€• -2. Cornell University Law Library FROM THE BENNO LOEWY LIBRARY RECEIVED BY CORNELL UNIVERSITY UNDER THE WILL OF MR. BENNO LOEWY Cornell University Library KF 1071.D72 C.2 A treatise on the law of stock-brokers a 3 1924 018 931 521 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018931521 A TREATISE ON THE LAW OF STOCK-BROKERS AND STOCK-EXCHANOES BY JOHN R DOS PASSOS OJ TBESEyr YOKE BAR NEW YOEK HARPER & BROTHERS, FRANKLIN SQUARE 1882 iv Preface. at one time the sole source of investment, has, in this respect, fallen into a secondary rank behind railroad and other com- mercial companies which offer attractive and regular returns to capital, and whose shares may be carried about by their own- ers wherever they may go, defying alike the depredations of crime, the ravages of time, and the destruction of the elements. As a result of this condition of affaii's, Stock Exchanges have become of incontestable value to the public. In the first place, all securities which have been admitted to their lists can, as a general rule, be readily converted into cash. Irrespective of the regular investors, and of the pro- fessional operators outside of the exchanges (factors of the greatest magnitude in stock dealings), there is a trading ele- ment inside of those bodies — represented in the London Ex- change by the " Jobber," and in the New York Stock Ex- change by the " Scalper" — which is ready at a moment's notice to deal in and pay for any number of shares that may be offered for sale ; and which, in times of exciting panics, con- stitutes the breakwater against great financial disasters. It is absolutely certain that without the existence of great public marts like the New York and London Stock Exchanges the marvellous development and progress of this country, which make it the admiration and wonder of the civilized world, would not have been attained. And this truth was recog- nized by Bramwell, L. J., in a leading case in England, in which the transactions of the London Stock Exchange had been violently assailed as mere gambling devices and in hos- tility to the true interests of the country," and who, in sus- taining those operations, said : " I am not sure that it is a dis- advantage that there should be a market where speculation may go on, for it is owing to a market of that kind that we now have so many railways and other useful undertakings." » Thaoker vs. Hardy, L. E. 4 Q. B. Div. 685, 693. Preface. ■ v In May, 1877, a commission' was appointed by. royal de- cree to inquire into the origin, object, present constitution, customs, usages, and mode of transacting business on the Lon- don Stock Exchange, which commission reported, in July, 1878, after a careful study of the subject, among; others, the following suggestions to Parliament, then in session : " The main object of the association appears to be the easy and expe- ditious transaction of business, and the enforcement among themselves of fair dealing. " Our opinion is that, in the main, the existence of such an association, and the coercive action of the rules which it enforces upon the transaction of business, and upon the conduct of its members, have been salutary to the interest of the public. " We recognize a great public advantage in the fact that those who buy or sell for the public in a market of such enormous magnitude in point of value should be bound in their dealings by rules for the enforcement of fair dealing and the repression of fraud, capable of affording relief and exercising restraint far more prompt, and often more satisfactory, than any within the reach of the courts of law.'' The commission closes its report as follows : " It is recommended by us, not because we have any reason to think that the present association has at all, in the main, fallen short of its du- ties in the past, but rather for the purpose of strengthening its hands and increasing its efficiency in the future, that the London Stock Exchange be incorporated either by royal charter or an act of Parliament; and if, preserving the element of self-government, additional weight could be given to the institution, and additional consideration and reliance be be- stowed upon its members, by investing the existing association with a public character in the form of a charter of incorporation, we are of opin- ion that it would be a sensible gain to the public." At various times within the last century and a half, the legislatures of the different countries and states, acting under a spasmodic public sentiment, have sought to prevent specula- tions in securities and stocks by enacting stringent and severe laws against such practices, generally known as " Stock-job- bing Acts." But, as will be seen in the eighth chapter of ' See post, 261. viii Preface. The ground covered in the present work is entirely new, and hence I have not hesitated to discuss the various questions with freedom, but, as I trust, without dogmatism. My aim has always been to arrive at the correct result, and it is sin- cerely hoped that the reasoning which has been used in at- tempting this is such as will commend itself to my profes- sional brethren and to the public. The relation of a Broker to his Client is an anomalous one, having no ascertained place in the well-settled rules of the law of principal and agent ; it is sui generis, and in the course of time a body of law will be formed as distinctive and separate as that which governs the conduct of an agent in his dealings with his principal, a trustee with his cestui que trust, or a guardian with his ward. In the discussion of the nature and kind of securities in which a Broker deals, a vast subject was opened, capable of jBlling a dozen volumes, and much of it has been already ably treated by other authors ; and in this respect the dilemma was not what to put in, but what to keep out. If I have been judicious in my selections, it is all that I can hope for. I de- sire in this connection to acknowledge the invaluable assis- tance of my brother, Benjamin F. Dos Bassos, Esq., of the New York Bar, in the preparation of the work and of its index. Finally, I submit the book to the profession and the public, with the feeling that the subject has been at least fully opened, and that I have endeavored, to the best of my abil- ity, to perform the task in a manner which should make the volume satisfactory and valuable. NEW YORK, Marol, 1882. '""^ ^- ^^^ ^^^SOS. CONTENTS. PAGE TABLE OF CASES xix CHAPTER I. INTBODTJCTION. ORIGIBT OF STOCK-BROKERS ANB STOCK EXCHANGES . 1 CHAPTER II. LEGAL NATURE OF STOCK EXCHANGES; CHARACTER AND INCIDENTS OF MEMBERSHIP THEREIN; AND RULES AND REGULATIONS THEREOF. Organization of the New York Stock Exchange . . .12 General Legal Nature of Unincorporated Stock Exchanges . 13 Stock Exchange not a Partnership .... .14 Nor is the Stock Exchange a Corporation or Incorporated Joint- stock Company ........ 17 Rights of Members in Property Held by Non-incorporated Stock Exchanges ......... 11 Liability of Members for Debts, etc. . . . . .21 Suits by and against the Stock Exchange . . . .23 Rules and Regulations of Stock Exchanges . . . .32 General Power to Make Rules .... 32 Power of Suspension and Expulsion .... 40 Rule Giving Members of Exchange Lien on Proceeds of De- faulting Members " Seats," etc., in Preference to other Creditors, not Illegal ....... 64 X Contmts. PAGE The Stock Exchange Cannot Take Cognizance of Matters Arising Outside of, and Disconnected with, the Purposes of its Organization . . . • • • .75 Members not Bound by Eules which Prevent Recourse to Courts of Law 'i^8 Liability of Seats in Exchange to Legal Process ... 86 Gratuity Fund. — Life-insurance . . • ■ ■ .97 CHAPTER in. ANALYSIS OF TEANSACTION BETWEEN BEOKER AND CLIENT UPON PURCHASE OR SALE OF STOCKS IN THE UNITED STATES. Legal Relation of Stock -broker to his Client . . . .101 Definitions of Terms Used . . . ■ • .116 Purchase on "Long" Account — History of Transaction . . 118 The Order to Purchase, Price, and Number of Shares to be Bought 118 Duty and Liability of Broker in Purchasing ; Right to In- demnity . 123 Disposition of Stock when Purchased; Safely Keeping same; Liability to Keep Identical Stock Purchased, etc. . ' 136 Dividends, Profits, Assessments, Calls, Interest . . . 151 Right of Client to Control and Take Up Stock . .160 Duty of Broker to Sell.— " Stop Order " . . . .164 Special Contract with Client. — Joint Adventures in Stocks . 169 Sales for " Short " Account . . .... 180 Nature of Short Sale . . . . . . .180 Duty of Broker to Sell at Price Ordered . . .182 Nature of Contract Made upon " Borrowing " Stock, and from whom the Stock may be Borrowed . . 182 Duty of Brokers to Close Short Contract by "Buying in "Stock '_ 2g^ Contents. xi PAOK Compulsory Sale .by Broker .188 For Failure to Put "Up Margins to Meet the Fluctuations of the Market 188 Form of Notice ; Upon whom Served ; Keasonable Time . 189 Notice of Sale for Failure to Comply with Demand for Mar- gins .... 196 Place of Sale 206 Broker Cannot Sell or Purchase 213 Effect of Sale or Purchase by Broker . . . .224 When Broker can Close Transaction 226 When Broker can Act by Substitute ..... 230 Commission of Broker . . . . . . . .231 Communications between Broker and Client not Privileged . 235 CHAPTER IV. STOCK-BROKEES IN ENULAOT). Statutes relating to Stock-brokers in England .... 289 Decisions under Foregoing Statutes. ..... 248 Commissions of Brokers, and Actions for, by Unlicensed Bro- kers ; Actions by Licensed Brokers Acting in Dlegal Trans- actions 254 Origin and History of the London Stock Exchange, and Eules and Regulations thereof 260 CHAPTER V. ANALYSIS OF TRANSACTION BETWEEN BROKER AND CLIENT UPON PURCHASE OR SALE OF STOCKS ON LONDON STOCK EXCHANGE. Definitions 269 Trading " for Money " 272 Trading " for the Account " 273 Relation of Broker to Client . . . . . . .280 .Ownership and Disposition of Securities when Purchased . 286 Summarily Closing Transaction . . . . .288. Other Incidents of the Relation 292 Xll . Contents. FAQB 295 Relation between Client and Jobber .... General Liability of Jobber to Vendor . . . . 295 Special Contract between Jobber and Client. — Guaranteeing Kegistration ........ 307 Liability of Client to Jobber . . . . . . 309 Relation of Client to Undisclosed and Intermediate PurcHasers . 311 Relation between Selling Client, or Vendor, and TJltimate Pur- chaser, or Transferror, and Transferee .... 315 CHAPTER VL THE PARIS BOURSE. History of the Bourse 324 Agents de Change 327 Nature of Transactions 336 CHAPTER Vn. USAGES OP STOCK-BROKERS. General Rules relative to Usages .... Cases in which Usages of Stoct-brokers. Held Binding In the United States In England Cases in which Usages have been Rejected In the United States In England 341 356 356 860 363 363 377 CHAPTER Vm. STOCK-JOBBING. Dealings in Stocks at Common-law Stock-jobbing Acts Wagers At Common-law Wagers under Existing Laws 382 383 406 406 408 Contents. Xlll FAOE 410 Wagers — Continued. Wagers between Principals . . Actions by Brokers foi' Money Laid Out, etc., and Commis- sions in Stock Transactions ... . 420 "Options," "Putg," "Calls," "Straddles," or "Spread- eagles " . 444 Conspiracy to AfiEect Stocks, etc. ; " Pools," " Corners " . 455 General Prinpiples Deducible from the Cases . . .477 CHAPTER IX. NEGOTIABILITY AND NON-NEGOTIABILITY. Negotiable Instruments 479 Origin and Nature of Negotiability 480 How Negotiability may be Established . . . 484 Requisite Elements of Negotiability .... 493 It must be in Writing ...... 493 A Negotiable Instrument must Contain an Uncon- ditional Order or Promise to Pay . . .495 There must be an Engagement for Unconditional Pay- ment ......... 496 A Negotiable Instrument must be for the Payment of Money 497 The Amount to be Paid must be Certain . . .498 A Specified Time for Payment is not Essential . . 498 An Instrument is not Negotiable unless Payable to Somebody . 499 Negotiable Words are Essential to the Negotiability of an Instrument ....... 500 Delivery of an Instrument is Essential to bility its Negotia- Enumeration of Negotiable Instruments . Bills of Exchange and Promissory Notes Bank-notes Checks . Certified Checks Forged Checks United States Bonds Bonds of Foreign Governments 500 502 502 502 503 525 544 553 553 XIV Contents. Enumeration of Negotiable Instruments — Continued. paoe Scrip of Foreign Governments; Municipal Bonds; State Bonds; County Bonds; City Bonds; Village Bonds ; Railroad Bonds ; Certificates of Deposit; Coupons. 554 Bills of Lading 557 Results of Negotiability; Bona Mde 'H.oldei; Notice; Value. 563 He must be a Purchaser in Good Faith Without Notice 564 He must be a Purchaser Before Maturity . . .569 He must be a Holder for Value. .... 571 Non-Negotiable Instruments . . .... 576 Doctrine of Non-Negotiability ..... 576 Nature and Different Kinds of Shares of Stock . . 579 Negotiability as Applied to Stock Certificates . . .595 Cases in which Notice Appears on the Face of the Certificate 602 Notice Dehors the Documents of Title . . . 608 Cases in which the Bona Fide Purchaser or Holder Ac- quires the Right to Hold the Certificate by Reason of the Negligence or Carelessness of the Owner . . 611 Transfer of Stock . 616 Method of Transfer 616 Transfer between Parties 623 Transfer as to Third Persons ...... 624 Lien of Corporation for Debts 629 Forged Transfers . .631 The Position of a Corporation Issuing a Stock Certificate to the Real Owner and to a Party Claiming Title there- under by Forgery or Otherwise ..... Position of a Bona Fide Purchaser of a Certificate Issued by a Corporation in Exchange for One whose Power of Transfer was Forged. .... Fraudulent or Over Issue of Stock by a Corporation , Dividends ........ General Rules as to Dividends Effect of Declaration of Dividend , Dividends when Declared Belong to the Registered Owners Pledges of Stock Certificates 631 637 641 646 645 646 651 657 Contents. XV CHAPTEH X. KBMEDIES. Remedies of Stock-brokers and Clients against Each Other Relation of Brokers to Each Other Relation of Clients to Each Other Liability of Brokers to Undisclosed Clients "WTien he Makes the Contract in his Own Name Where he Voluntarily Incurs a Personal Responsibil- Stock-broker's Lien . Specific Performance Preliminary Observations General Rule . When Specific Performance Refused in England Cases Involving " Calls " when Relief Refused . Cases of a Miscellaneous Character . When Specific Performance Decreed in England Specific Performance in the United States Preliminary Observations . . . , When Relief Refused When Decreied as to Railway Shares Mandamus . Con- Prin- PAGE 674 674 676 679 680 680 680 681 681 681 ity either Express or Implied .... Where he does not Disclose the Name of his Princi- pal 080 Where he Exceeds his Authority Agents or Factors are Personally Liable upon all tracts for Foreign Principals Where the Agent has no Authority . Agent is Liable where there is no Responsible cipal 681 Agent is Liable when Guilty of Fraud or Deceit. . 681 Liability of Undisclosed Clients to Stock-brokers . . 684 Liability of Brokers to their Own Clients. . . 686 Liability of Clients to their Own Brokers. . . . 698 General Indemnity , 698 Banker's Lien 699 . 711 715 715 717 718 721 723 725 731 731 732 736 741 xvi Contents. PAGE The Effect of Usury upon Stock Transactions .... 748 Statute of Frauds "^SS Contracts for Sale of Stocts not within English Statute . TS8 Contracts for Sale of Stock Held to be within Statute of Frauds in the United States . . . . / . TBS When Statute must be Pleaded '^'74 CHAPTER XI. JIEASUBE OF DAMAGES. General Rule in the United States in Actions relating to Per- sonal Property. . . . . . . • .777 J In Actions by Vendee against Vendor .... 777 In Actions by Vendor against Vendee .... 780 In Actions for Conversion of Personal Property . . 781 Refusal to Return Borrowed Stocks .... 782 In Actions between Clients and Stock-brokers .... 785 By Clients against Stock-brokers for Failure to Buy as per Instructions . 785 Client against Broker for Failure to Sell Stocks . . 787 Measure of Damages for Conversion of Securities by Bro- ker . 789 Exceptions to Rule laid down in Baker vs. Drake . . 797 Where Stocks are Held for Investment . . . 797 Where the Broker Realizes a Profit from his Wrong- doings . . . . . . . . 798 Reasonable Time ........ 799 Market Value 800 In Actions by Stock-broker against his Client . ' . . 802 APPENDIX. Constitution and By-laws of the New York Stock Exchange . 805 Preamble 807 Constitution gQg By-laws 828 Contents. Rules and Regulations of the London Stock Exchange Committee Admissions, Re-elections, and Re-admissions Appendix to Admissions and Re-elections Partnerships Cleris General Rules applicable to Stock Exchange Transactions Rules applicable to English and India Stocks, etc Rules applicable to Securities of Companies Deliverable by Deed of Transfer Rules applicable to Securities to Bearer Special Settling-days and OflBcial Quotation of New Loans, Shares, and Stocks Ordinary Settling-days and Official Quotation of Prices Failures Official Assignees Rules and Regulations of the Company of Stock and Exchange Brokers of Paris Organization of the Company Preliminary Chapter Agents de Change . Syndical Chamber . General Meetings Of Honorary Members Sleeping or Silent Partners Personnel of the Agents de Change Of the Rights and Obligations of Agents de Change . 909 Operations and Deliveries General Provisions . Of Negotiations Properly so Called Of Discounts, or Deliveries of Securities in Of Official Buying-in and Selling-out Deliveries, Attachments, Payments . Quotations of Prices for Stocks Of General Settlements .... The Common Fund ..... Revenues Appropriated to the Common Mode of their Appropriation Uses of the Common Fund B xvn FAGK 847 849 854 858 861 863 865 870 872 878 883 886 888 893 897 897 897 898 900 908 904 906 907 . 912 . 912 . 913 Advance . 918 . 923 . 924 . 926 . 929 . 935 Fund, and . 935 . 936 xviii Contents. PAGE Fees for Services 937 Reserve Fund 937 Of the Use of the Eeserve Fund . . . .938 Creation of a Special Guarantee Fund for the Benefit of the General Treasury . . . . .939 Of the Establishment of a Safe of Deposit . . 940 Administration of the Different Branches of the Com- mon Fund and of the Company . . . .941 Committee on Accounts 942 Pension Fund for the Employes of the Common Fund 943 Commissions 943 INDEX 945 TABLE OF CASES. [ The references are to pages.] Abbett V8. Frederick 112, 139 Acraman vs. Cooj)er 692 Adams vs. Blackwall Ey. Co. 727 vs. Capron 232 vs. Otterback 356 vs. Peters 352 Adamson vs. Jarvis 698 Adderley vs. Dixon 717, 720 vs. Storm 618 Agar vs. Macklew 81 Agra etc. Bank vs. Leighton 569 Agricultural Bank vs. Burr 582 vs. Wilson 582 Aiuswortb vg. Bowen 224 Albon vs. Pike 85, 86 Alexander vs. Burchfield 517,518 Alger vs. Johnson 774 AUan vs. Graves 304, 305 vs. Sandius 698 Allen vs. Aguirre 773 vs. Brown 481, 482 vs. Clark 24, 30 vs. Dykers 363, 365, 366 vs. HiU 623 vs. Pegram 589, 592 vs. Stephens 689 vs. The N. Y. Cotton Exch. 91 Alston, Ex parte 669 Ambergate E. K. Co. vs. Mitchell 581 Ainburger vs. Marvin 774 Amherst Academy vs. Cowls 481 Amory vs. Meryweather 390, 478 Amy vs. Dubuque 555 Anderson vs. Biddle 732 vs. Germ. Nat. Bank 509 vs. Nicholas 692 Andrew vs. Blachley 511 Andrews vs. Clarke 112 Androscoggin E. E. Co. vs. Au- burn Bank 152 Appeal, see title. Appleman vs. Fisher 181, 404 Arbouin vs. Anderson 568 Archer vs. Putnam 751 Arent vs. Squires 112, 139 Armitage vs. Pulver 669 Armstrong vs. Toler 389, 440 Arnold vs. Eock Eiver E. E. Co. 497 vs. Kuggles 592 Arnott vs. Pittston etc. Coal Co. 468, 472 Ash vs. Guie 15 Asbby vs. Ashby 500 Ashe vs. Johnson 717, 737 Ashton vs. Atlantic Bank 606 vs. Dakiu 442 vs. Langdale 587 Aston's Case 382, 383, 388 Asylum vs. Phenix Bank 744 Atherford vs. Beard 407, 408 Atkins vs. Gamble 145 Atkinson vs. Atkinson 600, 606, 608, 620 VB. Brooks 572 vs. Scott 757 Attica vs. Manufacturers' etc. Bank 744 Atty. Gen. vs. Conn. Life Ins. Co. 507 Aubert vs. Maze 389, 478 Aul vs. Colket 375, 597, 600, 611 Aulton vs. Atkins 482 Austin vs. Burns 498 vs. Gillespie 736 vs. Searing 23, 26, 33, 78, 80, 81 Ayres vs. French 692 Ayrey vs. Fearnsides 498 B. Bagge's Case 382 Bagge, Ex parte 617 Bahia vs. San Francisco E. E. Co., In re 635, 637, 641 Bailey vs. K. E. Co. 593 XX Tcihle of Cases. Bakervs. Drake 111, 112, 113, 169, 188, 201,354,358,367,776,789, 790,791,792,793,794,797, 798, 799, 800 TB. Nat. Bank 164 vs. Plaskitt 583 vs. Walker 571 Baldwin vs. Caufield 623 vs. Commonwealth 741 vs. Williams 768 Ballard vs. Bennett 78 Baltimore City E. E. Co. vs. Sewall 779 Baltimore Marine Ins. Co. vs. Dalrymple 204, 212, 224, 779 Baltzen vs. Nioolay 681 Bancroft vs. Wentworth 387 Bank vs. Dubuctue &, Pao. E. E. 224 vs. Evans 615 vs. Farnsworth 554 vs. Gridley 625 vs. Lanier 583, 599, 633, 635, 641 vs. Van Antwerp 756 vs. Wager 756 Bank of Commerce vs. Union Bank 545,548,550 Bank of Commerce's Appeal 582, 584, 625, 655 Bank of England vs. Lunn 587 Bank of Montgomery vs. Eeeves 794 vs. Moffatt 587 Bank of New York vs. Vander- ^orst 572 Bank of Eepublic vs. Millard 504, 507, 508, 509, 510, 529 Bank of Eoohester vs. Jones 560 Bank of Eome vs. Eome 495, 554 Bank of Salina vs. Babcock 572 Bank of Sandusky vs. ScoviUe 572 Bank of St. Albans vs. Gilliland 572 Bank of U. S. vs. Davis 191 vs. McAUester 702 Bank of Utica vs. Smalley 636 Baptist Assoc, vs. Hart's Exec. 21 Bargate vs. Shortridge 617 Bargett vs. Orient. Mnt. Ins. Co. 538 Baring vs. Corning 169 vs. Corrie 602 Bariuy's Case 140 Barker, In re 137, 622 Barklay's Case 382 Barksdale vs. Brown 119, 372 Barkwarth vs. Young 774 Barlow vs. Lambert 487 Barnard vs. Brookbonse 415 vs. Campbell 560, 561 Barnard vs. Kellogg 349 Barned vs. Hamilton 784 Barnes vs. Brown 580 vs. Mott 669 vs. Ontario Bank 525 Barnett vs. Smith 531 Barrett vs. Hyde 398, 400 vs. Mead 400 vs. Mut. Union Ins. Co. 609 Barrow vs. Paxton 170 vs. Ehinelander 698 Barry vs. Croskey 462, 464, 465, 474 vs. Kennedy 87 Bartlett vs. Drew 580, 646 vs. Med. Soc. 56 Bass vs. Clive 545 Bates vs. Androscoggin E. E. Co. 594 vs. McKinley 656 vs.N.Y.Ius.Co. 649 Batesville Inst. vs. Kaufman 578 Battles vs. Landenslager 565 Baxter vs. Board of Trade 34, 38 vs. Mclntyre 28 Bayard vs. Farmers' Bank 607, 619, 632 Bayliffe vs. Butterworth 124, 352, 354 Bayly vs. Wilkius 124 Bear vs. Bromley 15 Beatty vs. Ebury 462 Beavan vs. Adams 462 Beaver County vs. Armstrong 559 Bebee vs. Bank of N. Y. 578 Beckett vs. Billbrough 723 Beckham vs. Drake 685 Beckwith vs. Union Bank 703 Beebee vs. Eobert 685 Beers vs. Bridgeport Spring Co. 649 vs. CroweU 768 Beeston vs. Beeston 409, 421 Bellamy vs. Majoribanks 503, 509 Belmont Branch Bank vs. Hoge 568, 569 Beutley vs. Craven 213 Bercich vs. Marye 601, 617 Berd vs. Lovelace 235 Berkley vs. Watling 557 Berlin vs. Eddy 145 Bermingham vs. Sheridan 285, 307, 323, 724 Talle of Gases. Bernhard vs. Yonng 753 Bertram vs. Godefroy 119 Bevan vs. Waters 713 Bickerdyke vs. Bolman 514 Bickett vs. Taylor 172 Biokford vs. First Nat. Bank 528, 530 Biddle vs. Bayard 615, 634, 692 Biederman vs. Stone 124, 698, 724 Bigelow vs. Benedict 404, 414, 419, 434, 452, 453, 454, 478 Billiugs vs. Flight 388 vs. PoUey 388 Birdsall vs. EusseU 495, 554, 564, 569 Birkhead vs. Brown 559 Birmingham Ins. Co. vs. Com- monwealth 745 Bishop of Winchester vs. Paine 565 Bissell vs. Farmers' Bank 732 vs. M. S. & N. I. E. E. Co. 642 vs. Eyan 356 Black vs. Homersham 323, 653 vs.Eyder 756,757 Black & White Smiths' Soc. vs. Van Dyke 64 Blackhan vs. Doren 575 Blair vs. Wilson 504, 506 Blake vs. Nicholson 713 Blanchett vs. Powell 557 Blankenhagen vs. Blundel 499 Bligh vs. Brent 588,764 Bloomer vs. Henderson 578 Blouin vs. Hart 625 Bloxham, Ex parte 701 Board of Trade of Chicago vs. Underwood 188 Boardman vs. Cutter 768 VS.L.S.&M. S.E.Co.594, 595, 645, 647, 652, 732 Bohbett vs. Pinkett 545, 547 Boddington vs. Schlenker 503, 518 Bodenham vs. Hoskins 707 Boehm vs. Stirling 503, 524 Bolder vs. Jackson 754 Bolinghroke's Case 707 BoUand vs. Bygrave 699, 700 Bolton vs. Colder 487 vs. Dngdale 498 vs. Pnller 699 Bonner, In re 671 Bosanquet vs. Dndman 700 Booth vs. Fielding 128, 131, 684 vs. Hodgson 389 Bordenave vs. Gregory 388 Borham vs. Godefroy 116 Boas vs. Hewitt 570 Bostock vs. Floyer 139 Bousfield vs. Wilson 259, 383 Boweii vs. Newell 349, 504, 511, 512 Bower vs. .Jones 232 Bowlhy vs. Bell 127, 322, 763 Bowring vs. Shepard 278, 285 Boyce vs. Green 764 Boyd vs. Eockport Steam Cotton Mills 625 Boylan vs. Hnguet 145, 692 Bradford vs. Fox .572 Bradley vs. Delaplane 504, 511 vs. Hamilton 511 vs. Holdsworth 764 Bragg vs. Meyer 211 Brainard vs. N. Y. etc. E. E. Co. 495, 554 Brandao vs. Barnett 484, 699, 700,707 Branker vs. Eoherts 33 Branning vs. Markham 496 Brass vs. Worth 104, 112, 208, 212, 792 Bray vs. Farwell 24 Brell vs. Eice ,755 Brewster vs. Hartley 623, 659 vs. Sime 606 Bridenbecker vs. Howard 24, 26 Bridgeport Bank vs. N. Y. etc. E. E. Co. 600, 633, 639, 656 Bridgeport Bank vs. Welsh 574 Briggs vs. Partridge 678, 680 Brigham vs. Mead .398 Bright vs. Jndson 573 Brightwell vs. Mallory 591 •Brisbane vs. Adams 472 vs. D. L. & W. E. E. Co. 618, 632, 654 Broad vs. Pitt 236 Broadbent vs. Barlow 669 vs. Varley 692 Broadway Bank vs. McElrath 629 Brogden vs. Marriott 407 Bromwick vs. Lloyd 484 Bronson vs. Silverman 574 Brookman vs. Eothschild 112, 118, 213,214,224,373,286 Brooks vs. Mitchell 522, 570 Brower vs. Peabody 560 Brown, In re 504, 511, 519 Brown vs. Adams 645 vs. Black 314, 730 vs. Boorman 169, 365 XXll Table of Oases. Brown vs. ButoherB' etc. Bank 493 vs. Coal & Nav. Co. 647 vs. Dale 31 vs. Davies 570 vs. Galliland 736 vs. Gilman 499 vs. Hall 453 vs. Howard Fire Ins. Co. 632, 634,637 vs. Leavitt 572 vs. Livingston 552, 553 vs. Lusk 504, 511, 512, 515, 516 vs. Morris 28 vs. Phelps 398, 399 vs. Speyer 453 vs. Spofford 564 vs. Turner 386, 389, 390, 478 vs. Ward 213 Brownell vs. Hawkins 658 Browning vs. Aylwin 252 Brownson vs. Chapman 674, 676, 769 Brua's Appeal 424, 426, 427, 453 Brace vs. Westoott 496 Bruff vs. Mali 619 Brnndage vs. Allen 652 vs. Brnndage 645, 647, 656 Bryan vs. Baldwin 117, 190, 191, 198, 224 vs. Lewis 386, 453, 454 Bryaon vs. Eaynor 204, 212, 224 Buhb vs. Yelverton 420, 421 Buck vs. Amidou 681 vs. Buck 258, 383 Buokridge vs. Ingraham 587, 588 Budd vs. Monroe 599, 605 Buhner, Ex parte 390 Bull vs. Sims 497 Bullard vs. Kinney 16, 24 vs. Nat. Eagle Bank 630 vs. Eandall 513, 530 Buller vs. Crips 483 Bullock vs. Richardson 387 Bun vs. Eiker 408 Burke vs. Eisley 506 Burkett vs. Taylor 120, 165, 173, 189, 190, 191, 195, 197 Burkhalter vs. Second Nat. Bank 511, 520, 521 Burr vs. Sickles 356 Burrall vs. Bushwick E. E. Co. 579, 580, 582, 584, 585, 590, 591, 596, 615, 739 Burridge vs. Anthony 793, 800 Burraivs.WatertownBank 545,546 Burroughs vs. N. C. E. E. Co. 647, 652 Burt vs. Dutcher 790 Burton's Appeal 600, 607, 614 Burton vs. Shotwell 731, 738 Bush vs. Cole 119 vs. Lathrop 577 Butler vs. Fink 140, 178 Butterfield vs. Beardsley 16 Butterworth vs. Peck 504, 507 Butts vs. Wood 580 Buxton vs. Lister 717, 720 Byers vs. Beatty 422 c. Cahill vs. Bigger 21 vs. Hirshman 230 Caldioott vs. Griffiths 15, 18 Caldwell vs. Warehouse Co. 756, 757 Calhoun vs. Eichardson 616 Calton vs. Bragg 157 Calvin vs. Williams 760,763,769 Calvit vs. McFadden 777 Cameron vs. DurkUeim 117, 189, 190, 191, 193,197,357,415, 785,786,794,801 Campbell vs. Morgan 632 vs. Putney 622 vs. Eichardson 408 Canal Bank vs. Bank etc. 545, 546 Canfield vs. Monger 521 Cannan vs. Bryce 389, 390, 478 Cannon vs. Folsom 779 Capper vs. Harris 720 Capron vs. Capron 449 vs. Thompson 145, 201, 230 Cardwell vs. Hicks 574, 575 Carey vs. McDougald 554 Carlan vs. Ireland 503 Carlen vs. Drury 61 Carlisle vs. Southeast. Ey. Co. 592, 647 Carlon vs. Kenealy 497 Carlton vs. Jackson 636 Carpenter vs. Ins. Co. 736 vs. Longau 578 vs. N.Y.dc C.E.Co. 592, 645, 647 Carr vs. Hincholiff 678 vs. Thomas 695 Carrington vs. Ward 671 Carstairs vs. Stein 756 Carter vs. United Ins. Co. 481 Table of Gases. xxm Carteret Club vs. Florence 60, 63 Cartwright vs. Wilmerding 671 Carver vs. Hays 496 Case vs. MoClellan 294 Casey vs. Cavaroo 657, 661 vs. Nat. Bank 661 vs. Schneider 661 Cass County vs. Grfcen 564 Cassard vs. Hinman 394, 397, 405, 406,412,453 Castellan vs. Hobson 313 Castello vs. City Bank 197, 208 Cates vs. Knigbt 86 Cathell vs. Goodwin 514, 516 Catlin vs. King 774 Cayuga etc. Bank vs. Daniels 561 Cazeaux vs. Mali 462 Cease vs. Bramley 658 Cecil Bank vs. Farmers' etc. Bank 709 Cecil, In re 620,622 Central Nat. Bank etc. vs. Con- necticut etc. 164 Chaler vs. San Francisco Ey. Co. 726 Chamberlain vs. Greenleaf 145, 161, 669,670,798 Chambersburg Ins. Co. vs. Nichols 61 Champion vs. Gordon 504, 506, 511 Chandler, In re 419, 457 Chapman vs. Gordon 348 vs. Eose 494 vs. Sheppard 124,131,153 vs. White 504,507 Charles vs. Blackwell 553 Chase vs. Vanderbilt 593, 646, 647 Chat vs. Edgar 483 Chatterton vs. Fisk 404 Cheale vs. Kenward 323, 728 Cherry vs. Frost 668 Chesapeake etc. E. E. Co. vs. Paine 589 Chester Glass Co. vs. Dewey 582, 584 Chew vs. Bank of Baltimore 633 Chicago Artesian Well Co. vs. Corey 224 Chioopee Bank vs. Chapin 575 Child vs. Hudson Bay Co. 630 vs.Hugg 112,204,205,210,212 vs. Morley 125, 127, 273, 274, 386 Chillas vs. Snyder 403 Chippendale vs. Thurston 753 Chrisler vs. Eenois 498, 572 City vs. Lamson 555, 556 City Bank, Ex parte 556 City Bank of Eacine vs. Bab- cook 198 City Bank of Eome vs. Water- town E. E. Co. 602 CityofOhiovs. E. E.Co. 645,647 City of Eichmond vs. Daniel 590 City of Utica vs. Churchill 586 Claflin vs. Farmers' etc. Bank 554 Clark vs. Bayley 109 vs. Bouvain 204, 212 vs. Farmers' Manuf. Co. 495 vs. Flint 732,736 vs. Foss . 453 vs. Gilbert 109 vs. Giraud 386 vs. Iowa City 495, 555 vs. Iselin 661 vs. Moody 234 vs. Pinckney 694 vs. Powell 109, 222, 249 vs. Van Northwiok 169 Clarke vs. Dickson 462 vs. Meigs 112, 145, 160, 165, 168,195,205,212,692 Clealand vs. Walker 685 Clegg vs. Townshend 135 Gierke vs. Martin 483, 486, 488 Cleveland vs. Loder 753, 757 Cleveland etc. E. E. Co. ys. Eob- bins 655 Cleveland etc. E. E. Co. vs. Tap- pet 619, 632, 633, 655 Clifford vs. Turrill 727 Cliquot's Claim 802 Clute vs. Eobinson 577 Coal Co. vs. Frye 16, 24 Cockran vs. Irlam 230 Codd vs. Eathbone 757 Coddingtou vs. Bay 573, 574 Coe vs. Cayuga Lake Ey. Co. 495 Coggill vs. Am. Exch . Bank 547 Colborne, Ex parte 556 Cole vs. Daltou 497 vs. Milmine 404, 453 vs. Saulpaugh 574 Colehan vs. Cook 499 Coleman vs. Second Ave. E. E. Co. 580 Coles vs. Bank of England 632 vs. Bristowe 276, 278, 301, 352, 684, 730 XXIV Talle of Cases. Colket vs. Ellis 197, 204, 212, 348, 350, 353,355,358,367,688 CoUamer vs. Day 409 Collins vs. Buckeye Ins. Co. 675 vs. Gilbert 569 Colson vs. Arnot 554, 569 Colt vs. Clapp 398 vs. Nettervill 717,721,725,760 vs. Owens 793 Columbine vs. Chichester 723 Comeau. vs. Guild Farm Oil Co. 625 Commercial Bank vs. French 678 vs. Hughes 702 vs.Kortright 599 vs. Norton 230 Comm'rs vs. Clark 567 vs. Reynolds 623, 624, 625 vs. Watmough 625, 628 Comm'rs of Knox Co. vs. Aspin- wall 555 Commonw. vs. Carlisle 472 vs. Cooper 213, 220, 360, 376, 697 vs. German Soo. 63 vs. Pa. Ben. Soc. 56 vs. Pike Ben. Soc. 52, 64 vs. St. Pat. Ben. Soo. 34, 63,76 vs. Shurman's Adm. 29 vs. Simonds 502 vs. Thomas 502 Conine vs. Junction etc. Ey. Co. 495 Conkey vs. Bond 213 Conroy vs. Warren 515,517,518,522 Considerant vs. Brisbane 496 Cousterdine vs. Consterdine 139 Content vs. Metropol. Elev. R. R. Co. 582, 742, 746 Continental Nat. Bank vs. Elli- ott Nat. Bank 623, 625 Continental Nat. Bank vs. Nat. Bank of Commonwealth 535 Continental Nat. Bank vs. Town- send 570 Conyngham's Appeal 197 Cooke, Ex parte 163, 288 Cooke, In re 265 Cooke vs. Davis 415 vs. State Bank etc. 529, 530 vs. United States 501, 553 Cooper vs. Meyer 547 vs. Neil 421 Cope vs. Dodd 356 vs. Rowlands 255 Corbett vs. Underwood 189, 196, 348, 358, 367, 453 ComeU vs. Hiohens 578 vs. Moulton 499 Corning vs. Greene 24 Cortelyou vs. Lansing 170, 176 Cory vs. Leonhard 704 Cota vs. Buck 499 Cottam vs. Eastern Con nties Ry. Co. 615,632,635 Cottingham vs. Shrewsbury 636 County of Warren vs. Maroy 556 County of Wilson vs. Third Nat. Bank 500 Cousland vs. Davis 692 CovellvB.Hill 562 Cowdrey vs. Vandenburgh 670 CoWell vs. Simpson 710 Cowing vs. Altman 517, 525 Cowles vs. Whitman 72:j Cowperthwaite vs. Sheffield 507 Cox vs. O'Eiley 487 vs. Sprigg 481 vs. Troy 501 Craft vs. McConoughy 472 Craig vs. Cockroft 496 Crawshay vs. Homfray 713 Creery vs. Holly 557 Cripps vs. Davis 570 Crisp vs. Bunbury 85, 86 Crocker vs. Crocker 609 Croft vs. Bunster 578 Croker vs. Old Society 64 Crooks vs. Moore 781 Cromwell vs. County of Sao 565,566, 570, 575 vs. Lovett 517, 518 Crosby vs. Watts 174 Cross vs. Saokett 462 Crouch vs. Credit Poncier 485, 490 Cruchley vs. Clarance 494 Crowley's Claim 290, 291, 293, 698 Cruger vs. Armstrong 503, 504, 514, 516 Crull vs. Dodson 213, 217, 760, 766 Cruse vs. Paine 270, 307, 352 Cud vs. Rutter 717, 718, 719, 721, 725, 733 Cummins vs. Webster 609 Cunningham vs. Spier 590 vs. Soules 682 Tcihle of Gases. XXV Cuppell vs. Milwaukee Chamber of Commerce 34, 36 Curran vs. The State 646 Currie vs. Misa 571 vs. White 453, 652,777, 778,780 Curry vs. Smith 366 vs. Woodward 649 Cushman vs. Haynes 498 vs. Thayer Manuf. Co. 739 Cutting vs. Damerel 154 vs. Marlor 139 Bails vs. Lloyd 689 Dalton vs. Midland Ey . Co. 647 Dance vs. Girdler 28 Danforth vs. Evans 478 vs.Phila. Ey.Co. 734 Daniels, Ex parte 384 In re 227 Darnall vs. Morehouse 514 David vs. Steins 756 Davies vs. Austen 577 Davis vs. Bauk of England 611, 635 vs. Bechstein 576, .577 vs. Bowsher 699, 700 vs. Gwynne 165 vs. Haycock 285, 321, 730 vs. Stephens 618 Dawkins vs. Antrobus 36 Daws vs. Bank of England 584 Dawson vs. Kittle 355 vs. Real Estate Bank 699 Day vs. Holmes 119, 213, 220, 225, 375, 665, 694 vs. Perkins 783 vs. Stuart 390, 478 Dearborn vs. Union Nat. Bank 139 Dearing vs. Winchelsea 669 De Berd vs. Atkinson 514 De Forrest vs. Frary 499 Delacey vs. Neuse Eiver Nav. Co. 63 De la Chaumette vs. Bank of England 571 Delafield vs. State of Illinois 119, 495, 554 Delano vs. Wild 28 Delevan vs. Simonson 691 De Meza's Succession 661 De Mott vs. Starkey 570 Dennis vs. Kennedy 79 Denny vs. Lyon 598, 615, 633, 635 Dent vs. Holbrook 782, 796 Dentvs.Nickalls 295,296,304 Denton vs. Livingston 589 vs. Eodie 157 De Eibeyra vs. Berkley 140, 141 Deshler vs. Beers 124, 232 Devaynes vs. Noble 140 Devoe vs. Moffat 515 Dewees vs. Miller 408 De Witt vs. Chandler 24, 25 Diamond vs. Lawrence County 495 Dickinson vs. Dudley 600, 614 vs. Gray 351 vs. Tillwall 362 Diker vs. Brubacker 197 Dillay vs. Commercial Bank 601 Dinsmore vs. Duncan 491 Doe vs. Barnard 751, 7.52 Doloret vs. Eothschild 717, 726, 728 Donald vs. Suckling 666 Donaldson vs. Donaldson 656 Donnell vs. Columbia Ins. Co. 486 Donohue vs. Gamble 198 Doolubdass vs. EamloU 407 Dorison vs. Westbrook 721, 725 Dorriens vs. Hutchinson 388 Douglas vs. Wilkeson 499 Douglass vs. Caft 796 vs. Leland 169 Down vs. Holling 522, 523" Downing vs. Marshall 21 vs. Potts 620 Dows vs. Cobb 559 vs. Greene 559 vs. Nat. Exch. Bank 560, 561 vs. Perrin 559, 560 Draper vs. Stone 732 Drew vs. Power 689, 749 Driscoll vs. West Bradley Manuf. Co. 591,609,625,627,629,630,670 Dubois vs. Thompson 604 Duden vs. Waitzfelder 224 Duffy vs. O'Donovan 774 Duke vs. Cahawba Nav. Co. 623, 625 Dunbar vs. Wilson 253 Duncan vs. Berlin 507, 531, 535 vs. Breman 705 vs. Hill 130, 292, 378 vs. Luntley 635 vs. North & South Wales Bank 703 Dunouft vs. Albrecht 717, 727, 728, 734,762,764 Dung vs. Parker 681 XXVI Tcihle of Cases. Dunham vs. Trustees of Eachael 34 Dunn vs. Com'l Bank of Buffalo 584 Dunne vs. English 313, 220 Durant vs. Einsteiu 690 vs. Burt 352, 353, 360, 398, 440, 441 Durham vs. Manrow 496 Duston vs. MoAndrews 781 Dutchess etc. Ins. Co. vs. Hatch- field 554, 567 Dutton vs. Connecticut Bank 625 Dyer vs. Eick" 779 Dykers vs. Allen 148, 183, 208, 210, 487, 658 vs. Leather Manuf. Bank 503, 507, 513 vs. Townsend 395, 478 Dyster, Ex parte 222, 242, 253, 257 E. Eagle vs. Buoher 32 Eagleson vs. Shotwell 752 Eames vs. Wheeler 623, 625 East Haddam Bapt. Church vs. East Haddam Bapt. Soo. 21, 23 East River Bank vs. Judah 26 Easterly vs. Cole 156, 233 Eastern Ey. Co. vs. Benedict 744, 779 Tiastman vs. Shaw 502 vs. Wright 481 Eaton vs. Bell 157 vs. New England Tel. Co. 633 Ebbinghousen vs. Worth Club 22, 23, 24,26 Eokert vs. Belden 694 Edgell vs. McLoughliu 409 Edie vs. East India Co. 484, 490 Edwards vs. Goulding 678 vs. Jones 575 vs. Hall 588 vs. Moses 514, 515 Egerton vs. Furzeman 407 Ehle vs. Chittenango Bank 647 Eichelberger vs. Finley 517, 518 Elizabeth City vs. Force 554 Ellis's Appeal 600,608 Ellis vs. Essex Bridge Co. 584, 742, 743 Ellsworth vs. Cole 386 EUwell vs. Chamberliu 230 Eltiug vs. Brinkerhof 517 Ely vs. Sprague 645 Emerson, Ex parte 724 Emerson's Case 131, 153 Emery vs. Irving Nat. Bank 561 vs. Pease 688 Empire City Bank, In re 152 English vs. Brenan 22 Ensign vs. Kellogg 461 Enthofen vs. Hoyle 495 Erben vs. Lorillard 232 Esmond vs. Apgar 696 Espy vs. Bank of Cincinnati 504,529, 531,538 Esser vs. Linderman 112, 116, 118, 199, 226 European Bank, In re 706 Evans vs. Hooper 29 vs. Jones 407 vs. Phila. Club 62, 63 vs. Wain 371, 377 vs. Wister 27, 34, 67, 89 vs. Wood 285, 302, 319, 320, 323, 730 Everton vs. Nat. Bank 495, 499, 555, 556, 570 Ewbank vs. Nutting 782 Exon vs. RnsseU 494 Factors & Trad. Ins. Co. vs. Ma^ rine D. D. Co. 633 Faikney vs. Eeynous 389, 478 Fallon vs. E. E. Co. 731, 734 Fancourt vs. Thorne 469 Fant vs. Miller 668 Fareira vs. Gabell 421, 427, 429, 433 Farmer vs. Eussell 259, 440 Farmers' etc. Bk. vs. Atkinson 557 vs. Butchers' etc. Bk. 534, 643 vs. Logan 561, 603 vs. Wasson 627, 628 vs. Wilson 625,638 Farmers' L. & T. Co. vs. Carroll 755 Farrington vs. Park Bank 570 Fassett vs. First Par. Ch. etc. 18 Fatman vs. Lobach 670 Fawcett vs. Lowrie 647 Fay vs. Gray 148,658,664,693 vs. Wheeler 773 Felt vs. Heye 609 Feutou vs. Eobinson 569 Fenwick vs. Buck 295 Ferguson vs. Fyffe 159 Table of Cases. Ferguson vs. Pashall 732, 736 vs. Wilson 725 Ferris vs. Killner 675 Fesenmeyer vs. Adoook 496 Field vs. Lelean 362, 800 vs. Sawyer 253 v8.Tibbetts 570 Finan. Ins. Co., In re 2.38 Finch vs. Blount 678 Firemen's Ins. Co., Ex parte 742, 744 First Nat. Bank vs. Gay 498 vs. Harris 523 vs. Hartford Life Ins. Co. 631 vs. Hoch 129 vs. Leach 509, 528 vs. Shaw 557, 562 vs. Whitman 528, 529,535,546 Fish vs. Kempton 678 Fishe vs. Ellis 29 Fisher vs. Board of Trade 38 vs. Brown 372, 374, 377, 658, 692 vs. Essex Bank 625 vs. Fisher 572 vs. Keane 59 vs. Leslie 496 vs. Morris 554 vs. Otis 578 vs. Eaab 30 vs. Walham 406, 407 Fitzgerald vs. Blocher 206 Flagg vs. Manhattan E. E. Co. 582 Fleet vs. Murtou 681 Fleming vs. Hector 15 Fletcher vs. Dickinson 196 vs. Green 636 vs. Marshall 120, 121, 124, 134, 355, 691 Florence Sew. Machine Co. vs. Warford 562 Floyd's Acceptances 501, 533 Foard vs. Womack 514 Foley vs. Hill 509, 510 vs. Tovey 32 Folger vs. Chase 494 Foil's Appeal 735 Ford's Case 586 Ford vs. Thornton 699, 701 Forrest vs. Elwes 727, 753, 755, 784 Foster vs. Harrison 56 vs. Paulk 514 Foster vs. Potter 589 Fourth Nat. Bank vs. City Nat. Bank 699 Fowle vs. Ward 658, 690 Fowler vs. Gold Exch. Bank 404, 785, 786,794,799,801 Prank vs. Chemical Nat. Bank 549 vs. Wessels 497 Franklin vs. Bank of England 587 vs. Marsh 496 vs.Vanderpool 514, 516, 517, 518 Franklin Benev. Assoc, vs. Com- monwealth 63, 64 Eraser vs. Tel. etc. Co. 557 Frazer vs. Jones 709 Frebilcock vs. Wilson 415 Freeman vs. Harwood 692 French vs. Bank of Columbia 514, 516 Freund vs. Importers' etc. Bank 481, 482, 521, 522, 530 Friedlander vs. SlaugUter-house Co. 633 Froggatt, Ex parte 709 Frost vs. Clarkson 394 Puller vs. Smith 546, 548 Furman vs. Haskin 523 Fyfe vs. Swaby 727 Gc. Gar vs. Louisville Co. 491 Gardner vs. PuUen 719, 720, 725, 726 vs. Allen 678 vs. Fremantle 62 Garlick vs. James 198 Garrard vs. Hardy 6, 8 Garth vs. Ward 565 Garvin vs. Wiswall 600, 614 Gaston vs. American Bank 605 Gates vs. HalUday 151, 152 Gay vs. Moss 197 Gaylord vs. Van Loan 499 Geary vs. Physic 493 Gelpke vs. Dubuque 555, 556 Genet vs. Howlaud 190, 191, 195, 197, 205 Genin vs. Isaacson 119, 137, 145, 227, 396, 764, 769 George vs. Clagett 603 German Bldg. Union vs. Soud- meyer 744 Gheen vs. Johnson 124, 140, 231 xxvm Table of Oases, Gheen vs. Morgan Gibbons vs. Eule Gibson vs. Crick vs. MoCall Gidding vs. Sears 429 4,250 698 21 803 Gilbert vs. Iron Manuf. Co. 620, 626 vs. Marsh 704 vs. Sharp 569 vs. Sykes 407, 408 Gilbough vs. Norfolk etc. Ry. Co. 555 Gill vs. Cubitt 568 Gillespie vs. Mather 497 Gillet vs. FaircMld 480 Gillett vs. Pepperoorne 213, 217, 225 Gillette vs. Bate 97 Gilpin vs. Howell 112, 145 Girard vs. Taggart 678 Gloucester Bank vs. Salem Bank 552 Glyn vs. Baker 488, 554 Goddard vs. Merch. Bank 545, 548 Godefroi, Ex parte 436 Goldschmidt vs. Jones 304 Good vs. Elliott 407 Goodenongh vs. Gaskell 236 Goodloe vs. Taylor 499 Goodman vs. Harvey 523, 524, 567, 568 vs. Simonds 568, 569, 571 Goodrich vs. Norris 557 Goodspeed vs. East Hadd. Bank 642 Goodwin vs. Eobarts 375, 485, 487, 488, 554, 563, 599, 763 Goodyear vs. Ogden 355 Gorgier vs. Milville 553, 692 Gosden vs. Dotterill 591 Gouoh vs. Staats 517 Gould vs. Central Trust Co. 161, 162, 669, 670, 671, 705 vs. Farmers' Loan & Trust Co. 149, 669, 671, 705 Gram vs. Stebbins 396, 732 Grand Eapids etc. Ey. Co. vs. Sanders 495 Granger vs. Bassett 645, 647 Granite Bank vs. Ayers 190 vs. Eichardson 199 Grant, Ex parte 70 Grant vs. Hamilton 408 vs. Taylor 707, 709, 715 vs. Vaughan 485 Gratz vs. Eedd 646 Graves vs. Am. Exch. Bank 545, 548 Graves vs. Colby 28 Gray vs. Collins 462 vs. Green 704 vs. Haig 122 vs. Pearson 29 vs. Portland Bank 744 Green, In re 423 Green vs. African Meth. Soo. 77 vs. Davies 500 vs. Weaver 238,252,253 Greenby vs. Kellogg 480 Greening vs. Wilkinson 782 Greenland vs. Dyer 390, 478 Greenough vs. Gaskell 236 Greenwood's Case 16 Gregory vs. Wakefield 162 vs. Wendell 204, 231, 416, 419, 478 Gresham Life Assoc. Soc, In re 626 Griffin vs. Weatherby 497 Grimes vs. Hillenbrand 569 Griunell, In re 200 Grinnell vs. Cook 712, 713 Griasell vs. Bristowe 278, 295, 296, 299,800,312,319 Grizewood vs. Blane 411, 412, 477 Grocers' Bank vs. Murphy 90, 95 vs. Penfield 574 Grover vs. Grover 481 Gruman vs. Smith 112, 113, 118, 151, 160, 188, 193, 196, 197, 200, 204, 793, 802 Grymes vs. Hone 584 Gulick vs. Markham 693 Gurney vs. Behrend 559, 560 Gushee vs. Eddy 498 Gwyn vs. Godby 157 Hagar vs. Union Nat. Bank 649, 650 Haggart vs. Morgan 81 Haight vs. Child 774 Half hide vs. Penning 84 Haliday vs. Holgate 666, 669 Halifax Union vs. Wheelright 552 Hall vs. Puller 552 vs. Hnae 550 vs. Wilson 569 Halverson vs. Cole 356 Hambleton vs. Central O. E. E. Co. 632, 634 Hamblett vs. Benuett 21 Hamer vs. Hathaway 796 Table of Cases. XXIX Hamilton vs. State Bank 204, 212, 224 Hamond vs. Messenger 48t Hanks vs. Drake 112, 188, 196 Harbeck vs. Craft 517 Hardenbergh vs. Bacon 717, 739 Hardy vs. Chesapeake Bank 547 vs. Jaudon 150, 665 Hargreaves vs. Parsons 446, 763 Harker vs. Anderson 504, 511, 514 Harkness vs. Eemington 32 Harnett vs. Fielding 717, 720 Harper vs. Pond 487 vs. Raymond 654 Harriman vs. Sanborn 497 Harris vs. Clark 504, 506, 507 vs. Knickerbocker 774 VS.N.D. E. K.Co. 723 vs. Tumbridge 117, 171, 370, 445, 447 Harrison vs. Harrison 606 vs. Heathorn 8, 382 Hart's Case 730 Hart, In re 436 Hart vs. Frontino Co. 637 vs. Ten Eyck 234 Hartga vs. Bank of England 612 Hartley vs. Allen 656 Hasbrook v8.,Vandervoort 152, 659 Haseltine vs. Siggers 762 Haskins vs. Alcott 23 Hastings vs. Drew 580 vs. McKiuley 481 Hatch vs. Douglas 756 vs. Elkins 133 Hataeld vs. Phillips 671 Havemeyer vs. Havemeyer 473 Hawkins vs. Maltby 132, 284, 292, 294, 319, 320, 321, 323, 723, 730 Hawley vs. Brumagim 145 Hayden vs. Demets 781 Hays vs. Riddle 661 Hayward vs. Nat. Bank 693 Haywood etc. R. R. Co. vs. Bryan 622 Hazard vs. Fiske 561, 562 vs. WeUs 704 Healy vs. Oilman 517, 518 Hearne vs. Keane 698 Heath vs. Erie Ry. Co. 652 vs. Mahoney 203 vs. Pres. Gold Exch. 25, 33, 62, 80,81 Heckscher vs. Gregory 388 Heist vs. Hart 565 Henderson vs. Bamewell 769 vs. Bise 387 vs. Pope 511 Heneqnin vs. Clews 696 Henkley vs. Heudrickson 780 Henniug vs. N. Y. & N. H. E. E. Co. 643 Heritage vs. Paine 301 Hern vs. Nichols 603 HestonviUe Ey. Co. vs. Shields 224 Hewison vs. Guthrie 710 Hewitt vs. Price 386 Heywood vs. Watson 701 Hiatt vs. Griswold 694 Hibblewhite vs. Beeson 292 vs.McMorin6 292,452, 453, 454, 477, 478 Hibemia Fire Eng. Co. vs. Com- monwealth 34 Higgins vs. EiddeU 32 vs. Moore 539 vs. Senior 352, 683, 685 Higginson vs. Simpson 409, 420, 421 Highmore vs. Malloy 248 Hill's Case 617 Hill vs. Newioh. Co. 369, 651, 652, 653 Hilton vs. Giraud 764 Hinkler vs. Merch. Nat. Bank 557 Hoaglaud vs. Bell 584 Hochreiter's Appeal 34 Hodges vs. Shuler 496, 498 Hodgkinson vs. Kelly 284, 285, 295, 317, 321, 323, 353, 730 Hoffman vs. Livingston 108,»135, 234, 353, 676 Holbrook vs. N. J. Zinc Co. 582, 634, 638, 639 Holmes, Ex parte 622 Holmes vs. De Camp 689 vs. Germ. etc. Bank 561 vs. Higgins 16, 24 vs. Smith 572 vs. Symons 285, 323 Holt vs. Eoss 546 Holyoke Vs. Burnham 152 Home vs. Ould 501 Hooley vs. Gieve 164, 288 Hope vs. Lawrence 168, 224, 785, 788 Hopkins, In re 656 Hopkinson vs. Marquis of Exe- ter 33, 62 Hopper vs. Sage 369, 653 Hoppin vs. Buffum 682 XXX Taile of Cases. Hombeok vs. Am. Bible Soc. 21 vs. Sleight 21 vs. Westbrook 21 Horstmau vs. Hensliaw 547 Hortou vs. Morgan 137,145,352,356, 365, 366 Hotohkiss vs. Ladd 774 Hotham vs. Sutton 591 Howard vs. Brigham 111, 199 vs. Sheppard 559 Howe vs. Buffalo etc. Ey. Co. 802 vs. Starkweather 398, 589, 591, 623 Howell vs. Chicago etc. K. E. Co. 645, 646 vs. Earp 20 Howley vs. Knight 29 Hoy vs. Eeade 711 Hoyt vs. Quicksilver Mining Co. 581 vs.Seeley 504,514,516,517 Hudson vs. Weir 767 Huif vs. Wagner 575 Hughes vs. Vt. Copper Co. 647, 650, 694 Humble vs. Langstou 137, 314, 730 vs. Mitchell 761, 766 Humboldt Towuship vs. Long 491 Humfrey vs. Dale 362, 681, 683 Hunt vs. Gunn 124, 125, 724 Hunter vs. Walters 632 vs. Wetsell 772 Huntington va. Knox 678 Hussey vs. Crickitt 407 ^8. Manuf. etc. Bank 779 Hutchins vs. Olcutt 712, 713 vs. State Bank 591, 606 Hutchinson vs. Bowker 355 Huyk vs. Meador 496 Hyatt vs. Allen 647, 650, 694 vs. Argent! 169, 212 Hybart vs. Parker 28, 29 Hyde vs. Woods 12, 14, 34, 64, 88, 91, 93 Ikin vs. Bradley 157 Imeson, Ex parte 497 Imp. Merc. Credit Assoc, In re 131 luohbald vs. Cockerill 409 vs. Neilgherry Coffee Co. 124 India Assoc, vs. Eock 472 Ingraham vs. Disborough 577 Inhab. of Palmyra vs. Morton 33 Innes vs. Wiley 56 Ins. Co. vs. Sturges 756 Ins. & Trust Co. vs. Cole 765 Ireland vs. Livingston 119 Irving Nat. Bank vs. Alley 499 Isham vs. Buckingham 617 Iveson vs. Connington 682 Ivory vs. The Bank etc. 504, 511 Jacks vs. Darrin 514, 515, 524 Jackson vs. Cocker 723,725 vs. Corey 21 vs. Cummings 713 vs. Plank Eoad Co. 647 vs. Y. & C. E. E. Co. 554, 555 James's Appeal 715 James vs. Hagar 496 vs. Morey 578 vs. Woodruff 394 Janssen vs. Green 249 Jaudon vs. Nat. City Bank 607, 609 Jaycox vs. Cameron 179 Jenkyns vs. Brown 560 Jenne vs. Ward 535 Jenys vs. Fowler 545 .Jerdeine vs. Bright 774 Jerome vs. McCarter 200 Jessopp vs. Lutwyche 257, 420 Johnson vs. Albany etc. Ey. Co. 739 vs. Bank etc. 514 vs. Brooks 782 vs. Dexter 660, 670 vs. Mulry 398, 769, 770 vs. Osborne 352, 380 vs. Stear 667 vs. Weed 513 vs. Underbill 154, 618, 626 Johnston vs. Laflin 623, 624, 625 vs. Par.sey 615, 632 vs. Eenton 615, 632, 635, 636 vs. EusseU 408 Jones vs. Brinley 8, 591 vs. Fales 497, 498 vs. Kent 176 vs. Littledale 675, 683 vs. Marks 164, 168 vs. Newhall 731 vs. Ogle 656 vs. Pepperoorne 700, 708, 714, 715 vs. Eandall 407 vs. E. Co. 369 Table of Cases. XXXI Jones vs. Eyde 548 Y8. Simpson 498 vs. Terre Haute etc. E. E. Co. 581, 647, 650 Jordan vs. Nat. Shoe etc. Bank 703 Josephs vs. Pebrer 129, 259, 383 Jourdaine vs. Lefevre 699, 700 Joyce vs. De Moleyns 709 Judah vs. Harris 497 Judsou vs. Etheridge 713 Justice vs. Lang 771 K. Kane vs. Bloodgood 647, 650 Karnes vs. Eochester etc. E. E. Co. 645 Kean vs. Frankliu 29 Keene vs. Beard 521 Kenicott vs. Supervisors 578 Keith vs. Jones 497 Kelley vs. Brooklyn 497 vs. Hemmingway 499 vs. Whitney 570 Kelly vs. Munson 678 vs. Second Nat. Bank 514, 518 Kemhle vs. Atkins 222, 253. 257 vs. Mills 516,517 Kendall vs. Kendall 591 Keufield vs. Latham ' 112,204,205 Kent vs. Guiter 777 vs. Quicksilver etc. Co. 581, 593, 594 Keppel vs. Petersburg E. E. Co. 647 Ketchum vs. Clark 687 Keystone Br. Co. vs. McCluney 156 Kill vs. HoUister 80, 83 Kimball vs. Huntington 496 Kimber vs. Barber 213,224,225,226 King vs. Bank of England 742, 744 vs. Capper 585, 586 vs. Churchwardens 590 vs. De Berenger 458, 472 vs. Griffiths 64 vs.PatersonE.E.Co. 645,647 vs. Talbot 233 Kingsbury vs. Kirwin 352, 358, 453 Kingsland vs. Braisted 30 Kingston Bank vs. Eltinge 546, 547 Kinne vs. Ford 404 Kinsley vs. Eobinson 514 Kirk vs. Dodge Ins. Co. 496 Kirkpatrick vs. Bonsall 416, 419, 434 vs. Muirhead 574 Knickerbocker Life Ins. Co. vs. Nelson 749 Knight vs. Barber 763 vs. Cambers 420, 436, 698 vs. Fitch 391, 420, 436, 698 vs. Wiffeu 637 Knowlton vs. Fitch 116, 160, 180, 183 185, 188, 207, 403 Kortright vs. Buffalo Bank 742 Krause vs. Settley 403 Kurz vs.Eggert 28 Labouchere vs. Earl of Wharn- cliffe 36, 56 Lacey vs. Hill 197, 278, 280, 286, 288, 290, 291, 293, 347, 352, 358, 360, 367, 698 Lafond vs. Deems 22, 30, 61, 83 Lake Ontario Ey. Co. vs. Masou 499 Lambertson vs. Van Boskerk 694 Laraert vs. Heath 111, 124, 125 Lamm vs. Port Deposit etc. Assoc. 642 Lancaster Bank vs. Woodward 523, 524 Lane vs. Bailey 668 Langton vs. Waite 142, 147, 287, 381 Lansing vs. Gaiue 501 Lassen vs. Mitchell 200 Lathavo vs. Barber 393 Lauman's Appeal 623, 659 Laverty vs. Suethan 693 Lawrence vs. Clark 573 vs. Maxwell 114, 145, 188, 352,357,366,539,663, 790 Lawson vs. Eichards 348 Lawton vs. Hickman 383 Leach vs. Forbes 738 vs. Harris 12, 13, 14, 27, 34, 35, 38,40,41,46,52,77,81,87 Lebanon Bank vs. Mangan 554 Le Blanc, In re 649 Le Croy vs. Eastman 145 Lee vs. Gargulio 132 Leech vs. Leech 27, 34, 66, 90 Ledoux vs. Gaza 230 Ledwich vs. McKim 494, 495, 569, 605 Legg vs. Evans 667 Legge vs. Thorpe 514, 515, 516 Leggett vs. Bank etc. 609 Lehman vs. Strassberger 439, 477, 478 Leiber vs. Goodrich 498 XXXll Table of Oases. Leitch vs. Wells 566, 606, 607, 613, 673 Leland, In re 491 Lenheim tb. Wilmarding 574 Leonard vs. Hart 403 Leonardville Bank vs. Willard 26 Le Roy vs. Globe Ins. Co. 647, 648, 649 Lett vs. Morris 481 Levy vs. Bank etc. 545, 548 vs. Loeb 145, 146, 150, 222, 233, 235 vs. Peters 515 Lewis vs. Graham 658 vs. Littlefield 409 vs. Mott 668 vs. "Varuum 196 Lexington vs. Butler 555 Lexington Ins. Co. vs. Page 646 Leyoraft vs. Dempsey 688 Lightfoot vs. Creed 127, 273, 726 Lilley vs. Miller 515 Little vs. Barker 164, 755 vs. Pheuix Bank 503, 504, 517, 518 Lindley vs. European etc. Co. 547 Livermore vs. Bushnell 472 Lloyd vs. Gilbert 352 vs. Howard 570 vs. Loaring 81 Locke vs. Presoott 710 Lockliart vs. Van Alstyne 593, 647 Lookwood vs. Bank 625, 630 vs. Thome 688, 689 Loeb vs. Hillman 124 Logan vs. Musiok 453 Lombardo vs. Case 344, 367, 369, 652 London vs. Brandon 223, 251 London Bank etc.. Ex parte 723 London, H. & C. E. Bank, In re 128 London etc. Soo. vs. Sav. Bank 554 Long vs. Constant 481 Long Island R. K. Co., In re 620 Loomis vs. Stave 204,212 Lorimer vs. Smith 386, 453, 454 Loring vs. Gurney 354 vs. Salisbury Mills 608, 632, 634 Loudon vs. Bernadiston 78 Love vs. Harvey 409 Lowndes vs. Anderson 503 Lowne vs. Amer. Fire Ins. Co, 648 Lowrey vs. Muldron 736 vs. Com. etc. Bank 607, 619, 620, 635, 640 Loyd vs. Williams 749 Lucas vs. Dorrein 705 vs. Harper 409 Luffman vs. Hoy 125 Luling vs. Atlantic etc. Ins. Co. 592, 594, 645, 650 Lunt vs. Bank etc. 507 Lupton vs. White 234 Luster, In re 421 Lyne vs. Sieskind 422 Lynn vs. Kerridge 591 Lyon vs. Culbertson 443, 449, 453, 477 vs. Marshall 500 Lyttleton vs. Blackburn 62 M. McDaniel vs. Flower Br. Mfg. Co. 137 Machinists' Nat. Bank vs. Field 634, 640 Madison etc. Bank vs. Savings Soc. 644 Haddock vs. Rumball 754 Magee vs. Atkinson 136,274, 352, 675 vs. Badger 567 Magruder vs. Colston 154 Mahoiiey vs. Capertou 212 Maitland vs. Citizens' etc. Bank 574 Malcolm vs. Scott 537 Mandeville vs. Reed 191 Manhattan Co. vs. Osgood 756 Mann vs. Butler 31 Manning vs. McClure 512 'vs. Quicksilver Co. 595, 618, 652, 656 Manningford vs. Toleman 707 Marbled Iron Works vs. Smith 26 Mareau vs. Longley 406 Marfield vs. Goodhue 200 Marine Bank vs. Biays 647 vs. Fiske 560, 561 vs. Nat. City Bank 532, 537, 538 vs. Wright 561 Markham vs. Jaudon 103, 104, 111, 112, 113. 114, 115, 151, 160, 169, 191, 196, 197, 201, 210, 346, 348, 355, 358,360,366,694,790, 798 Markle vs. Hatfield 548 Marnham, Ex parte 148, 414, 453 Marsh vs. East Ry. Co. 652 vs. Keating 635, 644 Table of Gases. XXXlll Marsh vs. Oneida Bank 699, 703 vs. Kussell 472 Marshall vs. Thrnston 412, 443 Marston vs. Gould 145, 174 Marten vs. Gibbons 131, 352, 436, 763 Martin vs. Boure 483 vs. Moulton 213 Martineau vs. McCoUnm 578 Marvin vs. McCullum 500 Marye vs. Strouse 119, 120, 158, 159, 213,220 Maryland F. Ins. Co. vs. Dalrym- ple 112, 191, 204, 210, 212, 224, 692 Marzetti vs. Williams 510 Mason vs. Armitage 717, 719 . vs. Decker 769, 771 vs. Lickbarrow 558, 559, 560 Massey vs. Eagle Bank 525 Masters vs. Ibberson 567 Mastersou vs. Botts 26 Mather, Ex parte 389 Mather vs. Lord Maidstone 545 Mathews's Estate 238 Mathews vs. Coe 782 vs. Mass. Nat. Bank 600, 638 Maxted vs. Morris 119, 121, 295, 355 vs. Paiue 119, 121, 274, 276, 278, 285, 292, 302, 303, 311, 313, 314, 341, 3.52, 354, 355 Maxton vs. Gheen 180, 181, 426, 432 Maxwell, la re 656 May vs. Chapman ' 567 Mayhew's Case 302 Maynard vs. Anderson 711 vs. Eaton 303 McAllister vs. Kuhn 692 McArthur vs. Seaforth 784 McBlair vs. Gibbes 389 MoBride vs. Eykyn 131 McBurney vs. Martin 694 McCagg vs. Woodman 703 McCalla vs. Clark 112, 152 McCarty vs. Roots 571 McClernan vs. Hall 675 McComb vs. Wright 675 McCombie vs. Davies 667 McCormick vs. Trotter 497 McDowell vs. Ackley 34, 55, 97 vs. Bank etc. 609, 630, 702 McEwen vs. Woods 121, 124 McGowen vs. Remington 736 McHvaine vs. Egerton 396, 415, 453 Mclntyre vs. Warren 689 McKenna, Ex parte 710 McKenny vs. Haines 783 McKenzie vs. Nevins 712 McKeon vs. Kearney 21 McKinnel vs. Robinson 390 McLaughlin vs. Detroit R. R. Co. 594 McMahon vs. Rauhr 24 McNeil vs. Tenth Nat. Bank 112,566, 596, 600, 613, 633, 634, 656,660,666,670,671 Meacham vs. Stearns 232 Meacher vs. Fort 547 Mead vs. Young 546 Meads vs. Merch. Bank 529, 572 Mechanics' Bank vs. Crow 572 vs. Merch. Bank630 Mech. Bk. vs. N. Y. & N. H. R. E. Co. 591, 643 vs. Seaton 732 vs. Straitou 504 Mechanics' Bldg. Assoc, vs. Con- over 659 Medewe's Trust, In re 705 Meehan vs. Forrester 704 Mercantile Credit Assoc. In re 237 Merch. Bank vs. Cook 137, 620, 659 vs. HaU 486 vs. Livingston 610, 633, 660 vs. Phenix Bank 490 vs. Spicer 494, 517 vs. State Bank 504, 509, 527, 529, 530 vs. Trenholm 669 vs. Union Ry. etc. Co. 481, 659 Merchants' etc. Trust Co. vs. Bk. 542 Merrick vs. Butler 570 Merrill vs. Mclntyre 28 Merry vs. Mckalls 278, 284 Mervin vs. Hamilton 226, 227, 228, 698 Metcalf vs. Bruin 28 Mewburn vs. Eaton 132, 294 Mexican & S. A. Co. In re 236 Meyer vs. Beldeu 695 vs. Clark 404 vs. Muscatine 555 vs. Peck 557 Michigan Bank vs. N. Y. etc. 619 Michoud vs. Giroud 221 Middlessex Bank vs. Minot 224 Middleton's Case 78 C XXXIV Table of Cases. Midland Ey. Co. vs. Taylor 634 Milford TS. Hughes 251 Miller vs. Austen 554 vs. Ids. Co. etc. 232, 354 vs. Kent 121 vs. Eace 488, 502, 569 MlUikeu vs. Dehon 169, 189, 190, 191, 193, 204, 207 Mills vs. Gould 404 vs. Hunt 675 Milnes vs. Gery 81 Mims vs. West 566 Minet vs. Gibson 504 Minshall vs. Arthur 693 Minturn vs. Fisher 348, 504, 511 Mississippi etc. E. E. Co. vs. Cromwell 734 Mitchell vs. City etc. Bank 724 vs. Cockburn 389 vs. Culver 494 vs. Harris 81 vs.Newhall 112,124,273,352, 353 Mocatta vs. Bell 145, 147, 275, 685 Moeller vs. McLagan 188, 189 Moflfatt vs. Farquhar 627 Mohawk & H. E. Co., In re 620, 621 Mohawk Nat. Bank vs. Broderick 505, 507, 518, 519 Moline, In re 253 Mollett vs. Eobinson 681 Monk vs. Graham 635, 692 Monroe vs. Peck 175 vs. Smelly 408 Moody vs. Bank 600 vs. Mack 518 Moon vs. Guardians etc. 230 Moore vs. Battle 751 vs. Brink 16 vs. Burke 462 vs. Metrop. Nat. Bank 577, 599, 601, 613 vs. Voughton 159, 354 Morgan, In re 414 Morgan vs. Bank 546 vs. Bank of North Amer. 631 vs. Congdon 713 vs. Great East. Ey. Co. 647 vs. Jaudon 112 vs. Mech. Bank. Assoc. 753 vs. Smith Amer. etc. Co. 578 vs. Mason 232 vs. Pehrer 386, 407 Morgan vs. Eichards 409 Morley vs. Morley 139 Mornyer vs. Cooper 567 Morrioe vs. Hunter 124, 127 Morrill vs. Cooper 744 Morris vs. Cannau 323, 382 vs. Mowatt 622 Morris Canal etc. vs. Fisher 555 vs. Lewis 196,197, 555 Morris Eun Coal Co. vs. Barklay Coal Co. 468, 472 Morrison vs. Bailey 504, 511 vs. Glover 85 Morse vs. Swits 462 Mortimer vs. McCaUau 280, 309, 352, 387, 453, 698 Morton vs. Burn 571 Mosier vs. Norton 756 Moss, In re 696 Mosse vs. Salt 707 Mott vs. Clark 578 Moule vs. Brown 518 Mountford vs. Scott 705 Mount Holly etc. Co. vs. Terrell 600 Moxey's Appeal 27, 34, 52, 63, 68 MuUer vs. Pondir 569 Mnndorf vs. Wickersham 611 Munger vs. Shannon 497 Munn vs. Barnum 229, 623, 624 vs. Burch 507 Murray vs. Ballon 565 vs. Bush 627 vs. Judah 514, 517 vs. Lardner 554, 555, 569 vs. Pinkett 708 vs. Stevens 741, 744 Musgrave vs. Beckendorf 777, 783 Musgrave's Case 730 Mussell vs. Cook 760, 766, 774 Myers vs. Perigal 587 N. Naglee vs. Pacific Wharf Co. 625 Narbriug vs. Bank of Mobile 692 Nat. Bank vs. B'way Nat. Bank 548 vs. Case 152 vs. Kirby 570 vs. Lasher 24 vs. Lewis 756 vs. Nat. Bank 531, 536 vs. Ninth Nat. Bk. 545, 548 vs. Smith 703 Table of Cases. XXXV Nat. Bank vs. Vaa Derwerker 24 Nat. Bank of Commerce vs. Nat. Meoh. Bank Absoc. 542, 545, 546, 547, 548, 551 Nauman vs. Caldwell 790 Neale vs. Janney 629 Neiler vs. Kelly 692 Neilson, Ex parte 260, 380, 382 Nellis vs. Clark 570 Nesbit vs. Heeler 119 NewbeiTy vs. Irou JIfg Co. 625 Newbery vs. Garland 462 New Brunswick etc. Co. vs. Mug- geridge 717, 722, 731 Newell vs. Gregg 570 Newport etc. Co. vs. Douglas 223 Newton vs. Fay 658, 659, 660, 663 vs. Wilson 750 New York etc. E. E. Co. vs. Schuyler 583, 591, 599, 618, 641, 643, 651 NichoUs vs. Eaton 93 Nicholson, Assignee, vs. Gonch 66, 267, 278, 392 Nickalls vs. Eaton 295, 304 vs. Merry 295, 297, 304, 307, 352, 683 Niooll vs. Burke 678 Nightingale vs. Devisme 8, 591 Nims vs. Vaughn 740 Norris vs. Irish Land Co 743, 746 North vs. Forrest 767, 772 vs. Phillips 115,117,428,432, 477, 777, 795 Northrup vs. Newtoii etc. Co. 625 vs. Shook 109 North Shore S. I. Ferry Co., In re 622 Norton vs. Coon 669 Norwich Bank vs. Hyde 494 Nourse vs. Prime 137, 143, 352, 353, 356, 365, 658, 756 Noyes vs. Marsh 736, 739 vs. Spaulding 382, 386, 453, 623, 624 Nunemaker vs. Lanier 514, 519 Nunezo vs. Daiitel 496 Nutbrown vs. Thornton 717, 720, 727 Nutting vs. Thomasson 609 Oakley vs. Eigby ' 386 Gates vs. Nat. Bunk 571 O'Callahan vs. Sawyer 570 Ocean Nat. Bank vs. Fant 502 Odessa Tramway Co. vs. Mendel 749 Oelrioks vs. Ford 187, 189, 377 Oerter vs. First Nat. Bank 625 Ogden vs. Ben as 546 vs. Lathrop 148, 197, 211, 660, 662 Ogle vs. Kiiipe 591 Olcott vs. Eathbone 513 Oldham vs. Ramsden 421 Olivierson vs. Coles 386 OUery vs. Brown 26, 56, 61 Ommanney vs. Butcher 591 Ontario Bank vs. Mumford 481 Orange etc. Ey. Co. vs. Fulberg 777 Oriental Co. vs. Briggs 721, 728 Orleans vs. Piatt 566 Orr vs. Bigelow 623,624,778 vs. Union Bank 548 Osborn vs. Hawley 496 Osgood vs. Laytin 646 vs. Pearsons 499 Overend, Guruey & Co. lu re 730 Overman vs. Hoboken City Bk. 535 Owen vs. Davis 440 vs. Eouth 784 Owens vs. Miss. Soc. 21 Oxford etc. Co. vs. Bunnell 625 P. Page vs. Board of Trade 35 vs. Fowler 796 Paine vs. Hutchinson 284, 309, 323, 728, 730 Palmer vs. Hussey 694 vs. Palmer 686 vs. Pratt 499 vs. Yates 578 Pancoast vs. Gowen 88 vs. Houston 88 Pannell vs. Hurley 603 Pardee vs. Fish 491 , 497, 554 Park vs. Musgrave 189, 690 vs. Simmons 22 Park Bank vs. Watson 569, 574 Parker vs. Gale 696 vs. Merchant 510 vs. Eamsbottom 751 Parrot vs. Thatcher 356 Parsons vs. Martin 147, 372, 694 Partridge vs. Bank etc. 490 vs. Forsyth 356 vs. Ins. Co. 487 XXXVl Table of Cases. Pasley vs. Freeman 462 Patterson vs. Poindexter 554 vs. PoweU 383, 386 Payne, Ex parte 85 Payne vs. Elliott 589, 692 vs. Jenkins 496 Peabody vs. East. M. Soo. 21 vs. Speyers 353, 404, 415, 769 Peacock vs. Rhodes 569 Pearson vs. Scott 292, 372, 377, 599, 604 Peckham vs. Ketchnm 124, 125 vs. Van Wagener 650 Pedder vs. Preston 706 Peek vs. Guruey 462 Peets vs. Bratt 499 Pender vs. Fox 306 vs. Lushington 725 Pennell vs. Alexander 362, 683 Penney, Ex parte 629 Pennsylvania K. E. Appeal 615, 632 People vs. Assessors 652 vs. Board of Trade 34 vs. Central Car etc. Co. 649 vs. CommTS of Taxes 579,580, 586 vs. Crockett 629 vs. Elmore 623 vs. Kipp 620 vs. Mechanics' Aid Soc. 63 vs. Med. Soc. of Erie 34, 35, 63 vs. Merchants' Bank 513 vs. Olmsted 26 vs. Parker Vein Coal Co. 744 vs. Sau Francisco Ben. Soc. 55 vs. St. George Soc. 61 vs. Tibbetts 620 Peppercorne vs. Clench 295, 304 Perring vs. Hone 24 Peters vs. Mortimer 758 Petrie vs. Clark 574 vs. Hanney 389, 440 Pettamberdass vs. Thackoorsey- dass 457 Pettee vs. Front 569 Pettilou vs. Hippie 690 Phen^ vs. Gillan 148 Phila. Bank vs. Newkirk 498 Phila. E. E. Co. vs. Cowell 647, 650 Phillips, Ex parte 149, 414, 453 Phillips vs. Belden 689 vs. Berger 736 Phillips vs. Jones vs. Moir 32 124 vs. Wickham 622 Phillips's Appeal Pickering vs. Appleby vs. Busk 783 759, 766 561 vs. Cease 404, 443, 449, 453, 477 vs. Demeritt 119, 213, 220, 225, 374, 376 Piokhard vs. Sears 637 Pidgeon vs. Burelem 257 Pigot vs. Cubley 198, 224 Pigott vs. Thompson 28 Pike vs. Ledwell 755 Pinch vs. Anthony 33 Piukerton vs. M. & L. E. Co. 625, 628, 744, 779 Pinkett vs. Wright 724 Pinney vs. Wells 713 Pitt vs. Holmes 480, 481 Pittsburgh Bank vs. Neal 569 Pixley vs. Boynton 404, 417, 453 Planters' Bank vs. Keesee 504 vs. Merritt 504, 507, 529 Player vs. Archer 78 Plumbly, In re 70, 71, 72, 267 Pollock vs. Nat. Bank 632, 634, 739 vs. Glassell 495 vs. Pollock 656 vs. Stables 124,273,354,361 Poole vs. Middletou 724, 730 Pope vs. Bank of Albion 531 Porter vs. Parks 610 vs.Talcott 513 vs. Viets 449, 453 Pott vs. Flather 777, 780, 781 Potter vs. Thompson 191, 198 Potts vs. Mayer 572 Powell vs. Abbott 49 vs. Jessop 764 vs. Newburg 698 Pratt vs. Adams 757 vs. Hamil 608 vs. Tilt 600, 607 vs. Machinists' etc. Bank 632, 635 vs. Pratt 645 vs. Taunton Copper Co. 632, 633, 635 Pray vs. Mitchell 764 Preachers' Aid Soc. vs. Eich 21 TaMe of Cases.. xxxvii Prentice vs. London 84 Presoott vs. De Forest 632 Price vs. Gover 116, 142, 145 vs.Minot 398,401 vs. Neal 545, 548 Prioleau vs. S. W. E. Bank 482 Pritchett vs. Smart 388 Proctor vs. Brain 222,254 Prouty vs. M. S. etc. E. E. Co. 593, 594, 646 Pnllman vs. Upton 152 Pulsifer vs. Shepbard 164 Purchase vs. Bank 739 vs. Mathison 515 Pyke, Ex parte 421 Quackenboss vs. Sayer 660, 750, 752 QuarleS vs. The State 406 Quincy vs. White 83, 211, 213, 223, 473, 688 Quiuer vs. Marblehead Soc. Ins. Co. 652 R. Eahone vs. Williams 603 Eailroad Co. vs. Benedict 769 vs. Ephternacht 736,737 vs. Schutte 575 Eaineyvs. Laing 20 Kance's Case 646 Band vs. White etc. E. E. Co. 777, 780 Eandon vs. Barton 777 Eankin vs. McCnllough 208 Eapalje vs. Norsworthy 233 Eaphael vs. Bank of England 502 Eash vs. His Creditors 189 Eathbone vs. Budlong 675 Eawle vs. Gnnu 764, 769 Eawlings vs. HaU 238, 384, 388, 390, 478 Eaymoud vs. Leavitt 456, 457, 458, 464,468,470 vs. Middleton 500 Bead vs. Lambert 112, 196, 692, 693 Beed vs. Bank of Newburgh 623 vs. Jaudon 179 vs. Eoberts 584 Bees vs. Fernie 690 Eegina vs. Aspinwall 459, 476 vs. Brown 463 vs. Esdaile 461, 463 vs. Whitmarsh 15 Eeitenbaugh vs. Ludwlck 794 Eemfry vs. Butler 124 Eenner vs. Bank etc. 348 Benny vs. Morpis 278, 305 Eex vs. Commissioners etc. 254 vs. Gurney 459 vs. Norris 459 vs. Waddington 458 Eice vs. Board of Trade 35, 37, 38 vs. Gist 409 Eioh vs. Boyce 161 Eichards vs. Warring 483, 500 Eichardson vs. Dickinson 32 vs. Maun 224 vs. Sew. Mach. Co. 783 Eiokford vs. Eidge 518, 519 Eiggs vs. Magrnder 769 vs. Tayloe 654 Eiley vs. Schawacker 567 Eindskoff vs. Barrett 492, 497 Eisley vs. Phenix Bank 508, 531 vs. Ind. E. E. Co. 580 Eitohie vs. Bradshaw 518 Bitter vs. Cushman 112, 188 Bitterband vs. Baggett 87, 92 Eivara vs. Ghio 712 Eobarts vs. Tucker 552 vs. Trenaine 751, 754 Bobbins vs. Butler 16 vs. Dillaye 794 vs. WeUs 30 Boberts vs. Berdell 783 vs. Croft 708 vs. HaU 572 vs. Lane 567 Eobins vs. Edwards 130,153 Eobinson vs. Chartered Bk. 626, 724 vs. Hawksford 504, 508 vs. Hurley 197,199,782 vs. Kitchen 252 vs. Mearns 407 vs. Molett 213, 219, 281, 342,349,352,356,380 vs. Morris 157, 169, 172, 756 Eobson vs. Bennett 521, 531 vs. Fallowes 386 Eock vs. Nichols 398, 401 Eogers, Ex parte 436 Bogers vs. Gould 145, 765, 769 Bolin vs. Steward 510 Bomaine vs. Van Allen 658, 790 Borke vs. Eussell 23, 24, 25, 33, 46, 62,63 XXXVIU Talle of Cases. Eorke vs. Short 443 Eose vs. Dickson 756 Eosenstock vs. Tormey 120, 206, 210, 227, 228, 231, 353 Eosewarne vs. Billings 124, 421, 423, 436 Boss vs. S. W. Ey. Co. 623, 625 vs. Union etc. E. E. Co. 717, 731, 732, 734 Eothschild vs. Corney 522, 523 Eow vs. Dawson 481 Eowe vs. Guillaume 696 Eoyal Brit. Bank vs. Turquand 583 Euohitzky vs. De Haven 429, 432 Eudge vs. Bowman 383 Eudolf vs. "Winters 450, 478 Eumball vs. Metrop. Bank 491, 554, 599, 613 Eumsey vs. Berry 416, 453 Eusaell vs. Hadduck 699 vs. Langstaff 494 vs. Whipple 496 Eyder vs. Alton etc. R. E. Co. 650 S. Sabin vs. Woodstock 625 Sackett vs. Palmer 496 vs. Spencer 496, 499 Saffery, Ex parte 82, 265 Salem Bank vs. Gloucester Bank 550 Salinas vs. Waight 499 Salisbury Mills vs. Townsend 632, 635, 640 Salter vs. Bart 505, 519 Salters vs. Genin 116,212,692 Saltsman vs. Shults 24 Sampson vs. Shaw 467, 478 Sanborn vs. Benedict 404, 453 Sanderson vs. Bell 713 Sandford vs. Supervisors 17 Sanger vs. Simpson 498 Sargent, Ex parte 559, 560 Sargent vs. Essex etc. Co. 625 vs. Franklin Ins. Co. ^98, 620, 623, 626, 649 Saunders vs. Kentish 386, 387 Savannah Cotton Bxch. vs. State 79 Sawyer vs. Hoag 647 vs. Langford 387 vs. Taggart 441, 477 Sayles vs. Blane 315, 730 vs. Sims 669 Scarborough vs. Harris 516 Scarfe vs. Morgan 713 Schenectady E. E. Co. vs. Thatcher 154 Schepeler vs. Eisener 112, 210, 698 Scherinerhorn vs. Talman 755 Schmidt vs. Gunther 26 Scott vs. Avery 68, 83 vs. Central E.E. Co. 650 vs. Eagle Fire Co. 592 vs. Franklin 697,700,701 vs. Inglis 251 vs. Irving 354 vs. Ives 95 vs. Jackson 251 vs. North ^1 Scould vs. Bntler 718 Scrace vs. Whittington 682 Sorimgeour's Claim 197,278,286, 288, 347, 358, 360, 367 Searing vs. Butler 204, 212 Sears vs. Boston 733 vs. Lawrence 498 Second Nat. Bank vs. Nat. etc. Bank 631 Security Bank vs. Nat. Bank 491, 538 Seibel vs. Nat. Currency Bank 553, 568, 569 Seldon vs. Equitable Trust Co. 109 Semmes vs. Boykin 669 Serrell vs. Derbyshire Ky. Co. 523 SewaU vs. Boston W. P. Co. 633, 634, 635, 636, 779 vs. Ives 25, 26, 46, 63, 74, 81 vs. Lancaster Bank 693 Seymour vs. Delancey 731 Shaw vs. Fisher 720, 722, 728, 730, 734 vs. Holland 777, 779, 781, 784 vs. E. E. Co. 483, 493, 559, 560, 563, 564 vs. Eowley 730 vs. Spencer 375, 606, 608 Sheffield Gas Co. vs. Harrison 723, 724 Sheldon's Case 586 Sheldon vs. Parker 482 Shelliugton vs. Howland 154, 155 Shepherd vs. Johnson 784 Sheppard vs. Gillespie 284, 728, 730 vs. Murphy 272, 274, 278, 284, 292, 295, 319, 730 Sherwood vs. Am. Bible Soc. 21 Shipley vs. Mechanics' Bank 742, 744 Shipman vs. Etna lus. Co. 625 Shrewsbury vs. Blount 462 Table of Cases. xxxix Shropshire etc. Ey. Co. vs. The Queen 580, 583, 615 Shumate's Case 406 Sibbald vs. Bethlehem Iron Co. 234 Sibley vs. Carteret Club 59 Sim vs. Anglo-Amer. Tel. Co. 636 Simmons vs. Monier 81 vs. Taylor 503 Simon vs. Merritt 567 Singerly vs. Johnson 27, 34, 67 Sistare vs. Best 128 Skillen vs. Richmond 497 Slaymaker vs. Bank 589, 691 Slosson vs. Duff 757 Slowman vs. Bank of Eug. 632, 634 Smart vs. Mechanics' Bank 572, 757 Smith vs. Allen 496 vs. Am. Coal Co. 625, 656 vs. Blandy 355 vs. Bouvier 119, 164, 166, 180, 181, 355. 425, 427, 431, 434, 453 vs. Chester 545 vs. Clench 462 vs. Compton 81 vs. Crescent City etc. Co. 623 vs. Goldsworthy 581 vs. Heath 157, 756 vs. Lindo 124, 250, 251, 256, 257, 352 vs. Miller 517, 521 vs. Nelson 21 vs. Pettee 781 vs. Schibel 481 vs. Smith 408 vs. Thomas 429, 431, 477 vs. Tracy 165 vs.Wyckoff 501 Snelling vs. Howard 675, 680 Snow vs. Wheeler 24 Society vs. Commonwealth 64 Society for etc. vs. Commonw. 52, 61 Solomon vs. Bank of England 503 Somerby vs. Bnntin 768 Somerset Ey. Co. vs. Cushing 581 Sonneborn vs. Lavarello 63, 82 Spangler vs. McDaniel 507, 514, 515 Sparhawfc vs. Drexel 204, 205, 209 Sparling vs. Parker 587, 764 Spear vs. Crawford 580 vs. Hart 367, 652 Speyer vs. Colgate 136 Spooner vs. Holmes 5.55 Sprague vs. Cooheco Manuf. Co. 605 Squires vs. Whisken 407 Stackhouse vs. Countess etc. 708 Stall vs. Eombauer 742, 744 Stalker vs. McDonald 573, 574, 575 Stanton vs. Allen 472 vs. Percival 727 vs. Small 415,453 Stanton Iron Co., Ill re 627 Staples vs. Gonld 185, 187, 395, 396 Star Eire Ins. Co. vs. Palmer 224 State vs. Baltimore E. E. Co. 647, 650 vs. Bank 594, 645 vs. Chamber of Commerce 63 vs. Croteau 409 vs. Georgia Med. Soc. 63 vs. Lusitanian Portug. Soc. 64 VS.N. O. &C. Ey.Co. 743 vs. Pettinelli 617 vs. Tudor 622 vs. Williams 40 State Bank vs. Armstrong 699, 702 State of Illinois vs. Delafield 169 Steadman vs. Hockley 712, 713 Stearns vs. Marsh 198 Stebbins vs. Leowolf 396, 398, 399 Steers vs. Lashley 389, 390, 423, 478 Steinman vs. Wilkins 713 Stenton vs. Jerome 112, 113, 169, 188, 189, 197, 204, 226, 354, 696 Stephens vs. Blount 499 vs. Do Medina 134, 322 vs. Fox 580 vs. Hurlbut Bank 800 Sterling vs. Jaudon 112, 180, 226 Stevens vs. Strang 500 Steward, Ex parte 709 Stewart vs. Aberdeen 354 vs. Cauty 127, 134, 352, 354, 362, 780, 800 vs. Drake 145,191,192,196, 197 vs. Lupton 323 vs. Orvis 154 Stinson vs. Thornton 634 St. John vs. Erie E. E. Co. 593, 595 Stocking vs. Sage 698 Stoddard vs. KimbaU 572, 575 vs. Shetucket etc. Co. 592, 646 Stokes vs. Frazier 198, 224 Stone vs. Elliott 566 xl Table of Gases. stone vs. Marsh 140, 141 Story vs. Brown 686 vs. Salomon 445, 446, 477, 478 S tough ton vs. Lynch 688 Stover vs. Flack 179 vs. Whitman 487 Straohan, In re 163, 388 . Straffon, Ex parte 730 Strange vs. Lee 28 vs. Houston etc. E. E. Co. 618, 634, 638 Stray vs. Eussell 137, 306, 322, 355 Street vs. Eigley 81 Strong vs. Nat. Bank Assoc. 198 vs. Place 176 vs. Smith 137, 621 Struthers vs. Clark 778, 779 Sturgis vs. Board of Trade 34, 38 Suffolk vs. Bank of England 552 Sullivan vs. Tuck 736 Sumner vs. Stewart 352 Supervisors vs. Sohenok 583 Sutolifif vs. McDowell 514, 515, 516 Sutter vs. Matthews 739 Suiting vs. Thomassen 620 Sutton vs. Tatham 122, 124, 127, 351, 352 Suydam vs. Jenkins 797, 798 Swan, Ex parte 599 Swan vs. North etc. Co. 552, 599, 632 vs. Produce Bank 606 Sweeny vs. Thickstun 498 Swift vs. Tyson 571, 572, 574, 701 Taft vs. Chapman 573 Tahiti etc. Co., In re 659 Taintor vs. Prendergrast 677, 678, 685 Talty vs. Freedman's Bank etc. Co. 491, 659, 668 Tassell vs. Cooper 510 Tate vs. Hilbert 506 vs. Wellings 386, 754, 755, 756 Tattersall vs. Grote 84 Taussig vs. Hart 112, 118, 145, 147, 164, 213,214,218,225,799 Tayler vs. Great lud. Pen. Co. 292, 598, 599, 603, 632, 635 Taylor vs. Bates 521 vs. Griswold 622 vs. Ketcham 112, 145, 184, 366 vs. Page 578 Taylor vs. Plumer 162, 163, 164, 287, 288 vs. Stray 124, 137, 153, 154, 257 vs. Wilson 513, 518, 519 Tel. Co. vs. Commonwealth 650 Tempest vs. Kilner 124,125,382,763, 777, 781, 784 Tenant vs. Elliot 259, 440 Tenney vs. Foote 478 Terry vs. Parker 514 Terwilliger vs. Kuapp 780 Tetley vs. Shand 681 Thacker vs. Hardy 280, 284, 290, 386, 393,422,434,436,437, 438, 439, 453, 478 Thackoorseydass vs. DhoudmuU 407 The Bark Olbers 557 The Delaware 557 The King vs. Bank of Eng. 742, 744 vs. Capper 585, 586 vs. Churchwardens 590 vs. De Berenger 458, 472 The Lady Franklin 557 The Wellington 557 Third Nat. Bank vs. Boyd 139 Thom vs. Biglaud 691 Thomas vs. Ellmaker 14, 15 vs. Graves 356 vs. Newton 388 Thompson vs. Adams 14, 88 vs. Alger 397, 398, 400, 771, 780 vs. Charnock 81, 83 vs. Davies 472 vs. Downing 481, 559 vs. Erie Ey. 593, 595 vs. Harcourt 720 vs. Ketcham 499 vs. Lee County 555 vs. Planet etc. 86 vs. Sloane 498 vs. Tolaud 112, 145, 600, 606 Thomson vs. Bank etc. 525, 528, 529, 546, 548 vs. Davenport 362, 683 Thorndyke vs. Locke 780 Thurman vs. Wilson 780 Tliwaite vs. Warner 389 Tibhetts vs. Blood 24, 26 Ticknor Estate 21 Tiernan vs. Jackson 480 TiUor vs. Spradley 675 Table of Cases. xli TiUey vs. County of Cook 344, 349 Timms vs. Williams 58 Tiukham vs. Borst 580 Tisdale vs. Harris 692, 766, 767, 768, 772 Titcomb vs. Union etc. Ins. Co. 559 Todd vs. Shelboume 575 vs. Taft 739 Tome vs. Parkersburgh Ey. Co. 600, 644 Tomkins vs. Saffery 68, 70, 71, 72, 265, 267, 379 TomlLnson vs. Miller 769 vs. Tomlinsou 587 Torrey vs. Baker 31 Torriugton vs. Lowe 274, 312, 313, 314 Towle vs. Topham 774 Townsend vs. Mclver 742, 744, 747 Trammell vs. Gordon 406 Treasurer vs. Comm'l Co. 738, 740 Trenton etc. Ins. Co. vs. Johnsou 408 Trevelyan vs. Charter 213, 233 Troy etc. E. E. Co. vs. Tibbits 580 vs. Warren 580 Trueman vs. Loder 683 TuUy vs. Tranor ' 796 Turner, Ex parte 386 Turner vs. Bank etc. 513,514, 520,521 vs. Liverpool Docks 602 vs. Treadway 573 Tuttle vs. Walton 630 Tyler vs. Barrows 415 vs. Gould 507 Ubsdell vs. Cunningham 499 Underwood vs. N. Y. etc. R. E. Co. 592, 645 Union Bank vs. Laird 609 vs. The State 591 Union College vs. Wheeler 577 Union Nat. Bank vs. Sixth Nat. Bank 547 Union Pac. E. E. Co. vs. United ■ States 595 Union Trust Co. vs. Eigdon 638 United States vs. Bank of Georgia 548,551 vs. Bank of Metrop. 501, 553 vs. Cutting 109 vs. Fisk 109 United States vs. Vaughn 398, 623 vs. White 500 Upton vs. Gray 685 Uther vs. Eich 658 V. Vail vs. Foster 513 vs. Eioe 356 VaUey Bk. vs. Strihling 752, 753, 757 Van Alen vs. Vanderpool 169 Van Allen vs. 111. Centr. E. E. 584 Vance vs. Lowther 552 Van Cott vs. Van Brnnt 580 Vanderheyden vs. Vanderheyden 233 Vanderpool vs. Kearns 443 Vanderzee vs. Willis 705 Vansands vs. Middlesex Ey. Co. 630 Van Valkenburgh vs. Stupple- been 570 Vartie vs. Underwood 669 Vaupell vs. Woodward 114, 388, 396, 658, 775 Vawter vs. Baker 681 Veazie Bank vs. Winn 517, 518, 519 Vere vs. Lewis 504 Vermilye vs. Adams Ex. Co. 370, 443, 470, 492, 501 Vinton vs. King 570 Violet vs. Powell 678 Violefct vs. Passen 494 Voorhia vs. Olmsted 561 Voris vs. McCredy 691 Vyne, Andrewe de, Case of 251 w. Wachtel vs. Noah etc. Soc. 56 Waddell vs. Blockley 794 Wagner vs. Peterson 794 Wait vs. Johnson 678 Wakeman vs. Dalley 462, 579 Waloott vs. Heath 404, 449, 477 Walker vs. Bartlett 314, 639, 730, 764 vs. Milne 287 vs. Snpple 763, 764 Wall vs. Bayley 342, 345, 352 Waller vs. Thomas 24 Wain vs. Bank of North Amer. 630 Walpole vs. Sauuders 407 Walrad vs. Petrie 499 Walter's Case 617 Walter vs. Smith 666 Walters vs. Howard 736 Waltham Bank vs. Waltham 587 xlii TMe of Gases. Walwyn vs. St. Qaintin 514 Ward vs. Southeast. Ey. Co. 743, 746 vs. Van Duzer 122 Wardropei- vs. Outfield 656 Ware vs. Cumberlege 588 vs. Hayward Rubber Co. 232 Waring vs. Cox 559 Warner vs. Gouverneiir 758 Warren vs. Hewitt 411, 441 vs. Lynch 495 vs.Soott • 500 vs. Shook 109 Warwick vs. Rogers 509 Washburn vs. Franklin 397 Waterbnry vs. Mer. U. Ex. Co. 30, 38 Waterhouse vs. London Ey. Co. 634 Waterman vs. Buckland 443, 452 Watson vs. Miller 684 vs. Spratley 763, 764 Watts vs. Brooks 257 vs. Christie 710 Weaver vs. Bardeii 600, 635 Webb vs. Challoner 124 vs. Graniteville Co. 619 Weed vs. Clark 496 vs. Small 688 Weekly vs. Weekly 589 Weeks vs. Taloott 95 Weightman vs. Caldwell 769 Weisser vs. Deuisou 545, 546, 548, 549, 5.50 Welch vs. Mandeville 481, 509 vs. Sage 554, 565, 569 Welles vs. Cowles 769 Wells vs. Gates 16, 23 vs. Miller 669 vs. Porter 386, 420 vs. Welter 123 Welsh vs. Germ. Amer. Bk. 546, 549, 550 Welton vs. Adams 554 Westchester E. E. Co. vs. Jackson 647 Westcott vs. Pavgo 24 Western U. T. Co. vs. Davenport 632 Western Eeserve Bank vs. Potter 758 Westminster Bank vs. Wheaton 511 Weston vs. Barker 509 vs. Bear Eiver Co. 623, 625 Westropp vs. Salomon 111, 124, 135, 353 Wheeler, In re 622 Wheeler vs. Friend 408 vs. Garcia 229 Wheeler vs. Newbold 196, 198, 207, 208, 366, 539 vs. Warner 499 Wheelook vs. Kost 152 Whistler vs. Forster 482, 570, 571 Whitaker vs. Sumner 668 White vs. Baxter 60, 358 vs. Brownell 13, 14, 15, 17, 18, 25,33,34,36,38,40,41,42, 60, 79, 80, 81, 87, 110 vs. Drew 173, 773 vs. Fuller 230 vs. Howard 21 vs. Jaudon 696 vs. Joy 499 vs. Kearney 781 vs. Piatt 661 vs. Smith .226, 785, 788, 794 vs. Schuyler 739 vs. Vermont etc. E. E. Co. 495 vs. Wright 751, 753 White & Black Smiths' Soc. vs. Van Dyke 52 Whitehouse vs. Moore 352, 354, 358, 698 Whiting, Ex parte 715 Whitman vs. Wilks 552 Whitney vs. Boardman 781 VVhittemore vs. Gibbs 767 Wicker vs. Gordon 256 Wicks vs. Hatch 167, 169, 170, 180, 201,211 Wiggins vs. Gans 686, 687 Wigglesworth vs. D^iUison 352 Wilde vs. Jenkins 689 Wildman vs. Wildman 585, 591 Wilkes vs. Ellis 248, 250 Wilkinson vs. Johnson 548 vs. Providence Bank 745 Willoocks, Ex parte 137,620,622 Willets vs. Phoenix Bank 500,504, 523, 529 Williams vs. Archer 784 vs. Bank of Michigan 23 vs. Gregg 632 vs. Gulinau 345 vs. McClure 199 vs. Mech. Bank etc. 625 vs. Millington 712 vs. Smith 519 vs. Tyre 238, 386 vs. The London etc. Co. 691 Table of Cases. xliii Williams vs. Western U. T. Co. 579, 580 ve. Williams 485 WiUiar vs. Irwin 419, 477, 478 Willis vs. Phila. E. R. Co. 643 Williston vs. M. S. & N. I. R. E. Co. 646 Wilson vs. Curzou 24 vs. Keating 728 vs. Little 151, 170, 624, 657, 659, 660, 783 vs. Martin 713 vs. Thornbury 552 Wiltshire vs. Sims 169, 691 Winans vs. Hassey 165, 173 Windale vs. Pall 387 Winston vs. Westfield 566 Winter vs. Coit 561 vs. Drnry 507 vs. Mining Co. 600 Witherhead vs. Allen 30 Withy vs. Cottle 727 Wonson vs. Feuno 737, 739 Wood's Appeal 600, 607, 634, 669 Wood vs. Hamilton 208 vs. Hays 110, 112, 145 vs. Hiokock 356 vs. Morewood 782 vs. Sheehan 704 vs. Smith 607 Woodbridge vs. Blair 675 Woodman vs. Churchill 567 Woods vs. North 498 Woodward vs. Harris 733 vs. Hunton 767 vs. Powers 778 Wood worth vs. Bank of America 494 vs. Bennett 389, 478 Woodruff vs. Hurson 756 Worcester County Bank vs. Dor- chester etc. Bauk 503 Worden vs. Dodge 496, 497 Work vs. Bennett 202, 668, 696 vs. Talman 504, 511 Worsley vs. Scarborough 565 Worthiiigton vs. Curd 482 vs. Tormey 145 Wright vs. Whitley ' 499 Wyer vs. Dorchester etc. Bauk 503 Wykoff vs. Irvine 141 Wylde vs. Radford 699, 705 Wyman vs. Am. etc. Co. 779 vs. Fiske 401, 478 Wynkoop vs. Seal 112,116,145,227, 432, 433 Wynne vs. Price 323, 728, 730, 731 Yerkes vs. Salomon 445, 449, 477 Young vs. Cole 125 vs. Kitchiu 481 vs. Lee 572,575 vs. Smith 383 Zabriskie vs. C. C.E.E. Co. 583 vs. Smith 481 Zimmerman vs. Anderson 497 Ziuck vs. Walker 709 Znlick vs. Markham 600, 614 Zulueta's Claim 128 LAW OF STOCK-BROKERS AND STOCK EXCHANGES. Chaptee I. INTRODUCTION. Origin of Stochhrohers and Stock Exchanges. Theee is a great diversity of opinion respecting the origin of the word " Broker," some of the authorities maintaining that it was originally applied to those who broke up goods into small pieces — retailers; while others contend that the term is derived from the Saxon word hroc, misfortune, and that the name " Broker " comes from one who was a broken trader by misfortune, which is often the true reason for a man's breaking, and that none but that class of persons were formerly admitted to that employment in London.' But the ' Jacob's Law Diet., tit. "Bro- ular8(TermesdelaLey,Cowell). The kers." " The etymology of the term law Latiu from obroeator, however, Broker has been variously given. By seems to point distinctly to the Sax- some it has been derived from the on abrceoau (to break), as the true Saxon iroe, misfortune, as deuoting root, which iu the old word dbh'och- a broken trader; the occupation be- ment (q. v.) or abroachment, had the ing formerly confined, it is said, to sense of breaMng up goods, or selling unfortunate persons of that descrip- at retail. A Broker, therefore, would tion (TomMns). According to others, seem tohave originally been aretailei; it was formed from the French iroi- and hence we find the old word auc- eur, a grinder or breaker into small tionarma (q. v.) used iu both these pieces; a .Broker being one who sense8"(Bnrrill'sLawDiet.,tit."Bro- heaU or draws a bargain into partio- ker"). Wharton gives,a8 the deriva- 2 Stock-lrohers and Stock Exchanges. statutes passed in the reigns of Edward the First and James the First, hereafter referred to, would seem to indicate that the latter view can hardly be correct. In England, the term " Broker " occurs in an act of Parliament as early as the year 128S." It recites, in substance, that whereas divers persons do resort unto the city (London) from parts beyond the sea, fugitives from their own lands, and of these some become "Brokers," hostlers, and innkeepers, etc., and they do wear fine clothing, and do eat costly meat and food, etc. ; it there- fore enacts that " there shall be no Broker in the city except those who are admitted and sworn before the warden, mayor, or aldermen." It is evident, from a perusal of this statute, that the occupation of Brokers in those days was subverted by persons who used the name as a cover to transact a species of disreputable pawnbroker's business ; and hence the severe penalties of the second section of the act, which provided that " if any other innkeeper or Broker be found within the city, or any other of whom there is evil suspicion, he shall be arrest- ed by the warden, or mayor, or the sheriffs, or the alderman of the ward, and punished ; viz., innkeepers and Brokers shall be incapable of their freedom and adjudged to. prison, and the others shall be punished by imprisonment or otherwise." ' tion of the word, the French 'brocenr, Dwellyng at London. AndgartBack- and the Latin tritofr, a person who bitingbeabrocour. To blame men's breaks into small pieces ( Whar., Law ware." It clearly means here a/a«?i- Diot., tit. "Broker"). Webster gives finder, as in Provenpal brae is refuse. as its derivation, the old English bro- The Broker was originally one who coMr,NormanFrenchSrosjoMr,Frenoh inspected goods and rejected what brocanteur. Under the word " broke," was below the standard (Wedge- to deal in second-hand goods, to be wood). a Broker, Webster says it is probably ' 13 Ed. I., Stat. Civ. London, 1285. derived from the word iraeft. Worces- ' See also 2 Crabb's Dig. of Stat, ter derives it from the Anglo-Saxon tit. "Brokers," 261. There were a bruoan, to discharge an office ; bro- class of persons known to the Eo- cian, to oppress; and the lYench iroy- mans, who were deemed public offi- er, to grind. See"Broke"and"Bro- cers, and who united the functions ker." The word" Broker" seems first of bankers, exchangers. Brokers, com- to occur in literature in Piers Plough- missioners, and notaries, all in one man, "Among burgeises have I be under the description of proxmetce. Origin of Stock-brokers and Stock Exchanges. 3 The next statute, passed in the reign of James the First, more than three hundred years after that just recited,' regu- lates the calling of Brokers with greater detail than the first act, and clearly shows, by the use of the words "merchandise and wares," that down to this period the Broker in money, stock, and funds had no recognized legal existence. The preamble to the statute also indicates that the regular calling was and had been a favored one : " Forasmuch as of long and ancient time by divers hundreds years there have been used within the City of London and Liberties thereof, certain Free- men of the city to be selected out of the Companies and Mys- teries whereof they are free and Members, and the same per- sons to be presented at least by six approved and known hon- est persons of the same Mystery to the Lord Mayor of London for the time being, and to the Aldermen his Brethren, and to be recommended by such Presenters to be persons for their known approved Honesty, Integrity, and Faithfulness, Persons meet for to be Broker Brokers." It was not until the latter part of the seventeenth century, when the East India Com- pany came prominently before the public," that trading or speculating in stock became an established business in Eng- land ; and the term " Broker," which had then a well-under- stood meaning, was promptly transferred to those persons who were employed to bny or sell stock or shares, and who thence- forth became known as " Stock-brokers." In 1692, William the Third having adopted, for the first time in England, the system of raising funds' for governmental purposes by creat- (Whar., La-w Diet., tit. " Brokers ;" Dietionary, revised by Lewis and Story on Ag. § 20, Dig. Lib. 50, Short, where j)roa;eneto is tlius given: tit. 14, ch. 2.) Spelman, cited in "negotiator, factor, broker, agent. Gibbons vs. Eiile, 12 Moo. 539, 543. Sen. Ep. 119; Mart. 10. 3. 4; Dig. 50. There is very high authority, how- 14. 2." ever, for asserting that the term ' 1 Jac. I. c. 21, 1604. proxenetw does not occur in any Lat- ' This company was incorporated in author before the first oentnry by Queen Elizabeth in 1600. after Christ. See Freuud's Latin ' The system of obtaining money i Stoch-'brokers All applications for membership are publicly announced by the presiding officer, with the names of the proposer and seconder. Every applicant '^ must be twenty-one years of age ; and any wilful misstatement by any applicant for admission, upon a material point, shall, in certain cases, subject the offend- ing party to loss of membership. It is now a prerequisite to admission that an applicant shall be a citizen of the United States. Neither the Constitution of the New York Stock Exchange nor the Kules and Kegulations of the London Stock Exchange, in express terms, state the objects for which those bodies were organized, but they are so manifest that a statement of them has not been deemed essential. The Constitution and By-laws of the New York Stock Ex- change set forth the manner in which the business shall be ' The Philadelphia and San Fran- ch. 130). The act does not show Cisco Stock Exchanges are iinincor- where the Exchange was to be lo- porated associations, organized in cated, and no public organization substantially the same manner as seems to have been effected under the'N. Y. Stock Exchange. Fidte it. See also Stat. Indiana (1876 Leech vs. Harris, 2 Brews. (Pa.) vol. i. ch. 38, §§ 1, 2, and 3), provid- 575, 576; Hyde' vs. Woods, 2 Sawy. ing for the organization of boards 655, affd 94 U. S. (4 Otto) Eeps. of trade, commercial or real -estate 523. A Stock Exchange by the name exchanges, chambers of commerce of "The New Jersey Stock Ex- or other commercial orgauiza^ change" was incorporated by an act tions. of the Legislature of that state, ap- » Art. X. § 1, Const. N. Y Stock proved March 16, 1875 (L. N, J. 1875, Exchange. Legal Nature of. 13 conducted, the rates of commission to be charged, and the acts or omissions which constitute a ground for dismissing a member. Such of these provisions as are important, and •which have been made the subject of legal adjudication, will be particularly noticed hereafter.' II. General Legal Nature of Unincorporated Stock Exchanges. A voluntary association of persons, like the New York Stock Exchange, by which each individual Broker is enabled to carry on his separate business, under regulations made alike for the protection of himself and his Client or principal, has no technical name or place in the law. Mr. Justice Daly, in describing an association formerly known as "The Open Board of Stock-brokers,"" an organ- ization almost similar to the Stock Exchange, said that it was' "an association of persons engaged in the same kind of busi- ness, who have organized together for the purpose of estab- lishing certain rules, by which each agrees to .be governed in the conduct and management of his separate transactions or business." So, in describing a similar board in a sister city,* the court said : " The Philadelphia Board of Brokers is not a corporation. It is not a joint-stock company, in the sense in which such companies are regarded by the English law, although it has a large amount of property which belongs to it in its joint or aggregate capacity. Such private associations are said not to be partnerships as between themselves, whatever may ' Full copies of the Eules and Stock Exchange. VidLe Preamble to Regulations of the N. Y. and London the Constitution of the latter body. Stock Exchanges will be found in the ' White vs. Brownell, 4 Ab. Pr. Appendix. (n. s.) 162 ; s. c. 2 Daly, 329. ' This body, on the 8th of May, * Leech vs. Harris, 2 Brews. (Pa.) 1869, consolidated with the N. Y. 571. 14 StocJcrhrokers and Stock Excha/nges. be their relations to third persons." ' The Board of Brokers is a voluntary association of persons who, for convenience in the transaction of business with each other, have associated themselves to provide a common place for the transaction of their individual business, agreeing among themselves to pay the expenses incident to the support of the objects of the association, in which each for himself, at stated hours of the day, and for his individual profit^ may prosecute his own business, and enter into separate engagements with his fel- low-members. The association does not share in the losses of the individual associates; each member takes his own gains, and individually sustains the losses incident to his en- gagements." " These associations have some elements in common with corporations, joint-stock companies, and partnerships.' An institution like the Stock Exchange is an anomaly in the law. It is amphibious in its nature ; for, without being either a corporation or a partnership, it possesses some of the characteristi&s of both. Like a corporation, it has perpetual being; and in this respect it has an advantage over bodies politic, for the charters of the latter generally limit their ex- istence to some definite period ; 'whereas the New York Stock Exchange can preserve its organization (as it has since 181Y) until it voluntarily dissolves itself.* III. Stoch Mcchange not a Partnership. But the Stock Exchange does not come within the legal definition of a partnership. The general rule undoubtedly ' The oonrt cited White vs. Brow- = Leech vs. Harris, supra .575, 576. Dell, 3 Ab. Pr. (n. s.) 318 ; Thomas vs. See also Hyde vs. Woods, 2 Sawy. 655 Ellraaker, 1 Pars. Caa. (Pa.) 98. aff'd 94 U. S. (4 Otto), 523. "Leech vs. Harris, supra; White * See also Thompson vs. Adams vs. BrowneU, 3 Ab. Pr. ( n. s.) Sup. Ct. Pa. 7 Week. Notes of Cas. 318. 281. Not a Pwrtnershvp. 15 is that " no partnership or quasi partnership subsists between persons who do not share either profit or loss,, and who do not hold themselves out as partners. Societies and clubs, the ob- ject of which is not to share profits, are not partnerships, nor are their members, as such, liable for each other's acts." ' The Stock Exchange exists under an agreement between its members to pay the expenses incident to the support of a "Mart," in which each for himself, at stated hours of the day, and for his individual profit, may prosecute his own business, and enter into separate engagements with his fellow-members. The association does not share in the losses of the individual associates ; each member takes his own gains, and individually sustains the losses incident to his engagements. The organi- zation of this board grew out of a necessity for new and great- er facilities for exchange and negotiation, incident to the rap- idly developing interests of the country and the increasing number and value of its commercial securities." Although it may possess property derived from the pay- ment of dues or fines, such property is a mere incident, and not the main purpose or object of the association. A mem- ber has no severable proprietary interest in it, or a right to any proportionable part of it upon withdrawing." There are no profits earned to be divided among its mem- bers, nor are there any losses to be borne arising out of the acts of the joint body. If a partnership, the death of one of its members would, ipso facto, dissolve it." In the case of Caldicott vs. GriflBths," it was held that a ' Lindley on Part. (3d ed.) 57. tions, Thomas vs. EUmater, 1 Pars. ^ Van Vorst, J. in White vs. Cas. (Pa.) 98; Flemyug vs. Hector, Brownell, 3 Ab. Pr. (n. s.) 318. 2 M. & W. 172 ; Eegina vs. Whit- ^ Daly, F. J. in White vs. Brow- marsh, 15 Q. B. 600; Bear vs. Brom- nell, 4 Ab. Pr. (n. s.) 191. ley, 18 id. 271. See also recent case * White vs. Brownell, 3 Ab. Pr. (n. of Ash vs. Guie, 11 Pitts. L. J. (Pa.) s.) 325. 1 Lindley on Part. (3d ed.) n. s. 449 ; s. c. Alb. L. J. July 30, 57. See also discussion as to the 1881, 83. nature of unincorporated associar = 8 Ex. 898. 16 Stockrlrohers omd Stock Exchanges. society called " The Midland Counties Guardian Society for the Protection of Trade," the professed object of which was to " watch the progress of any measure in Parliament affect- ing the trade interests, and to protect its members from the practices of the fraudulent and dishonest," and which was organized with a president, vice-president, treasurer, secre- tary, and conmiittee — to which committee was given the gen- eral management of the affairs of the society, and which so- ciety was organized under a series of rules adopted for the management of the same — was not a partnership ; and that, therefore, one of the members of the society who had fur- nished certain printing to the committee might sue the com- mittee ; and that the principle that one partner cannot sue the partnership did not apply. In the argument, the defendants referred to a case ' which held that the promoters of a railroad company constituted a partnership, as showing that a partnership existed in the case before the court. The court, in reaching its conclusion, said : " The question is, whether, by entering into this scheme, the subscribers form a partnership or a g■'wa«^ - partnership ; or whether the case is similar to that of a number of persons subscribing to a hospital or to an ordinary club. The solu- tion of that question is not to be arrived at by examining cases which have reference to the liability of committee-men or shareholders in projected railway companies, and in other undertakings of that description, but by consulting the rules themselves." Yet unincorporated associations are, in law, often regarded as mere partnerships.' ' Holmes vs. Higgins, 1 B. & C. wood's Case, 23 Eng. L. & Eq. 422 ; 74. Wells vs. Gates, 18 Barb. (N. Y.) 557 ; ' Eobbins vs. Butler, 24 111. 397 ; Butterfield vs. Beardsley, 28 Mich. BuUard vs. Kinney, 10 Cal. 60 ; Coal 412 ; Moore vs. Blink, 4 Hun (NY) Co. vs. Fry, 4 Phil. (Pa.) 129 ; Green- 402. ' ' Not a Corporation. 17 IV. Nor is the Stock Exchange a Corporation or In- corporated Joint-stock Association. It does not exist by virtue of a charter or legislative grant. The obligations and rights of its members are not deter- mined by any statutory provision.' There is no contribution of capital by its members for the prosecution of any kind of business by the association. It issues no stock, nor can the individual members claim any rights of property in it as stockholders." Unlike an incorporated commercial joint-stock company, the privilege of membership in such a, voluntary association may be conferred or withheld, at its pleasure, and the law cannot compel the admission of an individual into the society against its wish.' The above are some of the general elements which dis- tinguish stock exchanges from corporations, incorporated joint-stock associations, or partnerships, and these distinctions will be further developed in the ensuing subdivisions of this chapter. V. Bights of Members in Property Held hy Non- incorporated Stock Exchanges. In respect to the property which the Stock Exchange may, from time to time own, interesting questions are involved in which the distinction between this body and corporations and partnerships will further appear. As has been shown, the Exchange is in no wise interested ' A voluntary unincorporated visors of N. Y., 15 How. Pr. (N. Y. ) joint -stock company is, however, 172. liable to be taxed on its capital, ' White vs. BrowneU, 3 Ab. Pr. as a corporation, under the laws (n. s.) 318. of New York. Sandford vs. Super- » Id. 4 Ab. Pr. (n. s.) 162. 2 X.8 Stock-hrokers cmd Stools Ecohomges. in the pecuniary gains or profits of its members ; and the sole source of its revenue is derivable from such dues, fines, assess- ments, or contributions as it may, from time to time, collect or receive from its members, together with any increase of its present accumulations. At common-law, the legal title of the personal property of the Exchange, it being unincorporated, is vested in all of its members, in like manner as the title to partnership prop- erty is vested in all the partners. But, unlike the relation of partners,- a member of the Exchange, or his legal representa- tives, has no right to call for an account of the property and a division of the same. A member has no several proprietary interest in it, or a right to any proportionable part of it, upon withdrawing. He has merely the enjoyment and use of it while he is a member ; but the property remains with, and belongs to, the body while it continues to exist, like a pew, the ultimate and dominant property in which is in the congregation, and not in the pew- holder; and when the body ceases to exist, those who may then be members become entitled to their proportionate share of its assets.' This principle arises mainly from the fact that organizations of this character are not constituted for gain, but for the con- venience of their members, and the possession of property by them is a mere incident, and not the main purpose or object of the association." When a person is elected a member of the Exchange, he becomes entitled to what is commonly called a " seat," and such a proportionate interest in the property of the associ- ation as he would be entitled to if he should happen to be a member at the time of its dissolution ; and that interest would ' St. James's Club, 13 Eng. L. & Parish in Boyleston, 19 Pick. 361 ; Eq. 592; White TS. Brownell, 4 Ab. Caldioott vs. Griffith, 8 Ex. 898. Pr. (n. s.) 162-191 ; Fassett vs. First ' White vs. Brownell, supra. Memheri Rights in Property. 19 be found by dividing the amount of property by the number of " seats " then existing after deducting debts and liabilities. These "seats," under the 13th Article of the Constitution of the Exchange, are transferable, but the transferee must be ap- proved by two thirds of the Committee on Admissions. The transfer, sale, or assignment of the interest of a partner would work a dissolution of the partnership.' In the present instance, however, the transferor, by such an act, does not disturb or af- fect the general organization ; he simply ceases to be a mem- ber and to have any legal interest or concern in the Exchange, and the transferee becomes invested with all of the privileges, duties, and attributes of membership. When a member dies, his membership may be disposed of by the Committee on Admissions ; and, after satisfying claims of the members, the balance remaining is paid to the legal representatives of the deceased. If the Committee on Admissions should, for even arbitrary reasons, refuse to approve a person to whom a mem- ber has bargained to sell his seat, it follows that the latter is forced to continue his membership. By signing the Con- stitution each member agrees to the same, and to all the by- laws, rules, or regulations which may be adopted (provided they are legal, as we shall hereafter see) ; and thus a contract Is expressly established, by which the ordinary principles that govern the relations of partnerships and corporations, are avoided. As to any real estate which the Exchange may acquire, the questions which would ordinarily arise in relation thereto are more difficult and numerous. Their property being, as we have seen, technically held by them as partners, it follows that the persons who are members, when they acquire lands are vested with equal interests therein ; and that the Stock Exchange at common-law, being an unincorporated body, could confer no ' Pars, on Part. (3d ed.) 433, 434; 1 Lindley on Part. (4th ed.) 698. 20 Stoch-lrokers and Stock Exchanges. title upon a purchaser unless all of its members joined in the conveyance; or, if any of them were deceased, the heirs of such of them as were members at the time the real estate vested in the Exchange. To avoid the many questions of the above nature which doubtless would have arisen if real estate were held by the Exchange, a company was incorporated under the laws of the State of New York, ' duly empowered to hold real estate, the stock of the company being exclusively owned and held by the Stock Exchange. And there is now a general law in the State of l^ew York authorizing any joint-stock company or association to pur- chase, hold', and convey real estate : 1st,. To an extent neces- sary for its immediate accommodation in the convenient trans- action of its business ; 2d, Such as shall be mortgaged to it in good faith, to secure loans made by or moneys due to it ; or, 3d, Such as it shall purchase at sales under judgments, decrees, or mortgages held by it ; but in no other case, nor for any other purpose. Conveyances shall be made to the president of the asso- ciation, as such, and he and his successors may sell, assign, and convey, free from any claim of shareholders, or any per- son claiming under them." This act may be construed as a restraint upon the right of joint-stock associations to purchase and hold real estate not needed for immediate use. Such seems to have been the construction given to it in Eainey vs. Laing.' But if the statute is violated in this respect, no one can question the title but the State.* ^ Ineorp. Jan. 30, 1863. just quoted, it is a question -whether, " L. of N. Y. 1867, vol. i. ch. 289, in view of the fact that the members 5''6. of the Exchange are partners, in ^ 58 Barh. 489. some aspects, a grant to the Stock * Id. ; Howell vs. Earp, 31 Hun Exchange would he valid. It has (JSr. Y.), 393. Aside from the statute been held that a community or so- IdaMlity of Members. 21 VI. LiabiliPy of Members for Debts, etc. Another question which arises, in considering the nature of an unincorporated association like the Stock Exchange, is as to the individual liability of the members thereof, ex contractu or ex delicto, for the acts of its officers, committees, representa- tives, or of their fellovs'-members. The general rule is, that members of unincorporated com- panies are regarded as partners, and are subject to the whole law of partnerships.' But the application of this principle to a body like the Stock Exchange is very restricted. No case seems to have occurred which is expressly decisive of the personal liability of members of a Stock Exchange ; but ciety, not incorporated, cannot pur- chase land and take in Buccession. Co. Litt. 3 a. 10 Co. 266, Com. Dig., tit. Capacity, B. 1 ; Jackson vs. Cory, 8 Johns. (N.T.) Eeps. 385 ; Hornbeek vs. Westbrook, 9 id. 73; same vs. Sleight, 12 id. 198. In this last case it is said: "The inhabitants of Eochester were not a body corpo- rate, so as to be competent to take an estate in fee. And if a grant to them in a deed would be void, a res- ervation to them in a deed, in fee, to a third person would be equally void. Nor wonld it be valid as a covenant to stand seised. The inhabitants of Eochester were strangers to the deed. The present inhabitants, at all events, must be so considered. For they not being a body corporate so as to perpetuate the rights granted to the patent, these rights must be restricted to the then inhabitants." But see Ticknor's Est., Sup. Ct. Mich., 4 Am. Law Eeg. (n. s. ) 269 note ; Hamblett vs. Bennett, 88 Mass. 140 ; East Haddam Bapt. Ch. vs. East Haddam Bapt. Soc, 44 Conn. 259. So a voluntary unincorporated association for charitable puiposes •cannot take property by devise in the State of New York. White vs. How- ard, 46 N. Y. 144, affg 52 Barb. 294; Sherwood vs. American Bible Socie- ty, 1 Keyes (N. Y.) 561, 567; Owens vs. Missionary Society, 14 N. Y. 380 ; Downing vs. Marshall, 23 N. Y. 366 ; McKeon vs. Kearney, 57 How. Pr. (N. Y.) 350 ; Contra, Hornbeek vs. Am. Bible Soc, 2 ' Sandf. Ch. 133. Nor can such an association take a bequest, although subsequently to the death of the testator it becomes incorporated. Baptists' Association vs. Hart's Executors, 4 Wh. ( XT. S. ) 1 ; 3 Pet. 497 ; see also 2 Eedf. on Wills, oh. i. § 7. That a bequest to such an association may be valid or be made to take effect indirectly, see Preacher's Aid Society vs. Eich, 45 Me. 552; Cahill vs. Bigger, 8 B. Monr. (Ky.) 211 ; Smith vs. Nelson, 18 Vt. 511, 546 ; Peabody vs. East- ern Methodist Soc, 87 Mass. 540 ; Gibson vs. McCall, 1 Eich. (S. C.) Eep. 174. 'Pars, on Part. (3d ed.) 588; Wardsworth on Joint - stock Com- panies, 21, 220. 22 Stockrbrokers wnd Stock Enxhcmges. there are very many instances in the books in which mem- bers of chibs and other associations have been sought to be charged as individuals, for acts of committees, etc., and which would doubtless control a case of the former character, if it ever should arise. For the acts of its officers or servants, di- rectly authorized, by the constitution, laws, or regulations of the Stock Exchange, its members would be individually liable under the general principle above cited. But the great contention- has arisen in those cases where the officers or servants have contracted obligations or incurred liability, without any direct or express authorization from the association. This question seems to have been determined, in the modern cases, by the law of principal and agent rather 'than that of partnership. Mr. Lindley says on this subject: " If liabilities are to be fastened on any of their members, it must be by reason of the acts of those members themselves, or by reason of the acts of their agents ; and the agency must be made out by the person who relies on it, for none is im- plied by the mere fact of association." ' This question is, at present, entirely speculative, and there can be no practical use in discussing it at any length, but a collection of modern authorities upon the general subject will be found below." ' 1 Lindley on Part. (4th ed.) (N. Y.), 128, which seems to be con- 57. trary to the majority of the cases on ' 2 Lindley on Part. 57, note (d) this subject, and is expressly repu- and cases cited. See, also, Wards- diated by Ebbinghousen vs. Worth ■worth on Joint -stock Companies, Club (supra); Lafond vs. Deems, 1 ch. viii. and cases cited ; Pars, on Ah. New Cas. 318 ; 81 N. Y. 507. As Part. (3d ed.) 4.5, note (b) ; Ebbing- to the question of liability of mem- housen vs. Worth Club, 4 Ab. New bers of a club for negligence in the Cas. (N. Y.) 300, and note, where a management of their property, see full discussion of this subject is English vs. Brenau, 60 N. Y. 609; 2 made; Park vs. Simmons, 10 Huu Hilliard on Torts, 330. Suits By amd Against. 23 VII. Suits hy and against the Stock Mcclumge. At common law, carrying out the analogy between unin- corporated bodies and partnerships, in a suit by or against the former, it was necessary that all persons composing the same should be made parties.' But the Legislature of the State of New York, by the act of 1849, ch. 258, has provided that any joint-stock company or association, consisting of seven or more stockholders or associ- ates, may sue and be sued in the name of the president or treasui-er, for the time being, of such joint-stock company or association." This provision, not being deemed broad enough, was ex- tended by the Laws of 1851, ch. 456, to any company or asso- ciation composed of not less than seven persons who are own- ers of, or have an interest in, any property, right of action or demand, jointly or in common, or who may be liable to any action on account of such ownership or interest." The New York statute provides that where an association ' Ang. & Ames on Corp. (10th ed.) unincorporated, when the members § 591, 599 ; Williams vs. Bank of of said companies do not reside wlth- Miohigan, 7 Wend. 542 ; Wells vs. in the commonwealth, process may Gates, 18 Barb. (N. Y.) 554 ; Dicey be served upon any officer, agent, on Parties, 170, 172 (Truman's etc. Brightly's Purd. Dig. vol. 1. 42. notes) ; East Haddam Bapt. Ch. vs. By the Rev. Stat, of Ohio, § 5011, a East Haddam Bapt. Soc. 44 Conn, partnership formed for the purpose 259; Haskius vs. Alcott, 13 Ohio St. of carrying on a trade or business in 216. that State, or holding property there- " Whether this act extends to pri- in, may sue or be sued by the usual vate voluntary copartnerships or as- or ordinary name which it has as- sociations, which are not organized sumed, or by which it is known ; in pursuance of some statute, was and, in such case, it shall not be nec- questioned in Austin vs. Searing, 16 essary to allege or prove the names N. Y. 112; and in Eorke vs. Eussell, of the individual members thereof. 2 Lans. Eep. (N. Y.) 244 ; see also The above statute only applies to Ebbinghonsen vs. Worth Club, 4 Ab. companies doing business within the New Cas. 300. State. Haskins vs. Alcott, 13 Ohio ^ By the laws of Pennsylvania, in St. 216. the case of joint-stock companies, 24 Stodk-lrohers amd Stock ExcTumges. consists of more than seven members, the action may be brought in the name of the president/ and this provision has been held to extend the remedy to all associations." The statute applies to the remedy, and the lex fori governs. It is not confined to associations of the State of New York, but applies to all associations which come into court under it. Where the statute provides a remedy, it extends to all per- sons who use it, unless the act, by its terms, expressly limits its application.' In the case of Eoi'ke vs. Russell,* it was held that the above-recited statutes were passed for the purpose of facil- itating a certain class or kind of legal actions, relating to, or by which a remedy is sought as regards, the " joint property and effects " of the company or association ; and that where, in an action against the President of the New York Mining Stock Board, the only relief asked for was that the president of the board, its officers and members, should be restrained from enforcing the vote or i-esolution of the board, suspending the plaintiff from his membership for a certain number of days, it was held that the action was not within either of these stat- utes ; that plaintiff could not bring a suit against the president ' 3 N. Y. Key. Stat. (6th ed. ) 762. joint-stock association may maintain Brideubecker ys. Hoard, 32 How. an action against such association. Pr. (N. Y.) 289; Tibbetts vs. Blood, It is not an action against himself. 21 Barb. 650 ; Corning vs. Greene, 23 Westcott vs. Fargo, 61 N. Y. 542 • id. 33 ; De Witt vs. Chandler, 11 Ab. Saltsman vs. Shults, 14 Hun (N. Y.)^ Pr. (N. Y.) 459, 470; National Bank 256; see McMahon vs. Eanhr, 47 N. vs. Lasher, 1 T. & C. (N. Y.) 813 ; Y. 67 ; Snow vs. Wheeler, 113 Mass. Waller vs. Thomas, 42 How. Pr. (N. 179. But see Bullard vs. Kinney, 10 Y.) 346; Ebbinghousen vs. Worth Cal. 60; Coal Company vs. Fry, 4 Club, 4 Ab. New Cas. 300 ; Allen vs. Phil. (Pa.) 129 ; Wilson vs. Curzon, Clark, 65 Barb. 563; National Bank 15 M. & W. 532; Perring vs. Hone vs. Van Derwerker, 74 N. Y. 234; and 4 Bing. 28 ; Holmes vs. Higgins, 1 b' see 4 Duer, 362; 18 Ab. Pr. 191; 55 & C.74. Barb. 487. So an action may be = See also N. Y. Code of Civil brought in the name of the presi- Proc. J 448, allowing one to be sued, dent, -to recover calls from share- where a large number of persons are holders. Bray vs. Farwell, 3 Lans. interested. (N. Y.) Eep. 495. So a member of a * 2 Lans. (N. Y.) 245. Suits By and ^gamst. 25 alone ; that such a suit could not be regarded as a suit against the company or board ; that no member of the latter would be regarded as a party to it ; and that, accordingly, an injunc- tion could not be regularly issued against any one else than the president. This construction seems too narrow, and it was dissented from by one of the justices ; but, although the decision does not appear to have been expressly overruled, subsequent cases would seem to show that it has not been follpwed as a precedent. And in the recent case of National Bank vs. Yan Derwerk- er,' where the defence .was, that to bring a case within the statute in question it was necessary to show the existence of a company having stock divided into shares, and shareholders holding the same, the court held that the statute required no greater formalities in that respect for the formation of such associations than for the formation of ordinary partnerships. In that case it appeared that an association existed which had adopted for its title the Old Saratoga Union Store Associa- tion. It had more than fifty members, but there were no writ- ten articles signed by the members, nor any articles of incor- poration, except a constitution and by-laws. There were also a president and board of directors. The president of the association, under authority of the body, made certain promis- sory notes. In an action on these notes, the court held that tlie suit was properly brought against the association, in the name of the president; and that judgment in such an action, and execution thereon, bound the joint property of the asso- ciation, and not the individual property of the president. In the cases cited in the notes, suits were instituted against the Stock Exchange in the name of its president;' and in the ' 74 N. Y. 234. Pr. 318 ; 4 id. 162 ; Sewell vs. Ives, " Heath vs. Prest. Gold Exchange, N. Y. Superior Ct., Sp. T., unreport- 7 Ab. Pr. ( n. 8. ) 251 ; s. c. 38 How. ed, N. Y. Daily Beg., Feb. 11, 1879 ; Pr. 168 ; White vs. Brownell, 3 Ab. Eorke vs. Kussell, 2 Lans. (N. Y.) 26 Stockrbroksrs offid Stock Meohcmges. State of New York, under the statutes in question, there appears to be no legal impediment to the bringing of a suit against the Stock Exchange in the name of the president, treasurer, or other officer named in the act.' In the case of Korke vs. Enssell, above referred to,' it was held, by Mr. Justice Ingraham, that where an injunction was issued and served on the defendant, in an action against the president of an association which purported to restrain him " as president " of the association, " its officers and members," the associates to whom the service was made known, and the summons, complaint, and order were read, at a meeting of the association, by its officers acting thereat, were amenable for contempt in taking proceedings contrary to the prohibi- tions of the injunction. The New York statute further provides that after judg- ment shall be obtained against any joint-stock company or association, and execution thereon shall be returned unsatis- fied in whole or in part, suits may be brought against any or all of the shareholders or associates, individually ; but no more than one suit shall be brought or maintained against said shareholders at any one time, nor until the same shall have been determined, and execution issued and returned unsatis- fied, in whole or in part.' The effect of these statutes permitting an unincorporated as- Eep, 244. lu the case of Sewell vs. 311 ; Tibbetts vs. Blood, 21 Barb. Ivea the question was directly raised, 650; De Witt vs. Chandler, 11 Ab. and the form of the action against Pr. 459 ; Bridenbeoker vs. Hoard, 32 the President of the Stock Exchange How. Pr. (N.Y.) 289 ; Austin vs. Sear- sustained, under the aforementioned ing,16N.Y. 112; Masterson vs. Botts, act. See also Sewell vs. Ives, Prest. 4 Ab. Pr. Eep. 130 ; N. Y. Marbled N. Y. Superior Ct., Sp. T., N. Y. Daily Iron Works vs. Smith, 4 Duer (N. Beg., May 18, 1881. Also, Olery vs. Y.) 362; East River Bank vs. Judah, Brown, 51 How. Pr. (N. Y.) 92. 10 How. Pr. 135 ; Leonardvillo Bank ' For other cases, interpreting ts. Willard, 25 N. Y. 574 ; People vs. the statutes of 1849 and 1851, see Olmsted, 45 Barb. 644, 647. Schmidt vs. Gunther, 5 Daly, 452. " 2 Lans. (N. Y.) Eep. 245. Also cases cited in note to Ebbing- ' Laws 1849, ch. 258, J 4; as amend- housen vs. Worth Club,4 Ab.New Cas. ed, L. 1853, ch. 153. Suits By and Against. 27 sociation to sue and be sued in the name of one or more of its officers, has been to remove another great objection to sueli or- ganizations, and to make them equal in dignity and efficacy to corporations. In Pennsylvania, the first case which seems to have aris- en, involving a question between the Ph'iladelphia Stock Exchange and its members, was that of Leech vs. Harris.' There a bill was filed to prevent the plaintifE from being sus- pended as a member of the Exchange. In that case, a com- mittee of the Exchange was appointed by the president to investigate a certain claim against the plaintiff. Apprehend- ing that the committee would suspend him, the plaintifE asked for an injunction. The action was brought against the mem- bers of the committee as a " Committee and Members of the Board of Brokers," and no objection seems to have been taken to this form of the action, the injunction being granted pre- venting the plaintiff's expulsion. In another case," the action was brought against the " Treas- urer of the Board of Brokers and the Philadelphia Board of Brokers ;" and in a previous case, Leech vs. Leech,' " the Board of Brokers " were made garnishees. So in the very recent case of Moxey's Appeal, decided by the Supreme Court of Pennsylvania in January, 1881,' where the action was, in equity, to restrain defendants, infer alia, from interfering with plaintiff's right and privilege of using his seat in the board, the bill was filed against " The Phila- delphia Stock Exchange, A. B., president thereof." ' In view of these authorities, there would seem to be no ' 2 Brews. (Pa.) 571. s Id. 542, note. ' Singerly vs. Johnson, 3 Weekly * 9 Weekly Notes Cas. 441, affg Notes Cas. ( Pa. ) 541, 542, and see 37 Legal Int. 82. Leech vs. Leech, id. 542, where a snit * See also Evans vs. Wister, 1 ■was brought against ." The Board of Weekly Notes Cas. 181. Brokers," garnishees. Also Evans vs. Wister, infra. 28 Stockrhrdkers and Stock Exchcmges. difficulty, in the State of Pennsylvania, in maintaining an ac- tion against the Exchange as a body, without joining the indi- vidual members.' There seems to be no statute in Massachusetts providing for the bringing of actions by or against voluntary associa- tions, in the name of their officers or otherwise. Nor are there any laws declaring the status or regulating the manage- ment of such bodies. But such associations have been recog- nized as legal, and suits have been brought against, and in the name of, their trustees. But the actions were brought in re- spect to contracts made with trustees, by name, and their suc- cessors, of such associations." There is another class of cases which should be referred to in this connection, viz., where instruments are given to unin- corporated associations whereby money is secured and made payable to some officer of the company and his " successors in office." A number of the English cases hold that effect can- not be given to such an instrument, it being an attempt to provide for payment to official successors ; that it is in law constituting the officer a corporation sole, which cannot be done by agreement, but must be done by the crown.' ' See ante, p. 23, n. 3, for statute standing the act of April 28, 1876 of Pennsylvania relating to suits (P. L. 53 Purd. Dig. 1981), declaring against unincorporated associations that such benefits shall bo paid from where the members reside outside of the treasury only, such associations the State. In the case of Kurz vs. still continue to he partnerships, and Eggert (9 Weekly Notes Cas. 126), that the action -was improperly the plaintiff brought an action of as- brought. sumpsit against the president, a trus- ''Merrill vs. Mclntyre, 13 Gray, tee, and the treasurer of The Augusta 157; Baxter vs. Mclntyre, 13 Gray, Teutonia Lodge, No. 34 Deutsche Or- 168 ; Delano vs. Wild, 6 Allen, 1. der of Hamgari, an unincorporated ^ Dance vs. Girdler, 4 B. & P. 40 • beneficial association, to recover the Strange vs. Leo, 3 East, 484 ; Graves amount to be paid during the sick- vs. Colby, per Lord Denman, 9 Ad. & uess of plaintiff. The defendant de- E. 356 ; Metcalf vs. Bruin, 12 East, murred, on the ground that plaintiff 400; also, 2 Camp. 422 ; Pigott vs. could not maintain an action at law Thompson, 3 B. & P. 147 ; but see against the officers of the associa- this latter case explained in Bowen tiou. The court held that, notwith- vs. Monis, 2 Taunt. 381 ; Hybart vs. Suits By cmd Agamst. 29 In siich a case, it would seem that the right of action at common-law (unless affected by statute) on a contract made with several persons jointly passes on the death of each to the survivors, and, on the death of the last, to his representatives.' In the United States, however, the law, in some of the States, is different; and it is held that the right to sue ex- ists in the subsequent incumbent of the office; at all events, where the engagement or undertaking is for the benefit of some public or quasi-public body." There have been some decisions, as to the effect of the re- covery of a judgment against these non-incorporated associ- ations, which it may not be amiss to refier to in this con- nection. Where a judgment is recovered against the president of an association for a debt owing by the latter, it does not preclude individual members, when sued for the same debt, from con- testing their liability for the debts of the association. A suit against the president is necessary, in the first in- stance, by the express terms of the statute, before an action against the members can be maintained ; but the judgment therein is only so far effective as to reach the property owned by the association : when it fails to secure satisfaction of the debt, then an action against the associates directly to enforce the payment of the debt out of their own individual property is proper. At most, a judgment against the president can be no more than prima facie evidence in the plaintiff's favor in a sub- sequent action against the associates. It will not sustain his right to recover, where the evidence shows that the judgment Parker, 4 C. B. (n. s.) 209 ; Gray va. = Fishe vs. Ellis, 20 Mass. 532; Kean Pearson, 5 L. E. C. P. 568 ; Evans vs. vs. Franklin, 5 Serg. & E. 154 ; Com- Hpoper, L. E. 1, Q. B. D. 4^; Howley nion\Y. vs. Shurman's Adm. 18 Pa. St. vs. Knight, 14 Q. B. 240. (6 Har.) 347. ' Dicey on Parties, 128. 30 Stoch-lyrohers and Stock Exchanges. so recovered exceeds the amount for whicli the association or its members were liable in the action.' The statutes of New York also provide that whenever the property of a joint-stock association is represented by shares of stock, such association may provide, by articles of associ- ation, that the death of any stockholder, or assignment of his stock, shall not work a dissolution of the association ; nor shall said company be dissolved, except by judgment of a court, for fraud in its management, or other good cause to such court shown, or in pursuance of its articles of association.' Under this section it has been decided, in the State of New York, that a dissolution of a joint-stock company is to be con- ducted mainly according to the methods employed in the case of insolvent corporations, and not according to those derived from the law of simple partnerships.' The causes for which the courts will dissolve such bodies are either those for which a dissolution is specifically pro- vided in the constitution, or, where that instrument is silent upon the subject, a dissolution will be decreed in the same cases as a corporation.* There is no provision in the constitution or by-laws of the New York Stock Exchange relative to its dissolution; and ' Allen vs. Clark, 65 Barb. 563 ; of violent dissensions and irreoonoil- Witlierhead vs. Allen, 4 Ab. (N. Y.), able differences between the inem- App. 628, reversing 28 Barb. 661; bers of a voluntary association jiidg- Kingsland vs. Braisted, 2 Laus. 17 ; ment will be rendered at tbe suit of Eobbius vs. Wells, 1 Eobt. (N. Y.) one or more members against all the 666. others dissolving the society; but " Laws 1854, ch. 245. they should not be dissolved for ^ Waterbury vs. Mer. Union Ex. sliglit causes, and, if at all, only Co. 50 Barb. 157, s. c. 3 Ab. Pr. (u. s.) when it is entirely apparent that 163. the organization has ceased to an- * There are some reported cases swer the ends of its existence and where the courts have been aslied to no other mode of relief is attainable, dissolve these unincorporated asso- Lafond vs. Deems, 1 Ab. New Cas. ciations, and it might not be uuprof- (N. Y.) 318 ; 81 N. Y. 507 ; Fischer itable to refer to a few of them in vs. Baab, C. P., Sp. T., N. Y. Bailn this connection. Beg. Feb. 10, 1879.. Thus it has been held that iu case Suits By ct/nd Against. 31 were the period to arrive when its dissolution should be asked for, the question would probably be determined by the statutes above referred to, together with such cases as have been de- cided under them. Under the present laws of the Stock Exchange of New York, there would appear to be little diflBcnlty in dividing its property if a dissolution were to take place. By dividing the property by the number of seats, the result would clearly appear. But as there has arisen considerable dispute upon the dissolution of voluntary societies, a number of cases are collected in the notes which show upon what principle and by what methods the court directs a distribution in those in- stances where the regulations or laws of the associations have left the matter unsettled or in doubt.* ' In Browu vs. Dale (27 W. B. 149), in the chancery division of the Eng- lish Court, the Master of the Bolls held that where a voluntary soci- ety has a fund — in this case aris- ing ou the sale of some of their real property — there being no rule of the society nor any express obligation to the contrary, the members, at a given time, were entitled to divide the fund among themselves ; hence, that new members coming in after such a de- termination, though before actual di- vision, could not share, nor insist that the fund be invested and only in- come divided. A minority have the right to en- join the majority frpm distributing the funds among the members in a manner different from that provided by the constitution without a vote, according to the constitution , to make the necessary alteration. So held in the case of a benefit society, although for fifty years there had never been a call for relief upon the society pur- suant to its articles, and the fund was the accumulation of voluntary assessments, all made more than forty years before the suit (Torrey vs. Baker, 83 Mass. 120). Where a sale and distribution of the property in a certain period is positively provided for by private articles of association, any of the shareholders have a right to insist upon the sale and distribution ac- cording- to the articles, though it may not be for the interests of the concern, or may be against the will of the majority (Mann vs. Butler, 2 Barb. Ch. 362). A club formed for the purpose of relieving its members from draft, provided that the sum of $300 should be paid to every member who should volunteer or put in a substitute. The funds of the association were paid by its treasurer to the defend- ants, who were not members, upon the agreement that they would fill the quota of the whole township. The plaintiff, a member of the club, was drafted, and put in a substitute. Held, that the fund passed to the de- fendants, covered with a trust to pay it according to the terms of the sub- scription; that they stood in the ,32 Stock-lroTcers and Stock Exohcmges. VIII. Rules and Begulations of Stock Exchanges. {a.) Oeneral Power to Make Rules, eitc. By the 21st Article of the Constitution of the New Tork position of the club; and that the plaintiff was entitled to his share of the fund (Foley vs. Tovey, 54 Pa. St. 190). Divers persons subscrihed various sums to assist an unincorporated mu- sical association to erect a building for their use as a band. Held, that these subscriptions were absolute gifts to the members of the associ- ation, and that the building erected by means of them and of funds oth- erwise obtained was owned by the members as tenants in common (Higgius vs. Bidden, 12 Wis. 587). An agreement under seal that " we, the owners in the E farm, hereby agree to any division of the remain- ing portion of saidfarm unsold, which a majority of interest in said prop- erty shall decide upon as fair and equitable." Held to refer to the mode of division, and not to author- ize the majority in interest to set off to any owner a certain portion of the laud without his assent (Hark- ness vs. Eemington, 7 E. 1. 154). An association was formed for the purpose of obtaining gold in Cali- fornia. By the articles each agreed to pay $25 to furnish an outfit for, and to pay the expenses of, eight of their number, to he elected by the members to go to California and labor for the association iu procur- ing gold; and that from the prod- ucts of their labor their expenses should be first paid, and of the resi- due one half should be divided among the eight and the remainder among all the members. The eight, on arriving in California, sold their outfits, divided the proceeds, and each one took his own way. One of the eight returned to Ohio, and a bill was filed to compel him to account. Held, that the eight members of the association stood in relation thereto of employes, and that their acts, on arriving in California, did not dis- charge them from any of their obli- gations to it (Eagle v. Bucher, 6 Ohio St. 295). B was a member of the " Chesh- ire Company," and A and B ad- vanced $500 each, which was paid by B as his contribution thereto, with the agreement that they should share in certain proportions the prof- its of the enterprise, and that the directors of the company might re- tain A's share as his attorneys. B sold his interest therein at an ad- vance of 11000 before the company realized any profits to the other members. Held, that A was enti- tled to receive his stipulated portion of that advance as profits (Eichard- son vs. Dickinson, 26 N. H. (6 Fost.) 217). A, the owner of a share of the outfit Of a California gold company, sold to B "one half of his interest in the company ;" but the writing provided that B should not be a partner in the company, but ouly " purchaser of A's interest in the metals and ores " that might be ob- tained. Held, that B acquired no interest in the outfit (Phillips vs. Jones, 20 Mo. 67). The defendants, owners of mineral lands, entered into a written agree- ment with tUe plaintiff, reciting their intention either to sell the lands or to form a joint-stock company for the working of the mines thereon ; and promising, in consideration of services rendered and to be rendered by the plaintiff, to pay to him a oer- KuUs and Begulations. 33 Stock Exchange/ every member is required, within five days after his admission, to sign the constitution and by-laws, and pledge himself to abide by the same, and all amendments and all existing or future rules or regulations. The general effect of a rule like the above will be first con- sidered, and afterwards reference will be made to such partic- ular rules as are important, or have been made the subject of legal interpretation. It is well settled that before a member of an unincorporated association is bound by the constitution and by-laws of a society, it must appear that he personally assented to the same." This assent, however, need not necessarily be based upon an actual signing of the by-laws or rules, but it may be inferred or presumed frotn the circumstances of each case, and especially from the fact of admission and acting as a mem- ber." And it seems that where an association, through a com- mittee or otherwise, seeks to suspend or expel a member for acts not provided for in the by-laws or constitution, or by an ex post facto resolution, the courts will interfere by injunc- tion to prevent the same.* So a member of a Stock Exchange tain sum out of the proceeds of the years had elapsed, that the plaintiff sale of the lands, if the same should has no claim upon them in equity, be sold, or, if they should not he sold, except for the stipulated salary and a company should be formed for (Pinch vs. Anthony, 10 Allen (Mass.) working the mines, then to convey 470). to him stock to that amount; and ■ As amended, June, 1876. the plaintiff, on his part, agreed, in ^ Austin vs. Searing, 16 N. Y. 112; consideration of the foregoing agree- Heath vs. Prest. Gold Exchange, 7 ments, to remain in their service as Ab. Pr. (n. s.) 251. long as they might require, not ex- ' Innes vs. Wylie, 1 Car. & K. 262; ceeding one year, for a fixed salary Brancker vs. Eoberts, 7 Jur. ( n. s. ) and a house and land free of rent. 1185; Hopkiuson vs. Marquis of Exe- Held, that the defendants vrere not ter, 5 L. E. Eq. 63 ; Lihabitants of bound to sell the land, nor to form Palmyra vs. Morton, 25 Mo. 593 ; a joint-stock company, until by using White vs. Brownell, 4 Ab. Pr. (u. s.) reasonable efforts it should be for 162,193. the mutual interest of all the parties * Per Ingraham, J., Eorke vs. Ens- concerned; and vrhere, without neg- sell, 2 Lans. (N. Y. ) Eep. 244, 248. ligence on their part, they had failed The adoption, by an unincorporated to do so, although more than seven society, of a new constitution is ille- 3 34 Stochirohers amd Stock Exchanges. is bound by a by-law passed while lie is a tnember, whether he votes for it or not." As to the limit and extent of the rules which such an or- ganization can adopt, it appears to be established that its members possess the right to make such regulations for the government of the body as they may deem proper, providing that they contain nothing unreasonable' or against tlie law of the land, which, of course, includes anything immoral or against public policy ; and that, with these necessary limita- tions, their rules will be obligatory upon each member assent- ing thereto.' " It follows, from the very nature of such an organization," says the court, in "White vs. Brownell, " with such objects, in- tents, and purposes, that there must be rules and regulations' for the good order of the iassociation ; and such rules should be held to be conclusive as to the mode of transacting busi- ness between the members, and as to the privilege of admis- sion to and continued enjoyment of membership." * But, in passing upon questions involving the propriety and gal, and of no force where it has not Wister, 1 Week. Notes Cas. 181 ; beeu carried in accordance with the Thompson vs. Adams, 7 id. 281 ; Ang. provisions of the existing constitu- & Ames on Corp. (lOth ed.) j 333- tiori of the society (Hochreiter's App. 335 ; Moxey's Appeal, 9 Week. Notes 8 Week. Notes Cas. 461). Cas. 441, aff'g 37 Leg. Int. 82; Hi- ' MacDowell vs. Aokley, 8 Week, hernia Fire Eng. Co. vs. The Com- Notes Cas. 464. monw. 8 Week. Notes Cas. 320 ; " No member is hound hy a by-law id. April 21, 1880, 521 ; People ys. which is unreasonable and which he Board of Trade, 80 111. 134 ; but see does not consent to. Hibernia Fire this case questioned by the Supreme Eng. Co. vs. The Commonw. 8 Week. Ct. of Wisconsin in State ex rel. Notes Cas. (Pa.) 320; id. April 21, Guppel vs. Milwaukee Chamber of 1880, 521 ; Dunham vs. Trustees of Comm. 47 Wis. 670. See also Bax- Eachael, 5 Cow. 462 ; People vs. ter vs. Board of Trade of Chicago, 83 Med. Soc. of Erie, 24 Barb. 570. 111. 146 ; Sturges vs. Board of Trade, ^ White vs. Brownell, 4 Ah. Pr. (n. 86 111.441; Commonw. vs. St. Pat- s.), 162, 193; Hyde vs. Woods, 2 Sawy. rick's Benev. Soc. 2 Binn. (Pa.) 442 ; 665, per Sawyer, J ; affirmed, 94 U. S. The Butchers' Benevolent Assoc. 35 Reps. 528; Leech vs. Harris, 2 Brews. Pa. St. (11 Casey) 151. ( Pa. ) 571 ; Singerly vs. Johnson, 3 * Per Van Vorst, J., White vs. Week. Notes Cas. (Pa.) 541 ; Leech Brownell, 3 Ab. Pr. ( n. s. ) 318, vs. Leech, id. 542, note; Evans vs. 326. liules and Hegulations. 35 legality of their rules, where there is the slightest property interest involved,'. the courts will apply the same rule which is used in the case of corporate bodies. In Leech vs. Harris," the court said: "I have very little doubt, therefore, that the same rules of law and equity, so far as regards, the control of them, and the adjudication of their reserved and inherent powers to regulate the conduct and to expel their members, apply to them as to corporations and joint^stock companies." In the case of The People ex rel. Page vs. The Board of Trade of Chicago," the charter conferred upon the defendants the right to admit or expel such persons as they might see fit, in manner to be prescribed by the rules, regulations, or by-laws thereof; but the court held that this language only conferred upon the defendants the power to admit or expel for some just or reasonable cause. In a later case * the Supreme Court of Illinois held that, without any consideration of the reasonableness or legality of the by-laws, it would not compel the defendants, by man- dandus, to restore a member, who had been duly expelled, to the exercise of his rights. The court said : "Has relator such an interest or legal right to membership in the board as will be regarded by a court of justice?" And it held that, al- though the Board of Trade was incorporated, it was, in effect, but a voluntary association — not maintained for the ti-ansac- tion of business or pecuniary gain, but simply to promulgate and enforce among its members correct and high moral prin- ciples in the traiisaction of business ; and refused to interfere. This case is solitary in its position, and the Supreme Court ' See, as to distinction between People vs. Med. Soc. of Erie, 24 Barb, nuinoorporated associations possess- 577. " 2 Brews. (Pa.) 571-576. ing property, and those instituted ^ 45 111. 112. for mere social enjoyment or benefit, * The People ex rel. Eice vs. The State vs. Ga. Med. Soc. 38 Ga. 608; Board of Trade of Chicago, 80111. 134. 36 Stookrhrdkers and Stock Exchanges. of "Wisconsin has refused to follow it.' The better rule would seem to be that the courts will in all cases interfere, by appro- priate legal remedy, to prevent the expulsion or interference with a member's rights in an unincorporated association where the latter is acting under a by-law, rule, or regulation which is illegal, unreasonable, or contrary to public policy." In the ease of Dawkins vs. Antrobus," where the plain- tiff sought to have the court review a resolution expelling him from a club, James, L. J., after referring to the ob- servations of the Lords Commissioners iu another case' — to the effect that shareholders, assembled at a meeting duly convened, were the judges of what was a reasonable cause for removing their directors ; and that altliough the court might inquire whether the meeting were regularly held, and in cases of fraud, clearly proved, might interfere with the acts done, still there was no jurisdiction, where no ease of dir rect fraud was proved, to determine whethei* the decision of the meeting had, or had not, been unduly influenced by un- founded statements, made by persons taking an active part in the proceedings— said that he agreed with every word of these observations, which were equally applicable to the case of a club. ..." Unless it could ie said that their decision was so grossly, unfair and unreasonable, that it could not have been arrived at unless from some malicious motives, this court had no power to interfere." ' In State ex rel. Cuppel vs. Milwaukee Chamber of Com- merce," the visitatorial power of courts over corporations was examined. The relator had been suspended from member- ship of the defendant for refusing to pay a fine imposed by ' The State ex rel. Ciippel vs. CLam- * Iiiderwick vs. Snell, 2 Mao. & 6. lier of Comm. 3 Northw. K. (n. s, ) 221. 713 ; B. c. 47 Wis. 670 ; 21 Alb. L. J. 23. ' See also, iu this counection, La- " White vs. Bi'owuell, 4 Ab. Pr. (n. bonchere vs. Earl of Wharncliffe, s.) 162, 193. L. R., 13 Ch. Div. 346. ■ » L. E. 17 Ch. Div. 615. « 47 Wis. 670. Mules and Regulations. 37 its directors for violation of one of its rules. The rule in •question prohibited its members from "gathering in any pub- lic place in the vicinity of the "Exchange room," and "form- ing a market" for the purpose of making any trade or con- tract for the future delivery of grain or provisions, before the time fixed for opening the Exchange room for general trading, or after the time fixed for closing the same, daily. The char- ter authorized the corporation to make reasonable rules for the regulation of its members. The rule in question was held to be reasonable, and not an unlawful restraint upon trade, nor void for uncertainty ; and the relator having been fairly tried, upon due notice, and in accordance with the rules of the cor- poration, and there being abundant proof against him tending to show that he had committed the offence charged, it was de- cided that he could not be restored by mandamus. The visitatorial or superintending power of the State over corporations created by the Legislature will always be exercised in proper cases, through the medium of the courts of the State, to keep those corporations within the limits of their lawful powers, and to correct and punish abuses of their franchises. To this end the courts will issue writs of quo warranto, manda- mus, or injunction, as the exigencies of the particular case may require ; will inquire into the grievance complained of, and, if the same is found to exist, will apply such remedy as the law prescribes. Every corporation of the State, whether public or private, civil or municipal, is subject to this superintending control, although, in its exercise, different rules may be ap- plied to different classes of corporations. The Court said that, in the light of these views, "we cannot accept the doctrine which seems to have received the sanction of the Supreme Court of Illinois in The People ex rel. Kice vs. The Board of Trade of Chicago,' that the power of such ' 80 111. 134. 38 Stoch-hrohers and Stock Exchanges. corporations to enact by-laws is unlimited, and that the courts will not interfere with the enforcement of any by- laws thus enacted. The case' seems in conflict with earlier decisions of that court, and we are not aware that the court has reasserted any such doctrine, although it has since consid- ered several cases involving the legality of the proceedings of the same Board of Trade.' True, these were equity cases, in which the respective complainants sought to restrain the board from expelling them, or to compel it to restore them after ex- pulsion ; yet the doctrine of The People ex rel. Kice vs. The Board of Trade, swpra, is referred to hypothetically. in the opinions of the court, and no mention whatever is made of that case. Whether that learned and able court adhere to that doctrine or not, we are unable, as at present advised, to adopt it as the law of this State." We have seen from this case what the " visitatorial " power of the State over corporations is, and in what cases the courts will exei'cise the same. Although, as we have shown, a Stock Exchange is not a cor- poration, yet it practically exercises the functions of one ; and there seems to be no good reason why the courts should not be guided by the same principles, in interpreting their by- laws, as they apply in the case of corporations, keeping in view," of course, the different, objects and ends for which the ' See Fisher vs. The Board of Trade See also Waterbury vs. Mer. Union of Chicago, 80 111. 85 ; Sturges vs. Exp. Co. 50 Barb. 160. lu White vs. Same, 86 id. 441 ; Baxter vs. Same, Browuell, however (4 Ab. Pr. (n. s.) 83 id. 1,46. 162), the court said: "A meniber of ' This is the view expressed in a lody of this desoi-iption ( a Stock Leech vs. Harris (2 Brews. (Pa.) Exchange) has, as such, undoubtedly 571),byMr. Justice Pierce, who said: rights which the law wlllprotect; but '' I have very little doubt, therefore, they do not rest upon the same that the rules of law and equity, so ground, and are by no means coex- far as regards the control of them, tensive with the franchise enjoyed and .the adjudication of their re- by a member of a corporation. They served and inherent powers to reg- depend upon the nature of the or- ulate the conduct and to expel the gauization, upon the objectfor which members, apply to them as to corpo- it was formed, and upon the rules rations and joint-stock companies." Tegulatious, ooustitution, or by-laws Bules and Regulations. 39 incorporated and non-incorporated bodies maj have been in- stituted. To confer upon an unincorporated association an unlimited power to make by-laws would be not only to raise it above corporations which are supposed to have special fran- chises, but to endow it with legislative authority.' The utmost that these associations can claim, therefore, is the power to make rules and regulations for their internal government, which the courts will not pronounce oppressive or unreasonable ; and, when their rules are brought into a court of justice, for construction, they must also submit to the test which is applied to the by-laws of incorporated bodies, and submit to have them declared as void, when they violate the Constitution or laws of the United States, or of the in- dividual States wliere the associations exist, or the common- law as it is generally accepted." which are explanatory of its pur- pose, and which the body has adopt- ed for its governmeut." But the learned judge who delivered the opinion in that case expressly ad- mitted that the rules of these volun- tary associations must have "noth- ing in theni in confiict with fhe law of the land." ' As to the legality of unincorpo- rated joint-stock associations at com- mon-law, see Aug. & Ames on Corps. (10th ed.) 5 591, uote 4; Lindley on Part. (4th ed.) 5. ' Aug. & Ames on Corps. (lOtli ed.) } 332. The following is an apt and amus- ing case illustrative of the rule that an association cannot pass any rule or by-law which is in violation of the principles of law. It was an indict- ment for assault and battery, the de- fendants justifying under a rule of a voluntary unincorporated society. The defendants and the prosecutrix were members of a benevoleut soci- ety known as the "Good Samari- tans," which society had certain rules and ceremonies kuown as the ceremonies of initiation and expul- sion. The prosecutrix having been remiss in some of her obligations, and, when called upon to explain, having become violent, the defend- ants, with others, proceeded to per- form the ceremony of expulsion, which consisted in suspending her from the wall by means of a cord fastened around her waist. This ceremony had been inflicted upon others, theretofore, in the pres- ence of the prosecutrix. She resist- ed to the extent of her ability. The court, on appeal, held : " When the prosecutrix refused to submit to the ceremony of expulsion established by this benevoleut Socie- ty, it could not be lawfully inflicted. Eules of discipline for this and all voluntary associations must conform to the laws. If the act of tying this woman would have been a battery, had the parties concerned not been members of the " Society of Good Sa- maritans," it is not the less a battery because they were all members of 40 Stoch-lrohers mon- ey or property to which plaintiff might be entitled ; but the case was determined upon the grounds just stated.'. Finally, upon this question, it should be stated that, in all cases in which a member is proceeded against with a view to his expulsion, it is necessary that the proceedings should be conducted in accordance with the constitution and by-laws of the association, and that he should be duly notified to appear, and be allowed an opportunity to explain hia acts or be heard in his defence." In other words, there must be a charge made against him, of which he should be notified, and a time set for its hearing, not too limited to prevent the accused from prop- erly collecting his proofs and producing his witnesses; and the hearing or trial of the charge should include the right to ' See also, in this connection, Mac- ' Ang. & Ames on Corps. (10th Dowell vs. Ackley, Supreme Ct. Pa. ed.) § 420 ; People vs. San Francisco 8 Week. Notes of Cas. 464. Bene v, Soo. 24 How. Pr. (N. Y. ) 216. 0,6, Stookrbrdkers and Stock Exchanges. examine his own witnesses, and cross-examine those against him, and to present such suggestions as he may deem proper, in fine, he should be allowed a full and fair opportunity of defending himself, This question of notice was recently considered by the Court of Appeals of New York, in "Wachtel vs. Noah "Wid- ows and Orphans' Benevolent Society;' and it was held that an association whose members become entitled to priv- ileges or rights of property therein cannot exercise its powers of expulsion without notice to the party charged or without giving him an opportunity to be heard; and that where the charter of a beneficiary association provided that the secretary should give to a member who is six months in arrear a written notice of the fact, and that "he shall be stricken from the roll if he does not pay his dues within thirty days," a notice was essential to deprive the member in arrears, or his representative after his death, of the benefits of mem- bership in the society ; and that the fact that the member had changed his place of residence, without notifying the so- ciety, was not an excuse for a failure to serve a notice upon him, especially when there was a specific penalty imposed in the by-laws of the society upon a member changing his resi- dence without giving notice." In the celebrated case of Labouchere vs. Earl of Wharn- cliffe,' several important questions relative to the expulsion of members of voluntary associations were considered. One of the rules of the club, of which plaintiff was a member, pro- vided that " in case the conduct of any member, either in or out of the club, shall, in the opinion of the committee, after ' 84 N. T. 28. For other eases re- 32 N. Y. 187 ; Commonw. vs. Penns. lating to power of uuiuoorporated Benev. Soc. 2 S. & Eawle, 141; Innes associations to expel a member, see vs. Wylie, 1 C. & K. 257. Consult preceding subdivision, p. 34. Foster also Olery vs. Brown, 51 How. Pr. vs. Harrison, Week. Notes of Cas. 171. 92. ' See also Bartlett vs. Med. Soo. ^ L. K. 13 Ch. Div. 346. Suspension cmd Eaypuhion. 57 inquiry, be injurious to the welfare and intei'ests of the club, the committee shall call upon him to resign." The court held that the words "after inquiry" did not mean that the committee might take up a newspaper, see in it that Mr. A. B. has written an objectionable letter, or has been brought up at a police-court for drunkenness, and then expel him; but that the inquiry should be a fair one into the truth of the alleged facts. That where the conduct of a member is impugned, such conduct should be inquired into ; and the committee making the inquiry ought to see what ex- cuse or reason the accused member can give for it, and they ought to give him notice that his conduct is about to be in- vestigated, and afford him an opportunity of stating his case to them. And the notice should not be ambiguous, but should clearly inform the member that his conduct was to be investi- gated. At a special meeting of the committee, held on the 16th of October, 1879, it was resolved that the plaintiff be called upon to resign in accordance with the above rule. This he refused to do. Rule 31 of the club provided that the committee should, at any time, have power to call a gen- eral meeting on giving a fortnight's notice. On the evening of the 31st of October, an adjourned meeting of the commit- tee was held, which continued in session into the following morning ; at which meeting it was resolved to call a general meeting of the club to consider the expulsion of the plaintiff. Notice was posted in the club-house at 3 a.m. of the same morning, the 1st of November, calling such a meeting to be held on the 14th of November ; and, in the course of the 1st of November, notices were mailed to the members of the club. According to the statement of the secretary of the club, the notice posted in the club-house at 3 a.m. on the morning of the 1st of November would be reckoned, hav- ing regard to the custom of the club, as being done on the 68 Stoch-hroTcers and Stock ExGhomges. 31st of October, on which day the notice was dated. On the 14th of November the general meeting of the club was held. There were one hundred and seventeen members pres- ent, all of whom voted, except the plaintiff and one other ; of whom seventy-seven voted for the committee, and thirty- eight for the plaintiff; The plaintiff was present, addressed the meeting, and protested against his expulsion ; but made no objection to the proceedings on the score of irregularity or the insufficiency of the notice. In respect to the sufiBciency of the notice, the court held that, the notice having been first posted on the 1st of ITovem- ber, it was not a fortnight's notice, and that, therefore, the meeting was irregularly called. That a fortnight had a defi- nite legal meaning, and was not affected by the secretary's notion of the club-day. It was further held that the plain- tiff had not waived the irregularity by addressing the meeting ; that the plaintiff had said that he protested against his expulsion, and that was sufficient. In respect to whether plaintiff had been expelled by a two -thirds vote of "those present," the court said: "The rule of the club was to the effect that, in the event of a member re- fusing to resign, a general meeting of members should be called, at which it should be competent for two thirds of 'those present' to expel him. Now, Mr. Labouchere has stated that there were one hundred and seventeen persons present, of whom one hundred and fifteen voted; that he himself was present,, but did not vote; and that the num- ber who voted for his expulsion was seventy-seven. It is clear, therefore, that if there were one hundred and seventeen persons present, seventy-seven were not two thirds of the number. The expulsion was, therefore, irregularly made. " "When a resolution is put to a meeting, the persons pres- ent may take one of these courses : they may vote for or Suspension and Mapulsion. 59 against it; or, not wishing to express a positive opinion on the question, refrain from voting at all. This being so, those who do not vote may, by not doing so, turn the scale in favor of the accused member of the club. It was, therefore, the duty of the secretary to ascertain, first, how many persons were present when the question was put, and, secondly, how many of those present had voted for the resolution ; but no such course has been adopted in this instance. It appears to me, then, that this also is a fatal objection." So, in Fisher vs. Keane,' in an action against the Trustees and Conimittee of the Army and Navy Club, asking for a declaration that a resolution purporting to expel the plaintiff from membership in the Army and Navy Club was null and void, Jessel, M. E., construed the rule under which the plain- tiff was expelled, and held that the action of the committee was irregular, and, further, decided that a committee of a club, acting under its rules, is bound to act according to the or- dinary principles of justice, and cannot convict a man of a grave offence, warranting his expulsion, without fair, ade- quate, and sufficient notice, and an opportunity of meeting the accusations brought against him ; he should be given an opportunity of either defending himself or palliating his con- duct. The question also came up in New Jersey, in the case of Sibley vs. Carteret -Club of Elizabeth.' In that case the club was incorporated, and possessed power, in virtue of its charter, to make regulations and by-laws for the admission, suspen- sion, and expulsion of members. Under one of the sections of the constitution it was provided that, if a member remained in default of his indebtedness after fifteen days of posting, he should forfeit his membership in the club, etc. The Board of ' 41 L. T. 335; s. c. L. E. 11 Ch. » 40 N. J. L. Rep. 295. Div.353; 49 L. J. Ch. 11. 60 Stockrbrdkera and Stock Moclumges. Managers, upon failure of the relator to pay after posting, resolved that he ceased to be a member; whereupon the re- lator sued out a writ of mandamus, commanding them to cause his name to be replaced upon the roll of members. The writ was granted, the court holding that there could be no forfeiture by a mere failure to pay dues, unless there was a determination of that fact by the Board of Managers, upon notice to the member charged; that the right of membership in a club is one which the courts will protect ; and that an ir- regular removal will warrant the use of the writ of mandamus to effect a restoration of the expelled member to his rights.' And a contract made between a Broker and his Client, that if the former would refuse to appear before the Arbitration Committee and suffer suspension, the latter would reimburse him for all losses incident to giving up his business, is good, and damages may be recovered for its breach." A club cannot recover dues from a member during his sus- pension from the club, unless the by-laws to which the mem- ber has subscribed contain. an express or implied contract to pay dues during suspension. And it seems that where the by-laws of a club provide that a member may be expelled for not paying his dues or indebtedness, the expulsion of the member is an election as to remedies, and, after expulsion takes place, action will only lie where he has received some consideration after his suspension or expulsion.' But before a member of an unincorpoi'ated association can appeal to the courts, it must appear that he has exhausted all of the remedies provided for by the constitution and by-laws of the association. This question arose in White vs. Brownell,* and the court ' 40 N. J. L. Rep. 295. ' The Carteret Club vs. Florence, * White vs. Baxter, 71 N. Y. 254, 3 N. J. L. Jour. (1880) 208. aff'g 9 J. & S. (N. Y. Superior Ct. • 4 Ab. Pr. (ii. s.) 162. Kep.) 358. Suspension and Expulsion. 61 held that, before it would examine into any proceedings of the committee of the Stock Exchange, it must appear that the plaintiff had exhausted all of the remedies provided for in the constitution and by-laws, the court saying : " The by-law having provided a mode for reviewing and correcting any error or injustice on the part of the committee on member- ship, in reporting to the president that the plaintiff was in de- fault he was bound to avail himself of the remedy provided .by the constitution and by-laws of the body of which he had be- come a member, before he can ask a court of equity to inves- tigate a proceeding not necessarily final in the body itself, but which was there subject to review, and might be annulled by the action of a committee expressly clothed with authority to investigate it (Carlen vs. Drury, 1 Yesey & B. 154). " ' But the courts will not review and set aside proceedings of a society, taken under the authority of its articles of associa- tion assented to by. its members, for the expulsion of a mem- ber upon notice of charges presented, and a hearing according to the by-laws, either because the charges were insuflBcient or the proceedings ' irregular, unless injustice has been . done, which the party charged, tried, and expelled could not have objected to in the society or committee meeting. Proceedings to. expel a member under charges presented, notice given, and a hearing afforded, in conformity with arti- cles of association agreed to by all the members, are to be considered without too much regard to any technicalities. Substantial justice is to be followed rather than form.' So, where a committee of a club have power to expel any member whose conduct is, in their opinion, injurious to the in- ' Id. 199; Lafoncl vs. Deems, 81 that plaintiff had exhausted his rem- N. Y. 507; see also Soc. for Visitation edies in the association, and his ap- of Sick vs. Commonw. ex rel. Meyer, pea^ to the courts was npbehl. 52 Pa. St. 125. In Olery vs. Bro\vn, = People vs. The St. George's Soo. .51 How. Pr. (N. Y.) 92, it appeared of Detroit, 28 Mich. 261. 62 StoGjcrhroJcers and Stock Msohanges. terests of the club, and they exercise this power, all that is re- quiiied is that the committee should form their opinion in a hona fide wa,j, and the question whether their opinion is just or unjust is immaterial. The court will not interfere with the authority of the committee unless it appear that their de- cision has been arrived at dishonestly, or through caprice or improper motives.' In respect to the form of the remedy which a member of one of these associations should adopt to prevent an interfer- ence with his membership or with his rights in the body, the question seems to have been generally raised by injunction. In the case of Leech vs. Harris," where the plaintiff had prayed for an injunction to restrain the Board of Brokers from acting on a report of a committee by which he would be expelled, the defendants contended that the plaintiff's action was prema- ture, and " that the board must first decide whether the case was within its jurisdiction before a court can interfere." The court, upon this point, said : " But whether this be so or not, equity prevents mischief. It does not wait until it is consum- mated. It does not even measure the paces by which it ad- vances. It meets it at the threshold, and seeks to prevent a meditated wrong more often than to redress an injury already done. Courts of equity constantly decline to lay down any rule which shall limit their power and discretion as to the par- ticular cases in which special injunctions shall be granted or withheld (2 Story's Eq. Juris., § 862, 959 b)." ' ■ Gardner vs. FremautTo, 19 W. R. 2 Lans. (N. Y.) 244. See also, as to 256 ; Hopkinson vs. Marqnis of Exe- general power of court to interfere ter, 5 Eq. L. E. 63-66 ; Lyttleton vs. by injunction in cases of unincorpo- Blackburn, 33 L. T. Eeps. 641. But rated associations like clubs, Joyce see Evans vs. Phila. Club, 14 Wright on Injunctions, 748, 751 ; Heath vs. (Pa.), 107. Prest. of the Gold Exchange ; 7 Ab. ' 2 Brews. (Pa.) 571. Pr. (n. s.) 251. In the following ' To same effect, Powell vs. Abbott, cases the injunction was denied on 9 Week. Notes of Cas. 231. But see, the merits, but not on the ground in this connection, Eorke vs. Russell, that the remedy invoked was im- Suspension and Expulsion. 63 But when a member has been expelled from a corporation for no legal cause, mandamus lies against the corporation to compel it to restore him to membership.' Mr. High says : " " The use of the writ of mandamus as a remedy for the wrongful amotion of a corporator, and to re- store him to the enjoyment of the franchise, of which he has been wrongfully deprived, is of very ancient origin, and may be distinctly traced to a period as early as the reign of Ed- ward the Second. It was also used for the same purpose in the time of Henry the Sixth ; and in the reign of Elizabeth it was ti-eated as a well-established jurisdiction." The following are some of the grounds held sufficient for invoking the extraordinary aid of mandamus: Want of no- tice of proceedings taken for the removal of a member, and want of opportunity of being heard in his defence ; '■ where no sufficient cause has been shown for the removal, and where the proceedings have been conducted with irregularity, and in a spirit of malice ; ' and where the member has been ille- gally removed for violating a rule of the corporation which is in conflict with public policy and the law of the land ; ° or where he has been expelled under an unreasonable by-law." Where, however, a corporator has been regularly tried in ac- proper : Sonneljoru vs. Lavarello, 2 Aid Soc. 22 Mich. 86 ; People vs. Hun, 201 ; Rorke vs. Russell, 2 Lans. Med. Soc. of Erie, 24 Barl). (N. Y.) (N. y.) 244 ; Sewell vs. Ives, N. Y. 570; State vs. Chamber of Comm. Daily Keg. Feb. 11, 1879; Moxey's 20 Wis. 63; Delaov vs. Neuse River App., 9 Weet. Notes of Cas. 440, af- Nav. Co.l Hawk..(N. C.) 274; Frank- firmiug s. c. sub nom. Moxey vs. lin Beneficial Assoc, vs. The Com- Phila. Stock Exchange, 37 Leg. Int. monw. 10 Pa. St. 357. 82. " Extra Legal Rem. § 291. ■ High, Extra Legal Rem. 5 291 ; ' Delacy vs. Neuse River Nav. Co. State vs. The Georgia Med. Soc. 38 (supra). Ga. 608, -where there is a review * State vs. The Georgia Med. Soc. of authorities ; Evans vs. Phila. (supra). Club, 50 Pa. St. 107 ; The Carteret * People vs. Med. Soc. of Erie (su- Club vs. Florence, 3 N. J. L. J. 208; pra). Commonw. vs. The German Soc. 15 ^ Commonw. vs. St. Pat. Benev. Pa. St. 251 ; People vs. Mechanics' Soc. 2 Biuu. (Pa.) 442. 64 Stockbrokers and Stock Exchanges. cordance with the rules of the association, which he has assent- ed to by becoming a corporator, and has been expelled in due form, the merits of the expulsion will not be examined in pro- ceedings for a mandamus.' So it woiild seem that a mere restriction upon the mode in which the member may exercise his corporate right, and not an actual exclusion from the corporation, affords no ground for a mandamus." And mere informality in the proceedings for the removal of a membei', especially where they are car- ried by his own action, will not justify interference by man- damus, where there was just ground for his removal, and the member has been acting in hostility to the corporation, and threatens to continue his opposition.' The return must set forth distinctly all the facts essential to the conviction, both as to the cause of disfranchisement and the mode of proceeding.' (e.) Rule Gvomg Members of Exchange Lien on Proceeds of Defaultmg Members' " Seats^^ etc., in Preference to other Cv^ditors, not Illegal. In the ease of Hyde vs. "Woods,' it was held that a provision in the constitution of a Stock and Exchange Board (a volun- tary unincorporated society, whose members are elected by bal- lot and are limited in number)— that a member, upon failing to perform his contracts or becoming insolvent, may assign his seat to be sold, and that the proceeds shall, to the exclusion ' Higt, Extra Legal Rem. § 292; Crocker vs. Old South Soc. 106 Mass. Society vs. The Conimonw. 52 Pa. 489. St. 125; see also Black and White ' High, Extra Legal Rem. J 301; Smiths' Soc. vs. Vaudyke, 2 Whart. State vs. Lusitaniau Portuguese Soc! 309; also, Commoiiw. vs. Pike Benev. 15 La. An. 73; King vs. Griffiths 5 Soc. 8 W. & S. 247. Mandamus to Barn. & Aid. 731. ' restore corporator, Franklin Beuefi- * Society vs. Coramonw. 52 Pa. St. cial Assoc, vs. The Commonw. (su- 125, aud cases there cited. ■Pra). » 94 U. S. (4 Otto) 523, affirming 2 = High, Extra Legal Rem. J 300; Sawy. 655. Lien on Seats. 66 of his outside creditors, be first applied to the benefit of the members to whom he is indebted — is neither contrary to public policy nor in violation of the Bankrupt Act. The reasoning of the court was that the San Francisco Stock and Exchange Board was a voluntary association, and the mem- bers had a right to associate themselves upon such terms as they saw fit to prescribe, so long as there was nothing im- moral, or contrary to public policy, or in contravention of the law of the land in the terms and conditions adopted. No man was under any obligation to become a member unless he saw fit to do so; and when he did, and subscribed to the con- stitution and by-laws, thereby accepting and assenting to the conditions prescribed, he acquired just such rights, with such limitations, and no others, as the articles of the association provided for. The decision was affirmed by the Supreme Court of the United States,' where the court, through Mr. 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 credit- ors, for such a preference is only void when made within four months previous to the commencement of the bankrupt pro- ceedings. Neither the Bankrupt Law nor any principle of morals is violated by this provision, so far as we can see. A seat in this board is not a matter of absolute purchase. Though we have said it is property, it is encumbered with conditions when purchased, without which it could not be ob- tained. It never was free from the conditions of Article XV., neither when Tenn bought nor at any time before or since. That rule entered into and became an incident of the property when it was created, and remains a part of it, into whose hands • 94 U. S. 523. 5 66 Stockrbrdkera and Stock Exchanges. soever it may come. As the creators of this right — this prop- erty — took nothing from any man's creditors when they cre- ated it, no wrong was done to any creditor by the imposition of this condition." The case of Nicholson, Assignee, vs. Gouch,' was, in many respects, very much like the above, the action having been brought to recover certain property that, under the rules of the London Exchange of which the bankrupt was a member, had been received and paid to his fellow-members. This was asserted to be a preference, void by the Bankrupt Law ; and the rules of the Exchange under which it was done were as- sailed on the same ground taken above. It is true that in the decision of the Queen's Bench in banc, Lord Campbell, the Chief-Justice, ruled against the plaintiff, on the ground that the money in question arose out of wagering contracts, which, as they could not have been enforced by the bankrupt, were therefore not subject to the cliaim of the assignee ; but Comp- ton, J., held, also, that the money being received and distrib- uted under the rules of the Stock Exchange, by reason of the bankrupt having become a member subject to said rules, this was a sufficient defence to the party who so received and distributed it. So, in the State of Pennsylvania, there are several decisions which uphold the right and power of the Board of Brokers to make by-laws by which members of the association are en- titled to a preference in the payment of their debts from the proceeds of the sale of an insolvent member's seat over out- side creditors. In the case of Leech vs. Leech," an outside creditor sought to reach the proceeds of the sale of his debtor's seat in the Exchange by attachment; but the court held that the claims of the fellow-members of the insolvent should first be paid ; ' 5 El. & Bl. 999. > 3 Week. Notes of Cas. 548, note. Zien on Seats. 67 that this was the condition upon which the insolvent became possessed of his seat, and it could not be repudiated.' In the case of Singerly vs. Johnson," the plaintiff's intestate, at the time of his death, was a member of the Philadelphia Board of Brokers. After his death, his seat was sold by the secretary, under the provisions of the constitution, as follows : " Sec. XII. . . . When a member dies, his seat may be sold by the secretary, and after satisfying the claims of the members of the board, the balance shall be paid to his legal representa- tives." The plaintiff's intestate was indebted to another member of the board at the. time of his death, which claini was passed upon and allowed by the Arbitration Committee, in pursuance of the constitution. On this state of facts, it was held — (1) that the decision of the Arbitration Committee was final and conclusive as to the existence, validity, and amount of the member's claim, and that a court of law has no jurisdic- tion to go behind or inquire into the finding of said commits tee ; (2) that the agreement to abide by the arbitration clause, etc., in the constitution, entered into by Singerly, or implied by his membership, was not revoked by his death ; (3) that the plaintiff, as the legal representative of the decedent, was only entitled to recover the balance, if any, after the payment of the member's claim, with interest ; and that such limitation of his right was not affected by the fact that the decision of the Arbitration Committee was made after the commencement of the suit. This case was followed by Thompson vs. Adams," where the court held, that under the constitution and by-laws of the Philadelphia Stock Exchange, providing that a member may ' This decision was confirmed in '3 Week. Notes of Cas. 541. the case of Evans vs. Wister, 1 Week. ' 7 Week. Notes of Cas. 280. Notes of Cas. 181. 68 StoclcrbroTeera and Stock Exchanges. sell his seat if he has no claims against him, and also provide ing that, in case of death, a member's seat might be sold and the proceeds paid to his representatives, after satisfying' claims of members, a secret equitable owner of a seat — one who had advanced the money to the member to enable him to purchase the same^-has no right, as against rdembers of the board who are creditors of the legal owner, to share in the proceeds of the sale of the seat oh the death of the latter. It was held that the constitution and by-laws have the force of law as to its members. The court said : " The jurisdiction of the courts cannot be ousted by con- tract, but any person may covenant or agree that no right of action shall accrue until a third person has decided on any dif- ference that may arfse between himself and the other party to the covenant. The leading case upon this subject, and fol- lowed in Pennsylvania, is Scott vs. Avery." ' Upon appeal the court said : " There is nothing unlawful or unreasonable in this regulation." ° But by a recent decision in England the law upon this question seems to be differently settled by the House of Lords, where a member of the Exchange seeks to prefer his fellow-members to his outside creditors by paying money to the oflScial assignee of the Exchange. In the case in question,' it appeared that C. was a member of the Stock Exchange, and became unable to meet his Stock Exchange engagements, of which fact he gave notice to the secretary.^ In such a case the rules of the Stock Exchange prescribe the course to be folr lowed. The defaulter ceases to be a member of the body ; two members of the Exchange act as oflScial assignees of the de- faulter ; a meeting of the creditors is called ; the defaulter ' 5 House of Lords Cas.Sll. such a regulation was not contrary s See. also Moxey's App. ante, p. to law. 52, where the conrt again held that ' Tomkins vs. Saffery, 3 L. R. App. Cas. 313. Lien on Seats. 69 (as he is required to do) makes his statement; and, the assem- bled creditors having, decided what is to be done, the official assignees carry the decision into execution. The committee of the Exchange has the power to readmit the defaulter or to refuse him readmission. C. made his statement at the first meeting, declaring at that time he had no debts outside the Stock Exchange. His Stock Exchange creditors then consented to accept a composition, and to provide for a part of it he, at the demand of the official assignees, gave them a cheque for £5000, then standing to his credit in the Bank of England. The official assignees obtained the money and apportioned it among his Stock Exchange creditors. C. afterwards confessed to owing debts to a large. amount to out- side creditors, and was declared a bankrupt. The trustee in bankruptcy, on behalf of the general creditors, claimed from the official assignees of the Stock Exchange the £5000, and the court decided that the trustee was entitled to claim it, for the action of C. in paying it to the official assignees amount- ed to a cessio honorwni, and constituted an act of bankruptcy ; and that the rules of the Stock Exchange as to defaulting members of the body are the rules of a domestic forum, which have no influence on the rights of those who are not amena- ble as members to the jurisdiction of. that body. They can- not, therefore, govern the rights of the general creditors of a defaulting member. The Lord Chancellor, in delivering his opinion in this case, said : " I can see nothing whatever in those rules which is de^ serving of any animadversion whatever. They seem to nie to ■be judicious and ' business-like rulefe: They do not seem to me to be rules contemplating or intending in any way to warp or strain, or in any way to elndfe or defeat, the operation of the bankruptcy law of the country ; but they are rules which, from the very nature of the case, are and must be sub- TO Stoch-'brohers and Stock Exchanges. ject to one infirmity — namely, that, if they are to be effectualj they must be applicable to the case of a person who not mere- ly is a defaulter upon the Stock Exchange, but who has no Creditors outside the Stock Exchange ; because if such a per- son has creditors outside the Stock Exchange, the general law of the country will step in, and must step in, and will give to those creditors rights which these rules cannot take away from them, and which, I am bound to say, these rules do not profess to attempt to take away from them. Therefore, although everything doYie in the domestic forum of the Stock Ex- change under those rules may be done according to the rules, and may be most wholesome in its operation for the members of the' Stock Exchange, still what is done must be subject to the rights of those who are not amenable to the jurisdiction of the Stock Exchange; and when those higher rights come into conflict with these rules, of course these rules must give way to those higher rights." But in the case of Ex parte Grant, Ke Plumbly,' the case of Tomkins vs. Saffery was distinguished 5 and the result shows that the English courts did not mean to condemn all the transactions of an insolvent Broker as void, whereby his fel- low-members reaped the benefit of his assets to the exclusion of his outside creditors. The facts of this ,case showed that on the 25th of June^ 1879, Plumbly, a Stock-jobber, and a member of the London Stock Exchange, having given notice that he was unable to meet his engagements, was declared a defaulter in accordance with Eule 142 of the Stock Exchange. The same day he filed a liquidation petition, and a trustee was afterwards appointed. Grant, the oflScial assignee of the Stock Exchange, in obedi- ence to Eule 168, closed all Plnmbly's contracts with mem- bers of the Stock Exchange, which were open for the next M2L.T.E.(n.8.)387. Lien on Seats. 71 account or settling day, the 27tli of June, at the market prices on the 25th of the vai-ious stocks and shares contracted for ; and called upon those members who on that footing were debtors on their contracts with Plumbly, to pay to the official assignee the differences due from them. On hearing this, the trustee gave notice to the debtors to pay the money to him, instead of to the official assignee. They, however, paid them to the official assignee. The amount of these differences so received was £3957, which sum was, under Eule 168, divisi- ble among those members of the Stock Exchange who, on the above-mentioned footing, were creditors for differences on their contracts with Plumbly. The rules of the Stock Exchange apply to Jobbers as well as to Brokers. It appeared to be the practice of Stock-job- bers to make two contracts equal and opposite at once, so that a Stock-jobber's legitimate profit is the difference be- tween the buying and selling prices, and the fact of stocks going up or down in price does not affect him. The Jobber does not deal with an outside principal, but only with mem- bers of the Stock Exchange. The trustee in the liquidation claimed the £3957 as part of the assets distributable among Plumbly's creditors. The reg- istrar, being of opinion that the case was within Tomkins vs. Saffery," held that the trustee was entitled to the, money. The official assignee appealed, and the judgment was re- versed upon the theory laid down by the court, per Baggal- lay, L. J., that the distinction to be, drawn between this case and that of Tomkins vs. Saffery was a very marked one. Here there is no division of Plumbly's money. The official assignee holds no private assets of Plumbly, and the fund which he has collected is a fund collected by virtue of cer- tain rules of the Stock Exchange; certain sums ascertained ■ 37 L. T. E. (n. s.) 758; 3 L. E. App. Cas. 213. 72 Stock-'broTwvs and 8tooh Exchanges. in a particular way being raised from particular members of the Stock Exchange, and applied in a particular manner. These funds can in no respect be regarded as funds belong- ing to Plurablj; they are voluntary contributions of the members of the Stock Exchange, to be applied in satisfac- tion of the Stock Exchange creditors; or, if they are to be regarded as moneys handed over by persons who had be- come surety to meet the claims of the Stock Exchange, in either view of the case they cannot be claimed by the trus- tee. "It certainly did," says the learned justice,. "at one time occur to me that some injustice might be done to the general creditors of Plumbly by the official assignee taking these sums. But the true view of the case appears to me to be this: As far as regards any losing contracts, entered into by Plumbly, the trustee in bankruptcy or in liquidation is re- lieved from them ; and if, on the other hand, it is said that there may be some winning contracts, the answer, as far as re- gards thiem, is, that it would be impossible to realize on them, because, when the time arrived for the completion of the con- tract, Plumbly could not, and would not, have been ready and willing to perform them. In making these observations, I do not mean to imply that in such cases the contracts, whether losing or winning, are absolutely void ; but, in regard to the case now under consideration, I am satisfied that no injury could be done to the outside creditors by the course pursued." Upon a first reading, there seems to be very little substan- tial distinction between the case of Tomkins vs. Saffery and the last one. In both cases the money had been placed in the hands of the official assignee of the Stock Exchange, who had received the same from debtors of the insolvent member, and who had, with knowledge of the latter's insolvency or failure, paid out the money so received to his Stock Exchange cred- itors. But, in the one ease, the official assignee received the Lien on Seats. 73 money by virtue of a check given by the defaulting Broker upon the Bank of England, an outside debtor ; on the other hand, the official assignee received the money from voluntary payments made to him by members of the Stock Exchange who were debtors to the defaulter, but who were under no obligations to pay at the time they did, except by reason of their being such members. Tliere is nothing unreasonable in annexing to a member- ship of an Exchange a condition, that, if the member fails to perform his contracts, his seat and the money due him from fellow-members should first go to satisfy the claims, of his fellow-members. Such a condition is in the nature of a lien on his property in the Exchange. It is not made secretly, nor with any intent to defraud creditors ; nor are the latter injured any more in their rights than they would be in the case of a mortgage. It is upon the faith of this condition that his fellow-members transact any business with him, and it is hard to subscribe to a doctrine which invests subsequent outside creditors with the property of a defaulting member, which he has acquired by reason of his membership in the Exchange. It must also be borne in mind, in this connection, that there is a wide difference in the facts of the American, from those in the English, cases upon which^we are commenting. In the former cases the creditors sought to reach the seats, or the proceeds of the seats, of members of the Stock Exchange; seats which had been granted to the members with certain conditions attached, which gave a preference to their fellow- members ; whereas in the English case of Tomkins vs. Saffery the Stock Exchange creditors sought to appropriate money in hank, belonging to the insolvent member, in preference to his outside creditors. But the members of the Exchange bave no lien upon the 74 Stock-iroleers amd Stock JExchanges. proceeds of a seat illegally ordered to be sold by the associ- ation ; and in an action by a member whose seat has been so illegally disposed of, against the President of the association to recover damages as for a conversion of his property, the fact that the proceeds have been applied towards satisfying claims against the member whose seat has been sold is not a mat- ter in niitigation of damages,* or the proper subject of a coun- ter-claim. These propositions were laid down in the case of Sewell vs. Ives, President,' In that case, the New York Stock Exchange, in January, 1878, attempted to expel the plaintiff upon an accusation of " obvious fraud," and in an action between the same parties the court adjudged and decided that his expulsion was illegal and void. The defendant, treating the plaintiff as effectually expelled, under Article XX. of its constitution, in April, 1878, sold his seat, and appropriated the proceeds to the payment of his creditors in the Exchange. The court held that the seat of a member in the Exchange was property in every proper sense of the term, and could be sold ; and was transferable as any other species of property having actual value as such. The price realized by the de- fendant was $4000, which is proof of its then value. It was proved, and the court on the former trial found, that the plain- tiff paid, on his admission to the board, $2000 for his seat. Although the plaintiff was a suspended member of the New York Exchange, it having been held and decided that his al- leged expulsion therefrom was void and of no effect, it fol- lowed that, the sale of his seat by the board having been made solely upon the ground of his wrongful expulsion, the Ex- change became by that act responsible to the plaintiff for any injury or damage done thereby. It was claimed that the proceeds of this sale were applied ■ • N. Y. Superior Ct., N. Y. Daily Reg. May 18, 1881. Lien on Seats. 75 to the payment of the plaiiitiflE's debts in the Exchange, and that such payment should be received in mitigation of damr ases, i£ not in bar to the action. The court said : " If this be so, it must be upon the assumption that the defendant had authority to dispose of the seat, and to receive and appropri- ate the proceeds of the sale to his creditors." The court held that, under the facts in the case, no such authority was shown, nor can any be inferred, as all the proceedings on defendant's part were wholly illegal and void. The property wrongfully taken or appropriated by the de- fendant, in satisfaction of a demand against the plaintiff as owner, cannot be set up in bar or in mitigation of damages suffered by him. The first objection urged against the plain- tiff's right to recover was that the action was for the conver- sion of personal property, commonly known as an action of trover. The declaration tersely set out "that the plaintiff was owner, and entitled to the possession, of a seat in the asso- ciation of the value of $10,000 ; that, the defendant vrrong- f uUy and unlawfully sold said seat and converted the proceeds to its own use, to tlie plaintiff's daimages." The court held that it was too late to raise this objection. The defendants treated the seat of the plaintiff as their prop- erty, or they could not have undertaken to sell it. They are estopped by their own acts. The amount of recovery in the action, the court decided, was the amount of the proceeds re- ceived by the defendant, with interest. {d.) The Stock Exchange cannot Take Cognizamce of Matters Arising outside of, a/nd Disconnected with, the Pwposes of its Organisation. It would seem entirely reasonable to confine and limit the jurisdiction of the Stock Exchange to those rnatters which arise between its members in the course of their business with each 76 Stooh-lrokeii's amd Stock Exchanges. other as BroTeers; otherwise its judicial powers might be ex- tended to embrace every affair of human life, which was nev- er contemplated, and which the law would not permit. Thus, the wife of a Broker might bring her grievances be- fore the Board or its Committees, and claim to have them set- tled by that tribunal, just as any outside person might insist upon having an action of assault and battery alleged to have been committed upon him by a member of the Exchange de- termined by the same forum. For very obvious reasons, the law will not permit any organizations to usurp the preroga- tives of the regularly constituted courts of justice. One of the most important is, that such an organization has no power to issue subpoenas, or any other compulsory process, to enforce the attendance of witnesses. It can coerce its own members into attendance by threatening expulsion, but it has no power over outside witnesses. Another equally important reason is, that the law has pre- scribed, for the determination of disputes between citizens, regular and well-adapted forms and proceedings, which no one can be deprived of against his will.' Chief-justice Tilghman,' in speaking of a corporation tak- ing cognizance of matters unconnected with the affairs of the society, said : So far from its being necessary for the good government of the corporation, it. appears to me that taking cognizance of such offences will have the pernicious effect of ' See, for other cases illustrating " All debts, without distinction, are this proposition, the next succeeding binding upon the members of the snbdivision (e.). Exchange, and the Governing Com- It is yery doubtful, under the cases mittee -will take cognizance of them next cited in the text, whether the upon complaints properly made and 19th Article of the Constitution of presented." ' theNewYorkStockExchaugeisnot See also J VII. of Article IV. of illegal when it is sought to be used the Constitution in this conneo- to investigate transactions of a mem- tion. ber disconnected with his- business in ° Commonw. vs. St. Pat. Benev. the Exchange. It is as follows : Soc. 2 Binn. 449. Jurisdiction of Outside Affmrs. 77 introducing private feuds into the bosona of tEe society, and interrupting the transaction of business.' In the case of Leech vs. Harris,' the plaintiff was a member of the Philadelphia Board of Brokers, a private unincorpo- rated association, similar to the New York Stock Exchange. One M. presented a complaint to the board, charging the plaintiff with having obtained money from him by falsely- pretending that he had paid a large sum of money for certain oil lands, and thus inducing M. to purchase an interest in the same. Thereupon the board appointed a committee to inves- tigate the charges, which it was proceeding to do, when the plaintiff procured an injuh&tion, on the ground that the board had no jurisdiction over the question, and that it would be impossible for him to produce his witnesses without the aid of the process of the courts, which could not be obtained in behalf of defendant's tribunal. The court, after full argument, in a careful opinion granted a perpetual injunction, oh the ground that the matter sought to be inquu-ed into was not within the jurisdiction of the board. The court said : " What the plaintiff really submitted to when he became a member of the Board of Brokers was that the board should take jurisdiction if he should refuse to comply with his stock contracts; not that they should have jurisdiction of his con- tracts touching houses, lands, leasehold estates, or farming in- terests. ... I do not perceive that either by the law of the association, by the law of the land, or by subinission to its jurisdiction, the Board of Brokers has acquired iany right to arbitrate and settle the matters in dispute between the plaintiff and Mr. Eeuben Manley, Jr. The courts of law are open to Mr. Manley to vindicate his rights and to redress any wrongs done to him. But the Board of Brokers cannot erect itself ' See also Green vs. African Meth- ' 2 Brews. (Pa.) 571. odist Society,! S. and Ea wle (Pa.), 254. 78 Stoch-lrokers and Stock Exchanges. into a tribunal for this purpose. Tlie plaintiff has, in my opinion, a clear right to the protection of a court of equity. He has a valuahle interest in his membership in the board, which cost him $2000. He has an interest, in common with his fellow-members, in the accumulated funds of the association, and in the claim which he would have, in case of necessity, npon the fund set apart to aid poor or distressed members or their families whom the board may think proper to assist. He has a right, also, to be protected in his good name and reputation from unauthorized proceedings against him, in which he cannot have the assistance of a court of law to com- pel the attendance of witnesses or to obtain testimony from abroad." ' («.) Members not Bound hy Eules which Prevent Mecourse to Courts of Law, This subject is closely connected with that which has been briefly discussed under the preceding subdivision. It is a well-recognized principle of law appertaining to in- corporated bodies that where their by-laws prohibit the mem- bers from pursuing their legal remedies beyond the jurisdic- tion of the corporation, such by-laws are void." The theory being that no power less than that of the Legislature can ex- clude the subject or citizen from his right to legal redress. ° There is no substantial reason why this principle should not be applied to the by-laws or rules and regulations of un- incorporated associations, and the precedents are directly that way. In Austin vs. Searing,' the question discussed was as to the ' Examine, in this connection, rule ' Player vs. Archer, 2 Sid. 121 of Stock Exchange as to paying Loudon vs. Bernardiston, 1 Lev. 16 debts, submitting differences, etc. Ballard vs. Bennett, 2 Burr. 778 " Aug. & Ames on Corps. (10th ed.) Middleton's Case, Dyer, 333 (a). } 341. i 16 N. Y. 123. lUegal Bules. 79 validity of a by-law which undertook to confer judicial pow- ers upon a body of officers of the association, with power to adjudicate upon alleged violations of rules, and to decree a forfeiture of the rights to such property as the parties violat- ing the rules were possessed of as members of the association. The court said : " But, were it distinctly averred that the de- fendants had subscribed the constitution of the grand as well as of the subordinate lodge, I should still be of the opinion that public policy would not admit of parties binding them- selves by such engagements. The effect of some of the pro- visions of these constitutions is to create a tribunal having power to adjudicate upOn the rights of property of all the members of the subordinate lodges, and to transfer that prop- erty to others ; the members of this tribunal being liable to con- stant fluctuations, and not subject in any case to the selection or control of the parties upon whose rights they sit in judgment." To create a judicial tribunal is one of the functions of the sovereign power; and although parties may always make such tribunal for themselves, in any specific case, by a sub- mission to arbitration, yet the power is guarded by the most cautious rules. A contract that the parties will submit con- fers no power upon the arbitrator ; and, even where there is an actual submission, it may be revoked at any time. The law allows the party up to the last moment to ascertain wheth- er there is not some covert bias or prejudice on the part of the arbitrator chosen. It would hardly accord with this scrupulous care to secure fairness in such cases that parties should be held legally bound by an engagement, by which the most ex- tensive judicial powers are conferred upon bodies of men whose individual members are subject to continual fluctuations." ' See also White vs. Brownell, 3 change vs. State, 54 Ga. 668 ; Den- Ab. Pr. (n. s.) 318; s. c. on appeal, nis vs. Kennedy, 19 Barb. (N. Y.) 4 id. 162, 198; Savannah Cotton Ex- 527. 80 Stook-hrokeirs cmd Stock Exchanges. So, in the case of Heath vs. President of the Gold Exchange,' the effect of a clause in the constitution of an unincorporated association was considered, providing that " it shall be the duty of said committee (arbitration) to take cognizance of, and exer- cise jurisdiction over, all claims and matters of difference be- tween the members of the board, and their decision shall be binding." The plaintiff, at the commencement of his action, was a member of the Gold Exchange, and sought to restrain the defendant, bj injunction, from proceeding to hear and de- termine, under such clause, a dispute between himself and oth- er members of the body. Subsequent to the suit, and before the argument for a perpetual injunction had been heard, the plaintiff resigned his membership in the Exchange. It was held : 1. That before a member could be bound by the constitution and by-laws of such a body, it must appear that he personally assented to the same.' 2. That the most that could be claimed for the arbitration clause in question was, that it should have the same force and effect as an agree- ment in writing, made by persons to submit to the decision of one or more arbitrators any controversy existing between them, and that the plaintiff had the right to revoke and annul the power to arbitrate ; that by resigning from the board this was conclusively established ; and that any attempt afterwards to arbitrate claims by the board was null. The decision was placed upon the ground that the enforce- ment of arbitration agreements was against public policy ; and that, as courts of justice are presumed to be better capable of administering and enforcing the real rights of the parties than mere private arbitrators, such agreements would not be en- forced either in law or equity.' • 7 Ab. Pr. (n. s.) 251. » The following cases were citefl ' Austin vs. Searing, 16 N. Y. 112. on the last point : Enssell's Arbitra- But see as to this White vs. Brow- tor, 147; 2Story Eq.Jur. J 1457; lid. nell, 4 Ab. Pr. (n. s.) 162, 193. $ 607 ; KiU vs. HoUister, 1 Wile. 129; Illegal Rides. 81 Upon this question of the right of a member to apply to the courts, there is another article of the constitution of the New York Stock Exchange which is important to be con- sidered. By the 22d Article of that constitution it is declared that " any member of the Stock Exchange who shall himself, or whose partner or partners shall, apply for an injunction or legal instrument restraining any officer or committee of the Exchange from performing his or its duties under the consti- tution and by-laws, shall by that act cease to be a member of the association." The general effect and meaning of a provisioa similar to the above. has been before the courts on several occasions. If the intention of the enactment is, to prevent a member from appealing to the courts from an arbitrary and illegal decision against his rights and privileges as a member of an associa- tion, which he otherwise would be deprived of, it seems that such provision would be abortive and illegal.' In the case of Sewell vs. Ives, hereafter refeiTed to," this provision was invoked by the Exchange against the plaintiff, but the court passed it without notice, and determined the case upon other grounds. So, in Leech vs. Harris,' it was said : " It is not alleged that he has in any manner offended against the rights or interests of the Board of Brokers, or failed in his duty as a member thereof, unless his refusal to submit to its claim of authority in this case can be construed into an offence against his duty as a member of the board. Street vs. Eigby, 6 Ves. 818; Agar 29 Barb. 419; Smith vs. Compton, 20 vs.Maoklew,2Sim.&S. 418; Milaes id. 262. vs. Gery, 14 Ves. 408 ; Tliompsoa vs. ' Austin vs. Searing, 16 N. Y. 123 ; Charnock, 8 Terra, 139 ; Haggart vs. Heath vs. President, etc., of Gold Morgan, 5 N. Y. (1 Seld.) 422. See Exchange,? Ab.Pr.(n.s.) 251; White also Lloyd vs. Loaring, 6 Ves. 772; vs. Brownell,4 Ab. Pr. (n. s.) 162. Mitchell vs. Harris, 2 Ves. Jr. 129, and ' Ante, p. 74. N. Sumner's ed. ; Simmons vs. Monier, 2 Brews. (Pa. ) 571. 6 82 Btockr'brdhers and Stock Exchanges. If he is right in resisting the authority which the board claims over him, then he has committed no offence against his duty as a member. In such case, his right of self^protection justifies him in his action, and he more faithfully discharges his duty as a member of the board in resisting its encroach- ments than he would iu submitting to its unlawful authority. He becomes not only the vindicator of his own rights, but the vindicator and defender of the rights of every member of the boardj and of the well-being and integrity of the board itself." ; The English courts have also emphatically, through James, L. J.,' endorsed this view. " The Stock Exchange is not an Alsatia. The Queen's laws are paramount there, and the Queen's writ runs even in the sacred precincts of Capel Court." But where the association, in expelling or disciplining a meinber, acts within the sphere of its authority in enforcing rules which are not contrary to law or public policy, the courts will not interfere." So where a member of a Stock Exchange signs or agrees to a constitution in which is contained a provision referring all differences between members to an Arbitration Committee, and such committee proceeds in the mode pointed out by the organic law, giving full notice and ample opportunity to be. heard, it has been held that a member is bound by the result, and a court will not interfere in the matter. In the case of Sonneborn vs. Lavarrello,' the plaintiffs and defendants, members of the New York Produce Exchanee, had voluntarily submitted to the Arbitration Committee there- of (chosen in pursuance of § 5 of ch. 359, Laws of 1862) a dispute arising out of a transaction in petroleum. The com- ' Ex parte Saffery, 4 L. K. CU. D. °S6eoa8escitedaute,under8ub.(J.) 561. of$8,oU.8. '2Hun(N.Y.),201. Illegal Eules. 83 mittee having decided in favor of the defendants, the plain- tiffs brought this action to restrain them from entering judg- ment on the award, on the grounds that the arbitrators had not been sworn, and that they had received illegal evidence. It was held, that the plaintiffs, by appearing before the com- mittee, making their statements, discussing their case and the whole controversy, and. interposing no objection to the pro- ceedings in any respect, had waived any such irregularities on' the part of the arbitrators. The power to adjourn rests in the sound discretion of the committee ; but its proceedinigs in this' respect are nevertheless subject to review, and may be annulled if it appear that the discretion has been abused.' So when a member of the New York Stock Exchange, cited by another member to account for a sum of money claimed, voluntarily pays the same with full knowledge of all the facts, he cannot recover back the money. Fear of the Arbitration Committee before which the claim was adjusted is not duress." ' See also Lafond va. Deems, 81 "Then, after the lapse of about N. Y. 507, at 514, per Miller, J. half a century, occniTed a case before ' Qulnoy vs. White, 63 N. Y. 370; Lord Kenyon, and, from the language reversing 5 Daly, 32. In Scott vs. that fell from that learned judge, Avery (5 House of Lords Cas. 845), many other cases had probably been the Lord Chancellor (Cranworth); decided which are not reported ; but after stating the nature of the ac- iu the time of Lord Kenyon occurred tion and the pleadings, said : " There the case which is considered the lead- is no doubt of the general principle ing case upon this subject, the case which was argued at your lordship's of Thompson vs. Charuock (8 T. R. bar, that parties cannot by contract 139). That was an action upon a oust the ordinary courts of their ju- charter-party in which there was a risdlction. That has been decided in stipulation that if any difference many cases. Perhaps the first case I should arise it should be referred to need refer to was a case decided about arbitration. That clause was plead- a century ago^Kill vs. HoUister (1 ed in bar to the action which had Wils. 129). That was an action on a been brought upon a breach of the policy of insurance, in which there covenant with an averment that the was a clause that, iu case of any loss defendant had been, and always was, or dispute, it should be referred to ready to refer the matter to arbitral arbitration. It was decided there tion. That was held to be a bad plea, that an action would lie, although upon the ground that a right of ac- there had been no reference to arbi- tion had accrued, and that the fact tration. - that the parties had agreed that the 84 Stockrhrdkers and.Stoch Exchanges. A dispute between an association and a party claiming to be a member, as to whether such party is a member or not, is not a dispute between the association and such a person, as member, and consequently is not a case within a by-law, or statutory provision requiring disputes between a member and the society to be decided by arbitration. And where the' trus- tees or officers of an association deny the right of a person to be a member of the society, they are estopped from saying that the dispute is one between the parties, as members, with- in the rule.' The matters in dispute, which are the subject of reference and decision under the constitution and by-laws of associations and incorporations, as a general rule, are only matter should be settled by arbitra- tiou did not oust the jnrlsdiotloa of the courts. "Just about the same time oc- curred a case in the Court of Com- mon Pleas, when that court was pre- sided over by Lord Eldon — the case Of Tattersall vs. Groote (2 Bos. & P. 131). That was an action by the administratrix of a deceased partner against a surviving partner for not naming an arbitrator, pursuant to a covenant in the deed of partnership. To that action there was a demurrer, and the demurrer was allowed. But that case, I think, can afford very lit- tle authority in the present action, or in actions similar to the present, because there the covenant was only that if any dispute arose between the partners, they would name an arbi- trator. One of the partners died, and his administratrix brought an action, and Lord Eldon pointed out that the covenant did not apply to a case where one of the partners was dead and an action was brought by his representatives. Therefore, i n truth, that amounts to no decision whatever upon the general question. There was then a case before Sir Lloyd Kenyon at the Bolls, of Halfhide vs. Fenning (2 Bro. C. C. 336), in which he held a different doctrine. That was a bill for an account of partner- ship transactions. The plea to that bill was that the articles contained an agreement that "any difference which should arise should be settled by arbitration, and the Master of the Kolls allowed that plea. But I think that case cannot be relied upon, be- cause it has been universally treated as having proceeded upon an errone- ous principle. There is no doubt that where a right of action has accrued, parties cannot by contract say that there shall not be jurisdiction to en- force damages in respect to that right of action. Now, this doctrine de- pends upon the general policy of the law, that parties cannot enter into a contract which gives rise to a right of action for the breach of it, and then withdraw such a case from the juris- diction of the ordinary tribunals. But surely there can be no principle of policy of the law which prevents parties from entering iuto such a contract as that no breach shaU oc- cur until after a reference has been made to arbitration. It appears to me that, in such cases as that, the policy of the law is left uutonohed." ' Prentice vs. London, L. K. 10 C. P. 679. Illegal Rules. 85 snch matters as are in dispute between the society and its members, dbs memrSbers, and not extraneous matters of any kind. Thus, where a building society loaned; money . to a member on mortgage. of leasehold property, and the. member covenanted to observe and fulfil the rules of the society, and also to pay the rent reserved by the lease, and the trustees of the society sued for breaches of both those covenants, it was held that as some part of the plaintifE's qlaim was not a matter in dispute between the society and the defendant^ as member, but only as mortgagor, the society was not bound by its rule to refer to arbitration the subject-matter of the action.' . ' Morrison vs. Glover, 4 Ex. 430. It is not an unusual thing for the statutes incorporating iassooiations to oust the jurisdiction of ordinary tribunals, and to refer all disputes, either between the members them- selves or between the members and the association thereof, to certain persons or classes of persons named by the statute, whose jurisdiction is exclusive and whose decision is final. Thus, the statute of 6 & 7 William IT. c. 32, incorporating the pro- visions of 10 Geo. IV. c. 56, relating to the formation of friendly socie- ties, provides that rules shall be made by such societies directing whether disputes shall be settled either by justices of the peace or by arbitra- tors; and, when rules have been adopted to that effect, it has been held that.any decision made by such justices of the peace, or 'by such ar- bitrators, was final, and a rule for a mandamus to compel the judge of the county court to proceed in such an action was denied (Ex parte Payne, 5 D. & L. 679). The Same is true under the "Act to Consoli- date and Amend the Laws relative to Savings - banks " (9 Geo.' IV. c. 92, % 45), by which it was provided that any dispute arising between the bank and the depositor should be decided by arbitrators appointed in the manner provided by the statute. It was hfild that the right of a de- positor to bring an action in a court of law for any matter coming with- in the purview of the provisions of the statute was barred by the stat- ute ; and it was held that the lan- guage of the statute, which was that "the matter so in dispute shall be referred," etc., gave the arbitrators an esclnsive, and not merely concur- rent, jurisdiction (Crisp vs. Buubury, 8 Bing. 394). (This 45th section of the act is omitted in the edition of the Statutes of 1875.) So, in the Act relative to Loan Societies (5 & 6 'Wm. IV. c. 23, § 8), it was provided that all notes and securities entered into for the payment of loans might be prosecuted, upon default, by the treasurer ; and that it should be law- ful for one or more justices of the peace to summon, etc., the person complained of, etc. In construing this statute, it was held that the jurisdiction of the higher courts was ousted, if not by the express words of the statute, at least by implication (Tiinms vs. 'Williams, 3 Q. B. 413; but see, contra, Albon vs; Pyke, 4 M. & G. 421, and note, 426). 86 Stooh-lrohers and Stock Exchomges. IX. Liability of Seats in Exchange to Legal Process. The general nature of seats in an unincorporated Stock Exchange has already been considered in Section V. of this chapter, and we have seen that its members have no separate or severable interest in its property, and no right to call for an account of the same, or its accumulations, with a view of dividing it, as in the ease of ordinary partners. The question now is, as to the right of ontside creditors to attach or seize this seat, upon attachment or execution, to satisfy their claims. ' In the first place, it will be observed that, as between the owner or member and the association, the seat is regard- ed, and has been recognized, as a right or property of a valu- And ■where a bill in equity Tras brouglit, by a bolder of shares in a building society, against the society aud its directors, for miscondact, and praying a declaration that the plaintiff was not bound by certain rules, etc., it was held that this was a dispute for the decision of which arbitrators were the proper author- ity under the statute of the socie- ty's incorporation (6 & 7 Wm. IV. c. 32) I and that it was not only pro- vided by the statute that such dis- putes should be referred to arbitra- tion, but that it was against the pol- icy of the law, as shown by the stat- ute, to drag the disputes of friendly benefit societies into the courts, etc. (Thompson vs. Planet Benefit Build- ing Soc. 15 L. E. Eq. 333). But the jurisdiction of the superior courts is puly to be ousted by express words, or by necessary implication (Gates vs. Knight, 3 T. E. 442 ; Crisp vs. Buubury, 8 Bing. 394; aud Albou vs. Pyke, supra). ' The rules of the New York Stock Exchange provide as follows, in re- lation to seats : Article X. § I. of the Constitu- tion provides that all applications for membership shall be publicly an- nounced; aud % II. states the qual- ification of the member. Article IV. sub. Third, provides for the admis- sion of members by two thirds of the committee on admissions, which com- mittee shall determine the manner and form in which their proceedings shall be conducted. Any member wishing to transfer his membership shall submit the name of the pro- posed transferee to the Committee on Admissions ; and, on the approval of two thirds of said committee, the transfer may be made, "provided the member transferring has no un- settled contracts" (Art. XIII. § I.). Upon the death of a member, his membership may be disposed of by the said committee ; who, after sat- isfying the claims of the members, shall pay any balance to the legal representatives of the deceased (ibid. * II.). Elaborate provision is also made for the suspension and readmission aud expulsion of members. Seats Liable to Legal Process. 87 able nature, of which the. owner cannot be depriv.ed, except in accordance with the rules of the organization, and. that. a court will interfere by an injunction, or other appropriate le- gal remedy, to prevent such deprivation. : . , , But, on the other hand, it is equally well settled, as we have seen, that the ownership of a seat in such association is not absolute and unqualified, biit it is limited and restricted by the rules of the body issuing the same. . The owner can- not sell the seat to a person whom the body will not rec- ognize.' He cannot devise or bequeath the same, so that his heirs or personal i-epresentatives will be able to use and enjoy it as the testator has, for the seat is a mere personal privi- lege, dying with the member, and not; containing any inher- itable qualities.' .The proceeds of his seat, it is true, may be- long to his personal representatives, but the franchise or right of exercising the occupation of Broker in the Exchange is gone. Moreover,' a member may be entirely deprived of the ben- efits and value of the seat by a violation of the rules of the association.' A seat, therefore, in one of these bodies, is a species of incorporeal property^^a personal, individual right to exercise a certain calling in a certain place, but without the attributes of descendibility or assignability which are characteristic of other species of property.' By far the most numerous class' of cases in which the le- gal character of seats has arisen are those iix which seats liave been sought to be attached or seized on execution by creditors of -ari insolvent member. ; Carrying out the princi- ples just alluded to, the courts have uniformly held that the ■ White vs. Brownell, 3 A,b. Pr. (n. ' Ritterband vs. Baggett, 4 Ab. s.) 318; Leech vs. Harris, 3 Brews. Kew Cas. 67, Sp. T. (Pa.) 571. * Compare, as to character of mar- ' Id. ket-stands, Barry vs. Kennedy, 11 Ab, Pr. (n. s.) 421. 88 Stochirdkers amd Stock JEkohanges. right of a member to a seat in a Stock Exchange cannot be attached' or seized on execution." By the rules oi the Philadelphia Stock Exchange, it- was provided that a member might sell his seat to any person whom the association should elect ; that the proceeds of such sale shall belong to the creditors of the owner who are mem- bers of the association, and the balance, after paying their claims, shall go to the owner. The court held, that such seat was not properly subject to execution^ in any form. It was a mere personal privilege; perhaps, more accurately, a license to buy and sell at the meetings of the board. It cer- tainly could not be levied on and sold under a, fi.fa. The sheriff's vendee would acquire no title which he conld en- force. Nor is it within either the words or the spirit of the act of June 16, 1836, § 35 (Pamph, L. 767), providing for at- tachment on judgments. " Whether," says the court, '' the proceeds of the sale of the seat, in the hands of the treasurer of the board, and pay- able to the defendant, according to the regulations and by- laws of the board, could be thus reached, is an entirely differ- ent q-uestiori. This, and no more, is what we understand to have been decided by the Supreme Court of the United States, in Hyde vs. Woods,' where Mr. Justice Miller says : " If there had been left in the hands of the defendants any balance after paying the debts due to the members of the board, that bal- ance might have been recovered by the assignee in bank- ruptcy." * The case of Thompson vs. Adams' is another interesting ease on this subject, holding that a third person, secretly fur- ' Pancoast vs. Houston, Phila. C. Alb. L. J. 414 ; s. c. 36 PhlL Lef. Int. P. 17 Alb. L. J. 172; s. c. 5 Week. 86. =■ 4 Otto, 525. Notes Cas. 36. * Pancoast vs. Gowen, 20 Alb. L. J. ' Hyde vs. Woods, 94 IT. S. (4 414. Otto) 525 ; Pancoast vs. Gowen, 20 » 7 Week. Notes of Cas. 281. Seats lAahle to Legal Process. 89 nishing money to a member to purchase his seat, has no claim for the money until after the debts are paid to the members of the board. The Supreme Court of Pennsylvania held, in that case, that a seat in the Philadelphia Board of Brokers was not property in the eye of the law, and could not be seized in execution for the debts of the members ; it was the mere crea- tion of the board, and was to be held and enjoyed with all the limitations and restrictions which the constitution of the board have put upon it ; and, under the constitution and by- laws of the Philadelphia Board of Brokers, the secret equita- ble owner of a seat therein has no right as against members of the board, who are creditors of the legal owner, to share in the proceeds of the sale of the seat on the death of the latter. The plaintiff in that case was not a member of the board, but had furnished the money by which the deceased member had obtained his seat, but plaintiff's name was not known to the board in connection with the seat. The rules of the board 'provided that all claims upon the seat of a dead member should be decided by the Arbitration Committee, and such claims were so passed upon in this case. The court said : "His [plaintiff's] contention is that he was the equitable owner of the seat, and had title to what was received for it, and that the defendant had no right to apply the proceeds to debts due by Eichards to other members, in pursuance of the terms of the constitution of the club. But why not ? Eich- ards was the member of the board, the legal owner of the seat, and the plaintiff an entire stranger, unknown to the asso- ciation. The members give credit to each other in part, no doubt, upon the. faith of the liability of a member's seat to them for his debts. There is nothing unlawful or unreason- able in this regulation." In Evans vs. Wister," the same court held that an attach- ' 1 Week. Notes of Cas. 181 ; a. c. 32 Leg. Int. 354. 90 StocJc-hrokera and Stock Exchanges. ment would not lie against the Board of Brokers for the pro- ceeds of the sale of a seat of a member, he being indebted lo his fellow-members to the amount of the proceeds. In that Case one W., being a member of the board, became insolvent. Subsequently he sold his seat, but the purchaser was informed bj the secretary that the transfer could not be completed until the price of the seat was paid to him, to be held for the cred- itors of W. in the board. Plaintiff then presented his claim to the Arbitration Committee, but the same was disallowed. He thereupon began a suit, attaching the money in the hands of the secretary, with the above result.' In the suit of the Grocers' Bank vs. Murphy, Mr. Justice. Yan Hoesen, ini the New Tork Court of Common Pleas," passed upon the question whether a seat in the E"ew York Stock Exchange may be regarded as property subject to con- version by legal process against the owner. An execution in this case was issued upon, a judgment in favor of plaintiff, and subsequently an order was granted requiring the defend- ant to appear before the court to make discovery on oath concerning his property, etc., under section 292 of the Code of Procedure; and, it appearing that the defendant possessed a seat in the New York Stock. Exchange, plaintiff asked to have it assigned, and the proceeds applied towards the 'satis- faction of his judgment. The court, in denying a motion re- quiring defendant to make the assignment, said, " There is no doubt, if a seat be sold, the proceeds of the sale, after the payment of claims due to membei's of the board, may be reached by proper process. This is the view of every court which has had occasion to express an opinion on the subject. It by no means follows, however, that the seat itself may be ' This was an affirmance of Leech reversed on appeal, N. Y. Daily Meg. ys. Leech, 3 Week. Notes of Cas. 542, March 12, 1881, where dissenting note. opiniou of Van Brunt, J., is also re- " T^.Y. Daily Beg. June 14, 1880; ported; a. o. UN. Y.Tree%I»((?.538. . Seats Liable to Legal Process. 91 seized by the sheriff, or taken possession of by a receiver. It may well be doubted if a seat in the Exchange be property. It is true that. Mr. Justice Miller, of the Supremei Court of the United States, in the case of Hyde vs. Woods,' said that he thought it was property ; but the Supreme Court of Penur sylvania, in two carefully considered decisions,. in which the decision of Mr. Justice Miller was thoroughly reviewed, came to the opposite. conclusion. ... A seat in the Exchange does not fall withiu any of the classes into which the subjects of property are divided. It is not. capable of manual delivery or appropriation ; it is not a domestic animal, nor a product of labor or skill, nor a right created by statute." But, upon appeal, this decision was reversed by two of the judges, the- third judge dissenting, and coinciding with Mr. Justice Yan Hoesen.'; Mr. Justice Beach, in delivering the opinion reversing the decision of tlie court below, after reviewing the cases, held that, under the section of the code in question, the defendant was bound to apply the proceeds of the seat to the satisfaction of his debts; and that if this result were not correct, the legal principle which makes the debtor's possessions liable to his creditors would be nullified. '.' Probably an order appointing a receiver, containing directions for the judgment debtor to do whatever may be deemed needful to transfer the seat un- der the rules of the Exchange, would accomplish the result sought." In another case,' a peremptory mandamus, directed to the defendant, compelling it to transfer to the relator, who had purchased the same at a sheriff's sale, a seat in the Cot- ton Exchange, was refused upon the grounds heretofore ad- verted to in the preceding cases. If the seat were subject to direct legal process, it is very evident that the whole design ' 94 U. S. (4 Otto) 523. » Allen, Jr., vs. The New York Cot- ' N. Y. Daily Reg. March 13, 1881. ton Exchange, id. March 31, 1880. 92 StocTc-lrokers and Stock Exchanges. of the organization would be thwarted by introducing into the Exchange the purchasers at a judicial sale, without a com- pliance with the prerequisite rules of admission and against the wish of the regular members. This the courts have uni^ f ormly refused to do. But the courts, through the instrumentality of their equity powers, or by process in aid of execution, will compel an insol- vent member to sell his seat to some person whom the associ- ation will recognize, and apply the proceeds to the satisfaction of his debts. It would be a failure of justice to allow an in- solvent to be the possessor of such a valuable right or property, to the defiance of his just creditors. So, in a case* where a receiver instituted an action to com- pel a debtor member of a Produce Exchange to convey bis seat to a member-elect, with whom the receiver might con- tract for its sale, the court said : " The appointment of plaintifE as receiver of Baggett, made in the supplemental proceedings under the code, vested in him the legal title to all the personal property of Baggett. By force of the statute, Code 298, the receiver of the judginent debtor is subject to the direction and control of the court in which judgment was obtained upon which the proceedings are founded. This action was commenced by leave granted by this court, and the receiver's appointment confers upon him the right to make discovery, on defendant's oath, of all his property. I am of the opinion that the seat in the Cotton Exchange was an incorporeal right which Baggett had at the time he became bankrupt, and was in the fullest sense prop- erty, and that the franchise and privileges secured to the Ex- change by its charter and high price of the initiation fee show that it was valuable property. Nor can I doubt that had there been no supplemental proceedings under which a receiver was ' Kitterbaucl vs. Baggett, 4 Ab. New Cas. 67. Seats Liable to Legal Process. 93 appointed it would have passed, subject to the rules of the Cotton Exchange, to his assignee in bankruptcy ; and if there had been left in the hands of the members of the board any balance, after paying the debts due to the members, and all penalties and charges, that balance might have been recovered by the assignee. The question whether the seat in the board was property has been fully settled in a late case, almost if not entirely, identical with the case at bar.' The question being settled that the seat in question is property of value, 1 think it is the duty of the court to enforce its transfer for the plain- tiff's benefit in this action, either to a receiver or to a third person qualified to work out the designs of the law. We have seen that the personal estate of the debtor becomes vested in the receiver from the time, and by virtue, of his appointment. The entry of the order appointing the receiver places the title of all the personal property in him. The provisions of the Code relating to supplemental proceedings were enacted for the purpose of making the property of the debtor available assets in his hands to pay his debts. By a by-law of the Ex- change this j)roperty cannot be assigned to any one but mem- bers and to members-elect. It cannot, therefore', be assigned to the receiver, as he is neither a member nor a member-elect. If this property cannot be reached by the receiver unless some mode is presented, the object and intention of the Code be- come not only a dead letter, but lifeless in spii'it. Kights of property, from time immemorial, could be reached by a cred- itor's bill ; and it is now well settled that the same result may be accomplished by proceedings under the Code, which fur- nish a substitute for that proceeding in chancery. Personal property passes to the receiver without assignment ; but if an assignment be necessary to effect the purpose of the law, I do 'Hyde vs. Woods, 94 U. S. (4 Otto) 524. See also NiclioUs vs. Eaton, 91 U. S. 716. 94 Stoph-'brOkers and Stoch Exchcmges. not question tlie power of the court to direct it to be done; I therefore direct an assignment to be made to Mr. Covas or some other competent and fit member of the Cotton Exchange, with. apt and proper directions." So in thie recent inatter of Ketcham, bankrupt/ on an application for an order requir- ing the bankrupt to make transfer of his seat in the New York Stock Exchange to the assignee in bankruptcy, or to such person as the' assignee might procure as a purchaser of the seat. Judge Choate, in the United States District Court, in a lengthy decision, said: "The real question is whether the riglit or privilege which the bankrupt holds as a mem- ber of this Stock Exchange is to be regarded as property which passes to his assignee in bankruptcy, under the Bank- rupt Law, for the benefit of his creditors. If it is, then what- ever it may be necessary for the bankrupt to do to make the right available to the assignee he will be required to do. The seat, however, has an actual pecuniary value which the rules of the society, as interpreted and applied in practice, permit the holder to realize by a sale and transfer. There is no practical difficulty in effecting a transfer of this right -or in- terest, for a pecuniary consideration, subject to the condition that the debts of the present holder to members are first paid, and the right or privilege is, to all intents and purposes, a ^ business right, or privilege for business purposes only. I see nothing in the rules of the Exchange which renders it im- possible for a seat to be disposed of by tlie assignee wi.th the co-operation of the bankrupt, subject to the condition above mentioned., This seat in the board was actually used as a part of the business capital of these bankrupts as Stock-bro- kers. To suffer the bankrupt still to hold it virtually with- drawg several thbusand. dollars in value of his business assets from his creditors." The court reviewed several cases some- ' N. Y. Daxhj Eeg. Feb. 9, 1880 ; s. o. more fully, 9 Eep. 305. Seats Liable to Legal Process. 93 •what analogous, one of which was touching a stall in a mar- ket, in which it was determined that the transfer could not be made without the consent of the city authorities, and con- cluded as follows: "The controlling consideration is, as it seems to me, that practically, and whatever its form or inci- dents with respect to other matters may be, it is a part of the bankrupt's business assets, or, more generally, of his property, which it was the primary design of the Bankrupt Law to dis- tribute among his creditors ; and that the peculiarities which distinguish tlus from other property are, in view of the evi- dent purpose and scope of the Bankrupt Law, unessential, mere technical cobwebs which the law is strong enough to break thi'ough." An order was directed to be entered requir- ing the bankrupt to execute any transfer, assignment, or other instrument necessary for the purpose of vesting the title of his seat in the New York Stock Exchange in such person as the assigniee in bankruptcy might procure.' And in the case of Campbell vs. The New York Cotton Ex- change,' the plaintifE, a receiver, set up a judgment in favor of one Weeks vs. Talcott ; the ownership by Takott of the cer- tificate of a seat in the Cotton Exchange ; that the by-laws provide that on the surrender by a member of his certificate to the treasurer of the, Exchange, "a transfer should be made by him to a member or member-elect only ;" and that " any member may purchase said rights of membership of any other member, which shall give him the right to sell the same to any other member or member-elect ;" that plaintifE, as receiver in Weeks vs. Talcott, prior to the commencement of this ac- ■ ' These decisions were cited and denied an application for an iujunc- the conclusions approved in the case tion to restrain the president of the of Grocers'. Bank vs. Murphy, N. Y. New York Stock Exchange from dis- C. P. 11 N. Y.Weekly Big. 538 ; s. c. in posing of, or interfering with, the full, N. Y. Daily Beg. March 12, 1881. proceeds of a member's seat in the See also Scott vs. Ives, N. Y. Dally Exchange. Beg. July 24, 1879, where the court ' N. Y. Daily Beg. Jan. 11, 1881. "96 Stodkrhrdkers amd Stock Exchanges. tioD, received an offer from one M., a member, in good stand- ing, of the Excliange, of $1000 for said seat; that Talcott refused to execute the necessary transfers, and the suit is brought to compel such transfer, it being alleged that Talcott has no other property. Tbe corporation demurred to the com- plaint, claiming that it was improperly joined as defendant, there being no suggestion that the Exchange would refuse to abide by its rules and by-laws, and that the court was bound to assume that when the time came, and the necessary condi- tions precedent were performed, the Exchange would do what it ought to do. But the demurrer was overruled on the ground that the plaintifi's equitable cause of action comprehended a consum- mated assignment of the seat ; or, in other words, a complete vesting of the right to a seat, which could not be accomplished without the defendant the New York Cotton Exchange's co- operation. It is therefore a necessary party to the action. There is no more trouble substantially connected with the de- fence of the action than would be involved in the defendant's scrutinizing any set of circumstances which would be present- ed to it with a demand of transfer under the rules. The defendant should receive due indemnity by the exer- cise of the court's discretion as to costs. All of the cases can be reconciled by keeping in view the circumstances under which they arose; and the following propositions may be deemed as settled : 1. That in the disposition of a seat, or the proceeds thereof, the members of the Exchange will be preferred to outside creditors. 2. That the seat is not the subject of seizure and sale on attachment and execution. 3. That the proceeds of the seat, in the hands of the Ex- change or its officers, are capable of being reached, after the claims of members have been satisfied, to the same extent Gratuity Fund, 97 and in the same manner as any other money or property of a debtor. 4. Tliat a person owning a seat in the Exchange can be compelled, by proceedings subsequent to execution, or under the direction of a receiver, to sell his seat to a person accepta- ble to the Exchange, and devote the proceeds to the satis- faction of his judgment debts. And the New York Court of Appeals has recently decided' that a patent may be reached by a creditor's liill, and the debtor cannot set up that it is in- valid for want of utility, and therefore not property. X. Gratuity Fund. — Life-insurance. The constitutions of both the New York and the Philadel- phia Stock Exchanges make provision for the families or representatives of deceased members. In the absence of actual cases, it would be useless to specu- late upon the construction of the different and varied provi- sions by which this Gratuity Fund, as it is called, is established. The question has arisen, however, in Pennsylvania, in regard to the right of the representatives of a deceased suspended mem- ber to recover the sum, and we content ourselves with giving that case as the only reported adjudication upon the subject. In this case' the facts were these : One MacDowell, the fa- ther of the plaintiff, purchased a seat in the Exchange, and was elected a member August 28, 1865. In December, 1875, while MacDowell was still a member, an amendment to the constitution of the Exchange was passed, providing substan- tially as follows : That every full member of the Exchange should, in addition to all other payments required of him at the time of his admission, pay into the hands of the trustees " GiUette vs. Bate, 24 Albany L. J. " MacDoweU vs. Aokley, 8 Week. 368, Oct. 1881. Notes Cas. 464. 7 98 Stooh-'brokers and Stock Exchanges. $15, and the further sum of $16 annually, on December 1, and also the sum of $10 upon the death of any full member. Said payments were to he charged and collected in the same manner as all other dues to the Exchange. Said trustees were to set apart the fvnd arising from such payments as the"Crra- iuity Eund," and were to pay therefrom, within thirty days after the death of any full member, the sum, of $2000 to his nominee, widow, children, or legal representatives. A full member was one owning a seat in the Exchange, whether suspended or not. After the passage, MacDowell paid all assessments except those stated hereafter. On November VI, 1877, the following amendment to the constitution was adopted : " That amy suspended rnemher who shall have failed for three months to pay in full all gratuity dues and assessments, shall forthwith cease to be a full member for the purposes of this section; such member may be restored to such full mem- bership by a f amor able report of the Standing Committee, upon paying in full all arrears of gratuity dues and assessments." It was not shown that MacDowell ever expressly assented ' or agreed to this amendment. He failed to pay his reg- ular quarterly dues for 1877 and for some parts of the year 1878, and several assessments due from him to the Gratuity Fund, by reason of the deaths of members, in 1877 and 1878, and continued indebted in these amounts to the Exchange un- til his death. In April, MacDowell became hopelessly insane, and he was subsequently, in August, duly suspended in ac- cordance with the rules for non-payment of dues, after which no further dues or assessments were imposed upon him. In November, 1878, he died, leaving one child, the plaintiff, his sole heir, and having designated no person to whom the gratu- ity from the Exchange should be paid. Gratuity Fvnd. 99 After his death, his seat was sold under the rules, but suffi- cient was not realized to pay the claims of the members of the Exchange. A portion of the proceeds of the sale of the seat were applied to the payment of said dues and assessments; said proceeds were not distributed, however, but were held by the treasurer of the Exchange. This action was brought by the guardian of the heir of MacDowell against the officers, etc., of the Exchange to recover the sum of $2000 above pro- vided for. Judgment was rendered for the defendant, which was affirmed by the Supreme Court, where it was held that the right of MacDowell in this Gratuity Fund was grafted on his existing membership in the Stock Exchange, and that he was bound by the amendment which had been regularly adopted. The court further held that his absence when the amendment was adopted, even if shown, could not avail ; that even if he had dissented therefrom he could not have been relieved from its obligation ; for, having subscribed to the constitution and by-laws, and the change having been made in accordance therewith, he could not be permitted to question its validity ; he could not enjoy the benefits of the fund without perform- ing his part towards creating it ; and that his subsequent men- tal incapacity did not relieve him from the effect of previous neglect and refusal to discharge his legal and just duty. In concluding this review of the general legal character of unincorporated Stock Exchanges, we find that the subjects discussed are almost new in the law, and hence we have, at great labor and expenditure of time, set forth the most im- portant adjudications in full ; from which it appears that the courts have treated these novel questions in a spirit of great fairness, and that, when analogous branches of the law have failed to furnish precedents, they have been determined upon general principles of justice and good sense. 100 Stock-hrokers and Stock Exchanges. Chapter III. ANALYSIS OF TEANSACTION BETWEEN BROKER AND CLIENT UPON PURCHASE OR SALE OF STOCKS IN THE UNITED STATES. , I. Legal Relation of Stock-Broker to Ms Client. II. Definitions of Terms Used. III. Purchase on " Long Account" — History of Transaction. (a.) The Order to Purchase — Price — Numher of Shares to be Bought. (6.) Duty and Liability of Broker in Purchasing ; Right to Indemnity. (c.) Disposition of Stock when Purchased ; Safely keeping same; Liability to Keep Identical Stock Purchased, etc. (rf.) Dividends, Profits, Assessments, Calls, Interest. (e.) Bight of Client to Control and Take Up Stock. IV. Duty ofDroler to Sell—" Stop Order." V. Special Contract with Client. — Joint Adventures in Stocks. VI. Sales for " Short Account." (a.) Nature of Short Sale. (5.) Duty of Broker to Sell at Price Ordered. (c.) Nature of Contract Made upon " Borroioing" Stock; and From Whom the Stock may be Borrowed, {d.) Duty of Broker to Close " Short " Contract by " Buying in" Stock. VII. Compulsory Sale by Broker. (a.) For Failure to Put Up Margins. Legal Relation to C^eni (6.) Form of Notice; Upon Whom> Time. (c.) Notice of Sale for Failure to Comply with Demand for Margins, (d.) Place of Sale, (e.) Broker Cannot Sell or Purchase. (/.) Effect of Sale or Purchase ly Broker. VIII. When SroJcer can Close the Transaction. IX. When BroJcer can Act by Substitute. X. BroJcer's Commissions. XI. Communications between BroJcer and Client not Privi- leged. I. Legal Relation of StochhroTcer to his Client. In the United States, the business of buying and selling stocks and other securities is generally transacted by Bro- kers for a commission agreed upon or regulated by the usages of the place ; and although any person may enter into such an occupation, no license to perform it being necessary,' such business is now generally restricted to those ' By the statutes of Pa., the oc- 9. Tax on Broker's license. Three cnpation of Stock - broker is regu- per cent, on commissions, etc. lated by statute (Brightly's Purd. 10. To be appraised. Dig. 42), the substance of wMch is ]!. How classified, here given : 12. To make annual returns on 1. Stock-brokers to be licensed, etc. oath. 5. License to be renewed annual- 13. Statement of name of Broker ly, etc., to enure for the benefit of as- or firm, location of business, and signees or legal representatives. Pro- amount of capital engaged to be re- ceedings in such cases : Brokers not ported to the Attorney-general. to use more than one place of bnsi- 14. Penalty for neglect. ness. The same person may be li- 15. Power of Auditor - general in ceased as Stock, Exchange, and Bill relation to penalties. Broker. 16. Tax to be additional to U- 6. Penalty for acting -without li- cense, cense. 102 Stochrhrdkers and Stock Exchanges. Brokers who are members of Stock Exchanges, there being one of these bodies in several of the principal cities of the Union.' Considerable discussion has arisen in the eases, especially those in the State of New York, as to the precise relation which exists, where a Broker with his own money purchases or sells stocks, etc., for his Client, for the purposes of specula- tion. Does the Stock-broker in such a transaction, in the absence of an express agreement defining the relation, unite in him- self the characters of " Broker," " pledgee," and " trustee ?" The importance of this question is obvious, because, if it be answered affirmatively, it would seem to follow that all of the incidents and consequences of those characters would attach to the Broker, in his dealings with his Client ; but, on the other hand, if the question be answered negatively, the simple relation of debtor and creditor, arising out of a breach of con- tract, would exist. The embarrassment of the question arises from the fact that, in the case of an ordinary purchase of stocks for specula- tion, on a margin, the Stock-broker, without literally filling the technical definitions of "Broker," "pledgee," or "trustee," comes within the purview of all of those terms. He is a Broker because he has no interest in the transac- tion, except to the extent of his commissions ; he is a pledgee, in that he holds the stock, etc., as security for the repayment of the money he advances in its purchase ; so he is a trustee, for the law charges him with the utmost honesty and good faith in his transactions; and whatever benefit arises there- from enures to the cestui que trust. The circumstances attendant upon an ordinary transaction between a Broker and his Client in a stock speculation are ' Philadelphia, San Francisco, and Boston. Legal Relation to Client. 103 carefully described by Hunt, Ch. J., in a leading case in the State of New York." "The customer employs the Broker ... to buy certain 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 ad- vances ten per cent, of their market value, and agrees to keep good such proportionate advance, according to the fluctuations of the market. . . . " 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 cus- tomer, 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 appreciation in the value of the stocks is the gain of the customer, and not of the Broker. " 4. At aW 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 required by him, upon the receipt of the advances and commissions ac- cruing to the Broker ; or, " 6. To sell such shares, upon the order of the customer, 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 current market value of the shares. "2. To keep good such margin according to the fluctua- tions of the market. " 3. To take the shares so purchased on his order whenever ' Markham vs. Jaudoo, 41 N. Y. 235. 104 Stoch-hroTcers cmd Stock Exchanges. required by the Broker, and to pay the difference between the percentage advanced by him and the amount paid therefor by the Broker." ' It may be well to set forth the history of an ordinary trans- action between a Client and Broker, even with a little more detail than that contained in the foregoing extract. The or- dinary margin paid on opening an account with a Broker — that is, in ordering him to buy or sell securities — is ten per cent.' The margin may be less than this, or frequently none is ad- vanced, according to the confidence which the Broker has in the ability of the Client to respond to ultimate loss. But, whether the Broker advances all or only the principal portion of the sum invested in the securities, the relation of the par- ties is unchanged. The fact exists that the Broker looks to the principal for an indemnity upon the entire transaction. The Client, having given the Broker an order to buy or sell, either in writing or- verbally, the next step in the transaction is, that the Broker goes into the Stock Exchange and executes the business, making a verbal contract therefor with another Broker. Frequently the Broker, upon receiving an order, deputes another, or subordinate. Broker to do the business. This is contrary to the general principle of law, that an agent cannot delegate his business to another — " ddegata potestas non potest delegari j" ' but it is justified by the general usage of Wall Street, of which the Client has express or im- plied knowledge.* The exact transaction in the Stock Exchange is as follows : The selling Broker offers for sale his secui'ities, and if there is a Broker present who wishes to purchase, the contract is completed, upon his assenting to the terms mentioned. ' See also Brass vs. Worth, 40 ' Leask's Dig., Law of Cont. 482. Barb. 648. * See on this subject, subdivision ° Markham vs. Jaudon, 41 N. Y. IX., " when Broker can act by sub- 235. stitute," p. aso. Legal Relation to Client. 105 Where the number of shares is not named by the selling Broker, it shall be considered to be for one hundred shares of stock, of the par value of one hundred dollars, or ten thousand dollars of bonds.' Some rules of the Stock Exchange are here given which further illustrate the transaction in the Stock Exchange : "All offers made and accepted shall be binding."' " Offers to buy or sell shall be entitled to the floor in the following order : " 1. Bids ' seller three days,' and offers to sell ' buyer three days,' shall take precedence of cash and regular. " 2. ' Cash ' and ' regular ' bids and offers may be made simultaneously, as being essentially different propositions. " 3. Offers to buy or sell on longer options than three days may be made at the same time with offers to buy or sell ' buyer, or seller three.' "4. In offers to buy on seller's option, or to sell on buyer's option, the longest option shall have precedence. " In offers to buy on buyer's option, or sell on seller's op- tion, the shortest option shall have precedence." ' " No party to a contract shall be compelled to accept a principal other than the member offering to contract, unless the name proposed to be substituted shall be satisfactory, or shall be declared at the time of making the offer." * " Whenever there is a disputed claim for the purchase or sale of a security, made during the sessions of the Exchange, the presiding officer shall decide the same, or he may appeal to the board for their decision. If an appeal be made from the decision of the presiding officer, and seconded by two members, the question shall be put to vote." " ' Art. V, 5 2, of By-laws, N. Y. = Art.V. § 3, id. Stock Exchange. ' Art. V. j 4, id. " Alrt..Y. $ 1, id. ' Art. VII. § 1, id. 106 Stockrbrdkers and Stock Exchanges. "In any disagreement between members, growing out of the purchase and sale of a security or securities, as soon as the same is ascertained, if not settled by mutual agreement, the money difference shall be established forthwith by purchase or sale, by an officer of the Stock Exchange, wherever the Ex- change may be at the time convened." ' "All purchases and sales shall be settled for on the next business day, unless expressed to the contrary." ' Sales for " cash " are settled for immediately after the pur- chase, upon the delivery of the same.' In all deliveries of stocks, bonds, etc., the party delivering shall have the right to require the purchase-money to be paid at the time and place of delivery.* By Article XXX. of the By-laws of the New York Stock Ex- change, transactions may be made in government securities for the " account " for two " settling-days " — viz., the 15th and last days of each month. Provision is also made for securing and carrying out such contracts ; but, as a matter of fact, this system of dealing is rarely if ever used. But to continue : the Brokers, in making transactions with one another, do not know for whom they are made, the names of the principals being jealously concealed. One Bi'oker looks to the other contracting Broker to carry out the transaction, and in practice there is no attempt made to enforce any liabil- ity against the principal should he become known. Here an- other question arises, whether there is any liability on the part of the unknown principal for the default of his Broker % Is there any privity between him and the othercontracting Broker? We shall not attempt to answer these questions in this place, but they are suggested as they arise in the history of the transaction.' ■ Art. VII. % 2, of By-laws, N. Y. 'Art. XVII. Constitution. Stock Exchange. * Id. ' Art. XII. % \, id. ' See this subject considered, Ch. X. Legal Relation to OUent. 107 There is no written contract, as a general rule, between the Brokers, each one merely dotting down the transaction made, and reporting it to his oflSce, at which place, later in the day, the business is confirmed by comparisons made by each side. The Statute of Frauds here looms up to destroy such con- tracts ; but the rules of the board make them inviolable ber tween the members in the tribunal known as the " Arbitra- tion Committee." On the following day, if the transaction is made " regular," the stocks are duly delivered at the office of the purchasing Broker by the selling Broker, who receives payment for them. If the sale be made on time, the transaction is completed when the time expires. The stock, when received, remains in the office of the purchasing Broker to await the further orders of the Client. Sometimes the stock is held by the Broker with merely a general power of attorney in blank at- tached to or endorsed on it. " In the delivery of stock, of which but one transfer in a day is allowed, the receiver shall have the option of receiving said stock by certificate and power iiTCvocable, in the name of, witnessed or guaranteed by, a member of the Exchange, or a firm represented at the Exchange, resident or doing business in I^ew York, or by transfer thereof." ' " In all transactions exceeding one hundred shares, where the delivery is by certificate and power, the purchaser shall have the right to require the delivery in certificates of not more than one hundred shares each." " "Powers of attorney, or substitution, signed by trustees, guardians, infants, executors, administrators, or attorneys, shall not be a good delivery." ° Sometimes the stock is transferred on the books of the com- ' Art. IX. 5 1, of By-laws N. Y. = Art. IX. § 2, id. Stock Exchange. " Art. IX. § 3, id. 108 Stockrbrdkers cmd Stock Eechanges. pany in the name of the Broker, rarely in the name of the principal. This stock is considered as the Client's, subject only to the lien of the Broker for advances and commissions. The Broker collects the dividends, and pays assessments upon it, if any be levied, and the same remains in his hands through the whole transaction until it is sold, the Client never having possession of, and rarely ever seeing, the stock. Upon the purchase of the stock, the Broker sends a notice to his Client giving the price and the name of the Broker from whom ^he hm purchased.^ What effect this would have upon a contest between the unknown principal and the other, or selling, Broker is still another question. Frequently a Broker is himself a speculator, and, in executing an order for his principal, unites a purchase or sale on his own account. Finally, the Broker in many instances may have two Clients, who, at the same time, give him counter-orders, the one to buy and the other to sell, which the Broker fre- quently executes at the market price, but without any real sale or purchase, merely making cross-entries in his books. In the absence of any fraud or any damage to the Clients, can such transactions stand ? During the time the stock or securi- ties remain in the possession of the Broker, ho uses them to raise money with which to carry on his business, and no attempt is made to keep the stocks separate, or to keep the identical certificates on hand, the Client usually being satisfied if the Broker is able to deliver the number of shares pur- chased, without any regard to particular certificates. Accord- ing to the strict legal definition, it is manifest that a Stock- broker, in transactions such as those described above, is not embraced within the term " Broker." ' And it was decided iu Hoffman the Broker to give this notice was vs. Livingston, 46 N. Y. Supevior Ct. such negligence as to preclude him (14 J. & S.) 552, that a failure of from recovering his commissions. Legal Relation to Client. 109 " Brokers " liave been defined bj a standard legal lexicogra- pher to be " those who are engaged for others in the negotia- tion of contracts relative to property with the custody of which they home no concern ;" ' and " Stock-brokers " as " those em- ployed to buy and sell shares of stocks in incorporated com- panies and the indebtedness of governments."" The distinctions between a Stock-broker and an ordinary Broker are tersely summarized by Woodruff, J., in his dissent- ing opinion in the well-known case of Markham vs. Jaudon,' in this language : " In the first place, the Stock-dealer who is employed, though called a Stock-broker, does not act as Bro- ker in this transaction. It is no part of the office or duty of a Broker to pay the price. It is no part of the office or right of a Broker to receive the property, still less to take the title to his own name.' " In this transaction he acts in a peculiar business, in his own name and on his own responsibility, pro- tected against loss by the indemnity furnished, or by the agree- " 1 Bouv. L. Diet., title " Broker." By the subsequent 5, 3408, a tax Ewall's Evans on Agency, 4 et seq. of one twenty-fourth of one per cent. " Ibid. See also Clark vs. Pow- is imposed each month upon the av- eU, 1 Nev. & M. 494, arguments of erage amount of deposits; and alike counsel pro and con. Ab. L. Diet., amount on the capital employed, title " Broker." As to liability of See also, for interpretation of this Broker to pay taxes, etc., see § 3407, law, Northrup vs. Shook, 10 Blatchf. Eev. Stat. U. S. (2d ed. 1878), which 243 ; Clark vs. Bailey, 12 id. 156, s. c. provides as follows : affirmed 21 Wall. (U. S.) 284 ; War- " 5 3407. Every incorporated or ren vs. Shook, 91 IT. S. 704 ; United other bank, and every person, firm. States vs. Cutting, 3 Wall. 441 ; Uuit- or company having a place of busi- ed States vs. Fisk, id. 445 ; Clark vs. ness where credits are opened by Gilbert, 5 Blatchf. 330 ; Bankers' tLe deposit or collection of money Cases, 11 Op. Att'ys-Geu. 482 ; Seldeu or currency subject to be paid or re- vs. Equitable Trust Co. 94 U. S. 419. mitted upon draft, check, or order; Ml N.Y.256; Northrup vs. Shook, or where money is advanced or loan- supra. ed on stocks, bonds, bullion, bills of * A Broker has not the custody of exchange, or promissory notes; or the goods of his principal; he is where stocks, bonds, bullion, bills of merely empowered to effect the con- exchange, or promissory notes are tract of sale or purchase on his be- reoeived for discount or for sale, half. Chitty on Cent, (11th Am. ed.) shall be regarded as a bank or as a 274; Paley on Ag. 13; Story on Ag. banker." (8th ed.) $ 28 et seq. 110 Stook-lrohers omd Stock Exchanges. ment to be furnished, to him. The idea of mere agency ordi- narily suggested by the name Broker does not, therefore, arise out of the fact that the dealers in stocks for account of others, as to profit and loss, are called Stock-brokers. In the next place, the transaction, according to the intent and purpose of the employment of the Broker, does not contemplate that the customer will ever receive the stock, or own it. It may be that if the Broker desires to close his connection with the transac- tion, the customer, if he pays the cost, interest, and all com- missions which the Broker has earned, or is entitled to earn, will receive the stock, whether he may so insist or not is a col- lateral question ; and, if he be so entitled, it will nevertheless be true that this is not in pursuance of the arrangement, but a departure from it ; for the intent is, that the stock shall be carried by the Broker until directed to be sold, the customer never having the title to the stock at all. And, finally, in my opinion, the transaction is an executory agreement for a pure speculation in the rise and fall of stock, which the Broker, on condition of perfect indemnity against loss, agrees to carry through in his own name and on his own means or credit, ac- counting to his customer for the profits, if any, and holding him responsible for the loss." ' Notwithstanding these technical differences, the decided inclination of the courts has been to visit a Stock-broker with all of the responsibilities of a Broker and pledgee, and, as we > in the case of Wood vs. Hayes, liimself, but for another. He is a 81 Mass. 375, it was held that wliere middle - man, a negotiator between a Stock - broker advances his own other persons for a compensation, money in the purchase of stocks for A Stock -broker deals in stocks of another, and holds the shares in his moneyed corporations and other se- own name, the transaction stands cnrities for bis principal. It is a on the footing of contract, which is calling of great responsibilities, in strictly conditional to deliver so which punctuality, honesty, and many shares on payment of so much knowledge are required." Per Van money. " A Broker is an agent sim- Vorst, J., White vs. Brownell, 3 Ab. ply. He transacts business not for (N. Y.) Pr. (n. s.) 326. Legal Relation to CUent. Ill shall hereafter see, to confer upon him all of the advantages of those relations. It is conceded by Mr. Justice Woodruff, and all of the ad- vocates of his view of the law, that where the Stock-broker makes purchases of stock, etc., for his principal /br investment, ■ with money furnished by the latter, the relation of pledgor and pledgee exists.' It is also conceded that when stock, etc., is purchased on a margin for the Client, it instantly becomes the property of the latter,' together with all of its future dividends and earn- ings f and that the Client is entitled to the possession of such stocks, etc., upon paying the money represented in their pur- chase, with the commissions of the Broker.* So it has been decided that a pledgee of stock is not liable for a loss occasioned by his neglect to sell the stock, it having depreciated in his hands till it became worthless, when, by the contract between the parties, the right to sell the stock had been conferred upon the pledgee or a third person ; and the pledgee has never refused to transfer the stock for the pur- pose of a sale, and the pledgor has never requested that a sale should be made.' It has also been held that a Stock-broker is not liable where spurious securities are purchased by him for a Client in the regular course of business. And if he sell stocks or securities for his principal, which turn out to be spurious, and the Bro- ker, in consequence, repays the purchase-money to the buyer, he can recover the same from the principal.' ' Markham vs. Jandon, 41 N. Y. ' Howard vs. Brigham, 98 Mass. 235, at 257 and 258 ; also Gro ver, J., 133 ; O'Neill vs. Whigham, 87 Pa. St. 8. c. at 247. See also Bakei vs. 394. Drake, 53 N. Y. 211, at 216. ' Lamert vs. HeatL, 15 M. & W. ' Id. 486 ; 8. c. Lambert vs. Heath, 15 L. ' Id. J. Exch. 298; Mitchell vs. Newhall, * Per Grover, J., Markham vs. Jan- 15 M. & W. 308 ; Westropp vs. Sol- don, snpra, p. 247. omon, 8 C. B. 373. 112 Stock-hrdkers cmd Stock Exchanges. So if the pledge be stolen from the Broker, he is not liable unless the theft arose from, or was connected with, a want of ordinary care on his part." Again, if assessments or "calls" are made upon stocks which a Broker holds for a Client, the liability to pay them, if any, is that of the principal, and not the Bi'oker.' In fine, all of the benefits, liabilities, and disadvantages of ownership are attached to the principal, while the Broker has no interest in the transaction except to the extent of his commissions.' In view, therefore, of these considerations, the better doc- trine would seem to be to hold the Broker to the responsibili- ties of that relation ; in fact, it appears diificult to conceive of any other relation which could so fully harmonize with the circumstances as that of Broker and Pledgee. And this now seems to be the established law".* The leading case of Markliam vs. Jaudon was expressly over- ruled on the question of the measure of damages in an action for the conversion of stocks by a Broker.' It should also be '2Par8.onCont.(6thed.)112; Ab- Taussig vs. Hart, 58 N. Y. 425; bett vs. Frederick, 56 How. Pr. (N. Thompson vs. Tolaud, 48 Cal. 99 ; Y.) 68. See Arent vs. Squires, 1 Daly, Kenfield vs. Latham, 2 Cal. Leg. Eec. 347. 235 ; Gilpin vs. Howell, 5 Pa. St. 41 ; = McCalla vs. Clark, 55 Ga. 53. Wyukoop vs. Seal, 64 Pa. St. 361 ; ' See the above questious oonsid- Esser vs. Linderman, 71 Pa. St. 76; ered at pp. 123, 151. Maryland Fire Ins. Co. vs. Dalrym- * Gruman vs. Smith, 81 N. Y. 25 ; pie, 25 Md. 242 ; Baltimore Ins. Co. Markham vs. Jaudon, 41 N. Y. 235 ; vs. Dalrymple, id. 269 ; Child vs. Morgan vs. Jaudon (Ct. of App.), 40 Hugg, 41 Cal. 519. The same rule How. Pr. (N. Y.) 366 ; Steuton vs. Je- would seem to exist in England : rome, 54 N. Y. 480 ; Baker vs. Drake, Brookman vs. Rothschild, 3 Sim. 153, 53N. Y.211; id. 66 N. Y. 518 ; Ritter aff'd by House of Lords in 5 Bli. vs. Cushman, 7 Robt. (N. Y.) 294; (u. s.) 165. Contrary to this view Read vs. Lambert, 10 Ab. Pr. (n. s.) are Hanks vs. Drake, 49 Barb. (N. Y.) 428 ; McNeil vs. Tenth National Bank, 186 ; Schepeler vs. Eisner, 3 Daly, 11 ; 55 Barb. (N. Y.) 59 (reversed on other Sterling vs. Jaudon, 48 Barb. (N. Y.) points in 46 N. Y. 325) ; Clarke vs. 459, which have all been expressly Meigs, 22 How. Pr. (N. Y.) 340 ; Brass overruled in the State of New York. vs. Worth, 40 Barb. (N. Y.) 648 ; Au- See also Wood vs. Hayes, 81 Mass. drows vs. Gierke, 3 Bosw. 585 ; Tay- 375. lor vs. Ketchuni; 5 Eobt. (N. Y.) 507 ; » Baker vs. Drake, 53 N. Y. 211. Legal Relation to Client. 113 noticed that there were two elaborate dissenting opinions by Woodruff and Grover, JJ., on the question of the relation which existed between the Broker and the Client, the two judges just mentioned holding that the Brokers were not pledgees, but that thej held the stock under a contract which enabled them to sell upon the failure of the Client to furnish margins. When this question came again befoi-e the court of last resort in New York,' Commissioners Earl and Reynolds both wrote opinions affii-ming the judgment on the specific ground that the Brokers were pledgees. But in the case of Baker vs. Drake' (which was not adverted to in the preceding case), overruling Markham vs. Jaudon upon the question of the measure of damage^ Mr. Justice Eapallo, in alluding to the latter case, said : " It seems to me, after as full an ex- amination of- the subject as circumstances have permitted, that the dissenting opinions (per Woodruff and Grover, JJ., alluded to above) embody the sounder reasons." Yet, when Baker vs. Drake came before the Court of Appeals again in September, 1876,' the court expressly reiterated and reaf- firmed three propositions laid down in the case of Markham vs. Jaudon, the principal one being that " the relation of Broker and Client, under the ordinary contract for a spec- ulative purchase of stock, is that of pledgee and pledgor." From this view Rapallo and Allen, JJ., dissented. The doctrine of Markham vs. Jaudon was again distinctly reaffirmed in the last - mentioned respect in Gruman vs. Smith.* The theory that the relation which exists between a Stock- broker and his Client in an ordinary speculative transaction is not that, of pledgor and pledgee, is mainly based upon ■ Stenton vs. Jerome, 54 N. Y. 480. * 81 N. Y. 25, reversing 12 J. & '53]Sr.Y.211. S. = 66 N. Y. 518. 8 114 Stockrlrokers and Stock Meehanges. the argument ah inconvenienti. It is said that as stocks are a fluctuating species of property, whose value is liable to be wiped out in a moment, the burden should not be put upon a Broker to give his Client notice of a decline or rise, as the case may be, and to make a demand for further margins. But this argument is just as forcible when applied to the un- disputed case of a pure pledge, where it is conceded that there must be notice to the pledgor before a sale can be made, as where the owner of stocks pledges them to secure borrowed money. In this instance, although the stocks are liable to de- cline and leave the lender without security, it is clear that, in the absence of express agreement, they could not be sold with- out legal notice.' So it has been held that where, instead of money, the Client deposits stock, etc., as margin, the relation of pledgor and pledgee exists." The Broker may always, in the outset, protect himself against the fluctuations of an advance or decline in the mar- ket by exacting sufficient margins to meet the contingencies of speculation ; and if he neglect to do this, he should not ex- pect the law to aid him. But, flnally, the Broker may always fully insure himself by making a special contract with his Client,^ which will enable him to dispose of securities in any manner and at any time that may be agreed upon without notice, and such contracts the law will uphold and carry out.* Upon the whole, while it must be conceded that there are incongruous features in the relation, there seems to be no hardship in holding that a Stock -broker is a pledgee; for, although it is true that he may advance all or the ' Sohouler on Bailm. 206 et seq. ' See in this connection remarks " Lawrence vs. Maxwell, 53 N. Y. of Hnnt, Ch. J., Markham vs. Jan- 19; see also Vanpell vs. Woodward, don, 41 N. Y. 244. 3 Saudf. Ch. 143. * Post, subdivision (V.) of this chapter, p. 169. Legal Relation to Client. 115 greater part of the money embraced in tlie speculation, if he acts honestly, faithfully, and prudently, the entire risk is upon the Client, and may be enforced against him, as a personal liability, irrespective of the value of the securities, which are the subject of the transaction. To introduce a different rule would give opportunities for sharp practices and frauds, which the law should not invite; and if it be true, as Mr. Justice Woodruff' puts it, that "the transaction is an executory agreement for a pure speculation in the rise and fall of stock, which the Broker, on condition of perfect indemnity against loss, agrees to carry through in his own name and on his own means," accounting to the Client for the profits, it is very questionable whether all the transactions of Wall Street could not be set aside as mere wagers." But, as we have seen, the cases most emphatically condemn this view, except those in Pennsylvania, in one of which — viz., North vs. Phillips ° — the Supreme Court of Pennsylvania held that the peculiar facts there developed showed that the dealings between the Client and the Brokers were in "differences" and " margins," and the purchase and sale of the stock'were a mere pretence; but it is plain, from reading the opinion of the learned judge in that case, that not only was no effect given to the verdict of the jury, which found that the purchases of stocks had been made honafide, but the different elements which made up the transaction between the Brokers and their CUent were completely overlooked — viz., that stock was actual- ly purchased for the Client; that it was held subject to his or- ders ; that he would have been entitled to the dividends thereon ; that he could have insisted upon the instantaneous delivery of- the stock to him upon tendering the purchase- money remaining due ; that, if the Brokers had failed, the ' Markham vs. Jaudon, 41 N. Y. ^ See cases cited in chapter on 256; ante, p. 109. "Stock-jobbing." ' 89 Pa. St. 250. 116 Stockbrokers and Stock Exchanges. stock would not have passed to their assignees; and that, in fine, the Brokers were only interested in the transaction to the extent of their commissions. With great respect, there- fore, we think that this case is not entitled to rank as an au- thority upon the question involved, especially as it appears to he directly opposed to the previous cases of Esser vs. Linder- man ' and Wynkoop vs. Seal," where similar transactions were upheld.' 11. Definitions of Terms Used. There are a number of technical or well-known terms used in "Wall Street which should be defined preliminarily to a dis- cussion of this chapter. When a person is said to be "long" of stocks, it is meant that he has purchased stocks through his Brokers or other- wise, in the expectation of a rise or advance in the market; he is then called a " bull." To be "short" of stocks is where one sells stocks which he does not ow;n or possess, and borrows the number of shares which he has sold from some third person to deliver to his vendee, expecting to be able to buy the stocks at a lower fig- ure, and then return them to the person from whom he has borrowed them ; he is called a " bear." * To " carry " stocks means where a Broker or other person advances the money, or a principal part thereof, with which to purchase stocks, and. holds the same subject to the orders of his Client.' A " corner " in stocks is where the owners or holders (i. e. bulls) refuse to loan stocks to the "bears," with which to ■ 71 Pa. St. 81. * White ys. Smith, 54 N. Y. 522 ; ' 64 Pa. 361. Kiiowlton vs. Fitch, 52 N. Y. 289. = See this question fiilly discussed ° Price vs. Gover, 40 Md. 102 ; Sal- iu chapter on " Stock -jobbing," un- ters vs. Genin, 3 Bosw. (N. Y.) 250, der head of " Wagera." 260. Definition of Terms. 117 carry out their short contracts, in which event the " bears," being unable to deliver, are compelled to go into the mar- ket or Exchange' and buy the stocks at any price at which they can obtain them.' "Wash sales" are not real sales, but are made by persons interested to each other, for the purpose of giving a fictitious value to the stock." A "shave" is a consideration for carrying stock for a cer- tain time.' A " call " is a contract by which the party signing or mak- ing the same agrees, in consideration of a certain sum, to de- liver, at the option of a party therein named, or his order or bearer, securities therein mentioned, at a certain day for a cer- tain price.* A "put" is also an option contract, except the party holding the same has the option of delivering securities to the maker.' A "straddle," or "spread-eagle," combines the advantages of a "put" and a "call," being a contract by which the hold- er has the right or option either to deliver or have delivered to him certain stocks at prices designated in the writing.' ' Cameron vs. Durklieim, 55 N. Y. By the usage of Brokers, it is nego- 425,438. See also chapter on " Stock- tiable, and it has been declared valid jobbing." by certain courts. See title " Stock- ^ Bryan vs. Baldwin, 52 N. Y. 232, jobbing," under head of " Wagers." 236 ; aff 'g 7 Lans. (N. Y.) 174. = It is as follows : 3 North vs. PhiUips, 89 Pa. St. . , 250-255. "New York, 1881. * The following is a copy of the " For value received, the bearer call commonly used: ■ may deliver me shares of the common stock of the Railroad " New York, 1881. Company at per cent., at any "For value received, the bearer time in days from date. The may call on me for shares of the undersigned is entitled to all divi- common stock of the Eailroad dends or extra dividends declared Company at per cent., any time during the time, in days from date. The bearer " Expires at 1| P.M. is entitled to all dividends or extra " Signed, ." dividends declared during the time. " Expires 1881, at 1| P.M. = Harris vs. Tumbridge, 8 Ab. New " Signed, ." Cas. 291 ; aff'd 83 N. Y. 92, where the 118 Stock-irohers and Stock Mochanges. HI. Pitrchase on ^^ Long ''^ Account. ■ We have already seen what the relation is where a Stock- broker contracts to buy stocks for a Client on a margin for speculation, and advances all or the greater portion of the pur- chase-money ;' and that, after such purchase, the Broker im- mediately acquires a lien upon the stocks, for the balance of the purchase-money in excess of the margins received, which he has advanced to pay for the stocks, and becomes, in rela- tion thereto, a pledgee, with the full powers and responsibili- ties of that position." It is proposed to examine, under this subdivision, with some detail, the duties of the Broker in respect to the purchased stock, from the inception to the termination of the business. {a.) The Order to Purchase, Price, and Nurriber of Shares to he bought. The rule of law is that a Broker or agent, when he is di- rected to buy a:t a fixed price, must buy at that price and no court, in speaking of a " straddle,'' liver the same to tbe undersigned at said, " The word, if not elegant, is per cent., any time within the at least expressive. It means the period named. All dividends or ex- dpuble privilege of a 'put' and a tra dividends declared during the 'call,' and secures to the holder the time are to go with the stock in right to demand of the seller at a either case; and this instrument is certain price, within a certain time, to he surrendered upon the stock a certain number of shares of speci- being either called or delivered, fied stock, or to require him to take " Expires at IJ P.M. at the same price, within the same " Signed, ." time, the same shares of stock." The following is the form of a » See cases cited in this chapter, " straddle :" } I. ; and see Taussig vs. Hart, 58 N. Y. 425 ; Esser vs. Liudermau, 71 " New York, 1881. Pa. St. 76. " For value received, the bearer ' Id. Brookman vs. Rothschild, 3 may call on the undersigned for Sim, 153, aflf'd in House of Lords, 5 shares of the common stock of the Bli. (n. s.) 165; Grnman vs. Smith, Eailroad Company at per 12 J. & Sp. (N. Y.) 389, aff'd 81 N". y! cent., any time in days from date. 25. Or the bearer may, at Ms option, de- Order to Purchase — Price. 119 other. Agents constituted for a particular purpose, and un- der a limited and circumscribed power, cannot bind their principal beyond their authority.' Accordingly, an order to buy stocks "regular" is not fulfilled by a purchase by the Broker at "seller's option, thirty days."" An order to pur- chase at 571- is not fulfilled by a purchase at 57|- or 58.' So an order to a Broker to buy 500 shares of stock, buyer's op- tion in 60 days, at $2 per share, is not fulfilled by the Broker's buying the same at $1 62^ per share, at 30 days, buyer's option, and then charging $1 75, 60 days ; and the Client is not liable, therefore, even though he give a note, without knowledge of the "facts.* If the Broker is merely directed to buy, without any price being designated, he can make the purchase at the market price." In respect to the amount or number of shares which the Broker may buy, he is, of course, restricted to the order. But if he cannot purchase the whole amount stated, he may purchase a less number of shares ; and where a Bro- ker receives an order to purchase securities, his undertaking is not to deliver the whole absolutely, but to buy as many of them as could be bought in the regular way, below or at the limit," unless there is something in the circumstances to show the intention of the Client to be otherwise. An ordinary Bro- ' Genin vs. Isaacson, 6 N. Y. Leg. ° Taussig vs. Hart, 58 N. Y. 425- Obs. 213; Bash vs. Cole, 28 N. Y. 428. 261, and cases cited ; Delafield vs. ' Genin vs. Isaacson, supra. State of 111. 26 Wend. 221 ; Story ♦ Day vs. Holmes, 103 Mass. 306; on Ag. 5 126; Wharton on Ag. 5 712; Pickering vs. Demeritt, 100 Mass. Max:tedvs.Paine,L.E.4Ex.81;Max- 416. ted vs. Morris, 21 L. T. (n. s.) 535. As ' As to how far the usages of the to where instructions are indefinite business affect the orders of the Bro- and capable of two constructions, ker, see chapter on " Usages." It see Ireland vs. Livingston, L. E. 5 has been held, however, that no H. L. Cas. 395. Nor is this rule af- usage will authorize a factor or fected by the fact that the contract agent to depart from positive in- made is more advantageous for the structions (Barksdale vs. Brown, 1 principal ; Nesbitt vs. Helser, 49 Mo. N. & McC. (S. C.) 517). 383; Sraithvs.Bouvier,70Pa.St.325; ' Marye vs. Strouse, 5 Fed. Kep. Borham vs. Godfrey, 1 Knapp, 381. 483. 120 Stodkrhrokers amd Stock Exchanges. ker's contract for the buying of stock, each share of which has a distinct and independent vahie, cannot be regarded as an entire contract.' Accordingly, it was held " that where a Client ordered Mining Brokers to buy 600 shares of the Franklin Mining stock at the San Francisco Stock Board, and the Brokers purchased 125 shares at the latter place, and delivered 375 to their firm of the said stock belonging to one of the mem- bers of the firm, whiish was placed in the Client's account as a fulfilment of his order, without his knowledge, the Client was to be held for the 125 shares regularly purchased, the other shares being stricken from the account upon the familiar ground that an agent employed to buy cannot become the seller.' So, in regard to the place where the securities are to be purchased, the Broker is justified in acting according to the course of trade and the regular usages of business. Therefore, where a Client residing in Baltimore directs, his Broker, residing in the same place, to purchase stock — the or- der being in general terms, and not directing the purchase to be made at any partixjular place or mode, and not containing any restrictions as to price — the Broker has the right to make the purchase in New York througli correspondents' Brokers or sub-agents residing and doing business in that city.* So, as to the length of time within which the Broker should execute his orders, the question depends upon the circum- stances of each case. The general rule is, in the absence of express restrictions or limitations, that the authority of an agent continues until countermanded,' and that the principal may terminate the relation at any time. ' Marye vs. Strouse, 5 Wei. Rep. out tho order at all events (Fletcber 483. vs. Marshall, 15 M. & W. 755). ' Id- ' Eosenstock vs. Tormey, 32 Md. ' Nor is there any absolute engage- 169. meut on the part of Broker to carry ' Birkett vs. Taylor, N. Y. Ct. of App. MSS. Oct. 1881). Order to Purchase — Price. 121 But the previous dealings between the parties, the usages of Brokers, the fluctuating and uncertain vahie of the securities dealt in on the Exchange, may all be appealed to to vary the general rules of law in this respect and establish a different principle. In England it has been held that where an order has been given to a Broker to deal ia a curxent security, a jury would be authorized to consider the usage of the Stock Exchange to deal for the coming settling-day, and to find that when that day arrived a reasonable time had elapsed for carrying out the order, and that the authority of the Broker was at an end.' Until the Broker has acted upon his authority to buy shares, it may be revoked ; and if any money has been given him, in order to enable him to pay for them, it may be de- manded, back." But this cannot be done after he has entered into a cohti'act for purchase and become personally responsi- ble for the due performance of that contract.^ But in both instances — viz., where he is directed to buy at a particulai" price, or at the market price — he is bound to act with dili- gence and prudence, and in entire good faith. A commission merchant or Broker has no right to conceal from his Client any portion of his transactions and dealings in relation to the property alleged to have been bought or sold ; and when he withholds the fullest information on that subject, the right to examination before trial, in an action brought to recover al- leged profits or to adjust the unsettled accounts, should be fully accorded." And a Broker is also bound to exercise his judgment and discretion to the best advantage for tlie benefit of his principal, to render just and true accounts, and to keep •Maxted vs. Paine, L. R. 4 Ex. 'McEwen vs. Woods, 11 Q. B. 13; 81 ; see also Maxted vs. Morris, 21 Sutton vs. Tatham, 10 Ad. & E. 27. L. T. (n. s.) 535. * Miller Vs. Kent, 10 N. Y. WeeUy ' Fletcher vs. Marsliall, supra. Dig. 362 ; s. c. 23 Hun (N.Y.), 657. 122 Stodh-'brohers and Stock Exchanges. the property of his principal unmixed with his own or the property of other principals.' _In the case of Miller vs. Kent," the court held that, in an action by a principal against a Broker for an account, the lat- ter would be ordered to give an itemized account of all the transactions. A Broker who is the agent of his Client is, and ought to be, required to show fully and specifically each item of the account which he charges against his Client. Fur- nishing a gross sum is insufficient. Each of the parties to an account is entitled to know and to have presented to him, when a demand is made for a loss, supposed or real, the items which make up such loss, and to be given an opportunity not only to inspect and ascertain the correctness of the same, but to controvert such items whenever it becomes necessary.' In order to charge a defendant in an action for money paid for the purchase of stock on his account, and by his order, the plaintiff must clearly show the authority under which he act- ed, and prove that he was instructed by the defendant to make the purchase. And where the proof is so defective that the jury will be compelled to infer such authority from con- versations and admissions of the defendant, which are neither explicit nor satisfactory, the plaintiff will be non-suited.* Speculations in stocks are frequently made by agents of the Client with the Broker. In such cases, where the authority of the agent is denied, the .proof must be the same as would exist in an ordinary case between a third person seeking to charge the principal for the acts of his agent, and the burden would be upon the party asserting the fact. So cases may arise where a speculative transaction is made between a Client and a clerk or agent of the Stock-broker, and the authority of the clerk is disputed or his acts disowned by the Stock- ■ Gray vs. Haig, 20 Beav. 219, 238. • Ward vs. Van Duzer, 2Hall (N. T.), » 23 Hun (N. Y. ), 657. » Id. 162. Or^r to Purchase — Price. 123 broker, in which event ordinarily the question is one for a jury to determine; In a recent case in Nevada, it appeared that K. & P. were Stock-brokers, and R. was also agent and P. cashier of the express and banking business of W. F. & Co. One W. called at the banking department and asked K. how much interest W. F. & Co. would charge to buy for him cer- tain shares of stock. The interest was agreed on, and R. & P. ordered the stock through their Brokers in San Francisco, and sent W. notice of the purchase in their own iirm name of E. & P. The next day "W., at R.'s request, executed his note to W. F. & Co. for the amount of money it took to purchase the stock. This note and another, executed in its place, were taken up, and replaced by the note sued on. The stock was never delivered to W., but the latter was credited upon the books of R. & p. with the stock and the amount of purchase- money stated in the note. R. & P. received credit with W. F. & Co. for the same amount as so much money deposited. R. & P. subsequently failed, and W. never received the stock. W. F. & Co. brought suit against W. on the note, aind .the question was whether the transaction was only a loan, as claimed by "W. F. & Co., or a contract to procure the stock as claimed by W. The jury having found a verdict for W., the court upon appeal refused to disturb it.' (5.) Duty and lAdbiliiy of BroTcer in Purchasing ; Right to Indemnity. In respect to the character and kind of stocks or securities which the Broker may buy, he is bound to purchase the kind designated by the Client. But if the Broker exercises pru- dence and care, he is not liable, although the securities pur- chased by him for a Client in the regular course of business prove spurious. ' Wells vs. Welter, 15 Nev. 376. 124 Stoch-hroTcers and Stock Mechcmges. A Broker or factor is only required to act with reasonable diligence and care in his employment. The known usages of trade and business enter into such employment ; and if he con- ducts his business according to such usages, he will be exoner- ated from all responsibility.' In the case of "Westropp vs. Solomon/ the plaintiffs were Stock-brokers, and were employed by the defendant to sell certain scrip which turned out to be invalid. The certificates were such as to deceive everybody who dealt in them. There was no fraud or negligence on either side. The Brokers paid the purchase-hioney back to the vendors, as also a certain sura which, under the rules of the Stock Exchange, had been pre- scribed to be paid in such cases. They then sued their prin- cipal, who did not contest the right of plaintiff to recover the principal sum, but defended as to the additional sum, as to which the defendant succeeded. In Mitchell vs. Newhall,' the defendant gave the plaintiff, a Broker on the Stock Ex- change, an order to purchase for him fifty shares in a for- eign railway company. At that time no shares of the com- pany were in the market, the foreign government not having yet authorized its establishment; but letters af ctUoimient for shares were then, according to the evidence of persons on the Stock Exchange, commonly bought and sold in the market as > Phillips vs. Moir, 69 111.155; Glieen vs. Jolinson,90Pa.Sfc.38; Siit- Deshlervs.Beer8,32I11.368; Mitcbell ton vs. Tatliam, 10 Ad. & E. 27 ; Smith vs. Newhall, 15 M. & W. 308 ; West- vs. Lindo, 5 C. B. (n. s.) 587 ; Eose- ropp vs. Solomon, 8 C. B. 345 ; Pol- -warne vs. Billing, 15 C. B. (n. a.) 316 ; lock vs. Stables, 12 Q. B. 765 ; Tem- Eeinfry vs. Butler, 1 E. B. & E. 887 ; pest vs. Kiluer, 3 C. B. 253 ; Bayley. Biederman vs. Stone, L. E., 2 C. P. vs. Wilkins, 7 C. B. 886 ; Hunt vs. 504 ; Chapman vs. Shepherd, Wbite- Gunn, 13 C. B. (n. s.) 227 ; Taylor vs. head vs. Izod, L. E. 2 C. P. 228 ; Stray, 2 C. B. (n. s.) 175 ; Lamert vs. Webb vs. Challoner, 2 F. & F. 120 ; Heath, 15 M. & W. 486 ; 15 L. J. Ex. M'Ewen vs. Woods, 11 Q. B. 13 ; Bay- 298; "Morrice vs. Hunter, 14 L.T. 897; liffe vs. Butterworth, 1 Ex. 425; see Inchbald vs. Neilgherry Coffee Co. also, generally' upon this subject, 34 L. J. (C. P.) 15 ; Peckham vs. Loeb vs. Hellman, 83 N. Y. 601. Ketohura, 5 Bosw. (N. Y.) 506 ; s. c. = 8 C. B. 346. less fully, 10 Ab. Pr. (N. Y.) 220; > 15 M. •& W. 308. Duty and Liability of Brolcer. 125 shares. The plaintiff bought for the defendant a letter of al- lotment for fifty shares, and it was held, that a jury might well find that this was a good execution of the order.' In Lamert vs. Heath," where a Broker was instructed to purchase " Kentish Coast Railway Scrip," and he bought what was known as such and was paid for it, it was held -that he was not liable to refund the money he had received ; although it turned out that he had bought scrip issued without due authority, and, in fact, utterly woi;thless. So iu Young vs. Cole,' a Broker brought an action against his Client to recover the proceeds of Guatemala bonds which he had sold for his Client on the Exchange. The bonds, after being a short time in the purchaser's possession, were discov- ered to be unmarketable for want of stamps, and they were returned to the Broker, who indemnified the purchaser with- out consulting with his Client. The court held, upon the au- thority of Child vs. Morley,' that the Broker was entitled to recover from his Client the sum previously paid to him, on the ground that the consideration on which it had been paid over had failed, the. Client having delivered something which, though resembling the article contracted to be sold, was of no value; and that the repayment made by the Broker to the purchaser was necessary, according to the custom of the Stock Exchange, which treated a Broker dealing with foreign stock as a principal, and made him liable to expulsion if he did not make good his differences. In the case of Peckham vs. Ketelium," a case almost similar to Lamert vs. Heath, the court held that a Broker who is em- ployed to purchase stock, and who in good faith, and in accord- ance with the custom of the market, makes the purchase in his ' Tempest ts. Kiluer, 3 C. B. 253 ; =3 Bing. (N. C.) 724. Hniit vs. Gnnn, 13 C. B. (n. s.) 227. * 8 T. E. 610. ' 15 M. & W. 486. See Luffraan vs. = 5 Bosw. ( N. Y. ) 506 ; s. c. less Hoy, 13 N. Y. Weellij Dig. 324. fullv, 10 Ab. Pr. (N. Y.) 220. 126 Stock-irohm's a/nd Stock Exchanges. own name, and transfers the stock bought to his principal, is not liable to the principal if the stock prove to be spurious. In that case the plaintiff called at the oflBce of defendants and ordered thera to buy ten shares of railroad stock at a certain price. On the same day the defendants sent to the plaintiflE a memoran- dum of the purchase, who sent his check for the same, the de- fendants stating that they would transfer the stock referred to into his name on the books of the company that day, but that the certificate would not be ready until the next day. At the time mentioned they delivered to him a certificate in due form for said stock, signed by one Schuyler, the transfer agent of said railroad company, who was the proper officer to issue the same. In the purchase of the stock the defendants acted in good faith " in the mode usual and customary among Stock- brokers in the city of New York, among whom it is not usual to disclose the names of their principals to persons with whom they dealt," and defendants paid for the stock upon receiving the certificate from the selling Broker. The certificate issued and delivered to the plaintiflE did not represent actual stock, and was valueless ; and, upon the discovery of this fact, in due time the plaintiff tendered the same to defendants and de- manded a return of his money, which was refused, and the ac- tion was brought to recover the same. In an opinion giving judgment for the defendants, HoflEman, J., after reviewihg the English authorities upon the subject, concluded that the plain- tiff, having contracted with defendants as Stock-brokers, was bound by the custom which prevailed in relation to that spe- cies of business, and especially by the usage by which Brokers only, and not their Clients, are known in their dealings with each other, and that such a custom put the plaintiff in the same position as in the case of a contract made distinctly with one as the agent of a known or disclosed principal. The court also held that the employment of the defendants could not be Duty and lAahiliiy of Brokers. 127 justly treated as an employment to purchase genuine stock to the extent and import of making them guarantors of the va- lidity of that which they should purchase; it was rather to purchase what in the marTcet was passing as stock of this de- scriptMn, and that an agent employed to purchase a commodi- ty of a particular clmracter or quality is only hound to use aU the circumspection and diligence which a prudent purchaser himself would exercise. The conclusion reached in this case is in accord with the English authorities, and is entirely sound upon principle, there being no just distinction in this respect between the employ- ment of a Stock-broker and any other kind of agent.' So where a person employing a Broker to sell shares direct- ed him by mistake to sell 250, when he intended to sell and had only 50 shares, and the Broker sold the shares in accord- ance with his directions, the Client was held bound to pay the difEerence vrhich, under the rules of the Stock Exchange, the Broker had been compelled to pay to the Broker to whom he had sold the same." And the case of Morrice vs. Hunter' furnishes still an- other illustration of the general rule. There the defendant instructed his Brokers to buy 10 Agra & Masterman's shares, which the Brokers' manager by mistake described as £25 shares in place of £50 shares with £25 paid, on which ground the defendant attempted to repudiate the transaction. In an action by the Brokers to recoup themselves for payments ' As to when the statutes against Bnt see Bowlby vs. Bell, 3 C. B. 284 ; gaming cannot he set up in an action Fletcher vs. Marshall, 15 M. & W. brought by a Broker to recover mon- 755; Stewart vs. Canty, 8 M. & W. ey paid at the request of his Client, 160. As to liability of Broker for see chapter on "Stock-jobbing," p. stocks lost by or stolen from him, 420. or for losses occasioned in the exer- ° Sutton vs. Tatham, 10 Ad. & E. ciseof his employment, see post, suh- 27; see also, to same effect, Child vs. division (c), p. 138. Morley, 8 T. E. 610 ; Lightfoot vs. ' 14 L. T. 897. Creed, 8 Taunt. 268 ; s. u. 2 Moo. 255 ; 128 Stook-h-dkers and Stock Exchanges. made on the Stock Exchange, Mr. Justice Willes left it to the jury to say whether the order given depended on there being £25 shares, or whether the plaintiffs had bought what they agreed to buy for the defendant. The following ease falls under the same general principle which we are considering: A savings-bank, having taken cer- tain shares of stock to secure a loan, resolved that it should be sold by the president for the best interest of the bank. The president sold a part of the stock, and directed the plain- tiff, a Stpck-broker, to sell the remainder at a price named at tlie New York Stock Exchange ; which he did, and so advised the president, whereupon the latter informed him that he had himself previously sold the stock. Plaintiff, being un- able to deliver the stock to the Broker to whom he had sold it, was compelled to pay the purchaser differences. In an action against the receiver of the bank to recover the amount so paid — held, that the bank was liable to the plaintiff for the damage occasioned by the act of its president; and that the liability of the bank was not affected by the fact that it was forbidden by statute to loan money upon personal security.' A somewhat different conclusion was reached in re Lon- don, Hamburg, and Continental Exchange Bank — Zulueta's Claim." That case arose in the winding-up of a banking company. It appeared that the directors of the bank had given orders to their Broker to buy for tlie bank a large num- ber of their own shares for the purpose of keeping up the price. Although the order was ultra vires, it was executed by the Broker in due course, some of the shares being taken and paid for by the directors and their friends, and the balance were transferred to a trustee for the company ; and the Bro- ker's account with the bank was credited with the price. The ■ Sistare vs. Best, 16 Him (N. Y.), » L. K. 9 Eq. 270. 611. Duty and Liability of Brokers. 129 question was whether the Broker was at liberty to prove for this amount in the winding-up of the company. Lord Komil- ly, the Master of the Rolls, held the proof should be admit- ted, on the ground that it was not the duty or business of the Broker to decide whether the directors were or were not ex- ceeding their powers; and as the transaction was concluded, and the Broker's account with the bank credited with the price of the shares — which, in the opinion of the Master of the Rolls, was equivalent to the payment of money — the only rem- edy of the shareholders should be to require the directors personally to refund it. But this decision was reversed on appeal,' and the transaction held to be wholly void ; and the Broker was held bound to know that the directors were act- ing ultra vires — the court intimating that even if the money had been actually paid over to the Broker by the directors, he would have been liable to refund it." But where an applica- tion was made by Stock-brokers to be declared creditors of a company, and it appeared that the manager and certain direc- tors, having associated themselves together in a body, called a "syndicate," for dealing in shares of the company, employed the applicants to borrow money for them on the security of shares of the company, which the applicants effected by lend- ing shares on several occasions to dealers on the Stock Ex- change, who advanced the market value of the shares until a subsequent account-day. In the interim, a call was made on 820 shares thus lent by the claimants, which they paid ; and the value of the shares falling, and their principals not giving them instructions to renew, the applicants at the end of the period sold the shares at a loss, and repaid the lenders of the cash. ' The balance of sums due the applicants on these ac- counts was the sum claimed. One of the "syndicate" was a " S. c, rev'd, L. E. 5 Ct. App. ° See also, in this connection, Jo- 444. sephs vs. Pebrer, 3 B. & C. 639. 130 StocTcrhrohers and Stock Exchanges. brother of the applicant B ; but the applicants deposed that they had no knowledge of the existence of this body, and be- lieved throughout that they were dealing with property of the company by the direction of its authorized agents. It was objected that the claim was illegal, upon the ground that the applicants knew that these transactions were effected without the knowledge of the shareholders ; and if not, the transactions were beside the company's powers: they must show that they held these shares as a security ; and, if they did, that they have a right to be indemnified. But the vice-chancellor said the applicants had dealt with ostensible managers of the com- pany in a regular way. If the articles had strictly forbidden the raising of money on behalf of the company by this means, there might have been a question as to whether the Brokers were not bound to take notice of such a provision ; but, in fact, there was no such prohibition. No question^as to the bona fides of the transaction could arise ; for it seemed that these transactions were examined by the directors from day to day. The question resolved itself simply into one of indem- nity, and the rule that it is the duty of principals to indemnify their agents must prevail. The mortgage might have been effected by some other means than by the loan of shares, and then no question as to the object to be repaid could have been raised. The claim was accordingly allowed.' The language of Mr. Jiistice Blackburn in Duncan vs. Hill' is strong and apposite upon this question of the right of the Stock-broker to receive indemnity for acts performed in the business of his Clients. " It must be admitted that the plain- tiffs were authorized by the defendants to enter into contracts ' In re Imperial Mercantile Credit (Eobins vs. Edwards, id. 197}. First Assoc. 2 Week. Notes (1867), 131. A Nat. Bank vs. Hoch, 20 Alb. L. J. 215 ; bill lies by Stock-brokers to compel Pa. St. May, 1879. the defendant to accept the transfer " 8 L. E. Ex. 342, rev'g 6 L. K. Ex. of shares, bought for him, and .to re- 255. pay plaintiffs for calls in the shares ■ Duty and lAahility of Brokers. 131 in their behalf according to the rules of the Stock Exchange. It must be admitted that for any loss incurred by the agent by reason of his having entered into such contracts according to such rules, unless they be wholly unreasonable, and where the loss is without any personal default of his own, he is en- titled to be indemnified by his principal upon an implied contract to that effect." And the case of Marten vs. Gib- bon' carried the doctrine of indemnity still further; for in that case, where a Broker at the request of his Client made a sale on the Exchange to a jobber of the prospective dividends of shares in a railway company — dealings in which, by a rule of that body, will not be recognized — and the Broker subsequently paid differences to the jobber, it was held, not- withstanding the aforesaid rule, that the Client was bound to refund these differences to the Broker, on the ground that the rule did not affect the general liability of the members towards each other for contracts made on the Exchange. And a pur- , chaser is bound to indemnify a Broker who pays for and takes a transfer of shares in a company after commencement of the Avinding-up.'' And where a Client deposits bonds with a Broker to secure him against losses which might occur in speculations upon the Exchange, and it turns out that the bonds belong to the wife of the Client, and have been pledged by her husband without her consent, the Stock-broker can, in the absence of actual or constructive knowledge of the wife's interest in the bonds, hold them for the purposes for which they were placed with him. And the fact that the Broker receives checks during the existence of the transaction, drawn to the order of the wife and by her endorsed, is not sufficient to charge him with notice of the wife's interest in the bonds.' ■ 33 L. T. (u. s.) 561. Eramerson's case, L. E. 1 Ch. App. = Chapman vs. Shepherd, L. E. 2 433. C. P. 228; Whitehead vs. Izod, id.; = Macbryde vs. Eykyn (1871), 6 Week. Notes, 111 ; aff'd id. 175. 132 Stock-hrdkers and Stock Moohangea. A very interesting question arose in the case of Mew- burn vs. Eaton ' between a Broker and his Client. In that case the Broker had sold certain shares for his Client on the Stock Exchange, and the latter had executed the transfers and received the purchase price. Subsequently, however, the trans- fers were returned to the Broker by the ultimate purchaser for some trifling corrections in the spelling of names, and the Broker delivered the same to his Client for that purpose. The latter, however, refused to " initial " the corrections un- less the Broker paid him the price mentioned in the transfers to the ultimate purchaser, which was higher than tlie price at which his shares were originally sold. In consequence, the shares were bought in, and the Broker, under the rules of the Stodk Exchange, was compelled to pay the differences to the jobber. And the court held that the Broker was entitled to recover the sum which he had so paid out by reason of the conduct of the Client. The court did not pass upon the ques- tion as to whether a vendor was bound to sign a transfer to the ultimate purchaser in which the consideration was stated at a price greater than that which he had received for the shares ; but the intimations were that he would not be so com- pelled. It was held that this objection had been waived by the Client in originally signing the transfers." A principal in a stock transaction cannot avoid his liability to his Brokers for a loss by setting up the guaranty of a third party. In Lee vs. Gargulio," the plaintiff, it appeared, had cer- tain stock transactions in which defendants acted as his Bro- kers, in which there was a loss. He sought to avoid this loss by introducing a guaranty signed by one F., which was en- ' 20 L. T. Eep. (n. s.) 449. a contract for a different coosidera- ' In Hawkins vs. Maltby (L. E. 6 tion than that actually agreed upon. Eq. 505 ; 4 Ch. App. 200), the speoiflo But subsequently the Broker was performance of a contract was re- held entitled to an indemnity. fused, on the technical ground that ' 45 N. Y. Sup. Ct. (13 J. & S.) the hill called for the eiiforcemeut of 595. Duty am,d Liability of Brokers. 1-83 closed in a letter to defendants. The letter began, " Yours, notifying me of acceptance of my offer by customer at 35, at hand. I accept his conditions as set forth in your letter, and enclose guaranty, etc." The guaranty enclosed was in these words : " For and in consideration of one half the profit on 800 shares, etc., I hereby guarantee the holder of said 800 shares against all or any loss whatsoever; and further agree, in case of decline of said stock below 35, to deposit margin, if called on to do so, to cover all or any decline as fast as it may be made in said stock. Orders to sell and repurchase said 800 shares, or any part thereof, to be given exclusively by me, the undersigned, for a period of sixty days from the date hereof." Held, that by accepting the guaranty the Broker did not dis- charge the principal, and that it was not inconsistent with the original agreement. But in an action against a surety who has agreed in writing to indemnify a Stock-broker against losses in any stock specu- lations which the Broker might make for his Client, the ac- counts rendered to the latter by tlie Broker, which showed a loss, and were admitted to be correct by the Client, are not ad- missible against the surety. In such a case, the party holding the indemnity claiming loss against his indemnitor must prove it by evidence competent against him. He cannot prove it by the mere admissions or statements of the principal, how- ever formally made. The admissions of the Client are no part of the res gestoB so as to be binding upon the surety.' From all the cases heretofore cited upon this subject, the rule to be deduced is, that where a Broker acts in pursuance of his authority, according to the usages of the Stock Ex- change or of his fellow-Brokers, and in good faith and with prudence, he is entitled to a full indemnification for any losses which may occur in the transaction of the business. ' Hatch T8. ElkiiiB, 65 N. Y. 489. 134 StQckrbrokers a/ad Stock Exchcmgea. Bat the Broker has uo right to recover where he acts beyond the scope of his authority.' Tliis proposition is well illustrated in the case of Bowlby vs. Bell.' In that case a Bro- ker was employed to sell shares, and made a bargain on the Stock Exchange for the purpose. The scrip having been sent to the company's office for registration, the Broker failed to deliver registered shares, and, after notice from his Client not to do so, paid the difference due on a " buying in " of other shares at an advanced price against him. He claimed to re- coup the same as money paid to the Client's use. The price of the shares had not been paid to the latter, and no transfer had been tendered by the purchaser; and the court was of the opinion that, as the Broker of the purchaser had made no such tender, he was not in a position to take any steps against the Broker of the vendor ; and, therefore, the difference paid by the latter was paid in his own wrong, and could not be re- covered from his principal. In this case it appeared that the contract made by the selling Broker was for the sale of regis- tered shares. Upon this point the court said : " If the contract was for unregistered shares, it may be collected from the corre- spondence that the defendant did not authorize the plaintiff to make such a contract; and if he did make it, and thereby increased a liability to have shares bought in against him, he cannot charge the defendant with the loss sustained." A similar result was reached in Fletcher vs. Marshall,' where the plaintiff employed the defendants as Brokers to buy shares for him to be delivered within a " reasonable time ;" and the defendants made a bargain for the next settling-day with H., who did not then deliver, yet they paid the purchase-money ; ' See cases heretofore cited under ° 15 M. & W. 755 ; consult also, iu this Lead. this oouuoctioii, Stewart vs. Canty, = 3 C. B. 284, decided on the an- 8 M. & W. 160. tbority of Stephens vs. De Medina, 4 Q. B. 422. Dtity and Liahiliiy of Brokers. 135 and it was held by the Court of Exchequer that tlie words " reasonable time " were rightly interpreted by the usages of the Stock Exchange, and that on non-delivery of the shares on the settling-day the defendants ought not to have paid the money, and that an action would lie against them by the plain- tifE to recover it. Nor . can a Stock-broker bind his Client by anything done under a rule of the Exchange which was not made until after the instructions were given to him.' So in the case of Clegg vs. Townshend" it was decided that a Broker must not incur any expense on the principal's be- half which the Broker can avoid. Accordingly, vfhere — acting on the supposed instructions of his principal, who wished to repudiate a contract for the purchase of shares — a Broker de- fended an action which was virtually without legal merit, and sued his principal for the price of the shares and costs of the former action, the price having been paid into court, the trial- justice directed a non-suit. And the court, in the case of Hoffman vs. Livingston,' car- ried the general principle so far as to hold that the Broker could not recover his commissions, where it is shown that he has not exercised due diligence and ordinary skill in the man- agement of his Client's business — i. e., not giving her notice of each transaction in stocks according to the usages of Bro- kers.* So where the defendants, acting as plaintiff's Brokers, pur- chased for him $40,000 in gold, he entered into two agree- ments with one M., by one of which he sold $20,000 to be de- livered at his option between the 1st and 20th of February ; and by the other he sold $20,000, to be delivered at M.'s op- •Westropp vs. Solomon, 8 C. B. =46 N.T. Sup.Cfc. (14 J. &.S.) 552. 345. * See also post, sub "Comrais- " 16 L. T. 180. slons," pp. 233, 234. 136 Stockrhrdkers cMid Stock Exchomges. tion between the 21st of January and 21st of February. The contracts signed by M. were sent by the plaintiff to the de- fendants, with a letter requesting them to deliver the amounts to the buyer. An agent of M. called on the 30th of January, and demanded the $20,000 deliverable at his option, which was accordingly delivered to him. The agent at the time stated that he had the other contract in his possession. The defendants did not tender the $20,000 sold under the other agreement during the time specified. In an action brought to recover the damages sustained by the loss of the oppor- tunity to sell the gold, held, that it was the defendants' duty to have made the tender, and they were liable to the plaintiff for the damages sustained by him from their failure so to do. The plaintiff was first informed of their failure on the 3d of April. Held, that it was his duty to take at once the neces- sary steps to secure himself against further loss, and that the defendants were not responsible for any loss sustained by him in consequence of the subsequent fall in gold.' And a Broker employed to sell shares, who renders a sales note to the purchaser or his agent, in his own name, is liable as a principal, although known to be a Broker. Evidence that it is the custom in the place where the transaction is made to send in Broker's notes without disclosing the principal's name is properly rejected ; and the subsequent rendering of a different note describing the true purchaser will not alter this rule." (c.) Disposition of Stock when Purchased ; Safely Keeping same ; Liability to Keep Identical Stock Purchased, etc. After the stock has been purchased and paid for by the Bro- ker, several questions arise respecting the care and disposition ' Speyer vs. Colgate, 4 Hun (N. Y.), = Magee vs. Atkinsou, 2 M. & W. 622. 440. Dispositwn and Safe-Teeeping of Stocks. 137 thereof. The first question arises as to the transfer of the stock.' It has been held that the Broker is entitled to have the stock transferred into his ov^n name, or those of his clerks, so that he may be able to secure himself for the amount of the advances made by him. In Horton vs. Morgan," the court said : " As he [the Broker] was to hold the shares as security for the balance of the purchase-money, which he had advanced, it was proper and entirely consistent with the nature of the transaction that he should take the title in his own name ; . . . and we do not see anything unlawful in his transferring it to his clerks if it remained under his control, and if he was ready when called on by the plaintiff to transfer it to him upon the advance being paid." ° And when the Client directs the Bro- ker to deliver the stock to him, giving him the full price there- for, the Broker is not bound to procure a transfer of the stock for the principal, where the office of the company is removed from the city where the Broker lives and the company is in- solvent." But this right of the Broker to have stock transferred in his own name does not, it would seem, deprive the Client of the privilege to vote upon the stock. The rule is well set- tled that pledgors of stock are entitled to vote upon it.' And although there seems to be no express decision upon the sub- ject, it is reasonable to argue that the law would compel the 'As to liability for "calls" or As to duty of selling Broker to pro- " assessments " upon stocks, see post, core registration or transfer of stock p. 151. " 19 N. Y. 170. on books of company, see Stray ts. ^ To same effect, Geniu vs. Isaac- Eussell, 1 El. & E. 888; Taylor vs. son, 6 N. Y. Legal Ohs. 213-216 ; see Stray, 2 C. B. (u. s.) 175, aflf'd'id. 197 ; also Nonrse vs. Prime, 4 Johns. Ch. Humble vs. Langston,7 M. & W. 200. 490 ; B. c. 7 id. 69. The same rule ex- = Strong vs. Smith, 15 Hnn ( Jf. Y.), ists in the case of a pledge, the law 222; Ex parte Willcocks,7 Cow. 402; being that the pledgee may traus- Matter of Barker, 6 Wend. 509; fer the securities into his own name SchoulerouBailm.200; McDanielvs. (Schouler on Bailm. 182, 200; Tyler Flower Brook Maunf Co. 22 Vt. 274 ; on Usury, 507). Edwards on Bailm. § 219; Merchants' * Horton vs. Morgan, 19 N. Y. 170. Bank vs. Cook, 4 Pick. 405. 138 Stoch-hroTeers and Stock ExoJianges. Stock- broker to retransfer the stock into the name of his Client, or to give him a proxy where that method would suf- fice, to enable hiin to exercise this important attribute of own- ership.' With respect to the care which the Broker should exercise in keeping the securities of his Clients, it seems to be settled ' Since the above was written, Mr. cases cited liave no bearing, for the Justice Barrett, in the Supreme proposition is not disputed, that the Court, N. Y. City, has rendered a de- company can only look to its trans- cision which bears generally upon fer-book in determining who is en- and sustains the view of the text, titled to vote. It is jnst because the In that case, one McH. brought an defendant is registered as the owner action against J. and others as trus- of the stock, and entitled upon the tees to resti'ain them from voting face of the company's books to vote, upon shares of the C. C. C. and I. that this action is brought. There Kailroad at a future election. These is really no answer to the gist of the shares of stock were purchased by plaintiff's bill, which is that he is McH. in 1873, by direction of W., the owner of the shares, and that then president of the Erie Railway the defendant holds them as collat- Company, for the purpose of ena- eral merely; facts established in an bliug the company to obtain a con- English court of justice upon the de- trolling direction of the C. C. C. fendaut's own contention. It will and I. road. This stock was in- hardly be contended that a pledgee volved in a suit brought by the Erie has a right, without special contract Railway Company against McH. in to that effect, to vote upon collaterals England, and McH. claimed that as against the wish of the pledgor, theresult of a judgment against him This is substantially this case, for in that suit, this stock belonged to there is no pretence of a direct con- him on making certain payments, tract upon the subject of voting, which he alleged he was prepared And whatever license the defendant to do. It was claimed on behalf of may previously have had is plainly the defendants that the stock re- revokable. The defendant says that ferred to was pledged by McH. for unless he is permitted to disregard a loan in 1874; that they were sold the plaintiff's wishes to vote upon in 1876 to' the New Tork, Lake Erie, the shares, the latter will be voice- and Western Railroad Company, and less at the election. The owner is that J. holds them as trustee for that surely the only person to complain company, subject to McH.'s right of of such a state of things. The plain- redemption by payment of the loan tiff's rights in the present particular and subsequent attachments put are also unaffected by the attach- upon the stock by the company, ment proceedings. Upon the whole, McH., it was asserted, is insolvent, it seems to me to be entirely clear and cannot pay these claims ; audit that the injunction should be con- was averred that J. had voted upon tinned pendente lite" ( N. Y. DaiZw this stock since 1876 without objoc- Beg. Oct. 11, 1881). As to ri<>-ht to tiou , on the part of McH. Judge vote by proxy, see Ch. IX. Barrett, in his de cisiou, savs : "The Disposition and Safe-Tceejping of Stocks. 139 that if the securities be stolen from or lost by the Broker he is not liable unless the theft or loss arose from or was con- nected with a want of ordinary diligence or care on his part.' In the case of Abbett vs. Frederick' it was held that a pawn- broker, where his place of business was broken into and arti- cles pledged taken therefrom, was not liable if he exercised ordinary diligence. The court said : " The rule laid down in the case of Arent vs. Squires," that in cases of pawn or pledge all that has ever been required since the days of Bracton, by the common -law, on the part of the pawnee, has been that which is required of warehousemen, the exercise of ordinary diligence, is the law which must govern this case." So where a bank receives stocks or bonds as collateral security for the repayment of a loan, it is not liable for their loss unless there has been an absence of proper and sufficient care on its part, and this is a question for the jury.* Lord Holt quotes Bracton to the effect that, if a creditor takes a pawn, he is bound to restore it upon payment of the debt ; but if the pledge be lost while in the possession of the pledgee, and the latter has used due diligence, he will be in- demnified notwithstanding the loss, and he may resort to the pledgor for the debt." But in the case of Cutting vs. Marlor ° it was held that a corporation is liable for stocks and bonds * 2 Pars, on Cont. (6tb ed.) 112; 1 -whicli a pradent man would take of Inst. 89 a; 4 Rep. 83 b; Abbett vs. bis own property (Morley vs. Mor- Frederiok, 56 How. (N. Y.) Pr. 68 ; ley, 2 Cb. Cas. 2 ; Jones vs. Lewis, 2 Tbird Natl. Bank vs. Boyd, 44 Md. Ves. Sen. 240; Exp. Belebier, Amb. 47; Jenkins vs. Natl. Village Bank, 218; and see Bostock vs. Floyer, L. E. 58M6. 275; Dearborn vs. Union Natl. 1 Eq. 26). As to precantions wbicb Bank, 58 id. 273 ; 61 id. 369. trustees of shares payable to bearer " Snpra. sbould take witb regard to tbe safe- ^1 Daly, 347. ty of securities transferable by deliv- * Tbird Natl. Bank vs. Boyd, supra, ery, and as to shares wbicb a com- ' Bracton, 99 b ; see also Scbouler pany requires to be registered in a on Bailm. 190 et seq. ; Tbird Natl, single name, Consterdine vs. Con- Bank vs. Boyd, supra. Tbeliiibilityof sterdiue, 31 Beav. 330. trustees does not extend to cases of ° 8 N. Y. Weekly Dig. 345 ; aff 'd 78 robbery or fraud beyond tbe care N. Y. 454. 140 Stockrlrokers and Stock Exchanges. deposited with it as collateral security for a loan which have been abstracted and misappropriated by one of its officers who was permitted to have unrestrained control of the affairs and assets of the corporation, and where the trustees omitted to exercise a proper oversight over the conduct of such offi- cer. And this case is equally applicable to Stock-brokers who receive stocks of their Clients as collateral or otherwise, and, through fraud or negligence, allow them to be lost or misap- propriated. This principle has also been extended to a case where a firm, in the course of its business, received money be- longing to third persons, and one of the partners misapplied it while it was in the custody of the firm ; and it was held that the latter must make it good.' And the cases just cited directly hold that whei'e stocks or money are received or held by a firm of Stock-brokers for its Clients, and an individual member converts or misapplies the same, the remaining partners are liable to the Clients, although they had no knowledge of the conversion or misapplication. In a recent case in Pennsylvania" the question was discussed as to the liability of a Stock-broker for margins which he had placed in the hands of a fellow-Broker to cover transactions of his Client. The court laid down the rule that where the Broker acted in good faith, and in accordance with the usages of Stock-brokers, he was not liable for the loss of the margins caused by the insolvency of his fellow -Broker. The court said : " The law implies a promise from Brokers, bankers, or other agents that they will severally exercise competent skill and proper care in the service they undertake to per- form ; but it neither implies nor requires more than this." Ac- ' X Lindley on Part. (4th ed.) 304, Marsh, 6 B. & C. 551; and Ey. & and cases cited ; Devaynes vs. Noble Moo. 364 ; see also, iu this conncc- ( Bariny's case), 1 Mer. 611; Sndler tiou, Butler vs. Finck, 21 Hun (N.Y.), vs. Lee, 6 Beav. 324; De Eiboyie vs. 210. Barclay, 23 Beav. 107 ; Stone vs. " Gheeu vs. Johnson, 90 Pa. St. 38. Disposition and Safe-keeping of Stocks. 141 cordingly, where G., a Stock-broker, deposited a margin with B., another Broker, to cover a short sale made by G. on ac- count of one J., and did not demand security therefor, but, according to the custom of Brokers, it was optional with G. to do so, he acting in good faith ; and when the deposit was made with B., the latter was in full credit — held, that there was no evidence of negligence such as would make G. responsible for a loss occurring through B.'s insolvencj'.' Another important question should be alluded to in this connection — viz., as to the use which the Broker may make of securities held by him on margin. Although in law these securities are regarded as the Client's, the Broker's money has paid for them. Can the latter, there- fore, use the same in his business ? Can he hj'pothecate them ? Both reason and the precedents hereinafter alluded to seem to require these questions to be answered affirmatively. In the case of an ordinary pledge of personal property, the gen- eral rule seems to be, that the pledgee has the right to use the pledged property, unless prohibited either by the nature of the thing pledged or by agreement," the pledgee accounting to the pledgor for the benefits or profits less the amount properly expended in the use of the thing.^ The authorities, however, do not all accord upon this sub- ject ; but whatever doubt there may be in relation to other kinds of personal property, it seems to be clear that, in case of stock purchased on margin by a Stock-broker, the latter would have the right to use it in his business. And this follows from the peculiar nature of stock, and from the circum- stances attending an ordinary speculative transaction in the same. In the first place, a Stock-broker, when he makes a purchase ' Wykoff vs. Irvine, 6 Miun. 496 ; " Sclioiiler on Bailm. 196 et seq. Siidler vs. Lee, De Eibeyre vs. Baulay. ' Id. 142 Stooh-'brokers and Stock Exchomges. of stocks on the order of his Client, receives the same directly from the selling Brokers in the shape of a certificate with a blank assignment and irrevocable povrer of attorney authoriz- ing its transfer on the books of the particular company, and the stock generally does not pass through the hands of the Client at all. By advancing the purchase - money for the stocks, the law gives the Broker a lien for the same, and es- tablishes the relation of pledgor and pledgee. In the second place, the money which the Broker advances is a part of his capital, upon which he relies to carry on his business ; accordingly, he is compelled to use the stocks of his Client to borrow money upon, which he does from banks or capitalists, and he is thus enabled to get back the whole or some part of the money originally invested, with which he continues to transact his business. If it were held that the Broker was bound to keep on hand the identical stock pur- chased for a Client, and that he could make no other use or disposition of the same, it is apparent that his business would be stopped^ for no private fortune would be adequate to make many purchases.' None of the questions which arise out of a pledge of ordi- nary personal property, capable of being handled and of man- ual delivery, can apply to a pledge of stock. The latter cannot be handled or worn or used ; it is nothing but an incorporeal right, and the certificate merely represents the interest whicii the owner has in the whole capital — the right to share in the profits and property when they are divided. Nor is this question affected by the rule applied in the case of Langton vs. Waite," where the plaintiff borrowed from the defendants, who were Stock-brokers, a certain sum of money, and deposited with them certain railway stock, which the de- fendants subsequently sold, and, repurchasing the same at a • See Price vs. Gover, 40 Md. U5. " 6 L. K. Eq. 165. Disposition and Safe-keeping of Stocks. 143 lower price, delivered the latter stock to the plaintifE upon the payment of his loan. In that case it did not appear that the defendants kept on hand a sufficient or any quantity of stock of the kind deposit- ed with them by the plaintiff ; and the court, in accoi'dance with the rule laid down in the American cases hereafter re- ferred to,' charged the defendants with the price at which they sold the same. Accordingly, the doctrine may be asserted as well settled, that a Broker holding stocks for his Client on margin for speculation is not bound to keep on hand the identical shares purchased ; but he answers all of the duties of his employ- ment, by having ready for delivery to his Client shares of the same description and amount. Shares of stock have no ear- mark; and one share being of equal value with every other share of the same stock, the Brokers are not bound to deliver, or to have on hand for delivery, any particular shares, or the identical shares purchased, for a Client. This principle was first laid down in the State of !N"ew York in the year 1820 by Chancellor Kent, in the well-known case of Nourse vs. Prime." In that case the defendants, who were Stock-brokers, had purchased various shares of United States Bank stock for the plaintiff, and rendered him an account thereof, by which it appeared, that the latter was indebted to defendants in a large sum of money, for which he gave his promissory note, the defendants retaining the shares as collat- eral security, and giving therefor to the plaintiff the following receipt : " We acknowledge to hold 430 shares of the stock of the United States Bank as collateral security for the payment of the said note, dated the 24th of December last, for $54,200, payable on the 10th of January next, with interest at 7 per cent., etc. ; on the payment of which note and interest ^ve 'Post, p. 147. "4 Johns. Ch. 490, and 7 id. 69. 144 Stochtrokera wnd Stock Exchanges. engage to retransfer the said 430 shares to the said C. J. N". or his order, accounting with him for the dividends that shall become payable on the same; and in case the note and interest are not duly paid, we are at liberty to make an immediate sale of the said shares, accounting with him for any surplus, and holding him responsible for any deficien- cy. Dated New York, 11th Feb., 1818." Upon a bill in Chancery to restrain the defendants from proceeding with a suit at common-law on the note, and to compel defendants to account to the plaintiff for the highest market price at which the defendants had sold any United States Bank stock inter- mediately, the Chancellor held — treating the question as an original one, to be decided upon general principles^liat, as thq plaintiff dealt with the defendants in their character as Stock-brokers, and the shares in question were not defined and designated so as to be distinguishable from other shares in the same bank, under the receipt in question the defendants had performed their whole duty in the premises by having on hand or under their control shares to the amount in question, which they were ready, able, and willing to account to the plaintiff for; and that, in the absence of express stipulation, they were not bound to hold the identical shares purchased for plaintiff or referred to in the receipt. This case again came before the court upon the pleadings and proof, the former opinion having been delivered by the Chancellor in dissolving an injunction, and the opinion previously given was fully endorsed ; and it was expressly decided that, considering the established usage of Brokers in similar cases, there was an implied authority from the plaintiff to the defendants to sell or pledge the stock to raise money to meet their advances in respect to the transaction with the plaintiff, and that tiie plain- tiff only reserved to himself a right to call for a retransfer to him of a similar number of shares on payment of his note. Disposition and Safe-Tceeping of Stocks. 145 The case of Nourse vs. Prime was cited by the Supreme Court of Pennsylvania, in the year 1846, in Gilpin vs. How- ell,' and the principle there laid down fully confirmed. Again, in 1859, the l^ew York Court of Appeals, in Horton vs. Mor- gan," said : " The plaintiff had no interest in having his shares kept separate from the mass of the defendant's stock. One share was precisely equal in value to every other share.'" The same doctrine was laid down in England early in the reign of George the First (1722) by the Court of Chancery, in the case of Le Croy vs. Eastman." In that case, plaintiff bought £990 of South Sea stock of one Le G. ; but, not car- ing to have this stock in his own name, it was, at his desire, transferred to the defendant, from whom the plaintiff took a note, declaring that he was a trustee of this stock for. the plaintiff, and that he would be accountable to him for the stock and produce. Afterwards, when the stock sold at about 600 per cent., the plaintiff desired that the defendant would transfer the £990 of stock to him ; the defendant accordingly transferred £500 of this stock, and informed the plaintiff that it would be inconvenient to him, at that time, to transfer more, but that it was all one, for he would be accountable for ■ 5 Pa. St. 41. N. Y. Ct. App. 13 N. T. Weekly Dig. 199 ; = 19 N. Y. 170. Boylau vs. Hugnet, 8 Nev. 345 ; see ^ See also, confirming the above also Wynkoop vs. Seal, 64 Pa. St. 361 ; proposition, Genin vs. Isaacson, 6 Wood vs. Hayes, 81 Mass. 375 ; Atkins N. Y. Legal Oba. 213 ; Salters vs. Ge- vs. Gamble, 42 Gal. 86 ; Hawley vs. nin, 7 Ab. Pr. (N. Y.) 193 ; s. c. 3 Bosw. Brumagim, 33 Cal. 394 ; Le Croy vs. 250; Stewart vs. Drake, 46 N.Y. 449; Eastman, 10 Mod. 499 ; Mocatta vs. Levy vs. Loeb (not yet reported, N. Y. Bell, 27 L. J. Ch. 237 ; Berlin vs. Eddy, Ct. of Appeals, Oct. 1881), applying 33Mo.426;Pricev8.Gover,40Md.l02; the rule to government bonds ; Law- Worthington vs. Tormey, 34 Md. 193. reuce vs. Maxwell, 58 Barb. 511, 6 See also, upon this head, Clarke vs. Lans. 469, 53 N. Y. 19 ; Taussig vs. Meigs, 13 Ab. Pr. (N. Y.) 467 ; 22 How. Hart, 58 N. Y. 425 ; Rogers vs. Gould, Pr. (N. Y.) 340, rev'g 12 Ab. Pr. 267, 6 Hun (N. Y.), 229 ; Thompson vs. and 21 How. Pr. 187. Also Taylor Toland, 48 Cal. 100 ; Marston vs. vs. Ketcbum, 5 Robertson ( N. Y. ), Gould, 69 N. Y. 220, at p. 226 ; Cham- 507 ; s.o. 35 How. Pr. (N. Y.) 289, over- berlin vs. Greenleaf, 4 Ab. New Cas. ruled by the above cases. (N. y.) 178; Capron vs. Thompson, * 10 Mod. 499. 10 146 Stockrbrdhers and Stock Exchanges. the stock. Subsequently the stock fell, and the plaintiff brought a bill against the defendant, praying, that he might account for the £490 stock at the price the stock was at the time he requested defendant to deliver the same — viz., at £600, insisting that the defendant, by agreeing to be account- able, had assumed to pay at the price it then was. There was no question of conversion in the case. The defendant had, for some time after he became trustee as above, £1000 of the stock, which he had mortgaged, and he afterwards sold all the stock he had in his own name, except £80 ; but he had more than stock enough in another person's name to have answered tlie'trust, if the plaintiff had insisted upon a transfer, and he offered to transfer the £490 stock and produce. Parker, Lord Chancellor, held that it was not material at what the defendant sold the stock, for the sale was at his own risk. If the stock had risen, he would still have been accountable fbr the same ; and, therefore, as he must have stood to the loss in case of the rise, it was reasonable that he should reap the advantage of a fall. The Lord Chancellor said : " I take it to be very plain that the defendant has not sold, but mortgaged, the trust stock. For since there is no specificating £100 South Sea stock from another, . . . therefore the stock mortgaged must be esteemed the stock of the plaintiff, the stock sold that of the defendant. The defendant must only account for the stock and produce." The same rule applies where government bonds are pur- chased for a Client; and in such case the identical bonds need not be retained, unless there bo some special agreement to the contrary.' So it is within the scope of the implied authority of a member of a Stock Exchange, when securities are deposited with him for the purpose of his advancing money upon > Levy vs. Loeb (N. Y. Court of Appeals, Oct. 1881, not yet reported). Disposition and Safe-lceeping of Stocks. 147 them, to pledge those securities to some other person for tliat purpose.' But, where a Client delivers a specified quan- tity of stock to a Stock-broker for sale, and the Broker trans- fers part of the same to a third person, and part to himself, the Client can treat this as a sale of his stock; and it is no defence, that rt is a custom among Brokers to place the stock sent them for sale to their own names on the books of the-company, and, in making transfers, to do so indiscrimi- nately, without regard to the person from whom the stock was received, or for whose account the same was sold. A Broker, in such a case, has no right to pledge or do anything else with the stock except to sell it.'' And the Broker must at all times have on hand stock suf- ficient in quantity to deliver the same to his Client upon the payment by the latter of the amount due thereon. The most he can claim is that, so long as he has on hand shares similar in kind, etc., to those he has purchased for his Client, he has performed his contract ; but when he denudes himself of the quantity sufficient to answer his Client's demands, he is guilty of a conversion, and the latter may assume that the sale by which the Broker dispossessed himself of the stock was made for his benefit, and recover the price of the shares on the day the sale was made.' The language of the New York Court of Appeals, in the case of Taussig vs. Hart,* is interesting upon this question: " The subsequent acquisition, by the plaintiffs after the stock had fallen to a very low. figure, of a sufficient number of shares to replace those which they had held for account of the defendant, did not relieve them from liability. Such re- acquired stock was never accepted by the defendant, and he ' Mocatta vs. Bell, 27 L. J. Ch. ^ See, as to this point, Langton vs. 237. Waite, 6 L. R. Eq. 165. " Parsons vs. Martin, 77 Mass. 111. « 58 N. Y. 425. 148 Stochlrokers omd Stock Exchanges. was, in fact, ignorant of the transactions. To allow a Broker to sell his customer's stock without authority, and speculate upon it, replacing it at a lower price, would be encouraging speculations by agents at the risk of their principals, and is totally inadmissible under familiar rules. Should the stock rise largely in price, after the Broker had thus divested him- self of all control over the shares which he had purchased on the order of his principal, the Broker might be unable to re- place the shares, and the principal would have no remedy ex- cept a personal claim against the Broker. This, clearly, is not what is contemplated under an agreement to buy and carry stocks. The customer does not rely upon an engage- ment of the Broker to procure and furnish the shares when required, but upon bis actually purchasing and holding the number of shares ordered, subject only to the payment of the purchase price." ' So it has been held in England that where money was bor- rowed from a Stock-broker for a certain period, and railway stocks deposited with him as collateral for its repayment, the Stock-broker was not justified, either in law or by the custom of the Stock Exchange, in parting with the security during the pendency of the loan, but was bound to return the identi- cal stock pledged ; and that the person to whom the loan was made was entitled to recover from the Broker the amount of profits realized by the dealings in his stocks by the latter.' The court said that, " in the absence of express contract, the ' To same effect, Lawrence vs. pledge of stock, that the pledgee Maxwell, 53 N. Y. 19. See, as to may use the same, is not admissible, right of pledgee to part with stock, where a written instrnment has been under a written instrument confer- given by the pledgee, in which he ring general authority to use, etc., states that he holds it as collateral Ogden vs. Lathj'op, 65 N. Y. 1.58. security, and may sell " on one day's See also, in same connection, Dyk- notice." Fay vs. Gray, 124 Mass. ers vs. Allen, 3 Hill (N. Y.), 593, 500. aff'd by Court of Errors 7 id. 497. = Laugton vs. Watte, L. E. 6 Eq. But parol evidence in the case of a 165. Disposition and Safe-keeping of Stocks. 149 pawnee of property cannot sell it until the debt for which it is pledged becomes payable ; and if he does so, the owner has a right to charge the pawnee with the price be gets for the property if he finds it to his interest to do so." The court also, while finding that there was, in fact, no custom of the Stock Exchange which varied the rule above laid down, de- clared that such a custom would be manifestly unjust; the borrower would be completely at the mercy of the lender, who might convert the security and appropriate the proceeds to his own use, and at the expiration of the period of the loan be wholly unable to return to the borrower what be- longed to him.' But the owner of stocks pledged as collateral for the re- payment of borrowed money may depi"ive himself of any remedy by dealing with the property so retransferred to him.' Where plaintiffs, Stock-brokers holding stocks for different Clients on margin, in speculative transactions, pledge the same to outside Brokers, who in turn repledge or rehypothecate the stocks with a bank, and subsequently the latter claims to ap- propriate and hold them as security for other distinct loans made to the outside Brokers, and in consequence thereof the plaintiffs are compelled, under duress, to pay an excessive amount to release the stocks, the plaintiffs have the right to maintain an action against the bank to: recover such excessive sum. The stocks being the property of the Clients and hav- ing been released, the extra sum paid to obtain the custody of the same being the money of the plaintiffs, the latter have the exclusive right to recover the same.' And there would seem to be no good reason in law, why a ' See also Ex parte Phillips, Ex " See Langtou vs. Waite, L. K. 4 parte Maruham, 30 L. J. Bk. 1 ; 2 Ch. App. 402. De G. F. & J. 634 ; Pheng vs. Gillau, = Gould vs. Fanner's Loan and 5 Hare, 1 ; 1 Story's Eq. Jar. 714, Trust Co. 23 Huu, 322, at p. 326. See note 1. also p. 160 et seq. 150 . Stoch-hrolcera and Stock Exchanges. Broker holding stocks on margin, in a speculative transaction, should not have the right — he possessing the power to dispose of the securities — to maintain an action for their recbvery against any person wrongfully holding the same, notwith- standing the technical ownership of them is in his Clients. But the rule that the Broker is not bound to keep on, hand the identical stock or bonds purchased only applies in the ab- sence of agreement. Where the parties agree that the origi- nal bonds shall be carried, the Broker must keep them on hand in the identical shape in which they were purchased. And where the Broker sells or disposes of the bonds in breach of such an agreement, he cannot recover from his Clients any loss arising upon a sale of other bonds substituted for the original, although the Broker shows that he had constantly on hand during the relation other bonds sufficient to meet the de- mands of his Clients.' Before a Broker can recover in such a case, he must show that he has performed substantially all the conditions precedent which are embraced in the contract.^ These questions arose very recently in the case of Levy vs. Loeb.° There the defendants, bankers and Brokers, bought for account of the plaintiff certain bonds of the United States upon an agreement that the defendants were to advance the purchase price in the form of a loan, upon which intei'est at the rate of 4 per cent, was to be allowed, the bonds meanwhile being held as collateral to the loan, but to be carried by the defendants, for plaintiff's account. The bonds were accordingly purchased by the defendants, but were charged to the plaintiff at a higher price than the amount paid for therri, and other improper items were also included in the price. Before the maturity of the loan, and while the ' Levy vs. Loeb (K. Y, Ct. of App. ' Supra. Sec also, in this connec- Oot. 1881, not yet reported). tiou, Hardy vs. Jandon, 1 Eobt. 261, » Id. aff 'd 41 N. Y. 619. Disposition and Safe-Tceeping of Stocks. 151 contract to carry was in force, the defendants for their own account, without the knowledge and consent of the plaintiff, sold the whole lot of original bonds. At the maturity of the loan the plaintiff was called upon to pay the alleged indebted- ness, or be sold out — the amount demanded including the ex- cess charged over the actual cost. Upon refusing, the defend- ants sold otlier and substituted bonds, and this " vicarious " sale demonstrated a large deficiency ; whereupon the plaintiff brought an action to repudiate the alleged purchase and to re- cover the money paid upon it. The defendants set up a coun- ter-claim for the deficiency. In the Court of Appeals the plaintiff's claim was sustained, and the counter-claim of de- fendants rejected upon the grounds before stated. And if there be two different kinds of stock of the corporation, a pledgee must restore the same, kind originally pledged with him. Accordingly, a pledge of fifty shares of "consolidat- ed " Erie stock, cannot be restored or made good to the pledgor by assigning to him the same number of shares of " convert- ed " stock. The pledgees are at least bound to restore stock of the identical kind pledged.' {d.) Dividends, Profits, Assessments, Calls, Interest. As a consequence of the declaration of the law that the stock as soon as it is purchased becomes the property of the Client,' it follows that all of the benefits in the way of accre- tions, interest, dividends, or profits which result therefrom be- long to the latter.' Under this rule, all profits or benefits of any description « Wilson vs. Little, 2 N. Y. 443, view (n. s. ), 172, as to right of 449. pledgee to receive dividends. As ' Gruman vs. Smith, 81 N. Y. 25 ; to general subject of dividends, etc., rev'g 12 J. & S. 389. see post, Ch. IX. The same rule is ' Markham vs. Jaudon, 41 N, Y. applicahle to a pledge — viz., that all 235; see also Gates vs. Halliday the profits, etc., belong to the pledgor (Mo. Ct. of App.), 1 Am. Law Ee- (Schouler on Bailm. 197). 162 Slockrbrokers and Stock Exchanges. which the Stock-broker may derive from the loan or use of his Client's securities would, in the absence of agreement, belong to the latter. But the pledgee of securities has the right to collect the dividends or interest thereon.' This is very properly the rule, for the securities are in his possession ; and he has, as we have seen," a right to have them transferred into his name upon the books of the company. If, therefore, a pledgor of stock receives the dividends from the company, an action lies by the pledgee against him to recover the same.' And in the case of the Androscoggin Eailroad Company vs. Auburn Bank,' the court held that where a bond with interest coupons attached was the subject of the pledge, there was an implied authority in the pledgee to collect the interest thereon. On the other hand, the Client is subjected to all of the re- sponsibilities of pure and absolute ownership; and he is liable, and not the Broker, for all assessments or calls of any kind made upon the stock while he is the owner thereof, although the Broker may have paid them, in the first instance, by rea- son of the stock being transferred on the books into his own name, in accordance with the usages of the business.' The general rule being that a pledgee of stock who has transferred the same on the books of the company is subject to all of the liabilities of a stock-holder." By § 16 of the General Manu- facturing Act of New York 1848, no person holding stock in any company organized under that law as executor, adminis- trator, guardian, or trustee, or as collateral security, shall be per- ' Gates vs. Halliday, supra ; An- " MeCalla vs. Clark, 55 Ga. 53. droscoggin Eailroad Co. vs. Auburn ' National Bank vs. Case, 99 U. S. Bank, 48 Me. 335; Hasbrook vs. Van- 628 ; Pullman vs. Upton, 96 id. 328 ; dei-voort, 4 Sand. 74. Wheelock vs. Kost, 77 111. 296 ; In re " Ante, p. 137. Empire City Bauk, 18 N. Y. 199 ; Hol- ' Gates vs. Halliday, supra. yoke vs. Burbam, 11 Cush. 183. See * Supra, also, as to liability for calls, Cb. IX. Dividends, Assessments, Calls. 153 sonally subject to any liability as stockholder of such com- pany. In Robbins vs. Edwards/ where it appeared that a Broker, at the request of his principal, continued shares in his own name, the Master of the Rolls ordered the principal to repay to his Broker a call which he had paid, and to procure, as far as possible, that the shares should be registered in his own name." Another element of the transaction should be he^-e noticed. The selling Broker is bound to deliver, upon receiving from the purchasing Broker the price agreed upon, a certificate of stock (if stock be the subject of the sale) for the number of shares purchased. This certificate must be in every respect proper and legal. It must be issued by the company, or its authorized officers or agents, and must show, on its face, that the person therein mentioned is entitled to so many shares in the capital stock of the corporation. Usually certificates of stock have forms of assignment endorsed on them, together with irrevocable powers of attorney, authorizing the officers of the corporation to transfer upon the books of the company the number of shares represented in the certificate to the person therein named. It is the duty of the selling Broker to procure this assignment to be duly executed by the person named in this certificate, as the sale would not be complete without it, although there might arise a case where this rule would not prevail.' Upon the point as to what a Broker of a vendor sells on the Stock Exchange, the remarks of Lord Campbell, C. J., in Stray vs. Eussell * are pertinent: "According to these usages, ' 15 TV. E. 1065. ker, oa Loudon Stock Exchange, ' To same effect, Taylor vs. Stray, Cli. V. 2 C. B. (n. s.) 175; Cbapmau vs. Shep- ♦ 1 El. & E. 888, at p. 900. Where herd, L. E. 2 C. P. 228 ; Whitehead a Note-hroker sold a note to another vs. Izod, id. ; Emmerson's case, L. E. Note-hroker -without kuowledge of 1 Ch. App. 433. the latter that it was worthless, and ' See as to duty of selling Bro- he is compelled to take it hack from 154: Stockrbrdkevs and Stock Exchanges. the price of the shares is payable on the one broker handing over to the other the transfers and certificates. WTiat does the vendor contract to sell and deliver f Genuine transfers a/nd certificates, with the interest and rights which they con- vey. There might be a condition subsequent, imposing upon the vendor the onus of procuring the consent of the directors to the transfer, but I find no evidence of such a condition." ' And the point was directly passed upon in the last-named case,° that the selling Broker is not bound to procure a trans- fer or registration on the books of the companj'. In practice, generally, this assignment is executed in blank by the person in whose name the shares stand on the books of the company, leaving the purchaser to fill in any name and to effect the transfer upon the books, if he so desire it. Frequently, however, a certificate of stock, with the power of attorney executed in blank attached thereto, is passed from hand to hand, and is used in several different transactions be- fore there is an actual transfer of the shares on the books of the company. But, by executing the certificate to the pur- chaser as between the latter and the seller, the purchaser be- comes the owner of the shares." Although, until the same is transferred on the books of the company, the seller is liable for any " calls " or assessments.' So a person is liable to the company for the amount of his subscription, although after calls were made, and before they were payable, he assigned his stock to a responsible party.' And if the purchaser does his principal, the buying Broker is Shellington vs. Howland, 53 N. Y. entitled to recover the amount paid 372. to the sellingBroker therefor. Stew- * Id. ; Cutting vs. Damerel, 23 Hun art vs. Orvis, 47 ; How. Pr.518. (N. Y.), 339. See also Magruder vs. " See also, to same effect, Taylor Colston, 44 Md. 349 ; Johnson vs. Un- va. Stray, 2 C. B. (n. s.) 175 ; aff'd in derhill, 52 N. Y. 203. Exch . Chamber, id. 197. ' Schenectady E. E. Co. vs. Thatoh- = Supra. er, 11 N. Y. 102. » 1 Liudley on Part. (4th ed.) 706 ; Dividends, Assessments, Calls. 155 not procure the transfer upon the books of the company, and, in consequence, the seller is made liable for assessments or calls, the purchaser is bound to indemnify the seller in respect thereto, and from all liability accruing to the shares since the time they were sold.' On the other hand, the purchaser can compel the seller to execute a proper transfer, and to account for all dividends received by him since he ceased to be the equitable owner of the shares." In the United States, this question of transferring stock upon the books of the company has not received the attention which it has in England, because in the latter country, where most commercial corporations are organized by the payment of only a limited amount of the fixed capital, calls can be, and are generally, made upon the stockiiolders of record, and if the registration of the shares is not attended to, the share- holder of record may be compelled to pay the same, although he may have long since parted with his stock. The rule is the same in this respect in the United States." But with us, corporations have eitlier paid up their capital in cash, or its equivalent, pursuant to statutory enactment, and the stock- holders are not generally liable for future calls. But the increasingnnmber of corporations, and the frequent evasions of the requirements of the statutes authorizing the issuance of the entire capital for property by placing a fraudulently extravagant value thereon, may, and doubtless will, render the question of calls or assessments, and the necessity of see- ing that a transfer or registration is made upon the books of the company when a sale is made, as important and essen- tial as it is in England." ' 1 Lindley on Part. (4th ed. ) ity for calls in England, see post, 707. Ch. V. Where shares in a bridge 'Id. company ^^■e^e Issued as paid-np ° Sbellington vs. Howland, supra, shares, -which were not fully paid * For the subject of the liabil- up, the transaction, though a fi-aud 156 Stuoh-BroTcers and Stock Exchainges. In respect to the liability of the Client to pay interest,, it is a well-understood rule of Stock-brokers to charge him legal interest upon the amount advanced by the Broker in the pur- chase of the stock ; it is also the usage of the Brokers to charge the Client with any extra interest which the Broker is compelled to pay for carrying the stocks of the former caused by a stringency of the money market. Both of these usages are reasonable, and it does not seem to be diflScult to sustain tliem by authorities. Thus it has been held that an agreement for interest may be inferred from the course of dealing between the parties ; as where interest has before been charged and allowed under the like circumstances.' Also, when the creditor has a uni- form practice of charging interest, which was known to the debtor at the time of the dealing. And where there is a gen- eral usage in any particular trade or branch of business to charge and allow interest, parties having knowledge of the usage are presumed to contract in reference to ity and if the usage does not conflict with the terms of the contract, it will be deemed to enter into and constitute a part of it. Knowl- edge of the usage may be established by presumptive as well as by direct evidence. It may be presumed from the fact that both parties are engaged in the particular trade or branch of busi- in law upon the creditors of the to the creditors of the corporation company, was made apparently in under the statute for the amount good faith by the company, and on actually unpaid on the shares. In its face was formal and regular, the order that the shares should be shares appearing on the books as regarded as paid-up shares in the paid, and nothing appearing to ap- hands of an innocent purchaser, it prise a purchaser that such was not is enough that they were in the ns- tbe fact ; a purchaser to whom the ual form ; it is not necessary that shares had been transferred without they should express upon their face notice was not required to suspect that they were fully paid. Key- fraud or institute inquiries where stone Bridge Co. vs. McCluney, Mo. all seemed to be lawful and regular ; Ct. of App., decided March 30, 1880 ; and if he paid full value for the 1 Am. L. Eev. 395. shares as paid up, he is not liable ' Easterly vs. Cole, 3 N. Y. 503. Bight of Client to Control. 157 ness to which the usage relates, and also from other facts, as the uniformity, long continuance, and notoriety of the usage.' In the case of Robinson vs. ISTorris" the question of the lia- bility of a Client to pay interest which the Broker had been compelled to pay, beyond the rate established by law, was raised and indirectly sustained. There a Broker, authorized by his principal to borrow money in order to carry stocks for him, rendered an account to the latter by which it appeared that in borrowing money he had been compelled to pay to other persons, as commissions, sums exceeding the amount allowed by the laws of the State of Il?"ew York ' for effecting loans, and it was held that it was the duty of the principal promptly to object to the payment of such commissions ; and in ease he fail so to do, he cannot, in an action by the Broker to recover a balance due to him, insist that such payments were illegal and unauthorized. And a charge made by a Broker for extra and usurious interest paid to enable him to carry his Client's stock was sustained,* on the ground that the Client had authorized the Broker to pay the same. Where, however, the Broker is himself the lender of the money, he cannot charge a rate of interest beyond that allow- ed by statute ; and the assent of the Client to the payment of such excess of interest cannot affect the operation of the laws forbidding usury. But, where a statute does no more than pro- hibit a recovery of interest in excess of 10 per cent., unless the contract is in writing, and does not otherwise make the rate of interest unlawful, interest in excess of that rate may ' Id. ; Calton vs. Bragg, 15 East, = 6 Hun (N. Y.), 233. 223 ; Bruce vs. Hunter, 3 Camp. ^ 2 Eev. Stat. (5th ed.) 979. 467 ; Denton vs. Eodie, id. 496 ; * Smith vs. Heath, 4 Daly (N. Y.), Gwyn vs. Godby, 4 Taunt. 346; 133. Eaton Ts. Bell, 5 B. & Aid. 34; Ikin vs. Bradley, 2 Moo. 206. 158 StooTc-lrohers md Stock Exchanges. be included in an account stated ; and money paid on account by the debtor may be applied to the payment of such inter- est by the creditor, in the absence of any appropriation by the debtor.' This proposition is laid down in Marye vs. Strouse, a case which arose out of dealings in certain mining stocks. In that case, it appeared that the Broker had a book called a "Broker's Pass-book," which contained an account of all the transactions between himself and his Client (being a copy of the Broker's ledger), the Client having possession of the book at all times, save when it was being " written up," after which it was again returned to him. The statute of Nevada" provides that "when there is no express contract in writing iixing a different rate of interest, interest shall be allowed at the rate of 10 per cent, per annum for all moneys. . . . Parties may agree in writing for the payment of any rate of interest whatever on money due or to become due." The Broker, without any agreement in writing, charged .'his Client with interest at the rate of 2 per cent, per month, whicK sums were duly entered in, the "pass-book" and known to the Client. Interest on all advances during the month, as well as on the balance brought forward from the preceding month, was charged at the same rate at the end of each month, and went into the balance struck. No objection was ever raised to these charges by the Client, and the court held that the facts constituted an account stated ; and the agreement being fair and perfectly understood, and nothing in it opposed to the policy of the State or good morals, such interest could be included in the balance agreed to in stating the ac- count. And a right may be made to charge compound interest, either by express contract, or it may be implied from the • Marye vs. Strouse, C. C. U. S. (Ne- ' Cdmp. Laws, \ 32. vada); 5 jFled jBep. 483. Dividends, Assessments, Calls. 159 mode of dealing with former accounts or custom;' but a Client is not bound, or affected bj the practice of his bank- ers, to charge interest upon interest by making rests in their accounts at stated intervals, unless it be proved that he was aware that such was their custom." Any other expenses or actual disbursements which a Stock- broker makes for his Client, in pursuance of agreement or usage, would seem to be recoverable upon the principles laid down in the preceding cases ; but it should be shown that the expenses have been actually incurred. Thus, in Marye vs. Strouse,° the Brokers sought to recover money laid out for telegrams. The Brokers were in the habit of receiving or- ders daily for the purchase and sale of mining stocks. It often happened that a number of orders would be sent to San Francisco in one despatch; in such case the practice was to charge each Client having an order thereon seventy- five cents (that being the proper charge for a single tele- gram of ten words), although such Client's proportion of the actual cost was often, if not always, less. But no effort was made to keep an account of the sums actually paid out for telegrams about the business of the particular Client sought to be charged. The Brokers, however, relied for recovering such charges on the ground that they were in accordance with an established usage of mining-stock Brokers ; but the court rendered judgment against them on this point, holding that a custom or usage like the one in question, of charging not merely the actual cost of telegrams, but an arbitrary price, if it can be considered as reasonable, should be established by showing that both parties had knowledge of it. ' Fergussou V8.Fyffe,8C. &F.121, Chitfy on Cont. (11th Am. ed.) 957, 140. note (A), and cases there oolleot- '' Moore vs. Voughton, 1 Stark, 487 ; ed. Leask's Dig. Law of Cout. 1107; " 5 Fed. Eeporter, 483. 160 Stooh-hroJcers and Stock Exchanges. (e.) Eight of Client to Control and Take up Stock. Although, as we have seen, the stock in an ordinary specu- lation upon margin remains in the possession of the Broker, it is at all times, in the absence of express agreement to the contrary, subject to the orders of the Client. The latter has the right to demand possession of the stock upon payment of the purchase price and the commissions and proper expenses.' And where the Broker has deprived himself of the power of delivering the stocks to his Client by selling them, or other- wise disposing of them without, or contrary to, the instruc- tions of his Client, an offer by the Broker to replace the stock does not bar the right of action of the Client, because where an agent has violated his duty or instructions, and made him- self liable to an action for damages, nothing but payment of the damages, an accord and satisfaction, or a release, is a bar to the same. The offer of the Broker to replace the stock, so long as it is unaccepted, affects neither the principal's right to recover nor the measure of damages.'' If the Broker wrongfully hypothecate the stock, his Client can follow the same, and, upon payment of the amount due, compel the delivery of the stock to himself; and if the Client be compelled to pay to the third person an amount greater than that which he owes upon the same to the Broker, he can recover the surplus from the latter or his estate. So if the ' Markliam vs. Jaudon, 41 N. Y. eral property in €he pledge may sell 235, at 247, This proposition is con- it, and compel its restoration upon ceded even by Mr. Justice Grover in paying the debt secured (Rozet vs. his dissenting opinion in that case. McClellan, 48 111. 345). See also, as to right of Client to di- ' Clarke vs. Meigs, 10 Bosw. (N. Y.) reot the stock to be bought in on a 337, 338 ; s. o. 22 How. Pr. (N. Y.) 340 ; short sale, Knowlton vs. Fitch, 52 Gruman vs. Smith, 12 J. & S. (N. Y. N. Y. 288 ; rev'g 48 Barb. 493. The Sup. Ct.) 389 ; rev'd, on another same rule exists in the case of a ground, 81 N. Y. 25. pledge; the pledgor having the gen- Bight of Client to Control. 161 stock belonging to the Client be in the hands of a receiver or assignee of an insolvent Broker, the Client can recover the same upon payment of the amount due thereon. But where the Broker has so mixed the stock he has bought for his Client, in hypothecating it with several pledgees on separate loans by each, that no Client can identify any of the stock in the hands of any pledgee as the stock bought on his order, he cannot say it is his stock. And if, notwithstanding such hypothecation, the Broker had continued to hold stock enough to deliver to each Client all to which he might be entitled on paying the amount due from him to the Broker, the Client could not claim any right to the hypothecated stock ; and this results from the rule heretofore referred to, that the Broker is not bound to keep on hand the identical stock purchased, but his obligation to his Client is fulfilled if he keep on hand suffi- cient like stocks, and be ready to deliver the same to his Client at any time that they are demanded. These positions were enforced in the recent case of Chamberlin vs. Greenleaf.' A pledgee, with whom securities belonging to several persons are pledged as collateral security for a loan made thereon to one having all'the securities in his possession, and who wrongfully re-pledges or re-hypothecates them, should ^xoceQAjpa7'i passu in the application of the securities to the satisfaction of the loan, so that whatever loss should be occasioned to the parties whose stocks are wrongfully pledged shall fall on them rat- ably. Accordingly, if the pledgee, without notice of the claims of the true owners, sells the securities of one, thus realizing sufficient in amount to repay his loan on all the se- ' 4 Ab. New Cas. (N. Y.) 178; and See also Gould vs. The Central Trust consult this case also for the measure Co., 6 id. 381, for principle, of niar- of damage in a case where a Broker shalliug assets realized from sale of hypothecates stocks helonging to pledged stocks which have been re- his general Clients and which cannot hypothecated. See also Rich vs. be identified by any particular one. Boyce, 39 Md. 314. 11 162 StoGh-lrokers cmd Stock Exchanges. curities, and leaving in bis hands as surplus the sectirities of the others, a court of equity will order such surplus seciirities to be sold, and the proceeds applied so that the burden of the loan will be borne by all in equitable proportions.' And where a draft for money was intrusted to a Broker to buy Exchequer bills for his principal, and'the Broker received the moneys and misapplied it by purchasing American stock and bullion, intending to abscond with it and go to America — and did accordingly abscond, but was taken before he quitted Eng- land, and thereupon surrendered to the principal the securities for the American stock and the bullion, who sold the whole and received the proceeds — held, that the principal was enti- tled to withhold the proceeds from the assignees of the Bro- ker, who became bankrupt on the day on which he so received and misapplied the money." And where bankrupts, in their character of Stock -bro- kers, received dividends on dividend warrants intrusted to them, and pledged the dividend warrants for their own debt, they wei'e ordered to be delivered up to trustees who had em- ployed the bankrupts as their Brokers.' And although Brokers are within the list of traders in the English Bankruptcy Acts of 1861 and 1869,' yet, in the event of such bankruptcy, a sum of stock or shares which the Bro- ker has bought for his principal and taken into his own name are not in his order and disposition so as to pass to his as- signees or trustee." The theory of the law is, that the prop- erty of a principal, intrusted by him to his factor or Broker for any special purpose, belongs to the principal, notwith- standing any change which that property may have under- » Gould vs. Central Trust Co. 6 D. & DeG. 613. As to doctrine of Ab. New Cas. (N. Y.) 381. subpledging and rehypothecation, " Taylor vs. Plumer, 3 M. & S. see p. 161. 562. * Taylor vs. Flamer, supra. ' Exp. Gregory vs. Wakefielil, 2 M. ' Id. Eight of Client to Control. 163 gone in point of form, so long as sucli property is capable of being identified and distinguished from all other property ; and that all property thus circumstanced is equally recover- able from the assignees of the factor, in the event of his becoming a bankrupt, as it was from the factor himself be- fore his bankruptcy. And if the property in its original state and form was covered with a trust in favor of the prin- cipal, no change of that state and form can divest it of such trust, or give the factor or agent, or those who represent him in right, any other more valid claim in respect to it than they respectively had before such' change. An abuse of trust can confer no rights on the party abusing it, nor on those who claim in privity with him.' The case of Taylor vs. Plumer was directly endorsed in Ex parte Cooke." In that case, C, a trustee, employed a Stock-broker to make purchases of cer- tain railway shares, informing him that it was for a certain trust fund in which he was interested. C. left the money with the Broker to make the purchase, which was duly made on the Exchange in the usual way for the next settling- day, the Broker in the meantime depositing the money in bank. Before the settling-day, however, the Broker failed, and moved for a declaration in the Bankruptcy Court that a portion of the money in the hands of the bankruptcy trustees belonged to C. This was refused by the registrar, on the ground tliat the transaction constituted the relation of debtor and creditor between C. and the Stock-broker, and not that of trustee and cestui que trust. But this decision was reversed on appeal, the appellate court holding that the Stock-broker had notice that the money belonged to a trust fund, and that the money could be traced. And the court also expressly said that, even if there had been no notice, the relation of the Stock-broker and C. was of a fiduciary character, so as to ' Taylor vs. Plumer, supra. = In re Strachan, L. E. 4 Ch. Div. 133. 164 Stochhrohers and Stock Exchanges. make the case undistinguishable from Taylor vs. Plumer.' But a pledgor cannot follow the securities which he has placed with a pledgee in the hands of a purchaser in good faith from the pledgee, purchasing without notice of the pledge." IV. Duty of Broker to Sell.— ''Stop OvderP The Broker, when directed to sell, is bound to comply with the order, and to sell the stocks at the price named or at the market price, if that be the instruction. This consequence flows from the ownership of the stock. And the general rule is the same as in the case of an order to purchase — ^viz., that the Broker is bound to rigidly can-y out the directions in re- spect to time, price, number of shares, manner, and place, and with prudence and caution and the utmost good faith." An agent with express authority to sell has no implied authority to warrant, when the property is of a description not usually sold with warranty. One employed to make a sale of bank stock is not presumptively empowered to warrant it in the name of the principal, and the receipt of the proceeds by the 'See furtlier, upon the subject Of be permifctecl to assert its own claim commingling funds and right of to the balance of an agency account principal or cestui que trust to follow as agai list the beneficial owner when property, note to Hooley vs. Gieve, the bank has notice, either actual or 9 Ab. New Cas. (N. Y.) 8, at p. 41. constructive, of such equity. This Aud the U. S. Supreme Ct., in the view is also endorsed in the case of case of The Central National Bank of Baker vs. N. Y. Natl. Bank, decided Baltimore vs. Conn. Mutual Life Ins. by the N.Y. Ct. App.Oct.1881. N.Y. Co. 24 Alb. L; J. 454, 455 fDec. 3, DoAly Beg. Nov. 9, 1881. 1881], has decided that if money " Little vs. Barker, Hoff. Ch. (N.Y.) held by a person in a fiduciary ca- 487. paoity, though not as trustee, has ' See these questions discussed, been paid by him to his account at ante, p. 118 ; Bush vs. Cole, 28 N. Y. his banker's, the person for whom 261 ; Taussig vs. Hart, 58 id. 425, 428 ; he holds the money can follow it, Smith vs. Bouvier, 70 Pa. St. 325; and has a charge on the balance in Jones vs. Marks, 40 111. 313 ; 1 Lind- the banker's hands, although it is ley on Partn. (4th ed.) 730; Pulsifei mixed with his (the depositor's) own vs. Shephard, 36 HI. 513, moneys ; and that the bank cannot Right of Client to Control. 16a owner of the stock, in ignorance of an unauthorized warranty by the agent, is not a ratification of the unauthorized engage- ment.' An authority to sell exists until countermanded or revoked by implication ; but the question is greatly gov- erned by usage and the course of dealings between the parties. Accordingly, where the defendants. Stock -brokers, were carrying certain stock for plaintiff on margin, and the lattei', on Sept. 12, 1867, wrote to them, that "in case the stock should look like reaction, or weaken, or have a down- ward look, they should sell for him 50 or 100 shares, as the case might look;" to which letter, two days later, the defendants replied that they thought the market would re- cover from its present depression. On Sept. 17 the plaintiff ordered the defendants to purchase 100 shares, if the stock looked like rising. On the 18th the defendants bought for the plaintiff 50 shares, and on the 20th, the market falling rapidly, they sold all the plaintiff's stock without notice to him. Held, that the direction contained in the plaintiff's let- ter of the 12th was not revoked by what subsequently took place, and defendants were justified in selling upon the fall in the market." Where, however, an order has been given, in writing, to sell stock at a certain designated figure, evidence is admissible to show that the written order was subsequently modified by an oral understanding.' Parol evidence is also admissible to ex- plain a Broker's contract for the sale of stock, acknowledging the receipt of the first payment of the margin.* A Broker is not authorized to sell stock, standing in the name of two trustees, upon an order of one who undertakes to procure his co-trustee to join in the transfer, unless such • Smith vs. Tracy, 36 N. T. 79. 337. To same effect Burkitt vs. Tay- ' Davis vs. Gwynne, 4 Daly (N. Y.), lor, N. Y. Ct. of App. (Oct. 1881), not 218,aff'd57N.Y.676. yet reported. ° Clarke vs. Meigs, 10 Bosw. (N. Y.) * Wiuans vs. Hassey, 48 Cal. 634. 166 StoGh-lrokers and Stock Exchanges. co-trustee authorized or concurred with the other in making the transfer.' In this connection a practice of Wall Street should be ad- verted to and explained. Frequently a Client wishes to limit a loss upon stocks, in which case he gives his Broker what is called a " stop order" which authorizes and directs the Broker to sell the stocks (or to buy them in, as the case may be) when thej arrive, at a certain price, in which event the Broker must sell or buy when the price reaches his limit ; with this reserva- tion, however, that the price at which the Broker is directed to sell or buy must be made by some third person. This may be illustrated by the following example. If A, being the own- er of 100 shares of New York Central E. E. stock, should di- rect his Broker to sell the same when the stock should reach or be quoted at 99, in this event it is the duty of the latter to sell at that price ; not, however, until some other Broker, by a distinct tra;nsaction, has made the stock sell at 99, it being the understanding that a Broker cannot make that price himself by the sale of the stock. If, however, the Broker, when the stock reaches 99, is unable to sell at that price, it seems, by the usage of "Wall Street, that he can sell at the next figure below 99. Conclusions rather antagonistic to the above view seem to have been drawn in the case of Smith vs. Bouvier.' In that case the order was made by the Client in a transaction in which he was short of stocks, and was as follows : " Buy for my ac- count 2000 shares, New York Central, at 166 ; or, in event of that stock going against me, take the 2000 shares in at 175." A Broker testified that " take in " means to buy. The Brokers acting under this order bought in the shares at an average of » Leyton vs. Sueyd, 2 Moo. 583. ' 70 Pa. St. 325. See also post, " Joiut Adventures in Stocks," p. 173. Right of Client to Control. 167 174f, or f below the price mentioned in the order. The ques- tion was squarely raised in the case as to whether this was an execution of the order ; and the court said upon that point, in charging the jury, that " if the contract of the plaintiffs with the defendants was an absolute one, that they were not to buy in the stock until it reached 176 ; and if they had no dis- cretion in the premises whatever, then, of course, they had no right to buy it in at a less price, and the plaintiffs' third point would be well taken ; but is that a reasonable supposition ? Is that the contract which was entered into ? Was it not rather that the plaintiffs (as one of the Brokers testified to) were not to let the stock go beyond 175 before buying it in ? and is not that a reasonable interpretation of the written or- der, in view of what was plainly the interest of the defend- ants, and of w^hat occurred at that time ?" It will be seen that the learned judge left the question of the construction of the order to the jury, and did not pass upon it himself. The jury found for the Brokers, and, on appeal, the decision was affirmed, no allusion being made to this important question. Although the act of the Brokers in "buying in" the stock at 174f might have been advantageous to their Client, it was not in accordance "with the stop order, which gave them the. right to act only when the stock reached 175. As we have seen, an agent or Broker must obey strictly his instructions, and it is no answer in his mouth to say that by, disobeying them an advantage accrued to his principal.' Suppose the stock had never reached 175, but, after selling at 174|-, it declined until it reached 166? Here would have been, a loss to the Client fi'om which it seems the Broker could not have escaped responsibility by showing a sale at 17if.' ' See eases cited ante, p. 118. Con- where Broker is instructed to sell struction of writings a question of when margin should fall below 5 per law. Davis vs. Uwynne, 57 N. Y. 676. cent., see Wicks vs. Hatch, 62 N. Y. " For construction of stop order 535. 168 SiocTirltdkers and Stock Exohcmges. Where, however, a principal gives his Erbker orders to sell gold for hira if it reach a certain price, and that price is reached, and the Broker does not sell, but holds on, lioping in good faith to realize a still higher price for his principal, which is impliedly assented to by the latter, but, owing to a sudden fall, a sale at a lower price is finally made, the Broker is liable only for the actual loss sustained. He cannot be charged with any loss from a neglect to sell at the highest point reached.' If the Broker fails to sell when directed, the principal may recover back, in an action of assumpsit on the common counts, the margin originally deposited by him with the Broker." With respect to the terms upon which the Broker is au- thorized to. sell, he is likewise bound by the direction of the Client. If no directions are given, he is entitled to make the sale in accordance with the general usages of Brokers.' The general rule is, that it is no part of the duty of a sell- ing Broker to his employer to procure payment of the price, nor to procure the execution by the purchaser of a transfer of the shares, nor to procure the registration thereof.* But this question is greatly influenced by usage, especially as to the duty of the Broker to receive payment for the stock sold ; and we understand the usage of Wall Street to be de- cidedly in that way, and as establishing a uniform and unas- sailable practice on the part of the Broker to receive payment for securities sold, especially as the latter is invested with the possession of the stocks, and is clothed with the apparent ownership upon which purchasers rely, who do not even know the principal.' It has been held, however, that a Stock-broker cannot sell upon credit, for that is'not the usual course of his ' Hope vs. Lawrence, 50 Barb. 258. 245 ; Clark's Law of Joint-stock Com- ' Jones vs. Marks, 40 111. 313. panics (Scotch), 145. . "Ch. VII,, "Usages." ' Clarke v8.Meig8, 10 Bosw.(N.Y.) ♦ Booth vs. Fielding, 1 Week. Notes, 337. Special Contracts with Client. 169 business.' And where it appears that stocks are usually sold for cash, the Broker is liable for any loss which may occur by his selling on credit, although he may have been acting lona fide, a:nd with the object of benefiting his principal.' F". Special Contract with Olient. — Joint Adventures in Stocks. But the usual and customary obligations of a Broker may be varied and controlled by special agreement with his Client, it being established, that the former may by special contract limit his liability in any respect.' In the case of Milliken vs. Dehon * special authority was given to sell cotton " at public or private sale or otherwise, at his option, for the most that it would bring." The court held, that such a contract authorized the pledgee to sell at private sale without notice, and modified the ordinary rights of a pledgor to have notice of the time and place of sale ; and that these general rules could be legally modified or waived by agreement. To the same effect was Baker vs. Drake,' where it was held, that by a special contract a Client might agree that his business should be conducted in accordance with the usage of a particular oflBce, and that if such usage justified a sale of stocks where the margins were exhausted, without notice, the Client would be bound thereby. But a » 2 Kent's Coram. 827, *C22 (lltli 6 John;. (N. Y.) 69; Douglass vs. Le- ed.), note (b) ; Baring vs. Corie, 2 B. land, 1 Wend. (N. Y.) 490. & Aid. 137, 143, 148 ; Wiltshire vs. ' Milliken vs. Dehon, 27 N. Y. 364 ; Sims, 1 Campb. 258 ; State of Illinois Baker vs. Drake, 66 id. 518 ; Mark- vs. Delafield, 8 Paige (N. Y.), 527 ; s. c. ham vs. Jaudon, 41 id. 235, at p. 244 ; 26 Wend. 192. Wicks vs. Hatch, 62 id. 535 ; Stentou ' Brown vs. Boorman, 11 CI. & vs. Jerome, 54 id. 480 ; Hyatt vs. Ar- Fin. 1. But see as to Brokers gen- genti, 3 Cal. 151 ; Robinson vs. Nor- erally, where usage justifies a sale oa ris, 51 How. Pr. (N. Y.) 442; aff'd 6 credit, Goodenow vs. Tyler, 7 Mass. Hun (N. Y.), 233. 36; Clark ys. Van Northwick, 18 *27N.Y.364. id. 343; Van Aleu vs. Vanderpool, » 66 id. 518. 170 Stoch-hroTcers and Stock Moohanges. provision in an agreement of pledge by which the pledgor waives notice of sale is not a waiver of demand of payment before sale.' Wicks vs. Hatch" is another case illustrating a dealing where there was a special contract. In that case, it appeared the plaintiff executed to G. A. "W. a power of attorney em- powering him to buy and sell gold, stocks, and bonds, and to execute for her, and in her name, " all orders, -checks, or other instruments in writing whatsoever," which might, in his dis- cretion, be necessary in the business, with power of substitu- tion, etc. G. A. "W". employed defendants as Brokers, deposit- ing a sum as a margin. He gave to them a writing signed by him, as attorney for plaintiff, authorizing them to sell, in their discretion, at public or private sale, without notice, the stocks which they might be carrying for her, whenever the margin should fall below 5 per cent. In an action to recover damages for sales made at the Board of Brokers in pursu- ance of this authority, defendants set up as a counter-claim a deficiency arising on the sales after exhausting the margin. The court held that it was within the authority of G. A. "W". to execute the writing, and defendants were authorized to sell at the Board of Brokers without notice, when in good faith, and in the exercise of a sound discretion, they deemed the state of the market justified it; that plaintiff was liable for any loss on sales beyond the amount of the margin ; and that the same was proper as a counter-claim. The court charged, among other things, that defendants had a right to sell when the market rendered it prudent, either for the benefit or pro- tection of their principal or for their own protection. Held, ' Cortelyou vs. Lansing, 2 Cai. cided ; see also Wilson vs. Little, 2 (N. Y.) Cas. 200; see as to this case N. Y. 44a Barrow vs. Paxton, 5 Johns. (N. Y.) ■ 62 N. Y. 535, aff 'g 6 J. & S. (N. T.) 260, by -which it is explained by 96. Kent, Ch. J., that it was never de- /Special Contracts with Client. 171 no error, that from their peculiar relations as Brokers, holding stock paid for, mainly out of tlieir own funds, defendants were authorized to act, and necessarily in making sales acted, for the protection of their own interest as well as that of their principal. The late case of Harris vs. Tumbridge ' illustrates a special contract with Brokers growing out of a " straddle." In that case, the plaintiff purchased through defendant, a Broker, a 60 days' "straddle" — viz., a contract by which the plaintiff had the option to either receive or deliver 100 shares of Lake Shore stock at 62J for 60 days, the defendant further guaranteeing that the stock should fluctuate at least 8 per cent. The "straddle" remained in the hands of the defend- ant. The day after the making of the bontract, the defend- ant, without express authority, sold "short" 100 shares of Lake Shore stock against the " straddle," and closed out the contract eventually at a loss to the plaintiff. Immediately after the contract, Lake Shore began to ad- vance in price, and reached 73f a short time afterwards. The plaintiff, in an action on the "straddle," recovered a judg- ment ; and the court held, that the subsequent action of de- fendant in purporting to sell " short " against the " straddle " was nugatory. It was his duty to have closed the " straddle " contract by exercising the option at a most favorable time within the sixty days ; and a failure to do so made him liable for what plaintiff lost by his neglect, and that this result could not be affected by an alleged custom of Brokers not known to the plaintiff. And where a Client, at the commencement of his dealings with a firm of Brokers, deposits with them money with an order to purchase stocks on his account, and receives from them an agreement for his signature, saying " We herewith ' 8 Ab. New Cas. 291 ; aff'd 83 N. Y. 92. 172 Stockrhrokers and, StooJc Emhanges. enclose our usual customer's agreement for your signature," and lie signs and returns the same to them — which agree- ment authorizes the Brokers to sell, at their discretion, at the Brokers' Board or elsewhere, or at public or private sale, with or without advertising, and without prior demand of any kind, upon a notice to the Client of the time and place of sale, of all or any gold, stocks, property, things in action, or collateral securities held by them and belonging to the Client — the latter is bound by the terms of the agreement ; and would have been bound, though he had never signed it or given any assent to it, if he subsequently gave orders un- der it.' But where there is a special contract in writing between the Brokers and theit Client, by which the ordinary principles applicable to such a relation are set aside or modified, and the dealings under such contract being fully closed, new trans- actions are subsequently entered into, the former written con- tract will not apply unless the parties have specially agreed thereto. In Bickett vs. Taylor," the Client, in November, 1870, signed a written agreement in respect to certain stock trans- actions between him and the Brokers. This agreement clothed the Brokers with the greatest possible power with re- spect to the use and sale of the stock, and subjected the Client to the most stringent obligations to keep his margin at all times at 10 per cent. The transactions under this agreement, and the accounts in respect to them, were fully closed. More than two years afterwards the Client bought stock through the Brokers, which the latter sold without notice for default of Client to keep up margins. Held, that evidence on the part of the Client to show that the former written contract was not • Robinson vs. Norris, 51 How. Pr. ' 55 How. Pr. (N. Y.) 128. (N. Y.) 442 ; aff 'd 6 Hun (N. Y.), 233. Joint AdveniMres in Stocks. 173 applicable,. but bad been superseded by an oral arrangement, was proper, and tbe question should have been submitted to the jury. The court was inclined to the opinion, that under the circumstances, as matter of law, the previous written con» tract was ended, and did not apply to a fresh dealing between the pai'ties." Joint Advenlmres in Stocks. There are a few cases which illustrate a dealing in securi- ties for speculation on joint account or for the joint benefit of the parties engaging therein. It is not an uncommon occurrence in stock operations for the joint account of two or more persons, for one of the par- ties to furnish the "information," or facts, upon which the transaction is ma;de, and the other person to contribute the capital or means to carry on the operation. And the courts have held, that the contribution of information whicli is used as a basis for operations in stocks is a suflScient consideration for an agreement to give the party furnishing the same an in- terest in the profits of the transaction. In the ease of White vs. Drew," the plaintiff, being in pos- session of valuable information in relation to a certain stock, which he proposed to impart to defendant upon condition that, if defendant should consider it sufficiently important to war- rant his acting upon it, he (defendant) should hold 5000 shares of such stock at cost for plaintiff's account and at his risk, and subject to his orders for a period of sixty or ninety days, to which defendant assented, and thereupon plaintiff impart- ed said information, which defendant accepted and acted upon, pronouncing it the best "point" he had heard of in a long * See this case in Conrt of Appeals See also Winans vs. Hassey, 48 CaL smJ nom. Bickett vs. Taylor (Oct. 634. 1881, not yet reported), where the " 56 How. Pr. (N. Y.) 53. above views were fully sustained. 174 StoGh-lrokers and Stock Exchanges. time, the court held that the moment the information was given, and the transaction assented to by defendant, it was an executed contract, and the defendant bore the same relation to the plaintiff in regard to this stock as Stock-brokers ordi- narily bear to Clients for whom they are carrying stocks. The rule, that where one offers a reward for information he is bound by his contract to the one who responds to his offer, ap- plies with equal force to the case where information is prof- fered by one and accepted by another under a contract by him to carry certain stocks for the benefit and profit of the party imparting the information. And reliable information, as to facts upon which the future price of a stock will depend, is a sufficient consideration to uphold an agreement or contract in relation to such stock. Such information, the court said, being concededly of great value, is just as effective to take the case out of the statute of frauds as if a cash payment had then been made.' In Marston vs. Gould," the parties engaged in a joint ad- venture in the purchase and sale of stock, under an agree- ment, by which defendant was to furnish the funds, and to bear the loss if the operations should result in loss; the net profits, if any, to be divided in certain proportions. No pro- vision was made fixing a limit of time for the continuance of the operations, or for closing them and settling the ac- counts. The court held that the arrangement was termi- nable at any time at the will of either of the parties, and that either could maintain au equitable action against the other for an accounting or for the adjustment of losses sustained by the misconduct of the other, without regard to the question whether or not they "tvere to be regarded as partners inter sese. By arrangement, the Brokers, through whom the joint oper- ations were conducted, kept the account thereof under the let- 1 56 How. Pr. (N. Y.) 53. » 69 N. Y. 220. Joint Adventaires in Stocks. 175 ter " M." By direction of defendant this account was closed, and the stock on hand, purchased under the agreement, was transferred to his individual account. It did not appear that the certificaties of the stock were disturbed. In January, 1872, there was a sudden rise in the market, when plaintiff made a formal call upon defendant to sell the stock, and account to plaintiff for his portion of the profits ; and, upon his failure to comply, brought this action. Upon the trial, defendant of- fered to prove that he sold all of the stock held on " M " ac- count before January 9, 1872. This was excluded solely because not connected with an offer to prove that the sale was made avowedly on joint account. Held, error ; that if de- fendant had authority to sell, it was not necessary to make known at the time of the sale that it was made on joint ac- count ; and if he made the sale in good faith in the ordinary wayj plaintiff was bound.' So in an action for an accounting on the purchase of stock, where the only question between the parties is, whether the purchase was joint or several, and the testimony is conflicting between them, the point will be considered settled in favor of the plaintiff, as a joint purchase, where it appears that the de- fendant had previously rendered an account to the plaintiff for the latter'e share, adding, interest and commission to that date, stating that the purchase was joint and containing the actual interest of each of them in the enterprise.' Under an agreement for a joint venture in stock, to be held by one party for thirty days, the other party to bear all the loss, if any — held, that the former could not recover the defi- ciency on a decline in price without proving an actual sale at a loss within thirty days.' '69N.Y.220. ' » Monroe vs. Peck, 3 Daly, 128. .'■■ Crosby vs. Watts, 49 How. Pr. (N. Y.) 364. 176 Stookrbrohera and Stock •Moohanges. So in an action on an agreement to pay a certain portion of the profits of a joint adventure, upon condition that in- formation furnished by the plaintiff should prove true, the bifrden of the proof is on the plaintiff to show, that the infor- mation was true ; although, if there were no such expressed condition, the burden would be upon the defendant to prove falsity, if he relied upon that defence.' An interesting case upon the question of the right to par- ticipate in the profits of certain stock is that of Jones vs. Kent." In that case defendant's intestate gave to the plaintiff a paper containing these words : " Eeceived of J. W. Jones, by agreement, one thousand shares of St. Joe Lead stock, for which I paid him $3000. The understanding is that I am to give said Jones one half of whatever price the same is sold for, when sold, over and above that sum." Whereupon the stock was delivered by plaintiff. The latter brought an ac- tion to enforce the trust, the stock having increased very much in value ; and the court below held that the instrument ex- pressed an absolute purchase and sale free from any trust, and gave exclusive discretion or option to the buyer as to whether he would sell, and, if so, when, subject only to the obligation to pay over one half of any excess in case he should choose to sell, and should sell at an advance. The Court of Appeals reversed this ruling, and decided that it was apparent, from an inspection of the writing, that the last clause was an in- ducement to the sale and part of the consideration thereof ; and, the party making the instrument having died, his repre- sentatives would be compelled to carry the same into effect ; but that plaintiff could not recover any dividends or other income received by defendant's intestate, the contract not covering the same. A portion of the stock, however, had ' strong VB. Place, 4 Robt. 385 ; s. o. » 80 N. Y. 585, rev'g 13 J. & S. 66. 33 How. Pr. (N. Y.) 114. Joint Adventures in Sto'clis, IW been exchanged into bonds of the same company, and it was held that plaintiff was entitled to one half interest . in the avails of the same, after deducting any money paid to com- plete the conv'ersion of the stock into bonds. The court did not pass upon the question whether the in- testate had the right to choose the time of sale, so that this discretion could not be interfered with by th6 plaintiff. It would seem, however, that such agreements are to be con- strued according to the circumstances of each case, and that no general rule can be laid down. But it is clear that the pai-ty possessing the discretion cannot seek to exercise it unreason- ably against the other party to the agreement. ' So in an adtion to recover, with dividends, :certain shares of telegraph stock, claimed to be in defendant's hand^, and to beloug to plaintiff, ?is assignee of S. & Co., it appeared' that in March, 1854, the stock was placed in defendant's hands, under a contract that he was to do the best he could with it, "and to have one half of the proceeds." At that time the stock was comparatively worthless. Defendant retained the stock, and dividends were made upon it. In February, 1865, S. i& Co. demanded the stock, which defendant declined to give up. No request was made to' sell the same. : When thfe demand was made it had reached a higher point than it had touched at any time since it was placed in defendant's hands. Upon the trial, it was adjudged that plaintiff was the own- er of the, stock and entitled to a transfer thereof, and to the dividends received and interest thereon. But the judgment in respect to the dividends was modified, and it was held that plaintiff was entitled to the whole of the stock. On appeal this was held, error ; that as no request was made to sell, and as no injury had accrued to plaintiff by the delay, and as there was no failure on the part of defendant to fulfil his contract, 12 178 Stockrhrokers and Stooh Exchanges. he should receive one half of the avails of the stock and oi the dividends actually. paid to him.' The case of Butler vs. Finck " should also be noticed in this connection, as bearing upon the question as to how far a joint speculation will constitute the parties engaged therein part- ners, so as to render one of them liable for the fraud of his co-operator. There the defendant entered into an agreement with his brother-in-law, B., to the effect that he should conduct certain stock speculations for B.'s benefit, collecting informa- tion of such a character as to justify the purchase of stocks, and giving his time and attention to the purchase and sale thereof ; for these services he was to receive one third of the net profits, the margin to carry the account being furnished by B. The defendant knew that B. was a book-keeper in the employment of the plaintiff, and had no means outside of bis salary. On April 23, 1879, the defendant, claiming that his share of the profits amounted to $6818.48, received from B. an order upon his Broker for that sum, which was paid by the drawee. Subsequently B. absconded, and it was then learned that he had stolen bonds from the plaintiff, and pledged them to secure his account with the Broker, by whom some had been sold and others pledged. It appeared that the sum re- ceived by the defendant was, in fact, one third of the profits actually made by him while conducting the account, and also that B had, without his knowledge, speculated on his own ac- count, both before and after the times referred to. It was not shown that the defendant knew that B. had stolen the bonds until after he had absconded. The defendant having refused to account to the plaintiff for the amounts received by him, an action was brought to recover damages for the conversion of -the bonds ; and, upon the trial thereof, the court ' Wriglit vs. Wood, 12 N. Y. Weelc. ' 21 Han (N. Y.), 210. Dig. 529, Oct. 1881, N. Y. Ct. App. Joint Adventures in Stocks. 179 directed a verdict for the plaintiff, for the entire amount lost by the abstraction of the bonds, on the theory that the defend- ant and B. were copartners in the transaction, and that the former was therefore liable for the acts of the latter. It was held, that this was error, and that the question as to whether or not a partnership existed between B. and the defendant should have been submitted to the jury. It was doubted whether in any event the defendant was liable for the amount actually received by him from B. Where A, in pursuance of a parol authority from B, pur- chases stock in his own name on the joint account of himself and B, the latter becomes the owner of one half the stock, and liable to pay A the amount advanced therefor ; and no writ- ten assignment of the stock from A to B is necessary, to render B liable for his proportionate share of the purchase-money.' But where two parties agree to operate jointly in stocks, and one of them accordingly opens an account in his own name with a Stock-broker, without disclosing the name or in- terest of the other party in the transactions, and individually manages and directs the operation, and the Broker has no knowledge of the other person, the latter cannot recover his interest in the profits of specified operations, ignoring the bal- ance of the account. He cannot isolate certain items from the account, and recover them simply for the reason that he had no interest in the other transactions going to make up the whole account from which losses resulted. The Brokers, hav- ing dealt in ignorance of the rights of the other owner, may insist that the entire dealings shall be' closed, as if the person operating the account were the only one interested." The mere fact that a check, paid out by a member of the firm, is in the name of the firm, is not sufiieient notice to the parties ' Stover VB. Flack, 41 Barb. (N. Y.) (N..Y.) 303. See also Jaycox vs. 162, aff'd 30 N. Y. 64. Cameron, 49 N. Y. 645. ' Bead vs. Jaiidon, 35 How. Pr. 18Q Stockrhrokers and Stock Exclumges. deceiving it that it is partnership property,. nor enough to put them on inquiry before crediting the amount to the private account of the partner of whom they receive it.' VI. Sales for ''Short Account (a.) Nkture of " ShoH Sale." A "short sale" of stocts has already been defined. By such a sale the Client expects to be able to deliver the stock at a lower price. In case the sale of the stocks is made " reg- ular" (that is, not upon time, seller's option), the party sell- ing is bound to deliver them on the next day after the sale is made, in which case, not having the stocks which he has sold, he is compelled to borrow them, and to deliver such borrowed stocks. If, however, as is frequently the case, the stocks are sold deliverable in the future — that is, " seller's option " or " buyer's option " — then, and in such event, it is not necessary for the vendor to deliver the stocks until the expiration of the option, or until the buyer calls for them, as the ease may be." In Knowlton vs. Fitch,' Mr. Justice Kapallo defined a " short sale " as follows : " The nature of these sales has, in the many litigations which have come before the courts concern- ing them, been frequently proved, and is again explained in the testimony in this case. It is proven to be a sale before pur- chase, with a view of purchasing at a future time at a lower price. It is evident that, to carry out such a speculation, the stock sold must be temporarily procured by the seller for de- livery to the purchaser. The manner in which this had been accomplished, in the course of the previous dealings between ' Sterling vs. Jaudon, 48 Bavb. Knowlton vs. Fitch, 52 id. 288, rev'g (N. y.) 459. 48 Barb. 493 ; Smith vs. Bouvier, 70 ' See, for cases defining " short Pa. St. 325 ; Maxtou vs. Gheen, 75 id. sales," White vs. Smith, 54 N. Y. 166. 523; Wicks vs. Hatch, 62 id. 535; '52N.Y.288. " Short Sales." 181 the plaintifE and the defendants, is explained in the testimony. The plaintiff did not furnish the stock to deliver,, but only margins. The defendants furnished the stock. They sold in the regular way, which is deliverable the next day, and then, borrowed the stock of. other parties to deliver. The profit or loss depended upon whether the stock rose or fell. The plain- tiff had the. right to direct his Brokers at any time to buy in. the stock and close the transaction. Until bought in, the Brokers remained bound to the persons from whom they had obtained the stock, to return to. them an equal number of shares, whatever might be the market price at the time it was demanded." ' A " short sale " was also defined, and the duties of a Broker considered, in the case of White vs. Smith." It was there laid down that where a Stock-broker agreed for a commission to be paid to him, and upon a deposit with him of a stipulated margin, to make a short sale for a Client, the agreement is but partially performed by a sale ; it is part of the bargain that the Broker shall carry the stock for a reasonable time, as otherwise the object of the transaction would be defeated. The Broker can close the transaction at any time if, upon de-, mand and notice, the margin is not kept good; and he may ' A "short sale'' of stocks is legal the value of the stock as to be able in Peimsylvania (Smith vs. Bouvler, to buy up enough before delivery 70Pa. St. 325; Maxton vs. Gheen,75 would be required. This noxious id. 166). In the case of Applemau kind of speculation was checked by; vs. Fisher (34 Md. 540), a contract to an Act of Parliament (30 Vict. c. sellgold"short"wa3upheldaslega]. 29, 1867), which now requires the See also Chap. VII. " Stock-jobbiug." seller of bank shares to specify the _ "About ten years ago it became numbers or the registered proprietors the practice to rig the market as re- of the shares which he is selling for gards the shares of particular joint- future delivery " (Jevon's Money and stock banking companies. A party theMechanismof Exchange, pp. 210, would be -formed, perhaps, owning 211). But the practice of selling none of the shares of the selected stocks and securities "short "has pte- company, and they would proceed to vailed for a very much longer time in sell considerable quantities of the this country. As to legality of "short shares, hoping so to damage the rep- sales," see title " Stock-jobbing." ntation of the company and lower '54N. Y. 522; 182 Stoch-lrohera and Stock 'Exchanges. close it upon notice after he has carried the stock for a reason- able time. He has not the right, unless so expressly agreed, to buy in stock to cover the sale without notice to, or direc- tion from, his Client, and by so doing he becomes liable for any loss he thus occasions his principal. In that case it ap- peared that, on the 18th of October, defendants (Stock -bro- kers), upon plaintiff's order and on his account, sold 300 shares N. Y. C. " short " at 186. On the 1st of November, without plaintiff's order or knowledge, they "bought in" stock to cover the sale. On the 2d of November, the stock having declined to 180J, plaintiff ordered defendants to cover their sale, to which no attention was paid. The court held that the plaintiff was entitled to recover, and that the proper measure of damages was the difference between the price at which the stock was sold short, and the market price upon the day when the order was received to purchase, with interest, deducting commissions, etc. (5.) Duty of BroTcer to Sell at Price Ordered. The Broker's duty, upon receiving an order to sell stocks short, is analogous to that which he owes in the case of a pur- chase. Where he is ordered to sell at a fixed price, he must, if possible, sell at such price ; if at the market price, he must, as we have seen, sell at the best possible market price, being responsible to his Client for the non-exercise of ordinary care and diligence.' (c.) Nature of Contract made upon " Borrowing " Stoch, and from whom the Stoch may he Borrowed. The practice or usage in borrowing stocks is this : A Broker who has sold stocks " short " borrows the number of shares of stock sold from a fellow -Broker who has the stocks to loan, ' See ante, } III., sub. (o.), p. 118. NatMTe of Coni/raets. — Borrowing Stocks. 183 and pays him the market price for them. Although in sem- blance a sale, the full market price being paid and the stock delirered, it is, in effect, but a loan, and is so registered on the books of the respective Brokers. So, if the borrowed stocks fluctuate widely, either Broker can call upon the other to put up a sufiBcient margin to guard against loss until the stock is returned.' For instance, a stock may be selling for $100 per share when it is borrowed, and afterwards may decline to $50 per share, in which case the borrowing Broker has stock which is only worth one half the amount which he has paid to the lender ; in such a case the borrower has the right to call upon the lender to make up the difference by depositing a sufiBcient margin, and vice versa.'' So, it seems, that a Broker who is "short " of stock for a Client may borrow the stock belonging to other Clients; no one can object to this arrangement but the Clients themselves whose stocks are borrowed, and it does not lie in the mouth of the person " short " to do it." Eapallo, J., upon this point, said : " The fact that the shares thus used belonged to a customer of the defendants can make no difference to the plaintiff. The result of the transaction was to leave the defendants liable to their customer as before, to deliver to him an equal number of shares when demanded. Whether or not the defendants were authorized thus to em- ploy the stock of their customer depends upon the arrange- ments between them." In the case of Dykers vs. Allen,' Mr. Chancellor "Walworth held, that an ordinary loan of a given number of shares of stock of a corporation amounts in sub- stance to a sale, to be paid for in kind and quality, and the ' See Article XVII. J I. of By-laws rowed stock, see chapter " Measure of New York Stock Exchange ; also of Damages." Article XVIII. § 2. ' a Knowlton vs. Fitch, 52 N. T. 288, " As to the measure of damages rev'g 48 Barb. 593. for refusal or neglect to return bor- * 7 Hill, 497. 184 - Stock-lrohers cmd. Stock .Exchanges. . title vests in the boiTower.' If a bonus be declared on stock loaned, while it is in the hands of a borrower, the lender is in equity entitled to the bonus." This law fully accords with the practice of Brokers, who hold all dividends, interest, or other accretion's to the stock for the account of the lender. (d.) Duty of Brokers to Close Short Contract ly " Bvying in " Stock. As we have seen," the Broker has no right to buy in the stocks with which to cover or conclude a "short" sale, with- out the order or knowledge of the Client, unless, after notice and demand of additional margin, the latter fails to respond. Upon the order or request of the Client, the Broker must proceed to buy the stocks, and return them to the person from whom they were originally borrowed, and this closes the transaction. If the stocks can be purchased at a lower iSgiire than that for which they were originally sold, the Client has made a profit ; if otherwise, a loss. In the case of White vs. Smith," the defendants, Stock - brokers, bought in stocks to complete a short sale without the authority of the plaintiff; and, subsequently, the latter directed them to make the purcliase, which the defendants refused to do. The defendants contended that they were not under an ob- ligation to act for the plaintiff, either for any fixed period or to any definite amount. But the court held the rule of law otherwise, and decided that, by the agreement by which the agency was created, no period was fixed for its continu- ance, and the ouly limit as to amount was fixed by margin ov deposit.; and that it could not be revoked by the defend- ants without notice ;. and a renunciation without such notice i' ' See also iFoscllok vs. Greene, 27 ' Vaugban vs.Wood, 1 M. & K. 403. Ohio St. 484; Taylor vs. Ketohum, ' White' vs. Smith, 54 N.Y. 522. 35 How, Pr. (N. Y.) 289. - • 6 Laus. (N, Y.) 5, . Duty of Broker " Buying in." 185 subjected the defendants to a liability for any damages the plaintiff might sustain thereby.' In Knowlton vs. Fitch," the plaintiff employed defendants, who were Stock r brokers, to operate for him in stocks. He was to furnish a margin, and keep it good without notice ; defendants to care for themselves, if he did not. All the transactions were "short sales," defendants selling, deliver- able the next day, and borrowing the stock to deliver until plaintiff directed a purchase to replace the stock borrowed. At the close of a -transaction thus conducted, defendants had to the order of plaintiff $1249.19. The latter then directed the sale of 100 shares of Michigan Southern. De- fendants sold as ordered on account of plaintiff, borrowing the stock to deliver, and placing proceeds to plaintiff's credit. The stock rising in the market so as to exhaust the margin, defendants notified plaintiff to furnish more, and, upon his failure to comply, bought in, to replace the stock, borrowed. In an action brouglit to recover the $1249.19, held, that the defendants were authorized under plaintiff's order to sell, and to borrow the stock for delivery ;. and, upon failure of plaintiff to furnish the necessary margin, ihey had the right to buy on his account; that the purchase was so made; and that therefore a finding that such purchase M'as not made for or on account of plaintiff was error. In the case of Staples vs. Gould," the court held that where a Broker is employed to sell " short " certain stock, deliverable, at any time within 30 days, at the option of the principal, and the Broker sells the stock as ordered, although the. stock advances beyond the extent of the margin deposited with- the Broker,, the latter cannot buy in the stock, without the authorization of the principal, at any time before the 30 days have expired, the time, for delivery ' This case was afflrmed on appeal, a 52 N. Y. 288, rev'g 48 Barb. 593. 54N.Y.522. =9N.y.520. 186 Sfochhrohers and Stock Exchanges. limited by the contract. In that case the plain tifE, on the 15th of January, 1851, employed the defendant^ a Broker, to sell for him 200 shares of Canton Company stock at %&Q per share, deliverable at the plaintiiFs option, at any time within 30 days from date. At the same time, he deposited with the defendant .the sum of $750 "for the purpose of protecting the defendant against loss or damage in the business of such agency." In pursuance of his employment, the defendant on the same day made contracts for the sale to two firms speci- fied in the agreement with defendant. The plaintiff did not at the time own any stock of the Canton Company. On the 20th of January, 1851, the defendant delivered to each of the purchasers the 100 shares of stock contracted to be sold by him, without the knowledge or consent of plaintiff, the stock on that day selling at $80 and $85 per share. At the expira- tion of the 30 days the stock was below %&Q per share. The plaintiff brought an action to recover back the money de- posited with the defendant, and the court held that the plain- tiff had a cause of action, but there could be no recovery under the Stock-jobbing Act. The usage of "Wall Street is, that where stock is sold deliver- able at a future time, the parties to the contract can call upon each other for a deposit to meet fluctuations commensurate with the present market price of the stock. This can be re- peated any number of times, so that each party will remain intact.' But it may be contended, that the legitimate effect of the case just cited would be to put the whole burden of the fluctuations upon the Broker, and to leave the Client en- tirely unburdened in a transaction consummated for his sole benefit, after his margin has been entirely exhausted by the rise in the price of the stocks. This does not seem to be reasonable, but the only relief against the decision would seem ' Art. XVII. } 1, By-laws N. Y. Stock Exchange ; also Art. XVIII. J 2. Duty of Broker '■^Buying in." 187 to be by providing in the beginning of the transaction, either by a deposit or special agreement, for the fluctuations of the market. The full force and influence of this view of the de- cision in Staples vs. Gould will be seen by the following illus- tration : A Client orders his Broker to sell 100 shares of stock " short," seller 60, at $100 per share. The Broker executes the order upon receiving a 10 per cent, margin, or $1000. Ten days after tffis sale the price of the stock is $120, and fifty days after the sale it has risen to $150. Yet it seems that the Broker cannot call upon his Client for further mar- gin, nor buy in the stock without his consent. This is cer- tainly contrary to the usage of "Wall Street; and if the ques- tion were to clearly arise again, the courts would have good reason to reject the decision upon the ground that the case of Staples vs. Gould was really decided upon another point, and that it contradicts the law that the Client is impliedly bound to furnish margins to meet the fluctuations of the market." Or, although no reference is made to this point in the opinion, the decision may be supported upon the ground that the plaintiff had the right to recover back his margins because the stock was bought in by the Broker, and the transaction closed, without any notice to him. While the theory of the law in this respect, when applied to general commercial sub- jects, is correct, that where goods are sold, deliverable within sixty days, at the option of the buyer, there is no liability on the part of the latter until the sixty days have accrued," yet when applied to a Wall Street transaction, where the business is conducted from day to day upon present values, it works manifest hardship and injustice. ' See, upon this point, next sub. ' Oelricks vs. Ford, 33 How. (U. S.) (VII.), p. 188. 49. 188 Stockrhrokers and.Stock Exchanges. VII. Compulsory Sale by Brolier. (a.) For Failure to Put up Margins to Meet the Fluctuations of tJie Market. In the absence of an express contract providing otherwise, the law will not thi-ow the burden or risk of loss from tlie fluctuations of the market upon the Broker^ but will compel the Client, upon a proper demand by the former, to furnish margin sufficient to make the latter safe. In a stock transaction such as we are treating of j it is ex- pressly or impliedly agreed, that the margin shall be -replen- ished, if the stock appreciates or depreciates, as t!ie case may be ; and, upon failure of the Client to do so, the stock may be sold upon reasonable and customary notice.' The relation which exists between a Broker and his Client in the purchase of stocks has already been considered," and it follows," from the establishment of the relation, that the Bro- ker cannot summarily, without any previous demand of mar- gin, dispose of his Client's stocks. He is bound to give the latter notice that his margin is diminished, and that further margin is required.' An injunction, however, will not be granted to restrain a Stock-broker from selling stocks deposited with him as a mar- gin in a speculative transaction, upon a mere general averr ment of irreparable injury, without showing in what respect this injury will be entailed. Where there is no averment or ' Gruman vs. Smith, 81 N. Y. 25 ; ' Supra,' p. 101 et seq., and cases 10 If. Y, Weekly Dig. 63, rev'g 12 J. there cited. «& S. (N. Y.) 389 ; Knowlton vs. Fitch, » Id. ; Baker vs. Drake, 66 N. Y. 52N.Y. 288; Stenton vs. Jerome, 54 518; Gruman .vs. Smith, 81 id. 25; id. 480; and cases cited at p. 103. Eitter vs. Cushman, 35 How. Pr. •See, as to similar rule where grain is (N. Y.) 284; s. c. 7 Eoht. 294 ; Hanks bought upon margin on the Board vs. Drake, 49 Barb. 186 ; Stenton vs. of Trade of Chicago, Corbett vs. Un- Jerome, 54 N. Y. 480. derwood, 83 111. 324 ; Moeller vs. Mo- Lagan, 60 id. 317. Form of Notice. \ 189 proof of the Stock-broker's insolvency, the fact of a " low " market is not enough to justify the issuing of an injunction. The plaintiff in such a case has a perfect remedy at law in damages for the conversion of. his stocks, if they are improp- erly sold.' Nor can a pledgor resist the sale of the stock on the ground that it can only be made at a gi'eat sacrifice.' So where there is a written contract for the delivery of cer- tain merchandise at a given price, to be delivered within a named time at the option of the seller, evidence offered by the purchaser of a usage existing, by which a "reasonable" margin should be put up to meet the fluctuations of the mar- ket, is rightfully excluded, because it is too indefinite and un- certain to establish a usage. Moreover, where there is no doubt or ambiguity on the face of the contract, evidence of the usage is inadmissible.' (5.) Form of Notice;; llpon whopi Served; Reasonable Time. There is no set form which the Broker is obliged to use in making this demand for more margin. Any language is suflS- cient which brings clearly home to the Client a notice that additional margin is required.* In one case ' the demand for more margins was made orally, and this, no doubt, is eq-ually as effective as a written demand, if it can be clearly proved. '■ But it seems that a demand for margins should specify the sum , required ; yet the Client may use such language as " I have no money," which will obviate the necessity of the sum being mentioned." A notice without date or signature, left in 'Park vs. Musgrave, 2 T. & C. Corbett vs. Underwood, 83 ni. 324; (N. Y.) 571. Moeller vs. McLagan, 60 id. 317. ' Rascli vs. His Creditors, 1 La. . ' Cameron vs. Durklieim, 55 N. Y; Ann. 31. 425. •^ Oelrioks vs. rordj23How. (TJ. S.) 'Cameron vs. Dnrkheim, snpra; 49. ' Steuton vs. .Jerome, 54 N. Y. 480, at * Milliken vs. Dehon, 27 N. Y. 364 ; 486. See also Burkett vs. Taylor Cameron" vs. Durkheini, 55 id. 425 ; (N. Y. Ct. of Appeals, not yj3t report- ed, Oct. 1881). 190 Siock-lrolcers and Stock Exchanges. the pledgor's office, stating that if a specified amount of the loan was not paid the stock would be " used," does not consti- tute a demand sufficient to authorize a sale.' Respecting the person upon whom the demand should be made, the general rule is that it should be served upon or made to the Client in person, although there are circumstances which would justify the service of the same upon an agent or representative of the latter." It may be made upon the clerk of the Client employed by him in that particular transaction, or upon a confidential clerk of the Client, where the latter is absent from the city." So a notice left at the dwelling or place of business of the Client would seem to be sufficient. Shaw, Ch. J., lays down the rule ' that " all notices at one's domicile, and all notices respecting transactions of a commercial nature at one's known place of business, are deemed in law to be good constructive notice, and to have the legal effect of actual notice." ' In Burkett vs. Taylor," the Court of Appeals of the State of New York intimated that where a Client had given a place to the Brokers where all notices should be delivered, a notice sent to a different address would not be sufficient. In the case of Milliken vs. Dehon,' the facts showed that the transaction had been negotiated through one D., a clerk of the plaintiff, who sometimes did out-door business for him, and that he acted as plaintiff's agent in the transaction in question. On this evidence the question was left to the jury, whether D. was authorized by the plaintiff to receive the no- ' Genet vs. Howland, 45 Barb. 560. ' See also, to same effect, Bryan " Cameron vs. Durkheim, and cases vs. Baldwin, 7 Lans. (N. Y.) 174; supra. and cases cited under sub. (c. ), ' Milliken vs. Dehon, 27 N. T. 364 ; post, p. 196 ; Burkett vs. Taylor, su- Camerou vs. Durkbeim, supra; and pra. oases heretofore cited. " Court of Appeals, not yet re- * Granite Bank vs. Ayers, 33 Mass. ported, Oct. 1881. 392. ' 27 N. Y. 364. Notice, lepmi WTwm Served ; HeasonahU Time. 191 tice, and that this would depend upon whether D. acted as plaintiff's agent or not. The jury having found that he did act as agent, the instruction was upheld by the appellate court. In delivering the opinion, Marvin, J., said : " It is also insisted that the defendant was bound to make a de- mand of payment of the margin personally of the pledgor, and that notice to redeem should have been given person- ally, and so as to the time and place of sale. ... It seems to me that a demand upon an authorized agent, or notice given to him, is, in law, equivalent to a notice to the principal, and no reasons occur to me why such demand or notice should not bind the principal. It is not a proceeding by which a per- sonal judgment is to be recovered. A different rule would often be very inconvenient." ' And where several are jointly bound to do an act upon notice to them, notice to one is sufficient." Another very important inquiry is as to the length of time which the Broker should give the Client to respond ; this can- not be definitely stated, but the Client should be allowed a reasonable time ' within which to comply with the demand ; and what constitutes a reasonable time depends upon the pe- culiar circumstances of each case. It may be an hour, a day, or a week, depending in each case upon the situation of the partiesj the character of the market, or the nature of the stock.* In Burkett vs. Taylor,^ the court intimated that a notice to ' To same effect, Bank of U. S. ts. Stewart vs. Drake, 46 id. 449; Mary- Davis, 2 Hill (N. Y.), 451 ; Wade on land Fire Ins. Co. vs. Dalrymple, 25 Law of Notice, § 672 et seq. ; Potter Md. 242 ; Willonghby vs. Comstock, vs. Thompson, 10 E. 1. 1. 3 Hill (N. Y.), 389 ; Byran vs. Bald- " Mandeville vs. Eeed, 13 Ab. Pr. win,? Lans. (N.Y.) 174; Burkett vs. (N. Y.) 173. Taylor, N. Y. Ct. of Appeals, not yet ' Markham vs. Jaudon, 41 N. Y. 235, reported, Oct. 1881. at 243. ' Supra. See also Genet vs. How- * Cameron vs. Durkheim, 55 N. Y. land, 45 Barb. 560. 425; Milliken vs. Dehon, 27 id. 364; 192 Stock-hrokers and Stock Exchanges. a Client demanding additional margins before twelve o'cloet of the day on -whicli it is dated would not be a sufficient no- tice in point of time ; also that a notice such as above shotild specify the time and place of sale in Case. of default to supply additional margins. So where the Broker and his Client lived in the same city, a notice for margins, or in default thereof the stock would be sold in two days from the date of the demand, was held timely, and reasonable.' In that case defendants, Stock-bro- kers in the city of New York, purchased for plaintiff certaiil stocks under an agreement that they were to advance the money for the purchases, and he was to keep with them a sat- isfactory ma,rgin or security. A portion of the stock was sold by defendants without giving plaintiff notice of the time and place of sale. Plaintiff repudiated and disavowed the sale. Defendants acceded to such disavowal, and notified plaintiff they would not consider the sale as made on his account, but on their own ; and by both parties it was subsequently treated as a nullity as between them. After that defendants notified plaintiff to furnish additional margin, and upon his failure so to do, in the afternoon of the 28th of April, served upon him personally. a notice, that unless a satisfactory margin was furnishedj or the balance of his account paid, his stocks would be sold at public auction upon the 30th of April, at 12.30 P.M., at a place designated ; and the stocks were sold in accordance with' the notice. The plaintiff was held to have waived his right to recover as for a conversion of the stocks sold at the first sale. His default in furnishing a satisfactory margin, or paying the balance of the account, entitled the de- fendants to enforce tlieir lien by the sale of the stock \ and, the parties living in. the same city, the notice of sale was a timely and reasonable one, and the sale legal. It was held, • Stewart vs. Drake, 46 N. Y. 449. Jieasonahh Time in Giving Nolioe. 193 further, that in an action brought to recover damages for the alleged unauthorized sale of the stock, the answer setting up a counter-claim, it was proper for the referee to state an ac- count between the parties, and to give judgment in favor of defendants for any balance found due them. In the case of Gruman vs. Smith," the court said: "Upon failure to do so [furnish margins], the stock may be sold upon reasonable and custoTnary notice." It thus seems that, in respect to the time given by the notice to comply with the demand, the usages of Brokers may be well introduced to establish a limit, as this is one of the ele- ments which may be assumed as understood in the inception of the relation of Broker and Client." In Milliken vs. Dehon,' which arose out of a transaction in cotton, similar in substance to a stock speculation, the pledgee, as he may be termed, gave the pledgor notice that, if the lat- ter did not make his margins good the next day, he would sell the cotton, which was done, and there was no point raised in the case that the notice was too short. But a ease* which arose out of a speculation in gold most strongly illustrates the question of what is a reasonable time in this respect. ■ There the Brokers had made oral demands for more margins, to which the Client stated, in effect, that he had no money and was ruined, and that the Brokers must take care of themselves, whereupon the latter closed the account by a settlement. This the Court of Appeals held not only to be a waiver on the part of the Client of any more formal demand, but that it also authorized the Bro- kers to close the account in the manner in which they did. Church, Ch. J., in delivering the opinion of the court, said : "The defendants had sold $404,000 of gold short for the '81N.Y.25. '27N.Y.364. ° See chapter on " Usages." ' Cameron vs. Duikheim, 55 id. 425. 13 194 Stockrlrdhers wnd Stock Exchanges. plaintifE, and, according to tlie usual custom in transacting that business, had borrowed the gold to deliver. They had received from the avails of the gold sold, and from the plain- tiff, payment for the gold at 140. On the morning of the 23d gold was quoted at 140J, and at night it reached 143. On that day the defendants called upon the plaintiff for an addi- tional margin of $7481.05, which would secure the gold at 141f . The plaintiff was absent from the city on that day, and his clerk delivered some collaterals to the defendants, ac- companied by a promise to give a check the next morning, which was not done. On the morning of the 24th, at ten o'clock, gold opened at 150, and rose rapidly until, at about half-past eleven o'clock, it reached 162^, and at a quarter-past twelve the market broke and went as low as 136, and soon {ifter dropped to 133. The effect of the sudden and unprece- dented rise in gold, as the evidence shows, was to produce the most intense excitement and consternation among those con- cerned in such transactions. At one time the plaintiff was deficient in margin more than $80,000, while within an hour afterwards he might have closed the transaction with a bal- ance in his favor of something over $25,000. The interviews between the parties took place during the height of the ex- citement, when everything was uncertain. Whether gold would depreciate or go to a much higher figure, whether the rise would continue during the day or for several days, and whether it would remain pernianent or not, were questions of doubt and apprehension. When the defendants called for ad- ditional margins, as they had a right to, if the plaintiff did say to them in earnest and seriously, as claimed, ' I have no mon- ey ; I cannot put up any more margin. This ruins me : I hope it won't ruin you ; you must take care of yourselves,' — it was pregnant with authority and consent that the defend- ants might take any course to save themselves from loss which Eeasonalle Time of NoiAoe. 193 would be deemed prudent and judicious under the circum- stances in which they were placed. It could scarcely have been inore significant if the language had been, ' The sudden rise in gold ruins me, and I now authorize you to adopt any course which will be most likely to save yourselves from loss on my account.' This is the natural import of the lan- guage.".' . In another case" the plaintifE employed the defendants, Stock-brokers, to buy certain stocks on time, making and agreeing to keep good, in the defendants' hands, a deposit, to indemnify them against depreciation in the market value. The stocks having fallen after their purchase, the defendants called on the plaintiff for a further deposit, and he replied that it was not convenient that day, but that he would make it the next day. At the same interview he gave them writ- . ten authority to sell in these terms : " Please sell for my ac- count 200 111. Central K. K. at 51." After receiving this writ- ten authority, the defendants sold the stocks the same day at 52. In an action against the defendants for making the sale, evidence was adjudged competent, on the part of the^ plaintiff, that it was agreed at the same interview, and before giving the aiithority to sell, that the defendants should wait until the next day for a further deposit, and that if the stock went down to 51 meanwhile (at which point the existing de- posit would be exhausted), the defendants might sell the stock. This evidence does not contradict the written power. And such an agreement to delay is not void as being without consideration. The reasonableness of the notice may also depend upon previous dealings between the parties. • But compare Burkett vs. Taylor, " Clarke vs. Meigs, 10 Bosw. (N. Y.) supra, and Genet vs. Howland, 45 337,338. Barb. 560. 196 Stockrlrdkers and Stock Exchanges. So where the question was whether reasonable notice to make a deposit had been given by Brokers to their principal, and all the evidence on the subject was that furnished by a former transaction between the same parties, in which the same notice was given — the Brokers waited until the next morning, when the deposit was made and it was satisfactory — the court held that the principal had a right to suppose that the same course of dealing which had occurred in the former transaction, and was satisfactory to the Brokers, was expected in the present case; and that if the Brokers re- quired compliance in any shorter time, they should have given notice accordingly." (c.) Notice of Sale for Failure to Comply with Demand for Margins. But the mere failure of the Client to furnish margins, after notice of decline or advance in the market, as the case may be, and a demand for margins, is not sufficient to authorize a Broker to sell the stock or close the transaction. He must also give notice of the time and place of sale to the Client." ' Hanks vs. Drake, 49 Barb. (N.Y.) and cases cited under stieceeding 186 ; as to whether this case is over- paragraph. Also Schouler on Bailm. ruled on this point, see Markham vs. 207, note 3. When usage justifies Jaudon, 41 N. Y. 243, per Hunt, Ch. J. Broker iu selling without notice, see See also cases cited under succeeding Corbett vs. Underwood, 83 111. 324. paragraph. So a pledgee cannot sell In this case it was held that where or dispose of the securities until pay- a commission merchant contracts for ment of the note is demanded and the purchase of grain for another, to refused (Lewis vs. Varnum, 12 Ab. be delivered at a future time, the (N. Y.) Pr. 305). principal making an advance on the ' Cases cited under preceding sub- purchase, which is in the merchant's divisions, Gruman vs. Smith, 81 N. Y. name, and agrees to keep the max- 25; Stewart v8.Drake,46id. 449, 450, giu good up to the time of delivery, and 453 ; Wheeler vs. Newbould, 16 the relation of pledgor and pledgee id. 392; Read vs. Lambert, 10 Ab.(N, will not be created, so .is to require Y.) Pr. 11. s. 428; and see, generally, a notice of the time and place of a Cortelyouvs.Lansing,2Caines(N.Y.) sale on failure to keep up the mar- Cas. 200 ; Fletcher vs. Dickinson, gins. 89 Mass. 23; Morris Canal and Bank- So, in England, Stock-brokers who lug Co. vs. Lewis, 12 N. J. Eq. 323 ; have with their own money pur- Notice of Sale. 197 lu respect to the form or contents of tlie notice to the Client, no uniform rule can be laid down, l&o peculiar terms or words need be used. It may be oral or in writing ; and it will be sufficient, if it conveys, by plain and simple language, the nature of the property to be sold, and the time and place of such sale. The notice should state the time 2,^1^ place of sale.' In respect to the time of sale, the general principle is that it should be reasonable. What constitutes a reasonable time depends upon the peculiar circumstances of each case, and no uniform rule can be laid down. The nature of the stock, the residence of the parties, and all the other elements and characteristics of the particular transaction control the question." It is not necessary that this notice of sale should be made separately from, or subsequently to, the demand for more margins. They may both be embraced in one notice." In respect to the person upon whom this notice should be served, it has been detided several times that, in case of a pledge, there must be personal notice of the sale to the pledgor, or a notice left at his residence; and that if the pledgor cannot be found, so as to be served in this manner, resort must be had to judicial proceedings to foreclose the chased stock for a priuoipal are au- App. 57 id. 474 ; Gay vs. Moss, 34 Cal. tliorized to close a transaction witli- 125 ; Robinson vs. Hurley, 11 Iowa, out notice when it is apparent that 410. their Client will be unable to respond ' See this question considered in to any loss, by reason of bankruptcy, the preceding subdivision (6.). Mor- death, or insolvency of the latter ris Canal Co. vs. Lewis, 12 N. J. (Lacey vs. Hill [Scrimgeour's Claim], Eq. 323 ; Diller vs. Brubaker, supra ; L. E. 8 Ch. App. 921 ; see also Colket Conyngham's App. supra; Gay vs. vs. Ellis, 10 Phila. 375; s. c. 32 Leg. Moss, supra; Little vs. Barker, Hoffm. Int. 82). Ch.487; Genet vs. Rowland, 45 Barb. ' Burkett vs. Taylor, N. Y. Ct. of (N. Y.) 560; s. c. 30 How. Pr. 860; App. unreported, Oct. 1881; Lewis vs. Lewis vs. Graham, 4 Ab. (N. Y.) Pr. Graham, 4 Ab. (N. Y.) Pr. 106 ; Cas- 106 ; Ogden vs. Lathrop, 3 J. & S. tello vs. City Bank, 1 N. Y. Leg. Obs. (N. Y.) 73; rev'd 65 N. Y. 158. 25; Markham vs. Jaudon, 41 N. Y. ' Stewart vs. Drake, 46 N. Y..449; 235, at 243 ; Edwards on Bailm. (2d Gruman vs. Smith, 81 id. 25 ; Came- ed.) § 286 and note 3; Diller vs. Bru- ron vs. Durkheim, 55 id. 425; Sten- baker, 52 Pa. St. 498 ; Conyngham's ton vs. Jerome, 54 id. 480, at 486. 198 Stookrlrdk^Ts cmd Stools Exchanges. rights oi the latter.' But notice to an authorized agent is suflBcient." And where it is impossible to give notice by reason of the acts of the pledgor, a sale may be made without notice/ And in some instances a sale may be made after publication of notice thereof in a newspaper.* The case of Wheeler vs. Newbould/ although not one arising out of any stock transaction, is frequently met with in stock cases upon the question of the manner in which the pledgee should proceed to sell the pledge. The defendant, in that case, purposely withheld from the plaintiff all knowledge of the time, the place, and manner of ■sale, and the sale, when effected, was made privately for about three fourths of the actual and nominal value of the securities. The court held that this was illegal. .It was said by Brown, J., that, "if we assume that the defendant had authority to sell the subject of the pledge in satisfaction of his debt, it was nevertheless his duty to give to the plaintiff personal notice of the time and place of the sale. . . . And personal notice to the pledgor to redeem and of the intended sale must be given as well in the one case as. in the other (whether the debt be payable presently or on time), in order to authorize a sale by the act of the party;" and if the pledgor cannot be found, and notice cannot be given him, judicial proceedings to authorize the sale must be resort- ed to. Before giving notice, the pledgee has no right to sell the pledge ; arid if he do, the pledgor ma;y recover the value ' Stearns vs. Marsh, 4 Denlo, 227 ; 'City Bank of Racine vs. Babcock, Garlick vs. James, 12 Johns. 146 ; supra. .Story's Eq. Jut. §1008; Strong vs. * Stokes vs. Frazier, 72 111. 428. Nat'l Bank'g Ass'n, 45 N. Y. 718 ; See also cases cited under preceding Bryan vs. Baldwin, 7 Lans. (N. Y.) subdivision (6.). As to how far this 174 ; Donohoe vs. Gamble, 38 Cal. rule inay be affected by waiver, see 340 ; Pigot vs. Cubley, 15 C. B. (h. s.) post, pp. 204, 212. 701 ; City Bank of Racine vs. Bab- ' 16 N. Y. 392. cock, 1 Holmes (C. C. U. S.), 180. " Sterns vs. Marsh, 4 Denio (N. Y.), " Potter vs. Thompson, 10 R. 1. 1. 227. JHfoUoe of SaU. 199 of it from him without tendering the debt." After a pledgee, , however, has called xipon the pledgor to pay the debt, and ^ has given legal notice of sale, he is not bound to proceed and sell the same. And this doctrine has been directly applied to the case of a transaction between a Stock-broker and his client by the Su- preme Court of Pennsylvania,' where it was decided that, upon the failure of the Client to respond to a proper demand, a Broker who is carrying stock for him, and who notifies the latter by letter to increase his margin or take up the stock, is not bound to sell in default of receiving an answer. The rule is, that a pledgee of stocks or securities is under no obligation to sell the security after default in payment of the debt." In the Granite Bank vs. Eichardson," a creditor holding as collateral security certain bank shares requested the debtor to pay the debt, and notified him that if the request were not complied with immediately the shares would be sold. The debt was not paid, and the pledgee did not sell. The bank subsequently failed, and the shares became worthless. The creditor then began an action to recover the money due him, and it was held that his failure to sell the shares consti- tuted no defence. There was no duty on the part of the pledgee to sell the shares; he simply; held them as security, with perhaps the power to sell attached. The debtor's rem- edy was to pay the debt and redeem the shares. But where the pledgee or Broker neglects to sell after request or demand so to do from his pledgor or Client, it may be that the former would be liable for any loss which might occur in consequence of his omission to sell." Where a pledgee, however, has ac- ' Esser vs. Linderman, 71 Pa. St. Howard vB.Brigha/m, 98 id. 133; Wil- 76. liamson vs. MoClure, 37 Pa. St. 402; = O'Neill vs.Whigliam, 87 Pa. St. Sohouler ou Bailm. 219. 394; s. c. 7 Reporter, 245; Eobinsou " Supra. V8. Hurley, 11 loTva, 410 ; Granite * Howard vs. Brigham, supra ; Bauk vs. EloLardson, 47 Mass. 407 ; Q'Neill vs. Whigjtiam, supra. 200 Stock-hroTcers and Stock Exohcmges. quired the right to sell for his own protection, either by a de- mand or notice, or by waiver of such demand and notice, "all he need do is to act in good faith." ' But in a grain transaction, where the seller, before the time expires for the delivery of grain sold, notifies the purchaser, that unless he places in his hands a deposit to cover a decline in the price of the grain he will sell it, and afterwards does sell it, and notifies the buyer of the fact, he thereby rescinds the contract, and cannot subsequently renew it without the concurrence of the purchaser.' Where a pledgor of securities becomes a bankrupt after a pledge and before the redemption thereof, it has been held that such fact does not in anywise affect the rights of the pledgee to sell and transfer the securities upon the bank- nipt's default. The Bankrupt Act does not take away any right secured to the pledgee by his contract,' nor is leave of the bankruptcy court necessary to sell the stock pledged.* But the mere fact that the Broker sells, without due notice to his Client of the time and place of sale, and by such act com- mits a conversion, does not preclude him from bringing an ac- tion against his Client to recover the debt arising out of the advance made by the Broker to purchase the stock. This point arose in Gruman vs. Smith,' where the action was brought by the plaintiff as tlie assignee of F. & Co., Stock- brokers, to recover a balance due the latter from the defend- ant, growing out of a stock transaction. After the stock was purchased, the defendant, besides leaving some money as a margin, deposited the stock in question with the Brokers, as collateral security. The margin having become exhausted by a sudden decline of the stock in question, the collateral was ' Marfield V8. Goodlnie, 3 Com- * lu re Griuuell, 9 Nat'l Bankr. stock (N. Y.), 62-73. Reg. 137. " Lassen vs. Mitchell, 41 111. 101. » 81 N. T. 25, rev'g 12 J. & S. 389. ' Jerome vs. McCarter, 94 U. S. 734. Notice of Sale. 201 sold without due notice of the time and place of sale. A technical conversion was conceded. The action was subse- quently brought to recover the above balance, the defendant having been first credited with the proceeds of the sale at 90. At the trial, the court nonsuited the plaintiff on the ground that the assignee represented the Brokers, who were the wrong- doers. The plaintiff claimed that this cause of action grew out of the original purchase of the stock in the first place, and not out of its wrongful conversion after it became a col- lateral. On an appeal, the judgment below was afiirmed on the ground that "the defendant was entitled to notice of the time and place of sale, and the sale of the stock with an omission to give such notice was an act of conversion on the part of the Brokers that debars their assignee from maintaining this action against defendant." But in the Court of Appeals, this judgment was reversed and a new trial ordered, on the ground, that a technical conversion of the collateral did not of itself work an extinguishment of the original claim, and that the defendant was only entitled to damages actually sustained. In support of this view. Baker vs. Drake' and Markhara vs. Jaudon" were cited. But this case differs from all the others in that the action was brought by the Brokers, or a party representing them, and not by the Client whose stock was converted. The action was not based upon the wrongful sale, but upon the debt for the advance made by the Brokers to purchase thet stock. The title of the stock when purchased was in the de- fendant ; the advance of the whole or a portion of the pur- chase-money created the relation of debtor and creditor; and the stock put up as security, together with any additional amount called a margin, was a pledge to secure the debt. > 53 N. Y. 211. " 41 id. 435. 202 Stooh-brohers and Stock Exchanges. The defendant was not bound by the sale for want of no- tice, and might insist upon full indemnity for his loss or in- jury ; but such loss was not necessarily the whole amount of the plaintiffs claim. The court, by Church, C. J:, upon this latter point said : " The stock sold at 90. Suppose that was then its full value, and it had gone down to 60 and i-emained there, it is. very clear that, so far from being injured, the defendant would have been benefited by the sale. The defendant cannot claim a greater benefit than would have been derived if the act com- plained of had not been committed. The defendant might have shown that the market value of the stock at the time of the sale exceeded the price for which it was sold, and he was entitled to a reasonable time after notice of the sale to replace the stock; and if in the meantime it had advanced in price, the defendant would have been entitled to the difference. Be- yond this, he was not legally injured." ' So when Stock-bro- kers are sued for illegally converting plaintiffs stocks, they may interpose a counter-claim for the deficiency on such sale.° . And these propositions were again confirmed by the N. T. Court of Appeals in October, 1881.° In that case the plain- tiffs, who were Brokers and copartners, brought an action to recover an amount claimed to be due upon an alleged agree- ment as to the sale and purchase of stocks on defendants' joint account. It appeared that plaintiffs purchased for de- fendant T. 56,650 shares of a certain stock. The referee, in stating the account between the parties, credited plaintiffs with 24,200 shares sold by them, and excluded from such ac- count 32,450 shares, although he found that plaintiffs had bought and paid for the latter on account of the defendant T. ■ 81 N. Y. 25. ' Capron vs. Thompson, 13 N. Y. "" Wioks vs. Hatch, 62 id. 535. To Wwkly Dig. 199. same effect, Work vs. Bennett, 70 Pa. St. 484. Notice of Sale. 203 As to them, he also found that on April, 20, 18Y4-, they were not in the possession of plaintifEs, but prior to that time had been pledged by them for a loan of money for their use, and had never been tendered to T. and the amount due thereon demanded. He found, as conclusions of law, that plaintiffs could not recover for the purchase of said 32,450 shares, un- less they showed performance of a contract on their part. He also found that the pledge of the stocks, and suffering them to be sold by the pledgee, was not such a performance ; and that defendants were not bound to redeem the stock so pledged, and plaintiffs could not recover for the purchase of such stock. Plaintiffs claimed that their pledge of the stock was not a failure to perform a condition precedent, but a breach of a condition subsequent, which is to be compensated in this action by a recoupment or counter-claim of the damages. Held, that the finding of the referee was erroneous ; that the purchase of the stock was upon T.'s account, and was a proper charge against him ; and the sale of the stock was a failure to perform a subsequent duty, and no condition pre- cedent was broken which prevented plaintiffs from charging T. for the purchase of the stock. And where a minor has employed a Stock-broker to buy stock for him, and,, on coming of age, has repudiated , the transaction, and retracted the authority given to the Broker, a sale of the stock bought by the latter, without notice or de- mand of payment on the Client, is a tortious conversion of the stock ; and in an action by the Broker for the loss on the stock, undei" such circumstances the Client is entitled to re- cover, under a counter-claim, the amount deposited by him with the Broker to cover margins.' ' Heath vs. Mahoney, 24 Hun but, finding the price rapidly going (N. Y.), 341 ; s. c. reported more fully, down, sold it for his own protection ; 12 N. Y. JFee&Zy Dig. 404. A Broker and, on the refusal of his principal commissioned to buy corn did so, to ratify the sale, replaced it, and 204 Stoch-lrokers and Stock Exchanges. This right to notice of sale, however, may be waived, either expressly or by implication ; or, where there has been no no- tice, or an insufficient notice, the proceedings thereunder may be confirmed or ratified by the acts of the pledgor/ In Stenton vs. Jerome," the question arose as to how far a conversion of the Client's stocks may be waived by a subse- quent payment of an apparent balance of account to the Bro- kers. There the Brokers had committed a conversion by an unauthorized sale of stocks, without a previous demand of margin. This wrongful sale was made on the 11th of Janu- ary, 1866, and a notification of it sent to the Client. On the 14:th of January the Brokers made up the account, showing a small balance due them, and leaving in their hands as secu- rity for such balance certain United States bonds. Subse- quently the Client called and complained of the manner in which she had been treated. The Brokers having written several letters stating that unless the balance was paid they would sell her bonds, she finally, being in ill-health, and her husband having met with a serious accident needing her at- tention, and having pressing need for her bonds, wrote to her Brokers informing them of these facts, and sent therewith the balance of account ; thereupon the Brokers delivered the United States bonds to her messenger. She subsequently brought an action to recover damages foi; the unlawful con- teudered the elevator receipts. .The vs. Hugg, 41 Cal. 519; Bryson vs. principal refused to receive them, Eayner, 25 Md. 424 ; Hyatt vs. Ar- aud the Broker sold the corn. Both genti, 3 Cal. 151 ; Loomis vs. Stave, sales were made at a loss, and the 72 lU. 623 ; Md. Fire Ins. Co. vs. Dai- Broker sued his principal for dam- ryraple, 25 Md. 242-264; Colket vs. ages. Held, that in estimating dam- Ellis, 10 Phila. 375 ; s. c. 32 Leg. Int. .ages the first sale was immaterial 82; Baltimore Marine Ins. Co. vs. (Gregory vs. Wendell, 40 Mich. 432). Dalrymple, 25 Md. 269; Hamilton vs. ' Sparhawk vs. Drexel, 12" Nat'l State Bank, 22 la. 306; Clark vs. Bankr. Reg. 450 ; Gruman vs. Smith, Bouvain, 20 La. Ann. 70 ; Searing vs. 81 N. Y. 25, rev'g 12 J. & S. 389 ; Butler, 69 111. 575. But see Kenfield Stenton vs. Jerome, 54 N. Y. 480 ; vs. Latham, 2 Cal. Leg. Eec. 235. Milliken vs. Dehon, 27 id. 364 ; Child » 54 N. Y, 480. Notice of Sale. 205 version of her stocks. The court of ultimate resort, affirm- ing the judgments of the lower tribunals, held that the action of the Client in accepting the account did not constitute an account stated between the parties ; and that her subsequent payment of the balance for the purpose of obtaining her bonds was not voluntary, but compulsory, constituting a duress of goods. One of the learned judges held that an action could have been sustained to recover back the balance paid to the Brokers ; and that inasmuch as the present action was one of conversion, it, having once vested, could only be discharged by release under seal or the receipt of something in satisfaction.' But where a sale. of mining stocks was made without noti- fying the pledgor to make his margin good, and without suf- ficient notice of time and place of sale, still, if the pledgor knew of the time and place and made no objection, and, after the sale, he was presented with an account in which he was credited the amount received at the sale, and he admits the correctness of the same, approves of the sale, and promises to pay the balance claimed — these facts are sufficient to show a ratification of the illegal sale, and the court will not disturb the same." But where the notice of sale was dispensed with, but de- mand for payment of the debt was not, it was held that the Broker who sold his Client's stock without notice and withoxit demand was guilty of a conversion of the stock, and was lia- ble in damages." Where, however, there has been a waiver of demand, or of notice of time and place of sale, there is still an obligation resting upon the pledgee to act with entire good faith, and to sell the securities for the highest price that he can obtain.* • To same effect, see Clarke vs. ' Kenfield vs. Latham, supra. Meigs, 10 Bosw. (N. Y.) 337 ; s. c. 22 ' Sparhawk vs. Drexel, 12 Nat'l How. Pr. 340. Bankr. Eeg. 450, at 471 and 472 ; Genet ' Child vs. Hugg, 41 Cal. 519. vs. Holland, 45 Barb. (N. Y.) 560; 206 Stocltrbrok&ra and Stock Mschanges. ' (d.) Place of Sale. The preliminary steps having been properly taken, the next inquiry is as to the ^lace where the sale should be made. In the case of an ordinary dealing in stocks, where a Client orders his Broker to buy or sell, the place where the purchases or sales are to be made is at the Stock Exchange, unless the Bro- ker is otherwise directed. That is the place where transac- tions of this description are customarily made, and, by em- ploying a Stock-btoker, the Client impliedly authorizes him to perform the business in the manner and at the place estab- lished by local usage.' And, on the other hand, the Broker, in his dealings for his Client, is likewise restricted by usage, and he violates his instructions by buying or selling in any other manner or place than that which usage justifies." But what is more particularly intended in this connection is to ascertain the proper place for buying or selling the stocks where the Client is in default of margins after proper de- mand and notice, or where the Broker desires to close the transaction and the Client refuses to " buy in " or receive the stocks which are being " carried " for his account, or to author- ize the Broker to do so. In the first place, where the Client is " short " of stocks, and by a rise in the price his margin is exhausted, it would seem to be reasonable that the Broker, after due demand and notice, should be at liberty to " buy in " the stocks and close the transaction at the Stock Exchange. The very nature of a " short " sale requires that the Broker should make the pur- chase at the Exchange, which is always open, and where stocks may be bought at any time during the regular hours of busi- ness. It would be absurdly incongruous to hold that where, Fitzgerald vs. Blooher, 32 Ark. 742; ' Ro8enstockvs.Tormey,32Md.l69. and cases just cited, ante, p. 304, ' Id. ; see also title " Usages." Place of Sale. 207 on a short sale, the Client was in default, the Broker should be required to make the purchase of the stock at public auction. The Broker would have no power to compel a public auction to be held, or to force any one to put up the kind and amount of stocks which he desired to buy. There would therefore seem to be no room for doubt that the Broker, in such a case, could make the purchase at the Exchange.' But a different and more difficult question arises in a case where a Client is " long " of stocks and the Broker is carry- ing them for his account. In this event, as has been observed, the Broker occupies the relation of a pledgee to his Client, and upon failure of the latter to supply proper margins to meet the fluctuations of the market he may, after proper notice to the Client, as we have seen, sell the same. Where ? Is the answer to be determined in precisely the same manner as if the case were one of pure pledge, as, for instance, where money is advanced upon the security of personal property and the pledgor refuses to redeem it ? Or, will the courts take into consideration the important element of usage, and hold that a sale made at the Exchange is binding upon the Client ? Tlie general principle is, that the pledgee of stocks must sell the same at public auction." The rule confining the place of sale to a public auction is very old and uniform. The theory of the law is, that the sale should be made at some place where all the parties interested may have an opportunity to attend and see that it is fairly conducted ; that the pledgor may exert himself in procuring buyers, and thus enhance the price, and give him the right to redeem the pledge at any moment before the sale should be ' See authorities cited ante, under Wheeler vs. Newhould, 16 id. 392 ; § VI., appertaining to a short sale, Edwards on Bailra. J 283; Sohonler especially Knowltou vs. Fitch, 52 N. on Bailm. 209; Tyler on Usury, etc. Y. 288. 585 et seq. = Milliken vs. Dehon, 27 N. Y. 364; 208 StooTcrlrohers and Stock Exchanges. actually made.' And, in the absence of express agreement authorizing a different mode, there are eases that undoubted- ly hold that mere local usage to sell at private sale cannot be allowed to modify this right of the pledgor.'' In furtherance of this general rule, the courts have repeatedly held that a sale of pledged stocks cannot be made at the Board of Brokers in New York city, unless there was a stipulation to that effect, for the reason that by the regulations of the Board the sales are essentially private, no one being allowed to enter the room but members." It will be observed that, in all of the cases just cited, the relation of pledgor and pledgee existed between the parties, hut that such relation did not grow out of speculations in stocks ujpon margins, save in the case of Brass vs. "Worth. In that case, however, the Brokers had sold the Client's stock without any notice to him that his margins had become exhausted, and the court said, " The defendants claim the right to sell the property pledged without notice to or knowledge of the pledgor the moment prices sank so that the collaterals de- posited are no longer equal to the margin of the five per cent, stipulated in the contract ;" and that this fact, coupled with the sale being made at the Board of Brokers, a place that the court held was private, rendered the transaction nugatory. But the grounds upon which these decisions are based, hold- ing that a sale at the Stock Exchange, in the absence of express agreement, is invalid, will, we think, when carefully examined, be found faulty and untenable at the present day. In the first place, a sale at the Stock Exchange is not in any broad 'Id. cases cited. Edwards on Bailm. ° Brown vs. Ward, 3 Duer, 660 ; § 283, and cases cited in notes 2 and Wheeler vs. Newbould, 16 N. Y. 392 ; 3. Story on Bailm. (9th ed.) % 310, note = Id. ; Wood vs. Hamilton, cited in 3 ; but compare DyUers vs. Allen, 7 Castello vs. City Bank, snpra ; Eiin- Hill, 497 ; Castello vs. City Bank, kin vs. McCiiUough, 12 Barb. (N. Y.) 1 N. Y. Leg. Oba. 25, and other 103 ; Brass vs. Worth, 40 id. 648. Place of Sals. 209 sense made ^privately ; it is in almost every respect a public sale. While it is true that Tie Stock Exchange is, to a certain extent, a private organization, from which all persons are sedu- lously excluded who are not members, yet it is the great mart for disposing of and establishing the prices of stocks ; and in no public exchange could they be sold to better advantage. And although strangers are not allowed to attend and bid, they can always be represented by Brokers of their own choos- ing, who will carry out the wishes of their principals. In Sparhawk vs. Drexel,' Cadvvalader, J., in overruling an objection to a sale made at the Stock Exchange, says : " As to the mode, I am not aware of any reason that the sales should have been by auction. On the contrary, I think that, consid- ering the nature of the seciirities, this would not have been an advantageous mode of disposing of them, if there was a fair market for them at the Stock Exchange, or Brokers' Board, where the ruling prices ordinarily fix the standard value, from time to time, of such securities. If the times of sale were proper, this mode was unobjectionable." In that case, however, there was an express authority to sell at public or private sale. It seems almost absurd to call a great mart like the Stock Exchange a private place, in face of the patent fact that" all prices are established there ; yet, as has been seen, the above cases hold that, in the absence of an agreement giving the pledgee a right to sell privately, a sale at the Board of Brokers does not answer the requirements of the general law of pledges, requiring a sale of the pledge to be at public auction. In the second place, the closing of a speculative transaction in stocks is different from that of an ordinary pledge. The parties to a stock speculation intend that the transaction shall be carried on and consummated at the Stock Exchange ; in- ' 12 Nat'l Bankr. Eeg. 450, at 470. 14 210 Stock-'brdkefs cmd Stock Exchcmges. deed, there is no other place where such a speculation can be engaged in. It is, therefore, but reasonable that the Broker should be allowed, after giving all necessary preliminary no- tices, to close the transaction by a sale of the stocks at the Stock Exchange, and the introduction of the usages of Stock- brokers might go very far towards effecting this result. This was the view adopted by the Court of Appeals of Maryland as early as, 1866,' after a review of the New York cases holding to the contrary. The court said : " . . . Con- sidering the requirements of the law, and the reason and nat- ure of the transaction, we are of the opinion that the most proper and suitable place for a sale of stock is at the Board of Brokers. There is 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 ; a,nd unless there be, in the particular case, some ground for impeaching, their fairness, we are of opinion they are reasonable and ought to be supported." And this doctrine was afterwards expressly confirmed by the same court.' And it has been held ' that where a pledgor is notified that a sale of his stocks will be made at the Board of Brokers, if he is dissatisfied with the place of sale he must promptly dis- sent, or his silence will be understood as an acquiescence. In Dykers vs. Allen,* however, the Supreme Court of New York held that where authority was given to sell stock at the Board of Brokers the sale must be openly made. The court, upon this point, said : " The authority to sell the stock in question at the Board of Brokers for the payment of the ' Md. Fire luB. Co. vs. Dalrymple, by Markham vs. Jandon, 41 N. Y. 235 ; 25 Md. 242-265. aud tho question was raised, but not ° Eosenstock vs. Tormey, 32 Md. decided, in Child vs. Hugg, 41 Cal. 519. 169; see also in this connection Sche- ' Willoughby vs. Comstook, 3 Hill peler vs. Eisner, 3 Daly (N. Y.), 11, (N. Y.), 389. which, however, is in effect overruled ♦ 7 Hill (N. Y.), 497. Place of Sale. 211 debt, if such debt was not paid when it became due, did not authorize the pledgees, even if they had retained the stock in their own hands, to put the sa/me wp secretly. But they should have put up the stock openly, and offered it for sale to the highest bidder at the Board of Brokers, stating that it was stock which had been pledged for the security of this debt, and with authority to sell it at the Board of Brokers if the debt was not paid. In this way only the stock would be likely to bring its fair market value at the time it was offer- ed for sale. And in this way alone could it be known that it was honestly and fairly sold, and that it was not purchased in for the benefit of the pledgees by some secret understand- ing between them and the purchasers." Altogether, the law upon this subject is in a very unsatis- factory condition; and if the remarks just quoted are accepted as correct, it is rendered even more uncertain. But we be- lieve that the rule is otherwise, and that an authority to sell at the Board of Brokers includes the jjower to sell in ac- cordance with the ways and manner in which sales are ordi- narily conducted at that place. A statement preceding the sale, that the stocks were being sold to close a transaction, as indicated above, would not en- hance the price of the same, and would be of no conceiva- ble benefit to the pledgor.' Upon the whole, we are inclined to think that, taking into consideration the character of a speculative transaction in securities on margin, the courts would uphold a sale at the Stock Exchange for the reasons heretofore advanced. Where several different kinds of stock are pledged as security for different loans, a judgment direct- ing a sale in gross of all the stocks is erroneous. . Unless the several stocks are pledged as security for the same debt, it is 1 See, as generally sustaining the N. Y. 535 ; Ogden vs. Lathrop, 65 id. above views. Wicks vs. Hatch, 62 158 ; Quinoey vs. White, 63 id. 370. , 212 StooJc-'brole&r'a and Stock Exchomges. not proper to apply the proceeds to the payment of the entire indebtedness." The doctrine of waiver may exercise a very important in- fluence on all the questions heretofore discussed ; because it has been held, in a number of cases, that the pledgor may waive his right not only to a notice of sale, but as to the man- ner and place where the sale should be made. This waiver, moreover, need not be expressly entered into by the pledgor, but it maiy be inferred by the court from the nature of the transaction, or the surrounding circumstances thereof.' And the pledgor may waive his rights to object to the informality of the proceedings of the sale of the pledged article by con- duct on his part amounting to a ratification.' So acquiescence by a principal in the wrongful acts of his agents, to amount to a ratification, must have been continued for some length of time, and the principal must have been cognizant of his rights." A principal, however, is not necessarily to be deemed to have ratified a wrongful act of his agent so as to exempt the agent from liability to him, merely because he" does not notify to the agent his dissent at the earliest possible oppor- tunity after being informed of the wrongful act." But the ratification may be inferred from circumstances, as where the agent exceeds his authority a subsequent assent may be in- ferred, and the law will consider it as equivalent to an express ratification.' ' Mahoney vs. Caperton, 15 Cal. Clark vs. Bouvain, 20 La. Ann 313. 70. " See oases heretofore cited, p. 204. * Brass vs. Worth, 40 Barb. (N. T.) Bry son vs. Ray ner, 25 Md . 424 ; Hyatt 648. vs. Argenti, 3 Cal. 151; Loomis vs. ' Clarke vs. Meigs, 10 Bosw. (N. Y.) Stave, 72 111. 623 ; Md. Fire Ins. Co. 338. V8.Dalrymple,25Md.242,264; Balti- "Searing vs. Butler, 69 111. 575. more Marine Ins. Co. vs. Palrymple, As to what will constitute an admis- id.269; Colket v8.ElUs,10Phila.375; sion and ratification of the acts of B. c. 32 Leg. Int. 82. a Stock-broker in a series of stock 'Hamilton vs. State Bank, 22 Iowa, speculations, see Saltus vs. Geniu, 3 306; Child vs. Hugg, 41 Cal. 519; Bosw. (N. Y.) 250. Sale or Pwrchase. 213 {e.) Broker Gomnot Sell or Pwchase.' The general rule of law which governs the relation of prin- cipal and agent is applicable to that existing between a Stock- broker and his Client ; and it is well settled that an agent cannot, without the knowledge and consent of his principal, either sell to or buy from the latter. The principle is based upon the obvious reason, that the position of an agent being one of trust and confidence, many frauds and undue advantages would creep in if the law sanc- tioned his dealing with his principal in his own behalf. Such a transaction is therefore considered a breach of the agent's duty, and the contract is subject to rescission, irre- spective of any question of intentional fraud or actual injury.' The law rejects indiscriminately all transactions, whether purchases from or sales to the agent, and whether there is any evidence or intention of frand or not. The mere fact of a purchase by an agent from his principal, without the knowl- edge of the latter, ipso facto vitiates the transaction. Hence it would seem that although the agent paid the full market value for the article in question, and that no higher price could be obtained, yet there is no answer in the mouth of the agent to an action to set the transaction aside. Bat how far should this rule be followed in a case where the stocks are sold or purchased by the Broker at the Ex- ' Conkey vs. Bond, 36 N. Y. 427 ; Marye vs. Strouse, 5 Fed. Eeporter, Taussig vs. Hart, 49 id. 301 ; also 483 ; Gillett vs. Peppercorne, 3 Beav. s. c. 58 id. 425; Pickering vs. De- 78; Kimber vs. Barber, L. E. 8 Ch. merritt, 100 Mass. 416; Day vs. App. 56; Bentley vs. Craven, 18 Holmes, 103 id. 306; Quinoey vs. Beav. 76; Trevelyau vs. Charles, 9 White, 63 N. Y. 370 ; Eobinson vs. id. 140 ; Dunne vs. English, L. E. 18 MoUett, L. E. 7 H. L. Eng. & I. App. Eq. 524 ; Common w. vs. Cooper, 15 Cas. 802 ; Brookman vs. Eothschild, Am. Law Eev. 360. Nor can he sell 3 Sim. 153, 224 ; s. c. H. L. 5 Bligh. to a firm of which he is a member (n. s.) 165; 2 Dow. & CI. 188; Crull (Martin vs. Moulton, 8 N. H. 504) ; vs. Dodson, Maou. Sel. Cas. 114 ; 4th Kent's Comm. (7th ed.) 475. 214 Slock-'brdhers cmd Stock Exchcmges. change? Suppose A., who has 100 shares of stock in the office of a Broker, directs the latter to sell the same; can the Broker himself purchase the stock at the Board of Brokers at the market price? Or suppose the Broker is directed to sell the stock, and by another Client is directed to buy the same kind of stock ; can the Broker legally execute both of the orders by a simple transfer through his books at the mar- ket price ? We should answer both these questions negative- ly ; for, while the Broker might show that his principal was just as much benefited as if a third person had bought the stock, yet the opportunity for fraud would be obviously too great to establish any other rule. The Broker, knowing the temper of the market, might sell his Client's stock when the prices were lowest, so as to buy cheaply for himself. Or he might sell the stocks when the market would not take so many shares without a great sacrifice of the real price. Al- together, the reasons seem to be too strong to authorize a departure from the general rule, even where the sale or purchase takes place at the Open Board. In the State of New York these views have received con- firmation in the case of Taussig vs. Hart,' where Brokers trading in stocks on a margin for a Client had made, among other transactions, a purchase for the latter of 100 shares of Pacific Mail, which they had subsequently transferred from de- fendant to themselves, reporting to him the existing market price and crediting him therefor. The court held that the Client had the right to treat the sale of this stock by the Brokers to themselves as void, and to demand an actual sale of the stock, in which event he would incur the risk of any loss arising from its depreciation, and be entitled to the bene- fit of any rise, or he eould elect to affirm the sale and hold the Brokers to the price which they had reported; but he ' 49 N. Y. 301. Sale or Pv/rohase. 216 could not do both. If the Brokers, after taking the stock to their own account, sold it at an advance, the Client could charge them with any profit realized by them from the trans- action, or he might treat them as having converted the stock to their own use, and charge them with damages for the con- version ; but he could not charge the Brokers with the price or value of the stock, either as purchasers or as having con- verted it, and at the same time claim that the stock is undis- posed of, and the account for that reason not closed. The rule we are considering was likewise most impressively laid down by the House of Lords in the year 1829 in the case of Brookman vs. Eothschild.' This case arose out of a trans- action with the well-known banking house of Eothschild. It appeared that the plaintiff was a holder of 20,000 French rentes. The defendant resided in London, and dealt largely in foreign securities, and had contracted for the Prussian loan ; he was also a partner with his brothers in the Paris firm. The plaintiff employed the defendant to sell his rentes. The defendant, without the plaintiff's knowledge, purchased them for himself and his partners, but gave the plaintiff the market price. The plaintiff then purchased Prussian bonds of the defendant, and agreed that they should remain in his hands as a security for the purchase-money, which remained unpaid, but no bonds were appropriated or set apart for the plaintiff. The defendant, however, had always in his hands bonds to a greater amount. Subsequently defendant was directed to sell the bonds; and he informed the plaintiff that he had sold them accordingly, and gave the plaintiff credit for the alleged price. The plaintiff then purchased 115,000 rentes of the de- fendant, which he was to pay for on a future day, and the rentes were then to be transferred to him ; but no rentes were set apart for the plaintiff or identified as belonging to him. ' 3 Sim. 153; aff'd in H. L., 5 Bligh, 165. 216 StooTcrbrokers and Stock Mechomges.^ Before the day of payment arrived, the defendant, by the plaintiff's desire, sent an order to his partners to sell the rentes; and they subsequently informed the plaintiff that they had sold them accordingly, and gave the plaintiff credit for the alleged proceeds. The accounts between the plaintiff and de- fendant were afterwards settled, and the plaintiff paid the bal- ance which appeared due from him to the defendant. Four years afterwards, the plaintiff having discovered that the 20,000 rentes had been purchased by the defendant and his partners, and that there was no appropriation on the two after-pur- chases, filed his bill to have all the transactions set aside. The vice-chancellor, in an elaborate opinion, sustained the plain- tiff's claim, and set the transaction aside. Upon appeal to the House of Lords, this decree was unanimously sustained with- out hearing the respondents. Lord Wynford, who delivered an opinion of great force, but which is extraordinary in its opening, said :"...! am very sorry to say that, with respect to one of the parties in this case, it is perfectly clear that he is a most desperate gambler in the funds, and he has met with that fate which most of those meet with who become such gamblers ; for I belie.ve, whenever a man puts his foot into the Stock Exchange, not being a member of that Stock Ex- change, his ruin is certain, and the only question is a question of time." He then proceeds with his opinion, some extracts from which vividly illustrate the subject upon which we are treating. " It has been said at the bar, that if a man in the country sends to his Broker in London, and desires him to sell stock for him, the Broker in London may take that stock for himself, and charge him with the day's price on it. If Brokers in London do this, I have no doubt they do it fairly; but I will take leave to say that Brokers in London are not to be trusted in these things any more than any other descrip- tion of agents. If I live in Dorsetshire, and I write to my Sale or Pwrchase. 217 Broker in London to sell my stock, I fancy that I have the advantage of that Broker's assistance as to the day on which it is proper to sell. I fancy that, living in London, he has a knowledge of the facts which will act on the market. If the Broker in London, instead of going to the Stock Market, or instead of exercising a discretion as to the period when he should sell any stock, is to take that stock to himself, he deprives me of the security I have and the confidence I repose in his skill and intelligence ; and if there is a loss to me, he is the person who takes advantage of that loss. I take it to "be a general principle of law and equity that a man cannot be a seller for me and a buyer of that property himself." ' This principle is also forcibly illustrated by the case of Gillett vs. Peppercorne." There the defendant, a Stock-broker, was largely interested in the shares of a water- works company, of which he was also an active director. Having recommended the plaintiff to make investments there- in, the plaintiff in May, 1826, December, 1830, and January, 1831, respectively, purchased through the defendant twentj- five shares in the company, which shares were transferred to the plaintiff by certain persons who held them as trustees for the defendant, and who so held them simply to enable the defendant to make a transfer of the shares through third par- ties. Some of the shares had, after their purchase, been trans- ferred by the plaintiff to his sons by way of advancement ; but they were retransf erred the day previous to the institution of the suit. The plaintiff made the discovery of the real nat- ure of the transaction in 1837; and in 1838 he filed his bill to set aside the transaction on the ground that it was not com- petent for a Stock-broker, or agent employed to purchase, to sell his own shares to his principal in the name of another ' See also CrnU vs. Dodson, Maon. ° 3 Beav. 78. Sel. Cas. 114. 218 Stoch^okers and Stock Exchanges. party. The court so held. The court found that in one of the transactions the defendant acted as a gratuitous agent of the plaintifiE, but held that this made no difference, and that the same principle would apply; and it refused to counte- nance such a transaction because it was said to be an every-day practice among Brokers. The court, in its opinion, said that the plaintiff might say, " Put me in the situation in which I was before. Whether these shares were of greater value or not, I do not choose to be at the risk of selling the shares which now stand in my name. They have been transferred to me in a manner which the law does not warrant, and I de- sire to be placed in the situation in which I should have been If the transaction had not taken place." The court directed that the defendant should take back the shares, with all the dividends which had been paid upon them ; and he ought to pay to the plaintiff the purchase-money, with interest, and the costs of the suit. In regard to the question of laches in dis- covering the fraud and bringing the suit, the court said : " It is not sufficient to say that the plaintiff, being a proprietor, might have gone to the books and made a search, and found out all these matters, or that the son, being a director, and having the books before him, might have made the search; the knowledge, in my opinion, ought to have been brought home to the plaintiff — and this has not been done." The court also held that the transfer of the shares made previous to the suit did not affect the plaintiff's right of action. "When the case of Taussig vs. Hart,' before referred to, came before the Court of Appeals of New York for a second time, the court reiterated the doctrine that, upon an order by a Client to buy stock, the Broker could not deliver his own, "for the reason that the law does not permit an agent employed to purchase to buy of himself. It is no reason that ' 58 N. Y. 425. Sale or Pu/rchme. 219 the intention was honest, and that the Brokers did better for their principal by selling him their own stock than they could have done by going into the open market; The rule is inflex- ible, and although its violation in the particular case caused no damage to the principal, he cannot be compelled to adopt the purchase." And the case of Kobinson vs. Mollett ' carries the principle still further, by establishing the rule that not even a local custom of Brokers will sanction a Broker in selling his own goods to his principal, without the knowledge and consent of the latter. In that case, plaintiff, a merchant in Liverpool, gave orders to a tallow Broker in London to buy certain quantities of tallow for him. The Broker did not buy the specified quantities from any person, though he sent bought notes in the nsual form — " Bought of A. on your account ;" but, both before and after the order, he bought from various persons in his own name larger quantities of tallow, proposing to allot to plaintiff the quanti- ties he had desired to be bought. On plaintiff's refusal to ac- cept, the Broker sold the tallow and brought an action for the difference. This case was very elaborately argued by counsel and decided upon several different opinions, the judges being unanimous, except one, that the suit could not be maintained ; and although the evidence showed such a mode of dealing to be the usage in the London tallow market, it appearing that the principal had no knowledge of it; that the mere fact of employing a Broker to execute a commission as a Broker in a market where such usage prevails would not make the principal liable; and that mere usage, without express knowledge and assent, could not be admitted to con- vert a Broker employed to buy for his employer into a prin- cipal to sell for him. Quoting the language of Willes, J., • L. E. 7 H. L. Eng. & I. App. Cas. 802. 220 StockrJyrdhera Communications not Privileged, 235 rule of law is that if the Broker's services are wholly abortive, or executed in such a manner that no benefit results from them, he is not entitled to recover either his commissions or even a compensation for his trouble. That the question is one of due diligence and ordinary skill, and the want of this may be the result of inattention or incapacity. It is not necessary in such case for defendant to show actual fraud." It has also been held that a Broker employed to purchase government bonds for a Client cannot act in the same trans- action as agent for the seller, and receive commissions from both sides, although this may be done where the Client ex- pressly assents to the same." XL Communications hetween Broker and Client not Privileged. A wise public policy dictates that certain kinds of evidence should not be received in legal controversies, either because of the confidential relations existing between the parties, as in the case of husband and wife, or because of the subject- matter of the evidence itself. Under this last head are included secrets of State and papers and communications con- fided by a Client to his legal adviser. In the latter case the attorney's mouth is not sealed because of the confidential rela- tions existing between him and his Client, for the privilege was not extended to other professions by the common-law, but because the interests of justice demand that the Client should be able to lay before his counsel the full facts of his case without fear of future disclosure ; and this not only for his own assurance, but also to enable the attorney to exercise properly the duties of his profession.' ' For cases where Stock -brokers ' Levy vs. Loeb, N. T. Ct. of App., have sued for commissions earned in not yet reported, Oct. 1881. illegal transactions, and for money ' The earliest reported case on the- laid out, etc., in the same, see chap- subject is Berd vs. Lovelace,. Gary, ter "Stock-jobbing."' (anno 19 Eliz.), 88; see also Green- 236 Stoek-lrokers and Stock Exchanges. It may be added that in some of the states the same pro- tecting policy has been extended to confessions made to a clergyman, in the course of the discipline enjoined by the rules of his denomination, and to knowledge gained by a physician in attending a patient, which knowledge was neces- sary to enable him to prescribe for the disease.' And in Eng- land,' Best, C. J., said that he for one would never compel a clergyman to disclose a communication made to him by a prisoner. It seems, however, that the privilege may be waived. The principle which underlies the exclusion of this evidence is that of public policy: the public benefit arising from its suppression, in the great majority of cases, overweighs the occasional hardship of the rule when applied to particular instances.' Although, in practice, the communications and transactions between a Broker and his Client are regarded and observed as sacredly confidential, yet they are not considered as being iu anywise embraced within the rules to which we have alluded. In a case in England,* a Stock-broker was held bound to dis- cover the names of the persons for whom he had purchased shares in a joint-stock company which had neither been incor- porated, chartered, nor registered, and which was regulated by no deed of settlement, and whose shares passed by delivery. The case is valuable in demonstrating that the liability of a Broker to answer,- in ordinary transactions between him- self and Client, is unquestioned ; that only in cases present- ing special features can he refuse to answer, and his refusal in ough vs. Gaskell, 1 Myl. & K. 101 ; 1 1845, oh. 186, §§ 19, 20 ; Rev. Stat, of Greenleaf on Ev. § 236 et seq., and Mich. 1846, oh. 102, §$ 85, 86. cases oited. ' Broad vs. Pitt, 3 Car. & P. 518. ' Wis. Kev. Stat. 1849, oh. 98, § 75 ; '1 Greenleaf on Ev. J 236. Wis.Eev. Stat. 1878, 992; Iowa Code, 'Ee Mex. and So. Am. Co., re arts. 2393, 2395 ; N. Y. Code of Civil Aston, 27 Beav. 474. Proc. $i 833, 834; Bev. Stat, of Mo. Comrmmications not JPrwileged. 237 such cases would be grounded on no peculiar privilege extend- ed to Brokers, but on a protectio^ common to all classes ; as, for instance, where the Broker relies on the rule of law ex- empting persons from testifying where their answers would expose them to a fine, penalty, or criminal prosecution. The case of The Mercantile Credit Association ' also strongly illustrates this point. In winding up this association the name of one D. appeared on the list of shareholders as a holder of certain shares. " Calls " had been made by the ofScial liqui- dator on these shares, no part of which had been paid. The liquidator haying caused inquiries to be made with respect to the ability of D. to pay the calls, it was discovered that he had no property whatever ; and that, at the time the shares were transferred to him, he was an infant living with his father, receiving wages as clerk to a law stationer, but with no other source of income. The transfer had been made to him with his consent, and, although he had come of age, he had not re- pudiated it. One C, a Broker, had proposed to act on his behalf in the matter of the transfer, and it was through C.'s agency that D.'s name was placed upon the register. The official liquidator applied to the Broker for information as to the circumstances attending the transfer, in the hope of being able to make the transferee liable for the amount due on the shares, but the Broker refused to give any such information. The liquidator accordingly moved for an order to summon him before the court for the purpose of being examined as a peirson whom the court might deem capable of giving infor- mation concerning the trade, dealings, estate, or effects of the company. Wood, V. C, in giving his opinion, said that he " was sur- prised that such applications should always be strenuously op- posed on behalf of the proposed witness ;" and he accordingly '37L.J.(n.s.)pt. 1,295. 238 Stoch-hrohers cmd Stock Emchcmges. ordered that C. should be summoned to attend the judge in chambers at such times as the judge might designate, touch- ing the estate and effects of the association.' Considering the vast strides the business of dealing in securities has made within the last decade, and a growing dis- position on the part of Brokers to assert the privilege hitherto denied them, the question is probably destined to pass under the cognizance of the courts with greater frequency, and in cases involving more gigantic interests than ever before. As yet the few adjudicated cases show that the courts, rec- ognizing no public policy suiBciently urgent to demand the secrecy of such transactions, have uniformly checked the ef- fort of the Broker to place himself in the category of those protected by the law of privileged communications. It by no means follows, however, because such transactions are not privileged, that they are public; that a resort to a Broker's books can be had ad libitimb, to satisfy an idle curi- osity, or entries thrown open to what the courts have' termed a " fishing excursion." On the contrary, the courts scan with jealous eyes all attempts of that nature ; and it is only where the party shows a clear legal right to the remedy, and in cases where the interests of justice demand a discovery, that a Bro- ker's books or a Broker's testimony as to dealings with his Client is evidence at the instance of an adverse suitor. > See also, ou same point, Eaw- Tyre, 18 Beav. 366 ; Matthews Est. 4 lings vs. Hall, 1 Car. & P. 11 ; Green Am. L. J. (n. s.) 356 ; In re Finan. Ts. Weaver, 1 Sim. 404 ; Williams vs. Ins. Co. (Lim.) 36 L. J. (n. s.) 687. Eelalmg to Statutes. ' 239 Ohaptee IV. STOCK-BROKEES IN ENGLAND. I. Statutes relating to Stock-hroJcers. II. Decisions under Statutes. III. Commissions of Brokers, and Actions for, hy Unlicensed Brokers; Actions hy Licensed Brokers acting in Illegal Transactions. IV. Origin and History of London Stock Exchange, and Rules and Regulations thereof. I. Statutes relating to Stock-irohers in England. In England, as in the United States, transactions in stocks are carried on through the instrumentality of Stock-brokers. Some of these Brokers are members of the Stock Exchange ; others are not. We shall first touch upon the law as ap- plicable' to Stock-brokers in general, and then consider the legal status of Brokers as members of the Exchange, with which subject we are principally concerned in this treatise. By an act passed in the year 1707, which is given in full in the notes,' all persons acting as Brokers in the city of London • 6 Anne, o. 16, 1707, entitled" An titnled ' An Act for the Well garbling Act for Stealing the Act of the first ofSpices,' several Drugs, wares, spices, year of King James ike Mrst, intituled and Merchandize are to be garbled ' An Act for the Well garbling of Spices' within the city of London and the and for Granting an Equivalent to the liberties thereof, as therein is men- Ciiy of London by Admitting Srohers. tioned, under the penalties and for- "I. Whereas by an Act of Parlia- feitnres therein specified, and several ment made in the first year of the powers are thereby given to the gar- Eeign of King James the First; in-' bier for the time iDeing for that pur-i 240 Stoak-hrohera and Stock Exchamges. and liberties thereof, shall from time to time be admitted to do so by the Coxirt of the Mayor and Aldermen of the said pose ; which act for the garbling of spices and other wares and merchan- dizes in many cases has now become useless, and in other cases would be prejudicial and to the Damage of several wares and merchandizes so to be garbled, to the obstruction and discouragement of the Trade of this Kingdom, and the Foreign Exporta- tion, and to the vexation of the sub- jects by . . . unnecessary Prosecutions in her Majesty's Court of Exchequer; Be it therefor enacted, by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal and Com- mons in this present Parliament as- sembled, and by the authority of the same. That the said Act shall be and froin henceforth stands repealed, and all powers, penalties, and forfeitures therein mentioned or given shall from henceforth be null and void. • " II. And be it further enacted that by authority aforesaid. That all suits and informations now depending in her Majesty's Court of Exchequer or iu any other Court, or which shall at any time hereafter be brought or prosecuted upon the said Act under pretence of any seizure or forfeiture or penalty incurred for breach of the said Act, or for any offence commit- ted or supposed to be committed against the same, shall be and are hereby declared to be discharged, discontinued, and determined, and that no proceedings shall be had thereupon ; and aU seizures upon the said Act made or to be made are hereby declared to be discharged, released, nuU and void. " III. Provided always that it shall and may be lawful for the Lord Mayor and Court of Aldermen and Common Council of the City of Lon- don for the time being to appoint from time to time a fit and able per- son to execute the office of Garbler in the City of London and the liber- ties thereof, who at the request of any person or persons, owner or own- ers of any Spices, drugs, or other wares or merchandizes garbleable and not otherwise, shall garble the same; and such Garbler shall have and receive for his pains and trouble therein as the said Lord Mayor, Court of Aldermen, and Common Council shall appoint and no more. "IV. And whereas the profits of the said office are part of the Revenues and Incomes of the City of London, and are now let by Lease to William Stewart, under the rent of three htin- dred pounds per annum, the profits of which office and the Bight of the said William Stewart to the same by re- pealing the said Act will be very much diminished. Be it enacted by the authority aforesaid, That from and after the Determination of this present session of Parliament, all per- sons that shall act as Brokers within the City of London and liberties thereof shall from time to time he admitted to so do by the Court of Mayor and Aldermen of the said City for the time being under such restrictions and limitations for their honest and good behavior as that Court shall think fit and reasonable, and shall upon such, their admission, pay to the Chamberlain of the said city for the time being, for the uses hereinafter mentioned, the sum of forty shillings, and shall also yearly pay to the said uses the sum of forty shill in gs upon the nine-and-twentieth day of September in every year, all which moneys shall in the first place be applied for and towards the pay- ing and satisfying to the said Will- iam Stewart the sum of nine hundred sixty-seven pounds and ten shillings for the compensation for his interest in the said office ; and that from and after the full payment of the said Relatmg to Statutes. 241 city, under such restrictions and limitations for their honest and good behavior as that court shall think fit and reason- able ; and shall upon their admission be compelled to pay forty shillings, and a like sum yearly thereafter; and it was also provided by the last section of the act that if any person shall take upon himself to act as Broker, or employ any per- son under him to act as such, said person should forfeit and pay to the use of the Mayor, of said city, for ^every such offence, the sum of five-and-twenty pounds, to be recovered by action of debt. By statute of 1 Geo. II. c. 8, § 9, every Broker or other per- son who shall negotiate or act as a Broker, receiving broker- age in the buying or disposing of stocks, shall keep a Broker's book, in which he shall enter all contracts that he shall make on the day of the making of such contract, with the names of the principal parties ; and such Broker who shall not keep such book, or shall wilfully omit to enter any such contract, shall forfeit £50. In the year 1708, after the passing of the statute of Anne above referred to, the Coui-t of Mayor and Aldermen of the City of Loudon made certain rules and regulations for the government of Brokers. sum of nine linnflred sixty-seven sions of Parlianieut shall take upon poands and ten shillings to the said him to act as a Broker or employ any William Stewart, all the moneys other under him to act as such, with- arising by such admissious and year- in the said City and liberties, not be- ly payments shall go to and be en- ing admitted as aforesaid, every such joyed by the said Mayor and Com- person so oifending, shall forfeit and monalty and Citizens of the City of pay to the use of the said Mayor London ; and that from and after the and Commonalty and Citizens of the determinatioii of this present sessions said City, for every such offence, the of Parliament, the said lease to the sum of five-and-twenty pounds, to be said William ^ieMioM't and every clause recovered by action of debt in the therein contained shall cease, deter- name of the Chamberlain of the said mine, and be absolutely void. City, in any of her Majesty's Courts " V. And be it further enacted by of Record, in which no Protection, the authority aforesaid. That if any Essoin, or wager of Law shall be al- person or persons from and after the lowed, or any more than one Impar- determiuatioa of this present ses- lance," 16 24r2 Stoch-lroJeers and Stock Exchanges. The bond of the Broker was as follows : ' "That the said A. B., for and during such time as he shall and doth continue in the said office and employment, shall and do well and faithfully ex- ecute and perform the same without fraud, covin, or deceit ; and shall, upon every contract, bargain, or agreement by him made, declare and make known to such person or persons with whom such agreement is made, the name or names of his principal or principals, either buyer or seller, if thereunto required, and shall keep a book or register, and therein truly and fairly enter all such contracts, bargains, and agreements within three days at the farthest, after making thereof, together with the names of all the respective principals for whom he bnys or sells, and shall, upon demand made by any, or either of the parties, buyer or seller, concerned therein, produce and show such entry to them, or either of them, to manifest and prove the truth and certainty of such contracts and agreements, and for satisfaction of all such persons as shall doubt whether he is a lawful and sworn Broker or not, shall, upon request, pro- duce a medal of silver with his Majesty's arms engraven on one side, and the arms of this city, with his name, on the oth- er, and shall not directly, or indirectly, by himself or any other, deal for himself or any other Broker in the exchange or reinittance of money, or in buying any tally or tallies, or- der or orders, bill or bills, share or shares, or interest in any joint stock to be transferred or assigned to himself or any Brokei*, or to any other in trust for him or them, or in buying any goods, wares, or merchandises to barter and sell again upon his own account, or for his own or any other Broker's benefit or advantage, or to make any gain or profit in buying or selling any goods over and above the usual brokerage ; and shall and do discover and make known to the said Court of Mayor and Aldermen, in writing, the names and places of ' Ex parte Dyster, 1 Met. 156. Relaimg to Statutes. 243 abode of all and every person or persons, as he shall know to use and exercise the said office or employment, not being thereunto duly authorized and empowered as aforesaid, with- in thirty days after his knowledge thereof, and shall not em- ploy any person under him to act as a Broker within the said city and liberties thereof, not being duly admitted as afore- said, and shall not presume to meet and assemble in Ex- change-Alley, or other public passage or passages within this city and liberties thereof, other than upon the Royal Ex- change, to negotiate his business and affairs of exchange, to the annoyance or destruction of any of his Majesty's subjects, or any other in their business or passage about their occa- sions." The oath administered was as follows : " Tou shall sincerely promise and swear that you will truly and faithfully execute and perform the office and employment of a Broker, between party and party, in all things appertaining to the duty of the said office or employment, without fraud or collu- sion, to the best of your skill and knowledge." The penalty of £25 under the act of Anne was subse- quently, by act of 57 Geo. III. c. 60, raised to £100. There is also an act' relating to Stock-brokers in Ireland ' 39 Geo. Iir. c. 60, 1799;. 19 Irish the King's most Excellent Majesty, Stat. atLarge, 402 (Irish Parliament), by and with the advice and consent „,,,,_, „ , . , of the Lords spiritual and temporal, An Act for the Setter Begulatwn of ^^^ Commons.in this present Parlia- ' Stock-brolcers. jj,g^(. assembled, and by the author- " Freamile. — Whereas, the estab- ity of the same. That, from and after lishingof regulations by which prop- the twenty-fourth day of June, one er persons only will be permitted to thousand seven hundred and ninety- act as Stock-brokers, for the selling nine, a Stock Exchange shall be es- and buying of government stock and tablished in the city of Dublin, at government securities, and by which such convenient place and subject to the prices at which such stock and such rules and regnlations as shall securities shall be bought and sold be approved of by the Lords of his shaU be known to the sellers and Majesty's Treasury ; and that no per- buyers of such stock and securities, son shall act in the capacity of a will be beneficial to the proprietors Stock-broker, in the selling or buy- and purchasers of such stock and se- ing of any government stock or gov- cuiities. Wherefore,be it enacted by ernment securities on commission, 244 Stoch-lwlcera cmd Stock Msokanges. which we give iu this connection. This act, among other things, establishes a regular Stock Exchange in the city of withont having taken out a license a license for the purpose of force, ev- for that purpose, under the hands of ery such person shall forfeit the sum two or more of the Commissioners of five hundred pounds; and every of his Majesty's Treasury ; and no person acting as Broker iu the sell- such license shall be granted unless ing and buying of any such stock or the Commissioners of his Majesty's securities on. commission, who shall Treasury shall think that the person advertise, or cause to be advertised, applying for the same is a proper the sale or buying thereof, or shall person to be licensed. affix to any part of his house any "II. And be it enacted, That every notification that any such stock or such person shall, before such license securities are to be sold or bought be granted, enter into a bond to his by him, aud who shall sell or buy the Majesty, iu the penalty of two thou- same on commission, and shall not sand pounds, for himself, and two se- have a license for that purpose of -curities of five hundred pounds each, force, shall forfeit the sum of fiv6 conditioned that he will not, during hundred pounds, the time he shall continue to be li- " V. And be it enacted. That every censed, buy or sell such stock or se- person who shall be so licensed as curities for himself or on his own aforesaid shall, every time that he account, when employed by any per- shall sell to any person any govem- son not being a Broker, to purchase ment stock or any government secn- or sell such stock or securities, and rity either in debentures or exche- that he will keep a book to contain quer or treasury bills, give to the entries of all such stock and securi- person for whom he sold the same an ties as shall be sold and bought by account in writiog, signed with his him, describing the names of the name, of the quantity of such stock persons to whom he shall sell such or government security so sold, to stock and securities, and the amount whom the same was sold, and true of every sale to every person, and rate of purchase or price paid for the the price at which the same shall be same, and shall enter into the said sold. book to be kept by him a like ac- "III. And be it enacted. That it count, together with the name of the shall and may be lawful for the Com- person for whom he sold the same, missioners of his Majesty's Treasury, auli shall, at the request of the per- or any three or more of them, when- son for whom such stock or securi- ever it shall appear to their satisfac- ties shall have been sold, show to tion that any person to whom any him or her the entry therein relative such license shall be granted is unfit to the stock sold for such person, to be licensed, by order under their Aud if any person -who shall be so hands, to annul such license; and licensed shall sell for any person any from thenceforth such license shall such stock or securities, aud shall be null and void. not give such accouut in writing, as "IV. And be it enacted, That every aforesaid, to the person for whom he person who, after the twenty-fourth shall have sold the same, or shall day of June aforesaid, shall act as a not keep such book, and make such Stock-broker,in selling or buying any entries therein as aforesaid, or shall government stock or government se- not at such request, as aforesaid, per- curities on commission, without hav- mit the person for whom he shall jug takeu out such license, or having have sold such stock or securities to Hdating to Statutes.. 245 Dublin, and the amount of commission which Brokers are authorized to charge is regulated at 2s. &d. per cent. By statute of 7 and 8 Will. III. c. 19, § 6, Brokers were pro- hibited from buying or selling bullion ; but that statute was repealed by 59 Geo. III. c. 49, § 12. The commission of Brokers on contracts for any stock erected by act of Parliament or letters patent is limited by 10 Anne, c. 19, § 12, to 2s. 9d per cent. Both the acts of Anne and George were amended in the year 1870,' which amenda- tory law we give in the notes. inspect the entries therein of the SM- his Majesty's Courts of Record at count of stock so sold, or shall insert Dublin in which no essoign, proteo- in said account or in the said book tion, or wager of law, or more than any false account of the price at one imparlance shall be allowed, which such stock or securities were "VIII. And be it enacted, That sold or bought, every such person this act shall be deemed aud consid- shall, for every such offense, tbrfeit ered as a public act, and shall be the sum of one hundred pounds, and judicially taken notice of as such be disqualified from ever after act- without the same being specially ing as a Stock-broker in this king- pleaded." dom. «, "No such bond to be registered, etc., "VI. Andbeitenacted,Thatitshall until breach of condition (31 and 32 and may be lawful for every such Vict. c. 31, amending 39 Geo. III. Broker as aforesaid to demand and c. 60)." take from every person for whom he ' 33 and 34 Vict. c. 60 : shall sell any such stock or securi- ,, . . . . „ ,. ^i r> i jut. ..,„■' i u M Act to Meheve the Brokers of the ties, and from every person to whom ^.. ,r j ^ ^i. o • ■ he shall sell t.he same a fee at the '^'*2' of London from the Supervmon llO OlittlL sell Llie bdfUlC.'.di 1CK3 , dL ViXO p ,. r. . j. s«- Ji .t ■. , J. , ,.,,. ' ,.j of the Court of Mayor ana Aldermen rate of two shiUmgs and. sixpence •'.., ., ^.; mjL a lo-rm for each one hundred pounds of such "^ '^'""^ ^''^ ^^"""^ ^"g' 1*^™)- stock or securities, and no more, for " Vhereajs, by an act of Parliament brokerage or commission; andif any madeiiu the sixth year of the reign person so licensed as aforesaiid shall of Queen.Anne, intituled 'An Act for take or receive, directly or indirect- Eepealing the Act of the First Year Ly, any money or other reward or of King James the First,' intituled thing for brokerage or commission 'An Act for the Well Garbling of for the selling or buying any such Spices aud for Granting an Equiva- stook as aforesaid above the rate lent to the City of London by Ad- aforesaid, every such person shall, mitting "Brokers," 'it was, amongst for every offence, forfeit the sum of other things, enacted that from and one hundred pounds. . after the determination of the then " VII. And be it enacted, That all session of Parliament, all persons penaltiesimposedby this act maybe that should act as Brokers within recovered by any person who shall the City of London and liberties sue for the same by action of debt, thereof should from time to time be bill, plaint or informatiou, in any of admitted so to do by the Court of 24:6 Stochiroleers cmd Stock Exchanges. The practical effect of the statute of 1870 has been Mayor and Aldermen of the said City for the time being, under such re- strictions and limitations for their honest and good behavior as the said Court should think fit and rea- sonable ; and should upon such their admission, pay to the Chamberlain of the said City for the time being, for the nses thereinafter mentioned, the sum of forty shillings, and should also yearly pay to the said uses the sum of forty shillings upon the 29th day of September in every year. And it was further enacted that if any person or persons from and after the then session of Parliament should take upon him to act as a Broker or employ any other under him to act as such within the said City and lib- erties, not being admitted as afore- said, every such person so offending should forfeit and pay to the use of the said Mayor and Commonalty and citizens of the said City for every such offense, the sum of twenty-five pounds to be recovered as In the said act is mentioned. And whereas, by an act (local and personal) made and passed In the fifty-seventh year of the reign of King George the Third, entituled 'An Act for Granting an Equivalent for the Diminution of the Profits of the Office of Ganger of the City of London, and Increasing the Payments to be made by Bro- kers,'" after reciting among other things the beforementioued act, it was among other things enacted, "That all persons that from and after the first day of July next after the passing of that act should be admitted to act as Brokers within the City of London and liberties thereof by the said court in pursu- ance of the said recited act of Par- liament, should, upon such their ad- mission, over and above the sum of forty shillings required to be paid by the said recited act, pay to the Chamberlain of the said City for the time being, the sum of three pounds; and should also yearly pay to the said Chamberlain, over and above the said yearly sum of forty shillings required to be paid by the said re- cited act, the sum of three pounds, on the 29th day of September In every year. And It was, amongst other things, further enacted that so much- of the said recited act as imposed a penalty of twenty - five pounds upon any person who should take upon him to act as a Broker, or employ any person under him to act as such, not being admitted In pur- suance of the said recited act, should be and the same was thereby repeal- ed; audthat from and after the pass- ing of the now reciting act, if any person should take upon him to act as a Broker, or employ, or cause, per- mit, or sufter any person or persons to be employed with, under, or for him, to act as such within the said City and liberties, not being admit- ted in pursuance of the said recited act, every such person so offending should forfeit and pay to the use of the Mayor and Commonalty and cit- izens of the said City for every such offence the sum of One hundred pounds, to be recovered as In the now reciting act Is mentioned. " And, whereas, the Said Court of Mayor and Aldermen of the said city (hereinafter called ' the Court '), act- ing by virtue of the powers conferred upon them by the said recited acts or one of them, or by virtue of some oth- er authority, have from time to time made and established rules and reg- ulations for the admission of Brokers within the City of London and lib- erties thereof, and have Imposed re- strictions and limitations on the manner In which the persons whom they have admitted into the office and employment of a Broker within the said City and liberties thereof were and are to carry on their busi- Relating to Statutes. 247 to allow almost any person to become a Stock -broker ness as Brokers, and have exercised, and claim the right to exercise, juris- diction and control over such Bro- kers for the purpose of enforcing the observance of the said regulations, restrictions, and limitations : "And, whereas, the said Court have also required every Broker admitted by them to find two sureties to be approved of by the said Court to enter into a bond for the due and jnst execution by the Broker of his said office and employment, or in place of such sureties have required such Broker to transfer into the joint names of himself and the Chamber- lain of the said City stock in the pub- lic funds to the nominal amount of One thousand pounds : "And, whereas, the said Court have also required each Broker admitted by them to enter into his own bond in the penal sum of One thousand pounds, to secure the due perform- ance of his duties as a Broker, and also to secure the annual payment of the sums of two pouuds and three pounds to the Chamberlain of the City pursuant to the provisions of the said Acts of the sixth year of the reigu of Queen Anne, and of the fifty- seventh year of the reign of King George the Third. "And, whereas, it is expedient to relieve the said Brokers from the ne- cessity of providing such sureties, or entering into such personal bond, and from the jurisdiction and super- vision exercised by the said court over the Brokers in manner herein- after provided: May it therefore please your Majesty that it may be enacted; and "Be it enacted, by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Com- mons in this present Parliament as- sembled, and by the authority of the same, as follows : " I. This act may be recited as the 'London Brokers' Belief Act, 1870.' "II. After the passing of this act, the Court shall not require a Bro- ker, by himself or sureties, to give any bond on bis admission as Bro- ker, and the jurisdiction, supervis- ion, and control of the said Court over Brokers in the said city of Lon- don and the liberties thereof shall cease, and the said Court shall not have power to make, or enforce any rules, orders, regulations, restric- tions, liniitations or penalties affect- ing, except as hereinafter mentioned, the admission of such Brokers or the manner in which the business of such Brokers shall be carried on. " III. No bond or declaration of trust executed by any Broker, in pur- suance of any rules, orderis or regu- lations heretofore enforced shall af- ter the passing of this act be put in suit or enforced, and all sums of stock transferred by way of security as aforesaid shall, from and after the passing of this act, be held in trust for the Broker transferring the same and upon no other trust. " IV. Nothing in this act contained shall prej ndice any proceedings act- ually commenced before the passing of this act upon any such bond or declaration of trust. " v. Except as herein expressly en- acted, this act shall not extend to take away from the said court such right as they now have under the recited acts to require Brokers to be admitted, or to repeal the penalty of one hundred pouuds imposed by the said act of the 57 Geo. III., in the case therein mentioned, or affect the liar bility of Brokers, when admitted to pay to the Chamberlain of the said city, for the uses mentioned in the said recited acts respectively, the sums of forty shillings and three pouuds on admission, and the yearly sums of forty shilliugs and three 248 Stoch-lrokers omd Stock Exchanges. by taking a few preliminary and purely formal steps,' the re- sult of which has been much regretted. II. Decisions vmder Foregoing Statutes. It appears that the first adjudication made under the ear- liest of the statutes above referred to was the case of Bos- worth vs. Machado," decided in 1745, wherein it was held that a person who sold South Sea stock was a Broker within the meaning of the act of 6 Anne, c. 16. But before that de- cision, in the year 1737, it seems that Lord Hardwicke had declared that a person dealing in stock was a Broker," al- though the particular point there was as to whether 2ipawn- hroker was a trader within the bankruptcy laws. pounds, which are made payable by Aldermen from the list of Brokers the said recited acts respectively; either absolutely or for the time and the said yearly sums of two mentioned in such certificate." pounds and three pounds maybe re- 'London Stock Exchange Corn- covered by the Chamberlain of the mission, 1878, which reported upon said city for the time being, in the this subject as follows: "It has been Mayor's Court of the City of London, proved to us by the Town-clerk of the or in the City of London Court. City of London, that for five hundred " VI. The court shall keep a list or six hundred years the law pro- containing the names and addresses vided for a complete control over of all Brokers who shall from time to the office of a Broker in the city time have been admitted; and if any of London by requiring aU per- such Broker shall be convicted iu sons following that vocation to any criminal court of felony or fraud, take out a license, under heavy or if a judge of any of the superior penalties for acting as Broker with- courts of law or equity, or a judge out it. The granting this license, in bankruptcy, shall in any action, and its withdr-awal in case of mis- suit, or other proceeding prosecuted conduct, was one of the ancient or depending before such judge, and duties and privileges of the corpora^ to which such Broker shall be a tion of the city of London. In the party, certify (as he is hereby em- year 1870, however, an act of Parlia- powered to do) that such Broker has ment was passed under which the been guilty of fraud, and that he license was retained, and with it the ought to be disqualified from acting duty of making inquiries into the as a Broker altogether, or for such fitness of the applicant upon the period as such judge shall name in grant of a license, or of punishing the certificate, such Broker shall ac- misconduct by withdrawing it." cordingly bo disqualified, as from ' Cited in Wilkes vs. Ellis, 2 H. Bl. the date of such conviction or oer- 556. tificate, and his name shall there- ' Highmore vs. Malloy, 1 Atk. 206. upon be removed b.y the Court of Decisions v/nder Statutes. 249 In Janssen vs. Green, decided in 1767,' it was held that a person who, in the words of 7 Geo. II. c. 8, for brokerage and hire, negotiates and concludes bargains for stocks is a Broker in point of law. In that case the action was brought to recover the penalty or forfeiture under 6 Anne for acting as a Broker without a license, and Lord Mansfield held that the act against Stock- jobbers, known as Sir John Barnard's act, was decisive of the question as to who was a Broker. After reciting the act, he asks, " Can any words more strongly express what the Parlia- ment meant by a Broker ?" Mr. Justice Yates said, " The court will follow the parliamentary idea of a Broker," and he agreed with Lord Mansfield that Sir John Barnard's act was conclusive "as to their idea of a Broker." That a Stock-broker is a Broker within the statute was, however, directly decided in 1833 by the Court of King's Bench." There the action was likewise brought to recover the penalty of £100 for having acted as Broker without the license required by the act of Anne. In approving the case of Janssen vs. Green,' the court, per Littledale, J., in the course of an exhaustive opinion upon the subject, said : " Con- sidering the provisions of these statutes, recently before and after the passing of the statute of the 6 Anne, it appears to us that persons buying and selling government stocks and securities for others were considered as Brokers at that time, and must fall under that description in the statute in question. If Brokers dealing in government stock and securities then existing were so, it does not admit of a doubt that those who dealt in all subsequently created stock and securities of the like description would be so just as much as merchant Brokers who bought or sold a new description of merchandises." The ' 4 Burr. 2104. » Supra. » Clark vs. Powell, 1 N. & Man. 492; 4B. & Ad.846. 250 StooTc-'broTcers emd Stock Exchanges. same judge, in alluding to the act, said : " That act . . . had in view the regulation of Brokers, and to have secured and enforced the ancient right of the city to admit brokers which, by the Statuta Oi/oitatis Londvni, 13 Edw. I., it appears to have possessed, in the earliest times." It was accordingly held that the defendant was liable to pay the penalties im- posed for acting as Broker without a license. There has been, however, some doubt as to the precise mean- ing of the term " Broker " as used in the statutes.' For, so late as 1858, in a much-litigated case," Crowder, J., said : " "We must look at the term ' Broker ' in the 6 Anue, c. 16, as having been used in its general, popular sense. It is difficult for us at this day to determine, with any degree of accuracy, what Brokers were at that time ; there must be many things now dealt with by Brokers that were wholly unknown." A Ship-broker, or one who obtains on commission freight and passengers for vessels, is, however, not a Broker within the statute ;° and one of the judges, in this very case, appears to have been of the decided opinion that the term " Stock- broker " was only used after the passage of the act of 8 and 9 Will. III. c. 20, by which the first government loan was raised, and he speaks of a new description of Brokers then existing who were employed in buying and selling tallies — to wit, Stock-brokers. It has been further held that an auctioneer is not a Broker within the statute of Anne.* Nor is a person a Broker who hires or procures, for another, persons to be employed by him in the laying and surveying of a line of railway. "To make a man a Broker," says Alderson, J., "he must intermediate, and be the agent through whom the contract is ' See, on this subject, Paley on Ag. 'Gibbons vs. Eule, 12 Moo. 539; 12, note a. 4 Bing. 301 ; s. c. 5 L. J. C. P. 176. = Smitli vs. Liudo, 4 C. B. (ii. s.) ♦ Wilkes vs. Ellis, 2 H. Bl. 555. 406. Decisions wider Statutes. 251 made." ' But the dealing in, or buying and selling for reward of, shares in English or foreign joint-stock banks or companies, or the debts, stock, or securities of foreign governments, is an acting, and assuming to act, as a Broker within 57 Geo. III. c. 60." This was decided upon the authority of Smith vs. Lindo.° Slight evidence has been held sufficient to charge a person as having acted as Broker. Thus, where a witness stated that he took S. to an office in the city of London used by the de- fendant, and upon that occasion four memoranda were made by the defendant, each of the sale by S. of stock to a person whose name did not transpire ; that nothing was handed over at the time ; and that he did not see any money pass, — held, evidence for tlie jury of an acting by the defendant as a Bro- ker withia 6 Anne, c. 16, and 57 Geo. III. c. 60." So where A. was an officer of a company formed for the purpose of carrying on the business of Stock-broking, under the name of "Open Stock Exchange," and in the course of business bought some stock for a Client, and signed the bought and sold notes, the principals not seeing one another, and no one else acting as a Broker in the transaction, it was held that A., who had no license to act as a Broker, was liable to the penalty of £100, imposed by 57 Geo." In one case, it was held by Lord Ellenborough that a London Broker might refuse to allow his employer to inspect his contract book ; and it is no breach of his bond if it shall be produced at the proper time, and the Broker does produce it afterwards before a Court of Aldermen." It was also there held that it ' Milford vs. Hughes, 16 M. & W. * Seot.t vs. North, 2 L. E. C. P. 270 ; 174 ; 16 L. J. Exch. 40. In the note 15 L. T. (n. s.) 508. to this case will be found the case of ° Scott vs. Cousins ; same vs. In- Andrewe de Vyne, A.D. 1455, 34 Hen. glis, 4 L. E. C. P. 177, 179 ; 38 L. J. C. VI., from the Liber Dnnthorn. P. 156. ' Scott vs. Jackson, 19 C. B. (n. s.) " Mayor of London vs. Brandon, 134. " Supra. Holt, 438, note ; 8 Stark. 14. 252 StockrlroJcers cmd Stock Exchcmges. was no breach of his bond to employ a person who is not a sworn Broker. But a person who holds himself out as a Bro-' ker of the city of London, and is employed by a person who believes him to be such, cannot, when sued by his principal for an account of his transactions as such Broker, protect himself from discovery, in a suit in equity, upon the ground that it may render him liable to penalties for having acted as a Broker without having been duly admitted as such. In this case the M. K. said: "A person holding himself out and acting as a Broker asserts that he is duly qualified to act." ' And a Broker in the city of London must answer a bill of discovery in aid of an action brought against him by his employer for misconduct, although the discovery will sub- ject him to the penalty of a bond given by him to the cor- poration on his admission." In this case it was held, first, that the policy of the law not only requires that a Broker or agent should act with fidelity to his employer, and should be ready at all times to render a full and clear account of his transaction; but, secondly, from the nature of the case the defendant exclusively possessed the means of stating that account, which the policy of the law entitled the plaintiff to demand.' A sworn Broker of the city of London is in the nature of a public agent ; and therefore, in an action against him for negligence in making a contract, the court will compel him to produce his books for the purpose of enabling the plaintiff to inspect them and take a copy of the contract." A defend- ant has been allowed to amend his plea, after notice of trial ' Eobin8on vs. Kitchin, 2 Jnr. (n. knew that he was not duly admitted 8.) 294; 25 L. J. Chaiio. 441; L. J., qxiceref aff 'g decision of Eomilly, M. R., 21 = Green vs. Weaver, 1 Sim. 404 ; s. Beav. 365, 2 Jur. (n. s.) 57 ; 25 L. J. c. 6 L. J. Ch. 1. Chanc. 354. Whether it would make » 1 Sim. 404-424. any difference that the principal, at * Browning vs. Aylwin, 9 D. & E. the time of employing the Broker, 801 ; 7 B. & C. 204. Decisions under Statutes. 253 served and set up, that the plaintiff was not a Broker duly licensed under the 6 Anne, c. 16.' In Dunbar vs. Wilson,'' the Lord Chancellor, consider- ing that one Sylva, a Broker, and a respondent in that case, "had grossly misbehaved himself in the business of a Broker in not keeping books of the contracts made by him pursuant to the act of T Geo. II. c. 8, ordered that it should be recommended to the Court of the Lord Mayor and Alder- men, to cause the bond given by him for performance of his duty as a Broker to be put in suit against him for his mis- behavior; and, further, to censure him for the same, as they were enabled and ought to do, consistently with law and jus- tice. If a Broker make a contract contrary to the regulations of the city of London, and in violation of the bond into which he has entered with the mayor and aldermen, he is not there- fore precluded or disqualified from bringing an action on a contract so made in contravention of his duties under the bond.^ The remedy against him is an action for the penalty of the bond, and the contract is not ipso facto void." So it has been held ° that a London Broker could maintain an action on a contract or sustain a proof of a debt arising out of transactions as a merchant, although such transactions are in contravention of the bond which he executes and to the oath which he takes on his appointment ; not, however, if the debt or contract arises out of a transaction in which he has acted both as Broker and principal, that being void upon principles of common-law. ' Field vs. Sawyer, 5 C. B. 844. taken by them upon being licensed. ' 6 Brown, P. C. 231 (1773). See also Green vs. Weaver (supra), ' Kemble vs. Atkins, 1 Moo. 6 ; 7 where the bond and oath are also Taunt. 260 ; Holt, 427. given in full. * In this case (Holt, 431, note) is ° Ex parte Dyster, in the Matter given in full the bond which Brokers of Moline, 1 Mer. 155 ; s. o. 2 Eose, were required to execute under the B. C. 349. statute of Anne, also the ofScial oath 254 Stoch-hrohers cmd Stools Mschanges. But it is the duty of a sworn Broker of the city of London to charge his Client only the cost price of articles purchased for him, in addition to his commission ; and the Client having averred in an action of assumpsit that the Broker had charged him an amount greater than the cost price, which the plaintiff had paid, it was held that it was sufficient proof of such aver- ment to produce a running unsettled account between the par- ties, by which it appeared that the Client had paid more than the amount of the overcharges; although on the whole account, and when the balance at a subsequent period was struck, the Client was indebted to the Broker in a sum far exceeding such overcharges.' It seems that a Stock-broker was liable to pay to the Chamberlain of London, for the benefit of the corpo- ration, the annual duty of iOs., directed by statute 6 Anne, c. 16, to be received by the Chamberlain from any Broker. It was accordingly held that a mandamus would issue to compel the Commissioners of the Court of Requests to proceed in such an action on behalf of the Chamberlain." JIJ. Commissions of Brokers, and Actions for, hy Un- licensed Brokers ; Actions hy Licensed Brokers Act- ing in Illegal Tixinsactions. But the question that appears to have been most earnestly litigated in England under the statute of Anne, was as to whether an wnUoensed Broker could sustain an action to re- cover his commissions, and for moneys paid and expended by him in the purchase and sale of stocks for his Client." ' Proctor vs. Brain, 2 Moo. & P. limited by 10 Anne, c. 19, § 12, to 2«. 284 ; 3 C. & P. 536. M. per ceut. By statute 29 Geo. III. '' Eex vs. Com'rs Ct. of Requests, c. 60 (Irish Parliament), the amoiiut 7 East, 292, and note a. of commissions allowed to be charged ' The commission of Brokers on by Stock-brokers in Ireland is regu- contracts for any stock erected by lated at 2«. Gd. per cent. The corn- act of Parliament or letters patent is missions to which Brokers, are en- Actions for Commissions. 255 Upon the subject of commissions, the English courts ap- pear to be. unanimous in deciding that such Broker cannot recover them, although the statute imposes a penalty for his illegal action ; and the decisions upon this point seem to be based partly upon the ground that the Broker forfeits his compensation by acting in an illegal capacity ; for, if he were permitted to recover, it is obvious that the entire object and purport of the statutes would be frustrated, however strongly it might be urged that he would still be liable to pay the heavy lines imposed.'; The first case in which this subject came before the Eng- lish courts was Cope vs. Rowlands." It was there held that a Broker could not maintain an action for worTc, labor, and commissions for buying and selling stock unless duly licensed by the Mayor and Aldermen of the City of London under the statute of Anne. In an opinion rendered in the case, Parke, B., gave abundant reason for sustaining the judgment when titled for. their services are stated acts for two Clients in the same as follows: transaction, and thereby gets two On transactions in British or commiasions J yet it is obvious that Ex'?han%Mt.::;::::::;::uol''""- had he gone into the market and sold Colonial, government, and and bought again the same stock American stocl£ and Eaii- ^jjjj ^ dealer, he Would have had to waybonds Is. 0(J. " " j.i j i , j. ■ j i-i- xi On shares under £6 is.Od.persh. pay the dealer's turn in additiou. .It Between £5 and £10 Is. 6d. " " js hardly possible, therefore, to ob' Between £10 and £2S 2s. Od. " " .„ . j. .C. j? iu t> i Between £25 and £50 6s. OA " " JO"* *» the course of the Broker, £S0 and upwards 10s. per ot. though it is open to this possibility, — on the consideration money (Eoyle that he might, under this system of on the Law of Stocks, etc., p. 41). executing the orders he had received, As to right of Broker to receive have charged to his Clients the mar- double commission, the London Stock ket price for buying and selling, and Exchange Commission reported as have kept the term of the market follows: for himself" (Report of London " In the one case a Broker receiv- Stock Exchange Commission, July, ing orders from two Clients at the 1878). same time to buy and sell sets-off, the 'As to when Broker will forfeit one against the other, directly, with- his right to recover commissions by out going to a dealer on the mar- acting dishonestly or in bad faith, ket, divides the turn which is there- see ante, p. 233 et seq. by saved between his Clients, and " 2 M. & W. 149 ; 2 Gale, 231.; s. c. charges brokerage to each. In such 6 L. J. (u. s.) Exch. 63. a case, the Broker undoubtedly 256 SlockrhroTwrs and Stock jExchcmges. he said: "The question for us now to determine is whether the enactment of the statute of 6 Anne, c. 16, ... is merely meant to secure a revenue to the city, and for that purpose to render the person acting as a Broker liable to a penalty if he does not pay it ; or whether one of its objects be the protec- tion of the public, and the prevention of vm^aper persons act- ing as BroTeers. On the former supposition, the contract with a Broker for his brokerage is not prohibited by the statute ; on the latter it is, far it cam,not he permitted to a person to re- cover a compensation for an act which the law interdicts him from, domg." But as to whether the unlicensed Broker could recover the moTheys expended and laid out at the Client's request in the purchase of stocks, the courts have held that he can ; and that he is not precluded from so doing by the mere fact that he acts in an illegal capacity, it being held that he recovers quite independently of that character. As was decided in Smith vs. Lindo,' he could recover the moneys paid for shares, there being nothing to show that the payment was made in pursu- ance of any illegal contract, or that it was a necessary part of the duty of a Broker as such to pay the money. The following cases fully explain the principle : To a declaration in assumpsit on two bills of exchange by drawer against acceptor and on an account stated, the defend- ant pleaded generally to the whole declaration that he retain- ed the plaintiff to act as his Broker in the city of London, and as such to enter into contracts there for the purchase of stocks and shares, and to pay certain moneys therefor, and that the plaintiff undertook such employment and did pay certain moneys in the purchase of said stock and shares ; and that at the times mentioned the plaintiff was not a duly licensed Bro- ker within the city of London, and that such bills were ac- ' 5 C. B. (n. 8.) 587. See also Wicker vs. Gordon, 3 B. & Aid. 335. Act/ions for Comm/issions. 257 cepted by defendant and received by plaintiff on account of moneys due plaintiff by defendant for having acted as such Broker, etc., held bad on demurrer; and although plaintiff could not recover recompense for his services as Broker, yet he was entitled to recover money paid at defendant's request ; and the court held that the contract was not void.' The distinction laid down in this case was subsequently ful- ly recognized in the case of Jessopp vs. Lutwyche," where the court held that the statute of Anne does not prevent an un- licensed Broker from recovering money paid at the request of his employer, or for money due on accounts stated with his employer. Parke, B., said : " Pidgeon vs. Burslem cannot be surmounted. The statute relating to Brokers only precludes them from recovering remuneration for their services as such.'" The same judge further said: "That case shows that the disability to act as a Broker only disentitles a person to cmy recompense for his services as a Broker, and affords no reason why he should not recover from his employer money he has paid at the employer's request, express or implied." * And the doctrine as laid down in the former cases ° was subsequently in all respects fully reiterated and sustained." As was said by Lord Loughborough :' " So upon stock trans- actions, though the court would not execute the contract ; yet where the parties have been settling stock dealings and paying differences, I must bring those into the account." ' But where the Broker acts m illegal t/ransaebions — in most ' Pidgeon vs. Burslem, 3 Ex. 465 ; " See also Taylor vs. Stray, 2 C. B. 18 L. J. Ex. 193. (n. s.) 197, 195; 3 Jur. (n. s.) 964 ; 26 » 10 Ex. 614 ; 24 L. J. Ex. 65 ; 3 C. L. J. C. P. 287. L. E. 359. ' Watts vs. Brooks, 3 Ves. 612. " 10 Ex. 616. » See also Kemble vs. Atkins, 1 * 3 C. L. E. 361. Moo. 6; 7 Taunt. 260; Holt, 427 ; Ex 'Smith vs. Lindo, 4 C. B. (n. s.) parte Dyster, 1 Mer. 155 ; s. o. SEose, 395 ; 27 L. J. C. P. 196; afPd on ap- B. C. 349. peal,5C.B.(n.8.)587;4Jur.(n.8.)974. 17 258 Stockrbrdkers and Stock Exchanges. cases transactions contrary to law or public policy— it has been held that he cannot recover from the Client either com- missions or money expended by him at the Client's request in the sale or purchase of stocks in such iUegal t/ransacUons / nor can the Client recover bact moneys paid to the Broker therefor. Hence where B., being employed by A. to purchase certain transferable shares in an unincorporated company, charged and received from him £25 beyond the market price of such shares at the time, it was held that an action would not lie to recover back this sum, the company being within 6 Geo. I. c. 18, and the parties im, jpari delicto^ So in an action of as- sumpsit by a Broker for work and labor and money expended in the purchase of shares in a concern called the " Equitable Loan. Bank Company," it appeared that the company pro- fessed to have a capital of £2,000,000 in shares of £50 each ; that a deposit of £1 per share was required on the delivery of certificates for shares to the holders ; that the shares were to be transferred without any restriction ; and that the holders were to be subjected to such regulations as might be con- tained in any act of Parliament passed for the government of the society, and, in the meantime, to such regulations as might be made by a committee of management, it was held — no evidence being given as to the particular objects or ten- dency of the company — that the com/pany was to he considered Ulegal within, the act of 6 Geo. I. c. 18 ; and that the plain- tiff consequently could not maintain his action, as it arose out of an illegal tn^ansaction. Abbott, C. J., said : " We say, therefore, that dealing in these shares was an illegal trans- action ; and this being our opinion, every one must observe that the signs of the times require us to declare it without de- lay. There is another point which I shall notice very briefly, ' Buck vs. Buck, 1 Campb. 547. Actions for Commissions. 259 as it waS not touched upon on the argument — viz., that traf- ficking in these shares may very possibly have been illegal at common-law, inasmuch as it vras bargaining and wagering about an act of Parliament to be obtained in future. Upon the whole, I am satisfied that the plaintiff was not in law en- titled to maintain his action." ' But in an action of assumpsit for money had and received, the defendant pleaded, as to £94, that after the passing of the 1 and 8 Yict. c. 110, and after the 1st of November, 1844, the defendant, as the Broker and agent of the plaintiff, sold, on account of the plaintiff, fifteen scrip shares in a certain joint- stock company for £94 — the formation of which company was commenced after the 1st of November, 1844, and which, at the time of such sale, was a joint-stock company within the provisions of the said act ; that is to say, a partnership whereof ,the capital was agreed and intended to be divided into shares, etc., and not being a banking company '^and that the £94 was money received by defendant as proceeds of such sale ; it was nevertheless held bad, on demurrer, for not showing'that the company was a railway company, the execution of whose works could be carried into effect without the assistance of Parliament, and therefore not within the provisions of the end of the 7 and 8 Yict. c. 110, § 2, wMoh is in legal effect an exception. It seems that if the sale Iiad been illegal, the defendant, the Broker who negotiated the sale and received the money, had no right to set up the illegality of the trans- action in answer to an action for money had and received, the purchaser not having insisted on such illegality." This case, it appears, is to be distinguished from the pre- ' Josephs vs. Pebrer, 3 Barn. & C. ' Bonsfield vs. Wilson, 16 M. & W. 639; s. c. 1 C. & P. 341,507. 185. On the latter point, see Ten- ° Nega,tiving the excepted cases ant vs. Elliot, 1 Bos. & P. 3 ; Farmer mentioned in the enacting part of 7 vs. Kussel, id. S96. & 8 Vict. c. 110, J 2. 260 Stoch-lrohers cmd Stock ExcTumges. ceding cases, as the facts did not bring it within the statute, the court expressly deciding it to be an exception. But an allotter of shares in a completely registered joint-stock com- pany, who has not executed the deed of settlement of the company, cannot, under the provisions of the 26th section of the Joint-stock Companies' Eegistration Act,' enter into a con- tt'aetfor the sale of his shares. Hence, where W. E. was the allotter of shares in such a company, Jmt had not executed the deed of settlement, his brother, acting under the authority of a power of attorney, desired Messrs. IS., Stock-brokers, to sell these shares ; and they entered into contracts with purchasers accordingly, but, before the transfers were registered, W. E. became a bankrupt, and the Brokers were obliged, at their own cost, to complete the contracts with the purchasers — the court held, dismissing a petition by the Brokers, claim- ing to have the bankrupt's shares transferred to them, that, under the terms of the 26th section, the contracts were null and void, and that the assignees of the bankrupt were entitled to the shares as part of his estate and eflEectfe." IV. Origin and History of the London Stock Mc- change, and Mules a/nd RegulaUons thereof. I. The London Stock Exchange is a voluntary unincorpo- rated association of persons who deal in securities. It has been in existence about eighty years, and numbers about two thousand members. On the 9th of May, 1877, a royal commission was appoint- ed by her present Majesty to inquire into the origin and meth- ods of the Stock Exchange. At the head of the commission ' 7 & 8 Vict. 0. 110. against the statutes of betting and ' Ex parte Neilson, 3 DeG. M. & G. gaming, or contrary to the statutes 556. For cases in which defence was against stock -jobbing, see chapter set up that the transactions were on " Stock-jobbing." History of London Stock Exchamge. 261 was Baron Penzance. It consisted of twelve members, prom- inent among whom was Lord Blackburn. This commission held a large number of meetings, and examined many wit- nesses, including some of the most experienced Brokers and jobbers in the Exchange. The commission made a full and interesting report on the 3lst of July, 1878, and the report made to the commission of the origin of the Exchange, by the secretary of the Committee for General Purposes,' is given in this connection as the most authentic history of that body. The earliest minutes bearing on the subject of the origin of the London Stock Exchange are those of December, 1798, and it appears from these records (in which reference is made to the existence of a Stock Exchange in 1773), and from tra- dition, that the business of Stock-brokers and jobbers in the public funds was conducted at the end of the last century, not only in the Rotunda of the Bank of England, which was spe- cifically appropi'iated by the governor and directors for that purpose, but at rooms in the Stock Exchange Coffee-house in Threadneedle Street, to which any person was admitted upon payment of Qd. Even at this early date these rooms were known as " The Stock Exchange "or " The House," and there is little doubt that, while the greater part of the business carried on at the Eotunda related to small transactions by the public, and to the immediate transfer of stocks in the books of the Bank, the Stock Exchange rooms afforded a ready mar- ket for the operations of the bankers, merchants, and capital- ists connected with the floating of the numerous loans raised at that period for the service of the State. It is on record that the rooms were under the control of a " Committee for General Purposes," the expenses of the man- agement being defrayed by the voluntary subscriptions of the ' Mr.Franois Levien (see pp. 3 and to Report of Eoyal Stock Exchange 4 of Minutes of Evidence attached Commission). 262 Stoch-'brokef's amd Stock Exeha/riges. frequenters; and that tHe functions of this committee were- then, as now, judicial as regards the settlement of disputed bargains, and administrative as regards rules for the general conduct of business and for the liquidation of defaulters' ac- counts. Early in 1801 it became apparent that the rooms did not afford sufficient accommodation for the transaction of the greatly increased business arising out of the creation of loans hitherto unprecedented in amount, and, moreover, that the in- discriininate admission of the public was calculated to expose the dealers to the loss of valuable property. Under these cir- cumstances, Mr. William Hammond and other gentlemen, who had required a site in Capel Court or its immediate neigh- borhood (described as a centrical situation), succeeded in rais- ing a capital of £20,000 in 400 shares of £50 each, and in founding a new undertaking, to which the affairs of the old rooms were ultimately transferred. The first stone of the new building was laid in May, 1801. A Committee for Gen- eral Purposes, consisting of the nine promoters of the scheme and twenty-one other proprietors, was formed ; and this body, whose meetings pro tern,, were held at the " Antwerp " and other taverns in the neighborhood of the Koyal Exchange, proceeded to elect members by ballot at a subscription of ten guineas each. A deed of settlement — which, however, was not executed until the 27th of March, 1802 — was drawn up; and in this document it was formally recited that " Whereas the Stock Exchange in Threadneedle Street, where the Stock- brokers lately met for the transaction of their business, hav- ing been found to be inconvenient," William Hammond and others had upon the site referred to " caused to be erected a spacious building for the transacting of buying and selling the public stocks or funds of this kingdom ; and the same is now nearly finished, and is called the Stock Exchange, and is intended to go under that appellation." History of London Stock Exchange. 263 It will be further found in that deed that the management, regulations, and direction of all the concerns of the under- taking were vested in a committee, consisting of thirty mem- bers or subscribers, to be chosen annually by ballot upon the 2oth of March ; while the treasuryship and management of the building were placed under the sole direction of nine triis- tees and managers (separate from the committee) as represen- tatives of the proprietors. Under these conditions, the new Stock Exchange was opened in March, 1802, with a list of about 300 subscribers. A new deed of settlement was executed in 1876, in which the prin- ciples of the original deed have been substantially adhered to. The Exchange, as at present constituted, consists of tw;o distinct bodies, composed in some degree of the same mem- bers, but having different interests. There are (1) the shareholders, or proprietors, and (2) the subscribers, these latter being generally described as members of the Stock Exchange, or members of the " house." To the shareholders the Stock Exchange is a joint-stock undertaking, the profit arising from the management of which accrues to them as a dividend. They have no rights as sha/reholders to enter the building ; and with this class we have no concern in this bogk.' The Stock Exchange is governed by a "Committee for General Purposes," who are elected by the members. It consists of thirty members, who are elected annually. They appoint their own secretary and the official assignees, and exercise a general control over the mode in which business is transacted in the house and the conduct of its members. The members of the Exchange pay an admission fee of 100 guin- eas, and a renewal subscription of twenty guineas, unless they have been clerks, in which case they pay sixty guineas as an ' Eep. of Eoyal Stock Exch. Com. 5. 264 Slockrbrokers and StocTc Exchcmges. admission fee and an annual subscription of twelve guineas. The Committee for General Purposes have no funds at their disposal, the entrance fees and subscriptions of members being substantially a rent -paid to the shareholders for the use of the building.' The rules and regulations of the Exchange are made and altered from time to time by the Committee for General Pur- poses ; and a full copy of the same will be found in the Ap- pendix, to which reference should be had. A synopsis of some of these rules should here be given. The right of entry into the building is strictly confined to members and their clerks. Candidates for admission have originally to be recommended by three members, who each guarantee the sum of £500 in case the new member be declared a defaulter within four years from his admission, and these are balloted for by the Committee for General Purposes. All members of the Ex- change, as between themselves, stand in the position of prin- cipals ; but they can act in the capacity of Dealers and Brokers at pleasure, not being allowed, however, to act in the double capacity at the same time." The two classes— Dealers and Brokers — in number are about equal. The Dealer remains in the house ready to deal with any one who comes to him. The Broker comes into the house only when he' has business to transact.' Some of the rules of the London Stock Exchange have been before the courts, and those we shall hereafter specially notice. As to the power of the association to make rules for the government of its members, it seems to be undoubted ; and although there appears to be no direct precedent in England arising out of a contest between the Exchange and one of its members, it is safe to affirm that there will be no difference in this respect between the courts of England and those of the » Kep. of Com. 6. » Kule XL. » Rep. 7. Rules and Regulations of London Stock Exchcmge. 265 United States ; and that all rules and regulations that are rea- sonable, and not contrary to public policy or the law of the land, are valid, and will be enforced by the courts.' But if a member of an association invokes the courts to defend him against a rule which is shown to be contrary to law, or against public policy, or unreasonable, he will undoubtedly be pro- tected, as is shown by the authorities heretofore referred to.' In respect to suits which may be brought against the Lon- don Stock Exchange, there would appear to be no difficulty since the Judicature Acts of 1873 and 1875, and the rules is- sued under their authority. So far as the form is concerned, in a suit against the "Committee for General Purposes," the proceedings of the association could be reviewed.' But the rules of the Exchange are much more limited in their operation when applied to the rights of third persons not members of the Exchange than when they are used to ' control the acts of members imter se. This proposition is sustained and illustrated by a recent case in the House of Lords, in which the rules of the Ex- change were sought to be used to distribute the property of an insolvent member contrary to the Bankrupt Law.* In that case, a member of the Exchange who had been declared a defaulter attended the usual meeting of the Stock Exchange creditors, and gave to the official assignees for distribution ' See authorities cited under ch. 2, they had expelled on a charge of dis- § VIII. So far as our researches are honorable conduct, the lawsuit be- conoerned, the only case that we ing based on the ground that the have found in which a direct con- action of the committee was not jus- test has arisen in the courts between tified in law. The trial lasted seven a member of the Exchange and the days aud proved abortive." general body is that contained in the ' Ch. 2, § VIII., sub. (a.) report of Mr. Scott, one of the mem- ' 1 Lindley on Part. (4th ed.) 466, bers of the London Stock Exchange 500. Commission (p. 30 of Eep.), which ' Ex parte Saffery, In re Cooke, is as follows : " Eecently the com- L. E. 4 Ch. Div. 555 ; TomkinS vs. mittee of the Stock Exchange were Saffery, L. E. 3 App. Cas. 213. assailed at law by a member whom 266 Stoohirokers cmd Stock Exehomges. among his Stock Exchange creditors a check on his bankers for £5000, being about five eighths of his assets, stating at the same time that he had none but Stock Exchange cred- itors. On the day after this sum had been distributed, the debtor informed the Stock Exchange creditors that his father- in-law claimed to be a creditor for a large amount of money lent. It did not appear that up to this time the debtor had committed any act of bankruptcy, but soon afterwards he filed a liquidation petition, and was adjudged a bankrupt. Upon this state of facts, the House of Lords held that the trustee in bankruptcy was entitled to recover the £5000 from the official assignees of the Stock Exchange. The lord chan- cellor, in his opinion, held that the rules of the Stock Ex- change were rules which, from the very nature of the case, are and must be subject to one infirmity — namely, that if they are to be effectual, they must be applicable to the case of a person who not merely is a defaulter upon the Stock Ex- change, but who has no creditors outside the Stock Exchange ; because if such a person has outside creditors the general law of the country will step in and give to those creditors rights which those rules cannot take away from them. Therefore, although everything done in the domestic forum of the Stock Exchange may be done according to the rules, and may be most wholesome in its operation for the members of the Stock Exchange, still what is done must be subject to the rights of those who are not amenable to the jurisdiction of the Stock Exchange; and when those higher rights come into confiict with such rules, the latter must give way to the former. It was also held by James, L. J., in the lower court, that any scheme made for the distribution of the assets of insolvents otherwise than according to the bankrupt law is a fraud on such law, and a palpable fraud upon creditors. But where a Broker becomes a defaulter in accordance with Rules and Regulations' of the London Stock Exohamge. 267 Eule 142 of the Stock Exchange, and thereupon the official as- signee fixes the market price, and collects differences due to the defaulter from other members, to be set off and paid to those members to whomi, on the same footing, differences are due from the defaulter, it was held that the trustee in liqui- dation could not recover the sum collected from the official assignee.' The court distinguished the case from Tomkins vs. Saffery, Baggallay, L. J., saying : " As far as regards any losing contracts, entered into by Plumbly [the defaulting Broker], the trustee in bankruptcy or in liquidation is relieved from that ; and if, on the other hand, it is said that there may be some winning contracts, the answer as far as regards them is, that it would be impossible to realize on them, because, when the time arrived for the completion of the contract, Plumbly could not and would not have been ready to perform them.'" The question as to how far the rules of the Stock Exchange enter into contracts made for a principal through its members is discussed in the chapter on " Usages ;" and as there seem to be no direct precedents which are peculiarly applicable to Stock- brokers in England, the reader is referred to the second chapter, where the rules, regulations, and general character of unincor- poi'ated Stock Exchanges are considered. ' In re Plumbly, 42 L. T. (n. s.) Nicholson vs. Goooh, 5 El. & Bl. 999. 387. Also Ch. n. 5 VIII. for American = See also, in this connection, decisions. 268 StocM/rohers cmd Stock Mochcmges. Chapter V. ANALYSIS OF TRANSACTION BETWEEN BROKER AND CLIENT UPON PURCHASE OR SALE OF STOCKS ON LONDON STOCK EXCHANGE. I. Definitions. II. Trading "for Money." III. Trading "for the Account." IV, Eelation of Broker to Client. (a.) Ownership and Disposition of Securities when Purchased. (J.) Summarily Closing Transaction, (c.) Other Incidents of Relation. V. Belation between Client and Jobber, {a.) General Liability of Jobber to Client. (6.) Special Contract between Jobber and Client Guaranteeing Megistration. (c.) Liability of Client to Jobber. VI. Eelation of Client to Undisclosed and Intermediate Pur- chasers. VII. Belation between Selling Client, or Vendor, and Ultimate Purchaser; Transferror and Transferee. Analysis of Transaction between Broker and Client upon Pwrchase or Sale of Stocks on London Stock Ex- cha/nge. We propose now to analyze an ordinary transaction in stocks, as carried on through the London Stock Exchange. Dejmiiions. 269 There are Stock-brokers who are not members of the Ex- change/ but it is not of that class that we here mean to speak, except to remark incidentally that a sale or purchase of securities through a Stock .broker, effected and consum- mated outside of the Exchange, would ordinarily be in no- wise different in its legal aspect from a sale or purchase of any other kind of property through an agent or Broker. As we have already seen, operations in the Exchange are conducted through two classes of its members — viz., "Bro- kers," and " Dealers" or "Jobbers." Brokers are those members who buy and sell securities for the public for a compensation called a commission. Dealers or Jobbers are those who deal, make terms, or spec- ulate in the " house " for their own account. But these characters of Brokers and Jobbers are not inva- riable and uniform. The members of the Exchange may change them at pleasure, and a Broker may become a Jobber, and vice versa ; but it seems that they cannot act in a double capacity in the same transaction." I. Definitions. In the outset, it will be well to define some phrases that are peculiarly applicable to the dealings on the London Exchange, referring the reader for others to another part of the work,' where those terms are defined which are alike applicable to England and the United States. .The terms " bull," " bear," " put," " call," and " options " are used as substantially syn- onymous in both countries.* A "lame duck" is one who cannot meet his engagements. Frequently an arrangement is made to continue shares, i. e., postpone delivery or payment until the next settling-day, ' Eep. of London Stock Exchange ' Rule 40, London Stock Exchange. Com. 1878. = P. 116. * See p. 116. 270 Stoch-hrohers and Stock Mochcmges. which is performed by the payment of a premium called, in the case of a seller,-'^ backwardation ;" in that of a buyer, " con- tango." The terms "conta,ngo" and "backwardation" have been fully explained in several adjudications, as well as before the royal commission to which allusion has already been made. These latter terms grow out of an indisposition on the part of persons entering into transactions on the Exchange to close the same on the account-day for which they are made. The market may be unfavorable, or some other cause may arise rendering it desirable to carry the operation over to the next account-days, in which event the transactions are continued by the operation of " contango " or " backwardation," as the case may be. The manner in which this is done is given in detail in the notes.' ' The following extract is taken no previous contract (except as re- from an excellent practical treatise gards payment of the consideration), on the law and customs of the Lon- because the difference between the don Stock Exchange, by Melsheimer original contract price and the price and Laurence, London, 1879, p. 10 : at which the carrying-over is effect- "If,however, the market should tend ed must be paid at once — that is to unfavorably, or if for any other rea- say, on the settling-day. The nom- son it should be found desirable, an inal price of the security at vrhich arrangement may be made to post- the carrying-over is effected would pone the completion of the contract obviously be quite immaterial to the until the following settling-day. parties, since the two contracts bal- This is called ' continuation ' or ' car- ance one another, were it not that ryiug over,' and is practically effect- this difference is payable immediate- ed, we will suppose, by the bull or ly. Being payable immediately, more speculative buyer as follows : The bargaining would become necessary vendor of the stock (in consideration to fix the price for the new contracts ; of a payment made to him by the but this is obviated by the pnblica- buyer) enters into two contracts with tion of a list of'making-up prices,' the buyer — one a contract for the which are, in round figures, the ap- purchase of the same amount of proximate values of all the recog- stock as he has contracted to sell nized securities on that day, as set- (such contract to be completed on tied by the clerks of the house in the settling-day, so as to cancel the the various markets, and are usual- subsisting contract), and the other ly based upon the average price of a fresh contract for the sale of the the first two or three hours of the same amount of stock, to be com- day. In case of any dispute as to plBted on the subsequent settling- themaking-upprices, orof any omis- day. The result is, that the vendor sion in fixing them, the clerk acts and purchaser stand in precisely the upon the decision of two members of same position as if there had been the committee. AU continuations Definitions. 271 But, practically, the terms " backwardation " and " con- tango " mean that a new operation is begun each settling-day, muat be effected at these prices, or, where no such prices have been fixed, at the then existing market price. " The consideration thus paid by the buyer, for which the vendor agrees to postpone the delivery of the stock he has sold to a future specified date, is called a ' contaugo ;' on the other hand, a 'backwardation' is the pre- mium paid by a seller of stock for the privilege of postponing his de- livery of such stock from ^nd to a specified date. "Inasmuch as the vendor and pur- chaser stand in the same position af- ter the continuation as if there had been no previous contract, the con- tinuation may equally be effected between persons other than the par- ties to the previous contract, and this is frequently the case. Let us suppose that a ' bull account' exists in the particular stock with which we have to deal — that is, that the amount of stock bought for the set- tlement is greater than the buyers are prepared to take up (we may here premise that every bargain in the stock must be and is settled on the account-day); a person who has bought stock for which he is unable or unwilling to pay must then find some one who, for a consideration, is willing to stand in his place by taking up such stock at the making- up price, and holding it for a speci- fied time, charging a rate of interest for the money employed, and hold- ing the stock as security; the real buyer engaging, at the eud of that time, to take possession of the stock by repayment of the money. " The continuation may, of course, be effected outside the Stock Ex- change; but, for its more easy ex- planation, we will suppose that a purchaser has given his Broker in- structions to continue the stock for which he is liable to pay, and that the Broker carries out the transac- tion with a member of the house. This carrying-over is, as we have seen, not necessarily effected with the dealer from whom the original purchase was made, though this is very generally the case; but the Broker finds some dealer in this stock who has money to employ, or who is out of the stock, and agrees with him for the accommodation at the market rate. The Broker then renders a contract to his Client, showing the sale of his stock at the making-up price for the current ac- count, and its repurchase for the next account at the same price, but with an addition representing the value of the money practically borrowed by his Client, together with the mon- etary consideration, if any, for the accommodation ; and, in the case of registered securities, if the lender of the money is obliged to take them into his own name, this will include the cost of stamps and transfer-fees, from the payment of which the Cli- ent is pro tempore relieved. It is this difference between the price of sale for the current account and the actual buying price for the next ac- count which is called a ' contango ;' and this, as will be easily seen, will be regulated partly by the nature of the security, partly by the value of mon^y, and partly by the demand existing for such accommodation ; and will also be affected by the in- dividual credit of the person seeking the accommodation. " Conversely, let us suppose a ' bear account' to exist in the stock ; here the amount of stock sold for the settlement is greater than the sellers are able to deliver, and the bear will have to find some one who, for a con- sideration, is willing to supply the stock which will enable him to com- plete his bargain. There are three 2Y2 JStockrlrdkers wnd /Stock Mechcmges. because the loss is settled and paid by the Client on each of those periods. 11. Trading ^^for MoneyP Sales or contracts on the Exchange are either made " for money " or " for the account." A contract " for money " is one for immediate execution ; the securities are delivered by the selling Broker at once upon their sale by a transfer to a designated name, and the Jobber or Broker for the buyer thereupon immediately pays for the same. These contracts are not numerous, and are generally con- fined to consols.' In this transaction, in respect to both the selling and. purchasing Brokers, the relation they bear to their Clients is that of pure agents. And the agent is entitled classes of persons who will be able to render the bear this assistance ; first, the speculative buyer, who is unable to complete his bargain, and is there- fore anxious to continue ; secondly, the buyer who, though able to com- plete bis bargain, is willing, for a consideration, to defer such comple- tion to a future day ; and, thirdly, in the last resort, the geuuiue holder of stock, who is willing to accept a pre- mium for the loan of his stock for a specified time. In these cases, the Broker, having similarly effected the continuation, renders a contract to his bear Client, showing the pur- chase of his stock at the making-up price for the current account, and its resale for the next account at a low- er price. The difference between these prices is called 'backwarda- tion,' and represents the premium paid by the bear for the loan of the stock, leas tlie value of the money which is here supposed to be ad- vanced by the bear ; and here again this amount may include the cost of stamps aud transfer-fees, which will be payable by the holder who lends his stock, on its retransfer to him. "It win be observed, therefore, that it does not necessarily foUow either that the buyer will have to pay contango, or the seller back- wardation, when they are desirous of carrying over their stock ; for if the former has bought for an account at which it is found that more of the stock has been sold than can be de- livered, he will be in a position to postpone payment, and at the same time to receive backwardation for the temporary loan of the stock which he has bought ; aud, converse- ly, in the case of a bull account, the latter may receive contango for post- poning the delivery of stock sold." Consult also, in this connection, Sheppard vs. Murphy, 16 W. E. 948 ; see also evidence attached to Report of London Stock Exchange Commis- sion, where full explanation of the operations of " contango " and " back- wardation" are given. ^ See Kep. of Stock Exchange Com. Trading "for the Account." 273 to full indemnity for any act which he does in the business of his Client, provided there is no fraud or neglect on his part. For instance, if the former order the Broker to sell securities, which he does, and the Client neglects or refuses to furnish the same for delivery, and by reason of such fail- ure the Broker is compelled to make good the difference, in this case the Client is bound to indemnify him.' So where a Broker, being instructed to buy certain shares, bought let- ters of allotment, and it was in evidence that these passed on the Stock Exchange as shares, it was held that the jury might find the order to have been fulfilled," and that the Broker had fully performed his duty by buying what passed on the Ex- change as shares. Again, if the Broker advances from his own funds all or any portion of the money to pay for the securities, he has a lien upon them to that extent, and the relation of pledgor and pledgee is added to the previous one of Broker and Client.^ In a word, the relation of principal and agent being once es- tablished, it follows that the Broker is clothed with all of the attributes of that character; and as all of the decisions in which contests have arisen between Stock-brokers and their Clients, both in England and in the United States, have been already set forth, it is only necessary in this connection to direct a reference to that part of the work where they are collected.' III. Trading "for the Account." But by far the most numerous transactions on the London Stock Exchange are those "for the account," and it is in such ' Child YS. Morley, 8 T. E. 610 ; = Brootmau vs. Eotlisohild, 3 Sim. Liglitfoot vs. Creed, 8 Taunt. 268; 153; aff'd 5BU. (n. s.) 165. Pollock YS. StaWes, 12 Q. B. 765. ■* Ch. III. ' Mitchell vs. Newliall, 15 M. & W. 308. 18 274 Stochrlrohers cmd Stooh Exohmges. tradings that the Broker seems to lose the attributes of an agent and to assume the garb of a principal. The following history of an ordinary stock transaction "for the account" is substantially taken from a leading case, and it illustrates with great detail the whole course of. the business.' When a Broker is instructed by his Client to sell shares on his own account, he goes on the Stock Exchange and deals with either a Jobber or another Broker, as the case may be. In case a Broker deals with a Jobber, he asks the Jobber for the price ("to make a price") of a particular class of shares, without saying whether he (the Broker) desires to sell or buy. The Jobber then names two prices to the Broker — the one that at which he will buy, the other that at which he will sell. If the Broker be willing to sell at the price named, he de- clares to sell, and accepts the offer of the Jobber to buy at that price." Thereupon the bargain is concluded between them.' The bargain is made for a certain specified day, which is known on the Stock Exchange as the " account-day ;" and on the day preceding the account-day (which latter day is known as the " name-day") the Jobber is bound to pass to the Broker ' Maxted vs. Paine, L. E. 4 Ex. Bought for William Marphy, Esq., 205. 100 Overend Gurney shares at IXdiscount £1387 IDs. DA " The Broker is not bound to dis- (£16 paid) stamps 7 is. 6d. close his principal (Child vs. Morley, Brokerage is los. od. M. & W . 44U). No. 7 Finch Lane, E. C, 21st April, 1866. ' A bought or sold note is then For Lowndes, Surgey, & Wooley, Brokers, given to the principal, on which the <^'sned) J. s. Bywater. name of the Jobber is occasionally (Sheppard vs. Murphy, 16 W. E. 948.) inserted, though this is by no means '^^^ 8°^ note is as foUows : a universal custom. The names of 2 Royal Exchange Building, May 24, 1866. the Jobbers purchasing were inserted , f "J? ^^-.Z^^,^ ""* J"); account of e. p. Max- ,. ..*',. ., ted, Esq., 100 Overend, Gurney, & Co. shares at in the notice oontamea in the case 17 discount For the 30th inst of Torrington vs. Lowe, L. E. 4 C. Sahdeman, dobree, & Co. P. 26. (Maxted vs. Paine (2d action), L. E. 4 The bought and sold notes are in Ex. 203, 210.) But usually no docu- the following form, nmtotis mutan- ment passes between the Broker and dis: Jobber; each one, however, makes a memorandum of the transaction in his own book. Trading "for the Account." 'iilb the name of a person or persons (as the case may be) as the ultimate purchaser or respective purchasers of the said shares ; but the Jobber may in lieu thereof give his own name to the Broker as the ultimate purchaser of the shares ; or, in the event of his having had no dealing with the shares subsequent io the original bargain, then as the purchaser of the shares, in which latter case he is bound himself to take the same. This name is passed upon a document called a "ticket," which is in the following form, mutatis mutmidis : £15 paid, 1 13-16 discount £131 17s, M. Stamp 15s. 0^. £132 12s. U. : Ten shares Overend, Gumey, & Co. Francis Peppercorn, of West Street, Hertford. 30 May, 1868. Watson, Cowell, & Co. pay. The dealings in the shares after the concluding of the first bargain may have been either many or few, but in all cases the ticket is endorsed, either in pencil or ink, with the names of the members of the Stock Exchange, whether acting as prin- cipals or Brokers, through whose hands the ticket has passed. In addition to his obligation to give the name or names afore- said, the Jobber is also liable to the Broker for the price of the shares as agreed upon ; and the Broker can either apply for the price to the Jobbers, or can apply to the Broker of the ulti- mate purchaser for the amount of the purchase-money which he is to pay for the shares, looking to the Jobber for the dif- ference, if any. But the usual practice is to make appli- cation in the first instance to the Broker of the ultimate purchaser whose name appears on the ticket as the person to pay, as sliown on the above form of ticket.' ' The payment for thestook is made ment ; in the absence of such notice, by the paying Broker in notes of the a member is bound to accept the Bank of England or coin, if notice is crossed check of another member given to him to that effect before ( Mooatta vs. Bell, 27 L. J. Ch. eleven o'clock ou the day of settle- 237), 276 Stoch-hrohers and Stooh Exchanges. In the event of the Jobber failing to give a name by two o'clock on the name-day, the Broker has the right, after the lapse of an hour, to sell out the shares as against him by auc- tion on the Stock Exchange through the medium of another Broker, who is, however, in most instances the secretary or clerk of the Stock Exchange. The Jobber then becomes liable to the Broker for the difference (if any) between the price at which the shares are so sold and the price originally bargained for between the Broker and Jobber. At any time before the transfer of the shares has been executed by tlie seller,' the Bro- ker may object to any name or names given by the Jobber; and in the event of the Jobber and Broker failing to agree, the Broker may appeal to the committee of the Stock Ex- change, who on such appeal have the power to require the Jobber to give to the Broker a better name, in case they con- sider the Broker to be thereunto entitled.'' So if the Broker wishes to secure the registration of tlie shares and the exoneration of his Client from all future li- ability in respect of the same, he makes a special bargain with the Jobber in express terms to that effect ; but in that case the price offered by the Jobber is often considerably below the price which he would otherwise have offered. But this guaranteeing of .registration is of rare occur- rence.' It also appears in accordance with the usages of the Stock Exchange that the Broker may, in executing the order of a Client, enter into a contract for the specific amount of stock ordered to be bought or sold, or may include such order with others he may have received in a contract for the entire quantity, or in quantities at his convenience. ' By Rule 98, registered sliiires or ' Masted vs. Paine, L. E. 4 Ex. 205. stock, if not delivered witbin ten ^ M.axted vs. Paine, id.; Cruse vs. days, may lie bought in against the Paine, L. K. 4 Ch. App. 441 ; Coles vs. seller. Bristo\Ye, id. 3. Trading "for the Account." 277 TTeithei" in Stock Exchange contracts is tliere any real ap- propriation to any particular Client of any particular stock in any transaction entered into with the Jobber. Each transac- tion only forms an item in an account with that Jobber, or, more correctly, with the house generally — that is to say, speci- fic delivery or acceptance of that amount of stock is not nec- essarily made ; but the transaction is liable to be balanced at any time during that account by a counter-transaction by the same Broker on belialf of the same or any Client, or even on his own behalf, so that the balance only of all purchases and sales of that, particular stock made by the Broker in the house generally is to be finally accepted or delivered by him, and this through the instrumentality of the clearing-house and the system of tickets. On the usual settling-days, the members of the house bal- ance between themselves the purchases and sales so made, and make or receive deliveries to or from their principals; or if their principals refuse to accept or deliver, then sell or buy against them, as the case may be, and charge them with the loss, if any ; or if delivery is not required on either side, then any difference which may result from a rise or fall in the mar- ket is paid by the one to the other.' ' " An important extension of the each other. Instead, then, of actn- clearing principle was effected by ally making transfers of stock for the establishment in 1874 of the each transaction and paying by London Stock Exchange Clearing- checks, which greatly swell the busi- house, which undertakes to clear, ness of the Lombard Street Clearing- not sums of money, but quantities house on settling-days, a plan has of stock. As Stock-brokers settle been arranged according to which their transactions only once a fort- each member of the clearing-house night, or in consols once a, month, it prepares a statement of the net naturally arises that in the intervals amount of each stock which he has the same Broker will usually have to receive from or deliver to each bought the same kind of stock for other member. The manager of the one Client and sold it for another, house, after verifying these accounts, The very same stock may have which should balance in the aggre- passed through several different gate, directs the debtor members to hands, and the same Brokers may transfer quantities of stock to the have had reciprocal dealings with creditor members in such a way as 278 Stockrhrohers and Stock Exchanges. The following extract from the report of the London Stock Exchange Commission in 1878, which is based upon the testi- mony of many experienced Brokers, is confirmatory of the transaction as described in the cases before referred to : " As soon as the contract is made, it is usual, but not universal, for each party to make a note of it in his own note-book ; but no written contract passes between them." The Broker who has acted for his Client in making such a contract sends a written note of it to the Client ; but as a rule he does not mention the name of the dealer with whom he has dealt. There are two fixed days, called account-days, in every month, for stocks other than government stocks, these latter beingsettled only once a month. When the account-day arrives, the securities are delivered and paid for, unless some fresh bargain is made by whfch the execution of the contract is annulled or practically deferred until the next account-day. If the bargain, however, is completed on the original ac- count-day, it is not necessarily carried out between the origi- nal parties to it ; for the seller may have bought similar stock to close all the transactions. It will tomer iu the 5 Law Mag. and Sep. be noticed that for pretty obvious 401 (Aug. 1880, 4th series), and the fol- I'casons the transfers are made in the lowing cases: Lacey ts. Hill (Scrim- Stock Exchange directly from Bro- geour's claim), L. R. 8 Ch. App. 922; ker to Broker, and not to the mana- Maxted vs. Paine, L. E. 4 Ex. 203, ger of the clearing-house, as in bauk- and 6 id. 132; Bo wring vs. Shepherd, ing transactions. A separate clear- L. E. 6 Q. B. 309; Grissell vs. Bris- ing has, of course, to be made in towe, L. R. 4 C. P. 36, and 3 id. 112; each kind of stock. It is found that Coles vs. Bristowe, L. E. 4 Ch. App. 3, the quantities actually transferred do and L. E. 6 Eq. 149; Sheppard vs. not exceed 10 per cent, of the whole Murphy, 16 W. E. 948 ; Eennie vs. transactions cleared, aud the checks Morris, L.E. 13 Eq. 203; overruled by drawn are diminished on settling- Merry vs. Nickalls, L. E. 7 Ch. App. daysasmuchasteumillionssterling" 733, and L. E. 7 H. L. Cas. 530; (Jevons's Money and the Mechanism Nicholson vs. Gooch, 5 El. & B. 999 ; of Exchange, pp. 281, 282). See also, also Lindley on Part. (4th ed.) 721, as to method of transacting business which contains a valuable summarv on the London Stock Exchange, an of the law upon the subject of sales article ou The Legal Eelations be- on the Stock Exchange; Cavanagh's tween a Stock-broker and his Cus- Law of Money Securities, 513 et seq. Definitions. 279 from some third person, and he in like manner from another, and so on through several hands, so that the whole series of bargains is settled by the ultimate seller delivering to the ul- timate buyer. If, when the account-day arrives, the seller is not able to deliver the stock which he has sold, the buyer is entitled, af- ter a certain lapse of time, to " buy the stock in " against him. This proceeding consists in an official Broker announcing in the market that he wants the given quantity of stock, to- gether with the purpose for which he wants it. The original seller has to pay the difference in price. Similar practice prevails with regard to "^ selling out" in the case of non- acceptance by the buyer. All disputes or charges of unfairness between Brokers are referred at once to a committee, who dispose of the matters in controversy with the utmost promptitude. The Dealers constitute a class which is a distinctive feature of the London Stock Exchange. They are ready, at a mo- ment's notice, and, in cases where required, even to pay for at a moment's notice, almost any quantity of a current secu- rity, with the knowledge that they can perhaps within the same day, or, at any rate, before the next account-day, sell the same again at a margin of profit which is involved in the dif- ference between the two prices that they named, and they act without hesitation upon this facility. The securities dealt in on the Exchange are distinguished into "current" and " non-curnent." It is only in the "cur- rent " securities that the dealer can " make a price ;" in the other class the sale is effected by bargains between the mem- bers, generally conducted through a middleman also a member. 280 Stochhrokers and Stock Exchanges. IV. Relation of Broker to Client. In the above transaction, the identity of the Client seems to be entirely lost sight of, and the settlement of the contract by the payment of differences, by which the delivery of stocks is avoided, renders the transaction radically and wholly different from the ordinary case of a Broker acting in the purchase or sale of merchandise. But, notwithstanding this dissimilarity, the rule in England is, as in the United States, to hold the Stock-broker to all the responsibilities, and to invest him, on the other hand, with all of the privileges, of an agent.' For it appears in all of these transactions that the funda- mental elements of agency exist^viz., that the Broker makes the contract or enters into the business for his Client, and not for his own account; and the fact that his own money or credit is used in the business, and his principal's name con- cealed or disregarded, is of no importance. These, and all of the other incidents of the trading, exist mainly by virtue of the rules of the Stock Exchange, and are mere ramifications of the business, and do not affect the ultimate relation which the parties bear to each other." But the position has been taken extra-judicially in England," that the Stock-broker was a principal, and that he should be regarded as agreeing himself with the Client as principal, from the inception to the close of the transaction, it being argued that the transactions would then assume their real shapes viz., as mere contracts for differences, and consequently void as gaming contracts. But, in the absence of some express agreement between the > Thaoker vs. Hardy, L. E. 4 Q. B. 58 ; 4 Jiir. 172 ; Lacy vs. Hill L E 8 Div. 685. Ch. App. 921. "Mortimer vs. McCallan, 6 M.&W. ' 5 Lmn Mag. and Bev. (Auo-. 1880) 401, 4th series. Relation to Client. 281 Broker and Client (and in stock transactions on the London Exchange such an agreeinent has never been shown to ex- ist), this view cannot be maintained, and is very strongly re- pudiated in the interesting case of Eobinson vs. Mollett,' which holds that a Broker cannot be a principal in a transac- tion where he is employed to act as Broker. The facts in that case were these : A merchant gave two certain orders to the defendants, tallow-brokers, to buy tallow ; the first of the orders was " to buy for him 50 tons of tallow, June delivery, at 46s. Qd. ;" the second was, " Buy 200 tons of tallow for June, best terms." Upon the receipt of these orders, the Brokers immediately sent notes, saying, " We have this day bought for your account," and signed them with the addition of the words " M. B. & TJ., sworn Brokers." The price of tallow fell in the market between the dates of the oi'ders and the time for the June delivery. On the trial, it appeared that the Brokers did not buy, and had not, at the time of sending the notes to their principal, bought, the specified quantities from any person ; but, both be- fore and after the order, had bought from various persons, in their own name, larger quantities of tallow, proposing to allot to their principal the quantities he had desired to be bought. The principal refusing to accept the tallow which the Brokers tendered, the latter .brought suit to recover the difference. The Brokers had judgment in the Common Pleas, which judgment stood affirmed, through an equal division of opinion among the judges in the Exchequer chamber.. On the trial they rested their right to recover upon a cus- tom which they proved to exist in London, for tallow-bro- kers, where they receive an order from a principal for the purchase of tallow, to make a contract or contracts in their own names without disclosing their principals, and also to ' L. E. 7 H. L. Eng. & I. App. Cas. 802. 282 StoGkrbrokers and Stock Exchanges. make such contracts eithei- for the specific quaritity of tallow so ordered, or to include ' such order with others they may have received in a contract for the entire quantity, or in any quantities at their convenience, at the same time exchanging bought and sold notes with the selling Brokers, as above de- scribed in the present case, and passing to their principals a bought note for the specific quantity ordered by them as before described in this case; and that when a Broker so purchases in his own name, he is personally bound by the contract ; and that on the usual settling-days the Brokers bal- ance between themselves the purchases and sales so made, and make or receive deliveries to or from their principals, as the case may be; or, if the latter refuse to accept or deliver them, to sell or buy against them, as the case may be, and charge them with the loss, if any ; or if delivery is not re- quired on either side, then any difference which may arise from a rise or fall in the market is paid by the one to the other. This custom does not exist at Liverpool, and was un- known to the defendant. But the whole of the transactions and dealings in the present case were carried out in accordance with this custom. The House of Lords reversed the judgment of the court below, and opinions were delivered by several judges, the novelty and importance of the question justifying extracts therefrom. Mr. Justice Mellor said, adopting the language of the court below : " It appears to me to amount to a custom for a Bro- ker in the tallow-trade in London to do something entirely inconsistent with the character of a Broker — viz., to convert himself from an agent to buy for his employer into a principal to sell to him. ... It is an axiom of the law of principal and agent that a Broker employed to sell cannot himself become the buyer ; nor can a Broker employed to buy become himself Belation to Client. 283 the seller without distinct notice to the principal, so that the latter may object if he think proper. A different rule would give the Broker an interest against his duty. . . . Although a custom of trade may control the mode of performance of a contract, it cannot change its intrinsic nature." Mr. Justice Brett, in the course of his opinion, said that a custom, so long as it did not infringe some fundamental principle of right or wrong, may prevail ; but if it is found to be fundamentally unjust to the other side, if sought to be en- forced against a person in fact ignorant, it is unreasonable, contrary to law, and void. " The relation between the plain- tiffs and defendant, established by these orders of the defend- ant (in error) and their acceptance by the plaintiffs (in error), was that of principal and agent — a merchant principal and a Broker agent. . . . And whatever view may be taken of the effect of the custom if allowed, it must go to the extent either of making a contract of purchase and sale between the plain- tiffs and defendant, or of absolving the plaintiffs from an obli- gation to make a contract for the defendant — that is to say, to make a contract for, the purchase of tallow to which he should be a party as purchaser, and some person or firm bound by the plaintiffs should be a party seller." In conclusion, he said : " I fail to see any advantage to the merchants who em- ploy the Brokers adequate to the loss of a carefully selected principal. It is a custom, therefore, invented by the body of Brokers for their own exclusive advantage." Mr. Baron Cleasby, another of the prevailing judges, said : " The vice of the usage set up in the present case cannot be appreciated by examining its parts separately. It must be looked at as a whole, and its vice consists; I apprehend, in this : that the Broker is to make the contract of purchase for another, whose interest as buyer it is to have the advantage of every turn of the market; but if the Broker may eventually 284 Stock-lrokers cmd Stock Exchanges. have to provide the goods as principal, then it becomes his interest as seller that the price which he is to receive should have been as much in favor of the seller as the state of the market would admit. Thus the two positions are opposed." The reasoning of this case cannot but fail to meet the ap- proval of the profession ; and the adoption of any other rule would leave in the hand of the Broker untold means of fraud upon a person who was paying him a commission for the ex- ercise of his -disinterested skill, diligence, and zeal.' The case of Merry vs. Nickalls '' should also be referred to in this connection, where it was held that upon a sale of shares on the Stock Exchange the ultimate contract is not between the vendor's Broker and the purchaser's Broker, but between the vendor and the purchaser named on the ticket who are brought together by means of the Jobber. Another class of cases may also be profitably referred to as confirming the view that, in all stock transactions where a Broker is acting under a commission, the courts hold the relation to be that of agency. The cases we allude to are those in which the question arises as to the respective liability of persons buying or sell- ing through the Stock Exchange for " calls ;" for when the ticket containing the name of the ultimate purchaser issued by his Brokers is delivered to the vendor (by his Broker), and he has executed a transfer of his shares, and that transfer has been accepted by the purchaser, and he has paid the price, the purchaser is bound to indemnify the vendor against all liabili- ty in respect of the shares,' although the purchaser has not ' See also, in this connection, story kinson vs. Kelly, L. E. 6 Eq. 496; on Ag. J 210; also Tliacker vs. Hardy, Hawkins vs. Maltbv, 6 id. 505, and L. E. 4 Q. B. Div. 685. L. E. 4 Ch. App. 200 ; Shepherd vs. = L. E. 7 Ch. App. 733 ; affd L. E. Gillespie, L. E. 5 Eq. 293 ; Sheppard H. L. 7 Eug. & I. App. Cas. 530. vs. Murphy, I. E. 2 Eq. 544, and 16 = Paine vs. Hutchinson, L. E. 3 Eq. W. E. 948 ; "Wynne vs. Price, 3 De G. ■257, and L. E. 3 Ch, App. 388 ; Hodg- & Sm. 310. Relation to Client. 285 executed the transfer,' and where the registration of the trans- fer cannot take place by reason of the stoppage of the com- pany'' — it being held that a privity exists between the vendor and the ultimate purchaser the moment the ticket containing the purchaser's name has been handed by his authority to the vendor, and he has accepted the name and indicated the ac- ceptance to the purchaser." It has also been held that undis- closed principals are liable — viz., that if the first purchaser is a Broker buying for a principal, the liabilities of such princi- pal are the same as the liabilities of a purchasing Broker or Jobber.'' To sum up this proposition, we find : First, that the Broker is ordered to buy or sell by his Client on the Stock Exchange. The Broker does not ofiEer, or profess to ofEer, his own securi- ties for sale. Second, the Broker goes into the Stock Ex- change, and there makes the transaction with a Jobber or fel- low-Broker. Third, the loss or profit of the transaction is the Client's. Fourth, the Broker acts for a commission. Fifth, he renders a statement of the business in his capacity as Bro- ker to his Client. So far as the Broker's relation to his Client is concern- ed, there would seem to be no difference between a trading " for money " or " for the account ;" and altogether there appears to be nothing in a speculative transaction in secu- rities which authorizes the position that the Broker is a principal.^ ' Wynne vs. Price, supra. ring vs. Shepherd, L. R. C Q. B. 309- ° Evaus vs. Wood, L. E. 5 Eq. 9 ; 328 ; Davis vs. Haycock, L. E. 4 Hodgkiuson vs. Kelly, 6 id. 496; Exoh. 373, 384, 386; Maxted vs. Holmes vs. Synions, 13 id. 66 ; comp. Paine, L. E. 6 Ex. 132, 166. Bermingham vs. Sheridan, 33 Beav. * See Lord Blackburn's opinion in 660, v?hich, however, cannot be relied Maxted vs. Paine, supra, on (as to \>rhich see L. E. 3 Ch. App. ' For further consideration of this 393). subject, see chap, on " Stock -joh- ' See cases heretofore cited : Bow- bing" under title of " Wagers." 286 Stoch-'brokers arid Stock Exchanges. {a.) Ownership omd Disposition of Securities when Purchased. This brings us to another phase in the transaction — viz., that, although the Client orders particular securities to be bought for him upon the Exchange, and a contract is accord- ingly made for them by his Broker, there is no immediate de- livery, and in fact they do not become the property of the Client until the transaction is closed by the delivery of the securities to the Broker. This point vras involved in Lacey vs. Hill," where a Broker summanly closed an account of his Client before the settling- day, and sought to recover the loss made by so doing from the latter's estate. In that case it was stated upon this point that " when a Broker, on the instructions of his principal, agrees to buy, or actually buys, a certain amount of stock or shares, the stock or shares so bought are in nowise identified as the stock or shares so ordered to be purchased, hut remain, by the practice of the Stock Exchange, the property of the Brokers, and at their dis- position, not at that of their principal. When the ti'ansaction as between the Brokers and the principal is completed by payment by the latter and" by delivery of the stock, the par- ticular stock becomes the principal's property, and is treat- ed and considered as the subject of the bargain, and the Bro- kers, according to the practice, are thereupon bound to hold the particular stock or shares at the disposal of the principal.' When, however, the stock has been paid for by the Client, but remains in the custody of the Broker ; or where the Bro- ker advances the purchase-money, or a portion of the same, as was done in Brookman vs. Eothschild," it would seem that ' Scrimgeour's Claim, L. E. 8 Ch. ' See also Lacey vs. Hill (Crowley's App. 921, 922. Claim), L. E. 18 Eq. 182. » 3 Sim. 153, aff'd iu H. L. 5 Bli. 165. EelaUon to Client. 287 all of the law applicable to the ownership of the property at- taches. The Broker can make no disposition of it without the consent of the owner; he is bound to retain the actual stock or shares transferred, and not to retransfer other stocks or shares bought at a lower price, and thus make a profit out of them.' And although Brokers are within the list of traders in the Bankruptcy Act of 1861, and the firet schedule to the act of 1869," yet in the event of such bankruptcy a sum of stock or shares which the Broker has bought for his principal and taken into his own name are not in his order and disposition so as to pass to his assignees or trustee.' The court held in the last-cited case that the property of a principal intrusted by him to his factor or Broker for any special purpose be- longs to the principal, notwithstanding any change which that property may have undergone in point of form, so long as such property is capable of being identified and distin- guished from all other property ; and that all property thus circumstanced is equally recoverable from the assignees of the factor, in the event of his becoming a bankrupt, as it was from the factor himself before his bankruptcy. And the court further laid down the general principle that if the property, in its original state and form, was covered with a trust in favor of the Client, no change of that state and form can divest it of such trust, or give the factor or agent, or those who represent him in right, anj' other more valid claim in respect to it than they respectively had before such change. An abuse of trust can confer no rights on the party abusing it, nor on those who claim in privity with him. The ' This was so held in the case of 4 Ch. App. 402). As to the custom a mortgage of stocks (Langton vs. in the United States of Brokers using Waite, L. E. 6 Eq. 165). But, after securities held for account of their the mortgagor has discovered the Clients, see Cb. III. p. 141 et seq. fact, he may deprive himself of any ^ Taylor vs. Plumer, 3 Mau. & S. remedy hy dealing with the proper- 562. ty so retransferred to him (id. L. K. ' Id. 288 Stock-lrokers and StooTc ISxchcmges. case of Taylor vs. Plumer was directly endorsed in the case of Ex parte Cooke.' In that case, C, a trustee, employed a Stock-broker, who had notice of the trust, to sell out consols and invest the proceeds in railway stock. The Broker sold the consols for cash, bought railway stock to the same amount for the settling-day, and received the price of the consols in a check, which he paid into his account at his bankers. He stopped payment before the settling-day, and went into liqui- dation. The trustee claimed so much of the Broker's balance at his bankers as was attributable to the price of the consols. This was refused by the registrar, on the ground that the transaction constituted the relation of debtor and creditor be- tween C. and the Stock -broker, and not that of trustee and cestui que trust. But this decision was reversed on appeal, the appellate court holding that the Stock -broker had notice that the money belonged to a trust fund, and that the money could be traced. And the court also expressly said that, even if there had been no notice, the relation of the Stock-broker and C. was of a fiduciary character, so as to make the case undistinguishable from Taylor vs. Plumer." ' (5.) Summarily Closing Transaction. The case of Lacey vs. Hill ' established another proposition which should be touched upon — viz., that when it appears to the Brokers that their Client is, from insolvenc}'^, bank- ruptcy, or death, unable to carry out his contracts, the Brokers may summarily close the account before the next settling-day ' In re Straohuan, L. K. 4 Ch. Div. trust property, elaborate note to Hoo- 123. ley vs. Gieve, 9 Ab. (N. Y.) New Cas. ' See further on tbe subject of com- 8, at 41. mingling proceeds, and right of ces- ' Scrimgeonr's Claim, supra, tui que trust or principal to follow •Smrvmarily Closvng TramsacUon. 289 has arrived, taking their chances, nevertheless, that the price of the securities will be as unfavorable to their Client on the settling-day as it was on the day they closed the transaction. In that case, Messrs. S. were Brokers on the London Stock Exchange, and had been employed as such by H., a banker at Norwich. In the year 1870 they had bought for him £204,000 Spanish stock and £150,000 Italian stock. The Bro- kers paid the purchase -money, having borrowed money for that purpose from their bankers on the security of the stock. In their accounts they treated it as a loan to H. They were in the habit of sending H. fortnightly accounts after each settling-day. On the first settling-day in June, 1870, the stock had risen in price, and his accounts showed a balance in his favor of £8794. The Brokers paid £6700 to him, and, under verbal instructions from him, carried over or continued the stocks to the next settling-day. On the next settling-day, the 28th of June, these stocks had fallen, and there was on this account a balance of £292 against H. The stocks were again carried over or continued for the next settling-day, the 4th of July, on which day the stocks had fallen heavily, and the bal- ance against H. was £15,988. He had on that day directed them to sell half the stock, which they did, and credited him with the price. The account was sent to him on the 14th. On the following day he shot himself, and died on the 19th of July. On the 16th H.'s bank at Norwich stopped pay- ment. Messrs. S. being, as they stated, apprehensive of a fur- ther fall in the market, sold on the 16th, 18th, and 19th of July the remainder of the stock. The result of these trans- actions was that the balance against H. in the books of Messrs. S. was (after deducting their commission on the sales) £26,346. A suit was instituted by creditors for the administration of the estate of H., and Messrs. S. carried in a claim against the 19 290 Stodkrbrokers cmd Stock Exchcmges. estate for this sum. In support of their claim, they produced evidence from members of the Stock Exchange that, with very few exceptions, all bargains and transactions on the Stock Exchange are made for certain periodical days called " settling- days;" that when it becomes notorious that a principal is, by reason of bankruptcy or death, unable to receive and pay for, or to deliver, the stock or shares which he has ordered to be purchased or sold, and that no one is authorized to deal with the account, or able and willing to take the responsibility thereof — then and in such case it is usual for the Broker, who is responsible to the members of the Stock Exchange for the transactions entered into for his principal, to pro- ceed at the earliest practicable period to close the account of such principal by selling, on the best terms, amounts of all stocks or shares equivalent to those he may have contracted to deliver. The court, in delivering the opinion, said : " The rules of the Stock Exchange are very reasonable, and would apply. Those rules are that when a Broker, making a contract in his own name, has made, for his principal a contract by way of speculation whether certain stocks will, during the next fort- night, rise or fall, and the principal dies or becomes a bank- rupt, or falls into such a state of insolvency that it is manifest the Brokers cannot depend on him to protect them against any loss that may occur, then the Brokers may at once ter- minate the transaction, so as to make the profit or loss, which- ever it is, depend upon the state of things on that day, and not to run the risk of any further fall in the market. That appears to me a most reasonable rule." ' But it seems that this Brokers, before acting in this sum- mary manner, should have some evidence of the insolven- ' See also, upon this point, Laoey Eq. 182'; Thacker vs. Hardy, L. E. 4 vs. Hill (Crowley's Claim), L. E. 18 Q. B. Div. 685, 689. Sv/mmtcvriT/y Closing Trcmsaotion. 291 cy or inability of their Client to perform his contract, and that they should be prepared, if the transaction be questioned, to furnish the same. It does not appear from Lacey vs. Hill what evidence of the inability of his Client to meet his en- gagements would be sufficient, but it would seem that each case must rest upon its own peculiar circumstances. In the subsequent case, Crowley's Claim,' the Master of the Rolls, Sir G. Jessel held that the meaning of insolvency, under the Stock Exchange rules, was the simple meaning of the word as between business men ; and that where a bank "put up its shutters" and did not pay, such act constituted good evidence of that condition. It should also be borne in mind that the Brokers who act thus summarily are liable for the consequences of their own conduct ; for, if a Client's account should be closed before the settling-day, the Brokers must take the risk of the subsequent fluctuations of the mar- ket ; and stress was laid upon this point, in the case above referred to, in this language: "If it had resulted in any loss to him, possibly it would have been a very good set-ofE. The executors would have said, ' We owed you money, but you closed the account earlier than you ought to have done, and the result is, you have exposed us to loss.' " " Sir C Mellish, L. J., also said upon this point : " But the principal would have a counter-claim against him for dam- age, if any, which might have resulted from the fact of selling a fortnight earlier than he ought to have done. But if it turned out that the market kept continually falling during the fortnight, so that the sale was in fact a gain to the principal's estate, in that case there would be nothing to recover." The effect of the rule thus indicated is quite unsatisfactory, ' Lacey vs. Hill, L. E. 18 Eq. 182. " Per Sir W. M. James, L. J., L. E. 8 Ch. App. 923. 292 Stockrhrokera and Stock Exchanges. for, while it permits the Broker to terminate summarilj a transaction, under the circumstances mentioned, it at the same time holds him for such act, if the market should turn in far vor of his Client at the account-day. Thus the whole efBcacy of the rule is destroyed. It may be said, however, that this question was not involved in the case, and that the above remarks are mere dicta.^ (c.) OtTier Incidents of the Relation. Another important question has been raised,' as to the authority of a Stock-broker to continue the account to the next settling-day. The vice-chancellor in that case held that the Broker had mrtute officii such authority ; but, on appeal, the court did not put the decision upon that ground, prefer- ring to rest it upon the fact that an order for the continua- tion had been given ; and it seems that the Broker has no such authority.^ The case of Duncan vs. Hill' should be here mentioned as illustrating a dealing between Stock -brokers and their Clients. In that case the plaintiffs. Brokers on the Lon- don Stock Exchange, bought for their Client, defendant (who was not a member of the Exchange), certain shares for the account of the 15th of July ; and on that day, by his instructions, carried them over to the account of the 29th of July, and paid differences amounting to £1688. On the ' See also Pearson vs. Soott, L. E. Nor has a Stock-broker authority to 9 Ch. Div. 198 ; Melsheimer & Lau- fill in a deed executed by a vendor rence's Law and Customs of the in blank (Tayler vs. Great Indian Pe- Stock Exchange, 47. And compare ninsular Co. 4 De G. & J. 559 ; Haw- also the rule in the United States kins vs.Maltby, L.E. SCh.App. 194). (where it is held that a Broker can- See, as to when a deed executed in not close a, speculative transaction blank, as to the name of a purchaser, in stocks without notice to his Cli- is void, Hibhlethwaite vs. McMoriue, ent), Ch. III. p. 188. 6 M. & W. 200. ' Sheppard vs. Murphy, Ir. Kep. 2 * Same vs. Beeson, L. R. 8 Ex. 242, Eq. 544. rev'g L. K. 6 Exoh. 355. ' Maxted vs. Paine, L. E. 4 Ex. 81. Incidents of Belation. 293 18th of July the plaintiffs, being unable to meet their engage- ments, by reason of various persons for whom they had effect- ed contracts (and, among others, the defendant) failing to make their due payments, were declared defaulters, and, ac- cording to the rules of the Exchange, all their transactions were closed at the prices current on that day. The result was to make the Brokers liable to pay a further sum fpr dif- ferences, upon the stocks and shares so carried over by them for the defendant, and they sought to recover this difference, together with the £1688, from their Client. As to the latter claim, there was no contest; but, in respect to the former, the court gave judgment for the Client, holding that, as the loss incurred by the Brokers arose from their own default by rea- son of their insolvency, brought on by want of means to meet their other primary obligations, and that there was no evi- dence that such insolvency was occasioned by reason of their having entered into the contracts for their Client, the latter was not liable. If, however, the Brokers' losses accrued solely by reason of the failure of their Clients to make payments, it would seem that a different question would arise, as appears by the case of Lacey vs. Hill,' where the court held that the Stock-broker could recover a full indemnity for the loss occar sioned by the act of his Client; though it appeared that the Stock-brokers, after having become defaulters, had settled with their Stock Exchange creditors at the rate of Qs. 8c?. on the pound. Upon this point the court said : " Then, it is said the Brokers made default, and that they have not paid for the stock they purchased for Sir H. ; but if he has had the stock sold for him, and is credited with the proceeds, what difference can it make to him whether the Brokers paid for it, or whether the persons who sold it have ' Crowley's Claim, L. E. 18 Eq. 182. See also, as to right to indemnity, ante, p. 123 et seq. 294 StockrhroTcers and Stock Mcchanges. chosen to give them credit for the amount? He has had the stock and has had it sold for him ; that is, he has been credited with the proceeds. ... It appears to me that that is the ti'ue view of the present, transaction, and it is utterly immaterial whether the Broker, who has become personally liable for the amount, has paid at all." A very interesting question arose in the case of Mewburn vs. Eaton,' between a Broker and his Clients. In that case the Broker had sold certain shares for his Client on the Stock Ex- change, and the latter had executed the transfers and received the purchase price. Subsequently, however, the transfers were returned to the Broker by the ultimate purchaser for some tri- fling corrections in the spelling of names, who delivered the same to his Client for that purpose. The Client, however, re- fused to " initial " the corrections unless the Broker paid him the price mentioned in the transfers to the ultimate purchaser, which was higher than the price at which his shares were orig- inally sold. In consequence the shares were bought in, and the Broker, under the rules of the Stock Exchange, was com- pelled to pay the differences to the Jobber. And the court held, that the Broker was entitled to recover the sum which he had so paid by reason of the conduct of the Client. The court did not pass upon the question as to whether a vendor was bound to sign a transfer to the ultimate purchaser in which the consideration was stated at a price greater than that which he had received for the shares ; but the intimations were that he would not be so compelled. The court held that this objection had been waived by the Client in originally signing the transfers." In respect to the manner, etc., in which the Broker should execute the business of his Client in the dif- ' 20 L. T. (n. s.) 449. bill called for the enforcement of a ' In Hawkins vs. Maltby, L. E. 6 oontraot for different consideration Eq. 505, L. E. 4 Ch. App. 200, the than that actually agreed upon. See specific performance of a contract alsoCa8evs.McClellan,25L.T. (n.s.) was refused on the ground that the 753. lAabiUty of Jobber to Vendor. 295 ferent stages of a stock transaction, and of his general lia- bility and dnty, as well as his right to indemnity for losses incurred on behalf of his Client — these questions have all been considered in a previous chapter, and need not be set forth here.' V. Relation between Client and Jobber, {a.) General lAcMUty of Jobber to V&ndor. In England, nearly all of the cases in which there has arisen a discussion as to the nature of transactions on the Stock Ex- change, have grown out of questions involving the liability of different persons for " calls." A large, if not the principal, number of joint-stock com- panies are formed with their capital in part unpaid; and as "calls" for further payments upon the capital are liable to be made, it concerns the seller of the shares of sucli companies to ascertain that the ultimate buyer is a responsible person." In the discussion of this question as to where the liability for "calls" rests, the nature and effect of a sale on the Stock Ex- change have been fully examined on both the law and equity sides of the English courts, and the relations of the different parties to the transaction analyzed and defined.' Inasmuch as all dealings in securities upon the Stock Exchange are made between members of that body, who, under its rules, are regarded as principals to each other, and an outside person de- ' See Ch. III. p. 101. In respect to mony of Mr. De. Zoete, Chairman of usage of Brokers, see chapter on Stock Exchange, 536) ; Peppercorne "Usages." YS. Clench, 26 id. 656; Fenwick vs. = Per Kelly, C. B., GrisaeU vs. Bris- Buck, 19 W. E. 597 ; Hodgkinson vs. towe, L. E. 4 C. P. 36, at 52, rev'g 3 Kelly, L. E. 6 Eq. 496; Nickalls vs. id. 122 ; Sheppard vs. Murphy, 16 W. Merry, L. E. 7 Eng. & I. App. Cas. 530, E. 948. and cases there cited and discussed ; = Maxted vs. Morris, 21 L. T. (n. s.) Capper's Case, cited in Cast case, p. 535 ; Nickalls vs. Eaton, 23 id. 689 ; 545 ; see also L. E. 3 Ch. App. 458. Dent vs. Nickalls, 29 id. 536 (testi- 296 Stockbrokers and Stock Exchomges. sirous of purchasing or selling, being therefore compelled to transact his business through a Broker, who does not disclose his principal's name, on the very threshold of an action by the latter against the jobber it was natural to encounter the ob- jection that the action could not be maintained for want of privity between the parties. This objection was urged in the first reported case, in an action brought by a vendor against a Jobber,' and in several subsequent cases; but, however divergent the views of the^ courts may have been respecting the liability of the Jobber in other respects, they are unanimous in the judgment that there is a clear and enforceable contract between the vendor and the Jobber. It must be borne in mind, however, that as the rules of the Stock Exchange prohibit a member from dealing in the double character of Broker and Jobber, it is and was assumed in the case just referred to, that the Jobber deals with the Broker as one acting for a principal ; but it is doubtful, even if this fact did not exist, whether the general rule which permits the real principal to enforce a contract would be altered. The effect of such a transaction, according to the rules and usages of the Stock Exchange, and especially by Rules 49 and 61 of the printed rules, is to render Broker and Jobber per- sonally responsible to each other for the fulfilment of the contract of sale, but at the same time leaving it entirely open to the undisclosed principals to intervene. Furthermore, the Broker and Jobber are at liberty to adopt any remedies against their principals that their own protection may demand.' The purchasing Jobber may therefore be said to be the party primarily liable to the vendor, the Broker of the latter ' Grissell vs. Bristowe (Jan. 1868), " Dent vs. Mckalls, 29 L. T (n s ) L. E. 3 C. P. 112. 536 ; Grissell vs. Bristowe, L. E. 4 C. P. 36. LidbiUty of Jobber to Vendor. 297 selling directly to him in the first instance ; bnt as the trans- action is not to be closed immediately, the Jobber in turn selling the securities again, the elements of an ordinary sale are modified or displaced by the usages of the Stock Exchange. These usages have been characterized by the courts as rea- sonable and binding upon the vendor, who, by authorizing a transaction to be made on the Stock Exchange, adopts and ratifies the methods of doing business which prevail there. It is quite important to see what these usages are, and as they have been detailed in a recent case in the House of Lords," by a prominent ofiicial of the Stock Exchange, we transcribe the account in full from that report : " Mr. De Zoete has been appealed to as the exponent of the rules of the Stock Ex- change, and I will now refer to his evidence. He states : " In the case supposed, where the Jobber would stand as purchaser, he would, on the day preceding such account-day (which was usually called the "name-day"), be bound to pass to the Bro- ker a ticket containing the name of a person, or of several persons, as the purchaser or purchasers of the said shares ; or he might, if he pleased, pass his own name as such purchaser, in which latter case only would he have been bound himself to take the shares. If the Jobber had failed to pass to the Broker such a name or names by the name-day, the selling Broker could have sold out the shares against him, and have compelled him to pay any loss thereon. Until the name-day it was not seen who might stand ultimately either as pur- chasers or sellers, or, in other words, who might be the per- sons to transfer or to take transfers of shares, and until then a Jobber might have had a great many transactions both of buy- ing and selling with the same Brokers or Jobbers, or with various Brokers or Jobbers. On the name-day, in the case ' Nickalls vs. Merry, L. E. 7 H. L. Eng. and I. App. Cas. 530, 539. 298 Stoch-hrokera and Stock Exchanges. supposed, if the Jobber, having purchased, had sold again, a ticket containing the name of the person to whom the shares were to be transferred would have been issued by and passed on from the ultimate purchasing Broker to his seller, and so on through the hands of the other intermediate sellers and buyers in succession, who, whether acting as Jobbers or as Brokers, had dealt in the shares until it reached the hands of the original selling Broker. Every member passing a ticket was required to write on the back of it the name of the mem- ber to whom it was passed ; such ticket would also have con- tained the amount of purchase-money agreed to be given for the shares by the ultimate purchasing Broker, and also a note that he would pay the same. So many transactions of this kind took place during the account that on the name-day the ticket, of necessity, only remained in the possession of an inter- mediate Jobber or Broker for the time required to take the particulars of it. It sometimes happened that the same ticket passed through the same member's hands several times in ful- filment of bargains made with other members, and, as a mat- ter of fact, he had neither the opportunity, time, nor the means for making inquiries respecting the name so passed. The original selling Broker would not have been bound to deliver a transfer of the shares to the ultimate purchasing Broker until the expiration of ten days after the account-day, and during these ten days the said purchasing Broker could not have bought in the shares against the seller. During this time it was open to the original selling Broker to object to the name passed by his buyer, in which case such buyer would, of course, have passed on the objection to the person from whom he received the name as hereinbefore mentioned, and, practically, such buyer would have had no liability or interest in the question, as whatever grounds there might have been for objecting to the name would have had to be Liability of Jobber to Vendor. 299 met by the person from whom it emanated, and who had originally issued the ticket ; and the committee of the said Stock Exchange would, if appealed to by the selling Broker, have decided as to the validity of any such objection, and would have required another name to be given in case they had considered it right to do so. But after the lapse of these ten days, the selling Broker was required to deliver the certifi- cates and transfer of the shares to the said ultimate purchas- ing Broker, or, in default thereof, the latter could have bought in the shares against the seller. The usual course of business was for the selling Broker to deliver the transfer, together with the corresponding ticket, to the said ultimate purchasing Broker from whom he received the purchase-money. The said ultimate purchasing Broker did not know to whom his ticket had been ultimately passed until the delivery of the transfer. According to the long-recognized and well-estab- lished rules and usages of the said Exchange, if the original selling Broker did not deliver his transfer and certificates, and obtain payment of the purchase-money, within fifteen clear days from the name-day, his immediate buyer was released from all loss caused by the default of the ultimate purchasing Broker to pay for the shares, and the latter would alone re- main responsible ; in like manner, if the member who issued the ticket containing the name of the intended transferee of the shares did not buy in, or attempt to buy in, the same shares within fifteen days from the account day, his immedi- ate seller was released from all loss caused by the failure of any member through whose default the shares were not de- livered to, and the purchase-money paid by, the ultimate pur- chasing Broker. The Jobber had fulfilled all the obligations required of him by the rules and usages of the said Stock Ex- change in respect of his contract." '" ' See also opinion of Byles, J., in Grissell vs. Bristowe, L. E. 3 C. P. 137. 300 Stoch-hrdkers and Stock Esohcmges. As we have seen, the above usage came before the English^ courts for the first time in 1868 in the case of Grissell vs., Bristowe.' In that case the plaintiff, through his Brokers, sold certain shares on the Stock Exchange, and the defend- ants were the Jobbers with whom plaintiff's Brokers dealt. There was no direct dealing between the plaintiff and the de- fendant, nor was the former's name disclosed. The names passed by the defendants as transferees were accepted by plaintiff's Brokers, and the transfers executed, but not regis- tered. The plaintiff, in consequence, was compelled to pay a call ; and the transferees not being solvent, the plaintiff in- stituted the action against defendants, the Jobbers. The court . held that the latter were bound to reimburse the plaintiff in the amount of such calls. On appeal," however, this judg- ment was reversed ; and it was decided that under the usages of the Stock Exchange, which the court adjudged reasonable, and with reference to which the contract was made, the de- fendants — the first buyers — were to be at liberty to transfer the contract, with all of its rights and obligations, to any re- sponsible buyers who would take it upon them with all of its incidents ; that as the plaintiff had transferred the shares to the defendant's nominees, and the latter had accepted and paid for them, though they had not executed or registered the transfers, the defendants were released from all further lia- bility on their contract to the plaintiff. Cockbum, C. J., said : " We are of opinion that the state- ment of the usage in this case must receive a reasonable in- tendment, and be understood as claiming for the Jobber a right to transfer the contract, and claim exemption from lia- bility in respect of it, only on his giving a name of a buyer to whom the seller has no reasonable ground to object. And we are further of opinioUj from the particulars of the usage •L.E.3C.P.112. 'L. E. 4id. 36. LiabiUty of Jobber to Vendor. 801 as stated in the case, that it is only when the nominees of the Jobber have paid for the shares — in other words, have acceptv ed the transfer and placed themselves in the position of; buy- ers, and taken upon themselves the obligations of the contract — that the Jobber is held to be released." In interpreting the usage the same learned judge said : " The sum and substance of the usage, as we collect it, after a careful consideration of the statement in the case, may be thus stated : It appears that in transactions between members of the Stock Exchange there is ah implied understanding that on the purchase of stock the Jobber shall be at liberty by a given day, common- • ly called the 'name-day,' to substitute, if he is able to do so, another party or parties as buyers, and so relieve himself from further liability on the contract, provided that such party or parties be persons to whona the seller cannot reasonably ex- cept,- and that such party or parties accept the transfer of the ■shares and pay the price agreed on between the seller and the Jobber — in other words, become the buyer of the shares at the price originally agreed on." Contemporaneous with this litigation was that of Coles vs. Bristowe,' which arose out of a dealing in the shares of the same company. In that case the plaintiff, through his : Brokers, sold 200 shares to the defendants, who were Stock-jobbers, for set- tlement on the 15th of May. On the 10th the company stopped payment, and the petition for winding-up was pre- sented on the 11th of May. The purchase-money was paid by the defendants on the 15th, and the certificates of the shares were then delivered by the plaintiff, and transfers were executed by him to seventeen persons as nominees of the defendants. The transfers could not be registered in consequence of the winding-up of the company. Upon a ■ L. E. 6 Eq. 149. See also Heritage vs. Paine, 34 L. T. (n. s.) 947 ; 2 L. JJ. Ch. Div. 594. 302 Stobh-lrohers and Stock Exehmtges. bill for a specific performance, Vice-chancellor Malins held that the defendants were bound to fulfil the contract, to re- pay the amount of calls paid by the plaintiff, and to indem- nify him against future calls. Upon appeal, however, this decree was reversed.' The Lord Chancellor said : " If this were an ordinary case of a sale and purchase of shares, in which the plaintiff was vendor and the defendants purchaser in the usual acceptation of these terms, the right of the plain- tiff to relief would be clear." But the court held that the case would have to be decided according to the usage and course of business of the Stock Exchange ; and that, " according to this, the contract of the Jobber is that at the settling-day he will either take the shares himself — in which case he would, of course, be bound to ac- cept and register a transfer, and to indemnify — or he will give the name of one or more transferees (names to which no reasonable objection can be made) who will accept and pay for the shares. The Jobber may perform either alternative ; and if electing to perform the latter alternative, he sends in . names which are accepted and to which transfers are exe- cuted, and those transfers are taken and paid for by the transferees or their Brokers : the Jobber is then, at that stage, relieved from further liability, and the liability to register and indemnify is shifted to the transferees." ' The subsequent case, of Maxted vs. Paine' extended the principle still further, because it was there held that the Job- ber discharged his contract by passing the name of any per- son answering the description of an "ultimate buyer," where it is used without fraud and is accepted ; although it turn out that the person whose name is presented is a man of straw ' L. E. 4 Ch. App. 3. Mayhew's Case, 5 De G. M. & G. 849, ' Evans vs. Wood, L. R. 5 Eq. 9 ; 850. ' L. E. 4 Ex. 203 (2d action). LiaMUty of Jobber to Vendor. 303 and irresponsible, and has allowed his name to be used as a transferee for a consideration paid by the real purchaser. Bramwell, B., said : "I think the plaintiff would have had a right, according to these rules and practice, to object to Goss's name. I think Goss was a person he could .not have been compelled to accept as a transferee. If I am wrong in this, the plaintiff has clearly no case. If I am right, then, had he objected, the defendant must have found a fresh name. He [the defendant] might then have objected to F. & Co., and they must have found a fresh name. But the plaintiff did not, nor did his Brokers, object, but he executed the trans- fer to Goss. ... By the rules, the seller has ten days to make the transfer. During these ten days he can make in- quiries as to the proposed transferee. The Jobber or other middleman has not a moment, for on the day he receives the name he must pass it on." But the Jobber is by no means, under the decisions, relieved from liability by merely passing a name, receiving the money, and executing transfers. The name passed must be that of a person legally compellable to take the shares. This proposition is illustrated in the last-named case.' In that case the shares had been " continued " or carried over for another account -day, without the consent of the intended buyer, so that he was not bound to take the shares ; and the court held that the Jobber was not discharged by passing such a name, but remained liable to the vendor. The court said : " When his name was passed, he had ceased to be a per- son who could be called upon to take the shares." And, as was decided in a case before the English Chancery Appeals," if the Jobber or Broker give the name of an infant as the transferee, he does not absolve himself from liability. ' Maxted vs. Paine, L. K. 4 Ex. 81 ' Maynard vs. Eaton, L. E. 9 Ch. (Ist action). App. 414. 304: StodkrhroTcers and Stock Exchanges. And the same rale applies to an ultimate purchaser who gives such a name; he cannot escape the consequences of his contract except by supplying a name capable of accepting the transfer and paying for the shares. This duty is not performed by giving the name of a person absolutely incapable of accepting the transfer.' So where the name of an infant was given by the Jobber," he was held liable for calls paid by the vendor, although an- other person might also be liable to pay the money, and might be the person who ultimately would have to pay. This prin- ciple was also subsequently afllrmed.' Nor is the Jobber relieved of his responsibility, if the name which he passes is that of a foreigner domiciled abroad.' What the effect would be of the Jobber giving the name of a foreigner otherwise unobjectionable, i.e., having property in England which could be applied to satisfy any liability which might accrue in respect of the shares, has not yet been deter- mined. The question of the liability of the Jobber finally reached the House of Lords," where it was elaborately argued and con- sidered. It appeared in that case that M., not a member of the Stock Exchange, directed his Broker to sell certain shares. The latter sold them to a Jobber, who, according to the known practice on the Exchange, sold them again (and in a similar way they passed through several hands), and the Jobber (with- out fraud) received from his purchaser and passed to M.'s Broker the name of L. as the ultimate purchaser. M. exe- cuted a transfer to L., and received payment for the shares. ' Id. per Sir R. Malins, V. C, rev'd * Goldsohmidt vs. Jones, 22 L. T. on other grounds. (n. s.) 220 ; Allaai vs. Graves, 39 L. J. " Niokalls vs. Eaton, 23 L. T. (n. s.) Q. B. 157. 689. ' Niokalls vs. Merry, L. K. 7 H. L. » Dent vs. Niokalls, 29 L. T. (n. s.) Eng. & Ir. App. Gas. 530. 537 ; Peppercorne vs. Clench, 26 id. 656. IdahiUty of Jobber to Vendor. 305 L. turned out to be a minor legally incapable of ^accSpt- ing the shares. M.'s name, without his knowledge, re- mained on the registry of the company. Subsequent '. calls being made, which were not paid by L., M. was compelled to pay them. The court decided that the Jobber was liable to make good 4o M. the amount he had paid on such calls ; that the contract of a purchasing Jobber is to accept the shares, or to furnish the name of a person able and willing to accept them ; and that the time (ten days) limited by the rules of the Stock Ex- change for the approval or rejection of the name of the ulti- mate purchaser applies only to the respmsibilitt/, and not to the ^ers&nal capacity and willingness of the person whose name is given. In reaching this result the case of Kennie vs. Morris ' was overruled. The Lord Chancellor (Cairns) said : " It cannot be disputed that a valid contract was made be- tween the respondent (the vendor) through his Broker and the appellant (the Jobber), and that this contract continued for some time to be binding upon both." Upon the question as to the character of the name which the Jobber could sub- stitute, the Lord Chancellor added: "The words ... clearly imply the name of a person who can and will purchase, and would have no application to the name of a non-existing per- son, a lunatic, an infant, a married woman, or a person who has given no authority to Use his name. ... In fact, the con- tract which, both from the nature of the case and the evidence of Mr. De Zoete, I understand the Jobber to make, may be thus expressed : ' I (the Jobber) agree with you (the seller) that on the account-day I will either myself take and pay for tlie shares, or else I will on that day furnish you with the name of another person who will agree with you to take a transfer of and pay for the shares ; and if you desire to in- ' L. E. 13 Eq. 203. 20 306 Stooh-hrdkers and Stock ExchMiges. quire into the responsibility of that othier person, "you shall have a limited number of days to do so.' " The argument of ah mcon/oenienti was strongly pressed upon the court, in reply. to which the Lord Ghancellor said : "I will only add that it does not appear to me that this view of the effect of a contract of this kind ought to cause any inconven- ience in the transactions on the Stock Exchange. The gentle- men forming that body have facilities, through the medium of their rules and their domestic jurisdiction, to take security that no meniber of the Excbange shall pass to another a name which is not real, i. e., which does not describe a person com- petent and willing to contract." ' Stray vs. Kussell ' illustrates still further the extent and limit of the Jobber's responsibility. In that case the Client had or- dered his Broker to buy certain shares for the next settling- day. The Broker purchased the required number from a Job- ber, who, in due season, delivered certificates in proper form to the Broker, with the Client's name inserted therein as pur- chaser. The company having previously stopped payment, and the directors refusing to make any transfers upon the books of. the company, the Client attempted to repudiate, whereupon the Broker, who had, under the rules of the Ex- change, paid the purchase-price to the Jobber, brought suit and recovered judgment against his Client. The latter in turn sued the Jobber for the amount he bad been compelled to pay his Broker, contending that it was the duty of the Jobber to have procured a transfer of the shares upon the books of the company, and that the sale was incomplete with- out it. But the court gave judgment for the Jobber, holding that his duty in the premises had been fully performed when ' The foregoing cases were follow- ' 1 El. & E. 888. ed in Pender vs. Fox, Week. Notes (1872), 151. Special Contracts. 307 he handed to the Client's Broker the transfers and certificates, and that it was not his duty to get the transfer registered. It seemed to be assumed in the case that there was a privity be- tween a vendee and a selling Jobber. The case of Nickalls vs. Merry, and the cases heretofore re- ferred to, determine definitely the position of a Jobber, free- ing hira from responsibility Only npon his passing the name of a person legally compellable to take the securities, and leaving the circumstances of any case to be affected by fraud as in any other contract.' (&.) Special Contract between Jobber and Client. — Guarantee- ing Begistration. The liability of the Jobber may, however, be extended by special agreement. We have seen that the Jobber sometimes guarantees registration, and the effect of such a guarantee was considered in the case of Cruse vs. Paine.'' In that case the plaintiff sold through his Brokers certain shares to the defendants, who were Stock-jobbers. The sale note was as follows : 22 Theeadneedle Street, ) London, E. C, 2d Nov., 1865. \ Sold by order and for account and risk of A. Cruse, Esci. (subject to the rules of theXiondon Stock Exchange), To H. Paine & Co., 100 Contract Corporation Shares, at 7 dis £300 00 ( Wiih regUt)-ation guaranteed.) V. &W. Stamp fees..; £300 00 Brokerage 1 05 £298 15 Vektue & Whiting. Payment 15th Nov. ' See also Bermingham vs. Sheri- ' L. R. 6 Eq. 641. dan, 33 Beav. 660. 308 StOGh-hrokers cmd Stock Exchcm^ges. Shortly before the 15th of November the defendants sent to the plaintifi's Brokers the name of H. as transferee, with the purchase-money, and the transfers were executed by the plaintiff to H. and delivered to his Brokers. The transfers were not, however, registered ; and the defendants, in De- cember, 1866, obtained a decree for specific performance by H. of the contract with them, and for indemnity. Mean- while the company had been wound up, and the plaintiff's name, being still on the register, was settled on the list of contributories. He filed a bill against the defendants for specific performance and indemnity. Thecourt held that the Jobbers were simply principals, and were personally liable upon the contract into which they had entered ; that the mere fact of the plaintiff having executed at the instance of the defendants a transfer did not alter the liabilities of the parties under the special contract ; that it did not in any sense release the defendants from their obligation to get ai complete registration, so that the vendor should by their acts be actually released from liability in respect of the shares. The court further decided that the plaintiff having 'died, and his executor having been placed upon the list of contributories, the executor was entitled to all the rights to which his testator, if living, would have been entitled ; and that the right to indemnity was not limited to the amount of dividends which the estate would be sufficient to pay. Upon appear this result was sustained. The appellate court was of opinion that the introduction of the words "registra- tion guaranteed" took the case out of an ordinary sale to a Job- ber, and the terms were not merely that the Jobber should find a purchaser who would pay for the shares and accept the transfer, but that the Jobber should find a purchaser who would do that and would also register the transfer ; and until ' L. R. 4 Ch. App. 441. Liability of CUent. 309 that was done the Jobber was not discharged from his engage- ment. (c.) Jyiability of CUent to Johler. Inasmuch as the law regards a Jobber as the principal, he has rights which can be enforced against the principal of the Broker with whom he contracts, when the former is dis- covered, to the same extent as the principal can enforce his claims against the Jobber. This position is established by the case of Paine vs. Hutchinson.' There the plaintiff's Jobbers on the Stock Exchange contracted to sell to the Brokers of the defendant shares which they had purchased from, and which remained registered in the name of, one 0. On the settling- day the Brokers of the defendant gave his name as principal for insertion in the deeds of transfer. Transfers executed by C. to the defendant were delivered to defendant's Brokers, who paid for the shares out of the money given to them by the defendant. The defendant refused to execute the deeds and to procure their registration, on the grounds that he had told his Brokers that he intended to resell without taking a trans- fer, and that they had given his name without authority. Some months after the sale the company was ordered to be wound up ; and on a bill for specific performance and indem- nity (filed before the windin'g-up), to which C. was not a party, the court held that the contract was very plain in its terms, and was binding upon the defendant ; that, as he had not sup- plied the name of a transferee, the Brokers were entitled to give that of the defendant ; that the plaintiff was entitled to a decree for specific performance ; that C. should execute the deeds of transfer to defendant, and that the latter should pro- cure the registration in his name upon the company's books. Upon appeal this decree was affirmed." The case of Mortimer vs. McCallan " is instructive in this ' L. E. 3 Eq. 257. ' L. E. 3 Ch. App. 388. » 6 M. & W. 58. 310 StockrlyrdheTS cmd Stock Mechanges. connection. This was an action in assumpsit in £5000, for certain £3 per cent, stock alleged to be sold and caused to be transferred by the plaintiff to the defendant, and by the defendant duly accepted. Pleas — 1st, non-assumpsit ; 2d, that the defendant did not accept the stock from the plaintiff. At the trial it appeared that one T., a Stock-broker, bad ap- plied to the plaintiff, a Stock-jobber, for the purchase of cer- tain stock for the defendant. The plaintiff not having stock of his own, applied to "W"., who agreed to ti-ansfer, and did accordingly transfer, stock standing in his name to the de- fendant. It further appeared that T. gave his own check for the purchase-money, requesting that the same should not be presented until the following day; although, after the transfer, the plaintiff had requested T. to give him the check of his principal. The check of T. was dishonored. It was also shown that T. had for a long time owed the defendant £5000 worth of stock which the defendant had allowed to re- main in his hands, on receiving an undertaking that he would replace it within a certain time. Evidence was given that it was the usage on the Stock Ex- change to give credit to the Broker even though the principal were disclosed ; though credit is sometimes given to the prin- cipal, and his check taken, where? the Broker's credit is not thought sufficient. The trial judge instructed the jury that although, by the regulation of the Stock Exchange, the Bro- ker was the party considered liable, it did not follow that the principal might not be liable also, and he left it to them to say whether the plaintiff had ever given credit to or taken the responsibility of T., or ever consented to release the de- fendant as principal. Upon appeal from a verdict in favor of the plaintiff, the court recognized the question as one of great importance, in- volving the practice of the Stock Exchange generally. The Belation of Client to Fwchasers. 311 court also conceded that on the Stock Exchange there was an understanding between the parties that inter se they hold the; Broker liable ; and while not denying that that understand- ing would have a very great influence on the question in individual cases, in the case in question the evidence left it in doubt whether the Jobber meant to hold the Broker alone responsible, or to have also the security of the principal; that the rules of the Stock Exchange would not make any differ- ence as to the right of a party who sells stock to choose to what person he would give credit; and that the question as to whom the Jobber or plaintiff intended to give credit was for the jury to determine. And the verdict was accordingly, sustained. VI. Relaticm of Client to Undisclosed aTid Intermediate Purchasers. As will be perceived from a review of the course of busi- ness on the Stock Exchange, in an ordinary transaction, the only persons who are brought into contact with each other are the Broker of the selling Client, or vendor, the purchasing Jobber, or Broker, and in the end the ultimate purchaser. As between the selling Client, or vendor, and the purchasing Jobber, there is, as we have shown, a clear and direct contract. Or if the vendee is a Broker purchasing on account of a prin- cipal, the liabilities of the latter are the same as those of a purchasing Jobber. There is no difference in the rules and usages of the Stock Exchange as to the liability of a Broker member and that of a Jobber member. On the contrary, it seems that their con- tracts and their duties towards those with whom they con- tract are identical, though the motives inducing them to enter into the transaction are different.' " Per Blackturn, J., Masted vs. Paine, L. E. 6 Ex. 132, 170. 312 Stock-hrokers cmd Stock Meehcmges. Before considering the relation of selling Client, or vendor, to the ultimate purchaser, let us examine the position of the intermediate or undisclosed purchasers, if there be any. We have already seen that by the rules of the Stock Exchange the ticket containing the name of the ultimate purchaser, or his nominee, as the case may be, is endorsed by each Jobber or Broker through whose hands it passes ; but, as Cockburn, C. J.,' puts it : " In the end the transaction becomes one which is to be carried out between the vendee (the issuer of the ticket) and the original seller, as though such vendee had pur- chased immediately of such seller." The question is then pre- sented, whether there is any liability between the holder of such a ticket and the purchasers intervening after the com- mencement of the transaction, but before the final termi- nation of the same ? Is there any privity between such par- ties? Does there arise -from the nature of the transaction an implied contract between these persons? Is there any liability on the part of undisclosed purchasers who intro- duce the names of other persons to represent them in the transaction ? These questions were to some extent involved in the case of Torrington vs. Lowe." There the plaintiff sold through his Brokers, on the Stock Exchange, certain shares in an in- corporated association to one P., a Jobber. The defendant, in the same month, purchased through his Brokers on the Stock Exchange an equal number of shares in the same company. Both the above sale and purchase were made for the same settling-day. The defendant's Brokers, on the name-day, in- structed P., the Jobber, to pass the name of one C. as the trans- feree of the shares so purchased, which was accordingly done, and a transfer was duly executed by both plaintiff and C. in the proper form prescribed by the articles of association, and » Grissell vs. Bristo we, L. E. 4 C. P. 43. ' L. R. 4 C. P. 26. Relation of CUent to Purchasers. 313 the purchase-price duly paid to the plaintiff through his Bro- kers. A petition for winding up the company having been afterwards presented, the liquidators refused to register the transfer, and placed the plaintiff on the list of contributories^ and he was consequently obliged to pay certain calls. To re- cover the amount he had been compelled to pay, he brought an action at law against the defendant. The court decided against the plaintiff on the ground that there was no contract between him and defendant ; that the contract between the plaintiff and the Jobber had been ful- filled by the latter's presenting a name which the plaintiff had accepted ; and that the fact that C, the transferee, was an agent of the defendant made no difference in the result, the rule of law being that a principal cannot be sued on a deed to which he is not a party. The court seemed to think that even in equity there would be no remedy. The original con- tract of sale was between plaintiff and P., the Jobber ; and, in pursuance of the usage of the Stock Exchange, P. at the proper time gave the name of C. as the purchaser of the shares, and that plaintiff had accepted him and executed a transfer to him. Nor would it seem, under the case of Grissell vs. Bristowe,' that the plaintiff could hold the Jobber liable in such a case, for the latter was released upon giving the name of a proper party as a transferee. Lord Blackburn, in his elaborate opinion in the case of Maxted vs. Paine," dissents from the conclusion of the court in Torrington vs. Lowe, and maintains that the plaintiff had a remedy at law as well as in equity against the defendant. This view of Lord Blackburn seems to have been adopted in a subsequent case,' where the facts were substantially ' L. E. 4 C. P. 36. » CasteUan vs. Hobson, L. E. 10 » L. E. 6 Ex. 132, 167. Eq. 47. 814 Stochirohers mid Stock Exchanges. similar to those of Tonington vs. Lowe.' The court over- ruled the defence of want of privity ; and held that where A, through his Broker, sold shares to a Jobber, from whom B had agreed to purchase the same number of shares — giv- ing the name of 0, one of his workmen, as the person to whom the shares were to be transferred — and in conse- quence of the winding-up of the company the transfer could not be registered, and the shares still remained in the name of A, an action would lie by the latter against B, as the real purchaser and equitable owner, to indemnify A against calls in respect of the shares. The court said: "... It is not a question of vendor and purchaser ; it is not a question of specific performance at all: it is a question of trustee and cestmi que trust." The court held that C, the workrhan, was not the owner of the shares, but a mere agent, and that it could pass over to the real owner, B ; and that C, the intermediate trustee of a mere equity, could be disregard- ed altogether. Torrington vs. Lowe" was not referred to in the opinion. The same principle was applied in a case ' where the name of an infant was given as transferee. About two years after- wards, an order was made to wind up the company, and it being found that the transferee was an infant, the plaintifE's name was restored to the register. The court held that he was entitled to indemnity from the real owner of the shares.* The better view, therefore, would seem to be that an undis- closed or intermediate purchaser of securities on the Stock Exchange is liable, upon being discovered, to the same extent and upon the same principle as an ultimate purchaser.' ' L. E. 4 C. P. 26. ' Id. « Per Blackburn, J., Masted vs. » Brown vs. Black, L. E. 8 Ch. Paine (2d action), L. E. 6 Ex. 132, App. 939. 167 ; see also Humble vs. Laugston, 7 * See also, in tliis couueotion, s. c. M. «fc W. 517 ; Walker vs. Bartlett, 17 L. R. 15 Eq. 363. C. B. 446. Relation hei/ween Clients amd Purchasers. 315 This view is not affected by the case of Sayles vs. Blane.' There S. sold certain railway shares, of which B., after inter- mediate sales, and without any privity with S., became pur- chaser. S. transferred them to B. by deed. B. not having registered the transfer, S. was obliged to pay a subsequent call. The court held that for such payment S. could not maintain an action against B. as for money paid to his use. The sale did not appear to have been made through the Stock Exchange, and its rules and usages were not noticed, the case being disposed of on the form of the action — the court in- timating that the plaintiff had a cause of action against the defendant for a failure in the performance of a duty on the part of the defendant in not getting the transfer deed regis- tered. Another case, in the Queen's Bench,'' should also be men- tioned in this connection. In that case it was held that a Stock- jobber who had agreed to " take in " shares purchased by a fel- low Stock-jobber from a Broker acting for a principal, and who had failed to deliver the name and. address of a person into whose name the shares were to be transferred, was directly liable to the vendor for calls which the latter was compelled to pay by reason of the shares remaining in his name. But it will be noticed that the Brokers of the vendor were actually brought in contact with the intermediate purchaser — the sec- ond Jobber — and negotiated with him concerning the shares. VII. Relation hetween Selling Client, or Vendor, and Ultimate Purchaser, or Transferror, and Transferee. The last step in the transaction is the actual delivery of the stock or securities by the original seller to the ultimate ' 14 Q. B. 205. " AUan vs. Graves, 39 L. J. (n. s.) 157. 316 Stochlrokers amd Stock EecJumges. purchaser. This portion of the business most powerfully illustrates the influence and scope of the usages of the Stock Exchange upon the contract. Ordinarily, in the sale of property, the bnyer and the sell- er meet and consummate the transaction in person, or they are brought into contact with each other by means of Bro- kers authorized by, and acting directly for, their respective principals. The usages of the Stock Exchange produce the legal parar dox of a vendor selling to a vendee with whom he does not have any dealings, either personally or through his immediate Brokers, and who frequently is not in existence in his char- acter of purchaser when the vendor makes the sale. Again, ordinarily, to make a binding contract in law, there must be a meeting of minds, mutuality, with reference to the same subject-matter, upon the same terms and price; yet a Stock Exchange transaction frequently exhibits a sale made in prcEsenti which takes effect infuturo, the place of the first vendee being frequently filled by another person or persons who may purchase at a price different from that at which the first vendor originally sold. All of these seeming incongruities result from the usages of the Stock Exchange and the peculiar course of dealing carried on there. But it will be observed that the rights of a vendor are not in any way infringed or diminished by these rami- fications of business. "We have seen that a sale may be made either for money or for the account. If for money, the transaction is con- cluded at once ; if for the account, a vendor who launches a sale upon the Exchange knows, or is presumed to know, that his vendee is not necessarily the person to whom his Broker originally makes the sale, but may be a different person pur- chasing for some intei'raediate Jobber at a subsequent date, Belation ieiween CUent and Purchaser. 317 and to whom delivery is to be ultimately made. The legal elucidations of the relation between the original vendor and the ultimate purchaser have grown out of contests as to where the responsibility for "calls" rested. In this con- nection it is proposed to set forth the principal cases that have arisen between these persons, remarking that in the case of the sale of securities, where the capital is fully paid in, no such contests would arise — the purchaser in such event mere- ly receiving the security, and the seller the money, there be- ing nothing in such a transaction necessarily different from what might occur in the sale of any other kind of personal property. The leading authority in England upon this subject is Hodg- kinson vs. Kelly.' There A bought of a Jobber on the Stock Exchange shares in a certain company ; and afterwards, the company in the meantime having stopped payment, B sold to another Jobber shares in the same company at a lower price for the same settling-day. On the name-day A's name was given to B as the purchaser of B's shares. B executed a transfer of the shares to A, and delivered the transfer and Certificate to A's Broker, who paid the price for wliich A purchased the shares; A afterwards repaid his own Broker and took away the transfer and certificates, but did not execute the transfer, and it was never registered, in consequence of which B was compelled to pay certain "calls." B brought action against A to indemnify him against all consequences flowing from the ownership of the shares subsequent to the execution of the transfer. The court, per Eomilly, M. R., sustained the action, and a decree was entered for the plaintiff. The court held that contracts for the sale of shares on the Stock Exchange were not like, and could not be made to depend on exactly >L.E.6Eq.496. 318 Stoch-hrokers cmd Stock Exchcmges. the same principles as were applicable to, contracts for the sale and purchase of other matters — sales of houses and the like; but when a man sold or bought shares through his Broker on the Stock Exchange, he entered into an implied contract to sell or buy according to the customs or usages prevalent in that body ; that there was nothing illegal or im- moral in these usages ; that a person by ordering a transaction to be consummated at that place, entered into a contract, not with a specified person, but with a person whose name is to be disclosed afterwards, when the transaction is complete. Lord Komilly said : " It is not, as has been supposed, that the seller of 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 until the day arrives and the instrument of transfer is executed. It was put in 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 transfei to E ; but, in truth, this does not appear to me to put the case sufficiently high. It is, in my opinion, an engagement entered into by A on one side, and E on the other, that through the instrumen- tality of certain other persons, whoever they may be, certain shares shall be sold and bought, and they undertake to complete the contract with the person, whoever he may be, who buys on one hand, and sells on the other." The court held that these usages were founded on common-sense and common honesty, and that it was of no importance to A to know to whom his shares are to be transferred, nor is it to B to know from whence the shares come. The court based this result on the EdaUon hetmoe&n Client a/nd Pwchaser. 319 cases cited in thfe notes.' In Sheppard vs. Murphy,' which was an action in equity, brought by a vendor against an ultimate purchaser, the court held, in answer to the argu- ment that there was no privity between the plaintiff and the defendant, that the nature of a transaction on the Stock Exchange by which a vendor of securities was brought into contact with an ultimate purchaser was not a contract between the possessor of a thing at the time and an- other party for the delivery of a specific thing, but a contract that the person who enters into it shall, upon the day on which it is to be performed, procure persons to do a thing that he un- dertakes shall be done, and that upon that occasion the person who is to receive this thing, and not until that day, shall pay these persons, and not the person who has made the bai-gain at all. In other words, if A had bought one hundred shares from one hundred different persons," he could have walked to the oflSce of the vendee's Broker with his hundred men at his back, each with a transfer of one share in his pocket, and he could have said to the vendee's Brokers, " Here are the shares^ how pay to each man his aliquot portion of this sum ; that is^ buy every share just at that price I am willing to sell it to you for, from the persons who have come here to deliver them." Bnt upon the Stock Exchange a symbolical mode of proceed- ing has been adopted to prevent the necessity of the above course — viz., giving a "name;" and when the name is given transfers of the shares are made to the vendee, and, without occupying the time of all these parties, the whole thing is done by this simple process, which is not open to any charge of illegality or objection. ' Grissell vs. Briatowe, L. E. 3 Ch. vs. Murphy, Ir. Eeps. 1 Eq. 490 ; s. c. App. 112 ; Hawkins vs. Maltby, L. E. on appeal, 16 W. E. 948. 3 id. 188 ; Evans vs. Wood, L. E. 5 " 16 "W. E. 948, overruling Ir. Eeps. Eq. 9, and the Irish case Sheppard 1 Eq. 490. 320 Stockrbrdkera and Stock Exohanges. In one case,' A sold to a Stock-jobber and B purchased from N five shares in a joint -stock company. According to the practice of the Stock Exchange, N gave to A, the original vendor, the name of B as the purchaser, and the transfer of the shades from A to B was executed by A and B, and the purchase-mouey paid by B to A ; but B was pre- vented, by accidental absence from home, from sending the transfer for registration until after the company had stopped payment. B's name was not registered, and, A's name ap-r pearing on the books, the latter was compelled to pay certain calls. B was held liable for these calls and to indemnify A against future liability in respect to the shares. This question was again directly in issue in a case" in which a bill was filed by a vendor, to compel an ultimate pur- chaser to take shares which he had bought through the ven- dor's Broker, and upon which a call had been made. The action was resisted on the ground that the Jobber had had no dealings with the vendor, and that there was no privity between them. The court overruled this objection, saying : " The defendant first insists that there is no privity between himself and the plaintiffs, the original vendors. Undoubted- ly, upon the original transaction, there was not ; but . . . though the plaintiffs did not in the first instance agree to sell to the defendant, nor the defendant to purchase from the plaintiffs, yet when afterwards they were brought together, and the defendant agreed to take the transfer and carried away the certificates, he adopted the whole contract and be- came the purchaser." This view was sustained upon appeal,' Lord Chelmsford, L. C, saying that " he [defendant] knew that shares frequent- ly passed through several hands before they came into posses- ' Evans vs. Wood, L. E. 5 Eq. 9. ' L. E. 3 Ch. App. 188. "Hawkins V8.Maltby,L.E.4id.572. Bdation hebween Client and Purchaser. 321 sion of the actual purchasei", to whom the transfer -would be made ; and he knew that the transfer would not be made by the person from whom he purchased, but by the holder of the shares." In Davis vs. Haycock/ the defendant had, on the lith day of April, 1866, bought, through his Broker, of one G., a Job- ber, fifty shares in O. G. & Co. The shares were bought for the 27th, but were afterwards carried over to the next account - day, the 15th of May, G. paying backwardation. On the 16th of May, the plaintiff, through his Broker, sold to G. for immediate delivery thirty shares in the same company. On the 10th of May the company stopped payment, and the next day a winding-up petition was presented. Oil the 14th of May (the name-day) the defendant's Brokers, as purchasing Brokers, issued a ticket for the shares in his name to the sell- ing Jobber. The Jobber, in conformity with the usages of the Stock Exchange, divided the defendant's ticket, and ' handed to the plaintiff's Broker, iu part performance of his contract^ a ticket containing defendant's name as purchaser- of ten shares. The transfer of the shares was duly executed by the plaintiff, and, together with the certificates, were finally de- livered to the defendant, who retained the same. After the company stopped payment, the directors refused to register any transfer. Two calls were made after the stop- page, which plaintiff, whose name remained on the register, was compelled to pay. An action at law was brought to re- cover the amount of these calls. The defendant contended that there was no privity of contract between the parties, and that the contracts made with the Jobber by each of the par- ities were entirely separate and independent, had never been consolidated, and sought to distinguish the cases of Hodgkin- son vs. Kelly and Hawkins vs. Maltby from that action. ' L. E. 4 Ex. 373. 21 322 Stoch-fyrokera and Stock Mochcmges. There was a divieion of the court, two of the judges, Kelly, C. B.., and Pigott, B., holding that plaintiflE was entitled to judgment, and Cleasby and Channel, BB., dissenting from that view on the ground that the plaintiff had no remedy at law, but not denying that the plaintiff was entitled to relief in equity. As the usages of the Stock Exchange are expressly in- corporated into all transactions which take place there, the better view would seem to be that advanced in the opinion of Kelly, C. B. Without giving any more cases in detail, the result of the decisions seems to establish the following propositions : First. A contract between the vendor and the ultimate purchaser is complete when a ticket containing the name of the purchaser has been delivered by his authority to the vend- or, and he has accepted the name, indicated that acceptance by receiving the purchase-money, or in some other definite manner. Second. Although, in the case of Stephens vs. Medina,' it was decided that where registered shares are transferable only by deed it is the duty of the purchaser to tender to the ven- dor a transfer -deed, duly executed, as a condition precedent to enforcing the contract, yet it is the usage of the Stock Exchange for the seller to prepare a deed at the expense of the purchaser. A tender of this deed, duly executed, must be made before the purchase-money can be demanded. Third. The transferror is not bound to procure the consent of the directors (if required) to the registration of the trans- fers, because the contract of sale is not made conditional on the insertion of the purchaser's name on the list of share- holders." ' 4 Q. B. 422 ; followed by Bowlby ' Lindley on Part. 714 (n.) ; Stray VB. Bell, 3 C. B. 284. vs. Russell, 1 El. & E. 888 ; Paine vs. Relation iet/ween Client and Purchaser. 323 Fourth. The transferror is liable to account to the trans- feree for all dividends or any bonus or new shares which he may have received, or which may have been issued to him in right of the shares which he has contracted to sell while his name remained on the register.' The principle upon which the courts act is, that from the time a contract is entered into the transferror becomes a trustee of the security for the im- mediate buyer or his vendee or nominee, and therefore, until registration is completed, occupies the technical position of legal owner, without any beneficial interest in the subject- matter of the trust. Fifth. As a result of the principle just alluded to, the transferee is bound to pay all calls and to assume all other liabilities accruing after the contract is made," although the transfer-deeds are never executed by the transferee, it being, as we have seen, the duty of the transferee to have the trans- fer-deeds executed and registered.' Sixth. We have already seen that the real buyer of the shares is, when discovered, liable to indemnify the seller although his name has not been passed as the ultimate purchaser, but, instead thereof, the name of some real or fictitious person being inserted. Hutcliinson, 3 Ch. App. 388 ; Evaus ' Blact vs. Homersham, 4 L. E. Ex. vs. Wood, L. E. 5 Eq. 9 ; Hodgkinson Dly. 24; Stewart vs. Lupton, 22 W. E. vs. KeUy, L. E. 6 id. 496; Holmes 855. vs. Symons, L. E. 13 id. 66, althongli ''Evans vs. Wood, L. E. 5 Eq. 9; this was not formerly thought to be Hawkins vs. Maltby, 3 Ch. App. 188, the rule (Berminghara vs. Sheridan, on app. from 4 L. E. Eq. 572. 32 Beav. 660): this case cannot, ^Id. aud cases heretofore cited; however, be relied on in determining Morris vs. Canuan, 4 De G. F. & J. contracts on the Stock Exchange, as 581 ; Cheale vs. Kenward, 3 De G. & has been admitted by the judge who J. 27 ; Wynne vs. Price, 3 De G. & S. decided it. 310. 324 Stoch-lrolcers and Stock Mschanges. Chaptee VI. THE PAEIS BOUKSE. 1. E.i$tory of the Bourse. II. Agents de Change. III. Natu/re of Transactions. I. History of the Bourse. The Paris Bourse is an association whose history can be traced back for several centuries; and one can find in the early authors of France many complaints of the noisy and turbulent gatherings of the money-changers and Brokers in different streets of Paris, imtil finally, in the beginning of the fourteenth century, public convenience demanded that these public assemblages, which interfered with the orderly traflBc of the capital, should be confined to a certain locality. Ac- cordingly, in February, 1304, it was ordered that the " Change de Paris," the nucleus of to-day's Bourse, be established at the Grand Pont, on the side of La Gr^ve, between the Great Arch and the Church of St. Leufroy.' From the Grand Pont it was first transferred to the large court of the Palais de Justice, before the Galerie Danpliin6 ; but, as transactions grew in volume, every space assigned to the Broker had to make place for a larger one.' ' B^darride, Droit Commercial, 6, ' Or, " chassde d'nu local public, la 133. speculation ddploya sa tente dans la History of the Paris Bourse. 325 The history of the Bourse shows many successive struggles against hostile decrees of changing governments, all impelled by a general public sentiment which appeared to regard its do- ings as noxious and immoral. The speculative excitement cre- ated by John Law in 1720 attracted such hosts of stock specula- tors to the Bourse that the Brokers had to go from the narrow Rue Quincampoix, where they then were, to the Place Ven- dome, and soon after to the gardens of the Hotel de Sois- sons.' It appears that owing to these frequent changes of locality the Brokers, instead of having fixed offices, occupied temporary booths or stands in these gardens, for which 600 francs monthly rent was asked," and the demands even at that figure could not be supplied. In consequence of the condition of the country caused by the schemes of Law in 1720, an arret du conseil ordered the suppression of the Bourse, then situated in the H6tel de Sois- sons.° But this suppression, caused, as we have seen, by the collapse of the Law bubble in stocks, lasted only four years ; for in September, 1724, by an arrU du conseil, the Bourse was given a legal character, and it was decreed that an Exchange should be established with its official quarters at the Hotel de Nevers,' where transactions in stocks and merchandise might be made through sixty agents de change, to be appointed by the King, according to the provisions of an edict previously made in the month of January, 1723.° And it was especially prohibited to hold any gathering for stock dealings at any place other than the regular Bourse under penalty of a heavy fine. It was also forbidden to announce by. voice or sign the rue ; sur les bords fangeux des mis- ' Buohfere, Operations de la Bourse, seaux ou chercha un refuge dans les 7. repaires obscurs des bouges et des " B^darride, Droit Comm. 6. cabarets environnants." — M. Jean- ' Id. 9. notte Boz^raiu, La Bourse, 1. 1, p. 16, * Bucbfere, Operations de la Bourse, N°- 18. 7. • B^darride, Droit Comm. 9, 10. 326 Stoeh-hroleera and Stock Ibchanges. price of any security with a view of putting its quotation up or down ; and every Broker violating this provision was to be liable to a fine of 6000 livres, while private persons were to be punished by being forever excluded from the Bourse." The alleged object of this strange regulation was " to main- tain the order and tranquillity of the Bourse, so that every one might transact his affairs uninterruptedly." ' But these and other hostile provisions proved inoperative, and were sub- sequently repealed. The Bourse continued its location at the H6tel de Nevers until the year lt93, when it was closed by a decree of the 27th of June of that year." Its suppression, however, caused by the turmoils of the Eevolution, was of but short dura- tion, for by a decree of the very same year it was re-estab- lished. By the terms of the latter all persons in Paris, as well as in other cities where there were Bourses, were pro- hibited from making operations of a designated character in any places except those where the authorized Bourses were held. After these decrees the Paris Bourse was tempo- rarily installed in the Church of the Little Fathers, whence it was removed first to that part of the Palais Koyal now occu- pied by the Galerie d'OrMans, and subsequently to the Con- vent of the Daughters of St. Thomas. Hei'e it remained until it obtained possession of its present building, of which Napo- leon I. laid the corner-stone, but which was not finished till the end of 1826.* The State furnished the ground for the building, while the city of Paris paid for the cost of its erection, which was over 8,000,000 francs.' ' B^darriile, Droit Comm. 32. ♦ M. 8. » Id. ' P. Larousse, Dictionnaire Uni- ' Buch&ie, Operations de la Bourse, versel, 1145. 7. Agents de Chwnge. 327 II. Agents de Change. The functions of the Stock-broker in France are principally regulated by the 76tli article of the Commercial Code of that country. We give the article in full in the notes. By this article the legally constituted agents de change have the sole right to ne- gotiate public and other securities susceptible of quotation, and also bills of exchange and other commercial instruments. Con- currently with merchandise Brokers, they were also empowered to negotiate for the sale or purchase of metallic values, but by usage the dealings were confined to gold and silver in coin or bars.' The legal status of the agerd de change is quite unique. He is a government officer in one sense of the word, and, though a public functionary, he is yet mainly amenable to the dis- cipline of the Governors (Chambre Syndicale) of the Bourse, whose powers appear to be almost, if not quite, as autocratic as those of the Governors of the London or the !N"ew York Stock Exchange." And the government has a supervising authority to see that the proceedings of the Bourse are carried on in conformity with the requirements of the law and good order ; but in all disputes and questions affecting the rights and interests of the Brokers, the decisions of the Chambre Syndicale, or Governing Committee, chosen by the Bourse, are generally final." The number of agents de change in each city is regulated by a decree of the State upon the prop- osition of the Minister of Finance. At Paris this number ' B&larride, Droit Coram. 202. de chauge pourroiit falre, concnrrem- " Art. 76. Les agents de change, con- ment avec les courtiers de marchan- stitn^s de la manifere prescrite par la dises, les n^gociations, et le courtage loi, ont seula le droit de faire les n€- des ventes'ou achats de mati&res gociations des effets publics et autres m^talliques. lis ont senls le droit susceptibles d'etre cot6s; de faire d'en constater le cours." pour le compte d'autrui les n^gocia- ' Buchfere, Operations de la Bourse, tions des lettres de change ou billets, See Rules of Paris Bourse iu Appen- et de tons papiers comraerfables, ot dix. d'en constater le conrs. Les agents ^ Id. §28 Stockrbrahers and Stock JEkchanges. was fixed at sixty by a royal ordinance of the 29tli of May, 1816, whicli has never since been modified.' The cigents de chcmge are nominated by the chief executive power. They are obliged to reside in the place where they exercise their functions, which becomes their legal domicile." The rules of admission require that the agent de change must be a French citizen, twenty-five years of age, and that he must produce a certificate of ability and integrity signed by the chief mem- bers of several banking and commercial houses in good standing. In Paris the presentation of the candidate by the Chambre Syndicale is addressed directly to the Minister of Finance.' The agents de change can present their successors, with the approval of the nominating power ; but the govern- ment has expressly reserved the right to augment or reduce their number. In the event, however, of their number be- ing increased, the new members would be obliged to pay a sum to be determined by the minister, to be distributed among the old members as an indemnity for the diminution of the value of their offices. On the other hand, if the num- ber is decreased, it is the usage to fix an indemnification sum which shall be paid by the other members to their associate or associates who may retire at the instance of the govern- ment.* The agents de change are governed by seven of their members, elected annually, who are called syndics, and consti- tute the Chambre Syndicale. Before entering on his func- tions, the Broker must take an oath before the Tribunal of Commerce, in due form, and he must also pay into the treasury of the Bourse his cautionment, or guarantee, of 250,000 francs. Previous to 1862 this was only 125,000 francs, having been raised to that figure gradually in the course of time from very small amounts. In Lyons the ' Bach&re, Operations de la Bourse, ' Id. 32. 30. ' Id. 31. * Id. 31. Agents de Change. 329 cautionment is only 40,000 francs; in Marseilles and Bor- deaux, 30,000 francs ; in Toulouse and Lille, 12,000 francs ; and in the smallest Bourses as low as 4000 francs. The object of the cautionment is to secure the Clients of the Broker.' It is a pledge of the Broker's good conduct, and for the Clients' indemnification for any loss occasioned by the error or fault of the agent de change. It is, in fine, a fund held for any judgments that may be pronounced against him." The cautionment must be kept intact.' Thus, for instance, if it should be adjudged that a Broker owed a Client 100,000 francs, and the Chambre Syndicale paid over that amount to the aggrieved party, the agent de change in question would be compelled, in order to retain his mem- bership, to bring his cautionment again up to the full amount of 250,000 francs. The agent de change is also required to contribute 50,000 francs to a common fund, which is called caisse commwne, and which the Bourse employs in aiding and extricating from their difficulties such of its members as may, through no fault or wrong-doing of their own, find themselves in a temporarily embarrassed financial position." And it seems that millions of francs have been spent by the Paris Bourse in this manner, only a portion of which has ever been repaid by the agents de change. This common fund, which was first instituted in 1819, has grown to be very considerable in amount ; and, when not in use for its actual purposes, it is profitably employed by the governors, in their discretion, in time loans, effected through " turns " in stocks, by which it yields a very large interest to the Bourse.' The Chambre Syndicale, which ad- ministers the funds, makes a report twice a year to the Bourse ' Bach&re, Op&ations de la Bourse, ^ Id. 174. 40, 41. * * Id. 174, 175. ' B€darride, Droit Comm. 173. ' Id. 175. 330 Stoch-hrokera and Stock Exchanges. as to the results of its operations, and a, dividend from the profits is usually declared in July and December of every year." The Chambre Syndicale presides over the fortnightly settlements through two of its delegates appointed for the purpose." Under a law enacted in 1816, the Chambre Syn- dicale has power to suspend a member pending their investi- gation into any charges which may have been brought against him, to impose a fine, or propose his expulsion, if they re- gard his offence as one of sufficient gravity for such an ex- treme measure. Its decisions, in cases of dispute between members, or between members and their Clients, are subject to appeal to the Tribunal de Commerce, if the question is one of civil jurisdiction, and to the action of tlie police authori- ties if a criminal offence is involved. In a case decided in 1827, in which a Broker — Sandrie-Vin- court by name — had been expelled for having failed (his donbt- fiil financial position having been brought to the attention of the Chambre Syndicale as early as 1822), the Cour de Paris decided that the Chambre Syndicale could not be held liable for not having suspended him sooner, and the court rejected the claim that the agents de chwnge collectively, and the mem- bers of the Chambre Syndicale individually, were legally re- sponsible for the loss inflicted upon the bankrupt Broker's creditors.' Expulsion alone can deprive a member of his own right to present the name of his successor, and thus practically to sell his "seat."' As must have been inferred from the above, the agent de change has a vested interest in the Bourse, of which, as al- ready stated, only an expulsion for moral delinquency can de- ■ BMarride, Droit Comm. 176. ' B^darride, Droit Comm. 188, 189, » Rules in Appendix. 19a * Id. 151. Agents de Change. 331 prive him. As there are only sixty of these functionaries, they are generally men of large capital, doing a most exten- sive and valuable business. In case of the Broker's failure, the creditors are entitled to present the name of bis successor; and if the latter be ap- proved by the Bourse and confirmed by the government, it is to him the creditors must look for their indemnification. The same rule holds good in the case of the death of a member, where either the heirs or creditors, as the case may be, have the right to present a successor to the vacant seat ; and the latter, if accepted, reimburses those presenting him for its value by the payment of such a sum as they may agree upon. Proper caution is expected to be used by the Chambre Syn- dicale in placing new securities on the list ; and in order that the Bourse may not be committed to the soundness of any new security, it is generally placed on the so-called " non-offi- cial " list until it shall have received the approval of the Min- istry of Finance as being worthy of official quotation.' The entirely inadequate number of agents de change for the immense transactions in stocks led to the formation of the Coulisse, comprising a vast number of unauthor- ized, or "curbstone," Brokers, as they are called in New York." The word coulisse, in its ordinary theatrical sense, means the wings of the theatre hidden from the spectator's view, where the actors stand before coming on the stage.' Its curious application in designating the part of the Bourse unauthorized by law was, according to Fremery, derived in this manner : In one of the ancient places of reunion ' BfidaiTide, Droit Comm. 185, 186. opfirations en effets publics et rentes ° "On appelle coulisse la rfiunion sur I'gtat" (BScTarride, Droit Comm. de spficulatenls qui nggocient entre 104). eux, ou par I'intermgdiare d'agents de ' Littrfi, Dictionnaire de la Laiigue change non-commissionn^s, de nom- Fraufaise, 841. breuses et souvent fort importantes 332 Stockrbrok&ra and Stock Eechcmges. assigned to the Bourse, there was a passage separated by a partition from the space where the commerqants assembled. This passage extended to the very enclosure of the Brokers ; and the men who made transactions with each other, without the intervention of the regular Brokers, habitually occupied it. It was called the Coulisse, and those frequenting it couUssiers.^ The development of the Coulisse, which is as ancient as the Bourse itself, was at first strenuously combated by the regu- lar Brokers. An edict of 1716 sought its suppression, follow- ed by another several years later, which instituted the func- tions of the agents de change. Ten years later another royal decree was hurled against " the individuals without authority," to translate its language, "who introduce themselves in the Bourse under the title of agents de change, and make transac- tions between each other which are prejudicial to the integ- rity of commerce and the public safety." " But the Coulisse struggled with wonderful persistency against the attacks of the Bourse ; and neither fines nor imprisonment, nor repeated prohibitions of its meetings by the government, could van- quish the irrepressible coulissier. The Kevolution, with its destruction of monopolies, made the profession of agent de change free,' and the Coulisse then disappeared for a time ; but as soon as the monopoly was re-established in the year 1801, it reappeared. The struggles of the agents de change against their unauthorized rivals — the Coulisse — were so unavailing for many years that down to 1859, when by a legal decision it was suppressed, it may be said to have enjoyed an almost official, though certainly somewhat troubled, existence. The govern- ment always took its severest measures against the Coulisse, and seemed to hold it responsible, when disastrous events produced a panicky decline in the public funds. Thus, in 1819, when, ' LarouBso, Dictionnaire Universel, ° Bfidarride, Droit Comm. 105. 307. ' Decree of March 17, 1791. Agents de Change. 333 owing to legislative changes of a radical character and a de- ficit of one hundred millions in the budget, the five per cent, rente declined in a few days from Yl francs 50 centimes to 65 francs 10 centimes, the assemblages of the Coulisse, which then held its reunions in the Passage des Panoramas, were at once prohibited. The Coulisse then migrated to the Boule- vard de Gand and to the Caf6 Tortoni, and was allowed to remain unmolested for four years; but in 1823, when, owing to threatening political clouds, the five per cent, rente fell in eight days from 87 francs 65 centimes to 78 francs 30 centimes, the Coulisse was again held responsible, and visited with the severity of the Tribunals. In October, 1840, when the bom- bardment of Beyrout by the English fieet was commenced, the five per cent, rente fell from 106 francs to 101 francs, and the reunions at the Caf^ Tortoni were again prohibited. A few days after a recovery began, and the Coulisse resumed its op- erations.' In 1842 the Bourse formally instituted proceedings against the Coulisse before the Pr6fet de Police, who reported, how- ever, to the Ministry of Finance that the Coulisse did not encroach upon the domain of the Bourse, because no stocks actually changed hands through their transactions, which were simply bets on what the price of a security at the Bourse would be on a given day." In 1850, on the publica- tion of an apocryphal message by the then President of the Eepublic, subsequently the Emperor Louis Ifapoleon, the rente fell, in the dealings of the Coulisse, 3 francs befoi'e the meet- ing of the Bourse, and once more the Coulisse was proscribed. But only eight days elapsed when it again reassembled in the Casino de la Chauss^e d'Antin. This was its last sheltered asy- lum, from which it was driven in 1853, when a fall of 3 francs ' Laronsse,DictioniialreUniversel, " Bfidarride, Droit Comm. 106. 307, 308. 334; Stoch-hroTcers wnd Stock Exchanges. in the dealings on the Coulisse greeted the first news of the departure of the French fleet for the East. Thence, until 1859, Paris beheld the spectacle of the Coulisse in full blast, in the mornings from 11 to 1, and in the evenings from 8 to 10, before the Passage de I'Op^ra.' This brings us to the critical year of 1859, when the Coulisse was suppressed by law; and it should be remem- bered that during all this time its transactions invariably required the co-operation of the regular agents if an actual transfer of stocks was to be efEected. Every agent de change had his coulissier; and it was said to be a custom among the agents de cham^e, if they received orders from their Clients which they regarded as ill-judged, to direct their coulissiers to purchase what they had sold, or to sell what they had bought, for their Clients." In 1859, through the instrumentality of the Chambre Syn- dicale, not less than twenty-six coulissiers were convicted of usurping the functions of the agents de change, and condemn- ed to pay a fine of 10,500 francs each, and their appeal was rejected by the Cour de Cassation.' This was a very serious blow to the Coulisse, the history of which will always be one of the most interesting features of the record of the Paris Bourse. It had its own rules and usages, though these were of a far more informal character than those of the Bourse, and admission to its ranks was obtained by presentation by some of the older mem- bers, and the tacit consent to the reception of the new-coiner by the others. When it was formally suppressed by the de- cision of 1859 above alluded tO', it included the members of two hundred banking-houses of great solidity, and six- ty of these occupied themselves solely with operations in ■LaroussejDictionnaireUniversel, proceeding is called "discounting" 308. or "coppering" a Client. ' M. Jeannotte Bozgrain, De la = Bfidarride, Droit Comm. 108, 109. Bourse, No. 145. lu New York tliia Agents de Change. 335 rentes.- The smaller commissions charged by the coulissiers, dnd their quicker mode of operating, had caused their trans- actions to grow so enormously as to overshadow those of the regular Brokers ; but the decision of 1859 put an end to the Coulisse.' In concluding this history of the Coulisse, it should be added that it still serves to this daiy for the vast minor operations on the Petite Bourse, where, in operations known as the marcM a prime, much smaller margins are accepted than on the regular Bourse. The contracts are regulated from one day to another. Every afternoon at two o'clock all the little differences are adjusted, and an immense number of small speculators make contracts for the next day." Indeed, the coulissiers still exist, but they occupy themselves almost ex- clusively with operations in securities not listed on the Ex- change, and gambling on the Petite Bourse, which continues to hold its meetings outside the place and hours of the regu- lar Bourse.' Owing to the enormous growth of financial operations, it was found, however, indispensable to increase the number of persons allowed to exercise the functions of agents de change / and hence, by a decree made in October, 1859, each of these sixty functionaries was permitted to have one or two clerks, who, under the rules established by the Chambre Syndicale, might exercise the power of his employer at the Bourse.' By this means a legally constituted Coulisse was established, and eacli agent de change is to-day a trinity acting under a single name.° The commissions of the agents de change are fixed by the Chambre Syndicale. They are regulated, not by the number ' Larousse, Dictionnaire Universe], ' Bucbfere, Op^ratioDs de la Bourse, 308. 26. = Id. * B6darride, Droit Comm. 109. 'Id. 336 Stockrbrohsrs and Stock Mechcmges. of shares purchased or sold, as in New York, but by the nomi- nal value of the securities. For every 1000 francs ($200) facfe value the commission is 1 franc 25 centimes (26 cents), or one- eighth per cent. ; and for every security of a face value below 800 francs ($160) the minimum commission of one franc is charged.' When, in the same Bourse, the Client makes a sale and a purchase, but one commission is charged — that upon the largest capital employed — which is called " arbitrage" and the other is made free — "franco." III. Nature of Transactions. The transactions of the Paris Bourse are substantially simi- lar to the dealings on the London Stock Exchange, except that the operations are more diversified. There are two settling-days each month." There are two principal species of securities dealt in on the Bourse — les nommatifs and lesporteurs — viz., either regis- tered or to bearer. The delivery of the security to bearer is a sufficient transfer of the property. For the registered secu- rities the seller must sign a declaration which transfers the property to the bayer, whose name is mentioned on the decla- ration. These declarations, called " ti-ansf er-sheets," are fur- nished by the companies, and can generally be sent to the seller for signature when he does not live in Paris, with the words "good for transfer," written in his own hand- writing, preceding his signature. But in those securities which require that the transfer should be signed on the books of the company, the seller must sign at the chief office or headquarters ; or, if he does not live in Paris, he must send a power of attorney, with his securities, authorizing the person to whom they are sent to effect the transfer. ' See Rules of Paris Bourse, in Appeudlx. " Id. Nature of Transactions. 337 There is in Frericli bonds a third species of seeiirity which partakes of the nature of the two former, and which, for that reason, is called " mixed securities." They are registered, and the title to them can only be transferred by a declaration signed by the seller ; but they are furnished with coupons to bearer which can be detached from the security, and on the presentation of which the sum therein mentioned (arrirages) will be paid. The transactions of the French Bourse are either for money or for the account, and in respect to the settlement or adjust- ment of the contracts do not substantially vary from the course of the London Exchange. The most numerous dealings on the Bourse are for the account, and are settled by the payment of differences. These transactions are known under the general designation of " des operations d, terme." To sell or buy securities " d terme " in- dicates on the part of those who make the operation the inten- tion to delay the execution of the contract until a determinate period. The time when contracts of this nature mature and are settled is known on the Bourse as " liquidation." Ordinarily, in the past, there has been but one liquidation, which occurred at the end of the month. But when the financial or political situation is such as to create very a,ctive movements on the Bourse, two settling-days are resorted to for the greater number of securities, and this seems to have been the case for a long time past. These liquidations are had on the 1st and 16th of each month.' The operations d terme may be made at the option of the Client either for the ensuing liquidation or for any follow- ing. And these operations can be made for a term longer than is embraced within the next ensuing settling-days: thus, in the case of securities for which monthly settling- ' Rule 66 of Paris Bourse. 22 338 Stockrhrokers and Stock Mechanges. , dajs are fixed, the liquidation can be deferred beyond that period, while the same holds good with reference to those securities for which two settling - days per month are al- lowed. The operations & terme, or for the account, are of two spe- cies — " les marcMs dferme" and " les march&s a prime." To buy or sell ferme is where one binds himself to receive or deliver, upon a certain day, a designated number of shares at a fixed price. , The vendor rarely possesses the shares which he agrees to sell, and the buyer has not sufficient capital to pay for the shares purchased; and hence both expect to settle the transaction by the payment of differences. In this species of operations the loss is not limited, but is subject to the extremest fluctuations of the market.' The operations d, prims, on the other hand, are those wliere the loss is limited to a fixed sum. The contract is a prime whenever the price is followed by the word dont. For in- stance, A buys fifty shares cL terme at the price of 1055 francs each, " dont 10." This means that A's loss is limited to 10 francs per share; for if at the expiration of the contract the shares should be worth only say 1030 francs each, A can abandon the prime at a loss of 500 francs ; whereas, if the operation had been ferme, he would have lost 1250 francs." The " reponse des primes " is the declaration by the buyer of his intention, or not, to avail himself of his option. If the transaction is maintained, the purchase becomes fixed, " un achat ferme." On the Paris Bourse, however, there is no for- mal declaration, as the oflBcial quotations are regarded as indi- cating of themselves the intention of the buyer.' These contracts are mere options, and this entire system of ■ B^darride, Droit Coram. 101. » Id. 103. Md. 101,108. Nature of Transactions. 339 dealings has teen assailed as illegal and pernicious. It is re- lated that when Napoleon I, had before liim one of the gov- ernors (syndic) of the Bourse, tliis functionary, in defending its operations, said : " Sire, if my water-carrier is at my door, would he commit a wrong in selling me two barrels of water instead of only the one which he has with him ? Of course not, because he is always certain to find another barrel of water in the river. "Well, sire, at the Bourse there is a river of rentes." ' But, notwithstanding the attacks upon these option contracts, the Cour dg Cassation, in 1860, finally de- cided that the dealings on the Bourse for future delivery are valid, provided that an actual delivery of the securities is contemplated, and they are not made as mere pretexts for gam- bling operations. And in this respect the French law agrees with the doctrine laid down by the courts of England and the United States." There are various other operations, a full description of which would, however, exceed the space assigned to this chap- ter. One of the most popular is the report. The rejport in- dicates an operation which consists of a simultaneous purchase and sale for different periods of time, and assimilates itself to what is commonly known in ISTew York as the " turning" of stocks. Thus a capitalist who on the same day buys rente for 69 francs, cash, and sells it at 69 francs 45 centimes, payable at the end of the month, will gain the difference between the two amounts as tlie interest on his money. Again, specula- tors often desire to prolong their operations beyond the set- tling-day, and then the Brokers, who make this branch of operations a specialty, will renew or carry over the contract on the payment by the operator of a certain difference called report.' In the latter sense, the repoi4 would seem to corre- ' B^darride, Droit Comm. 81. ^ Dictionnaire de la Conversation, " Id. 108. 604. 340 Stockrbrokers cmd Stock Exchanges. spond to what in England is known as the " carrying rate " for stocks. As the cours moyen, or average market price, of any securi- ty on a given day is of great importance in adjusting settle- ments, the rule has been established that the average between the highest and lowest prices of the day shall be considered the cours moyen} ' Larousse, Dictionnaiie Universel, 1144. TJsages. 341 Chaptee YII. USAGES OF STOCK-BEOKEES. /. Oeneral Rules relative to Usages. II. Cases in which Usages of StocMroTcers held Binding. (a.) In the United States, {b.) In England. III. Cases in which Usages have been Rejected. (a.) In the United States. (6.) In England. I. General Rules relative to TTsageSi A I'ule of law laid down in the elementary works as being well settled is, that a contract should be interpreted in accord- ance with the intention of the parties thereto, and that the "usage" or "custom" of any particular trade, occupation, business, or place, when it is reasonable, uniform, well settled, and not in opposition to fixed rules of law or in contravention to the express terms of a contract, is deemed to form a part of the contract and to enter into the intention of the parties. There are different kinds of customs, such as the custom of merchants, lex mercatoria, which is recognized by the law of the land ; but the " usages " of which we treat in this chapter must be proved as any other facts, and, when proved, may be used as presumptive evidence to establish the contract.' Mr. "Starkie on Ev. 455; Maxted vs. 2 Phillips on E v. (Cowen's, Hill's, aud Paine,L.E.4Ex.81 ; id. (2d case) 205; Edwards's notes, 4th Am.ed.) 726; 2 342 Stoclc-'brokers and Stock Exchanges. Justice Brett, in a case' which powerfully illustrates the connection between the usages of trade and the law, said: " Customs of trade, as distinguished from other customs, are generally courses of business invented or relied upon in or- der to modify or evade some application which has been laid down by the courts of some riile of law to business, and which application has sc-jmed irksome to some merchants. And, when some such course of business is proved to exist in fact, and the binding effect of it is disputed, the question of law seems to be whether it is in accordance with fundamental principles of right and wrong. The mercantile custom is hardly ever invoked but when one of the parties to the dis- pute has not, in fact, had his attention called to the course of business to be enforced by it; for if his attention had, in fact, been called to such course of business, his contract would be specifically made in accordance with it, and no proof of it as a custom would be necessary. A stranger to a locality or trade or market is not held to be bound by the custom of such locality, trade, or market because he knows the custom, but . because he has elected to enter into transactions in a locality, trade, or market wherein all who are not strangei's do know and act upon siich custom. Where considerable num- bers of men of business carry on one side of a particular bus- iness, they are apt to set up a custom which acts very much in favor of their side of the business. So long as they do not infringe some fundamental principle of right and wrong, they may establish such- a custom; but if, on dispute before a legal forum, it is found that they are endeavoring to enforce some rule of conduct which is so entirely in favor of their Pars, on Cont. (6tli ed.) 535 ; 1 Greeu- son on Usages, 287, 288, where the law leaf on Ev. § 292, 294 ; Starkie ou ou this sabject is exhaustively dis- Ev. 637, 710 ; Broom's Leg. Max. 682, cussed, and all of the cases referred to. 889, 890 ; Walls vs. Bailey, 49 N. Y. ' Robinson vs. MoUett, L. E. 7 H. L. 464. See also a recent work. Law- Eng. & L App. Cas.802, 816. Usages. 343 side that it is fundamentally unjust to the other side, the courts have always determined that such a custom, if sought to be enforced against a person in fact ignorant of it, is un- reasonable, contrary to law, and void." It will be the object of the present chapter to ascertain how far these general views and the principles hereafter set forth have been introduced into cases arising out of transac- tions between Stock-brokers and their Clients ; and it will be seen, in the application of these general principles to the facts, that the courts have exercised a very wide range of discre- tion, and that their conclusions have not by any means been uniform or harmonious. • The importance of allowing the introduction of usages of Stock-brokers in all cases arising out of transactions on the Stock Exchange cannot be overestimated. The business of buying and selling stocks, although of modern origin, has grown to be one of gigantic magnitude, employing yearly more capital, perhaps, than any other commercial pursuit. As the system of conducting a transaction in stocks is sui generis, the usages of the business have generally arisen out of its necessities, and to fail to give effect to them in a litiga- tion is practically to determine it upon principles and facts which have no existence in the oi'iginal transaction. In truth, it is entirely impossible to make out or understand intelligently an ordinary transaction, either of the London or the New York Stock Exchange, without the aid of these usages. The time required to make a sale of securities at either of these places is but momentary. It often happens that barely a half-dozen words are spoken in a transaction : a nod, the raising of a hand, or other signs and ejaculations, ai'e fre- quently used to bind a buyer or seller to a contract embrac- ing thousands of. shares of securities. One transaction is the representative of thousands. Very often the Brokers make 344 StochhroTcera cmd Stock Exchanges. no memorandum of the business, or, when one is made, it is apt to be of tlie scantiest character and utterly decipherless without the explanation of persons acquainted with the course of dealing on the Exchange. What actually transpires be- tween the buying and selling Brokers constitutes, it may be, but the framework of the transaction, and an intelligible, full, living agreement can only be made out by a resort to other evidence, involving, perhaps, not only a consideration of the rules of the Stock Exchange, but of the unwritten usages, so to speak, of the Brokers. With these preliniinary observations, we shall proceed to state certain general rules which have been established by the courts upon the doctrine of usage, together with such criti- cisms upon them as seem reasonable and appropriate. Fwst. It may be laid down as a proposition well settled in the law that the usage of a business is never permitted to make an entire or new contract for the parties. What usage does is to take a contract which is deficient and incomplete in its terms or expressions, and supply the omissions; and, unless some contract is shown, evidence of usage or custom is immaterial." Second. So the usage of a business plays an important part in the interpretation of technical words and phrases in a contract, because, if language is employed which is only known in a certain business, the law, to enlighten itself as to what is meant by the contract between the parties, invites individuals skilled in that business to explain or unlock the meaning of the terms used. This branch of the law is also comparatively uniform and clear. Thi/rd. Another rule is also well settled — viz., that a writ- ten and express contract cannot be contradicted or varied by " Tilley vs. County of Cook, 103 30 How. (N. Y.) Pr. 117; Parsons vs. U. S. Eep. 155; Lombardo vs. Case, Martin, 77 Mass. 111. Usages. 345 usage, *. e., where the terms of a contract are full and com- plete and can be deciphered by the courts without resort to extrinsic evidence; as where A., of New York, agrees to sell B, of the same place, ten barrels of flour, each barrel to weigh one hundred pounds : here an offer to show that the ordinary barrels of flour known among the flour trade of New York weigh only ninety pounds could not be received. So that evidence of usage is generally receivable only in cases where the contract, whether written or oral, is doubtful, incomplete, or deficient, or where technical terms or phrases are to be translated. Fourth. A statement is frequently met with in the ele- mentary treatises and in adjudicated cases, that usage, when it is not in opposition to "fixed rules of law," and is not un- reasonable, is deemed to form a part of the contract, and to enter into the intentions of the parties thereto.' What is the meaning, in this connection, of the phrase " fixed rules of law?" If by such expression it is meant that all usages of business contrary to the express prohibitions of statutes are void, the proposition can perhaps be easily sustained; for no usage can, or should, have the force and effect of a legislative enactment. And for the same reason contracts, either express or implied, are void if they conflict with similar statutes. But there are a great many contracts con- trary to the "fixed rules. of law" which are valid, and which are made for the express purpose of evading or avoiding the rules of the law. For instance, it seems to be well set- tled in the State of New York that where A pledges stock or securities for the payment of a loan, so that a pledge is created, B, before he can sell the same, must demand pay- ment, and, upon default, give A reasonable notice of time 'Starkie on Er. 637, 710; Williams vs. Galinan, 3 Greeul. 276; Walls vs. Bailey, 49 N. Y. 464. 3i6 Stock-Tyrokers and Stock Exchanges. and place of sale.' This principle seems to be a " fixed rule of law ;" in fact, all the principles of law are " fixed rules." The fundamental essence of a law is its fixity. Law is a. rule, to distinguish it from advice or coimsel, which one is at liberty to follow or not a!s he sees proper; it is also a rule, to distinguish it from a compact or agreement, the latter be- ing nothing but a promise proceeding from us, whereas the law is a command directed to us: its language is, "Thou shalt or shalt not do this."" But this rule, in relation to a pledge, may be waived by the pledgor, so that the pledgee may sell without notice. The former can/ make a contract by which he agrees to. allow B, in default of payment, to sell the stocks without notice of any kind, at any place, and such a waiver is entirely legal.' Here we find a "fixed rule of law" set aside at the option of the parties to an agreement. Can A, by an implied contract, do that which he can do by an express contract? It is just here that the difficulty arises in the application of the doctrine of usage to contracts. For if a usage exist in a certain locality, or among a certain class of merchants or traders, which does not conflict with the pro- hibitions of a statute, or which is not contra honos mores, or contrary to public policy, but which merely extends or limits a principle of commercial law, or a " fixed rule of law," and parties contract with a knowledge of the usage, why sliould it not be presumed that it entered into-their intentions, and that they have made it a part of their contract to the same extent as if they had specifically embodied it in the instrument? In Markham vs. Jaudon,' evidence was offered to prove the existence of a usage in the city of New York by which Brokers have the right to sell out the Client's stock on the exhaustion of the margin, without notice to the latter. The ' Markham vs. Jaudon, 41 N. Y. 235. ' Markham vs. Jaudou, supra. " Blaokstone's Com. (Sharswood's * 41 N. Y. 245. cd. ) *45. Usages. 347 appellate court held that such evidence was legally rejected upon the ground that it was in hosUUty to the terms of the contract. If it were so, unquestionably the usage should have succumbed to the plain agreement of the parties. But there was no written contract in the case, and the conclusion was based upon the general principles of the law relating to the subject of pledges. Ordinarily, of course, where persons do not specifically agree upon the terms of a contract, the presumption is that they contract with reference to the existing law, and the con- tract will be enforced according to prevailing principles ; but where a usage exists with reference to which parties are as- sumed to contract, why should not this usage be imported into the contract, with the result of varying the " fixed rules of law," to the same extent as if an express undei'standing had been entered into ? In the case in question, it was not disputed but that the Client could have waived his right to demand notice. Did he not, by entering into a transaction with a Stock-broker, adopt as part of the business the usages which prevail among Brokers, respecting the sale of securities held under the cir- cumstances there disclosed? There were two dissenting opinions in that case,' which held that such evidence was ad- missible, on the ground that it explained a doubtful con- tract. And it has been directly decided in England that a usage of the Stock Exchange to close an account before the account-day, where the Client becomes insolvent, should be upheld as a reasonable and just usage ; " although it must be confessed that this case is weakened by the intimations of the court that, if the account is summarily closed before the ac- count-day, the Broker is liable to indemnify the Client if the ' Grover and Woodruff, JJ. ^ Laoey vs. Hill ( Sorimgeoiir's Claim), L. R. 8 Cli. App. 931. 34:8 Stock-lrokers and Stock Exchanges. market changes in favor of the latter on the last-named day.' As we have said, a fixed principle or rule of law may be expressly waived. So, even in cases where the legislature has regulated the law of a certain subject by statute, parties may contract to avoid its effect, and such contracts are per- fectly legal. Many statutory provisions are merely declara- tory of the common-law, and are made to govern cases where parties have not entered into any agreement in reference thereto. For instance, if an act of the legislature of a state specifi- cally allows three days' grace on negotiable instruments (and we use this illustration because it is made in the case of Markham vs. Jaudon" by the learned judge who delivered the opinion of the court), a promissory note which should, on its face, state that it was to be without days of grace would be perfectly valid, because the party had chosen to waive the benefits of the existing law. And if there exist a known usage among the merchants of a certain place to allow no days of grace, would not such a usage bind a person who executed a note and made it payable at such place ? Would he not be presumed to have made the instrument with express reference to such usage? The courts of Pennsylvania and California say that he would." So a custom on the part of all the banks of a particular place to demand payment and give notice to endorsers of negotiable paper on ih.e fourth day of grace is binding on an endorser if known to him.' And the reasoning of the Supreme Court of the United States shows the fallacy of the argument used in the case of Markham vs. Jaudon to reject the usage there ' But see Colket vs. Ellis, 10 Phila, (Pa.) 179 ; Champiou vs. Gordon, 70 (Pa.) 375; s.o. 32 Leg. Int. (Pa.) 82; Pa. St. 476; Minturn vs. Fisher, 4 Corbett vs. Underwood, 83 111. 324. Cal. 35. » 41 N. Y. 235. * Renner vs. Bank of Columbia, 9 ' Lawson vs. Eiobards, 6 Phila. Wheat. 582. Usages. 349 sought to be upheld. And the general principles of law re- lating to the time and place of demand and notice in the case of notes and bills may be overruled by usage.' The Supreme Court of the United States, in Barnard vs. Kellogg," decided a question which strongly illustrates the general subject. There it was held that the well-known rule of ca/ueat emptor could not be affected by a local custom by which the seller was made to warrant the quality of the goods ; but the learned judge who delivered the judgment of the court, in concluding liis opinion, laid great stress upon the fact that it appeared the parties had no hnowledge of the custom invoked. A still further and more ambiguous limitation of the doctrine of usages, in their influence upon contracts, was made by Mr. Justice Brett, in the case of Kobinson vs. Mol- lett,° where he said : " So long as they do not infringe some fundamental principle of right and wrong, they may establish such a custom," but that " customs fundamentally unjust, if sought to be enforced against persons ignorant of them, are void." In that case a usage was attempted to be introduced which allowed a Broker, commissioned to purchase certain mer- chandise for his principal, to become himself the purchaser. The order to purchase was given by a Liverpool merchant to a London tallow-broker, and the usage pertained to the London tallow market; but the principal was not shown to have had any knowledge of the usage ; and upon the ground of the principal's ignorance of the same it was rejected. Tlie • See article " The Power of Usage " 10 Wall. 383. and Custom," by John D. Lawson, ^ L. K. 7 H. L. Eng. & I. App. Cas. Esq., 7 South. L. Key. 43 ; see also 802, 816 ; see also Tilley vs. County Bowenvs.N6well,4Selcl.l90,3Kern. of Cook, 103 U. S. Eep. 161, where 290, -where the usage of the hanks of the court say that absurd and nnrea- Connecticnt, to regard checks pay- sonable customs are not binding, able after date as not entitled to days of grace, was held admissible. 350 Stochhrokers cmd Stock Exchanges. learned judges who delivered opinions in- the case did not pass upon the question as to the influence of such a usage upon a contract made by persons having knovrledge thereof ; but it is not diflBcult to perceive that, if such knowledge had been shown, the case would have been differently determined. Without pursuing the subject further, it seems to us that harmony can only be reached in this branch of the law by keeping in constant view the distinction between contracts void in law and those which are valid. In the former class, whether the contracts are void because made so by statute, or are against public policy, the law will not enforce them. In the latter class, embracing all contracts not included in the former, agreements will be enforced, al- though they contravene fixed rules of the law merchant, or common^law, and frequently statutory provisions. As usage is considered a portion of the contract between the parties, it would seem to follow logically that it should be sustained in every instance where an express contract is up- held, providing, of course, the evidence is suflBcient to show that the parties had knowledge of such usage. In fine, whenever an express contract is valid, a known usage, which is but another way of proving what the parties intended and agreed upon, should be declared equally so.' There is one answer which may be made to tliis conclusion — viz., that "public policy" requires, where parties assume obligations which the law docs not impose, or release obliga- tions which it does impose, it should be done by express contract. This view was advanced by Chapman, J., in a case where a ' These views, since they Tcere son, Esq., of the Missqnri Bar, 7 writteu, have received a powerful South. L. Rev. (n.s.) 1 ; 6 id. 845; see endorsement from two elaborate and also Coll^et vs. Ellis, 10 Pbila. (Pa.) able articles on the "Power of Us- 375; s. 0.32 Leg. Int. (Pa.) 82. age and Cnstoni," by John D. Law- Usages. 351 usage was set up that certain goods were always sold with a warranty, where the law implied none." The learned judge said: "... If the parties agree that there shall be a war- ranty where the law implies none, they can insert the war- ranty in the bill of sale ; or if the manufacturer sells without warrant}', he can so express it. But if such usages were to prevail, they would be productive of misunderstanding, liti- gation, and frequent injustice, and would be deeply injurious to the interests of trade and commerce. They would make it necessary to prove the law of the case by witnesses on the stand, and it would be settled by the jury in each particular case;" and he concludes that "public policy" requires that such usages should be expressly incorporated in contracts. The exclusion of usage on the ground of " public policy " invokes an argument which we have not discovered in many cases ; and, if it were well-founded, it would require the rejec- tion of all usages, because it would apply to all with the same force that it did to the one set up in the case in question. And this mere statement would seem to be all the answer which such an argument requires. There is another complete answer, however — viz., that a large number of the many contracts which come before the courts are proved by parol ; and there is no more practical diflSculty in proving usages, which are but portions of contracts, than there is in proving any other terms or stipulations expressly agreed upon by the verbal utterances of parties. Fifth. The rule has been established, in a large number of cases, that where one employs a Broker he is 'presumed to authorize him to deal with reference to the custom of Bro- kers ; and that a Stock-broker, in the execution of his orders, has an implied authority to follow the rules and usages of the Stock Exchange." ' Dickinson vs. Gray, 89 Mass. 29. » Sutton vs. Tatham, 10 Ad. & E. 352 Stock-iroTcera and Stpclc Exchanges. In England, this ruZe was first clearly laid down in the case of Sutton vs. Tatham,' where Lord Denman said : " I think a person employing one who is notoriously a Broker must be taken to authorize his acting in accordance with the rules of the Stock Exchange." This rule was recently reiterated in the House of Lords by Mr. Justice Cleasby in Eobinson vs. Mollett," and limited in certain particulars which are important to notice: "I quite agree that by employing the Broker, who acts upon a partic- ular market, you authorize him to make contracts upon all such terms as are .usual upon the market, otherwise his hands would be tied, and he might not be able to contract at all. There- fore, as regards all such matters as the time and mode of pay- ment, the tijne and mode of delwery, the various allowances to he made, the mode of adjusting disputes as to quality, and all such matters as arise upon the contract made in the m,arTcet, the principal would.be bound by the usage; but not, I apprehend, because he must be supposed to have made inquiries and to have known them, but for the reason given by Mr. Justice 27 ; Pollock vs. Stables, 12 Q. B. 765 ; Hoclgkinsou vs. Kelly, L. E. 6 Eq. 501 ; Mitchell vs. Newhall, 15 M. & W. Adams vs. Peters, 2 C. & K. 723 ; 308; Smith vs. Lindo, 5 C. B. (n.s.) Marten vs. Gibbon, 33 L. T. (ii. s.) 587 ; Mortimer vs. McCallau, 6 M. & 561 ; Nourse vs. Prime, 4 Johns. Ch. W. 58-61 ; Magee vs. Atkinson, 2 id. 490; s. c. 7 id. 69; Horton vs. Mor- 440 ; Lloyd vs. Gilbert, 25 L. J. Q. B. gan, 19 N. Y. 170 ; Lawreuce vs. 74 ; Nickalls vs. Merry, L. E. 7 Eng. Maxwell, 53 id. 19 ; Wbitehouse vs. & I. App. Cas. 530 ; Bayliffe vs. But- Moore, 13 Ab. Pr. 142 ; over-ruled terworth,l Ex.425; Higgins vs. Sen- on other points, White vs. Baxter, ior, 8 M. & W. 834 ; Stray vs. Ens- 9 J. & S. (N. Y.) 358 ; aff 'd 71 N. sell, 29 L. J. Q. B. 279 ; Lacey vs. Y. 254 ; Kingsbury vs. Kirwiu, 11 J. Hill, L. E. 8 Ch. App. 921 ; Coles vs. & S. (N. Y.) 451 ; aff 'd 77 N. Y. 612 ; Bristowe, L. E. 4 C. P. 36 ; Cruse vs. Walls vs. Bailey, 49 id. 464, 473 ; Paine, L. E. 4 Ch. App. 441; Johnson Eosenstock vs. Tormey, 32 Md. 169 ; vs. Osborne, 11 A. & E. 549 ; Maxted Sumner vs. Stewart, 69 Pa. St. 321 ; vs. Paine, L. E. 4 Ex. 81 ; id. (2d ac- Duraut vs. Burt, 98 Mass. 161. See tion) 205; notes to Wigglesworth also cases cited In Ch. V., where vs. Dallison, 1 Sm. L. C. 843-857 (6th the question as to liability for calls ed.) ; Stewart vs. Canty, 8 M. & W. is discussed. 160 ; Eobinson vs. Mollett, L. E. 7 ' 10 Ad. & E. 27. H. L. Eng. & I. App. Cas. 802-826; " L. E. 7 H. L. Eng. & I. App. Cas. Westropp vs. Solomon, 8 C. B. 345; 802-806. Usages. 353 Willes — because they were within the authority conferred upon his agent." In the United States, this rule seems to have been first ap- plied in the case of Nourse vs. Prime,' decided by the Court of Chancery of the State of New York, in the year 1820, where it was held that Stock-brokers purchasing stocks for their Clients, and holding them as collateral security for the repayment of the purchase-money, need not keep on hand the identical shares purchased, but that the usages of Brokers, which impliedly become a part of the contract, authorize them to use such stocks in their business, keeping on hand an equal number of similar shares ready for delivery to their Clients. Sixth. And the general rule last stated does not relate sole- ly to dealings between Brokers and their Clients ; but it ap- plies to dealings between themselves, and they are presumed to know the usages of their own business.'' From the cases cited under the two general rules last men- tioned, it appears that the Client is bound, whether he knows the usage or not ; and here we find a decided exception to the general rule, which reqiiires that one can only be bound by a usage of which he is shown to have knowledge. By employ- ing a member of the Stock Exchange to transact business, one must necessarily give him the means to carry it through, which can only be done by making the transaction in accord- ance with the course of business there prevailing, founded upon the rules and usages of the Exchange ; and hence such a person cannot avail himself of his supposed ignorance of the mode of dealing there prevailing.' ' 4 Johns. Ch. 490 ; 7 id. 69. bers, and its constitution and by- ^ Durant vs. Burt, 98 Mass. 161 ; laws become part of their contracts Colket vs. Ellis, 10 Phila. 375, s. c. -with each other (Peabody vs. Spey- 32 Leg. Int. (Pa.) 82 ; Hoffman vs. ers, 56 N. Y. 230). Livingston, 14 J. & S. (N. Y.) 552. ^ See particularly, on this point. So the rules of the N. Y. Gold Ex- remarks of Pollock, C. B., in Mitchell change are binding upon its mem- vs. Newhall, 15 M. & W. 308; Pol- 23 35i Stoch-lrokers mid Stock Exdhanges. There may arise. castf& in' ■which the comets' will not. apply the two general rules which we have just laid down, without some evidence- tha;t the party sought to be iaffected by the usages had knowledge' of them ; but they piay confine their applipatioQ to the cases embraced in the remarks of Mr. Jus- tice Brett in Kobinson vs. Mollett, heretofore cited. S&oeriih. The proof that a party to a contract had knowl- edge of a usage need not be direct. It may be proved, like any other fact of this description, by pl-esumptive' evidence ; by the circumstances surrounding the transaction.' In Stewart- vs. Cauty " the rules of the Liverpool Stock Exchange were ad- mitted in evidence as the best means of showing what' was; the understanding of the parties in the contract in question by "i-e'as6nable time" for' its completion. . Eighth: The usages of a particular Broker, firm, or business may also be introduced to interpret or govern a contract when they: are known to the party sought to be charged. with the same.^ In Baker vs. Drake', the plaintiff" employed defend- ants to purchase stocks for him upon margin, he agreeing, in writing, that all the transaction's should be in every way sub- ject to the usages of defendant's office. In an action for a conversion by an alleged sale without notice of stocks pur- chased, defendants offered to prove that it "was the custom of lock vs. stables, 12 Q. B. 765 ; Bay- ' Stewart vs. Cauty, 8 M. & W. liffe vs. Butterwortli, 1 Ex. 425 ; and 160. To charge any person, how- see also Maxted vs. Paine, L. E. 4 ever, with a custom confined to any Ex. (2d action) id. 203. As to its particular house in any particular heing unnecessary to set up in a trade, it must be shown that he had pleading against a client that he express knowledge of the same had knowledge of the existence of (Moore vs. 'Voughton, 1 Stark. 487 ; the usages of Brokers, see 'White- Scott vs. Irving, 1 B. & Ad. 605; house v^. Moore, 13 Ab. (N.Y.) Pr. Stewart vs. Aberdein, 4 M.&'W. 211). 142. The general doctrine, however, " Supra. of this case, while perhaps overruled ' Baker vs. Drake, 66 N. Y. 518 ; by Stentori vs. Jerome, 54 N. Y. 480, Loring vs. Gurney, 22 Mass. 15 ; see is not affected in the above respect, also cases cited under Kiile 'VII. in See also Miller vs. Insurance Co., 1 note. Ab. Now Gas. 470. * 66 N, Y. 518. Zfsfiges., ■■ _ , :355 their; office .to sell on account of failure to f uriiish sufficient margin at the Stock: Exchange, without, giving n'ptice to the Client of the" time and platfe of sale. This offer was rejected, and the appellate, court held that, such rejection was efror. The court, in the prevailing opinion (there being three; out of the seven judges who dissented), expressly adhered -.to th0 dfe- cision id Markham ys. Jatidoh,^ that,o:ral proof of the usage of Brokers in such cases is' nqt admissibl'e to add to or make part of the contract; but held that inasmuch as. the paper h^d been admitted in the case without objection, by which the Client agreed that all transactions in stocks should be in every way subject to the usages of the defendant's office, such paper must be construed, and that parol proof was ad- missible to explain what those usages were ; and that if parol proof should show that it was a usage of the defendant's of- fice. for want of a margin to .sell stocks in pledge at the, pub- lic Board of Brokers, without notice, to the pledgor of the time or place of sale, such proof tended to. establish an agree- ment to that effect, and that such an- agreement would not contravene any statute -nor infringe upon- public policy." Winth. On the other hand, a Broker cannot bind his Client without his express agreement by transacting business, com- mitted to him, in any other than the ordinary and customary method.' , , , Tenth. Although it is in general the province of a court to construe a written instrument, the construction of a partic- ular mercantile expression therein is for the jury." ' 41 N. Y. 235. ,W. 755 ; Hoffman vs. Livingston, 14 " See also, in this connection, Col- J. (fc S. (N. Y.) 552. ket vs. EUis, 10 PMIa. (Pa.) 375 ; s.c. ♦ Cliitty on Cent. 82; Smith vs. 32 Leg. Int. 82. Blancly, Ky. & M. 260 ; , Hutcliinson 'Wiltshire vs. Sims, ICampl). 258; vs. Bowker, 5 M. & W. 540; Smith Brown vs. Boorman, 11 CI. & Fin. 1,; vs. Boiivier, 70 Pa. St. 325 ; Dawson Masted vs. Paine, L. K. 4 E?. 81; vs. Kittle, 4 Hill, 107; Goodyear vs. Maxted vs. Morris, 21 L. T. (n. s.) Ogden, id. 104. 535 ; Fletcher vs. Mp,rsh3,ll, 15 M. & 356 Stockrhrokers and Stock Ecchomges. Eleventh. In respect to proving a commercial usage, it has been held that one witness is sufficient to establish the same, if his means of knowledge are abundant and his testimony fall and satisfactory.' With this preliminary statement of some of the leading general principles governing usages, we shall now proceed to set forth the most prominent cases in both countries relating to Stock-brokers in which their usages have been sustained and rejected, with such comments as the circumstances seem to call for in the light of these general rules. II. Oases in which Usages of 8toch- brokers held Binding. (a.) In the United States. In the State of New York, the first case in which the usage of Stock-brokers was sustained is bourse vs. Prime, to which we have already referred." That case was followed in Horton vs. Morgan,' where the plaintiff had ordered the defendant, a Stock-broker, to purchase stock for him at the New York Stock Exchange, advancing part of the money as margin to pay for the same, the Broker making up the balance from his own funds. It appeared that defendant did not keep the identical stock on hand which he had purchased, but, upon demand of his Client, sent to him certificates in the name of his clerk, with blank powers of attorney signed by the latter. It was proved by Brokers that purchases of stock at the Board ' Vail vs. Eice, 5 N. Y. 155; Thomas isolated instance is not sufficient to vs. Graves, 1 Mill ( S. C. ), Const, prove a custom, nor will evidence of Eep. 150; Parrot vs. Thatcher, 26 the custom of one person be suffi- Mass. 426; Patridge vs. Forsyth, oieut to establish a general course 29 Ala. 200. Some oases, however, of trade (Burr vs. Sickles, 17 Ark. hold that one witness is not snffi- 428 ; Cope vs. Dodd, 13 Pa. St. 33 ; oient to prove a custom — Bissell vs. Adams vs. Otterbaok, 15 How. (U. S ) Kyan, 23 111. 566 ; Wood vs. Hickok, 539). 2 "Wend. (N. Y.) 501 ; Halwerson vs. » Ante, pp. 145, 353. Cole, 1 Spears (S. C), 321. But an ° 19 N. Y. 170. Usage JBinding in the United States. 357 of Brokers were always made iu the name of the Broker with- out disclosing his principal's name, and that his liability to his principal was limited to transferring. to him the req[uired number of shares when called upon, without regard to the particular or identical shares bought. The court, on appeal, held that this practice, by which Bro- kers only, and not their Clients, are known in their dealings with each other, was not unreasonable; and the plaintiff, by directing the purchase to be made, must be understood as con- senting that it should be done in the usual manner ; and that the plaintiff had no interest in having his shares kept sepa- rately from the mass of defendant's stock, one share being precisely equal in value to every other share.' Although the court in this case expressly refrained from passing upon the question whether a usage of Stock- brokers to use or hypothecate stocks held by them on margin for their Clients was valid, there is abundance of reason and authority for sus- taining such a usage.' And it has also been held in New York that the rules of the Board of. Brokers are binding upon third persons who employ members thereof to make transac- tions with other Brokers relative to stocks. And, accordingly, where W. and C, being members of the Open Bo.ard of Bro- kers, and W. as Broker of B., but in his own name, entered into a contract with C. for the sale of certain stocks, accord- ing to the rules of the Exchange, of which B. had knowl- edge, and thereafter, under the rules, C. called on W. for fur- ther margin ; whereupon W". notified B., and reminded him that he would be liable to suspension if he did not comply ; ' The principle of these cases has may be bound, when he refuses to been several times reaffirmed In put up additional margins, by a N. Y. ; see Ch. III. p. 145. usage of Wall Street authorizing a ' Lawrence vs. Maxwell, 53 N. Y. settlement of his account at private 19, and also cases collected in Ch. III. instead of public sale, see Cameron at p. 145. As to how far evidence is vs. Durkheim, 55 N. Y. 425. admissible to show that a Client 358 • Stochhrohers and Stock Exchanges. and B. then agreed that if W. would not jjut up the margins he would protect him against all loss. which should ensue from such refusal, and if lie was' suspended, would pay him during the time of his suspension from the board at a rate equal to the average business of W. for the previous year, with 10 per cent, added thereto ; and "W". did refuse to put up the margin, and was suspended — ^held, that he could recover from B. un- der this agreement ; that there was sufficient mutuality and consideration, and the same was perfectly valid.' Baker vs. Prake^" which has been fully noticed under the e^^A^A general rule,' should here be alluded to as further ex- tending the law of usage, and laying down the precedent that parties may also be bound by, the usages of a particular Bro- ker's office.' ■ So a Client engaged in speculative purchases and sales of cotton was held to be presumed to know the usages in re- spect to Cotton-brokers and the Cotton Exchange ; and it be- ing shewn that he had had previous dealings in the business, he was not permitted to set up ignorance of the meaning of the term " closirig-out," and the mode in which it was done.' Pennsylvania also furnishes a very strong precedent for up- holding the usages of Brokers in the case of Colket vs. Ellis." There, the parties being members of the Philadelphia Stock Exchange, the plaintiffs borrowed on " call " a sum of money from defendante, depositing as collateral security certain ' Whit6 Vs: Baxter, 9 J. & S. * The above cases in New York, (N. Y.) 358 ;■ aff'd 71 N. Y. 254. See the. case of Colket vs. ElUa, 32 Leg. also, for other cases in .which usages Int. 82, s. o. 10 Phila. (Pa.) 375, and of Brokers have been uphelcl, White- the English case of Lacey va. Hill house vs. Moore, 13 Ab. (N. Y.) Pr. (Scrimgeour'sClaim), L. E. SCh.App. 142, -which in. the main, however, is 921, would seem to be irreconcilable overruled by Baker vs. Drake, 66 with the case of Markham vs. Jau- N. Y. 518, 522; Corbett vs. Under- don, 41 N. Y. 235. wood, 83 111. 324 ; also cases cited uu- ' Kiugs"bury vs. Kirwin, 11 J. & S. der Ch. III.'p. 145i (N. Y.) 451 ; aff'd 77 N. Y. 612. » 66 N. Y. 518. « 32 Leg. Int. ( Pa. ) 82 ; s. c. 10 ' Ante, p. 354. PhUa. (Pa.) 375. Usages Binding in the - United States. 35& stocks. It was shown that there was an established general ■usage among-Brokers, when a "call" loan is not paid on the •day it is demanded,' to sell out the collateral- securities at the -Board of Brokers -without further notice to the borrower. The trial court found that both parties were faniiiliar with the usage, and both acted- throughout on the basis of at« validity. The money not- having been paid upon.call made in the regu- lar way, the defendants sold the stock on the same day at the fetock Exchange, -first notifying the plaintiffs of their inten- tion, and rendered the former accounts of the sale. The plaintiffs subsequently tendered the amount of the loan, and demanded the return of the stocks pledged as collateral; and, upon refusal, brought. an action of trover to recover for the conversion of the same upon the ground that the usage under which the sale was made was in contravention of the rule of law requiring a sale of collaterals to be public dfter due no- tice. But the trial judge, Mitchell, J., overruled this defence, holding, in a well-considered opinion, that wliei'e no statute or principle of public policy intervenes but a rule of law, which is a mere privilege, and may be waived, there is no reason why the waix'er may not be ias well established by a custom known to and acquiesced in by the parties as by an express contract ; and, without intimating what would be the effect if such a usage were set up against an outside party, he was of the opinion that, as between the parties before him, both members of the Board of Brokers, and familiar with and dealing on the basis of suish usage, it was valid and lawful, and controlled the rights of the parties. This case confirms the views heretofore expressed ■ undei' i\iQ fourth general rule laid down in this chapter," and we con^ fess that we can perceive no legal or substantial reason for not applying the rule as well to third persons who have full ■ P. 345. 360 Stochhrokers and Stock Enxhcmges. and complete knowledge of the usage as to members of the Stock Exchange — -the whole basis of the doctrine of usage resting upon the knowledge of the parties — and why evidence of a similar usage should not have been received in the case of Markham vs. Jaudon.' In Massachusetts evidence has also been held admissible to show that by the custom of Brokers in Boston, " when they receive an order to buy stocks on mar- gin, it means that the Broker makes a contract, verbal or writ- ten, with any person whatever, that within sixty days from said date, if the stock goes up the seller shall pay in cash the difference, and if the stock goes down the buyer shall pay in cash the difference ; and that the money, or margin, put up by the buyer is for security that he shall perform his contract." " And it is not error on the part of a Judge to instruct a jury that the fact that both parties were Brokers, and might be presumed to know the usages of their business, was entitled to great weight.' (J.) In England. But by far the greatest number of decisions in which the usages of Brokers have been sustained are to be found in England. In that country the question of the effect of usage upon contracts has been carefully and thoroughly considered by the courts. There are two classes of cases in which the usages of Stock- brokers have been sustained which have already been referred to at length, and they need not be here set forth." The first class compi'ises those cases in which a principal or Client di- rected his Broker to buy or sell securities or to make con- tracts upon the Stock Exchange ; and where the Broker has ' 41 N. Y. 245 ; see also, in this con- Mass. L. E. (May 4, 1881) No. 24 ; s. c. nection, Laoey vs. Hill (Sorimgeour's Am. L. Eev. 360 (May, 1881). Claim), L. E. 8 Ch. App. 921. ' Durant vs. Burt, 98 Mass. 162. ' Commonwealth vs. Cooper, 4 • See Ch. V. Usages Binding in England. 361 sought indemnity at the hands of his Client for acts per- formed by him in pursuance of directions of his Client. The principle applied was, that parties who make or direct a bargain or transaction to be made in connection with a partic- ular trade are taken to have contracted subject, or with refer- ence, to the known usages of that trade. Sutton vs. Tatham and Pollock vs. Stables' are illustrations of this class, as are the other cases cited under the fifth general rule." As the most important of these cases have been set forth in Chap- ter III.,° a reference to them is all that is necessary in this connection. The second class comprises those cases in which the princi- pal question involved was upon whom the liability for "calls" rested where stocks were sold on the Stock Exchange. In these cases the courts fully investigated the various steps of a purchase and sale upon the Stock Exchange, and rigorously and uniformly applied the usages and rules of Stock-bro- kers to explain the contracts there entered into, and to fix the ultimate responsibility for "calls" made where the capital stock was not fully paid up to the limit fixed by the charter or articles of incorporation. As these cases have been fully described in Chapter Y., it is only necessary, in this connec- tion, to refer to that portion of the work ; ' but their perusal will forcibly illustrate the extent to which the English courts have gone in applying this doctrine of usage. In considering the soundness of the cases in which usage has been rejected, these English adjudications should be prominently kept in view. There are a few cases in England that do not fall within either of these classes, and to them a more special reference should be made. Thus,' it has been decided that evidence of ' Ante,- p. 351. ^ P. 351 et seq. • At p. 268 et seq. " P. 123. = Adams vs. Peters, 2 C. & K. 723. 362 Stock-hrojcers and Stoek- Exchanges. the course of business and custoni of London Brokers shouM be admitted to explain the authority meant to be given to a London banker by a power oi attorney to sell stock sent through a country banker. So in an action for the non-acceptance of railway shares, which by the contract (made at Liverpool through Brokers) were to be delivered in a reasonable time, a written rule of the Liverjpool Stock Exchange, stated to be acted upon by all the Liverpool Brokers, " that the «eller of shares was in all cases entitled to seven days to complete his contract by de- livery, the time to be computed from the day on which he was acquainted with the name of his transferee,^' was held admissible upon an- issue whether the plaintiff, within a rea- sonable time, was ready arid willing arid ofiEered to transfer the shares; although it was not proved that either of the parties or their Brokers were members of the Liverpool Ex- change.' And, in avoidance of a sale- made by. a Broker, the defendant may prove that by the custom of the trade the authority to sell expires with the day on which it was given.' It has also been held that parol evidence is competent to show that a person acted as a Broker for the plaintiff; and that parol evidence as to the usage :of trade in making Bro- kers liable where their principals are not disclosed is also ad- missible, on the ground that such evidence does not vary the terms of a written contract, but merely annexes a particular or incident thereto which, though not mentioned in the con- tract, was connected with it, or with the relations growing out of it. Such evidence is admitted with a view of giving effect, as far as possible, to the presumed intentions of the parties.' ' Stewart vs. Cauty, 8 M. & W. 309. » Humfrey vs. Dale, 7 El. & Bl. 266'; Also Field vs. Leleaii, 6 H. & N. 617. Thomson vs. Davenport, 9 B. & C. ' Dickenson vs. Tilwall, 1 Stark. 78 ; PenncU vs. Alexander, 3 El. & 128 ; 4 Campb. 279. Bl. 77, 288. Usages Rejected in the United States. 363 III. Oases in which Usages have heen Rejected, {a) In the United States. There are in the TJriited States a number of cases arising out of transactions in stocks in which the usages of Brokers have been rejected. A close examination of these decisions, however, shows that in many instances they are utterly irrec- oncilable with the rules which we have laid down, as well as with the theory upon which usage is admitted in evidence. Beginning with the cases in the State of New York, we find the well-known case of Allen vs. Dykers.' In that case it ap- peared that A. borrowed of D-, a Stock-broker, a certain sum of money, for which he placed in his hands as collateral secu- rity certain bank stock, at the same time giving to the Broker a promissory note agreeing to pay the loan at a time stated, and, in default, empowering the Broker to sell the same at the Board of Brokers. The Broker immediately transferred the stock into his own name, and, before the maturity of the note, pledged or parted with the same. • In defence of an action against the Broker, brought to re- cover the difference between the value of the stock and the money loaned, he offered to prove that, when Brokers took as- signments of stocks as collateral security, for the money loan- ed, it was not the custom to retain the stocks in specie, but to transfer it by hypothecation or otherwise,, if they thought proi?er ; and, on payment or tender of the principal debt, to return to the debtor an equal quantity of the same kind of stock, and that this custom was known to the plaintiff when the -transaction was made. The court held that this evidence was illegal and properly ruled out. , The Brokers proved that !from .the date of the note until after it fell due they had a ' 3 Hill, 593 ; afifd 7 id. 497. 364 Stock-hrohers Daiant vs. Burt, 98 Mass. 161. (Ky.), 727. To same effect, Warren ' Sawyer vs. Taggart, 14 Bush vs. Hewitt, 45 Ga. 201. 442 Stook-brdhera and Stock Exchanges. S. & Co. made claim against their assignee. Payment was resisted on the ground that the transactions were mere illegal wagers, to be settled by the payment of " differences." In each instance it was shown that S. & Co. entered into agree- ments with third persons, and the transactions were carried on in a manner similar to the method of doing business on the Stock Exchange. S. & Co. having thus shown that they entered into con- tracts valid on their face for the purchase of the goods they were directed by H. & Co. to buy; that, pursuant to direc- tions, they resold the same, and delivered to the purchasers delivery orders which they had received; and that on such re- sales there were losses, which they paid — the court held that they made out a cledix prima facie right to recover; that the fact that some of the persons with whom S. & Co. made con- tracts for pui'chases had not the goods contracted for on hand at the times of entering into the contracts, and that they had no reasonable expectation of acquiring them except by pur- chasing in the market, did not render the contracts unen- forceable, much less vicious. The court also held that the fact that the purchaser for future delivery did not intend to receive and pay for the goods, but to resell them before the date of the delivery, furnished no ground for holding that it was tacitly understood the contract was not to be performed, and was to be settled by the payment of diffei-- ences. The court cited, to sustain this last proposition, the case of Ashto'n vs. Dakin.' In that case tlie plaintiff, a Stock-broker, was directed by the defendant to buy for him certain stock for future delivery, which was done through another Broker, who made the contract in his own name, and became liable for its performance. Before the day of delivery the defend- ' 4 Hurl & Norm. 867. Actions for Money Laid Out. 443 ant ordered the stock to be sold, and it was sold at a loss, •which the Broker paid. The plaintifiE repaid the Broker, and brought his action for the amount. The defendant pleaded that the' transaction was a mere wager on the market price of the stock. The arbitrators found that the defendant never, in fact, intended to take a transfer of the stock, and that the plaintiff was fully aware of this when the orders were given, and that they were given and accepted on the implied terms and understanding that the plaintiff should not be called on by the defendant to deliver the stock or any part thereof, and that he should not be called on to receive or pay for it ; but that it should be resold by the plaintiff be- fore the time of payment arrived, and the defendant should, oil the resale, either pay or receive the difference, after debiting him with the plaintiff's charges on the purchase and resale. The court "held that this was not a gaming trans- action.' In the case of Marshall vs. Thruston," a suit was brought by a bank upon notes given for money advanced by it. The de- fence interposed was, that the defendant having been engaged in speculating in the future prices of Tennessee State bonds, the notes in suit were given for the differences due on settle- ment ; and the question arose whether the bank's furnishing the money to the defendant had any necessary connection with the speculative transactions in bonds. The court, at the trial, instructed the jury that if defendant, in his gaming trans- actions, had sustained losses, "and the bank, at his request, 'In the following cases the de- ulatlons in the differences of market fence of wager was sustained : Pick- values, the seller having the privi- ering vs. Cease, 79 111. 328 ; Lyon vs. lege of delivering or not delivering, Culbertson, 83 id. 33; Waterman vs. and the buyer the privilege of calling Buckland, 1 Mo, App. 45; Eourke vs. or not calling for the subject-mat- Short, 34 Eng. L. & Eq. 219. On ter of the contract, as they saw fit. examination, however^ these cases " Supreme Ct. of Tenn.; reportedin will be found to be " optional con- 10 Cent. L. J. 242. See also Vander- tracts" in an illegal sense, %. e. spec- poel vs. Kearns, 12 E. D. Smith, 170. 444: Stockrl/rdhera and Stock Exchanges. paid the amount of such losses, or if the bank paid such losses without being requested, and defendant afterwards ratified its action, and gave his notes for the amount so paid, such amount can be recovered of him in this action ;" but " if the bank furnished defendant with money for the purpose of enabling him to engage in an unlawful undertaking, it could not re- cover of him the amount so furnished." Both these instruc- tions were sustained as unexceptionable by the appellate court. In response to the suggestion that mere knowledge on the part of the bank of the intended use of the money by defendant would make it an aider and abettor in the gam- bling, Cooper, J., explained that the test in such cases is whether the plaintiff requires any aid from the illegal trans- action in order to establish his claim, or whether he was in fact a participant in the illegal transaction. And a recovery by the bank was allowed in that case, because no such partici- pation appeared.' (e.) "Options;' ''Puts;' "■CaXk;"' '' Straddles;' or " Spread- eagles." Both in England and in the United States a large number of transactions in stocks are made through the instrumen- tality of what are termed " option " contracts, and we have consequently separated that class of cases from the bulk of decisions in which the defence of wager has been interposed, although, as we shall see, these " options " are not treated dif- ferently from other wagering contracts by the courts, where it appears that they are mere covers for gambling operations, and the parties to them contemplate and intend that mere "differences" shall be paid. An " option," in the sense of the present work, may be ex- plained as a contract by which A, in consideration of the pay- ment of a certain sum to B, acquires the right or privilege of ' See also Hatch vs. Douglass, 16 Am. Law Rev. 181. options, Puts, Calls,Straddle8. 4A5 buying from or selling to B specified securities at a fixed price within a certain time." These options are of three kinds — viz., "calls," "puts," and "straddles," or "spread-eagles."" A "call" gives A the option of calling or buying from B, or not, certain securities. A " put " gives A the option of selling or delivering to B, or not, certain shares of said securities. A " straddle," or " spread- eagle," is a combination of a " put " and a " call," and secures to A the right to buy of or sell to B, or not, a certain num- ber of shares of specified^securities.' These optional contracts are recognized both in the rules of the London * and of the New York Stock Exchange.' In England it seems that the legality of optional contracts in stocks has never been tested in the courts. How far the peculiar system of transacting business on the London Stock Exchange would militate against their legality remains to be seen. It is perfectly plain, however, that in Eogland, as in the United States, these options frequently represent real trans- actions, and that there may be a iona fide intention of de- livering or receiving stocks when they are issued. As it has been well said,° " Let us suppose a person who is possessed of certain securities to be desirous of selling if he could get a bid,. say one per cent, higher than the present price, and to be at the same time desirous of doubling his holding if he could buy at a price one per cent, lower. If he gives his in- structions in this form to his Broker, it may well happen that the price does not fluctuate sufficiently to make it possible to .' Story vs. Salomon, 71 N. Y. 420 ; ' Id. see also opinion of Van Hoesen, J., " Eule 72, London Stock Exch. in court below, 6 Paly (N. Y.), 531 ; " Arts. XIII., XI-V., XV., By-laws Yerkes vs. Salomon, 11 Hun (N. Y.), N. Y. Stock Exch. 471 ; Harris vs. Tumbridge, 83 N. Y. « Law and Customs of Stock Ex- 93. change, by Melsheimer and Laurence » Id. (London, 1879), 24. M6 Stockrhfoh&ra and Stock Exchanges. cany out either transaction.^ Bat the same practical result may be attained with certainty by the owner of the securi- ties taking a one per cent, price for the put and call of them, for the money thus received would be, as it were, a reduction of one per cent, in the purchase price if the security is put upon him, and would equally, as it were, go to increase the selling price if it is called from him. There is, of course, this difference, that if the security is at precisely the same price on the option day as on the day the bargain was made, it may happen that the security is neither put nor called, and in that case the owner will have secured his one per cent, without further liability, and be in a position to repeat the process. Under such circumstances, the option could not be said to be void as a wager." And these observations are equally forcible when applied to dealings in stock options in the United States, many, if not most of them, being issued under the circumstances above disclosed. In England, however, as we have seen, the validity of these stock privileges does not seem to have been passed upon by the courts," but doubtless the same rule will be adopted there as was introduced by the Court of Appeals of New York in the case of Story vs. Salomon," although, as we have inti- mated, the methods of dealing in London may justify a differ- ent result. In this case the cause of action was based upon what is known as a "straddle" — i. e., a double privilege, a " put " and "call " combined, in the following form : " New York, May 15, 1875. "For value received the bearer may call on the undersigned for one hundred shares of the capital stock of the Western Union Telegraph Com- ^ But see Hargreaves vs. Parsons, of the validity of snch instruments 13 M. & W. 661, -where the question was incidentally involved. ' 71 N. Y. 420. . Options, Puts, OaUs, Straddles. 447 pany at seventy-seven and one half per cent, any time in thirty days from date. " Or the bearer may, at his option, deliver the same to the undersigned at seventy-seven and one half per cent, at any time within the period named, one day's notice required. " All dividends or extra dividends declared during the time are to go with the stock in either case, and this instrument is to he Surrendered upon the stock being either called or delivered. "S. N. S." The defendant Salomon, having suspended payment, subse- quently agreed with the plaintifE to settle with him, and thereupon endorsed upon the contract "Settled at market, seventy-two and three quarters," which was the price of the stock on that day. The defence was that the contract was in violation of the statute against gaming; but the court held, in the absence of parol proof to the contrary, that there was nothing illegal on the face of the contract. One may pay for an option to take at a future day, at a cer- tain price, a farm, or article of personal property, and most contracts for the purchase or sale of merchandise at a future day are made with a view to the market price on the day of performance. There is always an element of speculation and uncertainty as to that ; but it has never been supposed that there is any betting by such contracts. The court in such a ease will not infer an illegal intent unless obliged to ; and the transaction, unless intended as a mere cover for a bet or wager on the future price of the stock, is legitimate. If it had been shown that neither party intended to deliver or accept the shares, but merely to pay differences according to the rise or fall of the market, the contract would have been illegal. But, in the absence of such evidence, upon the above i-easoning the contract was sustained. The recent case of Harris vs. Tumbridge ' reiterates the law • 83 N. y. 93. 448 StocMyrohers and Stock Mnohanges. concerning stock options. In that case the plaintifE entered into a speculation in stock, purchasing through her Broker a straddle contract on 100 shares of Lake Shore at 62f . The Broker on the day after the purchase sold short against the straddle. The result was a loss to the plain tifi. This short sale was assailed by the plaintiff as unauthorized, negligent, and unskilful, and defended by the Broker as prudent and customary, and ratified by his principal. The questions of want of skill, negligence, and authorization having been de- cided against the Broker, the court, per Finch, J., next at- tacked the further argument of the defendant — viz., that the transaction was a gambling one, and as such prohibited by statute : " The contract was not of necessity a wager contract. That it might have been, does not at all dispense with the necessity of proving that it was. The evidence now relied on is contained in a description of a ' straddle ' given by the wit- ness L. He describes it first, and then adds, 'In other words, it is a bet that the stock will fluctuate so much.' He speaks of a straddle generally. He does not speak of the actual trans- action between these parties at all. As to that, there is no proof of its character as a mere wager. We cannot supply it by suspicion, or infer it from the making of a contract not necessarily within the prohibition." The form of the contract, however, is not binding, and does not decide the question, because it would not be difficult to make the contract relating to a bet apparently lawful, while the intent with which it was entered into would be to avoid or evade the statute ; accordingly, parol evidence is always ad- missible to show the intent of the parties. And where the question was asked, " Was it your intention, at the time those contracts, or either of them, were made, to tender or call for the stock, or merely to settle upon the difference ?" the Su- preme Court of New York held that the evidence should Options, Puts, Calls, St/raddles. . 4:49 have been admitted, and reversed a judgment on the ground of its exclusion.' The courts of Illinois, in several cases arising out of trans- actions in grain, have very. strongly condemned " puts" and "calls," when it appeared that mere difEerences were to be settled by them, without any /eal delivery or acceptance of the grain being contemplated or intended. In Wolcott vs. Heath,'' in distinguishing such contracts from honajide time bargains, the court said : " What the law, pro- hibits, and what is deemed detrimental to the public interests, is, speculations in difEerences in market values, called, perhaps, in the peculiar language of the dealers, 'puts' and 'calls,' which simply means a privilege to deliver or receive the grain or not, at the seller's option. It is against such fictitious gam- bling transactions, we apprehend, the penalties of the law are levelled." And in the subsequent case of Pickering vs. Cease,' the court declared that optional contracts, where the seller had the privilege of delivering or not delivering, and the buyer the privilege of calling or not calling, for the grain just as they chose, and which on the maturity of the contracts were to be filled by adjusting the differences in the market values, were in the nature of gambling transactions, and would not be tolerated by the law. And upon the authority of these cases, the same court' held that a contract for the sale of wheat in store, to be delivered at a future time, which required the parties to put up mar- gins as security, and provided that if either party fails on no- tice to put up further margins, according to the market price, the other might treat the contract as filled immediately, and ' Yerkes vs. Salomon, 11 Hun (N. ' 78 HI. 433. Y.), 471. But see Porter vs. Viets, 1 ' 79 Dl. 328. Biss. 177. * Lyon vs. Culbertson, 83 HI. 33. 29 450 Stockrhrdke/rs cmd Stock Mechamges. recover the difference between the contract and market price, without offering to perform on his part, or showing an ability to perform, is illegal and void, as having a pernicious ten- dency." The same question came before the United States District Court in Illinois, in the interesting case of In re Chandler." In that case C. conceived the idea of making a corner in oats for the month of June then ensuing, and with that view he purchased all the " cash oats " as they arrived in the market, and took all the " options " offered him for June delivery — his purpose being to own all the oats in the market, and com- pel those who had sold " options " for June to pay his price, or, in other words, to settle with him by paying such differ- ences as should exist between the prices at which he pur- chased the options and the price he should establish for cash oats on the last day of June, when the options matured. In pursuance of this plan, he purchased between the 15th of May and the 18th of June 2,500,000 bushels of cash oats — being all, or substantially all, the cash oats in the market — and also bought June "options" to the amount of 2,939,400 bushels. The total amount of oats in store in Chicago on the 18th of June was only 2,700,000 bushels, and the total amount re- ceived during the remainder of the month was only 800,000 bushels. As part of the machinery of this corner, C. also sold "puts," or privileges of delivering to him oats during the month of June, in the following form, duly signed : " Received of E. F. $50, in consideration of which we give him, or the holder of this contract, the privilege of delivering to us or not, prior to 3 o'clock P.M. of Jane 30, 1872, by notification or delivery, 10,000 bushels ' See also Rudolf vs. Winters, 7 transaction, which the law will not Neb. 125, where the court holds that tolerate ; but, upon the facts report- .1 contract to operate in grain op- ed, it would seem very difficult to tions, to be adjusted according to sustain the conclusion of the cOurt the diiferences in the market value in that case, thereof, is a contract for a gambling ' 13 Am. Law Reg. (n. s.) 310. Options, Puts, Calls, Si/raddles. 451 No. 2 oats, regular receipts, at 41 cents per bushel, in store ; and if deliv- ered, we agree to receive and pay for the same at the above price.'' The amount paid by the purchaser of these " puts " was one half cent per bushel. " Puts " of this description were issued to the extent of 3,700,000 bushels. The market having heavi- ly declined, C. failed, and before the time of the maturity of the " puts " the holders of the same claimed to have made tender to the bankrupt of the quantity of oats called for by their contracts, and, the oats not having been accepted and paid for, they sold them upon the market under the rules of the Board of Trade, and proved their claims for the differences. These claims they sought to charge against the estate of C, and his assignee moved to expunge them from the record on the ground that they constituted mere gambling transactions. The court found that all of the claimants knew that C. was engaged in manipulating the market with express reference to a " corner ;" that C. was endeavoring to keep the price up, while the sellers of "options" and holders of "puts" were endeavoring to break down the price ; and that the " con- tracts in question partake of all the characteristics of a wager," and " that it was as manifestly a bet upon the future price of the grain in question, as any which could be made upon the speed of a horse or the turn of a card ; " that it conclusively ap- peared that no delivery of the grain was intended by these holders of puts, because they knew that C. controlled all the oats in the market and fixed the price, and that their only ex- pectation of success depended on their being able to break tlie market before their time for delivery had expired. The court lield that the test was — " Did the parties intend to sell on one side and buy on the other the oats which purported to be the subject-matter of the transaction ? or did they only intend to adjust the differences?" and that the evidence was overwhelm- ingly against the claimants on this point. The court further 452 Stoohirokers amd Stock Excka/nges. held that, although the above transaction might not be con- trary to any statutory law of the State of Illinois, the wagers were, nevertheless, void at common-law, as contrary to pub- lic policy. The idea was disaflSrmed that it was intended to be understood that every " option " contract or " put " for the delivery of grain or stock was void ; but upon the evidence in the present case it was established that the transactions were bets upon the price of oats, and that as it was obvious that the effect of them was to beget wild speculations, to de- range prices, to make prices artificially high or low, thereby tending to destroy healthy business and unsettle legitimate commerce, there can be no doubt of their injurious tendency, and they should be held void as against public policy.' Upon a close examination, these cases will not be found to conflict with the cases of Bigelow vs. Benedict " and Bonsall vs. Kirkpatrick," hereafter referred to, where, in the absence of extrinsic evidence to show that they were intended as wagers, the court sustained option contracts as legal. It is well settled that, in the absence of statutory prohibi- tions, a honafide contract or time bargain for the future deliv- ery of stocks, gold, or any commodity — as grain, for instance — is legal, although at the time the vendor has not the stocks, gold, or commodity which he has agreed to deliver. The ven- dor may reasonably expect to produce or acquire them in time for a future delivery ; and,|while wishing to make a market for them, is unwilling to enter into an absolute obligation to deliver, and therefore bargains for an option which, while it relieves him from liability, assures him of a sale in case he is able to deliver. And the purchaser may, in the same way, guard himself against loss beyond the consideration paid for the option in case of his inability to take the goods.* » See also "Waterman vs. Buokland, ' 70 N. Y. 202. " 72 Pa. St. 115. 1 Mo. App. 45. * Hibblewhite ys. MoMoriue, 5 M. . Options, Puts, Calls, Straddles. 453 We select from the large bulk of cases that sustain this proposition two of the leading ones which fully illustrate it. In England the question was considered in Hibblewhite vs. McMorine.' In that case the plaintifE brought an action of assumpsit to recover damages for the breach of a contract with defendant, by which the latter agreed to purchase from plain- tiff certain shares of a railroad company " to be transferred, delivered, and paid for on or before the 1st day of March, 1839, or at any intermediate date that defendant might re- quire them." The declaration averred a readiness and offer on the part of the plaintiff and a refusal of defendant to ac- cept the shares. The defence pleaded was that the plaintiff never 'possessed or owned the shares in question, and had no reasonable expectation of becoming possessed of the same within the time provided for the fulfilment of the contract otherwise than by purchasing the same after the making of the contract. To this plea a demurrer was interposed, which was unanimously sustained and judgment ordered for the plaintiff. Parke, B., said : " 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 & W. 462 ( overruling a contrary Cease, id. 328 ; Logan vs. Musick, 81 doctrine laid down by Lord Tenter- id. 415 ; Cole vs. Milmine, 88 id. 349 ; deu in Bryan vs. Lewis, Ey. & M. Corbett vs. Underwood, 83 id. 324 ; 386 ; see also Lorymer vs. Smith, 1 Lyon vs. Culbertson, id. 33 ; Porter B. & C. 1 ; 2 D. & E. 23) ; Morti- vs. Viets, 1 Biss. 177 ; Clarke vs. mer vs. McCallan, 6 M. & W. 58, Foss, 7 jd. 540 ; Brna's Appeal, 55 and 9 id. 636; Thacker vs. Hardy, Pa. St. 294; Smith vs. Bouvier, 70 id. L. E. 4 Q. B. D. 685, 688; Ex parte 325; Noyes vs. Spaulding, 27 Vt 420 ; Phillips and Ex parte Marnham, 2 Brown vs. Hall, 5 Lans. (N. Y.) 180 ; De G. F. & J. 634 ; Currie vs. White, Eumsey vs. Berry, 65 Me. 570 ; Cas- 45 N. Y. 822 ; Bigelow vs. Benedict, sard vs. Hinman, 14 How. (N. Y.) Pr. 70 id. 202; Kingsbury vs. Kerwin, 11 84, affd 1 Bosw. 207; Stanton vs. J. & S. (N. Y.) 451, affd 77 id. 612; Small, 3 Sandf. 230; Mcllvaine vs. Wolcott vs. Heath, 78 111. 433 ; San- Egerton, 2 Eobt. (N. Y.) 422; Brown bom vs. Benedict, id. 309 ; Pixley vs. vs. Speyer, 20 Grat. 309. Boynton, 79 id. 351 ; Pickering vs. ' 5 M. & W. 462. 454 Stock-lroTcers and Stock Exchanges. time of the bargain, aud has no reasonable expectation of re- ceiving." All of the judges repudiated the contrary doctrine of Lord Tenterden.' In New York, the Court of Appeals " has recently held that a contract whereby A, for a valuable consideration, agrees to purchase of B gold coin at a specified price within a specified time, B having the option to deliver or not, was not invalid on its face. By the contract the defendant bound himself to take the gold if delivered within the time specified at the price named, and he I'an the hazard of loss in case the market price of gold should be more than ten per cent, less, at the time specified for the delivery, than the price he agreed to pay. That there was an element of hazard in the contract is plain ; but the same hazard is incurred in every optional contract for the sale of any marketable commodity, when for a considera- tion paid one of the^ parties binds himself to sell or receive the property at a future time at a specified price, at the election of the other. The contract in the case in question was at- tacked on the ground that it was a wager within the statute of New York, and in that respect it differs from Hibble- white vs. McMorine. The principle of these cases is fully sustained in all of the other states, and particular allusion has been ma^e under the foregoing subdivisions to such of them as were deemed im- portant. In fine, " options " stand on the same footing as any other species of contract. Where it appears that the intention of the parties is to contract for the payment of " differences " merely, and not to deliver or accept stock, the law pronounces it a wager, irrespective of the form used to cover the trans- action ; but, on the other hand, where there is a iona fide in- ' In Bryan vs. Lewis and Lorymer " Bigelow vs. Benedict, 70 N. Y. vs. Smith, supra. 202. Conspiracies to Affect /Stocks. 455 tention to deliver or receive property, the agreement will be sustained. In some states, however, as we have seen, the courts seem inclined to stamp these contracts as void on their face,' thus reversing the well-settled maxim of the law, before alluded to, that where a contract is capable of two constructions that one will be adopted which is legal. (/.) " Con^pi/raay " to Affect Stocks, etc.; " Pools," " Corners." 1. Conspiracies. — At common-law there were three crimi- nal offences against public trade, which were distinctly known as " forestalling," " regrating," and " engrossing." "Forestalling" was defined by Statute 5 and 6 Edw. VI. c. 14, to be the buying or contracting for any merchandise or victual coming in the way to market, or dissuading persons from bringing their goods or provisions there, or persuading them to enhance the price when there — any of which prac- tices makes the market dearer to the fair trader." " Regrating," by the same statute, was described to be the buying of corn or other dead victual in any market, and sell- ing it again in the same market, or within four miles of the place. This also enhances the price of the provisions, as every successive seller must have a successive profit.' "Engrossing" was the getting into one's possession or buy- ing up large quantities of corn or other dead victual, with intent to sell them again. This was considered to be injuri- ous to the public by putting it in the power of one or two rich men to raise the price of provisions at their own discre- tion. And the total engrossing of any other commodity, with an intent to sell it at an unreasonable price, is an offence in- dictable and finable at common-law.* The penalty for these ' Illinois and Nebraska. ' Id. = 4 Blaot. Com. (Sharaw. ed.) 158. * Id. 456 Stoch-hrokers amd Stoek Exclumges. misdemeanors by the common-law was discretion aiy fine and imprisonment. Under the head of " Monopolies," in a subsequent chapter of the same statute, combinations among victuallers or ar- tificers to raise the price of provisions or any other commodi- ties, or the rate of labor, were punishable as misdemeanors. The statutes concerning the above offences were repealed by 12 Geo. III. c. 71, and by 7 and 8 Vict. c. 24 the law of engrossing or regrating was abolished.' The effect of the repeal of these statutes was not, however, to render transactions such as above defined legal. On the contrary, many of the acts embraced in these statutes were, and still are, illegal, and criminal at common-law." But it is a question, not free from difficulty, as to the extent the old common-law principles in this respect should be applied to the present methods of transacting business. A most cursory ' Mr. Wharton, in his excellent usurious hoarding of grain to he a treatise on Criminal Law (7th ed. public crime. In the exposition of vol. ii.$2801),gives the following his- the law we are told that lege Jul. de tory of these misdemeanors : " These arm. poena statuitiir adversus eum gni oflfences are taken from the Roman contra annB. & Ad. a relaxation of the common-law rule 619. so far as to extend the remedy against ' Philadelphia Bank vs. Newkirk, endorsers to notes payable absolutely 2 Miles, 442. in a medium other than cash ; but in ,' Cushman vs. Haynes, 37 Mass. all other respects the legal rules ap- 132. plicable to negotiable paper are the '° Woods vs. North, 84 Pa. St. 407 ; same in that State as in our own." Sweeney vs. Thickstun, 77 id. 131 ; Perhaps Jones vs. Fales, 4 Mass. 245, First Nat. Bank vs. Gay, 63 Mo. 33. Sanger vs. Stimpson, 8 id. 260, and " Jones vs. Simpson, 2 B. & C. Gushee vs. ilddy, 77 id. 502, may 318. Requisite Elements of NegoUabiUty. 499 legal effect;' and, because the law so fixes the time where it is not specified, pai'ol evidence is inadmissible to show a dif- ferent time.' If time is mentioned at all, it must be certain and definite. Thus, an order payable on the sale of "certain carriages " is not negotiable ; ° or " as soon as circumstances will permit ;" * or " thirty days after the arrival of a certain ship ;" ' or " when he is twenty-one years of age ;" ' because the contingency may never happen. But if a time is specified which must arrive, its distance is not material ; ' and it is held that any uncertainty which the law makes certain, by constru- ing it as a reasonable time, is not incompatible with negotiabil- ity;" though so loose an application of a rule as is made in these two, cases would seem to render it tiseless. If a day is specified with an alternative, the day specified is held to be the ultimate day-° 7. An instrument is not negotiable unless payahle to some- body ;^° and it must not, it seems, be payable to one or the other of two persons. named alternatively.'' Notes made pay- able, to the order of the maker or of a fictitious person have, when; negotiated, the same validity as against the maker and all persons having knowledge of the facts as if payable to bearer ;'" but a payee may be .made out by construction with- ' Wheeler vs. Waruer, 47 N-T. 519; ° Capron vs. Capron, 44 Vt. 412; Sackett vs. Spencer, 29 Barb. 180; Ubsdell vs. CunniDgham, 22 Mo. Peets vs. Bratt, 6 id. 662; Cornell 124. vs. Moulton, 3 Den. 12, 13 ; Gaylord ' Stevens vs. Blonnt, 7 Mass. 240 ; vs. Van Loan, 15 Wend. 308; Lake Goodloe vs. Taylor, 3 Hawks (N. C), Ontario E. Co. vs. Mason, 16 K Y. 458. 451. '°Evertsonv8.NationalBank,66N. ^ Thompson vs. Ketoham, 8 Johns. Y. 14, .20 ; Douglass vs. Wilkeson, 6 189. See Wright vs. Whitley, 40 Wend. 637; Brown vs. Gilman, 13 Barb. 235, 240. Mass. 158. See White vs. Joy, 13 N. = DeForest vs. Frary, 6 Cow. 151. Y. 83, 85. • Salinas vs. Waight, 11 Tex. 572. " Osgood vs. Pearsons, 70 Mass. 5 Palmer vs. Pratt, 2 Biug. 185. 455 ; Walrad vs. Petrie, 4 Wend. ' Kelley vs. Hemmingway, 13 111. 575 ; Blankenhagen vs. Blundell, 2 604. B. & Aid. 417. 'Cota vs. Buck, 48 Mass. 588; " 1 Rev. Stat. 768, § 5. See Irving Colehan vs. Cooke, Willes, 393, 396. Nat. Bank vs. Alley, 79 N. Y. 536. 500 Stoch-hroJcers cmd Stock JExchcmges. out being directly named as payee : thus, " Keceived of A. £100, which I promise to pay on demand," is regarded as suf- ficient ;' and an instrument payable to " order of bills payable," like one payable to the order of a fictitious payee, is payable to bearer.' And the elasticity of construction in the cases is illustrated in United States vs. White,' where a note made payable to the order of the person who should thereafter en- dorse the swme was declared negotiable ; but it seems there is no fiction to save a note made payable " to the estate of M. L., deceased." * 8. NegoiAahle words a/re essential to the negotialnlity of an instrument, such as " to A. or order," or " to bearer," or their equivalent. This is in accordance with the familiar rule that contracts must be construed according to their terms. And accordingly a note payable to A. simply is not negotiable ; " nor is a note payable to the bearer A." Where a note was made " payable and negotiable at the Kensington Bank," it was held to be negotiable there, and in the first instance there only.' A bond issued by a county in aid of a railroad com- pany set forth that the county was indebted to the railroad company, " or the holder hereof, if this bond is transferred by the signature of the president of said company." The bond was endorsed "for value received this bond is trans- ferred to bearer;" which indorsement was signed by the president of the company mentioned. It was held that the bond was a negotiable instrument.' 9. Delmery of an instrument is essential to its negotialnliiy, because in fact it has no legal inception until it is delivered ;' 1 Green vs. Davies, 4 B. & C. 235 ; ' Richards vs. Warring, 39 Barb. 42. Ashby vs. Ashby, 3 Moo. & P. 186. « Warren vs. Scott, 32 Iowa, 22. ° Willets vs. Phcenix Bank, 2 Dner, 'Raymond vs. Middleton, 29 Pa. 121; Stevens vs. Strang, 2 Sandf. St. 529. 138. » County of Wilson vs. Third Nat. ' 2 HiU, 59. Bank, 23 Alb. L. J. 397. *Lyon vs. Marshall, 11 Barb. 241. "Marvin vs. McCuUum, 20 Johns. Requisite Elements of NegotiahiUty. 501 and so long as the maker has it under his own control he may change his mind and obliterate his signature, or otherwise de- stroy the instrument.' In Cooke vs. The United States," certain Treasury notes had been printed, stamped, and sealed by the proper agents of the government, but they had not been issued ; but an innocent purchaser of them was held to be protected. And though the decision of Blatchford, J., holding differently from this, was reversed by the Supreme Court, there 'were so many dissenting voices in that court that it would be difficult to say upon which side is the weight of authority. Waite, C. J., was of opinion that as soon as the Treasury notes in question received the impression of all the plates and dies necessary to perfect their form, they were, like coins in the mint, ready for circu- lation and use ; and that no official act of putting them in circulaltion was necessary to make them binding on the gov- ernment as negotiable instruments. There is no doubt that genuine Treasury notes form part of the negotiable commer- cial paper of the country,' and that when the United States become parties to commercial paper they incur just the same responsibilities as private persons.' Among private persons it is well settled that delivery of commercial paper by its maker is essential to its negotiability ;^ in fact, it has no legal inception until such delivery. No reason is obvious why the government should not be as free as a private person as to the undertakings it will assume, except a decided and commend- able disposition on the part of the courts to throw every pro- tection around the character of a lonafide purchaser, and in cases of doubt to lean in favor of the latter. 288; Lansing vs. Gaine, 2 id. 300; ' VermUye vs. Express Co. 21 Wall. Smith vs. Wyokoff, 3 Sandf. Ch. 77; 138. Howe vs. Ould, 28 Gratt. 1. * United States vs. Bank of Me- ' Cox vs. Troy, 5 B. & Aid. 474. tropolis, 15 Pet. 377 ; The Floyd Ao- ' 91 U. S. 389, reversing 12 Blatohf. oeptances, 7 WaU. 557. 43. , "Supra. 502 Stochbrdkera amd Stock Exchanges. A nice question as to the liability of a maker on a note which had no valid inception was decided in Eastman vs. Shaw/ The maker, defendant, executed his note and put it into the payee's hands as evidence to others of his willingness to take a share in a company. No company was formed, but the note was sold by the payee at a discount greater than lawful interest. Held, that the note had no inception until the sale, and was usurious and void. {d) Emmieration of Negotiable Instruments. Having thus briefly stated the fundamental elements neces- sary to constitute negotiability, we proceed to enumerate the principal instruments which the courts and the statutes have declared negotiable. 1. Bills of Excliange and Promissory Notes. These instruments, if in negotiable form, are now negotia- ble by the law-merchant, and the force of statute throughout this country and the leading commercial countries of Europe. It would be a work of supererogation to give them any gen- eral treatment here. On demanding and protesting a stock note, the collaterals must be produced or at hand." 2. Bank-notes. A bank-note or bank-bill is in form and substance a promis- sory note of an incorporated bank, payable to bearer on de- mand.' Being payable to bearer, it passes from hand to hand by delivery, possession alone being sufficient evidence of title;' it will therefore be no defence against the holder of a bank-note that he had the means of knowing it was stolen, and did not inform himself.' And such notes cannot '65 N. Y. 522. Mass. 59 ; Commonwealth vs. Thom- » Ocean Nat. Bank vs. Fant, 50 N. as, 76 id. 483. Y. 475. * Miller vs. Eace, 1 Burr. 452. ' Commonwealth vs. Simonds, 80 ' Raphael vs. Bank of England, 17 C. B. 161. Checks. 503 be followed by their owner into the hands of a lona fide holder for value.' In England, in the case both of stolen bank-notes as well as of other stolen negotiable instruments, the holder must show that he acquired them in the ordinary course of business and without notice." In the United States, in the case of stolen bank-notes, priv- ity in the fraud or complicity in the offence must first be brought home to the holder, though the rule is the same as in England as to other stolen negotiable paper.' 3. Checks. The subject of checks is one of great importance to Stock- brokers, and will justify a more extended treatment of the law upon the subject than any other class of negotiable instruments. Checks are in the nature of inland bills;* but a check pay- able in a particular kind of funds, as bank-bills, is not negotia- ble,' the rule being that the negotiability of checks is defeated by the same causes which defeat the negotiability of bills and notes in general." Crossing a check with the name of a banker through whom it is intended the check shall be paid, according to the English custom, does not affect its negotiability.' So, writing the word " mem." upon a check, as denoting that it is given simply as an evidence of debt, does not affect its negotiability or alter the right of the holder to present it at once to the bank for payment." But if the bank had knowl- ' Lowndes vs. Anderson, 13 East, ' Little vs. The Phoenix: Bank, 2 130 ; Solomons vs. Bank of England, Hill, 425. id. 135. ' 2 Parsons ou Notes and Bills, °D6 La Chaumetto vs. Bank of 58; Little vs. Phoenix Bank, supra. England, 9 B. & C. 208. ' Bellamy vs. Marjoribanks, 7 Ex. = Worcester Co. Bank vs. Dorches- 389 ; Simmons vs. Taylor, 2 C. B. teretc.Bank,64 Mass.488; Wyervs. (n. s.)528; 4 id. 463; Boddiugton Dorchester etc. Bank, 64 Mass. 51. vs. Sohlencker, 4 B. & Ad. 752; Car- * Cruger vs. Armstrong, 3 Johns. Ian vs. Ireland, 5 El. & Bl. 765. Cas. 5 ; Boehm vs. Sterling. 7 T. K. ° Dykers vs. The Leather Manu- 424. faoturers' Bank, 11 Paige, 612. 504 Stock-lro'k&rB 21 Wall. 138. Results of Negotiabilily. 571 United States payable to holder or bearer at a future definite time were subject to this principle, and that a purchaser after they were overdue took subject to the rights of antecedent holders. 3. He must he a holder for value. The rule in England seems to be that one who takes a ne- gotiable instrument as a security for a pre-existing debt is a holder for value as well as one who parts with value at the time he takes it ;' and yet, in De la Chaumette vs. Bank of England," it was mentioned as a fact adverse to plaintiff that although the balance was in his favor at the time he received the stolen bank-note, he did not make any further advance or give any further credit on the strength of it; he was con- sidered as an agent rather than a holder for value, and failed to recover against the bank. It was said in Currie vs. Misa,° by Lush, J., that he was not aware of any cases directly in point, and the only au- thority he cited was Story, Promissory Notes, § 186. In England, as in this country, it is likely that an exten- sion of time or the suspension of an existing demand by the taker of a negotiable instrument would make him a holder for value.* The Supreme Court of the United States is supposed to have adopted a similar rule, as laid down in Swift vs. Tyson," that one who takes commercial paper as security for any ex- isting debt is a holder for value, and to retain it still, though there has since been in that court no actual adjudication on the precise question ; but certainly such cases as are cited be- low " do not go so far, because in them there is an extension ' Currie vs. Misa, L. R. 10 Ex. 153 ; Baker vs. Walker, 14 M. & W. seeWhistlervs.Forster,14C.B.(n.s.) 465. = 16 Pet. 1. . 248. « Gates vs. Nat. Bank, 100 U. S. 239 ; " 9 B. & C. 208, 216. • Goodman vs. Simonds, 20 How. U. S. ° Supra. 343-370 ; McCarty vs. Boots, 21 id. * Morton vs. Burn, 7 Ad. & El. 19; 430. 672 Stoch-lroTcers and Stock Exchamges. of time or other forbearance granted to the debtor, which constitutes a parting with present advantage on the part of the creditor. Swift vs. Tyson has been followed to a great extent in this country ;' though in some of the cases the important distinc- tion between taking negotiable paper as absolute payment and taking it as a mere security of a pre-existing debt is not kept in view. The same rule is followed in Connecticut on the ground that the taking of negotiable paper as a collateral security is in the ordinary course of business.' In New York a purchaser of negotiable paper /br value is one who parts with some value, money, property, or existing security, or forbears the exercise of a valuable right at the time he receives it, and as the consideration of its acquisition, e. g., if he makes a loan on a note and at the same time takes the negotiable paper as collateral security,' or surrenders a se- curity,' or takes negotiable paper in payment of a note al- ready due which he surrenders or cancels,"^ or who receives negotiable paper as absolute payment of any existing indebt- edness and not merely as security for its payment ; ° and the last case supposed is stronger if in connection with it he pays present money or value as part consideration ;' but if a creditor receives negotiable paper from his debtor, it seems that no presumption arises from the mere fact of receiving it that it is taken in absolute payment of the debt.* ' Fisher vs. Pislier, 98 Mass. 303 ; ♦ Chrysler vs. Eenols, 43 N. Y. 209. Stoddard vs. Kimball, 60 id. 469 ; » Pratt vs. Coman, 37 N. Y. 440 ; Atkinson vs. Brooks, 26 Vt. 569; Brown vs. Leavitt, 31 id.ll3; Meads Holmes vs. Smith, 16 Me. 177; Man- vs. Mer. Bank, 25 id. 143, 149 ; Youngs ning vs. McClure, 36 111. 490 ; and see vs. Lee, 12 id. 551; Bank of Saliua a very thorough discussion of this vs. Bahcock, 21 Wend. 499 ; Bank of subject, endorsing the view laid St. Albans vs. GiUilaud,23 id. 311. down in Swift vs. Tyson, 1 Am. Law « Potts vs.Mayer,74 N. Y. 594; Bank Eev. (n. s.) 479. of Sandusky vs.Scoville,24Wend.ll5. ' Roberts vs. Hall, 37 Conn. 205. ' Mechjinios' etc. Bank vs. Crow 60 » Bank of New York vs. Vander- N. Y. 85. horst, 32 N. Y. 553. « Bradford vs. Fox, 38 N. Y. 289. Besults of NegoUdbility. 573 The rule laid down in Coddington vs. Bay,' that in order to be a purchaser for value there must be a parting with present value or with a present advantage, has been followed in this State without shadow of turning ; and therefore in New York one who receives negotiable paper merely as security for a debt already existing is not a purchaser or holder for value." This principle has been rigidly applied to Stock-brokers. In the case in question defendants. Stock-brokers in l^ew York, received from one Van A., residing at Lyons, orders by telegraph to buy Erie stock, he agreeing to send margin. On the day of sending and receipt of telegrams defendants contracted for the stock ordered, to be delivered three days thereafter, at which time they were delivered to and paid for by defendants. On the day of the sending of the telegrams, but whether before or after does not appear. Van A. stole $6500 of United States coupon bonds belonging to plaintiff, which he forwarded to defendants as a " margin." The bonds were received by the defendants before the delivery of and payment for the stock. In an action for the conver- sion of the stock, it was decided that defendants gave credit to the promise of Van A. and not to the bonds ; that the re- ceipt of the bonds and the fulfilment of the contract for the purchase of the stock after such receipt did not make them iona fide holders, and that they were therefore liable ; also, that if defendants, after receipt of the bonds, purchased upon the credit thereof any stocks for Van A., they were entitled to hold them as security for any loss arising in that trans- action; but the sale of bonds beyond the amount necessary for such indemnity was a conversion for which an action would lie.° ' 20 JohDS. 637. Bright vs. JudsoD,47 Barb.29; Stalk- " Turner vs. Treadway, 53 N. Y. er vs. McDonald, 6 Hill, 93. 650 ; Lawrence vs. Clark, 36 id. 128 ; ^ Taft vs. Chapman et al. 50 N. Y. 415. 574 Stock-Tyrdk&rs ct/nd Stoch Exchcmges. In Pennsylvania the rule is the same as in New York.' The holder must have paid some present value or relin- quished some present advantage.' An accommodation note is an exception to the general rule even in New York, for, if no restriction is made as to the manner in which it is to be used, an endorsee who takes it as security for an existing debt is a holder for value.' It is only where such a note has been diverted from the purpose for which it was intended that it is necessary the holder should have parted with value in order to enforce it.* And one who receives such paper without notice of the di- version, in exchange for other collateral paper, is a iona fide holder for value, notwithstanding the diversion.'' Referring to the conflict of opinion as to what constitutes a holder for value, Leonard, J., says ° that " twenty years of judicial construction have not fully terminated the contro- versy in this State so ably discussed in the conflicting cases of Swift vs. Tyson ' and Stalker vs. McDonald." The case last mentioned was determined in the late Court of Errors ; ... it expressly endorses Coddington vs. Bay' and Eosa vs. Brother- son " as the law of this State, and condemns the case of Swift vs. Tyson." The conflict still continues, with no modification of views on either side, except, perhaps, a slight departure from Swift vs. Tyson by later cases in the Supreme Court of the United States." It has been repeatedly held in the State of New York that ' Petrie vs. Clark, 11 Serg. & R. 29 Conn. 475 ; Grocers' Bank vs. Pen- 377 ; Lenheim vs. Wilmarding, 55 field, 69 N. Y. 502. * Id. Pa. St. 73; Bronson vs. Silverman, ° Park Bank vs. Watson, 42 N.Y. 77 id. 94. 490. ' Kirkpatriok vs. Muirhead, 16 Pa. " Card well vs. Hicks, 37 Barb. 458. St. 117. ' 16 Pet. 1. « 6 Hill, 93. " Cole vs. Saulpaugh, 48 Barb. 104 ; ' 20 Johns. 637. Maitland vs. Citizens' Nat. Bank, 40 lo 10 Wend. 85. Md. 540 ; Bridgeport Bank vs. Welch, " But see 1 Am. Law Rev. (n. s.) 479. Remits of Wegotiahility. 575 the iona fide holder of negotiable paper can recover on it only what he paid for it, where there was fraud in its origin, or the maker has other equities.' These decisions are based upon the idea that a holder of negotiable paper is only entitled to protection from loss, and should not be allowed to make a profit out of the maker if the latter has been wronged." Thus in Stalker vs. McDonald,' Walworth, Ch., says : " This principle of protecting the iona fide holder of negotiable paper who has paid value for it is derived from the doctrines of the courts of equity, in other cases where the purchaser has obtained the legal title with- out notice of the equitable right of a third person to the property. . . . And if he has paid but a part of the considera- tion or value of the property, he is only entitled to be con- sidered as a 'bona fide purchaser ^to tamioP* On the contrary, in Cromwell vs. County of Sac,° Field, J., expressed the opinion that a purchaser of a negotiable se- curity before maturity, and not personally chargeable with fraud, is entitled to recover its full amount though he may have paid less than its par value, and whatever may have been its original infirmity. He admitted that there were many adverse decisions, but thought it a sound rule, " and in consonance with the common understanding and usage of commerce, that the purchaser, at whatever price, takes the benefit of the entire obligation of the maker." And in the very recent case of Railroad Companies vs. Schutte," it was held that bonds of the State of Florida in the open market purported to be what they called for ; and ■ Huff YS. Wagner, 63 Barb. 215 ; = Todd vs. Shelboume, 8 Hun, 510. Card well vs. Hicks, 37 id. 458 ; Youngs = 6 Hill, 93. vs. Lee, 18 id. 189, aff 'd 12 N. Y. 551. * This is the rule in England. Ed- Also Chieopee Bank vs. Chapin, 49 wards vs. Jones, 7 Car. & P. 633. Mass. 40 ; Stoddard vs. Kimball, 60 » 96 U. S. 51, 60. Mass. 469. « 103 U. S. 118, 145. 576 Stockrbrok&rs and Stock Exchanges. that as the "Kailroad Companies" had put them out, and in legal effect endorsed them, they must to a honafide holder re- spond to their endorsement commercially — that is, by paying the bonds according to their face, regardless of what their maker or they themselves may have got for them.' And this seems to be the better rule, and certainly more consonant to the general dealings of Wall Street, where many securities are sold and bought under the par value, upon the expectation of the purchasers that they will eventually ob- tain their full face value. In concluding this branch of the subject, it will be observed that the Supreme Court of the United States has been foremost in upholding and advancing doctrines which tend to make commercial securities almost unassailable in the hands of innocent purchasers. II. Non-negotiable Instruments. (a.) Doctrine of Non-negotiability. The modern doctrine of non-negotiability is simply this : that while the assignee of a contract or chose in action, by statute or usage, can sue upon the same in law or equity, the action is subject to all of the defences and equities be- tween the original parties, to the same extent and in the same manner as if they were themselves before the court." The effect of this doctrine is, of course, to lower the commer- cial standing and value of non-negotiable instruments, for the obvious reason that a purchaser of them must beware of what he is buying, for he is chargeable with notice of all defects in the title of his assignor, and of all defences or equities which may exist in favor of the party or corporation against whom he proposes to enforce the same. The cases which we give ' Per Waite, C. J. " ° Davis vs. Beohstein, 69 N. Y. 440. Doofrme of Non-negoimbility. 517 in the notes fully illustrate the doctrine of non-negotia- bility.' It is, perhaps, not finally settled whether the assignee of a chose in action takes it subject only to the original equities — that is, the equities between the assignor and the debtor — or subject also to the latent equities of third persons. There are most respectable authorities on both sides of this question, but in the State of New York the weight of opinion at pres- ent is in favor of the latter doctrine, that the purchaser of a chose in action must abide the case of the person from whom he buys, for the reason that the holder of a chose in action cannot alienate anything but the beneficial interest he pos- sesses. It is a question of power or capacity to transfer to another, and that capacity is to be exactly measured by his own rights." ' In Davis vs. Beohstein, 69 N. Y. ' This doctriae is sustained by 440, a bond and mortgage were in- Union College vs. Wheeler, supra, trusted to E. to enable him to get a vrhere it was held that the as- note discounted by using thom as signee of the bond and mortgage collateral security. E. did not use took subject not only to original them for that purpose; and it was equities, but also to the rights and held that, inasmuch as E. could not equities of the third persons to whom enforce them against the mortgagor, contracts of sale had been executed, he could give no greater right to an In Bush vs. Lathrop, 22 N. Y. 535, the assignee than he had himself. In only thing in issue was a latent Union College vs. Wheeler, 61 N. Y. equity of a third person. Denio, J., 88, the mortgagee received his mort- cited and discussed all of the New gage knowing that the mortgagor York cases and many others, and re- had executed contracts of sale to pudiated any supposed distinction various p^sons of portions of the between latent equities and those mortgaged property. It was held existing between the original par- that the mortgage was a chose in ac- ties ; he referred, with approval, to tion, that the mortgagee took it sub- the declaration of Lord Thurlow in ject to the rights and equities of the Davies vs. Austen, 1 Ves. 247, that " a purchasers under the contracts, and purchaser of a chose in action must that his assignee of the mortgage oc- always abide by the case of the per- cupied simply his position and took son from whom he buys." But this subject to the same rights and equi- case is overruled by Moore vs. Met- tles, lu Ingraham vs. Disborough, ropolitan Nat. Bank, 55 N. Y. 41, al- 47 N. Y. 421, the decision was precise- though in the latter the contest was ly the same on a similar state of in respect to a certificate of indebt- faots. See also Clute vs. Eobinson, edness, and it was determined upon 2 Johns. (N. Y.) 612. the doctrine of estoppel. Probably 37 678 StocTcrbroTcers and Stock Exchanges. It has been held, however, that where a chose in action is assigned as a security of a negotiable note which is itself transferred before maturity for value, it is taken by the as- signee free from all equities, on the ground that the security partakes of the nature of the. debt." : Thus, in Kenicott vs. Supervisors," where, on a bill to foreclose a mortgage given to secure negotiable railroad bonds, it appeared that the bonds were transferred to a "bona fide holder for value, no other or further defences were allowed as against the mortgage than would be allowed were the action brought in a court of law upon the bonds. And in another case in the same court," Swayne, J., says : " Equity puts the principal and accessory on a footing of equality, and gives to the assignee of the evi- dence of the debt the same rights in regard to both. . . . This dependent and incidental relation takes the case out of the rule applied to choses in action, where no such relation of dependence exists." * So we shall hereafter see that the doe- trine of non-negotiability has been directly applied to certifi- cates of stock, and the transferees or assignees thereof have been made subject to all defences existing between the origi- nal parties." the most powerful advocate of the by Mott vs. Clark, 9 Pa. St. 398 ; Bloo- doctrine that the assignee of a chose mer vs. Heuderson, 8 Mich. 395. But in action is only subject to original it has not prevailed in the State of equities was Kent, C. J. In Bebee New York. vs. Bank of New York, 1 Johns. 529, ' Batesville Institute vs. Kauflf- Le says (p. 573): " When it is said man, 18 Wall. 151 ; Taylor vs. Page, that an assignee of a chose in action 6 Allen, 86 ; Croft vs. Bunster, 9 Wis. takes it subject to all equity, it is 504, 510. meant only that the original debtor ' 16 Wall. 452. can make the same defence against ' Carpenter vs. Longan, 16 Wall. the assignee that he could against 271. the assignor." He was, however, And see Palmer vs. Yates, 3 outvoted by four judges to one, and Sandf. 137 ; Morgan vs. Smith Am. Tompkins and Spencer, JJ., deliv- Organ Co. 73 Ind. 179; Cornell vs. ered decidedly contrary opinions. Hichens, 11 Wis. 353 ; Fisher vs. Otis, Kent's opinion was followed iu James 3 Chand. 83; Martiueau vs. MoCol- vs. Morey, 2 Cow. 246, and the doc- lam, 4 id, 153. trine which it advocates is supported ' P. 595. Nature and Kinds of Shares. 579 (&.) Nature and Different Kinds of Shares of Stock.. Among the most prominent securities which fall under the head of non-negotiable instruments are certificates of stock ; but,. before inquiring how far they are affected by the general doctrine stated above, it will be well to examine briefly the nature of stock: The capital stock of a corporation is that money or property which is put into a fund by those who, by subscription, therefore become members of the corporate body.' The terms " capital," " capital stock," and " property " are sometimes used indiscriminately, as in the ith, 6th, and 10th sections of 1 N.T.Eev. Stats. 414; and "capital" and "capital stock " are very generally so used as applicable to the estate of a corporation. The phrase " capital stock " is, however, an unfortunate one, because the words " capital " and " stock " are antithetical terms. Strictly speaking, the sums subscribed and paid in, or secured to be paid in, are the capital of a corpora-r tion ; but stock is the thing or right or interest which the snh- Bcxihev pays for and receives from the corporation in return" for what he pays in.' This property or money is subscribed by persons who are jointly interested in some business or en- tei-prise, and the combination of capital which these contri- butions form is generally made upon the supposition that by an aggregation of means the business can be more successful- ly developed or conducted. Besides, by the formation of a coi-poration, each individual, providing the requirements of the law are complied with, is relieved from personal liability ; and the money or property which he originally invests, unless by his acts he creates an extra obligation against himself, is ' Bnrrall vs. BnsUwiok E. E. Co. 75 220. As to meaning of terms " cash N. Y. 311. capital," " paid - up capital," see ' People vs. Com'rs of Taxes, 23 Wakeman vs. Dalley, 51 N. Y. 27, at N. Y. 192, 223 ; Williams vs. Western 30, 31, Union Telegrapli Co. 61 How. Pr, 216, 580 Stockrbrokers L. E. 2 Q. B. Div. 194. Bank, 55 N. Y. 41 ; Leitoh vs. WeUs, -' 46 N. Y. 325. 48 id. 585. ' See also Moore ts. Metropolitan 614 Stodkr'brok&rs and Stock MBchomges. money for him thereon, the Broker, instead of so doing, through the aid and assistance of defendants (who were also Brokers, and who acted in good faith and without knowledge of who was the owner of the stock, or what the plaintiffs in- structions to his Broker had been), sold it to a purchaser in good faith. Held, that the defendants were not liable for a conversion of the stock, and stood, being equally innocent, in the same position as the purchaser from them in good faith." In Burton's Appeal," B. left with one P., a Stock-broker in the city of Philadelphia, certificates of stock for 100 shares of railroad stock, with instructions to sell if the stock reached 64|- ; at the same time, he signed and left with P. a blank power of attorney to transfer, and a bill of sale of the stock in the usual Broker's form. The stock never reached 64|-, and several times during the year B. asked for the return of the certificates, but P. always made some excuse and did not return them. In fact, two days after their receipt, P. had pledged the stock to a life-insurance company for an advance made to him individually, and the stock remained with the company until P.'s death. The question involved was wheth- er B. could recover from the life-insurance company the certifi- cates, or the price thereof. The- question was an original one in Pennsylvania, and the court held " that when the owner of stock, in the ordinary course of business, and in the method common to all mercantile communities, by his own act has armed another, his agent or attorney, with power to act for him, and when this agent or attorney deals with innocent third parties, who, without notice or other intervening equity, advance money upon the faith of the evidences of title in the possession of the attorney or agent, the owner takes every risk, and is bound by the act of the person whom he sees fit ' Zuliok vs. Markham, 6 Daly, 129 ; See Garvin vs. Wiswall, 83 111. Dickinson vs. Dudley, 17 Hun, 569. 215. " 93 Pa. St. 214. Negotiability as Applied to Stock Certificates. 615 to hold out to the world as his attorney or agent." The court distinguished the case from one where the owner, by accident or misfortune, parted or lost his certificate ;' or where a name had been erased from a certificate and another one inserted." But negligence cannot be imputed to trustees for leaving documents of title in the hands of one of their number, and allowing him to receive the income ; and no authority to deal with the property (railway debentures) can be implied even in favor of a honafide purchaser from such trustee.' And the mere intrusting, by the owner of stock, of his certificates to bankers for safe-keeping is not of itself such negligence as will prevent a reclamation even after the stock has passed into the hands of a hona fide purchaser by means of a for- gery; because the mere possession of the certificates is not complete evidence of ownership. It is, however, such negli- gence as disentitles the owner who reclaims to costs.* So in Bank vs. Evans,' trustees of an incorporated charity possessed stock in the public funds registered in the Bank of Ireland. The secretary of the incorporated trustees was allowed to have the seal in his possession. Five powers of attorney, sealed with the seal of the incorporated trustees, the due af- fixing of which seal was attested by witnesses, were presented to the bank, and the stock was transferred. By a power of attorney duly executed, the trustees then authorized C to transfer the stock, but the bank refused to make the trans- fer. An action was brought byHhe trustees on this refusal ; the judge who tried the case told the jury that if, under these circumstances, the trustees had so negligently conducted them- selves as to contribute to the loss, the verdict must be given ' Biddle vs. Bayard, 13 Pa. St. Co. 1 John. & H. 243. See Shrop- 152. shire Union E. E. & C. Co. vs. The ' Denny vs. Lyon, 38 Pa. St. 98. Queen, L. E. 7 H. L. 496, before ci,ted. See also Pa. E. E. Co.'s Appeal, 5 * Johnston vs. Eeiitou, L. E. 9 Eq. Week. Notes Cas. 22 ; 86 Pa. St. 80. 181 ; same vs. Parsey, id. ' Cottam Vs. Eastern Counties E. = 5 H. L. Caa. 390. 616 Stockbrokers and Stock Eschanges. for the bank. On exception for this direction, held, that it was wrong. How far the owner of stock may be estopped by his own acts from asserting his title, even as against one not having the equities of an innocent purchaser for value, is well illus- trated in Calhoun vs. Kichardson,' where the president of a company having made his affidavit that certain bonds belong- ing to defendant were assets of the company, the defendant signed a certificate as to the truth of the affidavit, but pre- tended he did not know the contents of the same, and it was held that it was a question for the jury whether the de- fendant was not guilty of such gross negligence as estopped him from asserting title to the bonds as against a trustee ap- pointed to -wind up the affairs of the insolvent company. III. Transfer of Stock. («.) Method of Tranrfer. There does not seem to be a solitary case in the books where the general right to sell and transfer certificates of stock has been denied. Indeed, the celerity with which this species of property can be sold and transferred offers one of the principal inducements for capitalists to deal in it. Accord- ingly, most, if not all, commercial corporations or companies invite and encourage the assignments of their shares, and provide on the face of their certificates, by virtue of their charters, by-laws, or regulations, the methods by which such transfer may. be effected, in language substantially as fol- lows : tramsferahle on the hooks of the compcmy, im, person or hy attorney, on sv/rrender of cerUfioate. And it has been asserted by some judges that it is the duty of business corporations to prescribe the rules and formalities ' 30 Conn. 210. Method of Transfer. 617 to be observed by assignees of stock which will act as safe- guards to its stockholders and to the public' If no method is provided by the company for transferring its stock, or no book furnished in which the transfer can be entered, an effect- ual legal and equitable title will pass even against the com- pany by delivery of the certificate with a power of attorney to transfer, and the original stockholder will not be liable for calls upon the stock transferred, made subsequent to the trans- fer.' So the corporation may expressly, or by an established course of dealings to the contrary, waive the formalities for transferring stock prescribed in their by-laws or rules." There may also be a waiver on the part of the corporation by the failure or neglect of its oflficers." The instrument of sale and power to transfer are generally printed on the back of the certificate, and are ordinarily in the following form : For value received do hereby sell, assign, and transfer to shares of the capital stock of the Company, of one hundred dollars each, standing in name on the hooks of the said com- pany, and represented by the within certificate, and do hereby irrevocably constitute and appoint , attorney, to execute a surrender and cancellation of the ■within certificate, and also to do all things requi- site to transfer the said stock on the books of the said company in such form and manner as may be necessary, or be required by the regulations of the said compaouy, in that behalf, with full power of substitution in the premises. Dated , 188 . In presence of ^ BurraU vs. Bushwick E. E. Co. (Bercichvs.Marye, 9Nev. 312; State 75 N. Y. 211. vs. Pettineli, 10 id. 141) . ' Isham vs. Buckingham, 49 N. T. ^ Chambersburg Ins. Co. vs. Nioh- 216; see also Ex parte Bagge, 13 ols,lJones(Pa.),120; Walters'sCase, Beav. 162. Under the laws of Cali- 19 L. J. (Ch.) 501 ; Bargate vs. Short- fornia, the legal title to mining ridge, 5 H. L. Cas. 297. stock, except as between the parties, * HUl's Case, L. K. 4 Ch. App. 769, can be acquired only by transfer note (2). upon the books of the corporation 618 StocTc-lrokers cmd Stock Exchanges. This regulation of. corporations requiring the transfer of stock to be made on their books is necessary not only for their protection, but it is absolutely essential to enable them to transact business with their stockholders. By this means a corporation is enabled to know who its stockholders are, and, if necessary, promptly to communicate with, or notify, them in respect to matters appertaining to their business. And it is now settled, as a general rule, that a corporation is only bound to recognize those persons as stockholders who appear so by record.' And this rule is peculiarly applicable to questions where the right to vote or the title to dividends is involved; although, in levying assessments or calls, it has been decided that a corporation may go behind its record; and hold the true owner liable when he is represented on its books by an agent or other person not having any beneficial interest in the stock." Accordingly, where the certificate provides that a transfer can only be made on the books upon the production of the certificate, the company has no right to issue new stock with- out the production of the certificate. And where A, to whom shares were issued by a company, executed upon the certifi- cate a power of attorney for their sale to B, and delivered to the latter the certificate, but no transfer was made upon the books during A's lifetime, and twenty years afterwards A's administrator procured the transfer of the shares upon the books of the company, the latter was held liable to B for the shares, because they could not be lawfully transferred without the surrender of the certificate, which had been issued to authenticate the right of the person named in it to them.' 1 Brisbane vs. D. L. & "W. E. E. Co., Hill (N. Y.), 624 ; Johnson vs. Uuder- N. Y. Daily Reg. Nov. 30, 1881 ; Man- hill, 52 N. Y. 203. ning vs. Quicksilver Mining Co. 24 ' Brisbane vs. D. L. & W. E. E. Co. Hun, 360. supra ; N. Y. & New Haven K. E. Co. ° Davis vs. Stevens, 1 Am. Law vs. Schuyler, 34 N. Y. 30, 33 ; Strange Rev. (u. 8.) 84 ; Adderly vs. Storm, 6 vs. Houston & Texas Cent. R. R. Co.' 53 Texas, 163. Method of Transfer. 619 And the corporation is liable in such case, although in its by-laws it is declared that certificates may be issued on the special order of the board of directors, in place of those lost or destroyed, on proof of loss and receiving indemnity. The issuing of a certificate under such a by-law does not affect the liability of the corporation to the holder of the certificate.' As corporations are trustees for the property and title of each owner of their stock, being custodians of the primary evi- dence of title, they are held to proper care and diligence in its preservation, and ought, before permitting the transfer of stock which appears on the faith of the certificate to be held in trust, to require an exhibition of the trustee's authority to transfer, and without it cannot be compelled to make the for- mal transfer on their books.'' In Webb vs. Graniteville Manuf'g Co.,° the infant plaintiffs owned stock in the defendant corporation, standing in the name of " P., guardian." The guardian placed the certificate with a blank endorsement in the hands of D., his counsel, for purposes connected with his trust. D. procured an order of court permitting a sale and investment, and then hypothe- cated the certificate to the S. Bank as security for a loan for his personal use. H., who was president of the bank, and also of the defendant, with another purchased the stock from the bank, and had it transferred by the defendant to the pur- chasers. Held, that the defendant was chargeable with knowl- edge of the trust and its beneficiaries, and liable to respond to the plaintiffs for the stock. And in Lowry vs. Commercial Bank,* it was held that the defendant was bound to take no- tice of and examine the will, and because of its negligence in •Cleveland & Mah. E. E. Co. vs. Barb. 534 ; Mioli. Bank vs. N. Y. etc. Tappett, Sup. Ct. Ohio, 1 Am. Law. 36 id. 200, 4 Duer, 480. Eev. (u. s.) 396, 397. = ^ g_ q 395 ' Bayard vs. Farmers' etc. Bank, * 3 Am. L. J. (n. s.) 111. 52 Pa. St. 232; Braff vs. Mali, 38 620 Stock-hrokera amd Stock Mschanges. omitting to do so it was held responsible for not preventing the executor from making the transfer.' « In respect to voting at corporate elections, the general rule is that the right to vote is restricted to the registered owners of the stock on the books of the company." Even if a person has sold his stock, if his name is on the books, and the stock has not been transferred, the registered owner has the right to vote.' But while the books of the company may generally be conclusive as to the right to vote at a corporate election, as between itself and a person seeking to exercise this franchise who is not a registered owner, it by no means follows that it precludes all inquiry into the question as to who is the real owner of the stock, and consequently entitled to vote there- on ; for it is well settled that a stockholder of a corporation who has pledged his stock is entitled to vote thereon:* so is a cesind gue trust where the stock stands in the name of a trustee.' To give, therefore, the transfer-books such a binding effect as to shut out all inquiry in every case might enable the direct- ors or other persons to control the election to the injury of the real owners. It has accordingly been held, in a number of cases, that where it appears the nominal and registered owners of stock have voted contrary to the instructions of the real owners, the courts will, by quo warranto or other author- ized proceeding, inquire into the question ; and, if the election ' Atkinson vs. Atkinson, 8 Allen, p. 137, note 5 ; Merchants' Bank vs. 15 ; Suiting vs. Thomasson, 57 Ga. Cook, 21 Mass. 405. 418 ; In re Mohawk & H. R. Co. 19 ' People vs. Tibbetts, supra ; see Wend. 135; Lowry vs. Commercial also, as to general right of voting on & P. Bank, Taney's Deo. 310. shares, Gilbert vs. Iron Co. 11 Wend. ''In re Cecil, 36 How. Pr. 477; 627 ; Downing vs. Potts, 3 Zab. (N. J.) People vs. Tibbetts, 4 Cow. 358 ; 66 ; Sargent vs. Franklin Ins. Co. 25 People vs. Eip, id. 382, note; s. c. Mass. 90. U. S. Law J. 286 ; Ex parte Will- * Ante, p. 138, note 1. cocks, 7 Cow. 402 ; Matter of Long " Id. ; Ex parte Willcooks, 7 Cow. Island K. E. Co. 19 Wend. 37 ; ante, 402. Method of Trmsfer. 621 has been produced by such illegal votes, it will set the same aside.' And in one case in New York an election of directors was set aside under the statute, it appearing, by affidavits, that at the time of the election one L, who offered to vote on cer- tain shares and was refused, and whose vote, if it had been received, would have changed the result, was the owner of such shares by assignment from the individual in whose name they stood upon the books, and that he had applied at the proper place to have the transfer entered upon the books, which was refused for the reason that the stock had already been declared forfeited for default in payment of calls, the court being of opinion that the directors had no power to declare the stock forfeited, and that the proceeding in that regard was void. But it will be observed that the New York cases were de- termined under statutes of that State, giving the courts power to inquire into, and, in certain cases, to set aside, elections." The effect of the rule, by which all persons are excluded from participation in the affairs of the company whose names do not appear as stockholders on the books of the company, is at times to surrender the management and control of the body to persons who have no interest or ownership in the same. For illustration, most of the business corporations in this country, previous to an annual meeting or election, give pub- lic notice through the newspapers that on and after a certain date their books will be closed, and will remain so until after a certain date. The object of this notice is to enable the cor- poration to determine definitely who constitute its stockhold- ers, and it is a practice that has been universally recognized as very reasonable and proper ; indeed, there seems to be no other method that is consistent with the safe and prudent ' Strong vs. Smith, 15 Hun (N. Y.), "1 Kev. Stat. N. Y. 603. 333, and cases theie cited. (322 Stoch-'brdkers and Stock Exchanges. management of tlie body. But the effect of it is to exclude the true owners of the stock of the company from any voice or control in its management; for although two thirds or more of the entire capital stock may be sold and assigned after the books have closed, and before the annual meeting, yet the nominal stockholders of record are the only ones entitled to vote ! The question seems never to have directly arisen between such nominal registered owners and the real owners and holders of the stock of the company; but the courts might, if properly applied to, restrain the nominal owners from voting on the stock against the wishes or inter- ests of the true owners, or compel them to give proxies to, or vote as directed by, the real holders of the stock. It is a grave question whether it is not against public policy to de- prive the true owner of stock from voting and participating in the general management of the corporation, and to confer such right upon persons who are in no wise interested in the same save as they appear upon the books as stockholders.' ' Closely akin to the aljove sub- absence he may be represented, ject is the question of the right to And An gell& Ames, $ 493, think that vote by proxy, whioh we should per- such agent or attorney would have haps briefly allude to in this connec- all the rights the owner would have tion. The general rule is that the if he were present at the meeting ; right to vote by proxy does not exist and this would seem to be the most as a general right, but the party reasonable doctrine (Campbell vs. claiming it must show a special Pultney, 6 Gill & J. 94 ; In the mat- authority for that purpose : AngeU ter of Mohawk E. R. 19 Wend. 135 ; & Ames on Corp. ^ 128 et seq. ; Mor- In re Barker, 6 id. 509). ris vs. Mowatt, 2 Paige, 590 ; Phillips As to form of proxies. Party will vs. Wiokham, 1 id. 590 ; State vs. be restrained to the object for which Tudor, 5 Day, 329 ( the authority proxy was given (Matter of Wheeler, of this last case Kent thinks is 2 Ab. Pr. ( n. s. ) 361). Proxy need shaken, 2 Kent Comm. 294, note) ; not be acknowledged (Matter of Taylor vs. Griswold, 2 Green (N. J.), Cecil, 36 How. Pr. 477). Where prox- 223 ; In re Barker, 6 Wend. 509; Ex ies are given and lost, parol evidence parte Holmes, 5 Cow. 426; Ex parte may be given as to their contents Willoooks, 7 id. 402. But it seems (HaywoodP. R.Co.vs.Bryan,6 Jones that an owner of corporate stock (N.C.),82). Trustees having stock in in a commercial association may theirnam6sentitledtovote(Matterof delegate his rights in it to his North Shore S. I. Ferry Co. 63 Barb. agent or attorney, so that in his 556; Hoppin vs. Buffum, 9 E. 1. 513). Transfer hebmeen Pa/rties. 623 (J.) Trcmsfer ietween Pwrties. As between the immediate parties to a transaction in stocks — e.g., vendor and vendee, pledgor and pledgee, etc. — an ef- fectual transfer of the interest of the owner in the corporate property may be made by the mere delivery of the certificate with power of transfer executed in blank,' irrespective of the requirements of the rules and regulations of the company issuing the stock." If there is no legislative regulation as to the mode of transferring title to stock, the method of transfer must be de- termined on general principles of law based on sound reason and public policy. As was said by the Supreme Court of In- diana, " Stock in a corporation held by an individual is his own private property, which he may sell or dispose of as he Stock owned by partnership in name 590 ; s. c. Thompson's Nat. Bank of one partner, the surviving partner, Cases, 331 ; Comeau vs. Guild Farm and not administrator, has the right Oil Co. 3 Daly (N. Y. ), 218 j Con- to vote (Allen vs. Hill, 16 Cal. 113). tinental Nat. Bank vs. Elliott Nat. A stockholder may revoke his proxy Bank, U. S. Circuit Ct. ( Mass. ) 24 authorizing another to vote, though Alb. L. J. 149 ; Ross vs. Southwest- it was given for value, if necessary to ern K. K. Co. 53 Ga. 514; Smith prevent a fraudulent use of it (Reed vs. Crescent City Stock Landing, vs. Bank of Newburgh, 6 Paige, 337). etc. Co. 30 La. Ann. 1378 ; Duke vs. Under § 3 of the General Manu- Cahawba Nav. Co. 10 Ala. 82; facturiug Act of N. Y., 1848, stock- Eames vs. Wheeler, 36 Mass. 442 ; holders may vote either in person or Weston vs. Bear River etc. Co. 6 by proxy ; but under the act of Cal. 425 ; People vs. Elmore, 35 id. June 21, 1875, entitled An Act to Pro- 653 ; Brewster vs. Hartley, 37 id. vide for and Regulate Certain Busi- 15. ness Corporations, § 26, " no person " Howe vs. Starkweather, 17 Mass. shall be permitted to vote upon the 243 ; Sargent vs. Franklin Ins. Co. 25 proxy of a stockholder iu any such id. 78 ; United States vs. Vaughn, corporation after the lapse of eleven 3 Biun. 394 ; Munn vs. Barnum, 24 months from the date thereof, unless Barb. 283 ; Noyes vs. Spaulding, 27 the stockholder shall have specified Vt. 420; Orr vs. Bigelo w, 20 Barb. 21 ; therein that it- is to continue in Baldwin vs. Canfield, 26 Minn. 43. But force for some longer and limited an absolute transfer of the certifi- time." oates may always be shown by parol ' Commissioners vs. Reynolds, 13 testimony to be a pledge and not a Am. Law Reg. 380 ; Johnston vs. Laf- sale, Newton vs. Fay, 92 Mass. 505 ; lin, 2 Morison's Trans. Sup. Ct. U. S. Lauman's Appeal, 68 Pa. St, 88. 624 Stooh-lrokers wnd Stock Eechcmges. sees proper, and over which neither the corporation nor its officers have any control. It is the subject of daily com- merce, and Is bought and sold in the market like any other marketable commodity." ' As the capital stock of corporations is incapable of manual delivery, a symbolical delivery is universally recognized by the courts, and the title passes through the instrumentality of the scrip or certificate." And where a contract for the sale of shares of the capital stock of a corporation deliverable at a future day has been made, a tender of the certificates of stock with a blank power of attorney in the usual form is a good tender ; and upon refusal of the vendee to take and pay for the same, the vendor may recover the contract price.' (e.) Trcmsfer as to Thwd Persons. By the universal practice of corporations, shares of stock are transferable on the books of the company by delivery and cancellation of the old certificate and the issuing of a new one; and the question has frequently arisen whether there can be a valid and effectual transfer, so far as the rights of third persons are concerned, without a compliance with these formalities. "While the decisions are conflicting upon this subject, the weight of authority is that there can be such a transfer ; and the proposition may be regarded as established, both by reason and precedent, that the holder of stock may transfer the same by assignment and delivery of the certifi- cate, and no transfer upon the books of the company is nec- essary ; and the transferee takes title against all outside per- ' Commissioners vs. Reynolds, 13 " Wilson vs. Little, 2 N. Y. 443. Am. Law Keg. 380. See also an See also Ch.X.," Statute of Frands." elaborate review of the authorities ' Murfn vs. Baranm, 24 Barb. 283 ■ in Johnston vs. Laflin, 2 Morison's Noyes vs. Spaulding, 27 Vt. 420 ; Orr Trans. Sup. Ct. U- S. 590 ; s. o. Thomp- vs. Bigelow, 20 Barb. 21. son's Nat. Bajik Cases, 331. Transfer "between Third Parties. 625 sons, whether the transfer is absolute or for the purpose of "collateral security, provided, of course, it is honafide^ The regulations of the companies requiring the transfer to be made on their books is considered to be for the protection of the company only, and is not intended to affect the rights of a bona fide holder or purchaser in a contest between the assignor and his creditors, or third persons acquiring rights from him subsequent to and without the possession of the certificate." The possession of the certificate, with a power to transfer endorsed thereon in blank, is prima fade evidence of title ; and if the possessor has given value, his title should not be impeached by subsequent purchasers dealing with the registered owner without a certificate, much less by his cred- itors ; although it must be acknowledged that there is an array of decisions against these views, which leaves the sub- ject in a very doubtful and unsatisfactory condition. Before proceeding to give the arguments pro and con upon this question, it may be well to allude to a few proposi- ' Commissioners vs. Reynolds, 13 Hart, 30 La. Ann. 714. The cases Am. Law Keg. 380 ; Johnston vs. contrary to the above are : Fisher Laflin, 2 Moriaou's Trans. Sup. Ct. vs. Essex Bank, 71 Mass. 373 ; Boyd tr. S. 590 ; s. 0. Thompson's Nat. vs. Eockport Steam Cotton Mills, Bank Cases, 331 ; Oerther vs. First 73 Mass. 406 ; Northrop vs. Newton Nat. Bank, 20 Alb. L. J. 142 ; Dris- etc. Turnpike Co. 3 Conn. 544 ; Ox- coll vs. West Bradley eta. Co. 4 ford Turnpike Co. vs. Bunnell, 6 id. J. & S. 488, 59 N. Y. 96; Comeau 552; Dutton vs. Connecticut Bank, vs. Guild Farm Oil Co. 3 Daly, 13 id. 498 ; Shipman vs. Minn Ins. 218 ; Continental Nat. Bank vs. El- Co. 29 id. 245 ; Lockwood vs. liott Nat. Bank (U. S. Circuit Ct.), Bank, 9 E. I. 305 ; Sabin vs. Wood- 24 Alb. L. J. 149 ; Eoss vs. South- stock, 21 Vt. 353 ; Pinkerton vs. western R. E. Co. 53 Ga. 514 ; Duke Eailroad Co. 42 N. H. 424 ; People's vs. Cahawba Nav. Co. 10 Ala. 82; Bank vs. Gridley, 91 111. 457 ; Weston Eames vs. Wheeler, 36 Mass. 442 ; vs. Bear Eiver Co. 6 Cal. 186 ; Naglee Sargent vs. Essex Marine Co. 26 id. vs. Pacific WharfCo.20id.529; Will- 202; Quiner vs. Marblehead Social iams vs. Mechanics' Bank of New Ins. Co. 10 id. 476 ; . Conimw. vs. Haven, 5 Blatchf. 59 ; Brown vs. Watmough, 6 Whart. (Pa.) 139; Adams, 5 Biss. 181; Bank of Corn- Smith vs. American Coal Co. 7 mei'ce's Appeal, 73 Pa. St. 59. Lans. 317 ; Newberry vs. Iron Mfg. " Consult also Farmers' Gold Bank Co. 17 Mich. 144; Bank of Utica vs. Wilson, 8 Pacific Coast L. J. vs. Smalley, 2 Cow. 770 ; Blouin vs. 371. 40 626 Stodk-lrohers and Stock Exchanges. tlons which seem to be acquiesced in by all of the authorities as tending to strengthen the position which we have assumed in the controversy. In the first place, it is settled by a de- cision in Massachusetts ' that a corporation cannot make a by- law which prohibits the transfer of stock unless made at the office of the company, in person or by attorney, and with the assent of the president of the company. Such a by-law is void as in restraint of trade. In the second place, a transfer by a stockholder of his stock in an incorporated or joint-stock company passes his interest to the purchaser, although the transfer be not made in con- formity to the rules and by-laws of the company." . In the case of Gilbert vs. Manchester Iron Manufacturing Co., the court said : " The rules and by-laws of a company which prohibit any transfer except upon the books of the company and upon notice . . . have reference either to the right of voting or to the security of the company by way of a lien upon the stock for any indebtedness of the stockholder, and do not incapacitate such stockholder from parting with his interest. The purchaser acquires the right of the prop- erty which the seller had. If the stock is under encumbrance, it remains so ; if it cannot be voted upon unless transferred twenty days before an election, and frhe transfer is made ten days previous, then it cannot be represented in that election." In the third place, where, by the deed of settlement or by- laws, no person shall become a transferee of stock without the approval of the directors, the latter cannot exercise their power arbitrarily and refuse unreasonably to permit any trans- fer at all to be made.' = Sargent vs. Franklin Ins. Co. 25 hill, 52 N. Y. 203 j and cases cited Mass. 98. ante, p. 623, n. 1. ' Gilbert vs. Iron Mfg. Co. 11 ' In re Gresham Life Ass. Soo.,Ex Weud. 628 ; Utioa Bank vs. Smal- parte Penney, L. E. 8 Cli. App. 446 ; ley, 2 Cow. 770 ; Johnson vs. Under- Bobiuson vs. Chartered Bank, L. R. Transfer between Third Parties. 627 It is thus seen that the courts are in substantial accord upon these propositions, and they exhibit a decided tendency and inclination to prevent all obstruction to the free transfer of stock; and, as we shall see hereafter, going so far in the commercial State of New York as to hold that such transfers are good even as against the corporation itself when the lat- ter undertakes to clog the same with a condition which it has no express power to impose.' There are, however, the two classes above referred to where the decisions are utterly irreconcilable : 1st, in con- tests between the bona fide holders or purchasers of certifi- cates and the creditors of the vendor or assignor; and, 2d, in contests between such holders or purchasers and subsequent purchasers who have dealt with the registered owner of the stock, but without a certificate. 1st. In contests between the bona fide holders or purchasers of certificates and the creditors of the vendor or assignor. It is utterly impossible to harmonize the authorities upon this subject, but we believe the most reasonable doctrine to be that such holders or purchasers should be protected against all the world, whether creditors or otherwise, and whether they have notice or not. Of course, if such third persons have notice of the rights of the bona fide holders or purchasers, it is plain that they should not be allowed to intervene ; and, if they have no notice, then their claims should succumb to the supe- rior rights and equities of the bona fide purchasers and holders. The main argument against this view seems to be that, if the law should allow a person who has sold his stock still to retain his title upon the books of the company, he would be enabled to obtain credit on a false basis ; and that the vendee 1 Eq. 32 ; Moffatt V8. Farqiiliar, L. E. Farmers and Merchants' Bank vs. 7 Ch. Div. 591. But see Murray vs. Wasson, 48 Iowa, 336. Bush, L. E. 6 H, L. 37 ; Ee Stanton » DriscoH vs. West Bradley Co. 59 Iron and Steel Co. L. E. 16 Eq. 559; N. Y. 96. 62S Stookrlvokers and Stock Exohcmges. would be a party to the fraud, for he has it in his power to have the stock transferred in the proper way.' And in Sabin vs. Bank of Worcester,' Kedfield, J., said : " "We entertain, however, upon the present argument, no reasonable doubt that the mode of transfer of the stock pointed out by the charter is the only mode which the public are bound to re- gard as conveying the title. All persons unaffected with no- tice to the contrary are at liberty to act upon the faith of the title being where it appears upon the books of the corporation to be." But this argument is not very cogent, for the reason that if a person obtains credit upon the representation that he owns stock which he does not own, or commits any other fraud by virtue of his nominal ownership on the books of the company, he is liable to the person who relies upon such representation, or who is otherwise defrauded. Mor- over, the argument is unfounded in fact, and this suflBcient- ly appears from the views expressed by Kennedy, J.,' who clearly shows that there is very little danger of the outside world being affected by those things of which they have no knowledge. " Stock," said that learned judge, " is incapable of such possession so as to make it known or notorious who has the use or benefit of it, and thus raise a general belief in regard to the ownership thereof. Even its existence may be unknown, excepting comparatively to but few persons. The only evidence that can be safely trusted as to this is the books of the bank or corporation ; but they, being of a private nat- ure, are not open to public inspection. Hence it is that the ownership of such stock, though held by the owner in his own name on the books of the corporation, is not supposed to have given him a general credit with the world." And as the acts ' Pinkerton vs. Manchester & L. * 21 Me. 353. K. R. Co. 42 N. H. 424; Angell & ' Commw. vs. Watmough, 6 Whart. Ames on Corp. J 578 et seq. 139, Zien of Corporation for Debts. 629 of, stockholders, in their official capacity, are also not revealed to the public, the same reasoning would apply to them. But, above and beyond all this, the true policy of the law is to protect these securities in the hands of bona fide holders or purchasers. These certificates pass from hand to hand ; and, by well-recognized commercial usages, the transfer on the books of the corporation, as to the outside world at least, is regarded as of only secondary importance." 2d. In contests between bona fide holders or purchasers of stock certifica,tes and third persons who, have subsequently dealt with the registered owner of the stock, but without a certificate. As has been seen, the certificate is the muniment of title ; and if a person chooses to deal with one who is mere- ly the registered owner on the books of the company, but has not the possession or control of the certificate, he takes the risk of meeting the claims of a honafide holder or purchaser to whom the certificate has been delivered, and whose claim will be protected.' IV. Lien of Corporation for Debts. By the common-law a corporation has no claim or lien upon the stock it issues ; the reason being that a different rule would subvert the wholesome doctrine of that law against secret liens." Nor has a corporation the right to create such a lien, unless it has authority by virtue of its charter or the general law un- der which it is incorporated. The policy of the law is to pro- tect a bona fide purchaser of stock certificates ; and a by-law of a company providing that no stock shall be allowed to be transferred on the books of the company if the person in ' See views ofChanc. Green, Broad- ' DriscoU vs. West Bradley & C. ■way Bank vs. McElrath, 13 N. J.Eq. M. Co. supra, and authorities there 24 ; DriscoU vs. West Bradley & C. cited ; Neale vs. Janney, 2 Cranch M. Co. 59 N. Y. 96. (C. Ct.), 188 ; People vs. Crockett, 9 " See Farmers' Gold Bank vs. Wil- Cal. 112 ; Farmers & Merchants' son, 8 Pacific Coast L. J. 371. Bank vs. Wasson, 48 Iowa, 336. 630 Stock-hroTeers and Stock Exchanges. whose name the stock shall stand shall be indebted to the company, unless with, the consent of the president or treasurer or by a vote of the board of trustees, is void unless authorized by charter or the general law.' And such authorization will not be implied from the general powers to make by-laws for the , management of the corporation and its affairs, or the power to make by-laws for the transfer of its stock.' But there are authorities for the proposition that a holder of stock is bound by a usage.of the company, or by an informal regu- lation, made known at the time of taking his certificate; that the company has a lien thereon for an indebtedness, and that assignees in insolvency of such a stockholder are also bound.' So a corporation may have the power, by express statute, to create a lien upon its stock for an indebtedness due it from a stockholder, which would be binding even upon a hona fidb purchaser or bolder without notice.* These questions were all examined in the case of Driscoll vs. West Bradley & C. M. Co.,' by the New York Court of Appeals, in 1874, and all of the authorities referred to and dis- tinguished: The court refused tG permit a corporation to set up a lien for a debt against a hona fide purchaser of the debt- or, where the power to create the lien was not expressly given by statute. Mr. Chief-justice Folger held that to imply such an authority from the grant of general powers would be not only in opposition to the policy of the common-law, which, as before observed, is against the existence of secret liens, but it ' Id. see comments of Folger, J., iu Dris- ' Id. See also Bullard vs. Nat. coll vs. West Bradley & C. M. Co., Eagle Bank, 18 Wall. 589 — wMoli au- supra, where he reviews these au- thorities are in seeming conflict with thorities, and holds that they do not Lock wood vs. Mechanics' Nat. Bank, conflict with that case. 9 E. I. 308 ; Child vs. Hudson Bay ' Wain vs. Bank of N.Am. 8 Serg. Co. 2 P. Wms. 207; McDowell vs. & E. 73 ; Vansands vs. Middlesex Co. Bank, 1 Harr. (Del.) 27, 369; Tuttle Bank, 26 Conn. 144. vs.Walton, 16a. 43; Mechanics' Bank ♦Driscoll vs. West Bradley & C. vs. Merchants' Bank, 45 Mo. 513 ; bnt M. Co. 59 N. Y. 96. " Sapra. Forged Transfers. 631 would be also in opposition to the policy of the law in its par- ticular dealings with this kind of property. " Shares of stock," said the court, " are in general personal property, to be dealt with as such, and with as much freedom and ease. The right to them is a chose in action, and, though not transferable so as to give the same safety in dealing as is given to a })ona fide taker of negotiable paper, the current of authority in this State is to the protection of the hona fide vendee against secret or equitable liens thereto of one who has indued the vendor with the indicia of ownership. It is evident that such a by-law as this in question, not made known upon the certificate of stock issued by the corporation, if it is to be upheld is a very serious hinderance to the ease and safety with which sellers and buyers of shares of stock may deal therewith." ' Y. Forged Transfers. Very many questions arise out of the forgery of powers of attorney to transfer stocks, which will be best illustrated un- der the following heads : 1st. The position of a corporation issuing a stoch, certificate to the real owner and to a party claiming title thereunder hy forgery or otherwise. No person can be deprived of his property in the absence of assent or negligence on his part. Stock certificates being non-negotiable, and in no way different from other choses in ' In Second Nat. Bank vs. Nat. Hartford Life etc. Co. 45 Conn. 22, State Bank, 7 Chicago Leg. News, 70, ■where the lien of a corporation for it was held that a hank can neither a debt of a stockholder is rigor- create nor hold a lien upon its shares ously maintained. The question as of stock to pay a subsequent indebt- to what debts are embraced in a lien edness from the stockholder to the created by a corporation will be bank as against the pledgee of such found discussed in Angell & Ames stocks for value. See also Morgan on Corp. §J 355, 569 et seq. Also 7 vs. Bank of North America, 11 Am. Southern Law Eev. 450, 21 Am. Law Dec. 582, and note by Mr. Proffat. Eeg. 57, note. And consult First Nat. Bank vs. 632 StooTcrhrokers and Stock Exchanges. action, it follows that the owner of a lost or stolen certificate which is put into circulation by the forgery of his name to a power, transfer, or assignment is not thereby prejudiced in his rights. A sale under such circumstances, even to a lona fide purchaser for a valuable consideration, vests no higher title in him than was possessed by the vendor.' If the corporation, misled by a forgery, cancels his certifi- cate and issues a new one to an innocent person who derives title under the forged transfer, the owner is entitled to have his name restored to its books -and to a new certificate." This right, however, may be lost by negligence or culpable conduct on his part.' Due care and diligence will be required on the part of the corporation. to assure itself of the validity of the title of the person presenting the paper purporting to be a transfer and requesting to be recorded as a stockholder.* And a failure on the part of the corporation to require a surrender of the certificate or proof of its loss, in conformity with the terms of tlie certificate, statute, or by-laws', renders it liable to an innocent transferee.' • Pratt vs. Taunton Copper Mfg. Eq. 292, 319-320 ; and compare Tay- Co. 123 Mass. 110 ; Same vs. Maohin- lor vs. The Great ludian Peninsula ists' Nat. Bank, id. ; Pollock vs. Nat. Co. 4 De G. & J. 559. Bank, 7 N. Y. 274 ; Johnston vs. Eeu- ' Friedlander vs. Sl.aughter House ton, L. E. 9 Eq. 181; Sloman vs. Co. 31 La. Ann. 523; Coles vs. Bank of Bank of England, 14 Sim. 475 ; Cot- England, 10 Ad. &E. 437; Peunsylva- tam vs. Eastern Countios Ry. Co. 1 nia E. K. Co.'s Appeal, 86 Pa. St. 80. John. & H. 243 ; Prescott vs. De For- * Western Union Tel. Co. vs. Dav- est, 16 Johns. 159. enport, 97 U. S. 369 ; Salisbury Mills " Western Union Tel. Co. vs. Dav- vs. Townsend, 109 Mass. 115 ; Loring enport,97U.S. 369; Swan vs. North- vs. Salisbury Mills, 125 id. 138; British Australasian Co. 2 Hurl. & C. Campbell vs. Morgan, 4 Brad. (111.) 175; Johnston vs. Kenton, L. R. 9 100; Cleveland & Mahouiug R. R. Eq. 181 ; Johnson vs. Parsey, id. ; Co. vs. Tapett (Ohio S. Ct.), 22 Alb. Pratt vs. Taunton Copper Mfg. Co. L. J. 117 ; Bayard vs. Farmers & Me- supra ; Brown vs. Howard Fire Ins. chanios' Bank, 52 Pa. St. 232 ; Penn- Co. 42 Md. 384; Pollock vs. Nat. sylvania R.R. Co.'s Appeal, 86 id. 80; Bank, 7 N. Y. 274; Hambleton vs. Williams vs. Greggs, 2 Strobh.(S.C.) Central Ohio R. R. Co. 44 Md. 551. Eq. 316. But see Hunter vs. Walters, L. R. 11 » Brisbane vs. Del., Lack., & W. R. Forged Transfers. 633 In Chew vs. Bank of Baltimore ' a transfer of stock under a bill of sale and power of attorney from a lunatic was avoided to the bank's loss, though thei'e was no actual fault on the part of the bank; and the loss was cast upon the latter on con- siderations of justice and expediency as being best able to provide against it, because the bank might have refused to recognize the power of attorney, and required the personal attention for the purpose of determining such matters as might give rise to disputes. And an assignee of certificates of shares of stock who leaves the certificates with the assignments unrecorded in the pos- session of the assignor is not thereby guilty of negligence so as to be estopped to set up his title against a person who claims title to the certificates through an alteration of the as- signments by the assignor.' Nor can the owner of stock who has executed an assignment of a portion thereof, with ordinary care in the mode of filling up the blank form, be deprived of a greater portion by a subsequent fraudulent alteration which purports an assignment of the whole; and if the corporation acts on such altered assignnaent, it is liable in damages for transferring the excess.' Where the assignment was made in blank to be used for a particular purpose, and the person re- ceiving it, after filling the blank with one name, erased it and inserted another, his authority to fill the blank was held to be exhausted by the first insertion.* The decision of the Supreme Judicial Court of Massachu- setts in a recent case in that State ° will further illustrate the E. Co. N. Y. Daily Reg. Nov. 30, 1881 ; ' Sewall vs. Boston Water Power Bridgeport vs. N. Y. & N. H. E. E. Co. Co. 86 Mass. 217. 30 Conu. 231-270; Bank vs. Lanier, * Denny vs.Lyon,38Pa.St.98. See 11 Wall. 369; Factors & T. Ins. Co. also Merchants' Bank vs. Livingston, vs. Marine Dry Dock Co. 31 La. Ann. 74 N. Y. 223, "where the case of Mc- 149 ; Cleveland & Mahoning E. E. Neil vs. Tenth Nat. Bank is distin- Co. vs. Eohbins, 35 Ohio St. 483. guished. ' 14 Md. 299. ' Pratt vs. Taunton Copper Mfg. ° Eaton vs. New England Tel. Co. Co. 123 Mass. 110. 68 Me. 63. 634 Stockrlrdkers and Stock Exchanges. foregoing principles. Briefly, the facts were these : Plaintiff was the owner of shares of stock in the defendant company, for which she had a certificate. This certificate was taken from her house without her knowledge, and, together with a forged power of attorney in her name to the company, authorizing it to transfer the same, was delivered to a Stock- broker, who procured a new certificate, which was sold to an innocent purchaser, to whom the company issued another certificate. Plaintiff brought a bill in equity against the company and the purchaser, praying that the latter be com- pelled to surrender his certificate, and the former to issue a new certificate for the shares of stock held by her. The court held that the plaintiff could not be deprived of her stock without her consent or negligence on her part ; and that, the power of attorney in her name being forged, she might maintain the bill to compel the company to issue a certifi- cate to her for her shares, and to pay her the dividends thereon.' The owner of lost or stolen certificates of stock has the fol- lowing remedies : ' 1st. He may either bring suit against the corporation, when his right of ownership is denied and con- tested, to compel it to recognize him as a stockholder.' 2d. Or for cancelling a certificate and allowing a transfer in vio- lation of a stockholder's rights, he may bring an action against ' This holding is supported by the E. Co. 44 Md. 551 ; Western Union cases of Ashby vs. Black well, 2 Eden, Tel. Co. vs. Davenport, 97 U. S. 369. 299; s. c. Amb. 503; Sloman vs. " Biddle vs. Bayard, 13 Pa. St. Bank of England, 14 Sim. 475 ; Mid- 152. land Eailway vs. Taylor, 8 H. L. C. ' McKeil vs. Tenth Nat. Bank, 46 751; Pollock vs. Nat. Bank, 7 N.Y. N. Y.325; Holbrook vs. New Jersey 274; Sewall vs. Boston Water Power Zinc Co. 57 id. 616; Stinson vs. Co. 86 Mass. 277 ; Brown vs. Howard Thornton, 56 Ga. 377 ; Strange vs. Ins. Co. 42 Md. 384 ; s. c. 20 Am. Eep. Houston & T. C. E. E. Co. 10 Eep! 90. See also Machinists' Nat. Bank 28; s.c. 53 Texas, 162; Loring vs. Sal- vs. Field, 126 Mass. 345; Waterhouse isbury Mills, 125 Mass. 138; Wood's vs. London Ey. Co. 41 L. T. (n. s.) Appeal, 10 Eep. 125; s. o. 92 Pa. St. 553 ; Hambleton vs. Central Ohio E. 378. Forged Trwnsfers. 635 the party who has possession of the certificate, and compel its surrender or delivery to him as never having . legally parted with it, or damages as the case may be.' But it seems that he cannot pursue both remedies in the same action." Should the corporation, however, issue a new certificate to the holder of a forged one, it would seem, from the case of Pratt vs. Machinists' National Bank, that his transferee or assignee in good faith will not be forced to, surrender his certificate." • In this case it will be noticed the plaintiff's remedy against the corporation was clear and complete. But had she, in the first instance, brought her bill against the purchaser Dean alone, it is probable the practice in Weaver vs. Barden^ would have been pursued, and the purchaser Dean compelled to restore the stock to her as never having legally parted with it, leaving him to his rem- edy, if any, against the corporation. And if the purchaser bad claimed under a transfer which he knew, or was bound to know, to be forged or invalid, the owner's right of action would seem to be unquestioned.' In such a case, presenting considerations similar to those in Pratt vs. Taunton Copper Mfg. Co., where the relief given to the plaintiff does not require or involve the decision of any question between co- defendants, the court, unless by consent, does not and cannot decide such a question so as to bind the co-defendants as ' Davis vs. Bank of England, 2 Nat. Bank, id. ; Salisbury Mills vs. Bing. 393; Sewall vs. Boston Water Tow.nsend,109id.ll5; Lowry vs.Com- Power Co. 86 Mass. 277 ; Duncan vs. mercialBank,Taney (C. C.),310; Bank Luntley, 2 Macn. & G. 30; Pratt vs. vs. Lanier, 11 Wall. 369 ; IureBaliia& Machinists' Nat. Bank, 123 Mass. ' San Francisco Ey. Co. L.E. 3 Q.B. 584. 110; Marsh vs. Keating, 1 Bing. N. ' See also, on this point, cases cited C. 198; Weaver vs.'Barden, 3 Lans. in preceding note. 338, and 49 N. Y. 286. And in Monk ' 3 Lans. 338, and 49 N. Y. 286. vs. Graham, 8 Mod. 9, an action of ' Cottam vs. Eastern Counties Ey. trover was maintained by the own- Co. 1 John. & H. 243 ; Johnston vs. er against a honafide purchaser. Eenton, L. E. 9 Eq. 181; Taylor vs. = Pratt vs. Taunton Copper Mfg. Co. Great Ind. P. Ey. Co. 4 De G. & J. 123 Mass. 110; Same vs. Machinists' 559; Denny vs. Lyon, 38 Pa. St. 98. 636 Stoch-lrokers and Stock Ecchanges. against each other, but leaves it to be settled in a proper suit between them.' * The question here arises, does the issuance of a certificate by the corporation to a person deriving title through a forged transfer estop the corporation from denying his title? Is it the duty of the corporation to make inquiries ? and do regis- try and the issuance of the certificate amount to an affirma- tion that the transfer is correct ? It seems not. The questions squarely arose in the case of Simm vs. Anglo- American Telegraph Co.' upon the following facts : B. & Co. purchased upon the Stock Exchange £5000 stock in the de- fendant company. A transfer of the stock, purporting to be executed by C, the true owner, was lodged with the company by S. & Co., the nominees of B. & Co. The company, after sending the usual notice to C, registered S. & Co. as holders. B. & Co. then, to secure advances, obtained a transfer of the stock to the plaintiffs, who were in like manner registered as owners, the certificate being issued to them by the company. The advances being paid off, the plaintiffs continued to hold the stock as trustees for B. & Co. It was afterwards dis- covered that the transfer from C. was a forgery, and the com- pany thereupon replaced C. upon the register, and refused to pay dividends to the plaintiffs or to acknowledge their title to the stock. Held, that B. & Co. being the real plaintiffs, the defendants were not estopped from denying the validity of the transfer to S. & Co. There were three able opinions in that case, all assailing the theory of an estoppel and the duty of the company to make inquiries. Brett, L. J., used the following language : ' Cottam vs. Eastern Counties Ey. Power Co. 86 Mass. 277, 283 ; Carlton Co. supra ; Johnston vs. Eenton, vs. Jackson, 121 id. 591, 597 ; 16 Alb. supra ; Cottingham vs. Shrewsbury, L. J. 251. 3 Hare Ch. 627 ; Fletcher vs. Green, 33 » 20 Am. Law Reg. (n. s.) 159. Beav. 426 ; Sewall vs. Boston Water Forged Transfers. 637 " Now, it is a practice of companies, before registering, to make inquiry of the transferror; but they are not bound to do this on behalf of the transferee — they do it for their own bene- fit ; and, indeed, if the transferee does not put credit in the Broker, he can himself make inquiry of the transferror. All the facts which caused B. & Co. to be put upon the regis- ter, aiid 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 company's. They know, for in- stance, 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 transferror, if valid, makes B. & Co. holders of the stock; but the company do this on the statement of B. &,Co. The certificate is merely a statement that the com- pany have accepted B. & Co. as Jiolders, but does not al- lege any fact known to the company and not known to B. & Co." ' 2d. Position of a hona fide purchaser of a^certificate issued hy a corporation in exchange for one whose power of transfer was forged: We have seen that the purchaser of a forged certificate of stock acquires but the title of his vendor ; that he buys upon the faith of the forged transfer, and that the issuance to him of a new certificate by the company introduces no element which can alter his legal position. But what is the position of a hona fide purchaser of this new certificate issued by a corporation in exchange for a forged transfer? It is evident that he purchases upon the faith of the corporation's certifi- ' The following cases were dis- Piokard vs. Sears, 6 Ad. & E. 469 ; tinguisbed in the opinion of Brara- Hart vs. Frontino Company, L. E. 5 ■well, L. J. : Knight vs. Witfen. L. E. Ex. 111. See also Brown vs. Howard 5 Q. B. 660 ; In re Bahia and San Fire Ins. Co. 42 Md. 384. Francisco E. E. Co. L. E. 3 Q. B. 584 ; 638 Stockr'brdkera and Stock Exchanges. cate, and that he is in a better position than the plaintiff was in Simm ts. Anglo-American Telegraph Company. The cor- poration has, in effect, made a representation in reliance upon which he has acted ; and if, in so acting, he has suffered pecu- niary damage, the corporation will be estopped from denying the truth of the bogus transfer.' This subject was elaborately considered by the Circuit Court of the United States, District of Massachusetts." In that case the facts were these : The defendant, the Massa- chusetts National Bank, loaned money to C, taking in good faith, as collateral security therefor, what purported to be a certificate of two hundred shares of the stock of a railroad company, issued by the company to the bank. The certificate, in reality, was a forgery by C. C. paying the loan, the cashier of the defendant bank, for the purpose of restoring the collat- eral to C, returned to him the certificate with his signature in blank as cashier to the printed form of transfer on the back. Subsequently C. obtained a loan from plaintiff, giving the said certificate as collateral. The forgery having been dis- covered, plaintiff brought action against defendant for the damages sustained by him. Held, that the signature of the cashier bound the bank, and that the bank so far warranted the genuineness of the certificate as to be estopped from set- ting up the forgery as a defence. The court said: "The certificate in this case, as it came from the bank, contained on the same piece of paper, and on the back of the certificate, a blank assignment, which was all that was necessary to transfer the title of the stock as between the parties. The defendant must therefore be held to have in- tended and agreed that whoever should present the certificate, ' Strange vs. Houston & T. C. E. " Matthews vs. Mass. Uat. Bank, 10 E. Co. 10 Rep. 38 ; s. c. 53 Texas, 162 ; Alb. L. J. 199 ; s. u. 14 Am. Law Reg. Holbrook vs. New Jersey Zinc Co. 153. See also cases cited ante, p. 637, 57N.Y. 616. n. 1. Forged Transfers. 639 so issued from the bank, with the assignment executed in blank, should be entitled to fill up the blanks with his own name, and to have a transfer of the stock made to himself on the books of the company. The certificate accompanied with the transfer, executed in blank, has a species of 'negotiability of a peculiar character, but one well recognized in commercial trains- actions and judicial decisions, and absolutely essential to the usages and necessities of modern commerce, to make such cer- tificate available in commercial transactions. Even when such blank assignments, or powers of attorney to transfer stock, are under seal, the blanks may be filled up according to the agreement of the parties at the time.' The decisions to the contrary in the English courts have not been followed in this country, and they were infiuenced not merely by a rigid adherence to the technical rules of the common-law in rela- tion to instruments under seal, but by the policy of the stamp system. But the case of Walker vs. Bartlett," and late Eng- lish decisions, recognize the validity of blank transfers of stock, and that such transfers of stock impose upon the holder of them the obligation to pay calls upon the shares while they remain his property." In Holbrook vs. The New Jersey* Zinc Company, the court held that a corporation having power to issue a stock certifi- cate in which it afiirms that a designated person is entitled to a certain number of shares of stock, thereby holds out to persons who may deal in good faith with the person named' in the certificate that he is an owner and has capacity to trans- fer the shares. This proposition does not rest on any view of the negotiability of stock, but on general principles appertain- ing to the law of estoppel.' ' Bridgeport Bank vs. N. Y. & N. ° 36 Eng. L. & Eq. 368. H. E. R. Co. 30 Conn. 374, 275 ; Eed- ' Snpra. field on Eailvrays, % 35, and cases cited. 640 StockrTrrdkers and Stock Exchmges. TBe recent and well-considered case of the Machinists' Na- tional Bank vs. Field' establishes with great clearness the status of a lonafide purchaser of certificate of stock issued by a corporation in exchange for a forged transfer, both as re- gards the corporation and the original owner upon whom the forgery was practised. The case presented the following facts : A certificate of shares in the capital stock of a corporation was taken without the owner's knowledge, and, together with a forged power of attorney, delivered to a Broker for sale. The Broker employed an auctioneer, who sold the stock to a purchaser. The Broker then sent the stolen certificate, with the forged power of attorney, to the corporation, requesting a new certificate in the name of the auctioneer. The corpora- tion complied with the request, and a new certificate was sent to the auctioneer, who delivered it to the Broker with a power of attorney, who in turn delivered it to the purchaser, to whom the corporation afterwards issued a new certificate. The Broker, the auctioneer, the purchaser, and the corporation acted in good faith, and supposed the forged power of attorney to be genuine. The forgery being discovered, the original own- er brought her bill in equity against the company and against the purchaser, praying that he be ordered to reconvey the shares or surrender her certificate. The court ruled upon this point as follows : " The individual defendant was a purchaser in good faith, for full consideration, without knowledge or no- tice of the plaintiff's title or of the forgery, and does not hold the certificate which she had. The immediate transfer to him was made by Hawes & Henshaw, who then held a new cer- tificate of stock ; and the corporation, upon surrender of that certificate, issued to him another one. His rights against the corporation depend upon the effect of this certificate; the plaintiff is clearly entitled to no decree against him."' ' Machinists' Bank vs. Field, 126 ' Salisbury Mills vs. Townaend, Mass. 345. 109 Mass. 115; Lowry vs. Commer- Forged Transfers. 641 It will be noticed that the company, in the case supposed, has been in some degree the author of its own misfortune ; and the fact that the forgery was skilful and difficult of de- tection, that the company displayed a commendable diligence in adopting all reasonable precautions to assure itself of the genuineness of the certificate — as notice to the stockholder of • record, etc. — are not sufficient grounds for visiting an equally blameless purchaser with the consequences of its mistake in regarding as a verity a transfer which was in fact sham. Justice demands that the company assume all consequential injuries flowing from its mistakes. Its position would not be different from a case in which its authorized agent issues false certificates of stock." In both instances the hona fide pur- chaser of such stock has indisputably a right either to com- pensation for the fraud to which he has been subjected, or to be admitted as a corporator or stockholder. 3d. Fraudulent or over issue of stock iy corporation. We have considered the status of a corporation which has been induced to act upon a forged transfer with regard to three classes of persons : (1.) The original and rightful owner. (3.) The person who derives title under the forged power of trans- fer. (3.) The purchaser of a genuine certificate issued by the corporation in exchange for a forged certificate. It now re- mains to notice the liabilities of a corporation in cases of a fraudulent or over issue of stock by its directors or authorized agents. It is manifest that stock thus illegally created can never become part of the capital of the corporation. In the words of Davis, J., in the Schuyler case," " a corporation with a fixed capital divided into a fixed number of shares can have no power of its own volition, or by any act of its officers cial Bank, Taney (C. C), 310 ; Bank ' N. Y. & New Haven E. E. Co. vs, vs. Lanier, 11 Wall. 369 ; In re Bahia Schuyler, 34 N. Y. 30. & San Francisco E. E. Co. L. R. 3 Q. ' Id. B. 584. 41 642 Stoch-hrohers and Stock Exchanges. or agents, to enlarge its capital or increase the number of shares into which it is divided. The supreme legislative power of the State can alone confer that authority and re- move, or consent to the removal of, restrictions which are part of the fundamental law of the corporate being; and hence every attempt of the corporation to exert such a power before it is conferred, by any direct and express action of its ■ officers, is void; and hence every indirect and fraudulent at- tempt to do so is void. For if such a result cannot be accom- plished directly by the whole machinery of the corporate powers, it is absurd to suppose that it can be produced by the covert or fraudulent efforts of one or more of the agents of the corporation." But in this case the court considered the liability of a corporation for the consequences of its wrongful acts, however foreign to its nature or ieymid its granted pow- ers the wrongful transaction or act may be, as so distinctly settled by authority, and so clear upon principle, as to bear no more than mere enunciation.' Where the transfer agent of the defendant's corporation was authorized to sign and issue certificates of stock on a transfer from one shareholder to another upon the books and on the surrender of the previous certificates, and the agent, for his own purposes, signed and issued certificates in form precisely similar to those genuine and authorized, and, trusting to their false appearance, the plaintiffs took one of them by transfer and advanced money upon it, held, that the acts of the agent were not within the real or apparent scope of the power delegated to him. And in the first stages of the litigation relating to the over-issue of the stock of the New York and New Haven Kailroad Company by its president and trans- ' Lamm vs. Port Deposit Home- Biasell rs. MicLigan S. & N. I. E. Co. eteacl Assoc. 49 Mil. 233 ; Goodspoed 22 N. Y. 305-309, per Seldeu, J. vs. East Haddam Bank, 22 Conn. 541 ; Forged Transfers. 643 fer agent, Schuyler, the evidence went to establish that his agency was limited to an issue of certificates whei-e there was a transfer of shares on the company's books accompanied by a surrender of the certificate of the previous owner. On this state of facts the court held that the corporation was not liable for the acts of its agent/ But it appeared, in the later case of the New York and New Haven Railroad Company vs. Schuyler," that, in addition to the power just stated, Schuyler's agency extended to the power of issuing certificates in precisely the same form to the original subscribers for the stock ; that he had authority to dispose of the stock not taken by tlie original subscribers, and issue certificates in the same form to purchasers ; that he had authority to dispose of certain forfeited shares, and in such case issue like certificates ; that to him was intrusted the keep- ing of all the stock accounts of the company, and that these books were kept closed to dealers. These facts threw the re- sponsibility of the agent's acts upon the corporation, in obedi- ence to the principle before alluded to. The reasoning and result of the Schuyler case was fully confirmed in the opinion of Hare, 0. J., in the case of Willis vs. Philadelphia Kailroad Company." It had been contended, upon the argument, that as neither the vote of the directors nor stockholders, nor both conjoined, could authorize an issue of stock in excess of the number the company's charter al- lowed, so as to bind the company to that which the company was powerless to perform, the agent could acquire no power through fraud which the principal did not possess and could not have conferred. The court, in passing upon this point, said : " This argument might be unanswerable if the power to ' Henning vs. N. Y. & New Haven etc. Bant vs. Drovers' Bank, 16 id. E. E. Co. 9 Bosw. 283 ; Mecliaiiics' 125, 150. Bank vs. N. Y. & New Haven E. E. = 34 N. Y. 30. Co. 13 N. Y. 599; see also Farmers' ' 6 Week. Notes Caa. 461. 644 Stook-lrdkers and Stock Exchanges. give certificateB was identical with the power to create stock, or if a certificate conld not be legitimately issued to any one who claimed under a derivative title, because it would then be incumbent on third persons to take notice of the limited power and ascertain whether it had been strictly pursued. It is, how- ever, plain that the Legislature did not intend to impose a rule contrary to the ordinary course of business, and which would have impaired the market value of the stock. Although the company could not issue a larger number of shares than that prescribed by its charter, it might well give a new certificate to a purchaser in lieu of that surrendered by the vendor, and repeat the act as often as occasion required. . . . That which a corporation is not authorized to do under any circumstances, or which is absolutely forbidden by its charter, is so entire- ly void that nothing short of an act of Assembly can render it valid ; but that which it may do for certain purposes and not for others, or on the happening of a particular event, is not necessarily within this rule, and may take effect although the prerequisites were not fulfilled." In Tome vs. Parkersburgh R. E. Co.,' the treasurer of the company was intrusted with the custody of the books relating to ownership and transfer of stock, and it was his duty to prepare and countersign all certificates of stock and scrip. He fraudulently issued certificates of stock for his private purposes, and the company was held liable for his acts to the purchasers of the spurious certificates.'' A stockholder, whose stock has been sold without his knowl- edge, under a forged power of attorney, may sustain an ac- tion for money had and received against the innocent partners of the forger who received the proceeds of the sale.' ' 39 Md. 36. s jiarsh vs. Keating, 1 Biiig. N. C. ^ And see Madison etc. E. R. Co. 198. vs. Norwich Sav. Soo. 24 lud. 457. - General Rules as to Dwidends. 645 VT. Dwidends. (a.) General Hules as to Dividends. Before a dividend is declared, all the property of the cor- poration belongs, in fact, jointly to all the stockholders, the legal title being in the corporate body, and its affairs managed by the directors as trustees for the stockholders: After a divi- dend is declared, each stockholder has a right in severalty to his particular proportion, and this right cannot be abridged by any discrimination.' We have already stated " that, as a general rule, the stock- holders of a corporation cannot compel the directors or trus- tees of a corporation to declare dividends. The directors have a discretion in this respect which the courts ■will not interfere with, unless its non-exercise is attended with circum- stances which will result in gross and manifest wrong to the stockholders.' Nor can the stockholder interfere to prevent a j^roper divi- dend ; * nor, if the directors have power to increase the capital of the company, can a stockholder prevent them, by injunc- tion, from issuing new stock in lieu of a dividend.* Where spurious stock, however, has been issued, a stockholder may enjoin the payment of a dividend until it is established who are the genuine stockholdei'fe." Nor will a corporation be en- ' Boardman vs. L. S. & M. S. E. Co. vs. Bank, 6 La. 745 ; Ely vs. Sprague, 84 N. Y. 157 ; King vs. Paterson etc. Clarke Ch. 351 ; Green's Brioe's Ultra E. E. Co. 29 N. J. L. 82 ; City of Ohio Vires (2d ed.), 202 et soq. ; Pierce ou va. Cleveland etc. E. E. Co. 6 Ohio St. Eailroads, 122. 489 ; Carpenter vs. N. Y. etc. E. E. Co. • Carpenter vs. N. Y. & New Haven 5 Ab. (N. Y.) Pr. 276; Granger vs. Bas- E. E. Co. 5 Ab. (N. Y.) Pr. 277. sett, 98 Mass. 462. = Ante, p. 594. " Howell vs. Chicago etc. E. E. Co. ^ Karnes vs. Eoohester etc. E. E. 51 Barb. 358, 378. As to dividends be- Co. 4 Ab. (u. s.) 107; Boardman vs. ing paid in money or stock, see Brund- L. S. & M. S. E. E. Co. 84 N. Y. 157 ; age vs.Brundage,60N.Y.544; Green's Pratt vs. Pratt, 33 Conn. 446 ; Luling Brice's Ultra Vires (2d ed.), 199. vs. Atlantic Ins. Co. 45 Barb. 510, 50 = Underwood vs. N. Y. & New Hav- Barb. 520, aff'd 51 N. Y. 207; State en E. E. Co. 17 How. (N. Y.) Pr. 537. 646 Stoch-hfohers and Stock Exchanges. joined from declaring a dividend in a State where it has neither officers nor a place of business." So where dividends have been improperly declared and paid, they may be recovered back. The assets of a corpora- tion cannot be divided among its stockholders, in the shape of dividends or in any other form, to the prejudice, detriment, or postponement of creditors. The property or assets of a cor- poration constitute a trust fund for the payment of its debts, and a judgment creditor, after the return of an execution un- satisfied, may maintain an action in the. nature of a creditor's bill against a stockholder to reach property or assets of the corporation so received by him. And it is equally immaterial whether he got it by fair agreement with his associates or by any wrongful act. These views were laid down by the Commission of Appeals of the State of New Tork in the case of Bartlett vs. Drew.' The court said : " It was found that the defendant D. had a large amount of the assets in his possession, which belonged to the corporation when the plaintifiE's demand accrued, and some portion of which should have been applied in discharge of its obligation to the plaintiff ; ... it was so much of the assets of the corporation as ought to be devoted to the pay- ment of the debts of the company, and his claim as a stock- holder could not prevail over the creditors' prior right." ' (5.) Effect of Declaration of Dividend. But the questions with which we are most concerned are those which arise subsequently to the declaration of a divi- ' Willlston va. Michigan Southern App. 104. Consult also Sawyer vs. & N. I. E. R. Co. 95 Mass. 400. Con- Hoag, 17 Wall. 610 ; Currau vs. State, suit also Prouty vs. Same, 1 Hun, 655, 15 How. (U. S.) 304 ; Osgood vs. Lay- 52N.Y.363; Howell vs. Chicago & N. tin, 3 Keyes (N. Y.), 521; Gratz vs. W. R. R. Co. 51 Barb. 378 ; Chase vs. Redd, 4 B. Mon. 178 ; Stoddard vs. Vanderbilt, 5 J. & S. (N. Y.) 334 ; 62 Shetucket Foundry Co. 34 Coun. N.Y.307. "57N. Y.587. 542; Lexington etc. Ins. Co. vs. » Sec also Ranee's Case, L. E. 6 Ch. Page, 17 B. Mon. 412. Effect of Declaration of Dividend. 647 deud, ill contests either between stockholders and the corpora- tion, or the stockholders and third persons, respecting their several rights to the money or scrip declared by the corpora- tion. And under this head it liiay be stated, as an undisputed proposition, that when a dividend has been declared by a cor- poration it becomes the individual property of the stock- holder, for which, when the time elapses for its payment, a suit may be maintained by the stockholder or his legal repre- sentative.' The theory of these cases, permitting a stockholder to main- tain an action against the corporation for a dividend, is this: When a dividend is declared it becomes a debt, like any other debt, irrespective of the time of payment ; and the rela- tion of debtor and creditor is established between the stock- holder and the corporation instantly upon the declaration. And some of the cases have advanced the doctrine that, when a dividend has been declared, it becomes a trust fund for the stockholder, and cannot be appropriated for any other purpose to the prejudice of the stockholder entitled to the ' The English cases are as follows : L. S. E. E. Co. 84 N. Y. 157 ; Hughes Fawoett vs. Laurie, 1 Dr. & Sm. 192; vs. Vermont Copper Miuing Co. 72 Stevens vs. South Devon Ey. Co. 9 id. 207. Pennsylvama cases: Browu Hare, 313 ; Dalton vs. Midland Ey. vs. Coal & Nav. Co. 49 Pa. St. 270 ; Co. 13 C. B. 474; and each stock- E. E. Co. vs. Cowell, 28 id. 329 ; West- holder must hring his own action, Chester & P. E. E. Co. vs. Jackson, 77 Carlisle vs. Southeastern Ey. Co. 2 id. 321. Other States : Marine Bank H. & T. 366 ; 19 L. J. (Ch.) 477 ; Mor- vs. Biays, 4 H. & J. 338 ; Granger vs. gan vs. Great Eastern Ey. Co. 1 H. Bassett, 98 Mass. 462 ; Stoddard vs. &M. 560. The New York cases : Le Shetucket Foundry Co. 34 Conn. Eoy vs. Globe Ins. Co. 2 Edw. Ch. 542; King vs. Paterson E. E. Co. 657; Kane vs. Bloodgood, 7 Johns. 29 N. J. L. 82; s. c. id. 504; Jack- Ch. 90 ; Brundage vs. Brundage, 60 son vs. Plank Eoad Co. 31 id. 277 ; N. Y. 544; Carpenter vs. New York Lookhart vs. Van Alystine, 31 Mich, etc. E. E. Co. 5 Ab. (N. Y.) Pr. 277; 78; City of Ohio vs. E. E. Co. 6 Chase vs. Vanderbilt, 5 (J. &, S. Ohio St. 489; State vs. Baltimore N. Y.) 334 ; Ehle vs. Chittenango etc. E. E. Co. 6 Gill, 363 ; Burroughs Bank, 24 N. Y. 548 ; Jones vs. Terre vs. N. C. E. E. Co. 67 N. C. 376 ; Kep^ Haute E. E. Co. 29 Barb. 353; 57 id. pel vs. Petersburg E. E. Co. Chase, 196; Hyatt vs. Allen, 56 id. 553; 167. Boardmau vs. Michigan Southern & 648 Stoch-lrohers and Stock Exchanges. same. This view was laid down in Le Eoy vs. Globe Ina Co.' In that case the directors of an insurance company de- clared a dividend on the 10th of November, 1836, and on the thirtieth day of the same month the dividend was carried on the books of the company to the profit-and-loss account, leav- ing the capital intact with a surplus. Public notice was given that the dividend was payable on and after the 18th of De- ceniber,.and checks were prepared for each person's dividend. These checks were placed in the hands of the secretary, with directions to deliver them to the stockholders, and about four fifths of the checks had been called for, when the great fire in New York rendered the company insolvent. In an action by a stockholder against the receiver, the court held that the divi- dend had been severed, and the former was entitled to it; that the money should be regarded as a trust fund, to which the stockholders had vested rights — not in their corporate capacity, but as individuals to whom the money legally and equitably belonged. " Having acquired this right as between them and the corporation, the assignment or transfer to the receiver could not take it away." " And in certain cases the person entitled to a dividend may follow the money and compel its appropriation to the payment of the same. In September, 1873, the Erie Eail- way declared a dividend of one per cent, upon its stock, and deposited the money to pay the same with D., S., & Co. On December 10, 1874, the money then remaining with the said firm was withdrawn by the company, and subsequently passed, with its other property, to a receiver of the road. An application was made by the petitioner, who, at the time the dividend was declared, was a stockholder of the said road, to compel the receiver to pay him the amount of his ' 2 Edw. Ch. 657. " See also Lowne vs. The Ameri- cau File Iiis. Co. 6 Paige Ch. 484. Effect of Declaration of Dividend, 649 dividend. The court held that the fund deposited with D., S., & Co. should be regarded as specifically appropriated for the payment of the dividend, and that the stockholders ac- quired in equity a lien upon such fund to the extent of the amount to which they were respectively entitled, and that such lien followed the fund in the hands of the receiver; that a stockholder might apply on petition for such dividend, and was not obliged to bring an action therefor.' Aad in an action against the corporation for a dividend declared and payable, the company is estopped from setting up that the dividend has not been earned, and that its payment would cause the withdrawal of part of its capital." But a corpora- tion may retain dividends as pledges for debts due to it from its stockholders.' In respect to the proper form of action against a corpora- tion to recover a dividend declared, it has been decided that mandamus is not a proper remedy.* Where a stockhold- er receives from a corporation dividends declared, and ad- mitted by it to be due to him, on shares of the corporate stock, an action is not maintainable against him in the first in- stance, at the suit of one claiming to be entitled to share in the dividends, but whose rights had been ignored by the cor- poration, to recover as for moneys had and received the pro- portion of the dividends so received which plaintiff would have been entitled to, had his shares participated. It seems that the remedy of one thus wrongfully excluded from the ■ In re Le Blanc, 14 Hun, 8, aff 'd 75 ^ Hagar ts. Union Nat. Bank, 63 N. Y. 598. Consult also, in this con- Me. 509 ; Sargent vs. Franklin Ins. neotion, Beers vs. Bridgeport Spring Co. 25 Mass. 90; Bates vs. N. Y. Ins. Co. 42 Conu. 17 ; and Curry vs. Wood- Co. 3 Johns. Cas. 238. ward, 44 Ala. 305, where it is said * People vs. Central Car etc. Co. that unpaid dividends are assets, and, 41 Mich. 166. But see Le Roy vs. being such, are liable for the debts Globe Ins. Co. 2 Edw. Ch. 657 ; and of the corporation. consult also In re Le Blanc, 14 Hun, = Stoddard vs. Shetucket Foundry 8, aff'd 75 N. Y. 598. Co. 34 Conn. 542. 650 Stock-brokers and Stock Exchanges. rights of a stockholder is against the company. He cannot follow the assets of the company in the hands of parties to whom it has paid them, until at least he has established his rights as a creditor of the company and has exhausted his legal remedies against it.' Before a stockholder can maintain an action against the corporation for a dividend, he must make a demand against the company ; " but a mere letter of inquiry is not sufficient,' nor can there be a sufficient demand while the shares are un- der attachment by the corporation.* The Statute of Limita- tions, however, will not run until such demand and refusal.* And in the case of Hughes vs. Vermont Copper Mining Co." the Court of Appeals of New York held that after a stock- holder had elected to treat his shares as converted by the cor- poration, and brought an action against it for such conver- sion, he cannot during the pendency of that action sue for dividends. "When, however, a corporation declares a dividend, as a general rule it must be payable to all of its stockholders alike, and the dii'ectors cannot discriminate between them unless such power of discrimination is conferred by the charter of the company.' The case of Jones vs. Terre Haute Eailroad Co.* will suffi- ciently illustrate this proposition. In that case, the plaintiff, holding bonds of the defendant by their terms convertible into cash, surrendered them, and received stock issued prior ' Peckham vs. Van Wagener, 83 ' 72 N. Y. 207. N. Y. 40 ; 13 J. i& S. 328. ' Jones vs. Terre Haute R. E. Co. ° Scott vs. Central E. E. Co. 52 29 Barb. 353 ; 57 N. Y. 196 ; Luling Barb. 45. vs. Atlantic Ins. Co. 45 Barb. 510, ' Id. aff'd 51 N. Y. 207 ; Atlantic etc. Tele- * Hagar vs. Union Nat. Bank, 63 grapbCo.v8.CommonweaItb,3Brews. Me. 509. (Pa.) 366; State vs. Baltimore etc. = Pbila. & C. E. E. Co. vs. Cowell, E. E. Co. 6 Gill, 363; Eyder vs. Alton 28 Pa. St. 329; Kane vs. Bloodgood, etc. E. E. Co. 13 lU. 516. 7 Johns. Cb. 89. » Supra. Dividends Belong to Registered Owners. 661 to the declaration of a dividend by the board of directors. The court held that the directors had no right to limit the payment of the dividend to the stockholders holding stock at a day prior to the issue of the stock to the plaintiff — viz., to those persons holding stock at the close of the fiscal year of the company. In denying the right of the directors to affect plaintiff's title to dividends by their adopting a particular day as the close of the corporate fiscal year, or special days for declaring dividends, or directing the close of the com- pany's books, the court said : " The circumstance that the di- rectors have adopted some particular day as the close of the corporate fiscal year, or that special days are adopted for de- declaring dividends, or that it is found convenient to close the transfer-books for any purpose, does not in any way impair the legal rights of a stockholder to share in dividends subse- quently declared, although the closing of the books would to some extent embarrass the transfer of stock. . . . After a div- idend is declared, each stockholder has a right in severalty to his particiilar proportion ; and this right cannot, I think, be abridged by any discrimination of the directors in any form." ' (o.) Di/vidends when Declared Belong to the Registered Owners. There have been numerous contests between the I'egistered owners of stocks and persons becoming stockholders subse- quently to the declaration of a dividend respecting the rights to the latter. In those cases where a person was the registered owner of the stock at the time of the declaration and payment of the dividend, the authorities seem to be unanimous in awarding ' As to how far the usage of the waniok Co. 8 Hnn, 459, aff 'd 71 N. Stock Exchange may affect a right Y. 593 ; Chap, ou Usage, pp. 368, to dividends, see Hill vs. Newicha- 369. 652 StochhroTcers cmd Stock Exchomgea. it to such owner, though he may have parted with his stock before collecting the dividend from the corporation.' The same rule applies where the owner parts with his stock after the declaration of the dividend, but before the time des- ignated for its payment has arrived. In such case, the divi- dend clearly belongs to the registered owner of the stock at the time of its declaration," although there are a few cases against this view.' Dividends, when declared by a corporar tion, do not pass upon an ordinary transfer of the stocks, but they remain the property of the transferror in the absence of special agreement. And this is the settled rule both of this country and England. The reason is that when a dividend is declared it becomes a debt due from the corporation to the stockholder, who is quoad Jioo a creditor of the company ; ac- cordingly, as an assignment of shares of a corporation mere- ly transfers a proportionate part of the capital, or assets and property, a dividend, which is a debt due from the corpora- tion to a stockholder, does not and cannot pass with an ordi- nary transfer of the shares. There are many cases which illustrate this proposition; but the case of Hill vs. E^ewichawanick Co." most striking- ly and forcibly presents the prevailing doctrine of the courts. And on a stock contract for the sale of shares deliverable at a future time, the purchaser is entitled to dividends accruing between the sale and the delivery ; and the purchaser's rights ' Spear vs. Hart, 3 Eobt. (N. T.) C. C. 347 ; March vs. Eastern E. E. 420; Lombardo vs. Case, 45 Baib. Co. 43 N. H. 515. 95 ; 30 How. (N. Y.) Pr. 117 ; Hyatt • Manning vs. Quicksilver Mining vs. Allen, 56 N. Y. 553; People vs. Co.24 Hun,360; Boardman vs. L. S. Assessors, 76 id. 202; Hill vs. Newioh- & M. S. E. E. Co. 84 N. Y. 157. awauick Co. supra; Bruudage vs. ' Burroughs vs. North Carolina E. Alleu, 1 N. Y. Sup. Ct. (T. & C.) 82 ; E. Co. 67 N. C. 376. Heath vs. Erie E. E. Co. 8 Blatohf. • 48 How. (N. Y.) Pr. 427 ; 8 Hun, 459, aff'd 71 N. Y. 59a Dividends Belong to Registered Owners. 653 are the same, whether the seller at the time of making the contract had the shares on hand or not.' And, as we have seen," the courts in the State of New York have refused to allow this well-settled principle of law to be controlled or set aside by the nsage of Brokers, although, in the case which we have just alluded to,' Mr. Chief-justice Davis intimated that such a usage might avail in a proper case. But since then the Superior Court, General Term, of New York has again pronounced against that view." The last-mentioned case was an action upon a contract known as a " put " in stock opei'ations, allowing bearer to deliver cer- tain stocks to defendant at a specified price within a specified period, as follows : " New York, May 23, 1878. " For value received, the bearer may deliver me ou one day's notice, except last day, 'n-hen notice is not required, 500 shares of the commou Btook of the Chicago & Northwestern E. E. Co., at 49 per cent.; any time in thirty days from date. The undersigned is entitled to all the dividends or extra dividends declared during the time. Expires — 13 — four o'clock P.M. E. S." The controversy arose out of a dispute as to who was entitled to a dividend of 3 per cent, which was declared on the 16th of May, before the contract existed, and was payable on the 27th of June, after it had expired. The court held that the contract was plain, and that evidence offered and admitted by a referee, under exception, for the purpose of explaining or varying the import and legal effect of the written instru- ment, on the ground of custom or usage among a class of dealers, was improperly allowed ; that the only dividends the defendant was entitled to claim under the clause in the con- ' Currie vs. White, 45 N. Y. 823. ' Chap, on Usages, pp. 368, 369. To same effect. Black vs. Homers- ' Hill vs. Newichawauick Co. supra, ham, 39 L. T. E. (n. s.) 671. See Hy- ' Hopper vs. Sage, 12 N. Y. Week. att vs. Allen, 56 N. Y. 553. Dig. 78. 654 Stockr'brdkers and Stocic Exchanges. tract were sucli as were declared during the time of thirty days which was the limit of the privilege ; that, under a con- tract to sell shares of stock, the dividend payable after the day for the delivery of the stocks does not pass with the stocks. Dividends are not an incident to stocks so as to pass with them ; they belong to the corporation, and are divided among the shareholders, and may be sold or assigned without parting with the stocks. They are not earned, like interest, by money represented in the stock. The custom or usage received by the court below was therefore improperly admit- ted as against the settled rules of law. So under a sale of stock paying, therefore, par value, with a pro rata propor- tion of an anticipated dividend, the buyer can recover back the portion of the price paid upon the anticipation of the dividend, upon the event proving that no dividend had been earned.' So where a contract in writing was made for the sale of cer- tain stock, and all the "right, title, and interest" of the holder therein ; and on the following day an assignment was made by the seller, and accepted by the buyer as a full performance of the contract, and this assignment transferred the stock " and all future benefits and dividends thereof," it was held that the title to a dividend declared prior to the sale, but not drawn by the seller, did not pass." The subject of the liability of a corporation for dividends to the owner of stock not appearing on its books was re- cently considered by the General Term of the Supreme Court in New York." In that case, the corporation issued a certifi- cate to one B. for ten shares of stock, containing the usual statement that such stock was transferable only on the books ' Eiggs vs. Tayloe, 2 Cranoli C. Ct. ' Brisbane vs. Del., Lack., & W 687. R. R. Co. (N. Y. Sup. Ct., Gen. Term, "Harper vs. Raymoud, 3 Bosw. First Dept.)N.Y. iJaWw i^eo. Nov. 30 29 ; 8. c. 7 Ab. (N. Y.) Pr. 142. 1831. ' Dividends Belong to Registered Owners, 655 of tlie company upon surrender of the certificate. On the 1st of January, 1856, B. executed a jjower of attorney en- dorsed on the certificate, appointing the plaintiff his attorney irrevocable to sell and transfer the stock ; bnt no transfer ■was made upon the books of the company until after the death of B., in 1876. In the intermediate time, stock and cash dividends had been declared, and credited upon the books of the company to B., who appeared as the owner of the stock, and they were paid over to the administrator of B., without any notice of the plaintiff's rights in the premises. Whereupon the plaintiff brought suit to recover these divi- dends from the company ; but the court held that the action could not be maintained. The court, per Daniels, J., said : " As long as the books of the company contain evidence that the person who received the certificate was still to be regard- ed as the owner of the shares, it had an authentic record upon which it could lawfully act; and that determines the disposi- tion which should be made of the dividends.' B. stood upon the books of the company as owner of the shares; nothing appeared to impeach his title, and as they were only trans- ferable upon the surrender of the certificate, as long as that had not been done no other alternative existed than to re- gard him as still the owner of the shares. To obtain the divi- dends upon the shares he was not bound to produce the cer- tificate which had been issued for the stock, but he could do so upon the fact of his recorded title, as long as no evi- dence appeared from which his rights could be impeached or questioned. Payment to him under such circumstances ' Similar reasoning was adopted corporator and the corporation, the and a lilie result reached in the case records of the corporation or its of Cleveland etc. Eailroad Co. vs. stock-book are the evidence of their Kobbins, 35 Ohio St. 483. See also relation. Meetings of the stockhold- Bank of Commerce's Appeal, 73 Pa. ers, elections, dividends, etc., are reg- St. 59, holding that, as between a ulated by this record. 656 Stockrbrdkers and Stock Mechwnges. would be a lawful and proper disposition of the divi- dends." " But thei'e may.arise cases where the company would not be justified in adopting this well-known practice, although these instances will necessarily be of rare occurrence ; for the cor- poration may possess such direct and positive notice that the stock is improperly registered in the name of one not the owner as to render it liable to the true owner if it should pay the dividend in face of such knowledge. The question would then resolve itself into one of payment of money or de- livery of property to one possessing the indicia of title or ownership, but known not to be such owner by the party pay- ing the money or delivering the property ; ' and the tnie own- er of the stock, it would seem, could apply to the courts to prevent the payment to the nominal and registered owner of the dividend or interest accruing on the same. There is another class of cases in respect to ownership of dividends — viz., in contests between persons claiming under wills or deeds of settlement, and as these controversies have all depended upon the particular language used, or have been determined upon the principles heretofore alluded to, we con- tent ourselves with merely citing them in the notes." ' The court cited to sustain these 280 ; Jones vs. Ogle, L. E. 8 Ch. 192 ; views, Smith vs. American Coal Co. 42 L. J. Ch. 334 ; 21 W. E. 239, aff'g 7 Lans. (N. Y.) 317 ; McNeil vs. Tenth 14 L. E. Eq. 419 ; Donaldson, vs. Don- Nat. Bank, 46 N. Y. 325 ; Manning vs. aldson, 10 L. E. Eq. 635 ; 23 L. T. (n. Quicksilver Mining Co. 24 Hun (N. s.) 550; In re Hopkins, 18 L. E. Eq. Y.), 360. See also Cleveland & Mab. 696 ; 30 L. T. (n. s.) 627 ; Pollock vs. E. E. Co. vs. Tappett, Supr. Ct. Ohio, Pollock, 18 L. E. Eq. 329 ; . 44 L.J. 1 Am. Law Eev. ( n. ». ) 396, where Ch. 168. See also as to apportiona- the same conclusion was reached. bility of dividends. Hartley vs. Allen, ' Consult, in this connection, N. Y. 4 Jur. (n. s.) 500 ; 27 L. J. Ch. 621 ; In & New Haven E. E. Co. vs. Schuyler, re Maxwell, 1 Hem. & M. 610 ; Ward- 34 N. Y. 30, 81, 82 ; Bridgeport Bank roper vs. Cutfield, 10 Jur. (u. s.) 194 ; vs. N. Y. & New Haven E. E. Co. 30 33 L. J. Ch. 605 ; Donaldson vs. Don- Conn. 270. aldson, supra ; Pollock vs. Pollock, ^ Brundage vs. Brundage, 60 N. Y. supra. 544 ; Bates vs. Mackinley, 31 Beav. . Pledges of Stock C&irtificates. 657 VII. Pledges of Stock Certificates. We have already examined at considerable length in the third chapter of this work ' the relation which a Stock-broker bears to liia Client, and the rights and duties of the former over stock certificates which he may be carrying. for his Client. The law of pledges is a distinct and voluminous subject, which has already 'been separately treated of by several author^ ; and it is no part of this work to go over the same ground, except so far as Stock-brokers are directly concerned in the cases, or where they seem to bear directly on that business. But we may summarize the law upon the subject of pledges of stock certificates as follows : 1st. It is well settled now that certificates of stock may be pledged or delivered as collateral security for loans ; though this ^yas formerly doubted, because in order to constitute a pledge there must be an actual delivery of the thing pledged to the pledgee,'' and there ca-n be no transfer of possession of shares in a corporation except by a written transfer. The doctrine formerly was that the written transfer of stock by way of security passed indeed the legal title thereof, and thus the transferee assumed the relation of mortgagee to the equitable owner, but that by such transfer the transferee did not acquire the special property therein, together with pos- sessioii, which constituted him a pledgee. These were the pretensions of counsel in the well-consid- ered case of Wilson vs. Little,' and it was there decided and finally settled in' the State of New York that there was no reason in law why stock could not be pledged. It was, in- deed, fully recognized that possession must uniformly accom- pany a pledge, and that the transfer of the legal title was ' Pp. 101, 141 et seq. = 2 N. Y. 443. . , 'Casey vs. Cavaroc, 96U. S. 467. . 42 658 Stockr'brokers and Stock Exchanges. necessary to a change of possession, because there could be no manual delivery of the stock ; but it was held that there was nothing in these facts inconsistent with the nature of a pledge, and that it was snfiBcient to constitute a pledge of stock that its certificate should be put by a written transfer within the power of the pledgee, so as to be made available to him for the satisfaction of his debt.' For the sake of perspicuity, it is not irrelevant to notice here the well-settled distinction between a mortgage and pledge of stocks, to which a passing allusion has already been made. A mortgage is a sale of the stock by way of securing a debt, with a condition that if the mortgagor pays the debt the sale shall be void ; a pledge contains no words of sale, but an au- thority, if the debt is not paid, to sell the pledge for that pur- pose. In the former case the title passes to tlie mortgagee ; in the latter the title remains in the pledgor, although posses- sion is given to the pledgee." , In a leading Massachusetts case on. this subject " the distinc- tion was thus expressed : " If regarded as a pledge, it is more in the nature of a trust than if regarded as a mortgage. The principal reason assigned for not regarding a "mortgage as strictly a trust is that the mortgagee has a property in the thing which he may make absolute, in case the condition is not performed, by foreclosing the right of redemption. Bnt the pledgee cannot do this. If the debt or duty is not dis- charged, he must avail himself of the security by selling the thing pledged, and not by foreclosure ; and he holds the avails ' But the validity of the pledge of Fowle vs. Ward, 113 id. 548 ; Fish- stock was sustained in the State of er vs. Brown, 104 id. 259; Day vs. New York as early as Nourse vs. Holmes, 103 id. 306. Prime, 4 Johns. Ch. 490 (1820). See » Lewis vs. Graham, 4 Ab. (N. Y.) also Dykers vs. Allen, 3 Hill, 593; s. Pr. 106, 109; Browuell vs. Hawkins, c. 7 id. 497 ; Vaupell vs. Woodward, 2 4 Barb. 491 ; and see Ceas vs. Bram- Sandf. Ch. 143 ; Eomaine vs. Van Al- ley, 18 Hun, 187 ; Union Trust Co. vs. len, 26 N. Y. 309 ; and in Massaohu- Eigdon, 93 111. 458. setts, Fay vs. Gray, 124 Mass. 500; ' Newton vs, Fay, 92 Mass. 505. Pledges of Stock Certificates. 659 of the sale in trust to discharge the debt or duty, and, if any balance remains, to pay it to the pledgor." Probably some confusion and difficulty have arisen in distin- guishing a pledge of stock from the mortgage of it, from the fact that a change of possession of stock, from its incorporeal nature, can be effected only by a written transfer which in form passes the legal title, and in this respect assimilates it to a mortgage. In general, whenever there is a transfer of stock as collateral security, unless it is in form a mortgage — that is, with a clause of defeasance — the presumption is a fair one that it is intended for a pledge and not for a mortgage ; that the owner does not intend to part with the title so long as he has the right to its restoration, unless he does so in express terms.' And the instrument evidencing the pledge may be in the form of an absolute transfer, leaving the purpose and consideration of the transfer, and its true nature as a pledge, to be proved by parol." Where stock has been actually sold and trans- ferred in payment of a debt, and the transaction has become executed and complete, its character cannot be changed by subsequently according a right to redeem it ; but even in such a ease it seems that the transaction is to be viewed in the light of surrounding circumstances, and parol evidence admitted to show its true nature.' If, however, the owner of stock pledges it by an instrument in the form of an absolute transfer, he does so, as we have seen, at his own risk ; for he thereby in- vests the pledgee with the apparent ownership of the stock, and puts it in his power to pass a title to a bona fide purchaser which will be paramount to his own.* But a ' Mechanics' Building Assoc, vs. Merobants' Bank vs. Cook, 21 Mass. Conover, 14 N. J. Eq. 219 ; and see 405. Wilson vs. Little, 2 N.Y. 443; Has- = Lauman's Appeal, 68 Pa. St. brouok VB. Vandervoort, 4 Sandf. 88. 596 ; Brewster vs. Hartley, 37 Cal. 15. * Ex parte Sargent, in re Taliiti 'Newton ts. Fay, 92 Mass. 505; Cotton Co. L. K. 17 Eq. 273; Talty 660 Stookrbrohers and Stock Exchanges. loaq in bonds instead of money has been held not to be a sale.' 2d. A pledge is perfected by the delivery of the certificate to the pledgee, with a power in blank to transfer. Stock, being incorporeal in its nature, is not capable of man-, ual delivery, and the mere delivery of its certificate does not ti'ansfer the stock — that is, does not pass the legal title." But mere, delivery of the certificate, it seems, does convey to the pledgee an equitable interest in the stock which a court of equi- ty will protect by decreeing a sale of the stock for his benefit.^ The ordinary form of transfer by which a pledge of stock is effected both in this country and in England is by delivering to the pledgee of the certificate of stock with written transfer of tlie same, which is usually endorsed on the certificate, and a power of attorney authorizing a transfer of the stock on the books of the corporation. Very often these trail sfers and powers of attorney are executed in blank, leaving the pledgee. to fill in bis own name.' The pledge is often effected by a written transfer, endorsed on the certificate or otherwise, but absolute in its fprm and without any note or memorandum indicatiiig the pledge,' leaving the true nature and consideration. of the transaction to be established by parol, as it may be,' It is a better practice, and one necessary for the protection of the pledgor, for him to take from the pledgee a receipt or mein- orandum showing the precise nature of the transaction ;' but vs. Preedmnn etc. Trust Co. 93 U. Ex parte Sargent, L. R. 17 Eq. 273. S. 321 ; and see cases cited at p. And this method of pledging stock 599 et seq. is effectual and lawful uuless the act ' Quackenbos vs. Sayer, 4 Sup. Cfc. of incorporation or articles of asso- (T. & C.) 424. ciation require a deed (id.). ! See Merchants' Bank vs. Livings- » McNeil vs. Tenth Nat. Bank, 46 ton, 74 N. y. 223 ; Wilson vs. Little, N. Y. 325 ; Merchants' Bank vs. Liv- 2 id. 443. ingston, 74 id. 22.3. = Johnson vs. Dexter, 2 MaoArth, " Newton vs. Fay, 92 Mass. 505. 530. ' Ogden vs. Lathrop, 65 N. Y. ♦ Ogdeu vs. Latlu-op, 65 N. Y. 153; 158. Pledges of Stock Certificates. 661 even this, as we have seen, would not afford the pledgor ade- quate protection as against the equities of third personSj un- less incorporated with or so referred to in the written transfer of the stock as to give notice of the pledge to all who should deal with the stock. The simple insertion of the ■ Higgins vs. Senior, 8 Mee. & W. 72 ; Upton vs. Gray, 2 Greenl. 373 ; 844 ; Beckham vs. Drake, 9 id. 96 ; 11 Hyde vs. Wolf, 4 La. Eep. 234 ; Clea- id. 317 ; Beebe vs. Eobert, 12 Wend, land vs. Walker, 11 Ala. 1064. 413 ; Taintor vs. Prendergrast, 3 Hill, = 27 L. J. Cli. 237. 686 Stochhrokers omd Stock Exohwnges. bonds, should give him his check for a sum sufficient to en- able the Stock-broker to meet the check he was to give to the plaintiff. Accordingly, the bonds were obtained by the Stock- broker on his crossed check, and delivered to the defendant, but the latter refused to give his check for the sum required, and the Stock-broker's crossed check, in passing through the Clearing-house, was dishonored. lu a suit praying that the defendant might be ordered to deliver up the bonds or to pay the plaintiff the amount of his advances thereon, and for an injunction restraining the defendant from parting with the same in the interim, it was held that the plaintiff was entitled to judgment ; that he was not deficient in caution in taking the crossed check, and that he was not bound to inquire whether it would be honored before delivering the bonds ; and that the defendant's conduct amounted to zxi ex post facto fraud at least, from the consequences of which he could not es- cape. (e.) LiaMlity of Brolcers to their Own Clients. We have already discussed and stated the liability of Bro- kers to their Clients in the third chapter of this work,' and it will be sufficient to notice in this connection the form of the actions by which this remedy may be enforced. In equity, the best -known remedy to enforce a liability where there have been numerous transactions between the Client and Broker is by bill for an accounting. It is one of the settled principles of equity jurisprudence that where the relation of principal and agent, or Broker, exists, a bill in equity will lie to compel an accounting. And the liability to do this follows, as a matter of course, from the admission or establishment of the agency." By means of a bill filed by the ' P. 123 et seq. Sandf. 646 ; Story vs. Brown, 4 Paige " 1 Daniel's Cli. Pr. & PI. (4tli Am. Ch. 111. For general principles of ac- ed.) 856 ; Palmer Vs. Palmer, 13 How. tious against agents for acconnting, (N. Y.) Pr. 363 ; Wiggins vs. Gans, 4 see 1 Jac. & Walk. 135 ; 14 Ves. 500, Liability of Brokers to their Own Clients. 687 principal, or Client, against the agent, or Broker, all of the transactions may be investigated, and a fuller and more satis- factory result reached than by any other means. The rule of practice in bills for an accounting under the old chancery system, which has not been substantially modi- fied by a codification of the methods of practice, or by the abolition of legal and equitable actions into one general remedy,' was well stated in the case of Wiggins, vs. Gans," as follows : " An accounting party, however, does not stand in the situation of a mere witness. The rendering of the account is a duty which he is required to perform. He is to furnish materials which are to be the subjects of examination and proofs of the witnesses — materials which, in most cases, can be furnished by him alone. The decree to account implies that he has failed in obligations which he owed to his princi- pal, and is a mode of compelling him to do that which he ought to have done voluntarily. There is, moi'eover, a mani- fest propriety in requiring a party who has acted in a fiduci- ary capacity for another as factor, agent, or trustee, who in that capacity has received and disbursed moneys, not only to furnish a full and true account of his receipts and disburse- ments, but to do so under the solemnity of an oath." But where, on a bill filed for an accounting, there is no admission in the answer of the agency, the burden is on the plaintiff, in the first place, to establish that fact.° After the fact is established, the usual course in a court of chancery is to refer the matter to a master to state the account ; but, in those States where codes of procedure exist, the general course of practice would be to refer the whole case to a mas- ter or referee in the first instance, although this disposition rests largely in the discretion of the courts. 510 ; 8 id. 49 ; 13 id. 47, 53 ; 4 Madd. 'Id. » 4 Sandf. 646. 373 ; 1 Chit. Gen. Pr. 509, 868, 869; =1 Daniel's Ch. Pr. & PI. (4tli Am. Ketcbum vs. Clark, 22 Barb. 219. ed.) 856. 688 StOGkr'brdkers P. 123 et seq. 584 ; Whitehouae vs. Moore, 13 Ab. Pr. " Id. See also Stocking vs. Sage, 142 ; Merwiu vs. Hamilton, 6 Duer, 1 Conn. 522; Powell vs. Newburg, 244. 19 Johns. 284 ; Adamsou vs. Jarvis, 4 ° Merwin vs. Hamilton, 6 Duer, Bing. 66. 244 ; Knight vs. Cambers, 15 C. B. ^ Ante, p. 123 et seq. ; Laoey vs. Hill 562 ; Same vs. Fitch, id. 566 ; Gibson (Crowley's Claim), 43 L. J. Ch. 551 ; vs. Crick, 1 Hurl. & C. 142 ; Allan vs. 22 W. R. 586 ; L. E. 18 Eq. 182 ; Bie- Sundius, id. 123. Requisites of com- derman vs. Stone, 36 L. J. 1 C. P. 198 ; plaint in action by Gold-broker for 8. c. L. E. 2 C. P. 504. money laid out, etc., in transactions * Mortimer vs. M'Callan, 6 Mee. & in gold for account of Client, Sohepe- W. 58 ; Hearue vs. Keene, 5 Bosw. ler vs. Eisner, 3 Daly (N. Y.), 11. Ba/aker's Lien. 699 2. Banker's Lien. Stock-brokers frequently act as bankers, in which case they have an additional remedy through the instrumentality of what is known as a " banker's lien ;" and, as will be seen hereafter,' it appears by analogy that the Stock-broker, when he acts in that capacity singly, has also the right to invoke this lien for his protection. We shall first examine the nature of a banker's lien, and then consider how far the principles upon which it rests ap- ply to the relation of a Stock-broker. The established rule is that bankers have a general lien upon all notes, bills, and other securities deposited with them by their depositors for the balance due to them on general ac- count." The true principle upon which all banker's lien must be sustained is that there must be credit given upon the credit of the securities, either in possession or in expectancy.' The term " securities," as used in respect to a banker's lien, is lim- ited to promissory notes, bills of exchange, exchequer bills, coupons, bonds of foreign governments, etc. ; and does not, in the absence of special agreement, apply to a deed of lands in the Banker's hands." The general lien of bankers is part of the law-merchant, and will be judicially noticed by the ' P. 711. tlon of debtor and creditor ; the " Story on Agency, § 380 ; Wbar- money is tlie money of tlie bank, ton on Agency, § 688 ; Morse on Bank- and there would seem to be no place ing, 42 ; Davis vs. Bowsber, 5 T. K. for the doctrine of lien (Dawson vs. 488 ; Bolton vs. Puller, 1 Bos. & P. Keal Estate Bank, 5 Pike (Ark.), 283 ; 539 ; Bolland vs. Bygrave, 1 Ky. & Marsb vs. Oneida Bank, 34 Barb. M. 271 ; Jourdaine vs. Lefevre, 1 Esp. 298 ; Fourth Nat. Bank of Chicago 66; Scott vs. Franklin, 15 East, vs. City Nat. Bank of Grand Eapids, 428 ; Brandao vs. Barnett, 12 CI. & 68 111. 398). Pledged property can- F. 787. And the lien has been held not be held for general lieu (Duncan to extend to moneys on deposit vs. Brennan, 83 N. Y. 487). (Ford vs. Thornton, 3 Leigh, 695 ; = Russell vs. Hadduok, 3 Gilm. State Bank vs. Armstrong, 4 Dev. 233. (N. C.) 519). But the deposit of ♦ Wylde vs. Kadford, 33 L. J. Ch. money with a bank creates the rela- 51. 700 Stockrbrdkers and Stock Exchanges. courts without proof of the usage upon which the same is founded.' The general rule is that the lien extends to all the securi- ties deposited with the banker where they are not so deposited for some specific purpose. But this rule is subject to modifi- cation by certain circumstances, and the cases cited in the notes fully illustrate this proposition." The rights of a banker in respect to securities in his hands have been held to go even beyond the mere right of lien ; for when his acceptances exceed the cash balance he is a holder of such securities for value,' and, as endorsee of the bill or other security, may bring an action oin the same.* So where a check payable to bearer is paid in by a depos- itor on his general account, although not credited to him as cash, the banker takes the legal as well as equitable title to the check, and may sue upon the same.* But where the party sued and sought to be made liable on the bill or ' Brandao vs. Barnett, 12 CI. & F. upon which the banker is liable, are 787 ; Story on Agency, $ 375 ; Jones paid (id. ; Bolland vs. Bygrave, 1 vs. Peppei-corne, 5 Jur. (n. s.) 140. Ey. & M. 271 ; Jonrdaine vs. Lefevre, " Where the course of dealing be- 1 Esp. 66). And even -where the tween bankers and their depositor balance is in favor of the depositor, Tvas that the customer lodged bills if that balance does not equal in payable at a future day with the amount any one of the bills or bankers from time to time, and drew other securities held by the bank, upon them for any money he wanted the bank may retain all (BoUand in advance, and the bankers used to vs. Bygrave, supra). And where the select out of the bills in their hands banker sues on any one of such se- such as they pleased and were near- curities, the customer cannot set off est to the sura advanced, and dis- such balance, for the court cannot counted these bills, debiting the de- say that any one acceptance in par- positor with the amount of such dis- ticular shall have the beneiit of this count in his account, it was held surplus (id.). It makes no difference that the bankers had a lien on all that the banker keeps a cash and the bills so deposited with them, discount account ; both are regarded and that they might hold the bills as parts of the general account, for that were not discounted until the which the banker has his lien (JouT- general balance was paid (Davis vs. daine vs. Lefevre, 1 Esp. 66). Bowsher, 5 T. E. 488). And the bills ' Bosanquet vs. Dudman, 1 Stark. 1. and notes so deposited may be held * Id. until other bills not yet due, and ° Scott vs. Franklin, 15 East, 428. Ba/iiker's Lien. 701 other security defends the action on behalf of the depos- itor, then the banker can only recover on the instrument; the amount of the balance in his favor on, the account, and not the face of the bill or other security.' So where a banker, in the course of dealings with a depositor, who has become bankrupt, makes advances to the latter, and accepts and dis- counts bills for him, and the depositor remits bills to the banker from time to time, any acceptances of the banker not due at the time of the bankruptcy are a good consideration, and give the banker a right to prove upon the bills deposited, but not due till after the bankruptcy. The proof must be upon the bills, and not as a cash balance.^ So where bankers allowed the firm of M. & "W., their de- positors, to overdraw their account, and M. gave the bankers his individual note for £2000 as collateral security, and W, gave his individual note for £1000 to M., who transferred it to the bankers, it was held that the bankers might sue and re- cover on the note of W.^ A bank discounted a note for a depositor for his accommo- dation, who died before the note matured — held, that the bank might retain sufficient of his cash deposit to meet the matur- ing note. The bank is a debtor to the depositor's estate only to the extent of the balance of the deposit in excess of the note ; and this is so although there are debts against the de- positor's estate of superior dignity which are not paid.* And if the depositor in his lifetime sues the bank to recover his deposit, though he could not set off at law because his note was not due, yet, upon showing in a court of equity that the depositor and his endorsers were insolvent, there can be no question of the right of the bank to stop the amount in its own hands." ' Scott TS. Franklin, 15 East, 428. 496. See also cases cited in Swift = Ex parte Bloxham, 8 Ves. 531. vs. Tyson, 16 Pet. 21, 22. ' Heywood vs. Watson, 4 Bing. * Ford vs. Tlioruton, 3 Leigli, 695. = Id. Y02 Stock-hrohers omd Stock Esuchcmges. Where, however, a bank retains a cash balance in its hands in respect to any claim which it has against its depositor, it is more properly an. appropriation of payments than an exercise of a right of lien. If the claim against the depositor is so connected with the balance appearing due on open account that both are items in a continued dealing, then the retention of the cash balance is rightful, because in truth there is nothing due. If, however, the mutual claims of bank and de- positor are unconnected, then the bank may refuse to pay over the cash balance, because it is a proper subject of set-off.' The cash balance created is still the money of the bank, and it may apply it at its election to any claim against the depositor which it may have ; and it is not the right of the depositor to make the appropriation." But where the maker of a note has funds in the bank on general deposit after the note falls due, the bank is bound to apply them in payment of the note, or the endorser is discharged." "Where money paid into a bank is passed generally to the credit of the owner, the bank does not hold it as bailee, but as owner ; and it may appropriate the deposit to any claim it may have against the depositor.* There would seem to be no lien in such cases. But if a bank receive a deposit of funds for the special pur- pose of paying certain coupons, it cannot apply such funds to the payment of another account which the depositor has over- drawn, and thus defeat the right of the holders of such cou- pons to receive payment of the same.' A bank cannot apply the balance of deposit to the payment of a note maturing in its hands, where it makes such appropriation of payment after the depositor has made an assignment for the benefit of cred- itors. Upon the execution of the assignment the balance due " State Bank vs. Armstrong, 4 Dot. * Commercial Bank vs. Hughes, 17 (N.C.)519. "Id. Wend. 94. ' McDo-well vs. Bank of Wilming- ' Bank of U. S. vs. Macalester, 9 ton, 1 Harr. 369. Pa. St. 475. Bamkm's Lien. 703 the depositor becomes the money of the assignee, and it is then too late to apply it to the payment of the maturing bill.' The rule as laid down by Morse on Banks, " that the bank has a general lien on all moneys and funds of a depositor in its possession for the balance of the general account," is too broadly stated, and needs the limitation that the balance of that account must be due and payable." Thus a bank has no right to retain the balance of a deposit to apply the same to the payment of a note not yet matured.' But the bank need not apply the deposit to the payment of a note in its hands for which the depositor is liable immediately upon the matu- rity of the note, but may prosecute the note to judgment, and then make the application. And if the depositor sue for his deposit, the bank may then set o£E the judgment.' "Where a banker holds a note of a depositor who has on deposit with the latter sufficient funds to pay it, and the banker makes an assignment for the benefit of creditors before the note matures, the depositor, in an action brought on the note by the assignee, may set off the sum due him against such note.' Where a bank holds a note of a depositor which has been protested for non-payment, and subsequently the depositor makes a general deposit of money sufficient to pay the note, such deposit, without regard to the note, does not operate as payment. It is optional with the bank whether it shall apply such deposit to the payment of the note or not ; and its fail- ure to do so does not discharge the endorser." In the case of Duncan vs. l!^ orth and South Wales Bank,' ' Beokwith vs. Union Bank, 4 * Marsh vs. Oneida Central Bank, Sandf. 604, 9 N. Y. 211. 34 Barb . 298. = Jordan vs. National Shoe and ' McCagg vs. Woodman, 28 lU. 84. Leather Bank, 74 N. Y. 467. ' National Bank vs. Smith , 66 N. Y. sjd. ' 271. '27W.E.521. 704: StOGk-hrokers cmd Stock Exehcmges. one of a firm deposited with the firm's bankers securities be- longing to himself, to secure the general balance of the firm for the time being. The firm subsequently accepted certain bills in favor of the plaintiffs, who procured the bankers to discount them. Upon the insolvency of the firm the plain- tiffs claimed that the securities held by the bankers must be applied in discharge of the sums due on the bills. The plain- tiffs claimed that they were mere sureties (the firm being the principal debtors), and were entitled to contribution, and the vice-chancellor sustained this claim. The Court of Appeal reversed this decision, holding that it could not be tolerated; that without the consent of the bankers, or their knowledge of the real position of the other parties, the plaintiffs should be treated as sureties, so as to prevent the bank from dealing in their own way with the securities they held. " No bank," said the Master of the Rolls, " which held a security, either by way of suretyship or by way of deposit from its customers, could venture to discount a bill with eight or ten names on it, without examining carefully to see if any one of the names was the name of a debtor to the bank, who had given them security ; and, if they did, they might be put in the position of being incapacitated from carrying on their dealings with their customers by varying the securities given by that cus- tomer to the bank. It shows at once that to extend the doc- trine to such a case would paralyze the business of discount- ing bills of exchange, and that it would be unwise, as far as this court is concerned, to extend for the first time the doc- trine of principal and surety, which for certain purposes ex- tends to bills of exchange, to such a transaction as this. On this ground alone I think the decision cannot be supported." ' 'Compare Gilbert vs. Marsh, 12 Hazard vs. Wells, 2 Ab. New Cas. 144 ; Hun, 519 ; Cory vs. Leonard, 56 N. Y. Wood vs. Sheehan, 68 N. Y. 365 ; also, 494, aflf'g 1 Sup. Ct. (T. & C.) 183; Gray vs. Green, 12 Hun, 598, rev'd 77 Meehan vs. Forrester, 52 N. Y.277; N.Y.615. Banker's Lien. 705 "Where securities are deposited with a banker to secure a specific sum, he cannot hold them to secure his general bal- ance.' The depositor, or his representatives, may redeem the securities bj paying the special sum which they were given to secure." The general rule of law relative to pledges is that a former debt due to the pledgee, or a subsequent debt con- tracted by the pledgor, does not authorize the pledgee to re- tain a pledge given for anpther demand, unless, from all the circumstances, there is just ground of presumption that this was the intention of the parties.' And if securities upon which a banker has declined to loan money are casually left at his banking-house, they cannot be retained by him as, secu- rity for his general balance.' Security given by a depositor to his bankers to cover a bal- ance then existing against him is not to be deemed a security for a floating balance. Accordingly, where a depositor kept three several accounts with his bankers — a private account, a partnership account, and an executorship account — which were all overdrawn, and to secure the same charged his estate with the payment " of the three several sums of money which shall or may be found due on the balance of the said several accounts," it was not a security for " such balance which shall from time to time become due." ' Where the deposit of a deed of conveyance was for the special purpose of giving a security upon one of the pieces of property described in such deed, it was held that the bankers could claim no general lien, by the custom of bankers, upon another piece of property described therein.' ' Duncan vs. Brennan, 83 N. Y. there cited; Duncan vs. Brennan, 487. supra. " Vanderzee vs. Willis, 1 Bro. C. C. * Lncas vs. Dorrein, 7 Taunt. 279 ; 21; Gould vs. Farmers' Loan & Trust Mouutford vs. Scott, 1 Turn. & E. Co. 23 Hun, 322 ; Same vs. Central 274. Trust Co. 6 Ab. New Cas. 381. ' Ee Medewe's Trust, 26 Beav. 588. = Story on Bailments, 304, and cases " Wylde vs.Eadford,33L. J.Cb.51, 45 706 Stoch-hrokers am,d Stock Exchanges. " As between banker and customer, whatever number of ac- counts are kept in the books, the whole is reallj but one ac- count, and it is not open to the customer, in the absence of some special contract, to say that the seciirities which he de- posits are only applicable to one account." Thus, where the O. C. Bank had three accounts with the A. and M. Bank — namely, a loan account, a discount account, and a general ac- count — and the O. C. Bank were in the habit of applying to the A. and M. Bank for accommodation loans of considerable amount, which were entered in the loan account, and they from time to time deposited securities to meet these loans, and, having drawn upon the A. and M. Bank for a large sum, deposited with them three accommodation acceptances of the E. Bank by way of collateral security, the A. and M. Bank claimed a lien on theSe acceptances, so far as they were not required to cover the balance of the loan account, for the de- ficiency in the general account — which was allowed against the E. Bank in the winding-up of the same.' But if a depositor keep two separate accounts with his banker, but not in a separate character, he may offset one account against the other. The corporation of P. kept three separate accounts with plaintifE's banking-house — viz., the " corpora- tion account," the Board of Health account, and the bath and wash-house account. The corporation was debtor on the cor- poration account, but a creditor on the last two accounts, and sought to set off the same. The court held that the corpora- tion of P. was the same person who owed the money and to whom the money was owing, and therefore the set-off was allowed." Where the securities are placed in the hands of the banker for some special and particular purpose, the lien does not at- : lu ro European Bank, L. E. 8 Ch. ' Pedder vs. Preston, 9 Jur. (n. s.) App. 41. 496. Banker'' s Lien. 707 tach. Thus where B., who acted as agent for a foreign corre- spondent, took certain exchequer-bills from a tin box which he kept at his bankers', and gave them to the bankers to be ex- changed for other bills and to collect the interest, which they were in the habit of doing in respect to such bills, and before B. came to take back the exchequer-bills and return them to his box the bankers paid certain acceptances of B. which ex- ceeded the balance of his account, and he subsequently became bankrupt, it was held that the bankers had no lien on the exchequer-bills for their balance of account, and that the owner of the bills, the principal of B., could recover.' Securities given to the bank for a fixed and definite sura are not to be treated as securities for the balances of the bank- ing account which may become due from time to time. And the account in respect to such securities must be kept separate from the general banking account, and interest cannot be com- pounded as in the general account." Where a depositor keeps a private account with his bankers, and also a trust account, and he pays moneys into his separate account from the trust account, with the knowledge of the bankers, the bankers cannot retain such moneys against the parties entitled to the same.' The rule is, that where the security deposited by the depositor to cover any balance against him is subject to a trust, such trust must prevail as against the banker's lien, although the banker had no notice of such trust being attached to the security ; ' but the consent or acquiescence of the cestui que trust might alter the case.' And where a trustee, holding certain shares in trust, enters into an agreement with a bank to transfer to it such shares as ' Brandao vs. Barnett, 12 CI. & F. ' Bodenham vs. Hoskyns, 2 De 6. 787. M. & G. 903. > Mosse vs. Salt, 32 Beav. 269 ; * Manningford vs. Toleman, 1 Coll. Grant vs. Taylor, 3 J. & S, (N, Y.) 670. 338. ' Id. See also Lord Bolingbroke's Case, 1 Sell. & Lef. 346. Y08 Stock-hrdkers amd Slock Exchanges. collateral security for a loan, the equity of the cestui que trust will prevail over that of the bank, and it cannot retain the same to cover its advances.' If the trustee sell the original trust shares, and subsequently to such sale deals in the same kind of shares on his own ac- count, and if at any time when he is called upon to account for such shares he is found in possession of similar shares, although not the oi;iginal trust shares, he will be considered as trustee to the extent of the number of shares he is bound to have in his possession as such trustee ; and he will be so held against the claim or lien of the bank." So where a trustee deposits with his bankers mortgage deeds which he holds in trust to secure a loan to him individ- ually, the bankers have no lien on the same, unless the cestui que trust have been guilty of negligence. And where a trus- tee invested trust funds in a mortgage which he took in his own name, and in which mortgage other moneys were invested not included in the trust fund in question, the court held that it was not negligence in the cestui que trust to leave the mortgage deed in the hands of the trustee, they holding a written declaration of trust outside of the mortgage. The trustee, as such, probably had a right to hold the deed, espe- cially as the mortgage covered some of his own money.' In the case of Jones vs. Peppercorne,' Vice-chancellor "Wood held that where securities were left with a banker for safe custody, and he fraudulently deposited them with his Broker as security for advances made to him, the Broker might hold them as against the true owners until their lien for a general balance of account was satisfied. In this case, however, the bonds were payable to order.' ' Murray vs. PiDkott, 12 CI. & F. sey, 30 L. J. Ch. 421. See also Eob- 764. eits vs. Croft, 24 Beav. 223. ' Id. ♦ 5 Jur. (n. s.) 140. ' Staokhouse vs. Countess of Jer- ' The following cases illustrate banker's Lien. 709 Where a depositor of a bank authorizes a trustee of a fund of which he is a cestui que trust to pay to the credit of his account with the bank moneys that are coming to him from the trust, the bank acquires a good lien, which is not counter- mandable.' And a country banker sending bills to his London agent, endorsed generally to receive payment of them, the bills, on the bankruptcy of the country banker, are not lost to the owners of them, but the London banker has a lien upon them for any balance due from the country banker.' And a depositor, remitting bills to his bankers to meet acceptances which the bankers fail to pay, may recover the bills or their proceeds from the bankers or their assignee, sub- ject to any lien upon the same which the bankers may have/ A bank receiving a bill for collection, so endorsed that they have notice that the parties sending it only held it for collec- tion, cannot retain out of the proceeds for a general balance due the bank from the party from whom they so receive the same. And an endorsement, " Pay J. L. & Co., or order, for collection," is sufficient notice." Whether deposits are intended as security for a general balance must be, to a great extent, a matter of evidence. Pre- vious dealings between the parties is of importance as show- ing the true intent." Where there is an account between a firm and the bank, and another account with one particular member of the firm, the bank has no lien upon the balance due upon the separate account of the individual partner for a balance due to the this question still further : Frazer Walker, 2 W. Bl. 1154 (note), 9 East, va. Jones, 17 L. J. Ch. 353 ; Joyce vs. 13. De Moleyns, 2 Jo. & Lat. 374. = Ziuok vs. Walker, snpra. ' Ex parte Steward, 3 Mont. D. & * Cecil Bank vs. Farmers' Bank of D. 265. Maryland, 22 Md. 148. = Ex parte Froggatt, 3 Mont. D. & " See Grant vs. Taylor, 3 J. & S. D. 322. To same effect, Zinck vs. (N.Y.)349. YIO Stock-lroTcers and Stock Exehamges. bank from the firm.' And where a firm is sued by the bank to recover a balance due it, the firm cannot set off a balance of account due from the bank to an individual partner." And although the individual partner, between the time of the suspension of the bank and its bankruptcy, assigns his balance of account to bis firm, and directs the bank to place such bal- ance to the account of the firm, such assignment will not en- large or change the right of lien or set-off.' So if an individual member of a firm deposits securities with the bank to secure his separate indebtedness to it, and transfers such securities to his firm subsequent to their bank-, ruptcy, the bank has no lien upon the securities for a debt due it from the firm.* Although bankers may safely advance money upon the security of stock or shares deposited with them by any one, where the bankers have not notice or reason- able cause to believe that the stock or shares belong to anoth- er, yet when they receive notice that such stock or shares belong to another person, the stock or shares can then only be a secu- rity for the balance due to them at that period. Thus, where the person making the deposit of the stock upon which the bankers made a loan wrote to the bankers that they had been requested by their " principal " to extend the time of the loan on the stock, it was held that this gave the bankers notice that the stock belonged to another.^ Where a special contract is made inconsistent with a right of lien, as where a solicitor takes time-notes for his services, the lien is good.° "If a security is taken for the debt for which the party has a lien upon property of the debtor, such security being payable at a distant day, the lien is gone." ' ' Watts vs. Christie, 11 Boav. 546. ' Locke vs. Prescott, 32 Beav. 261. ' Id. ° Cowell vs. Simpson, 16 Ves. 275. ^ Id. On the above point, see the cases * Ex parte M'Konna, 30 L. J. Bank, cited in note to this case. 20. ' Hewison vs. Guthrie, 3 Scott, 311. Stock-lroJcer's Lien. 711 Where one having a lien upon a chattel in his possession, upon its being demanded by the owner, does not disclose his lien, but claims to be the owner, he is estopped from setting up his lien in an action to recover possession.' 3. Stock-broiler's Lien. An agent generally has a lien upon the property committed to his care for all his commissions, expenditures, advances, and services made and performed in and about the property so in- trusted to his agency ; and Stock-brokers, being a well-known class of agents, come within the operation of this rule." The position of a Stock-broker buying stocks on a margin is very similar to that of a factor who holds property consigned to him for sale, and upon which he makes advances. He is in possession of the property of his principal, he has all the in- dicia of title, he can sell the stock in his own name, and when he sells he can retain his advances from the proceeds. The relation of pledgor and pledgee exists, as in the case of factors. He may sell upon notice to secure his advances, where the mar- gin is not made good. And he may even repledge the stock for his own debt to a third person.' So that a Client may often invest the Broker with the office of a factor. And if an anal- ogy between the many rights and duties of a Stock-broker, purchasing stock on margin, and an ordinary factor, wer^ suf- ficient to establish the right of a general lien, then it would seem that it might well be allowed to exist. But where the Broker advances the money to pay for the stock which he is employed to purchase, he stands in the position of pledgee of the stock so purchased, and may hold- the same till his ad- vances are paid, as we have seen in another connection. And in such a case he would have a lien for his commission also.' ' Maynardvs.Anaer8on,54N.Y.641. ^ Wood vs. Hayes, 81 Mass. 375. ' Story on Agency, §5 373-375. * Hoy vs. Keade, 1 Sweeny, 626. 712 Stockrbrdkera and Stock Mochanges. Mr. Story, on this subject, says ; " When a Broker is iutrasted with negotiable notes endorsed in blank, for sale, he becomes rather a factor than a Broker; for he is then intrusted with the disposal and control of them, and may, by his negotiation, pass a good title to them. A Broker is often both a factor and Broker. When a Broker becomes possessed of the thing abont which he is employed, he acquires, equally with a factor, a lien for his commissions — as, for example, an insurance Bro- ker having possession of a policy." ' Liens are either particular or general ; the former being limited, to what is due in respect to services performed in some particular matter, the latter extending to what is due on a general balance of account.' Particula;r liens arise either by operation of law or by express contract, or by an implied con- tract growing out of the usage of trade, or from the previous dealings between the parlies. General liens are not favored in law, and consequently only arise out of either of the two last-mentioned sources — viz., special contract or usage.' The instances in which liens arise by operation of law are special, and very few in number. Liens at common-law were first al- lowed where some, duty was imposed by law to receive the goods upon which the lien is claimed, as in the case of carriers or innkeepers; or where the lienee had at his peril, labor, and expense, rescued the goods from loss at sea, as in the case of salvors.* Thus auctioneers have been allowed to have a lien for their charges, because of their duty to take the goods into their possession.' ' Story on Agency, § 34, n. 3. See • 3 Parsons on Contracts, 235 ; Hnt- also McKenzie vs. Nevius, 22 Me. chins vs. Olciitt, 4 Vt. 549; Grinnell 138 ; 2 Ciit. on Com. and Manf. 210, vs. Cook, 3 Hill, 485 ; Eivara vs. Gbio, 211, 541 ; Blunt's Com. Dig. oh. 15, p. 3 E. D. Smith, 264. 230 ; 1 Bell Coram. 386 (see 409, 4th ' Williams vs. Millington, 1 H. Bl. ed.); id. 478 (5th ed.). 81; commented upon and oxphiined " Story on Agency, § 354. in Steadman vs. Hockley, 15 M. & ' Id. 355, W. 553. Broker's Lien. 713 Liens at common -law were afterwards extended to the case of tradesmen and ai-tisans to whom goods were deliv- ered to perform some service upon them for their altera- tion or improvement.' And the benefit of this right has been claimed and allowed by many trades which were un- known to the common - law." And if Stock - bi'okers have a lien at common -law for their commissions, it must be by extending this tradesman's or artisan's lien to their busi- ness.' But, irrespective of apparent exceptions, the prevailing doc- trine appears to be that no lien attaches except where work is to be done on a chattel to improve it, or to increase its value; but where it is merely delivered to a person to do anything with it or in respect of it, the lien cannot be sup- ported.* In the case of Steinman vs. Wilkins,' a much more liberal view of the scope and application of the law of particular liens was taken than in any of the above cases ; and the re- stricted doctrine, that the service or disbursement must be such as to add to the value of the thing in respect to which the right of lien is claimed, is criticised and disapproved. In the above case it was held that a warehouseman has a specific, not a general, lien ; but he may deliver a part and retain the residue for the price chargeable on all the goods received by him under the same bailment, provided the ownership of the whole is in the same person. ' Story ou Agency, 353; Bevan vs. eon vs. Martin, 40 N. H. 88 ; Stead- Waters, 3 C. & P. 520; Scarfs vs. man vs. Hockley, 15 M. & W. 553; Morgan, 4 Mee. & W. 270 ; Jackson Sanderson vs. Bell, 2 Croinp. & M. vs. Ciimmings, 5 id. 342 ; Judson vs. 304 ; Pinney vs. Wells, 10 Conn. 115 ; Etheridgo, 3 Tyrw. 954 ; Hutching Blake vs. Nicholson, 3 Man. & S. 168; vs. Olcutt, 4 Vt. 549 ; Grinnell vs. Crawshay vs. Homfray, 4 Barn. & Cook, 3 Hill, 485. Aid. 50. " Hntchins vs. Olcutt, supra. * This is •well illustrated in the ' See cases cited supra, note 1, and case of Sanderson vs. Bell, supra. Morgan vs. Congdon, 4 N. Y. 552 ; Wil- = 7 W. & S. 466. 714 Stockr'brdkers and Stock Eschanges. But where Brokers act as bankers and make advances on securities deposited with them, they not only have a lien on such securities for the money advanced, but also for a general balance of account. Such, at least, is the practice among Brokers on the London Stock Exchange.' In the last-mentioned case, the testimony of a Broker to the Court of Chancery in respect to the pi-aetice among Brokers on the London Stock Exchange in relation to the subject of lien was as follows : " Where lenders or other Brokers hold securities deposited by the same borrowers at several times and on distinct occasions, and choose to close their account, or their account is closed by circumstances, such as the borrow- ers stopping payment, the lenders have a lien upon all the borrowers' securities in their possession until the balance due to them from the borrowers on every account is paid, and they have the right to sell a suflScient portion of the securi- ties to cover any such balance. In fact, all securities in the hands of the lender at the time of closing an account are ap- plicable not only to the particular sum advanced at the time of the deposit of particular securities, but to whatever balance may be due from the borrower to the lender at the time that the account is closed." Similar evidence was given in the same case by other eminent Brokers. And the court said : "Indeed, it would appear that the court would require no evi- dence of the practice of Brokers in this respect, considering it as settled." A party who holds stock of the bankrupt as collateral for a certain debt, which was over-due at the commencement of the proceedings in bankruptcy, may, if he has the power to sell the stock, retain the surplus by way of set-off on another claim which he holds against the bankrupt. When one part- ner pledges his property as security for a firm debt, the cred- ' Jones vs. Peppercorne, 5 Jur. (n. s.) 140. Specifia Performance. Y15 itor may prove his full claim against the firm without a valu- ation of the securities.' In the case of Jones vs. Peppercorne, the court seems to place a Broker who also acts as a banker for his Client in loaning money on securities in the same category with bankers themselves in respect to the right of lien. In the case, however, of Grant vs. Taylor, in the Superior Court of the City of New York," it was held that only "bankers" who are strictly such, and who are dealers in money, have a general lien for a balance of account ; and that where a firm of bankers and Brokers, who, as in that case, ad- vanced money to their Clients on bills of exchange, claimed a general lien, it must be proved. So where a Broker has obtained a loan for his principal, and holds certain chattels as security therefor, he cannot, in the ab- sence of a special agreement, appropriate the proceeds of said chattel to the payment of a debt due to him by the principal.' In conclusion, it will be observed that there are very few, if any, direct cases where the naked question has arisen as to whether a Stock-broker has a lien for his commissions or gen- eral balances, where he has done nothing more than purchase the securities with the money of his Clients ; but the tendency of the decisions has \been to extend this general lien rather than to restrict it. Where he advances his own money in the purchase of secui'ities, it is clear that the Broker has such lien. II. SpeciflG Performance. (a.) Preliminary Observations. We shall confine our consideration of this topic to those cases which arise out of transactions in securities. The cases ' Ex parte Whiting, 14 Nat. Bank » 3 J. & S. 338. Keg. 307. - ' James's Appeal, 89 Pa. St. 54. 716 Stoch-hrokers and Stock Exchanges. rarely, if ever, occur between Eroker and Client, but general- ly between parties who bear towards each other the relation of vendor and vendee, and perhaps more frequently between the latter party and corporations in which he may have pur- chased shares. In considering this class of decisions, we nat> urally look to the English adjtidications, as they contain the earliest rules and enunciations of courts of equity upon the subject. During a period of over a century and a half, these courts have made numerous and important rulings as to the specific execution of contracts for the sale or transfer of stock and shares, some of which, however, it is difficult at times to recon- cile with the later cases. The difference between the English and American courts upon this branch of the law, especially in its application to stock and shares, would seem to be based mainly upon several considerations, which it may not be amiss to notice — and first, upon the fact that stock transactions in the mother-country are regulated by a system or custom among Brokers of doing business on the Stock Exchange, which system, as has been al- ready shown, is entirely different from that prevailing among Stock-brokers in the United States, and which is directly in- volved when questions arise as to the liability of stockholders in corporations or joint-stock companies for " calls " or assess- ments;' second, in England a radical distinction exists between " stock " and " shares ; " and while the specific performance of contracts embracing the latter class may and will be de- creed by the courts in a proper case, a different rule gener- ally applies to the former kind of securities, as to which it has been and is the constant practice of courts of equity to ' Most of these bodies are created decisions thereon, in Browu & Theo- Tiuder the Companies Act of 1862. bald's Law of Railways (Loudon: See these laws in full, with notes of 1881). Specific Performance. 717 send an aggrieved party to courts of law for pecuniary dam- ages.' Tlie distinction which is made between "stock" and "shares"" in England is this: the former term is held to ap- ply to government and other public securities, which, being numerous, are of course always easily to be procured in the open market ; while the term " shares " is said to include the stock of private corporations, chartered companies, joint-stock associations, and railways, the stock of which is often, if not generally, limited in quantity, and is in consequence more diffi- cult to be obtained.' Hence the necessity sometimes arises for equitable interference where the latter class of securities is concerned.* (5.) General Rule. The general rule is that this remedy is not obtainable in equity where damages at law will afford adequate or just re- lief. In England this rule has been generally applied to gov- ernment and other public stocks, as we have already stated, from the earliest times.' When the subject is fairly consid- ' Dnnonft vs. Albrecht, 12 Sim. = Chit. Pr. (ist Am. eel.) 853 ; Story 189; Coltvs.Nettervill,2P.Wms.305. Eq. Jur. % I'iA ; Adderly vs. Dixon, 1 '^ See Eoss vs. Uuion Pac. K. E. Co. Sim. & St. 610 ; Brunswiot Co. vs. 1 Woolw. (U. S. Circuit Ct.)26, 32. Muggeridge, 4 Drew. 698; Addison ^ See tliis distinction stated in ou Coutr. *207 ; Harnett vs. Fielding, Cavanagh's Law of Money Securi- 2 Sch. nd that to sell out his stock then at 73 would re- sult in considerable loss; but that if the mortgagor would ' Moore vs. Battle, Amb. 371. ' Archer vs. Putnam, 12 Smed. & ° Roberts vs. Trenayne, Cro. Jac. M. (Miss.) 286. 508; Wbite vs. Wright, 4 B. & C. * 5 B. & C. 257; s. o. 3 D. & E. 273. 138. Y52 Stoch-lrokers anid Stock EnxJumges. take it at 75 he should have the sum wanted ; and thereupon the latter received £1500 on those terms in stock valued at 75, which he sold on the same day at 721-, at a loss of nearly £60 ; and it was held by Lord Kenyon that the transaction was usurious.' So in a recent case in the State of New York," which the Court of Appeals held was not distinguishable, in its minutest circumstances, from that of Doe vs. Barnard, where, upon ap- plication to one for a loan of money, he declined, but offered to and did nominally sell to the applicant, upon a credit, cer- tain railroad bonds at an exorbitant price, which he knew the latter did not want and could only use as a substitute for and as a means of raising the money, the transaction was consid- ered not as a bona fide sale, but as a usurious loan. The court strongly condemned the whole transaction as a plain and most palpable attempt to evade the statute of usury by an old and worn-out contrivance. And where the directors of a bank proposed to sell defend- ant 100 shares of bank stock at par ($100 each), for the price whereof they agreed to renew and discount his note for $10,000, secured not by a pledge of the stock, as defendant had offered, but by other persons joining him in the note as makers, etc., the note to be Regularly renewed every 60 days, and the discounts paid according to the custom of the bank for and during the term of 18 months; and also that S. should have a loan of $2500 for the same term, etc. ; to which defendant assents, and the notes are accordingly made and dis- counted, defendant and the directors both knowing that the utmost value of the stock in the market at the time was but per share — held, this was a sale of the stock at an exor- ' Doe VB. Baruard, Esp. N. P. CaB. ios' Bank, 19 Johns. 496 ; Valley Bank 11. See also Eagleson vs. Sbotwell, vs. Stribllng, 7 Leigh, 26. 1 Johns. Ch. 536; Smart vs. Meohan- " Quaokenhos vs. Sayre, 62 N. Y. 344. Usiiry. 753 bitant price, coupled with a loan of money, arising out of a proposition to borrow money ; the sale and the loan one en- tire contract, inseparably connected with each other, and the one made dependent on the other; and the transaction and defendant's notes made and discounted by the bank in pursu- ance of the agreement were usurious.' In Bernard vs. Young" the M. E. said : " The case of Forrest vs. Elwes ° differs from this in the very point in which I con- ceive the usury to consist. In that case the objection, though at first made, was. properly given up ; as though it is true, if the stock had risen the lender might have had more than principal, then legal interest; yet on the other hand, if it had fallen, he would have had less, as he had no option to have stock or money; but the borrower could have discharged himself by merely replacing the stock. Here the security is of this kind. The lender is, at his election, to have his princi- pal and interest, or to have a given quantity of stock trans- ferred to him. His principal never was at any hazard, as he was at all events sure of having that with legal interest, and had the chance of an advantage if the stock rose. It was usurious to stipulate for that chance. In fact, the stock did rise, and if the contract had been performed he would have had principal and interest and a very large premium. Though not probably so intended, this is, in fact, an usurious contract." * So in White vs. "Wright," the lender of stock, besides re- serving to himself the dividends by way of interest, took the option of deciding at a future day whether he would have the stock replaced, or the sum produced by the sale of it re- paid to him in money, with five per cent, interest; and it was held that this bargain was usurious, and that it made no dif- ' Valley Bank vs. Stribliug, 7 * See also Chippendale vs. Thnrs- Leigh, 26. ton, 1 Moody & M. 411 ; Cleveland ^ 17 Ves. 44. vs. Loder, 7 Paige, 557. ' 4 Ves. 492. » 4 B. & C. 273. 48 754 Stockrlrdlcers and Stock Exchanges. ference whether the whole of the agreement was contained in one instrument, or whether the lender procured the execution of two instruments, by one of which he might compel the re- placing of the stock, by the other the payment of the money and the interest. Bayley, J., and his associates, were clearly of the opinion that the case fell within the statute. "A party," said he, " may lawfully lend stock to be replaced, or he may lend the produce of it as money, or he may give the borrower the option to repay it either in the one way or the other. But he cannot legally reserve to himself a right to determine in future which it shall be. It is not illegal to re- serve tiie dividends by way of interest for stock lent, although they may amount to more than five per cent, on the produce of it, for the price of stock may fall, and then the borrower would be a gainer." ' But a loan at more than the legal rate of interest is not usurious if by the repayment of the principal the bor- rower may avoid the interest.'' Nor is a mere loan of stock usurious, nor the payment of the dividends in the meantime, though they exceed the legal rate of interest.' Nor is the loan of money usurious produced by the sale of stocks, on an agreement that the borrower shall replace that stock on a cer- tain day, or repay money on a subsequent day, with such in- terest in the meantime as the stock itself would have pro- duced, though the interest exceed five jper cent., unless the transaction be colorable, and a mere device to obtain more than legal interest, which in this case was negatived by the finding of the jury.' So a loan of chattels is not within the usury laws unless contrived as a disguise for loan of money; ' See Boldero vs. Jackson, 11 East, • Id. See also Maddock vs. Kam- 611 ; Eobbins vs. Dillaye, 4 Ab. ball, 8 East, 303. In this case the (N. Y.) Ct. App. Dec. 71. court agreed there was no usury, as 'Roberts vB.Trenayiie,Cro.Jac.508. the anionut of the sum to be paid by ' Tate vs. Welliugs, 3 T. E. 531. the defendant depended upon a con- Usury. 755 and on such a loan, if honafide, it is immaterial what compen- sation is reserved.' So an agreement for the purchase of stock, to be trans- ferred at a future day, at a prifie below the then value is not usurious." Lord Ellenborough said, that, whatever remedy the defendant might have in equity on the ground of this being a catching bargain, he liad none at law: contingency on the thing purchased was incompatible witli the idea of usury, in which the principal must always be certain. It was admit- ted that if the stock, when transferred to the plaintiff, would be worth but £160, it would not be usury; that the stock would suffer that most extraordinary depreciation was very improbable, but still it was within the reach of possibility. He therefore could not say that there was not sonde contin- gency in the transaction ; and if so, the contract was not usuri- ous. Where there was a transfer of stock by way of loan upon bond, with condition to replace the stock six months after date, and in the meantime to pay interest at five jper cent., the stock not being replaced, and being depreciated, the obligee is entitled to the value of the same at the time of the transfer, with interest at five per cent.' A loan of certifi- cates of deposit worth in market much less than par, on an engagement to repay the face with interest, is usurious.* But a transaction by which a loan was procured by A through B from C and D, on pledges of stock transferred to B, was held separable, so that usury on the part of C did not affect the transaction as to D.° tingenoy; that this was no more ' Brell vs. Eioe, 5 N. Y. (I Seld.) usury tlian an agreement to replace 315. stock lent, -which, though once con- ' Pike vs. Ledwell, 5 Esp. 169. tended to be usury if more than the ' Forrest vs. Elwes, 4 Ves. 492. principal and legal interest -were * Farmers'. Loan & Trust Co. vs. thereby obtained, had been long set- Carroll, 5 Barb. 613 ; see Schermer- tled to be legal. See Tate vs. Wei- horn vs. Talman, 14 N. Y. 93. lings, 3 T. E. 531 ; Pike vs. Led well, 5 ' Little vs. Baker, Hofifm. (N. Y.) Esp. 164. Ch. 487. 756 Stock-hrokers and Stock Exchanges. So it is held that a honafide charge by a banker or a Stocks broker of a commission or extra sum for expense or trouble is not usurious. To render a transaction usurious, there must be an unlawful or corrupt intent confessed or proved.' And a ti-ansfer of stock as a lawful commission for services in pro- curing it, not as a bonus for a loan, is not usurious." And it has been held in New York that a Stock-broker can recover from his Client usurious interest which the Broker was com- pelled to pay for money borrowed in order to carry the Cli- ent's stocks, and which the latter agreed to pay; and that, as between the parties, the transaction did not amount to an ex- action of usury so as to avoid the same. In such a case the Broker merely acts as an agent of the Client, and not as a principal.' So the custom of Brokers to debit and credit in- terest monthly on balances does not infect a contract to pur- chase and sell stocks with usury.* And the custom of bankers, on discounting paper, to exact payment of interest in advance does not render the paper usurious.' A corrupt agreement for the forbearance of "money must be strictly pleaded according to the fact.' And the question whether the transaction is fair and honest, or whether it is a colorable payment of usury upon a loan, etc., or to obtain un- lawful interest, is a question for the jury.' "Where usury is 'Noursevs.Prime,7 Johns. Ch. 69; Johns. 162; Ins. Co. vs. Sturges, 2 Woodruff vs. Hurson, 32 Barh. 557. Cow. 664 ; Bank vs. Wager, id. 712, " David vs. Illius, 9 How. Pr. 450. 766. = Smith vs. Heath, 4 Daly (N. Y.), <■ Tate vs. Wellings, 3 T. R. 531 ; 123. See also Robinson vs. Norris, 51 National Bank vs. Lewis, 75 N. Y. How. Pr. 442. As to when the court 516 ; Banks vs. Van Antwerp, 15 will continue an injunction where How. Pr. 29; Hosier vs. Norton, 83 the contracts made by the Broker in 111. 519. relation to commissions on the loan ' Tyler on Usury, 92 ; Tate vs. of stocks are alleged to be mere cov- Wellings, supra; Carstairs vs. Stein, ers for usury, see Caldwell vs. Ware- 4 Man. & S. 192 ; Rose vs. Dickson, 7 house Co. 1 Hun (N. Y.), 718. Johus. 196. When jury may infer ' Hatch vs. Douglas, 16 Am. Law usury in a note given for sale of Rev. 181. stock, see Black vs. Ryder, 5 Daly, ' Manhattan Co. vs. Osgood, 15 304. Usury. 757 not proved by direct evidence, it can be proved by infer- ences from the evidence given ; and it seems to be the prov- ince of the jury to draw the proper inferences from the evi- dence. In other words, it is their duty to decide not only on proved, but inferred, facts.' So where the facts in regard to an alleged usurious transaction do not show usury, but are such that the jury could infer that they were intended as a cover for usury, it is competent to ask the lender whether he intended to take usury." So parol evidence against the face of a bond to prove a usurious agreement has been held admissible.' The court will continue an injunction granted to restrain a party from selling securities pledged as collateral to a loan, the complaint averring and the answer denying that the con- tracts in relation to commissions were designed to be, and were, mere covers for usury, when it appears that, in addition to seven per cent, for interest and all expenses, and disburse- ments attending the care and custody of the collaterals, and eight per cent, on the gross proceeds of a sale, if one was made, a sum equal to twenty-four per cent, per annum on the loan is charged for the care and custody of the bonds and stock certificates pledged, and this under an agreement which devolves all risk of loss on the borrower. It is impos- sible to say that the jury would not be justified in finding that this transaction was a c6v6r for usury." And although there may be a defence to an action at law in a matter of usury, yet a bill will hold to compel the giving-up of securi- ties-^certificates of deposit — left as collateral security for the '■ValleyBankTS.StriblingjTLeigh, 19 Jolius. 496 ; Cleveland vs. Loder, 57. 7 Paige, 357; Slosson vs. DuflF, 1 Barb. = Black vs. Eyder, 5 Daly (N. Y.), 432'; Codd vs. Eathbone, 19 N. Y. 37. 304.. When use of proceeds of collaterals ' Atkinson vs. Soott,l Bay (S. C), constitutes usury, see Morgan vs. 307. As to what constitutes usury Mechanics' etc. Banking Assoc. 19 in sale of uncurrent bank-notes and Barb. 584. bills, see Pratt vs. Adams, 7 Paige, * Caldwell vs. Warehouse Co. 1 615 ; Smart vs. Mechanics' etc. Bank, Hun (N. Y.), 718. 758 Stock-lrohers and Stock Exchcmges. usurious debt, and an injunction will be a consequence to stay the action.' Finally, when a usurious loan has been made, a transfer of valid securities to the lender, as collateral security for the payment of such loan, is void ; and he can- not enforce tliem even against the maker of them." But a valid security is not tainted by being hypothecated by its owner for a usurious loan ; and, were it otherwise, redeeming it purges tfie taint.' VI. Statute of Frauds. {a.) Contracts for Sale of Stocks not within English Statute. In the latter part of the seventeenth century, a statute was passed in England which, with certain modifications and amend- ments, has in the course of time become a component part of the law of nearly every state and country where the English lan- guage is spoken. This is the celebrated statute of Charles the Second passed in 1677, and entitled " An Act for the Preven- tion of Frauds and Perjuries." * The objects which the statute of Charles had in view are perhaps too well known to require any comments. Hence, in the present work, we shall merely concern ourselves with de- cisions arising under the act as to the validity of contracts for the purchase and sale of stocks and shares. And the question presents itself, Do such contracts come within the 17th sec- tion of this important enactment ? Tliat section reads as fol- lows : " And be it enacted that from and after the 24th day of June, 1677, no contract for the sale of goods, wares, and merchandise for the price of £10 sterling or upwards shall be ' Peters vs. Mortimer, 4 Edw. Cli. ' Warner vs. Gouvemeur, 1 Barb. 279. (N. Y.) 86. ' Western Reserve Bank vs. Potter, ♦ 29 Car. II. c. 3. Clarke (N.Y.), 432. Statute of Frauds. 759 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 authorized." Question has also arisen as to whether these contracts were within the ith section of the statute concerning lands, the de- cisions relating to which will be referred to hereafter. In England, it seems that the law is now settled, as a mat- ter of judicial history beyond all cavil, that contracts for the sale of stocks are not within the Statute of Frauds, and con- sequently are not required to be in writing ; and this, in brief, is based upon the fact that the English courts do not consider that the terms " stock " and " shares " come within the mean- ing or spirit of the words " goods, wares, and merchandise," and that they are mere choses in action, of which there cannot be a part delivery. As the law is so well settled in that country, it is only deemed necessary to refer to a few of the most prominent cases where the question has been considered. The earliest case in England in which the question arose is that of Pickering vs. Appleby,' decided about 1720, where the point was elaborately discussed^and not decided, there being an equal division of the court. The action was one of as- sumpsit upon a contract to sell shares of stock in a copper mining company alleged to have been transferred and sold to the defendant, who pleaded non assumpsit. On the trial it appeared that there was no memorandum in writing of the contract or any earnest paid ; and it was doubted by King, C. J., whether such shares were within the purview and in- tent of the act, and whether plaintiff could recover. Al- ' 1 Cora. 354 ; s. c. 2 Eq. Abr. 50, pi. 37. 760 Stochlrdkers and Stock Exchanges. though the arguments of counsel were most elaborate, both pro and con, the books fail to show what the views of the judges were, save that. they were divided in opinion, and the case was adjourned. About five years after, Colt vs. Nettervill ' came before the Lord Chancellor, involving precisely the same question. There a bill was brought to compel the defendant to perform an agreement to take certain stock, and he pleaded the Statute of Frauds; but the Lord Chancellor said the point had al- ready been before all the judges, who were equally divided — six against six — and that therefore it was too difficult for de- termination upon demurrer. Counsel insisted that the word " goods " in the statute was extensive enough to cover the con- tract, and that at least it was within merchandise; for every vendible thing was said to be merchandise, and that stock was a thing vendible, and in the year 1720 was the most usual merchandise which people dealt in. It was further contend- ed that Lord Cowper had already deteimined such a contract to be within the statute. The point, however, was not de- cided. About the same time occurred the case of Mussell vs. Cooke," which was likewise a bill for specific performance of a con- tract for the sale of stock. There A agreed with B's Broker for £5000 South Sea stock ; the Broker, according to usage, made an entry of this agreement in his pocket-book; and the court held that it was within the statute. The plea was, however, overruled for not stating that the agreement had not been reduced to writing. Following this, we find a like decision in Crull vs. Dodson ; ' but it does not appear there that the Statute of Frauds came ' 2 P. Wms. 304. ^ 38, wbere it was decided in Mary- ' Free. Ch. 533. laud, in -which State the statute pre- = Macn. Sel. Cas. Ch. 114. See also vails, that the sale of bank stock is Calvin vs. Williams, 3 Har. & J. -within the statute of 29 Car. II. c. 3. Statute of Frauds. 761 before the court but incidentally ; for in a note to the case ' it is said that, " independently of this consideration [the Statute of Frauds], the case could not have been decided on any oth- er grounds than that of public policy." The facts showed that the defendant, a Broker, had certain stock in his hands belonging to the plaintiff, who said he would sell when it i-eached £200. The defendant, when the stock had gone be- yond that price, told plaintiff that he sold £1000 of it to one at £200, and £500 to another, who was his partner, and the rest he had taken himself at that price, which was clearly a breach of trust on his part; and entries were made in his books accordingly, but in such a manner that it looked as if done after the use of the stock, and only designed as an evi- dence in case of dispute. The plaintiff had a decree, which was affirmed upon the ground that the transaction was a fraudulent one ; and the court said : " On the sale, if any, he [the Broker] should have taken earnest;, for it has been de- termined here that such a bai'gain is witliin the Statute of Frauds, and without earnest only nudum pactii/m." Both of these cases are, however, disregarded as authorities in England ; and they are clearly overruled by the great mass of subsequent decisions to the contrary, some of which we will give, as they conflict with the weight of authority in the United States upon this subject. In Humble vs. Mitchell," which is one of the leading cases upon the subject, the plaintiff brought assumpsit for not transferring shares in a joint-stock banking company, and the defendant interposed the Statute of Frauds. But it was held that a contract for the sale of such shares of £10 value is not a contract for the sale of goods, wares, and merchandise, so as to require a written memorandum within the 17th section of ' Maon. Sel. Cas. Ch. 106. = 3 Per. & Dav. 141 ; s. c. 11 AdoL & El. 205. 762 Stoch-hroTcers and Stock Mschanges. the statute. Lord Denman, 0. J., said : " It appears that no ease has been found directly in point ; but it is contended that the decisions upon reputed ownership are applicable, and that there is no material distinction between the words used in the Statute of Frauds and in the Bankrupt Act. I think that both the language and the intention of the two acts are dis- tinguishable, and that the decisions upon that act cannot be reasonably exteiided to the Statute of Frauds. Shares in a joint-stock company like this are mere choses in action, in- capable of delivery, and not within the scope of the 17th section. A contract in writing was therefore unnecessary." ' The same views were expressed in another well-known case, where the subject involved was railway shares.° The action was specific performance to compel a ti-ansfer of the shares. The vice-chancellor said : " In my opinion, this is a case to which the 17th section of the . Statute of Frauds does not apply, because it is impressed upon my mind that in the decisions which have been made with respect to the 17th sec- tion it has been held to apply only to goods, wares, and mer- chandise, which are capable of being in part delivered. If there is an agreement to sell a quantity of tallow or of hemp, you may deliver a part ; but the delivery of a part is not a transaction applicable, as I apprehend, to such a subject as railway shares. They have been decided not to be land. They have been decided to be in effect personal estate, but not personal estate of the quality of goods, wares, and merchandise, within the meaning of the 17th section." So in another case, where it was decided that a sale of rail- way scrip was not a sale of goods, wares, and merchandise, within the meaning of the exemption in the Stamp Act,' the ' See also, to same effect, Hasel- ' Dmicuft vs. Albreoht, 12 Siiti. tine vs. Siggers, 1 Wels. & Hurl. & 189. Gord. 856. ° 53 Geo. III. c. 184. Statute of Frauds. 763 defendant contended that shares of that description had been held to be goods and chattels under the Bankrupt Act; but Pollock, C. B., stated that under that act all the rights of the bankrupt passed under the word " chattels " (which the Stat- ute of Frauds does not contain). The court said : " Scrip and shares are not merchandise ; they are merely bought and sold by parties who wish to speculate upon their right to obtain shares in the companies as soon as the latter are formed." ' It has likewise been held in England that these contracts do not come within the 4th section of the statute relating to contracts concerning lands. Stocks or shares have consequent- ly been held not to be interest in lands or within the Mort- main Act. * In Watson vs. Spratley," which is perhaps the leading case upon the subject, the plaintifE contracted to sell defendant certain shares in a joint-stock mining company. The plain- tiff, it appears, made a memorandum of the sale, but there was no note in writing signed by the defendant. The mode of transferring shares was' by a certificate of sale, which au- thorized the substitution of the vendee's name upon the books of the company in the place of the vendor. It was decided that the shares were not an interest in land within the 4tli section of the act, and that there was no difference in this re- spect between an incorporated and an unincorporated com- pany. The court said that the interest which the holder of the shares in such a company had was not a legal title to the lands which were vested in the company, but merely the right to receive the dividends payable on his shares — a right to his just proportion of the profits arising from the employment of ' Knight vs. Barlier, 16 L. J. Ex. Kilner, id. 249. As to scrip, see 18; 16 Mee. & W. 66; Watson vs. Goodwin vs. Kobarts, 45 L. J. Ex. Spratley, 10 Ex. 222. See also, as to Div. 748; Marten vs. Gibbon, 33 L. railway shares, Hargreaves vs. Par- T. (n. s.) 561. See also Calvin vs. sons, 13 Mee. & W. 561 ; Bowlby vs. Williams, 3 Har. & J. 38. Bell, 3 C. B. 284, 291; Tempest vs. ' 10 Ex. 222. 764 Stochirohers cmd Stock Exchanges. the joint stock, consisting, indeed, partly of land ; but while he holds his shares he has no interest or separate right to the land or any part of it. The court based its decision upon the cases cited in the note," and upon the decision per Lord Langdale in Sparling vs. Parker," upon the Mortmain Act,^ prohibiting the devise of land, etc., to charitable uses, where the court held that a devise of shares was good, as they were not an interest in land within that act: "Now, this case seems to me to be in point; for if a share in an unincorpo- rated joint-stock dock company is not an interest in land for the purpose of a devise to a charitable use, neither it nor a share in a joint-stock mining company can be an interest in laud for the purpose of a contract within the 4th section of the Statute of Frauds."' And it does not lie in the mouth of a Client to interpose the Statute of Frauds to transactions which he has authorized his Broker to make for him.° Thus where plaintiff had at defendant's request entered into a contract for the purchase of Spanish bonds, to be delivered at a future day, and had afterwards paid the price, it was held that the defendant could not, in answer to an action for money paid to his use, object that the contract was not in writing.' So a Client who gives a verbal order to his Broker to purchase certain stock, in pursuance of which the Broker purchases the stock, and the same is on the following day ■ Bligh vs. Brent, 2 Y. & C. 294; W. 422; Bligh vs. Brent, 2 Y. & C. Dunouft vs. Albreclit, 12 Sim. 189; 268). See also Powell vs. Jessop, 36 Myer vs. Perigal, 2 De G. M. & G. Eng. Law & Eq. 274, decided upon 599. See also Walker vs. Bartlett, 18 authority of Watson vs. Spratley, C. B. 845. 10 Ex. 222. See, however, a contrary » 9 Beav. 450. See also Hilton vs. decision in Ireland as to mining Giraud, 1 De (J. & Sm. 183. shares being real estate, Boyce vs. = 9 Geo. 11. c. 36. Green, Batty, 608. * Kailway shares are not an In- ' Genln vs. Isaacson, 6 N. Y. Leg. terest in laud within the 4th section Oba. 215. (Bradley vs. Holdswortb, 3 Mee. & « Pawle vs. Gunn, 4 Bing. N. C. 445. StaUite of Frauds. 765 delivered to and paid for by him, cannot insist that the Con- tract is void, on the ground that no part of the stock was de- livered and no money paid at the time of giving the order. The delivery by the seller, and the acceptance by the Bro- ker acting as the agent of the buyer, render the contract valid and binding.' (5.) Contracts for Sale of Stock Held to he within, Statute of Frauds in the United States. If the English decisions are so decided upon this question, the American cases seem to be equally decisive that verbal contracts for the sale of stocks are within the Statute of Frauds ; and in this respect do not follow, but rather oppose, the English authorities. There is, however, some conflict among the decisions in this country. The statute of Charles the Second was introduced at an early date into nearly all the States, but in some of them the original language of the stat- ute has been so modified as expressly to include stocks and shares. This, for example, is the case with the statutes in force in the States of New York and Florida. The New York statute ' speaks of the words " chattels or things in action," which would clearly include stock and shares of any kind ; while the statute of Florida, in addition to the words "goods, wares, and merchandise," uses the words " personal property," which it has been held is comprehensive enough to include shares of stock in an incorporated company.' Similar modifi- cations of the old statute have been made in other States, while in some few its provisions remain in full force and effect." One of the earliest cases in the United States upon the sub- ' Rogers vs. Gould, 6 Hun (N. Y.), * See Browne on Frauds (4th ed.), 229. " 2 Eev. Stat. 140. Appendix, where all these statutes ' Ins. & Trust Co. vs. Cole, 4 Fla. are given iu full. 360. 766 Stoch-lyrohers and Stock Exchanges. ject is Tisdale vs. Harris/ where the Supreme Court of Massa- chusetts, in 1838, made a thorough examination of the ques- tion, and came to the conchision that contracts for the sale of stocks were within the Statute of Frauds of that State. In that case the action was assumpsit on a contract by which de- fendant agreed to sell plaintifE 200 shares in the stock of a Connecticut corporation at $10.80 per share. The object of the suit was to recover $300, the amount of a dividend declared on the shares. The court held that the contract was within the statute, which was copied precisely from the English statute. The court, per Shaw, C. J., considered it somewhat remark- able that the question had not been definitely settled in Eng- land, and cited the early English cases ^ as showing that the better opinion seemed to be in that country that shares in in- corporated companies were within the statute as goods or mer- chandise, and it was considered that the weight of authority in modern times was that such contracts are not valid unless evidenced by some writing properly subscribed. The court said : " Supposing this a new question now for the first time calling for a construction of the statute, the court are of opin- ion that, as well by its terms as its general policy, stocks are fairly within its operation. The words 'goods' and 'mer- chandise ' are both of very large signification. Bona, as used in the civil law, is almost as extensive as personal property itself, and in many respects it has nearly as large a significa- tion in the common-law. The word ' merchandise,' also in- cluding, in general, objects of trafiic and commerce, is broad enough to include stocks or shares in incorporated companies." The court considered that the English cases which decided that buying and selling stocks did not subject a person to the operation of the bankrupt law did not bear much upon the > 37 Mass. 13. * 533; Crnll ts. Dobson, Maon. Sel. " Pickering vs. Appleby, 1 Com. Cas. Ch. 114. 354; Mussel vs. Cooke, Free. Ch. Statute of Frauds. 767 general question, as the bankrupt acts were deemed to be highly penal and coercive, and tended to deprive a man in trade of all his property : the construction in question only decided that by taking such shares merely as an investment a man should not be deemed a merchant within the act. The court considered the argument, that the statute only applied to goods a part of which may be delivered, to be a rather narrow aiid forced construction. In conclusion, it was said : " There is nothing in the nature of stocks or shares in compa- nies which in reason or sound policy should exempt contracts in respect to them from thesei reasonable restrictions, designed by the statute to prevent frauds in the sale of other commod- ities." We have quoted from this decision at length, as it has been followed by the courts of many other States as a settled au- thority, and in opposition to the prevailing rule in England. The case of Humble vs. Mitchell,' holding the contrary, was not decided until 1839; but it is safe to predict that had it been before the court in Tisdale vs. Harris the decision there might have been different, especially when it is considered that the statute under consideration by that court was precise- ly similar to that of Charles the Second. Baldwin vs. Williams," where a sale of a promissory note was subsequently held to be within the Statute of Frauds, was decided upon the authority of the latter case, although Humble vs. Mitchell was then known to the court and recognized as an opposing authority.' Kecently, in Massachusetts, however, the court has had occa- sion to re-examine the authorities somewhat closely and more ' 3 Per. & Dav. 16. Conn. 400, and Pray vs. Mitchell, 60 " 44 Mass. 363. To the contrary on Me. 430, where it ^yas decided that a this point are Hudson ys. Weir, 29 contract for the sale of shares of a Ala. 294, and Whittemore vs. Gibbs, joint-stock company is within, the 24 N. H. 484, where the court refused statute, following Tisdale ys. Harris, to follow the Massachusetts case. supra. ^ See also North vs. Forrest, 15 768 Stooh-hrdkers and Stock Eixchanges. critically than heretofore, in a case where it was contended that an agreement for the sale of a mere interest in an inven- tion, before letters-patent were obtained, is a contract for the sale of goods, wai-es, and merchandise within the statute.' But the court decided that it was not within the statute, and clearly limited the doctrine laid down in the early cases. Gray, C. J., after referring to the early English cases and to Tisdale vs. Harris, said : " But the modern decisions in England are the other way, and the decisions in other States are at variance." The words of 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 palpable form. To include in them an incorporeal right or franchise granted by the government . . . would he unreasonably to extend the meaning and effect of words which have already ieen carried quite far enough." Again, in a still later case,''' Ames, J., in upholding the ob- jection, upon the above authorities, that a verbal contract for the sale of shares was within the statute, referred to the con- flict of the decisions of other courts upon this point, and spe- cially referred to Soraerby vs. Buntin ; * but said " we do not feel called upon to overrule the two decisions above cited." ' In Beers vs. Crowell," the court said : " If there be any doubt whether stocks, forming so large and valuable a pai't of the personal property of the country as they do, and subject as they are to such frequent contracts and transfers, be within the statute, there can be, it should seem, little doubt but that bills, notes, and checks, which are mere securities, evidences of debt, and choses in action, are not included." > Soraerby vs. Buntin, 118Mass.279. * 118 Mass. 279. ' Citing Browne on Frauds, § 296- ' Referring to Tisdale vs. Harris, 298;. 1 Chit. Cont. ( lltli Am. ed.) 37 Mass. 9, and Baldwin vs. Williams, 541, note. 44 Mass. 365. " Boardman vs. Culter, 138 Mass. * Dudley, 28. 388. Statute of Frauds. 769 .. Other cases upon this subject, which are for the most part dicta, wijl be found in the notes.' There are some cases which have arisen under the statute of New York State which, however, by reason of their importance to Stock-brokers, deserve special attention. Thus it has been held that the Statute of Frauds of that State cannot be raised by a Client to defeat the claim of .his Broker for moneys advanced in the purchase of the stock merely because the contract was a ver- bal one, and that the statute had no application to such a case.' So where a purchaser signs and delivers to the seller an agree- ment to buy certain stock upon terms specified, and the latter agrees by parol to sell upon the terms stated, there is a bind- ing contract, which may be enforced against the purchaser.' So where the rules of the Stock Exchange make all verbal agreements or contracts between its members binding, it was held that the defendants' Stock-brokers, being bound by such rules, could not interpose the Statute of Frauds as a defence to an action brought against them to recover certain bonds stolen from plaintiffs and deposited with defendants as mar- gin.* In Tomlinson vs. Miller,' the plaintiff and defendant agreed verbally with a third person to exchange bonds of a railroad company for its stock, it being understood between the plain- tiff and defendant that they should furnish the bonds to be ' See Weightman vs. Caldwell, 4 Bing. New Gas. 445. But a contract Wheat. 89, note ; Walker vs. Supple, for the sale of gold is within the stat- 54 Ga. 178 ; Eigga vs. Magruder, 2 ute, and must be made in compliance Cranch,143. Bank stock held within therewith (Peabody vs. Speyers, 56 statute, Colvin vs. Williams, 3 Har. N. Y. 230). & J. 38. Shares in turnpike com- ^ Mason vs. Decker, 72 N. Y. 595; pany,Welle8VS. Cowles, 2Conn. 567, aff'g 10 J. & S. 115; Justice vs. 577. Shares in railroad company Lang, 42 N. Y. 493. Contra, it seems, held to be personal property, Johns is Johnson vs. Mulry, 4 Eobt. (N. Y.) vs. Johns, 1 Ohio St. 350; Eailroad 401. Co. vs. Benedict, 76 Mass, 212. * Brownson vs. Chapman, 63 N. Y. ' Rogers vs. Gould, 6 Hun (N.Y.), 625; see, however, Henderson vs. 229 ; Genin vs. Isaacson, 6 N. Y. Leg. Barnewell, 1 Y. & J. 387. Obs. 215 ; see also Eawle vs. Guun, 4 = 7 Ab. (^. Y.) n. s. 364. 49 770 Stock-hrok&rs and Stock Exchanges. given, and share the stock to be received in a certain propor- tion ; and that the defendant should attend to making the exchange, and should furnish all the bonds in the first in- stance, plaintiff subsequently to replace his share so advanced. Held, that though the agreement was void under the Statute of Frauds, for want of a written memorandum, yet, after the defendant had made the exchange on behalf of himself and plaintiff, in pursuance of the agreement, the Statute of Frauds had no application to the claim of the plaintiff on tendering the share of bonds to be furnished by him, to recover from the defendant the shares of the stock which defendant had received for him. The court said : " This being the case, I am unable to see that the Statute of Frauds has any application to the case in hand. As between vendor and vendee, no writing is nec- essary to transfer the title to bonds or stock. Delivery of the bonds or of the certificate of stock under a parol contract of sale is sufiicient to that end. Suppose that the verbal con- tract of exchange had been between P. and the plaintiff solely, and the plaintiff had requested the defendant, as his agent, to advance the bonds and complete the exchange, and the defendant had, in the name of the plaintiff, and avowedly as his agent, made the exchange with Patchin pursuant to the contract, advancing his own bonds for that purpose, what application could the Statute of Frauds have to the case ?" The question has also been considered as to what is not a sufficient memorandum to take the contract out of the statute. Thus, in Johnson vs. Mulry," it was held that a mere entry in a book, by the clerk of the Stock-brokers of a vendor by whom a sale of choses in action has been made, of such sale, although assented to verbally by the buyers as correct, is not a sufficient reduction of the contract to writing, or written ■ 4 Eobt. (N. Y.) 401. Statute of Frauds. T71 memorandum, or note thereof, signed by the partieSj within the statute. It was also held in this ease that the necessity of having such contract in writing was not dispensed with by the Stock-jobbing Act,' providing that contracts fpr the sale of stock shall not be void or voidable by reason of. a want of consideration or the non-payment of a consideration^ or the non-possession or ownership by the vendor, at the time of making such contracts, of the certificates or other evidence of such shares.' But the court seemed to be of opinion that if the purchase-money was to be deemed the consideration, or a part of the consideration, then the third subdivision of the statute ha,d no application to the case, the payment having been rendered unnecessary by the act last cited. But upon the point that there was no sufficient memoran- dum signed and subscribed by the parties, it would seem that this case cannot be considered as good law in New York, for, as we have seen, a contract for the sale of stock is sufficiently binding if signed by one party and accepted by the other.' The New York statute was also construed^ in the case , of Thompson vs. Alger,* as to what is a sufficient part payment. There an oral contract was made in New York for the pur- chase of railroad stock, and afterwards the buyer paid a part of the agreed price to the seller^ but finally refused to pay the balance and take the stock. In a suit to recover the residue of the agreed price, or damages for not performing the con- tract, it was contended by the defendant that the contract was void within that provision of the statute which provides that contracts or things in action shall be void " unless the buyer shall at the time pay some part of the purchase-money." The court, per Dewey, J., in repudiating this argument said : " These ' LawsN. Y. 1858, ch. 134. " See Mason vs. Decker, 72 N. T. " See Thompson vs. Alger, 53 Mass. 595 ; Justice ys. Lang, 42 id. 493. 428, 436. • 53 Mass. 428, 436. 7Y2 Stoch-hroTeers cmd Stock Eechanges. payments were part of the purchase-money for the stock which Alger contracted to buy and Stone contracted to sell, and will take the case out of the operation'of the Statute of Fi'auds un- less the court sanction the ground taken by the defendant, that in order to take the case out of the statute such payment must have been made at the precise point of time when the parties made their original verbal agreement. I^o such doctrine has ever been applied to the English Statute of Frauds, nor to that of Massachusetts ; nor could it seriously be urged as to either. It is only upon the peculiar language of the statute of l^ew York that this point is relied upon in the defence." And this interpretation of the statute appears to have received the sanc- tion of the courts of l^ew York State in several recent cases.' Where B, the owner of shares, agreed with A that he, B, in consideration of A's discharging B from his contract to sell such shares to A for the sum of $3000, promised to pay A one half of the excess of such sum as he, B, should sell said shares for to a third party over $3000, and B sold them to a third person for $3200. In an action brought by A against B on such promise, it was held that the contract was not ex- empted from the operation of the Statute of Frauds on the ground of a part performance." So where there was a part performance of the contract by the payment of the money and delivery of the stock, after the action brought, these acts cannot be relied on to show a cause of action when the action was commenced.' ' See the clecision commented upon contract. And where a cheek is de- in Hunter vs. Wetsell, 57 N. Y. 375 ; livered and received as a payment, also s. c. 84 N. Y. 549, where it was which is good when drawn and is held that where, after the making of paid on presentation, this is a pay- am oral contract for the sale of goods, ment at the time within the meaning void under the Statute of Frauds, a of said statute (2 Eev. Stat. 136, payment is made thereon, and at the § 3, sub. 3), and satisfies its require- time of such payment the essential ments. terms of the contract are restated, ' North vs. Forest, 15 Conn. 400. this takes the case out of the opera- ' Tisdale vs. Harris, 37 Mass. 13. tion of the statute, and validates the Statute of Frmds. 773 In a recent case in New York ' it was held that the furnish- ing of reliable information as to facts iipon which the future price of a stock will depend was a sufficient consideration to uphold a verbal agreement or contract in relation to such stock ; and that the information, being concededly of great value, was just as effective to take the case out of the Statute of Frauds as if a cash paj'ment had been made. No authority was cited for this proposition, but it appears to have been based by the learned judge upon the principle that one who offers a reward for information is bound by his contract to the person who responds to his offer : then the contract was considered by the court as having been executed by the fact that the defendant assented to the same, and acted upon it by purchasing the stocks. And where the plaintiff purchased certain shares of stock at a given price of the defendant, the latter agreeing to take it back and repay the plaintiff for the same on request — held, that the plaintiff having tendered back the stock and de- manded repayment, the contract for the repayment was not within the Statute of Frauds, though not in writing. The court based its decision upon the fact that the contract sued upon was not an independent one for the resale of the stock from plaintiff to defendant, but was rather a part of the one by which plaintiff purchased the stock, and by which the pur- chase became a qualified and not an absolute one. The orig- inal contract was taken from the operation of the statute by a part performance, by the delivery of the stock, and by the payment of the money.' ' "Wliite TS. Drew, 56 How. Pr. the same effect, Allen vs. Aguirre, 7 (Sp.T.)53. N.Y.543. ' Fay TS. Wheeler, 44 Vt. 293. To 774 Stockrhrdkers and Stock Mmohanges. (c.) When Statute must ie Pleaded. In England, by statute,' where a contract is alleged in any- pleading, a bare denial of the contract by the opposite party shall be construed only as a denial of the making of the con- tract in fact, and not of its legality or its suflSciency in law, whether in reference to the Statute of Frauds or otherwise; and it has been decided that the statute must be pleaded," and that a defence founded thereon cannot be raised by de- murrer.' The rule seemed to be different in equity. And advantage may be taken of the statute by demurrer to the bill where a contract in writing is not alleged,* but this is perhaps obviated, by the above statute. It has been held in Vermont that the defence under the statute may be shown under the general issue or pleaded specially." An'd the same rule prevails in New York,' save that, if the defendant admits the making of the contract in his pleading, he must specially allege the Statute of Frauds as a defence.' The objection to the statute may be taken in equity by answer to the bill denying the fact of the agree- ment.° But where complainant sold defendant 200 shares of railway stock at a stipulated price, deliverable at a future day, and, to secure performance of the contract, each party deposited 100 shares of similar stock with Brokers, and when the contract matured defendant declared that he would not receive the ' Sup. Ct. Judicature Act Amend- (n. s.) Ch. 156 ; Jerdein vs. Bright, 2 ment, 1873 ; 38 and 39 Vict. c. 77, John. & H. 325. order xix. 23 ; Browne on Frauds ° Hotchkiss vs. Ladd, 36 Vt. 593. (4th ed.), 560. ^ Harris ts. Knickerbocker, 5 » To-wle vs. Topham, 37 L. T. (n. s.) Wend. 644 ; Duflfy vs. O'Donovan, 46 308. See also Mussell vs. Cooke, N.Y.223; Haight vs. Child, 34 Barb. PrecCh. 533. 186; Morrill vs. Cooper, 65 id. 512; = Catling vs. King, L. R. 5 Ch. Div. Amburger vs. Marvin, 4 E. D. Smith, 660. 393. * Barkworth vs. Young, 26 L. J. ' Alger vs. Johnson, 4 Hun, 412. ' Browne on Frauds (4th ed.), 565. Statute of Frauds. 775 stock, and no tender or offer of it was made to him, where- upon plaintiff filed a bill that the 100 shares pledged might he sold and his damages paid out of the proceeds — the de- fendant answered, substantially admitting the making of the contract, but alleged " that the contract was void in law and not binding upon him." It was held that the answer was not sufl5cient to enable him to avail himself of the Statute of Frauds or put complainant on proof of a contract in writing.' ' Vaupell vs. Woodwark, 2 Sandf. Ch. 143. 776 Stooh-lrokers and Stock Exchanges. Chaptee XI. MEASURE OF DAMAGES. /. General Hule in the United States in Actions relating to Personal Property. . (a.) In Actions by Vendee against Vendor. (6.) By Vendor against Vendee. (c.) In Actions for Conversion of Personal Property, (d.) Refusal to Return Borrowed Stocks. II. In Actions between Clients and Stoch-hrokers. {a.) By Clients against Stoch-hroker for Failure to Buy as per Instructions. (6.) Clients against Brohersfor Failure to Sell Stocks. (c.) For Conversion of Stocks by Broker, {d.) Exceptions to Rule laid down in Baker vs. Drake. (e.) Reasonable Time. (/.) Market Value. III. Measure of Damage in Actions hy Stock-hroJcer against Client. It is not within the limits of this work to discuss extensive- ly the measure of damages in actions for the non-perform- ance of contracts relative to the sale or purchase or for the con- version of personal property. This more properly belongs to a separate treatise on damages, and it has been ably performed by Mr. Sedgwick in his well-known work. The object of this book will be fulfilled by strictly confining the present chapter to the principles of the law of damages immediately Actions by Vendee against Vendor. Ill growing out of transactions in stocks and other securities dealt in by Brokers on the Stock Exchange, prefacing it with a mere statement of the general principles applicable to other kinds of personal property. I. General Rule in the United States in Actions re- lating to Personal Property, (a.) In Actions hy Vendee against Vendor. In an action for the breach of a contract to deliver personal property, the measure of damages seems to be the difference between the contract and the market price at the time and place where it should have been delivered." If the price has been paid in advance, the purchaser is entitled to any rise in the value of the article which may have taken place down to the time of trial;' but the rule is modified where extraordinary circumstances have occurred to produce extreme prices in the article, or other circumstances attending the transaction which would render it inequitable to allow, as a measure of damages, the highest price of the article after default iu delivery." And it seems to be settled that the above general proposition is not altered when stocks are the subject-matter of the contract,* nor even in a case where the purchaser has paid for the prop- erty in advance.' In an action oh a guarantee that the sold shares shall yield certain annual dividends for a certain period, the meas- '1 Sedgwick on Damages (7th ed.), Mee. & W. 136; Pott vs. Flather, 5 552 et seq.; Eandon vs. Barton, 4 Eng.Ey. & Can. Cas. 85; Tempest vs. Tex. 289. Kilner, 3 C. B. 249-253; Hnntington " Id. & Broad Top K. E. Co. vs. Eng, 86 Pa. ' Calvit vs. MoFadden, 13 Tex. 324. 247. But compare Kent vs. Guiter, * 1 Sedgwick on Damages, 577 ; 23 Ind. 1 ; Musgrave vs. Becken- Nortk vs. Phillips, 89 Pa. 250 ; Eand dorff, 53 Pa. St. 310. vs. White Mountains E. K. 40 N. H. =1 Sedgwick on Damages, 578, and 79; Currie vs. White, 45 N. Y. 822; note (a); Orange & A. E. E. Co. vs. 1 Sweeny, 166 ; Shaw vs. Holland, 15 Fulberg, 17 Grat. 366. '^■78 Stockrhrdkers and Stock Exchanges. ure of damages is the difEerenee between the actual value of the shares and their value if they had proved to be of the stip- ulated quality.' And a party subscribing for shares at the re- quest of another, who agrees to take them and indemnify him, is not limited to the amount paid less the market value at the time of the refusal, but may recover of the person so agreeing the amount advanced, with interest, on his refusal to fulfil the agreement.'' But on a breach of contract to pay in cer- tain State stocks to a nominal amount, it was held that the measure of damages is not the value of the State stocks at the place of delivery, as in contracts to deliver private property, but the market value of such stocks in the principal cities, deducting the necessary expense in converting the stocks into money." In an action between Stock-brokers upon a contract for the purchase and sale of shares of stock of a railroad corporation at a specified price, " payable and deliverable, seller's option, in this year, with interest at the rate of six per cent, per an- num," it was held that a sale inproBsenti was effected — the vend- or becoming a quasi trustee for the purchaser ; and that the latter was entitled to recover all dividends accruing thereafter on such shares, together with the difference between the con- tract price and interest and the market value of the shares of stock on the day when the vendor fixes the time for the de- livery of the same." And where there was a guarantee that stocks sold should be worth a certain sum, market value, with- in one year from date, the correct measure of damages is the difference between said sum and the highest value the stock reached in the market during the year." And where defendant had agreed to deliver a certificate of ' Struthers vs. Clark, 30 Pa. St. * Cnrrie vs. White, 45 N. Y. 822. 210. ' Woodwai-d vs. Powers, 105 Mass. " Orr va. Bigelow, 14 N. Y. 556. 108. = 1 Coldw. Term. 180. Actions by Vendee against Vendor. 779 ten shares of the corporate stock of a manufacturing company, ■whose capital was to be $100,000, divided into not more than two hundred shares, and instead thereof made a tender of a certificate of ten shares of the stock of the company, of which $34,000 only was paid, divided into seventy shares, the court held that the measure of damages was the value of ten shares in the full capital stock if it had been made up at the time stipulated, and the company had then been ready in good faith to operate upon the capital pursuant to its charter.' But in an action for not delivering stock according to an or- der which specifies no time of delivery, the measure of dam- ages is the value of the stock when demanded.'' In Iowa, in the case of Cannon vs. Folsom," it was held that where the price of the commodity contracted for has been paid prior to the time of delivery, the plaintiff may recover the highest market price between the day for delivery and the time suit is brought, provided the plaintiff does not unreason- ably delay the institution of his suit. But iu England, in an action by a purchaser on a contract for the sale of railway shares, it was held that the measure of damages was the difference between the market price of the shares at the time of making the contract and the day on which it was broken ; allowing the purchaser, however, a rea- sonable time to go into the market to buy fresh shares." ' Dyer vs. Eick, 42 Mass. 180. See see Hussey vs. Manufacturers & Me- also Strutliers vs. Clark, 30 Pa. St. chanios' Bank, 27 Mass. 415 ; Sewall 210. vs. Boston Water Power Co. 86 ifl. " Eastern E. E. Co. vs. Benedict, 76 277; Wyman vs. American Powder Mass. 212. Co. 62 id. 168; Baltimore City = 2 Iowa, 101. Pass. E. Co. vs. Sewall, 35 Md'. * Siiaw vs. Holland, 15 Mee. & W. 238 ; Baltimore Marine Ins. Co. vs. 136; 4 Eailw. Cas. 150; 15 L. J. Ex. Dalrymple, 25 Md. 269-304; Pinker- 87. For the measure of damages ton vs. Manchester & L. E. Co. 42 against a corporation wrongfully re- N. H. 424. fusing to issue certificate of shares, 780 Stoch-hrohers and Stock Exchanges. (b.) By Vendor against Vendee. Where the goods have been delivered, the measure of dam- ages is the contract price.' Where the goods have not been delivered, and the vendee refuses to carry out the contract, the vendor is entitled to recover the contract price.' If no price has been agreed on, the vendor is entitled to recover the mar- ket value of the subject-matter of the contract on the day when it should have been received.' In stock cases, the value of the subject-matter of the con- tract is to be determined by its value in the best market for the sale of the particular or similar stock in this country, ac- cording to the ordinary course of dealing in such stocks.* So, in England, in a suit brought for the non-acceptance of railway shares pursuant to a contract of sale entered into by two parties through the medium of Brokers, the proper meas- ure of damages is the difference of the prices of the shares on the day when they ought to have been accepted and on the day when they were resold by the vendor, such resale being within a reasonable time.' And in a similar case ° it was held that the measure of dam- ages was to be obtained by ascertaining the value of the shares on the day when the contract was broken, or on the earliest subsequent day when the shares could be sold. And general- ly the measure of damages for breach of contract to purchase or deliver stock is the difference between the contract price and the market value at the time of the breach.' ' Terwilliger vs. Kuapp, 2 E. D. eeq. ; Henckley vs. Hendrickson, 5 Smith (N. Y.), 86 ; Thurman vs. Wil- McLean C. Ct. 170. son, 7 Brad. ( 111. ) 312; 1 Sedgwick * 1 Coldw. (Tenn.) 241; id. 145 ; 4 on Damages (7th ed.), 593. id. 433. ' Id. 593 et seq. ; Thompson vs. Al- ' Stewart vs. Cauty, 8 Mee. & W. ger, 53 Mass. 428 ; Thorndike vs. 160 ; 2 Eailw. Gas. 616. Locke, 98 id. 340. ^ Pott vs. Flather, 5 Eailw. & Can. ' 1 Sedgwick on Damages, 592 et Gas. 85. ' Rand vs. White Mountains R. R. Actions fw Conversion of Personal Properi/y. 781 Ordinarily the vendor has three methods in which to in- demnify himself : 1st. He may retain the property for the vendee, and sue him for the full purchase price.' 2d. He may sell the property, acting as agent for this pur- pose of the vendee, and recover the difference between the contract price and the price realized on the sale. 3d. He may keep the property as his own, and recover the difference between the market price at the time and place of delivery and the contract price.'' But there are important elements which should be borne in mind in a case where a vendor elects to sell and charge the vendee with the difference: 1st. That such resale does not furnish the measure of damage if it does not take place within a reasonable time;' and, 2d, it seems that such a resale need not be at a public auction, it being enough to show that the property was sold for a fair price.* And the vendor is enti- tled to recover not merely the difference between the con- tract price and the price realized from the resale, but he is entitled to recover such difference, flus the Broker's charges and other expenses of such resale.' (c.) In Actions for Conversion of Personal Property. In actions for the conversion of personal property the gen- eral rule of the measure of damages is the full value of the chattel at the time of conversion. But if special damage has Co. 40 N. H. 79; Currie vs. White, 45 = Four mouths held uot to be a N. Y. 822, 1 Sweeny, 166 ; Shaw vs. reasonable time, Smith vs. Pettee, 7 Holland, 15 Mee. & W. 136; Pott vs. Hun (N. Y.), 334. Flather, 5 Eng. Ey. & Can. Cas. 85; ''1 Sedgw. on Damages (7th ed.) Tempest vs. Kilner, 3 C. B. 249- 594, 595; White vs. Kearney, 2 La. 253. Ann. 639 ; Crooks vs. Moore, 1 Sandf. ' But see 1 Sedgwick on Damages (N. Y.)597. (7th ed.), 595, note (b). ° Whitney vs. Boardman, 18 Mass. ' Dustan vs. McAndrew, 44 N. Y. 242 ; 1 Sedgw. on Damages (7th ed. ) 572 ; Hayden vs. Demets, 53 id. 426. 593, note b. 782 Stock-lrohers cmd Stock Eechanges. been sustained, it is recoverable.' The rule formerly was, in the United States, that in such an action, where the value of the property converted was of a fluctuating character, the measure of damages is the highest price of the article between the time of the conversion and the trial," The main reason, if there be any reason for it, which seems to have been assigned for distinguishing the measure of dam- ages where the subject of the suit was of a fluctuating nature, and where its value was uniform and ascertained, is, that in the former case the owner is deprived of the use of his prop- erty to the time of the trial;' and if his goods had not been detained the plaintiff might have had a good opportunity of selling the same.* {d) Refusal to Return Borrowed Stocks. In this connection should also be considered those cases where a borrower, pledgee,, or other person refuses to return stock. This refusa,l generally constitutes a conversion, and the measure of damages wojild ordinarily be the same as in that class of actions — viz., the value at the time of conversion, ' "Wood vs. Morewood, 3 Q. B. 440, qualified rule giving a plaintiff in n. ; Fiuch vs. Blount,? Car. & P. 478 ; all cases of conversion the benefit of Ewbank vs. Nutting, 7 C. B. 809. It the highest price to the time of trial, has been held that the measure of I am persuaded, cannot be upheld the liability of the pledgee to the upon any sound principle of reason pledgor upon a conversion of the or justice. Nor does the qualification ■ pledge is its value at the time of the suggested in some of the opinions, conversion. Eobinson vs. Hurley, 11 that the action must be commenced Iowa, 410. Under § 3336 of the Civil within a reasonable time, and pros- Code of California, as amended Jan. ecuted with reasonable diligence, 22,1878,the damages which apledgor relieve it of its objectionable char- is entitled to from a pledgee who has acter." converted pledged stools is the high- ' 2 Sedgw. on Damages (7th ed.), est market value of the stock at any 375. time between the conversion and the * Greening vs. Wilkinson, 1 Car. & verdict (Dent vs. Holbrook, 54 Cal. P. 625. For rule in the different 145). States as to measure of damages in ' 2 Sedgw. on Damages (7th ed.), actions for conversion of property, 378. But in Matthews vs. Coe, 49 see Setlg. on Damages (7th ed.), where N. Y. 57, the court said; "An nn- the oases are collected. Refusal to Ret/u/rn Borrowed Stocks. 783 together with all dividends, interest, or accretions which may have accrued on the stock.' The measure of damages for not returning borrowed stocks at the time agreed is the market price at the time when they should have been returned," or the highest price intermediate that time and the suit.' In one case the pledgee of stock wrongfully sold it; and when the pledgor offered to pay the debt and requested a return, he was put off from time to time by the pledgee with promises to re- place it, and in the meantime it rose in value. Held, in an action for wrongfully selling the stock, that the pledgor might recover the enhanced value.* The measure of damage for breach of a contract to return borrowed bank stock on demand is the value of the stock on the day of the demand, with inter- est for the delay. An increase in value cannot be taken into account.' But there may be cases where a plaintiff has been "deprived of some special use of the property anticipated by the wrongdoer;" in which event, and in some other special in- stances, a different rule of damages may prevail." In Pennsyl- vania the measure of damages for the breach of contract to replace borrowed stock is its highest price between the breach and the trial.' But this rule only applies where, by the re- fusal to perform, the plaintiff has suffered the loss of the ad- vanced price of the stock.' There have also been several English decisions in actions growing out of failures to return borrowed stocks which should be noticed. It has been held that the true measure of damages in an action for not redelivering shares lent to the '■ 2 Sedgw. on Damages (7th ed.), at time ofdemand, with interest, was 391. allowed. " Day vs. Perkins, 2 Sandf. Ch. = McKenny vs. Haines, 63 Me. 74. 359; 2 Sedgw. on Damages (7th ed.), « 2 Sedgw. on Damages (7th ed.), 141. 391. ' Id. 365, note. ' Musgrave vs. Beckendorf, 58 Pa. * Wilson vs. Little, 2 Hr.Y. 443, aff'g St.310; Richardson vs. Sewiug-ma- 1 Sandf. 351 ; compare Roberts vs. chine Co. 17 Pitts. L. J. 1. Berdell, 61 Barb. 37, where the value ' Phillips's Appeal, 68 Pa. St. 130. . 784 -Stoclcrbroleers t j zations. cease to be a member of this Exchange. This rule shall * The ordinary form of notice, to the effect that one party will either buy in or sell out Stock for the account of a defaulting party, or hold said party liable for damages, is not sufficient notice to authorize the clos- iug-ont of the Stock under the rule. But if it is intended to close a contract under the rule, positive notice of that intention must be given before 2^ p.m., as required by the By- laws. — Besolution of Governing Committee. 838 Constitution and By-laws of the not apply to the New York Mining Stock Exchange while its trans- actions are limited to the class of Securities at present dealt in at that Exchange. Sec. 2. Any member of the Exchange dealing with a person not a Dealing with member, in the rooms of the Exchange, shall be subject non-members, i • j penalty. to the penalty of suspension for not less than sixty days nor more than twelve months. AETICLE XX. DUES AND FINES. PENALTY FOE NON-PAYMENT. Section 1. The dues of all members of the Exchange shall be pay- able on May 1 and November 1 of each year, and shall be Twenty-five Dollars semi-annually, exclusive of fines and of dues under Article XXIV. of the Constitution. Sec. 2. Any member who shall neglect to pay his fines or dues for Penalty for three months after they become payable, shall, after due non-payment, notice, be suspended until they are paid ; and if not paid at the end of one year, he shall no longer be considered a member, and his membership may be disposed of by the Committee on Ad- missions. ARTICLE XXI. INDECOKOUS language, disorderly conduct, etc. PUNISHMENT. Section 1. Any member who shall, during the sessions of the Ex- Disovderiy change, use indecorous language to another member, or conduct, etc. ^j^q gj^^jj jjg guilty of conduct subversive of good order and decorum, or of any act or acts whereby the personal comfort or safety of other members is seriously interfered with, may be fined, at the discretion of the Presiding Officer, in a sum not exceeding Ten Dollars ; or may, upon complaint made, be summoned before the Gov- erning Committee, who may suspend him for a period of not more than thirty days. A repetition of the offence may subject him to ex- pulsion, and he shall not be readmitted except by consent of two thirds of the members of the Governing Committee present at a ses- sion thereof. Sec. 2. Any member interrupting the Presiding Officer while call- New York Stock Exchange. 839 interrnpting ing Stocks, by speaking or otherwise, shall pay a fine of Officer. not less than Twenty-five Cents for each offence, at the dis- cretion of the Presiding Ofiicer, from which there shall be no appeal. The levying of all fines shall rest exclusively with the Presiding Officer. ARTICLE XXII. SMOKING FORBIDDEN. Any member smoking in the business rooms of the Exchange, or in Smoking ^Tiy other part of the Exchange where the Committee of forbidden. Arrangements may decide to prohibit the same, shall be fined Five Dollars. ARTICLE XXIII. INJURING PROPERTY OF THE EXCHANGE. EMPLOYES, ETC. Section 1. If a member injures or destroys the property of the Injuring Exchange, it shall be repaired or replaced under the direc- property of o ' * i. JSxciiange. tion of the Committee of Arrangements, and the expense charged to such member, in addition to any fines which may be im- posed by the Presiding Ofiicer for the ofEence, under Article XXI. of the By-laws. Sec. 2. If any employe of the Stock Exchange shall deface the Misconduct building or injure the property of the Exchange, he shall vLltors,''o?' b^ discharged forthwith ; and if any employe of a mem- subscribere. ]jgp ^f ^jjg Exchange, or of a telegraph company, or if any visitor or subscriber, shall deface or destroy the property of the Exchange, or be guilty of rude or improper conduct, he shall be ex- cluded from the rooms of the Exchange. Sec. 3. Any member who shall ignite fireworks or other explo- Burning of sives, or burn papers in any part of the Stock Exchange papers, etc. buildings, shall be subject to a fine of not less then Twenty- five Dollars ; and upon a repetition of the oHence shall be summoned before the Governing Committee, who may suspend him for a period of not more than sixty days. ARTICLE XXIV. SPECIAL MEETINGS. AYES, NOES, ETC. Section 1. Except by unanimous consent, no business shall be before "can " transacted previous to the first call of Stocks. 840 Constitution and By-laws of the Sec. 2. When any special meeting of the Exchange shall be ap- Speciai pointed, the fine for non-attendance may, by a vote of meetings. ^^^ (.jjjy^g ^f ^jjg members present, be fixed at a sum not exceeding Five Dollars. Sec. 3. No notice shall be taken of any resolution or resolutions Eesointions. unless submitted in writing. Sec. 4. No member shall speak more than twice on any question Membevs-not under discussion by the Exchange, without permission tospeakmore , -r^ . i. \^n- in i. than twice. from the Presiding Oifacer, nor shall any member inter- rupt another while speaking. Sec. 5. The Presiding Officer shall not participate in any discus- flcef whln"^" ^^°^ arising in the Exchange while occupying the chair. uot to debate. Sec. 6. The ayes and noes shall not be called for upon any ques- Ayee and ^10°) excepting at the request of one fifth of the members "°°^" of the Exchange present. When the ayes and noes are ordered, a ballot-box shall be placed on the Secretary's desk, and kept open for the reception of votes from 10^ a.m. until 2 p.m. The vote shall be taken by the deposit of a ballot endorsed by the mem- ber voting, and containing his vote, ay or no. Said ballots shall be placed on file, in alphabetical order, and preserved for fifteen days. The votes shall be entered upon the roll, opposite to the names of the members who have voted, and such roll shall be placed in the Secre- tary's desk for the inspection of members. ARTICLE XXV. ACCESS TO THE MINUTES. No person shall have access to the minutes of the Exchange ex- Minntes of ggpt the members or their partners. ARTICLE XXVL COMMUNICATIONS INFLUENCING THE MARKET. No communications having a tendency to influence the market Commnnica- shall be read to the Exchange without the consent of the ing maiket. President or Presiding Officer. New York Stock Exchange. 841 ARTICLE XXVn. INTRODUCTION OF STRANGERS. No member shall introduce a stranger on tlie floor of the Exchange strangers. unless by permission of the President or Presiding OflBcer. ARTICLE XXVIIL ARBITRATION OP CLAIMS. Any person shall have the right to bring a claim against a member Claims of the Exchange before the Arbitration Committee, aris- natuie o£ jj,g irom. transactions in Bonds, Bullion, Stocks, or other Securities, or from any transactions in money, on the conditions fol- lowing, and not otherwise. The person making such claim shall execute a full release of his claim against said member, duly signed, sealed, and stamped, and shall deliver the same to the Chairman of the Arbitration Committee to be held in trust, to abide the event of the suit before said Committee. Form of Release. Know all Men by these Presents, That I, , Form of f*"" ^^^ ^^ consideration of the sum of One Dollar, to me release. j^ hand paid by , the receipt of which is hereby acknowledged, have remised, released, and forever discharged, and by these presents I do hereby remise, release, and forever dis- -charge, the said of and from any and all demands here- tofore existing and due and owing to me, and the said is hereby fully released and discharged from the same. Sealed with my seal, and dated at New York, this day of ,18... The Chairman of the Arbitration Committee shall keep the said re- Disposition lease in trust, to abide the result of said suit, and shall ofreiease. deliver the same to the defendant in either of the three following cases : 1st. In case the claimant shall not present his claim to the Arbitra- tion Committee within twenty days after executing said release. 2d. In case judgment shall be rendered for said defendant by the Arbitration Committee. 842 Constitution and By-loms of the 3d. In case the defendant shall pay, or offer to pay, to such claim- ant the amount of judgment rendered in favor of said claimant. In case judgment shall be rendered against any member of the Ex- Wheo re- change which he is unable or unwilling to pay, then such lease is to be o * .* ' ^ cancelled. release shall be cancelled and returned to such claimant. ARTICLE XXIX. THE TRUSTEES OF THE GRATUITY FUND. 1. On the first Monday after the annual election of tbe New York Trnstees of Stock Exchange, or as soon thereafter as may be practica- the Gratuity ,, ,„ „,^ . t,,,ii -i. Fund. ble, the Trnstees of the Gratuity Fund shall organize by electing a Chairman, Secretary, and Treasurer of the Gratuity Fund, who shall serve for one year or until their successors shall be chosen. 2. There shall be a regular meeting of the Trustees on the third Monday in each month. The Chairman may call a special Meetings. . " . i i i, n • ^ meeting at any time ; he shall call a meeting at the re- quest of two Trustees. Qnoram. 3. At all meetings three shall constitute a quorum, 4. It shall be the duty of the Chairman to preside at meetings; he Chairman. shall vote On all questions ; he shall on the Monday pre- ceding the annual election in the Stock Exchange make a report to Annual re- the Exchange of the condition of the fund, with a state- ''°'"'' ment by the Treasurer of receipts and disbursements. 5. It shall be the duty of the Secretary to keep regular minutes of the Secretaiy. proceedings of tbe Trustees, and to give notice of meetings. 6. It shall be the duty of the Treasurer to receive and sign vouch- T,.=.»„..., ^rs for all moneys paid to the Trustees, which he shall de- posit in such institutions as they may direct, to his credit as Treasurer of the Gratuity Fund of the New York Stock Exchange. He shall have the custody of all Securities belonging to the fund or Custody o{ held by the Trustees, subject, however, at all times to Securities. \\iQ\t examination and direction. He shall keep, or cause to be kept, proper books of account. New York Stock Exchange. 843 He shall receive and keep a record of all claims for payment under Record of -A^rt. XXIV. of the Constitution of the New York Stock ciamifl. Exchange, and present the same to the Trustees for their action. When allowed and approved by the Trustees he shall pay the same ; but no such payment shall be made until directed by the Trustees. He shall make such investments for the fund as may be ordered by the Trustees. His books shall always be open to the inspection of any Trustee, Inspection of and he shall make to the Chairman an annual statement "" ■ of receipts and disbursements. He shall receive ont of the fund such compensation per annum as Compensa- may be fixed by the Trustees and approved by the Govern- ing Committee of the New York Stock Exchange. 7. All investments of money belonging to the fund shall be made Investment of by the Trustees as directed by Art. XXIV. of the Consti- '""''■ tution of the New York Stock Exchange. All registered Stock shall be inscribed in the name and to the order Registered of " The Trustees of the Gratuity Fund of the New York Stock Exchange," but without specifying the individual names of such Trustees, and may be disposed of and assigned by any three of said Trustees. In case any person entitled to any gratuity shall be nnder age, and have no guardian entitled to receive payment at the maturity thereof, the Trustees may, in their discretion, deposit such money with the New York Life Insurance and Trust Company or the United States Trust Company, as the property of, and in trust for, such minor ; and, in like manner, if any person apparently entitled to any payment fails to claim, or has disappeared or cannot be found after reasonable in- quiry, the Trustees may deposit the presumptive share of such person in either of said trust companies to the credit of " The Trustees of the Gratuity Fund of the New York Stock Exchange, in trust," to the end that it may be paid to. such person if afterwards found, or other- wise to the parties who may subsequently establish their right thereto ; and further, that a similar discretion shall apply in the case of any dis- pute between claimants for a gratuity or a portion thereof. 8. The Treasurer of the Gratuity Fund shall be authorized to receive from the members of the Stock Exchange, who may desire to make 844 Constitution and By-laws of the payments in advance of the regular maturity of. their dues under Members may Art. XXIV. of the Constitution, any sum not less than advance pay- rn -i-* 11 ■ « i jr j ments. ien Dollars at a time, and issue his receipt thereror; and such receipt shall be received by the Treasurer of the New York Stock Exchange, vrhen the semi-annual dues become payable, as a payment for the amount specified. To facilitate such payments on the part of members, the Treasurer of the Gratuity Fund may avail himself of the services of the Roll-keeper of the Exchange. 9. The Trustees shall have povrer, at their discretion, to consult and DiBbarse- employ legal counsel. They shall be authorized to make dis' ments. bursements out of the fund to defray necessary expenses ; but no such disbursements shall be allowed without a resolution, spec- ifying the nature and amount of the same, being entered at large upon the book of minutes of the Secretary. Each Trustee shall re- ceive from the fund Five Dollars for every meeting at which he shall be present. 10. In case of a vacancy occurring in the oflBce of Chairman, Secre- tary, or Treasurer, the Trustees shall forthwith proceed to Vacancies. ./ ^ 7 r fill the same for the unexpired term. In case of the tem- porary absence or inability to act of either Chairman, Secretary, or Treasurer, the Trustees shall have power to appoint one of their num- ber to act in his stead pro tern. 11. The Governing Committee of the New York Stock Exchange Power of shall at all times have the right to direct the production Governing _ ... Committee, before them of the Securities belonging to the fund, the Secretary's book of minutes, and the Treasurer's books of account. It shall be the duty of the Finance Committee of the Exchange to Examination make an examination of the condition of the fund once of fund. jij gygyy y ^31 ', and said committee shall have the right at any time to make such additional examination as they may deem proper. 12. The Governing Committee of the New York Stock Exchange Charges shall have the power to try charges against any Trustee for Kusiees. malfeasance or negligence in ot&ce, and, by a vote of two thirds of all its members, to suspend him from his'functions or declare the ofiice vacant. New Torh Stock Exchange. 845 13. It shall be the duty of the Treasurer of the New York Stoct Ex- Treasurer to "^^nge to pay over semi-monthly all dues collected under ?emi°monOi°r ^'^- ^^^^- °^ ^^^ Constitution to the Treasurer of the Gratuity Fund. AETICLE XXX. THE ACCOUNT. Section 1. Transactions may be made in Government Securities The account, for the account under the following regulations : The fifteenth and last days of each month shall be known as " set- Transactions tling-days," and transactions may be made on any days meutsfor'the within those periods for settlement on those days respec- acconnt. tively, and without interest. Transactions made for the account on settling-day, unless for cash, shall be considered as for the next account. Either party to a transaction may call for an original margin of two per cent, to be deposited jointly in a Trust Company ; and should the market price vary at any time one per cent, from the contract price, such difference shall be deposited in the TVust Company by the party against whom it exists, when notified in accordance with Art. XVII. of the By-laws. Sec. 2. A committee of three shall be appointed by the President, who shall have power, in case of non-fulfilment of contracts on "set- tling-day," to assess the damages and fix the price at which settlements may be made. Sec. 3. The Committee of Arrangement shall have charge of all matters pertaining to the account, other than those expressed in the preceding section, and shall have power to make additional rules and regulations therefor, reporting the same to the .Governing Committee for approval. They shall also have power to change the date of the " settling-day," except for the existing account. Sec. 4. Transactions may be made in " decimal lots" of stock less than one hundred shares, under the provisions of Section 1 of this Article. EULES AND EEGULATIONS OF THE LONDON STOCK EXCHANGE COMMITTEE. 1. On the 20tli day of March in every year, or if that day should Election of the tie a Sunday or bank holiday, then on the following busi- GeueTii PuJ-'" ^ess day, a ballot by the members shall be held for the poses. appointment of a committee of thirty members who shall be called the " Committee for General Purposes," and shall hold ofBce for twelve months from the 25th of March next following the date of their election, but shall be re-eligible. Notice of such ballot shall be publicly exhibited in the Stock Exchange during fourteen days previous to the same being held, and a further notice containing the names of the persons on the existing committee willing to serve again, and of all new candidates, their proposers and seconders, shall be publicly exhibited in like manner during three business days pre- viously to such ballot being held. The members on the said com- mittee retiring shall remain in office until the 25th of the same month of March in which their successors shall have been elected, and in case no election shall be made at any such ballot as aforesaid, the members retiring shall remain in office until the 25th day of March in the following year, or until a valid election shall have taken place under Clause 92. Four business days' notice previous to any ballot of intention to propose any person not already on the committee and eligible for re-election must be given to the Secretary of the commit- tee in writing, signed by two members, and the ballot shall be by printed lists containing the names of the persons willing to serve again and of all persons so proposed, distinguishing the former from the latter. In case no valid election be made on the day hereinbefore appointed for that object, the committee may forthwith, or at any time thereafter prior to the next ordinary yearly ballot, cause a ballot to be held for such election, on a day to be fixed by the committee for that purpose, and in all respects, as lastly hereinbefore provided ; and the committee to be appointed by such ballot shall remain in office until the 25th day of March then next following. Every ballot for the election of the Committee for General Purposes, or for supply- ing vacancies in the committee, shall be held at the Stock Exchange, 54 850 Bules and Regulations of the and, except as specially provided by these presents, shall be conducted in accordance with the existing practice and usage in reference to such elections. In case of dispute as to what such practice and usage has been in any particular, the committee shall from time to time de- termine the same by resolution. — Deed of Settlement, § xii. el. 90. 2. No person shall be elected to the said Committee for General Qnaiiflcation Purposes who shall not for the space of five years imme- of members . ^ i ■ i t of the com- diatelv precedina: the day of election have been a member, mitteeandof ,"^^ * ■ ^ x. x. u n ■ j- * voters. and every person on ceasing to be a member shall tpso/acto vacate his seat on the committee. — Deed of Settlement, § xii. el. 91. Every member is entitled to vote, although he may not have paid his subscription. 3. Any occasional vacancy in the said Committee for General Pur- Occasionai poses shall be filled up by a ballot of members to be vacancy i",,,. , ■, i^iti/~i committee. held for the purpose on a day to be fixed by the Com- mittee for General Purposes, and of which seven days' previous no- tice shall be given by the same being publicly exhibited in the Stock Exchange. Similar notice of nomination shall be given as provided by Clause 90. The surviving or continuing members on the com- mittee, notwithstanding any vacancy in their number, may act until the same shall be filled up. Any person elected to supply an occasional vacancy in the said committee shall hold ofiGce for the residue of the year in which he shall be elected, and shall then retire with the other members of the said committee. — Deed of Settlement, § xii. els. 92, 93. 4. The said Committee for General Purposes shall meet at such Procedure of times as they may from time to time appoint, and shall the commit- . , . , rr i tee. determme their own quorum (the same to be not less than seven members actually present) and mode of procedure. Until otherwise determined, the quorum of the said committee shall be seven members personally present. — Deed of Set- tlement, § xii. els. 98, 99. 6. The said Committee for General Purposes shall regulate the Committee transaction of business on the Stock Exchange, and may bosfifess'™ make rules and regulations not inconsistent with the pro- chlng'e,*id*' visions of these presents respecting the mode of conduct- make rules, ing t]je Fallot for the election of the committee, and London Stock Exchange. 851 respecting the admission, expulsion, or suspension of members and their clerks, and the mode and conditions in and subject to which the business on the Stock Exchange shall be transacted, and the conduct of the persons transacting the same, and generally for the good order and government of the members of the Stock Exchange; and may from time to time amend, alter, or repeal such rules and regulations, or any of them, and may make any new, amended, or additional rules and reg- ulations for the purposes aforesaid. — Deed of Settlement, § xii. cl. 95. 6. At their first ordinary meeting after the annual election, the Election of committee shall elect, from among themselves, a Chair- Depii™-'chak^ ™^" ^'I'l Deputy-chairman, who shall respectively hold ™''"' office till the 25th of March next ensuing. In case either appointment shall become vacant, it shall be filled up as soon after- wards as possible. When the Chairman and Deputy-chairman are absent, the meeting shall appoint a Chairman. In all cases when, on a division, the votes are equal, the Chairman shall have a second or casting vote. V. At the first meeting of the committee one of the members of Election of the Stock Exchange shall be chosen Secretarv, who shall Secretary and ° . . '' Scrutineers, hold his office during their pleasure ; and three other members shall be appointed to act as Scrutineers at elections, who shall report the result of the ballot to the committee and to the Stock Exchange. 8. The ordinary meetings of the committee shall be held every „ ,. Monday at one o'clock, commencing on the first Monday Meetings. •' i , . t. ■ i after each annual election. But a special meeting of the Committee may at any time be called by the Chairman or Dep- Speciai meet- uty-chairman, or (in their absence, or in case of their re- ™^^' fusal) by any three members of the committee. One hour's notice, at least, shall be posted in the Stock Exchange. 9. If a quorum be not assembled within a quarter of an hour after Absence of the time appointed for meeting, the Chairman or Deputy- quorum, chairman may adjourn such meeting. 10. The business of the committee shall be divided into two Business, classes, viz. : routine and .p, special. Koutine, Special. 852 Rules and Regulations of the The first, to comprehend the reading of minutes for the purpose of confirmation or otherwise, the admission of members and Minutes. ■, ■, f ■ clerks, fixing settling-days, etc. The second, the investigation of claims and other matters relating to the interests of the members or of the public. The printed notices of the meetings of the committee posted in Notices of tli6 house shall contain the words on " Routine " or " Spe- meettog. g^^.,, Business. 11. No resolution of the committee shall be valid, or put in force, Conflnnation until confirmed, unless it relate to the shutting of the of resolution, jjoygg^ the admission of members, the readmission of de- faulters, the fixing of ordinary settling-days, or the granting or refusing of special settlements, and official quotations. In cases which do not admit of delay, two thirds of the committee present must concur in favor of the immediate confirmation of the resolution, and the urgen- Decisions <5y ^^ the case must be stated on the minutes. In all cases ^""'^ brought under the consideration of the committee, their decision, when confirmed, is final, and shall be carried out forthwith by every member concerned. 12. Notice shall be given in writing of any alteration of, or addi- Noticeof new ^i^n to, the Rules, and a copy of such alteration of a rule, rules. ^jj. proposed new rule, shall be sent to each member of the committee. After the reading of the minutes, the consideration of any altera- Precedenceof ^on of a rule, or proposed new rule, shall take prece- business. dence of all other business, except the readmission of de- faulters and cases of urgency. 13. All communications to the committee shall be made in writing, Communica- tions. and no anonymous letter shall be acted upon. 'o> 14. Members and their clerks shall attend the committee when Attendance of required; and shall give such information as may be in "erksfwheif ^^^^'' possession relative to any matter under investiga- requiied. ^ion. 15. The committee may expel any of their own members from BxpniBion of the committee who may be guilty of improper conduct, committee. The resolution for expulsion must be carried by a majori- London Stock Exchange. 853 ty of two thirds in a committee specially summoned for the purpose, and consisting of not less than twelve members, and must be con- firmed by a majority of the committee at a subsequent meeting spe- cially summoned. 16. The committee may expel or suspend any member of the Expulsion or Stock Exchange who may violate any of the rules or reani- suspension of . ® ■' '' ° members. lations. Or fail to comply with any of the committee s decisions, or who may be guilty of dishonorable or disgraceful con- duct. The resolution for expulsion or suspension must be carried by Special com- ^ majority of three fourths in a committee specially sum- mittee. moned for the purpose, and consisting of not less than twelve members, and must be confirmed by a majority of the com- mittee at a subsequent meeting specially summoned. 17. The Committee for General Purposes for the time being may. Publication i^ their absolute discretion, and in such manner as they of names, etc. ^^^ ^^imk fit, notify, or cause to be notified, to the public that any member has been expelled, or has become a defaulter, or has been suspended, or has ceased to be. a member, and the name of such member. No action or other proceeding shall under any circum- stances be maintainable by the person referred to in such notification against any person publishing or circulating the same ; and this rule shall operate as leave to any person to publish and circulate such no- tification and be pleadable accordingly. 18. The committee may dispense vrith the strict enforcement of Suspension of ^'^7 of t^e regulations ; but such power shall only be ex- rnies. ercised by a committee specially convened for that pur- pose, and consisting of not less than twelve members, three fourths of whom must concur in the resolution for such dispensation. The resolution must be confirmed by a majority of the committee at a subsequent meeting specially summoned. 864 Eules and Regulations of the ADMISSIONS, RE-ELECTIONS, AND RE- ADMISSIONS. 19. Every member desirous of being re-elected shall, on or before Appiicationa the 4th of March in each year, address to the Secretary a election. letter, of the form inserted in the Appendix. Each individual of a partnership is required to sign a separate letter. 20. The committee shall, on the first Monday in March, proceed to Admission admit and re-elect such persons as they shall deem eligi- eieotion. ble to be members of the Stock Exchange, for one year, commencing on the 25th of March then instant, or last preceding the admission of such subscriber, at the amount fixed by the trustees and managers for such admission. 21. Every applicant for admission, previously to being balloted for. Sureties for must be recommended by three members of not less than new mem- bers. four years' standing, who have fulfilled all their engage- ments, and who are not indemnified. Each recommender must en- gage to pay five hundred pounds to the creditors of the applicant, in case the latter shall be declared a defaulter within four years from the date of his admission. If the applicant has been a clerk in the Stock Exchange for four When two years previously to his application, two recommendevs sureties re- , , ,, , . i , , . . ., quired. only shall be required, who must each enter into a similar engagement for three hundred pounds. No member shall be surety for more than three new members at the same time. 22. No foreigner shall be admissible unless he shall have been Foreigners, naturalized for a period of two years. 23. A notice of each application, with the names of the recom- Notice of menders, stating whether they are, or expect to be, indem- appiication. uifigd, shall be posted in the Stock Exchange at least eight days before the applicant can be balloted for. London Stoch Exchange. 855 24. Members are required to have such personal knowledge of ap- Persoiiai plicants whom they recommend, and of their past and appUcamby' present circumstances, as shall satisfy the committee as to sureties. ^^jeir eligibility. 25. Any recommender of a new member who at the time of such Sabsequent member's admission shall have avowed that he was not, ton of"*"*" and that he did not expect to be, indemnified, and who Bnreties. gjjg^jj subsequently receive any indemnity, shall, in the event of the new rnember failing within the time of his liability, be compelled to pay to the creditors any sum so received, in addition to the amount for which he originally, became surety. 26. An applicant may be recommended by a firm, but not by two Ineligibility members of the same firm ; nor by two members one of of sureties. whom is authorized clerk to the other; nor by a member whose authorized clerk the applicant may be ; nor by a member whose sureties are still liable. 27. If a member enter into partnership with, or become authorized New sureties clerk to, any one of his sureties, or if any one of his sure- whenrequired. ^jgg cease to be a member daring his liability, he shall find a new surety for such portion of the time as shall remain unex- pired ; and, until such substitute is provided, the committee will pro- hibit his entrance to the Stock Exchange. 28. No applicant is admissible if he be engaged as principal or Applicants clerk in any business other than that of the Stock Ex- otfei^busi- change, or if his wife be engaged in business, or if he be nesses. ^ member of, or subscriber to, any other institution where dealings in stocks or shares are carried on ; and if subsequently to his admission he shall render himself subject to either of those objec- tions, he shall thereby cease to be a member. 29. * No applicant for admission who has been a bankrupt, or has passed through the Insolvent Court, or has compounded with his creditors, shall be eligible unless he shall have paid 6«. %d. in the pound ; nor then, until two years after he shall * This rule does not apply to the readmission of members of the Stock Exchange. , 856 Buhs and Eegulations of the have obtained his oflacial discharge, or fulfilled the conditions of his deed of composition, unless he shall have paid his debts in full ; and no applicant having more than once been a bankrupt or insolvent, or compounded with his creditors, shall be eligible for admission until he shall have paid in full. 30. A member intending to object to the admission of an appli- Objections cant or to the re-election of a member is required to ing. communicate the grounds of his objection to the commit- tee by letter previously to the ballot or re-election. 31. If any applicant for admission or re-election be rejected, he Eeiected ^^^^^ ^°^ ^^ balloted for again before the 25th of March applications. ^|jg^ jjg^^ ensuing. Defaulters who have been rejected Special upon two ballots can only be readmitted by a majority onrSecUid °^ three fourths in a committee specially summoned, and defaniteM. consisting of not less than twelve members. 32. Any former member who, not having been a defaulter, bank- Discontinu- rupt, or insolvent, shall have discontinued his subscription scriptions. for One year must be recommended for re-election by two members, but without security. If he shall have discontinued his sub- scription for two years, he will be considered a new applicant, and must apply for admission in the usual way. 33. A notice of every defaulter, bankrupt, or insolvent applying for EeadmiBsion readmission shall, at the discretion of the committee, be ofdefaaiterB. posted (without recommenders) in the Stock Exchange at least twenty-one days, and the committee shall then take the appli- cation into consideration, upon the report of the sub-committee ap- pointed according to Eule 164. If, however, the committee think fit, a defaulter may be readmitted without the above notice, upon a re- port of the sub-committee and a certificate signed by such a number of the creditors as may be satisfactory to the committee, that all liabilities have been bona fide discharged in full. In all such cases, after the defaulter has been readmitted by ballot it shall be decided by show of hands whether his name shall be posted in the Stock Exchange as having paid 20s. in the pound, or whether it shall be placed in one of the two classes mentioned in Rule 165. London Stock Exchange. 85T 34. The readmission of defaulters shall take precedence of all other Precedeiice business. of defaulters' readmissiou, 35. The chairman of the committee, in addition to any other Questions put questions that may appear to be necessary, shall, to each tu sureties. Qf the recommenders of an applicant, put the following : — Has the applicant ever been a bankrupt, or has he ever com- pounded with his creditors ? and if so, within what time, and what amount of dividend has been paid ? Would you take his check for three thousand pounds in the ordi- nary way of business ? Do you consider he may be safely dealt with in securities for the account 1 36. The Chairman shall require every new applicant to acknowl- Qnestions edge his signature to the form of application, and shall appiicanll ask such questions as may be deemed necessary. 858 Bules and Begulations of the APPENDIX TO ADMISSIONS AND EE-ELECTIONS. 1. Form of letter to be signed by persons desirous of becoming members of the Stock Exchange : To the Secretary of the Committee for General Purposes. Sni, — ^You -will please to acquaint the Committee for General Purposes that I am desirous of being admitted a member of the Stock Exchange for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Rules and Regulations of the Stock Exchange which now are, or hereafter may be, for the time being in force. I have read the Rules and Regulations of the Stock Exchange. I have read the resolution at the back of the letter. I am a British subject, and of age. I am (state whether married or unmarried). My residence is My ofBce is My bankers are I am not engaged in any business except such as is transacted at the Stock Exchange, nor am I clerk in any public or private establishment unconnected with the Stock Exchange, nor a member of, or subscriber to, any other institution in which dealings in Stocks or Shares are carried on. I am, sir, yours faithfully, We recommend Mr. as a iit person to be admitted a member of the Stock Exchange ; and in case he shall be publicly de- clared a defaulter within four years from the date of his admission, we each of us hereby engage to pay to his creditors, upon application, the sum of iive hundred pounds* to be applied in discharge of the said defaulter's debts, in the Stock Exchange. * The sureties must state opposite to their signatures whether they are, or are not, or expect to be, indemnified for the security they give, and must attend, togetlier with the person recommended, at one o'clock of the day (jn which the ballot is to take place ; and they are required to have such personal knowledge of the applicant and of his past and present circum- London Stock Exchange. 859 The following rule is to be printed on the back of the letters of application : 26. If a member enter into partnership with, or become authorized clerk to, any one of his sureties, or if any one of his sureties cease to be a mem- ber during his liability, he shall find a new surety for such portion of the time as shall remain unexpired ; and until such substitute is provided, the committee will prohibit his entrance to the Stock Exchange. The Secretary shall send to every member, on his admission, a let- ter to the following efiect : Sir, — ^I am directed to inform you that you are elected a member of the Stock Exchange for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Rules and Eegulations of the Stock Exchange which now are, or hereafter may be, for the time being in force. You will be admitted into the house on pay- ment of the entrance-fee and subscription to Mr. W. F. Pekownb, the Sec- retary to the Managers. I am, sir, etc., etc., Francis Levien, Sec. to the Committee for General Purposes. 2. Form of the letter to be signed by persons desirous of being re- elected members of the Stock Exchange : APPLICATION FOR EE-ELECTION. To the Secretary of the Committee for General Purposes. Sir, — ^You will please to acquaint the Committee for General Purposes that I am desirous of being re-elected a member of the Stock Exchange for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Eules and Regulations of the Stock Exchange which now are, or hereafter may be, for the time being in force. My residence is My bankers are The under-named will continue to act as my clerk. I am engaged in partnership with I am not engaged in any business except such as is transacted at the Stock Exchange, nor am I clerk in any public or private establishment unconnected with the Stock Exchange, nor a member of, or subscriber to, any other institution in which dealings in Stocks or Shares are carried on. I am, sir, your obedient servant, stances as may enable them to give a satisfactory account of the same to the committee. 860 Bules and Regulations of the Name of Clerk. Here state whether anthorized or not to transact business ; and if the party be a member, it is to be so stated. The subscription is to be paid to Mr. W. F. Perowui!, the Secretary to the Managers, in the committee-room within twenty-one days from the 25th March. 3. The Secretary shall furnish each applicant with a book of the Eules and Eegulations, which must be carefully read by him previous to his admission. The Secretary shall send to every member, on his re-electioUj a let- ter to the following effect : Sir, — I am directed to inform you that you are elected a member of the Stock Exchange for the year commencing on the 25th of March, 18 , upon the terms of, and under and subject in all respects to, the Eules and Eegu- lations of the Stock Exchange which now are, or hereafter may be, for the time being in force. Yon will please to pay your subscriptioa to Mr. W. P. Pekownb, the Secretary to the Managers. I am, sir, etc., etc., Feancis Levien, Sec. to the Committee for General Purposes. London Stock Exchcmge. 861 PARTNERSHIPS. 37. In eveiy year, as soon as possible after the general election, a Notice of list of partnerships shall be made out by the Secretary, partnerships, j^ ^^^^ ^£ ^ ^^^ ^^ alteration in an old partnership, the same shaU be communicated to the committee ; and no partnership shall be considered as altered or dissolved until such communication be made. AU notices relative to partnerships must be signed by the parties, countersigned by the Secretary, and posted in the Stock Exchange. 38. The failure of a firm dissolves the partnership ; and should the Pavtuerships members of such firm, when readmitted, desire to renew dissolved by . ' . failure. the partnership, notice thereof must be given to the com- mittee in the usual way. 39. No member of the Stock Exchange shall be allowed to enter Partnership i"to partnership with any person who is not a member : membe™ n*"" shall any member form a partnership during the liabil- prohibited. j^y ^f j^jg recommenders, without their written consent ; sureties. such consent to be communicated to the committee. 40. Memberg dealing generally together in any particular stock or J . shares, and participating in the result, shall be held re- sponsible for the liabilities of each other, not only in the shares or stock in which they are jointly interested, but also in any other description of securities in which either of them may transact business, unless they forward a written notice to the Secretary, specify- ing the particular shares or stock in which they deal on joint account. This rule to be applicable also to members allowing others to deal with their shares, stock, or capital, and participating in the result. Limited part- Form of notice to be countersigned by the Secretary, nership. ^^^ posted in the Stock Exchange. 862 PmUs and Begulations of the (notice.) We, the undersigned, beg to inform the Committee for General Form of Purposes that, from this day until further notice, we hold uotice. ourselves jointly responsible to the Stock Exchange for all transactions entered into by either of us in We are, sir, etc., 41. The committee will not allow members or their authorized Brokei-B and dealers, clerts to act in the double capacity of Brokers and and their clerks. dealers ; nor will they sanction partnerships between Partnership between -n ^ j j i Brokers and dealers. xJroKers and dealers. London Stock Exchange. 863 CLEKKS. 42. No clerk shall be admitted without the permission of the corn- Admission, mittee, nor unless he be seventeen years of age. No person who is not eligible for adijiission as a member can be Eligibility. admitted as a clerk, with the exception of persons under age who are ineligible as members on that account only. No clerk shall be authorized to transact business until he has been Authority to two years in the Stock Exchange, and is twenty years of '^««'- age. No authorized clerk shall transact business as a dealer in any mar- ket other than that in which his employer is engaged. 43. A member desirous of obtaining the admission of a clerk, or Application of employing another member as his clerk, shall make foradmission. application in writing to the committee, and state whether .such clerk is authorized, or not authorized, to transact business. When application is made for the admission of a clerk who has Previous previously been ensaged in business out of the Stock Ex- occupation of ' ■* T T 1 appiicautB. change, the name and address of such person, together with the name of the member applying for his admission, shall be posted in the Stock Exchange eight days prior to the application be- ing considered by the committee. No clerk shall enter the Stock Exchange until his employer has received from the Secretary notice of his admission. Notice of ad- mission. 44. A member applying for the admission of an authorized clerk a new°membe?to h?s' ™1S* ^''^t obtain the consent of his sureties in writ- employment of an au- inor if the term of their liability be not expired, thonzed clerk. o' , *' *^ 45. A member who may part with a clerk, or be desirous of with- Dismissai of a drawing from an authorized clerk the permission to trans- draw'ai of au- act business on his account, shall give notice in writing to deal,' etc." the Secretary, who shall forthwith communicate the same to the Stock Exchange in the usual manner. 864 Eules and Begulations of the 46. A list of authorized clerks (distinguishing those who are also List of author- members) and the names of their employers shall be post- ized clerks. ^^ -^^ ^^^ ^^^^^ Exchange, and the authority shaU be con- sidered to continue until revoked by letter to the committee. 47. A member authorizing a clerk to transact business shall not ResponsiWi- be held answerable for money borrowed by the clerk, ity of mem- ■' •' bers employ- without security, unless he shall have given special au- mg author- i . » , o i ized clerks. thority for that purpose. 48. A member employed as clerk, whether authorized or unau- thorizld^cierSl thorized, shall not make any bargain in his own name. 49. No clerk shall be allowed to apply for an allotment in loans Application ov shares without the sanction of his employer, who shall mente b^ ^6 responsible for the payment of the deposit on the clerks. shares or stock so applied for. 50. Clerks of defaulters are excluded from the Stock Exchange. Exclusion of Clerks of deceased members may, by permission of two clerks of de- . fauiters and members of the committee, attend to adjust unsettled ac- deceased members. COUntS. London Stock Exchange. 865 GENERAL RULES APPLICABLE TO STOCK -EXCHANGE TRANSACTIONS. 61. The Stock Exchange does not recognize in its dealings any Fttifliment of other parties than its own members ; every bargain, there- baigams. f^^g^ whether for account of the member eSecting it or for account of a principal, must be fulfilled according to the rules, regulations, and usages of the Stock Exchange. 52. No member shall attempt to enforce by law a claim arising out Legal pro- of Stock Exchange transactions against a member or de- ceedings by . ° .... members. faulter, or agamst the prmcipal of a member or defaulter, without the consent of such member, of the creditors of the defaulter, or of the committee. The committee have power to intervene in cases where the principal Legal pro- oi a member shall attempt to enforce by law a claim alaiisf which is not in accordance with the rules, regulations, members. g^^^ usages of the Stock Exchange, and will deal with such cases as the circumstances may require. 53. If a non-member shall make any complaint against a member, Complaints the committee shall in the first place consider whether blrs agS' tJie complaint is fitting for their adjudication ; and in the members. event of the committee deciding in the afiBrmative, the non-member shall, previously to the case being heard by the commit- tee, sign a consent in writing as follows : To the Committee for General Purposes of the Stock Exchange, London, In the Matter of a Complaint between and Gentlemen, — I do hereby consent to refer this matter to you, and I un- dertake to he hound by the said reference, and to abide by and forthwith to carry into effect your award, resolution, or decision in this matter, in the same manner as if I were a member of the Stoct Exchange ; and I 55 S66 Buks and Begulations of the further nndertate not to institute, prosecute, or cause or procure to be in- stituted or prosecuted, or take any part in, proceedings, either civil or criminal in respect of the case submitted. And I consent that the com- mittee may proceed in accordance with their ordinary rules of procedure, and I undertake to be bound by the same. Also, that the committee may proceed ex parte after notice, and that it shall be no objection that the members of the committee present vary during the inquiry, or that any of them -may not have heard the whole of the evidence; and any award or resolution of the committee, signed by the Chairman for the time being, shall be conclusive that the same waa duly made or passed, and that the reference was conducted in accordance with the practice of the commit- tee. And I hereby consent that such award or resolution shall be deemed to be an award under the Common-law Procedure Act, 1854, and be en- forceable accordingly, and that the same may be made a rule of the Court of Queen's Bench or of either of the other superior courts of common- law. I remain. Gentlemen, 64. If a member shall do a private bargain, either for money or Private deal- time, with an individual member of a finn in the Stock iDg with in- dividnaisof Exchange, such bargain being concealed from the firm, hibited. both members shall be expelled. 55. If any member or authorized clerk shall do a bargain, either for Bargainswith money or time, with an authorized or unauthorized clerk, or for clerks, f^j, account of such clerk, they shall be liable to expulsion. 56. The committee particularly caution members against transact- Specuiative bus- ing speculative business for clerks in public or private es- iness for clerks i... .. ii iiri-i prohibited. tabhshments, without the knowledge of their employers. Members disregarding this caution are liable to be dealt with in such Penalty. manner as the committee may deem advisable. 57. No application which has for its object to annul any bargain in Inviolability the Stock Exchange shall be entertained by the commit- of bargains, ^gg^ unless upon a specific allegation of fraud or wilful misrepresentation. 58. The committee will not recognize any dealing in letters of jdlot- -teifof^iotment °*^5*i either of loans, or shares in new companies. London Stock Exchange. 867 59. A member applying for Shares or Stock of loans or public com- Payment of panics, and neglecting to pay the deposit on the same, allottees. shall be considered to have violated a contract, and shall be compelled to fulfil his engagement. 60. The committee will not recognize new Bonds, Stock, or other New bonds of Securities issued by any foreign government that has vio- foreign gov- . ■ , . . • j • ernments vio- lated the Conditions of any previous public loan raised in lating condi- i.iii i • ix tionsofpre- this country, unless it shall appear to the committee that loans. a settlement of existing claims has been assented to by the general body of bondholders. Companies issuing such Securities will be liable to be excluded from the official list. 61. The committee will not, after the restoration of peace, recognize. Loans raised by qj. allow the quotation of, any loan raised by a power powers while at ^ t J j r war with Great while at war with Great Britain. Britain. 62. No member shall enter into bargains in prospective dividends mwlends™ °° Shares or Stock of railway or other companies. forbidden. 63. All disputes between members not afiecting the general inter- ests of the Stock Exchange shall be referred to arbitra- Arbitration. . . .„ . . . , . tion; and the committee will not take into consideration such disputes, unless arbitrators cannot be found or are unable to come to a decision. 64. No member shall be obliged to take a reference for payment Reference for to a non-member ; nor shall he be obliged to pay a non- uou-membera member for Securities bought in the Stock Exchange. not sanc- tioned. 65. Checks must be passed through the Clearing-house, unless Checks for the drawer consent to their being otherwise presented, clearing. j^^^ j£ .^ member require bank-notes in payment for Se- Deraand for curities sold, without having made such stipulation at the banic-notes. i\xne of making the bargain, he must give notice to that effect before half-past eleven o'clock on the day of delivery, and pay- ment shall be made upon delivery of the Securities or the bank receipt. 868 Buks and Begulations of the 66. A seller, having transferred or delivered Stock or other Securi- Seiiermay tjeg has a riffht to demand payment from the member require pay- ' e> r j ment ofpnr- -Hrho passed him the ticket ; and in case the seller apply chase-money ^ ' . byhiBbnyer. to the issuer of the ticket, and fail to obtam payment, or receive a check which is dishonored, the member from whom he re- ceived the ticket shall make immediate payment. 67. A seller may require payment of the difference between the between^^rice P™® marked on the ticket and the making-up price of marked on the day on which the ticket is tendered ; but if such mak- dered and ing-up price be above the price of sale, he shall only be thatatwhioh ^. , , ,.,,.„ , • „ ^ sold may be entitled to claim the difierence up to the price or sale, demanded. 68. In cases of loans, the lender is not entitled to place beyond his Loans, deal- control Shares or Stock received as security for money ad- ing'withtbe 1 1 • j security. vanced; and he may, after reasonable notice, and upon payment of the principal together with interest up to the time for Security to which the loan was originally made, be required to return when'"™*^ the identical Bonds, or to retransfer the Shares or Stock required. given as security for such loan. But this liability does not apply to a member who has taken in Shares or Stock upon con- tinuation. All continuations shall be effected at the making-up price, or at the Continuation, then existing market price. 69. Buying-in or selling-out must be effected publicly by the Sec- Ein^oy"*?* retary to the Committee for General Purposes, or by the buying-in or clerks of the house in their respective markets, who shall sellmg-ont, . i ., , i i • etc. trace the transaction to the responsible party, and claim the difference thereon. To. Bonds, Shares, or other Securities shall not be bought in while When tl^^y ^re known to be out of the control of the seller for may nofbe ^^ payment of calls, or the receipt of interest, dividends, bought in. qj, bonus ; and the committee, on being applied to, will fix a day on which they may be bought in. Tl. In the settlement of all bargains, dividends are to be accounted How for at the net amount receivable after deduction of income- dividends i.„„ are to be ""aX' accounted for. jj, the casB of dividends payable only abroad, the Sec- London Stock Exchange. 869 retary to the Share and Loan Department shall fix a price for the Fixing price coupons in sterling money, which shall be posted in the conpone. Stock Exchange, and at which the dividends shall be ac- counted for. Current Securities to bearer are not deliverable on the settling- coupon, ^^y. ^itJJo^t t]je current coupon. When deliver- Securities to bearer, with coupon payable on the set- able ex cou- , ' r r J pen. tling-day, shall be delivered ex coupon. When the dividend is payable after the settling-day, outstanding whrnAmieni bargains in Securities to bearer shall be settled with the p&y&DiG Alter settling-day. current coupon, otherwise the buyer shall have the right to demand the market value of the coupon, which, in case of dispute, shall be fixed by the Secretary to the Share and Loan Department. Ir2. All optional bargains for the settlement shall be declared at a quar day. quarter before three o'clock two days before the settling- 73. The hours of business in the Stock Exchange are from eleven Hours of until three o'clock. On Saturdays business will close at business. 111 one o clock. "When the ticket-day is fixed for a Saturday, the house will be Ticket-day ^^P* Open until THREE o'clock, for the purpose of the set- on SatuKTayB. tigfuent only, the regulations for which shall be the same as on ordinary ticket-days. The Stock Exchange will be closed on the following days, viz. : 1st January, Easter-Monday, 1st May, Whit-Monday, the first Monday in August, 1st November, 26th De- cember, unless specially ordered otherwise by the committee. When either the 1st January, 1st May, 1st November, or 26th De- cember falls on a Sunday, the house will be closed on the day fol- lowing. Baro'ainsto N.B. The .committee strongly recommend that all be checked, bargains be checked on the following day. 870 Bules and Begulations of the EULES APPLICABLE TO ENGLISH AND INDIA STOCKS, Etc. 74. All bargains, when no time is specified, shall be considered as wh«?no time '^^'i® ^'^^ ^^^ existing account. Hpecified. 75. The committee will not recognize any bargain for a future ac- iieaiing for count if it shall have been effected more than eight days future ao- it o •/ coants. "previously to the close of the pending account. 76. An ofEer to buy or sell a sum of Stock at a price named is Offers to buy binding as to any part thereof; and an oflEer to buy or °' ^^"* sell Stock when no amount is named is binding to the amount of £1000 Stock. 77. ,If the seller of Stock shall not receive from the purchaser a Transfer- transfer-ticket by ten minutes before one o'clock, he may *^®^" demand two shillings and sixpence for each transfer-fee, which may be paid for the actual transfer of such Stock. On a set- tling-day, if the transfer-ticket is not delivered by a quarter before one o'clock, the seller may claim of the purchaser two shillings and sixpence for every £1000 Stock; and if he shall not receive a trans- fer-ticket before half-past one o'clock on the day it was contracted to. deliver the said Stock, he may sell out the same, and claim ^ '"^ of the person who held the ticket at half-past one o'clock any loss or charge incurred. On Saturdays Stock may be sold out at a quarter to one o'clock. 78. Stock bought for a specified day, and not then delivered, may be bought in on the following day at eleven o'clock ; and the member causing the default shall pay any loss in- London Stock Exchange. 871 cnrred, and also one eighth per cent, for the non-delivery of the Stock. This fine shall attach to all Stock not delivered on the day Fine. '' for which it was bought, whether it shall have been bought in or not. .79. Transfer receipts for stock bought for a specified day must be Time for de- delivered by a quarter before four o'clock, or by half-past livery of trans- , , , ^ i 'J r , fer receipts, one o clock on Saturdays. Omnium or scrip not paid in full must be delivered before two Omnium. o'clock, Or by one o'clock on Saturdays. 80. When Stock is borrowed without any stipulation as to its re- Borrowed turn, the borrower or lender may be called upon to deliver stock. Qp j.^^g j^^ Q^ ^]jg following day, whether a regular transfer- day or not. 81. In cases of loans on the deposit of Stock, when the striking of the Loans on balances for dividend takes place before repayment of the stock. jgg^jj^ ^2jg lender shall allow the dividend, deducting interest Dividend thereon till the day of payment, of, and. at the same rate allowed. as, the loan. 82. Purchasers of Bank or East India Company's Stock may re- Limit as to quire, at the seller's expense, as many transfers as there of transfers, are even thousand pounds stock in the sum bargained for.' 83. The clerk of the house shall fix the making-up prices, by^ Fixing taking the average price between eleven and one o'clock prices. on each of the two days preceding the account, and be- tween eleven and a quarter before one o'clock on the settling-day; and no making-up shall be binding unless at such fixed prices. 872 Bvhs and Begidations of the KULES APPLICABLE TO SECURITIES OF COMPANIES DELIVERABLE BY DEED OF TRANSFER. 84. Bargains in Shares or Stock, when no time is specified, and bar- Bargains gains made before twelve o'clock on ticket-days, shall be when no time ° "* is specified, considered to be made for the existing account. 85. The committee will not recognize any bargain in Shares or Stock ftit^re !(>" effected for a period beyond the ensuing two accounts. conntB. 86. An offer to buy or sell an amount of Shares or Stock at a price Offers to buy named is binding as to any part thereof, that may be a or Bell. marketable quantity ; and an offer to buy or sell Shares or Stock when no amount is named is binding to the amount of ten shares, if in value under £500, or a number not exceeding in value that sum, or to the amount of £1000 Stock. 87. The seller of Shares or Stock is responsible for the genuineness Hesponsibii- *nd regularity of all documents delivered, and for such for regniari ty dividends as may be received, until reasonable time has and'for'divt' ^^^ allowed to the transferee to execute and duly lodge dends. stigij documents for verification and registration. When an official certificate of registration of such Shares or Stock has been Dispnted title issued, the committee will not (unless bad faith is alleged tration. against the seller) take cognizance of any subsequent dis- pute as to title, until the legal issue has been decided, the reasonable ^expenses of which legal proceedings shall be borne by the seller. London Stock Escchange. 873 88. The committee will not (except under special circumstances) Transfers in interfere in any question arising from the delivery of blank. Shares, Stock, Bonds, or Debentures by transfer in blank. 89. The buyer who takes up Securities deliverable by deed of trans- Mode of pro- far shall, before twelve o'clock on the ticket-day, issue a ticket-days, ticket with his own name as payer of the purchase-money, which ticket shall contain the amount and denomination of the Stock Tickets to or Security to be transferred ; the name, address, and de- patticniars. scription of the transferee in full ; the price, the date, and the name of the member to whom the ticket is issued. Each inter- Endorse- mediate seller, in succession, to whom such ticket shall be "'™'' passed shall endorse thereon the name of his seller. All tickets representing Stock or Shares which, at the time, are sub- Making-np ject to arrangement by the Settlement Department shall tickets pass- ^^ passed through the accounts at the making-up price of s'eft'emeM" ^^^ day before the ticket-day, and the Stock or Shares paid Department fgj g^ ^jj^t price; but the consideration money in the deed must be at the price on the ticket. A member receiving a ticket from the issuer after twelve o'clock on »T .-^ . the ticket-day shall note the same on the back of the tick- Notiflcation ... .-,, , , , n ^ of time of et; it IS also required that the member who nrst receives a ''"='"^- ticket After one o'clock. After half-past one o'clock, After two o'clock, or After half-past two o'clock, shall draw a line noting such times ; and members receiving tickets after three o'clock, or at any time on any subsequent day, shall mark the exact time at which they are received. Members omitting to note the times thus fixed may become liable for losses occasioned by selling out in case undue delay is proved un- der the provisions of Rule 98. A member splitting a ticket shall pay any increased expense caused Splitting hy such splitting, and shall retain the original ticket, tickets. gpjj^ tickets must bear the name of the issuer of the original ticket. A member failing to keep the original ticket will be required to Selling ont. trace it in case of selling out. 874 Mules and Regulations of the On ticket-days the passing of tickets shall commence at ten o'clock. Time for leaving Tickets may be left at the office of the seller up to half- ticketeatofflcee. ^^^ ^^^ o'clock on ticketrdays. Tickets may be issued and passed on the day before the ticket-day, but the buying-in upon tickets so issued shall not be allowed until the eleventh day after the ticket-day. 90. When Shares have been converted into Consolidated Stock and Shares con- are SO quoted in the official list, buyers are required to verted into con- , * ' ./ ± soiidated atocis. pass tickets for Stock, and not for Shares. 91. A member not refusing an antedated ticket, when tendered as Antedated such, takes it with all its liabilities : but if it be passed as or nndated . . . -, \ tickets. an ordinary ticket, the liabilities remain with the mem- ber putting such ticket again into circulation ; and any member hold- ing an undated ticket shall not be liable for any loss arising from the Shares or Stock having been bought in, unless such ticket has been seven days in his possession. 92. A member who makes an alteration in, or improperly de- Iterationor tains, a 1 _jtention of tickets. thereby. Alteration or tains, a ticket shall make good any loss that may occur detention of e> J J 93. The deliverer shall cause the Shares or Stock to be transferred Prices marked ^t t^^ price marked upon the ticket; but no member on ticket. gjj^jj ^^ compelled to. take- a ticket at a price not quoted in the official list during the account, unless the bargain represent- ed by such ticket shall have been made within the two preceding accounts. 94. The deliverer may, previously to delivery, pay any call made on „ .. „ registered Shares, although not due, and claim the amount Pending caJls. / . ' = ' of the issuer of the ticket. 95. The buyer of Shares or Stock shall pay the ad valorem duty Payment of ^^^ registration fee, and shall state on the ticket the stamps. amounts in which- he may desire to have the Shares or Stock transferred, provided no such amounts require a higher stamp than £50. In cases of loans, the borrower shall pay the nominal-consideration London Stock Exchange. 875 stamps on stamp of ten shillings, the registration fees, and the mortr loanB. g^gg stamp. 96. The buyer shall, in the event of his ticket being split, pay for FortiouB to be any portion of Shares or Stock which may be presented,' paid for. provided the number be not less than ten Shares or the value less than £200. 97. The buyer of Shares or Stock may refuse to pay for a transfer Coupons or deed unaccompanied by coupons or certificates, unless it vrith^ransfer ^^ ofl5cialIy certified thereon that the coupons or certifi- deed. cates are at the oflBce of the company. But if the' trans- fer deed bo perfect in all other respects, the Shares or Stock must not be bought in until reasonable time has been allowed to the seller to Division of obtain the verification required. If the seller have a larger coupons. coupon than the amount of Stock conveyed, or only one coupon representing Stock conveyed by two or more transfer deeds, the coupon may be deposited with the Secretary of the Share and „ ^ .. , Loan Department of the Stock Exchange, who shall for-' To be certified ,.,,». - , by Secretary ward it to the ofiice of the company, and certify to that of Share and _ , i. n i ,. i , „ , , Loan Depart- •eSect on the transfer deeds, whicn shall then be a valid ' delivery. No person is to look to the Managers or Com- mittee of the Stock Exchange as being liable for the due or accurate performance of those duties, the managers and committee holding' themselves, and being held, entirely irresponsible in respect of the execu- tion, or of any misexecution or non-execution, of the duties in question. 98. The deliverer of Shares or Stock who shall not receive a ticket by half-past two o'clock on the ticket-day may sell out such Securi- ties up to three o'clock. If a ticket shall not have been regularly is- sued before twelve o'clock, the issuer thereof shall be responsible for any loss occasioned by such selling-out. Should, however, a ticket have been regularly put into circulation, the holder thereof at two o?clock shall be responsible for any selling-out on the ticket-day. If the selling-out take place on the next day, the holder of the ticket at three o'clock on the ticket-day shall be liable — unless such ticket was Settlement ^^ *^* Settlement Department at three o'clock, in which Department, ^^^gg fj^g holder ofsuch ticket at four o^ clock shall be liable. In case of selling out on any subsequent day, the holder of the tick- et at three o'clock on the previous day, or at one o'clock on Satur- 876 Eules and Regulations of the days, shall be liable, unless he can prove undue delay in passing the ticket. Should the deliverer allow two clear days to elapse without availing Release of himself of his right to sell out, his buyer shall be released intermediates, f j^^ ^jj j^gg j^ ^^^^^ where the ticket has not been passed in consequence of the public declaration of any member as a default- er. If a seller does not deliver Shares or Stock within thirteen clear days, the intermediate buyer from whom he received the ticket shall be released, and the issuer thereof shall alone remain responsible for the payment of the purchase-money. 99. When Shares or Stock are sold out, if a ticket be not given Tickets for within half an hour after the time of sale, the transfer may sold-out , 1 . , ,. 1 , shares. be made into the name of the buyer. 100. If Shares or Stock are not delivered within ten days, the issuer of the ticket may buy in the same against the seller at or Buying-in, j j a after twelve o'clock on the eleventh day after the date of the ticket, or on any subsequent day. One hour's public notice of such buying-in must be posted in the Stock Exchange, and the purchase must be made or attempted within half an hour after the expiration of the time fixed. The name into which the Shares or Stock are to be transferred must be stated in the order to buy in. The loss occasioned by such buying-in shall be borne by the ultimate seller, unless he can prove that there has been undue delay in the passing of the ticket on the part of any member, who shall in that case be liable. Shares or Stock thus bought in and not delivered by one o'clock on Non-delivery the following day, or by twelve o'clock on Saturdays, may stock, etc. be repurchased for immediate delivery without further no- tice, and any loss shall be paid by the member causing such repurchase. 101. The issuer of a ticket who shall allow thirteen clear days Time for from the date of his ticket to elapse without buying in, or bnying-in. attempting to buy in, Shares or Stock, shall release his seller from all liability in respect of the non-delivery of the securities, Eight to unless he shall have waived his right to buy in at the re- bay in. quest or with the consent of his seller ; and the holder of the ticket shall alone remain responsible to such issuer for the deliv- ery of the securities. London Stock Exchange. 817 102. The buyer is entitled to new Shares or Stock issued in right Eight to new of old, provided that, within reasonable time, he specially claim the same, in writing, from the seller. Claims should Claims. jjg entered as bargains, and, as such, be checked in the usual manner. When practicable, claims are required to be settled by letters of Letters of re- renunciation, but if not practicable, and there be suflBcient nunciation. ^j^jjjg £qj, registration, the seller may, after due notice, re- quire the buyer to complete the bargain in old Shares or Stock. If the new Shares or Stock cannot be obtained by letters of renun- Fixing prices ciation or by the transfer of the old, the committee will for new « . shares. fix a price at which the same shall be temporarily settled, and which amount may be deducted by the buyer from the purchase- money of the old Shares or Stock, until the special settlement. The committee will not entertain any dispute relating to unchecked Uncheciiea claims, unless brought before them within ten days after claims. tjjg gpggjgj settling-day. 103. On the day before the ticket-day, and on the ticket-day, the Making-up Clerk of the house shall, at twelve o'clock, fix the making- prices, ^jp pyiees by taking the then actual market prices ; and no making-up shall be binding, unless at such fixed prices. In case of dispute as to the making-up price, or of any omission in fixing the same, the Clerk of the house shall act upon the decision of two mem- bers of the committee. 104. On ticket-days all unsettled bargains shall be brought down Maising up and temporarily adjusted at the making-up price of the nStied day, the difference thereon being paid on each subsequent accounts. settling-day, until the closing of the transaction. 105. No member shall be required to pay for Shares or Stock pre- Time for re- sented after half -past two o'clock, or after one o'clock on quiring pay- „ , , ment. Saturdays. 878 Rules and Begulations of the EULES APPLICABLE TO SECURITIES TO BEARER. 106. Bargains, when no time is specified, shall be considered as Bargains, made for the existing account ; but those made on a set- when np time . . specified. tling-day shall, unless otherwise expressed, be for the en- suing account. 107. The committee will not recognize any bargain effected for a Dealing for period beyond the end of the ensuing two accounts. future ac- r j o -counts. 108. An offer to buy or sell a sum of Stock at a price named is Offers to buy binding, as to any part thereof ^ not less than the under- or sell. mentioned sums, and divisible by the same — viz. : £1000 Stock or Scrip ; Fs. 750 French Eentes ; 10 Shares. 109. No member shall be required to accept the delivery of a cer- bonasTna tificate of American Shares of a larger amount than 10 Imomi't deiiv- ^^^^^^ °^ ^^^O each nominal capital, or 20 Shares of $50 erabie. each, nor an American Bond of a larger amount than $1000, except upon special contract. 110. The seller of Securities for a particular day which the buyer g ... J is not prepared to pay for by half-past two o'clock on that day (or half-past twelve o'clock on Saturdays) may sell out the same, and claim of the buyer any loss incurred. 111. On the ticket-day, between ten and three o'clock, tickets shall Tickets shall ^® passed without any price thereon, and the accounts be passed. made up therewith are to be settled at the making-up price of the day. ' London Stock Exchange. 879 Tickets must bear distinctive numbers and be for the following Snumberi amounts, viz. : Amonnts ^1000 stock, or multiples of £1000 up to £5000. deliverable. £1000 Italian stock, or multiples ttereof up to £5000. Also £800, or multiples thereof up to £4800. $5000 American stocks, or multiples thereof up to |25,000. Fs. 1500 French 3 per cent, rentes, or multiples thereof up to fs. 6000. 10 shares, or multiples thereof up to 100. Tickets for £500 stock may be passed for bargains or balances of that amount. Smaller amounts must be settled without tickets. Tickets shall not be issued later than two o'clock on the ticket- day. Tickets shall not be split, except in the Settlement Department in cases where the sub-committee appointed to control that department may consider it necessary. Every member is required to endorse on the ticket the name of the member to whom it is passed. Tickets may be left at the office of the seller up to half-past two o'clock on ticket-days. On the settling-day, and on the day after the settling-day, the de- livery of Securities shall commence at ten o'clock. Sellers shall accept tickets ; and if they elect to settle with their im- mediate buyers under the provisions of Rule 66, they shall deliver their Securities before half-past twelve o'clock. The holder of tickets may deliver Securities up to half-past one o'clock on settling-days. A member electing to take Securities from his immediate seller must give notice thereof before twelve o'clock on the ticket-day, in which case he shall be required to pay up to two o'clock on the set- tling-day. Members neglecting to give such notice shall be required to pay up to half-past two o'clock. Buyers shall pay for such portion of Securities as may be delivered PortioDs to within the prescribed times. be paid for. '^ 112. A member shall be required to pay for Securities presented Time for re- until half-past two o'clock on any day other than settling- quirmg pay- * . ^ • i c ment. days. On Saturdays he shall not be required to pay for Securities after one o'clock. 880 Eules and Begulations of the 113. Securities bought for any period, except the settling-day, which Bnying-in ®^^'^ ^°^ ^^ delivered by half-past two o'clock or by half- past twelve o'clock on Saturdays, may be bought in on the same or any subsequent day, and any loss occasioned by such re- purchase shall be borne by the seller. But Securities bought for the settling-day, and not delivered by half-past two o'clockj may be bought in on the following or any sub- sequent day, after one hour's notice to be posted in the foreign market, announcing the intended purchase. The buying-in not to take place before two o'clock, nor before half-past twelve o'clock on Saturdays, in which case the loss shall be borne by the member who shall not have delivered the shares or stock by half- past two o'clock on the previous day, or by one o'clock on Saturdays. Stock thus bought in, and not delivered by one o'clock on the fol- Non-deiiveiy lowing day, or by twelve o'clock on Saturdays, may be re- bought in. purchased for immediate delivery without further notice, and any loss shall be paid by the members causing such repurchase, A member neglecting to take the numbers of Securities delivered Neglecting after time shall be required to trace out the member re- numbers, sponsible for the loss. 114. A member who shall allow two clear days to elapse without Limit of time availing himself of his right to buy in, or without attempt- i>»y>ng I"- ing to buy in. Securities releases the seller from any loss hitMwdi- ^'^ consequence of the public declaration of any member ates. as a defaulter, unless he shall have waived such right at the request or with the consent of the seller. 115. The Clerk of the house shall, at twelve o'clock on each of the Maiiing-up ^^° ^^J^ preceding each settling, fix the making-up prices prices. (j£ ^11 Securities by taking the then actual market prices ; and no making-up shall be binding unless at such fixed prices. 116. On settling-days all unsettled bargains shall be brought down Mnking-up and temporarily adjusted at prices to be fixed by the Clerk tiing-dny. of the house at half-past two o'clock, and the differences shall be paid in the usual manner. 117. Bargains in exchequer bills are for bills not filled up to Exchequer order. London Stock Exchange. 881 118. Bargains in French rentes, unless otherwise specified, shall be French settled in certificates to bearer, and at a fixed exchange of rentes. gS fs. per pound sterling. 119. Foreign coupons sold at the exchange of the day, and not whSi reSwl: Pai'ge.) CONSTKUCTION of written instrument, 355. of wager contract, 478. of order to. sell when left to jury, 167. of statute relating to arbitrators, 85. CONTANGO, 270. "CONTINUATION," 270 n. 1. CONTRA BONOS MORES, effect of usage conflicting with, 346. Index. 965 [Figures refer to pages.] CONTEACT, ■when transaction between Broker and Client considered, 110 n. 1. between Broker and Client to suffer suspension from board, good, 60 when Client cannot revoke authority of Broker, 121. when order to buy shares of different value not regarded as an en- tire, 120. when usage cannot make, 344. written or express, not varied by usage, 344, 345. between Broker and Client on marginal transaction defined, 103. for speculative purchase of stock, when relation of pledgor and pledgee created by, 112. (See Pledgor and Pledgee.) specially authorizing Broker to sell stocks without notice, 114. special contract and joint adventures in stocks, 169. (See Joint Account; Special Contract.) of Broker for sale of stock, when explained by parol evidence, 163. when Broker authorized to contract according to rules of Exchange, 130, 131. made by Broker as principal and agent void, 253. when courts not ousted of jurisdiction by, 84 n. when trustee in bankruptcy relieved from, 72. CONVERSION, ACTION OF. (See Remedies.) COPARTNERS, liabilities of, for speculations by their clerks, 180. "CORNER," defined, 116, 117. (See CoNSPiUAcy.) CORPORATIONS, dealing in shares of, not illegal at common-law, 382. rules preventing members having recourse to law void, 78. mandamus to reinstate expelled member of, 63. placing fraudulent value upon capital of, etc., 155. when liable for collaterals misappropriated by officers, 139, 140. organization of, in England and the United States considered, 155. liability of shareholders where capital not paid up, 155. when jurisdiction of courts over, ousted by statute, 55 n. when exclusive jurisdiction to decide disputes between members given to, 85 n. how right of parties to vote in, determined, 138 ». 1. right of pledgee of stock to vote, 138 u. 1. license to vote revocable, 138 n. 1. 966 Index. [Figures refer to pages.] COEPOEATIONS (continued), liens of, for debts of stockholders. (See NEGonABiLiTY ; Keme- DiES ; Stock Exchange.) COEKECTIONS in transfer, liability of Client for failare to make, 132. COSTS, indemnifying Exchange for, in action to compel transfer of seat, 96. when Client not liable for costs of action defended by Broker on his behalf, 135. COTTON, sale of, by Broker for want of margin, 193. COTTON EXCHANGE, Client presumed to know usages of, 358i COULISSE. (See Paris Bourse.) COUNTEB-CLAIM. (See Ebmedies.) COUNTEE-OEDEES to buy and sell Stocks, how executed, 108. COUNTY BONDS. (See Negotiability.) COUPONS, interest ou may be collected by pledgee of bond, 152. (See Negotiability.) COUET OF MAYOE AND ALDEEMEN, Brokers in London licensed by, 239, 240. rules of, relating to Brokers, 241. Brokers to furnish iuformation as to persons acting without license, 242, 243, bond given to by London Brokers, contents of, 242, 243. no present jnrisdiction over Brokers, 245 n., 246 n. when to remove Brokers convicted of felony, etc., 248 n. suit by, upon bond of Broker, for misbehavior, 253. COUETS, rules preventing recourse to, void, 78. when members of unincorporated associations can appeal to, 60, 61. proceedings for suspension not reviewed by, 61. jurisdiction of, ousted by implication, 85 n. decision of arbitration committee not interfered with, 82. to construe written instrument, 355. CEEDIT, Stock-broker cannot sell upon, 168, 169 ami n. 2. Index. 967 [Figures refer to pages.] CKEDITOE, ■when relation of debtor and creditor exists between Broker and Client, 102. right of, to seize seat upon attachment, etc., 86. when not entitled as secret equitable owner of seat to share in pro- ceeds of same, 89. right of creditors to participate in member's seat, etc. (See Stock Exchange.) CEEDITOK'S BILL, patent may be reached by, 97. seat in Stock Exchange subject to, 97. CRIMES, Stock Exchange no jurisdiction over, 76. CRIMINAL REMEDY. (See Conspiracy ; Embezzlement ; Remedies.) CROSSED CHECK, payment for stock by means of, 275. "CURRENT" SECURITIES, 279. CUSTOM. (See Usage.) CUSTOMARY NOTICE, Broker may sell upon, where Client fails to put up margins, 193. CUSTOMER. (See Client; Stock-broker.) CUSTOMER'S AGREEMENT, authorizing Broker to close out transaction at public or private sale, etc., 171, 172. (See Special Contract.) DAMAGES, a bar for violation of duty of Broker, 160. measure of, on failure to "buy in'' under short sale, 182. for failure to return borrowed stock, 183 n. 2. accept stock ; proof in action for, 387. tender gold under option contract, 136. in action for, when unnecessary to allege ownership of stock, 398. for illegal sale of member's seat, 74. what not matter in mitigation of, 74. for conversion of stocks, 225. Broker may counterclaim in action for, 193. where Broker fails to give notice of sale and demand, 205. when recovered upon contract to suffer suspension from Exchange, 60, (See Measure of Damages ; Remedies.) 968 Index. [Figures refer to pages.] DEALEE. (See London Stock Exchange.) , DEATH, Broker may summarily close account by reason of Client's, 288. agreement to submit to Arbitration Committee not revoked by mem- ber's, 67. DEBT, action of, against Broker for acting without license, 241. DEBTOR AND CEEDITOE, when relation of, created between Broker and Client, 102, 201. (See Creditor ; Pledgor and Pledgee ; Stock Exchange, etc.) DECLARATION. (See Remedies.) DEED of shares executed in blank cannot be filled in by Broker, 292 n. 3. void when executed in blank, 292 n. 3. of registration, when tender must be made, 322. DEFAULTER. (See London Stock Exchange ; Stock Exchange.) DEFENCE, mandamus for failure to give corporation opportunity to present, 63. DEFINITIONS: about, 830. account day, 274. backwardation, 270. bank, 110 n. 2. banker, 110 m. 2. bear, 269. bear account, 271 n. Broker, 1, 2, 109, 111 n. 1, 248. bull, 269. bull account, 271 n. buyer's option, 180. call, 117, 269. calls, 117, 445. carry stocks, to, 116. carrying over, 270 n. 1. closing out, 358. combination, 463, 464. contango, 270. continuation, 270. corner, 116, 117, 464, 471 n. engrossing, 455. for money, 272. for the account, 272. Index. 969 [Figures refer to pages.] DEFINITIONS {mnlmued.) : forestalling, 455. lame duck, 269. long of stocks, 116. name day, 274. options, 269. pool, 473. put, 117, 269. regular, 180. regratiug, 455. seat, 87. seller's option, 180. shave, 117. short of stocks, 116. short sale, 180. spread-eagle or straddle, 117, 171, 445. Stock-broker, 4, 109, 110 «. I. stop order, 166. straddle or spread-eagle, 117. take in, 166. terms used on Loudon Stock Exchange, 269 et seq. wash sales, 117. DELEGATA FOTESTAS NON POTEST DE^EGARI, application of maxim to Stock-brokers, 104. DELIVEKY, kind of shares Broker may deliver, 104. ■when to be by 100 shares each, 107. power of attorney by executors, etc., not considered good, 107. of certificate, when to be by power irrevocable or transfer, 107. upon " regular " transaction, 107. DEMAND, of payment upon pledgor, when not waived, etc., 170, 205. must be made before stocks can be sold for want of margin, 181, 188, 196. for margin may be in writing or orally, 189. must specify sum wanted, 189. what an insufficient notice for margin, 189, 190. person upon whom notice for margin should be served, 189, 190. (See Pledgor and Pledgee ; Eemedies. ) DEMUEREE. (See Bell in Equity; Remedies.) DEPOSITOR, when dispute of, with bank within exclusive jurisdiction of arbi- trator, 85 n. 970 Index. CFigures refer to pages.] DEPUTY, wlieu Broker may act by, 104. (See Substitute.) DEVISE, seats in Stock Exchange not snbject of, 87. DIFFERENCES, defined, 384 n. speculation for, on London Stock Exchange explained, 436. settlement of contract on London Stock Exchange by payment of, 280. cannot be recovered if paid by Broker without authority, 134. expulsion of Broker where not made good, 125. liability of Client for, upon giving wrong order to sell, 127. occasioned by failure to "iuitial" coiTections made by Broker in transfer of stock, 132. recoverable though dealings not recognized by rnles, 131. liability of savings-bank to Broker for, 128. Jobber for, by failure to give name, 276. Broker may recover, although intention of Client was only to pay, 436. when wager no defence to action for, 414, 421. when contracts for payment of, considered wagers, 410, 411. cannot be recovered as between principals, 410, 411. what not deemed sufficient to show intent to pay, 417. contracts for mere, void as against public policy, 477. speculations in stocks for payment of, considered wagers in Penn- sylvania, 115. paid in stock-jobbing transactions not recoverable, 389. note given for void, 390. bringing into an account, 257. when official assignee entitled to, from members, 70, 72, 267. when assignee of bankrupt not entitled to recover, 391. (See Wager.) DILIGENCE. (See Stock-broker.) DISAGREEMENTS on exchange, how settled, 106. DISBURSEMENTS of transaction, when recoverable from Client, 159. (See Client.) DISCOVERY. (See Remedies.) DISCRETION, abuse of, by Arbitration Committee, effect of, 83. DISPUTE, when member may appeal to Board for decision on, 105. how decided during session of New York Stock Exchange, 105. Index. 971 [Figures refer to pages.] DISPUTE {continued), exclusive jurisdiction of arbitrators over, 85, 86 n. "DIVIDEND ON," usage as to selliug stock, 368. when purchaser not entitled to dividend declared at time stock sold, 369. DIVIDEND WAERANTS pledged by Stock -brokers, bankrupts for tbeir own debt, right of trustees to, 162. DIVIDENDS, generally collected by Broker, 108. on borrowed stock, 184. declared upon stock deliverable at a future day, 368. when stock sold " dividend on " and " ex dividend," 368. transferror must account to purchaser for, 323. Client entitled to, where stocks bought on margin, 115. on stock purchased belong to Client, 151. pledgee may collect, 152. action by pledgee to recover, 152. dealing in prospective, 131. sale of prospective, legal, 436 ii. 3. seller of stock may be compelled to account for, 155*. specific performance to compel payment of, on preferred stock, 733. ■when party to joint account not entitled to, 176. (See Negotiability ; Stock.) DOUBLE COMMISSIONS, right of Broker to receive, 254 n. 3. (See Commissions.) DUBLIN, establishment of Stock Exchange in, 243 n. 1. book to be kept by Brokers in, 244 n. accounts to be furnished by Brokers to purchasers, 244 n. commissions of Brokers in, 245. DUE DILIGENCE, when a question for the jury, 139. DUES. (See Stock Exchangk.) DURESS, when action against Brokers not discharged by, 205. recovery of money paid by Broker under, to recover stocks repledged with bank, 149. 972 Index- [Figures refer to pages.] DWELLING-HOUSE, notice for margin may be left at Client's, 190. E. EAST INDIA COMPANY, ■when stock of, first dealt in, 3. EDWARD I., statute of, relating to Brokers, 250. ELECTION, right of pledgor to vote at. (See Stock.) EMBEZZLEMENT, when Broket guilty of, in converting margins, 697. insolvent Bankers and Brokers receiving deposits of stock, etc., guilty of, in Illinois, 697 n. 2. ENDORSEE, when promissory note, etc., given for differences, valid in hands of, 390. ENGLAND, Stock-brokers in, 239. (See Lonbon Stock Exchakgb.) speculations in bank shares regulated in, 181 «. 1. ENGROSSING defined,'455. (See Conspiracv.) EQUITY. (See Biii in Equity ; Remedies ; Specific Perfokmasce.) ERRORS, liability of Client for loss occasioned by failure to correct, 132. ESTOPPEL, when members bound by amendment to by-laws, etc., 99. when corporation estopped from alleging that dispute is between parties, as menibers, 84. EVIDENCE, employment of Broker, how proved, 122. what considered evidence of having acted as Broker, 251. parol, admissible to show that a person acted as Broker, 362. proof of authority to act as Broker to be clearly shown, 122. when authority of Broker may be shown from conversation, 122. oral, admissible to show that party is principal, 684. to show that Brokers are liable where principals not disclosed, 362. that written order to sell was modified by subsequent oral under- standing, 165. parol, to explain Broker's contract for sale of stock, 165. Index. 973 [Figures refer to pages.] EVIDENCE (continued), oral, to sliow that special contract with Broker is uot applicable to new transactions, 172, 173. to show wagering contract, 448, 477. for what purposes proof of usage admissible, 373, 376. to show knowledge of usage of Brokers, 354. to show custom of Brokers, 360. of usage to close Client's account at private sale, 357 n. 2. of knowledge of usage to charge interest, how established, 156. not admissible to show custom for pledgee to use or hypotliecate stocks pledged, 148 n. 1, 363. of usage to put up "reasonable" margin on future sale rejected, 189. of custom to send sold notes without disclosing principal's name; rejected, 136. to explain power of attorney to sell stock, 362. to give effect to presumed intentions of parties, 362. as to proof of usury, 757. of sales made on joint account, 175. of a joint account, what considered, 175. when accounts showing loss not admissible against surety, 133. when loss not proved by mere admissions of Client, 133. when admissions not part of res gestce, 133. communications between Brokers and Clients not privileged, 235. what, not sufficient to charge Broker with notice that bonds belong to wife of Client, 131. to charge Broker with negligence iu failing to take security, 141. decision of Arbitration Committee, when not set aside for receiving, illegal, 83. "EX DIVIDEND," usage of Brokers selling stock, 368. EXAMINATION of Broker before trial, when granted, 121. EXCHANGES, STOCK. (See titles of different Exchanges.) EXECUTION, when seat iu Exchange subject to. (See Stock Exchange.) EXECUTORS, powers of attorney signed by, not a good delivery of shares, 107. holdiug stock not personally liable as stockholders iu N. Y., 152, 153. EXPENSES, when recoverable by Broker, 159. 974 Index. [Figures refer to pages.] EXPULSION of nicmbera from Stock Exchange. (Sec Stock Exchange.) FALSE NEWS OR INTELLIGENCE, circulating, to advance or depreciate stocks, etc., a misdemeauor in New York, 463 «.l. forging names of persons with like intent punishable, 463 ». 1. statute of Illinois as to forestalling market price of grain and stock by, etc., 470 n. 1. FALSE PRETENCES, conviction of, in illegally procuring shares to be listed on Ex- change, 476. when Stock Exchange no jurisdiction over charges of, between members, 77. FALSE REPRESENTATIONS. (See Remedies.) FELONY, Brokers disqualified on conviction of, 248 n. FIDUCIARY CHARACTER, when existing between Stock-broker and trustee, 163. money held in, may be followed by cestui que trust, 164 n, 1. (See Remedies.) FIXED RULES OF LAW, effect of usage in opposition to, 345. FLUCTUATIONS, how Broker may protect himself against, 114. Client to keep margin good during, 103. FORECLOSURE, when pledge may be sold by, 197. (See Pledgor and Pledgee.) FOREIGNER, liability of Jobber giving name of, as transferee, 304. FORESTALLING, defined, 455". (See Conspiracy.) forestalling the grain and stock market punishable in Illinois, 470 ». 1. FORFEITURE of membership for failure to pay dues, 59. (See Stock Exchange.) FORGERY. (See False News, etc. ; Negotlability.) Index. 975 [Figures refer to pages.] FORM OF ACTION in trover, when objection against deemed waived, 75. in assumpsit, by principal against Broker, 690 n. 6. declaration against Share-broker for not purchasing shares, etc., 691 n. 2. ex delicto, on the case against Broker, 691 n. 3. to set aside account stated, 689 n. 1. for specific performance of stock contract, 735 «. 1. FORMS of bond required to be given by London Broker, 242. of "call," 117 n. 4. of notice to put up margin, 189, 190. of oath taken by Loudon Brokers, 243. of " put" commonly used by Stock-brokers, 117 n. 5. of " straddle" or " spread-eagle," 117 n. 6, 118 n. FORM OF REMEDY. (See Remedies.) "FOR MONEY," transactions, 272. "FOR THE ACCOUNT," 272,274. FRAUD, London Broters disqualified on conviction of, 248 n. Broker guilty of, in acting as buyer aud seller, 222. liability of Broker for collateral lost by, 140. when trustees not liable for loss by, 139 n. 5. actions for relief from, at law and in equity, 462 li. 1. principles upon which liability for rests, 462 n. 1. when party to joint speculation not liable for fraud of co-operator, 178. FRAUDS, STATUTE OF. (See Statute of Featos.) G. GAMBLING, GAMING. GENUINE TRANSFERS, when vendor contracts to deliver, 154. (See London Stock Exchange.) GEORGE II., Stock-jobbing act of. (See Stock-jobbing.) GEORGE III., who deemed Brokers within 57 Geo. III. c. 60, 251. statute of, regulating Brokers in Ireland, 243 n. 1. repealing 7 aud 8 Wm. III. relating to bullion, 245. '' > (See Stock-jobbing ; Wagek.) 976 Index. [Figures refer to pages.] GOLD, short sales of, legal, 404. must be in -writiDg within Statute of Frauds, 404. constructiou of contracts relating to, 404 n. 4. act of Congress, 1863, relative to contracts for sale of, 404. contract for future sale of, not considered a wager, 414, 415. what deemed a reasonable notice of sale where Client fails to put up margin as to, 193. when Broker not liable for neglect to sell at highest point, 168. liability for failure to tender, under option contract, 136. when Client must bear loss in fall of price of, 136. GOLD EXCHANGE, submission of claims in, to arbitration construed, 80. GOOD FAITH, Broker must act in, 121, 164. not liable for loss of margins where he acts in, 140. must sell for highest price, 205. GOVEENMENT BONDS, when Broker need not keep identical bonds purchased separate, 145 n. 3, 146. liability of Broker for failure to hold identical bonds under agree- ment, 150. how transactions made for, on New York Stock Exchange, 106. GOVEENMENT STOCKS, persons dealing in for reward, deemed Stock-brokers, 249, 251. GEAIN, selling for want of margin, rule as to, 188 n. 1, 200. recovery of loss on second sale of, where first was illegal, 203 «. 1. contracts for future delivery of, when wagers, 415. when optional contracts in, considered illegal in Illinois, 449. form of " put " in grain contracts, 450. indictment for making "corners" in, 470 n. 1. GEAIN MEECHANTS, custom among, in Baltimore on sales for future delivery, 417. GEATUITY FUND, provisions as to, in constitutions of New York and Philadelphia Ex- changes, 97. right of representatives to participate in, 97, 99. GUAEANTY, loss sustained by Client not avoided by guarauty of third person, 132. Index. 977 pi'igures refer to pages.] GUARDIAN holding stock as such, not personally liable in New York, 152, 153. H. HEIES of member, proceeds of seat descend to, 87. HYPOTHECATION. (See Pledgor and Pledgee, and other titles.) I. ILLEGAL COMPANY, money paid to Broker for shares in, not recoverable, 258. when sale of shares in, prohibited, 382 n. 1. not illegal to sell shares in companies being wound up, 383 n. ILLEGAL CONTEACTS. (See Stock-jobbing; Wageb.) ILLEGAL EULES, what considered, 79, 80, 81. (See Stock Exchange.) ILLEGAL TEANSACTIONS, Broker cannot recover either commissions or moneys expended in, 257, 258. Client cannot recover moneys paid in, 257, 258. ILLEGALITY, when Stock-broker cannot plead, 259. (See Stock- JOBBING ; Usage; Wager.) ILLINOIS, " puts " and " calls " condemned by courts of, 449. laws of, as to forestalling grain or stock market, corners, sale of options, etc., 470 n. 1. statute of, against Stock-jobbing, 403. decisions under, 403 et seq. IMPLICATION, when jurisdiction of courts ousted by, 85 n. INDEMNITY FOE LOSSES, ETC. (See Client; Stock-broker.) INDICTMENT against Broker for embezzling margins, etc., 697 ». 2. INFANT, speculating on margin may recover money deposited, 429. Jobber not absolved from liability by giving name of, 303-305. powers of attorney signed by, not a good delivery, 107. 62 978 Index. [Figures refer to pages.] INFORMATION, agreement to share profits upon condition that information prove true, 176. when burden of proof as to, npon informant, 176. (See Joint Account.) INJUNCTION. (See Eembdies.) INSOLVENT. (See Bankrupt; Stock-broker.) INSPECTION, when hooks of Broker may he produced for inspection and copy, 352. when Broker may refuse inspection of contract-hook, 251. INTENTION, when evidence admissible to give effect to, 362. (See Wagek.) INTERMEDIATE PURCHASER, liability of, to vendor, 314. INTEREST, ownership of, on stock purchased, 151. pledgee may collect, 152. agreement for, when inferred from previous dealings, 156. when parties bound by usage of trade to charge and allow, 156. right to charge compound interest implied by course of dealings, 158, 756. when knowledge of usage to charge presumed, 156. (See Stock-bkoker ; UsuRi.) INVESTMENT, relation between Client and Broker when stocks purchased for. 111. IRELAND, Stock-brokers in. See Dublin.) IRREGULARITIES in proceedings, when courts will not set aside suspension for, 61. ITEMS. (See Account; Account Stated.) J. JOBBER. (See London Stock Exchange ; REMEDrES.) JOINT ACCOUNT, joint adventures in stocks by Broker and Client, 169. what considered evidence of, on purchase of stock for, 175. when parties to, liable for loss, 175. Index. 979 [Figures refer to pages.] JOINT ACCOUNT {continued), when party not bound to make known that sale is upon, 175. liability of parties to, as partners, where bonds taken are stolen from third party, 178. nature of, where information is furnished by one and capital by an- other, 173. when furnishing of information as to future price of stocks, etc., be- comes an executed contract, 173. when terminated, 174. action by parties to, for accounting, 174. effect of sales made by one party, 175. when no recovery had against other party without proof of actual sale, 175. effect of agreement to divide profits where information furnished by one party, 176. when agreement for, enforced, 176, 177. contract to divide proceeds of stock deposited with Broker, 177, 178. when action to recover the stock does not lie, 177, 178. liability where stock is ordered to be bought on, 179. when party cannot recover interest on profits and ignore balance of account, 179. when account may be closed by Broker as if only one party were interested, 179. JOINT SPECULATION. (See Joint Account.) JOINT-STOCK COMPANIES, persons dealing in shares of, for reward, deemed Brokers, 251. JUDGMENT, cannot direct sale in gross of stocks pledged for different loans, 211. how satisfied out of seat in Exchange, 93, 94. upon award, when not restrained, 83. JUDGMENT DEBTOE, when compelled to transfer seat to receiver, 91. JUDICIAL POWERS, when corporations cannot usurp, 79. (See Stock Exchange.) JUDICIAL SALE, purchasers of seats at, not recognized by Exchange, 92. Broker may become purchaser of pledged security at, 223. JURISDICTION of Mayor and Aldermen of London over Brokers taken away, 247 n. 980 Index. [Figures refer to pages.] JURISDICTION (continued), courts cannot be ousted of, by private contracts, 83 n. 2, 84 n. when ousted by statute, 85 n. (See Stock Exchange.) JUEY, when agency of Broker deemed a question for, 122, 123. construction of mercantile expression in written instrument left to, 355. not error to instruct that Brokers are presumed to know usages of their business, 360. intention of parties as to whether contract is a wager, a question for, 412, 419, 425, 427, 434, 477. the rule different in Pennsylvania, 412, 431, 434. intention may be shown by parol evidence, 448. finding of, where letters of allotment were purchased /or shares, 124, 125. when authorized to consider usage in limiting Broker's order to settling-day, 121. when question as to proper execution of orders by Broker left to, 127, 128, 167. what is proper and sufficient care where pledged securities are stolen, left to, 139. when usury a question for, 756. K. KENTISH COAST EAILWAY SCRIP, when order to bny, properly executed by Broker, 125. KNOWLEDGE. (See Usage.) L. LACHES, what not considered, in suit against Broker, 218. "LAME DUCK," defined, 269. LAW, defined, 346. effact of usage in opposition to " fixed rules of law," 345. members of Exchange not bound by rules preventing recourse to, 78. expulsion not contrary to, valid, 82. actions at, by and against Broker. (See Assumpsit ; Form op Action ; Remedies.) LAW OF THE LAND, effect of, upon rules of Exchange. (See Stock Exchange.) LEDGER to be kept by Brokers, 242, 244. Index. 981 [Figures refer to pages.] LEGAL EEPRESENTATIVES, right of, to balance duo deceased member, 67, 87. LENDER of stock entitled to dividends, 184. LETTERS OF ALLOTMENT. (See Jury ; London Stock Exchange.) LBX MEBCATOBIA. (See Negotiability.) LICENSE, Brokers do not generally have in United States, 101. must have in Pennsylvania, 101 n. 1. penalty for acting without, 101 ■«. 1, 241 n., 248, 249. tax upon, 101 n. 1, 248, 249. seat in Exchange said to be, 88. required by London Brokers, 248 n. 1. Broker acting vrithont cannot recover commissions, 254. to vote, revocable by pledgor, 138 n. 1. LIENS OF BANKERS AND STOCK-BROKERS. (See Remedies; Stock- BKOKERS ; Stock Exchange.) LIENS, effect of, upon stock certificates. (See Negotiability.) LIFE INSURANCE, right of members of Exchange to participate in, 97. representatives of deceased members in, 97, 99. LIVERPOOL STOCK EXCHANGE, what deemed reasonable time to deliver shares under rules of, 354, 362. LOAN SOCIETIES, under 5 & 6 Wm. IV., when jurisdiction of courts as to, ousted, 85 n. LOANS. (See Stock-brokers.) LONDON BROKERS. (See London Stock Exchange.) LONTDON BROKERS' RELIEF ACT (1870), 247. LONDON STOCK EXCHANGE, rules and regulations of, 847 et seq. early history of Stock Exchanges in England, 8, 9. origin and history of, 260. " The House," 261. " Jonathan's Coffee-house," 5 «. 2. existence of Exchange in 1773, 261. 982 Index. [Figures refer to pageB.] LONDON STOCK EXCHAN'GE {eonUnued), is a voluntary unincorporated association, 260. operations on, by whom conducted, 269. Queen's laws paramount in, 81. in whom management of, vested, 263. transactions upon, described by Eomilly, M. E., 318. members of, principals as between themselves, 264. Aocomit, transactions in stocks for " the account " described, 274, 278. Aotg relating to London BroTcers, Edward and James I., 2, 3. 8 and 9 William III., 4. Sir John Barnard's Act, 239, 249. regulations of, 6 Anne, i>. 16, and George I. and II., 4 m. 4 ; 240 nn. 1, 5. London Brokers' Eelief Act (1870), 33 and 34 Vict. c. 60, 5, 245 n. 1. practical effect of this statute considered, 246, 247. Assignee in iankrv-ptcy, shares held by Broker for Client do not pass to, 287. stocks in trust do not pass to, 287, 288. Sond, need not be given by London Brokers, 247 ?;. form of bond formerly required, 222, 342, 253 n. 1. what not a breach of, 251, 252. action upon contract made in contravention of duties und^r, 253. Boole, to be kept by Brokers, 241, 242. when Broker may refuse inspection of contract-book, 251. when subject to inspection and copy, 251, 252. action against Broker for failing to keep books of account, 253. Brokers, who deemed under statute of Anne, 248 et seq. can only charge for cost price of articles, 254. business of, where conducted, 261. nature of transaction between, and Jobber, 274. bought and sold notes, 274 n. 3. " ticket " of sale of shares, 275. stocks, how paid for by, 275 n. 1. sale of shares for failure to give name, 276. analysis of transaction between, and Clients, 268, 280. sales effected by, when not members of Exchange, 269. Index. 983 [Figures refer to pages,] LONDON STOCK EXCHANGE (contmued), Brokers (conUmwd), yvhen not discharged by payment to solicitor of Client, 377. liens of, 714. Calls, liability of different parties for, considered, 317. (See Calls.) Client, ■when stocks purchased become property of, 286. when stock cannot be disposed of without consent of, 286. relation of, to undisclosed and intermediate purchasers, 311. relation between Client and Jobber, 295. closing accounts by reason of death, insolvency, etc., of, 288, 290. Commissions, of Brokers regulated, 245. amount stated, 254 n. 3, 255 n. unlicensed Broker cannot recover, 254. (See Commissions.) Committee for General Purposes, powers and duties of, 263, 850, 865. Court of Mayor and Aldermen-, regulations of, for Brokers, 241. jurisdiction of, over Brokers, taken away, 246, 247. Dealei's, on London Stock Exchange, defined, 264, 279. operations conducted by, 269, 279. JDefaulters, rules relating to, 888. course followed in case of, 68, 69. when rules relating to, do not govern outside creditors, 69, 70. right of outside creditors to participate in property of, under Bank- rupt Law, 265, 266. official assignee entitled to differences collected for, 265, 266, 267. when trustee in bankruptcy relieved from losing contracts of, 72. of terms used on the Exchange, 269. (See Definitions.) Diffei-ences, settlements by payment of, 280. (See Deffbebnces.) Disputes between members, how settled, 279. 984 Index. [Figures refer to pages.] LONDON STOCK EXCHANGE (continued.), Expulsion, causes for, 852, 853. where differences not made good, 125. (See Stock Exchange.) False pretences, conviction of, In procuring shares to be listed, 476. Felony, removal of member on conviction of, 248 n. Insolvency, ■what evidence of, 291. ■when Client not liable for loss occasioned by Broker's, 377. Joitei-s, early history of, 261. operations conducted by, 269. nature of transaction between Broker and, 274. liability of, to Broker, 275. liabilities and duties of Jobber and Broker alike, 311. agreement with Broker for registration of shares, 276. relation with Client, 295. general liability of, to vendor, 295. bringing purchaser and vendor together, 284. Uability of Client to, 309. assumpsit by Jobber against Client for price of shares, 310. nature and effect of rules and usages upon contract of, etc., 296, 297 et seq. not bound to procure registration of transfer, 306, 307. special contract with Client guaranteeing registration, 307. must pass name of person legally compellable to take shares, 303, 307. liability of, for giving name of infant, lunatic, or married womau, 303, 305. for calls paid where name of infant furnished, 304. when transferee is a foreigner, 304. when ceases, 300 et seq. by passing name of an " ultimate buyer," 302. not liable for loss where man of straw is ultimate purchaser, 302. when dealings between, and Broker not affected by rules, 131. dealing in prospective dividends, 131. License, plea that Broker was not duly licensed, 206. required by Loudon Brokers, 248 n. 1. penalty for acting without, 240 n. 1. Broker cannot recover commissions without having, 254. Brokers to discover persons not having, 242. Index. 985 [Figures refer to pages.] LONDON STOCK EXCHANGE {cmtmued-), Members, nature of membersliip, 263. candidates for membership, how proposed, 264, 854, 858. admission fees and annual dues, 263. legal proceedings between, when prohibited, 865. Moiwy, transactions for, 272. Oaih to be taken by Brokers, 243, 253 n. 4. Official assignee, powers of, defined, 263, 893. entitled to hold dififerences collected from members, 266, 267. when not liable to assignee of bankrupt for differences paid to, 391 et seq. rule requiring members to pay money due defaulters to, not contra- ry to Bankrupt Law, 71, 72. when to pay over money to assignee in bankruptcy, 266. when members have no preference Hen over outside creditors, 68, 69. Option, . use of terra, 269. Order to purchase, nature of transaction where given, 285. how executed, 278. when purchase of letters of allotment a good fulfilment of, 124, 125, 273. Priiicipal, when Broker not to act as, 242. Piivity. (See Vbndoe.) Bmjal Commission of 1877 to inquire into dealings on Exchange, 260. Boyal Exchange, business of Brokers transacted in, 243. Mules and Eegulations of, 260, 847, 865. in relation to different classes of stocks, 870 et seq. considered those of domestic forum, 69, 70. power of Exchange to make, 264. valid if not against public policy, etc., 265. cannot deprive creditors of property belonging to insolvent Broker, 265, 266. ofSoial assignee entitled to differences under Rule 142, 267. 986 Index. [Figures refer to pages.] LONDON STOCK EXCHANGE (continuecC), BvXes and Regulations of {continues), efifeot of, upon principals' and third persons, 69, 70, 265. rule giving members preference lien on defaulter's property not ille- gal, 66, 70. •when not illegal under Bankrupt Act, 71, 73. TomUna vs. Saffery dis- Shares. (See Stocks.) Securities, distinguished as "current" and " nou-ourrent/' 279. rules as to, 277, 883, 886. Broker no power to continue account until, 292. when Broker may summarily close account before, 288-290. order to buy deemed ended if not executed by, 121. failure of Biroker to deliver until after, 134, 135. Sillier medal, to be worn by Brokers, 242. Suits to review proceedings of London Stock Exchange, 265. against London Stock Exchange, how begun, 265. "Ticket" of sale of shares, 275-277, 873 et seq. Tradei; Stock-broker considered, 162. Trading for the account, 273. Ti-ansfei; Client liable foi; neglect to make corrections in, 294. Jobber not bound to produce registration of, 306. agreement between Jobber and Broker for registration of, 276. Transferee, infant as : restoring name of responsible party to register, 314. when Jobber not relieved from responsibility by giving name of, 303, 304. liability of, to pay calls, 323. relation between, and selling Client, 315. Transferror, relation between Client and ultimate transferee, 315. not bound to procure registration, 322, must account for dividends, 322. Index. 98T [Figures refer to pages.] LONDON STOCK EXCHANGE (continued), persons presumed to contract with reference to, 318. when held binding, 360. (See Usage.) Vendor, by whom contracts for shares are made for, 284. when entitled to indemnity against calls, 284. deed of, executed in blank cannot be filled in by Broker, 292 n. 3. general liability of Jobber to, 295 et seq. Jobber liable to for calls by giving name of infant, 304, 305, 320. where name given is of a foreigner, etc., 304, 305, 320. when privity deemed to exist between, and intermediate purchaser, 312, 315, 320, 677, 678. when contract with ultimate purchaser deemed complete, 322. when tender of deed to be made by, 322. real buyer bound to indemnify, when discovered, 323. when not compelled to sign transfer, 132. must deliver genuine transfers and certificates, 153, 154. Wager, when dealings between members not subject to defence of, 413. (See Ebmbdies ; Stock Exchange; Wager; and other titles.) " LONG " of stocks, defined, 116. "LONG" ACCOUNT, purchases for, 118. relation between Broker and Client on, 207. closing out, by Broker for want of margin, 227. where sale must be made, 227. LOSS. (See Client ; Stock-broker.) LOST SECURITIES, when Broker liable for, 139. M. MALICE, ground for mandamus where corporator expelled by reason of, 63. MAN OF STRAW, Jobber not liable where ultimate purchaser is, 302. MANDAMUS, to restore corporator, origin of, 63. grounds for invoking aid of, 63. 988 Index. [Figures refer to pages.] MANDAMUS {continued), will lie where member is expelled without legal cause, 63. to reinstate member removed under illegal rule, 63. not granted for mere informality in proceedings, 64. nor where member is tried in due form and according to rules, 64. member must be actually Wcluded before granted, 64. when not issued to compel court to proceed against friendly society, 85 k. refused to compel member to transfer seat to sheriff's vendee, 91. will issue to compel collection of annual duty payable by Brokers, 254. does not lie where damages at law are adequate, 741, 747. nor where shares have a market value, 741, 742. to transfer shares provided for in England by statute, 742, 743. will issue under the Code in Louisiaua, 743. refused as to stock of the Bank of England, 743. stock in corporations, 744. purchaser of stock in corporation at sale under execution not en- titled to, 746. refused in New York as to railway shares, 746. when issued as to railway shares, 746, 747. return to writ of, 64. MAE6IN, amount of, required, 104. nature of transaction when stocks are bought upon, 141, 142. when relation' of pledgor and pledgee created by, 113, 114. effect of deposit of stocks as, 114. when stocks bought on, become property of Client, 111. right of Client to take up stocks on, 160. stock bought on, subject to orders of Client, 115. duty of Broker where margin is kept good, 103. Broker may exact, to meet fluctuations, 114, 186. action for converting stock deposited as, 189. recovery of, by minor, where stock is unlawfully converted, 203. recovery of, where Broker fails to sell as directed, 168. Broker cannot bo buyer and seller where ordered " to buy on," 220. providing for, by special agreement, 187. when Broker may close transaction on, 181. how Broker to close out short sale on failure of, 184. when Broker cannot buy in on exhaustion of, 185. right of Broker to close transaction at Exchange for failure of, 208, 209. Index. 989 [Figures refer to pages.] MAEGIN (conMnited), compulsory sale of stocks for failure to put up, 188. must be upon notice, 188. form and service of notice, 189, 190. how demand for, made, 189, 190. what to contain, 189, 190. what an insufficient notice to put up, 191, 193, Client to have reasonable time to put up, 191. what constitutes a reasonable time, 191, 193. notice of sale for failure to comply with demand for, 196. how served, 197. notice of time and place of sale to be given, 197. what deemed a reasouable time, 197. notice when served upon agent, 198. when sale authorized without notice, 198. by means of advertisement, 198. Broker not bound to sell stocks for failure to increase, 199. special authority from Client's agent to sell without notice for want of, 170. what deemed ratification of illegal sale for want of, 204, 205. when injunction will not issue to prevent sale of stocks deposited as, 188. when Client liable for losses by failure to put up, 170. when Client bound by usage of particular office to sell without notice, 169. evidence of usage to put up "reasonable," when rejected, 189. Broker may sell for want of, upon reasouable and ouatomary notice, 193. what deemed a waiver of notice to put up, 193, 194. death or insolvency of Client, 196 n. 2. usage to sell stocks without notice for want of, 346, 357 n. 2. meaning of purchase of stocks on margin shown by custom, 360. suspension for failure to put up, liability of Client to Broker for, 357 n. 2, 358. Broker not bound to keep identical shares purchased on, 142, 143. may deliver other shares of same description, 142, 143. when Broker not liable to Client for margin lost, 140. speculations on, not considered wagers, 115. the rule in Pennsylvania, 115. contracts for sale of stock, etc., on, when not upheld in Pennsyl- vania, 426. Broker converting to his own use, guilty of embezzlement, 697. (See Pledgok and Pledgee ; Stock-brokeks.) 990 Index. [Figures refer to pages.] MARKET, right of Broker to sell in falling, 165. MARKET VALUE, ten per cent, margin to be paid upon current value of shares, 103. (See Measure of Damages.) MARRIED WOMAN, Jobber liable for giving name of, as transferee, 305. when Broker may hold bonds of, deposited as collateral by hus- band, 131. MASSACHUSETTS, Stock-jobbing Act of, and decisions under, 398. MAYOR AND ALDERMEN OF LONDON, jurisdiction of, over Brokers, 222, 240. MEASURE OF DAMAGES, general rule in United States in actions relating to personal prop- erty, 776, 777. rule in California fixed by statute, 782 n. 1. the rule in different States, 782 n. 4. (1.) 1% actions by vendee against vendor, 776, 777. on guarantee that stock sold shall yield annual dividends, 776, 777. on subscription for shares, with indemnity from third person, 778. on breach of contract to pay in State stocks, 778. in action between Stock-brokers for purchase and sale of railroad shares, 778. on guarantee that stocks will be worth a certain sum, 778. for not delivering stock where no time specified, 779. where price of commodity has been paid, 779. rule iu England, on contract for sale of shares, 779. against corporation refusing to issue certificates of shares, 779 n. 4. (2.) Vendor against vendee, 788, 781. where goods have been delivered, 780, 781. -where not delivered, 780, 781. where no price agreed on, 780, 781. how value of stock determined, 780, 781. for non-acceptance of railway shares, 396, 780, 781. how measure of damages ascertained, 780. the rule generally, 780. methods by which vendor may indemnify himself, 781. ■where vendor may elect to sell and charge vendee with difference, 781. when Broker's charges and expenses may be recovered, 781. Index. 991 [Figures refer to pages.] MEASURE OF DAMAGES {oontinued), (3.) Conversion of personal property ,781. general rule as to, 781. where special damage sustained, 781. former rule in United States when property fluctuates in value, 782. action by pledgor against pledgee for conversion of pledge, 782 ». 1. (4.) Refusal to return horrowed stocic, 782, 783 u. 2. hy borrower, pledgee, etc., 782. when refusal constitutes a conversion and measure of damages thereon, 782, 783. when market value given at time stock should have been returned, 783. when the highest price intermediate that time and suit, 783. when pledgor may recover enhanced value of stock, 783. for failure to return borrowed bank stock on demand, 783. where owner has been deprived of special use of property, 783. failure to replace borrowed stock, rule in Pennsylvania, 783. rule in England for failure to return stock lent, 783. on bond conditioned to replace stock six months after date, 784. on a given day, 784. for non-delivery of railway shares pursuant to contract, 784 n. 4. for detention of scrip shares where same is delivered up before ver- dict, 784. (5.) Between Clients and Stock-hrolcers, 785, 804. against Stock-brokers for failure to buy as per instructions, 785. the rule as laid down by Story, 785. when Client can only recover actual loss sustained, 785. when only entitled to nominal damages, 785. when Client can recover profits for failure to buy stocks to cover " short sale," 785. when he cannot recover market price of gold on short sale, 786. recovery of actual loss where agents do business as a clearing-house between Gold-brokers, 786. (6.) Client against BroTcer for failure to sell stocks, 787, 789. recovery of actual loss sustained where Client is " long " of stocks, 788. rule where Broker is unable to make sale, 788. when he may sell at different price, 788. order to sell gold when Broker fails to sell hoping to procure higher price, 788. neglect of Broker to sell " stocks " short, 788. 992 Index. [Figures refer to pages.] MEASURE OF DAMAGES (continued), (7.) F(»- conversion of securities hy Stook-hrokers, 112, 789, 800. the formerrule to give highest price between conversion and trial, 789. the rule in New York abandoned, 790, 791 et seq. theory of old rule stated, 790, 791. what Client entitled to on conversion of securities, 790, 791, 793. conversion where Client's account is guaranteed by third party who withdraws guarantee, 793. Brokers may settle at price which will be adopted as proper meas- ure of damages, 794 n. 2. against Broker for hypothecating Client's stock, 161 n. 1. where plaintiff waives tort and sues in assumpsit, 794 n. 2. rule in Pennsylvania where trustee refuses to account for stock, 794. where bank stock has been wrongfully withheld, effect of payment, etc., of consideration, 794, 795. rule held only to apply to trusts, 795. rule stated in North vs. PMlHps, 795. " highest value " rule' in California, 796. when highest value recovered for conversion of mining stock, 796. the.ory upon which damages are awarded, 796. rule where stock is held for investment, 797. exceptions to rule in Balcei- vs. Drahe as to speculative transactions,797. where Broker realizes a profit from his wrong-doing, 796. reasonable time, what considered, 134, 799. question as to what constitutes, left to the jury, 799, 800. ten days held to be, 800. evidence of what is a " reasonable time," 800 m. 2. (8.) Market value, 800. question as to, left to jury, 801. how arrived at by jury, 801. as to price of gold, 801. when proved by current prices in file of newspapers, 802. Broker may recoup, etc., in action against him for conversion, 802. (9.) Measure in actions iy Stock-iroker against Client, 802. implied contract to indemnify innocent agent for loss, 802. principle applied to Stock-brokers, 803. damages for failure to deliver stocks within, 135. on refusal of Client to accept transfer of stock ordered to be pur- chased, 803. recovering money, etc., paid by Brokers under rules of Exchange, 803. MEDAL, silver, worn by Loudon Brokers, 242. Index. 993 [Figures refer to pages.] MEMBEES, ) MT7MT!rT?«TTTP < ^^ LONDON STOCK EXCHANGE J STOCK EXCHANGE.) MINING STOCKS. (See Stocks.) MINOR, recovery by, of margins deposited with Broker, 203. (See Infant; Margin.) MISAPPEOPEIATION, liability of corporation for collateral taken by officers, 140. (See Stock-broker.) MISBEHAVIOE, puuisbmeut of Broker for failing to keep books, etc., 253. MISDEMEANOE to circulate false news to depreciate or advance stocks, etc., in New- York, 463 n. 1. MISTAKE, liability of Client for giving wrong order, 127. wbere Broker misdescribes shares, 127. MITIGATION OF DAMAGES, when wrongful sale of seat by Exchange not the subject of, 74, 75. MONEY, tramsactions for, 272. when members have no preference lien to money in hands of as- signee, 68, 69. when rule requiring payment of, to official assignee legal, 7l, 72. (See Interest; Usury.) MONEY HAD AND EECEIVED, action for. (See Ebmedies.) MUNICIPAL BONDS. (See Negoti ability.) N. NAME-DAY defined, 274. NAMES, Jobber to give, to Broker, 275. sale of shares for failure to give, 276. objection to, by Broker, 276. Client liable for neglect to correct, in transfer, 294. forging names, etc., in New York to advance or depreciate price of stocks punishable, 463 n. 1. NEGLIGENCE, when pledgee not liable for, in failing to sell stock, 111. 63 994 Index. [Figures refer to pages.] NEGLIGENCE icontlimed), ■when evidence fails to show, iu action against Broker, 141. liability of Broker for collateral lost by, 140. NEGOTIABILITY, negotiable instruments as relating to Stock- brokers, 479. origin and nature of, 48Q. " choses in action " defined, 480. suit by assignee upon, 481 n. 1. word " negotiable " defined, 482. negotiable instruments defined, 483. bow establislied, 484. the Zex mercatona, 485, 486 et seq. of East India bonds, 488. of scrip certificates payable iu bonds, established by usage, 488, 489. effect of usage of Stock-brokers upon, 491 et seq. use of word " certification," 491 et seq. negotiable instrumeiits in different States, 492 et seq. requisite and primary elements of, 493 et seq. instruments payable in bank-notes, etc., 497. (1.) Enumeration of negotiable instruments, bills of exchange, and promissory notes, 483, 502. protesting stock notes, collateral must be i)rodnced, 502. bank notes and checks, 502, 503, 525. liability of banks and bankers upon checks, etc., 509 et seq. relation of bank to depositor, 513. (2.) CerUfied checks, practice and origin of, 525, 544. effect of certification, 527 et seq. liability of banks thereupon, 529, 533. form of certification, 530, 533. acceptance of check by bank, 535. "raised" checks, liability of bank upon, 539. effect of verial certification by bank, 539. (3.) Forged checks, 544, 553. forged certification, 533. liability of bank upon, 545. duty of depositor to bauk, 549. bank only concluded as to signature, 550. alteration in amount of check, 552. (4.) Other negotiable instruments enumerated, 553-557. when pledge of certificate perfected, 660. repledgo or rehypothecation of stock, 661. Index. 995 [Figures refer to pages.] NEGOTIABILITY {eonUnued), (5.) Besults of negotiaMUty oonsidei-ed, 563, 573 et seq. purchasers in good faith, etc., 564. before maturity, 569. for value, 571. principle as applied to Stock-brokers, 573. negotiability of railroad bonds, 575. (6.) Non-negotiable instruments, 576. doctrine of, stated, 576. nature and different kinds of shares of stock, 579. meaning of words " capital stock," " share," etc., 579, 580. number and classification of shares, 581. evidence of ownership of stock-certificates, 582 et seq. rights of owners, 585. meaning of word " stock," 585, 591. shares of national banks, 586. stocks considered personalty in England, 587. when shares not real estate, 587. . considered personal property in America, 589. liability of, to execution and attachment, 589. action by shareholder to recover dividends, -592 et seq. limitations upon rights of stockholders to begin suits, 592 «. 4. power to create preferred and guaranteed stock, 593. (7.) Negotidbilitii as applied to stock-eertiflcates, 595, 616. not technically negotiable, 595, 596. negotiability of, with assignment and blank powers of attorney, 154, 597. how purchaser becomes owner of Shares, 154. when usage of Stock Exchange making certificates negotiable re- jected, 597, 598. rights of T)ona fide holder, 599, 602. when true owner cannot be deprived of certificate, 602. certificates containing words "in trust," etc., 605. purchasers from executors, etc., 605, 609. when iona fide purchaser may liold stock by reason of owner's carelessness, etc., 611, 616. (8.) Method of transfer of stock, 616. form of assignment and power to transfer, 617. proxy, right to vote by, 622 n. 1. transfer as between parties, 623. as to third persons, 624. rights of bona fide purchasers, etc., of vendor as to transfer, 627. as between previous and subsequent purchasers, 627. 996 Index. [Figures refer to pages.] NEGOTIABILITY (continued), (9.) Lien of corporation for debts, 629. as against bona fide purchasers, 630. (10.) Forged transfers of stoclc, etc., 631, 644. lost and stolen certificates of stock, remedies of owners, 634. position of bona fide bolder of certificate issued for one with forged transfer, 637. fraudulent or over issue of stock, 641. (11.) Dividends, 645. general rule as to, 645. effect of declaration of, 646, 651. when declared, belong to registered owner, 651, 6.56. on stock deliverable at future time, 652 et seq. pledges of stock certificates for loans considered, 657-672. NEGOTIABLE PAPER, when principle of commercial law as to, not defeated by custom of . Brokers, 370. NEVADA, construction of statute as to rule of interest in, 157, 158. NEW YORK, statute of, against Stock-jobbing, 393. repeal of, 397. (See Stock-jobbing; Wager.) NEW YORK GOLD EXCHANGE, rules of, binding upon members, 353 n. 2. NEW YORK PRODUCE EXCHANGE, power of Arbitration Committee, 82, 83. NEW YORK STOCK EXCHANGE, constitution and by-laws of, 9, 804 et seq. early history of, 9. personal property of, in whom vested, 18. division of property on dissolution of, 30, 31. applications for membership in, 86 n. must be publicly announced, 86 n. qualification of members, 86 n. vote necessary to admit members, 86 w. seats in, how transferred, 86 «. disposition of seat upon death of member, 86 n. suspension of members under rules of, 86 «. rules as to transactions on, 105. Broker not compelled to accept different principal from one con- tractiug, 105. Index. 997 [Figures refer to pages.] NEW YORK STOCK EXCHANGE (continued), disputed claims, how decided, 105. 110 power over extraneous differences between members, 85. by-laws of. (See Stock Exchange.) (1.) Constitution, when appeal by members to courts justified, 60, 61. has force of law as between members, 68. not binding unless personally assented to, 80. provision giving preference lien to members upon defaulter's seat legal, 67. 19tb Article of, considered illegal, 76 n. 1. effect of clause preventing members applying for injunction, 81. expulsion for " obvious fraud," when illegal, 74. ■when members not voting for amendment to, bound by, 99. (2.) Miacellaneons matters, form of " call," " put," and " straddle " used on, 117 nn. 4, 6, 6. when sale at, of stocks, on failure to put up margin, not good, 208. when sale may be made by special agreement, 209. sale at, must be openly made, 210. pledgee not authorized to put stock up secretly, 210, 211. sale at, to close speculative acconnt, when proper, 211. business on, may be transacted by substitute, 230. custom among Brokers to transfer stocks into their own names valid, 126. nature and liability of seats of members, etc. (See Stock Ex- change.) voluntary payment of money by member, when not recovered back, 83. (3.) Arbitration Committee, its importance and powers considered, 44, 45. members must exhaust their remedies before, 44-46. jurisdiction of, not revoked by consent of member, 45. when not revoked by member's death, 67. when expulsions by, not interfered with, 61. effect of contract of Broker with Client to refuse to appear before, 60. when decision of, final, 67. judicial power cannot be conferred upon, by rules, 79. effect of clause in Constitution to submit claim to, 80. when resignation of member revokes power of, 80. when members bound by decision of, 82. members bound where evidence received by, without objection, 83. 998 Index. [Figures refer to pages.] NEW YORK STOCK EXCHANGE (conUnued), ArMtration Committee (continued), waiver of irregularities before, 83. proceedings of, annulled where discretion as to adjonrnment abused, 83. no power over subjects relating to extraneous matters, 84, 85. when rules of, binding upon third persons, 357. (See Stock-beoker; Stock Exchange, etc.) NEWSPAPER, sale of stocks pledged by means of advertisement in, 198. NON-CURRENT SECURITIES, 279. NON-NEGOTIABLE INSTRUMENTS. (See Negotiability.) NONSUIT, when Broker nonsuited in action against Client, 135. NOTE, giving of, when not a ratification of illegal acts of Broker, 220. NOTE-BROKER, liability of selling Broker to, for proceeds of worthless note, 153 n. 4. NOTICE OF PURCHASE, sent to Client by Broker on execution of order, 278. failure to give, precludes recovery of commissions, 108 «. 1. NOTICE OF SALE, ETC., for want of margin, etc. (See Margin ; Stock-broker.) 0. OATH taken by Loudon Brokers on admission, 222, 243. " OBVIOUS FRAUD," when expulsion from Exchange for, illegal, 74. OFFERS on Exchange, when considered binding, 105. OFFICIAL ASSIGNEE. (See London Stock Exchange.) OIL, when contract for delivery of, not a wager, 419. OMNIUM, jobbing in, within Sir John Barnard's Act, 386. OPTION, defined, 117, 444. use of term on London Exchange, 269. Index. 999 [Figures refer to pa^es.] OPTION (continued), legality of, 444. not piima fame gambling contracts, 477. (See Wagebs.) liability of Broker for failure to tender gold under, 136. ORAL EVIDENCE. (See Evidence.) ORDER. (See Stop Order.) ORDER TO PURCHASE, ) _ „ >• (See Stock-broker.) ORDER TO SELL. > ORDINARY CARE, ■when pledgee or Broker liable for want of, 112, 139. OVEE-ISSUE of stock. (See Negotiability.) OWNERSHIP, when stocks become Client's property, 286. P. I'AEI DELICTO, party to illegal transaction cannot recover money paid, 258. PARI PASSU, when principle of, to be followed in satisfying loan upon stocks, 161. PARIS BOURSE, origin of, considered, 7 n. 1. rules and regulations of, 897. history of, 324. nature of transactions on, 336. speculations of Law, 325. suppression of, by arrSt de conseil, 325. The Petite Bourse, 335. object of the Caisse Commune, 329. transactious on, similar to Loudon and New York Exchanges, 336. description of securities dealt in, 336. Agents de change, 327. their number and legal status, 325, 326 et seq. cautionment, or guarantee paid by, 325, 326 et seq. speculations at other places forbidden to, 325. Chambre Syndicule, origin and powers of, 327 et seq. appeal from decision of, to Tribunal de Commerce, 330. 1000 Index. [Figures refer to pages.] EAEIS BOURSE (continued), Coulisse, nature and history of, 331 et seq. PAROL CONTRACT. (See Statute of Frauds.) PAROL EVIDENCE. (See Evidbnce.) PARTNERS, members of Stock Exchange not, 86. when check of, not notice of partnership property, 179, 180. Brokers not put upon inquiry by reason of check of, 179, 180. when joint speculators become, 178. PARTNERSHIP, Stock Exchange not considered, 13, 14. when board member of insolvent firm may be suspended, 47. liability of members of, for conversion of securities, 140. misappropriation of securities by member of, 140. PATENT, may be reached by creditor's bill, 97. PAWNEE. (See Pledgor and Pledgee.) PAYMENT, voluntary, by Brokers, when not recovered, 83. PENALTY, action for, against Broker acting without license, 241 «.,243, 244, 248, 249. PENNSYLVANIA, statute of, against Stock-jobbing repealed, 403. decisions under statute, 403. occupation of Stock-broker in, regulated, 101 n. 1. penalty for acting without license in, 101 n. 1. decisions in, on subject of "wagering" contracts, 423 et seq. " short " sales of stock, when valid in, 426. when declared illegal, 430. contracts for purchase of stock on margin declared illegal, 428. North vs. Phillips criticised, 115, 116, 428. hypothecation, etc., of stocks in, punishable by fine, etc., 665 n. 4. act not extended to Brokers, 665 n. 4. PERJURY, member of Exchange may be expelled for, 40. PETITE BOURSE. (See Paris Bourse.) PHILADELPHIA STOCK EXCHANGE, early history of, 9. an unincorporated association, 11 n. 1. Index. 1001 [Figures refer to pages.] PHILADELPHIA STOCK EXCHANGE {fiont%nue&), no jurisdiction over matters cTisconueoted with organization, 77. force of constitution and by-laws, 68. suits against, how brought, 27, 28 n. 1. rule as to reinstatement of suspended members, 53. Beat in, defined, 88. rule giving members lieu upon seats in, legal, 66, 67, 68, 89. claims on seat of deceased member, by whom passed upon, 89. seat in, not considered property, 89. not subject to attachment or execution, 88. not within act providing for attachments on judgments, 88. vendee by sheriff's sale cannot acquire title to, 88. when Client bound by usage of, to close out securities on "call" loans without notice, 358, 359. Gratuity Fund, right of representatives of suspended members in, 54, 79, 98. (See Stock Exchange.) PLACE of.sale for want of margins. (See Margins.) PLEA, ) \ (See Remedies.) PLEADING. PLEDGE. (See Hypothecation; Pledgor and Pledgee.) PLEDGOR AND PLEDGEE, of stocks considered, 142, 657. how constituted, 657. mortgage and pledge of stocks distinguished, 658. when and how perfected, 660. distinction between pledge and lien, 666 «. 2. railway bond with interest-coupons subject of, 152. profits of, 151 n. 3. by husband of wife's bond with Broker, effect of, 131. to be restored upon payment of debt, 139, 160 n. 1. when stock purchased on margin may be pledged by Broker, 144, 147. right of lonafide sub-pledgee to certificate with blank power, 668, 670. stock delivered to Broker with instructions to sell cannot be pledged, 147. title of purchaser in good faith and without notice, 164. 1002 Index. [Figures refer to pages.] PLEDGOE AND PLEDGEE {cmiinued:), The pledgor, when Client becomes, in stock transaction, 111, 113, 142, 273. •when by deposit of stocks as margin, 114. right of, to stocks upon payment of price, etc., 151, 160 n. 1. when remedy against pledgee lost, 149. liability of, for debt where pledge is lost, etc., 139. right of, to vote upon stock, 137, 138 n. I. (See Client; Stock-brokee.) The pledgee, when Broker held to be, 102, 110, 112, 114, 142. when on speculative transactions, 113, 118, 273. basis of contrary theory stated, 113. Broker may use stocks pledged, 141. when parol evidence of custom for pledgee to use stocks not ad- missible, 141, 148 «. 1. right of, to part with stock under special agreement, 148 «. 1. authority of, to collect interest, etc., 148 n. 1, 152. when dividends, etc., recoverable from pledgor, 152. may transfer securities pledged into his own name, 137 n. 3, 152. liabilities of, on transferring stock into his own name, 1.52. when to return identical stocks pledged, 139, 148, 151. pledge of " consolidated " not made good by restoring "converted" stock, 151. when indemnified where pledge lost, 139. when remedy against, lost, 149. right of, to vote on collaterals pledged, 138 7i. 1. rights of, not impaired by bankruptcy of pledgor, 200. Hypothecation and rehypotheeation, by Stock-l^roker of securities, object of, 108. the general rule as to- hypothecation, 661 et seq. when custom to hypothecate illegal, 364, 365, 366 n. 1, 663. right of Broker to hypothecate securities, 141. special power to repledge, effect of, 662. when usage of Brokers to hypothecate shares upheld, 357. custom of to hypothecate collaterals, when rejected, 363, 663. Stock -brokers in Pennsylvania may repledge, etc., by statute 665 n. 4. when Client not entitled to follow stock hypothecated by Broker, 161. measure of damage in action against Broker for, 161 n. 1. marshalling assets realized from stocks hypothecated, 161 m.1. Index. 1003 [Figures refer to pages.] PLEDGOR AND PLEDGEE {continued), Hypothecation and rehypothecation (continued), when Client entitled to stock wrongfully hypothecated, 160. rights of Client against Broker, 160. liability of bank to original pledgors, 149. when excessive amount paid hank to reclaim stocks may be re- covered, 149. (See Negotiability.) The sale, cannot be made until debt is payable, 149. payment of debt must be demanded and refused, 196 n. 1. when waiver of notice by pledgor does not waive demand of pay- ment, 170. pledgor must have personal notice of time and place of, 114, 198. what considered waiver of notice and time of, 109. pledgor may waive right to notice and manner of, 202, 212 and n. 6. effect of waiver of, 346. waiver of may be inferred from circumstances, 212. waiver of ratification or acciuiesoenoe, 212. service of notice of, how made, 197. when to be made upon agent, 198. when without notice, 198. publication of notice in newspaper, 198. pledgee must sell at public auction, 207. rule not modified by local usage to sell in private, 208. pledgee cannot sell at Stock Exchange for failnre of margin nnless Client consents, 208. when Client bound by private, 357 n. 2. when sale of pledged stock at Stock Exchange valid, 209, 210, 228. special contract authorizing Broker to sell at private, 109. stocks pledged on different loans cannot be sold in gross, 211. when surplus securities to bo sold to equalize burden of loan, 162, 211. when pledgor cannot resist sale of stock, 189. pledgee not bound to sell pledge in default of payment, 199. liable where pledgor requests, 111, 199. may make, without leave of Bankrupt Court, 200. must act in good faith and sell at highest price, 199, 200, 205. right of Broker to purchase pledge, 223, 224. when pledgee deemed to have ratified illegal sale by Broker, 205. (As to sales for want of margiu, see also Margin ; Remedies.) 1004 iTtdex. [Flguros refer to pages.] " POINT," furnishing information as to, 173. POOLS, legality' of (See Conspiracy.) POWEES OF ATTOENEY, upon certificates of stock, 153. to sell stock, meaning of, explained by usage, 361, 362. when held by Broker in blank, 107. right of agent to bind Client by special contract made under, -with Brokers, 170. authorizing attorney to buy and sell stocks, etc., coustniction of, 170. PEEFEEENCE, rule giving members lien on defaulters' seats not illegal, 64, 66, 67. over outside creditor, when members of Exchange not to have, 68, 69. (See London Stock Exchange ; Stock Exchaj«ge.) PEESIDENT of Stock Exchange, suits against. (See Stock Exchange.) PEESUMPTIVE EVIDENCE. (See Evidence.) PEICE. (See Stock-beoker.) PEINCIPAL AND AGENT. (See Broker; Client; London Stock Ex- change ; Stock-broker.) PEIVATE SALE, right of Broker to sell at, for want of margin. (See Margin; Pledgor and Pledgee.) PEIVILEGED COMMUNICATIONS, do not exist between Broker and Client, 235. when Broker to discover names of persons for whom he has pur- chased shares, 236. "PEIVITY. (See Stock-broker.) PEOFITS, agreement to share. (See Joint Account; Remedies; Stock- broker.) PEOMISSOEY NOTES, given " for margins on stock contracts," when valid, 427. when Client not liable upon, where orders have not been properly fulfilled, 119. (See Negotiability; Eemedies ; Stock- jobbing ; Wager.) PEOOF. (See Burden of Proof ; Evidence ; Eemedies.) PEOPEETY, whether "seat" in Exchange considered, (See Stock Exchange.) Index. 1005 [Figures refer to pages.] PROSPECTIVE DIVIDENDS, sale of, legal, 435 n. 3. PROTEST of stock notes, collateral must be produced, 502. FBOXENETJE, ' or Brokers, under Roman law, 2 n. 2. PROXY, right of person holding, to vote. (See Client; Stock; Vote.) PRUDENCE, Broker must execute orders with, 121. Broker exercising, not liable for spurious stocks bought, 123. PUBLIC AUCTION, when Broker must sell at, for want of margin. (See Makgin ; Pledgor and Pledgee.) PUBLIC POLICY, effect of repeal of statute prohibiting contracts against, 397. when contracts for mere differences void as against, 477. "corner" in grain, etc., when illegal as against, 450, 452, 469. when contract for sale of bank stock against, 735. (See also Conspiracy; Specific Performance; Stock Exchange; Usage; Wager.) PUBLIC SALE. (See Pledgor and Pledgee.) PURCHASE, ■) ,^ ^ J- (See Client; Stock-broker.) PURCHASER. > PURCHASE FOR JOINT ACCOUNT. (See Joint Account.) PURCHASE-MONEY. (See London Stock Exchange ; Remedy ; Stock- broker.) " PUT," defined, 117, 445. form of, commonly used, 117 n. 5, 653. form of, in grain contracts, 450. use of term on London Exchange, 269. legality of, 444. not pnma facie gambling contracts, 477. (See Wager.) Q- QUESTIONS OF LAW AND FACT. (See Construction ; Due Diligence ; Jury.) 1006 - Index. [Figures refer to pages] R. RAILROAD BONDS. (See Negotiability.) RAILWAY SHARES. (See Specific Peisformance.) RATIFICATION, when receipt of proceeds of uuanthorized warranty not, 164, 165. of illegal acts of Broker, what not considered, 220, 375. (See Plbdgok akd Pledgee.) "REASONABLE" MARGIN, evidence of usage to put up, on future sales rejected, 189. REASONABLE NOTICE, Broker may require Client to take shares purchased after giviug, 226. question as to, may depend upon previous dealings, 195. what considered, to put up margins. (See Makgin.) REASONABLE TIME, meaning of, how interpreted, 135, 354, 362. for carrying out order to purchase defined, 121. Broker may close short sale after he has carried stock for, 181. must be done upon notice, 182. (See Margin ; Measure op Damages ; Pledgor and Pledgee.) RECEIPT upon deposit of collateral giving Broker right to sell, etc., 143, 144. RECEIVER, effect of order appointing, iu supplemental proceedings as to debt- or's seat, 92. when debtor compelled to transfer seat to, 91. may compel debtor to sell seat, 97. when Client entitled to stock in hands of, 161. RECOUPMENT, remedy of Client by, 229. (See Remedies.) RECOVERY, amouut of, in action for damages for conversion of seat, 75. (See Measure op Damages.) REFEREE stating account where Broker interposes counter-claim, 193. REGISTRATION, when not duty of Broker or Jobber to procure, 154, 158, 306, 307. special agreement between Broker and Jobber for, 276. Index. 1007 [Figures refer to pages.] EEGISTRATION (continued), sale note containing guarantee of, by Jobber, 307. transferror not bound to procure, 323. tender of deed of, must be made before purchase-money payable, 322 ■when dealing in shares without, illegal, 382. (See London Stock Exchange.) EEGEATIN6 defined, 455. REGULAR, defined in short sale, 180. when stocks delivered under transaction, 107. order to buy, when not properly fulfilled, 119. REHYPOTHECATION. (See Negotiability; Pledgoe and Pledgee.) RELEASE, action against Broker barred by, 160, 205. REMEDIES, StoeJc-hrolcers and Clients against each other, 674, 715. relation of Stock-brokers to each other, 674. when regarded as principals, -674. liability of, for not disclosing principal, 675. bargains between, within Statute of Frauds, 676. cannot interpose statute against each other, 674 n. 1. Relation of Clients to each other, 676-679. usage of Broker on making transactions for Clients, 676. report of securities dealt in delivered to Client, 676. effect of failure to deliver on right to commissions, 676 n. 2. report npon principals to transaction, 677. description of transaction by Brokers for Clients, 677. privity between Clients, etc., 677. rights of undisclosed principal, 677 et seq. privity between vendor and vendee on London Stock Exchange, 678. Broker and Jobber, difference between, 679. when vendor and vendee liable to each other in United States, 679. Liability of BroTcers to undisclosed Clients, 679, 684. when privity exists betweeu, 680. liability of agents to third persons considered, 680. buying Broker or Jobber to veudor for " calls," 682. when Brokers personally liable to vendee for signing sale note, 682. liability of Jobber to undisclosed principal where infant is trans- feree, 683. 1008 Index. IFigures refer to pagds.] REMEDIES (continued), lAability of undiaelosed Clients to Stock-hroTcers, 684-686. oral evidence to show that party is priucipal, 684-686. liability to Broker for money loaned on bonds, 685. injunction to prevent Client from parting with bonds pendente lite, 686. Liabilitij of Brolcers to their own Clients, 686-697. JUability of Clients to tJmr own Brolcers, 698, 715. general indemnity by Client, 698, 715. assumpsit and other remedies to recover losses sustained by Broker for Client, 698, 715. Accounting, in eq^uity, between Client and Broker, where transactions numerous, 686, 688. general principles of actions for, 688 n. 2. rules of practice in bills for, 687. when plaintiff must establish agency, 687. account stated by Broker full defence to bill for, 688. account becomes account stated, 688. fraud or mistake must be shown in account stated, 688, 689. form of bill to set aside account stated, 689 n. 1. equity no jurisdiction to redeem stocks pledged as margin, 689. jurisdiction in such cases to take account or discovery, 689. not sustained where account consists of one item, 689. when pledgor of stocks replaced in original position by, 690 «. 1. Assumpsit, etc., forms, etc., of action in, by principal against Broker, 690 n. 6. Stock-broker selling on credit liable in, to principal, 690 n. 6. declaration for not purchasing shares at market price, etc., 691 n. 2. giving true account of purchases, 691 «. 2. actions ex delicto and in assumpsit against Broker, 690. ■when assumpsit lies against agent, 691. action ex delicto lies, 691. action for money had and received lies, 691. Broker sued for profits cannot be held in damages, 691. by Broker to recover losses sustained for Client, 698-715. money paid under false representations may be recovered, 691. effect on demurrer, of allegation that defendants sold stock, 692. Conversion, what deemed, of securities by pledgee, 366. Index. 1009 [Figures refer to pages.] EEMEDIES (conWrewed), Conversion {oontinueS), failure to deliver stock puroliased, when deemed, 147. illegal disposition of stocks by Broker may l)e treated as, 203, 225, 354. by Brokers buying Clients' stock for their own use, 215. sale of stocks without notice, etc., when, 354. what a good defence to, by Broker, 354. what a waiver of right to recover for, 192, 204. ■when objection against form of action deemed waived, 75. action of, against Broker for disposiug of stocks deposited as mar- gin, 189. when possession of other shares by Broker not a defence to, 373, 374. liability of firm where collateral is misapplied, 140. action of, for bonds stolen aud bought into joint account, 178. against Exohauge for illegal sale of seat, 74. when conversion does not lie, 691. is the visual remedy in New York, 692 et seq. what complaint must allege in action for, 692. of certificates of stock, 692. measure of damage where stocks converted, 112. of bonds, what constitutes, 693. arrest of Broker in New York for conversion of stock, etc., 694 and n. 4. when discharge in bankruptcy defence to action against Broker for, 695, 696 n. 1. when cause of action against Broker for conversion not discharged, 205, 696. when Broker guilty of embezzlement in converting margin, etc., 697 n. 2. Counter-claim, by Brokers iu various actions, 192, 201, 202, 203, 205 n. 3, 696. Broker for deficiency on exhaustion of margin, 151, 170. Client for closing account before settling-day, 291. recovering margins under, where stock is unlawfully converted, 203. by Client, where stock is pledged and Broker sues for price, 229. what not considered in action for illegal sale of seat, 74. Declaration, when ownership of stock need not be alleged in, 398. when not necessary to allege that Client had knowledge of usage, 354 «. by Broker for commissions, when plea of wager not a defence to, 391. 64 1010 Index. [Figures refer to pages.] REMEDIES (continued), Demurrer, •when does not lie to bill to compel transfer of seat, etc., 96. •when wagering contract with Broker may be taken advantage of by, 422 n. 4. to bill for want of privity between second Broker and principal, 231. Discovery, when Broker to discover names of purchasers, 236. books of Broker not open to "fishing excnrsion," 238. when Broker not protected from, by reason of penalty, 252, 388. nnder Stock-jobbing Act, 387. compelling, of names of Clients pnrchasing shares in illegal com- pany, 388. of books of Broker, 388. Equity, bill in, to restrain action upon note for stock transactions, 144. will not enforce arbitration agreements, 80. when rule as to special injunction not limited by coui'ts of, 62. proceeding in, to review expulsion, 62. Injunction, when denied upon the merits, 62 n. 3. wheu premature, 62. to restrain sale of securities iiending accounting, 689. when court will not interfere by, in speculative transaction, 690. not issued to prevent Broker selling stocks held on margin, 188, 690. issued to restrain unexecuted contracts founded on wagers, 690. when contract is alleged to be usurious, 756 n. 3, 757. by Broker, to prevent Client from parting with bonds, etc., 686. power of courts to interfere by, in cases of unincorporated associa- tions, 62. effect of clause preventing members applying for, 87. to preveut inquiry by Exchange into matters not within jurisdic- tion, 77-80. to restrain Exchange from disposing of proceeds of seat, 95 «. 1. to prevent illegal deprivation of member's seat, 87. reviewing proceedings to suspend or expel member by, 62. to preveut pledgee of collateral from voting on stock, 138 «. 1. Money had and received, action for, does not lie to recover Stock-jobbing differences, 257, 258, 390. when unlicensed Broker may recover money expended, 256. Index. 1011 [-Figures refer to pages.] REMEDIES ieoiUiiitted), Money paid, etc., proof necessary to sustain iu action for, agaiast Client, 122. iuterposing statute against gaming to action for, 127 n. 1. lent to pay differences not recoverable, 390. paid hy Brokers for Client in sale of spurious securities. 111, 124. action by vendor of sbares against purchaser for calls, 315. JPlea, that Broker was not duly licensed, 253, 256. of Stock-jobbing Act, burden of proof, 395. when not sufficient, 391. of wagering contract under 8 and 9 Vict., 391. wager must be affirmatively pleaded, 478. when wager sufficiently pleaded, 411, 412. of usury, 756. that parties agreed to submit to arbitration when bad, 83 n. 2. Proof, where employment of Broker denied, 122. when considered defective, 122. what Broker must show iu order to recover loss, 228. of wagering contract, what must be shown, 419. (See Wager.) how parties to joint account charged with loss, 175i Purcliase-money, when recovered from Broker, 225. liability of Broker for paying, without receiving stocks, 134, 135. Sloclc-hrolcei's lien, where stocks are bought on margin, 711,715. for commissions, 713, 715. on Loudon Stock Exchange, 714. where thej' act as bankers, 699-711. (See Stock-buokbr.) KEPLEDGE. (See Negotiability ; Plbdgok and Pledgee.) EEPEESENTATIVES, right of, in Stock Excliauge Gratuity or Insurance Fnnd, 97, 98. MES GESTM, when admissions of Client not binding upon surety as part of, 133. RESIGNATION, power of Exchange to arbitrate between members annulled by, 80. RETURN. (See Mandamus.) 1012 Index. [Figures refer to pages.] REVIEW, proceedings of Arbitration Committee, when subject to, 83. RISK, ■when upon Client, 115. ROBBERY, ■when trustee not liable for, 139 ». 5. ROYAL EXCHANGE, business of London Brokers confined to, 243. ROYAL STOCK EXCHANGE COMMISSION, inquiry of, into history, etc., of London Exchange, etc., 260 et seq. RULES AND REGULATIONS OF STOCK EXCHANGES. (See Appen- dix, and Stock Exchange.) S. SALE. (See Pledgor and Pledgee ; Short Sales ; Stock-brokers.) SALE NOTE, guaranteeing registration by Jobber, 307. liability of Broker rendering, in his own name, 136. SAN FRANCISCO STOCK EXCHANGE a voluntary association, 65. SATISFACTION, discharge of action of conversion by, 20.5. SAVINGS-BANK, liability of, to Broker for stock sold by president, 128. SCRIP, when Client not bound for loss occasioned by sale of, 134. SCRIP CERTIFICATES. (See Negotiability.) SEAL, effect of, upon negotiability of instruments, 495. SEAT IN STOCK EXCHANGE. (See Stock Exchange.) SECURITIES. (See Negotiability ; Stock.) SELLER. (See Stock-broker, and other titles.) SELLER'S OPTION, defined, 180. when precedence of buyer's option, 105. when action by purchaser on, maintained, 329 n. 1. "SELLING OUT" for non-acceptance by bnyer on account-day, 279. Index. 1013 [Figures refer to pages.] SET-OFF. (See Remedies.) SETTLING-DAY. (See London Stock Exchange.) SHAEEHOLDEES in London Exchange defined, 263. (See also Stockholders.) SHAKES. (See Specific Performance ; Stock.) " SHAVE " defined, 117. SHEEIFF, cannot sell seat under execution, etc., 88. purchasers of seats sold by, 92. SHIP-BEOKER not a Broker within statute of Anne, 250. SHORT defined, 116. SHORT ACCOUNT. (See Short Sales.) "SHORT" SALES, defined, 180, 182. legalized in New York, 397. when considered illegal in Massachusetts, 401 et seq. of gold considered legal, 404. promissory note given for losses on, when void, 424. when upheld iu Pennsylvania, 181 n. \, 425, 426. legal in Maryland, 181 n. 1. prohibited iu England in bank shares, 181 «. 1. when Brokers cannot recover money laid out in, for Client, 430. where Broker may borrow from other Clients on, 183. nature of agreement for, considered, 181. Broker to carry stock on, for reasonable time, 181. how Broker to close, where margin not kept good, 181, 184, 206, 227. Broker need not "buy iu" at public auction, 207. " buying in " stock where margin exhausted, 184. Staples vs. Gould criticised, 186, 187. right of Client to have stock bought in on, 160 «. 1. selling " short" against " straddle," when illegal, 171. (See Measure of Damages.) SILVER MEDAL worn by London Brokers, description of, 242. 1014 Index. [Figures refer to pages.] SKILL, Broker to exercise, 140. effect of failure to exercise, on right to commissions, 135. SOUTH SEA STOCK, persons selling, deemed Brokers, 248. SPECIAL CONTRACT, between Client and Broker, limiting liability of latter, 114, 169. conducting business under, according to usage of particular office, 114, 169. by Client's attorney authorizing Broker to sell at public or private sale, 170. ■when Client bound by, 171 et seq. Broker may provide against fluctuations by means of, 187. when not applicable to new transactions, 172, 173. nature of, as to joint adventures in stocks, 179, 173. selling short against "straddle" contract, liability of Broker for loss, 171. between Jobber and Client, 307. (See Margin; Pledgor and Pledgee.) SPECIAL INJUNCTION. (See Remedies.) SPECIFIC PEKFOKMANCE, rreliminary ohseivations, 715, 741. difference between English and American courts as to application of remedy, 716. "stock" and "shares," distinction between in England, 717, 727. general rule as to, of stock contracts, 717. when bill prays delivery of certificates of government stock, 717 ». 4, 726. rule not to decree, where stocks easily obtained in market, 718. exceptions to rule in England stated, 717 n. 4, 718. When refused in England, 718. as to South Sea Stock, 718, 719. rules of Baron Gilbert as to, 720 n. 1. cases involving " calls," when refused, 721, 729. in cases of a miscellaneous character, 723. When dea'eed in England, 725. in cases involving " stock," 725. rule whore alteration has taken place in price of stock, 726 n. 2. " scrip " certificates, when decreed, 723 n. 4. where trusts are involved, 727 and n. 1. of annuity payable out of dividends of stock, 727 and n. 1. Index. 1015 [Figures refer to pages.] SPECIFIC PERFORMANCE (continued), When decreed in England (continned), of railway shares, 727 and n. 1. agreement for, enforced although nudum pactum, 728. in cases involving " calls," 317, 728, 729. decree may provide for past and future calls, 730. In the United States, preliminai-y observations, 731. rule not to decree where damages compensate, 731, 733. When refused, 732. of government bonds and railway stock, 732. of contract to construct railroad for bonds and stock of company, 734. where contract is against public policy, 735. refused as to insurance stock, 736. when dea'eed as to railway shares, 736. of agreement to subscribe to stock of new company, 736. reasons for transferring stock in an association, 739. of shares of manufacturing corporations, 739. rule as to where values are fluctuating, 740 n. 1. . decreed as to mining stocks, 740. of shares in turnpike company, 740. decreed where contract concerns real estate and stocks, 731 Ji. 1, 738, 739 n. 2. where trust is involved, 731, 732 n. 1. of contract to pay dividends on preferred stock, 732. Miscellaneous, to compel Jobber to indemnify and register shares, 308. to compel Client to indemnify Jobber, 309. as between vendor and intermediate purchaser, 311 et seq. where it is sought to enforce different consideration than agreed upon, 132 n. 3. form of bill for, 735 «. 1. demurrer to bill for want of privity, 231. SPECULATION, legal relation between Broker and Client on stock speculation de- fined, 102. elements making transaction considered, 115. risk of, upon Client, 115. distinction between, and gambling, 416. Broker may demand margins to meet contingencies of, 114. when transaction may be summarily closed by Broker, 290 et seq. account for, cannot be summarily closed in United States, 292 «. 1. 1016 Index. [Figures refer to pages.] SPECULATION (continued), when Bale at Exchange on failure of margin held valid, 210,211. ratification of acts of Broker iu speculation, 212 n. 6. (See Ghent ; Stock-broker, etc.) SPEEAD- EAGLE, definition of, 445. legality of, 444. form of, 117 «. 6, 118 n. (See Wager.) STATE BONDS. (See Negotiability.) STATUTA CiriTATIS LONDINI, 13 Edward I., admitting Brokers in Loudon, 250. STATUTE, when jurisdiction ousted by implication, 85 n. (See Brokers ; Stock-jobbing, etc.) STATUTE OF FEAUDS, contracts for sale of stock not within English, 758, 765. stocks not considered goods, wares, and merchandise within, 758, 759. nor interests iu land, 759, 763, 764. railway shares or scrip not within, 762, 764 n. 4. mining shares not within, 763. Client cannot interpose in action by Broker for money paid, 764. where he gives verbal orders to Broker to purchase shares, 764, 769. when Brokers cannot interpose, 674 n. 1. bargains between Brokers on Exchange within, 107, 676, 769. Decisions vpon, in United States, 765. statutes of New York and Florida made to include " shares," etc., 765. contracts for stock within, in Massachusetts, 766. early decisions as to, limited in that State, 767, 768. when stocks, etc., not within, 768. contracts by Stock-brokers, when not within, 769. effect of rules of New York Stock Exchange upon verbal contracts between members, 769. contracts for sale of gold within, 404, 769 n. 2. agreement for exchange of bonds and stock, when not within, 769. what not snfScient memorandum to take contract out of, 770. what a sufficient part payment at the time within New York, 771, 772 ji. 1. part performance after action brought, 772. furnishing information as to future price of stocks, when sufScieut to uphold verbal contract, 174, 773. Index. 1017 [Figures refer to pages,] STATUTE OF FRAUDS (mutinued), cases to which statute does not apply, 773. how aud when statute may be pleaded, 774. effect of repeal of Stock-jobbing Act upon, iu New Toi-k, 398. STATUTE OF MORTMAIN, shares held not interest in laud within, 764. STOCK, meaning of, 585, 591. share of, not a debt, 590. considered chose in action, 591, 759, 762. an incorporeal right, 142. not considered money, 8, 591. considered personalty, 586, 587, 589. when not real estate, 587, 589. distinction between " stocks " and " shares " in England, 717. certificate of, represents owner's interest iu capital, etc., 142. certificates of, not technically negotiable, 374, 375 n. 1, 595, 598. when certificates pass as negotiable instruments, 596, 597. (See Negotiability.) preferred and guaranteed stock, 593. definitions of terms used in transactions for, 116, 117, 869. business in, carried on by Stock-brokers, 102, 239. elements making speculative transaction iu, 115. ordinary dealings in, where coudncted, 206. what is contemplated under agreement to bny aud sell, 148. when considered the Client's property, 108, 286. when executors, etc., in New York, not personally liable upon, 152. purchasers of, from executors, 605, 606, 609. liability of trustees for shares payable to bearer, 139 «. 5. certificates of, containing words "in trust," 602, 605. liability of, to execution and attachment, 589. hypothecation of, punishable in Pennsylvania by fine, etc., 665 n. 4. when sale of shares in companies prohibited, 382 «. when sale of, illegal, 382 n. dealing in, not illegal, at common-law, 382. bona fide sales of, not affected by Sir .John Barnard's Act, 383. wagers in, prohibited, 384. speculations in, on joint account, 179. (See Joint Account.) when dividends and earnings arising from, belong to Client, 103, 111. dividends and ownership, when declared on, 645 et scq. when dividends on the property of lender of, 184. 1018 Index. [Figures refer to pages.) STOCK (_continued), when pledgee may collect dividends on, 151, 152. selling "dividend on" and "ex dividend," 368. (See Dividends; Negotiability.) " borrowing," practice as to defined, 182. conspiracies to affect price of, 455. contracts for sale, etc., of, on margin, when not upheld in Pennsyl- vania, 426. rights of bona fide holder of, 599, 611. rights of innocent purchaser of fraudulent issue of, 155 «. 4. Client may vote upon, though in Broker's name, 137. pledgors may. vote upon, 137. when retrausfer of, into Client's name, compelled to permit him to vote, 138. pledgee cannot vote upon, 138 n. 1. license to vote upon, revocable, 138. right to vote upon, by proxy, 138, 622 n. 1. form of proxies for, 622 n. lien of corporation upon, for debts, 629. spreading false rumors to influence price of, 470 n. 1. forging names to messages, etc., with intent to depreciate or ad- vance price of, 463 n. 1. combinations and corners in, 463, 464. (See Conspiracy ; Negotiability ; Pledgor and Pledgee ; Remedies ; Specific Performance; Transfers.) STOCK-BOOK, to be kept by London Brokers, 242. by Dublin Bi'okers, 244 n. (See Books.) STOCK-BROKER, who deemed, 249. term defined, 109, 248, 249. distinction between, and ordinary Brokers, 109. when not embraced iu term " Broker," 108. when term first used, 250. what considered evidence of having acted as Broker, 251. in England, 239. to bo licensed by Mayor and Aldermen of Loudon, 239. regulated in the City of London, 222. statnte of George II. and III. relating to, 222, 241. statute of Anne, 239 n. 1. London Brokers' Relief Act, 1870, 245 «. 1. considered a "trader" under the English Bankrupt Acts, 162. Index. 1019 [Figures refer to pages.] STOCK-BEOKEE (continued), in Ireland, 243 n. 1. generally not licensed in the United States, 101. occupation of, in Pennsylvania regulated, 101. to act with fidelity, etc., 252. must strictly obey instructions, 16T. when to act by substitute, 104, 230. discretionary duties of, cannot bo delegated, 230. penalty for failure to Iceep books of account, 253. analysis of transaction between Bi'oker and Client on London Stock Exchange, 268. relation of, to Client defined on London Stock Exchange, 280. held to all responsibilities of an agent, 280. names of Clients not divulged by, 105. when authority of, cannot be revoked, 121. cannot conceal transactions from Client, 121. examination of, before trial, where information refused, 121. when to furnish itemized account, 122. must render correct account, 234. communications between Broker and Client not privileged, 235. may be compelled to disclose names of purchasers, 236. must not mix own property with Clients', 121, 122. when he can close transaction, 226. may require Client to take shares upon reasonable notice, 226. may contract according to rules of Exchange, 130, 131. Client liable for losses occasioned by, 130, 131. to procure execution of assignment of stock, 153. accord and satisfaction a bar to violation of duty by, 160. nature of speculative transaction between Broker and Client, 102, 110. use of securities by, to raise money, 108. to pay taxes, 109 n. 2. when relation of Broker aild trustee of a fiduciary character, 163. liability of, for stolen securities, 112, 139. for lost securities, 127 n. 2. for failure to close out " straddle " contract, 171. Calls, usually paid by Broker, lOS. when Broker not liable for assessments or, 112. Broker may recover money paid for, from Client, 152, 153. (See Calls.) Commissions, 231. interest of Broker in transaction only extends to, 102, 1020 Index. [Figures refer to pages,] STOCK-BEOKEE (cojiHiiMefi), Cormniimtni, agreement of Brokers to sbare legal, 233. when unlicensed Brokers caunot recover, 254, 256. not recoverable where transaction against public policy, 258. (See Commissions.) by Brokers, action for. (See Eembdies.) Broker must exercise, 121, 140. effect of failure to exercise, 135. liable for stocks stolen or lost by failure to exercise, 139. in purchasing genuine stock for Client, 127. when a question for the jury, 139. DvwM'ttAa collected by Broker, 108. (See Dividends ; Stocks.) proof of, by Broker, where agency denied, 122, 123. to act for Client to be clearly shown, 122. stocks pledged as security for loan cannot be disposed of by Broker, 148. (See Pledgor and Pledgee.) hiSiemniUj, right of Broker to, 123, 130, 272, 273, 293. Broker cannot recover, where he acts without authority, 133. for losses occasioned in business, 133. expenses and disbursements of transaction recoverable, 159. for losses through dealing not recognized by rules, 131. where contracts are made according to rule of Exchange, 130 et seq. for loss occasioned by raising money upon stocks for Client, 129, 130. for purchase of shares in company being wound up, 131. for money paid out iu wager contracts, 421, 422. where differences are paid by Broker, 131. /»«oZ»eiicj, insolvent Broker receiving deposits punishable in Illinois, 697 n. 2. account may be summarily closed by reason of Client's, 288, 290. what considered evidence of, to authorize closing of account, 291. when Client not liable for loss occasioned by Broker's, 293. when Broker not liable for loss occasioned by fellow-Broker's, 141. Index. 1031 [Figures refer to pages.] STOCK-BEOKEE (aontinued), Interest, Broker may charge, on money advanced for stocks, 156. may charge extra interest which he is compelled to pay, , etc., 156. ■when entitled to more than legal rate of, 157. ■when Client not bound by custom to charge compound, 159. (See Interest ; Usury.) Joint account with Broker. (See Joint Account.) Lien, of Broker for advances and commissions, 108. for money paid upon shares, 142,273. for purchase-money paid on marginal transaction, 118. when enforced by sale of Client's stock, 192. (See Eemedies.) on Broker's seat. (See Stock Exchange.) Loan, practice as to loan of stocks defined, 182. in whom title vested when loan amounts to sale, 183. when collateral for, cannot be disposed of by Broker, 148. liability of Broker for selling out collateral before expiration of, 148, 150, 151. Broker must return identical stocks pledged on, 148. right of Broker to hold wife's bonds deposited as collateral for, 131. stocks pledged in gross on different loans, how sold, 211. (See also Collateral.) Loss, liability of Broker for, where he sells upon credit, 169. when accounts showing, not admissible against surety, 133. how limited by means of " stop order," 166. what Broker to show in action to recover, upon Client's default, 228. when entirely upon Client in speculative transactions, 115. (See Client; Indemnity, supra.) Marginal transactions, duties of Broker on, defined per Hunt, C. J., 103. 1. To buy stock for Client. 2. To advance all money beyond ten per cent. 3. To carry stocks until margin exhausted, etc. 4. To have shares ready for delivery upon demand of Client. 5. To deliver shares upon payment of price, etc. 6. To sell upon order of customer. when Broker to keep sufficient quantity of stock for Client on, 143. 1022 Index. [Figures refer to pages.] STOCK-BROKER {continued), Marginal transactions (continued), •when Broker need not keep identical shares purchased on, 108, 142, 145, 356. liability of Broker under express agreement to keep identical shares, 150, etc. form of receipt given hy Broker, where stock is deiiosited on, 143, 144. stocks purchased on, luay be used in Broker's business, 141, 142. recovering margins where stock is unlawfully converted, 203. liability of Client for suspension for failure to put up margins, 357, 358. ■when Broker not liable for loss of margin on, 140. right of Broker to recover marginal securities wrongfully withheld, etc., 149, 150. when dividend warrants pledged for, ordered to be delivered to trustees, 162. (See Margin.) Misappropriation , of collateral by individual member of Broker's firm, 140. when assignee in bankruptcy not entitled to collateral misapplied, 162. of Client's money. (See Misappkopkiation.) Pledgee, when a Broker becomes trustee or, 102, 110, 118. when stocks may be jdedged by, to raise money, 144 et seq. right to recover when stock is pledged, 229. when sale by, cannot be resisted by pledgor, 189. Partnership property, when check delivered to Broker u6t notice of, 179, 180. Payment, Broker may receive payment of price, 168. PHncipal, Broker not considered as, 280. person employed as Broker cannot be, 222, 281, 282. when Brokers considered, as to each other, 674. Broker guilty of fraud in acting as both seller and buyer, 222. not bound to disclose, 274 n. 2. when liable for not so doing, 362. cannot sue where he acts as principal and agent, 253. wlicu Broker not compelled to accept other, 105. Broker liable as, when he renders sales notes in his own name, 136. Index. 1023 [Figures refer to pages.] STOCK-BEOKER {eonHnued), Frivity, between Client and other Broker conaidereil, 106. where does not exist between principal and second Broker, 231. existence of, between Jobber and vendor, 296. (See London Stock Exchange.) Pi-ofits, Broker to account for, where made by dealing in Client's stock, 148, 215, 287. wliere made by Broker by sale of his own stocks to Client, 224. Piireliase, how order for, executed on London Stock Exchange, 278. relation between Broker and Client on London Stock Exchange. 201,285. duty and liability of Broker in purchasing stocks, 104, 123. purchase or sale for own account, 108. where price is not named, 119. effect of advancement of money for, 110 it. 1. duty of Broker, where ordered to, 121, 127. Broker can only charge cost price, 254. Broker to make immediate purchase when so ordered, 103. place as to may he regnlated by usage, 120. when Broker not authorized to depart from positive instructions by usage, 119 n. 5. when order fnlfilled through sub-agents in another city, 120. Broker cannot buy at price other than directed, 118. counter-orders to sell and buy, how executed, 108. Broker must purchase according to order, 119, 123. when less number may he purchased, 119. when orders to be executed, 120. when Broker not bound to carry out orders for, 120 «. 3. what a good execution of order to, 124, 125, 273. revoking order to, 121. recovery of money paid upon order, 121. contents of notice of, etc., sent to Client by Broker, 108. when does not relieve Broker from liability, 147. failure to deliver stocks within "reasonable time," 134, 135. Broker not to pay for shares where not delivered on " settling-day," 135. dnties^of Broker in respect to stock purchased, 118, 136. when Broker compelled to take same back, etc., 225. when Client entitled to stock, 106, 111, 115, 147, 229, 286. Broker may require Client to take shares purchased, 226. 1024 Index. [Figures refer to pages.] STOCK-BEOKEE (conHitued), Purchase {continued), Broker cannot become purchaser where employed as an agent, 224, 282. duty of Broker when employed to buy on margin, 220. custom to be both buyer and seller illegal, 120, 214, 220, 222 n. 1. Broker to show that he has made full disclosure to principal on, 220 B. 3. the general rule stated, 213, 219. remarks of Lord Wyuford in Brookman vs. Botliscliild, 216. Broker compelled to deliver shares, etc., where same are purchased for himself, 224, 225. Broker canuot sell Client his own shares through third party, 217,218. Broker may buy in " under the rule" to protect himself, 223. relation of Broker to Client in transaction for "the account," etc.,272. Broker may recover difference whore Client refuses to deliver securities, 273. what not considered a ratification of Broker's illegal act on, 220. liability of Broker for illegal, 225. Broker may purchase pledged security at judicial sale, 223. cannot recover where purchase is ultra vires, 128,129. not guarantor of genuineness of stock purchased, 127. only bound to purchase what is passing in market as stock, 127. rights of Broker on purchase, etc., of spurious securities or worth- less stock, 111, 124, 125, 126. Ilemedies of Broker and Client. (See Eemedies.) Sale, effected by Broker when not member of Exchange, 269. place of, 204. nature of, on Exchange between Brokers, 107, 154. effect of sale of Client's stock, 224. cannot be made by Broker upon credit, 168, 169. when usage justifies sale on credit, 169 n. 2. duty of Broker on instruction to make, 147. price at which to be made, 164, 182. terms of, 168. duty of Brokers as to number of shares, manner and place of, 164. margin may be recovered where he neglects to make, 168. must be at price ordered, 182. verbal authority to sell at different price, 165, 195. when not to be made upon order of one of two trustees, 166. under stop order, duties of Broker, 164, 166, 167. Index. 1025 [Figures refer to pages.] STOCK-BEOKEE {conUnued), Sale (continued), wheu Broker justified in making upon fall of market, 165. may sell for his own protection, 170, 171. not ohargealjle for neglect to sell at highest point, 168. when power to sell expires on day of order for, 16.'5, 362. when not revoked by subsequent order, 165. when settled for, 106. for cash, how settled, 106. closing out at private, for neglect to put np margin, 357 n. 2. when contract of completed upon Exchange, 104. number of shares considered sold, 105. Client liable to Broker for difiference ou mistaken order, 127. kind of stocks Broker may deliver, 103. how delivery made to buying Broker, 142. selling Broker to deliver certificate of stock, etc., 153. certificate must be proper and legal, 153. right of Broker to sell when Client becomes bankrupt, 227. Broker cannot fill in deed executed by vendor in blank, 292 n. 3. rule as to procuring transfer and registration of shares, 154, 168. what deemed a ratification of an illegal, 205. when Broker not to warrant stock in name of Client, 164, 165. of stock standing in name of trustees, 165. of stocks held on joint account, 175. Shares, heeping separate, when not necessary to keep shares, etc., separate, 145 n. 3, 146. as to keeping identical shares purchased, 136, 150, 161. Short sale. (See Short Sales.) Special contract, with Client for stock speculations. (See Special Contract ; Spec- ulation.) Stolen ionds, etc., pledged with Broker to secure account, 178. when Broker not liable for stolen or lost securities, 112, 139, 140. (See Pledgor and Pledgee.) Stop order. (See Stop Order.) Trust funds, dealings of Brokers with, when trustee may follow same, 288. (See Client; Transfers of Stock; Usage.) STOCK CEETIFICATES. (See Negotiability.) STOCK EXCHANGE, early history of, in England, 8, 261. 65 1026 Index. [Figures refer to pages.] STOCK EXCHANGE (eontmued), history of bourses, 7 n. 2. in Philadelphia aud San Francisco, 12 n. 1, 102. New York, 9, 12. Boston, 102. London, origin an^ history of, 260. Paris, origin and history of, 324. Dublin, 243 n. 1. terms and contracts used on, by Brokers, 117. legal nature of, 11, 13. not partnerships, 14. not corporations nor joint-stock companies, 13, 17, 38. object of their organization, 18. remarks of James, L. J., upon, 82. property of, may be taxed in New York, 17 n. 1. account of transaction upon, 104, 677. nature of memorandum of transactions upon, between Brokers, 107. Aoti&ns against, when brought against president of, 24, 27 n. suits by and against, how and when instituted, 23, 80. AvKtraiion Committee, necessity for, 44. jurisdiction of, over members cannot be revoked, 45. what not a dispute requiring action of, 84. when enforcement of agreements before, against public policy, 80. (See New Yobk Stock Exchange.) By-laws, object of, 39. power to make, not unlimited, 38, 39. principles applied to interpretation of, 38 and n. 2. a contract between members, 43. not binding unless personally assented to, 80. when members bound by, 33, 34. amendments to, when binding, 99. have force of law as between membei-s, 68. when under dispute cannot be decided by Ai'bitration Committee, 84, 85. void if in conflict with Constitution of United States, 39. State constitution or common-law, 34, 39 n. constitution of association, 51. hard aud unconsoiouable, not binding, 43, 44. unreasonable, not binding, 34 h. 2. preventing recourse to law void, 78. void if illegal, 35, 36, Index. 1027 [Figures refer to pages.] STOCK EXCHANGE iconUniied), By-laws {continued), power of Exchange to enact, liow limited, 38. conferring judicial power illegal, 79. doctrine of Illinois as to interfering with unreasonable, 37. action of Exchange not reviewed when in accordance with, 43. members must exhaust remedies under, 60, 61. reinstatement of member expelled by means of uureasonable, 63. effect of provision expelliug members for riou-payment of dues, 60. giving preference lien in defaulters' seats to members legal, 65, 66. (See New York Stock Exchange.) ConstiUition and by-laws, a contract between members, 43. amendments to, when binding, 99. effect of clause in, to submit to arbitration, 80. (See New York Stock Exchange.) Ejcpulaion, inherent power to expel for acts not contaiued in by-laws, 40. 1. For acts of an infamous nature, crimes, etc. 2. Offences against member's duty as corporator. 3. Offences of a mixed nature, general rule upon, stated, 36, 41. how legality of, tested, 35. the English rule upon, stated per James, L. J., 36. of members from voluntary association, 56. when cannot be for acts disconnected with corporate business, 41. for crimes, when not proper, 41. for acts not contaiued in constitution of Exchange, 46 and «. 1. by-laws must be observed in proceedings for, 55. of members of associations having property interest, 56. rules applied where property interests involved, 35. can only be for just or reasonable cause, 35, 59. what deemed a reasonable rule upon subject of, 37. difference between " expelled" and "suspended" member, 48. resolution for, how voted upon, 58, 59. nature of proceedings in trial for, hearing, etc., 55. notice of hearing for, how and where served, 56. must be upon fair, adequate, and sufficient notice, 59. when trial unnecessary, 55. member may examine witnesses on proceedings for, 56. on charges for, party must have opportunity for defence, 56. when merits of, not examined into, 64, void if contrary to pnblic policy, 63, 82. 1028 Index. [Figures refer to pages.] STOCK EXCHANGE (cmUnued), Expulsion {continued), void whea result of malice or fraud, 36. ■when expulsion for "obvious fraud" illegal, 74. ■when not interfered with, etc., 62. ■when not to be set aside, 43, 43, 61, 82. by ex post facto resolution, 46. prevention of, where rules are illegal, 36. of member of insolvent firm -when irregular, 47. without legal cause, mandamus for, 63. when not interfered with by mandamus, 52. ■when prevented by injunction, 33, 62. complaint or declaration by expelled member, 47. sale of seat -wrongf ully procured by, 74. members to collect proofs on proceedings for, 55. remedy of member'whereby-laws.pro vide for non-payment of due8,60. when justified, 41. where differences not made good, 125. ■when not proper for failure to pay dues, 59. Gratuity Fund, right of representatives to participate in, 97, 98. Judgment against, effect of, upon members, 29. Jurisdiction, ' cannot usurp judicial powers, 76. cannot take cognizance of matters outside of its organization, 75. confined to matters between members, 84. no power to summon ■witnesses, 76. cannot issue subpoenas, 76. cannot exclude members from obtaining legal redress, 781. ■when member may refuse to submit to authority of, 81, 82. ■when injunction lies to prevent unwarranted exercise of, 77. effect of taking cognizance of private affairs, 76. has no jurisdiction over private affairs, etc., 77. clause preventing members from applying for injunction, etc., 81. sentence of, conclusive, when acting judicially, 52. ■when finding as to amount due from defaulter conclusive, 67. (See Jurisdiction.) MenibersMp, rules of New York Stock Exchange as to application for, 86 n., 812. London Exchange as to, 858, 859. Paris Bourse as to, 898. applicants for, 12. Index. 1029 [Figures refer to pages. ] STOCK EXCHANGE (conimwetT), Meiriberihvp (^continued), right of, iu Exchange considered property, etc., 35. when lost for violation of rules, etc., 81. gives no several Interest iu property of Exchange, 17, 86. real estate held by rights of members iu, 19, 20. liability of members for debts, 21. nature of contract between members in Exchange, 107. right of members to participate iu insolvent property, 265. when members iu England have no preference over outside credit- ors, 68. restoring members by mandamus, 60, 63. interlocutory injunction against Exchange by member, 47. disputes between members and the Exchange considered, 84. where dispute relates to extraneous matters, 84, 85. when payment of claim due other members not recovered back, 83. members not liable for dues during suspension, etc., 60. effect on, of failure to pay dues, 59. Bules and regulations, power to make, 32, 34, 39. effect of, upon persons not amenable to jurisdiction, 69, 70. how treated by courts where property interests involved, 35. void if immoral or contrary to public policy, 34, 65, 79, 265, 380 n. 1. preventing recourse to law void, 78. hard or unreasonable, void, 34. ex post facto, void, 33, 46. giving members preference lien on proceeds of defaulters' seats, 64, 67, 71, 72, 89. effect of violation of, 87. conferring judicial powers not binding, 79. indemnity from Client for acting according to, 130, 131, 133. made after instructions given to Broker not binding, 135. for good order deemed conclusive, 34, 353 n. 2. when binding on Client, 351. Broker impliedly authorized to contract in reference to, 130, 131. admitted to show meaning of words " reasonable time," 354. as to dealings in prospective dividends, 131. when Brokers regarded as principals by, 674. Seat, defined, 87, 88, 92. in New York Stock Exchange, 18. rules of, relating to applications for, 86 n. held subject to rules of Exchange, 87. 10.30 Index. [Figures refer to pages.] STOCK EXCHANGE (^continued), Seat {continued), members dein-ived of, for violating rules, 87. when protected by injunction, 87. regarded as property, 65, 74, 86, 94. when not property in the eye of the law, 89. ■n-hat considered proof as to value of, 74. distinction between English and American cases as to liens npon, ' 68,69,73. when sale of, compelled to satisfy debts, 93. rule giving members preference lien on, not illegal, 65, 66, 88, 96. lien of members upon defaulters' seats not unreasonable, 73. when prior to other claims, 66,67. when no preference lien to, over outside creditors in England, 68, 89. when proceeds of, subject to outside creditors, 90, 96. members have no lien npon proceeds of, when illegally sold, 74. not assignable to any but members or members-elect, 93. how transferred, 19, 74, 86 n. disposition of, upon member's death, 19. not subject to devise or bequest, 87. proceeds of, belong to member's personal representatives, 87. claims on seats of deceased members, by whom passed upon, 89. not salable to person whom Exchange will not recognize, 87. Exchange liable in damages for illegal sale of, 49 n., 74. when secret equitable owner has no claim to proceeds of, 68. when members compelled to apply proceeds of, to payment of debts, 91. when equity will compel sale of, 92, 97. vesting of, in receiver appointed in supplemental proceedings, 92. supplemental proceedings to reach, 92, 93, 95. cannot be attached or seized on execution, 86, 88, 90,91,96. whether proceeds of, after payment of Board debts, can be reached by execution, qucere, 88. not transferred to vendee upon sheriff's sale by mandamus, 91. when property of member not to be distributed contrary to Bank- rupt Law, 265. how vested in assignee in bankruptcy, 93-95. right of assignee to recover balance of proceeds of, 93. Suspension, for acts not contained in by-laws, 46 and n. 1. for trading before proper hours, 37. contract of Broker with Client to suffer, good, 60. Index. 1031 , [Figures refer to pages.] STOCK EXCHANGE (coMtinwed), Sitspension (continued), of Broker for failure to put up margin when Client liable for, 357, 358. effect of, 48 n. prevented where right to appeal is infringed, 49, 50. "Long Room," New York Stock Exchange, right of suspended member to enter not considered property, 48 n. how member restored where irregularly obtained, 60. when member not liable for dues during, 60. right of representatives of suspended member to participate in Gra- tuity Fund, 97, 98. Usage, Broker impliedly authorized to buy and sell at Exchange by, 120, 206. restricted by, to transacting business at Exchange, 206. for Broker to charge Client more than cost price not binding, 159. Broker acting according to, entitled to full indemnity for losses, 133. (See Usage.) STOCKHOLDERS, limitations upon rights of, to begin suits, 592 n. 4. in United States not generally liable for future calls, 155. when Broker subject to liabilities of, 152. when executors, etc., not personally liable as in New York, 152. STOCK-JOBBEES, practice of, in making contracts on the Exchange, 71. STOCK-JOBBING, definition of transactions in, 384 n. distiuctiou between Sir John Barnard's Act and statute against wagering, 420. repeal of Sir John Barnard's Act against, 392 et seq. in time of George III., 383. object in enacting Sir John Barnard's Act, 383. Beawes's history of " time bargains," 385 n. 1. , Nature of stocks embraced in the act against, 385. applied to " public stocks," 385. "time bargains" prohibited as, 383, 384 h. applied to jobbing in omnium, 386. loans of stock, 387. execn tory contracts for transfer of stock, 387. consols, contract to pay difference to become due on, 387. Nature of stocks not embraced in act against, railway and joint stock shares not within, 384, 385. 1032 Index. [Figures refer to pages.] STOCK-JOBBING {continued), Nature of stoclcs not embraced in act against (continued), bargains iu foreign funds not within, 386. did not apply wbere seller was possessed of stocks, 386. JEvidence and discovery under, etc. bill of discovery under, act against, 387. Stock-broker, when cannot be compelled to testify under act, 388. books of Broker may be produced, 388. when Broker to discover names of Clients purchasing shares iu illegal company, 388. cannot resist discovery where no penalty imposed, 388. Actions not maintainable under, diflfereuces in, when not recoverable, 388 et seq. money lent to pay differences not recoverable, 390. when promissory notes given for differences void, 390. what plea under act must allege, 260 n. 2, 391. actions for money used and commissions in Stock-jobbing transac- tions, 388. Nev) Torlc statute against, 393. repeal of, 397. did not apply to shares of dissolved corporation, 394. applied to stocks, 394. when vendor mnst own stock agreed to be sold, 394. time sales by Broker not possessed of stock void, 395. differences not recoverable from principal, 395. bnrden of proof on one pleading statute, 395, 415. when money paid to Broker iu transactions against may be recov- ered, 396. when purchase made by Broker not within act, 397. " short " sales not within, 397, 401. effect of repeal of act against, 397, 401. when plaintiff need not allege, in pleading ownership of stock, etc., 398. effect of repeal upon Statute of Frauds in New York, 398. Massachusetts statute against, 398. pleading in actions by Broker for refusal to take stock, etc., 398, 399. when money paid by Broker recoverable, 398, 399. when contracts by Brokers not within, 400. when promissory note for losses sustained valid under, 401. money paid for losses cannot be recovered back, 401. when contract for future transfer of shares not within, 401. " short " sales considered illegal iu Massachusetts, 401 et seq. Penn»ylvania statute against, repealed, 403. Index. 1033 [Figures refer to pages.] STOCK-JOBBING (.continued), Illinois statute against, 403. decisious under, 404. acts against not considered effective in preventing speculation, 405. vphen assignee not entitled to differences paid under stock-jobbing contracts, 391. STOLEN SECUEITIES, liability of Broker for, 127 n. 2. (See Stock-broker.) STOP OEDEE, defined, 164. loss upon stocks limited by, 166. sale under, illustrated, 166. liability of Broker for failure to sell at price designated in, 167. "what a proper execution of, 166, 167. construction of, where Broker instructed to sell, 167 n. 2. ''STEADDLE," OE " SPEEAD-EAGLE," defined, 117, 171, 445. legality of, 444. not pnma facie gambling contract, 477. form of, as commonly used, 117 n. 6, 118 «., 446. liability of Broker for failure to close out, 171. failure of Broker to close out, when not affected by custom, 171. STEAW MAN, Jobber not liable for, 302, etc. SUB-PLEDGE. (See Negotiability; Pledgor and Pledgee.) SUBPCENA, Stock Exchange no power to issue, 76. SUBSCEIBEES to London Stock Exchange defined, 263. SUBSCEIPTION, liability of stockholder for, where stock is assigned, 154. SUBSTITUTE, when Broker can act by, 104, 230. acting through in other cities, 231. what duties cannot be delegated to, 230. rule in cases of necessity, or where authorized by known usage, 230. business on New York Stock Exchange may be transacted by, 230. 1034 Index. [Figures refer to pages.] SUITS against London Stock ExcLange, how beguu, 265. (See Actions ; Eemedibs ; Stock Exchange, etc.) SUPPLEMENTAL PEOCEEDINGS, seat in Stock Exchange subject to, 91, 96, 97. SURETY, ■when accounts not admissible against, 133. SURPLUS SECURITIES, when pledgee ordered to sell, 161, 162. SUSPENSION. (See Stock Exchange.) T. "TAKE IN" defined, on short sale, 168. "TAKE UP," when Client may be required to, 226. TALLIES, Stock-brokers first engaged in buying, etc., 250. TAXES, liability of Broker to pay, 109 n. 2. Stock Exchange to pay, 17 n. 1. TECHNICALITIES, when suspension of member not vitiated by, 61. TELEGRAMS, when Client not liable for extra money expended for, 159. TENDER, when action maintained without showing, 229 Ji. 1. (See Remedies.) THEFT of stocks, when pledgee not liable for, 112. TICKETS. (See London Stock Exchange.) TIME, how transaction on completed, 107. of sale of stock at Broker's option, -when notice of waived, 169. in which Broker must execute orders, 120. of sale of stocks for want of margin must be reasonable, 193, 197. Client must have notice of, etc., on sale for want of margins, 196. TIME BARGAINS, bona fide in stock or gold legal, 452. (See Stock-jobbing.) Index. 1035 [Figures refer to pages.] TITLE to seat not acquired by vendee at sheriff's sale, 88. TEADEK, when Stock-broker considered, 162. TRADING for the acoouut, 273. TRANSACTIONS cannot be concealed by Broker from Client, 121. TRANSFER, of stocks, form of, 617. method of making, 107, 108, 616. of stock in the United States and England, 153, 155. liability of transferror, 153, 155. receiving stock by power irrevocable or by, 107. upon books of assignment of stock executed in blank, 154. efifect of forged, 631, 644. general rule as to duty of Brokev to procure, 168. duty of Broker to procure, where company insolvent, 137. duty of selling Broker to procure, 137 re. 4. when Broker not bound to procure, etc., of stock sold, 154. Broker entitled to have, into his name or that of clerk, 137. custom to transfer Into name of Broker considered valid, 126. liability of Broker as stockholder on transferring stock into his own name, 152. liability of Client by failure to coiTect errors in, 132, 294. pnrchaser failing to procure, liable for calls, 154, 155. seller may be compelled to execute, and account for dividends, 155. when objection to executing waived, 132. TREASURY NOTES, effect of purchase of, by Brokers after due, 370, 371. TRIAL, amending plea after notice of, 253. what Broker must show upon, in order to recover loss, etc., 228. when certificates of stock need not be produced at, 229. examination of Broker before, when accorded, 121. TROVER, for conversion of collateral, 177, 178, 359. when objection against form of action deemed waived, 75. amount of recovery in action of, 75. (Sec Remedies.) 1036 Index. [Figures refer to pages.] TRUST FUNDS, stocks held by Broker as, do Dot pass to assignee in bankruptcy, 163. right of cestui que trust to follow, 164 n. 1. ■ TRUSTEE, certificates of stock in name of, 374, 375. power of attorney signed by, not a good delivery, 107. when not personally liable as stockholder in New York, 152, 153. when Broker not authorized to sell upon order of one, 165, 166. Insolvent Brokers employed by pledgee of, ordered to deliver up dividend warrants, 162. when not liable for fraud or robbery, 139 n. 5. liability of, where intrusted with shares payable to bearer, 139 n. 5. entitled to trust fund in hands of assignee of insolvent Broker, 163. when estopped from asserting that dispute is between parties, as members, 84. when officers liable for misappropriation of securities by, 140. when Broker becomes, for Client, 102. Broker chargeable with honesty and good faith as, 102. (See London Stock Exchange ; Negotiability.) TRUSTEE IN BANKRUPTCY, when relieved from losing contracts of defaulter, 72. (See Bankrupt ; London Stock Exchange; Stock Exchange.) U. ULTIMATE PURCHASER, when Jobber not liable for, 302. when Jobber not absolved from liability by giving name of infant as, 304. relation between, and selling Client or transferror, 315. when transfer to, not compelled, 132. VLTBA VIBES, ■when transaction between Broker and bank deemed, 128, 129. UNDER THE RULE, when Broker may buy, to protect himself, 223. UNINCORPORATED ASSOCIATIONS. (See London Stock Exchange ; New Yokk Stock Exchange; Stock Exchange.) UNITED STATES, transactions in, between Broker and Client analyzed, 101 et seq. bonds of (See NEGOTiABnjTY.) UNKNOWN PRINCIPAL, liability of, for default of Broker, 106. Index. 1037 [Figures refer to pages,] UNLICENSED BROICERS. (See Commissions ; Stock-bkokeks.) UNMARKETABLE SECURITIES, when Broker may recover from Client price of, 125. USAGE, of Stock-brokers, 341 et seq. general rule relating to, 126, 341 et seq. bad, if too indefinite or uncertain, 377. cannot make a new or entire contract, 344. interpretation of words and pbrases by means of, 134, 135, 344. written or express contract not varied by, 344, 345. effect of, when in opposition io "fixed rules of law," 345 et seq. "fixed rules of law" waived by, 348,349. when not contrary to public policy or contra honos mores, 220, 346, 350, 351. to sell out stocks without notice, for want of margin, illegal, 346. when no defence to indictment for embezzling margin, 697 «. 2. when legal, 165, 196 Ji. 2. illegal if in hostility to terms of contract, 347, 373. to close account before settling-day, when legal, 347, 373. to allow uo days of grace, when binding, 348, 349. to give notice, etc., to endorsers on fourth day of grace, held bind- ing, 348. caveat emptor, rnle of, when not affected by local, 349. validity of, where infringing fundamental principles of right and wrong, 349. illegal for Broker commissioned to purchase to become himself the purchaser, 220, 282, 349. absurd and unreasonable, not binding, 349 m. 3. distinction between contracts void in law and those valid, to be ob- served in giving effect to, 350. when obligations not imposed by law to be assumed by express contract, 350. persons employing Brokers presumed to deal in reference to, 124, 351. when Stock-broker has implied authority to follow rules and usages of Exchange, 351, 352. justifies Broker in making transaction at Exchange, 120, 206, 676. rule as to, when first applied in New York, 353. Brokers presumed to know, of their own business, 353, 359, 360. when Client bound whether he knows of, or not, 353. when Client must have knowledge of, 354. knowledge of, when to be shown by presumptive evidence, 354. of particular firm of Brokers, 354. 1038 Index. [Figures refer to pages.] USAGE {continued), when Client must be shown to have knowledge, 354 n. 1. not necessary to plead that Client had knowledge of, 354 n. Broker must do business in ordinary and customary method, 168, 355. when Broker authorized by, to sell upon credit, 169 n. 2. construction of mercantile expressions in written instrument for the jury, 355. may be established by one witness, 233, 356. when not so established, 356 n. 1. Of StooJc-'broJcers, when held Unding in the United States, 356, 417. not to keep identical shares on hand, 144, 356, 357. to hypothecate stocks, 356, 357. of Wall Street, authorizing settlement of account at private sale, etc., effect of, 208, 357 n. 2. rules, etc., of New York Stock Exchange upon Clients, 357. ■when Client bound by usage of particular Broker's office, 169, 358. to close out securities on " call " loans, 358, 359. when fixed rule of law waived by custom to sell collateral without notice, etc., 359. of Brokers in Boston as to speculation on margin, 360. Brokers presumed to know, etc., 360. Of Stoclc-irolcei's, u'hen held Mnding in- England, 360. parties presumed to contract in reference to, of London Stock Ex- change, 318 et seq., 361. rules and usages of Exchange in relation to liability for " calls," 361. to explain authority given banker by power of attorney, etc., 362. Of Stoeh-irokers, when rejected in th-e United States, 363 et seq. to hypothecate collateral security, 148 n. 1, 363, 365, 366. that Brokers need not keep identical stock pledged, 365, 366. in contravention of terms of contract, 364, 367. Allen vs. Dykers criticised, 365. to sell commercial paper pledged, 366 n. 1. to sell stocks without notice on exhaustion of margin, 189, 207, 366, 367. on this point Marlcham vs. Jaudon criticised, 366, 367. as to dividends declared upon stock deliverable at future day, 368, 369, 651 n. 1. of Brokers to sell stock "dividend on" and "ex dividend," 368, 369. as to meaning of words " dividends or surplus dividends," 368, 369. principle upon which persons are bound by, 370. Index. 1039 [Figures refer to pages.] USAGE {continued), Of Stoclc-hrolcers, when rejected in the United States {continued), when priuciples of law not defeated by custom of Brokers, 370, to keep transactions in one account and remit balance, 371. authorizing departure from positive instructions, 119 n. 5, 372 n. 1. to sell shares under other circumstances than those specified, 147, 372. in Boston for Brokers to sell stock for another's account, 373. for what purposes proof of, admissible, 373. Broker employed to purchase cannot buy of himself, 220, 374. stock certificate not made negotiable by, 374, 488, 489. ■when negotiability established by, 375 n. 1, 491. what usages have no standing in courts, 375. of Broker to buy stock and sell to Client at advanced rate, 375. against sound policy and good morals, 376. of Brokers to assume order and not make contracts with third par- ties, 376. Of Stoclc-irolcei's, ivhen rejected in England, 377, 381. as to discharge of Broker for payments to solicitor of Client, 377. as to liability of Client for loss caused by Broker's insolvency, 378 et seq. • rules of Exchange cannot deprive creditors of property belonging to insolvent Broker, 379. of tallow market not binding upon Client having no knowledge of same, 380. Miscellaneous, as to expiration of authority to sell, 165, 362. of Brokers to debit and credit interest monthly, not void, 756. as to charging interest, 156, 159. as to making necessary disbursements, etc., 125, 133, 159. effect of, upon transaction between selling Client and ultimate pur- chaser, 315, 316. upon Jobber and Broker, 311. upon contract of Jobber and vendor, 297 et seq. effect of customs of London Stock Exchange on defence of wager, 413. Broker acting in accordance with, not liable for loss of margins, 140. of Wall Street as to requiring deposits to meet fluctuations, 186. to sell upon customary notice for want of margin, 193. among grain merchants in Baltimore on sales for future delivery, 417. ■when order to purchase limited by, to coming settling-day, 121. to execute several orders at one time, 276. authorizing Brokers to receive payment for shares, 168. as to payment oif price on delivery of shares to buying Broker, 153, 154. 1040 Index. [Figures refer to pages.] USAGE (continue^, to send sold notes without disclosing Client's name, 136. not to disclose principals valid, 126. Broker not liable for spurious stock purchased in accordance with, 125, 126. when order fulfilled by, to purchase through sub-agents in another city, 120. when, authorizes Broker to act by substitute, 104, 230. of Wall Street as to sales under stop order, 166. to transfer stocks bought into Broker's name, 126, 152. closing out " straddle " without authority, when not affected by, 171. USURY, effect of, upon stock transactions, 748. early history of, in England, 748,749 n. defined, 749 and n. punishment for taking, in New York, 749 n. contracts for loan of stock, etc., when, 750. securities given upon usurious contract void, 751. loan of stock secured by mortgage, 751. sale of bank stock, 752. when loan of stock not, 754. agreement to purchase stock at future day, 755. loan of certificates of deposit, 755. when charge by Stock-broker of commissions, etc., not, 156, 157, 756. Stock-broker may recover usurious interest paid for Client, 756. pleading, 756. when a question for the jury, 756. when jury may infer, in note given for sale of stock, 756 n. 7. injunction against usurious contracts for stock by Broker, 756 n. 3, 757. evidence as to question of, 757. in sale of uncurrent bank notes and bills, 757, n. 3. use of proceeds of collaterals, when, 757 n. 3. when hypothecated security not invalidated by usurious loan, 758. custom of Brokers to debit and credit interest monthly, not, 756. compelli^ig delivery of securities left as collateral to usurious debt, 747. ■ V. VALUES. (See Measure of Damages ; Specific Performance.) VENDEE,") (See London Stock Exchange; Remedies; Stock Ex- VENDOE. I change.) Index. 1041 [Figures refer to pages.] VICTOEIA, QUEEN, acts of, relating to Stock-brokers, 223, 345, 393 n. 2. VILLAGE BONDS. (See Negotiability.) VOTE, right of Client to, upon stock in Broker's name, 137. by proxy, 137 n. 5. how right of parties to, upon stock determined, 138 n. 1. pledgee cannot, against wishes of pledgor, 138 n. 1. license to, may be revoked, 138 n. 1. retransfer of stock into Client's name to permit him to, 138. w. WAGEE, definition of, 406, 410, 433, 434. distinction between gambling and speculation, 416. how contracts for construed, 478. when not void at common-law, 406 et seq. in England under 8 and 9 Vict. c. 109, 408. distinction between, and Stock-jobbing Act, 384, 430. under New York Eev. Stat., 409. statutes of other States as to, 409 n. 3, 449, 455. contracts for differences void in Wisconsin, 423. as affected by nature of transactions upon Stock Exchange, 433, 437. contract for future sale of gold or grain, when not, 414, 415, 416. bona fide time bargains in stock or gold coin valid, 458, 454. contracts for railway shares, when not, 453. contract for sale of goods, etc., deliverable at future day legal, 416, , 419. effect of secret intentions of seller not to deliver, 417. sale of prospective dividends not, 436 n. 3. ■ when Broker may recover commissions, differences, etc., in contracts for, 127 n. 1, 392 n. 1, 410, 420, 478. when Broker may recover money laid out on "short" sale, 425, 436. Broker may recover indemnity although intention was to pay dif- ferences, 420, 435, 436, 439. effect of promissory notes given as margin for differences, 427, 478. when short sale illegal as, 430. promissory notes for losses on " short " sale, when void, 424. when Broker cannot recover losses on " short " sale, 430. when infant may recover margin paid to Broker on contract for, 429. when contract by Broker amounts to, 433. between principals, when void, 410, 411, 424. 66 1042 Index. [Figures refer to pages.] WAGEE (oonWBMed), contracts for purchase on margin, when illegal as, in Pennsylvania, 114, 115, 4S8. on this point Nmfh m. Phillips, and other Pennsylvania cases, crit- icised, 428, 431. contracts for payment of mere differences considered, 410, 477. tendency of United States courts to consider void, 409. when usage to pay differences does not avoid contract, 417. Options, contemplating mere " differences " void, 444, 454. not prima fade gambling contracts, 477. " calls," " puts," and " straddles," or " spread-eagles," considered, 445. recognized in London and New York Exchanges, 445. when not void as wagers, 446. " puts " and " calls " condemned in Illinois, 449, 455. distinguished from lonafide time bargains, 449. when contract for recovery of difference in market price illegal, 450. when " corner " in grain illegal, 450, 451, 452. when defence of sustained, 433 n. 1. when plea of, insufficient, 391. defence not favored in England in transactions on Exchange, 413. must be affirmatively pleaded, 415, 416, 477. when sufficient pleaded under New York statute, 412. when Client cannot plead under Massachusetts statute that con- tract is, 440, 441. burden of proof of, 414, 415, 418. as question of intent for jury, 412, 419, 425, 427, 434, 477. what not sufficient evidence of illegal intent, 417, 451. when intent not inferred from straddle contract, 447, 448. intent may be shown by parol evidence, 448, 477. both parties must concur in illegal intent, 419, 477. injunction to restrain unexecuted contracts founded on, 690. contracts for, not enforceable by assignee of bankrupt, 66. general principles deducible from cases as to, 477. (See Stock- JOBBING.) WAIVER, what deemed, of right to recover for conversion of stocks, 192. when right to recover for conversion not waived, 204. what deemed, of demand to put np margin, 193, 194. notice and manner of sale for want of margin, how waived, 169, 204, 212. of an illegal sale of mining stocks, 205. Index. 1043 [Figures refer to pageB,] WAIVER {continued), of notice of sale does not waive demand for payment of debt, 305. Brolier must sell for highest price where there is, 205. of rule of law, hy custom or usage, to sell collateral without notice, 359. what deemed, on part of Client, to objections to transfer of stock, 132. when objection against form of action in trover deemed waived, 75. of irregularities before Arbitration Committee, 83. WALL STEEET, usage of, authorizing Brokers to receive payment for securities sold, 168. (See New Yokk Stock Exchange ; Usage.) WARRANTY, when receipt of proceeds by Client not a ratification of unauthor- ized, 164, 165. "WASH SALES" defined, 117. WIFE. (See Married Woman.) WILL, seats in Exchange cannot be devised, etc., by, 87. WINDING UP, claim of Broker against bank on, when deemed ultra vires, 128, 129. right of Broker to indemnity upon purchase of shares in company after, 131. WITNESS, one may establish a commercial usage, 356. Stock Exchange no power to subpoena, 76. communications between Brokers and Clients not privileged, 235. WORK AND LABOR, when unlicensed Broker cannot recover as for, 255. Broker cannot recover for, in sale of shares in illegal company, 258. (See Remedies.) WRITTEN INSTRUMENT, how and by whom construed, 355. when Broker held liable by usage as principal under, 362. WRITTEN ORDER, modification of, by verbal understanding, 165. THE END. Date Due Library Bureu Cat. No. 1137 KF 1C71 nrg Author Vol. Dos Passos^ John Randolph, treatise on the law of Title A stock-brokers Copy and stock- Borrower's Name