Smith v. Becker

109 N.W. 131, 129 Wis. 396, 1906 Wisc. LEXIS 78

• Court: Wisconsin Supreme Court
• Decided: October 9, 1906
• Status: Published

Opinion

KbewiN, T.

The first proposition discussed by appellant is that there was no sale of any of the stock of the plaintiff, but simply a pretense of sale. The court below found there was a sale, and -the question presented under this head is whether there is sufficient evidence to support the finding. This branch of counsel’s argument is classified under two heads: (1) That Vermilye & Co., who were agents for the sale of the stock, retained 700 shares thereof, representing it as sold, and at some date, not ascertained, transferred it to defendant Becher. (2) That as the 842 shares were a part of an indistinguishable mass of stock held by the bank, included in which were shares belonging to the bank itself, when the bank made a sale without any designation as to which stocks were sold, as a matter of law this effected a sale of the bank’s, own stock, and the representation made a few days later that the plaintiff’s stock was sold cannot affect the situation.

1. The argument as to the 700 shares is that they were-transferred to the clerks of Vermilye & Oo. and immediately indorsed by such clerks and returned to Vermilye & Oo., and that the clerks had no interest in them, but that they remained the property'of Vermilye & Oo., and stood on the books in” the names of such clerks, and were afterwards transferred by Vermilye & Co. to defendant Beclcer. Vermilye &• Co. had two certificates of stock from the bank for sale — one-No. A-504 for 500 shares, and one No. A-506 for 2,477 shares. The 500 shares were on April 27, 1895, transferred to L. A. Miller, a clerk of Vermilye & Co., who indorsed and returned them to Vermilye & Co. The 2,477 shares were with the approval of the bank transferred by Vermilye & Co. into twenty-five certificates in the names of their clerks, and two of these certificates for 100 shares remained in the names of the clerks of Vermilye & Co. So, it is claimed that these 700 shares remained unsold in Vermilye & Co.’s hands. Ver-milye & Co. reported, in obedience to telegrams to sell, the sale of the 700 shares remaining in the names of their clerks, and were debited for the proceeds of such sales in connection with 842 shares sold between April 27 and June 20, 1895. On the transfer of the 500 shares to L. A. Miller, certificate No. A-504 was surrendered and certificate No. A-727 for the same amount issued to L. A. Miller. The 500 shares and the 200 shares transferred to Vermilye & Co.’s clerks were accounted for at market prices on the dates sales were reported as made. No transfer on the books of the Western Gas Company of these 700 shares was made, but on report of sales from Vermilye & Co. the bank charged the amount to Vermilye & Co. and credited the amount upon the plaintiff’s indebtedness, to which the '/'OO shares of stock were collateral. .While some point is made by appellant as to the stock being sold or reported sold upon a rising market, we are unable to find from the evidence, which is voluminous, th'at any of the sales were made below the market price on the days sales were reported as made. But the adequacy of price is not questioned; the point is: Was there a sale of the 700 shares ? The point of contention is that, because the 700 shares remained in the names of the clerks of Vermilye & Co. and such clerks appearing to have no interest in the 'stock, there was no sale. But upon the record we think this conclusion does not follow. It appears from the evidence that it was the custom on the stock exchange in New York to make sales in the manner shown by the proof in this ease. It also appears that it was customary to split up certificates into small lots and indorse them in the way these were indorsed, in order to put them upotí the market'to advantage. The testimony is that, in dealing in stock on the New York exchange, the stock must be indorsed, before it is good delivery, by some member of the stock exchange or by some one having a membership; then it passes as a good delivery from house to- house. The reasons for such indorsement are given in the evidence. After such indorsement the certificate passes current. The evidence is that buying and selling is done in the names of brokers or their clerks, although in the meantime the stock is passing from one owner to another, and finally returns to some client of the first broker, in whose name, or in the name of whose clerk, it is. The custom is for brokers to deal in their own name and not disclose their principal. This appears to be the custom in New York on the curb and in the stock exchange, and there is nothing in the evidence tending to show that the course pursued by the brokers, Vermilye & Oo., raised any presumption that they did not sell the stock in the usual manner and according to .the custom of brokers. 23 Am. & Eng. Ency. of Law (1st ed.) 125, 726, 775. The evidence does not show that there was any continuous ownership of these 700 shares in one person from the time of sale, April 27, 1895, until the time defendant Becker got the stock in 1902, but shows that the certificates were current on the market, duly indorsed, and sales of them reported to the bank by Vermilye & Co. according to the custom of doing business on the stock exchange, and the proceeds of each sale placed to the credit of the bank by Vermilye & Co. The court below found

“that for each and every one of said sales said Wisconsin Marine & Eire Insurance Company Bank received cash at the time of said sale to the amount of the proceeds of said sale, and such sale was so consummated by payment in full to the said bank, and by the broker, or broker’s clerk, in whoso name tbe certificate stood, delivering tbe same to tbe purchaser either by an actual manual delivery then and there, or by bis becoming, by agreement and understanding with the purchaser, from thenceforth the bailee of the purchaser. And the court further finds that such mode of sale was in contemplation of the parties to said contract of pledge, who were familiar with transactions in that kind of property, and was the best and most advantageous method of disposing of this particular property.”

In view of this proof of custom and the transactions between the brokers, Yermilye & Co., a reputable firm, and the bank, it cannot be said that the brokers were guilty of a breach of their engagement with the bank in violating the trust reposed in them. The court below was, at least, warranted in drawing such inference. The fact that the 700 shares remained upon the books of the Western Gas Company, while under some circumstances it might tend to prove title, is not sufficient to overcome the inferences of sale which may legitimately be drawn from the whole evidence produced. There is no proof whatever that defendant Becker purchased at the sale by the bank through' its brokers, and the fair inference is, upon the whole record, that defendant Becker bought on the market at some time subsequent to the sale by the bank, and that Yermilye & Co. sold through brokers who did not in all cases disclose the name of the purchaser, and in this way the stock was permitted, as appears from the evidence to be customary, to remain in the name of parties other than the real owners. One witness testified:

“We never in any of our books, in stock transactions, have any other name entered as buyer except the name of the outside broker — the sales are made on the stock exchange. These sales in question were not listed stock, but curb stock, so called, but the same rule applies — curb brokérs just the same.”

Counsel for appellant makes a point on the fact that defendant brought from New York the brokers’ bookkeeper and that he produced the only book he was instructed by defendant Becher to bring. This was a credit cash-book showing the credit items in the cash account of Vermilye & Co., i. e. representing the credits that Vermilye & Co. gave to the Wisconsin Marine & Fire Insurance Company Bank, which were entered as if sales of stock had been made. The evidence shows that Vermilye & Co. kept a purchase and sales book which was not produced, respecting which the witness testified:

“That book will not show the date.of the transaction, the name of the person, and the amount involved. It will show simply the date, the name of the person, number of shares, and price.”

There is nothing in the evidence indicating any attempt to suppress evidence on the part of any of the defendants, and nothing to show but that the plaintiff might have obtained such book or any other evidence in possession or under control of the defendants or Vermilye & Co. We cannot think there is anything in the evidence to warrant the inference that, if this book referred to. had been produced, it would have shown any transaction unfavorable to defendants. Doubtless it would have shown that in some cases sales were made through brokers and the names of the purchasers not disclosed.

It is also claimed by counsel for appellant that only non-dividend-paying stock passes current without transfer on the books to the purchasers, and finally returns to the firm from whom it was originally transferred. But there is evidence that stock paying dividends passed this way, and that the dividends are paid to the person in whose name the stock is at the time of payment, although not the real owner. The transactions usually and ordinarily accompanying a sale of this character seem to have been quite fully xoroved. Ver-milye & Co.- were authorized to sell. They reported sales in compliance with such authorization and credited the bank with the proceeds, and the bank likewise debited them. The stock was parted with and passed from the possession and control of tbe bank. From transactions proved both the bank and Vermilye & Go. understood there was a sale. The plaintiff was credited upon his indebtedness to the bank with the proceeds of such sales, and notified that the sales had been made, stating date, price, and credit given to him, all of which he assented to. This seems to constitute, at least in the absence of any evidence to overthrow it, quite formal proof of a sale, and is sufficient under the authorities. 1 Meehem, Sales, 4, 218; Skiff v. Stoddard, 63 Conn. 198, 26 Atl. 874, 28 Atl. 104; 1 Cook, Corp. (4th ed.) §§ 331, 334. It is said by counsel for appellant that all these things may be sufficient to show that there might have been a sale, but they do not show a sale. We think they are sufficient to warrant the court in finding a sale upon the evidence in this case.

2. The appellant further contends that the evidence establishes an agreement between the pledgee bank and the three pledgors to keep the stock of each separate, and that this agreement applied to the stock of the Western Gas Company which belonged to plaintiff and was claimed to have been sold in May and June, 1895. The original note given by plaintiff, Weil, and Montgomery was a joint note and secured by the stock of the Milwaukee Gas Light Company. This note, however, was taken up and three notes given — one by Weil and one by Smith for $126,000 each, and one by Montgomery for $126,100. Each of these notes was indorsed by the other two makers, so that, while the indebtedness was separated, each continued liable for the whole debt, and the Milwaukee Gas Light Company stock was, with the approval of plaintiff, Weil, and Montgomery, sent to New York to be exchanged for Western Gas Company stock. The letter of advice by the three pledgors to the pledgee at this time directs how the stock shall be apportioned, according to which Weil was to receive stock to the par value of $126,142, Smith $120,766, Montgomery $120,892, Eerguson $50,000, Johnston $50,000, and Murphy $10,200. But, as has been seen, when the Western Gas Company issued its certificate for tbe Milwaukee Gas Light Company stock, it issued it to Montgomery for 6,110 shares, and this was surrendered and three certificates issued to defendant Beclcer, one for 1,628 shares, one for 1,577 shares, and one for 1,575 shares, so that no one of these certificates .covered only the shares of Montgomery, Weil, or Smith. It seems, therefore, that the pledgors themselves assented to this mingling of shares. The evidence shows they assented to the distribution of the shares as made in the three certificates, and thereby consented that the shares need not be kept separate. Waiving the question of the competency of' the proof offered by plaintiff of the oral agreement and the question whether, if any such were made, it applied to the Western Gas Company stock, we think it is established that the plaintiff assented to the mingling of shares.

Put we do not regard the question of the alleged mingling of shares important. Besides the 700 shares heretofore referred to, Vermilye & Co. sold 842 shares. These were included in the two certificates sent them for sale, one for 500 shares and the other for 2,477 shares. After the certificate' for the 2,477 shares was split up into twenty-five certificates, 842 shares were sold between April 27 and June 24, 1895. It is not disputed but that these 842 shares were sold, but it is insisted that, they being sold out of a certificate containing shares of the bank, it must be determined that the bank sold its own shares and not the plaintiff’s. Every share of the 842 was the same as every other share in the certificate, which included the shares of the bank. There were no earmarks on any particular shares by which they could be designated as the shares of the bank or the shares of the plaintiff. '

“One share of stock does not differ from another share .of' the same capital stock. Each is but an undivided interest in the corporate rights, privileges, and property.” 2 Cook, Corp. (5th ed.) § 469; 26 Am. & Eng. Ency. of Law (2d ed.) 828; Pietsch v. Krause, 116 Wis. 344, 93 N. W. 9; O. L. Packard M. Co. v. Laev, 100 Wis. 644, 76 N. W. 596.

So the bant could sell any 842 shares out of the 2,477 as the shares of plaintiff. But it is said that, when the bank sold from this common mass without designation as to what shares were sold, the law conclusively presumed that it sold its own shares. The evidence, however, is that at this time the bank was not selling its own stock, but the stock of plaintiff. It did designate the shares sold as the shares of plaintiff. Williams testified:

“All the sales of the Western Gas Company stock or bonds made by the bank between the dates of April 27, 1895, to June 24, 1895, inclusive, were credited to the account of and on the notes of A. H. Smith with the exception of thirty-four hundredths of a share.” • •

Mr. Williams was engaged in the bank and had knowledge of the facts and was custodian of the collaterals. Upon the proof before us it cannot be said that the bank did not at the time of sale identify the 842 shares sold as the plaintiff’s stock. ■

Eespecting the contention that the stock was sold upon a rising market we may say that between April 27 and June 24, 1895, the stock materially advanced, but after careful examination of the evidence on this point we are unable to say that there was proof of any material advance in the market price of any parcel of stock sold between the date of sale and the date of the entry of such sale by the bank. But, however this may be, we do not regard the question controlling. It was doubtless better for the pledgor to have the stock sold on a rising than on a declining market. And it appears from the evidence that the stock was at least fairly well sold, and probably for prices fully up to the market at the dates of sale. Plaintiff testified that he made no objection to the way the stock was sold and had none to make. He knew all the facts respecting the sales, and settled and received the proceeds shortly after the sales had been made. When we consider that the indebtedness to which the stock was collateral was long past due at the time of sale, and that under the power of sale tbe bank bad tbe right to sell at private sale without notice, that at least a fair market price satisfactory to plaintiff was obtained and accounted for to plaintiff, we are not impressed with tbe weight of this branch of appellant’s argument. Tbe case appears to have been fairly tried below, and findings made in favor of tbe defendants upon all tbe material issuable facts presented in tbe case. We cannot say tbe finding that there was a sale is not supported by tbe evidence. There being a valid sale under tbe power, no other question need be considered.

By the Court. — Tbe judgment of tbe court below is affirmed.