Noyes v. Spaulding

27 Vt. 420

• Court: Supreme Court of Vermont
• Decided: February 15, 1855
• Status: Published

Opinion

The opinion of the court was delivered by

Isham, J.

The questions in this case arise on exceptions, and also on a petition for a new trial. The bond in suit was given on the 21st day of August, 1848, conditioned for the, payment of fifteen hundred dollars on the 21st day of August, 1851, for which payment, the plaintiff was then to deliver to the defendant twenty shares of the stock of the Vermont and Massachusetts Railroad Company.

To sustain this action, the plaintiff must have performed the conditions of the bond on his part; for the delivery of the stock, and the payment of the money are concurrent acts, and neither can sustain an action without showing a performance, or a readiness to perform on his part, or an excuse for non-performance. It is insisted, that this action cannot be sustained, as the plaintiff has not transferred the stock for which the bond was given. It appears in the case, that on the 6th of February, 1850, the plaintiff held the certificate, and was the owner of twenty shares of the stock mentioned in the bond, and that by the terms of the certificate, they were transferable on the books of the corporation, subject to the provisions of the charter, and the by-laws of the corporation. It also appears, that on the 21st of August, 1851, the plaintiff transferred to the defendant that certificate of stock, with power to perfect a full transfer of the stock to himself, on the books of the corporation. We are satisfied, that the tender of that certificate, with that assignment, was, in that particular, a sufficient performance of the contract on his part. The Vermont and Massachusetts Railroad Company was incorporated by an act of the legislature of Massachusetts. The validity of the transfer of its stock is> therefore, to be determined by the laws of that state. The statute of that state, to which the charter of this company is made subject, provides, that the capital stock of any railroad corporation shall be personal estate ; that it may be transferred by any conveyance in writing recorded in books kept by the corporation for that purpose, and that no conveyance shall be valid against any other person than the grantor, and his representatives, unless so recorded. As against tho grantor, the transfer is valid, and vested the title of the stock in the defendant, though not recorded in the books of the corporation. That provision is similar to the statute in this state in relation to the transfer of real estate; under which, it has uniformly been held, that the title passes to the grantee, as between the parties to the conveyance, though the deed is unrecorded. The authorities on this question are very decisive, that when a party assigns all his interest in the shares of a corporation, surrenders his certificate of stock, and executes a power authorizing the vendee to transfer the shares in due form on the books of the corporation, the title vests in the person to whom the stock is transferred. The object of having the transfer recorded on the books of the corporation is notice, and that is the only object. For that reason the transfer, though unrecorded, is good against the party and all those who have notice in fact of the transfer. This doctrine has been held in several states, and by the supreme court of the United States. Union Bank v. Laird, 2 Wheat. 390. Plymouth Bank v. Bank of Norfolk, 10 Pick. 454. Sargent v. Franklin Ins. Co., 8 Pick. 90. Eastman v. Fiske, 9 N. Hamp. 182. Union Bank v. Smalley, 2 Cowen 770. U. States v. Vaughan, 3 Binney 394. Thompson v. Alger, 12 Met. 442. In Connecticut a different rule has been adopted. In the case of Northrop v. Bridgeport T. Co., 3 Con. 544, it was held that an actual registry in the books of the company was necessary to pass the title, and that the registry is the originating act in the change of title. Oxford T. Co. v. Bunnell, 6 Conn. 552. That doctrine is not, however, regarded as sustained by the general current of authorities. The stock, while standing in the name of tho plaintiff, was probably subject to any attachment at the suit of his creditors, if they had no notice in fact of the transfer, but no difficulties of that character exist in the case. We think, therefore, the defendant obtained a good title to the stock by that transfer and tender of the certificate, and it was competent for him, on the surrender of that certificate, to make a valid assignment on the books of the corporation and receive therefor a new certificate of the stock to himself. "When certificates of shares are given to a purchaser, they are analogous to the sale of chatties. And the assignment and delivering of the certificate is a symbolical delivery of the shares themselves. Howe v. Starkweather, 17 Mass. 243. Sargent v. F. Ins. Co., 8Pick, 98, 9. That being as complete a delivery as the subjept matter admits ofi a title to the stock passed by the tender of the certificate, and the defendant’s refusal to receive it, leaves the certificate in the hands of the plaintiff as the trustee or bailee of the defendant. 2 Kent’s Com. 741 note (b.)

It is contended, however, that the plaintiff cannot recover, as he did not transfer or tender to the defendant, the identical stock which was transferred to th 3 plaintiff on the 21st of April, 1848. On that subject it is sufficient to remark, that it does not appear from any fact stated in the case, that the plaintiff was to keep and re-transfer the same stock at the expiration of three years, and certainly no such provision is contained in the bond. We cannot regard the contract, therefore, as containing, any such provision. In the case of Frost v. Clarkson, 7 Cowen 24, it was held, that a contract for the sale of shares in an incorporated company at the end of sixty days, was not rescinded or rendered inoperative by a gale of a portion of the stock which he then had, intermediate the contract and time of sale. The court observed, “ that though the “ parties might buy and sell a thousand shares of the same stock, “ and though they might not have had a single share one day after "the contract was made, it does not follow that they could " not have fulfilled their contract at any time on demand.” The same point was decided in the case of Shales v. Seignoret, 1 Ld. Raymond 440. The certificate of stock in this case stands ©n the same footing, and is of equal value, with that sold by the defendant to the plaintiff in 1848. There is no reason, therefore, in treating that contract as having been rescinded or rendered inoperative by a sale of that stock.

A11 objection is also made to the plaintiff’s recovering in consequence of the subsequent issue of various shares of stock at a less nominal value per share, than that which had been previously issued by the company. It is insisted, that its effect is to depreciate and change the character and value of the whole stock issued by the company, and render it different from that for which the contract was made. It appears from the case, that such stock was issued by the company after this bond was executed, and before the transfer and tender of the certificate was made. The right of the corporation under their charter to issue that stock has not been disputed. The contract provides for a given number of shares in the Vermont and Massachusetts II. Co. It specifies the time when it was to be transferred and the sum to be paid for it. The certificate which was assigned to the defendant was given to the plaintiff before the vote of the corporation creating that stock was passed. If any difference is made in the dividends of the company, this stock has the benefit of it. But if no difference is made, and the stock of both issues share alike in the dividends, it will not, we think, affect the liability of the defendant on this bond. When the defendant agreed to become the purchaser of this stock, and to receive a transfer of it on the 21st day of August, 1851, he assumed it, subject to the provisions of the charter of the company, and to the exercise of such corporate powers as should be deemed necessary by the directors. The issue of that stock will no more constitute a defense to this suit, than it would, if an original subscriber to the stock were sued for assessments, when no act had been done by the directors, but such as was within their corporate powers. For the same reason, the liability of the defendant on this bond is unaffected by the mortgage of the road and its property for the security and payment of the debts of the corporation. The purchase of the stock was made subject to the exercise of that right, as being within their corporate powers and duty. Boody v. R. & B. Railroad Co., 24 Vt. 662.

It is also insisted, that this bond is void; that no recovery can be had upon it, on the ground that the contract for which it was given is illegal as being a stock jobbing contract, and that all contracts for the sale of stock on time are, in effect, wagers on what will be the value of the stock at the time it is to be transferred. This objection is taken on the' authority of Collamer v. Day, 2 Vt. 144, in which it was held, that all contracts in the nature of wagers are illegal, and cannot be enforced in this state. At common law, with some exceptions, the rule was recognized as being otherwise. The case of Collamer v. Day has, however, never been questioned in this state, and we feel no disposition to do it. Contracts for the sale of stock of this character on time are valid at common law, and can be enforced by action. The statute 7 Geo. 2, Ch. 8, made perpetual by 10 Geo. 2, Ch. 8, has rendered some contracts of that character illegal. They are rendered void so far as the public stocks of that country are concerned, when the seller had no stock at the time of making the contract, and none was ever intended to be transferred by the parties, but their intention was to pay the difference merely that may exist between the market value of the stock at the time of the transfer, and the price agreed to be paid. Such contracts are rendered void by that statute, and are treated as wagering contracts; “ the seller virtually betting that the stock “will fall, the buyer, that it will rise.” Chitty on Bills 112, note (w). It has been held, that railroad stock is not within the act; Hewett v. Price, 4 Man. & Gran. 355. 3 Railway Cas. 175. Fisher v. Price, 11 Beav. 194. In the case of Mortimer v. McCullon, 6 M. & Wels. 69, Ld. Abinger observed, “that the act “ was made for the purpose of preventing what is declared to be “ illegal trafficking in the funds by selling ficticious stock merely “ by way of differences; but it never was intended to affect bona “fide sales of stock.” Ellsworth v. Cole, 7 M. & Wels, 30. 2 Kent’s Com. 468 note (b). In the ease of Grezewood, v. Blanc, 20 Eng. Law & Eq. Rep. 290, it was held, that a colorable contract for the sale of railroad shares, where no transfer is intended, but merely “ differences,” amounting to the rise or fall of the market, it is gaming within the 8 & 9 Vict. Ch. 109, § 18. 11 Common Bench R. 538. Whether a contract that would be rendered illegal by 7 Geo. 2, or the statute 8 & 9 Viet, would be treated as void in this state, on the authority of the case of Collamer v. Day, we are not under the necessity of deciding, as we are satisfied that this case has none of the elements of such a contract. The plaintiff in this case was the owner of the stock long before the time it was to be transferred; an actual transfer of stock was not only intended, but made on the day specified so as to vest a title to the same in the defendant, and the suit is now brought, not for differences on a'ficticious sale, but for the price agreed to be paid on the transfer of the stock. That such a sale and contract is legal, we have no doubt. Under the late English cases, the doctrine seems now well established, “ that when a man sells stock of which “ he is not possessed, and afterwards buys it, and transfers it to “the vendee, he may, notwithstanding the statute, maintain an “ action for the price.” Byle on Bills 194. Mortimer v. Mc Cullan, 7 M. & Wels. 20. 9 M. & Wels. 636. 6 M. & Wels. 58. 2 Kent’s Com. 468, note (b). In this country such sales of stock have been frequently sustained. Frost v. Clarkson, 7 Cowen 29, Eastman v. Fisk, 9 N. Hamp. 182. Thompson v.Alger, 12 Met. 428. Gilchrist v. Pollock, 2 Yeates 18.

In the case of Bryan v. Lewis, Ry. & Moody, 386, it was held by Lord Cn. J. Abbott, “ that if a man sell goods to be delivered “ at a future day, and neither has the goods at the time, nor has “ entered into any prior contract to buy them, but means to go into “ the market and buy the goods which he has contracted to deliver, “ he cannot maintain an action for damages for non-performance “ of the contract.” The same doctrine had previously been ruled by the same judge, in the case of Lorymer v. Smith, 1 B. & Cres. 1. In relation to those cases, however, it is sufficient to observe that, that doctrine has never been subsequently recognized in the English courts; but, on the contrary, those cases have been directly overruled in the exchequer, by the cases of Hibblewhite v. McMorin, 5 M, & Wels. 462, and Mortimer v. Mc Cullen, 6 M. & Wels. 75. We think, therefore, that the plaintiff is entitled to recover on this bond, the price stipulated to be paid for the stock which was transferred to the defendant, on the 21st of August, 1851.

The exceptions are overruled, and the judgment of the county court is affirmed.

In relation to the petition for a new trial, we think, it must be dismissed. As a general rule, to sustain such an application, it must appear, not only that injustice has been done, on the trial of the case, but that there has been no want of diligence on the part of the petitioner; and in no case, will the court exercise that power, unless there is a reasonable certainty that the subject matter, on which the application is founded, will, on another trial, produce a different result. Middletown v. Adams, 13 Vt. 285; Beckwith v. Middlesex, 20 Vt. 593. Assuming that there has been no negligence on the part of the petitioner — that the facts stated in the petition were omitted from the statement of the case by accident and mistidce, and that it is competent for the court to exercise that power, where the case is made by the agreement of the parties, and in which they have stipulated that the facts so stated, “ is the “ case and the whole case, the truth and the whole truth, and that “ no other evidence shall be allowed,” still, we think, a new trial should not be granted, as the same judgment must have been rendered, if the facts stated in the petition had-been made part of the case.

The union of the Vermont and Massachusetts Railroad Company with the Brattleboro and Fitchburg Railroad Company was effected on the 4th of June, 1851, after these bonds had been given, and before the stock was to he delivered. It is unnecessary, in the disposition of this question, to inquire what effect the union has had upon the value of the stock of these different companies, or whether the franchises and property of the latter have become the property of the former company. It will be perceived that, by the charter of the Vermont and Massachusetts Railroad Company, a union of that kind was contemplated and allowed. A specific provision for that purpose was granted to that corporation, in their charter. In forming that union, that corporation was only exercising its corporate powers, subject to which, the stock was taken by the original subscribers. When the defendant gave his bond to purchase and receive twenty shares of the Vermont and Massachusetts railroad stock, and bound the plaintiff by his bond to transfer it to him, he assumed the obligation of the purchase, subject to the exercise of that right by the company, — for it was the exercise of a corporate power, which they had at the time, and previous to the execution of this bond. Those who were stockholders in that company before the union, remain stockholders in the company since they have become united. The company axe acting under the same charter, they axe in the enjoyment of the same franchises, and are only exercising an extended power, subject to which the whole stock of the company is held.

We do not perceive that any such provision is made in the original charter of the Brattleboro and Fitchburgh Railroad Company. The power to make that union was given to them by their amended charter, granted in 1849, after these bonds were given. If this bond had been given for the transfer of the stock of that company, different questions would arise from those which are now presented. But it is not competent for the stockholders of the Vermont and Massachusetts Railroad Company to urge objections, which might be proper when taken by the stockholders of the Brattleboro and Fitchburgh Railroad Company; for, by becoming stockholders in the Vermont and Massachusetts Railroad Company, or purchasers of its stock, they have assented to the provisions of that charter, and to the exercise of all their corporate powers. The union of these companies, it is stated, was effected without any agency or participation of Mr. Noyes, and the certificate of stock which was assigned to the petitioner, was given before that union was formed. The petitioner, therefore, stands on the same footing, and the shares which were transferred to him are no more affected by that union, than are the identical shares which were transferred by him to Mr. Noyes, on the 21st of August, 1848. If the union of the companies was legal, the petitioner has no legal ground of complaint, for it was one of the contingencies of his purchase. If the act was illegal, and an unlawful exercise of authority, by the directors, it is a matter which may be resisted by the petitioner, as one of the stockholders of the company. In either event, it will be no defense to this suit.

The petition must be dismissed, with costs.