is no adequate remedy at law. In regard to executory contracts, however, relating to this species of property, that is, where only so many shares of a given stock are contracted to be sold, but no specific shares are set apart or ascertained as the very property sold, then, as we have pointed out on a former page, the courts have usually declined to compel an actual fulfilment of the contract, unless at the date of the contract, or, at all events, of the filing of the bill, shares of the same description can be shown to be in the actual possession of the vendor, which, from the evidence or the circumstances, the court may fairly infer to have been the actual prop- erty intended by the parties to be dealt with. Ex- cepting in such cases, the parties to a contract purely executory are usually left to their remedy at law. In London, under the peculiar system of that Stock Exchange, where a name is passed by the first taker of the shares as that of the ultimate purchaser, the courts, as we have seen, have held, that a contract arises between the seller and the person whose name is passed. And this contract is one for a breach of which an action at law will lie, though two judges, Channell and Cleasby, expressed the view that the only remedy, if any, lay in equity ; 2 but the right to the equitable remedy seems free from doubt. 3 Relief at law. The question then remains as to what action lies 1 Supra, p. 234. * Musgrove & Hart's ease, L. a Davis v. Haycock, L. R., Ex. 4, R., Eq. 6, 193 ; see Wilson v. Keat- 373. ing, 7 W. R. 484. CHAP. I.] REMEDIES OF THE PARTIES. 391 for a breach of a contract of sale or pledge of this species of property, by the buyer against the seller, or vice versa ; and what other remedies a creditor of the owner or holder of securities possesses. For bonds and debentures, an action of detinue, or Actions. of trover, will of course lie; 1 but, shares, and prob- ably scrip, being a kind of ideal and incorporeal property, trover or detinue will not lie, 2 though they would, probably, in all cases lie for the certificates. In some States of the Union, however, the courts have held, that trover does lie for a share of stock. 3 It has always, also, been held, that stock is not money ; so that a declaration so describing it is de- murrable. 4 An action of covenant lies, as in other cases, for a breach of contract under seal, relating to these securities, and assumpsit, when it is by parol. SECTION II. REMEDIES OF CREDITORS AGAINST THE THING ITSELF. Shares of stock were thought to be of such an in- tangible nature that it was formerly considered there could be no change of possession, and it could not be known whether they could be attached or not, and, therefore, there could be no sale of them on execu- tion. 5 Thus, in Denton v. Livingston, 6 where the sheriff Denton ». Livingston. had levied upon and sold one share of bank, and three 1 Neiler v. Kelly, 69 Pa. 403 ; 273 ; Boylan v. Huguet, 8 Nevada, Acraman v. Cooper, 10 M. & "W. 345. * See supra, p. 140. 585. 5 See Denny v. Hamilton, 16 2 Neiler ». Kelly, 69 Pa. 403. Mass. 402 ; Howe ». Starkweather, 3 See Payne v. Elliott, 9 Eeporter, 17 Mass. 240. 678 ; Kuhn v. McAllister, 1 Utah, « 9 Johns. 96. 392 REMEDIES FOE BREACH OF CONTRACT. [PART IV. Remarks of shares of library stock, Kent, C. J., said, " The bank Kent, C.J. i -i .i , . i i "and library shares were levied on by mistake; " for these were mere choses in action, and not the "subject of a levy and sale by a fieri facias, any " more than bonds .and notes." Howe v. And so in Howe v. Starkweather, 1 Parker, C. J., Stark- weather, said, "Shares in a turnpike or other incorporated Remarks of ,, t -i i , i ■ , • Parker, c. J. company have more resemblance to choses m action " than to real estate, being merely evidence of prop- " erty, the sale of them upon execution not being jus- Ammant v. " tifiable at the common law." And also in Ammant andria Turn- v - New Alexandria Turnpike Company, 2 the court held, pike Co. ^^ a t urn pi]j e roa( j cou l(J no t be levied upon, under a judgment against the company, because the company had no tangible interest, and nothing but a right to receive tolls ; though in Connecticut it has been held, that shares in such a company are real property. 3 This has, however, been altered by statute in Eng- land, 4 and in many of the United States, 5 and now there are statutory processes established everywhere for issuing execution on shares of stock. With regard to bonds and debentures being choses in action, the same rule would apply to them as to shares of stock or promissory notes. But in respect to coupon bonds, or bonds payable to bearer, they would, as their title passes by delivery, perhaps be liable to execution at the common law. 1 17 Mass. 243. 12 ; also see Nicholls v. Rosewarne, S 13S. &R. 210. 6C. B. (N. S.) 480. 8 2 Conn. 567. 6 See Angell & Ames on Corpora- * 192 Vict. c. 110, s. 14, 15, & s. tions, | 589. CHAP. I.J REMEDIES OP THE PARTIES. 393 SECTION III. REMEDIES OF THE PARTIES AGAINST A CORPORATION FOR NOT TRANSFERRING STOCK ON ITS TRANSFER BOOKS. An action will lie either by the transferee or trans- Actions by transferor or feror against a corporation for not allowing the regis- transferee p p i t i p i against cor- tration ot a transfer on the books ol the company, or poration. for a refusal to pay dividends. 1 Where the company improperly refuses to register, the remedy is by an action on the case, or by assumpsit; 2 but an action for money had and received will not, as we have seen, lie against the corporation for merely refusing to issue certificates. 3 In Rex v. Bank, 4 the court refused a mandamus to Rex v. Bank, compel a transfer, because there was a remedy by action on the case at law. If the purchaser is ready and willing to be regis- tered, it is then prima facie the duty of the company to place his name upon the register. Sometimes, it Restrictions . . . corporation is true, the company has a right to impose certain may impose restrictions with regard to registration, and it may be said that these are to be interpreted by the terms of the charter or deed of settlement of the company allowing it to do so. This has been, as far as prap- ticable, d|scussedj supra, on page 176. 5 Where a stock certificate has been duly issued by 1 Stracy v. Bank, 6 Bing. 754 ; 5 See, also, In re Hall, 17 Q. B. Foster v. Bank, 8 Q. B. 689 ; Coles 645 ; Hubbersty v. Ry. Co., 8 B. v. Bank, 10 Ad. & El. 437 ; Davis & S. 425 ; Railway v. Dalbiac, 6 v. Bank, 2 Bing. 393. Ry. Cases, 753 ; Rudolph v. Ins. 2 Kortright v. Bank, 20 Wend. Co., 8 L. T., N. S. 551 ; Ry. Co. v. 91. Mount, 4 M. & G. 651 ; N. A. Col. 3 Arnold v. Bank, 27 Barb. 424. Ass. Co. v. Bentley, 19 L. T., Q. * 2 Douglass, 523. B. 427. 394 REMEDIES FOR BREACH OP CONTRACT. [PART IV. Effect of cer- tificate issued by corpora- tion, ordi- narily. Holbrook v. N. J. Zinc Co. Effect of cer- tificate issued by agent, acting fraud- ulently for his own benefit. a corporation having power to do so, it has been held in the United States to be a continuing affirmation of the ownership of the specified amount of stock, by the person therein designated, until it is in some legal manner withdrawn ; and in England to be so as re- gards third parties, so that a purchaser buying, in good faith, from a vendor who holds a certificate in his own name, under the seal of the company, for its stock, has a right to rely thereon, and to claim the benefit of an estoppel in his favor against the cor- poration, should the latter attempt subsequently to deny the vendor's title; and of course a person making advances upon the faith of the ownership by the borrower of such a certificate, ranks, up to the amount of his loan, as a purchaser. Thus, where, in Holbrook v. New Jersey Zinc Co., 1 the plaintiff brought an action against the company for a refusal to deliver certificates of stock, the court held, that he was not bound to show affirmatively the title of his immediate transferor, and that the corporation could not defeat his title as a bona fide purchaser without actual notice, by affirmative proof, of the pendency of an action in a competent court of that State, to deter- mine the title of the original holder to the stock, since its own positive statements in the certificate could not be overcome by such a constructive theoretical notice. Where, however, the officers of a company act fraudulently, not as agents, but as individuals ; that is to say, where the fraud is committed by them upon the company, the company not pocketing the benefits of the fraud, — as where the transfer agent forges a cer- 1 57 N. Y. 616. CHAP. I.] REMEDIES OP THE PARTIES. 395 tificate in the name of himself or of an accomplice, and fraudulently affixes the seal of the company to it, — a more difficult question is presented. As the fraudulent transferee himself could have no right of action against the company, it has been argued that his vendee, even though buying bona fide, cannot assert any greater rights against it, so that a certificate so created could not bind it. Here, the act of affixing the seal is not, properly speaking, that of the company, and the ques- tion is removed one step further back, to the general authority conferred upon its officers to affix the seal. In the Bank of Ireland v. The Evans Charities, 1 the Bank of ire- trustees of a charity gave the custody of their cor- charities, porate seal to the secretary, who affixed it fraudulently to an order, transferring stock, in a bank belonging to the charity. The signatures to the order were genuine, the secretary having obtained them fraudulently. The bank having transferred the stock according to the order, the trustees sued the bank. It was held, that the trustees were guilty of no negligence in giving the custody of the seal into the keeping of the secretary. " We all concur in the opinion," said Baron Parke, Remarks of in delivering the opinion of the law judges, which was ar e ' requested by the House of Lords, " that the evidence " given, which was only of a supposed negligent cus- " tody of their corporate seal by the trustees, in leaving " it in the hands of Mr. Grace, whereby he was en- " abled to commit the forgery, is not sufficient evidence " of that species of negligence which alone would war- " rant a jury in finding that the plaintiffs were dis- " entitled to insist upon the transfer being void. * * * 1 5 H. L. C. 389. 396 REMEDIES FOE BREACH OF CONTRACT. [p ART IV. " If there was negligence in the custody of "the seal, it " was very remotely connected with the act of transfer. " The transfer was not a necessary or ordinary or likely " result of that negligence. It never would have been, " but for the occurrence of an extraordinary event, that "persons should be found either so dishonest or so " careless as to testify on the face of the instrument " that they had seen the seal duly affixed. It is quite " impossible that the bankers could have maintained " an action for the negligence of the trustees, and re- " covered the damages they had sustained by reason " of their having made the transfer." This case, which is useful, however, only by way of analogy, was decided on the ground of negligence; and it more nearly resembles the case of a transfer by a corporation of stock really owned by a stock- holder on a forged power of attorney from him. It only goes f,o show that where a fraud is committed on a corporation by the officer having the custody of its seal, and prima facie authority to use it in proper cases, it does not thereby bind the corporation when he fraudulently affixes it to an instrument for his individual benefit. Mechanics' In The Mechanics' Bank v. The New York & y. & N. h. New Haven R. E. Co., 1 however, Robert Schuyler, the transfer agent of the defendants, fraudulently issued to one Kyle a certificate for eighty-five shares of stock, when in fact the latter owned none ; and the bank advanced to Kyle, bona fide, $12,000 on the certificate as collateral. Kyle had paid nothing for the certificate, and was treated as a party to the fraud. 1 3 Kernan, 599. E. E. Co. CHAP. I.] REMEDIES OF THE PARTIES. 397 In an action by the bank against the railway com- pany, it was held by the court, that the certificate was void as against the corporation, because it had been fraudulently issued, and because, moreover, all the stock authorized by the company's charter had been already issued, and that the transferees by purchasing Kyle's certificate, with a power of attorney executed in blank by Kyle, took thereby no better title than Kyle himself. The by-laws of the railroad company provided 1 that, transfers might be made by the stock- holders by executing an instrument in writing on the transfer books, and only in case of a surrender of the outstanding certificate for the same stock prior to the transfers being made. Comstock, J., who delivered the opinion of the court, said, " By the charter of this Remarks of ,, . , , „ . ■ n i i Comstock, J. " corporation the shares oi its capital stock were made "transferable in such manner and in such places as "the by-laws should direct ; and the by-laws declared "that all transfers should be made in the transfer " books kept at the proper oflice, and where a certifi- " cate of stock had been issued that the same should "be surrendered prior to the transfers being made. " The certificate now in question, as all others, declared " on its face the same conditions. This certificate has " in fact never been surrendered, and no such transfer " has ever been made. The plaintiffs, on making their "loan to Kyle, took from him an assignment and " power of attorney in blank, but paid no regard to " the fundamental conditions on which alone a legal " title to the stock could be transferred. Of these con- " ditions of course they had notice. * * * If extreme 1 See Report, p. 605. 398 REMEDIES FOB BREACH OP CONTRACT. [PART IV. " caution is exercised, the purchaser will inquire of the " maker of the obligation, and procure his admission " of its validity and his assent to the transfer ; and, " having done so, an estoppel will arise in his favor, not " because he has invested his money in the purchase, " but because he purchased after procuring such ad- " mission or consent, and upon the face thereof." This case, which was one of the earliest cases upon N. T. & N. this subject, was followed by the New York & New ■u. Schuyler?" Haven E,. B,. Co. v. Schuyler. 1 In this case, which arose out of the same frauds as in the last, the facts appeared somewhat differently. It was shown in this subsequent litigation that in addition to the powers which were stated in the former case to have been del- egated to the transfer agent, Schuyler, he really had authority to issue certificates in precisely the same form to the original subscribers, and did so ; that he had further authority to dispose of the stock of the com- pany not taken by original subscribers, and of which there was a large amount, and had issued certificates in the same form to the purchasers ; that he was the general financial agent of the company, and had raised money on its behalf by the issue of fictitious stock ; and, further, that the transfers had been entered on the transfer book of the company of stock which never existed, and for which the fraudulent certificates were issued, and that the transfer books themselves would, if examined, have shown the over-issue of the stock. The same court, under these circumstances, held the railroad company liable to purchasers of this fraudulently issued stock, on the ground that Schuyler 1 7 Tiffany's Reports (84 N. Y.); 61. CHAP. I.J REMEDIES OP THE PARTIES. 399 had power to sell the original stock of the company, and that transfers of the stock had been made in the transfer book to some person, generally to Schuyler himself, before the fictitious certificates had been is- sued. " We may," said Mr. Justice Davis, " with con- Remarks of . . ,. Davis, J. " fidence declare the true doctrine on this branch of " the law of agency to be, that, where the principal has "clothed the agent with power to do an act upon the " existence of some extrinsic fact, necessarily and pecu- " liarly within the knowledge of the agent, and of the " existence of which the act of executing the power is "itself a representation, a third person dealing with " such agent in entire good faith, pursuant to the ap- " parent power, may rely upon the representation, and " the principal is estopped from asserting the truth to "his prejudice." But the court, in delivering their opinion, stated 1 that the inquiries in this case were not involved in the case of the Mechanics' Bank v. the New York & New Haven K. B. Co. In Pennsylvania, the earliest case on this subject is Bank of the Bank of Kentucky v. the Schuylkill Bank, 2 where sXuyikiiT' the controversy was between the principal and his agent. The defendants, who were the agents of the Bank of Kentucky for the purpose of transferring its stock in Philadelphia, over-issued the stock to bona fide purchasers for value. The Bank of Kentucky sued their agent, and recovered the amount of loss sustained. It appears, however, from the report of the case, that the moneys, or part of them, thus fraud- ulently raised, had been used by the defendants in their corporate capacity; and, as they must have 1 On page 53 of the Report. 2 1 Parsons, Eeports, 180. 400 REMEDIES FOR BREACH OP CONTRACT. [PART IV. been held liable in any case, the remarks made by the court as to the rights of bona fide purchasers must 'be considered rather as dicta. Willis v. But in the recent case of Willis v. The Darby Co. Railroad Company, 1 Fry, the president of the defend- ant corporation and its transfer agent, fraudulently issued fictitious certificates of stock in his own name, and borrowed money on them from various banks and individuals, executing the usual blank power of at- torney to transfer in all cases. In some instances, the borrower sent the certificates, with the power of at- torney thus executed by Fry, the transfer agent, back to the company, and obtained for it a new certificate in their own name ; while, in others, the original cer- tificate only, in Fry's name, was preserved. When the frauds were found out, suits were brought against the company by those who had advanced on the cer- tificates, and it was held, by the Court of Common Pleas, that the company was liable to all the plain- Hemarksof tifis alike. "It is well settled," said Judge Hare, Hare, J. . " that one, who, as a purchaser or lender, gives value " on the face of a certificate of stock, authenticated by " a receiver of the corporation, and the signatures of "the proper officers, acquires an equitable title, and " may require the corporation to transfer the stock to " him or respond in damages for the default. It is not " a sufficient answer to such a demand that the certifi- " cate was fraudulently issued, because corporations are " not less than actual persons answerable for the con- " duct of their agents in the business entrusted to their " care, nor is it necessarily concluded that the party 1 6 "Weekly Notes, Phila., 461. CHAP. I.] REMEDIES OP THE PARTIES. 401 "from whom he bought was cognizant of or par- ticipated in the fraud. If a certificate of stock is " not a negotiable instrument, it is a written declara- " tion that the holder has a definite share in the capital " or profits of the concern, which, though delivered to "him, is intended for circulation, and virtually ad- " dressed to all the world, and third persons who are "misled by such an instrument may justly require " that the loss shall fall on the corporation, and not on " them." And Railroad Company v. Schuyler, and R . R . Co. •». Bank of Kentucky v. the Schuylkill Bank, were cited. Bank of Ky. „,. J /, . \ . . , ..Schuylkill Inis case was never appealed; and no decision by Bank, cited, the Supreme Court of Pennsylvania, on the subject, exists. But in the Bank of Commerce's Appeal, 1 that court Bank of held, that as between the corporator and the corpora- Appeai. r tion the record of the corporation or its stock book was the evidence of their relation. " The certificate," said Certificate of the court, " is but secondary evidence, and is never de- secondary "manded except when the stockholder deals with the ownership. " corporation in a contract relation. * * * The assign- " ment of the certificate is only an equitable transfer of " the stock, and to be made available must be produced "to the corporation and a transfer demanded. * * * " When the corporation itself is not dealing with its " stockholders on the security of its stock, and is merely "performing a corporate duty, its own record is the "only authority it need consult," etc. In this case, which has already, been referred to, a stockholder in a building association transferred to the Bank of Com- merce his certificate, with the usual power of attorney, 1 73 Pa. 64. 26 402 REMEDIES FOE BREACH OF CONTRACT. [PAKT IV. executed in blank, as collateral security for an advance. He subsequently borrowed from the association itself on the same stock, without being required to produce the certificate. The association was wound up by trustees, who, finding the stockholder's name still on their books, paid him over the balance due on the shares after de- ducting the loan due the association. Subsequently the Bank of Commerce presented the certificates with the power of attorney, and demanded payment. The court declined to hold the association liable, on the grounds just mentioned. Effect of cer- There can, of course, be no doubt that where the tificate when „ issued by fraud is committed by the officer, not for his individual fraudulently benefit, but for the corporation, the latter pocketing company. ° the proceeds, it will be liable at all events to the ex- tent of the money that it has received through the fraud. But where the fraud is committed by the agent for his own benefit, he, and not the company, obtaining the fruits of it, the later cases seem still to show that the company is estopped by its seal, although affixed with- out authority, from disputing the title of any bona fide holder, on the ground that it is within the apparent authority of the transfer agent to affix the corporate seal to the stock certificate. This doctrine is a neces- sary corollary of that of the negotiability of stock, ac- companied by the power of attorney executed in blank ; a doctrine which is undoubtedly in accord with existing commercial usage both in this country and in England, and which has of late years influenced, more and more, judicial decisions. The question is further complicated in that the powers of the transfer agent depend, in almost every case, upon the charter of the company, so CHAP. I.] REMEDIES OF THE PARTIES. 403 that one case is not necessarily a precedent for an- other. Apart from the doctrine of the quasi negotiability of the certificate accompanied by a power of attorney, which has not, as yet, been actually decided, the real question in these cases is, whether the case is brought within the doctrine of Pickard v. Sears, 1 and Freeman Pickard v. v. Cooke, 2 that if a person makes a representation Freeman ». with the intention that it shall be acted upon by another, and he does so, that person is estopped from denying the truth of what he has represented to be the fact. And as the act which here constitutes the alleged representation, is not the corporate act of the company, but, in reality, a fraud upon it, the question reverts to the corporate powers of the officers to make such a representation in its behalf, so as to bind it. In Willis v. The Darby Railroad Company, 3 the Willis ». i i i ii i -o i hi Darby B. K. charter declared that the certificates should be trans- Co. ferable at the pleasure of the holder, in the presence of the president or treasurer, on the books of the com- pany, but conferred no authority upon the transfer agent to issue certificates, which he did only by virtue of the custom to issue a fresh certificate on the sur- render of the old one. A strict construction of such a corporate power would lead to the result announced in The Mechanics' Bank against the Railroad, 4 namely, that the purchaser took no better title than his transferor. The ground of negligence, on which many of these Negligence, cases have been argued, depends upon whether the 1 6 Adol. & Ellis, 469. » Supra, p. 400. ' 2 Exch. 654. * Supra, p. 396. 404 REMEDIES FOE BREACH OF CONTRACT. [PART IV. transfer books, which are made by most charters the direct and only evidence of title to their stock, disclose transfers or attempted transfers of the fictitious stock for which the forged certificates were issued. If they do, a purchaser of such a certificate would, if he ex- amined the transfer book, see an apparently valid title to the shares bought by him ; and, as the directors are bound to examine the books, they would be negligent in not discovering fraudulent entries upon them. But if no such entries appear in the transfer books, no dili- gence on the part of the directors could ascertain the fact that their transfer agent was tearing blank certifi- cates out of one of the certificate books, and affixing the corporate seal to them, and issuing them, as the book out of which the blanks were taken could be concealed, or new blank certificates printed. Nor are directors guilty of negligence in leaving the custody of their seal to a transfer agent, for they must, in the very nature of the case, leave it to some one. 1 And if they be not negligent in selecting him, no neglect can be im- puted to them because they so leave the seal with him. We have hitherto discussed the case where the com- pany or its officers are at fault. • But it not unfre- quently happens that corporations make transfers on their books of stock, standing in the name of some stockholder, upon the presentation to them of a forged power of attorney purporting to be from him ; and Questions important questions arise as to their liability to the forged transferee in such cases, which for convenience may tomey! be considered under the following categories : 1 See Bank v. The Evans Charities, 6 House of Lords Cases, 389, above referred to. CHAP. I.]. REMEDIES OP THE PARTIES. 405 1. Where the company acts on a forged transfer, and Division of issues a certificate which a bona fide purchaser subse- quently buys. 2. "Where the transferee purchases stock, and takes a forged power to transfer to the company, and gets certificates issued to him by reason of the forged power. 3. Where the transferee bargains for stock, and re- fuses to take the certificates till registered in his name, and the company issues certificates on the faith of a forged power of transfer presented by the seller. 1. In the first case, it has been held, that the com- pany is liable to the transferor; for he acts, not on the faith of the forged transfer, but on the faith of the certificate issued by the company ; and the negligence is on its part in permitting the certificate, and conse- quently the company will be estopped from afterwards denying his title. Thus, In the matter of the Bahia and San Fran- in the matter cisco, etc. Railway Company, 1 Miss Trittin, being the and San • ■I n n -i • ..-,.., Prancisco, registered owner 01 live shares in a registered joint e te. Ry. Co. stock company, left the certificates in the hands of her broker. A transfer of the shares to S. & G., purporting to be executed by her, together with the certificates, was left with the secretary for registration. The secretary, in the usual course, wrote to her, noti- fying her that the transfer had been so left, and, receiving no answer, after ten days, registered the transfer and removed her name, placing that of S. & Gr. on the register, and giving them fresh certificates certifying that they were the registered owners. A. » L. R., 3 Q. B. C. 584. 406 REMEDIES FOR BREACH OF CONTRACT. [PART IV. bargained for five shares, through a broker, on the Stock Exchange, and paid the value of them, and took a transfer from S. & G. of these specific five shares, and A.'s name was placed upon the register and share certificates were given him. It was after- wards discovered that the transfer to S. & G. was a forgery, and the company was ordered to restore Miss Trittin's name upon the register. On a case stated, the court held, that the giving the certificate to S. & G. amounted to a statement by the company, intended by the company to be acted upon by pur- chasers of shares in the market, that S. & G. were entitled to the shares, and that A. having acted on that statement, the company was estopped from denying its truth, and that A. was consequently en- titled to recover from the company the value of the shares. Hart v. On the same principle, in the case of Hart v. Fron- Frontino,etc. , Gold Co. tino, etc. Gold Co., plaintiff purchased shares in the de- fendants' company, and received duly executed share certificates, but was not registered on their books. The seller, being compelled to pay a call upon them, demanded repayment of the plaintiff, who required to have transfer of the shares registered in his name. Plaintiff's name was thereupon entered on the registry, and he received from the company a certificate certi- fying that he was the owner of the shares. On the faith of this certificate and registration he paid the call to the seller. The company subsequently discovered that, before the plaintiff had purchased the shares, they had been bought by a Mr. Fitzgerald, and 1 L. R., 5 Ex. 111. CHAP. I.] REMEDIES OF THE PARTIES. 407 transferred to him by a duly executed transfer. The plaintiff's name was then removed from the register, and that of Fitzgerald substituted. The plaintiff sued the company for removing his name, and it was held that, by the registration of plaintiff's name and the delivery to him of the certificates, followed by a payment by him of the call, the defendants were estopped from denying his title, and were liable to him for the value of the shares. 2. An excellent illustration of the second class is Simmr. Anglo- the recent case of Simm v. Anglo-American Telegraph American Company. 1 In this case Burge & Co. purchased upon Co. the Stock Exchange £5000 of stock in the defendant company. Before the transfer was effected, Burge & Co., desiring to borrow money on the stock, requested to have the transfer made in the name of Spurling & Co., and a transfer of the stock purporting to be executed by C, the true owner, was lodged with the company by Spurling & Co., who had agreed to make the advances. The company, after sending the usual notice to C, registered Spurling & Co. as holders. Spurling & Co. again repledged the stock with Simm & Co., who were in like manner registered as owners, a certificate being issued to them by the company. The advances, how- ever, were subsequently all paid off, so that the plain- tiffs, Simm & Co., continued to hold the stock merely as trustees for Burge & Co. It was discovered, mean- while, that the transfer from C. was a forgery, and the company thereupon replaced C. upon the register, and refused to pay dividends to the plaintiffs or to acknowl- edge their title to the stock. The court below held, 1 20 American Law Eegister, p. 159. 408 EEMEDIES FOB BKEACH OF CONTEACT. [PAET IV. Bemarks of Bramwell, L.J. Bemarks of Brett, L. J. that Spurling & Co. and Simm & Co. had, by having fresh certificates issued to them, acquired a title by estoppel against the company, and that, having so acquired it, the benefit of that estoppel enured to Burge & Co., who had, though innocently, originally presented a forged power of attorney to the company by which they had obtained the certificates to their nominees. This, however, was held by the Court of Appeals to be erroneous. " Mr. Benjamin contended," said Bramwell, L. J., " that it was the duty of the de- " fendants to make inquiries, and that by putting the " plaintiffs on the register and giving them the certifi- " cate, they affirm that the transfer is correct. I en- " tirely dissent from that proposition. This system of " companies making inquiries before putting the names " of purchasers of stock on the register is comparatively " modern, and is a very reasonable one, but it is for " their own benefit only ; for, as between themselves and " the transferees of the company, having given a certifi- • " cate, they would be estopped from denying their title " to the stock, and therefore for their own protection "they ought to make inquiry; but I do not see why, " because they do so, they should be precluded in this "action from saying that the transfer presented by " Burge & Co. is a forgery. * * * In my opinion, it "is unnecessary to consider in this case whether any " damage has accrued to the plaintiffs. Even if it " could be shown that Burge & Co. have suffered dam- " age in consequence of what the company have done, " it would not, I think, make any difference. It would " be their misfortune." Brett, L. J., said, " The com- " pany are not bound to make inquiries, and indeed if CHAP. I.] EEMEDIES OF THE PARTIES. 409 " the transferee does not put credit in the broker he " can himself make inquiry of the transferor. All the " facts which caused Burge & Co. to be put upon the " register and entitled them to a certificate are as much " known to them as to the defendants, and some of " them are more within their knowledge than the com- " pany's. They know, for instance, what the contract " with the broker was, and it is quite as much their " duty to make inquiries as it is the company's. All " the company do is to put the names on the register, " which act of the transferor, if valid, makes Burge & " Co. holders of the stock, but the company do this on "the statement of Burge & Co. The certificate is "merely a statement that the company have accepted " Burge & Co. as holders, but does not allege any fact "known to the company and not known to Burge & " Co. The only use of it is for the purpose of making a " transfer, or to show the title to the stock. The issuing " of it, therefore, does raise an estoppel against the com- "pany as between them and a subsequent purchaser, " as it is given with the intent that he may act upon it, " and is a representation by the company of facts .not " within his knowledge. There is, then, no representa- " tion made by the defendants to Burge & Co. sufficient " to raise the estoppel, and I doubt whether Burge & " Co. have made any representation which might estop " them as against the company. Even if the company " had made such a representation to Burge & Co. they ".would not be estopped, because the legal position of "Burge & Co. has not been altered by it. If ever " they had a remedy against the broker at law, they " have it still ; and I think any remedies they may 410 REMEDIES FOR BREACH OF CONTRACT. [PART IV. Pratt v. Machinists Bank. "have had under the rules of the Stock Exchange, " they have still." 1 3. The case, where a person bargains for stock, but does not pay the price until a certificate is procured for him from the company, on the faith of a forged transfer by the forger, is well illustrated by the case of Pratt v. Machinists' National Bank. 2 There, certificates of stock were stolen from the plaintiff, Miss Pratt, and given by the thief to P. & Co. to sell, together with a forged power to transfer. They employed H. to sell the stock at auction, who sold them to D. The certifi- cates, with the transfer filled up to H., were sent after the sale to the company to issue new certificates to H., and "the new certificates then sent with a transfer to D., the buyer, to the company, who issued fresh certificates to him. All the parties acted bona fide. On the dis- covery of the forgery, the plaintiff filed her bill against D. and against the company, asking for a decree of new certificates from the latter, and that the former be ordered to give his up. The court held, that the bill lay against the company, and cited the authorities in the notes, 3 but refused in that proceeding to order the purchaser to surrender his certificates, though without prejudice to any future proceeding as between these two co-defendants. 4 A review of these cases will satisfy any one that the the foregoing proper course for the broker to pursue, whenever he Principles derived from 1 See Hilyard v. South Sea Co., 2 P. Wm. 76 ; Ward i>. R. R. Co., 37 Georgia, 515. a 123 Mass. 110. 8 Ashby v. Blackwell, 2 Eden, 299; Sewall v. Boston Water-Power Co., 4 Allen, 277; Pollock v. Bank, 3 Seld. 274. 4 See note by Mr. Bennett in 20 Amer. Law Register, p. 168; to the case of Simm v. Anglo-Ameri- can Telegraph Co. CHAP. I.] REMEDIES OF THE PARTIES. 411 becomes either a purchaser of stock, or a holder as bailee for an advance, is to register it in his own name and get a fresh certificate from the corporation. In this case he is, according to all the decisions excepting that in Simm v. Anglo- American Telegraph Company, 1 Simm v. An- .,.■,.» glo-Amer. just noticed, protected against mistake in the issue of Tel. Co. the stock by the officers of the company or fraud in the execution of the transfer from the original owner. Under the last-mentioned case, a new certificate in the name of the purchaser would be no protection where it was issued on a forged transfer presented by an in- nocent purchaser, at least after his purchase. It did not, however, appear there that Burge and Co. had purchased expressly on the faith of the issue of the new certificate ; as, if they had done so, the company might then have been estopped from setting up their defence. But the decision certainly seems to be at variance with the dicta of the court in Hart v. The • Frontino, etc. Gold Company. 2 There, Bramwell, B., said, "If they" (the company) "elect to do it, and Remarks of "acts are done by him" (the purchaser) "in conse- B.,inHarW. "quence, he cannot afterwards undo it. The plaintiff Goidc"!' 6 * ' " has a right to say, ' I made you a tender of myself as " shareholder, and you accepted me, and I acted upon " that acceptance.' This is no novelty ; as against a " bona fide holder for value a banker paying a forged " check or a drawee paying a forged bill cannot after- " wards recover back the money, nor can an acceptor "deny a drawer's signature. Suppose the plaintiff had " sold the shares and handed over the certificate, it is " admitted that the purchaser would have a good title 1 Supra, p. 410. ' L. R., 5 Exch. 111. 412 REMEDIES FOR BEEACH OF CONTRACT. [PART IV. " by estoppel against the defendants, who could not "have denied his right to compel him to enter his "name. That would show, if the defendant's con- " tention is sound, that the plaintiff would have been " better off if he had sold the shares than if he had " continued a shareholder ; but why should that be ?" Under this view, Burge & Co., 1 after having re- ceived a certificate in their own name as purchasers, would clearly have been entitled to rely upon it as against the company ; and it can hardly be that they were in a worse position because, when purchased, the stock was actually registered and certificates issued in the names of Spurling & Co. and Simm & Co., whose title as purchasers or lenders was confessedly valid. But, even under the reasoning of this case, a broker who refused to complete the purchase until a new certificate was issued at the transfer office, in his own name or that of his nominee, would acquire a good title as against the company by estoppel. This course would always protect the purchaser or lender from liti- gation and delay, which alone may involve great loss, in cases where the title to the stock sold or hypothe- cated is put in doubt by reason of some fraud, or on account of the capacity in which the seller is acting, as in the case of executors, trustees, etc. 1 The real parties in interest in Simm v. The Anglo-American Tele- graph Co., supra, p. 407. CHAPTER II. MEASURE OF DAMAGE FOE THE BEEACH OF THE CONTEACT OF SALE AND PLEDGE. Preliminary remarks . . . 413 Division of chapter .... 414 SECTION I. — MEASURE OF DAM- ASKS WHERE NO CONSIDERATION HAS PASSED. Rule in England 414 Rule in different States in America 415 PAGE SECTION II. — 1, 2. MEASURE OF DAMAGES WHERE THE CONSID- ERATION HAS PASSED. Rule in England 416 Rule in different States in America 416 Reader referred to eases in- volving other species of per- sonal property 424 In the business of a stock broker, the two contracts, of Preliminary v phi &rk s hypothecation and of- sale, are those by means of which the great part of his daily transactions are executed. For a breach of either of these the remedy is usually by an action at law against the offending party. It becomes, therefore, requisite to consider the measure of damage which the injured party is entitled to as com- pensation for the breach of eithei 4 of these contracts. The breach of the contract of sale occurs when there is a refusal to deliver or transfer stock. The breach of the contract of pledge occurs when there is a refusal to return borrowed stock. The breach of the contract of sale falls obviously under two heads : — -first, where the vendee has actually paid the consideration money ; secondly, where no con- sideration money, or at all events but a small portion of it, has passed. 413 414 REMEDIES FOR BREACH OF CONTRACT. [PART IV. Law in the United States con- flicting. Division of chapter. Unfortunately, the law respecting the measure of damage is, in the United States, in great confusion; and in discussing this subject, we shall be compelled, generally, to examine the rules laid down in different States. We shall, however, classify decisions of the several States as far as is possible. "We shall consider in Section I. — The measure of damages, where there is a failure to fulfil a contract to deliver stock, but where no consider- ation has passed ; and in Section II. — 1. The measure of damages, where there is a failure to fulfil a contract to deliver or transfer stock where the consideration has been actually paid. 2. The measure of damages, where there is a failure on the part of the bailee to return borrowed stock. Rule in Eng- land. SECTION I. — MEASURE OF DAMAGES WHERE NO CON- SIDERATION HAS PASSED. The measure of damages, where there is a breach of a contract to deliver stock, and no consideration has passed, is, in England, the difference between the con- tract price and the market price at the time the con- h own. Hoi- tract was broken. Thus, in Shaw v. Holland, 1 Parke, B., said that he " was at first disposed to think this "was like the case of an action for not replacing " stock, in which the measure of damages is the dif- ference of price on the day on which it ought to "have been replaced, and on the day of trial, but " upon consideration," he thought, " it more resembled " the case of an action for the non-delivery of goods." In the case of Gainsford v. Carroll, 2 which was an 1 15 M. & W. 136. » 2 Barn. & Cr. 624. land. Bern arks of Parke, B. Gainsford v. Carroll. CHAP. II.] MEASTJEE OF DAMAGE. 415 action for not delivering goods on a given day, the court held, that it was not like the case of a loan of stock, where the borrower holds in his hands the money of the lender, and thereby prevents him from using it altogether ; but that the plaintiff, having his money in his possession, might purchase the like goods the very day after the contract was broken ; and, therefore, that the true measure of damages was the difference between the price agreed upon and the market price of the goods at the time the contract was broken. Here the plaintiff had his money in his own possession, and might have gone into the market and bought other shares as soon as the contract was broken. In Pennsylvania, the rule, laid down by the more Euie in recent cases with regard to stocks, where the consider- ation had actually passed, was the same as that of any ordinary commodity. 1 Where, therefore, the con- sideration has not passed, it would probably also be in analogy to the case of any other commodity, and would be the difference between the contract price and the market value at the time the contract was broken. 2 So, in New York, where no case precisely analogous exists, probably the ordinary rule of measure of dam- ages would apply, as in the case of other chattels, which was discussed in Clark v. Pinney, 3 on the breach Clark v. of a contract to deliver salt. mney ' In Kansas, 4 in executory contracts, the court said, that the measure of damages was the difference between 1 Huntington, etc., E. E. Co. u. 2 See Wilson v. Whitaker, 49 Pa. English, 86 Pa. 247 ; North v. Phil- 114. lips, 89 Pa. 250. » 7 If. T. 681. * Field v. Kinnear, 4 Kan. 476. 416 REMEDIES FOR BREACH OF CONTRACT. [PART IV. the stipulated value and the market value at the time the contract was broken. In Louisiana, 1 the court has held, that the proper measure of damages was the value at the breach of contract, or the conversion. Rule in England. Rule in America. SECTION II. — MEASURE OF DAMAGES WHERE THE CONSIDERATION HAS PASSED. 1. 2. The principle in respect to the measure of damages, (1) where the consideration has been paid, and there is a failure to deliver stock, and (2) in the case where there is a failure to replace borrowed stock, is obviously the same, as in each case the offending party is, in effect, a bailee, and the stock held in bailment. In England, the measure of damages is, in these two cases, the value at the time the contract was broken, with interest, where there has been a fall in the price of the stock; 2 and where the price has risen, it is the value at the day of trial. 3 It was at one time supposed that the highest in- termediate value, between the time the contract was broken and the day of trial, constituted the true meas- ure of the damage suffered; but this idea has been repudiated. 4 In Pennsylvania, the later cases hold, where the consideration has passed, and there is a failure to deliver, or where there is a failure to replace borrowed 1 Vance v. Tourne, 13 Louisiana, 225. 2 Forrest v. Elwes, 4 Vesey, Jr., 492 ; Sanders v. Kentish, 8 T. R. 162 ; In the matter of the Bahia, etc., Ry. Co., L. E., 3 Q. B. C. 584. 8 Shepherd «. Johnson, 2 East, 211 ; Harrison v. Harrison, 1 C. & P. 412 ; Owen v. Routh, 78 E. C, L. K. 326. * McArthur v. Seaforth, 2 Taun- ton, 257 ; see Greening v. "Wilkin- son, 1 C. & P. 625. CHAP. II.] MEASURE OF DAMAGE. 417 stock, that the proper measure is the value at the time of the breach of the contract, with interest to the day of trial, 1 unless, it is said, some peculiar relation exists between the parties, as in the case of a cestui que trust and a trustee. It is true, that in Bank of Montgomery v. Reese, 2 Bank of . _ Montgomery where bank stock had been wrongfully withheld from v . Keese. a party entitled to it, the consideration of the stock having been paid, the measure of damage was held to be the highest value between the breach of the contract and the trial, together with the bonus and dividends which had been received in the mean time ; but where the consideration had not been paid, the plaintiff, it was said, would be allowed the difference between it and the value of the stock, together with the difference between the interest on the consideration money and the dividends on the stock. The highest intermediate value was, in this case, allowed. But this has been frequently said, by the Supreme Court of Pennsyl- vania, to have been done here, because the corporation was considered as a trustee for the stockholders. The reasoning, however, adopted, in the opinion of the court, does not support this explanation, but proceeds upon the broad principle of giving due compensation to the injured party under the circumstances of the case. Lewis, C. J., in delivering the opinion of the Remarks of court, said, " The case of stock is an exception to the ewis ' "general rule applicable to chattels. It is made an "exception in obedience to the paramount obligation 1 Neiler „. Kelly, 69 Pa. 403; 70 Pa. 484; North v. Phillips, 89 Huntington, etc. K. K. Co. t>. Eng- Pa. 250. lish, 86 Pa. 247 ; Work v. Bennett, s 26 Pa. 143. 27 418 REMEDIES FOR BREACH OF CONTRACT. [PART IV. Neiler v. Kelly. Remarks of Sharswood, J. "to indemnify the party for his loss. The rule of " convenience gives place to the rule of justice. The " moment we proceed, on this ground, to take it out of " the general rule, we are obliged to substitute one that " will do complete justice to the party injured. The " question is, what did the plaintiff lose ? * * * He is " entitled to all the advantages he could have derived " from the stock if it had been delivered at the speci- "fied time. * * * Those advantages are the highest " market value between the breach and the trial, to- gether with the bonus and dividends which have " been received in the mean time. * * * This is the "rule where the consideration has been paid. * * * " Nothing short of this will do justice, because nothing " short of it will give the plaintiff the benefits he could "have enjoyed if he had not been deprived of his "rights." In the subsequent case of Neiler v. Kelly, 1 Shars- wood, J., remarking that the rule regarding the meas- ure of damages had been somewhat modified in respect to stocks from that of ordinary chattels, said, " The " rule, however, is not changed, but only modified to " this extent, that wherever there is a duty or obligation " devolved upon a defendant to deliver such stocks or " securities at a particular time, and that duty or obli- "gation has not been fulfilled, then the plaintiff is "entitled to recover the highest price in the market " between that time and the time of the trial." And in all the subsequent cases where the highest inter- mediate value has been allowed in Pennsylvania, there has been some peculiar relation existing be- * 69 Pa. 403. CHAP. II.] MEASURE OF DAMAGE. 419 tween the parties other than mere bailor and bailee, or vendor and vendee. 1 The rule apparently laid down, therefore, in Bank of Montgomery v. Reese, can hardly be regarded, except with this important qualification, as the law of Pennsylvania. In New York, the courts have from an early period favored the highest intermediate value between the conversion and the trial, and the rule with regard to that State is that, where there is a failure to replace borrowed stock, or to deliver stock, when the consider- ation has passed, the measure of damages is the highest intermediate value between the conversion, or breach of contract, and the trial. 2 In Romaine v. Van Allen, 3 where the trial had been Bomaine v. protracted, and the stock risen in the mean time, the measure of damages was the highest value between the conversion and the last day of the trial. The courts in New York, however, have taken a distinction between the case of a failure to deliver stock which has been paid for by the agent of the vendor, and by the vendor himself; and where the former has advanced the purchase money, and the latter has not advanced any, the later decisions lay down as the meas- ure of damage, the value of the stock at the time of the demand by the vendee, or within a reasonable time 1 See Persh v. Quiggle, 7 Sm. v. Dutcher, 34 N. T. 493 ; Allen v. (Pa.) 247 ; Reitenbaugh u. Lud- Dykers, 3 Hill, 593 ; Markham v. wick, 7 Casey (Pa.), 131; Musgrave Jaudon, 41 N. Y. 235; Lobdell v. v. Beckendorff, 53 Pa. 310 ; "Wag- Stowell, 51 N. Y. 70 ; Baker v. nerv. Peterson, 83 Pa. 238. Drake, 53 N. Y. 211; same case, 2 See Cortelyou v. Lansing, 2 66 N. Y. 518 ; Thayer v. Manly, Caines's Cases, 216; Nauman ». 73 N. Y. 305; Morgan u. Gregg, Caldwell, 2 Sweeney, 212; West 46 Barb. 183. v. Wentworth, 3 Cowen, 82 ; Bank » 26 N. Y. 309. v. Kortright, 22 Wend. 348; Burt 420 EEMEDIES FOE BKEACH OF CONTRACT. [PAET IV. Markham v. Jaudon. Baker v. Drake. Eemarks of Eapallo, J. afterwards, where there has been a failure to replace a deposit made as security. A different rule was laid down in Markham v. Jau- don, 1 where the highest intermediate value was allowed. But in Baker v. Drake, 2 the court said that the highest' intermediate value was not invariably the correct meas- ure of damage, and that where shares of stock were purchased by stock brokers for their principal} with the funds of the former, and carried in their name merely for speculative purposes, and not for invest- ment, which had been converted by the brokers, the proper measure of damages was what it would have cost the plaintiff to replace the stocks on some day within a reasonable time after the wrongful sale, de- ducting the sum due the defendants for commissions, etc. Eapallo, J., said, in delivering the opinion, " More than two-thirds of this supposed damage arose "after the bringing of this suit. This enormous " amount of profit, given under the name of damages, " could not have been arrived at except under the un- " reasonable supposition, unsupported by any evidence, " that the plaintiff would not only have supplied the " necessary margin and caused the stock to be carried " through all its fluctuations until it reached its high- " est point, but that he would have been so fortunate " as to seize upon that precise moment to sell, thus "avoiding the subsequent decline, and realizing the " highest profit which could have possibly been derived " from the transaction by one endowed with the super- " natural power of prescience. In a case where the " loss of probable profits is claimed as an element of 1 41 ST. Y. 235. s 58 N. T. 211 ; 66 ib. 518. CHAP. II.] MEASURE OF DAMAGE. 421 " damage, if it be ever allowable to mulct a defendant " for such a conjectural loss, its amount is a question "of fact, and a' finding in respect to it should be based " upon some evidence. In respect to a dealing which, • "at the time of its termination, was as likely to result " in further loss as in profit, io lay down as an inflex- ible rule of law that as damages for its wrongful " interruption the largest amount of profit which sub- " sequent developments disclose might, under the most " favorable circumstances, have been possibly obtained " from it, must be awarded to the fortunate individual " who occupies the position of plaintiff, without regard "to the probabilities of his realizing such profits, " seems to me a wide departure from the elementary "principles upon which damages have hitherto been " awarded. * * * The plaintiff did not hold the stocks " as an investment, but the object of the transaction " was to have the chance of realizing a profit by their " sale. He had not paid for them. The defendants " had supplied all the capital embarked in the specu- " lation, except the comparatively trifling sum which " remained in their hands as margin. Assuming that " the sale was in violation of the rights of the plaintiff, "what was the extent of the injury inflicted upon " him ? He was deprived of the chance of a subse- " quent rise in price, but this was accompanied with " the corresponding chance of a decline, or, in case of " a rise, of his not availing himself of it at the proper "moment; a continuance of the speculation also re- quired him to supply further margin, and involved " a risk of ultimate loss. If, upon becoming informed " of the sale, he desired further to prosecute the adven- 422 EEMEDIES FOR BREACH OF CONTRACT. [PART IV. Rule in Markham v. Jaudon mod- ified. Moody v. Caulk. Remarks of Randall, C. Kent v. Ginter. Remarks of Perkins, J. " ture and take the chances of a future market, he had " the right to disaffirm the sale and require the defend- " ants to replace the stock. If they failed or refused " to do this, his remedy was to do it himself and charge " them with the loss reasonably sustained in doing so. " The advance in the market price of the stock from "the time of the sale up to a reasonable time to re- " place it, after the plaintiff received notice of the sale, " would afford a complete indemnity." And the case of Markham v. Jaudon was overruled so far as it con- flicted with the principles thus laid down. In Florida, in Moody v. Caulk, 1 the measure of damage was held to be the value at the time of the conversion with interest, but Randall, C. J., said, " In " the case of public stocks held as an investment, of " rare pictures, jewels, and like articles, held otherwise " than for purposes of immediate commerce, it would " be equitable and proper that the highest value after " conversion should prevail, if the jury should be satis- " fied from the evidence the plaintiff would have held " the property up to the time of the advance in value, " for the defendant should make good the actual loss " sustained by reason of his act. But this suggestion " is probably not applicable to the present case." This, therefore, was merely an obiter dictum. In Indiana, in Kent et al. v. Ginter, 2 Perkins, J., said, " Generally, the value of the property at the time "and place of delivery is taken as the datum for " measuring damages. * * * But one exception to this " rule is quite well established, and that is where stocks 1 14 Fla. 50. 2 23 Indiana, 1. CHAP. II.] MEASURE OF DAMAGE. 423 "are the subject-matter of the sale. Romaine v. "Allen. 1 " In Maine 2 and Massachusetts, 3 in the case of stocks, where the consideration has passed, or in the case of loaned stock, the measure of damage was the market value with interest ; and in Pinkerton v. E. E. Co.,* £ in £ er ' on v - . _ ' _ ' B. B. Co. in New Hampshire, the court especially stated that the above was the proper measure of damages, and that the value at the trial, and not any intermediate value, was to be considered by the jury. In Maryland, 5 where stocks and bonds were deposited in a bank, and by them lost, as well as in a case in Virginia, 6 the measure of damage was held to be, in the former case, the value at the time of the theft or con- version, and in the latter, the value at the day when they should have been delivered ; and in Arkansas the same rule seems to have been adopted. 7 In Ohio, in Bates v. Wiles, 8 an action of trover Bates «. "Wiles was brought to recover the certificates wrongfully con- verted ; and the court held, that the highest value in- termediate between the conversion and the trial was a fair compensation to the injured party. In Nevada, in Boylan v. Huguet, 9 the court held, Boyian v. that -the highest intermediate value between the con- version and the trial was not the true measure of damage, but the value at the conversion with interest to judgment, and generally any damage which legiti- mately might arise out of the transaction. 1 26 N. Y. Eep. 309. • 0. & H. E. E. Co. v. Fulvey, 2 McKenney v. Haines, 63 Me. 17 Grattan, 366. 74. 7 Jefferson v. Hale, 31 Arkansas, s Fisher v. Brown, 104 Mass. 259. 286. • 42 N. H. 463. » 1 Handy (Ohio), 532. 6 Bank v. Boyd, 44 Md. 47. » 8 Nevada, 345. 424 REMEDIES FOR BREACH OP CONTRACT. [PART IV. Bercich < Marye. Reader re- ferred to cases involving other kinds of personal property. In Bercich v. Marye, 1 the court said that in the statutory action of claim and delivery of. personal property, in case a return cannot be had, the value of the stock at the day of trial, with the dividends that have been paid upon it as damages for detention, is the only complete indemnity. The courts sometimes, in deciding the proper meas- ure of damages for the breach of contracts of sale, have drawn a distinction between those cases, where shares of stock, and those, where other kinds of prop- erty, constituted the subject-matter of the contract. We have therefore deemed it inadvisable to consider the decisions in 'those States where no cases apply the rule as to the measure of damages, either directly or indirectly, to the case of shares of stock or bonds. The reader is, however, referred to the following cases, where the subject has been discussed in States, other than those we have already quoted, in refer- ence to other kinds of personal property. 2 1 9 Nevada, 312. 2 Dryer v. Lewis, 57 Ala. 552 ; Harrier o. Hathaway, 33 Cal. 117 ; Cofield v. Clark, 2 Col. 101 ; C. R. & B. Co. v. A. & G. B. B. Co., 50 Ga. 444; Deere v. Lewis, 51 111. 254; Stapleton v. King, 40 Iowa, 278; Derby v. Gallup, 5 Minn. 119; Allen v. Kinyon, 41 Mich. 281 ; Storm v. Green, 51 Miss. 103 ; Rickey v. Ten-. Broeck, 63 Mo. 563 ; French v. Ramge, 2 Neb. 254 ; Woolcott v. Mount, 7 Vroom (N. J.), 262 ; Kid v. Mitchell, 1 N. & McC. (S. C.) 334; Cartwright v. McCook, 83 Texas, 612. INDEX. "ABOUT" meaning of, as applied to amount of stock or commodity, construed at law, 87, 88. meaning usually a question for jury, 89. construed by New York Stock Exchange, 87. ACCOUNT sale for the, 69. ACCOUNT DAT, 45, 69. ACTION in rem, 391. for breach of contract, 390, 391. See, also, Contract. by feme sole trader, husband joined, 78. against corporation refusing to transfer, 393. ADMINISTRATORS, see Executors. ADVANCES to executors and administrators, 323-331. by factor, give no right to repledge, 354, 355. to executor for his own purposes, fraudulent, 325. to trustees, 331-335. on collaterals, pledgee should protect himself by special agreement, 348, 349. usual form of collateral note, 349. AGENCY, ) . „„ _ > see Principal and Agent. AGENT, J ALLOTMENT, 70. AMBIGUOUS INSTRUCTIONS, 87-90. See "About." ANTECEDENT DEBT how far consideration for pledge, 371-373. See Pledge. ATTACHMENT by creditors against stock, 374. See Creditors, and Execution. BACKWARDATION, 48, 70. BAILEE broker, when, bound to use reasonable care, 100. See Pledge. 425 426 INDEX. , BANKRUPT ACT vests right to proceeds of sale of seat in assignee, subject to claims of Board creditors, 51. BANKRUPTCY revokes broker's agency, 124. of member of Stock Exchange, 61. effect of, on proceeds of seat, see Seat. BARNARD'S ACT, 298. BARTER stock broker has no authority to, 193. BEAR definition of, 70. BLIND POOL, see Pool, 73. BONA FIDE PURCHASER of stock certificate, rights of, against company, 161. of stock for value, rights of, against real owner, 153. BONDS, 147. how far negotiable, 157. foreign government, passing by delivery, held negotiable in England, 159, 171. of East India Company, made negotiable in England by statute, 158. in America, drawn to bearer or order, negotiable, 164. municipal bonds in America negotiable, 167. how pledged, see Pledge. as to coupon bonds, see Coupon Bonds. BONUS defined, 70. BOUGHT AND SOLD NOTE exchanged on sale of securities, 54. BROKER, see Stock Broker. BULL defined, 70. BUYER'S OPTION, see Option. BUYING IN shares at Stock Exchange, 48, 70. CALLS, 70. liability of transferee to, 175. recoverable from customer by broker paying them, 218. due on shares, must be paid before making delivery, 268. CALL LOAN, 66. CANAL SHARES held by earlier cases to be within Mortmain Act, 207. but not by later ones, 208, 209. CARRYING STOCK, 70, 376-378. See Pledge. CERTIFICATE OF STOCK effect of, issued by corporation, 393, 394. held to be only secondary proof of ownership in Pennsylvania, 401. forged, how far binding, see Forged Certificate. INDEX. 427 CLEARING HOUSE definition and description of, 55-66. modus operandi of, 56. •=— of stock, peculiar to Philadelphia, 59. example of account of broker with, 57. agent of buyer and seller, 61. transactions effected through, valid, 65. merely accomplishes what principals themselves may do, 62. , customers of brokers not affected by, 64. sheet, decisions relating to, in Pennsylvania, 307. delivery through, see Delivebt. COLLATERAL NOTE form of, 349. COMMISSIONS broker may sue for, 116. not recoverable in England by broker, unless sworn, 118. not recoverable by broker if guilty of negligence or misconduct, 116. fraud towards principal forfeits all right to, 118. where contract only partly performed through fault of principal, commis- sion on whole may be recovered, 116, 117. not recoverable where contract illegal, 117. amount of, prima facie fixed by usage of Stock Exchange, 116. CONSIDERATION failure of, what constitutes, 289, 290. CONTANGO, 48, 71. CONTANGO DAY, 71. CONTINUATION, 71. CONTINUING SHARES, 48. CONTRACT at Stock Exchange, always of a thing in esse, 188. there must be mutual assent as to subject of, 192. effected by letter, 190, 191. by telegraph, 191, 192. by married women, 78. validity of, by feme sole trader, depends upon business carried on by her, 78, 80. for stock, how far must be in writing, 197-204. distinction between executed and executory, 230, 231. breach of, remedies for, 389. specific performance of executory contract, 234-257, 390. partly executed, cannot he countermanded to detriment of broker, 117. avoidance of, 287-318. by mistake, 288. because in restraint of trade, 290-295. because of wager, 297-318. because of fraud, 288. for sale of goods not owned by vendor, held illegal in earlier cases, legal by later ones, 302. where delivery is contemplated, not illegal, 301-304, 309. where delivery is not contemplated, how far illegal, 300, 301, 310, 313, 318. where no delivery is intended, but merely settlement by differences, illegal, 300, 313. intention to deliver, question for jury, 313, 314, 318. whether cover for gambling transaction, question for jury, 313. for options, see Options. of pledge, see Pledge. of sale, see Sale. 428 INDEX. CONSOLS special account day for, in London, 46. CORNER agreement to make, illegal, 294. combination to create by false rumors, held a conspiracy, 296. persons advancing funds for, cannot recover back amounts actually expended, 294. CORPORATION acting within scope of authority, liable as natural persons, 83. power to contract to buy securities depends upon charter, 84. may contract to sell securities owned by it, 84. appointment of agent by, 82. if acting ultra vires in appointment of agent, not liable, 83. may ratify acts of agent by implication, 82. municipal, cannot ratify acts of agent when ultra vires, 83. COUPONS dissevered from bonds may be sued on, 168. bear interest from demand and refusal to pay, 174. dissevered, have same qualities, as commercial paper, as instruments to which they were attached, 168. lien of, when detached from bonds, 174. COUPON BONDS how far negotiable, 158. not negotiable at common law, 158. but in America held negotiable, 164, 167. COVENANT, see Restraint or Trade, and Contract. CREDITOR outside of Stock Exchange not affected by rules of, as to his rights against debtor's property, 68. , otherwise as to seat of member, 68 ; see Seat. attachment by, how far binding on stock not transferred in form prescribed by corporation by-law, 374. ' fraud as against, see Eraud. DAMAGES measure of, see Measure of Damages. DAYS how counted in stock transactions, 280. DEALERS, 46. See Jobbers. DEATH generally revokes agency, 124. See Principal and Agent. DEBENTURES definition of, 147. of private company to bearer, how far negotiable, 161-163. DELEGATION of authority, by trustees, not permissible, 333. though authority to perform mere ministerial acts may be delegated, 334. no distinction as to, between naked power and power coupled with an in- terest, 336. INDEX. 429 DELIVERY definition of, as applied to transactions on Stock Exchange, 260. remarks of Mr. Benjamin on, 269. duty of vendor to deliver, 260. vendor bound to deliver shares free of liability for pre-existing calls, 267. manner of effecting, 49, 65, 266. usual mode, by giving certificate and power of attorney, 266, 267. by transfer and registration, 266, 283. regulated by custom of trade, 267. rules as to, in various Stock Exchanges, 266, note. must be of stock of exact kind contracted for, 261. must be with warranty of genuineness, 262. must be of certificates marketable at time of delivery, 265. broker may loan his own stock to customer to make delivery, 65. usage as to time of, 280, 281. through Clearing House, 56, 279. through Clearing House constitutes actual delivery, 61. through Clearing House hitherto not held good in Pennsylvania, 61, 307. contract for future delivery, 183, 301-309. unaccompanied by transfer, how far good against attaching creditors, 374,375. DEPOSITS, see Pledge. DETINUE will not lie against pledgee unless tender of advance first be made, 369. will lie for bonds and debentures, 391. DIFFERENCES settlements by, see Wager. DIVIDENDS, 176. discretionary with directors, 176, 181. after declaration of, are individual property of stockholder, 180. assumpsit lies for, by stockholder, 180. improperly declared, may be recovered back, 179. EQUITY OF REDEMPTION pledgeor's right to, on fraudulent sale of pledge, 349. ESTOPPEL pledgeor estopped as against bona fide transferee of stock, 153-155. now far company estopped by fraudulent use of its seal, 395. corporation bound by certificate of shares under its seal, 402-404. how far company bound by issue of certificate to person holding forged transfer, 404-4i2. innocent transferee of certificate protected, 412. how far company bound by entering name of person as stockholder on regis- ter, 406-408. EVIDENCE' parol evidence not admissible to overturn written contract by showing illegal intent, 319. ° but admissible to show writing only part of real contract, 319. of res gestae admissible to show whether or not transaction a gaming one, 319. EXECUTION on shares of stock, 391, 392. EXECUTORS power to sell or pledge securities of estate, 323-329. prima facie power to sell, 334. but not where long time has elapsed since decedent's death, 335. advances to, on securities of their estate, 324. advances on stocks, etc., in name of, 326-329. 430 INDEX. FEME SOLE TRADER how far she may contract, 78. may act as agent, if within line of her business, 77. power to contract limited by nature of her business, 80. competent to carry on business of broker, 77. in action by or against, husband generally joined, 78. PLAT, 71. FORGED CERTIFICATES authority of officers of company to affix seal wrongfully, 395. how far company estopped by forgery of transfer agent, 396-400. when agent armed with authority to issue certificates, his forgery binding on company, 398. where issued by agent, fraudulently, for benefit of company, the latter liable in any case, 398, 402. where issued by agent without authority, how far binding on company, 403. effect of forgery on parties acting bona fide, 403-412. duty of purchaser to examine transfer book, 404. FORGED TRANSFER title of bona fide transferee, 405. title of transferee purchasing on faith of new certificate, 407. FRAUD defined, 288. avoidance by reason of, 288. renders contract voidable only, 288. in pledgee's sale of pledge, 349. against creditors, by fictitious pledge, 373, 374. against creditors, pledge voidable for, under statute of 13 & 27 Elizabeth, 373, 374. in over-issue of stock, see Forged Certificate. FRAUDS, STATUTE OF, 194-206, 214. how far stock contracts in America are within, 200-204. how far parol sales of securities in America held to be within, 196, 197. held to embrace executory contracts, 196. what is a sufficient memorandum in writing, 205. agent duly authorized within, 206. how far 4th section, relating to interests in land, includes sales of stock, 214. GAMING CONTRACTS advances in, not recoverable, 112, 113, 115. advances in, distinction between void contracts and contracts voidable only, 115. 8 & 9 Yict. c. 109 against gaming contracts not pleadable in action for money paid at principal's request, 113. See, also, Wager. HYPOTHECATION. See Pledge. measure of damages for breach of contract of, see Measure of Damages. ILLEGAL CONSIDERATION pledge by vendor voidable for, 370. ILLEGAL CONTRACTS. See Contracts, Gaming Contracts, and Wager. INDEX. 431 INFANT cannot be stock broker, 76. INSOLVENCY of member of Stock Exchange, 50-52. See Seat. INSUBANCE FUND for members of Stock Exchange in America, 53. JOBBER definition of, 71, 132. not liable after transferee's name accepted by seller, 133-136. mode of dealing as member of Stock Exchange, 46. method of fulfilling his contract, 47. liability continues until acceptance of transfers by buyer, 134, 135. released from liability when name passed, 48. released, even though "man of straw" put forward as transferee, 136. not liable to vendor of shares for allowing the latter's name to remain on register, 223, 224. not responsible for passing name of ' ' straw man' ' as ultimate purchaser, 223-4. may sue principal when circumstances show credit not given to broker, 136. LAME DUCK, 71. LAND COMPANIES not within Mortmain Act, 212. LEAP-YEAR meaning of, 280. LETTER contracts effected by, 190, 191. LIEN definition, of, 118. generally attaches only on liquidated demands, 122. differs from pledge, 121, 354-357, 366. generally gives no right to sell, 119. is not transferable by person holding, 354-357. of broker, for advances, governed by law regulating banker's lien, 119,120,122. of broker cannot arise, where inconsistent with his contract with customer, 121. of corporation on its own stock, 176. right to, by a corporation under its charter, must be clear, 177, 178. no implied lien by a corporation in its own shares, unless proviso in charter, 176-178. of corporation on dividends, 179. LISTING STOCKS OR SECURITIES, 54. LONG, TO BE, 71. MAKING A PRICE, 71. MANDAMUS when it lies to compel transfer, 393. ' See Specific Performance. "MAN OP STRAW" defined, 71, 72. after acceptance of, vendor cannot except to, 223. See Jobber, and Vendor and Purchaser. 432 INDEX. MARGIN, 71. deposit of, 377, 378. keeping it good, 378. MARRIED WOMAN contract of, at common law, void, and incapable of ratification, 78. cannot be stock broker, 76. cannot bind herself through agent to carry-out executory contract, 79. may invest or Bell her own securities through broker, 79. may become principal in stock transactions to a limited extent with consent of husband, 79. may authorize agent, with consent of husband, to perform administrative act, 79. authorized by statute to transfer personal property, 79. may complete executed sale, 79. power to contract and carry on business if constituted feme sole trader, 78. See Ebme Sole Trader. MEASURE OE DAMAGES for breach of stock contract, 413-424. Where consideration has passed, value of stock at day of trial, 416, 417. highest intermediate value formerly favored in New York, 419. but lately qualified in that State, 420. highest intermediate value, distinction taken in New Tork, where consider- ation paid by agent of vendor and by vendor himself, 419. where consideration has passed, in other States in the Union, 422, 423. rule giving highest intermediate price generally abandoned, except where relation of trustee and cestui que trust exists, 416-419. Where no consideration has passed, difference between contract and market price, 414-416. distinction between sales of stock and other kind3 of personal property, 424. for breach of contract of pledge, 413-424. MEDIUM OP PAYMENT regulated by Stock Exchange, 283. MEMBERS of Stock Exchange, 50. See Stock Exchange, and Seat. MEMORANDUM of sale made by broker with jobber, 46. . what is a sufficient, see Frauds, Statute of. MINING SHARES how far within Mortmain Act, 211. See Mortmain Act. MISTAKE as to subject of sale, 192, 193. of customer, makes him responsible, 216. avoidance of contract by reason of, 288. of law, what constitutes, 289. MONEY selling for, 71. MONTH meaning of, 280. "MORE OR LESS" construed in special cases, 87-89. See Ambiguous Instructions. index. 433 moetgage of stock, 387. difference between, and pledge, 367, 387. MOETGAGE BONDS of railway and canal companies within Mortmain Act, 210. MOETGAGEE of stock, how far obliged to return identical shares, 387. MOETMAIN ACT test of its application to stock, 209. land companies not within, 212. applies to shares only where representing aliquot portion of land, 211. mortgages of railway and canal companies, how far within, 210. shares and securities not within, under later decisions, 208-210. how far the act applies to mining shares, 211. NAME DAY, 47, 72. NAME, PASSING A, 72. NEGLIGENCE in custody of seal by company, 395-400. company liable for, in issue of forged stock, 403, 404. See Forged Certificate. NEGOTIABILITY of securities generally, 148. See Negotiable Instrument. NEGOTIABLE INSTEUMENT can be sued on by holder, 148. negotiability in England held to depend on usage, 163. how far stock is negotiable, 156. stock held in America to approximate to a negotiable instrument, 155. scrip generally negotiable, 169, 170. scrip certificates for shares, how far negotiable, 171, 172. scrip exchangeable for government bonds held negotiable in England, 169. distinction between government bonds and those of public companies as to negotiability, 159, 170. as to specific performance, in contracts as to, distinction between government securities and bonds or stock of public companies, 239, 246, 252, 253. NEW YOEK special account day for government securities, 55. NOTE, 54. See Bought and Sold Note. NOTICE what constitutes reasonable notice, 350. determined by usage, 352. NOTICES under rules of Exchange, 281. NOVATION, 72. OMNIUM, 72. OPTION, 72. contracts for, legal, 309. to deliver gold coin and money, 311. 28 434 INDEX. OPTION— continued. held legal, 312. to deliver, not illegal, 300. to deliver or not to deliver, not necessarily illegal, 311. OPTION ACCOUNT DAY, 72. OPTION MONEY, 72. OVER-ISSUE liability of company for, see Fobged Certificate. PAROL CONTRACT within Statute of Frauds, in England, 194. See Fbauds, Statute of. PASSING A NAME, 47, 72. PAWNEE. See Pledgee. PAYMENT of price, 282. medium of, 282. how it must be tendered, 282. See Sale. PLEDGE, 322-400. defined, 322. distinction between, and lien, 354, 367. distinction between, and mortgage, 367, 387. right to make, 176, 323-330. avoidance of, 370. voidable from illegal consideration, 370. void for bad consideration, 371. made to secure pre-existing debt, how far good, 372, 373. voidable from fraud under statutes of Elizabeth, 370. void when made by one not having authority, 371. Who may pledge, 322-335. " persons whose powers are restricted, 322. power of corporations to, 82-84, 323. powers of executor to, 322. executor or administrator may usually pledge for purposes of estate only, 323-325. bailee with notice of fraud compelled to return security, 325. executor or administrator has no implied power to, when a long period has elapsed after decedent's death, 328. how far co-executors pledging must join, 329, 330. trustees primarily have no power to, unless expressly authorized by instru- ment, 331. by trustees, where several, must act jointly, 333. trustees cannot delegate authority to agent to pledge, 335, 336. stock broker cannot pledge principal's property to secure his own debt, 91. Formation of, 322-328. . manner of effecting, 338. subject-matter of, 337. what may be pledged, 337. of negotiable securities, how effected, 338. must always be delivered to pledgee, 888. if non-negotiable securities, how effected, 338. Effect of, 339-368. pledgee, how far bound to return identical shares deposited, 100, 384-387. under rules of London Stock Exchange, 101, 104. INDEX. 435 PLEDGE— continued. Effect of — continued. in America, 102-105. sale of, on failure to pay demand loan, legal, 66. of stock carried by broker, broken by pledgeor's failure to perform his con- tract, 376. Rehypothecation by bailee illegal, 91, 353-369. rehypothecation made penal in Pennsylvania by statute, 104. rights of sub-pledgees without actual notice, 326-328. assignment of, see Pledgee. PLEDGEE Powers and duties of. responsible for use of pledge, 341. responsible as ordinary bailee, 341. of shares of joint stock companies, liabilities of, 340, 341. holding legal title of shares, liable for calls, 340. holding legal title, liable for all obligations of stockholder, 340. may collect dividends and coupons and vote, 342. bound to account for dividend, 343. Rehypothecation by. how far bound to return identical security pledged, 100-104, 384, 385. return of identical securities, Langton v. Waite considered, 386, 387. termination of pledge by return of article pledged, 383. wrongful conversion by, terminates pledge, 362. may in England assign pledge, 356. right to sub-pledge, 353. review of general principles, 368. right to rehypothecate considered, 369. right to sub-pledge, how far upheld in America, 360-364. rights of sub-pledgee without notice, 326, 360-362. Sale by. right to sell the pledge, 343. hound to make demand on pledgeor to redeem, 350. bound to give reasonable notice of time and place of sale, 350. broker bound to notify customer of sale of stock carried for him, 379. reasonable notice of sale, 350. ' sale by, without the aid of court, 344. bound to sell publicly, 345. how far he may sell at Stock Exchange, 345. right of, to bid at sale of pledge, 347. sale by judicial process, 344. without entire possession of thing pledged, must always invoke court's aid to sell, 344. may stipulate for sale of pledge without notice, 858. safer to make special agreement to sell securities and purchase at sale, 348, 349. of commercial paper cannot sell, but must collect at maturity, 344. may proceed against debtor personally, 343. Advances by. what constitutes notice to, 350, 351. how far safe in loaning to executors, 325. advancing to executor for pre-existing debt of latter, party to fraud, 825. how far safe in advancing to trustees, 331, 332. bound to make inquiries of trustee, 331. taking certificates registered in name of trustee, put on notice, 332. of trustees should return deposit to both, 330. PLEDGEOR bound to convey good title to pledgee, 344. 436 INDEX. PLEDGEOR— continued. terminates pledge by tender of payment, 383. right to reasonable notice of sale, 346-350. entitled to notice of sale of stock carried for him, 379. bound to bear legal expenses of sale of pledge, 353. ■when pledge sold privately, how far equity to redeem exists, 349. may avoid sale of pledge, when bought in by pledgee, 347, 348. may maintain trover against pledgee for wrongful conversion of pledge by him, 362. can recover for special damage sustained by reason of rehypothecation, 369. rights of, as against sub-pledgee, 356. method of effecting pledge, see Pledge. powers of, when acting in a fiduciary capacity, see Exectttors, and Trustees. powers of corporations pledging, see Corporation, and Pledge. POOL, 73. POST contracts effected through agency of, 190, 191. POWER OP ATTORNEY to execute specialty, must be under seal, 269, 270. Executed in blank, how far good, 270-278. executed in blank, bad in England, 269, 270. in blank, usual method of transferring stocks in America, 81. executed in blank, valid in some American States, 274-277. invalid in others, 271. upheld by many later decisions in America, 276-278. executed in blank and filled up in presence of grantor, binding, 279. revoked by death of principal, 124-128. to transfer Bank of England stock, not revocable by death, 128. forged power of attorney, 404. See Forged Transfer. PRICE of securities sold at Exchange must be money, 193, 282, 283. PRINCIPAL AND AGENT who may become principal, 78. married woman, in certain cases, may become principal, with husband's con- sent, in stock transactions, 79. Agency, how created. authority may be given by parol, 81. how agency of stock broker created, 81. duly authorized within Statute of Frauds, 206. agency to execute unsealed instruments may be created verbally, 82. to authorize agent to bind principal by contract under seal, his agency must be created by seal, 81. otherwise, may be created verbally, 81. but when principal present when agent executes sealed instrument, authority from principal implied, 82, 279. corporation may appoint agent under seal or by implication, 82. Broker's relation to principal, when carrying stock, considered, 380, 381. customer principal of stock broker, 75, 76. regulations of Stock Exchange binding on principal without actual notice, 42. principal usually not disclosed by broker, 46. agent cannot act for both buyer and seller as principal, 90. broker can only bind principal within scope of authority, 96. pledge by factor of principal's goods held to be void, 105. INDEX. 437 PRINCIPAL AND AGENT— continued. Obligations of agent. agent must follow principal's instructions, 85. agent bound to act wholly in principal's interest, 227. broker liable to principal for violation of duty, 106. brokers or agents acting as government agents not personally responsible, 97-99. broker cannot delegate authority unless purely ministerial, 94. delegation of power where ordered to be executed abroad, 95. principal liable to broker for advances and disbursements on his behalf, 110. broker may recover differences he has been forced to pay by principal's de- fault, 111. sub-agent cannot retain debt due by agent employing him from sale of prin- cipal's securities, 91, 228. broker cannot recover advances in illegal transaction, 112. where broker guilty of negligence, cannot recover expenses, 111. principal making mistake liable to agent, 216. ambiguous instructions construed favorably to agent, 87. Dissolution of agency, 122. dissolution of agency by parties, 122, 123. dissolution of agency by operation of law, 123. agency not ipso facto revoked by death, where there is a power coupled with an interest, 128. generally revoked by death of either party, 124. acts of agents performed in ignorance of principal's death, 125. acts bona fide after principal's death valid in certain States, 126. lien of agent on principal's securities, see Lien. PRIVILEGED COMMUNICATIONS broker's communications with principal not privileged, 105. PURCHASE MONEY paid in London by broker to original seller, 47. PURCHASER liable for calls paid by broker, 218. PUT, 73. PUT AND CALL, 73. REASONABLE tests of what is, as applied to usages and rules of the Stock Exchange, 41, 42, 66. reasonable notice of sale, see Pledge, and Pledgee. RECEIPT how far demandable by purchaser, 286. RECLAMATIONS for irregularities in delivery governed by rules of various Stock Exchanges, 264, 265. REGISTRATION duty of parties to sale to effect, 282, 283. duty of buyer to make, 49. vendee responsible to vendor for failure to effect, 284. vendee not registering liable for future calls during his ownership, 285. REGULAR WAY defined, 73. 438 INDEX. EEHYPOTHECATION, 353-370. of stock carried for customer, 377. held illegal in several of the American States, 369. statute forbidding, in Pennsylvania, 91, 369. See Pledge. EEMEDIES for breach of contract of sale, 389, 390. against corporations for refusal to transfer, 393, 394. of creditors in rem, 391, 392. See Action. EESTEAINT OP TEADE how far contracts bad for, 290. limited as to time, 296. See Contract. SALE subject, how considered, 138. who can make, 183. contract of, 182. assent of parties as to subject of, 192. when recorded in books of Stock Exchange, 54. At Stock Exchange, 139. of stock at Exchange, really a contract to sell, 184. method of executing, 54. always of a thing in esse, 188, 189. by jobbers, 133-135. by broker, must be for money, 91, 193, 282, 283. and for cash, unless otherwise instructed, 92. for money, 45. for the account, 45, 55. for cash, 54. regular way, 54. where, in- London, no time mentioned, account day understood, 46. usually executory, 184, 234. executory, described, 187, 189, 230, 231. executory, vests no property in goods, until ear-marked, 233. executed contract of, vests property in buyer, 232. implied condition that article sold is genuine, but no warranty of value, 92. at future day, how far legal, 185. See, also, Gaming Contract, and "Wager. of goods not owned by seller, legal, 187. how far sales of securities embraced in Statute of Prauds, 196, 197. of shares not within Statute of Prauds in England, 197, 199, 200. of stock, in America, how far within Statute of Prauds, 200, 201. public, what constitutes, 345-347. at Stock Exchange, how far public, 345. acceptance of offer by mail, 190, 191. 1 as to powers of executors and trustees to sell, see Executors, and Trustees. by pledgee, see Pledgee. measure of damages for breach, see Measure as Damages. SCEIP, 73, 147. SCEIP CEETIPICATES how far negotiable, 168. of foreign bonds transferable by delivery by usage of brokers, negotiable, 169. SEAL effect of corporate seal on certificate of stock, see Porged Certificate. INDEX. 439 SEAT IN STOCK EXCHANGE assignment of, not good as against fellow-member of Exchange, 62. held subject to restrictions created by Stock Exchange, 53. subject to owner's debts to members of Stock Exchange, 50. may be sold on insolvency of member, 50. application of proceeds of insolvent's seat, 50. not subject to attachment, 68. of bankrupt member, proceeds of, distributed first among his creditors in Exchange, 51. distribution of proceeds among members only, legal, 67. by-laws of Exchange regulating distribution of proceeds of seat in case of insolvency, not a preference under Bankrupt Act, 51, 68. See, also, Stock Exchange, Seat in. SECURITIES when delivered, carry rights incident to them, 49. list of, kept at Exchange, 45. how called at Stock Exchange, 54. rules governing listing of new securities, 45. special account days for new securities, in London, 46. account days for, in London, 46. government, special account day for, in London and New York, 46, 55. non-current securities, 48. how far negotiable, see Negotiable Instrument. how far parol sales of, governed by Statute of Frauds, see Frauds, Statute or. SELLER'S OPTION, see Option. SELLING- FOR MONET, see Sale. SELLING OUT, 48, 73. SETTLING DAT, 45, 73. stock transferred on, 48. SET-OFF sub-broker cannot retain debt due by broker employing him from sale of principal's securities, 91, 228. SHARES, 73. See Stock. SHARE WARRANTS, 73. SHAVE, 74. SHORT SALES, 74. not illegal, 304. generally held illegal in Pennsylvania, 306, 307. SPECIFIC PERFORMANCE general principles regulating, 234-257. enforced as to specific chattels, 235. of stock contracts, enforced, where shares limited in number, 239. of executory contracts, 239, 390. distinction between government securities and shares of private corporations , as to, 239, 246. distinction drawn in America between government bonds and other securi- ties, 251-253. not enforced as to executory contracts, in early cases, 236. rule deducible from earlier authorities, 238. where executory contract has become executed, courts will award, 246. 440 INDEX. SPECIFIC PEEFOEMANCE— continued. to enforce executory contract, awarded in America, where remedy at law not entirely adequate, 250, 251. American cases as to, 246, 255. remarks on decisions on, 254. granted to compel issue of certificates to stockholder, 249. awarded to compel transfer to be permitted, and certificates to he issued, 249. bill for, will not lie against directors in a discretionary matter, 241, 242. how far directors compellable to approve of a transferee, 242. SPEEAD EAGLE, 74. STATUTE OP FEATJDS, see Frauds, Statute or. STATUTE OF MOETMAIN, see Mortmain. STOCK Defined, 140. shares of, are choses in action, 145. is not money, 391. though bequest of money sometimes passes, 141. generally personalty, unless made otherwise by statute, 142. where land in a company owned individually by shareholder, shares consti- tute real property, 144, 145. held to be "goods, wares, and merchandise" under Statute of Frauds in the United States, 146, 197-204. subject of larceny and felony, 146. subject to judgment debts and execution, 146, 181. holders of, no right to profits until dividends actually declared, 179. owner of, entitled on registration to vote, 175. preferred shares, 146. How far negotiable. shares of, in England, not negotiable, 149. shares of, in America, how far negotiable, 149, 154. approximates to negotiable paper, 155. Transferability of, 174. transfer of, usually under seal, 268. usual mode of transfer in America is by power of attorney in blank executed by principal, 81. how far transferee affected by fraud of transferor, 150, 151. agency to purchase, may he given by parol, 81. certificate of, see Certificate. corner in, see Corner. standing in name of executor or trustee, see Executor, and Trustee. of canal, treated as real estate within Mortmain Act, 207 ; see Mortmain Act. shares of, how pledged, see Pledge. obligation to return identical shares, when pledged, see Pledgee. carrying, 380-81 ; see Pledge. salability of, see Sale. See, also, Securities. STOCK BOOK register held only evidence as regards company, 375, 401. STOCK BEOKEE definition of stock broker, 33. who may be, 39, 41, 76. women may be, 76. married woman cannot be, 76. but feme sole trader may be, 77. originally agent for both parties, !J4. and incurred no liability, 37. INDEX. 441 STOCK BEOKEE— continued. licensed vocation, open to all, 39. remarks of Justice Brett on functions and liabilities of brokers in general, 35. difference between, and ordinary broker, 34, 35. remarks of Woodruff, J., on, 37. additional functions of stock broker in England and America, 34. of London, 39. effect of London Belief Act, 40. unless sworn, cannot in England recover commissions, but may recover ad- vances, though unlicensed, 118. in the United States, governed by statutes in the different States, 40. not necessarily member of Stock Exchange, 41, 76. admission to Stock Exchange, 45. if member of Exchange, affected by rules of, 41. Duties of, towards customer. liability to custdmer, 106. how far he may act as agent for married woman, 80. , acting for feme sole trader, does so prima facie at his own risk, 80. in transactions for principal, all profits belong to latter, 90. bound to use reasonable skill and diligence, 100. bound to avoid unnecessary expense, 100. bound to keep accounts, 100. liable for deviating from principal's instructions even if done with intent to benefit principal, 85, 86. where misled by ambiguous instructions, excused, 86, 87. See Ambiguous Instructions. when authorized to employ sub-agent, not responsible for latter's mistakes, 95. not liable for refusing to commit illegal transaction, 100, 106. cannot act for both buyer and seller without notifying parties, 34, 65, 90. when employed to sell, cannot buy from principal, 90. cannot act as both jobber and broker, 46. cannot have interest adverse to principal, 89, 227. entrusted with the possession of principal's property, 34. stock broker may receive property purchased and deliver property sold, 35. Might to make sale, 183. must sell for cash unless otherwise instructed, 91. no authority to sell, except for money, 193, 282, 283. with general authority to sell, may bind principal by sale at reasonable price, 92. may receive payment on behalf of principal, 91. principal may sue on contract made by agent, 131. Liability of principal to, 107. may recover loss incurred by principal's default, 111. cannot recover advances made in illegal transaction, 112. carrying stock, relations of, to customer considered, 380, 381. may loan shares or purchase money to customer, 65. Dealing with trustee, 84, 323-335. taking check or draft drawn by trustee, 337. not safe in receiving trust moneys in payment, 337. Relation to third parties, 129. stock broker a principal as to third parties, 35. brokers primarily liable to each other on Stock Exchange contracts, 96, 130. when making contract in his own name, may sue, 35, 37. may recover disbursements and advances made on principal's behalf, 110. no right to hypothecate principal's securities, 90, 91, 353-368. but may rehypothecate stock bought for a customer on margin, 362. See, also, Pledge. how far bound to return identical shares hypothecated with him, see Pledgee. 442 INDEX. STOCK BROKER— continued. Relation to third parties — continued. should register stock whether as purchaser or as bailee in his own name, 411. deals with jobber as principal, 46. defaulting in delivery, compelled to pay increase in price on shares bought in, 48. creditors of, affected by rules of Stock Exchange, 66. dissolution of agency for customer, 122. See Principal and Agent. in relation to Stock Exchange, 45 ; see Stock Exchange. right to commissions, see Commissions. for delivery by, see Delivery. STOCK EXCHANGE definition of, 40, 43. history of, 44. character of principal Stock Exchanges, 49. who may become member of, 41, 76. of London, 44. of London, constitution of, 44. method of dealing in, in London, 46. definition of, in America, 49. origin of, in America, 49. origin of, in Philadelphia, 49. in America, method of dealing in, 53. Seat in. admission of members of, regulated by rules of, 53. purchase of seat, 50. vested interest in seat, 50. proceeds of seat in, in America, pass to executor, 50. member must be elected, 50. admission of members to, in England, 45. conditions of election of member, in England, 45. member has no vested interest in, in London, 45. See, also, Seat in Stock Exchange. By-laws and usages of. by-laws of, validity of, 51. by-laws of, binding without notice on each member, 67. members how far legally bound by, 65. usages of, binding on members, 41. rules of, how far binding on non-members, 66. rules of, binding on outsider employing member of, 66. non-member dealing through member, affected by usages of, 41. rules of, must be reasonable, 66. rules of, cannot give creditor in Stock Exchange general priority, against Bankrupt Act, 69. rules of, cannot vary broker's relation to outside creditors, 132. customs of, often evidence of commercial usage, 41. how far sale at, constitutes a public sale, 345. sales at, see Sale. insolvency of members, 50-52 ; see Seat in Stock Exchange. STOPPAGE IN TRANSITU, 261. STRADDLE, 74. SUB-PLEDGE, see Pledge. SUNDAY when delivery falls on, made on preceding day, 56, pledge made on, voidable, 370, 371. index. 443 telegraph contracts effected by, 191, 192 ; see Contract. TENDER, 282 ; see Payment. 1ICKET, 74. how passed to selling broker, 47. TICKET DAY, 47, 74. See Name Day. TIME days, how counted, 280. last hour for delivery, 280. in stock transactions, generally fixed by regulations of different Stock Ex- changes, 281. construction of word " month," 280. of " leap-year," 280. when fixed by a contract, usually binding in stock transactions, 279. TRADE restraint of, see Restraint of Trade, and Contract. TRANSFER must, in England, be registered by buyer, 49. acceptance of, in one mode, by broker, waives right to insist on transfer in any other, 281. of negotiable instruments, 148. made without surrender of certificate, held good, 153, 376, 401. how far production of stock and certificate necessary to, 153, 375, 401. of stock usually under seal, 268. when not effected under by-laws of corporation, how far good against attach- ing creditors, 374. remedy for refusal to, by corporation, 393. right of company to impose restrictions as to, 393. right of owner of stock to, 174. under seal, executed in blank, how far good, 269-278 ; see Power of At- torney. of forged certificates, 396 ; see Forged Certificate. TRANSFEREE when passed by jobber, must be sui juris, 136. name of ultimate transferee delivered to jobber with price, 47. selling broker, how far bound to accept, 47. not bound to show title of transferor in order to effect transfer, 394. of scrip certificates of bonds, 169-172. of stock, as to title of, see Negotiable Instrument. of stock, by forged transfer, see Forged Transfer. TROVER held in some States to lie for shares, 391. held to lie against pledgee on rehypothecation to latter, 369. will not lie against pledgee unless tender of advance first be made, 362, 369. "TRUSTEES no implied power to pledge, 331. cannot delegate power to pledge, 333. when authorized to pledge, must act jointly, 333. no implied power to sell, 331, 332, 335. person making advances to, is affected with notice of contents of instrument creating trust, 332, 333. in selling, all must join, 335, 336. cheque by persons acting as, how far broker safe in receiving, 337. power to buy securities other than those authorized by statute depends upon trust deed, 84. 444 index. ultimate buyer, 74. ultimate purchaser, 74. ultimate transferee, 47. See Transferee. USAGE of Stock Exchange, how far binding on persons dealing with and through stock brokers, 215, 219, 220. generally binding on person dealing on Stock Exchange even if ignorant of it, 225. what constitutes unreasonable, 226, 227. - of sub-broker to deduct debt due him by broker from sale of his principal's securities, bad, 91, 228. evidence of, admissible, unless opposed topublic policy, 225. distinction between rules binding on members and third parties, 226. new rules made by Stock Exchange after contract, not binding on third parties, 225. of trade as to payment, 91. of Stock Exchange, as to time, binding on outside parties dealing through it, 217, 218. regulates mode of making delivery, 267. as to notice, see Notice. See, also, Stock Exchange. VENDOR AND PURCHASER, 230. vendor need not have possession of goods contracted to be sold, 187. what vendor must deliver, 260, 261. what parties contracted to buy and sell, question for jury, 263, 264. vendor's duties in making delivery, 267. how delivery effected, 55, 266. vendor must transfer usual evidence of title, 266. vendor warrants title, but not intrinsic value, 262. buyer may demand certificates of 100 shares each, 55. where " man of straw" put forward by jobber, vendor bound, unless he object at time, 136. duties of vendee as to registration, 283. • vendor need not place vendee's name on register unless required, 266. either party may demand transfer by registration, in Philadelphia Stock Ex- change, 55. vendee bound to register if required, 283. vendor may deliver power of attorney to transfer with certificate, 55, 266-269. vendee may demand actual transfer, in New York or Philadelphia Stock Ex- change, 55. purchaser bound to accept and register name if required, 283. vendor, when bound to guarantee power of attorney, 55. vendor liable for delivering forged certificate, 262. how far vendor bound to give receipt, 286. purchaser may buy from executor, unless a long time has elapsed since de- cedent's death, 328-335. See Executors. effect of failure to register upon delivery, see Delivery. trustee has no implied power to sell, 33i-333 ; see Trustees. VOTING privilege of, passes to transferee, 175. WAGER not bad at common law, 297. statutes relating to, in England, 298. INDEX. 445 WAGER — continued. Sir John Barnard's Act, 298. held vojd in America, 297, 298. cases on/~in the United States, 299-318. Pennsylvania cases on, 305-308. general principles as to validity of stock contracts, 318. where contract mere cover for gaming transaction, illegal, 318. whether contract merely cover for gaming transaction, question for jury, 313, 318. test of what constitutes, applied in early cases, 299. how far sale for future delivery is, 185, 303. contract of sale held valid where delivery contemplated, 318. contract not illegal because no manual delivery intended, 303. short sale, where actual delivery not contemplated, not illegal, 304. question of intention to deliver, for jury, 313. See, also, Gaming Contracts. WARRANTY of genuineness of things sold hy broker, 262. no warranty on sale of stocks on Stock Exchange, hut condition that article sold is genuine, 94. vendor does not warrant that securities are properly or legally issued, 262. vendor liable for delivery of forged certificates, 262, 263. question of genuineness, one of fact for jury, 263. WASH, 74. WASHING illegal, 90. WOMEN may be stock brokers, but never yet admitted as members of Stock Exchange, 76. See Married Woman, and Feme Sole Trader. THE END. Date Due Library Buraai Cat. No. 1137 TCP 1071 B 58 Vol. Biddle, Arthur, I852-I897 Titk A treatise on the law of c opy stock brokers. Borrower's Name ill iiiililiiilll II- ■II si III ll 11 II I llil HIIHHHHI I Si: I! li II i i I i I liiiii! 1 i ii ii it! i iiii ii i f , H I »! ijjjjn Hi 1 " IH I