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Vol. II.]

Price v. GOVER.

No. 4.

This being the purpose and character of the mortgage, we must now determine the question of its validity. The onus of proof in this respect rests of course upon the parties assailing the instrument.' They must show affirmatively and clearly its invalidity. The grounds upon which they assail it are:

1st. A total failure of consideration for its execution by reason of the absolute failure in fact of the appellees to carry the stock according to their agreement.

2d. Actual fraud and imposition practised by them upon Price by which he was led to execute it.

Ist. As to the first ground, the bill charges in substance, that the defendants did not, as they pretended, carry the said 1,150 shares or any part of them, but on the contrary parted with every share thereof for their own use and benefit, without the knowledge or consent of Price, before the mortgage was executed, and pretended to be, while they were not in fact, the holders of any such stock of his, and therefore could not carry it, or in any wise discharge their obligation to him under their contract, and at no time did they incur loss or risk of loss on his account in regard thereto, and especially had not at the time of the execution of the mortgage any of these 1,150 shares of stock in their possession, and had no honest claim upon him in the premises, or any ability to do that which alone would have furnished a consideration for the mortgage. By this it is assumed, in the first place, that it was the duty of Lee & Co. to return the identical shares which they received from Purvis & Co. and the 150 which they subsequently purchased, and to hold them ready to be delivered or sold, whenever by the terms of their contract a delivery or sale could be lawfully demanded or made. But in our judgment it is quite clear the law did not impose that duty upon the brokers. In the case of Worthington v. Tormey, 34 Md. 193, it was decided by this court that where a broker is employed to purchase stock for a customer, it is not necessary that the stock so purchased shall, until delivery, be kept separate and apart from other like stock belonging to the broker, or that he should mark and designate it as belonging to the customer; but if either he or his agents, through whom the purchase was made, had such stock in their possession, so that it could be delivered to the customer upon his paying what was owing for it, that was all the law required him to do. To the same effect is the decision of Chancellor Kent in Nourse v. Prime et al. 4 Johns. Ch. Rep. 490, and 7 Ib. 69, where there was a written agreement by which the brokers acknowledged that they “held 430 shares of United States Bank stock, as collateral security" for the custoiner's note payable at a future time, and engaged on payment of that note “ to retransfer the said 430 shares to " him or to his order, accounting to him for the dividends payable on the same during the running of the note, and in case the note was not paid at maturity, they to be at liberty to make an immediate sale “ of said shares,” accounting with him for any surplus, and holding him responsible for any deficiency. In that case as in this, the defendants carried on the business of stockbrokers, and the chancellor held that as the plaintiff dealt with them in that capacity, he should have caused the shares to have been identified if he intended they should be kept separate and distinct from the mass of Vol. II.)


(No. 4.

stock in which the brokers dealt; that the shares in question were not defined and designated so as to be distinguished from other shares in the same bank, and if the defendants had always in their possession and names, and under their control, shares to that amount during the whole time of credit given by the note, and were ready, willing, and able at all times to account to the plaintiff for that number of shares, and the dividends arising thereon, whenever he entitled himself to such an account, it was all that he could ask, under the contract'; that the brokers were not bound to separate 430 shares from the common stock, and mark or otherwise designate them as the separate property of the plaintiff, but that it was enough if the brokers always had the requisite quantity of shares on hand, “and the law will presume that the shares so on hand from time to time, were the shares deposited, because the parties have not reduced the shares to any more certainty.” To the same effect, also, are the decisions of the court of appeals of New York in Horton v. Morgan, 19 N. Y. 170, and Stewart v. Drake et al. 46 Ib. 449.

It was no part of the contract, nor was it, in our opinion, contemplated by the parties that the stock should be transferred to Price, and certificates therefor issued to him, and that he should then by power of attorney transfer and deliver them to Lee & Co. He never required this to be done, but on the contrary allowed Purvis & Co. to transfer the 1,000 shares directly to Lee & Co., and we think it is fairly to be inferred from the nature of the transaction, as well as from the evidence in the record, that this was the intention and understanding of both parties when the contract was made. It was therefore, according to the authorities we have cited, no breach of any legal duty or obligation resting upon the appellees, under either the prior verbal agreement or that contained in the mortgage, to sell the whole or any part of the shares originally received and purchased on Price's account, provided they had, at all times during the pendency of this carrying contract, from its inception in May, 1857, to its close by the sales in June, 1859, on hand, in their possession or under their control, ready for delivery when Price should pay them what he owed them on account thereof, or to be sold on his account when he should so direct, an equal number of other shares of the same stock. But it was their duty so to keep on hand unsold this number of shares. Have they failed to discharge this duty ? The bill charges they have, the answer denies it. We have carefully examined the testimony by which alone this question must be determined, and our conclusion from it · is, that it fails to establish clearly a breach of duty in this respect on the part of the appellees. It is shown there was not at all times this amount of stock standing in their names on the transfer books of the railroad company, but we cannot infer from this that they did not own or have control of that number of shares. It is very manifest they could be the owners of a much larger number by holding certificates therefor, under blank powers of attorney without any transfer to themselves appearing on the company's books. In response to the demand in the bill for the respondents to show fully how much of this railroad stock they held and owned on the 26th of May and the 6th of October, 1857, and at various other designated dates, the answer sets forth a specific number on each of these dates as being held and owned by them. These Vol. II.]

Price v. GOVER.

(No. 4.

amounts are in each case more than 1,400 and in some largely over 2,000 shares. Reese, in his examination in chief, testifies on this subject to the effect that from the origin of this transaction down to the ultimate sale of the stock in June, 1859, the firm had on hand, that is by hypothecation and control of, an adequate amount of stock over and above what they were carrying for other parties, to have delivered on call what they were carrying for Price ; that it did not always stand in their names on the books of the railroad company, for the reason that when the stock was hypothecated it was usually transferred into the name of the party who advanced upon it. On cross-examination he is more explicit, and swears that during the running of the contract with Price, the firm had always on hand or under its control sufficient of this stock to meet all its contracts with all its customers; that by having stock under their control he meant having command of it, and being prepared to deliver it; that they held their Baltimore and Ohio Railroad stock in such a position, as to be at all times ready and prepared to comply with all their contracts on call, and were not obliged to buy for that purpose ; but though not obliged to buy they would have been under the necessity of disembarrassing their stock from hypothecation, or other liens, in order to be able to deliver it. From this and other portions of his testimony it is clear that while hypothecation is admitted, a sale to the extent of touching the 1,150 shares is explicitly denied. This witness was not only competent to testify at the time he was examined, but he had then no interest in the result of the suit. He had also the means of knowing that to which he has thus positively sworn. We have carefully considered the arguments so earnestly pressed by the appellants' counsel against this testimony, but they have not convinced us it is our duty to refuse it credit. It is insisted the firm all this time was actually insolvent and could not have had the ability to meet a demand for the delivery of this stock without fraud, bad faith, or breach of trust, as to their other customers or creditors, and that such insolvency is shown not only by the testimony of some of the witnesses, but by the extent and character of their failure in October, 1860. But in opposition to this there stand the undoubted facts that they purchased and paid for this stock a very large sum of money; that they had means and credit sufficient to continue their business during the whole time covered by the transactions with Price, a period of great financial trouble ; that they did not exercise their right to sell immediately after the expiration of the year, but allowed eight months more of credit to Price; and then after giving him due notice, actually produced the stock, sold it and delivered it to the purchasers, and credited the account of Price with the proceeds; and that their failure did not take place until more than sixteen months after such sale. Their failure at that time, complete and disastrous as it was, does not justify the conclusion they had not this stock on hand or under their control up to the time of its sale; nor will that or any other evidence in the testimony warrant us in pronouncing positive testimony that they did so hold and have control of the stock, fabricated and false. We are, therefore, of opinion there was no sale of this stock amounting to a breach of duty on the part of the appellees.

But it is conceded they hypothecated it, and the next inquiry is, was

[No. 4.

Vol. II.)


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this a breach of duty on their part? The case does not call for the decision of the broad question whether under a contract to purchase and carry stock on a margin to be kept good by the customer, the broker has the right to hypothecate the stock for the purpose of raising money upon it, because we are satisfied from the evidence that when this arrangement was entered into, it was understood between the parties that the appellees, in undertaking to carry the stock, were to be at liberty to use it for the purpose of enabling them to do so. Price, in his testimony, admits that, at the time he entered into this arrangement with the appellees, Purvis & Co. were carrying for him 400 other shares of the same stock; and in reference to this carrying, he says, “ Purvis took them up and borrowed money on them, and that is the way they were carried, that is the way I got him to do it." There is nothing to show he could reasonably have expected Lee & Co. to deal differently with the 1,000 shares they agreed to take up, but on the contrary, it is very clear he must have expected they would deal with them in the same way; for he says that when the arrangement respecting the 1,000 shares was proposed, Gover, the partner to whom it was made, said to him, we can carry them for you, and that he knew where he could lay his hands on $60,000; that when he reported to Purvis that Lee & Co. bad agreed to carry the 1,000 shares, Purvis said, “ They are not able, they are from hand to mouth, for they are borrowing every day;" that he then told him that Gover had said he knew where he could put his hands on $60,000, and Purvis then replied, “By the help of outsiders they may be enabled to carry it.” Again, he testifies that he told them, before they took the stock, that he had no money, it was all in their hands; that they knew he had no money from the start; that they knew he was carrying the 400 shares, and knew all about it as well as he did. He was, therefore, according to his own testimony, informed beforehand they would be obliged to borrow money to carry the stock, and according to the testimony of Reese, he was informed by the latter in frequent interviews and conversations, that they had borrowed money on the stock by hypothecating it, and that was the manner in which it was carried, and to this no protest or objection on his part was made. We cannot escape the conclusion that it was part of the original agreement and understanding that the brokers should in this case have the power of hypothecation. There was, therefore, no violation of their duty in this case, even if that power would not, without an agreement to that effect, express or implied, remain with the broker, under a contract to carry stock on a margin, a point upon which we wish to be understood as expressing no opinion.

2d. We find no proof upon which the charge that actual fraud and imposition were practised by the appellees upon Price, by which he was led to execute the mortgage, can be sustained. There was no attempt to take advantage of his inability to read. The mortgage was prepared by his own directions, and by his own conveyancer, in whom he had confidence, and whom he trusted to prepare all his deeds, and it was carefully read over to him before he executed it. There is nothing in it to which he did not give his full assent. He understood wbat a stock operation of this kind meant. When he engaged in it he hoped to make money, but he knew he ran the hazard of loss. He acted intelligently, with his eyes


dence, and Whions, and by his to read. Theme


[No. 4.

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and wedeceived. In this conice, that at one time to

open, and we cannot discover that he has been in anywise cheated, defrauded, or deceived. In this connection our attention has been particularly called to the testimony of Price, that at one time he gave an order to sell the stock which they failed to execute. His testimony is: “I think about August, 1857, I gave Josiah Lee & Co. a written order to sell that stock at $65 per share, but not less; they did not do it, and I think I called the order in and they tore it up, to the best of my knowledge." But it does not appear at what time in August this order was given, or that it would have been possible to obey it before it was withdrawn by a sale at $65 per share. At this period the value of the stock was very fluctuating. The record shows that on the 5th of August, 1857, the appellees purchased for Price 150 shares, at $52 per share, and that the highest point it reached between the 25th of June and the 6th of October, 1857, was $674 per share. This is all we learn from the record on this subject, and it is impossible for us to infer fraud on the part of the appellees in not executing the order referred to.

These are all the questions in the case we deem important to be decided. Having thus considered and disposed of them, the result is that the decree appealed from must be affirmed.

Decree affirmed.


[DECEMBER, 1874.]




An agreement, that in case a common carrier shall fail to deliver goods intrusted to it

to the consignee, a claim for the goods shall be made within a specified time, is liable

to no sufficient objection, provided the period is a reasonable one. In the case of an express company ninety days is a proper limitation.

THE opinion of the court was delivered by Mr. Justice STRONG. The defendants in the court below, having been sued as common carriers for their failure to deliver at New Orleans a package received by them on the 23d day of April, 1862, at Jackson, Tennessee, pleaded that when the package was received “it was agreed between them and the plaintiff, and made one of the express conditions upon which the package was received, that they should not be held liable for any loss of, or damage to, the package whatever, unless claim should be made therefor within ninety days from its delivery to them.” The plea further averred that no claim was made upon the defendants, or upon any of their agents, until the year 1868, more than ninety days after the delivery of the package to them, and not until the present suit was brought. To the plea thus made the plaintiff demurred generally, and the circuit court sustained the demurrer, giving judgment thereon

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