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 . rtC.riiicrtB.. 
 
 .AcrftiirnB..
 
 A TREATISE 
 
 ON THE 
 
 LAW OF STOCK-BROKERS 
 
 AND 
 
 STOCK-EXCHANGES 
 
 BT 
 
 JOHN R. DOS PASSOS 
 
 OK THK NKW YORK liAK 
 
 Author of " Interstate Coinmeree Act," " Commercial Trusts, 
 " The Anglo-Saxon Century," etc. 
 
 SECOND EDITION 
 In two volumes 
 
 Vol. I. 
 
 THE HANKS LAW PITRLISFIING CO. 
 21 MlIKItAV STMKKT, N'KW YORK 
 
 LIBRABY 
 or 
 
 EDWARD UCMU9TCR 
 
 7'
 
 CoPYKiGirr, 1882, 
 By JOHN K. DOS PASSOS. 
 
 Copyright, 1905, 
 By JOHN R. DOS PASSOS. 
 
 07407^
 
 PREFACE. 
 
 According to a computation made in a financial journal 
 of New York, tlie sales of shares, alone, of corporations, in 
 the year 1904, upon the New York Stock Exchange, reached 
 the enormous total of about one hundred and eighty mil- 
 lions (180,000,000), representing in cash, at one hundred 
 dollars per share, the sum of eighteen billions of dollars 
 ($18,000,000,000). 
 
 When the aggregate transactions for the same period of 
 the London Stock Exchange, the Paris Bourse, and the 
 other well-known bourses of the Continent are added to 
 those of the New York Stock Exchange, it will be appreci- 
 ated that the capital involved, yearly, in the business of 
 dealing in shares and other securities, reaches figures which 
 are almost too vast for human comprehension. If one 
 wishes to profitably study tiic financial and coninicrcial 
 history of this country, let him put in juxtapo.sitioii the 
 li.sts of the New York Stock Exchange of 1882 and 1904— 
 the period intervening between the publication of the first 
 and second editions of thi.s work. They are worth voliinics 
 of general history. In view of these facts, the occupation 
 of the Stock-broker, and the dealings on the Stock l"]x- 
 changes, have become subjects of the profoundest (!()ncern 
 and of a public interest which increases ev(>ry year. No 
 matter how true it may formerly have been that the opcra- 
 
 iii
 
 IV 
 
 Preface to the Seooiul Edition. 
 
 lions on the Stock l'>xclian<;(> witc of interest merely to the 
 professional speculator, to-day the dealings of these bodies 
 are of national and absorbing importance. Shares and 
 bonds of conmiercial corporations now constitute permanent 
 investments in all countries; and real estate, at one time 
 the sole source of investment, has, in this respect, fallen 
 into a secondary rank. The securities of railroad and other 
 commercial companies not only offer attractive and regular 
 returns to capital, hut the shares may be carried about by 
 their owners wherever they may go, with more safety than 
 money, defjang alike the depredations of criminals, the 
 ravages of time, or the destruction of the elements. 
 
 Brief allusion to some striking features of Stock Ex- 
 changes is pertinent in this connection. 
 
 All securities which have been admitted to their lists can, 
 as a general rule, be readily converted into cash. Irrespec- 
 tive of the demands of regular investors, and of the pro- 
 fessional operators outside of the exchanges (factors of the 
 greatest magnitude in these dealings), there is a trading ele- 
 ment inside of those bodies — represented in the London 
 Exchange by the "Jobber," and in the New York Ex- 
 change by the " Scalper " or "Trader " — 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, constitutes a breakwater against great 
 financial disasters. It is universally conceded that without 
 the existence of great public marts, like the New York and 
 London Stock Exchanges, the marvelous development and 
 progress of this country would not have been attained. 
 And this general truth was recognized by Bramwell, L. J.,
 
 Preface to the Second Edition. v 
 
 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 hostility to the true interests 
 of the comitry,' and who in sustaining those operations 
 said: " I am not sure that it is a disadvantage 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." 
 
 Xo one will claim that Stock Exchanges are institutions 
 of unqualified good and benefit to the community. They 
 have their evil side. But it is beyond the scope of this 
 work to discuss that branch of the subject. 
 
 In May, 1877, a commission ' was appointed in England 
 by royal decree to inquire into the origin, object, present 
 constitution, customs, usages, and mode of transacting 
 business on the London Stock Exchange, which 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 ex- 
 peditious transaction of business, and the enfurcenietit among them- 
 selves of fail dealing. 
 
 " Our opinion is that, in the main, the existence of such an associa- 
 tion, and the coercive action of the rules which it enforces upon the 
 transacticjn of business, and upon the conduct of its nieinbcis, have 
 been salutary to the interest of the public 
 
 " Wo recognizt! a ^jreat i>ublic advantage in the fact that thoso who 
 buy or sell for the imblic in a market of such enormous magnitude in 
 I)oint of value should be bound in their dealings by rules for the en- 
 forcement of fair dealing and tlie re])n'Ssion of fraud, capable of alTonl- 
 
 ' Thacker v. Hardy, L. H. 1 Q. H. Div. fl,sr>, C.g.i. And a kindred re- 
 mark was niufle l)y Haker, J., in X. Y. &. Chicago Stock K,\clmnge v. 
 Chicago Hoard of Trade, 127 Illinois, l.W. 
 
 ' Se«; /lOHt, p. OO'J.
 
 vi Preface to llic Second Edition. 
 
 ing relief and oxercisiny restraint far nioro i)rompt, and often more 
 satisfactory, tliau any within the reach of the courts of law." 
 
 The commission closes its report us follows: 
 
 " It is recorauiended by us, not because we have any reason to think 
 that the present association has at all, in the main, fallen short of its 
 duties in the past, but ratiior for the purpose of streuglhouiug its 
 hands and increasiufj; its efficiency in the future, that tlio London Stock 
 Ex(;han<j:e be incorporated either by royal charter or an act of Parlia- 
 ment; and if, i)reserving the element of self-^roverument, additional 
 weight could be given to the institution, and additional consideration 
 and reliance be bestowed upon its members, by investing the existing 
 association with a public character in the form of a charter of incor- 
 poration, we are of opinion that it would bo a sensible gain to the 
 public." 
 
 At various times within the last century and a half, the 
 legislatures of different Countries and States, acting under 
 a spasmodic public sentiment, have sought to prevent spec- 
 ulation in securities and stocks by enacting stringent and 
 severe laws against such practices, generally known as 
 " Stock-jobbing Acts." But, as will be seen in the fifth 
 chapter of this work, such laws have been vain and futile; 
 they have been openly and persistently deified, and at 
 length, so far as regards England, and the States of New 
 York and Pennsylvania, tlicy liave been repealed.' In 
 face of this experience, it is not too much to affirm that, 
 at this day, when it is almost impossible to distinguish 
 legitimate investment operations from pernicious specula- 
 tions, the subject is beyond legislative prevention. The 
 evil of excessive speculation carries its own corrective; the 
 blow falls upon its own authoi-s rather than on the general 
 community; and, although prices or quotations may be af- 
 fected or diverted by these gambling transactions, to the 
 temporary inconvenience of the legitimate investor, the 
 
 ' See Chap. V, p. 487 et seq.
 
 Preface to the Seeond Edition. vii 
 
 inevitable laws of true \alue will assert themselves, and the 
 tide again flow on in its regular channel. 
 
 Yet it may well be that occasions may occur when it will 
 become the duty of the General or State Governments to 
 intervene in Stock Exchange transactions. When, and un- 
 der what circumstances, such interventions may be neces- 
 sary, it is quite useless to speculate. The latent legal power 
 exists, if events should occur which may unhappily require 
 its exercise. 
 
 A Stock Exchange fulfils another highly important mis- 
 sion in forming a barrier between the public and many en- 
 terprises and schemes which are constantly springing up in 
 our midst, some of which are manifestly corrupt, and others 
 visionary and extravagant; but all being calculated, by al- 
 luring or deceitful representations, to induce the public to 
 invest in them. For the prevention of such schemes each 
 of the Stock Exchanges has established rules against the 
 listing of securities without a previous rigid examination 
 by committees appointed for this purpose, consisting of 
 well-trained and experienced Brokers; and while at times, 
 as must be expected from a variety of causes, these rules 
 are eluded and defeated, yet, in the main, the character of 
 securities which are enrolled on the list represent fair busi- 
 ness enterprises, and, although not always fulfilling the 
 hopes and expectations of their promoters, are nrn'ertheless 
 the fit subjects of speculation or investment. 
 
 To a fli.scu.ssion of the legal nature and character of Stock 
 lOxchanges, to a history of the various transactions made 
 in such places, and to a consideration of the reciprocal 
 legal rights and duties which are evolved from the relation
 
 viii Preface to the Second Edition. 
 
 of Broker and Client, as well as to the nature and kind of 
 securities dealt in on the Exchanges, I have devoted this 
 work. In 1875, discovering that there was no legal treatise 
 covering the whole subject, I began the collection of mate- 
 rials, which, after great labor and expenditure of time, were 
 shaped into the first edition of this work pul)lished in 1882. 
 
 The ground covered in tlie present work, when the first 
 edition was issued, was entirely new, and hence I did not 
 hesitate to discuss the various questions with freedom ; but, 
 as I trust, without dogmatism. I take some pride in the 
 fact that, so far as I have ascertained, the statement of 
 principles by me, as applicable to different questions em- 
 braced in the treatise during a period of twenty-two years, 
 has never been questioned by the courts before which they 
 have come for determination. 
 
 The new edition contains about 4,692 cases. The old 
 edition contained only 2,277. So that there have been 
 added 2,415 cases, an enormous increase of litigation in 
 twenty-two years, making nearly 200 cases more than were 
 decided during the previous two hundred years. 
 
 In the preparation of the second and third chapters of 
 this edition I beg to acknowledge the great services ren- 
 dered by my partner, Edmund Francis Harding, Esq., who, 
 unfortunately, was prevented from continuing his work by 
 exacting professional labors, and in the whole work I have 
 had the co-operation of P. J. Power, Escj., without whose 
 care and continuous labor this edition would not yet have 
 seen the light of day. 
 
 John R. Dos Passos. 
 
 January 2, 1905.
 
 CONTENTS. 
 
 TABLE OF CASES 
 
 PAGE 
 
 xvii 
 
 CHAPTER I. 
 
 INTRODUCTION. 
 
 ORIGIN OF STOCK-BROKERS AND STOCK EXCHANGES 
 
 CHAFIER II. 
 LEGAL NATURE OF STOCK EXCHANGES; CHARACTER 
 AND INCIDENTS OF MEMBERSHIP THP:REIN: AND 
 RULES AND REGULATIONS THEREOF. 
 
 Organization of Stock and otlier Exchanges 
 
 13 
 
 General Legal Nature of rnincorporated Stock Exchanges 20 
 
 Stock Exchange not a Partnership ..... 28 
 
 Nor is the Stock Exchange a Corporation or Incorporated 
 
 Joint-stock Association . . . .31 
 
 Rights of Members in Property Held by Non-incorporated 
 
 Stock Exchanges ....... 32 
 
 Liability of Mcinlx'rs for I)(l)ts, etc. .... 38 
 
 Suits by and against tix- Stock Exchange. ... 40 
 
 Rules and H«'giilations of Slock Exchanges . . . 57 
 
 General Power to Make Rules ..... 57 
 
 Power <»f Suspension and Expulsion .... 72 
 Rule fJiving .Aleinbeis of Exchange Lien on Proceeds 
 of defaulting Meuibcrs " Scats," etc., in Prefer- 
 ence to other C"re<litorH, not Illegal .113 
 
 ix
 
 X Contents. 
 
 PAfiF. 
 
 Kulos ami Kuuiilalioiis of Stock KxclKin<2;es — Cont'miiPil. 
 
 The Slock Exchange Caiuiot Take Cognizance of jNIat- 
 teis Arising Outsi(h' of, and I)isconn('cte<l wiili, 
 the Purposes of its Organization . . . . rill 
 
 Menil)ers not Bound l)v Rules wiiicli PriMut Recourse 
 
 to Courts of Law ...... 132 
 
 Liability of Seats in Exchange to Legal Process . . lii 
 
 " " " to Taxation 103 
 
 Gratuity Fund — Life-insurance ..... 1G4 
 
 CHAPTER in. 
 
 ANALYSIS OF TRANSACTION BETWEEN BROKER AND 
 CLIENT UPON PURCHASE OR SALE OF STOCKS IN 
 THE UNITED STATES. 
 
 Stock- Brokers and Stock Exchanges — License . . . 17."5 
 
 Legal Relation of Stock-broker to his Client . . . 179 
 
 Definitions of Tenns Used ...... 200 
 
 Purchase on "Long" .\ccount — History of Transaction . 20.') 
 The Order to Purchase, Price, and Number of Shares 
 
 to l)e Bought 206 
 
 Duty and Liability of Broker in Purchasing ; Right to 
 
 Indemnity . . . . . . . .218 
 
 Disposition of Stock when Purchased ; Safely Keejjing 
 same ; Liability to Keep Identical Stock Pur- 
 chased, etc. ....... 241 
 
 Dividends, Profits, Assessments, Calls, Interest . 264 
 
 Right of Client to Control and Take Up Stock . . 275 
 
 Duty of Broker to Sell— "Stop Order" . . . .297 
 
 Special Contract with Client — .Joint Adventures in Stocks 306
 
 Couteiits. 
 
 XI 
 
 Sales for " Short " Account 
 
 Nature of Short Sale ...... 
 
 Duty of Broker to Sell at Price Ordered 
 
 Nature of Contract Made upon '' Borrowing " Stock, 
 
 and from whom the Stock may be Borrowed 
 Duty of Brokers to Close Short Contract by " Buying 
 in " Stock ........ 
 
 Compulsory Sale by Broker ...... 
 
 For Failure to Put Up 3Iargins to Meet the Fluctua- 
 tions of the Market ...... 
 
 Form of Notice ; Upon whom Served ; Reasonable Time 
 
 Notice of Sale for Failure to Comply with Demand for 
 
 Margins .... 
 
 Place of Sale .... 
 
 Broker cannot Sell or Purchase . 
 Effect of Sale or Purchase by Broker 
 
 When Broker can Close Transaction 
 
 When Broker Can Act by Substitute 
 
 Commission of Broker 
 
 Comnnmications between Broker and Client not Privileged 
 
 Puts. Calls, Straddles and Pools considered apart froni 
 their Wagering Aspect ...... 
 
 The Clearing House ....... 
 
 CHAPTEU IV. 
 USAGE.S OF .STOCK-UKOKEKS 
 General Rules relative to Usages 
 
 PAOK 
 
 323 
 323 
 
 327 
 
 327 
 
 329 
 334 
 
 334 
 336 
 
 347 
 356 
 365 
 
 382 
 
 385 
 
 391 
 394 
 400 
 
 404 
 
 406 
 
 Cases in which Usages of Stock-brnkt-rs H 
 
 III the United States . 
 
 In Kiiglaml .... 
 
 Cft«ert ill wliicli Usages have been Rejected 
 In the I'liited Slates . 
 In Kngl.'iiid .... 
 
 H 
 
 iidiiig 
 
 410 
 
 43.3 
 •183 
 111 
 
 1 IM 
 
 tec
 
 Xll 
 
 Contents. 
 
 CHAFFER V. 
 STOCK-JOBBING. 
 
 Dealings in Stocks at Conmion-hiw . 
 Stoclc-jublnng Acts .... 
 
 Wagers 
 
 At Common-law 
 
 Wagers under Existing Laws 
 
 Wagers between Principals 
 
 Actions by Brokers for Money Laid Out, etc 
 
 Commissions in Stock Transactions 
 "Options," "Puts," "Calls," "Straddles 
 
 "Spread-eagles" .... 
 
 Conspiracy to Affect Stocks, etc.; "Pools," ' 
 
 ners," " Rigging the Market" 
 General Principles Deducible from the Cases 
 
 , aiK 
 
 Cor 
 
 475 
 476 
 515 
 515 
 519 
 536 
 
 551 
 
 noi 
 
 615 
 645 
 
 CHAPTER \ I. 
 
 STOCK EXCHANGE SECURITIES; NEGOTIABILITY AND 
 NON-NEGOTIABILITY; DEALIN(; WITH APPARENT 
 OWNERS; FRAUD; ILLECiALITY. 
 
 Stock Exchange Securities .... 
 Negotiable Securities .... 
 
 Non-negotiable Secui'ities .... 
 
 Negotiability ....... 
 
 Origin and Nature of Negotiability . 
 How Negotiability may be Established 
 Requisite Elements of Negotiability . 
 Results of Negotiability ; Houa Fide Holders 
 
 Non-Negotiability ...... 
 
 Doctrine of Non-Negotiability . 
 Negotiability as applied to Stock Certificates 
 Forged Transfers ..... 
 
 Dealing willi Apparent Owners ; Fraud ; Illegality 
 
 648 
 649 
 656 
 
 656 
 656 
 662 
 575 
 
 678 
 
 697 
 697 
 700 
 725 
 
 743
 
 Conteuts. 
 
 xm 
 
 CHAPTER VII. 
 
 REMEDIES. 
 
 Remedies of Stock-brokers aud Clients against Each Other 
 Relation of Brokers to Each Other . 
 Relation of Clients to Each Other 
 Liability of Brokers to Undisclosed Clients 
 
 When he makes the Contract in his Own Name 
 Where he Voluntarily Incurs a Personal Rosponsi 
 
 bility either P^xpress or Implied . 
 Where he does not Disclose the Name of his 
 
 Principal ..... 
 Where he Exceeds his Authority 
 Agents or Factors are Personally Liable upon all 
 
 Contracts fur Foreign Principals . 
 Where the Agent has no Authority . 
 Agent is Liable where there is no Responsible 
 
 Principal ..... 
 
 Agent is Liable when Guilty of Fraud or Deceit 
 
 Liability of Undisclosed Clients to Stock-brokers 
 
 Liability of Brokers to their Own Clients . 
 
 Lialjility of Clients to their Own Brokers . 
 
 General Indemnity .... 
 
 Banker's Lien ..... 
 
 Stock-broker's Lien .... 
 
 Specific Performance ..... 
 
 Preliminary Observations .... 
 
 General Rule ...... 
 
 When Specific Performance Refused in EnghuK 
 Cases Involving "Calls" when Relief Refusec 
 Cases of a Miscellaneous Character 
 When Specific Pcrfornianci' Decreed in Englaii* 
 
 Specific Perfonnance in the United States 
 
 Preliminary Observations .... 
 When R«-li«-f Refused .... 
 
 When Decreed as to Railway Shares 
 
 749 
 749 
 753 
 759 
 760 
 
 760 
 
 760 
 761 
 
 761 
 761 
 
 761 
 761 
 765 
 
 667 
 
 784 
 784 
 785 
 804 
 
 810 
 810 
 
 812 
 H13 
 SI 6 
 819 
 H22 
 
 M2H 
 
 828 
 h;{0 
 HIVJ
 
 XIV 
 
 Contents. 
 
 Maiulanius ........ 
 
 Tlie Effect of Usury iipou Stock Transactions . 
 
 Statute of Frauds ....... 
 
 Contracts for Sale of Stocks not within English Statute 
 Contracts for Sale of Stock Held to be within Statute 
 
 of Frauds in the United States 
 When Statute must be Pleaded .... 
 
 rA(iF, 
 
 848 
 
 Hi'yH 
 
 875 
 875 
 
 883 
 899" 
 
 CHAPTER Vni. 
 
 MEASURE OF DAMAGES. 
 
 General Rule in the United States in Actions relating to 
 Personal Property. ...... 
 
 In Actions by Vendee against Vendor 
 
 In Actions by Vendor against Vendee 
 
 In Actions for Conversion of Personal Property 
 
 Refusal to Return Borrowed Stocks . 
 
 In Actions between Clients and Stock-brokers . 
 
 By Clients against Stock-brokers for Failure to Bu 
 
 as per Instructions ..... 
 Client .against Broktr for Failure to Sell Stocks 
 Measure of Damages for Conversion of Securities l)y 
 
 Broker ....... 
 
 Exceptions to Rule laid down in Baker vs. Drake 
 
 Where Stocks are Held for Investmcnl 
 
 Where the Broker Realizes a Prolit fiom hi 
 Wrongdoings ..... 
 
 Reasonable Time . ..... 
 
 Market Value ....... 
 
 In Actions by Stock-broker against his Client . 
 
 CHAPTER IX. 
 
 STOCK-BROKERS IX EN(;LANr). 
 Statutes relating to Stock-brokers in F^nulaiid . 
 
 902 
 902 
 908 
 910 
 912 
 
 91 (i 
 
 91(5 
 919 
 
 921 
 981 
 931 
 
 933 
 934 
 936 
 
 938 
 
 941
 
 Contents. xv 
 
 PAGE 
 
 Decisions under Foregoing Statutes ..... 953 
 
 Commissions and remuneration of Brokers . . . 960 
 
 Origin anil History of the London Stock Excliauge, and 
 Rules and Regulations tliereof ..... 969 
 
 CHAPTER X. 
 
 ANALYSIS OF TRANSACTION BETWEEN BROKER AND 
 CLIENT UPON PrRCHASE OR SALE OF STOCKS ON 
 LONDON STOCK EXCHANGE. 
 
 Definitions 982 
 
 Trading '"for Money" ....... 986 
 
 Trading '• for the Account" 987 
 
 Relation of Broker to Client 994 
 
 Ownership and Disposition of Securities whtMi |)ur- 
 
 chased 1000 
 
 Summarily closing Transaction ..... 1004 
 Other Incidents of the Relation 1008 
 
 Relation between Client and .Jobber ..... 1011 
 
 General Liability of Jobber to Vendor . . . 1011 
 Special Contract between Jobber and Client — Guaran- 
 teeing Registration ...... 1026 
 
 Liability of Client to Jobber 1027 
 
 Relation of C'li<'nt t(; L'ndisclosed mid Iiitiriiifdiati' I'lii- 
 
 chasers . . . . . . . . Ki.il 
 
 Relation between Scliiiiji Client, or \'i iidoi', :iiid ritiiiialf 
 
 l^iirchascr, or Tninsfcrror, and Tr:iiist»'ri.'t' . . 1036 
 
 CIIAI'lKli \I. 
 
 THE I'ABIS UorUSE. 
 
 HiBtorv of the Bourse ... ... 1045
 
 xvi Contents. 
 
 rAOK 
 
 Agents do Change ........ 1018 
 
 Tilt' Coiilissii'is ........ l().o4 
 
 Nature of Transactions ....... 10;V,) 
 
 APPKNDIX. 
 
 Constitution of the New Yorli Slock Exchange, with sonic 
 
 resolutions :uh:)ptcd l»y the ( Jovcniing C'oniiiiiltec . IOC)") 
 
 Index to New York Stock Exchange Constitutinn and 
 
 Resolutions ........ 10(17 
 
 Rules and Regulations of the London Stock Exchange . 1 127 
 
 Contents of Rules of the London Stock Excliange . 112!) 
 
 Index to Rules, etc., of the London Stock P^xchaiigc. 11 IK") 
 
 Synoptic Tables of the three Regulations of the Stock Ex- 
 change Company of Paris . . . . . .1221 
 
 Table of Contents of Synoptic Tables . . . 122o 
 
 Table of Forms ........ 13315 
 
 GENERAL INDEX 135.5
 
 TABLE OF CASES. 
 
 [The references are to pages.] 
 
 A. 
 
 Abbett vs. Frederick 190, 
 
 Ackerman vs. Ackerman 
 Acranian vs. Cooper 
 Adair vs. Shaw 
 Adams vs. Ball 
 
 vs. Blackwall R. Co. 
 
 vs. Capron 
 
 vs. Clews 
 
 vs. First Nat. Bank 
 
 vs. Otterback 
 
 vs. Peters 425, 
 
 Adatns Express Co. vs. Scho- 
 
 field 
 .\dainson vs. Jarvis 
 Addcrly vs. Dixon 812, 
 
 .\ddis vs. Knijiht 
 Mtrnx Life Ins. Co. vs. Middlp- 
 
 port 
 Agar vs. Macklcw 
 Agra, etc , Bank v.s. Leighton 
 Ainsworth vs. Bowen 
 .Mab.itiia State Bank vs. 
 
 Barnes 
 .\lasi;;er vs. ("urric 
 .\lberH vs. .Merchants' Ex. .V.}, 
 (V.i, Gl. ?>0, <jri, 97. 9H, ior>, 
 
 .Mbert vs. Baltimore 
 AlbertHon vh. Ix)ughlin 
 Alhon vs. Pyke 
 .Mderdirc vs. Truss 
 .Mfxanflor vs. SUite 
 Alger v.s. JohnHon 
 
 524, 
 
 241 
 50 
 777 
 798 
 291 
 824 
 395 
 782 
 801 
 433 
 443 
 
 50 
 784 
 815 
 802 
 
 225 
 135 
 086 
 383 
 
 7s7 
 7H6 
 00, 
 
 no, 
 
 112 
 713 
 570 
 144 
 884 
 501 
 900 
 
 Allan vs. Graves 
 
 vs. Sundius 
 Allen vs. Aguirre 
 
 vs. Brown 
 
 vs. Choteau 
 
 vs. Clark 
 
 vs. Dubois 
 
 vs. Dunham 
 
 vs. Dykers 
 
 vs. Eghmie 
 
 vs. Fuller 
 
 vs. Graves 
 
 vs. Hill 
 
 vs. McConihe 
 
 vs. Montgomery R. R. 
 
 vs. X. Y. Cotton Ex. 
 
 vs. St. Louis National 
 Bank 
 
 vs. South Boston R. I{. 
 Co. 
 
 vs. Stead 
 
 vs. Stevens (1) 
 
 vs. Steveas (2) 
 
 vs. Whit stone 
 .Mlien vs. Wotherspoon 
 .Mtman vs. Ben/, 
 Alton C'o. vs. .Xortoii 
 .\nil)urger vs. Marvin 
 .\mcriran Live Stock Co. vs. 
 Chicago Live Stock ^]x. 
 
 32. (30. 03, 01, no, 09. 
 I 15. 162 
 .\inerican Press .\nm\. vs. Br.mf- 
 inghani 701 
 
 (xvii ) 
 
 1022, 1035 
 
 785 
 
 895 
 
 658 
 
 652 
 
 42, 53 
 
 260, 451 
 
 508 
 
 448, 450, 451 
 
 896 
 
 522 
 
 764 
 
 250 
 
 206, 327 
 
 476 
 
 151 
 
 463 
 
 901 
 
 775 
 
 38 
 
 770 
 
 513 
 
 35 
 
 57 
 
 70 
 
 899 
 
 vs. 
 
 21 . 26.
 
 Table of Cases. 
 
 Amoriran Steel it Wire Co 
 
 . \s. 
 
 
 Wire Drawers Unions 
 
 
 50 
 
 American Tel. Co. vs. Day 
 
 726 
 
 Amherst Aeademy vs. Cowls 
 
 657 
 
 Aniory vs. Meryweather 
 
 4.S.5, 
 
 647 
 
 Amsden vs. Jacobs 
 
 307, 
 
 589 
 
 Amy vs. Dubuque 
 
 
 653 
 
 Ancient Order of P'orresters vs. 
 
 
 Court Abraham Lincoln 
 
 
 49 
 
 Anderson vs. Bank 
 
 
 803 
 
 vs. Heard 4(59, 
 
 75Q, 
 
 1030 
 
 vs. liiddle 
 
 
 829 
 
 vs. Kissam 
 
 744, 
 
 746 
 
 vs. Nicholas 
 
 
 77() 
 
 vs. Sutherland 
 
 459. 
 
 470 
 
 vs. United States 
 
 6S 
 
 Andre vs. Crawford 
 
 415, 
 
 466 
 
 Andrews vs. Clark 216, 217 
 
 243 
 
 746 
 
 vs. Clerke 
 
 
 192 
 
 vs. Mockford 
 
 
 624 
 
 Androsroffdn H. R. Co. 
 
 vs. 
 
 
 Auburn Bank 
 
 
 265 
 
 Anonymous, (I) 
 
 
 870 
 
 .\nonymous, (2) 
 
 
 884 
 
 Anthony vs. Unangst 
 
 
 570 
 
 Appleman vs. Fisher 
 
 325 
 
 513 
 
 Appleyard, E.\ parte 
 
 
 907 
 
 April vs. Baird 
 
 
 53 
 
 Arbouin vs. Anderson 
 
 
 685 
 
 Archer vs. Putnam 
 
 864, 
 
 873 
 
 vs. Williams 
 
 
 915 
 
 A rent vs. Squires 
 
 191, 
 
 241 
 
 Arents vs. Conmionwealth 
 
 
 653 
 
 Argus Printing Co., In re 
 
 
 250 
 
 Armour vs. Bank 
 
 
 803 
 
 Armstrong vs. American 
 
 Ex- 
 
 
 chani^e 
 
 Nat. 
 
 
 Bank 
 
 
 (i45 
 
 vs. Bank 
 
 
 799 
 
 vs. Chemical 
 
 Nat. 
 
 
 Bank 
 
 789 
 
 795 
 
 vs. Helm 
 
 
 794 
 
 vs. Toler 
 
 483 
 
 577 
 
 vs. Village 
 
 
 398 
 
 vs. Warner 
 
 
 794 
 
 .\nnstrong, In re 790 
 
 .\rnold vs. Smith 228 
 
 Arnott vs. Pittston Coal Co. 634, 639 
 Ash vs. Guic 29 
 
 Ashby vs. Blackwell 729 
 
 .\she vs. Johnson 812, 840 
 
 .\shner vs. .\benheim 416 
 
 Asliton vs. Atlantic Bank 712 
 
 vs. Dakin 584 
 
 .Associate vs. Seminary 58 
 
 Aston 's Ca.se 402. 475, 476. 482 
 Asylum vs. Phenix Bank 852, 853 
 Athortord vs. Beard 517, 518 
 
 .\tkins vs. Gamble 255 
 
 Atkinson vs. Atkinson 706, 712, 716 
 vs. Brooks 691 
 
 vs. Scott 873 
 
 .\ttorney General vs. Bouwens 650 
 Atty. Gen. vs. Hollingsworth 870 
 Atty. Gen., In re 627 
 
 .Atwater vs. Manvillc 508 
 
 Aubert vs. Maze 483, 647 
 
 Audain, Ex parte 968. 969 
 
 Au>iusta Teutonia Lodge, The 49 
 AuU vs. Colket 463, 703, 705, 706, 
 719,776 
 .Vulton vs. -Atkins 659 
 
 Austen vs. Brigham 163, 164 
 
 Austin vs. Gillespie 8.39 
 
 vs. Searing 41, 46, 59, 64, 
 i03, 133, 135, 137 
 
 vs. Walker 873 
 
 .\\ery vs. Ryan 839 
 
 Ayer vs. Meade 220 
 
 vs. Seymour 250 
 
 .\yres vs. French 776 
 
 B. 
 
 Babcock vs. Merchants' Ex. 142 
 
 vs. Schuylkill Ry. Co. 837 
 
 Baeck vs. Meinken 830 
 
 Bagge's Case 475 
 
 Bahia & San F. Co., In re 729, 730, 
 732, 737 
 
 Bail vs. Clarke 233
 
 Table of Cases. 
 
 XIX 
 
 409. 
 843, 
 295, 
 
 229, 
 
 278, 
 
 Bailey vs. Bensley 
 
 vs. Champlain 
 vs. Drew 
 vs. Galbraith 
 vs. Strohecker 
 Baily vs. Carnduff 
 Baker vs. Bank 
 
 vs. Drake 190, 191, 192, 
 
 232, 2.5.5, 306, 307, 
 
 430,430,453,921, 
 
 923, 924, 925, 92G, 
 
 931, 933, 934, 
 
 vs. Marshall 
 
 vs. X. Y. Nat. Bank 295, 
 vs. Xottinjrham Bank 
 vs. Plaskitt 
 vs. Walker 
 Baldwin vs. Commonwealth 
 
 vs. Williams 887, 
 
 vs. Zadij]; 
 Balkis vs. Tomkin.son 732, 832, 
 Ball vs. Davis 
 Ballard vs. Bank 
 
 vs. Bennett 
 vs. Green 
 Ballon vs. Willett 
 Baltimore Central .\ational 
 
 Bank vs. Conn. In.sce. Co. 
 Baltimore City Pa.ss. R. Co. vs. 
 
 Sewall 
 Baltimore City K. R. Co. vs. 
 Hamhleton 837, 
 
 Baltimore Ins. Co. vs. Dalrym- 
 ple 193, a53, 364, 383, 
 
 Baltimore Ry. Co. vs. Wheeler 
 !).iltz<;n vs. .N'icolay 7(51, 
 
 l{an<Toft vs. Wentworth 
 liari;ror, ete., Co. vs. RobiiLson 
 Itan^s vs. Homick 
 liank vs. Bank 
 VH. (.'arroll 
 VH. Duljuque tt I'.i'-. H 
 
 R. Co. 
 VH. Edmans 
 VM. Evans 
 
 420 
 S45 
 296 
 440 
 855 
 302 
 799 
 231, 
 336, 
 922, 
 927, 
 935 
 853 
 803 
 671 
 476 
 691 
 846 
 889 
 597 
 93S 
 590 
 863 
 133 
 505 
 521 
 
 798 
 
 906 
 
 845 
 
 906 
 787 
 889 
 181 
 707 
 5S0 
 463 
 .504 
 
 :{S3 
 .50! 
 724 
 
 Bank \s. Harrison 525, 
 
 AS. Hepworth 
 
 vs. Lanier 705, 727, 729, 
 
 vs. Leighton 
 
 vs. Levy 
 
 vs. Owens 
 
 vs. Packinu Co. 
 
 vs. Proctor 
 
 A's. Reese 
 
 vs. Ritzinger 
 
 vs. Schreiner 
 
 vs. Taliaferro 284, 
 
 vs. ^\'a2;er 
 
 vs. Walker 
 
 vs. Wisconsin 
 Bank of Allentown vs. Hoch 
 173, 
 Bank of Attica vs. Manufac- 
 turer's, etc. 
 Bank of Bengal vs. McLeod 
 Bank of Commerce's Appeal 
 Bank of Montgomery vs. Reese 
 Bank of Montreal vs. Wonte 
 Bank of New York vs. Vander- 
 
 host 
 Bank of Rome vs. Village of 
 
 Rome 
 Bank of St. Albans vs. Gilli- 
 
 land 
 Bank of Salina vs. Bal>cock 
 Bank of Sandusky vs. Scoville 
 Bank of U. S. vs. Davis 
 Bank of U. S. vs. Macalester 
 Bankers' Cases 
 Banks vs. Van .\ntwcrp 
 Banta vs. Chicago 175, 17(1, 
 Baptist's As.sociation vs. Hart's 
 
 Executors 
 Bare 
 
 vs. Culver 
 vs. Smitli 
 K.iriiig vs. Corie 
 li.irk vs. Bank 
 M.irker, MaU<»r of 
 liarkl.'iy's (';is«», 
 Bark.sdale vs. Mmwu 
 
 113. 147. 
 301. 
 
 20S 
 
 855 
 471 
 737 
 6S6 
 808 
 873 
 504 
 792 
 903 
 792 
 787 
 463 
 872 
 802 
 790 
 
 240 
 
 852 
 374 
 795 
 928 
 7;) 
 
 (>92 
 
 652 
 
 ()!)2 
 692 
 692 
 339 
 791 
 177 
 .S72 
 iss 
 
 37 
 329 
 1 52 
 70S 
 747 
 247 
 475 
 45S
 
 XX 
 
 Tabic of Tases. 
 
 Barlow vs. Laml)crt 
 
 (■)(■).") 
 
 Bnrnard v.s. Backhaii.s .')()S, 
 
 .^)I3, 
 
 5M, 
 
 ()46 
 
 V.S. KclloKfl 
 
 421 
 
 vs. Yonnfi 866, 
 
 870 
 
 Barned vs. Hamilton 
 
 915 
 
 Biu-nes v.s. Brown 903, 926, 
 
 938 
 
 A-.s. Smith 549, 
 
 582 
 
 Barnett vs. Baxter 
 
 501 
 
 vs. Warren 
 
 439 
 
 Barrett vs. Hyde 494, 
 
 496 
 
 vs. Mead 
 
 494 
 
 vs. Union Mutual Ins. 
 
 
 Co. 217, 
 
 717 
 
 Barrow vs. Paxton 
 
 307 
 
 vs. Rhinelander 
 
 771 
 
 Barry vs. Croskey 519, 623, 
 
 629, 
 
 630, 632, 
 
 641 
 
 vs. Kennedy 
 
 146 
 
 Barstow vs. Sava<!;e 
 
 703 
 
 Bartlett vs. Bartlett 90, 109, 
 
 141 
 
 vs. Collins 
 
 509 
 
 vs. Medical Soc. 
 
 99 
 
 vs. Smith 228, 580, 
 
 612 
 
 Barton, Ex parte 
 
 785 
 
 Barton vs. R. Co. 
 
 726 
 
 Bassett vs. Irons 
 
 61 
 
 Bate vs. McDowell 213, 214, 
 
 215, 
 
 218, 219, 264, 382, 
 
 775 
 
 Bateman vs. Strauss 
 
 839 
 
 Batesville Institute vs. Kauff- 
 
 
 man 
 
 699 
 
 Battles AS. Laudenslajjer 
 
 681 
 
 Baum vs. X. Y. Cotton Ex. 104 
 
 , 107 
 
 Baxter vs. Allen 
 
 394 
 
 AS. Board of Trade of 
 
 
 Chicago 60, 62 
 
 108 
 
 vs. Mclntyre 
 
 49 
 
 Bayard vs. Edwards 
 
 365 
 
 vs. Farmers' & Me- 
 
 
 chanics' Bank 
 
 714, 
 
 726 
 
 727 
 
 Bayley vs. Wilkins 
 
 220 
 
 Bayliffe vs. Butterworth 220, 
 
 424, 
 
 
 429 
 
 licacii vs. Ki(l(l(M- :?91 
 
 Boadles vs. McElrath 531, 5S3 
 
 \s. Ownby 508, 58(» 
 
 Bear vs. Bromley 29 
 
 Beattie vs. Ebury 623 
 
 Beaver vs. Arm.stronjT 652, 653 
 
 Bebee vs. Bank of \. Y., ()98 
 
 Bcchuanaland Exportation Co. 
 
 vs. London Trading Bank 446, 
 
 655, 663, 669 
 
 Becket vs. Bilbrou;i;h 819 
 
 Beckham vs. Drake 765 
 
 Beckhusen vs. Hamblet 469, 757, 
 
 1030 
 Beckmann vs. Mepham 898, 900 
 Beckwith vs. Burrough 844 
 
 vs. Union Bank 792 
 
 Bedford Bank vs. Acoam 801 
 
 Bedford County vs. Nashville 
 
 Ry. 843 
 
 Beebe vs. Robert 765 
 
 Beer vs. Landman 600 
 
 Beers vs. Crowell 889 
 
 Beeston vs. Beeston 519, 552 
 
 Begliie vs. Phosphate Sewage 
 
 Co. 628 
 
 Belchier, Ex parte 242 
 
 Belden vs. Xicolay 903 
 
 Bell vs. Calhoun 865 
 
 Bellairs vs. Tucker 624 
 
 Belmont Branch Bank vs. 
 
 Hoge 272, 685, 686 
 
 Belton vs. Hatch 20, 22, 2.S, 29, 
 
 31, 33, 45, 60, 61, 64, 73, 114, 
 
 146, 158, 977 
 
 Bennett as. Covington 228, 580, 770 
 
 Benson a's. Morgan 501 
 
 A-s. Warehouse Co. 598 
 
 Bentinck vs. Joint Stock Bank 
 
 194, 216, 278, 415, 446, 650, 670, 
 671, 803 
 Beiitlcy vs. Craven 366 
 
 Bcntley, In re 968 
 
 Bercich vs. Marye 707 
 
 Berd vs. Lovelace 401
 
 Tablo of Cases. 
 
 XXI 
 
 Beril.'ll vs. Allen 323 
 
 Ber.ii N's. San Antonio 397 
 
 Berlin \ s. Edd\' 255 
 
 Berniiniiham vs. Sheridan S19, 
 
 1000. 1025, 1043 
 
 Bernard \s. Maury 20t) 
 
 ^■s. Young SG6 
 
 Bernhard v.s. Walls S,S9 
 
 Bernheini vs. Keppler 15, 20, 29, 
 
 88, 114, 118, 129 
 
 Bertram vs. Godfray 305, 300 
 
 Bethlehem First Nat. Bank vs. 
 
 Peisert 798, 799 
 
 Bevan vs. .\dams 623 
 
 vs. Waters 806 
 
 Beveridge vs. Hewitts 500 
 
 Bibb vs. Allen 220, 228, 235, 395, 
 
 399, 426, 427, 579, 785 
 
 Bickett vs. Taylor 210, 310 
 
 Biddle vs. Bayard 723, 729, 777 
 
 Biebenger vs. Bank 795 
 
 Biederman vs. Stone 220, 784, 821 
 
 Bigelow vs. Benedict203, 513, 542, 
 
 548, 569, 611, 612, 613, 646 
 
 vs. Legg 416, 419 
 
 Bill vs. Fish 871 
 
 Billings vs. Flight 482 
 
 vs. Policy 482 
 
 Billing-slea vs. Smith 210, .599 
 
 Bingham vs. Scott 521 
 
 BirdsiiU vs. Ru.s.sell 652, ()8(), 6S6 
 
 Bimiingham vs. Gallagher 40 
 
 liirmiiitiham Ins. Co. vs. Com- 
 
 Mi'iiiwealtli 854 
 
 Birmingham Nat. liaiik vs. 
 Mayer 792 
 
 vs. 
 
 Roflen 843 
 
 liirnbaum vs. May 211,327 
 
 Bi-schoffsheim vs. lialtzer 225, 372 
 
 Bishop VH. Balkis Co. 415,732, 
 
 992 
 vs. Cinrinn.ifi ChiimlxT 
 
 of Cotiimcrce 91 , 97 
 Bi.nhop of Winchehler vs. Puinf (iSl 
 
 Bi.ssell vs. Farmers Bank 829 
 
 vs. Michigan, S. it X. I. 
 
 R. Co. 739 
 
 vs. Ryan 432 
 
 Black vs. Homersham 1044 
 
 vs. Ryder 865, 872, 873 
 
 Black and ^^'hite Smith's Soc. 
 
 vs. Van Dyke 1 1 1 
 
 Blackburn vs. Mason 425, 4.58, 471, 
 757, 1025 
 Blair Co. vs. Rose 912 
 
 Blake vs. Nicholson 806 
 
 vs. Stump 411 
 
 Blakemore vs. lleyman 220, 410, 
 
 457 
 Blakeslee vs. Ervin 394 
 
 Bligh vs. Brent 881, 882 
 
 Bloete vs. Simon 42 
 
 Bloodworth vs. Jacobs 787 
 
 Bloomer vs. Henderson 699 
 
 Bloomington vs. Smith 651 
 
 Rloxham, Ex parte 789 
 
 Bhuiiontlial vs. Cincinnati 
 
 Cliamlier of Commerce 95, 112 
 
 Board vs. Donovan 24 
 
 vs. Exchange 24 
 
 vs. Ellis 27 
 
 vs. Kinsey 24, 515 
 
 vs. O'DeilCo. 24 
 
 \s. Weare 84 
 
 Board of Trade \s. Central Stock 
 
 and Grain 
 
 Exc. 23, 502 
 
 vs.Chri.stie 23, 27 
 
 vs. Donovan Co. 24 
 
 vs. .Nelson 16, 62, 
 
 64^ 71, 90, 109 
 
 vs. Riordan 60, 62 
 
 vs. Thomson Co. 24 
 
 Board of Trade of Chicago vs. 
 
 Had<len-Knill Co. 27 
 
 vs. 
 Thom-oii Comrnissioii Co. 21 
 
 B(i:inliii;in \s. Ciiltrr 8S8 
 
 vs. (J.iillard 321
 
 X\ll 
 
 Tabic of Cases. 
 
 Hnanlinnn vs. Lake Shore ».V: 
 
 
 Boyce vs. O'Dell 
 
 
 524 
 
 M. S. K. 1 
 
 ..Co. 
 
 S30 
 
 Boyd \s. Barrett 
 
 
 218 
 
 Hodt'iiliam vs. Hoskyns 
 
 
 79S 
 
 vs. Coatcs 
 
 
 531 
 
 Ikxtti-her vs. Col. Nat. Ha 
 
 Ilk 
 
 798 
 
 vs. Conshohockcn Mills 
 
 2()4 
 
 lioj^crt vs. Ef^erton 
 
 
 787 
 
 vs. Hansom 
 
 
 579 
 
 Bolder o vs. Jackson 
 
 865 
 
 868 
 
 vs. Yerkes 210, 
 
 215. 
 
 217 
 
 Bolinjibroke's Case 
 
 
 799 
 
 Boy Ian vs. Huguet 
 
 255 
 
 776 
 
 Bollaiid vs. Bygrave 
 
 786 
 
 788 
 
 Boyle vs. Hcnning 
 
 218 
 
 581 
 
 liolton vs. Colder 
 
 
 665 
 
 Brackett vs. Griswold 
 
 
 624 
 
 vs. Puller 
 
 
 786 
 
 Bradfield vs. Patterson 
 
 
 235 
 
 Tiondurant vs. Bank 
 
 
 873 
 
 Bradford vs. Fox 
 
 
 692 
 
 Bonciovanni vs. Soci^t<^ 
 
 G^n- 
 
 
 Bradley vs. .\ngel 
 
 
 792 
 
 6rale 
 
 
 414 
 
 vs. Holds worth 
 
 
 882 
 
 Bonsficld vs. Wilson 
 
 
 966 
 
 vs. Western L 
 
 nion 
 
 
 Boody vs. Pratt 
 
 
 236 
 
 Tel. Co. 
 
 25, 
 
 503 
 
 Boomer vs. Flagler 
 
 
 927 
 
 Bragg vs. Meyer 
 
 
 377 
 
 Booth vs. Fielding 301 
 
 ,393 
 
 764 
 
 Brainard vs. N. Y., etc., R. R. 
 
 
 Booth vs. Hodgson 
 
 
 483 
 
 Co. 
 
 
 652 
 
 vs. People 
 
 
 502 
 
 Branch vs. Commissioners 
 
 
 678 
 
 Bordenave a"s. Gregory 
 
 
 4S2 
 
 \s. Palmer 
 
 
 504 
 
 Borham vs. Godfrey 
 
 
 207 
 
 Brancker vs. Roberts 
 
 
 59 
 
 Bosanquet vs. Diidman 
 
 
 789 
 
 Brand vs. Henderson 
 
 
 500 
 
 Bostock vs. Floyer 
 
 
 242 
 
 vs. Lock 
 
 
 501 
 
 Boss vs. Hewitt 
 
 
 688 
 
 Brandao vs. Barnett 651, 
 
 662, 
 
 786, 
 
 Boston & Albany R. R 
 
 . vs. 
 
 
 
 788, 
 
 797 
 
 Pearson 
 
 
 42 
 
 Brantingham vs. Huff 
 
 
 844 
 
 
 vs. 
 
 
 Brass vs. Worth 182, 192 
 
 , 359 
 
 364 
 
 Richardson 
 
 738 
 
 907 
 
 
 
 924 
 
 Boston Music Hall Association 
 
 
 Braun vs. Chicago 175 
 
 , 176 
 
 188 
 
 vs. Cory 
 
 
 476 
 
 Bray vs. Farwell 
 
 
 42 
 
 Bosworth vs. Machado 
 
 
 953 
 
 Breed vs. Purvis 
 
 
 787 
 
 Boultbee vs. Growski 
 
 
 447 
 
 Brehm vs. Sperry 
 
 
 836 
 
 Bousfield vs. Wilson 
 
 
 476 
 
 Brell vs. Rice 
 
 
 869 
 
 Bowen vs. Bull 
 
 
 147 
 
 Brewster vs. Schrader 
 
 
 694 
 
 vs. Morris 
 
 
 52 
 
 vs. Sime 
 
 
 713 
 
 vs. Newell 
 
 
 421 
 
 vs. Van Liew 
 
 193, 
 
 244, 
 
 Bowers vs. Jones 
 
 
 394 
 
 
 
 777 
 
 l^owes, Re 
 
 
 786 
 
 Bridenljecker vs. Hoard 
 
 42 
 
 !, 46 
 
 Bowlby vs. Bell 225, 234, 
 
 880, 
 
 1043 
 
 Bridgeport Bank vs. R. R 
 
 .Co. 
 
 
 Bowler vs. Barberton De\ 
 
 elop- 
 
 
 706, 
 
 727, 
 
 735 
 
 nient Syndicate 
 
 
 821 
 
 Bridgman vs. Gill 
 
 
 798 
 
 Bowman vs. Close 
 
 296 
 
 297 
 
 Briggs vs. Boyce 
 
 
 279 
 
 Bowring vs. Shepherd 
 
 269, 
 
 992, 
 
 - vs. Kennett 
 
 216 
 
 243 
 
 
 
 1000 
 
 
 265, 
 
 927 
 
 Boyce vs. Green 
 
 
 882 
 
 vs. Partridge 
 
 755, 
 
 760
 
 Table of Cases. 
 
 XXIU 
 
 Brigliam vs. Mead 494 
 
 Bri-ht vs. Judson 603 
 
 Brii^litwell V.S. Mallory 476 
 
 Brisbane vs. Adams 6:iS 
 
 VS. Del., Lack, ct W. 
 
 R. R. Co. 727 
 
 British and American Tele- 
 graph Co. vs. The .\lbion 
 Bank 630 
 
 Britton vs. Ferrin 416 
 
 Broad vs. Pitt 401 
 
 Broadbent vs. Yarley 777 
 
 Brockenbrough vs. Spindle S70 
 Brogden vs. Marriott 517 
 
 Bromwick vs. Loyd 661 
 
 Bronson vs. Silverman 694 
 
 Brooklyn City, etc., R. R. Co. 
 
 vs. Bank 691 
 
 Brookman vs. Rothschild 193, 205, 
 
 366, 369, 372, 383, 976, 987, 1001 
 
 Brooks vs. Hoey 4'2 
 
 vs. Mitchell 688 
 
 vs. Sullivan 694 
 
 Brown vs. Alexander 501 
 
 vs. Barse 400 
 
 vs. Black 828, 1034 
 
 vs. Boorman 301, 432 
 
 vs. Britton 833 
 
 vs. Champlain 865 
 
 vs. Dale 56 
 
 vs. Da vies 687 
 
 vs. Galliland 836 
 
 vs. Hail 612 
 
 vs. Howard P'iro Ins. 
 
 Co. 726, 729, 732 
 
 vs. Institute 795 
 
 vs. Leavitt 692 
 
 vs. I^eckie 7S7 
 
 V8. Mutual Trust Co. 
 
 17, 115 
 V8. Nevitt .S73 
 
 vs. Phelps 491, 495 
 
 vs. S|X'yiT 612 
 
 V8. S|X)fford 079 
 
 VH. State OS 4 
 
 Brown \s. Turner 480, 
 
 •1S3, -IS 1, 
 
 
 647 
 
 vs. United States 
 
 689 
 
 vs. Ward 
 
 358 
 
 Brownell vs. Hawkins 
 
 295 
 
 Brownint:; \s. Aylwm 
 
 958 
 
 Brownson vs. Chapnian 
 
 693, 750, 
 
 753, 891 
 Brua's Appeal 557, 559, 561, 612 
 Bruce vs. Hunter 271 
 
 Brunswick Co. vs. Muggeridge 812 
 Bryan vs. Baldwin 203, 338, 340, 
 349, 382, 383 
 vs. Lamson 501 
 
 vs. Lewis 480, 612, 613 
 
 Bryant vs. Western Union Tele- 
 graph Co. 23, 25, 26, 
 511, 531, 535 
 Bryson vs. Rayner 353, 364, 383 
 
 Bubb vs. Yelverton 
 Buck vs. Amidon 
 
 vs. Buck 
 Buckingham vs. Fitch 
 Budd vs. Monroe 
 Buffalo County Xat. Bank v 
 
 Hanson 
 Bull vs. Douglas 
 Bullard vs. Kinney 
 
 vs. Smith 
 Buller vs. Crijis 
 Bullock vs. Richard.son 
 Buhner, Ex parte 
 
 652 
 762 
 
 476, 965 
 
 595 
 
 705, 712 
 
 787 
 865 
 30, 42 
 499 
 061,662 
 481 
 484 
 
 Bundy vs. Monticelio 795, 798, 799 
 Biinn vs. Rikcr 518 
 
 Bunting vs. Camden R. Co. 652 
 Burl)a vs. Ricardo 444 
 
 Burl)ridge vs. Gumbel 439 
 
 Burgo vs. .\shley 556 
 
 Burhorn vs. Lockwood 213, 770, 
 773, 926. 935 
 Burk vs. Mead 830. 897, S98 
 
 Burkholder vs. Bcctoin 716 
 
 Burkitt vs. Taylor 210, 310, 337, 
 338, 340, 318 
 Burleigh vs. Ik-van 320
 
 XXIV 
 
 TiilHr ot Cases. 
 
 Burliiiuton vs. White (11 
 
 Buruham vs. Cieiitry S73 
 
 Burns vs. Campbell 898 
 
 BurnsvlUe Turnpike Co. vs. 
 
 The State 857 
 
 Burr vs. Davis 511 
 
 vs. Sickles 433 
 
 Burrall vs. Bushwiok R. Co. 
 
 701, 842 
 Burridge vs. Anthony 925, 935 
 
 Burt vs. Grand Lodfje 108, 112 
 
 vs. Dutcher 921 
 
 Burton vs. Shotvvell 829, 842 
 
 Burton's Appeal 705, 714, 723 
 
 Bush vs. Cole 207, 298 
 
 vs. Lathrop 698 
 
 Butcher vs. Krauth 366 
 
 Butcher's Beneficial Assn., The 60 
 
 Butler vs. Co. 865 
 
 vs. Finck 243, 319 
 
 vs. Nohe 501 
 
 vs. Sprag:ue 295 
 
 Butterfield vs. Beardsley 30 
 
 Buttlar vs. McLean 775 
 
 Buxton vs. Lister 812, 815 
 
 Byam vs. Bickford 37 
 
 Byers vs. Beattie 554 
 
 Cady vs. South Omaha Nat. 
 
 Bank 803 
 
 Cahill vs. Bipser 37 
 vs. Carbolic Smoke Ball 
 
 Co. 516 
 
 vs. Hirschman 391 
 
 Caldicott vs. Griffiths 29, 33 
 
 Caldwell vs. People 502 
 
 vs. Warehouse Co. 
 
 872, 874 
 
 Calhoun vs. Richardson 725 
 
 Callanan vs. Brown 904 
 
 Calton vs. Bragg 271 
 
 Calumet Co. vs. Williams 501 
 Calvin vs. Williams 878, 880 
 
 Calvit vs. McFadden 902 
 
 ("aiiuicM \s. 
 Cameron vs. 
 
 Guarantors 48 
 
 Durkheim 201, 202, 
 
 337, 338, 340, 343, 
 
 348, 434, 543, 916, 
 
 918, 927, 937 
 
 vs. Tompkins 
 
 
 896 
 
 Cammann vs. Huntington 
 
 
 377 
 
 Campbell vs. Brass 
 
 
 212 
 
 vs. Morgan 
 
 
 726 
 
 vs. National Bank 
 
 
 
 528, 
 
 647 
 
 vs. New Orleans 
 
 
 Bank 
 
 
 510 
 
 vs. N. Y. Cotton Ex. 
 
 160 
 
 vs. Patterson 
 
 
 865 
 
 vs. Richardson 
 
 
 518 
 
 vs. Wright 302, 
 
 305, 
 
 323, 
 
 
 326, 
 
 335 
 
 Cannan vs. Bryce 483, 484, 647 
 
 649 
 
 Cannon vs. Folsom 
 
 
 906 
 
 vs. Toronto Corn 
 
 Ex. 
 
 
 96 
 
 107, 
 
 112 
 
 Canton vs. Smith 
 
 
 907 
 
 Cantwell vs. Boykin 
 
 
 505 
 
 Caponigri vs. Altiere 
 
 
 860 
 
 Capper vs. Harris 
 
 
 815 
 
 Capper s Case 
 
 
 1012 
 
 Capron vs. Thompson 
 
 192, 
 
 232, 
 
 255 
 
 263, 
 
 391 
 
 Cardwell vs. Hicks 
 
 694 
 
 695 
 
 Garland vs. Tel. Co. 
 
 
 511 
 
 Carlen vs. Drury 
 
 
 104 
 
 Carley vs. Todd 
 
 
 860 
 
 Carmi chad's Case 
 
 
 968 
 
 Carney vs. Plimmer 
 
 
 555 
 
 Carlton vs. Jackson 
 
 
 730 
 
 Carpenter vs. Ins. Co. 
 
 
 836 
 
 vs. Longan 
 
 
 699 
 
 vs. Momsen 
 
 
 805 
 
 Carr vs. Hinckliff 
 
 755, 
 
 756 
 
 vs. Thompson 
 
 
 781 
 
 Carrall vs. Exchange 
 
 Bank 
 
 
 
 790 
 
 ,795 
 
 Carroll vs. Holmes 
 
 
 500 
 
 Carstairs vs. Stein 
 
 
 872
 
 Table of Cases. 
 
 XXV 
 
 Carteret Club, The, vs. Flor- 
 ence 103, 104, 109 
 Carter vs. United Ins. Co. 058 
 Case vs. McClellan 1011 
 Casey as. Bentley 144, 488, 820 
 Cashman vs. Root 193, 507 
 Cass County vs. Green 680 
 Ca.ss vs. Higenbotam 259 
 Cassard vs. Hinman 490, 492, 515, 
 516, 539, 612 
 Ciistellan vs. Hobson 1033 
 Castello vs. City Bank 348, 358 
 Caswell vs. Putnam 216, 244, 253, 
 428, 434, 777 
 Cates vs. Knight 144 
 Catling AS. King 899 
 Catney vs. Blair 865 
 Caton vs. Shaw 873 
 Cazeaux vs. Mali 623 
 Cecil Bank vs. Farmers Bank 801 
 Cecil, Mat. of 248 
 Cecil vs. Simmons 108, 128 
 Central & Banking Co. vs. 
 
 Farmers' Loan & Trust Co. 683 
 Central Bank vs. White 745 
 
 Central Grain and Stock Ex- 
 change of Chicago vs. Ben- 
 dinger 501, 744 
 
 Central Xat. Bank of Baltimore 
 
 vs. Coim. Mutual Life Ins. Co. 295 
 Central Stock and Grain Ex. 
 
 vs. Board of Trade 23, 502 
 
 Chaffee vs. R. R. Co. 653 
 
 Chaffee vs. Sprague 838 
 
 Chaler vs. San FrancLsco S. R. 
 
 Co. 823 
 
 Chamberlin vs. Greenleaf 255, 290, 
 
 932 
 Chanil>erlain vs. Jones 896 
 
 Champion vs. Gordon 421 
 
 Chumplain vs. Smith 585 
 
 Chan<ller, In re 549, 609, 618 
 
 Cliaprnjiu vh. Shepherd 220, 229, 
 
 2(>6 
 ChappcU VH. Cudy 800, 807 
 
 Chase vs. Boston 194, 195 
 
 vs. Co. S65 
 
 vs. Petroleum Bank 792 
 
 Chat vs. Edgar 661 
 
 Chatterton vs. Fisk 513 
 
 Cheale vs. Kcnward 825, 1044 
 
 Chedworth, Lord, vs. Edwards 768 
 
 Chew vs. Bank of Baltimore 727 
 
 vs. Louchheim 193, 777 
 
 Chicago vs. Tilton 65, 1 12 
 
 Chicago Artesian-^^'ell Co. vs. 
 
 Corey 383 
 
 Chicago Bank vs. Foreman 787 
 Chicago Edison Co. vs. Fay 726 
 Chicago Open Board of Trade 
 
 A's. French 20 
 
 Chichester as. Hill ct Son 671 
 
 Chicopee Bank vs. Chapin 695 
 
 Child vs. Hugg 193, 353, 355, 
 
 362, 364 
 
 vs. Morley 222, 225, 480, 986, 
 
 988 
 
 vs. Thorley 789 
 
 Chillas vs. Snyder 500 
 
 Ciiipman \s. Bank 792 
 
 Ciiippendale \s. Thurston 867 
 
 Choteau Spring Co. vs. Harris 47() 
 
 Chouteau vs. .Mien 354, 381 
 
 Christie St. Co. vs. Board of 
 
 Trade 23, 24, 502 
 
 Chrysler vs. Renois 692 
 
 Church vs. Citizens R. R. Co. 700 
 Cincinnati, etc., R. Co. vs. Citi- 
 zens Bank 706 
 Citizens Bank vs. .Mexander 79S 
 vs. Boweu 7S7 
 vs. Kendrick 791 
 City Bank vs. Balx-ock 349 
 vs. Rome, Water- 
 town, etc., R. 
 Co. 70S 
 City Bank, Ex parte 605, (■)55 
 City Loan Co. vs. Cheney 865 
 City of Balfimore vs. Jolmson 164 
 Little Rock vs. Barton 177
 
 XXVI 
 
 Talkie of Cases. 
 
 City, Tlio, vs. Lainson (>.'):?, C..")! 
 
 flark vs. liailcy 177 
 
 \.s. Homain Wt'.\, 'M\ 
 
 vs. Hrown .WS 
 
 vs. Dos Moinos SOo 
 
 vs. Flint 829, 836 
 
 vs. Gilbert 177 
 
 vs. Giraud 480, 870 
 
 vs. Iowa City 653 
 
 vs. Moody 308 
 
 vs. Northampton Rank, 786, 
 
 792, 801 
 
 vs. Pinckney 199, 779 
 
 vs. Pinney 903 
 
 vs. Powell 6, 188, 379, 903, 
 
 954 
 
 vs. Van Northwick 301 
 
 Clarke vs. Bank 799 
 
 vs. Callow 899 
 
 vs. Dickson 623 
 
 vs. Ennis 776 
 
 vs. Foss 409, 612 
 
 vs. Meijrs 192, 255, 276, 299, 
 
 301, 345, 3.55, 364, 771, 776 
 
 Clarkson vs. Toronto Stock 
 
 Ex. 115, 120, 126 
 
 Clay vs. Allen 597 
 
 Clealand vs. Walker 765 
 
 Clegg \s. Townsend 236 
 
 Cleland, In re 782 
 
 Clemens vs. Hecksher 715 
 
 Clemmer ^•s. Drovers Xat. Bank 798 
 Gierke vs. Martin 660, 664, 666 
 Cleveland, Duke of, Settled Es- 
 tates, Re 300 
 Cleveland vs. Hcidenheimer 551 
 vs. Loder 865, 867, 873 
 Cleveland it IMahonin;: R. R. 
 Co. vs. Robbins 727 
 vs. Tapott 726 
 Cleveland Telegraph Co. ^•s. 
 
 Stone 21 
 
 Clews vs. Jamie.son 15, 137, 204, 
 
 212, 220, 390, 408, 426, 465. 
 
 .501, 772 
 
 Clic. mot's Claim 937 
 
 ClilTortl vs. Turriil 824 
 
 Clinton National Bank vs. Na- 
 tional Park Hank 747 
 Clipi)er Mining Co. vs. Eli Min- 
 ing Co. 844 
 Cloyes vs. Tha>er 402 
 Clute vs. Loveiand 15, 19, 35, 
 36, 145, 149 
 vs. Robinson 698 
 Coal Co. vs. Fry 30, 42 
 Coates vs. Pacey 473, 488 
 Coates vs. Preston 802 
 Cobb vs. Prell 580 
 Cochran vs. Adams 48, 118, 429 
 vs. Irlam 392 
 Cockrell vs. Mclntyre 898 
 vs. Thompson 550, 595 
 Cockrill vs. Joyce 786 
 Codd A-s. Rathbone 873 
 Coddington vs. Bay 692, 694 
 Coffm vs. Coke 398 
 Coffman vs. Young 500 
 Coit vs. Goodhart 391, 770 
 Colborne, Ex parte 655 
 Colderwood vs. McCrea 500 
 Cole vs. Milmine 501, 612 
 vs. Ryan 470 
 vs. Skrainka 411 
 Coleman vs. Commin 863 
 Coles vs. Bank of England 726 
 vs. Bristowe 216, 424, 494, 
 764, 828, 990, 992, 1019 
 Colket vs. Ellis 347, 3.53, 364, 420, 
 423, 428, 431, 436, 453, 770 
 Collen vs. Wright 733 
 Collings A's. Nevin 548 
 Collins vs Buckeye Ins. Co. 751 
 vs. Gilbert 686 
 vs. Sccreh 873 
 Colonial Banlc vs. Cady 279, 441, 
 446, 670, 672, 
 705 
 vs. "UHiinney 1002 
 Colson vs. Arnott 651, 686
 
 Table of Oases. 
 
 Xxvn 
 
 Colt vs. Clapp 494 
 
 vs. Netterville 7S2, 811, SIR. 
 
 S22, S77 
 
 vs. Oweiis 02.5, 920, 934 
 
 Columbine vs. Chichester S19 
 
 Colvin v.s. Willianis 884, 8S9 
 
 Colwes AS. Miller 83(3 
 
 Commercial Bank vs. French 75.5 
 
 vs. Henninger 787, 
 
 794 
 
 vs. Hughes 791 
 
 vs. Jones 799 
 
 vs. Kortright 70.5 
 
 vs. Norton 392 
 
 vs. Rowland 790 
 
 vs. Smith 898 
 
 vs. Spaids 500 
 
 Commercial Telegram Co. vs. 
 
 Smith 14, 20, 24, 31, 32, 45, 59, 60 
 Commissioners, etc., vs. Clark 683 
 Commissioners of Knox Co. vs. 
 
 .\spin\vall 652 
 
 Commonwealth vs. Barrett 460, 569 
 
 vs. Carlisle 638 
 
 vs. Cooper 366, 
 
 375, 4.39, 465, 
 
 783 
 
 vs. Dalzell 250 
 
 V8. German So. 109 
 
 vs. Lucas 177 
 
 vs. Penn. Be- 
 
 nev. Soc. 99 
 vs. Pike Be- 
 nev. Soc. 
 
 90, 112 
 vs. Quay 746 
 
 vs. St. Pat- 
 rick's 
 Ben, Soc. 
 60, 111, 1.30 
 vs. Shurman'H 
 
 Adiii. .52 
 
 vs. Smith 7K3 
 
 vs. Tlie CJor- 
 
 nian Soc. 109 
 
 Compton vs. Chelsea (>2 I 
 
 Conant vs. National Ice Co. 837 
 
 Conger vs. Judson 310 
 
 Conkey vs. Bond 360 
 
 Conneil vs. Averill 416 
 
 Connelly vs. Assn. 64 
 
 Conner vs. Bramble 897 
 
 vs. Robertson 439, 590 
 
 Connor vs. Black 366, 509, 525, 
 
 596, 646 
 
 vs. Heman .590 
 
 Consterdine vs. Consterdine 242 
 
 Content vs. Met. R. R. Co. 850, 856 
 
 Continental Nat. Bank vs. 
 
 Townisend 688 
 
 vs. 
 
 Weems, 789, 795 
 
 Contract Corporation 403 
 
 Conwell vs. Harris 258 
 
 Conyngham's Appeal 348 
 
 Cooic vs. Bank 873 
 
 vs. Davis 543 
 
 vs. Fuller 798 
 
 Cook, Ex parte, In re Strachan 
 
 181, 294, 1003 
 Cooke vs. Eshelby 75(), 1025 
 
 vs. United States 649, 677 
 Cooke, In re. Ex parte Saffrey 
 
 13.8, 978 
 
 Cooper vs. 111., etc., R. R. Co. 71 I 
 
 vs. Neil 553 
 
 vs. Sandford 410 
 
 Coote vs. Bank 801 
 
 Cope vs. Dodd 433 
 
 vs. Rowlands 001 
 
 Copley vs. Doran Co. 510, .5SS 
 
 Copper vs. Mayor 6.53 
 
 Coquard vs. Bank of Kaasa.s 416, 
 
 427, 466 
 
 vs. Wciiistein 200 
 
 Corbett vs. Tnderwood 193, 335. 
 
 3.37, .347, 420, 430, 4.53, 012 
 
 Corcaliis vs. Grand Canal 
 
 Co. 810 
 
 Co rev vs. Griflin 522
 
 xxvin 
 
 Table of Cases. 
 
 Corn Exchange Bank vs. Fjuin- 
 
 ers' Xat. Hank 
 Cornell vs. District i)f Columbia 
 
 vs. I lichens 
 Corninc; vs. CJreen 
 Cortelyou \s. Lansing; 307, 
 
 Cory vs. Leonard 
 Cothran vs. liank 
 
 vs. Ellis 300, 
 
 vs. State 
 
 vs. Telejrraph Co. 504, 
 Cottam vs. Eastern Comities R. 
 Co. 724, 72G, 
 
 Cottinghani \s. Shrew.sbury 
 Coiinselnian vs. Reichart 
 County of Warren vs. Marcy 
 Coxisland vs. Davis 
 Covell vs. Loud 195, 337, 
 
 356, 418, 
 Cover vs. Smith 
 Cowell vs. Simpson 
 Cowles vs. Kiehel 
 
 vs. Whitman 
 Cox vs. O 'Riley 
 
 vs. Spri<r.<i; 
 Crabl) vs. Miller 210,209 
 
 Craft vs. McConouii'hy 
 Crafton a-s. Carmichael 
 Crandell vs. White 
 Crawford vs. Pile & Brown 
 
 vs. Spencer 525, 
 
 Crawshay vs. Homfray 
 Cripps vs. Davis 
 Crisp vs. Bunbury 143, 
 
 Croak vs. Hiiih Court 
 Crocker vs. Crocker 
 
 vs. Old South Soc. 
 Croft vs. Bunster 
 Cromwell vs. County of Sac 
 
 682, 688, 
 Crook vs. Scott 
 Crooks vs. Moore 
 Cross vs. Eureka Lake Canal 
 Co. 264, 
 
 vs. Sackett 
 
 790 
 688 
 699 
 42 
 347 
 794 
 911 
 501 
 511 
 530 
 
 730 
 730 
 505 
 682 
 777 
 343, 
 438 
 599 
 803 
 700 
 829 
 665 
 6.58 
 756 
 038 
 898 
 520 
 897 
 595 
 806 
 6S7 
 144 
 64 
 717 
 112 
 699 
 681, 
 696 
 897 
 910 
 
 270 
 623 
 
 Crosby \s. Watts 
 Crossley vs. Maj^iiac 
 
 Croucli 
 
 315 
 
 459, 470, 
 
 761, 1025 
 
 . Credit Foncier (555, 663, 
 
 009, 670 
 
 Crowley's Claim 784, 1006, 1010 
 
 Crull vs. Dodson 366, 372, 878, 886 
 
 Crump vs. Thurber 832 
 
 Cruse vs. Paine 424, 990, 1026 
 
 Cud or Cuddee vs. Rutter 812, 813, 
 
 814, 816, 822, 831,927 
 
 Cumminps vs. Mead 691 
 
 vs. Webster 717 
 
 (Xunmiskey vs. Williams 595 
 
 Cunningham vs. Bank 530, 598, 647 
 
 vs. Fairchild 600 
 
 vs. Soules 762 
 
 vs. Stevenson 276, 
 
 588, 776 
 
 Currie vs. Booth 446, 1025 
 
 vs. Misa 690, 691 
 
 vs. Smith 451 
 
 vs. W'hite 612, 902, 905, 909 
 
 Currier vs. Studley 16, 156 
 
 Curtis vs. Gibney 465 
 
 vs. Leavitt 272, 865 
 
 vs. Wright 429, .501 
 
 Curtis, Matter of 103, 101 
 
 Cushman vs. Thayer Mfg. Co. .S43, 
 
 844 
 
 Cutting vs. Damerel 268 
 
 \s. Marlor 242 
 
 Cvrus vs. I'ortman 590 
 
 Dails vs. Lloyd 
 Dammert as. Osborne 
 Dance vs. Girdler 
 Daney vs. Phelan 
 Danforth vs. Evans 
 
 771 
 
 38 
 
 52 
 
 598 
 
 647 
 
 vs. Philadelphia, etc. 833 
 Daniels, Ex parte 477 
 
 Daniels, In re 386 
 
 Danville vs. Sutherlin 865 
 
 Dauler vs. Hartley 570
 
 Table of Cases. 
 
 XXIX 
 
 Davenport vs. Powell 9()9 
 
 David vs. Illius 871 
 
 Davidson vs. Tulloch 624 
 
 Davies vs. Austen 698 
 
 Davies, Matter of 627 
 
 Davis, etc., vs. Howard 426, 427, 
 
 447, 1007 
 
 Davis vs. Bank of England 719, 
 
 729, 803 
 
 vs. Bechstein 697 
 
 vs. Bowsher 786, 788 
 
 vs. Davis 547 
 
 vs. Gwynne 299, 304 
 
 vs. Haycock 757, 828, 
 
 1000, 1041 
 
 vs. Hoy 863 
 
 vs. Nat. Eagle Bank 714 
 
 Davison vs. Holden 50 
 
 Dawkins vs. .\ntrobus 64 
 
 vs. Penrhyn 899 
 
 Dawson vs. Bank 795 
 
 vs. Kittle 432 
 
 vs. Ileal Estate Bank 786 
 
 vs. Wilson 802 
 
 r)a\>- vs. Bansis 521 
 
 Day vs. Holmes 208, 366, 375, 
 
 384, 463, 779 
 
 vs. Jameson 213,219,29s, 
 
 366 
 
 vs. Perkins 912 
 
 vs. Stuart 485, 647 
 
 Dean vs. Woodward 400 
 
 Dpiirhorn vs. Tnion Nat. H.uik 241 
 
 Decatur vs. Goodrich 7S1 
 
 Deck vs. Fcid 9(IS 
 
 De Cordova \>. iViriiuiii 191, 230, 
 
 435 
 Dcicrliii^ \s. Slori|) 551 
 
 De la ('liaunM'tt<! vs. Bank of 
 
 En^'Iand 690 
 
 Dclacy vs. IJivf-r .Nav. ('». 110, 111 
 Di-lafifld V-. Slat*- <.f Illinois 207, 
 
 651 
 D.-iaiio vs. Wilrl 19 
 
 Delennif vs. Hai^lit tV: I''ree«cCo. 213 
 
 Delexan vs. Simonson 775 
 
 Dc Mattos vs. Benjamin 556 
 
 Demery vs. Burtenshaw's Est. 387 
 
 De Mott vs. Starkey 687 
 
 Dempsej- vs. Harm 570 
 
 Dennis \'s. Kennedy 134 
 
 Dennison, In re 415, 466 
 
 Denny vs. Lyon 463, 704, 723, 
 
 728, 730 
 
 Dent vs. Holbrook 910, 930 
 
 vs. Nickalls 1012, 1013, 1022 
 
 Denton vs. Jackson 233, 342, 
 
 426, 810 
 
 vs. Rodie 271 
 
 DeRibeyre vs. Barclay 243, 244 
 
 Derry vs. Peek 624 
 
 Deshler vs. Beers 220, 395 
 
 Devaynes vs. Noble (Baring's 
 
 Case) 243 
 
 De Waal ^^s. Adler 756 
 
 Dcwees vs. Miller 51 S 
 
 De Witt vs. Chandler 12, Hi 
 
 Dickenson vs. Chamber of 
 
 Commerce S9 
 
 vs. Tihvall 443 
 
 Dickinson vs. Dudley 705, 722 
 
 vs. Gray 423 
 
 vs. Poutrhkeepsie 433 
 
 Dickson vs. \'alentine 861 
 
 Dickson's E.xecutor vs. Thomas 
 
 407, .5()3, 564 
 Diepciil)rock \s. I'roduci" 10\- 
 
 chaiige i:!, 171 
 
 Dill.ard vs. I'.niinci- .")1{) 
 
 \s. I'atou (II, 457 
 
 Diilaway vs. Aldcii .592 
 
 Dillayc vs. Commercial Hank 707 
 Dillcr vs. Brubakcr 318 
 
 Dillon vs. McCrc.i 501 
 
 Dinkier vs. B.icr 8S9 
 
 Diiismore vs. Diine.ni t')l9, t>72 
 
 Doak \'s. Siiap|) 905 
 
 I)o:uie vs. Dunham 409 
 
 Dobson vs. Kuhula 4 14 
 
 Dock vs. Snapp 873
 
 XXX 
 
 Table of Cases. 
 
 Dodge vs. Tiawson 201 
 
 Doe vs. Barnard 864, SO.') 
 
 Doloret vs. Rothschild 812, 823, 
 
 82.5 
 
 Donald vs. Gardner 346, 391 
 
 Doniu'li vs. Colunihiiin Ins. 
 
 Co. 66.') 
 
 vs. Wyckoff 264 
 
 Donohoe vs. Gamble 349 
 
 Donovan vs. Daiber .')1 1 
 
 Doolubdass vs. llamloll .517 
 
 Dorison vs. Westbrook 816, 822 
 
 Dorriens vs. Hutchinson 482 
 
 Douglas vs. Bank 798 
 
 vs. Carpenter 192, 244, 
 255, 258, 428, 434 
 
 vs. Smith 504 
 
 Douglass vs. Kraft 929 
 
 vs. Leland 301 
 
 Douthitt vs. Stimson 37 
 
 Dow vs. Chamberlain 907 
 
 Dowington vs. Meeker 865 
 
 Downes vs. Bennett 142 
 
 vs. Black 913 
 
 Downing vs. Marshall 37 
 
 Dows vs. Glaspel 528 
 
 Doxey vs. Spaids 500 
 
 Drake as. Thompson & Deer 
 
 Co. 219 
 
 vs. Weinman 219, 768 
 
 Draper vs. Stone 829 
 
 Drew vs. Power 770, 859 
 
 Driscoll vs. West Bradley, etc., 
 
 Co. 717 
 
 Driver vs. Bond 882 
 
 Drouilhet vs. Pinckard ' 600 
 
 Dmce vs. Levy 1007 
 
 Dubois vs. Thompson 779 
 
 Duchemin vs. Kendall 312, 499 
 
 Duclos vs. Cunningham 397 
 
 Duden vs. Waitzfelder 383 
 
 Duff vs. Hutchinson 219, 768 
 
 Duffy vs. O'Donovan 899 
 
 Dullvs. Culver 835 
 
 Dullnig vs. Weekes 353 
 
 Dunli.-ir vs. Wilson 9,58 
 
 Duncan vs. Hesson 1009 
 
 vs. Brennan 786, 789, 
 
 794, 795 
 
 vs. Hill 48, 228, 235, 467, 
 
 468, 1009 
 
 vs. Jauduii 712, 715 
 
 vs. Jones 42 
 
 vs. Luntley 729 
 
 vs. North & Soutli 
 
 Wales Bank 793 
 
 Duncomb vs. N. Y. & X. H. U. 
 
 Co. 383 
 
 Duncuft vs. Albrecht 811, 812, 824, 
 826, 832, 879, 881 
 Dung vs. Parker 761 
 
 Dungan vs. Dohnert 835 
 
 Dunham vs. Trustees of 
 
 Rachael 59 
 
 Dunn vs. Bell 508, 587 
 
 Dunne vs. English 366, 376, 382 
 Dupignac vs. Bernstrom 897 
 
 Durant vs. Burt 425, 428, 439, 
 
 494, 577, 581 
 vs. Einstein 772 
 
 Durfcc vs. Harper 853 
 
 Durluun vs. Monumental Min- 
 ing Co. 8.55 
 Dustan vs. McAndrew 909 
 Dutch vs. Warren 903 
 Dutchess, etc., Ins. Co. vs. 
 
 Hachfield 651, 684 
 
 Dwight vs. Badgley 588, 589 
 
 Dyer as. Rich 903, 906 
 
 Dyctt A's. Seymour 775 
 
 Dykers vs. Allen 2.59, 328, 358, 362, 
 
 665 
 
 vs. Townsend 491, 646 
 
 Dyster, Ex parte 6, 379, 944, 959, 
 
 963 
 
 E. 
 
 Eagle vs. Bucher 57 
 
 Eagleson vs. Shotwell 865 
 
 Earl vs. Howell 587
 
 Table of Cases. 
 
 XXXI 
 
 Earle vs. Scott 203 
 
 East Birmingham Land Co. vs. 
 
 Dennis 457, 6S4, 703 
 
 East Haddam Baptist Church 
 vs. East Haddam Baptist 
 Soc. 37, 40 
 
 East River Bank vs. Judah 46 
 Easterly vs. Cole 271, 396 
 
 Eastern R. Co. vs. Benedict 
 
 852, 906 
 
 Eastman vs. Reid 838 
 
 vs. Wright 657 
 
 Easton vs. Bank 705 
 
 Eaton vs. Bell 271 
 
 vs. New England Tel. 
 
 Co. 727 
 
 Ebbinghousen vs. Worth Club 
 
 40, 41, 42, 46 
 
 Ex^kert vs. Belden 779 
 
 Eckstein vs. Downing 837 
 
 Edelstein vs. Schulcr 411, 446, 
 
 650, 656, 665, 669 
 
 Edgell vs. McLoughlin .524 
 
 Edic vs. Ea-st India Co. 662 
 
 Edwards vs. Goulding 755 
 
 vs. HoeffingliolY 580 
 
 vs. Jones 696 
 
 vs. Stevenson 'M), 596 
 
 vs. Warren 49 
 
 Exlwards Brokerage Co. \s. 
 
 Stevenson .596 
 
 Egcrton vs. Furzeinan 517 
 
 Eggl&ston vs. Rumble 591 
 
 vs. WooLsey SlO 
 
 Ehlennann vs. Bank 7S6 
 
 Elder vs. Talrott .")3() 
 
 Eldridge \s. Mff. liank :i\7, 927 
 Eliot vs. Merrhant-s' Ex. 147, 1.V2, 
 
 154 
 Elizat>cth City vs. Force ()51 
 
 ICIIerbc vs. Faust 61 
 
 Elliii vs. l'.iise.v liridgi; Co. .s.50 
 
 VH. Pond 22.S, 233, .310. 420. 
 167, 771, 7S4. 7K5, 992 
 Elli«'H Appeal 705,710 
 
 Ellsworth vs. Cole 479 
 
 Elwell vs. Chamberlain 392 
 
 Embrey vs. Jemison 579 
 
 Emery vs. Pease 770 
 
 Emmerson's Case 229, 266, 476, 
 
 820 
 Empire City Bank, In re 266 
 
 Emrich, In re 146 
 
 Endownnent Rank vs. Powell 50 
 Engelhardt vs. Heck 835 
 
 England vs. Moore 865 
 
 English vs. Brenan 40 
 
 Ennis vs. Ross 592, 773 
 
 Ensign vs. Kellogg 658 
 
 Erben vs. Lorillard 395 
 
 Erisman vs. Delaware County 
 
 Nat. Bank 799 
 
 Erskine vs. Sachs 380, 774 
 
 Ertz vs. Produce Ex. 68, 618 
 
 Esmond vs. Apgar 781 
 
 Esser vs. Linderman 193, 197, 
 
 3.50, 386 
 European Bank, In re 797 
 
 Evans vs. Adams 149 
 
 vs. Chamber of Com- 
 merce 141 
 vs. Hooper 52 
 vs. Jones 517 
 vs. Phila. Club 106, 109 
 vs. Wain 201, 4.57, 
 4.59, 467 
 vs. Wister 47, 48, 
 60, 116, 149 
 vs. Woo.l 820, S21 , 828, 999, 
 1020, 1039, 1010, 1043, 
 1014 
 Everriiighaiii \s. Lord 4.39 
 vs. Mcigiian .508 
 E\LTt.s(»n vs. Nat. Hank (■>52, 6.53, 
 r.51, 6S.S 
 10x<liaii;:c vs. (Jregory 27 
 Exchange Bank vs. Ciatskill ()24 
 vs. Swopson Kf),! 
 ICwbank vs. .Nutting 910 
 Eyrich vh. Capitul State Hank 802
 
 xxxu 
 
 Table of Cases. 
 
 F. 
 
 Factors' & T. Ins. Co. vs. 
 
 Marine Dry Dock Co. 727 
 
 Faikncy vs. Ueynoiis 1S3, 647 
 
 Fairchild vs. Scrjieiit 698 
 
 Falklaiul vs. St. Xicliolas Nat. 
 
 Hank 786 
 
 Fallon vs. R. R. Co. 829, 8.32, 8.'^3 
 Fareira vs. Gabell 553, 560, 563, 
 
 568 
 
 Farmer ^■s. Board of Trade 60, 64, 
 
 90, 135 
 
 vs. Kvissell 577, 966 
 
 Fanners' Bank vs. Diebold Safe 
 
 it Lock Co. 712 
 vs. Farwell 787 
 
 vs. McFarran 794 
 vs. Tensor 531 
 
 Farmer's Co. vs. Floyd 916 
 
 Farmers', etc., Bank vs. Drov- 
 ers' Bank 740 
 Farmers' Loan it Trust Co. vs. 
 
 Carroll 871 
 
 Farmers' Nat. Bank as. Logan 708 
 Farnswortli, In re 786 
 
 Farrington vs. Park Bank 687 
 
 Farwell vs. Importers, etc., 
 
 Nat. Bank 265, 282 
 
 Fassett vs. First Parish in 
 
 Boyleston 33 
 
 Faulkner vs. Cuml)crland Val. 
 
 Bank 794 
 
 Faurc .Vccumulator Co., In re 968 
 
 Ferris \s. Kilmer 
 
 751 
 
 Field vs. Lelean 443, 
 
 934 
 
 vs. Sawyer 
 
 958 
 
 vs. Tibbetts 
 
 688 
 
 Finan Ins. Co., In re 
 
 404 
 
 Finch vs. Blount 
 
 910 
 
 Fine vs. Ilornsby 
 
 889 
 
 Fine Art Soc. vs. Union Bank 
 
 670 
 
 Finlay & Co. vs. Kurtz 
 
 836 
 
 P'inley vs. McCormick 
 
 873 
 
 Finnegan vs. Lee 
 
 651 
 
 Finney vs. Gallaudet 213 
 
 214 
 
 Firbank vs. Humphries 
 
 733 
 
 Fireman's Ins. Co., Ex parte 
 
 
 850, 
 
 852 
 
 First Nat. Bank vs. Armstronj!; 
 
 790 
 
 vs. Charlotte 
 
 173 
 
 vs. Hall 
 
 383 
 
 vs. Hoch 173, 
 
 240 
 
 vs. Miller 
 
 163 
 
 vs. (Xskaloosa 
 
 550 
 
 vs. Peisert 798 
 
 799 
 
 vs. Peltz 787, 
 
 794, 
 
 
 795 
 
 vs. Schreiner 
 
 794 
 
 vs. Strang 
 
 911 
 
 vs. Taliaferro 
 
 
 284, 
 
 463 
 
 Fischer vs. Raab 
 
 54 
 
 Fi.sh vs. Fiske 147, 
 
 156 
 
 vs. Kempton 
 
 7.55 
 
 Fisiie vs. Ellis 
 Fisher vs. Bidwel 
 
 863 
 
 Fay, Matter of 
 
 168, 
 
 169, 170 
 
 
 
 vs. Board 
 
 of 
 
 Trade of 
 
 
 Fay vs. Gray 
 
 
 259, 778 
 
 
 
 Chicago 
 
 
 62, 
 
 108 
 
 vs. Slaughter 
 
 
 726 
 
 
 
 vs. Brown 
 
 4.58 
 
 462 
 
 467 
 
 777 
 
 \s. Wheeler 
 
 
 895 
 
 
 
 vs. Fisher 
 
 
 547, 
 
 587, 
 
 691 
 
 F'ayetville Bank vs. ] 
 
 .utterloh 863 
 
 
 
 vs. Keane 
 
 
 
 64, 
 
 102 
 
 Feit vs. Heye 
 
 
 717 
 
 
 
 vs. Moller 
 
 
 
 
 299 
 
 Fenn vs. Curtis 
 
 
 624 
 
 
 
 vs. Morris 
 
 
 
 
 652 
 
 Fenton vs. Robinson 
 
 
 686 
 
 
 
 vs. Otis 
 
 
 
 
 699 
 
 Fenwick vs. Buck 
 
 
 1012 
 
 
 
 vs. Waltham 
 
 
 516, 
 
 517 
 
 Ferguson vs. Fyffe 
 
 
 273 
 
 Fit 
 
 zgerald vs. Blochcr 
 
 
 356 
 
 vs. Paschal! 
 
 
 829, 836 
 
 Fit 
 
 zp; 
 
 itrick vs. V 
 
 utter 
 
 
 51 
 
 vs. Wilson 
 
 
 821 
 
 
 
 vs. Woodruflf 
 
 
 896
 
 Table of Cases. 
 
 XXXIU 
 
 Fitzsimmons, Matter of B 
 
 
 38 
 
 Matter of J 
 
 
 38 
 
 Flagg vs. Baldwin 
 
 
 527, 
 
 592 
 
 vs. Gilpin 
 
 
 
 527 
 
 vs. Mann 
 
 
 
 320 
 
 vs. Swift 
 
 
 
 53 
 
 Fleet vs. Murton 
 
 
 
 761 
 
 vs. Wernberg 
 
 
 
 590 
 
 Fleming vs. Thomas 
 
 
 
 873 
 
 vs. Hector 
 
 
 
 29 
 
 Fletcher vs. Dickinson 
 
 
 347 
 
 vs. Green 
 
 
 
 730 
 
 vs. Marshall 209, 
 
 211, 
 
 225, 
 
 
 23.5, 
 
 432, 
 
 775 
 
 Flour noy vs. First N 
 
 at. ] 
 
 iank 
 
 794 
 
 Flowers v.s. Sterner 
 
 
 
 896 
 
 Floyd Acceptances 
 
 
 
 649 
 
 F^loyd vs. Patterson 
 
 
 511, 
 
 512 
 
 Foley vs. Holtrey 
 
 
 
 624 
 
 vs. Tovey 
 
 
 
 57 
 
 Foil's .Vppeal 
 
 833 
 
 835, 
 
 847 
 
 Foote vs. Smith 
 
 
 
 338 
 
 Ford vs. Chicago Milk 
 
 5hii> 
 
 
 pers .\.ssn 
 
 
 
 67 
 
 vs. Thornton 
 
 
 786, 
 
 790 
 
 Forget vs. Baxter 
 
 
 220, 
 
 425 
 
 vs. Ostigney 
 
 
 5.52, 
 
 575 
 
 Forest vs. Peel Ri\'er 
 
 Co. 
 
 
 911 
 
 Forrest vs. Elwes 
 
 824, 
 
 866, 
 
 871, 
 914 
 
 Fort Dearborn National 
 
 Bank 
 
 
 vs. Blumcnthal 
 
 
 
 787 
 
 Fortenbun.- vs. State 
 
 
 
 50<) 
 
 Fosdick vs. Green 
 
 
 3-29 
 
 912 
 
 vs. Myers 
 
 
 
 .502 
 
 F088 v.x. Cuminings 
 
 
 .500, 
 
 645 
 
 Foster vs. Harrison 
 
 
 
 98 
 
 Fourth Nat. Bank 
 
 r Chicago 
 
 
 vs. City Nat. Bank 
 
 of (j 
 
 rand 
 
 
 Rapids 
 
 7SC. 
 
 7.S7 
 
 792 
 
 Fowie vs. Ward 
 
 
 
 772 
 
 FowUt vs. .Nc'w York 
 
 CJold 
 
 
 Kx(liaii;:o Bank 
 
 .'ilS. 
 
 9 1 6, 
 
 918. 
 
 
 927 
 
 , 934 
 
 936 
 
 Fox VH. Marroth 
 
 
 
 :i82 
 
 Fox vs. Martin 279 
 
 vs. Steever 501 
 
 France vs. Clark 471, 716 
 
 vs. Gaudet 927 
 
 Francis vs. Taylor 627 
 
 Franklin Ben. Assn. vs. The 
 
 Commonwealth 110, 112 
 
 Franklin \s. Osgood 393 
 
 Frazer ^'s. DTnvilliers 649 
 
 vs. Jones 800 
 
 Frazier vs. Simmons 499 
 
 Freeman vs. Harwood 777 
 
 French vs. Boston Bank 848 
 
 vs. Com. Ex. 165 
 
 vs. Sanger 889 
 
 Freon vs. Carriage Co. 853 
 
 Freund vs. Importers, etc., 
 
 Bank 659 
 Friedlander vs. Slaughter House 
 
 Co. 726 
 
 Frith vs. Cartland 798 
 Fritz vs. Muck 44, 95, 96, 108, 110 
 
 Froggett, Ex parte 800 
 
 Frost vs. Clarkson 489, 490 
 
 vs. Stokes 861 
 
 Frothingham vs. Morse 911 
 
 Fuller vs. Steiglitz 792 
 
 Fullerton vs. State 512 
 
 Futcher vs. Futcher 899 
 
 Fyfe vs. Swaby 824 
 
 G. 
 
 Gaar vs. Louisville Co. 
 
 
 672 
 
 Gad.><dcn vs. Lance 
 
 
 897 
 
 Gainsford vs. Carroll 
 
 
 912 
 
 Galbraith vs. People's 
 
 Bldg. 
 
 
 A.ssn. 
 
 
 852 
 
 Gale vs. Grannis 
 
 
 873 
 
 vs. Townsend 
 
 
 50 
 
 Galigher vs. .Jones 206 
 
 207, 
 
 211, 
 
 
 2*)7 
 
 927 
 
 (lallairhcr. In ro 
 
 
 159 
 
 (JardcniT vs. PulU-n 
 
 S14, 
 
 815, 
 
 
 822 
 
 ,823 
 
 Gardiner vs. Meeker 
 
 
 501
 
 XXXIV 
 
 Tahle of Cases. 
 
 tiardiicr as. Allen To") 
 
 vs. First National 
 
 Bank 7'.»l 
 
 vs. Frcnuintle lOO 
 
 v.s. Powell Iri') 
 
 Garlick vs. James 849 
 
 Garrard vs. Ilardey S, 10 
 
 Garth vs. Ward (ISl 
 
 Garvin vs. Wiswall TOd. 7'22. 911 
 
 Gaston vs. .\iner., (•t<'., Hank 712 
 
 Gates vs. Haekenthal .S73 
 
 vs. Halliday 26.5 
 
 Gaw vs. Bennett 516, 569 
 
 Gay vs. Dare 910 
 
 vs. Mo.ss 348 
 
 Gaylord, In re 158 
 
 Gay lord a's. Duryea 596 
 
 Gazzam vs. Simpson 899 
 
 Gebhard vs. X. V. ("lui) 97. 104, 106 
 
 Gelpcke vs. Dubuque 653, 655 
 
 Gelster as. The Syracu.se Sav- 
 
 in<is Bank 322 
 
 General Provident .\ssurance 
 
 .\.ssoc., In re 7S6 
 
 Genet vs. Howland 337, 340, 344, 
 
 348, 356 
 
 Genin vs. Isaacson 207, 208, 213, 
 
 245, 255, 388, 492, 
 
 883, 890 
 
 vs. Tompkins 389 
 
 George vs. Braden 312 
 
 vs. Clagett 709 
 
 Georgia Seed Co. vs. Talmadge 
 
 792, 801 
 German Bank vs. Foreman 787, 795 
 German Land -Association vs. 
 
 Scholler 36 
 
 German Savings Bank vs. Ren- 
 
 shaw 284, 416, 702 
 
 German I'nion Bldg., etc., vs. 
 
 Scudmeyer 852 
 
 Geyser-Marion Gold Mining Co. 
 
 vs. Stark 417,432,712 
 
 Gheen vs. Johnson 220, 244, 
 
 394, .563 
 
 Ciibhons vs. IIccox 
 vs. Rule 
 
 (iibney vs. Curtis 
 
 Gibson vs. Crick 
 vs. Fristoc 
 vs. MeCall 
 
 Giddings vs. Sears 
 
 Gieve, Re 
 
 Gilbert vs. Erie Bldi 
 
 7S7 
 
 3, 5, 9.55 
 
 416 
 
 785 
 
 865 
 
 38 
 
 939 
 
 538, 603 
 
 Assoc. 703 
 
 vs. Gaugar 203, .501, 580 
 vs. Marsh 793 
 
 vs. McGinnis 416 
 
 vs. Sharp 687 
 
 vs. Sykes 517, 518 
 
 Gilbough vs. Norfolk it Peters- 
 
 burg R. R. Co. 
 Giles vs. Perkins 
 Gill vs. Cubitt 
 
 vs. O'Rourke 
 Gillett vs. Bate 
 Gillet vs. Fairehild 
 Gillett vs. Peppercorne 
 
 653 
 
 786, 792 
 
 671, 685 
 
 221 
 
 162 
 
 657 
 
 366, 372, 
 
 384 
 
 vs. Whiting 192, 213, 232, 
 
 233, 335,355,391,434, 
 
 770 
 
 Gilman vs. New Orleans, etc., 
 
 R. Co. 653 
 
 Gilpin vs. Howell 193, 254 
 
 Girard vs. Taggart 755 
 
 Gist vs. Telegraph Co. 505 
 
 Glardon vs. Supreme, etc.. 
 
 Lodge 04 
 
 Glendinning, Matter of 163 
 
 Glenn vs. Garth 216, 752 
 
 Glidden vs. Bank 383 
 
 Globe Finance Corporation, In 
 
 re 807, 809 
 
 Glyn vs. Baker 051, 0()6, 670 
 
 Goddard vs. Garner 414 
 
 vs. Lethl)ridge 870 
 
 A's. Merchants' Bank 60, 
 
 70 
 
 Godefroi, Ex parte 573 
 
 Goe.sely as. Bimeler 36
 
 Table of Cases. 
 
 XXXV 
 
 Goldschuiidt vs. Jones 1022 
 
 Goldstein vs. State 512 
 
 Gooch vs. Holmes SS9 
 
 Good vs. Elliott 517 
 
 Goodenow vs. Tyler 301 
 
 Goodhart vs. Rostert 503 
 
 CJoodman vs. Harvey 671, 083, GS5 
 vs. Simonds 684, 685, 
 686, 691 
 Goodspeed vs. East Haddam 
 
 Bank 739 
 
 Goodwin vs. Robarts 278, 463. 
 
 650, 651,655, 663, 66(5, 667, 670, 
 
 672. 705, 721, 880 
 
 Goodwin Gas Stove & Meters 
 
 Co.'s Appeal 846, 847 
 
 Goodyear vs. Ogden 432 
 
 Gordon vs. Miichler 787 
 
 Gorpiier vs. Milville 650, 777 
 
 Gottisehale vs. Stein 847 
 
 Gould vs. Farmers' Loan it 
 
 Trust Co. 277, 795 
 
 vs. The Central Trust 
 
 Co. 290, 201, 795 
 
 vs. Trask 274,305,306,346, 
 
 355 
 
 Graff, In re 290 
 
 Graham vs. O'Connor 826 
 
 Gram vs. Stebbins 491, 493, 829 
 
 Granite Bank vs. .\yres 338 
 
 vs. Richard.son 350 
 
 Grant vs. Hamilton 518 
 
 vs. Taylor 788, 795, 798, 
 
 801 , SOS 
 
 vs. Vau^han 664 
 
 Grant, E.\ parte. Re Piumbly 
 
 122, 123, 126, 9S0 
 
 Graves vs. Colby 52 
 
 VH. Mining; Co. 706 
 
 Gray vh. liennett S<)3 
 
 VH. Collins 023 
 
 VH. Green 79 1 
 
 VH. HaiR 219, 2()> 
 
 VH. Ijcw'w 62.S, 630 
 
 VH. IVairnon 52 
 
 Gray vs. Portland Bank 852, 903 
 Greathouse vs. Throckmorton 518 
 Greeley vs. Doran-Wright Co. 
 
 411, 429 
 Green, In re 555 
 
 Green vs. African Methodist 
 
 Soc. 130 
 
 vs. Board ot Trade 60, 62, 
 
 96, 97, 98 
 
 vs. Brookins 311 
 
 vs. Camden Nat. Bank 801 
 
 vs. Higham 629 
 
 vs. Weaver 379, 403, 
 
 957, 959 
 
 Greenby vs. Kellogg 656 
 
 Greene vs. Jackson Bank 790 
 
 vs. Security Bank 792 
 
 Greenfield School vs. Bank 799 
 
 Greenhow vs. Harris 865 
 
 Greening vs. Wilkinson 911 
 
 Greenland vs. Dyer 485, 647 
 
 Greenmount Turnpike Co. vs. 
 
 Bulla 856 
 
 Greenough vs. Gaskell 401 
 
 Greenwood's Case 30 
 
 Greer vs. Stoller 40, 71, 109 
 
 Greesboro Bank vs. Clapp 799 
 
 Gregory, E.x parte, \s. Wake- 
 field" 293 
 Gregory \s. Bewley 873 
 vs. Wattower 504 
 vs. Wendell 352. 393, 544, 
 517, 617, SIO 
 Griffith's Api)c:il 569 
 Griffitlis vs. Sears 569 
 Griffith vs. Burden 911 
 vs. Western Union Tel- 
 egraph Co. .503 
 Grigg vs. Medical Soc. lOS 
 Grig^'s vs. I):iy 926. 935. 93S 
 Grimes vs. Hill('iil)r.ind (iS7 
 Griiinrll. In re 352 
 GrinM.'ll vs. fook 80fi 
 (Jri.ssell vs. Uristowc 992. 1012, 
 1013, KM 7, 1032. 1033, 103U
 
 XXXVl 
 
 Table of Cases. 
 
 Gnswold vs. Grejig 
 Grizewood vs. Blane 519, .537, 
 
 151, 
 
 k of 
 
 20.5, 
 2{).-), 
 92.5, 
 
 Grocers' Bank vs. Murphy 
 
 Grover vs. Grover 
 
 Grubey vs. National Han 
 Illinois 
 
 Gniman vs. Smith 192, 
 232, 2.55, 263, 264, 276, 
 336, 342, 347, 34S, 353, 
 
 Gnmer vs. Stucken 
 
 Gulick vs. Markhani 
 
 Gurley vs. McLennan 
 
 Gwyn vs. Godby 
 
 H. 
 
 Haas vs. Durant 415, 
 
 Habenicht vs. Lissak 147, 154, 
 Hackett \'s. Reynolds 
 Haebler, In re, vs. X. Y. Pro 
 duce Ex. 16, 60, 61, 64, 68 
 89, 96, 
 Hafner vs. lierron 
 
 500 
 539, 
 
 645 
 1.50, 
 
 1.56 
 
 657 
 
 .501 
 230, 
 335, 
 93S 
 600 
 778 
 300 
 271 
 
 376, 
 398, 
 Flagar vs. Kinji 889, 
 
 Haggart vs. Morgan 
 Hagood vs. .Vtkin 
 Haight vs. Child 
 
 vs. Dickerman 45, 60, 
 115, 
 Hair vs. Burnell 
 Hajek vs. Bohemian Society 
 Hakman vs. Sciiaaf 
 Halfhide vs. Feiming 140, 
 
 Hall vs. Barrett 
 vs. Law 
 vs. Wilson 
 Halstead vs. Seaman 
 Halwerson vs. Cole 
 Hambleton vs. Central Ohio 
 R. H.Co. 726, 
 
 Hamblett vs. Bennett 
 Hamorvs. Hatliaway 
 Hamilton vs. Moore 472, 
 
 785 
 1.55 
 790 
 
 , 88, 
 136 
 396, 
 400 
 896 
 135 
 863 
 899 
 61, 
 428 
 855 
 51 
 787 
 141 
 501 
 548 
 686 
 139 
 432 
 
 729 
 
 37 
 
 929 
 
 873 
 
 Hamilton vs. Schaack 366, .383 
 
 vs. State Bank 353, 364, 
 
 383 
 
 vs. Young 369, 372, 
 
 411, 422, 472 
 
 Hamlin vs. Fitch 869 
 
 Ilannnond vs. Messenger 658 
 
 Hancock vs. Bank 787 
 
 Hanke vs. Cigar Makers' Union 42 
 
 Hanks vs. Drake 192, 3.36, 346 
 
 Hanscom vs. Hendricks 114 
 
 Hansen vs. Boyd 213, 220, 
 
 427, 778 
 
 Hanson vs. Slaven 842 
 
 Harben vs. Phillips 250 
 
 Hardenbergh vs. Bacon 812, 842 
 
 Harding vs. Field 219, 244, 245, 
 
 2.55, 264, 428, 4.34, 768 
 
 Hardoon vs. Belilios 10.37 
 
 Hardwiche, Earl of, vs. Vernon 768 
 
 Hardy vs. Jaudon 261 
 
 vs. Peters 337, 775 
 
 Hargreaves vs. Parsons 603, 880 
 
 Harker vs. Edwards 220, 228, 
 
 425, 446, 474, 784 
 
 Harkness vs. Remington 57 
 
 Harper vs. Pond 665 
 
 Harnett vs. Yielding 812,815 
 
 Harris vs. Ely 937 
 
 vs. Knickerbocker 899 
 
 vs. N. D. Ry. Co. 819 
 
 vs. Pryor 306, 326, 329, .342 
 
 vs. Tumbridge 204, 212, 213, 
 
 308, 366, 405, 455, 602, 
 
 60() 
 
 Harrison vs. Harri.son (1) 713 
 
 vs. Harrison (2) 914 
 
 vs. Hea thorn 10, 475 
 
 Hart, In re 573 
 
 Hart vs. Frontino Co. 732 
 
 vs. Garrett 396 
 
 vs. Ten Eyck 398 
 
 Hartervs. Eltzroth 225 
 
 Hartga vs. Bank of England 720 
 
 Hart's Case 828
 
 Table of Cases. 
 
 XXXVll 
 
 Hartas vs. Ribbons 228, 235, 46S, 
 
 7S4, 1010 
 
 Har^•ey ^.s. Doty 505 
 
 " vs. .Merrill 582 
 
 Hasbrook vs. Vandervoort 265 
 
 Haseltin vs. Sig,<j;ers 650, S79 
 
 Ha.-^kins vs. .Vlcott 40, 41 
 
 Hatch vs. Bank 799 
 
 vs. Dousilas 201, 206, 271, 
 
 274, .')27. r),S6, 872 
 
 vs. Elkias 237 
 
 vs. Fourth National 
 
 Bank 803 
 
 Hathawav vs. \m. Min. St. 
 
 Ex. 46 
 
 vs. Bank 795 
 
 HausbrouRli vs. Baylor 865 
 
 Havemayer, In re 180 
 
 Havemeyer vs. Havemeyer 640 
 
 Hawarden vs. Coal Co. 618 
 
 Hawkins vs. Maltby 229, 818, 
 
 827, 82S, 999, 1009, 
 
 1011, 103!), lOlO, 
 
 1012, 1044 
 
 Hawley vs. Bibb 531 
 
 vs. Brumagim 255 
 
 vs. Jones 647 
 
 V.S. Kountz 272, 860, 
 
 861, 865 
 
 Hayden vs. Bank 787, 801 
 
 vs. Dcmots 909 
 
 Hayes, In re lis, 119, 120, 430 
 
 Hayes vs. Mas.sac'hiLsetts Life 
 
 In.s. Co. 910 
 
 Haynard vs. Rogers 255 
 
 Hayne-s vs. Ilatc-h 776 
 
 Hays vs. Currie ISO 
 
 Hayward vs. I^e Baron S73 
 
 vs. .\at. Biink 777, 77S 
 
 Hiizarri vs. WelLs 791 
 
 Hcjinie vs. Ke.-ine 7S1 
 
 Heart vs. State Bank 47f) 
 
 Heath vs Griswold 779 
 
 VH. Malioney 352 
 
 VH. Pane 870 
 
 Heath vs. Prest. Gold Ex- 
 change 45, 59, 107, 
 134, 137 
 vs. Silverthorn Lead Co. 250 
 Hecht vs. Ratcheller 416 
 
 Hecksher vs. Gregory 482 
 
 Hedges vs. H. R. R. Co. 926, 934 
 Hedland vs. Dewey 847 
 
 Hegeraan vs. McCall 650 
 
 Hegibben vs. Perin 840 
 
 Heidelbach vs. National Bank 792 
 Heidenheimer vs. Cleveland 512 
 Heist vs. Hart 681 
 
 Hellman's Est. 163, 164 
 
 Helm ^•s. Jesse 873 
 
 vs. Swiggett 857 
 
 Henckle}- vs. Hendrickson 908 
 
 Henderson vs. Barnewell 891 
 
 vs. Bise 479 
 
 vs. State 170 
 
 Henegar vs. Lsabella Copper 
 
 Co. 90S 
 
 Hennequin vs. Clews 781 
 
 Henning vs. N. Y. & New 
 
 Haven R. R. Co. 7 10 
 
 Henson vs. Flannigan 511 
 
 Hentz vs. Jewell 576 
 
 Hentz vs. Miner 590 
 
 Heritage vs. Paine 1019 
 
 Hern vs. Nichols 709 
 
 Herrnian vs. Maxwell 265 
 
 Hcrtzficld vs. Aaron 2;iS 
 
 Herwig vs. Richardson 695 
 
 Hess vs. Ran 201 , 326, 329, 3.39, 
 .3S7, 431 
 vs. \\ arrcii 61 
 
 He.stonvil!e R. R. Co. vs. 
 
 Shields 383 
 
 Hewi.son vs. Gutlnic 803 
 
 Hewitt vs. Price 479 
 
 Hey wood vs. Wat.son 790 
 
 Hi.it t vs. (Jriswold 779 
 
 Hil)l.;ird vs. Hatch Co. S<»3 
 
 liil.liiTt vs. McKiniioM S32. S37 
 
 Hibl.lclhw.lilc \s Bersoii l(M)9
 
 XXXVlll 
 
 Table of Cases. 
 
 IIiM)l('tli\vaito vs. McMoiinc .")]'.), 
 612. (>1 I.OIC). lOO'.l. 1(110 
 llibcrnia Fire ICiii;. Cn. \ >. Tin- 
 
 Coiiiinonwoaltli .">!), (50 
 
 Higgiii-s v.><. MfCroa 2_'(). 157, .WO, 
 
 -y.iO, .">80 
 
 v.s. iruldcll .57 
 
 \s. Senior 424, 703, 7G5 
 
 Hijiginson v.s. Simpson 519, 552 
 
 Highinore v.s. Malioy 953 
 
 Hill vs. Johnston 595 
 
 vs. Morris 393, 411, 432, 430 
 
 vs. Newichawanick 454 
 
 Hilton vs. Giraud 881 
 
 Hinchnian vs. Lincoln 889 
 
 Hinckler vs. Merchants' Nat. 
 
 Bank 655 
 
 vs. Pfister 250 
 
 Hine vs. Allen 746 
 
 Hirst vs. Maag 524 
 
 Hitchcock vs. Corn Exchange 
 
 Bank 501 
 
 Hixon vs. Hixon 907 
 
 vs. Pixley 779 
 
 Hooker vs. Western l^nion Tel. 
 
 Co. 504 
 
 Hochreiter's App. 71 
 
 Hodgkinson vs. Kelly 425, 82S, 
 999, 1000, 1012, 1037, 1042, 1013 
 Hoeffner vs. Lodge 01 
 
 Hoffman v.s. Livingston 200, 212, 
 213, 214, 398, 428, 4.32, 7.53 
 Hogan vs. Shaw 1008 
 
 Holl^rook vs. New Jersey Zinc 
 
 Co. 729, 7.34, 730 
 
 Hollingshead \-s. Green 207, 298 
 
 Holmes vs. D'Camp 770 
 
 vs. Higgins 30, 42 
 
 vs. Manning 865 
 
 vs. Smith 691 
 
 vs. Symons 1000, 1043 
 
 Holyoke vs. Bnrham 206 
 
 Home Bank vs. Xewton 787 
 
 Home Co. vs. Favorite 409 
 
 Hone vs. Bovie 278 
 
 Hooker vs. Vanderwater 03S 
 
 Hooley vs. Gieve 295, 1004 
 
 Hope vs. Lawrence 305, 3.S3, 
 
 910, 920 
 Hopkins vs. Clark 212, 213, 21S 
 vs. Lane 321 
 
 vs. O'Kanc 198, .570 
 
 vs. United States 21, (i8 
 Hopkinson vs. Marquis of Exe- 
 ter 59, 100 
 vs. Roe 969 
 Hopper vs. Sage 203, 405, 416, 455 
 Iloppin vs. Buffum 250 
 Hornbec-k vs. .\m. Bil)le Soc. 37 
 vs. Sleight 37 
 vs. Westbrook 37 
 Horner's Est. 785 
 Horsfall vs. Halifax Bank 787 
 Horton vs. Morgan 245, 246, 255, 
 425, 433, 451 
 Hotchkiss vs. Ladd 899 
 Houghton vs. Page 863 
 Howard vs. Brigham 190, 3.50 
 Howard Bank, Ex parte 786 
 Howe vs. Buffalo, N. Y. <t 
 
 Erie R. II. Co. 938 
 vs. Starkweather 494 
 
 Howell A's. Earp 36 
 
 Howlej^ v.s. Knight 52 
 
 Hoy vs. Reade 801 
 
 Hubbard vs. Sayre 599 
 
 Hubl>ell vs. Blandv 243 
 
 vs. Drexel 
 
 245, 255, 
 
 428, 452 
 
 vs. Meigs 904 
 
 Hudson vs. Spalding 53 
 
 vs. Weir 887 
 
 Huff vs. Wagner 695 
 
 Hughes vs. Vermont Copper 
 
 Co. 778 
 
 Humbert vs. Abeel 47, 53 
 
 Humble vs. Langston 247, 827, 
 
 1035 
 
 vs. Mitchell 879, 887, 888 
 
 Humboldt Township vs. Long 672
 
 T:i]>le of Cnsos. 
 
 XXXIX 
 
 Iluinfroy vs. D.ilo 111, TOO, 
 
 Hunt, In re 
 
 Hunt vs. Chamberlain 
 
 vs. Gunn 220, 222, 
 
 vs. Jones 
 Hunter vs. Walters 
 vs. Wetsell 
 Huntiniidon vs. English 
 Huntinjrton \s. Knox 
 HuntiiiiTton i^c Broad Top R. 
 
 R. vs. Ens 
 Hurst vs. X. Y. Produce Ex. 
 SS, S9, 109, 119, 
 Huse & Loomis Ice Co. v.s. 
 
 Heinze 
 Hussey vs. Crickitt 
 
 vs. Manufacturers' & 
 Mechanics' Bank 
 Hustis vs. Pickands 176, 
 
 Huston vs. Ruethinger 
 Hutchins vs. Olcutt 
 
 vs. State Bank 
 Hutchinson vs. Bowkers 
 vs. Dee 
 
 vs. Lawrence 44, 
 95, 96, 97, 
 110, 
 vs. Manhattan Co. 
 Huth vs. Humboldt 
 Hyatt vs. Argenti 307, 353, 
 Hyl)art vs. Parker 
 Hyde vs. Wolf 
 vs. Woods 
 
 16, 22, 60, 
 148, 151, 
 
 Hvide vs. liadford 
 
 63 
 593 
 476 
 ,820 
 884 
 726 
 894 
 912 
 755 
 
 902 
 
 136 
 
 904 
 517 
 
 906 
 399 
 
 64 
 806 
 714 
 432 
 927 
 ,90, 
 107, 
 428 
 790 
 
 49 
 364 
 
 52 
 765 
 113, 
 153 
 787 
 
 I kin v.s. Bradley 271 
 
 llliniiworth vs. De Mott 369 
 
 Illinois ConmiisHion Co. vs. 
 
 Cleveland Tel. Co. 2(i 
 
 Illinois Trast and Savinpi Bank 
 
 VH. Im Tounhe 501 
 
 Imperial Mercantilf Credit 
 
 AnsfK'., Inn? - 10 
 
 Iniportci-s' it Grorors' Ex- 
 change, In re 56 
 Inchbakl vs. Cockcrill 519 
 vs. Xeilgherry Coffee 
 
 Co. 220, 964 
 
 Inderwick vs. Snell 64 
 
 India Association vs. Kock 639 
 Ingraham vs. Disborougli (598 
 
 vs. Taylor 206, 255, 527 
 Inhabitants of Palmyra vs. 
 
 Morton 59 
 
 Inman vs. Swifte 549 
 
 Innes vs. Wylie 59, 99 
 
 Innocenta, The 411 
 
 Ins. & Trust Co. as. Cole 885 
 
 Ins. Co. vs. Sturges 872 
 
 International Bank vs. Jones 801 
 vs. Vankirk 500 
 Investment Co. vs. Eldridge 624 
 Ireland vs. Livingston 206 
 
 Irvine vs. Angus 
 vs. Dean 
 vs. Dunhani 
 
 Irwin vs. Williar 
 
 Isett vs. Ogilvie 
 Isham vs. Post 
 
 830 
 797 
 830 
 422, 439, 535, 
 578, 589, 598 
 273 
 218, 226, 227, 
 745, 747, 773 
 Iveson vs. Connington 762 
 
 J. 
 
 Jackson vs. Bank 
 vs. Cocker 
 vs. Corey 
 vs. Cunimings 
 vs. Foote 
 vs. Jacob 
 vs. South 
 Live 
 
 818, 
 
 802, 
 501, 
 
 Oinaii.'i 
 Stock Ex. 
 .59. 67 
 vs. Y. it C. Railnmd 
 Co. 6.')2, 
 
 Jameison vs. Wallace 
 James vs. .Morcy 
 
 \s. W'oodrulT 
 
 547 
 824 
 37 
 806 
 580 
 7.')8 
 
 , 98 
 
 6.5.3 
 .531 
 ()99 
 490
 
 xl 
 
 Tiihlo of Casos. 
 
 James's Appeal 809 
 
 Jamison, In re 200 
 
 Janssen vs. Green 954 
 
 Jarvis vs. Manli.attan Beach 
 
 Co. 7-42, 9-10 
 
 vs. Sohaefer 393, -JOO 
 
 Jaudon vs. National City Bank 711, 
 
 717 
 Jaycox vs. Cameron 322 
 
 Jemison vs. Citizens' Savinfjs 
 
 Bank 589 
 
 Jenkins vs. Nat. Village Bank 241 
 Jenkinson, In re 1002 
 
 Jenkinson v.s. Wysner 51 
 
 Jennie Clarkson Home vs. 
 Chesapeake R. R. Co. 432, 726, 
 
 733 
 Jerome v.s. McCarter 352 
 
 Jessopp vs. Lntwyche 552, 963 
 
 Johns vs. Johns 889 
 
 Johnson vs. Albany <k S. R. R. 
 
 Co. ' 842 
 
 vs. Bank 799 
 
 vs. Brooks 316, 829, 844 
 vs. Humphrey 787 
 
 vs. Kaune 550 
 
 vs. Kirby 838 
 
 vs. Mulry 494, 890, 892 
 vs. Osborne 424 
 
 vs. Payne & Williams 
 
 Bank 798 
 
 vs. Undorhill 268 
 
 vs. Williamhurst 865 
 
 vs. Williams 176 
 
 Johnston vs. Miller 342, .506 
 
 vs. Parsey 724, 726 
 
 vs. Ronton 724, 726, 730 
 
 vs. Rus.sell 518 
 
 vs. Trask 311, 773, 896 
 
 vs. U.sborne 471 
 
 Jonau vs. Ferrand 404 
 
 Jones vs. Ames 499 
 
 vs. Brinley 10 
 
 vs. Brown 846 
 
 vs. Chamberlain 903 
 
 Jones 
 
 v.s. Fisher 
 vs. Frost 
 vs. Gallagher 
 
 Kent 
 
 Lewis 
 
 Litlledale 
 
 vs 
 
 785 
 
 751, 
 
 vs. Marks 29S, .300, 77 1, 
 
 vs. Montreal Bank 
 
 vs. Xewhall 
 
 ^■.s. Peppercorne, 
 
 788, 
 807, 
 
 vs. Powell 
 
 vs. Railroad Co. 
 
 vs. Randall 
 
 vs. Shale 
 
 vs. Smith 
 
 vs. Times 
 
 vs. Wattles 
 
 vs. Williams 
 Jordan vs. Nat. Shoe & Leather 
 Bank 
 vs. W^eston 
 Josephs vs. Pebrer 239, 476, 
 Jourdaine vs. Lefevre 786, 
 
 Joyce vs. De Moleyns 
 Judah ^'s. Marsh 
 Judson vs. Etheridge 
 Judy vs. Farmers' Bank 
 Justh vs. Bank 
 
 vs. Holliday 532, .581, 
 Justice vs. Lang 890, 
 
 K. 
 
 Kahn vs. Walton 503, 599 
 
 Kanady vs. Burke 331 
 
 Karcher ^■s. Lodge 64 
 
 Kaufman vs. Herzfeld 776 
 
 Kean vs. Franklin 52 
 
 Keiran vs. Hoyt 382 
 
 Kelley vs. Lewis 865 
 
 vs. Upton 389 
 
 vs. WHiitney 688 
 
 vs. York Cliff Co. 839 
 
 Kellock vs. Enthoven 827 
 
 128 
 397 
 809 
 317 
 242 
 7()3 
 80(;, 
 810 
 786 
 829 
 800, 
 808 
 969 
 455 
 517 
 550 
 899 
 836 
 894 
 713 
 
 792 
 195 
 966 
 788 
 800 
 776 
 806 
 797 
 799 
 (iOl 
 893
 
 Table of Cases. 
 
 xli 
 
 Kellogg vs. Lehigli Valley R. 
 
 Co. ^ 627 
 
 Kelly vs. Munson 755 
 
 vs. Sprague 870 
 
 Kemble vs. Atkins 379, 958, 963 
 
 Kemp vs. X. Y. Produce Ex. 
 
 164, 168, 169, 170 
 
 Kenfield vs. Latham 193, 3.53, 3.56 
 
 Kenicott vs. Supervisors 699 
 
 Kennedy vs. Budd 236 
 
 vs. Stout 500, 531 
 
 Kent vs. Ginter 902, 903 
 
 vs. Miltenberger 593 
 
 vs. Quicksilver Mining 
 
 Co. 71 
 
 vs. Westbrooke 296 
 
 vs. Woodhull 419, 465, 590 
 
 Kenyon vs. Luther 589 
 
 Kerhoff vs. .\tlas Paper Co. 508 
 
 Kerr vs. City of Corry 653 
 
 vs. Trego 110 
 
 Kershaw vs. Wright 411 
 
 Ketchuin vs. Clark 768 
 
 Ketchum, Bankrupt, Matter of 
 
 156, 158, 159 
 Keystone Bridge Co. vs. Mc- 
 
 Cluney 270 
 
 Kiernan vs. Co. 26 
 
 Kierstead vs. Bennett 53 
 
 Kilbourn vs. Tiioinp.son 203 
 
 Kilbride vs. Mo.s.s 897 
 
 Kill vs. HoUister 135, 140 
 
 Kimball vs. Billings 679 
 
 vs. WiiliaiMS .121 
 
 Kimber vs. Barber 366, .374, .382. 
 .384, .385 
 King vs. B;inkof Kngl.ind 8J9, 8.50, 
 
 851 
 vs. De IferengJT 619, r.3s 
 
 VH. Grimtlis 112 
 
 va. HutUin 126, 200, 445, 782 
 vs. Lufkry .501 
 
 VH. Tull)ot .397 
 
 vs. Wi>M! .320 
 
 Kin«, K.x parte 126, 200 
 
 King, Tlie, vs. Bank of Eng- 
 land 849, 8.50 
 vs. De Berenger 619, 
 638 
 Kingsbury vs. Kirwin 425, 4,36, 612 
 Kingsland vs. Braisted 53 
 
 Kingston, Ex parte 798 
 
 Kinne vs. Ford 513 
 
 Kirkpatrick \s. Adams 580 
 
 vs. Housall ,548, ,569, 
 611 
 vs. Muirhead 694 
 
 Kissam vs. Anderson 745 
 
 Klaus, In re 855 
 
 Knapp vs. Cowell 801 
 
 vs. Simon 228, 751 
 
 Knickerbocker Life Ins. Co. vs. 
 
 XeLson 860 
 
 Knickerbocker vs. Gould 347, 391, 
 
 785 
 
 Knight vs. Barber 880 
 
 vs. Chambers 552, 572, 785 
 
 vs. Fitch 485, 552, 572, 785 
 
 vs. Wiffen 732 
 
 Knowlton vs. Fitch 201, 275, 323, 
 
 328, 331, 335, 3,57, 
 
 485, 499 
 
 Knox vs. Eden Mu.see Co. 701, 702 
 
 Knox County vs. Aspinwall 552, 653 
 
 Kobogum vs. JacLson Iron Co. 843 
 
 Koehler vs. Brown 31 
 
 KolIT vs. Exchange 109 
 
 Kr>lsky vs. Enslen 8.38 
 
 Kortjohn vs. Continoiital Bank 792 
 
 Kortright vs. Buffalo Bank 8.50 
 
 Kosiikonong \s. Burton 6.54 
 
 Kountze vs. Kemiedy 624 
 
 Krake vs. .Mexandor 529 
 
 Kratt vs. Hopkins 216 
 
 Kniuse \s. S<'tlev 500 
 
 Kreigh vs. Sherman 500 
 
 Kronfield vs. Haines 39 
 
 Kruse vs. Kcmictt .501, .531 
 
 Kurliiiciiiuiidf VS. Smifh 15, 73, 
 
 95, 96, 97, 107
 
 xlii 
 
 Tablo of (\isos. 
 
 Kulh vs. T^nitod St.-ifos iuA). (MS, 
 (ISH, (ISl 
 Kullnienn vs. Siinun'iis .")()7, ')'.)S 
 Kurz vs. K.niicit is 
 
 Kut/ vs. Fleisclior T)!*? 
 
 L. 
 
 Labouchero vs. Earl of Whani- 
 
 flilfo li.",, !)'.) 
 
 Labouisse vs. Evening Post ()2S 
 Lacey vs. Hill (Scrinigeour';^ 
 
 Claim) 233, 347, 
 38G, 3S7, 420, 
 424, 436, 438, 
 453, 992, 995, 
 1001, 1001 
 (Crowley's 
 Claim) 7S4, 
 
 1006, 1010 
 Lacombe vs. Forstell's Sons 3S1 
 Lady Ormond vs. Hutchinson 768 
 Lafayette Bank vs. Hill 7SG 
 
 Lafond vs. Deems 28, 40, 54, 
 
 104, 139 
 La Gar vs. Carey 590 
 
 Laing vs. Blumauer 241 
 
 Lamb vs. Morris 787, 792 
 
 Lambertsou vs. Van Boskerk 779 
 Lamert vs. Heath 190, 220, 222 
 Lamm ^■s. Post Deposit Home- 
 stead Assoc. 739 
 Lamson vs. Beard 744 
 Lamsen vs. Boyden 501, 645 
 Lane vs. Bailey 795 
 vs. Logan Grain Co. 614 
 Lang vs. Smitli 650, 651, 655 
 Langton vs. Waite 252, 258, 260, 
 472, 1002 
 Larminie vs. Carley 233, 774, 810 
 Larrabee vs. Badger 207 
 Lassen vs. Mitchell 351 
 Lathavo vs. Barber 487 
 Lathrop vs. Brown 776 
 Lanbach vs. Lavibach 903 
 Laugh ton vs. Griffin 618 
 
 LaNorty vs. Snethan 777 
 
 Lawford vs. Harris 210 
 
 Law (luuranteo, etc., Society 
 
 V-;. li.ank of England S5() 
 
 Lawrence vs. Bank 7s7 
 
 vs. Clark 693 
 
 vs. Maxwell 191. 255, 
 
 259, 425, 434. l.")l, 921 
 
 Lawson \s. Hcwell 6 1 
 
 vs. irichards 421 
 
 Lawton vs. Hiitch .WS 
 
 vs. Hickman 476 
 
 323, 331, 434 
 
 841 
 
 Lazare vs. Allen 
 
 Leach vs. Forbes 
 
 vs. Haight 
 
 Lcahv vs. Lobdell 
 
 776 
 181,352, 
 758, 80f) 
 712 
 964 
 870 
 255 
 208, 438 
 392 
 677, 686, 712 
 532 
 236 
 
 Leake vs. Watson 
 Learoyd vs. Bracken 
 Leavitt vs. Pell 
 Le Croy vs. Eastman 
 Ledd}' A's. Flanagan 
 Ledoux vs. Goza 
 Ledwich vs. McKim 
 Lee vs. Boyd 
 
 vs. Gargulio 
 
 Leech vs. Harris 15, 21, 22, 47, 
 
 60, 62, 69, 73, 74, 80, 
 
 90, 107, 130, 137, 145 
 
 V.S. Leech 47, 60, 116, 150 
 
 Leggett vs. Bank of Sing Sing 717 
 
 vs. Waller 146, 155 
 
 Lehman vs. Feld 60, 335, 439, 579 
 
 vs. Mfg. Co. 786 
 
 vs. Strassberger 575, 646, 
 
 647 
 
 Lcitch vs. Wells 682, 705, 714, 722 
 
 Leland, Matter of 672 
 
 Lc .Marchant vs. Moore 281, 282, 
 
 284, 285, 394 
 
 Lemonius vs. Mayer 510 
 
 Lenheim vs. Wilmarding 694 
 
 Leonard vs. Hart 499 
 
 vs. Poole 203, 406, 641 
 
 Leonardville Bank vs. Willard 46
 
 Table of Cases. 
 
 Xllll 
 
 Le Roy vs. Mathewson 
 Lester vs. Buel 
 Lett vs. Morris 
 Leveson Gower vs. May 
 Le Vie vs. Fenlon 
 Levitt vs. Hamblet 
 
 295 
 
 503 
 
 65S 
 
 21S 
 
 848 
 
 442, 4G9, 
 
 470. 1030 
 
 Levy v.s. Loeb 251, 255, 261, 
 
 263, 377, 384, 396, 400 
 
 Lewis \s. Andrews 312 
 
 \s. Graham 348 
 
 vs. Ingersoll 393 
 
 vs. Littlefield 525 
 
 vs. Varnum 346 
 
 vs. Wilson 45, 60, 61, 64, 73, 
 
 90,94,95,97, 104, 107, 
 
 607 
 
 Lexington vs. Butler 653 
 
 Leycraft vs. Dempsej' 769 
 
 I^eyton vs. Sneyd 300 
 
 Licliten vs. Vernor 269, 760 
 
 Liederkranz Singing Society vs. 
 
 Turn-Verein 48 
 
 Lisigett vs. Lad 37 
 
 Liggett Co.'s .\ppeal 795 
 
 Lightfoot vs. Creed 225, 823, 986 
 
 Lilly vs. Rankin 552, 1007 
 
 Linden vs. Silverston 209 
 
 Lines vs. Shepard 217 
 
 Lis-set vs. Beave 758 
 
 Little vs. Barker 295, 348, 865, 871 
 
 Livennore vs. Bushnell 638 
 
 Live Stock Conmu.s.sion Co. vs. 
 
 Live Stock Exchange 21, 26, 32, 
 
 60, 63, 64. 66. 69, 142. 145, 162 
 
 Lloyd vs. GillxTt 424 
 
 vs. Howard 687 
 
 vs. Loaring 1.35 
 
 \K. Scott 863 
 
 Ijjcke vs. Fowler 501 
 
 vs. Pre«cott 798, 802 
 
 Ixwk Haven Bank vs. Pelt/, 7h7, 
 
 79 1 , 795 
 
 I/<MkwfMHl VS. Beckwith 792 
 
 VM. Thome 769,771 
 
 Loder vs. Keknl('« 927 
 
 Logan vs. Musiek 012 
 
 Lombardo vs. Case 414, 453, 455 
 Londheim vs. White 154, 161 
 
 London and Canadian Co. \s. 
 
 Morphy 146, 147, 154, 163 
 
 London and County Bank vs. 
 
 London and River Plate 
 
 Bank 471 
 
 London and Globe Finance 
 
 Corp., In re 807 
 
 London Bank of Scotland, Ex 
 
 parte 819 
 
 London Bank vs. White 786, 788 
 London, etc., Co. vs. Duggan 278 
 London, etc., vs. Brandon 379,957 
 London Founders .\ssn. vs. 
 
 Clarke 247, 444, 756, 1043 
 
 London, Hamburg, etc., Bank, 
 
 Zlueta "s Claim 238, 239 
 
 London Joint Stock Bank vs. 
 
 Simmons, In re 247, 446, 650, 671 
 London vs. Bernardiston 133 
 
 London vs. London 6.50 
 
 Lonergan vs. Peck 376 
 
 \s. Stewart 409 
 
 Long Island Loan it Trust Co. 
 
 V.S. Coioinl)us, etc., R. R. Co. 688 
 
 Long vs. Conklin 903 
 
 \s. Constant 6.58 
 
 Looniis vs. Stave 3.53, 364 
 
 Lord Boiingbroke's Ca.se 799 
 
 Loring vs. Davis 206, 268, 430, 
 
 4S,S, 755, 1037 
 
 vs. Gurney 430 
 
 vs. Salisl>ury Mills 716, 
 
 726. 729 
 
 l^orynicr vs. .Smitli ISO, 612, ()13 
 
 Loubat vs. Le l{oy 64, 69, 75, 95, 
 
 96, 9S, 102. 104, 105 
 
 Ix>ughiin vs. Parkiiisiin .520 
 
 Loughton vs. (Jrillin 519 
 
 Lowe \s. \\ iillcr 863 
 
 vs. ^'ount: 501 
 
 Lowenberg vs. (Jrecnebauin 1 17
 
 xliv 
 
 Tablr oi' Cases. 
 
 Lowenfcld vs. Howat 
 
 Lowry ^■s. ComiiuTcial Bank 
 
 714,729,737,869, 
 
 vs. Dillman 
 
 vs. Miildrow 
 
 vs. Reed 
 Loyd vs. Williams 
 Lucas vs. Dorrein 
 vs. Harper 
 Luders vs. Rasmus 
 I-udowiski vs. Society 
 Lviffmaii vs. Hoy 
 Liilly vs. Bank 
 
 vs. Morgan 
 Lum vs. Fauntleroy 
 Lnptori vs. White 
 Lurman, Matter of 
 Lurman vs. Jarvie 
 Luster, In re 
 
 Lutheran Church vs. Gristfjau 
 Lydis vs. Braman 890, 893, 896, 
 Lyle vs. Addicks 
 Lyne vs. .Siesfield 
 Lyon vs. Bache 
 
 vs. Culbertson 
 
 409, 
 608, 612, 
 
 .■) 4 1 
 
 873 
 543 
 836 
 107 
 859 
 795 
 523 
 316 
 
 64 
 222 
 647 
 532 
 529 
 398 
 
 84 
 112 
 .552 
 110 
 900 
 848 
 554 
 782 
 585, 
 646 
 521 
 531 
 
 64 
 106 
 
 Lyons vs. Coe 
 
 vs. Hodgen 
 Lysaght vs. Assn. 
 Lyttleton vs. Blackburn 
 
 M. 
 
 Maberly vs. Turton 768 
 
 ^lacbryde vs. Eykyn 743 
 
 Machinists' Nat. Bank vs. 
 
 Field 729, 736, 737 
 
 MacDowell vs. Ackley 59, 71, 94, 
 106, 166, 168 
 MacKenzie vs. Johnston 768 
 
 ^Lackey vs. Rausch 590 
 
 Mackie vs. Requa 282, 285 
 
 Macoun vs. Erskine 380, 784 
 
 Maddock vs. Rumball 869 
 
 Madison, etc., R. R. Co. vs. 
 
 Norwich Sav. Soc. 
 
 742 
 
 Maiit'o vs. Atkinson 
 
 302, 
 751, 
 
 vs. Badger 
 
 Magnus vs. Bank 
 
 Magruder vs. Colston 
 
 Maguire vs. Halstead 312, 300, 
 
 Mahoney vs. Caperton 
 
 Maitland vs. Martin 218, 228, 
 
 Manchester Bank, Ex parte 
 
 Mandeville vs. Read 
 
 Manhattan Bunk vs. Walker 
 791, 798, 
 
 Manhattan Co. vs. Osgood 
 
 Manhattan Savings Inst. vs. 
 
 X. Y., etc., Bank 651, 
 
 685, 
 
 Manley vs. Bonnell 
 
 Mann vs. Bishop 
 vs. Butler 
 vs. Sands 
 
 Manning vs. Klein 
 
 vs. McClure 
 
 Manningford vs. Toloman 
 
 Manton vs. Ray 
 
 Manufacturer's Bank \ 
 
 Man\ille vs. Luwton 
 
 Marbled Iron Works vs. Smith 
 
 Marbury vs. Ehlen 
 
 Marden vs. Phillips 
 
 Marean vs. Longley 
 
 Marfield vs. Goodhue 
 
 Marine Grain & Stock Ex- 
 change vs. Western Tnion 
 Tel. Co. 
 
 Marine Ins. Co. vs. Dalryinple 
 
 Marion Co. vs. Stark 
 
 Mark vs. Stanley 
 
 Markham vs. Jaudon 181, 182, 
 
 191, 192, 194, 196, 201, 231, 
 
 265, 275, 295, 307, 340, 346, 
 
 362, 417, 418, 420, 421, 431, 
 
 438, 4.52, 779, 921, 
 
 Marks vs. Metropolitan Stock 
 Exchange 
 
 Markwick vs. Hardington 
 
 199, 
 
 837, 
 Jones 
 
 l-M, 
 9S.S 
 683 
 242 
 268 
 842 
 364 
 751 
 787 
 
 :vu) 
 
 802 
 
 872 
 
 677, 
 686 
 768 
 499 
 
 56 
 781 
 
 49 
 691 
 798 
 846 
 792 
 366 
 
 46 
 713 
 521 
 516 
 351 
 
 23 
 906 
 713 
 776 
 190, 
 255, 
 348, 
 436, 
 932 
 
 522 
 386
 
 Table of Cases. 
 
 xlv 
 
 Marland vs. Stan wood 208 
 
 Marnham, Ex parte 2G0, .')19, 541, 
 
 612 
 
 Marsh vs. Keating 729, 742 
 
 vs. Oneida Bank 7S6, 793 
 
 vs. Russell 638 
 
 Marshall vs. Bank 278, 721 
 
 vs. De Cordova 744 
 
 vs. Levy 266 
 
 vs. Rice 869 
 
 vs. Thurston 538, 585 
 
 Marston vs. Gould 255, 314 
 
 xMarten vs. Gibbon 228, 425, 
 
 573, 880 
 
 Martin vs. Bo\\-ie 661 
 
 vs. Gross 781 
 
 vs. KuntzmuUer 792 
 
 vs. Moulton 366 
 
 vs. Peters 214 
 
 Martineau vs. McCullum 699 
 
 Marvel vs. Marvel 501 
 
 Marvin vs. Brooks 316 
 
 vs. Buchanan 219 
 
 vs. Weeks 366 
 
 Marye vs. Strouse 208, 209, 272, 
 
 274, 360,376,411, 
 
 429, 466 
 
 Maryland Fire Ins. Co. vs. 
 
 Dalrymple 193, 340, 353, 361, 
 
 364, 383, 777 
 
 Marysville Bank vs. Brewing 
 
 Co. 786 
 
 Marzetti's Ca.se 628 
 
 Mason vs. Armitage 812, 813 
 
 VH. Decker 890, 893 
 
 Masonic Bank vs. Bangs 795 
 
 M;i.s.soy vs. Allen 907 
 
 .Ma.st^-rs \H. Ibbcrsoii 683 
 
 .Mast^rson vs. liotts 46 
 
 M.L'^ury vs. Bank 702 
 
 .\Iatlu!\vs vs. Briggs 140 
 
 .Mather, Kx part^' 4S3 
 
 .Matl«T of Chandler .549,609, 61S 
 Matter of Da vies 627 
 
 Matter of B. Htzsimmona 38 
 
 Matter of Haobler vs. X. Y. 
 
 Produce Exchange 16, 60, 61, 
 
 64, <>S, 88, 89, 96, 136 
 
 Matter of J. Fitzsininions 38 
 
 Matter of Leiand 672 
 
 Matter of Lurmau 84 
 
 Matter of Renville 1 4, 20, 25, 31 , 32 
 
 Matter of Pierson 214, 290, 778 
 
 Mattern vs. Sago 194, 785 
 
 Matthew's Est. 403 
 
 Matthews vs. Associated Press 67 
 
 vs. Coe 911 
 
 vs. Fuller 234 
 
 vs. Mass. Nat. Bank 
 
 705, 734 
 
 vs. Warner 874 
 
 Mattingly vs. Pcnnie 397 
 
 vs. Roach 397 
 
 Maturin vs. Tredennick 366 
 
 Maurer vs. King 59S 
 
 Maury vs. Ingrahani 873 
 
 Maxted vs. Morris 207, 210, 
 
 432, 1012 
 
 vs. Paine 207, 210, 41 1, 424, 
 
 429, 432, 987, 9S9, 990, 992, 
 
 1000, 1008, 1020, 1021, 1031, 
 
 10.33, 1035 
 
 Maxton vs. Gheen 323, 325, .560, 
 
 566 
 
 May vs. Angeli 469, 999 
 
 vs. Chapman 683 
 
 Mayhew's Ca.se 1020 
 
 Maynard vs. Anderson 803 
 
 vs. Eaton 1021 
 
 vs. Pea.se 926 
 
 Mayo vs. Knowlton 2.55, 366, 384, 
 
 390, 775 
 
 Mayor vs. Governor 726 
 
 Mayor of London \s. Brandon 379, 
 
 9.57 
 McAllister vs. Kiilin 776 
 
 McArfhur vs. Seaforth 913, 915 
 
 McBlair vs. Gibbs 483 
 
 .McBurncy vs. Martin 198, 779 
 
 Mc(;abe VH. Emmoas 1.52, l.W, l.VJ
 
 xlvi 
 
 Tabic of Cases. 
 
 MrC'abe vs. Goodfcllow 
 Mc'CiijiK vs. Woodiium 
 McCalla vs. Clark 101, 
 
 McCarthy \-s. Wcare Commis- 
 sion Co. 597, 
 McCarty vs. Roots 
 McClain vs. Flcshman 17S, 
 Mc'Clcan vs. Stme 
 McClernan vs. Hall 
 Mc'Coml) vs. Wri^jiit 
 Mc'Connell \'s. Apollo 
 McCord vs. McCord Ids. 
 McCormick vs. Nicholls 
 McDaniels as. Flower Co. 
 McDermid vs. Cotton 
 McDevitt vs. Connolly 217, 3(i,S, 
 McDonakl vs. Grant 
 McDonnell vs. Trustees 
 McDowell vs. Bank of 
 
 mington 
 McEwen vs. Davis 
 
 vs. Woods 
 McFadden vs. Goettert 
 McGeoch vs. Hooker 
 McGinnis vs. Smythe 
 McGowen vs. Rcmina,ton 
 McGrew vs. City Produce Ex- 
 change .39, .507, 
 
 vs. McGregor 
 McGuffin vs. Dinsmore 
 McHenry vs. Jewett 248, 249, 
 Mcllvaine a's. Egerton 491, 543, 
 Mclntyre vs. Warren 
 McKane vs. Gen. Dem. Comm. 
 McKay vs. McKay 
 McKay's Ca.se 
 McKenna, Ex parte 
 McKcnnej' vs. Haines 
 McKenzie vs. Nevins 
 McKeon vs. Kearney 
 McKinley vs. Williams 
 McKinncl vs. Robinson 
 McLaughlin vs. Barnard 314, 
 McLelland vs. Norfolk 
 McLoughlin vs. Erdlitz 
 
 Wil- 
 717, 
 
 211, 
 
 337 
 
 49 
 793 
 2(iH 
 
 890 
 091 
 
 201 
 594 
 751 
 
 752 
 IS 
 ICO 
 500 
 250 
 208 
 821 
 291 
 IS 
 
 791 
 787 
 220 
 744 
 212 
 347 
 830 
 
 531 
 548 
 
 42 
 2.50 
 612 
 770 
 
 44 
 391 
 742 
 802 
 913 
 805 
 
 37 
 926 
 484 
 396 
 655 
 
 55 
 
 .McLure vs. Sherman 832, 891 
 
 McMalion vs. Hauhr 42 
 
 McNaughton vs. Haldeman 569 
 McNeil vs. Tenth Nat. Bank 
 
 192, 201, .569, 682, 701, 
 705, 706, 722, 72S, 729 
 M((2uillen vs. Real E.st. Ex. 1 16 
 
 Meaciiem \s. Stearns 397 
 
 Meads vs. Mer. Bank 692 
 
 Meaker vs. Fiero S(ll 
 
 Mechanics' Bank vs. Duncan 
 
 508, 587 
 vs. N. Y. & 
 N. II. 
 R. R. 
 Co. 
 vs. Seitz 7X 
 
 etc, 
 
 Seton 
 Bank \s. 
 
 Mechanics', 
 
 Crow 
 Medewes' Trust, In re 
 Medical Society vs. \\'eatheily 
 Meehan vs. Forrester 
 
 \'s. Sharp 
 Megibben a's. I'erin 
 Melchert vs. American U'. Tel. 
 
 Co. 
 Mellott vs. Downing 
 
 775 
 Memphis vs. Bethel 
 Memphis & Little Rock R. R. 
 
 Co. \s. \\'acker 
 Memphis Appeal Pul). Co. vs. 
 
 Pike 
 Mendel as. Boyd 
 Mendelsohn, In re 
 Mercantile Credit .\.ssn. 
 Merchant vs. O'Rourke 
 Merchant Banking Co. vs. 
 
 Phcpnix Bes. Steel Co. 
 Merchants' Bank vs. Livings- 
 ton 718, 
 vs. Meyer 787 
 vs. Weill 
 
 740 
 794, 
 SOI 
 829 
 
 692 
 796 
 6 1 
 791 
 499 
 846 
 
 535 
 221. 
 SIO 
 8(i5 
 
 907 
 
 8.55 
 601 
 170 
 102 
 897 
 
 671 
 
 728 
 801 
 099
 
 Tablo of Cases. 
 
 xlvii 
 
 Merchant*;' Xational Bank vs. 
 Armstrong 624 
 
 vs. 
 HaU 664 
 
 Merriam vs. Stock Exchange 
 
 524, 563 
 Merrick vs. Butler 6S7 
 
 Merrill vs. Farmers Loan and 
 
 Trust Co. .393 
 
 vs. Garver 51.^, 601 
 
 vs. Mclntyre 49 
 
 vs. Norfolk Bank 799 
 
 Merry vs. Nickalls 992, 999 
 
 vs. Ochiltree 504 
 
 Mer^vin vs. Hamilton 386, 3SS, 389, 
 
 784, 785 
 
 Metcalf vs. Bruin 52 
 
 Metropolitan Bank vs. Jansen 534 
 
 Metropolitan Co. vs. Scrinigeour 968 
 
 Metropolitan Grain Ex. vs. 
 
 Chicago Board of Trade 23, 25 
 Mewburn vs. Eaton 229, 1010 
 
 Me.\. and So. Am. Co., Re, vs. 
 
 Aston, Re 402, 475, 476, 482 
 
 Meyer, In re 787 
 
 Meyer vs. Belden 780 
 
 vs. Blair 842 
 
 vs. Clark 513 
 
 vs. Muscatine 653 
 
 vs. Porter 053 
 
 vs. Richards 695 
 
 Michael vs. Hart 420, 774, 911, 100s 
 
 Mirhoud vs. Girod 37(> 
 
 .Middlesex Bank vs. Minot 383 
 
 Mi.ldleton's Ca.s«' 1.33 
 
 .Mi.ilan.l Railway vs. Taylor 729 
 
 Mifflin vs. Bn)ok 322 
 
 Miles \s. Andrews 500 
 
 Milford vs. HiisrheH Orti) 
 
 Mili.r vs. Barber 904 
 
 \s. lienHley 501 
 
 VH. CV)ate.s 865 
 
 vs. Fanner's Batik 7N(i 
 
 VK. Inx. Co. of \(»rtli 
 
 America 395, 129 
 
 Miller vs. Kent 219, 768 
 
 vs. Murray 249 
 
 vs. Race 650, 667, 686 
 
 Milliken vs. Dehon 306, 307, 337, 
 
 338, 340, 342, 353, 
 
 358 
 
 Mills vs. Gould 513 
 
 vs. Hunt 752 
 
 Milnes vs. Gery 135 
 
 Milroy vs. Chicago, M. & St. P. 
 
 Ry. Co. 432 
 
 MiuLS vs. West 682 
 
 Miner as. Beekman 296 
 
 Minier vs. Bank 790 
 
 Minnesheimer vs. Doolittle 593 
 
 Minnesota, etc., Co. vs. White- 
 breast, etc., Co. 501 
 Minor vs. Beveridge 232, 233 
 Miashall vs. Arthur 778 
 Minturn \s. Fisher 421 
 Mississippi, etc., R. R. Co. vs. 
 
 Cromwell 832 
 
 Mitchell vs. Catchings 509 
 
 vs. City of Glasgow 
 
 Bank 325, 488, 821 
 
 vs. Cockburn 483 
 
 vs. Harris 135 
 
 vs. Xewhall 190, 220, 222, 
 
 424, 429, 986 
 
 Mobile Mutual Insurance Co. 
 
 \'s. Cullom 476 
 
 .Mocatta vs. Bell 255, 257, 
 
 766, 989 
 Moeller vs. Mcl,a<j;.iii 335, 337 
 
 Moffat vs. Far(iuli:ir 821 
 
 .Monul St<'amboat Co. vs. Mc- 
 Gregor 66 
 Molir vs. Micsen 596 
 Molii.c. In re 6, 379, 944, 9.59, 963 
 .Moline Prow Co. vs. Carson 832 
 Moilett vs. Robin-son 172. 7()1 
 Mon.arch Co., Re 96S 
 Moticiirr vs. Dermott 8()5 
 Monk \s. (irali.-im 729, 777 
 I .M(>nr(»e vs. Peck 316
 
 xlvm 
 
 Tiihlc of ('asps. 
 
 Monroe vs. Smolly .518 
 
 Moody vs. Bank 705 
 
 Moon \s. Guardians Ii02 
 
 Moore v.s. .Vnicrican Loan it 
 
 Trust Co. 294 
 
 vs. Battle 864 
 
 vs. lirink 31 
 
 vs. Burke 023 
 
 vs. Metropolitan Xat. 
 
 Bank G9,S, 099, 705, 
 
 707, 722 
 
 vs. Vance 873 
 
 vs. Vosbur^h 897 
 
 vs. Voughton 274, 430 
 
 vs. Woodworth 865 
 
 Moorehouse \s. Crangle 897 
 
 Morehead vs. Western Xortli 
 
 Carolina R. R. Co. 855 
 
 Morgan, In re 541 
 
 Morgan's Estate 245 
 
 Morgan as. Congdon 806 
 
 vs. Jaudon 192 
 
 vs. Lathrop 787 
 
 vs. Mason 395 
 
 vs. Mechanics', etc., 
 
 Banking .\ssoc. 873 
 vs. Pebrer 480, 517 
 
 vs. Richards 524 
 
 vs. Skiddy 624 
 
 vs. Smith Am. Organ 
 
 Co. 099 
 
 vs. United States 689 
 
 vs. Worthington 899 
 
 Morley vs. Morley 242 
 
 Mornyer vs. Cooper 683 
 
 Morrice vs. Hunter 220, 225 
 
 Morrill vs. Cooper 899 
 
 Morris vs. Cannan 476, 1044 
 
 vs. Dixon National 
 
 Bank 501 
 
 vs. Grant 130, 
 
 132, 381 
 vs. Jamieson 328,411 
 
 A's. Norton 503 
 
 vs. Telegraph Co. 526 
 
 Morris Canal ct Banking Co. vs. 
 
 Fisher (')53 
 
 vs. Lewis 347, 348, 653 
 
 Morris Run Coal Co. vs. Bar- 
 clay Coal Co. 634, 638, 639 
 Morrison vs. Glover 113 
 Morrissey vs. Bromai 601 
 Morse vs. Swits 623 
 Mortimer vs. McCallan 424, ISl, 
 612, 784, 995, 102S 
 Morton vs. Burn 691 
 vs. Timken 852 
 Mosier vs. Norton 872 
 Mosse vs. Salt 798 
 Moss, In re 781 
 Moss vs. Exchange Bank 504, 530 
 Mott vs. Clark 699 
 Mould vs. Importers', etc., 
 
 Bank 291 
 
 Moulton AS. Warren Manufac- 
 turing Co. 836 
 Mount Holly Turnpike Co. vs. 
 
 Terrel 705' 
 
 Mountford vs. Scott 795 
 
 Mount Sterling Bank vs. Green 787 
 Moxey's Appeal 48, 60, 91, 107, 
 
 IIS 
 Moxey vs. Philadelphia Stock 
 
 Exchange 48, 60, 91, 107, 1 IS 
 Muench vs. Bank 780 
 
 Mulcah}' vs. Emigrant Indus- 
 trial Savings Bank 322 
 Mulford vs. Caeser 596 
 Muller vs. Legerdre 259, 785 
 vs. Pondir 687 
 Mulligan, In re 293 
 Mulroy AS. Lodge 64 
 Mulviilo VS. Bank 278 
 Muniff)rd vs. Insurance Co. 865, 870 
 Mundorff vsi Wickersham 719 
 Mundy a's. Davis 832 
 Municipal Ins. Co. vs. Indus- 
 trial & Gen. Trust Co. 414, 416, 
 
 465 
 Munn vs. Barnum 390
 
 Table of Cases. 
 
 xlix 
 
 Munn vs. Illinois 22, 23 
 
 Munnerlyn vs. Bank 799 
 
 Mumis vs. Donovan Commis- 
 sion Co. oOl 
 Murdock vs. Bank 7S7 
 vs. Philips .Vcadeiny 
 
 97, lOS 
 Murphy vs. Chicago Board of 
 
 Trade 22 
 
 Murray vs. Balou OSl 
 
 vs. Doud 213 
 
 vs. Hewitt 774, 922,1007 
 
 vs. Lardner (352, 653, 6S6 
 
 vs. Pate 911 
 
 vs. Pinkett 798, 799 
 
 vs. Stanton 911 
 
 vs. Stevens 849, 853 
 
 Musgrave vs. Beckendorff 903, 913 
 
 Musgrave's Case 828 
 
 Mus.sell vs. Cooke 877, 886, 899 
 
 Mutton vs. Peat 290, 773 
 
 Mutual Life Ins. Co. vs. Watson 585 
 
 Myer vs. Periijal 881 
 
 Myers vs. Paine 203, 398, 406, 773 
 
 vs. Tobias 569 
 
 N. 
 
 Narhring vs. Bank of .Mohiio 770 
 Nash vs. Bryant 772 
 
 Xa.shua Bank vs. .Vhbott 155, 150. 
 
 169 
 
 National Bank vs. .Mloii 219 
 
 vs. Caldwell 921 
 
 vs. Case 26() 
 
 vs. Conn. .Mut. 
 
 L. IriH.Co. 7S6 
 vs. fionnloy 792 
 vs. Kirljy Oss 
 
 V8. La.sh(T 42 
 
 vs. Ix'wis S72 
 
 vs. Peek 7s7, 795 
 vs. Sinifli 793 
 
 VB. Spc'iuht 795 
 
 vs. VariDcr- 
 
 wcrkor 42. 14 
 
 National Coffee Palace Co., 
 
 In re 302 
 
 National Tel. News Co. vs. 
 
 Western Union 26 
 
 Nauman vs. Caldwell 921 
 
 NaAe vs. Wilson 547 
 
 Neely vs. Rood 799 
 
 Neiler vs. Kelly 777 
 
 Neill vs. Rogers 787 
 
 Neilson, Ex parte 467, 470, 475, 
 496, 967 
 Neilson vs. James 247. 269, 300, 
 472,488, 773 
 Neimann, In re 159 
 
 Nellis vs. Clark 687 
 
 Nelson vs. Board of Trade 16, 62, 
 64, 71, fK), 109 
 Neponset Bank vs. Leland 795 
 
 Nesbitt vs. Helser 207 
 
 Nester vs. Craig 216 
 
 Neukirch vs. Keppler 75, 97 
 
 Newbery vs. Garland 624 
 
 Newbold vs. Patrick 792 
 
 New Brunswick Co. vs. Mug- 
 
 geridge 812, 817, 828 
 
 Newcojnb vs. Ahny 792 
 
 vs. R. R. Co. 275, 294 
 .\ewoll vs. Gregg 688 
 
 Newman vs. Lee 220, 428 
 
 -Newport, etc., vs. Douglas .381 
 
 -Newton vs. Bronson 393 
 
 vs. Cribbes 1(M).S 
 
 vs. Wilson S()3 
 
 .New York vs. Whipple 42 
 
 -New York, etc.. Stock Ex- 
 change vs. Board of Trade 
 
 )6, 22, 21, 26 
 
 -Nichols, Matter of 1.59 
 
 vs. B.irdwell 50 
 
 vs. Kafoii 1.53 
 
 vs. Lumpkin ,5S,S 
 
 vs. St.ile SOI 
 
 .\ichoUf)ti, .V.ssigiice, \'s. (ioiich 11.5, 
 
 IS6. 9.S(), 992 
 
 Niekalls vs. Katoii 1012. 1021
 
 1 
 
 Table of Cases. 
 
 Nickiills vs. Mcrrv IJl, TCI, U)V2. 
 
 101 1, 1 ()•_"_', 102") 
 
 Nicoll vs. .\iiic.s 17S 
 
 vs. Hurko 755 
 
 \ s. Munii 1- 
 
 Nightiuiiiilc vs. Devisnic 10 
 
 Nims vs. Vaughn 845 
 
 Nolans vs. Clarke 529 
 
 Nonmapietic Watch Co. of 
 
 America, In re 7S7 
 
 Norris vs. Irish Land Co. S5(), 85r) 
 
 North vs. Forest SS5, S8S, S9 1 
 
 vs. Phillips 196, 203, 5(11, 
 
 o()(), ()}(), 902, 909, 929 
 
 Northern Central R. R. Co. vs. 
 
 Walworth 847 
 
 Northern National Bank vs. 
 
 Arnold 524 
 
 Northrup vs. Buffinnton .549, 582 
 
 vs. Shook 177, 188 
 
 Norton, Ex parte 772 
 
 Norton vs. Blinn 503 
 
 Nourse vs. Prime 245, 253, 254, 
 
 425, 428, 433, 445, 871, 876 
 
 Noyes, Matter of 168, 169 
 
 Noves vs. Marsh 835, 842 
 
 vs. Spauldin,^ 475, 479, 612 
 
 Nntbrown vs. Thornton 812, 815, 
 
 825 
 Nuttini!; vs. Thomason 716 
 
 N. Y. it New Haven R. R. Co. 
 
 vs. Schuyler 705, 738, 739, 740 
 N. Y., etc.. Stock Ex. vs. Mel- 
 
 len 500, 531 
 
 N. Y., L. E. <t W. R. Co. vs. 
 
 Davies 259, 276 
 
 N. Y. MarI)lo(l Iron \\'()rks vs. 
 
 Smith 46 
 
 N. Y. Protective Assn. vs. 
 McGrath 103 
 
 Oakley vs. Rip;by 479 
 
 Gates vs. Nat. Bank 691 
 
 Oatinan vs. Batavian Bank 792 
 
 O'Brien \s. Luques 525 
 
 O'Connor vs. Irvine 837 
 
 vs. Mechanics' liaiik S03 
 O'Calla^han vs. Sawyer 687 
 
 O'Connell vs. Lamb 51 
 
 Odes.s:i vs. Mendel 817, 828 
 
 Odell vs. Gray 651 
 
 O'Donofihoe vs. Lejisett 411, 416 
 Oelricks vs. Ford 334, 336, 465 
 
 Oj^den vs. Lathrop 259, 348, 363 
 Ohio Ry. Co. vs. People 849 
 
 Oidershaw vs. Knowles 220, 409, 
 
 785 
 Oldham vs. Ramsden 552 
 
 Olds vs. Chicago Board of 
 
 Trade 108, 126 
 
 Olery vs. Brown 16, 99, 104 
 
 Olipiiant vs. Markham 511, 512 
 
 Oliver vs. Bank of England 732 
 Olivierson vs. Coles 480 
 
 O'Meara vs. North American 
 
 Min. Co. 843 
 
 O'Neill vs. Sinclair 176 
 
 vs. Wchl) 847 
 
 vs. Whigham 190,350 
 
 Ontario Bank vs. Mumford 658 
 
 Opinion of Attorney General 
 
 of Pcnna. 174 
 
 Oppenheim vs. Waterhury 237 
 
 Orange & A. R. R. vs. Fvdijerg 903 
 Orchard vs. School District 865 
 Oregon ct Trans. Co. vs. Kil- 
 mers 259, 426, 435, 451 
 Oriental Co. vs. Briggs 816, 825 
 Orleans vs. Piatt 682 
 Ormerod's Case 968 
 Ormond, Lady, vs. Hutchinson 
 
 768 
 Ormsl)y vs. Vermont Copper 
 
 Mining Co. 911 
 
 Orr vs. Bigelow 905 
 
 Orvis vs. Curtiss 323, 861 
 
 vs. Wells, Fargo & Co. 758 
 Osgood AS. Bander 500, 504 
 
 O'Sullivan vs. Thomas 556
 
 Table of Cases. 
 
 U 
 
 Otis vs. Cullum 
 
 2lV) 
 
 6; 1.5 
 
 Otto vs. Union 
 
 64, 69, 74 
 
 ,90, 
 
 
 91, 
 
 lOS 
 
 Ottos Mines, In re 
 
 732, 
 
 907 
 
 Overend Gurney Co.. 
 
 In re 
 
 828 
 
 Overman vs. Hoboken City 
 
 
 Bank 
 
 
 411 
 
 Overseers of Poor 
 
 ^•s. State 
 
 
 Bank 
 
 
 799 
 
 Overwej:, In re 
 
 387, 
 
 414 
 
 Owen vs. Davis 
 
 
 577 
 
 vs. Ramsay 
 
 
 400 
 
 vs. Routh 
 
 913, 
 
 927 
 
 Owens vs. Missionar> 
 
 Society 
 
 37 
 
 Owl Canon Gypsum 
 
 Co. vs. 
 
 
 Ferguson 
 
 
 397 
 
 Owsley vs. Bank 
 
 801, 
 
 802 
 
 Page vs. Board of Trade 62, 63 
 
 vs. Edmunds 159 
 
 vs. Fowler 930 
 
 vs. Shainwald 312 
 
 Paine vs. Hutchinson 825, 827, 
 
 999, 1028, 1043 
 
 vs. Loeb 382, 760 
 
 Palmer vs. Hussey 779, 781 
 
 vs. Palmer 767 
 
 vs. Yates (i99 
 
 Palmetto Lodge vs. Hubbell 83 
 
 Pancoast vs. Gowen 48, 147, 148 
 
 vs. Houston 147 
 
 Panmure, E.\ parte 217, 225, OK) 
 
 Parinell vs. Hurley 7(J9 
 
 Pardee vs. Fish 672 
 
 Pardridge vs. Cutler 430. .501, 585 
 
 Parish vs. .\. V. Produce Ex. 
 
 71, 117, 165 
 
 Park v.s. Musgrave 336, 772 
 
 VH. .SimmotiH 40 
 
 Park Bank v.s. Watw.n 686 
 
 Parker vs. Gale 7Sl 
 
 vs. McQuesten ()24 
 
 VH. Moore .505, 506 
 
 VH. Otia 5(J7, .598 
 
 Par ker \ s. Ranishottoni 864, 865 
 Parmalee as. Lawrence 863 
 
 Pa. R. R. Co.'s Appeal 723, 726, 727 
 Parrot vs. Thatcher 432 
 
 Parsons vs. Martin 257, 298, 
 
 414, 460, 779 
 Partlow vs. Williams 869 
 
 Partridge vs. Bank of England 
 
 656, 670 
 
 vs. Forsyth 432 
 
 vs. Ins. Co. 665 
 
 Pasley vs. Freeman 623 
 
 Paterson vs. Powell 476, 480 
 
 Paton vs. Newman 220, 750 
 
 Patterson's Appeal 548 
 
 Patterson vs. Keys 220 
 
 vs. Powell 476, 488 
 
 Pawle vs. Gunn 883, 890 
 
 Payne, Ex parte 143 
 
 Payne \s. Elliott 776 
 
 Peabody as. Eastern Methodist 
 
 Soc. 37 
 
 vs. Speyei-s 428, 513, 
 
 543, 890 
 
 Peacock vs. Rhodes 68(i 
 
 Pearce vs. Dill 523 
 
 vs. Foote 203, 500, 530 
 
 vs. Rice 501 
 
 Pearse vs. Green 768 
 
 Pearson vs. Scott l.").s, I6(), 705, 
 
 710, 1007 
 
 Pea.sc, Ex parte 795 
 
 Peckham vs. Kct.luini 220. 223 
 
 Peck vs. Bank 790 
 
 vs. Doran A: Wright Co. .589 
 
 Redder vs. Preston 797 
 
 Peek vs. Derry 901 
 
 vs. Gurney 623 
 
 Peet vs. Hatcher 532 
 
 Pender vs. Fox 1024 
 
 vs. Lushington 821 
 
 Peiidinton vs. Smi.ssacrf .'>32 
 
 Pennell vs. .Mcxaiidcr 111, 7()l 
 
 vs. DcfT.-ll 79.S 
 
 PcniiNylvuniu Co. vs. Franklin 720
 
 Hi 
 
 Table of Cases. 
 
 Pennsylvania R. R. Co's. Ajv 
 
 peal 723, 724, 72G, 727 
 
 Pennsylvania R. i{. Co. \s. 
 
 Penn. Co. 250 
 
 People vs. .\m. Inst. 109 
 
 vs. Board of Trade (1) 
 
 62, G-.i 
 vs. Board of Trade (2) 
 
 16, 60, 62, 63 
 vs. Chicago Live Stock 
 
 Ex. 60, 67, 6S 
 
 vs. City of Rochester 295 
 vs. Coleman (1) 362 
 
 vs. Coleman (2) 29,31,60 
 vs. Co. 855 
 
 vs. Crockett 856 
 
 vs. Feitner (1) 14, 20, 21, 
 29, 158, 162, 163, 164 
 vs. Feitner (2) 180 
 
 vs. Fire Underwriters 67 
 vs. Garrahan 625 
 
 vs. Goslin 625, 627 
 
 vs. Institute 109 
 
 vs. Karste 221 
 
 vs. Mechanics' Aid 
 
 Soc. 109 
 
 vs. Med. Soc. of Erie 59, 
 62, 109, 111 
 vs. Metropolitan R. R. 
 
 Co. 850, 856 
 
 vs. Milk Ex. 67, 68, 618 
 vs. Miller 16,114,128,853 
 vs. Musical Union 95, 96, 
 105, 111 
 vs. Mutual Trust Co. 17 
 vs. X. v. Ben. Soc. 109, 
 111 
 vs. X. Y. Commercial 
 
 As.sn. 74, 80, 88, 89, 97 
 vs. N. Y. Cotton Ex. 
 
 80, 89, 109, 110, 111. 
 1.33, 137, 142 
 vs. Olmstead 46 
 
 vs. Parker Vein Coal 
 
 Co. 852 
 
 People \s. Produce Ex. 60, OS, 71, 
 
 88, 89, 90, 91, 95, 96, 
 
 105, 106, 109 
 
 vs. Powers 38 
 
 vs. Putnam 625 
 
 vs. The St. George's 
 
 Soc. of Detroit 106 
 vs. San Franciscus 
 
 Benev, Soc. 95, 111 
 vs. Sheldon 67 
 
 vs. Society 64, 109 
 
 vs. Sugar Refining 
 
 Co. 641 
 
 vs. Thomas 200 
 
 vs. Todd 521, 607 
 
 AS. Union 64 
 
 vs. Wade .507, 519, 521, 607 
 
 vs. Wemple 29, 31, 69, 70 
 
 Peoples' Bank vs. Legrand 794 
 
 vs. McKurty 225 
 
 Peoples' Savings Bank vs. 
 
 Gifford 505 
 
 Peppercorne vs. Cicncli 1012, 1022 
 Perin vs. Parker 22S, 335,337,340, 
 345, 350, 426, 785 
 Perkins vs. Smitli 860 
 
 Perring vs. Hone 42 
 
 Perryman vs. Wolffc 532 
 
 Perry vs. Barnett 473, 488, 785 
 vs. Hale 624 
 
 Perth Amboy Mut. l^oan Assn. 
 
 vs. Chapman 686 
 
 Peters vs. E<1 wards 365 
 
 vs. Grim 198, 569 
 
 vs. Mortimer 874 
 
 Peterson vs. Currier 501 
 
 vs. Hall 805 
 
 Petillon vs. Hippie 772 
 
 Petre vs. Sutherland 380 
 
 Petrie vs. Clark 694 
 
 vs. Hanney 483, 577 
 
 Pettamberdas vs. Thackoorsey- 
 
 dass 617 
 
 Pettpo vs. Prout 686 
 
 Phelps vs. Holderness 506
 
 Table of Cases. 
 
 lin 
 
 Phelps vs. Riley S73 
 
 Phen6 vs. Gillan 260 
 
 Phila. Nat. Bank vs. Smith 785 
 
 Philes vs. Hickies 845 
 
 Phillip's Appeal 913 
 
 Phillips, Ex parte 260, 
 
 519, 541, 612 
 
 Phillips vs. Belden 771 
 
 vs. Berger 836 
 
 vs. Gifford 516 
 
 vs. Jones 58, 387 
 
 vs. Mason 865 
 
 vs. Moir 220 
 
 Pickard vs. Sears 732 
 
 Picker v.s. London and County 
 
 Bankinji Co. 446, 650, 655 
 
 Pickering vs. Appleby 876, 886 
 
 vs. Cease 500, 585, 608, 
 
 612, 636, 646 
 
 vs. Demeritt 208, 366, 
 
 375, 384, 462, 464 
 
 Pidgeon vs. Burslem 963 
 
 Pierson, Matter of 214, 290, 778 
 
 Pierson vs. Scott 775 
 
 Pigott V.S. Cubley 337, 349, 383 
 
 vs. Thompson 52 
 
 Pike VS. J.edwell 868, 869 
 
 Pim vs. Wait 214 
 
 Pinch vs. ,\nthon}' 58 
 
 Pinkerton vs. Manchester, etc., 
 
 R. Co. 8.52, 907 
 
 Pinkett vs. Wright 819 
 
 Pinney vs. WelLs 806 
 
 Pitcher vs. Board of Trader of 
 
 Cliicago ()2, 90, 108 
 
 Pitt vs. HoliiH.-H 6.56, 6.57 
 
 Pittsburgh Bank vh. Neal fisC) 
 
 Pittsburgh, etc., Co. vs. Lyndc 
 
 682, 686 
 Kxdiaiigc, 
 
 19 
 
 203, 501,.'->J5, 
 
 612, 6.3() 
 
 523, 517 
 
 51 
 
 Pittsburgh Stock 
 
 In rf; 
 Pixley VH. lioynfon 
 
 Plnnk vs. Jack.soM 
 Plant vs. UickcrHon 
 
 Piatt \s. Baldwin 400 
 
 vs. Jones 151, 155, 158, 159 
 vs. Machinists' Nut. 
 
 Bank 725 
 
 vs. Taunton Copper Mfg. 
 
 Co. 725 
 
 Player vs. .\rcher 133 
 
 Pluml) vs. Campbell 516 
 
 Plumbly, In re 122, 123, 12(1, 9S0 
 
 Poindexter vs. Davis 402 
 
 Pollock vs. Nat. Bank 725, 726, 
 
 729, 842 
 
 vs. Stables 220, 424, 429, 
 
 442, 9S6 
 
 Ponder vs. Jerome Hill Cotton 
 
 Co. 507 
 
 Pontifex vs. Bignold 623 
 
 Poole vs. Middleton 819, 828 
 
 Pope vs. Hanke 500 
 
 Porter vs. Massengale 504 
 
 AS. Parks 719 
 
 vs. Pittsburgh Steel Co. 683 
 
 vs. Viets 607, 612, 646 
 
 vs. Woodruff 36() 
 
 vs. Wormsor 201, .302, .305, 
 
 3.59, 366, 3r)7. .3S2, 
 
 770, 896, 900 
 
 Post vs. Leland 52! 
 
 Postal Telegraph Calile Co. vs. 
 
 Lathrop 
 Pott vs. Flather 
 Potter vs. Thompson 
 Potts vs. Aeciitoriiacht 
 vs. Dunlop 
 vs. Mayer 
 Powell \'s. Abl)ott 
 vs. Dunn 
 vs. Jessop 
 vs. McCord 
 vs. Tnistees Vil. 
 
 N«!wbiirgh 
 vs. W.'ildron 1,52, 
 I'owncy \s. Ml()ml)crg 
 Prall vs. Ii;(iiiil 
 
 vs. Tilt ir>3, 
 
 
 .502 
 
 902, 
 
 909 
 
 339 
 
 319 
 
 
 395 
 
 
 548 
 
 
 ()92 
 
 84 
 
 107 
 
 
 48 
 
 882, 
 
 903 
 
 .500, 
 
 5S5 
 
 ..f 
 
 
 
 7SI 
 
 1."). 
 
 I.5S 
 
 
 S(J5 
 
 71 1. 
 
 715 
 
 706, 
 
 711
 
 llv 
 
 TaUlo of Tnsos. 
 
 Pratt vs. Adfims .S7;i 
 
 vs. Ainerican liill Tele- 
 phone Co. 41)9 
 vs. Boody 51);} 
 vs. Coinan 692 
 v.s. Mtifhiiiist's Nat. 
 
 Bank 729, 730, 737 
 vs. Taunton Copper 
 
 Mfg. Co. 720, 728, 729, 
 730, 737 
 Pray vs. Mitehell 888 
 
 Preacliers' Aid Society vs. Hieh 37 
 Prentice vs. London 1 U, 142 
 
 Prentiss vs. Press oOl 
 
 Prescott vs. De Forest 72() 
 
 President, etc., Del. etc., Co. 
 
 vs. Pa. Coal Co. 136 
 
 Press vs. Duncan .504 
 
 Preston vs. Cincinnati, C. & 
 
 H. V. R. Co. 503 
 
 Price, Matter of 277 
 
 Price vs. Cover 201, 252, 255 
 
 vs. Minot 494, 497 
 
 Prince vs. Robinson 330, 387 
 
 Printing Co. vs. Washburn 705 
 Prioleau vs. South W. R. 
 
 Bank 658 
 
 Pritchett vs. Smart 482 
 
 Proctor vs. Brain 379, 559, 959 
 
 Prosser vs. First National Bank 624 
 Prout vs. Chisolm 206, 207, 213, 
 214, 218, 219, 306, 398, 409, 
 
 775 
 Pryce, In re 1002 
 
 Public Grain & Stock Exchange 
 
 ^•s. ^Western ITnion Tel. Co. 22 
 Pugh vs. Moore 695, 760 
 
 Pullen vs. Snelus 899 
 
 Pullman vs. Upton 266 
 
 Pulsifer vs. Shephard 298 
 
 Purchase vs. Bank 842 
 
 Purdy vs. Sistare 296 
 
 Pursifull vs. Pineville Banking 
 
 Co. 794 
 
 Pyke, Ex parte 552 
 
 a. ♦ 
 
 (Juackenbos vs. Sayre 863, 865 
 
 Quaries vs. State 516 
 
 (^ueen vs. Shropsliire riiion 
 
 Railways ,SI9 
 
 Queensland Co. vs. O'Connell 1022 
 
 Quincey vs. White 139, 321, .363, 
 
 366, .380, 381,640,770 
 
 Quinlan vs. Raymond 233, 347, 
 
 .36.5, .399, 927 
 
 R. 
 
 Rabone ^s. Williams 709 
 
 Rafferty \s. Buffalo City Gas 
 
 Co. " 627 
 
 Railroad Co. vs. Benedict 889 
 
 vs. ICchtcrnacht 
 
 835, 840 
 vs. Schutte 651, 696 
 Rainey ^■s. Laing 36 
 
 RamloU Thackcoorseydass vs. 
 
 Soojumnull Dhondmull 480 
 
 Randall vs. Bank 935 
 
 Randon vs. Barton 902, 903 
 
 Rand vs. Whipple 214 
 
 vs. White Mountain R. 
 
 R. 
 
 902, 
 296, 
 
 Rankin vs. McCullough 
 Rapalje vs. Nors worthy 
 Rasch vs. His Creditors 
 Ratcliffe vs. Mendelsohn 445, 
 Rathbon vs. Budlong 
 Rawle vs. Gunn 
 Rawlings vs. Hall 403, 417, 
 482, 485, 
 Raj^mond vs. Colton 
 
 vs. Lcavitt 616, 617, 
 628, 6.33, 634, 
 vs. Palmer 
 Read vs. .\nderson 211, 552, 
 vs. Jaudon 
 
 vs. Lambert ' 192, 
 
 776, 
 Reading vs. Porter 
 Real Estate Trust Co. vs. Bird 
 
 909 
 
 3.58 
 397 
 336 
 470 
 751 
 890 
 477, 
 647 
 895 
 618, 
 635 
 803 
 .556 
 322 
 347, 
 778 
 6.53 
 706
 
 Table of Cases. 
 
 U 
 
 Ream vs. Hamilton r)94 
 
 Redding vs. Godwin 904 
 
 Redmond vs. Bedford 138 
 
 Red Polled Club vs. Red Polleii 
 
 Club 5S 
 
 Reed vs. Copeland SS.'S 
 
 Rees vs. Fernie .")1<). (i44, 772 
 
 vs. Fellow 211 
 
 Reese vs. Rutherford 272 
 
 Reeside, The 605 
 
 Ref. Ch. of Gallupville vs. 
 
 Schoolcraft 37 
 
 Reg vs. Aspinall 620, 644 
 
 vs. Brown 624 
 
 vs. Carnatie Ry. 851 
 
 vs. Charnwood Ry. Co. 851 
 vs. Esdaile 622, 624 
 
 vs. Midland Ry. Co. 856 
 
 vs. Shropshire W. R. 
 
 Co. 851 
 
 vs. Whitmarsh 29 
 
 Reggio vs. Stevens & Co. 555 
 
 Reilly vs. Freeman 320 
 
 Reitenbaugh vs. Ludwick 928 
 
 Remfry vs. Butler 220 
 
 Renner vs. Bank of Columbia 421 
 Rermie vs. Morris 992, 1023 
 
 Renville, Matter of 14, 20, 25, 
 
 31, 32 
 
 Repplier vs. Jacobs 509 
 
 Rex vs. Comrs. Ct. of Requests 900 
 
 vs. Gurney 020 
 
 vs. London .Assurance Co. 850 
 
 vs. Mott ()2() 
 
 vs. Norris 020 
 
 vs. Richard.son 10s 
 
 vs. Wafldington OlS 
 
 Reynes vs. Dumont 780, 795 
 
 Reynolds vs. Boland 835, 83«j 
 
 vs. .\eal 803 
 
 vs. Plumbers' Assn. 17 
 
 vs. Scriber 836, 894 
 
 Rhea vs. Rhiner 881 
 
 Rhinr-landcr vh. Bank 2<M 
 
 UhcMlfrM VH. Fuli(!Mwid«T 873 
 
 Rice vs. Board of Trade 10, 00, 
 
 195, 
 
 vs. Davis 
 vs. Gist 
 vs. Winslow 
 Rich vs. Boyce 
 Richards vs. La Tourette 
 
 vs. Warring 
 Richardson vs. Dickinson 
 vs. Emmet t 
 vs. International 
 
 Bank 
 vs. Mann 
 vs. Mining Co. 
 vs. Sewing Ma- 
 chine Co. 
 vs. Storment, Todd 
 & Co. 
 Riebe vs. Hellman 439, ,501, 
 Rigg vs. Railway Co. 
 Riggs vs. Magruder 
 
 vs. Pennsylvania, etc., 
 R. R. Co. 
 Righter vs. Philadelphia Ware- 
 house Co. 
 Riley vs. Schawacker 
 Rimmer vs. ^^'ehster 
 Rindskoff vs. Barrett 
 Ringler vs. Jetter 
 Riordon vs. Doty 
 Ritter vs. Cushman 
 Ritterband as. Baggett 
 Rivara vs. Ghio 
 Rivers vs. P'ame 
 Roach vs. Duckworth 
 Ko.inoka St. Ry. Co 
 
 Ili.ks 
 Hobliins \<. Butler 
 vs. Dillaye 
 vs. Iv I wards 
 vs. Wells 
 Roberts vs. Berdell 
 vs. Croft 
 VH. Hail 
 vs. LaiH? 
 
 192, 
 146, 
 
 vs. 
 
 868, 
 
 296. 
 
 02. 
 
 63 
 400 
 529 
 521 
 291 
 792 
 661 
 
 58 
 720 
 
 802 
 383 
 853 
 
 913 
 
 469 
 585 
 834 
 889 
 
 681 
 
 872 
 683 
 216 
 673 
 838 
 505 
 33() 
 152 
 806 
 49 
 382 
 
 836 
 30 
 873 
 2()6 
 53 
 913 
 800 
 602 
 683
 
 Ivi 
 
 Table <>f Cases. 
 
 llobcrts vs. Sykes 2*»0 
 
 vs. Trenayiu' SOI, S()S 
 
 Robertson vs. lletTar 977 
 
 Robins v.>^. Edwards 210, 2()t) 
 
 Robinson vs. Bohvinn Co. 21 C) 
 
 vs. Cliartored Bank S20 
 
 vs. Crawford 346, 431 
 
 vs. Frost 70.5 
 
 vs. Hurley 34S, 
 
 350, 910 
 
 vs. Jenkins 211 
 
 vs. Kitc'hin 957 
 
 vs. Mearas 517 
 
 vs. Mollett 360, 374, 3.82, 
 
 411, 421, 422, 424, 
 
 425, 430, 404, 471, 
 
 472, 916, 970, 995 
 
 vs. Norris 271, 307, 
 
 309, 872 
 
 vs. X. Y. and Texas 
 
 S. S. Co. 410 
 
 Robson vs. Fallowes 479 
 
 Roche vs. Day 501 
 
 Rock vs. Nichols 494, 490 
 
 Rockwell vs. Charles 809 
 
 Rockwood vs. Oakfield 591 
 
 Rogers, Ex parte 488, 552, 555, 572, 
 
 999 
 
 Rogers vs. Burr 889 
 
 vs. Corre 503 
 
 vs. Edmund 503 
 
 vs. Gould 255, 883, 890 
 
 vs. Marriott 001 
 
 vs. Van Xortwick 830 
 
 vs. Walsh 095 
 
 vs. Wiley 326, 350, 424, 
 
 434, 917 
 
 Romaine vs. Van Allen 921 
 
 Rommel vs. Coal Co. 835, 830 
 
 Roome vs. Swan 154, 155 
 
 Roosevelt vs. Roosevelt 393 
 
 Root vs. Merriam 525, 710, 755 
 
 Roots vs. Williamson 716, 755 
 
 Rorke vs. Russell 41, 43, 45, 40, 59, 
 
 80, 107 
 
 Hoikc \s. San Francisco Stock 
 Exchange lioard 
 
 49, 115 
 
 Ro.se vs. Dick.son S05, 872 
 
 Kosenberg \s. Meyer 203 
 
 Rosenfeld vs. Einstein 853 
 
 Kosenstock vs. Tormey 210, 213, 
 
 356, 361, 388, 389, 392, 425 
 
 Rosewarne vs. Billing 220, 552, 
 
 555, 572 
 
 Roshi's Appeal 110 
 
 Ross vs. Union Pac. R. R. 811, 
 
 812,829,830, 833 
 
 Rothschild vs. Allen 255, 356 
 
 vs. Brookman 768 
 
 Roulstone vs. Moore 523 
 
 Roundtree vs. Smith 577 
 
 Rourke vs. Elk Drug Co. 627 
 
 vs. Short 585 
 
 Row vs. Dawson 658 
 
 Rowe vs. Guillaume 781 
 
 vs. Stevens 400 
 
 Rowley vs. Swift 311 
 
 Rowley's Appeal 843 
 
 Royal Ex. Ins. Co. vs. Moore 
 
 267, 7.58, 763 
 
 Rozet vs. McClellan 275 
 
 Rubino vs. Scott 395 
 
 Kuchizky vs. De Haven 407, 563, 
 
 566, 569 
 
 Rudgo AS. Bowman 476 
 
 Rudolf vs. Winters 008, 014, 046 
 
 Rued vs. Cooper 507, 598 
 
 Rugg vs. Davis 300 
 
 Ruinball vs. Bank 278, 446, 651, 
 
 663, 670, 072, 705, 721 
 
 Rumsey vs. Berry 544, 012, 044 
 
 vs. Ry. Co. 847 
 
 Russell vs. Bos worth 674 
 
 vs. Hadduck 787 
 
 vs. X. Y. Produce Ex. 
 
 20, 01, 06 
 
 Russell's Arbitrator 135 
 
 Ryan vs. Cudahy 62, 63, 68, 90, 
 
 139, 335
 
 Table of Cases. 
 
 Ryiiii vs. Laiuson 
 vs. McLane 
 vs. Seaboard 
 Co. 
 Ryder vs. Sistare 
 Ryers vs. Tuska 
 Ryman vs. Gerlach 
 
 s. 
 
 62 
 833 
 
 et R. R. 
 
 846 
 29S, 323, 773 
 750, 7->3, 891 
 394, 459, 463 
 
 380, 
 
 138, 
 
 Sachs vs. Spielmau 
 
 Sadd vs. Foster 
 
 Sadler vs. Lee 
 
 SafFrey, Ex parte 
 
 Saffrey vs. Mayer 
 
 St. James's Club 
 
 St. Laurence Steamboat Co., 
 
 In re 
 St. Louis, etc., vs. Wilson 
 St. Paul Third Xat. Bank vs. 
 
 Stillwater Gas Co. 
 Salaman vs. Warner 624, 630, 
 Salisbury Mills vs. Townsend 
 726, 729, 
 Saltsman vs. Shults 
 Saltus vs. Genin 201, 255, 365, 
 Sampson vs. Camperdown 
 Cotton Mills 
 vs. Shaw 632, 
 
 Samuel vs. Rowe 774, 922, 1 
 Samuels vs. Oliver 400, 429, 500, 
 Sanborn vs. lienedict 501, 
 
 Sander vs. Eidlen 
 Sanderson \s. liell 800, 
 
 Sandford vs. Supervisors 29, 31 
 San Franci.sco vs. .\nderson 
 
 vs. WannenlH'im 
 Sargent vs. Franklin Ins. Co. 
 vs. Kaasas Midland 
 R. R. Co. 
 Saunders vs. Kentish 4K0, ISl, 
 
 vs. Phelps Co. 
 Savanniih «t Charlofiton R. R. 
 
 Co. vs. Callahan 
 Savannah Cotton Kx. vs. Stat<» 
 01, IIU, 111, 
 
 968 
 603 
 243 
 978 
 556 
 33 
 
 250 
 832 
 
 799 
 632 
 
 737 
 
 42 
 
 776 
 
 505 
 647 
 008 
 645 
 612 
 42 
 807 
 . 69 
 164 
 164 
 494 
 
 S33 
 !H4 
 505 
 
 907 
 
 134 
 
 Sawyer vs. Gruner 100, 132, 140 
 
 vs. Langford 481 
 
 vs. Taggert 531, 582, 645 
 
 Sayles vs. Blane 827, 1035 
 
 249 
 799 
 832 
 501 
 806 
 316 
 
 Co. 
 
 vs. Brown 
 Sayre vs. Weil 
 Sayward vs. Houghton 
 Scanlon vs. Warren 
 Scarfe vs. Morgan 
 Schantz vs. Oaknian 
 Schenectady R. R 
 
 Thatcher 
 Schepeler vs. Eisner 
 Schermerhorn vs. Tahnan 
 Scheu vs. Grand Lodge 
 Schiller vs. Jaennichen 
 Schlee vs. Guckenheimer 
 Schmidt vs. Gunther 
 Sclimiieckle vs. Waters 
 Schneider vs. Turner 501, 502, 611, 
 614, 616 
 Scholey vs. Mumford 279 
 
 Scholfield vs. Union Bank 250 
 
 Schreiner vs. Orr 59!) 
 
 Schuler vs. Laclede Bank 786,801 
 
 vs. 
 
 269 
 
 192, 362, 785 
 
 871 
 
 95 
 
 58 
 
 501 
 
 41, 46 
 
 587 
 
 Schwa rt 
 
 1. vs. Weckler 
 
 
 53 
 
 Scofield 
 
 vs. Blackinan 
 
 
 4()0 
 
 
 vs. McXaught 
 
 
 873 
 
 Scollans 
 
 vs. Rollins 
 
 432, 
 
 440, 
 
 
 
 651, 
 
 673 
 
 Scott vs. 
 
 Avery 
 
 118 
 
 140 
 
 vs. 
 
 Brown 432, .59(), 
 
 625, 
 
 62S 
 
 vs. 
 
 Cousins 
 
 
 957 
 
 vs. 
 
 Ernest 
 
 756, 
 
 978 
 
 vs. 
 
 Franklin 
 
 786 
 
 789 
 
 vs. 
 
 Godfrey 205, 
 
 429, 
 
 44(i, 
 
 
 469 
 
 . 757 
 
 771 
 
 vs. 
 
 Inglis 
 
 
 957 
 
 vs. 
 
 Irving 
 
 
 430 
 
 vs. 
 
 I VfS 
 
 
 156 
 
 vs. 
 
 Jackson 
 
 
 950 
 
 vs. 
 
 North 
 
 
 950 
 
 vs. 
 
 Scott 
 
 
 757 
 
 Scoitld vs. fhittor 
 
 
 813 
 
 Scracc vs. Wliittington 
 
 
 76;i
 
 Iv 
 
 111 
 
 Tabic of Cases. 
 
 Scrimsicour's Claim 233, 317, 3sC., 
 
 387, 120, 42J, 136. 43S, 103, <)92, 
 
 i)f>5. 1001. 1001 
 
 RcruiXiis vs. ("otterill .S33, SAA 
 
 Seariii'; vs. Butler 3.53, 30.'') 
 
 Searles vs. Lmu 510 
 
 Scars vs. Ames 8S9 
 
 vs. Boston 831 
 
 Secor vs. Goslin 203, 62.5 
 
 Security Bunk vs. National 
 
 Bank 673 
 
 Seddon vs. Resenbaum 896 
 
 Seeligson vs. Lewis 51 1 
 
 Selby vs. Morgan 870 
 
 Selden vs. Eq. Trust Co. 177 
 
 Sergeant vs. Franklin Insur- 
 ance Co. 476 
 Sewall vs. Boston Water Power 
 
 Co. 728, 729, 730, 906 
 
 vs. Lancaster Bank 777 
 
 Sewell vs. Ives 45, 80, 107, 108, 
 
 126, 137 
 
 Sexton vs. Commercial Ex. 94 
 
 Seybel vs. Nat. Currency Bank 
 
 649, 684, 6SG 
 Sevmour vs. Bridge 473, 488, 785 
 vs. Delancy 829 
 
 Shapley vs. Abbott 750 
 
 Sharp Vs. Stalker 593 
 
 Shattuck vs. Robins 624 
 
 Shaw vs. Bentley 968 
 
 vs. Caledonian Railway 
 
 Co. 541 
 
 vs. Clark 533 
 
 vs. Fisher 815, 817, 818, 
 
 825, 827, 829, 832 
 
 • vs. Holland 902, 906, 
 
 909, 915 
 
 vs. Port Philip Mining 
 
 Co. 732 
 
 vs. Railroad Co. 660, 679 
 
 vs. Rowley 827 
 
 vs. Spencer 462, 712,715 
 
 Shea vs. Metropolitan Stock 
 
 Exc. 520 
 
 Slu'chy vs. Shinn .507 
 
 Sheffield vs. Banks 278, 651 , S03 
 vs. Barclay 732 
 
 vs. London .Tnint- 
 
 Stock Hank CTl 
 
 Shenield Gas Co. vs. Harrison 
 
 817, snt 
 
 .Slicldon vs. Parker 6.59 
 
 Shcllington \-8. Howland 268, 269 
 Shclmcrdine vs. Wal.sh 250 
 
 Sliepard vs. Stockham 837 
 
 Shepherd \s. Gillespie 825, 828, 999 
 vs. Johnson 913 
 
 vs. Sawyer 518 
 
 Sheppard vs. Barrett 48, 118, 415, 
 
 438 
 
 vs. Murphy 757, 828, 
 
 986,992, 999, 1008, 
 
 1012, 1039 
 
 Sherwood vs. American Bible 
 
 Society 37 
 
 vs. Meadow 703 
 
 vs. Tradesman's 
 
 Nat. Bank 889 
 Shinkle vs. Vickery 836 
 
 Shipman vs. Rollins 37 
 
 Sherman vs. Weiss 790 
 
 Shermerliorn vs. Trust Co. 8(55 
 
 Shipley vs. Mechanics' Bank 
 
 8.50. 852 
 Shoemaker vs. Exchange 35 
 
 Short vs. Mercier 402 
 
 Shrewsbury vs. Blount 623 
 
 Shropshire Union R. ct C. Co. 
 
 vs. The Queen 710, 724 
 
 Shumates' Ca.se 516 
 
 Sibbald vs. Bethlehem Iron 
 
 Co. 211, 397 
 
 Sibley vs. Carteret Club of 
 
 Elizabeth 102, 103 
 
 Sigua Iron Co. vs. Brown 270 
 
 Silberman vs. Clark 416 
 
 Sillcocks vs. Gallandet 290 
 
 Si nun vs. Anglo-American Tele- 
 graph Co. 731,734
 
 Tabl«' of Cases. 
 
 lix 
 
 Simmons vs. Bank 
 
 716. S03 
 
 915 
 
 vs. More 
 
 
 214 
 
 vs. Monier 
 
 
 135 
 
 vs. Taylor 
 
 683 
 
 688 
 
 Simon vs. Merritt 
 
 
 683 
 
 Simpkins vs. Lane 
 
 
 911 
 
 Sims vs. Maj' 
 
 298, 
 
 392 
 
 vs. Vyse 
 
 320 
 
 .321 
 
 Singerly vs. Jolinson 
 
 47,60 
 
 116 
 
 Sinsrleton vs. Bank 
 
 
 504 
 
 Sipe vs. Finarty 
 
 
 518 
 
 Sistare vs. Best 
 
 201, 
 
 241, 
 
 
 323, 
 
 361 
 
 Sizor vs. Miller 
 
 
 873 
 
 Skelton vs. Wood 
 
 372, 785 
 
 967 
 
 Skiff vs. Stoddard 
 
 181, 193, 
 
 194, 
 
 19G, 206, 213, 220, 
 
 245, 252, 
 
 2.55, 
 
 2.58, 281, 282, 284, 
 
 285, 292, 
 
 .324, 
 
 392, 426 
 
 434, 439, 
 
 527 
 
 Skinner vs. City of 
 
 London 
 
 
 Marine 
 
 Ins. Cor- 
 
 
 poration 
 
 910 
 
 vs. Osgood 
 
 
 501 
 
 Skipworth vs. Gibson 
 
 
 870 
 
 Skunk vs. Merchants' 
 
 Bank 
 
 792 
 
 Slack vs. Bank 
 
 
 787 
 
 Slemmons vs. Thomp 
 
 son 
 
 855 
 
 Sloman vs. Bank of 
 
 England 
 
 
 
 726, 
 
 720 
 
 Slosson vs. Duff 
 
 
 S73 
 
 Smart vs. Mechanics' 
 
 Bank 865 
 
 873 
 
 Smedlcy vs. Roberts 
 
 
 8(58 
 
 Smith vs. Barclay 
 
 1.52 
 
 1.55 
 
 vs. Barringer 
 
 
 414 
 
 vs. Blundy 
 
 
 432 
 
 vs. Bollcs 
 
 
 90} 
 
 vs. Bouck 
 
 
 xso 
 
 vs. Bouvier 
 
 207, 29.S, 
 
 303, 
 
 323, 32.5, 
 
 432, .5.5.S, 
 
 .561, 
 
 
 .565, 5()9 
 
 612 
 
 V8. Clencli 
 
 
 623 
 
 vs. Co. 
 
 
 26 
 
 vs. Compton 
 
 
 1.35 
 
 VH. n.'ath 
 
 272 
 
 S72 
 
 VH. Kummcrcr 
 
 
 570 
 
 vs. Lindo 220, 424, 955, 
 956, 962, 963 
 vs. Nelson 37 
 
 vs. N. Y., etc., Clearing 
 
 House 255, 366 
 
 vs. X. Y. Stock and 
 
 Produce Ex. 207, 215, 
 
 2,55, 394, .590, 645 
 
 vs. Pettee 910 
 
 vs. Pryor 300, 426 
 
 vs. Reynolds 228, 425, 445, 
 
 752, 986 
 
 vs. Savin 279, 280, 281, 282, 
 
 283, 292, 353, 926, 935 
 
 vs. Schibel 
 
 658 
 
 vs. Seattle 
 
 366 
 
 vs. Smith 
 
 518 
 
 vs. Thomas 
 
 .563, 564, 565, 
 
 
 566 
 
 vs. Tracv 
 
 299 
 
 vs. Western LTnion Tel. 
 
 Co. 511, .531 
 
 Smyth vs. Glendinniiig 19S, 746 
 Snelling vs. Howard 751, 760 
 
 Snoddy vs. Bank .507, 531, 586, 647 
 
 Snow vs. Wlieelor 
 
 42 
 
 Soljy vs. The People 
 
 502 
 
 Soci(5t6 Generak^ vs. Walker 
 
 716 
 
 Soc. for Visitation of Sick vs. 
 
 
 Com. 90. 10 1, 111, 
 
 112 
 
 Solomon vs. McKay 90, 
 
 110 
 
 Somerby vs. liuntin 888 
 
 889 
 
 Sondhcim vs. Gill)('rt 
 
 525 
 
 Somu'born vs. I.a\('n'll<i 107, 
 
 1.3S 
 
 Soudieu vs. Faurcs 
 
 91(1 
 
 Soulos \s. Wcldon National 
 
 
 Bank 
 
 526 
 
 So\ifh .Xfrican Tcrrrtorics \s. 
 
 
 Wallington 
 
 S2I 
 
 South .\frican Trust »V I'inancc 
 
 
 Co., In ro 
 
 603 
 
 Southall vs. Farish 
 
 S73 
 
 .Soiitlicr vs. StiM'ckli 
 
 1 10 
 
 Sparliawk \s. I)ri'\il .{5.3, .356 
 
 ,361) 
 
 vs. Vcrki'.s 
 
 153. 1.59
 
 Tabl«' of Cases. 
 
 Sparks vs. Husted IS 
 
 Sparlinp; vs. Parker SSI 
 
 Spear vs. Hart 453 
 
 Speight vs. Gaunt 242, 393 
 
 Sperry's Appeal 64, 112 
 
 Speyer vs. Col.ijato 21S, 3*H), 774 
 Spinney vs. Hill S9S 
 
 Spooner vs. Holmes 653 
 
 Sprajnie vs. Cocheco Mfg. Co. 712 
 vs. Warren 601, 646 
 
 Spreckels vs. Nevada Rank 250 
 Spreeve vs. Adams 774 
 
 Sproul vs. Morris 35 
 
 Squires vs. Whisken 517 
 
 Stack vs. O'Hara 91, 95 
 
 Stackhouse vs. Countess of 
 
 Jersey 800 
 
 Stackpole vs. Seymour 854 
 
 Stalker vs. McDonald 693, 694, 695 
 Standen vs. Brown 870 
 
 Stannard Milling Co. vs. 
 
 Flower 530 
 
 Stanton vs. Allen 638 
 
 vs. Percival 824 
 
 vs. Small .543, 612 
 
 Staples vs. (Joukl 332, 333, 334, 
 
 490, 491 
 
 Star Fire Ins. Co. vs. Palmer 383 
 
 Stark vs. Bank 790 
 
 Starkey vs. Bank of England 732 
 
 State Bank vs. Armstrong 7S6, 791 
 
 vs. Coquillard 861 
 
 vs. Cowan 873 
 
 State of Illinois vs. Delafield 
 
 301, 651 
 State of Nevada vs. Guerrew 856 
 State of New Jersey vs. Rector 
 
 of Trinity Church 152 
 
 State vs. Associated Press 27 
 
 vs. Bank 856 
 
 vs. Beach 792 
 
 vs. Bell Telephone Co. 25 
 
 vs. Canal 857 
 
 vs. Carpenter 856 
 
 vs. Carriage Co. 853, 856 
 
 Stale vs. ("hamher of (Com- 
 merce (1) 11 
 vs. Chamber of Com- 
 merce (2) 1 15 
 vs. Cheraw 856 
 vs. Cincinnati Chamber 
 
 of Commerce 97, 1()() 
 vs. Cobb 651 
 
 vs. Corcoran 527 
 
 vs. Crescent City Co. 843 
 vs. Cunningham 509 
 
 vs. Duncan 177, 507 
 
 vs. Field 176 
 
 vs. First National Bank 
 
 of Jefferson 855 
 
 vs. Ga. Med. Soc. 62, 109, 111 
 vs. Grimes 528 
 
 vs. Gritzer 509 
 
 vs. Kenter 509 
 
 vs. Logan 509 
 
 vs. Lusitanian Portu- 
 guese Soc. 112 
 vs. McMillan 527 
 vs. Milwaukee Chamber 
 
 of Com. 60, 62, 65, 
 
 110, 11! 
 vs. N. (). i^- C. 1{. Co. S51 
 vs. Orleans K. H. Co. 857 
 vs. Rombauer 850, 853 
 
 vs. Sla^onska 1 1 2 
 
 vs. Smith 249 
 
 vs. R. R.Co. 225 
 
 vs. St. Louis Paint Mfg. 
 
 Co. 852 
 
 vs. The Georgia Med. Soc. 
 
 62, 109, ill 
 vs. Vn. Merchants' Ex. 
 
 110, 111, 133, 135, 136 
 vs. Warren Foundry Co. 852 
 vs. Williams 64, 72 
 
 Steadman vs. Hockley 806 
 
 Stearns vs. Marsh 349 
 
 Stebhins vs. Leowolf 491, 494, 495 
 Steers vs. Lashley 483, 484, 555, 
 
 647
 
 Table of Cases. 
 
 Ixi 
 
 Steinman vs. Wilkins S07 
 
 Stenton vs. Jerome 191, 102, 307, 
 
 335, 336, 337, 348, 
 
 353, 354. 38(i, 429. 
 
 7S2 
 
 Stephens \'.s. Board 799 
 
 vs. De Medina 234. 1043 
 
 Steptoe vs. Harvey SOS 
 
 Sterlins vs. Jaudon 192, 322, 380 
 
 Stern Brothers vs. Bank 090 
 
 SternberiTcr vs. Bernheinier 316 
 
 Sterns vs. Marsh 295, 350 
 
 Stevenson vs. Unfecher 873 
 
 Stevens vs. Hurllxit liank 934 
 
 Stewart, Ex parte 800 
 
 Stewart vs. .\berdein 430 
 
 vs. Cauty 225, 235, 424, 
 
 430, 443, 909. 934 
 
 vs. Drake 2.55,340,341, 
 
 347, 348 
 
 vs. Garrett 579 
 
 vs. Lupton 1044 
 
 vs. Urvis 267 
 
 vs. Parnell 548 
 
 vs. Schall 599 
 
 Sticktenoth vs. Central Ex. of 
 
 ChicafTo 531 
 
 Stief vs. Hart 260 
 
 Stiason vs. Thornton 713, 729 
 
 St. I^awrence Steamboat Co., 
 
 In re 2.50 
 
 St^K'k Co. vs. Gahnoyle 221 
 
 Stock Exrhangc vs. Board of 
 
 ThmJc ()2H 
 
 Stwkinn \'s. Sapc 784 
 
 Sto<kwell vs. Holmes 873 
 
 StfKJdard vs. Kimb.ill 691. 695 
 
 St<H?v«'r \s. Whit man <i65 
 
 StoKdeii vs. \a-o 761, 1022 
 
 Strikes vs. Kr;i/i.T 349, .383 
 
 vs Stoki'H S37 
 
 Stone vs. Kliiofl 682 
 
 vs. I,iilhro|> 2i>9 
 
 vs. Marsii 243 
 
 StonebridKe vs. Smith 111, 119 
 
 Stoneham vs. Wyman 
 
 Story vs. Brown 
 vs. Salomon 
 
 447, 750, 
 
 1031 
 
 768 
 
 204, 602, 
 
 604, 646 
 
 769 
 
 321 
 
 Stoughton vs. Lynch 
 
 Stover vs. Flack 
 
 Stowe vs. Hamilton Bank 795 
 
 Strachan, In re 181, 294, 978, 1003 
 
 Straffon, Ex parte 827 
 
 Strange vs. Houston & T. C. 
 
 R. R. Co. 729, 734 
 vs. Lee 52 
 
 Strasburg R. Co. vs. Engelhardt 835 
 Stratford vs. Jones 781 
 
 Strathmore vs. Vane 796 
 
 Straus vs. Tradesman's Nat. 
 
 Bank 786, 798 
 
 Stray vs. RusseU 247, 267, 424, 
 
 444, 765, 1024, 1043 
 
 Street vs. Morgan 757 
 
 vs. Rigby 135 
 
 Strcmpel vs. Rubins 104 
 
 Stribbhng vs. Bank 865 
 
 Strickland a's. Leggett 295 
 
 Strong vs. Lyon 238 
 
 vs. Xat. Banking Assn. 349 
 
 vs. Place 316 
 
 vs. Smith 248 
 
 Strouse \s. Elting 898, 899 
 
 Struthors vs. Clark 904, 906 
 
 vs. Drexel 861, .S70 
 
 Stuart vs. Bank 873 
 
 vs. Bigler 152 
 
 Sturges vs. Board of Trade 60, 62, 
 
 108 
 Sii.ir.'/, vs. Hunipclly 393 
 
 .Sullivan vs. Jernigaii 432 
 
 vs. Postal Tel. Co. 23 
 
 vs. Tuck 8.16 
 
 Summerlin vs. I'rontcriza Sil- 
 ver Mining iV; .Milling Co. 8.32 
 Sumner vs. Stewart 125 
 
 Suter vs. MutthewH 812 
 
 Sutherland, In re 158
 
 Ixii 
 
 Table of Cases. 
 
 Sutton vs. Gray 
 
 
 319 
 
 vs. TatiKiin -ill. 
 
 220, 
 
 225, 
 
 ■I2l 
 
 425, 
 
 442 
 
 Huytiain vs. Jenkins 
 
 
 931 
 
 Swan, Ex parte 
 
 
 705 
 
 Swan vs. Baxter 
 
 
 434 
 
 vs. North British 
 
 Aus- 
 
 
 tralasian Co. 
 
 705, 
 
 726 
 
 vs. Prodnee Bank 
 
 
 712 
 
 Swanson vs. White 
 
 
 865 
 
 Sweeney vs. Rogers 
 
 
 207 
 
 Sweeting vs. Pearce 
 
 
 45S 
 
 Swift, In re 191, 194, 
 
 195, 
 
 196, 
 
 210, 284, 352 
 
 390 
 
 927 
 
 Swift vs. Tyson 691 
 
 694 
 
 790 
 
 Swifts vs. S. F. S. & E. Board 
 
 49 
 
 Swim vs. Wilson 
 
 679 
 
 707 
 
 Symons vs. Mulkern 
 
 650 
 
 787 
 
 Taft vs. Chapman 693 
 
 vs. Riesenman 569, 570 
 
 Tahiti Cotton Co., In re 278, 821 
 Taintor vs. Prendergrast 754, 
 
 755, 765 
 Talbot vs. Doran & Wright 
 
 Co. 219, 775 
 vs. Warfield 873 
 
 Taliaferro vs. First Nat. Bank 
 
 284, 440, 674 
 
 Tallentine vs. Ayre 206 
 
 Talmage vs. Bank 206, 279, 281, 
 
 282, 283, 355 
 
 Talty vs. Freedsman's Bank 
 
 284, 672 
 
 Tantiun vs. Arnold 527, 593 
 
 Tate vs. Wellings 480, 869, 872 
 
 Tatem vs. RecAC 556 
 
 Tattersall vs. Groote 140 
 
 Taussig vs. Hart 193, 208, 255, 258, 
 
 298, 366, 368, 373, 
 
 384, 933 
 
 Ta>lor, Estate of 198, 570 
 
 Taylor vs. Bailey 210, 427, 501 
 
 vs. Blair 312 
 
 Taylor \s. Great Indian Pen- 
 insula Ry. Co. 703, 
 705, 709, 726, 730, 
 1008, 1009 
 vs. Guest 367 
 
 vs. Ketcluuu 192, 255, 
 
 329, 451 
 vs. Page 699 
 
 vs. Penquite 595 
 
 vs. Pknner 181, 292, 293, 
 294, 1002, 1003 
 vs. Stray 220, 244, 247, 
 266, 268, 963 
 Teasdale vs. McPike 595 
 
 Tempest vs. Kilner 220, 222, 475, 
 880, 902, 909, 915 
 Temple vs. Toronto Stock Ex. 
 
 98, 112 
 Tenant vs. Elliott 577, 966 
 
 Tenney vs. Foote 647 
 
 Terrell vs. Georgia R. R. Co 855 
 Terry vs. Birmingham Savings 
 
 Bank 368, 4-11 
 
 vs. McNeil 937 
 
 Terwilliger vs. Knapp 90S 
 
 Tetlcy vs. Shand 761 
 
 Teutonia Bk. as. Loeb 795 
 
 Texas vs. Wliite 689 
 
 Thacker vs. Hardy 228, 479, 487, 
 
 554, 568, 570, 572, 573, 575, 578, 
 
 612, 646, 994, 999, 1006 
 
 Thackoorseydass a-s. Dhond- 
 
 mull 517 
 
 The Carteret Club as. Florence 
 
 103, 104, 109 
 The City vs. J.amson 653, 654 
 The King vs. Bank of England 
 
 849, 850 
 vs. Berenger 619, 638 
 The New Brunswick Co. vs. 
 
 Muggeridge 817, 828 
 
 The Reeside 665 
 
 The Soc. for the Visitation of 
 the Sick vs. The Common 90, 
 
 104, 111, 112
 
 Table of Cases. 
 
 Ixiii 
 
 The White and Black Smiths 
 
 Soc. vs. Van Dylve 
 Third Nat. Bank vs. Boyd 241 
 vs. Harrison 
 
 525, 594 
 vs. Tinsley 
 
 Thorn vs. Bigland 
 Thomas, Case of 
 Thomas vs. Elhnaker 2 
 
 vs. Graves 
 
 vs. Hooker Col villi' 
 Steam Pump 
 Co. 
 vs. Murray 
 vs. Xew'ton 
 Thompson vs. Adams 22, 60, 
 14S 
 vs. Alser 492, 494, 
 892, 893 
 
 vs. Bank 
 
 283, 
 353 
 
 vs. Brady 
 
 vs. Brown 
 
 vs. Charnock 135, 
 
 vs. Cununin^s 501 
 
 vs. Davies 
 
 vs. Dominy 
 
 vs. Harcourt 
 
 vs. Le<; County 
 
 vs. Maddox 
 
 vs. .Mayor 
 
 vs. Meade 
 
 vs. rianet licm-fit 
 Biiildiii^i Soc. 
 
 vs. Powlcs 
 
 vs. RioixT 
 
 vs. St. .Nicholas 
 
 .Nat. U-.iuk 
 
 vs. Tolaiid 193, 
 
 (i57, 705, 
 
 vs. Whitney 
 Thoiiip«on'H I<^lutc 
 Tlionison vs. CIvdewlale Maiik 
 
 90 
 242 
 
 . 794 
 
 525, 
 
 594 
 
 774 
 
 43 
 
 1, 29 
 432 
 
 411 
 
 8G9 
 
 482 
 
 117, 
 
 439 
 
 496, 
 
 , 908 
 
 295. 
 
 425 
 
 522 
 
 321 
 
 140 
 
 , 550 
 
 Gas 
 
 657 
 815 
 653 
 599 
 397 
 207 
 
 I 14 
 S70 
 569 
 
 (iSl 
 255, 
 713 
 H97 
 
 5rs 
 
 2«»5, 
 799 
 
 Thomson vs. Davenport 444, 746 
 Thorndike vs. Locke 908 
 
 Thorp vs. Woodhull 843 
 
 Thuemmler vs. Barth 790 
 
 Thurman vs. Wilson 908 
 
 Thwaite as. Warner 484 
 
 Til)betts vs. Blood 42, 46 
 
 Ticknor's Est. 37 
 
 Tiernan vs. Jackson 656, 657 
 
 Tiffany vs. Williams 41 
 
 Tiller vs. Spradley 751 
 
 Tilloy vs. County of Cook 414, 
 
 421 
 
 Timms vs. Williams 144 
 
 Timpson vs. Allen 214, 215 
 
 Tindall vs. Childress 518 
 
 Tisdale vs. Harris 777, 886, 887, 
 
 888, 889, 894 
 
 Tobey vs. Bank 787 
 
 vs. Hakes \ 850 
 
 Todd vs. Bishop 375 
 
 vs. Diamond State Co. 838 
 
 vs. Shelbourne 695 
 
 vs. Taft 842 
 
 Tomblin vs. Callen 504, 580 
 
 Tome vs. Parkersburfth R. R. 
 
 Co. 705, 742 
 
 Tomkins vs. Saffory 120, 122, 123, 
 
 125, 126. 469, 978, 9S0 
 
 891 
 
 896 
 
 838 
 
 56 
 
 9SS. 1032, 
 
 1033, 1034 
 
 899 
 
 S56 
 
 ,S()5 
 
 SI'.), S5I. 
 
 .S.-,() 
 
 Tr.iiiiniel \s. (iordou 51(), 135, 151 
 
 Traii.xcontincntnl Co. vs. ilil- 
 
 MHTs 416, 135, 451 
 
 Treasurer vs. Conunercial C<i. 
 
 .S41, ,S45 
 
 Toinlinson \'s. -Millci- 
 Tompkins vs. Shcohan 
 ToplilT vs. .McKcndree 
 Torrey \s. Bjikcr 
 Torrini^ton \s. Lowe 
 
 Towlc vs. Tdpliaiii 
 TowiH's vs. .Nichols 
 Town.scnd vs. Cornino; 
 vs. Mclvcr
 
 Ixiv 
 
 Ta])lo of Cases. 
 
 Treat vs. Snydecker 501 
 
 vs. White 405 
 
 Trebilc'ock vs. WiKson 543 
 Trenton, etc., In.s. Co. v.s. 
 
 John.son 518 
 Trevelyan v.s. Cliartor 366, 3S2 
 Trinil)ie v.s. Bank 733, 734 
 True vs. Houirhton 846 
 Trueman v.s. Loder 763 
 Trumlile v.s. Ward 624 
 Tnell vs. Paine 213 
 Tally vs. Tranor 930 
 Turner, Ex parte 479 
 Turner vs. Liverpool Docks 708 
 vs. Moy 825 
 vs. Tread way 693 
 Turnoy vs. Bank 873 
 Turpin vs. Turpin 873 
 Twycross vs. Grant 628 
 Tyler vs. Barrows 543 
 Tynji vs. Coninicrcial Ware- 
 house Co. 870, 874 
 
 u. 
 
 Ubben vs. Binnian 501 
 
 Union Bank of Australia vs. 
 
 Murray-.\ynsley 791 
 
 Union Bank vs. Carr 504, 580 
 
 vs. Laird 717 
 
 vs. Leary 898 
 
 vs. Tutt 786 
 
 Union College vs. Wheeler 697, 698 
 
 Union Pac. R. Co. vs. Schiflf 291 
 
 Union Stock Yards Bank vs. 
 
 Gille-spie 798, 803 
 
 United States vs. liank of Mo- 
 
 vs. 
 vs. 
 vs. 
 vs. 
 
 vs. 
 
 649 
 177 
 177 
 618 
 
 tropolis 
 Cuttinu; 
 Fisk 
 
 Knisiht Co 
 National lik. 
 
 of .Ashville 798 
 Northern Se- 
 
 c u r i t i es 
 
 Co. 640 
 
 United States vs. Thomas 178 
 
 vs. Vaughan 494 
 United States Bank vs. Ma- 
 
 calester 786, 795 
 
 United States Co. vs. Union 51 
 Universal Stock Exchange vs. 
 
 Stevens 5-12 
 
 vs. 
 
 Strachan 538, 603, 646 
 
 Upton vs. Gray 765 
 
 Uther vs. Rich 685 
 
 Vail vs. Rice 432 
 
 Vallev Bank vs. Stribling 865, 866, 
 
 873 
 
 Van .\len vs. Vanderpool 301 
 
 Van .Mien vs. Bank 792, 
 
 798, 903 
 
 V.S. Illinois C. R. R. 
 
 Co. 903 
 
 Van Blarcom vs. Broadway 
 
 Bank ' 292 
 vs. Donovan 594 
 Vance vs. Tournc 903 
 
 Vanderheyden vs. Vanderhey- 
 
 den 397 
 
 Vanderpoel a-s. Kearns 585 
 
 Vanderzee vs. Willis 795 
 
 Van Dieman's Land Co. vs. 
 
 Cockerill 903 
 
 Van Dusen-Harrington Co. vs. 
 
 Jungeblut 220, 366, 408, 426 
 
 Van Horn vs. Gilbough 342, 353, 
 
 365, 438 
 
 Van .\orden vs. Keene 204, 405 
 
 Van Valkenburgh vs. Stupple- 
 
 becn 687 
 
 Van Vonrhis \s. Rea 259, 435 
 
 Van Winkle Co. vs. Citizens' 
 
 Bank 794 
 
 Van Woert vs. Olmstead 292 
 
 Vaughan vs. Wood 329 
 
 Vaughn vs. Hemdon 64, 1.36, 1.3S, 
 
 139
 
 Table of Cases. 
 
 Ixv 
 
 Vaupell vs. Wocxlwanl 191, ^^29. 
 43ri, 4S2, 491, «)()0 
 Vawter vs. Baker 701 
 
 vs. Griffin 884, 889 
 
 Veazy vs. Allen 324 
 
 Veil vs. Mitchell 79S 
 
 Venables vs. Baring 440, 0.50, 009, 
 
 071 
 Verniilye, In re 212, 218, 771 
 
 Vermilye vs. Adams E.\p. Co. 
 
 450, 049, 073, 077, 088 
 Vennuele vs. Vermuele 871 
 
 Vickry vs. State SaA'. .\ssn. 790 
 Village of Hempstead v.s. Sey- 
 mour 838 
 Vinton vs. King 688 
 Violet vs. Powell 755 
 Violett vs. Mangold 510 
 Virden vs. Murphy 528 
 Virtue vs. loka 48 
 Vischer vs. Bagg 588 
 Voris vs. McCredy 775 
 Vowell vs. Thompson 250 
 Vuden vs. Murphj- 528 
 Vyne Andrew de, Case of 956 
 
 w. 
 
 Wachtel vs. Society 64, 98 
 
 Waddeli vs. Blockley 927 
 
 Waddle vs. Lober 518 
 
 Wagner vs. Hildebrand 198, 570 
 vs. Peterson 927 
 
 W'aite vs. Bartlett 139 
 
 vs. PVank 533, 640 
 
 Wait vs. Johnson 755 
 
 Wakefield vs. Famum 549 
 
 Wakeman vs. Dalley 023 
 
 Walcott vs. Heath .501 . 008, 030, 
 
 04 (> 
 
 Waidron vs. Johnson 501, 581 
 
 Walker vs. Bamberger H90 
 
 V8. Bartlett 735,827,881. 
 
 1035 
 
 VB. Johnson .501, 531 
 
 vs. Manhattan Bank S()3 
 
 Walker vs. Supple 
 
 
 889 
 
 Wall vs. Metropolitan 
 
 Stock 
 
 
 Exchange 
 
 
 520 
 
 vs. Schneider 
 
 
 543 
 
 Wallace vs. Townsend 
 
 
 843 
 
 Waller vs. Thomas 
 
 
 42 
 
 Walls vs. Bailey 41 
 
 , 410, 
 
 425 
 
 Walpole vs. Saunders 
 
 
 517 
 
 Walters vs. Comer 
 
 
 598 
 
 Walters vs. Howard 
 
 
 836 
 
 Walter vs. King 
 
 362 
 
 380 
 
 Ward, Ex parte 120, 120, 430, 445, 
 
 470, 044, 750 
 
 Ward, In re 120, 120, 430, 445, 
 
 470, 644, 7.50 
 
 Ward vs. Southeastern Ry. 
 
 Co. 851, 856 
 
 vs. Van Duzer 211 
 
 vs. Vosburgh 409, 439, 501, 
 
 581 
 
 Ware vs. Hayward Rubber 
 
 Co. 394 
 
 vs. Jordan 585 
 
 vs. Raven 345 
 
 Warfield vs. Boswell 873 
 
 Warner vs. Gouvemeur 875 
 
 Warren vs. Hewitt 536, 582 
 
 vs. Louisville Ex. 72 
 
 vs. Scanlon 501 
 
 vs. Shook 177 
 
 Washburn vs. Franklin 493 
 
 Washer vs. Bond 511 
 
 Waterbury vs. Merchants' 
 
 Union Express Co. 29, 54, 09 
 Waterhoiise vs. London l{y. 
 
 Co. 729 
 
 Waterm.an vs. Buckland 585, 61 1 
 
 Waters vs. Marrin 199, 394 
 
 Watson vs. Black 971 
 
 vs. Miller 701 
 
 vs. Spratloy 880, 881 
 
 Watte vs. Costclio .500 
 
 vs. Wickcrsham (MM 
 
 Watts' VM. 170 
 
 Watts vs. Brooka 963
 
 Ixvi 
 
 Tahic of Cases. 
 
 \V;itts vs. Christie 
 WjukI, Ex parte 
 Waugh V.S. Beck 
 
 vs. Seaboard Bank 
 Weatherhead vs. Boyers 
 Weaver vs. Barden 705, 
 
 vs. Fisher 
 Webb vs. B. & E. S. R. 
 
 vs. Challoner 
 vs. Commissioners 
 Heme Bay 
 vs. Meyers 168, 
 
 Webster vs. Sturges 
 vs. Upton 
 "Weed vs. Small 
 Weeks vs. Talcott 
 W^eidenfeld vs. Keppler 
 Weightraan vs. Caldwell 
 Welch vs. Sage 652, 
 
 vs. Mandeville 
 Weld vs. Barker 
 Welles vs. Cowles 
 Wells vs. Gates 
 
 vs. Green Bay Co. 
 vs. McGeoch 
 vs. Porter 
 vs. Welter 
 Wentworth vs. French 
 Werdcr, Matter of 
 West vs. Holmes 
 vs. Knight 
 vs. Marquart 
 vs. Wright 
 Westcott vs. Fargo 
 
 vs. Mulvane 
 Western Bank vs. Potter 
 Western Union Tel. Co. 
 Blanchard 
 
 Chamblee 
 
 Davenport 
 
 Littlejohn 
 
 SOI, 
 
 S02 
 
 
 538 
 
 
 548 
 
 411, 
 
 457 
 
 
 873 
 
 729, 
 
 7S0 
 
 113, 
 
 155 
 
 Co. 
 
 
 884 
 
 889 
 
 
 220 
 
 of 
 
 
 
 851 
 
 169, 
 
 171 
 
 500, 
 
 502 
 
 
 246 
 
 
 769 
 
 
 160 
 
 46, 
 
 110 
 
 
 889 
 
 680 
 
 686 
 
 
 657 
 
 411 
 
 459 
 
 
 889 
 
 30 
 
 , 40 
 
 
 843 
 
 
 638 
 
 479 
 
 552 
 
 215, 
 
 216 
 
 
 249 
 
 
 158 
 
 
 526 
 
 
 591 
 
 
 501 
 
 589 
 
 591 
 
 
 42 
 
 
 832 
 
 869 
 
 874 
 
 vs. 
 
 
 504, 
 
 530 
 
 vs. 
 
 
 
 532 
 
 vs. 
 
 
 726 
 
 729 
 
 vs. 
 
 
 
 510 
 
 Western Union Tel. Co. vs. 
 
 Way 532 
 
 Westinghouse vs. Bank 706 
 
 West of England Paper Mills 
 
 vs. Gilbert 968 
 
 Weston, In re 339 
 
 Weston vs. Ives 45, 60, 61, 70, 71, 
 
 114, 119, 
 
 vs. Jordan 
 
 
 293 
 
 Westropp vs. Solomon 
 
 190, 
 
 220, 
 
 
 221 
 
 425 
 
 Wetmore vs. Barrett 
 
 
 597 
 
 Wheeler vs. Exchange 
 
 
 525 
 
 vs. Friend 
 
 
 518 
 
 vs. Garcia 
 
 
 390 
 
 vs. McDermid 
 
 
 500 
 
 vs. Millar 
 
 
 269 
 
 vs. Newbould 
 
 347, 
 
 349, 
 
 
 358 
 
 451 
 
 vs. Sedgwick 
 
 
 321 
 
 Wheeless vs. Fisk 
 
 
 543 
 
 Wheelock vs. Kost 
 
 
 266 
 
 vs. Lee 
 
 
 874 
 
 Whelan vs. Lynch 
 
 
 937 
 
 Whistler vs. Forster 
 
 659 
 
 , 690 
 
 Whitaker vs. White 
 
 
 213 
 
 White and Blacksmith 
 
 3 SOC. 
 
 
 vs. Van Dyke 
 
 
 90 
 
 Whitehead vs. Izod 
 
 220, 
 
 229, 
 266 
 
 WTiitehouse vs. Moore 
 
 425, 
 
 429, 
 
 
 435 
 
 784 
 
 Whitesides vs. Hunt 
 
 
 587 
 
 White vs. Barber 
 
 501 
 
 , 531 
 
 vs. Baxter 103, 425, 435 
 
 vs. Brownell 20, 21, 28, 29, 
 
 32, 33, 44, 45, 59, 60, 
 
 61, 64, 69, 73, 75, 76, 
 
 80, 104, 108, 134, 135, 
 
 137, 145, 188, 428 
 
 vs. Drew 313, 894 
 
 vs. Eason 510 
 
 vs. Fuller 392 
 
 vs. Howard 37 
 
 vs. Jaudon 782
 
 Table of Tiises. 
 
 Ixvii 
 
 White vs. Kearney 910 
 
 vs. Schuyler 842 
 
 vs. Smith 201, 323, 325, 
 
 329,330,386,916,917. 
 
 919, 927 
 
 vs. Treat 178 
 
 vs. Wright 864, 867 
 
 Wliiting, Ex parte 808 
 
 Wliitlark vs. Davis 537 
 
 Whitley vs. Foy 799 
 
 Whitlock vs. Bank 283, 428 
 
 Whitman vs. Hubhill 42 
 
 Whitney vs. Boardman 910 
 
 vs. Pane 266 
 
 Whittemore vs. Gibbs 887 
 
 ^^^littmo^e vs. Malcomson 591 
 
 Whitworth vs. Adams 863 
 
 Wicker vs. Gordon 962 
 
 Wickler vs. First Nat. Bank 173 
 
 Wicks vs. Hatcli 234, 305, 307, 
 
 323, 353, 363 
 
 vs. Monihan 45, 103 
 
 Wiechers vs. Central Trust Co. 726 
 
 Wiggins vs. Gans 767, 70S 
 
 Wigfilesworth vs. Dallison 424 
 
 Wight vs. Wood 318 
 
 Wilde vs. Jenkins 771 
 
 Wildy vs. Stephenson 410, 752 
 
 Wiley vs. Board of Trade 22, 26 
 
 Wilkes vs. Ellis 953, 9.56 
 
 Wiikinijon vs. Providence Bank 
 
 853, 854 
 
 Willfofks, Ex parte 247 
 
 William-s vs. Archer 915 
 
 vs. Aroni 300 
 
 vs. Bank of Miclii- 
 
 gan 40 
 
 V8. Colonial Bank 471 
 vs. Gn;nKs 727 
 
 VH. Gulinaii 4 16 
 
 vs. .Millirijrton H()6 
 
 VH. Pe. 1 Hivor Co. 803 
 VH. The London 
 
 Com. I';\(li. 
 Co. 774 
 
 Williams vs. Tiedeman 593 
 
 vs. Trust Co. 353 
 
 vs. Tyre 403, 
 
 479, 482 
 
 vs. Williams 664 
 
 Williams, In re 786, 787 
 
 Williamson vs. Ellis 429 
 
 vs. Krohn 846 
 
 vs. Mason 173,718 
 
 vs. McClure 3,50 
 
 Williar vs. Irwin 409, 547, 646 
 
 Willard vs. Doran it Wrisiht 
 
 Co. 519. 521 
 
 vs. White 281,282,284, 
 519, 766,810 
 Willis vs. Philadelphia Rail- 
 road Co. 741 
 Willoughby vs. Comstock 340, 362, 
 
 869 
 
 vs. Edwards 780 
 
 Wilson vs. Commercial Tel. Co. 20, 
 
 25, 31, 32, 45 
 
 vs. Curzon 42 
 
 vs. Dawson 795 
 
 vs. Head 520 
 
 vs. Keating 825 
 
 vs. Kilburn 873 
 
 vs. Little 264,307,913 
 
 vs. Martin 806 
 
 vs. Short 374 
 
 Wiltshire vs. Sims 301 , 432, 793 
 
 Wily vs. Pearson 884 
 
 Winans vs. Ilassey 300, 310 
 
 Windale vs. Fall " 481 
 
 Winston vs. Westfeldt 682 
 
 W inter vs. Belmont 703 
 
 vs. .Mining Co. 705 
 
 Winward vs. Lincoln 522, 527 
 
 Wirt vs. Stubblclield 532. 647 
 
 Witherhead vs. Alien .53 
 
 Withy VH. Cottle 824 
 
 Wolcott VH. Heath 608. 612 
 
 Wolf VH. Campbell 116 
 
 VH. Nutiotial Bank of 
 
 IllinoiH .501
 
 Ixviii 
 
 Tahh' of Casos. 
 
 Wolff vs. r.ockwood 21 .">, :? IS, 77:?, 
 
 <)20 
 ^Volsl«y vs. Nci'U'v .'■)()1 
 
 Wolstenholin vs. Tlu- Sli.-llicld 
 
 Bank 7s'.) 
 
 Wonsoii v.s. Feniio MO, S 12 
 
 Woodbridge vs. Blair 751 
 
 Woodd, Re; Ex parte Kini; 120, 200 
 Woodman vs. Churchill G83 
 
 AVoodrulT vs. Ilunson 871 
 
 Wood's Appeal 705, 709, 
 
 714, 720 
 Wooils vs. De Fif^aniere 12 
 
 Woodsworth vs. Joint-stock 
 
 Co. 38 
 
 Wood vs. Hamilton 358 
 
 vs. Hayes 194, 255, 779, 804 
 
 vs. Hickok 432 
 
 vs. Morewood 910 
 
 vs. Perkins 845 
 
 vs. Roylston Nat. Bank 786 
 
 vs. Sheehan 794 
 
 vs. Smith ' 714 
 
 vs. Stafford 799 
 
 vs. Travis 697 
 
 Woodward vs. Harris 831 
 
 vs. Powers 905 
 
 Woodworth vs. Bennett 484, 647 
 
 vs. Huntoon 683 
 
 W^ookcy vs. Pole 277, 651 
 
 Woolley vs. Bank 795 
 
 Wooster vs. Sage 311,313, 896 
 
 W^ootters vs. Kauffman 433 
 
 Work vs. Bennett 234, 782 
 
 vs. Tibbetts 295 
 
 Worn vs. Fry 31 1 , 366 
 
 Worsley vs. Scarborovi.^li 681 
 
 Worthinirton vs. Curd 658 
 
 vs. Tormey 255 
 
 Wright vs. Bank of Metropolis 
 
 926, 932, 934 
 
 \\ light \s. Hoard of Trade <>f 
 
 Chicago (>2 
 
 vs. Crahb 638 
 
 vs. Cudahy 501, (IHS 
 
 \s. Fonda 595 
 
 vs. Ross 383 
 
 Wronkow vs. Clews 201, 302, 
 
 .305, 306 
 
 Wyckoff vs. Anthony 321, 795 
 
 Wykoff vs. Irvine 244 
 
 Wyldo \-s. Radford 796 
 
 Wylie vs. Speyer 690 
 
 Wynian vs. American Powder 
 
 Co. 906 
 
 vs. Fiske 493, 496, 647 
 
 Wynkoop vs. Seal 193, 197, 255, 
 
 388, 566, 568 
 
 Wynne vs. Price 825, 827, 828, 
 
 999, 1044 
 
 Y. 
 
 Yerkes vs. Salomon 602, 607, 646 
 York vs. Passaic Rolling Mill 
 
 Co.' 832, 836 
 
 Young, Ex parte 203, 500. 618 
 
 Young vs. Cole 222 
 
 vs. Eanies 83, 97 
 
 vs. Glondinning 570 
 
 vs. Kitchin 658 
 
 vs. Smith 476 
 
 Youngs vs. Lee 692, 695 
 
 Zabriskie vs. Railroad 
 Zeitner vs. Irwin 
 Zelle vs. Institution 
 Zeitner vs. Irwin 
 
 64 
 592 
 
 792 
 
 518 
 
 Zimmerman vs. Heil 192, 206, 297 
 
 Zinck vs. Walker 801 
 
 Zuleta's Claim 2.38 
 
 Zulick vs. Markham 679, 705, 722
 
 LAW OF STOCK-BROKERS 
 
 AND 
 
 STOCK EXCHANGES. 
 
 ChA-PTER I. 
 INTRODUCTION. 
 
 Origin of Stock-brokers and Stock Exchanges. 
 
 There 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 hmc^ 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 breiikin<r, and that none but that class of persons Avere 
 formerly aduiitled to that employment in London.^ Jiut the 
 
 * Jacob's Law Diet., tit. " Bro- draws a bargain into particulars 
 kers." " Tlie etymoloj;y of tlie (Termes do la Ley, Cowell). The 
 term Broker has been variously law Latin from ohrocaU>r, how- 
 given. By some it has been de- ever, seems to point distinctly to 
 rived from tin; .Saxon hror, misfor- the Saxon ubrxcan (to break), as 
 tune, as denoting a broken trader; tlio ti no root, which in the old 
 the occupation being formerly con- word ahbrorhiupnt {q. \.) or (ihioach- 
 flned, it is said, to unfortunate i>er- vimt, had the sense of hnakiiKj up 
 sons of that description (TotnliDH). goodx, or selling at retail. A 
 Acconling to others, it was formed Broker, therefore, would seem to 
 from the Frencli hroieitr, a grinder have originally been a retailer, and 
 or breaki-r into small pieces; a hence wo find tlio old word due- 
 Broker being one who beats or (/onurim (q. v.) used In both these 
 1 1
 
 2 Stock-brokers 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 hitter view can hardly be correct. In Enghuul the terra 
 " Broker " occurs in an act of Parliament as early as the year 
 1285.' It recites, in substance, that whereas divers persons 
 do resort unto the city (London) from parts beyond the sea, 
 fuiritives from their own lands, and of these some become 
 " Brokers," ostlers, 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 spe- 
 cies of disreputable pawnbroker's business ; and hence the 
 severe penalties of the second section of the act, which pro- 
 vided that "if any other innkeeper or Broker be found 
 within the city, or any other of whom there is evil suspi- 
 cion, he shall be arrested by the warden, or mayor, or the 
 sheriffs, or the alderman of the ward, and punished ; viz., 
 
 senses" (BuiTill's Law Diet., tit. cian, to oppress; and the French 
 " Broker "). Wharton gives, as broijer, to grind. See " Broke " 
 the derivation of the vi'ord, the and " Broker." The word " Bro- 
 French broceur, and the Latin ker " seems first to occur in litera- 
 tritor, a person who breaks into ture in Piers Ploughman, "Among 
 small pieces (Whar., Law Diet., burgeises have I be Dwellyng at 
 tit. "Broker"). Webster gives as London. And gart Backbiting be 
 its derivation, the old English bro- a brocour. To blame men's ware." 
 cour, Norman French brog(jour, It clearly means here a/fn(/<-^nder, 
 French brocanteiir. Under the as in Provenpnl 6rac isrefuse. The 
 word "broke," to deal in second- Broker was originally one who in- 
 hand goods, to be a Broker, Web- spected goods and rejected what 
 ster says it is probably derived was below the standard (Wedge- 
 from the word brock. Worcester wood). 
 
 derives it from the Anglo-Saxon i 13 Ed. I., Stat. Civ. London, 
 brncan, to discharge an office; bro- 1285,
 
 Origin of Stock-brokers and Stock Exchanges. 3 
 
 innkeepers and Brokers shall be incapable of their freedom 
 and adjudged to prison, and the others shall be punished by 
 imprisonment or otherwise." ' 
 
 The next statute, passed in the reign of James the First, 
 more than three hundred 3'ears 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 " merchan- 
 dise 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 Freemen of the city to be selected out of the Com- 
 panies and ^lysteries whereof they are free and Members, 
 and the same persons to be presented at least by six approved 
 and known honest 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 Presentors 
 to be persons for their known approved Honesty, Integrity, 
 and Faithfulness, Persons meet for to be Broker or Brokers." 
 It was not until the latter part of the seventeenth century, 
 when the East India Company came prominently before the 
 
 » See also 2Crabb'8 Dig. of fcjtiit., 12 Moo. 530, 543. There is very 
 
 tit. " Brokers," 201. There were hifjh authority, however, for as- 
 
 a class of persons known to the sertiug that the term jiroxciietce 
 
 Romans, who were deemed ])iil)lic does not occur in anyX<:itin author 
 
 officers, ainl who united tiie func- bcfoio the first century after C'hiist. 
 
 tions of bankern, exchangcrH, Urn- See Freund's Latin Dictionary, re- 
 
 kers, comniissionerK, and nnliiricH vised Ity I^ewis and Siuirt, where 
 
 all in one, under tlie description of proxt^nctic is tlius given: "negoti- 
 
 jiriixinpttt. (Whar., Law Dirt., tit. ator, factor, bntker, agent. Son. 
 
 "Hrokers;" Story on ,\g. Oth ed. Ep. IHt; Mart. 10, 3, 4; Dig. 60, 
 
 8.30, Dig. Lib. ."A lit. 14, ch. 3.) 14,3." 
 
 Spelman, cited in Gibbons vs. Kulo, ^ 1 Jac. L c. 21, 1604. '
 
 4 Stock-brokers and Stock Exchanges. 
 
 public/ that trading or speculating in stock became an es- 
 tablished business in England ; and the term " Broker," 
 wliich had then a "well-understood meaning, was promptly 
 transferred to those persons who wei'e employed to buy or 
 sell stock or shares, and who thenceforth became known 
 as "Stock-brokers." In 1692, William the Third having 
 adopted, for the lirst time in England, the system of raising 
 funds'^ for governmental purposes by creating a national 
 debt, speculations in the "funds " and the shares of the East 
 India Company at once became general;^ and in 1097 the 
 Brokers and Stock-jobbers, to borrow from the language of 
 the statute passed in that year, had been guilty of such " un- 
 just practices and designs " in selling and discounting tallies, 
 bank stock, bank bills, shares and interest in joint stock, that 
 it became necessary to pass a stringent act, by which no 
 persons except regularly sworn appointees were permitted to 
 act as Brokers ; and the latter were compelled to keep a 
 register in which all contracts were to be entered within 
 three days after they were made, and their compensation 
 was fixed at ten shillings per centum.* And Best, C. J., in 
 commenting upon this statute, says: "The statute 8 and 9 
 "William III., ch. 20, by which the first government loan was 
 raised, speaks of a new description of ' Brokers ' — persons 
 employed in buying and selhng tallies, the government se- 
 curities of those days : these have since been called Stock- 
 
 1 This company -was incorporated 1688 (Tit. "Funds," Cyclopedia 
 by Queen Elizabetli in 1600. of Com. [Waterston] ). 
 
 2 The system of obtaining money 3 Francis's Clironicles and 
 for government purposes by loans Ciiaracters of the Stock Exchange, 
 is said to have originated in the 24. 
 
 fifteenth century in Venice. It ♦ 8 & 9 Wm. III. c. 32, 1697, con- 
 was next adopted by Holland, and tinued by 11 and 12 Wm. III. c. 
 was introduced into England 13. 
 shortly after the Revolution of
 
 Oriirin of Stock-brokers and Stock Exchanges. 5 
 
 brokers.'' ' Several other similar statutes were passed in the 
 subsequent reigns of Anne and George.'^ 
 
 An early legal author (writing about the year 1S13) gives 
 the following account of Stock-brokers, which is interesting 
 in this connection : " Stock-brokers are persons who con- 
 line their transactions to the buying and selling of property 
 in the public funds and other securities for money, and 
 they are employed by the proprietors or holders of the said 
 securities. Of late years, owing to the prodigious increase 
 of the funded debt of the nation, commonly called the stock, 
 they are become a very numerous and considerable body, 
 and have built, by subscription, a room near the Bank, 
 wherein they meet to transact business with their piincipals, 
 and with each other ; and to prepare and settle their pro- 
 ceedings before they go to the transfer-offices at the Bank, 
 the South Sea, and India houses, thereby preventing a great 
 deal of confusion at the public oHlces, where the concourse 
 of people is so great, during the hours of transferring stock, 
 that if the business was not prepared beforehand, it would 
 be impossible to transact it within the given time." ^ The 
 whole business of stock-jobbing being c(Mitrary to law, ex- 
 cept as the persons acting as Brokers wore licensed, under 
 the act of 6 Anne, ch. 10 ; and as many other persons, irre- 
 spective of the requirements of the statute, acted as Stock- 
 brokei-s without liaving received a license as such, a ailver 
 7/v^^A// was given to each licensed liroker, having the king's 
 arms on one sid(.*, and the armsf of the city of J.ondon on the 
 reverse, with the liroker's name, which he was ordered topro- 
 
 > GibboriH VB. Riilo, 1827, \2 Moo. Cvu. I. c. IH, 171W ; ;i «.i'(.. 11. r. ;!1, 
 
 53U ; 4 HiiiK. 301. 17:iO ; 7 (Jeo. II. .-. 8, 173-1. 
 
 '' 6 .\iirje, c. 10, 1707 ; 10 ibid. »-. » IJeaw. Ia>x. .M.t. .Inl t-d. 020. 
 19, 1711; 12 ibid. Sut. 2, c. 10 ;
 
 6 Stock-brokers and Stock Exchanges. 
 
 duce upon every occasion when he should he required to 
 show his qualification ; and, to give further publicity to the 
 names of the regular Brokers, a list of the licensed Brokers 
 was annually printed by the order of the Lord Mayor and 
 Court of Aldermen, which was hung up in the walks of 
 the Royal Exchange and in Guildhall, and at most of tlie 
 reputable coffee-houses near the Exchange. In 1708, the 
 year after this act was passed, the Court of Mayor and Alder- 
 men of the city of London, who, by the act were permitted 
 to license brokers, made rules and regulations for the govern- 
 ment of Brokers, and by virtue of which every person, pre- 
 viously to his being admitted a Broker, Avas required to enter 
 into a bond, conditioned for the proper performance of his 
 employment, to the Mayor, Commonalty and citizens of 
 London, and also to take an oath to faithfully execute and 
 perform the office and employment of a Broker without fraud 
 or collusion. The form of the bond and oath may be found 
 in the report of a case arising in 1816, when these rules were 
 still in force.^ The Brokers had some years previously (about 
 the year 1698, vide c. IX.) left the Royal Exchange and lo- 
 cated their business in Change Alley .^ By an act passed in 
 1870,3 called the " London Broker's Relief Act," the re- 
 
 1 Ex parte Dystev, 1 Mer. 15o; inscription, "Morgan Vaughan, 
 Clarke vs. Powell, 4 B. & Ad. 84G. Hatter, Hosier, and Stock-broker, 
 
 2 " Jonathan's " Cofifee-house, in No. 7 Finch Lane, Cornhill, Lon- 
 Chauge Alley, the general mart for don," from which it would appear 
 Stock-jobbers, was the i)recursor of that Stock- brokers and jobbers 
 the present Stock Exchange in could combine their callings with 
 Capel Court. — Addison in Sir R. other forms of business. Galig- 
 De Coverley. Among the relics of nani's Messenger, Jan. 1, 1891. 
 these earlier days, collected by a ^ o-j & 34 Vict. c. 60. In the 
 Stock Exchange antiquarian, is year 1884 the last remnant of the 
 an illustrated card or advertise- city's authority was swept away, 
 ment plate, whereon a shield is 47 Vict. c. 3. Vide c. IX. 
 suspended from a tree with the
 
 Orisriii of Stock-brokers and Stock Exchanges. 7 
 
 strictions and guards which were formerly placed upon 
 Stock-brokers were removed, and the jurisdiction of the 
 Court of Aldermen over Brokers ceased. The effect of this 
 act is practically to enable any person to exercise the call- 
 ing of Broker in London, outside of the Stock Exchange ; 
 and this result seems to be justly deplored in the Report of 
 the Royal Stock Exchange Commission presented to Parlia- 
 ment in ISTS.^ 
 
 The advantage of employing Brokers as intermediaries, in 
 the purchase and sale of property, seems to have been early 
 recognized among the merchants ; and a very old writer on 
 the law merchant says, " It is an old proverb, and very true, 
 that between what will you but/ ? and what will you sell ? there 
 is twenty in the hundred differing in the price, which is the 
 cause that all the nations do more effect to sell their commod- 
 ities with reputation by means of Brokers than we do ; for 
 that which seems to be gotten thereby is more than double 
 lost another way. Besides, that by that course many differ- 
 ences are prevented which arise between man and man in 
 their bargains or verbal contracts ; for the testimony of a 
 sworn Broker and his book together is sufficient to end the 
 same." ^ 
 
 The Venetians, says Malynes, had an office called 3fe8- 
 sacaria (Messageria ?j, consisting only of Brokei's who dealt 
 between man and man ; " and in Spain they are of such esti- 
 mation that they ride on horseback, upon their foot-cloths ; 
 and, having the invoices of merchants' gootls, they will deal 
 for great matters at a time, against the lading of the fleet 
 from Nova Espagna, and the islands of the AVest Indies, to 
 be paid partly ready money and partly at the return of the 
 
 » See i>OBt, p. 017. ^ .Mai. Lex Mer. 143(162:2).
 
 8 
 
 Stock-brok(Ms and Stock Exchanges. 
 
 said fleet ; and these afterwards let you understand their 
 merchant. " ' 
 
 The oriirin of stock-certificates — dealings in ^vhich, at the 
 present date, constitute the main business of Stock-brokers — 
 cannot in England be satisfactoril}' traced beyond the middle 
 of the seventeenth century. Such species of property was 
 altogether unlaiown to the law in ancient times, nor, indeed, 
 was it in usage and practice until a short period antecedent to 
 the passage of the Bubble Act in the reign of George the 
 First.'' 
 
 Although it is fully established that mercantile or com- 
 mercial corporations existed among the Romans,^ and though 
 
 1 Mai. Lex. Mer. 143. 
 
 2 Garrard vs. Hardej', 5 Man. & 
 G. 471, 483. 
 
 3Ang. & Ames on Corps, (lltli 
 ed.) §40: "A Collegium Mercato- 
 rum existed at Rome 493 B. C. ; 
 but the modern bourse, from the 
 Latin bursa, a purse, originated 
 about the fifteenth century. 
 Bourges and Amsterdam contend 
 for tlie honor of having erected the 
 first bourse. The Paris Bourse 
 was erected in 1808" (Johnson's 
 NewUniv. Cyclop, tit. " Bourse "). 
 " A Rome, malgre que le commerce 
 n'y flit pas en grande consideration, 
 nous trouvons ce mOme usage pub- 
 liquement pratique. Tite Live 
 nous apprend, en effet, qu'en I'an 
 259 de sa fondation, sous le con- 
 Bulat d'Appius Claudius et de Pub- 
 lius Servilius, on construisit un 
 vaste Edifice, dont les vestiges por- 
 tent encore le nom de Loggia, et 
 qui, sous la denomination de Col- 
 legium Mercatorum, avaitune des- 
 tination analogue a celle de nos 
 
 bourses actuelles " (Droit Commer- 
 cial, " Bourses de Commerce," 
 par Bedarride). But, according to 
 Livy (ii. 27), the Collegium Merca- 
 torum does not belong to this pe- 
 riod. Livy says that when the con- 
 suls were disputing which of them 
 should have the honor of dedicat- 
 ing a temple to Mercury, the ques- 
 tion was referred to the people; 
 and the Senate decreed that which- 
 soever of tlie consuls should be 
 chosen should also form a " Colle- 
 gium Mercatorum," or association 
 of corn-dealers, to help him and 
 the priest in religious and mercan- 
 tile matters related to the temple. 
 But the plan fell through, and it 
 does not appear that the "Colle- 
 gium" was ever formed; nor that 
 it would have had, if formed, any- 
 thing but a religious significance. 
 Accordingly, the above citations 
 seem to be unfounded. The near- 
 est approach to a Stock Exchange 
 membership in ancient times was 
 the right of ownership in a "gild"
 
 Origin of Stock-brokers and Stock Exchanges. 9 
 
 much light has been thrown upon the character and mode 
 of conducting these bodies,^ there is an utter dearth of in- 
 formation respecting the form and manner by which owner- 
 ship in the corporate property was attested and estabhshed. 
 The Roman hiw required three persons to oiganize a cor- 
 poration ;* and as each body had at least that number of 
 members, if not more, it would seem but natural that a cer- 
 tificate, or some other substantial muniment of title, should 
 have been issued by the corporation to its respective members, 
 in which the proportion of interest of each in the capital or 
 corporate property of the association appeared. But whether 
 a certificate was, in fact, issued, and, if so, was regarded as 
 property capable of sale or other negotiation, and of vest- 
 ing in the representatives of the owner, on his decease, or 
 "whether the corporations were all of the nature of guilds con- 
 ferring upon the members mere per social rights — all of these 
 questions seem now to be incapable of solution ; and the 
 Koman law, which sheds such floods of light upon commercial 
 subjects, apparently leaves the above matters in total darkness. 
 In England stock-certificates were not introduced into 
 the courts of law for many years after they had become es- 
 
 or "guild." A person's "£/j7(Za" Though in Eonie, it seems, corpo- 
 
 that is his right :is a niembei- of the rations did not require charters 
 
 gihl is treated as an object of own- from tlie State, the hitter, by vir- 
 
 ership. With the consent of the tue of its police power, suppressed 
 
 Court (evolved out of the fratern- those which appeared tobechinger- 
 
 ity)a man miglit give or sell it. If ous, mostly those of a ]u>litical 
 
 he be dispossessed of it then it will character. Iti order to doterinino 
 
 descend to his heir. History of wliethersuch a corporation existed, 
 
 P^nglisii Law ( Pollock «i' Mailland), the words tns /(iriunt coUcijium 
 
 vol. 1 (id ed.), p. C<;8. were used. Hut that acorporation 
 
 ' Urowu's Lect. Civ. Law (2<led.), could exist with only one member 
 
 HI. left Is well settle.l (1. 7, '-', I). '.\, 4,). 
 
 '^ Tti a fariunt collegium, Ang. «fe <iaiidHmit Pandects, 1.71, 1; Wind- 
 Ames on Corps. (11th ed.); Or- Bcheidt, L CO, 3; ArndtB, U, J. 
 tolan's Hist. Itoman Law, (WM».
 
 10 Stofk-luokcrs and Stock Exeliaiiges. 
 
 tablished in the mercantile coiiununity ; for Lord Mansfield, 
 in 1770/ in a case -wherein it was contended that such cer- 
 tificates were moiieij, in deciding against that view, said : 
 " This is a nein species of property arisen within the compass 
 (fa few years. It is not money." - The Bubble Act ^ having 
 been repealed/ it was held ^ that the formation of a company, 
 the stock in which should be transferable, was not an offence at 
 common-law. And this doctrine was subsequently affirmed.* 
 
 A Stock Exchange or Bourse, in the sense in which it is 
 considered in this work, is also a creation of modern times. 
 
 An Exchange was erected in Coi-nhill, Londc^n, in 1571, 
 but it was used exclusively by dealers and Brokers in mer- 
 chandise. This structure was destroyed in the great fire of 
 1666 ;" but it was not until several years after, when it was 
 rebuilt, that the ]3rokers in funds and stock were assigned a 
 portion of the building for the transaction of their business. 
 
 In 1698 the Stock-jobbers, annoyed by the objections made 
 to their remaining in theKoyal Exchange, and finding their 
 numbers seriously increased, removed to Change Alley, a 
 large and unoccupied space, where extensive operations might 
 be carried on.^ 
 
 In the United States there seems to be no trace of a Stock 
 Exchange until about the beginning of the present century, 
 
 1 Nightingale vs. Devisme, 5 'Johnson's New Univ. Cyclop. 
 
 Burr. 2589. tit. " Stock Exchange." 
 
 - To same effect, Jones vs. Biin- *> Francis's Chronicles and Char- 
 ley, 1 East. 1. acters of Stock Exchange, 24. 
 3 6 Geo. I. c. 18. The "cannibals of Change Alley" 
 ^G Geo. IV. c. 91. is a name Lord Chatham once ap- 
 6 Garrard vs. Hardey, 5 Man. and plied to the Stock-jobbers. Galig- 
 Q. 471. nani's Messenger, Jan. 1, 1891. 
 6 llarrison vs. Heathorn, 6 Man. See also Report of Royal Stock Ex- 
 and G. 81; 1 Pars. Con. (6th ed.) change Commission, July, 1878, 
 144 and post, p. 971.
 
 Orisriii of Stoek-brokei's aud Stock Exebau2:es. 11 
 
 at which time there existed in Philadelphia a Board of Stock- 
 brokers, possessing a forinal organization and regular consti- 
 tution, which the Brokers in New York, in 1817, used as a 
 model in framing the rules of their own Exchange.^ 
 
 Although there is in the archives of the Xew York Stock 
 Exchange a document bearing date May IT, 1792, signed by 
 a number of Brokers, in which it is, infer alia, stated that 
 " "We, the subscribers, Brokers for the purchase and sale of 
 public stock, agree to do business at not less than one fourth 
 of one per cent.," no organization appears to have been 
 formed in the city of Xew York until the year 1817, when 
 a constitution was adopted, which is no longer in existence, 
 it having been destroyed in the great fire of 1835.^ 
 
 It appeare that in the beginning, the dealings of the Stock- 
 brokers in this country wei-e confined to speculations in Con- 
 
 ^ Medbery's Men aud Mysteries York dealers iu public stock met 
 
 of Wall Street, 280. together iu a Broker's office, and 
 
 * " The earliest annals of the signed their names, in the bold, 
 
 New York Stock Exchange are strong hand of their generation, to 
 
 meagre, the fire of 1835 having an agreement of the nature of a 
 
 destroyed the record of the cousti- protective league. The date of 
 
 tution adopted in 1817, the date of this curious paper is May 17, 1792. 
 
 its first regular organization. A The volume of business of all these 
 
 tablet in the wall of the present primitive New York brokers could 
 
 room recites that the Exchange not have been much above that of 
 
 was founded in 1792, but the evi- even the poorest first-class Wall 
 
 dence of that exists only in a doc- Street house iu our time. The 
 
 uroent still preserved among its lievolutionary ' shinplasters,' as 
 
 archives" (Johnson's New I'niv. the irreverent already styled them, 
 
 Cyclop, tit. " Stock Exchange," were spread over tlie land in such 
 
 by Stnjng Wad.sworlh). plenty that there were a hundred 
 
 The following account is from dollars to each inhabitant. Some- 
 
 Medl>ery'8 Men and Mysteries of thing was to bo made, therefore, 
 
 Wall Street, 28C: "... when from llie fiuctuations to wliidi they 
 
 Wasiiington was President, and were liable. Indeed, one of the 
 
 Continental money was worth a greatest lirokcr firms of subseiiiuMit 
 
 trifle more hh currency than aH years derived ilx cajiitul from the 
 
 waste paper, some twenty New lucky speculations of its «enlor
 
 12 Stock-brokers and Stock Exchanges. 
 
 tinental money ; but when, in 1812, the United States gov- 
 ernment issued Treasury notes and negotiated loans to the 
 amount of many millions'of dollars, the dealings embraced 
 all these securities, beside operations in the stocks of banks, 
 which were being rapidly foniicd in all j)arts of the country. 
 From the year 1820, when the real history of the New York 
 Stock Exchange may be said to have commenced, it has 
 gone on steadily increasing in its members, power and in- 
 fluence, until to-day it can be safely affirmed to be the most 
 powerful organization of the kind in the world ; and by 
 forming a mart where all kinds of securities can be promptly 
 converted into cash, it has largely contributed to the devel- 
 opment and wealth of the country by encouraging and sus- 
 taining our great railroad systems, which have brought all 
 parts of the Republic into a closer relation to each other, and 
 firmly strengthened the union and prosperity of the States. 
 
 member in this currency. "The dealers met in the room of an as- 
 war of 1812 gave the first genuine sociate, and voted to send a dele- 
 impulse to speculation. The gov- gate over on the stage line to in- 
 erninent issued sixteen millions in vestigate the system adopted in the 
 Treasury notes, and pat loans rival city. Tiie visit was success- 
 amounting to one hundred and ful; and the draft of a constitution 
 nine millions on the market, and by-laws, framed from that of 
 There were endless fluctuations, the Philadelphia Board, received 
 and the easy-going capitalisls of the final approbation of a sufficient 
 the time managed to gain or lose number of the brokers to enable 
 handsome fortunes. Bank stock the New York Stock Exchange to 
 was also a favorite investment, become a definite fact. Three 
 An illustration of one of the years after, on the 21st of Feb- 
 sourcos of money-making to ruary, 1820, this preliminary code 
 Brokers at this period is found in of rules received a thorough revi- 
 the fact that United Slates 6's of sion, and the organization was 
 1814 were at 50 in specie and 70 in strengthened by the accession of 
 New York bank currency. some of tlie heaviest capitalists in 
 " In 181(5 one could count up the city. Indeed, with 1820, the 
 two hundred and eight banks with real history of the Exchange may 
 a capital of $82,000,000. . . . "One properly be said to commence." 
 day in 1817, the New York stock-
 
 Legal Nature of. 13 
 
 Chapter II. 
 
 LEGAL NATURE OF STOCK EXCHANGES ; CHARACTER AND 
 INCIDENTS OF MEMBEUSHir THEREIN ; AND RULES AND 
 REGULATIONS THEREOF. 
 
 /. Organization of Stock and other Exchanges. 
 11. General Legal Nature of Unincorporated Stock ^Ex- 
 changes. 
 
 III. Stock Exchange not a Partnership. 
 
 IV. Nor a Corporation or Incorporated Joint-stock Asso- 
 
 ciation. 
 Y. Rights of Members in Property Held l>y Non-inco^'- 
 porated Stock Exchanges, 
 yj. Liability of Members for Debts., etc. 
 y I f. Suits by and against the Stock Exchanges, 
 yi II. Ruhs and Regulations of Stock Exchanges, 
 {n.) Gciii'ral Poirer to Make Rules. 
 (Ji.) Pdicrr of Suspension (tnd Exjuilsimi. 
 ('•.) Rule Gii'ing Members of Exchange Lieu on Proceeds 
 of Defaulting Members, "■ Seats," ete., in Pref- 
 erenre to other Creditors, not Illi'gnl. 
 ('/.) Stnrk KxeJiiinge ritiinot Tnke CiHjniziinee nf Jf<iffers 
 Arising outside if, (tnd J)is<-oiinei-ted irifh, the 
 Purpose of its Orrj<ini::<ition. 
 («'.) Members not lioum! bij Rules u-hieh J'reeent 7u'- 
 eourse to Courts of' Lnie. 
 
 /X. Liability of '" Scats'^' in Err hanges to l^'g<il Process. 
 X. LiidAlity <f " SeatM"'' to taxation. 
 XL (rratuity Trust — Life Insurance.
 
 14 Stock-brokers and Stock Exchanges. 
 
 I. Organization of Stock and other Exchanges. 
 
 The New York Stock Exchange is an unincorporated 
 association of more tlian one thousand members and exists 
 under a written constitution.* 
 
 The constitution vests the Avhole government of the Ex- 
 change in forty members, elected in classes, to serve one, 
 two, three, and four years, together with the president and 
 treasurer, making in all forty-two persons, called the " Gov- 
 erning Committee." 
 
 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 offending party to loss of membership. It is 
 now a prerequisite to admission that an applicant shall be 
 a citizen of the United States. 
 
 The Constitution of the New York Stock Exchange states 
 (Art I.) its object thus : " Its object shall be to furnish 
 exchange rooms and other facilities for the convenient 
 transaction of their business by its members, as Brokers ; to 
 maintain high standards of commercial honor and integrity 
 among its members ; and to promote and inculcate just 
 and equitable principles of trade and business." '^ 
 
 * People ex rel. Lemmon vs. Feit- case of People ex rel. Lemmon vs. 
 
 ner, 167 N. Y. 1-4; Commercial Feitner, 167 N. Y. 4, may be quot- 
 
 Telegram Co. vs. Smith, 47 Hun, cd: "The principal purposes and 
 
 494-497; Matter of Renville, 46 objects of the association (the New 
 
 A. D. (X. Y.) 37-42. York Stock Exchange) are the af- 
 
 ^ Art. XIII., §1, Const. N. Y. fording to members facilities for the 
 
 Stock Exchange. transaction of business as Brokers 
 
 ^ The following extract from the in stocks, bonds and other securi- 
 
 opinion of Bartlett, J., in the recent ties, the providing for a convenient
 
 Organization of Stock and other Exchanges. 15 
 
 The constitution of the Kew York Stock Exchange 
 sets forth the manner in which the business shall be con- 
 ducted, 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.' 
 
 The Philadelphia and San Francisco Stock Exchanges 
 (the latter known as the Stock and Exchange Board) are 
 unincorporated associations organized in the same manner 
 as the 'Sew York Stock Exchange.^ 
 
 The Company of Associated Stockbrokers (of San Fran- 
 cisco) is a corporation without capital stock composed of 
 the members of the unincorporated association (the San 
 Francisco Stock and Exchange Board) and was formed for 
 the purpose of purchasing land and building thereon a Stock 
 Exchange out of funds contributed by the Stock and Ex- 
 change Board. ^ 
 
 The Chicago Stock Exchange was formed as a voluntary 
 unincorporated association in the year 1882 and its constitu- 
 tion is modelled on those of the Xew Yoi-k, riiiladclphia 
 and San Francisco Stock Exchan<;es.^ 
 
 The other Stock Exchanges in the United States and 
 Canada are those which have i)cen organized as unincor- 
 poratetl associations (jr coi-porations in the following cities, 
 
 exehariKo or salesroom for the trans- LoiuJon Stock Exchaufies will I)c 
 
 at-tion of such IjiLsint-ss, aiul the fouiui in tlu- Appendix, 
 
 maintenanf*; of rfctitudc and lion- ' liV/f Leech vk. Harris, 2 lircw. 
 
 orable dealinKH between it.-i nicinlicrs (Pa.) .'57.'i, 57G; Hyde vs. Woods, 2 
 
 in tlieir businc-sH trarwactions." Sawy. 655, alT'd 94 U. S. (4 Otto) 
 
 See abo Beniheim v. Kcpplcr, .31 5'J.3. 
 
 Mi«*c 321 . ' C'lute VH. Lovcland, 68 Cal. 254. 
 
 'Full copies of the HuIch and H'lews vs. Janiieson, 182 U.S. 
 
 Hcpilations of the .New ^'ork and 402.
 
 16 Stock-brokers and Stock Exchanges. 
 
 viz. : Boston,^ St. Louis, Baltimore, Piltsburg, Cleveland, 
 Cincinnati, Denver, Detroit, Kansas City, New Orleans, 
 Providence, J^os Angeles, Indianapolis, Richmond, "Wash- 
 ington, Montreal and Toronto. 
 
 The Chicago Board of Trade - was unincorporated prior 
 to its incorporation by special act on l-'ebruarv 18, 1859.^ 
 Although the Board is incorporated, it is, in effect, but a 
 voluntary association, not maintained for the transaction 
 of business, or for pecuniary gain.^ 
 
 The New York Produce Exchange was incorporated by spe- 
 cial statutes (L. 18G2, c. 359 ; L. 1867, c. 30), its former name 
 having been the "New York Commercial Association."^ 
 The use of the word " Produce '' in its present corj)orate 
 name does not restrict its dealings to agricultural produce.* 
 
 The New York Cotton Exchange is also a corporation 
 formed under Laws of 1871, c. 365.® 
 
 A considerable number of other exchanges and mercantile 
 associations have also been organized either as corporations 
 or unincorporated associations and transact their business 
 in the city of New York, such as the New York Mer- 
 cantile Exchange, the Consolidated Stock and Petroleum 
 Exchange, the Coffee Exchange, the Consolidated ]\[ilk 
 Exchange, the Clearing House of the New York Stock 
 Exchange, the ConsoUdated Clearing House of New 
 York, the Merchants Credit Exchange, the Metropolitan 
 
 'The Boston Stock Exchange is Trade, 80 111. 1.34; Board of Trade 
 
 an unincorporated association. Cur- vs. Nelson, 162 111. 431. 
 rier vs. Studley, 159 Mass. 17. * In re Haebler vs. New York 
 
 2 New York, etc.. Stock Ex- Produce Exchange, 149 N. Y. 419. 
 change vs. Board of Trade, 127 ' In re Haebler vs. N. Y. Produce 
 
 111. 153; Priv. Laws, 111. 1859, p. Exchange, supra. 
 13. 'People ex rel. Khron vs. Miller, 
 
 ' People ex rel. Rice vs. Board of 39 Hun, 557.
 
 Organizatiou of Stock and other Exchanges. 17 
 
 Mining Exchange, the International Mining Exchange, 
 the Chamber of Conunerce, the Harlem Board of Com- 
 merce, the Italian Chamber of Commerce in New York, 
 the Xew York Dry Goods Exchange, American Horse 
 Exchange, the Board of Real Estate Brokers, the Real Es- 
 tate Salesroom, the Builders Brokers Exchange, the Build- 
 ing Material Exchange, the Choir Exchange, Crockery- 
 Board of Trade, Cut Flower Exchange, Hay Exchange, 
 the Lager Beer Brewers Board of Trade, Leaf Tobacco 
 Board of Trade, Maritime Exchange, Mechanics and Traders 
 Exchange, National Railway Exchange, Fruit Exchange, 
 Furniture Board of Trade, Furniture Exchange, Metal Ex- 
 change, Retail Coal Exchange, Southern California Fruit 
 Exchange, and the U. S. Export Association, and numerous 
 similar associations and corporations ha-ve been organized 
 in the other chief cities of the Union, 
 
 A corporation was created by chapter 279, New York 
 Laws of lb(j8, called the " Public Exchange,'' the name be- 
 ing subsequently changed to the Mutual Trust Company, 
 having power to establish and conduct in the City of New 
 York an Exchange for the daily meeting of merchants, bank- 
 ers and trad(.'smen and for the convenient delivery and in- 
 terchange of stocks and bonds and other securities between 
 the dealers therein, and for other purposes. The corpo- 
 ration was judicially dissolved in 1884.' 
 
 By Laws of New York of 1886, c. 333, corporations or 
 associati<jns may be organ iy.cd to foster trade and commerce. 
 This statute was held not void as against j)ublic policy.^ 
 
 ' People VH. Mutual Trunt ('(j., W> ilua charter, see Hrown vs. Mutual 
 
 N Y 11. Ah to nature of Heats in Trunt Co., '22 \V. I). .'{'.»'.. 
 the Exehaiine (Ariieriean Mining ' UeyuoliiH vh. riuinijirs' Ahhii., 
 
 Sto<-k Kxehatit'e) orj;aiiiz<-<l under 63 .\ Y. S. 303.
 
 18 Stock-brokers and Stock Exchanges. 
 
 Under the " Membership Corporations Law " of New York, 
 Art. XL, there may be formed as corporations, boards of 
 trade or exchanges, " for the purpose of fosteriug trade and 
 commerce, or the interests of those havingaooTmnon trade, 
 business, financial or professional interest, to reronn abuses 
 relative thereto, to secure freedom from unjust or unlawful 
 exactions, to diffuse accurate and reliable information as to 
 the standing of merchants and other matters, to procure 
 uniformity and certainty in the customs and usages of 
 trade and commerce, and of those having a common trade, 
 business, financial or })rofessional interest, to settle differ- 
 ences between its members and to promote a more enlarged 
 and friendly intercourse between business men." ^ 
 
 A Stock Exchange by the name of " The Xew Jersey 
 Stock Exchange " was incorporated by an act of the Legis- 
 lature of that state, approved March 16, 1875 (N. J. L. 1875, 
 ch. 130). The act does not show where the Exchange was 
 to be located, and no public organization seems to have 
 been effected under it. Provision is now made by ch. 138, 
 Laws of JS'ew Jersey, 1890, for the incorporation of boards 
 of trade or chambers of commerce, and similar associations. 
 See also Stat. Indiana (1875, ch. 5, §§ 1, 2 and 3), providing 
 for the organization of boards of trade, commercial or real 
 
 ' Although such a corporation, membership or mixed corporation, 
 
 having; a capital stock, and dis- and the provisions of sec. 33 of the 
 
 tributing profits amongst its mem- latter law, as to conflicting laws, 
 
 bers, might come within the defini- would render its organization under 
 
 tion of a Stock Corporation (Gen. the Membership Corporations Law 
 
 Corp. Law of X. Y. § 2) and be sufficient; although such a corpora- 
 
 therefore required at first sight to tion organized under a law repealed 
 
 organize under the Business Cor- by the Membership Corporations 
 
 porations Law, it is submitted that Law is not governed by the latter, 
 
 the reference to such a corporation § 131, 
 in sec. 1 of the Gen. Corp. Law, as a
 
 Organization of Stock and other Exchanges. 19 
 
 estate exchanges, chambers of commerce, or other com- 
 mercial organizations. 
 
 Corporations may be formed for a like purpose in Cali- 
 fornia (^ 591, Pomeroy's Civ. Code), and the statutes of 
 Pennsylvania (P. L. June 10, 1S93, 417) and of Wisconsin 
 and Kansas also provide for the organization of boards of 
 trade and business exchanges. The Pittsburgh Stock Ex- 
 change was held entitled to a charter of incorporation under 
 the Corporation Law of 1ST4, enabling corporations to 
 organize for "trade or commerce.''^ Some of the States 
 however prohibit such organizations. In Louisiana cor- 
 porations for mercantile, or commission brokerage, stock- 
 jobbing, or exchange business are prohibited, and in 
 Connecticut, corporations for dealing in bonds, notes or 
 other evidences of debts, cannot be organized. 
 
 The Company of Associated Stock-Brokers (San Fran- 
 cisco) is a corporation composed solely of the voluntary 
 association, supi^a} 
 
 Nearly all of the Stock Exchanges organized in the United 
 States are unincorporated associations, whilst, on the other 
 hand, the majority of the Produce Exchanges have been 
 formed as corporations. 
 
 Although we have, in this subdivision, given a reference 
 to the principal Produce Exchanges, this chapter will 
 chiefly treat of the legal nature, character and incidents, 
 and the rules and regulations of unincorporated Stock Ex- 
 changes. P^or a more extended consideration of the nature 
 and incidents of Produce Exchanges, the reader is referred 
 to Messrs. Bisbee and Simonds' " T^w of the Produce Ex- 
 
 ' Rf PittsburKh Stork Exchange, ' Clute vs. Loveland, OS Cal. 
 26 I'itU. L. J. N. S. 308. 254.
 
 20 Stock-brokers and Stock Exchanges. 
 
 change," and to the American and English Enc. of Law 
 (2d ed.), and the Cn'c. of Law and Procedure. 
 
 II. General Legal Nature of Unincorporated Stock 
 Excliauges. 
 
 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 princi- 
 pal, 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 E.xchange, 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." And the New York Stock Exchange has been 
 judicially described as " a voluntary association of individ- 
 uals united, without a charter, in an organization for the pur- 
 pose of offering to the members thereof certain facilities in 
 the transaction of their business."^ 
 
 It is purely a voluntary association.^ 
 
 ' This body, on the Sth of May, 47 Hun, 505; Wilson vs. Telegram 
 
 1869, consohdated \ntli the N. Y. Co., IS \. Y. St. Rep. 78; Matter 
 
 Stock Exchange. of Renville, 46 App. Div. 37. 
 
 ^ White vs. Brownell, 4 Ab. Pr. In reference to Produce Ex- 
 
 (n. s.) 162; s. c. 2 Daly, 329. changes it was held in Chicago 
 
 =• Belton vs. Hatch, i09X.Y. 593; Open Board of Trade vs. French, 
 
 People ex rel. Lemmon vs. Feit- 61 111. App. 349, that the Chicago 
 
 ner, 167 N. Y. 1, at page 4. See Open Board of Trade being a pri- 
 
 also Bemheim vs. Keppler, 34 Misc. vate corporation might discrimi- 
 
 321; 69 X. Y. S. 803. nate as to persons, not being mem- 
 
 * Commercial Tel. Co. vs. Smith, bers, it may admit to its floors or
 
 Legal Nature of. 21 
 
 So, in describing a similar board in a sister city,' the court 
 said : " The Philadelphia Board of Brokers is not a corpora- 
 tion. It is not a joint-stock coni])any, 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 ])rivate associations are said 
 not to be partnerships as between themselves, whatever may 
 be their relation to third jiersons.'' ^ " 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 commonplace 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 liis 
 fellow-members. The association does not share in the 
 losses of the indi\'idual associates ; each member takes his 
 own gains, and individually sustains the losses incident to his 
 engajrements." ^ The Exchange itself transacts no business 
 as such in the buying and selling of stocks. The business 
 therein transacted is that of tlic indivicUial menibers.'' 
 
 gallcrj", and it mifrht therefore ex- interstate conunerce in violation of 
 
 elude a member's women eus- the Anti-Trust .\ct, see Hoplcins vs. 
 
 tomers. Quiere: Wliether a eorpo- I'niled States, 171 U. S. 578. 
 
 ration can be admitted to member- ' Leech vs. Harri.s, 2 Brews. (Pa.) 
 
 ship in such a corporation? Live .'371. 
 
 Stock Commis-sion Co. vs. Live ' The court cited White vs. Hrow- 
 
 Stock Exehanfie, 143 111. 22.S. A!- neil, A Ab. Pr. (n. s.) 31S; Thomas 
 
 though the busineHS of such a vs. Kllmaker, 1 Pars. Cjus. (Pa.) VKS. 
 
 eorpffration hsm become of ;;reut ' Leech vs. Harris, supra; White 
 
 volume, the courts are not em- vs. Hrowiiell, .'5 .\1>. Pr. (n. s.) 
 
 powered to declare their markets 3 Is. 
 
 public. lb. As to when a Live * People ex nl. Leminon vs. Feit- 
 
 8tock Exchanf^c is not engai'ed in m r lii? V ^' I
 
 22 Stock-brokers and Htock Exchanges. 
 
 These associations have some elements in common with 
 corporations, joint-stock companies, and partnerships.* 
 
 An institution lik'o 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 
 characteristics of both. Like a corporation, it has perpetual 
 being ; and in this respect it has an advantage over bodies 
 politic, for the charters of tlie latter generally limit their ex- 
 istence to some detinite j)eriod ; whereas the Xew York 
 Stock Exchange can preserve its organization (as it has since 
 1817) until it voluntarily dissolves itself.^ 
 
 Is the Stock Exchange in any legal sense a public insti- 
 tution, charged with public duties ? The question has arisen 
 principally^ in respect to the right of such exchanges to 
 control the publication of the quotations or prices reached 
 in dealings on its floors. In Illinois the Supreme Court,^ 
 relying on the doctrine of the United States Supreme Court 
 in Munn vs. Illinois,^ that when private property has been 
 devoted to a jniblic use and has become affected with a 
 public interest it ceases to hejtc/'isjyrivati only, and is sub- 
 ject to public regulation, held that the Chicago Board of 
 Trade, an incorporated organization, having so conducted its 
 affairs for many years, as to create a standard market for 
 agricultural products, and acting in combination with tele- 
 
 * Leech vs. Harris, supra, 575, App. 93. See also Public Grain & 
 576; Belton vs. Hatch, 109 N. Y. Stock Exchange vs. Western Union 
 593. See also Hyde vs. Woods, 2 Tel. Co., Circuit Court of Cook 
 Sawy. 655, aff'd 94 U. S. (4 Otto) County, May, 1883, 17 Fed. Rep. 
 523. 830, note; Murphy vs. Chicago 
 
 ^ See also Thompson vs. Adams, Board of Trade, 20 Chic. L. N. 59; 
 
 93 Pa. St. 55. Wiley vs. Board of Trade, 14 Nat. 
 
 * New York and Chicago Grain & Corp. Rep. 181, and note to 17 Fed. 
 Stock Exchange vs. Chicago Board Rep. 828. 
 
 of Trade, 127 lU. 153, rev'g 27 lU. *94 U. S. 113.
 
 Legal Nature of. 23 
 
 graph companies, built up a system for the instantaneous 
 and continuous indication of the fluctuations of that mar- 
 ket, until the pubUc and all persons dealing in such products 
 had conformed to such system, and thus such market quo- 
 tations had become necessar}^ to the safe conduct of busi- 
 ness, this system had become affected with a public interest, 
 and the Board could not make any unjust discrimination, 
 in furnishing the quotaticms, between persons willing to pay 
 therefor and to conform to all reasonable rules. This deci- 
 sion was expressly limited to the facts above stated, and it 
 was admitted that the Board could at any time, at its own 
 pleasure, cease the collecting and publication of the quota- 
 tions entirely. In so far as they rule to the contrary, 
 either expressly or by implication, the decisions of the 
 United States Circuit Court mentioned in the footnote* 
 must, in view of the prior decision of the Supreme Court of 
 the United States in Munn vs. Illinois, supra, and of the 
 State Supreme Court decision just cited, be considered as 
 overruled. 
 
 But the Chicago Board of Trade will not be compelled to 
 supply its quotations to a " bucket shop." ^ 
 
 * Metropolitan Grain Exchange change vs. Board of Trade, 198 
 
 vs. Chicago Board of Trade, 15 Fed. 111. 396. 
 
 Rep. 847; Bryant vs. Western The Board of Trade and tele- 
 Union Telegraph Co. (U. S. Cir. Ct.), graph companies may require that 
 17 Fed. Rep. 82.5; Marine Grain and persons, to whom quotations are 
 Stock Exchange vs. Western Union supplied, should sign an agreement 
 Tel. Co. (U. S. Cir. Ct.), 22 Fed. not to ke^-p a bucket shop. SuUi- 
 Rep. 2.3; Board of Trade v. Christie, van vs. Postal Tel. Co., 123 Fed. Rep. 
 110 Fed. Rep. 914. See also valu- 411. Such an agreement is not 
 able note appended to Brj'ant vs. in restraint of conmierce. Boanl 
 Co., 17 Fed. Rep. S2.'5-S28. vs. Chri.stie, 121 Fed. OOK. 
 
 'Christie St. Commission Co. vs. It ha.s been recently held, how- 
 Board of Trade, 94 III. .'\pp. 229; ever, that as over 90 per cf-nt of the 
 Central Stock and Grain Ex- transactioiui on the Chicago Board
 
 24 Stock-brokers and Stock Exchanges. 
 
 And it was held in lioardof Trade of the City of Chicago 
 vs. Thomson Commission Co.,' that the Board had only the 
 common knv i)roperty right in the quotations, viz., till 
 their first publication, and it could guard against subsequent 
 publications only through the statutory copyright. In that 
 case as it was doubtful whether the defendants had inter- 
 fered with plaintiff's common-law right of first publication, 
 a preliminary injunction restraining defendants from using 
 the quotations was denied pending the taking of the proofs. 
 
 And it was held in Cleveland Telegraph Co. vs. Stone,^ 
 that the Board may assign this ]">roperty right (viz., the 
 right of property in the quotations till the same are made 
 over to the public) to a third person Avho may restrain the 
 unauthorized distribution of such quotations before publica- 
 tion. 
 
 In ]^ew York, with particular reference to the Stock 
 Exchange, the decisions have been uniformly opposed to 
 the Illinois case of Xew York, &c.. Exchange vs. Board of 
 Trade, sujjra, and have answered the reasons of the Illinois 
 court. In the principal case,^ the plaintiff was engaged in the 
 business of collecting upon the floor of the New York Stock 
 Exchange quotations of dealings in stock and distributing 
 such quotations to its customers. The Stock Exchange 
 threatening to oust the })laintiff from the Exchange, an in- 
 junction was sought to restrain such action, upon the ground 
 that the Stock Exchange being a body created for the bene- 
 
 of Trade are gambling ones, the Fed. 944; Board vs. Kinsey, 125 
 
 board cannot restrain the use of Fed. 72. 
 
 its quotations. Board vs. Dono- ' Board of Trade vs. Thomson 
 
 van Co., 121 Fed. 1012. To same Co., 10.3 Fed. 902. See also Board 
 
 effect Board vs. O'Dell Co., 115 vs. Ex., 121 Fed. 433. 
 
 Fed. 574; Christie Co. vs. Board of ^ 105 Fed. 794. 
 
 Trade, 125 Fed. 161, rev'g s. c. 116 ^Commercial Telegram Co. vs. 
 
 Smith, 47 Hun, 494.
 
 Le2:al Nature of. 26 
 
 fit of the public, it was against public policy, irrespective 
 of contract, to refuse to permit the plaintiff to enter the 
 Exchange for the purposes above mentioned. But the court 
 refused to entertain that view, saying : " The claim that the 
 Stock Exchange has no right to exclude the Commercial 
 Telegram Company from its floor upon the ground of public 
 policy evidently proceeds upon an entirely erroneous theory. 
 The Exchange is a private association ; it has the right 
 to admit to its floor whom it pleases; it obtained nothing 
 from the State except that protection which the law affords 
 to every citizen ; it has sought no special privilege and ob- 
 tained no special powers. It is, therefore, just as nmch the 
 master of its own business and of the method of conduct- 
 ing the same as any private individual within the State. 
 It may make public the transactions that occur within its 
 walls, or it may refuse all information in respect thereto. 
 Xo matter which course is pursued, so long as it violates no 
 law, it has a right to continue its business as it pleases.^ It 
 
 ' Matter of Renville, 46 App. Div. ropolitan Grain and Stock Ex- 
 
 37; Wilson vs. Telegram Co., IS N. change vs. Board of Trade, supra. 
 
 Y. St. R. 78. The business of collecting and fur- 
 
 A related cjuestion to that dis- nishing commercial new's is distinct 
 
 cussed in the text is the duty of a from its business as a common 
 
 telegraph company, as a public carrier, and in engaging in it, the 
 
 servant, like a common carrier, to company is in the .same position as 
 
 furnish the quotations collected by a private person would be who buys 
 
 it to all who comply with its condi- and sells goods, selling to one and 
 
 tioiLS, without discrimination. As refusing to -sell to another. Brad- 
 
 to this, qua-re in Matter of Renville, ley vs. Western Union Tel. Co., 
 
 supra. The relations which tele- Cincinnati Connnercial Gazette, 
 
 graph Companies bear towards the April S, 1SS7, 17 Fed. Rep. 834, 
 
 public may be such as to prevent note. See, however, State e.x rel. 
 
 any such discrimination. Bryant Telegraph Co. vs. Bell Telephone 
 
 VB. Western Union Tel. Co., supra. Co., 36 Ohio St. "ilMJ, where it was 
 
 But it is said: "It is no part of the held that under the statute of that 
 
 duty of the t«-legrai)h company to stati-, a telephone <(jmpany was a 
 
 transmit such information." Met- pultlic servant and possessed no
 
 26 Stock-brokers and Stock Exchanges. 
 
 may give its quotations to one man and deny them to an- 
 other." 
 
 But the fact that the business at a particular market, 
 owned or conducted by a private corporation or a voluntary 
 association, has become so great as to influence the commerce 
 of a large section of the country, or more or less largely of 
 the whole country, does not permit the courts to declare such 
 markets public and impressed with a public use, or to apply to 
 it any rules of public policy peculiar to that class of market. 
 Markets overt, such as exist in England are unknown here. 
 If the magnitude of a particular business is such, and the per- 
 sons affected by it are so numerous, that the interests of so- 
 ciety demand that the rules and principles applicable to pub- 
 lic employments should be applied to it, this would have 
 to be done b}^ the Legislature,' The court distinguishes the 
 Case of New York and Chicago Grain and Stock Exchange 
 vs. Board of Trade, siijjra.'^ 
 
 Although the last cited case decided that a public inter- 
 est attached when the quotations were given out, Avhich 
 entitled the applicants to receive them without unjust dis- 
 crimination, it nevertheless held that the Board possessed a 
 property right in the quotations before publication and it was 
 
 right to discriminate as to whom it Chicago Live Stock Exchange, 143 
 
 would provide with instruments. 111. 210. 
 
 A telegraph company will not be In Russell vs. N. Y. Produce 
 compelled to furnish quotations to Exchange, 58 N. Y. Supp. 842, the 
 a "bucket shop." Bryant vs. claim was made that the business 
 Western Union Tel. Co., supra; done on the New York Produce / 
 Wiley vs. Board of Trade, 14 Xat. Exchange was so affected by a pub- 
 Corp. Rep. 181. See also National lie use that it was subject to judi- 
 Tel. News Co. vs. Western Union, cial regulation at the instance of an 
 119 Fed. 294; Illinois Commission outsider, but no evidence to sub- 
 Co. vs. Cleveland Tel. Co., 129 Fed. stantiate the claim was produced. 
 301; Smith vs. Co., 84 Ky. 664. M27 111. 153. See also Kiernan 
 1 American Live Stock Co. vs. vs. Co., 50 How. Pr. 194.
 
 Legal Nature of. 27 
 
 subsequently held * that the furnishing of the quotations to a 
 customer either through a ticker or b}'' means of a blackboard 
 in the customers' office, not being a universal publication, 
 was not a publication thereof, and therefore when defend- 
 ants obtained such quotations from a firm who purloined 
 them from the customers' office before they were given out 
 to the press, they were enjoined from taking and using the 
 reports so derived, without authority. And reasonable reg- 
 ulations may be made by the Board, and therefore when 
 defendant declined to comply with a requirement of the 
 Board that the quotations should not be used in the con- 
 duct of a bucket shop, it will be enjoined from recover- 
 ing or surreptitiously acquiring them, and the defendant can- 
 not argue that the complainant Board violated the " bucket 
 shop " statutes without very clear proof that gambling trans- 
 actions were carried on in pursuance of, and not in violation 
 of, its rules.^ 
 
 The recent case of Board of Trade vs. Christie, «?(/>;•«, de- 
 cided that courts cannot by their decree assume the initia- 
 tive in declaring private property to be impressed with a 
 public use. There should exist first the condition of ex- 
 pansion of a private business justifying the assertion of 
 a public interest therein, followed by legislative recog- 
 nition of such condition. When such a condition arises, 
 the measure of the public control is limited by the ex- 
 tent of the public interest, and the making of regulations 
 pertaining thereto is of legislative, not judicial, cognizance. 
 See also State vs. Associated ]*ress,^ where it was held that 
 
 ' Board of Trade of Chifa^o vh. 'Hoard of Tradf- vs. Christie, 1 1G 
 Ha<lden-Knjll Co., 121 Fed. 1017. Fe<l. Oil. 
 See also Hoard vh. Kllis. \S2 Fed. ' 1.7.) .Mo. )1() .a p. I'Jl. 
 319; Ex. VH. Gregory (1«'JG;, 1 Q. li. 
 J J7.
 
 28 Stock-brokers aiul Stock Kxchaiiflres. 
 
 to brm<^ the pi-oporly (»r Imsincss of ;i pei-soii under govern- 
 menttil control there must he an exercise of the police 
 power. The conclusic^ns reached in Munn's Case, supra, are 
 very ably criticised in this case. 
 
 III. Stock Exchange not a Partnership. 
 
 But the Stock Exchange does not come within the legal 
 definition of a partnership. The general rule undoubtedly 
 is that "no partnership or 2■was^ partnership subsists between 
 persons who do not share either prolit or loss and who do 
 not hold themselves out as partners. Societies and clubs, 
 the object of which is not to share profits, are not partner- 
 ships, 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 busi- 
 ness, 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 engage- 
 ments. The organization of this board grew out of a 
 necessity for new and greater facilities for exchange and 
 negotiation, incident to the rapidly developing interests of 
 the country and the increasing number and value of its 
 commercial securities.- 
 
 ' Lindley on Part. (3d ed.) 57. of Appeals in the case of Belton vs. 
 
 See also edition of 1893; Belton vs. Hatch, 109 N. Y. 593. where the 
 
 Hatch, 109 N. Y. 593; Lafond vs. court, through Associate Judge 
 
 Deems, 81 X. Y. 507-514. Gray, said: 
 
 MVhite vs. Brownell, 3 Ab. Pr. "It (The New York Stock Ex- 
 
 (n. s.) 318. The views expressed in change) cannot be said to be strictly 
 
 the text are confirmed by the Court a copartnership, for its objects do
 
 Not a Partnership. 29 
 
 Although it may possess property derived from the pay- 
 ment of dues or fines, such property is a mere incident, and 
 not the main ])urp<)se 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 Avithdrawing.* 
 
 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, ij^so facto, dissolve it.^ 
 
 In the case of Caldicott vs. Griffiths^ it was held that a 
 society called " The Midland Counties Guardian Society for 
 
 not come within the definition of may be, against financial irresponsi- 
 
 one. A copartnership results from bility. Bernheim vs. Keppler, 34 
 
 a contract between the parties by Misc. 321. 
 
 which they agree to combine their ' Daly, P. J., in Wliite vs. Brow- 
 property or labor, or both, in some nell, 4 Ab. Pr. (n. s.) 191. This 
 common enterprise and for a com- subject is fully treated, post, p. 33. 
 mon profit, to be shared in the pro- ' Belton vs. Hatch, 109 X. Y. 
 portion stated in their agreement. 593; Bernheim vs. Keppler, 34 
 The objects of a voluntary' associa- Misc. 321. 
 
 lion of brokers do not, however, ' White vs. Brownell, 3 .\b. Pr. 
 involve any such combination, or (n. s.) 325; 1 Lindley on Part. (3d 
 any communion of profits from the ed.) 57. See also discussion as to 
 business transacted by the members, the nature of unincorporated asso- 
 Like a business club, its principal ciations. People ex rel. Piatt vs. 
 object is the promotion of the con- Wemple, 117 X. Y. 136; People ex 
 venience of its members by furnish- rel. Winchester vs. Coleman, 133 N. 
 ing facilities which aid them in Y. 281 ; Sandford vs. Supervisors of 
 doing their business, and are, there- Xew York, 1.5 How. Pr. 172; Water- 
 fore, of benefit to them." bury vs. .Merchants' Union Exp. Co., 
 
 To same effect, People ex rel. 50 Barb. 100; Thomjis vs. Ellmakcr, 
 
 Ix>mmon vs. Feitner, 1G7 -N. Y. 1 Pars. Cas. (Pa.) 98; Flemyng vs. 
 
 1. Hector, 2 M. & W. 172; Kegina vs. 
 
 .\n incidental purpose, but of Whitmarsh, 15 Q. B. 600; Bear vs. 
 
 great importance to the business Bromley, 18 id. 271. See also case 
 
 and in%'esliiig community, is the of A.sh vs. Guie, 11 Pitts. L. J. 
 
 maintenance of a higli standard of (Pa.) n. s. -119; a. c. Alb. L. J.July 
 
 comnuTfial integrity among the 30, 1KX1,83. 
 
 members and protection, so fur aa * 8 Ex. 898.
 
 30 Stock-brokers and Stock Exchanges. 
 
 the Protection of Ti-adc," t lie professed ol)jectof which was 
 to " watch tlie prog-ress of any measure in Pai-lianient affect- 
 ing the ti'ade interests, and to ]irotectitsinein))ers from the 
 practices of the fraudulent and dislionest," and whicli was 
 organized with a president, vice-president, treasurer, secre- 
 tary, and committee — to which committee was given the 
 general management of the affairs of the society, and which 
 society was organized under a series of rules adopted for the 
 management of the same — was not a partnership ; and that, 
 tlierefore, 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 oiu^ 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 quasi- 
 partnership ; or whether the case is similar to that of a 
 number of persons subscribing to a hospital or to an ordi- 
 nary club. The solution 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 com- 
 panies, and in other undertakings of tiiat description, but 
 by consulting the rules themselves." 
 
 Yet unincorporated associations are, in law, often regarded 
 as mere partnerships.^ 
 
 'Holmes vs. HigRins, 1 B. & C. Co. vs. Fry, 4 Phil. (Pa.) 129; Grcen- 
 
 71. wood's Ciise, 23 Eng. L. & Eq. 422; 
 
 'Robbins vs. Butler, 24 111. 397; Wells vs. Gates, 18 Barb. (N. Y.) 
 
 Bullard vs. Kinney, 10 Cal. 60; Coal 5.57; Butterfield vs. Beardsley, 28
 
 Not a Corporation. 31 
 
 And although a voluntary unincorporated association like 
 the Xeu' York Stock Exchange is not a partnership, the 
 rights of the associates do not ditfer from a partnership, so 
 far as their rights in the property of the association are 
 concerned. "When therefore a member violates the con- 
 tractual relation between him and the association, by being 
 guilty of reckless dealing, or doing business with im- 
 proper parties, and he is thereupon deprived of his 
 memberehip and declared ineligible for read mission, he, 
 or his assignee, forfeits all right to the proceeds of his 
 seat, and the same may be disposed of as the association 
 may direct.^ 
 
 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. It has neither franchises, special privileges nor 
 special powers. It obtains nothing from the state save 
 that protection afforded to every citizen.^ 
 
 The obli<j:ations and rights of its members are not deter- 
 mined by any statutory provision.'^ There is no contribu- 
 tion of capital by its members for the prosecution of any 
 kind of business by the association. It issues no stock, 
 
 •Mich. U2; .Moore vh. Brink, 4 Hun ^ A voluntary unincorporated 
 
 (N. Y.), 402; Kochler vs. Urown, 2 joint-stock company is, liowever, 
 
 Daly (N. Y.), 78. liable to be taxed on its capital, 
 
 ' Bclton V8. Hatch, 109 N. Y. 593. as a corporation, under the laws 
 
 'Commercial Tel. Co. vs. Smith, of New York. Sandford vs. Super- 
 
 47 Hun, .50.'); Wilson vs. Telepram visors of N. Y., l.'i How. Pr. (N. Y.t 
 
 Co., 18 .\. Y St. Rep. 78; Matter of 172; People ex nl. Piatt vs. Wem- 
 
 Renville, 40 App. Div. '.17. For pie, 1 17 .\. Y. l.'iC*. Compare Peo- 
 
 Ktatutes under which exchanir«'S pie ex rel. Winchester vs. Coleman, 
 
 may be incorporated see ante, p. 17. 133 N. Y. 281.
 
 32 Stock-brokers and Stock Exchanges. 
 
 nor can the individual members claim any rights of prop- 
 erty in it as stockholders.' 
 
 Unlike an incorporated commercial joint-stock company, 
 the privilege of membershiji 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 distinc- 
 tions ^vill be further developed in the ensuing subdivisions 
 of this chapter. 
 
 V. Rights of Members in Property Held by Non-incorpo- 
 rated Stock Exchanges. 
 
 In respect to the property which the Stock Exchange 
 may, from time to time own, interesting questions ai-e in- 
 volved in which the distinction between this body and cor- 
 porations and partnerships Avill further appear. 
 
 As has been shown, the Exchange is in no wise interested 
 in the pecuniary gains or profits of its members; and the 
 sole source of its revenue is derivable from such dues, fines, 
 assessments, or contributions as it may, from time to time, 
 collect or receive from its members, together with any in- 
 crease of its present accumulations. 
 
 At common-law, the legal title of the personal property 
 of the Exchange, it being unincorporated, is vested in all 
 
 » White vs. Brownell, 3 Ab. Pr. X. Y. St. Rep. 78; Matter of Ren- 
 
 (n.s.)318. villc, 46 App. Div. 37; Live Stock 
 
 ' Id. 4 Ab. Pr. (n. s.) 162; Com- Commission Co. vs. Live Stock Ex- 
 
 mercial Tel. Co. vs. Smith. 47 Hun, change, 143 111. 210. 
 505; Wilson vs. Telegram Co., 18
 
 Members' Rights iu Property. 33 
 
 of its members, in like manner as the title to partnership 
 property is vested in all the partners. But, unlike the rela- 
 tion of partners, a member of the Exchange, or his legal 
 representatives, has no right to call for an account of the 
 property and a division of the same. The interest of each 
 member in the property of the association is equal, but is 
 subject to the constitution and by-laws. They ex[)ress the 
 contract by which each member has consented to be bound, 
 and which measure his duties, rights and privileges as 
 such.^ 
 
 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 pewholder ; and when the body ceases to exist, 
 those who may then be members become entitled to their 
 proportionate share of its assets.^ 
 
 This princij)le arises mainly from the fact that organiza- 
 tions of this character are not constituted for gahi, but for 
 the convenience of their members, and the possession of 
 prop<irty by them is a mere incident, and not the main 
 pur|)ose or object of the association.^ 
 
 When a person is elected a member of the Exchange, ho be- 
 comes entitled to what isconmionly called a "seat," and such 
 a i)roportionate interest in the property of the association as 
 he would be entitled to if he should haj)pen to be a mem- 
 
 ' Belton VB. Hatch, 100 N. Y. Pr. (ii. s.) 102-101 ; Fiuwott vs. First 
 
 593. I'ariHh in Hoyk-Htoii, 10 Pick. 301; 
 
 'St Jamc«'H CIul), 13 Va\\i. L. k Cakiicott vs. (Jriflith, H Iv\. HOS. 
 Exj. 502; \Vhit« vh. lirowncll, 4 Ab. ' White vh. Hrowiicll, Mupru. 
 
 8
 
 34 Stock-brokers and Stock Exchanges. 
 
 ber at the time of its dissolution ; and that interest would 
 be found by dividing the amount of property b}" the num- 
 ber of "seats" then existing after deducting debts and lia- 
 bilities. These " seats, '' under the 15th Article of the 
 Constitution of the New York Stock Exchange, are trans- 
 ferable, but the transferee must be approved by two thirds 
 of the Committee on Admissions. The transfer, sale or 
 assignment of the interest of a partner would work a disso- 
 lution of the partnership.' In the present instance, however, 
 the transferor, by sucli an act, does not disturber affect the 
 general organization ; he simply ceases to be a member 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 f (allows that the latter 
 is forced to continue his membership. By signing the Con- 
 sitution 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.^ 
 
 * Pars, on Part. (5th ed.) 433, 434; ject, however, to the condition that 
 1 Lindley on Part. (4th ed.) 698, before the purchaser can participate 
 6th ed. p. 575, 577. in the proceedings of the board he 
 
 ^ In the case of exchanges which must be elected a member, then 
 by their rules expressly permit a there can be no doubt that if a 
 m ember to dispose of his seat, sub- member should sell his scat to one
 
 Members' Rights in Property. 35 
 
 As to any real estate which the Exchange may acquire, the 
 questions which woukl ordinaril}'- arise in relation thereto 
 are more difficult and numerous. Their propert}" heing, as 
 we have seen, technically held by them as partners, it follows 
 that the persons who are members, when they acquire hinds 
 are vested with equal interests therein ; and that the 
 Stock Exchange at common law, being an unincorporated 
 body, could confer no 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 Ex- 
 change. 
 
 To avoid the many Cjuestions of the above nature which 
 doubtless would have arisen if real estate Avere held by the 
 Exchange, a company was incorporated under the laws of 
 the State of New York,' duly empowered to hold real estate, 
 
 who should not be elected a member uce Exch-nige, having no money 
 
 of the board, such purchaser would value attached, is a personal privi- 
 
 take, subject to any rules imposed lege, and a bill will not lie for an 
 
 by the association, the interest of injunction to restrain the Exchange 
 
 his vendor in the property of the from issuing new certificates of 
 
 association, and this was so held in membership to four members whose 
 
 the case of Clute vs. Lovcland, GS seats plaintiff had purcha-sed. Un- 
 
 Cal. 2.54. dcr the nilos plaintiff could not be 
 
 .\rticle XV. of the constitution of "approved" as a member more 
 
 the New York Stock Exdiango, than once. If he wire injured, he 
 
 iliffcrs, however, frr»m the rules of had his remedy at law. Shoemaker 
 
 Exchanges permitting, a.s above vs. Exchange, 15 Phila. K. 103; 30 
 
 shown, a " disposal " of the member- Leg. Int. 373. As to retran.sfer of 
 
 ship, before the approval of the a seat by an employee of a member 
 
 purrhaHcr by the Exchange, by in whose name the seat wa-s helil, 
 
 denying the right of tran.sfj-r of his see Sproul vs. Morris, 31 Pitts. L. J. 
 
 seat to a member until his trans- (n. s.) 310. S<>e also ,\llicn vs. 
 
 feree hivt bcfu approve<l l)y two Wotherspoon, r>0 X. ^' Super. Ct. 
 
 thirds of the committee on admis- 117. 
 nioiiH. ' Incoq). Jan. .30, l.S()3. 
 
 A seat in tlie I'liil.idelplii;! I'rod-
 
 36 Stock-brokers and Stock Exchanges. 
 
 the stock of the company being exclusively owned and held 
 by the Stock Exchange.' 
 
 In the year 1807 there was enacted in the State of New 
 York a general law authorizing any joint-stock company or 
 association to purchase, hold, and convey leal estate : 1st, To 
 an extent necessary for its iiiiinediate accommodation in the 
 convenient transaction 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 associa- 
 tion, as such, and he and his successors may sell, assign, and 
 convey, free from any claim of shareholders, or any person 
 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 Rainey vs. Laing.'* But if the 
 statute is violated in this respect, no one can question the 
 title but the State.^ 
 
 ' The ownership of the building in ^ 58 Barb. 489. 
 
 which the London Stock Exchange *Id.; Howell vs. Earp, 21 Hun 
 
 is situated is also in a distinct body. (X. Y.), 393. Aside from the stat- 
 
 Mclsheinicr it Lawrence Stock Ex. ute just quoted, it is a question 
 
 3d ed. 4; Brodliurst's Lawand Prac- whether, in view of the fact that 
 
 tice of the Stock Ex. p. 32. The the members of the Exchange are 
 
 real estate of the San Francisco partners, in some a.spect.«;, a grant to 
 
 Stock and Exchange Board, a vol- the Stock Exchange would be valid. 
 
 untar>- as.sociation, is held by a cor- It has been held that a community 
 
 poration composed exclusively of or society, not incorporated, cannot 
 
 the members of the board. Clute purchase land and take in succes- 
 
 vs. Loveland, 68 Cal 2.5.5. sion. Co. Litt. 3 a,10 Co. 266; Com. 
 
 2 L. of N. Y. 1867, vol. i, ch. 289, Dig tit. Capacity, B 1 ; Gocsely vs. 
 
 576. Bimeler, 55 U . S . 589 ; German Land
 
 Members' Ri2:Iits in Property. 37 
 
 The question is not, however, now of moment as this 
 statute was repealed by the Joint Stock Association Law,' 
 and as the second section of the hitter hiw restricts its 
 
 Association vs. Schollcr, 10 Minn. 
 331; Liggett vs. Ladd, 17 Cr. S9; 
 Douthitt vs. Stimson, 73 Mo. 199; 
 Jackson vs. Cory, S Johns. (X. Y.) 
 Reps. 385; Hornbeck vs. Westbrook 
 9 id. 73; same vs. Sleight, 12 id. 198. 
 In this last case it is said: "The in- 
 habitant.s of Rochester were not a 
 body corporate, so as to be compe- 
 tent to take an estate in fee. And 
 if a grant to them in a deed would 
 be void, a reservation to them in a 
 deed, in fee, to a third person would 
 be equally void. Nor would it be 
 vaHd as a covenant to stand seized. 
 The inhaljitants of Rochester were 
 strangers to the deed. The present 
 inhabitants, at all events, inu.st 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." Although 
 if a voluntary association is subse- 
 quently incorporated, the title to 
 land held by its officers by adverse 
 poR.se.ssion, pas.ses to the corpora- 
 tion. Kt'f. Ch. of Gallupvillc vs. 
 Srhwilcraft, 65 X. Y. 131. Hut see 
 Ticknor's Est., Sup. Ct. Mich, t 
 Am. Law Reg. ^n. s.) 2G9 note; 
 Hamblett vs. Bennett, S8 Mass. 
 140; IvLst Haddam Hapt. Ch. vs. 
 I'2a.st Had<iani liapt. Sor., 44 Conn. 
 259. .\ grant to a vohnitary unin- 
 coq)orate<l as-sociatiori, whosi- nicm- 
 bcFH arc ascertainable may be con- 
 Htrucd an a grant to Kuch nu-mberH 
 
 as tenants in common. Byam vs. 
 Bickford, 140 Mass. 31. A volun- 
 tary association unincorporated is 
 incapable of taking a legacy. A 
 legacj' bequeathed to such an asso- 
 ciation is invalid, and the property 
 so bequeathed vests in the testator's 
 next of kin if not otherwise disposed 
 of. Shipman vs. Rollins, 19 X. Y. 
 Weekly Dig. 370; Supm. Ct. Gen'I 
 Term, 1st Depart., and cases there 
 cited. So a voluntary unincor- 
 porated association for charitable 
 purposes cannot take property by 
 devise in the State of Xew York. 
 White vs. Howard, 46 X. Y. 144, 
 aff'g 52 Barb. 294; Sherwood vs. 
 American Bible Society, 1 Keyes (N. 
 Y.), 501, 567; Owens vs. Missionary 
 Society, 14 X. Y. 380; Downing vs. 
 Marshall, 23 X. Y. 366; McKeon vs. 
 Kearney, 57 How. Pr. (X. Y.) 350; 
 Contra, Hornbeck 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 incorpo- 
 rated. Baptists' A.ssociation vs. 
 Hart's Executors, 4 Wh. (U. S.) 1; 
 3 Pet. 497; see also 2 Rcnlf. on Wills, 
 ch. i, § 7. That a bequest to .such 
 an association nuiy .lie valid or bo 
 made to take <'lTect indirectly, sop 
 Preacher's .\id Society vs Rich, 45 
 Me. 552; Caliill vs. liigirer, 8 B 
 Monr. (Ky.) 21 1 ; Smith vs Xel.son, 
 IS Vf. 511, 5n'); PealxMly vs V/.isi- 
 eni Methodist Scic, H7 Mjwm. 540; 
 
 « L. 1S94, c. 235. cli 45. of the Gen. Laws.
 
 38 Stock-brokers jiiid Stock Exchanges. 
 
 operation to unincorporated joint-stock associations, com- 
 panies, or enterprises, having written articles of associa- 
 tion, and capital stock divided into shares, qualifications 
 not possessed by the Xew York Stock Exchange, that body 
 could scarcely be held entitled to the benefit of its sixth 
 section which substantially reenacts the provisions of the 
 prior statute,' except as to alienation of the land by the 
 president. 
 
 VI. Liability 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, representatives, or of their fellow- 
 members. 
 
 The general rule is, that members of unincorporated com- 
 panies are regarded as partners and are subject to the 
 Avliole law of partnerships.' But the application of this 
 principle to a body like the Stock Exchange is very re- 
 Gibson vs. McCall, 1 Rich. (S. C.) tion. Allen vs. Stevens, 161 N. Y. 
 Rep. 174. But now by L. 1893, 122. Also a bequest of personal 
 c. 701, conveyances, devises, gifts property. Matter of J. Fitzsimmons, 
 or bequests to charitable, etc., uses 29 Misc. 204, and a bequest to an 
 which shall be in other respects unincorporated charitable associa- 
 valid, shall not be deemed invalid tion is valid. Matter of B. Fitz- 
 by reason of the indefiniteness of simmons, 29 Misc. 731. See also 
 the beneficiaries. The Real Prop- Dammert vs. Osborne, 140 N. Y. 
 erty Law, L. 1896, c. 547, § 93, con- 30; People vs. Powers, 147 N. Y. 
 tains a similar provision as to real 104. 
 estate. Under those .statutes a de- ' L. 1867, c. 289. 
 \'ise of real estate for permanent 'Pars, on Part. (4th ed ) §431; 
 charitable purposes has been held Wordsworth on Joint-stock Com- 
 valid although the testator did not panics, 21, 220. 
 direct the formation of a corpora-
 
 Liability of Membei*s. 39 
 
 stricted. One case seems to have occurred wliicli is im- 
 pliedly decisive of tlie personal liability of members of a 
 Stock Exchange ; ^ but there are very many instances in the 
 books in which members of clubs and other associations 
 have been sought to be charged as individuals, for acts of 
 committees, etc., and Avhich would doubtless control a case 
 of the former character, if it ever should arise. For the 
 acts of its officers or servants, directly 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 in- 
 curred liability, without an}' direct or express authorization 
 from the association. This question seems to have been de- 
 termined, in the modern cases, by the law of })rincipal and 
 agent rather than that of partnership. Mr. (now Lord) 
 Lindley says on this subject: "If liabilities are to be fast- 
 ened 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 implied 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, 
 
 • Kronfield vs. Haines, 20 Misc. lawful contracts, and the incorpora- 
 
 102. tion boiiiK a mere device to escape 
 
 ' In McGrew vs. City Produce E.x- their otlier\vi.se individual liahility. 
 
 change, H.'i Tenn. 572, it was held ' 1 Lindley on I'art. and C"()nii)aiiy 
 
 that the incorporators of an incorpo- Law (1th edj, hi. Tlie liahility of 
 
 rate<l exchanue were individually partners is now repdated in Knu- 
 
 liahle for sums receivcxl hy the e.x- land hy the Partnership .Act, ISiiO. 
 
 change mananers in waiierinn con- See Lindley on Partnersiiip ((ith 
 
 tracts, it heinK the intention of all the cd.), p. 133 et acq. 
 Incorporutoni to engage in such uu-
 
 40 
 
 Stock-brokers and Stock Exchanges. 
 
 but a collection of modern authorities upon the general sub- 
 ject will be found below.' 
 
 Til. Suits by and against the Stock Exchange. 
 
 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 1S49, ch. 258, has provided that any joint-stock company 
 or association, consisting of seven or more stockholders or 
 associates, may sue and be sued in the name of the president 
 or treasurer, for the time being, of such joint-stock com- 
 pany or association.^ 
 
 1 2 Lindley on Part. 57, note (d) 
 and cases cited. See also Lindley 
 on Partnership (6th ed.), p. 133 et 
 seq. See, also, Wordsworth on 
 Joint-Stock Companies, ch. viii. and 
 cases cited; Pars, on Part. (3d ed.) 
 45 note (b); (4th ed.) § GO, and note 
 2; Ebbinghousen vs. Worth Club, 4 
 Ab. New Cas. (N. Y.) 300, and note, 
 where a full discussion of this sub- 
 ject is made; Park vs. Simmons, 10 
 Hun (X. Y.), 128, which seems to be 
 contrary to the majority of the 
 cases on this subject, and is ex- 
 pressly repudiated by Ebbinghousen 
 vs. Worth Club (supra) ; Lafond vs. 
 Deems, 1 Ab. New Cas. 318; 81 N. 
 Y. 507. As to the question of lia- 
 bility of members of a club for 
 negligence in the management of 
 their property, see English vs. 
 Brenan, 60 N. Y. 609; 2 Hilliard on 
 Torts, 230. 
 
 ' Ang. & Ames on Corp. (10th ed.) 
 
 §§591, 599; Williams vs. Bank of 
 Michigan, 7 Wend. 542; Wells vs. 
 Gates, 18 Barb. (N. Y.) 554; Dicey 
 on Parties, 170, 172 (Truman's 
 notes); East Haddam Bapt. Ch. vs. 
 East Haddam Bapt. Soc, 44 Conn. 
 259; Haskins vs. Alcott, 13 Ohio St. 
 216. But in equity in certain cir- 
 cumstances suit may be maintained 
 by the trustees of a voluntary asso- 
 ciation on behalf of themselves and 
 their associates. Birmingham vs. 
 Gallagher, 112 Mass. 190; or against 
 the board of directors, Greer vs. 
 Stoller, 77 Fed. 1. 
 
 ^ This act and its amendments (L. 
 1851, ch. 455, and L. 1853, ch. 153) 
 were repealed b)' L. 1880, ch. 245, 
 and their provisions have been re- 
 enacted in the Code Civ. Pro. 
 §§ 1919-1924. The amendment of 
 1854 (L. 1854, ch. 245) was repealed 
 by and re-enacted in the Joint- 
 Stock Association Law (L. 1894,
 
 Suits By and Agaiust. 41 
 
 This provision, not being deemed broad enough, was ex- 
 tended by the Laws of 1S51, ch. 455, to any company or 
 association composed of not less than seven persons who are 
 owners of, or have an interest in, any property, right of ac- 
 tion 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 associa- 
 tion consists of more than seven members,- the action 
 may be brought in the name of the president,^ and this 
 
 ch. 235). TSTiether this act extends purpose of carn'mg on a trade or 
 
 to private voluntary copartnerships business in that State, or holding 
 
 or associations, which are not or- propertj- therein, may sue or be 
 
 ganized in pursuance of some stat- sued by the usual or ordinary name 
 
 ute, was questioned in Austin vs. which it has assumed, or by which 
 
 Searing, 16 N. Y. 112; and in Rorke it is known; and, in such case, it 
 
 vs. Russell, 2 Lans. Rep. (X. Y.) shall not be necessary to allege or 
 
 244; see also Ebbinghousen vs. prove the names of the individual 
 
 Worth Club, 4 Ab. New Cas. 300. members thereof. Tlie above stat- 
 
 But this question is put at rest by ute only applies to companies doing 
 
 § 1919, Code Civ. Pro., which specif- business within the State. Haskins 
 
 ically includes partnerships and vs. Alcott, 13 Ohio St. 210. 
 
 unincorporated associations. In England several acts have 
 
 It has been held that such a state been passed allowing certain speci- 
 statute, authorizing one or more fied unincorporated associations to 
 members of an unincorporated asso- sue and be sued in the name of their 
 ciation to represent the others in officers for the time being. I 
 the courts, will be followed by a Chitty'-e PI. IG (16th Amer. ed.). 
 Federal court of equity, and the ' The allegation that the associa- 
 members conclusively presumed to tion consists of seven or more mem- 
 have the same citizenship as such hers is material and issuable. 
 ofFicers. 1 Foster's Fed. Pr. (2d Tiffany vs. Williams, 10 Abb. P. 
 ed.) i 45, p. lis, and caaes cited in U. 204 
 note 27. *()r treasurer. 3 N. Y. Rev. 
 
 « By the laws of Pennsylvania, in Stat. (6th ed.) 762; Code Civ. Pro. 
 
 the case of joint-stock compunlc.'^, § 1919. But the actimi cannot be 
 
 unincorp<>rate<l, process may be Ijnmght against Ixith president and 
 
 8cr\'ed up^jn any officer, agent, etc. treiwuror. Schmidt vs. (Junther, 
 
 PeppiT (t Lcwi.s's Dit:. vol. 4, p 5 Daly. 452. The action cannot be 
 
 1.361. By thi- H< V Stat, of t)hio, brought against the iLKsocintion as 
 
 I 501 1, a partiHTHhip formed for the hu( li, and service on the .secretary is
 
 42 
 
 Stock-brokers and Stock Exchaiiffos. 
 
 provision has been held to extend the remedy to all associa- 
 tions.' 
 
 The statute applies to tlie remedy, and the lex fori 
 
 insufBcicnt. Hanke vs. Cigar Mak- 
 ers' Union, 58 Supp. 412. If the 
 association has no president, the 
 action may be brought by some of 
 the members on behalf of them- 
 selves and the other members, and 
 such action may be so brought 
 whether there is a president or not, 
 § ID It) of the Code not limiting the 
 eflfect of § 446 and § 448. Bloete 
 vs. Simon, 12 Civ. Pro. Rep. 114. 
 
 ' Bridenbecker vs. Hoard, 32 
 How Pr. (N. Y.) 289; Tibbetts vs. 
 Blood, 21 Barb. 650; Corning vs. 
 Greene, 23 id. 33; De Witt vs. 
 Chandler, 11 Ab. Pr. (N. Y.) 459, 
 470; National Bank vs. Lasher, 1 
 T. & C. (N. Y.) 313; Waller vs. 
 Thomas, 42 How. Pr. (N. Y.) 346; 
 Ebbinghousen vs. Worth Club, 4 
 Ab. New Cas. 300; Allen vs. Clark, 
 65 Barb. 563; National Bank vs. 
 Van Derwerker, 74 N. Y. 234; and 
 see 4 Duer, 362; 18 Ab. Pr. 191; 55 
 Barb. 487. § 1919, N. Y. Code 
 Civ. Pro., extends the remedj' to all 
 associations having a president or 
 treasurer. So an action may be 
 brought in the name of the presi- 
 dent, to recover calls from share- 
 holders. Bray vs. Farwell, 3 Lans. 
 (N. Y.) Rep. 495. So a member of 
 a joint-stock association may main- 
 tain an action against such associa- 
 tion. It is not an action against 
 himself. Westcott vs. Fargo, 61 
 N. Y. 542; Saltsman vs. Shults, 14 
 Hun (N. Y.), 256. See McMahon 
 vs. Rauhr, 47 N. Y. 67; Sander vs. 
 Eidlen, 13 Daly, 238; Snow vs. 
 
 Wheeler, 113 Mass. 179. But see 
 Bullard vs. Kinney, 10 Cal. 60; 
 Coal Company vs. Fry, 4 Phil. (Pa.) 
 129; Wilson vs. Curzon, 15 M. & W. 
 532; Perring vs. Hone, 4 Bing. 28; 
 Holmes vs. Higgins, 1 B. & C. 74. 
 As to when the agent of a Lloyd's 
 Assn. may be sued, sec New York 
 vs. Whipple, 36 App. Div. 49. 
 
 The officer sued in his representa- 
 tive capacity is a party to the ac- 
 tion and as such may be examined 
 before trial. Woods vs. De Figa- 
 niere, 1 Rob. 607; McGuffin vs. 
 Dinsmore, 4 Abb. N. C. 241 ; Brooks 
 vs. Hoey, 18 Civ. Pro. (N. Y.) 98; 
 Whitman vs. Hubhill, 30 Fed. Rep. 
 81. Contra Duncan vs. Jones, 32 
 Hiui, 12, where, however, it was 
 said that, in a proper case, he may 
 be examined before trial as a wit- 
 ness. 
 
 No power is given to the desig- 
 nated officers to sue where the 
 members themselves could not have 
 sued. Corning vs. Green, 23 id. 33. 
 
 And it is immaterial whether the 
 officer sued is an infant or not. 
 The action is against the officer as 
 such, not against him as an indi- 
 vidual. Nicoll vs. Munn (N. Y. 
 Sup. Chambers), N. Y. Law Jour- 
 nal, p. 432, Nov. 16, 1894. 
 
 The statute, of course only ap- 
 plies to the remedy in the State, 
 and members of such an a.ssocia- 
 tion, may be sued in other states 
 as partners. Bo.ston & Alb. R. Co. 
 vs. Pearson, 128 Mass. 445. 
 
 In France the syndic who is at the
 
 Suits By and Against. 
 
 43 
 
 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 persons who use it, unless the act, by its terms, 
 expressly limits its application.' 
 
 In tKe case of Rorke vs. Russell ^ it was held that the 
 above-cited 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 prop- 
 erty and effects " of the company or association ; and that 
 where, in an action against the president of the 'New York 
 
 head of the sjTidical board as gov- 
 erning committee, is the legal rep- 
 resentative (mandataire) both of the 
 committee and of the association 
 and brings action on their behalf in 
 his own name. 
 
 In the case of Thomas, a member 
 of the Lyons Exchange or company 
 of agents de change, the Court of 
 Cassation decided in 1885 that it is 
 the "syndic qui lui-meme repr^- 
 sente l^galement la chambre et 
 toute la corporation; qu'il en resulte 
 qu'au cas de necessity d'agir contre 
 un d«5biteur de la caisse, c'e-st le 
 syndic qui a seul qualit6 pour in- 
 tenter Taction ; et qu'il exerce en son 
 nom propre en vcrtu de son titre de 
 mandataire l^gal; et i defaut du 
 syndic, au liquidateur que la justice 
 aura dfsign6 pf>ur en rern[)lir les 
 fonctiorw." (Sirey, 1SS(», 1, 1 ')()). 
 In u noU; on the sarni' pag*- the 
 functions of the syinlic and Hyndiral 
 chamber are thus tlefincil: " F.eH 
 a;;cntH de change de chaque place 
 doivent «e r<?unir et nonuner, h la 
 majorit<? abttolue, un syndic et six 
 
 adjoints, pour exercer une police 
 interieure, rechercher les contraven- 
 tions auxlais et reglements et les 
 faire connaitre a I'autoritd publique. 
 Comme toutes les corporations ana- 
 logues institutes par la loi, tellcs 
 que celles de notaires, avou(5s, 
 avocats, et du sein desquelles est 
 tir^e une representation chargde de 
 r^gler les questions de discipline 
 interieure et de faire valoir leur 
 interets au dehors, la corporation 
 des agents de change a ete par 
 cette disposition pourvue d'un 
 corps representatif, la chambre 
 syndical ayaiit a sa tete le syndic, 
 charge de personnificr et de repr<5- 
 senter la corporation dans toutes 
 les circonstances ou ce serait n<5- 
 cessaire." 
 
 ' See also N. Y. Code of Civil 
 Proc. § MS, allowing one to be aue<l, 
 where a large number of jXTSons are 
 interested. See Diepeiibrock vs. 
 Prmluce lOxchange, N. Y. L. J., 
 Julv 11, 1901. 
 
 » 2 Lans. (N. Y.) 245.
 
 44 Stock-biokers and Stock K>Lcliiiii(?es. 
 
 Mining Stock Boiinl, the only relief asked for was that the 
 president of the board, its officers and members, should be 
 restrained from enforcing tlie vote or resolution of the 
 board, susjiending the ])laintilT from his membership for a 
 certain number of days, it was held that the action was not 
 within either of these statutes ; that i)laiiitiir could not bi-ing 
 a suit against the president 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 injunction 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 w^ould seem to show that it has not been followed as 
 a precedent.^' 
 
 And in the later case of National Bank vs. Van Der- 
 werker,^ where the defence was, that to bring a case within 
 the statute in question it was necessary to show the exist- 
 ence of a company having stock divided into shares, and 
 shareholders holding the same, the court held that the stat- 
 
 * Since the above was written the within the purpose designed to 
 case in question has been expressly be accomplished by the acts of 
 overruled by Mervin, J. (Spec. 1849 and 1851. See also Mc- 
 Term, Sup. Ct.), who held in Fritz Kane vs. Dem. Gen. Comm., 21 
 vs. Muck, 62 How. Pr. 69, that an Abb. N. C. 89. White vs. Brownell, 
 action may be maintained against 2 Daly, 329, and Hutchinson vs. 
 the president of a voluntary a.sso- Lawrence, 67 How. Pr. 38, are cases 
 ciation, by an expelled member, to of the same nature, brought again.st 
 compel his restoration. The object the president, where, however, the 
 of the plaintiff is to place himself in point in q\iostion wa.s not raised, 
 a position where he can reach the '74 X. Y. 234; § 1919, Code Civ. 
 joint property; and so the action is Pro., expressly includes any part- 
 in regard to the joint rights and nership having a president or treas- 
 property of the association and urer.
 
 Suits By aud Agaiust. 45 
 
 ute 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 St^re Association. It had more than fifty 
 members, but there were no Avritten articles signed by the 
 membei*s, nor any articles of incorporation, except a con- 
 stitution and by-laws. There were also a president and 
 board of directors. The president of the association, under 
 authority of the body, made certain promissory notes. In 
 an action on these notes the court held that the suit was 
 properly brought airainst the association, in the name of the 
 president ; and that judgment in such an action, and exe- 
 cution thereon, bound the joint property of the association, 
 anil 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 
 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 olficer named in the act.'^ 
 
 ' Heath vs. Prest. Gold Exchange, 121 N.Y. 284. Suit maybe broiifrht 
 
 7 Ab. Pr. (ii. 8.) 2.'>1; s. r. 38 How. by the latter E.xchanpe in tlie 
 
 Pr. 1G.S; White vs. Browiell, 3 .\b. name of its president. Wilson vs. 
 
 Pr. 31S; 4 id. 1(32; Sewell vs. Ives, Gl Conmiereial Tel. Co., 3 X. Y. Supp. 
 
 How. Pr. .>!; Korke vs. Ru.s.sr-11, 2 033. And a local a.ssembly (an 
 
 Lan8. (N. Y.) 21.^; Coininenial Tel. unincorporated l>odyU)f llu- Kni^^hts 
 
 Co. vs. Smith, 47 Ilmi, 4'.)4; Weston <if Lalior, may sue in the name of its 
 
 V8. Ive8, 97 N. Y. 222; Kuehn- treasurer (Co<ie Civ. Pro. § IDl'.t)- 
 
 mundt vs. Smith, 2 N.Y. Supp. Ojr); Wicks vs. Monihan, 54 Hun, (»1G. 
 lielton vs. Hatch, 109 N. Y. 593; » In the ca.se of Sewell vs. Ivc>«, 61 
 
 Hai«ht vs. Uickcnnan, IS N. Y. II<»w. Pr. 54, the f|uestion was di- 
 
 Supp. .'>59. As to the New York re<-tly raised, and the fonn of the 
 
 Cfiiisolidated Stock and Petroleum artiun against the Pre.si<lent of the 
 
 Exchange, sec 5f) Hun, HWi, afT'd Stock E.\change su-staineti, under
 
 46 Stock-brokers and Stock Exchanges. 
 
 In the case of Rorke vs. Russell, above referred to/ it was 
 held, by Mr. Justice Ingrahiun, 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 tlie 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 prohibitions 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 
 
 the aforementioned act. See also 459; Bridenbccker vs. Hoard, 23 
 
 Olery vs. Brown, 51 How. Pr. (X. How. Pr. (X. Y.) 2S9; Austin vs. 
 
 Y.) 92. It is immaterial by what Scaring, 16 X'. Y. 112; Masterson vs. 
 
 name the chief executive officer is Botts, 4 Ab. Pr. Rep. 130; X. Y. 
 
 called, whether president, or chair- Marbled Iron Works vs. Smith, 4 
 
 man or otherwise. Hathaway vs. Duer (X.Y.), 362; East River Bank 
 
 Am. Min. St. Ex., 31 Hun, 575. vs. Judah, 10 How. Pr. 135; Leon- 
 
 For cases interpreting § 1919, X'. ardville Bank vs. Willard, 25 X. Y. 
 
 Y. Code Civ. Pro., see cases cited 574; People vs. Olmsted, 45 Barb, 
 
 in the notes to that section, 2 644, 647. In providing by sec. 
 
 Bliss's 5th ed. Code Civ. Pro. Also 1919 of the Code that actions and 
 
 Stover's, 6th ed., and the cases proceedings may be brought by or 
 
 cited in Birdseye's Rev. Statutes, against such associations, it would 
 
 Codes and Gen. Laws of X'. Y., be a forced construction to hold that 
 
 vol. 2, pp. 1953, 1954. For other legal process of everj- kind (such as 
 
 cases, interpreting the statutes of mandamus) available against pub- 
 
 1849 and 1851, see Schmidt vs. lie or private individuals and cor- 
 
 Gunther, 5 Daly, 452. Also cases porations may be levelled against 
 
 cited in note to Ebljinghousen vs. unincorporated associations. Wei- 
 
 Worth Club, 4 Ab. Xew Cas. 311; denfeld v. Keppler, 84 A. D. 235; 
 
 Tibbetts vs. Blood, 21 Barb. 650; aff'd 68 X. E. 1125. 
 
 De Witt vs. Chandler, 11 Ab. Pr. ' 2 Lans. (X. Y.) Rep. 245.
 
 Suits By and Agaiust. 47 
 
 said shareholders at any one time, nor until the same shall 
 have been determined, and execution issued and returned 
 unsatisfied, in whole or in part.' 
 
 The effect of these statutes permitting an unincorporated 
 association to sue and to be sued in the name of one or more 
 of its officers, has been to remove another great objection 
 to such organizations, and to make them equal in dignity 
 and efficacy to corporations. 
 
 In Pennsylvania the lirst case which seems to have arisen, 
 involving a question between the Pliiladelpliia Stock Ex- 
 change and its members, was that of Leech vs. Harris.^ 
 There a bill was filed to prevent the plaintiff from being 
 suspended as a member of the Exchange. In that case a 
 committee of the Exchange was appointed by the president 
 to investigate a certain claim against the plaintiff. Appre- 
 hending that the committee would suspend him, the plain- 
 tiff asked for an injunction. The action was brought against 
 the membei'S of the committee as a " Committee and Mem- 
 bers of the Board of Brokers," and no objection seems to 
 have been taken to this form of the action, the injunction 
 being granted ])reventiMg the plaintiff's expulsion. 
 
 In another case ^ the action was brought against the 
 " Treasurer of the Board of Brokers and the Philadelphia 
 Board of Hrokers ; " and in a ])ri'vious case. Leech vs. Leech,* 
 "the Board of Ln^kers" were made garnishees. 
 
 ' Laws, 1840, ch. 2r).S, § I, jus XoIrs Cas. (Pa.) 511, .'il'J, and soe 
 
 amended, L. lS.5.'i, ch. IT).!, and Leech vs. Leech, id. 54"J, where a 
 
 since the text waa written embodied suit was brought aj^ain.st "The 
 
 in ii 1922, 1923, N. Y. Code Civ. Hoard of Brokers," garnishees. 
 
 Pro. See Humbert vs. Abeei, 7 .Mso Evans vs. Wi.stcr, infra. 
 
 Civ. Pro<-. H. 417. * Id. 542, note. 
 
 '2 Brews. (Pa.) 571. 
 
 ' SinKcrly vs. Johnson, A Weekly
 
 48 
 
 Stock-brokers and Stock Exchauges. 
 
 So in the case ol" Moxe3''s Appeal, decided by the Supreme 
 Court of Peimsylvania iu January, 18S1,* wLiere th(i action 
 was, ill equity, to restrain defendants, */?^tv' alia, from inter- 
 fering with phiintiff's right and privilege of using his seat 
 in the board, the bill was filed against " The Philadelphia 
 Stock Exchange, A. B., president thereof." "^ 
 
 In \\Q\y of these authorities, there would seem to be no 
 difficulty, in the State of Pennsylvania, in maintaining an 
 action against the Exchange as a body, without joining the 
 individual members.^ 
 
 > 9 Weekly Notes Cas. 441, aff'g 
 37 Legal Int. 82. 
 
 * See also Evans vs. Wister, 1 
 Weekly Notes Cas. 181. In Pan- 
 coast vs. Gowen, 93 Pa. 66, an at- 
 tachment execution was sought 
 against Henry Gowen and others 
 trading as the Philadelphia Stock 
 Exchange, garnishees, and no ob- 
 jection was made to the form of 
 the proceeding. In Cochran vs. 
 Adams, 180 Pa. St. 489, certain 
 officers of the Philadelphia Stock 
 Exchange were sued without objec- 
 tion being raised as copartners 
 trading as the Philadelphia Stock Ex- 
 change. The action, however, was 
 not to charge them as partners but 
 to reach a particular fund in their 
 official custody. See also Shep- 
 pard vs. Barrett, 17 Phil. 145. In 
 Liederkranz Singing Society vs. 
 Tum-Verein, 163 Pa. St. 265, fol- 
 lowed in Powell vs. Dunn, 7 Pa. 
 Dist. R. 275, it was held that in the 
 case of unincorporated associations 
 whose membership is large, suit 
 may be brought bj' some of the mem- 
 bers on behalf of all, but if the ac- 
 tion is brought in the name of the as- 
 
 sociation by certain of its members, 
 the plaintiff cannot be nonsuited 
 for want of parties, when there is no 
 plea in abatement, and the plain- 
 tiffs are responsible for costs. This 
 case was also followed in Sparks vs. 
 Husted, 5 Pa. D. R. 189; Virtue vs. 
 loka, id. 634. But an action at 
 law is not maintainable against an 
 unincorporated beneficial society. 
 McDonnell vs. Trustees, 24 Pa. C. 
 C. 40. And it is still the law in 
 Pennsylvania that an unincorpo- 
 rated association cannot be sued as 
 such. McConnell vs. Apollo, 146 
 Pa. St. 79. 
 
 ^ See ante, p. 41, n. 1, for statutes 
 of Pennsylvania relating to suits 
 against unincorporated joint-stock 
 associations. By P. L. 1890, p. 353, 
 service on unincorporated associa- 
 tions for business purposes may be 
 made on any officer. And by P. L. 
 1901, p. 614, service on limited 
 partnerships, etc., may be made on 
 any officer or agent. See Camden 
 vs. Guarantors, 35 A. 796. In the 
 case of Kurz vs. Eggcrt (9 Weekly 
 Notes Cas. 126), the plaintiff brought 
 an action of assumpsit against the
 
 Suits By aud Against. 49 
 
 There seems to be no statute in ]\Iassacbii setts providing 
 for the bi-ingitig of actions by or against voluntary associ- 
 ations, in the name of their officers or otherwise. Nor are 
 there any laws declaring the status or regulating the man- 
 asement of such bodies. But such associations have been 
 recognized as legal, and suits have been brought against, 
 and in the name of, their trustees. But the actions were 
 brought in respect to contracts made with trustees, by 
 name, and their successors, of such associations.* 
 
 Under the General Statutes of Connecticut actions and 
 suits may be brouglit by and against voluntary associations 
 as such, and judgment may be had and execution issued 
 against them.'^ It has been held that such an association 
 may compromise a suit brought against it.^ Formerly 
 it could not be sued by a member.^ But, by section 588 
 
 president, a trustee, and the treas- See also Edwards vs. Warren, 168 
 
 urer of The Augusta Teutonia Mass. 564. In a case in California 
 
 Lodge, No. 34 Deutsche Order of (Rorke vs. San Francisco Stock 
 
 Hamgari, an unincorporated bene- Exchange Board, 99 Cal. 196) the 
 
 ficial association, to recover the plaintiff sought b}' mandamus to 
 
 amount to be paid during the sick- compel his restoration to member- 
 
 ness of plaintiff. The defendant ship in the defendant, an unincor- 
 
 dcmurrcd, on the ground that plain- poratcd voluntary association. No 
 
 tiff could not maintain an action at objection appears to have been 
 
 law against the officers of the a.sso- made to the form of remedy. But 
 
 ciation. The court held that, not- in a prior case in that State it was 
 
 withstanding the act of ,\pril 28, held that the Exchange could not 
 
 1876 (P. L. 53, Purd. Dig. 1981), be sued by its common name under 
 
 declaring that such benefits Hhall be the Code Civ. Proc. § 3S8, as it was 
 
 paid from the trca-sury only, such not engaged in any bu.'<ine.'!s. Swifts 
 
 ivwic'iiiUona still continue to be vs. S. F. S. »t E. Board, 67 Cal. 567. 
 
 partnerships, and that the action ' Cien. Stat. Conn. Rev. of 1902, 
 
 wa.s improperly brought. See also § .')S8. 
 
 Rivers vs. Fame, 11 C. C. 241; ' .\ncient Order of Foresters vs. 
 
 Manning vs. Klein, 1 1 C. C. 525. Court Abraham Lincoln, 40 .\. 606. 
 
 ' .Mf-rrill vr. Mclntyre, 13 Gray, * Huth vs. Humboldt, 61 Conn. 
 
 157; Baxter vs. M<Intyre, 13 Gray, 227, contra McCabe vs. Coodfellow, 
 
 108; Delano vs. Wild, .Mien, 1. 01 Hun, 019. 
 
 4
 
 50 Stock-brokers and Stock Exchanges. 
 
 of the General Statutes (Revision of 1902), a member may 
 sue the association, which may also sue a member. 
 
 It is optional with a creditor of such an association to 
 sue the association as such, in which case he can only 
 lew on its ])roperty ; or to sue the members, in which 
 case the members are individually liable.' Under section 
 573 of the General Statutes, service of process in actions 
 against voluntary associations may be made upon the pre- 
 siding officer, secretary or treasurer. 
 
 In Colorado two or more persons associated in business 
 under a common name may be sued, by such name.^ An 
 unincorporated association may, under this section, be sued 
 by the name under which it did business.^ 
 
 And a similar statute has been enacted in ^Minnesota.'* 
 
 In Kentucky an association consisting of over 3,000 
 members will, under the Constitution and statutory enact- 
 ment, be treated as a corporation for the ])urpose of process.^ 
 
 In Texas suit may brought by an unincorporated society 
 by its name, if the petition describes it as a voluntary 
 association composed of certain named persons as plain- 
 tiffs, and there is no allegation of incorporation.^ 
 
 In Ohio a few indivitluals may sue or be sued as repre- 
 sentatives of a class.'' 
 
 In Illinois a voluntary association may be sued in equity 
 
 * Davison vs. Holden, 55 Conn. * Adams Express Co. vs. Scho- 
 103. field, 64 S. W. (Ky.) 903. But see 
 
 'Code, § 11. 48 S. W. (Ky.) 1091. 
 
 ' Endowment Rank (Knights of • Ackerman vs. Ackerman, 60 S. 
 
 Pj-thias), 53 P. (Col.) 285. W. (Tex.) 366. 
 
 * Gen. St. 1878, ch. 66, § 42; Gale ' American Steel & Wire Co. vs. 
 vs. Townsend, 45 Minn. 357. See Wire Drawer's Unions, 90 Fed. 
 as to this subject pencrallj', Ameri- 598. 
 
 can Digest (Century ed.), vol. 4, 
 p. 2536 et seq., and Annuals,
 
 Suits By aud Against. 51 
 
 as such if it is a de facto corporation, viz., if it has an or- 
 ganization consisting of directors, president, secretary and 
 other oificers, if its name implies a corporation, and if it 
 exercises corporate powers. AYhen its members are numer- 
 ous, service of process upon a part, Avho act for other 
 members as well as themselves, is sufficient. If the members 
 are scattered all over the United States and Canada, service 
 on the secretary will suffice,^ but in a common-law action 
 all the members, lunvever numerous, must join.- 
 
 In Missouri a judgment cannot be I'endered in favor of 
 or against an unincorporated association as such.^ 
 
 A statute similar to the New York statute was enacted 
 in Michigan in 1897 (Comp. L. § § 10,025-G). But the 
 statute does not take away the right to sue the members 
 individually.^ This statute is constitutional."' 
 
 In Georgia an objection that all the beneficiaries 
 of a voluntary association should bo ])arties to a suit 
 against it, must be taken by special, and not by general, 
 demurrer.* 
 
 There is another class of cases which should be referred 
 to in this connection, viz., where instruments are given to 
 unincorporated associations whereby money is secured and 
 made payable to some oilicer of the company and his ".«.*/r- 
 cessors in ojice.'" A number of tin; English cases hold that 
 eflFect cannot be given to such an instrument, it being an 
 attemj)t to prcjvidc for j);iyni('nt to ollicial successors ; that 
 it is in law c(mstituting tli(; ollicer a corporation sole, which 
 
 ' Fitzputrick vh. Kuttcr, 1(10 III. * .FciikiiiNoii vh. NNysncr, SiJ .N. 
 
 282. \V. lorj. 
 
 * O'Connell vh. Luinl), (V.i 111. * Unitod Stutc-H Co. vs. Union, 
 App. G.'}2. SS N. VV. (Midi.) SK9. 
 
 * Hujek VH. Bohemiuti Society, 60 * IMuiil vh DickerMon, •l.'i S. E. 
 Mo. App. rm. (Gu.) 483.
 
 52 Stock-brokers uud Stock Exchanges. 
 
 cannot be done by agreement, but must be done by the 
 crown.' 
 
 In such 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 repre- 
 sentatives.^ 
 
 In the United States, however, the law, in some of tlie 
 States, is different ; and it is held tbat the right to sue 
 exists in the subsequent incumbent of the office; at all 
 events, where the engagement or undertakmg is for the 
 benefit of some public or quasi-\)uh[ic body.^ 
 
 There have been some decisions, as to the effect of the 
 recovery of a judgment against these non-incorporated 
 associations, which it may not be amiss to refer to in this 
 connection. 
 
 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 contesting their liability for the debts of the associa- 
 tion. 
 
 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 
 
 ' Dance vs. Girdler. 4 B. & P. 40; 209; Gray vs. Pearson, 5 L. R. C. P. 
 
 Strange vs. Lee, 3 East, 4S4; Graves 568; Evans vs. Hooper, L. R. 1 Q. 
 
 vs. Colby, per Lord Denman, 9 Ad. B. D. 45; Howley vs. Knight, 14 Q. 
 
 & E. 356; Metcalf vs. Bruin, 12 B. 240. 
 
 East, 400; also, 2 Camp. 422; Pigott ^ Dicey on Parties, 12S. 
 
 vs. Thompson, 3 B. & P. 147; but ^ Fishe vs. Ellis, 20 Mass. 532, 
 
 see this latter case explained in Kean vs. Franklin, 5 Serg. <fc R. 154; 
 
 Bowen vs. Morris, 2 Taunt. 381 ; Commonw. vs. Shurman's Adm., 18 
 
 Hybart vs. Parker, 4 C. B. (n. s.) Pa. St. (6 Har.) 347.
 
 Suits By and A{j;aiiist. 53 
 
 owned by the association ; when it fails to secure satis- 
 faction 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 ])resident 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 so recovered exceeds the amount for which 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 ])rovide, 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 associ- 
 ation.' 
 
 Under this section it has been decided, in the State of 
 New York, that a dissolution of a joint-stock company is to 
 be conducted mainly according to the methods employed in 
 
 ' This is changed by § 1923, N. Y. ' Allen vs. Clark, O.') Hurl). 503; 
 
 Code Civ. Pro., and an action may Withcrhead vs. Allen, 4 Ab. (N. Y.), 
 
 be maintained in the first instance App. 628, reversing 28 Barb. G(il ; 
 
 again-st all the members. Schwartz Kin^^sland vs. Hrai.sted, 2 Lans. 17; 
 
 vs. Wechler, 21i Abb. .\. C. 3.T2; H(.l)ljin.s vs. Wells, iRobt. (N. Y.) 
 
 Hudson vs. Spalding, N. Y. Supp. GOO. If the treiLsiirer of a volun- 
 
 S77; Humbert vs. .\beel, 7 .N. Y. tary lusKocialion ^ivosa note as such, 
 
 Civ. Pro. Rep. 417, opposinn I'lii;.'^ he is iidt personally liable, l)ut ho 
 
 vs. Swift, ITi Hun, 023, and di.stiii- thereljy binds all the nicn>l>ini 
 
 RuishinK Witherhead vs. Allen, 4 Kierstead vs. liennett, 93 Me. 3Ja. 
 Abb. Ct. App 028. See also April ' F.aws, 1854, cli. 245. 
 vs. Baird, 52 Supp. 973.
 
 64 Stock-brokers and Stock Exchanges. 
 
 the case of insolvent corporations, and not according to 
 those derived from the hiw 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.' 
 
 This statute (Laws, 185-i, ch. 245) was repealed by the 
 Joint Stock Association Law (Laws of 1894, ch. 235), sec- 
 tion 2 of Avhich provides that the articles of a joint-stock 
 association nuiy (1) provide that the death of a stockholder, 
 or the transfer of his shares, shall not work a dissolution of 
 the association ; (2) prescribe the number of its directors, 
 not less than three, to have the sole management of its 
 affairs ; (3) contain any other provision for the management 
 of its affairs not inconsistent with law. Section 5 provides 
 that a joint-stock association shall not be dissolved except 
 in pursuance of its articles of association, or by consent of 
 all its stockholders, or by judgment of a court for fraud in 
 its management, or for good cause shown. 
 
 It can scarcely be contended that tiie Joint-Stock Associ- 
 ation Law would include unincorporated associations like 
 
 ' Waterbnry vs. Mer. Union Ex. ment will be rendered at the suit of 
 Co., 50 Barb. 157, s. c, 3 Ab. Pr. one or more members a^;ainst all the 
 (n. s.) 163. others dissolving; the society; but 
 ' There arc some reported cases they should not be dissolved for 
 where the courts have been asked to slight causes, and, if at all, only 
 dissolve these unincorporated asso- when it is entirely apparent that 
 ciations, and it might not be unprof- the organization has ceased to an- 
 itable to refer to a few of them in swer the ends of its existence and 
 this connection. no other mode of relief is attain- 
 Thus it has been held that in case able. Lafond vs. Deems, 1 Ab. New 
 of violent dissensions and irreconcil- Cas. (N. Y.l 318; 81 N. Y. 507; 
 able differences between the mem- Fischer vs. Raab, C. P., Sp. T., 51 
 bers of a voluntary association judg- How. Pr. 57.
 
 Suits By iiud Against. 55 
 
 the New York Stock Exchange within its purview, inas- 
 much as the definition of joint-stock associations could not, 
 as has been already stated (a/tte, p. 37), be held to apply 
 thereto, and as there are substantial changes made in the 
 statute as re-enacted, the provision of the Statutory Con- 
 struction Law, section 32, continuing a statute so re-enacted, 
 would be scarcely applicable.' Besides, the seventh section 
 of the Joint-Stock Association Law contains provisions as 
 to increase or reduction of capital stock, etc., which clearly 
 indicate the legislative intent to confine its operation to 
 joint-stock associations, as such associations are usually un- 
 derstood, and not to unincorporated stock exchanges with- 
 out capital stock, directors, articles of association, or termi- 
 nable existence. 
 
 There is no provision in the constitution or by-laws of the 
 New Yoik Stock Exchange relative to its dissolution ; and 
 were the period to arrive when its dissolution should be 
 asked for, the question W(nild probably be determined cither 
 by a court of equity in an equitable action to compel its dis- 
 solution or, if they could be held applicable, by the statutes 
 above referred to, together with such cases as have been de- 
 cided under tliein.* 
 
 ' Mcl.oughlin vs. En Hit z, .50 A. urr, providing that where a niajor- 
 
 D. 518. ity of tlic trustees f;iv(ir cli.><sohiti()n, 
 
 ' Where the iiitere.sts of the stork- and it appears tluit a di.ssolution 
 holders of an unirieorporated l>u.si- will be beiiefieial to the interests 
 nes8 Exchanf^e are so di.seordaiit as of the stoekliolders, . . . the 
 to prevent effective management, eourt mvLst make a final order dia- 
 and a lar^e majority of both tnis- holvinK tlie corporation. Under 
 t^-es and members wish to wind up such circtnnstanees it is better for 
 it8 affairs, dis.Holiition ami distribii- all that a dissolution should be 
 tion of the iuvs<^4s amonir the stock- ordere<l, so that a majority niay re- 
 holders will be bf-neficial to the in- incorporate upon some more prac- 
 tcre«tfl of thf stockhoMcrs, within tical lnwis. if thev so desire, and 
 section 2429, Code of Civil Vn>('<\- ili • tn.ijorif v inav no longer be
 
 5t) 
 
 Stock-brokers and Stock Exchanges. 
 
 Under the present laws of the Stock Exchange of New 
 York, there would ajipcar to be little difficulty 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.^ 
 
 forced to keep up a feeble and use- 
 less organization, in which they 
 take no interest, and from which 
 they derive no benefit. In re Im- 
 porters & Grocers' Exchange of 
 New York, 132 N. Y. 212; 8 N. Y. 
 Supp. 319, affirmed. 
 
 'In Brown vs. Dale, 27 W. R. 
 149, in the chancery division of the 
 English Court, the Master of the 
 Rolls held that where a voluntary 
 society has a fund — in this case 
 arising on the sale of some of their 
 real property — there being no rule of 
 the society nor any express obliga- 
 tion to the contrar>% the members, 
 at a given time, were entitled to 
 di\'ide the fund among themselves; 
 hence, that new members coming in 
 after such a determination, though 
 before actual division, could not 
 share, nor insist that the fund be 
 invested and only income di^^dcd. 
 
 A minority have the right to en- 
 join the majority from distributing 
 the funds amonc the members in a 
 manner different from that provided 
 by the con.stitution 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 pursuant 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. Bulter, 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 asso- 
 ciation were paid by its treasurer to 
 the defendants, who were not mem- 
 bers, upon the agreement that they 
 would fill the quota of the whole
 
 Rules aud Regulations. 
 
 57 
 
 Till. Rules aud Regulatious of Stock Exchanges. 
 
 (a) General Power to Make Hides, etc. 
 By the 13th Article of the constitution of the New York 
 
 township. The plaintiff, a member 
 of the club, was drafted, and put in 
 a substitute. Held that the fund 
 passed to the defendants, covered 
 with a trust to pay it according to 
 the terms of the subscription; that 
 they stood in the position of the 
 club; and that the plaintiff was en- 
 titled to his share of the fund . Foley 
 vs. Tovey, 54 Pa. St. 190. And 
 where the majority of the members 
 of a lodge withdraw and form a new 
 lodge imder the old name, the mi- 
 nority who remain are entitled to 
 the property of the old lodge. Alt- 
 man vs. Benz, 27 N. J. Eq. 331. 
 
 Divers persons subscribed various 
 sums to assist an unincorporat(>d 
 musical association to erect a build- 
 ing for their use a-s a bund. Held 
 that these subscriptions were abso- 
 lute gifts to the members of the 
 association, and that the building 
 erected by means of them and of 
 funds otherwise obtained was owned 
 by the memliers as tenants in com- 
 mon. Higgins vs. Ridddl, 12 Wis. 
 587. 
 
 An agreement under seal that 
 "we, the owners in the II farm, 
 hereby agree to any division of the 
 remaining portion of «aid farm un- 
 sold, which a majority of interest in 
 said property shall deride upon as 
 fair and equitable," licld to ref<>r 
 to tin- mode of division, and not to 
 authf)ri7-e the majririty in interest 
 to Hft off to any owner a certain 
 portion of land without Ium uMsent. 
 
 Harkness vs. Remington, 7 R. I. 
 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 be elected by the 
 members to go to California and 
 labor for the association in 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 
 ovitfits, divided the proceeds, and 
 each one took his own way. One of 
 the eight returned to Oliio, and a bill 
 was filed to compel him to account. 
 Held that the eight meml)ers of the 
 associations stood in relation there- 
 to in the character of employes, and 
 that their acts, on arriving in Cali- 
 fornia, did not discharge them from 
 any f»f tlu'ir ol)ligations to it. Eagle 
 vs. Buchcr, Ohio St. 295. 
 
 B was a member of the "Che- 
 shire Company," and A and B a<l- 
 vanced $500 each, whicli was ])aid 
 by B as his contriljution thereto, 
 with the agreement that they should 
 share in certain proportions the 
 profits of the enterprise, and that 
 tlu! directors of the comi)any might 
 retain A'h share as his attorneys. 
 B sold his interest tlierein at an ad- 
 vance of $1,000 before tlie conii)any
 
 58 
 
 Stock-brokers and Stock Exchanges. 
 
 Stock Exchange/ every person elected to membership, is re- 
 quired, before he shall be admitted to the pi-ivileges thereof, 
 to sign the constilution and by-laws, and by sue! i signature 
 })ledge himself to abide by the same, and all amendments 
 thereto. 
 
 The general effect of a rule like the above will l)e first con- 
 sidered, and afterwards reference will be made to such ]Kir- 
 ticular rules as are important, or have been made the sub- 
 ject vf. legal interpretation. 
 
 realized any profits to the other 
 members. Held that A was enti- 
 tled to receive his stipulated portion 
 of that advance as profits. Rich- 
 ardson vs. Dickinson, 26 X. H. (6 
 Fost.) 217. 
 
 A, the owner of a share of the 
 outfit of a California fjold company, 
 sold to B "one half of his interest 
 in the company;" but the writing 
 provided that B shovild not be a 
 partner in the company, but only 
 "purchaser of A'a interest in the 
 metals and ores" that might be ob- 
 tained. Held that B acquired no 
 interest in the outfit. PhiUips vs. 
 Jones, 20 Mo. 67. 
 
 The defendants, owners of min- 
 eral lands, entered into a wTitten 
 agreement with the plaintiff, recit- 
 ing their intention either to sell the 
 lands or to form a joint-stock com- 
 pany for the working of the mines 
 thereon; and promising, in consid- 
 eration of services rendered and to 
 be rendered by the plaintiff, to pay 
 to him a certain sum out of the pro- 
 ceeds of the sale of the lands, if the 
 same should be sold, or, if they 
 should not be sold, and a company 
 should be formed for workmg the 
 mines, then to convey to him stock 
 
 to that amount; and the plaintiff, 
 on his part, agreed, in consideration 
 of the foregoing agreements, to re- 
 main in their service as long as they 
 might require, not exceeding one 
 year, for a fixed salary and a house 
 and land free of rent. Held that 
 the defendants were not bound to 
 sell the land, nor to form a joint- 
 stock company, until by using rea- 
 sonable efforts it should be for the 
 mutual interest of all the parties 
 concerned; and where, without neg- 
 ligence on their part, they had failed 
 to do so, although more than seven 
 years had elapsed, that the plaintiff 
 has no claim upon them in equity, 
 except for the stipulated salary. 
 Pinch vs. Anthony, 10 Allen 
 (Mass.) 470. Where the members 
 unanimously agree to incorporate, 
 the association is thereby dissolved, 
 aTid the members' rights transferred 
 to the corporation. Red Polled 
 Club vs. Red Polled Club, 78 N. W. 
 (Iowa) 803. The consent must be 
 imanimous. Schiller vs. Jaennich- 
 en, 74 X. W. (Mich.) 458; Associate 
 vs. Seminary, 49 Supp. 745. See 
 also American Digest, vol. 4, p. 
 2544, and Annuals. 
 
 • As amended to April, 1903
 
 Rules and Regulations. 59 
 
 It is well settled that before a member of an unincor- 
 porated 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-hi\vs or rules, but 
 it may be inferred or presumed from the circumstances of 
 each case, and especially from the fact of admission and 
 actino; as a member.^ And it seems that where an associ- 
 ation, thi'ough a committee 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 injunction to prevent the same.^ So a mem- 
 ber of a Stock Exchange is bound by a by-law passed while 
 he is a member, whether he votes for it or not.^ 
 
 As to the limit and extent of the rules which such an 
 organization 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, pro- 
 viding that they contain nothing unreasonable* or against 
 
 ' Austin vs. Scaring, IG N. Y. 112; ultra their rules, or whore the latter 
 Heath vs. Prest. Gold Exchange, 7 conflict with the established prin- 
 Ab. Pr. (n. s.) 251. Ry-laws are of ciplos of law. Commercial Tele- 
 equal obliRation with the con.stitu- gram Co. vs. Smith, 47 Hun, 494- 
 tion. Jackson vs. South Omaha 505. 
 Live Stock E.xchanRe, 49 Xeb. 0,S7. * MacDowell vs. Aekley, S Week. 
 
 ' Innes vs. Wylie, 1 Car. it K. 2G2; Notes Cas. 4G4. 
 
 Brancker vs. Roberts, 7 Jur. (n. s.) * No member is bouiul by a by- 
 
 1185; Hopkinson vs. Marquis of law which is unreasonable and 
 
 Exeter, 5 L. II. Eq. 63; Inhabitants which he does not consent to. 
 
 of Palmyra vs. Morton, 25 Mo. 593; Hibernia Fire Eng. Co. vs. The 
 
 'White vs. Hrowiicj], 4 .\b. Pr. (n. K.) Commonw., H Week. Notes Cas. 
 
 162, 193. (Pa.) 320; id, April 21, ISSO, 521; 
 
 * Per Inirrahani, J., I{«>rke vs. Dunham vs. Trustees of Uachac I, 
 
 Ru8.s<ll, 2 Lans (S. V.) K<p. 244. 5 Cow. 462; People vs. Med. Soc of 
 
 24S. And courts will not l»- bound Erie, 24 Marb. 570. My-laws nnist 
 
 bv H determination of an Exchange be reasonable. Albera V8. Mor-
 
 60 
 
 Stock-brokers and Stock Exchanges. 
 
 the law of the land, which, of course, includes anything im- 
 moral or against public policy ; and that, with these neces- 
 sary limitations, their rules will be obligatory upon each 
 member assenting thereto.^ 
 
 " It follows, from the very nature of such an organization," 
 says the court, in White vs. Brownell, " with such objects, 
 intents, and ])urposes, that there must be rules and regula- 
 tions for the gooil order of the association ; and such rules 
 should be held to be conclusive as to the mode of transacting 
 
 chants' Exchange, 138 Mo. 140; 
 American Live Stock Co. vs. Chi- 
 cago Live Stock Exchange, 143 111. 
 210. A rule of the Chicago Board of 
 Trade subjecting to expulsion a 
 member who shall knowingly exe- 
 cute an order for firms or organiza- 
 tions dealing in differences, is not 
 unreasonable or against public pol- 
 icy. Board of Trade vs. Riordan, 
 94 111. App. 298. The principle 
 stated in the text applies to all 
 voluntary associations whether in- 
 corporated or not. American Live 
 Stock Co. vs. Chicago Live Stock 
 Exchange, 143 111. 210, supra. 
 
 ' White vs. Brownell, 4 Ab. Pr. 
 (n. s.) 162, 193; Haight vs. Dicker- 
 man, 18 N.Y. Supp. 559; Beltou vs. 
 Hatch, 109 N. Y. 593; Weston vs. 
 Ives, 97 X. Y. 222; Lewis vs. Wil- 
 son, 121 X. Y. 2S4; People ex rel. 
 Johnson vs. X. Y. Produce Ex- 
 change, 149 N. Y. 401 ; In re Hacb- 
 ler vs. N. Y. Produce Exchange, 
 149 N. Y. 414; Goddard vs. Mer- 
 chants' Exchange, 9 Mo. App. 
 290, aff'd 78 Mo. 609; Albers vs. 
 Merchants' Exchange, 13S Mo. App. 
 161; People ex rel. Mcllhany vs. 
 Chicago Live Stock Exchange, 170 
 111. 556; American Live Stock Com- 
 
 mission Co. vs. Chicago Live Stock 
 Exchange, 143 111. 210; Green vs. 
 Board of Trade, 174 111. 585; Farmer 
 vs. Board of Trade, 78 Mo. App. 
 557; Lehman vs. Feld, 97 Fed. 852; 
 Com. Tel. Co. vs. Smith, 47 Hun, 
 491, 505; Hyde vs. Woods, 2 
 Sawy. 665, per Sawyer, J.; affirmed, 
 94 U. S. Rep. 528; Leech vs. Har- 
 ris, 2 Brews. (Pa.) 571 ; Singerly vs. 
 Johnson, 3 Week. Notes Cas. (Pa.) 
 541; Leech vs. Leech, id. 542, note; 
 Evans vs. Wister, 1 Week. Notes 
 Cas. 181 ; Thompson vs. Adams, 7 
 id. 281 ; Ang. & Ames on Corp. (10th 
 ed.) § 332,-335; Moxey's Appeal, 9 
 Week. Notes Cas. 441, afT'g 37 Leg. 
 Int. 82; Hibernia Fire Eng. Co. vs. 
 The Commonw., 8 Week. Notes Cas. 
 320; id. April 21, 1880, 521 ; People 
 vs. Board of Trade, 80 111. 134; but 
 see this case questioned by the Su- 
 preme Ct. of Wisconsin in State ex 
 rel. Cuppel vs. Milwaukee Chamber 
 of Comm., 47 Wis. 670. See also 
 Baxter vs. Board of Trade of Chi- 
 cago, 83 111. 146; Sturges vs. Board 
 of Trade, 86 111. 441; Commw. vs. 
 St. Patrick's Benev. Soc, 2 Binii. 
 (Pa.) 442; The Butchers' Bene 
 ficial Assoc, 35 Pa. St. (11 Casey) 
 151.
 
 Rules and Reerulatioiis. 61 
 
 business between the raeinbers, and as to the privilege of 
 admission to and continued enjoyment of membership." ^ 
 
 The provisions of the constitution and by-laws of the 
 association are obligatory upon the members as a contract.^ 
 They express the contract by which each member has con- 
 sented to be bound, and measure his duties, rights, and obli- 
 gations as such. Whatever are the rights acquired by a 
 member and created by his admission to membership, the 
 rules by which the membership is created or dissolved and 
 which control the affairs of the organization and the rela- 
 tions of members, entered into those rights when created 
 and remained a part of them. This condition is self-imposed.^ 
 
 No person can insist upon remaining a member and at 
 the same time refuse compliance with its rules.'' 
 
 But, in passing upon questions involving the propriety 
 
 • Per Van Vorst, J., White vs. vs. N. Y. Produce Exchange, 58 N. 
 Brownell, 3 Ab. Pr. (n. s.) 31S, 326. Y. Supp. 842. When the members 
 In Dillard vs. Paton, 19 Fed. Rep. make a contract subject to the 
 619, at p. 624, the court said: "It rules of the Exchange (in this case 
 cannot be denied that merchants the Union Merchants' Exchange of 
 may voluntarily a.ssociate together, St. Louis) the rules become part of 
 and prescribe for themselves regu- the contract. Bassctt vs. Irons, 8 
 lations to establish, define and con- Mo. App. 127. liut not if a rule of 
 trol the u-sages or customs that shall the Exchange (the Memphis Cotton 
 prevail in their dealings with each Exc.) is habitually violated by the 
 other. These are useful institu- contracting members. Dillard vs. 
 lions, and the courts recognize their Paton, 10 Fed. 619. If a rule of tho 
 value and enfone their nilcs when- Hoard of Trade is changed before 
 ever parties deal undf-r them, in tln' completion of the contract, the 
 which ca.se the regulations become? latt<'r is nevertliele8.s governed by 
 undoubtedly a part of Ihe con- the rule jus it existed when the con- 
 tract." Sec 20 Am. L. Hev. (1K86), tract was made. Hess vs. Warren, 
 p. 17, where the validity of by-laws 15 111. App. 596. 
 in relation to option dealings is * Helton vs. Hatch, 109 N. Y. 593; 
 discussed. Haight vs. Dickerman, IS N. Y. 
 
 ' Wertton vs. Ives, 97 N. Y. 222; Supp. 559. 
 
 In n- Ilaebler vs. N. Y. Produce * Lewis vs. Wilson, 121 N. Y. 
 
 Exchange, 149 N. Y. 414; HuhhvU 284.
 
 62 Stock-brokers and Stock Exchauges. 
 
 and h'gality of their rules, whei'C there is the slightest 
 property interest involveil/ the courts will upply the same 
 rule which is used in the case t)f corporate bodies. 
 
 In Leech vs. Harris ^ the court saitl : " 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 con- 
 duct and to expel their members, a])ply 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 de- 
 fendants the right to admit or expel such persons as they 
 might see fit, in manner to be prescribed by the rules, reg- 
 ulations, 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. This 
 must now be regarded as the settled law of Illinois, the 
 cases in that State ^ indicating a contrary doctrine, the 
 reasoning of which was criticized in the first edition of this 
 work^ having been, after some contrariety of opinion, dis- 
 tinguished and in effect overruled in the case of Pyan vs. 
 Cudahy,* where the court said : "Expressions may be found 
 
 *See, as to distinction between 111. 85; Sturges vs. Same, 86111. 441; 
 
 unincorporated associations pos- Baxter vs. Same, 83 111. 146; Wright 
 
 scssing property, and those insti- vs. Same, 15 Chic. L. News, 230; 
 
 tilted for mere social enjoyment or Pitcher vs. Same, 121 111. 412. See 
 
 benefit, State vs. Ga. Med. Soc, 38 also Ryan vs. Lamson, 44 111. App. 
 
 Ga. 608; People vs. Med. Soc. of 204. 
 
 Erie, 24 Barb. 577. Sec Board of * pp. 35-38. 
 
 Trade vs. Iliordan, 94 111. App. 298. ' 157 111. Rep. 108. See also Board 
 
 '2 Brews. (Pa.) 571-576. of Trade vs. Nelson, 162 111. 431; 
 
 M5 111. 112. Green vs. Board of Trade, 174 111. 
 
 * People ex rel. Rice vs. Board of 585; State ex rel. Cuppel vs. Mil- 
 Trade of Chicago, 80 111. 134; Fisher waukee Chamber of Commerce, 47 
 vs. Board of Trade of Chicago, SO Wise. 670; 3 N. W. 713; 21 Alb. L.
 
 Rules aud Kegulations. 63 
 
 in the opinion of the court (referring to People ex rel. 
 Eice vs. Board of Trade),' which may bear the construction 
 that a court would not interfere in any case, "with the action 
 of an organization like the Board of Trade, but those expres- 
 sions were not necessary to a decision of the case, and cannot 
 be regarded as authorit}^," ^ The court also said : ^ " Lan- 
 guage may have been used in some of the cases cited, which 
 might, without a close examination of the questions involved 
 in the cases, lead to the conclusion reached by counsel 
 (viz., that a court of equity had no jurisdiction to interfere 
 with the action of the board of trade). But upon a care- 
 ful consideration of the questions involved and decided in 
 each case, it will be found that the question presented by 
 this record did not arise in those cases, and was not before 
 the court." And tiic plaintiff was held entitled to an in- 
 junction restraining the Board of Trade from indorsing 
 its certificates of deposit made by plaintiff, to a contractor 
 of plaintiffs, on the ground that at a hearing before a com- 
 mittee, appointed by defendant, under one of its rules, 
 plaintiff was not allowed to produce evidence that the 
 market value of produce sold by him was no higher on the 
 day of delivery than when it was sold. 
 
 J. 23; Albers vs. Merchants Ex. of the non-membership of the com- 
 St. Louis, 39 Mo. -Vpp. 583. plainunt, saying, however, "If tlie 
 'HOIU. 13>. iissociation, or a majority of its 
 ' 1.57 111. Hep. at p. 123. The nicinbc-rs, pa.ss l)y-Ia\vs which are 
 court liad prcvi<ju.sl}' indicated ils unria.sonaljlc, or contrary to law or 
 adoption of tlic correct doctrine in public policy and attempt to en- 
 Live iStock ComnuHsion Co. vs. force- them a.s a>jain.st adis-scntinj^or 
 Live .Stock Exchanjie, 113 III. 210. controlling; minority, such minority 
 (See post, p. (>-l.) Here the objcc- may doubtless, in proper ca-scs, np- 
 tion that the rules were illegal wiw peal to the <'<turt« for relief against 
 ur^cd by a non-member and the their enforcement." 
 court refused to interfere, because of ' .\t p. 123.
 
 64 Stock-brokers and Stock Exchanges. 
 
 The general rule now seems to be that the courts will in 
 all cases interfere, by appropriate 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 case of Dawkins vs. Antrobus,'^ where the plaintiff 
 sought to have the court review a resolution expelling him 
 from a club, James, L. J., after referring to the observations 
 of the Lords Commissioners in another case^ — to the effect 
 that shareholders, assembled at a meeting duly convened, 
 were the judges of what was a reasonable cause for re- 
 moving their directors ; and that although the court might 
 inquire whether the meeting was regularly held, and in 
 cases of fraud, clearly proved, might interfere with the 
 acts done, still there was no jurisdiction, where no case of 
 direct fraud Avas proved, to determine whether the decision 
 
 ' White vs. Brownell, 4 Ab. Pr. Supreme Lodge, Knights of Pyth- 
 
 (n. s.) 162,193; People vs. Union, ias, 50 Mo. App. 45; Lysaght 
 
 118 N. Y. 100; Wachtel vs. Society, vs. Assn., 55 Mo. App. 547; Albers 
 
 84 N. Y. 28; Austin vs. Searing, IG vs. Exchange, 138 Mo. 165; Ellerbe 
 
 N. Y. 124; People vs. Society, 32 N. vs. Faust, 1 19 Mo. 653; Mulroy vs. 
 
 Y. 196; Belton vs. Hatch, 109 N. Y. Lodge, 28 Mo. App. 463; Ludowiski 
 
 593; Haebler vs. Exchange, 149 N. vs. Society, 29 Mo. App. 337; Am. 
 
 Y. 421; Lonbat vs. Le Roy, 40 Hun, L. Stock Co. vs. Exchange, 143 111. 
 
 549; Lewis vs. Wilson, 121 N. Y. 210; Croak vs. High Court, 162 111. 
 
 284; Fisher vs. Keane, L. R. 11 Ch. 298; Board of Trade vs. Nelson, 162 
 
 Div. 362; Sperry's Appeal, 116 Pa. 111. 438; State vs. Williams, 75 N. 
 
 St. 391 ; Savannah &c. Ex. vs. State, C. 135; Lawson vs. Hewell, 118 Cal. 
 
 54 Ga. 668; Connelly vs. Assn., 58 618; Karcher vs. Lodge, 137 Mass. 
 
 Conn. 552; Otto vs. Union, 75 Cal. 371; Vaughn vs. Hcrndon,01 Tenn. 
 
 314; Huston vs. Ruethingor, 91 Ky. 68; Farmer vs. Board of Trade, 78 
 
 333; Medical Society vs. Weatherly, Mo. App. 5.57. 
 
 75 Ala. 252; Burlington vs. White, ' L. R. 17 Ch. Div. 615. 
 
 41 Neb. 547; Zabriskie vs. Railroad, ' Inderwick vs. Snell, 2 Mac. & G. 
 
 18 N. J. Eq. 183; Hoeffner vs. 221. 
 Lodge, 41 Mo. App. 349; Glardon vs.
 
 Rules and Regulations. 65 
 
 of the meeting hud, or had not, been unduly influenced by 
 uufoundeil statements made by pei"Sons taking an active 
 part in the proceedings — said that he agreed with every 
 word of these observations, Avhich were equally a[)plicable 
 to the case of a club. ..." UnJes^s it could he said that their 
 deci-iion 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 
 its directoi'S for violation of one of its rules. The rule in 
 question prohibited its members from " gathering in any [)ub- 
 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 charter authorized the corporation to make reasonable 
 rules for the regulation of its members. The rule in ques- 
 tion was held to be reasonable, and not an unlawful restraint 
 upon trade, nor void for uncertainty; and the relator hav- 
 ing been fairly tried, npcju due notice, and in accordance 
 with the rules of the corporation, and there being abundant 
 proof against him tending to show that he had committed 
 the olfence charged, it was decided that he could not bo 
 restored by mandamus.^ 
 
 ' Soe also, in this conncrlioii, L:i- ' As to when ii nilc may l)c ro!i- 
 
 liourlnTe vs. Kurl of WliarmlifTc, Hoiialjin or uiirciLsoiiiil)li' under <ir- 
 
 L. K. 1.3 Ch. Div. '.VM'\. cumHljincrH, see (JhiciiKo va. Tilton, 
 
 ' 17 Wis. 070; 3 .\. W. 7(iO (Wot- S7 III. .'',17. 
 torn priirinp); 21 Ml. L.J. 23.
 
 66 Stock-brokers and Stock Exchanges. 
 
 A noii-mcmber may not enjoin the operation of a by-law, 
 or tlu' posting of a notice prohibiting members from doing 
 business for or witli iiini on the ground that such by-law or 
 notice violated public policy, as in restraint of trade.' 
 
 If it be admitted tluit sucli by-laws are so far in restraint 
 of trade as to be invalid for that reason, still the position of 
 the com])lainant is in no respect improved. By-laws or 
 contracts in restraint of trade are illegal only in the sense 
 that the law will not enforce them. Thev are simply void. 
 The law does not prohibit the making of contracts in re- 
 straint of trade ; it merely declines, after they have been 
 made, to recognize their validit}'.^ A party to such con- 
 tract is not bound to perform it, but he may perform it if 
 he sees fit, ami his doing so exposes him to no legal ani- 
 madversion. If the by-laws in question are invalid because 
 of being in imi)ro})er restraint of trade, they are merely 
 void, and the members of the Exchange, being under no 
 obligation to obey them, may, perhaps, be entitled, at their 
 own instance, to protection against such disciplinary conse- 
 quences as the Exchange may see fit to impose in case of 
 disobedience. But such protection cannot be invoked in 
 their behalf by a stranger, nor can they be required to dis- 
 obey such rules except at their own volition.-^ 
 
 ' American Live Stock Commis- the Stock Exchange being the niles 
 sion Co. vs. Chicago Live Stork Ex- of a domestic forum, cannot affect 
 change, 143 111. 210; Russell vs. persons who are neither members, 
 New York Produce Exchange, 58 nor the clients of members. Thus 
 X. Y. Supp. 842. they cannot afTect the rights of the 
 
 ' Mogul Steamboat Co. vs. Mc- general creditors of a defaulting 
 Gregor, L. R. 2.3 Q. B. D. 598. member. A defaulting member, 
 
 ' In this connection the following therefore, cannot voluntarily pay 
 quotation from Williams' Forensic money to the ofScial assignee to be 
 Facts and Falliries (Lond. 18S5), distril^uted exclusively amongst 
 106, is interesting. "The rules of those creditors whose claims arise
 
 Rules aud Regulations. 67 
 
 But the courts will issue a writ of quo warranto, to in- 
 quire into the enforcement of an illegal by-law of a corpo- 
 ration. Thus, in People ex rel. Mcllhany vs. Chicago Live 
 Stock Exchange/ it was said: ""When a corporation is 
 created there goes with it the power to enact by-laws for its 
 government and guidance, as well as for the guidance and 
 government of its members. . . . But (such) by-laws must 
 be reasonable and for a corporate purpose. . . . They 
 must not infringe the policy of the state nor be hostUe to 
 public welfare." Thus, men engaged in trade and com- 
 merce may advertise, emplo}'^ solicitors, and offer rewards 
 and inducements to secui'e trade witliout violating the law. 
 A by-law, therefore, pr(jliibiting such means, is unlawful, as 
 hostile to public welfare, and in restraint of trade and com- 
 merce.^ 
 
 And the courts, at the instance of the attorney general, 
 will annul the charters of incorporated " Exchanges " organ- 
 ized by dealei*s in particular products, such as coal, milk 
 and meat, where the purpose of the incorporation, and the 
 effect and intent of the by-laws, is to control the prices of 
 such products.^ Indeed the members of such an " Exchange " 
 may be indicted and convicted of the offence of criminal 
 conspiracy to do an act injurious to trade or commerce.* 
 
 out of Stock Exchange transactions Press, 136 X. Y. 333; People ex 
 
 And if it ho nrjiifl that this is the rel. Pincknej' vs. Fire Tnder- 
 
 rule of the Stork Exehan^je, the an- writers, 7 Hnii, 24S; Jackson vs. 
 
 swer, as Lord Ju.stice James said, is South Omaha Live Stock Exdianpe, 
 
 that the Stock Exchange is not an 49 Neb. 0S7 
 
 Alsatiu; the Queen's laws are par- ' People vs Milk Exchange, Nfi 
 
 amount there, and the Queen's N. Y. 267; Ford vs. Chicago Milk 
 
 writ runs even into the sacred pre- Shippers' A.ssn., 27 L R .\. 20S. 
 
 cincts of f'apel Court." ♦ I'eoplc vs. Sheldon, 139 N. Y. 
 
 '170 III -,'.6 2.51. 
 
 'Cf Matthews vs. AHHOciate<l
 
 68 Stock-brokers and Stock Exchanges. 
 
 And wluMi the constitution und by-laws of a corporation 
 regulated the credit to be allowed to members ; discrimi- 
 nated (in the price to be paid for produce) against non-mem- 
 bers ; controlled the delivery of goods ; and provided a 
 penalty by fine and suspension against offend mg and de- 
 faulting members, it was lield, that such an organization 
 was in restraint of trade, and a member who was suspended 
 for violatinfr such bv-law might maintain an action for 
 damages against the corporation and its members for the 
 subsequent boycotting of his business.^ 
 
 The visitorial or superintending power of the State over 
 corporations created by the Legislature will alway be exer- 
 cised 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. The power extends to the investigation 
 of their proceedings for the purpose of protecting the rights 
 of members against usurpation of the governing body to 
 their prejudice/ To this end the courts will issue writs of 
 quo warranto,^ mandamus,' 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, 
 
 ' Ertz vs. Produce Exchange, 51 Exchange, 145 N. Y. 267, the 
 
 L. R. A. 825. writ of quo warranto and proceed- 
 
 ' People ex rel. Johnson vs. Pro- ings by information in the nature of 
 
 duce Exchange, 149 N. Y. 401. quo warranto have been abol- 
 
 ' Or permit the filing of an in- ished. Code Civ. Pro. § 1983. See 
 
 fonnation in the nature of quo also Hopkins vs. U. S., 171 U. S. 
 
 warranto. People ex rel. Mcllliany 578; Anderson vs. U. S., id. 604. 
 vs. Chicago Live Stock Exchange, * People ex rel. Johnson vs. N. Y. 
 
 170 III. 556. In New York an ac- Produce Exchange, 149 X. Y. 401; 
 
 tion by the attorney general for the In re Haebler vs. N. Y Produce 
 
 annulment of the charter of the cor- Exchange, 149 N. Y. 414. 
 poration may be maintained. Code * Ryan vs. Cudahy, 157 111. 108. 
 Civ. Pro. § 1798; People vs. Milk
 
 Rules and Resrnlations. i39 
 
 will apply such remedy as the law prescribes. Every cor- 
 ]>oratioii of the State, whether pubhc or private, civil or 
 municipal, is subject to this superintending control, although, 
 in its exercise, different i-ules may be applied to different 
 classes of corporations. 
 
 Although, as we have shown, a Stock Exchange is not a 
 corporation, 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 interjireting their 
 by-laws, as they apply in the case of corporations,^ keeping 
 in view, of course, the different objects and ends ior which 
 the incorporated and non-incorporated bodies may have 
 been instituted. T<j confer upon an unincorporated associ- 
 ation an unlimited power to make by-laws would be not 
 
 ' Tliis is the view expressed in Loubat vs. Le Roy, 15 .\hb. N. C. 
 
 Leech vs. Harris, 2 Brews. (Pa.) 44. In White vs. Brownell, how- 
 
 571, by Mr. Justice Pierce, who ever (4 Ab. Pr. [n. s.] 1G2), the court 
 
 said: "I have very little doubt, said: ".4 member of a bodi/ of this 
 
 therefore, that the rules of law and description (a Stock Exchanp;e) has, 
 
 equity, so far as regards the control as such, undouhtedhi rights which the 
 
 of thoni, and the adjudication of law ivill protect; but they do not rest 
 
 their reserved and inherent powers upon the same {rround, and are by 
 
 to reffulate the conduct and to expel no means coextensive witli the fran- 
 
 the meml)ers, apply to them as to chi.se enjoyed bj' a mcmljcr of a cor- 
 
 corporations and joint-stock com- poration. Tliey depend \ipon the 
 
 panics." See also Otto vs. Journey- nature of the orj^anization, upon the 
 
 men Tailors' Protective Union, 75 oljject for which it was formed, and 
 
 Cal. 308; American Live Stock Co. upon the niles, reRulations, consti- 
 
 V9. Chicago Live Stock ExchaiiRe, tution, or by-laws wliich are ex- 
 
 143 III. 210; Watcrbury vs. Mer. planatorv of its purpose, and which 
 
 Union Exp. Co., 50 Harl). 100; Sand- the body has adopted for its gov- 
 
 ford vs. Sup«T\i.sorH of .New York, ernment." But tlic Icarnetl judge 
 
 15 Mow. Pr. iN. Y.) 172; Peoi)l(' ex wlio ticHvcred the opniioii in that 
 
 nl. Plait VH. Wcrnjjle, 117 X. Y. C!i.s«' expressly admittc<l that the 
 
 13A; rf. P«-oi)lr- ex nl. WinchcKter rules of these vohnitary associa- 
 
 vs, Colf-man, 133 N. Y. 2S1. See t\i>\\n muni, huvo " nothing in thciu in 
 
 not^* on judicial int«Tpo.Hition in the conflict with the law of the lanj." 
 iifTair.'t of a, voluntarv association.
 
 70 Stock-brokers uiul Stock Kxcliiiiiges. 
 
 only to I'iiiso it above corporaticjns which are supposed to 
 have special franchises, but to endow it with legislative 
 authority.' 
 
 The courts will never be bound by a determination of an 
 Exchange, ultra its rules or by a determination in accord- 
 ance with rules, which conflict with established principles 
 of law.- 
 
 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 bi'ouglit 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 individual States where the associations exist, or 
 the common law as it is generally accepted.'^ 
 
 And in the exercise of any reserved or inherent power to 
 
 ' See Ang. & Ames on Corp. (11th member's seat could be made, other 
 
 ed.) § 591, note 5; Lindley on Part, than that which was provided by 
 
 (4th ed.) 5. See also ed. of 1893. the rules and to which he has as- 
 
 In People ex rel. Piatt vs. Wemple, sented. 
 
 117 N. Y. at p. 144, it is pointed out ^ Ang. & Ames on Corp. (11th 
 (with numerous citations) that such ed.) § 332. But a by-law estab- 
 associations, when formed without lishing a rule of contract differing 
 authoritj' of parliament, were de- from the conunon-hiw rule is not 
 clared in England to be illegal and void, unless some principle or policy 
 void and to be deemed a public of the common law is violated, 
 nuisance (6 Geo. I. chap. 18, § 18), Goddard vs. Merchants Exchange, 
 the statute m this respect, it is said, 9 Mo. App. 290, aff'd on opinion 
 following the common law, and en- below, 78 Mo. 609. .V rule requir- 
 forcing its rules by the imposition of ing compulsory' submission of prop- 
 penalties, erty rights is illegal. Bank of 
 
 nVcston vs. Ives, 97 X.Y. 222, Montreal vs. Wonte, 105 111. App. 
 
 whore it wa.s held that no appro- 373 ; Alton Co. vs. Norton, id. 
 
 priation of the proceeds of a sale of a 385.
 
 Rules and Rei;ulatioiis. 71 
 
 amend, alter, or repeal the by-laws they will be governed 
 by the same general principles. 
 
 This is so with corporations. Xo private corporation 
 may repeal a by-Uiw so as to impair rights which have been 
 given and are vested thereby.^ Nor so as to destroy the 
 contract rights of the members.- Subject to these limita- 
 tions, the power to amend a by-law is inherent.^ In the 
 interpretation of b\'-laws the words are given their ordinary 
 and popular meaning, nil loquitur valgus, being made and 
 enforced by men unlearned in the law.* 
 
 And the strict rules of criminal pleadings are not appli- 
 cable to the proceedings of a Board of Trade for expulsion 
 of a member for violation of one of its by-laws.^ 
 
 By-laws must possess reasonable certainty in terms.® 
 
 ' Kent vs. Quicksilver Mining Co., 'People ex rel. Johnson vs. N. 
 
 78 N. Y. 159. Y. Produce E.xchange, 149 N. Y. 
 
 'Weston vs. Ives, 97 N. Y. 222; 401. 
 
 Parish vs. X. Y. Produce Exchange, The following is an apt and amus- 
 
 169 N. Y. 34. As to when an ing case illustrative of the rule that 
 
 amendment of a by-law as to a an association cannot pass any rule 
 
 gratuity fund does not impair the or b^'-law which is in violation of the 
 
 contract right, .see McDowell vs. principles of law. It was an indict- 
 
 Aekley, 93 Pa. St. 277. See also men t for a.s.sault and battery, the de- 
 
 Greer vs. Stoller, 77 Fed. Rep. 1. fendants justifying under a rule of 
 
 ' Parish vs. X. Y. Produce E.\- a voluntary unincorporated .society. 
 
 change, 169 X. Y. 34. The adop- The defendants and the prosecutrix 
 
 tion, by an unincorporated society, were mem!)ers of a Ijcnevolent soci- 
 
 of a new constitution is illegal, and cty known as the "Good Sanuiri- 
 
 of no force when; it ha.s not been tans," which society had certain 
 
 carried in accordance with xXw pro- rules and ceremonies known lus the 
 
 vi.sions of the exi.sting <on.stitution ceremonies of initiation and expul- 
 
 of thcsocirrty. Hociireiter's .\pp., 8 sion. The prosecutrix having been 
 
 Week. .Not«j Ca.s. 461. remiss in some of her obligations, 
 
 ♦ .Nelson vs. lioard of Trade, .08 and, when called upon to explain. 
 
 III. .\pp. .399, rev'd on other proundH having become violent, the dcfeiid- 
 
 162 111. 431. unt, with others, proceeded to pcr- 
 
 ' Ikjard of Trade vh. Xelaon, 162 form the ceremony of expulHion, 
 
 ^"- '••'• which consisted in suspending her
 
 72 Stook-brokors and Slock Excliaiii^cs. 
 
 AVheii ;i CoiniiuM'cial l^xcliangc is empowd'cd by its cluir- 
 ter to regulate its int'iiil)ersiii the conduct of tlicir business, 
 a rul(> that nuMnbcrs who were warehousemen shouhl execute 
 a bond to secure tosliipjiers or iiienibers the pi'oeceds of the 
 sales of their property is valid, and such a bond is binding.^ 
 
 (/>) Power of Suspension and Expulsion. 
 
 One of the most important functions of an association or 
 comj)any, whether incorpoi'ated or unincorporated, is the 
 power of suspension and expulsion from membership. As 
 several of the Stock and Produce Exchanges in the United 
 States have become incorporated, whilst others, like the 
 Xew York Stock Exchange, remain unincorporated bodies, 
 it is desirable to ])f)int out the distinction which exists be- 
 tween rights in a corporation and rights in an unincorpo- 
 rated association. In the former case, the member is in the 
 enjoyment of unfranchise, the right to wdiich is not derived 
 from the body, but is created by statute, or exists by pre- 
 scripti<jn, and cannot be taken awn}' by the act of the cor- 
 poration, except authorized by its charter, or for the three 
 
 from the wall by means of a cord batterj', had the parties concerned 
 
 fastened around her waist. not been members of the "Society 
 
 This ceremony had been inflicted of Good Samaritans," it is not the 
 
 upon others, theretofore, in the loss a battery because they were all 
 
 presence of the prosecutrix. She members of that humane institu- 
 
 resisted to the extent of her ability, tion. The punishment inflicted 
 
 The court, on appeal, held: upon the person of the prosecutrix 
 
 "When the pro.secutrix refused to was wilful, violent, and against her 
 
 submit to the ceremony of e.xpul- consent, and thus contained all the 
 
 sion established by this benevolent elements of a wanton breach of the 
 
 Society, it could not be lawfully in- peace." State a's. Williams, 75 N. 
 
 flicted. Rules of discipline for this C. 134. 
 
 and all voluntary- associations must ' Warren vs. Louisville Exchange, 
 
 conform to the laws. If the act of 55 S. W. (Ky.) 912. 
 tying this woman would have been a
 
 Suspension and Expulsion. 73 
 
 causes mentioned siqyra (pp. 74 and 75). But in the latter 
 case the member Las no rights of a liiglier dignity than those 
 springing out of a vohmtary contract between himself and 
 his fellow members. Such contracts are upheld when they 
 are not unreasonable or contrary to law or public polic}", 
 and the member may thereby voluntarily subject himself to 
 summary expulsion for causes and in modes which would 
 not be justified in the case of a chartered corporation.^ 
 
 It seems to be reasonably well settled that, as unincorpo- 
 rated societies have the right to prescribe rules for the con- 
 duct of their business, the}^ have the correlative power to 
 enforce them ; and that for a violation of such rules, after a 
 hearing in accordance with the methods prescribed in the 
 constitution or rules, any offending member may be either 
 suspended or expelled from membership, as the nature of 
 act justifies.^ 
 
 ' Thompson's Commentaries on seems undoubted. Angell & Ames 
 
 Corporations, § 846, and cases cited on Corp. §§410, 411, and cases 
 
 in footnotes. Some of the author- cited. 
 
 ities seem to hold that in the case of For cases arisinc; between corpo- 
 
 moneycd corporations a member rations and their members as to the 
 
 cannot be expelled unless the right power to suspend or expel, sec Ang. 
 
 has been conferred by statute, even & Ames on Corps. (11th ed.) § 408 
 
 for the three causes mentioned in et secj.; Potter on Corps. § 721; 
 
 the text. Angell & A. on Corp. (11th Morawctz on Corp. (2d ed.) §§ 277, 
 
 ed.) 410; Thomp.son's Com. on 49.3; Beach on Corp. §§ 97, 595; 
 
 Corp. § 840, and cases cited in note Speeling on Corp. § 523 ct seq.; 
 
 1. But the soundness of this doc- Thompson on C'orp. § 799 et seq.; 
 
 trine may be questioned, JLS a mem- Cook on Corporations (4th ed.), 
 
 ber might, by continuous violation §§ 11, 504, 710; .\mcrican & Eng- 
 
 of his duty :ls an incorporator, en- li.sh Kncy. of Law (2d ed.), tits, 
 
 sure the destruction of tlir- corpora- "Amotion" and " Disfranchi.se- 
 
 tion, and the latter bf powerless to m(>nt." 
 
 prevent its enforced dissoluti()n l>y ' Leech vs. Harris, 2 Brews. (Pa.) 
 
 his pxpul.sif)n. But tluit he would 571; Wliite vs. I^rownell, 4 .'\b. Pr. 
 
 be entitled tf) the amount of his (n. s.) 102, afT'g 3 id. 31H; Belton vs. 
 
 stork and could n-cover it in an Hatch, 100 N. Y. 593; Lewis vs. 
 
 action against the corporation Wil.son, 121 X. Y. 2<S4; Kuehne-
 
 74 Stock-brokers and Stock Exchanges. 
 
 And unincorporuleil bodies have not only the right to 
 cx|)fl a nieiiiljer lor a violation of their express rules, where 
 such a penalty is attached to the act, but such associations 
 equally with corporations have the inherent power to expel 
 their members, in the following cases, for certain acts, 
 although they may not be specifically mentioned in their 
 by-laws : 
 
 1. When an offence is committed, which has no immediate 
 relation to a member's corporate duty, but is of so infamous 
 a nature as to render him unfit for the society of honest men. 
 Such as the offences of perjury, forgery, etc. But before an 
 expulsion is made for a cause of this kind, it is necessary 
 that there should be a previous conviction by a jury accord- 
 ing to the law of the land. 
 
 2. When the offence is against his duty as a corporator ; 
 and, ill that case, he may be expelled, on trial and conviction, 
 by the corporation. 
 
 3. When the offence is of a mixed nature, against the 
 member's duty as a corporator, and also indictable by the 
 law of the land.' 
 
 Upon this question of disfranchisement there is a "well- 
 defined distinction between those bodies, corporated or un- 
 incorporated, where the members exercise a personal and 
 active supervision or duty, and in those commercial organ- 
 
 raundt vs. Smith, 2 N. Y. Supp. ^ Leech vs. Harris, 2 Brews. (Pa.) 
 
 625. In CaUfornia it has been held 571; People ex rel. Thacher vs. N. 
 
 that a member may be also expelled Y. Commercial Assn., 18 Abb. Pr. 
 
 for conduct clearly violating the 271. Expulsion is justified by 
 
 fundamental objects of the associa- ficuilt of any act, which though not 
 
 tion. Otto vs. Tailor's Union, 75 expressly prohibited by the by- 
 
 Cal. 308. When by the rules the laws, yet violates the fundamental 
 
 offense is punishable by fine only, objects of the association. Otto vs. 
 
 the association cannot expel the Tailors' Union, 75 Cal. 308. 
 member. Id.
 
 Suspensiou and Expulsion. 75 
 
 izations instituted mainly for gain, where the members do 
 not actively participate in the management, but merely 
 hold certiticates of stock, which are transferable by assign- 
 ment and delivery, and which entitle each holder to a 
 proportionate share of the assets, profits, and earnings of 
 the company. In the former class the personal character 
 and conduct of the member may be of great importance, 
 and the rules stated above, respecting the power of expul- 
 sion, will rigidly apply ; but in the latter class the personal 
 character of the stockholder is of no particular concern ; 
 and, consequently, it seems to be settled, both by reason 
 and precedent, that, generally, a member cannot be dis- 
 franchised, and deprived of his rights in the corporate 
 property, for acts of misconduct disconnected with the cor- 
 porate business.^ 
 
 The rule that seems to be applied to all cases is that when a 
 member disqualifies himself from assisting in promoting the 
 object and purpose of the corporation, he forfeits his corpo- 
 rate franchise, and may thus justify a vote of expulsion ; but 
 even then, it seems, in a commercial joint-stock company, 
 the member would be entitled to th.e amount of his stock, 
 and could recover it in an action against the corporation.* 
 
 "With this statement of the general rule, reference will now 
 specially be made to the cases which have arisen between 
 Stock and Produce Exchanges and their members relating 
 to the power of expulsion ; and, as the subject is compara- 
 tively a new one, we deem it better to set them out fully, 
 
 ' .\nK. <fc Ames on Corp. (lllh luw in 27 AllKiny L. J. :V_'(»; urticlc 
 
 ed.) § 410; White vs. Browneli, 4 on conclu.sivcnc.s.s of dfcisions of 
 
 Ab. Pr. (n. h.) 162-109. See also irihuiiulH of luwocijilions or rorporii- 
 
 Ix)uhat V8. Lc Key, 1.5 AI>Ij. N. (.'. tions, 4'.) L. It. A. 3r,3; Noukirch 
 
 1, and valuable note apjK-nded vh. Kep|)I(T, (it; \. E. (.\. Y.) 1 112. 
 
 thereto at p. 44, and artidf; <jn rlulj ' .\n«. A .Xnir.s, §§ 110, 111.
 
 T») Stock-brokers ami Stock Exchiinges. 
 
 that Llic views uf the court iiiuy be thoroughly appre- 
 ciated. 
 
 In the case of "White vs. Brownell ' a claim and matter of 
 difference arose between the plaintilF, a member of the Open 
 Board of Brokers, an unincorporated association, and C. M. 
 & Co., also members, growiiii^- out of their rights and ob- 
 ligations under a contract for the purchase of certain rail- 
 road stock, agreed to be sold and delivered by plaintiff to 
 saiil C. M. & Co. The contract Avas made at the board, 
 and as members thereof. A dispute subsequently arose, 
 and, after notice to plaintiff, C. M. Sz. Co. purchased a cer- 
 tain amount of the stock under the rules, but plaintiff re- 
 fused to recognize the transaction or pay for the stock ; and, 
 in consequence thereof, C. M. & Co. made a claim against 
 him for a large sum of money, being the amount of the 
 difference in their favor. C. M. ife Co. subsequently pre- 
 sented their claim to the Arbitration Committee, which, 
 under the constitution of the board, had cognizance of all 
 claims and matters of difference between members of the 
 board, and its decision was declared binding. Under the 
 constitution, an ap))eal would lie from the Arbitration 
 Committee to the Board of Appeals. It was also provided 
 in the by-laws that, as a means of mutual protection, it 
 should be the duty of an}'- member to report to the board 
 all cases of defalcation of contracts of other members, and 
 all cases of refusal or inability to pay differences, where- 
 upon the president should declare the member so reported 
 suspended. From such suspension the reported member 
 might appeal, and demand a hearing before the Executive 
 Committee. After the claim of C. M. & Co. had been pre- 
 
 > 3 Ab. Pr. (n. s.) 318.
 
 Suspeusiou aud Expulsion. 77 
 
 sented to the Arbitrutiou Committee, a day for hearing was 
 appointed, and plaintiff duly summoned to a})pear and an- 
 swer. The plaintiff declined to appear before the committee, 
 whereupon the latter heard and determined the matter upon 
 the statements of C. M. ct Co., and rendered judgment to the 
 Board of Appeals ; and, after the time for appeal had 
 elapsed, C. M. & Co. brought the matter to the notice of 
 the Committee on Membersliip, Avhich, after investigation, 
 reported to the board that plaintiff was in default under 
 his contract, whereupon the president, in accordance with 
 his duty, declared the plaintiff suspended. The plaintiff 
 thereupon appealed to the Executive Committee ; but be- 
 fore that body had convened he brought an action praying 
 that the president and board should be restrained and en- 
 joined from interfering with him in the full exercise of his 
 rights, etc., as a member of the board, alleging that the 
 action of the respective committees was unjust, and insist- 
 ing that his original contract with C. M. ife Co. was still 
 in force. The court refused to give the ])laintiff any relief, 
 and dissolved the preliminary injunction which had been 
 granted, on the ground that, as all the proceedings had 
 been conducted in accordance with the by-laws, which 
 plaintiff had submitted to upon becoming a member, a court 
 would not interfere where there was no claim that the terms 
 of the constitution were hard and unc(jnscionaljle. The court 
 said : " The very existence of this body depends upon the 
 faithful observance of its organic law by all its members. 
 The court must regard the constituticjn and laws of this 
 board as the contract by which all the menibn-s are bound. 
 The court caimot mak(iany othercontract lor the parties than 
 they havesolemrdy mad<! for themselves. It is not tlu^ prov- 
 ince of courts of law to make contracts for parties. It may
 
 78 Stock-brokers aud Stock Exchanges. 
 
 explain, interpret, enforce, and in some instances, where con- 
 tracts are hard and unconscionable, relieve from them. But 
 there is no claim in this suit that the terms of this constitu- 
 tion adoplcel by the plaintiff are hard and unconscionable. 
 The plaintiff does not ask to be relieved from his member- 
 ship, he rather demands that he may bo allowed to remain 
 in the association, under the constitution ; he docs not wish 
 to be suspended, or have his connection determined and 
 ended. In an organization of the character of the Open 
 Board of Brokers, with its several hundred members, the 
 business transacted at its rooms being daily large in amount, 
 and the stocks and securities dealt in being ever fluctuating 
 in value, it Avas not unreasonable to apprehend that there 
 would be constantly occurring differences between members 
 acting as agents for others, in regard to the terms of con- 
 tracts and as to the obligations and duties of contracting 
 parties, under agreements often hastily made. The temp- 
 tation to avoid a contract in a rapidly rising or falling mar- 
 ket, as the pecuniary interest of a party might prompt, ren- 
 dered it imperative that some tribunal in the body of the 
 association should be appointed, and agreed upon, to take 
 cognizance of, and exercise jurisdiction over, all claims and 
 matters of difference which might arise between members 
 of the board. This appears the more important, as confi- 
 dence in each other and in the engagements which they 
 might make one with the other, and in the fairness, openness, 
 and uprightness of their transactions, and in the certainty 
 that their engagements would be fulfilled, are announced as 
 the causes which led to the organization. To be effective, 
 their decisions should be prompt. As these engagements 
 would be constantly maturing, it was eminently proper that a 
 tribunal should be near to render speedy and exact justice.
 
 Snspeusiou <ind Expulsion. 79 
 
 Confidence in the real life of such engagements ; hence the ap- 
 pointment of a Committee of Arbitration is a prominent 
 feature in the constitution of this board ; and, by the express 
 assent of each member, jurisdiction is awarded to this com- 
 mittee in advance of all claims and matters of difference 
 ■which might arise between the members. . . . The plaintiff 
 agreed, when he became a member, that the Arbitration 
 Committee should take notice of all claims and differences 
 between members, and that he would be bound b}' its de- 
 cision. He refused either to acknowledge its conclusive 
 force in a case in which he was interested, or to appeal from 
 its decision. The constitution must be taken as a whole. 
 The contracting part is an entirety. All its obligations are 
 to be assumed and discharged ; all its benefits are to be en- 
 joyed. The enjoyment of the latter depends upon the per- 
 formance of the former. AYere it otherwise, the association 
 would be of no real advantage to its members. It clearly 
 appears that good faith in the observance of the constitu- 
 tional obligations of the members was intended to furnish 
 a test for the right of continued membership." 
 
 " There was some tliscussion on the argument of this mo- 
 tion as to the right of the plaintiff to revoke his consent to 
 th<.' jurisdiction of the Arbitration Committee over the claim 
 and difference in question. In an action in a court of law to 
 enforce the award, such (juostion might be raised. For the 
 purposes of this action, under the facts of the case, it can 
 give him no relief. If the plaintiff would revoke the part 
 of his agreement with his associates, which imposes duties 
 and obligations upon him, he cannot insist, in a court of 
 equity, that hesiiall be jjrotcctcd in tlu-: enjoyment of rights 
 and privileges created by the same; contracts. He that 
 would have equity must do equity."
 
 80 Stock-brokers iiiul Stock Exchanges. 
 
 This cause was subseciuently appealed,' and the judgment 
 of the lower courts was allirmed. It will be observed that in 
 neither of the two elaborate opinions delivered in the cause 
 did the court consider the legal aspect of the issue between 
 the plaintiff and M. C. & Co., but the same was deliberately 
 avoided, it being held that, under any circumstances, the 
 plaintiff was lirst bound to exhaust his remedy — an appeal to 
 the executive committee, in the manner pointed out in the 
 constitution and by-laws of the board — before any resort to 
 the courts could be had. 
 
 But it seems that where an unincorporated association, 
 through a committee or otherwise, seeks to suspend or expel 
 a member for acts not provided for in the constitution or by- 
 laws, or by an ex jjo.st facto VQ'&oXnXAon^ the courts will inter- 
 fere by injunction to j)revent the same.^ 
 
 The case of Sewell vs. Ives, President, etc.. New York Stock 
 Exchange^ is an interesting case, illustrating this question of 
 the right of suspension and expulsion. The plaintiff was a 
 
 * 4 Ab. Pr. (n. s.) 162; s. c, 2 obtaining by the relator of goods 
 Daly, 318. under false pretences was a breach 
 
 ^ Per Ingraham, J., Rorke vs. of his duty to the association. Id. 
 Russell, 2 Lans. (X. Y.) 244, 248. But a member of the New York 
 As to the power of an uniucorpo- Cotton Exchange (incorporated) 
 rated association to suspend or ex- cannot be expelled for contesting 
 pel a member, where there is no his title to a seat, there being no 
 specific pro\'ision in the const itu- provision in the charter or by- 
 tion or by-laws to that effect, see laws relative thereto. People ex 
 Leech vs. Harri.s, 2 Brews. 571 . If a rel. Elliott vs. New York Cotton 
 member of an incorporated asso- Exchange, 8 Hun, 216. The pre- 
 ciation directly violates its charter sumption should be against the 
 or by-laws, he may be expelled, power to expel except for the causes 
 People ex rel. Thacher vs. N. Y. recognized by the adjudged cases, 
 Commercial Assn., 18 Abb. Pr. 271. citing A\'Tiite vs. Brownell, supra. 
 In that case the corporation was Id. 
 
 organized (inter alia) "to inculcate 'X. Y. Supreme Ct., Sp. T., re- 
 just and equitable principles of ported in X^. Y. Daily Reg. Feb. 11, 
 trade" and it was held that the 1879.
 
 Suspension and Expulsion. 81 
 
 member of the firm of J. B. & Co., which failed. An investi- 
 gatioQ of the affairs of the firm showed that it had re-hypoth- 
 ecated securities upon which it had loaned money to Brokers ; 
 and the members of the firm, consisting of B. and the plain- 
 tiff, were arraigned before a sub-committee of the Governing 
 Committee of the Stock Exchange, which reported in favor 
 of their expulsion, on the ground that they had been guilty 
 of obvious f i-aud under Article XX. (now Art. XVII., sec. 2, 
 in amended form) of the Constitution of the Exchange, as 
 follows: " Should anv member be guilty of obvious fraud, of 
 which the Governing Committee shall be the judge, he shall, 
 upon conviction thereof, by a vote of two thirds of the mem- 
 bers of the said committee present, be expelled, and his 
 membership shall escheat to the Exchange ; subject, however, 
 to the provisions of Article XIV. of the constitution as re- 
 gard the claims of members of the Exchange Avho are cred- 
 itors of such persons." 
 
 The resolution of expulsion was approved of by the Govern- 
 ing Committee. There was a unanimous vote on B.'s guilt ; 
 but only a majority suKscribed to the finding in plaintiff's 
 case, though there was a two-third vote in favor of the lat- 
 ter's expulsion. 
 
 The plaintitf applied for an interlocutory injunction, re- 
 straining the presidt'iit and other officers of the Exchange 
 from interfering with his entering the Exchange and carrving 
 on bu.siness there, alleging that his expulsion was unjust, and 
 that it deprived him of iiis interest in the property of the 
 Exchange and all of the rights and incidenis pertaining to a 
 membership therein. The Court iield that, although the 
 plaintiff's expulsion had been technically irrew'nlar, vet, as it 
 was an admitted fact that the linn of which he was a mem- 
 ber was insolvent, he c(juld not justly complain of beiiiir sus-
 
 82 
 
 Stock-brokers and Stock Exchanges. 
 
 pended from membership; as under Article XIV. (now ar- 
 ticle XVI.) of the Constitution of the Stock Exchange, all 
 members becoming insolvent shall be suspended until they 
 have settled with their creditors.' 
 
 This decision may be open to question, upon the ground 
 that the effect of the difference between a " suspended " and 
 an " expeUed '' member does not seem to have been fully re- 
 garded ; inasmuch as a " susjiended " member is one who 
 under the I'ules of the Exchange can be restored to member- 
 ship, whereas an "expelled" member forever loses his prop- 
 
 • The full decision of Mr. Justice 
 Sedgwick is given in this connec- 
 tion: 
 
 *' It seems clear to me that Article 
 XX. of the Constitution of the de- 
 fendant means that before a mem- 
 ber can be expelled he must be 
 found guilty by a vote of two thirds 
 of the members of the committee 
 present, and that the attempted ex- 
 pulsion was void. This, of itself, 
 does not give a cause of action. The 
 illegal act must have some relation 
 to a right which the law can pro- 
 tect. It must appear that an in- 
 junction to prevent the defendant 
 acting upon the illegal expulsion 
 ^Nnll permit the plaintiff to enjoy 
 some substantial right, capable of 
 present or future actual enjoyment. 
 The complaint charges that the de- 
 fendant, under the pretence of the 
 void expulsion, deprived said plain- 
 tiff of the power to enter said build- 
 ing, or mart, to carry on such busi- 
 ness as he may have to carr>' on, 
 and has unlawfully deprived him of 
 his scat, which cost him ?2,000: has 
 •WTongfuUy and unlawfully deprived 
 him of the interest in such property 
 
 as the association may own ; and has 
 wrongfully and unlawfully deprived 
 him of all the rights and privileges 
 incident to such membership, which 
 are xery valuable to plaintiff, and 
 absolutely essential to the discharge 
 of plaintiff's business as Broker. 
 
 "The testimony showed that the 
 defendant did exclude the plaintiff 
 from the enjoyment of any and 
 ever}' privilege of a member, of a 
 kind that would actually accrue to a 
 member in his lifetime, and did 
 claim that he was properly expelled. 
 One of the defences was that before 
 the expulsion, hnd, by reason of the 
 plaintiff becoming insolvent, he be- 
 came, by force of certain articles of 
 the constitution, a suspended mem- 
 ber, or suspended from member- 
 ship, and had so ever remained. 
 The effect of this suspension was 
 that it legally deprived him of every 
 present and future advantage of 
 membership, and until he should 
 settle with his creditors and should 
 apply for readmission to member- 
 .ship. His readmission would then 
 depend upon the vote of the com- 
 mittee or committees to which ap-
 
 Suspeusion and Expulsion. 83 
 
 erty and privileges.^ If tlie basis of proceeding against a 
 member is under one particular rule^ and the action of the 
 Exchange held to be unauthorized and illegal, it seems rather 
 anomalous to uphold the decision in ousting a member upon 
 another rule merely justifying suspension, and to which no 
 reference was made to the proceedings before the Exchange.^ 
 And this view seems to have finally prevailed in the case. 
 
 The most recent Xew York case illustrative of the power 
 of the Stock Exchange over its members is Young vs. 
 
 plication must be made. The right that of itself is not in the nat- 
 testimony was that he had not ure of propert)-, has no pecuniary 
 applied for readniission, and that value, and an unlawful exclusion 
 he had not made a settlement with from it could be adequately com- 
 his creditors. There was no proof pensated by damages. The second 
 that he had the means of making was not an injury to the plaintiff; 
 one. Therefore, there is no present as, from the nature of membership, 
 right recognized by the constitu- he could be fully reinstated without 
 tion to apply for readniission or setting the sale a.side, and any claim 
 to be readmitted. \ mere lapse of of right to a resale would be repug- 
 time will not Imng him to such a nant to the foundation of this ac- 
 right. An injunction against using tion." 
 
 the void expulsion would not enable "For the reason that the plaintiff 
 him to enjoy or go into pos.session has no substantial right that would 
 of any advantages. While present be protected by injunction, the com- 
 facts exLst there is no po.ssibility of plaint must be dismissed." — N. Y. 
 any right accruing to him; and Daily Reg. Vvd. 11, 1S79. 
 whether there will be a possibility ' As to n>cognition by the courts 
 hereafter is incapable of dotermina- of the difference betwecti suspen- 
 tion, if a mere possibility as dis- sion and expulsion under the by- 
 tinpiisho<l from a contingent right laws of a Ma.sonic lodge, see Pal- 
 to the subject of adjudication. If metto Lodge vs. Hubbell, 2 Strob. 
 there be a doubt as to the corrcd- Law (S. Car.), 457. 
 ness of this, it rests upon — first, ' And see this cjise again reported 
 that a HUspeiidcKi niciubcr had a at p. 126 of this chapter, where in an 
 right Ui go into what tl>e witness action against the Slock K.xchange 
 culled the "long room;" srcorul, for a coTivcrsion of his "scat" tlie 
 that aft«T the attcm|)t<d i-xpulsioii, pl.iiutiff recovered damages on tlic 
 and before a year hiwi i)a>^He<l, thiTc; gnnnid that it liad l)een illegally 
 was a Hale of the plaintiff's right of dispo.sed of ijy the Stock Kxchunge. 
 nicmbeniliip. Tlie (irst refers to u
 
 84 Stock-brokei^s and Stock Exchanges. 
 
 Eames.^ In that case the phiintilT, who liad hcen expelled 
 for fraud, brou^-lit an action against the Exchange (h'lnand- 
 ing judgment that it bo deci'eed that he was a nuMuber 
 in good standing, and that the Exchange be restrained 
 from preventing him transacting business upon the Ex- 
 change, thereby compelling the defendant to prove the 
 validity of the expulsion, and it was held that the Exchange 
 was only bound to prove the prej)aration of charges, no- 
 tice of the hearing, the calling of witnesses and the decision 
 reached, and that the committee had followed the proce- 
 dure required by the constitution, and that it was not 
 incumbent on them to produce all the evidence taken be- 
 fore them. A presumption arose that the decision was 
 valid, and it rested upon the plaintitf to show" in what re- 
 spect it was void. It was also held that the plaintiff was 
 rightly expelled for fraud, although under another rule he 
 might have been only suspended for making a fictitious 
 sale, Avhen the sale, besides being fictitious, was also 
 fraudulent, and of which the Committee was to be the 
 judge. 
 
 The case of Powell vs. Abbott^ illustrates a casein which 
 the courts will interfere. That was a bill in equity to re- 
 strain the defendants, members of the Philadelphia Mining 
 and Stock Exchange, an unincorporated association, from 
 carrying into effect the suspension of the pjaintitf from 
 
 ' 78 A. D. 229. See also lioard mandamus compelling; his roinstate- 
 
 vs.Weare, 105 111. App. 289. ment on the ground that the com- 
 
 ' 9 Week. Notes Cas. 231, Nov. mittee should have investigated the 
 
 1880. When a member of the New question of adulteration, as he could 
 
 York Coffee E.xchange, an incorpo- not be compelled to do an illegal 
 
 rated association, was suspended act (L. 1893, c. 661, § 41) without 
 
 from membership for refusing to such investigation. Matter of Lur- 
 
 pay for alleged adulterated coffee, man, 149 N. Y. 588. 
 it was held that he was entitled to
 
 Suspension and Expulsion. 85 
 
 membership in the association, and fiom disposing i^f 
 certain stock belonging to him and deposited as secu- 
 rity. 
 
 The bill set forth that the plaintiff had made a time 
 contract with A., one of the defendants, for the sale of 
 certain mining stock, and deposited with another member 
 of the Exchange certain shares of otber stock assecm*ity; 
 that, the stock having advanced in price, A. demanded a 
 further security, which plaintiff declined to make, on the 
 gromid that the sales at the advanced price were fictitious ; 
 that the question was then referred to the Arbitration 
 Committee of the Exchange, whose duty it \vas to investi- 
 gate and decide all claims and matters of difference arising 
 between members of the Exchange, and also to adjudicate 
 such claims as may be preferred against members by non- 
 members, when non-members agree in writing to abide by 
 its decision. The decision of the committee shall be final, 
 except in cases involving a difference of one hundred dol- 
 lars or over, when either party may appeal, within three 
 days, to tlie Exchange for final adjudication. The com- 
 mittee decided that the plaintifi' must make the additional 
 deposit called for by A., from which decision plaintiff forth- 
 with notified the acting chairman of the Exchange that 
 he apj)ealed ; but betoi-e any luiilici' action could be 
 taken on said appeal, at the request of said A. the acting 
 chairman of said Exchange appointed a committee of 
 three members, who called upon plaintiff, and inquired of 
 him why he had not complied with the report of the .\rbi- 
 tration Committee. IMaintill" n-plied to them that he had 
 appeah'd from its deeision. The said coiiimittec; thei't'U|)on 
 re[)orted l>a{:k to tlie acting chairtnaii of th(> Ivxchangc that 
 the following: section of the; bv-laws be eiifoi'ccMl :
 
 86 Stock-brokers and Stock Exchanges. 
 
 "Section XI. Any uRMuber wlio fails to comply with his 
 contracts, or who becomes insolvent, shall immediately in- 
 form ti)e chairman of the Exchange of the fact, whose duty 
 it shall be to give notice forthwith, from the chair, of the 
 failure of such member; and in case of the refusal or neg- 
 lect of such delinquent to make such report to the chairman, 
 it shall be the duty of any member, having a knowledge of 
 the fact, to report the same forthwith to the Governing 
 Committee or the chairman, who shall thereupon appoint a 
 committee of three members to inquire into the facts, and re- 
 port thereon, without delay ; and i f said committee report the 
 charge to be true, and the Exchange confirm the report, said 
 member shall be suspended ; and it shall, furthermore, be 
 the duty of the Governing Committee, upon receiving in- 
 formation thereof, or having, directly or indirectly, any 
 knowledge of such failure on the part of any member to 
 comply with his engagements, as above stated, to report the 
 same, without dela}', to the chairman, and- ask for the ap- 
 pointment of a committee as before provided. xVnd, in case 
 of the insolvency of any member, he shall within three 
 days make good, to the full amount thereof, all friendly 
 loans of cash or stock from members, or any overdraft on 
 any bank ; but seven days shall be allowed him in which to 
 settle stock contracts." 
 
 A meeting of the members who "were present at the Ex- 
 change in the afternoon of the same day was called, without 
 any preliminary notice, to take action on the report of the 
 committee. Plaintilf protested, at the time, that he had ap- 
 pealed from the decision of the Arbitration Committee, and 
 asked that his appeal should be heard before any further 
 action was taken in the matter. Plis objection and request 
 were overruled, and his right of appeal denied him ; and a
 
 Suspension and* Expulsion. 87 
 
 motion was made to suspend him, which w us thereupon put 
 and carried. 
 
 The court, after commenting upon the nature of the associ- 
 ation and its rules, and holding that where there was a con- 
 flict between the constitution of the association and by-laws 
 the former must prevail, said : 
 
 '' But whether this be so or not, the right of the plaintiff 
 to the protection of a court of chancery rests upon the denial 
 to him of his right of appeal from the decision of the Arbi- 
 tration Committee, and the consequent threatened sacrifice 
 of his rights as a member of the association, and the sell- 
 ing and disposing of the stock deposited as security for 
 his contracts before his rights have been adjudicated, in 
 the manner prescribed by the constitution of tlie associa- 
 tion. 
 
 " It has been alleged by the learned counsel for the defend- 
 ants that the plaintiff has a legal remedy by mandamus for 
 restoration of his rights as a member if he has been im- 
 properly suspended, and that consequently he cannot invoke 
 the equitable powers of this court. 
 
 " A writ of mandamus would not secure to the ])laintiff the 
 protection which he seeks. The object of that writ would be 
 to restore him to liis rights as a member if he had been im- 
 properly sus|>ended. In the meanwhile there might be the 
 threatened sacrifice of his property, as complained by him. 
 And as tliiscourthaso(jnital)l(; jurisdiction fortliosuixM-vision 
 and control of these associations, and to prevent threatened 
 mischief, upon the well-settled principle that where a court of 
 equity has jurisdiction for any j)urpos(; il will di-aw to itself 
 juri.sdiction of .ill rpiestions incident to the sui)ject-rnatti!r of 
 inf|uiry, to make a final (l<'t(*rmii\ation of tlu^ riglits of the 
 parties, and to prevent multiplicity of actions, I think the
 
 88 Stock-brokers and Stock Kxcluiiij^es. 
 
 jurisdiction can be nuiintuiiicd/" The special injunction 
 was accordingly continued. 
 
 Incorj)orated Exchanges have in more than one instance 
 made it an express recital of their charters or certificates of 
 incorporation, that, the purpose, or one of the purposes, in 
 organizing, was to " inculcate just and e(|uitablc principles 
 of trade." And a similar purpose is readily discernible in 
 the constitution and rules of the JS'e.v York Stock Ex- 
 change.' 
 
 A by-law punishing infractions of just and equitable prin- 
 ciples of trade is to be liberally construed in aid of its pur- 
 pose and " extends to conduct in respect to a contract 
 either in its incejjtion or execution, or the failure to execute 
 it, which is inconsistent with just and fair dealing, although 
 it may fall short of actionable fraud, and although it is not 
 of that speciiic and definite character of which the law in 
 an action between the parties will take notice. The law 
 does not undertake to enforce mere moral obligations. 
 Their observance, however, by parties to contracts is re- 
 quired by the pi'inciples of commercial honor and integrity, 
 and it would seem to be the policy as well as the duty of an 
 association, organized to inculcate just and equitable princi- 
 ples of trade, to discourage by disciplinary action any disre- 
 gard of business rectitude on the part of its members in 
 their business transactions." ^ 
 
 A person, it is pointed out, " may perform the very letter 
 of his contract and respond to the full extent of the law and 
 
 ' Bemheim vs. Keppler, 34 Misc. Produce Exchange, 149 N. Y. 428; 
 
 321. Hurst vs. New York Produce Ex- 
 
 ' Per Andrews, C. J., People ex change, 1 Cent. Rep. 260; People ex 
 
 rel. Johnson vs. New York Produce rel. Thacher vs. New York Com- 
 
 Exchange, 149 N. Y. 411. See mercial Assn., 18 Abb. Pr. 279. 
 also In re Haebler vs. New York
 
 Suspension and Expulsion. 89 
 
 yet be guilty of proceedings inconsistent with tlie just and 
 equitable principles of trade. He may exact no more than 
 the pound of flesh precisely nominated in the letter of his 
 bond and yet be guilty of unfair dealing and gross miscon- 
 duct.'' And, therefore, the fact that the matter is also un- 
 der judicial investigation, does not oust the jurisdiction of 
 the Exchange.^ 
 
 It seems, however, that the simple non-performance by a 
 member of a contract is not within the by-law. For that 
 there is usually another provision of the by-laws.^ 
 
 Such a by-law will reach and punish a member for offenses 
 committed outside of the Exchange, and even if not com- 
 mitted against a fellow-member.^ 
 
 A member is not acting in antagonism to the corporate 
 power of establishing just and equitable principles of trade, 
 in refusing to submit to an adverse report by a committee 
 upon his title to his seat in the Exchange, there being no 
 express or imj^lied power in the body to determine the 
 ownership of a disputed seat.^ 
 
 In a recent case in Wisconsin a temporary injunction 
 was granted against the ^Milwaukee City Chamber of Com- 
 merce, enjoining it from suspending or expelling plaintiff 
 from the Chamber for an alleged violation of a rule as to 
 
 ' Hurst vs. .\. Y. P. Ex., 1 Cent. ' People e.\ rcl. Johnson vs. New 
 
 Rep. 260, and other rases cited in York Produce Exchange, 149 N. Y. 
 
 preceding note. A by-law of a !>ody 410. 
 
 haviiii^ umonj; its corporate objects ' In -MatU-r of Ilax'bler vs. .\ew 
 
 the inculcation of just and equitable York Produce Exchange and IVople 
 
 principles of trade, may prcscriije ex rcl. Thacher vs. New York Coni- 
 
 Bu-speiLsion for the breach of a con- niercial .V.ssn., supra; Dickenson vs. 
 
 tract, even though the contract Chamber (if Commerce, 29 Wis. 4.5. 
 
 violated be void under the statute * People ex rel. Elliott vs. Cotton 
 
 of frauds. Dickenson vs. Chamber Ex., S Hun, 21(). 
 of Commerce, 29 Wis. 45.
 
 90 Stock-brokers and Stock Exchanges. 
 
 contracts, it appearing' that a certain contract Avhich plain- 
 tiffs declined to fullil, was made by their clerk without 
 their autliority, with a person having knowledge of the 
 clerk's scope of employment.' 
 
 The case of Leech vs. 1 lurris was another Stock Exchange 
 case,^ and it was there held that where a charter of a 
 society provides for an offense, directs the mode of proceed- 
 ing, and authorizes the society, on conviction of a member, 
 to expel him, this expulsion, if the proceedings are not 
 irregular, is conclusive, and cannot be inquired into collater- 
 ally by mandamus, action, or any other mode. 
 
 It is like an award made by a tribunal of the party's own 
 choosing, for he became a member under and subject to the 
 articles and conditions of the charter, and, of course, to the 
 provisions on this subject as well as others. The society 
 acts judicially, and its sentence is conclusive, like that of 
 any other judicial tribunal.^ The courts entertain a juris- 
 diction to preserve these tribunals in the line of order, and 
 to correct abuses; but they do not inquire into the merits 
 of what lias passed in rejnjudicatam in a regular course of 
 proceedings.^ 
 
 But it seems, in view of the generall}'^ summary character of 
 
 > Bartlett vs. Bartlctt, 93 N. W. Board of Trade, 78 Mo. App. 557; 
 
 (Wis.) 473. Ryan vs. Ciidahv, 157 111. 108; Nel- 
 
 ' 2 Brews. 571. The court cited the son vs. Board of Trade, 58 111. App. 
 
 following authorities: Commonw. 399. 
 
 vs. Pike Benev. Soc, 8 W. it S. 247; ^Hutchinson vs Lawrence, 67 
 
 The ^^^lite and Black Smiths' Soc. How. Pr. 39; Solomon vs. McKay, 49 
 
 vs. Van Dyke, 2 WTiart. 309; The N.Y. Super. Ct. 138; People ex rel. 
 
 Soc.forthe Visitation of the Sick vs. Johnson vs. N. Y. Produce Ex- 
 
 The Commonw., 2 P. F. Smith change, 149 N. Y. 401; Lewds vs. 
 
 (Pa.), 125 Wilson, 121 N. Y. 284; Pitcher vs. 
 
 ' Otto vs. Tailor's Union, 75 Cal. Board of Trade, 121 111. 412; Nelson 
 
 309; Albers vs. Merchants' Ex- vs. Board of Trade, 58 111. App. 399; 
 
 change, 138 Mo. 164; Farmer vs. Otto vs. Tailors' Union, 75 Cal. 308.
 
 Suspension and Expulsion. 91 
 
 the proceedings, ami that they are not subject to review by 
 the ordinary process of appeal, that a total absence of evi- 
 dence to support the sentence of ex})ulsion should have the 
 same force in a mandamus proceeding, as an absence of 
 jurisdiction to make any inquiry at all.^ 
 
 The case of Moxey's Appeal, decided by the Supreme 
 Court of Pennsylvania, January, 1881,^ is an adjudication 
 upon this subject. 
 
 In that case Moxey, in 1875, became a member of the 
 Philadelphia Stock Exchange, and transacted business therein 
 until July 29, 1876. At or about this time, the firm of B., 
 M. & Co., of which the plaintiff was a member, purchased a 
 large number of shares of a certain company, from different 
 members of the Board. Before the time of deliver}', however, 
 Moxey gave written notice to the president of the board of 
 their insolvency, under Section XL of the rules of the associ- 
 ation which we fully quoted before (p. 80), except § 3, })ara- 
 graph 1, which isas follows : " If any suspended member fail 
 to settle with his creditors, and appl}' f or readmission within 
 one year from the time of his suspension, his membership 
 shall be disposed of by the Committee on Admissions, and 
 the proceeds paid irro rata to his creditors in the Exchange. 
 The Governing Committee may, by a vote of two thirds 
 of the members present, extend the time for settlement, 
 
 ' People ex rc-l. Johnson vs. N. Y. Suspen.sion is a jiulicial act based 
 
 Produce ExchjinRc, HON. Y. 401; on something which calls for such 
 
 Bishop vs. Cincinnati Chamber of suspension. Stack vs. O'llara, 98 
 
 Commerce, 5 f)hio N. P. 365. Pa. St. 232. 
 
 The expulsion of a member, ' Week. Notes of Cas. 410; af- 
 
 nominully for an ofTenc*' for which firmiiiK s. c. mih nom. Moxey vs. 
 
 such punishment is proper, but in Phila. Stock Exchange, 37 Leg. 
 
 reality for an ofTcnce punirthable Int. 82. 
 only by fine, is invalid. Otto vs. 
 Tailors' I'nion, Ifi Cal. 308.
 
 92 Stock-brokers and Stock Exchauges. 
 
 and for application for readinission, of such suspended 
 member." 
 
 The rules allowed a suspended member, presenting a cer- 
 tificate of discharge under the United States Bankrupt Laws, 
 to become eligible, providing that upon a ballot, where not 
 less than lif tv votes are cast, and not more than fifteen black- 
 balls appear against him, he may be reinstated ; but such ap- 
 plication shall be referred to a standing committee, whose 
 duty it shall be to ascertain that the applicant has settled 
 and arranged his affairs to the satisfaction of his creditors, 
 and that his present situation affords a reasonable security in 
 future transactions ; and unless, and until, the said committee 
 report in favor of readmitting the said suspended member, 
 he shall be held to be still in default, and no vote to restore 
 him to his seat shall be had. On January 15, 1S7T, plain- 
 tiff went into voluntary bankruptcy, and obtained his dis- 
 charge on December 21, 1877. On January 15, 1878, he 
 wrote to the Secretary of the Stock Exchange that he had 
 obtained his discharge in bankruptcy, and he received an 
 answer that, if he desired to apply for readmission under 
 the rules of the Stock Exchange, the matter would be im- 
 mediately referred to the standing committee and be invjes- 
 tigated. 
 
 The letter also notified him that, as more than a year had 
 elapsed since his suspension, the Exchange considered itself 
 entitled to sell his seat at any time. No notice was taken of 
 this letter, and on July 5, 1878, plaintiff's seat was sold, on de- 
 mand of his creditors, at public sale of the board, after post- 
 ing and notice in accordance with the rules. At the time 
 he joined the Stock Exchange a Gratuity Fund existed, pay- 
 able on the death of a full member (whether suspended or 
 not) to his nominee, widow, child, or legal representative.
 
 Snspeusiou and Expulsion. 93 
 
 On November 15, 1ST7, this was altered so that any sus- 
 pended member who failed, for three months, to pay in full 
 all gratuity dues and assessments should cease to be a full 
 member for the purposes of the Gratuity Fund. Moxey was 
 notified of the passage of this provision, but failed to pay his 
 dues, and on March 7, IS 78, was notilieil that he was debarred 
 from participating in the benefit thereof. 
 
 lie filed a bill in equity against the Stock Exchange, al- 
 leging that b}'^ far the greater part of the indebtedness of 
 B., M. <t Co. was merely fictitious, being founded upon con- 
 tracts for the sale and delivery of certificates of stock which 
 had no real existence ; that they constituted gambling trans- 
 actions, and that the payment of such debts would be in vio- 
 lation of the Bankrupt Act. 
 
 The court dismissed the bill, holding that, irrespective of 
 the alleged gambling transactions, the evidence showed a 
 large indebtedness, whicii plaintiff's firm was unable to meet ; 
 that by filing his petition in bankruptcy, the plaintiff had con- 
 fessed his insolvency, and that he had not shown any offer 
 to liquidate his indebtedness or arrange with his creditors 
 under the rules of the Stock Exchange ; and that the plain- 
 tiff had been suspended in accordance with the rules, on his 
 own confession and acts, and could not be restored except 
 under the rules, which ho had not complied with. 
 
 Upon appeal, the judgment of the lower court dismiss- 
 ing the bill was sustained ; the appellate tribunal holding 
 that, as the firm of which the plaintiff was a member had 
 admitted their inability to fuUil their contracts, and, under 
 the by-laws of the Stock P2xchang<', plaintiff was immedi- 
 ately sus|)ended, no trial was necessary in such a case, tlie 
 member having pleaded guilty. That the l)ankru])tcv had 
 the same effect. The court could see nothing unreason-
 
 94 
 
 Stock-brokers au«l Stock Exchanges. 
 
 able ill the rule that before such a i)arty could be readmitted 
 lie must settle with his creditors who are members of the 
 Exchange. It may give them an advantage over other 
 creditors, but they have a right to stii)ulate for it, and the 
 appellant was a party assenting to the law. No suggestion 
 appears to have been made that the assignee in bank- 
 ru})tcv, in whom all the assets of the plaintiff had become 
 vested, was the proper party to recover any money or 
 property to which plaintiff might be entitled ; but the case 
 was determined upon the grounds just stated.^ 
 
 ' See also in this connection, 
 MacDowell vs. Ackley, Supreme Ct. 
 Pa. 8 Week. Notes of Cas. 664. A 
 similar rule was held reasonable in 
 Sexton vs. Commercial Exchange, 
 10 Pa. Ct. C. 607. 
 
 As to when an allegation that a 
 contract, in respect of which plain- 
 tiff was suspended, was a gambling 
 one, will not avail, see Lewis vs. 
 Wilson, 121 N. Y. 281. In that 
 case it was expressly urged as a 
 ground for the exercise of the 
 equitable power of the court to 
 compel restoration to membership 
 that the contract for the breach of 
 which the member was suspended 
 was of a gambling character and 
 illegal and, therefore, its violation 
 was not a "breach of contract" un- 
 der the rules of the Exchange. The 
 court ruled against the point and 
 sustained the Consolidated Stock 
 and Petroleum Exchange of New 
 York in suspending the member, 
 holding that whether the contract 
 to which the complaint before the 
 committee related was valid or void 
 was wliolly irrelevant, and that the 
 plaintiff could not insist upon re- 
 
 maining a member of this associa- 
 tion while at the same time he 
 repudiated the conditions of mem- 
 bership. That having been sus- 
 pended in strict conformity with 
 the constitution of the Exchange, 
 and having had an opportunity to 
 be heard, and the charge having 
 been examined by the proper com- 
 mittee, his suspension was Aalid. 
 The court said: "The members of 
 the association may, if they so 
 agree, say that no associate shall 
 remain a member and enjoy the 
 privileges of the association if he 
 refuses to comply with its rules. 
 It may be true that the committee, 
 if the facts had been presented and 
 proved as there claimed bj- the 
 plaintiff, would nevertheless have 
 regarded the gambling element as 
 no excuse to the plaintiff for not 
 performing his contract. But 
 whether the committee should de- 
 cide rightly or wrongly does not 
 change the attitude of the plaintiff 
 as a member of the as.sociation, or 
 qualify his obligation to submit to 
 the decision of t^e agreed tribunal 
 under pain of suspension. . . .
 
 Suspension and Kxpulsion. 95 
 
 When a rule of an association provided that " any mem- 
 ber failing to pay his assessment within thirty days shall 
 be suspended," it was held that the non-payment of an 
 assessment was not of itself a suspension, and that the 
 association should take some affirmative action to make 
 such suspension valid. ^ 
 
 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 dulv notified 
 to appear, and be allowed an opportunity to explain his acts 
 or be heard in his defence,^ even although the rules of the 
 
 There is an intimatiou in the argu- The failure on his part to request 
 
 nient of the plaintiff's counsel that the pri\'ilege to be present is no 
 
 the Exchange was organized as a answer to his exclusion, for he is 
 
 cover for illegal trading. If this not legally bound to ask such privi- 
 
 was the truth the plaintiff is in the lege, but the committee taking ac- 
 
 plight of asking the court to exert tion upon the evidence obtained, is 
 
 its equitable powers to reinstate him legally bound to extend and secure 
 
 as a member of this illegal body." the opportunity for a hearing to 
 
 ' Scheu vs. Grand Lodge, 17 Fed. him, before it can proceed to a 
 
 214. hearing and consideration of the 
 
 ' People vs. Musical Mutual Pro- case. Loubat vs. Le Hoy, 40 Hun, 
 
 tective Union, 118 N. Y. 101. 546. 
 
 * Ang. & Ames on Corps. (11th See, however, Blumcnthal vs. 
 
 ed.) 5 420; People ex rel. Johnson Cincinnati Chamber of Commerce, 7 
 
 vs. N. Y. Produce Exchange, 149 Wkly. L. Bull. 327; S Ohio Dec. 
 
 N. Y. 401; Hutchinson vs. Law- liep. 410, where it w:us held that the 
 
 rencc, 67 How. Pr. 3S; Loubat v.s. I.,e Chamljcr had jurisdiction to try and 
 
 Hoy, 1.5 .\bb. N.C.I; 40 Hun, .546; indcfmiuly .suspend a meml)cr for 
 
 I>fwi.s vs. Wilson, 121 X. Y. 2K4; unmercantile conduct although ho 
 
 Kuehnemundt v.s. Smith, 2 X. Y. ha<l not received any notice of the 
 
 Supp. 62.5; Albers vs. Merchants' charges preferred against him. A 
 
 Exchange, 39 Mo. .\pp. .5S3; People preliminary inquiry into charges by 
 
 vs. San FnincLscuM lienev. Soc, 24 a conuniltee to determine wliether 
 
 How. Pr. (X. Y.) 216; Stack vs. cliarges shall l)e preferred, witliout 
 
 O'Hara, 9H Pa. St: 213; Kritz vs. ncitice to the member concerned, is 
 
 Muck, 62 How. Pr. 69. not improper, since such prelimi-
 
 96 
 
 Stock-brokei-s and Stock Exchanges. 
 
 association do not so provide.^ In other words, there must 
 be a charge made against him sufficient in form to fairly in- 
 form tlie member of what he is charged;'- he should be noti- 
 fied of the charge and a time set for its hearing, not too 
 limited to prevent the accused from pi-operly collecting his 
 proofs and producing his witnesses ; and the hearing or trial 
 of the charge should include the right to examine his own 
 witnesses and cross-examine those against him, and to pre- 
 sent such suggestions as he may deem proper,^ 
 
 narj- inquir^^ is not a trial. Green 
 vs. Board of Trade, 174 111. 5S5 . 
 
 ' Fritz vs. Muck, 62 How. Pr.69. 
 
 ' Hutchinson vs. Lawrence, 67 
 How. Pr. 38, at p. 52; People ex rel. 
 Johnson vs. X. Y. Produce Ex- 
 change, 149 N. Y. 401; In re Haeb- 
 ler vs. N. Y. Produce Exchange, 149 
 N. Y. 414; Cannon vs. Toronto Corn 
 Exchange, 5 Ont. App. 268. To 
 require technical precision in com- 
 plaints of thi.s character, dra^wn by 
 merchants or business men, and to 
 apply to them the strict rules of 
 pleading in an action in a court of 
 law, would greatly embarrass and 
 many times defeat the disciplinary 
 regulations of such associations. 
 People ex rel. Johnson vs. X. Y. 
 Produce Exchange, supra. And 
 even if a complaint be objectionablj'' 
 vague and indefinite, an appearance 
 by the accused without objection 
 to its sufficiency and a trial of the 
 case upon its merits, renders it 
 sufficient and objections thereon on 
 that account must be regarded as 
 waived. In re Haebler vs. X'. Y. 
 Produce Exchange, 149 X. Y. 414. 
 But if a copy of the charges are not 
 served upon the member as re- 
 
 quired by the by-laws, and his sub- 
 sequent conduct before the board 
 of directors does not amount to a 
 waiver of the defective procedure, 
 his expulsion is illegal. People vs. 
 Musical Mutual Protective Union, 
 118 X. Y. 101. 
 
 ' Hutchinson vs. Lawrence, 67 
 How. Pr. 38, where it was held that 
 a re-examination of complainant in 
 the defendant's absence, and the 
 taking of additional testimony, with- 
 out opportunity of cross-examina- 
 tion, were improper. The conclu- 
 sions reached in this case are not 
 entirely satisfactory, because it did 
 not appear that the expelled mem- 
 ber had requested to be present and 
 cross-examine the witnesses or that 
 the usages of the Exchange had 
 established any such practice. 
 Moreover the cases relied upon by 
 the learned judge were of a class 
 where the parly expelled had been re- 
 fused a Jiearing, or had requested to be 
 further heard, which was not the 
 fact in the Hutchinson case. 
 Kuehnemundt vs. Smith, 2 N. Y. 
 Supp. 62.5; Loubat vs. Le Roy, 40 
 Hun, 546. The right to cross- 
 examine opposing witnesses may
 
 Siispeusiou and Expulsion. 97 
 
 These requirements having been met and the offense be- 
 ing one of whicli the committee has jurisdiction, a mem- 
 ber, by not making his defences then and there, is held to 
 have waived them.' It has been intimated '^ that on such 
 a trial the accused member is entitled to be represented by 
 counsel, and Chief Justice Shaw in an early case,^ review- 
 ing the action of tlie board of trustees of a corporation, 
 held that to make binding the decision of any tribunal act- 
 ing judiciallv upon the rights of others, there should be 
 substantially (1) a monition or citation to him to ajipear ; 
 (2) a charge given him to which he is to answer ; (3) a com- 
 petent time assigned for his proofs and answers ; (4) liberty 
 of counsel to defend his case, and (5) a solemn sentence af- 
 ter hearing the proofs and answers. It has been held, how- 
 ever,^ that a by-law providing that " in investigations before 
 
 be waived by neglect to claim it at not raised by the pleadings, and 
 
 the proper time. Kuchncnmndt (Ncukirch vs. Kepplcr, 5G A. D. 
 
 vs. Smith, supra. 230) because plaintiff had not asked 
 
 ' Bishop vs. Cincinnati Chamber for counsel. 
 of Commerce, 5 Ohio N. P. 365. * Green vs. Board of Trade, 174 
 
 See also State vs. Id., 4 Ohio X. P. 111. 5S5. A by-law of the Mer- 
 
 244; Lewis vs. Wilson, 121 N.Y. 284. chants' E.vchange of St. Louis pro- 
 
 * By Barrett, J., in Gebhard vs. vided that in investigations before 
 
 N. Y. Club, 21 Abb. X. C. 248, at the board, either parly should be 
 
 p. 252. In Hutchinson vs. Law- allowed to be represented by a 
 
 fence, 07 How. Pr. 3.S, it appeared meinlier, either a.s professional 
 
 that at a meeting of tlie governing coun.scl or as a friend. It was hcKl 
 
 committee of the Stock Exchange, in .\lbers vs. Merchants' Exchange 
 
 preliminary to hearing charges of St. Louis, 138 Mo. 1G3, that the 
 
 agaiast the plaintiff, a nmtion on board might be advised by their 
 
 behalf of the latter to be defended counsel as to the legality of a by- 
 
 by coun.sel wjis dffcatcd. law under which plaintiff wjis s\is- 
 
 ' .Murdcjck vs. Pliiiiips' Academy, pended even though such coun.scl 
 
 29 .Mjws. 203. In Young vs. Eames, was a member of the board. The 
 
 7.S A. I). CS. \ .) 220, plaintiff ol)- principle of trial l)y jury is in no 
 
 jert«'d that he had no counsel, and way applicable to such triiil. Pc<»- 
 
 the court held that ."uch objection pie ex n I. Tlwu-hcr vs. rouuncrci.'il 
 
 could not be considered as it was .Vssn., IS .\1)1). I'r. 27L 
 
 7
 
 98 Stock-brokers aud Stock Exchanj^es. 
 
 the board of directors or any committee of the association, 
 no partv shall 1)0 allowed to be represented by professional 
 counsel,"' was not against public policy or unreasonable. 
 The rules, the coui-t said in that case, " provide a tribunal 
 and proceduiv, voluntarily chosen to determine questions 
 arising between the association and its members, to which 
 the members assented on being admitted.'' In fine, he 
 should be allowed a full and fair opportunity of defending 
 himself.' 
 
 The fact that the charges are preferred by a member of 
 the committee which is to try the same is not a cause for 
 interference by injunction to prevent the trial.^ 
 
 This question of notice was considered by the Court 
 of Appeals of New York, in AVachtel vs. Noah Wid- 
 ows and Orphan's 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 
 Avithoiit 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 
 
 ' And the accused member is not That the charges on which a mem- 
 
 merely entitled to be present at the ber has been suspended after due 
 
 taking of the evidence but also at notice and a fair trial were preferred 
 
 the rendition of the judgment, by an employee not a member of 
 
 Loubat vs. Le Roy, 40 Hun, 556. the Exchange, will not invalidate 
 
 ^ Green vs. Board of Trade, 174 the proceeding. Albers vs. Mer- 
 
 111. 585. The presumption cannot chant's Exchange, 39 Mo. App. 
 
 be entertained that the board would 583. 
 
 not give the member a fair trial. '84N.Y.2S. For other cases re- 
 
 Ibid. See also Jackson vs. South lating to power of unincorporated 
 
 Omaha Live Stock Exchange, 49 associations to expel a member, see 
 
 Neb. 687, and compare Temple vs. preceding subdivision, p. 59 ; Foster 
 
 Toronto Stock Exchange, 8 Ont. vs. Harrison, Week. Notes of Cas. 
 
 705 171.
 
 Suspension and Expulsion. 99 
 
 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 I'epresentative after his death, of the bene- 
 fits of memberehip in the society ; and that the fact that 
 the member Lad changed his place of residence, without 
 notifying the society, was not an excuse for a failure to 
 serve a notice upon him, especially when there was a spe- 
 cific penalty imposed in the by-laws of the society upon a 
 member chancjing: his residence without ffivinor notice.^ 
 
 O O DO 
 
 In the celebrated case of Labouchere vs. Earl of Wharn- 
 clifife^ 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, 
 provided that " in case the conduct of any member, either 
 in or out of the club, shall, in the opinion of the committee, 
 after inquiry, be injurious to the welfare and interests of 
 the club, the committee shall call on 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 tliat ^Iv. A. B. has written an objectionable letter, or 
 has l)e(*n brought up at a p<^lice-court for drunkenness, and 
 then expel him ; but that the inquiry should ])e a fair one 
 into the truth of the alleged facts. That where the eon- 
 duct of a meml>er is impugned, such conduct should bci 
 inquired into; and the committee making the inquiry ought 
 to see what excuse or reason the accus(Ml member can give 
 for it, and they ought to give him notice that his conduct is 
 
 ' See also liartlctt vs. Med. Hoc, Consult iilso Olory vs. lirowii, r>l 
 
 32 N. V. 1X7; ("oriiiiionw. vs. IViins. How. Pr. 02. 
 IJcnev. Hoc, 2 S. i1- Hiiwl.-, Ill; M.. R. i:U'li. Div. ;M(i 
 TntK-*! VM Wylie, 1 C <V K 2^7.
 
 100 Stock-hrokcis and Stock Exchanges. 
 
 about l«) bo investigated, and afford liiiii an opportunity of 
 stating his case to them. And the notice should not be 
 ambiguous, but should clearly inform the member that his 
 conchict was to be investigated. 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 ac- 
 cordance with the above rule. This he refused to do. 
 Rule 31 of the chib provided that the committee should, 
 at any time, have i)ower to call a general meeting on giv- 
 ing a fortnight's notice. On the evening of the 31st of 
 October an adjourned meeting of the committee 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. Xotice 
 was posted in the club-house at 3. a. m. of the same morn- 
 ing, the 1st of November, calling such a meeting to be held 
 on the llrth of November ; and, in the course of the 1st of 
 Xovember, 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 morn- 
 ing of the 1st of IS^ovember would be reckoned, having re- 
 gard to the custom of the club, as being done on the 31st 
 of October, on M'hich 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 
 present, 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 insufficienc}'' of the notice. 
 
 In respect to the sufficiency of the notice, the court held
 
 Snspeusiuii and Expulsion. 101 
 
 that, the notice having been first posted on the 1st of Novem- 
 ber, it was not a fortnight's notice, and that, therefore, the 
 meeting was irregularly called. That a fortnight had a 
 definite legal meaning, and Avas not affected by the secre- 
 tary's notion of the club-day. It was further held that 
 the plaintiff had not waived the irregularity by addressing 
 the meeting : that the plaintiff had said that he protested 
 against his expulsion, and that Avas 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 refusing 
 to resign, a general meeting f)f members sliould be called, 
 at which it should be competent for two thirds of ' those 
 present' to expel him. Xow, 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 ditl not vote ; and that the number 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 
 against it; or, not wishing to express a positive opinion on 
 the (juestion, refrain fi-om voting at all. This being so, those 
 wh(j do not vote may, by not doing so, turn the scale in fa- 
 vor of the accused member of the club. It was, therefore, 
 th(j <luty of the secretary to a.scertain, lii-st, how many 
 persons were present wht-n tlu; ([ucstion was put, iind, 
 secondly, how many of thost; prcscMit had voted for the 
 r«'soliiiioii ; but no such course has been adcjptcd in this
 
 102 Stock-brokers and Stock Exchanges. 
 
 instance. It appears to me, then, tliat this also is a fatal 
 objection.'' ' 
 
 So, in Fisher vs. Keanc,' in an action against the Trustees 
 and Committee of the Army and Navy Club, asking for a 
 dechiration that a resolution purporting to expel the plain- 
 tiff from membership in the Army and Navy Club was null 
 and void, Jessel, M. H., construed the rule under which the 
 plaintiff was expelled, and held that the action of the com- 
 mittee was irregular, and, furtlier, decided that a committee 
 of a club, acting under its rules, is bound to act according 
 to the ordinary principles of justice, and cannot convict 
 a man of a grave offence, warranting his expulsion, with- 
 out fair, adequate, and sufficient notice, and an opportunity 
 of meeting the accusations brought against him ; he should 
 be given an opportunity of either defending himself or pal- 
 liating his conduct. 
 
 The question also came up in New Jersey, in the case 
 Sibley vs. Carteret Club of Elizabeth.^ In that case the club 
 Avas incorporated, and possessed power, in virtue of its char- 
 ter, to make regulations and by-laws for the admission, sus- 
 pension, 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. 
 
 * Where a two-thirds vote of a eighteen members, of whom four- 
 committee consisting of twenty- teen voted for the expulsion, the 
 four members is expressly required other four being opposed to it, it 
 to expel, only an affirmative vote of was held that the expulsion was 
 two thirds of the full committee irregular, as sixteen of the members 
 will suffice, and therefore, when at should have voted therefor. Lou- 
 the time of the expulsion proceed- bat vs. Le Roy, 40 Hun, 546. 
 ings the committee had become re- ^41 L. T. 335; s. c. L. R. 11 Ch. 
 duced to twenty members, of whom Div. 353; 49 L. J. Ch. 11. 
 there were present at the meeting ' 40 X. J. L. Rep. 295.
 
 Snspension and Expulsion. 103 
 
 The Board of Managere. upon failure of the relator to pay 
 after posting, resolved that he ceased to be a member ; 
 whereupon the relator sued out a writ of mandamus, com- 
 manding 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 irregular removal \vill 
 warrant the use of the writ of mandamus to effect a resto- 
 ration of the expelled member to his rights.^ 
 
 And a contract made between a Broker and his Client, 
 that if the former Avould refuse to appear before the Ar- 
 bitration Committee and suffer suspension, the latter would 
 reimburse him for all losses incident to giving up his busi- 
 ness, is good, and damages may be recovered for its breach.^ 
 
 A club cannot recover dues from a member during his 
 suspension fi'om the club, unless the by-laws to which the 
 member has subscribed contain an express or implied con- 
 tract 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 ex- 
 pulsion of the member is an election as to remedies, and, 
 
 ' 10 N. J. L. Rep. 29.5. In N. Y. decreeing a forfeiture of the risht of 
 
 Protective -■Vssocialifjii v.s. Mc- ineinbers in property of a local as- 
 
 Grath (23 N. Y. St. Rep. 209), a «embly without judicial proccs.s was 
 
 by-law of an incorporated as.socia- held void. To sanu- «'fi"cct i.s .\ustin 
 
 tion was held to be void because it v.s. Searing, IG N. Y. 112. 
 
 provided that on the expulsion of a ' White vs. Ba.\ter, 71 X. Y. 254, 
 
 IfK-al afl.s<.'mbly, all of its members afT'n 9 J. & S. (.\. Y. .Su|H>rior Ct. 
 
 should be dwnied to have voluii- Rep.) 3.^. 
 
 tarily withdrawn, and in Wicks vs. ' The Carteret Club vs. Florence, 
 
 Monihan (51 Hun, Oil), a l.v-l.w :< V ,1 I, J,mr. (ISSO) 208.
 
 104 Stock-brokers and Stock Kxchaiiffcs. 
 
 after expulsion takes place, action will only lie wiiere he has 
 received some consideration after his suspension or expul- 
 sion.' 
 
 But before a member of a coi'poration or an unincorpo- 
 rated association can appeal to the courts, it must appear 
 that he has exhausted all of the remedies provided for by 
 the constitution and Ijy-laws of the association. 
 
 The question arose in White vs. Brownell,^ as to an unin- 
 corporated association, viz.. The Kew York Stock Exchange, 
 and the court held that, before it would examine into any 
 proceedings of the committee of the Stock Exchange, it 
 must ajipear 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 re- 
 viewing and correcting any error or injustice on the part of 
 the committee on membership, in reporting to the president 
 that the plaintiff was in default he was bound to avail him- 
 self of the remedy provided by the constitution and by-laws 
 of the body of which he had 'become a member, before he 
 can ask a court of equit}'' to investigate 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 ct B. 154)."^ 
 
 * The Carteret Club vs. Florence, exhausted his remedies in the asso- 
 3 N. J. L. J. 208. ciation, and his appeal to the courts 
 
 * 4 Abb. Pr. (n. s.) 162. was upheld. Gebhard vs. New 
 'Id. 190; Lafond vs. Deems, 81 York Club, 21 Abb. N. C. 248; 
 
 N. Y. 507; see also Soc. for Visita- Baum vs. N. Y. Cotton Exchange, 
 tion of Sick vs, Commonw. ex rel. 21 Abb. X. C. 253; Lewis vs. Wilson, 
 Meyer, 52 Pa. St. 125; Strempel vs. 2 X. Y. Supp. 806, aff'd in 121 X. Y. 
 Rubins, 21 X. Y. St. Rep. 483. In 284; Loubat vs. Le Roy, 40 Hun, 
 Olen,- vs. Brown, 51 How. Pr. (X. 549. 
 Y.) 92, it appeared that plaintiff had
 
 Suspension and Expulsion. 105 
 
 He is not, liowevor, obliged to follow the possible relief 
 under a by-law which provides, not for an appeal from the 
 trial body, but for a rehearing by that body itself. The 
 pi'obability in that case, of favorable reconsideration, is so 
 slight, that the court will not compel a member to seek it 
 before applying to the courts.^ 
 
 And if he has been unlawfully expelled, it has been held 
 that he is not obliged, before resorting to mandamus, to ex- 
 haust the means for reinstatement provided by a by-law 
 authorizing the society to reinstate one expelled, by a two- 
 thirds majority of all members })resent, after having paid 
 all dues and fines, and an extra fine of fifty dollars, and 
 after having passed the examination required for original 
 membership, as the by-law related to cases of lawful ex- 
 pulsion, and where the appeal was to the discretionary 
 power of the society.^ 
 
 But the courts will not review and set aside proceedings 
 of a society, taken under the authority of its articles of as- 
 sociation assented to by its members, for the expulsion of a 
 member upon notice of charges presented, and a hearing ac- 
 cording to the by-laws, either because the charges were in- 
 sufficient or the proceedings irregular, intless injustice has 
 been done, which the party charged, tried, and expelled 
 c<juld not have objected to in the society or committee 
 meeting. 
 
 Proceedings to expel a member under charges presented, 
 notice given, and a hearing alfordt'd, in conformity with 
 articles of association agre<-<l to by all the mcmburs, are to 
 be considered without t(jo nmch regard to any teclmicali- 
 
 ' Louhat VH. L«' Koy, tO Hun, ' People vh. Musiriil Mutuiil Pro- 
 MG tc-ctivc Union, US N. Y. 101
 
 106 Stock-brokors and Stock Exchanges. 
 
 ties. Substantial justice is to be followed rather than 
 form.' 
 
 So, where a coininittee of a club have power to expel 
 any member whose conduct is, in their opinion, injurious to 
 the interests of the club, and they exercise this power, all 
 that is required is that the committee should form their 
 opinion in a hona fde way, 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 ap- 
 pear that their decision has been arrived at dishonestly, or 
 through caprice or improper motives."^ But if the managers 
 of a corporation exceed their authority, and their decision 
 therefore cannot be enforced, a payment made in pui-suance 
 of such decision, cannot be recovered. Accordingly, when 
 a by-law of the New York Coffee Exchange provided for a 
 member's suspension on his insolvency, and the managers 
 proceeded to settle a dispute between members by declaring 
 that one of them, who was solvent, was in default on his 
 contracts, if such solvent member makes a payment to the 
 other, under the ruling of the managers, he does not do so 
 under duress, as the decision could not be enforced by his 
 suspension, and he cannot recover back the money so paid.^ 
 
 In respect to the form of the remedy which a member of 
 one of these associations should adopt to prevent an inter- 
 
 ' People ex rel. Johnson vs. N. Y. ter, 5 Eq. L. R. 63-66; Lj^ttleton vs. 
 
 Produce Exchange, 149 N. Y. 401, Blackburn, 33 L.T. Reps. 641. But 
 
 at p. 413; Albers vs. Merchants' see Evans vs. Phila. Club, 14 
 
 Exchange of St. Louis, 39 Mo. App. Wright (Pa.), 107. The jurors pro- 
 
 583, at p. 587; State vs. Cincinnati vidcd by the organic law are not to 
 
 Chamber of Commerce, 4 Ohio N. be lightly set aside. Gebhard vs. 
 
 P. 244; People vs. The St. George's New York Club, 21 Abb. N. C. 248, 
 
 Soc. of Detroit, 28 Mich. 261. at p. 251. 
 
 ' Gardner vs. Fremantle, 19 W. R. ^Sawyer vs. Gruner, 17 N. Y. 
 
 256; Hopkinson vs. Marquis of Exe- Supp. 465
 
 Suspension and Expulsion. 107 
 
 ference with his membership or with his rights in the body, 
 the question seems to have been generally raised by injunc- 
 tion. 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 b\' Avhich he 
 "would be expelled, the defendants contended that the plain- 
 tiff's action was premature, 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 Avhether this be so or not, equity prevents mischief. 
 It does not wait until it is consummated. It does not even 
 measure the paces by which it advances. 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 particular cases 
 in which special injunctions shall be granted or withheld 
 (2 Story's Eq. Juris. §§ 862, 959 b)." - 
 
 • 2 Brews. (Pa.) 571. junction was denied on the merits, 
 
 * To same effect, Powell vs. Ab- but not on the ground that the rem- 
 bott, 9 Week. Notes of Ca-s. 231. edy invoked was improper; Sonne- 
 Lowry vs. Reed, 3 Brews. (Pa.) 452. born vs. Lavarello, 2 Hun, 201; 
 An injunction jjenderUe lite restrain- Rorke vs. Rus-scil, 2 Lans. (N. Y.) 
 ing the E-xchanRC from iLssertinji; a 244; Sewell vs. Ives, N. Y. Daily 
 resolution of expulsion ajiain.st the Ifrg. Feb. 11, 1879; Lewis vs. Wilson 
 cxpclh'd member, w:is granted in 121 N. Y. 2S4; Moxey's Ai)p., 9 
 HutchiiLSon vs. Lawrence, ()7 How. Week. Notes of Cas. 440, anirmins 
 Pr. 38. But see, in this connection, s. c. nub nnm. Moxey vs. Phila. Stock 
 Rorke vs. Ru.s.sell, 2 Lans. (N. Y.) Exchange, 37 Leg. Int. S2, and in 
 244. See also, as to general power Baum vs. N. Y. Cotton Exchange, 
 of court to interfere I)y injunction in 21 .\l»l). N. C. 253, an injunction 
 ca-ses of unincorporate<l a.sso(iatioiis against the defendant, a corporal imi, 
 like clubs, Joyce on Injunctions, Wiis deiii«'d on the merits. Sec al.so 
 74H, 751; Heath vs. Prcst. of the ('amion vs. Toronto Stock Exchange 
 (jold Exchange, 7 .\b. I'r. (n. k.) 5 Out. App. 2(iS; Kuchnennmdt vs. 
 251, In the following cjmes the in- Smith, 2 N. Y. Supp. 025 But in
 
 108 Stock-ln*()kers and Stock Exchanges. 
 
 And in ;i recent case in Wisconsin the Milwaukee City 
 Chamber of Coninierce was temporarily enjoined from sus- 
 pending or expelling plaintiffs, on the ground that their 
 comj)laint stated good grounds of relief, and as there was 
 a probability that cora})lainants were entitled to a perma- 
 nent injunction, they were entitled as a matter of right to 
 a temporary injunction, as, if the Chamber of Commerce 
 were allowed to do the mischief threatened, it was reason- 
 ably certain that the object of the suit would be in a great 
 
 Massachusetts it has been hold that in the case of a certificate of mem- 
 
 where the charter of a corporation bership the vahie of the ri^ht of 
 
 gives it power to suspend or expel wliich it is evidence of title, without 
 
 members, there was conferred upon interest. Olds vs. Chicasro Bd. of 
 
 the corporation a special and limited Trade, 33 111. App. 445. Or may 
 
 judicial power, and that a court, of recover damages for any Avrong to 
 
 chancery could not interfere with its him consequent upon the wronj^ul 
 
 action in the contemplated expulsion expulsion. Burt vs. Grand Lodge, 
 
 of a member. Grigg vs. Medical 66 Mich. 87. A mandamus against 
 
 Society, 111 Mass. 185. an unincorporated as.sociation was 
 
 In Fritz vs. Muck, 62 How. Pr. granted in the case of Otto vs. 
 69, Mer-s\'in, J., said: "Cases are Tailore' Union, 75 Cal. 308. 
 cited showing that the proper rem- In Illinois it has been held that in- 
 edy is by mandamus where parties junction is a preventi\'e, and not an 
 seek restoration to the membership affirmative, remedy and, therefore, 
 of a corporation, but this does not, I a court of chancery cannot by in- 
 think, apply to an unincorporated junction restore an improperly ex- 
 association (see White vs. Brownell, pelled member to membership. 
 2 Daly, 329, 358). Here if the party Fisher vs. Bd. of Trade, SO 111. 85; 
 has any remedy it is by suit," and Baxter vs. Bd. of Trade, S3 111. 146. 
 he held that plaintiff was entitled to Nor can injunction issue to restrain 
 a judgment declaring his expulsion a threatened expulsion. Sturges 
 invalid and restoring him to all his vs. Board of Trade, Sfi 111. 441, or 
 rights as a member. where the expulsion has been le- 
 
 The expelled member may, after gaily effected. Pitcher vs. Board of 
 
 the expulsion has been declared Trade, 121 111. 412. And see Hex 
 
 void, recover the value of his seat, vs. Richardson, 1 Burr. 539; Mur- 
 
 in an action of conversion, if the dock vs. Phillips Academy, 12 Pick. 
 
 Exchange has sold it and retained (Mass.) 244; Beach on Injimctions, 
 
 the proceeds. Sewell vs. Ives, 61 p. 1362; Spelling on Injunctions. 
 
 How. Pr. 54; Cecil vs. Simmons, X. p. 633. 
 Y. Daibj Reg. March 17, 1S86. Or
 
 Suspeusiou aud Expulsion. 109 
 
 measure defeated. A judgment in their favor, if the status 
 quo was not preserved during the litigation, would leave 
 them irreparably injured, while, if it was preserved, no 
 damage of a serious character could accrue to the Cham- 
 ber if it finally prevailed, certainly none that could not be 
 adequately guarded against by security.* 
 
 In a similar case in Xew York, where a member of the 
 Xew York Produce Exchange souiiht to restrain the Ex- 
 change from investigating charges brought against him 
 by another member, an order granting a temporary injunc- 
 tion was dissolved, as a majority of the court was in favor 
 of reversal of the order granting it. Three of the judges 
 were in favor of reversal on the ground that the board 
 had jurisdiction of the complaint, whilst the three dissent- 
 ing judges held that the board had no jurisdiction. An- 
 drew, J., concurred for reversal on the ground that, upon 
 the facts, the remedy by injunction would not lie, as no vio- 
 lation of plaintiff's rights had happened, or might ever hap- 
 pen, and no injury thereto was threatened in such a sense 
 as justified a preventive remedy.'-* 
 
 But when a member has been expelled from a corpora- 
 tion for no legal cause, mandamus lies against the corpo- 
 ration to compel it to restore him to membership.^ 
 
 ' liartli'tt vs. Harthtt, 03 N. W. L. J. 208; Commonw. vs. The Ger- 
 
 (Wis.) 473; See Kolff vs. E.\.. 48 nmnSoc, 15 Pa. St. 2ol; People vs. 
 
 Minn. 215. Mechanics' Aid Soc. 22 Mich. 86; 
 
 * Huret vs. New York Produce People vs. Med. Soc. of Erie, 24 
 
 Exchange, 100 N. Y. 005; Grc-cr v. Barb. (X. Y.) 570; People vs. New 
 
 Stoller, 77 F. 1. York Cotton Ex., 8 Hun, 216; Peo- 
 
 » Hijih, Extra. LcRal Hem. (2d pie vs. N. Y. Ben. Soc, 3 Hun, 361 ; 
 
 ed.) i 201; State vs. The Georgia People vs. Am. Inst., 44 How. Pr. 
 
 Med. Sw.,38 Ga.608, where there is 4(>H; People vs. N. Y. Prod. Ex., 149 
 
 a review of authorities; Evans vs. N. Y. 401; People vs. Soeiely, 24 
 
 Phila. f'luh, .V) Pa St. 107; The How. Pr. 216; People vs. Institute, 
 
 Carteret Club VH. Florence, 3 N. J. 2 N. Y. Leg. Ub. 170; Nelson
 
 no 
 
 stock-brokers and Stock Exchanges. 
 
 Mr, Iliirh savs : • " The use of tlie writ of mandamus as 
 a remedy for the wrongful amotion of a C(^rporator, and to 
 restore 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 
 Edward the Second. It was also used for the same purpose 
 in the time of Henry the Sixth ; and in the reign of Eliza- 
 beth it was treated as a well-established jurisdiction." 
 
 vs. Board of Trade, 58 111. App. 
 414. 
 
 In Albers vs. Mer. Ex., 39 Mo. 
 App. 583, under the statutes of 
 Missouri, an injunction against a 
 corporation was granted restraining 
 the enforcement of a resolution of 
 suspension. The remedy bj^ in- 
 junction has been also applied in 
 Pennsylvania and Wisconsin. Kerr 
 vs. Trego, 47 Pa. St. 295; Roshi's 
 Appeal, 69 Pa. St. 467; Lutheran 
 Church vs. Gri-stgau, 34 Wis. 336. 
 Mandamus cannot issue to restore 
 one to membership in an unincor- 
 porated Exchange. Weidenfeld vs. 
 Keppler, 84 A. D. 235; 68 N. E. 
 1125. The proper proceeding in 
 such case is by equitable action. 
 Fritz vs. Muck, 62 How. Pr. 69. 
 
 It seems that where a member is 
 expelled and seeks to review the act 
 of the Exchange in expelling him in 
 the courts on the ground that it was 
 unauthorized and illegal, the court 
 will permit him by order to inspect 
 and copy the record and proceed- 
 ings under which he was expelled, 
 and to examine the President or 
 other officers upon the subject to 
 
 enable him to prepare his com- 
 plaint. Hutchinson vs. Lawrence, 
 N. Y. Supreme Ct. Chambers, N. Y. 
 Daily Reg. Feb. 20, 1883, aflf'd 
 by Gen. Term, 3 N. Y. Civ. Proc. 
 Rep. 98. And as to what questions 
 the President of the Exchange can 
 be compelled to answer upon such 
 examination, see elaborate opinion 
 of Lawrence, J., in Hutchinson vs. 
 Lawrence, N. Y. Daily Reg. April 3, 
 1883, N.Y. Supreme Ct. But where 
 a member of the New York Stock 
 Exchange is expelled for "obvious 
 fraud" under its rules and constitu- 
 tion, in an action by such member 
 against the E.xchange, the plaintiff 
 is not entitled to a bill of particu- 
 lars of the fraud. Solomon vs. 
 McKay, 17 N. Y. W. Dig. 229. See 
 also State vs. Chamber of Comm., 
 20 Wis. 68; State vs. Chamber 
 of Comm., 47 Wis. 670; Delacy 
 vs. Ncuse River Xav. Co., 1 
 Hawk. (X. C.) 274; Franklin Bene- 
 ficial Assoc, vs. The Commonw., 
 10 Pa. St. 357 ; State vs. Un. 
 Merchant's Ex., 2 Mo. App. 96; 
 Savannah Cotton Ex. vs. State, 54 
 Ga. 668. 
 
 •Extra. Legal Rem. (2d ed.) mus, § 166; Albers vs. Exchange, 39 
 § 291, and see Merrill on Manda- Mo. App. 583, at p. 588.
 
 Suspeusiou aud Expulsion. Ill 
 
 The following: are some of the ijrounds held sufficient for 
 invoking the extraoi'dinary aid of mandamus : AVant 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 irregu- 
 larity," and in a spirit of malice ;•' and where the member 
 has beeli illegally removed for violating a rule of the cor- 
 poration which is in conflict with public policy and the law 
 of the land ;^ or where he has been expelled under an un- 
 reasonable by-law ; ^ or where the act of the member is not 
 a violation of the charter and by-laws.^ "Where, however, 
 a corporator has been regularly tried in accordance with 
 the rules of the association, which he has assented 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 mandanms." 
 
 So it would seem that a mere restriction upon the mode 
 
 ' Delacy vs. Neuse River Xav. been denied, Savannah Cotton 
 
 Co. (supra); People v.s. St. Francis- E.\. vs. State, 54 Ga. 668. 
 
 cu-s Soc, 24 How. Pr. 216; People 'People ex rel. Elliott vs. New 
 
 vs. Benevolent Soc., 3 Hun, 361; York Cotton Exchani^e, 8 Hun, 216. 
 
 State vs. Chamber of Commerce, 47 'High, Extra Legal Hem. (2d 
 
 Wis. 670. ed) § 292, and cases cited; Merrill 
 
 'People vs. New York Cotton on Mandamus, §166; Society vs. 
 
 Exchan>;e, 8 Hun, 216; People vs. The Commonw. 52 Pa. St. 125. 
 
 Mu.sical Union, 118 N. Y. 101. Nor will mandamus be issued be- 
 
 * State vs. The Georgia Med. Soc. cau.se of mere irregularity in the 
 (supra). expulsion proceedings, if it appears 
 
 * People vs. Med. Soc. of Erie that proj)cr grouml.s for tlic cxpul- 
 (supra). sion exist and the mcml)cr may, 
 
 * Commonw. vs. St. Pat. Benev. after the restoration by virtue of the 
 Soc., 2 Binn. (Pa.) 442; State vs. mandanms, again be expelled by 
 L'nion Men. Ex., 2 Mo. .\pp. 96. proceedings in due form. Merrill 
 And where an appeal from the com- on Mandamus, 5 170, and cases 
 mitl^'c's decision, on ground of ju- tin re cited; see also Black and 
 ri'tdiction, rcwrving the merits, hiw White Smiths' Soc. vs. Vandyke,
 
 112 Stock-brokers antl Stock Excbauges. 
 
 in Avhich the member may exercise bis corporate right, 
 and not an actual exchjsion from the corporation, alTords 
 no ground for a mandamus.^ And mere infonnaliLy in the 
 proceedings for the removal of a member, especially where 
 they are carried by his own action, will not justify inter- 
 ference by mandamus, 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 essen- 
 tial to the conviction, both as to the cause of disfranchise- 
 ment and the mode of proceeding.^ 
 
 An action for damages may also be maintained by a 
 member who has been unlawfully expelled ' or indefinitely 
 suspended,^ or if he is denied the privileges of the Exchange 
 and his means of livelihood as a Broker without actual sus- 
 pension or expulsion.^ And the bringing of such an action 
 is a waiver of the right to mandamus.' 
 
 2 Whart. 309; Sperry's Appeal, 116 ^Cannon vs. Corn Ex., 5 Ont. 
 
 Pa. St. 391; also, Commonw. vs. App. 268; Burt vs. Grand Lodge, 
 
 Pike Benev. Soc, 8 W. & S. 247. 66 Mich. 87. 
 
 Mandamus to restore corporator, * Blumenthal vs. Cincinnati 
 
 Franklin Beneficial Assoc, vs. The Chamber of Commerce, 8 Ohio 
 
 Commonw. (supra). Dccis. Rep. 410. 
 
 'High, Extra. Legal Rem. (2d "Temple vs. Stock Ex., 8 Ont. 
 
 ed.) § 300; Crocker vs. Old South (Can.) 705. 
 
 Soc, 106 Mass. 489. ' State vs. Slavonska, 28 Ohio St. 
 
 ^ High, Extra Legal Rem. (2d 665. As to when not even nominal 
 
 ed.) § 301 ; State vs. Lusitanian damages will be given, see Albers vs. 
 
 Portuguese Soc, 15 La. An. 73; King Ex., 138 Mo. 140. See also Lurman 
 
 vs. Griffiths, 5 Barn. & Aid. 731. vs. Jarvie, 81 N. Y. Supp. 468. 
 
 ' Society vs. Commonw., 52 Pa. 
 St. 125, and cases there cited.
 
 Lien on Seats. 113 
 
 (c.) Rule Giving members of Exchange Lien on Proceeds of 
 Defaulting Members" ^^ Seats,"" etc., in Preference to other 
 Creditors, not Illegal. 
 
 In the case of Hyde vs. "Woods ^ it was held that a provi- 
 sion in the constitution of a Stock and Exchange Board (a vol- 
 untary unincorporated society, whose members are elected 
 by ballot 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 of his outside creditors, be first applied to the bene- 
 fit of the members to whom he is indebted — is neither con- 
 trary 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 
 members had a right to associate themselves upon such terms 
 as they saw fit to prescribe, so long as there was nothing im- 
 moral, orcontrai-y to public policv, 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 b^'-laws, thereby accepting and assenting to the 
 conditions j)rescribed, he acquired just such rights, with such 
 limitations, and no others, as the articles of the association 
 provi<led for. The decision was affirmed by the Supreme 
 Court of tlie T'nited States,* where the court, through ^Ir. 
 Justice Millcj-, said : " Then; is no reason why the Stock 
 Board should not make membership subject to the rule in 
 
 ' *.\\ V . S. (4 Otto) 523, aff'K 2 waa not property such iis coiilil l)e 
 
 .Sawy. Go.'}. Sec this oiwe cliHtiii- Kold to pay the holder's debts. 
 
 ^iHhc<l ill Han lay vs. Smith, 107 Hut H<'e Weaver vs. Fisher, 110 111. 
 
 111. ',i'>'t, in which it was held that a 1 1(>. 
 
 Chica(;o lioard of Tnule certificate ' 'Jl U. S. .')2.'J. 
 
 8
 
 114 Stock-brokers aud Stock Exchanges. 
 
 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 Banki-upt Law against preference of credit- 
 ors, for such a preference is oidy 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 propert}^ it is encumbered with 
 conditions when purchased, without which it could not be ob- 
 tained. It never was free from the conditions of Article XY., 
 neither when Fenn bought nor at any time before or since. 
 That rule entered into and became an incident of the prop- 
 erty when it was created, and reuiainsapartof it, into whose 
 hands soever it may come. As the creators of this right — 
 this property — took nothing from any man's creditors when 
 they created it, no wrong was done to any creditor by the 
 imposition of this condition." 
 
 In Xew York it has also been decided that a person 
 becoming a member, assents to the appropriation of the 
 proceeds of his seat, to the payment of debts on the Ex- 
 change.' 
 
 ' Weston vs. Ives, 97 N. Y. 222; admission and the proceeds first 
 Bernheim vs. Keppler, 34 Misc. 321; applied to his debts in the Ex- 
 Stonebridge vs. Smith, 55 N. Y. change. The Governing Commit- 
 Super. Ct. 294; People ex rcl. Krohn tee may extend the time for scttle- 
 vs. Miller, 39 Hun, 557; Hanscom ment for periods of not more than 
 vs. Hendricks, 52 Hun, 80. See one year, and it has been held that 
 also Belton vs. Hatch, 109 X. Y. when a member is svLspcndcd the 
 593. The constitution of the New rights of other members in the pro- 
 York Stock Exchange provides ceeds of his seat do not become fixed 
 that if a member be suspended, immediately, unless the seat is then 
 upon insolvency, and fails to settle sold, and if the period of settlement 
 within one year, his seat shall l)e is extended, the committee are to 
 disposed of by the committee on determine such rights according to
 
 Lieu ou Seats. 115 
 
 But if the articles of incorporation, rules, or b3'-laws of 
 a chamber of commerce do not ffive the members a lien on 
 the certificate of membershi[) for debts due to them, such 
 debts become barred by the discharge of the debtor in 
 bankruptcy', and mandamus will lie to compel the board 
 to transfer the certificate on its books to one to whom 
 the trustee in bankruptcy had sold it, the sole reason for 
 the refusal of the transfer being the objection of two of 
 the memBers to the transfer on the ground that debts due 
 to them by the bankrupt were unpaid,^ 
 
 The case of Nicholson, Assignee, vs. Gouch ' was, in many 
 respects, very much like that of Hyde vs. Woods, 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 assailed 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 wager- 
 ing contracts, which, as they could not have been enforced 
 
 the rules existing at the extended doe-s not eontniveuo the .statute 
 
 tirnc and not a.s they were at the forbidding perpetuities. lirown vs. 
 
 time of HU.spen.sion. Haight vs. Mutual Trust Co., 2'2 \Ve(>kly Dig. 
 
 Dickerman, IS .\. V. Supp. .559. (.\. Y.) 3lM. 
 
 The constitution of the San Fran- ' State vs. Clianiher of Com- 
 cisco .Sto<-k Exchange has a similar mcrce, 79 N. W. (Minn.) 102G. 
 provision which has been judicially ' 5 El. & Bl. 999. In Clarkson vs. 
 appUed. Horke vs. San Francisco Toronto Stock Exchange, 13 On- 
 Stock Exchange Board, 99 Cal. 190. tario Hep. 213, a by-law giving a 
 An agreement to invest the pur- preference to claims of the Ex- 
 cha.He price of seats in a projxjsed change and its members was bus- 
 Exchange in a trust fund for the tuined. 
 uccurity of debts between members,
 
 116 Stock-brokers and Stock Exchanges. 
 
 by the bankrupt, were therefore not subject to the claim of 
 the assignee ; but Compton, J., held, also, that the money 
 being: received and distributed under the rules of the Stock 
 Exchange, by reason of the bankru})t having become a 
 member subject to said rules, this was a suiRcient defence 
 to the party who so received and distributed it. 
 
 So, in the State of Pennsylvania, there are several deci- 
 sions which uphold the right and power of the Board of 
 Brokers to make by-laws by which members of the associa- 
 tion are entitled to a preference in the payment of their 
 debts from the proceeds of the sale of an insolvent member's 
 seat over outside 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 ; 
 that this was the condition upon which the insolvent be- 
 came possessed of his seat, and it could not be repudiated.^ 
 
 In the case of Singerly vs. Johnson ^ the plaintiff's intes- 
 tate, at the time of his death, was a member of the Phila- 
 delphia Board of Brokers. After his death, his seat was 
 sold by the secretary, under the provisions of the constitu- 
 tion, as follows : " Sec. XII. . . . AVhen 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 representatives.'' 
 
 The plaintiff's intestate was indebted to another member 
 of the board at the time of his death, which claim was 
 passed upon and allowed by the Arbitration Committee, in 
 
 ' 3 Week. Notes of Cas. 542, the case of Evans vs. Wister, 1 
 note. Week. Notes of Cas. 181. 
 
 ^ This decision was confirmed in ' 3 Week. Notes of Cas. 541.
 
 Lieu on Seats. 117 
 
 pureuance 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 jurisdiction to go behind or inquire into the finding of 
 said committee ; (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 plaintifl", as the legal representa- 
 tive of the decedent, was only entitled to recover the bal- 
 ance, if any, after the payment of the member's claim, with 
 interest ; and that such linfitation of his right was not af- 
 fected by the fact that the decision of the Ari)itration Com- 
 mittee 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 sell his seat if he has no claims against him, and also 
 providing that, in case of death, a member's seat might be 
 sold and the proceeds paid to his representatives, after satis- 
 fying claims of members, a secret ecpiitable 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 
 members of the board who ai-e creditors of the legal ownei-, 
 to share in the ])roceedsof the sale of the seat on the death 
 of the latter. It was held that the constitution and by-laws 
 hav(! the force of law as to its membci's. The court said : 
 
 •* The jurisdiction of tlu; courts cannot be ousted i)y con- 
 tract, but any person may covenant oi- .igree that no light 
 of action shall accrue until ;i thii-d person has decided on 
 
 > 93 Pa. St. 55.
 
 118 Stock-brokers and Stock Exchanges. 
 
 any iliffereiico that may arise between himself and the other 
 parly to the covcTiaiit. The loading case upon this subject, 
 and followed in I'eniisylvania, is Scott vs. Avery.'"' Upon 
 appeal the court said : '' There is nothing unlawful or un- 
 reasonable in this rt'gulation." - 
 
 The by-laws may provide that the preference shall extend 
 to all debts incurred in tlie course of business between the 
 members, though they do not grow out of stock transactions.' 
 But the debt must have arisen in dealings on the Exchange 
 of the character specified in the rules or by-laws. The 
 maxim inchisio ^mns est exclusio alterius applies.' 
 
 A debt due to a firm in which only one of the partners 
 has a seat in the Exchange, is entitled to the same preference 
 as if due to the partner individually. A debt to a firm is a 
 debt to each member of the firm.^ 
 
 * 5 House of Lords Cas. 811. "all contracts, debts or obligations 
 ^ See also Moxey's App, ante, of every description" (art. 13, §6) 
 
 p. 91, where the court afjain held due to members are to have prefer- 
 that such a regulation was not con- ential payment, the committee on 
 trary to law. claims has only jurisdiction of 
 ' Sheppard vs. Barrett, 17 Phila. claims arising from transactions in 
 145, where it was held that the rules the Exchange, viz., those arising on 
 included in the preference given, stocks, bonds, bullion, grain or cot- 
 a "friendly loan" which by the ton on the Exchange, and if the 
 custom of brokers was a loan of committee, in investigating these 
 money or stocks between brokers claims, proceeds according to the by- 
 for business purposes. laws and the jurisdiction conferred 
 
 * Bernhcim vs. Keppler, 34 Misc. upon them, their findings will be 
 321; Cockran vs. Adams, 180 Pa. sustained. In re Hayes, 75 X. Y. 
 St. 289. In the first named case it Supp. 312. 
 
 was held that a claim bj* one mem- * Shcppard vs. Barrett, 17 Phila. 
 
 ber against the proceeds of the sale 145. In Cochran vs. Adams, 180 
 
 of the seat of another arising out of Pa. St. 289, the provision of the 
 
 transactions prior to the former's constitution considered had a spe- 
 
 admission to membership was prop- cial provision to this effect. And the 
 
 erly disallowed. same has been held to apply in New 
 
 -Mthough the language of the York, although the member had 
 
 constitution of the Exchange is that made a prior general assignment.
 
 Lien on Seats. 119 
 
 By the terms of the constitution and by-laws, the person 
 becoming a member assents, in case of suspension, to the 
 appropriation of the proceeds of his seat in a particular way, 
 and no other appropriation can be made. Even though the 
 decision of the comtnittee making the distribution as to 
 claims is declared to be final, it has no power beyond that 
 given by the contract. It cannot admit a claim which the 
 constitution by its terms excludes, and this is so whether 
 the claim is valid or not.^ 
 
 A Stock Exchange creditor who has taken the benefit of 
 the distribution of the proceeds of the seat, or in England, 
 of the other assets to be distributed under the rules, is not 
 precluded from afterwards taking ordinary legal proceed- 
 ings, for the recovery of the balance due him, though in 
 England he must give credit for what he has received in the 
 
 In re Hayes, 75 N. Y. Supp. 321. committee, is not enough to sustain 
 
 Even although the constitution of the granting of an ad interim in- 
 
 the Xew York Stock Exchange does junction, restraining the disposition 
 
 not so clearly indicate, proof of the of the fund. It is to be presumed 
 
 usage of the Exchange, and of the that the action of the committee 
 
 practical construction put upon the will be legal. Stoncbridge vs. 
 
 constitution Ijy the parties thereto. Smith, 55 N. Y. Super. Ct. 294. 
 
 will give effect to the constructions See also Ilurst vs. N. Y. Produce 
 
 thereof as stated in the text. Id. Exchange, 100 X. Y. 605; s. c. 1 
 
 ' We-ston vs. Ives, 97 N. Y. 222. Cent. Kep. 2G0, in which it was held 
 
 An amendment to the con.stitution that it is to be presumed that the 
 
 or by-laws, made after the member committee will deal justly in decid- 
 
 had ceased to be such, but pending ing any question arising under the 
 
 the distribution of the fund in the by-laws. 
 
 hands of the Exchange, ^f^d ad- The committee are all members 
 
 mittirig claims to the preference, of the Exchange, and they may have 
 
 which were not entitled previously an interest in the matter before 
 
 thereto, would be iiieffectual in them. Hut tlie mere fact of having 
 
 that cant'. Ibid. such interest does not disciualify 
 
 A threat bv an ofFicer or member them from taking part in a di-eision, 
 
 of the Exchange to makf an im- though the fact that some members 
 
 prop«'r diHtribution, even if such have an interest may put the other 
 
 individual were a member of the members of the committee on their
 
 120 Stock-brokers and Stock Exchaiii^os. 
 
 Exchanir(\' In Xew York, liowrvci' it lias been held that 
 when a member of the Stock Exchange makes a general as- 
 signment, his membership is an asset of the assigned estate, 
 subject to the existing constitutional rights therein of the 
 Stock Exchange creditors, and therefore in the distribution 
 of the general estate by the assignee, the claims of the Stock 
 Exchange creditors, without reference to the amounts re- 
 ceived by them out of the proceeds of the sale of the seat, 
 should be allowed as filed, subject to the exception that no 
 such creditor should receive any sum, as dividend, in excess 
 of the balance due him upon the full amount of his original 
 claim, after deducting the amount received by him from the 
 proceeds of the membership.'- 
 
 Reverting to the question of preference, the law seems 
 to be differently settled in England,^ where a member of the 
 Exchange seeks to prefer his fellow-members to his outside 
 creditors by paying money to the official 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 followed. 
 The defaulter ceases to be a member of the body ; two 
 members of the Exchange act as official assignees of the 
 defaulter ; a meeting of the creditors is called ; the defaulter 
 
 guard as to how far the opinion of made to a master to ascertain what 
 those members who have an inter- deductions should, under the by- 
 est is to be considered. Ex parte laws, be made. Clarkson vs. To- 
 Ward, L. R. 20 Ch. Div. 356. ronto Stock Exchange, 13 Ont. 213. 
 
 "VNTicre the by-laws provided no ' Ex parte Ward, 20 Ch. Div. 356. 
 means of deciding a contest as to ^ jj^ j.^ ij^yes, 75 N. Y. Supp. 312. 
 the propriety of particular dcduc- ^ Tomkins vs. Saffery, 3 L. R. 
 tions, the jurisdiction of the court is App. Cas. 213. 
 not ousted and a reference will be
 
 Lien on Seats. 121 
 
 (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 out- 
 side 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 outside creditors, and was declared a bankrupt. The 
 trustee in bankruptcy, on belialf of the general creditors, 
 claimed from the official assignees of the Stock Exchange 
 the £5000, and the court decided that the trustee Avas en- 
 titled to claim it, for the action of C. in paying it to the 
 official assignees amounted to a ccmIo honorum, and consti- 
 tuted 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 amenable as members to the 
 jurisdiction of that body. They cannot, therefore, govern 
 the i-ights of the genei'ul creditors of a defaulting member. 
 The Lord Chancellor, in delivering his o|)inion in this 
 case, said : " I can see nothing whatever in those rules which 
 is deserving of any animadversion whatever. They seem 
 to me to be judicious and business-like rules. Tiiey do not 
 seem to me to be ruh-s contemplating or intiMiding in any 
 way to war[) c»r strain, or in any way lo (dude or defeat 
 the operation of the baidiruptcy law of the country ; but
 
 122 Stock-brokers and Stock Exchanges. 
 
 they iire 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 
 Exchange, but wlio has no creditors outside the Stock 
 Exchange; because if such a person 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 
 done in the domestic forum of the Stock Exchange 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, Ee Plumbly,^ the case 
 of Tomkins vs. Saffer}' was distinguished ; and the result 
 shows that the English courts did not mean to condemn all 
 the transactions of an insolvent Broker as void, whereby 
 his fellow-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 accord- 
 ance "with Rule 142 of the Stock Exchange. The same day 
 
 1 42 L. T. R. (n. s.) 387.
 
 Lien on Seats. 123 
 
 he tiled a liquidation petition, and a trustee was afterwards 
 appointed. Grant, the official assignee of the Stock Ex- 
 change, in obedience to Eule 16S, closed all Plunibly's con- 
 tracts with members of the Stock Exchange, which were 
 open for the next account or settling day, the 2Tth of June, 
 at the market prices on the 25th of the various stocks and 
 shares contracted for; and called upon those members who 
 on that footing "were debtors on their contracts with Plum- 
 bh', to pay to the official assignee the differences due from 
 them. On hearing this, the trustee gave notice to the debtors 
 to })ay the money to him, instead of to the official assignee. 
 Thi'V, however, paid them to the official assignee. The 
 amount of these differences so received was £3957, which sura 
 was, under Rule 168, divisible among those members, of the 
 Stock Exchange who, on the above-mentioned footing, were 
 creditors for differences on their contracts with Pluinbly. 
 
 The rules of the Stock Exchange apply to Jobbers as 
 well as to Brokers. It appeared to be the practice of Stock- 
 jobbers to make two contracts equal and opposite at once, 
 so that a Stock-jobber's legitimate profit is the difference 
 between the buying and selling })rices, and the fact of stocks 
 going up or down in price docs not affect him. The Job- 
 ber does not deal with an outside principal, but only with 
 members of the Stock Exchange. 
 
 The trustee in the liquidation claimed the £3957 as part of 
 the assets distributable am<jng 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 w;ls re- 
 versed ujion the theory laid down by thecoui-t, per Paggal- 
 
 ' 37 L. T. H. (n. k.) 758; :j 1-. R. .\|)|). Cits. 213.
 
 124 Stock-brokers and Stock Exchanges. 
 
 lay, L. J., that the distinction to be drawn between this case 
 and that of Tomkins vs. Satl'ery 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 certain 
 rules of the Stock Exchange ; certain sums ascertained 
 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 Plumbly ; 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 ai-e 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, "atone 
 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 ti-uo 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 
 relieved from them ; and if, on the otlier 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 and willing to ])erform them. In making these ob- 
 servations, 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, T am 
 satisfied that no injury could be done to the outside creditors 
 by the course pursued."
 
 Lieu on Se.its. 125 
 
 Upon a firet 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 mem- 
 ber/ and who had, with knowledge of the latter's insol- 
 vency or failure, paid out the money so received to his Stock 
 Exchange creditors. But, in the one case, the official 
 assignee received the 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 Avho Avere 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. 
 
 There 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 tliuir rights than they would 
 be in the case of a mortgage. It is upon the faith of this 
 condition that his fellow-mom bers transact any business 
 with him, and it is hard to sul)scribo to a doctrine which 
 invests subsequent outside creditors with the property of a 
 defaulting meinb'-T, which he has acquired by reason of his 
 membership in tin; Exchange.' 
 
 ' In Tomkirm vs. SafFcrv he n-- ' And hiricc tlii" alxivc was wrilli'ii 
 ceivcti the money from Ihr- iiiHol- Ihc private adiiiinislraliim liy tlic 
 vent 'h bank. Sec p. 120. odicirs i.f llic I'xrlianirf of tin- iw-
 
 126 Stock-brokers and Stock Exclianges. 
 
 It imist 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 Ex- 
 change ; 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 bank, belonging to the insolvent 
 member, in preference to his outside creditors.^ 
 
 But the members of the Exchange have no lien upon the 
 proceeds of a seat illegally ordered to be sold by the associa- 
 tion ; and in an action by a member whose seat has been so ille- 
 gally 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 matter 
 in mitigation of damages, or the proper subject of a counter- 
 claim. These propositions were laid down in the case of 
 Sewell vs. Ives, President.^ 
 
 sets realized as in Ex parte Grant, clients, even though the defaulter 
 
 Re riumbly, to the payment of has in tuni become liable on the 
 
 debts on the Exchange, accounting execution of the same contract, to a 
 
 onlj' to the trustee in bankruptcy, jobber member of the Exchange, 
 
 for the balance, has been uniformly Re Woodd; Ex parte King, supra, 
 
 sastained in England. Ex parte ' Tomkins vs. Saffery is so dis- 
 
 Ward, L. R. 20 Ch. Div. 356; King tinguished in Clarkson vs. Toronto 
 
 vs. Hutton, L. R. 2 Q. B. D. 1900, Stock Exchange, 13 Ont. Rep. 221 
 
 504; Re Woodd; Ex parte King, 82 ^ 61 How. Pr. Rep. 54. The 
 
 L. T. X. S. 504. measure of damages is the value of 
 
 But the committee is not, as the property right at the time of the 
 
 against the trustee in bankruptcy, conversion, with interest. Olds vs. 
 
 entitled to balances due the de- Chicago Open Board Trade, 33 111. 
 
 faulting member from his outside App. 445.
 
 Lien cm Seats. 127 
 
 III that case the New York Stock Exchange, in January, 
 1S7S, attempted to expel the plaintilf upon an accusation 
 of " obvious fraud, " and in an action between the same 
 parties the court adjudged and decided that his expulsion 
 was illegal ami void. The defendant, treating the plaintiff 
 as effectually expelled, under Article XX . of its constitu- 
 tion, in April, 1878, sold his seat, and appropriated the 
 proceeds to the payment of his creditois in the Ex- 
 change. 
 
 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 jii'operty 
 having actual value as such. The price realized bv the de- 
 fendant was $4000, which is })roof of its then value. It was 
 pr(jved, and tlie court on the foi-mer trial found, that the 
 plaintiff 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 uj)on the ground of his wrongful expulsion, the 
 Exchange became by that act responsible to the plaintilf for 
 any injury or damage done thereby. 
 
 It was claimed that the j)roceeds of this sale wcrc^ applie(l 
 to the payment of the plaintiff's debts in the Exchange, and 
 that .such payment should be received in mitigation of dam- 
 ages, if not in bar t<j the action. The court said : "If this Ix' 
 so, it must b(i upon the assumption that tlKMlefcntlant h;id au- 
 thority todisposoof the scat, and to recciv*; ami ap|)ro|»i-i:il(» 
 the proceeds of the sale to his creditors." The court held 
 that und«*r the facts in thccasc, no such aulhorit v was shown,
 
 128 Stock -brokers and Stock Exchanges. 
 
 nor can any be inferred, as all the proceedings on defendant's 
 part were wholly illegal and void. 
 
 The })roperty AvrongfuUy taken or appropriated by the 
 defendant, in satisfaction of a demand against the plaintiff 
 as owner, cannot be set up in bar or in mitigation of dam- 
 ages suffered by him. The first objection urged against 
 the plaintiff's right to recover Avas that the action was for 
 the conversion 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 association of the value of $10,000 ; that the 
 defendant wrongfully and unlawfully sold said seat and 
 converted the proceeds to its own use, to the plaintiff's 
 damages." ' 
 
 The court held that it was too late to raise this objec- 
 tion. The defendants treated the seat of the plaintiff as 
 their property, 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 received by the defendant, with interest.^ 
 
 ^A similar complaint was sus- greatly diminishing; its value. Jones 
 
 tained on demurrer in Cecil vs. vs. Fisher, 2 Western Rep. 890. 
 Simmons, N. Y. Daily Reg. March One of the by-laws of the New 
 
 17, 1886. York Cotton Exchange provided for 
 
 ^ Where a certificate of member- the transfer from one member to 
 ship has been ordered by judicial another of certificates of member- 
 decree to be transferred by the ship upon ten daj's' notice of inten- 
 person in whose name it stood to tion so to do, such notice to be 
 the actual owner, and the decree posted upon the bulletin board of 
 has not been obeyed, on inquisition thf; Exchange, and upon payment 
 of damages, the proper measure is of all claims against the member 
 its value when it should have been making the transfer, and it was held 
 so transferred, and not what it had in People vs. Miller, 39 Hun, 557, 
 become, during the delay, by being that this by-law should have been 
 subjected to debts to members strictly complied with by complet-
 
 Jurisdiction of Outside Affairs. 129 
 
 ((/.) The Stock Exchange cannot Take Cognizance of Matters 
 Arising outside of, and Disconnected with the Purposes of 
 its Organization. 
 
 It would seem entirely reasonable to confine and limit the 
 jurisdiction of the Stock Exchange to those matters which 
 arise between its memhers in the course of their business with 
 each other as Brokers, otherwise its judicial powers might 
 be extended to embrace every affair of human life, which 
 was never contemplated, and which the law would not per- 
 mit' 
 
 Thus, the wife of a Broker might bring her grievances 
 before the Bf)ard or its Committees, and claim to have them 
 settled 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 Ex- 
 change, determined by the same forum. For very obvious 
 reasons the law will not permit any organizations to usurp 
 the prerogatives of the regularly constituted courts of jus- 
 tice. 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 co- 
 
 ing the tran-sfer and obtainftip a sur- law for ilainajips, and not by man- 
 render of the certifK-ate at the end danius. 
 
 of the ten days and that a notice of '"This proposition is certainly 
 nearly one year wits insiiificient, as consistent with the purpose for 
 the selUnK nuinljcr cfjiitinued to be which the jussociation w;is formed, 
 Huch until the certificate; wa-s sur- is pat«'nt from a reading of the in- 
 rendered, and mifiht incur further stnunent vitalizing it, and should 
 HabiUties, the lien of which mi^ht not l)e extended to the detriment of 
 not be HufTicieiitly protected by one of the contractinu parties in>- 
 Hueh an indefinite notice. It was less the lanmiajie of the provision 
 held in that cawe als<» that tin- p>ir- invoked urunistakably intends it." 
 chasing member's remedy atrainst Per licvintritt, J., Hcrnheim vs. 
 the corfjoration was bv action at Kcppler, 'M Misc. .'VJl. 
 
 9
 
 130 Stock-brokers and Stock Exchanges. 
 
 erce its own iiR-inbcrs into attendance by threatening ex- 
 pulsion, but it has no power over outside witnesses. 
 
 Another ((jually iin[)()rlant r(nis()n is, that the law has 
 prescribed, for the determination of disputes between citi- 
 zens, regular and well-ada])ted forms and proceedings, which 
 no one can be deprived of against his will.^ 
 
 And while a voluntary association may adopt rules obliga- 
 tory upon its own members, by which their rights may be 
 summarily determined as between themselves, such determi- 
 nation has no external force to injure or impair the riglitsof 
 non-members not voluntarily subject to the jurisdiction of 
 the ti'ibunal." 
 
 Chief Justice Tilghman,"' in speaking of a corporation 
 taking 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 
 tiiat taking cognizance of such offences will have the per- 
 nicious effect of introducing private feuds into the bosom 
 of the society and interrupting the transaction of business."* 
 
 In the case of Leech vs. Harris' the plaintiff was a mem- 
 ber of the Philadelphia Board of Brokers, a private unin- 
 corporated association, similar to the New York Stock 
 Exchange. One ]\r. presented a complaint to the board, 
 
 ' See, for other cases illustrating bors of the association. With the 
 
 this proposition, the next succeed- private affairs of its members, the 
 
 ing subdivision (e.). corporation has nothing to do, and 
 
 ' Morris vs. Grant, 34 Hun, 377. any by-law attempting to interfere 
 
 ^ Commonw. vs. St. Pat. Benev. vnth such affairs is nece.ssarily ultra 
 
 Sec, 2 Binn. 449. vires and void." Boisot on By- 
 
 * "The power of a corporation to Laws (2d ed.), §72. See also 
 
 control the conduct and define the Green vs. .'\frican Methodist Soci- 
 
 rights of its members, by means of ety, 1 S. & Rawle (Pa.), 254. 
 
 its by-laws, is limited strictly to *2 Brews. (Pa.) 571. 
 their rights and conduct as mem-
 
 Jurisdictiou of Outside Affairs. 131 
 
 charging the plaintiff with having obtained money from 
 him by falsely pretending that he had paid a large sura of 
 money for certain oil lands, and thus inducing ^[. to pur- 
 chase an interest in the same. Thereupon the board ap- 
 pointed a committee to investigate the charges, which it 
 was proceedin.;- to do, when the plaintiff procured an in- 
 junction, 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 de- 
 fendant's tribunal. The court, after full argument, in a 
 careful opinion granted a perpetual injunction, on the 
 ground tliat the matter sought to be inquired into was 
 not within the juiisdiction of the board. The court said : 
 
 " "What the plaintiff really submitted to when he became 
 a member of the Board of Brokers Avas that the board 
 should take jurisdiction if he should refuse to comply with 
 his stock contracts; not that they should have jurisdiction 
 of his contracts touching houses, lands, leasehold estates, 
 or farming interests. ... I do not perceive that either by 
 the law of the association, by the law of the land, or by 
 submission to its jurisdiction, the Board of Brokers has ac- 
 quired any rigiit to arljitratc and settle the mattci's in dis- 
 pute between the i)hiiiitiir and Mr. lieubcn Manley, Jr. 
 The courts of law are open to Mr. Manley to vindieate his 
 rights and to redress any wrongs done to him. Thit the Board 
 of Bnjkers cannot erect itself into a tribunal for this pur- 
 pose. The |)i;iiiitill' has, in my opinion, a cleai' right to the 
 protection of a comt of equity. He has a vahuible interest 
 in his membership in th(* l)oard, which cost him $'J,(hi(). He 
 has an interest, in common with his fellf>w-mcMil)ers, in the 
 accumulated funds of the association, and in the claim which
 
 132 Stock-brokers and Stock Exchanges. 
 
 be would have, in case of necessity, upon the fund set apart 
 to aid poor or distressed nieuibei's or their families whoni 
 the board may think proper to assist, lie has a right, also, 
 to be })rotected in his gooil name nnd rej)utation fiom unau- 
 thorized proceedings against him, in which he cannot have 
 the assistance of a court of law to compel the attendance 
 of witnesses or to obtain testimony from abroad." ' 
 
 A related question is that of the exercise of jurisdiction 
 by a committee of the Exchange, over a matter arising on 
 the Exchange, but beyond the jurisdiction conferred upon 
 the committee by the by-laws. A determination made in 
 the exercise of such unwarranted jurisdiction is wholly 
 nugatory and will not be regarded l)y the courts.- Accord- 
 ingl}"- a committee empowered to pass upon the regularity 
 and genuineness of the form of securities dealt in, has no 
 jurisdiction to adjudge the legal rights of the parties to a 
 transaction where the regularity or genuineness of the se- 
 curities are ni^t involved, and if it relieves a vendee from 
 the obligations of a contract of sale, enforceable in law, the 
 determination will be set aside by the courts.^ 
 
 (c.) Members not Bound Inj liii/cs ir/iirh Prevent Recourse to 
 Courts of Laic. 
 
 This subject is closely connected with that which has been 
 briefl}' discussed under the preceding subdivision. 
 
 ' Examine, in this connection, under the charter or by-laws of an 
 
 rule of Stock Exchange as to paying incorporated Exchange to deter- 
 
 debts, submitting differences, etc. mine who was the owner of a dis- 
 
 ^ Morris vs. Grant, 34 Hun, 377; puted right of membership, a mem- 
 
 Sawj^er vs. Gruner, 17 X. Y. Supp. ber is not guilty of improper con- 
 
 465. duct warranting liis expulsion for 
 
 ' Morris vs. Grant, supra. So, resorting to the courts to prevent 
 
 too, where there was no jurisdiction the corporation from disposing of
 
 lllepU Rules. 133 
 
 It is a Tvell-recognized principle of law appertaining to 
 incorporated bodies that where their by-laws prohibit the 
 members from pursuing their legal remedies beyond the 
 jurisdiction of the corporation, such b3'-laws are void.* The 
 theory being that no power less than that of the Legislature 
 can exclude 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 i-egulations of 
 unincorporated associations, and the precedents are directly 
 that way. 
 
 In Austin vs. Searing ^ the question discussed was as to 
 the validity of a by-law which undertook to confer judicial 
 powers upon a body of officers of the association, with power 
 to adjudicate upon alleged violations of rules, and to de- 
 cree a forfeiture of the rights to such property as the 
 parties violating the rules were possessed of as members of 
 the association. The court said : " But, were it distinctly 
 averred that the defendants 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 themselves by such engagements. The 
 effect of some of the provisions of these constitutions is to 
 create a tribunal having power to adjudicate upon the 
 rights of j)ropi'rly of all tlie members of the subordinate 
 lodges, and to transfer that |»i-o|)('rty [o others ; tlii' mem- 
 
 Huch a riRht claimc«l !)>• liiin. Pco- Hullard vs. Honiu-tt, 2 Hurr. 77S; 
 
 pie vx Tc\. Klliott V8. New York .Middlctun's Ca.so, Dyer, 'S.V.i (a); 
 
 fxtttoii Kxrliaiinc, H Hun, 216. Statf ex rel. K(Muu'<iy vs. Union 
 
 ' An^. <fe AmtJH on f'orp. (1 llh fd.) .Monhants' Kxchan^o, 2 .Mo. App. 
 
 5 3-11. «»(•>, at J). 101. 
 
 * I'layor vs. Anlifr, 2 Sid. 121 ; ' IT, X. V. 123; s. c annotated. ()<» 
 
 Ix>ndon vh. Ik>rnardiston. 1 Lev. 1 1 ; .\in. Doc. 070.
 
 134 Stock-brokers and Stock Exchanges. 
 
 bers of this tril)iiniil being liable to constant fluctuations, 
 and not subject in any case to the selection or control of 
 the i)arties 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 abitration, yet the power is guarded by the most 
 cautious rules. A contract that the parties will submit 
 confers no power upon the arbitrator ; and, even where 
 there is an actual submission, it may be revoked at any 
 time. The law^ allows the ])arty up to the last moment to 
 ascertain whether there is not some covert bias or prejudice 
 on the part of the arbitrator chosen. It would hardly 
 accord Avith this scrupulous care to secure fairness in such 
 cases that parties should be held legally bound by an en- 
 gagement, by which the most extensive judicial powei-s are 
 conferred upon bodies of men whose individual members 
 are subject to continual fluctuations.' 
 
 So, in the case of Heath vs. President of the Gold Ex- 
 change,- the eff'ect of a clause in the constitution of an un- 
 incorporated association was considered, providing that "it 
 shall be the duty of said committee (arbitration) to take 
 coo-nizance of, and exercise jurisdiction over, all claims and 
 matters of difference between 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, by injunc- 
 tion, from proceeding to hear and determine, under such 
 
 * See also White vs. Brownell, 3 nis vs. Kennedy, 19 Barb. (N. Y.) 
 Ab. Pr. (n. s.) 318; s. c. on appeal, .527. 
 4 id. 162, 198; Savannah Cotton Ex- ^^ 7 Ab. Pr. (n. s.) 251. 
 change vs. State, .54 Ga. 6G8; Den-
 
 Illegal Rules. 135 
 
 clause, a dispute between bimself and other 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 ajv 
 pear 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 tlie same force and effect 
 as an agreement in writing, made by persons to submit to 
 the decision of one or more arbitrators any controversy 
 existing between them, and that the phaintiff had the right 
 to revoke and annul the power to arbitrate ; that by resign- 
 ing 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 enforced either in law or equity.^ 
 
 • Austin vs. SearitiK, IG X. Y. 112. MiUliell vs. Harris, 2 Ves. Jr. 129, 
 
 But see as to tliis White vs. Brow- and N. Sumner's ed.; Simmons vs. 
 
 nell, 4 -Xb. Pr. (n. s.) 162, 193. Monier, 29 Barb. 419; Smith vs. 
 
 'The following; cas<« were cited Compton, 20 id. 2G2. See also 
 
 on the la-st point: Russell's Arbitra- State e.\ rel. Kennedy vs. Union 
 
 tor, 147; 2StoryE'|. Jiir. § 1 1.')?; 1 id. Merchants' E.\chanfie, 2 Mo. App. 
 
 J G07;Kill vs. ilolli.sler, 1 Wils. 129; 101, and the many ca-sos cited 
 
 Street vs. Rij^by, G Ves. HIH; Ajcar in 2 Am. & Eng. Ency. of Law (2d 
 
 vs. Miu.-klcw, 2 Sim. A: S. 4 IS; Milncs ed.), 570. 
 
 vs. Gery, 14 Ves. 40S; Thomp.son vs. The distinction attempted in the 
 
 Chamock, 8 Term, 139; HaKgart vs. cuse of Farmer vs. Boanl of Triule, 
 
 Morgan, 5 N. Y. (1 Seld.) 422. See 7S Mo. App. r)G7, that the associa- 
 
 also Lloyd vs. Loaring, G Ves. 772; tion may rightfully enforce, not tin;
 
 136 Stock-brokers and Slock Kxchaiiscs. 
 
 Upon this question of tho right of ;i incinhcr to apply to 
 the courts, there is another article of the constitution of tlie 
 New York Stock Excliange which is important to be con- 
 sidered. 
 
 By tho 22d article' of that constitution it is declared that 
 "any incinhcr of the Stock Excliange who shall himself, or 
 whose pai'tncr or partners shall, apply for ;in injunction or 
 legal instrument restraining any officer oi' committee of the 
 
 agreement to arbitrate, lint the an unincorporated Board of Trade 
 penalty of expulsion for refusal to and by-laws pursuant thereto, au- 
 arbitrate, is not unsound and that thorizinp; and indeed, requirin<:; the 
 case itself is opposed to the earlier settlement of all questions of dis- 
 ease in the same state. Cf . State pute between members, by commit- 
 ex rel. Kennedy vs. Union Mer- tees of arbitration, was judicially 
 chants' Exchanjie, 2 Mo. App. 96. commended in Vau{i;hn vs. Ilerndon, 
 It has been said by an able judije 91 Tenn. Gl, "as wise le<;islation, 
 that it was difficult to assign any that will operate to prevent much 
 good reason at this day why an needless and expensive litigation as 
 executory contract for the amicable well as promote the welfare of corn- 
 adjustment of any differences that merce, if correctly enforced." 
 may arise, either bj' arbitration or The fact that a member is given 
 otherwise, made by parties .standing l)y the by-laws an opportunity to 
 upon an equal footing and intelli- arbitrate or conciliate his differ- 
 gently and deliberately, should not ences where a complaint has been 
 stand and the parties made to abide made, before it shall be referred to 
 by it and the judgment of the tri- the board of managers, does not 
 bunal of their choice, and that the make the by-law under which the 
 tendencj' of the more recent deci- complaint is made coercive or in- 
 sions is to narrow rather than en- valid as repugnant to public policy 
 large the operation and effect of on the ground that it gives the 
 prior decisions. The rule that an l)oard power to punish only when 
 agreement to arbitrate all questions the member refuses to arbitrate, 
 that may arise will not oust the Such a by-law does not compel the 
 courts of jurisdiction, is not to be member to submit to arbitration 
 extended or applied to new cases but permits him to do so or not as 
 not coming within the letter and he chooses. In re Haebler vs. N. Y. 
 spirit of previous decisions. Allen, Produce Exchange, 149 X. Y. 414; 
 J., in President, etc., Del. & Hudson Hurst vs. X. Y. Produce Exchange, 
 Canal Co. vs. Pa. Coal Co., 50 X. Y. 100 X. Y. 60.5; s. c. fully reported, 1 
 250, at 258-259. Cent. Rep. 260. 
 
 And a provision in the charter of ' This article has been rescinded.
 
 lUesal Rules. 137 
 
 Exchange from performing his or its duties under the con- 
 stitution and by-kws, shall by that act cease to be a mem- 
 ber of the association." 
 
 The general effect and meaning of a provision 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 
 association, which he otherwise would be deprived of, it 
 seems that such ]>rovision would be abortive and illegal.^ 
 
 In the case of Sewell vs. Ives, heretofore referred to,^ this 
 provision was invoked by the Exchange against the ])lain- 
 tiff, 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. 
 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-protec- 
 tion justifies him in his action, an<l he more faithfully dis- 
 
 ' .\astin vs. Seariiif;, IG N. Y. 123; pie ex rel. Elliott vs. New York 
 
 Heath vs. President, etc., of Gold Cotton Exchunj^e, 8 Hun, 21G. 
 
 Exchance, 7 Ab. Pr. (n. s.) 2.51 ; And where the nilea provide a 
 
 White VH. Brownell, 4 Ab. Pr. (n. 8.) remedy which does not aHsunie to 
 
 162. cxclmle the jurisdiction of the 
 
 A member is not t^iilly of "iin- cotirtx, the parties to contracts 
 proper conduct" warranting his nnule with reference to such rules 
 expulsion, in applyinn for an in- are not to be restiicted to the rein- 
 junction rcHtraininK the Exchange etly so provided. Clews vs. Jamie- 
 from proc(re<linc in a matter over son, IS2 U. S. -Ifil, at p. 495. 
 which, under its charter and by- ' Ante, p. 80. 
 laws, it ha<l no jurisdiction. Peo- *2 HrewH (Pa.) f)?!.
 
 138 Stock-brokers and Stock Exch.-inisres. 
 
 charges his duty as a meinberof the board in resisting its 
 encroachments than lie would in submitting to its unlawful 
 authority. Tie becomes not only the vindicator of his own 
 rights, but the vindicator and defender of the rights of every 
 member of the board, 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 ]mramount there, and 
 the Queen's writ runs even in the sacred precincts of Capel 
 Court." 
 
 But where the association, in expelling or disciplining a 
 member, 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 ^vhich 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 Idw, giving full notice and ample opportunity to be 
 heard, it has been held that a meml)er is bound by the result, 
 and a court will not interfere in the matter.^ 
 
 In the case of Sonneboi'n vs. Lavarrello * the plaintiff and 
 defendants, members of the Xew York Produce Exchange, 
 had voluntarily submitted to the Arbitration Committee there- 
 
 * Ex parte Safferj^ 4 L. R. Ch. D. parties are simply left jis they were, 
 
 561. and one of them may sue the other 
 
 ^ See cases cited, ante, under sub. in the courts. There should be rea- 
 
 (6.) of § 8, ch. 2; Vaughn vs. Hern- sonable certainty in an award to 
 
 don, 91 Tenn. 64. make it conclusive upon the rights 
 
 ^ But if the committee on ap- of the parties. Redmond vs. Bed- 
 peals, of the Chicago Board of ford, 40 111. 267. 
 Trade, simply reverses an award of * 2 Hun (N. Y.), 201. 
 the committee on arbitration, the
 
 Illegal Rnles. 139 
 
 of (chosen in pursuance of § 5 of ch. 359, Laws of 1862) a dis- 
 pute arising out of a transaction in petroleum. The com- 
 mittee having decitled in favor of the defendants, the phiin- 
 tiffs broufrht this action to restrain them from entering: 
 judgment on the award, on the grounds that the arbitra- 
 tors had not been sworn, and that they had received ille- 
 gal evidence. It was held that the plaintiffs, by ap- 
 pearing before the committee, making their statements, 
 discussing their case and the whole controversy, and inter- 
 posing no objection to the proceedings 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 proceedings in this respect are never- 
 theless 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 anotlier 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 monev. Fear of 
 the Arbitration Committee before which the claim was ad- 
 justed is not duress.'^ 
 
 'See also Lafond vs. Deems, 81 to settle business disputes hctwecMi 
 
 N. Y. 507, at 514, per Miller, J. In its nieml)crs under its l)y-lH\vs." Id. 
 
 arbitrations generally the refu.sal of The ca.se of Vauj^hn vs. Herndon, 91 
 
 the arbitrator to hear testimony, Tenn. G4, does not eonflict with this 
 
 pertinent and material, is suffifient view, as a reading merely of its 
 
 to set aside the award. Ilalsted vs. headnote mijiht indiealo. 
 Seaman, S2 N. Y. 27; s. e. :J7 \m. 'Quincey vs. White, G3 N. Y. 
 
 Hep. 5.16. And this also is the rule 370; rcversirifj 5 Daly, 32. Nor is a 
 
 appertaining to thf trial of (lispuled payment iiiad(! under an unfounded 
 
 cjuestions before eomrnittees of I^x- f«'ar that the board of mnnjii^ers 
 
 chanKCfl. Ryan vs. rudahy, 157 would <irder suspension in ea.se of 
 
 III. lOS, at p. 120. See Waite vs. non-payment, recoverable, when, 
 
 Bartlett, 17 f'hie. I,. J. 03fi, an«l in fact, the board had no juris- 
 
 artirle on " Poworof Hoard of Trade, dirtion or aulhoritv at all iti tlie
 
 140 
 
 Stock-brokers and Stock Exchanges. 
 
 liut ill a recent case in which plaintiffs sought to enjoin the 
 Chamber of Connnerce of the city of Milwaukee from ex- 
 pelling or suspending them, it was held that if the board of 
 
 matter. Sawyer vs. Gruner, 17 
 N. Y. Supp. 465. In Scott vs. 
 Avery (5 House of Lords Cas. 845), 
 the Lord Chancellor (Cranworth), 
 after stating the nature of the ac- 
 tion and the pleadinsis, said, "There 
 is no doubt of the general principle 
 which was argued at your lordship's 
 I)ar, that parties cannot by contract 
 oust the ordinary courts of their ju- 
 risdiction. That has been decided 
 in man}' cases. Perhaps the first 
 case I need refer to was a case de- 
 cided about a century ago — Kill vs. 
 HoUister (1 Wils. 129). That was 
 an action on a policy of insurance, 
 in which there was a clause that, in 
 case of any lo.ss or dispute, it should 
 be referred to arbitration. It was 
 decided there that an action would 
 lie, although there had been no ref- 
 erence to arbitration. 
 
 "Then, after the lapse, of about 
 half a century, occurred a ca.se be- 
 fore Lord Kenyon, and, from the 
 language that fell from that learned 
 judge, many other cases had proba- 
 bly been decided which are not re- 
 ported; but in the time of Lord 
 Kenyon occurred the case which is 
 considered the leading case upon 
 this subject, the case of Thompson 
 vs. Charnock (S T. R. 139). That 
 was an action upon a charter-party 
 in which there was a stipulation 
 that if any difference should arise it 
 should be referred to arbitration. 
 That clause was pleaded in bar to 
 the action which had been brought 
 uf>on a breach of the covenant with 
 
 an averment that the defcndaTit had 
 been, and always was, ready to refer 
 the matter to arbitration. That 
 was held to be a bad plea, upon the 
 ground that a right of action had 
 accrued, and that the fact that the 
 parties had agreed that the matter 
 should be settled l:)y arbitration did 
 not oust the jurisdiction 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 survi\ing 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 
 little authority in the present action, 
 or in actions similar to the present, 
 because there the covenant was 
 only that if any dispute arose be- 
 tween the partners, they would 
 name an arbitrator. One of the 
 partners died, and his administra- 
 trix brought an action, and Lord 
 Eldon pointed out that the cove- 
 nant did not apply to a case where 
 one of the partners was dead and an 
 action was brought by liis repre- 
 sentatives. Therefore, in truth, 
 that amounts to no decision what- 
 ever upon the general question. 
 There was then a case before Sir 
 Lloyd Kenyon at the Rolls, of Half-
 
 Illegal Kiiles. 141 
 
 arbitrators went outside the scope of the submission or 
 were guilty of palpable misconduct, their award was de- 
 fective for jurisdictional error.' 
 
 In that case a temporary injunction was granted. When 
 a statute under which a Chamber of Commerce was organ- 
 ized conferred upon it the right to make membership con- 
 ditional upon the submission of business disputes to arbi- 
 tration, a by-law, providing for expulsion if a member did 
 not submit a business dispute to arbitration, is not against 
 public policy nor does it oust the court of jurisdiction.* 
 
 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 memher, and consequently is not a case within a by-law, 
 or statutary provision requiring disputes between a mem- 
 ber and the society to be decided by arbitration.^ And 
 
 hide vs. Fennins (2 Bro. C. C. 3.36), not enter into a contract which 
 
 in which he held a different doc- gives ri.se to a right of action for the 
 
 trine. That wa.s a bill for an ac- breach of it, and then withdraw 
 
 count of partnership transactions, such a case from the jurisdiction 
 
 The plea to that bill was that the of the ordinary tribunals. But 
 
 articles contained an agreement surely there can be no principle or 
 
 that any difference which should policy of the law which prp\eiits 
 
 arise should be scttU^l by arbitra- parties from entering into such a 
 
 tion, and the Ma-stcr of the Rolls contract as that no breach shall oc- 
 
 allowed that pica. But I think cur until after a reference has been 
 
 that ca.se cannot bo relied upon, be- made to arl)itration. It api>ears to 
 
 eau.se it ha.s been universally treated me that, in such cases as that, the 
 
 UH having pnjceeded upon an erro- policy of the law is left untouched." 
 
 neous principle. There is no doubt ' Bartlett vs. Bartlett^, 93 N. W. 
 
 that where a right of action has ac- 473. 
 
 cnje<l, parties cannot by contract ' Evans vs. ChainlxT of Coin- 
 Kay that there shall not be juri.sdic- merce of Minneapolis, <)1 .\. W. S. 
 tion to enforce danuitros in resport ' Prentice vs. London, L. \\. 10 T. 
 to that right of action. Now, thi.s P. 679. .N'or can nn Kxchange. 
 do<-tnne dep<;nds upon the general tinder itH power of "adjusting con- 
 policy of the law, that partic-s can- troversies between its members"
 
 142 
 
 Stock-brokers and Stock Exchanges. 
 
 where the trustees or ollicers 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, within the rule.' The matters in 
 disj)ute, which are the subject of reference and decision 
 under the constitution and by-kiws of associations and in- 
 
 and of "inculcating just and equita- 
 ble principles of trade," and in the 
 absence of any reserved right, try 
 the title to a disputed membership 
 claimed by one member under a bill 
 of sale from another, and expel him 
 for refusing to abide bj' its deci- 
 sion. "He had no controversy 
 with any member or officer. He 
 said simply: 'You cannot sell the 
 membership because it belongs to 
 me, and I do not admit your au- 
 thority to dispose of my rights in 
 regard to it.' . . . There is no 
 provision in the by-laws for the 
 trial of the title to a seat, and there 
 is, therefore, on refusing to submit 
 to the decision, no violation of the 
 by-laws." People ex rel. Elliott 
 vs. N. Y. Cotton Exchange, 8 Hun, 
 216. 
 
 In Babcock vs. Merchants' Ex- 
 change of St. Louis, 159 Mo. 381, it 
 appeared that plaintiff, who was a 
 Broker, and had deskroom in the 
 Exchange building, with tenants of 
 the Exchange, who were not mem- 
 bers thereof, purchased from a 
 member his certificate of member- 
 ship, but the E.xchange had refused 
 to permit him to become a member. 
 Thereafter, notwithstanding a reso- 
 lution of the Exchange, excluding 
 non-members from the "Curb," a 
 portion of the building where mem- 
 
 bers traded with each other after 
 the regular session, he continued, as 
 he had theretofore done, to trade 
 in the "Curb," and at the instance 
 of the committee on irregular trad- 
 ing, was arrested, charged with 
 trespass, and subsequently acquit- 
 ted. In an action for damages for 
 malicious pro.secution, it was held 
 that the right of plaintiff to mem- 
 bership could not be determined in 
 that action. If his application for 
 memlDership were improperly re- 
 jected, the courts were open to him 
 in a proper action, but even if this 
 were done, he could not go upon the 
 premises until his right was estab- 
 lished by a competent court. 
 
 ' Prentice vs. London, L. R. 10 
 C. P. 679. 
 
 On the other hand, if one not a 
 member often visits the Board of 
 Trade on a visitor's ticket, and deals 
 with another a.s if he were a mem- 
 ber, he is estopped from denying that 
 he is a member, and he is bound by 
 the board's rules and customs. Chi- 
 cago vs. Tilton, 87 111. 547. And a 
 non-member cannot enjoin an Ex- 
 change from fining one of its mem- 
 bers for breach of a rule prohibiting 
 members from dealing with non- 
 members. Downes vs. Bennett, 63 
 Kan. 653.
 
 Illegal Rules. 143 
 
 corporations, as a general rule, are only such matters as 
 are in dispute between the society and its members, as 
 members, 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 cove- 
 nanted 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 plaintiff's claim was 
 not a matter in dispute between the society and the de- 
 fentlant, 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, in such an action was denied (Ex 
 It is not an unusual thing for the parte Payne, 5 D. & L. 679). The 
 statutes incorporating associations same Ls true under the "Act to Con- 
 to oust the jurisdiction of ordinary solidate and Amend the Laws rela- 
 tribunals, and to refer all disputes, tive to Savings-banks" (9 Geo. IV. 
 either between the members them- c. 92, § 45), by which it was pro- 
 selves or between the memliers and vided that any dispute arising be- 
 the association thereof, to certain tween the bank and the depositor 
 persons or classes of persons named should be decided by arbitrators 
 by the statute, whose jurisdiction is appointed in the manner provided 
 exclusive and whose decision is final . by the statute. It was held that 
 Thus, the statute of 6 & 7 William the right of a depositor to bring an 
 IV. c. 32, incorporating the provi- action in a court of law for any mat- 
 sions of 10 Geo. IV. c. 56, relating ter coming witliin the purview of the 
 to the fonnatioii of friendly .socic- provisions of the .statute w;i.s liarrod 
 ties, provides that rules shall be by the .statute; and it was held that 
 made by such .societies directing the language of the .statute, which 
 whether disputes .shall be settled wits that "the matter .so in dispute 
 either by jitstices of the peace or by ^/i«// be referred," etc., gave the ar- 
 a^^>it rators ; and, when niles have bitrators an exclusive, and not 
 been adopted to that effect, it hits merely (-oncurrent, jurisdiction 
 been held that any decision made (Crisp vs. Huiil)ury, S Hiiig. 301). 
 by such ju.sticfs of the pea<'e, or by (This \M\ sectir)ii of the act is 
 Huch arbitrators, was fmal, and a <tmitte<l in the edition uf the Stat- 
 nile for a mandamus to compel the utes of IS75.) So in the .Vet rela- 
 judge of the county court to procee<l tive to Loan Societies (5 it 6 \\in.
 
 144 
 
 Stock-lnokers and Stock Exchjini'es. 
 
 IX. Liability ot Seats in Excbange to Legal Process. 
 
 The general nature of seats in an unincorporated Stock 
 Exchange has ah-eady been considered in Section \ . of this 
 chapter, and we have seen that its members have no sepa- 
 rate or severable interest in its property, and no right to 
 call for an account of the same, or its accunmlations, with 
 a view of dividing it, as in the case of ordinary ])artners. 
 
 The question now is, as to the right of outside creditors 
 to attach or seize this seat, upon attachment or execution, 
 to satisfy their claims.^ 
 
 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 bj'' the express 
 words of the statute, at least by 
 implication (Timms vs. Williams, 3 
 Q. B. 413; but see, contra, Albon vs. 
 Pyke, 4 M. & G. 421, and note, 426). 
 And where a bill in equitj' was 
 brought, by a holder of shares in a 
 building society, against the society 
 and its directors, for misconduct, 
 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- 
 tys' incorporation C6 & 7 Wm. IV. c. 
 32'>; and that it was not only pro- 
 vided by the statute that such 
 disputes should be referred to arbi- 
 
 tration, but that it was against the 
 policy of the law, as shown by the 
 statute, to drag the disputes of 
 friendly benefit societies into the 
 courts, etc. (Thompson vs. Planet 
 Benefit Building Soc, 15 L. R. 
 Eq. 333). But the jurisdiction of 
 the superior courts is only to be 
 ousted by express words, or bj' 
 neces.sary implication (Gates vs. 
 Knight, 3 T. R. 442;Grisp vs. Bun- 
 bury, S Bing. 394; and Albon vs. 
 Pyke, supra). 
 
 ' The rules of the New York 
 Stock Exchange provide as follows, 
 in relation to seats: 
 
 Art. XIII. § 1, states the qualifi- 
 cation of the member. Art. XI. 
 § 1, subd. 2, provides for the admis- 
 sion of members by two thirds of the 
 committee on admissions. Any 
 member wishing to transfer his 
 membership shall submit the name 
 of the proposed transferee to the 
 Gommittee on Admissions; and, on 
 the approval of two thirds of said 
 committee, the transfer may be 
 made, upon payment, out of the 
 proceeds of the transfer, of fines, as-
 
 Seats Liable to Legal Process. 145 
 
 In the first place, it will be observed that, as between 
 the owner or member and the association, the seat is re- 
 garded, and has been recognized, as a right or property of 
 a valuable nature, subject to taxation as personal property,* 
 of which the owner cannot be deprived, except in accord- 
 ance with the rules of the organization, and that a court 
 will interfere by an injunction, or other appropriate legal 
 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, but it is limited and re- 
 stricted by the rules of the body issuing the same.* The 
 owner cannot sell the seat to a person whom the body will 
 not recognize.^ He cannot devise or bequeath the same, 
 so that his heirs or personal representatives will be able to 
 use and enjoy it as the testator has, for the seat is a mere 
 persoiud privilege, dying with the member, and not con- 
 taining any inheritable qualities/ The proceeds of his seat, 
 it is true, may belong to his personal representatives, but 
 
 sessments and unsettled contracts, of the vendor subject to the rules 
 
 due by the member (Art. XV.), the and conditions of the Exchange, 
 
 balance, if any, to be paid to the And, therefore, if a certificate of 
 
 member. Id. Upon the death of membership is transferred, tlie only 
 
 a member, hi.s membership may be way the transferee ran avail of it, if 
 
 dLsp<jsed of by said committee (Art. refused meniliership, is by trans- 
 
 XV. § 7). ferring it, for a consideration, to 
 
 Elaborate provision is also made some person desiring incinborship. 
 
 for the suspension and readmission American Live Stock Co(nm. Co. vs. 
 
 and expulsion of members. Live Stock Exchange, 113 111. 210; 
 
 > See post, p. 163. Clute vs. Loveland, CS Cal. 254, and 
 
 'See ante, p. 31. cusos cited, ante. 
 
 ' Whitevs. Hn)\vnell,3Ab. Pr. (II. « White vs. HrowiiHI. :\ .\b. IV 
 
 H.) 31S; Leech vs. IL-irris, 2 Hrews. (n. s.) 31.S; Leech vs. Harris, 2 
 
 (Pa.) ri7l. \uy disposition of the Hrews. (Pa.) 571. 
 Hcat gives merely the rights therein 
 
 10
 
 14G Stock-brokers aud Stock Exchanges. 
 
 the franchise or right of exercising the occupation of Bro- 
 ker in the Exchange is gone. 
 
 ]\[oreover, a member may be entirely deprived of the 
 benefits 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 exer- 
 cise a certain calling in a certain place, but without the at- 
 tributes of descendibility or assignability which are charac- 
 teristic of other species of jjroperty.^ It is not a chose in. ac- 
 tion.' It does not, in New York, constitute the working 
 tools of the member so as to exempt it from judgment 
 creditors, and even if it did, it would, under § 1391 of 
 the Code of Civ. Proc, be exempt only to the extent of 
 $250.-« 
 
 By far the most numerous class of cases in which the le- 
 gal character of seats has arisen are those in which seats 
 have been sought to be attached or seized on execution by 
 creditors of an insolvent member. Cariying out the princi- 
 ples just alluded to, the courts have uniformly ^ held that the 
 
 ' Ritterband vs. Baggett, -1 Ab. ber in good standing maj' dispose of 
 
 New Cas. 67, Sp. T. And the asso- his seat, subject to the rules, 
 
 ciation may then fill the vacancy or ^ Compare, as to character of 
 
 not as it pleases. Belton vs. Hatch, market-stands, Barry vs. Kennedy, 
 
 109 N. Y. 593. In that case a dis- 11 Ab. Pr. (n. s.) 421; In re Emrich, 
 
 tinction is made between the case of 101 Fed. Rep. 231. And as to 
 
 an expelled member who is iueligi- auction-stand in a real estate Ex- 
 
 l)le for readmission, and a member change, McQuillen vs. Ileal Estate 
 
 who becomes honestly insolvent and Exchange, 15 X. Y. Supp. 206. 
 
 fails to qualify for readmission. In ' London and Canadian Co. vs. 
 
 the former case the member is de- Morphy, 10 Ont. 86. 
 
 prived of all claim upon the associa- ♦ Leggett vs. Waller, 80 N. Y. 
 
 tion, but in the latter, the proceeds Supp. 13. 
 
 of the seat may be paid to the mem- * See, however, Leggett vs. Wall- 
 
 ber after all claims of the associa- ers, supra, 
 tion are discharged. And a mem-
 
 Seats Liable to Legal Process. 147 
 
 right of a member to a seat in a Stock Exchange cannot 
 be attached^ or seized on execution. '~' 
 
 By the rules of the rhiUidelphia 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- 
 bei-s 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 perst>nal [)rivilege ; 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^. /a. The 
 sheriff's vendee would ac(juire no title which he could en- 
 
 ' Pancoa^st vs. Houston, Phila. C. the Exchange having been first 
 
 P. 17 Mb. L. J. 172; s. c. 5 Week, paid? 
 
 Notes Cas. 36. The court held that In Bowen vr,. Bull, 12 N. Y. Supp. 
 
 until all claims of members were 325, aff'd without opinion, 128 N. 
 
 settled the seat was the property of Y. 507, it appeared that an attach- 
 
 the Exchange, and until it was ment had been issued against a seat 
 
 shown that such claims were settled in the Open Board of Brokers, and 
 
 or that none exLstetl, an attachment the court, without deciding whether 
 
 could not issue. It appeared that a seat in the stock exchange was 
 
 some claims existed against the capable of attachment, held that 
 
 seat, and it might be contended as there was no proof of the levy, a 
 
 that if no claims existed, the seat purchaser at a sheriff's sale could 
 
 could be attached. But in face of not compel the Exchange to rcc- 
 
 the rule of the Exchange that a ognize his right to the .scat, 
 member could only sell his member- ' Freeman on Executions (3d 
 
 ship upon condition tliat the pur- ed.), p. 422; Pancoa.st vs. Ciowcn, 20 
 
 chaser w:ls first Itallottcd for and .\llj. L. J. 11 1 ; s. c. 30 Phil. Leg. Int. 
 
 elected, and that all claims of the SO; Lowenberg vs. (Jreencbaun, 99 
 
 association had been paid, this con- Cal. 1(52; Eliot vs. Merchant.s' Ex- 
 
 t«ntiori could hardly be sustained, change, 14 Mo. App. 235; Barclay 
 
 Qua-re, Could an intending pur- vs. Smith, 107 111. 349; Fish vs. 
 
 chaser at an executifjn sale, following Fiske, 1.54 Mass. .302. The rule 
 
 judgMJcnt upon the attachment, also prevails in Canada. London 
 
 be first ballotte<i f«)r and elected, and ('anadian Loan Co. vs. Morphy, 
 
 and then have a transfer nf the 10( )nt. Hep. SO. Sceal.so Ilabenicht 
 
 »cat by the HherifT, all claims of vs. Lis.sak, 78 Cal. 351.
 
 148 Stock-brokers and Stock Exchanges. 
 
 force. Nor is it within either the words or the spirit of 
 the act of June 10, 1830, § 35 (Paniph. L. 707), providin*,' 
 for attachment on judgments. 
 
 " AVhether/' says the court, " the proceeds of the sale of 
 the seat, in the hands of the treasurer of tlic board, and 
 payable to the defendant, according to the regulations and 
 by-laws of the board, could be thus reached, is an entirely 
 different question. This, and no more, is what we under- 
 stand 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 balance might have been recovered by the 
 assignee in bankruptcy." ^ 
 
 The case of Tlionipson vs. Adams ^ is another interesting 
 case on this subject, holding that a third person, secretly fur- 
 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 creation of the board, and was to be held and enjoyed 
 with all the limitations and restrictions which the constitu- 
 tion of the board have put upon it ; and, under the consti- 
 tution and by-laws of the Philadelphia Board of Brokers, 
 the secret equitable 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 
 
 ' 4 Otto, 525. '7 Weekly Notes of Cas. 281. 
 
 ' Pancoast vs. Gowen, 20 Alb. L. 
 J. 414; s. c. 93 Pa. St. 66.
 
 Seat« Liable to Lei?al Process. 149 
 
 death of the latter. The plaintiff in that case was not a mem- 
 ber of the board, but had furnished the money by which the 
 deceased member had obtained his seat, but phiintiti'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 Richards to other members, in 
 pursuance of the terms of the constitution of the club. But 
 why not? Richards was the member of the board, the legal 
 owner of the seat, and the plaintiff an entire stranger, un- 
 known to the association. The members gave 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 nothin": 
 unlawful or unreasonable in this regulation."^ 
 
 In Evans vs. Wister^ the same court held that an attach- 
 ment would not lie against the Board of Brokers for the 
 proceeds of the sale of a seat of a member, he being indebted 
 to his fellow-members to the amount of the proceeds. In 
 that case one W., being a member of the board, became in- 
 solvent. Subsequently he sold his seat, but the purchaser 
 was informed by the secretaiy' lliaL tlie transfer could not 
 be completed until the j)i-ice of the seat was j)ai(l to 
 
 ' In Clute vs. Loveland, 68 Cal. imposed \>y llic rules of the ilsso- 
 
 2.54, it waa held thut u nieniljer (if elation. 
 
 the San Fraiiciwco Stock K.\<)iaiij;e ' 1 Week. Note.s of Cius. ISl ; s. e. 
 
 had power to plo<ine or rnortna^e hJH 32 I.e^. Int. '.iry\; h. e. svb nom. 
 
 Beat, and that the lien tlierchy Evans vs. .\danis, 81 Pa. St. (32 
 
 crcatw] may \>c. foreclosed and the Sm.) 413. 
 Beat HoUi, hiilijfcf to the condilioua
 
 150 Stock-brokers and Stock Exchaupes. 
 
 him, to be held for the creditors of W. in tlie board. Plain- 
 tiff then presented his chiini to the Arbitration Committee, 
 but the same was disallowed, lie 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. IMurphy, Mr. Justice 
 Van lloesen, in the ISew York Court of Common Pleas,^ 
 passed upon the question whether a seat in the New York 
 Stock Exchange may be regarded as property subject to 
 sale by legal process against the owmer. An execution in 
 this case was issued upon a judgment in favor of plaintiff, 
 and subsequently an order was granted requiring the de- 
 fendant to appear before the court to make discovery on 
 oath concerning his proper t}-, etc., under section 292 of the 
 Code of Procedure ; and, it appearing that the defendant 
 possessed a seat in the Xew York Stock Exchange, plaintiff 
 asked to have it assigned, and the proceeds applied towards 
 the satisfaction of his judgment. The court, in denying a 
 motion requiring 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 members of the board, 
 may be reached by proi)er 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 seized by the sheriff, or taken possession of by a re- 
 ceiver. It may well be doubted if a seat in the Exchange 
 be property.^ It is true that Mr. Justice Miller, of the 
 
 * This was an affirmance of Leech opinion of Van Brunt, J., is also re- 
 vs. Leech, 3 Week. Notes of Cas. ported; s. c. 11 N. Y. Weekly Dig. 
 542, note. 538; 60 How. Pr. 426. 
 
 ' N. Y. Daily Reg. June 14, 1880; ' The Xew Yori< Court of Ap- 
 
 re versed on appeal, X. Y. Da i/y 7?^^. peals has, however, since the te.\t 
 
 March 12, 1881, where dissenting was written, held that a seat in the
 
 Seats Liable to Lei?al Process. 151 
 
 Supreme Court of the United States, in the case of Hyde vs. 
 Woods/ said that he thought it was property ; but the 
 Supreme Court of Pennsylvania, in two carefully considered 
 decisions, in which the decision of Mr. Justice ^liller was 
 thoroughly reviewed, came to the opposite conclusion. . . . 
 A seat in the Exchange does not fall within 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 Van Iloesen.- 
 
 Mr. Justice Beach, in delivering the opinion reversing the 
 decision of the court below, after reviewing the cases, held 
 that, under the section of the code in question, the defend- 
 ant was bound to apply the proceeds of the seat to the satis- 
 faction 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 delHor to do whatever may be deemed needful to 
 transfer the seat under the rules of the Exchange, would 
 accomplish the result sought." In another ciise ^ a peremp- 
 tory 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 Cotton Exchange, was refused 
 
 New York Stock ExchanRe is, in a ' .\. Y. Daily Ifcg. .Mjirch 12, 
 
 certain sciwo, property and pa-sses 18S1 ; 00 How. Pr. 426. 
 
 to the member's aKsi(n>c • in bank- * Allen, Jr., vb. The New York 
 
 ruptoy. Piatt vs. Jones, 96 N. Y. Cotton ExohanRe, N. Y. Daily 
 
 24, 20, and cascw cited. licK , March .H , 1880. 
 ' 94 U. 8. (4 Otto) 523.
 
 152 Stock-brokers and Stock Exchanges. 
 
 upon the grounds heretofore adverted to in the preceding 
 cases. If the seat were subject to direct legal process, it is 
 very evident that the whole design of the organization 
 would be thwarted by introducing into the Exchange the 
 purchasers at a judicial sale, without a compliance with the 
 prerequisite rules of admission and against the wish of the 
 regular members. This the courts have uniformly refused 
 to do.' 
 
 But the courts, through the instrumentality of their equity 
 powers, or by process in aid of execution, will compel an in- 
 solvent member to sell his seat to some person whom the 
 association will recognize, and apply the proceeds to the 
 satisfaction of his debts. It would be a failure of justice to 
 allow an insolvent to bo 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 
 compel a debtor member of a Produce Exchange to convey 
 
 ' See in this connection McCabe which defendants have no present 
 vs. Emmons, 109 N. Y. 665. interest." 89 N. Y. 332, 333. The 
 
 ^ Text commended, Eliot vs. Mer- latter case of Smith vs. Barclay was, 
 chants' Exchanjxe, 14 Mo. App. however, reversed in Barclay vs. 
 242, 243. These views have also Smith, 107 111. 349, in which it was 
 since received confirmation in New held that a certificate of member- 
 York in Powell vs. Waldron, 89 N. ship in the Board of Trade was not 
 Y. 328, and in Illinois in Smith vs. property. See page 154, note 1, as 
 Barclay, 21 Am. L. Rep. (n. s.) 408, to criticism of this decision which is 
 where the subject is fully discussed, contrary to all the authorities, 
 and the views herein expressed are And in a later case the Supreme 
 endorsed. Court, of New Jersey held that 
 
 In the former case Judge riiich in courts of law will interpose to con- 
 deciding the cause said: "Whether trol the proceedings of ecclesiastical 
 he (the receiver of the member's bodies when a right to property is 
 estate) could make it available, or involved, but in no other instance 
 in what manner convert it into (State of New Jersey vs. Rector of 
 money or how it might prove to be Trinity Church, 28 Alb. L. J. 111.) 
 encumbered under the rules of the ' Ritterband vs. Baggett, 4 Ab. 
 Exchange, are after questions in New Cas. 67.
 
 Seats Liable to Legal Process. 153 
 
 his seat to a member-elect, with whom the receiver might 
 contract for its sale, the court said : 
 
 '"The appointment of plaintiff as receiver of Baggett, 
 made in the sup])leinental 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 judg- 
 ment debtor is subject to the direction and control of the 
 court in which judgment was obtained upon which the pro- 
 ceedings are founded. This action was commenced by 
 leave granted by this court, and the receiver's appoint- 
 ment 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 property, and that the franchise and 
 privileges secured to the Exchange 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 su[)plemental pro- 
 ceedings under which a receiver was 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 j)eiudties 
 and charges, that balance might have been recovered by 
 the assignee. The (juestion whether the seat in the board 
 wa.s property has been fully settled in a late case, almost 
 if not entirely, identical with the ca.se at bar.' Tiio ques- 
 tion being settled that the seat in (|uestion is property of 
 value, I tliink it is tlic duty of the court to enforce its trans- 
 fer for the plaintill's licnrlit in this nction, cithci' to a ro- 
 
 ' Hyde vh. WcmxIh, >H I' . H. (4 Kiitoii, «l U. S. 71(i, followed in 
 Otto) .524. See ubo .Nichols vs. Spjirhawk V8. Yerkcs, I J2 U. S. 1.
 
 154 Stock-brokers and Stock Excliiiuges. 
 
 ceiver or to a third person qualified to woi-k out the designs 
 of the law. AVe have seen that the personal estate of the 
 debtor becomes vested in tiie receiver from the time, and 
 by virtue, of his ap[)ointment. 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 Exchange this 
 property cannot be assigned to any one but members 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 become not only a dead letter, but lifeless in spirit. 
 Rights of property, from time immemorial, could be reached 
 by a creditor's bill ; and it is now Avell settled that the 
 same result may be accomphshed by proceedings under the 
 Code, w^hicli furnish a substitute for that proceeding in 
 chancery. Personal property passes to the receiver with- 
 out assignment ; but if an asssignment be necessary to effect 
 the purpose of the law I do not question the power of the 
 court to direct it to be done. I therefore direct an assign- 
 ment to be made to Mr. Covas or some other competent and 
 fit member of the Cotton Exchange, with apt and proper 
 directions." ^ 
 
 * To same effect are Londheim vs. see cases cited post, pp. 156-160, 
 White, 67 How. Pr. 467; Roome vs. under the bankruptcy law. 
 Swan, 2 X. Y. Supp. 614; Habenicht A seat in the New York Consol- 
 vs. Lessak, 78 Cal. 351; EHot vs. idated Stock and Petroleum Ex- 
 Merchants' Exchange, 14 Mo. App. change will pass to a receiver in sup- 
 234; London and Canadian Loan plementary preceedings. If there 
 Ccvs.Morphy, lOOnt. Rep.86, and are debts due to the members of
 
 Seats Liable to Le£:al Process, 155 
 
 The seat may be pledgeil to secure a loan, and the lien 
 may be enforced without a foreclosure.^ And if the seat 
 has been pledged as collateral for a loan the receiver has the 
 right to redeem it.'- 
 
 In Massachusetts a creditor may, under Pub. Stat. ch. 151, 
 § 2, cl. 11, and St. of 1884, ch. 285, § 1 (now Rev. L. ch. 159, 
 § 3, cl. 7), bring a bill in equit}' to reach property which can- 
 not be attached or taken in execution. It has been held 
 that the bringing of a bill in equity under this statute to 
 compel the sale of a seat in the Boston Stock Exchange, did 
 not give the plaintiff such a lien on the property as would 
 prevent it passing to the assignee in insolvency of the debtor, 
 
 the Exchange, the receiver takes by creditor's bill to the payment of 
 
 the equitable interest of the judg- his debts. Smith vs. Barclay, 107 
 
 ment del)tor in it. Leggettvs. Wal- 111. 349; Weaver vs. Fisher, 110 111. 
 
 ler, 80 X. Y. Supp. 13. 146. 
 
 In Roome vs. Swan, supra, it was The doctrine of these cases is 
 held that the debtor would not be severelj' criticised in au article in 22 
 required to si-^n a consent that the Am. L. Reg. (n. s.) 438, and un- 
 purchiLser take his seat or to for- doubtedly "the weight of authority 
 mally resign and nominate the pur- and the better reasoning support 
 cha-ser as his succe.ssor (these for- the proposition that such a seat or 
 malities being required by the niles membership is property and should 
 of the Exchange) the sale and pur- be applied as other property of a 
 chase at law being equivalent to debtor to the payment of his debts, 
 these, but he would be required to To hold that it cannot be thus ap- 
 sign a con.sent that the purcha.ser be plied would establish a rule giving 
 vested with the rights and privi- to the meinbei-s of such jUNSociations 
 leges einiring to memljcrship. .\nd the power to invest fortunes under 
 a banknipt nieniber will ])c com- the name of licenses and j)riviloges, 
 polled in equity to execute any in- and by their constitutions and rcgu- 
 htnjment necessary to complete the hitifins to establish a law for the ex- 
 transfer of title to a purcha.scr from emption of the same." Habenicht 
 the aasignoe. Piatt vs. Jones, 90 vs. Lessak, 7S Cal. 357. 
 N. Y. 24. ' Nitshua Savings Bank vs. Ab- 
 
 In Illinois, however, it has been bott, 03 X. E. fMa.ss.) lO.W. 
 
 held lh;tt II eertificnte of nieinluT- ' Powell VS. Waldron, 89 N. Y. 
 
 ship in a eominerrial Exchange in 328, 
 not propcrrty liable to l)o subjected
 
 156 Stock-brokers and Slock Exchanges. 
 
 and that when the latter made an assignment pending an 
 appeal, the proceeds of the sale of liis seat passed to his as- 
 signee.' 
 
 If, however, after the seat has been pledged to secure a 
 loan, and the death of the member, the seat has been sold 
 under the rules of the Exchange and the proceeds paid to 
 the member's administrator, the lien subsists and holds the 
 proceeds of sale in the administrator's hands, when the seat 
 was sold with notice to the Exchange and to the adminis- 
 trator of the claim, and the short statute of limitations did 
 not bar a claim under the lien.^ 
 
 In another case in Massachusetts it appeared that a seat 
 in the Boston Stock Exchange was purchased b}'^ a firm of 
 stock-brokers, but the membership was taken in the name of 
 one of the two persons composing the firm, the rules not 
 allowing partnerships to become members. The firm failed, 
 and afterwards the members of it did no business together, 
 but no formal dissolution or settlement of the firm affairs 
 was made. Fifteen years subsequently the member who 
 held the seat, and who afterwards occupied it for the trans- 
 action of his private business only, sold the seat, and his 
 former copartner sued him for a moiety of the proceeds, 
 and it was held that the statute of limitations was a bar to 
 the plaintiff's claim.^ 
 
 In the bankruptcy courts the same doctrine has been 
 adopted. In the matter of Ketcham, bankrupt,* on an ap- 
 
 * Fish vs. Fiske, 154 Mass. 302. Rep. 840; cited and the conclusions 
 
 ^ Nashua Bank vs. Abbott, 63 N. approved in the case of Grocers' 
 
 E. (Mass.) 1058. Bank vs. Murphy, N. Y. C. P. 11 
 
 3 Currier vs. Studley, 159 Mass. N. Y. Weekly Dig. 538; s. c. in full, 
 
 17. 60 How. P. 426; N. Y. Daily Reg. 
 
 <N. Y. Daily Reg. Feb. 9, ISSO; March 12, 1881. See also Scott vs. 
 
 s. c. more fuUy, 9 Rep. 305; 1 Fed. Ives, N. Y. Daily Reg. July 24, 1879,
 
 Seats Liable to Legal Process. 157 
 
 plication for an order requiring 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 as- 
 signee 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 right or 
 privilege which the bankrupt holds as a member of this 
 Stock Exchange is to be regarded as property which passes 
 to his assignee in bankruptcy, under the Bankrupt Law, 
 for the benefit of his creditors. If it is, then whatever it 
 may be necessary for the bankrupt to do to make the right 
 available to the assignee, he will be requu'ed 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 efifecting a transfer of this right 
 or interest, for a })ecuniary consideration, subject to the con- 
 dition 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 pur- 
 poses only. I see nothing in the rules of the Exchange 
 which renders it impossible for a seat to be disposed of by 
 the assignee with the co-operation of the bankrupt, sub- 
 ject to the condition ;d)ove mentioned. This seat in the 
 board was actually used as a part of the business capital 
 of these bankrupts as Stock-brokei-s. To suffer the bank- 
 rupt still to hold it virtually withdraws several thousand dol- 
 lars in value of his business assets from his creditors." The 
 court review<'d scvend cases somewliat analogous, one of 
 
 where the court dei>ie«l an upplicii- Exchange! from disposing of, or in- 
 tion for an injunction to restrain tcrfcrinj; with, the proceeds of a 
 the president of the .New Yorit Stock inenihcr'H Heat in the E.xcliange.
 
 158 Stock-brokers ami Stock Exchanges. 
 
 which was touching a stall in a market, in which it was 
 determined that the transfer could not be made without 
 the consent of the city authorities, and concluded as fol- 
 lows : "The controlling consideration is, as it seems to me, 
 that practically, and whatever its foi-m or incidents with 
 respect to other matters may be, it is a part of the bank- 
 rujifs business assets, or, more generally, of his property, 
 Avhich it was the priraar}' design of the Bankrupt Law to 
 distribute among his creditors ; and that the peculiarities 
 which distinguish this from other property are, in view of 
 the evident purpose and scope of the Bankrupt Law, unes- 
 sential, mere technical cobwebs which the law is strong 
 enough to break through." An order was directed to be 
 entered requiring the bankrupt to execute any transfer, as- 
 signment, 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 assignee in bankruptcy might procure.^ 
 
 ' Contra, In re Sutherland, G 109 N. Y. 593, but the court, held 
 
 Biss. 526, but the doctrine of In re that as the rules of the Exchange 
 
 Ketchum, supra, has since entirely merely provided for the sale of the 
 
 prevailed. Matter of Werder, 15 seat of an expelled member, and 
 
 Fed. 789; Piatt vs. Jones, 96 N. Y. were silent as to the disposal of the 
 
 24; McCabe vs. Emmons, 109 N. proceeds, the member could not be 
 
 Y. 665; Powell vs. Waldron, 80 deprived of the property right in his 
 
 N. Y. 328; People ex rel. Lem- seat, and that after paying any 
 
 mon vs. Feitner, 167 X. Y. 1. So, debts due to the members or to the 
 
 too, vmder the bankruptcy act of Exchange, the balance constituted 
 
 1898. In re Gaylord, 111 Fed. part of the bankrupt's estate to 
 
 Rep. 717. In that case it appeared which his trustee became entitled, 
 
 that the bankrupt member had been Id . 
 
 expelled for fraud, and the St. The title to the seat is vested in 
 Louis Stock Exchange sought to re- the assignee by the assignment in 
 tain the proceeds of the sale of the bankruptcy and the assignor may 
 seat on the ground that the expul- be compelled by order of the court 
 sion of the member had worked a having jurisdiction of the bank- 
 forfeiture of the proceeds to the Ex- ruptcy proceedings to execute the 
 change, as held in Belton vs. Hatch, necessary assignments, transfers,
 
 Seats Liable to Legal Process. 159 
 
 It has been also recently decided by the United States Su- 
 preme Court in the case of Page vs. Edmunds/ that a seat in 
 the Philadelphia Stock Exchange is property within the 
 meaning of the Bankruptcy act, as a bankrupt member might 
 have transferred it prior to the tiling of the petition (Act of 
 189S, section TO, subdivision 5), subject, however, to the pay- 
 ment of any debts due to the Stock Exchange creditors, and 
 when there are no such debts, it passes to the bankruptcy 
 trustee. 
 
 etc., to pass the seat to such person He has then ceased to be either 
 
 as the assipjnee mijiht procure, "debtor" or "bankrupt." Matter 
 
 Matter of Ketchum, Piatt vs. Jones, of Nichols, 1 Fed. 842; Piatt vs. 
 
 supra. Jones, supra. Nor will a court of 
 
 "In an unreported case Judge equity under such circumstances 
 lilatchford refused to make an order interfere by injunction, at the in- 
 for tlie sale, at auction, of a seat in stance of the assifinee or a purchaser 
 tlie Stock E.xchanije, solely l)ecavise from him who has not been admit- 
 he would not permit a public sale to ted to the E.xchange, to restrain the 
 be made under the sanction of the former bankrupt from using the un- 
 court, in a case where the assignee transferred seat or the Stock Ex- 
 could not undertake with the pur- change from allowing liim to do so. 
 chaser to deliver the thing sold." The membership of the Exchange 
 In re Gallagher, 16 Blatch. 117. Ix-iiig unlimited and the assignee or 
 The assignee in bankruptcy, how- vendee not being admitted, there is 
 ever, is not bound to accept prop- no injury done him by allf)wiiig the 
 erty of an onerous or burdensome former liankrupt to contiinie his use 
 nature, and may elect to accept or of the seat. When the vendee of 
 not a seat encumbered with debts the assignee had applied to the Ex- 
 to members of the Exchange, change to have his right recognized, 
 Twelve years of "masterly inac- or when he iiad been legally iiomi- 
 tivity" while the bankrupt was by nuted ami elected to the Exchange, 
 his own elTort.s discharging his debts then undoubtedly the jnri.sdiction 
 within tlie Exchange, was sufTicient of a court of e<)uity might be 
 ground upon which to decide that invoke<l to compel the former 
 the assignee had elected not to take, bankrupt, in case of his rcfus.il, to 
 Sparhawk vs. Verkes, 112 V. S. 1. execute any paper tlnit might be 
 
 The authority of the court of necessary to vcwt a complete title in 
 
 bankniptcy ceancs at the dlMclmrgo the applicant. McC'abe vs. lunmons, 
 
 and the former bankrujit cannot and Piatt vs. Jones, supra, 
 
 after that be com|)elled by such ' 1S7 I'. S. r^'M). Sec- also In ro 
 
 court to execute such iiuitrumentjj. .N'cimann, 121 Eed. 738.
 
 160 Stock-brokers and Stock Exchanges. 
 
 From the evidence it appeared that the seat had a decided 
 value, as the bankrupt had paid $5500 for it, and he testified 
 that tlie last price he had heard paid for a seat was $8500. 
 Upon the question of value the court said: " The contin- 
 gencies wliich may defeat or affect its title, or its enjoyment, 
 will be reflected in its price, and if, notwithstanding them, a 
 seat has a vendible value of from $5000 to $8000, it would 
 seem that tlie law should have some process to reach it for 
 the benefit of creditors. And the bankrupt act supplies the 
 process." The court also declined to follow the cases of 
 Thompson vs. Adams and Pancoast vs. Gowen, in so far as 
 it might be gathered from them that a seat in the Stock 
 Exchange was not property which might pass to a trustee 
 in bankruptcy, as these decisions were not interpretations 
 of a state statute, but were declarations of general law — 
 mere definitions of property — as to which the court might 
 dispute their conclusions, if their reasoning did not ])ersuade. 
 And an order directing the trustee to sell the seat at public 
 auction, subject to the by-laws of the Exchange, was ap- 
 proved. 
 
 Whether the Exchange should be joined as a part}'' in 
 such proceedings has been mooted. In the case of Campbell 
 vs. The New York Cotton Exchange,' in the New York 
 Supreme Court, Special Terra, the plaintiff, a receiver, set 
 up a judgment in favor of one Weeks vs. Talcott ; the owner- 
 ship by Talcott of the certificate 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 Ex- 
 change, " a transfer should be made by him to a member or 
 member-elect only ; " and that " any member may purchase 
 
 » N. Y. Daily Reg. Jan. 11, 1881; s. c. 47 N. Y. Super. Ct. 55&
 
 Seats Liable to Legal Process. 161 
 
 said rights of membership of any other member, which 
 shall give him the right to sell the same to any other mem- 
 ber or member-elect;" that plaintiff, as receiver in Weeks 
 vs. Talcott, prior to the commencement of this action, 
 received an offer from one M., a member, in good stand- 
 ing, of the Exchange, of $1000 for said seat; that Talcott 
 refused to excute the necessary transfers, and the suit is 
 brought to compel such transfers, it being alleged that Tal- 
 cott has no other ])ro[)erty. The corporation demurred to 
 the complaint, claiming that it was improperly joined as 
 defendant, thei-e 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 conditions precedent were performed, the Ex- 
 change would do what it ought to do. 
 
 But the demurrer was overruled on the ground that the 
 plaintiff's equitable cause of action comprehended a con- 
 summated assignment of the seat ; or, in other words, a com- 
 plete vesting of the right to a seat, which could not be ac- 
 complished 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 con- 
 nected with the defence of the action than would bo in- 
 volved in the defendant's scrutinizing any set of circum- 
 stances which Would lie jiresented to it with a demand of 
 transfer under the rules.' 
 
 ' It has not, however, been the compel the <lel)tor to assifin his seat 
 practice to join the Kxchuiific U8 a to a receiver in .siipplenicntnry pro- 
 party, and in Londhoiin vh. White, ceedinjis, it was hcltl that as all the 
 1 N. Y. City Court, S[M*cial Term, 07 rights and interests of the I';.\<han;;e 
 How. Pr. 107, where the ohjection in the niemhersiiip are fixetl and the 
 of nor»-joinder of the Exchange wiw transferee; takes it with the hunlen 
 raised in oppoHition to a motion to of thettc ^i^ht8, which co\ild not be 
 11
 
 162 Stock-brokers aud Stock Exchanges. 
 
 The following propositions may be deemed as settled : 
 
 1. That in the disposition of a scat, 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 and in the same manner as any other money or 
 property of a debtor. 
 
 4. That 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. IIow far the Exchange ma}'' 
 go in deciding that such a person is not acceptable to it has 
 not been decided. The Court of Appeals said,^ there is " no 
 case where the Stock Exchange has admitted to membership 
 the purchaser at a judicial sale. The court has no power to 
 compel such action and the probability of a creditor reach- 
 ing a favorable result by selling the seat of a member is, to 
 say the least, exceedingly remote." But it seems that the 
 
 divested by any order of the court, ner, 167 N. Y. 1. See also Ameri- 
 
 the Exchange was not a necessary can Live Stock Co. vs. Chicago Live 
 
 party. It certainly does not seem Stock Exchange, 143 111. 210, at pp. 
 
 proper to submit the Exchange to 228, 229. The Xew York Court of 
 
 the annoyance of being joined as a Appeals has decided that a patent 
 
 party in every such proceeding may be reached by a creditor's 
 
 where its own interests cannot be bill, and the debtor cannot set 
 
 infringed and where there is no up that it is invalid for want of 
 
 claim that it will infringe the in- utility, and therefore not property, 
 
 terests of others. Gillett vs. Bate, S6 X. Y. 87. 
 ' People ex rel. Lemmon vs. Feit-
 
 Liability of "Seats" to Taxation. 103 
 
 Exchange could not wantonly refuse a member leave to sell 
 to a proper person, and st'?)ihle also to one proposed by a 
 sequestrator.^ 
 
 X. Liability of "Seats" to Taxation. 
 
 The value of a seat in the Stock Exchange is, with some 
 judicial dissent, recognized to be capital invested in business^ 
 and as such liable to the operation of any tax law which 
 reaches personal property either in the usual acceptation of 
 that terra, or as it may be defined by statute, such for in- 
 stance as the Transfer or Inheritance Tax.^ 
 
 * London and Canadian Loan Co. property to pay that debt can be 
 
 vs. Morphy, 10 Ont. Sfi, at p. 00. pursued. An injunction will not be 
 
 The question as to how a seat in the granted restraining the transfer 
 
 Stock Exchange should be regarded pendente lite of such seat. First 
 
 in the settlement of the affairs of a Nat. Bk. as. Miller, Daibj Reg. Oct. 
 
 partnership, ha.s never apparently 2.5, 1882; 4 Mo. L. Bull. (N. Y.) 92. 
 
 directly arisen. It seems that ' People ex rel. Lemmon vs. Feit- 
 
 there can be no objection to part- ner, 167 N. Y. 1; Matter of Glen- 
 
 ners, only one of whom is a member dinning, 68 .^pp. Div. 125, aff'd 
 
 of the Exchange, making any bar- without opinion, 64 N. E. 1121; 
 
 gain they plea.se Ijetween them- Austen vs. Brigham, 67 N. Y. Supp. 
 
 selves about the seat of the Ex- 891. See also Matter of Curtis, 31 
 
 change partner and about the price Mbc. 83. 
 
 or value of it, subject of course to Money is capital and when money 
 
 the superior rights of the Exchange. Is invested in facilities or appliances 
 
 London and Canadian Loan Co. vs. to do business with, it is capital in- 
 
 Morphy, 10 Ont. 86, at p. 101. vested in that business; instances 
 
 An action cannot be maintained being money expended for the li- 
 
 which Is fnie at law to reco\cr judg- brary of a lawyer, tlic implcnienta 
 
 mcnt for del)t again.st three of four of a siirgeon, the patent rigiits of 
 
 defendant-s, and a creditor's bill as a manufacturer. The money ex- 
 
 to the other defendant, to reich an |)ended in buying a seat in the Stock 
 
 Exchange membership in the lut- Exchange is paid for property of 
 
 ter's name, but allogwl to have been great value and which is the main 
 
 purchaHe<l with tn(jncy Ix-longing to instmmentality for carrying on the 
 
 a copartiienship of the thrw other member's lju.sino.s8. IVr Vann, J., 
 
 defendantH and in o<jiiity to Ijclong in I'eople vs. Feitnor, l(i7 N. Y. I. 
 
 to them, UM a judgment for debt 'Matter of Ileilnian's F*st., 171 
 
 muiit alwayn be secured before the N. Y. 251, rev'g 77 \. i). 355; Mat-
 
 164 Stock-brokers and Stock Exchanges. 
 
 It has been held in New York that the definition of 
 the personal property upon which the latter taji is imposed 
 is that contained in section 242 of the Tax Law (Laws, 1S96, 
 ch. 908), and not in that of subdivision 5 of section 2 of the 
 same statute.' 
 
 A membership in the Stock Exchange is not, however, 
 considered to be personal ])roperty under the special and 
 limited definition of that species of property, given by the 
 last cited section (subdivision 5 of section 2),'^ and, therefore, 
 the value of a seat in that State, whether owned by a resident 
 or non-resident of the State, is not liable to the general tax 
 applicable to county, town, and municipal purposes, imposed 
 upon property by the Tax Law (Arts. 1-9).^ 
 
 In California it has been held that as a seat in the Stock 
 Exchange is a mere personal privilege to belong to an 
 association with the latter's assent, it is not liable to city, 
 county, or state taxes.* 
 
 XI. Gratuity Fund — Life Insurance. 
 
 The constitutions of both the New York and the Phila- 
 delphia Stock Exchanges make provision for the families or 
 representatives of deceased members. The New York 
 Produce Exchange has, by its by-laws, made similar pro- 
 vision in accordance with express authority in its charter,' 
 
 ter of Glendinning, 64 N. E. 1121, Brigham, 67 N. Y. Supp. 891, so 
 
 afT'g 68 A pp. Div. 125; Matter of far as it decides to the contrary. 
 
 Curtis, 31 Misc. 84; 64 X. Y. Supp. ^ San Francisco vs. Anderson, 36 
 
 574. Pac. 1034; San Francisco vs. Wang- 
 
 » Matter of Hellman, 174 X. Y. 254. enheim, 37 Pac. 221 . See also City 
 
 ' L. 1896, ch. 90S, § 2, subd. 4, of Baltimore vs. Johnson, 54 Atl. 
 
 made subd. 5 by L. 1901, ch. 490. 646. 
 
 ' People ex rel. Lemmon vs. Feit- ' Laws, 1882, ch. 36; Kemp vs. 
 
 ner, 167 X. Y. 1, which must be X'. Y. Produce Exchange, 34 App. 
 
 considered as overruling .Austen vs. Div. 175.
 
 Gratuity Fiiud. 
 
 166 
 
 and it has been held that it could not divert the fund which 
 it had accumulated to meet death losses, anil destroy the 
 vested rights of members therein, bv so amending its by- 
 laws as to provide for its distribution among the living 
 subscribing members. The power of such a corporation to 
 amend its by-laws is a power to regulate, within reasonable 
 bounds, not a power to destroy the contract rights of its 
 members.^ 
 
 ' Parish vs. New York Produce 
 Rxchange, 169 N. Y. 34. The 
 p-atuity fund of this Exchange 
 exists by \'irtue of a provision in the 
 charter of the Exchange, and an 
 additional reason given by the 
 court for its decision was that the 
 statute of uicorporation did not 
 confer upon the members of the 
 Exchange the power to create a 
 fund by assessment for di.stributing 
 among the subscribing membei-s 
 thereof. Had a by-law with that 
 purpose been enacted in the first 
 in.stancc it would have been without 
 authority in the charter, which did 
 not attempt to confer the power to 
 create a gratuity fund for distribu- 
 tion among the members of the 
 E.xchange, l)ut instead limited its 
 scope to that (jf provisions for the 
 widows and families of decease<l 
 members or other persons depend- 
 ent ufx>n a dc*cea.sed mcnil)er. 
 
 It hart, however, been since held 
 by the Supreme Court, Spt;cial Term 
 (French vs. Commercial ICxchange, 
 N'. Y. L. J. July Zr^, HK)2) that an 
 amendment to the by-laws of the 
 New York Merrantiie Kxchaii^re 
 (which is an incorporated !LHso<in- 
 tion), pfntiitting the withdrawal of 
 a member holding a certificate in 
 
 the participating class, upon gi^^ng 
 notice and relinquishing his claim 
 upon the gratuity fund, was not 
 unreasonable, as it did not under- 
 take to dispose of the funds on 
 hand, or any assessments which had 
 accrued, and that, therefore, it did 
 not interfere with the vested rights 
 of plaintiff (a participating member) 
 under the agreement by which 
 the participating membership was 
 formed. It is doubtful, however, 
 if the doctrine of this decision can 
 be upheld in view of the decision of 
 the Court of .\ppeals, ju.st cited 
 (Parish vs. N. Y. Produce Ex- 
 change, 169 N. Y. 34). If aU the 
 participating members of the Mer- 
 cantile Exchange should, imme- 
 diately after the passage of the by- 
 law, elect to avail of its provisions, 
 antl withdraw from the participa- 
 tion, tlic ()l)jo(t for which the fund 
 was established could not be ful- 
 filletl, viz: the making provision 
 for the widows and children, etc., of 
 such members, except to the extent 
 of the fund then existing, and even 
 as to that fimd, it could scan-ely lie 
 made available for the bencliriaries 
 under the by-laws, in view of such 
 general withdrawal.
 
 ItJG Stock-brokers and Stock Kxchanpres. 
 
 The question has arisen, in Pennsylvania, in regard to the 
 right of the representatives of a deceased suspended member 
 to recover the fund. 
 
 In this case ' the facts were these : One MacDowell, the 
 father of the phiintiff , purchased a seat in the Exchange, and 
 was elected a member August 28, 1865. In December, 1875, 
 while ^lacDowell was still a member, an amendment to the 
 constitution of the Exchange was passed, providing substan- 
 tiallv as follows : That every fall onemher of the Exchange 
 should, in addition to all other payments required of Ji'nyi at 
 the time of his admission, pay into the hands of the trustees 
 $15, and the ftrther sum of $\5 a7imially, on Decemher 1, 
 and also the sum of %\^ 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 fund arising from, such payments as the " Gra- 
 tuity Eu7id,'" and loere to pay therefrom, withiji thirty days 
 after the death (f any fxdl member, the sum o/'S2000 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 ]xiid all assessments except 
 those stated hereafter. 
 
 On November 17, 1877, the following amendment to the 
 constitution was adopted : 
 
 " That any suspended member who shall have failed for 
 three months to j>ay in full all gratuity dues and assessments, 
 shallforthwith cease to be a full member for the purposes of 
 this section j such memher maybe restored to such full mem- 
 bership by a favorable report of the Standing Committee, 
 
 * MacDowell vs. Ackley, 8 Week. Notes Cas. 464.
 
 Gratuity Fund. 1(17 
 
 upon paying infuU all arrears of gratuity dues and assess- 
 ments. ^^ 
 
 It was not shown that MacDowell ever expressly assented 
 or agreed to this amendment. lie failed to pay his regular 
 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 1S7S, and 
 continued indebted in these amounts to the Exchange until 
 his death. In April MacDowell became hopelessly insane, 
 and he was subsequently, in August, duly suspended in ac- 
 cordance with the rules fornon-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 
 gratuity from the Exchange should be paid. 
 
 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 assess- 
 ments ; said proceeds were not distributed, however, but 
 were held by the treasurer of the Exchange. This action 
 was brought by the guardian of tlie heir of ^lacDowell 
 against the ofScers, etc., of the Exchange to recover the sum 
 of $2,000 above provided for. Judgment was rendered for 
 the defendant, which was affirmed by the Supreme Court, 
 where it was held that the right of ^facDowell in this 
 Gratuity Fund was grafted on his existing mombersliij) in 
 the Stock Exeiian^^e, and that ho Wiis ij(jund by the amend- 
 merit which had been regularly adopted. The court further 
 h(ild that hisal)sence when the aniendnieut was a<l<)j)ted, 
 even if shown, could not avail ; that even if lie had dis- 
 8entc<l therefrom ho couhl not have heen relieved from its
 
 168 Stock-brokers and Stock Exchiiiii^es. 
 
 obligation ; for, lia\ iiig subscribed to the constitution and 
 bv-la\vs, and the change havin<; been made in accorchmce 
 therewitli, he could not be i)erniitted to (juestion its validity ; 
 he could not enjoy the benefits of the fund without perform- 
 ing his jxirt towards creating it; and that his subsequent 
 mental incapacity did not relieve hiiu from the effect of 
 previous neglect and refusal to discharge his legal and just 
 duty. 
 
 Article XYIII. of the constitution of the New York 
 Stock Exchange, establishing the gratuity fund, will be 
 found in the appendix, and the by-luw of the Produce 
 Exchange is substantially the same.* 
 
 The agreement of the Stock Exchange, expressed in its 
 constitution, does not bin<l that body to pay upon the death 
 of a member the full sum named, but only to pa}'' that 
 suni or such part thereof as shall be yielded by levy and 
 assessment upon surviving members.^ While it is called a 
 gratuity it is beyond the power of the Exchange itself to 
 withhold it, after collection, against those beneficially inter- 
 ested.^ 
 
 The right to the gratuity fund falls with the loss of 
 membership or the non-payment of subscriptions in accord- 
 ance with the constitution and by-laws."* 
 
 The provision in the plan against assignability for debts 
 has been sustained by the courts. The gratuity is " in- 
 capable of assignment. It was the intention to create pro- 
 vision for the family of the deceased member which should 
 
 'Kemp vs. New York Produce ^ Webb vs. Meyers, 67 Hun, 11. 
 
 Exchange, 31 App. Div. 175; Mc- See also Matter of Xoyes, 5 Dem. 
 
 Cord vs. McCord, 40 App. Div. 307. 
 
 275. ^MacDowell vs. Ackley, 93 Pa. 
 
 ' Matter of Xoyes, 5 Dem. 309, at St. 277; Matter of Fay, 25 Misc. 
 
 p. 317. 469.
 
 Gratuity Fund. 169 
 
 be beyond the hazard of loss from pecuniary misfortune.'' * 
 It is not liable to the payment of debts or legacies- and 
 even an assignment made during the life of a member, by 
 his wife, who was the sole beneticiary of the fund, in which 
 assignment the husband joined, would not vest in the as- 
 signee any interest in the fund.^ 
 
 In the last cited case tbe court based its conclusion " upon 
 the broad ground that it would not only be against public 
 }X)licy to uphold the assignment, but it would be subversive of 
 the entire plan of beneficence as embodied in the constitution 
 and by-laws of the Exchange." * 
 
 Nor does the fact that, with the consent of a creditor to 
 whoui a seat in the Boston Stock Exchange was assigned 
 to secure a loan, part of a gratuity fund paid to the assign- 
 or's widow, was applied in part payment of the loan, 
 preclude the creditor from enforcing his lien against the 
 proceeds of the sale of the seat, as the gratuity was not 
 a right, but merely a gift from the other members to the 
 widow.^ 
 
 Nor has the member any such property right in the 
 gratuity fund as would enable him to change the benefi- 
 ciary while living or alter the disposition of the fund by 
 his will.® And it is not taxable under the Transfer or 
 
 ' Kemp vs. New York Produce * Xiishua Bank vs. .\bbolt, 63 
 
 Exchai.fie, 34 App. Div. 175. N. E. (.Mxs.s.) 105S. 
 
 'Matter of Fay, 25 MLsc. 408. ' Webb vs. Meyers, 04 Hun, 11. 
 
 * McCord vs. McCord, 46 App. Yet, where in making a particular 
 Div. 275. lefjacy to hLs next of kin, the testa- 
 
 * Id. The arpumont uprjii tlie tor nianif«?sts liis intention that the 
 ground of puljlic policy is ba.si.-d upon amount of the gratuity fiuid sliall 
 the Himilarity f)f the jrratuily fund to form pari, thereof, as l)y directing; 
 ordinary life insuranctf policies for his executors to collect it and apply 
 the l)enefit of thfwe dep<-ndcnt upon it on the le;;acy, the lc;:ateo is 
 the insured, whicli in .New York are deenu'd to take the (gratuity iw pro 
 generally non-a«HiKnabl<' Id tanto in satisfaction of the IcRacy,
 
 170 Stock-brokers and Stock Exchauses. 
 
 Inheritance Tax, as assets of the deceased, as it passes 
 not by virtue of his will, or the administration of his es- 
 tate, but by the contract of the deceased with the Ex- 
 change.* 
 
 The fund is to be paid to the widow, descendants, children, 
 adopted children, or next of kin,^ but under by-laws wherein 
 children and not adopted children were mentioned, an 
 adopted child, in view of the statutes giving to such all the 
 ri"-hts of a child includino: that of inheritance, was held en- 
 titled to share in the fund and this, it was said, would be so 
 even if the deceased adopted the child, for the very purpose 
 of enabling the adopted child to obtain the fund.^ 
 
 The meaning of the term "next of kin" as used in the 
 gratuity fund article is to be determined according to the 
 law of the State at the time the fund becomes payable.* 
 
 It is provided that, " In all cases a certified copy of the 
 proceedings before a Surrogate or Judge of Probate shall be 
 accepted as proof of the rights of the claimants, be deemed 
 ample authority to the Exchange to pay over the money, 
 shall protect the Exchange in so doing, and shall release 
 
 under the familiar doctrine in the ^ Article XVIII. § 5, as amended 
 
 law of wills, that a beneficiary who to April, 1903. Should there be 
 
 accepts the bounty of a testator none of these, it shall be credited to 
 
 must do so upon such terms as the the members against whom the as- 
 
 testator has imposed. Matter of sessmcnt shall have been levied. 
 
 Noyes, 5 Dem. 309. And if an ^ Kemp vs. New York Produce 
 
 executor collects the pjatuity, and Exchange, 34 App. Div. 175. 
 
 treats it as part of the estate, and Semble that the adopted child 
 
 his account is adopted as rendered, might, under the .statutes of New 
 
 the surrogate has no jurisdiction to York, claim the fund, as next of 
 
 reopen the decree for the purpose of kin, if not considered as the child 
 
 having the amount thereof deducted of the deceased wthin the by-law. 
 
 from the estate. Watt's Estate, 20 Ibid. 
 
 N. Y. Supp. 03. ■• Kemp vs. New York Produce 
 
 ' Matter of Fay, 25 Misc. 468. Exchange, 34 App. Div. 175.
 
 Gratuity Fund. 171 
 
 the Exchange forever from all further claim or liability 
 whatsoever.-' ^ And payment so made, though to persons 
 not justly entitled thereto, discharges the Exchange from 
 any hability to again pay it over, even to the rightful owners 
 thereof. This protection, however, to the Exchange does 
 not affect the right or title of those legally entitled to the 
 fund to recover the amount from the jierson to whom it 
 was paid, as money had and received to their use.- 
 
 All interested beneficially in the fund should join in any 
 action for its recovery from the Exchange. It cannot be 
 sued therefor piecemeal.^ 
 
 In concluding this review of the general legal character of 
 unincorporated Stock Exchanges, we find that the subjects 
 discussed are comparatively new in the law, and lience we 
 have, at great labor and expenditure of time, set fortli the 
 most important 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. 
 
 ' Art. XVIII. § 5. Exchance CSpecial Term, X. Y.), 
 
 * Webb V.S. Meyers, G4 Hun, 11. N. Y. Law Journal, July 11, 1901. 
 ' Diepenbrock va. N. Y. Produce
 
 IT'J Stock-brokers and Stock Kxchaii^es. 
 
 Chapter III. 
 
 ANALYSIS OF TRANSACTIONS BETWEEN BROKER AND 
 CLIENT UPON PURCHASE OR SALE OF STOCKS IN THE 
 UNITED STATES. 
 
 1. Stock-Brokers and Stock Exchanges — License. 
 
 II. Legal Relation of Stock-Broker to his Client. 
 
 III. Definitions of Terms Used. 
 
 IV. Piu'chase on '■^ Long Account'''' — History of Trans- 
 
 action, 
 {ci.) The Order to Purdiasc — Price — Number uf Shares to 
 
 he Bought. 
 (Jb.) Dutg and LlahUlty of Broker in. Parrhoshig ; Right 
 
 to Indevinitij. 
 (c.) Disposition of Stock xohen Purchased ; Safely Keep- 
 ing same ; Liability to Keep Identical Stock Pur- 
 chased^ etc. 
 (d.) Dividends, Profits, Assessments, Calls, Interest. 
 (e.) Rigid of Client to Control and Take Up Stock. 
 Y. Duty of Broker to sell — ^^ Stop Order'' 
 VI. Special Contract loith Client — Joint Adventures in 
 Stocks. 
 VII. Sales for " Short Account.^'' 
 («.) Nature of Short Sale, 
 (b.) Duty of Broker to Sell at Price Ordered. 
 (f.) Nature of Contract Made upon '' Borrou-ing " Stock ; 
 
 and From Whom the Stock may be Borrowed, 
 (d.) Duty of Broker to Close " Short " Contract by 
 " Buying in " Stock.
 
 License. 173 
 
 VIII. Compulsory Sale hy Broler. 
 
 (a.) For Failure to Put Up Mnvgins. 
 
 (b.) Form of Notice ; Upon Wliom Served ; Reasonable 
 
 Time. 
 (c.) Notice of Sale for Failure to Comply with Demand 
 
 for Mary ins. 
 (d.) Place of Sale. 
 (?.) Broker Cannot Sell or Purchase. 
 (/.) Effect of Sale or Purchase by Broker. 
 IX. When Broker can Close the Transaction. 
 
 X. When Broker can Act by Substitute. 
 XI. Broker'' 8 Commissions. 
 XII. Comjnu7iications betweeii Broker and Client not 
 
 Privileged. 
 XIII. Puts, Calls, Straddles and Pools, considered apart 
 
 from their wagering aspect. 
 XI Y. The Clearing Ilonse. 
 
 1. Stock-Brokers and Stock Exch.anj^es — License. 
 
 Ik the United States tlie business of buviiif}: and selling: 
 stocks and other securities is generally transacted by Bro- 
 kers for a commission agreed upon or regulated by the 
 usages of tiie })lace ; and although any person may enter 
 into such an occupation* upon his obtaining a license for 
 
 ' A national hank, however, is not But it is within the incidental 
 by its charter, or incidental!}', au- powers of a national hank, as part 
 thori7e<J to act as l>roker in the of the business of l)ankin>j, to sell 
 purchase or sale of bonds and securities for a customer, where such 
 Blocks. First National Hank vs. sale is simply for the purpo.se of 
 Charlotte, 02 U. S. CI Otto) 122; increjisin^^ the customer's d(>p<isit 
 bank of AUentown vs. Hoch, 89 account with the hank. William- 
 Pa. St. 324; Wickler vs. First Na- son vs. Mason, 12 Hun, \M . 
 tional Bank, 42 Md. 581, and cases 
 cited.
 
 174 Stock-brokers and Stock Exchiiuges. 
 
 that purpose, when he intends to carry on the business of 
 a Stock-broker in a State whose legislation makes a license 
 a prerequisite, such business is now generally restricted to 
 Brokers wlio are members of Stock Exchanges. 
 
 In Pennsylvania the occupation of Stock-broker is reg- 
 ulated by statute, the substance of which is here given: 
 
 I. Stock-brokers to be licensed, etc. 
 
 5. License to be renewed annually, etc^ to enure for the 
 benefit of assignees or legal representatives. Proceedings in 
 such cases : Brokers not to use more than one place of 
 business. The same person may be licensed as stock, ex- 
 change, and bill Broker. 
 
 6. Penalty for acting without license. 
 
 9. Tax on Broker's license. Three per cent on com- 
 missions, etc. (Stock, bill and exchange Brokers were re- 
 lieved from license tax by the Act of June 7, 1901, P. L. 
 254.) 
 
 10. To be appraised. 
 
 II. How classified. 
 
 12. To make annual returns on oath. 
 
 13. Statement of name of Broker or firm, location of 
 business, and amount of capital engaged to be reported to 
 the auditor-general. 
 
 14. Penalty for neglect. 
 
 15. Power of auditor-general in relation to penalties. 
 
 16. Tax on receipts to be additional to license. (This tax 
 was reduced from three to one per cent by the Act of 
 June 13, 1901, P. L. 266.y 
 
 ' See 1 Pepper <t Lewis's Digest of 1899, p. 184, and Opinion of Attor- 
 
 the Laws of Penna. tit. "Brokers," ney General of Penna., 9 Dist. Ct. 
 
 where the cases arising under the Rep. 166. 
 statute are given. See also P. L.
 
 License. 175 
 
 Under authority of the legislature, Chicago has enacted 
 an ordinance making it unlawful to follow the business of 
 a Broker generally, without a license therefor. The text of 
 the statute and the ordinance may be found in the cases 
 hereinafter cited. 
 
 The constitutionality of this license tax was attacked in 
 Ulinois, but unsuccessfully, the supreme court holding that 
 a tax upon occupations or employments whether for rev- 
 enue or as an exaction for the privilege of pursuing a call- 
 ing may be imposed in the form of a license tax and that 
 the legislature is not restricted therein to occupations or 
 businesses which are immoral, vexatious or injurious to the 
 well-being of society, nor is it necessary that before a busi- 
 ness can be regulated or burdens imposed upon its exer- 
 cise, that there should be power to suppress it. " It is true 
 that in order to be effectual, a license must confer author- 
 ity to do that which without the license would be illegal 
 but . . . the occupation may be lawful in itself and not sub- 
 ject to prohibition or regulation by the State, yet it may be 
 prohibited in order to compel the taking out of a license if 
 the purpose is to raise revenue by means of license fees. 
 Co(jley on Taxation, pp. 595, 507." The constitutional re- 
 quirement of uniformity in taxes is met by a uniform 
 operation upon all within the class to be taxed, and the 
 taxing or licensing power may be delegated by the State to 
 its municipalities.' 
 
 Tile ordinance defines a i'roker as " one who for coniinis- 
 sion or othcr'-()nipcnsiition i-icML'.igrd in st-llinn'oi- in-Liot iat in"-- 
 the sale of goods, wares ;ind iiii'rciiandi.M', pfuduct* or >n-,i\n 
 belonging to others" and tlir phrase " goods, wares and 
 
 ' Bantu VH. Cliiciiuo, 17-' 111. JOJ; h. c. JO L. II. .\. (ill; Hniuii va 
 ChicaKo, no 111. ISO.
 
 176 Stock-brokers jiiui Stock Exchanges. 
 
 merchantlise " includes shuies in the stock of incorporated 
 companies and other securities which are the subject of 
 common barter and sale, and which are given visible and 
 palpable form by means of certificates, bonds, or other evi- 
 dences of indebtedness.' 
 
 Brokers in mining stocks are also included in the "words 
 quoted, and a Broker who has dealt in stocks for a third 
 party in violation of the ordinance cannot maintain an ac- 
 t ion for his commission.^ But in Indiana, where there is also 
 a licensing statute (§ 5269, Horner's Stats. 1902 ed.), an un- 
 licensed person not engaged in " the regular brokerage busi- 
 ness," to which regular business the statute only applies, w^as 
 not debarred from maintaining an action for compensation 
 for effecting the sale of stock.^ And the statute does not 
 .apply to persons dealing in stocks, etc., on their own account.'* 
 
 In Colorado cities are empowered to license Brokers. 
 Mill's Ann. Stats. § 4403, cl. 61. 
 
 In Kansas cities may collect a license tax from keepers 
 of " bucket" shops and option dealers. Gen. Stats. (Dass- 
 ler) § 727. 
 
 In Maryland Stock-brokers were required to be licensed. 
 Public Gen. Stat, art 56, § 12, but this section was repealed 
 by L. 1896, ch. 144. 
 
 In Missouri money Brokers and exchange Brokers must 
 be licensed. Rev. Stats. § 5203. A savings bank whose 
 president acts on behalf of the bank as a money Broker 
 and exchange dealer need not be licensed.^ 
 
 ' Banta vs. Chicago, supra. * Henderson vs. State, 50 Ind. 
 
 ' Hustis vs. Pickands, 27 111. App. 234. 
 
 270. ^ State vs. Field, 49 Mo. 270. 
 
 ' Johnson vs. Williams, 36 N. E. For other cases on this subject, see 
 
 Rep. 167. See also O'Neill vs. Sin- footnote to Missouri Rev. Stat, 
 
 clair, 153 111. 525. pp. 1212, 12ia
 
 License. 177 
 
 In Michigan, Brokers and exchange dealers shall not en- 
 gage in such business until a verified certificate giving cer- 
 tain i)articulars is first filed with the county clerk. Comp. 
 Laws, §§ 5271-5276. 
 
 Coupon Brokers must be licensed in Virginia. Code, 
 § 402, L. lSS3-t, § 05 ; also Stock-brokers. L. 1883-1884 
 §§ 58-60.» 
 
 All the foregoing enumerated States (nine in number) 
 comprise some of the sixteen States in the principal cities 
 of which stock exchanges have been organized. The re- 
 maining seven States have not enacted any licensing laws 
 as to Stock-brokers. 
 
 Other States (in which stock exchanges have not been or- 
 ganized) also provide for the licensing of Stock-brokers. In 
 Tennessee, a Broker's privilege tax is not payable by one 
 who sells stocks or bonds purchased with his own moneys.^ 
 
 In West Virginia Stock-brokers must be licensed. Code, 
 ch. 32;§ 2. 
 
 The city of Little Rock in Arkansas has power under an 
 act passed in the vear 1875 (§ 12) to license Brokers who 
 buy or sell scrip, bonds or exchange.'' 
 
 Under tiie United States Internal Revenue Act of 1864 
 (now repealed), bankers as such, Brokers, and bankers doing 
 lousiness as Brokers were required to pay certain taxes 
 upon their transactions.^ 
 
 •Com. vs. Lucas, 84 Va. 303. Blatch. 243; Clark vs. Hailey, 12 
 
 ' State vs. Duncan, S4 Tenn. 7r.. lilatch. 1.%; s.c, afT'd 21 Wall. 284; 
 
 * City of Little Kock vs. Burton, Hankers' Cases, 11 Op. Atty. Clen. 
 
 33 .\rk. 130. |,S2; Selden vs. Ivjuituble Trust Co., 
 
 U'lurk vs. Gillx-rt, .') Bhitdi. 330; 'M U.S 110; Warren vs. Sliook, 91 
 
 United States vs. Cuttinu, 3 Wall. T. S. 701, followed in State vs. 
 
 441 ; riiit«-<l States vs. Fisk, 3 Wall. Duncan, 10 Lea (T«"i»), 75. 
 •ll.'j; .Vnnhnip vs. Slujok, 10 
 
 12
 
 178 Stock-brokers aud Stock Exchanges. 
 
 By the act of June 13, ISOS (30 U. S. Stats, at Large 
 ch. 44S), coiuinonly spoken of as the AVar Revenue Act, 
 ail annual special or license tax of $50 was imposed upon 
 hankti-s and a similar tax upon stock and bill Brokers, and 
 in tlie case of sales of stocks the seller was required to de- 
 liver to the buyer a meuiorandum of the sale, sliowing 
 the date of the sale, the name of the seller, the amount of 
 the sale or tlie matter or thing to which it referred. A tax 
 of two cents for each $100 of the face value of the sale was 
 imposed by the act, and adhesive stamps denoting the 
 amount of the tax were required to be affixed to such 
 memorandum. 
 
 A memorandum and stamps were also required upon 
 each sale or agreement to sell any products or merchan- 
 dise at any exchange, board of trade, or similar place. 
 
 The constitutionality of the provision requiring such 
 memorandum and stamping has been upheld in Nicoll vs. 
 Ames,' but since these provisions were entirely repealed by 
 the act of April 13, 1902 (32 Stats, at Large, ch. 500), it is 
 not deemed necessary to do more than mention the cases. 
 The War Revenue Act was also considered in McClain vs. 
 Fleshman.^ 
 
 The question of the taxability of seats in the Stock Ex- 
 change is taken up in another place {ante, pp. 163-4). 
 
 Stock Exchanges have been organized in the following 
 cities of the United States, viz. : New York, Philadelpliia, 
 Chicago, Boston, St. Louis, San Francisco, New Orleans, 
 Denver, Baltimore, Cleveland, Cincinnati, Detroit, Kansas, 
 
 ' 173 U. S. 509. Also in United Fed. 880. Also in White vs. Treat, 
 States vs. Thomas, 115 Fed. 207. 100 Fed. 290. 
 ' 105 Fed. 610; s. con appeal, 106
 
 Lej;al Relation to Client. 179 
 
 Providence, Indianapolis, Richmond, Washington, Pitts- 
 burg, and Los Angeles. 
 
 About twenty per cent of the members of the Xew York 
 Stock Exchange are known as " Room Traders,'" i. e. they 
 devote themselves exclusively to dealing in securities on 
 their own account, and in this respect they resemble the 
 London Stock Jobbers. See cha])ter IX. 
 
 Other members of the various Stock Exchanges buy and 
 sell securities for themselves, besides transacting brokerage 
 business for their clients. 
 
 n. Legal Relation of Stock-broker to his Client. 
 
 Considerable discussion has arisen in the cases, especially 
 those in the State of New York, as to the precise relation 
 which exists, where a Broker witli his own money purchases 
 or sells stocks, etc., for his Client, for the purposes of specu- 
 lation. 
 
 Does the Stock-broker in such a transaction, in the ab- 
 sence of an express agreement defining the relation, unite 
 in himself the characters of " Broker," " pledgee," and 
 " trustee < " 
 
 The importance of this question is obvious, because, if it be 
 answered affirmatively, it would seem to folhjw tiuit all of 
 the incidents and conso(|uenccs of those characters would 
 attach to the Broker, in iiis dealings with his Client; but, 
 on the other hand, if the (piestion be answered negatively, 
 tiie sitiiph; relation (>\' debtor and creditor, arising out <^f a 
 breach of conti-act, would exist. 
 
 The emb:irrassuienl of the (|uestion arises from the fact 
 that, in tin; e.'isc; of an ordinary pnrchas(! of stocks for sper- 
 ulation, on a margin, the Stock-broker, without literally
 
 180 
 
 Stock-brokers and Stock Exchanges. 
 
 filling the techuiciil delinitions of " Broiler," "pledgee," or 
 " trustee," comes within the purview of all of those terms. 
 
 lie 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 
 
 'Hays vs. Currie, 3 Sand. Ch. 
 Ketchum's ed. 638 (marginal paging 
 5S5). 
 
 ' The question of a Stock-broker's 
 relation to a client for whom he 
 makes advances, on stocks pur- 
 chased by, and held by, him as 
 security for his advances, came in 
 question incidentally in a recent 
 case (People ex rel. Sands vs. Feit- 
 ner, 76 App. Div. 620; 79 N. Y. 
 Supp. 1143, no opinion, aff'd 173 N. 
 Y. 647). The relator contended 
 (see New York L. J. November 8, 
 1902, giving the arguments of coun- 
 sel) that a large sum alleged to be 
 due by him to his Stock-brokers, 
 should be allowed as a deduction in 
 assessing his personal property for 
 tax for the year 1901, on the ground 
 that his relation with his Broker 
 was that of pledgor and pledgee, 
 and that he absolutely owned the 
 stocks purchased for him, and owed 
 the Brokers, as pledgees, the 
 amount of their advances. The 
 claim of the tax commissioners was 
 that as the only liability of relator 
 was contingent on a fall in the price 
 of the securities, he had shown no 
 present liability under the contract 
 with his brokers, and a.s it was uncer- 
 tain what, if an^-thing, would ever 
 become due from him to his Brokers, 
 
 the deduction should not be allowed. 
 The question was decided at Special 
 Term adversely to the relator's 
 contention, and this decision was 
 unanimously aflirmed by the .\p- 
 pellate Division, whose decision 
 was affirmed by the Court of .\p- 
 peals on the ground that the ques- 
 tion of fact thus passed upon was 
 not reviewable. 
 
 In a prior case in the Surrogate's 
 Court it was held, in a similar state 
 of facts, that the client's title to the 
 stocks was not absolute but he held 
 merely the rights of a pledgee with 
 relation to it, the Brokers lieing the 
 owners of the property at law, sub- 
 ject to the client's right to redeem 
 upon paying the entire amount of 
 the debt, and, therefore, on the 
 client's death, when the securities 
 were sold by the Brokers for a sum 
 less than what was due them, the 
 A'alue of the stocks sold was not 
 part of the decedent's estate for the 
 purpose of transfer tax. In re 
 Havemayer, 32 Misc. 416. If a 
 Broker sells stock on his own ac- 
 count to his client, the mere fact 
 that he acts as a Broker in other 
 transactions, does not convert the 
 former stock into a pledge. The 
 relation of the parties as to that 
 stock IS that of vendor and vendee.
 
 Legal Kelatioii to Client. 181 
 
 honesty and good faith in his transactions ; anil whatever 
 benetit arises therefrom enures to the cestal (jiw t/'U6'i} 
 
 The circumstances attendant upon an ordinary transac- 
 tion between a Broker and his Client in «. stock speculation 
 are carefully described by Hunt, Ch. J., in a leading case in 
 the State of Xew Tork.^ 
 
 " 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 cus- 
 tomer advances ten per cent, of their market value, and 
 agrees to keep good such pi-oportionate 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 ])er 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 tlie value of the stocks 
 is the gain of the customer, and not of the Broker. 
 
 " 4. At all times to have in his name, or under his control, 
 ready for deliver^', the shares purchased, or an equal amount 
 of other shares of the same stock. 
 
 " 5. To deliver such shares to the customer, when re- 
 Leahy vs. Lobdell, 80 Fed. Rep. ' .Markliaiii vs. Jaudon, 11 Y. N. 
 00.5. 235. This analysis of tlic oi)iiKa- 
 
 ' That the position which aStoek- tion of the parties to a purchjise of 
 l>roker occ-upies in relation to liis stocks on nuir^;in wa-s adopted liy 
 principal is that of a tni.ntec has tlie Connect icnt S\ipronic Court. 
 liMMi held in Tavlor vs. Pluiner, 3 SkifT vs. Stoddard, (i.'J Conn. IDS; 
 M .t S. 5fi2; Ex parte CVxjk. I Ch Jl L. H. .\ ll.J. 
 Oiv. 123.
 
 182 Stock-ln'ok<'rs and Stock Kxchuuges. 
 
 quire<l by him, upon the receipt of the advances and com- 
 missions accruing to the Broker ; or, 
 
 '' 0. To sell such shares, upon the order of the customer, 
 uj)()n payment of the like suras to him, and account to the 
 customer for the proceeds of sucli sale. 
 
 " Under this contract the customer undertakes : 
 
 " 1. To pa}' 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 
 required by the Broker, and to pay tlie difference between 
 the percentage advanced by liim and the amount paid there- 
 for by the Broker."^ 
 
 It may be well to set forth the history of an ordinary 
 transaction between a Client and Broker, even with a little 
 more detail than that contained in the foregoinjj: extract. 
 The ordinary 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 fre- 
 quently none is advanced, according to the confidence which 
 the Broker has in the ability of the Client to respond to 
 ultimate loss. But, whether the Broker advance all or only 
 the principal portion of the sum invested in the securities, 
 the relation of the parties 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 
 
 ' See also Brass vs. Worth, 40 ^ Markliam vs. Jaudon, 41 N. Y, 
 Barb. 648. 235.
 
 Legal Kelatiou to Clieut. 183 
 
 Stock Exchange and executes the business, making a verbal 
 contract therefor with another Broker. Frequently the 
 Broker, upon receiving an order, deputes another, or subordi- 
 nate. Broker to do the business. This is contrary to the 
 general principal of law, that an agent cannot delegate 
 his business to another — " delegata potestas non potest 
 delegar'i i'"^ but it is justified by the general usage of Wall 
 Street, of which the Client has express or implied knowledge.* 
 
 The exact transaction in the Stock Exchange is as follows: 
 
 The selling Broker offers for sale his securities, and if there 
 is a Broker present who Avishes to purchase, the contract is 
 completed, upon his assenting to the terms mentioned. 
 
 All offers to buy or sell securities shall be for 100 shares 
 of stock, or for $10,000 par value of bonds, unless otherwise 
 stated.^ 
 
 Some rules of the Stock Exchange are here given which 
 further illustrate the transaction in the Stock Exchange. 
 
 All bids and offers made and accepted in accordance with 
 the rules of the Stock Exchange shall be binding.^ 
 
 Bids and offers may be made only as follows : 
 
 (a) " Cash," i. e. for delivery upon the day of contract. 
 
 (J) " Tleguhir way," i. e. for delivery upon the business 
 day following the contract. 
 
 (c) " At three days," i. e. for delivery upon the third 
 d;iy following the contract. 
 
 {(1) " i>uyer's," or " Seller's " options for not less than four 
 days, nor more than sixty days. 
 
 ' Leake's DIk- Lhw of ('out. 4S2. Stock Exchange, Hull's for tlir 
 
 ' .Sc«; oil thiH H>iljj(!ct, HulxliviHion traii.saction or coiKluct of businexs, 
 
 X., " Wlnrii I'.rok«;r can act by mib- Art. XXIII. § 2. 
 
 Btitutc," p. :j'Jl. * Id. 5 1. 
 * CotiMtitutiun of tlie New York
 
 184 Stock-brokers and Stock Kxcliant^es. 
 
 Bids ami offers iiiuler oiicli ol' iliese specilications may be 
 made simultaneously us being essentially different })roposi- 
 tions, and may be separately accepted without precedence 
 of one over another. 
 
 Bids and offers made without stated conditions shall be 
 considered to be in the " regular way." 
 
 On transactions for more than three days written con- 
 tracts shall be e.Kchanged on the day following tlie transac- 
 tion, and shall carry interest at the legal rate, unless other- 
 wise agreed ; on such contracts one day's notice shall be 
 given, at or before 2:15 P. M., before the securities shall be 
 deliverable prior to the maturity of the contract. 
 
 On offers to buy " Seller's Option, or to sell " Buyer's 
 Option," the longest option shall have precedence. On of- 
 fers to buy " Buyer's Option," or to sell " Seller's Option," 
 the shortest option shall have precedence.^ 
 
 No party to a contract shall be compelled to accept a 
 substitute principal, unless the name proposed to be sub- 
 stituted shall be declared in making the offer, and as a part 
 thereof.^ 
 
 "When a disagreement arising from a transaction in se- 
 curities shall be discovered, the money differences shall 
 forthwith be established by purchase or sale by the chair- 
 man, or by mutual agreement.^ 
 
 All deliveries of securities must be made before a quarter 
 after 2 o'clock P. M., otherwise the contract may be closed 
 " under the rule," in the manner provided by Art. XXVIII.^ 
 
 On half holidays securities sold for " cash " must be de- 
 livered and received at or before 11: 30 o'clock A. M., 
 
 ' Id. § 3. » Id. Art. XXX. 
 
 ' Id. .\rt. XXIV. § 9. •• Art. XXVI. § 1.
 
 Legal Relation to Client. 185 
 
 otherwise the contract may be closed "■ under the rule " 
 (Art. XXYIII.), after 11:40 o'clock A. M.' 
 
 In all deliveries of securities, the party delivering shall 
 have the right to require the purchase money to be paid 
 upon delivery ; if delivery is made by transfer, payment 
 may be required at time and place of transfer.'- 
 
 But to continue : the Brokers, in making transactions 
 with one another, do not know for whom tliey are made, 
 the names of the principals being jealously concealetl. One 
 Broker looks to the other contracting Broker to carry out the 
 transaction, and in practice there is no attempt made to 
 enforce any liability against the principal should he become 
 known. Here another 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 other contracting Broker? "We shall not attempt 
 to answer these questions in this place, but they are sug- 
 gested as they arise in tiie history of the transaction.^ 
 
 In transactions for three days or less, there is no written 
 contract as a general rule between the Brokers, each one 
 merelj' dotting down the transaction made. On transac- 
 tions for more than three days written contracts must, as 
 alreadv stated, be exchanged on the following day. But 
 as to every transaction it is the (hity of every humhIjcm- to 
 report eacli of liis transactions as j)i'oni))tly as |)()ssil)l(' at 
 his office, wiiere he shall furnish op|)ortunity for prompt 
 comparison.' If there is no written contract the contract 
 is invalid in a niajority of the States under the Statute of 
 Fraud.s.^ P.ut the rules (Art. .Will. ,^ 1) make theui 
 
 «Id. S5. * Art .XXIV. § 1 ot soq. 
 
 Ufi. .\rt. X.XV. i 1. 'So*' post, eh. VII. tit. "Stiitute 
 
 '.Sec th'w Hubjcct conHidercnl, <h. of KruudH." 
 VII.
 
 186 Stock-brokers and Stock Kxchaiiges. 
 
 inviolable between the members in the tribunal known as the 
 " Arbitration Committee." 
 
 On the f()liowin<i: dav, if the transaction is made " in the 
 regular way," the stocks are duly delivered at the office 
 of the purchasing Broker by the selling Broker, who re- 
 ceives payment for them. If tlie sale be made on time, the 
 transaction is C(>m})leted when the time expires. The 
 stock, when receivetl, remains in the office of the purchas- 
 ing Broker to await the further orders of the Client. Some- 
 times the stock is held by the Broker with merely a general 
 power of attorney in bhiiik attached to or endorsed on it. 
 
 The receiver of the shares of stock shall have the option 
 of requiring the delivery to be made either in certificates 
 therefor or by transfer thereof ; except that in cases where 
 personal liability attaches to ownership, the seller shall 
 have the right to make delivery by transfer. The right 
 to require receipt or delivery by transfer shall not obtain 
 while the transfer books are closed.' 
 
 Deliveries of securities on contracts subject to the rules 
 of the Exchange shall in all cases confoi'in to the require- 
 ments for regularity which may be made from time to 
 time, by the committee on securities.^ 
 
 The buyer must, not later than 2:15 o'clock P. M., accept 
 and pay for all or any portion of a lot of stock contracted 
 for, which may be tendered in lots of one lumdred shares, or 
 multiples thereof ; and he may buy in " under the rule" the 
 undelivered portion, in accordance with the provisions of 
 Article XXVIII. This rule shall also apply to contracts 
 for b(mds where tender is made in lots of $10,000, or 
 multiples thereof.^ 
 
 > Constitution, Art. XXV. § 2. ' Id. § 4. 
 
 »Id. §3.
 
 Legal Relation to nient. 187 
 
 Usually the stock is ti'aiisf erred on the books of the Com- 
 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 stook, the Broker sends a notice 
 to his Client giving the price and the name of the Broker 
 from whom he has j)urchased. What effect this would 
 have upon a contest between the unknown principal and 
 the other, or selling, Broker is still another question. Fre- 
 quently 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 countei-- 
 orders, the one to buy and the other to sell, which the Bro- 
 ker frequently 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 securities remain in the possession of the Bro- 
 ker, he uses them to raise money with which to carry on his 
 business, and no attempt is made to keep the stocks sepa- 
 rate, or to keep the identical certiticat<.'s on hand, the Client 
 usually being satislied if the Broker is able to deliver the 
 number of shares purchased, without any regard to particu- 
 lar certificates. According to the strict legal (Icliiiitioii, it is 
 manifest that a Stock brokn-, in transactions such as those 
 dcscrilwd abf)ve, is not eiiiljraccd within the term " Ihoker." 
 
 " iirokers" have been defined In a standard legal le.xicog-
 
 188 Stock-brokers and Stock Exchanges. 
 
 rapber to be " those who aic engaged for others In the 
 negotiation of contracts relative to property with the cus- 
 tody of ivhicli they have no concern ; " ' and " Stock-brokers " 
 as " those employed to buy and sell shares of stocks in incor- 
 porated I'onipanies and the indebtedness of governments."^ 
 The distinctions between a Stock-broker and an ordinary 
 Broker are tersely summarized by Woodruff, J., in his 
 dissenting ojiinion in the well-known case of ]\[arkham vs. 
 Jaudon,^ in this language : " In the first place, the Stock-dealer 
 who is employed, though called a Stock-broker, does not act 
 as Broker in this transaction. It is no part of the oflice 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 responsibil- 
 
 * 1 Bouv. L. Diet. Rawle's Rev. calling of great responsibilities, in 
 
 title "Broker"; Ewall's Evans on which punctuality, honesty, and 
 
 Agency, Bedford's American ed. knowledge arc required." Per Van 
 
 p. 36; Mechem on Agency, §§ 13, Vorst, J., White v.s. Brownell, 3 .\b. 
 
 927, 936; Reinhard on .\gency, § 21 ; (X. Y.) Pr. (n. s.) 326. 
 
 Huffcut on Agency, § 112; Tiffany Ml X. Y. 256; Northrup vs. 
 
 on Agency, p. 224; Braun vs. City Shook, 10 Blatch. 243. 
 
 of Chicago, 110 111. at p. 194. * A Broker has not the custody of 
 
 'Ibid.; Anderson's Law Diet, the goods of his principal; he is 
 title "Broker"; Black's Law Diet, mereh' empowered to effect the con- 
 same title. See also Clark vs. Pow- tract of sale or purchase on his be- 
 ell, 1 Xev. & M. 494, arguments of half. Chitty on Cont. (11th Am. ed.) 
 counsel pro and con.; Ab. L. Diet. 274; Paley on Ag. 13; Story on Ag. 
 title "Broker"; Banta vs. Chicago, (9th ed.) § 28 et seq. The func- 
 172 111. 204; s. c. 40 L. R. A. 611. tions of a Stock-broker are thus 
 ".A. Broker is an agent simply. He broader than tho.se of the ordinary 
 transacts business not for himself. Broker; some of these broader fune- 
 but for another. He is a middle- tions pertain more nearly to the 
 man, a negotiator between other functions of factors or Ijankers, but 
 persons for a compensation. A their exercise does not make the 
 Stock-broker deals in stocks of Stock-broker any the less such, 
 moneyed corporations and other se- Banta vs. Chicago, supra. 
 curities for his principal. It is a
 
 Legal Kelatioii to Client. 189 
 
 ity, protected against loss by the indemnity furnished, or by 
 the agreement to be furnished to him. The idea of mere 
 af^ency ordinarily suggested by the name Broker does not, 
 therefore, arise out of the fact that the dealers in stocks for ac- 
 count 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 con- 
 template 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 transaction, the customer, if he pays 
 the cost, interest, and all commissions which the Broker has 
 earned, or is entitled to earn, will receive the stock. Whether 
 he may so insist or nut is a collateral 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 Bro- 
 ker 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 specu- 
 lation 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, 
 accounting to his customer for the profits, if any, and hold- 
 ing him responsible f(;r the loss. " 
 
 Notwithstanding these technical differences, the decided 
 inclination of the courts has l)een to visit a Stock-broker with 
 all of the res|X)nsibilitiesof a IJroker and pledgee, and, as we 
 shall h(;reafter see, to confer u})on him all the advantages 
 of those relations. 
 
 It is itii])!ic(lly conceded by Mr. Justice Woodrnlf, and all 
 the .'idv(x;at<;s of his view of the law, that wlu'iv liic Slofk- 
 broker makes purcha.s».'S of .stock, etc., for his principaly'or
 
 190 Stock-brokers and Stock Exchanges. 
 
 invest 1116)11, with money furnished by the former, the rela- 
 tion of pledgor and pledgee exists.' 
 
 It is also conceded that when stock, etc., is purchased on a 
 margin for the Client, although it does not become the prop- 
 ert}' of the latter,^ together with all its future dividends and 
 earnings ;^ yet that the Client is entitled to the possession of 
 such stocks, etc., upon paying the money represented in their 
 purchase, Avith 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 conferi-ed upon the pledgee or a third person ; and 
 the pledgee has never refused to transfer the stock for the 
 purpose of a sale, and the pledgor has never requested that a 
 sale, should be made.^ 
 
 It has been also 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 secui'ities 
 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.^ 
 
 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.' 
 
 ' Markham vs. Jaudon, 41 X. Y. 133; O'Neill vs. Whigham, 87 Pa. St. 
 
 235, at 257 and 258; also Grover, J., 394. 
 
 s. c. at 247. See also Baker vs. ' Lamert vs. Heath, 15 M. & W. 
 
 Drake, 53 X. Y. 211, at 216. 486; s. c. Lambert vs. Heath, 15 L. 
 
 ' Id. J. Exch. 298; Mitchell vs. Xewhall, 
 
 » Id. 15 M. & W. 308; Westropp vs. Sol- 
 
 * Per Grover, J., Markham vs. omon, 8 C. B. 373. 
 
 Jaudon, supra, p. 247. '' 2 Pars, on Cont. (8th ed.) vol. 2, 
 
 * Howard vs. Brigham, 98 Mass. p. 119 (bottom paging); Abbett vs.
 
 Legal Relation to Client. 191 
 
 Again, if assessments or '"culls" are made upon stocks 
 which a Broker holds lor a Client, the liability to pay tliera, 
 if any, is that of the principal, and not the Broker.^ In line, 
 all of the benefits, liabilities, and disadvantages of ownerehip 
 are attached to the principal, while the Broker has no in- 
 terest in the transaction except to the extent of his com- 
 missions.'- 
 
 In view, therefore, of these considerations, the better doc- 
 trine would seem to be to hold the Broker to the responsi- 
 bilities of that relation ; in fact, it a}ipears difficult to con- 
 ceive of any other relation which could so fully harmonize 
 with the circumstances as that of Broker and pledgee.^ 
 
 The leading case of Markham vs. Jaudon was expressly 
 overruled on the question of the measure of damages in an ac- 
 tion for the conversion of stocks by a Broker.* It shoukl also 
 be noticed that there were two elaborate dissenting opin- 
 ions by "Woodruff and Grover, J J., on the question of the rela- 
 tion which existed between the Broker and the Client, the 
 two judges just mentioned holding that the Brokers were 
 not pledgees, but that they held the stock under a contract 
 which enabled them to sell upon the failure of the Client to 
 furnish margins. Wht-n this question came again before 
 the court of last resort in Sew Vork,^ Commissioners Earl 
 and Reynolds both wrote ()|)inions allii-niing the judgment 
 on the specilic ground that the IJrokers were ])ledgees. Hut 
 in the case of Baker vs. Drako'^ (which was not adverted to 
 in the preceding casej, overruling Markham vs. Jaudon 
 
 Frederick, .OG How. I'r. (\. Y.) 68. doctrine criticised in In re Swift, 11 J 
 
 Sec .\rerit vs. S<|uirfiS, 1 Djily, .'M7. Fed. Hep. .31.S. 
 
 ' .McCulla vs. Clark, FtF, Ga. .W. ♦ liaker vs. Drake, r,:\ .N. V. 21 1 . 
 
 ' See the above questions coiisid- *Stcntnii vs. Jerome, 51 N. Y. 
 
 ere«l at pp. 2 IS, 204. ISO. 
 
 •Sec, however, the .New York ' .W N. V. 21 1.
 
 l'J2 Stock-biukcrs and Stock Excliaiiges. 
 
 upon tlie (jucstion of the measure of danuige, Mr. Justice 
 Tlapallo, ill alluding to the latter case, said : "It seems to 
 nu', after as full an exammation of the subject as circum- 
 stances have permitted, that the dissenting opinions (per 
 WoodrufT 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 
 exi)ressly reiterated and reaffirmed throe propositions laid 
 down in the case of Markham vs. Jaudon, the principal one 
 beinof that " the relation of Broker and Client, under the 
 ordinary contract for a speculative 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,- and in several later cases.^ And this now seems 
 to be the established law in IS'ew York,^ and is sustained 
 
 ' 66 N. Y. 518. chum, 5 Robt. (N. Y.) 507; Capron 
 
 ' 81 N. Y. 25, reversing 12 J. & S. vs. Thompson, 86 N. Y. 418; Gillett 
 
 389. vs. Whiting, 120 N. Y. 402; Douglas 
 
 ' See cases cited in following note. vs. Carpenter, 17 App. Div. 329; 45 
 
 * Gruman vs. Smith, 81 X. Y. 25; N. Y. Supp. 219; Zimmerman vs. 
 
 Markham vs. Jaudon, 41 N. Y. 235; Heil, 33 N. Y. Supp. 391, aff'd 156 
 
 Morgan vs. Jaudon (Ct. of App.), 4 X. Y. 703. Contrary to this view in 
 
 How. Pr. (N. Y.) 366; Stenton vs. addition to the cases cited, supra, 
 
 Jerome, 54 N. Y. 480; Baker vs. are Hanks vs. Drake, 49 Barb. (N. 
 
 Drake, 53 X. Y. 211; id. 66 X. Y. Y.) 186; Schepeler vs. Eisner, 3 
 
 518; Ritter vs. Cushman, 7 Robt. Daly, 11; Sterling vs. Jaudon, 48 
 
 (X. Y.) 294; Read vs. Lambert, 10 Barb. (X. Y.) 459, which have all 
 
 Ah. Pr. (n. s.) 428; McXeil vs. Tenth been exprcsslj' overruled in the 
 
 Xational Bank, .55 Barb. (X". Y.) 59 State of Xew York, 
 
 (reversed on other points in 46 X^. Whether the relation is that of 
 
 Y. 325); Clarke vs. Meigs, 22 How. pledgor and pledgee, or that of a 
 
 Pr. (X. Y.) 340; Brass vs. Worth, 40 special contract under which the 
 
 Barb. (X. Y.) 648; Andrews vs. Broker holds the stock, the Broker's 
 
 Clerke, 3 Bosw. 585; Taylor vs. Ket- obligation to keep the same or an
 
 Legal Relation to Client. 193 
 
 in the United States generally by the weight of au- 
 thority.' 
 
 The theory that the relation which exists between a 
 Stock-broker and his Client in an ordinary speculative trans- 
 action is not that of pledgor and pledgee, is mainly based 
 upon the argnment 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 fur- 
 ther margins. But this argument is just as forcible when 
 applied to the undisputed 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 decline and leave the lender without 
 
 equal quantity of stock in his pos- 3 Sim. 153, aff'd by House of Lords 
 session, is the same. Taussig vs. in 5 Bli. (n. s.) 165. The text 
 Hart, 58 N. Y. 425. writers also have adopted this 
 * Skiff vs. Stoddard, 63 Conn. 198, view. See works cited in Skiff v& 
 222; 21 L. R. A. 112; Thompson vs. Stoddard, supra, at p. 222 . 
 Toland, 48 Cal. 99; Cashman vs. In tlie carrying of executory con- 
 Root, 89 Cal. 373; Kenfield vs. tracts for the future delivery of 
 Latham, 2 Cal. Leg. Hec 235; grain, when neither tlic grain nor 
 Brewster vs. Van Liew, 1 19 111. 554; warehouse receipts are delivercil, 
 Gilpin vs. Howell, 5 Pa. St. 41; the Broker is not a pledgee, and tlie 
 Wynkoop vs. Seal, 64 Pa. St. 301 ; distinction between such a case and 
 E&ser vs. Linderman, 71 Pa. St. 70; the ca.se of a. carrj'ing of stock on a 
 Maryland Fire Ins. Co. vs. Dalrym- margin is this: The stocks are de- 
 ple, 25 Md. 212; Baltimore Ins. Co. livered into the actual poH.sc.ssion of 
 vs. Dalrymple, id. J(i9; Child vs. the Broker who claims it a-s the 
 Hugg, 41 Cal. 519;Ch«'W vs. Louch- plc<ige, while the grain l)ought for 
 helm, SO I'Y-d. J{cp. 5(M) ( "The re- his customer or any evidence of 
 lation of the partieji wjis that of title theretr) is not delivered to the 
 bailor and bailee"). The sume connnission menhiiiit. Curln'tt vs. 
 rule would seem to exist in En- l.'nderwood, K\ 111. 321. 
 gland' Brookmaii vs Hothschild,
 
 194 Stock-brokers and Stock Exchanges. 
 
 security, it is clear that, in the absence of express agree- 
 ment, thev could not be sold without Icfjal notice.* So it 
 has been held that ^Yhore, instead of money, the Client de- 
 posits stock, etc., as margin, the relation of pledgor and 
 pledgee exists.^ 
 
 The Broker may ahva3's, in the outset, protect himself 
 against the fluctuations of an advance or decline in the market 
 by exacting sufficient margins to meet the contingencies of 
 speculation and if he neglect to do this, he should not 
 expect the law to aid him. 
 
 But finally, 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 tlie law will uphold and carry out.^ 
 
 A different result has been reached in Massachusetts. 
 There it is held that the transaction between a Broker and 
 his Client on a marginal purchase of securities stands on 
 the footing of a contract by the Broker to deliver the shares 
 on the payment by the Client of so much money. This 
 doctrine is probably peculiar to cases arising in Massachusetts ^ 
 and was first promulgated in the case of Woods vs. Hays.* 
 
 'Schouler on Bailm. (3d ed.) ' In re Swift, 112 Fed. Rep. 318; 
 
 § 229. Skiff vs. Stoddard, 63 Conn. 214; 21 
 
 * Lawrence vs. Maxwell, 53 X. Y. L. R. A. 111. A later decision in 
 19. See also Vaupell vs. Woodward, Massachusetts, however, affirms 
 2 Sandf. Ch. 143; De Cordova vs. that the English doctrine on the 
 Barnum, 9 N. Y. Supp. 237, aff'd subject is the same as that of 
 130 N. Y. 615; Mattem vs. Sage, 16 Massachusetts, citing Bentinck vs. 
 Daly, 142. Bank (1893), 2 Ch. Div. 120, 
 
 ^ See in this connection remarks 140; Chase vs. Boston, 180 Mass. 
 by Hunt, Ch. J., Markham vs. Jau- 458. 
 don, 41 N. Y. 244. • 81 Mass. 375. 
 
 * Post, subd. (VI.) of this chapter, 
 p. 306.
 
 Legal ReLitiou to Client. 195 
 
 WMle that case did not in its facts present a marginal pur- 
 chase at all, and if it stood alone might not be decisive,^ 
 it has in subsequent decisions of the same court received 
 the interpretation indicated above.^ These subsequent 
 cases^ have been held by the United States courts to de- 
 clare the rule in. Massachusetts in cases arising in that State, 
 and therefore to be governed by its law.^ 
 
 And a recent Massachusetts decision holds that the legal 
 title is in the Broker, and he is liable to pay municipal tax 
 on the value of stocks, carried by him on margins.'^ The 
 question of the Broker's relation to his customer also 
 came up in the case of Rice vs. "Winslow,^ in which 
 the latter sought to recover margins deposited \Yith his 
 Broker to secure the purchase of securities bought and 
 afterwards sold by the defendant, on the ground that, under 
 the cases cited, the relation was a contractual one, and, 
 that being so, the Broker ultimately sells to the customer, 
 and that sale brought the transaction within the first clause 
 of § 2, of the gaming statute — L. 1890, ch. 437 ; but the 
 court held that such a construction was a mistake. The 
 
 ' In re Swift, 105 Fed. Rep. 496; * In re Swift, 105 Fed. Rep. 493; 
 Jones on Collateral Securities (2d s. c.aff'd 112 Fed. Rep. 310. Itwa.s 
 ed.), § 49H, n(jte. suftf;ested in the liust-named ciuse 
 'See next note, 3. that the dilTerence in the doctrines of 
 ' Co veil vs. Loud, 135 Ma.ss. 41; tiie New York and Ma.s.sachusetts 
 Jordan vs. Weston, IGS Ma.ss. 401. courts was one of name only and 
 In this latter case, while the court not of substance. Theje are, how- 
 recognized the rule declared in ever, differences of substance which 
 Covell vs. Loud, there waw appar- l>ecome apparent when tiic rcinc- 
 cntly soma dcnibt in its mind of the dies rcspcctivrly for conversion and 
 correctnciss of the nile. See In re for simple breach of contract arc 
 Swift. 105 Fc<L Rr-p. 40(>. Hut a considered. 
 
 later decision aflirmed the drx-- ' Chiwe vs. Hostoii, ISO Miuss. 
 
 trine. Cha»e vs. iJrwton, iKOMass. 45S. 
 
 458. • Kice vs. WIunImw, I so M.iss 500.
 
 196 Stock-brokers jiiid Stock Exchanges. 
 
 relation of the Broker to the customer was that of an agent, 
 and when the Ih-okcr actually bought and received the se- 
 curities, there was no violation of the statute. The 
 contract referred to in the statute was the contract to buy, 
 not the contract to carr}^ the securities. 
 
 I'})on the whole, while it must be conceded that there 
 are apparently some incongruous features in the rela- 
 tion,' there seems to be neither difficulty nor hardship in 
 holding that a Stock-broker is a ]>ledgee ; for, although 
 it is true that he may advance all or the greater part 
 of the money embraced in the speculation, if he acts hon- 
 estly, 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 dif- 
 ferent rule Avould 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 transac- 
 tions 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 Penn- 
 
 • Markham vs. Jaudon, supra; '■' Markham vs. Jaudon, 41 N. Y. 
 
 dissenting opinions. In re Swift, 2.56; ante, p. 1S9. 
 
 10.5 Fed. Rep. 498; 112 Fed. Rep. ^ See cases cited in chapter on 
 
 .318. See also Skiff vs. Stoddard, 63 "Stock-jobbing." 
 
 Conn. 217 et seq; 21 L. R. A. 112, * 89 Pa. St. 250. 
 113.
 
 Legal Relation to Ciient. 197 
 
 sylvania 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 tlie 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 
 bona Jide, but the different elements which made up the 
 transaction between the Brokers and their Client were 
 completely overlooked — viz., that stock was actually pur- 
 chased for the Client ; that it was held subject to his or- 
 ders ; that he would have been entitled to the dividends 
 thereoxi ; that he could have insisted upon the instantaneous 
 delivery of the stock t(j him upon tendering the purchase- 
 money remaining due ; that, if the Brokers had failed, the 
 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, 
 therefore, we think that this case is not entitled to rank 
 as an authority upon the question involved, especially as it 
 appears to be directly opposed to the previous cases of 
 Esser vs. Lintlerman ' and Wynkoop vs. Seal,'^ where sim- 
 ilar transactions were upheld.^ 
 
 ' 71 Pa. St. 81. said: "In doalin<r with stork trans- 
 
 * 64 Pa. 301. uc'tioii.s fallinji witliiii or in any way 
 
 'See thi.s question fully discussed connected witii wafierinji contract-s, 
 
 in chapter on "Stock-jobljiiif?," un- the law of Penn.sylvania i.s of ex- 
 
 der head of "Wafers." The case ceptional and ... of illoj^ical and 
 
 cited muat be con.sidered as sub- untenable severity in its interfor- 
 
 stantiaily overruled in Peiujsyl- ence with the business affairs of 
 
 vania. Since the text was written parties sui juris and entirely coni- 
 
 the Supreme Court of Pennsylvania petent to manaue (licir own adiiirs," 
 
 in Hp'-akint: of the cla.HM of cases of " .\ purclia.se of stock for spec iil.it lot) 
 
 which North vs. I'liillipH was one, luis even when done merely on margin
 
 198 Stock-luokors and Stock Exchanges. 
 
 Some cases have also been decided in New York involv- 
 ing the question of a Stock-broker's character as a trustee. 
 In McBuruey vs. ]\Iartin ' the complaint set up a refusal by 
 the defendant Stock-broker to pay money claimed to have 
 been received by him in a Jidiuna?'i/ capacity, and the court 
 in vacating an order for defendant's arrest, held tluit the 
 179th section of the Code did not include, in the class of 
 persons liable to be arrested, any one except those who 
 received moneys purely in a fiduciary capacity as sim- 
 ple agents, to apply it as directed, and therefore it excluded 
 all those who had a personal interest in such money, or its 
 use. In the case under consideration the defendant had 
 sold stock "short" for plaintiff's assignor, who had de- 
 posited money with defendant as " margin," and defendant 
 borrowed stock to deliver to the purchaser, and wdth plain- 
 tiff's assignor's assent, retained the purchase money to in- 
 demnify him against any appreciation in the borrow^ed 
 stock, for which he was personally responsible. In viola- 
 tion of his agreement with plaintiff's assignor to keej? the 
 stock borrowed, and not to buy in and close the transaction 
 until so instructed, defendant bought in stock and delivered 
 same to the lender, whereas if he had waited nine days sub- 
 sequently, he could have purchased the stock, which had de- 
 is not necessarily a pamblina; trans- him, with or without margin, the 
 action. If one buys stock from A transaction is not necessarily difTer- 
 and borrows the money from B to ent in character." Peters vs. Grim, 
 pay for it, there is no element of 149 Pa. St. 1C3; Hopkins vs. 
 pamblins; in the operation, though O'Kane, 169 Pa. St. 478; Wagner vs. 
 he pledge the stock with B as secu- Hildel^rand, 187 Pa.'St. 136; Estate 
 rity for the money. So, if instead of of Taylor, 192 Pa. St. 304, 309, 313; 
 borroT^nTig the money from B, a Smj'th vs. Glendinning, 194 Pa. St. 
 third person, he borrows it from A, .550. 
 
 or in the language of Brokers pro- ' McBurney vs. Martin, 6 Rob. 
 cures A to 'carrj'' the stock for (X. Y.) 502.
 
 Legal Relation to Client. 199 
 
 clined, at a much lower figure. The court held, as already- 
 stated, that the defendant had an interest in the moneys 
 retained by him, as he was personally liable to the lender 
 of the stock, and therefore the moneys were not held by 
 liini as a trustee. But if the stocks to be sold belong to 
 the plaintiff, and are actually delivered to the Broker, 
 the latter is a trustee of the purchase price. So held in 
 Waters vs. ^larrin,^ which distinguishes the last cited case. 
 In a state of facts similar to those in McBurney vs. Martin, 
 supj^a, the Supreme Court, however, subsequently held that 
 a case of agency was disclosed showing that money received 
 by defendant Stock-broker as " margin " was held by him 
 as a trustee, and an order for his arrest was granted.^ But 
 the doctrine enunciated in McBurney vs. Martin, supj^a^ 
 seems to be more reasonable, and it was followed in Mann 
 vs. Sands,' where it was held that if moneys are deposited 
 as margins and settlements are had by balances struck, the 
 relation thus formed becomes that of debtor and creditor, 
 and a failure by either party to pay the balance due does 
 not furnish the other with a ground of arrest. This, like 
 every other loan or deposit, ma}"-, to a limited extent, imply 
 a trust and confidence, but it does not necessarily create 
 that fiduciary relation which subjects the party who makes 
 default in paying such balance to arrest. As stated in the 
 last cited case, the general rule is that if a Broker is given 
 money to buy a particular stock, he becomes a trustee as to 
 iKjth stock and money. If he sells a particular stock bo- 
 longing to a client, he becomes a fiduciary as to such stock 
 
 ' Waterfl vh. Marrin, 12 Daly, ' Mann vs. Sands, 2 City Ct. Rep. 
 145. 2.0. 
 
 ' Clark VH. Pinckney, .00 Harb. 
 226.
 
 200 Stot'k-brokers and Stock Ext'haiiy;es. 
 
 and its proceeds. For a breach of duty in cither case lie is 
 liable to arrest, But as to money dcj)osited on " margin " 
 to cover the fluctuations of the mai'kct, and where settle- 
 ments ai'e had l)y the balances struck, he is merely a 
 debtor to his client, and a failure to pay a balance due by 
 him does not authorize his arrest. 
 
 It was held in Jloirmann vs. Livingston' that the agree- 
 ment made by the parties disclosed Vi fiduciary relation. 
 In that case the Broker asked his Client, a woman not ac- 
 customed to dealing in stocks, whether she wanted to trust 
 him as to the amount of stocks to be bought and sold for 
 her, and she replied that she left it to his own judg- 
 ment, and the court held that the relation established 
 largely imposed confidence and good faith in the discharge 
 of the duties assumed by the Stock-bi-oker. 
 
 HI. Deiiiiitious of Terms Used. 
 
 There are a number of technical or well-known terms used 
 in Wall Street which should be defined preliminarily to a 
 discussion 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 
 
 ' Hoffman vs. Li^^ngston, 14 J. and in Avhich the relation merely of 
 
 & S. (X. Y.) 552. See also the re- debtor and creditor exists between 
 
 cent English cases of King vs. Hut- them. See also as to what consti- 
 
 ton, 69 L. J. Q. B. D. 786; Re tutes a breach of trust, In re 
 
 Woodd, Ex parte King, 82 L. T. R. Jamison, 29 Atl. Rep. (Pa.) 1001; 
 
 504 (and cases cited), which distin- People vs. Thomas, S3 A. D. 226. 
 
 guish transactions in which a Broker And see post p. 779, 
 becomes a trustee for his Client,
 
 Dettnitiou of Terms. 201 
 
 he does not own or possess, and borrows the number 
 of shares which he has sold from some third person to 
 deUver to his vendee, expecting to be able to buy the 
 stocks at a lower figure, 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.^ 
 
 " Margin " is the security against loss on the part of the 
 Broker while he is carrying stock for his customer.^ 
 
 " Net balance," as applied to the proceeds of the sale of 
 stock, means, the balance of the proceeds after deducting 
 the expenses incident to the sale.'* 
 
 " Stop Order," an order given to a Broker to await a 
 certain figure in the price of a particular bond or stock be- 
 fore he buys or sells it, and then to "stop" the transac- 
 tion by then buying or selling as the case may be, as well 
 as possible.^ 
 
 ' White vs. Smith, 54 N. Y. 522; Law. See Ch. on " Stock-job- 
 
 Knowlton vs. Fitch, 52 X. Y. 289; bins;." 
 
 Cameron vs. Durkheim, 55 N. Y. ' Price vs. Cover, 40 Md. 102; 
 
 425; Hes.s vs. Kau, 95 N. Y. 359; Saltus vs. Genin, 3 Bosw. (N. Y.) 
 
 Sistare vs. Best, 88 X. Y. 533. The 2.'j0, 2G0. 
 
 sale of stocks "short" was legalized ' MoXeil vs. Tenth National 
 
 by statute in Xew York State, L. Bank, 55 Barb. 59, 04; Markham 
 
 185.S, ch. 134, repealed by and re- vs. Jaudon, 41 N. Y. 235; Hatch 
 
 enacted in the Personal Property vs. DourIjis, 48 Conn. 110, 128; 
 
 Law, S 22. It is illefral by statvite McClain vs. P'leshman, 100 Fed. 
 
 in Mas.sachu.scttH and Illinoirt, and Kcp. 880, 882. 
 
 was illegal in Xew York (\ Rev. * Evans vs. Wain, 71 Pa. St. 09, 
 
 Stat. 710, 5 0) prior to the pa«.saKe 74. 
 
 of L. 1858, ch. 1.34. See liirdseye's » PoHer vs. Worin.ser, 94 NY. 
 
 Stats., vol. 2, p. 2035, and cuhch 413; Wronkow vs. Clews, 52 N V. 
 
 noted under sec. 22, Per. Prop. Super. Ct. 170. As used in a httcr
 
 202 Stock-brokei-s and Stock Exchanges. 
 
 " Dividend on," means that a dividend goes to the buyer 
 of stock. 
 
 " Ex-dividend," means that the seller retains a dividend. 
 
 In connection with these terms, Art. XXXII., § 1 of tlie 
 constitution of tlie New York Stock E.xchango may be 
 quoted. " On the day of closing of the transfer books of a 
 cor[X>ration for a dividend upon its shares, all transactions 
 therein for 'cash 'shall be 'dividend on" up to the tifne 
 officially designated for the closing of transfers; all transac- 
 tions on that day other than for ' cash ' shall be ' ex-divi- 
 dend.' Should the closing of transfers occur upon a holi- 
 day or half holiday, observed by the Exchange, transactions 
 on the preceding business day, other than for ' cash,' shall 
 be ' ex-dividend.' '' ' 
 
 A "corner" in stocks is where the owners or holders 
 (i. e. bulls) refuse to loan stocks to the " bears," with which to 
 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 Avhich 
 they can obtain them.^ 
 
 A "pool" means that individuals have combined together 
 
 by a Broker to his principal then coupons and accrued mterest; 
 abroad, in which the Broker called $500,000 do. at lOOJ do., do.," 
 for more margin, it means that the means that the Brokers were re- 
 Broker would "stop" entirely in quired to sell when the market 
 everything, i. e., keep the transac- price should decline to lOOi or lOOi 
 tion in statu quo, till he heard from without the July coupons, or if sold 
 his principal. Id. after July 1st when the . market 
 
 'See Chap. IV., "Usages of price should equal lOOJ and 100J-, 
 
 Stockbrokers." plus the accrued interest from that 
 
 The following request by a cus- date. Porter vs. VVormser, 94 X. Y. 
 
 tomer to his Brokers directing a sale 431, 443. 
 
 of government bonds carried by ' Cameron vs. Durkheim, .55 N. Y. 
 
 them for him "or at your discretion 425, 438. See also chapter on 
 
 'stop order' $.500,000 United States "Stock-jobbing." 
 four per cent, bond at 100^ ex. July
 
 Definition of Terms. 
 
 203 
 
 in buying and selling stocks, and dividing the profits or loss 
 in agreed proportions.^ 
 
 " "Wash sales " are not real sales, but are made by persons 
 interested in each other, for the purpose of giving a ficti- 
 tious 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 
 making the same agrees, in consideration of a certain sum, 
 to deliver, at the option of a party therein named, or his 
 order or bearer, securities therein mentioned, at a certain 
 day for a certain price.^ 
 
 A "• put " is also an option contract, except the party 
 holding the same has the option of delivering securities to the 
 maker.'' 
 
 ' Kilboum vs. Thompson, 103 U. 
 S. 195; Myers vs. Paine, 13 App. 
 Div. 332; afT'd 57 X. E. Rep. 1118; 
 Leonard vs. Poole, 114 N. Y. 371. 
 One action ajrainst two "pool" 
 partnerships cainiot be maintained 
 when the members of each are not 
 the same. Earle vs. Scott, 50 How. 
 Pr. 506. 
 
 »Brj'an vs. Baldwin, 52 N. Y. 
 232, 236; aff'g 7 Lans. (N. Y.) 174; 
 Secor vs. Goslin, X. Y. L. J. March 
 26, 1901, p. 2310. Rosenberg,' vs. 
 Meyer, X. Y. L. J. June 10, 1902, 
 p. 922. The price at a wash sale 
 is not evidence of the real market 
 value of the stock with a view 
 to aascusinp damaRcs. Bryan vs. 
 Baldwin, supra. 
 
 »Xorth vs. Phillips, S9 Pa. SL 
 2.50-255. 
 
 * Tlie foIlowinK is a copy of the 
 call commonly ujicd: 
 
 "New York, ,1881. 
 
 "For value received, the bearer 
 may call on me for shares of the 
 common stock of the Railroad 
 
 Company at per cent., any time 
 in days from date. The bearer 
 is entitled to all dividends or 
 extra dividends declared during 
 the time. 
 
 "E.xpires 1881, at IJ P. M. 
 "Signed, ." 
 
 By the usage of Brokers, it is 
 negotiable, and it has been declared 
 valiti l)y certain courts. See title 
 "Stock-jobbing," under head of 
 "Wagers." 
 
 ' Hopper vs. Sage, 112 X. Y. 530; 
 Bigelow vs. Beneilict. 70 X. Y. 202; 
 Ex parte Yo\ing, 6 Biss. 53; Gilliert 
 vs. Gaugar, S id. 21 S; Pixley vs. 
 Boynton, 79 111. 353; IVurco vs. 
 Koote, 113 111. 231; .Vnderson's Law
 
 204 {Stock-broktMs and Stotk Exchanges. 
 
 A " straddle," or " spread-eagle," combines the advantages 
 of a " put " and a " call," being a contract by which the 
 holder has the right or option either to deliver or have de- 
 livered to him certain stocks at prices designated in the 
 writing.' 
 
 A purchase or sale of stock " for the account" means a 
 purchase or sale of stock to be received or delivered at a 
 futui'c time. Transactions " for the account," have been 
 practised on the London and Xew York and other Stock 
 Exchanges for many years.^ 
 
 Diet, title "Put." It is as fol- Ct. 67; Story vs. Salomon, 71 N. Y. 
 
 lows: 420. 
 
 "New York, 1881. The following is the form of a 
 
 "For value received, the bearer "straddle:" 
 rasLy 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 ill day.s from date. The may call on the undersigned for 
 
 undersigned is entitled to all divi- shares of tlie common stock of the 
 
 dends or extra dividends declared Railroad Company at per 
 
 during the time. cent., any time in daj-s from date. 
 
 " Expires at 1 ^ P. M. Or the bearer may, at his option, de- 
 
 "Sjgned, ." liver the same to the undersigned at 
 
 per cent., any time within the 
 
 * Harris vs. Tumbridge, 8 Ab. period named. All dividends or ex- 
 New Cas. 291; aff'd 83 N. Y. 92, tra dividends declared during the 
 where the court, in speaking of a time are to go with the stock in 
 "straddle," said: " The word, if not either case; and this instrument 
 elegant, is at least expressive. It is to be surrendered upon the 
 means the double privilege of a stock being either called or de~ 
 ' put ' and a ' call , ' and secures to the li vcred . 
 
 holder the right to demand of the "Expires at IJ P- ^^■ 
 
 seller at a certain price, within a cer- "Signed, ." 
 tain time, a certain number of 
 
 .shares of specified stock, or to re- ^ Clews vs. Jamieson, 182 U. S. 
 
 quire him to take at the same price, 461, 487. In that case transactions 
 
 within the same time, the same of this kind as practised on the Chi- 
 
 shares of stock." See also Van cago Stock Exchange arc explained 
 
 Norden vs. Keene, 5.5 X. Y. Super, in full detail. See also Chap. X.
 
 Purchase on "LoiiJ?" Account. 205 
 
 IV. Purchase on ''Long" Account. 
 
 We have ah'ead y 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 purchase-money, and that, after such purchase, the Bro- 
 ker immediately acquires a lien upon the stocks, for the 
 balance of the purchase-money in excess of the margins re- 
 ceived, which he has advanced to pay for the stocks, and 
 becoines, in relation thereto, a ])ledgee, with the full powers 
 and responsibilities of that position. - 
 
 It is proposed to examine, under this subdivision, with 
 some detail, the duties of the Broker in respect to the pur- 
 
 p. 987, et seq. as to such trading on beinp; enforced against the defend- 
 
 ihe London Stock Exchange ants, although, but for such settle- 
 
 An interesting question was meut, there might have been some 
 
 raised in Clews vs. Jamieson, supra, embarrassment in maintaining a 
 
 as to the privity of contract be- suit against the latter for a portion 
 
 iween undisclosed principals in only of the total shares sold them, 
 
 sales "for the account." In that while the other portion was repre- 
 
 case Brokers on the Chicago Stock sented by different clients of com- 
 
 Exchange had sold, on the 3d of Au- plainants' Brokers. 
 
 gu.st, 1150 .shares of stock belonging In England, however, a Broker 
 
 to different owners for delivery on may make one contract with a job- 
 
 the 31.st of August. Included in the ber as to shares in the same undcr- 
 
 shares sold were a large number taking owned by several clients, and 
 
 (70O) belonging to plaintiffs. Set- a usage to that effect is valid. Scott 
 
 tloments were had a.s to all the vs. Godfrey, 2 L. R. K. B. (1901) 
 
 shares except those l)elonging to 726. For other Englisli cases on 
 
 plaintiffs. It wa.s held that the thi.s subject, see Chap. X. 
 
 fact that there were, in the sale of ' See cases cited in this chapter, 
 
 .\ugust 3, other shares than the § II. 
 
 7(K), and that, in regard to tho.se ' Id.; Brookman vs. Rothschild, 
 
 others, some had been sold origi- 3 Sim. 153, aff'd in House of Lords, 
 
 nally by complainant's Brokers to 5 Bli. (n. s.) 105; (Jniman vs. Smilli, 
 
 other and diff<Teiit Brokers than de- 12 J. & Sp. (N. Y.) 389; aff'd SI N. 
 
 fendant's, would not prevent the Y. 25. 
 contract a« to the 7(KJ shares frcjm
 
 206 Stock-brokers aud Stock Exchanges. 
 
 chased stock, from the inception to the termination of the 
 business.^ 
 
 (rt.) The Order to Purchase^ Price, and Number of Shares to be 
 
 Bought. 
 
 If the order to purchase is ambiguous or fairly susceptible 
 of two constructions and the Broker honestly and fairly acts 
 on that not intended by the Client, the latter must bear any 
 loss.^ 
 
 If the technical terms of the stock market are used in the 
 order of the Client, he cannot afterwards claim that be in- 
 tended them to have other than their customary meaning.' 
 
 A Broker is not obliged to accept a proposition that he 
 act as such, nor is he necessarily bound to communicate his 
 declination to the proposer,^ but the rule of law is that hav- 
 ing entered into the relation, he is, when directed to buy or 
 sell, bound to follow the directions of his principal, or give 
 prompt notice that he declines to do so.^ 
 
 If the order is to purchase he must actually execute it.* 
 If the Broker fails to execute the order in the expectation 
 of making a profit for himself through the fluctuation of the 
 
 ' See also Mr. Eliot Norton's ' Hatch vs. Douglas, 48 Conn, 
 
 essay on "A simple purchase and 116. 
 
 sale through a Broker" (8 Harvard * Mechem on Agency, § 108. 
 L. Rev. p. 435), afterward amplified * Galigher vs. Jones, 129 U. S. 
 and publuslied under the title "On 193. The declination to execute 
 Buying and Selling Securities the order should be b}' means as 
 through a member of a Stock E.x- speedy as the circumstances re- 
 change," N. Y. 1896. quire. Ibid. 
 
 ' Ireland vs. Livingston, L. R. 5 « Skiff vs. Stoddard, 63 Conn. 198; 
 
 H. L. 395; 41 L. J. Q. B. 201; 21 L. R. A. 110, overruling Ingra- 
 
 Coquard vs. Weinstein, 16 Mont, ham vs. Taylor, 58 Conn. 503 
 
 312, and cases cited. See also Prout vs. Chisolm, 21 App. Div. 54 
 
 Tallentine vs. AjTe, 1 T. L. R. 143; Zimmerman vs. Heil, S6 Hun, 114 
 
 Loring vs. Davis, 32 Ch. D. 625. aff'd 156 N. Y. 703; Allen vs. Mc-
 
 Order to Purchase — Price. 207 
 
 market, he is guilty of fraiul in morals as well as law.' 
 Making a contract with a tliird party whereby he can get 
 the stock by paying for it, but which he does not obtain, is 
 not enough.^ 
 
 If the order is to buy at a fixed price he must buy at the 
 best price obtainable not exceeding that price. He is not 
 entitled to buy at a lower }M-ice and ro-sell to the Client at 
 the price named, although he does not charge commission.^ 
 If the Broker disobeys his Client's orders, and the result is a 
 loss which the Broker promises to pay, the fact that the 
 Broker, with the consent of the Client, continues to specu- 
 late, and the Client's entire deposit is thereby lost, does not 
 relieve the Broker from liability as to the first loss which he 
 promised to repay .^ 
 
 Agents constituted for a ])articular purpose, and under a 
 Umited and circumscribed power, cannot bind their prin- 
 cipal beyond their authority.'^ Accordingly an order to 
 buy stocks " regular " is not fulfilled by a purchase by the 
 
 Conihe, 124 X. Y. 342. Proof that customer may either sue for a non- 
 
 the Broker employed other Brokers delivery of the stock, or for a retvirn 
 
 to make the purchase and that the of his deposit with interest. Larra- 
 
 latter reported that the purchase bee vs. Badger, 45 111. 440. 
 
 had been made, ts not sufficient. ' Genin vs. Isaacson, 6 X. Y. Leg. 
 
 Sweeney vs. Rogers, 10 Daly, 409. Obs. 213; Bash vs. Cole, 2.S X. Y. 
 
 ' Prout vs. Chi.solm, supra. 261, and cases cited; Uchifield vs. 
 
 ' Smith vs. Xew York Stock and State of 111., 20 Wend. 221 ; Clali^'her 
 
 Produce Exchange, 25 X. Y. Supp. vs. Jones, 129 U. S. 193; Story on 
 
 261. An. 9th ed. § 120; Wharton on .A^. 
 
 ' Thompson vs. Meade, 7 T. L. 11. § 712; Maxted vs. Paine, L. 11. 4 
 
 698. Ex. 81 ; Maxted vs. Morris, 21 L. T. 
 
 * HolIinKshead vs. Green, 1 Cin. (n. h.) .535. Xor is this rule affected 
 
 Super. Ct. R. 305. If a Broker is by the fact that (lie contract made 
 
 intnmt«'d with money to buy stocks is more atlvantacoous for the princi- 
 
 for phiintifT, he does not execute liis pal. Xesliitt vs. Ilclscr, 19 Mo. ;iS3; 
 
 duty wn u^cnt by purch«.'*iiii; flu* Smith vs. Bonvicr, 70 I'a. St. 325; 
 
 BtfH'kH in his own name, and the Borham vs. Godfrey, 1 Knapp, .'iMI.
 
 208 Stock-brokers and Stock Kxcliauffes. 
 
 Broker at " seller's option, thirty days." ' An order to pur- 
 chase at 57} is not fultillod by a purchase at 57| or 58.^^ 
 
 So an order to a Broker to bu}' 5(.)(> shares of stock, bu3^er's 
 option in (50 days, at $2 per share, is not fulfilled by the 
 Broker's Ijuying the same at $1.62^ j)er 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 Broker re- 
 ceives 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 do otherwise. If an un- 
 foreseen emergency arise, such as for instance an extraordi- 
 nary advance in the price of the securities ordered to be pur- 
 chased before the completion of a direction to invest a cer- 
 tain sum therein, the Broker is justified if acting in good 
 
 * Taussig vs. Hart, 58 N. Y. 425- busiii'ess affect the orders of the 
 428. Broker, see chapter on "U.sages." 
 
 ' Genin vs. Isaacson, supra. It has been held, however, that no 
 
 ^ Day vs. Ilohnes, 103 Mass. 306; usage will authorize a factor or 
 
 Pickering vs. Demeritt, 100 Mass. agent to depart from positive in- 
 
 416. An order to buy "five De- structions (Barksdale vs. Brown, 1 
 
 cember barley" is not fulfilled by X. & McC. [S. C] 517). 
 
 buying "five January barley," al- * Marye vs. Strousc, 5 Fed. Rep. 
 
 though the latter purchase might 483; Leddy vs. Flanagan, 3 Phila. 
 
 have been as advantageous. Mc- 355; Marland vs. Stanwood, 101 
 
 Dermid vs. Cotton, 2 111. .Vpp. 297. Mass. 470. 
 
 ♦ As to how far the usages of the
 
 Order to Purchase — Price. 209 
 
 faith in writing and waiting for further instructions of the 
 Client.^ An order to i)urchase stock to a certain amount 
 must be carried out and an error in regard to the par vahie 
 must be borne by the Broker.^ 
 
 An ordinar}' Broker's contract for the buying of stock, 
 every share of which has a distinct and independent value, 
 cannot be regarded as an entire contract,^ 
 
 Accordingly, it was held ^ that where a Client ordered 
 Mining Brokei-s to buy 500 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 
 shares to their firm of the said stock belonging to one of the 
 members of the firm, which 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 regulai-ly 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 retmlar usatjes of business. 
 
 Therefore, where a Client residing in Baltimore directs his 
 Broker, residing in the same })lac<', to pui'chase stock — the or- 
 der being in general terms, and not directing the purchase to 
 be made at any particidar place or modr, and not containing 
 any restrictions as to price — the Broker, in the full exercise of 
 his discretion, and acting iri good faith, may make the pur- 
 
 ' Bfirnard vh. Maury, 20 Gnitt. « Id. 
 4.'M; Story oil Aneiify, 5 103. 'Nor in tlu-rc iiiiy ul)»nliito en- 
 
 ' I.iiidnn vh. SilvernUJii, (■> IV 1' (rancinciit on the |)iirt of Broker to 
 
 June '22, 1S90. nirry out tin- order at all events 
 
 •Marj'c VH. StrouHC, 5 Fed l'.e|> (Fletcher vh. Marnhall, If. .M A W. 
 
 483. T.W).
 
 210 Stock-brokers and Stock Exchanges. 
 
 chase in New York through correspondents' Brokers or 
 sub-agents residing and doing business in that city.* The 
 transaction is governed by the hiwofthe place where it is 
 to be performed.^ 
 
 So, as to the length of time within which the Broker 
 should execute his orders, the question depends upon the 
 circumstances of each case. The general rule is, in the 
 absence of express restrictions or limitations, that the au- 
 thority of an agent continues until countermanded^ and 
 that the principal may terminate the relation at any 
 time. 
 
 But the previous dealings between the parties, the usages 
 of Brokers, the fluctuating and uncertain value of the securi- 
 ties dealt in on the Exchange, -may all be appealed to to vary 
 the general rules of law in this respect and establish a dif- 
 ferent principle. 
 
 In England it has been held that where an order has 
 been given to a Broker to deal in a current 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 
 
 ' Rosenstock vs. Tormey, 32 Md. 'In re Swift, 112 Fed. Rep. 
 
 69; Billinpslea vs. Smith, 77 Md. (Mass.) 315. 
 
 504; Taylor vs. Bailey, 48 N. E. ^ Burkitt vs. Taylor, 13 W. D. 75; 
 
 Rep. (III.) 200. Evidence as to aff'ji s. c. sub nom. Bickett vs. Tay- 
 
 entrics contained in the books of the for, 55 How. Pr. 128. 
 
 correspondent Broker is not admis- * Maxted vs. Paine, L. R. 4 Ex. 
 
 Bible against the client to show that 81; see also Maxted vs. Morris, 21 
 
 the stocks had been purchased. L. T. (n. s.) 535; Lawford vs. Har- 
 
 Boyd vs. Yerkes, 25 111. App. 527. ris, 12 T. L. R. 275.
 
 Order to Purchase — Price. 211 
 
 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 demanded back.- But this cannot be done after he has 
 entered into a contract for purchase and become personally 
 responsible for the due performance of that contract.^ 
 
 And if after a Stock-broker has received instructions to 
 sell certain shares, and before rescission of the instructions, 
 he receives notice from a third party claiming the shares, 
 the Brokers, having no interest, are entitled to interplead.^ 
 
 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 plaintifif must clearly shou' the authority under 
 which he acted, and prove that he was instructed b\' the 
 defendant to make the [)urchase. And where the proof is 
 so defective that the jury will be comjielled to infer such 
 authority from conversations and admissions of tlie de- 
 fendant, which are neither explicit nor satisfactory, the 
 plaintilT will be non-suited.^ "While ordinarily it is the 
 principal's judgment, and not the Broker's, which is to con- 
 trol in the purchase and sale of stocks,* in some cases 
 Clients, by special agreement, give to the Brokers general 
 authority to buy and sell for the Client at the Broker's own 
 discretion as to stock and prico.^ If a Broker guarantees 
 
 ' Sibhall vs. Bethlehem Iron Co., by him to make ct'rtaiii trans- 
 
 H.'i X. V. .'J7S. actions, then thti burden of proof to 
 
 ' Fletcher vs. Marshall, supra; show the receipt by the Brokers of 
 
 Rees vs. Fellow, 97 Fed. Hep. 1()7. such orders is upon him. Proof of 
 
 ' McFwen vs. Woods, 1 1 Q. B. 13; mailinfr the order, without proof 
 
 Sutton vs. Tathani, 10 .\d. Jii K. 27; that such mailing; was timely, is 
 
 Hea<l VB. Anderson, 13 Q. B. D. 779. not enouKh. Birnbaum vs. May, 
 
 • Robinson vs. Jenkins, 21 Q. B. 5S A. D. 70. 
 
 I). 275. •Galinher vs. Jones, 129 U. S. 
 
 » Ward vs. Van Duzer, 2 Hill (\. 193. 
 
 Y.),1G2. When the client is iissert- ' l'r<«if that the (iisdniicr lolii (lie 
 
 ing that the Broker has been ord'-red Iin)ker tliat he would like to make a
 
 212 Stock-brokers aud Stock Exchanges. 
 
 the return of money deposited with iiini lo buy and sell 
 stocks with interest, and any profits he may make, the 
 mere fact tluit the profits were carried to a new account 
 and left on the Ih'okcr's hands did not show that he also 
 guai'aiiteed the security thereof ; aud if the Broker, act- 
 ing ill his discretion and in good faith, subsequently loses 
 these profits in further speculation, the Client must bear 
 the loss.' But if the transactions are so conducted by the 
 Broker that through his want of that degree of diligence 
 and skill which the Client might expect at his hands, no 
 benefit results, this, it is said, constitutes a defence, to a 
 suit for commissions.^ 
 
 A Client may ratify an unauthorized purchase of his 
 Broker, and then the position is the same as if the Client 
 had given an original authority. The ratification relates 
 back to the time of the act which is ratified.^ 
 
 Before one is called upon to ratify any unauthorized 
 transaction, he is entitled to have all the facts before him 
 and to have a reasonable time in which to act in regard to 
 the transaction.^ 
 
 The question is one for the jury, and the burden of proof 
 
 dollar if he could, and that if the exercise of such discretion. Hop- 
 Broker could help him he would like kins vs. Clark, 158 N. Y. 290. 
 to have him do so, is not, however, ^Hoffman vs. T/ivinpcston, 14 J. 
 .sufhcient authority for the Broker to & S. 552. 
 
 enter into " di.scretionary " specu- ^ Campbell vs. Brass, (1891) 7 T. 
 
 lative transactions for the client. L. R. 612; Clews vs. Jamicson, 182 
 
 Hopkinsvs. Clark, 7 App. Div. 207; U. S. 461. As to when the burden 
 
 aff'd 158 X. Y. 299. of proof to show ratification rests 
 
 • In re Vermilye, 43 N. J. Eq. 146; upon the Stock-broker, .see Hopkins 
 
 10 A. 605, and evidence as to the vs. Clark, 7 App. Div. 461 ; Mc- 
 
 intrinsic value of the securities Geoch vs. Hooker, 11 111. App. 640. 
 
 dealt in, is admissible upon the * See cases cited in note 3, supra; 
 
 question of good faith and wise Harris vs. Tumb ridge, 83 N. Y. 92,
 
 Order to Purchase — Price. 213 
 
 rests upon the Brokers.^ Ratification may be proved by 
 the acceptance of an account showing the unauthorized 
 transaction, and a promise to pay the baUince due upon 
 that account.' But mere retention of such an account is 
 not enough as matter of hiw to operate as a ratification.^ 
 It is the custom in the Stock Exchange when ordei-s 
 have been executed, for the Broker to give prompt notice 
 to his CHent of that fact, stating the number of shares pur- 
 chased or sold, the price received or paid and the name of 
 the opposite Broker,^ and obedience to that custom in trans- 
 actions in the Exchange is the Broker's legal duty.^ 
 
 99. A client is not chargeable with J. & S. 5.52; Skiff v.s. Stoddard, 63 
 
 a price which the .stock directed to Conn. 204; 21 L. R. .\. 102; Finney 
 
 be purch;\.sed may have had prior to vs. Gallaudet, 2 N. Y. Supp. 707; 
 
 the time that the order was given, Tuell vs. Paine, 80 N. Y. S. 
 
 and greater than it then had, unless 9.56. 
 
 she consents to adopt such greater * Hoffman vs. Livingston, supra; 
 
 price. Day vs. Jameson, 33 N. Y. Rosenstock vs.Tormey, 32 Md. 17S; 
 
 St. Rep. 375, 377. Prout vs. Chisolm, 89 Hun, 108; 
 
 * See cases cited in note 3, supra, s. c. 21 App. Div. 54; Bate vs. Mc- 
 See also Day vs. Jameson, 33 X. Y. Dowell, 17 J. <k S. 106. 
 
 St. R. 375, 377; Harris vs. Turn- In Delenno vs. Ilaiglit it Free.se 
 
 bridge, 83 N. Y. 92, 99. See also Co., N. Y. J.. J. May 23. 1903, it Wiis 
 
 Genin vs. Isaacson, 6 X. Y. Leg. Ob. held that it was the duty of defend- 
 
 213; and cases cited in notes 4 and ant Broker to give to its principal, 
 
 2, supra. the plaintiff, the names of the Brok- 
 
 ' Gillett vs. Whiting, 55 X'. Y. ers from whom it bought and sold 
 
 Super. Ct. 187, reversed on other stock for plaintifl' and the prices at 
 
 grounds, 120 X. Y. 402. which such .stock wa-s I )ought or sold 
 
 * Burhoni vs. Lockwood, 71 .\pp. and it will l)e compelled to deposit 
 Div. 301, alT'd 177 X. Y. 17, 32; its books and papers in coiirt, or 
 Hansen vs. Boyd, 161 U. S. 397. have them examined l)y a referee 
 A« to how far the letters between ut its expen.se, for the purpose of 
 the parties and diary entries are eliciting such information, 
 admiiwiblc in evidence and the Bought and sold notes sent by a 
 weight that should be attachwl to Broker to th(; buyer and .seller, the 
 them, itce Wliitaker vh. White, 69 execution of which is not denied, 
 Hun, 258; Hofikins vs. Clark, 7 constitute the contract bet wi-en the 
 App Div, 207. |)arties .Murray vs. Doud, (V.i III. 
 
 *iUni lluffinari vs. Livingston, 14 App. 247. But a "sold" note giv-
 
 214 Ntock-brokers and Stock Exchanges. 
 
 His refusal to furnish information as to tlie time or times 
 of sale, and the amount realized by the sale or sales, raises a 
 prt'Suui})tion authorizing the strictest construction against 
 him as to aiiiouiit, value and price.' And it was decided in 
 Hoffman vs. Livingston,'^ that a failure of the Broker to give 
 this notice was such negligence as to preclude him from 
 recovering his commissions. Where such notices are ren- 
 dered by the Broker to the Client, who relies thereon, the 
 Broker is afterwards estopped from denying the truth 
 thereof.^ It is for the jury to decide whether a Broker 
 should keep accounts showing the names of persons with 
 whom he deals for his principal.^ Where the transaction 
 reported was in fact never made, the Brokers are guilty of 
 fraud. ^ 
 
 Speculations in stocks are frequently made by agents of 
 the Client with the Broker, and the authority of the agent 
 is denied.* So cases may arise where a s})eculative transac- 
 tion is made between a Client and a clerk or agent of the 
 Stock-broker, and tlie authority of the clerk is disputed or 
 his acts disowned by the Stock-broker.' Sometimes, too, 
 
 ing the name of the opposite princi- * See Finney vs. Gallaudet, 2 N. 
 
 pal, on the assumption that the Y. S. 707. As to when one partner 
 
 Litter's Brokers had authority from becomes the agent of another in the 
 
 him, does not constitute a contract purchase of stocks, see Rand vs. 
 
 between principal and Broker, so as Whipple, 71 A. D. 62. See also 
 
 to render the latter lialile for negli- Martin vs. Peters, 4 Rob. (N. Y.) 
 
 gence, when the opposite principal 434. 
 
 repudiates the contract. Pim vs. ' The ordinary presumption is 
 
 Wait, 32 Fed. Rep. 744. See Sim- that the party in whose name an 
 
 mons vs. More, 100 N. Y. 140. account stands is the party in in- 
 
 ' Bate vs. McDowell, supra. terest from whom instructions are 
 
 M6 X. Y. Super. Ct. 552. to be taken. Timp.son vs. Allen, 
 
 » Matter of Pierson, 19 App. Div. 149 X. Y. 513, 519. ^\^^ere a tran.s- 
 
 478. action is made prior to t»he partner- 
 
 * Prout vs. Chisolm, 21 A. D. 54 ship by an individual member of a 
 
 ' Id. firm of Brokers for his own client,
 
 Order to Purchase— Price. 215 
 
 dealings are had between Broker and Client, thi'ough an 
 intermediary, and each side asserts that such intermediary 
 is the agent of the other.' 
 
 In one case in Xevada it appeared that R. & 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 R. how 
 much interest ^Y. F. & Co. would charge to buy for 
 him certain shares of stock. The interest was agreed 
 on, and R. and P. ordered the stock through their Bro- 
 kers in San Francisco, and sent W. notice of the pur- 
 chase in their own firm name of R. & 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. The stock 
 •was never delivered to AV., 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. tfe P. received credit 
 with AV. F. & Co. for the same amount as so much money 
 deposited. R. & P'. subsequently failed. AV. F. & Co. 
 brought suit against W. on the note, and 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 
 AV. Th«; jury having found a verdict for AV.on the ground 
 that li. ik: P. acted as agents of AV. F. & Co., the court upon 
 
 and the firm renders an account of Wells vs. Welter, 15 Xev. 270. .\s 
 
 such transaction in its own name to when a Broker is liable for 
 
 charRinj; thenuselves with tlie whole the acts of a "correspondent," see 
 
 transaction, they will tlicrchy be Smith vs. New York Stock &v. E.\., 
 
 held to have adopted the act of the 2ry .\. Y. S. 261. 
 
 indivirlual partner, its to any bene- ' Timpson vs. .Mien, 1 I'.t N. V. 
 
 fit to be derived therefrom, and as 513; Wolff vs. Lockwood, 75 N. Y. 
 
 to resfKMiKibility for lo.ss. Hate vs. Supj). (i()5; IJoyd vs. Yerkcs, 25 111. 
 
 McDowell, 17 J. & S. IOC, See also App. 527.
 
 210 Stot'k-lirokcrs ami Stock Kxchaii^es. 
 
 appeal rol'used to disturb it,' on tlie yroiuul that R. A: F. 
 acted as agents of W. F. *fe Co. In all such cases, where the 
 authority of the agent is denied, the question is one of fact, 
 and the prot)f must be the same as would exist in an or- 
 dinary case between a third person seeking to ciiarge the 
 principal for the acts of his agent, and the burden would be 
 upon the party asserting the fact. Authoi'ity in an agent 
 may be implied from circumstances, and a customer has a 
 right to rely upon the apparent authority of the Broker's 
 agent.^ 
 
 The agency being proyen, the general rule applies in all 
 such cases that a party who employs an agent to transact 
 business with third ])arties cannot be relieved from liability 
 for the misdoings of such agent in the absence of neglect or 
 want of ordinary care on the part of the party injured. 
 When one of two innocent parties must suffer from the act 
 of a third person, he shall sustain the loss who enabled the 
 third })arty to do the injury.^ And the general rule that, 
 if an agent has limited authority to contract, a party with- 
 out notice of such limitation is not bound to inquire as 
 to the extent of such authority, is also applicable,^ but if 
 the party has notice he is put upon inquir}'.^ 
 
 When therefore a principal imposes a limit upon his 
 Broker, the former is liable if the Broker exceeds the limit.' 
 But if the Broker makes an unauthorized contract (i. e. when 
 
 » Wells vs. Welter, 15 Xev. 276. * Rimmer vs. Webster, (1902) 2 
 
 2 Kratt vs. Hopkins, 78 X. Y. S. Ch. 163; Robinson vs. Brewing Co., 
 
 1012; Briggs vs. Kennett, 8 Misc. (1896) 2 Ch. 841; Bentinck vs. 
 
 264; aff'd (without opinion) 149 X. Bank, (1893) 2 Ch. 120. 
 
 Y. 577. * Xester vs. Craig, 69 Hun, 543. 
 
 ' Andre\\'s vs. Clark, 72 Md. 396; 'Crabb vs. Miller, 24 L. T. 219; 
 
 Caswell vs. Putnam, 120 X. Y. 153, Coles vs. Bristowe, L. R. 4 Ch. 
 
 158, and cases cited in note 1, supra. 14.
 
 Order to Purchase — Price. 217 
 
 instructed to buy the shares of one company, by mistake, 
 purchases those of another), he is personally liable, on the 
 ground of misrepresentation of authority, for the fulfilment 
 of the contract, and if the shares are unsalable, the dam- 
 ages will be the full price named in the contract.^ If no 
 limit is placed upon the Broker, ho has implied authority 
 to contract subject to the rules of the Exchange and reason- 
 able customs (see chapter on Usages), but a vendor's 
 Broker has not implied authority to receive the purchase 
 money unless it mav be presumed from the vendor's acts, 
 i. e. when he gives the Broker share certificates or a 
 transfer.^ 
 
 A Broker or Client dealing with an agent within the 
 limit of his authority has the right to assume if not other- 
 wise informed that the authority of the agent is unlimited, 
 and when the dealing continues after tlie authority is re- 
 voked the principal is bound unless notice of the revocation 
 is brought home to the opposite party .^ But where the 
 agent or office manager of the Broker is given general au- 
 thority by the Client to make purchases and sales for his 
 account, notice by the Client to such agent to cease, is bind- 
 ing upon the Broker, his principal, within the rule that no- 
 tice to an agent touching the subject-matter of his agency 
 is notice to the principal, this rule applying even where the 
 agent represents Ijoth parties at one time.^ 
 
 ' K\ parte Paiimuro, 24 f 'h. l)iv. mixed question of law and fact to be 
 
 367. detennined l)y the eouii, whether 
 
 ' McDevittvs. Connolly, lo L II. the chaii^^e.s are enouf^h to put a 
 
 (lr.).'}f)0. eu.-^toiiicr on iii(|uiry a.s to with 
 
 * Andrews vh. ("lark, supra, whom he is dealing. Lines vs. 
 
 When chanpes arc nuide in a hrok- She|)ard, Hi Daly, 471. 
 crafjc busineHH whereh)y a former * Moyd vs. ^'erkes, '_'.') III. .Vpp. 
 
 clerk becomes the proprietor, it is a .')27.
 
 218 Slock-brokors and Slock Exchanges. 
 
 (^.) Dnttj and LiahUitji i>f Ih'ohrr in Purcltashig ; Right to 
 
 I ltd emu it I/. 
 
 Brokers or factors are requiiinl to act with reasonable dil- 
 igence ami })ruclence in tlieir employment/ and to exercise 
 their judgment and discretion Id the best advantage of the 
 principal. This means that those who deal with them, con- 
 tract for, and have a right to expect, a degree of care com- 
 mensm'ate with the importance and risks of the business and 
 a skill and capacity adequate to its performance. That care 
 and skill is different in kind from the ordinary diligence and 
 capacity of the ordinary citizen, and the Broker is employed 
 for that reason."^ 
 
 These requirements apply in all cases, where an order to 
 purchase is given to a Broker, whether the transaction is 
 to be executed at a fixed price, or at the market price, or at 
 his discretion, and whether the Broker is acting for com- 
 pensation or gratuitously.^ 
 
 A commission merchant or Broker must also in his deal- 
 ings with his Client act in entire good faith,'' and he has no 
 right to conceal any portion of his transactions and dealings 
 in relation to the property alleged to have been bought or 
 
 ' Prout vs. Chisolm, 21 .\pp. 10.5; Boyd vs. Barrett, 16 Phila. 
 
 Div. 54; Bate vs. McDowell, 17 J. & 6.53. 
 
 S. 106, 111; Speyer vs. Colgate, 4 ^ Isham vs. Post, supra. If a 
 Hun, 622; Leveson Gower vs. May, Broker has a general discretion as to 
 7 T. L. R. 696; Boyle vs. Henuing, purchase of securities, and gives 
 121 Fed. Rop. 376; In re Vermilye, evidence to prove a proper exercise 
 43 N. J. Eq. 146; 10 A. 60.5. If the of such discretion, his client may 
 Broker acting in good faith, and introduce evidence contra. Hop- 
 within the line of his duty, inciirs kins vs. Clarke, 158 N. Y. 299. 
 damages, his principal is liable. * AMien a sale of stock is actually 
 Maitland vs. Martin, 86 Pa. St. 120, made by Brokers, and there is no 
 124. evidence to show that they acted in 
 
 ^Isham vs. Post, 141 N. Y. 100, bad faith, it is error to submit the
 
 Duty and Liability of Brokers. 219 
 
 sold.^ His duty to keep and render just and true ac- 
 counts is ''plain to the last degree.'"- 
 
 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. Furnishing 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 orreal, 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.^ A 
 presumption against the Broker's good faith and honesty 
 can be drawn from his omission of these duties.^ 
 
 "When the Broker withholds the fullest information in 
 this respect, the right to examination before trial, in an ac- 
 tion brought to recover alleged profits or to adjust the un- 
 settled accounts, should be fully accorded.^ Ilis refusal to 
 give such information without compulsion raises a presump- 
 tion authorizing the strictest construction of the evidence 
 against him.* 
 
 question of their good faith to* the N. Y. Weekly Dig. 20, but when an 
 
 jurj-. Day vs. Jameson, .33 N. Y. accounting i.s demanded, a dis- 
 
 St. Rep. .37.'), 379. covery of the Broker's books will not 
 
 ' Miller vs. Kent, .59 How. Pr. be granted to enable the client to 
 
 322, 32.5; Marvin vs. Buchanan, 62 prepare his complaint. Id. N. Y. 
 
 Barb. 408; Talbot vs. Doran & Z)ai7i/ /Peg. Nov. 27, 1,SS2; 5 Monthly 
 
 Wright Co., 9 X. Y. Supp. 478; L. BuU. 4. 
 
 Drake v.s. Weinman, 33 X. Y. ' Miller vs. Kent, supra; Harding 
 
 Supp. 177; Drake vs. Thompson & vs. Field, 46 X. Y. St. Hep. 628, and 
 
 Deer Co., .33 .\. Y. Supp. 180, and ca.ses supra, 
 
 cases cited in succeeding notes. * Prout vs. Chisolm, 21 .Vpp. 
 
 ' Prout vs. Chi.solm, 89 Hun, 108; Div. .54. 
 
 B. c. 21 .\pp. Div. .54; Bate vs. Mc- * See post, \). 770, whcro the rem- 
 
 Dowell, 17 J. A S. 106; .Miller vs. cdy is more fully discu.ssed. 
 
 Kent, 10 Wf.kly Digest, .362; s. c. 23 • liate vs. McDowell, supra; Gray 
 
 Hun, 6.57; Dull v.s lIutcirniHon, 19 vs. Haig, 20 Beav. 219.
 
 220 
 
 Stock-brokers and Stock Excliuiiges. 
 
 A Broker has no right to adopt methods of business that 
 are so intricate or toi-tuous that Ihey are incapable of being 
 exphiined to the full comprehension of an ordinarily intel- 
 ligent jury.' 
 
 The known usages of trade and business enter into such 
 employment ; and if he conducts his business with diligence, 
 care and good faith according to such usages, he will be ex- 
 onerated from all responsibility.'^ 
 
 But a Stock-broker cannot bind his Client by anything 
 done under a rule of the Exchange which was not made 
 until after the instructions were given to him.^ 
 
 * Oldershaw vs. Knowles, 101 111. 
 117. 
 
 ^ Bibb vs. Allen, 149 U. S. 481 
 Clews vs. Jamieson, 182 U. S. 461 
 Hausen vs. Boyd, IGl U. S. 403 
 Phillips vs. Moir, 69 111. 155; Deshler 
 vs. Beers, 32 IH. 368; Paton vs. 
 Newman, 51 La. Ann. 1428; 28 
 So. Rep. 576; Skiff vs. Stoddard, 
 63 Conn. 198; 21 L. R. A. 102. 
 Mitchell vs. Xewhall, 15 M. it W. 
 308; Westropp vs. Solomon, 8 C. B. 
 345; Pollock vs. Stables, 12 Q. B. 
 765; Tempest vs. Kilner, 3 C. B. 
 253; Bayley vs. Wilkins, 7 C. B. 886; 
 Hunt vs. Gunn, 13 C. B. (n. s.) 227; 
 Taylor vs. Stray, 2 C. B. (n. s.) 175; 
 Lamert vs. Heath, 15 M. & W. 486; 
 15 L. J. Ex. 298; Morrice vs. Hun- 
 ter, 14 L. T. 897; Inchbald vs. 
 Xeilgherrj' Coffee Co. 34 L. J. (C. 
 P.) 15; Forget vs. Baxter, L. R. A. 
 C. (1900), 467; s. c. 82 L. T. R. 510; 
 Barker vs. Edwards, 57 L. J. Q. B. 
 147; Peckham vs. Ketchum, 5 
 Bosw. (N. Y.) 506; s. c. less fully, 
 10 Ab. Pr. (X. Y.) 220; Van Du.sen- 
 Harrington Co. vs. Jungeblut, 77 X. 
 
 W. Rep. 970; Gheen vs. Johnson, 90 
 Pa. St. 38: Sutton vs. Tatham, 10 
 Ad. & E. 27; Smith vs. Lindo, 5 C. 
 B. (n. s.) 587; Rosewarne vs. Bill- 
 ing, 15 C. B. (n. s.) 316; Remfry vs. 
 Butler, 1 E. B. & E. 887; Biederman 
 vs. Stone, L. R. 2 C. P. 504; Chap- 
 man vs. Shepherd, Whitehead a's. 
 Izod, L. R. 2 C. P. 228; Webb vs. 
 Challoner, 2 F. & F. 120; M'Ewen 
 vs. Woods, 11 Q. B. 13; Bayliffe vs. 
 Butterworth, 1 Ex. 425; Patterson 
 vs. Iveys, 1 Cin. Super. Ct. Rep. 
 (Ohio) 94. As to knowledge of the 
 usage by the client, see Blakemore 
 vs. Heyman, 23 Fed. Rep. 648; 
 Higgins vs. McCrea, 23 Fed. Rep. 
 782. If the Broker's agent receives 
 an order forbidden by the Stock 
 Exchange rules, the broker is liable. 
 Xewman vs. Lee, 84 X. Y. Supp. 
 106. See also chapter on "Usages." 
 
 ' We-stropp vs. Solomon, 8 C. B. 
 345. As to when evidence of Board 
 of Trade custom is admissible, see 
 Ayer vs. Mead, 13 111. App. 625. 
 
 If a rule of an Exchange requires 
 a vendor, on receiving written no-
 
 Duty and Liability of Brokers. 221 
 
 The Broker should hand over to his principal money or 
 securities as soon as he l^as received them, but the CUent 
 cannot insist on delivery, at the time of the pa^'ment of the 
 purchase money, if this obliged the Broker himself to ad- 
 vance the purchase money, as the Broker is under no obli- 
 gation to pay the price.^ 
 
 In resi)ect to the character and kind of stocks or securi- 
 ties which the Broker may buy, he is bound to purchase 
 the kind designated by the Client.^ But if he exercises 
 prudence and care, he is not liable, although the securities 
 purchased by him in the regular course of business prove 
 spurious. 
 
 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 certifi- 
 cates were such as to deceive evervbody who dealt in them. 
 There was no fraud or negligence on either side. The 
 Brokers paid the purchase money back to the vendors, as 
 also a certain sum which, under the rules of the Stock Ex- 
 change, had been prescribed to be paid in such cases. They 
 
 tice that a default is intended, to Board of Tratle but were fictitioixs 
 
 sell on or before the first open board or "bucket shop" transaction!! 
 
 thereafter, he must on receiving a made in the Broker's own olHce, the 
 
 notice tliat, for the reason given Client may recover the amount of 
 
 "the deal is off," strictly comply margins deposited by him with the 
 
 with the rule, quite irrespective of Broker. Mellott vs. Downing, 64 
 
 the reasons given. Gill vs. (J'- Pa. St. 393. A Stock-broker is an 
 
 Kourke, G I'a. Super. Ct. Hep. G05. "agent" within the meaning of 
 
 'Stock Co. vs. Galmfjyic, 3 T. L. Coinp. Laws, Midiigan, § ll.'iT'i, 
 
 K. SOS. making an agent criminally liable 
 
 ' If tlie Client instructs his Broker for mi.sai)plyiiig money sent to him 
 
 to purchase and sell grain on lh<! with wri(tc!n instructions a« to its 
 
 Chicago Boanl of Tra<le, but it ap- application. I'eople vs. Karate, 93 
 
 pcufH that the purchaww and huU-m S. \V. Uep. lOSl. 
 were not mode on the Chicago ' 8 C. B. 310.
 
 222 Stock -brokers and Slock Exchanges. 
 
 then sued their princij)al, who did not contest the right of 
 plaintitf to recover the principal sum, but defended as to 
 the additional sum, as to whioli the defendant succeeded. 
 In Mitchell vs. Newhall ' the defendant gave the plaintiff, 
 a Broker on the Stock Exchange, an order to purchase for 
 him fifty shares in a foreign railway company. At that 
 time no shares of the company were in the market, the 
 foreign government not having yet authorized its establish- 
 ment; but letters of allotment for shares were then, accord- 
 ing to the evidence of persons on the Stock Exchange, com- 
 monly bought and sold in the market as shares. The 
 plaintiff bought for the defendant a letter of allotment 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 Avas instructed to 
 purchase '" Kentish Coast Ilailway 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 ; al- 
 though it turned out that he had bought scrip issued with- 
 out due authority, and, in fact, utterly worthless. 
 
 So in 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, Avere 
 discovered to be unmarketable for want of stamps, and they 
 were returned to the Broker, who indemnified the purchaser 
 without consulting with his Client. The court held, upon 
 the authority of Child vs. Morley,^ that the Broker was en- 
 
 ' 15 M. & W. 308. vs. Hoy, 13 N. Y. Weekly Dig. 324; 
 
 = Tempest vs. Kilner, 3 C. B. 253; aff'd 94 N. Y. 626. 
 
 Hunt vs. Gunn, 13 C. B. (ii. s.) 227. ' 3 Bing. (N. C.) 724. 
 
 ' 15 iM. & W. 486. See Luffman ^ 8 T. II. 610.
 
 Duty and Liability of Urokers. 223 
 
 titled to recover from bis 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 some- 
 thing which, though resembling the article contracted to 
 be sold, Avas of no value; and that the repayment made by 
 the Broker to the purchaser was necessary, accoi-ding 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 diffei-- 
 ences. 
 
 In the case of Peckham vs. Ketchum,^ a case almost 
 similar to Lamert vs. Heath, the court held that a Broker 
 who is employed to purchase stock, and who in good faith, 
 and in accordance with the custom of the market, makes 
 the purchase in his 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 office of defendants and ordered tlieni to 
 buy ten shares of railroad stock at a certain price. On 
 the same day the defendants sent to the plaintiff a memo- 
 randum of the purchase, who sent his check for the same, 
 the defendants stating that they would ti-ansfer the stock 
 referred to into his name on the books of the coini)any 
 that day, but that the certificate would not be rea<ly 
 until the next day. At the time mentioned they deiivei-ed 
 to him a certificate in due form for said stock, signed by 
 one Schuyler, the transfer agent of sai<l raili'oad com- 
 pany, who was the proper officer to issu(; tli(»same. In the 
 |)urchase of the stock th<! derendants ;icte«l in good faith 
 "in the mo<le usii;d and cnstomary among Stock-brokers in 
 
 '5 BoHw. (.N. Y.) fjOfi; h. c. Ichu fully, ID Al). I'r. (.\. V.) 220.
 
 224 Stock-brokers and Stock Kxchau^es. 
 
 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 plaint i If did m)t represent actual stock, 
 and was valueless ; and, upon the discovery of this fact, in due 
 time the plaintiff tendered the same to defencUints and de- 
 manded a return of his money, which was refused, and the 
 action was brought to recover the same. In an opinion giv- 
 ing judgment for the defendants, Hoffman, J., after review- 
 ing the English authorities upon the subject, concluded that 
 the plaintiff, having contracted with defendants as Stock- 
 brokers, was bound by the custom "which })revailed in rela- 
 tion to that species of business, and especially by the usage 
 by which Brokers only, and not their Clients, are known 
 in their dealings Avith each other, and that such a custom 
 put the plaintiff in the same position as in the case of a con- 
 tract made distinctly with one as the agent of a known or 
 disclosed principal. The court also held tliat the employ- 
 ment of the defendants could not be justly treated as an em- 
 ployment to purchase genuiue stock to the extent and im- 
 port of making them guarantors of the validity of that 
 which they should purchase ; it was rather to purchase what 
 in the market loas passing as stock of this description^ 
 and that an agent employed to purchase a commodity of a 
 particular character or quality is only hound to use all 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 princii)le, 
 there being no just distinction in this respect between
 
 Duty and Liability of Brokers. 225 
 
 the employment of a Stock-broker and any other kind of 
 agent.^ 
 
 So where a person employing a Broker to sell shares di- 
 rected him by mistake to sell 250, when he intended to sell 
 and had only 50 shares, and the Broker sold the shares in 
 accordance ^Yith his directions, the Client was held bound 
 to pay the difference which, nnder 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 ilkistration of the general rule. There the defendant 
 instructed his Brokers to buy 10 Agra & Masterman's 
 
 ' Within the principles of the a state are constitutionally issued. 
 
 cases cited in the text, the Broker is Otis vs. Cullum, supra. See also 
 
 not to be held to any of the war- iEtna Life Ins. Co. vs. Middleport, 
 
 ranties implied on the sale of secu- 124 U. S. 534. The decision in 
 
 rities and which would obtain be- Bischoffsheim vs. Baltzer, 20 J"ed. 
 
 tween his Client and the opposite Rep. 890, to the contrary, might 
 
 party. better have rested on the fact that 
 
 Between the principals the rule there the vendor of the unconstitu- 
 is that "the seller is liable ex delicto tionally issued bond, wiis really act- 
 forbad faith, and ex contractu there m<r as Broker for the vendee and 
 Is a warranty implied on his part wa.s sellinj; him his o\\ni securities, 
 that the .securities ljelon<< to him and But sec Ex parte Piunnure, 24 Ch. 
 are not forgeries. Where there Ls D. 307. 
 
 no express .stipulation, there Ls no - Sutton vs. Tatham, 10 Ad. & E. 
 
 liability beyond this." Otis vs. 27; see also, to same effect, Child vs. 
 
 Cullum, 92 U. S. 447. There Ls no Morley, S T. R. 610; Lightfoot vs. 
 
 implied warranty of the solvency of Creed, 8 Taunt. 268; s. c. 2 Moo. 
 
 the corporation, or that the stock 255. But see Bowlljy vs. Bell, 3 C. 
 
 sold hi not part of a fraudulent over- B. 284; Fletcher vs. Marsilall, 15 M. 
 
 iflsue. Peoples Bank vs. Kurty, 11 & W. 755; Stewart vs. C'auty, 8 M. 
 
 W. N'.C. 225. Or that the stock sold it W. 160. As to lial)ility of Broker 
 
 Ls of a corporation de jure, Ilarltr for stocks lost by or stolon from 
 
 V8. Eltzroth, 111 Ind. 1.39. Or that him, or for los.ses occ!i.si(»ned in the 
 
 it ha« gwxi title to its property, or exercise of his employment, see 
 
 as U} its value. State vs. R. R. Co., post, subdivision (c), p. 241. 
 
 34 La. Ann. 947. .Neither is there ' 14 L. T. 897. 
 any impliwl warrantv that bonds of 
 
 ir,
 
 226 Stock-brokers and Stock Exchanges. 
 
 shares, which the Brokers' manager b}^ mistake described 
 as £25 shares in phice of £50 shares with £25 paid, on 
 which ground tlie defendant attempted to repudiate the 
 transaction. In an action by the Brokers to recoup them- 
 selves for i)ayments made on the Stock Exchange, Mr. 
 Justice Wiles 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 care incumbent upon a Broker, it would seem, 
 does not require him to })resent the purchased certificates 
 of stock at the office of the corporation for verification of 
 their genuineness if there is nothing on their face to arouse 
 suspicion. 
 
 It was so held in respect to a loan by a banker of his 
 customer's money upon the security of certificates of stock,* 
 and the reasoning of that case seems equally applicable to 
 an ordinary purchase by a Broker, particularly as the 
 Broker ordinarily is under no duty to have the purchased 
 stock transferred at the company's ofiice into his Client's 
 name. 
 
 Fuller mention of the case of Isham vs. Post, above re- 
 ferred to, is pertinent here, for the transactions therein con- 
 sidered, i. e., loaning the Client's money upon the collateral 
 security of shares of stock, are more or less common to all 
 stock-brokerage offices. It was held that it is not the 
 duty of the Broker to inquire into the solvency of borrow- 
 ers reputed to be responsible, })articulai'ly where there is no 
 proof that inquiry would have developed any doubt of 
 solvency. "Where the stocks upon pledge of which the loan 
 
 'Isham vs. Post, 141 N. Y. 100.
 
 Duty and Liability of Brokers. 227 
 
 is made prove to be forgeries and a question is raised as to 
 whether the Broker gave the certiticates an examination 
 reasonably careful under the circumstances, he is entitled to 
 show that the forgery was so deft as to deceive the reason- 
 able scrutiny of other careful bankers, and that for an ex- 
 tended time the same forged certificates have been com- 
 monly received on the Street among such bankers and 
 Brokers as colUiteral for loans. lie may also show upon 
 this point that he has himself loaned his own money on 
 similarly forged certificates.* 
 
 But it is not enough to state that he had " carefully " 
 examined the certiticates, without showing in what that 
 care consisted, or that he was possessed of any information 
 which \vould make his inspection anything of a safeguard ; 
 or that loans upon similarl}'' forged certificates had been 
 made by other bankers and Brokers apparently equally as 
 careless as himself.- 
 
 Where a Broker acts in pursuance of his authority, ac- 
 cording to the usages of the Stock Exchange or of his 
 fellow-Brokers, and in good faith and w^ith prudence, he is 
 entitled to a full intlemnification for any outlays and 
 losses which may occur in the transaction of the business. 
 Ills employment implies an undertaking to this effect on 
 his employer's part. The general rule, in respect to the re- 
 lation between principal and agent, being thus; — a re- 
 quest to undertake an agency or employment, the proper 
 execution of which does or may involve the loss or cxpendi- 
 tun; of money on tluj part of the agent, operates as an im- 
 plied ie(juest on tli<.' part of the principal to rcimbuisc; liim 
 
 ' iMlwirn VH. I'o.sl, supra. '^PP- l^i^'- 005; M S. Y. Siipp. 1 1.{7; 
 
 ' iHham VH. Post, on lu-w trial, r.l aff'd 107 \. Y. r,M .
 
 228 Stock-brokers and Stock Exchanges. 
 
 for such losses as may result from the performance of his 
 agency.' 
 
 The hinguage of ]\[r. Justice Bhickburu in Duncan vs. 
 Hiir-^ is strong and apposite upon this questicju of tlie 
 Stock-broker to receive indemnity for acts performed in 
 the business of his Clients. '' It must bo admitted that 
 the plaintiffs Avere authorized by the defendants to enter 
 into contracts in their l)ehalf according to tlie rules of the 
 Stock Exchange. It must bo 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 entitled to be iiuleui- 
 nified by his principal upon an im[)lied contract to that 
 effect." And the case of Marten vs. Gibbon^ carried 
 the doctrine 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 subse- 
 quently 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 
 
 ' Bibb vs. Allen, 149 U. S. 481, L. T. R. (n. s.) 808; Hartas vs. Rib- 
 
 499; Bennett vs. Covington, 22 Fed. bons, 22 Q. B. D. 254; Ellis vs. Pond, 
 
 Rep. S16, 819; Bartlett vs. Smith, L. R. 1 Q. B. D. (1898) 42G; Harker 
 
 13 Fed. Rep. 263; Arnold vs. Smith, vs. Edwards, 4 T. L. R. 92. See for 
 
 85 Ga. 510; Perin vs. Parker, IS X. further English cases, Stutfield's 
 
 E. Rep. 747; Knapp vs. Simon, 96 Rules and Usages of the Stock Ex- 
 
 N. Y. 284; Maitland vs. Martin, 86 change, 172. 
 
 Pa. St. 120; Duncan vs. Hill, 29 L. =^8 L. R. Ex. 242; rev'g 6 L. R. 
 
 T. R. 268; Thacker vs. Hardy, 4 Q. Ex. 255. 
 
 B. D. 685; Smith vs. Reynolds, 66 ' S3 L. T. N. S. 561.
 
 Duty aud Liability of Brokers. 229 
 
 members towards each other for contracts made on the 
 Exchange. AVhere a customer refuses to deliver stock 
 which his Broker sells })ursuant to contract, the latter may 
 buy it for delivery at the best price he can and hold the 
 former for the loss.^ And a purchaser is bound to indem- 
 nify a Broker Avho pays for and takes a transfer of shares 
 in a company after commencement of the winding up.^ 
 
 If the Broker held collateral secuiity of the Clients 
 against the loss, he is not required, in the absence of a 
 special agreement, to realize thereon, or to return the same 
 to the customer before bringing action to recover the 
 
 ' Baily vs. Caruduff, 59 Pac. Rep. der the rules of the Stock Exchange, 
 
 407. was compelled to pay the differ- 
 
 * Chapman vs. Shepherd, L. R. 2 ences to the jobber. And the court 
 C. P. 228; Whitehead vs. Izod, id.; held that the Broker was entitled to 
 Emmerson's case, L. R. 1 Ch. App. recover the sum which he had so 
 433. A very interesting question paid out by reason of the conduct of 
 arose in the case of Mewburn vs. the Client. The court did not pa.ss 
 Eaton (20 L. T. Rep. 449) between upon the question as to whether a 
 a Broker and his Client. In that vendor was bound to sign a transfer 
 case the Broker had sold certain to the ultimate purchaser in which 
 shares for his Client on the Stock the consideration was stated at a 
 Exchange, and the latter had exe- price greater than that which he had 
 cuted the transfers and received the received for the shares; ijut the inti- 
 purchase price. Sub.sequently, mations were that he would not be 
 however, the transfers were re- so compelled. It wa.s held that 
 turned to tlif; Broker by the ulti- this objection had been waived by 
 mate purcha.ser for some trifling cor- the Client in originally signing the 
 rections in the spelling of names, tran.sfer8. In Hawkins vs. Maltby, 
 and the Broker delivere<l the same (L. R. Eq. 505; 4 Cli. .\pp. 200), 
 to his Client for that purpose. The the specific performance of a con- 
 latter, however, refii.'^ed to "initial" tract was refu.scd, on llie tecluiical 
 the corroctiiiiiM unless llic Broker grovuid that tlie bill called for the 
 paid him the price iiuMiti(jne«l in the enforcement of a contract for a dif- 
 transfers to the ultimate purchitser, ferent consideration than that actii- 
 which w:m higher than the price at ally agreed upon. But subse- 
 which hi.H sliartts were (»rigiiially rpiently the Broker was lield en- 
 Hold. In conHCfiucnce, the shurtM titled to an indemnity, 
 were bought in, unrl the Broker, un-
 
 230 Stock-brokers and Stock Exehaiiges. 
 
 amount lost.' This right to indemnity is not lost by a 
 wrongful termination of the transaction by the Broker. It 
 is simply to be diminished in its amount by the damage to 
 the Client. Thus the mere fact that the Broker sells, with- 
 out due notice to his Client of the time and place of sale, 
 and by such act commits a conversion, does not ]n'eclude 
 him from bringing an action against his Client to recover 
 the debt ai-ising out of the advance made by the Broker 
 to purchase the stock. This must be deemed the settled rule, 
 despite some contrariety in the decisions in New York 
 State and some opposing authorities elsewhere. 
 
 The point first arose in Gruman vs. Sraith,^ where the 
 action was brought by the plaintiff as the assignee of 
 F. & Co., Stock-brokers, to recover a balance due the 
 latter from the defendant, growing out of a stock trans- 
 action. After the stock was purchased, the defendant, 
 besides leaving some money as a margin, deposited the 
 stock in question Avith the Bi'okers as collateral se- 
 curity. The margin having become exhausted by a sud- 
 den decline of the stock in question, the collateral was 
 sold without the due notice of the time and place of sale. 
 A technical conversion was conceded. The action was sub- 
 sequently brought to recover the above balance, the defend- 
 ant 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 wrongdoers. The plaintiff claimed that this cause of 
 action grew out of the original purchase of the stock in the 
 
 ' De Cordova vs. Barnum, 130 N. ' 81 N. Y. 25. 
 Y. 615.
 
 Duty ami Liability of Brokers. 231 
 
 first place, and not out of its wrongful conversion after it 
 became a collateral. 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 sup})ort of this view, Baker vs. Drake ' and 
 Markham vs. Jaudon ^ were cited. 
 
 The action was not based upon the wrongful sale, but 
 upon the debt for the advance made by the Brokers to pur- 
 chase the stock. The title of the stock when purchased 
 was in the defendant ; the advance of the whole or a por- 
 tion of the purchiise-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. 
 
 The defendant was not bound by the sale for want of 
 notice, and might msist upon full indemnity for his loss or 
 injury ; 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 liad gone down to 50 and remained there, it 
 is very clear that, so far from being injurotl, the defendant 
 would have been benefited by the sale. The defendant 
 cannot claim a greater benefit than would have been derived 
 if the act complained of had not been committed. Tlio de- 
 fendant might have shown that the market vahie of the 
 stock at tlie time of the sale exceeded the price for whieh it 
 was s(jld, and he was entitled to a reasonable time after 
 
 '53 N Y. 211. »n id. 435.
 
 232 Stock-brokers and Stock Kxcliaiii^es. 
 
 notice of the sale to replace the stock; jiiul if in the mean- 
 time it had advanced in price, the defendant would have 
 been entitled to the ditference. Beyond this, he was not 
 legally injured." 
 
 And these propositions were again confirraed by the 
 New York Court of Ap]>eals in Caprou vs. Thompson.' 
 
 But later the Second Division of the Court of Apj)eals in 
 Gillett vs. AVhiting,'^ rofei'ring to tlie language of the lower 
 Appellate Court, that the fact of conversion did not go to 
 the whole damages asked by the Broker but entitletl the 
 Client to a reduction of the Broker's demand b\' the amount 
 2)roven to have been suffered by the conversion, and that 
 no such amount was proven,'' said " We d(j not under- 
 stand this to be the law. This action was based upon the 
 performance of the agreement by the plaintiffs, in which 
 they undertook to carry for the d(?fendant the stock pur- 
 chased, and if, instead of performing the contract on their 
 part, they converted the stock to their own use, they had no 
 ground of complaint or cause of action against th(3 defend- 
 ant." There was no mention in the briefs of counsel or 
 in the opinion of the court, of the cases of Gruman vs. 
 Smith and Capron vs. Thompson, and the court assumed 
 that the only basis for the decision of the General Term 
 was the case of Baker vs. Drake, which was held to be dis- 
 tinguishable. This view was then followed by the Gen- 
 eral Term of the Supreme Court in Minor vs. Beveridge,* 
 but when these two cases came again to the Court of Ap- 
 peals,' the coui-t re-declared the doctrine of Gruman vs. 
 
 '86X. Y. 418. «67Him, 1. 
 
 ' 120 X. Y. 102. 5 Gillett vs. Whiting, 141 N. Y. 71; 
 
 s 23 J & S. 187, 188. Minor vs. Beveridge, 141 N. Y. 399.
 
 Duty ami Liability of Brokers. 233 
 
 Smith and Capron vs. Tliompson and said that the remarks 
 on the first appeal in GiUett vs. Whiting were obiter and 
 not necessary to the decision of that appeal. 
 
 Bartlett, J., said, in the second appeal in Minor vs. 
 Beveridge : "AVe think the trial Judge should have sub- 
 mitted these questions (viz., whether the Client sustained 
 loss on the sale, and as to whether he could have replaced 
 the stocks sold within a reasonable time) to the jury under 
 the settled law of this court that even where a Stock-broker 
 sells without due notice stock purchased by him for a cus- 
 tomer, on a margin, and held in pledge to secure the advance 
 made by him for the purchase, he does not thereby, as 
 matter of law, extinguish his claim against the customer for 
 the advance, Ijut the customer is entitled to be allowed as 
 damages the difference between the price for which the 
 stock sold and for which he received credit, and its 
 market price then, or within such reasonable time after 
 notice of sale, as would have enabled him to replace 
 the st(K-k in case the market price exceeded the price 
 realized.'" 
 
 In certain other jurisdictions, however, the doctrine stated 
 in GiUett vs. Whiting, suj>ra, is in effect adopted. These 
 cases are referred to in note.^ 
 
 So when Stock-brokers are sued for illegally converting 
 
 See also Quinlan vs. Raymond, X. Iu> recovered under the coinmoM 
 
 Y Daily Rtg. July 29, 1880; ufT'd 3 fo\iiit.sin lussuinpsit. Ellis vs. I'uiid, 
 
 N. Y St Hep. .07:^. 1 Q. U. 1). ( 18<JS) ILMJ. In tliLs lat- 
 
 ' 141 \. Y. at 103. ter com', however, lliere wjus a di.s- 
 
 ' liail vs. Clark, 28 Fed. Rep. 179; HentiMi: ojiinion and the ca-sc i.s 
 
 DenUjn vs. Jaekson, 100 111. ■\X\, elahorately considered and criti- 
 
 437; Larminie vs. ("arley, 111 111. eiscnl in an article in 23 L. .M. and 
 
 196, in which c;i.sc it w:lh also ln'ld \U'V. |). 3.1.'i. S«-c also I-accv vs. 
 
 that the murginH deposited iniKht Hill, Sdini. CI. L. R. SCIi. '.rjl.
 
 234 Stock-brokers and Stock Kxchjinges. 
 
 plaintiff's stocks, they may interpose a counterclaim for the 
 (leliciency on such sale.' 
 
 But the Broker has no right to recover indemnity for acts 
 beyond the scope of his authority.^ This proposition is well 
 illustrated in the case of Bowlby vs. Bell.^ In that case a 
 Broker 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 recoup 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 pur- 
 chaser; 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 an}'^ 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 recovered 
 from his principal. In this case it appeared that the contract 
 made by the selling Broker Avas for the sale of registered 
 shares. Upon this point the court said : " If the contract 
 was for unregistered shares, it may be collected from the 
 correspondence that the defendant did not authorize the 
 ])laintiif to make such a contract ; and if he did make it, 
 and thereby incurred a liability to have shares bought in 
 
 • Wicks vs. Hatch, 62 id. 535. 446. See also cases heretofore 
 
 To same effect, Work vs. Bennett, cited under this head. 
 
 70 Pa. St. 484. ^ 3 C. B. 284, decided on the au- 
 
 ' .\s to when a Broker is within his thority of Stephens vs. De Medina, 
 
 authority if he acts in good faith, 4 Q. B. 422. 
 see Matthews vs. Fuller, 123 Mass.
 
 Duty and Liability of Brokers. 235 
 
 against him, be 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 ; and it was held by the Court of 
 Exchequer that the 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 de- 
 fendants ought not to have paid the money, and that an 
 action would lie against them by the plaintiff to recover 
 it. 
 
 So authority to a Broker to invest a sum of mone}'^ 
 deposited with him for the purpose, in certain stocks, does 
 not authorize a larger investment, and the Client may recover 
 the value of the stock ordered, in an action on an account.- 
 Nor can the Broker recover where the loss is caused l)y his 
 own default.^ But he cannot be deprived of his indemnity 
 for commissions and expenses on the ground that he has 
 not avoided a contract which was not in strict conformity 
 with the statute of frauds, in the absence of any instructions 
 of his principal ncjt to comply therewith."* 
 
 ' 15 .M. <t W. 755; consult also, in As to wlieii it is error to diroct u 
 
 this connection, Stewart vs. Cauty, money verdict for a Client for an 
 
 8 M, & \V. WjO. amount admitted hy the Hrokers to 
 
 * Bradfield vs. Patterson, lOG .\la. I»e due, when it appears that the 
 397. huHl)and <if the Client advanced 
 
 'Duncan vs. Hill, L. H. S Ex. more than the amount due, u|M>n 
 
 242, unless the Client elects to he- his wife's ac<'ount, conditionally 
 
 coniel>o<md therefor hy ratification, upon the hitter's account heint; lia- 
 
 IlartuM vs. IlihhoiiM, 22 (^ H. D. 251. i)le to indenmify the husi)and's ac- 
 
 * Bibb vs. .\Ilen, 119 U. S. IHl. count fur tiie amount so advanced.
 
 236 Stock-brokers ami Slock Kxclianges. 
 
 As the oljject of carrying stock on a margin is to enable 
 the customer to realize a prolit if there is an advance, or to 
 permit the Broker to close the transaction if there is a 
 depreciation exhausting the margin, and tlie customer does 
 not respond to a call for further margins, the Client need 
 not pay a balance due in the transaction until a request for 
 payment has been made' and the statute of limitations ac- 
 cordingly does not run till such demand by the Broker.^ 
 And a Broker must not incur any expense on the ])i-incipal's 
 behalf which the Broker can avoid. According^, where — 
 acting on the supposed instructions of his principal, who 
 wished to repudiate a contract for the purchase of shares — 
 a Broker defended 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.' 
 
 A principal in a stock transaction cannot avoid his liabil- 
 ity to his Brokers for a loss by setting up the guaranty of a 
 third party. In Lee vs. Gargulio ' the plaintiff, it appeared, 
 had certain stock transactions in which defendants acted as 
 his Brokers, in which there was a loss. He sought to avoid 
 this loss by introducing a guaranty signed by one F., which 
 was enclosed 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 w^ords : " For and in consideration of one half 
 
 see Bood\- vs. Pratt, 45 Atl. Rep. ' Clegg vs. Townsend, 10 L. T. 
 
 598. ISO. 
 
 » Kennedy vs. Budd, 5 App. Div. * 45 \. Y. Super. Ct. (13 J. & S.) 
 
 140. 695.
 
 Duty and Liability of Broilers. 237 
 
 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 nuirgin, if called on to do so, to cover all or any 
 decline as fast as it uiaj'' 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 accept- 
 ing the guaranty the Broker did not discharge the principal, 
 and that it was not inconsistent with the original agree- 
 ment. 
 
 Where a promise that a guarantor will become liable, is 
 part of the inducement on which the Broker acts, there is 
 sufficient consideration for the subsequently signed contract 
 of the surety.^ 
 
 But in ail 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 the Broker, which showed 
 a loss, and were admitted to be correct by the Client, are 
 not admissible against the surety. In such a case, the party 
 holding the indemnity claiming loss against his indemnitor 
 must pnn'e it by evidence competent against him. He cannot 
 prove it by the mere admissions or statements of the prin- 
 cipal, however formally made. The admissions of the Client 
 are no part of the res (jesUn so as to be binding upon the 
 surety.^ 
 
 ' Oppenheim vs. Waterbury, 86 fitooks for a certain timo or until ii 
 
 Hun, 122; 'i3 .\. Y. Supp. IS.'i; certain price is rcachotl, he may 
 
 liraiidt on SuretyHhip, 2d ed. § 17. recover upon it at its maturity and 
 
 ' Hatch vs. Klkins, 65 N. Y. 4S9. hold the proceeds against loas on 
 
 If a note is ^i^f'" to secure th«? the closinR of the tran.saction, and 
 
 Broker against loss on carrying this irrespective of whether \w had
 
 238 Stock-brokers aud Stock Excliauges. 
 
 A guaranty against loss on the purchase of certain shares 
 is not a continuous guaranty against loss on subsequent 
 transactions in buying and selling shares of the same stock 
 where they are so interniinglecl that it is impossible to say 
 whether or not there was a loss on the shares originally 
 purcliased.* 
 
 A Broker also is not entitled to indemnity for losses on 
 transactions for a corporation acting ultra vires. This 
 conclusion was reached in re London, Hamburg, and Con- 
 tinental Exchange Bank — Zulueta's Claim.- That case arose 
 in the winding-uj) of a banking company. It appeared 
 that the directors of the bank had given orders to their Bro- 
 ker to buy for the bank a large number 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 tlie 
 directors and their friends, and the balance was transferred 
 to a trustee for the company ; and the Broker's account 
 with the bank was credited with the price. The question 
 was whether the Broker was at liberty to prove for this 
 amount in the winding-up of the company. Lord Eomilly, 
 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 
 exceeding their powers ; and as the transaction was con- 
 cluded, 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 remedy of the shareholders should be to require 
 
 suffered loss at the time of suing on ' Strong vs. Lyon, 63 N. Y. 172. 
 the note. Hertzfield vs. Aaron, 17 ' L. R. 9 Eq. 270. 
 W. D. 309.
 
 Duty and Liability of Brokers. 239 
 
 the directors personally lo refund it. But this decision was 
 reversed on appeal/ and the transaction held to be wholly 
 void ; and the Broker \vas held bound to know that the 
 directors were acting 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 application was made by Stock-brokers to be 
 declared creditors of a company, and it appeared that the 
 manager and certain directors, having associated themselves 
 together in a body, called a " syndicate," for dealing in shares 
 of the company, emplo3'ed the applicants to borrow money for 
 them on the security of shares of the company, which the a}> 
 plicants effected by lending shares on several occasions to deal- 
 ers on the Stock Exchange, who advanced the market value 
 of the shares until a subsequent account-day. In the in- 
 terim a call was made on S20 shares thus lent by the 
 claimants, which they paid ; and the value of the shares 
 falling, and thi-ir princi[)als not giving them instructions 
 to renew, the apjilicants 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 accounts was 
 the sum claimed. One of the " syndicate " was a brother of 
 the aj)plic-ant B ; but the applicants deposed that they 
 had in) knowledge of the existence of this body, and be- 
 lieved throughout that they were dealing witli proj)erty of 
 the company by the direction of its authorizetl agents. It 
 was objecte<l that the claim was illegal, upon the ground 
 that tin; aj)j)lic;intskn<'W that these transactiojis were circi-ted 
 without tlu! knowh;dgc of the shareholders ; and, if not, 
 
 ' S. c, rev'd \.. 1( .') 't,. Apj). 'Sen iil.so, in IIiIh roniioction, Jo- 
 444. HcphH VH. i'ebrer, 3 li. & C. 039.
 
 240 Stock-brokers Jiiid Stock Exchanges. 
 
 the transactions were beside the company's powers : they 
 must show that they held these shares as a securit}' ; and, if 
 they dill, that they have aright to be indeniniiied. But the 
 vice-cbiincellor said the applicants had dealt with ostensible 
 managers of the company 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 hona fides of the transaction could 
 arise ; for it seemed that these transactions were examined 
 b}'^ the directors from da}' to day. The question resolved 
 itself simply into one of indemnity, and the rule that it is 
 the duty of principals to indemnify their agents must pre- 
 vail. The mortgage might have been effected by some other 
 means than by the loan of shares and then no question as 
 to the right to be repaid could have been raised. The claim 
 was accordingly allowed.^ 
 
 So, too, where a savings-bank, having taken certain 
 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 
 plaintiff, a Stock-broker, to sell the remainder at a price 
 named at the New York Stock Exchange; which lie did, 
 and so advised the president, whereupon the latter in- 
 formed him that he had himself previously sold the stock. 
 Plaintiff, being unable to deliver the stock to the Broker to 
 
 * In re Imperial Mercantile Credit and to repay plaintiffs for calls on 
 
 Assoc, 2 Week. Notes (1867), 131. the shares (Robins vs. Edwards, 
 
 A bill lies by Stock-brokers to com- id. 197). First Nat. Bank vs. 
 
 pel the defendant to accept the Hoch, 20 .\lb. L. J. 215; Pa. St. 
 
 transfer of shares, bought for him, May, 1879.
 
 Disposition and Safe-keeping of Stocks. 241 
 
 whoui he had sold it, was compelled to pay the purchaser 
 differences. In an action against the receiver of the banlc 
 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, such a transaction 
 being not void but merely voidable by the borrower.^ 
 
 (c.) Disposition of Stock ivhen Purchased ; Safely Keeping same ; 
 Liability to Keep Ide7itical Stock Purchased^ etc. 
 
 After the stock has been purchased and paid for by the 
 Broker, several questions arise respecting the care and dis- 
 position thereof. 
 
 AVith respect to the care which the Broker should exercise 
 in keeping the securities of his Clients, it seems to be settled 
 that if tlie securities be stolen from or lost by the Broker 
 he is not liable unless the theft or loss arose from or was 
 connected with a want of ordinary diligence or care on his 
 part.'' 
 
 In tiie case of Abbett vs. Frederick^ it was held that a 
 paw^n-broker, where his place of business was broken into 
 and articles 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 
 
 'SLstare vs. Best, 10 Hun, Oil; liaiik, .W Me. 275; Deurborii vs. 
 
 aflf'd S8 N. Y. 527. riiioii Nut. Bunk, 5.S id. 27:J; (il ul. 
 
 » 2 Para, on Cont. 8th ed. vol. 2, .JO'J. 
 
 p. 117 (Wottoni pa^iiiK), mid cases ' Supru. To same effect, Laing 
 
 cited; 1 Inst. 89 a; 4 Hop. 8.3 b; Ab- vs. MIuimuu.t, 1 City Court (.\. Y.), 
 
 bett vs. Frederick, .50 How. (N. Y.) 2.18. 
 
 Pr. 08; Tliird .Nut. Hank vs. Boy<l, « 1 Duly, 317. 
 44 .Md. 17; Jonkins vs. .Nat. Village 
 
 V'>
 
 242 Stock-brokers and Stock Exchanges. 
 
 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.i 
 
 Lord Holt quotes Bracton to the effect that, if a creditor 
 takes a pawn, he is bound to restore it upon pa3nTient 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 lie may resort to tlie 
 pledgor for the debt."'^ But in the case of Cutting vs. Marlor ' 
 it was held that a corporation is liable for stocks and bonds 
 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 
 
 ' Third Nat. Bank vs. Boyd, the safety of securities transferable 
 
 supra. by dehvery, and as to shares which 
 
 ^ Bracton, 99 b; see also Schouler a company requires to be registered 
 on Bailm. 3d ed. § 204 et seq., and in a single name, see Consterdine 
 cases cited; Third Nat. Bank vs. vs. Consterdine, 31 Beav. 330. See 
 Boyd, supra. The liability of trus- also Speight vs. Gaunt, 9 App. Cas. 
 tees does not extend to cases of 1 (in which a tnistee was held not 
 robbery or fraud beyond the care liable to his cestui cjue trust for 
 which a prudent man would take misappropriation of the purchase 
 of his ownproperty (Morlcy vs.Mor- price of trust securities by a Stock- 
 ley, 2 Ch. Cas. 2; Jones vs. Lewis, 2 broker) and Magnus ^-s. Bank, 37 
 Ves. Sen. 240) Exp. Belchier, Amb. Ch. Div. 476 (to the effect that 
 218; and see Bostock vs. Floyer, L. tnistees may render themselves 
 R. 1 Eq. 26). As to precautions liable through negligence), 
 which trustees of shares payable to ^8 X. Y. Weekly Dig. 345; aff'd 78 
 bearer should take with regard to N. Y. 454.
 
 Disposition and Safe-keeping of Stocks. 243 
 
 omitted to exercise a proper oversight over the conduct of 
 sucli officer. 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 misappropriated.' This principle has also been 
 extended to a case where a firm, in the course of its business, 
 received money belonging to third persons, and one of the 
 partners misapplied it while it was in the custody of 
 the firin ; and it was held that the latter must make it 
 good .2 
 
 And the cases just cited directly hold that where stocks 
 or money are received (jr lield by a firm of Stock-brokers 
 for its Clients, and an individual member converts or mis- 
 applies the same, the remaining partnei's are liable to the 
 Clients, although they liad no knowledge of the conversion 
 or misapplication. 
 
 Brokers, too, are liable to a Client, where their Clerk 
 converts the securities purchased and delivers forged certif- 
 icates to the Client in their place, unless the Avrong doing 
 might have been prevented by ordinary care on the part of 
 the Client, and even then if, by the exercise on the part by 
 the Broker of due and reasonable care as to the duties of the 
 clerk, the loss would not have occurred." 
 
 • If a Stock-broker receives a se- Ribeyrc vs. Barclay, 2.'} Bcav. 107; 
 
 rurity from the owner for safe-keep- Stone vs. Marsh, G B. & C. 551 ; and 
 
 inp, and without authority delivers Ry. & Moo. 3G4; see also, in this 
 
 it to the corporation by whom it is connection, Butler vs. Finck, 21 
 
 cancelled, and a new certificate Hun (N. Y.), 210; Bri^j^ vs. Ken- 
 
 i.s.sue«l to aiKjthcr, he is lial)l<! for nctt, X. V. L. J. .May 10, ISO I; S 
 
 coiivertiii;; the stock, liiiblicll \s. Misc. 2(>1. .\s to lialiility of corpo- 
 
 lilaiidy, .S7 .Mi<li. 20*.). ration for act of its oflicers in 
 
 ' 1 I.iiidley on I'art. Otli <?d. J). Hi? fraiululcntly and illc^^ally issuinj^ 
 
 ct Hc<i , mid cii.si's c-ite<l; Hevayncs Hfock (•crtificatcs, s<'(! post, |). I'M 
 
 vs Noble Miarinj^'s c;iw'), 1 .Mcr. et He<j. 
 Id 1 ; Sadler vs. Lw, G Bcav. .'i2J ; De ' .\ndrews vs. Clark, 72 M<i IVM.
 
 244 Stock-brokers and Stock Exchanges. 
 
 In a case in Pennsylvania * the question was discussed as 
 to tlie 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 under- 
 take to perform; but it neither implies nor requires more 
 than this." Accordingly, where G., a Stock-broker, depos- 
 ited a margin with B., another Broker, to cover a short 
 sale made by G., on account 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 insolvency.^ 
 
 Another question arises as to the transfer of the stock.^ 
 A Broker is under no obligation to have stocks purchased 
 on margin transferred into the name of his Client.' As we 
 have shown,^ his duty is fully j)erformed if he at all times 
 has stock in hand to meet the demands of the Client whether 
 
 'Gheen vs. Johnson, 90 Pa. St. * Caswell vs. Putnam, 120 N. Y. 
 
 38. 153; Brewster vs. Van Liew, 119 111. 
 
 2 Wykoff vs. Irvine, 6 Minn. 496; 554, 563; Harding vs. Field, 1 App. 
 
 Sadler vs. Lee, De Ribeyre vs. Div. 391, 393; Douglas vs. Carpen- 
 
 Barclay, supra. ter, 45 X. Y. Supp. 219, 220, and 
 
 ' .\s to liability for "calls" or cases cited, 
 
 "assessments" upon stocks, see ^ Post, p. 252. 
 post, p. 265.
 
 Disposition and Safe-keeping of Stocks. 240 
 
 or not it is tlie particular shares purcliased in the execution 
 of the Client's order.' 
 
 It also follows from this, and it is well settled that the 
 Bi-oker is entitled to have the stock transferred into his own 
 name, or those of his clerks, so tliat he may be able to se- 
 cure 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 ad- 
 vance being paid.'' ^ Whether the Jii-nkcr has tiie riglit oi- 
 authority to transfer the purchased stock into his Client's 
 name, is a question which has not directly arisen. It wouUl 
 seem that he may do so if necessary for his own protection, 
 AS for instance, where a call is to be made upon stockholdei's 
 of record and his Client's stock stands in his name. I^ut 
 where one Broker acting as such, executes his Client's orders 
 thrc^ugh another Broker, there is no imjilication of authority 
 to the latter to transfer the stock into the name of the lirst 
 Broker. In such a case each Broker knows that the other 
 is only acting as a iiii(l<lli'ii);in an<l without any intciilioii of 
 
 'Harding vs. Field, supra, and Stoddard, 03 Conn. 198; 21 L. R. A. 
 
 Hee caHes <-ite<l, post, p. 252. 102; Hiibbell v.s. Drexel, 11 Kwl. 
 
 ' 19 -N. Y. 170, foUowod in caacn Hep. ll.'i. The same niie exists in 
 
 <'ite<l in note 4, j). 244. the ea.se of a pied^re, the law Ix-inj? 
 
 'To same efTeet, Genin vs. Isaae- that the pledircc may transfer the 
 
 W)H, S . Y. I,t(jttl Ohs. 'Jl'A 21(5; Hee weurities into his own name 
 
 al.H<» .N'ourse vs. Prime, 1 .lohns. ('h. fSchonler on M.uihn :Jd ed. 1S2, 2(X); 
 
 •I'.K); H. e. 7 i<l. i'tU; .Moruan's I-><tate. Tyl<T on I'sury, rA)7). 
 1 1 Pa (' C. Hep. r,:U\ .'.)() SkifT VH.
 
 246 Stock-brokers and Stock Kxchanges. 
 
 himself becoming a stockholder. And the Broker into 
 whose name the stock has so been transferred cannot be 
 made liable by the corporation or its creditors for an unpaid 
 assessment upon such stock.' 
 
 There is an intimation in Horton vs. Morgan tliat when 
 the purchase price of the stock is fully paid by the Client 
 and the certificates are to be delivered to him, it is the duty 
 of the Broker to have same transferred into tlie Client's 
 name, but even in such a case 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 insolvent.^ 
 
 As between Brokers, fellow-members of tlie Kew York 
 Stock Exchange, the rules formerly provided that, " in the de- 
 livery of stock the Receiver shall have the option of re- 
 ceiving said stock by certificate and power irrevocable, in 
 the name of, w^itnessed or guaranteed by, a member of the 
 Exchange, or a firm represented at the Excliange, resi- 
 dent, or doing business in Xew York, or by transfer thereof ; 
 but in all cases where personal liability attaches to owner- 
 ship, the seller shall have the right to deliver stock by 
 transfer.'' The purpose of the first part of this rule was to 
 give to the " Receiver " or purchaser the security of the en- 
 dorsement or guarantee of a member of the Exchange, the 
 selling Broker becoming a surety for the genuineness of the 
 signature. The last ])art of the rule giving the seller the 
 right to deliver stock by transfer in the case stated, simply 
 expresses a rule of law. Webster vs. Upton, siqjra? 
 
 1 Glenn vs. Garth, 133 N. Y. 18. S. 65; cf. Glenn vs. Garth, supra, 
 
 There is, however, implied author- at p. 39. 
 
 ity in the vendor of stocks to trans- ' Horton vs. Morgan, supra, 
 
 fer the same into the name of his ' The rule as amended merely 
 
 vendee. Webster vs. Upton, 91 U. gives the receiver the option of re-
 
 Disposition and Safe-keep! nj? of Stocks. 247 
 
 The question as to how far the jilcdgor's right to vote the 
 stock is affected by the hypothecation, and by the Broker's 
 riorht to transfer it to his own name, will now be considered. 
 By the Revised Statutes of Xew York (1 Rev. Stat. 596, 
 ch. IS, § 37), it was provided that the pledgor of stock in 
 moneyed corporations {i. e. banking or insurance corpora- 
 tions, § 51), created after January 1, 1828, could not vote upon 
 the stock, but this chapter was repealed by the Repealing 
 Act of 1882, and the General Corporation Law. As to all 
 other corporations, except libraries and religious societies, it 
 was provided by 1 Rev. Stat. 603— i, §§ 6, 8, that the transfer 
 books should be conclusive upon the inspectors of election, 
 but section 5 conferred upon the Supreme Court summary 
 powers to review and, in a proper case, to set aside an elec- 
 tion. In an application under this section^ it was held that 
 while the stock remained in the pledgor's name, he was 
 entitled to vote the stock, and this decision was followed in 
 Matter of Barker,^ in which case it was also held that, 
 although the corporation was an insurance company, 
 §37, of ch. IS of the Rev. Stats., supra^ had no applica- 
 tion, as the corporation was created prior to January 1, 
 1828. 
 
 ceiving certificates, or a transfer. Lanpjston, 7 M. & W. 517; London 
 
 Art. XXV. sec. 2, Const. X. Y. Stock P^ounders' .Assn. vs. Clarke, L. R. 20 
 
 Exchaiii^e. (Jrdiiiarily the .selling Q. H. I). 57G. Whether he would be 
 
 Broker is under no duty to the oppo- liable to his own Client for any call 
 
 sit* Hroker or principal to procure which such Client would have to pay 
 
 registration or transfer of stock on by rejuson of the Hroker's failure to 
 
 books of company, nor does the .sale transfer the .stock into the name of 
 
 by him impf)rt an undertaking that the vendee, wius suggested but not 
 
 the company will make the transfer, decided in Neilson va. James, 9 L. 
 
 where it has a discretion in the mat- R. Q. H. D. ry\i\. 
 
 tcr. See Stray vs. Rufwell, 1 Kl. <t ' Ivx parte Willcocks, 7 Cow. 102, 
 
 E. 88S; 01 7; Taylor vs. Stray, 2 C. H. 411. 
 
 (n. 8.) 175, afl'd id. l'J7; Humble vs. ' G Wend. 509.
 
 248 Stock-bi-okers aiMl Stock Kxclianges. 
 
 In Matter of Cecil ' it was held that inspectors of election 
 had no power in the case of a non-nioiieyed corporation when 
 a stockholder ^vas voting personally or by proxy, to require 
 an affidavit that the stock was not ])ledged, as a proceeding 
 under § 5 of 1 Eev. Stats. 603-4, sujira, could not be had 
 under the act in relation to moneyed corporations, but it was 
 within § 5, supra, which applied to all other coi'porations, 
 except libraries and religious corporations. This decision 
 did not refer to the General Manufacturing Act of 1848, 
 eh. 40, § 17, of which provided that the pledgor had the right 
 to vote upon the stock, notwitiistanding the pledge. It was 
 held in Strong vs. Smith' that, as to a corporation organized 
 under that act, the Supreme Court had ])ower under §§ 5 
 and 6, supra, to go behind the transfer books of the com- 
 pany, and determine whether a transfer on the books was a 
 sale or pledge, and in the latter case to enable the pledgor 
 to vote, although the name of the pledgee appeared on the 
 books. 
 
 The equitable powers of the Supreme Court have been 
 also invoked to restrain, by injunction, the pledgee from 
 voting the stock when it has been transferred to his name,^ 
 but the pledgor must show that his rights will be prejudiced.'* 
 
 The provisions of the Revised Statutes referred to (1 
 Kev. Stats. 603, §§ 5, 6, 8) and the Act of 1S4S, were re- 
 pealed by the General Corporation Law (L. 1890, ch. 563) 
 and have been re-enacted, in amended form, in the latter 
 law (as amended by L. 1901, ch. 355, §§ 20-7).=^ The effect 
 
 ' 36 How. Pr. 477. * S. c. 90 N. Y. 58. 
 
 ' 1.5 Hun, 222. * See Cumming & Gilbert's Gen. 
 
 ' McHenry vs. Jewett, N. Y. Laws, title "Corporations." 
 Daily Reg. October 19, 1881; aff'd 
 26 Hun, 453.
 
 Disposition and Safe-keepiui? of Stocks. 249 
 
 of § 20 of the Geueral Corporation Law seems to be, that 
 only the holder of record is entitled to vote, but if the stock 
 has been pledged, the pledgor may demand from the pledg- 
 ee a proxy to vote upon the stock upon payment of the 
 necessary expenses thereof. It would seem, therefore, that 
 in the State of Xew York, the pledgor may vote the stock 
 whilst it remains in his name, but the Stock-broker may, if 
 he has transferred the stock to himself, vote upon the stock, 
 subject to the summary power of the Supreme Court (untler 
 § 27), and to the general equitable powers of that court to 
 set aside the election, and also to the right of the pledgor 
 to demand a proxy. 
 
 In Massachusetts it is provided by statute that a certificate 
 of stock issued as a pledge shall state that fact in the body 
 of the certificate, and it has been held that in such case the 
 pledgor may vote upon the stock, but in other cases the cor- 
 poration need not accept the vote of the pledgor, although 
 the pledgee may be compelled in equity to give a proxy.* 
 
 The statutes of some of the States provide that the pledgor 
 may vote his stock.^ And it may be stated as a general 
 proposition that equity will intervene to protect the right 
 of the pledgor.^ 
 
 ' Wentworth Co. vs. French, 176 the books of the corporation, until 
 
 Mass. 442. the pledgor's rights shall have been 
 
 'See as to Colorado, National foreclosed by a sale, etc., the 
 
 Bank of Commerce vs. .Vlleii, 90 pledgor and not the pletlgee Ls en- 
 
 Fe<l. Rep. .545; -Miller vs. Murray, 17 titled to vote on the stock in the 
 
 Col. 40S. Ah to KIkmIc Island, see ab.sence of a statute providing 
 
 Sayles vs. IJrown, 40 Ked. Hep. K. otherwise. State ex rel. lieeti vs. 
 
 * VSTiere shares of Htrnk are Smith, IT) Ore. 9S; l.'i Pac. Rep. SSO; 
 
 pledged as collateral, the pleiJgi-c .'iO .\lb. L. J. 4SG. See also Mc- 
 
 reserving the right to s<'ll in (■.•tse of Henry vs. Jewett, .\. Y. Daibj Itrg. 
 
 default, and the ple<Igee caijwts a Oct. H), ISSl ; afT'd 2ti Hun, 4'):}; 
 
 tran-sfer to hiiiLself to be recorded on s. c. 90 N. Y. 58.
 
 250 
 
 Stock-brokers and Stock Exchanges. 
 
 Another important ijucstion should he alhided to in this 
 connection, viz., as to the use which the P>roker may make 
 of securities held by liiiii on margin. 
 
 Althougli in law these securities are regarded as the 
 Client's, the Broker's money has i)aid for them. Can the 
 latter, therefore, use the same in his business? Can he 
 h^'pothecate them? Both reason and the precedents herein- 
 after alluded to seem to require these questions to be 
 answered affirmatively. In the case of an ordinary pledge 
 of personal property, the general rule seems to bo, that the 
 
 It is undisputed, as said by Judge 
 Barrett in McHenry vs. Jewctt, 
 supra, that the corporation can 
 only look to its transfer books in 
 determining; who is entitled to vote 
 (see cases cited In re Arjius Printing 
 Co., 12 L. R. A. 781). The pledgee 
 after a transfer to him on the books 
 has the legal right to vote and the 
 rights of the pledgor are then solely 
 in equity, and he may in a proper 
 case compel the pledgee by bill in 
 equity, to give him a proxy or per- 
 haps such a transfer of the stock as 
 would allow him to vote upon it. 
 Scholfield vs. Union Bk., 2 Cranch 
 C. C. 115; Vowell vs. Thompson, 3 
 id. 428; Hoppin vs. Buffum, 9 R. I. 
 513; In re Argus Printing Co., 12 L. 
 R. A. 781, citing other cases to same 
 effect. But equity will not inter- 
 fere with the result of an election, 
 when the pledgor has slept on his 
 rights for years. Hoppin vs. Buf- 
 fum, .supra. At common law there 
 is no right in a shareholder to vote 
 by proxy, independently of the con- 
 tract between the shareholders, and 
 the form prescribed in the articles 
 of association must be strictly com- 
 
 plied with or the proxies will be a 
 luillity; and in Harben vs. Phillips, 
 48 L. T. Rep. 334, they were held to 
 be null, becau.se not "attested by 
 one or more witnesses." 
 
 As to rights of stockholders when 
 the right to vote is given by pledgor 
 and pledgee to third parties, see 
 Shelmerdine vs. Walsh, 20 Phila. 
 Rep. 199. If the pledgee, however, 
 votes, he is not guilty of conversion. 
 Heath vs. Silverthorn Lead Co., 39 
 Wis. 146. See also In re St. Law- 
 rence Steamboat Co., 44 N. J. L 
 529, 540; Allen vs. Hill, IG Cal. 113; 
 Re Argus Printing Co., 1 N. D. 434 
 McDaniels vs. Flower Co., 22 Vt 
 274; Ayer vs. Seymour, 5 N. Y 
 Supp. 650; Spreckels vs. Nevada 
 Bank, 113 Cal. 272; Schouler on 
 Bailments, 3d ed. § 216; Edwards 
 on Bailments, 3d ed. § 219. But 
 see Com. vs. Dalzell, 152 Pa. St. 
 217; Hinckley vs. Pfister, 83 Wis. 
 64. The pledgor may demand a 
 proxy to vote the stock if his right 
 to do so is protected by special agree- 
 ment. Pennsylvania R. R. Co. vs. 
 Pennsylvania Co., 54 Atl. (Pa.) 
 783.
 
 Disposition and Safe-keeping of Stocks. 251 
 
 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, incase 
 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 the stock, and from the 
 circumstances attendmgan ordinary speculative transaction 
 in the same. 
 
 In the first place, a Stock-broker, when he makes a purchase 
 of stocks on the order of his Client, receives the same di- 
 rectly from the selling Brokers in the shape of a certificate 
 with a blank assignment and irrevocable power of attorney 
 authorizing its transfer on the books of the particuhir com- 
 pany, and the stock generally docs not pass through the 
 hands of the Client at all. By advancing the purchase- 
 money for tlie stocks, the law gives the Broker a lien for the 
 same, and establishes the relation of pledgor and pledgee. 
 
 In the second ])lace, the money which the Broker ad- 
 vances is a part of his capital, upon which he relies to carry 
 on his business ; accordingly, he is comju'lliMJ 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 j^art of the money oi-iginally in- 
 vested, with which he conlitmes to transact his business. 
 
 ' Schoulor on Rmlrrifnlw, M «•<! ' Id. 
 I 211 ; I^-vy VH. Lo«b, xr, N. V :i7().
 
 252 Stock-hrokers aiul Stock Exchauses. 
 
 If it were held that the Broker was bound to keep on hand 
 the identical stock purchased lor a Client, and that he could 
 make no other use or disposition of the same, it is apparent 
 that his l)usiness woidd bo stopped, for no private fortune 
 would be adequate to make many i>urchases.* 
 
 None of the questions which arise out of a pledge of or- 
 dinary personal property, capable of being handled and of 
 manual delivery, can ai)ply to a pledge of stock. The latter 
 cannot be handled or worn or used ; it is nothing but an in- 
 corporeal light, and the certificate merely represents the 
 interest which 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. AVaite,* 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 defendants subsequently sold, and, repurchasing 
 the same at a lower price, delivered the latter stock to the 
 plaintiff 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 the stock of the 
 kind deposited with them by the plaintiff ; and the court, 
 in accordance with the rule laid down in the American 
 cases hereafter referred to,^ charged the defendants with the 
 price at which they sold the same. 
 
 The doctrine may be asserted as well settled, that a 
 
 ' See Price vs. Cover, 40 Md. 115. even to the extent that the securi- 
 
 In Slviff vs. Stoddard, 21 L. R. A. ties might be pledged en bloc with 
 
 102, 112, it was held that although those of other customers, 
 the right to replcdge did not exist at ' 6 L. R. Eq. 165. 
 commo7i law, it was sanctioned by ' Post, p. 255. 
 the usage of the Stock Exchange
 
 Dispositiou and Safe-keeping of Stocks. 253 
 
 Broker holding stocks for his Client on margin for specula- 
 tion is not bound to keep on hand the identical shures pur- 
 chased ; but he answers all of the duties of his employment, 
 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 de- 
 liver, or to have on hand for delivery, any particidar shares, 
 or the identical shares purchased, for a Client. 
 
 This principle was first laid down in the State of New York 
 in the year 1S20 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 retainingtheshares 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 forthe 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 we 
 engage to retransfer the said 43(J shares to the said C. J. N. 
 or his order, accounting with him for tiie 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 sai<l shares, accounting with him for 
 any surplus, and liolding hini n'sponsibio for any deficiency. 
 Dated New York, 1 Ith Feb., isls." rpon a bill in (Mian- 
 
 ' 4 .loliiw, Cli. l'.»0, Hiid 7 id. 09.
 
 254 Stock-brokers and Stock Exchanges. 
 
 eery to restrain the defendants from proceeding with a suit 
 at coniinoii-law on the note, and to compel defendants to 
 account to the phiiiititT for the highest market price at which 
 the defenihuHs liad sold any I'nited States Bank stock inter- 
 mediately, the Chancellor held — treating the question as an 
 original one, to be decided upon general principles — that, as 
 the plaintiff dealt with the defendants in their character as 
 Stock-brokers, and the shares in question w^ere not defined 
 and designated so as to be distinguishable from other shares 
 in the same bank, under the receipt in question the defend- 
 ants had performed their whole duty in the premises by 
 having on hand or under their control shares to the amount 
 in question, wliich the}' were ready, able, and willing to 
 account to the plaintiff for; and that, in tlie absence of ex- 
 press stipulation, they were not bound to hold the identical 
 shares purchased for plaintiff or referred to in the I'eceipt. 
 Tliis case again came before the court upon the pleadings 
 and })roof, the former opinion having been delivered by tlie 
 Chancellor in dissolving an injunction, and the opinion pre- 
 viously given was fulh^ endorsed ; and it was expressly de- 
 cided that, considering the established usage of Brokers in 
 similar cases, there was an implied authority from the plain- 
 tiff to the defendants to sell or pledge the stock to raise 
 money to meet their advances in respect to the transaction 
 with the ])laintiff, and that the plaintiff only reserved to 
 himself a right to call for a re transfer to him of a similar 
 number of shares on payment of his note. 
 
 The case of Nourse vs. Prime was cited by the Supreme 
 Court of Pennsylvania, in the year 1846, in Gilpin vs. 
 Howell,^ and the principle there laid down fully confirmed. 
 
 '5Pa. St. 41.
 
 Disposition and Safe-keeping of Stocks. 255 
 
 Again, in 1S50, the New York Court of appeals, in Ilorton 
 vs. Morgan,' 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 Avas laid down in England early in the 
 reign of George the First (1722) b}' 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 
 
 ' 19 X. Y. 170. Supp. 219; Baker vs. Drake, 66 N. 
 
 ' See also, confirniins the above Y. 522; Gruinan vs. Smith, 81 N. 
 
 proposition, Markhaiii vs. Jaudon, Y. 28; Boyhiii vs. Hu;;uet, S Xev. 
 
 41 N. Y. 235;Hortonvs. Morgan, 19 34.5; Hvibbell vs. Drexel, 11 Fed. 
 
 X. Y. 170; Genin vs. Isaacson, 6 X. Rep. 115; Haj'uard vs. Rogers, 62 
 
 Y. L.5^a/06.v. 213; Saltus vs. Genin, Cal. 348; Skiff vs. Stoddard. 63 
 
 7 Ab. Pr. (X. Y.) 193; s. c. 3 Bosw. Conu. 198; 21 L. R. A. 102, overrul- 
 
 250; Stewart vs. Drake, 46 X. Y. ing Ingraham ^•s. Taylor, 58 Conn. 
 
 449; Levy vs. Loeb, 85 X. Y. 365, 503; Rothscliild vs. .\llen, 86 X. Y. 
 
 applying the rule to goverinnent S. 42. See also Wynkoop vs. Seal, 
 
 bond.s; Lawrence vs. Ma.xwell, .58 64 Pa. St. 361 ; Wood vs. Hayes, 81 
 
 Barb. 511;6Lans. 469;53X.Y. 19; Ma.ss. 375; Atkins vs. Gamble, 42 
 
 Taussig vs. Hart, 58 X. Y. 425; Cal. 80; Hawley vs. Bruniagini, 33 
 
 Rogers vs. Gould, Hun (X. Y.), Cal. 394; Le Croy vs. Eastman, 10 
 
 229; Barclay vs. Culver, 30 Hun, 1; Mod. 499; Mocatta vs. Boll, 27 L. J. 
 
 Thomp.son vs. Toland, 48 Cal. 100; Ch. 237; Berlin vs. Eddy, .33 .Mo. 
 
 Manston vs. Gould, 69 X. Y. 220, at 420; Price vs. Gover, 40 Md. 102; 
 
 p. 220; Chambcrlin vs. Greenleaf, 4 Worthington vs. Tonney, 34 .Md. 
 
 Ab. Xew Ca.s. CS. Y.) 178; Capron 193. See also, upon this head, 
 
 vs. Thompsfjii, 86 X. Y. 418; Cas- Clarke vs. .Meigs, 13 Ab. Pr. (X. Y.) 
 
 well vs. Putnam, 120 X. Y. 153; 467; 22 How. Pr. (X. Y.) 340, rev'g 
 
 Mayo vs. Knowlton, 134 X. Y. 2.50; 12 Ab. Pr. 207, and 21 How. Pr. 187; 
 
 Smith vs. .New York Stock and Also Taylor vs. Kclchum, .5 Hobert- 
 
 Prfxluce Clearing IIou.sc, 25 .\. Y. son (S. Y.), 507; s. c. 3.5 llow. Pr. 
 
 Supp. 201, 2<'>3. .\j)i)lying the rule (S. Y .) 289, <>\crrul('d by the above 
 
 U) "diHcretionary " tranHacti«)nH. ciuscw. 
 
 Harding vs. I'ield, 1 .\pp. Div. 391 ; ' 10 .Mod. 199. 
 Douglas v«. CaqK-Mitcr, 45 .\. Y.
 
 '2o^j IStotk-brokers and Stock Excliaiip:es. 
 
 a note, declaring that he was a trustee of this stock for the 
 plaintiff, and that he woukl be accountable to him for the 
 stock and produce. Afterwards, when the stock sold at 
 about <!()() per cent, the plaintiff desired that the defendant 
 would transfer the £'990 of stoek to him ; the defendant ac- 
 cordingly 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 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 agree- 
 ing to be accountable, had assumed to pay at the piici; it 
 then was. There was no question of conversion in the case. 
 The defendant had, for some time after he became trustee 
 as above, £1,000 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 the 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 for 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. I^or since there is no specificating £100 South Sea 
 stock from another^ . . . therefore the stock mortgaged
 
 Disposition and Safe-keeping of Stocks. 257 
 
 must be esteemed the stock of the plaintiflF, the stock 
 sold that of the defendant. The defendant must only ac- 
 count for the stock and ])roduce.*" 
 
 So it is within the scope of the imphed authority of a 
 member of a Stock Exchange, when securities are deposited 
 with him for the purpose of his advancing money upon 
 them, to pledge those securities to some other person for 
 that purpose.^ 
 
 But, where a Client delivers a specified quantity of stock 
 to a Stock-broker for sale, and the Broker transfers 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 it 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 any- 
 thing else with the stock e.xcept 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; itut when hr de- 
 nudes hiiii.self of the (juantity sufficient to answer his 
 Client's demands, he is guilty oi a conversion, and the latter 
 may assume that the sale by which the Broker dispossessed 
 him.self of the stock was Miadf U)\- his benelit, and re- 
 
 ' Mocatta vs. liell, 27 L. J. C'h. ' Parsons vs. Martin, 77 Maas. 
 237. 111. 
 
 17
 
 258 Stock-brokers and Stock Exchanges. 
 
 cover the price of the shares on the day the sale was 
 made.' 
 
 The hmguage of the New York Court of Appeals, in the 
 case of Taussig vs. Hart,' is interesting upon this question : 
 "The subsequent acquisition, by the plaintifTs after the stock 
 had fallen to a very low ligure, of a sufficient number of 
 shares to replace those which they had held for account of 
 the defendant, did not relieve thera from liabilit}'. Such 
 re-acquired stock was never accepted by the defendant, and 
 he was, in fact, ignorant of the transactions. To allow a 
 Broker to sell his customer's stock Avithout authority, and 
 speculate upon it, replacing it at a lower price, would be 
 encouraging speculations by agents at the risk of their prin- 
 cipals, and is totally inadmissible under familiar rules. 
 Should the stock rise largely in price, after the Broker had 
 thus divested himself of all control over the shares which 
 he had purchased on the order of his principal, the Broker 
 might be unable to replace the shares, and the principal 
 
 ' See, as to this point, Langton vs. kind and amount. Douglas vs. 
 
 Waite, 6 L. R. Eq. 165, and cases Carpenter, 17 App. Div. .329. See 
 
 cited supra. Whether a custom of this case criticized by Mr. Ehot 
 
 the market which authorizes a Norton in an article on "The right 
 
 pledgee in a margin buying transac- to pledge securities carried on a mar- 
 
 tion, temporarily, to effect short gin," in "The American Lawyer," 
 
 sales, to reduce his carrying of any vol. 5, p. 573, in which he says that 
 
 stock, below the amount required to if the decision is strictly followed by 
 
 meet the demands of all his cus- Stock-brokers it will be difficult for 
 
 tomers, will be sanctioned, quicrc. them to do their business conven- 
 
 SkifT vs. Stoddard, 63 Conn. 198. iently, or, in some cases, not at all. 
 
 If the Broker mingles his client's and recommends that the consent 
 
 securities with those of other cus- of the customer should be obtained 
 
 tomers and pledges the entire for an to this method of doing business, 
 
 amount greater than the indebted- See also Conwell vs. Harris, N. Y. 
 
 ness of his Client, he is hable for con- L. J. March 17, 1897. 
 version, if he does not keep in his ' 58 X. Y. 425. 
 possession other securities of a like
 
 Disposition and Safe-keeping of Stocks. 259 
 
 would have no remedy except 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 engagement of the Broker to procure and 
 fm*nish the shares when required, but upon his actually pur- 
 chasing 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 
 borrowed from a Stock-broker for a certain period, and 
 railway stocks deposited with him as collateral for its repay- 
 ment, the Stock-broker was not justified, either in law or 
 by the custom of the Stock Exchange, in parting with the 
 
 ' To same effect, Lawrence vs. not be restored to the owner upon 
 
 Maxwell, 53 N. Y. 19, where the payment of the loan, although both 
 
 stock had been hj'pothecated. Here parties understood that the Broker 
 
 the court said: "Concediiifi the would have to use the securities to 
 
 right to use the stocks pledged by obtain the loan. So held also in 
 
 way of hypothecation or otherwise. Van Voorhis vs. Rea, 153 Pa. St. 19; 
 
 as claimed, and that it was at the Cass vs. Higenbotam, 100 X. Y. 
 
 time of the tender and demand law- 248; X. Y. L. E. & W. R. Co. vs. 
 
 fully out of the actual pcssession of Davies, 38 Hun, 477; Muller vs. 
 
 the defendant, it was his duty at Legerdre, 47 La. Ann. 1017. See 
 
 once to regain the pos.session and also as to right of pledgee to part 
 
 restore the same to the plaintiff, with stock, under a \NTittcn in.stru- 
 
 . . . It Is immaterial whether the ment conferring general authority to 
 
 stock was hypothecated by the de- iLse, etc., Ogden vs. Lathrnp, G5 .\. 
 
 fendant upon a loan of money for Y. 158. See also, in same connection, 
 
 the benefit of the plaintifT's transac- Dykers vs. Allen, 3 Hill (X. Y.), 
 
 tions or for his own purposes." .503, afT'd by Court of Errors, 7 id. 
 
 The doctrine of Lawrence vs. Max- 497. liut parol evidence in the 
 
 well, 53 X. Y. 19, is followed by the case of a pledge of stock, that the 
 
 United States Circuit Court in Ore- pledgee may use the same, is not 
 
 gon <fe Transcontinental Co. vs. Hil- admissible, where a written iiistni- 
 
 mers, 20 Fed. Rep. 717, where it ment luis been given l)y the pledgee, 
 
 was held that when the owner of in whiili ho staten that he holds it jw 
 
 Hccurities pledges them to a SU>ck- collateral WM-urity, and may sell "on 
 
 broker as collateral to a loan, the one day's notice." Fay vs. Gray, 
 
 latter ha.s no right to nhypotherute 124 Moss. 500. 
 ihr-iii ill such a w;iv that thcv ciin-
 
 260 Stock-brokers and Stock Exchauges. 
 
 security during the pendency of the loan, but was bound 
 to return the identical 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 pawnee of property can- 
 not sell it until the debt for which it is pledged be- 
 comes payable ; and if he does so, the owner has the 
 right to charge the pawnee with the price he 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, declared 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 bor- 
 rower what belonged to him.^ 
 
 But the owner of stocks pledged as collateral for the 
 repayment of borrowed money may deprive himself of 
 any remedy b}' dealing with the property when retransferred 
 to him ^ on repayment of the loan. 
 
 As incident to the Broker's rights in stock carried on 
 
 ' Langton vs. Waite, L. R. 6 Eq. after the sale the property should be 
 
 165. returned to the pledgee to be re- 
 
 ^ See also Ex parte Phillips, Ex deemed by the purchaser. Stief vs. 
 
 parte Marnham, 30 L. J. Bk. 1; 2 Hart, 1 X. Y. 20. As to general 
 
 De G. F. & J. 634; Phen6 vs. Gillan, duties of pledgee when promissory 
 
 5 Hare, 1; Allen vs. Dubois, 75 X. notes and stocks are pledged a.s 
 
 W. 443; 1 Story's Eq. Jur. 714, collateral security, see article, 17 
 
 note 1. A sheriff having an execu- Western Jurist, Jan. 1883, p. 1. 
 
 tion again.st the pledgor may take ^ See Langton vs. Waite, L. R. 4 
 
 the property from the pledgee and Ch. App. 402. 
 sell the .same on such execution, but
 
 Disposition and Safe-keepina; of Stocks. 261 
 
 margin there would seem to be no good reason in law 
 why he should not have the right — possessing as he does the 
 power to dispose of the securities — to maintain an action 
 for their recovery against any person wrongfully holding 
 the same, notwithstanding 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 absence of agreement. "Where the parties agree that 
 the original 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 demands of his Clients.' 
 Before a Broker can recover in such a case, he must show 
 that he has performed substantially all the conditions prec- 
 edent which are embraced in the contract.^ 
 
 These questions arose in the case of Levy vs. Loeb.^ 
 There the defendants, bankers and Brokers, bought for ac- 
 count 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, u})on which interest 
 at the rate of four ])er cent was to bo 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 In' the defendants, but 
 
 ' Levy VH. Loeb, 85 N. Y. .'iO/S. tion, Hardy vs. Juudoii, 1 Hobt. 
 »Id. •201,afT'd21 N Y.OlO 
 
 * Supra. See alao, in th'w conncf-
 
 262 Stock-brokers and Stock Kxehan^es. 
 
 ■were charged to the plaintiff at a higher price than the 
 amount ])aid for them, and other improper items were also 
 inchidod in the price. Phdntiff made a payment on ac- 
 count of these purchases of over $10,000, in consideration of 
 which defendants agreed to carry the bonds })urchased for 
 a certain period, which was afterwards extended. Before 
 the maturity of the loan, and while tlie contract to carry 
 was in force, the defendants for their own account, without 
 the knowledge and consent of the phiintilf, sold the whole 
 lot of original bonds. At the maturity of the loan the 
 plaintiff was called upon to pay the alleged indebtedness, or 
 be sold out — the amount demanded including the excess 
 charged over the actual cost. Upon refusing, the de- 
 fendants sold other and substituted bonds, and this " vicari- 
 ous " sale demonstrated a large deficiency ; whereupon the 
 plaintiff brought an action to repudiate the alleged pur- 
 chase and to recover the money paid upon it. The de- 
 fendants set up a counterclaim for the deficiency. The 
 Special Term disalloweil the counterclaim and directed 
 judgment for plaintiff for $713.77, the amount of the 
 illegal charges made by defendants. Plaintiffs appealed 
 from that portion of the judgment which disallowed them 
 the $10,000 paid by them. Defendants a})pealed from 
 that portion of the judgment which disallowed their 
 counterclaim. In the Court of Appeals, on the hearing of 
 defendants' appeal, the counterclaim of defendants was re- 
 jected upon the grounds before stated. This case came be- 
 fore the Court of Appeals for a second time on plaintiff's 
 appeal and the principles first laid down were reiterated, 
 and the plaintiff was further held to be entitled to recover 
 back the money paid by plaintiff in consideration that 
 defendant's bankers would carry the bonds for plain-
 
 Disposition and Safe-lteepins^ of Stocks. 203 
 
 tiff, for a limited time, and which the defendants failed to 
 do.^ It does not appear from the reports whether de- 
 fendants on the first sale of the bonds (i. e., that before the 
 time limited for carrying them had been reached) sold them 
 at a profit or a loss. But even if they had sold them at a 
 loss, it is difficult to see how they could have recovered 
 such loss, or that the plaintiffs would not be entitled to re- 
 pudiate the contract. The court (pev Miller, J.), on the 
 hearing of the second aj^peal, said : "■ Looldng at the trans- 
 action in the light most favorable for defendants, they 
 stood in the position of vendors. "Where the vendor of 
 property, who has received a portion of the ])urchase-price, 
 on agreement to hold and deliver the property to the ven- 
 dee on payment of the balance, without notice to the ven- 
 dee disposes of the same, he may be treated as wrongly 
 rescinding the contract on his part, and the vendee may 
 maintain an action to recover the money paid in part per- 
 formance of such contract." The court also distinguished 
 the case from Capron vs. Thom])S(jii,- and Gruman vs. 
 Smith,^ wherein it was held that the unauthorized sale by a 
 Broker of stock purchased and carried on a margin was not 
 a breach of a condition preceilent which prevented the 
 Broker from charging for the money paid by him for 
 stock, although he was liable in damages for the unau- 
 thorized sale. In the case under review there was a 
 breach of a condition precedent, viz., an iigrcenient to carry 
 the bonds for a stipulated time, ami the failure of de- 
 fendants so to do operated as a rescission of the contract, 
 rendering them liaijle to refund the money paid Ijy phiin 
 
 » Ixivy VH. Ix>cb, 89 N. Y. 386. '81 .N. Y. 25. 
 
 '80 N. Y. 418.
 
 264 Stock-brokers ami Stock Kxcliaii^cs. 
 
 tiffs. And if there be two different kinds of stock of the 
 corporation, u {)k'dgee must restore the same kind originally 
 pledged with him. Accordingly, a pledge of lifty shares 
 of " consolidated " Erie stock, cannot be restored or made 
 good to the pledgor by assigning to liim the same number 
 of shares of " converted " stock. The pledgees are at least 
 bound to restore stock of the identical kind pledged.' 
 
 The Broker need not keep the property of his principal 
 unmixed with his own or the property of other principals. 
 But where such intermingling takes place and dispute 
 arises, the Client is entitled to the most favorable pre- 
 sumption that can be drawn from the evidence.^ 
 
 (d.) Dividends, Profits, Assessments, Calls, Literest. 
 
 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 ac- 
 
 ' Wilson vs. Little, 2 N. Y. 443, certificate and was its exact equal in 
 
 449. The pledgee meets this re- value. Donnell v.s. Wyckoff, 49 N. 
 
 quirement if he restores stock in the J. L. 48. 
 
 same company, equivalent in value ^ Hardinc; vs. Field, 1 App. Div. 
 
 to and representing the stock 391; Bate vs. McDowell, 17 J. & S. 
 
 pledged. Thus where a corpora- 106; Gray vs. Haig, 20 Beav. 219. 
 
 tion, by legislative authority and ' Gruman vs. Smith, 81 N. Y. 25; 
 
 for the purpose of re-organization, rev'g 12 J. ife S. 389, and cases cited, 
 
 reduced its capital stock and so ante, p. 192. The legal title to the 
 
 proportionally reduced the nominal stock pledged remains in the pledg- 
 
 value of each share, it was held that or, the pledgee having the right to 
 
 the surrender by the pledgee of the retain them until the debt is dis- 
 
 pledged certificate of old stock and charged, and while so holding them 
 
 the acceptance of a certificate for he cannot claim adverse!}' and thus 
 
 the same number of shares of the obtain a title under the statute of 
 
 new stock was not a conversion. limitations. Cross vs. Eureka Lake 
 
 The new certificate represented the Canal Co., 73 Cal. 302. See atso 
 
 same proportional share in the Boyd vs. Conshohocken Mills, 24 
 
 company's assets as did the pledged Atl. Rep. 287.
 
 Dividends, Assessments, Calls. 265 
 
 cretions, interest, dividends, or profits which result there- 
 from belong to the latter.' 
 
 Under this rule, all profits or benefits of any description 
 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 Broker as pledgee of securities has the right to 
 collect the dividends or interest thereon,^ it being reasoned 
 that any increase of the pledged property is likewise pledged.^ 
 
 The securities also 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. 
 
 He has. however, no right to apply the proceeds of the 
 pledged property to the re-payment of his advances, until 
 after default in its payment.* 
 
 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 Andros- 
 coggin Railroad 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 
 
 ' Markham vs. Jaudon, 41 X. Y. 'Gates vs. Halliilay, supra; An- 
 
 23."); Hrifit^s vs. Keunett, 28 X. Y. droscoKnin Kailroaci Co. vs. .Vuburn 
 
 Supp. 740; see also Gates vs. Halli- Hank, 4S Me. '.V.i't; Hiusbrook vs. 
 
 day (^Mo. Ct. of App.), 1 Am. Law Vandcrvoort, 4 Sand. 74. 
 
 Review (n. b.), 172, aa to ri^ht of ' Ilerrmaii vs. .Maxwell, 47 X. Y. 
 
 ple<iKec to receive dividends. See Super. Ct. 347. 
 
 further as to dividends, post, Ch. 'Ante, p. 245. 
 
 IV. The same rule is appKu-ahle ' Farwell vs. Importer's, etc., 
 
 to a pledKe— viz., that all the prof- Nut. lik., 90 X. Y. 4S3. 
 
 its, eU'., beloHK to the pledgor • Gates vs. Hidli<lay, supra. 
 
 (Schouler on Hailm 3<1 ed. ( 212). ' Supra.
 
 266 Stock-brokers and Stock Exchanges. 
 
 responsibilities of pure and absolute ownership; and he is 
 liable, and not the JJroker, 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 in- 
 stance, by reason 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 stockholder,^ except 
 where statutes have provided, as in New York, § 16 of the 
 General Manufacturing Act (184S), of which State provides 
 that no person holding stock as executor, administrator, 
 guardian, or trustee, or as collateral security, shall be per- 
 sonally subject to any liability as stockholder of such com- 
 pany.^ In Eobins 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 prin- 
 cipal to repay to his Broker a call which he had paid, and 
 to procure, as far as possible, that the shares should be reg- 
 istered in his own name.^ 
 
 Another element of the transaction should be here noticed. 
 The selling Broker is bound to deliver, upon receiving from 
 
 ' McCalla vs. Clark, 55 Ga. 53; with the additional provision that if 
 Marshall vs. Levy, 66 Cal. 2.36; the executor, administrator, guard- 
 Whitney vs. Page, 1 How. Pr. (n. s.) ian or trustee voluntarily invested 
 389. the trust funds in such stocks he 
 
 * National Bank vs. Case, 99 U. S. shall be personally liable as a stock- 
 
 628; Pullman vs. Upton, 96 id. 328; holder. 
 
 ^\^leelock vs. Kost, 77 111. 296; In re * 15 W. R. 1065. 
 
 Empire City Bank, 18 X. Y. 199; ^ To same effect, Taylor vs. Stray, 
 
 Holyoke vs. Burham, 11 Cush. 183. 2 C. B. (n. s.) 175; Chapman vs. 
 
 'This act was repealed by the Shepard, L. R. 2 C. P. 228; White- 
 General Corporation Law, and its head vs. Izod, id.; Emmerson's case, 
 provisions have been re-enacted in L. R. 1 Ch. App. 433. 
 § 54 of the Stock Corporation Law,
 
 Dividends, Assessments, Calls. 267 
 
 the purchasing Broker the jirice agreed upon, a certificate 
 of stock (il stock be the subject of the sale) for the number 
 of shares purchased. This certificate must be in every re- 
 spect 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, au- 
 thorizing 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. Kussell ^ are pertinent : " According to these 
 usages, the price of the shares is payable on the one Broker 
 handing over to the other the transfers and certificates. 
 What does the vendor rontract to sell and deliver ? Genuine 
 
 ' See as to duty of .selling liro- broker had sold upon the order of A 
 
 ker, on London Stock Exchange, to plaintilTs, railway debentures be- 
 
 Ch. X. longing to A, B, and C, A having 
 
 M El. & E. 888, at p. 000. Where forged the signatures of B and C to 
 a Xote-l)rokor sold a note to an- tlie transfer, the plaintilTs were en- 
 other Note-broker without knowl- titled to recover the sums paid l)v 
 edge of the latter that it w;ls wortli- them for the delientures witli iutcr- 
 less, and he is rompelled to lake it est, they having been compelled by 
 back from his princip.al, the buying suit in equity to restore the debeii- 
 Broker is entitlrjd to recover the tures and interest to B and C. Hoyal 
 amount paid to the selling Broker Ex. Assn. Co. vs. Moore, 8 L. T. N.. 
 therefor. Stewart vs. C)rvis, 17 S. 212. 
 How. Pr. ijlS. -And where a Stock-
 
 208 Stock-brokers and Stock Exchanges. 
 
 traiiftfers and certijicates, u^ith the interest and rights which 
 they convey. There might be a coiulition subsequent, im- 
 posing u[)t)n the vendor the onus ol" procuring the consent. 
 of the directors to the transfer, but I lind no evidence of 
 such a condition." * And the point was directly passed 
 upon in the hist-named case,^ that the selling I'roker is not 
 bound to procure a transfer or registration on the books of 
 the company. 
 
 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 tiie purchaser to fill in any name 
 and to effect the transfer u})on the books, if he so desire it. 
 
 Frequently, however, a certificate of stock, with the 
 power of attorney executed in blank attached tiiereto, is 
 passed from hand to hand, and is used in several different 
 transactions before there is an actual transfer of the shares 
 on the books of the company. But, by executing the cer- 
 tificate to the purchaser as between the latter and the 
 seller, the purchaser becomes the owner of the shares.^ Al- 
 thouo-h, until the same is transferred on the books of the 
 company, the seller is liable for any "calls'' or assess- 
 ments.^ So a person is liable to the company for the 
 amount of his subscription, although after calls were made, 
 
 ' See also, to same effect, Taylor the charter does not require entry 
 
 vs. Stray, 2 C. B. (n. s.) 175; aff'd hi on the books, the corporation may 
 
 Exch. Chamber, id. 197. recognize a purchaser as a .stock- 
 
 ' Supra. holder in such a way as to preclude 
 
 ' Lindley on Company Law (5th it from demandinc; assessments or 
 
 ed.), 505 et seq; Sliellington vs. calls from the seller, as l)y pa.\'iiig 
 
 Rowland, 53 N. Y. 372. the dividends to the purchaser. 
 
 *Id.; Magruder vs. Colston, 44 Cutting vs. Damarel, 88 X. Y. 410. 
 
 Md. 349; Johnson vs. Underbill, 52 See also Loring vs. Davis, 32 Ch. 
 
 N. Y. 203. Yet where there has Div. 625. 
 been no transfer on the books, and
 
 Dividends, Assessiiieuts, Calls. 269 
 
 and before they were payable, he assigned his stock to a 
 responsible party.' And if the purchaser does not pro- 
 cure 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 re- 
 spect 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 atten- 
 tion 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 caj)ital, calls 
 can be, and are generally, made upon the stockhohlers of 
 record, and if the registration of the shares is not attended 
 to, the shareholder of record may be compelled to j)ay 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 either paid up 
 
 ' Schenectady R. R. Co. vs. R. 6 Q. B. 323; Ncilsoii vs. James, 
 
 Thatcher, 11 N. Y. 102. Q. B. D. 553. 
 
 ' 1 Lindloy on Company Law (5th ' 1 Lindley on Company Law 
 
 ed.), 492, 505. If a Broker is the 490. To constitute a person a 
 
 purch{t.ser and lie does n<jt disclose stockholder and a.s such liable to 
 
 his principal, tlic former is, inider creditors of the corporation, it is not 
 
 the i;<^:neral law of agency, hound to neces.sarytliat a certificate should ho 
 
 indemnify the seller acain.st the i.ssued to him, or payments made by 
 
 payment of calls. Lichten vs. him. A subscription for stock and 
 
 V'enier, 8 Pa. Dist. Rep. 21S. .\h arecofinilioii of liiml)y thecomiiany 
 
 U} the effect of tlie company's in- a-s a stockholder are suflicient. 
 
 solvency, see ("rabb vs .Milh-r, 21 I, \Vh«'elor vs. .Miller, 90 N. V. 353. 
 
 T. 219; liowrinK vs. Shepherd, L. ' Sliellin^^ton vs. I lowland, supra.
 
 270 Stock-brokers aud Stock Exchauges. 
 
 their capital in cash, or its equivalent, pursuant to statutory 
 enactment, and the stockholders are not generally liable 
 for future calls. But the increasing number of corpora- 
 tions, 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 seeing that a 
 transfer or registration is made upon the books of the com- 
 pany when a sale is made, as important and essential as it 
 is in England.^ 
 
 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 purchase of the stock ; it is also the usage of the 
 Brokers to charge the Client with an extra interest which 
 the Broker is compelled to pay for carrying the stocks of 
 the former caused by a stringency of the money market. 
 
 * For the subject of the liability full value for the shares as paid up, 
 
 for calls in England, see post, Ch. X. he is not liable to the creditors of 
 
 Where shares in a bridge compan}' the corporation under the statute 
 
 were issued as paid-up shares, for the amount actually unpaid on 
 
 which were not fully paid up, the the shares. In order that the 
 
 transaction, though a fraud in law shares should be regarded as paid- 
 
 upon the creditors of the company, up shares in the hands of an inno- 
 
 was made apparently in good faith cent purchaser, it is enough that 
 
 by the company, and on its face they were in the usual form; it is not 
 
 was formal and regular, the shares necessary that they should express 
 
 appearing on the books as paid, and upon their face that thej- were fiilly 
 
 nothing appearing to apprise a pur- paid. Keystone Bridge Co. vs. Mc- 
 
 chaser that such was not the fact; a Cluney, Mo. Ct. of App., decided 
 
 purchaser to whom the shares had March 30, 1880; 1 Am. L. Rev. 395. 
 
 been transferred -without notice was As to when a transferee is liable un- 
 
 not required to suspect fraud or in- der an implied promise to pay call, 
 
 stitute inquiries where all seemed to see Sigua Iron Co. vs. Brown, 171 
 
 be lawful and regular; and if he paid N. Y. 488.
 
 Dividends, Assessmeuts, Calls. 271 
 
 Both of these usages are reasonable, and it does not seem 
 to be diificult to sustain tlieni 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 uniform practice of charging interest, which was 
 known to the debtor at the time of the dealing. And 
 where there is a general usage in any particular trade or 
 branch of business to charge and allow interest, parties hav- 
 ing knowledge of the usage are presumed to contract in 
 reference to it ; and if the usage does not conflict with the 
 terras of the contract, it will be deemed to enter into and 
 constitute a part of it. Knowledge of the usage may be 
 established by presum})tive as well as by direct evidence. 
 It ma}' be presumed from the fact that both parties are en- 
 gaged in the particular trade or branch of business 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. Norris^ the question of the 
 liability of a Client to pay interest which the Broker had 
 been compelled to pay, beyond the rate established b}-- law, 
 was raised and indirectly sustained. There a Broker, 
 authorized by his principal to borrow money in ordei- 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, suras 
 
 ' Easterly vs. Cole, 3 NY. 503. (Jcxlhy, 4 Tuunt. 310; Eaton vs. 
 
 ' Id.; Hatch vs. Douglas, 4S Conn, iiell, 5 B. & .VM. 31 ; Ikin vs. Brud- 
 
 1 16; Calton vs. Bragj?, 15 Ea«t, 223; ley, 2 Moo. 20(i. 
 
 Bruce vs. Hunter, 3 Camp. 107; ' Hun (.\. Y.), 2.33. 
 Denton vs. Rodie, id. 100; Clwyn vs
 
 272 Stock-brokers and Stock Exchanges. 
 
 exceeding the amount allowed by the laws of the State of 
 New York ' for elfecting loans, and it was held that 
 it was the duty of the principal ])roiiiptly to object 
 to the payment of such commissions ; and in case he 
 failed 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 al- 
 lowed 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 not more 
 than prohibit 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 be charged in an account stated ; and money paid on ac- 
 count by the debtor may be applied to the payment of such 
 interest by the creditor, in the absence of any appropriation 
 by the debtor.' This proposition is laid down in Marye vs. 
 
 ' 2 Rev. Stat. (5th ed.) 979. By the pledge of negotiable instru- 
 
 Laws of N. Y. of 1850, c. 172, corpo- ments. Hawley vs. Kountz, 6 App. 
 
 rations may not interpose the de- Div. 217. 
 
 fence of usur>'. The elTect of this ' Smith vs. Heath, 4 Daly (N. Y.), 
 
 statute is to repeal the Statute of 123. \ Stock-broker is entitled to 
 
 Usur\' so far as it applied to corpo- charge upon all accounts due previ- 
 
 rations. Curtis vs. Leavitt, 15 N. ous to any statutory change in the 
 
 Y. 85, 155; Belmont Bank vs. Hoge, interest rate, in accordance -with the 
 
 35 X. Y. 65. A similar effect was old rate. Rees^vs. Rutherford, 90 
 
 produced by the enactment of L. N. Y. 644. 
 
 1882, c. 237, upon all demand loans ' See last preceding note, 
 
 of $5,000 and upwards, secured by * Marye vs. Strouse, C. C. U. S.
 
 Birideuds, Assessments, Calls. 273 
 
 Strouse, a case wbich arose out of dealings in certain min- 
 ing 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 hav- 
 ing 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 fixing 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, which sums were duly 
 entered in the " pass-book " and known to the Client. In- 
 terest 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 
 WL-nt into the balance struck. No objection was ever raised 
 to these charges by Client, and the court held that the 
 facts ctmstituted an account stated ; and the agreement be- 
 ing 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 account. 
 And a right may be made to charge C(>m])()und interest, 
 either by ex|)ress c<;ntract, or it may be imj)li('(l from the 
 m(jde of dt-alin;; with former accounts oi' custom;-' but a 
 
 (Nevadu) 5 Fc<l. Rep. 483. See 2710, Cutting's Coiiip. Laws, ed 
 
 abw Iwett vs. (Juilvie, 9 Iowa, 1900. 
 
 313. ' I''ern\iH,soii vh. KyfTe, H C. & F. 
 
 ' Comp, Luws, 5 .'.J, now H '-*7ir, \2\. 1 10. 
 18
 
 274 Stock-brokers aud Stock Exchanges. 
 
 Client is not bound, or affected by the practice of his bank- 
 ers, to charge interest uj^on interest by making rests in their 
 accounts at stated intervals, unless it be proved that he was 
 aware that such was their custom.' He cannot, however, 
 object to such method of charging interest, or indeed to 
 any method claimed to be unlawful, in his own action for 
 conversion of stocks sold for default of margin, where it 
 does not appear that the excessive charges would equal the 
 deficit in margins.^ 
 
 And where the taking of compound interest is usury, 
 it does not affect a contract for the purchase and sale of 
 the stock. The charging of interest is outside of that con- 
 tract and may be disallowed by the court.^ 
 
 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 Mary e 
 vs. Strouse,* the Brokers sought to recover money laid out 
 for telegrams. The Brokers were in the habit of receiving 
 orders 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 telegram of 
 
 * Moore vs. Voughton, 1 Stark, 116. In that case the Brokers 
 
 487; Leake's Dig. Law of Cont. waived their claim for compound 
 
 1107; Chitty on Cont. (11th Am. interest and charged simple interest 
 
 ed.) 957, note (h), and cases there only, so that the (juestion whether 
 
 collected; 13th Eng. ed., p. 545, and that part of a cu-stom contravening 
 
 cases cited. the policy of the law would be en- 
 
 ' Gould vs. Trask, 10 N. Y. Supp. forced was not before the court. Id. 
 
 619. * 5 Fed. Rep. 483. 
 
 ' Hatch vs. Douglas, 48 Conn.
 
 Right of Client to Control. 275 
 
 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 tele- 
 grams 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 his i)oint, hold- 
 ing that a custom or usage like the one in question, of 
 charging not merely the actual cost of telegrams, but an 
 arbitraiy price, if it can be considered as reasonable, should 
 be established by showing that both parties had knowledge 
 of it. 
 
 (e.) Rigid of Client to Control and Take up Stock. 
 
 Although, as we have seen, the stock in an ordinary spec- 
 ulation upon margin remains in the possession of the 
 Broker, it is at all times, in the absence of express agree- 
 ment 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 i^roper expenses.' 
 
 ' Markham v.s. Jaudon, 41 N. Y. McClellan, JS 111. 34.5). In an ac- 
 2.3.5, at 247. This propo.sition is tion against a corporation by one to 
 conceded even by Mr. Justice Grov- whom certain of its Ijonds had been 
 er in hi« dissenting opinion in that pledged, to Ije declared the owner of 
 ca«e. See abio, as to right of Client such bonds and registeretl as such, 
 to direct the stock to be bought in the jjledgor, although not opposing 
 on u short side, Knowlton vs. Kitch, thisdj'uiand of the plcdirec, is a ncc- 
 .52 .\. Y. 2HS, rev'g 4S Harb. 40.3. easary party to the a<ti(in, because 
 The same nde exists in the case of a he luus a riirht of redemption bv pay- 
 pledge; the plefl;ror havintr the gen- ing his debt and an interest in any 
 eral propertv i'l the plfnl/c in;iy sell proceofls after satisfaction of his 
 it, and cf»mnol its rwtorntirtn npnu debt Xewcombe vs. Hy. Co., 8 N. 
 paying the debt secured (Hnzpi vs V Supp. 30ft And it seems that
 
 276 Stock-brokers and Stock Exchanges. 
 
 And where the Broker sells the stock without authority, 
 a demand therefor is not necessary to maintain an action for 
 conversion, and such action may be maintained although 
 they were purcliasetl in the name of plaintiff's agent.' 
 
 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, be- 
 cause where an agent has violated his duty or instructions, 
 and made himself liable to an action for damages, nothing 
 but payment of the damages, and accord and satisfaction, or 
 a release, is a bar to the same. The olfer of the ]3roker 
 to replace the stock, so long as it is unaccepted, affects 
 neither tiie 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 tliat which he owes upon the same to the 
 
 Broker, he can recover the surplus from the latter or his 
 
 estate.* 
 
 where stocks are pledged as collat- S. (X. Y. Sup. Ct.) 389; rev'd, on 
 
 eral security that the pledgee can- another groinid, 81 X. Y. 25. 
 
 not, whilst his debt remains unsat- ^ An unauthorized hypothecation 
 
 isfied, acquire a title to them by of stocks by a Broker is a conver- 
 
 virtue of the statute of limitations, sion, but it does not destroy the 
 
 Cross vs. Eureka Lake, etc.. Canal original contract of pledge so that 
 
 Co., 73 Cal. 302. the pledgor may demand a return of 
 
 ' Cunningham vs. Stevenson, 20 the stocks without tender or pay- 
 
 \\. D. (X. Y.) 82. ment of the debt. Xew York, L. E. 
 
 'Clarke vs. Meigs, 10 Bosw. (X. & W. R.Co. vs. Davies, .38 Hun, 477. 
 
 Y.) 337, .3.38; s. c. 22 How. Pr. (X. * And when the Broker's assigned 
 
 Y.) 340; Gruman vs. Smith, 12 J. & estate is benefited, he is entitled to
 
 Right of Client to Control. 277 
 
 "WTiei-e plaintiffs, Stock-brokers liokling stock for differ- 
 rent Clients on margin, in speculative transactions, pledge 
 the same to outside Brokers, who in turn repletlge oi' rehy- 
 pothecate the stock with a bank, and subsequently the 
 latter claims to appropriate and hold them as security 
 for other distinct loans made to the outside Brokers, and in 
 consequence thereof the plaintiffs are compelled, under du- 
 ress, 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 
 propert}' of the Clients and having been released, the ex- 
 tra 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.' 
 
 In London Joint Stock Bank vs. Simmons' it appeared 
 that a Stock-broker in fraud of his pledgor had repledged 
 negotiable instruments (Cedulas bonds) en hloc with securi- 
 ties belonging to other persons for an advance to him, and 
 then absconded. The bank had wo knowledge whether the 
 bonds belonged to the Broker or whether he had any au- 
 thority to deal with them, and it had made no inquiries on 
 these points. In an action brought by the owner of the 
 bonds it was held : That as there were, as matter of fact, 
 no circumstances to create suspicion as to the Broker's au- 
 thority and power, the bank was entitled to retain and 
 realize on the bonds, they being negotiable instruments 
 taken for value and in trood faith. And the mere fact that 
 
 a preference over the other creditors ' L. R. .\. C. (1892) 201; rcv'^; 
 
 in the payment of Hiich Huri)luH. 8. c. (1.S91) L. R. 1 ("h. Div. 270. 
 
 .Mtttt/;r of Price, 171 .N. Y. 15. See the lower court (h'cisiou criti- 
 
 ' Gould VH. Fiirincr'H Loan and ci/cd in IS Wii.'^li. I, l{. '20.'^. Sc'e 
 
 TruHt Co.. 23 Hun, :f22, at p WH\. also Wookcy v.s. Pole, J B. it Aid. 1.
 
 278 Stock-brokers and Stock Exchanges. 
 
 a bank knew that the j^ledgor was a Broker is not suffi- 
 cient to charge the bank with knowledge.' 
 
 This case was folh^wed in Bentinck vs. London Joint 
 Stock Bank/ in which stocks had also been repledged with 
 the Bank by a Stock-broker en Hoc with others as security 
 for a loan to him, and transferred and registered in the 
 names of the bank directors, some by the Client himself, 
 some by the Broker and some by the parties from whom the 
 Broker had purchased. The Client, asserting that he had 
 onlj'' authorized the Broker to repledge for the same amount 
 as he was indebted to the Broker, claimed to be entitled to 
 redeem from the bank on payment of that amount. The 
 court denied this claim, liolding that as upon all the evi- 
 dence and especialh^ upon that relating to the " contango" 
 system under which the Broker had purchased the stock, 
 there was nothing to lead the bank to suppose that the se- 
 curities were not the Broker's own pro])ert\', it was entitled 
 to be treated as a bona fide holchM* for value without no- 
 tice; its legal title to the securities could not be impeached, 
 and the Client could not redeem without paying the full 
 amount due to the Bankers by the Brokers. 
 
 In both these cases the court carefully distinguished Shef- 
 field vs. The Banks,^ where the banks had either actual 
 
 * Baker vs. Bank, 60 L. J. Q. B. as to put it upon inquiry. Mulville 
 
 542. See also Goodwin vs. Rob- vs. Bank, 27 L. R. (Ir.) 379. As 
 
 erts, L. R. 1 App. Cas. 47G; Rum- to what will constitute notice, see 
 
 ball vs. Bank, L. R. 2 Q. B. D. 194; London and Canadian Loan and 
 
 Hone vs. Boyle, 27 L. R. (Ir.) 137; Agency Co. vs. Duggan, (1893) A. 
 
 Marshall vs. Bank, 61 L. J. Ch. 465. C. 506. 
 
 When the Broker is apparently the ^ L. R. (1893) 2 Ch. Div. 120. 
 
 owner, the sub pledgee may compel ^13 A. C. 333. See article 
 
 registration in his, the subpledgee's, "Fraudulent dealing with client's 
 
 name. In re Tahiti Cotton Co., L. securities" in 27 Ir. Law Times, 
 
 R. 17 Eq. 273, but the sub pledgee is 167, 181, commenting on the English 
 
 liable if the circumstances are such cases cited in the text, and also on
 
 Rififht of Client to Coutrol. 279 
 
 knowledge or reason to believe that the person pledging 
 negotiable and non-negotiable securities to them, and who 
 was a money lender with the course of whose business they 
 were familiar, had no further authority to repledgo other 
 than for the same sum which he himself had loaned. The 
 banks in this case made no inquiry as to that amount, but 
 choose to rely on the money lender not to repledge beyond it, 
 and it was properly held that they therefore were not pur- 
 chasers for value, without notice, and that the owner of 
 the securities was entitled to them or their proceeds upon 
 payment to the banks of the amount of his debt to the 
 money lender. 
 
 If a Broker pledges a blank transfer signed by the owners 
 of the certificates it is constructive notice to the pledgee, 
 who should have inquired into the Broker's authority.^ 
 The tender by the pledgor of a larger amount then is justly 
 due to the pledgee upon stocks pledged by his Broker is not 
 an admission that the pledgor owes the^amount tendered, nor 
 is it an estoppel to that effect.^ This conclusion proceeds 
 upon a like principle to that obtaining where a tender is made 
 for the purpose of obtaining property sold and in the hands 
 of the tendee claiming to own the same and the tender is 
 accepted, in which case the rule is undoubted that the money 
 may be recovered back.^ 
 
 In the case of Smith vs. Savin,^ after the decision cited 
 at J). 201, note 1, the plaintiff becoming apprised of the 
 facts stated below, amended his complaint so as to make his 
 
 several Irish cafles decided about ' Talmntre vh. Bank, 01 N.Y.551. 
 
 the Hariu! tirno. ' Hnj;^s vs. Hoyco, f>(S N'. Y. 2S9; 
 
 ' Cdlonial Hank VH. f'a<ly, 15 App. Scholey vs. Miunford, GO N. Y. 
 
 Cafl. 267; Fox vh. Martin, 01 L. J. 40H. 
 
 Ch. 473. * Ml N. Y. 315.
 
 280 Stock-brokers and Stock Exchanges. 
 
 action in effect one for conversion. On May 8, 1894, plain- 
 tiff huii (.leposited with B. ct Co., New York bankers, 100 
 shares of a stock as security for any indebtedness which he 
 might incur to that firm. On that day B. & Co., without 
 plaintiff's knowledge, pledged this stock with other stocks 
 as security for a loan with S. & Co. Both firms were 
 members of the Stock Exchange and the loan was made 
 subject to its rules. S, & Co. were bona fide liolders with- 
 out knowledge that B. «&; Co. were not the real owners of 
 the stocks pledged. On May 14 B. & Co. assigned, and 
 plaintiff then learning of the pledge of his stocks notified 
 S. &; Co. of his interest, and requested a statement of the 
 amount for which his stock was lield. S. & Co. refused all 
 information or to recognize plaintiff's rights, and on the 
 same day, without notice to him or to B. & Co., and in 
 violation of the rules of the Exchange, sold all the stock 
 pledged, realizing thereby more than the debt of B. & Co. 
 to them, but excluding the price of plaintiff's stock, not 
 enough to discharge that debt. Plaintiff did not learn of 
 the sale of his stock until June 21, at which time his stock 
 had reached par, and the other stocks had so far advanced 
 that if then sold the proceeds would have entirely repaid 
 the loan, leaving plaintiff's stock free from any claim. 
 The Court of Appeals affirmed the judgment of the General 
 Term,^ and seems to proceed on the same theory, i. e., that 
 the plaintiff being the undisclosed principal of his agents, 
 B. & Co., had the right to ratify their wrongful pledge and 
 maintain an action for conversion of his property against 
 S. & Co., subject to their claim on the proceeds of his stock 
 for the balance of the loan after first selling the stocks 
 
 »69 Hun. 311.
 
 Risrht of Client to Control. 281 
 
 pledged belonging to B. &: Co., and without any right in 
 them to apply the surplus on any other loan to B. & Co. 
 
 Cases have arisen when the order given to one firm 
 of Brokers was by them executed through a second firm 
 without the knowledge of the real ])urchaser, and with whom 
 the stocks purchased were pledged as margin for their 
 general account with the fii-st Brokers. On the insolvency 
 of the first Brokers, the second Brokers, even if then in- 
 formed of the purchaser's claim, ai'o in such equity as 
 entitle them to sell the stock for the ])urpose of paying 
 the balance of indebtedness on the general account for 
 which they held the stock on pledge.' But if any surplus 
 remains that belongs by right to the oi-iginal purchaser, and 
 the second Brokers by having presumptive knowledge of 
 his legal right thereto, are liable to him for its amount if 
 they pay it to the assignees of the first Bi'okers.^ 
 
 The one to whom the Broker has liypothecated his 
 Client's stock is a bona fide holder in two classes of cases, 
 and as such entitled to have his claim against the Broker 
 paid before he delivers the stock to the Client. These 
 cases are as follows : 
 
 1. Where no hypothecation has been authorized l)v the 
 Client, but the P.rokor is apparenth' the owner of the stock, 
 and the pledgee has no notice that actually lie is not such 
 owner.^ 
 
 2. W here the power to hypothecate for tli(i general })urpose 
 of the Broker's business is expressly or impliedly given.'* 
 
 ' Willard vs. \Miitc, .')0 Htiii, r)Sl ; Smith vs. Savin, 1 Jl \, V. WXTy, Lo 
 
 I>e Marrhant vw. Moorr-, 70 Iltin, Manhaiit vs. Monro, 70 Ilun, .'^'52; 
 
 3.52; aff'd ir/) N. Y. 200. afT'd ir>0 N. V. 200, and oa.«ws 
 
 Md. ,i(,.,l. 
 
 * Willard v.«. Whit*-, .OC Hun, .')S1 ; « Skiff v.s. Stoddard. .sui)ra; Tal- 
 
 SkifT vs. Stoddard, 03 Cotiri. lOS; rnaRc vs. Bank, 91 N. Y. 5-13.
 
 282 Stock -brokers and Stock Exchanges. 
 
 The difference iii the position of one who has not 
 authorized hypothecation and one who has, is this : If the 
 stocks of both such Clients be hypothecated for the same 
 loan, the former has the right to demand that all the stock 
 of the latter be so applied as to extinguish all the pledgee's 
 claim before resort is made to his.^ 
 
 He stands, after informing the pledgee of his rights, 
 merely as a surety for the repayment of the loan to his 
 Broker.'^ 
 
 In either class of cases the Client's title is no further 
 affected by the hypothecation than so far as the pledgee 
 acquires the right to secure by it the repayment of the 
 amount advanced by him.^ 
 
 And if the stocks hypothecated have been sold by the 
 pledgee, the surplus is to be distributed to the owners of 
 the stock, preference in such distribution being given to 
 those who have not authorized the hypothecation/ 
 
 If several loans have been made to the Broker, the 
 pledgee is a holder for value only to the extent of the par- 
 ticular loan upon the particular stocks,^ unless the loans 
 are made generally upon all the stocks." And a Client 
 whose stocks, together with others belonging to his Broker, 
 have been, without his authority, liypothecated as security 
 for a loan to his Broker, made subject to the rules of the 
 Stock Exchange, after he has informed the pledgee of his 
 ownership, has the right to demand that these stocks be 
 
 ' WUlard vs. TVTiite; Skiff vs. vs. Requa, N. Y. L. J. July 6, 1892. 
 
 Stoddard, supra. * Willard vs. White ; Skiff vs. 
 
 ' Famell vs. Bank, 90 N. Y. 483; Stoddard, supra. 
 
 Smith vs. Savin, 141 N. Y. 315. "> Smith vs. Savin, 9 N. Y. Supp. 
 
 ' WiUard vs. "Wliite ; Skiff vs. 106; Talmage vs. Bank, supra. 
 
 Stoddard; Le Marchant vs. Moore; ' Willard vs. White ; Le Marchant 
 
 Smith vs. Savin, supra, and Mackie vs. Moore, supra.
 
 Rip:ht of Client to ( outrol. 283 
 
 sold in accordance with the rules of the Exchange, and may 
 treat an unauthorized sale as a conversion. Therefore, 
 after the proceeds of the sale of the other stocks have been 
 applied to the payment of the loan, he is entitled to the 
 highest price which his stock reached within a reasonable 
 time after its illegal sale, and to judgment for that sum, 
 deducting therefrom the balance due the pledgee after 
 such application. In regard, however, to the other stock 
 not belonging to him, he is not entitled to charge the 
 pledgee with the highest price because of the illegal sale, 
 provided they sold at the full market value on the day of 
 the sale. He then could have no cause of complaint.^ 
 
 The Client, in order to maintain an action for the recovery 
 of the pledged property, is bound to show that no title passed 
 to the pledgee, or that at some time prior to the commence- 
 ment of the action he had become entitled to the jirop- 
 erty pledged, which may be shown by proof that the debt 
 for which it was pledged had been discharged, or that a 
 tender had been made of a sufficient amount to dis- 
 charge it."^ 
 
 When a Stock-broker ])ledges his customers' securities 
 en Uoc with a bank even to an amount beyond his indebt- 
 edness to them, it was held that as the transfer appeared to 
 be absolute, the baidv look good title to hold the securities 
 as collateral for the Broker's indebtedness to it, and after 
 payment thereof, the proceeds of sale belonged to the cus- 
 tfjraers pro rata? 
 
 ' Smith VH. Savin, supra. See In such case so much of n Client's 
 
 al>V) TidmaRe vs. Rank, 01 N. Y. securities as remain with (he Imiik 
 
 537. after payment of their chiim out of 
 
 'Thompson vs. Hank, ll.'i .N. V flic proceeds of the oilier .securilie.s 
 
 3.3,3. will lie directed to lie sold, and tlio 
 
 •Wliitlotk VM Hank, 2t Mi."**- M broker cannot object to a present
 
 284 Stock-brokers and Stock Exchanges. 
 
 And where the security deposited as colhiteral is sold by 
 the Broker to a hyna Jide }>urchaser without notice, there 
 must be a tender to the latter of the amount due by the 
 pledgor, before there can be a recovery.* 
 
 In German Saving's Bank vs. Tlenshaw ^ it appeared that 
 Stock-brokers had hypothecated witli defendant bank, securi- 
 ties deposited with them as collateral security for stock 
 purchased by them for plaintiff. The assignments and 
 power of attorney endorsed authorized a saU only of the 
 securities. This sale was to be made, if necessary, to cover 
 the Client's indebtedness in connection with the stock deal- 
 ing transactions. And it was held that as the bank had 
 notice that the securities were only for sale, and that the 
 endorsed assignment did not authorize a j^Jedge, it stood 
 merely in the place of the original pledgee, and as nothing 
 was due to the latter bv the pledgor, it was bound to 
 restore the stock to the owner and that a tender of the 
 original debt was not necessary. So if the 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.^ 
 
 The assignee of a Broker stands in the same relation to 
 stocks hypothecated by the Broker as his assignor stood, 
 and so is not a hona fide purchaser for value as against cus- 
 tomers of the firm for whom the stocks had been purchased.'' 
 
 sale on the i^round that the market is ' Demand and tender are not nec- 
 
 low; s. c. N. Y. L. J. April 20, 1898. essa^}^ In re Swift, 112 Fed. Rep. 
 
 ' Talty vs. Freedsman's Bank, 93 315. 
 
 U. S. 321. * Willard vs. ^Vhite, 56 Hun, 581. 
 
 * 78 Md. 475. To same effect Le Marchant vs. Moore, 79 Hun, 
 
 are Taliaferro vs. First National 352; Skiff vs. Stoddard, 63 Conn. 
 
 Bank. 71 Md. 209; and usaa;e cannot 198. 
 control. First National Bank vs. 
 Taliaferro, 72 Md. 164.
 
 Right of Client to Control. 285 
 
 Prior to the insolvency the general creditors of the Broker 
 had no right to appropriate such stocks to the payment of 
 their claims, and, after the assignment, the purchasers may 
 redeem the stocks and the creditors are not thereby de- 
 prived of any right or advantage they ever had. Nor does 
 the fact that the insolvent Broker had the stocks trans- 
 ferred to his own name on the corporate books confer any 
 such right on the general creditors.' Nor can the pur- 
 chasers be deprived of their right to redeem, and hold to 
 themselves the surplus after redemption, by the act of the 
 pledgees (the agents of the purchaser's Brokers) in selling the 
 stocks Avithout their loiowledge and immediately turning 
 over the surplus after payment of their claim to the assignee 
 of the purchaser's Brokers. In such a case the pledgees 
 are liable to the purchasers to the amount of such surplus.^ 
 
 The presentation to the assignee by the customer of a 
 claim against the Broker's estate is not an election to hold 
 the estate and release the stocks. He may still claim them 
 if he can find them.' 
 
 The assignee, therefore, not being allowed to retain the 
 stocks, but they, or their proceeds, if they have been sold, 
 being subject to redemption by the customers for whom 
 they wei-e held, interesting questions arise as to marshalling 
 the secui'ities or proceeds between the customers and as to 
 the rights of thesul>pledgee if the slocks liavt'])een hypothe- 
 cated by the insolvent Brokers. In AVillard vs. White and 
 Skiff vs. Stoddard such questions arose, and in Skiff vs. Stod- 
 dard are very ably treated and disposed of. In the latter case 
 it appeared that tiie Brokers, who carried on business in Now 
 
 ' Skiff vs. StCHldani, Hii|)r:i. ' MacUic vs U('(|U!i, .\. Y. L.J. 
 
 ' I.«- Marchiuit VM .Moore, 7U Hum, .Inly (1. I.SU2, p. 812. 
 352; aff'd IW) N V 2(HI.
 
 286 Stock-brokers and Stock Exchanges. 
 
 Haven, bought aiul sold stocks upon their own account, 
 and for others. The kirgest part of their business con- 
 sisted in buying and selHng upon nuirgins for customers. 
 At the time of their assignment they were in some manner 
 carrying various stocks and securities. A few of them were 
 in their own hands, others in the hands of pledgees from 
 them, and others still in the hands of their New York 
 agents, who held them as security for advances to the in- 
 solvent firm. The accounts of nearly all the customers 
 showed an indebtedness to the Brokers, but the stocks car- 
 ried as aforesaid were not sufficient to fill all the orders. 
 The phuntiffs desired to pa}^ their debit balances and re- 
 deem their securities. The defendant (trustee in insolvency) 
 disputed their right so to do. 
 
 I'rentice, J., in an o])inion which is given at length 
 because nearly every possible contingency as to these 
 questions is ex])lained, said (p. 22-i) : " An attempt on the 
 part of the several plaintiifs to redeem, raises legal ques- 
 tions which demand consideration. These questions relate 
 to the necessity of identification and the character and ex- 
 tent of that identification. The pledge relation implies the 
 possession by the pledgee of some projierty to which the 
 pledge attaches. A pledgor seeking to retake his own must 
 be able to identify it. The burden isuj^on him, not only to 
 establish the contract relation, but to point out the prop- 
 erty of which the contract gives him the right to repossess 
 himself upon redemption. In ordinary cases of pledge, 
 where the property given in security is corporeal, or con- 
 sists of certain kinds of choses in action, the means of 
 strict identification are usually at hand. In cases like the 
 present, where the pledged property is made up largely 
 of stocks, the problem of identification becomes compli-
 
 Right of Client to Control. 287 
 
 cated b}' reason of the right in the pledgee to take out 
 in his own name a new certilicate, and to presei've no sep- 
 aration of particular shares from other like shares held by 
 the pleiigee. A strict identification of precise shares is thus 
 oftentimes rendered impossible. Kevertheless, both in law 
 and in fact, shares are being held in pledge. Evidently 
 the rule which demands identification as a prerequisite 
 to repossession must, jvhen such conditions are encountered, 
 receive such reasonable construction and apjilication as 
 will, upon the one hand, satisfy the purpose of the rule, 
 and upon the other hand do justice to the parties. It 
 will not do to dispense with the necessity of identifica- 
 tion. Neither will it do to permit a permissible practice 
 on the part of the pledgee to deprive a pledgor of his 
 property." 
 
 '• If we look at the conditions which the claims of the 
 several plaintiffs present, we find that nearly every possi- 
 ble contingency exists. These may be classified as follows : 
 
 " Class 1. Where it can be shown that the precise certifi- 
 cates of stock or evidences of title originally purchased in 
 the execution of a plaintiff's order were held for him 
 by the Brokers at the time of their assignment. 
 
 " Class 2. Where it appears that certain particular certifi- 
 cates of stock or evidences of title were by the Brokers 
 being carried in fulfilment of a plaintiff's order, although 
 it may be impossible to establish that such certificates or 
 evidences of title were the precise ones originally pur- 
 chased in the execution (jf that order. 
 
 " These classes present no difficulty. TIh' plaint ills mak- 
 ing such identification arc; cleai-ly entitled to rcdetMii. 'ihis 
 identification being a strict one (jf j)r(*r;ise property, it, of 
 course, f<jll<jw.s that it must taUt; j)recedenco of any general
 
 288 Stock-brokers and Stock Exchanges. 
 
 identification such as remains to be considered, and gives 
 to the fortunate pledgor the first rigLit to tliat which is so 
 identitied." 
 
 "Class 3. Where no more precise identification is pos- 
 sible than that the Brokers were carrying a block of stocks 
 of a particular kind sufficient to satisfy the demands for that 
 kind of stock of all their customers, including themselves." 
 
 " The problem of identification and distribution as re- 
 lated to class three is not a difficult one. If the Brokers 
 were at the time of their failure carrying a block of certain 
 stock, and the orders of their customers taken together 
 called for them to carry that amount of stock, the identi- 
 fication of that stock as being stock carried for these cus- 
 tomers, the requisite amount for each, is clearl}' reasonable 
 and sufficient. The shares being all alike and merely rep- 
 resenting an ownership of a certain undivided interest in 
 a corporation, the interests of all concerned are satisfied by 
 a distribution to each pledgor of his proper numberof shares." 
 
 " Class 4. Where it appears that the Brokers were car- 
 rying a block of stocks of a particular kind not capable of 
 the precise identification contemplated in classes 1 and 2, and 
 the whole amount of unidentifiable shares is insufficient to 
 satisfy the demand of all their margin buying customers, 
 including themselves, but suflBcient to satisfy the demands 
 of all such customers, exclusive of themselves, either as in- 
 dividuals, or as a partnership. 
 
 " This class presents the same problem as class 3, modi- 
 fied only by the additional factor that the shares in the 
 Broker's hands were insuflicient to meet the demands of 
 their customers and themselves together. The Brokers had 
 the right to do as they pleased with their own. For their 
 customers they were bound to hold and carry the requisite
 
 Right of Clieut to t'outrol. 289 
 
 stocks. If they did not have on hand what was called for 
 by their customers' contracts and their own purchases, it 
 will be presumed in the absence of evidence to the contrary 
 that the situation arose in a wav consistent with their rigflit 
 and iluty and that the stocks on hand were held for their 
 custoraers. This presumption, however, must yield to the 
 fact. If it appeared that certain shares were at the time of the 
 assignment specifically held by the insolvent firm upon the 
 purchases of, or for itself, or its members, and thus, and not 
 otherwise, actuall}' carried, the right thereto of the trustee 
 or administrator of such purchaser and owner would be as 
 clear as that of a plaintiff who is able to make a like strict 
 identification. Should the exercise of this right by the de- 
 fendant as trustee of the insolvent Broker reduce the 
 amount of any kind of stock remaining below that required 
 to satisfy the demands of customers, the distribution would 
 fall under the principles of class 5 to be considered. Other- 
 wise each customer would take his full quota of stock." 
 
 "Class 5. Where it appears that the Brokers were carry- 
 ing a block of stocks of a particular kind not capable of the 
 precise identification contemplated in classes 1 and 2, and 
 the whole amount of such unidentifiable shares is insulli- 
 cient to satisfy the demands of all their margin buying cus- 
 tomers exclusive of themselves either as individuals or as 
 partners. 
 
 " Our previous discussion has eliminated certain of tho 
 features of this class. There remains the single question as 
 to what shall be done when it appears after all efforts at 
 precise identificati(m have l)een exhausted, and after th(3 
 claims of the Brokers as purchasers have been cut off, that 
 there remains a block of stock insiifficif^nt to meet tho de- 
 mands of all th(' pledgors of that stock. There is a short- 
 ly
 
 290 Stock-brokers and Stock Exchanj^es. 
 
 age which must fall to the loss of somebody. ... It is 
 not possible to show to whom it, share by share, does be- 
 long. The shares are all alike. AVe think that the iden- 
 tification is suiiicient to justify, and that equity requires, 
 the division of the stock ^a> rato among all those for whom 
 the Brokers were holden to carry such stock. This course 
 full}' protects the creditors of the Broker. No stock is 
 taken from' the assets of the linn to which it was ever by 
 any possibility entitled. It gives the pledgors their rights 
 so far as may be and in an equitable manner." ^ 
 
 But where the Broker has so mixed the stock he has 
 bought for his Client, in hypothecating it with several pledg- 
 ees 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 con- 
 tinued 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 here- 
 tofore referred to, that the Broker is not bound to keep on 
 hand the identical stock purchased, but his oiiligation to 
 his Client is fulfilled if he keep on hand sufficient like stocks, 
 and be ready to deliver the same to his Client at any time 
 that they are demanded. These positions were enforced in 
 Chamberlin vs. Greenleaf.- A pledgee, with whom securi- 
 
 ' See also Mutton vs. Peat, 2 Ch. ure of damage in a case where a 
 
 Div. (1900) 79; In re Graff, 117 Broker hypothecates stocks belong- 
 
 Fed. Rep. 343; Sillcocks vs. Gallau- ing to his general Clients and which 
 
 det, 66 Hun, 522; Matter of Pierson, cannot be identified by anj- particu- 
 
 19 App. Div. 478. lar one. See also Gould vs. The 
 
 -4 Ab. XewCas. (X. Y.) 178;and Central Trust Co., 6 id. 381, for 
 
 consult this case also for the meas- principle of marshalling assets real-
 
 Right of Client to Control. 291 
 
 ties belonging to several persons are pledged as collateral 
 security for a loan nuule thereon to one having all the se- 
 curities in his possession, and who wrongfully re-pledges or 
 re-hypothecates them, should \)roceed _i)ar I jmssu in the ap- 
 plication 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 thein 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- 
 curities, arid leaving in his hands as surphis the securities 
 of the others, a court of equity will order such surplus se- 
 curities to be sold, and the proceeds ap[)lied so that the bur- 
 den of the loan will be borne by all in equitable propor- 
 tions.' And where a draft for money was intrusted to a 
 
 ized from sale of pled^ied stocks to preferred creditors the proceeds 
 which have been re-hypothecated, of the sale of a customer's stocks, 
 See also Rich vs. Boyce, 39 Md. 314. after payment of the amount due by 
 But although a Stock-broker had the customer, in an action by the 
 surrendered the pledged certificate latter to recover such sum. Adams 
 and obtained a new certificate in vs. Ball, 24 App. Div. GO. When 
 his own name, and the certificate one of three notes with some bonds 
 eub-pledjie<l to defendant bank bore which with other bonds were do- 
 a different n'unl>er from the Client's posited ;us collateral liave been sub- 
 stock, the latter may nevertheless pledged, the original pledgors may 
 recover the certificate from the bank redeem same from the sub-pled}?oe 
 when the weight of evidence shows on payment of the amount of the 
 that it Ls Ills, Mould vs. Importer's note. McDonald vs. Grant. 09 St. 
 <t T. N. Bank, 72 .\pp. Div. 30, even Rep. 4S. As to when interpleader 
 although he has presented a claim will l)e refused as between the origi- 
 to the tnwtee in bankruptcy of the rial pledgor, the assignee of the 
 Broker Id.; Rhinelander vs Bank, pledgee, and the sub-pledgoo, see 
 3») App Div. 11. Ah to the rights of Dodge vs. Lawson, 19 X. Y. Supp. 
 custotners whose stock wji.s merely 904. And jus to indemnity to sub- 
 on deposit for sale and of t how; whose pledgee, see Union Par. R. Co. vs. 
 Ht<M-k wa« pledged to the Broker, see SchifT, 74 Fed. Rep 074. 
 laHt cited caws. An aKHigne*- will be ' CiouM vs. Central Tnist Co., 
 enjoine<l pendentf Iit«- fniui paying Ab New Cas. (N. Y.) 3.S1 If,
 
 292 Stock-brokers and Stock Exchanges. 
 
 Brokei- Lo buy Exchequer bills lor his })rincip;il, and the 
 Broker received the iiKJueys and misappUed it by pui-clias- 
 ing American stock and bullion, iuteiuling to abscond with 
 it and go to America — and did accordingly abscond, but 
 "Was taken before he quitted England, and thereupon sur- 
 rendered to the principal the securities f(^r the American 
 stock and the bullion, who sold the whole and received 
 the proceeds — held, that the principal was entitled to with- 
 hold the proceeds from the assignees of the Broker, who be- 
 came bankrupt on the day on which he so received and 
 misapplied the money.^ 
 
 And Avhere bankrupts, in their character of Stock-brokers, 
 
 pledjred with t)ie stocks of tho Siipp. 106. See this case on second 
 Cheats, are also some stocks of tlie trial, 141 N. Y. 315. Where de- 
 Brokers themselves, as l^etween the fendants holding certain stocks as 
 Clients and the Brokers, equity collateral security which had subse- 
 would doubtless apply the Brokers quentlj^ been assigned to the plain- 
 stocks to the extinguishment of the tiff, sold the same with the assent of 
 debt before resort is made to the the assignees; held, in an action by 
 stocks of the Client, but where the the assignees against the defendants 
 Brokers have become insolvent and to recover the surplus proceeds of 
 the rights of other creditors have the stock, that the defendants could 
 intervened, the Clients are not en- claim, against such surplus, only 
 titled to such relief. It would in ef- such an amount as, if tendered by 
 feet give th'em a priority over other the plaintiffs at the time of the as- 
 creditors. Skiff vs. Stoddard, 63 signment, with interest and expendi- 
 Conn. 198. See also Van Woert vs. tures, would have cancelled and 
 Olmstead, 71 X. Y. Supp. 431. discharged the claims of defendants 
 WTiere there has been a series of as pledgees of the stock; that the 
 loans and stock of various owners title to the surplus moneys at the 
 has been pledged to secure each time of the sale was vested in the 
 loan, a surplus arising on the sale assignees; and consequently the de- 
 of the stocks pledged on one loan fendants could set off no claim 
 will not be applied to a loss arising which they at that time held against 
 on a sale of the stocks pledged on the plaintiff's assignors. Van Blar- 
 another. The pledgee is a holder com vs. Broadway Bank, 37 N. Y. 
 for value only to the extent of the 540. 
 
 particular loan upon the particular ' Taylor vs. Plumer, 3 M. & S. 
 
 stocks. Smith vs. Savin, 9 N. Y. 562.
 
 Right of Client to Control. 298 
 
 received dividends on dividend warrants intrusted to them, 
 and pledged the dividend warrants for their own debt, they 
 were ordered to be delivered up to trustees who had em- 
 ployed the bankrupts as their Brokers.^ 
 
 And although Brokei^ are within the list of traders in the 
 English Bankruptcy Acts of 1861 and 18G9,^ yet, in the event 
 of such bankruptcy, a sura 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 hun to his factor or Broker 
 for any special purpose, belongs to the principal, notwith- 
 standing any change which that property may have under- 
 gone in point of form, so long as such 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 be- 
 coming 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 
 
 * Exp. Gregor)' vs. Wakefield, 2 livers them to tlie customer oa re- 
 M. D. ct DeG. 613. As to doctrine ceipt of the contract price, the 
 of suhpledginj^ and re-hypothoca- transaction i.s a prefer(>nce in viola- 
 tion, see p. 270, et seq. tion of the insolvent law (I'ub. St. 
 'Taylor vs. Plunier, supra. ch. 157, §90) to the extent of the 
 ' Id. In Massachu.setts it lias excess in \iilue over the contract 
 been held that if a Broker purchases price. Weston vs. Jordan, Kis 
 shares for a customer on a marjiin, Ma-ss. 401. When a Client becomes 
 and on account of his insf»Ivency is bankrupt, see its to ri;;lit of lien of 
 unable U> deliver tliem, and event- owner of property left with the 
 ually purcha-ses them on the market Client for sale, its against tlw trns- 
 for a price higher than the customer tee, In re .Mulli;;an, 110 I'cd Hep 
 contructc<l to pay for them und de- 715.
 
 294 Stock-brokers and Stock Exchauges. 
 
 in riglit, any other more valid claim in respect to it than they 
 respectively luid before such change. An abuse of trust can 
 confer no rights on the [)arty abusing it, nor on those who 
 claim in privity with him.' The case of Tayler vs. Plumer 
 was directly endorsed in Ex parte Cook.^ 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 
 Avith 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 that the transaction constituted the relation of debt- 
 or 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 make the case undistinguishable from 
 
 ' Taylor vs. Plumer, supra, plodsee's knowledge, pledged secu- 
 Where one executor has wTongfully rities, the pledgee can only relieve 
 and for his own use, pledged secu- himself from liability by showing 
 rities belonging to the estate, his that the money loaned was applied 
 coexecutor may pay the amount for for the benefit of the estate. Moore 
 which they were pledged and regain vs. American Loan k Trust Co., 115 
 pos.se.ssion of the bonds. New- X. Y. 65. 
 
 combe vs. R. R. Co., 8 X. Y. Supp. ' In re Strachan, L. R. 4 Ch. Div. 
 366. And if an executor has, in 123. 
 abuse of his trust, and with the
 
 Right of Client to Control. 
 
 295 
 
 Taylor vs. Pluraer.' But a pledgor cannot follow the se- 
 curities which he has placed with a pledgee in the hands of 
 a purcbiiser in good faith from the pledgee, purchasing with- 
 out notice of the pledge.- 
 
 An important question in the law of pure pledge is as to 
 the time when the pledgor may be called upon to redeem. 
 When is the debt due ? This depends upon the circum- 
 stances of the contract. By the pledge the title does not 
 pass to the pledgee, but remains in the pledgor until di- 
 vested by a sale upon notice or by judicial proceedings.^ 
 
 If no time of redemption be fixed by the terms of the 
 
 ' See further, upon the subject of 
 commingUng funds and right of 
 principal or cestui que trust to fol- 
 low property, note to Hooley vs. 
 Gieve, 9 Ab. New Cas. (X. Y.) 8, at 
 p. 41. And the United States 
 Supreme Court, in the case of 
 The Central National Bank of 
 Baltimore vs. Conn. Mutual Life 
 Ins. Co., 104 U. S. 54, has de- 
 cided that if money held by a person 
 in a fiduciary capacity, though not 
 as trustee, has been paid by him to 
 his account at his banker's, the per- 
 son for whom lie holds the money 
 can follow it, and ha.s a charge on 
 the balance in the banker's hands, 
 although it Ls mixed with hLs (the 
 depositor's) own moneys; and that 
 the bank cannot be permitted to aa- 
 sert its own claim to the balance of 
 an agpiicy account as agaiitst the 
 beneficial owner when the iKink ha.s 
 notice, either actual or constructive, 
 of Huch ef^uity. Thi.^ \\q\\ is al.so 
 endor»©d in the <;i.se of Baker \s. 
 N. Y. Nat. Bank, de<ide<l by the 
 N Y fk-t.fral Term, Oct. 1S81. 
 N y Daily Urg Nov. 9, 1881, 
 
 s. c. 25 Hun, 453; aff'd on new trial, 
 ICON. Y. 31; 16 Abb. N. C. 458. 
 In Butler vs. Sprague, 66 N. Y. 392, 
 where special deposits were sought 
 to be reclaimed, the court held that 
 unless the depositor could trace the 
 identical money, lie could not stand 
 on any better footing than any ordi- 
 nary creditor. Compare Le Roy 
 vs. Mathewson, 47 N. Y. Super. Ct. 
 389, and see generally People vs. 
 City of Rochester, 93 N. Y. 582. 
 
 ' Little vs. Barker, Hoff. Ch. (N. 
 Y.) 487; Strickland vs. Leggett, 21 
 N. Y. Supp. 3.56. Nor can he fol- 
 low them into the hands of a bona 
 fide pledgee of his ple<igce, unless the 
 debt of the latter is paid or its 
 amount tendered. Thompson vs. 
 Nat. Bk., 113 N. Y. 325; Work vs. 
 Tibbets, 87 Hun, 352. See also 
 Thomson vs. Bank. IS .\. C. (1893) 
 2H2, and cases cited. 
 
 ' Markham vs. Jaudon, 41 \. Y. 
 2.35; StoriLS vs Marsh. 2 Denio, 230; 
 Browni'Il vs Hawkins, 4 Bnrh 491; 
 Gniman vs Smith, SI N. Y 25; 
 Bailey vs. Drew, 17 N. Y. St. Rep. 
 18.5.
 
 296 Stock-brokers aiui Stock Excluiiiges. 
 
 contract of pledge, the pledgor may redeem at any time, 
 aud althougii a day of payment be fixed he may redeem 
 after that day. lie has his whole lifetime to redeem, 
 provided the pledgee does not call upon him to do so, as he 
 has a riglit to do, at any time in his discretion, and if 
 no such call be made, the representatives of the pledgor 
 may redeem after his death.' 
 
 Until his title is divested by sale or judicial proceed- 
 ings the pledgor's right to redeem is a continuing one, 
 and as an incident to this right of redemption he may at 
 any time during its continuance invoke the aid of a court 
 of cquit}'' and ask to have the amount of his debt ascer- 
 tained, if uncertain. - 
 
 This cause of action does not depend upon the rights 
 of the ])arties as thev existed at the time of the pledge, 
 but depends upon the rights of the pledgor to redeem at 
 the time his bill is filed and the cause of action upon which 
 such bill is founded accrues, not when the collateral security 
 was first pledged, but when the right to redeem was first 
 insisted upon, namely, upon the filing of the bill, and so the 
 statute of limitations is no bar to the action.^ 
 
 » 4 Kent's Com. (14th ed.) 138. Roberts vs. Berdell, 15 Ab. N. S. 
 
 'Kent vs. Westbrooke, 1 Vesey, 183; Purdy vs. Sistare, 2 Hun, 126. 
 
 278; Bailey vs. Drew, supra. The ca.se of Roberts vs. Syk.es, 30 
 
 ' Bailey vs. Drew, supra; Bow- Barb. 173, to the contrary must be 
 
 man vs. Close, 20 N. Y. Supp. 415; looked upon as overruled. Miner 
 
 N. Y. L. J. .\un;ust 11, 1892. This vs. Beekman, 50 N. Y. 342; BaUey 
 
 rule is also applicable in an action vs. Drew, supra. 
 
 for the conversion of the pledge. The question whether collateral 
 
 A mere omission of the pledgee to security for a time note is entitled to 
 
 return the pledge after the paj'ment days of grace as well a.s the note has 
 
 of the del)t is not a conversion. No been answered in the negative, 
 
 conversion is committed until there Rankin vs. McCullough, 12 Barb, 
 
 has been a demand for tlie return of 103. 
 the pledge and a refusal to return.
 
 Duty of Broker to Soil. 297 
 
 The same principle also applies to an action by the 
 pledy-ee to foreclose bis lien.' 
 
 y. Duty of Broker to Sell— ''Stop Order." 
 
 Tbe Broker, wbcn directed to sell, is bound to comply 
 with the order, and to sell tbe stocks at the price named 
 or at tbe market price, if that be tbe instruction. This 
 consequence flows from tbe ownership of the stock.* 
 
 Kor does tbe Client lose the right to order a sale 
 when his margin is exhausted. His orders to sell the 
 securities must still be obeyed. Any otlier rule would 
 permit an agent to speculate at the risk of bis principal,^ 
 So a Broker cannot refuse to sell stocks and invest the pro- 
 ceeds in the pui'cbase of othei's, because tbe balance due 
 him for advances exceeds the value of tbe stocks ordered 
 to be sold, particularly if tbe conversion requires no further 
 advance from him;'' and where a Client delivers a speci- 
 fied quantity of stock to a Stock-broker for sale with in- 
 structions to sell when tbe market value should " go up," 
 and the Broker transfers part of the same to a third per- 
 son, and part to himself, the Client can treat this as a sale 
 of bis stock ; and it is no defence, that it is a custom 
 among Brokers to place tbe stock sent tlii-in for sale to 
 their own names on the books of the company, and, in 
 making transfers, to do so indiscriminately, without re- 
 gard to tbe |)erson from whom the stock was received, 
 or for whose account the same was sold. A I>roker, in 
 
 ' B^jwman VH. Close, Bupra. Supp. .391; uff'd witlioiit. opiiiidii, 
 
 'Galijiher vh. Jono.s, 129 U. S. l.'jO .\. Y. 703. 
 193. ' Ciulighcr V8. Joiioi, Huprii. 
 
 ' Ziinineniiuii vh. llcil, 33 .\. V.
 
 298 Stock-brokers and Stock Exchaii|:?es. 
 
 such a case, lias no i-iglit to pledge or do anything else 
 with the stock except to sell it; and the Client is en- 
 titled to recover the market value of the stock at the time 
 of its transfer, and cannot be compelled to accept from the 
 Broker a certificate of an equal number of such shares of 
 stock.' 
 
 As to the duty of the Broker, the general rules are the 
 same as in the case of an order to purchase — viz., that the 
 Broker is bound rigidly to carry out the directions in 
 respect to time, price, number of shares, manner, and 
 place, and to act with prudence and caution and the 
 utmost good faith.2 ^^,^ agent with express authority 
 to sell has no implied authority to wai'rant, when the 
 property is of a description not usually sold with war- 
 ranty. One employed to make a sale of bank stock is 
 not presumptivelv empowered to warrant it in the name 
 of the principal, and the receipt of the proceeds by the 
 owner of the stock, in ignorance of an unauthorized warranty 
 by the agent, is not a ratification of the unauthorized en gage- 
 
 * Parsons vs. Martin, 77 Mass. a jireater price could have been ob- 
 111. taiued or some other such fact must 
 
 * See these questions discussed, be shown in order to rebut tlie pre- 
 ante, p. 205; Bush vs. Cole, 28 N. Y. sumption of the Broker's good faith. 
 261; Taussig vs. Hart, 58 id. 425, Day vs. Jameson, supra. Where a 
 428; Ryder vs. Sistare, 15 Daly, Broker is invested with di.scretion- 
 90; Day vs. Jameson, 33 X. Y. St. ary powers as to whether a sale 
 Rep. 379;Smith vs. Bouvier, 70Pa. should be made or not, he must 
 St. 325; Jones vs. Marks, -40 111. 313; exercise his discretion before .selling. 
 1 Lindley on Company Law (5th But, having determined upon a sale 
 ed.), p. 511 et seq., and cases cited; he has exercised his discretion, and 
 Pulsifer vs. Shephard, 36 111. 513; the execution of the order involves 
 Hollingshead vs. Green, 1 Cin. no discretion whatever. He is not 
 Super. Ct. 305; 13 Ohio Dec. Rep. obliged to personally make the sale, 
 565. Where it is established that and he may, for that purpose, em- 
 he has actually made the sale at a ploy a sul)-agent. Sims vs. May, 16 
 specified price, it must appear that N. Y. St. Rep. 780.
 
 Dnty of Broker to Sell. 299 
 
 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 par- 
 ties. Accordingly, where the defendants, Stock-brokers, 
 were carrying certain stock for plaintiff on margin and the 
 latter, 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 thouglit the market would re- 
 cover from its present depression. On Sept. IT the plaintiff 
 ordered the defendants to purchase 100 shares, if the stock 
 looked like rising. On the ISth the defendants bouirht 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 
 letter 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 ortler was subsequently 
 modilied by an oral understanding.^ The question of modi- 
 fication or waiver is for the jui-y.^ Parol evidence is also 
 
 •Smith vs. Tracy, 36 X. Y. 70. sale of tlie .stock witlunit iiuMition- 
 
 * Davis vs. Gwynne, 4 Daly CS . iu-i the fif^iire, and the broker sub- 
 
 Y.), 218; afT'd .57 N. Y. 670. se<iueiitly sold the greater part of 
 
 •Clarke vs. Meips, 10 Bosw. (X. the stock at 102, and svied the 
 
 Y.) .337. .\nd where it appears that Client for the Ios,s, it wa.s held error 
 
 the Client verballv rigree<l with the to exclude evidence of the verbal 
 
 Broker's clerk U) sell certain seen- afjreement, lus part only of the con- 
 
 ritif« !it 10.') or within a small frac- tract w:ih in the written order, 
 
 tion of that fiirnre, but the written Fisher vs. Moller, 17 .\ Y Snpp S31 
 order of the Client merely directed a ♦ Stone vs. I,:ithrop, 1U1> Mass (».'{.
 
 300 Stock-brokers and Stock Exchanges. 
 
 admissible to explain 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 un- 
 dertakes to procure his co-trustee to join in the transfer, 
 unless such co-trustee authorized or concurred with the 
 other in making the transfer.^ 
 
 If the P>roker fails to sell wlien 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 wliich 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 usage of I>rokers.^ 
 
 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 i)rice, 
 
 As to when a written memoranduni Williams vs. Aroiii, 35 La. Ann. 
 
 made by a Broker is inadmissible. 1115. If the sale is cancelled i)y 
 
 Gurley vs. McLennan, 17 App. Cas. the Exchange for no fault of the 
 
 (D. C.) 170. Broker, the Client cannot hold him 
 
 * Winans vs. Hassey, 48 Cal. 634. for damages resulting from failure to 
 
 ^ Leyton vs. Sneyd, 2 Moo. 583. carry out the sale. Smith vs. 
 See also post, "Joint Adventures in Pryor, 26 N. Y. St. Rep. 928. As 
 Stocks," p. 313. In England it has to the effect of a usage of the Peoria 
 been held that upon an investment Board of Trade, see Ilugg vs. Davis, 
 of capital moneys arising under the 15111. App. 647. Where a statute in- 
 Settled Land Acts, a tenant for life validates a sale of stock, \mle.ss its 
 is not entitled to direct the trustees requirements are complied with, the 
 to employ a particular Stock-broker Broker cannot escape responsiijility 
 chosen by himself. Re Duke of in loss resulting to his Client by 
 Cleveland's Settled Estates (1902), showing a custom of the E.vchange 
 2Ch. Div. 350. to disregard the statute, such cus- 
 
 ' Jones vs. Marks, 40 111. 313. torn being illegal. Neilson vs. 
 
 <Ch. IV., "Usages." See also James, 9 L. R. Q. B. D. .SIG. 
 Cothran vs. EUis, 107 111. 413;
 
 Duty of Broker to Sell. 301 
 
 nor to procure the execution by the purchaser of a transfer 
 of the j<hares, nor to procure the registration thereof.* 
 
 But this question is greatly influenced by usage, especially 
 as to the duty of the IJroker to receive payment for the 
 stock sold ; and we understand the usage of "Wall Street to 
 be decidedly in that way, and as establishing a uniform 
 and unassailable practice on the jnirt of the Broker to receive 
 payment for securities sold, esi)ecially as the latter is in- 
 vested with the possession of the stocks, and is clothed with 
 the apparent ownership upon Avhich purchasers rely, wdio do 
 not even know the principal.' It has been held, however, 
 that a Stock-broker cannot sell upon credit, fur that is not 
 the usual course of his 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 honafide^ and with the object of bene- 
 fiting his principal.^ 
 
 So also 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 princij)al, although known to be a Broker. 
 Evidence that it is the custom in the place where the trans- 
 action is made to send in Bn^ker's notes without disclosing 
 the principal's name is properly rejected ; and the subsequent 
 
 ' Booth vs. Fielding, 1 Week. vs. Delafield, 8 Paige (N. Y.), 527; 
 
 Notes, 245; Clark's Law of Joint- s. c. 2G Wend. 192. 
 stock Companies (Scotch), \Ar>; Mirown vs. Doorman, 11 CI. & 
 
 Lindley on Company Law (5th ed.). Fin. 1. But see as to Brokers gen- 
 
 p. 511. erally, wliero iisa-^e jnstifie.s a sain on 
 
 * Clarke vs. .Meins, 10 Bosw. (N. crcKlit, Coodenow vs. Tylor. 7 Milhs. 
 
 Y.) 337. 30; Clark vs. Van Northwick. IS id. 
 
 »2Kent'BComm. 1024,*022(lUh 3J3; Van .Mm vs. Vandnrpool. 
 
 ed.), note (h); Barinir vs. (V)rio, 2 B. Jolins. (N. Y. )(>'.); I)oTiKla.ss vs. Le- 
 
 * .\Id. 137, 1 13. 14H; Wiltshire v.m land, 1 Wend. (N. Y.) 490. 
 Sinrw, 1 Cimiplj. 258; State of Illinnis
 
 302 Stock-brokers and Stock Exchanges. 
 
 rendering of a different note describing the true purchaser 
 ■will not alter this rule.' 
 
 If, however, a Broker is employed to sell shares at a 
 certain llgure and he does so, but his Client refuses to 
 deliver the stock, the Broker, who, under the rules of the 
 Exchange, becomes personally liable to the purchaser, is 
 entitled to go into the market, and buy the shares at the 
 best price possible, and if at a loss, he may recover the loss 
 from his Client, and the latter cannot say that he was not 
 bound to deliver the stock until he was paid the price, un- 
 less it should appear that the Broker was himself the pur- 
 chaser.^ 
 
 In this connection a practice of Wall Street should be 
 adverted to and explained. Frequently a Client wishes to 
 limit a loss upon stocks, in which case he gives his Broker 
 what is called a " stoj) order ^"^ which authorizes and directs 
 the Broker to sell the stocks (or to buy them in, as the case 
 may be) w^hen they arrive at a certain price, in which event 
 the Broker must sell or buy when the price reaches his limit ; 
 with this reservation, 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 : 
 
 ' Magee vs. Atkinson, 2 M. & W. represents that he had. In re Na.- 
 440. And when a Broker assumes tional Coffee Palace Co., Ct. App. 
 to make a contract on behalf of a Cli. Div., Aug. 1883; 32 Weekly Rep. 
 principal when he is not really au- 236; N. Y. Daily Reg. April 9, 1884, 
 thorized to make the contract, he is where the cases upon this subject 
 liable in damages to the party in- are referred to. 
 jured by his assuming to have au- ' Baily vs. Camduff, 59 Pac. 
 thority even although he does so by Rep. (Colo.) 407. 
 mistake. In such a case the Broker 'Anderson's Law Diet., title 
 warrants that he has authority and " Order," p. 738; Porter vs. Worm- 
 thereby contracts that he has au- ser, 94 X. Y. 431-443; Campbell vs. 
 thority. The contract, therefore, is Wright, 118 X. Y. 594-598; Wron- 
 that he had the authority which he kow vs. Clews, 20 J. & S. 178.
 
 Duty of Broker to Sell. 303 
 
 If A., being the owner of 100 shares of New York Central 
 K. R. stock, should direct 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, bv a distinct transaction, has made 
 the stock sell at 99, it being the understanding that a Bro- 
 ker 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, b}' 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 account 2,000 shares, Xew York Central, at 166 ; or, in 
 event of that stock going against me, take the 2,000 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 174 1, or | below the price mentioned in the 
 order. The question was squarely raised in the case as to 
 whether this was an execution of the oriier ; and the court 
 said upon tliat))oint, in charging the jury, that " if the con- 
 tract of the })laintiirs with the defendants was an al).si>lute 
 one, that they were not to buy in the stock until it reached 
 175 ; and if the}' had no discretion in the premises whatever, 
 then, of course, they had no right to buy it at a less price 
 and tlie plaintiff's tliird point would be well tnkon ; but is 
 that a reasonable supj)osition '{ Is that the contract which 
 was entered into? Was it not rather tliat the j>laintifTs (as 
 one of the Brokers testified to) were not to let the stock go 
 
 ' 7(1 I'h Si. :V2r,
 
 304 Stock-brokers and Stock Exchanges. 
 
 beyond 175 before buying it in ? unci is not that a reasonable 
 interpretation of the written order, in view of what was 
 plainly the interest of the defendants, and of what 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 
 tliis important question. Although the act of the Brokers 
 in " buying in '' the stock at 174| might have been advanta- 
 geous 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 17-t|, it declined until it 
 reached IGG ? Here would have been a loss to the Client 
 from which it seems the Broker could not have escaped 
 responsibility by showing a sale at 174|. 
 
 Thus in a later case a stop order was entered to buy in 
 or cover a short sale at t»3|, which price was never actually 
 realized. The Broker, however, bought in at 91|, which the 
 Client repudiated, and, the price then rapidly falling to 87|, 
 ordered the Broker to buy in at that price, which the 
 Broker refused to do, setting up the purchase at 91 1, as the 
 termination of the transaction. It was held that the Client 
 was entitled to recover the amount that would have been 
 reahzed had the Brokers made the purchase at 87| as or- 
 
 ' See cases cited ante, p. 205- of law. Davis vs. Gwynne, 57 N. 
 Construction of writings a question Y. 676.
 
 Duty of Broker to Sell. 305 
 
 dered, and that Ins right to order a purchase at that price 
 was not affected by the unauthorized sale at 91|. A Client 
 has the right to designate a limit, at wbich the transaction 
 is to be terminated, within that which his margin will 
 cover/ and a sale b}' the Broker before the poiat limited is 
 reached is unauthorized.'^ 
 
 "Whei'e a principal gives his Broker orders to sell gold 
 for him if it reach a certain price, and that price is reached, 
 and the Broker does not sell, but holds on, hoping 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.^ In England it has also been held that an order 
 to sell stocks at a particular price must be obeyed when the 
 stock reaches that price, and if the Broker did not sell 
 wlien lie might have done, he would in equity be held to 
 have made the stock his own from that time and ordered 
 to account to liis Client at the price named.^ 
 
 ' Campbell vs. Wright, 118 N. Y. N. Y. 535, and for construction of 
 
 594; reportcii below, 8 X. Y. St. stop order to sell bonds "at 100} 
 
 Hep. 474. and 1004 ex-coupons and accruetl 
 
 ' Cam pi jell vs. Wright, supra; interest," see Porter vs. Worniser, 
 
 Porter vs. Wormser, 94 X. Y. 431 ; 94 X. Y. 4.31, where it wius held that 
 
 Gould vs. Tra^jk, 10 X. Y. Supp. the sale was authorized when such 
 
 619. A stop order may describe the bonds had sold in the market for a 
 
 price limited by referrinj^ to condi- flat price wliich after deduction of 
 
 tions and continf^encies. It is not the coupons aiul accruetl interest 
 
 essential that a definite price be would leave the (i^ure at which the 
 
 named. Wronkow vs. Clews, 20 J. sale luul l>een ordered. 
 
 AS. 17<». For cc)nstructi<in (»f stop 'Hope vs. Lawrence, 50 Harl». 
 
 order where Hroker is instnwtc<l to 258. 
 
 sell when rnart'in should f.ill below • Bertram vs. Godfray, 1 Knapp 
 
 6 per cent, w.-e Wicks vh llal.li, <i'_' P. C. :iSl. 
 20
 
 306 Stock-brokers and Stock Exchauges. 
 
 Keceipt by the Client of dividends on the stock after the 
 limit of a stop order to sell had been reached to his knowl- 
 edge would be evidence of a waiver of the stop order.' 
 
 The term " stop order " may be used, of course, in other 
 then its ordinary sense. Thus when a Broker writing to 
 his Client, then abroad, for margin, adds, " in the meantime 
 we enter stop order," the term may not have its ordinary 
 meaning, but that the Broker will stop entirely and hold 
 the transaction in statu quo till he hears from his Client.^' 
 
 When therefore the Broker in his letter of May 12th, 
 quoted the price of certain stock at 105|, and requested 
 further margin, and the Client on jNlay 2-ith cabled the 
 Broker to sell such stock, which the Broker did the same 
 day at 95, it was held that the Client could not make the 
 Broker liable for the difference.^ 
 
 TI. Special Contract with Client — 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 i-espect.^ 
 
 ' Bertram vs. Godfray, supra. of the stop orders had been reached. 
 
 ' Wronkow vs. Clews, 20 J. & S. And see also Harris vs. Pryor, 18 
 
 176. N. Y. Supp. 12S, where although the 
 
 ^ Id. Compare this case with Client authorized stop orders at 1 
 
 Gould vs. Trask, 10 N. Y. Supp. per cent above the market, the 
 
 619, in which case the Brokers noti- Brokers were held justified in clos- 
 
 fiied their Clients that they would en- 'uv^ at their own stop order of half 
 
 ter a "stop order" the next day, on a point from the market, when they 
 
 securities carried by them on mar- did not agree to the stop order of 
 
 gin, at certain specified prices, the Client, who had failed to furnish 
 
 meaning that unle.ss the Client margins. 
 
 meanwhile deposited sufficient mar- * Milliken vs. Dehon, 27 X. Y. 
 
 gin the)' would sell when the limit 364; Baker vs. Drake, 66 id. 518;
 
 Special Contract with Client. 307 
 
 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 nioditied the ordinary rights 
 of a pledgor to have notice of the time and placed 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 
 Ghent might agree that his business should be conducted in 
 accordance with the usage of a particular office, 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 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 ajipeared 
 the plaintiff executed to G. A. "W. a power of attorney em- 
 jx)wering him to buy and sell gold, stocks, and bonds, and to 
 execute for her, and in her name, " all orders, checks, or other 
 
 Markham \s. Jaudon, 41 id. 23.5, at cided; see also Wilson vs. Little, 2 
 
 p. 244; Wicks vs. Hatch, (i2 id. .5.35; N. Y. 443. .\n aRreeinent to carry 
 
 Stenton vs. Jerome, .54 id. 480; wheat until a specified <latc witiiout 
 
 Hyatt vs. .Argenti, 3 Cal. 151; further inar^xin, no side to he inado 
 
 Robinson vs. Norris, 51 How. Pr. until ordered by the Client, doiis not 
 
 (N. Y.) 442; aff'd G Hun (.\. Y.), mean tliat tlie wheat is to be carried 
 
 233. inilefiiiitely without further margin 
 
 ' 27 .N". Y. 301. until such time jls the Crieiit orders 
 
 ' 60 id. 518. a sale, l)<jt .simply that a sjde could 
 
 ' Cortclyou vs. Lansing, 2 Cai. not be made i)rior to the specific*! 
 
 (N. Y.) Cujs. 200; see as to this case date without his order, .\mjklen 
 
 Barrow vs. Paxton, 5 Johns. i\. Y.) vs. Jacobs, 75 Hun, 31 1 . 
 
 200, by which it is explained by MJ2 .\. Y. 535; afT'g J. A S. (N. 
 
 Kent, Ch J , that it wai never de- V.) 96.
 
 308 Stock-brokers and Stock Exchanges. 
 
 instruments in writing whatsoever/' which might, in his dis- 
 cretion, be necessary in the business, with power of substitu- 
 tion, etc. G. A. "\V. employed defendants as Brokers, deposit- 
 ing- a sum as a margin. He gave to them a writing signed 
 by him, as attorney for phuntitf, autliorizing 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 counterclaim 
 a deficiency arising on the sales after exhausting the margin. 
 The court held that it was within the authority of G. A. AV. 
 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, the}'^ deemed the 
 state of the market justified it; that plaintilf was liable for 
 any loss on sales beyond the amount of the nuirgin ; and that 
 the same wasproper as a counterclaim. 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 pi-otection. Held, 
 no error, that from their peculiar relations as Brokers, hold- 
 ing stock paid for, mainly out of their 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 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 
 
 » 8 Ab. New Cas. 291; aff'd S3 N. Y. 92.
 
 Special Contract with Client. 309 
 
 plaintiff bad the option to either receive or deliver 100 shares 
 of Lake Shore stock at 62| for sixty days, the defendant 
 further iruarauteeino' that the stock should iluctuate at least 
 S per cent. The " straddle" remained in the hands of the 
 defendant. The day after the making of this contract, the 
 defendant, 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 T3| a short time afterwards. 
 The plaintiff, in an action on the " straddle," recovered a 
 judgment ; and the court held that the subsequent action 
 of defendant 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 plaintilT. 
 
 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 " AVe herewith 
 enclose our usual customer's agreement f(jr your signature," 
 and he 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 privatc^salo, 
 with or without advertising, and without ])rior demand of 
 any kind, upon a notice to the T'lient of the time and place 
 of sale, of all or any gold, stocks, pr<>|)(Mty, things in action, 
 or collateral sociiritios luld by thcin aii<l iHlon^ring to th(< 
 Client — th(; latter is bound by tin- tn-ms of the agreement ;
 
 310 Stock-brokers aud Stock Exchauges. 
 
 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 their Client, by which the ordinary prin- 
 ciples applicable to such a relation are set aside or modified, 
 and the dealings under such contract being full}' closed, new 
 transactions are subsequently entered into, the former writ- 
 ten contract 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 agi-eement 
 clothed the Brokers wnth the greatest possible })ower with 
 respect 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 full}' 
 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 applicable, but had been superseded 
 b}' an oral arrangement, was proper, and the question should 
 have been submitted to the jury. The court was inclined to 
 the opinion, that under the circumstances, as inatter of law, 
 the previous written contract was ended, and did not apply 
 to a fresh dealing between the parties.^ 
 
 ' Robinson vs. Norris, 51 How. peals sub nom. Burkitt vs. Taylor, 
 
 Pr. (N. Y.) 442; aff'd 6 Hun (N. Y.), 13 W. D 75, where the above views 
 
 233. were fully sustained. See also 
 
 * 55 How. Pr. (N. Y.) 128. Winans vs. Hassey, 48 Cal. 634. 
 
 ' See this case in Court of Ap-
 
 Special Contract with Client. 311 
 
 Special agreements between the Broker and the Client 
 are sometimes made whereby the former agrees to re- 
 purchase from the Ghent the securities bought for him, 
 on certain contingencies, usually that of the Ghent's dissat- 
 isfaction. Such a contract, either between Broker and 
 Client or vendor and vendee, is not a contract for the sale 
 of good, chattels, or things in action, within the Statute of 
 Frauds, but is a provision for the rescission of the entire 
 contract, and is valid though oral.' A party does not di- 
 vest himself of an option to return purchased securities 
 at cost price by selling them again with the same option 
 to his vendees, whicli is exercised.^ "Where the agreement to 
 re-purchase is without express limit as to time, and is there- 
 fore to be construed as running fur a reasonable period, a 
 delay not demanding a re-purchase, in one case of three years, 
 and in another of nearly two years, in both cases the 
 vendor having in the interim repeatedly urged the vendee 
 to keep the securities, was held not to be, as matter of law, 
 an unreasonable length of time.^ 
 
 "When an option contract provides that notice of intention 
 to require performance of the contract of repurchase is to be 
 given on a specified day, it must be given on that day, al- 
 
 ' Johnston vs. Tnisk, 110 X. Y. a promise to answer for the debt, 
 
 136, and cases tliere cited; Wooster etc., of another siiould l)e in writing, 
 
 vs. Sa^e, 07 X. Y. 67. Xor is an Green vs. Brooliins, 23 Mich. 48. 
 
 oral contract, whereby a promoter ' Wooster vs. Sage, 07 X. Y. 67. 
 
 of a company promised plaintiff As to meaning of agreement to 
 
 that if the latter would take two "make good" amount advanced on 
 
 shares in the company and give liis purchjwc of stock, see Uowley vs 
 
 promi.s.s^iry note therefor, the former Swift, 07 Ilun, 95. 
 
 would fnid some one to take the 'Johnston vs. Tnusk, 110 .N ^' 
 
 shares r)ff the hands of pluintiff who 1.30; Wooster vs. Sage, 07 X. Y. 07. 
 
 would not ho put tr) any expense in .As to transactions between part- 
 
 the matter, within the provision of ners, see Worn vs. Kry, SI Cal. 
 
 the Statute- of Fraudii declaring that Z'iO.
 
 312 Stock-brokers and Sfock Exchsiiii^es. 
 
 though n holi(hiy other than iSuiulay, as the Holiday Acts 
 do not affect such a transaction, otherwise the contract will be 
 deemed to be at an end, and it cannot be enforced in the 
 absence of evidence of an agreement reviving it or mak- 
 ing a new contract with reference thereto.' And a tender 
 of the stock, and an offer to transfer the same, must 
 furthermore be made on the day when performance 
 is due,^ unless the court can say under all the circum- 
 stances that time was not of the essence of the contract, 
 in which case tender within a reasonable time will suffice.^ 
 But a repudiation of the contract before maturity dis- 
 penses with the necessity of tender, and the production 
 upon the trial of the securities, and an offer to deliver 
 over, is enough/ 
 
 The vendee is not, upon the trial, bound to prove any 
 damages, the obligation of the vendor being to repurchase 
 the securities or to refund the cost. It may be that 
 when the vendor refuses to accept a return, the vendee 
 may dispose of the property and sue for the deficiency. 
 
 If the securities consist of coupon bonds, and any of the 
 coupons are removed by the vendee, they must be de- 
 ducted out of the purchase-money, but any profit in the 
 
 * Page vs. Shainwald, 169 X. Y. made, which non-residence also ex- 
 
 246. If the option is to repur- isted at the time the acxeement was 
 
 chase at the end of one year after entered into, does not dispense with 
 
 thirty days' notice, it is not neces- the malcing of the tender. Ibid, 
 
 sary that such notice should be See, however, George vs. Braden, 70 
 
 given thirty daj'S before the expira- Pa. St. 56. 
 
 tion of the j^ear. A notice any time ^ Duchemin vs. Kendall, 149 
 
 within the year is sufficient. Ma- Mass. 171. If a certificate has no 
 
 guire vs. Halsted, IS -\pp. Div. 228. value, tender at the trial is sufficient. 
 
 2 Taylor vs. Blair, 30 X. Y. St. Lewis vs. Andrews, 127 X. Y. 673. 
 
 Rep. .i2S. Mere non-residence of * Masruire vs. Halsted, 18 App. 
 
 the party to whom tender is to be Div. 228.
 
 Joint Adventures in Stocks. 813 
 
 transaction stands on a different footing, and cannot be 
 regarded as any part of the property to be returned.^ 
 
 Joint AdrentiD'cs in Stocks. 
 
 There are a few cases which ilhistrate a dealing in securi- 
 ties for specuhition on joint account or for the joint benefit 
 of the parties engaging therein. 
 
 It is not an unconiraon 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 made, and the other person to contribute the 
 capital or means to can y on the operation. And the courts 
 have held, that the contribution of information which is used 
 as a basis for operations in stocks is a sufficient consideration 
 for an agreement to give the party furnishing the same an 
 interest in the profits of the transaction. 
 
 In the case 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 itsulKciently important to 
 warrant his acting upon it, Ije (defendant) should hold 5(»00 
 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 phiintiff 
 imparted said inf<jrmation, which defendant accepted and 
 acted upon, pronouncing it the best " point'' lie had lu aid 
 of in along time, the coui-t h(*ld that tht; mouKMit the in- 
 formation was given, and the transaction assented to l)y de- 
 fendant, it was an ex<M;uted ((jntract, and the defendant bore 
 the same relation to the plaintiff in regar<l to this stock as 
 
 • Woortcr v«. SaKc, 67 N Y r,7 ' .W Ildw I'r. (N. Y.) 53.
 
 314 Stock-broktM-s sind Stock Exchanges. 
 
 Stock-brokers ordinarily l)ear to Clients for whom they are 
 carrvinc stocks. The rule, that where one offers a reward 
 for information he is bound by his contract to the one who re- 
 sponds to his offer, apj)lies with equal force to the case where 
 information is proffered 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 re- 
 liable information, as to facts upon which the future piice of 
 a stock will depend, is a sufficient consideration to uphold an 
 agreement or contract in relation to such stock. Such in- 
 formation, 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 Avhich 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 courts held that the arrangement was termi- 
 nable at any time at the will of either of the ])arties, and that 
 either could maintain an 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 ques- 
 tion whether or not they were to be regarded as partners inUr 
 sese. By arrangement, the Brokers, through whom the joint 
 operations were conducted, kept the account thereof under 
 
 1 56 How. Pr. (N. Y.) 53. In- eration for a promLse to divide such 
 
 formation furnished by one Broker commissions. McLaughlin vs. Bar- 
 
 which enables another to effect a nard, 2 E. D. Smith, 372. 
 
 sale or purchase and thereby earn ^ 69 N. Y. 220. 
 commissions is a sufficient consid-
 
 Joint Advoiitiires in Stocks. 315 
 
 the letter " M." By direction of defendant this account 
 was closed, and the stock on hand, purchased under the 
 ao^reement, was transferred to his individual account. It 
 did not appear that the certificates of the stock were dis- 
 turbed. 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 offered to prove that he sold all 
 of the stock held on " M " account 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 defendant had authority to 
 sell, it was not necessary to make known at the time of the 
 sale that it was made on joint account; and if he made the 
 sale in good faitli in the ordinary way, ])laintiff 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 conflict- 
 ing between them, the point will be considered settled in 
 fav(;r of the plaintiff, as a joint purchase, where it appears 
 that the defendant had previously rendered an account to 
 the plaintiff for the hitter's share, adding interest and com- 
 mission to that date, stating that the purchase was joint 
 and containing the actual interest of each of them in the 
 enterprise.' 
 
 '69 N. Y. 220. tifT to recoive a spocifiod ainoimt 
 
 'Crosby vh. Watts, 49 How. Pr. tlicrcof. In an action to coinpel 
 
 (N. Y.) 3GI; alT'd 11 .\. V. Supi-r. .Hpccific performance, held that a 
 
 Ct. 208. And where phiiiitifT with Irast wius created, involving an oh- 
 
 otherH, advanced a Huin of money to huation to use the fnndH for the 
 
 defendant to be u»e<l in purcha-ninK purpose for which they were Hiib- 
 
 certain Htorks anrl botuN, the plain srril)e(|, wiiich the dcfrndant could
 
 81G 
 
 Stock-broktM-s and Stock Exchanges. 
 
 Under an agreement tor a joint venture in stock, to be 
 licld by one party for thirty days, the other part}' to bear 
 all the loss, if any — held, that the former could not recover 
 the deliciency on a decline in ])rice without proving an actual 
 sale at a loss within thirty da3's.' 
 
 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 
 burden of 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.- 
 
 not avoid by showing that he chose 
 to use his own funds, and purchase 
 for himself; that the transaction 
 was not avoided by the statute of 
 frauds; and plaintiff was entitled to 
 a transfer of the portion which fell 
 to him according to his subscrip- 
 tion. Johnson vs. Brooks, 46 
 Super. Ct. (J. & S.) 13. But if the 
 plaintiff upon the joint adventure 
 has received the money, bought and 
 sold the stock, and holds the pro- 
 ceeds, he cannot sustain an action 
 for an accounting. Conger vs. Jud- 
 son, N. Y. L. J. August 1, 1901. 
 The trust relation must be estab- 
 lished and that defendant received 
 plaintiff's money, Schantz vs. 
 Oakman, 1G3 X. Y. 148, and the 
 burden is upon defendant to show 
 that his triLst has been performed. 
 Marvin vs. Brooks, 94 X. Y. 71. 
 The judgment should be against all 
 jointly liable, although some were 
 not served with process. Stem- 
 berger vs. Bemheimer, 121 N. Y. 
 194. 
 
 * Monroe vs. Peck, 3 Daly, 128. 
 
 -Strong vs. Place, 4 Robt. 385; 
 s. c. 33How. Pr. (N. Y.) 114. The 
 case of Luders vs. Rasmus, 14 
 X. Y. W. D. 221, also arose out 
 of joint adventures in stock. 
 The plaintiff agreed with de- 
 fendants to purcha.se bonds and 
 stocks for them, he to receive one 
 third of the net profits and be 
 chargeable with one third of the 
 losses thereon. Certain bonds pur- 
 chased by him turned out to be 
 counterfeits; the loss thereon was 
 afterwards partially made good and 
 plaintiff was credited with one 
 third of the net amount received. 
 The agreement was thereafter mod- 
 ified so that plaintiff could only 
 draw a certain amount of his share 
 of the profits per month, the excess 
 to be applied on the charge for loss. 
 The following year plaintiff left the 
 business. In an action to recover 
 an amount alleged to be due him, 
 held, that plaintiff having aban- 
 doned the means provided by the
 
 Joint Adventures in Stocks. 317 
 
 An interesting Ciise 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 : '' deceived of J. 'NV. Junes, 
 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 C( »urt below held that the instrument 
 expressed 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 
 inducement of the sale and part of the consitleration 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 I'ecover any tlividends or other 
 income received by defendant's intestate, the contract not 
 covering the same. A portion of the stock, however, had 
 been exchanged into i)onds of the same company, and il was 
 held that plaintiif wius entitled to onehidf interest in the 
 avails of the same, after dtMlu(;ting any money paid to com- 
 plete the conversion oi tlui stock into bonds. 
 
 nKxlifiwl atrr«Tmoiit for payini: tlu; simre of llic hiifaticc of loss wfia ro- 
 
 halaiice duo from him I)y tin- appli- (•ov«'ral)r(' l)y ilcfciidaiits I)y way of 
 
 ration of th«- Huriiliis jirolits, hw rountcrflaiiii 
 ori^'iiial liahilitv revived and his ' HO N. V ^.O, rev'g 13 J. i^- S 00.
 
 318 Stock-brokers jiiul Stock Exchaupes. 
 
 The court did not pass upon the question whether the intes- 
 tate hail the right to choose the time of sale, so that this dis- 
 cretion could not be interfered with by the plaintiif. It 
 ^voul(l 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 
 party possessing the discretion cannot seek to exercise it un- 
 reasonably against the other party to the agreement. 
 
 So in an action to recover, with dividends, certain 
 shares of telegraph stock, claimed to be in defendant's 
 hands, and to belong to plaintiff, as assignee of S. & Co., 
 it appeared that in March, 1854, the stock Avas 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. De- 
 fendant retained the stock, and dividends were made upon it. 
 February, 1805, S. & Co. demanded the stock, which defend- 
 ant declined to give up. Xo request was made to sell 
 the same. "When the 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 owner 
 of the stock and entitled to a transfer thereof, and to the divi- 
 dends received and interest thereon. But the judgment in 
 respect to the dividends was modified, and it was held that 
 plaintiff Avas 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, 
 he should receive one half of the avails of the stock and of 
 the dividends actually ])aid to him.' 
 
 * Wight vs. Wood, 12 .\. Y. Week. Dig. 529, s. c. 85 N. Y. 402.
 
 Joint Adventures in Stocks. 319 
 
 The case of Eutler vs. Finck^ sbouUl also be noticed in 
 this connection, as bearing upon the question as to how far 
 a joint speculation Avill constitute the parties engaged there- 
 in, partners, 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 beneilt, 
 collecting information 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 re- 
 ceive one third of the net profits, the margin to carry the ac- 
 count 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 his salary. On April 23, 1870, the 
 defendant, claiming that his share of the profits amounted 
 to $0818.48, received from B. an order upon iiis Brokei- for 
 that sum, which was paid by the drawee. Subsecpu.'ntly 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 s(tld and others 
 pledged. It appeared that the sum received by the defend- 
 ant was, in fact, one third of the ]irofits actually made by 
 him while conducting the account, and also that B. had, with- 
 out his knowledge, speculated on his own account, both !)•'- 
 fore and after the times referred to. It was not shown that 
 the defendant knew that H. had stolm the l>on<ls until after 
 
 ' 21 Hun (N. v.), 210. It wa.s sioiis imd wius (o Ix-nr li:ilf tin- 
 
 held in Sutton vh. Gray, (1894) 1 Q. losst-s, was not a partnorship af;roo- 
 
 H. '2.S'>, tliat an ajjreeinent |jc;tween niont, and di<l not come within the 
 
 a njc'inlior of the Kxchant:»- ami a Ith soction of the Statute of KraudM 
 
 noij-in<nnl>«T, Ijy which tin- lattfr. on ho m to n'tpiire the m^reeiuent to bo 
 
 buiiiucKH intro<lufe<l by him. Wits to in writiiif^. 
 Titi-\\i- Ijilf till- Broker's cymmi»-
 
 320 Stoek-brokeis and Stock Kxchanges, 
 
 he bad absconded. The defendant having refused to account 
 to the ])hiinti(r for the amounts received by him, an action 
 was brought to recover damages for the conversion of tlio 
 bonds ; and, u[)on the trial thereof , the court directed a ver- 
 dict for the plaintiff, for the entire amount lost by the ab- 
 straction of the bonds, on the theory that the defendant and 
 B. were co-partners 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 jur^^ It was doubted 
 whether in any event the defendant was liable for the amount 
 actually received by him from B.^ 
 
 And where an agreement was made between three per- 
 sons to share the profits and losses of a single transaction, 
 the parties do not become partners so as to render an ac- 
 counting necessary, and if the speculation has proved a loss, 
 and one of the parties has paid the entire loss, he may re- 
 cover one third of the loss from the representative of one 
 of the parties who had died, without naming the other as a 
 party to the action.^ 
 
 Where A., in pursuance of a parol authority from B, pur- 
 chases stock in his own name on the joint account of him- 
 self and B., the latter becomes the owner of one half the 
 
 ' An agreement by whicli one general question as to whether 
 
 party loans money to another to be joint operators are partners, see 
 
 used in joint-stock speculations, the Parsons on Partnership ( tth ed.), 50, 
 
 profits of which were to be equally 51 ; also as to joint adventures in a 
 
 divided and the money loaned re- purchase or enterprise, see King vs. 
 
 turned, nothing being said as to the Wise, 43 Cal. 62S; Flagg vs. Mann, 2 
 
 los.ses, constitutes the parties co- Sumner, 486; Reilly vs. Freeman, 1 
 
 partners, the copartnership being App. Div. 560. 
 terminable at will. Sims vs. Vyse, ■ Burleigh vs. Bevan, 22 Misc. 
 
 13 N. Y. St. Rep. 355. Upon the 38.
 
 Joint Adventures in Stocks. 
 
 321 
 
 stock, and liable to pay A. the amount advanced therefor ; 
 and no ^vritten assignment of the stock from A. to B. is nec- 
 essar}', to render B liable for his proportionate share of the 
 purchase-money.' 
 
 « Stover vs. Flack, 41 Barb. (N. 
 Y.) 162, aff'd 30 X. Y. 64. And if the 
 stock is worthless he is not bound to 
 attempt to sell it in the market be- 
 fore commencing his action. Ibid. 
 Unless otherwise stipulated parties 
 to a joint account are entitled to 
 share in the profits and liable to 
 divide the loss in proportion to the 
 amount of the purchase money each 
 has advanced. Boardman vs. Gail- 
 lard, 60 N. Y. 614. See generally 
 on subject of "joint account" and 
 several lial^ilit)' in stock transac- 
 tions, Quincey vs. AMiite, 63 X. Y. 
 370, 377, 378; Kimball vs. Wil- 
 liams, 65 X. Y. Supp. 69. In an 
 action to recover capital contrib- 
 uted for the purpose of engagins; in 
 joint speculations, a recovery can 
 only be had by proof that there had 
 been no transaction on joint ac- 
 counts, and where there have been 
 such traasactions resvilting in total 
 loss of the capital, the complaint 
 must be dismis.sed. Siuis vs. V'yse, 
 13 X. Y. St. Rep. 355. Joint ac- 
 count may be proved by showing 
 original authority to buy or sell; or 
 if there be no such authority by sub- 
 BCfiuent ratification. Wheeler vs. 
 Sedgwick, 94 U. S. 1. The sale of 
 stock by one of the parlies to a joint 
 account witliout the knowlwltre or 
 coascnt of the others, is a conver- 
 sion, and the parlies not consulted 
 are not liable for any losn occurring 
 thereby, Thompson vn. Brown, 2 
 
 21 
 
 J. & S. 1. TMiere bonds were pur- 
 chased by plaintiff, there being an 
 agreement that another who did not 
 become part owner of the bonds 
 should share in the profits and loss- 
 es, but the plaintiff advanced all the 
 money and had the exclusive right 
 of possession, the defendants, Brok- 
 ers, who acted in the purchase could 
 not, when sued for conversion, set 
 up that such third person was a 
 necessary party; they had no equity 
 to place the latter in any other rela- 
 tion to plaintiff than had been as- 
 sumed by the parties themselves 
 under the agreement. Wyckoff vs. 
 Anthony, 90 X. Y. 442. A claim 
 for damages growing out of a breach 
 of warranty or fraud by the seller 
 belongs to joint buyers jointly, and 
 cannot therefore be set up in a 
 separate counterclaim of any of 
 them. Hopkins vs. Lane, S7 X. Y. 
 501. AMiere in an action for an ac- 
 counting as to joint transactions in 
 stocks by copartners, the plaintiff's 
 right to an account is cstabli.shed 
 and the referee states snch account, 
 and directed further that certain 
 bonds and stocks be delivered by 
 defendant to several persons not 
 mentioncfl in the complaint, nor par- 
 ties to the suit, held tli:it tlic direc- 
 tions of the judgment witli rcferenco 
 to these persoas not |)arties to the 
 suit were improjx'r; that the referee 
 should havedirectc^l, wlieti he found 
 outside parties hud claims agiiinst
 
 322 Stock-brokers and Stock Exchanges. 
 
 But where two parties agree to operate jointly in stocks, 
 and one of tlieni accordingly opens an account in his own 
 name with a Stock-broker, without disclosing the name or 
 interest of the other party in the transactions, and individ- 
 ually manages and directs the operation, and the Broker 
 has no knowledge of the other person, the latter cannot re- 
 cover his interest in the profits of specified operations, ignor- 
 ing the balance of the account. lie 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 re- 
 sulted. The Brokers, having 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 
 sufticient notice to the parties receiving it that it is partner- 
 ship property, nor enough to put them on inquiry before 
 crediting the amount to the private account of the partner 
 of whom they receive it.^ 
 
 Although a Broker may make a hard and unconscionable 
 bargain in a joint speculation in stocks in which he procures 
 from his contractee a guarantee against all losses and that 
 
 the firm property, the appointment posits moneys in the absence of the 
 
 of a receiver, who should a-scertain other, the husband is presiuiied, in 
 
 the valid claims and distril)vite the the absence of evidence, to own 
 
 same, etc. Mifflin vs. Brooks, 18 half at least of the sum standing to 
 
 "S.Y. Week. Dig. 531. their credit. Gelster vs. The Syra- 
 
 ' Read vs. Jaudon, 35 How. Pr. cuse Savings Bank, 17 'S . Y . Weekly 
 (N. Y.) 303. See also Jaycox vs. Dig. 137. As to effect of joint de- 
 Cameron, 49 X. Y. 645. posit of money in a savings bank, 
 
 ' Sterling vs. Jaudon, 48 Barb, see Mulcahy vs. Emigrant Indus- 
 
 (N. Y.) 459. WTiere husband and trial Savings Bank, 15 N. Y. Week. 
 
 wife have a bank account in their Dig. 27. 
 two names, and each draws and de-
 
 ''Short Sales." 323 
 
 his (the Broker's) profits on the transaction should in any 
 case amount to a certain sum, tlie parties advancing the 
 capital in about equal shares, the relationship between the 
 parties is that of copartners, and not that of borrower and 
 lender, so as to enable the contractee to interpose the de- 
 fence of usury." 
 
 VII. Sales for "Short Account." 
 
 (a.) Nature of ''Short Sale." 
 
 A "short sale" of stocks 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 
 " regular *' (that is, not upon time, sellers option), the party 
 selling is bound to deliver them on the next day after the 
 sale is made, in Avhich 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 fre- 
 quently 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 oi)tion, 
 or until the buyer calls for them, as the case may be.'' 
 In Knowlton vs. Fitch,^ Mr. Justice Rapallo defined a" short 
 
 ' Orvifl vs. CurtLss, 1.57 N. V. 0.57. 118 N. V. 594; Lazare vs. .\llen. 20 
 
 See further a.s to joint adventures ill App. Div. GIG; Smith vs. Houvier, 
 
 stocka, and as to opening? an account 70 Pa. St. 325; Maxton vs. (Iheon, 
 
 Htated. lierdell vs. Allen, 22 J. &: S. 75 id. IGG. 
 
 38; aff'd 1 16 N. Y. 6G1 . ' 52 N. Y. 288. As to dilTcrenct. 
 
 'See, for cases defMiiiiR "short between ".short sale" and one at 
 
 Hales," White vs Smith, ."il N. Y. seller's option where t lie seller owns 
 
 522; Wicks vs. nat<h, G2 id. 53.5; the sto<'k c<jntracte<i to ho sold, siw) 
 
 Knowlton vs. Iit<h. .52 id. '2SH. rev'u Sistare vs, Ik-st, KS X. Y. .5.H:V Tho 
 
 •JS Harl) 193; f ■;iiiiphcl! vs Wright, seller's option here rcfcrnnl to is of a
 
 324 Stock-brokers and Stock Exchaiif^cs. 
 
 sale " as follows : " The nature of these sales has, in the 
 many litigations which have come before the courts concern- 
 ing them, been f i-ecjuently })rove(.l, and is again explained in 
 the testimou}' in this case. It is proven to be a sale before 
 purchase, with a view of pnrchasing at a future time at a 
 lower price. It is evident that, to carry out such a specuhi- 
 tion, the stock sold must be temporarily procured by the 
 seller for delivery to the purchaser. The manner in which 
 this had been accomplished, in the course of the previous 
 dealings between the plaintiff and the defendants, is ex- 
 plained in the testimony. The plaintiff did not fuiTiish the 
 stock to deliver, but only margins. The defendants fur- 
 nished the stock. They soUl in the regular way, which is 
 deliverable the next day, and theu borrowed the stock of 
 other parties to deliver. The profit or loss depended upon 
 whether the stock rose or fell. The plaintiff had the right 
 
 different nature from that referred 113. A contract to sell stocks 
 to in the text, where the seller need "short" which is contrary to public 
 not possess the stocks at the time of policy cannot be enforced. Veazy 
 sale. Requirements of complaint vs. .Vllen, 173 N. Y. 359. In that 
 against Broker for nef2;lect to execute case the Client's claim was that the 
 "short sale" stated in Ryder vs. defendant Brokers, in consideration 
 Sistare, 15 Daly, 90. \Vlien the of liis supplj'ing them with informa- 
 complaint does not show that the tiou concerning an investigation in- 
 stocks ordered bought ever in- to the affairs of two corporations 
 creased in value, or that loss was popularly known as the "Whisky" 
 caused by any change in the value and "Sugar" Trasts, which he was 
 of the stocks ordered .sold, the plain- to procure to be made b}^ Congress, 
 tiff can only recover nominal dam- w-ould sell the stock of the corpora- 
 ages. Id. As to whether a custom tions, and buj' tliem again at a 
 of Brokers to use stocks carried for lower price, the decline in price be- 
 margin buyers in effecting sales for ing caused by the Congressional in- 
 other "short sale" customers, so vestigation, and divide with him the 
 that the amount of certain stocks profits so made, and the court held 
 carried are at times reduced below that such a contract was clearly 
 the requirements of the purchasing against public policy, and unen- 
 castomers, is reasonable, quaere, forceable. Id. 
 Skiff vs. Stoddard, 21 L. R. A. 102,
 
 '* Short Sales.'* 326 
 
 to direct his Brokers at any time to buy in the stock and 
 close the transaction. Until bought in, the Brokers re- 
 mained bound to the persons from whom they had obtained 
 the stock, to return to tliem 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-bi'oker 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, 
 
 ' A " short sale " of stocks is legal and the Mechanism of Excliange, 
 in Pennsylvania (Smith vs. Bouvier, pp. 210, 211). The act of 1867 has 
 70 Pa. St. 325; Maxton vs. Gheen, been, however, disregarded on the 
 75 id. 166). In the case of Apple- English Stock E.xchanges, and it 
 man vs. Fisher (34 Md. 540), a con- has, to a large extent, failed to at- 
 tract to sell gold "short" was up- tain the object of its enactment, as 
 held as legal. See also Chap. V. knowledge by tlie Client of the cus- 
 " Stock-jobbing." tom to disregard it, is sufficient to 
 
 ".\bout ten years ago it became exonerate the Broker. See Chapter 
 the practice to rig the market as re- on"Usages"; Brodliurst's Stock Ex- 
 gards the .shares of particular joint- change Law, p. 197; Chitt}''s Stat- 
 stock banking companies. .\ party utes, vol. 1, title "Bank," p. 39. It 
 would be formed, perhaps, owning was held in Mitchell vs. City of Glas- 
 none of the shares of the selected gow Bank, 4 -^^pp. Cas. 024, that 
 company, and they would proceed entries in tiie books of the respect- 
 to sell considerable quantities of the ive lirokers, each entry specifying 
 shares, iioping .so to damage the rep- the name of the Broker for tlie other 
 utation of the company and lower party, initialed by him, coupled 
 the value of the stock as to be able with the mention of tlie vendor's 
 to buy up enougli before delivery name after the sale, was not a corn- 
 would be required. This noxious plianc-e with the act. But the prao- 
 kind of speculation was checked by tice of selling stocks and securitiert 
 an .\ct of Parliament (30 Vict, c 29, "short" has prevaile<l for a very 
 1867), which now requires the seller nnich longer time in this country. 
 of bank shares to specify the num- .\s to legality <if "short sales," see 
 bars or the registered proprietors of title "Stock-jobbing." 
 the share* wliich he is wiling for '51 N. Y. 522. 
 future delivery" (Jevon'tj Money
 
 :{Jt) Stock-brokers ami Stock Exchanges. 
 
 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 trans- 
 action would be defeated. The Broker can close the trans- 
 action at any time if, upon demand and notice, the margin 
 is not kept good ; and he may close it upon notice after he 
 has carried the stock for a reasonable time. He has not 
 the right, unless so expressly agreed, to buy in stock to 
 cover the sale without notice to, or direction from, his 
 Client, and by so doing he becomes liable for any loss he 
 thus occasions. his principal. In that case it a})peared that 
 on the 18th of October, defendants (Stock-brokers), upon 
 plaintiff's order and on his account, sold 300 shares N, Y. C. 
 "short" at 186. On the 1st of Xovember, without plain- 
 tiff's order or knowledge, they "bought in" stock to cover 
 the sale. On the 2d of November, the stock having de- 
 clined to ISO^, plaintiff ordered defendants to cover their 
 sale, to which no attention was paid. The court held that 
 the plaintiff Avas entitled to i-ecover, and that the j)roper 
 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' 
 
 ' See also to same effect, Rogers profits, while the customer, on his 
 vs. Wilev, 131 N. Y. 527. The same part, is bound to keep his margin 
 rule was declared in regard to a good, so as to secure the Broker 
 short sale of wheat in Campbell against loss. But the customer is 
 vs. Wright, 118 N. Y. 394. The entitled to notice before the Broker 
 Broker and the customer have mu- can close him out by buying in the 
 tual and correlative rights and stock on his account. Hess vs. 
 duties. The former undertakes to Rau, 95 N. Y. 359, 362, afT'g 17 J. 
 carry the stock a reasonable timej & S. 324; Harris vs. Prj^or, 18 N. Y. 
 so as to afford the customer an op- Supp. 128. But if a Client wishes 
 portunity to realize the expected to "cover" a short sale, he must
 
 Nature of Contracts — Borrowing Stocks. 327 
 
 {li.) Dutij of Broker to SvU at Price Onfcn'J. 
 
 The Broker's duty, upon receiving an order to sell stocks 
 short, is analogous to that which he owes in the case of a 
 })urchase. Where he is ordered to sell at a tixed 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 
 ])rice, being responsible to his Client for the non-exercise of 
 ordinary care and dihgence,^ 
 
 (c.) Nature of Contract made upon ^'^ Borroirinff" Stork, arid 
 from whom the Stock may be 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, 
 and ])ays him the market price for them. Although in 
 semljlance a sale, the full market price being paid and the 
 stock delivered, it is, in effect, but a loan, and is so reg- 
 istered on the books of the respective Brokers. So, if the 
 borrowed stocks fluctuate widely, either Broker can call 
 upon the other to j)ut up a suilicient margin to guard against 
 loss until the stock is returned.^ 
 
 prove that his instructions reached Brokers at the opening of tlie niar- 
 
 the Broker iu suflicieut time to ket on October 23. Birnbauni vs. 
 
 make the purchase at the time re- May, 58 App. Div. 79. If a "short 
 
 quested. His evidence that he sale" is repudiated by the customer, 
 
 mailed a letter to hLs Broker on the Broker is justified in closinp;, 
 
 October 21, 22 or 2'^, to buy 10 and the Client cannot afterward 
 
 shares of railroad stock at the mar- enforce it. Id. 
 
 ket price at the openin;; of the mar- ' See ante, § IV., sub. (a.), p. li-UU. 
 
 ket on (JcUjber 2.'{, is not Kufficicnt See also Allen vs. McConihe, ante, 
 
 to holi] the Brokers liable for n(»t p. 2()ti. 
 
 filling the order, unleas it is shown 'See .Vrts. XXXI. and XX\11I. 
 
 that the letter was maile<l at such a Connt. New York Stock E.xchaiiKe. 
 
 time that it would liave reached the But tiie nili; to reipiire the lender to
 
 328 Stock-brokers iind Stock Exchanges. 
 
 For instance, a stock may be selling for $100 pLT share 
 ■when it is borrowed, and afterwards; may decline to S-^** poi' 
 share, in which case the borrowing Bi-oker 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 light to call 
 uiH)n the lender to make up the difference by depositing a 
 suificient mai'gin, and vice versa.^ So, it seems, that a Bro- 
 ker 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.^ 
 
 Rapallo, 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 cus- 
 tomer as before, to deliver to him an equal number of shares 
 when demanded. Whether or not the defendants were 
 authorized thus to employ the stock of their customer de- 
 pends upon the arrangements between them." In the case 
 of Dykers vs. Allen ^ Mr. Chancellor Walworth held that 
 an orilinarv loan of a given number of shares of stock of a 
 corporation amounts in substance to a sale, to be paid for 
 
 put up margins, or a usage to that usage of the Exchange, to that ef- 
 
 effect, must be proved, and there- feet. Morris vs. Jaraieson, 68 N. 
 
 fore, if a Stock-broker, at his Ghent's E. Rep. 742. 
 
 request, borrows the stocks to cover ' As to the measure of damages 
 a short sale, and paj-s, for such bor- for refusal or neglect to return bor- 
 rowed stock, a greater sum than rowed stock, see chapter "Measure 
 that received on the short sale, he is of Damages." 
 
 not bound to require the lender to ^ Knowlton vs. Fitch, 52 N. Y. 
 
 put up margins on a decline of the 288, rev'g 48 Barb. 593. 
 
 stock, in the absence of a special ^ 7 Hill, 497. 
 agreement, or proof of a rule or
 
 Duty of Krokor '* Buying in." 820 
 
 in kind and quality, and the title vests in the borrower.' 11" 
 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 witii the practice of Brokers, who 
 hold all dividends, interest, or other accretions to the stock 
 for the account of the lender. 
 
 (d) Duty of Brokers to Close Short Contract hy '''■Buying in" 
 
 Stock. 
 
 As we have seen,^ the Broker has no right to buy in the 
 stocks Avith which to cover or conclude a "short'' sale, 
 without the order or knowledge of the Client, unless, after 
 notice and demand of additional niari;in, 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 
 
 ' See also Fosdick vs. Greene, 27 tract until the appointment of a 
 
 Ohio St. 484; Taylor vs. Ketchuni, lej^al representative. Tlie Broker 
 
 35 How. Pr. (N. Y.) 289. The bor- has bound himself to return the 
 
 rower is not bound to return the stock, howe\'er, for delivery, and 
 
 identical shares borrowed. Anycer- has an interest in the contract, and 
 
 tificate for the name number of so the ca.se is within the exception 
 
 shares will suffice, provided the to the rule that tlic tleath of a prin- 
 
 shares continue to represent the cipal revokes tlie authority of the 
 
 same interest in the corporate capi- a^ent. He.ss vs. Kau, '.).') N. Y. 
 
 tal. Harday vs. Culver, :iO Hun, 1. :«5), afT'f^ 17 J. & S. 32 J. The court 
 
 * Vaughan vs. Wood, 1 .M. it K. .said (p. .3(13): ".\s it turned out it 
 403. would have been to the advantaKo 
 
 * Wliite vs. Smith, .54 N. Y. 522; of the estate if the stocks had been 
 Heas vs. Ilau, 95 N. Y. 359; Harris bought in immediately after Rau's 
 vs. Pryor, 18 X. Y. Supp. 128. (the riicnt's) dcatli. H\it if this 
 
 * If the f'licnt ha.s rlied, or be- course had been taken and the mar- 
 comes incrmipet cut to transact busi- kct had none the. other way, the 
 ncHs, a Hroker, actintr in nood faith; Brokers wmild have been caijerl upon 
 mny continue a "short sale" con- to ju.stify the transaction. We think
 
 S30 Stock-brokers and Stock Kxcliauges. 
 
 a lower figure than that tor 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 plaintiflf ; and, subsequently, the latter di- 
 rected them to make the purchase, which the defeiuUints 
 refused to do. The defendants contended that they were 
 not under an obligation to act for the jjlaintiff, eitlier for 
 any fixed period or to any definite amount. I>ut the coui-t 
 held the rule of law otherwise, and decided tliat, by the 
 agreement by which the agency was created, no period was 
 fixed for its continuance, and the only limit as to amount 
 "was fixed by margin or deposit ; and that it could not be re- 
 voked by the defendants without notice; and a renunciation 
 without such notice subjected the defendants to a liability 
 for any damages the })laintiff might sustain thereby.^ 
 
 The notice to furnish more margin must be a reasonable 
 notice. As to what is a reasonable notice to justify a Broker 
 
 the plaintiffs were not bound to awaitine; the appointment of a rep- 
 place themselves in this dilemma, resentative; but however this may 
 but were authorized, acting in good be, we think it plain that no exi- 
 faith, to maintain the existing situa- gency existed in the case now under 
 tion until a representative of the es- consideration which imposed any 
 tate should be appointed. . . . such duty upon the plaintiffs." 
 
 "The act of buying in the stocks If the promisor in a stock option 
 on account of the estate, which the contract dies while the contract is 
 executor insists should have been executory, a demand for the stock 
 done, would have been a more de- under the contract must be made 
 cisive act of agency than to borrow upon the personal representatives 
 stocks to replace others previouslj' of the deceased promisor and not 
 borrowed, in order to discharge upon the bank where the contract 
 their own obligation. We do not is made payable. Prince vs. Robin- 
 say that circumstances might not son, 14 Fed. Rep. 631. 
 exist which would justify a Broker ' 6 Lans. (X. Y.) 5. 
 in closing a .stock transaction after ' This ca.se was affirmed on ap- 
 the death of the principal, without peal, 54 N. Y. 522.
 
 Duty of Broker " Buyiug iu." 331 
 
 to cover a transaction and close the deal, depends upon circum- 
 stances/ It was held in Lazare vs. Allen,- that a notice 
 given at between 10 and 10 : 30 a. m. lo furnish more mar- 
 gin, the stock having been purchased by the Brokers about 
 noon of the same day, was, standing alone, unreasonable in 
 point of time, but in that case the Brokers had testified that 
 on the fourth, third and second days before the sale they had 
 requested more margins from their Client, the stock having 
 gone up, and if the case had gone to the jury they might 
 from the evidence have declined to find that the Client 
 (who had been forty years engaged in stock transactions, 
 and who lived only a block away from the Broker's office) 
 had the necessary margins ready for use on the day of sale. 
 If the purchase had been made four days' subsequently, the 
 customer would, owing to the fall in price of the stock, have 
 made a profit of $925. After the transaction was closed 
 the Brokers had to his credit $01.35, for which sum the 
 jury found for theplaintitf under the direction of the court, 
 and tlic judgment on such verdict was aflirmed by the 
 Ajjpellate Division. 
 
 In Knowlton vs. Fitch' the plaintiff employed defend- 
 ants, who were Stock-brokers, to operate for him in stocks. 
 He was to furnish a margin, and keej) it good without no- 
 tice; defendants to care for themselves, if he did not. All 
 the transactions were " short sales,'' dofeiulants selling, de- 
 livenible the next day, and i)orrowing the stock to deliver 
 until plaintiir directed a jmrchnso to replace the stock bor- 
 rowed. At the close of a transaction thus condut^ted, de- 
 fendants li;id to the order of |)l;iintiir slii |',t. p.t. The latter 
 
 • Seep. .340, iirxJciLscs.itcdiioU; I. '52 N. Y. 28S, rcv'g IS Uurl). 
 »20 App. l)iv. 010. Sec uls.) S'J.'i. 
 Karuuly vb. Hurk, IS Midi. 278.
 
 332 Stock- brokers and Stock Kvchaiij^cs. 
 
 then directed tlie sale of 1<>0 slmres of Michigan Southern. 
 Defemlants sold as ordered on account of phiintilf, borrow- 
 ing the stock to deliver, and placing proceeds to plaintiffs 
 credit. The stock rising in the market so as to exhaust 
 the margin, defendants notified plaintiff to furnish more, 
 and, upon his failure to conipl}', bought in, to i-eplace the 
 stock borrowed. In an action brought to recover the 
 $1249.19, held, that the defendants were authorized under 
 })l;untiirs order to sell and to borrow the stock for deliv- 
 ery ; and, upon failure of plainLilf to furnish the necessary 
 margin, they had the right to buy on his account ; that the 
 purchase was so made, and that therefore a finding that 
 such purchase was not made for or on account of plaintilf 
 was error. In the case of Staples vs. Gould ' the court 
 held that where a Broker is employed to sell " short" cer- 
 tain stock, deliverable at any time Avithin 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 can- 
 not buy in the stock, without the authorization of the prin- 
 cipal, at any time befoi-e the 30 days have ex[)ired, the 
 time for delivery limited by the contract. In that case 
 the plaintiff, on the 15th of January, 1851, erapWed the 
 defendant, a Broker, to sell for him 200 shares of Canton 
 Company stock at $66 per share, deliverable at the phiin- 
 tiff's 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 
 
 > 9 N. Y. 520.
 
 Duty of Broker " Buyiui? iu." 333 
 
 same day made contracts for the sale to two firms speci- 
 fied in the agreement with defendant. The phiintiff did 
 not at the time own any stock of the Canton Company. 
 On tlie 20th of January, 1851, the defendant delivered to 
 each of the purchasei-s 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 expiration of the 30 days the stock was be- 
 low S«JG per share. The plaintiff brought an action to re- 
 cover back the money deposited with the defendant, and 
 the court held that the plaintiff 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 de- 
 liverable at a future time, the parties to the contract can 
 call upon each other for a deposit to meet fluctuations com- 
 mensurate with the present market price of the stock. This 
 can be repeated any number of times, so that each party 
 will remain intact.' But it may be contended that the 
 legitimate etfect of the case just cited would be to put the 
 whole burden of the fluctuations u[)()n the Broker, and to 
 leave the Client entirely unburdened in a transaction con- 
 summated for his sole benefit, after his margin has been 
 entirely e.xhausted by the rise in the price of the stocks. 
 This does not seem to be reasonable, l)ut the only relief 
 against the decision would seem to be by })roviding 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 decision in Staples 
 V!5. Gould will be seen ]>y th«^ following illustration : A 
 Client orders his llrokcr to sell joii shares of stock "short," 
 
 ' ArtH. X.XXI and X.WIII. Const. .\. V. Stock KxrhaiiKO.
 
 334 Stock-brokers aud Stock Exchanges. 
 
 seller 60, at $100 per share. The Broker executes the or- 
 der upon receiving a 10 per cent margin, or $1000. Ten 
 days after this sale the price of tlie 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 margin, 
 nor buy in the stock without his consent. This is certainly 
 contrary to the usage of Wall Street ; and if the question 
 were to clearly arise again, the courts would have good rea- 
 son 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. 
 TThile the theory of the law in this respect, when applied 
 to general commercial subjects, 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 AYaU Street 
 transaction, where the business is conducted from day to day 
 upon present values, it works manifest hardship and injustice. 
 
 Till. Ciiinpulsory Sale by Broker. 
 
 («.) For Failure to Put iqy Margins to Meet the Fluctuations of 
 
 tJie Market. 
 
 It the absence of an express contract providing other 
 
 wise, the law will not throw the burden or risk of loss from 
 
 ' See, upon this point, next sub. ' Oelricks vs. Ford, 23 How. (U. 
 (VIII.), p. 335. S.) 49.
 
 For Failiiie to Put up Margins. 335 
 
 the 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, it is ex- 
 pressly or impliedly agreeel that the margin shall be re- 
 plenished, if the stock appreciates or depreciates, as the 
 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 
 Broker cannot summarily, without any previous demand of 
 margin, dispose of his Client's stocks. He is bound to give 
 
 ' The fact that in dealings be- bought upon margin on the Board 
 
 tween members of the Chicago of Trade of Chicago, Corbett vs. 
 
 Board of Trade, one mem})er might Underwood, 83 111. 321; Moeller vs. 
 
 be able to defeat a call for margins McLagan, 60 id. 317. As to the 
 
 under § 7 of rule 20 of the rules, did difference between an unauthorized 
 
 not deprive him of the right, when purchase by a Broker to cover a 
 
 the title to the margins wa.s put in "short" sale, and of a purcha.se on 
 
 issue, to prove, that the niarket a margin, see Campbell vs. Wright, 
 
 value of the article .sold wa.s no US \. Y. 594. See also Perin vs. 
 
 higher on the day of delivery than Parker, 12(5 111. 201. As to the 
 
 when it wius sold. Ryan vs. legality of a usage on the Exchange 
 
 Cudahy, 1.57 111. lOS, 121. to sell without demand for margin, 
 
 'Grumaii vs. Smith, SI X. Y. 25; see post, p. 418 et seq. .\nd upon 
 10 N. Y. Weekly Dig. 03, rev'g 12 J. the .New Orleans Cotton Exchange 
 & S. (N. Y.) 389; Knowlton vs. when, under its rules, contracts are 
 Fitch, 52 X. Y. 288; Stenton vs. "closwl out" at stated "times by the 
 Jerome, .54 id. 480; Gillett vs. Whit- payment of differences, and a con- 
 ing, 120 X. Y. 402 (in which case it tract is "closed out" by a cotton 
 wa-s also lield that as there wa.s a factor although llie opposite party 
 breach of contract bv the Brokers does not demand more margins. 
 they were not entitle*] to any dam- Lehman vs. Feld, 37 Fed. Hep. S52. 
 acce), and ciiMM cited at j) 3-12. Sec, '.Supra, p. 179 et seq., and cusca 
 ri" '" -irnilar nil'- wIkt'- "run j.^ ilnti- <iii-i|.
 
 336 Stock-brokers and Stock Excliauges. 
 
 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-ljroker from selling stocks deposited with him as a 
 margin in a speculative transaction, upon a mere general 
 averment of irreparable injury, without showing in what 
 respect this injury will be entailed. "Where there is no 
 averment or 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 improperly sold.' Nor can a pledgor resist the 
 sale of the stock on the ground that it can only be made 
 at a great sacrifice.^ 
 
 So where there is a written contract for the delivery of 
 certain 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 
 market, is rightfully excluded, because it is too indefinite 
 and uncertain to establish a usage. Moreover, where there 
 is no doubt or ambiguity on the face of the contract, evi- 
 dence of the usage is inadmissible.^ 
 
 (b.) Form of Notice ; Ujjon whom Served; Reasonable Time. 
 
 There is no set form which the Broker is obliged to use 
 in making this demand for more margin. Any language 
 
 ' Baker vs. Drake, 66 X. Y. 518; = Park vs. Musgrave, 2 T. & C. 
 
 Gruman vs. Smith, Si id. 25; Ritter (X. Y.) 571. 
 
 vs. Cushman, 35 How. Pr. (N. Y.) * Rasch vs. His Creditors, 1 La. 
 
 284; s. c. 7 Robt. 294; Hanks vs. Ann. 31. 
 
 Drake, 49 Barb. 186; Stenton vs. •• Oelricks vs. Ford, 23 How. (U. 
 
 Jerome, 54 X. Y. 480. . S.) 49.
 
 Form of Notice. 337 
 
 is sufficient 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 equally as effective as a writ- 
 ten 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 sura 
 being mentioned.^ A notice without date or signature, left 
 in the pledgor's office, stating that if a specified amount of 
 the loan was not paid the stock would be " used," does not 
 constitute 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 cir- 
 
 ' Milliken vs. Dehon, 27 N. Y. The Client is precluded from ob- 
 
 364; Cameron vs. Durkheim, 55 id. jectin.ir that the demand for margin 
 
 425; Corbett v.s. Underwood, S3 111. was excessive if at the time of the 
 
 324; Moeller vs. McLagan, 60 id. demand, he did not make this ob- 
 
 317. An examination of a Client jection, but refused to pay on an- 
 
 before trial as to his receipt of no- other ground. Perin vs. Parker, 
 
 tices for margin was allowed in 126 111. 201. 
 Hardy vs. Peters, 30 Hun, 79. -A. verbal notice personally given 
 
 'Cameron vs. Durkheim, 55 N. by the Broker to the customer 
 
 Y. 425. thus: "Let me close you out; let ua 
 
 'Cameron vs. Durkheim, supra; buy that boat load, and we will 
 
 Stenton vs. Jerome, 54 N. Y. 4H0, at take what ready money you can 
 
 486. See also liurkett vs. Taylor, give us, and your note for the bal- 
 
 N. Y. Ct. of .\ppeul8, 86 N. Y. 618; ance," which proposition the cus- 
 
 suh nom., Hur-kitt vs. Taj'lor, 13 tomer declined, is not, lus matter of 
 
 Weekly Dig. 75; Covell vs. Loud, law, sufficient to enable the Hroker 
 
 135 .Ma.s8. 41. to do.se the customer out, without 
 
 * Genet vs. Howland, 15 H.irl) further direction. McCinnis vs. 
 
 fjiVi. \ notice by a pledgee that he Siiiythe. IS .]. Si S. 103; alTM 23 W. 
 
 will Ht;l\ unless an excessive sum is I). 203; 101 N. Y. 6-16; more fOlly 1 
 
 paid, renders the sale invalid. Sii. 23. 
 Pigot VH Ciiblcv. 15 C. IJ. N. S. 701.
 
 388 Stock-brokers and Stock Exchanges. 
 
 cumstances 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 outdoor busi- 
 ness for him, and that he acted as plaintiff's agent in the 
 
 'Cameron vs. Durkheim, and vs. Taylor, 13 W. D. 75. "WTiere it 
 
 cases supra. is agreed that if more margin is re- 
 
 ' Milliken vs. Dehon, 27 N. Y. quired no sale will be made, but the 
 
 364; Cameron vs. Durkheim, supra, Broker will draw on the Client for 
 
 and cases heretofore cited. the amount needed, the Broker has 
 
 ' Granite Bank vs. Ayers, 33 no right to sell without so drawing, 
 
 Mass. 392. even if the Client is without the State 
 
 * See also, to same effect, Bryan and to the Broker's knowledge has 
 
 vs. Baldwin, 7 Lans. (N. Y.) 174; made no provision for the payment 
 
 and cases cited under sub. (c), of the draft. Foote vs. Smith, 136 
 
 post, p. 347; Burkett or Burkitt vs. Mass. 92. 
 Taylor, supra. « 27 N. Y. 364. 
 
 ' 86 N. Y. 618; sub nom., Burkitt
 
 Form of Notice. 339 
 
 transaction in question. On this evidence the question 
 was left to the jury, whether D. was authorized by the 
 plaintiff to receive the notice, 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 demand of payment of 
 the margin personally of the pledgor, and that notice to 
 redeem should have been given personally, 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 princi- 
 pal, and no reasons occur to me why such demand 
 or notice should not bind the principal. It is not a 
 proceeding by which a personal judgment is to be re- 
 covered. A different rule would often be very incon- 
 venient." ^ 
 
 • To same effect, Bank of U. S. vs. Rau, 95 N. Y. 359. And after 
 
 DavLs, 2 Hill (N. Y.), 451; Wade on executors have qualified, they, un- 
 
 Law of Notice (2d ed.), § 672 et der a direction in the will to convert 
 
 seq., and cases cited; Potter vs. stock into money, without limit as 
 
 Thompson, 10 R. I. 1. The agency to time, liuve a tliscretion to wait a 
 
 of a Stock-hroker on margin trans- reii.sonal)le time for tlie performance 
 
 actions bcinn one coupled with an of the duty and (hero is no rii^id and 
 
 interest, his authority to act as arbitrary standaril by wliich to 
 
 agent is not revoked by the death measure such time. The statutory 
 
 of his customer, and he may, acting period allowe<l to close an estate 
 
 in good faith, maintain the exi.stinp may sometimes mark the limit of 
 
 deals, until a representative of the discretion; whih; always a circum- 
 
 cstate shidl be appointed. Hut a.s stance to be considered, it is not nec- 
 
 U) whether circum.stances mi^ht not cssarily conchjsive. In re Weston, 
 
 exist which would justify the Hro- 91 .N. Y. 502. 
 
 ker in flosinu the transactions with- .\s to custom in England to close 
 
 out aw.'iitint; the rjuahfu'ation of the transactions of deceased customer, 
 
 representative, rjuare. Hess vh. see cu«es cited, po.st, p. 1001.
 
 340 Stock-brokers and Stock Exchanges. 
 
 And where several arc jointly bound to do an act upon 
 notice to them, notice to one is suflRcient.' 
 
 Another very important inquiry is as to the length of 
 time which the Broker should give the Client to respond; 
 this cannot 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 peculiar, circumstances of each case. It may be 
 an hour, a day, or a week, depending in each case upon the 
 situation of the parties, the character of the market, or the 
 nature of the stock.^ 
 
 In Burkett vs. Taylor * the court intimated that a notice to 
 a Client demanding additional margins before twelve o'clock 
 of the day on which it is dated would not be a sufficient 
 notice in point of time ; also that a notice such as above 
 should 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, 
 
 ' Mandeville vs. Reed, 13 Ab. Pr. Lane, and the decision of the court 
 
 (N. Y.) 173. was doubtless based upon the im- 
 
 ' Markham vs. .laudon, 41 X. Y. probability of the notice reaching 
 
 235, at p. 243. the Client in sufficient time, if his 
 
 ^ Cameron vs. Durkheim, .55 X. friend were oblijxed, in the Client's 
 
 Y. 425; Milliken as. Dehon, 27 id. absence, to forward the notice to 
 
 364; Stewart vs. Drake, 46 id. 449; another address. See also Genet 
 
 Maryland Fire Ins. Co. vs. Dalrym- vs. Rowland, 45 Barb. 560. 
 
 pie, 25 Md. 242; Willoughby vs. A letter, by the Broker, written 
 
 Comstock, 3 Hill (X. Y.), 389; on the 18th of the month, enclosing 
 
 Br^-an vs. Baldwin, 7 Lans. (X. Y.) an account showing differences 
 
 174; Burkett or Burkitt vs. Taylor, against the Client, and requesting 
 
 supra; Perin vs. Parker, 126111.201; instructions as to closing the ac- 
 
 17 Bradw. 169. count by 11 o'clock of the next day, 
 
 * Supra. In the case cited in the was held to be an unreasonably 
 
 text the Client had requested the short notice. Ellis vs. Pond, L. R. 
 
 Broker to send him notice to the 1 Q. B. (1898) 428, 445. 
 office of S. a friend, at 99 Maiden
 
 Form of Notice. 341 
 
 a Dotice for margins, or in default thereof that the stock 
 would be sold in two days from the date of the demand, was 
 held timely and reasonable.' In that case defendants. Stock- 
 brokers in the city of New York, purchased for plaintiff 
 certain stocks under an agreement that they were to ad- 
 vance the money for the })urchases, and he was to keep with 
 them a satisfactory margin or security. A portion of the 
 stock Avas sold by defendants without ginng plaintiff notice 
 of the time and place of sale. Plaintitf 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 fui'nished, or the balance 
 of his account paid, his stocks would be sold at public auc- 
 tion upon the 30th of April, at 12:30 p.m., at a place des- 
 ignated ; and the stocks were soKI in accoixlance with the 
 notice. Tlie })laintiff was held to have waived his right to 
 recover as for a c<jnversion of tiie stocks sold at the first sale. 
 His default in furnishing a satisfactory mai-gin, or paying 
 the balance of the account, entitled the defendants to enforce 
 their lien by the salV* of the stock ; jind, the parties living in 
 the same city, the notice of the sale was a timely and reason- 
 able one, and the siile legal. It was held, further, that in an 
 action brought to recover damages for the alleged un- 
 autiiorized sale of tlie stock, the answer setting up a counter- 
 claim, it was proper for the referee to state an account 
 
 ' Stewart V- Dr.ik.'. 11. V V JKl.
 
 342 Stock-brokers and Stock Excliaiis^es. 
 
 between the purtios, and to yivc judgment in favor of de- 
 fendants 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 cvdoinary 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 elements 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 latter did not make his margins good the next day, 
 he would sell the cotton, which was done, and there 
 
 '81 N. Y. 25. for notice from them, ;uk1 furtlier 
 'See chapter on "Usages." If tliat if one per cent margin were not 
 the usage of the Exchange justifies sent in by next morning's mail, stop 
 it, there may be a sale for failure to orders to the best of their ability 
 put up margins without any notice, would be entered, it was held that 
 Van Horn vs. Gilbough, 21 Am. the jury was warranted in finding 
 Law Reg. (n. s.) 171. If the parties that this notice of one day was rea- 
 make no agreement as to notice, the sonable, and that it had not been 
 Board of Trade rules apply. If the waived by the Brokers, on receipt 
 latter require notice, such must be next morning, of a letter from the 
 given. If there is neither agree- Client directing stop orders at one 
 ment, nor nile, then the common point from the market, haA'ing tele- 
 law requires reasonable notice, graphed that»they had entered stop 
 Denton vs. Jackson, 15 Chic. Leg. orders at one half point. This 
 News, 309. showed that the Brokers had not 
 '27 N. Y. 361. And in another accepted their customer's proposi 
 case, it appearing that Brokers in tion, but acting in compliance with 
 Philadelphia had notified their their notice had entered .stop orders 
 Client in New York that as they had to the best of their ability. Harris 
 made an exception in his case to vs. Pryor, 18 X. Y. Supp. 128. See 
 their usual requirement of five per also Johnston vs. Miller, 53 S. W. 
 cent margin, he should himself Rep. (Ark.) 1052. 
 watch his account without waiting
 
 Form of Notice. 343 
 
 was no point raised in the case that the notice was too 
 short. 
 
 But a case^ Avhich arose out of a specuktion in gold most 
 strongl}'- illustrates the question of what is a reasonable 
 time in this respect. There the Brokers had made oral de- 
 mands for more margins, to which the Ghent stated, in ef- 
 fect, that he had no money and was ruined, and that the 
 Bi"okers must take care of themselves, whereupon the latter 
 closed the account i)y a settlement. This the Court of Ap- 
 peals held not only to be a waiver on the part of the Client 
 of any more formal demantl, but that it also authorized the 
 Brokers 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 plaintiff, and, according to the usual custom in transact- 
 ing that business, had borrowed the gold to deliver. The}'' 
 had received from the avails of the gold sold, and from the 
 plaintiff, payment for the gold at 140. On the morning of 
 the 23d gold was Cjuoted at 14(i^, and at night it reached 
 143. On that day the defendants called upon the phuntiff 
 for an additional margin of $7481.05, which would secure 
 the gold at 14 1^. The })laintiff was absent from the city on 
 that day, and his clerk delivered some collaterals to the de- 
 fendants, accompanied by a promise to give a check the 
 
 'Cameron vs. Durkheini, .W id. that evpii if tlie latter relation cx- 
 
 42.5 In .Ma.s.sachusetts it Wius held i.sted, the Client, by tellin;^ the Hro- 
 
 that a.s the relation of Hroker, carry- kers he conld pay no more, and re- 
 
 ing stocks on a inar^^in, to a Client, questin;^ them to do the host they 
 
 was a contractual one, and not that could for him, authorized a sale, 
 
 of ple^Jgor and pledgee, the Broker withotit notice, if made in pood 
 
 miyht sell without notice, when the faith. The question of a u»iv.ie of 
 
 Client faile<l to perform his part of the Boston Stock-brokers to sell 
 
 the contract bv m.ikin'.; the necra- without notice wa.s not considered. 
 
 Bary advances upon denuind, and Coveil vs. Loud, 135 Mu.ss. 11.
 
 344 Stock-brokers and Stock Exchanges. 
 
 next morning, which was not done. On the morning of 
 the 24th, at ten o'clock, gold opened at 150, and rose rapidh' 
 until, at about half-past eleven o'clock, it reached 102^, and 
 at a quarter-past twelve the market broke and went as low 
 as 136, and soon after dropped to 133, The effect of the 
 sudden and unprecedented rise in gold, as the evidence 
 shows, was to produce the most intense excitement and con- 
 sternation among those concerned in such transactions. At 
 onetime the plaintiff was deficient in margin more than 
 $80,000, while within an hour afterwards he might have 
 closed the transaction with a balance in his favor of some- 
 thing over $25,000. The interviews between the parties 
 took place during the height of the excitement, when every- 
 thing was uncertain. . Whether gold would depreciate or go 
 to a much hiiiher fi<2-ure, whether the rise would continue 
 during the day or for several days, and whether it would re- 
 main permanent or not, were questions of doubt and appre- 
 hension. When the defendants called for additional mar- 
 gins, as they had a right to, if the plaintiff did say to them 
 in earnest and seriously, as claimed, ' I have no money ; 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 defendants 
 might take any course to save themselves from loss which 
 would be deemed prudent and judicious under the circum- 
 stances in which they were placed. It could scarcely have 
 been more 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.' Thisis the natural import of the language." ^ 
 
 * But compare Burkett vs. Tay- 45 Barb. .560. Where the Client's 
 lor, supra, and Genet vs. Howland, agent, when the Broker took his
 
 Form of Notice. 345 
 
 In another case ^ the phiintiff em[)h)yed 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 })ui'eliase, the defend- 
 ants called on the i)laintiff for a further deposit, and he 
 rephed that it was not convenient that day, but that he 
 would make it the next day. At the same interview he 
 gave them written authority to sell in these terms : " Please 
 sell for my account 200 111. Central Jl. E. at ."il." After 
 receiving this written authority, the defendants sold the 
 stocks the same day at 52. In an action against the defend- 
 ants for making the sale, evidence was adjudged competent, 
 on the part of tlie plaintiff, that it was agreed at the same 
 interview, and before giving the authority to sell, that the 
 defendants should wait until the next day fvv a further 
 deposit, and that if the stock went down to 51 meanwhile 
 (at which point the existing deposit would be exhausted), 
 the defendants might sell the stock. This evidence does 
 not contradict the written power. Aiul such an agreement 
 to delay is not void as being without consideration. 
 
 order for a " short " sale, had agreed quishment of a known riRht; and 
 
 to stay in the oliice and watcli the there mast be botli knowledge of the 
 
 market, and in ra.se it went af:ainst rehnquishniont of the rij.';lit uiul an 
 
 his principal, would direct the liro- intention to relinquish it. A suh- 
 
 ker at once to cover it, and it ap- secjuent demand \<* not necessarily 
 
 peared that two ilcniands for mar- a waiver of a prior one, even if, 
 
 pins were made on tlie day of closing, heca^ise of ciianties in.tlic market, 
 
 the liroker w.'w justified in ciosinfj the amount demanded in tlic suhse- 
 
 without further notice. Ware vs. (juent notice sliouM l)e dilTerent 
 
 Raven, 6 X. Y. St. Rep. 2.'>9. It from that demande<l in the former. 
 
 ha« been made a question hf)W far Porin vs. Parker, 120 111. 201. 
 
 rcpcate<i demands for mar^'in o|)rr- 'Clarke vs. Meigs, 10 Hosw. (N*. 
 
 atcd as a waiver of former rlcni.iiids. Y.) .'{;{7, '.V.VS. Where after margin 
 
 A waiver la the intentional reliii- has been demandetl, the C'!i(>nt givoH
 
 346 Stock-brokers ami Stock Excluinj^es. 
 
 The reasonabloiiess of tlie notice may also depend upon 
 previous dealings between the parties.' 
 
 So where the question was whether reasonable notice to 
 make a deposit had been given by Brokers to their princi- 
 pal, and all the evidence on the subject was that Turnished 
 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 sat- 
 isfactory — the court held that the principal had a right to 
 suppose that the same course of dealing which had oc- 
 curred in the former transaction, and was satisfactory to the 
 Brokers, was expected in the present case ; and that if the 
 Brokers required compliance in any shorter time, they 
 should have given notice accordingly .^ 
 
 his time note, but it is not received ' A Broker may close out without 
 by the Broker under any agreement notice when memorandums sent 
 that such shall be its effect, it does their client in prior transactions so 
 not operate as a deposit of margins stipulated, and there were many 
 nor does it extend the time for such previous • transactions in running 
 deposit until the maturity of the account. Robinson vs. Crawford, 
 note. Gould vs. Tra.sk, 10 N. Y. .52 N. Y. Supp. .500. 
 Supp.619. And it was also held that 'Hanks vs. Drake, 49 Barb. (N. 
 as the Client's action was for conver- Y.) 186. As to whether this case is 
 sion, and not for a balance due on an overruled on this point, see Mark- 
 account, he could not place in issue ham vs. Jaudon, 41 N. Y. 243, per 
 the question of excessive interest Hunt, Ch. J. See also cases cited 
 charged by the Broker, when the under succeeding paragraph. So a 
 interest would not equal the defi- pledgee cannot sell or dispose of 
 ciency in margins. Id. But if the the securities until payment of the 
 note is accepted as cash, the ac- note is demanded and refused 
 count cannot be closed before its (Lewis vs. Varnum, 12 Ab. [N. Y.] 
 maturity. Donald vs. Gardner, 44 Pr. 305). 
 App. Div. 235.
 
 Notice of Sale. 347 
 
 (f.) Notice of Sale for Failun' to Coyyiph/ icith 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 
 ma}' be, and a demand for margins, is not sufficient to au- 
 thorize 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.* 
 
 In respect to the form or contents of the notice to the 
 Client, no uniform rule can be laid down. No peculiar 
 terms or words need be used. It may be oral or in writ- 
 ing ; and it will be sufficient, if it conveys, by plain and 
 
 • Cases cited under preceding sub- ing without notice, see Corbett vs. 
 divisions, Gruman vs. Smith, 81 N. Underwood, 83 111. 324. In this 
 Y. 25; Stewart vs. Drake, 46 id. 449, case it was held that where a com- 
 450 and 453; Wheeler vs. Xewbould, mission merchant contracts for the 
 16 id. 392; Read vs. Lambert, 10 purcha.se of grain for another, to be 
 .\b. (X. Y.) Pr. n. s. 42S; McGinnis delivered at a future time, the prin- 
 vs. Smythe, 1 Sil. 23; 23 W. D. 203; cipal making an advance on the 
 and see, generallj'^, Cortelyou vs. purchase, which is in the merchant's 
 Lansing, 2 Caines (N. Y.) Cas. 200; name, and agrees to keep the mar- 
 Fletcher vs. Dickinson, 89 Mass. 23; gin good up to the time of delivery, 
 Morris Canal and Hanking Co. vs. the relation of pledgor and pledgee 
 Lewi.s, 12 .\. J. Eq. 323; Eldridge will not be created, .so as to require 
 vs. Metrop. Bk. X. Y. Daily Rig. a notice of the time and place of ii 
 Jan. 31, 1887. .\s to when the sale on failure to keep up tiic mar- 
 Hroker is not liable in damages al- gins. 
 
 though the notice may have been So, in England, Stock-brokers 
 
 iiLSufficient, see Quinlan vs. Ray- whohave with their own money pur- 
 
 mond, X. Y. Daily Reg. July 29, chased stock for a principal are nu- 
 
 1880; afT'd on other ground.s, 3 St. thorized to close a transaction with- 
 
 Rep. 573. The question of want of out notice when it isiipparont that 
 
 notice of the time and place of sale their Client will be imable to re- 
 
 caimot be raised for the first time on .spond to any lo.ss, by roa.son of 
 
 apjMial. Knickerl>ocker vs. Could, bankniptcy, death, or insolvoncy 
 
 1 15 X. Y. 533. See also citses cifcd f»f the latter fLacey vs. Ilill (Scrim- 
 
 under succee<ling parajrrapli. .\Un geo\ir's Claim], L. R. K Ch. .Al)|). 
 
 Srhouler on Railm. ^2(1 e<l.) 5 229. 921; see also Colket vs. EHih, 10 
 
 When tisage jastifie** Hroker in sell- I'liila. 375; s. c. 32 Leg. Int. 82).
 
 348 Stock-brokers and Stock Exchauges. 
 
 simple language, the nature of tlie proj)erty to be sold, and 
 the time and place of such sale. The notice should state 
 the time and 2>face of sale.' In respect to the iin)e of sale, 
 the general principle is that it should be reasondble. What 
 constitutes a reasonable time depends upon the peculiar cir- 
 cumstances of each case, and no uniform rule can be laid 
 down. The nature of the stock, the residence of the par- 
 ties, and all the other elements and characteristics of the 
 particular transaction control the question.'- It is not nec- 
 essary 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 decided several times that, in case of a 
 
 'Burkett vs. Taylor, 86 X. Y. ^ Stewart vs. Drake, 46 X. Y. 449; 
 
 618, sub nom. Burkitt vs. Taylor, 13 Gruman vs. Smith, 81 id. 25; Came- 
 
 W. D. 75; Lewis vs. Graham, 4 Ab. ron vs. Durkheun, 55 id. 425; Sten- 
 
 (X. Y.) Pr. 106; Castello vs. City ton vs. Jerome, 54 id. 480, at 486. 
 
 Bank, 1 X'. Y. Leg. Obs. 25; Mark- It was intimated in a recent case 
 
 ham vs. Jaudon, 41 X'. Y. 235, at that a notice sent by special mes- 
 
 243; Edwards on Bailm. (3d ed.) senger on the evening of the day 
 
 § 286 and notes 3, 4 and 5; Diiler vs. pre\ious to the sale, and after tl^e 
 
 Brubaker, 52 Pa. St. 498; Conyng- closing of the Exchange, from the 
 
 ham'sApp.,57id.474;Gay vs. Moss, Broker's office at 44 Broadway to 
 
 34 Cal. 125; Robinson vs. Hurley, the Reform Club (the address given 
 
 11 Iowa, 410. by the Client) would have been 
 
 ' See this cjuestion considered in sufficient as a notification to the 
 
 the preceding subdivision (6.). Mor- Client that his margins were ex- 
 
 ris Canal Co. vs. Lewis, 12 X. J. hausted, and hLs stock would be 
 
 Eq. 323; Diiler vs. Brubaker, supra; sold unless margin was kept up, if 
 
 Conyngham's App., supra; Gay vs. the inference coidd fairly be drawn 
 
 Moss, supra; Little vs. Barker, that the Client actually received the 
 
 Hoffm. Ch. 487; Genet vs. How- notice, the latter having sworn that 
 
 land, 45 Barb. (X. Y.) .560; s. c. 30 he did not receive it. WolfT vs. 
 
 How. Pr. 360; Lewis vs. Graham, 4 Lockwood, 75 X'. Y. Supp. 605, 
 
 Ab. (X. Y.) Pr. 106; Ogden vs. 608. 
 Lathrop, 3 J. & S. (X. Y.) 73; rev'd 
 65 X. Y. 158.
 
 Notice of Sale. 349 
 
 pledge, there must be persotial 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 
 rights of the latter.* But notice to an authorized agent is 
 sufficient.^ And where it is impossible to give notice by 
 reason of the acts of the pledgor, a sale may be made with- 
 out notice.^ And in some instances a sale may be made 
 after publication of notice thereof in a newspaper.'' 
 
 The case of "Wiieeler vs. Newbould/ although not one 
 arising out of any stock transaction, is frequently met with 
 in stock cases up«m 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 lield 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 nevertiieless his duty to give 
 to the plaintiff personal notice of the time and place of the 
 sale. . . . ' And ])ersonal notice to the pledgor to redeem and 
 of the intended sale must be given as well in the one case 
 
 ' Steams vs. Marsh, 4 Dcuio, 227; ' Potter vs. Thompson, 10 R. I. 1. 
 Garlick v.s. James, 12 Johns. 110; 'City IJank of Racine vs. Bab- 
 Story's Eq. Jur. (13th ed.) § 1(K)S; cook, supra. 
 
 StronR vs. Nat'l Bank'g Ass'n, 45 ♦Stokeu vs. Frazier, 72 111. 428. 
 
 N. Y. 718; Bryan vs. Baldwin, 7 See also cases cited under preceding 
 
 \j&x\s. (N. Y.) 171; Donohoe vs. stjhchvision (/;.). As tf) how far tliis 
 
 Gamble, 38 Cal. 340; Pii:f»t vs. (Nil)- rule m;ty l»e affected l»y waiver, see 
 
 ley, 15 C. B. (n. s.) 7f»l ; City Bank post, pp. 3r>3-G. 
 
 of Racine vs. Babco<-k, 1 Holmes ' H» .N V. ;W2. 
 (C.C. U.S.), 180.
 
 360 Stock-brokers jiiid Stock Kxclianges. 
 
 as ill 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 resorted to. Before giving notice, the pledgee has no 
 right to sell the pledge ; and if he do, the pledgor may re- 
 cover the value of it from liiiu without tendering the debt.' " 
 After a pledgee, however, has called upon 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 Supreme 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 \vho 
 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. Richardson,* a cred- 
 itor holding as collateral security certain bank shares 
 requested the debtor to pay the debt, and notified him that 
 
 ' Sterns vs. Marsh, 4 Denio (X. customer. Perin vs. Parker, 25 
 
 Y.), 227. 111. App. 465; a£f'd 126 111. 201. 
 
 ' Esser vs. Linderman, 71 Pa. St. ' O'Neill vs. WTaigham, 87 Pa. St. 
 
 76. It was intimated in the case of 394; s. c. 7 Reporter, 245; Robinson 
 
 a sale upon margin of grain for vs. Hurley, 11 Iowa, 410; Granite 
 
 future deliver>- that where addi- Bank vs. Richardson, 47 Mass. 407; 
 
 tional margin is peremptorily re- Howard vs. Brigham, 98 id. 133; 
 
 fused, it is the duty of the Broker Williamson vs. McClure, 37 Pa. St. 
 
 upon settled principles of law to buy 402; Schouler on Bailm. §§ 244, 245. 
 
 in the grain with due diligence so as * Supra, 
 to limit the loss to himself and his
 
 Notice of Sale. 351 
 
 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 ac- 
 tion to recover the money due him, and it was held that his 
 failure to sell the shares constituted no defence. Thei'c 
 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 remedy 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 omis- 
 sion to sell.* "Where a pledgee, however, has acquired the 
 right to sell for his own protection, either by a demand 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 pur- 
 chaser that unless he places in his hands a deposit to cover 
 a decline in the price of the grain he will sell it, and after- 
 wards does sell it, and notili<*s tlie buyer of the fact, he there- 
 by rescinds the contract, and cannot subsequently renew it 
 without the concurrence of the purchaser.' 
 
 Where a pledgor of securities l^ecomes a bankrupt after 
 a pledge and before the redemption th<M*eof, it has been held 
 that such fact does not in anywise alfcct the rights of the 
 pledgee to sell and transfer tiie scciirilics upon the bank- 
 rupt's default. The Bankrupt .\ct- docs m<.l take away any 
 
 ' Howard vs. Brinliaiii, supra; ' MarCicltl vh. (loodliuc, '.\ Com- 
 «J'.\cill V8. WhiKliuiii, s\i|ira Htock (N. V.), (i'J 7.1 
 
 ' LiuHS«Mi VH. .Mitchell, II 111 lUI.
 
 352 Stock-brokers and Slock Kxcliaiiges. 
 
 right secured to tlie pledgee by his contract,' nor is leave of 
 the banki'uptcy court necessaiy to sell tlie stock pleilged.'^ 
 But tlie mere fact that the Broker sells, without due notice 
 to the Client of the time and place of sale, and by such act 
 commits a conversion, does not preclude him fi-om bringing 
 an action against his Client to recover the debt arising out 
 of the advance made by the Broker to purchase 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 demand 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, under such circumstances the 
 Client is entitled to recover, under a counterclaim, the 
 amount deposited by him with the Broker to cover mar- 
 gins.^ If a colorable sale has been made by the Broker, 
 and subsequently rescinded, and he regains possession of 
 the securities, he cannot make a second sale without notify- 
 ing his Client.* 
 
 ' Jerome vs. McCarter, 94 U. S. did so, but, finding the price rapidly 
 
 734. Soing down, sold it for his own pro- 
 
 ^ In re Grinnell, 9 Xat'l Bankr. tection; and, on the refusal of his 
 
 Reg. 137. princijjal to ratify the sale, replaced 
 
 If a Broker makes a general it, and tendered the elevator re- 
 assignment or becomes bankrupt, a ceipts. The principal refused to 
 demand by a customer, followed by receive them, and the Broker sold 
 tender, is not necessary. And tlie the corn. Both sales were made at 
 same rule applies to banlcruptcy a loss, and the Broker sued his prin- 
 followed by a general assignment, cipal for damages. Held, that in 
 In re Swift, 112 Fed. Rep. 315. estimating damages the first sale 
 
 ^ Heath vs. Mahoney, 24 Hun was immaterial (Gregory vs. Wen- 
 
 (N. Y.), 341; s. c. reported more dell, 40 Mich. 432). 
 fully, 12 X. Y. Weekly Dig. 404. A * Leahy vs. Lobdell, 90 Fed. Rep. 
 
 Broker commissioned to buv corn 665.
 
 Notice of Sale. 
 
 353 
 
 This right to notice of sale, however, may be waived, 
 either expressly' or by implication; or, where there has 
 been no notice, or an insufficient notice^ the proceedings 
 thereunder may be conhrmed or ratilied by the acts of the 
 pledgor.^ 
 
 ' A bona fide sub-pledgee for 
 value may sell the securities at pub- 
 lic or private sale without notice, 
 when the contract of sub-pledjie 
 expressly so provides, and this riglit 
 Ls not affected by notice from the 
 orisinal pledgor, unless the latter 
 pays or tenders the amount of the 
 sub-pledge. Thompson vs. Bank, 
 113 X. Y. 32S. See also Williams 
 vs. Trust Co., 133 X. Y. 660. But 
 if there is no such special agreement 
 to sell vs-ithout notice, the sub- 
 pletlgee Is guilty of conversion when 
 he sells without demand of the sul)- 
 pledgor of payment, and without 
 notice. Smith vs. Savin, 141 X. Y. 
 328. If the contract of pledge au- 
 thorizes a private sale "without ad- 
 vertisement or notice, which are 
 hereby expressly waived," notice 
 of the sale need not be given either 
 to the pledgor or the public. A 
 mere authorization of a private sale 
 Ls an irnplie<l waiver of the notice. 
 Dullniu' vs. Weekes, 40 S. W. Rep. 
 CTex.) 178. 
 
 Although notice is dispcn-sed 
 with, Stock-brokers mu«t however 
 make the sale in good faith and in 
 the exercLse of a sound judgment 
 when they consider the state of 
 the market warrants. Wick.s vs. 
 Hatch. 62 X. Y. .Wr,. 
 
 ' Hparhawk vs. DrexH, 12 .Vat'l 
 Bankr. Reg. 450; fJniman vs 
 Smith. 81 X Y 2.-.: n-v'- 12 J. S: S. 
 0'> 
 
 389; Stenton vs. Jerome, 54 X. Y. 
 480; Milliken vs. Dehon, 27 id. 364; 
 ChUd vs. Hugg, 41 Cal. 519; Bryson 
 vs. Rayner, 25 Md. 424; Hyatt vs. 
 Argenti, 3 Cal. 151; Loomis vs. 
 Stave, 72 111. 623; Md. Fire Ins. Co. 
 vs. Dalrymple, 25 Md. 242-264; 
 Colket vs. Ellis, 10 Phila. 375; s. c. 
 32 Leg. Int. 82; Baltimore Marine 
 Ins. Co. vs. Dalrymple, 25 Md. 260; 
 Hamilton vs. State Bank, 22 la. 
 300; Clark vs. Bouvain, 20 La. Ann. 
 70; Searing vs. Butler, 69 111. 575. 
 But see Kenfield vs. Latham, 2 Cal. 
 Leg. Rec. 235. Where it appears 
 from the Client's own admission that 
 he never intended to pay for and 
 take up the stock, he is estopped 
 from complaining of want of notice 
 of sale, or any other informality in 
 connection with it. The object of 
 the notice Ls to enable a part}' to 
 come forward, pay up and prevent 
 the sacrifice of the i)leilge, but when 
 he says he would not have availed 
 him.self of such a notice, nor have 
 interfered to protect the stock by 
 paying the amount owed upon it, 
 what advantage would it have been 
 to him to have notice, "or what harm 
 could come from the lack of it. 
 Vanhorn vs. Gilbough, 21 Am. L. 
 H.-g (n. h) 171; 10 W. X. C. 347. 
 A s.ilr' of phnlircfl securities may 
 be iii.kIc witiiout notice or dcm.'ind 
 when (\) the parties have so cx- 
 |)rcHsly agrewl, or (2) where the debt
 
 354 Stock-brokers and Stock Exchanges. 
 
 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 bahince of account to the 
 Brokers. There the B rokers had committed a conversion by 
 an unauthorized sale of stocks, without a previous demand of 
 marcfin. This wronf!:ful sale was made on the 11th of Janu- 
 ary, 18G6, and a notification of it sent to the Client. On the 
 14th 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 for the unlaAvf ul con- 
 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 consti- 
 tute an account stated between the parties ; and that her 
 subsequent payment of the balance for the purpose of ob- 
 taining her bonds was not voluntary, but compulsory, con- 
 is to be paid on a specified day. the maturity of the note. Id. If 
 Chouteau vs. Allen, 70 Mo. 290. a pledgee assigns a security which is 
 In which case it was also held that not negotiable, his assignee takes no 
 when a note (the payment of which greater title than he himself pos- 
 is secured by a pledge of bonds) is sesses. Id. 
 sub-pledged to secure acceptances, * 54 N. Y. 480. 
 ^ sale of the bonds mav be made at
 
 Notice of Sale. 355 
 
 stituting 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 ad- 
 raits the correctness of the same, approves of the sale, and 
 promises to pay the balance claimed — these facts are suf- 
 ficient to show a ratification of the illegal sale, and the 
 court will not disturb the same.' 
 
 And 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 
 
 ' To same effect, see Clarke vs. either as a waiver of the right to 
 
 Mei^, 10 Bosw. (>«. Y.) 337; s. c. 22 notice of .sale, or as a ratification of 
 
 How. Pr. 340. As to the effect of the method of sale adopted, and so 
 
 tender, .see Talma^^e vs. Third Na- does not require that the proof 
 
 tional Bk , 91 N'. Y. 531 at .535. .should reach to the conclusiveness 
 
 'Child vs. Hugg, 41 Cal. 519; of an account stated. Without an 
 
 Gould vs. Trask, 10 \. Y. Supp. actual agreement upon a precise 
 
 619. Even if after a wrongful sale, balance and a promise to pay it, 
 
 the Broker presents an account to there may still l>e such a promi.se on 
 
 the Client showing surh sale and a the part of the Client a.s nece.s.sjirily 
 
 resultant lf>ss, and the Client with- recoi;ni/.os and ratifies the .sales 
 
 out (jhjection to the tnaniuT of sale made and t!ie met hex! whieli the 
 
 promi.ses to settle the arcouiit, this Broker hii-s pursued. Gillett vs. 
 
 promi.se is fonrlusive upon liim, and Whiting, 141 N. Y 71, 73; s c. 120 
 
 the Broker may recover the loss \ Y. 402, U)Ct. .See also u[)()n this 
 
 The promi/»e mav Ix- considered point, p. 212.
 
 356 Stock-brokers and Stock Exchanges. 
 
 without dcinund was guilty of a conversion of the stock, 
 and was liable in damages.' 
 
 AVhere, 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."^ 
 
 (d.) Place of Sale. 
 
 The preliminary steps liaving been properly taken, the 
 next inquiry is as to the j)laee 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 j^lace where 
 the purchases or sales are to be made is at the Stock Ex- 
 change, unless the Broker is otherwise directed. That is 
 the place where transactions of this description are custom- 
 arily made, and, by employing a Stock-broker, the Client 
 impliedly authorizes him to perform the business in the 
 manner and at the place established 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 instruc- 
 tions by buying or selling in any other manner or place than 
 that which usage justifies.^ 
 
 J>ut what is more particularly intended in this connection 
 is to ascertain the proper place for buying or selling the 
 
 ' Kenfield vs. Latham, supra. failure, after notice, to put up mar- 
 
 ^ Sparhawk v.s. Drexel, 12 Xat'l gin, rea-sonable notice of the time 
 
 Bankr. Reg. 450, at 471 and 472; and place of sale mu.st nevertheless 
 
 Genet vs. Rowland, 4.5 Barb. (N. be given. Rothschild vs. Allen, 86- 
 
 Y.) 560; Covell vs. Loud, 135 Mass. N. Y. Supp. 42. 
 
 41. See also Rogers vs. Wiley, 131 ^ Rosenstock vs. Tormey, 32 Md. 
 
 N. Y. 527; Fitzgerald vs. Blocher, 169. 
 
 32 .\rk. 742; and cases just cited, ^ Id.; see also title "Usages." 
 
 ante, p. 355. Even though there is
 
 Place of Sale. 357 
 
 stocks where the Chent is in default of margins after 
 proper demand 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 ac- 
 count, or to authorize the Broker to do so. 
 
 In the first place, where the Client is " short '' of stocks, 
 and by a rise in the price his mai'gin 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 purchase at the Exchange, which is always open, 
 and where stocks may be bought at any time during the 
 regular hours of business. It would be absurdly incongru- 
 ous to hold that where, 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 j)utup the kind and amount of stocks which he de- 
 sired 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 E.xchange.' 
 
 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 uj)on failure of the latter to supply proper 
 margins to inet^t the fluctuations of the markci he may, 
 after proper notice to th<i Client, as we have seen, sell the 
 same. Where? Is the answer to b<! detei-inined in piM'cisely 
 
 ' .S«'o iiutlifiriti«»s citfil unt*', uii<I«t (-sixfciHlly KikjwUoii vh. I'itch, .'ili 
 i VII., upfK-Ttaiiiin;; to u hliort Hule, .%'. Y. 2H8.
 
 368 Stock-brokers and Stock Kxchauj^es. 
 
 the same iiuiimer as if the case were one ol" pure pledge, as, 
 for instance, where money is advanced upon the security of 
 personal })roperty and the pledgor refuses to redeem it? 
 Or, will the courts take into consideration the inipor-tant 
 element of usage, and hold that a sale made at the Ex- 
 change is binding upon the Client? The general principle 
 is, that the pledgee of stocks must sell the same at public 
 auction.' 
 
 The rule confining the place of sale to a ])ublic 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 actually made.^ And, in the absence of 
 express agreement authorizing a different mode, there are 
 cases that undoubtedly 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 beinff allowed to enter the room but members.* 
 
 'Milliken vs. Dehon, 27 N. Y. 392; Story on Bailm. (9th ed.) 
 
 364; Wheeler vs. Newbould, 16 id. § 310, note 3; but compare Dykers 
 
 392; Edwards on Bailm. (3d ed.) vs. Allen, 7 Hill, 497; Castello vs. 
 
 § 2S3; Schouler on Bailm. (2d ed.) City Bank, 1 N. Y. Leg. Obs. 25, and 
 
 § 230; Tyler on Usury, etc., 585 et other cases cited. Edwards on 
 
 seq. Bailm. (3d ed.) § 283, and cases 
 
 ^ Id. cited in notes 2 and 3. 
 
 ^ Brown vs. Ward, 3 Duer, 660; ^ Id; Wood vs. Hamilton, cited in 
 
 WTieeler vs. Xewbould, 16 X. Y. Castello vs. City Bank, supra; Ran-
 
 Place of Sale. 359 
 
 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 upon margins, save in the case of Brass vs. "Worth, 
 In that case, ho\ve\'er, the Brokers had sold the Client's 
 stock without any notice to him that his margins had be- 
 come exhausted, and tlie court said, " The defendants claim 
 the right to sell the property pledged without notice to or 
 knowledge of the pledgor the mouient prices sank so that 
 collaterals deposited 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, 
 holding that a sale at the Stock Exchange, in the absence of 
 
 kin vs. McCullough, 12 Barb. (N. procuring buyers of his stock, en- 
 
 Y.) 103; Brass vs. Worth, 40 id. 64S. hance the price and give him the 
 
 But where the limit of a stop order right to redeem the pledge at any 
 
 has been reached, the Broker may moment before the sale should be 
 
 sell the stocks carried in any usual actually made," while in the second 
 
 and ordinary way whether at the case, there is no necessity for notice 
 
 Stock E.vchange or at private sale, of place of sale to the Client, nor for 
 
 Porter vs. Wormscr, 94 \. Y. 431. him to be present in order to get an 
 
 The difference between the case of adequate price for his stock. He 
 
 a compulsory sale by a Broker on has him.solf fi.xcd the price of sale in 
 
 default of his Client to furnish mar- his stop order, and the Broker is at 
 
 gin, where the sale mast be liv pub- liberty to follow any usual and ordi- 
 
 lic auction, and cases such as Porter nary method of selling so long as he 
 
 vs. Wormser, \» this: In the first obtains that price, 
 
 case, as stated in the text Cp. 3.58), There is in effect a waiver by the 
 
 "the theory of the law Ls that the Client of notice of place of sale, and 
 
 Hale should be inmle at some pla<* an authority to the liroker to ob- 
 
 wherc all the parties interested iimy tain a certain price Tliis price l>c- 
 
 luive an opportunity t(» attend and ing obtaine<l it is inunatcriul by 
 
 see that it is fairly roiiductcd; that what method of sale it was done, 
 the pledgor may exert himjielf in
 
 360 Stoek-brokors aiul Stock Kxchaii^es. 
 
 express agreement, is invalid, will, \v(i think, when carefully 
 examined, be found fault}' and untenable at the present day. 
 In the lirst place, a sale at the Stock Exchange is not in any 
 broad sense made lyrivatehj ; it is in almost every respect a 
 public sale. While it is true that the Stock Exchange is, to 
 a certain extent, a private organization, from which all per- 
 sons are sedulously 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 Bro- 
 kers of their ow^n choosing, who will carry out the wishes 
 of their principals. 
 
 In Sparhawk vs. Drexel ^ Cadwalader, J., in overruling 
 an objection to a sale made at the Stock Exchange, says : 
 "As to the mode, 1 am not aware of any reason that the 
 sales should have been by auction. On the contrary, I 
 think that, considering the nature of the securities, this 
 •would not have been an advantageous mode of disposing of 
 them, if there was a fair market for them at the Stock Ex- 
 change, or Brokers' Board, -where the ruling prices ordi- 
 narily 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 
 
 1 12 Nat'l Bankr. Reg. 450, at 470.
 
 Place of Sale. 361 
 
 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 transac- 
 tion in stocks is different from that of an ordinary pledge. 
 The parties to a stock speculation intend that the trans- 
 action shall be carried on and consummated at the Stock 
 Exchange ; indeed, there is no other place where such a 
 speculation can be engaged in. It is, therefore, but reason- 
 able that the Broker should be allowed, after giving all 
 necessary preliminary notices, to close the transaction by a 
 sale of the stocks at the Stock Exchange, and the introduc- 
 tion of the usages of Stock-brokers might go very far to- 
 wards effecting this result. 
 
 This was the view adopted by the Court of Appeals of 
 Maryland as earl v as ISGG,' after a review of the Xew York 
 cases holding to the contrary. The court said : "... Con- 
 sidering the requii-ements of the law, and the reason and na- 
 ture 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 Bnjkers. There is the Stock Market — the mart to which 
 vendors and purchasers resort, by their agents, to buy and 
 sell st<x;k, where com])etition among bidders is most apt to 
 be found. Such sales are public; ; ;uul unk'ss there be, in 
 the particular case, some ground for inipoaching their fair- 
 ness, we are of opinion they are rL'asonal)Ie and ouglit to bo 
 supported.'' And this doctrine was afterwards expressly 
 confirmed by the same court.'' 
 
 ' Md. Fire Ins. Co. vs. Dulrymple, Andrews, J., in Sistaro vs. Best, S8 
 
 2T) M<1 2l2-2Gr). N. Y. .W J, in reH|)e<t to h side at tlie 
 
 ' lUi^'WHiwV. vs. Tonnoy, ."12 .Md. New York Stock IOxclian;;<'. And 
 
 169. Similar languaj^c was u-scd by tlie .New York Court of Appeals in
 
 B62 
 
 Stock-brokers and Stock Exchanges. 
 
 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 prom})tly 
 dissent, or his silence will be understood as an acquiescence. 
 In Djkers vs. Allen,^ however, the Supreme Court of New 
 York held that Avhere 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 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 same up secretly. 
 
 holding that, in ascertaining the 
 "actual" value of stock, for the 
 purposes of taxation, the commis- 
 sioners of assessment might proba- 
 bly have done injustice to the 
 relator, in taking the book value in- 
 stead of the market value of the 
 stock, said (People vs. Coleman, 107 
 N. Y. 5-14) : "So the market value of 
 the shares of capital stock may 
 sometimes be above and sometimes 
 below the actual value. Such value 
 may be greatly enhanced or de- 
 pressed for speculative purposes 
 without any change in the actual 
 value. But the market value of 
 any stock which is listed at the 
 Stock Exchange in New York, and 
 largely dealt in from da}' to da}' for 
 a series of months will usually fur- 
 nish the best measure of value for 
 all purposes. The competition of 
 sellers and buyers, most of them 
 careful and vigilant to take account 
 of ever}'thing affecting value of 
 stock in which they deal, and each 
 mindful of his own interests, and 
 
 seeking for some personal gain and 
 advantage, will almost universally, 
 if time sufficient be taken, furnish 
 the true measure of the actual value 
 of the stock." The court, however, 
 added: "But there is no law which 
 compels assessors to resort to mar- 
 ket value to find the actual value of 
 capital stock. That standard is 
 sometimes illusory and untrust- 
 worthy. The buyers or sellers may 
 be too few, and the transactions not 
 sufficiently numerous to furnish a 
 real test of value." See Walter vs. 
 King, supra, p. 380, cited in Brod- 
 hurst on "Stock Exchange Law " 
 p. 215; see also in this connection 
 Schepelervs. Eisner, 3 Daly (N. Y.), 
 11, which, however, is in effect 
 overruled by Markham vs. Jaudon, 
 41 X. Y. 235; and the question was 
 raised, but not decided, in Child vs. 
 Hugg, 41 Cal. 519; Laws of X. Y. of 
 1891, c. .34. 
 
 ' Willoughby vs. Com.stock, 3 Hill 
 (X. Y.), .389. 
 
 2 7 Hill (X. Y.), 497.
 
 Place of Sale. 363 
 
 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 \Yhicb 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 offered 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 understanding between them and 
 the purchasers." 
 
 Altogether, the laAv upon this subject is in a very unsatis- 
 factory condition ; and if the remarks just quoted are ac- 
 cepted as correct, it is rendered even more uncertain. But 
 ■we believe that the rule is otherwise, and that an authority 
 to sell at the Board of Brokers includes the power to sell in 
 accordance with the ways and manner in which sales are 
 ordinarily conducted at that place. 
 
 A statement preceding the sale, that the stocks were 
 being sold to close a transaction, as indicated above, would 
 not enhance the price of the same, and would be of no con- 
 ceivaljle benefit to the pledgor.' Upon the whole, we are 
 inclined to think that, taking into consideration the char- 
 acter of a sj^eculative transacti(ni in securities on margin, 
 the courts would uphold a sale at the Stock Exchange for 
 the reasons licretoforc advanced. AVhere several different 
 kinds of st(jck are pledged as security for ditfercnt loans, a 
 judgment directing a sale in gross of all the stocks is erro- 
 neous. Unless the several stocks are pledged as security for 
 
 ' See, as generally siistaiiiiiiK the N. Y. .Wr); Of^deu vh. I-jilhrop, M id. 
 above viewn, WickH vh. IIuUli, 02 158; Quincey vs. White, 03 id. 370.
 
 3G4 Stock-brokers and Stock Exchanges. 
 
 the same debt, it is not proper to apply the jjroceeds 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 
 manner and place where the sale should be made. This 
 waiver, moreover, need not be expressly entered into by 
 the pledgor, but it may be inferred by the court from the 
 nature of the transaction, or the surrounding circumstances 
 thereof.^ And the pledgor may waive his rights to ol)ject 
 to the informality of the proceedings of the sale of the 
 pledged article by conduct on his part amounting to a ratifi- 
 cation.^ 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 opportunity 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 inferred, 
 
 »Mahoney vs. Caperton, 1.5 Cal. Ellis, 10 Phila. 375; s. c. 32 Leg. 
 
 313. Int. 82. 
 
 ^ See cases heretofore cited, p. ^ Hamilton vs. State Bank, 22 
 
 353. Brj-son vs. Rayner, 25 Md. Iowa, 306; Child vs. Hiisj-;, 41 Cal. 
 
 424; Hyatt vs. Argenti, 3 Cal. 151; 519; Clark vs. Bouvain, 20 La. .\nn. 
 
 Loomis vs. Stave, 72 111. 623; Md. 70. 
 
 Fire Ins. Co. vs. Dalrymple, 25 Md. * Brass vs. Worth, 40 Barb. (X. 
 
 242, 264; Baltimore Marine Ins. Co. Y.) 648. 
 
 vs. Dalrv-mple, id. 269; Colket vs. ^Clarke vs. Meigs, 10 Bosw. (N. 
 
 Y.) 338.
 
 Sale or Purchase. 365 
 
 and the law will consider it as equivalent to an express 
 ratification.' 
 
 {p.) Broker Cannot Sell or Purehase. 
 
 The general rule of law which governs the relation of 
 principal and agent is aj^plicable 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 trustand confidence, many 
 frauds and undue advantages \V()uld creep in if the law 
 sanctioned 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- 
 
 ' Searing vs. Butler, 69 111. 575. repudiated. Peters vs. Edwards, 
 
 As to what will con-stitute an admis- 95 X. Y. 659 (no opinion), aff'g 
 
 sion and ratification of the acts of judgment of the General Term of 
 
 a Stock-broker in a series of stock the court of Common Pleas in the 
 
 speculations, see Saltus vs. Genin, 3 same case, sub nom., Baj'ard vs. 
 
 Bosw. CS. Y.) 250. The failure to Edwards, on report of a referee, not 
 
 object to the sale for nearly a month reported. The report of the ref- 
 
 after prompt notice that the stock eree, and the opinion of Van Brunt 
 
 had been sold, amounted to a and \'an Iloeseii, JJ., at General 
 
 ratification. Vanhorn vs. Gil- Term will be found in "Cases in the 
 
 bough, Jl .\m. Law Reg. N. S. Court of Appeals," July, IHS'.i, lo 
 
 171; 10 \V. N.C. 347. See supra, July, ISSl, vol. 703. As to what 
 
 p. 351, on this question of waiver, acts of the customer will constitute 
 
 Although Brokers have been guilty a waiver of any defect in the notice, 
 
 of conversion by a sale, without no- see Quinlan vs. Raymond, X. Y. 
 
 tice.of Hccuriticw carried on margin, Daily Rtg. July 29, 1KS(>, in which 
 
 the fact that the Client Kubse- cjise it w.ls also hold that although 
 
 fjuently promi.>*es that the Brokers the notice* wjus defective, the Bro- 
 
 Hhall not lo.sc anything, and de- kers migiit n'cover, unless their 
 
 po«its stocks with them to secure claims miirht be offset by any dain- 
 
 his indcbtcilncss, is a substantial as;e the cu.stomer may have sufTered. 
 
 ratification of the sale, and such AfT'd on other ground.^, 3 St. Bep. 
 
 ratification cannot be afterwards 573. But actual knowledge of
 
 366 
 
 Stock-brokers and Stock Exchanges. 
 
 spective of any question of intentional fraud or actual in- 
 jury.' 
 
 The law rejects indiscrirainately all transactions, whether 
 purchases from or sales to the agent, and whether there is 
 anv evidence or intention of fraud or not.^ The mere fact 
 
 principal must lie shown to cstat>- 
 lish ratification. Harris vs. Turn- 
 bridge, 83 N. Y. 92. 
 
 > Conkey vs. Bond, 36 X. Y. 427; 
 Taussig vs. Hart, 49 id. 301; also 
 s. c. 58 id. 425; Marvin vs. Weeks, 
 62 Barb. 468; Smith vs. N. Y. Stock 
 and P. Clearing House, 25 N. Y. 
 Supp. 261 ; Porter vs. Woodruff, 36 
 N. J. Eq. 174; Porter vs. Wormser, 
 94 N. Y. 431, 447; Day vs. Jame- 
 son, 33 N. Y. St. Rep. 375; Man- 
 ville vs. Lawton, 19 N. Y. Supp. 
 587; Prout vs. Chisolm, 21 App. 
 Div. 57; Pickering vs. Demeritt, 
 100 Mass. 416; Day vs. Holmes, 103 
 id. 306; Quincey vs. White, 63 \. Y. 
 370; Robinson vs. MoUett, L. R. 7 
 H. L. Eng. & I. App. Cas. 802; 
 Brookman vs. Rothschild, 3 Sim. 
 153, 224; s. c. H. L. 5 Bligh (n. s.), 
 165; 2 Dow. & CI. 188; Crull vs. 
 Dodson, Macn. Sel. Cas. 114; Marye 
 vs. Strouse, 5 Fed. Rep. 483; Gillett 
 vs. Peppercorne, 3 Beav. 78; Kim- 
 ber vs. Barber, L. R. 8 Ch. App. .56; 
 Bentley vs. Craven, 18 Beav. 76; 
 Trevclyan vs. Charter, 9 id. 140; 
 Dunne vs. English, L. K. IS Ivj. 
 524; Maturin vs. Tredennick, 9 L. 
 T. 82; s. c. 10 L. T. 331 : Commonw. 
 vs. Cooper, 15 Am. Law Rep. 360. 
 Nor can the Broker sell to a firm of 
 wliich he is a member (Martin vs. 
 Moulton, 8 X. H. .504); 4th Kent's 
 Comm. (7th ed.) 475. See also id. 
 14th ed. N'or may a Broker buy 
 
 from his partner to .sell to his Client. 
 Connor vs. Black, 119 Mo. 126; 24 
 S. W. Rep. 1S4. And authority to 
 sell to any person whatsoever does 
 not authorize the Broker to become 
 the purchaser himself. Hamilton 
 vs. Schaack, 16 W. D. (X. Y.) 423. 
 See also Butcher vs. Krauth, 14 
 Bush (Ky.), 713; Worn vs. Fry, 84 
 Cal. 256. But a corporation which 
 does brokerage business, may le- 
 gally sell to another corporation, 
 some of the officers of which are 
 officers of the former corporation, 
 in the absence of evidence that the 
 customer was prejudiced. Van 
 Dusen-Harrington Co. vs. Junge- 
 blat, 77 N. W. 270. If, however, 
 an agent is given an interest in a 
 contract which he is authorized to 
 make, such a contract is voidable at 
 the election of the principal. Smith 
 vs. Seattle, L. S. & E. Ry. Co., 72 
 Hun, 202. 
 
 ^ The rule is intended to be pre- 
 ventive of the possibilit}' of wrong, 
 as well as remedial of actual wrong 
 done, and is rigidly enforced. It 
 involves a question of public policy 
 and is applied, although perfect good 
 faith was intended and no loss has 
 been sustained. Mayo vs. Knowl- 
 ton, 16 Daly, 245. But if Stock-bro- 
 kers deal in securities on their own 
 account they may sell such bonds as 
 vendors to their Clients as vendees. 
 The relations between them is then
 
 Sale or Purchase. 367 
 
 of a purchase b}' an agent t'roui his principal, without the 
 knowledge of the latter, i'j)so 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, 3'et there is no answer in the mouth 
 of the agent to an action to set the transaction aside. 
 
 But how far should this rule be followed in a case where 
 the stocks are sold or purchased by the l^roker at the Ex- 
 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 Bro- 
 kers 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 market price ? We should answer both these ques- 
 tions negatively ; 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 ])rice. Altogether, the reasons seem to be too 
 
 thut of vendor and vendee, not that olitaiiiablc, whereas he luid pro- 
 of prinripal and a^ent. Porter vs. viou-sly arranf^cd to ffoll the same 
 \Vorm>;cr, 94 N. Y. 431, 442. A stocks at 15 per cent advance, he 
 Stfx-k-broker may, if he acts iis a will not l)e rharneahlc witli such 
 principal, huy and resell at a profit, a<lvanro, wlicn the plainlifT vendor 
 and even if his a^ont makes a <lid not rely on the fra>i(iui(>nt rcp- 
 fraudulent reprewentation, viz., that rcsentation. Taylor vs. Guost, M 
 the prifc at which the Sto.k-hrokcr .\. Y. 262. 
 would purchase was the best price
 
 368 
 
 Stock-brokers and Stock Excliauges. 
 
 strong to authorize a departure from the general rule, even 
 where the sale or purchase takes })lace at the Open Board. ^ 
 In the State of jN'ew Yoik these views have received con- 
 firmation in the case of Taussig vs. llart,"'^ where Brokers 
 trading in stocks on a margin fur a Client had ina<le, among 
 other transactions, a purchase for tlie latter of !(»(» shares of 
 Pacific Mail, which they had subsequently transferred from 
 defendant to themselves, reporting to him the existing mar- 
 ket price and crediting him therefor. The court held that 
 
 ' This state of facts occurred in 
 Terry vs. Birmiiiiihain Savinais 
 Bank (Ala.), 13 So. 1 49; 99 Ala. 566; 
 but the Broker instead of attempt- 
 ing to execute the orders in the way 
 suggested in the text, employed an- 
 other Broker to openly bid on the 
 Exchange, the price limited in his 
 purchasing customer's order and 
 made the sale at that price, which 
 was not below the fair market value 
 of the stock. It was held that the 
 principle of law that the same per- 
 son cannot be both buyer and seller 
 did not apply, because here the sale 
 was made bj^ the Broker at the in- 
 stance of a pledgee of the stock, and 
 the objection to the mode of sale 
 was made by the pledgor in defence 
 to an action against him for the bal- 
 ance of his debt. Thus the objec- 
 tion was to the mode of sale which 
 had been adopted by the pledgor, 
 and as it appeared that neither the 
 pledgee nor the purchaser of the 
 stock had any knowledge of the 
 Broker's co-existent order to sell 
 and purchase, the above principle 
 was held to be inapplicable. This 
 is not a conclusive authority. Sup- 
 pose a Broker receives orders from 
 di£ferent Clients —one to sell a cer- 
 
 tain stock, the other to buy the 
 same stock. As Broker for the 
 .seller it is obvious that it is his duty 
 to sell at the highest figure, and as 
 Broker for the buj^er his dut}' is to 
 purchase at the lowest figure and he 
 cannot properly serve the two mas- 
 ters. It is therefore his duty to in- 
 form the Clients of his dual employ- 
 ment so that they may withdraw or 
 continue as they choose. McDevitt 
 vs. Connolly, 15 L. R. (Ireland) 500. 
 If, however, he does not so inform 
 them, but executes both orders by 
 making an entry on his books and 
 sending bought and sold notices re- 
 spectively to his Clients, and there- 
 upon receives payment, having au- 
 thority to do so, for the selling 
 Client, the latter is bound thereby, 
 and the purchasing Client is entitled 
 to the stocks, though the Broker in 
 whose possession they remain, by 
 subsequent bankruptcy is unable to 
 pay the purchase money to the sell- 
 ing client. McDevitt vs. Connolly, 
 supra, where, however, it was held 
 that the Broker had no authority to 
 receive payment for the vendor and 
 therefore the latter was still entitled 
 to retain the stocks. 
 2 49 N. Y. 301.
 
 Sale or Purchase. 369 
 
 the Client had the right to treat the sale of this stock by 
 the Brokers to themselves as voul, and to demand an actuid 
 sale of the stock, in which event he would incur the risk of 
 any loss arising from its depreciation, and bo entitled to the 
 benefit of any rise, or he could elect to ailirm the sale and 
 hold the Brokers to the price which they had n'ported ; but 
 he 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 transaction, or he might treat them as having converted 
 the stock to their own use, and charge them with damages 
 for the conversion ; but he could not charge the Brokers 
 with the price or value of the stock, either as purchasers or 
 as havinsf converted it, and at the same time claim that the 
 stock is undisposed of, and the account for that reason not 
 closed.^ 
 
 The rule we are considering was likewise most impres- 
 sively laid down by the House of Lords in the year 1820 in 
 the case of Brookman vs. Rothschild.* This case arose out of 
 a transaction with the well-known banking house of Roths- 
 child. It appeared that the plaintiff was a holder of 20,000 
 French rentes. The defendant resided in London, and dealt 
 
 ' And a usane of the Stock Ex- the same. Ilaniiltoii vs. Young, 
 change aiitliorizinji Brokers wlio are 7 L. R. (Irehind) 2.S9. If a Stock- 
 entitled to sell stock or shares of a broker illegally acts for the pur- 
 custonier for the reahzation and cluuser after havini; heen employed 
 payment of money due to thcan l>y hy the seller, the purcluiser although 
 Huch castonier, to take over to entitleil to rescind the contract, 
 them-selves, at the price of the day, cannot recover profits made by the 
 HtcK-k or shares of the customer, for Hroker. Illinirworth vs. DeMott, 
 which there is an inadequate de- ir) Atl Rep. (N. J.) 272. 
 mand, where a forced sale would ' .'} Sim. l.'iS, ufT'd in II. L. 5 
 lower them in sellint;, is not l)indinK Hli(;h, IG.*}. 
 upon a customer unactpiuinted with 
 
 24
 
 870 Stock-brokers and Stock Exchauges. 
 
 largely in foreign securities, and had contracted for the 
 Prussian loan ; he was also a }>ai-tiier with his brothers in the 
 Paris linn. 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 the}' 
 should remain in his hands as a securit}' for the purchase- 
 money, which remained unpaid, but no bonds were appro- 
 priated or set apart for the plaintiff. The defendant, h(j\v- 
 ever, 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 defendant, 
 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. 
 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 defendant were afterwards settled, and the 
 plaintiff paid the balance 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 appro- 
 priation on the two after-purchases, filed his bill to have all 
 the transactions set aside. The vice-chancellor, in an elab- 
 orate opinion, sustained the plaintiff's claim, and set the 
 transaction aside. Upon appeal to the House of Lords,
 
 Sale or Purchase. 371 
 
 this decree was unanimously sustained without hearing the 
 respondents. Lord "Wynford, who delivered an opinion of 
 great force, but which is extraordinary in its opening, said : 
 "... I 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 believe, Avhenever 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 ques- 
 tion of time.'' lie 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 L(mdon 
 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 description of agents. If I live in 
 Dorsetshire, and I write to my Broker in London to sell 
 my stock, I fancy that I have the advantage of that 
 Broker's assistance as to the day on uhicli it is pr()j)er to 
 sell. I fancy that, living in London, he has a knowledge 
 of the facts which will act on the raai-ket. If the Broker 
 in London, instead of going to the Stock Market, or instead 
 of exercising a discretion as to the period when he sliould 
 sell any stock, is to take that stock to him.self, he dej)rives 
 me of the security I have and the conlidence I repose in 
 his skill and intelligence; and if then; is a loss to mo, he is 
 the person who takes .Kivantagc of that loss. I take il to 
 b«; a general priiiciiih; of l;i\v ami e<juity that a man cannot
 
 372 Stock-brokers and Stock £xch:iii^e8. 
 
 be a seller for ine and a buyer of that projjertj himself."* 
 This ])rinciple is also foi'cibly illustrateil by the case of 
 Gillett vs. Peppei'ccjrne.'^ There the defendant, a Stock- 
 broker, was lai-gely interested in the shares of a water-works 
 company, of which he was also an active director. Having 
 recommended the plaintiff to make investments therein, the 
 plaintiff in May, 1826, December, 1830, and January, 1831, 
 respectively, purchased through the defendant twenty-five 
 shares in the conipan\^, 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 malve a transfer of the shares through 
 third parties. Some of the shares had, after their purchase, 
 been transferred by the plaintiff to his sons by way of ad- 
 vancement ; but they were retransferred the day previous 
 to the institution of the suit. The plaintiff made the dis- 
 covery of the real nature of the transaction in 1837 ; and 
 in 1838 he filed his bill to set aside the transaction on the 
 ground that it was not competent for a Stock-broker, or 
 agent employed to purchase, to sell his own shares to his 
 principal in the name of another party. The court so held. 
 The court found that in one of the transactions the de- 
 fendant acted as a gratuitous a^nt of the plaintiff, but held 
 
 ' Brookman vs. Rothschild was Crull vs. Dodson, Macn. Sel. Cas. 
 
 followed in Bischofscheim vs. Bait- lit; Hamilton vs. Younji, 7 L. R. 
 
 zer, 20 Fed. Rep. 890, and a trans- (Ireland) 289. 
 
 action in which the Broker under- - 3 Beav. 78. See also Skelton vs. 
 took to deliver his own bonds to his Wood, 71 L. T. 616, in which case it 
 Client was set a.side, and the bonds was held that the Broker could not 
 having subsequently become worth- recover if he bought stocks, and re- 
 less, it was held that the loss should sold them without his Client's 
 be borne by the Broker, and the knowledge and then bought them 
 purchase price of the bonds be back again, charging his Client with 
 stricken from his account. See also the differences.
 
 Sale or Purchase. 378 
 
 that this made no difference, ai\d that the same principle 
 woidd apply ; and it refused to countenance such a transac- 
 tion 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. 
 AVhether these shares were of greater value or not, I do 
 not choose to be at the risk of selling the shares which now 
 stantl in my name. The}- have been transferred to me in 
 a manner which the law does not warrant, and I desire to 
 be placed in the situation in a\ hicli 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 in- 
 terest, and the costs of the suit. In regard to the question 
 of laches in discovering 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 
 hiis not been dtme." The court also held that the transfer 
 of the shares made previous t(3 the suit did not affect the 
 plaintiff's right of action. 
 
 "When the case of Taussig vs. ilart,' before referred to, 
 came before the Court <jf Appeals of New Vf)rk for a .second 
 time, the court reiterated the doctrine that, u]>(>n an order 
 by a C'lient to buy stock, the iJrokcr couM not deliver his 
 own, ''for the reason that tiie l.iwdoes not j)ermiLan agent 
 
 ' 5K .\. Y. 125.
 
 374 Stock-brokers and Stock Exchanges. 
 
 employed to purchase to buy of himself. It is no reason 
 that 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 inflexible, and although its violation in the 
 particular case caused no damage to the principal, he can- 
 not be compelled to adopt the purchase." 
 
 And the case of Robinson 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 or- 
 ders 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 usual form — "• Bouglit 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, pro- 
 posing to allot to plaintiff the quantities he had desired to be 
 bought. On plaintiff's refusal to accept, 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, although 
 the evidence showed such a mode of dealing to be the usage 
 in the London tallow market, it appearing that the prin- 
 cipal had no knowledge of it. And it was further held that 
 the mere fact of employing a Broker to execute a commis- 
 
 • L. R. 7 H. L. Eng. Sc I. App. Kimber vs. Barber, L. R. 8 Ch. 56; 
 Cas. 802. See also Bank of Bengal AVilson vs. Short, 6 Hare, 366. 
 vs. McLeod, 7 Moo. P. C. C. 35;
 
 Sale or Purchase. 375 
 
 sion 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 ad- 
 mitted to convert a Broker employed to buy for his employer 
 into a principal to sell for him. Quoting the language of 
 "Willes, J., below, ]\Ir. Justice Mellor said that " it is an 
 axiom of the law of principal and agent that a Broker em- 
 ployed to sell cannot himself become the buyer, nor can a 
 Broker employed to buy become himself the seller, without 
 distinct notice to the princij)al, so that the latter may object 
 if he think proper ; a different rule would give the Broker 
 an interest against his duty.-' 
 
 So in Massachusetts it has been hekP that an order of the 
 Client to a Broker, to buy stock deliverable at the buyer's 
 option in GO days, does not authorize the Broker to buy 
 the stock himself at 3u days, and deliver it to his Client at 
 the end of 60 days at an increased price and interest, be- 
 sides the usual commission, and a usage of Brokers to do so 
 is bad ; n(jr is the exchange of bought and sold notes be- 
 tween Broker and his Client, nor the giving of his note to 
 his Broker in ])ayment for the stock, in ignorance of the 
 Broker's conduct, a ratification of iiis acts.^ 
 
 "When a person gives an order to a Stock-broker " to buy 
 stocks on mai'gin," Jie euiploysthi' Broker to act for iiiiu and 
 in his interest; accordingly the Brok(M' has no i-iglit to |)ut 
 himself in a position antag(jnistic to the interests of his em- 
 ployer ; he cannot make himself both buyer and sculler, ami 
 any custom to this ofTect, uidinown to the employer, is 
 against public j)olicy and illegal.'' 
 
 'Day VH. Holmiis, 103 -Mii-ss. Detnoritt, 100 ul. 110; TixKl v«. 
 300. lii.sli<»p, \M\ .MiusH. ;j.S(]. 
 
 'To name efTect, I'ickeriiin vs. ' Coininoiiw. v«. Cooper, ITi .Via.
 
 376 Stock-brokers and Stock Exclmuges. 
 
 And ill the case of Marye vs. Strouse the same rule 
 Avas laid down by the Circuit Court of the United States 
 in Nevada.' There mining-stock Brokers were ordered by 
 their Client to purchase 500 shares of a certain mining stock 
 at the San Francisco Mining-stock Board. They purchased 
 125 shares at the latter place ; and at the same time F., one 
 of the members of the firm of Brokei's, turned over to his 
 firm 375 shares for the purpose of filling the Client's order. 
 The Client never received the stock into his possession, 
 never assented to this mode of filling his oi-der, and had no 
 knowledge of it until the time of bringing a suit against him 
 to recover the amount thereof. 
 
 The court held that he was not chargeable with the 
 amount of the 375 shares. The court said: "It is not 
 claimed that there was any fraud in fact here, but evidence 
 establishing the transfer of the stock to have been bona fide 
 and for a fair price is unavailing. The inquiry does not 
 reach the question whether there was or was not fraud in 
 fact." The court cited among other cases the decision of 
 the Supreme Court of the United States in Michoud vs. 
 
 Law Rev. 360; s. c. 15 Mass. Law Although an agent employed to 
 
 Rep. Xo. 24, Ma}^4, 1S81. And the sell stock is guilty of bad faith in 
 
 burden of proof lies on the agent to acting both for buyer and seller, and 
 
 show that he has made a full dis- if the transaction were completed 
 
 closure to his principal; but his without his principal's knowledge, 
 
 simple, uncorroborated evidence to would forfeit his commissions, yet 
 
 that effect will not avail where it is if before fulfilment, the principal, 
 
 contradicted by his principal with knowledge of the real state of 
 
 (Dunne vs. English, L. R. 18 Eq. facts, docs not repudiate the sale, 
 
 524). A Broker does not meet the but closes with the purchaser, he 
 
 burden of proof which is upon him cannot decline to pay the agent's 
 
 to show that he has executed his commission. Hafner vs. Herron, 
 
 Client'sorderstopurchase, by show- 46 N. E. Rep. (111.) 211. 
 ing that he has transferred his own ^ 5 Fed. Rep. 483. 
 stocks to the Client. Lonergan vs. 
 Peck, 136 Mass. 361.
 
 Sale or Pnrcliase. 377 
 
 Girod,^ and further decided that the mere fact that there 
 was an account stated between the parties subsequent to 
 the transaction did not alter the rule, in the absence of 
 knowledge on the part of the Client. Finally, where a 
 Client has dealt with his Broker several times as a princi- 
 pal in stock transactions, it does not annul his character as 
 Bnjki-r, or deprive the Client of the protection Avhich the 
 law extends to him by reason of the relation which exists 
 between him as princi})al and the Broker as such.^ 
 
 The question as to wliat evidence is sufficient to warrant 
 the sulmiission to tlie jur}' of an instruction that if a pledgee 
 became, through a third person, a purchaser at his owm sale 
 there was no sale sufficient to bind the Client, came up in a 
 recent case.^ It was there held that when the Brokers fur- 
 nished the ])urchase money, and that one of them was alleged 
 to have stated that they still carried the stock for the Client 
 on their books, the instruction should have been submitted 
 to the jury, although an employee of the Brokers testified 
 that the ])urchase was made for the wife of an outside 
 Broker Avho had deskroom in plaintilf Broker's office, and 
 was so entered on their books, when neither the outside 
 Broker, nor his wife, was called as a witness to show that 
 she was the purchaser. 
 
 If there is any piincij)le of law that is well settled, it 
 seems to be the one which we are considering, and we do 
 not deem it within the ])urpose of this work to refer to 
 any cases uixjii the subject othei' than those in whi(-h Stock 
 and Produce Brokej's have been involved; ahhoiiLrh the 
 priiicijile is fi-amed so coiniirejiensively as to einltraci' everv 
 
 ' 4 How. (U. S.) 5^).'}. ' ('aiiiinaim vs. Iluntin^n, 85 
 
 ' BraKK vh. Meyer, 1 McMl. (('. X. V. S. l.U. 
 C.) 408, 117.
 
 378 Stock-brokers and Stock E\clianges. 
 
 relation in wliicli the sli^^htcst element of trust or confi- 
 dence exists.' 
 
 The solicitude with which the law of England has watched 
 over the rights of Clients to pi-otect them from any mis- 
 placed confidence or frauds on the part of Brokers is vei'y 
 apparent from a perusal of the acts passed in the reigns of 
 AVilliam III.- and Queen Anne,^ and the subsequent acts 
 amendatory of the latter act, passed in the reigns of Geoi"ge 
 III., and Victoria,' as also of the acts referred to in chap- 
 ter I. pp. 2— i. 
 
 By the first of these acts (8 and 9 William III.), Brokers 
 were compelled to become licensed, and the jurisdiction 
 over them -was placed in tlie hands of the court of the 
 Mayor and Aldermen of London, and they were required 
 to enter into a bond and take an oath of office. The act 
 also prohibited the Broker from dealing on his own ac- 
 count. By the act passed in the reign of Queen Anne, all 
 persons were to be admitted as Brokers in the city of Lon- 
 don, under regulations to be made by the mayor and alder- 
 men. Regulations in pursuance of this act were made by 
 the mayor and aldermen and a form of bond and oath 
 prescribed. The form of this bond and oath is fully 
 
 ' Xor can a Broker who is directed thoin is that by the committee of 
 
 to purchase bonds sell them to his the Stock Exchange. The acts of 
 
 Client at a higher price. Levy vs. William and Anne have been also 
 
 Loeb, 85 X. Y. 365, aff'd on new repealed by the Stat. L. Rev. Acts 
 
 trial, 89 X. Y. 386. 1867 and 1887. But the repeal of 
 
 ^ 8 & 9 Wm. III. ch. 32. these statutes did not, however, m 
 
 ^ 6 Anne, ch. 16. any way weaken or modify the prin- 
 
 * 57 Geo. III. ch. 60; and 33 & 34 ciple mentioned in the text as to the 
 
 Vict. ch. 607. But bj^ a statute of illegality of a Broker acting in the 
 
 1884 (47 Vict. ch. 3) the jurisdiction dual capacity of principal and agent 
 
 of the city over Stock-brokers and at the same time, e.xcept in so far as 
 
 jobbers was terminated, and at pres- it has been relaxed in recent years. 
 
 ent the only control exercised over See p. 380.
 
 Sale or Purchase. 379 
 
 given in the case of Green vs. Weaver' and from a perusal 
 of the bond it appears that one of its conditions is similar 
 to the provision contained in the act of "William III., i, e. 
 that a Broker shall not deal on his own account. 
 
 But although by the })rovisions of those acts, and of the 
 reguhitions passed by the city, a Broker was prohibited 
 from trading on his own account, the consequences of his 
 so trading were merely confined to the penalty of the bond, 
 dismissal from office, and to his liability to be prosecuted 
 criminally for a violation of his oath, and they did not ex- 
 tend to create a disability to sustain an action in respect 
 of these prohibited dealings. Therefore if he traded on 
 his own account openly and in public he might recover on 
 account of such transactions, but if he acted ostensibly as 
 Broker whilst actually a principal in the same dealing, he 
 was guilty of a gross fraud, and could not recover.'* 
 
 And in Proctor vs. Brain ^ Best, C. J., used the following 
 signilicant language: "A man who is a sworn Broker can- 
 not be a principal (in the same transactions), and this is for 
 the wisest reasons. ... I am satisfied that nobody of men 
 will rejoice more in seeing the regulations enforced than the 
 Brokers tliemselves. If I employ a Broker, I pay him for 
 his assistance, and I suppose that I have the benefit of his 
 judgment; 1 suppose that he is acting honestly; but what 
 security have I if a man is to shift his character at pleasure 
 from that of l>roker U) principal?''* 
 
 ' 1 Sirn. 401, 124; a. c. « L. J. » 2 Moo. & P. 284; 3 C. «t P. 53G. 
 Ch. 1. See form of bond und oatli * See also remarks of Lord Ellen- 
 given, poHt p. 944. Kcmljle vs. borough in London, etc., vs. Hnm- 
 .\tkin.s, 1 Holt, 427, I'M, note; don, Holt, l.'iH, note; hw; nl.so nwoH 
 Clark V8. Powell, 1 N'ev. «t Man. cited under tlie next HiibdiviKion 
 492, .W-l. (/), and report of Hoyal Stock Ex- 
 
 * Ex parte Dvst«'r. I ,M. r. 1.").'). cliaimc ('oniniiH.sion, July, 1878.
 
 380 Stock-brokers and Stock £xcliaiiges. 
 
 Of late years, however, in England the courts have re- 
 laxed something of the stringency of the rule which forbade 
 a Broker to deal with his principal whilst acting as a 
 Broker in any other capacity than that of agent. It seems 
 that although a Broker is on all occasions bound to use his 
 best endeavors in his emi)loyei''s interests, yet, if in doing 
 so, he is compelled to abandon the position of an agent and 
 take up that of a principal, he will not be held to have 
 acted wrongfully' and, as he is, under the rules of the 
 Exchange, personally liable on contracts, he may, to mini- 
 mize his loss, sell and repurchase from a jobber at a fair 
 price fixed by the jobber,^ but if the sale and repurchase is 
 one and the same transaction, he must account to the Client 
 for any profit made.^ 
 
 There seems to be an exception to the principle above 
 stated, which Avas made for the first time by the Court of 
 Appeals of the State of New York in the case of Quincey 
 vs. White.^ It was there held that where stocks were 
 sold at the Board of Brokers " under the rule "' "' by a Broker 
 who had loaned money on them to a fellow-Broker, the 
 proceeding was in the nature of a foreclosure, and the 
 creditor might himself become the purchaser. The court 
 said : " It must be assumed that a person selling stock 
 under the rule (as it is called) has a right to purchase him- 
 self. The object is to foreclose the claim of the mortgagor 
 or pledgor, and, in analogy to other similar cases, the 
 pledgee or mortgagee may become the purchaser." And 
 
 » Petre vs. Sutherland, 3 T. L. R. ^ Erskine vs. Sachs, L. R. 2 K. B. 
 
 422; Sachs vs. Spielman, 5 T. L. R. (1901) 594. 
 487. * 63 X. Y. 370-376. 
 
 2 Walter vs. Kins, 13 T. L. R. * Art. XXVIII. Constitution N 
 
 270; Macoun vs. Erskine, L. R. 2 K. Y. Stock Exchange. 
 B. (1901) 493.
 
 Sale or Purchase. 381 
 
 the rule seems to be settled, that a Broker or pledgee may 
 become the purchaser of the pledged security at a judicial 
 sale held under a decree to foreclose the pledge.^ 
 
 And the parties may expressly agree that the pledgees 
 may become purchasers at their own sale.- The court 
 said : " Such a sale is not absolutely void, but only void- 
 able, for it may be sanctioned or ratified by consent, and 
 this is shown by numerous authorities," And further : " If 
 voidable, then capable of ratification ; if thus capable, then 
 also of a prior authorization." 
 
 ' Quincey vs. White, 63 X. Y. 370- Quaere, whether Brokers not 
 
 376; Jones on Mort. (4th ed.) members of the Stock Exchange 
 
 § 1636; Newport, etc.. Bridge Co. who borrow money from Brokers, 
 
 vs. Douglass, 12 Bush (Ky.), 673, members of the Exchange, on a 
 
 720. pledge of securities, are bound by 
 
 In the case of Lacomlje and others the rules of the E.xchange as to the 
 vs. Forstell's Sons, 123 U. S. 562 sale of collaterals, even though the 
 (1887), the United States Supreme loan was elTected on the floor of the 
 Court, without passing on the que.s- Exchange by a Broker employed by 
 tion, suggest a well founded doubt the borrowers. Morris vs. Grant, 
 as to whether the pledgee of securi- 34 Hun, 377. In that case it was 
 ties can cut off the pledgor's right also held that a buyer who had pur- 
 by putting them into tiie hands of a chased at such a sale, and liad re- 
 Broker to be sold on the market in ceived the securities, l)ut declined 
 the usual way, and instructing an- to pay the purchase money, could 
 other Broker to see (hat they are be compelletl to complete tiie pur- 
 not sacrificed, authorizing him to chase, notwithstanding a deci.^ion of 
 say that they would pay more for the committee on securities to the 
 them to the purcha-ser than they contrary, becau.se the latter had no 
 would sell for. Defendants claimed jurisdiction of the matter, there wa-s 
 that in this way the securities were no question jls to the legal riglits of 
 returned to them, and that tliis was the parties to l^e adjudicated, and 
 done without fraudulent purpose, the l)orrowers Iiad no notice of, and 
 but to secure the higliest market did not attend, (ho committee 
 price for tlie bonds at the sale. meeting. .Morris vs. (Irant, 31 
 
 Tlje court .say that althr)Ugli (h(; Ilun, 377. 
 
 f|ues(ion of ititentional fraud was 'Chouteau vs. .Mien, 70 Mi>. 21H), 
 
 re[M."lle<l, "the transaction is one 335. 
 which it might be diflicult to sustain 
 in a cotirt of equity."
 
 382 Stock-brokers and Stock Kxclianjjcs. 
 
 Courts of cqiiit}' do not, however, go so fur as to prevent 
 an agent dealing with his principal in all cases. They only re- 
 quire that he shall deal with him at " arm's length," and after 
 a full disclosure of all he knows with respect to the property.' 
 
 And where the Broker buys or sells his own stock on his 
 Client's account, and therein- makes a profit, his principal 
 may either repudiate the transaction altogether, or he may 
 adopt it, and claim for himself the benefit made by liis agent.^ 
 
 If a Broker purchases bonds from a Broker apparent!}' for 
 an undisclosed principal, but in reality for himself, and shields 
 himself from all liahiliry as agent, he is estopped from 
 suing for a breach of tlie contract either as principal or 
 agent.^ 
 
 (/.) Effect of Sale or Purchase hy Broker. 
 
 The effect of a purchase by a Broker or pledgee of the 
 stocks of the Client or pledgor, as we have seen, is to render 
 
 ' Evans on Ag. (2d ed.) 324; Tre- 95 N. Y. .391, 402, confirming Bryan 
 
 velyan vs. Charles, 9 Beav. 140; vs. Baldwin, 52 N. Y. 232. 
 
 Dunne vs. English, L. R. 18 Eq. And where a Broker mixes his 
 
 524; Robinson vs. Mollett, L. R. 7 own with his principal's bonds in 
 
 H. L. 815, 816. selling, and refuses to disclose the 
 
 ' Evans on Ag. (2d ed.) 324; time of the sale, and the amount 
 
 Kimbar vs. Barber, L. R. 8 Ch. App. realized, the jury are at liberty to 
 
 56. See also notes to Fox vs. find that all of the bonds sold are 
 
 Macreth, 1 L. C. Eq. (6th ed.) 141. the principal's. Bate vs. Mc- 
 
 A Broker is not precluded by the Dowell, 49 Super. Ct. Rep. (17 J. & 
 
 form of his notices of purchase or S.) 106. 
 
 sale, from showing that the transac- The rule that all advantages 
 
 tions were made with third parties, gained by an agent in unauthorized 
 
 Porter vs. Wormser, 94 N. Y. 431, dealings or speculations with his 
 
 447. The sale by a pledgee to him- principal's property, enure to the 
 
 self is not absolutely void, but void- principal, is declared and the cases 
 
 able only at the election of the cited and examined in Keiran vs. 
 
 pledgor. He may ratify the sale, Hoyt, 33 Hun, 145, s. c. more fully, 
 
 and if he elects to do so, then the X. Y. Daily Reg. Oct. 4, 1884. 
 
 sale becomes perfectly valid and ^ Paine vs. Loeb, 96 Fed. Rep. 
 
 eflfectual. Roach vs. Duckworth, 164.
 
 Effect of Sale or Purchase. 383 
 
 the transaction void, and the cases hold that such a pur- 
 chase does not change the creditor's rehition to his debtor, 
 but that the securities are still held by the creditor under 
 the original titles as securit\' for the original debt. The 
 transaction is treated precisely as if no sale had been made ; 
 and the debtor, in order to obtain another sale of the secu- 
 rities, or to redeem them, is not required to prove that the 
 Broker or pledgee made a fraudulent sale or one disadvan- 
 tageous to himself, but only that he became the purchaser. 
 The Broker or pledgee in selling the securities is in the posi- 
 tion of trustee for the Client or pledgor, and the law will 
 not allow of the temptation to fraud or the possibility of the 
 same through the trustee becoming purchaser at his own 
 sale. But the pledgor has the option to treat the sale 
 as valid, and to accept the benefits thereof.^ 
 
 In Brookman vs. Rothschild,^ where the 20,000 rentes were 
 purchased by the Brokers themselves, the decree of the court 
 was that they should deliver the same to the Client, to- 
 gether with all of the dividends thereon, upon being repaid 
 
 'Brookman vs. Rothschild, 3 R. Co., 84 X. Y. 201; Hope vs. 
 Sim. 221; afT'd H. L., o Bli^;h (II. s.), Lawrence,! iluii, .'{17; Diuicu vs. 
 165; Pigot vs. Culilcy, 1.5 C. B. Waitzfeldpr, Ht id. :j.J7; Hamilton 
 Cn. 8.) 702; Stokes vs. Frazier, 72 111. vs. Srhaark, 10 .\. V. \V. 1). ■I2;i; 
 428; Cliicatio .\rtesian-well Co. vs. .Mi(i<llf>,s.sf.\ Bank vs. Minot, 4.5 
 Corey, 00 id. 7'i; Bank vs. I)ubu<|uc .Nhuvs. :V2'r, .\in.s\vorlh vs. Boweii, 9 
 AParificR. R.,8lowa, 277;Hainil- Wis. 348; Ileslonvill.! R. Co. vs. 
 ton vs. State Bank, 22 id. 30(5; Md. Shields, 3 Brews. (Pa.) 2.')7. Seo 
 Fire Iils. Co. vs. Dalrymple, 25 NSd. also First National Bank vs. Hall, 
 242; B.altiniore .Marine Ins. Co. v.*. 22.\pp. Div. 35(»; Cdidden vs. Bank, 
 Dalryrnplf, id. 20(»; Bry.son vs. Ray- 13 L. R. .\. 737. ("misult also the 
 ner, id. 421; Star Fire Ins. Co. vs. fedlowinp; notes in L. R. \., "Pur- 
 Palmer, 9 .1, it S. (S. V.) 207; Rich- chiisc hy pledcee." 43 L. R A 7.55; 
 ard.son vs. Maim, .30 I,a .\iiii. 10(»0; "Who m.iy piir('luu<e," 53 I. H A. 
 Wriifht vs. Ross, 3() Cal 11 I; Bryan .SOI. 
 VH Baldwin, 7 L.-iiis, 174, uHW .52 .N' ' Supra. 
 Y. 232; Dunroml> vh. N. Y. & N. U.
 
 384 Stock-brokers and Stock Exchanges. 
 
 the sum Avitli interest whicli the Client had originally re- 
 ceived for them ; or that the Client should receive an amount 
 equal to the present value of the rentes. 
 
 And the other cases cited above hold that the Client, if the 
 Broker has sold the stocks, may elect to affirm the sale and 
 recover the proceeds ; or that he may treat the illegal dis- 
 position as a conversion and recover damages for the same.' 
 And where a Broker sold shares in a Water Company to 
 his Client, through third parties, the com't directed that the 
 defendant Broker should take back the shares with all the 
 dividends which had been paid upon them, and that he 
 should pay to the plaintiff, his Client, the purchase-money, 
 with interest at the rate of five per cent, and the costs of 
 the suit.^ So, Avhere a Broker purchases shares from a third 
 party with the view of selling them himself to his Client, in 
 the execution of an order to purchase, and does sell tlie same 
 to his principal at a price higher than that at w^hich he him- 
 self purchased, the Client may recover the difference be- 
 tween the price at which the Broker bought and that at 
 which he sold the shares; and this, although the Client has 
 parted with a portion of the shares, so that he might not be 
 in a position to rescind the transaction,^ 
 
 ' See, in addition to the authori- performinf:; their contract of agency 
 
 ties just cited, Taussig vs. Hart, 49 to purchase bonds, the defendants 
 
 N. Y. 301; id. 58 X. Y. 425; Picker- purchased the bonds in their own 
 
 ing vs. Demeritt, 100 Mass. 416; name at prices stated and then 
 
 Day vs. Holmes, 103 id. 306. But charged them to plaintiffs at higher 
 
 the Client cannot follow both of prices, and reported the purchases 
 
 these courses. Mayo vs. Knowl- as made for them at those enhanced 
 
 ton, 16 Daly, 245. prices. Relying upon this false 
 
 ^ Gillett vs. Peppercorne, 3 Beav. statement and in consideration of 
 
 78. an agreement to carry the bonds 
 
 ' Kimber vs. Barber, L. R. 8 Ch. for a certain time on part payment 
 
 App. 56. In Levy vs. Loeb, 89 N. of the purchase price, plaintiffs paid 
 
 Y. 386, it appeared that instead of the sum called for. Held that upon
 
 Close of Trausactiou. 385 
 
 One B., a Broker, knowing that one K. was desirous of ob- 
 taining shares in a certain company, called upon K. and told 
 him that he knew where the shares could be purchased at 
 £3 ])er share, and was authorized to make the purchase at 
 that price. B. then went to a person who had the shares 
 for sale and bought them for £2 per share, and made the 
 sale and transfer of the shares to K. through a third per- 
 son. K. subsequently discovering that B. was, in fact, 
 the owner of the shares, brought an action against B., in 
 which he prayed for alternative relief, either that B. inight 
 be decreed to pay K. the difference between the pi'ices paid, 
 or otherwise that the sale of the shares might be set aside, 
 and the purchase-money repaid upon a retransfer of the 
 shares. Previous to bringing the suit, K. had transferred 
 part of the shares; and the Master of the Rolls, on this 
 irround, held tliat the transaction could not be set aside. 
 And he refused to give the plaintiff the difference between 
 the prices [>aid, for the reason that it would be making a new 
 contract between the jiarties. On appeal, the decree of the 
 Master of the Rolls was reversed, and the. plaintiff, K., was 
 allowed to recover the difference in the prices paid. But 
 the court did n(jt undertake to decide whether the transaction 
 could be set aside, X. having })arted with a portion of the 
 shares.' 
 
 IX. When IJrokf'r can Close Transaction. 
 
 In the absence of ex[)r(ss agreement, iht; ilroker may, at 
 liis option, upon reasonable notice, recjuire the Client to take 
 
 the discovery of llie facts, pl:iiiililT.s reported, iind couhl recover buck 
 were authorized uiid jii.stified in re- the kuim |)aid. 
 
 pudiuting the fictiti<mH trurisuclion ' Kimher vh. M;irl>er, L. H. s ("h. 
 
 A pp. •Vi. 
 
 26
 
 386 Stock-brokers .and Stock Exchanj^es. 
 
 the stocks which he may be carrying for hiin, and thus close 
 the transaction.* As tlic Client may at any time require the 
 delivery of the stocks to him or the transaction closed upon 
 paying the amount advanced for their purchase, with com- 
 missions and interest, so the Broker, in the absence of agree- 
 ment, has the reciprocal right to require the Client at any 
 time to "take up" the stocks or close the transaction, and 
 to repay him the amount due thereon. Although the Client's 
 margin may not be exhausted, the Broker is not bound to 
 continue the transaction for an indefinite period. He earns 
 his commission by making the transaction, and in the absence 
 of agreement it would seem but reasonable to assume that 
 he should be able to discontinue the relation after a reason- 
 ble time at least. But there is no express adjudication upon 
 this point, and much can be said on both sides of the ques- 
 tion.^ 
 
 So there is another instance where the Broker seems to be 
 entitled to sell the Client's stocks, viz., where the latter be- 
 comes a bankrupt ;^ and it has been decided^ that where a 
 Broker holds stock for a Client on a margin, and the latter 
 becomes a bankrupt, it is the duty of the Broker to take no- 
 tice of this fact ; and that where the Broker continued to 
 hold the stocks after such bankruptcy for an unreasonable 
 time, and then sold them witliout any application or con- 
 sent of the assignee or bankruptcy court, and without no- 
 
 ' Stenton vs. Jerome, .54 X. Y. ^ Id. 
 480, 482; White vs. Smith, id. 522; ^ The authority of an agent is de- 
 Sterling vs. Jaudon, 48 Barb. (N. termined by notice of the bank- 
 Y.) 459; Memin vs. Hamilton, 6 ruptcy of his principal. Markwick 
 Buer (N. Y.), 244; Esser vs. Linder- vs. Hardington, 15 Ch. D. 339. 
 man, 71 Pa. St. 76. As to when * In re Daniels, 13 Nat'l Bankr. 
 Broker may close transaction on the Reg. 46; s. c. 1 N. Y. W. D. 271. 
 death of his Client, .see Lacey vs. 
 Hill, post, 387.
 
 Close of Transaction. 387 
 
 tice to any one, the bankrupt's estate was not properly 
 charo;eable with the loss. 
 
 So also a Stock- broker is justified in immediately closing 
 the account on the death of his Client.' The authority 
 given by the deceased Client becomes determined at his 
 death.2 But the Broker cannot, on the })lea that he had a 
 continuing authority from the deceased to carry over from 
 settling day to settling day, carry over the account for a 
 considerable period after notice of his Client's death.^ And 
 if he has a continuation account with a Client, and on notice 
 of the latter's death, does not close the account immedi- 
 ately, but makes a further continuation, and ultimately sells 
 at a loss, he cannot recover the amount of the loss from the 
 Client's estate.^ 
 
 But it has been held in the State of New York that when 
 a Broker acts in ffood faitli, lie niav continue the account 
 until the appointment of a legal representative, as, the 
 agency being coupled with an interest, the case presents an 
 exception to the i-ule that the death of the principal termi- 
 nated the agent's authorit3\'' But circumstances might jus- 
 tify him in closing the account immediately.^ And in case 
 of a stock oj)tion where the one liable to deliver the stock 
 dies before the option expires, the holder of the option 
 must make a demand of the stock from the legal representa- 
 tive when ap])oint<'d. A dcnuind in.idt' at llu' bank where 
 the sU>ck was ma<lr jjayable, immediately after th<- dt-ath, 
 is insufficient.' 
 
 » Lacey vh Mill, [. I{ S Ch. App. ' Hww vh. Ran, 0") .\ . V. iC.'J. 
 
 921. 'Id.; Hoo Dcincrv vs Hiirten- 
 
 ' Phillips VH. Joruw, 1 T L U 101. hliaw's Rst . \)\ N. W I{<|. r>l7. 
 
 * Id. ' PriiKO V.4. ItoltiiiHoiiH Admn*., 
 
 Mi. ro Ovorwf^, I, H i\<MH\) 1 l> I'.<1, \iv\>. CM. 
 Ch IJ. 209.
 
 388 Stock-brokers and Stocli Exchanges. 
 
 If the transaction be a " long one" — viz., a purchase of 
 stocl^s for tlie Client — the bettei' practice would be for the 
 Broker to make up a statement of the account and tender 
 the securities to the Client with a blank power of attoi-ney 
 to transfer, and offer to deliver the same upon payment of 
 the amount due.' 
 
 If, on the other hand, the transaction consists of a short 
 sale, the Broker should give tlic Client a notice, informing 
 him that he desired the transacti(^n closed either by a pur- 
 chase of the stock or a transfer of the operation to some 
 other person oi- office, as has been indicated above under the 
 head of " short sale." 
 
 When a Stock-broker fills an order for the purchase of 
 stock, and his ])rincipal makes default, and he thereupon re- 
 sells the stock at a loss, it is necessary for him, in order that 
 he may recover the amount of such loss from his principal, 
 to show that thestock was actually purchased by himself or 
 by an agent under his direction, at its fair market price on 
 the day of purchase, and that lie actually paid the })urchase- 
 money therefor ; that he notified liis principal of the pur- 
 chase, and requested him to receive the stock and pay the 
 price paid for it with reasonable commissions ; that at the 
 time of this notice he was in condition to deliver the stock, 
 by having it or other ])roper mdicia of title actually in hand 
 or in the hands of his agent ; that on the failure of the prin- 
 cipal to receive the stock he, after reasonable time and no- 
 tice to that effect to the principal, directed it to be sold ; 
 and that it was sold by his agent either at public sale in 
 market overt, or at a sale publicly and faii-ly made at the 
 
 * Merwin vs. Hamilton, 6 Duer 32 Md. 169; Genin vs. Isaacson, 6 
 (X. Y.), 244; Wynkoop vs. Seal, 64 X. Y. Leg. Ohs. 213. 
 Pa. St. 361 ; Rosenstock vs. Tormey,
 
 Close of Transact iou. 389 
 
 Stock Exchange, or a Stock Board or a Boanl of Brokers, 
 where such stocks are usually sold at a fair market value 
 on the day of sale.' 
 
 So it has been held' that where Brokers purchased in 
 their own names, and witliout disclosing the name of the 
 Client, certain stocks for the latter, before thev could main- 
 tain an action against the latter for a depreciation in the 
 price of the stocks, they were bound to tender the stocks 
 to the Client; and that where it ap))eared that this was 
 not done, and that the Bi-okers sold the stock without any 
 notice of the sale, they could not recover from their prin- 
 cipal.' 
 
 But where the Brokers have not sold the stocks purchased 
 for their Client, in an action against him to recover the ad- 
 vances made by the Brokers and their commissions on such 
 purchase, it i.s not necessary for them to produce the certifi- 
 cates of stock on the trial or account for their non-pro- 
 duction, where they give testimony that they bought and 
 have the same in their possession. It is not until the Client 
 has paid or tendered the sum laid out that he can demand 
 its delivery.* And where plaintiffs' Brokers and copartners 
 broujjht an action to recover an amount claimed to be due 
 
 ' RoseiLStock vs. Tormcy, 32 Md. 12 Barb. 2().'j. But see c-iuscs cittKl 
 
 169. ill next note. 
 
 * Merwiii vs. Hamilton, Duer 'Id. .\nd whorp ujjon ii oon- 
 
 (N. Y.), 214. tnict to dolivpr certain .^ihares of 
 
 'Upon a contract to deliver stock "at 8ener'.s option, si.xty 
 
 8tock.s to another for cash on de- days," the purchaser makes his 
 
 liven*', the act,s of deliver^' and pay- demand for the stock at tlje proper 
 
 ment are simultaneous and neither time and in tlie proper form, \>* then 
 
 can maintain an action auainst the ready to pay the price, and is rt*- 
 
 other with(tut showin^^ on his part fu.-^eil the delivery mi tlie ground 
 
 an actual pcrfonn.incc or a letral that the s<'Iler wiw not al>le to make 
 
 offer to perform; Kelley vs. I'plon, it, it Is not nece-wnry to the former's 
 
 5 Duer, 3.'<f',; r'.itiln vs Tompkins, right of action for the hrcjich that
 
 390 Stot'k-brokers and Stock Kxchaiiges. 
 
 upon an alleged agreement as to the sale and purchase of 
 stocks on defendants' joint account, it appeared tliat plaintiffs 
 purchased for defendant T. 56,<»r>U shares of a certain stock. 
 The referee, in stating the account between the parties, 
 credited plaintiffs with 24,200 shares sold by them, and ex- 
 cluded from such account 32,450 shares, althouf^h ho found 
 that plaintiffs had bought and paid for the latter on account 
 of the defendant T. As to them he also found that on April 
 20, 1874, they were not in the possession of plaintiffs, but 
 prior to that time had been })ledged 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 conclu- 
 sions of law, that plaintiffs could not recover for the pur- 
 chase of said 32,450 shares, unless 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 counterclaim of the damages. 
 
 Held, that the finding of the referee was erroneous ; that 
 the purchase of the stock was u})on T.'s account, and was a 
 
 he should have made an actual offer Ikuikruptcy of the Broker dispenses 
 
 or tender of the money (Wheeler vs. with the necessity of demand and 
 
 Garcia, 40 N. Y. 584). Munn vs. tender. In re Swifte, 172 Fed. Rep. 
 
 Barnum, 24 Barb. 283. A tender 315, 321. See also Mayo vs. 
 
 may be made by Brokers acting for Knowlton, 134 N. Y. 250. As to 
 
 principals in another state althoujrh when tender before action is unnec- 
 
 the former were the owners of the essary, see Map:uire vs. Halstead, 
 
 stock at the time of tender. Clews 4.5 .\'. Y. Supp. 783. See also 
 
 vs. Jamieson, 182 U.S. 461, 496. Speyer vs. Colgate, 67 Barb. 192.
 
 To Act by Substitute. 391 
 
 proper charge against him ; and the stile of the stock was a 
 faiUire to perform a subsequent duty, and no condition })re- 
 cedent was broken which prevented plaintiffs from charg- 
 ing T. for the jmrchase of the stock.' 
 
 If after a Broker has closed out a transaction owins: to 
 the failure of his Client to furnish sufficient margin, the 
 rendering of an account to the customer may, under circum- 
 stances, and when not objected to by the latter, constitute 
 an account stated. Thus if several accounts have been ren- 
 dered each showing a balance brought forward from the 
 previous account, and suit is commenced three weeks after 
 the rendition of the final account, all of the accounts having 
 been retained by the Client Avithout objection, the Client 
 will be deemed to have assented to their accuracy,^ and such 
 facts when alleged in the complaint will entitle the plain- 
 tiff to recover for moneys advanced, and for commissions 
 and expenses, and also upon an account stated.^ 
 
 X. When Broker can Act by Substitute. 
 
 The general rule of law is, that a Broker, like an attorney, 
 is selected as a specialist on account of his pi-esumed skill 
 and discretion, and of the conlidence consequently best(jwed 
 on him by the principal. lie cannot, therefore, depute his 
 duties, so far as they are discretionary, to anotlier, excoj)t 
 in cases of necessity, or In cu^es in whir/i such (1ej)ut<ition 
 is nuHlained hy usage^ of which it may he hnplicd that the 
 
 'Capron vs. Thompson, 13 N. Y. McKay, "^h N. V. Supp nf): SO 
 
 Weekly Dig 199; s. c. Ct. of App, 86 Hun, 012; Gillctt vh, Whitiiiu', II! 
 
 N. Y. 41.S See also Caliill vs. N. Y. 71; Donald vs. (Juriln.T. 11 
 
 Hirschman, 6 Xev. WJ. .\pp. Div. 23M; Coit vs. Gowlliart, /i 
 
 ' Knickcrbofkcr vs. Gould, 11/5 App. Div. -Ml. 
 N. Y. 533; Uca<li v.s. Kidder, S .\. ' Knickerbocker vs. Gould, su- 
 
 Y. Supp. 5S7. See al.so .McKay vs. i)ra
 
 302 Stock-brokers and Stock Exchaiii^os. 
 
 principal is cognizant} The rule being that, if a principal 
 constitute an agent to do a business which obviously, and 
 from its very nature, cannot be done by the agent otherwise 
 than throuirli a substitute, or if there exist in relation to that 
 business a known and established usage of substitution, in 
 either case the principal would be held to have expected 
 and have authorized such substitution.'^ Applying these 
 general principles to the business of Wall Street, it will be 
 very easy to sustain the usage, so universally prevalent 
 there, of transacting business through one or more sub- 
 ordinate Brokers who are necessarily employed, either for 
 secrecy or despatch, in the execution of the Client's busi- 
 ness or orders. And where an order to purchase stocks 
 is given by a Client to his Broker in Baltimore, and the 
 order is general in its terms — not directing the purchase 
 to be made in any ])articular place or mode, and not 
 containing any restrictions as to price — the Broker has 
 the right to make the purchase in New York through 
 correspondents— Brokers or sub-agents residing and doing 
 business in that city.^ 
 
 'Wharton on Ag. §§709, 711; Fuller, 4 Hun (X. Y.), 631; Com- 
 Mechem on Agency, §§195, 197. mercial Bank vs. Norton, 1 HilUN. 
 Cockran vs. Irlain, 2 Manic ct S. 301. Y.), 501, 505; ElweU vs. Chamber- 
 Of course if the discretion has lain, 2 Bosw. id. 230. 
 ceased, the Broker may act through ^ Rosenstock vs. Tormey, 32 Md. 
 a sub-agent. If a discretion is 169; SkifT vs. Stoddard, 63 Conn, 
 vested in a Broker as to whether a 198. In the latter case see the na- 
 sals should be made of stocks or ture of the business done through 
 not, and if he determines upon a New York correspondents described 
 sale, then the discretion is exer- in full detail, p. 205 et seq. 
 cised, and he may employ a sub- The sub-agent has no right of ac- 
 agent to make the actual sale, tion against the Client, where the 
 Sims vs. May, 16 St. Rep. 780. first Broker in employing the sub- 
 
 ' Moon vs. Guardians of Whitney, agent acts only as an independent 
 
 Union, 3 Bing. (N. C.) 814; Ledoux contractor, that is, employs a sub- 
 
 vs. Goza, 4 La. Ann. 160; AMiite vs. agent to execute an order intrusted
 
 To Act by Siilistitiitt'. 393 
 
 But it has beeu held that when a Broker, not beinsr in 
 Loiulo!!, employs a second Broker to make a bargain for 
 him on the Stock Exchange, there is no privity between the 
 princii)al and such second Broker; and therefore, if the 
 principal seek to make the latter a defendant in a suit for 
 specific performance, the bill will be demurrable.' 
 
 Defendants, who were bankers and Brokei*s, gave to 
 plaintiff a letter to their correspondent G., a Stock-broker 
 in Philadelphia, stating, "This will introduce to you J. 
 Any orders he may give you please execute on our account 
 and advise us.'' G. took his orders from plaintiff in the 
 purchase and sale of stocks, but reported to defendants and 
 made his calls upon them for the necessary margins. In 
 their accounts, defendants also treated plaintiff as dealing 
 
 for execution to himself. This he nary puroliase on tlie Stock Ex- 
 may do, but he cannot appoint an change, lie is not liable for any loss 
 additional co-ordinate agent. The which may arise to the trust estate 
 sub-agent is the agent merely of the in consequence of the default of the 
 first Broker and not of the Client, Broker employed bv him, if he has 
 and there is no such privity of con- selected him with care, and no cir- 
 tract between him and the Client as cumstances of siLspicion have been 
 would enable him to sue the Client brought to his knowledge which 
 for any balance due. Hill vs. should have induced him to dis- 
 Morri.s, 1.5 Mo. App. 322. But the (rust the Broker. Speight vs. 
 first Broker may recover from his Claunt, 4S L. T. R. (n. s.) 279; s. c. 
 principal the amount of his indebt- 2.S Alb. Law .1. .W; afT'tl by House of 
 edness to the sub-agent. Id.; 21 id. Lrjnls, .'?2 Werh. Rep. •J35. (Com- 
 25.S; Mechemon Agency, § 197, and pare Franklin vs. Osgood. 14 Johnfl. 
 cases there cited. Tvll , afT'g 2 Johns. Ch. 1 ; Suarez vs. 
 
 The fact that one employing ji UinnpcUy, 2 Sandf. Ch. .33(1; Uoose- 
 
 Broker to sell property, is liim.self vdt vs Hooscvolt, •> Abb. N. C. 1 17; 
 
 acting /i-s Broker for another, does Merrill vh rMirtncrs' Loan «t Trust 
 
 not discharL'e him from liability for C<t , 21 Hun, 2tl7; Newton vs. Bntn- 
 
 thc Hffcond Bntker's commisnionM, if son, 13 N. Y .'».s7; Lewis vs Inger- 
 
 thc airency of the first Broker were soli, 3 .\bb. Ct .\pp Dee. .'i.'i?/) 
 
 not disclosed. Jarvis vs. Schaefer, ' liooth vs. Fielding, 1 Week. 
 
 10.') .V. Y. 2S9. Notes. 21.'» But wu Gregory va. 
 
 ^^'herc a tnistee makes an ordi- Wendell, 10 .Midi. 132.
 
 394 Stock-lu'okers and Stock Exchanges. 
 
 directly with them ; and he was charged on their books 
 with the stocks, coraniissions, and interest, and credited 
 with the proceeds of sales. Held, that defendants were the 
 agents of plaintiff, and they could not ignore G.'s agency, 
 and cast the responsibility of a loss upon plaintiff, simply 
 because his orders were taken and obeyed in the purchase 
 and sale of the stocks.' 
 
 XI. €0111111 issiou of Broker. 
 
 In respect to the commissions or compensation which 
 a Stock-Broker is entitled to receive for transacting the 
 business of the Client, the amount thereof rests either upon 
 an express or an implied agreement. Of course, whenever 
 there is an express agreement by which the amount of the 
 commissions is definitely fixed, all greater or other rates 
 are excluded.^ But frequently, in employing a Stock- 
 
 ' Gheen vs. Johnson, 90 Pa. St. when received from his correspond- 
 
 38. To same effect, see Smith vs. ent in San Francisco. Waters vs. 
 
 N. Y. S. & P. C. Co., 25 N. Y. Supp. Marrin, 12 Daly, 445. As to the 
 
 261. See also Ryman vs. Gerlach, effect of the bankruptcy of an agent 
 
 153 Pa. St. 197. Where orders are employing; a correspondent, see 
 
 given by various persons to a Bro- Le Marchant vs. Moore, 150 N. Y. 
 
 ker in one place, and by him exe- 209. 
 
 cuted throudi a second Broker in ^ ^^'harton on Ag. § 323; Bowers 
 another place, the second Broker vs. Jones, 8 Bing. 65; Ware vs. Hay- 
 being g:iven the name of the princi- ward Rubber Co., 85 Mass. 84. An 
 pal in each transaction, he cannot express agreement as to commission 
 apply the gains on one of such prin- and its construction appears in 
 cipal's trades, to the losses resulting Blakeslee vs. Ervin (58 N. W. Rep. 
 from those of another such princi- 850), where a Broker contracted to 
 pal. Baxter vs. Allen, 46 111. App. sell certain stocks for the owner, re- 
 464 taining as compensation whatever 
 
 Although a New York Broker they sold for above par, and he 
 
 who has been instructed to sell made a sale at par and an unac- 
 
 mining stock employs a San Fran- crued dividend. This was held to 
 
 Cisco Broker to sell it, there being no be a sale at a price above par by the 
 
 market in New York, he is liable as amount of such dividend and the 
 
 a trustee for the proceeds of the sale Broker was entitled to that amount.
 
 Coniinissions. 395 
 
 broker, nothing is said as to the amount of his commissions, 
 in which case they must be ascertained by other means. 
 There is a uniform rate fixed by the Xew York Stock Ex- 
 change which is generally observed by the Brokers in deal- 
 ings with their Clients.' And the law seems to be that 
 where a Broker is employed, and no special compensation 
 is agreed upon, the rate of brokerage customarily charged 
 for the same services is the proper measure of damages. 
 The parties are then presumed to have contracted in ref- 
 erence to the usage.- 
 
 As has been shown in the chapter on "Usages," the law 
 
 ' Art. XXXR'. Const. Xew York of the article. By § 4 a proposition 
 Stock Exchanse. By sec. 2 all to accept less rates shall constitute 
 commi.ssions shall be calculated on a violation of the article, the pen- 
 the par value of securities, and the alty for which is suspension for a 
 rates shall be a.s follows: (a) On first offence, and expulsion for a sec- 
 business for non-members, indud- ond offence (^ 6). 
 ing joint account transactions in These rules, like any other rules 
 which a non-member is interested, and regulations in the contempla- 
 transactions for partners not mem- tion of the parties when contracting, 
 hers of the Exchange, and for firms would be admissiljle in evidence in 
 of which the Exchange member or an action by the Broker for his 
 members are special partners only, commissions. Bibb vs. Allen, 149 
 the commi.ssion shall not be less U. S. 481. If the contract is de- 
 than one eighth of one per cent; nied, evidence of the Xew York 
 (6) On bu.sine.ss for members of tlie rates of commission is admi.ssible. 
 Exchange, the commission shall not Rul>ino vs. Scott, 118 X. Y. 6G2. 
 be less than one thirty-second of one ' Morgan vs. Mason, 4 E. D. 
 per cent, except wliere a principal is Smith (X. Y.), 030; Miller vs. Iiw. 
 given up, in which case the conunis- Co. of Xorth .\merica, 1 .\i). New 
 sion .shall not be less than one Cjls. id. 470, and note, which con- 
 fiftieth of one per cent; (c) (Jn min- tains a collection of cime^s on the cx- 
 ing shares and sub.scription rights tent to which usage is admissil)!e to 
 such rates, to members and non- establish a rate of <'()mpcnsntion; 
 members, as may be determined see also Erl)en vs. I.orillard. '2 
 from time to time, by the comnjittee Keyes (\'. Y), .WT; .Vtlanis vs. 
 oncommisHions, with the approval of Capron, 21 Md. IHO; Deshler vs. 
 the govcniitig committee; (di Guv- Beers, 32 III .3tV.S; Potts vs .\ech- 
 cniment and nMwiicijwd securilif's ternarht. \>'.\ Vn St. l.'W; Bilib va. 
 are exempted from lh<' iirovjsions .Mien, 1 I'.J l'. S Isl.
 
 ;5y(; Sto(k-ln-<»k('rs and Stock Kxchanj^es. 
 
 is that where there is a general usage in any particular 
 trade or branch of business, parties having knowledge of 
 the usage are presumed to contract in reference to it ; 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. 
 Knowledge of the usage may be established by presumptive 
 as well as by direct evidence. It may be presumed from 
 surrounding facts, as the uniformity, long continuance, and 
 notoriety of the sarae.^ 
 
 And it is held ^ that an agreement between Brokers to share 
 commissions earned by one on information given by the 
 other is legal. 
 
 But it seems that a Broker or Agent is not always en- 
 titled to a commission, although he may have performed 
 the work or transacted the business for which he was em- 
 ployed, 
 
 Mr. Parsons lays down a proposition^ which seems to be 
 very generally accepted by the coui'ts, that " neither a fac- 
 tor nor a Broker can have any valid claim for his commis- 
 sions or other compensation if he has not discharged all the 
 duties of the employment Avhich he has undertaken with 
 proper care and skill and entire fidelity." This necessarily 
 embraces all acts of bad faith on the part of the Broker ; 
 and it even applies where a Broker, without fraudulent in- 
 tent, receives commissions f I'om a conflicting interest.^ 
 
 In the State of Kew York, however, it has been held 
 
 'See chap, on "Usages" and ' Pars. onCon. (7th ed.) *100, and 
 
 cases cited above. See also East- authorities cited, 
 
 erly vs. Cole, 3 X. Y. 502. * Wharton on Ag. § 3.36; Storj' on 
 
 ' MrT>aiifihlin vs. Barnard, 2 E. Ag. (9th ed.) § 331; Levy vs. Loeb, 
 
 D. Smith ex. Y.), 372. See also 85 X. Y. 365, aff'd on new trial, 89 
 
 Hart vs. Garrett, 87 A. D. .536. X. Y. 386; Hafner vs. Herron, 165 
 
 lU. 242.
 
 Coinmissioiis. 397 
 
 that where a trustee wrongfully invested trust funds iu 
 securities not authorized by law, such act did not deprive 
 him of his right to commissions ; and Mr. Justice AVoodrutf 
 doubted whether even misconduct or gross negligence would 
 operate to debar trustees of their authorized compensation, 
 where no imputation of fraud rests upon them.' 
 
 A Broker is never entitled to commissions for unsuccess- 
 ful efforts, even though, after his failure and the termina- 
 tion of his agency, his labor proves of use and benetit to 
 his principal. He does not, however, lose his commissions 
 where his effoi'ts are rendered a failure by the fault of his 
 principal, or where the purchaser declines to complete be- 
 cause of a defect which is the fault of the principal.'-^ 
 
 ' King vs. Talbot, 40 N. Y. 76; ward sending or tendering the 
 Vanderheyden vs. Vanderheyden, 2 money to him, in order to main- 
 Paige (X. Y.), 288; Rapalje vs. tain an action for commissions. 
 Xors worthy, 1 Sand. Ch. (id.) 406; Mattingly vs. Roach, S4 Cal. 207; 
 Meacham vs. Stearns, 9 Paige (id.), see supra, s. c. sub nom. Mattingly 
 405. vs. Pennie. The readiness of the 
 
 ' Sibbald vs. Bethlehem Iron Co. prosj)ecti\e purchaser or vendor, 
 (X. Y. Ct. App.), 11 X. Y. Week, procured by tlie Broi<er to buy or 
 Dig 44.5; Berg vs. San .Vntonio, 42 sell, can only be made to appear by 
 S. W. Rep. 647. When the Broker, showing that the Broker had pro- 
 employed to effect a sale or purcha.-<e, cured from him a valid contract of 
 ha.s found a party ready and willing purchiise or .sale. .\ vcrljal agree- 
 to .sell or purcha.se upon the terms inent only with a Broker to do some- 
 offered and of suffiiiont responsil>il- tiling which by the terms of the 
 ity, he has performed !iLs contract Statute of Frauds .should liave l)een 
 ancl is entitled to his (*ommi.ssions. tigreed to l)e done in writing, does 
 Thompson vs. .Mayor, .5S .\. Y. not entitle the Broker to cominis- 
 Supp. 203; Owl Canon Gypsum Co. sions. Mattingly vs. IVnnic, 10.5 
 V8. Ferguson, 'iO Pac. Rep. 255; 2 Cal. 514. 
 
 Colo. .\pp. 219; Du<'los V8. Cunning- And if the party foun<l by the 
 
 ham, 102 .\'. Y. 67S; Mattingly vs. Broker procures another person 
 
 Roacli, S4 Cal. 2f)7; Mechcin on (without being authori/itl so to do 
 
 .Agency, $ 966 Therefore, if the by the Broker) to purchiu**' the 
 
 Client repudiatf-s tlie Broker's con- Ktock which the Broker wa.s em- 
 
 trai't, it is not necessary for the l.ii- jtloycd id .sell, the Broker is not 
 
 tcr to take any further wleps to- eiititle<l t«) commiMHionN. Jonm vh.
 
 398 Slock-brokors and Stock Exchanges. 
 
 What constitutes a faithful porformance of the r>rolver's du- 
 ties depends greatly upon the nature of the business commit- 
 ted to his hands. It has been held, for instance, that he is 
 obh'ged to keep and render a correct account of the business 
 transacted.' And, altliough he may not absolutely forfeit 
 his commission by a failure to do this, it may l)e construed 
 as a failure of duty on his part, or as a suppression of evi- 
 dence.'^ 
 
 The case of Hoffman vs. Li\dngston^ peculiarly illus- 
 trates the question of a right of a Stock-broker to recover his 
 commissions. The plaintiff there sued to recover his com- 
 missions on transactions in stocks made for account of de- 
 fendant. The transactions were conducted by the plaintiff 
 under an arrangement by which the latter speculated for 
 the defendant under a discretionary order, buying and sell- 
 ing whenever he deemed it advisable. Under this arrange- 
 ment plaintiff made numerous transactions, resulting in a 
 
 Frost, 53 N. Y. Supp. 575, aff'd 62 tions in an answer will not suffice to 
 N. Y. Supp. 1102. If the jight defeat a Broker's claim for com- 
 to recover commissions is, under the missions and advances, see Myers 
 contract of employment to sell vs. Paine, 13 App. Div. 332; aff'd 57 
 bonds, made to depend upon the N. E. Rep. 11 IS. 
 fact of the bonds being sold and ' Clark vs. Moody, 17 Mass. 145. 
 their proceeds received, the Broker If the Broker reports fictitious deal- 
 is not entitled to commissions on ings he is not entitled to commis- 
 bonds which he contracts to sell at sions. Prout vs. Chisolm, 21 App. 
 a price which the vendor refuses to Div. 58. As to evidence on which 
 accept. Coffin vs. Coke, 6 T. «t C. the Broker may go to the jury, see 
 (N. Y.) 71. Armstrong vs. Village, 159 N. Y. 
 The Broker. howe\er, need not 315. See also Burns vs. Campbell, 
 personally introduce the purchaser 71 .\la. 271 . 
 
 to the principal. Hafner vs. Her- ^ Lupton vs. 'White, 15 Vesey, 
 
 ron. 165 111. 212. and it is immate- 432, 640; Hart vs. Ten Eyck, 2 
 
 rial if the principal effects a sale on Johns. Ch. 42, 108. 
 
 other terms with the party intro- ' 14 J. & S. (N. Y.) 552. 
 duced. Id. As to when the all ega-
 
 Cominissious. 399 
 
 loss to the defendant of a large sum, more than one half 
 of which was for commissions. Xotice of each transaction 
 was not given to the defendant in accoixlance with the cus- 
 tom of Brokers. 
 
 The action was contested on the ground that tlie circum- 
 stances showed that the operations were made with a 
 view of merely yielding commissions for the benefit of the 
 Broker, and it was held that the failure of the latter to 
 give notice to his Client of each transaction was a nefflect 
 of duty which was a sufficient bar to the recovery of com- 
 mission. The 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 trou- 
 ble. That the question is one of due diligence and ordinary 
 skilly 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 
 
 ' For cases where Stock-brokers pleted. Bibb vs. Allen, 149 U. S. 
 
 have sued for commissions earned in 197; Quinlan vs. Raymond, Daily 
 
 illegal tran.sactions, and for money Raj. July 29, 1S86, aff'd 3 .\. Y. St. 
 
 laid out, etc., in llie same, see chai>- Hep. .')7.'}, which also held that the 
 
 ter"Stock-jobl)in(;." statute should be specially pleaded 
 
 Itcaiuiotbe interposed as a valid as a defence. If a statute or ordi- 
 
 deferice or answer to the Broker's nance prescribes that Stock-bro- 
 
 demand for commissions that his kers shall be liccnse<l, an unlicenseti 
 
 contracts, in the makinnandexecu- Broker, in sellin;: stocks, does an un- 
 
 tion of which his rijrht to commis- lawful act, and caiuiot uuiintaiu un 
 
 Bions arose, were not enforceable un- action for comminnions on such sale, 
 
 der the Statute oi Frauds, or for Ilustis vs. I'ickands, 27 III. App. 
 
 want of other form, if, in fact, (hey 270. 
 have been fully exe<-ute<i and com-
 
 400 Stofk-ln-okers and Stock Excliaiii^es. 
 
 both sides,' although this may be done where the Ghent ex- 
 pressly assents to the same.''* 
 
 Neither is a grain Broker entitled to commissions when 
 his principal's intention is to " corner "" the market, and 
 such intent is known to the Broker.^ Nor can a Broker, 
 employed to sell bonds, recover commissions, altiiough he 
 procures a ])urchaser able and willing to buy, when, by the 
 agreement between the principal and the Broker, the pay- 
 ment of the commissions depended upon the pa3'raent of an 
 instahnent of the purchase money, which by reason of a prior 
 sale of the bonds to the vendors, having been declared illegal, 
 and the delivery thereof perpetually enjoined, was not made.^ 
 
 XII. Communications between Broker and Client not 
 
 Privileged. 
 
 A wise public policy dictates that certain kinds of evi- 
 dence should not be received in legal controversies, either 
 
 'Levy vs. Loeb, 85 X. Y. 36.5, cannot act for both sides, and so pre- 
 
 aff'd on new trial, 89 X. Y. 386; Rice serve the Broker's claim for com- 
 
 vs. Davis, 136 Pa. St. 439; Piatt vs. pensation from the vendee. Xoth- 
 
 Baldwin, 2 City Ct. 281 ; Hafner vs. ing short of an express agreement to 
 
 Herron, 165 111. 242. waive that rule would be sufficient 
 
 ^ Levy vs. Loeb, 85 X'. Y. 365; s. c. for that purpose. Rice vs. Davis, 
 
 89N.Y.386. A Broker may recover 136 Pa. St. 439. 
 commissions from both parties, if it 'Samuels vs. Oliver, 130 111. 73. 
 was promised with full knowledjie * Owen vs. Ramsey, 23 Ind. App. 
 
 that the Broker held the same rela- 285. .\s to when a Broker will be 
 
 tion to the other party. Ricev.s. Da- con.sidered as employed jearly, and 
 
 vis, 136Pa. St.439; Jarvisvs.Schae- iis to recovery in such a case, see 
 
 fer, 105 X.Y. 289; Rowe vs. Stevens, Dean as. Woodward, 52 Hun, 421. 
 
 53N. Y.621. The fact that a Broker Evidence that the principal had, in 
 
 for the sale of .stock receives a com- a prior brokerage transaction, by 
 
 pensation from the purchaser for his sharp practice, deprived the Broker 
 
 services, with the knowledce of the of his commissions, inadmissible, 
 
 vendor, and without any objection Brown vs. Barse, 3 App. Div. (N. 
 
 from him, will not constitute a Y.) 257. 
 waiver of the rule that a Broker
 
 Coinniimicatioiis not Privileged. 401 
 
 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 seci-ets of State and papers and communi- 
 cations confided by a Client to his legal adviser. In the lat- 
 ter case the attorney's raoutli is not sealed because of the 
 confidential relations 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 ]iroperly the duties of his profession.' 
 
 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 attentling a patient, which knowledge was neces- 
 sary to enable him to prescribe for the disease.^ And in 
 England^ Best, C. J., said that he for one would never 
 compel a clt?rgyman to disclose a communication made to 
 him by a j)risoner. 
 
 It seems, however, th:it the piivilege may be waived.* 
 The principle whidi underlies the exclusion of this evi- 
 
 ' The earlie«it reportctl case on the §§ SXi, KH; Rev. Stut. ui .Mo. 181)9, 
 
 subject Ls Herd vs. Lovelace, Cary § Kiril); Hpv. Stat, of Mich. 1897, 
 
 (anno 19 KHz ), HS; sec ulna (Jrecn- §§ l(),l.S()-10,l.Sl . 
 ouKh vs. Ga«kcll, 1 Myl. & K. 101 ; 1 ' Hroad v.s. Titt, A Car. & V .-ilS. 
 Greenle.if on Kv. flCth etl.) § 2;}0 M (Jrccnlcaf on Kv. (KJtli e«l ) 
 
 et scj., and rji-scs cited. 5 '2'M\. In .New York it nuist l><* an 
 
 * Wi.s Rev Stat ISOH, §5 1071 i-vprcss waiver, npuii the trial or 
 
 407'); Iowa (VhIc, I.S07, 5 UiO.S; examination, hy llic perMon confi'H- 
 
 Siipp of HM)2, ( \(V)H, and viim'M n'lup, the patient, or tlie Client, 
 
 rited; V V C<«1.- r.f Civil Troc. N. Y. Code Civ. Proc. | 830
 
 402 Stock-brokers and Stock Exchanges. 
 
 dence is that of public policy : the public benefit arising 
 from its suppression, in the great maj(jrity of cases, over- 
 Aveighs 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 
 in anywise embraced within the rules to which we have 
 alluded. In a case in England ^ a Stock-broker was held 
 bound to discover the names of the persons for whom he 
 had purchased shares in a joint-stock company which had 
 neither been incorporated, chartered, nor registered, and 
 which was regulatetl by no deed of settlement, and whose 
 shares passed by delivery. The case is valuable in demon- 
 strating that the liability of a Broker to answer, in ordinary 
 transactions between himself and Client, is unquestioned; 
 that only in cases presenting special features can he refuse to 
 answer, and his refusal in such cases would be grounded on 
 no peculiar privilege extended to Brokers, but on a protection 
 common to all classes ; as, for instance, where the Broker 
 relies on the rule of law exempting 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 associa- 
 tion the name of one D. appeared on the list of shareholders 
 
 ' Greenleaf on Ev. § 236. answer mis^ht subject him to the 
 
 ^ Re Mex. and So. Am. Co., re penalties of the stock-jobbing act. 
 
 Aston, 27 Beav. 474; aff'd 18 L. T. Short vs. Mercier, 3 M. & G. 205. 
 
 596. And see Cloves vs. Thayer, 3 Hill, 
 
 ^ Thus a Stork-broker may refuse 564; Poindexter vs. Davis, 6 Gratt. 
 
 to answer questions as to stock 481 . 
 
 transactions on the ground that his * 37 L. J. (n. s.) pt. 1, 295.
 
 Communications not Priviloijed. 403 
 
 as a holder of certain shares. '' Calls " had been made by 
 the official liquidator on these shares, no part of Avliich had 
 been paid. The liquidator having caused inquiries to be 
 made with respect to the ability of D. to pay the calls, it 
 was discovered that he had no projierty 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 Avith no other source of income. The 
 transfer had been made to him with his consent, and, al- 
 though he had come of age, he had not repudiated it. One 
 C, a Broker, had proposed to act on his behiilf 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 circum- 
 stances attending the transfer, in the hope of being able to 
 make the transferor 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 
 person whom the court might deem capable of giving infor- 
 mation concerning the trade, dealings, estate, or effects of 
 tlie company. 
 
 "Wood, y. ( "., in giving his f)pinion,said tliat lie " wius sur- 
 prised that such applications should always be strenuously o[>- 
 posedon beiialf (jf thf projtosed witness;" and lu; accordingly 
 ordered that C, should be sumnjoncd to attend the judge in 
 chambers at such times as the judge might dcsighatc, t(» l>o 
 examined as llm judge; might direct touching the eslnti' and 
 effects of the as.sociatioti.' 
 
 ' To Harnc effert, ('(nitnict Corpti- Cirofii vb. Wcjivcr, 1 Sim Id I; \\ il- 
 ralioii, -10 I-. .1. ("li 1.'). Sec uIhi) liaiiiM vh. Tyre, IS Uoav. .'}(Ki; .Mat- 
 HawlingH vh. Hall, 1 Cur. d: T. 1 1 ; tlu^w's VmI., i Am. L. J. (ii. h.) n.'iO;
 
 404 Stock-brokers and Stock Excliaiiffos. 
 
 The few adjudicated cases show that the courts, recog- 
 nizing no public policy sulficiently urgent to demand the 
 secrecy of such transactions, have uniformly checked the 
 effort 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 sucli trans- 
 actions are not privileged, that they are [)ublic ; that a re- 
 sort to a Broker's books can be had ad lihitain, to satisfy 
 an idle curiosity,^ or entries thrown open to what the courts 
 have termed a "fishing excursion." On the contrary, the 
 the courts scan "with jealous eyes all attempts of that nature ; 
 and it is onlj' where the party shows a clear legal right to 
 the remedy, and in cases where the interests of justice 
 demand a discovery, that a Broker's books or a Broker's 
 testimony as to dealings with his Client is evidence at the 
 instance of an adverse suitor. 
 
 XIII. Puts, Calls, Straddles and Pools (Considered Apart 
 from their Wagerinj; Aspect . 
 
 It is proposed to consider these dealings apart from any 
 aspect they might have as wagering transactions, as to 
 which see Chapter V., "Stockjobbing." 
 
 When a "put" is purchased outside of the Stock Ex- 
 change through a Broker not a member of the Stock Ex- 
 change, a I'ule of the Exchan^^e that dividends declared 
 prior to the closing of the transfer books shall, as to trans- 
 actions other than for cash, be "dividend off" (i. e. shall 
 not be payable to the owner of the stock), is not apphca- 
 
 In re Finan. Ins. Co. (Lim.), 36 L. J. compelled to state the names of the 
 
 (n. s.) 6S7. person with whom he has dealt in 
 
 ' .\ Broker examined to prove the such stock. Jonau vs. Ferrand, 3 
 
 market value of a stock cannot be Rob. (La.) 366.
 
 Puts, Calls, Straddles and Pools. 405 
 
 ble where a dividend has been declared on the stock pi-ior 
 to the contract, but is not payable till after the closing of 
 the transfer books, and after the day when the option to 
 deliver the stock expires. In such a case the dividend be- 
 longs to the owner of the stock at the time it was declared, 
 and therefore, in tlie case under consideration, it was held 
 to belong to the seller of the stock.' 
 
 A " call " is an agreement to sell, and as such it required 
 a stamp under the AVar Revenue Actof 1890, since repealed, 
 although a " put,'' or an agreement to buy, did not require 
 such a starap.^ 
 
 If a Broker sells a " straddle " it is his duty to close 
 the contract thereby created by exercising the option at the 
 most favorable time in the purchaser's interests within the 
 period during which the option may be exercised, and if he 
 sells " short " the day after the making of the contract, and 
 the stock subsequent!}'' goes up, he will be liable to pay the 
 purchaser what the latter lost by his neglect.^ 
 
 If one of the parties to a " pool " f(jrmed to speculate in 
 certain stock, should withdraw from the pool, and take up 
 and pay for his interest therein, notice should be given by the 
 
 ' Hopper vs. Sage, 112 N. Y. 530, ".striwlcllc" moans not sitnply !i 
 
 and ca.ses cited. person hii\in;i the paper in lii.s intli- 
 
 * Treat v.s. White, iSl U. S. 2frl. vidual custody, l)ut one apparently 
 
 * Harri.s vs. Tiiinhridue, 8 Abb. .\. exercising an individual dominion 
 C. 291, aff'd 83 -V. Y. 92. The pur- thereof as owner, and the party ob- 
 ties to a "straddle" may, of course, iipited by the "straddle" i.s still 
 by special aj;reement, vary its effect, bound to the true owner, thou;;h he 
 and settle their ri^^hts under it be- may have settled with one present- 
 fore the pf.'rio<l of its expiration, by ing it to him, if it was presenle<l \n»- 
 Kivinj^ and receivint; a fi\e<l sum der circumstanc«>s that chari:ed him 
 therefor, or otherwise. Van Nor- with the risk of tlw one pn-smtinu 
 den vs. Ke<;ne, 55 .\. Y. Suikt. Ct. it not beitin the traiwferee theruof. 
 fi? Id. 
 
 The term "bearer" ummI in a
 
 406 Stock-brokers and Stock Exchanges. 
 
 Brokers to the other parties thereto, but the failure to give 
 such notice is not material if the other parties in interest 
 are not prejudiced.' And in an action by the Brokers tore- 
 cover commissions and outlay, an answer alleging the pool 
 combination, antl that one of the parties withdrew from 
 the pool, but which does not allege that the Brokers 
 failed to notify defendants of such Avithdrawal, or that in- 
 jury resulted to defendants, and which merely asks for a 
 dismissal of the complaint, does not raise sufficient matter 
 of defence.^ In that case defendant on the trial claimed 
 that the failure to give notice was a breach of contract, and 
 that defendant was therefore entitled to the market price 
 of his stock as of the day of the breach, and not as of the 
 day of the closing, some months later, when the stock had 
 fallen considerably, but the court, as already stated, found 
 against this contention, as the issue was not proj)erly raised 
 by the pleadings and prayer for relief in the answer.^ 
 
 When a pool was formed between certain persons and a 
 firm of Brokers to purchase and sell land, the profits and 
 losses to be divided in certain })roportions, and the Brokers 
 to receive a certain commission and to buy and sell as prin- 
 cipals, it was held that they could not be sued as Brokers 
 Avithout recourse to the agreement, and as the latter was for 
 an illegal purpose, viz., to "corner" land, the action could 
 not be maintained.* 
 
 Xiy. The Clearing House. 
 
 The Stock Exchange Clearing House was established in 
 New York City in May, 1892 (in extension of the system of 
 
 ' Myers vs. Paine, 13 App. Div. ^ Id 
 332;aff'd57N.E. Rep. 1118. ^Leonard vs. Poole, 55 N. Y. 
 
 » Id. Super. Ct. 213; aff'd 114 N. Y. 371.
 
 The Clearing House. 407 
 
 clearings established by the banks of that city in October, 
 1853) to prevent the necessity of numerous transfers of 
 stock from hand to hand. Matters are settled by a com- 
 bination of stock bahmces and cash balances, both beiitg 
 very small in proportion to the aggregate of business done,' 
 and similar institutions have been established in some of the 
 principal cities of the United States. 
 
 The London Stock Exchange had adopted the clearing 
 principle in ISTl. Tide Cliapter X,, p. 991, note 1. See 
 also Brodhurst on the Law of the Stock Exchange (pp. 70- 
 72), in which the method of settlement of large transactions, 
 through the aid of the Clearing House, is shown in full detail. 
 
 Notwithstanding the great advantage of the Clearing 
 House from a business point of view, in rendering unneces- 
 sary the manual delivery of a great number of stock and 
 share certificates, and of the actual payment and receipt of 
 large sums of money representing the price of securities 
 bought and sold, the Supreme Court of Pennsylvania has 
 held that a delivery made on the Clearing House sheet was 
 a mere settlement of differences, and void at common 
 law ;^ but that this view is erroneous is thus ably pointed 
 out by the Messrs. Biddle in tlieir excellent work on the 
 Law of Stock-brokers, at p. 01 : " The Clearing House is the 
 agent of both of the parties, and wlierc a soUing IJiokcr 
 sends to it his account of sold shares, the Clearing House 
 in such a case is authorized by the buying Broker to accept 
 such shares, and if such an account were to contain nothing 
 
 ' Johiisoii'H Universal Cyclopufdia, House Law; .\rts. XXVI. and 
 
 vol, 2, p. 323, title "Cleanup; XXVII. Const, of the N. Y. Stock 
 
 House"; liiddle on Stock-brokers, E-Xchanne. 
 
 p. 55 et wq.; IJi.sljce & Simoiid'H * Dickson's Kxecutor vs Thoin.'Ls, 
 
 Law of the Vrodna; K.xcliannc, 10 W. N. C 112. See also Uucliiz- 
 
 i 38. See also Wataon's Clearins ky vs. iJe Haven, 10 W. N. C. 109.
 
 408 Stock-brokers and Stock Exchanges. 
 
 but sold shares, the Clearing House, as the agent of a buy- 
 ing Uroker, would simply direct the selling Broker to de- 
 liver the shares to his (the Clearing House's) principal ; but 
 where the account contains bought as well as sold shares, 
 the Clearing House then, acting as the agent of both the 
 Brokers, sets off one transaction as against the other. This 
 the ])rincii)als themselves might perfectly legally do, and 
 consequently it is obvious that tiieir agents may do the 
 same. In fact the sheets sent to the Clearing House by 
 the different Brokers are substantially nothing but bills of 
 sale made by them, and made to them, and sent to their 
 common agent, the Clearing House."" 
 
 And that transactions closed in accordance with the 
 Clearing House Rules of the Chicago Stock Exchange are 
 not framino: contracts, where there is no evidence of an in- 
 tention merely to settle differences, has been decided by the 
 Supreme Court of the United States in Clews vs. Jamieson,^ 
 in the report of which case the rules of the Chicago Clear- 
 ing House as to buying and selling "for the account" are 
 set forth at length. And settlements of differences through 
 the Clearing House have been also held valid in A^an Dusen- 
 Harrington Co. vs. Jungeblut,^ by the Supreme Court of 
 Minnesota, 
 
 That the Clearing House system cannot be used as a cover 
 for fictitious transactions, but that, on the contrary, its 
 records can (in the absence of proof by the Broker's books, 
 showing the names of parties from whom they bought or 
 to whom they sold stock, that the transactions were real) 
 be used in evidence for the purpose of showing that, as the 
 majority of the alleged transactions were never clearred, 
 
 » 182 U. S. 461. ^ 77 N. W. Rep. 970.
 
 Tlio Cleariiiir House. 409 
 
 they never in fact occurred, is the result of the decision in 
 Prout vs. Chisolm.' 
 
 In that case, in which a Client sought to recover moneys 
 and securities deposited with his Broker as margins, on the 
 ground that numerous transactions of buying and selling 
 reported by the Broker Avere all fictitious, it was held that, 
 as it appeared that the Clearing House sheets transmitted 
 to the Clearing House daily by the Brokers who had bought 
 and sold on the Exchange were destroyed at the end of thirty 
 days, the Clearing House ledgers were competent evidence 
 of the facts stated therein, when the clerk who made the 
 entries testified to tlieir accuracy, and that he made them 
 from the Clearing House sheets themselves, and it was also 
 held that where a failure to clear or leportthe transaction 
 was continuous, the conclusion was justified that the trans- 
 actions did not occur, although such a presumption might not 
 arise if only a few transactions were not reported or cleared. 
 
 In some localities a custom similar to the Clearing House 
 system, and known as " ringing up," ])revails amongst 
 Brokers and commission merchants, by which, when a 
 series of contracts have been made for the .sale of the same 
 kind of jjrain for future deliverv, the IJrokers actinfj for 
 buyers and sellci-s .settle by what they call a "ring," that 
 is, by whi'h they reciprocally suni'iuh r, oi- eanccl, eon- 
 tracts and adjust dilferences.' This custom, \\\wn not 
 adopted to promoK^ ;i gambling contract, is not illegal.' 
 
 '21 App Div..->J. voritp, 10 111. 2(W; Loiiorpun vh. 
 
 *See Wiliuir vs. Irwin, 11 Hiks. St ••wurt, .'».') Ill 41; Donne vs. Dim- 
 
 60, for a detailed de«friptiori of this hum, 7'.) III. \'^\ ; Hiiiloy vs. lU'iiMry, 
 
 cast/jm. S7 III. .Vin; I, yon vh. CnllKTl.Kon, S.'l 
 
 * Clarke vs. Ffww, 7 Hiss. MH; III '.i'-i; Olduniluiw vs. Kuowlcs, 1 
 
 Ward VH. Vo.sbiirKli, 'U Ke<l. Hep. Urad. G.'J. 
 12. Sec iiluo Home Co. vjj. Fa-
 
 410 Stock-brokers and Stock Exchanges. 
 
 Chapter IV. 
 USAGES OF STOCK-BROKERS. 
 
 /. General Rules relative to Usages. 
 11. Cases in which Usages of Stock-hrokers held Binding. 
 («.) In the Zfyiited States, 
 (h.) In England. 
 III. Cases in wJtich Usages have been R^ected. 
 {a.) In the United States. 
 (^.) In England. 
 
 I. Oeneral Rules relative to Usages. 
 
 A rule of law laid down in the elementary works as being 
 ■well settled is, that a contract should be interpreted in ac- 
 cordance with tlie intention of the parties thereto, and that 
 the " usage " or " custom " of any particular trade, occupa- 
 tion, business, or place, when it is reasonable, uniform, well 
 settled, and not in opposition to fixed rules of law or in con- 
 travention 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.^ 
 
 ' E^ idence of a custom of the sonable, certain and kno-svn to its 
 
 London Stock Exchange that a members. Wildy vs. Stephenson, 
 
 Broker, not disclosing the name of 1 C. & E. 3. 
 
 his principal, is personally liable, See Title "Custom" in Ency. of 
 being conflicting, the jury was un- the Laws of England, vol. 4; Rob- 
 able to agree ; s to its existence, inson vs. X. Y. and Texas S. S. Co., 
 The court charged that the custom 75 App. Div. (\. Y.) 431; Blake- 
 to be binding should be a universal more vs. Heyman, 6 Fed. Rep. 
 usage of the Stock Exchange, rea- 58L
 
 General Rules relative to Usaares. 
 
 411 
 
 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. Justice Brett, in a case* which power- 
 fully illustrates the connection between the usages of trade 
 and the law, said : "' Customs of trade, as distinguished 
 
 ' Starkie on Ev. 455; Maxted vs. 
 Paine, L. R. 4 Ex. 81; id. (2d case) 
 205; 2 Phillips on Ev. (Cowen's, 
 Hill's, and Edward's notes, 4th Am. 
 ed.) 726; 2 Pars, on Cont. (Sth ed.) 
 535; 1 Greenleaf on Ev. § 292, 294; 
 Starkie on Ev. 637, 710; Broom's 
 Leji Max. 7th ed. 705 et seq.; Walls 
 vs. Bailey, 49 X. Y. 464. See also 
 Lawson on Usape-, 2S7, 2S8, where 
 the law on this subject is exhaus- 
 tively discussed. 
 
 It has been recently decided in 
 England that a usage as to the ne- 
 gotiability of bearer bonds, has been 
 so often proved, that it must be now 
 noticed by the courts judicially and 
 this although the iisage luus been of 
 recent origin. Edelstein vs. Schu- 
 ler, 71 L. J. K. B. 572. And sec 
 observations of the court as to 
 judicially noticing the custom of 
 calling of "margins.'" Hill vs. 
 Morris, 21 Mo. Ap[). 250. 
 
 See also Cole vs. Skruinka, 37 Mo. 
 App. 427; Thomas vs. Hooker Col- 
 ville Steam Pump Co.,2.S Mo App. 
 563 (trade u.sagf« need not be an- 
 cient, if sufTicif-ntlv known). .\h to 
 evidence which wa.s he-id iiisufricient 
 to support an allege*! trade usage nf 
 the New York cofTee market t<i hcII 
 one kind of cofTcc as anoth'-r -••«• 
 
 O'Donoghoe vs. Leggett, 134 N. Y. 
 40. A custom of mining Stock- 
 brokers to charge an arbitrary 
 sum for telegrams was not shown 
 to be well establishetl, certain and 
 uniform and known to both par- 
 ties. Marye vs. Strouse, 5 Fed. 
 Rep. 4S7. 
 
 Particular trade usages or cus- 
 toms, however extensive they may 
 be, must be proven. And therefore 
 an alleged usage of Brokers to re- 
 quire a lender of stock, borrowed to 
 cover a short sale, to put up mar- 
 gins to secure the seller against the 
 decline of the stock, is not proved 
 by the mere opinion of the seller, 
 and of his secretary, that such a 
 usage existed. Morris vs. Jamieson, 
 68 N. E. Rep. 747. See also \Va)igh 
 vs. Seaboard Bank, 54 \. Y. Super. 
 Ct. (22 Jones fc S.) 2.S3; Weld vs. 
 Barker, 153 Pu. St. 41)5; 'iO Atl. 
 Rep. 230; The Innocenta, 10 Ben. 
 (U. S.) 410; Blake vs Stump. 73 
 Md. 100; Overman vs. Hoboken 
 City Bank, M) N. J. L. 61; C.re«>ley 
 vs. Doraii Wriirlit Co , MS .Miuhh. 
 116; Kershaw vs. Wright, 15Miwn. 
 301 
 
 ' Rol.iiiHon vs Mollift, L. R. 7 
 H. L. Eng. A- I \\<\> Ciw. 80'2. 
 KIO.
 
 412 Stoek-biokors and Stock Exchanges. 
 
 from other customs, are generally courses of business in 
 vented t)r relied upon in order to motlify or evade some ap- 
 plication which has been laid down by the courts of some 
 rule of law to business, and which application has seemed 
 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 fundiunental principles of right and 
 wrong. The mercantile custojn is hardly ever invoked but 
 when one of the parties to the dispute has not, in fact, had 
 his attention called to the course of business to be enfcii'ced 
 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 strangers do know and act 
 upon such custom. Where considerable numbei's of men of 
 business carry on one side of a particular business, 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 
 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 unreasonable, contrary to law, and void.'" 
 
 ' See Hamilton vs. Young, 7 L. R. I. 289, in which the court after
 
 General Rules relative to Usages. 413 
 
 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 ai-ising out of transac- 
 tions between Stock- broke i-s 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 
 discretion, 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, em})loying yearly 
 more capital, perhaps, than any other commercial pursuit. 
 
 As the system of conducting a transaction in stocks is ^mi 
 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 original transaction. In 
 truth, it is entirely impossible to make out or understand 
 intelligently an ordinary transaction, either of the London 
 or the Xew York Stock Exchange, without the aiil of those 
 usages. The time required to make a sale of securities at 
 either of these places is but momentary. It often happens 
 that Ijarely a half-<lozen words are spoken in a tiansaction : 
 a nod, the raising of a hand, or other signs arid ejaculations*, 
 are fn;quently u.sed to Ijind a buyer or .seller to a contract 
 einbracini: thousands of shares of securities. One transac- 
 tion is the representative <»f thousands. \'ery often the 
 Hrok'TS mak«; no nieiiioratidiiiii of the; imsiness, or, when 
 
 quotiiiK the lant two KciiUMircM nf with "thw lucid cxiHinitiori of tlio 
 the above cxtraft, ••oiicurM «'iitirHy law."
 
 414 Stock-brokers and Stock Exchanges. 
 
 one is made, it is apt to be of the scantiest character and 
 utterly decij)herless without the exphination of persons ac- 
 quainted with the course of dealing on the Exchange. 
 What actually transpires between 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 preliminary observations, we shall proceed to 
 state certain general rales which liave been established by 
 the courts upon the doctrine of usage, together with such 
 criticisms upon them as seem reasonable and appropriate. 
 
 First. 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 neio contract for the parties. AVhat 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.^ 
 
 When therefore a proposed amended complaint sought to 
 base a contract liability wholly upon an alleged usage 
 amongst London bond-dealers to protect their customer's 
 interests, and to expend money in their behalf, which money 
 was refunded by the customers, a motion to serve the com- 
 plaint as so amended w^as denied.'^ 
 
 ' Tilley vs. County of Cook, 103 627; 20 N. Y. Supp. 771. Usages 
 U. S. Rep. 155; Lombardo vs. Case, of Brokers may explain, but not 
 30 How. Pr. (N. Y ) 117; Parsons vs. prove, a contract. Goddard vs. 
 Martin, 77 Mass 111 ; Smith vs. Bar- Garner, 109 Ala. 98. 
 ringer, 37 Minn. 94; 33 X. W. Rep. ^ Municipal Inv.Co. vs. Industrial 
 116; Dobson vs. Kuhula, 66 Hun, & Gen. Trust Co., 89 Fed Rep. 254.
 
 General Rules relative to Usages. 415 
 
 Second. So the usage of a business plays an important 
 part in the interpretation of technical words and plirases 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.^ 
 
 Third. Another rule is also "well settled — viz., that a writ- 
 ten and express contract cannot be contradicted or varied by 
 usage, i. 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 
 
 ' WTien a customer buys bonds A "certification" of a transfer 
 
 and does not pay for them, and the means that if the seller's certificate 
 
 holders of the bonds "continue" includes more shares than he sells, 
 
 them, it was held that "continue" he does not deliver it to the buyer, 
 
 was a technical term of the London but an officer of the company, 
 
 Stock Exchanf;e and meant a sale whose shares are being sold, or an 
 
 and an agreement to repurcluuse. olfi<-er of the Stock Exchange, 
 
 Bongiovanni vs. Soci(''t<5 G^'n<?ralc, writes on the transfer "Certificate 
 
 54 L. T. 320. This dcciHi(jn wjis produced" and buyers and Hrokcrs 
 
 followed in In re Overweg; iia;is vs. act on this jis if the original certifi- 
 
 Durant, 69 L. J. Ch. 255, where a cale were prothice*!. IMshop vs. 
 
 Broker who, on hLs Client's «ieath, Halkia Co., 25 Q R. I). 512 Thist 
 
 haa "continued" in.stead of selling, "certification" docs not warrant 
 
 was held lialjle to his client as if title, and does not estop a company 
 
 there had been an iinme<liate sale at from donyini: pl.iintifT's title when 
 
 the price on the carrving over day. the transfer to liis vendor w«w in- 
 
 Sce aliio Ik'Htinck VK. London Joint- valid. II). 
 
 Stock Hank nK9.3). 2 Ch, 120. and A "friendly loan" is a loan of 
 
 the early Knclish rjii*es of In re money or stocks for l)usini>ss pur- 
 
 DcnniMon, .'{ Ve«. 552: Andn- vs. poms. Slieppard vs Marrctt, J2 
 
 CrawfoH, 1 Hr P. C .'WO. Leg. Int. (I'u.) 110.
 
 416 
 
 Stock-brokers and Stock Exchanges. 
 
 '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 doubt- 
 ful, 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 
 unreasonable, is deemed to form a part of the contract, and 
 to enter into the intentions of the parties thereto.^ AVhat 
 
 ' When a Stock-broker sold certain 
 shares of stock to his customer, 
 representing that he would dehvor 
 the same, evidence of a custom 
 amongst Stock-brokers to purchase 
 stock in their own name and to be- 
 come personally liable on the con- 
 tract is inadmissible, when the 
 Broker in fact had no such shares. 
 Wolf vs. CampbeU, 110 Mo. 114, 
 and cases cited. See also Municipal 
 Investment Co. vs. Industrial & 
 General Trust Co., Ltd., 89 Fed. 
 Rep. 254. 
 
 A contract by a Broker to sell 
 bonds and "past due" interest, 
 means, so far as regards interest, 
 such interest as has matured, and is 
 collectible on demand, and does not 
 include current interest, to the date 
 of sale, not yet due, and evidence of 
 a custom of Brokers and bankers in 
 St. Louis that "past due" interest 
 included current interest to the time 
 of sale, was properly excluded, as 
 the meaning of the contract was 
 clear. Coquard vs. Bank of Kansas 
 City, 12 Mo. App. 261. See Cook 
 on Corporations, 5th ed. § 453, and 
 cases cited. See also Transconti- 
 
 nental Co. vs. Hilmers. 20 Fed. Rep. 
 717; German Savings Bank vs. 
 Renshaw, 28 Atl. 281; Gilbert vs. 
 McGinnis, 114 111. 28; O'Donohue 
 vs. Leggett, 134 N. Y. 40; Hecht 
 vs. Ratcheller, 147 Mass. 335; Silber- 
 man vs. Clark, 96 N. Y. 522; Bigelow 
 vs. Legg, 102 X. Y. 652; Connell 
 vs. Averill, 8 App. Div. (X. Y.) 528; 
 Gibney vs. Curtis, 61 Md. 192. And 
 the cases cited in Danforth's Index- 
 Digest to Xew York Supreme Court- 
 cases under title, "Custom and 
 Usage," p. 565. See also Hopper 
 vs. Sage, 112 N. Y. 535, and cases 
 cited. 
 
 'Starkie on Ev. 637, 710; WU- 
 liams vs. Gulinan, 3 Greenl. 276; 
 Walls vs. BaUey, 49 X. Y. 464. 
 Hopper vs. Sage, 112 X. Y. 535 
 (seller of stock entitled to dividend 
 declared at sale but payable there- 
 after, although by the usage of the 
 Stock Exchange the buyer would be 
 entitled) . See also Ashner vs. Aben- 
 heim, 19 App. Div. (X. Y.) 287, and 
 cases cited; Britton vs. Ferrin, 171 
 N. Y. 235; Municipal Inv. Co. vs. 
 Industrial & Gen. Trust Co., 89 
 Fed. Rep. 254 ; Gilbert vs. McGinnis,
 
 Geueral Kules relative to Usages. 417 
 
 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 con- 
 tracts contrary 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 settled in the State of Xew York that where A ple<lges 
 stock or securities for the payment of a loan, so that a 
 pledge is created, B, before he can sell the same, must 
 demand payment, and, upon default, give A reasonable 
 notice of time and place of sale.' This j)rinciplc seems to 
 be a " fixed rule of law ; " in fact, all the princij)les of law 
 are " fixed rules.'' The fundamental essence of a law is its 
 fixity. Law is a rule, to distinguish it from advice or 
 counsel, which one is at liberty to follow or not as he sees 
 proper ; it is also a rule, to distinguish it fi'om a compart or 
 agreement, the latter being nothing but a promise proceetl- 
 ing from us, whereas the law is a command directed to us: 
 its language is, " Thou siialt or siialt not do this?.''* But 
 this rule, in relation to a pledge, may be waived In* the 
 pledgor, so that the ])ledgee may sell without notice. The 
 former can make a contract In' which he agrees to allow B, 
 in default of payment, to sell the stocks without notice of 
 
 111 111. 28; Geyser-Marion Gold ' .Miirkhiiin vh Jnudoii, il NY. 
 Mining' Co. vs. Stark, .W L. K. .\. 23.''). 
 
 684. ' IMarkntoiie'H Com (SlmrHWood'i 
 
 ed.) ♦ 45. 
 
 27
 
 418 Stock-brokers and Stock Exchanges. 
 
 any kind, at any place, and such a waiver is entirely legal.' 
 Here we lind a " (Ixed rule of law " set aside at the option 
 of the parties to an agreement. Can A, by an implied con- 
 tract, 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 tlie prohibitions of a 
 statute, or which is not contra lonos inores, 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 should 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 instru- 
 ment ? 
 
 In Markliam 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 
 ajjpellate court held that such evidence was legally rejected 
 upon the ground that it ^vas in hostility of the terms of the 
 contract? If it were so, unquestionably the usage should 
 
 ' Markham vs. Jaudon, supra. agreement entitling the Broker to 
 
 ^ 41 N. Y. 245. sell without notice. 
 'InCovell vs. Loud, 135Mass.41, It was held by the New York 
 
 this usage was held illegal by the Court of Appeals in 1886 that evi- 
 
 trial court, and the Client held en- dence could not be admitted of a 
 
 titled to recover the value of the custom of Brokers and dealers in 
 
 stock from the Broker, but on ap- wool, to consider a sales note of 
 
 peal this decision was reversed on wool a mere memorandum, amount- 
 
 the ground that the contract rela- ing to a proposition which might be 
 
 tion was not that of pledgor and accepted or rejected by either side, 
 
 pledgee but merely an executor}^ and, until rejected or accepted by
 
 General Rules relative to Usa£?es. 419 
 
 have succumbed to the plain agreement of the parties. But 
 there was no written contract in the case, ami the con- 
 chision was based upon the general pi-inciples 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 understanding 
 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 <jf the business the usages which [)revail 
 among Brokers, respecting the sale of securities huld under 
 the circumstances thei-e disclosed i There were two tlissent- 
 ing opinions in that case,' which held that such evidence 
 was admissible, on the ground that it explained a doubtful 
 contract. And it has been directly decided in England that 
 
 hotli, mip;ht be left open, when tlie is inadmissible. Cooper vs Saiul- 
 
 rontract fontained in the sales note ford, 1 Yer. •l.'i'j. 
 
 was a bindin;; one. When it wjls of .\nd a ciistoin of I'rodtu'e Ii.\- 
 
 such a character, no usaj^e could chan;;e HrokerH to cancel <'ontract.s, 
 
 control the rule of law applicable to without their principiUs licing in 
 
 its construction. Hineiow vs. Lejy;, some effective way Hubstitute<l, be- 
 
 102X.Y. 652; N.IO. Uei). 107. .V inn ••ontrary t(. cstabli.sh.-il le^'id 
 
 custom of commission mcrcliants in priticipl<*s, is not bindint; on the 
 
 .\ew Orleans to charge more than principal, even with his juwt«nt. 
 
 the le^al rate of interest, Ijciny ••on- Kent vs. Woodhull, .'».'• N. Y. Super, 
 
 trary to law, parol evidence thereof ("t. 311. 
 
 ' Grover and Woodruff, J J.
 
 420 Stock-brokers and Stock Exchanges. 
 
 a usage of the Stock Exchange to close an account before 
 the account-dav, whore 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 suiiiinarily closed before 
 theaccounl-(hiy, the Ilroker is liable to indemnify the Client 
 if the 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 Avhere the 
 legislature has i-egnlated the law of a certain subject by 
 statute, parties may contract to avoid its effect, and such 
 contracts are perfectly legal. Many statutory provisions 
 are merely declaratory of the common law, and are made 
 to govern cases \vhere parties have not entered into any 
 agreement in reference thereto. 
 
 For instance, if an act of the legislature of a state specif- 
 ically allows three days' grace on negotiable instruments 
 (and we use this illustration because it is made in the case 
 in Markham vs. Jaudon'' by the learned judge who de- 
 livered 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 in- 
 
 ' Lacey vs. Hill (Scrimgeour's ^ But see Colket vs. Ellis, 10 
 
 Claim), L. R. 8 Ch. .\pp. 921. See PhUa. (Pa.) 375; s. c. 32 Leg. Int. 
 
 Ellis vs. Pond, 67 L.J. Q. B.345; (Pa.) 82; Corbett vs. Underwood, 83 
 
 Michael vs. Hart, 70 L. J. K. B. 111. 324. 
 
 1000. ' 41 N. Y. 235.
 
 General Rules relative to Lsages. 421 
 
 strument with express reference to such usage { The courts 
 of Pennsylvania and California say that he would.' 
 
 So a custom on the })art of all the banks of a particular 
 place to demand payment and give notice to endorsers of 
 negotiable paper on XXxafourtlc 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 sought to be upheld. And the gen- 
 eral principles of law relating to the time and place of de- 
 mand 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 caveat emptor cowVX 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 his opinion, laid great stress upon 
 the fact that it appeared the parties had no knowUdge of 
 the custom invoked. 
 
 A still further and more ambiguous limitation of the 
 doctrine of usages, in tiieir influence ui)on contracts, was 
 made by Mr. Justice lirett, in the case of liobinson vs. Mol- 
 lett,' where he said : " So long as they do not infringe some 
 
 ' Lawson vs. Richards, I'liilji. Bowen vh. Newoll, \ Sold. 190; 3 
 
 (Pa.) 179; Chuini)ioii vh. Gordcm, 70 Kcrii. 290, wluTc tin- UHani* of the 
 
 Pa. St. 170; .Minium v.s. Fi.slicr, 1 l)arik.M of C'oiiiu'ctifMit, to roRard 
 
 Cal. 3.'>. chcck.s jmyal^h' afti-r dato iw not 
 
 ' Ufiiiuer VH. Hank of Columbia, 9 entitlod to davH of v.Ti\cc, wait held 
 
 Wheat. .'>.S2. adiniHuihlc. 
 
 • Sec article; 'The Power ■ f TnaKe « 10 Wall. :W3. 
 and Custom," !)>' John I). I.awMon, ' L. H. 7 H I, KuK iV I App Cim. 
 
 Vsr\., 7 South L. Ucv. 13; Hce oluo 802, 810; sec obo Tillpy vh County
 
 422 Stook-l)rokors and Stock Kxchaiises. 
 
 fundamental j)nnciple of right and wrong, they may estab- 
 lish such a custom," but that " customs fundamently 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 P>roker, commissioned to ]iurchase certain mer- 
 chandise for his jirincipal, 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 an}^ knowledge of the usage ; and upon the ground 
 of the principal's ignorance of the same it was rejected. The 
 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 liaving knowledge thereof ; 
 but it is not difficult to perceive that, if such knowledge had 
 been shown, the case would have been differently deter- 
 mined.' 
 
 "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 be- 
 cause made so by statute, or are against public policy, the 
 law will not enforce them. In the latter class, embracing 
 
 of Cook, 103 U. S. Rep. 161, where jected, on the ground that it worked 
 the coxirt say that absurd and unrea- a complete change in the nature of 
 ftonable customs are not binding. the principal's rights and obliga- 
 ' The case of Robinson vs. Mollet, tions, and such change could not be 
 supra, was followed in Irwin vs. made without his assent, which 
 Williar, 110 U. S. 499, where proof could be only implied from knowl- 
 of a similar custom amongst Balti- edge of the custom. See also Ham- 
 more commission merchants was re- ilton vs. Young, L. R. 7 Ir. 289.
 
 General Rules relative to Usages. 423 
 
 all contracts not included in the former, agreements will be 
 enforced, although thev contravene fixed rules of the law 
 merchant, or common law, and frequently statutory pro- 
 visions. 
 
 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 
 upheld, providing, of coarse, the evidence is sufficient 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 this conclusion 
 — viz., that "public policy'' requires, where parties assume 
 obligations which the law does 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 
 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 bo a war- 
 I'aiity where the law implies none, they can insert the war- 
 ranty in the ijill of sale; oi- if the manufacturer sells with- 
 <jut warranty, he can so express it. IJut if such usages were 
 to prevail, tliey would be productive of misunderstanding, 
 litigation, and frequent injustice, and would bo dee|)ly in- 
 jurious to the interests of trade and commerce. They would 
 make it necessary to pn^ve the law of the case by witnesses 
 
 ' These viewH, .since thoy were Lawson, riscj., of the Missouri Hnr, 
 
 written, have received a powerful 7 Soutli. L. Uev. (ii. h.) 1 ; (> id SITi; 
 
 etid«)rscmetit from two elal)orate see uIho Colkot vs. Kills, 10 Phihi. 
 
 and al»le articU-H mx the "Power of fPa ) H7.'»; s c. \\1 I-ei;. Int. (Pa.) S2. 
 
 Usane and Cu.stoni," by John I) ' l)i(kinst)n vs. Gray, SU Mass. 29.
 
 424 Stock-brokers and Stock Exchaiises. 
 
 on the stanil, and it would be settled by the jury in each 
 particular case ; " and he concludes that " public policy " re- 
 quires that such usages should be expressly incorporated in 
 contracts. 
 
 The exclusion of usage on the ground of " ])ublic pol- 
 icy" invokes an argument which wo have not discovered 
 in many cases ; and, if it were well-founded, it would re- 
 quire the rejection of all usages, because it Avould 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 num- 
 ber of the many contracts which come before the courts are 
 proved by parol ; and there is no more practical difficulty 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 auth(jrize him to deal with reference to the custom of 
 Brokers ; and that a Stock-broker, in the execution of his 
 orders, has an implied authority to follow the rules and 
 usaofes of the Stock Exchange.^ 
 
 » Sutton vs. Tatham, 10 Ad. & E. Russell, 29 L. J. Q. B. 279; Lacey 
 
 27; Pollock vs. Stables, 12 Q.B. 765; vs. Hill, L. R. 8 Ch. App. 921 ; Coles 
 
 Mitchell v.s. Newhall, 15 M. & W. vs. Bristowe, L. R. 4 C. P. 36; Cruse 
 
 308; Smith vs. Liudo, 5 C. B. (n. s.) vs. Paine, L. R. 4 Ch. App. 441; 
 
 587; Mortimer vs. McCallan, 6 M. & Johnson vs. Osborne, 11 A. & E. 
 
 W. 58-61 ; Maptee vs. Atkinson, 2 id. 549; Maxted vs. Paine, L. R. 4 Ex. 
 
 440;Lloydvs. Gilbert, 25 L.J. Q.B. 81; id. (2d action) 205; notes to 
 
 74; Xickalls vs. Merry, L. R. 7 Eng. Wijiclesworth vs. Dallison, 1 Sm. L. 
 
 &I. App.Cas. .5.30:Bayliffevs. But- C. 843-857 (6th ed.); Stewart vs. 
 
 ter\\-orth, 1 Ex. 425; Hisgins vs. Cauty, 8 M. & W. 160; Robinson vs. 
 
 Senior, 8 M. & W. 834; Stray vs. Moliett L. R. 7 H. L. Eng. & I.
 
 General Rules relative to Usages. 425 
 
 In England this rule was tirst clearly laid down in the 
 case of Sutton vs. Tatbara/ 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 Robinson vs. Mollett,- and lim- 
 
 App. Cos. 802-826; Westropp vs. (per Denman, J.), in which case the 
 
 Solomon, 8 C. B. 345; Hod^kinson principal was a dealer in stocks, al- 
 
 vs. Kelly, L. R. G Eq. 501; Adams though not a member of the Stock 
 
 vs. Peters, 2 C. & K. 723; Marten vs. Exchange, and he knew well the 
 
 Gibbon, 33 L. T. (n. s.) 561 ; Xourse rule, and that it would be relied on 
 
 vs. Prime, 4 Johns. Ch. 490; s. c. 7 by the broker with whom the princi- 
 
 id. 69; Horton vs. Morgan, 19 N. Y. pal dealt. But it was held in 
 
 170; Lawrence vs. Maxwell, 53 id. Blackburn vs. Mason. 68 L. T. 510, 
 
 19; Whitehouse vs. Moore, 13 Ab. that the customer is not bound by 
 
 Pr. 142; overruled on other points, an unreasonaljle custom unless 
 
 \Miite vs. Baxter, 9 J. & S. (X. Y.) known to him, and he agreed to be 
 
 358; aff'd 71 N. Y. 254; Kingsbury bound by it. 
 
 vs. Kirwiu, 11 J. & S. (X. Y.) 451; It was held bj* the Privy Council 
 aff'd 77 X. Y. 612; Walls v. Bailey, in Forget vs. Baxter, 69 L. J. P. C. 
 49 id. 464, 473; Rosenstock vs. 101, that when one employs a 
 Tonney, 32 Md. 169; Sumner vs. Broker to do business on the Stock 
 Stewart, 69 Pa. St. 321 ; Durant vs. Exchange, he should, in the absence 
 Burt, 98 Ma.ss. 161. See also ca.ses of contrary evidence, be taken to 
 cited in Chapter X., where the have employed the Broker on the 
 question as to liability for calls is terms of tlie Stock Exchange. And 
 disou.s.sed. if in accordance with the practice 
 ' 10 Ad. & E. 27. of the Stock Exchange, the Broker 
 *L. R. 7 11. L. Eng. & I. -^Jjp. receives a check for the price of 
 Cas. 802-800. shares payable to him.self which ho 
 \\Tien an outside principal em- deposits in his own l)ank, the latter 
 ploys a member of the Stock E.\- is not liable to repay the amount 
 change to sell shares subject to its thereof on the Broker's insolvency, 
 rules, he is bound by th«rse nih« unless it has kudwledge of the fraud- 
 unlesa they are illegal or unrcwdu- tilent conduct of tin; Broker who.sn 
 able or not known to him, Marker account at the time wilh ovenirawn 
 vs. I'xlward.s, 57 L. J. Q, B. 1 47, and to an amount larger than the de- 
 even if the nile be unreasoimble, ho posit, and who absconded a few 
 in liound by it, if it is known to him. days H\il)He(|uently. Tiioin.son va. 
 Smith vs. Reynold V 00 L T. SOS Bank (1893), App. ('as. 2K2.
 
 426 Stock-brok<»rs and Stock Exchanges. 
 
 ited in certain particulars wliicli are important to notice: 
 " I quite agree that by employing the Broker, who acts 
 upon a particular market, you authorize liim in make con- 
 tracts 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. Therefore^ as regards all such matters as 
 the time and mode of payment^ the time and mode of delivery^ 
 the various allowances to he made, the viode of adjusting dis- 
 putes as to quality, and all such matters as arise upon the con- 
 tract made in the marl-et, 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 ]\[r. Justice Willes — because they w^ere 
 within the authority conferred upon his agent." 
 
 The rule has also received judicial sanction in Davis & 
 
 When the customers knew that tinentalCo. vs. Hilmers, 20Fed.Rep. 
 their Connecticut Brokers would 717, as such a use would be incon- 
 deal with New York Brokers, they sistent with the contract of pledjje, 
 authorized a course of deahng in and no evidence of usa^e is admissi- 
 accordance with the usage of both ble which would destroy the con- 
 stock markets, viz., that their tract. See also. Perin vs. Parker, 
 Brokers miijht repledge securities 126 111. 207 (as to usages of Chicago 
 which they carried on a margin. Board of Trade); Denton vs. Jack- 
 Skiff vs. Stoddard, 63 Conn. 19S; 21 son, 106 111. 433. 
 L. R. A. 10!^ ^^^len one employs AMien a principal sends an order 
 another to deal in a particular mar- to a Broker doing business in an 
 ket, he will be held as intending that established market or trade, for a 
 the mode of performance should transaction in that trade, he there- 
 be in accordance with the usages by confers upon the Broker author- 
 of the market. Id. See also ity to deal according to any well- 
 Smith vs. Prj'or, 7 X. Y. Supp. 662; settled usage in such trade or mar- 
 Bailey vs. Bensley, 87 111. 556; Van ket. Bibb vs. .\llen. 1 19 U. S. 489; 
 Dusen vs. Jvmgeblut, 75 Minn. 298. see also Clews vs. Jamieson, 182 U. 
 But the Broker cannot so pledge S. 461, where the rules and u.sagcs 
 securities deposited with him that of the Chicago Stock Exchange are 
 they cannot be restored to the fully considered. In that case the 
 owner on repayment of latter's in- plaintiff, acting through a firm of 
 debtedness, Oregon & Transcon- Chicago Stock-brokers and the de-
 
 General Rules relative to Usages. 427 
 
 Co. vs. Howard/ ^vhere it was held that a usage of the 
 London Stock Exchange that all contracts for carrying 
 over are made subject to the differences being paid on pay- 
 day, and failing payment on pay-day, a Broker Las a right, 
 in the absence of cover and collateral security, to close 
 his principal's account, provided he has sent the account 
 showing the balance due by the customer, to the latter, at 
 least on the evening before pay-day, was reasonable. The 
 court said " that although this specific usage had not been 
 decided to be valid, the principle upon which it rested had 
 been recognized in decided cases, and that principle was 
 the right of the Broker to protect himself in consequence 
 of the peculiar position in which he is placed owing to 
 the nature of the business which he transacts for his 
 principal." 
 
 In the United States this rule seems to have been first 
 
 fendants, also Chicago Stock-bro- of that market, whether known to 
 kers, admitted that the transactions him or not, even although he did not 
 were under the rules of the Chicago instruct his Brokers to buy in the 
 Stock Exchange, and it was held New York market, when he subse- 
 that although sudi rules provided a fluently agreed to pay for the shares, 
 remedy for their violation, they did Evidence of the custom of bank- 
 not assume to provide a remedy to ers and Brokers in St. Louis is not 
 the e.vclusion of the juri.sdiction of admissiljle, wlien there is no ofTcr to 
 the courts. If they did, they could show that the principal, wlio lived in 
 not be enforced. The statute or- Kansas City, knew of the custom, 
 ganizing the New York Cotton E.x- and contracted in St. Louis with 
 change, and its rules, are admi-ssible reference to it. If the contract was 
 in evidence when the principal knew made in Kan.s;us City, evidence of 
 that his liroker would act in accord- the St. Louis cu.stom would be in- 
 ance therewith. Bihi) vs .Mien, rompctent. Ccxpiard vs. Bank of 
 149 U. S. 481. Kansjus City, 12 Mo. .\pp. 'jni . 
 
 In Taylor vs. Bailey, 4.S N. E. The nilos of (h(( Cliicairo Board of 
 
 Rep. 2fK), it was Ijcld that wliere a Trade arc admissil)I(' in evidence 
 
 cuutomer employed Brokers to pur- when known to tlie customer. 
 
 chaHC stock for him, and they Hansen vs. Boyd. 101 V. S. 397. 
 
 bouKht f,n the New York Stock Ex- ' 24 Q. B. Div. 091. 
 change, he is bound liy tlie usagert
 
 4*28 Stock-brokers and Stock Exchanges. 
 
 applietl in the case of ]Sourse vs. Prime/ decided by the 
 Court of CUancerv of the State of New York, in the year 
 1S20, where it was lield that Stock-brokers purchasing 
 stocks for their Clients, and lioklitig them as collateral se- 
 curity for the repayment of the purchase-money, need not 
 keep on hand the identical shares })urchasecl, hut that the 
 usages of Brokers, which iiiipHedly become a part of the 
 contract, authorize them to use such stocks in their busi- 
 ness, keeping on hand an equal number of similar shares 
 ready for deliver}' to their Clients. 
 
 But although a Client may be presumed to have con- 
 sented that a transaction be conducted according to the cus- 
 tom of Brokers, the Client is entitled also to presume that 
 the Broker or his agent Avill not act contrary to the custom, 
 and therefore if a Broker's agent receives an order forbid- 
 den by the rules of the Exchanges, the Broker cannot repu- 
 diate his agent's act.^ 
 
 Sixth. And the general rule last stated does not relate 
 solely to dealings between Brokers and their Clients ; but 
 it applies to dealings between themselves, and they are pre- 
 sumed to know the usafi-es of their own business.^ 
 
 ' 4 Johns. Ch. 490; 7 id. 69 Exchange are binding upon its 
 ' Newman vs. Lee, 84 N. Y. Supp. members, and its constitution and 
 106. See also Caswell vs. Putnam, by-laws become part of their con- 
 120 N. Y. 153; Douglas vs. Carpen- tracts with each other (Peabody \s. 
 ter, 17 A. D. {X. Y.) 329; Whitlock Speyers, 56 N. Y. 230). 
 vs. Seaboard National Bank, 29 The rules of the New York Stock 
 Misc. 84; Harding vs. Field, 1 App. Exchange are also binding vipon its 
 Div. (N. Y.) 391; Hubbell vs. members, when not in conflict with 
 Drexel, 11 Fed. Rep. 115. the law of the land. White vs. 
 'Durant vs. Burt, 98 iMass. 161; Brownell, 2 Daly, 329, followed in 
 Colket vs. Ellis, 10 Phila. 375, s. c. Hutchinson vs. Lawrence, 67 IIow. 
 32 Leg. Int. (Pa.) 82; Hoffman vs. Prac. 38, and Haight vs. Dicker- 
 Livingston, 14 J. & S. rN. Y.) 552. man, 18 N. Y. Supp. 559, 63 Hun, 
 So the rules of the New York Gold 632. But a seat cannot be sold to
 
 General Kiiles relative to Usages. 429 
 
 From the cases cited under the two general rules last 
 mentioned, it appears that the Client is bound, whether he 
 knows the usage or not ; and here we find a decided exce[)- 
 tion to the general rule, which requires that one can only 
 be bound by a usage of which he is shown to have knowl- 
 edge.' By employing 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 accordance with the course of business there 
 prevailing, founded upon the rules and usages of the Ex- 
 change; and hence such a person cannot avail himself of 
 his supposed ignorance of the mode of dealing there pre- 
 vailing.' 
 
 pay debts not coming within the Strouse, 5 Fed. Rep. 483, that a 
 
 scope of the rule.s. Cochran vs. custom of mining stock Brokers to 
 
 Adams, 180 Pa. 289. A rule as to charge the full cost of a telegram to 
 
 notice must be obeyed strictly, each customer, although a dozen 
 
 WilliauLson vs. Ellis, 12 Pliila. 338. customers' orders might be included 
 
 But a usage of the New York Pe- in the one telegram, w;is unretison- 
 
 troleum Exchange to settle all able, and did not l)ind the cu4omer 
 
 transactions between memljers at unless he had knowledge of it. 
 
 2' 15 P. M. the next day, does not 'See particularly, on this point, 
 
 apply to a principal, a non-meml)er, remarks of Pollock, C. B., in Mitch- 
 
 who instructed a member to buy oil ell vs. Xewhall, 15 M it W. 3()S; 
 
 for him on margin. Greeley vs. Pollock vs. Stables, 12 Q. B. 705; 
 
 Doran-Wright Co., IS N. E. Rep. BaylilTe vs. Butterworth, 1 Ex. 425; 
 
 878. and see also Maxtctl vs. Paine, I.. H. 
 
 ' See also Scott vs. G<Klfrey, 70 L. I K\. (2d action) id. 203. .\s to its 
 
 J. K B !)5I. When one deals in a being innieces.sary to .set up in a 
 
 particular market, he will be pre- pleading against a client that he 
 
 Humed to deal in accordance with had knowledge of the existence of 
 
 its usages, whether lie knows of the usages of Brokers, see ^^^lite- 
 
 them or not. Samuels vs. Oliver, house vs Moore, 13 .\b. (\. Y.) Pr. 
 
 130 111. 73. So nl.Ho one who em- 112. The general doctrine, liow- 
 
 ploys 8 board of t'a<le Broker is ever of this mso, wliile perhaps 
 
 boinid by a custom of the Ixiard al- overruled by Stent.on vs .Icromc, 51 
 
 thou'.;h ignorant of it. C'urti-i vs. \. Y. 4S0, is not affected in the 
 
 Wright, 10 III .\pp 4(11 tibove resji ct. ,*<ee also Miller vs. 
 
 but it w.m held ill M.ir\c \s Iiisiir.im c f'o , | Ab. New Ca». 470.
 
 430 Stock-brokers and Stock Excliauges. 
 
 There may arise cases in which the courts will not apply 
 the two general rules which we have just laid down, with- 
 out some evidence that the party souglit to be affected by 
 the usages had knowledge of them ; but they may conliiie 
 their application to the cases endjraced in the remarks of 
 Mr. Justice Brett in Robinson vs. Mollett, heretofore cited. 
 
 Seventh. 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 presumptive evidence; 
 by the circumstances surrounding the transaction.' In Stew- 
 art vs. Cauty- the rules of the Liverpool Stock Exchange 
 were admitted in evidence as the best means of showing 
 Avhat was the understanding of the parties in the contract 
 in question by "reasonable time" for its completion. 
 
 Eighth. The usages of a ])articuhir Broker, lii'in, or busi- 
 ness 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 
 defendants to purchase stocks for him upon margin, he 
 
 The fact that a special settlin<i ' Stewart vs. Cauty, 8 M. & W. 
 
 day (under a rule of the London 160. To charge any person, how 
 
 Stock Exchange) was fraudulently e\er, with a custom confined to any 
 
 obtained, will not affect a sale of particular house in any particular 
 
 shares of a new company, so far as trade, it must l)e shown that he had 
 
 regards members not concerned in express knowledge of the same 
 
 the fraud. Ex parte Ward, 51 L. J. (Moore vs. Voughton, 1 Stark. -187; 
 
 Ch. 752. The rules of the London Scott vs. Irving, 1 B. <fc Ad. 605; 
 
 Stock Exchange are imported into Stewart vs. Aberdein, 4 M. & W. 
 
 all contracts made by its members. 211). 
 
 Ex parte Ward. .52 L. J. Ch. 73. = Supra. 
 
 See Loring vs. Davis, 32 Ch. Div. '' Baker vs. Drake, 66 X. Y. 518; 
 
 625. Loring vs. Gurney, 22 Mass. 15: see 
 
 Board of trade usages are bind- also cases cited under Rule VII. in 
 
 ing whether knowni to the customer note. 
 
 or not. Pardridge vs. Cutler, 68 * 66 X. Y. 518. 
 lU. App 569.
 
 General Kiiles relative (o Usages. 431 
 
 agreeing, in writing, that all the transactions should be in 
 every way subject to the usages of defendant's office. In an 
 action for a convei-sion by an alleged sale without notice of 
 stocks purchased, defendants offerctl to prove that it was 
 the custom of their office to sell on account of failure to 
 furnish sufficient margin at tlie Stock Exchange without 
 giving notice to the Client of the time and place of sale. 
 This offer was rejected, and the appellate court held that 
 such rejection was error. The court, in the ])revailing opin- 
 ion (there being three out of the seven judges who dissented), 
 expressly adhered to the decision in Markham vs. Jaudon,' 
 that oral proof of the usage of Brokers in such cases is 
 not admissible to add to or make part of the contract ; but 
 held that inasmuch as the paper had 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 admissible to explain what those 
 usages were ; and that if parol proof should show that it 
 was a usage of the defendant's office for want of a margin 
 to sell stocks in pledge at the public Board of Brokers, with- 
 out notice to the pledgcji- of the time or place of sale, such 
 proof tended to establish an agreement to that effect, and 
 thatsuch an a;rr''<'iiH'nt would not contravene any statute 
 nor infringe upon puhlic policy.'^ 
 
 '41 N. Y. 23.5. ford, 31 App, Div. (-N. V.) 228. 
 
 ' See al-so, in thi.s connection, Col- And u Stock-broker is liiilile to a 
 
 ket V8. Elli«, 10 Phila. (I'a.) .375; corporation wlien he witnejwe-s a 
 
 8. c. 32 Leg. Int. 82. The habitual power of attorney to tran.sfor its 
 
 course of dealincH between tlie par- bonds, inider a custom of railway 
 
 tics may be shown as justifying a transfer ofTices in .New York City to 
 
 cotton Broker fo make a ^ale with- accept such witnessing as a guar- 
 
 put notice. Ilobin.son vs. ('raw- anty of iticntity, Jennie Clarkson
 
 432 Stock-brokers and Stock Exchanges. 
 
 JVhith. On the other hand, a Broker cannot bind his 
 Client Avithout his ex]>ress agreement by transacting busi- 
 ness, connnitted to iiim, 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 par- 
 ticular mercantile ex])ression therein is for the jury.^ 
 
 Elecenth. 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 testi- 
 mony full and satisfactor3^^ With this preliminary state- 
 Home vs. Chesapciike R. R. Co., 83 See also Milroy vs. Chicaj^o, M. ct St. 
 N. Y. Supp. 913. P. Ry. Co., 67 N. W. TiKv, Scott vs. 
 
 A custom of Stock-brokers of Salt Brown, 60 N. Y. Supp. 511 ; 29 Misc. 
 Lake City to carry in their names, as 320. When there is sufHcient evi- 
 trustees, the stock of third parties, dence of a custom as to the calling 
 and to transfer it without the con- of "margins," the question of its 
 sent of their cestuis que trust, is existence will be submitted to the 
 inoperative unless assented to both jury, the court saying that the cus- 
 by the customer and Broker, torn is so general among American 
 Geyser-Marion Gold Mining Co. vs. Exchanges in regard to the sale of 
 Stark, 53 L. R. A. 64. gniin, provisions, cotton, stock, and 
 
 ' Wiltshire vs. Sims, 1 Campb. bonds for future delivery, that it 
 258; Brown vs. Boorman, 11 CI. & might be doulited whether it might 
 Fin. 1; Maxted vs. Paine, L. R. 4 not be noticed judicially. Hill vs. 
 Ex. 81; Maxted vs. Morris, 21 L. T. Morris, 21 Mo. App. 256. See also 
 (n. s.) 535; Fletcher vs. Marshall, 15 ScoUans vs. Rollins, 60 N. E Rep. 
 M. & W. 755; Hoffman vs. Livings- 983. 
 
 ton,14J. &S. (N.Y.)552. Sec also 'Vail vs. Rice, 5 N. Y. 155; 
 Chap. in. Thomas vs. Graves, 1 Mill (S. C), 
 
 ^Chitty on Cont. 82; Smith vs. Const. Rep. 1.50; Parrot vs. Thatch- 
 Blandy, Ry. & >L 260; Hutchinson er, 26 Mjiss. 426; Patridge vs. For- 
 vs. Bowker, 5 M. k W. 540; Smith syth, 29 Ala. 200. Some cases, 
 vs. Bouvier, 70 Pa. St. 325; Dawson however, hold that one witness is 
 vs. Kittle, 4 Hill, 107; Goodyear vs. not sufficient to prove a custom. 
 Ogden, id. 104. Bissell vs. Ryan, 23 111. 566; Wood 
 
 WTiether a custom exists is for the vs. Hickok, 2 Wend. (^N. Y.) 501; 
 jur\- fSuIlivan vs. .Ternigan. 21 Fla. Halwerson vs. Cole, 1 Spears (S. C), 
 264\ although its reasonableness .321. But an isolated in.stance is 
 and validity are for the court. (Id.) not sufficient to prove a custom, nor
 
 Usasres of Stock-brokers held Binding. 433 
 
 inent of some of the leading general principles governing 
 usages, Ave shall now proceed to set forth the most promi- 
 nent cases in both countries relating to Stock-brokers in 
 which their usages have been sustained and rejected, with 
 iuch comments as the circumstances seem to call for in the 
 light of these general rules. 
 
 n. Cases in which Usages of Stock-brokers held 
 Binding. 
 
 (o.) 1)1 the United States. 
 
 In the State of New York the first case in which the 
 usage of Stock-brokers was sustained is Xourse 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 pur- 
 chased, but, upon demand of his Client, sent to him certif- 
 icates in the name of his clerk, with blank powers of at- 
 torney signed by the latter. It was proved by Brokers 
 that purchases of stock at the Board of Brokers were al- 
 wavs mad<; in the name of the Bioker without disclosinjr 
 
 will evidence of the castom of one the jury. Dickinson vs. Pouph- 
 
 pereon be sufficient to cstabli.sh a keepsie, 75 X. V. 77. If the tcsti- 
 
 general course of trade (Hurr vh. mony as to a custom of cotton 
 
 Sickles, 17 .\rk 4'2H; Cope vh. Dodd, factors is deiiie<l by another witness, 
 
 13 Pa. St 3:i; .\dam.s vs. Otterback, it is not provp<l. Woottcrs vs. 
 
 1.5 How (U S ] .WO). KaiifTman. 07 Tox IKS. 
 
 It Is not necessary tliat all tlio ' .\nto, pp 2.'»3, 127. 
 
 witnes^ses Hhoiijd airn-c to jyrovc the ' I'J .\'. V. 170 
 custom It i.H then a (ji jot ion for 
 L'8
 
 434 Stock-brokers and Stock Exchanges. 
 
 his principars name, and that his liability to his principal 
 was limited to transferring to him the required 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 
 Brokers onl}-, 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 un- 
 derstood as consenting that it should be done in the usual 
 manner; and that the plaintiff had no interest in having 
 his shares kept separately 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 mar- 
 gin for their Clients was valid, there is abundance of reason 
 and authority for sustaining sucli usage.^ And it has also 
 
 ' The principle of these cases has margin carried stocks is very fully 
 
 been sevi ral times reaflirmed in considered. 
 
 New York. See Ch. III. p. 253. Reasonable notice must be given 
 
 See also Caswell vs. Putnam, 120 to furnish more margin, Lazare vs. 
 
 N.Y. 153; Harding vs. Field, lApp. Allen, 20 App. Div. 616, in which 
 
 D!v. (N. Y.) 391. case, although a judgment for de- 
 
 ' Lawrence vs. Maxwell, 53 N. Y. fendant Stock-broker, upon a di- 
 19, and also cases collected in Ch. rected verdict, was affirmed, the 
 III. at p. 253. As to how far evi- court expressed an opinion that a 
 dence is admissible to show that a notice of a little over an hour, was 
 Client may be bound, when he re- unreasonable. See also Hess vs. 
 fuses to put up additional margins, Rau, 95 N. Y. 362; Gillett vs. Whit- 
 by a usage of Wall Street authoriz- ing, 120 id. 402; Rogers vs. Wiley, 
 ing a settlement of his account at 131 id. 527; Swan vs. Baxter, 36 
 private instead of public sale, see Misc. (N. Y.) 233. 
 Cameron vs. Durkheim, 55 N. Y. See Douglas vs. Carpenter, 17 A. 
 425. See also Skiff vs. Stoddard, 63 D. 329, as to liability of Broker for 
 Conn. 19S; 21 L. R. A. 102, and conversion if he pledges his Client's 
 cases cited, where the relation be- securities with others, for a larger 
 tween Brokers and Clients as to amount than his Client owes him.
 
 Usages of Stock-brokers held Binding. 435 
 
 been held in New York that the rules of the Board of Bro- 
 kers are binding upon third persons who employ members 
 thereof to make transactions with other Brokers relative to 
 stocks. And, accordingly, where AV. and C, being mem- 
 bers of the Open Board of Brokers, and W. as Broker of B., 
 but in his own name, entered into a contract with C. for 
 the sale of certain stocks, according to the rules of the Ex- 
 change, of which B. had knowledge, and thereafter, under 
 the rules, C. called on W. for further margin ; whereupon 
 "W. notified B., and reminded him that he would be liable 
 to suspension if he did not comply ; and B. then agreed that 
 if W. would not put up the margins he would protect him 
 against all loss which should ensue from such refusal, and if 
 he was suspended, would pay him during the time of his 
 suspension from the board at a rate equal to the average 
 business of AV. for the previous year, with ten per cent 
 added thereto : and W. did refuse to put up the margin, 
 and was suspended — held, that he could recover from B. 
 under this agreement ; that there was sufficient mutuality 
 and consideration, and the same was perfectly valid.' 
 
 -After all advances ha\e been paid, to sell such collateral and credit the 
 
 the Broker is not entitled to pledge customer with the proceeds, was 
 
 the stock, and Is liable as for a con- properly excluded, as whatever the 
 
 version. Van Voorhis vs. Rea Bros, custom of Brokers may be while a 
 
 «t Co., 153 Pa. 19. See also Trans- speculation is pending, it cannot 
 
 continental Co. vs. Hilmers, 20 Fed. apply to the broker's right to recover 
 
 Rep. 717; Whitlock vs. Seaboard what is duo him after he hius car- 
 
 .N'ational Bank, 29 .Misc. .N'.Y.) .S4. ried his cu.stonier's stocks lus long 
 
 In the ca.se of De Cordova vs. as ro(iuestctl, and finally sold 
 
 Banium, 1.% .V. Y. Gl."), it was held them pursuant to his ex|)ress order, 
 
 that a Stock-broker is not obliged ' White vs Baxter, J. it S. (.N. 
 
 to sell collateral security before Y.) MS; afT'd 71 X. Y. 251. See 
 
 suing his castomer for the balance also, for other cases in which usages 
 
 of his aecount, when there is no of Brokers have been upheld, 
 
 agreement to that effect and evi- \Vhitehou.se vs. Moore, 13*. \b. (.\. 
 
 dence of a custom of Stock-holders Y.) I'r. 112, which in the injiin.
 
 436 Stock-brokers smd Stock Excliaiiges. 
 
 Baker vs. Drake,' which has been fully noticed under the 
 eighth general rule,'^ sliould here be alluded to as further 
 extending the law of usage, and laying down the precedent 
 that })arties may also be bound by the usages of a particu- 
 kir Brokers otlice.^ 
 
 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 
 being shown that he had had previous dealings in the busi- 
 ness, he was not permitted to set up ignorance of the mean- 
 ing of the term "closing-out," and the mode in which it 
 was done.'' 
 
 Pennsylvania also furnishes a very strong precedent for 
 upholding the usages of Brokers in the case of Colket vs. 
 Ellis.^ There, the ])arties being members of the Philadel- 
 phia Stock Exchange, the plaintiffs borrowed on " call " 
 a sum of money from defendants, depositing as collateral 
 securit}' certain 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 
 
 however, is overruled l)y Baker vs. * Kingsbury vs. Kirwin, 11 J. &S. 
 
 Drake, 66 N. Y. 518, 522; Corbctt (N. Y.) 451; aff'd 77 N. Y. 612. 
 
 vs. Underwood, 83 111. 324; Hill vs. A usage of the New York Stock 
 
 Morris, 21 Mo. App. 256; 3 West. Exchange not to make any distinc- 
 
 409; also cases cited under Ch. III. tion, in distributing the proceeds of 
 
 p. 253. the transfer of a membership, be- 
 
 ' 66 N. Y. 518. tween debts due individual mem- 
 
 ' Ante, p. 430. bers, and debts due partnerships, 
 
 ' The above cases in New York, one of whose members was a mem- 
 
 the case of Colket vs. Ellis, 32 Leg. ber of the Exchange, was held es- 
 
 Int. 82, s. c. 10 Phila. (Pa.) 375, and tablished in In re Hayes, 75 N. Y. 
 
 the English case of Lacey vs. Hill Supp. 312, so as to give effect to an 
 
 (Scrimgeour's Claim), L. R. 8 Ch. ambiguous rule of the Exchange. 
 
 App. 921, would seem to be irrecoi)- "32 Leg. Int. (Pa.) 82; s. c. 10 
 
 cilable with the ca.se of Markham vs. Phila. (Pa.) 375. 
 Jaudon, 41 N. Y. 235.
 
 Usages of Stock-brokers held Uiiuling. 437 
 
 collateral securities at the Board of Brokers without fur- 
 ther notice to the borrower. The trial court found that 
 both parties were familiar with the usage, and both acted 
 throughout on the basis of its validity. The money not 
 having been paid upon call made in the regular way, the 
 defendants sold the stock on the same day at the Stock 
 Exchange, first notifying the plaintiffs of their intention, 
 and rendered the former accounts of the sale. The plain- 
 tiffs subsequently tendered the amount of the loan, and de- 
 manded the return of the stocks ])ledged as collateral ; and, 
 upon refusal, brought an action of trover to recover for the 
 conversion of the same upon the ground that the usage un- 
 der which the sale was made was in contravention of the 
 rule of law requiring a sale of collaterals to be public after 
 due notice. But the trial judge, Mitchell, J., overruled this 
 defence, holding, in a well-considered opinion, that where 
 no statute or principle of public policy intervenes but a 
 rule of law, which is a mere privilege, and ma}'^ be waived, 
 there is no reason why the waiver may not be as well estab- 
 lished by a custom known to and acquiesced in by the par- 
 ties as b}' an exi)ress conti'act ; 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 l)etweon the 
 parties before him, both members of the Board of IJrokors, 
 and familiar with and dealing on the l)asis of such usage, 
 it was valid and lawful, ami controlled th(; ri<rlits of the 
 parties. 
 
 This case confirms the views heretofore expressed under 
 the fourth general rule laid down in this chapter,' and wo 
 confess that we can perceive ikj legal or substantial reason 
 
 ' P. 41 (i.
 
 488 Stock-hrokcrs ami Slock Exchanges. 
 
 for not applying the rule as well to third persons who have 
 full and conn)lete knowledge of the usage as to members 
 of the Stock Exchange — the \vhole basis of the doctrine of 
 usage resting upon the knowledge of the parties — and why 
 eWdence 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 margin, it means that the Broker makes a 
 contract, verbal or written, 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 np by the buyer is for security 
 
 '41 N. Y. 245; see also, in this It has been also held in Pennsyl- 
 
 connection, Lacey vs. Hill (Scrim- vania that when a Broker is em- 
 
 geour'sClaim), L.R. 8 Ch. App. 921. ployed to sell stock, the fact that 
 
 In Van Horn vs. GilbouRh, 21 the Broker transferred the stock to 
 
 Am. L. R. (n. s.) 171; 10 \V. N. 347; his own name was in accordance 
 
 13 Lan. Bar 61, where a Stock- with the legitimate, if not the u.sual, 
 
 broker bought railroad stock for his course of l)usincss, and when lie sold 
 
 Client, and, according to a Broker's only a small part of it, and the rest 
 
 usage, pledged it as collateral for remained on his hands l^ecause he 
 
 payment of a balance of the pur- could not dispose of it without a 
 
 chase price, it was held that, under heavy sacrifice, a jury was not war- 
 
 a custom of Brokers, he was justified ranted in charging him with the 
 
 in pledging and the pledgee in sub- whole value of the stock, unless he 
 
 sequently selling the stock, on the refused to account, or return it. 
 
 fall of the market price, without Leddy vs. Flanigan, 3 Phila. 355. 
 
 notice to his Client, to whom both Likewise it was held in Sheppard 
 
 customs were known, and was en- vs. Barrett, 42 Leg. Int. (Pa.) 140, 
 
 titled to recover what was owing to that the term "friendly loan" by 
 
 him by his Client on the transaction, the custom of Brokers is universally 
 
 See note as to the efTect of Stock understood to be a loan of money or 
 
 Exchange usajes on non-members stocks, between Brokers for business 
 
 appended to the report of last cited purposes, and under the rules of the 
 
 ca.se in 21 Am. L. X. (n. s.) 171. Philadelphia Stock Exchange such 
 
 See Covell vs. Loud, 135 Mass. 41. are entitled to a preference out of
 
 Usages of Stock-brokei-s held Binding. 439 
 
 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.' 
 
 The most important recent decision as to the relation of 
 Stock-brokers and their customers so far as rcijards the 
 carrying of margins is furnished by the State of Connecti- 
 cut where it was held in Skiff vs. Stoddard ^ (per Prentice, 
 J.), that when a Client in Connecticut employed a Broker 
 in New Hartford to effect transactions for him on the New 
 York Stock Exchange, he would be bound by the usages of 
 that market, provided they were not unreasonable, and that 
 a custom to repledge a customer's stock held on margin was 
 not unreasonable. 
 
 In Ohio the evidence showed the existence in New York 
 and Cincinnati of a usage of Stock-brokers to look to each 
 other personally when the principals are not brought into 
 the transaction. This evidence was uncontradicted, but the 
 
 the proceeds of a member's seat, rules of the Xew Orleans Cotton Ex- 
 See also Thompson vs. Adams, 93 change as to substitution of con- 
 Pa. 55. tracts are binding upon principals 
 
 ' Commonwealth vs. Cooper, 4 who are acquainted with them. 
 
 Mass. L. R. (May 4, 1881) No. 24; Conner vs. Robertson, 37 La. Ann. 
 
 B. c. Am. L. Rev. 3G0 (.May, 1881). 815; Lehman vs. Keld, 37 Fed. 852; 
 
 The cu.stom of "ringing up" Irwin vs. Williar, 110 U. S. 499; 
 
 amongst grain IJrokers in Baltimore Barnett vs. Warren, 82 Ala. 557 (2 
 
 Is valid. Ward vs. Vosljurgh, 31 So. 457) (u.sage of cotton Factors to 
 
 Fed. 12. .\ cu.stom of the board of acquire lien on cotton stored for 
 
 trade by which a buyer of pjrain sale for moneys advanced, binding); 
 
 with warranty must within a given Burbridge vs. Gumbel, 72 Miss. 371 
 
 time object to the quality, Ls rca- (evidence of a usage to apply in- 
 
 Bonatjlc as between its members, structioiis as to insuring cotton only 
 
 Evcrringham vs. Lord, 19 111. .\pp. to the seiison in which the instruc- 
 
 56.5. Sec also Riebo vs. Hollman, tions were given, is adtnissible). 
 69 111. App, 19, and Kinney '.s III. ' Durant vs. Burt, 9S Miuhs. 102. 
 Dig, title "Board of Trade." The '03 Conn. 198; 21 L. 11. A. 102.
 
 440 Stock-brokers und Stock Exchauges. 
 
 jury ignored it, and gave a defendant Broker, ^vllO was sued 
 for the sum ])aid for foi-ged bonds, and whose defence was 
 that be was acting for a principal, and tbat be, as agent 
 was not liable, a verdict in bis favor, and tbe court on motion 
 of plaintiff granted a new trial, saying tbe trial court bad 
 fully instructed tbe jury upon this (juestioii, and tbe effect 
 of it.^ 
 
 In tbe same State a custom of the pork trade to close 
 tbe year on October 31st, and to charge extra commis- 
 sions on stock carried over, has been beld reasonable.^ 
 
 It has also been lately beld in Massacbusetts tbat a usage 
 of Bankers and Brokers and others engaged in dealing in 
 securities, to treat certificates endorsed in blank as negotiable, 
 and as enabling tbe bearer to give a good title to a bona 
 fide purchaser, is binding.' 
 
 A usage obtaining in Baltimore, on tbe Stock Exchange, 
 and amongst Bankers and Brokers, requiring registered con- 
 sols to be transferred in writing, and to be accompanied by 
 a power of attorney acknowledged before a notar}' public, 
 has been held in Taliferro vs. Bank* to be binding, and to 
 put an intended pledgee on inquiry as to ownership, but 
 the usage must be itself proved, and not tbe rules of the 
 Stock Exchange, the existence of which is not evidence 
 of tbe usage. 
 
 A usase of tbe Stock Exchange that when a Stock- 
 broker is employed to sell stock, and he is subsequently 
 employed by another person to purchase tbe same kind of 
 
 'Souther vs. Stoeckle, 7 Ohio => gcoHans vs. Rollins, 60 N. E. 
 Dec. Rep. 511. See BaUey vs. Gal- Rep. 983. 
 braith, 100 Tenn. 599. * 17 Atl. 1036. 
 
 * Mathews vs. Briggs, 7 Ohio 
 Dec. Rep. 23.
 
 Usages of Stoek-brokers held Binding. 441 
 
 stock, at a limited price, he may secure the services of an- 
 other Broker to bid the prices fixed by the intending pur- 
 chaser, has been held valid in Alabama in Terry vs. Bir- 
 mingham National Bank,' when neither the buyer nor seller 
 had any knowledge of each other's intentions, or of their in- 
 structions to the Broker. 
 
 Although the usages of the London and New York Stock 
 Exchanges are similar as to requiring the execution of 
 transfei-s of shares in bhink to be authenticated by the 
 proper officer, yet it was held in Colonial Bank vs. Cady,^ 
 that such a transfer, by executors, in England, of shares in 
 an American corporation, did not estop the executors from 
 claiming them from defendant bank to whom they had 
 been pledged by a Stock-broker for value without notice, 
 although if the case wei'e decided by American law such 
 a transferee would take title even if the executors' siy:- 
 natures to the transfer Avere not verified by the consul. 
 
 (b.) In EiigJ<ni<l. 
 
 * 
 
 In England the question of the effect of usage upon con- 
 tracts has been carefully and thoroughly C(jnsidered by the 
 courts. 
 
 There are two classes of cases in which the usa<res of 
 Stock-brokers have been sustained which have already been 
 referred to at length, and they need not be here set forth."* 
 The lii'st class comprises those cases in which a principal or 
 Client <lin;cted his Jji(jk(M* to buy or .st'll securities or tomaUe 
 corUracts upon tin? St(^ck Exchange ; and where the Broker 
 has sought indemnity at the hands of his Client for acts per- 
 
 ' 13 So. 149. 'SeeCh. X. 
 
 » 15 App. Caa. 267; L. 11. 38 Ch. 
 Div. 399.
 
 442 Stock-brokers and Stock Exchanges. 
 
 formed by him in pursuance of directions of bis Client. Tbe 
 principle applied was, tbat parties who make or direct a 
 barsrain or transaction to be made in connection with a 
 particular trade are taken to have contracted subject, or with 
 reference, to the known usages of that trade. Sutton vs. 
 Tathani and Pollock vs. Stables^ are illustrations of this 
 class, as are the other cases cited under the ffth general 
 rule.^ As the most important of these cases have been set 
 forth in Chapter 1 11.,^ a reference to them is all that is nec- 
 essary in this connection. 
 
 The second class comprises those cases in which the prin- 
 cipal question involved was upon whom the liability for 
 " calls '' rested where stocks were sold on the Stock Ex- 
 change. In these cases the courts fully investigated the 
 various steps of a purchase and sale upon the Stock Ex- 
 change, and rigorously and uniformly applied the usages and 
 rules of Stock-brokers to explain the contracts there entered 
 into, and to fix the ultimate responsibility for " calls " made 
 where the capital stock Avas not fully paid up to the limit 
 fixed by the charter or articles of incorporation. As these 
 cases have been fully described in Chapter X., it is only 
 necessary, in this connection, to refer to that portion of the 
 work ; ^ but their perusal will forcibly illustrate the extent 
 to which the English courts have gone in ap})lying this 
 doctrine of usage. In considering the soundness of the cases 
 
 * Ante, p. 424. The following which also held that a Broker might, 
 usages have been held binding: the in carrying over, transfer two par- 
 customer, when the Broker becomes eels of shares bought from two job- 
 a defaulter, has no option to close bers for two customers, from one 
 at "hammer" prices, and a Broker jobber to another, 
 who is in.structed to buy a specific ^ P. 424. 
 number of shares may buy from ' P. 218 et seq. 
 more than one jobber. Levitt vs. ^ At p. 981 et seq. 
 Hamblet, 6 Com. Cas. 79; 5 ib. 326,
 
 Usages of Stock-brokers held Binding. 443 
 
 in which usage has been rejected, these English adjudications 
 should be prominently kept in view. 
 
 There are some 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 
 the course of business and custom of London Brokers should 
 be admitted to explain the authority meant to be given to a 
 London banker by a power of attorney to sell stock sent 
 through a countr}'- banker. 
 
 So in an action for the non-acceptance of raiI^tay shares, 
 which by the contract (made at Liverpool through Brokers) 
 were to be delivered in a reasonable time, a written rule of 
 the Liverpool Stock Exchange, stated to be acted upon by 
 all the Liverpool Brokers, '' that the seller of shares was in 
 all cases entitled to seven days to complete his contract by 
 delivery, 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 and willing and offered 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 perscm acted as a Broker for the plaintitr ; and 
 that parol evidence as to the usage of trade in making liro- 
 
 ' Adams vs. Petere. 2 C. & K. 309. Also Field vs. Lelean, OH. it 
 723. N. 017. 
 
 * Stewart vs. Cauty, 8 M. <k \V ' Dirkonwin vs. Tilwiill, 1 Stiirk. 
 
 IJS ;l ("urnpb. 279.
 
 444 Stock-brokers and Stock E.vchauges. 
 
 kers liable where tlicir principals aie ikjI disclosed is alsoiid- 
 uiissible, on the ground that such evidence does uot vary the 
 terms of a written contract, but merely annexes a particuhir 
 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.' 
 
 It has been likewise held that under a practice of the 
 London Stock Exchange (where a loan is made by one 
 Broker to another on a deposit of stock) that the lender 
 send back the securities on the morning of the day of pay- 
 ment, the borrower to send a good check, or return the 
 same, or similar, securities later in the day, the lender did 
 not lose his right to the securities by returning them to the 
 borrower, when he did not receive a check or other securi- 
 ties to replace them.^ 
 
 So also where shares have been sold and the purchase 
 money paid at the transfer under the usages of the Stock 
 Exchange, the seller is not liable although the company 
 subsequently declines to register the transfer.^ 
 
 This decision was followed in Casey vs. Bentley,"* where, 
 in a similar state of facts, specific performance, or a rescis- 
 sion of the contract, was sought by the vendor. The 
 authorities are fully discussed, and the court (Fitzgibbon, 
 L. J., dissentiente) held that as the sale took place subject 
 to the usages of the Dublin Stock Exchange, "which were 
 
 ' Humfrey a's. Dale, 7 El. & Bl. ^ London Founders Association 
 
 266; Thomson vs. Davenport, 9 B. vs. Clarke, 57 L. J. Q. B. 291; 
 
 &C.7S;Pennellvs Alexander, 3 El. following Stray vs. Russell, 1 E. & 
 
 & Bl. 77, 288. E. 888. 
 
 2 Burba vs. Ricardo, 1 C. & E. * (1902) 1 Ir. R. 376. 
 478.
 
 Usages of Stoek-brokers held Binding. 445 
 
 similar to those of the London Exchange, the ph\intiflf was 
 entitled to neither, although if the sale took place outside 
 the Exchange, she should have judgment for rescission, as 
 the company refused to register the vendee. The result of 
 the decision was that the plaintiff became a trustee for the 
 purchaser, with right of indemnity to the vendor by the 
 defendant against calls. 
 
 In Ward in re ' it was decided that the amount due by 
 a defaulter to a Stock PLxchange creditor under its rules is 
 a liquidated sum within the meaning of the Bankruptcy 
 Act, and will support a bankruptcy petition by the cred- 
 itor, and in Ratcliffe vs. Mendelsohn,'^ a defaulting Broker, 
 was held liable to stock jobbers for the difference between 
 " hammer " and contract prices, as the jobbers under the 
 rules were bound to hand the official assignee the amounts 
 received by them on completion of the contracts.^ 
 
 A rule of the London Stock Exchange which provided 
 that the seller of shares of stock is responsible for the gen- 
 uineness of all documents delivered, and for such dividends 
 as may be received until reasonable time has been allowed to 
 the transferee to execute and lodge the same for verification 
 and registration, and that when an official certificate of regis- 
 tration has be<m issued, the committee will not (unless bad 
 faith is imputed to the seller) take cognizance of anj' subse- 
 quent dispute as to title ujitil the legal issue has been decided, 
 was held to be reasonal>le in Smith vs. Keynolds,* in which 
 case a principal was held bound t(i indemnify his I^ioker 
 who, undt.-r a resolution of the eomniittee, was obliged to 
 make gocxl a loss arising fioin a forged transfer. So 
 
 •52 L. J. Ch. 7.'J. 'Src Kiiij; vs. Iluttoii (I'.KKI), 2 
 
 » (1902) 2 K. li. 653. Q. H. 505. 
 
 * GO I.. T. 808.
 
 446 Stock-brokers and Stock Exchanges. 
 
 also in llarker vs. Edwards,' rule 57 providing that the 
 Stock Exchange in all dealings will only recognize its 
 own members, and Rule 11, that the decision of the commit- 
 tee (as to questions arising out of the contract) was to be 
 final, were held to be reasonable and binding. 
 
 A commercial and Stock Exchange usage to treat bearer 
 bonds as negotiable has been held binding, although of re- 
 cent origin.^ 
 
 When a Broker becomes a defaulter, and the Client, for 
 whom the Broker has sold shares, elects to complete the 
 transaction on his own account, the Client is not entitled 
 to nominate a person to transfer the shares to the jobber to 
 whom sold, the usage of the Stock Exchange not per- 
 mitting such nomination, as the effect w^ould be to substi- 
 tute the nominee as principal.^ 
 
 In Scott vs. Godfrey * a custom of the Stock Exchange by 
 which Brokers lump together the orders of their Clients 
 and execute them by means of one contract with the job- 
 ber, was established to the satisfaction of the jury, and in 
 the opinion of the court was a reasonable one. In that case 
 the jury also found that the Client gave his order on the 
 terms that it might be so executed. The court said that as 
 to the latter findinf]c it doubted whether there was evi- 
 
 ' 57 L. J. Q. B. 147. said the custom was now so uni- 
 
 ^ Bechuanaland Exportation Co. versal that it should be judicially 
 
 vs. London Trading Bank (1898), 2 noticed). See Picker vs. London 
 
 Q. B. G5S; Runiball vs. Metropoli- and Count)^ Banking Co., 18 Q. B. 
 
 tan Bank, 2 Q. B. D. 194; London D. 515; Colonial Bank vs. Cady, 15 
 
 Joint Stock Bank vs. Simmons App. Cas. 267 (the usage must be an 
 
 (1892), .\pp. Cas. 201; Venables vs. English one). 
 
 Baring Bros. (1892), 3 Ch. 527; ' Currie vs. Booth, 7 Com. Cas. 
 
 Bentinck vs. Bank (1893). 2 Ch. 77; rev'g s. c. 6 Com. Cas. 74. 
 
 120; Edelstein vs. Schuler, 71 L. J. * 70 L. J K. B. 954. 
 
 K. B. 572 (in which case the court
 
 Usages of Stock-brokers held Kiiuliiii?. 447 
 
 dence to support it, but it was imiiuiteiial, as the Client 
 gave his order to be executed according to the usages of the 
 Stock Exchange.' The jury also found that there \Yas a 
 custom by which a jobber and each Client of the Broker 
 became bound to each other to carry out the contract ap- 
 plicable to the particular Client's order. The court, how- 
 ever, did not think the evidence established the latter 
 custom, nor was it necessary in the particular instance, as 
 the facts themselves established privity. 
 
 It was held in Stoneham vs. Wyman- that, having refer- 
 ence to Rule 155 of the London Stock Exchange rules, if a 
 jobber who has been paid in full his diflferences up to the 
 date of the default of a Broker with whom he had dealt, 
 subsequently recovers from the Broker's customer a larger 
 sum, he is bound to account to the official assignees for an 
 amount equal to that which he has already received, and 
 the rule was held to be a reasonable one. See also Davis 
 vs. Howard, supra.'^ 
 
 A usage of the Toronto Stock Exchange that all trans- 
 actions must be "settled " on the following day, or, if Sat- 
 urday intervenes, on the following ^londay, has, in I'oultbee 
 vs. Cirowski,^ been held reasonable, in which case it was 
 also held that the word "settled" meant the completion 
 of the transaction, and if the jxirchasing Broker docs not 
 disclose his principal on the <lay of settlement, he incurs a 
 personal responsibility. 
 
 ' See p. 129. * 29 Can. S. C. 51; 21 OiU. .\i)i> 
 
 '6Com. Ca«. 171. 502. 
 
 »L. R. 24Q. B. D. 691.
 
 448 Stock-brokers and Stock Exchanges. 
 
 111. Cases in which Usages have been Rejected. 
 
 (a.) In the United States. 
 
 There are in the United States a number of cases arising 
 out of transactions in stocks in which the usages of Brokers 
 have been rejected. A close examination of some of these 
 decisions, however, shows that in many instances they are 
 utterly irreconcilable 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 Kew York, we 
 find the well-known case of Allen vs. Dykers.^ In that 
 case it appeared that A. borrowed of D., a Stock-broker, a 
 certain sum of money, for which he placed in his hands as 
 collateral security certain bank stock, at the same time 
 giving to the Broker a promissory note agreeing to pay tlie 
 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 
 recover the difference between the value of the stock and 
 the money loaned, he offered to prove that, when Brokers 
 took assignments of stocks as collateral security for the 
 money loaned, it was not the custom to retain the stocks in 
 specie, but to transfer it by hypothecation or otherwise, if 
 they thought proper; 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 
 
 » 3 HiU, 593; aff'd 7 id. 497
 
 Cases in which Usages have been Rejected. 449 
 
 that this evidence was illegal ami properly ruled out. The 
 Brokers proved that from the date of the note until after 
 it fell due they had a larger quantity of stock than that 
 mentioned in the note ; but it appeared that all of this 
 stock, except seventy -two shares, stood in the names of per- 
 sons to whom it had been pledged as collateral security for 
 various loans made to defendants, the Brokers. The court 
 said : " The defendants being Stock-brokers and dealers in 
 stock, their counsel offered to prove on the trial that it was 
 the usage, when stock was transferred to such dealers by 
 way of collateral security, not to hold it specifically, but to 
 transfer it by hypothecation or otherwise, at pleasure, and, 
 on payment or tender of the money advanced, to return an 
 equal quantity of the same kind of stock ; also that this 
 usage was general, and known to the agent who made the 
 loan in question. The object of the offer was to lay the 
 foundation for insisting that the usage should be regarded 
 as incorporated in and forming part and parcel of the agree- 
 ment, thus making the latter import a consent on the part 
 of the plaintiff that the defendants might use the stock 
 durinfj the runniiio: of tlie loan, the same as if tliev were 
 the absolute owners. It in not necessary to determine tchat 
 effect wouhl he due to such j)roof in the case of a simph 
 pled<je^ as collateral security u^ithout any further agreement. 
 P<jssib!y the known usage in liUe cases might bo consiilered 
 as attachiiiir itself to the tnmsaclioii, and conslitiitinLr a 
 part of it. l>ut whci-n tin* parlirs have chosen to jnescribo 
 f(jr themselves the terms and conditions of the loan, they 
 must be held to al)i(le by them, and we are especially 
 bound U) refuse effect tf) any general or paiticiilar usjig«i 
 when in direct contraventi<»n of the fair and legal import of 
 a written contract." 
 29
 
 460 Stock-brokers and Stock Exchanges. 
 
 The ground uj)()n which the court rested its judgment in 
 this case — viz., tliat the usage in question conflicted with 
 the terms of the contract — is perfectly sound. But did the 
 usage conflict with the written contract? There was 
 nothing said in the contract as to what disposition miglit be 
 made of the stock during the pendency of the loan ; but the 
 argument of the learned judge delivering the oj)inion was 
 that it Avas to be inferred, from the language contained in 
 it, that no disposition could be made of the same by the 
 pledgee, upon the maxim Expressio unius est cxclusio alte- 
 rius. With the utmost deference for the opinions of Chief- 
 justice Nelson, it seems to us that, in tlie absence of express 
 provision to the contrary, the usage mentioned should have 
 been held operative. The knowledge of the usage made it 
 a part of the contract, and there is no room for the applica- 
 tion of the niaxim. The court sought to distinguish the 
 case from Nourse vs. Prime,' on the ground that in the 
 latter case the Stock-brokers proved that they had always 
 on hand a number of shares equal to the amount pledged with 
 them, whereas in the present case there was no such proof. 
 It is very difficult, however, Avhen the facts of both cases are 
 carefully anal3'zed, to reconcile them ; for it did appear in 
 Allen vs. Dykers that the Brokers were, during the existence 
 of the pledge, the owners of more than the number of 
 shares pledged with them. The fact that the Stock-brokers 
 had pledged, for the purposes of their business, nearly all 
 of the particular stock held by them does not affect the 
 question, because the Brokers could have repossessed them- 
 selves of it by paying off the loan. 
 
 The doctrine of Allen vs. Dykers does not seem to have 
 
 ' 4 Johns. Ch. 490; 7 id. 69.
 
 Cases ill which Usages have been Rejected. 451 
 
 been very heartily accepted by the Court of Appeals in the 
 subsequent case of Ilorton vs. Morgan ; ' for although it was 
 quoted by counsel in the argument," it was not mentioned 
 in the opinion ; and the court seems to have regarded the 
 question, which was apparently settled in Allen vs. Dykers, 
 as still open, by saying, '' It is unnecessary to pass upon 
 the rulino' bv which evidence was admitted to show the 
 custom of Brokers to sell and hvpothecate stock hold by 
 them as security on advances, and we do not give any 
 judgment upon that question." Yet thecase has never been 
 directly ovei'ruled. 
 
 It seems to us that there can be no substantial reason to 
 charge a pledgee with a conversion of securities for parting 
 with or repledging the same, where he can establish that the 
 usages of Stock-brokers, and the peculiar nature of their busi- 
 ness, known to the pledgor, permits and makes such a prac- 
 tice necessary; and where, upon the ex})iration of the loan, 
 or upon demand, as the case may be, the pledgee is readv to 
 deliver to the pledgor shares of the identical character de- 
 posited with him.^ 
 
 ' 19 X. Y. 170. sell commercial paper pledged ixs 
 'See Brief of Counsel, X. Y. Ct. security for a loan, at private sali-, 
 of .\pp- Dec, on file in X. Y. Law and for the best price that could l)c 
 Inst. obtained, after demand of payment 
 •See, as sugtainin^ these views, and notice that such s;de would in- 
 Horton vs. Morgan, 19 X. Y. 170; made in ca.se of default The court 
 Lawrence vs. Maxwell, 53 id. 19; .see said that such a custom, if it exist- 
 alacj Ch. IIL p. 2.50. On the other ed, would be illegal and void. See 
 hand, a« sustaining Allen vs. Dy- also Transcontinental Co. vs. Mil- 
 kers, nee Taylor vs. Ketchum, 3.') mers, 20 Ked. Heji. 717; Jones on 
 How (X. Y.) Pr. 289;alwoCurrie vs. Pledges, 2d eti. p. MS et sc<i., ami 
 Smith, 4 X. Y. I.^k Obs. .313; cases cited. In .Mien vs Dubois. 
 Wheeler vs. Xewbould. 10 X Y 117 Mich 11.'), it was hefd (hat in 
 .393, where the court held that evi- the ca.se of collateral. ple<lue<l to se- 
 dcnce waw inaflmiiwible of a local cure a loan, the phvlnor is entitle<l 
 UMa^e in the city of Xow York to (o a retijrn <>f the identical shares
 
 452 Stock-brokers and Stock Exchanges. 
 
 The next cuse which we shall notice is the familiar one of 
 Markhani vs. Jaiuloii.' "We have already criticised this case 
 in this chapter in connection with the question of usage,'^ 
 and it is unnecessary to devote much space to it here. In 
 that case the defen(hints, in answer t<j an action for the 
 conversion of certain stocks which they were " carr^'ing " for 
 the plaintiff on margin, offered to prove the existence of a 
 custom in the city of New Yoi'k between Brokers and their 
 Clients b\' which Brokers have the right to sell out the 
 Clients' stocks on the exhaustion of the margin. The court, 
 in commenting upon such evidence, said : " This was an 
 offer not to explain the meaning of particular tcruis, or to 
 })rove attending circumstances to enable the court to con- 
 strue the agreement, but to change the rights of the parties 
 to a contract. By the law, as T have interpreted it, the 
 customer did not lose the title to his stock by any process 
 less than a sale upon reasonable notice, or by judicial pro- 
 ceedinirs. The Broker has no right to sell without such 
 a notice. A practice or custom to do otherwise would 
 have no more force than a custom to protest notes on the 
 first day of grace, or a custom of Brokers not to jmrchase the 
 shares at all, in a case like the present, but to content them- 
 selves with a menKM'andum or enti-y in their books of the 
 contract made with tlieir customei'. Such practice, in each 
 case, would he in hostility to the terms of the contract, an 
 attempt to cliange its obligations, and Avould be void. The 
 proof could not therefore be legally given." 
 
 pledged if he can identify them, Pa. St. 80; Hubbell vs. Drexel, 11 
 
 ahliough if a Broker buys stock and Fed. Rep. 115. 
 
 holds it as security for monej's ad- * 41 N. Y. 245. For historj' of 
 
 vanced, a sufficient number of the this case, see Ch. III. p. 191, and 
 
 same kind of shares need only Ije Ch. on "Measure of Damages." 
 
 returned. See Stuart vs. Bigler, 9S * Ante, p. 418.
 
 Cases iu which Usages have been Rejected. 453 
 
 The objections to the conclusious reached iu this case, as 
 above set forth, may be thus sammarized. 
 
 I. There is no doubt but that the " notice " alluded to 
 could have been waived by express agreement.' A knowl- 
 edire of the existence of a usa^je to sell without notice would 
 have the same etfect, and should be regarded as incorporated 
 in the contract.- 
 
 II. Under the circumstances disclosed, this usage was a 
 perfectly reasonable one, and it is eiToneous to consider the 
 case as if it were one of pure bailment arising between 
 pledgor and pledgee. 
 
 III. The question has been settled differently in Enirland.^ 
 There are but two other cases in the State of Xew York 
 
 upon this question of usage, to which we deem it necessary 
 to call special attention — viz., Spear vs. Ilart,^ and Lombardo 
 vs. Case.^ In Spear vs. Hart, the court held, in accordance 
 with the general rule upon the subject, that on a sale of 
 stock delivei'able at a future day at the option of the seller, 
 a dividend declared before the sale, but not payable until 
 after the day fixed for the delivery of the stock, belongs to 
 the seller, and does not pass to the buyer under the contract. 
 The effect of this rule was sought to be changed by the in- 
 troduction of a usage of Wall Street. This evidence was 
 ruled out. 
 
 The defendant had agreed to deliver certain railway stock, 
 seller's option, in ten days from March 28, 1865. This 
 matured on the 7th of April. On the 2:5d of .March the 
 railroad company declared a dividend of live per cent, pay- 
 
 ' Hukcr VH. Drake. GG .\. Y. FAH. kcl vh. KIIIh, :i2 l.c«. Int. SJ; s. «•. 10 
 
 'See ul«o mite, p. 4'Jl. I'hilii. ( I'li.) .S7.'>; see uI.soC«)rl)ett v.s. 
 
 * Lacey v«. Hill (Scriiniieour'H I'luierwocxl, JS.nil. .'VJI. 
 
 Claim), F.. R. H Cli. .Vpp. <»21, iind ' :{ Koh. JJO. 
 
 practically in IVmi.sylvaiiia ("ol- ' :5() How. (N. Y.) I'r 1 17
 
 454 Stock-brokers and Stock Kxcliaii^es. 
 
 able on the loth of April, and closed their transfer-books on 
 the 31st of March. The court, through Monell, J., said : 
 "I do not think such a custom could alter well-settled prin- 
 ci]ilos applicable to the law of contracts. . . . l)Ut under a 
 contract to sell lOO shares of stock, a custom that something 
 more passes to the purchaser cannot be allowed. It varies 
 the agreement by adding to it, and it would not be merely 
 an explanation or interpretation of it." 
 
 The facts of this case are very meagrely reported, and it 
 does not appear whether the sale was made on the Stock 
 Exchange. The invariable rule or usage of Stock-brokers is 
 to sell stock with the " dividend on," until the books are 
 closed, after which event the stock sells " ex dividend." ' 
 
 Under ordinary circumstances, therefore, the purchaser 
 in the above case would have been entitled to all dividends 
 on the stock at the time of the closing of the books on the 
 31st of March, the sale having been made before that time, 
 that fact actually entering into and affecting the market price 
 of the stock. And, according to the views which we have 
 already expressed, such a usage is perfectly valid, because it 
 becomes a part of the contract of the parties. Persons enter- 
 ing into agreements through Brokers understand that sales 
 of stock made at the Board of Brokers at any time before 
 the day fixed for the closing of the transfer-books of the 
 company, declaring a dividend payable at a future day, 
 carry with them the dividend so declared, and the price is 
 regulated accordingly. After the books are closed, the sales 
 are understood to be "ex dividend," and the price is accord- 
 ingly affected by the fact that the seller retains and is to 
 collect the dividend.^ 
 
 ^ See Art. XXXII., Sec. 1, Const. ' These usages were recognized in 
 N. Y. Stock Exchange. the case of Hill vs. Xewichawanick
 
 Cases iu which Usages have been Rejected. 4oo 
 
 So, in Lombardo vs. Case, the contract made by a Stock- 
 broker was as follows: " Xew York, October S, 18G3. For 
 value received, the bearer may call on me for one thousand 
 shares of the stock of the Cleveland and Pittsburgh Railroad 
 Company, at one hundred and seventeen (117) per cent, any 
 time in six months from date, without interest. The bearer 
 is entitled to all dividends declared dui'ing the time to half- 
 past one p. M. each day.'' It was held, on demurrer to the 
 complaint for a dividend declared prior to the making of the 
 contract, that an alleged custoin among Brokers and dealers 
 in stocks, that the words " dividends or surplus dividends " in 
 the contract Avere intended to mean dividends declared on 
 the stock without regard to whether they hud been announced 
 hefore or after the date of the contraxit^ provided that on the 
 day the contract was made the stock was selling in the 
 market " dividend on^'' and not " ex dividend," would not 
 be allowed to be proved on the trial, for the reason that 
 effect could not be given to the custom without making a 
 new contract between the parties, as six months from date 
 could not mean or include " a day or two before date." Con- 
 sequently, a dividend of four per cent, which had been de- 
 clared and announced at the time of the making of the con- 
 tract, could n<jt l^e recovered by the })urchaser, although the 
 stock was then selling "dividend on." ' 
 
 In Harris vs. Tumbridge,'' it was held proper to exclude 
 proof that it was common for parties purchasing" straddh's " 
 
 Co., 8 Hun (N. Y.), 459, aff'd 71 N. usaRc was nLsr) hold properly rejected 
 
 Y. 593. But Boe Jones v.s. R. Co., when the oontnict wils made out- 
 
 57 .v. Y. 190. Hide of tlio Stock Exchanup, and tlio 
 
 ' I/Onihardf) vh. Cuhc, 30 How. (.V. Broker was not a niiMnlxT tluTcof. 
 
 Y.) Pr. 117; Hopper vh. Saue, 12 N. Id. 
 
 Y. W'erkh, D<g 7H; k. c on n«w trial, ' ,S3 .\. Y. 92. 
 112 .\. Y. 5.30. Evidence of the
 
 45G Stoik-brokers and Stock Exchaiii^es. 
 
 to operate in stocks, holding tiie sti'addle as security ; but 
 no custom or usage such as to modify the contract, or be- 
 come interwoven with its terms, was in any manner shown 
 in that case. The court said that " a custom or usage which 
 binds the parties to a contract does so only upon the principle 
 either that they have knowledge of its existence, or that it 
 is so general that they must be supposed to have contracted 
 with reference to it." 
 
 In closing this criticism of the New York cases, in which 
 the usages of Stock-brokers have been rejected, we are com- 
 pelled to say that they are far from being satisfactory. 
 
 The usages of Brokers, bankers, and others cannot be set 
 up to defeat the well-settled and universally applied pi-in- 
 ciple of the commercial law that the purchaser of negotiable 
 paper past due takes it subject to the equities of other par- 
 ties, and can acquire no better title than his transferror.^ 
 In the last cited case a number of United States Treasury 
 notes had been stolen from an express company and pur- 
 chased by a firm of bankers, after the date at which they 
 were payable or convertible into bonds. Evidence was in- 
 troduced to show that securities of the kind in question 
 continued to be bought and sold by bankers and Brokers 
 after they had become due. The court held that this fact 
 did not avail to alter the law. " Bankers, Brokers, and 
 others," said the court, " cannot, as was attempted in this 
 case, establish by proof a usage or custom, in dealing in such 
 paper, which in their own interest contravenes the estab- 
 lished commercial law. If they have been in the habit of 
 disregarding that law, this does not relieve them from the 
 consequences, nor establish a different law." 
 
 1 Vermilye vs. Adams Exp. Co., 21 Wall. 139.
 
 Cases in which Usas:es have heeii Hejected. 4o7 
 
 A close examination of this case will show, hi)\vever, that 
 the evidence offered did not amount to a proof of a general 
 usage of Bankers and Brokers to deal in negotiable paper 
 after it was due, and to treat it as not due, and the case 
 should be confined to the peculiar facts there stated. More- 
 over, there seems to be an insuperable objection to such a 
 usage, as it would operate to defeat the I'ights of third per- 
 sons not parties to it. Usage is onl}'- admissible as forming 
 a part of a contract. In the case in question the dispute 
 was between adverse claimants for the possession of certain 
 personal property, the Treasury notes, and it is not very 
 clear how such a usage as that invoked could avail in such 
 a controversy.^ 
 
 The subject of usages was considered in the case of Evans 
 vs. AValn,- by the Supreme Court of Pennsylvania. There 
 the plaintiffs em])loyed M. 6c Bro., Brokers, in Philadelphia, 
 to sell certain stock fc^r them. ^l. & Bro. in turn employed 
 one W., another Bi-oker in Philadel[)hia, to sell the stock, 
 and the sale was eventually made through the defendants, 
 Stock-brokers in Xew York. A\'. IxMng in debt to the de- 
 fendants, and becoming insolvent, the latter deducted the 
 amount of such indebtedness from the proceeds of tiie sale 
 of pl:iintiir.s' stock, and remitted the l)alance. In an action 
 
 'As certificates of stock are not .\ custom of the New York Cotton 
 nejiotiahle, a custom of Stock- Exchange that a liroker may sell 
 brokers to the contrary caimot he before the contract matures, when 
 proved. E^st Birm'niKham Laiul the principal does not advance mar- 
 Co. V.S. DennLs, 2 L. K. A. H.'iG, and ^•"•''1 dot's not liind the latter unless 
 caKca cited. A custom of the I'e- known tohim. Ithikemore vs. Ilev- 
 troleum Exchani;e tliat all deliv- man, 2'A Fed. Krp (VJK. See also 
 cries of oil should he of oil that had Ilintrins vs. McCrea, 2.'J Im'<1 Hep 
 storage chari:es paid thereon, <1<k-s 7s2; 1 Wt V> . S. 071; Dillard va. 
 not, in the al>sen<e of contrart, hind Pnton, 19 Fe<l. itep. 019. 
 one not a mcinher. Wauch vs Sea- ' 71 I'a. St. 09. 
 board Dank, 51 .N . V. Suj^er. Ct. 283.
 
 458 Stock-brokers niid Slock Kxclianj^cs. 
 
 by the pliiintitrs to recover the full purchase-iiKmey, it was 
 shown that the defendants knew that the stock belonged 
 to the i)laintiffs, and that AV. was acting as Stock-broker 
 for them. The defendants offered to prove a custom by 
 which Brokers keep transactions with one party all in one 
 account, and remit the balance. This was ruled out. The 
 appellate court held that the ruling was correct, and that 
 such a custom, if proved, would have constituted no defence, 
 as the defendants had no right to credit AV.'s account with 
 the proceeds of the stock : he was not the owner of it, and 
 had no title or claim to its proceeds ; the defendants had 
 not received the stock from AV., and they were not bound 
 to account to him for the price at which it was sold. 
 
 As it was not shown that the account of "VV. was credited 
 with the proceeds, the court held that it was clear the case 
 was not \vithin the operation of the custom, if any such 
 existed. The court, in conclusion, based its reason for re- 
 jecting such evidence upon the following ground : " If there 
 is a custom among Stock-brokers, when dealing with others, 
 to appropriate money belonging to the principal to the pay- 
 ment of his Broker's indebtedness, the sooner it is abolished 
 the better — Malus nsus est aholendus. A custom so iniqui- 
 tous can never obtain the force or sanction of law, and the 
 marvel is that it should be set up as a defence in this ac- 
 tion." It will be observed that not even the express agree- 
 ment of TV. could have produced the result claimed for by 
 defendants.^ 
 
 * To same effect, Fisher vs. tive instructions (Barksdale vs. 
 
 Brown, 104 Mass. 259; Pearson vs. Brown, 1 Xott. & M. [S. C] 517). 
 
 Scott, 38 L. T. (n. s.) 747; see also In Blackburn vs. Mason, 68 Law T. 
 
 Sweeting vs. Pearce, 7 C. B. (n. s.) 510, this custom was held unrea- 
 
 449; and no usage will authorize a sonablc, and not binding on the 
 
 factor or agent to depart from posi- client unless he agreed to be bound
 
 Cases in which Usages have been Rejected. 459 
 
 In another Pennsylvania case ' the custom averred was 
 rejected, but not on its merits. Plaintiff bought from de- 
 fendants (bankers and Brokers in Philadelphia) certain 
 stocks and bonds, with an option to plaintiff at the end of 
 a year from the date of the contract, April 21, 1890, to re- 
 sell them at cost to defendants, who subsequently made an 
 assignment. Plaintiff exercised his option on April 22, 
 1801, and it was held that the general rule that " one 
 year from the date of the contract '' was to be computed 
 by excluding the day of the date, could not be modified by 
 an averment by defendants on information and belief of a 
 good general custom in Xew York, Boston and Philadelphia, 
 known to dealers in bonds and stocks, that an option to sell 
 at the end of a given period expired on the last day of such 
 period, and that therefore plaintiff w^as one day late, as the 
 defendants were bankers and Brokers, who presumably knew 
 the customs of such business, but they did not allege such 
 custom of their own knowledge, nor their ability to prove it, 
 and moreover the custom was alleged to be known to dealers 
 in bonds and stocks, without saying that plaintiff was such 
 a dealer. But, waiving these defects, the custom alleged was 
 as to an option to sell at the end of any given period, whereas 
 the contract provided for an option to demand a rescission 
 
 by it, and in Crossley vs. Ma^niac, Evans vs. Wain, supra, the court 
 
 (1893) 1 Ch. 594, the evidence failed held defendant Brokers liable for a 
 
 to prove this custom, and the court conversion, iniLsinuch as they were 
 
 said that, even if it were proved, it aware that their correspondent's 
 
 could not Ijind a forei^rn principal client wa-s the owner, althouj^h, if 
 
 from whom the London Broker re- tliey had not such knowledge, and 
 
 ceive<l, throu^^h the country Broker, as a blank jLs>ij;nment was attached 
 
 a power <>{ attorney to sell his 1o tlio certificate, they would not l)e 
 
 shares. See also .\nderson vs. lial)le. 
 
 Sutherland. 1.3 Times L. U. UV.i. ' Weld vs. Barker, 153 Pa. St 
 
 In Ryman vs. Gerlach, l.W Pa. St. 405; 20 Atl. 239. 
 197, in a state of facts similar to
 
 4H0 Stock-brokei-s and Stock Excliaii^e8. 
 
 of a sale after a year of obligatory i-etention by the purchaser 
 of the stocks sold. 
 
 Proof of a local custom in the oil trade, to regard future 
 sales of oil, at an advance of the market price at the time of 
 the contract, as merely to be settled by payment of differ- 
 ences, cannot be allowed, when its effect will be to vary the 
 terms of a written contract.' 
 
 It was held in Commonwealth vs. Barrett,^ that no custom 
 of Brokers can legalize fraud. 
 
 ^lassachusetts furnishes several instances where the usages 
 of Brokers have been rejected. In Parsons vs. JMartin,' which 
 appears to be the earliest reported case in that State upon the 
 subject, it was held that a Broker to whom a certificate of 
 shares in a corporation were intrusted by their OAvner, with 
 written directions to sell under circumstances specified, had 
 no right to transfer the shares for any other purpose, to the 
 name of another person or his own name, and that evidence 
 was inadmissible of a custom among Brokers so to do ; and 
 the owner may treat such transfer as a sale, and recover of 
 the Broker the market price of the shares on the day of the 
 transfer, although tlie Broker afterwards tenders him 
 another certificate of an equal number of such shares, which 
 he refuses to receive and does not retransfer to the Broker. 
 
 The court further held that a custom among Stock-brokers 
 in Boston, permitting a Broker to make a sale of stock, not 
 on account of plaintiff, but for some other person, using plain- 
 tiff's shares for that purpose, and replacing them with other 
 shares of a like kind, was bad. Xo usage or custom such as 
 that which defendant attempted to show could affect the le- 
 gal rights of the parties; nor, if fully i^rovod, would the law 
 
 •Scofield vs. Blackmail. 17 W. ' 40 Leff. Int. (Pa.) 474. 
 N. C. (Pa.) 518. ='77 Mass. 111.
 
 Cases in wbieh Usages have been Rejected. 461 
 
 sustain or tolei-ate it. Proof of usage is admissible to inter- 
 pret the meaning of the language of the contract, or, where 
 its meaning is equivocal and obscure, to ascertain its nature 
 and extent, but not to vary its terms or introduce new con- 
 ditions, or authorize the doing of acts which are in direct cuii- 
 traventlon of its jf/'ovi/sions. 
 
 "From these considerations," said the court, "it is ob- 
 vious, and, indeed, it seems to be a necessary consequence 
 from them, tliat the general proposition stated by tlie court, 
 ' that if the defendant caused the shares of stock belonffing: 
 to the plaintiff to be transferred to himself, in such a way 
 and under such circumstances that they were not afterwards 
 to be traced or distinguished from other shares held by 
 the defendant, such a transfei', if made without the ]ilain- 
 titf's authority, could not be jiistilied by any usage to that 
 elTect among Brokers,' was correct. And, having thus 
 violated his duty by making a disposition of the stock which 
 was unauthorized and unjustilial)le, he became immediately 
 responsible for the value of the property with which he had 
 been intrusted. It was, in effect, a conversion of it to his own 
 use. Itisnodefence toachiiin arisingundcr an unlawful con- 
 vei'sion of pro|)crty by such an unauthorized })receedingas 
 this, that the defendant was, at all times afterwards, either 
 actually possessed of, or had the means of immediately obtain- 
 ing, other shares of stock in the same company of ecpial value 
 with those di.sposed of, which he was ready and intended, 
 whenever called uj)on, to suljslitute for those belonging to 
 the jdaintilf which he had disjMjsed of. Tiio misappropria- 
 tion had already taken place, the wrong had been done, and 
 the right to :in ;i(l<(pi;it(! remedy 1i;m1 already aecrued. The 
 shares which the j)lainti(r had owned ci.uM n<t longer bo 
 identified, and there was im |treteiise, therefore, that tlx-y
 
 462 Ntoek-brokers and Stock Excliaiii^es. 
 
 could ever be restoivd to him. JIo was not bound to take 
 others in their stead, but was entitled to recompense for 
 those which had been unlawfully taken from him." 
 
 We have set out thus fully the views of the court in this 
 case because, although the general result reached in the case 
 may be correct, this reasoning directly conflicts with the 
 New York cases, in which it is held that a Broker j)urchas- 
 ing shares on margin, or speculativel}', is not bound to keep 
 on hand the identical stock purchased, but that he fulfils his 
 duty to his Client by having ready to deliver, upon demand, 
 similar shares of stock — there being no difference between 
 them, one share being equal in value to the other.' 
 
 In Pickering vs. Demeritt'^ the court intimated that it 
 would be very difficult to support a usage by which a Broker 
 employed to purchase stock might, without the knowledge 
 of his principal, buy the stock of himself. In another case^ 
 it was held that a certificate of stock expressing on its face 
 to be " transferable only on the books of the company by 
 the holder thereof in person, or by a conveyance in writing 
 recorded on said books, and surrender of this certificate," and 
 transferred in blank upon its back, is not a negotiable instru- 
 ment. The certificate was in the name of " E. Carter, 
 Trustee." In this case it was attempted to be shown that it 
 was usual with dealers in the stock market to deliver, by 
 way of sale or ]iletlge, certificates of stock with a blank trans- 
 fer ujion the back ; that it is usual for holders of certificates 
 of stock transferred in blank to fiU them up by inserting the 
 name of some person as transferee or purchaser ; tiiat it is a 
 matter of common occurrence for certificates of stock to be 
 
 ' See this subject discussed in Ch. 'Shaw vs. Spencer, 100 Mass. 
 III. p. 2.5'2. 382; cited and approved in Fisher 
 
 ' 100 Mass. 416. " vs. Brown, 104 id. 261.
 
 Cases in which Usajyes have been Rejected. 4(53 
 
 issued in the name of some other person as trustee ; that cer- 
 tificates of stock issued to a designated person as trustee are 
 constantly bought and sold in the stock market by a simple 
 endorsement of the certiiicate by the person named as the 
 holder, without inquiry as to the authority by which, or to 
 the use or purpose for which, the transfer was made. But 
 the judge, at the trial, ruled that the propositions were im- 
 material and inadmissible, and the ruling was sustained on 
 appeal.' The court said : " A usage to disregard one's legal 
 duty, to be ignorant of a rule of law, and to act as if it did 
 not exist, can have no standing in the courts." 
 
 Again, it was held in the same State ^ that the order of a 
 Client to a Broker to buy stock deliverable at any time, at 
 buyer's option, in sixty days, does not authorize the Broker to 
 buy the stock himself at thirty days, and deliver it to his cus- 
 tomer at the end of sixty days at an increased price and 
 interest, besides the usual commissions, and that a usage of 
 Brokers so to do is bad ; and that an exchange of bought and 
 sold notes between the Broker and the Client, and the giv- 
 ing of his note b}- the latter in pa3'raent for the stock, in 
 
 ' An offer to prove a similar cus- licld in IJaiik vs. Taliaferro, 72 Md. 
 
 torn was ruled out in IV-iinsylvania 1(3!), that evidence of such a custom 
 
 in the case of Aull vs. Colket, 2 \V. wjts properly excluded, as no .such 
 
 N. C. .'i22; .'i.'i Le;:. Int. 41; compare usaf^e could chaii^;e the le^al chanic- 
 
 with these authorities the English ter of a power of attorney merely' to 
 
 ca.se of Goodwin vs. Kobarts, L. R. .sell, and authorize tlie attorney to 
 
 10 Ex. 76, where it is held that ne- pledge the securities for his own 
 
 KOtiability may be established l)y debt, a result not contemplate*! by 
 
 usaRe. And see also Denny vs. the party who executed the power. 
 
 Lyon, .38 Pa. St. 9S, where the cus- And in .\llen vs. St. I.ouis National 
 
 torn was held vicious. See, how- Hank, 120 V . S. 20. .-i similar u.sace 
 
 ever, contra, I'ratt vs. Tilt, 2S \. J. between banks and lotton Mrokers 
 
 E^i- 479; Jones on Plediies. 2d ed. in St. Louis was also rejected, 
 
 p. 487, and canes cited. And we .\nd sec Hank vs. Hunk, L. U. 20 Q. 
 
 also Ryman vs. Gcrlarh, l.W Pa. B. D. 232. 
 St. 197. Hut it ha-s been recentlv ' Hav vs Holmes. 10.3 Mass .306
 
 464 Stock-brokers and Stock Exchanges. 
 
 ignorance of the Broker's conduct, was not a ratification of 
 his acts. 
 
 The court said : " The usage alleged by the plaintiffs to ex- 
 ist among Stock-brokers in Boston cannot avail them. There 
 are many forcible objections to its validity ; but a conclusive 
 one is, that it is against i^oand polietj and good morals. It 
 authorizes the Broker, in his discretion, to disregard his in- 
 structions, and, instead of acting solely in the interests of 
 his principal, to speculate upon the transaction for his own 
 benefit. It creates in an agent an interest adverse to his 
 principal, and is inconsistent with his duty and the obliga- 
 tions which the law imposes upon him when he enters into 
 the contract of agency. Such a usage, unhaown to the prin- 
 cipal^ cannot be supported." The court cited the earlier case 
 of Pickering vs. Demeritt.^ While the result reached in this 
 case may be correct,^ the ground upon which it is put does 
 not seem to be tenable, for the court intimates that if the 
 usage had been known to the principal it might have been 
 supported ; yet the ground of its rejection is, that it is against 
 sound policy and good morals. If the usage be against pub- 
 lic policy, or contra honos onores, the courts would reject it, 
 whether known to the principal or not, just as they would 
 reject an express agreement under the same circumstances. 
 The result of such a usage would be to convert a Broker into 
 a principal, and to make him a seller instead of an interme- 
 diary. And if parties agree, and all the circumstances are 
 fair and free from fraud, tiiere would seem to be no element 
 of morals or public policy to prevent such a transaction. 
 Agents or Brokers may deal directly with their principals 
 the same as third persons, and it is only where the Broker 
 
 ' 100 Mass. 416. ' It is fully sustained in Robinson 
 
 vs. MoIIett, infra, p. 471.
 
 Cases ill ^vbiili Usages have been Rejected. 465 
 
 acts in a dual character that the hiw is shocked and his 
 transactions vitiated. 
 
 So a custom of Stock-brokers, when tliey receive an order 
 from a Client to })urchase securities, to assume it them- 
 selves, instead of making contracts with third j^ersons, is 
 inadmissible.' 
 
 In the case of Oel ricks vs. Ford ' it was held that where 
 there was a written contract for the delivery of a certain 
 number of barrels of flour, at a given piice, to be delivered 
 within a named time, at the seller's option, and evidence 
 was offered by the purchaser of a usage existing that a 
 margin should be put up, the court below was right in re- 
 fusing to allow this evidence to go to the jury, because it 
 was too indefinite and uncertain to establish a usage. 
 
 And in Clews vs. Jamieson ^ a rule of the Chicago 
 Stock Exchange by which, when sales of the same kind of 
 securities are made by different Brokers, and the latter's 
 accounts are balanced by other transactions, a substitution 
 of buyer and seller is made, and that the principals are to 
 conform to such rule, was held not to bind a principal in so 
 far as to compel him to sell at a lower figure than that at 
 which he authorized his Broker to sell, nor to compel the 
 purchaser to buy, although the Brokers would be bound by 
 the nde. In Municipal Investment Co. vs. Industrial & 
 Gen. Trust Co. * it was held that a usage of London bond 
 dealers wliich empowered them, after an absolute sale of 
 securities, to control litigation which might alTect their va- 
 lidity, and charg(i the costs thereof to their customei-s, 
 
 ' Commonwealth v.s. Cooper, 1 ' 23 How. (U. S.) 19; boo also 
 Maas. L. R. (May 1, 1881) No. 21; Curtis v.s. Gibney, .W Md 15'). 
 B. c. 15 Am. Law Uev. 3G0 (.May, > 81) I-YhI. (j.J. See Kent vs. Wood- 
 1881). liull, 55 N. V. Super ("t. Ml. 
 
 •89 l"ed. Kep. 251. 
 
 80
 
 466 Stock-brokers and Stock Exchanges. 
 
 would, without the consent of the customers, be unreason- 
 able. 
 
 Evidence of a custom of St. Louis Bankers and Brokers 
 that a sale of bonds with " past due" interest included in- 
 terest accruing and not yet due, to date of sale, is inad- 
 missible, unless the principal, living in Kansas city, know 
 of it, and contracted in St. Louis in reference to it.^ 
 
 A custom of mining Stock-brokers to charge an arbitrary 
 sum for telegrams has been held to be unreasonable.^ 
 
 (b.) In England. 
 
 Although formerly the courts in England were more lib- 
 eral in sustaining the usages of Stock-brokers, the tendency 
 for the past nearly quarter of a century has been the other 
 way, and the number of such usages rejected by the Eng- 
 lish courts nearly double those which have not been sus- 
 tained by the American decisions. 
 
 Stock transferred to secure advances, and which stock 
 was, by the pledgee, transferred to third persons by way of 
 loan, was in In re Dennison ^ held a sale as of the date of 
 the latter transfer, so as to charge the pledgee with the 
 then price, although the contention of the pledgee was that 
 such loans of stock were never consitlered sales. 
 
 In the case of Pearson vs. Scott ^ the plaintiffs, as exec- 
 utors, instructed S., a solicitor, to have some stock and 
 shares sold, and authorized him to receive the proceeds of 
 such sale. S. employed in the business the defendant, a Stock- 
 broker, with whom he had at the time a current account 
 
 ' Coquard vs. Bank of Kansas ' 3 Ves. 552. See Andre vs. 
 
 City, 12 Mo. App. 2G1. Crawford, 1 Br. P. C. 366. 
 
 » Mar>-e vs. Strouse, 5 Fed. Rep. * 38 L. T. (n. s.) 747. 
 483.
 
 Cases in >Yhieli Usages have been Rejected. 467 
 
 for differences, iij)on private speculative transactions on the 
 Stock Exchange. The defendant, having sold the prop- 
 erty, paid a portion of the proceeds to S., and by his di- 
 rections placed the balance to the credit of S. in the current 
 account. S. never paid the balance to the plaintiffs, but 
 subsequently absconded, and was declared a bankrupt. The 
 court found that the defendant had notice of tho. agency of 
 S. in the business, audit was held that the defendant was 
 liable for the balance ; and that a usage of the London 
 Stock Exchange to the contrary would be unreasonable, and 
 could not be upiield in the absence of knowledge of it on: 
 the part of the principal.' 
 
 In the case of Duncan vs. Hill ^ the plaintiffs. Brokers on 
 the London Stock Exchange, bought for the defendant (who 
 was not a member of the Stock Exchange) certain shares for 
 the account of the 15th of July, ls7o, and on that day, by his 
 instruction, carried them over to the account of the 29th of 
 July, and paid differences amounting to ,£'16SS. The defend- 
 ant, and various others, principals of the plaintiff, not having 
 paid the amount due from them in res[)ect of contracts for 
 the 15th of July, th(^ pjaiiililfs became defaulters ; and on 
 the 18th, in conformity with the rules of the Stock Ex- 
 change, they were so declared, and their transactions were 
 closed, and accounts were made up at the prit-es curient on 
 that day. On the closing of the accounts, a further sum i)e- 
 came (lu<- from tht-m in I'l-sprct of (lilTereiices ujxrn tlie eon- 
 tracts carried over by them for the defendant. In an action 
 to recover this sum and the £'ltISS, held (i-cversiiig the de- 
 cision of the court ix-lowj that the; defendant was not liable 
 
 ' To Hiimc effect ure tlie Aiiu-riran ' L. II. 8 Ex. 212. Sco ElIU va. 
 piuwMof rWier vm. Unnvn, Kll .\Iils.s. Pond, (1898) 1 Q. li. D. 426. 
 2'/>; Kvunu vh. Wulii, 71 I'a Si lO'J.
 
 468 Stock-brokers and Stock Exchanges. 
 
 for anything beyond the £1688, there being no implied prom- 
 ise bv a principal lo his agent lo ind(!ninify him for loss 
 caused, not by reason of his liaving entered into the contracts, 
 which he was authorized to enter into b}'^ tlie principal, but 
 by reason of his own insolvency; although the transaction 
 had been carried out in accordance with the customs and 
 rules of the Stock Exchange, wliicli, however, were not 
 proven to have been known to the defendant. The court, 
 through Mr. Justice Blackburn, upon the subject of usage, 
 said : " 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 default is without any personal fault of his 
 own, he is entitled to be indemnified by his principal upon 
 an implied contract to that effect. But it is argued that 
 where the agent, as in this case, is subjected to loss, not by 
 reason of his having entered into the contracts into which he 
 was authorized to enter by his principal, but by reason of a 
 default of his own^that is to say, as in this case, by reason 
 of his insolvency, brought on by want of means to meet his 
 other primary oI)ligati<)ns — it cannot be said that he has 
 suffered loss by reason of his having entered into the con- 
 tracts made by him on behalf of his principal, and conse- 
 quently there is no promise which can be implied on the part 
 of his principal to indemnify him, and in the present case 
 there certainly was no express promise to this efifect. . . . 
 The plaintiffs' insolvency was, so far as regards the de- 
 fendant, entirely the result of their own default."' 
 
 ' But if the client chooses to ac- found bj' the assignee to be against 
 
 cept the assignee's closing, he is the Broker (Hartas vs. Ribbons, 
 
 bound to indemnify the defaulting 58 L. J. Q. B. 187, distinguishing 
 
 Broker in respect of the difference Duncan vs. Hill, supra), and if there
 
 Cases iu which Usages have been Rejected. 409 
 
 lu Tonipkius vs. Satfery ' it appeared that C. was a mem- 
 ber of the Stock Exchange ; he notified the secretary that 
 he was unable to meet his engagements on the Exchange. 
 In such a case the rules of the Exchange [)rescribe the course 
 to be followed : the defaulter ceases to be a member of the 
 body ; two members of the Exchange act as official assignees 
 of the defaulter ; a meeting of the creditors is called ; the 
 defaulter (as he is required to do) makes his statement ; and, 
 the assembled creditors having decided what is to be done, 
 the official assignees carry the decision into execution. C. 
 made his statement that he had no debts outside of the 
 Exchange. The creditors of C, members of the Stock Ex- 
 change, 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 check for £5000, then standing to 
 
 was privity of contract between the with tlie jobber at the "luunmer 
 
 chent and a jobber from whom the price, " but in Levitt vs. llaniblet, 
 
 Broker bought or sold, the jobber 5 Com. Cas. 326; 6 ib. 79, it was 
 
 miffht sue the client for completion, held that no such option existed, 
 
 or vice versa. Beckhusen vs. Ham- ' L. R. 3 App. Cas. 213. Tomp>- 
 
 blet, 69 L. J. Q. B 431; 70 L. J. K. kins vs. Saffery was considered in 
 
 B. 600, in which case a jobber Richardson vs. Storment, Todd & 
 
 failed to recover by reason of the Co., G9 L. J. Q. B. 369, in which it 
 
 want of privity ijetween him and wa.s held that the "assets" (Stock 
 
 the client occa.sioned by the Broker Exchan<io Rule 176) to be collected 
 
 lumping several onlers besides his by the oflicial assignee meant the 
 
 client's in the one contract, and a defaulter's cMitire iL>wets, and not 
 
 usa^e of the Stock E\chani;e to the merely the Stock Exchan-^e !is.set.s, 
 
 contrary, was held not proved, but and that the traM.><fer of a part 
 
 in Scott V8. Gfidfrey, 70 L. J. K. B. thereof, with the intention to trans- 
 
 954, such a u.sage was held estab- for all, wius a cpssio boiioruin em- 
 
 lished and it wa« also held that it pf)worin!r the a.s.sit;npe to sue for 
 
 was reasonable. See aW) May vs. recoverv of the entire. witho\it set- 
 
 .•ViiKcli, 13 Times L. R. .WS. re- ting off a debt of tin- di>faiilt«'r to 
 
 ver»c<l on other trrounds, 14 T I-. H. defonrlants, who h.-id been Stock- 
 
 5.51. In .\ndnrHon vs Beard, 69 brokers .nul were well acquainted 
 
 L. J Q, B. 610. it wiis held that the with the rulou. 
 customer hiul an option to cIoim!
 
 470 Stock-brokers and Stock Exchanges. 
 
 his credit in the Bank of Enghind. It afterwards appeared 
 that C. owed debts to a number of outside creditors and was 
 declared a bankrupt. The trustee iu bankruptcy, on behalf 
 of these creditors, claimed this sura from the official assignee 
 of the Stock Exchange, and the court decided that the 
 trustee was entitled to claim it, for the action of C. in paying 
 it to the official assignees amounted to a cessio ho7iorum, 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 inlluence on 
 the rights of those who are not amenable to the jurisdiction 
 of that body. They cannot, therefore, govern the rights of 
 the general creditors of a defaulting member.^ 
 
 ' See also Ex parte Neilson, 3 De that that would destroy the debt." 
 
 G. M. & W. 560, note, where Skir- Cotton, L. J., said the rule was ap- 
 
 row, Com., said: "The rules of the plicable, but no question arose, as 
 
 Stock Exchanfz;e are inoperative the assent had been obtained. The 
 
 that interfere with the law of the que.stion was not raised in the second 
 
 land." It has been also held that case just cited. 
 
 the rules of the Stock Exchange as In Levitt vs. Hamblet, 6 Com. 
 to defaulting members, do not pre- Cas. 79; 5 ib. 326, it was held that 
 vent a creditor, a member of the Rules .53, .54 and 177 of the London 
 Exchange, who has received a divi- Stock Exchange, although binding 
 dend from the official assignee, from upon its members, did not bind out- 
 suing for the balance of his debt siders. Rule 53 provided that the 
 (Ex parte Ward, 51 L. J. Ch. 7.52; Exchange in its dealings would only 
 Ratcliffe vs. Mendelsohn, 71 L. J. recognize members. Rule 54 con- 
 K. B.9,S4), or from instituting bank- tained certain inhibitions as to en- 
 ruptcy proceedings. In re Mendel- forcing claims, and Rule 177 had 
 sohn, (1903) 1 K B. 216. In Ex reference to a defaulting member, 
 parte Ward, just cited, also it ap- A usage amongst Brokers to settle 
 peared that there was a rule (54) in account was held not to bind 
 which prevented a Stock Exchange outsiders. Anderson vs. Suther- 
 creditor from suing at law without land, 13 Times L Rep. 163. See 
 the consent of the other Stock Ex- also Crossley vs. Magniac, (1903) I 
 chancre creditors, which consent had Ch. .594 (supra, p. 4.59) in which the 
 been obtained. Jessel, M. R. said: court said that a custom of London 
 "If they (the creditors) had not as- Stock Exohanire Brokers to debit 
 sented, it does not appear to me country Broker's accounts with the
 
 Cases in which Usages have been Uejected. 471 
 
 But the case in which the extent of usages in controllinsr 
 contracts was most thoroughly considered was that of 
 Eobinsou vs. MoUett,' which we have before referred to. 
 There R., a merchant of Liverpool, gave orders to a tallow- 
 broker in London to buy certain quantities of tallow for 
 him. The Broker did not buy the specified quantity from 
 any person, though he sent bought notes in the usual form 
 — " Bought of A. on your account ; " but both before and 
 after the order he bought from various persons, in his own 
 name, large quantities of tallow, proposing to allot to 11. 
 the quantities R. had desired to be bought. On Il.'s refusal 
 to accept, the Broker sold the tallow, and brought an action 
 for the diflFerences. Held, that though the evidence showed 
 such a mode of dealing to be the usage in the London tallow 
 market, the action was not maintainable against a principal 
 who did not appear to have had knowledge of its existence. 
 A custom in a particular market, that a Broker who has 
 purchased and is purchasing goods of a particular kind, in 
 his own name, may take portions of those goods and supply 
 
 proceeds of stock of the latter's change to treat share certificates, 
 clients was not proved, and, even with transfer executed in blank, as 
 if proved, w:ia unreasonable, in so ne^jotiable in.strunients, wa.s held 
 far as it would relieve an a^ent from not bindin;;, its they were intended 
 his obligation to his principal, who, to pass by transfer only. London 
 in this case, had given a power of and County liank vs. London and 
 attorney to the London Brokers. River Plate Hank, L. R. 20 Q. B. D. 
 The latter might be ju.stified in pay- 232; 21 ib. 535. See Bank vs. Hop- 
 ing the country Broker, if he were so worth, 30 Ch. D. 30; Franco vs. 
 authorized by the client, in cjush or Clark, 20 Ch. Div. 257; Williams vs. 
 by check, but not in debiting his Colonial Bank, 38 Ch. Div. '.{HH; 
 account in rurniing account, and aff'd 15 .^pp. Cas. 2()7; l.imllcy <>n 
 mi.xing it up with other transac- Companies, (ith (hI. 050, et 8«'<i. 
 tions. In lilackburn vs. .Mason, 08 ' L. R 7 H. L. Kng. & 1. App. 
 Law T. 510, such a custom was also Cas. K02. See also Johnston vs. 
 held unreasonable. Usbomo 11 A. «& E. &10. 
 A usage of the London Stock Ex-
 
 472 Stock-brokers ami Stock Excliaiii^es. 
 
 them to principals who have enn^loycd him in his character 
 of Broker to buy such goods for them, is one of a peculiar 
 nature, and cannot be supported as against a principal not 
 proved to have been acquainted with it when he gave the 
 order.' 
 
 The principle of the decision in Robinson vs. Mollet was 
 followed in Hamilton vs. Young,^ in which case a usage 
 of the Dublin Stock Exchange by which a Stock-broker, en- 
 titled to dispose of stock or shares of a customer for non- 
 payment of money due to him by the customer, might, in- 
 stead of selling the stock or shares, take over to himself, at 
 the market price of the day, such portion of the stock, as 
 would be necessary to meet the demand, or a forced sale 
 whereof would prejudice the price to the disadvantage of 
 the customer, was held to be more unreasonable even than 
 the usage in Mollet vs. Robinson. Although no improper or 
 unfair dealing was imputed to defendant Broker, the court 
 said : " The case requires to be disposed of on higher and 
 more general grounds than either actual fraud committed 
 or unfair profit made, and on those rules of equit}', which 
 it would be dangerous to disturb or infringe." 
 
 In the case of Neilson vs. James ^ a Stock-broker was em- 
 ploved by the registered owner of certain shares to sell them, 
 which he subsequently did to a jobber, but the bought and 
 sold notes did not, in accordance with a custom of the 
 Bristol Stock Exchange, give the name of the registered 
 owner as required by statute, thus rendering the contract of 
 sale void. The bank stopped before name day, and the 
 purchaser, named by the jobber, repudiated the purchase. 
 The court held that the custom was both unreasonable and 
 
 * See also Langton vs. Waite, L. ' L. R. 7 Ir. 269. 
 R. 6 Eq. 165. ^ 9 Q. B. Div. 546.
 
 Gases in which Usages have been Rejected. 473 
 
 iUegal, and for the breach of duty C(nuinitted by the bro- 
 ker, awarded the owner, as damages, the price for which the 
 shares were sold. It did not appear in that case that the 
 phiiiitifif knew of the custom, and the judgment of the court 
 is on the assumption that he was ignorant of it, for Brett, 
 L. J., says, " the phiintiff is only bound by such a custom as 
 is both reasonable and legal, for to that extent only can a 
 person who is ignorant of a custom be assumed to acquiesce 
 in, and be bound by, it.'' This decision was followed in 
 Perry vs. Barnett,^ in which case in was shown that the 
 Client was ignorant of the custom, but in a similar state 
 of facts it was held in Seymour vs. Bridge,'- that, as the 
 Client had many prior transactions on the Stock Exchange, 
 and was acquainted with the custom, he was bound by it. 
 In Coates vs. Pacey ^ the contract note did not give the num- 
 ber of the shares as required by statute, and there was a 
 verdict for the defendant Client, but in that case no evidence 
 of the custom was given. The Court of Appeals affirmed 
 the decision ^ on the ground that the Brokers had not acted 
 in accordance with the authority given to them, which was 
 to make a valid contract. 
 
 In conclusion we think that an examination of the Ameri- 
 can cases will show that the effect of the usages of Stock- 
 brokei*s upon contracts nuide upon the Exchange iiave not 
 been sufficiently considered or applied. 
 
 The system of busin«'ss transactetl between Stock- brokers 
 and their Clients is so novel when ctmtrasted with the 
 ordinary relation of ])rincipal atid aL'iMit, the business is 
 generally despatched with sneli iMarvriloiis proniplness, and 
 
 ' It Q. li. \)\v. 107; 1.0 Q. li. Div. ' s T. I.. \l. :\rA. 
 388. *.ST. I., i:. 171. 
 
 ' 11 H n. Div. 100.
 
 474 Stock-brokers uihI Stock Exchanges. 
 
 its results very often involve snnis of such great magnitude, 
 that, in a contest where either the Broker or the Client 
 seeks to be relieved from the responsibilities of his posi- 
 tion, the usages of the Exchange, when fully proved, 
 should play an important part, especially in the absence of 
 an express agreement ; and even if these usages seem at 
 times to intrench upon abstract principles of law, it should 
 be remembered that the business of dealing in shares upon 
 speculation is a comparatively new one, full of legal anom- 
 alies, and that it should not be too strongly governed by 
 rules that were made for a different and simpler condition 
 of business in times long since passed.
 
 Dealiugs in Stocks at Conimou-law. 475 
 
 CHAPTER Y. 
 
 STOCK-JOBBING. 
 
 I. Dealings in Stocks at Common-law. 
 II. Stock-} ohbing Acts, 
 (a.) In England. 
 (J).) In the United States. 
 III. Wagers. 
 
 (a.) At Common-law. 
 
 {b.) Under Existing Laws. 
 
 (c.) Wagers between Principals. 
 
 (d.) Actions by Brokers for Money Laid Out, etc., and 
 
 Commissions in Stock Transactions. 
 (e.) Options, ''Puts," " Calls," ''Straddles." 
 (/.) Conspiracy to Affect Stocks, etc. — " Corners," 
 
 "Rigging the Market," "Pools." 
 (y.) General Principles Deducihle from the Cases. 
 
 I. DealiiigH in Stocks at Coiuiiioii-law. 
 
 At common-law there is nothing illegal in the sale of the 
 shares or scrip of a corporation.' They are treated the 
 
 ' Barklay's Case, 26 Beav. 177; & 8 Vict. c. 110, the sale of shurc« of 
 
 .baton's Case, 4 De G. it J. 320; Har- certain named companies \va.s pro- 
 
 liHoti VH. Ileathoni, .Man. «t G. 81; liiljited until the company luuJ ob- 
 
 TempcHt VH. Kilner, 2C. li. 300, 308; taintMi a ccrtilicate of compicto 
 
 Bafaje's Case, 13 Beav. 102; Noye« reni-stration. Kven tlicn salcH matle 
 
 V8. Spaulding, 27 Vt. 420; Chitty on by any Hubscriber n<jt roi:iHtere<l iw a 
 
 Cont. aith ed.) 1011, 1012, note shareholder were made illeRal, 5 20; 
 
 (d). But in Enj;land, by Htatute 7 see aJHo Kx parte .NcilHon, 3 De G.
 
 476 Stock-brokers and Stock Exchanges. 
 
 same as any other kind of properly, and are subject to nu 
 restrictions or limitations except such as are imposed from 
 time to time by acts of the le<^ishiture, as will be hereafter 
 noticed. 
 
 11. Stock-jobbing Acts. 
 
 Early in the reign of George the Second the specuhition 
 
 in public stocks or securities became so prevalent, and as- 
 
 M. & G. 556; Morris vs. Cannan, 4 is itself illegal, the sale of its shares 
 
 De G. F. & J. 582. This statute or scrip is also illej^al (Joseph is. 
 
 was repealed, and the prohibitions Pebrer, 3 B. it C. 639; Buck vs. 
 
 never extended to companies the Buck, 1 Campb. 547). When the 
 
 formation of which was commenced business of a company is carried on 
 
 before the 1st of November, 1S44 (in in the colonies, the fact that it Ls 
 
 reference to which see Baker vs. registered in England does not 
 
 Plaskitt, 5 C. B. 262; Aston 's Case, make it illegal. Hunt vs. Cham- 
 
 27 Beav. 474), nor to railway or berlain (1896), 12 L. T. R. 186. 
 
 other companies requiring the au- But there is nothing illegal in the 
 
 thority of Parliament (Young vs. sale of shares in companies which 
 
 Smith, 15 M. &. W. 121; Bousfield are being wound up. Rudge vs. 
 
 vs. Wilson, 16 id. 185; Lawton vs. Bowman, L. R. 3 Q. B. 689. See 
 
 Hickman, 9 Q. B. 563). Companies Emmerson's Case, 1 Ch. 433 (as to 
 
 formed since 1862 arc now regulated enforcing a contract for the sale of 
 
 by the Companies Acts of 1862 and shares in a company in liquidation). 
 
 1867, and their amending acts. By the statute of 14 Geo. HI. 
 
 Some of the American decisions c. 48, no insurance shall be made on 
 
 holding that shares of stock are alien- the life of any person, or on any 
 
 able at common law, are Sergeant other event wherein the person for 
 
 vs. Franklin Insurance Co., 25 Mass. whose use or benefit, or on whose 
 
 90; Heart vs. State Bank, 2 Dev. account, such policy shall be made 
 
 Eq. (S. C.) Ill; Brightwell vs. Mai- .shall have an interest by way of 
 
 lory, 10 Yerg. (Tenn.) 196; .\llen gaming or wagering. Under this 
 
 vs. Montgomery' R. R., 11 Ala. 437, enactment it was decided, in Pater- 
 
 451; Choteau Spring Co. vs. Harris, son vs. Powell (2 Moo. & S. 399; 9 
 
 20 Mo. 382; Cole vs. Ryan, 52 Bing. 320), that an engagement, in 
 
 Barb 168; Mobile Mutual Insurance consideration of forty guineas, to 
 
 Co. vs. Cullom, 40 Ala. 558; Boston pay one hundred pounds in case 
 
 Music Hall Association vs. Corj-, Brazilian should be at a certain 
 
 129 Mass. 435. price on a certain day, subscribed 
 
 It has also been held that if a by several persons each for himself, 
 
 company, or a prospected company, is a void wagering policy.
 
 Stock-jobbiiii? Acts. 477 
 
 sumed so many different forms of gambling, that the whole 
 business community became infected and demoralized by it. 
 Accordingly, in 1734, a statute was enacted,' which by a 
 subsequent statute in 1737^ was made perpetual, entitled 
 " An Act to Prevent the Infamous Practice of Stock-job- 
 bing." This statute will hereafter be stated in full. It was 
 enacted for the purpose of preventing gambling in the 
 funds, b}' parties Avho never intended to buy or sell, but 
 merely to speculate upon the future price of stock, by mak- 
 ing what are called " time bargains," and comiX)unding for 
 differences. It was never intended to affect the lona fide 
 sale of stock, where the stock was actually transferred, al- 
 though the seller was not possessed of it at the time of mak- 
 ing the contract.^ 
 
 This act was called " Sir John Barnard's Act," after the 
 name of the individual who was instrumental in procuring 
 its passage. The preamble, which briefly summarizes the 
 effects of stock-jobbing, was as follows : " "Whereas, great 
 inconveniences have arisen, and do daily arise, by the 
 wicked, pernicious, and destructive practice of stock-job- 
 bing, whereby many of his Majesty's good subjects have 
 
 ' 7 Geo. II. c. 8. ha.s ri.sen, the seller pays tiie buyer 
 ' 10 Geo. II. 0. 8. in a similar way. The sums so paid 
 • .\ddi.son on Cont. (2d Am. ed.) are oallefl dilTerences. In fact, a 
 *122. In Chitty on Bills ( 11th Am. time hariiain is a mere wa^;er, the 
 ed.), *92, ncite (*•), a stock-jobbing seller bettiiii; that the .stork will 
 traasaetion is defined a.s follows: fall, the buyer that it will rise." See 
 "Neither buyer not seller have any Rawlinns vs. Hall, 1 C. & P. 13, note 
 stork, but the buyer agrees nomi- (a). Whether a lejjal- contract, ^iv- 
 nally U) buy of the seller stock (say ing a right of action, can arise out of 
 £1,(KX)) on a certain day. When illegal transactions, or by payments 
 that day arrives, if the st<M'k is at a made on account of another in set- 
 lower price than when the bargain tling dilTorcnccs \jpon transactions 
 wjm rna<le, the buyer pays the seller within the Stock-jobbing .\ct, 
 a» much ]>*T nut. on thr- £l,(KM)a.s ({uirrr. K\ p.irte iJaniclM, II Vcm. 
 the Hto<;k has fallen; but, if the stock Itil
 
 478 Stock-brokers and Stock Kxclum^es. 
 
 been and are diverted from pursuing and exercising their 
 lawful trades and vocations, to the utter ruin of themselves 
 and families, to the great discouragement of industry, and 
 to the manifest detriment of trade and commerce." The 
 statute then enacts that all contracts and agreements upon 
 which any premium shall be given or paid for liberty to put 
 upon, or delivei", receive, accept or refuse any public or 
 joint-stock or other public securities whatsoever, or any 
 part, share, or interest therein, and also all wagers and con- 
 tracts in the nature of wagers, and all contracts in the na- 
 ture of puts and refusals, relating to the then present or 
 future price or value of any such stocks or securities as 
 aforesaid, shall be void ; and all premiums or sums of money 
 given, received, paid, or delivered upon an}^ such, contracts 
 or agreements, or upon an}^ such wagers, or contracts in the 
 nature of wagers, shall be restored or repaid to the person 
 who shall give, pay, or deliver the same, who shall be at 
 liberty, within six months after the agreement, or laying 
 the wager, to sue for and recover the same from the person 
 receiving the same, etc." ' 
 
 ' The following is an interesting purchasing and selling any Quantity 
 
 historj- of "time bargains," from of Stock to be delivered or adjusted 
 
 Beaves, Lex. Mer. 482 (5th ed. at a future time. The usual Times 
 
 1792): for which Bargains, founded on real 
 
 " Time Bargains. Property, and intended to be settled 
 
 "But if the business of Stock- bona fide, were made, were from 
 
 Brokers was confined solely to buy- three months to three months, four 
 
 ing and selling the real Property of times within the year; viz. in Febru- 
 
 their Employers in the Funds, there ary, May, August, and November; 
 
 woiild not be Half the number that and those Periods of settling the ac- 
 
 now follow this Profession; it is counts of such Time Bargains was 
 
 therefore necessary to take notice, called the Rescounters, from a 
 
 that the interest which Foreigners Dutch mercantile tenn for adjusting 
 
 have in our funds, particularly the Accounts Current between mer- 
 
 Dutch, gave rise to Time Bargains chant and merchant. The Impos- 
 
 — that is to say, to contracts for sibility of ascertaining whether the
 
 Stoi'k-jobbinii: Acts. 
 
 4T1> 
 
 There were numerous decisions under "Sir John Bar- 
 nard's Act," the most important of which have been classified 
 under the following heads : 
 
 1. Nature of Stock emhraced in the Act. — The act only 
 applied to '• public stocks," and not to railway and joint- 
 stock shares.^ It did not apply to time bargains in foreign 
 funds ; ^ nor were such agreements illegal at common 
 
 Commissions from abroad given by 
 letters from Foreigners, or bj- their 
 Correspondence here, to Brokers to 
 buy and sell Stocks for Time were 
 founded upon real Property or not, 
 gave Birth to Stock-Jobbing, or 
 Dealing in the Funds upon Specula- 
 tion, and the Persons that play at 
 this Game, for Gaming it is of the 
 first Magnitude, whether Principals 
 or Brokers, are called Stock Job- 
 bers. They purchase or sell for a 
 given time, frequently without be- 
 ing possessed of any propertj' in the 
 Funds they bargain for, merely 
 upon speculation. For instance, A 
 imagines that a Peace, or some other 
 advantageous national Event, will 
 raise the Price of any given Fund 
 within the space of three months 
 considerably above the price of the 
 Day on which he makes his Time 
 Bargain: On this Principle he gives 
 his Broker Orders to buy a large 
 Quantity to be taken and paid for 
 three mcjnth.s from that date; wlien 
 the time expires, if the Stock luus 
 risen according to his expectation, 
 instciul of taking it, for prolmbly it 
 has f)een bought of a person, wlio 
 had it not to sell pvpii, he receives 
 from the Broker the Difference in 
 money between the price on tlie day 
 the Bargain was made, and tlie 
 
 price at the expiration of the three 
 months, and this is his Profit. If, 
 on the Contrary, the Stock has 
 fallen below the price of the day on 
 which he purchased for three 
 months, he must pay the Difference, 
 and this will be a losing .\ccount. It 
 is computed that the Bargains on 
 Stock Jobbing Accounts made in 
 the course of a year exceed liy many 
 millions the transfers made at the 
 Books of real Property, and the 
 Conclusion is apparent that great 
 Fortunes are made and lost by 
 Stock Jobbing. It is to be ob- 
 served likewi.se, that the Brokers 
 job for their own acct)init, wiiich 
 occasions frequently Failures at the 
 Stock Exchange." 
 
 ' 'A'illiams vs. Tyre, 18 Beav. 3GG; 
 Hewitt vs. Price, 5 Sco. X. R. 220, 
 and 4 Man. & G. 355; 3 Railw. Cas. 
 175; Ex parte Turner, 3 De G. i J. 
 40, and cases citetl; Thacker vs. 
 Hardy, L. K. 4 Q. B. Div. <>,S5, (VS9; 
 Noyes vs. Sj)aulding, 27 Vt. 42*.). 
 
 = EU.swortli vs Cole. 2 M. fc \V. 
 31 ; 2 Gale, 220; Henderson vs. Bi.se. 
 
 3 Stark. 1.58; Wells vs. Porter. 3 
 Sco. 141; B. c. 2 Bing. N. C. 722; 
 2 Hodg. 78; Oakley vs. Rigby, 3 
 Sco. 194; 8. c. 2 Bing. N. C. 732; 
 2 Hodg. 42; Bobmin vs. Fallowes. 
 
 4 Sco. 43; ». c. 3 Bing. N. C. 392;
 
 480 Stock-brokers and Stock Exchaiif^es. 
 
 law.' The act was confined to the stocks of England, and 
 not of other countries ;'^ and time bargains in India funds 
 were held valid up(jn appeal to the Privy Council.^ But 
 jobbing in oimiiion was within the statute.* 
 
 2. Transactions under the Statute. — The act did not ap- 
 ply where the seller was really possessed of the stocks in- 
 tended to be transferred;^ and it was sufficient if at the 
 time of the sale, through the medium of a Broker, the 
 principal was possessed of the stock, although his name was 
 not disclosed by the Broker.* A person who had omnium 
 was considered as potentially in possession of stock, and 
 could legally contract to sell out omnium to be replaced by 
 stock.' 
 
 So where C, being indebted to G. in £1,000, agreed to 
 transfer within a given time £100 per annum, long annuity, 
 at the then price, and in the meantime pay G. the divi- 
 dends, and that the debt of £1,000 should constitute part 
 of the purchase-money, but the stock was not purchased at 
 the time, and there was a rise in the price of the same — 
 held, that the agreement was not usurious or within the 
 Stock-jobbing Act,^ and there was nothing in the statute 
 to prevent a loan of stock — i. e., a transfer of stock from A. 
 to B. on the strength of an understanding by B. that the 
 
 3 Hodg. 41; Morgan vs. Pebrer, 4 * Brown vs. Turner, 7 T. R. 630; 
 
 Sco. 230;3Bing. N.C. •157;3Hodg. 2 Esp. 631; s. p., Olivierson vs. 
 
 3; Paterson vs. Powell, 9 Bing. 329; Coles, 1 Stark. 496. 
 
 2 Moo. & S. 399. See Bryan vs. ^ Saunders vs. Kentish, 8 T. R. 
 
 Lewis, Ry. & M. 386; Lorymer vs. 162; Tate vs. Wellings, 3 id. 531. 
 
 Smith, 1 B. & Cr. 3. ' Child vs. Morley, 8 id. 610. 
 
 I Id. ^ Olivierson vs. Coles, 1 Stark. 
 
 J Id. 496. 
 
 'Ramloll Thackoorseydass vs. 'Clark vs. Giraud, 1 Madd. 511. 
 Soojumnull Dhondmull, 12 Jur. 
 315.
 
 stock-jobbing Acts. 481 
 
 same stock, or a like amount of stock, should be transferred 
 to A. at a future day.' 
 
 An executory contract to transfer stock of which the party 
 was not possessed was, however, regarded as void and ille- 
 gal, although the transaction did not fall within the mis- 
 chief, as it ceitainly did not within the express prohibition, 
 of the act, inasmuch as an actual transfer of the stock was 
 intended.^ So a contract to pay the difference which may 
 become due on the settling-day on the sale of consols is 
 void.'' 
 
 In respect to the procedure under the act, the court held, 
 in "Windale vs. Fall,^ that the six months in the first section 
 meant lunar months, and no discovery lay where the cause 
 of action arose prior to the expiration of six lunar months ; 
 and a plea of the Stock-jobbing Act to a bill for discov- 
 ery of stock transactions was overruled, the second section 
 of the act requiring parties to make a discovery whereon 
 to found an action.^ 
 
 The second section of the act — which enacted as follows : 
 " That for the better discovery of the moneys or premiums 
 which shall be given, paid, or delivered, etc., every person 
 liable to be sued shall be obliged, etc., to answer under 
 oath, etc., any bill of discovery in equity," etc. — only 
 applied to discoveries as to moneys recoverable back, and 
 not to the recovery of jn-nalties under the lifth and eighth 
 sections.' 
 
 In an action to recover damages against one who had re- 
 
 » Saunders vs. Kentish, 8 T. K. « .} Hro. C. C. 11. 
 162. ' IJ:ui(T(ift VH. \V(Mit\V(irth, 3 Urn 
 
 '.Mortimer v« .M(<'aIIai., '» M .^ C. C. !», note, 
 W. 630; 6 id. 70; 7 id. 20. " Mullock vh. RicliiirdHon, 11 Vcm. 
 
 ' Sawyer vs. Lan(^ord, 2 C. & K. 373. 
 697. 
 
 31
 
 482 Stock-brokers and Stock Exchanges. 
 
 fused to accept and pay for stock agreed to be sold to him, it 
 was necessary to prove an actual transfer of the stock to some 
 other person before the action brought ; and tlie proof alone 
 of a contract to sell to such other person before the action 
 brought, thougli folloAved up by an actual transfer afterwards, 
 was not sufficient to sustain the action.' But it seemed not 
 to have been necessary for the plaintiff to show that he made 
 such transfer on the next possible day after default made by 
 the original contractor, though delay affected the damages.' 
 The act did not compel a party in a court of law to give evi- 
 dence criminating himself ; and therefore, in an action on 
 a bill at the suit of an endorser against the acceptor, it was 
 held that the drawer, a Stock-broker, might refuse to give 
 evidence that the consideration for it was Stock-jobbing 
 differences, though such Broker was bound to produce his 
 books.^ A Stock-broker was held bound, however, to dis- 
 cover the names of the persons for whom he had purchased 
 shares in a company which had not been incorporated, 
 chartered, or registered.^ Nor could such a Broker resist a 
 discovery under 7 Geo. II. c. 8, by alleging the illegality 
 of the transaction, no penalty being imposed by the 
 act.^ 
 
 But in Pritchett vs. Smart® the court refused to enter- 
 tain an application by a defendant, in an action on a bill of 
 exchange, to compel tlie plaintiff, as Stock-broker, to pro- 
 
 ' Heckscher vs. Grejjory, 4 East, ute 7 Geo. II. c. 8, see Billings vs. 
 
 607. A different rule was, however, Flight, 2 Marsh. 124; 6 Taunt. 419; 
 
 laid down in Xew York in the case Billings vs. PoUey, 2 id. 125 n.; 6 
 
 of Vaupell vs. Woodward, 2 Sandf. Tuant. 422. 
 
 Ch. 14.5, 146. 3 Rawling vs. Hall, 1 C. & P. 11; 
 
 ' Bordenave vs. Gregory, 5 East, Thomas vs. Ne^^ton, 2 id. 606. 
 
 105; Dorriens vs. Hutchinson, 1 * Aslon's Ca-^e, 27 Beav. 474. 
 
 Smith, 420. Whether an action of ^ Williams vs. Trye, 18 Beav. 366. 
 
 assumpsit can be supported on stat- ' 7 C. B. 625.
 
 Stoek-jobbiug Acts. 483 
 
 duce his books kept pursuant to this section/ in oi'der to 
 enable the defendant to plead the statute. 
 
 3. Actions for Money Uscd^ etc., and Coynmissions in 
 Stochjohhing Transactions. — AVhere, to an action of debt 
 upon a bond, the defendant pleaded the act of 7 Geo. II. 
 c. 8, that the jjlaintiff and one Tl. were jointly concerned in 
 certain contracts contrary to that statute ; that the plaintiff 
 voluntarily paid the differences ; and that the bond was 
 given by the defendants for securing to the plaintiff H.'s pro- 
 portion of that loss — on demurrer, the court was clearly of 
 opinion that the plaintiff was entitled to recover the amount 
 which he had paid under the special authority of R., though 
 for an illegal purpose.^ 
 
 Upon the authority of the last-named case, the court, in 
 Petrie vs. Hanney,^ held, against the opinion of Lord Ken- 
 yon, that where two persons engaged jointly in an illegal 
 stock-jobbing transaction, and incurred losses, and employed 
 a Broker to })ay the ditferences, and one of them, Avith the 
 privity and consent of the other, repaid the whole sum to 
 the Broker, he might recover a moiety from the other as 
 money paid to his use, notwithstanding the statute 7 Geo. 
 II. c. 8, on the ground that the defendant had exjiressly 
 authorized the plaintiff to make the payment for him. 
 
 But these cases were afterwards departed from, and are 
 no longer regarded as authority in England.^ 
 
 ' § 9 of act. .\rm.stronK vs. Tolor. 1 1 Whont. 2,'iS; 
 
 * Faikney vs. Reynous, 1 liurr. ul.so Kx piirto Miithcr, 3 Vlw. Juii. 
 
 2()69; 1 W. Black. 633, and cases 373; Aiihert vs. .Maze, 2 B. it T. 
 
 cited note (n), where this case is 371 ; Brown vs. Turner, 7 T. U. ri.'iO; 
 
 considered as overruled. Booth vs. IIcmI^soii, (5 T. \\. •10.'); 
 
 *3T. R.ns. Steers vs. Lashley. id. <H; Mit.h.ll 
 
 ♦See 2 rhitty onCont. nith .\rn vs. Cockhum, 2 H Bl 379, and 
 
 wJ ) .S9n iirid S97, citini; .Mclilair v«i. other ciumv* cited in Cannan vs 
 
 Gibbs, 17 Uow. (U S ) 232, 2.3r,: Bry<e, 3 B. fi Aid ISI. And see
 
 484 Stock-brokers and Stock Exchanges. 
 
 Thus ill Thwuite vs. Warner/ where parties were engaged 
 in stock-jobbing transactions, in violation of the statute, the 
 court hold that one of thorn would not be i)erniitted to 
 maintain an action against the other to recover money paid 
 to a Broker under such transactions. 
 
 And the direct question was at issue in Cannan vs. Bryce,'-^ 
 where it was decided that money lent, and applied by the 
 borrower for the express purpose of paying or compounding 
 dilferences on illegal stocR-jobbing transactions to which the 
 lender was no party, cannot be recovered back by him in an 
 action for money had and received.^ 
 
 So, there are several cases in which the results of stock-job- 
 bing transactions were represented by bills, checks, or other 
 written instruments, and the courts have concurred in the 
 above rule of law. 
 
 In Ex parte Buhner^ promissory notes were given by a 
 Stock-broker for the balance of an account of money advanced 
 to him to be employed in stock-jobbing transactions, contrary 
 to the statute. Part of the consideration consisted of the 
 profits of these transactions. Proof under his bankruptcy 
 was restrained to the residue — viz., the money received which 
 he had applied to his own use. So a bill given for the amount 
 of stock-jobbing differences was held void in the hands of an 
 endorsee with notice,^ and where it had been endorsed for 
 value after it became due.^ And a bond given to an endorsee 
 
 also opinion of Abbott, C. J., id. 183, ^ See also McKinnel vs. Robinson, 
 
 and cases cited and commented 3 M. & W. 434. 
 
 upon in Paley on Age. by Lloyd, * 13 Ves. Jun. 313. 
 
 119 n. (t). See also remarks of * Steers vs. Lashley, 6 T. R. 61; 1 
 
 Church, C. J., in Woodworth vs. Esp. 166. 
 
 Bennett, 43 N. Y. 278. • Brown vs. Turner, 7 T. R. 630; 2 
 
 ' Esp. X. P. Dii,'. 88. Esp. 631. 
 
 ' 3 B. & Aid. 179.
 
 Stock-jobbiiia: Acts. 485 
 
 ill lieu of :i [Toiuissory note orginally given for an illegal 
 stock-jobbing transaction, of which the endorsee had notice 
 before he took the bond, was held void.* But a bill of ex- 
 change or promissory note given upon a stock-jobbing trans- 
 action is valid in the hands of a party who afterwards took it, 
 before it was due, for value, and without notice of the illegal 
 consideration.'^ 
 
 To a declaration for work done, commissions, and for 
 money pjiid, a plea that the plaintiff was a stock and share 
 Broker, and as such made contracts with persons for the 
 defendant by way of wagering, contrary to 8 and Vict. 
 0. 109, under the semblance of pretended sales, respecting 
 the future market price of public and other stock, shares, 
 and scrip, whereby the defendant was to receive or pay the 
 difference between the price of the said public stock on the 
 days on which the contracts were made and the ])rice on 
 certain future days, according as the price had become lower 
 or higher ; and that the work was done, and the commission 
 claimed in respect of the making such contracts, and the 
 money paid in discharging the differences which had be- 
 come payable — held, first, that this was no defence under 
 the statute of Vict. ; secondly, that the plea disclosed no 
 defence under the Stock-jol)bing Act, as it was not alleged 
 that each contract related to pnhlic stock.^ 
 
 In an action by the assignees of a bankrupt, for money 
 
 ' Amory vh. Meryweather, 4 D. it ' Query, whf^tlicr tlic dofoiiro un- 
 
 Ry. 80; 2 H. A Cr. o73. dcr the lutU-r act wiis opoii <iii llio 
 
 * Day vs. Stuart, Hiiifr. \(Y.); 3 M. plea, rofereiicc Ixmii;^ oxprcssly iiiado 
 
 6l p. 33-1; GrocrilHiid vs. Dyer, 2 .M. to tin; otluT act fKniu'lit vh Kitcli. 
 
 k Ilyl, 422; Arnory vs Mf-rywcath- l.'iC. H. rmv, 1 Jur. [ii. h] 520; 24 L. 
 
 er, 2 B. .t C. 573; 4 D. k R KO Sin J. C. P. 122). 
 RawlitJKS VH. Hall, 1 C. & P. 11, aa 
 to evidence, etc.
 
 486 Stock -brokers and Stock Exchaiiscs. 
 
 received by the defendant for their use, it appeared that the 
 defendant was official assignee of the Stock Exchange for 
 the manajrement of the estates of those members who, 
 being unable to fulfil their engagements on the Stock Ex- 
 change, became defaulters. Before the receipt of the money, 
 the bankrupt, a Stock-broker and member of the Stock Ex- 
 change, was declared a defaulter, having at the time con- 
 tracts open with the members of the Stock Exchange, which 
 had the form of legal contracts, for the sale and delivery 
 of stock; but there Avas no intention that stock should be 
 delivered, and the contracts were to be settled by the pay- 
 ment of differences. Under the rule of the Stock Exchange, 
 the defendant collected the differences upon the contracts 
 upon which the bankrupt Avas a gainer, and, before notice of 
 an act of bankruptcy, distributed among members to whom 
 he was indebted for differences all said money except a small 
 amount, which was paid over after he was adjudged a bank- 
 rupt to the treasurer of a fund for decayed members, ac- 
 cording to the rules of the Stock Exchange. Held, that the 
 action could not be maintained. As to the money paid 
 over before the adjudication of the bankruptcy, it was not 
 money had and received by the defendant to the use of as- 
 signees of the bankrupt ; and as to the money paid over 
 after the adjudication of bankruptcy, the contracts, as well 
 as the payment and receipt of the differences, being illegal 
 by 7 Geo. II. c. 8, neither the bankrupt nor his assignees 
 could maintain an action to enforce the contracts or recover 
 the sums paid ; and that the differences were not paid to the 
 defendant as the agent of the bankrupt, but for the purpose 
 of being distributed among his Stock Exchange creditors.* 
 
 * Nicholson vs. Gooch, 5 El. it Bl. 1.37. For actions by Brokers for 
 999; 2 Jur. (n. s.) 303; 25 L. J. C. P. commissions and money laid out in
 
 Stoek-jobbiug Acts. 487 
 
 In June, 1860, the act of George II. was totally repealed, 
 the text of the repealing act clearly indicating that, after a 
 trial of one hundred and twenty -five years, the English 
 people "were satisfied that dealings in the public securities 
 should be left untrammeled, even at the cost of having 
 business men speculate in them. The preamble to the act 
 is as follows : " "Whereas an act was passed, in the seventh 
 year of the reign of King George the Second, chapter eight, 
 to prevent the practice of stock-jobbing, and by another act, 
 passed in the Tenth year of the said King's reign, chapter 
 eight, the said first-mentioned act was made perpetual. 
 And whereas the said acts impose unnecessary restrictions 
 on the making of contracts for the sale and transfer of pub- 
 lic stocks and securities, and it is therefore expedient to re- 
 peal the same: Be it enacted by the Queen's Most Excel- 
 lent Majesty, by and with the advice and consent of the 
 Lords Spiritual and Temporal, and Commons, in the present 
 Parliament assembled, and by the authority of the same, 
 as follows : I. From and after the passage of this act, the 
 said two several acts before mentioned shall be, and the 
 same are hereby repealed." * 
 
 The repeal of the act of George II. of course immediately 
 swept away all restrictions upon dealings in the public 
 stocks, and placed persons in reference thereto in the same 
 condition as if they were dealing in shares of j)rivale or 
 other corporations. But it should be stated in this con- 
 nection that there is an existing English statute relative to 
 the sale or transfer of shares in any joint-stock banking 
 
 trarwartioas contrary to (irt n^hititiK Tliaokor v.s Hardy, I- l{ I C^ 15 I) 
 to waucrs, hoc pf>«t, p. ."iril. (iS.'i, OHS; Lathuvo vh. Hurlier, T. 
 
 • 23 <t 24 Vict. c. 28. See also It 70,
 
 488 Stock-brokers ami Stock Excliaii^es. 
 
 company, the substance of which is given below.' The ob- 
 ject of this enactment is to prevent runs on banks, which 
 might be occasioned by a fall in the price of their shares re- 
 sulting from "short" sales or gambling transactions. 
 
 And by the Bankruptcy Act, 1890, section 8 (extending 
 the ])rinciple of the Bankruptcy Act, 1849, section 201), 
 the discharge of a bankrupt may be refused or suspended, if 
 he has brought on his bankruptcy by rash and hazardous 
 speculations.'"' 
 
 In the State of New York an act against stock-jobbing 
 is found among the Revised Laws passed in 1812, the text 
 of which is : 
 
 " That all contracts, written or verbal, hereafter to be 
 made, for the sale or transfer, and all wagers concerning 
 the prices present or future, of an}' certificate or evidence 
 of debt due by or from the United States or any separate 
 
 ' By 30 Vict. c. 29, § 1, it is en- tract note as required by this act 
 
 acted that all contracts made after has been declared ilicfial (see chap- 
 
 the 1st day of July, 1867, for the ter on Usages) the contract itself is 
 
 sale or transfer of any shares, stock, merely void. A Broker Avho disre- 
 
 or interest in any joint-stock bank- garded the act was held liable in 
 
 ing company in England or Ireland, damages to his client (Neilson vs. 
 
 constituted under or regulated by James, 9 Q. B. D. 546), and a pur- 
 
 any act of Parliament, royal charter, chaser, to whom shares were trans- 
 
 or letters-patent, issuing shares or ferred, was held bound to indenuiify 
 
 stock, transferable by any written the vendor as to calls (Loring vs. 
 
 instrument, shall be void unless such Davis, 32 Ch. D. 625). See also 
 
 contract sets forth in writing the dis- Perry vs. Barnett, 15 Q. B. D. 388; 
 
 tinguishing numbers of such shares, 14 Q. B. D. 467; Seymour vs. 
 
 stock, or interest on the register; Bridge, 14 Q. B. D. 460; Coates vs. 
 
 or, if there is no register, the person Pacey, 8 T. L. R. 351, 474; Mitchell 
 
 in whose name such shares, stock, vs. City of Glasgow Bank, 4 App. 
 
 or interest shall at the time of mak- Cas. 624; Casey vs. Bentley, 1 Ir. 
 
 ing such contract .stand in the books Rep. 376. 
 
 of the company. .Although a cus- 'Ex parte Rogers, 13 Q. B. D. 
 
 torn of the Stock Exchange not to 438. 
 give names or numbers in the con-
 
 Stoek-jobbins Acts. 489 
 
 state, or any share or shares of the stock of any bank, or 
 any share or shares of the stock of any company estabhslied, 
 or to be established, by any hiw of the United States, or 
 any indivichial state, shall be, and all sneli contracts are 
 hereby declared to be absolutely void ; and both parties are 
 hereb}"^ discharged from the lien and obligation of such con- 
 tract or wager ; unless the party contracting to sell and 
 transfer the same shall at the time of making such contract 
 be in the actual possession of the certilicate, or other evi- 
 dence of such debt or debts, share or shares, or to be otlier- 
 wiso entitled in his own riglit or duly authorized or em- 
 powered by some person so entitled to transfer the said 
 certificate, evidence, debt or debts, share or shares, so to be 
 contracted for. And the party or parties \Yho may have 
 paid any premium, differences, or sums of money in pur- 
 suance of any contract, hereby declared to be void, shall 
 and may recover all such sums of money, together with 
 damages and costs, by action on the case, in assumpsit for 
 money had and received to the use of the })laintilf, to be 
 brought in any court of record.'" ' 
 
 This statute was re-enacted by the Revised Statutes of 
 1830 in the language given in the notes.^ There were a 
 number of decisions under these New York statutes, a 
 reference to the principal of which will be found jHjrtinent 
 in this connection. 
 
 The act did not apply to sales of distributive shares of the 
 
 '2 R. L. 187, §18; Frost vs. rates of Hurh sluircs, or to ho nthiT- 
 
 Garksoti, 7 Cow. (\. Y.) 20. wise; etititlfd thereto, in hi.s own 
 
 '"All (•oiitrwU for tho Bale of riuht, or to ho duly adthoriziMJ, l)y 
 
 8tfK-kH are void iiiiIosH the party eon- Hfiruo perHoii ho eiititliHl, to soil tho 
 
 trar-tiiig to wll tho Rariie shall at tho oertificateH or wharcs ho rontracted 
 
 time of makiiiK nuch rontraets ho in for" (1 Kov. Stat. 710, ) 0). 
 the aetiial posHoasion of the cortili-
 
 490 Stock-brokers and Stock Exchanges. 
 
 effects of a dissolved corporation, such shares not being 
 stock, but were non-negotiable things in action.^ It was 
 likewise lield not to apply to any other kind of property 
 than stocks.'* 
 
 In the case of Frost vs. Clarkson,^ where a vendor, by con- 
 tract in writing, agreed to transfer one hundred shares of 
 stock in sixty days, and it appeared that he owned that num- 
 ber at tlie time of making the contract, but in the interval 
 between the contract and time of transfer sold sixty shares, 
 leaving him the owner of only forty shares, it was de- 
 cided that the statute ^ did not avoid such a contract, and 
 that it only applied where the vendor did not own the stock 
 at the time the agreement was made ; that the sale was not 
 of any particular one hundred shares, but any one hundred 
 shares in the company ; and if the vendor is ready to receive 
 a transfer and pay, any other one hundred shares may be 
 procured in the market. Subsequently'^ the Court of A p- 
 jieals held that where a Broker sold for his princijoal shares 
 of a certain stock which neither owned at the time of the 
 sale, deliverable at the oi)tion of the principal in thirty days 
 — the transaction being illegal — the principal, under the 
 maxim in pari delicto potior est conditio defendevitis, could 
 not recover from the Broker any differences to which he 
 might otherwise be justly entitled ; and that section 8," giving 
 an action to recover back money paid or property delivered 
 did not aid the plaintiff, as that section only applied to the 
 parties who actually paid or delivered the money and to those 
 
 > James vs. Woodruff, 10 Paige, ' 7 Cow. (N. Y.) 26. 
 
 541; aff'd 2 Den. 574, but opinion * 2 R. L. 187, § 18. 
 
 not reported. '^Staples vs. Gould, 9 N. Y. 520. 
 
 'Cassard vs. Hinman, 1 Bosw. « 1 Rev. Stat. 710. 
 (X. Y.) 207.
 
 stock-jobbing Acts. 491 
 
 who actually received it — viz., the Broker defendant, and 
 the third person to whom the Broker had made the sale of 
 the stocks. So it was further held that to avoid a contract 
 as against the Stock-jobbing Act the burden of proof is 
 upon the party alleging a violation to show that when the 
 contracts were made the other party did not own, and was 
 not authorized to sell, the stock contracted for;' that 
 where a contract is valid on its face all the plaintiff has to 
 do to entitle him to recover is to show a readiness and offer 
 on his part and a refusal by the defendant ; and that such 
 a contract at common law and in the absence of statute 
 being clearly valid, the courts will not presume that the 
 party contracting to sell stocks was not the owner thereof 
 for the purpose of rendering the contract void. The court 
 refused to recognize a contrary doctrine laid down by the 
 Supreme Court of Massachusetts in Stebbins vs. Leowolf,'^ 
 which arose out of a contract made in the State of New 
 York .3 
 
 But where one placed money in the hands of a Broker to 
 indemnify him for any losses which might accrue upon the 
 sale of stock, which the Broker was to make for him on 
 time, in violation of the above statute, he can recover it 
 back if the Broker has not paid it over, without notice of 
 the illegality or not to pay.' 
 
 In Vaupell vs. Woodward •' the question arose jus to 
 whether, in an action by a P.roker against a purchaser for 
 not accepting stock sold on time, it was not incumbi^it on 
 the Broker to prove u resale l)eforc bringing his action. 
 
 ' Dykere vs. Townseiid, 21 N. Y. .Mtllviiine vh. Enerton, 2 Kol). (iil.) 
 
 57. 122. 
 
 '67 MawH. 143. * flrarii vs Slchhiii.s, <5 Taino Ch. 
 
 * Hoe al.'W) Staples vb. Goulil ^<if- I'JI 
 
 cwion below), f, Saii.Jf. (N. V.; Ill ; '2 Saii-lf. CI. lir., 1 JO.
 
 492 Stock-broktTs and Stock Kxchaiiges. 
 
 The arginiuMil in favor of this view was, that a Broker with 
 100 shares of a particular stock could make a dozen or more 
 sales of 100 shares of that stock to as many different persons 
 on time ; and on their faihire to jierform, might sustain a 
 suit against them all, upon ))i'oof of his having owned the 
 100 shares; and that, if all the buyers should fulfil and 
 demand their stocks, his 100 shares would not go far to- 
 wards completing the contracts on his part. The English 
 Stock-jobbing Act, it appeared, contained a provision requir- 
 ing such a resale on time contracts. While the court ad- 
 mitted the cogency of this argument, it nevertheless over- 
 ruled the same, and held that the statute contained no 
 provision requiring a resale, and that the apparent defect 
 could only be remedied by further legislation. In another 
 case^ it was further held, that a Broker who purchased for 
 another by the express direction of the latter, and did not 
 himself agree to sell, was not within the act. In this case 
 there was no evidence that the sellers were not possessed of 
 the stock when they agreed to sell it.^ 
 
 It seems, however, that the statute of New York was not 
 very efficacious in preventing " short sales" of stock,^ and in 
 the year 1858 it was repealed by an act which is herewith 
 given in full : 
 
 " No contract, written or verbal, hereafter made for the 
 purchase, sale, transfer, or delivery of any certificate, or 
 other evidence of debt, due by or from the United States, 
 or any separate state, or of any share or interest in the stock 
 
 * Genin vs. Isaacson, 6 N. Y. Leg. Mass. 428, where the New York 
 
 Obs. 213. statute is construed. 
 
 ' See also Cassarrl vs. Hinman, ' See remarks of Hoffman, J in 
 
 14 How. (N. Y.) Pr. 84; aff'd 1 Cassard v.-^. Hinman, supra. 
 Bosw. 207; Thompson vs. Alger, 53
 
 stock-jobbing Acts. 493 
 
 of any bank, or of an}' company incorporated under any law 
 of the United States, or of any individual State, shall be 
 void, or voidable, for any want of consideration, or because 
 of the non-payment of any consideration, or because the 
 vendor at the time of making such contract is not the owner 
 or possessor of the certificate or certificates, or other evi- 
 dence of such debt, share, or interest." ' 
 
 By this act the selling of securities " short" is legalized, 
 and the doctrine of the common law re-established.* The 
 courts of New York have held that the effect of the repeal 
 of the statute relating to stock-jobbing takes away the de- 
 fence of illegality as to contracts made during its existence, 
 precisely as if such statute had never been passed ; the theory 
 of the law being that the repeal of a statute which makes 
 contracts illegal on the ground i>( public policy, legalizes 
 those entered into during its continuance, in violation of the 
 same.^ Xor is it necessary, in an action to recover damages 
 for the non-performance of a contract for the purchase of 
 stock, for the plaintiff to allege in his complaint that he was 
 the owner of the stock at the time of making the contract, 
 or that the contract was in writing.^ 
 
 The effect oi the repeal of the Stock-jobbing statute, how- 
 ever, was not to avoid the necessity of having a contract for 
 the sale of shares of stock reduced to writing, within the 
 Statute of Frauds. The latter statute is still in force, and 
 
 ' Ch. 131, I.aws, IHFiH, repealed "short," hut this law \v;i.s rcinviled 
 
 by the I'ersniial Property Law, and \>y the CJeneral ('orjMjratioii Law, iw 
 
 re-enacted in amended form therein amendeil in 1W>2. 
 
 (i 22). * ' \Va.shhurn vh. Kranklin, .ir) 
 
 * Except in ao far m it was abro- Harb (S. Y.) ."iOO; s. c. L3 .\b. Pr. 
 
 Kate*l, aH to officerH and directors of 1 10; rev'd 21 How. I'r. 51.'); 11 .\b. 
 
 railroaii corporation.^, by L. iSM, I'r. '.Kl. 
 
 ch, 223, which made it a crimitial * Id. 
 oflcncc for Huch ofhciaLi to hcII
 
 494 Stofk-brokers and Stock Exchanges. 
 
 unaffected to the extent, at least, of requiring such a con- 
 tract to be in writing properly subscribed.' 
 
 In the State of Massachusetts^ there is a law which de- 
 clares that a contract for the sale or transfer of a certificate, 
 or other evidence of debt due from the United States, or a 
 State, or of any stocks, or any share or interest in the stock, 
 of a bank, company, city, or village incorporated under a 
 law of the United States, or a State, is void, unless the party 
 contracting to sell or transfer the same is, at the time of 
 making the contract, the owner or assignee thereof, or is 
 authorized by the owner or assignee, or his agent, to make 
 the sale or transfer. This statute has been before the courts 
 for construction in several cases.^ 
 
 In Durant vs. Burt * the court held that where a Client 
 gave his Broker an order to purchase stock for him, and the 
 Broker does so, in accordance with the instructions and the 
 usages of the Stock Exchange, and the Client subsequently 
 refuses to take the stock, should the Broker, after notice, 
 sell it, the latter is entitled to recover the loss sustained, 
 toerether with his commissions. The court further de- 
 cided that the plea that the contract was illegal, because 
 made by the Broker with another member of the Stock 
 Exchansre, in violation of the above statute, was no defence 
 
 * Johnson vs. Mulry, 4 Robt. (N. Stebbins vs. Leowolf, 57 Mass. 137; 
 
 Y.) 401. Thompson vs. Alger, 53 Mass. 428; 
 
 2 Laws, 1836, ch. 279; Gen. Stat, opinion of Parker, C. J., in Howe vs. 
 Mass. ch. 105, § 6. Now re-enacted Starkweather, 17 Mass. 243; Sar- 
 in Rev. Laws of 1901, Title XIIL gent vs. Franklin Ins. Co. 25 Mass. 
 ch. 74, § 7. 98. See ako United States vs. 
 
 ^ Barrett vs. Mead, 92 Mass. 337; Vaughan, 3 Binn. 394. See also, for 
 
 Barrett vs. Hyde, 73 Mass. 160; Du- other cases interpreting the Massa- 
 
 rant vs. Burt, 98 id. 161; Price vs. chusetts statute, Rock vs. Xicholls, 
 
 Minot, 107 Mass. 49; Brown vs. 85 Mass. 342; Colt vs. Clapp, 127 
 
 Phelps, 103 id. 313, 314; Brigham Mass. 476; and cases cited post, 
 
 vs. Mead, 92 Mass. 245. See also * Supra.
 
 stock- jobbiua: Acts. 495 
 
 to the action ; especially where the purchasing Broker is 
 not shown to have been aware of this fact, or to have been 
 aware that the contract was illegal untler the Statute of 
 Frauds. The case of Brown vs. Phelps ^ also arose under the 
 Stock-jobbing Statute of Massachusetts. There a Broker, 
 eraploj'ed to purchase stock, contracted for it in his own name 
 with J. S., who owned it at the time, but had made a prior 
 contract for its sale. The employer, for groundless reasons, 
 repudiated the contract ; but the Broker, having no knowl- 
 edge of, or reason to suspect, the prior sale by J. S., paid for 
 the stock Avhen tendered to him. Held, that the statute^ 
 making void contracts for the sale of stocks not owned by 
 the seller did not debar the Broker from recovering from 
 his employer the amount so paid. 
 
 " The defendant," said the court, " contends that the case 
 of Stebbins vs. Leowolf is a decisive authority against the 
 plaintiff's claim in respect to these shares. That case i-elated 
 to a statute of the State of New York, but our own statute is 
 substantially like it, and must receive the same construction. 
 In that case the plaintiff had contracted to purchase thestocks 
 as agent of tlio defendant ; but he was conversant with all 
 the facts and of the objections to the validity of the contract 
 entered into by him, and volunteered to pay the claims <>f the 
 vendors of the stock without any legal liability on his part. 
 Under these ciicumstances, the court say that ho must bo 
 taken to have paid the money in his own wrong, if the con- 
 tract he entered into was in fact illegal. And they hold 
 that the burden of proof was on him to show a legal con- 
 tract, in onlei- to make n. ]>rima furie case. The <h'cision 
 was in conformity with the elementary law of agency, ac- 
 
 ' 103 MaKH. .'il.'l. ro-cimctisl in Wcv I.hwh of l',M)l, 
 
 'Gen. Stut. ch. lOr,, 5 (i, now tit. XIII. c. 7 J, J 7.
 
 496 Stock-brokers and Stock Exchanges. 
 
 cording to which, if an agent knowingly pays money on an 
 illegal contract, after it has been repudiated by his princi- 
 pal, ho cannot thereby bind his i)rinci|tal. Hut in tlie pres- 
 ent case no such knowledge of facts appears in the agreed 
 statement. The plaintiffs contracted to purchase tlie shares 
 of one who actually owned them. They were not bound to 
 presume that he had previously contracted to sell them ; and 
 there was nothing to put them on inquiry ; nor does it ap- 
 pear that they had any means of ascertaining, by the use of 
 reasonable diligence, what private contracts Spencer bad 
 made with other persons." 
 
 Nor is an agreement to purchase stocks for another, and 
 sell them again within a certain time, and share the ])rofits, 
 but bear alone any loss, within the statute.^ And a con- 
 tract for the sale of railroad stock by one who had originally 
 pledged it, and of which the pawnee held the 'certificate, 
 but which the pawnor had authorized the pawnee to sell 
 whenever he had an opportunity, is not within the New 
 York statute concerning stock-jobbing.^ 
 
 A promissory note given in consideration of money paid 
 by request of the maker to a Broker, for losses sustained in 
 stock-jobbing, negotiated by the latter for the former, in vio- 
 lation of the statute, is valid ; but money paid for losses in 
 stock-jobbing cannot be recovered back.^ Kor can the payee 
 of a check received in payment for shares, which were not 
 owned by him at the time when he undertook to sell them, 
 maintain an action thereon against the drawer.'* 
 
 A promise by the holder of more than 300 shares in the 
 stock of a corporation, to transfer 300 shares whenever he 
 
 ' Barrett vs. Hyde, 7.3 Mass. 160. ' Wyman vs. Fiske, 85 Mass. 238. 
 ' Thompson vs. Alger, 53 Mass. * Rock vs. Nichols, id. 342. 
 428.
 
 Stock-jobbiui^ Acts. 497 
 
 shall acquire enough shares to enable him to do so, and 
 still retain a majoi'ity of all the shares in the corporation, 
 is not within the statute.' 
 
 An interesting case arose in the Supreme Court of Massa- 
 chusetts, in Avhich the validity of speculations in selling cer- 
 tain stock " short " in Xew York was reviewed under the 
 statute of that State. The case had been referred to an 
 auditor. The facts showed that the plaintiffs in 1S72 were 
 partners as Brokers in Xew York. Prior to that time the 
 defendants' testator, D., had employed and made sales and 
 purchases of stock through them. On the 25th of October, 
 1S72, the plaintiffs received and executed an order from D. 
 to sell " short" 100 shares of the " common" stock of the 
 Chicago and Xorthwestern Railway, and on the 2Gth they 
 received and executed an order to sell cUiother 100 shares. 
 The first was sold at $7(!| per share and the latter at $S2|. 
 
 The auditor found that in "short" sales the seller is 
 required neither to own nor part with the stock sold. The 
 sellers Broker borrows the stock and pays the agreed price, 
 generally in a certilied check. The borrower or lender may 
 at any time close the transaction, the one by tendering and 
 the other by demanding the stock. If called for and not re- 
 turned, the lender has a right to buy in tlu; st(jck at the 
 market price, and, in case of an advance, to charge the bor- 
 rower with the (liff(;rence. With this course I), was familiar. 
 On November 2'^, 1.S72, O. ct Co., of whom the j>laintiffs 
 had borrowed the st(x:k, called fcjr its return. Since Novem- 
 ber 20 the stock liad been iaj)i(lly rising, and on the L'lst, 
 22d, and 23d the plaintiffs " addre.s.sed " numerous letters 
 and telegrams to D., askiiijj: him t<» conKrand settle or covjt 
 
 ' Price VH Miriot, 107 M.ihm. 19.
 
 498 Stock-brokers and Stock Exclmiiges. 
 
 his margins. The i)laiiiti(rs received no reply, and they pro- 
 ceeded to act on D.'s })i'evious general instructions — to use 
 their discreti(^n in the i)rotectioii of his interests. On No- 
 vember 23, therefore, they bought loO shares at $150, and, 
 on November 2."), luO more at $175 per share, and with 
 these 200 replaced the stock borrowed from (). A: Co. The 
 loss on the transaction was $16,G25. The plaintiifs had a 
 previous balance of $l,92-i.2S to the credit of D, The bal- 
 ance due them was, therefore, $14,700.72, and this sum, 
 with interest, was sought to be recovered against D.'s es- 
 tate. The defendants set up several defences. The first 
 was that the sales were illegal ; if not illegal, that the plain- 
 tiffs failed to give due notice to D. to make his margin good 
 (there being no evidence that the letters and telegrams were 
 delivered), or that in default thereof the plaintiffs would 
 buy in stock to replace that borrowed ; that if there was 
 notice the plaintiffs were only bound to furnish " preferred " 
 stock, which sold at $87.25 on November 23 and 25, instead 
 of " common ; " and that the plaintiffs bought stock for a 
 less price in transactions ol their own on the same day. 
 There was also a declaration in set-off for the $1,924.28 had 
 and received by the plaintiffs to the defendants' use. The 
 auditor found that the plaintiffs were entitled to recover in 
 the sum of $18,829.09, but the case was recommitted to 
 him to report the evidence, which he did. Coming before 
 the Supreme Court, the case was opened to a jury and the 
 report of the auditor submitted. The defendants' counsel 
 contended and argued that although such a transaction, if 
 proved, was authorized by the statute of New York which 
 permitted stock-jobbing and such " slioi'f "' sales, still a 
 court of Massachusetts was not bound by comity to en- 
 force the contract here, there being an ex})ress statute of
 
 stock-jobbing' Acts. 499 
 
 the State prohibiting such transactions, and, apart from 
 such statute, that the transaction was contrary to public 
 policy and good morals. It was contended and argued at 
 length by tbe counsel for the plaintiffs that such a contract 
 was not illegal, and that it could be enforced by tbe Massa- 
 chusetts courts ; that being valid in New York, where the 
 contract was made, it could be enforced here, where tlie 
 remedy is sought. In the Xew York case of Knowlton 
 vs. Fitch,^ the court bekl that, so long as these transactions 
 are not prohibited by law, there is no reason for reHeving 
 either party from the responsibilities which he incurs by 
 engaging in them. The court ruled that the action could 
 not be maintained, and directed a verdict for the defend- 
 ants.^ 
 
 ' 52 X. Y. 288. cha.se were delivered, it was held 
 
 * Leonard vs. Hart, N. Y. Herald, that he had not violated the statute, 
 
 Oct. 2, 1877. .\Ithoush a contract and that the transaction was not 
 
 is void under the Ma.s.sachusetts pamljling;. Mann vs. Bishop, 136 
 
 statute, a Stock-broker may re- Ma.ss. 495. 
 
 cover moneys paid under such con- An agreement between two pcr- 
 
 tract from his principal. Jones vs. sons to share ecjually in the profits 
 
 Ames, 135 Mass. 431. The sale of and lo.sscs on stock then owned bj- 
 
 shares before the date of delivery one of them, is not within the stat- 
 
 does not make the contract illegal, ute, nor does the fact that it wjus 
 
 when the vendor had possession at bought by agents of the Hrokers of 
 
 the date of the contnu-t. Pratt vs. the owner, who hiul not put up any 
 
 American liell Telephone Co., 141 margin, make it a wagering tran.s- 
 
 Mass. 225. See Duchcmin vs. Ken- action, when by reitson of other 
 
 dalJ, 119 M.'iss. 171; Mcf-han vs. transactions, his cro<lit with th« 
 
 Sharp, 151 .Mass. 501. When a Brokers was go<Kl. Hullanl vs. 
 
 Stock-broker, a memlx-r of the Bos- Smith, 139 Mass. 492 
 
 ton Stock Exchange bought sto<-ks When the Sto(-k-l)roker had in his 
 
 on a Saturday, and Wild a jjort ion of possession certilicates for tlie ninn- 
 
 them the same day to another mem- ber of shares of stock sold by him, 
 
 bcr, and on Monday, acconlirig to and which lie was «hilv authoriwsl 
 
 the custom of the Kxj-hanne, he by his principal to sell, the vtw is 
 
 re<'«;ive<l the certificates. :iiid writ- not witliin the statute I-'razier vs. 
 
 ten memoranda of the sale and pur- SinunoiLS, 139 .Mass. 531.
 
 500 Stock-brokers ami Stock Exchanges. 
 
 A similar statute also existed in Pennsylvania,' but it 
 has been repealed.- 
 
 By tbe Revised Statutes of Illinois,^ it is enacted that 
 " whoever contracts to have or give to himself or another 
 the option to sell or buy at a futui*e time any grain or 
 other commodity, stock of any railroad or other com- 
 pany, or gold, or forestalls the market by spreading false 
 rumors to influence the price of commodities therein, or 
 corners the market, or attempts to do so, in relation to 
 any such commodities, shall be fined not less than $10 or 
 more than $1,000, or confined in the county jail not exceed- 
 ing one year, or both ; and all contracts made in violation 
 of this section shall be considered gambling contracts, and 
 void."^ 
 
 > Act of May 22, 1841 (L. 1841, p. Spaids, id. 403; Doxey vs. Spaids, 
 
 398), § 6. id. 549; Ex parte Youn^, (3 Hi.s.s. 53; 
 
 ' For decisions under tliis statute, Colderwood vs. McCrea, 11 III. App. 
 
 see Chillas vs. Snyder, 1 Phila. (Pa.) 543; Kreigh vs. Sherman, 105 111. 
 
 289;Krausevs. Setley, 2id.32. 49; Brand vs. Henderson, 107 III. 
 
 ^Ch. 38, §130 (Cothran's ed. 141; Pearce vs. Foote, 113 111. 228; 
 
 1881). See also Hurd's edition, Osgood vs. Bauder, 75 Iowa, 550; 
 
 (1901) p. 614, c. 38, § 130. McCorniick vs. XichoUs, 19 111. 
 
 * See the able and interesting App. 334; Coffinan vs. Young, 20 
 
 charge of Mr. Justice Janiieson to a 111. App. 76; Higgins vs. McCrea, 
 
 grand jury of the criminal court of 116 U. S. 071 ; Carroll vs. Holmes, 24 
 
 Chicago, October 12, 1881, given in 111. .\pp. 453; Griswold vs. Gregg, 24 
 
 full at p. 635, in which this statute 111. App. 384; New York it Chicago 
 
 is interpreted and discussed. The Grain & Stock Exchange vs. Mellen, 
 
 decisions under this act have been 27 111. App. 556; Wheeler vs. Mc- 
 
 ver>- numerous, and nearly all relate Dermid, 36 111. App. 179; Foss vs. 
 
 to dealings in grain, pork, and other Cummings, 149 111. 353; Samuels 
 
 like commodities. vs. Oliver, 1.30 111. 73; Pope vs. 
 
 In the following cases, such trans- Hanke, 155 111. 629; Miles vs. An- 
 
 actions have been held to be within drews, 40 111. -\pp. 155; Watte vs. 
 
 the statute: Pickering vs. Cease, Costello, 40 111. App. 307; Powell vs. 
 
 79 111. 328; Webster a^s. Sturges, 7 McCord, 121 111. 330; International 
 
 111. App. .560; Beveridge vs. Hewitt, Bank vs. Vankirk, 39 111. App. 23; 
 
 8 id. 467; Commercial Bank vs. Kennedy vs. Stout, 26 111. 133;
 
 Stock-jobbiiiii: Acts. 
 
 501 
 
 Statutes have also beeu enacteil in several other states, 
 prohibiting option contracts, deahngs in futures or " on 
 margin" or "bucket shop" transactions in stocks or cora- 
 raodities, where no delivery is intended. 
 
 Wright vs. Cudaliy, 16S 111. 86; 
 Treat vs. Snydecker, 92 HI. App. 
 458; Butler vs. Nohe, 98 111. App. 
 625; Pardridge vs. Cutler, 168 111. 
 504; Gardiner vs. Meeker, 169 111. 
 40; Kruse vs. Kennett, 181 111. 199; 
 Walker vs. Johnson, 59 111. App. 
 44S: Calumet Co. vs. Williams. 97 
 111. App. :?65; Illinois Trust & Sav- 
 ings Bank vs. La Toushe, 101 111. 
 .\pp. 341; BroT^Ti vs. .\lexander, 29 
 111. App. 626; Central Grain & 
 Stock Ex. of Chicago vs. Bendinger, 
 48 C. C. A. 726. 
 
 Decisions in wliicli dealings in 
 grain and produce have been held 
 not to be gamljling within the stat- 
 ute are: Pixley vs. Boynton, 79 
 111. 351; Sanborn vs. Benedict, 78 
 111. 309; Walcott vs. Heath, id. 433; 
 Cole vs. Milmaine, 88 id. 349; Gil- 
 bert vs. Gauger, 8 Biss. 214; Jack- 
 son vs. Foote, 11 Biss. 223; Miller 
 .s. Ben.sley, 20 111. App. .528; Wliite 
 v.s. Barl)er, 123 V. S. .392; Roche vs. 
 Day, 20 111. App. 417; King vs. 
 Luckey, 21 111. App. 1.32; Ben.son 
 vs Morgan, 26 111. App. 22; Grubcy 
 vs. National Bank r»f Illinois, 35 III. 
 .\pp. 3.54; Ward vs. VoHl)urgh, 31 
 r«J. 12; Curtis vs. Wright, 40 111. 
 .\pp. 491; Hitchcock vs. Corn Kx- 
 'liange Bank, 40 111. App. 411; 
 Brand vs. Uxk, 48 111. Apj). 390; 
 Fox vs. Steovor, .55 111. App. 2.55; 
 '•liniuwota *tc. (.'o. vs. Whitcbrniwt 
 vc. Co., 160 111. 97; I.ainwn vs. 
 Bovdcn, 160 III 613; Hall vs Bar- 
 
 rett, 93 111. App. 642; Cothran vs. 
 Ellis, 125 111. 496; Pearce vs. Rice, 
 142 U. S. 28; Warren vs. Scaulon, 
 59 111. App. 1.38; Dillon vs. McCrea, 
 59 111. .\pp. .505; Barnett vs. Bax- 
 ter, 64 111. App. 544; Bryan vs. 
 Lanison, 88 111. App. 261; Clews 
 vs. Jamioson, 182 U. S. 461; Riebe 
 vs. Helhnan, 69 111. 19; Scanlon vs. 
 Warren, 169 111. 142; Schlee vs. 
 Guckenheimer, 179 111. 593; West 
 vs. Marquart, 78 111. 61; Munns vs. 
 Donovan Commission Co., 91 N. W. 
 789; Prenti.ss vs. Press, 63 111. App. 
 430; Morris vs. Di:jcon National 
 Bank, .55 111. App. 298; Marvel vs. 
 Marvel, 9() 111. App. 609; Bank vs. 
 Edman.99111. App. 235. 
 
 Transactions in stocks have been 
 held to be within the .statute in the 
 following cases: Schneider vs. Tur- 
 ner, 1.30 111. 28; I-ocke vs. Fowler, 
 41 111. App. 66; Wolsey vs. Neeley, 
 62 111. Ai)p. 141; Peterson vs. Cur- 
 rier, 62 111. App. 163; afT'.l 163 111. 
 528. 
 
 .\nd in the following c;iscs stock 
 and bond f rans:irtions wore held not 
 to come within its purview: Clews 
 vs. Jainieson, IS2 V. S. 461; Grubcy 
 vs. Nutioni'l Bank of Illinois, .35 111. 
 ,\pp. .3.54; Wolf vs. National Bank 
 of Illinois, 178 111. 85; I'bbcn v.s. 
 Bimii.'in, ls2 III. 50S; Taylor vh. 
 Bailey, 169 III. IHI; Skinner v«. 
 ()Mg<M)d, 83 III .\pp 4.51 
 
 Then" is a distinctinn made b(»- 
 1 wccii a contract for future tlelivery,
 
 502 S<()(k-lnokers and Stock Excluinses. 
 
 By Laws (^f ISS7, in force July 1, 1887 (Starr & Curtis's 
 Ann. St., vol. 1, p. loO-l), keeping a bucket shop in Illinois, 
 to deal in stocks, grain, etc., on margins, is declared unlaw- 
 ful, and penalties of fine and iuiprisonuicnt arc inflicted. A 
 conviction under this act for keeping a bucket shop and 
 dealing in grain on margins therein was sustained, although 
 defendant was onl}'' agent for a Chicago firm of Brokers.^ 
 The intention of the person keeping the bucket shop need 
 not be proved.^ 
 
 A statute as to options resembling tliat of Illinois was 
 passed in Ohio in 1882.^ Under this statute, an option 
 contract in stocks or commodities, where both parties 
 
 where the time of delivery, within Cable Co. v.s. Lathrop, 33 111. App. 
 
 fixed and reasonable limits, is op- 400. 
 
 tional with either party, and a con- ' Soby vs. The People, 134 111. 66. 
 
 tract whereby either party is given ^ Caldwell vs. People, 67 111. App. 
 
 an option to buy or sell, at a future 368. The object of the statute is to 
 
 time, grain or other commodity, prevent gambling. Board of Trade 
 
 The former is binding, but the lat- vs. Central Stock & Grain Ex- 
 
 ter, as being a gambling contract, change, 98 111. App. 218; afif'd 196 
 
 is not. Webster vs. Sturges, 7 111. 111. 396. As to what transactions 
 
 App. 560. In Schneider vs. Tur- will sustain an allegation that a 
 
 ner, 130 111. 28, it was held that, bucket shop was kept, see Christie 
 
 prior to the pa.ssage of the act, it vs. Board of Trade, 96 111. App. 235. 
 
 was lawful to have or give an op- Even although the maker of a 
 
 tion to sell or buy grain or stocks, note might have a good defence in 
 
 and such contracts were not void or an action to recover the amount, on 
 
 voidable at common law, but the the ground that it was given in 
 
 statute made all such contracts bucket shop transactions, the fact 
 
 void whether it was intended to that he surrendered it and gave an- 
 
 settle by differences or not. In other in lieu thereof, estops him 
 
 Booth vs. People, 1S6 111. 43, afT'd from making such a defence. Fos- 
 
 184 U. S. 425; the statute was held dick vs. Myers, 81 111. App. 544. 
 
 to be constitutional. Ninety per cent of the transactions 
 
 Option contracts in coffee, where on the Chicago Board of Trade are 
 
 delivery was intended, were held violative of this statute. See cases 
 
 valid by the common law of New cited ante, p. 24. 
 
 York, where the contracts were to ^ Bates Annotated Stats, of Ohio, 
 
 be executed. Postal Telegraph § 6934a.
 
 Stock-jobhiiii; Acts. 508 
 
 Understood that differences only Avere to be settled, is a 
 wager, and moneys paid on such a contract are recoverable 
 under section 4270, and the defendant cannot avoid pay- 
 ment on the assumption that he acted as a commission 
 merchant only.^ If one ^ives money to another as his 
 agent to invest in illegal option contracts in wheat, and 
 the latter places the money with Brokers, the owner may 
 recover it, antl resnlting profits, from theagent.^ 
 
 By §§ 6934 a 1-5 of the Ohio statutes bucket shops are 
 prohibited, and a penalty for gambling in stocks, bonds, pe- 
 troleum, cotton, gi'ain, and other produce is imposed. By 
 § 4270, moneys paid by the loser to the winner may be 
 recovered, and, by § 4271, the loser may also recover from 
 other persons interested.^ 
 
 Under the Code of Georo^ia a contract to do an immoral 
 
 ' Lester vs. Buel, 49 Oliio St. As to evidence which was deemed 
 
 240. insufficient to prove a transaction 
 
 ' Norton vs. BUnn, 39 Oiiio St. in grain, on the Chicago Board of 
 
 1 1.5. But if the money ha.s been Trade, a gamhUng one, see Preston 
 
 actually invested by the agent, and vs. Cincinnati, C. it H. V. II. Co., 36 
 
 the illegal tran.saction.s in wheat are Fed. Rep. 54. 
 
 not yet clo.sed, it cannot be recovered If there is an intent to deliver 
 
 by the one advancing it. Rogers and receive stock.s and bond.s, the 
 
 vs. Corre, 10 Ohio Cir. Ct. 11. transaction is not a gambling one, 
 
 346. although the sales and purcha^scs 
 
 Option derdinirs in oil with no in- are for speculation. Gootlhart v.s. 
 
 tention to deliver are within the Ro.'itert, 10 Ohio Dec. 40. .\nd 
 
 statute. .Morri.s vs. Norton, 75 l>oth parties must intend to gamble. 
 
 Fed. 912. to make the transaction of a wagcr- 
 
 * A telegraph company catmot be ing character. Id.. Persons who 
 
 enjoine<l fn)m rem«jving its "tick- merely ba<'k pambling transaiti(in.s 
 
 ers" from bucket shop room.s. in grain and pork futun'si»y furnish- 
 
 Hnwlley vs. Western Union Tele- ing t<>legraphi<' win*M and market 
 
 graph Co., 8 Ohio Dec. Rep. 707; quotations, aiul have a share in 
 
 (jrifhth VB. Same, S id. 571. See the commissions, are nevort.liele»w 
 
 KiJui VH. Walton, 40 Ohio St. li.ilile under sec 4271. Rogers vs. 
 
 195. i'idmund, 21 Ohio. Cir. Ct. Rep. 075.
 
 504 
 
 Stock-brokers and Stock Kxchaiiges. 
 
 or illegal thing (§ 3GGG), or a wagering contract (§ 3668), is 
 void. Short sales are also void (§ 3537).^ 
 
 Dealing in options in corporation stocks and grain, in 
 bucket shops, was also declared unlawful in 1891 by the 
 Code of Iowa (§ 4967), and the keeper is subject to fine and 
 imprisonment (§ 4968).^ 
 
 * A contract for the future de- 
 livery of cotton was held void under 
 this statute, § 3537. Branch vs. 
 Pahner, 65 Ga. 210; Thompson vs. 
 Cumminss, 68 Ga. 124; and of 
 wheat, Porter vs. Massengale, 6<S 
 Ga. 296. Damages cannot be re- 
 covered from a telesjaph company 
 for failure to deliver a message in 
 such transactions in coffee. Coth- 
 ran vs. Western Union Telegraph 
 Co., S3 Ga. 25, overruling Tel. Co. 
 vs. Blanchard, OS Ga. 299, nor can 
 a bank be compelled to perform its 
 agreement to advance money on 
 cotton "futures." Moss vs. Ex- 
 change Bank, 102 Ga. 808, but if a 
 bank advances money through one 
 of its officers on such transactions, 
 it cannot recover. Singleton vs. 
 Bank, 113 Ga. 527. Such transac- 
 tions are not protected by the in- 
 terstate commerce clause of the 
 United States Constitution. Alex- 
 ander vs. State, 86 Ga. 246. 
 
 ' Prior to this statute there should 
 have been an intent to deliver. 
 Lowe vs. Young, 59 Iowa, 364; 
 Gregorj' vs. Wattower, 58 Iowa, 711 ; 
 Bank vs. Packing Co., 66 Iowa, 41; 
 Douglas vs. Smith, 74 Iowa, 408. 
 An intention by one of the parties 
 was sufficient. Merr}- vs. Ochiltree, 
 59 Iowa, 435, but there might be a 
 bona fide intent, with possibility of 
 
 paying differences only. Tomblin 
 vs. Callen, 69 Iowa, 229. 
 
 The mere fact of putting up mar- 
 gins does not make option contracts 
 in futures void. The question is 
 did the parties intend delivery. 
 Union Bank vs. Carr, 13 Chicago L. 
 News, 197; 4 Ky. L. R. 635; Hocker 
 vs. Western Union Tel. Co., 34 So. 
 (Fla.)901. 
 
 The hitention of l)oth parties to 
 an optional contract in grain on the 
 Chicago Board of Trade as to 
 whether there shall l)e delivery is to 
 be determined, not only from the 
 contract, but from the conduct of 
 the parties. Where the evidence is 
 conflicting the verdict of the court, 
 sitting as a jury, will not be dis- 
 turbed. Press vs. Duncan, 69 S. 
 W. Rep. 543. 
 
 An option for future delivery to 
 be performed in Chicago was held 
 void under the law of that State. 
 Osgood vs. Bauder, 75 Iowa, 550. 
 A note in settlement of a gambling 
 deal in future.5 is void in the hands 
 of an innocent holder. Bank vs. 
 Carroll, 80 Iowa, 11. 
 
 Under the statute, the intention 
 to make the transaction a gambling 
 one must be mutual, and if the 
 commission merchant does not dis- 
 close from whom he made the pur- 
 chases, the jury may find the con-
 
 stock-jobbing Acts. 50o 
 
 Contracts in " futures " in stocks and certain connnotli- 
 ties, without intent to deliver, are declared void in North 
 Carolina by Laws of 1S89, c. 221, and persons engaging 
 therein are guilty of misdemeanor. ]\[oney lent to pay 
 losses in such transactions may, however, be recovered, if 
 the lender was not connected therewith.' When a commis- 
 sion Broker testified that certain contracts in " futures " in 
 meat were speculative contracts, and that either party 
 might demand delivery, there was a question for the jury 
 as to whether the contracts were within the statute.- 
 
 By the Civil Code of South Carolina, § 2310 (§ 1859, Kev. 
 Stat, of 1883), it is provided that future sales of bonds, 
 stocks, cotton, grain, or certain other products, shall be void 
 unless the vendor is the owner, or unless it is the intention 
 of the parties to have actual delivery.^ 
 
 And by § 2311 in actions to enforce such contracts, the 
 
 tract a wagering one. Counsel- contract is vixUd under tlie statute, 
 man \-s. Reichart, 103 Iowa, 430. and such contract may lie made by 
 A note given in settlement of a a cotton mill. Sampson vs. Cam- 
 bucket shop transaction is void perdown Cotton Mills, S2 Fed. Rep. 
 both under the statute, and inde- 833. 
 
 pendent of it. People's Savings When the contract is void imder 
 
 Bank vs. GifTord,. 108 Iowa, 277. tlie statute, a principal may recover 
 
 ' Ballard vs. Green, 118N.C. 390. margin deposited with cotton Hro- 
 
 ' Cantwell vs. Boykin, 127 N. C. kers. Saunders vs. Phelps Co., 53 
 
 64. S. C. 173. .\nd cotton Brokers are 
 
 * A contract for the future sale of not precluded, under the statute, 
 
 cotton in New York, although valid from re<'overing margins advancini 
 
 in the latter state, was held void by them, where tlicy make pur- 
 
 under the above statute. Gi.st vs. cha«e,s in good faitli, although tlie 
 
 Telegrapli Co., 4.'> S. C. 31J. Bro principal secretly iulriuliii to speru- 
 
 kers in cotton and grain cannot re- late. Parker vs. .Moore, WTt Fe<l. 
 
 cover for advanccH, where contracts R<'p. 79'.). 
 
 made by them are void under this If the contract is valici in New 
 
 Btatutc. Riordnn vs. Doty, ."iO S. ^'ork, where ma<le. it will nevertho- 
 
 C. 542; Harvey vs. Dotv, 54 S. C. !«•»« not be enforce<l in South Caro- 
 
 .382. If it is the bona fide intention Una, if contrary to tin* Htatute, or 
 
 of the parti<« io have delivery, the jiiiMic policy of that State. Id.
 
 606 Stock-brokers and Stock Exchanges. 
 
 burden of proof is on plaintiff to show lliiit both parties in- 
 tended delivery.^ 
 
 Dealing in futures was declared gambling and made a 
 misdemeanor in Arkansas by act of j\[arcb, 1883 (Sandels 
 «fe Hills' Dig. §§ 1634-5). 
 
 Under this statute a conviction for gambling in grain 
 futures against a Broker who kept a " bucket shop " was 
 sustained as being lyarliceps criinhns^ and in a civil action 
 he cannot recover losses on such dealings in cotton.^ 
 
 But when it plainly appears that the plaintiffs, New York 
 cotton Brokers, bought cotton for the defendant, at his 
 order, strictly under the rules of the Exchange, which made 
 them pei'sonally liable for any losses by reason of the de- 
 cline of the market, and that it was not possil)le for de- 
 fendant to cease to perform his part of the contract at any 
 time, neither the letter nor the spirit of the law is violated, 
 although plaintiffs might have been aware that defendant 
 could not pay for the cotton (500 bales) ordered, as defend- 
 ant would have the cotton itself to pay its value at the 
 time, or its purchase price, and he would therefore bo only 
 personally responsible for the difference in market pi-ices at 
 the closing. The fact that plaintiffs informed defendant that 
 he would make some money out of the transaction did not 
 indicate an intention to gamble, as the mere making of money 
 is not evidence that the method of making it is unlawful.^ 
 
 • The Brokers ma}'^ recover for to the Brokers. Parker vs. Moore, 
 
 money.s advanced, when the rules of 125 Fed. Rep. 807. 
 
 the New York Cotton Exchange ^ Fortenbury vs. State, 47 Ark. 
 
 provide for actual delivery, and the 188. 
 
 purchases were reported as made ' Phelps vs. Holderness, 56 Ark. 
 
 subject thereto, even though de- 300. 
 
 fendant did not intend delivery, ^ Johnston vs. Miller, 67 Ark. 
 
 when such intention was not known 172.
 
 Stoek-jobbiui:: Acts. 507 
 
 When a contract for the future delivery of cotton is valid, 
 and the seller intendeil to, and did, deliver the cotton, it 
 must be shown by the principal that he intended, with iho 
 knowledge of the Broker, to gamble in differences.* 
 
 By the constitution of California (Treadwell's Ann. Const, 
 p. 112, Art. IV. section 20) all contracts for the sale of the 
 shares of the capital stock of any corporation or association 
 on margin to be delivei'ed at a future day are declared 
 void, and moneys paid thereon recoverable. This provision 
 was adopted just after a period of remarkable stock specula- 
 tion which resulted in disaster to many persons,^ and the 
 court will take judicial notice that it was intended to put 
 an end to the particular kind of gambling specified.^ 
 
 By the Code of Tennessee, ^ 3100 (Laws, 1883, ch. 251, 
 §§ 1-3), dealing in bonds, stocks, grain, cott(jn, or other 
 produce for future delivery, on margin only without inten- 
 tion of either party to have actual delivery, is declared 
 gaming and made a misdemeanor, but by acts of 1883, 
 ch.s. 105 and lUO, and 1885, ch. 1, such dealing becomes 
 legal if the Broker takes out a license. It is not necessary 
 that the customer should be licensed.' Bi'ior to the passage 
 of the Act of 1883, ch. 251, dealing in fntuivs, without an 
 intention of hath parties to have delivery was void under 
 the (iaming Acts (Code, ^ 2440). The act made it gaming, 
 if either party did not intend delivery,' and a note given by 
 the pi-ineip.il to his agent is void in the hands of an inno- 
 cent iiolder for value befon.' maturity." "When the under- 
 
 ' Ponder vs. Jeromo Hill Cotton 101 ChI. .IO.'); Sliw>liy vs. Shiini. S9 
 
 Co., 100 Fed. Rep 373. ("ul. .373. 
 
 'CaHhman vs. Root, 89 Cal. 382. ♦State vh. Diinran, 81 Teiin 7t) 
 * III See nJHo Parker vh. OiIh, ' Mcflrew vh. City Pro<liice V.\- 
 
 130 Cal .322; Riie<| vs. Cooper. 110 cimiice. S."! Teim. .'572 
 Cal 103; KuIIiiH'iiti vh. SitiiineriH, * Siuxldy vs. Rank, H8 Tciui .')73.
 
 508 Stock-brokers and Stock Fxclianges. 
 
 standing of both parties was that there was to be no delivery 
 of cotton in dealings therein for future delivery, the Broker 
 cannot recover, even though he is a mere agent.' The wife 
 of one who has lost margins deposited in grain "futures" 
 may recover the amount thereof, under § 2441.^ 
 
 In Allen vs. Dunham ' it was held that margins deposited 
 with a firm of Stock-brokers might be recovered, when it 
 was the intention of both parties that there should be no 
 delivery of stocks bought or sold. In that case the trans- 
 actions were large, and it would be quite beyond the finan- 
 cial ability of the customer, a bank teller, to actually pay 
 for the stocks purchased, and tiie transactions were held 
 gambling, both under, and without the aid of, the statute. 
 A principal cannot recover the amount of a note given by 
 Stock-brokers in respect of dealings in stocks, void by this 
 act." 
 
 By ch. 81 of L. of AVisconsin of 1883 ("Wisconsin Statutes 
 of 1898, § 2319«) it is provided that contracts in "futures" 
 as to personal property shall not be void, when either party 
 intends performance, and extrinsic evidence shall not be al- 
 lowed to vary such contracts.^ 
 
 The rule laid down in Barnard vs. Backhaus,* that 
 
 * Beadles vs. Ownby, 84 Tenn. .354, in which the court held that 
 424. although the contracts were in form 
 
 ^ Dunn vs. Bell, 85 Tenn. 581. for future delivery, they were in- 
 ' 92 Tenn. 2.57. valid when no delivery was in- 
 
 * Mechanics Bank vs. Duncan, 36 tended. 
 
 S. W. Rep. 887. When the transactions were enor- 
 
 * It was held in Kerkhoff vs. mous, and were carried on with dis- 
 Atlas Paper Co., 68 Wis. 674, that proport/ionate capital, transactions 
 this statute referred only to WTitten in grain, pork and lard were held to 
 contracts and was doubtles.s passed be gamblina:. Atwater vs. Man- 
 to obviate the decisions in Barnard ville, 81 S. W. Rep 985. 
 
 vs. Backhaus, .52 Wis. .593, and « 52 Wis. 593. 
 Everingham vs. Meehan, 55 Wis.
 
 Stoek-jobbiug Acts. 509 
 
 to uphold a grain contract in "•futures" upon a board 
 of trade, it must atlirinatively appear that there was 
 to be actual receipt and delivery of the goods, was not 
 changed by § 2319«.* And where the contract is to be 
 partly performed in "Wisconsin and jiartly in Illinois, the 
 statute of the former State governs in an action by Brokers 
 to recover for advances and commissions.'* 
 
 By the Rev. Stats, of Missouri of 1899, c. 15, § 2337, 
 option dealing in stocks aiul produce without intention to 
 deliver is made a criminal offence. Intention by one of the 
 parties is sufficient (§ 233S). Keeping places for such deals 
 is forbidden (§ 2339). Commission merchants must furnish 
 names of purchasers or buyers (§ 340). " Bucket shops " 
 are also prohibited (§§ 2221-27). 
 
 In State vs. Logan ^ the keeper of a place Avhere unlawful 
 dealings in " futures" in stocks, grain, etc., were carried on, 
 was found guilty of violating § 2339 (being § 3933 of the 
 Revision of 1889), as the transactions actually took place 
 
 • Bartlett vs. Collins, 109 Wis. Mo. 12G, that the provision as to 
 477. "bucket shops" did not apply to 
 
 ' Id. comini.ssiou merchants. 
 
 * 84 Mo. .\pp. .5S4. The statute A demand note p\\cn to secure 
 ajrainst option dealin^i wits held in continuing option naml)ling tran.s- 
 State vs. Gritzer, 134 Mo. .512, not actions, may be reco\ered by the 
 to be unconstitutional, and not to holder, althoufjli he purchased it 
 have an extra-territorial effect. In 23 daj's after date, and 8uspccto<l 
 that ca.se the evidence was held in- that the note had been piven for 
 sufficient to convict a f^rain dealer such purposes. Mitchell vs. Catch- 
 for alleged option dealings with a ings, 2.'? Foil. Hep. 710. .\s to u 
 (,'hii-ago finn. vVnd although a New York contract, see Edwanls vs. 
 transaction in grain is gainl»ling Steven.son, 100 .Mo. fiKi. 
 
 within the statute, an agent may l)e An information in tljc langujige 
 
 convi(te<l of embezzling moneys fif { '2'.V.\0, charging defendant with 
 
 given to hun by the principal. keepiuL' a bucket shop, wiw hehl 
 
 State vs. runningham, ]r>\ Mo 170. siifncient in Slate vs. Kciitner. 77 
 
 It was held in (.'onnor vs. Ulack, 119 S. \V Kcp. .522.
 
 610 Stock-brokers and Stock Exchanges. 
 
 ■within the State in the pUice kept by defendant, whose 
 alleged agency to make the deals in Chicago was a subter- 
 fuge. 
 
 By Laws of Mississippi of 18!^2, j). 140, Annotated Code 
 of 1802, § 2117, future contracts for the purchase or sale of 
 commodities are not enforceable unless the parties intend 
 delivery, and §§ 1120 and 1121 inflict penalties for dealing 
 in futures.-* 
 
 In "Western Union Telegraph Co. vs. Littlejohn- it was 
 held that the act did not apply to the buying and selling of 
 stocks for present and not for future delivery, although such 
 purchases and sales might follow each other hourly in 
 rapid succession, and a principal was entitled to recover 
 from a telegraph company the amount of damages sus- 
 tained by him owing to delay in the transmissions of tele- 
 grams between him and his Broker, and resultant losses on 
 deals in stocks. The Act of 18S2, §§ 1 and 2, did not re- 
 peal § 990 of the Code of 1880 (§ 2114 of the Code of 1882), 
 voiding all wagerino: contracts.^ 
 
 By Laws of 1899, c. 77, §§ 1 and 2 (Dassler's Gen. Stat, of 
 1901, §§ 2247, 2450), dealings in futures in, and the keep- 
 
 ' It was held in Lemonius vs. a note piven to a Broker in siich 
 Mayer, 71 Miss. 514, that contracts transactions in wheat could not be 
 for future delivery of cotton could recovered by the Broker, but as the 
 not, U7ider the second section of the statute does not cover the case of 
 act of 1882, be enforced in Missis- one loaning money to pay gambling 
 sippi, although they might, as be- debts in futures, it was held in 
 tween the firms of Mississippi and Searles vs. Lum, 89 Mo. 235, that 
 Liverpool Brokers between whom such may be recovered at common 
 they were made, be enforced in law, where the lender is not a par- 
 England, in which country the ticipant. See also Dillard vs. Bren- 
 contracts were effected. To same ner, 73 Miss. 130. 
 effect, White vs. Eason, 15 So. 66. ^ 72 Miss. 1025. 
 And in Violett vs. Mangold, 27 So. ^ Campbell vs. New Orleans Bank, 
 875, it was held that the amount of 23 So. Rep. 25.
 
 Stock-jobbiiii? Acts. 611 
 
 ing of "bucket shops" for dealing in, stocks and commodi- 
 ties in Kansas, are made misdemeanors punishable by fine 
 and imprisonment. 
 
 Prior to the enactment of this statute dealing in options 
 in grain in the Chicago Board of Trade were held, on the 
 evidence submitted to the jury, to be illegal, and the Chi- 
 cago Brokers were held not entitled to recover the amount 
 of a note given to them by the customer in such transac- 
 tions.* 
 
 In Michigan, § 11373 of the Compiled Laws of 1897 pi-o- 
 hibits the purchase atid sale of stocks or produce on margins 
 for future or optional delivery without any intention of re- 
 ceiving or paying for the property so bought or sold.^ 
 
 Dealings in futures in stocks, etc., without intent to de- 
 liver, and bucket shops, are prohibited by the Revised 
 Penal Code of Texas of 1895, Art. 377. (Act of March 1, 
 1877.) Prior to the enactment of this statute such transac- 
 tions were held void as against public policy.^ 
 
 Moneys paid to Brokers in gambling transactions in 
 
 ' Washer vs. Bond, 40 Kan. 84. A telegraph company, althoufih 
 
 ' In an action against a telegraph under contract to furnish reports of 
 
 company for damages for failure to the market prices of stocks, etc., to 
 
 deliver a telegram ordering wheat a "bucket shop," is not bountl to 
 
 for future delivery, it was held in observe such a contract, Smith vs. 
 
 Garland vs. Western Union Tele- Western I'nion Tel. Co., Si Ky. 
 
 graph Co., 70 S. W. Kfj). 702, that 001. Even though the ko<'j><«rs aru 
 
 ajs the claim of defendant that the members of tlur Chicago Moan! of 
 
 transaction was a gamliling one, Tradi-. Bryant vs. Western Cnion 
 
 under the statute, was disputinJ, the Td. Co., 17 Ft>d. U<'p.S2.'i. 
 
 verdict of the jury in favor of plain- ' Hen.son vs. Flunnigan, 1 White 
 
 tiff would not be di.sturi)e<l In Sc W.'s Civ. Ciw. Ct. App { r>(Ml; 
 
 Donovan vs. Daiber, S2 N. W. Sceliip^on vs. Lewis, 65 Tpjc. 210; 
 
 Uep. 843, a Broker wa.M held cnli Flovd vs. Patterson. 72 Tex. 202; 
 
 tied to recover for lf)s.H«'s on wheat < >|iphiint vs. Markhain, 79 Tex, 
 
 88 the case did not come within the r>\:i. 
 ■tAtute.
 
 512 Stock-brokers and Stock Exchjinges. 
 
 cotton futures cannot be recovered, when they were })aid to 
 the Urokers as principals and not as agents of the phdntilT.' 
 
 And if one lends money to bo used in such transactions, 
 he cannot recover if he becomes interested therein or acts 
 as the borrower's agent, although, if he merely knew that 
 the money was to be so used, he might maintain an action 
 for recovery.^ 
 
 And mere intention to speculate in a future dealing in 
 bacon is not illegal, unless there is an intention not to de- 
 liver.^ An indictment under the statute is bad, which fails 
 to allege that certain dealings in futures were with refer- 
 ence to future contracts in cotton, about which the contracts 
 were made.^ 
 
 But the indictment need not allege specific dealings if it 
 charges the defendant with dealing in futures.^ 
 
 When from the testimony of one of the parties to a con- 
 tract for the future sale of bacon, and the correspondence 
 between them, it might be gathered that actual delivery 
 was intended, it was held error not to submit the question 
 as to whether the contract was void, as being a dealing 
 in "futures," to the jury.^ 
 
 By Act 16 of 1898, p. 20, gambling in futures on agri- 
 cultural products or articles of necessity, without in- 
 tent to deliver, is made a misdemeanor in Louisiana. The 
 Constitution of 1898 had directed the legislature to enact 
 such a statute. When money is advanced to invest in cot- 
 
 ' Floyd vs. Patterson, 72 Tex. R. 196; 36 S. W. Rep. 273; Gold- 
 
 202. stein vs. State, 36 Tex. Cr. R. 
 
 * Oliphant vs. Markham, 79 Tex. 193. 
 
 543. "Fullerton vs. State, 75 S. W. 
 
 3 Burr vs. Davis, 27 S. W. Rep. Rep .534. 
 
 589. ' Heidenheimer vs. Cleveland, 17 
 
 ^Cothran vs. State, 36 Tex. Cr. S. W. Rep. 524.
 
 stock-jobbing Acts. 613 
 
 ton futures, and there is no evidence that purchases of cot- 
 ton were not matle with a view to future delivery, the de- 
 fence of illegality cannot be sustained.^ 
 
 Dealing in futures in cotton, grain, or anything whatso- 
 ever, is made a misdemeanor by Indian Territory' Stats., 
 
 §§ 1191-2. 
 
 In this connection it should also be stated that contracts 
 for the purchase or sale of gold are legal.'* The theory of 
 these cases is, that where a contract is made for tiic sale or 
 purchase of gold, the latter is regarded as a couimodity, and 
 subject to all the rules of law relating to agreements for the 
 purchase or sale thereof — as, for instance, the Statute of 
 Frauds, requiring in certain cases a memorandum in writ- 
 ing.^ So, in the case of Appleman vs. Fisher,^ a contract to 
 sell gold " short " was upheld as legal. 
 
 By an act of the Congress (jf the United States passed in 
 March, 18G3,^ "all contracts for the purchase or sale of gold 
 or silver coin or bullion, and all contracts for the loan of 
 money or currency secured by pledge or deposit, or other 
 disposition of gold or silver coin of the United States, if to 
 be performed after a peri(jd exceeding tiirce days, shall bo 
 in writing or printed, and signed by the parties, their agents, 
 or attorneys, and shall have one or moi'e adhesive stamps, 
 as provided in the act to which this is an am«'ndment, equal 
 in amount to one half of one per centum, and interest at the 
 
 •Allen V8. WhitKtoiie, 3') Lii. Md. 
 
 Ann. S'lO. '.'{J M<1. rilO. I-or r<>ii«(niction 
 
 * I'oalKKly vs. Spey«?rn, Fji'i S. Y. of ciTliiin coMtracts rrlatiiiK to thn 
 
 230; Hif^elow vs. lieMcdict, lliiti piin-liii-sinK or HclliiiK of noltl, hw< 
 
 (X. Y.), 429, afT'd 70 .\. Y. 202; Kinne vt. F(.rd, Mi S Y. r>s7; 
 
 Fowler vs. Gold ExchauKc IJuiik. (57 Moyor vh. Cliirk, ATt id '2srt 
 
 id. 138-lJO; Chatterton vh Kisk, 1 ' Manli 3. ]sva. 2 Uri^lil S(ut. ut 
 
 Ab. NewCJua. 88; Mills vs. Gould, id. Urge, 111; 12 V. S .Slut. 71U. 
 O.'i
 
 614 Stock-!)rokeis and Stock Exchanges. 
 
 rate of six per centum per annum on the amount so loaned, 
 pledged or deposited. And if any such loan, i)ledge, or de- 
 })osit, made for a period not exceeding three days, shall be 
 renewed or in any way extended for any time whatever, 
 said loan, pledge, or deposit shall be subject to the duty im- 
 posed on loans exceeding three days. And no loan of cur- 
 rency or money on the security of gold or silver coin of the 
 United States, as aforesaid, or of any certilicate or other 
 evidence of deposit payable in gold or silver coin, shall be 
 made exceeding in amount the par value of the coin pledged 
 or deposited as security ; and any such loan so made, or at- 
 tempted to be made, shall be utterly void. Provided^ that 
 if gold or silver coin be loaned at its par value, it shall be 
 subject only to the duty imposed on other loans. Provided, 
 however, that nothing herein contained shall apply to any 
 transaction by or with the government of the United States ; 
 and all contracts, loans, or sales of gold and silver coin and 
 bullion, not made in accordance with this act, shall be wholly 
 and absolutely void ; and, in addition to the penalties pro- 
 vided in the act to which this is an amendment, any party 
 to said contract may, at any time within one year from the 
 date of the contract, bring suit before any court of compe- 
 tent jurisdiction, to recover back, for his own use and ben- 
 efit, the money paid on any contract not in accordance with 
 this act.'' This act was repealed in 1864.' 
 
 The history of these Acts seems to prove conclusively 
 that they have not been effective in preventing illegal 
 speculation in stocks and produce. In England, and the 
 
 ' See 13 U. S. Stat. p. 303; Laws, stract of the act is, however, given 
 
 U. S. 1864, ch. 173, § 173; see also in 1 Ab. Nat. Dig. 553, as late as 
 
 Re\'ision of Statutes of U. S. 1874, 1871. 
 2d ed. (1878), p. 1085. .\n ab-
 
 Wagers at Cominou-Iaw. 515 
 
 States of New York and Pennsylvania, after linsferinEr f<ir 
 years on the books, scorned and violated by "the unbridled 
 and defiant spirit of speculation,"^ despite the earnest 
 efforts of the courts to enforce them, they have finally 
 been repealed. In a recent case,- transactions in product' 
 in boards of trade are alluded to by the court as " boartl 
 of trade" transactions, having no I'eference to actual re- 
 ceipt or delivery of grain, and in another case' the court 
 found that 95 per cent of the transactions of the Chicago 
 Board of Trade were simply gambling dealings, closed im- 
 mediately by a settlement of differences, and for that 
 reason refused to restrain the defendants from using the 
 board's quotations. 
 
 It is perhaps better to allow the evil to correct itself, as 
 it surely does, than to bring the administration of justice 
 into contempt by filling the books with useless laws, which 
 are at all times openly violated :ind laughed at, and which 
 seem hardly more effective to prevent the practices at which 
 they are aimed, than legislation directed against the laws of 
 
 nature.* 
 
 III. Wagers. 
 
 ('/.) Af f'lniinioii-Iinr. 
 
 According to the definition of liouvier, which h:is been 
 substantially su.staincd by the courts, as appears Iroui ihi'dc 
 
 ' As .Mr. JiLstif-e HofTinan puts it CharlfH .\. Coii:int in tin- .\tlaiitii- 
 
 in Cas-sard vs. Hiiiiiiumi, 14 How. .Montlily for April, 1U1);{, in which In* 
 
 Pr. (S. V.) S4, 90. distinguishes hftwc'c'U triuw!»cti«>n« 
 
 'Merrill vs. Garver, 90 .N. W. in lujckct Hh<>|>s, nr iwHoeiatioiiN tti- 
 
 Ilep. C.N'eb.) 019. tiiMi-slunl purely to Kiiiuhli- in the 
 
 ' Ikmrd of Triulc vk. Kiiwey, \'l'i price •>[ ntockw or commodities, iuid 
 
 Fed. Hep. (Ind.) 72. deuiiiiKM in the Stock itiid PriMiuce 
 
 * S«re a very ahly written articli- en- ICxchanu'C!*, whii-h he Mtoutly <li»- 
 
 litled "The Fuiiction« of tJie Slock fendn, allhounh dilTereiicef«oiily may 
 
 and Produce I'IxchanK«;«," I^.V Mr Ix- Mettled.
 
 516 Stofk-brokers and Stock Exchanges. 
 
 cisions hereafter referred to, " a wager is a bet ; a contract by 
 which two parties or more agi-ee that a certain sum of money 
 or other tiling shall be paid oi- dcliveivd to one of them on 
 the ha})pening or not happening of an uncertain event." ' 
 And a contract U})on a contingenc}', by which one may lose, 
 although he cannot gain, or the other may gain, but cannot 
 lose, is a wager, as where property was sold at its real value 
 to be paid for if a third person be elected.-^ Yet in Quarles 
 vs. The State ^ it was decided that to constitute a wager there 
 must be a risk by both parties.^ And in Cassard vs. Ilinman '" 
 the court said : "A Avager is something hazarded on the issue 
 of some uncertain event ; a bet is a wager, though a wager is 
 not necessarily a l)et." 
 
 Wagers, at common-law, were not per se void, unless they 
 were calculated to injure third persons, and thereby disturb 
 the peace and comfort of society, or lead to indecent evidence, 
 or when they militated against the morality or public policy 
 of the countr3^ 
 
 ' Bouvier's Law Diet. tit. "Wa- Coldridge & Hawksford (London), 
 
 gers." See the definition of a wa- 1S95, pp. 4 and 26. 
 gering contract in Gaw v.s. Bennett, ^ 1 Bosw. (N. Y.) 207, on appeal. 
 
 153 Pa. St. 247. There may be an element of risk, 
 
 ' Shumate'.s Case, 15 Gratt. (Va.) and yet the contract may not be a 
 
 653. gambling one. So held in Plvnnb 
 
 3 5 Humph. (Tenn.) 561. vs. Campbell, 129 111. 101, where it 
 
 * See also Marean vs. Longley, 21 appeared that stocke and bonds 
 
 Me. 26; Trammel vs. Gordon, 11 were sold at a fixed sum, the Broker 
 
 Ala. 656; Fisher vs. Waltham, 4 Q. to pay anj- deficiency imder the 
 
 B. 889. If either of the parties market price, or to keep any surplus 
 
 may lose, but cannot win, it is not a thereover by way of commission, 
 
 wagering contract. Cahill a's. Car- And also so held in Phillips vs. 
 
 bolic Smoke Ball Co. (1892), 2 Q. B. Gifford, 104 Iowa, 458, which was 
 
 484; aff'd (1893) 1 Q. B. 256. The an action in reference to a saloon, 
 
 chance of gain or loss must be con- the sale of which was to be void if 
 
 templated by either party. lb., the purchaser were obliged to dis- 
 
 and see "Law of Gambling/' continue the liquor business by 
 
 reason of legislative enactment.
 
 Waiters at ("oiiiiiion-Iaw. 517 
 
 Some of the cases will fully illustrate this proposition. A 
 wager on the future price of foreign funds was held legal ; ' so 
 was one whether S. T. had or had n(^t before a certain day 
 bought a wagon belonging to D. C. ; - also a wager on the age 
 of plaintiff and defendant ; ^ and likewise a wager on the result 
 of an appeal from the Court of Chancery to the House of 
 Lords has been held good, no fraud being intended, and the 
 parties having no power to bias the decision.' On the other 
 hand, a wager as to tlie conviction or acquittal of a prisoner 
 on trial on a criminal charge is illegal as being against public 
 policv ;^ likewise a wager as to the event of a cock-tight^ or 
 a doiT-fiirhtJ or whether a horse can trot eicjliteen miles 
 within an hour.^ Wagers such as the above were held to be 
 illegal as tending to create disturbances and to encourage 
 cruelty.^ Those upon the result of any election are held to 
 be void, both in England and this country, upon the ground 
 that they are contrary to public policy and tend to impair the 
 puritv of election.^" But notwithstanding the rule upholding 
 certain wagers, the English courts frequently reprehended 
 such contracts and expressed their regret that they had ever 
 been sanctioned." Thus Ashhurst, J., '^questioned whether it 
 would not have been better for the public welfare if the courts 
 
 * Morgan vs. Pebrer, 4 Sco. 230. ' Eperton vs. I'urzciiiuii, 1 C. & 
 'Good vs. Elliott, 3 T. II. 003. P. 613. 
 
 * Hus.sey vs. Crickitt, 3 Campb. ' Broaden v.s. Murriott, 3 Bing. 
 168. (X. C.) 88. 
 
 * Jones vs. Randul, Cowp. 37; and • Id. 
 
 Bee generally, upon tiiis subjoft, '• Pars, on C'ont. (Sth ed.) Trif) n., 
 
 Ix)rd Carnpljell in Thackoorscydass and cjlscs llu're colh'ctefl. 
 
 vs. DhondinuU, G Moo. P. C. 300; " Koljinson vs. Mrariw, 10 E. C. 
 
 I)o<jlubda83 vs. Ilamloll, 3 Eng. L. L. R. 2r)3; Walpolc vs. Sanndem, id. 
 
 & Iv^. 39. 276;Gill)ert vs. Sykc-s, 10 KiimI. l.V); 
 
 * Evans vs. Jonc«, 5 .M. .t W. 77. Fislior vs. WuJtliani, 4 Q. H. HS». 
 •Squires vs. Whwken, 3 Cani|)l). " .Mherford \ti. Ikard, 2 T U 
 
 140. 010.
 
 518 Stock-brokors and Stock Exchanges. 
 
 had originally determined against all actions to enforce the 
 payment of wagers ; and "BuUer, J., in the same case, did not 
 considei- it to have ever been estabhshed as a position of law, 
 that a wager between two persons not interested in the sub- 
 ject-matter was legal. This, however, was ohiter dictum, and 
 he proceeded to determine the wager by distinctions taken in 
 former cases. And Lord Ellen borougii ' leans to the view of 
 P>iiller, J. ;^ and Le Blanc, J., in the same case, uses the fol- 
 lowing language : " It has often been lamented that actions 
 upon idle wagers should ever have been entertained in courts 
 of justice. The practice seems to have prevailed before that 
 full consideration of the subject which has been had in mod- 
 ern times." 
 
 The principle of the common-law upholding wagers was 
 adopted in this country by the States of California,^ Texas,* 
 Illinois,^ Kew Jersey ,* Alabama,^ lowa,^ Kentucky,^ Mis- 
 souri,*" North Carolina," and Delaware ;^^ and the United 
 States court in Grant vs. Hamilton " held that a wager 
 fairly made was recoverable at common-law. And the 
 early tendency of the New York courts was to sustain 
 wagers as valid within the rules of the common-law.^* 
 
 * Gilbert vs. Sykes, 16 East, 159. * Sipe vs. Finartj^ 6 Iowa, 394. 
 ^Atherford vs. Beard, 2 T. R. ' Greathoiise vs. Throckmorton, 
 
 610. 7 J. J. Marsh. (Ky.) 17. 
 
 'Johnston vs. Russell, 37 Cal. »» Waddle vs. Leber, 1 Mo. 635. 
 670. " Shepherd vs. Sawyer, 6 N. Car, 
 
 * As to horse racing only, but not 26. 
 
 as to other kinds of wagers. Wheel- '^ Dewees vb. Miller, 5 Harr. 347. 
 
 er vs. Friend, 22 Tex. 683; Monroe " 3 McLean (7th Circ. Mich.), 
 
 vs. SmeUy, 25 Tex. 586. 100. 
 
 'Smith vs. Smith, 21 lU. 244. '' Bunn vs. Rikor, 4 Johns. 426; 
 
 'Trenton, etc., Ins. Co. v. John- Campbell vs. Richardson, 10 id. 406, 
 
 son, 4 Zabr. (N. J.) 576. And see the later case of Zeltner vs. 
 
 ' Tindall vs. Childress, 2 Stew. & Irwin, 25 App. Div. 228, holding 
 
 P. (Ala.) 250. that wagering contracts were not;
 
 Wagers under Existing Laws. 619 
 
 {b) If'nf^f'rs under Existing Laws. 
 
 In England the strictures of the courts upon wagers led 
 to the passage of a statute' in the yeiir 1845, by § 18 of 
 which it is provided that "all contracts or agreements, 
 whether by parole or in writing, by way of gaming or 
 wagering, shall be null and void ; and no suit shall be 
 brought or nuiintained in uny court of law or equity for 
 recovering any sum of money or valuable thing alleged to 
 be won upon any wager, or which shall have been deposited 
 in the hands of any person to abide the event on which 
 such wager shall be made." ^ 
 
 By the Revised Statutes of New York,' " All wagers, 
 
 invalid at common-law unless they on contract, but for recovery of 
 were against public policy, and, in moneys to which defendant has no 
 the absence of proof to the contrary, title. VVillard vs. Doran & Wriplit 
 that the same rule prevailed in an- Co., 48 Hun, 402. Chapter IX of 
 other State. title X of the Penal Code also 
 
 ' 8 & 9 Vict. c. 109. contains provisions against gaming. 
 
 * For decisions under statute of It was hold in People vs. Todd, 5S 
 Vict, consult Higginson vs. Simp- Hun, 44G, that although contracts 
 son, L. II. 2 C. P. D. 76; Beestoa vs. made by one who kept a room with 
 Beeston, L. R. 1 Ex. D. 13; Inch- a stock quotation ticker in it, indi- 
 bald vs. Cockerill, 4 Jur. (n. s.) G93. eating the fluctuation of prices on 
 See also Grizewood vs. Blane, 11 C. the New York Stock Exchange, 
 B. 539; Rees vs. Fernie, 4 X. R. 539; were wagering ones, there being no 
 Hibblewhite vs. Mc.Morine, 5 M. & intention to deliver stocks, thoy <lid 
 W. 462; Barry vs. Croskey, 2 J. & not violate .sec. 343 of the Penal 
 H. 1; Ex parte Phillips, and Ex Code, making it a mi.sdeinoanor to 
 parte Marnham, 2 De G. F. & J. keep a room for gami)ling. 
 634; Loughton vs. Griffin, (1895) Thereupon that section was 
 A. C. 104. amended by L. 1S,S9. c 428, which 
 
 '1 Rev. Stat. 661, §8. Tran.sac- in elTect made the keeping of a 
 tions in futures in wheat without burket shop a niiRdeniennnr. Un- 
 intent to deliver are void under der this section iw so amended, a 
 this statute. Copley vs. Doran fi. conviction against the ki-oprr of a 
 Writrht Co , 17 N'. V. St. Rep 601, "bucket nhop" wft.s nustniiu»d 
 afT'd 49 Hun. 610. Hut an action I'<f>pl«' vs Wade. 59 Sup M40 
 for rofoverv of moneys paid to a Tin* roiiHtitution of the State «»f 
 Broker in such transactions is not New York, as uinendeil in 18U4, oUo
 
 620 Stock-brokers and Stock Kxcluiiigcs. 
 
 bets, or stakes made to depend upon any race, or upon any 
 gaming by lot or chance, casualty or unknown or con- 
 tintrcnt event whatever, shall be unhiwful. All con- 
 tracts for or on account of any money or property or 
 thing in action so wagered, bet, or staked shall be 
 void." 
 
 It is provided by statute in Massachusetts (L. 1890, c. 437, 
 L. 1901, c. 459, now embodied in the Revised Laws of Mas- 
 sachusetts, Revision of 1901, c. 99, § 4) that a recovery may 
 be had by any one contracting, upon credit or margin, to buy 
 or sell securities, when no actual sale is intended, and such in- 
 tention is known to the other party, whether principal or 
 agent, unless an actual sale or purchase has been made. Sec- 
 tion 5 protects the rights of third parties. By § 6, the fact 
 that the seller did not own the securities, and that settle- 
 ments were made without the completion of the sale, shall 
 he prima facie evidence that there should be no sale. And 
 § 7 defines securities. This statute was held to be consti- 
 tutional as intended to suppress gambling.' The statute 
 of 1890, was amended and not repealed by the statute of 
 1901.^ And a declaration following the language of the 
 amendment, as to transactions prior to its enactment, is 
 not demurrable.^ And after a cause of action under the 
 statute had accrued it might be released under seal.^ But 
 to recover collateral, a plaintiff nmst prove that he had no 
 intention to sell, and that such was known to the defend- 
 
 prohibits all kinds of gambling, and ' Wilson vs. Head, 69 N. E. Rep. 
 
 directs the legislature to pass ap- 317. 
 
 propriate laws in respect thereto. ^ Loughlin vs. Parkinson, 69 N. 
 
 Art. I. § 9. Mone}' deposited upon E. Rep. 319. 
 
 the event of a wager may be recov- * Wall vs. Metropolitan Stock 
 
 ered. 3 R. S. (Sth ed.) p. 2218. Exchange, 168 Mass. 282; Shea vs. 
 
 •Crandellvs.White, 164Mass. 54. Same, ib. 284.
 
 Wagers uuder Exist iiiy; Laws. 5*21 
 
 ant,* and that the defendant acted as phiintiff's agent or 
 employee, and that defendant performed the service for 
 an agreed compensation ; - and a set-olf cannot be allowed 
 defendant Stock-brokers for the amount of prolits pre- 
 viously paid plaintiff.^ When a Broker actually buys 
 securities, and the principal so understands, and that the 
 Broker will seU them when the customer requests, the 
 transaction is not within the statute, although the principal 
 intended to gamble in differences.* 
 
 And although the statute (§ 2) only gives the loser a 
 right to recover, in an action on contract, any money paid, 
 or the value of anything delivered, equity will enable him to 
 enjoin the foreclosure of a mortgage, and the surrender of 
 a note, given to a Stock-broker to secure losses."* The main- 
 tenance of an " exchange " telephonic communication be- 
 tween "living rooms" in which was a "ticker," ami a 
 Stock-broker's office, and the general course of the dealings 
 between the parties, were held to tend to show that the 
 Brokers had reasonable cause to believe that a Client would 
 not carry out her contracts." When money is lent, with the 
 lender's knowledge, to speculate in stocks in " bucket shoj)" 
 transactions, and the lender is to receive a moiety of the 
 prolits, a bill of sale to secure the loan is void." As the 
 statute was intended to suppress gambling in stocks, it can- 
 not be nullified by an agreement by the Client to save 
 the Broker harmless from the conse(|nencc of its violation, 
 
 ' Davy V8. BanRH, 174 Mas-s. 2.3S. » Uico vs. Winslow, (jr> S. E. Hop. 
 
 ' BinKham vs. Scott, 177 .Mus-s. 3GG. 
 
 208. • Ballou vs. Willet, 02 N. E. Hep. 
 
 ' Lyons vs. Coc, 177 Mass. .'{S2. lOGI. 
 
 ♦Rire VH. Winslow, «2 N. K. K«'p. ' ManU-ii vs. I'hillips, KM IVd. 
 
 10.'i7; Post vs. Leiand, 09 N. E. K.-p. I'.Ki. 
 Rep. 301.
 
 522 Stock-brokers and Stock Exchanges. 
 
 and equity will not restrain an action by the Client to re- 
 cover advances by reason of such agreement.' When no 
 stock was deUvered under a contract, which was terminated 
 by the decline in the market value of the securities to the 
 amount of the deposit, which thereupon became the Broker's 
 property, it was held in Marks vs. Metropolitan Stock Ex- 
 change- that this was a "settlement " within the meaning 
 of § G, importing that the principal had no intention to per- 
 form the contract, and that the Broker had reasonable cause 
 to so believe. A Stock-broker sued for recovery of margins 
 deposited in breach of the statute, is not entitled to a gen- 
 eral verdict, because some of the securities may not have 
 been securities within its meaning, when other securities 
 dealt in came within its purview, nor can he claim that the 
 transactions were through an agent, without proof of such 
 agency, when the evidence proved the agency, and the 
 wagering character of the contracts in violation of the stat- 
 ute is shown by the cross-examination of plaintitf, in which 
 he testified that speculation in the rise and fall of prices 
 only was intended, although such evidence, if offered by 
 plaintiff, would be incompetent.^ When the testimony 
 clearly shows that there was no intention to receive or 
 deliver stocks, the transaction is within the statute and the 
 words in § 6, " the fact that settlements had been made " 
 refer to settlements in the transaction in suit, and not to 
 previous settlements.* In Win ward vs. Lincoln^ §6 was 
 held, in stock transactions which originated in Rhode Is- 
 land, to have no extra-territorial effect and therefore not 
 
 ' Corey vs. Griffin, 181 Mass. 229; ^ Allen vs. Fuller, 6.5 X. W. Rep. 
 63 N. E. Rep. 420. 31. 
 
 M81 Mass. 251; 63 N. E. Rep. < Thompson vs. Brady, 65 N. E. 
 410. Rep. 419. 
 
 ' 51 Atl. Rep. 106.
 
 Wagers under Existing Laws. 623 
 
 applicable to an action in the Rhode Island courts respect- 
 ing such transactions. 
 
 In the Massachusetts statute (c, 99, Rev. Laws of 1901, 
 supra) it is also provided (§§ 1-3), that money lost at gam- 
 ing may be recovered, but these sections only relate to 
 gaming as that term is ordinarily used, as is evidenced by 
 §§ 4-T, supra, as to stock dealings. 
 
 In Ohio it is enacted (Dates' Annotated Stats. 2d ed. 
 § 6938), that " whoever plays at any game Avhatsoever for 
 any sum of money or other property of any value, or makes 
 any bet or wager for any sum of money or other property 
 of any value, shall be fined not more than $10<>, or impris- 
 oned not more than six months, nor less than ten days, or 
 both." And by ,^ 42 To, money lost in wagering mav be 
 recovered.* And Iowa (Code of 1S97, §4904), Indiana (Re- 
 vision of 18S1, with amendments to 1902, § 2081, Horner's 
 edition), "West Virginia (Warth's Code of 1899, cs. 97, 
 151) and Wisconsin (Statutes of 1898, § 4535) have similar 
 statutes. 
 
 The Revised Statutes of Indiana (§ 4950, Horner's edition, 
 § 6C75, Burn's edition) also ])rovide tliat notes and securities 
 given in wagering transacti(ms shall l)e void. This section 
 was held not applicable to moneys loaned to gamble in gniin 
 options at sometime in the future. The statute is conlineti 
 to a case where money is loaned at the time of the wager,' 
 In Pearce vs. Dill ' it was held that option dealings in gniin 
 in Illinois without intention to deliver were void as against 
 public policy, and that a wife was entitled to recover from 
 the keeper <jf a l)U(ket sh<>|), aiul fnna a bajik, moneys <»f 
 
 • See LucaA vs. n.iri..r, 2 J ( )lii<. ' I'liuik vs. Jiirkuon, 128 Ind. I'JO. 
 St. :J2S; HouLstoiu; vh. .Moore, 10 ' 1 !'.» Iml. LJi'i. 
 Ohio Dec. Ilep. 275.
 
 624 Stcuk-lnokers and Stock Exchans^es. 
 
 licr.s deposited in tiie bank, paid by her husband as her 
 trustee, in such dealings. Section 4951 of the Indiana Stat- 
 utes, Horner's edition (§ GG70, Burn's edition), also pro- 
 vides that money lost by betting on any game may be re- 
 covered by suing therefor within six months. It was held 
 in Boyce vs. OVDell Commission Co. ^ that money lost by 
 plaintiff in " bucket shop '' transactions could not be recov- 
 ered under this section, as sucii transactions were not "bet- 
 ting on any game" within the meaning of this section. 
 
 In Pennsylvania gaming contracts are void, and money 
 lost at a game or play of address or hazard may be re- 
 covered (Act of April 22, 1T94).2 In Merriam vs. Stock 
 Exchanee^ it was held that the act did not cover stock, 
 grain, and oil transactions on margins, where differences only 
 were settled, such being entirely unknown at the passage 
 of the act, and money paid by the customer to the Broker 
 could not be recovered under the 9th section of the act, the 
 transaction being a gambling one, and against the policy of 
 the law, and therefore void, although if the customer had 
 not paid it, he could not be compelled to do so. To the 
 same effect is Hirst vs. Maag.* An innocent holder for value 
 of a negotiable note given in a stock gambling transaction 
 may recover the same before maturity.' Equity will not 
 compel the return of notes (in the hands of a honafide pur- 
 chaser for value without notice) given by a customer to his 
 Broker to cover losses in stock gambling transactions.''' 
 Election bets are punishable by fine in Kansas (Dassler's 
 
 » 109 Fed. Rep. 758. * 13 Pa. Sup. Ct. Rep. 4. 
 
 ^ See Edgell vs. McLoughlin, 6 * Northern National Bank vs. 
 
 Whart. 176, overruling Morgan vs. Arnold, 1.S7 Pa. St. 356. 
 
 Richards, 1 Bro. 171. « .Vlbertson vs. Loughlin, 173 Pa. 
 
 » 1 Pa. Co. a. R. 478. St. 525.
 
 Wagers under Existing Laws. 525 
 
 Gen. Stats, of 19<U, § 2252) and gambling is prohibited by 
 §§ 2228 and 2233. 
 
 In Missouri (Rev. Stats, of 1899, c. 32, §§3424, 3432) 
 money lost on wagers may be recovered, if sued for within 
 three months after the cause of action has accrued. This 
 statute does not apply to gambling transactions in grain, 
 as money lost therein is not lost "at any game or gambling 
 device." ' Even if it does, the action must be brought within 
 the three months' liniitation.^ A note in frrain iramblins: 
 transactions in the hands of an innocent holder for value, is 
 enforceable.^ 
 
 In New Hampshire (Public Stats, c. 270, § 1.6) wagers 
 are declared void. And an agreement in which the parties 
 have no interest, except that created by such agreement, 
 shall be deemed a wager (§ 18), and money received there- 
 under may be recovered (§ 17).* 
 
 In Maine all wagers are held to bcA^oid."' By the statute 
 of that State gambling is punishable by fine (Rev. Stat, of 
 Maine, c. 12."), § 2), and securities given for gambling debts 
 (except in the hands of innocent holders) are void (lb. § lO). 
 In O'Rrien vs. Lwjues" it was hekl that a customer could 
 
 ' Craw-ford vs. Spencer, 92 Mo. note, Id.; Crawford vs. Spencer, 92 
 
 498; Connor v.s. Black, 132 Mo. Mo. 498; 1 Am. St. Rep. 745, and 
 
 1.50. note, Ijut the IllinoLs statute does, 
 
 * Connor vs. Black, 132 Mo. 1,')(>. even in the hands of an innocent 
 
 See also Batik vs. IlarrLson, 10 I*"ed. holder. Root vs. Merriain, 27 Fctl. 
 
 Rep. 213, deciding; that the .statute Rc|). 900, and ca.ses. cited in ajv 
 
 d(xsi not apjiiy to "options." jx'ndcd note. 
 
 'Third .National Bank vs. Tin.s- * .Marj^ins in stock (ran-sactions 
 ley, 11 .Mo. App. I9S; Third Na- when; there is to he no deliverj', 
 tional Bank vs. Harrison, 10 Fed. may lio rocovereil under these sec- 
 Rep 243; Sondheim vs. Ciilliert, 1 17 tions. Wheeler vs. Kxchanne, 50 
 Ind. 7i; 10 Am. St. Rep. 23. and Atl. Rej). 751. 
 
 note. Neither the statiitj's of .N'ew ' Lewis vs. Littlefield, 15 .Mc. 233. 
 
 Vork nor Indiana invali«late such a 'Sl Mc \i\
 
 526 Stock-brokers and Stock Exch.aiif^es. 
 
 not recover deposits made with a ])i'oker to gamble in grain, 
 even though tlic latter represented that the purchases were 
 to be made of a tirni ol Chicago Brokers, when they were 
 not in fact so made. V>nt in Nolan vs. Clarke^ it was held 
 tliat a principal iiiiglit, under § 8, recover from a Broker, 
 payments made in " futures " in corn, when delivery was 
 not intended, even thougli the forms of sale and purchase 
 were observed, and although the Broker was agent f(;r a 
 Boston company, when he did not disclose such fact to his 
 principal. It was held in Morris vs. Telegraph Co.^ that 
 as dealings in stocks between Broker and customer although 
 in form valid, were gambling transactions, there being no 
 intent to make delivery, the customer could not recover 
 damages from a telegraph company for non-delivery of a 
 telegram by which loss resulted to him in such transac- 
 tions. 
 
 In Vermont money paid to the winner of a wager can- 
 not be recovered.^ The statutes as to Avagering and gam- 
 bling (§§ 5133-9), permitting recovery from the winner, 
 only apply to sports or games.^ It was held in Soules vs. 
 "Welden National Bank'' that a Commission Broker, acting 
 for a New York stock-broking company, could not recover 
 deposits made by him in a bank, as the company's agent, 
 pursuant to an arrangement between him and the New 
 York company, on the ground that the transactions were 
 wagering ones. The keeping of a " bucket shop '' to deal in 
 stocks and commodities, is made a criminal offence in Ver- 
 mont by L. 1888, No. 147, § 1 (Vermont Stats. §§ 5128-32). 
 A conviction under this statute was not sustained, when 
 
 • 91 Me. 33. 
 
 ^Id. 
 
 2 94 Me. 423. 
 
 s 61 Vt. 375 
 
 3 West vs. Holmes, 26 Vt. 530. 

 
 Wagers under Existiuc: Laws. 527 
 
 the indictment did not sufficiently connect the defendant 
 with the illegal offence charged.^ In State vs. Corcoran ^ 
 it was held that an indictment which alleged that the re- 
 spondent kept a '' bucket shop," in which, following the 
 language of the statute, he conducted the business thereby 
 prohibited, was good. 
 
 By the General Statutes of Connecticut, § 4531, wagering 
 contracts are declared void, and by § 1920, municipalities 
 may prohibit bucket shops and dealings in margins. A 
 speculative contract in stocks is not necessarily illegal as a 
 gambling contract.^ 
 
 Although the gambling statute of Rhode Island (General 
 Statutes, ch. 92) does not forbid gambling in stocks, such 
 transactions are void as against public policy when there is 
 to be no delivery, even though the transactions have the 
 appearance of a sale, or of a sale and resale.^ If transactions 
 in stocks are void as against public policy in Rhode Island, 
 they cannot be enforced in that State, although valid under 
 L. 1S90, ch. 437, of Massachusetts, in which State the con- 
 tract was executed.^ 
 
 By the General Statutes of New Jersey, p. 1606, § 1, all 
 wagering is declared unlawful. Speculations in stock on 
 margins, are within this statu te.** 
 
 ' State vs. McMilhiii, 37 All. Uep. both States, as there was an intent 
 
 278. to have actual <lt'livery, alth()Uf;li 
 
 * 73 Ver. 401. tliore wjls in fact no actual jjurclixse 
 
 * Hatch vs. DoukIjus, 4S Conn, or delivery, and altliou>;h the prin- 
 IIG; Innraliani vs. Taylor, 58 id. cipjil did not intend to receive 
 'A}',i; SkifT vs. Stoddard, 03 i<l. 211. stocks purcha.sed, or pay therefor, 
 
 * Fla^;; VH. Gilpin, 17 It. I. 10. where he intendiMl that the Broker 
 
 * Winward V8. Lincoln, FA Atl. slxtuld receive an<l pay for them, fir 
 Uep 1(K5. In that cjwc, however, it the Hroker had reason to believe he 
 van held that a Hroker niinht re- had such intention. Id. 
 
 cover moneys due from a customer * Tantum vs. .\rnohi, ITiStew. fl'J; 
 in Huch tratwactiuiu*, \>y the law of l•"la^;^; vs. Baldwin, 11 Stew. Iu|.21U.
 
 528 Stock-brokers and Stock Exclumses. 
 
 Gaming on any contingency is ulso dtrlared unlawful in 
 the State of Maryland. Poe's Supp. to Public Gen. Laws, 
 Art. 27, § 124«. 
 
 By General Statutes of Minnesota, cli. 09, § 13 (now- 
 General Statutes, 1804, § 6593), money lost at play or 
 gambling may be recovered. It was licld in Dows vs. 
 GlaspeP that this statute did not relate to " option deals," 
 and that money paid, as margins, in such transactions in 
 grain, could not be recovered, in a counterclaim by de- 
 fendant customer who relied on the statute. It was also 
 lield that when no proof of the statute Avas offered by 
 plaintiff Broker, the latter was not entitled at common-law 
 to recover advances or commissions, when the ])urpose of 
 the principal was to gamble. A " stock " clock Avas held in 
 State vs. Grimes,'^ to be a gambling device Avithin the mean- 
 ing of the charter of the city of Minneapolis. 
 
 Gambling is made punishable as a criminal offence by 
 the Code of Mississippi, § 1122, and by § 211-1, contracts, 
 judgments, etc., on any wager, are declared void. It was 
 held in Campbell vs. Xational Bank^ that contracts for fu- 
 ture delivery are void, wdien the intent of the parties is 
 merely to speculate on the rise and fall of prices, Avhen 
 differences only are to be settled, and there is to be no de- 
 livery, and as such a contract was one of wagering, a judg- 
 ment on a note given by a principal to a Broker in payment 
 of moneys due on such transactions, and by the Broker en- 
 dorsed to the plaintiff bank, could not, under § 990 of 
 the Code of 1880 (§ 2114 of the Code of 1882), be en- 
 forced. And in Virden vs. Murphy^ it was held that a 
 note given to secure money loaned by plaintiff to defendant 
 
 '4X. D. 251. 3 74 T^iisg 526. 
 
 2 -49 Minn. 443. * 78 Miss. .515.
 
 Wagers imder Existing Laws. 529 
 
 to be used in a ''bucket shop" business carried on by de- 
 fendant in Philadelphia, could not be recovered, the business 
 being a gambJing one under § 211^ of the Code. And Luui 
 vs. Fauntleroy^ decided that in a suit on a judgment of 
 another State, the defendant was not })recluded from setting 
 up the gambling nature of the transactions (viz., dealing in 
 futures), upon which the judgment was based, and which, 
 as they took place in the State of Mississippi, were illegal 
 by the statutes of that State. 
 
 The Delaware statute against gaming (Laws of Delaware, 
 ch. 454, vol. IL), would seem to be directed against gaming 
 tables, etc., and would not therefore include gambling in 
 " futures." 
 
 In Virginia by the Code of 1887, § 2836, all gaming con- 
 tracts are declared void. In Krake vs. Alexander^ it was 
 held that when one lends money which is used by the bor- 
 rower in paying off a judgment obtained against hitn on a 
 note given by him as surety in respect of alleged gambling 
 transactions in pcjrk and grain options, and of which trans- 
 actions the lender liad no knowledge, the latter is not de- 
 barred from recovering the money lent by reason of the 
 alleged gambling nature of the transactions. 
 
 In North Carolina, gaming or betting contracts are void. 
 Code, c. 22. 
 
 Gaming is forbidden by the Ci\il Code of South Caro- 
 lina (§§ 2305-Oy 
 
 Under the Code of (ieorgia(§§ 275.3, now 3071), all wager- 
 ing contracts are void, and evidences of debt executcnl upon 
 a gaming consideration, are void in the hands of any per- 
 son. I'ndiT this s<*etion, a bank cannot i-ecovrroii a prom- 
 
 ' HO MiHH. 7r,7. ' See Itic-e vh. Gwi, 1 Strob. (S. C.) 
 
 ' sr, \n 20G. 82. 
 
 34
 
 530 Stock-brokers and Stock Exchanges. 
 
 issory note given in a transtiction in cotton futures, even 
 though a honaJiJe purchaser for value before maturity with- 
 out notice.' A principal may recover from a telegra[)h 
 company, damages occasioned by a mistake in transmit- 
 ting a message as to such deals,' but this doctrine was 
 subsequently overruled, and it was held that a telegraph 
 company was not, under such circumstances, obliged to 
 respond in damages,^ nor should a bank, with whom col- 
 lateral had been deposited, under an agreement to honor 
 a draft given by the depositor in payment of mai'gins in 
 " cotton" futures, be compelled to observe such agreement.^ 
 
 The constitution of Louisiana of 1S98 directs the legis- 
 lature to pass laws to suppress gambling. Arts. 188 and 
 2983 of the Eevised Civil Code prohibit gaming, except 
 games of skill. An optional contract to purchase flour in 
 St. Louis, which expressed that, if the vendee did not want 
 the flour, differences might be settled at the prices quoted 
 by the St. Louis ^lerchants Exchange, was held to be a gam- 
 ing contract under the statute.^ 
 
 By the Rev. Stats, of Illinois, § 131, wagering contracts 
 are declared void, and b\' § 132 moneys paid to the " win- 
 ner" in such transactions may be recovered. It was held 
 in Pearce vs. Foote* that moneys paid to a Broker in grain 
 option contracts may by recovered from the Broker as a 
 winner under § 132.' 
 
 ^Cunningham vs. Bank, 71 Ga. Flower, 46 La. Ann. 315; 15 So. 
 405. Rep. 16. 
 
 * Telegraph Co. vs. Blanchard, 68 « 113 111. 228. 
 
 Ga. 299. ' This decision was followed in 
 
 » Cothran vs. Telegraph Co., 83 Elder vs. Talcott, 43 111. App. 439, 
 
 Ga. 25; 9 S. E. Rep. 836. in a like contract, notwithstanding 
 
 * Moss vs. Exchange Bank, 30 contra decisions in Hisigins vs. Mc- 
 S. E. Rep. 267. Crea, 116 U. S. 671 (option con- 
 
 ' E. O. Stann^rd Milling Co. vs. tracts in pork and lard), and White
 
 TVagei's uuder Existing L;i>vs. 531 
 
 By the Code of Tennessee (§ 243S), gaming and wagering 
 contractsare declared void, and by § 2440, money lost tiiereon 
 may be recovered. Moneys paid in wagering contracts in 
 produce " futures," may be recovered under the latter sec- 
 tion.' 
 
 By the General Statutes of Kentucky (art. 1, ch. 47, § 1, 
 now ch. 58, § 1955, of the Kentucky Statutes), all gaming 
 or wairering: contracts are declared void. It was held in 
 Lyons vs. Ilodgen "^ that gambling in futures was within 
 this statute, although not practised at its enactment. 
 
 By the Code of Alabama of 1897, § 21G3, all contracts 
 founded on a gambling consideration are void.^ 
 
 vs. Barber, 12.3 U. S. 392 (like con- liver (Bryant vs. Telegraph Co., 17 
 tracts in grain). See also Kennedy Fed. Rep. 825), and a telegraph 
 vs. Stout, 26 111. App. 133; Jamieson company may not be enjoined from 
 vs. Wallace, 167 111. 3S8; Walker vs. refusing to supply a "bucket shop" 
 Johnson, 59 111. App. 448; X. Y. keeper with the market quotations. 
 &c. Stock E.x. vs. Mellen, 27 id. 556, Smith vs. Western Union Tele- 
 to same effect. Treble the amount graph Co., 84 Ky. 664. Wlien it 
 paid may be recovered. Kruse vs. clearly appeared that stocks were 
 Kennett, 181 111. 199. But not in never bought or sold, differences 
 the Federal court. Sticktenoth vs. only being settled, the transactions 
 Central E.\. of Chicago, 99 Fed. are gambling ones within this sec- 
 Rep. 1. tion, and moneys paid to a company 
 
 ' McGrew vs. City Produce Ex- engaged therein may be recovered, 
 change, 85 Tenn. 572. .\nd a note Boyd vs. Coates, 24 Ky. L. Rep. 
 given in such tran.sactions is void 7.30; 69 S. W. Rep. 1090. 
 even in the hands of a bona fide ' It wa.s held in Ilawley vs. Rilib, 
 holder before due. Snoddy vs. 69 Ala. 52, that dealing in "cot- 
 Bank, 88 Tenn. 575. ton" futures, without intent to de- 
 
 ' 90 Ky. 280. See aI«o to the liver, wjls gambling within Ihis stat- 
 
 Hame effect. Sawyer vs. Taggert, 77 ute, and that the amount of a note 
 
 Ky, 727; Smith vs. W«»frtern I'nion, given in sueh a transaction in .\la- 
 
 84 Ky. 661; BeadhrM vs. .McIClrath, liam.-i <'ould not be recovered even 
 
 85 Ky. 'I'M); Fanners M:ink vs. by an innocent holder for vuluc, but 
 I'n.ser, 13 Ky. I,. R. .565. wlien it took place in New York, it 
 
 Tran.sactions in grain "futures" miirlit be recovered at conuiion-l.iw, 
 arc illegal and against public policy in the absence of proof of a New 
 when there is no intention to <le- York statute to the contrary.
 
 532 Stock-brokers and Stock Exchanges. 
 
 Money lost on wagoi-s may be recovered in Arkansas 
 (Sandels 6c Hill's Dig. of Statutes, § 3501), and judgments, 
 etc., given in respect tliereof are void (§ 3504). 
 
 The keeping of gaming tables is forbidden in the District 
 of Columbia (Laws of January 31, 1883 ; Code of 1902, 
 §864).' 
 
 In Colorado gaming contracts are declared void (]\rills' 
 Anno. Stats. § 1344). "When one gave a note on transac- 
 tions alleged in his defence to be gambling in " futures " in 
 grain on the Chicago market, but which, he testified on the 
 trial, was given as accommodation paper, a verdict against 
 him was properly directed in an action brought by a bona 
 fide holder of the note for value without notice.'^ 
 
 Gaming is also prohibited in Michigan (Comp. L. §§ 5929- 
 38). Section 5933 (formerly § 1996 of the Comp. L. of 
 
 When no proof is offered that there ' A note given in transactions in 
 was not to be deUvery, a plea by a "futures" in stocks is void, even as 
 telegraph company that a "cotton against innocent holders without 
 future" was a gambling transac- notice. Lully vs. Morgan, 21 D. C. 
 tion, will not be considered, West- 88. This case was decided under 
 ern Union Tel. Co. vs. Way, 83 -AJa. the English statute of 9 Anne, 
 561 ; Same vs. Chamblee, 25 So. Rep. c. 14, § 1, which was held to be in 
 2.32, and where the contract was to force in the district, following 
 l>e performed in Germany, it cannot Justh vs. Holliday, 2 Mack. 346, 
 be held a gambling transaction in where the transactions were simi- 
 the absence of proof of the law of lar, but it has been recently de- 
 Germany. Id. See also Lee vs. cided in Wirt vs. Stubblefield, 17 
 Boyd, 86 .Via. 283; Peet vs. Hatch- App. D. C. 283, that 9 Anne, 
 er, 112 Ala. 514 (as to cotton c. 14, § 1, and 16 Car. 2, ch. 7, were 
 futures). In Ferryman vs. Wolffe, repealed by the "Negotiable In- 
 93 Ala. 290; 9 So. Rep. 148, it was struments Law" (Act of Congress 
 held that a contract for the sale of of Januarj- 12, 1899), so far as in- 
 stock to be delivered at the end of consistent therewith, and that a 
 twelve months, with an option to note in gambling stock transac- 
 the seller to deliver during the time, tions might be recovered by a bona 
 was valid, even though the seller fide holder. 
 
 had not the stock at the time, as it ' Pendleton vs. Smissaert, 1 Col. 
 
 appeared he intended deliver}-. App. .508; 29 Pac. Rep. 521.
 
 Wagers under Existiiii; Ljiws. 533 
 
 1S71), voiding notes given in guniiny; transactions, was 
 held in Shaw vs. (?lark ^ not to apply to " option dealings " 
 in wheat. 
 
 In Texas cities may suppress gambling houses and fraud- 
 ulent devices (Sayle's Texas Civ. Stats, art. 431, Act, 
 March 15, 1875, § 44). And gaming is prohibited by ch. 3 
 of the Texas Penal Code. 
 
 In Xorth Dakota it is provided that losses incurred by 
 betting on any game may be recovered (Rev. Stats, of 
 1895, § 7235). 
 
 In Oregon gambling contracts are void (Codes and 
 Statutes of Oregon of 1902, § 1945). 
 
 The keeping of any gambling apparatus is declared un- 
 lawful by § 7852 of the South Dakota Statutes of 1899. 
 The following circumstances wari-anteil a linding that 
 transactions in grain and other commodities were mere 
 gambling on the market prices : The fact that the Brokers 
 knew that the customer could not financially make the 
 large purchases which had been made ; that he was not 
 in the business of dealing in such commodities ; that not- 
 withstanding formal orders to buy and sell, differences only 
 were settled ; the customer's own testimonj^ to that effect, 
 and similar testimony of other customers of plaintills.^' 
 
 In Arizona gaming by unlicensed persons is punishable 
 by fine or imprisonment (Rev. Stats, of 1901, ch. IX). 
 
 Gaming is also made a ci-iminul offence by the Indian 
 Territory Statutes, ch. 38; by the Montana Stats. (Sander's 
 edition), ch. 9 ; and l)y the Comp. Stats, of Nebraska of 
 1901, :5 0877. 
 
 Gambling is punishable by fine or imprisonmcnl in I'lor- 
 
 • VJ .Mich. 384. ' Wailc vs. KniiiU, S(J .\. W. K.p. 
 
 015.
 
 534 Stoek-hrokers jind Stock Exchanges. 
 
 ida (Eev. Stats. §2651, as amended by L. 1895, p. 364); 
 and in Idaho, by Penal Code, § 4846. 
 
 In Nevada gambling, except by licensed persons, is for- 
 bidden (Coinp. Laws, § 1263). 
 
 In Xew Mexico securities given for gambling debts are 
 void (Comp. Laws, § 3202). 
 
 Gambling is made a criminal offence by the Statutes of 
 Oklahoma, ch. 56. 
 
 In Utah gaming is a misdemeanor (Rev. Stats, of 
 1898, § 4261). xVlso in Washington (Codes and Stats, of 
 1897, § 7260). And in "Wyoming all gambling contracts 
 are void (Rev. Stats, of 1899, § 2187). 
 
 Gambling is also prohibited by the Penal Code of Cali- 
 fornia (§ 350), but this statute apparently would not include 
 transactions in " futures." See the constitutional provi- 
 sion, supra. The same observation applies to the Indian 
 Territory Stats. (§1170-90). See supra as to dealing in 
 '' futures." And the Penal Code of Montana, § 600, and 
 §214 of the Criminal Code of Nebraska also prohibit gam- 
 ing at faro, etc., and do not cover transactions in " futures." 
 
 In Metropolitan Bank vs. Jansen ^ it was held that gam- 
 bling in grain " futures" without intent to deliver, is now 
 void in the United States, even in the absence of a prohib- 
 itory statute, and a bank cannot recover the amount of a 
 note given in such transactions. 
 
 In conclusion it may be said that the general tendency 
 of the courts of the various States is to consider all gam- 
 ing and wagering contracts as utterly void ; to look upon 
 them as insidious enemies to our modern public policy and 
 standard of morality, fostering unhealthy desires for sud- 
 
 » 47 C. C. A. 497.
 
 Wagers under Exist ini; Laws. 535 
 
 den gain, destroying the spirit of patient labor, and pre- 
 senting easy avenues to demoralizing habits of speculation 
 — often to positive crime.' 
 
 TTe shall now proceed to examine the cases under the 
 statutes and principles governing " wagers " which have 
 arisen out of transactions in securities and in '' petroleum," 
 "cotton"- and "grain"' — operations in the three last- 
 mentioned kinds of merchandise being very similar to 
 dealings in stocks — first setting forth those adjudications 
 in which the defence of. "wager" has been sustained; 
 secondly, those in which it has been overruled ; and, 
 thirdly, deducing the results of the cases into general prin- 
 ciples. 
 
 In the outset, the general proposition upon the subject of 
 wagei-s may be stated as follows : If the agreement between 
 the parties is a bona fide contract to buy and sell, the law 
 will sustain it ; but where it appears from the evidence 
 that there is no real contract of sale, and that the whole 
 arrangement is to be settled by the payment of " differ- 
 ences," it will be set aside.^ This statement is conceded in 
 
 ' See Irwin vs. Williar, 110 U. S. was illejial, there beinji no intention 
 499, and ca.ses cited. to deliver, or to hand over wure- 
 
 * See "Kay on Contractual I.iini- iiouse receipts, hut merely to settle 
 tations," p. .'W et se<j., and valuable differences, 'daniajies cannot be re- 
 note on "Cotton Futures" bj- Mr- covered from a telcRruph company 
 Alfred B. Shepperson, contained in for a loss on sales occasioned by 
 the appendix to that work, as also delay in the delivery of a telegram. 
 "I'rotfjst of the New York Cotton Mehhert vs. .Vmerican U. Tel Co., 
 KxchatiKe" afrain.st the pa-s-sa^e of 3 McCrary, .')21 . See valualile note 
 bills in Congress to prevent dealinR 'oil option sales by Mr Francis 
 in option.s and fiilures. Wharloti appended to the report of 
 
 ' .\nd not only will the oritriiial this casn. 
 contract be set aside, but certain It was held in Tiryant vs. Western 
 clafweM of collateral contracts aris- T^iion Teleirraph Co , 17 Fe<l Hep. 
 ing therefrom. Thus when a con- 82.'), that a de.-iler in erain and pork, 
 tract for the sale of rye in Chica;;o who kej)! a "bucket shop" could
 
 53G Stock-brokers and Stock KxcliaiiJ?es. 
 
 all of the cases ; and whatever inconsistency or want of 
 harmony there may be in the decisions will be found to 
 arise fi'om the ditferent inter})retations the courts have 
 placed upon the facts, and which can only be ascertained 
 by a review of tlie adjudications. 
 
 (c.) Wagevs between Principals. 
 
 There is a marked distinction in those cases w^hich have 
 arisen between the direct parties to a contract — as, for in- 
 stance, a vendor and a vendee — and those in which a 
 Broker, actino; for a principal, has entered into agreements 
 with third persons in behalf of iiis ])rincipal, and then 
 seeks indemnity from the latter for money laid out, etc., 
 and commissions in such transactions. In the former class, 
 if the intention of the parties is not to deliver or receive 
 property', but to settle by the mere payment of differences, 
 the contract is a wager. But a Ih'okei- may be ignorant of 
 the unlawful intention of his principals, and may then re- 
 cover for money paid out, commissions, etc., although the 
 principals would he unable to enforce the contract as be- 
 tween themselves.^ 
 
 This important distinction will be found to be supported 
 in all of the well-considered cases. Under this head, there- 
 fore, we shall set forth the cases arising hctweer^ principals 
 in stock transactions, remarking in the beginning that the 
 cases seem to be few^ in which the defence of wager has 
 been sustained. 
 
 not compel a telegraph company to no statute in Kentucky making 
 furnish him with "ticker" quota- such .u:amI)Un,<i criminal, 
 tions from the Chicago Board of ' Warren \-.s. Hewitt, 45 Ga. 201, 
 Trade, although he was a member and cases cited under subd. {d), 
 of that board, and although there is p. 551.
 
 Wagei*s between Principals. 537 
 
 The first case ^vllich arose under the act of Victoria was 
 that of Grizewood vs. Bhine.^ The pUiintiff, who was a 
 Stock-jobber in London, brought an action of assumpsit 
 against the defendant, who had, through his Broker, con- 
 tracted to sell certain shares of stock, which he did not own, 
 to tlie plaintiff, deliverable at a future tiuie. The market 
 in the meantime having advanced, the defendant could not 
 deliver the stocks at the price the plaintiff had bargained to 
 pay for them, whereupon it was agreed between the par- 
 ties that, instead of delivering the stocks, the defendant 
 should pay the differences between the contract and the 
 market price on the day they were to be delivered. The 
 action was upon this last agreement to recover- the " differ- 
 ences." The defendant interposed the defence that the 
 contract was illegal, as a wager on the price of the shares, 
 setting forth in his plea the very language of the act. The 
 court, upon special demurrer, gave judgment for the plain- 
 tiff, holding that the plea was bad, and that the defendant 
 was bound to show the circumstances which made the con- 
 tract set forth in the declaration a gaming one. The case 
 subsequently came to trial on the issues of fact. The court 
 left it to the jury to say what was the intention of the j)ar- 
 ties at the time of making the contract, whetiier either 
 party really meant to purchase or sell the shares in (pies- 
 tion ; that, if they did not, the conti'act was a gambling 
 transaction and void. Tiui jury found for thir dt'l'mdant. 
 Upon app(;al, this ruling was sustained, and the rule thus 
 estal)lish('d of h'aving the intention of tiie ))arties to be de- 
 termined by the jury lias, it seems, been substantially ad- 
 
 '20 EiiR. L. <fe Eq. '2'M); for (Icclaralioii in the ca.so, ««•(! S id. Ilf); 
 
 <• 11 r n. r/.m.
 
 538 Stock-hrokors and Stock Exchanges. 
 
 hered to, except by the courts of Pennsylvania, to which 
 alhision will liereafter be made.^ 
 
 In "Whitlark vs. Davis ^ it waslicld that an outside Broker 
 (who acted as a principal) was entitled to recover differ- 
 ences when he was ready to deliver the securities at any 
 time it" called upon l)y defendant to do so, and that the con- 
 tract was a real one, and not witliin the statute. 
 
 In The Universal Stock Exchange vs. Strachari'Mt was 
 decided however by the House of Lords that when the in- 
 tention was that " differences " only should be accounted 
 for, and that no stocks or shares should be delivered, an 
 option to demand delivery or acceptance thereof did not 
 take the case out of the statute, but securities deposited by 
 one party with the other to secure the payment of " differ- 
 ences" might be recovered, as they were not deposited "to 
 abide the event,'' but it was held in Strachan vs. Universal 
 Stock Exchange, Ld. (No. 2),'* that if money so deposited 
 had been ajipropriated by the depositee as against losses, 
 to the knowledge of the depositor, the latter could not 
 recover. 
 
 The decision of the House of Lords in Universal Stock 
 Exchange vs. Strachan, supra^ as to the effect of an option, 
 was followed in Re Gieve'' and it was held in Ex parte 
 Waud* that as such a contract was illegal, a promise by 
 a Broker, acting as a principal, to deliver stock in payment 
 of differences, was without consideration, and damages could 
 not be recovered for the non-delivery. 
 
 In the United States, beginning with the State of New 
 
 ' See also s. c. 11 C. B. 526; Mar- ^ (isgo) App. Cas. 166. 
 
 shaU vs. Thurston, 3 Lea (Tenn.), ^ (1895) 2 Q. B. D. 697. 
 
 743. ^ (1S99) 1 Q. B. 794. 
 
 2 10 Times L. R. 425. » (1898) 2 Q. B. 383.
 
 Wagei*s between Principals. 539 
 
 York, we find a case^ somewhat analogous to Grize^vood vs. 
 Blane, where a deniuiTcr was interposed to the complaint, 
 but with a different result from that reached in the English 
 case. In that case the Superior Court of New York inter- 
 preted the statute upon the subject of wagers, and held that 
 an answer to a complaint for damages for non-deliv^ery of 
 certain i)ork, which set up "that it was not the intention 
 of the defendant to make any actual sale or delivery of 
 pork to the phiintitf, nor was it the intention of the plain- 
 tiff actually to buy or receive an}"- pork from the defendant ; 
 that it was the mutual design of both the plaintiff and de- 
 fendant, at the making of the said supposed contracts, that 
 the same should not be specifically performed in whole or in 
 part ; but, on the contrary, that at the maturity of said sup- 
 posed contracts, the differences between the then market 
 value of the pork therein mentioned and the price of the same 
 fixed in said supposed contracts should be paid by the one 
 party to the other, as performance or satisfaction of said sup- 
 ]X)sed contracts,'' was good. The court distinguished the 
 case from Grizewood vs. Blane on the ground that the lan- 
 guage of the New York statute was broader than the English 
 act, l)Ut fully concurred in the result of that case. There are 
 other cases where the defence of wager has been sustained, 
 especially in the State of Pennsylvania, but they more 
 appropriately belong to the other subdivisions of this chap- 
 ter.^ 
 
 Bcirinninf; with Enjrland, we find that the decided tend- 
 ency of the courts of that country has been to reject the 
 defence of wager where it has been iiilrochiced to defeat a 
 
 ' Ca-war i vb Tlinirmn. 1 Posw ' Sr-p post, p. r>!y(S. 
 207; afT'c 11 How (S Y ) Pr HI.
 
 540 Stock-brokers and Stock Exchaiii?os. 
 
 recovery in actions gi'()\vin<,^ <iiit of Stock Exchange trans- 
 actions. 
 
 To ilhistratc this tendency, it is necessary to set forth 
 but a few of the leading; modern cases. In the foUowin": 
 cases, the C(jnrt, under a defence of wager, examined (U-al- 
 ings of members of the London Stock Exchange inte?' se, 
 and pronounced them invulnerable under the statute of Vic- 
 toria before cited. A, B, and C were members of the Stock 
 Exchange, according to the rules and customs of wliich 
 there are two (hiys appointed in a month for settling trans- 
 actions relating to foreign securities ; and, in case of a h)an 
 upon or a sale of such securities, the lender or seller has the 
 right, in case of non-payment of the loan or non-completion 
 of the purchase, either to sell or take them at their market 
 value — tlie deficiency, if any, in the price being paid to the 
 borrower or purchaser, and the surplus, if any, beyond the 
 loan or purchase-money being paid by liim to the lender or 
 seller, who, if the borrower or purchaser is declared a de- 
 faulter, is bound to take the securities at a price fixed by 
 the oflBcial assignees of the association. According to these 
 rules and customs, A lent to C money on tlie security of 
 foreign railway shares, which were of the full value of the 
 loan, and on each succeeding settling-day the amount of de- 
 preciation or increase in the value of the shares was paid by C 
 or A respectively to the other, till C Avas declared a defaulter, 
 wlicn A took the shares at the price fixed by the official 
 assignee. C was afterwards adjudged a Ijankrupt, and A 
 tendered a ])roof for the balance due him in respect of the 
 transaction, after deducting the price at which he had taken 
 the shares. 
 
 According to the same rules and customs, B agreed with 
 C to sell iiim one hundred foreign railway shares for a cer-
 
 TVagers between Principals. 541 
 
 tain sum. The transaction was not completed, but on each 
 succeeding settling-day the differences were paiil by B or 
 C, as in A's case ; and, on C being declared a defaulter, B 
 likewise took the shares at their value, and, on C's bank- 
 ruptcy, tendered a proof for the balance due to hiin in respect 
 of the said shares. The proofs were both rejected on the 
 ground that the transactions were illegal as wagers. On ap- 
 peal, the Court of Appeals reversed this ruling, and held that 
 the transactions were regular and legal. The court, in the 
 opinion, laid stress upon the facts proved in each case — that 
 the transactions had been conducted in accordance with 
 the rules of the Stock Exchange ; that there was an actual 
 advance of money and a deposit of shares in the one case, 
 and that in the other case the dividends on the shares 
 alleged to have been sold were accounted for to the bank- 
 rupt.^ 
 
 In the case of Shaw vs. Caledonian Railway Co.^ the 
 court held that transactions between a principal and an out- 
 side stock dealer were not gambling ones, although plaintiff, 
 who was the only witness examined, swore that he had no 
 contract except for the j)ayment of differences, the court 
 holding that if either one, or both, of the parties, could de- 
 mand or give <lelivery of the stocks, the transaction was a 
 real one, and not for the payment of differences. 
 
 The princij)le of this decision was followed in Lowenfeld 
 vs. Ilowat,' tJK; court holding that where tlieic was a ch-ar 
 contract disclosed by the bought and sold notes, the trans- 
 actions were; not gambling ones, unless it could be shown by 
 
 ' In rp M()ri.'aii, K\ parte I'liillipH ' (1«{K)) 17 Court Ses. Vhh. ( Itli 
 
 and Ex [lartc Marnliain. (i .Iiir. Oi.h.) S«»rieH) -lOO. 
 
 V27.i; !» W, U 1.11 ; 2 1)<' (i. V. * J. » 19 Court S<-h. Ciw. (1th SerieM) 
 
 (Vi\; -M L J. Hunk. 1 ; 3 L. T. (n. ».) 128. 
 r,UJ.
 
 542 Stock-brokers and Stock Exchanges. 
 
 some other written or (jral contract, that the original con- 
 tract was not intended to be a real one, and the evidence 
 did not disclose such a subsidiary agreement. 
 
 To the same effect is Universal Stock Exchange vs. 
 Stevens,^ where it was held that plaintiff stock-jobbers were 
 entitled to recover the balance due them, as, although the 
 parties contemplated that actual deliveries of stock should 
 not take place except under special circumstances, the con- 
 tracts were in fact sales and purchases of stock, and not 
 wagering, although the parties thought that the contracts 
 would in the long run result in the mere payment of 
 differences. 
 
 In the State of New York the leading case upon the sub- 
 ject of wagers is Bigclow vs. Benedict,^ where the instru- 
 ment sued on was as follows : 
 
 " Attica, Jan. 23, 1865. 
 
 " Know all men by these presents, that I, C. B. Benedict, for and in 
 consideration of the sum of $2.")0, do agree to receive from M. C. Bige- 
 low, at any time within six months from date he may choose to de- 
 liver the same, S2,500 in gold coin of the United States, for which I 
 agree to pay to the said B. 95 per cent, premium on the dollar, or at 
 the rate of ?195 in good current funds for each and every $100 of coin. 
 The said B. docs not contract to deliver the coin, but pays the $250 for 
 the privilege of delivering or not, at his option. 
 
 Signed, " C. B. B." 
 
 The plaintiff Bigelow tendered the gold before the time 
 mentioned in the contract had expired, brought suit and re- 
 covered judgment for the difference between the market 
 value in current funds of gold at the time of tender and 
 the price specified in the contract, with interest. The validity 
 of the contract was assailed on the ground that it was a 
 
 ' 66 L. T. R. 612. ' 70 N. Y. 202.
 
 ^Vagei-s between Priucipiils. 543 
 
 wager. The appellate court held that there was nothing 
 illegal on the face of the contract ; and as no evidence had 
 been given showing former dealings between the parties, or 
 any vicious intent, tlie judgment below was sustained. The 
 court was of opinion that the circumstances relied on to 
 show that the contract was a wager — viz., first, that it was 
 a contract for the sale of gold ; and, second, that it was 
 optional on the part of the seller — did not authorize the in- 
 ference that it was illegal. While the court admitted that, 
 if the contract in question was a mere device to evade the 
 statute, it would l)e illegal, the question was, did the con- 
 tract on its face disclose an illegal transaction ? The court 
 concluded that it did not, and that the defence of illegality 
 was not established, the burden of proof resting upon the 
 defendant to establish the same.' 
 
 15ut in a later case in the Supreme Court of "Wisconsin,'^ 
 it was decided that to " uphold a contract in writing for the 
 sale and delivery of grain at a future day for a price certain, 
 it must affirmatively and satisfactorily appear that it was 
 made with an actual view to the delivery and receipt of the 
 grain, and not as a cover for a gambling transaction." Tiie 
 law upon tills subject is clearly and well stated in Kirkpal- 
 
 ' See al.sr> IV.ihody vs. Speyers, .56 ' Barnard vs. Rarkliavis, .'i'i Wis. 
 
 N. Y. 2'.V); Caincron v.s. Durkheim, 593. ThLs decision wa.s followed 
 
 .5.5 id. 425; Cook vs. Davis, 53 id. in Lowry vs. Dillman, 59 Wis. 197, 
 
 318; 43 id. 209; Treliilcock vs. Wil- where it was held that the qup.s- 
 
 son, 12 Wall. (U. S.) (i87; Mcllvaine tion whether a note piven by the 
 
 VH. Egerton, 2 Iloht. C\. V.) 422; customer to the commission mcr- 
 
 Stunton vs. Small, 3 Sandf. 2.30; Ty- chant wa.s for los.ses on "future" 
 
 ler vs. Harrows, Kol»t. 104. The dealings in l)arl('y without intent to 
 
 fact that only a part of the price; of deliver, wils for the jury. Where 
 
 Rold (i. e, a margin) is furnislu^fl, one of the parties intends delivery 
 
 doe« not make the eontraet il- it is not ^lamhliiif^. Wall Vfs. 
 
 le^al. WheelcHS vs. Fi»k, 2.S La. Schneider, r,[i Wia. 352. 
 Ann. 732.
 
 544 Stock-brokers and Stock Exchanges. 
 
 rick vs. Ronsall,' and the viinvs there expressed accord with 
 coininoii-seiise and the ordinar}' course of business trans- 
 actions. As was renuirked by Agnew, J., in this case : 
 " We must not confound gambling, whether it be in corpora- 
 tion stock or merchandise, with what is commonly called 
 speculation. ]\rerchants speculate upon the future prices of 
 that in which they deal, and buy and sell accordingly. In 
 other words, they think of and weigh — that is, speculate upon 
 — the probabilities of the coming market, and act ui)on this 
 lookout into the future in their business transactions ; and 
 in this they often exhibit high mental grasp and great 
 knowledge of business and of the affairs of the world. 
 Their speculations display talent and forecast, but they act 
 U})on their conclusions, and buy or sell in a Jjona Jide way." 
 And the law docs not condemn such transactions, providing 
 the intention really is that the commodity shall be actually 
 delivered and received when the time for delivery arrives. 
 Consequently no h^gal objection exists to such time contracts, 
 which are to be performed in the future l)y the actual de- 
 livery of the property by the vendor, and the receipt and 
 payment of the price l)y the vendee, if the contract is in 
 writing ; and it is also true that a contract for the sale of 
 ffoods to be delivered at a future day is not invalidated bv 
 the circumstance that at the time the contract was made the 
 vendor has neither the goods in his possession nor has 
 entered into an agreement to buy them. A party may go 
 into the market and buy the gotxls which he has agreed to 
 sell and deliver.^ 
 
 It has also been decided tiiat a purchase of grain at a cer- 
 
 • 72 Pa. St. 155; Runi.sey vs. ^ Barnard vs. Backhaus, supra. 
 Bern,', 65 Me. 570; Gregory vs. 
 Wendell, 39 Mich. 337.
 
 lVas:ors between Priiieipals. 545 
 
 tain price per bushel, made in good faith, to be delivered in 
 the next month, giving the seller until the last day of the 
 month, at his option, in which to deliver, is not an illegal 
 or gambling contract, and that the purchaser would be en- 
 titled to its benefit, no matter what may have been the 
 secret intention of the seller.' 
 
 An interesting question arising on contracts for the sale 
 of grain, settled by payment of ditferences, was })asse(l on 
 by Judge Gresham in the United States Circuit Court for 
 Indiana. It had already been well settled in previous cases 
 that a contract, which on its face does not show an inten- 
 tion not to deliver, is presumed to have been an actual ]iur- 
 chase or sale, and, though optional, is valid until the party 
 impeaching the contract shows an illegal intent. The ques- 
 ti<jn as to what evidence will show the intent, and particu- 
 larlv whether the fact that the contract was actually set- 
 tled by adjustment of differences, or that there was a usage 
 to do so, necessarily shows it to have been illegal, or sulfices 
 to raise a legal presumption that the intent to make such a 
 settlement existed in the inception of the contract, arose in 
 the case before Judge Greshani, and he ruled that such a 
 usai'-e did not necessarilv make the contract void. 
 
 The testimony tended to sIkmv that a general custom ob- 
 tained among grain commission-merchants in Baltimore to 
 the following effect : When one commission-merchant, ui)on 
 the order of a Client, sells to another commission merchant 
 a quantity of grain for future delivery, and where it occurs 
 that at some other time before the maturity of the contract 
 the same commission-merchant receives an order from an- 
 other ('Ii«;nt to jHii-chase the same or a larL''<'r (plant ity of 
 
 » Pixley VH. Boynfoii, 7!> 111. 351. 
 
 85
 
 54G Stoi'k-brokers and Stock Exchanges. 
 
 tbo same kinil of grain, for the same future delivery, and 
 he executes this second order by making the purchase from 
 the same commission-merchant to whom he had made the 
 sale in tJie other case — tlicn in such case the two commission- 
 merchants meet together ;ind exchange or cancel the con- 
 tracts as between themselves, adjusting the difference in 
 the prices between the two contracts, and restoring any 
 margins that may have been put up ; and from that time 
 forth the first commission-merchant holds, for the benefit 
 of the Client for whom he sold, the order or contract of 
 the purchaser for whom he bought, so that the wheat of 
 the selling Client may, Avhen delivered, be turned in on the 
 order or contract of the purchasing Client, and the com- 
 mission-merchant is held responsible as guaranty to his Cli- 
 ent. The evidence also tended to show a custom obtaining 
 among commission-merchants in Baltimore to the further 
 effect that though the second transaction may have been 
 had with a different commission-merchant from the one 
 with Avhom the first transaction was had,- yet where it can 
 be found that a series of contracts are in existence for the 
 sale of like grain for like delivery, so that the seller owes 
 the wheat to the buyer to whom he sold, and he to another 
 who ow^es like wheat for like delivery to the first commission- 
 merchant, then in such case they settle by what they call 
 " a ring " — that is, they all reciprocally surrender or cancel 
 their contracts, adjust the price differences between them- 
 selves, and surrender all margins that had been put up ; 
 that in all such cases the commission-merchant substitutes 
 the contract of another Client in place of that with the 
 commission-merchant whose contract has been cancelled 
 or surrendered, and that he guarantees to his Client the 
 performance of the contract originally made on his behalf.
 
 Wagers between Principals. 547 
 
 The judge instructed the jury that these customs were 
 founded in commercial convenience ; that they are not in 
 contravention of the law ; and that they were vidid. He 
 also charofed them that the burden of showing: that the 
 parties were carrying on a wagering business, and were 
 not engaged i:i legitimate trade or speculation, rests upon 
 the defendant. On their face these transactions are legal, 
 and the law does not, in the absence of prijof, presume that 
 parties are gambling. A transaction which on its face is 
 legitimate cannot be held void as a wagering contract by 
 showing that one party only so understood and meant it to 
 be. The proof must go further, and show that this misun- 
 derstanding was mutual — that both parties so understood 
 the transaction.' 
 
 In Pennsylvania the following contract was sustained : 
 "November 10, IS TO. In consideration of $1,000 we agree 
 to deliver B., should he call for it during the first six months 
 
 ' Williar vs. Inviii, 12 Chic. Leg. loss on sale. Fisher vs. Fisher, S 
 
 News, 241, aff'd as to the definition Ind. App. 665. 
 
 of a wagering contract, 110 U. S. If a note is given by grain Bro- 
 
 507. See also, in this connection, kers for profits made by their cus- 
 
 Gregory vs. Wendell, 40 Mich. 432. tomer in gambling transactions in 
 
 If two persons have a deal in futures, the latter cannot recover on 
 
 grain "futures" with the keeper of the plea that the relation of princi- 
 
 a "bucket .sliop," and one advances pal and agent exists. Nave vs. 
 
 half the sum required for margin. Wilson, 12 Ind. .\pp. 3H. 
 
 for which he takes the borrower's Merc knowledge on the part of 
 
 note, he cannot recover the amount one loaning money that the l)or- 
 
 of such note. Davis vs. Davis, 119 rower intends to gamble in grain 
 
 Ind. 511. futures in Chicago, when the lender 
 
 If, however, deliven,- was in- is not a party to .such transactions, 
 
 tended, and warehou.se receipts are will not defeat a recovery, Jack.son 
 
 actually delivere<l by the lirokers to vs Mauk, 125 Ind. :M7. but it is 
 
 the principal.^, one of the latter may otherwise if he is iiitereHtfHJ in such 
 
 recover the amount of a note given transact ions Plank vs. Jackson, 
 
 by the other, being his moiety of a \'2H Ind. 424.
 
 'A^ Stock-brokers and Stock Exchanges. 
 
 of 1871, 5,(»00 barrels of oil. If said oil is called for, this 
 call becomes a contract ; ten days' notice shall be given ; 
 and B. agrees to receive and pay for the same, cash on de- 
 livery, at 1(1^ cents a gallon." This contract was attacked 
 as a gambling transaction ; but the court, upon reasoning 
 similar to that used by the courts of New Yot-k in Bigelow 
 vs. Benedict,' held that this did not appear from the face of 
 the instrument ; but that it was for the jury to say whether, 
 in view of all the facts, it was a mere scheme to gamble 
 upon the chance of prices.'^ In fine, in the language of Lord 
 Coke : " It is a general rule that Avhensoever the words of a 
 deed, or of the parties without deed, may leave a double 
 intendment, and the one standeth with law and right, and 
 
 ' Ante, p. 542. When the parties are sui juris, 
 - Kirkpatrick vs. Bonsall, 72 Pa. money given to invest in stock 
 St. 155. jiambling; is not recoverable. lb. 
 A note given by one partner to When the transactions in stocks 
 another in deaUngs in oil, on margins, are large, but the amount of money 
 where no delivery was had, is not advanced, small, the inference is 
 recoverable. Hall vs. Law, 1 Pa. that the dealings were upon a wager, 
 C. C. II. 477; McGrew vs. Mc- and one principal cannot recover 
 Gregor, 4 Penny. 100. If one of from another, even though there 
 two principals should die, a claim was an account started, and a prom- 
 by the other arising out of a stock ise to pay. Patterson's Appeal, 13 
 gambling transaction is not en- W. X. C. 154. A judgment given 
 forceable against the former's estate, by one principal to another, to cover 
 Thompson's Est., 11 W. X. C. 371. his share of the losses in dealing in 
 When, however, one actually buys, stocks on margin, is not recover- 
 through a Broker, stock for another, able. Collings vs. Xevin, .30 P. L. 
 at the latter's request, and holds it J. 238. 
 
 till the purchase money is paid by See Waugh vs. Beck, 114 Pa. St. 
 
 his co-principal, he can recover from 422; 6 .\tl. Rep. 923 (one who lends 
 
 the latter the loss occasioned by a money and takes a note therefor to 
 
 sale of the stock when it is not taken further a wagering transaction may 
 
 up by the borrower. Potts vs. recover, even although he has 
 
 Dunlop, 110 Pa. St. 177. If the knowledge that it is to be so used, 
 
 stocks are delivered, the transac- provided he does not confederate 
 
 tion is not a gambling one. Stew- \\nth the borrower as to the use of 
 
 art vs. Pamell, 147 Pa. St. 323. the money advanced).
 
 M'agei's between Principals. 549 
 
 the other is wrongful and against law, the intendnicMit that 
 standeth with the law shall be taken.'- ^ 
 
 In Wakefield vs. Farnuni ^ it was held that there was 
 evidence that defendants. Brokers in Boston, dealt with 
 their customer residing in Massachusetts as principal, in 
 wheat transactions which were held by th(5 couit l)elow to 
 be gambling ones by the common-law of Massachusetts, al- 
 though they carried out their contracts through Chicago 
 Brokers, and therefore the contract was made in Boston be- 
 tween the customer and the Boston Brokers and not between 
 the Chicago Brokers and the unknow n ])ersons with whom 
 they dealt, and it was not necessary to show that the con- 
 tract was a wagering one in Chicago. In this case the Bos- 
 ton Brokers had furnished an account showing a balance 
 due their Client, and it was held that the latter could not 
 recover such balance. And in Noithi'uj) vs. Buffington ^ it 
 was held that a customer could n<jt recover margins and 
 profits on stock transactions from Boston Stock-brokers, 
 although the latter were doing a commission business for 
 Xew York Brokers, through whom the ti'ansactions were 
 effecte<l, the contracts having beiMi found to l)e gambling 
 ones. AVhen one employs a Stock-broker to sell shares, and 
 the shares are sold by the Broker, the contract is nota wag- 
 erinj: one unless both seller mid buNcr understood that 
 there was to b<! no delivery of the shares.^ 
 
 A contra(;t f<jr the delivery of cotton, not then in exist- 
 ence, to be received in pavment of fertiliz(M-s and sup- 
 plies, is illegal in (Georgia.' One who deals in cotton " fu- 
 
 'Co. Lit. 12, IHS; but compiiro '171 Miwh. 4ftS. 
 
 Miitter of Chundler, 13 .\ni. Luw * H:inu*s vs. Smith, I.V.I .Milkh. 
 
 HcK ^n. 8) 310. ."ill 
 
 ' 170 Mu.s«. '\'2'2. ' Innum vs. Swiftf, S'.) (la 370.
 
 r)50 stock-brokers and Stock Exchanges. 
 
 tures " during the day, and buys or sells during the night 
 to cover himself, is a principal and not an agent, and can- 
 not recover.' 
 
 A note given by customers to Brokers, to cover margins 
 in futures, cannot be recovered by an endorsee, when the 
 transactions are gambling ones.'^ 
 
 "When two principals jointly made purchases of wheat 
 throurrh commission merchants, one is entitled to recover 
 from the other, a moiety of the losses on the transactions, 
 and commissions paid to the Broker, wdien, although there 
 might be a suspicion that the parties through whom the 
 plaintiff principal dealt, through his Brokers, were dealers 
 in " options," yet it was not so pleaded or proved, and the 
 court would not presume the contract to be illegal.^ But 
 where the intention of both parties clearly was to settle by 
 differences only, and not to deliver the commodities (hogs), 
 although actually in possession of one of the parties at the 
 time, the transaction is a pure wagering one.^ When in a 
 contract for the sale of coi-ii, the plaintiff vendee contem- 
 plated actual delivery to him, but the defendant merely in- 
 tended to speculate on differences without delivery, the con- 
 tract is not a wagering one, and the fact that plaintiff knew 
 that defendant intended to gamble, does not make such 
 intention, the intention of both parties, so as to render the 
 contract one of a gambling character.^ If the buyer of corn 
 for future delivery intends actual delivery, and the seller 
 intends to dehver the corn if he can obtain it at a profit, 
 
 ' Thompson vs. Cummings, 68 ^ Cockrell vs. Thompson, 85 Mo. 
 Ga. 124. 510. 
 
 'First National Bank vs. Oska- ■•Johnson vs. Kaune, 21 Mo. App. 
 loosa Packing Co., 66 Iowa, 41. 22. 
 
 5 Jones vs. Shale, 34 Mo. 302.
 
 Actions for Money Laid Out. 651 
 
 otherwise to pay the difference in money, the contract is 
 not a ffamblinir one under the statute as to "futures."* 
 
 It was held in Texas, in the case of Cleveland vs. 
 Ileidenheinier,^ that where a contract for future delivery 
 of bacon was doul)tful, a request by the vendee to have the 
 goods delivered on delivery day, and an attempt by the 
 vendor to deliver them, validates it. 
 
 (d.) Actions hij Brokers for Money Laid Oi(t, efe., and Com- 
 missions in Stock Transactions. 
 
 We propose to consider separateh' those cases in which 
 the defence of " wager '' has been set up in actions brought 
 by Stock-brokers to I'ocover for money laid out in stock 
 transactions at tlie request and for the use of the Client, 
 together with commissicms due him for services in such 
 dealings, again calling attention to the distinction drawn 
 by the decisions between this class of cases and those in 
 which the contest is between the direct i)arties to the con- 
 tract. 
 
 In the outset it will be noticed that the statute of Victo- 
 ria does not render wagering contracts themselves " ille- 
 gal," but declares that they shall be " null and void," and 
 that no suit siiall be maintained upon thcin. In this re- 
 spect it differs from the Stock-j(jbbing Act of Sir .lolin 
 Barnard, by which similar contracts were ]>rohibitO(l un- 
 der a penalty. Accordingly, no claim arising out of such 
 contracts couhl be enforced at law because of its illegality. 
 The distinction between th<j two acts is forciblv illusirattMi 
 in actions i)V lirokcrs for commissions. .\s we have seen 
 
 • DcierlinKVH. Sloop, 09 .Mo Aj)!) 'JJ S. W H.-p. .'i.'il. 
 446.
 
 552 Stock-brokers Jiiid Stock Exchanj^es. 
 
 under " Sir John Barnard's Act," a IJi-oker could not re- 
 cover as against his principal for commissions, or lor money 
 laid out for him, in transactions in the nature of gaming, 
 because the Broker could not estai)lish his rights except 
 by showing that he had done something forbidden under a 
 penalty, and consequently illegal.^ Yet, under the act of 
 8 and 9 Victoria, the contracts being voidable only,^ a 
 Broker could recover,^ even if he knew that the contract 
 entered into was void under the statute;^ for if one per- 
 son requests another to pay any loss that may occur in 
 such a transaction, there is a continuing request to pay un- 
 til revoked.'^ In fine, the law as to gaming contracts is, 
 that all such contracts are simply null and void. They 
 are not, therefore, illegal, and the parties making them are 
 not liable to any actions or penalties. 
 
 These distinctions were very forcibly noticed in Rose- 
 warne vs. Billing, where all of the decisions Avere referred 
 to. In that case, Erie, C, J., said : " I am clearly of opin- 
 
 ' Ante, p. 483; see also Wells the Canadian Civil Code being simi- 
 
 vs. Porter, 2 Bing. (X. C.) 722. lar to the English statute). 
 
 ' Higiiinson vs. Simpson, L. R. 2 ^ Id. See also Oldham vs. Rams- 
 
 C. P. D. 76. den, 44 L. J. C. P. 309; Bubb vs. 
 
 *See cases ante, p. 483; also Yelverton, 24 L. T. 822; Higginson 
 
 Jessopp vs. Lutwyche, 10 Ex. vs. Simpson, L. R. 2 C. P. D. 76; 
 
 614; Knight vs. Chambers, 15 C. Beeston vs. Beeston, I,. R. 1 Ex. 
 
 B. 562; Knight vs. Fitch, id. 566; Div. 13; Ex parte Pyke, In re Lus- 
 
 3 C. L. R. 567; I Jur. (n. s.) 526; ter, L. R. 8 Ch. Div. 7.54. A jobber 
 
 24 I.. J. C. P. 122; Bubb vs. may recover on notes given by one 
 
 Yelverton, 24 L. T. (n. s.) to an outside Broker employed by 
 
 822. him to conduct dealings in stocks 
 
 * Rosewame vs. Billing, 15 C. B. and shares, which were known by 
 
 (n. s.) 316; Ex parte Rogers, 15 the jobber to be gambling transac- 
 
 Ch. Div. 207; Read vs Anderson, 13 tions, and which were endorsed 
 
 Q. B. D. 779 (as to betting agents) ; over by the Broker to the jobber for 
 
 Forget vs Ostigney, (1895) \. C. valuable consideration. Lilly vs. 
 
 318 (as to Canadian Stock-brokers, Rankin, 56 L. J. Q. B. 248.
 
 Actious for Money Laid Out. 653 
 
 ion that if a man loses a wager, and gets another to pay 
 the money for him, an action lies for the recovery of the 
 money so paid."' ' And the court held that the fact that 
 the Broker made the contracts for the payment of differ- 
 ences in his own name, according to the usage of Brokers, 
 but for the account of his principal, nuule no difference in 
 the result. Of course, these views are subject to modifica- 
 tion and change where the language of a statute is not in 
 substantial accord with that of Victoria, heretofore cited ; 
 for such terms may undoubtedly be used by the legislature 
 as would prevent any recovery upon wagering contracts 
 either directly or indirectly."^ 
 
 In the case of Cooper vs. XeiP it ai)peared that the de- 
 fendant employed one B., a Broker, to enter into contracts 
 upon the Stock Exchange for the purchase of shares. B. 
 knew the defendant did not intend to acce[)t the shares, 
 but only to receive or pay "differences'' according to the 
 rise or fall in the market price of the shares. B. entered 
 into contracts Avith Jobbers for the purchas(; of shares, in 
 pursuance of the defendant's instructions, and, according to 
 the rules of the Stock Excliange, became i)ei-s()nallv liable 
 on the contracts. He was afterwards declared insolvent, 
 and the })laintiff, as his trustee, sued uptm an implied con- 
 tract of indemnity against the claims of the .Iol)bers. At 
 the trial the jury found that the contracts with the Job- 
 bers were nuii-e time b.ii'gains, and jiiduuicnt was given 
 for th(} defijndant. The court, upon a|»pc;il, however, held 
 that the verdict was unsatisfactory, and a new trial was di- 
 rected ; and, in giving its opinion, the court foreshadowed 
 
 'But HOC Hun", P. J., roritm, ' .Sw; its t<i thr cITrct of tlit- Gam- 
 in F'areira vh. Gabcll, 89 Pu. St. in^ Ad, 1K«)'2, post, p. 5.').'>. 
 H9. » i:{ Wc.-k. N'<»U-.s, I'JS.
 
 654 Stock-brokers and Stock Exchanges. 
 
 the result n'uclicd in TlKicker vs. JIurdy' by laying down 
 the proposition that if the defendant employed B. to make 
 contracts upon the Stock Exchange with the Jobbers, ac- 
 cording to the rules of the latter bod}', and therefore con- 
 tracts that were real so far as the Jobbers were concerned, 
 but that B. undertook with the defendant that he would so 
 manage, or endeavor to manage, the contracts with the 
 Jobbei's that the defendant would never be called upon to 
 pay or receive more than differences if B. succeeded, the 
 implication was that there was an implied contract that 
 if B. incurred liabilities without his own fault the defend- 
 ant wouUl indemnify liim.~ 
 
 But where the agreement was that the Broker should, at 
 the Client's direction, buy shares and sell them, the profits 
 to belong to the Client — the Broker being personally liahle 
 to Jiim for these profits — and the losses to be borne by the 
 Client, the Broker personally, and wot by way of indemnity, 
 receiving those losses — held, a ^vagering contract within the 
 statute.^ The fact that the Brokers are in either case to 
 receive their commissions and charges does not alter the 
 result.* 
 
 The court, however, laid stress upon the want of averment 
 by the Brokers that the latter, in making for the defendant 
 a contract of purchase and sale, contracted any liabilities 
 themselves to the vendor and vendee, or that they paid any 
 money to the vendor or received any money from the 
 vendee. 
 
 » Post. ' Byers vs. Beattie, 16 W. R. 279; 
 
 ^ See also, as explaining and dis- 2 Ir. R. C. L. 220. 
 
 tinguishing this case, Thacker vs. * Id. It was also held that this 
 
 Hardy, L. R. 4 Q. B. D. 685; and see invaUdity might be taken advan- 
 
 also Lyne vs. Siesfield, 1 H. & X. tage of by demurrer without any 
 
 278. special plea.
 
 Actions for Money Laid Out. 555 
 
 In Eeggio vs. Stevens it Co./ which was an action by a 
 principal to recover winnings, and asum deposited as cover, 
 the defendant, an outside Broker, pleaded that the transac- 
 tions were irauiblin<r ones under the act of 1845, and the 
 court upheld this plea so far as regarded the winnings, on 
 the ground that neither party intended to take up the stock, 
 but held plaintiff entitled to the " cover."" The evidence 
 indicated that the plaintiff might have the right to call for 
 delivery, but this question was not considered by the court, 
 as it appeared that he had no intention of taking up the 
 stock. 
 
 So in Ee Green - it was held that " contracts of sale which 
 do not contemplate the actual lona fide delivery of the 
 property by the seller, nor payment by the buyer, but are 
 intended to be settled by paying the difference in price at 
 some future time, are void uiulir the Wisconsin statute 
 against gaming contracts." And this rule was applied to a 
 Broker who had advanced the differences on such a contract 
 for a bankrupt. It was decided he could not prove his 
 claim for the amount so advanced. In that case the court, 
 in rendering its opinion, said : " liut, i)hiiii as it appeal's, the 
 case of Rosewarne vs. Billing, cited by the claimant's coun- 
 sel, seems to sanction a different doctrine. Hut I do not 
 think that case can be regarded as the law upon this ])oint 
 in Enirland. There are cases in contiict with it, so I think 
 it may l:>e safely asserted that the weiglitof English author- 
 ities is with Steers vs. Lashley."-' 
 
 But, as we shall s(;e, the case of Ttosewarne vs. Billing 
 ha.s been directly endorsed by tin; English courts. 
 
 In 1S92 the gaming act* was pas-scd as a result of the do- 
 
 ' 4 T. L. U. .T-'fi. »(iT<nn U (11 
 
 ' l.-i .Nul IWnk. Keg. 198. • W i\: .% Viet. c. '.).
 
 5;3G Stofk-brokers am! Slock Exchanges. 
 
 cisioii in ilie betting c;ise ol" Kccul vs. Anderson' \Yhich bekl 
 that ;i betting agent might recover from bis principal the 
 amount of ii bet paid by him on behalf of his principal, al- 
 though if the bet had not been paid, the winner could not, 
 under the provisions of the act of 184:5, recover it. It pro- 
 vided that promises to I'epay sums jniid under contracts 
 void by 8 and 9 Vict. c. loO, should be null and void. There 
 have been no decisions under this statute, as to transactions 
 on the Stock Exchange, or between Stock- brokers and their 
 principals, although there have been several decisions as to 
 betting and wagering generally, from which it would seem 
 that a Broker cannot now recover unless he was ignorant 
 of the fact that the transactions were gambling ones, or un- 
 less the law of estoppel aids him.^' 
 
 Mr. G. Herbert Stutfield, in his works on " Betting, Time- 
 Bargains and Gaming," and " Rules and Usages of the 
 Stock Exchange,'' is of opinion that the act of 1892 does 
 not affect the relations between Stock-broker and Client, as 
 transactions in the Stock Exchange are never "difference 
 bargains " or wager contracts, although " bucket shop " 
 transactions might be otherwise. In a footnote to C bitty 's 
 English Statutes, vol. 4, p. 57, the editor, Mr. Lely, is also 
 of oi)inion that this statute does not make Stock Exchange 
 speculative transactions void even as between Broker and 
 principal, as ordinarily conducted. Although an agent can- 
 not, under the act, recover, a principal may recover bets 
 paid to the agent.^ 
 
 Pennsylvania presents a number of decisions in which the 
 
 » 13 Q. B. D. 779. (1895) 1 Q. B. D. 698; Burpe vs. 
 
 'Tatem vs. Reeve, (1893) 1 Q. B. Ashley, (1900) 1 Q. B. 754. 
 
 44; Carney vs. Plimmer,(1897) 1 Q. * De Mattos vs. Benjamin, 70 L. 
 
 B. 635; Saffrey vs. Mayer, (1901) 1 T. 560. See also Coldridge "Law 
 
 K. B. 11; O'SuUivan vs. Thomas, of GambUng," chaptors IX and X
 
 Actions for Money Laid Out. 557 
 
 defence of " wager " was interposed to actions by Stock- 
 brokei*s, and the highest tribunal in that State has laid 
 down the doctrine in favor of sustaining the defence, with 
 such manifest rigidity and so inconsistently with the lead- 
 ing decisions of England and the States of the Union as to 
 draw forth sharp criticisms both from the bench ami the 
 bar of its own State.^ 
 
 The first case which we deem it necessary to notice is 
 Brua's Appeal.^ In that case one K. made a contract in 
 writing with one 11 , as follows : '' I have this day soUl and 
 agreed to deliver to J. S. II., or to his order, twenty-live 
 days from this date, two hundred shares Harlem Railroad 
 common stock, at the rate of sixty dollars per share ;"and 
 at the same time delivered his i)r()niissory note for $1,0(»0, 
 as martjin on the contract, it iK'in'2: a "• shoi't sale ; " and 
 subsequently, as the stock rose in price, delivereil to II. 
 other notes as additional margin. K. having made an as- 
 signment, these notes wei'e proved as claims against his 
 estate, and were allowed by the auditors. Upon appeal the 
 Supreme Court reversed tliis judgment, u[)on the ground 
 that as the auditors had lound as a fact that" the notes were 
 a component pai't of a stock-gambling transaction, in which 
 K., in effect, betted that in twenty-five days Harlem stock 
 would sell at lesjs than $0(>," such finding was conclusive 
 up<m the court, and it necessarily followed that, being a 
 "gami^ling contract, it could not be enforced; and that the 
 hohler of the promissory notes, havingknown this, and hav- 
 ing taken them after they were due, it was established that 
 
 ' .Se<! iirtidc of .Mr. Ju!^1i(<; liri^^s, Ihi.s f|U(*sti<)ii is )inii|uo, and op- 
 
 38 Lo;j Int (I'll) IKi; Lewis on |>mhi'(1 to all nuthorilios " S«'o also 
 
 Sto<-kH, ctr , 1(K>, wlnT(! it in H.iiil, Hi<l<Ilf on Stofk-hrokurs, llfj. 
 "The law of I'oniwylvania up<jii ' 5.') I'a. St. 294.
 
 558 Stock-brokers and Stock Exchanges. 
 
 there was no legal consideration for them, and that the 
 holder was not in a position to escape the taint that renders 
 them worthless."' This is the whole of that case, and it 
 will be observed that it was n(jt one which occurred through 
 the instrumentality of Stock-brokers, but was a transaction 
 between the parties themselves ; and the appellate court 
 found, in addition to the facts stated, that " the actual 
 transfer of stock between these parties was not contem- 
 plated by them." 
 
 The court did not decide that "short sales" were illegal, 
 but it used this language : " It is said the form in which 
 this contract appears enters largely into the business of 
 stock-brokerage. This is a mistaTic ; the lona Jide '^wrchixs.Q 
 of stocks, no doubt, can be conducted in a legitimate way, 
 and is so, generally, without trenching in tlie least on the 
 gambler's province." 
 
 In fact, in the next case upon the subject which is re- 
 ported in that State, Smith vs. Bouvier,' a " short sale " was 
 distinctly upheld. In that case one K., not owning stock, 
 employed Brokers to sell stock for him at a named price, to 
 be delivered on a particular day. The Brokers sold as or- 
 dered, and, as is customary, borrowed the stocks for deliv- 
 erv ; the stock appreciating in price, the Brokers bought 
 the same " in," and commenced an action for money laid 
 out and expended. The main contention in the case was 
 whether or not the transaction was a gambling one, and 
 would for that reason prevent the Brokers recovering money 
 advanced and commissions earned. The court behnv sub- 
 mitted to the jury the question, whether the transaction 
 was one in which the parties agreed that mere differences 
 
 ' 70 Pa. St. 325.
 
 Actions for Money Laid Out. 559 
 
 ■were to be paid, or a real transaction; and the jury found 
 for the plaintiff. 
 
 Upon api)eal, the defendant contended " that the jury 
 should have been instructed that all purchases of stocks, 
 with a view to resell and make profit on their rise, or 
 contracts to furnish stocks on time, should be declared gam- 
 bling transactions and illegal, not only between buyer and 
 seller, but as to Brokers and agents through whom the 
 sales or purchases had been made." Commenting upon this 
 argument, the learned court said : " This would make a 
 great inroad into what has, for an indefinite periotl, been 
 regarded as a legitimate business, and would either destroy 
 it altogether, or, if continued, put the Brokers at the mercy 
 of those for whom they transact sucli business. Let it be 
 understood that a Broker has no power to recover either 
 for advances or commissions, however honestly he may 
 have dealt, and there will be found enough persons whose 
 easy consciences would tlu'ow their losses upon the shoulders 
 of those who advanced the money and earned commissions 
 in their service. It would be a very palpable wrong to 
 the Brokers, who are licensed to do such business, if such 
 were held to be the law. To this extent Brua's Appeal* 
 never was intended to gij." In C(jnclusion, the court said : 
 " Wiiether the transactions embiaced in tliis case were 
 bona Jid'.\ or were merely in a form to cover gambling 
 transactions, after a full explanation, was left to the 
 jury." 
 
 It will be observed that the above was a clear case of 
 s|)eculating on "margins," wliicli t lie courts, in tlic o|iiiiions 
 hereafter referred to, regarded as so obnoxious; and that 
 
 ' Ante, p. 557.
 
 560 Stock-brokers and Stock Exchanges. 
 
 upon a " margin " cni>ital of $10,000 the Client sold 2,000 
 shares of stock " short," of the market value of $334,000. 
 
 Then follows the case of Maxton vs. Gheen.' That was 
 an action of assumpsit, brought by Stock-brokers against 
 their Client to recover a balance of account arising from 
 transactions in stocks. The defence was that the indebt- 
 edness arose out of gambling in stocks. It appeared that 
 the transactions were " short " sales of stock ; but the 
 Brokers, in the first instance, had no knowledge that the 
 defendant did not have the stock, although after the second 
 sale they knew he was selling " short." It also distinctly 
 appeared that the stocks were sold for account of defend- 
 ant on " margin ; " the Brokers testifying " that when 
 they sold stock short they required from two to ten dollars 
 per share on margin, unless the party left the stock with 
 them." The plaintiffs had a verdict, which was affirmed by 
 the appellate court, Agnew, C. J., delivering the opinion, 
 and holding that the facts did not disclose '' a transaction 
 in stocks by way of margin, settlement of differences and 
 payment of the gain or loss, without any intention to de- 
 liver the stocks." 
 
 The next case to which we will refer is Fareira vs. 
 Gabell.^ That was an action on certain promissory notes 
 made to plaintiff, a Stock-broker, some of the notes being 
 given as " margins on stock contracts," and the others for an 
 indebtedness arising out of losses in stock transactions. 
 The defence was that the transactions Avere " wagei-s." 
 The facts of this case are very meagrely reported ; but it 
 seems that the defendant jiroved that the contracts made 
 through the agency of plaintiff were simply wagering con- 
 
 ' 75 Pa. St. 166. » 89 Pa. St. 89.
 
 Actions for Mouey Laid Out. 661 
 
 tracts. The leai'ned trial judge very fairly submitted the 
 question to the jury v^hether the transactions were gam- 
 bling ones ; but he iUustrated the general rule of the law by 
 stating a sup})ositious case between fico jx'rsons dealing di- 
 rectly together in wheats without any intention, on the one 
 hand, to deliver, or, on the othrr hand, to receive. But 
 that illustration is entirely ineffective in presenting a con- 
 tract in which a Stock-brokei', acting for a commission^ 
 makes transactions for his Client upon a Stock Exchange 
 with third persons^ actually advancing money, and actually 
 receiving, in some form, the securities. However, the 
 question of wager or no wager was submitted to the jury, 
 and a verdict was found for the defendant. Upon appeal 
 to the Supreme Court this conclusion was affirmed without 
 any opinion, the court merely referring to Brua's Appeal 
 and Smith vs. Bcnivier as entirely sustaining the judge's 
 charge. 
 
 As we have said, the facts of this case are reported so 
 sparsely as to deprive us of the power of criticising the re- 
 sults reached by the jury ; but as the case stands, in view 
 of the fact that the (picstion was fairly submitted to the jury, 
 their decision would seem to be conclusive. But the next 
 case — North vs. I'hilipps' — which is reported in the same 
 book a.s the preceding case and was decided at the same 
 term, is utterly ii-reconcihiblc with ilnt previous (h-eisionsof 
 the courts of that State. In that case the defendants, Stock- 
 brokers, purchased certain stock for account of the ])IaintifT 
 on " margin," the contract being that plaintiff should con- 
 stantly keep witii the lirokers ten ])er cent of the par value 
 of tiie sto<-k. 'V\u\ stock declining, deftMulants i-c(jiicste(i 
 
 ' K'l ['.i St •.'.".(I 
 
 86
 
 562 Stock-brokers and Stock Kxchaiiges. 
 
 additional margins, and upon failure to accede to the de- 
 mand, the stocks were sold. The })laintiff thereupon brought 
 an action of assumpsit against the Brokers to i-ecover dam- 
 ages, upon the ei'r<meous theory that there had been a ]iur- 
 chase and sale of the stock between the 2>^(ii)itiff and de- 
 fendants ; and recovered a verdict based uj)on the dilfcr- 
 ence between the value of the stock on the day it was sold, 
 and the highest value it had reached down to the day of the 
 trial. Upon appeal to the Supreme Court, the doctrine of 
 the court below upon the question of damage was repu- 
 diated ; and the appellate court did not notice the/brm (f 
 the action, but (through Mr. Justice Goi'don) mainly occu- 
 pied itself in examining the character of the contract between 
 the parties, and adjudged it to be a mere gambling transac- 
 tion. The court held that the stock, although purchased 
 by the Brokers at the request and for the account of the 
 Client, was not his property, but that it belonged to the 
 Brokers ; and in face of the fact that the plaintiff had testi- 
 fied that he expected to pay for the same and take it up, 
 and ignoring the ])owerful circumstance that the jury had 
 passed upon the transaction and decided in favor of its valid- 
 ity — the reasoning of the learned court being that the dis- 
 parity between the Client's wealth and the amount of the 
 purchase-money required to purchase the stock proved con- 
 clusively that the contract was a mere gambling devise. 
 The learned court paid no attention whatever to the finding 
 of the jury. "We shall reserve our criticism upon this case 
 until we have examined the other cases, merely observing 
 that the form of the action would have more properly 
 been ex delicto in trover for the conversion of the Client's 
 stocks by an untimely and illegal sale of the same by the 
 Broker.
 
 Actions for .Money Laid Out. 563 
 
 In Gheen vs. Johnson ' the court, through the same learned 
 judge, went out of its way to assert the same doctrine as 
 that contained in the preceding case, and was only pre- 
 vented from applying it by the fact that the record did not 
 raise the legality of the contracts. But the principle estab- 
 lished in Fareira vs. Gabell was most vigorously upturned 
 in the subsequent cases of Ruchizky vs. De Haven ^ and 
 Smith vs. Thomas.^ In Ttuchizky vs. De Haven the court 
 held that money received by a Stock-broker fi'oni a minor 
 to carry on transactions in stocks may be recovered back 
 from the Broker, such a contract being void ah initio. In 
 reversing the opinion of the court below,^ Mr. Justice Gor- 
 don said : " When, under the case stated, the court below as- 
 sumed that the defendant must be regarded as the agents 
 of R. [the infant], ... it committed an error. The par- 
 ties were not dealing in stocks, but in margins, and II. knew 
 no principals but De II. and T. [the Brokers]." The court 
 concluded that the contracts fell under the ban of a gam- 
 bling transaction ; and that the Client, being an infant, could 
 recover the money and securities deposited with the Brokers 
 as margin, although the Brokers had no knowledge that ho 
 was not suijuria. The court, in its opinion, animadverted 
 most severely, but without the slightest foundation in fact, 
 upon the conduct of the Brokers. In speaking of tlu'ir wunt 
 of knowledge of tiie infancy of their Client, the following 
 hinguage was used : '' Mcjrcover, then' did not know because 
 
 ' 00 Pa. St. 38. Hui juris, money paid to the Broker 
 
 '.38 LcK. Int. ll.G; 97 I'u. St. in settlement of differencea in Htock 
 
 202. triin.saction.s cannot be rerovertnl 
 
 ' Id , H. c. Huh nom liickwm's Kxr. back. .Mcrriuni vs. Pul)lic Grain iV 
 
 vs. Thrmi.-LS, U7 Pa. St. 27H. Stock lOxdianiic, 1 Pa. Co. Vt. Ucp 
 
 •Per .Mitcbdl, J, M I.c^. Int. 17^, di.stin^MiiHhinK Uucliizky vs. Do 
 
 (Pa.) 174. When the partieH arc Haven, supra.
 
 504 Stock-brokers and Stock Exclianges. 
 
 they did not choose to inquire. They were getting his 
 money ; and like all other })ersons engaged in unlawful call- 
 ings, they cared not whether that money came from man, 
 woman, (»!• child — whether their victim was young or old, 
 sane or insane. . . . AVe repeat, therefore, there is nothing 
 to be returned to the defendant. Thev lost nothinof in this 
 transaction, and hence can the more easily return to the 
 plaintiff's estate that which belongs to it." 
 
 Then follows the case of Smith vs. Thomas,' in which 
 the court took occasion to review the subject anew and to 
 reiterate most emphatically its former decisions. In that 
 case the action was assumpsit, and was brought by a Stock- 
 broker against his Client to recover a balance due on cer- 
 tain stock transactions. Upon the trial the plaintiff had 
 judgment; but on appeal this was reversed, the opinion be- 
 ing again delivered by Mr. Justice Gordon. That learned 
 judge's statement of the facts is as follows : " Thomas [the 
 Broker] swears that he sold for Dickson 500 shares of Penn- 
 sylvania Railroad stock short ; and so Thomas further on 
 explains by saying that at the time he professed to sell this 
 stock he had no such stock in his hands to sell. Neverthe- 
 less, he says, when he sold these 500 shares he delivered 
 thera. This anomalous kind of testimony he explains by 
 sa3'ing that this delivery was made on the clearing-house 
 sheet, which means a mere settlement of differences. It ap- 
 pears also from this same testimony that, in order pi-operiy 
 to keep up appearances when the time came for delivery, he 
 had to borrow 500 shares of stock from somebody, whose 
 name does not appear, and of those there \vas no actual de- 
 livery, but, as the witness says, it came through the clearing- 
 
 ' 38 Leg. Int. 115; sub nom. Dickson's Exr. vs. Thomas, 97 Pa. St. 278.
 
 Actions for Moiioy Laid Out. SGo 
 
 house sheet. All this means, in couiinon parlance, that 
 Thomas sold for Dickson 500 shares of stock, which Dick- 
 son at that time neither had nor intended to have, and that, 
 under the pretence of meeting this contnict when it fell due, 
 Thomas pretended to borrow oUO shares, which were not 
 delivered to him ; that this altogether lictitious transaction 
 was accomplished through the agency of the clearing-house, 
 and was one in which no other parties were known but 
 Thomas and Dickson, who were to account to each other 
 for differences only." And upon this remarkably erroneous 
 statement the learned judge predicated the result reached, 
 that " confessedly, then, this was a dealing in differences or 
 margins — a wagering contract — and therefore utterly void ;" 
 and that there was no question as to a bona fide contract 
 upon which the jury was to pass. 
 
 The above represent some of the leading decisions of the 
 Supreme Court of Pennsylvania upon this subject of wager 
 in respect to stock transactions ; and it is dilficult to con- 
 ceive how a court whose decisions are received with such 
 universal homage could have gone so far astray upon a sub- 
 ject which vitally affects one of the most important mon- 
 eyed interests of that State. 
 
 First. The decisions of the court are in hostility to each 
 other. In Smith vs. iiouvier' the facts were precisely simi- 
 lar to those of Smith vs. Thomas. They both represented 
 "short" transactions in stocks upon a margin, in Smith 
 vs. Bon vier the jury found for the broker and the verdict 
 was sustaine<i ; but in Smith vs. Tiiomas a similar ver<li(rt 
 was reversed, tlie court arbitrarily setting aside the conelu 
 sion of the jury. The eh'uient of the ch-aring-house which 
 
 ' 70 Pa. St. 325.
 
 r)0('» Shu'k-brokors and Stock Kxclmiiges. 
 
 appeareil in Smith vs. Thomas can make no difference be- 
 tween the cases, because that system, as all familiar with its 
 workings know, was created to facilitate the lousiness ; and, 
 indeed, the fact of stocks being " cleared," if it shows any- 
 thing, ))roves that the transactions were real. It is utterly 
 impossible to reconcile the two cases, and yet Smith vs. 
 Bouvier was cited with a})proval in Smith vs. Thomas. It is 
 equally impossible to harmonize the last-named adjudication 
 with the case of Maxton vs. Gheen,' where the Client was 
 selling stock " short " on margins, and where a verdict for 
 the Broker was sustained. Although the Broker swore 
 that at first he did not know that his Client was selling 
 " short," yet he admitted that after the second transaction 
 he acquired that knowledge ; and it is perfectly manifest, 
 from reading the case, that it Avas an everyday speculation 
 on margin. Xorth vs. Philipps^ and Ruchizky vs. De 
 Haven ^ are illustrations of " long " transactions — that is, 
 purchases of stocks for Clients on margin. The facts in- 
 volved were in no sense different from those presented in 
 the case of Wyncoop vs. Seal,^ where stocks were purchased 
 on a margin ; and it did not occur either to the counsel or 
 court, in the last-mentioned case, to suggest that the trans- 
 action was void as a " wager." 
 
 Second. The fundamental error into which the Pennsylva- 
 nia court has fallen arises from the fact that the decisions 
 have proceeded upon the assumption that the dealings ^vere 
 merely between the Broker and his Client, without the in- 
 tervention of any third persons ; in fine, of treating a 
 transaction in stocks conducted through the medium of the 
 
 • 75 Pa. St. 166. ' 38 Leg. Int. 115. See ante, p. 
 
 = 89 Pa. St. 250. See ante, p. 563. 
 561. ♦ 64 Pa. St. 361.
 
 Actions for Money Laid Out. 5(37 
 
 Stock Exchange as one in effect between a vendor and 
 vendee, bargaining for mere ditferences. This is very far 
 from the fact. In the third chapter of this book, the de- 
 tails of a speculative transaction in stocks is fully set forth, 
 and it is not necessary to repeat the same liere;* but the 
 court does a manifest injustice to the Stock-broker when it 
 treats him as one den'vi/Kj henejit from his Client's losses. 
 This, with great respect, is as absurd as it is unfair. The 
 Broker has no interest in the business except to the extent 
 of his commissions, when he makes actual sales or purchases 
 with third persons on account of his CHent, which was clearly 
 shown in the cases in question. The version of the transac- 
 tion given by Mr. Justice Gordon is that of a sharper fleec- 
 ing his innocent victim ; and in that case, upon such 
 erroneous premises, the Broker was compelled to lose a con- 
 siderable sura of mone}', which he proved he had actually 
 paid out for his Clients. 
 
 The character of the business is shown by a simple illus- 
 tration. A orders B, a Stock-broker, to purchase 100 
 shares of a certain stock at par, and depctsits with him 
 $1,0(KJ. The Broker, in consideration of the commission 
 and of receiving interest for his money, or for such other 
 consideration as may enter into the arrangement, there- 
 upon purcha.ses at the Stock Exchange from C, a fellow- 
 Broker, the stock, which is duly (leliverrd to 15, and the 
 sum of $10,000 jiaid to ( ". 1' a<lvances the dillerence be- 
 tween the amount lie receives from his Clitmt and the 
 purchase-money from his own fimds, and holds the stock as 
 security. Thereupon the stock be(M)iiies the jiro|)erty ot 
 the (Jlient ; he receiv(,'s the (JivKl.iids ; pays the calls; it 
 
 'Ch. III. J), isi.
 
 i){jS Slock-brokcrs and Slock Kxcluui^es. 
 
 passes to liis assi^niee in bankruptcy, should he become 
 bankrupt; and, in line, all of the attributes of ownership 
 attach to the Client.^ We find here, then, an actual jmr- 
 chase and delivery of stock. This is the view of the transac- 
 tion presented in AVynkoop vs. Seal.' Hare, P. J., in 
 Fareira vs. Gabell,' defines a wager to be "a contract in 
 which the parties stipuhite that they shall gain or lose upon 
 the happening of an uncertain event, in wliich they have no 
 interest except that arising from the possibility of such gain 
 oi" loss." Jkit it is pei'fectly apparent that the transaction 
 which we have set forth is not embraced within this defini- 
 tion. It might apply as between A, the vendor, and C, the 
 vendee ; but as between A, the vendor, and B, his Broker, 
 there is clearly no bet or wager, B's interest in the transac- 
 tion being merely to the extent of his commissions. Nor 
 does the Broker act as the Client's agent in gambling sales 
 and purchases of stocks. The Broker, in jiursuance of his 
 Client's directions, makes ae^^w^ bargains enforceable in the 
 courts and in the forum of the Stock Exchange, and whose 
 non-fulfilment renders him liable to heavy damages. In 
 fine, the doctrine of wager must be confined to the actual 
 parties concerned, and cannot reasonably be extended to 
 defeat the right of a Broker to recover moneys paid out for 
 his Client in r^/Z transactions with f/u'/wl j)ersons. These 
 views are forcibly illustrated in the case of Thacker vs. 
 Hardy/ whicii should be consulted in this connection. 
 
 Third. But, in any event, the question as to whether a 
 ])articular transaction constitutes a wager is one for the 
 jury ; and this well-settled I'ule, although laid down in 
 
 ' See also Ch. III. p. 182, where = 64 Pa. St. 361. 
 the transaction is further illus- ' 89 Pa. St. 89. 
 trated. ■■ 27 W. R. 158.
 
 Actious for Mouey Laid Out. 569 
 
 Smith vs. Bouvieiy luis been ruthlessly violated by the 
 Pennsylvania courts in the cases referred to.^ 
 
 The case in which the dealings of the Stock Exchange 
 
 '70 Pa. St. 325. 149 Pa. St. 167; McNaughton va. 
 
 ' See also Kirkpatrick vs. Boiisall, Haldeman, U>0 Pa. 8t. 144. The 
 72 Pa. St. 155; Bigelow vs. Bene- fact that the customer's means were 
 diet, 70 N. Y. 202. A summary of inadequate to enable him to carry 
 the decisions of the courts of Pemi- out a stock contract, may be con- 
 sylvania subsequent to those men- sidered by the jury. Myers vs. 
 tioned in the text is here appended, Tobias, 24 W. X. C. 432. 
 and it only remains to add that, as In an action by a Broker to re- 
 late as 1$96, the District Court, in cover for loss on an oil transaction, 
 Taft vs. Riesenman, 7 Pa. Dist. R. the question whether there was a 
 496, quoted with approval the deci- bona fide intention to deliver the oil 
 tion in Ruchizky vs. De Haven, was for the jury. Thompson va. 
 supra, that " \Mien a person enters Richer, 123 Pa. St. 457. When 
 into stock gambling transactions stock transactions amounted within 
 through the medium of a Broker, he three years to about $70,(X)0, and it 
 will be deemed to be dealing with was shown that tlie Ghent had only 
 such Broker, a.s a principal, and not about SS,000 inve-sted in business, 
 as an agent." from which he derived a yearly in- 
 
 In Griffith's Appeal, 16 W. N. C. come of S5,00(), and that there was 
 249; 42 L. I. 277, it was held that as no intention to deliver or receive 
 contracts in stocLs on margins are stocks, a note given to the Broker 
 not enforceable, a judgment on a for losses was held irrecoverable, 
 bond given by a Client to his Broker Gaw vs. Bennett, 1.53 Pa. 247. 
 to secure the margins cannot be Wlien a customer paid 25 per 
 enforced by an assignee, unless the cent upon each purchiL>*e of stock, 
 doctrine of estopi>cl applies. Such and, when only a small portion 
 a bond is invalid for want of con- thereof was bought, In* deposited 
 sideration. Griffiths vs. Scare, 112 half the amount of such latter pur- 
 Pa. St. .523. chase witii the Broker in bonds ils 
 
 It was held in Peters vs. Grim, collatend, and p.'iid tlie balance duo 
 
 149 Pa. St. 103, that when there is upon the entire purcha;<o, which 
 
 an intention to deliver stocks there was large, within eighteen months, 
 
 Ls no gambling, even though the the transaction w.is not a gambling 
 
 delivery Ls postpone*!, and the one to be settl«?d by pnymiMit of 
 
 stock carried on marnns in the differences. Coin. vs. Harn-tt. 40 
 
 ifiterval. .\nd even if the trans- Let: Iiit (Pa ) 474. 
 
 action-s were {rambling ones, money When hUwkH wer<» purchaMNl by a 
 
 deposited can be rocoverwi from the Broker luid paid for by the Client, 
 
 Broker when the tran.sa<tioiis are and were then Nold by tiie nr<iker, 
 
 dosed. lb.; Rcpplicr vs. Jacobs, who rvtuined the procuudu, out u(
 
 570 
 
 Stock-brokers and Stock Exchanges. 
 
 ^vere examined most thoroughly in its relation to the act 
 concerning wagers is the one of Thacker vs. Hardy .^ This 
 action was brought by a Broker against his principal for 
 
 which he bouejht other stocks for 
 the Ghent, and a number of similar 
 transactions followed in which the 
 stocks bought were received by the 
 Broker for the customer, and those 
 sold were delivered by him to the 
 purchaser, the transactions were not 
 of a wagering character, and the 
 Broker was held entitled to recover 
 a balance due to him on the trans- 
 actions. Hopkins vs. O'Kane, 169 
 Pa. St. 478. And although stock 
 transactions are gambling ones, yet 
 if the Client finally demands the 
 stock, and the Broker tenders it, the 
 latter may recover the value when 
 the Client refuses to receive it. 
 Anthony vs. Unangst, 174 Pa. St. 10. 
 
 One who has given notes and 
 judgments in gambling transac- 
 tions in futures in wheat and pork 
 in Illinois cannot enjoin their col- 
 lection, Smith vs. Kammerer, 152 
 Pa. St. 98. Nor compel the return of 
 a promissory note given to a Broker 
 to secure a balance due in stock 
 gambling transactions. Albertson 
 vs. Laughlin. 173 Pa. St. 525. 
 
 One to whom a Broker has tran.s- 
 ferred a non-negotiable instrument 
 given to secure gambling transac- 
 tions in oil, cannot recover thereon, 
 although he paid a valuable con- 
 sideration. Dempsey vs. Harm, 20 
 W. N. C. 266. Margins deposited 
 with a banker as security for gam- 
 bling transactions in stocks and 
 grain, may be recovered from the 
 bank as a stakeholder, when not 
 paid over by the bank to the Broker. 
 
 Dauler vs. Hartley, 178 Pa. St. 22. 
 When the intention is that there is 
 to be no delivery of stocks, and the 
 transactions, during fifteen months, 
 involve purchases amounting to 
 over S300,000, the transactions are 
 merely wagers, and the Broker can- 
 not recover. Wagner vs. Hilde- 
 brand, 187 Pa. St. 136. Xor can 
 the customer, in such gambling 
 transactions in oil, compel an ac- 
 counting by the Broker. Taft vs. 
 Riesenman, 7 Pa. Dist. Rep. 496. 
 If the Broker actually buys and 
 sells stocks, he does not gamble, even 
 although his principal intended to 
 gamljle, and the Broker does not 
 deliver the stocks to the customer in 
 person. A delivery by sale, as or- 
 dered, is a sufficient delivery. 
 Young vs. Glendinning, 8 Pa. Dist. 
 Rep. 57, afT'd 194 Pa. St. 550. 
 If the last transaction is an actual 
 purchase, and a settlement is made, 
 and the account closed, it validates 
 all prior tran.sactions, although the 
 latter might be held gambling ones. 
 Id. 194 Pa. St. 550. When there 
 was a bona fide intent to receive 
 and deliver, the tran.sactions are 
 not illegal, although delivery may 
 be postponed. Dealing in stocks 
 on margins is not necessarily gam- 
 bling, and, if even the transactions 
 were wagering, the agreement of 
 the parties to make the sales actual, 
 will validate them. Taylor's As- 
 signed Estate, 192 Pa. St. 304, 309, 
 313. 
 
 • L. R. 4 Q. B. D. 685.
 
 Actions for Money Laid Ont. 571 
 
 indemnity against liabilities incurred by the former in buy- 
 ing and selling stocks and shares upon the London Stock 
 Exchange by his authority. It appeared that the defend- 
 ant was a speculator, and known as such to plaintiff ; and 
 that he (defendant) knew that, in order to carry out the 
 transactions which he had employed plaintiff to make, the 
 latter would have to enter into contracts to sell or buy re- 
 spectively, and that there was no other way in which to 
 speculate for defendant ; that the plaintitf did buy and sell 
 as per order ; and defendant never expected, nor intended 
 to accept, actual delivery of what plaintifif miglit buy for 
 him, nor actually deliver what he migiit sell. For losses 
 incurred by such speculations and commissions the suit 
 was instituted by the Broker. The nuiin defence was that 
 the claim was founded upon gaming and wagering transac- 
 tions.^ The court, per Lindley, J., in delivering the opin- 
 ion, said : " The agreement between the plaintitf and the 
 defendant rendered it necessary that the plaintiff shouKl 
 himself, as principal, enter into real contracts of purchase 
 and sale with Jobbers, and the plaintiff accordingly did so; 
 and in respect of these contracts he ineurrcd obligations, 
 for the non-performance of which actions could, and can 
 now, be brought against him. . . . "What the plaintiff was 
 employed to do was to buy and sell on the Stock E-xchan^^e, 
 and this he did ; and everything \\r did was perfectly legal, 
 unless it was rendered illegal as between the defendant and 
 himself by reason of the illegality of the object they had 
 in view, or of the transactions in which they were en^'ag«>d. 
 .... In answer to the ar<rument that a contract which is 
 void and unenforceable cannot l»e made the fuundalitin of 
 
 '8&9 Vict <• IW, i IS.
 
 572 Stock-brokers and Stock Exchanges. 
 
 an implied j)r()iiiise to iiKlcmiiily, it appears to me suffi- 
 cient to say that an obligation to iiulenmify is created when- 
 ever one person employs another to do a lawful act which 
 exposes him to liabilit}' ; and that, in my view of the evi- 
 dence, the defendant did authorize the plaintiff to incur lia- 
 bility by buying and selhng as above described." Upon 
 appeal these views were fully endorsed by the judges com- 
 posing the Court of Appeals, and a judgment for the plain- 
 tiff affirmed.^ 
 
 The case of Thacker vs. Hardy was subsequently used 
 by the court to sustain its decision in the later case of Ex 
 parte Rogers,^ where it was held that where a person has 
 instructed a Broker to speculate for him at the Stock Ex- 
 change, by buying and selling stocks for him, with the in- 
 tention that he should only receive or pay " differences," 
 and authorized the Broker to pay any losses for him, the 
 Broker is entitled to recover any sums which he has so paid 
 for the Client, even though he has not entered into separate 
 contracts on his behalf, but has appropriated to him parts 
 of larsrer amounts of stock Avhich the Broker has bought 
 as a principal with the view of dividing them among dif- 
 ferent Clients, for whom he has been instructed to buy. So 
 where the petitioner, a Stock-broker, applied under the 
 Bankruptcy Act to have respondent, who was not a mem- 
 ber of the Stock Exchange, adjudicated a bankrupt — the 
 debt arising from transactions which the respondent had 
 authorized the petitioner to make upon the Stock Exchange 
 — and the petition was resisted on the ground that the debt 
 was a gaming one under the statute of Victoria, it was held 
 
 * See also Rosewarne vs. Billing, bers, 15 C. B. 562; Knight vs. Fitch, 
 15C. B.(n.s.) 316; Knight VP. Cham- id. 566. 
 
 2L. R. 15 Ch. D. 207.
 
 Actions for Mouey Laid Out. 573 
 
 that the petitioner was merely an agent ; and since the re- 
 spondent mnst be taken to have known that by the rules of 
 the Stock Exchange the petitioner was bound to pay to 
 members of the Stock Exchange any suuis of money which 
 might be due from the respondent to them in regard to the 
 transactions, a request to pay such sums must be implied.* 
 
 Although the soundness of the decision in Thacker vs. 
 Hardy has been extrajudicially questioned upon the ground 
 that all of the ordinary transactions between Client and 
 Broker fall \\-ithin the Gambling Act/ it is submitted that 
 an analysis of such transactions shows that they are per- 
 fectly legal. 
 
 First. There is no agreement that mere differences shall 
 be paid jjer se without anything further being done ; but 
 the transaction is begun by an oi-der from the Client to buy 
 or sell shares of stock, at a fixed or market price. 
 
 Second. The Broker is employed as such. He is not a 
 party to the arrangement ; neither the profit nor the loss 
 of the transaction is his. The Broker's only interest in the 
 matter is to the extent of his commission. 
 
 Third. That the transaction thus made is in law a real 
 one fully appears from the note of the contract given by 
 
 ' Ex parte Godefroi, In re Hart, tion to "waRors," any more than u 
 
 Week. Notes, 95 (1K7U). So in the contrat-t to pay for all tlie oil in a 
 
 case of Marten vs. Gibbon, 33 L. T. wlialin^-ship, altliounh it is itnpossi- 
 
 (n. H.) 561, the court lield that sales l)If t<i tell how many whaU^s thenhip 
 
 of proHpcftivc divideriflK are not may brin^ bark (per l{hukl)urn, J.), 
 
 contrary to law. There Is no Sec also two spiritiH.! articli-s on 
 
 frroimd known to the law of Em;- ()[)tion Contrartw, ID Cent L. J. 
 
 land agaiiLSt a fK'rHon po«.HeHse<l of 221, 211. 
 
 property in railway nhareH Kellin;; ' S«h! 5 Iaiw Mag. and lirv. (Ith 
 
 the dividends to arise therefrom. Series), JOl, entitle<l "The Local 
 
 even thoiitrh the amount be uniw- Helations betwe«'n a Stock -broker 
 
 eertainixl. Such a trjin.xa«'tion is and his CuHlomcr." by McKsrM. 
 
 not conlrar)- to the wtututc in rela- ri;;uott fi. Whinney, Harristeru,
 
 574 Ntofk-brokers and Stock Exchanges. 
 
 tlie Broker to his Client. This may contain the name of 
 the purcliasing or selling Jobber — sometimes it does, gen- 
 ei'all y it clues not ; but it conclusively shows that the Broker 
 has uKule an o[)eration for the principal with a tldrd per- 
 son. From this contract so made by the Broker with the 
 Jobber there are evolved legal liabilities. We may men- 
 tion two of them ; 1st. If the Jobber should refuse to exe- 
 cute the contract and to deliver the securities, the Client 
 would have a cause of action against him.' 2d. But the 
 Client would not have any cause of action against his own 
 Broker for any neglect or refusal of the Jobber. Why ? 
 Because the Broker, having transacted the business of his 
 employment in accordance with his instructions, is, upon 
 familiar principles, not liable.^ 
 
 Fourth. The fact that the Broker may enter into a con- 
 tract or contracts for more than the specific amount of stock 
 ordered to be bought or sold by one Client does not alter 
 the legal status of the ])arties. If the Broker act in good 
 faith to his Client, he is not debarred from transacting simi- 
 lar business for other Clients. Nor does the fact of the es- 
 tablishment of a clearing-house, and the system of tickets, 
 enabling him to balance his business at one time, militate 
 against the legality of these stock transactions. All of 
 these things are mere auxiliaries to the Broker's business, 
 calculated to enlarge its volume, and to enable him to de- 
 spatch it with greater ease and promptness. 
 
 Although it was found as a fact, in Thacker vs. Hardy, 
 that the Client never expected nor intended to accept actual 
 delivery of what the Broker might buy for him, nor actually 
 deliver what he might sell for him, and that the Broker 
 
 ' See cases cited in Ch. X. ^ Ch. III. p. 220 et seq.
 
 Actions for Money Laid OiiL 575 
 
 knew this, yet it was also found that the Client, neverthe- 
 less, knew he incurred the risk of having to accept or de- 
 liver, but -was content to run that risk in the expectation 
 and hope that the Broker would be able so to arrange 
 raattei-s as to render nothing but differences actually payable 
 to or by him, as the case might be. Nor is the fact that 
 the Broker may himself speculate of any relevancy, so long 
 as he is not the actual party who makes a contract with his 
 Client for the payment of the differences, in which case ho 
 ceases to be a Broker, and becomes a principal. This risk 
 of being obliged to accept or deliver takes speculative trans- 
 actions on the London Stock Exchange out of the operation 
 of the gambling statute, although it remains to be seen what 
 effect the Gaming Act of 1S92 will have upon such transac- 
 tions. 
 
 The principle of the decision in Thacker vs. Hurdy, sitpt-o, 
 ■was followed by the Privy Council in Forget vs. Ostigny,' 
 where the facts were similar. The case was decided under 
 the Canadian statute, which was substantially equivalent to 
 the English statute of 1845, and it was held that as the 
 Broker was employed to make actual contracts on the 
 Stock Exchange, they were not within the statute, although 
 the j)rincij)al intended to speculate, and delivery of the 
 shares purchased w;ls never asked for or tendered. 
 
 Most of tlie American decisi(ms follow the rule laid down 
 by the English courts as to the interrne<liato charact^.'r of 
 the Broker, with this substantial difference, however, that 
 if the Br<jker is privy to the illegality, he cannot recover 
 commissions or advances. 
 
 In th(! case of Lehman vs. Strassberger -' the (juestiou 
 
 ' (1895) .\. C :il8. »2 WcKxl, (• C. .'i.VI. ThiM tl«v
 
 576 Stoi'k-brokers and Stock Exclianc^es. 
 
 was fully discussed in llie Circuit Court oi' the United 
 States. In that case the plain tiffs, who were cotton-factors 
 in Asew York, bought and sold as such for the defendant 
 cotton for future delivery ; it being the understanding be- 
 tween them that, in all sales and purchases of cotton by 
 them for him, there was to be no delivery, but that differ- 
 ences should be paid, except when special instructions were 
 given to receive or deliver cotton. These contracts were 
 entered into by plaintiff according to the rules of the Cot- 
 ton Exchange of New York, By these rules, \vliich Avere 
 given in evidence, an actual delivery of cotton is provided 
 for and required in every contract, unless waived in some 
 mode by the subsequent assent or conduct of both parties ; 
 or unless the party having the option to make or require an 
 actual delivery fails or declines to exercise his option or to 
 insist upon delivery. The action was based upon a note 
 given by defendant to the plaintiffs, the consideration 
 arising out of the transactions of defendant in such con- 
 tracts, and included losses on contracts paid by plaintiffs 
 for defendant, and their commissions for buying and sell- 
 ing. It did not appear that the names of the parties with 
 whom plaintiffs made the transactions were disclosed to 
 the latter. The defence was that the note was void under 
 the statute of New York in relation to gaming. There 
 was a verdict below for the defendant, and the case was 
 reviewed on exceptions to the charge of the judge, upon 
 the subject of wager contracts. 
 
 The Circuit Court held that, Avhile it might be conceded 
 that contracts for the future delivery of cotton, Avhen it is 
 agreed that there shall bo no delivery, but that differ- 
 
 cision was followed in Hentz vs. Jewell, 20 Fed. Rep. 592, in a similar 
 state of facts.
 
 Actions for Money Laid Out. 577 
 
 ences shall be paid, aio wagering contracts, and void as 
 between the parties, it was not the case disclosed in the 
 record ; the parties here were not parties to any contract 
 for the sale or delivery of cotton. The plaintiffs never 
 sold to or bought from the defendant any cotton. The 
 parties with whom the defendant contracted were pei-sons 
 other than plaintiffs, whose names were not disclosed, and 
 plaintiffs were only factors of defendant to make contracts 
 with other parties, the plaintiffs being mere agents for the 
 defendant in the transaction. "This is the case,'' said the 
 court, " to put it in its strongest light for the defendant, 
 of an agent wlio advances money to his principal to ])ay 
 losses incurred in an illegal transaction, and takes his note 
 for the money so advanced. In such a case the contract 
 between a principal and agent, made after the ihcgal 
 transactions are closed, although it may s})riiig from them 
 and be the result of them, is a binding contract." ' 
 
 The question lias also been discussed in several cases in the 
 Supreme Court of the United States. In Koundtree vs. 
 Smith,^ Brokers in Chicago recovered judgment for commis- 
 sions and advances in the ])urchase of grain, pork, and hiid 
 for defendant, and the court, in affirming the judgment, held 
 that tiiere was no evidence that the contracts were wag'T- 
 ing ones. The defendant testified that he had no under- 
 sttinding as to wliether there was to be actual delivery, and 
 plaintiffs testified that there was no siieli understanding, 
 and nothing was jirove'd of the intentidu of ihr pai-ties witii 
 whom j)laintiffs contraeted. and, as the contracts were al- 
 
 ' CitiriK Durant VH. Hurt, 9S Mjuw. Spo nlno Tpiinnt vh, KHml. I H<>h 
 
 167;PetrievH Hanncy, 3 T H IIS; tc V. 3; Farmer vh. Ua-wdl, id. 
 
 Owen v«. Davifi, 1 Hniif-y, 3ir,; Ann- 290. 
 Htroncr VM TolfT, 11 Wh.-ut 271 MOST S 200. 
 .37
 
 678 Stock-brokers and Stock Exchanges. 
 
 Avays in writing, it was furtlier held that evidence that a 
 large iiuijorit}'^ of similar transactions at the Board of Trade 
 in Chicago were merely difference contracts, was not suffi- 
 cient to prove a violation of the law in the transactions in 
 question. The court said that plaintiffs were not suing on 
 the contracts, but for services performed and money ad- 
 vanced for defendant, and although they might, under some 
 circumstances, be so connected with the immorality of the 
 contract as to be affected by it, if proved, they "were cer- 
 tainly not in the same position as a party sued for the en- 
 forcement of the original agreement. In Irwin vs. Williar' 
 the court reversed a judgment of the Circuit Court in favor 
 of Brokers in Baltimore for a balance due to theni on sales 
 of wheat for future delivery on grounds foreign to the sub- 
 ject of this chapter, but, as the question of wagering had 
 been raised, the court disposed of it by accepting the charge 
 of the court below that, to void the contract, the proof should 
 show that the intention was merely to settle for differences 
 and both parties so understood it, but said : " In England, it 
 is held that the contracts, although wagers, were not void at 
 common law, and that the statute has not made them illegal, 
 but only non-enforceable. Thacker vs. Hardy, uhi supra. 
 While generally, in this country, all wagering contracts are 
 held to be illegal and void as against public policy," and 
 further " a Broker might negotiate such a contract (i. e. a 
 wagering one) without being priv}^ to the illegal intent of 
 the principal parties to it which renders it void, and in such 
 a case, being innocent of any violation of law, and not suing 
 to enforce an unlawful contract, has a meritorious ground 
 for the recovery of compensation for services and advances. 
 
 MIOU. S. 509.
 
 Actions for Money Laid Out. 579 
 
 But "\ve :ire also of the opinion that when the Broker is 
 privy to the design of the parties, and brings them together 
 for the very purpose of entering into an illegal agreement, 
 he is jyarticejys criminis, anil cannot recover for services ren- 
 dered or losses incurred by himself on behalf of either in 
 forwarding the transaction." 
 
 This certainly narrows the liberality of the doctrine enun- 
 ciated in Thacker vs. Hardy, where it was held that the 
 Client should indemnify the Broker, although both parties 
 knew that differences merely were to be settled, but it is 
 submitted this decision will not generally affect transac- 
 tions on the Stock Exchange where, as already stated, there 
 is a delivery of the securities sold, although the principle of 
 this decision was followed in Stewart vs. Garrett,* where, 
 although the plaintiff stock and grain Brokers assumed that 
 as they sued, not on the contracts themselves but for serv- 
 ices performed and money advanced, they did not stand in 
 the same position as if seeking to enforce the original 
 agreement, the court held that, as they weva jyarticrps eriin- 
 inis to a gambling transaction, they could not recover. 
 In Embrey vs. Jemison^ it was held that as Brokers em- 
 ployed to buy cotton in New York for future delivery were 
 partlceps crimims to the illegal contract entered into on be- 
 half of the customer, they could not recover. 
 
 In Bibl) vs. Allen ^ it was held that as llie lirokers made 
 future sales of cotton, understanding that tlu're would Im> ac- 
 tual delivery, the custouK-r was liable for advances and 
 commission.s, although he meant to gamble and nothing 
 more. 
 
 ' 4 All. Kcp 390. effect in Lt-linmn vh, Fcltl, 37 I'«l. 
 
 » 131 U. S. 345. '^-p W-'i'i; b<jyd vh MiuLHoti, II F«l 
 
 M49 U. S. Wl. To the Hariu; Kep, 174.
 
 580 Stock-brokers and Stock Exchanges. 
 
 The United States Circuit Court held in Jackson vs. Foote^ 
 that the Illinois statute i)r()hibiting dealin<j in options to 
 buy or sell at a future time, was not violated by a time con- 
 tract to deal wholly in grain, pork or lard, for differences, 
 although such a contract might bo a wager at commnn law, 
 and that notes given by the customer to his Broker in pay- 
 ment of the latter's advances and commissions might be re- 
 covered by a third party avIio was a hona fide holder for 
 value.- 
 
 And it was hold by the United States Supreme Court, in 
 ITiggins vs. ]\IcCrea,Hhat when grain Hrokers testified that 
 their contracts with their principal were not made with in- 
 tent to wager, but the principal testified that he intended 
 to gamble merely, and that the contract was violative of the 
 Chicago statute, the former may recover advances and com- 
 missions, but the latter cannot counterclaim for margins. 
 In that case the plaintiff was held not entitled to judgment 
 on another ground, viz., that he had canceled the contracts 
 made by him without substituting other principals as re- 
 quired by tlie rules, l)Ut, if ho had not done so, he could have 
 had judgment both on his cause of action and on the coun- 
 terclaim.^ 
 
 ' 11 Biss. 223. fendant principal to show that the 
 
 * See also Gilbert vs. Guager, S tran.-^actioii was a gambling one); 
 
 Biss. 214; Union Nat. Bank vs. Toniblin vs. Callan, 23 N. W. Rep. 
 
 Carr, 1.5 Fed. Rep. 438. 573 (where the intent is to deliver, 
 
 '116U.S. 671. a grain Broker was held in Iowa 
 
 ^ See Kirkpatrick vs. Adams, 20 entitled to recover, although most 
 
 Fed. Rep. 287; Bartlett vs. Smith, of the transactions were settled by 
 
 13 Fed. Rep. 263; Bangs vs. Hor- differences). 
 
 nick, 30 Fed. Rep. 97; Edwards vs. The Circuit Court of the United 
 
 Hoeffinghoff, 3S Fed. Rep. 635. States for the District of Kansas 
 
 See also the following cases: Ben- held in Cobb vs. Prell, 22 Am. Law 
 
 nett vs. Covington, 22 Fed. Rep. Reg. 609, that when the parties did 
 
 816 (the burden of proof is on de- not intend actual delivery of com
 
 Actions for Money Laid Out. r)Sl 
 
 And where the Client gives his B i-oker an order to purchase 
 stock for him, and tlie hitter tU)es so in accordance with the in- 
 struction and the usages of the Stock Exchange, but the Ch- 
 ent subsequently refusing to take the Stock, the Broker, after 
 notice, sells it, the latter is entitled to recover the loss made, 
 together with commissions, etc. ; and it is no defence to the 
 action that the contract made by the Broker with another 
 member of the Stock Exchange is illegal, as being contrary 
 to the statute of Massachusetts (declaring sales of stock 
 void when the seller has no stock at the time of the alleged 
 sale), especially where the purchasing Broker is not shown 
 to have known this fact, or that the same was not legal 
 under the Statute of Frauds.' 
 
 "When it appeareil, however, that contracts maile in the 
 Chicago Board of Trade were clearly gambling contracts as 
 being intended to be settled ijy payment of differences only, 
 
 contracted for, but did intend to zen, although if tlic tnin.saction 
 
 speculate on the future market, a took place in that State he could not 
 
 commission merchant could not re- recover. Ward vs. Vosbur^h, 31 
 
 cover from his principal the differ- Fed. Rep. 12. 
 
 ences the former wa-s oljlijrcd to pay Under the Georgia statute voiil- 
 owiuK to his haviii;^ contracted to inu; fiamint^ contracts (('(vlo, Cla. 
 wli in his own name. See note § 3071) a "cotton future" contruct 
 appended to this cjLse discu.ssiiif^ the where the intention is nuTcIy to 
 subject, anfl collecting; many cjls««s. .settle difTerences, is void. Waldron 
 It was al8<j held in that ca.se, and in vs. Johnson, SO Fed. Hep. 757. 
 Justh vs. llolliday, 11 Wsush. L. When the customer's order (by 
 Rep. 4 IS, in a transaction in stocks, t«'letrra|)h) on it,s face shows tliut an 
 that a lirrtker in a ca.s<' of the kind, actual .sale of stock "sliort" wiui 
 was to be considere<l a principal, intendi'd, lie must, Jo prove that a 
 and not an a;;ent. transaction thcreun<K>r wa.s a ;:an>- 
 In Illinois an option us iri the time blin^; one, show that thcri' wa.s no 
 of delivery, and the settlement of intent both of himself and the Hro- 
 difTcrences on such a contract, does ker to iiuvu an actual mUc and do- 
 not inake it a wuKcriitK one under livery. Iktylo vs. llcnning, 121 
 the Illinois statute, and an Illinois Fc<|. Rop 370. 
 IJrokcr may re<*(iver lulvancjw and ' Duront vs. Hurt, US Mjiks 101. 
 commissions from a Wi.sconsin citi-
 
 582 Stock-brokers and Stock Exchanges. 
 
 it was held that such contracts were not only void but il- 
 legal by tlio coniinon law of ^lassachusetts (which was the 
 law ai)plicable to the case, there being no evidence of the 
 common law of Illinois), and that Brokers who knowingly 
 made such contracts could not recover for advances or 
 commissions.* 
 
 Nor can a principal recover from a Stock-broker the 
 amount of margins deposited, nor the proceeds of sales re- 
 ceived by the latter,'^ when no actual transactions were in- 
 tended. 
 
 In Barnes vs. Smith ^ the rule of hiw was thus stated. If 
 there was an understanding between customer and Broker 
 that no shares should be actually delivered, but that the 
 Broker should either make bargains to that effect with the 
 purchaser or buyer, or that he should protect the customer 
 from making or accepting actual delivery, then the contract 
 was illegal, and the Broker could not recover. But a mere 
 expectation on the part of Client and Broker that tlie pur- 
 chaser would settle b}' paying or receiving differences when 
 there was no understanding to that effect, or that the 
 Broker should protect the Client from making or receiving 
 actual delivery, would not make the contract illegal, and 
 the Broker would be entitled to his commissions and ad- 
 vances. 
 
 In a case in Kentucky* the Court of Appeals examined 
 
 ' Harvej' vs. Merrill, 150 Mass. 1. ments of the Brokers it appeared 
 
 ' Xorthrup vs. Buffington, 171 there was a tacit ajjreement that no 
 
 Mass. 468. cotton wa.s to i)e delivered, and 
 
 ' 159 Mass. 344. from the testimony of the defence 
 
 ^ SawA-er vs. Taggart, 14 Bu.sh (the principals being persons of 
 
 (Kv.), 727. To same aflfect, War- limited means who would be quite 
 
 ren vs. Hewitt, 45 Ga. 201. But unable to pay for the large pur- 
 
 when from the character of the chases made for them) the contracts 
 
 transactions, and from the state- were held to be wagering ones, and
 
 Actions for Money Laid Out. 583 
 
 the subject in a very able and exhaustive opinion, in 
 ■vvliich they reviewed the entire niethcxl of transacting 
 business upon the Cotton and Produce Exchanges of 
 New York in a case where a I)roker was directed to 
 make operations for a Client, and fully sustained their 
 validity. In that case II. 6c Co., commission-merchants, 
 at various times directed S. ik Co., commission-merchants 
 and membei-s of the New York Cotton and Produce Ex- 
 changes, to buy for their account, for future delivery, 
 certain specified (piantities of cotton, pork, and lard. 
 These purchases, II. S: Co. knew, were made on the Ex- 
 changes, subject to the rules and regulations of the trade. 
 As the time aj)proached when, according to the terms of 
 the contracts of ])urchase, the goods were deliverable, 
 II. it-. Co. directed the })urchases to be " transferred " to 
 subsequent months. This was undei-stood and intended to be 
 a direction to sell the goods, and purchase a like (piantity for 
 delivery in the months designated, "^riie rules of the Ex- 
 changes required that all crmtracts should he made in the 
 names of membci-s; and, II. S: Co. not being members, their 
 contracts were made in the name of S. cV: ( 'o., who became 
 liable on the contracts as principals, aiul advaiic«'d the 
 money necessary to C(^ver the loss. II. A: Co. failed, and 
 for the advances so juade foi- them, and hiokerage and 
 other (fxjjen.ses, S. iV Co. made claim against their assignee. 
 Payment was n*sisted <jn the ground that the transactions 
 were mere illegal wagers, to be settled by the payment of 
 "differences." In <'ach instance it was shown that S. iV: 
 Co. eiilei-ecj inio agreements with third pel-sons, and the 
 
 the HrokerH not fntitlf«<l to ri-rovor. hIiow tin' n-.i! imtiirc of tlir> tnitm- 
 .\lthou;.'li tlm rauirncl wiui in writ- nctioim Hnulli>M vn. ,M<'Klriitl>, 3 
 ine, parol evidence wai udmitted to S, W. U«'p. l.VJ; S.*) Ky. 230.
 
 584 Stock-brokers and Stock Excliaiii?os. 
 
 transactions were carried on in ii manner similar to the 
 metliod of doin«»' business on the Stock Excbanrre. 
 
 S. cS: Co. having- thus shown that they cnlered into con- 
 tracts vaHd on their face for the })urchase of the goods they 
 were dii-ected by II. ct Co. to buy ; that, pursuant to direc- 
 tions, they I'csold the same, and debvered to the })urcliasers 
 delivery ordeis which they had received ; and that on such 
 resales there were losses, which they paid — the court held 
 that they made out a clear prima facte right to recover; 
 tiiat the fact that some of the ])ersons with whom S. k, Co. 
 made contracts for purchases 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 purchasing in the market, did not render the con- 
 tracts unenforceable, 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, furnisiicd 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 
 differences. 
 
 The court cited, to sustain this last proposition, the case of 
 Ashton vs. Dakin.^ In that case the plaintiff, a Stock-broker, 
 was directed by the defendant to buy for him certain stock 
 for future delivei'v, which was done through another Broker, 
 who made the contract in his own name, and became liable 
 for its performance. Befoi-e the day of delivery the defend- 
 ant ordered the stock to be sold, and it was sold at a loss, 
 which the Broker paid. The plaintiff repaid the Broker, 
 and brought his action for the amount. The defendant 
 
 ' 4 Hurl, k Norm. 867.
 
 Actions lor .Hoiicy Laid (Mit. iySii 
 
 pleaded that the transaction was a mere wager on the mar- 
 ket price of the stock. The arbitrators found that the de- 
 fendant never, in fact, intended to take a transfer of the 
 stock, and that the phiintitf was fully aware of this when 
 the orders were given, and that they were given and ac- 
 cepted on the iinphed terms and understanding that the 
 plaintiff should not be called on by tlie 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 re- 
 sold by the plaintiff before the time of payment arrived, and 
 the defendant should, on 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 transaction.* 
 
 In the case of Marshall vs. Thurston ^ a suit was brought 
 by a bank upon notes given f(jr money advanced by it. The 
 defence interposed was, that the defendant having been en- 
 gaged in speculating in the future prices of Tennessee State 
 
 ' In the following cases the de- Ins. Co. vs. Watson, 30 Fed. Rep. 
 
 fence of wager was sustained: Pick- 653. Ctuses in grain dejilings in 
 
 ering vs. Cease, 79 111. 32.S; Lyon vs. which the defence of wager was not 
 
 Culbertson, S3 id. 33; Waterman v.s. sustained, are, Powell vs. McCord, 
 
 Buckhin.l, 1 .Mo. .\pp to; Kourke 121 111. 330; Ware vs. Jordan. 2.'> 111. 
 
 vs. Short, 34 Kng. L. & Eq. 219. On App. .Wl; Chatnplain vs. Smith. Kil 
 
 e.xamination, however, these casvn Pa. St. ISl. .Mthough tin- Broker 
 
 will be found to \>e "optional con- hiis a verdict in his fav«»r, (ho judg- 
 
 tracts" in an ille-ial .sense, i. e. spec- meiit thereon will he reverse*!, and 
 
 ulatiotLS in the differences of market the cjise remand<>«l liy rejwon of 
 
 values, the seller having the privi- erroneous in.st ructions. Paniridgo 
 
 lege of delivering or not delivering, vs. Cutler, WW III .VM; Hiebo v». 
 
 and the buyer the privileire of call- Hellman, 09 111. .\pp 22. 
 ing or not calling for the subject- ' Su|»reme Ct. of Tenn ; rp|><jrted 
 
 matter of the contrart, as they saw in H» Cent. !<. .1. 212. S««e aUo 
 
 fit. In the following case, in dejd- Vaiiderp<M"l vs. Kcurns, 12 li. U. 
 
 ingH in cotton, the rlefence of wafer Stnith, 170. 
 woj) also HUMtuined. .Mutu:il Life
 
 586 Stoek-brokersi aiul Stock Exchanges. 
 
 bonds, the notes in suit were given for the differences due 
 on settlement ; and the question arose whether the bank's 
 furnishing the mone}"^ 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 transactions, had sustained losses, " and the 
 bank, at his request, paid the amount of such losses, or if 
 the bank paid such losses without being requested, and de- 
 fendant 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 un- 
 lawful undertaking, it could not recover of him the amount 
 so furnished." Both these instructions 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 gambling. Cooper, J., explained 
 that the test in such cases is whether the plaintiff requires 
 any aid from the illegal transaction in order to estabhsh 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 participation appeared.^ 
 
 Since the enactment in Tennessee of L. 1883, ch. 251, 
 supra, such a note is void even in the hands of an innocent 
 holder for value before maturity.^ It was held in the same 
 State that dealing in cotton futures, where the intention of 
 the parties was that there should be no delivery, was wager- 
 ing, and that cotton factors could not recover advances, al- 
 though they only acted as agents.^ 
 
 » See also Hatch vs. Douglas, 16 ' Snoddy vs. Rank, 88 Tenn. .573. 
 Am. Law. Rev. 181. ' Beadles v.s. Ownby, 84 Tenn. 424.
 
 Actions for Money Laid Ont. 587 
 
 This decision was followed in Dunn vs. BelP where it 
 was held, however, that any winnings paid to the customer 
 may be set off as against the margin de[X)sits. In Me- 
 chanics' Bank vs. Duncan^ it wiis held, in the same State, 
 that notes given by Stock-brokers to plaintiff for profits 
 on stock dealings and margins deposited, could not be re- 
 covered, the dealings being clearly gambling ones without 
 any intention to deliver, and the consideration being there- 
 fore in part illegal. 
 
 In a well considered case in Indiana^ where the authori- 
 ties are fully reviewed, it Avas held that commission mer- 
 chants in grain were entitled to recover advances and 
 commissions, when they intended in good faith to make 
 delivery, although the customer only intended to gaml)le. 
 
 And in Fisher vs. Fisher * it was held that an allegation 
 in an answer that a note given by defendant to phiintiff 
 Brokers was given for an illegal consideration, viz., the 
 payment of margins on wheat that had never been de- 
 livered to defendant, was bail, as the mere payment of mar- 
 gins did not vitiate tlie contract. 
 
 In the State of Xew York it was lield in Karl vs. Howell' 
 that, notwithstanding the statute against wagering, a Stock- 
 broker was entitled to recover the balance of his account 
 with his Client, even though he arranged to settle for *' dif- 
 ferences" only, as he was not a princi|>:il, notwithstanding 
 that he did not ask for the usual margin, and llit-reforc! the 
 wagering act did not ap[)ly. 
 
 ' 85 Tenn. 5-Hl. S<lmuuTkl«' vh. Watorn, I'i.'i Iml. 
 
 ' .'iT) S. W, Rep. H87. 'Ji'iF}, whon- ii M|MH-iilativi' Iriiiwu-- 
 
 * \Vhite«i<Jes vh. Hunt, U7 Iml. tion in " HoluMiiiim outs" w;u» held 
 
 191-210. to \n; »if u ^itiiildiiiK iiuturo. 
 
 Ml.'l Irifl 171. S«f also » 1 I .\hlj. .N (' 171.
 
 588 Stock-brokers and Slock Ivvcliaiii^es. 
 
 And when it in)peared that the Client intended that 
 stocks shoiiUl be actually bought by her Drokei's, and held by 
 them subject to her order lor sale, and after they had been 
 sold that (.inferences might be settled, it was held in Cun- 
 ninirham vs. Stevenson^ that such a transaction was not a 
 gaining contract, and that plaintilf's action for conversion 
 of stock by the Brokers was maintainable. 
 
 In Vischer vs. Bagg^ it was held that an agreement be- 
 tween Client and Broker to buy stock on joint account, 
 the defendant Broker to carry it until a sale was agreed on 
 between them, was not a wagering contract. Expectation 
 of a " rise" in the price did not make it an unlawful one, as 
 most people buy stock with a view to selling it at a better 
 price. 
 
 In D wight vs. Badgley^ it was held that when a cus- 
 tomer positively testified that it was understood between 
 him and his Brokers that they were to buy and sell wheat 
 on options and settle by differences, and there was no 
 evidence that plaintiff Brokers owned any grain or pur- 
 chased any for deliver}' to the customer, it was error to 
 direct a verdict for plaintiff as there was a question of fact 
 for the jur}^ presented by the evidence. AVhen a com- 
 plaint avers that there was no intent to deliver wheat 
 in contracts for future sale thereof, but that differences 
 only were to be settled, it sufficiently states a cause of 
 action by a customer to recovei" mone3's paid to defendant 
 Brokers in such transactions/ 
 
 In Nichols vs. Lumpkin^ it appeared that defendant car- 
 
 » 20 N. Y. Weekly Digest, 82. * Copley vs. Doran & Wri-lit Co., 
 
 2 21 N. Y. Week. Dig. 399, aff'd 17 N. Y. St. Rep. 601. 
 
 106 N. Y. 674. * 19 N. Y. Super. Ct. Rep. 88. 
 
 '75 Hun, 174; see s. c. 60 Hun, 
 
 144.
 
 Actions for Money Laid Out. 589 
 
 ried on a '•• bucket shop " business in Boston, and bought 
 and sold stocks for plaintiff on margins without anv actual 
 delivery, and the ti-ansactions were held s:amblin<r ones, 
 under the authority of Irwin vs. W^illiar, su^rra,^ but that 
 plaintiff could not recover the amount of notes given to 
 him by defendant, as he should have disaffirmed the con- 
 tracts, and sued directh' under the statute. 
 
 In Jemison vs. Citizens' Savings Bank- it was held that 
 cotton Brokers could not recover for advances and commis- 
 sions on future -dealings in cotton, from a l)ank, as they 
 were bound to know that its charter did not authorize such 
 dealings. 
 
 It was held in Peck vs. Doran ct "Wright Co.,^ that the 
 evidence showed that the contracts made by plaintiff, as 
 principal, with defendant grain llrokers, wore wagering ones 
 within the statute, as plaintiff's evidence clearly showed 
 that the understanding was to settle differences merely, 
 and that no deliveries were to be made, and this although 
 the written contracts were against plaintiff, who was held 
 entitled to rec<jver the money lost by him upon tln' eon- 
 tracts. But in Aiiisden vs. Jacobs ' it was held that such a 
 contract is ncjt rendered invali<l by a secret intention (»f the 
 principal to evade it, unknown to liie Broker. 
 
 The cases of Kenyon vs. {.uthr-r '' an<l 1) wight vs. Badgloy,* 
 however, decided that evidence of such intention shoujil Im' 
 permitted to be given, as it might aid the jury in discover- 
 ing what was th«' intention of the parties; and in West vs. 
 Wright' parol evideiu-ji was h< Id to be admissible to sbow 
 
 ' no r s. 4«.w. » 4 Supp. los. 
 
 » n Hun, 412. •<10 Hun. 144. 
 
 *r,7 Hum. HVi ' hO Hun, 4M. 
 
 «7.-. H.n, Ml.
 
 590 Slock-brokcrs and Stock Exchanges. 
 
 that the umlerstaiuling between the parties was that differ- 
 ences only should be settled.' 
 
 When, under a euj^toni of the New York Produce Ex- 
 change and the Chicago Board of Trade, the plaintid 
 Brokers canceled their customers' contracts and substituted 
 themselves in place of tlic released parties, it was held in 
 Kent vs. WoodhulP that the contract was reduced to a 
 mere wagering one, although valid in its inception. So 
 also when it was the understanding of the parties that there 
 was to be no actual delivery of coffee, the contract is a 
 wagering one, although made under the Coffee Exchange 
 rules, which required actual deliverv.'^ And transactions 
 in grain and coffee are not illegal because the customers 
 secretly intended to gamble, when the Brokers intended 
 delivery.'* 
 
 AVhen, however, defendant Stock-brokers charged their 
 customers, who ordered stocks bought, with the market 
 price on their books, and in like manner credited the market 
 price to customers who ordered stocks sold, and bought or 
 sold shares to equalize the contracts, the contracts were 
 gambling ones, and margins deposited by the customer 
 might be recovered.^ 
 
 When although in the inception of stock transactions 
 
 ' See also Cyrus vs. Portnian, 1 actions, the burden is on the cus- 
 
 CityCt. Rep. (Supp.) 1 (contract for tomer, in an action by the Broker 
 
 the future dehvery of cotton valid, for losses, to show that no delivery 
 
 when made in good faith). The was intended (La Gar vs. Carey, 12 
 
 illegality of such a contract should St. Rep. 171, aff'd 120 X. Y. 647) 
 
 be pleaded (lb.) and the intention ^23 J. & S. 311. 
 
 of the parties is for the jury (lb. ' Mackey vs. Rausch, 15 N. Y. 
 
 and Ball vs. Davis, 1 St. Rep. 517), Supp. 4. 
 
 otherwise if, on the admission of the * Hentz vs. Miner, IS Supp. 880. 
 
 parties, the transactions in stocks ^ Smith vs. Xew York Stock and 
 
 are gambling ones (Fleet vs. "Wern- Produce Clearing House Co., Ltd., 
 
 berg, 2 City Ct. 421). In oil trans- 25 N. Y. Supp. 261.
 
 Actious for Money Laid Out. 691 
 
 only differences were to be settled, yet when the Brokei-s 
 subsequently at the customer's request actually bought and 
 sold stocks, they are not wagering ones.' 
 
 If the Broker is privy to a gambling contract in oil, he 
 is a stakeholder within the Xew York statute ajrainst ffam- 
 bling, and margins may be recovered from him by the 
 customer, but to do so the hitter must repudiate the con- 
 tract and sue for the stake.^ 
 
 "When defendant Stock- broker purchased stocks on the 
 written order of his customer wiio, not being able to pay 
 therefor, left them with the Broker as security, and di- 
 rected the hitter to sell them if they reached a certain fig- 
 ure, which they never did, but dechned to a figui-e below 
 the purchasing price, it was held, that the customer was 
 not entitled to a return of a deposit left with the Broker, 
 on the ground that the transaction w^as a gambling one, 
 when the Broker was willing to deliver the stocks on being 
 paid the Inilanco c^f the purchase money.' 
 
 AA'hen, however, the understanding was that differ- 
 ences only wcic t(^ be settled, money deposited with the 
 linjker may be recovered under the statute, and ])arol 
 evidence is adniissiljle to show what the undei"standing 
 was.* 
 
 An allegation in a (Iffoifc that |>lainfiir Iti-okrrs were 
 dealing in stocks upon margin <h'posited In' divers ju-rsons 
 who engaged themselves and plaintiffs in the risk an»l 
 chance of a rise or fall in the st(K;k market, is iiad, as not 
 .stating that ])lainliffs dealt with defendant in such trans- 
 
 ' Whitttnoro vk. MHlcoriison, 1(1 ' I'.L'L.'h'xtoii vs Huiiililr, Jd N V. 
 
 .\1>1). N C. 'Mi. Sup|) Sl'.r 
 
 Mlorkw.KKl VH. Oiikfield, 2 St. • \V«-ht vh. WriKlit, Hft IIuii, VM\. 
 Hc-p ^N. Y ).Tn.
 
 592 Stock-brokers and Stock Kxclianges. 
 
 actions, and it was held in tlie same case tliat such transac- 
 tions were not unlawful.' 
 
 In the State of Maine it was held in Dillaway vs. Alden^ 
 that when a Stock-broker always keeps on hantl a sufficient 
 quantity of stock to make delivery at any lime his customer 
 demands, and a number of dealings is closed, b}' actual deliv- 
 ery of the stocks representing the balance, the transactions 
 are not gambling within the statutes of ]\[assachusetts or 
 Maine, when it is not shown that actual delivery was never 
 intended. 
 
 In New Jersey it was held in Flagg vs. Baldwin^ that 
 when it appeared that in margin transactions between de- 
 fendant Broker and plaintiffs, it was never intended that 
 the stocks purchased or sold should become or be treated 
 as the stocks of plaintiffs, the transactions were wagers 
 within the meaning of the first section of the act to pre- 
 vent gaming,^ and a mortgage given to secure the Broker 
 was, under the third section of the act, void. In that case 
 it appeared the transactions were enormous, and that plain- 
 tiffs, who speculated their entire fortune, would be utterly 
 unable to pa}-" for the stocks purchased. Although the 
 transactions took place in Xew York, it was held that the 
 common law, which in the absence of other proof was 
 the law of that State, could not apply, as it would violate 
 the public policy of the State of New Jersey as to wager- 
 insf.'' 
 
 ' Ennis vs. Ross, 37 Misc. Rep. Div. 228, where it was held that a 
 
 160; 74 N. Y. Supp. 860. contract made in Pennsylvania, al-- 
 
 ' 88 Me. 230. though invalid in New York, was 
 
 ' 38 N. J. Eq. 219. valid by the common law in the ab- 
 
 * General Stat. vol. 2, p. 1606. sence of evidence of the Pennsyl- 
 
 * See Zeitner vs. Irwin, 25 App. vania statute.
 
 Actions for Money Laid Out. 593 
 
 In Pratt vs. Boody ^ it was held that large transactions 
 in stocks on the New York Stock Exchange by Brokei-s as 
 agents for coinjilainant's intestate were valid, where ileliv- 
 eries were actually made as to some of the transactions, and 
 no proof Avas offered to show an agreement to settle by 
 differences merely. 
 
 When the plaintiff Broker's testiraon\' showed that they 
 intended actual }mrchases and deliveries, the contract was 
 held, in Missoui-i, in the case of "Williams vs. Tiedemann,' 
 not to be a wagering one, although the i)laintiff intendetl 
 merely to settle differences, and in Kent vs. Miltenberffer,-' in 
 a similar state of facts, viz., the purchase of grain by plain- 
 tiff Brokeis for future delivery, as there was no evidence 
 
 '35 Atl. Rep. 1113; and see also their judgment, although the con- 
 In re Hunt, 26 Fed. Rep. 739. .\ tracts were Aalid in New York 
 wife who assicjned to a Stock-Ijroker where made, and although the de- 
 two mortgjiges on her separate fendants were not residents of New 
 property, and aLso gave him her Jersey, and had not alleged the 
 promi-ssory note securwl by bond gambling nature of the transac- 
 and mortgage on her property to tion-s. Minneshcimer vs. Doolittle, 
 enable her husband to gamble in 45 Atl. Rep. Gil. And transac- 
 stocks, may sue to have them trans- tion.s in stocks, bj' New York Bro- 
 ferred to her by the Broker's as- kers, are gambling on(»s, when in a 
 signee. Tantum vs. Arnold, 15 long series of such dealings there is 
 Stew. (.\. J ) GO. no actual tldivery to, or receipts of 
 
 And where the transactions are stocks by, the customer, altliough 
 
 clearly gamliiing in futures on the the Brokers actually bought and 
 
 New York Cotton Kxchaiige, from sold the stocks, in the former ci-so 
 
 the fact that the margiii.>< furnished there being actual delivery thereof 
 
 were entirely disproportionate to to them, and in the latter cjuse there 
 
 the large amount of the dealings, being an actual delivery (either of 
 
 and the fact that deliveries were not stock in their |H)H»ossion, or <»f j»ttH"k 
 
 to be made till several months had borrowi**! for the purjMM+e) by them 
 
 clapiMMl, so that ea<h traiwiwtion \\ hen, however, in one transaction 
 
 could be covered by a counter there wiuh an actuid deliviTv to the 
 
 trarusaf'tion, the .\ew .Fersey courtJ« ciLHfomer, such a de.nliii'.; whm valid, 
 
 will not ai«l .\'ew York Brokers Sliaq) vs Sl.nlker. 'ij .\ll Itep ll'JO. 
 who had obtained a judgment 'G .Mo Ajip Hep l'G!l 
 acainst their principal, to rii..\er ' \'\ Mo .\pj) Rep .'jU3.
 
 594 Stock-brokers siihI Stock Exchanges. 
 
 of an agreement to settle differences merely, the contract 
 was held valid, although defendant testified he only in- 
 tended to settle by payment of differences, and that this 
 intention was known to plaintiffs. It was also held that 
 the burden was on defendant of proving tiie invalidity of 
 the contract, which was valid on its face. The court, how- 
 ever, reversed a judgment for plaintiffs and remanded the 
 case on the ground that they had given no evidence of the 
 average market value of wheat on the day of settlement in 
 accordance with a rule of the Exchange, and that the bur- 
 den was on them to do so. 
 
 It was held in Third National Bank vs. Tinsley^ that, 
 although a wagering contract in grain to settle for differ- 
 ences only, was void as contra bona mores, it did not come 
 within the gaming statute of Missouri, and notes given to 
 the Broker were recoverable in the hands of a hona fide 
 holder for value without notice, and this decision was fol- 
 lowed in Third National Bank vs. Harrison, supra? 
 
 When the intention of the parties is that grain dealings 
 are to be settled by differences only, the transactions are 
 void,^ and the Broker cannot enforce recovery on the ground 
 that he was merely an agent, when it was shown that he 
 vfVi^ jmrticejys criminis, and was the instigating cause of the 
 wagering transactions.^ 
 
 "When the answer to a complaint by a Broker against his 
 principal avers that the contracts to purchase grain made by 
 the Broker with the unknown vendor were wagering ones, 
 
 ' See the decision cited in Third 317; Ream vs. Hamilton, id. 577; 
 
 National Bank vs. Harrison, 10 Van Blarcom vs. Donovan, 16 Mo. 
 
 Fed. Rep. 249, aff'd 11 Mo. App. 535. 
 
 498. * Ream vs. Hamilton, McClean vg, 
 
 2 10 Fed. Rep. 243. Stuve, supra. 
 
 ' McClean vs. Stuvo, 15 Mo. App.
 
 Actions for Money Laid Out. 595 
 
 it is suflBcienl, and it is not necessary to allege that the 
 principal intended the transactions to be gambling ones, 
 and the Broker cannot recover on a note given by his 
 principal.^ 
 
 "When there is no evidence of intention not to deliver, the 
 question as to whether transactions in grain for future de- 
 livery were wagering ones, should not have been submitted 
 to the jury/ 
 
 When it is the understanding not only between the prin- 
 cipal and his Brokers, but also between the latter and those 
 with whom they dealt that grain transactions were merely 
 to be settled bv differences only, the Brokers cannot recover, 
 distinguishing Cockrell vs. Thompson,' but a note given by 
 the principal to the Broker may be recovered by an inno- 
 cent holder for value before maturity, as such a note is not 
 within the gambling statute rendering notes void which are 
 given for money or pn^perty won at games.' 
 
 But the principal, in order to defeat the I>roker's right to 
 recover, must not only show that he intended an option 
 deal in grain, but that the Broker, and those with whom 
 he dealt, also s(j intended.* 
 
 ' Buckingham vs. Fitch, 18 Mo. Taylor vs. Penquite, 35 Mo. .\pp. 
 
 App. 91. 389. 
 
 ' Cummi.skey vs. Williams, 20 It \v;is hold in Wright vs. Fonda, 
 
 Mo. App. G06. 1 1 Mo. App. (ill, that whcliuT a 
 
 '85 Mo 713. tranHa<.-tion in grain wfu* a wagcf 
 
 'Crawford vs. Sjx>ncer, 92 .Mo. or not, wjls for the jury. 
 498. When |)rincipal and Hroker both 
 
 * TeartdiUe vs. McPike, 25 .Mo. iri^'riW that cotton is not to br pur- 
 
 .\pp. 311. \ Broker in wlmat for chiLso<l or sold, the latter cannot rt»- 
 
 future delivery is entitled to his ad- cover for lulvancoM or cotninisHions. 
 
 vances and cornmi.ssions, although Hill vs Johnston, '.iS Mo. .Vpp ^WS 
 
 he knows that his princip:d intended In the liu<t cit<-<l cilh4> the court nd- 
 
 gambling, unless the party with vertwl to the fact that the dtM-ision 
 
 whom the Broker contracted under- in Crawford vs. SiK'Hcer, supra, hml 
 
 •)too<i the transaction to be a wager, taken a step in advance of previom*
 
 596 Slock-ln'okcrs aiul Stock Excliaiiifos. 
 
 Ill the State of Minnesota it lias been held in I^folir vs. 
 Miesen,' that grain Brokers who know that their customer 
 intends gambling in " futures," cannot recover for advances 
 and commissions, and the court may consider all tlie circum- 
 stances surrounding the transactions for the puqiose of 
 ascertaining such knowledge on the Broker's part. 
 
 In the last cited case the contract was made in AVisconsin, 
 and the decision was made in accordance with the principles 
 
 decisions in ni;ikin2; the ^lnderstand- 263; Schreiner vs. Orr, 55 Mo. App. 
 
 ing or intent of the parties the cir- 406. 
 
 cumstance which vitiated the con- But these decisions must be con- 
 tract, and not merely their iinhiwful .sidered as overruled by the decision 
 agreement. It was hold in Connor in Connor vs. Black, 110 Mo. 126; 
 vs. Heman, 44 Mo. App. 346, that 132 Mo. 150, where it was held that 
 an instruction by the court that if grain Brokers could not recover, 
 the parties mutually agreed and when the principal did not intend 
 understood that there was to l)e no delivery, whether the Broker, or the 
 delivery of wheat, the Broker could purchaser of the grain sold by them, 
 not recover, was not erroneous, as knew of the vendor's intention or 
 the word "understood" was tanta- not. 
 mount to the word "intended." When Stock-brokers bought 
 
 \^'hen a Broker sold oats in Sep- stocks for their customer through 
 tember, to be delivered in the fol- Brokers in New York city, the con- 
 lowing Ma}', but, on the death of his tract was held a New York one, and 
 principal, closed out the transaction the presumption being, in the ab- 
 in October at a lo.ss, instead of wait- sence of contrary proof, that the 
 ing till May, when the oats were to common law prevailed in New 
 be delivered, it was held in Scott York, the Brokers were held en- 
 ^•s. Brown, 54 Mo. 606, that this titled to recover, in the absence of 
 circumstance, coupled ^s-ith the proof that they knew that the cus- 
 previous dealings of the parties, tonier intended to gamble. Ed- 
 Stamped the transaction as a wager- wards Brokerage Co. vs. Stevenson, 
 ing one. 160 Mo. 516. Where the evidence 
 
 To make a contract for the sale of is conflicting as to whether the Bro- 
 
 stocks and commodities invalid un- ker had such knowledge, its weight 
 
 der the statute (Rev. Stat. §3931), is for the jury, or the court, when 
 
 one of the parties must not have in- actinir as a jury. Id. To the same 
 
 tended delivery, and such intention effect is Gaylord vs. Duryea, 69 S. 
 
 must be known to the other partv. W. Rep. 607. 
 
 Mulford vs. Caesar, 53 Mo. App. ' 47 Minn. 228.
 
 Actions for Money Laid Out. 597 
 
 of the common law, in the absence of proof of any "Wiscon- 
 sin statnte. 
 
 And ii\ McCarthy vs. Wears Commission Co.,^ affirm- 
 ing a verdict for phiintitf customers for the amount of 
 profits on stock transactions alleged to be due to them 
 by defendant Brokers, it was alleged that the burden was 
 uj)on the party alleging that the transactions were gambling 
 ones of proving such allegation, and if the plaintiffs acted 
 in good faith, they might enforce the contracts. 
 
 In ^[ississippi it was hold in Clay vs. Allen '^ that where 
 either party intended deliverv of cotton in the future, he 
 Avas entitled to the benefit of the contract whatever might 
 be the intention of the other party, and when the princi- 
 pal alleged that the contract was a wagering one, he should 
 .prove it. As the transaction in this case occurred prior 
 to tiie passage of the act of 1882, prohibiting dealing in 
 "futures," the construction of the act was not involved in 
 the case. 
 
 In California it was held that an agreement between 
 Brokers by which one purchased and sold stocks for account 
 of the other, advanced money for the i)Ui'poso, and })uid 
 assessments on the stock purchased, d'u\ not violate the con- 
 stitutional ])rovision as to purchase of stocks on margins,'' 
 but when the customer simply i-eceives or pays differences, 
 and the Broker holds the stock bought as security for ad- 
 vances, the transactions wci-c? within the constitutional pro- 
 vision, and the Broker could not recover advances or com- 
 mi.ssions, but th(; custom(*r might recover moneys paid 
 t(^ the Brok<.'r,* but not inten;st thci-eon.'' Tiic <|u<'stion 
 
 '91 .\, \V. Kep. ;i;i. MVrdiK.rr \ -^ H.im-tt, KKM'iil 
 
 '03 Mks 120. 2 Ml 
 
 • Kiif z VH FleiHluT, 07 f'al M ' li;il.l\viii vs. Zmlif;, lUl Ciil. .V.M.
 
 598 Stock-brokers and Stock Exchanges. 
 
 as to whetlior the constitution lias been infringed is one of 
 fact.' The constitutional pi'ovision does not violate the 
 Federal Constitution, as although it does not distinguish be- 
 tween legitimate and gambling contracts, it is none the less 
 a proper police regulation, and the court, in construing it, 
 will protect lawful transactions.^ 
 
 When the principal becomes insolvent and dies, his right 
 to recover margins paid to Stock-brokers under the con- 
 stitutional provision, survives to his assignee.^ 
 
 There have been several decisions in the State of Geor- 
 gia as to speculations in cotton " futures." Such dealings 
 have been held gaming contracts and void.' A principal 
 may recover deposits with a Broker in illegal grain trans- 
 actions, but not profits.^ But a demand for deposits 
 made in gambling stock and produce transactions, must 
 first be made." Losses sustained in buying or selling 
 "futures" cannot be recovered." A note given in illegal 
 transactions in cotton futures is void and cannot be re- 
 covered.^ 
 
 In Maryland the principle of the decision in Irwin vs. 
 Williar^ was followed, and it was held that Brokers in 
 stocks and grain could not recover for commissions and ad- 
 vances in gambling contracts, as they were partleejys crim- 
 inis, and it was competent for the plaintiff to give evi- 
 
 ' Kullmen vs. Simmens, 104 Cal. ^Cunningham vs. Bank, 71 Ga. 
 
 595. 400; 75 Ga. 3G6; Walters vs. Comer, 
 
 ' Parker vs. Otis, 130 Cal. 322, 79 Ga. 796; 5 S. E. Rep. 292. 
 
 aff'd 187 U. S. 600. ^ Clarke vs. Brown, 77 Ga. 606. 
 
 ' Rued vs. Cooper, 109 Cal. 682. » Daney vs. Phelan, 82 Ga. 243. 
 
 See Maurer vs. King, 127 Cal. 114, ' Lawton vs. Blitch, 83 Ga. 663. 
 
 where the constitutional provision ' Benson vs. Warehouse Co., 99 
 
 was held not to apply to a condi- Ga. 303. 
 
 tional delivery of stock on purchas- " 110 U. S. 499. 
 ing land.
 
 Actions for Money Laid Ont. 599 
 
 dence showing the real nature of ihe ti-ansaction.^ It was 
 also held in Billino-slea vs. Smith' that a Stock-broker 
 could not recover advances when it was intended that there 
 was to be no delivery of stocks. But when the Broker ac- 
 tually contracts for the purchase of stocks, and at the 
 Client's request makes advances to the purchaser, such ad- 
 vances may be recovered.' 
 
 It has been held in Ohio in Ivahn vs. "Walton' that spec- 
 ulations in wheat and pork for future delivery, being mere 
 speculative transactions without any intention to actually 
 deliver the property and therefoi'e gambling transactions, 
 are illegal and void. Whether prohibited by statute or not, 
 the customer could not recover from his Broker the amount 
 paid by him for margins. 
 
 In Alabama it was held in Hubbard vs. Say re ^ that at 
 common law (in the absence of proof of any New York 
 statute to the contrary) New York Cotton-Brokers could 
 recover for advances and commissions on cotton futures, 
 when the principal promised to pay them, or allowed the 
 transactions to proceed. Nor is it gamljling when a Cotton- 
 Broker merely, to oblige his customers, deals, in their name, 
 in cotton futures for them, with a Xew York firm," 
 
 In Louisiana Cotton- l>rokers were held entitled in Connor 
 vs, Robertson* to recover for advances and commissions in 
 dealings in cotton for "future"' delivery, when they pro 
 ceeded according to the rules of the New Orleans Cotton 
 E.\chang(;, which recjuired actual delivery, and the fact that 
 jilaintifls, when defendant did not perforin his contract by 
 
 ' Stow.'irt vs. Srhall, cr, Md. 2S9. » lOf) Ala. MO. 
 
 '77M(l .")0l * 'riioiiipsoii vs. Miidck)-\, 117 
 
 » Covcrr VH. Smith, S2 Md. 5H0. .\la UiS. 
 
 «46 Ohio, ly.-i. ' ;J7 Lu. Aim. 814.
 
 000 Stock-ln'okcrs and Slock Kxchsiiii^es. 
 
 actual ik'livei y, })urcliasc(l Lraiisfciable oi'ilers from respon- 
 sil)le parties for the same amount and quality of cotton, and 
 delivered same to their vendees, did not make the transac- 
 tion a \vafferin<j one. This decision was followed in Gruner 
 vs. Stucken,' where it was held that New York Cotton- 
 Brokers, who had dealt under the rules of the New York 
 Cotton Exchange, were entitled to recover advances and 
 commissions, although, in previous transactions, the parties 
 had settled differences oidy, the evidence in the present 
 case showing no such intention. 
 
 In Texas it was hehl in Drouilhet vs. Pinckard^ that 
 dealings in cotton futures were not gambling transactions 
 when the evidence showed that there was an intention to de- 
 liver, although no delivery was made, but sales were made 
 by the Bi"oker to prevent loss, and it was also held that an 
 agreement to pay margins, did not necessarily make the 
 transaction a gambling one. 
 
 It was held in Beer vs. Landman'* that a note given by a 
 principal to Cotton-Brokers in payment of moneys alleged 
 to be due in dealings in cotton futures, was void, the evi- 
 dence showing that there was no intent to receive or de- 
 liver, or that the principal knew the other parties to the 
 contracts. 
 
 And in Cunningham vs. Fairchild^ it was also held that 
 moneys paitl by a principal to persons engaged in the busi- 
 ness of procuring contracts in cotton " futures," and by the 
 latter paid to Cotton-Brokers to deal in such " futures," 
 without intent to deliver, could not be recovered. 
 
 When a contract for the purchase of grain, for future de- 
 
 « 39 La. Ann. 1076. ' 30 S. W. Rep. 64, 726. 
 
 » 42 S. W. Rep. 135. * 43 S. W. Rep. 32.
 
 Options, Puts, Calls, Straddles. 601 
 
 livery, is on its face valid, and ilie evidence shows that de- 
 livery was intended, it was held in Nebraska, in Morrissey 
 vs. Bromal,' that such a contract was not a gambling one. 
 But if the principal intends to gamble in wheat futures, 
 and such intent is known to the Brokers, they cannot re- 
 cover for advances and coinniissions."- 
 
 In Mendel vs. Boyd ^ it was also held that where transac- 
 tions in grain were of a gambling character, the Broker 
 should repay to a surety on a bank cashier's bond, moneys 
 advanced as margins by the cashier out of the bank's funds, 
 even though he was unaware of the fact that the money 
 belonged to the bank, but he was entitled to credit for any 
 sums repaid to the cashier, which could be traced as having 
 been received by the bank. 
 
 It was decided in the District of Columbia in the case of 
 Justh vs. IloUiday * that when neither party contemplated 
 the delivery of stocks sold for future delivery, the contract 
 was a wagering one and void, although on its face it pur- 
 ported actual delivery. 
 
 (>'.) '' Optiojis" ''Puts" ''Calls" "Straddles" or '^ Spread 
 
 Uafjles." 
 
 Both in Englaml and the United States a laro;e number 
 (;f transactions in stocks are madi; tlii'ougli the iiislrumcn- 
 tality of what are tei'med " option" contracts, and we have 
 consequ(.MitIy separated that class of cast's from the bulk of 
 
 ' .'i7 .Neb. 7GG. (lcf(!ii(iaiit repudiutt' (lie ooMtract. 
 
 » Ito^cTH VH. .Marriott, .')!> .\<-l>. Mcrrcll vs. Carver, 'Hi N. \V. Rep. 
 
 7r,'.i; 82 .\. \V. Uep. 21. See uIho i\V.). 
 SproKue v«. Warren. 2G Neb. 32r»; '91 N. W . Rip. SOU. 
 Watte VH. WickerHham, 27 Neb. * 2 .Matkey's Uep. 346. 
 •1."j7. It m not necessary that the
 
 602 Stock-brokers and Stock Exchanges. 
 
 decisions in which the defence of wagn- luis been inter- 
 posed, although, as we shall see, these " options '' are not 
 treated differently from other wagering contracts by the 
 courts, where it appears that they are mere covers for gam- 
 bling 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 
 explained as a contract by which A, in consideration of the 
 })ayment of a certain sum to B, acquires the right or privi- 
 lege of 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 se- 
 curities. A " put " gives A the option of selling or deliv- 
 ering 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 number of shares of specified securi- 
 ties.^ 
 
 These optional contracts are recognized botli in the rules 
 of tiie London'* and of the Xew York Stock Exchange.^ 
 
 Option contracts, or "putting or receiving stock" (to 
 use the words of the statute), that is, contracts to pay or 
 receive a certain sum of money for the liberty to deliver, or 
 not to deliver, or to accept or refuse, a certain quantity of 
 stock on a given day, were prohibited in England by the 
 
 ' Story vs. Salomon, 71 N. Y. 420; = Id. 
 see also opinion of Van Hoesen, J., ' Id. 
 
 in court below, 6 Daly (X. Y.), 531; * Rule 76, London Stock Exch. 
 Yerkesvs.Salomon, llHun(X.Y.), ^ Arts. XXIII. XXXI. XXXII. 
 
 471 ; Harris vs. Tumbridge, 83 N. Y. Const. N. Y. Stock Exch. 
 93.
 
 Options, Puts, Calls, Straddles. 603 
 
 first section of the Stock-jobbing Act (7 Geo. II. c. S).^ Such 
 a coiitract was declared void, tlie money paid was recover- 
 able, and both parties were subject to a penalty unless the 
 money were refunded. But this statute was, as has been 
 stated, repealed in 1860 by the 23d and 24th Yict. c. 28. 
 The Stock-jobbing Act did not apply to shares, or to 
 foreign stocks, so that " option " contracts in such securi- 
 ties were not illegal under the Stock-jobbing Act, and, since 
 its repeal, option contracts in stocks are valid. Such con- 
 tracts have been held not to be of a gambling nature, but 
 see the observation of liOrd Esher cited in footnote.^ 
 
 It is perfectly plain that in England, as in the United 
 States, these options frequently represent real transactions, 
 
 ' London Stock Exchange Com- were entitled to recover the agreed 
 
 mission Report, 1S78, pp. 20-22; sum, and that it wa.s immaterial 
 
 Cavanagh's Law of Money Securi- whether plaintiffs should be deemed 
 
 ties, 2nd ed. p. 532; Stutfield's principals or agents. 
 
 "Law of Betting, Time Bargains Mr. Stutfield in his work on " Bet- 
 
 and Gaming," 3 J ed. ting, Time Bargains and Gaming," 
 
 ' In Sadd vs. Foster, 13 T. L. R. gives his reasons for the \'iew that 
 
 207, where Stock-brokers sued options are not in the nature of 
 
 their principal for a Ijalance due out wager contracts, 
 
 of a "put and call option," and the If the intention of the parties is to 
 
 defence was tliat plaintiffs had settle "differences," the contract 
 
 bought the shares ;ls principals and will not be rendered valitl by tlie 
 
 not a-s agents, it w;is jield (per Lord fact tliat the parties have the option 
 
 Fsher, M. R.) that plaintiffs were to demand acceptance or delivery 
 
 entitled to recover, as it was a of the shares. Universal Stock E.\- 
 
 modified transaction of principal change vs. Strachan, (189G) A. C. 
 
 and agent, and that plaintiffs had IGG; In re Gieve, (1S99) 1 Q.B. 791. 
 
 e.\erci.sed the option whidi had been See also In re South .African Trust 
 
 given them. Lord E.sher added, it Finance Co , 71 L. T. 769 (as to 
 
 however, that "For some reason damages for breach of an option 
 
 which he did not understand it had contract, in which case the question 
 
 been held that such a transaction of gaml)ling was not raisetl); Stut- 
 
 did not amount to gambling. " field on " Rules of the Stock Ex- 
 
 1/ipcfl and Chitly, L J J, concurred change," .Vi. And see Ilargrcavcs 
 
 in affirming the judgment for plain- vs. I'arsons, 13 M. & W. 501. 
 tiffs, but on the ground th.it they
 
 004 Stock-brokers and Stock Exchanges. 
 
 and that there may Ije a bo/ui ji'dt' intention of deliveriug or 
 receiving stocks wlien tliey are issnod. As it has been well 
 said/ " Let us suppose a person who is possessed of certain 
 securities to be desii'ous of selling if he could get a bid, say 
 one \)ev cent higlier 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 instruc- 
 tions in this form to his Broker, it may well happen that 
 the price does not fluctuate sufficiently to make it possible 
 to carry out either transaction. But the same ])ractical re- 
 sult may be attained with certainty bv the owner of the 
 securities 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 pre- 
 cisely 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 circum- 
 stances, 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 Story vs. Salomon^ the cause of action was based 
 upon what is known as a "straddle" — i. e., a double privi- 
 
 » Law and Customs of Stock Ex- ^ 71 N. Y. 420. 
 chansje, by Melsheimer and Lau- 
 rence (London, 1879), 24.
 
 Options, Puts, Calls, Straddles. 605 
 
 lege, a " j)ut " and '' Ciill " combined, in the following 
 
 form : 
 
 " New Yokk, 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 
 Company 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 under- 
 signed 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 be surren- 
 dered upon the stock being either called or delivered. 
 
 " S. X. S." 
 
 The defendant Salomon, having suspended payment, sub- 
 sequently agreed with the plaintiff to settle with him, and 
 thereupon endorsed upon tlie 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 con- 
 tract. 
 
 One may pay for an option to take at a future day, at a 
 certain ])rice, a farm, or article of personal i)ioperty, and 
 most contracts for the purchase or sale of merchandise at a 
 future d;iy are made with a view to the market price on the 
 day of performance. There is always an (^Icment of specu- 
 lation and uncertainty as to that ; but it has never been 
 supposed that there is any betting by such ccmtracts. The 
 court in such a case will not infer an illegal intent unless 
 obliged to; and the transaction, unless intended as a nu're 
 cover for a b(!t or wager on the future price of the stock, is
 
 G06 Stock-brokors and Stock Exchanges. 
 
 legitimate. If it had been shown that neither party in- 
 tended to deliver ov accept the shares, but merely to pay 
 difTerences 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 reasoning the contract was 
 sustained. 
 
 The later case of Harris vs. Tumbridge^ reiterates the 
 law concerning stock options. In that case the plaintiff en- 
 tered into a speculation in stock, purchasing through her 
 Broker a straddle contract on 100 shares of Lake Shore at 
 62|. The Broker on the day after the purchase sold short 
 against the straddle. The result was a loss to the plaintifT. 
 This short sale was assailed by the plaintiff as unauthor- 
 ized, 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 authoriza- 
 tion having been decided against the Broker, the court, per 
 Finch, J., next attacked the further argument of the de- 
 fendant — 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 witness 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 transaction 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." 
 
 ' 83 N. Y. 92.
 
 Optious, Puts, (alls, Straddles. 607 
 
 The form of the contract, however, is not binding, and 
 does not decide the question, because it would not be diffi- 
 cult to make the contract relating to a bet apparently law- 
 ful, while the intent with which it was entered into would 
 be to avoid or evade the statute ; accordingly, parol evi- 
 dence is always admissible to show the intent of the parties. 
 And where the question was asked, " AVas 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 i " the Supreme Court of New York held that the 
 evidence should have been admitted, and reversed a judg- 
 ment on the ground of its exclusion.^ 
 
 It was held in Lewis vs. "Wilson ^ that to render optional 
 contracts for the future delivery of stock void, it should ap- 
 peal* affirmatively that they were entered into as gaming 
 contracts, and not as real transactions for the purchase and 
 sale of property. 
 
 But such a wager, although void as a contract, did not 
 constitute a crime under § 34:3 of the Xew York Penal 
 Code, prior to its amendment in 1SS9,'' but under that sec- 
 tion, as so amended, a conviction against the keeper of a 
 " bucket shop " was sustained.' 
 
 The courts of Illinois, in several cases arising out of 
 transactions in grain, have veiy strongly condemned 
 " puts " and " culls," when it a|)peared that mere dilfer- 
 ences were to be settled by them, without any real deliv- 
 ery or acceptance of the grain being contemplated or 
 intended. 
 
 ' Yerkt-M VH. Salomon, 11 Hun (N. ' IVoplc vs. Todd, fiS lluii, M(>. 
 
 Y), 471. But Hi-i- I'orUT v.s. Viets, * Vv<}]iU: v.s. Wudo, 51) N. Y. 
 
 1 Hi.H.s, 177. Supp. SIO. 
 
 ' .V) Hull, MMl, alT'd IJl .N. V. 2SJ.
 
 608 Stock-brokors and Stock Kxclianges. 
 
 In AVolcott vs. Ileatb/ in distinguishing such contracts 
 from hona Ji<le time bargains, the court said : '' Wiiat the 
 hiw prohibits, and what is deemed detrimental to the pub- 
 lic interests, is, speculations in ditferences in market values, 
 called, perha})s, in the })eculiar language of the dealers, 
 'puts' and 'calls,' which si nn)l3Mneans a privilege to de- 
 liver or receive the grain or not, at the seller's option. It 
 is against such fictitious gambling transactions, we appre- 
 hend, 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 contract? 
 were to be filled by adjusting the dififerences in the market 
 values, were in the natuie 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 tinie, which required the parties to 
 put up margins as security, and provided that if either 
 party fails on notice to put up further margins, according 
 to the market price, the other might treat the contract as 
 filled iinmediately, and recover the difi'erence 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 tendency.^ 
 
 '78 111. 433. options, to be adjusted according to 
 ' 79 111. 328. the differences in the market value 
 ^ Lyon vs. Culbertson, 83 111. 33. thereof, is a contract for a gambling 
 * See also Rudolf vs. Winters, 7 transaction, which the law will not 
 Neb. 125, where the court holds tolerate; but, upon the facts report- 
 that a contract to operate in grain ed, it would seem very difficult to
 
 Options, Puts, (alls. Straddles. 609 
 
 The same question ciiine before the United States District 
 Court in Illinois, in tlie intei'esting 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 compel those who had sold " options " for 
 June to pay his price, or, in other words, to settle with him 
 by paying such differences as should exist between the 
 prices at which he purchased the options and the pi-ice he 
 should establish for cash oats on the last day of June, when 
 the options matured. In pursuance of this plan, he pur- 
 chased between the loth of May and the 18th of June 
 2,500,000 bushels of cash oats — being all, or substantially 
 all, the cash oats in the mai-ket — and also bought June 
 " options " to the amount of 2,939,-100 bushels. The total 
 amount of oats in store in Chicago on the IStli of June 
 was only 2,70<>,000 bushels, and the total amount received 
 during the remainder of the month was only 800,00*) bush- 
 els. As part of the machinery of this corner, C. also sold 
 " puts,*' or i)rivileges of delivei'ing to him oats during the 
 month of June, in the following fcjrm, duly signed : 
 
 " Ileceived of E. F. ••JmO, ia consideratiou of which wo pivc him, or 
 the hoUlur of this contnict, tlio privilege of deliverint; to us or uot, 
 prior to 3 o'clock i*. m. of Juno 30, 1872, by iiotilication or delivery, 
 10,000 bushclH No. 2 oats, rej^tilar receipts, at 41 cents jx r bushel, in 
 store; and if delivered, we agree to receive and pay for iho same at 
 the above price." 
 
 The aiMouiit ]);ii»l 1)V tin" |)Urclias('r of llicsc " [itils '' w;is one 
 
 BU-stuiri the conclu»ion of the court ' 13 Am. Law He;;, (n. s.) 310. 
 in that fiL^c. 
 V.)
 
 610 Stock-brokers and Stock Exchanges. 
 
 half cent i>er bushel. " Puts " of this description were issued 
 to the extent of 3,700,000 bushels. The market having heav- 
 ily declined, C. failed, and before the time of the matui-ity 
 of the " puts " the holders of the same claimed to have 
 made tender to the bankrupt of the quantity of oats called 
 f(jr by their contracts, and, the oats not having been ac- 
 cepted 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 " contracts in question par- 
 take 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 appeared 
 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 
 the market before their time for delivery had expired. The 
 court held that the test was — " Did the parties intend to 
 sell on one side and buy on the other the oats which pur- 
 ported to be the subject-matter of the transaction ? oi- did 
 they only intend to adjust the differences?" and that the 
 evidence was overwhelmingly against the claimants on this 
 point. The court further held that, although the above
 
 options, Tuts, Calls, Straddles. Gil 
 
 transaction might not be contraiy to any statutory law of 
 the State of Illinois, the wagers were, nevertheless, void at 
 common law, as contrary to public policy. The idea was 
 disaffirmed 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 derange prices, to 
 make prices artificially high or low, thereby tending to de- 
 stroy 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 be found not 
 to conflict with the cases of Bigelo\v vs. Benedict^ and 
 Kirkpatrick vs. Bonsall,'^ heretofore referred to, wlieiv, in 
 the absence of extrinsic evidence to show that they were 
 intended as wagers, the court sustained option contracts as 
 legal. 
 
 In a later case' in Illinois, however, it was held that an 
 option contract was void under the statute, whether it was 
 intended to settle merely for differences or not, and r>igelow 
 vs. Benedict^ is distinguished. An option contract to settle 
 by differences only, was void at common law as being a 
 gambling transaction, but wIktc (lcliv(!ry was intended, 
 such a contract was valitl at coiiimoii law. The statute, 
 however, now voids such contracts, whether it is intended 
 to settle by paying difTcrenccs or not.* 
 
 'See hIho Wutcnnaii v.s. liuck- 'Schneider vs. T\irin'r, 130 111. 
 land, 1 Mo. .\pp. J.O. :i«. 
 
 ' 70 N. Y. 202. » 70 .\. Y. 202. 
 
 '72 Pa St. ]r,F, • \:i() 111, :\s, .supm.
 
 612 Stock-brokers :iii(l Stock Exchanges. 
 
 It is well settled that, in the abseiiee of statutory pro- 
 hibitions, a huna jide contraet or time bargain foi' the 
 future tlelivery of stocks, gold, or any commodity — as 
 grain, for instance — is legal, althougli at the time the veii- 
 (hn- has not the stocks, gold, or commodity which he 
 has agreed to deliver. The vendor may reasonably expect 
 io produce or ac(juire them in time for 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, whik; 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.' 
 
 We select from the huge bulk of cases that sustain this 
 proposition two of the leading ones which fully illustrate it. 
 
 In England the question was considered in Ilibblewhite 
 vs. McMorine.- In that case the })laintiiT brought an action 
 
 ' Hibblewhite vs. McMorine, 5 M. Musick, SI id. 4 15; Cole vs. Milmine, 
 
 & W. 462 (overrulinj;: a contrary 88 id. 319; Corbett \'s. Underwood, 
 
 doctrine laid down by Lord Tenter- 83 id. 32-1; Lyon ^■s. Culbertson, id. 
 
 den in Bryan vs. Lewi.s, Ry. & M. 33; Porter vs. Viets, 1 Biss. 177; 
 
 386; see also Lorj-nier vs. Smith, 1 Clarke vs. Fo.ss, 7 id. 540; Brua's 
 
 B. & C. 1; 2 D. & R. 23); Morti- Appeal, 55 Pa. St. 294; Smith vs. 
 
 mer vs. McCallan, 6 M. & W. 58, Bomier, 70 id. 325; Noj-es vs. 
 
 and 9 id. 636; Thacker vs. Hardy, Spauldinjx, 27 Vt. 420; Brown vs. 
 
 L. R. 4 Q. B. D. 685, 688; Ex parte Hall, 5 Lans. (X. Y.) ISO; Rumsey 
 
 Pliillips and E.x parte Marnham, 2 vs. Berry, 65 Me. 570; Cassard vs. 
 
 DeG.F. it .1.634 ;Currie vs. White, Hinman. 14 How. (X. Y.) Pr. 84, 
 
 45 X. Y. 822; Bi^'elow vs. Benedict, aff'd 1 Bosw. 207; Stanton vs. Small, 
 
 70 id. 202; Kingsbury vs. Kirwin, 3 Sandf. 230; Mcllvaine vs. E.^er- 
 
 11 J. & S. (X. Y.) 451, aflf'd 77 id. ton, 2 Robt. (X. Y.) 422; Brown vs. 
 
 612; Wolcott vs. Heath, 78 111. 433; Speyer, 20 Gratt. 309; Bartlett va. 
 
 Sanborn vs. Benedict, id. 309; PLx- Smith, 13 Fed. Rep. 265. 
 ley vs. Boynton, 79 id. 351; Picker- ' 5 M. & W. 462. 
 ing vs. Cea.se, id. 328; Logan vs.
 
 Options, I»nts, Cjills, Straddles. GVP> 
 
 of assumpsit to recover damages for the breach of a contract 
 with defendant, by wliich the hitter agreed to purchase 
 from })hiintiff certain shares of a raib'oad company, " to be 
 transferred, delivered, and paid for on or before the 1st day 
 of March, 1839, or at any intermediate date that defend- 
 ant might require them." The declaration averred a readi- 
 ness and offer on the part of tlie plaintiff and a refusal 
 of defendant to accept the shares. The defence pleaded 
 was that the jilaintiff never possessed or owned the shares 
 in question, and had no reasonable expectation of becoming 
 possessed of the same within tlie time provided for the 
 fulfilment of the contract otherwise than by purchasing the 
 same after the making of the contract. To this plea a de- 
 murrer "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 beintf aUowed to contract for the sale of goods of 
 which he has not possession at the time of the bai*- 
 gain, and has no reasonable expectation of receiving." All 
 the judges repudiated the contrary doctrine of Lord Ten- 
 terden.' 
 
 Tn New York the Court of Appeals ^ has held that a con- 
 tract whereby A, for a valuable consideration, agrees to 
 purchase of B gold coin at a s))ecifie(l [)i'ic(' within a specilied 
 time, H having the option to deliver or not, was not invalid 
 on its face. By the C(jntract the defendant Ijound liiinself 
 to take the gold if delivered within the time specilied at the 
 |)rice named, and he ran the hazard of loss in case the markc^t 
 price; of gold should be more than ten per cent less, at the 
 time specified for the delivery, than the price he agreed to 
 
 'III Hrviiii VH I.fwiH unci Lury- ' Hi^eluw vs. IJciicdict, 70 .\. \'. 
 mcrr VH Smith, Hii|)rii. 'JO'J.
 
 014 Stock-brokers and Stock Exchanges. 
 
 }Kiy. That tliciv was an element f)f hazard in the contract 
 is plain ; bnt the same hazard is incnrred in every optional 
 contract for the sale of any marketable commodity, when 
 for a consideration paid one of the parties binds himself Ui 
 sell or receive the property at a fnture time at a specified 
 price, at the election of the other. The contract in the case 
 in question Avas attacked on the ground that it was a wager 
 within the statute of New York, and in that respect it dif- 
 fers from Ilibblewhite vs. McMorine. 
 
 The principle of these cases is fully sustained in all of the 
 other States, and particular allusion has been made under 
 the foregoing subdivisions to such of them as were deemed 
 important. 
 
 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 pro- 
 nounces it a wager, irrespective of the form used to cover 
 the transaction ; but, on the other hand, where there is a 
 honafide intention to deliver or receive property, the agree- 
 ment Avill be sustained. 
 
 In Illinois, however, as we have seen (Schneider vs. 
 Turner, snjpra)^ these contracts have, under the statute of 
 that state, been declared void, whether it is intended to have 
 delivery or not. And in Xebraska, such option contracts 
 have been declared gambling transactions (Rudolf vs. 
 Winters, supra). "Whether the sweeping provision of the 
 Calif ornian constitution, supra, includes such contracts, has 
 not been decided.^ 
 
 'In a recent case in Missouri the sale of a "put" was illegal, 
 (Lane vs. Logan Grain Co., 7ns. W. under the statute, the evidence 
 722), the court, whilst holding that showing tliat no delivery was in-
 
 Conspiracies to Affect Stocks. filo 
 
 i^f'.) '• Conspiraci/" tn Affect Storks, I'tr.; " Poofs," " Corners," 
 " Rig(jing the Market." 
 
 1. Conspiracies. — At common law there were three crimi- 
 nal offences against public trade, which were distinctly 
 known as "• foi-estalling," " regrating," and " engrossing." 
 
 " Forestalling " was defined by statute 5 and Edw. YI. 
 c. li, to be the buying or contracting for any merchandise 
 or victual coming in the way to market, or dissuading per- 
 sons from bringing their goods or provisions there, or per- 
 suading them to enhance the price when there — any of 
 which practices 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 
 sellini; it aj^ain in the same market, or within four miles of 
 the place. This also enhances the price of the provisions, 
 as every successive seller must liave a successive profit.'^ 
 
 "Engrossing'' was the getting into one's possession or 
 buying up large quantities of corn or other dead victual, 
 with intent to sell them again. This was considered to be 
 injurious to the public by putting it in the ])ower of one or 
 two rich men to raise the [)rice of provisions at th(Mr own 
 discretion. And the total engrossing ot" any other com- 
 modity, with an intent to sell it at an unreasonable price, 
 is an offence indictable and finable at common law.^ The 
 penalty for tliese misdemeanors by the common law was 
 discretionary line and iin|)iisoiinu'nt. 
 
 Under the head of " Monopolies," in asubs('(|n<Mit chapter 
 <;f the same statute, combinations :unon<r victuailei's or ai'- 
 
 tfn<l«?<J, would uIko Hoom to liold ' I iJlack. Coin. (Slmrsw. cd.) 
 
 tluit sucli u coiitnict In void ah initio, I oS. 
 
 aa " thoro could l>c no intention to ' Id. 
 
 deliver, when lh«T<r in un option of ' Id. 
 thiM Hort."
 
 616 Stock-brokors and Stork Exchanges. 
 
 tificers to raiso tlie \mce of provisions (»i' any other coin- 
 niodities, or the rate of hibor, were punishable as misde- 
 meanors. 
 
 The statutes concerning the above offences were repealed 
 by 12 Geo. III. c. 71, and by 7 and 8 Yict. c. 2-1, the law of 
 engrossing or regrating was abolished.^ 
 
 The effect of the repeal of those statutes was not, hoAv- 
 ever, to render transactions such as above defined legal. 
 On the contrary, many of the acts embraced in these stat- 
 utes were, and still are, illegal and criminal at common law.^ 
 But it is a question, not free from dilficulty, as to the ex- 
 
 ' Mr. Wharton, in his excellent public crime. In tlie exposition of 
 treatise on Criminal Law (10th ed. the law we are told that lege Jul. de 
 vol. ii. § 1849), ficives the following ann. poena statuitur adversus eum qui 
 historj' of these misdemeanors: contra annonam fecerit societatemve 
 "Tliese offences are taken from the coierit, quo annona carior fiat; and 
 Roman law. The Roman title is by the first section a penalty is im- 
 'Dardanariatus,' and consists in the posed on interference with trans- 
 artificial production of dearness and portaUon, or in any way preventing 
 scarcity in any market staple (ne the free carriage of grain: Eadem 
 dardanarii xdlius mercis sinf), but lege continetur, ne quis navem nau- 
 especially of grain. Popular feeling tamre retineat aul dolo ne faciaf, quo 
 Avas then, as it has been often since, jnagi.t dctincatur. Still sharper 
 aroused against the monopolizers or edicts followed, of which I'lpian 
 hoarders of food. The ^Ediles were mentions one: A'e aut ah his: qui 
 vested with jurisdiction to repress coemlas merces supprimunt [pur- 
 such offences; and Plautus illus- chixsers] aut a locupletioribus {hoard- 
 trates the process of prosecution be- ers of their own produce] annona 
 fore them in a passage where the oneratus. Zeno issued a special 
 Parasite calls for proceedings statute against monopolizers who, 
 against those qui consilium iniere to create an artificial scarcitj', buy 
 [something like our own conspira- up all a necessary staple, in order 
 cies to raise prices] quo nos rictu et subsequently to sell at their own 
 xnta prohibcant. So Livy tells us of price. Such ofTenders, on convic- 
 a fine imposed upon frumentarii ob tion, were to be sentenced to con- 
 annonam compressum. The pro- fiscation of goods and to bani.sh- 
 ceedings allowed in such cases took ment." 
 
 definite shape in the famous Lex ^ Raymond vs. Leavitt, Sup. Ct. 
 
 Julia de Annona, which declared the of Mich. 13 Cent. L. J. 110. 
 usurious hoarding of grain to be a
 
 Conspiracies to Affect Stocks. 617 
 
 tent the old coininon-l;i\v principles in this respect should be 
 a})plied to the present methods of transacting business. A 
 most cursory perusal of the definitions of " forestalling," 
 " regrating," and "engrossing" will show that if they were 
 enforced at the present day the commercial interests of the 
 world would be seriously curtailed and impeded ; and there 
 is no doubt that many of the old doctrines have been prac- 
 tically abrogated.' 
 
 In England it was held that the common-law offence 
 of engrossing applied only with respect to the neces- 
 saries of life;^ and it is very evident that these statutes 
 did not embrace, and were not intended to apply to, deal- 
 ings in securities or stocks, for the very obvious reason that 
 the latter description of property did not come into exist- 
 ence in England until many years after they were passed ; 
 but, as we shall see, the comprehensive and elastic principles 
 of the common law upon the subject of illegal conspiracies 
 have practically kei>t alive the spirit of these old statutes, and 
 furnished remedies sufficiently adequate to prevent combi- 
 nations in this new species of property when they threatened 
 the public property, trade, or commerce. 
 
 The modern rule, tlien, would seem to be this : that the 
 offences of " refri-atinfj:," " forcstallin<>:," and " enj!:rossin<):," 
 as they were defined under the statutes of Edward, no longer 
 e.xist (unless revived by express legislation) either in Eng- 
 land or in tliis country, so fai* as Individual action or prop- 
 
 ' Raymond vs. Loavift, supra; whether t lie offence of rcfiratiiifxevor 
 
 Story on Sales, (i-17; Henjainin on existed at eoninion law. Spo also 
 
 Personal Property, 111 i\'><i:\); 2 \ Harv L. Kev. 128. 
 
 Whart. Cr. Law MOlh ed ), § lsr>() ' Pettaini)erdass vs. Thaekoorsey- 
 
 und note H). dims. .'• Moo Tnd .\pp 10'.); 7 Moo. 
 
 TTifi writpr of an artielo in :i P. C. C. 'I'M; 15 Jur. 257. 
 Polif i«al Sei, Quart . 502, 50S. d<.ul)l.s
 
 618 Stock-brokers and Stock K\chiiuges. 
 
 erty is concerned ; but in i)lace thereof tlie common law de- 
 clares that combinations or conspiracies by several pei'sons 
 to engross or absorb an\' particular necessary staple of life, 
 to the detriment of the public, are illegal and the subject of 
 indictment.^ 
 
 The case of Rex vs. Waddington ^ illustrates this proposi- 
 tion, it being there held that the spreading of rumors with 
 intent to enhance the price of hops, in the hearing of hop- 
 planters, dealers, and others, that the stock of hops Avas 
 nearly exhausted, and that there would be a scarcity of hops, 
 with intent to induce them not to bring their hops to market 
 for a long time, and thereby greatly to enhance the price, 
 constituted the offence of "ingrossing" (engrossing), at 
 common law, notwithstanding the repeal of 5 & 6 Edw. 
 YI. c. 14 by 12 Geo. III. c, 71. Although this case has 
 been severely criticized, it has not, it seems, been directly 
 overruled.^ And, as W(3 have intimated, the general rule 
 has been extended to embrace combinations or C(mspiracies 
 to affect the price or market for stocks and government 
 securities. 
 
 ' See authorities heretofore cited Hawarden vs. Coal Co., 55 L. R. A. 
 
 under this subdivision, and consult 82S (coal combination illegal); Peo- 
 
 al.so, in this connection, the interest- pie vs. Milk Exchange, 27 L. R. A. 
 
 ing case of In re Chandler, 13 Am. 437. 
 
 Law Reg. (n. s.) 310; s. c. 6 Biss. C. It has been decided by the Eng- 
 C. 53, sub nom. Ex parte Yovmg. Ii.sh Privj- Council that the law of 
 See also Raj' on "Contractual Limi- the Colony of Natal does not make 
 tations" and cases therein cited; it illegal for any person or any body 
 Eddy on " Combinations " and cases of persons to buy shares with a view 
 cited. And see United States vs. to selling them at a profit. Laugh- 
 Knight Co., 156 U. S. 1 (purchase of ton vs. Griffin, (1S95) App. Ca-s. 104. 
 sugar refineries not in restraint of - 1 East, 143-160. 
 commerce); Ertz vs. Produce Ex- ' See 1 Bish. Cr. Law, §§ 527, 528, 
 change, 51 L. R. A. 825 (Produce and notes to 7th ed.; Raymond vs. 
 Exchange of Minneapolis held to be Leavitt, Sup. Ct. Mich. 13 Cent. L. 
 a combination in restraint of trade) ; J. 110.
 
 Conspiracies to Affect Stocks. 619 
 
 This was held in the celebrated case of the King vs. De 
 Berenger and othei's.' In that case De Berenger and seven 
 others were tried and convicted of conspiracy in disseminat- 
 ing false reports and rumors that a peace would soon be made 
 between England and France, and that Napoleon Bonaparte 
 was dead, thereby attempting to occasion, without any just 
 or true cause, a great increase and rise of the public govern- 
 ment funds and securities, to the injury and damage of the 
 subjects of the king, who should, on a certain day, purchase 
 and buy such securities. The defendants moved an arrest of 
 judgment upon several grounds : intei' alia, that no crime 
 known to the law had been committed ; that no adjudged case 
 of conspiracy had gone as far as this ; and that, if it were not 
 a crime in itself to raise the price of government funds, a 
 conspiracy to do so would not l)e illegal unless some collat- 
 eral object were stated to give it a criminal character. Lord 
 Ellenborough, C. J., in an oj)inion, the doctrine of which 
 was endorsed bv all of the judges, overruled all of the grounds 
 relied on, holding that the conspiracy was by false rumors 
 to raise the public funds and securities. The crime lay in 
 the act of conspirac}' and combination to effect that purpose, 
 and it would have been complete although it had not been 
 })Ui^ued to its consequences, or the parties had not been able 
 to carry it into effect. The purpose of such a conspiracy is 
 itself mischiev(^us, as it strikes at tht' pric(; of a vendible 
 commodity in the market, and, if it gives it a fictitious price 
 by means of false rumors, it is a fraud levelled against all 
 the public, being against all such as may possibly have anv- 
 thing to do with the funds on that |)articular day. While 
 the raising or lowering of ihr pulilic I'liiids is not yw *t' a 
 
 ' :{ M.iM A- S (17.
 
 620 Stock-ln'okiTs :iimI Slock ExcliJiiiKos. 
 
 crimo — foi- a man may have occasion toscll outalarge sum, 
 wliicli may have tho effect of depressing the price of stocks, 
 or may l)uy in a large sum and thereby raise the ])rice on a 
 l)articuhir day — yet the conspiracy by a nundjer of persons 
 to raise the funds on a particuhir day is an offence preju- 
 dicial to a certain class of subjects.' 
 
 This case was directly approved by the English courts in 
 1S7<) in Reg. vs. Aspinall,* where it was held that a con- 
 s[)iracy to procure, by fraud and falsehood, the sliares of a 
 compan}^ to be quoted in the official list, and thus give a 
 fictitious value to the shares beyond what they wouM 
 otherwise bring in the market, is a fraud upon tiie public, 
 and an indictable offence. In that case the indictment al- 
 leged that the defendants were promoters of the E. Com- 
 pany, Limited, and that ai)plicati()n had been made, on be- 
 half of the company, to the Committee for General Purposes 
 of the Stock Exchange to order tho quotation of the com- 
 pany in the official list of the Stock Exchange, under the 
 129th Rule, to the effect that the committee would order 
 the quotation of a new company in the official list, })rovided 
 that the company was of honafide character, etc. ; that the 
 requirements of Rule 128 had been complied with, requir- 
 ing the production of documents, etc., and list of allottees, 
 etc. ; that two thirds of the whole nominal capital proposed 
 to be issued had l)een applied for and unconditionally al- 
 lotted to the public; and that a member of the Stock Ex- 
 change was authorized by tiie compan v to give full infocma- 
 tion as to the formation of the undertaking, and able to 
 
 ' See also Rex vs. Gumey, 11 Cox ^ L. R. 1 Q. B. D. 730; aff'd 2 id. 
 
 C. C. 414. So a combination to fix 48. See also Rex vs. Mott, 2 Cas. 
 
 the price of salt is unlawful (Rex vs. & P. 521. " 
 Norris, 2 Ld. Ken. 300).
 
 Conspiracies to AftVct Slocks. 621 
 
 satisfy the coiiiinittee as lo all particulars they shoukl re- 
 quire. It. was also averred that defendants requested a 
 linn of Stock-brokei'S to give the information before men- 
 tioned and to apply to the committee to order the quota- 
 tion of the shares of the company in the official list, and 
 employed the Brokers to sell 5000 shares of the company 
 on behalf of alleged vendors of patents ; and that defendants 
 unlawfully conspired and agreed, by divers false pretences, 
 to injure and deceive the committee, and to induce them, 
 contrary to the true intent and meaning of the rules of the 
 Exchange, to order a quotation of the shares of the com- 
 pany in the official list of the Stock Exchange, to induce 
 persons who should Ijuy and sell the shares to believe that 
 the company was duly formed and constituted, and luid, in 
 all respects, complied willi the rules of the Stock Exchange, 
 so as to entitle the company to have their shares quoted 
 in the official list; and that defendants in pursuance of the 
 conspiracy, falsely pretended to Z. and other members of the 
 committee that the number of shares applied for Ijy the 
 public was 34,;305, and that the amount received thereon, 
 at 10.y. per share, was i: 17,282, and that 15,000 had been 
 alhjtted to the patentee, and that no shares had been con- 
 ditionally allotted, and thereby induced the committee to 
 order the shares to Ije quoted in the official list. 
 
 Upon a motifjn in ai-rest (jfjudgnjent, after conviction, the 
 Court of Queen's IJencii heUl that this count was sufficient, 
 and the case had been fully made out against the defend- 
 ants. The Court of A]»j)eals allirnu'd this judgment. The 
 court held that, as tlnj rides of a public body of sui-h 
 celebrity jus tin; London Stock |"].\eliange must be w idely 
 known to Br«»I<ers and others dealing in shares, it was plain 
 that to obtain a (juotatiori of their shares in tile official list
 
 622 Sto('k-]>r()kors aiul Stock Exchanges. 
 
 must be advantageous to companies and enhance their 
 value. Purchasers, on seeing tlie shares so quoted, would 
 have a right to believe that the requirements of the Stock 
 Exchange had been complied with, and that the company 
 whose shares they proposed to purchase had therefore sat- 
 isfied an independent body like the committee, of its re- 
 spectability and solvency, and it could not be doul)ted that 
 they would be willing to give a higher price for the shares 
 in consequence. It was further held that the crime of con- 
 spiracy is completely committed the moment two or more 
 have agreed that they will do at once, or at some future 
 time, certain things; but that it was not necessary, in order 
 to complete the offence, that any one thing should be done 
 beyond the agreement ; and that an agreement made with 
 a fraudulent mind to do that which, if done, would give to 
 the prosecutor a right of suit founded on fraud, is a criminal 
 conspiracy. 
 
 Another phase of an indictable conspiracy was pre- 
 sented in Reg. vs. Esdaile.' There the information charged 
 that the defendants, intending to deceive, defraud, and 
 prejudice such of the shareholders of the Royal British 
 Bank as were not aware of the true state of the affairs of the 
 bank, and to induce others to become customers and cred- 
 itors of the bank, and to purchase and hold shares there- 
 in, did conspire falsely and fraudulently to publish and rep- 
 resent that the bank and its affairs had been during the 
 3''ear 1855, and then were, in a sound condition, and pro- 
 ducing profits ; and that defendants published and distrib- 
 uted a balance-sheet apparently showing such a condition, 
 and also paid a dividend, knowing that such dividend had 
 
 'IF. &F. 213.
 
 Couspiracies to Affect Stocks. 623 
 
 not been earned, and also fraudulently issued new shares 
 while the bank was in an unsound state. Upon the trial 
 thereof, Lord Campbell, C. J., charged the jury that if, at 
 the time mentioned, the bank was insolvent, which fact 
 was known to the defendants, and that they nevertheless 
 entered into the design to represent that the bank was in a 
 prosperous state, with a view to deceive the shareholders 
 or to delude the public into becoming shareholders, a con- 
 s})iracy would be made out. And the defendants were all 
 convicted.^ 
 
 ' The rule of law in ch'il cases is injury must be the immediate and 
 
 even more stringent than that of the not the remote consequences of the 
 
 criminal law, and the general prin- representation^ thus made." 
 ciple may be stated that, in every These principles have been af>- 
 
 case of fraud for which an indict- plied to an infinite number of trans- 
 
 ment can be sustained, an action for actions in which the directors, pro- 
 
 damaires or relief in law or equity moters, organizers, or originators 
 
 will lie at the instance of the grieved of companies or schemes, either 
 
 party. The general principles upon through the instrumentality of 
 
 which a civil liability for fraud rests Stock Exchanges or otherwise, have 
 
 were stated by the vice-chancellor been guilty of fraud or deceit in in- 
 
 in Barry vs. Craskey, 2 J. & II. 1, a.s ducing pei-sons to become purchiis- 
 
 f olio ws: "First, even,- man mu.st be ers of shares or interests in the 
 
 held responsible for the conse- company. The following are some 
 
 quences of a false representation of the leading cases: Peek vs. Gur- 
 
 niade by him to another, upon ney, L. R. G II. L. Cas. 377; Pjisley 
 
 which that other acts, and, so act- vs. Freeman, 3 T. R. 51; Bevan vs. 
 
 ing,. is injured or damnified. Sec- Adams, 19 W. R. 76; 22 L. T. (n. s.) 
 
 oiidly, every man nuist be held re- T'J't; Beattie vs. F]l)ury, L. R. 7 H. 
 
 sponsible ff>r the coii.scquences of a L. Cjus. 102; Pontifex vs. B'gnold, 3 
 
 false representation ma<le by him to Scott N. R. 3!)0; Shrewsbury vs. 
 
 another, up<iii which a third person Blount. 2 id. ASS; Clarke vs. Dick- 
 
 urtH, and, so acting, is injured or son, 6 C. B. (n. a.) 4.')3; Moore vs. 
 
 clamnified; provided it appear that Burko, 4 F. tt F. 2.').S; Gray vs. 
 
 such false repreHcntation wjls made Collins, id.. 302; Smith vs. Clench, 
 
 with the intent that it shoulrj be id. .'i7S; Cross vs. Sacket, C .\b. (.\. 
 
 acted upon by such third person in Y ) Pr. 217; Wakmian vs. Dalley, 
 
 the niatuicr that occasions the in- M Barb. (.\. Y.) 4\)H; Cazeaux vs. 
 
 jur>' or JfjHs. .\nd, thirdly, but to .M.ili, 2.') id. .57S; s. c. ]!^ How. Pr. 
 
 bring it within the princifili-. the .{17; .Morse vs. Switu, H) id. 275;
 
 02 1 Stock-lnokors and Slock Exchaiii^es. 
 
 By the law of Xcw Ydk tlViial Code, §§ 168-170), 
 no conspiracies are j)miisliablc criminally except those there 
 stated, and, among others, the conspiiing of two or more 
 persons " to com m it any act injurious to the puhlic healtii, 
 to j)ublic morals, or to trade or conanerec, or tor the perver- 
 sion or obstruction of justice or the due administration of 
 the laws," shall constitute a misdemeanor. Under this 
 broad and comprehensive language, which is j)ractically 
 the rule in all of the States, either by a(l<)i)tiou of the 
 common law or express statute, infamous conspiracies or 
 combinations are punishable, whether their object be to 
 
 ^■c^vbery vs. Garland, 31 Barb. 121. And where the directors of a 
 Ami .see the following; Davidson v.s. joint-stock banlc, knowing it to be 
 Tnlloch, 3 Macq. (H. L.) 783; Derry in a state of insolvency, i.ssued a 
 vs. Peek, 14 A. C. 337; Fenn vs. balance-sheet showing a profit, and 
 Curtis, 23 Hun, 3S-1; Perry vs. thereupon declared a dividend of 6 
 Hale, 143 Mass. 540; Prosser vs. per cent, and issued advertisements 
 P'irst National Bank, 106 N. Y. 677; inviting the public to take shares 
 Conipton vs. Chelsea, 128X. Y. 537; upon the faith of their representa- 
 Tnunble vs. Ward, 97 Ky. 748; tions that the bank was in a flour- 
 Merchants National Bank vs. Arm- ishing condition, on an ex officio 
 strong, 65 Fed. Kep. 932; Foley vs. information filed bj^ the attorney- 
 Holtrey, 43 Neb. 133; Exchange general they were found guilty of a 
 Bank vs. Gatskill, 37 S. W. Rep. conspiracy to defraud. Reg. vs. 
 100; Investment Co. vs. Eldridge, 2 Brown, 7 Cox C. C. 442; Same vs. 
 Pa. Dist. Rep. 394; Parker vs. Mc- Esdaile, 1 F. & F. 213. 
 Questen, 32 Q. B. R. (Can.) 273; It was held, however, in Salaman 
 Bellairs vs. Tucker, L. R. 13 Q. B. vs. Warner, 65 L. T. R. 132, in 
 D. 103; Morgan vs. Skiddy, 62 N.Y. which a Stock-broker brought an 
 310; Kountze vs. Kennedy, 147 N. action for deceit and conspiracy 
 Y. 124; Andrews vs. Mockford, 73 again.st the promoters of a company. 
 Law Times R. 726; Brackett vs. alleging that lie had, owing to their 
 Griswold, 112 N. Y. 454; s. c. 13 N. having fraudulently obtained con- 
 Y. Supp. 192, aff'd 128 N. Y. 644; trol of the majority of the shares. 
 People vs. Garrahan, 19 App. Div. been obliged to purchase same at an 
 (N. Y.) 347; Shattuck vs. Robins, exorbitant price in fulfilment of his 
 68 N. H. 565. See also Cook on contracts, that plaintiff failed to 
 Corporations, 5th ed., chs. IX. and make out a case of deceit, within 
 XX., and numerous cases cited in the meaning of the three general 
 the notes thereto. principles already stated, and that
 
 Conspiracies to Affect Stocks. 625 
 
 alFect the '' necessaries •" of life, or securities, or other prop- 
 erty in which the public have an interest. 
 
 A conspiracy to depress the stock of the Brooklyn Rapid 
 Transit Company, dealt in on the Stock Exchange, is a con- 
 spiracy to injure trade or commerce within the meaning of 
 this section.' 
 
 In 1S74 the Legislature of the State of New York (Laws, 
 1S74, ch. 440) })assed a very stringent law against persons 
 circulating rumors to affect the stock market, as follows : 
 
 '' Sec. I. Every pei'son who shall knowingly circulate 
 false intelligence with intent of depreciating or advancing 
 the market price of the public funds of the United States, 
 or of any State or Territory thereof, or of any foreign 
 country or government, or the stocks, bonds, or evidence 
 
 an action for conspiracy was not when it appeared that plaintiffs and 
 
 known to the law. If the defend- defendants had a{!;reed that the 
 
 ants had ajrreed to do an unlawful purchase was to be made on the 
 
 act, they might be indicted, al- Stock Exchange with the view of 
 
 though their agreement did not inducing the pui)lic to believe there 
 
 result in any act. An action might wti-s a market for them, although, as 
 
 be brought against several defend- the parties knew, there was not such 
 
 ants who had agreed to do an act a market, and the court further held 
 
 which resulted in an infringement that such an agreement was a con- 
 
 of plaintiff's legal rights, but the spiracy for which the parties might 
 
 cau.se of action wa.s not the agree- Ije indicted. The court itself raised 
 
 ment. but the infringement of plain- the cjuestion of illegality, which was 
 
 tiffs legal rights, which in this ca.sc not advanced by the partie.s. And 
 
 had not been shown. .see Secor vs. Goslin, X. Y. L. J. 
 
 In Scott vs. Brown, (1892) 2 Q. March 26, 1901, p. 2310, where mo- 
 
 B. D. 724, it wxs heltl that princi- tions to vacate orders of arrest were 
 
 pal« could not obtain a r(«ci.ssion of denied on the ground that plaintiff 
 
 a contract made l>y them with Stock-brokers had boon induced by 
 
 Stock-brokers to purcha.se shares, the fraud and consjiiracy of defend- 
 
 and recover the money paid for ants to purchjise W(»rthle.ss stock. 
 
 thorn, on the grounil that the Bro- ' reopio vs. Goslin, 73 \. Y. 
 
 konj had dojivorod their own shares Supp. r)20. afT'd 171 X. Y..f»27. 
 
 to thorn, instoml of biiyinu thorn for Sec in tiiis connection, People vs. 
 
 plaintiffs on the Sto«-k Kxchango, I'utnam, 90 .\. I) 12.'i 
 
 40
 
 626 Stock-brokers and Slock Kxcliaiiges. 
 
 of debt of any cor[)oi'ati()n or association, or the market 
 price of any nierchamlisc or commodity whatever, hIiuU be 
 deemed guilty of a misdemeanor, and shall be pniiishcd, 
 upon conviction thereof, by a fine of not exceeding live thou- 
 sand dollars, and imprisonment for a period not exceeding 
 three years, or eitlier. 
 
 " Sec. 11. Ever}' person who shall forge the name of any 
 person, or the officer of any corporation, to an}"^ letter, mes- 
 sage, or paper whatever with intent to advance or dei)reci- 
 ate the market price of the pul)lic funds (jf the United 
 States, or of anj?- State or Territory thereof, or of any for- 
 eign country or government, or the market price of b(jnds 
 or stock, or other evidence of debt issued by any corpora- 
 tion or association, or the market price of gold or silver 
 coin or bullion, or of any merchandise or commodity what- 
 ever, shall, upon conviction, Ijc adjudged guilty of forgery 
 in the third degree, and shall be punished by imj)risonment 
 in a state prison for a term not exceeding five 3'ears." 
 
 This statute was repealed by L. 1886, ch. 593, § 1, subd. 49. 
 Its provisions have been substantially re-enacted in the Penal 
 Code, §435. An indictment under this section charged the 
 defendants with conspiring to occasion a fall in the market 
 price of the stock of a corporation by " contriving, propagat- 
 ing, and spreading " false rumors concerning its financial 
 condition, well knowing the same to be false — held that the 
 indictment was sufficient, as the words " contriving, propa- 
 gating and spreading " were the full ecpiivalent of the 
 statutory Avord " circulating," and motive, intent and 
 guilty knowledge were also sufficiently charged. The de- 
 fendants had ])iiblislu'd advertisements in New York news- 
 papers to tlie effect that the stock of tin? corporation would 
 fall, that it would be obliged, under a decision of the court, to
 
 Conspiracies to Affect Stocks. 627 
 
 pay a heavy tax under the Ford act, and that it was going 
 into the hands of a receiver, and it was held that the evidence 
 was sufficient to sustain a conviction for having violated the 
 provisions of this section, subd. 3.' 
 
 It is provided by Laws of New York of 1S90, c. 05)0, that 
 combinations to create a monopoly in the manufacture or 
 sale of any article in common use are illegal, and punishable. 
 It was held in Rourke vs. Elk Drug Co.' that any person 
 suffering special injury on account of such acts had a right 
 of action, and plaintiff druggists might maintain an action 
 against defendants for conspiring to injure their business. 
 The act of 1899 was held constitutional in Matter of 
 Da^'^es,^ and in Kellogg vs. Lehigh Valley R. Co. ^ it was 
 held that averments in a complaint as to an alleged unlaw- 
 ful combination against plaintiff grain elevator firm, were 
 good. A joint stock company may unite with a rival cor- 
 poration, where no restriction is })laced upon anyone from 
 engaging in the business carried on.^ Combinations of cor- 
 2)orations in restraint of ti-ade are prohibited by the Stock 
 Corporation Law, ^ 7. A combination of gas companies 
 was held not to violate this section." An examination under 
 the Mtjnopoly act is not extrajudicial." 
 
 In lUiiK^is it was held that the Board of Trade could be 
 coinpelh.'<l to continue to supply the plaintiff corporation 
 (the Xew V<jrk (iiain and Stock Exchange) with their mar- 
 ket ([notations as it could not create a monopoly therein, 
 although the Board of Trade was a private corporation, 
 
 ' I'cfjpir; VH. (JoHliii, 7.'i N. V. ' I'Vaiicis vs. Taylor, (if) .\. Y. 
 Supp .'j20, ufT'd 171 -N. Y. 027. Supp. 2S. 
 
 '77 .\. Y. Supp. .'17:j. •HafTcrty vs. HufTalo City Gas 
 
 ' 108 N. Y. H9. Co., r,(j S. Y. Supp. 2HK. 
 
 ♦70 N. Y. Supp 2:i7. ' Re .\ttorney General, 17 N. Y. 
 
 Sui)p. 883.
 
 628 Stock-brokers and Stock Excliaiij*es. 
 
 Avhen its properly was devoled to a public use and became 
 affected with a })ublic interest.' 
 
 2. '' Corner.'^,'' '' Rlg'jlng the tnarlxt,'' '' Pools r~i'\o&Q\y 
 akin to the foregoing is the subject of "Corners," " Iliggiiig 
 the market" and "Pools." 
 
 A "corner" is a scheme or coml)ination of one or more 
 "bulls" who are "long" of certain stocks or securities, 
 to compel the "bears," or persons "short" of the stock, 
 to pay a certain price for the same. Or it may be a com- 
 bination to force a fictitious and unnatural rise in a mar- 
 ket for the purpose of obtaining the advantage of dealers 
 and pui'chasers, and all persons whose necessities or contracts 
 compel them to use or obtain the thing "cornered."^ 
 
 " Itigging the market " is described as a process by which 
 " an artificial value is given to securities by means of dealings 
 upon the market which are not genuine dealings on behalf 
 of the public." See Brodhurst's Law and Pi'actice of the 
 Stock Exchange, )x 2^.3 
 
 A " pool " is defined as a combination of persons contrib- 
 uting money to be used for the purpose of increasing or 
 depressing the market price of stocks, gi-ain, or other com- 
 modities ; also the aggregate of the sums so contributed.' 
 A " pool " is also defined as a joint adventure by several 
 owners of a specified stock or other security temporarily 
 subjecting all their holdings to the same control for the 
 
 ' Stock Exchange vs. Board of ' Scott vs. Brown, (1892) 2 Q. B. 
 
 Trade, 127 111. 153. 724; Begbie vs. Pho.sphate Sewage 
 
 ' Raymond vs. Leavitt, 13 Cent. Co., 35 L. T. 350; Marzetti's Case, 
 
 L. J. 110. As to when it is not 42 L. T. 206; Twycross vs. Grant, 2 
 
 libelous per se to say of a Cotton- C. P. D. 469; Gray vs. Lewis, L. R. 
 
 Broker that he cornered the market, 8 Ch. App. 1035. 
 
 see Labouisse \'s. Evening Post, 41 ■♦ Webster. 
 N. Y. Supp. 688.
 
 Conspiracies to Affect Stocks. 029 
 
 purpose of a speculative operation, in which any sacrifice 
 of the shares contributed by one, and an}' profit on the 
 shares contributed by another, shall be shared by all alike.^ 
 
 A "corner" is manifestly much more obnoxious to reason 
 and to the law when it has for its object the artificial en- 
 hancement of the market value of any kind of property 
 which purchasers are compelled to buy, than when the 
 scheme is formed to " squeeze " the " bears,'' or persons who 
 have sold property which they did not possess, hoping to 
 buy it when it reached the level of their expectations. Yet 
 it is doubtful whether the "corner"' is not equally illegal in 
 the one case as in the other. 
 
 But, in any case, a combination or scheme which has for 
 its object the fraudulent inducing of persons to sell property 
 for future delivery, with the intention orpurpose of compel- 
 ling such persons to buy in or purchase the same at a price 
 fixed by the combination, destroymg a chance or opportun- 
 ity of a fair purchase, is void.^ 
 
 These " corners " are carried out in f(jrms varying as they 
 relate to different kinds of propei't}', ov as they are managed 
 in one or more places, where the course of dealing is not the 
 same. A " corner '' in stocks may be ilkistrated in this 
 manner : The " bears " in the market are tiiose persons who, 
 from a variety of reasons, believe or hope that the })rice of a 
 certain security will decline, and without having any of it, 
 they sell the sann.', boi-rowing the security fordeliverv from 
 some third jierson, expecting to buy it at a lower price and 
 
 'Century Dictionary. It wjih boncfit, the word "pool" \v.n\ no 
 
 held in Green v.s. Hi-.'liarn, Hil .Mo. technicul nionnint;, anti thai liu! 
 
 .'J33, that wliere three persori.M, own- word should he rea<l in the li;:ht of 
 
 inK between them GOO nhares of the the whole contract. 
 
 nUyrk of a c«(in|)any, a^'refnl to ' Harry vs ("roskey, 2 John.s. & 
 
 "pfKjl" Huid »hureM for their innlnal III, and cum-.s liercaftei cited.
 
 630 Stock-brokers and Stock Exchanges. 
 
 return it to the IcntU'r. The difference between the price 
 at which they sell the security jiiid the price which they are 
 compelled to pay for the same constitutes the profit or loss 
 of the transaction. If the security decline, there is a profit ; 
 if it advance, there is a loss. "The bulls," on the other 
 hand, discovering that tliere i.s a "short" representation in 
 the security, sufficiently large to justify the movement, 
 combine togetlier to buy all, or as much of the security as 
 will enable them to accomplish their object ; and when they 
 have succeeded they become masters of the situation. The 
 " bears " are then compelled to buy ; but, as all the securit}'' 
 is in possession or under the control of the " bulls," they are 
 forced to pay any price which the cornering party chooses 
 to ask for it. The " corner " is then complete. 
 
 The validity of the combinations which we have here 
 briefly described has been passed on by the courts on several 
 occasions, and in many instances they have been declared il- 
 legal. 
 
 In the interesting case of Barry vs. Croskey,' which arose 
 out of certain dealings on the London Stock Exchange, a 
 state of facts was revealed which showed that the defend- 
 ants, having first put themselves in control of all the shares 
 and allotments of a certain company, induced a Stock-job- 
 ber to sell a number of shares for future deliver}- — i. e., the 
 next settling-day — and then compelled him to settle his 
 contracts at figures satisfactory to them, before he knew of 
 the whole truth of the transaction. He subsequently 
 brought a bill in Chancery, in which he averred that de- 
 fendants, the directors and secretary of a projected rail- 
 
 > 2 Johns. & H. 1. See also Brit- Gray vs. Lewis, L. R. 8 Ch. App. 
 ish and American Telejjraph Co. vs. 1035; Salaman vs. Warner, 65 L. T. 
 The Albion Bank, L. R. 7 Ex. 119; N. S. 132.
 
 Conspiracies to Affect Stocks. 631 
 
 way company, having, partly by allotments to fictitious 
 pereons and partly by purchase, obtained possession of all 
 the shares of a given class in the company, though their 
 Broker induced plaintiff, a Stock-jobber, to contract to sell 
 them certain of such shares, to be delivered upon the set- 
 tling-day to be appointed by tlu^ committee of the Stock 
 Exchange ; and that they then, by false and fraudulent rep- 
 resentations made by them in their official character to 
 the committee of the Stock Excliange, procured the appoint- 
 ment of a settling-day ; u])on the arrival of which plaintifi', 
 being by reason of the scheme thus contrived by defend- 
 ants unable to procure the shares he had contracted to de- 
 liver, except at a ruinous premium, was compelled to pay 
 defendants a sum specified in the bill to release him from 
 his contract ; and the bill prayed for a declaration that such 
 a contract was fraudulent and void, or inoperative, and for 
 rej)ayment to plaintiff of the amount Ik; had paid in respect 
 thereof. The company having been joined as defendants to 
 the bill, upon the ground that they had adopted the fraud- 
 ulent representations made by theii- directors and secre- 
 tary to the committee of the Stock Exchange, the court 
 held, on demurrer by the company, that although the com- 
 pany might have benefited by the fraudulent representa- 
 tions — e. g., by obtaining a quotation and an increased price 
 for their shares — and allhough they might be answerable 
 for that increased price, or for any other direct advantage 
 derived from such fraudulent representations, yet it not be- 
 ing shown that the company knew such repn^sent.itions 
 were made by their directors with iutrnt to defraud the 
 ])laintin', by compelling hiui to pcifonn his (contract, or even 
 that they knew of tlie existence of such a contract, tiie 
 company were not r(!sponsii)le for the loss |)l,iintiir had tlius
 
 G32 Stock-brokers and Stock Exchanges. 
 
 incidentally sustained, and the company's demurrer was al- 
 lowed ; but it was further held that the bill was not open to 
 demurrer on the part of the other defendants on any ground, 
 it havinir averred that the several defendants had combined 
 to practise jointly this " scheme of deceit," as the court 
 termed it.' 
 
 The case of Salamon vs. Warner, supra^ afTords an example 
 of the difficulty of successfully maintaining a civil action 
 against a cornering combination, although, upim the facts 
 as stated, the defendants might have been indicted. 
 
 Sampson vs. Shaw^ presents an action between members 
 of the cornering combination. In that case it appeared that 
 the plaintiff, the firm of T. & Co., and one 11., entered into 
 an agreement to operate in the stock of a certain railway 
 company for the purpose of getting a " corner,'' T. & Co. 
 taking one half, and the plaintiff and R. each a quarter in- 
 terest in the operation, the plan of operation being as fol- 
 lows : T. & Co. -were to be the managers, and were to buy 
 up a large quantity of the stock and control it in such a 
 manner as to make a large demand for it, so that pai'ties 
 selling on time would be compelled to pay large differences ; 
 T. <fe Co. were then to receive and make proposals and 
 agreements thereon for the purchase of stock to be deliv- 
 ered at a future da}^ the parties agreeing to sell not then 
 having the stock in possession or owning it, and then the 
 sellers, when the day for delivery should arrive, would be 
 compelled to pay such pi-ices or differences as the parties 
 to the combination might ask ; the money to carry on the 
 
 * As the result of an inquirj' \>\ (Barry vs. Croskey, 2 Johns. & II. 
 
 the Stock Exchange Committee the 1) was snbsequently ordered to be 
 
 companj' attempted to be promoted stricken from the oflficial list, 
 
 in the case mentioned in the text * 101 Mass. 145.
 
 Couspiracies to Affect Stocks. 633 
 
 operation was to be furnished, and the profits or losses 
 shared or borne by the parties in proportion to their re- 
 spective interests; that said stock at the time was of little, if 
 any, intrinsic value, and was selling in the market for about 
 five dollars per share ; that R.. paid in money from time to 
 time as called for under the agreement for carrying on the 
 o^ierations. T. & Co. did proceed to make purchases, and 
 in so doing expended a large sum of mone3^ The opera- 
 tion in the stock wjis not successful, and the money invested 
 therein was substantially lost. The plaintiff brought an 
 action against the representatives of T. ^t Co. for money 
 had and received. The defendant, in answer, showed that 
 the amount had been actually appropriated or expended in 
 carrying out the above-described agreement. 
 
 The auditor to whom the cause was referred ruled that 
 the agreement for operating in the above manner was ille- 
 gal and void ; and this ruling was sustained, on appeal, by 
 the Supreme Court, which held that neither party as 
 against the other could enforce what remained to be done, 
 or correct what liad been done, under a conspiracy of that 
 description, and that such an agreement <lid not make the 
 parties partners. 
 
 In a case in Michigan' the Supreme Court examined the 
 subject of a "corner" in grain. In that case tlu? ])hiintiff 
 advanced certain money to the defendants Tor \\\o. piir|)ose 
 of controlling the wheat market, with a view of forcing up 
 prices and pi-oducing a " ccjrner," and c<jmj)elling ))arties 
 wlio had contracts to 111! to pay a higher price for wheat to 
 fill them. TIjc action was to recover the money advanced to 
 th»' (h'feuihint Un- this purpose, and the couit, thi'ough 
 
 ' l!.ivtiM.-ui X- I .••ixill, ]:\ ('. 1,1 I. .1 1 10
 
 G34 Stock-brokers and Stock Exchanges. 
 
 Campbell, J., in a very able and thorough opinion, held that 
 the plaintiff was not entitled to recover. The court said 
 that " the object of the arrangement between these parties 
 was to force a fictitions and unnatural rise in the wheat 
 market, for the express purpose of getting the advantage 
 of dealers and purchasers whose necessities compelled them 
 to buy, and necessarily to create a similar difficult}' as to all 
 persons who had to obtain or use that commodity, which is 
 an article indispensable to every family in the country. 
 That such transactions are hazardous to the comfort of 
 the communit}' is universally recognized. This alone may 
 not be enough to make them illegal, but it is enough to 
 make them so questionable that very little further is re- 
 quired to bring them within distinct prohibition." 
 
 The cases of The Morris Run Coal Co. vs. Barclay Coal 
 Co.^ and Arnott vs. Pittston, etc., Coal Co.^ held contracts 
 involving similar dealings in coal to be against public policy. 
 " And," said the court, in Raymond vs. Leavitt, supi^a, 
 "we think the reasoning of these cases is based on familiar 
 common-law principles, which iipply more strongly to pro- 
 visions than to any other articles. . . . At common law 
 there is no doubt such transactions as were here contem- 
 plated, although confined to a single person, were indictable 
 misdemeanors under the law applicable to forestalling and 
 engrossing. Some of our States have abolished the old 
 statutes which were adopted on this suljject, and which 
 were sometimes regarded as embodying the whole law 
 in such cases. . . . But, so long as the early statutes only 
 were repealed, it was considered that enough remained 
 of the common law to punish combinations to enhance the 
 
 ' 68 Pa. St. 173. * 68 N. Y. 558.
 
 Conspiracies to Affect Stocks. 635 
 
 value of comuiodities. And when this doctrine became nar- 
 rowed, it seems to have been considered that such combina- 
 tions to enhance the price of provisions remained under the 
 ban. . . . "We do not feel called upon to regard so much of 
 the common law to be obsolete as treats these combinations 
 as unlawful, whether they should now beheld punishable as 
 crimes or not. The statute of Xew York, which is univer- 
 sally conceded to be a limitation of common-law offences, 
 is referred, to in the case in 6S N. Y. 558, as renderinsf 
 such conspiracies unlawful. . . . There may be difficulties in 
 determining conduct as in violation of public policy, where it 
 has not before been covered by statutes as precedents. But 
 in the case before us the conduct of the parties comes within 
 the undisputed censure of the law, and we cannot sustain 
 the transaction without doing so on the ground that such 
 dealings are so manifestly sanctioned by usage and public 
 approval that it would be absurd to suppose the legislature, 
 if attention were called to them, would not legalize them. 
 "We do n(jt think public opinion has become so thoroughly 
 demoralized ; and until the law is changed, we shall decline 
 enforcing such contracts. If parties see fit to invest money 
 in such ventures, they must get it back by other than legal 
 means." 
 
 There are other American cases which sustain the doc- 
 trine laid down in Kavmond vs. Leavitt.^ 
 
 ' The following rharf^e of Mr. Jus- "CIkxtlemen of tub Crand- 
 
 t'uc Janiiesori to a firand-jury of tlic jruY. — Hcsidcs tlu* isfatvites a;iaiii.st 
 
 Criniinal Court of Chicaf^o, Ovi. 12, K''>"l'l"'>i. «cllin;j luiuor to minors, 
 
 ISSl, illuHtratfs tin- r-oiulitiori of the and acts of violence to person or 
 
 law of Illinois \i|)on the subject of properly, whirli form the suhject of 
 
 whieh we are treating;, ho fon-ihly your ordinary delilierations, I wish 
 
 and thoroughly that we give it in to eall your attention to one wliieh 
 
 full: I will now read: 'Whoever eon-
 
 C8G 
 
 Stock-brokers jind Stock Exclian£?es. 
 
 In the State of Xew Vork the Supreme Court has de- 
 cided that tlii^ law will not aid either part}' to enforce an 
 agreement entered into for the purpose of axlvancing the 
 
 tracts to have or give to himself the 
 option to sell or buy at a future time 
 any grain or other commodity, stock 
 of any railroad or other corporation, 
 or gold, or forestalls the market by 
 spreading false nmiors to influence 
 the price of commodilies therein, or 
 corners the market, or tries to do so, 
 iu relation to any of such commodi- 
 ties, shall be fined not less than SIO 
 nor more than SI 000, or confined in 
 the County Jail not exceeding one 
 3'ear, or both' (Revised Statutes, 
 Illinois, ch. 38, § 130). By this sec- 
 tion are denounced three separate 
 misdemeanors — the sale of options, 
 forestalling the market, and corner- 
 ing the market. All these have, 
 either in name or in spirit, been al- 
 ways interdicted by the common 
 law, and that of forestalling was, at 
 a very early day, made punishable 
 in England by statute. Over a 
 century ago a movement arose in 
 England for abolishing the restric- 
 tions upon the freedom of trade, and 
 these statutes were, or a part of 
 them, repealed; but the common 
 law has remained, both there and in 
 this country, unchanged, though 
 fallen into disuse. The exigencies 
 of the times induced our legislature 
 a few years since to re-enact the 
 statute against forestalling, and to 
 add to it those touching 'options' 
 and 'comers,' which I have read — 
 offences to which the criminal in- 
 genuity of our ancestors seems not 
 to have been equal. The first of- 
 fence is the illegal sale of options 
 
 for future delivery of grain and 
 other commodities. The fact that 
 property is .sold to be delivered at a 
 future day does not make the con- 
 tract illegal, although it is not at 
 the time possessed or owned l)y the 
 seller, or that the time of its deliver^' 
 is left within fixed limits, optional 
 with the buyer or seller, though in 
 one sense any such sale is a sale of 
 an option apparently within the 
 statute. What makes it a gambling 
 contract is the intent of the parties 
 that there shall not be a delivery of 
 the commodity sold, but a payment 
 of differences by the party losing 
 upon the rise or fall of the market. 
 Of this intent the jurj' are to be the 
 judges, and it may be inferred di- 
 rectly from the terms of the con- 
 tract or indirectly from the course 
 of dealing of the parties (Pickering 
 vs. Cease, 79 111. 32S; Walcott vs. 
 Heath, 78 id. 433; Pixley vs. Boyn- 
 ton, 79 id. 351 ) . By this legi.slat ion 
 the General .\ssembly had no pur- 
 pose to interdict bona fide sales of 
 commodities, but only such as are 
 colorable or fraudulent, contrived 
 by both parties as a cover merely 
 for gambling transactions. The 
 offence of forestalling originally 
 consisted in the l)uying or contract- 
 ing for merchandise or victuals com- 
 ing to market, or dis.suading persons 
 from bringing their goods or pro- 
 visions there, or inducing them to 
 raise their prices (2 A\'Tiart. Crim. 
 Law, 1819). Our statute has nar- 
 rowed the offence so that it covers
 
 Couspiraeies to Affect Stocks. 637 
 
 selling price of stocks by means of Hctitious dealings de- 
 signed to produce a false impression on the minds of observ- 
 ers concerning their real value, and in that way to induce 
 
 only forestalling; the market by this is not wronp; then nothing; is 
 spreadinti false rumors to influence wrong. Public rumor on the street 
 the price of commodities tliereiu. and in the press justifies me in say- 
 The obvious purpose of the legisla- ing; that these offences are rife 
 ture in makinsi this provision was to among; us; and in asking you, if 
 protect the people — the consumers evidence to that effect should reach 
 as well as innocent traders — from you, to make them the subject of in- 
 the damage resulting from unnatu- quiry, your duty and mine is plain, 
 ral and fictitious fluctuations of However powerful the combination 
 prices, brought about by the false to defy the laws, and however difh- 
 suggestions of interested persons, cult to detect and punish the crimes. 
 The offence of cornering the market we rank ourselves with the criminal 
 is not, so far as I am aware, men- if we fail to bring the terrors of the 
 tioned in the books, but it is one law to bear upon him. For one, I 
 of a numerous family of frauds, of refuse not to hear what fills the ears 
 which the various memljers in their of all to the discredit of the business 
 fight with society assume an infini- men and methods of this city. The 
 tude of shapes and colors. crimes indicated are being commit- 
 " To detect and punish these, not- ted. It imports much that the 
 withstanding the novelty and ap- validity of our statute and its suffi- 
 parent innocence of their disguises, ciency to reach the guilty parties 
 iij the first business of courts of should be early tested. If the spread 
 justice. The thing which we know of gambling has infecteil our busi- 
 aus a 'corner' in the market might be ness men, the consecpiences cannot 
 briefly described as a process of but be disastrous. Tiie course of 
 driving unsuspecting dealers in business, instead of proceeding 
 grain, stock, and the like into a quietl\' and healthily, will become 
 corral, and relieving them of their broken by fits of fever and panic; 
 purses. The essence of the offence unlawful gains will be preferred to 
 consists in the party securing a con- the .slow profits of legitimate trade; 
 tract for the future delivery of some our fanners, partaking of the |)reva- 
 conunodity at his option, and tlien, lent spirit, will iiold Inick their crops 
 In' engrossing the stock of such in expectation of corner proce.s.ses, 
 conunodity in the nuirket, making l)orrowing money on mortgage to 
 it im|K>K.sible for the other party to curry on their operations, instead of 
 complete hLs contract 8a\c i<y pur- realizing by the sale-s of farm prod- 
 chawing of \m adversary at his own nets. It is said that these phe- 
 price, or paying in cawh the differ- nomena are already .-ipparcnt , and 
 ence fixe<l by hiicIi a<!verHary. .\s they are charged to be the effects of 
 waa said of another great wrong, if violations of the law. I will only
 
 638 Stock-brokers and Stock Exchanges. 
 
 them to invest their money in such stocks. Such an aarec- 
 nient is void and against public polic}-.' But, as tlie facts 
 are not given in the last-mentioned case, it is impossible to 
 determine its value as a precedent. 
 
 And a contract entered into b}' the grain-dealers of a town 
 which, on its face, indicates that they liave formed a [)art- 
 nership for the purpose of dealing in grain, but the ti-uc ob- 
 ject of which is to form a secret combination which would 
 stifle all competition, and enable the parties, by secret and 
 frau(hdent means, to control the price of grain, costs of stor- 
 age, and expense of shipment at such town, is in restraint 
 of trade, and consequently void on the ground of public 
 policy.^ 
 
 It was also held in Wright vs. C'udahy,^ that a contract 
 of partnership between two persons under which large quan- 
 tities of pork were purchased, with a view to getting the 
 market " short," and thus advancing the market price of 
 
 add that it is not your duty to seek 699-708; Morris Run Coal Co. vs. 
 inquisitorially for evidence that Barclay Coal Co., 68 Pa. 173; Corn- 
 crimes have been connnitted. monwealth vs. Carlisle, Brif^htly, 
 Should evidence come to j'ou 36; King vs. De Berenger, 3 Man. & 
 through the regular channels, your S. 67, 72; 3 Rev. Stat. (5th ed.) 973, 
 duty will be to consider it, and act sub. 6 of § 8. 
 
 fearlessly and promptly to vindi- - Craft vs. McConoughy, 79 111. 
 
 cate the laws. I think I may prom- 346; s. c. 22 Am. Rep. 171. Com- 
 
 ise, on the part of the judiciary of binations to corner the market in 
 
 the county, that if you present men grain are illegal, Wright vs. Crabb, 
 
 for crime it will not go unpunished, 78 Ind. 487, but a Broker who is 
 
 so far as the enforcement of the unaware of his principal's intention, 
 
 laws depends on them." niay recover the amount of a note 
 
 ' Livermore vs. Bushnell, 5 Hun, given to him by the principal in set- 
 
 285. The court cited Thompson vs. tlement of his account. Id. See 
 
 Davies, 13 Johns. 112; Brisbane vs. also Wells vs. McGeoch, 71 Wis. 196, 
 
 Adams, 3 Comst. 129; Hooker vs. holding a combination to corner 
 
 Vandewater, 4 Denio, 349; Stanton grain illegal, 
 
 vs. Allen, 5 id. 434; Marsh vs. Rus- M8 N. E. Rep. 39. 
 sell, 2 Lans. 340; 2 Kent (7th ed.),
 
 Conspiracies to Affect Stocks. ij'S'i* 
 
 pork, was within the Illinois statute, g 130, and therefore 
 void, although the deal eventually proved unsuccessful. 
 
 So, an agreement entered into by several commercial 
 fii'ms, by which they bound themselves for the term of 
 three months not to sell any Indian cotton-bagging except 
 with the consent of the majority of them, was held to be a 
 combination to enhance the price of the article, which was 
 in restraint of trade and contrary to public order, and that 
 the agreement could not be enforced in a court of justice.' 
 So of a combination to control the sale and price of coal.-' 
 
 In Arnot vs. Pittston Co.'^ the Court of Appeals of New 
 York said, in speaking of a combination to enhance the 
 price of coal by keeping the latter out of the market, " that 
 a conibination to effect such a purpose is inimical to the in- 
 terest of the public, and that all contracts designed to effect 
 such an end are contrary to public policy, and thei'efore ille- 
 gal, is too well settled by adjudicated cases to be questioned 
 at this day. Eveiy producer or vendor of coal or other 
 commodity has the right to use all legitimate efforts to ob- 
 tain the best price for tiie article in which he deals ; but 
 when he endeavors to artfully enhance prices by su])press- 
 ing or keeping out of the market the product of others, and 
 to accomplish that purpose by means of contracts binding 
 them to withlu^ld thcii- supply, such agreements arc even 
 more mischiev(jus than combinations not to sell tinder an 
 agreed price. Combinations of that character hav(^ Ikhmi 
 held to be against pul^lic policy and illegal. If they should 
 be .sustained, the prices of articles of mere necessity, such 
 
 'India .AHHociulioii vs. Kock, II i{iiii ("(lalCo. vs. Hiirc-lay Coal Co., 
 
 La. .\nri. HiS. (iS Ta. Si. 173. 
 
 ' .\rnot vs. I'ittsloii Canal Co., (iS ' Supra. 
 N. Y. r,r}H; 'J.'J Am. IU-|.. I'.JO; .Murrin
 
 640 Stock-brokers and Stock Exchiiuges. 
 
 as coal, flour, and other iiKlisi)ensable commodities, might 
 be artificially raised to a ruinous extent far exceeding any 
 naturally resulting from the proportion between supply and 
 demand/' 
 
 Jjut an agreement to combine stock for the purpose of 
 terminating mismanagement by a change in the direction, 
 through the instrumentality of a majority of votes at a reg- 
 ular election, is not in conflict with the requirements of 
 the law, and in no wise derogates from its policy/ 'Kov i ; 
 an agreement made between a like number of stockholders, 
 in regard to holding their stock and selling the same to- 
 gether, invalid and in contravention of public policy and 
 law,2 So an agreement to form a " pool " for speculating 
 in a particular stock is not necessarily void as against 
 public policy.^ 
 
 By L. 1887, c. 175, L. 1889, c. 257, and L. 1891, c. 158, 
 Dassler's Gen. Stats. §§ 2427-46, pooling in grain and 
 stock or other unlawful specified combinations to control 
 prices and in restraint of trade, are made misdemeanors in 
 Kansas, and similar statutes have been enacted in Nebraska. 
 Comp. Stats. 1901, §§ 6959-C>4,and Kentucky, Ky. St. § 3915. 
 Other like statutes prohibiting trusts, and unlawful combi- 
 nations in restraint of trade have been passed in several other 
 States and by Congress, and many decisions interpreting 
 them have been rendered by the courts.^ A pool of a num- 
 
 ' Havemeyer vs. Havemeyer, 11 and "Excessive Combination and 
 
 J. & S. (N. Y.) 513. its Remedy," in 6 Law Notes, 101. 
 
 2 Id. 507. Under the Anti-Trust Act of 1890, 
 
 ^ Quincey vs. White, 03X. Y. 370, a combination of stock-holders of 
 
 383. two competing railroads by which a 
 
 * See the following article: "Anti- majority of its stock is tran.sferred 
 
 monopoly legislation from the days to a corporation organized to vote 
 
 of Elizabeth to the .\nti-Trust .Vet same, and thus prevent competition, 
 
 of 1890," in 55 Cent. Law Jour. 144, is illegal. U. S. vs. Northern
 
 Conspiracies to Affect Stocks. 641 
 
 ber of persons to advance the price of lard, being unlawful 
 under the New York statutes, an accounting cannot be had 
 against Brokers who acted as agents for the pool in carry- 
 ing out the scheme.' 
 
 In concluding our review of these miscellaneous author- 
 ities in reference to combinations or corners, it is very 
 important, as bearing upon their validity, to keep in mind 
 that by the statute of Xew York "short" sales of securities 
 are legalized.- This statute would seem to show most em- 
 phatically that the " public policy " of the State of New 
 York sustains the practice of selling " short," which, as we 
 have seen, is reprobated by the statutes of Massachusetts, 
 Georgia and South Carolina ; and the legislature, having en- 
 couraged and legalized these " short " contracts, it becomes a 
 question of very grave doubt whether the juilicial powers 
 should be used to relieve persons selling " short " f njni these 
 "corners," which are, after all, but the logical consequences 
 of their own acts. 
 
 "Where the parties organizing a corner are guilty of fraud, 
 as in Barry vs. Croskey,^ or where other circumstances 
 intervene which render it manifestly unjust to enforce the 
 result of the combination against the si-'llere of stocks, the 
 courts may interfere. But, in theordinary caseof a "short" 
 sale of stocks, it is very doubtful whether the courts should 
 be used to protect persons from the consequences of their own 
 folly in selling that which they do not own, in the hope 
 and expectation that by such sales the j)roperty of others 
 
 Sectiritics Co., 120 Fed. 721, iiffM vs. Sugar Refining Co., 51 Hun, 
 
 by the Supreme Court, Marcli, .'l.'il. 
 
 1904. ' Luw.s, IS.JS. eh. HI, now } 22 
 
 ' Ix.*onar(l vh. I'oole, 111 X V. of the Personal I'miM-ily I.iiw. 
 
 371. S«r<' jj.sf) im to KUgar, I'eoplu ' 2 .lolm. Si ]\. 1. 
 1 1
 
 042 Stock-brokers and Stock Exchanges. 
 
 will be so much affected as to make their undertaking a 
 success. And, if their expectations should fail, there would 
 seem to be neither reason nor justice, especially in those 
 States where " short" sales are sanctioned by statute, in the 
 courts aiding them to get relief from their contracts. 
 
 In England " corners " sometimes arise out of the peculiar 
 system which there prevails of dealing in shares befoi'e 
 allotment, and they were the subject of investigation by the 
 Koyal Commission to which, we have before alluded.' The 
 operation is there explained as follows : 
 
 There is yet another aspect of the dealings in shares be- 
 fore allotment. It may be called the "stock-jol)bing" 
 aspect. Quite independently of the object of floating the 
 company by getting its share capital subscribed, the pro- 
 moters of worthless companies have the immediate object 
 of receiving larger profits to themselves by traffic in these 
 new shares. Dealings before allotment give them the req- 
 uisite facilities for so doing. 
 
 There is another way in which this dealing before allot- 
 ment operates on the Stock Exchange. The promoters of 
 a new company send into the market and buy at a premium 
 a large quantity of their own shares — a quantity so large, 
 perhaps, relatively to the entire share capital, that when 
 the settling-day comes after the allotment, and the sellers 
 have to procure the shares to deliver, they find themselves 
 in a difficulty ; for the promoters — who, it must be remem- 
 bered, have the allotment entirely in their own hands — have 
 allotted so many shares to themselves or their friends, or to 
 other persons, with an understanding that they must keep 
 the shares allotted to them and not sell them, or have kept 
 
 ' Rep. of Stock Exch. Com. 1878.
 
 Conspiracies to Affect Stocks. 643 
 
 back so large a quantity of shares and not allotted them at 
 all, that they have practically obtained the entire control 
 of the market; and the dealers who have sold, in the ex- 
 pectation of having a free market of the entire share capital 
 to buy in for the purpose of delivery, find themselves, as 
 it is called, " cornered," and obliged to pay such prices as 
 the sellers choose to ask, to enable them to complete their 
 contracts. 
 
 This practice of buying shares or other securities — the 
 buyer having already possessed himself, or in some other 
 manner procured the control, of so large a quantity of the 
 thing which the seller has contracted on a future day to 
 deliver, that the seller is " cornered,'' and virtually ])laced 
 at the mercy of the buyer — is not confined to the dealings 
 before allotment in the shares of a new company or loan ; 
 but it is obvious that the allotment of the shares of a new 
 company, being entirely in the hands of the promoters, 
 gives them, if they choose to purchase their own shares 
 before the allotment, unusual facilities for carr}- out such 
 an operation. Accordingly, the rules of the Stock Exchange, 
 as administered by the committee, provide methods of de- 
 feating such combinations. 
 
 In the case of new companies, all bargains before allot- 
 ment are made for some future day, which is not fixed at 
 the time the bargains are made, but it is to be fixed at a 
 future day by the committee of the Stock Exchange ; and 
 if the committee refuse to fix a day of special settlement, all 
 bargains that have been previously made are void. This 
 system enables the committee to defeat opi/rations of the 
 character we have been just describing in cases where they 
 can arrive at the necessary facts. They hear and entertain 
 any obj(.-ction that any member may makt; to the settlement
 
 644 Stock-brokers and Stock Kxcliaiiges. 
 
 being granted ; and if it is shown to tlieui that the promoters 
 Lave by tbeir dealings, coupled with the allotment, pi-actically 
 obtained the command of the uiai'ket, ami placeil the dealers 
 or sellers in an unfair position, the settlement is refused. 
 
 If false statements are made to the committee in order to 
 induce them to grant quotation or settlement, the guilty par- 
 ties may at law be made criminally or civilly liable. Thus 
 in the Eupion Gas case, before referred to,' the promoters 
 of the company were convicted on a charge of agi-eeing to- 
 gether by false pretences to deceive the members of the 
 committee, and to induce them, contrary to the true intent 
 and meaning of the rules, to order a quotation of the shares 
 of the company in the official list ; and thereby to induce 
 and persuade all persons who should thereafter buy and 
 sell the shares of the said ccmipany to believe that the latter 
 was duly formed and constituted, and had in all respects 
 complied with the rules so as to entitle them to have their 
 shares quoted. 
 
 But it was held in Ex parte Ward, that if the settling day 
 has been obtained from the committee by a fraud to which 
 the contracting parties were not privy, the conti'act does 
 not become void.^ 
 
 * Reg. vs. Aspinall, 1 Q. B. D. althoujih the defendants did not 
 
 730; 2 id. 48. In Rees vs. Feniie, 4 deny the fraud practiced by them 
 
 N. R. 539, 13 W. R. 6, it was held on phxintiff. 
 
 that where a person owiiing only * 20 Ch. Div. 356. 
 
 thirty shares in a company, con- The Penal Code of California, 
 
 tracted for the purchase of between § 395 (Pomeroy's Annotated Codes, 
 
 700 and 800 shares for future de- p. 175), makes it a misdemeanor for 
 
 livery but was unable to deliver anj' person to employ any fraudu- 
 
 them in consequence of his intended lent means to affect the market 
 
 vendees being in control of the com- price of property, and under the 
 
 pany's shares, the court will not set Illinois statute, supra, cornering the 
 
 aside the contracts, which were in market is puni.shable by fine and 
 
 the nature of gambling contracts, imprisonment. .\n attempt to cor-
 
 Principles DtMluciblo from tlio Cases. ()45 
 
 (g.) General Principles Dcdiiciblf from the Cases. 
 
 The general result of the decisions, heretofore commented 
 upon, or cited in this connection in the notes, uj)on the sub- 
 ject of wagering contracts, may be summed up as follows : 
 
 1. "Where a contract is made for the delivery or accept- 
 ance of securities at a future day at a price named, and 
 neither party, at the time of the making of the contract, in- 
 tends to deliver or accept the shares, but merely lo pay 
 differences according to the rise or fall of the market, the 
 contract is void either by virtue of statute or as contrary to 
 public policy.^ 
 
 2. That in each transaction the law looks primarily at the 
 intention of the ))arties, which intention is a matter of fact 
 for the jury to determine.' 
 
 3. That the form of the transaction is not conclusive ; and 
 oral evidence may be given of the surrounding circumstances 
 and condition of the parties to show their intention, and that 
 a contract purporting on its face to be a contract of sale is a 
 
 ner the market in corn is within the such deposit w;is put. Armstroni; 
 
 latter statute. Fo.ss vs. Cunimint^s, vs. American Exchange Nat. Bank, 
 
 149 111. 3o3. Neither Broker nor 133 U.S. 433. 
 
 principal can enforce contracts ' Grizewood vs. Blanc, 11 C. B. 
 arising out of "cornering" the 538, and all of the other authorities 
 wheat market. Sanuiels vs. Oliver, agree upon this proposition. The 
 1.30 111. 73. In an action again.st intention of the parlies, however, 
 defendants to recover an excess of formed after the making of the con- 
 price paid for grain by reason of a tract, does not affect its validity 
 "corner" \>y defendants, latter (Sawyer vs. Taggart, 14 Bush (Ky.), 
 cannot he compelled to testify that 727) If stock trai\sactions are 
 they "cornered" t lie market. Lam- illegal in their inception, Ihev he- 
 son vs. Boyden, 10(J 111. 013. A come valid by subsequent actual 
 certifirat* of <leposit given in con- receipt an<l delivery. Smith vs. 
 ne<-tion with a "coniering" trans- New York Stock itc. Exchange, 'ir^ 
 action in wheat in violation of the N. Y. Supp. 201. 
 IllinoiH Htatule, may be Hue<l on by a ' .Ml of tlie authorities agrc*- u|)()n 
 bank ignorant of the use to which this propo.sition.
 
 646 Stock-brokers and Stock Kxchaiif^es. 
 
 mere gambling device, although the contract is in writing 
 under seal.^ 
 
 4. That option contracts — viz., " puts," " calls," and 
 "straddles" — are not prhna/dcic gambling contracts.'' 
 
 5. To make a contract a gambling transaction, both par- 
 ties must concur in the illegal intent.^ 
 
 6. The defence of wager must ])e affirmatively pleaded, 
 and the burden of proof is upon tlie party asserting the 
 same.^ 
 
 7. In construing a contract, that construction is to be pre- 
 ferred \\hicli will support it, rather than one which will 
 avoid it.^ 
 
 8. A Broker w^ho makes real contracts with third persons 
 in behalf of his Client, with the understanding between the 
 Client and Broker that the former shall never be called upon 
 to j)ay or receive more than differences, can recover the 
 amount paid out for his Client in the transactions, together 
 with his commissions." 
 
 ' Yerkes vs. Salomon, 11 Hun (N. ^ Lehman vs. Strassberger, 2 
 
 Y.), 471; Story vs. Salomon, 71 X. AVood C. C. 554; Hibblewhite vs. 
 
 Y. 420; Hibblewhite v.s. McMorine, McMorine, 5 M. & W. 462; Gresham, 
 
 5 M. & W. 4GG; North vs. Phillips, J., in Williar vs. Irwin, 12 Chic. 
 
 89 Pa. St. 2.50; Smith vs. Thomas, Law News, 241. But see Connor 
 
 10 Weekly Notes (Pa.), 112; Gresh- vs. Black, 119 Mo. 126; 132 Mo. 
 
 am, J., in Williar vs. Irwin, 12 Chic. 150. 
 
 Law News, 241 ; Waite vs. Frank, 86 * Dykers vs. Townsend, 24 N. Y. 
 
 N. W. Rep. 105. Porter vs. Viets, 1 57; Bigelow vs. Benedict, 70 id. 206; 
 
 Bi.«s. 177, if contrary to this, is Story vs. Salomon, 71» id. 420; 
 
 against all the authorities. See, Sprague vs. Warren, 26 Neb. 326. 
 
 however, Universal Stock Exchange But see Rudolf vs. Winters, 7 Neb. 
 
 vs. Stevens, 66 L. T. R. 612. 127; Bernard vs. Backhaus, 3 Wis. 
 
 ' Story vs. Salomon; Yerkes vs. L. N. 338. 
 
 Salomon, supra. But see Wolcott ' Bigelow vs. Benedict, 70 N. Y. 
 
 vs. Heath, 78 Til. 43; Pickering vs. 202; Story vs. Salomon, supra. 
 
 Cease, 79 id. 328; Lyon vs. Culbert- « Thacker vs. Hardy, 27 W. R 
 
 son, 83 id. 33; Schneider vs. Turner, 158. 
 130 ni. 38.
 
 Principles Dediicible from the Cases. 647 
 
 9. A Broker who advances money to his principal to pay 
 losses incurred in a stock-wagering transaction can recover 
 the same either on a note or otlierwise.' 
 
 10. A bill of exchange or promissory note given upon a 
 stock-jobbing transaction is valid in the hands of a party 
 who took it before it was due, for value, and without notice 
 of the illegal consideration.^ 
 
 11. But such a bill is void in the hands of the original 
 parties, or in the hands of a person who takes it after it is 
 due or with notice of the facts.^ 
 
 ' Id.; Lehman vs. Strassberger, 2 238. But see Tenney vs. Foote, 4 
 
 Wood C. C. 554; Woodworth vs. Brad. (111.) 594; Hawley vs. Jones, 
 
 Bennett, 43 N.Y. 273-277; compare 69 Ala. 52; Cunnint^ham vs. Bank, 
 
 Sampson vs. Shaw, 101 Ma.ss. 145; 71 Ga. 405; Campbell vs. Bank, 74 
 
 Wyman vs. Fiske, 85 id. 238; Can- Miss. 526;Snoddy vs. Bank, SSTenn. 
 
 nan vs. Bryce, 3 B. & A. 179; Amory 575. It wa.s held in the District of 
 
 vs. Meryweather, 2 B. & C. 573; Columbia that such a note could not 
 
 Gregory vs. Wendell, 39 Mich. 337. be recovered, LuUy vs. Morgan, 21 
 
 See, however, the decisions in Illi- D. C. 88, but this ca.se has been 
 
 nois under the gaming statutes of overruled owing to statutory en- 
 
 that State, contra. actment. Wirst vs.Stubblefield, 17 
 
 » Day vs. Stuart, 6 Bing. 109; 3 App. D. C. 283. 
 Moo. & P. 334, Chit. Jr. 1448; ' Danforth vs. Evans, 16 Vt. 538; 
 Greenland vs. Dyer, 2 M. & Ryl. Brown vs. T\irner, 7 T. R. 630; 2 
 422; Faikney vs. Reynous, 4 Burr. Esp. 631; Aubert vs. Maze, 2 Bos. & 
 2069; Amory vs. Meryweather, 2 B. P. 374; Steers vs. La.shley, 6 T. R. 
 & C. 573; s. c. Chit. Jr. 120; Rawl- 61; Chit. Jr. 533; Amory vs. Mery- 
 ings vs. Hull. 1 C. & P. 11; Wood- weather, 2 B. <k C, 573. As to re- 
 worth vs. Bennett, 43 X. Y. 273- lieving parties from wagering trans- 
 277; Wyman vs. Fiske, 85 Mass. actions, sec "Remedies," Cii. VII.
 
 648 Stock-brokers and Stock K.vcliaii^es. 
 
 Chapter VI. 
 
 STOCK EXCHANGE SECURITIES ; NEGOTIABILITY AND NON- 
 NEGOTIAHILITY ; DEALING WITH APPAKENT OWNERS; 
 FRAUD ; ILLEGALITY. 
 
 /. Stoch Exchange Securities, 
 {a.) Negotiable Securities, 
 {b.) No n- Negotiable Securities. 
 II. Negotiability. 
 
 {a.) Origin and Nature of Negotiability. 
 
 {b.) How Negotiability may be Established. 
 
 {c.) Requisite JElements of Negotiability. 
 
 (d.) Results of Negotiability; Bona Fide Holders. 
 
 III. Xon-JS^egotiahility. 
 
 (a.) Doctrine of Non-Negotiability. 
 
 (b.) Negotiability as Apj^lied to Stock Certificates. 
 
 (c.) Forged Transfers. 
 
 IV. iJealiny loith Apparent Owners j Fraud ; Illegality. 
 
 I. Stock Exchange Securities. 
 
 In this subdivision of this chapter we propose to discuss 
 the different kinds and general character of the property in 
 which Stock-brokers deal, and which is comprehended under 
 the general name of "securities." 
 
 Securities may be divided into two classes — first, those 
 which are negotiable and, secondly, those which are not 
 negotiable, and, as it is of the utmost importance to ascertain
 
 Negotiablo Securities. 649 
 
 whether an instrument is negotiable or not, it being obvious 
 that, if it has the former character, its vahie is greatly en- 
 hanced, we have in the second and third subdivisions of tliis 
 chapter entered more fullv into a discussion of the subject of 
 negotiability and non-negotiability than perhaps the scope 
 of this work might warrant, confined as it is to the transac- 
 tions of Stock-brokers, and the securities in which they deal. 
 It will be seen hereafter that many of the securities 
 classed as negotiable, may, for various reasons, be, or be- 
 come non-negotiable, whilst on the other hand, non-negoti- 
 able instruments, may, under circumstances, become nego- 
 tiable, and the decided tendency of the courts is to uphold 
 the usage of Brokers giving them that quality when accom- 
 panied by blank transfers and powers of attorney in blank. 
 
 (a.) Nefjotiable Securities. 
 
 The negotiable securities usuallv dealt in on the Stock 
 Exchange are : 
 
 1. United States hmds. These bonds ai-e issued by the 
 Secretary of the Treasury under authority of acts of Con- 
 gress, and are negotiable.' There is no doubt that genuine 
 Treasury notes form ])art of the negotiable commercial 
 paper of the country;^ and that when the United States 
 become parties to commercial paper they incur just the 
 same responsibilities as pi'ivate persons under the same cir- 
 cumstances.' 
 
 In Seybel vs. Xatioiud Currency 15ank ' I'nited States 
 
 'Cooke V8. United Statos, 12 'United States vs. Hank of .Mc- 
 
 Blatchf 4.1. rev'd 91 U. S. .isy. tropoIi.s, 15 Pet. 377; The Floyd 
 
 ' Verrnilye vs IOxpn?s« Co., 21 .\cc-eptanc-eH, 7 Wall. (J()0. 
 
 Wall l.W; Dinsmorc vh Dunnin, .'57 * b\ N. Y. 288. 
 N. Y. r»7.'l; Frazer vs. D'lnviUiers, 2 
 Pa. St. 200.
 
 650 Stock-brokers and Stock Exchanges. 
 
 bonds were held to be negotiable, so that a dealer in them 
 was not bound to ask any questions whatever from one of- 
 fering them for sale, and that omission to examine notices 
 affecting them left at his office was not enough to prove bad 
 faith. 
 
 2. United States gold certificates are also negotiable in- 
 struments.* 
 
 3. Certificates of deposit of silver htdlion were admitted 
 to regular trading on the New York Stock Exchange about 
 the year 1885.^ In an early case in Pennsylvania these cer- 
 tificates were held not negotiable, as they were not for the 
 payment of a certain sum of money, and did not contain a 
 fixed time of payment.^ Quwre, however, whether these 
 certificates may not be negotiable under the Negotiable 
 Instruments Law, and the usages of the exchange. 
 
 4. Bonds of foreign governments or companies, also may 
 be negotiable. It is so held of Prussian bonds in England.^ 
 
 ' Kulb vs. United States, 18 Mortgage Bank (London Joint- 
 
 C. Cls. 560. Stock Bank vs. Simmons, [1892] 
 
 * Johnson's Encyclop£edia, title, A. C. 201); American Railroad 
 "Stock Exchange." bonds (Venables vs. Baring, [1892] 
 
 'Hegemanvs.McCall, lPhila.529. 3 Ch. 527; Bentinck vs. London 
 
 * Gorgier vs. Milville, 3 B. & C. 45. Joint-Stock Bank, [1893] 2 Ch. 120; 
 The following have been also held Edelstein vs. Schuler, [1902] 2 K. B. 
 
 to be negotiable: Spanish bonds 14-1). 
 
 (Haseltine vs. Siggers, 1 Ex. 856); But foreign bonds to which the 
 
 fully paid Russian and Hungarian coupon sheets are not attached are 
 
 scrip (Goodwin vs. Robarts, 1 App. not negotiable. Picker vs. London 
 
 Cas. 476); unified Egyptian bonds, and County Banking Co., 18 Q. B. 
 
 Egyptian Preference Government D. 515. 
 
 bonds, and New South Wales bonds And from Lang vs. Smith, 7 
 
 (London vs. London, 21 Q. B. D. Bing. 284, it may be inferred that 
 
 535); French bonds (Symons vs. foreign instruments are not nego- 
 
 Mulkem, 30 W. R. 875); Russian tiable, unless negotiable where 
 
 bonds (Attorney General vs. Bou- made. See Smith's Leading Cases, 
 
 wens, 4 M. & W. 171); mortgage 11th ed. (note to Miller vs. Race) 
 
 bonds of the Buenos Ayres Land vol. 1, p. 479.
 
 Negotiable Securities. 651 
 
 Bonds are generally so distinctive and invariable that it 
 can be said of them, as a class, that they are negotiable.^ 
 But they are not negotiable unless they possess the elements 
 of negotiability, e. g., East India bonds ; -' but these were 
 made so by a statute passed in the reign of George the 
 Third.^ 
 
 5. Scrip of foreign governments is also negotiable because 
 treated as such in the stock markets.^ 
 
 6. Municipal bonds are usually in negotiable form like 
 promissory notes.* 
 
 7. State honds.^ 
 
 8. County honds? 
 
 9. City honds.^ 
 
 ' See Odell vs. Gray, 15 Mo. 337. Finnegan vs. Lee, 18 How. Pr. 1S6; 
 
 » Glyn vs. Baker, 13 East, 509. State vs. Cobb, 64 Ala. 127. 
 
 ' 51 Geo. III. c. 64, § 4. ' Colson vs. Arnot, 57 X. Y. 253. 
 
 Eiif^lish E.xchequer Bills are ne- ' Dutchess, etc., Iiis. Co. vs. Ilach- 
 
 potiable. Wookey vs. Pole, 4 B. & field, 73 N. Y. 226; Elizabeth City 
 
 A. 1; Brandao vs. Barnett, 1 M. & vs. Force, 29 N. J. L. 587; Bloom- 
 
 Gr. 909. ington vs. Smith, 123 Ind. 51. If 
 
 * Goodwin vs. Robarts, L. R. 1 the name of the payee is left blank, 
 App. Ca.s. 467, followed in Rinnl)all they are still negotiable, although 
 vs. Metropolitan Bank, L.R. 2 Q. li. they state on their face that they 
 Div. 194; 46 L. J. Q. B. 340; Shef- were intcnfled to be i.ssucd as regi.s- 
 field vs. Bank, L. R. 13 .\. C. 312. tered, as the requirement of rogis- 
 
 But if "Bordereaux" and "Cou- tration was for the purpose of a 
 
 pons" entitling the bearer to por- record. Manhattan Savings Inst, 
 
 tions of the public debt of the vs. N. Y. &c. Bank, 170 N. Y. 58. 
 
 kingdom of Naples, do not pass in When, however, city bond.s bear 
 
 England like money, they are not upon their face a statement that 
 
 negotiable. Lang vs. Smith, 7 they are tran.sferable Only at the 
 
 Bing. 284. ofTice of the city treasurer, and are 
 
 * See .\m. & Eng. Ency. of Law made payable to a named payee, 
 (2d ed), vol. 21, p. .54, and cases they are not negotiable, even al- 
 cited. flioin^h assigned l)y eiuiorsemetit in 
 
 *. State of 111 vs. Dclafield, H bhiiik. Scollans vs. Rollans, 173 
 
 Paige, .527, afT'd 2 Hill, 1.59; Rail- Mass. 275. But see S. C, 179 Muss, 
 
 road Cos. vs. Schutte, 103 U. S. 118; 346.
 
 652 Stock-brokers and Stock Kxcluiiises. 
 
 10. YiUaye hands} 
 
 11. Bailroad bonds ^^ And tlie purchaser of such bonds 
 in open market in the ordinaiy course of business is not 
 bound to a close and critical examination of them to escape 
 tlie imputation of bad laitli.' In the State of New York 
 a railroad bond pa3'able to bearer may be made non-nego- 
 tiable by endorsing thereon and subsci-ibing a statement 
 that the same is the property of the owncr.^ 
 
 12. Coupons. It was a disputed point at lirst whether 
 coupons were negotiable ; and in the case of Jackson vs. 
 Y. tfe C. Railroad Co.,° it was held, against the dissenting 
 opinion of Goodenow, J., that an action could not be main- 
 tained by an assignee upon interest coupons not containing 
 negotiable words. But the Supreme Court of the United 
 States, in the case of Comrs. of Knox Co. vs. Asjjinwall," 
 fully sustained their negotiability, as did the Supreme Court 
 of Pennsylvania," though in both of these cases the couj)ons 
 were in negotiable terms. Since which time the courts 
 have universally declared them negotiable, if negotiable in 
 form and not matured.^ 
 
 * Bank of Rome vs. Village of vol. 23, pp. 837-840, and cases 
 
 Rome, 19 N. Y. 20. cited. 
 
 MVelch vs. Sage, 47 X. Y. 143; ^ Birdsall vs. Russell, 29 N.Y. 220. 
 
 Brainard vs. N. Y., etc., R. R. Co., * L. 1871, ch. 84, § 1, repealed by 
 
 25 X. Y. 496; Murray vs. Lardner, the Xegotiable Iii.struments Law (L. 
 
 2 Wall. 110; Fisher vs. Morris, 3 1897, c. 712), § 66 of which pro- 
 
 Am. Law Reg. 423. vides that an endorsement of a ne- 
 
 But if there is uncertaint}^ as to gotiable instrument may be re- 
 
 the time of payment, they are non- strictive, thus (subd. 1) proliibiting 
 
 negotiable. Allen vs. Choteau, 70 the further negotiation of the in- 
 
 Mo. 290. And if the payee's name strument. 
 
 is inserted, there .should be an a.s- * 48 Me. 147. 
 
 signment to enable the purchaser to ' 21 How. U. S. .539. 
 
 sue in his own name. Bunting vs. '' Beaver vs. Arm.strong, 44 Pa. 
 
 Camden R. Co.. 81 Pa St. 254. See St. 63. 
 
 .\m. & Eng. Ency. of Law (2d cd.), ' Evertson vs. Xat. Bank, 66 X
 
 Negotiable Securities. 653 
 
 Coupons are in form and terms nothing else than promis- 
 sory notes, and their negotiability is a question of \a\v to 
 be determined from the instruments themselves, by the 
 same fixed and well-settled rules which apply to promis- 
 sory notes ; * and they are entitled to days of grace, the 
 same as promissory notes, so that a purchaser of them be- 
 fore the expiration of the days of grace is a purchaser 
 before maturity.^ Their negotiability is not afFected by 
 detaching them from the bonds, and the holder may re- 
 cover upon them without producing the bonds ;^ and yet 
 a coupon in the ordinary form is but a repetition of the 
 contract which the bond itself makes for the payment of 
 interest, and simply a device for the convenience of the 
 holder ; and is therefore so far aided and protected by the 
 bond that it was at one time understood not to be barred 
 by limitation unless the bond also was so barred.* 
 
 But in the case of Clark vs. Iowa City ^ the court held 
 that when dissevered from the bond coupons wei-e sul)ject 
 
 Y. 14; Murray vs. Lardner, 2 Wall. 06 X. Y. 14. Contra, .\reiit.s vs. 
 
 110; Gelpcke vs. Dubuque, 1 id. Commonwealth, 18 Grattan, 773; 
 
 175; Meyer vs. Muscatine, 1 id. 3S5; Cliaffee vs. R. R. Co., 146 Mass. 
 
 Gilbouj^h vs. Norfolk & Petersburg 233. 
 
 R. R. Co., 1 Hughes (U. S.), 410; Ud. 
 
 Morris Canal & Bank Co. vs. Lewis, ' Knox County vs. .\s|)inwali, 21 
 
 12 .\. J. Eq. 323; Same vs. Fisher, How. (U. S.) 539; Beaver County 
 
 9 id. 667; and .see Green's Briee's vs. Armstrong, 44 Pa. 63; Thomp- 
 
 Lltra Vires (2d ed), 270, where an- son vs. Lee County, 3 Wall. 327; 
 
 thorities are eollerted. See also Daniel on Neg. lasts, vol. 2, p. 492. 
 
 Kerr vs. City of Corry, 105 Pa. St. and ca-se.s eilod. 
 
 282; Copper vs. Mayer, 44 .\. J. L. 'The City vs. Lamsou, 9 Wall, 
 
 63-1; Gilrnan VH. New Orleans &c. R. 477; Lexington vs. Butler, 11 id. 
 
 Co., 72 .\la. 5C6. And sc-e Am. & 282; Reading vs. Porter, 2 Par. 
 
 Eng. Eticy. of Law (2d ed), vol. 8, Rep. (Cal.) 888; Meyer vs. Porter, 
 
 p. 3, and chhcs cited. 65 Cal (57. 
 
 ' Jackson vs. Y. «t C. R. Co., 48 ' 20 Wall. 583; Amy vs. Dubuque, 
 
 Me 147; Spoonor vh Iloline^, 210 98 U. S. 470. 
 Mawi 503; Evertson vs. .\at. Bunk,
 
 654 Stock-brokers and Stock Exchanges. 
 
 to the Statute of Limitations, and that it began to run from 
 their dates. The court said : " Coupons for the different 
 instalments of interest are usually attached to these bonds 
 in the expectation that they will be paid as they mature, 
 however distant the period fixed for the payment of the 
 principal. These coupons, when severed from the bonds, 
 are negotiable and pass by delivery. They then cease to 
 be incidents of the bonds, and become in fact independent 
 claims. The}'^ do not lose their validity if for any cause 
 the bonds are cancelled or paid before maturity, nor their 
 negotiable character, nor their ability to support separate 
 actions ; and the amount for which they are issued draws 
 interest from their maturity. Every consideration, there- 
 fore, which gives efficacy to the Statute of Limitations 
 should be applied to actions upon the coupons after their 
 maturity. . . . All statutes of limitation begin to run when 
 the right of action is complete ; and it would be excep- 
 tional and illogical to hold that the statute sleeps with 
 respect to claims upon detached coupons, w^hile a complete 
 right of action upon such claims exists in the holder. But, 
 if coupons not negotiable in form are detached from the 
 bonds, the negotiability of the latter is not communicated 
 to them."i 
 
 It has been held that where bonds and coupons issued to 
 bona fide holders for value are valid by the judicial deci- 
 sions of a State when issued, their validity in such hands 
 should not be alloAved to be impaired by a change of deci- 
 sion;^ and any such judicial oscillation was censured by 
 
 ' Evertson vs. Nat. Bank, 66 N. ' The City vs. Lamson, 9 Wall. 
 Y. 14. See also to same effect, 477. 
 Koshkonong vs. Burton, 104 U. S. 
 668.
 
 >>£:otial)le Securities. 656 
 
 the Supreme Court of the United States in Gelpcke vs. Du- 
 buque.- 
 
 In England these coupons and interest warrants are held 
 to be promissory notes and negotiable according to the 
 same rules.^ 
 
 Interest runs on coupons from their maturity' ; ^ and al- 
 though detached from the bonds, they are still liens under 
 the mortgage given to secure the same, whether the hold- 
 ers are entitled to ap;'o rata distribution or are entitled to 
 payment in the order in which the coupons fall due.* 
 
 The purchaser in good faith for value of overdue cou- 
 pons from negotiable bonds that have been stolen, acquires 
 no title against the owner of the bonds, although the bonds 
 were stolen before the coupons were due.^ 
 
 13. Debenture honds payable to bearer. These have been 
 held to be negotiable, if a custom to that effect is proved, 
 although the custom is of recent origin.^ And a recent 
 
 ' 1 Wall. 175, 20G. See also 2 also Daniel Neg. Insts. § 1513, et 
 
 Edward.s on Bills and Notes (3d seq. 
 
 ed.), ch. XI. p. 655; Burrou<:hs on * Green '.s Brice's Ultra Vires, 271. 
 
 Public Securities, ch. XII, p. 570; 1 Am. & Enj;. Ency. of Law (2d ed.), 
 
 Southern Law Kev. (Old Ser.) 189; vol. 8, p. 13. 
 
 8 id. (New Ser.) 351; Eaton k Gil- » Hinckler vs. Merchants' Xat. 
 
 belt's Commercial Paper, § 29, and Bank, Mass. S. J. C. (April, ISSl), 
 
 cases cited. If the coupons refer, 24 Alb. L. J. 4.3G; 131 Ma.>^. 147; 
 
 a.s to the interest, to the bonds and Daniel XeR. Insts §§ IKH, 1470, 
 
 mortRaKC securing same, they are and cases cited, 
 
 not negotiable. Mcl.,elland vs. • Beciuianaland Exjiioration Co. 
 
 Xorfolk, 110 X. V. 400. vs. London Trading Bank, (IS'.)S) 2 
 
 ' Ex parte Colbonie, L i{, 11 V.<\. Q. B. 0.58. In a prior ca.se such 
 
 478; Ex parte City Bank, L. K. 3 Ixmds were held not negotiable, es- 
 
 Ch. App. 7.58. pccially when conditions were at- 
 
 ' See caw^s collected in Green's t.nciied. Crouch vs. Credit Jiank, 
 
 Brice'H Ultra Vires, 270, and also L. R. 8 Q. B. .374. But the former 
 
 ca«eH collected in Am. it Eng, Ency, cji.se held thai, the la.st cited cilso 
 
 f>f Law (2*\ ed.), vol. 8, p. 10. ,%•(! was overruled !iy Goodwin vs. 
 
 UobartH, 1 App. Coses, 470.
 
 656 Stock-brokers and Stock Exclianges. 
 
 English case 'held that it is not now necessary to tender 
 evidence that such bonds are negotiable, that being a fact 
 of which the courts will take judicial notice. 
 
 1-i. Share warrants to hearer. Shares in a company 
 transferable by share warrants to bearer are negotiable.'^ 
 
 (b.) Kon-negoiiable Securities. 
 
 1. Certificates of stocl. Cei-tilicates of stock are the cus- 
 tomary and convenient evidence of the holder's interest in 
 the corporation issuing it.^ 
 
 They are not regarded as negotiable instruments'* altliough, 
 in certain circumstances, they may practically become so.'' 
 
 2. Dividend warrants. It has been held in England that 
 dividend warrants (i. e. Bank of England checks drawn 
 upon its cashier, and payable to a named payee, but with- 
 out negotiable words) are not negotiable.^ 
 
 II. Negotiability. 
 
 (a.) Origin and Nature of Negotiability. 
 
 At common law choses in action Avere not assignable, so 
 that the assignee could bring an action in his own name.^ 
 Blackstone's views of a chose in action,*^ '" tliat all property 
 
 ' Edelstein vs. Schuler, (1902) 2 « Partridge vs. Bank of England, 
 
 K. B. 144. 9 Q. B. 396. 
 
 2 Brodhurst's Law of the Stock ' Co. Litt. 214a, 266a; Greenby 
 
 Exchange, p. 81. Share warrants vs. Kellogg, 2 Johns. 1; Pitt vs. 
 
 for fully paid up shares are nego- Holmes, 10 Cush. 92, 96; Tiernan 
 
 liable by statute. 30 & 31 Vict. vs. Jackson, 5 Pet. 580; Edwards 
 
 c. 131, § 28. on Bills, 55; Chitty on Bills (*7), 9; 
 
 ' Daniel, Neg. Inst. (5th ed.) Eaton & Gilbert on Commercial 
 
 p. 728. Paper, 10; Daniel on Negotiable 
 
 ^Id., p. 726, and cases cited in Instruments (5th ed.), 1. 
 
 note 1. "2 BI. Comm. 397. 
 
 'Id., and cases cited in notes 2 
 and 3.
 
 Origin aud Nature of Negotiability. 657 
 
 in action depends entirely upon contract, either express or 
 implied, \Yhicb are the only regular means of acquiring a 
 chose in action," is now regarded as too limited. A better 
 definition is given by Bronson, C. J.,' who, adopting tlie 
 distinction made by Bhickstone between a chose in posses- 
 sion and a chose in action, ]M-oceeds to define the hitter as 
 including "all rights to personal property not in possession 
 which may be enforced by action, and it makes no ditfer- 
 ence whether the owner has been deprived of his property 
 by the tortious act of another, or by his breach of contract, 
 express or implied. In both cases the debt or damage of 
 the owner is a thing in action." 
 
 Under the term "chose in action" were included all in- 
 struments acknowledging an indebtedness or promising to 
 pay money. The inconvenience of this doctrine of non-as- 
 signability, in a country whose great aim was to foster and 
 encourage commerce, w;is snflicient to condemn it ; and we 
 find the courts very earW recognizing a custom of mer- 
 chants bv which bills of exchan<>:e were made "negotiable" 
 — that is, they could be transferred, and the hokhn-, en- 
 dorsee, or assignee might enforce payment of the same in 
 his own name.^ 
 
 ' Gillet vs. Fairchild, 4 Den. 80. Grover, 24 Pick. 261; Pitt vs. 
 
 'In Thoinp.son v.s. Doininy, 14 Hdlmos, 10 Cii.sli. 92, 97; .\mhcrst 
 
 •M. & W. 40.3, 407, Parkp, H., said: Ac-adciny v.s. CowLs, Pick. 427); 
 
 " I never heard it arj^ued tliat a con- and the as.sifi;nor acting in folin.sion 
 
 tract wa-s traii.sferaljle except by tlic with the debtor could not witlidraw 
 
 law merchant." .\nd, sjMjakinK of a .such a suit so a.s to bar a similar 
 
 bill of lading, he a<lded: "It trans- suixsequent suit by the aMsigneR 
 
 fers no more than the property in (Welch vs. .Miindeville, 1 Wheat, 
 
 the nood«; it does not transfer the ?:V.i, afT'd f) id. 277). The ri^ht of 
 
 contract." iho HKsinnce to use the uRsiirnor'a 
 
 The HHsif^oc of a clmw; in a<-tion name is incidental to the a.ssii;n- 
 
 could maintain an action at law in meni, ax Morton, .1 , said, in Kiust- 
 
 the name of tin- a.K«innor (CJrover VH. man vs. Wright, (I Pi«'k. 31(i, 322: 
 
 42
 
 658 
 
 Stock-brokers and Stock Exclians^es. 
 
 A negotiable instrument is a chose in action even before 
 maturity, anu may be transferred by assignment in the 
 same manner as an ordinary chose in action ; and if payable 
 
 "The assignor, by the assignment, 
 gives authority to the assignee to 
 use his name in any legal proceed- 
 ings which may become necessary 
 to give full effect to the assignment. 
 The assignor becomes the trustee of 
 the assignee, and a release made by 
 him after notice of the assignment 
 would be a fraud upon the assignee, 
 and would not defeat an action 
 brought for the benefit of the latter 
 in the name of the former." 
 
 In a court of equity the assignee 
 of a chose in action could always 
 sue in his own name, irrespective of 
 any promise by the debtor to pay 
 him if he had no remedy at law 
 (Lett vs. Morris, 4 Sim. 607; Row 
 vs. Dawson, 1 Ves. Sen. 331). In 
 the case last cited the Lord Chan- 
 cellor said: "And though the law 
 does not admit an assignment of a 
 chose in action, this court does, and 
 any words will do." See also En- 
 sign vs. Kellogg, 4 Pick. L If the 
 assignee could enforce his legal de- 
 mand, he was left to his action at 
 law in the name of the assignor; but 
 if the latter refused to allow him to 
 use his name, or otherwise acted in 
 collusion with the debtor, then^ 
 upon sufficient facts shown, equity 
 would allow the assignee to sue in 
 his own name (Ontario Bank vs. 
 Mumford, 2 Barb. Ch. 596; Carter 
 vs. United Ins. Co., 1 Johns. Ch. 
 463; Hammond vs. Messenger, 9 
 Sim. 327). 
 
 It is provided by the English Ju- 
 dicature Act (1873, § 25, subd. 6) 
 
 that a debt or other legal chose in 
 action may be assigned so that the 
 a.ssignee shall have the same reme- 
 dies thereon as the assignor, but 
 subject also to all equities, at least 
 to the extent of the assigned obliga- 
 tion (Young vs. Kitchin, L. R. 3 
 Ex. D. 127). 
 
 In the State of Xew York an ac- 
 tion may be maintained by the 
 transferee of a claim (Code Civ. 
 Proc. § 1909) but certain claims are 
 not assignable (§ 1910). See cases 
 cited in notes appended to these 
 sections in Stover's Anno. Code (5th 
 ed.), and Bliss's Anno. Code (5th 
 ed.). And, no doubt, in most of 
 the States, an assignee of a chose in 
 action inaj^ sue in his own name, 
 either by force of statute or of es- 
 tablished usage. Cox vs. Sprigg, 6 
 Md. 274; Smith vs. Schibel, 19 Mo. 
 140; Long vs. Constant, id. 320; 
 Cobb's Dig. (Ga.) 519; Prioleau vs. 
 South W. R. Bank, 16 Ga. 582; 
 Worthington vs. Curd, 15 Ark. 491. 
 In Allen vs. Brown (44 N. Y. 228), 
 Hunt, C, referring to §§111 and 
 113 of X. Y. C. of P., from which 
 sections 1909-10 of the present 
 Code are derived, says: "These pro- 
 visions are intended to abolish the 
 common-law rule which prohibited 
 an action at law otherwise than in 
 the name of the original obligee or 
 covenantee, although he had trans- 
 ferred all his interest in the bond or 
 covenant to another." See Eaton 
 tt Gilbert's Commercial Paper, § 8.
 
 Origiu and Nature of Negotiability. 659 
 
 to order and transferred witliout endorsement by parol and 
 manual delivery only, the transferee acquires only the rights 
 he would have had had the instrument been orii^nnally ni)n- 
 negotiable — i. e., the rights of the payee at the time of the 
 transfer,* 
 
 In Freund vs. Importers, etc., Bank- the payee of a 
 check payable to order transferred it to B without endorse- 
 ment, and it was held that he thereby became the lawful 
 assignee and owner of it, and entitled to have and enforce 
 payment from the bank which had certified it, but that he 
 had no greater right than he would have had if it had been 
 originally non-negotiable.^ 
 
 It would not be profitable to enter into an abstract in- 
 quiry as to the meaning of the \vord negoiUiUe, based either 
 upon its etymology or history. It has no specially interest- 
 ing or valuable history apart from its somewhat technical 
 use as a word of commerce. The meaning of the original 
 Latin word neyotiuni is husifiess,^ and indicates that a 
 negotiable instrument should relate to and facilitate business 
 affairs ; the past and present use of the word negotiaUe is 
 therefore quite in liarmony with its literal import,' and we 
 
 ' Negotiable Instruments Law, * Andrew's Frcund's Latin Diet. 
 
 § 60 et seq. ' rriniurily the word nejr<itial)ility 
 
 ' 76 X. Y. 3.52. means the eapabiUty of being nego- 
 
 ' Whistler vs. Forster, 14 C. li. (n. tiated—that is, transferretl liy en- 
 
 8.) 248. Therefore, if the holder of dorsement and delivery so as to 
 
 a bill payable to bearer as.signs it by give the endorsee a right of action 
 
 deed to D., and afterwards transfers on the negotiated iu.struinent, in his 
 
 it liy dehvery to E, who takes it for own name —and is nothing njoro; 
 
 value and without notice, E.'s title therefore, an in.strument, e. g.,al>ill 
 
 prevails over D.'s (.Vulton vs. .Vt- of lading, may l)e made negotialjlo 
 
 kins, ISC. B. 249); but if K. had no- by a statute or declared to l)e so by 
 
 tice of the prior assignment, it a court, and yet its negotiation may 
 
 would be sustained (Sheldon vs. not l»e attendetl with all the conso- 
 
 I'arker, 3 Hun, 498). See Eaton <nu'ncc!s and effects which generally, 
 
 k fiilljert's Com. Paper, \ 09. but not always, result from tlie ne-
 
 6(30 Stock-brokers and Stock Exchaiiffos. 
 
 may at onee proceed to state the accepted definition of a 
 negotiable instrument as a loritten promiae^ order, or reqaent 
 for the payment of a certain sum of 'nioneij to A, or order, or 
 hearer^ a definition which was (as to promissory notes) sub- 
 stantially adopted hy and iniplitnl in the New York Revised 
 Statutes,'^ which enacted that " all notes in w^-iting made and 
 signed by any person whereby he shall j)romise to pay to any 
 other person or his order, or bearer, any sum of money 
 therein mentioned, shall, etc., and shall have the same effect 
 and be nejrotiable in like manner as inland bills of ex- 
 change, according to the custom of merchants." 
 
 This provision was taken without material change from 
 3 and 4 Anne, c, 9, the preamble of which recites that it 
 had been held that promissory notes were not endorsable 
 over like bills of exchange.^ This act contains several items 
 of internal English history pertinent to the subject now un- 
 
 gotiatiou of bills and notes (Shaw tliat an instrument "is called ne- 
 
 vs. Railroad Co., 11 Otto, 557, 563). gotiable when the legal title to the 
 
 ' The definition of a negotiable instrument itself, and to the whole 
 instrument in the text has been amount of money expressed upon 
 adopted in California (Code, § 3087) its face, may be transferred from 
 as to six kinds of negotiable instru- one to another by indorsement and 
 ments, viz., bills, notes, bank notes, delivery by the holder, or by de- 
 checks, bonds and certificates of liverj' only.'' 
 deposit. The Negotiable Instruments Law 
 
 The following definition of nego- (§ 20), sets forth the requirements 
 
 tiablc instruments is given in necessary to make an instrument 
 
 Black's Law Dictionary, title "Ne- negotiable. 
 
 gotiable Instruments:" "Any writ- ^ 1 Rev. Stat. 768, § 1; R. S. pt. 
 
 ten securities which may be trans- II. ch. 4, tit. II. § 1. Repealed by 
 
 ferred by indorsement and deUvery, the Negotiable Instruments Law 
 
 or by delivery merely, so as to vest (L. 1897, c. 612), § 20 of which 
 
 in the indorsee (or holder) the legal makes provision as to the form of a 
 
 title, and thus enable him to sue negotiable instrument, 
 
 thereon in his own name." ' Referring, it is supposed, to 
 
 In Daniel on Negotiable Instru- Clerke vs. Martin, 2 Ld. Raym. 757. 
 ments (5th ed.), § 1, it is stated
 
 Origin and Nature of Negotiability. Gt!l 
 
 der examination: 1. That prior to it (1704) j)romissory 
 notes were not negotiable ; 2. That bills of exclian*re were: 
 3. That such negotiability luul its origin in the custom of 
 merchants.^ 
 
 AVhen this custom was established is not precisely known. 
 Daniel says^ (citing Anderson's History of Commerce, vol. 
 1, c. 361), "There is reason to believe that bills of ex- 
 change were known in England as early as 1307, since in 
 that year King Edward I. ordered certain money collected 
 in England for the Pope, not to be remitted to him in coin 
 or bullion, but by way of exciiange (per viam Canibiij."' 
 And Chitty ^ says that the statutes show that bills of ex- 
 change (foreign) were in use by English merchants as early 
 as tiie middle of the fourteenth century, but that there is no 
 mention of them in the law reports until the time of 
 James I.* 
 
 Inland bills of exchange came into use somewhat later, 
 it is said, and did n(jt come before the courts until the case 
 of Chat vs. Edgar,'^ which was within the memory of 
 Lord Ilolt.* They were at first regarded Avith great dis- 
 favor by the courts and their use restricted to merehaiits ;^ 
 but, by the statutes of Anne'^ and AVilliam III.,' they 
 were placed substantially on the same footing as foreign 
 bills. 
 
 Promissory notes were not introduced into England until 
 about the middle (jf the seventeenth centuiy, oi* perhaps 
 
 'See Richards vs. Warrintr, IV.) * Hiillf-r vs. Crips (» Mod. 20. 
 
 Barb. 42, 10. ' Hroniwick v.s, l.nyd, 2 Lut. 15S2 
 
 ' .\«'«. In«. (fith ed.) p. 1. SF,. 
 
 ' Hill.s of Ex. (*11) If). " .3 it I .Vni.c, <• <t 
 
 ♦.Martin vh. Howie, 2 Croke's ••.) it 10 Williaiii III. c. 17. 
 licp. () nO.Imv 1), 
 
 ' 1 Kr-I.. (i.Ki, ill io:j«.
 
 662 Stock-brokers and Slock Exchanges. 
 
 somewhat later. They had been previously in use upon the 
 continent of Europe.' 
 
 (h.) Ifnw Negotiahilit 1/ may he Eafahlhhed. 
 
 As the doctrine of the negotiability of bills of exchange 
 was first established by the custom of merchants, some pass- 
 ing observations upon these customs, and their force and 
 effect in the law, will not be out of place. 
 
 The law-merchant consists of those general customs of 
 merchants which have received the sanction of judicial de- 
 cisions, and are thereby recognized as binding and authorita- 
 tive. Thus Lord Campbell says ^ that, " when a general 
 usage has been judicially ascertained and established, it be- 
 comes part of the law-merchant which courts of justice are 
 bound to know and recognize."' Quite in harmony with this 
 authority is the judicial exposition of Foster, J.,^ where he 
 says : " But the custom of merchants, or hiw of merchants, 
 is the law of the kingdom, and is part of the common-law ; " 
 and, again (referiing to two cited cases), " therefore these 
 judicial determinations of the point are the lex inercatoria 
 as to this question, which is part of the law of tiie land. 
 But this finding of the jury in the present case is directly 
 contrary to the lex niercatoria so fully settled and estab- 
 lished by legal adjudications." 
 
 Thus the law-merchant, being made up of venerable and 
 solemnized customs, according to some authorities, prevails 
 over any modern usage, and to a large extent over the ex- 
 press stipulation of parties. As Blackburn, J., says in 
 
 •Daniel on Nep. Ins. (5th ed.) * Brandao vs. Bamett, 3 C. B. 
 p. 5; Strong on Notes, § 6; Buller 519, 530. 
 
 vs. Crips, 6 Mod. 29. ^ Edie vs. East India Co., 2 Burr. 
 
 1216, 1226, 1228.
 
 How Negotiability may be Established. 6G3 
 
 Crouch vs. Credit Foncier,' " There is no decision or 
 authority that it is competent to a party to create by his 
 own act a transferable right of action on a contract ; " and 
 again, " "Where the incident is of such a nature that the 
 parties are not themselves competent to introduce it by ex- 
 press stipulation, no such incident can be annexed by the 
 trial stipulation arising from usage. // may he so annexed 
 hy the ancient laio-merchant, which forms part of the law, 
 and of which the courts take notice. Xor if the ancient 
 law-tnercliant annexes the incident can anv modern usasre 
 take it away." But it is very doubtful whether the courts 
 at the present day will carry the le:c mercatoria to such an 
 extent as this language seems to contemplate.^ And we 
 find the definition of the law-merchant wliich we have 
 given above adopted almost verbatim by Cockburn, C. J., 
 in a case where the doctrine of negotiability was established 
 by the custom of 13ank(^r and Brokers.^ " It is neither 
 more nor less than the usages of merchants of trade, ratified 
 by the decisons of courts of law, which, upon such usages 
 being proved before them, have adopted them as settled law 
 with a view to the interests of trade and the ])ublic conven- 
 
 * L. R. 8 Q. B. 374, 3SG. portation Co. vs. London Trading 
 
 * See chapter on "Usages." Bank, 2 Q. B. D. 058. In that ciuio 
 Since the text wa.s written it has the plaintiff's secretary fraudulently 
 
 been held that the doctrine enun- abstracted certain bearer debenture 
 ciated in Crouch vs. Cr<!;dit Foncier, bonds from plaintiff's safe and 
 supra, was overruled by the de- pledged them with defendant i)ank, 
 cisions in Goodwin vs. Hobarts, who in pood faith, advanced money 
 Hupra, and Rumball vs. Motropoli- thereon, and it was held that the 
 tan Bank, 2 Q B I). 191, and that, defendants were entitled to hold the 
 as there w!is sufficient proof of a boiuls as they were nc>;otiablo in- 
 mercantile u.saKe to treat debenture struments passinR by delivery. Id. 
 bonds payable to bearer as ncRo- ' GocKlwin vs. Hobarts, L. H. 10 
 liable, the latter flecisions should bo Ex. 337, 310. 
 followed B«-chuanalarid Trans-
 
 0G4 Stock-brokers and Stock Kxchauj^es. 
 
 ience. . . . I>y this process, what before was usage only, 
 unsanctioned by legal decision, has become engrafted upon 
 or incorporated into the common-law, and may thus be 
 said to form part of it/' And in "Williams vs. WiUiams^ 
 the endorsee of a })romissory note having declared on the 
 custom of mcrehanifi, it was objected that, the note having 
 been made in London, the custom, if any, should have been 
 laid as the custom of London ; but the courts answered 
 " that this custom of merchants was part of the common- 
 law, and the courts would take notice of it ex officio, and 
 therefore it was sufficient to say that such a person, secun- 
 dum usiwi et coiisuctudinem tnercatorum, drew the bill," 
 
 So, in a case in the State of New York, the Court of Ap- 
 peals held that the courts will take judicial notice of the 
 general course of business in a community, including the 
 universal practice of banks.^ 
 
 It is interesting to notice with what jealousy this custom 
 of merchants was regarded by the courts, and ev^en Lord 
 Holt was provoked by its aggressive influence to exclaim 
 " that it amounted to the setting-up of a new sort of spe- 
 cialty unknown to the common-law, and invented in Lom- 
 bard Street, which attempted in these matters of bills of 
 exchange to give laws to Westminster Ilall." ^ There is no 
 doubt that the judges were at that time intent in restrain- 
 ing the attempted aggressions of the merchants ; for Lord 
 Mansfield, in Grant vs. \^aughan,^ speaks of the " first 
 struggle of the merchants which made Holt so angry with 
 them." 
 
 In more modern times we also find striking examples of 
 
 • Carth. 269. •' Clerke vs. Martin, 2 Ld. Raym. 
 
 ' Merchants' Nat. Bank vs. Hall, 757. 
 83 X. Y. 338. ■■ 1 W. BI. 485, 487.
 
 How Negotiability may be Established. 005 
 
 the disposition of courts to act as conservators of legal prin- 
 ciples when they are imperilled by encroaching customs and 
 innovations. Thus in Donnell vs. Columbian Ins. Co.,' 
 Story, J., says : " I am among those judges who think 
 usages among merchants should be very sparingly adopted 
 as rules of court, ... as they are often founded in mere 
 mistake, and still more often in the want of enlarged and 
 comprehensive views of the full bearing of principles," and 
 in The Keeside- he " rejoices to find that of late years the 
 coui'ts of law, both in England and America, have been dis- 
 posed to narrow the limits of the operation of such usages, 
 and to discontinue any further extension of them ; " ^ and 
 Stone, J., another American judge, uttered the warning 
 that " it became us to feel our way cautiously, lest there 
 grow up in our midst some third estate (of customs and 
 usages) which shall in time usurp the government."* 
 
 In Dykers vs. Allen ^ Senator Wright remarks, with some 
 asperity, that " to allow the usages of "Wall Street to con- 
 trol the general law in relation to any matter might result 
 in the establishment of [)rinciples not always in accordance 
 with sound morals. I prefer that legal ])rinciples should 
 have a universal application, and that contracts should re- 
 ceive the same interpretation in the lhr()nge<l and busy 
 mart of a commercial metropi^lis that they do clsrwlu'i-e." 
 "Whatever may have been the spirit in which these ani- 
 
 ' 2 Sumn. .307. vs. Pound, 10 Iiid. 32; \>y IVrkins, 
 
 » Id. .507. J., in Cox vs. O'Uiley, 4 id. 308; and 
 
 ' Similarly plain and pertinent ex- hy .Miller, J , in Partridpe v.s. Ins. 
 
 prcasioiiM of judicial critici.sni were Co., 1.') Wall. .'>73, .W). 
 
 ma<le by Gibwjri, C. J., in Bolton v.s * Hariuw vs I.amhert, 2S .Ma. 
 
 Colder, 1 Watt.s, .30f); l»y Til-ilinian, 7(11 
 
 C. J , in Stoever vs. Whitman, '7 Hill, VM. 
 
 Binn. 110; by .Stuart, J., in Ilaqx-T
 
 006 Stock-broktrs juul Slock Fxchaiiffes. 
 
 madversions were made, it should be observed that they 
 ^vero, for the most part, directed against local customs and 
 limited usages. But the ])o\ver of the judges has been 
 futile in arresting the usages or customs of trade, even 
 when confined to certain localities and to particular occu- 
 pations ; and, as appears by the leading case of Goodwin 
 vs. Robarts,' the usages of Stock-brokers and Bankers have 
 been successfully invoked, even to confer upon instruments 
 the powers of negotiabilit3\^ 
 
 If the orisrinal law-merchant had been a fixed and stereo- 
 typed system incapable of expansion, the negotiability of 
 commercial paper -would have ended where it began, -with 
 bills of exchange, or, more accurately, with foreign bills of 
 exchange. Such, however, was not its character, and could 
 not, and cannot be, in tlie very nature of things, because 
 regulations for public convenience Avhich are sufficient for 
 the wants of one generation are not fully adapted and ade- 
 quate to the changed and multiplied wants of another. 
 Lord Holt, indeed, attempted to stop the growth of the 
 law-merchant and to exclude ]iromissory notes from its 
 operation;- but the British Parliament took sides with 
 the merchants and passed 3 and 4 Anne, ch. 0, and admit- 
 ted notes to a substantial equality with bills. Later on in 
 English history, a similar attempt ended with a similar re- 
 sult ; the decision in Glyn vs. Baker,^ that East India 
 bonds were not negotiable, was followed by the immediate 
 passing of 51 Geo. III. ch. 64, by which such bonds became 
 transferable by delivery. 
 
 » L. R. 10 Ex. 337. ^ Gierke vs. Martin, 2 Ld. Ra}'m. 
 
 * See this question further dis- 7.57. 
 
 cussed in chapter on "Usages," M 3 East, 509. 
 p. 411.
 
 How Negotiability may be Established. 067 
 
 So also, when the circulating qualities of bank-notes came 
 to be judicially examined in Miller vs. Race,^ Lord Mans- 
 field said, " They are treated as money in the ordinary 
 course and transactions of business by the general consent 
 of mankind.'' which was clearly a case of a universal usage 
 receiving judicial sanction. 
 
 And in Goodwin vs. Eobarts, already cited, Cockburn, 
 C. J., after showing by abundant illustration to what a 
 broad scope it has expanded in the present day, asks, with, 
 great force, " Why is the door to be now shut to the admis- 
 sion and adoption of usage in a matter altogether of cog- 
 nate character, as though the law had been finally stereo- 
 typed and settled by some positive and peremptory enact- 
 ment ? " "Whenever, and as fast as, new instruments are 
 required, it is safe to predict that they will come into use; 
 custom will adopt them, and then, in its turn and in the ful- 
 ness of time, the custom Avill receive the sanction of the 
 law. In this very case we have a most instructive example 
 of the manner in, and the conditions upon, which custom 
 adds to the number of negotiable instruments. The subject 
 of litigation was scrip of the Russian government issued in 
 England, by which that government promised not to pay 
 money, but to give certain bonds. This scrip wjis unlaw- 
 fully pledged by one not the owner, and then sold by the 
 pledgee to a honajide purchaser. The contention on bchall" 
 of the owner was that scri]) of this description not coming 
 un<l(.'r the category of any of the securities foi* ihoney which 
 by the law-merchant are capable of being transferrcil by 
 endorsement and delivery, and not being a security for 
 money at all, but only for the futun,- delivery of a bond, the 
 
 • 1 burr. 1.32, 1.07.
 
 G68 Stock-brokers and Stock Exchanges. 
 
 rights of the true owner could not be divested by the fraud- 
 ulent transfer of the chattel b}' a person who had no title 
 as against the owner. Cockburn, C J., in rendering judg- 
 ment, said : "The ninth paragraph of the special case con- 
 tains the following statement, upon which, as it appears to 
 us, the decision of the case turns : The scrij) of loans to 
 foreign government, entitling the bearer to bonds for the 
 same amount when issued by the government, has been 
 well knoAvn to, and largely dealt in bv, bankers, money 
 dealers, and the members of the English and foreign Stock 
 Exchanges, and through them by the public, for fifty years. 
 It is and has been the usage of such bankers, money -dealers, 
 and Stock Exchanges, during all that time, to buy and sell 
 such scrip, and to advance loans of money upon the securitj'' 
 of it before the bonds were issued, and to pass the scrip 
 upon such dealing by mere delivery as a negotiable instru- 
 ment transferable by delivery ; and this usage has always 
 been recognized by the foreign government, or their agent, 
 delivering the bonds when issued to the bearers of the 
 scrip." 
 
 The very serious point made by the plaintiff, that the 
 scrip was not negotiable because it was not a promise to 
 pmj money^ but to deliver a bond, Avas disposed of as fol- 
 lows : " We think that substantially, and in effect, it is a 
 security for money^ which till the bond shall be delivered 
 stands in the place of that document, which, when delivered, 
 will be beyond doubt the representative of the sum it is in- 
 tended to secure. . . . The usage of the money market has 
 solved the question whether scrip should be considered se- 
 curity for, and the representative of, money, by treating it 
 as such."
 
 How Noijotiability may be Established. 6G9 
 
 In Crouch vs. Credit Fonciei*/ which is in contrast with 
 the last case, but not inconsistent with it in its main feature, 
 we lind an example of the judicial rejection of a usage be- 
 cause, if admitted to exist, it was recent, and because an in- 
 cident Of attribute of negotiability could not be annexed to 
 an instrument bv the tacit stipulation of such a usage which 
 coulil not be introduced into it by the express stipulation 
 of the parties. 
 
 But in Yenables vs. Baring,^ decided in- the year 1892, it 
 was held that American railroad bonds, payable to bearer, 
 were ne<?otiable accordinir to the law merchant. And in 
 the later case of liechuanaland Exploration Co. vs. London 
 Trading Bank ^ it was held that English debenture bearer 
 bonds were negotiable, if a custom to that effect, although 
 of recent origin, was proved. 
 
 The recent case of Edelstein vs. Schuler^ went further and 
 held that the time had passed Avhen the negotiability of 
 bearer bonds could be called in question ; the existence of 
 the usage to ti'cat them as negotiable had been so often 
 proved, and its convenience was so obvious, that it must be 
 now taken to be ])art of the law-merchant ; and accordingly 
 it was not now necessary to tender evidence to prove that 
 such bonds were negotiable instruments, that being a fact 
 of which the court will take judicial notice. In that c;ise 
 the bonds consisted of South African Kailroad and Mining 
 bonds, and American Kaili-oad Bonds. 
 
 There may be also nog(jtiability by estop|)cl. Tl (feet 
 
 ' L. R. S Q. n .374, overruled ' (1.S92) 3 C'h. 527. 
 
 by GcKxJwn vh. Roharts, supm; ' (ISOK) 2 Q H. H.'iM. 
 
 Iiec-hu;inalnrnl Kxplorutiod Co. v«. « (1{K)2) 2 K. I» IIJ Soo iirti- 
 
 Ixiriflon TnuJing Hank, id. (1S98) 2 <l«-.s in l.'i I.onildii l^imrlcrly lie- 
 
 Q B. D. CW. view, UH), 2I.'».
 
 670 Stock-brokers and Stock Exchanges. 
 
 of the decisions in Goodwin vs. Robarts and Ruraball vs. 
 Metropolitan Bank, mijjra, seems to be, tliat if one deposits 
 Avith an agent a security on the face of it, payable to bearer, 
 he cannot recover it from a bona fide holder for value, in 
 case the agent fraudulently puts it into circulation, whether 
 the instrument is negotiable or not.* 
 
 But usage cannot make instruments on the face of which 
 the right to sue is limited, negotiable. 
 
 Thus in Glyn vs. Baker- (decided before the passing of the 
 Act of 51 Geo. 3, c. 64, § 4, making India bonds negotiable), it 
 would aj)peHr from the judgment of the court that even if the 
 jury had found the India bond to be negotiable, it could not 
 have been made so in contemplation of law, as it appeared 
 on its face to be payable to the original obligee, thus limit- 
 ing the right to recover its amount to the latter or his rep- 
 resentatives. 
 
 This was accepted as a correct statement of the law in 
 Partridge vs. Bank of England.^ In that case the plea was 
 that dividend warrants, i)ayable to a specific person, with- 
 out negotiable words, were, by a sixty years' custom of the 
 bankers and merchants of London, transferable by delivery 
 only, without endorsement. The Queen's Bench sustained 
 the plea ; but the Court of Exchequer rejected the custom, 
 because it appeared by the instrument that it was payable 
 to a particular person, and that usage could not make an 
 instrument so limited negotiable. 
 
 And although an instrument may be negotiable, the trans- 
 
 ' See also as to estoppel, Crouch Bentinck vs. London Joint Stock 
 
 vs. Crddit Foncier, supra; Colonial Bank, (1893) 2 Ch. 120. 
 
 Bank vs. Cady, 38 Ch. D. 388; 15 ' 13 East, 509. 
 
 App. Cas. 267; Fine Art Soc. vs. M5 L. J. Q. B. 395. 
 Union Bank, 17 Q. B. D. 705;
 
 How Negotiability may be Established. 071 
 
 feree ranst take loiiajide and for value.' Gross negligence 
 "Was formerly held evidence of malajidesi^ But in Goodman 
 vs. Harvey^ it was held that there must be actual mala fides. 
 
 Mere negligence on the part of the transferee, to detect 
 his transferor's bad title, cannot be pleaded as a defence to 
 an action by the transferee.^ 
 
 But if an agent pledges negotiable instruments for an 
 amount beyond the limits of his authority, and the pledgee 
 has notice of the limit, he can only retain the securities in 
 pledge to secure the amount authorized.' 
 
 Although if the pledgee has not such notice he may re- 
 cover the full amount due to him.^ Mere knowledge that 
 the pledgor is a Broker is not sufficient notice.' 
 
 And it has been held that the owner of a negotiable 
 instrument, ■which has been stolen, has no title to it as 
 against a hojiafide holder for value, although he prosecutes 
 the thief to conviction.^ 
 
 There are English cases in which the usage of a partic- 
 ular trade has been held to be binding on the pei*sons en- 
 fjaged in the trade. 
 
 Thus in Merchant Banking Co. vs. Pha^nix Bes. Steel 
 Co.,® a usage of the iron trade that warrants for goods " de- 
 liverable to A. B., or assigns, by endoi-sement hereon," 
 were considered to pass to the holders for value, free from 
 
 * Loiidnn Joint Stock Hank vs. ' Hentiiu-k vf?. London Joint 
 Simrnons, supra. Stork Hunk, supra. 
 
 » Gill vs. Cubitt, 3 H. (t C. 406. ' Huker vs. .NottinKHjuin Hank, (M) 
 
 »4A. & E. 870. L. J. Q. H. 5-12. See uIho in thi.s 
 
 * Veniibles vs. Hurinn, (1S02) 3 <<)iinection, cjimph cited in Smith's 
 Ch. .527. Leading Ciw. vol. I. p. 4S». 
 
 * Londoti Joint Stock Hunk vs. " I'hichester vs Hill it Son, .'»2 L. 
 Sirninr>n«, supra; Shefncid vs. Lon- J. il. H. HJO. 
 
 don JointStock Bank, 13 \\>\k Vm. * L. R r,ri». I). 20r). 
 .333.
 
 672 Stock-brokers aiul Stock Exchanges. 
 
 any vendor's lien, was hold to be binding on the steel com- 
 pany, which was tlic vendor. This usage was shown to 
 have been quite general in the iron trade for nearly forty 
 years, and Jessel, M. R., foinul that tlio steel company knew 
 of it and gave the iron-warrant for the purpose of having 
 it dealt with in accordance with the usage ; and that hav- 
 ing given such a document to a person knowing that he 
 could use it, and intending that he should use it by obtain- 
 ing money on it, it could not afterwards be allowed to set 
 up against persons from whom he had obtained money, 
 that they should not have the benefit thereof ; that the 
 company was estopped from so doing on the most elemen- 
 tary principles of equity.' 
 
 "Without discussing the question further, it is sufficient 
 for our purposes to show that by the English authorities, 
 the custom of Bankers and Stock-brokers, such as was pre- 
 sented in the case of Goodwin vs. Ilobarts, is sufficient to 
 confer upon instruments the impoilant attributes of nego- 
 tiability f and it will be important hereafter to consider 
 this doctrine in connection with the sul)ject of certificates 
 of stock, which are technically non-negotiable. 
 
 The precise question how far usage will be allow^ed to 
 operate in extending negotiability has not been much dis- 
 cussed in our courts, but the general rules imposing limita- 
 tions upon usage are strictly applied in the State of New 
 
 ' Consult also, iu this connection, ^ This case was followed and en- 
 
 Talty vs. Freedman's Trust Co., 1 dorsed by Rumball vs. Metropolitan 
 
 MacArth. 522; Matter of Leland, 6 Bank, L. R. 2 Q. B. Div. 194; 46 L. 
 
 Ben. (U. S.) 175; Humboldt Town- J. Q. B. Div. 346; 36 L. T. N. S. 
 
 ship vs. Lon-T, 92 U. S. 642; Gaar vs. 240; 25 W. R. 366. See, however, 
 
 Louisville Co., 11 Bush (Ky.), 180; Colonial Bank vs. Cady, 15 App. 
 
 Dinsmore vs. Duncan, 57 X. Y. 573, Cas. 267. 
 rev'g 4 Daly, 199; Pardee vs. Fish, 
 60 N. Y. 265.
 
 How Nejiotiability may be Estal>lisluMl. G73 
 
 York. Thus, in Security Bank vs. National I^)ank,' an at- 
 tempt Avas made, by proof of usage among Dankers, to 
 give the word "■ certification"' alargerscope than it had re- 
 ceived by settled legal construction, and such proof was ex- 
 cluiled. 
 
 But in Massachusetts it has been held ^ that a custom in 
 Boston to treat certificates endorsed in blank as negotiable, 
 was, on being proved, sufficient to enable a hona fide holder 
 for value to assert his title as against the true owner, if the 
 latter entrusted the instrument to another who pledged it 
 for his own debt. 
 
 And in a case in Iowa, it was shown that there was a 
 usage among the merchants of tiie city of Burlington to re- 
 gard certain paper — a note — payable " in currency " as 
 negotiable. Tiiis usage was resisted on the gi-ound that by 
 the constitution of that State all laws were required to be 
 uniform, and therefore a note could not be negotiable in 
 one city and not so in another, nor could a custom be recog- 
 nized which wouUl result in the same thing. In passing 
 upon this question, the court said : " It must be rememl)c'i-ed, 
 however, that we have no statute prohibiting such custom. 
 A custom in a particular locality, w:hen not in violation of 
 law, becomes a law to parties contracting with a knowledge 
 of it. The same general rule as to what makes custoMi,and 
 its application in the construction of contracts, obtains uni- 
 forndy over the State. It might a.s well be claimed that 
 all parties must make; the same kind of contracts, as that 
 they may not contract in reference to different customs." 
 .And the u.sage was sustained.'' 
 
 '67 .\. Y. J.W. ' RindskofT vs. Marn-tt. It I..w:i, 
 
 * ScoUans vh. Ilollinfl, 170 Mjms. 101. Soo uIho V«Tiiiilyc vs. .AdntuH 
 346. Kxprow C;o., 21 Wall. l.W. 
 
 43
 
 674 Stock-brokers and Stock Exchanges. 
 
 But the effect of a custom of the Stock Exchange and of 
 Bankers and Brokers in Baltimore, requiring Virginia 
 registered consols to be transferred in writing, and to be 
 accompanied by a power of attorney acknowledgeil before a 
 notary public, is to restrict negotiability, as, in the absence 
 of such a custom, they would, as strongly resembling 
 promissory notes, be transferable by endorsement merel}'.' 
 
 In some of the United States attributes of negotiability 
 have been conferred upon certain instrument by statute, 
 which are not recognizable as negotiable by the law-mer- 
 chant. 
 
 In Iowa " bonds and other instruments, without words of 
 negotiability are made assignable by indoi*sement, and the 
 assignee shall have a right of action in his own name, sub- 
 ject to all defences which the assignor might have had 
 prior to endorsement. 
 
 In Illinois bonds or other instruments payable in money 
 or ''personal property," may be assigned by indorsement 
 in the same manner as bills of exchange.^ 
 
 A similar statute was passed in Georgia in 1799,^ and the 
 hona fide purchaser of negotiable paper not dishonored is 
 protected, though the seller had no title.^ 
 
 In Kansas^ all receipts for grain issued by any ware- 
 house shall be negotiable by endorsement in blank, or by 
 special endorsement, in the same manner as bills of exchange 
 and promissory notes. 
 
 'Taliaferro vs. Baltimore &c. order" in connection with payee's 
 
 Bank, 17 Atl. Rep. (Md.) 1036. name. Russell vs. Bosworth, 106 
 
 See also cases cited, ante, p. 462 111. App. 314. 
 et seq. ^ Code, § 3682. 
 
 ' Rev. Stats, of 1897, § 3045. '- Id. § 3538. 
 
 ' Rev. Stats. 111. ch. 98 (4). They « Dassler's Stats, of 1901, § 1441. 
 need not contain the words "or
 
 Requisite Elements of Negotiability. G75 
 
 (c.) Requisite Elements of Negotiability. 
 
 The Negotiable Instruments Law contains the following 
 provision (Art. 11. , jj 2<>) as to form : 
 
 " Form of Negotiable Instrument. — An instrument to be 
 negotiable must conform to the following requirements: 
 
 1. It must be in writing and signed by the maker or 
 drawer. 
 
 2. Must contain an unconditional promise or order to pay 
 a sura certain in money.' 
 
 3. Must be payable on demand, or at a fixed or determin- 
 able future time. 
 
 4. Must be payable to order or to bearer ; and 
 
 5. Where the instrument is addressed to a drawee, he 
 must be named, or otherwise indicated therein with reason- 
 able certainty." 
 
 And other sections of Art. il. contain provisions inter- 
 preting these various requirements as to form. 
 
 The statutory provision is mci't'ly declaratory of the law 
 as it existed prior to its enactment. 
 
 The Xetjotiable Instruments Law (codifvino: the law as to 
 negotiable insti-uments) has n(jw been adopted in twenty- 
 two States of the Lnion, and al.so in the District of Cohim- 
 bia,^ and as it will d<jublless be enacted in the remaining 
 
 ' A particular kind of curn-iit .Maryland, Ma«.sachu.setts and Vir- 
 
 moiiey may he dcsiji^nated (Neg. KJiiia in 189S. In the District of 
 
 In.sts. I^w, § 25, suhd .5). .\nd Colinnhia, N'ortli Carolina, N'orth 
 
 by .statute, irt some; of the States, Dakota, ()r€'^;on, Itliodc Island, 
 
 the inHtniMUMit may be payable in Tennessee, I'tah, \Va-sliin>rton and 
 
 property or hibor Seeante, p 071, Wisconsin in 1S'.)9. In IVnnsyl- 
 
 and Neg. Irmts. Law, § 'J.5 Cl:Lst vania and Arizona in 1001. In 
 
 Hentencc). Ohio, Iowa and N'«'W Jersey, in 1902. 
 
 ' In New York, Colorado, Con- In Idaho and Montana in HKl.'i 
 
 nectieut and Florida in 1S97 In It Nhonid be borne in tnind that
 
 G70 Stock-brokers ami Stock Exchanges. 
 
 States and Territories within the next few 3'ears, it has been 
 deemed sulficient to set forth a few of its pi-incipal pro- 
 visions, and to give a digest of the decisions alfccting the 
 noo-otiable instruments usuallv dealt in bv Stock-brokers or 
 dealers, and in which thoy may have been directly or in- 
 directl}' concerned, and a few of the leading cases as to 
 negotiable instrnmentsin genei-al, without encumbering this 
 work with a digest of the great mass of decisions (chiefly 
 relating to bills and notes, or to transactions outside of the 
 Exchanges, or between persons other than brokers) as to 
 such instruments.' 
 
 A negotiable instrument must be a complete and perfect 
 instrument when it is issued, or tliere must be authority re- 
 posed in some one to supply anything needed to make it 
 perfect.^ 
 
 Independent of statute, the rule is well established that 
 there must have been deliver}^ to render an incomplete in- 
 strument, filled up without authority, negotiable. There- 
 fore, when railroad bonds and coupons payable to bearer, 
 were made payable either in British currency in T.ondon, or 
 in United States currency in New York or New Orleans, 
 and the president was authorized to endorse on the bonds 
 the place of payment, but the bonds were never issued, or 
 
 the English codification statute cisions of the courts, wlierea.s in the 
 
 (Bills of Exchange Act, 1882) is United States i is practically now 
 
 confined to bills and notes, whereas contained in the Negotiable In- 
 
 the Negotiable Instruments Law struments Law (supplemented by 
 
 inchides the instnunents (enumer- the rules of the law merchant, Neg. 
 
 ated at p. 649 et seq.) usually dealt Inst. Law, § 7), as interpreted by 
 
 in by Stock-brokers, provided such the courts. 
 
 instniments comply with the re- ' For the law as to negotiable in- 
 
 f|uirements of its 20th section, .struments in general, see Daniel on 
 
 Therefore the law as to the nego- Neg. Inst. (5th ed.), and Eaton & 
 
 tiability of such instruments must Gilbert on Commercial Paper, 
 
 in England be .sought in the de- ^ See Neg. Insts. Law, §§ 32-5.
 
 Requisite Elements of Neijotiability. 077 
 
 the endorsement made bv the president, and the bonds were 
 stolen from the company while still in its possession, a hona 
 fide holder for value was not authorized to fill the blank 
 for the place of payment, and could convey no title to the 
 bonds.^ 
 
 And the S-ith section of the Negotiable Instruments Law 
 is now declaratory of the general rule, as ftjlows : " Where 
 an incomplete instrument has not been delivered, it will not, 
 if completed and negotiated without authority, be a valid 
 contract in the hands of any holder, as against any person 
 whose signature was placed tliereon, before delivery." 
 
 But if the incomplete instruments (e. g., city bonds) 
 have been delivered, with authority to negotiate them, the 
 holder may fill up the blanks.- And this rule is now incor- 
 porated in the ?>?A section of the Negotiable Instruments 
 Law. 
 
 Delivery may sometimes be presumed until the contrary 
 is pi-oved.' 
 
 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 thetn was held to be jirotected. There 
 is no doubt that genuine Treasury notes form part of the 
 negotialjle commei-cial pajx-r of the country.'' 
 
 I5ut if state couj)on bonds have been rtMJccint'd, and other 
 Ixjnds i.ssued iti their stead, and the foi-nn-r have been sub- 
 
 ' Lcdwich vs. McKirii, .'>;? .\. V. .Vow York oa^c upon (lir .sul)j('ct of 
 
 307. iienotiubility. 
 
 ' Muiihattaii SavinRS Inst. v.s. ' N't'K- In.st. Law, § 35. 
 
 Hunk, 170 N, Y. .58. TIuh ca.so, ««1 U. S. :j«y, reverninK 12 
 
 altlioiifih not oiio in wliicli Stock- Mlatchf. 13. 
 
 |jrok«T» wcr*.' conrcnicd, ih Irto ' Vi-rtiiilyo vh. Kxpretw Co., 21 
 
 (•it«'«l, !Ls \>i-\\\'' a le-adiiiK rfc«Mit Wall, 13S.
 
 G78 Slock-hrokers and Sfock Kxchaiif^es. 
 
 sequeiitly stolen from the State, and jiurchased by the plain- 
 tiffs in o-ood faith from a New Yoi-k Stock-broker, the 
 j)la in tiffs -dvo not entitled to have other bonds issued to 
 them, as tlie redemption of the bonds was equivalent to a 
 return of tlic bonds to the mak(M' (the State), and tlie sub- 
 sequent theft was not a delivery of the bonds making them 
 negotiable.' 
 
 A negotiable instrument (a rnitcnl States gold certificate) 
 made payable by special indorsement to the order of the 
 holder, can be only transferred by the indorsement of such 
 holder.^ If such indorsement is erased, an innocent pur- 
 chaser for value does not acquire title, although the erasure 
 is so skilfully made that it cannot be detected by the most 
 careful scrutiny.'' Such is the general rule.^ The purchase 
 of such a certificate by a share dealer in London at £30 be- 
 low its market price, although such certificates can always 
 be sold at their market value, and the not calling the seller 
 as a witness, made the transaction suspicious, and deprived 
 the purchaser of the benefit of an}'- exceptions to the gen- 
 eral rule.^ 
 
 {d.) Results of Npgotlabilltij ; Bona Fid/' Holders. 
 
 1. Results of XegotldhiUiy. — The change in the law which 
 we have indicated, making choses in actions assignable, so 
 that the assignee might sue and enforce the same in his 
 own name, if it had stopped there would have accomplished 
 much. What the commercial necessities of England re- 
 quired was that negotiable securities should pass from 
 
 ' Branch vs. Commissioners, SO ^ Id. Xeg. Inst. Law, § 205. 
 
 Fed. Rep. 427. * Id. 
 
 ' Kulb vs. United States, 18 Ct. * Id. 
 Cls. 560; Neg. Inst. Law, § 64.
 
 Results of Nesrotiability ; Kona Fide Holders. 1179 
 
 hand to hand, free from all restrictions and conditions ; 
 that they should become representatives of money ; and 
 that every person accepting or receiving them should be 
 entitled to collect them, without being subject to impedi- 
 ment or hindrance on the part of the maker, except his 
 financial abilit}'. And, growing out of this necessity of 
 commerce, we have now firmly established in law the main 
 and principal result of negotiability, and which is often er- 
 roneously confounded with the doctrine of negotiability 
 itself* — viz., that a purchaser or transferee in good faith, 
 for value, and before maturity of a negotiable instrument, 
 is not affected by any latent equities between the original 
 parties, or in favor of third persons, unless they are brought 
 to his notice. And in law this extensive privilege is com- 
 monly designated as "the rights of a hona fide holder or 
 purchaser." ^ But, to bring one within the protection of 
 this broad rule, it is necessary that certain conditions should 
 exist in his favor, the nature of which we shall now proceed 
 to examine briefly. 
 
 lie must be a purchaser, 1st, in good faith without no- 
 tice ; 2d, before maturity ; 3(1, for value.^ 
 
 1st. lie must he a pxirhcaser in (jood faith without notice. 
 For if he have notice that there are defects in the title of 
 his assignor, or the party from whom Ik; receives the nogo 
 tiable pajXir, it follows that he is not entitled t(» avail hiiii- 
 
 ' See distil I ctioiLS set fonh in nocently sold .securities for imot her 
 
 Shaw vs. II. R. Co., 101 U. S 557. liroker wjls liold not liuhlc to the 
 
 The rule docs no extend to jwr- priiicipiil of the laltcT. 
 
 hons not bona fide piirchitsers or ' lirown vs. B|)ofTord, 05 H S. 
 
 holders, nor to their agents Kim- 171 Tlw rule of law .set fortli in 
 
 ball vs. riiilintrH, 55 .Me. 1 J7; Swim tlic text is now einl>odied in the 
 
 vs. Wilson, 5 Hank. L. J. 2Hfi. Hut '.Hllh seetion (»f th«.' .Ni'^otialili! In- 
 
 see Zuliek vs. Markham, Daly, Btruments Law. 
 
 129, where a Stock-broker who in- 'See .Nen. Inst. Law, j'Jl.
 
 080 Stock-hrokors and Stock Exchanges. 
 
 self of tlio pi'otoction aironled by tlie nilf in (luostion, and 
 no commercicil necossit}' would seem to reciuire that he 
 should receive such protection. Express or actual notice 
 \Yould bar his rights as a huna fide holder,' and leave the 
 maker to assert any defence to the paper which existed in 
 his favor. l>ut the numerous cases on this extensive sub- 
 ject have mainly ai'is(Mi in attemi)ts to fix upon tiie holder 
 constructive notice of defects, and the courts have expe- 
 rienced no small difficulty in applying the familiar doctrine 
 to the facts. The form and condition of a negotiable in- 
 strument are of themselves constructive notice to the pur- 
 chaser. Constructive notice to a person is the imparting to 
 him of sufficient information to put him upon inquiry ; and 
 the true rule as to the meaning of '- put upon inquiry- " is 
 declared^ to be, that the rights of a purchaser of negotia- 
 ble paper are not affected by constructive notice of a defect 
 of title, unless it clearly appears that the in{piiry suggested 
 by the fact disclosed at the time of the purchase would, if 
 fairly pursued, result in the discovery of the defect. In 
 that case it was held that, the number of a bond not being 
 an integial ]xu't of it, an erasion and alteration of the num- 
 ber was not constructive notice that the bond had been 
 stolen ; and for the further reason, also, that the line of 
 inquiry suggested by the fact of alteration would not, if 
 pursued, lead to the detection of the larceny. Such a no- 
 tice as will })iit a pi-udcnt man on his guard is not enough, 
 e. g., the absence of certificates referred to in the bond.^ In 
 
 ' Cass County vs. Green, 66 Mo. bearer bonds, placed in their 
 
 498. hands for sale, with a bank, 
 
 ^ Birdsall vs. Russell, 29 N. Y. which receives them in the ordi- 
 
 220. nary course of business in pood 
 
 ^ Welch vs. Sage, 47 id. 143. faith, and for a valuable considera- 
 
 If Stock-brokers pledge railroad tion, and without notice of the own-
 
 Results of NeifOtiability ; Bona Fide Holders. 681 
 
 fact, clear knowledge of fi-aiul must be })rove(l on the part 
 of the holder, and is not to be presumed on slight evidence; 
 and, if the evidence is but slight, the court may withdraw 
 it from the jury.^ 
 
 If no actual notice of incipient fraud is given to the in- 
 tending purchaser of a note, he is not affected by notice 
 that the payee promised not to negotiate it, and by an in- 
 definite notice that he is buying a lawsuit, and he is not 
 thereby put upon inquiry for a fraud which actually entered 
 into the incipiency of the note ; that is, no complicity in 
 fraud is ever to be presumed as against a holder for value 
 of negotiable })aper.-' '^'en though he does not pay full 
 value and there may be enough to excite suspicion, his title 
 is not thereby impaired;^ 
 
 It is a general rulf that persons dealing with pi-operty 
 are bound to take notice of any suit pending with respect 
 to its tiile,^ even though not themselves parties to it;^ but 
 it seems that it is the jm'?i( fen ci/ ot the suit which creates the 
 notice, so that after the cause is ended the decree is not 
 notice.^ 
 
 Negotiable paper not due is, however, excepted from the 
 
 ere title, the bank affiuires a Rood ' Battles vs. Laudenslaper, 84 Pa. 
 
 title to .such securities as against the St. 446. 
 
 owner, a cu.stoiner of the Stock- ' Hei.st vs. Ilart, 7:5 Pa. St. 2S6. 
 
 brokers. Tliornpson vs. St. Xicho- 'Cromwell vs. County of Sac, lUi 
 
 las Nat. Bank, 113 X. Y. 325; id. 9 U. S. .11. 
 
 N. Y. St. Kep. 303. * Murray vs. Balou, 1 Johns. 
 
 But where the bond.s of a rail- ("h. rA'tCr, Garth vs. Ward, 2 Atk. 
 
 road, siffned by a trustee, are placed 174. 
 
 by him upon the market, and they * Bisho)) of \\'inchcs(or vs. I'ainc, 
 
 are sold for a trifling sum, the pur- 11 Vcs. I'.tl 
 
 chaser should have made in<|uiry * Worsley vs. Scarborough, .3 .\tk. 
 
 as to the reirnlarity of the issue. 391. 
 RiKpi vs. Pennsylvania Ac H. K. 
 Co., 10 Fed. Kep. S04.
 
 682 Stoek-brokors and Stock Kxcliau^es. 
 
 general rule, because of the high favor in which it is lield 
 as a circulating medinin, unless there is actual notice of the 
 suit.^ 
 
 The question arose in the case of Leitch vs. Wells ^ 
 whether a purchaser of certificates of stock was affected b}' 
 the pendency of a suit, and the court hold in conformity 
 with the above views, Earl., C, saying : " Since the decision 
 of the case of ^IcXeil vs. Tenth National Bank, alcove cited, 
 certificates of stock, Avith blank assignments and powers of 
 attorney attachetl, must be nearl}' as negotiable as commer- 
 cial paper. The doctr-ine of constructive notice by lis jyen- 
 dens has never yet been applied!*to such property. This 
 doctrine must have its limitations. It could not be applied 
 to ordinary commercial paper, nor to bills of lading, nor to 
 government or corporate bonds payable to bearer. Indeed, 
 I do not find that it has ever been applied, and I do not 
 think it ought to bo applied, to any of tlie articles of ordi- 
 nary commerce. Public policy does not require that it should 
 be thus applied. On the contrary, its application to such 
 property would work great mischief and lead to great em- 
 barrassments." 
 
 If a first endorsee for value takes without notice of any 
 prior equities, a second endorsee for value takes a good title, 
 although he had notice of such equities. As was declared 
 by Field, J.,^ " the rule has been too long settled to be ques- 
 
 * Orleans vs. Piatt, 99 U. S. 676, doctrine of lis pendens does not ap- 
 
 683; County of Warren vs. Marcy, ply to negotiable paper (railroad 
 
 97 id. 96; Winston vs. Westfeldt, bonds) purchased before due. Pitts- 
 
 22 Ala. 760; Stone vs. Elliott, II l)urgh &c. Co. vs. Lynde, 55 Ohio 
 
 OhioSt. 252;Mimsvs. West, 3SGa. St. 23. 
 
 18; and see Leitch vs. Wells, 48 X. ' Supra. 
 
 Y. 585. ' Cromwell vs. County of Sac, 96 
 
 In Ohio it has been held that the U. S. 51.
 
 Results of Negotiability; Bona Fide Holders. 083 
 
 tioned now, that whenever negotiable paper has passed into 
 the hands of a party unaffected by previous infirmities, its 
 character as an available security is established, aiul its 
 holder can transfer it to others with the like immunity." 
 In such case the second endorsee takes a new title from the 
 first endoreee, and therefore knowledge of any infirmities in 
 the old title does not affect him.^ 
 
 The rights of a holder of a negotiable instrument are to 
 be determined by the simple test of honesty and good faith ; 
 he is not bound to be on the alert for circumstances which 
 might excite suspicion.^ 
 
 The possession of an instrument, endorsed in blank or 
 made payable to bearer, is _p/'i7n a /"acie evidence that the 
 holder is the owner and lawful possessor of the same ; and 
 no degree of negligence, and nothing short of fraud on his 
 part, is sufficient to overcome the effect of that evidence and 
 invalidate his title.^ 
 
 But if a negotiable instrument (a United States gold cer- 
 tificate) is made payable by special endorsement to the 
 holder's order, it is only transferable by the hitter's endorse- 
 ment, and if it is stolen, and the special endorsement be 
 erased, London stock-dealers, who ])urchased the same for a 
 
 ' CommLssioners, etc., vs.Clark, 94 38 Fed. Rep. G82; Porter vs. Pitts- 
 
 U. S. 278, 286; Riley V.S. Schawafk- hvir^h Steel Co., 122 U." S. 267. 
 
 er, 50 Iiid. 592; Moniyer vs. Cooper, Nff^. In.st. Law, § 97. 
 
 35 Iowa, 257; Sinion vs. Mcrritt, 33 = Ma^ee vs. Hadf^cr, 31 N'. Y. 2J7. 
 
 id. 537; Woo<lnian vs. Churchill, 52 liad faith on the part of the hf)ldor 
 
 Me. 58; Robert.s vs. Lane, 64 id. 108; iiiu.st l>e shown. Neg. Inst. Law, 
 
 Woodworth vs. Huntoon, 40 111. § 95. And .xff Katon & Gilhert.s' 
 
 131 ; May vs. Chapman, 16 M. & W. Com. Paper, p. 372, and cjisos cited. 
 
 355; Masters vs. Ihljerson, 8 C. h. * (Joodiuaii vs. Harvey, 4 Ad. «.t 
 
 100; Central .t Hanking Co. vs. Kl. 870. Neg. Inst. Law, {§ 91, 
 
 Fanners' Loan <t Tnist Co., \\i\ 98. 
 F'ed. Itcp. 700; Simmons vs. Taylor,
 
 084 Stock-brokers and Slock Kxcluuij^es. 
 
 valuable consideration, and \vith(jut notice of the fraud, ac- 
 quire no title.' 
 
 In Dutchess Co. Ins. Co. vs. Ilatchfield,'^ New York \Wn- 
 kei's bought Poughkeepsie bonds which had been stolen. 
 The circumstances which were charged against them, indi- 
 cating bad faith, were — 1st, that they had bought a bond be- 
 fore from the same party which had turned out to be stolen ; 
 and, 2d, that, instead of offering tlie bonds in New York 
 city, they took them to Poughkeepsie and Albany. The 
 Brokers having proved that they had received an explana- 
 tion of the first transaction of the stolen bond, and having 
 offered to prove a usage of Brokers consistent with their 
 own course in offering the bonds for sale, they were sus- 
 tained in their possession of and title to the bonds, and 
 Church, C. J., laid down the rule applicable to such cases as 
 follows : " It is not sufficient that a prudent man would be 
 put upon inquir}^, nor that the purchaser was negligent, nor 
 that he did not exercise a proper degree of caution. A 
 purchaser of such securities will be protected if he is honest 
 and believes that the seller has a good title." ^ 
 
 Seybel vs. Nat. Cur. Bank^ was a case, to say the least, 
 of gross negligence and reckless disregard of others' rights. 
 Bonds were stolen from the plaintiff in the evening ; the 
 next morning he served printed notices of the theft, with 
 description of the property, at defendant's office, on their 
 
 ' Kulb vs. United States, 18 C. stolen certificate endorsed in blank, 
 Cls. Rep. 560. See Neg. Insts. acquirednotitle, the usages of Stock- 
 Law. § 64. brokers to the contrary not wit h- 
 
 ^73 N. Y. 226. But in East standing. 
 
 Birmingham Land Co. vs. Dennis, '' See also Brown vs. State, 1 
 
 39 Alb. L. J. (March 23, 1889) 223, Atl. Rep. (Md.) 54. 
 
 it was held in Alabama that an iu- ^ 54 X. Y. 288. 
 nocent purchaser for value of a
 
 Results of >'p2:otial)ility ; Bona Fide HoldtM-s. G85 
 
 cashier, who said they diil not care for notice; the same 
 day defendants bought the stolen bonds; and on their 
 testimony that they did not examine tlie notice, anil had no 
 time to examine such notices, the court sustained them, and 
 adopted the rule laid down in the leading case of Goodman 
 vs. Simonds,' to wit : " Suspicion of defect of title, or the 
 knowledge of circumstances which would excite such suspi- 
 cion in the mind of a prudent man, or gross negligence on 
 the part of the taker at the time of the transfer, will not 
 defeat his title. That result can be produced only by bad 
 faith on his pai-t." 
 
 In Goodman vs. Simonds"^ this subject is fully considered, 
 English and American cases examined, and (roodman vs. 
 Harvey^ referretl to as the leading case in England. In 
 the case last cited. Lord Dciiman said: ''We ai-c^ all of 
 opinion that gross negligence only would not be a sufficient 
 answer where a ])arty has given consideration for the 
 bill." 
 
 The case of Gill vs. Cul)itt,' laying down the doctrine 
 that tlie pnrchasci- of negotiable ]»aper must exercist; oi'- 
 di nary care and pi-udence, is ovt-rrnleil both in England and 
 in this country. It stands alone."' 
 
 Tlie title and rigiits of a hona^p'dr purciiaser of negoti- 
 able paper are not affected l)y the fact that the pei*son from 
 whom he rcM.civt-d it before matiii'ity had possession of it 
 
 ' 20 How. (U. S.) 343. Iiim.m S.iv. Inst, vs; Now Vnrk 
 
 ' Supra. .V:c. Hunk, 170 .\. Y. 58. 
 
 'I .\d..t E1.H70. Tlie piircluuser • :{ H. ik V MWi. 
 
 is not efTcctcd l»y «oiistru(tiv(! no- ' !irlin<jiit Mriunli Hank vs. IIokp. 
 
 tic-o unlww tlu-nr is a natural or Wh \. V. (i.'i; (JofKlnwui vh. Harvpy, 
 
 loKirul connection between tlit; farts sufira; I'tlnT vs. Hich, 10 .\<i. A Kl. 
 
 uppftttrinR, and the; fart of a <!<• 7hI; Arhouin vs. .\ndorMoii, 1 C^> H 
 
 fectivp titlf' in th« vcncl«ir Man- l'.»S, .Wl.
 
 686 Stock-brokers and Stock Exchanges. 
 
 for a specific purpose and misappropriated it/ nor by the 
 fact that the apparent owner from whom he bought it was 
 an agent who sold it in breach of his duty to his principal.'^ 
 
 The presum})tion is that the holder of negotiable paper 
 has p;iid value for it in the usual course of business.^ So 
 that, in bringing suit on it, all he has to do in opening is to 
 prove the signature and introduce it in evidence.* 
 
 Ordinarily, it is no defence against a bona fide holder 
 of a note that the maker was induced to sign it by fraud ;° 
 and a thief of negotiable pajier can give a good title to it 
 to a hona fide purchaser;*^ but it is otherwise as to non- 
 negotiable paper.'' But if a negotiable note is stolen before 
 delivery by the maker, it has no inception, and the thief 
 can give no title.^ 
 
 Negotiable paper in the hands of an innocent holder is 
 
 * Collins vs. Gilbert, 94 U. S. 753; An;ra, etc., Bank vs. Leighton, L. R. 
 Park Bank vs. Watson, 42 N. Y. 2 Ex. 61. 
 
 490. * Fenton a's. Robinson, 4 Hun, 
 
 ' Belmont Branch Bank vs. Hoge, 252. 
 
 supra. ' Welch vs. Sage, 47 N. Y. 143; 
 
 But if a Stock-broker knows that Seybel vs. Nat. Cur. Bank, 54 id. 
 railroad bonds pledged ^vith him by 288; Birdsall vs. Ru.ssell, 29 id. 220; 
 a bank ca.shier were not the hitter's Colson vs. Arnot, 57 id. 253; Pea- 
 property he cannot hold them as cock vs. Rhodes, 2 Doug. 633; Miller 
 against the true owner, although he vs. Race, 1 Burr. 452. 
 had not express notice of the partic- If the payee's name is left blank 
 iilar individual who was the real in a city bond, and is stolen, a bona 
 ownier. Perth Amboy Mut. Loan f.de purcha.ser from the thief may 
 Assn. vs. Chapman, 80 A. D. 556. fill in the blank in his own name and 
 See Pittsburgh &c. Co. vs. Lynde, acquire title thereto as if he had 
 55 Ohio St. 59. purchased it from the la^^'ful holder. 
 
 ' Goodman vs. Simonds, 20 How. Manhattan Sav. Inst. vs. N. Y. &c. 
 
 343; Pittsburgh Bank vs. Xeal, 22 Bank, 170 X. Y. 58. 
 
 id. 96; Murray vs. Lardner, 2 Wall. ' Ledwich vs. McKim, 53 X. Y. 
 
 1 10; Manhattan Sav. Institution vs. 307. 
 
 NY. ttc.Bank, 170X.Y.58. Xeg. « Hall vs. Wilson, 16 Barb. 
 
 Inst. Law, § 98. 548. 
 
 * Pettee vs. Prout, 69 Mass. 502;
 
 Results of »j?otial»iIity ; Bona Fide Holders. G87 
 
 not invalidated by an illegal consiileratiou unless expressly 
 declared void by statute.^ 
 
 If a person buys from a pretended owner, wlio is not in 
 possession, he is not a hona fide purcliaser, and takes no 
 better title or greater rights than the vendor ;* nor is he if 
 he buys from a known agent who endorses it without 
 authority;^ nor will he be made so by the principal's 
 ratification of the endorsement after maturity.^ 
 
 2. lie mnst he a j)urchaser hefore viaturity. 
 
 The fact that a bill or other instrument is overdue is 
 equivalent to notice of all facts relating to it ; thus, where 
 a note was endorsed after maturity, the maker, being sued, 
 was allowed to defend himself by showing that he had paid 
 it to the original payee.^ If there is any fact relating to a 
 bill, notice of which would disentitle a holder who took 
 the bill before maturity, the existence of such a fact dis- 
 entitles a holder who takes the bill after maturity irrespec- 
 tive of notice.® In other words, if a note is negotiated when 
 overdue, tlie maker, when sued by the endorsee, may set up 
 any ecjuitable defence which he had against the payee.' 
 
 The taker of an overdue note is but the assignee of a 
 chose in action, and takes only such title as his assignor 
 had.« 
 
 Instruments not payable on demand mature with the last 
 
 ' Grinicfi vs. llilleiibrand, 1 Hun, .Ncllis vs. Clark, 1 Hill, VIA; O'Cal- 
 
 354. hinhuii vs. Sawyer, 5 Johns. 118; 
 
 ' .Mull<;r vs. Poridir, 55 N. Y. ;125. Van Valkonhurnh vs. Stiipplohoen, 
 
 'Gill)ert vs. Sharp, 2 Lans. 412. 49 Harl). «.»<). S.'o Eaton A Gil- 
 
 ♦ Itl. l)ort 's ('(till. Paper, j) 3(tl,aii<l cjwps 
 ' Hrowii vs. Davics, .i '1". K. SO. cit*-*! 
 
 See Cripps vs. Davis, 12 .M. tV: W. " Karriiiirton vs. Park Ha!)k, 39 
 
 1.59. liarli (i45; Ih- .Mott vs. Sturkey, 3 
 
 • M(.v<l VM Howard, 15 Q. H. 995. liarh Ch 40.3. 
 ' .M«-rri<k vs Hutlcr, 2 Laus KKJ;
 
 G88 Stock-brokers aii<I Stock Exchaii£?cs. 
 
 day of grace.' An uccomniodation note transferred on the 
 last day of grace l)y tlu^ jiayee to ])laintiff, during haidcing 
 hours, as colhiteral security for an indcbteihiessof the payee 
 and to be applied thereon, makes the ]»huntiff a bona fide 
 holder before nuiturit}'.- An instrument payal^lc in in- 
 stalments is deemed wholly overdue when any instalment 
 is overdue;^ Ijut not from the mere fact that interest is 
 overdue,^ though it is held in New York ^ that a note is 
 dishonored by overdue interest. 
 
 In Vermilye vs. Express Company ^ the Supreme Court 
 of the United States held that bonds and Treasury notes 
 of the United States payable to holder or bearer at a future 
 
 * Evertson vs. Nat. City Bank, 66 the open market, into the hands of a 
 N. Y. 14. But under the Neg. bona fide purchaser for value, the 
 Inst. Law, § 103, a negotiable in- latter acquires a good title there- 
 strument is payable at the time to, although two of the interest 
 fixed therein, without grace. In coupons were overdue at the time 
 some of the States adopting that of purchase. Long Island Loan & 
 law, days of grace have been re- Trust Co. vs. Columijus «tc. 11. R. 
 tained, and in several of the States Co., 65 Fed. Rep. 4.55, and cases 
 which have not enacted it, days of cited. As to what circumstances 
 grace have been abolished. Eaton will not constitute the holders of 
 & Gilbert's Com. Paper, p. 476. railroad bonds, bona fide holders 
 
 ' Continental Nat. Bank vs. for value before maturity, see 
 
 Townsend, 1.3 N. Y. Week. Dig. 295; Simmons vs. Taylor, 38 Fed. Rep. 
 
 N. Y. Ct. App. Nov. 22, 1881. 682. 
 
 ' Vinton vs. King, 86 Mass. 562; ' Newell vs. Gregg, 51 Barb. 263. 
 
 Field vs. Tibbetts, 57 Me. 358. « 21 Wall. 138. To the same 
 
 * Nat. Bank vs. Kirby, 108 Mass. effect is Cornell vs. District of 
 497; Cromwell vs. County of Sac, Columbia, 20 Ct. Cls. Rep. 229, 
 96 U. S. 51 ; Kelley vs. Whitney, 45 where it was held that a bona fide 
 Wis. 110; Boss vs. Hewitt, 15 id. purchaser of District of Columbia 
 260; Brooks vs. Mitchell, 9 M. & W. coupon bonds stolen from the 
 15. Board of Audit, after they had be- 
 
 If the president of a railroad come due, could not recover, and 
 
 company (which had intrusted its that if he wished to avail of the 
 
 negotiable bonds to him for .sale or rights of prior holders, he should 
 
 exchange) pledges them with Bro- prove that they purchased before 
 
 kers to secure his own debt, and maturity, 
 they subsequently come, by sale in
 
 Results of ^ei^otiability ; Bona Fide Holders. 689 
 
 definite time were subject to this principle, aiul that a 
 purchaser after they were overdue took subject to the 
 rights of antecedent holders. 
 
 In an earlier case* it had been held that neijotiableo'ov- 
 eminent securities redeemable at the pleasure of the gov- 
 ernment, after a specified day, but in whieli no date was 
 fixed for final payment, ceased to be negotiable, as overdue, 
 after the day when they first became redeemable, but tliis 
 ruling was subsequently'^ limited to cases where the pur- 
 chaser acquired title with notice of the defect of title, or 
 under circumstances discrediting the instrument, such as 
 would affect tlie title of negotiable demand paper purchased 
 after an unreasonable length of time from the date of the 
 issue. Therefore when it appeared that United States 5-20 
 bonds (redeemable at the pleasure of the United States 
 after the 1st day of -Tuly, ISTi', and payable on the 1st day 
 of July, 1885), were stolen from the owner, in October, 1878, 
 and purchased in the year 1879, by the plaintiffs in London, 
 in the usual course of business, from responsible parties, it 
 was held that as the bonds in suit were called for redemp- 
 tion between October, 1878, and ^farch, 187l>, they became 
 payable on demand without interest after the maturity of the 
 call, until the date for absolute payment, and as the title of 
 the purchasers of the bonds was acquired at a time when 
 no unreasonable length of time had elapsed after the ma- 
 turity of the call, the title of thd purchasers shouKl pro- 
 vail airainst the owners.' 
 
 liut if detached coupons of bonds <jf a State are in- 
 trustetl bv the owners to a firm for collection only, and by 
 
 'Texas vs. White, 7 Wall 7<M». ' .MorKiiii vh. I'liilc^l Stuti»H, hu- 
 * MorRan vh. Unitofl Stiif«'H, ll.'J pra; Hrowii \h I'liitctl StnU«H, 20 
 U.S. 470 C. CU. Kfp tlO. 
 
 44
 
 690 Stock-brokers and Stock Exchanges. 
 
 the latter are, long after their maturity, pledged to a 
 bank to secure a debt of the pledgors, the pledgee acquires 
 no title as against the true owner.' 
 
 And the law of the State of New York must prevail over 
 that of a foreign jurisdiction, Avhen the plaintiff and one of 
 the defendants are residents of New York, and the prop- 
 erty, the subject of contention, has been voluntarily brought 
 within that State. Therefore when detached coupons of Pa- 
 cific Railroad bonds were purchased after maturity, in good 
 faith, by Stock-brokers on the Stock Exchange at Frankfort- 
 on-the-Main, and were by them sent to Xew York for col- 
 lection, their title cannot prevail against the plaintiff, the 
 true owner, although bv the law of Frankfort they would 
 acquire a good title whether the coupons were purchased 
 before or after maturity.^ 
 
 3. He must he a holder far valtce. 
 
 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 considered as an agent rather than a holder for value, 
 and failed to recover against the bank. 
 
 ' Stem Brothers vs. Bank, 34 entitled to a money judgment for 
 
 La. .\nn. 1119. the proceeds of the coupons. 
 
 ' WyHe vs. Speyer, 62 How. Pr. ^ Currie vs. Misa, L. R. 10 Ex. 
 
 107. It was also held in that case 153; see Whistler vs. Forster, 14 C. 
 
 that as the relief asked for was B. (n. s.) 248. 
 
 equitable, the relief could be equita- * 9 B. & C. 208, 216. 
 ble only, and that plaintiff was not
 
 Results of Negotiability : IJoua Fide Holders. C91 
 
 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 adopted a simi- 
 lar rule, as laid down in Swift vs. IVson," that one who takes 
 commercial paper as security for any existing debt is a holder 
 for value, but certainly such cases as are cited below ' do not 
 go so far, because in them there is an extension of time or 
 other forbearance granted to the debtor, which constitutes 
 a parting with present advantage on the part of the creditor. 
 However, in the case of Brooklyn City, etc., R. R. Co. vs. 
 Bank ^ the subject was exhaustively examined, and the doc- 
 trine of Swift vs. Tyson was affirmed. 
 
 Swift vs. Tyson has been followed to a great extent in 
 this country ;^ tiiough in some of the cases the important dis- 
 tinction between taking negotiable paper as absolute pay- 
 ment and taking it as a mere security of a i)ro-existing debt 
 is not kept in view. The .same rule is followed in Connec- 
 
 ' Supra. ' 102 U. 8. 150. See also Cum- 
 ' Morton vs. Burn, 7 Ad. \ K\. lit; ininps vs. Mead, Fed. Cius. 3176. 
 Baker vs. Walker, 14 M. & W. 4G.5. • iMsher vs. I'islier, «)S Mass. :«)3 
 .'\nd now by the English HilLs of Stoddard vs. Kinii)all, 00 id. 469 
 Exchange Act (1HS2) any anteced- .Vtkinson vs. Hrooks, 20 Vt. 509 
 ent debt or liahilify constitutes a Holmes vs. Smith, 10 Me. 177; Man- 
 valuable consideration for a bill or ning vs. .McClure, ;{('» III. 490; and 
 note. see a very thorough discussion of 
 * 16 Pet. 1. (his 8til)ject, endorsing the view 
 ♦Oates vs. Nat. Bank, 100 V. S laid down in Swift vs. Tyson, 1 ,\m. 
 2.39; Gofximun vs. Simonds, 20 F.aw Hev. (n. s.) 479. See also 
 How. U. S. 34.'J-.370; McCarty vs. Oawfoni's An. Neg Inst. Law, 
 lif)Otn, 21 id 4:30. 2d ed. p 33, and cjujcs cited.
 
 692 Stock-brokers and Stock Kxchaiij^es. 
 
 ticut on the ground tliat the taking of negotiable j)a|)ei' 
 as a C(illateral security is in the ordinaiy course of busi- 
 ness.' 
 
 In New York a purchaser of negotiable jiaper for value 
 is one who parts with some value, money, i)roperty, or ex- 
 isting 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 security,'' or takes negotiable paper in pay- 
 ment of a note already due which he surrenders or cancels,* 
 or who receives negotiable pa[)er as absolute payment of 
 any existing indebtedness and not merely as security for its 
 payment ;^ and the last case supposed is stronger if in con- 
 nection with it he pays present money or value as part con- 
 sideration ;^ 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 pay- 
 ment of the debt.' 
 
 The rule laid down in Coddington vs. Ba}^^ that in order 
 to be a purchaser for vahie there must be a parting with 
 present value or with a present advantage, has been folio Aved 
 in this State up to a recent period without shadow of turn- 
 ing ; and therefore in New York, prior to the passage of 
 
 ' Roberts vs. Hall, 37 Conn. 205. Wend. 499; Bank of St. Albans vs. 
 
 2 Bank of New York vs. Vander- Gilliland, 23 id. 311. 
 
 horst, 32 N. Y. 553. ' Potts vs. Mayer, 74 X. Y. 594; 
 
 ' Chrysler vs. Renois, 43 X. Y. Bank of Sandusky vs. Scoville, 24 
 
 209. Wend. 115. 
 
 « Pratt vs. Coman, 37 N. Y. 440; " Mechanics' etc.. Bank vs. Crow, 
 
 Brown vs. Leavitt, 31 id. 113; 60 N. Y. 85. 
 
 Meads vs. Mer. Bank, 25 id. 143, ' Bradford vs. Fox, 38 N. Y. 289. 
 
 149; Youngs vs. Lee, 12 id. 551; * 20 Johns. 637. 
 Bank of Salina vs. Babcock, 21
 
 Results of Negotiability ; Bona Fide Holders. t>93 
 
 the Xegotiable Instruments Law in 1897, one who ivceived 
 negotiable paper merely as security for a debt already exist- 
 ing was not a purchaser or bolder for value.' 
 
 This principle was rigidly applied to Stock- brokei's. In 
 the case in question defendants. Stock-brokers in New 
 Yoi-k, received from one Van A., residing at Lyons, ordei-s 
 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 delivereil three days 
 thereafter, at which time they were dehvered to and paid 
 for by defendants. On the day of the sending of the tele- 
 grams, but whether before or after does not appear, Van A. 
 stole S*J,yOO of United States coupon bonds belonging to 
 plaintiff, which he forwarded to defendants as a '' mai-gin." 
 The bonds were received by the defendants before the 
 delivery of and payment for the stock. In an action for 
 the conversion of the stock, it was decided that defendants 
 gave credit to the promise of Van A. and not to the bonds ; 
 that the receipt of the bonds and the fullilment of the con- 
 tract for the purchase of the stock after such receipt did 
 not make them honajide hohU-rs, and that they were there- 
 fore liable; also, that if defendants, after receipt of the 
 bonds, purchased uj)on the credit thei'cof any stocks for 
 Van A., they were entitled to liold them as securitv for any 
 loss arisinji: in that transaction ; but tin* sale of bonds be- 
 yond the amount necessary for such iiidcnmity was a eon- 
 version for which an action would lie.^ 
 
 But now by the Negotiable Instrtimmts Law (jj .M) an 
 
 ' TunuT vfl. Trojulw.'iv, S.'i N. Y. 'Tuft vh. CliiipiiKiii d :il., .V) N. 
 
 6.50; Ljiwrciice \h, (lark, .'W id. 12S; V. Iiri; h. v. on lu-w tri.-il. MrDWiiMtm 
 
 HriKht VM. JikIhoii, 17 liarlj 29; vh. Chapniaii, (i:{ .N. V. (UTi. 
 Htjilk.T VH. .McDonnl.I. C, Mill. •»:$
 
 694 Sto('k-l)n)k< IS aiul Stock Kxcliaiip^es. 
 
 antecedent debt constitutes value, thus overruling the doc- 
 trine of Coddington vs. Bay.' 
 
 In Pennsylvania the rule was the same as in New York.''^ 
 The holder must have paid some present value or relin- 
 quished some present advantage.^ • 
 
 Referring to the conflict of opinion as to what constitutes 
 a holdery<yr 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 Er- 
 rors ; ... it expressly endorses Coddington vs. Buy ' and 
 Rosa vs. Brotherson^ as the law of this State, and condemns 
 the case of Swift vs. Tyson." 
 
 Although the conflict still continues, yet, as the States of 
 New^ York and North Carolina have overruled the doctrine 
 of Coddington vs. Bay^ and as at least four of the States 
 which have follow^ed that doctrine (viz., Pennsylvania, 
 Iowa, Ohio and Wisconsin) have adopted the Negotiable 
 Instruments Law, whilst of the States which have followed 
 the ruling in Swift vs. Tyson, five (viz., Connecticut, Mary- 
 land, Massachusetts, New Jersey and Rhode Island) have 
 also enacted that law, it will be seen that the day is fast 
 
 * Brewster vs. Schrader, 20 Misc. ^ 16 Pet. 1. See very ablo article 
 
 480. Crawford's An. Neg. Inst, in 30 Am. L. Reg. 6.S9, upholding 
 
 Law, 2d ed. p. 32. this decision. 
 
 ^Petrie vs. Clark, 11 Serg. & R. »6 Hill, 93. 
 
 377; Lenheim vs. Wilmarding, 55 ' 20 Johns. 637. 
 
 Pa. St. 73; Bronson vs. Silverman, « 10 Wend. 85. 
 
 77 id. 94. ' Brewster vs. Shrader, 20 Misc. 
 
 ^ Kirkpatrick vs. Muirhead, 16 480; Brooks vs. Sullivan, 30 S. E. 
 
 Pa. St. 117. (N. C.) 822. 
 
 ^Cardwell vs. Hicks, 37 Barb. 
 458.
 
 Results of Netjotiability ; Hoiia PiHc Holders. G'.»A 
 
 approaching when, with the univei'sal acceptance of the 
 codifying statute, it will come to an end. 
 
 It has been held that the hona Jide holder of negotiable 
 paper may recover what he paid therefor, when there was 
 fraud in its origin. Thus in the case of Louisiana Stiite 
 bearer bonds which had been fraudulently reissued, and 
 which had been sold by a Broker (without disclosing his 
 principal), the Broker was held liable to refund the price 
 paid therefor, although he had no suspicion that there 
 was an\'thing wrong in the bonds.' But whether there 
 was fraud in the origin of such paper, or the maker had 
 other equities, the holder can only recover what ho 
 paid.'^ 
 
 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. Mc- 
 Donald,^ Walworth, Ch., says : " This principle of protect- 
 ing the ho?ia fide holder of negotiable paper who has paiil 
 value for it, is derived from the doctrines of the courts of 
 equity in other ca.ses where the purchaser has obtained the 
 legal title without notice of the equitable right of a third 
 person to the })ropcrty. . . . And if he has paid but a part 
 of the consideration or value of the property, he is only 
 
 ' Pugh vs. Moore, 10 So. Rep. 1 Daniel .Xcr. Inst, (.'ith e<l.) 
 
 (La.) 710. This deci.sion was fol- § 731a 
 
 lowed in Herwij; vs. Kichard.soii, 11 ' HiifT vs. Wapner, 63 Harb 21.'); 
 
 So. Rep. (La.) 13.'i, where similar Card well vs. Hicks, 37 id. •l.'VS; 
 
 bonds were purdui-scd by plaintifT Youngs vs. Lee, IS id. ISO, afT'd \'l 
 
 from flefendaiits thrfniuh Stock- \ Y.'i.'il. ,\Iso Chicopfe Hank vs 
 
 fjrokers. Sofi also .Meyer vs Rich- Cliapin, lU Miuw. 10; Stmldanl vs 
 
 anl.s, 103 U. 8. 3S0; Rofiers vs. Kimball, fiO Nfiuw. 409 
 Walsh, 12 Neb. 2«. Rut sec Otis » To<M vs ShHboume.S Hun. .MO. 
 vs. CuUum, 92 U. S. 12H. Sec also « Hill, 93
 
 6yG stock-brokers jiud Stock Exchanges. 
 
 entitled to be considered as a hona fide purchaser pi-o 
 tantor ' 
 
 On the contrar}', 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 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 that as 
 the " Eailroad Companies " had put them out, and in legal 
 effect endorsed them, they must to a hona fide holder re- 
 spond to their endorsement commercially — that is, by pay- 
 ing the bonds according to their face, regardless of what 
 their maker or they themselves may have got for thera.^ 
 
 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 obtain their full face value. And the rule has 
 now been incorporated into the Negotiable Instruments 
 Law, § 96 of which provides that a holder in due course 
 (i. e. a hona fide holder, for value, without notice, and be- 
 
 » This is the rule in England. = 96 U. S. 51, 60. 
 
 Edwards vs. Jones, 7 Car. & P. 633. ^ 103 U. S. 118, 145. 
 
 But see the English Bills of Ex- * Per Waite, C. J. 
 change Act, § 38.
 
 Doctrine of Nou-iiesotiability. 007 
 
 fore maturity) may enforce payment of the instrument for 
 the full amount thereof.^ In concluding this branch of 
 the subject, it Avill be observed that the Supreme Court 
 of the United States has been foremost in upholding and 
 advancing doctrines which tend to make commercial securi- 
 ties almost unassaihible in the hands of innocent purchasers. 
 
 III. Non-neirotiabili<y. 
 
 {a.) Doctrine of Non-negotiahiUty. 
 
 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 tiie 
 same manner as if they were themselves before the court,* 
 The effect of this doctrine is, of course, to lower tlie com- 
 mercial standing and value of non-negotiable instruments, 
 for tlie obvious reason that a purchaser of them must be- 
 ware 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 cfjuities which may exist in favor of the jiarty or corjio- 
 ration against whom he proposes to enforce the same. The 
 cases which we give in the notes fully illustrate the doctrine 
 of non -negotiability.^ 
 
 It is, perhaps, not finall}' settled whether the assignee of 
 
 ' See Crawford '.s Aim. X(*tx- In. note discounted by usinn tlieiu aa 
 
 Law, pp. 9G-8. collatenil Hei-urity. K: did not asc 
 
 ' Da\-i8 V8. Bechflteiii, 69 N. Y. theui for llmt purpose; and it was 
 
 440; Wood vh. Travis, 24 Mi.s<*. 5^9. held that, inahtiuich aa II. rould not 
 
 And see 2 .\in. A Eti;;. Enc Law, ciifori-t* thcni a^ainxt the niort^auor, 
 
 2<1 ed p lOSO, and easew fite<l. he eouM irivt- no trrealer riirht to an 
 
 ' III Davis VM, Heclistein, 09 N. Y. aHsi;rin'e thiin he hiul hiinstif In 
 
 440, a IkjihI iind iiiort(;it;;e were in- I'liion Cojle^re vs WIhh-Ut, (il \. Y, 
 
 tnwtetl U> It to enable hiui to \^vi a S.S, the uiortf;a};ee received his inort'
 
 698 Stock-brok(Ms and Siock Kxelianges. 
 
 a chose in action takes it subject only to the original ocpii- 
 ties — that is, the equities between the assignor and the 
 debtor — or subject also to the latent equities of third })er- 
 sons. There are most respectable authorities on both sides 
 of this question,' but in the State of New "\'()rk the weight 
 of opinion at present 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 possesses. It is a question of power 
 or capacity to transfer to another, and that capacity is to be 
 exactly measured by his own rights.^ But the doctrine is 
 subject to the important modification that the real owner 
 
 gage knowing that the mortgagor executed. In Bush vs. Lathrop, 22 
 
 had executed contracts of sale to X. Y. 535, the only thing in issue 
 
 A'arious persons of portions of the was a latent equity of a third person, 
 
 mortgaged property. It was held Denio, J., cited and discussed all of 
 
 that the mortgage was a chose in ac- the New York cases and many oth- 
 
 tion, that the mortgagee took it sub- ers, and repudiated any supposed 
 
 ject to the rights and equities of the distinction between latent equities 
 
 purchasers under the contracts, and and those existing between the orig- 
 
 that his assignee of the mortgage oc- inal parties; he referred, with ap- 
 
 cupied simply his position and took proval, to the declaration of Lord 
 
 subject to the same rights and equi- Thurlow in Davies as. Austen, 1 
 
 ties. In Ingraham vs. Disborough, Ves. 2-17, that "a purchaser of a 
 
 47 N. Y. 421, tlie decision was pre- chose in action must always abide 
 
 cisely the same on a similar state of by the case of the person from whom 
 
 facts. See also Clute vs. Robinson, hebuj-s." But this case was modi- 
 
 2 Johns. (N. Y.) 612. fied by Moore vs. Metropolitan Nat. 
 
 • See p. 1081, 2 Am. & Eng. Enc. Bank, 55 N. Y. 41. See cases cited 
 
 Law, 2d ed., and cases cited. in next note. Except as so modified 
 
 ''This doctrine is sustained by its doctrine stands. Fairchild vs. 
 
 Union College vs. ^^^leeler, supra, Sergent, 104 N. Y. 108. Probably 
 
 where it was held that the as- the most powerful advocate of the 
 
 signee of the bond and mortgage doctrine that the a.ssignee of a chose 
 
 took subject not only to original in action is only subject to original 
 
 equities, but also to the rights and equities was Kent, C. J. In Bebee 
 
 equities of the third persons to vs. Bank of New York, 1 Johns. .529, 
 
 whom contracts of sale had been he says (p. 573): "Wlien it is said
 
 Doctrine of Noii-ne2:otiabilitj . 699 
 
 will be estopped from asserting his title as against a bona 
 fide purchaser from one upon whom he has conferred 
 aj>parent ownership.' 
 
 It has been held, however, that where a chose in action is 
 assio^ned 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 tlie mort- 
 gage 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 
 assicrnee of the evidence of the debt th(? same rio-hts in refrard 
 to both. . . . This dependent and incidental relation takes 
 the case out of the rule ap))lied to choses in action, where 
 no such relation of dependence exists.'' ^ So we shall here- 
 
 that an assij^iiee of a chose in action See Merchants Bank vs. Weill, 163 
 
 takes it sultjpct to all cfiuity, it is N. Y. 4S6. 
 
 meant only that the oripnal debtor ' Moore vs. Metropolitan Bank, 
 
 can make the same defence a^ain.st .5.') X. Y. 41; Merchants Bank vs. 
 
 the a-s-si^nee that lie could again.st Weill, 103 N. Y. ISO. 
 
 the assignor." He was, however, ' Batesville Institute vs. KaufT- 
 
 outvotetl hy four judges to one, and man, 18 ^^'all. 151 ; Taylor vs. Page, 
 
 Tompkins and Spencer, JJ., deliv- (i .\llen, KG; Croft vs. Bunster, 9 
 
 eref] decidedly contrary opinions. Wis. 504, 510. 
 
 Kent's opinion was followed in * 10 Wall. 452. 
 
 James vs. Morey, 2 Cow. 240, and *Car|>crit(T vs. Lonpm, jfi W.tll. 
 
 the doctrine which it advocates is 271. 
 
 HUpfKjrted hy Mott vs. T'lark, \) Pa. ' \\\i\ se«' Palmer vs. Yates, ',\ 
 
 St. .'WH; Bloomer vs. Henderson, S Sandf. 1.'17; Morgan vs. Smith .\m. 
 
 Mich. 305 But it has not pre- Organ Co., 73 Ind. 170; Cornell vs. 
 
 vailed in the State of .New York. Hichens, II Wi« ',\r\:\; KiMhcr vs.
 
 700 Stock-brokers unci Stock Kxchaiigcs. 
 
 after see tbut the doctrine of noii-iie^otiability has been 
 directly applied to certiticates of stock, and the transferees 
 or assignees thereof have been made subject to all defences 
 existing between the original parties.^ 
 
 (b.) Negotiability as Applied to Stock Certificates. 
 
 We come now to consider the doctrine of negotiability as 
 directly applied to stock certificates ; and the importance of 
 this subject to Stock-brokers, banks, and capitalists cannot 
 be overstated, because dealings in these securities constitute 
 the bulk of their business, and hundreds of millions of dol- 
 lars are employed in their purchase and sale each week in 
 the city of New York alone. Stock certificates, as we have 
 seen, are not technically, negotiable instruments. They are 
 not promises to pay money, and, in a woi-d, lack almost 
 every element necessary to constitute negotiability. They 
 are certificates showing that the individual named therein 
 is entitled to a share in the capital stock of a corporation, 
 to its profits and dividends when they are declared, to a 
 proportionate share of its property upon its being wound up 
 or dissolved. The courts have everywhere with marked 
 unanimity placed them in the category of non-negotiable 
 instruments.^ And it has been held in the State of New 
 York that the Negotiable Instruments Law is not applicable 
 to stock certificates.^ 
 
 The effect of non-negotiabiUty we have already considered, 
 and it is very manifest that if that doctrine were to be ap- 
 
 Otis, 3 Chand. 83; Martineau vs. ' P. 700. 
 
 McCollum, 4 id. 153. See this sub- ^ See Church vs. Citizens R. R. 
 
 ject fully discussed, and many cases Co., 78 Fed. 526. 
 
 cited, in 1 Daniel on Neg. Inst. 5th ^ Cowles vs. Kiehel, 65 X. Y. S. 
 
 ed. pp. 842-8. 349.
 
 Negotiability as Applied to Stock Certificates. 701 
 
 plietl in its full force and rigor to stock certificates, the con- 
 sequences to the financial world would be most alarming 
 and serious. But we shall see that while the courts, on the 
 one hand, treat them as non-negotiable, on the other hand, 
 through the equitable doctrine of estoppel, stock certifi- 
 cates, with a power to transfer them endorsed in blank 
 thereon, can be dealt in with almost the same immunity as 
 bills, notes, and other nesfotiable instruments.' As a <reneral 
 rule, the company issuing a stock certificate does not recog- 
 nize a transfer of the same until it has been registered on its 
 books. This is ordinarily performed by an assignment of 
 the stock in writing, made by the former owner of it, with 
 a power of attorney to transfer it on the books of the cor- 
 poration. Books of transfer are kept for that purpose ; and 
 on the production of the above papers the nominated at- 
 torney makes the formal transfer, the old certificate is can- 
 celled, and a new certificate is issued to the new owner. 
 And it seems the courts will take notice of this general 
 mode of transfer.- 
 
 But despite the rules of the companies requiring transfers 
 upon their books, these certificates with an assignment and 
 irrevocable power of attorney executed in blank theret)n ])ass 
 from hand to hand in the same manner as other negotiable 
 instruments. And when they possess a market value they 
 are sold with the same, if nut a greater, facility than hills 
 
 • In u recent leading New York liability. " Knox vs. I'xlen Muiice 
 
 case, the Court of ApjK'uls (per Co., lis N. Y. •l.'Vl. .Vnd .soc Anieri- 
 
 .■\n(lrews, Ch. J.) said: "Hut the run Prens .\.sHri. vh. Hnkntin;;li.nin, 
 
 courtji of this country, in view of '.i7 .Mi.sc. 12<i; niT'd 7S .\. Y. Su|)|). 
 
 the extennive dealin^i.s in ccrtificat<« .'JO.'j. 
 
 of Hhares in roqKirate cnlcri»riMeH, ' Durnill vh. HuHhwirk H Co, 75 
 
 and the intermt both of the public N. Y. "Jl I ; .McNeil vh. The Tenth 
 
 ancl tlic rorfjoration, have n'^'*'" t" Nat. Hunk, 10 .\. Y. 325, 331. 
 thcin Hon»e of the ch-incnls of negu-
 
 702 Stock-brokers and Stock Exchanges. 
 
 or notes, and the transactions in tlie former are very nmcli 
 greater in volume and amount than in those of the latter 
 kind. Indeed, it may be affirmed that stock certificates 
 to-day constitute the chief commercial security of the age. 
 And dealings in them are not confined to one market or 
 locality ; they are bought and sold in every market in tlie 
 world, and by universal usage pass from hand to hand. 
 
 In view of all of these considerations, it is a grave ques- 
 tion whether the time has not arrived for a change in the 
 legal character of these certificates, either by an alteration 
 of the language of the latter so as to bring them within 
 the rule of the law-merchant, or by the courts receiving 
 evidence of the general usages of the commercial community, 
 which usages, as we have seen, have been heretofore suc- 
 cessfully invoked to raise non-negotiable securities to the 
 full rank and dignity of negotiable instruments.' This last- 
 
 ' See ante, p. 662 et seq. Since investors as well as dealers, whether 
 the text was written, the New York it would be wise to remove the pro- 
 Court of Appeals has taken a more tection which the true owner of a 
 conservative view of this subject, stock certificate now has against 
 for the court in Knox vs. Eden theft, accident, or robbery^. The 
 Musee Co., 148 N. Y. 456 (per system of registry of negotiable 
 Andrews, C. J.), said: "It is plain, bonds, which pr vails to a consid- 
 we think, that the argument in erable extent, authorized bj' stat- 
 support of the judgment in this utes of some of the states, and of 
 case, based on the complete nego- the United States, seems to indicate 
 tiability of stock certificates, is not a tendency to restrict rather than to 
 supported by, but is contrary to the extend the range of negotiable in- 
 decisions. If public policy re- struments." But see Masury vs. 
 quires that a further advance should Bank, 93 Fed. Rep. at p. 607. 
 be made in more completely as- In view of the decision in German 
 similating them to commercial Savings Bank vs. Renshaw, 78 Md. 
 paper in the qualities of negotia- 475, a change in the language of the 
 bility, the legislature and not the transfer usually endorsed on the 
 courts should so declare. . . . back of the certificate may help to 
 It may, perhaps, be doubted, taking enlarge the negotiability thereof, 
 into consideration the interest of It was in that case held that as a
 
 Negotiability as Applied to Stock Cernficates. TUo 
 
 mentioned means has been attempted, but S(i far unsuccess- 
 fully. In the case of Aull vs. Colket * Stock-brokers in the 
 ordinary course of their business received certain coi-titicates 
 from a clerk who had abstracted them from a box belong- 
 ing to his employers, and they offered to show '* that the 
 general custom among banks and Brokers was to transfer 
 title to stocks, especially non-dividend-paying stocks as 
 these were, on certificates and powers signed in blank, and 
 that this class of securities has assumed an important rela- 
 tion to trade"" and commerce ; that thousands of such shares 
 are circulated daily on the Stock Exchanges of New York 
 and Piiiladelphia, and pass by mere delivery of certificates 
 and powers; that by the general custom among lirokei-s 
 and Bankers these certificates and powere pass by delivery 
 the same as commercial paper or coupon bonds ; " but the 
 usage was rejected. 
 
 A somewhat similar case of the rejection of a Stock Ex 
 change usage occurred in Taylor vs. Grant Ind. Benin. R. 
 Co.,- where an owner of £2 and £20 shares desired to sell 
 the former, and for that purpose gave his Broker transfei-s, 
 which were blank as to name of transferee and as to value 
 and distinctive numbers of the shares. The Broker, in fac-t, 
 sold the £20 with fraudulent intent. For the jnirpose of 
 giving validity to the transaction and compellingthe owner 
 to stand bv the wrongful ami unauthorized act of th<^ 
 
 bank (a pledKoe <>i 8tock) hud no- Int. M. To winic offoct is l^iisi 
 
 tice from the trunsfer that tlio Hirniin^hain Land Co. vs. Dcnni.s, 
 
 stock wa« for nale only, and not S') .\ hi. .')<).'■). S<f also SIhtwoikI vs. 
 
 for jilcilgr, it wa-s not a hona lide .Meadow, r)() ("al. lU; Winter v«. 
 
 holder. Se<?, however, Clilhert vh. Helinont. M Cal. VZS; liarntow vs. 
 
 Krie BldK. Ahau., .«) .\tl. (Pa.) Savap-, (H Cal. :iKS. 
 
 201 eontru. ' 5 Jur. (n, 8.) 1087. 
 ' 2 \Vc<!k. .NotcN Van. Wll; X\ \a%.
 
 704 Stock-brokers and Stock Exchanges. 
 
 Broker, it was claiined to bo the universal i")ractico of tlxi 
 Stock Exchange to execute such transfers in blank, at least 
 as to the tranferee's name. The court assumed the practice 
 to exist, but refused to sanction it, and remarked : " It is 
 clear that these shares were not transferred by him [the 
 owner], for the law is settled upon this subject, and the 
 safety of property depended upon it. This case is, indeed, 
 a remarkable instance of the value of the existing rule of 
 law upon the subject. To permit the practice of Stock- 
 brokers and Stock-jobbers to prevail against such a rule 
 was entirely out of the question. Brokers must, like all 
 other persons, be bound by the law and must observe its 
 rules." 
 
 A similar usage was also condemned in Denny vs. Lyon,^ 
 where it was proved that the name of the transferee of stock 
 was usually not inserted in the power of attorney, and that 
 it was more convenient not to have it inserted, and the 
 court remarked : " "We know" that this is the commercial 
 usage. It was probably orginated by the banks. If not, 
 they have countenanced it and thus brought people to 
 practise it. And y«;t it is a vicious usage, w^hich no considera- 
 tions of convenience are sufficient to justify. Malus usus 
 aholendtis est. A power of attorney signed, sealed, and 
 delivered, what is it but a finished legal instrument ? Who 
 may alter it to the prejudice of another without incurring 
 liability to the charge of forgery ? If commerical usage 
 permit the attorney to insert the names of P. & W. and 
 then erase them, then insert the name of W. N. and next 
 erase it, and then insert his own name as agent, what other 
 legal instrument may not commercial usage tamper with in 
 
 > 38 Pa. St. 98. But see Scollans vs. Rollins, 179 Mass. 346.
 
 Negotiability as Applied to Stock Certitieates. TOo 
 
 like manner?" The usage was not sanctioned, and the 
 authority of the attorney was held to be exhausted bv the 
 insertion of the single name originally conteniplalod by the 
 owner of the stock. 
 
 But, notwithstanding the refusal of the courts to receive 
 such evidence and to invest these certificates with the attri- 
 butes of negotiability, the modern decisions have, as we 
 have said, practically placed them upon an equality with 
 bills, notes, and other negotiable instruments ; and we shall 
 find that a honafide purchaser for value of such certificates, 
 with powers of sale endorsed in blank thereon, can, with two 
 or three exceptions, to which we shall refer, hokl them even 
 against the true and rightful owner; and this proposition 
 forms the principal exception to the rule that the assignee 
 of a negotiable chose in action takes it subject to existing 
 equities.* 
 
 ' The principal. Endish authori- Hun, 316; McXeil vs. Tenth Xat. 
 
 ties for this proposition are as fol- Bank, 46 N. Y. 325; Commercial 
 
 lows: Ex parte Swan, 7 C. B. (n. s.) Bank vs. Kortright, 22 Wend. 348; 
 
 400; Swan vs. North British Austra- Moore vs. Metropolitan Xat. Bank, 
 
 lasian Co., 7 H. & X. 603; same vs. 55 X. Y. 41; X. Y. it Xew Haven R. 
 
 same, 2 H. & C. 175; Taylor vs. R. Co. vs. Schuyler, 34 X. Y. 30; 
 
 Great Indian Peninsula Ry. Co., 5 Weaver vs. Barden, 49 X. Y. 
 
 Jur. (n. s.) 10S7; 1 Story Eq. 375, 2S6; Leitch vs. Wells, 48 X. Y. 585; 
 
 §390;Pearsonvs. Scott, L. R. 9Ch. Zulick vs. Markham, Daly, 129; 
 
 Div. 198; 38 L. T. (n. s.) 747; 26 W. Printing Co. vs. Washburn, 77 .\. 1). 
 
 R. 796; Rumhall vs. Metropolitan 280; Dickinson vs. Dudley, 17 Hun, 
 
 Bank, L. R. 2 Q. B. Div. 194; 46 L. 509; Matthews vs. Mjws. .Nat. Bank, 
 
 J. Q. B. Div. 346; 36 L. T. (n. k.) 10 .Ml). L. J. 199; Wo<xl's .\pi)eal, 
 
 240; 25 W. R. .306; Goodwin vs. 8 Week. Xotes Cjus. 441 ; 92 Pa. St. 
 
 Roharts, 45 L J. E.\. Div. 748; L. R. 379; Burton's .\pj>eal. id. .m"); s. r. 
 
 I App. Cas. 476; 35 L. T. (n. s.) 179 93 Pa. St. 214; Ellis's Ap|M»al. id. 
 H. L; Easton vs. Bank, 34 Ch. .5.38; AuU vs. Cnlket, 2 Week NotP« 
 D. 93. But sec Colonial Bank vs. Cas. 322; 33 I^cr. Int. 44; Momly vs. 
 Cady, 15 App. Cas. 267. Bank, 3 Week. Notes Cas IIS; 
 
 The principal American authori- ThompHnii vs. Tojand, 48 Cal. 99; 
 ties are .'ls foliowH: Bank vs. J.anier, Winter vm Minintr Co , 7 Rep. 3.'V2; 
 
 II Wall 369; Biidd vh Monroe, IS Tome vs F'arktTHhurgh R. R Co, 
 
 40
 
 700 Stock-brokers and Stock Exchanges. 
 
 The general rule applicable to property other than ne- 
 gotiable instruments undoubtedly is, that the vendor or pled- 
 gor can convey no greater right or title than he has. Nemo 
 dat quod non hubet. But this maxim is applicable to a sim- 
 ple transfer from one party to another where no other ele- 
 ment intervenes. It does not interfere with the well-es- 
 tablished principle that where the true owner holds out an- 
 other, or allows him to appear, as the owner of, or as having 
 full power of disposition over, the property, and innocent third 
 parties are thus led into dealing with such apparent owner, 
 they will be protected. Their rights in such cases do not 
 depend upon the actual title or authority of the party with 
 whom they deal directly, but are derived from the act of 
 the real owner, which precludes him from disputing as against 
 them the existence of the title or power which, through neg- 
 ligence or mistaken confidence, he caused or allowed to ap- 
 pear to be vested in the party making the conveyance.' 
 
 It may therefore be stated as a well-settled proposition 
 that where the owner of a certificate of stock with a power 
 of attorney in blank endorsed thereon, attached thereto, or 
 connected therewith, intrusts it to an agent, servant, or 
 other person, so that by the recognized usages of business it 
 will pass from hand to hand, or the owner is guilty of neg- 
 ligence in respect thereto,^ a bona fide purchaser or holder 
 Avithout notice will be protected in his possession, although 
 
 39 Md. 36, 17 Am. Rep. 540; Mount cases cited therein; Graves vs. 
 
 Holly Turnpike Co. vs. Terrel, 17 Mining Co., 81 Cal. at p. 325; Real 
 
 N. J. Eq. 117; Prall vs. Tilt, 2S N. J. Estate Trust Co. vs. Bird, 90 Md. 
 
 Eq. 479; Bridgeport Bank vs. R. R. 229; Westinghouse vs. Bank, 46 
 
 Co., 30 Conn. 231; .Vtkinson vs. At- Atl. 380. 
 
 kinson, 90 Mass. 15; Garvin a's. ' Per Rapallo, J., McNeil vs. 
 
 Wiswall, 83 111. 215. See also Cin- Tenth Nat. Bank, 46 N. Y. 325. 
 
 cinnati &c. R. Co. vs. Citizens' ' AuU vs. Colket, 2 Week. Notes 
 
 Bank. 43 L. R. A. 777, and manv Cas. 322; 33 Leg. Int. 44.
 
 Negotiability as Applied to Stock Certifleates. TOT 
 
 the agent or person to whom the certificate has been in- 
 trusted has diverted it from the purposes for which it was 
 committed to him, or has been guilty of fraud or a breach 
 of trust in relation thereto.^ 
 
 The rights of a bona fide holder as against the true owner 
 of the stock, to whom the ap[)arent holder has either sold 
 or pledged it, do not depend on the negotiable character of 
 the certificates, but rest on a different principle — viz., that 
 one who has conferred upon another, by a written transfer, 
 all the indicia of ownership of property, is estopped to 
 assert title to it as against a third person who has in 
 good faith purchasel it for value from the apparent owner. 
 And this is a most just and reasonable rule, for when an 
 owner of one of these certificates executes a blank assign- 
 ment, with a power of attorney to transfer the stock on the 
 books of a corpcn'ation, such as is ordinarily used, without 
 any notice on the face of the same that it is intended U) be 
 restricted to a particular purpose, he commits a comnuTcial 
 act. If he then intrust it to a faithless agent, or if, by his 
 own negligence, the certificate gets into circulation and into 
 the hands of an innocent i)arty, the owner should suffer. 
 
 ' See authorities cited ante, p. 705. K/uno principle, whore ;i trustee i.s 
 But where a liroker received, in llie chithed with full power to man- 
 course of trade, a transfer in blank a;^e and control the trust estate, 
 of stock which had in fact been an a«si>;nment i)y him of a mort- 
 stolen and sold, in a mining com- ^a^e impressed with the trust to 
 pany or>!;aniz<,*d under the laws of a bojia fulc purchaaer cannot bo 
 California, held, that he was ]\n\Ac impeached by the cestui <pie trust 
 to the true owner for its vulue and (iJillayc vs. Commercial Hank, ."il 
 damages nk'rci<h vs. .Marye, 9 Nev. N. Y. .'Mr)); and Grovj-r, J , states 
 312; .Swim vs. Wilson, likK. A" L. J. the reason of the exception in the 
 2H0, and article on .Stock-l>rokcrs' foliowin;; words (Moore vs. ^!etr^^- 
 rc«ponsibiliti«'S in suih cases, id, politan .\at. Hank, S.*) \. Y. 11): 
 27.'?; and see Han^^or Ac. C<i. vh. "One rea«o!i why an owikt of cor- 
 Itobin«on,.'j2Fcfl Rep .')20) Onthe porate shanks or of ^oods and chat-
 
 708 Stoek-brokors and S<oek Excliaiifijes. 
 
 Tho wholt^ question tlien resolves itself into one of notice^ 
 Had the purchaser or holder of the stock certificate notice 
 of the rights of the true owner ? TIad he knowledge of the 
 jnii'pose for which the owner placed it in the hands of his 
 agent ? If he had no notice, the law protects hhn ; if other- 
 wise, it will not protect him. 
 
 "We shall now proceed to consider what notice is sufficient 
 to prevent the true owner from being deprived of his title ; 
 and the cases upon tiiis subject resolve themselves into three 
 classes : 1st, those in which the notice appears on the face 
 of the certificate ; 2d, where it is dehors the certificate, and 
 is gathered from the circumstances surrounding the transac- 
 tion ; and, 3d, those cases in which the hona fule purchaser 
 or holder acquires the right to hold the certificate by reason 
 of the neglifjence or carelessness of the owner. 
 
 1. Cases in which notice appears cm the face of the certifi- 
 cate. 
 
 It is a familiar and well-established rule, both in England 
 and the United States, that persons who deal with or receive 
 written instruments are chargeable with constructive notice 
 of their contents and of their legal effect, and are bound 
 thereby, Avhether they examine them or not.^ 
 
 In Baring vs. CorrieHhe defendants bought goods from 
 
 tels who has conferred upon another real title ajjainst an innocent pvir- 
 
 the apparent ownership, without chaser from one clothed by him with 
 
 transferring to him a valid title, was all the indicia of ownership and 
 
 held precluded from asserting his power of disposition." 
 
 title against a hona fide purchaser ' Farmers,' etc., Nat. Bank vs. Lo- 
 
 from such apparent owner is that gan, 74 X. Y. 568, 580; City Bank 
 
 such purchase was made upon the vs. Rome, Watertown, etc., R. Co., 
 
 faith of the title which he had ap- 44 id. 136; Turner vs. Liverpool 
 
 parently given, and that it would Docks, 6 Ex. 543. 
 
 be contrary' to justice and good con ^ 2 B. S: .\ld. 137. 
 .science to permit him to a.s.sert his
 
 Negotiability as Applied to SUn-k Certifloates. T<»i» 
 
 one whom they knew to be both a inerchaiii aiul ISroker, 
 but at the time of the sale they received from him a sold 
 note, exactly in proper form, supposing him to have sold in 
 his character of Brokei-. It was held that this was suffi- 
 cient notice to put them upon inquiry for the })rincipal, and, 
 having failed to make such inquiry, they were not permitted, 
 in settlement for the goods, to offset a claim which they had 
 against the Broker, but were obliged to pay the principal 
 in full. In this case the owner had not intrusted the Broker 
 with possession of the goods, and thereby enabled liim to 
 appear as oAvner, and therefore it was distinguished from 
 the early English case of Hern vs. Nichols,' where the owner 
 was held answerable for the deceit of his factor, and Ilolt, 
 C. J., said that, " seeing somebody must be a loser by this 
 deceit, it is n)ore reasonable that he that employ's and puts 
 a trust and confidence in the deceiver should be a loser than 
 a stranger.'' ^ 
 
 In Pannell vs. Ilurh-y ^ one P conveyed in trust to C. B. 
 ik D, who opened a trust account with bankers, headed in 
 their books *• II. P.'s Estate." The bankers dissolved, and 
 defendant continued the business, receiving the old books 
 and carrying on the trust account. I), one of the trustees, 
 drew out of the trust account and paid a deficit in his pri- 
 vate account. Held, that defendant was chargeable with 
 notice by the heading of the trust account, //</«/• <///(/, and 
 must settle with the Pannell estate, independently of any 
 set-off he had against the trustee D. 
 
 Taylor vs. (ireat Ind. Penin. ii. Co.* was a case of ccjn- 
 
 ' 1 Snlk. 289. tunnMl on tho simn- pniiit iis Hcrii 
 
 ' Gcor«e v«. ClaKCtt, 7 T. II. S-W, vh. .\ichobi. 
 and Uahone vs WilliuiiiH, i.l. lim, ' _' Cill. 211. 
 
 «5Jur. (n. 8.) 1087.
 
 710 Stock-brokors and Stock Exchaiijjes. 
 
 flicting equities, where either tlu' ow iut of stock or its pur- 
 chaser must suffer loss through the fraud of a Broker em- 
 ph)yed by the foinier ; and the purchaser contended that 
 the owner ought to bear it because he had been neghgent 
 in executing the transfer of the stock in blank, and thereby 
 made it possible for the Broker to effect the fraud ; but it was 
 held that inasmuch as the transfers, at tlio time they were 
 delivered to the purchaser, were still in blank as to the value 
 and distinctive numbers of the shares, and the name of the 
 transferees, they carried on their face constructive notice of 
 their invalidity to all concerned. The court, however, in 
 this case, did reflect upon the plaintiff for the imprudent 
 manner in which he had executed the transfers, and therefore 
 allowed hiiu no costs. This case would seem to teach that 
 w^here equities ai'e to be balanced between an owner and a 
 purchaser of stock, both of whom have been negligent, and 
 one of whom must suffer loss through the fraud of another, 
 the scale will turn in favor of him wdio has been least neg- 
 ligent. 
 
 The registered proprietors of stock have the legal title to 
 it ; and therefore an instrument of transfer by them, or any 
 other writing which suggests who are the registered proprie- 
 tors, is sufficient to put a purchaser upon the inquir}'- whether 
 they are not also the absolute and equitable owners. Ac- 
 cordingly,* a purchaser is not justified in dealing with the 
 solicitor of executors as a principal, because he received no- 
 tice from the form and terms of the transfer wdiich was 
 signed by the executors, and from the accompanying letter, 
 that they, and not the solicitor, had the legal title. 
 
 In Shropshire Union R. tt C. Co. vs. The Queen ^ certifi- 
 
 ' Pearson vs. Scott, L. R. 9 Ch. D. ' L. R. 7 H. L. Cas. 496. 
 198.
 
 Negotiability as Applied to Stock Ortitlcates. 711 
 
 cates of railway stock were intrusted to one of the tlirect- 
 oi-s, who was also the Banker of the companv, and he also 
 stood on the register of the company as the owner of the 
 said stock. He borrowed money from R., and deposited 
 the certificates with him as security, but R. died without 
 having applied to be registered as owner. His widow and 
 executrix made such application, and was refused, on the 
 ground that if E. had made proper inquiries he would have 
 found that his transferor was onlv a trustee ; that ne'i-li- 
 gence sufficient to affect their equitable title could not be 
 imputed to the other directors and the company in thus 
 allowing the apparent title to rest in the one director ; and 
 that consequently the equitable title of R. could not pre- 
 vail against the earlier equitable title of the company. And 
 Lord Cairns, it seems, was of the opinion that any one deal- 
 ing in stock or corporate property was always bound to 
 make inquiry as to the actual ownership and condition of 
 the title ; for he says,' " He ought to have known that al- 
 tiiough II. 's name appeared upon the register as the owner 
 of these shares, and although 11. could present to him the 
 certificates of this ownership, still it was perfectly possible 
 either that these shares were the beneficial property of II. 
 himself, or that they were the property of some other per- 
 son." In brief, that the only way he could |Kirfect his title 
 was to go to the couqiany and have a transfer of those 
 shares from If.'s name.' U) his own in tin' register. Hut it 
 is questionable whether the conclusion reaclunl in this case 
 is not in conflict with the best authorities both in Knglarxl 
 and in the United States. 
 
 So where the incompleUj and non negotiable bonds of a 
 
 P. .S05.
 
 712 Stock-brokei-s and Stock Exchanges. 
 
 railroud coipuiulion wei'e conditioned for the payment of 
 either of two specified kinds and amounts of national cur- 
 rency, to be determined by the phice to be fixed for their 
 payment, and contained a ckiuse autlioriziiig the president 
 of the corporation to fix, by his endorsement, such place of 
 payment, and the bonds were endorsed in l)lank l)y the 
 president, without fixing the place of payment, the lona 
 fide j)urchaser of such bonds was held chargeable with no- 
 tice of their defects, and could neither acquire nor convey 
 a title to the bonds.^ 
 
 A certificate of stock containing the words " in trust," 
 or other equivalent words, is constructive notice of a trust 
 to all who deal wuth the certificate, and puts them upon in- 
 quiry as to the authority of the trustee to dispose of the 
 stock.-^ If such a certificate is pledged by the trustee to 
 secure his own debt, the pledgee is by the terms of the cer- 
 tificate put upon inquiry as to the character and limitations 
 of the trust/ 
 
 ' Ledwich vs. McKim, 53 N. Y. assignment without any inquiry for 
 308. the cestui que trust, or for his assent 
 == Budd vs. Munroe, 18 Hun, 316; to the transfer. Geyser-Marion 
 Sprague vs. Cocheco xMfg. Co., 10 Gold Mining Co. vs. Staric, 106 Fed. 
 Blatchf. 173; Ga.ston vs. Amer., etc., Rep. 558, and many ca.ses cited. 
 Bank, 29 N. J. 98. ' Shaw vs. Spencer, 100 Mass. 
 If Stock-brokers at all times 382; Duncan vs. Jaudon, 15 Wall, 
 knew that securities placed with 165; Swan vs. Produce Bank, 24 
 them for speculative purposes stood Hun, 277; Atkinson vs. Atkinson, 
 in the name of one of their cus- 90 Mass. 15, where same rule is ap- 
 tomers as trustee for the other, they plied to a guardian. Compare Ash- 
 are chargeable with notice of the ton vs. Atlantic Bank, 85 Ma.ss. 217; 
 trust, and are bound to inquire into 2 Perry on Tru.sts, §§ 814, 815, and 
 the ownership of the property, cases cited. 
 
 Leake vs. Watson, 58 Conn. 332. And see the recent case of Farm- 
 It is actionable negligence for a ers' Bank vs. Diebold Safe & Lock 
 corporation to cancel a certificate of Co., 58 L. R. A. 620, and note, and 
 its stock and transfer the stock on cases cited at id. 624. 
 the signature of the trustee to the
 
 Kegotiability as Applied to Stock Certificates. 718 
 
 The old rule seems to have been that ordiuarih' it was a 
 breach of trust for a trustee of stock to transfer it, of which 
 a purchaser was chargeable with notice ; and therefore the 
 cestui que trust was entitled to have the individual stock 
 restored to him.^ 
 
 Brewster vs. Sime^ seems to be contrary to the general 
 current of authority, for it holds that the addition of the 
 word " trustee " after the name of a person to whom stock 
 is transferred is not sufficient to put persons dealing with 
 the trustee upon inquiry as to the trustee's title or as to the 
 owner's equitable right. Crockett, J., in his opinion, as- 
 signs as a reason for his position that "■ considerations of 
 public policy and common justice demand that when stock 
 is placed in the name of a trustee under these circumstances, 
 the secret owner sliall be bound In' the act of his trustee 
 dealing with persons who have no actual notice of the rela- 
 tions between the parties."'' And although, as we have 
 said, this j)osition is exceptional to the general run of the 
 cases, many strong reasons may be urged in su[)port of 
 it. But this and the other decisions cited "have not been 
 followed "and the reason of the case, the later decisions 
 of the courts, and the declarations of the text books have 
 united to make the pi-oposition we have announced the 
 established law of the land."'* 
 
 But an executor is not under the same disability as a 
 trustee, and a pui-chase of stock from him is ordinarily valid, 
 though alfected with some pcculiai- trust or I'tpiity, because 
 
 'Harrison vh. Ilurri«ori, 2 Atk. more, 1' Md. l.W, 171 . Hut tin- lat- 
 
 121. tor viuic wtm ovt-rruItHl in .Murl>ury 
 
 » 12 Ciil. 130. AikI hoc Stiiison vh. Khleii, 72 Md. 2(t(>, 21H. 
 v».Tlionitoii,.'>«G:i. :{77. « .Marion Co. vh Stark, 10(1 IV.I 
 
 •To harne ffTcct, TliompHoii vh Hop .'i.'iS S<«o alno Jonen vh \\ il- 
 
 Toluml. Isr.il 'M; .Mhcrt vr, Haiti- liaius, 21 Ueuv. 02.
 
 714 Stock-brokers and Stock Exchanges. 
 
 the purchaser cannot, be presumed to know tluit the sale is 
 not required in order to discharge the testator's debts,' it 
 being the executor's primary duty to dispose of assets and 
 settle the estate,^ which differs in this respect from the duty 
 of a trustee, which is that of custody, and not of adminis- 
 tration or sale; ^ but if the purchaser from an executor has 
 a reasonable ground for believing that he intends to misap- 
 ply the proceeds, he will not be protected.* 
 
 In Pennsylvania the highest court of the State in two 
 cases, almost simultaneously reported, has fully secured the 
 rights of a hona fide holder or purchaser of stock certifi- 
 cates. 
 
 In Wood's Appeal,^ G. R. W., one of several executors, 
 abstracted from a fire-proof safe certificates of stock be- 
 longing to the estate without the knowledge of his co-ex- 
 ecutors. These certificates stood in the name of C. S. W., 
 the testator, and were accompanied by a blank bill of sale 
 and power of attorne}' to sell and transfer, signed " G. R. "W., 
 acting executor." G. R. W. was engaged in stock specula- 
 
 * Hutchins vs. State Bank, ,53 ^ Bayard vs. Farmers,' etc., Bank, 
 
 Mass. 421. 52 Pa. St. 232; Jaudon vs. Xat. City 
 
 ' Leitch vs. Wells, 48 X. Y. 585; Bank, 8 Blatohf. 430. 
 
 Wood's Appeal, 92 Pa. St. 379; * Lowry vs. Commercial, etc., 
 
 PraU vs. Tilt, 28 N. J. Eq. 479. Bank, Taney's Dec. 310. 
 
 So also Stock-brokers are not And when Brokers have notice 
 
 neclicent if thej- sell bonds at the that an executor transfers .stock to 
 
 instance of a trustee, who misap- secure a personal loan, they cannot, 
 
 propriates the proceeds, although on purchasing the stock, compel the 
 
 the bonds stood in the name of a corporation to transfer it to them, 
 
 prior deceased trustee who was also or recover damages for its refusal to 
 
 executor of the will under which the do so. DaAns vs. National Eagle 
 
 trust was created, when it is not Bank, 50 Atl. Rep. (R. I.) 530. 
 
 shown that they were aware of the * Wood vs. Smith (s. c), 92 Pa. 
 
 latter's death, or of the then condi- St. 379; Burton's Appeal, 93 id. 214. 
 tion of the trust property. Cooper 
 vs. Illinois &c. R. R. Co., 38 A. D. 22.
 
 Negotiability as Applied lo Stock Certifleates. 715 
 
 tions, and delivered these certificates, with the power, etc., 
 to his Broker, "who in turn pledged them with another Bro- 
 ker, the defendant, to secure certain transactions between 
 them. In an action bv the co-executors of G. R. "W. against 
 the defendant, it was decided that they could not recover 
 from the defendant, he having purchased in good faith, and 
 that there was nothing to put him upon an inquiry. The 
 court held that, if the action had been against the first 
 Broker, the plaintiffs could have recovered, '' for they [the 
 Brokers] participated in the "SATongful act of G. TI. TV. ; the 
 transaction itself gave them notice of the misapplication ; 
 that the fact of the power of attorney being signed by 
 an executor made the case no different than if it had 
 been signed by the testator himself, an executor having 
 an absolute power of disposal over pei*sonal effects, and 
 the bona fide alienee being perfectly protected by such 
 sale." The court distinguished the case from one had 
 directly with trustees, where there is no presumption of a 
 right to sell it,' or from a case where it appeared that the 
 party dealing with an executor had notice of the transac- 
 tion.^ 
 
 This decision was followed in Clemens vs. Ilocksher,' 
 in which case it appeared that securities standing in the 
 names of trustees were pledged by a firm of Stock-brokers 
 (of which one of tlie trustees was a member) and the 
 pledgees were held liable to the trust estate. 
 
 And if a corporati<m issue; st(x:k to a trustee, knowing the 
 name (jf tlu; beneficiary, it is charg('al>l(' with notice of the 
 terms and limitations of the trust, and cannot, by any par- 
 
 • Dunraii vh. .laiirlou, I'l Wnll, • I'r.ill vm Il.iniil. 2S .\. J. K(i. GO. 
 1&5; Shaw vs. Si>encer, UK) .Muwm. ' iH.-i Th Si, 170. 
 382.
 
 71G Sluck-brokers and Stock Exclmui^es. 
 
 ticipation with the trustee in ii violation o! the trust, defeat 
 the rights of the beneliciary.' 
 
 1 he effect of notice to a purchaser, which is intrinsic to 
 the muniment of title, is well exemplified in Atkinson vs. 
 Atkinson,^ In this case the corporation issued a certilicate 
 to a guardian for ten shares of stock in his capacity as such, 
 and also two other shares to the same guardian without 
 qualifying him as such. His assignment of the ten shares 
 was set aside because of the notice to the transferee con- 
 tained in the certificate, while the transferee vf the two 
 shares was protected because he had no notice or knowledge 
 of the violation of the trust. 
 
 2. Notice dehors the documents of title. 
 
 If one who buys stock of an executor has notice that it 
 belongs to the testator's estate, and actual knowledge that 
 there are other executors who do not join, he is thereb}' put 
 upon inquiry as to the propriety of the sale ; and, if he 
 omits such inquiry, will be decreed to return the stock to 
 the estate discharged from the lien of his advances.* 
 
 If a person buys stock from one whom he knows to be 
 acting in an official capacity, he is chargeable with notice of 
 the legal duty imposed by law upon such official— e. g., he is 
 bound to know that an administrator is required by law to 
 sell at public sale.* 
 
 A purchaser of stock is not chargeable with notice of a 
 by-law, however, Avhich the corporation has no authority to 
 make either by its act of incorporation or by general law ; 
 
 >Loring vs. Salisbury Mills, 125 Clark, 22 Ch. Di v. 830; Simmons vs. 
 
 Mass. 138. Bank, (1891) 1 Ch. 270; Societe 
 
 '90 Mass. 15. G6n6rale vs. Walker, 11 App. Cas. 
 
 3 Ellis's Appeal, 8 Week. Notes 20. 
 
 Cas. 5.38. And see Roots vs. Wil- * Xutting vs. Thomason, 46 Ga. 
 
 liamson, 38 Ch. D. 485; France vs. 34.
 
 Neg:otiability as Applied to Stock C'ertiticates. 717 
 
 and is not put upon inquirv for a lira dci'lai-ed bv such \iivr 
 arisins out of the indebtedness of the seller of the stock to 
 the corporation.' But he is chargeable "with notice of 
 original articles of association, which have been adopted 
 into the charter of the corporation, providing that a share- 
 holder should not transfer his stock as long as he was in- 
 debted to the corporation.- T\'here the owner of stock 
 delivers the certificate to his pledgee with a power to trans- 
 fer it, the fact that his name is in the certificate is not 
 notice of his rights as against third persons, who take it for 
 value from the pledgee.^ 
 
 In Crocker vs. Crocker * the firm of L. & Co. advanced 
 moneys to one of the partners, Stephen Crocker, and took 
 as security certain shares of stock which they knew he held 
 in trust for his brotlior, and not in his own right ; there- 
 fore, as against the ce.sful qi/e trust, they took nothing by 
 the fraudulent transfer. 
 
 In Jaudon vs. Xationnl City I>ank ^ the ti^ansaction of loan 
 indicated that the transferee of stock was n<^t selling the 
 same in the ordinary course of liis business as trustee, but 
 that he was borrowing money for his private use on a 
 pledge of trust property ; and therefore they were obligetl 
 to disfjori'e. 
 
 And Stock-brokers do not l)ecome the honaji^le holders of 
 certificates of stock belonging to a customer of a l»ank and 
 ple<lged with tlieui by tiie ciishier of the bank (after trans- 
 
 ' Dri.scoU V8. West Bradley, etc , with .-ict of inrorporatioii. fiirn- 
 
 MfK. Co., 59 N. Y. 90. iniiiKs vs. \Vcl..si,.r. \:\ Me. 192; H.ir- 
 
 ' I.*KSctt vs. IJaiik of SitiR .Siiiji, rett vs. Union Mutual Ins. Co., 01 
 
 24 .\. Y 2X3; McDowcii vs. Hank of Milss ISl. 
 
 Wilniintrton, otr- , 2 Del. 1; I'nion ' I-VIl vs IIovo, 23 How. Pr. .'WO. 
 
 Bank vs. I.ainl, 2 Wlu-at .390 And • 31 \ Y .107 
 
 of by-laws pjLssf*! in ficconldru-c 'S Bl.-itrlif 130
 
 718 Stock-brokers and Stock Exchanges. 
 
 fer to his name) to secure a call loan (at exorbitant interest), 
 which he alleged was for the bank, but which in reality he 
 obtained for hhnself. The cashier had beiMi buying and 
 carrying stocks on margin through the Stock-brokers for 
 several years, and this fact, coupled witli the unusual cir- 
 cumstance that a bank Avould borrow a large sum at an 
 usurious rate of interest, charged the Brokers with the duty 
 of making inquiries, which they wholly neglected,' 
 
 In JMerchants' Bank vs. Livingston ^ it appeared that do 
 fendant L. delivered to defendant B. a certificate of stock as 
 collateral for a loan of |3,000. B. applied to ^Y., plaintiff's 
 agent, for a loan thereon of $S,000, stating that he wanted 
 it for a Client. AY. agreed to nuike the loan if B. wouhl 
 procure a proper power of attorney to be attached to the 
 certificate. B., by representing that he ought to have the 
 instrument to secure his loan, procured from L. a transfer 
 and irrevocable power of attorney to make a transfer exe- 
 cuted in blank. B. filled up the blanks save the name of 
 transferee and attorney, and delivered it with the certificate 
 to AY., who thereupon made the loan. B. had no authority 
 from L. to borrow or to pledge the stock. In an action to 
 foreclose plaintiff's alleged lien upon the stock — held, that 
 as B. did not claim to be the owner of the stock, but 
 only to be acting as agent for the owner, and as he had, in 
 fact, no authority or apparent authority so to act, L. was 
 not estopped from asserting his title to the stock, and plain- 
 tiff could not assert a lien save at most for the amount for 
 which the stock was pledged to B. ; that while the transfer 
 and power of attorney gave to B. an apparent ownersliij) in 
 case he had claimed title or an apparent authority to sell as 
 
 ' Williamson vs. Mason, 12 Hun, - 74 X. Y. 223. 
 97, 105.
 
 Negotiability as Applied to Stock Certificates. 719 
 
 aofent, it did not hold him out as authorized to make a loan 
 or to pledge the stock, or, at most, it only indicated that he 
 could pledge the stock for an authorized loan. The court 
 said : " If he [B.] had been authorized by L. to borrow the 
 money, he could probably have pledged the stock in his 
 possession to secure it. And he could have taken the cer- 
 tificate and power of attorney and gone into the market 
 claiming to act as the agent of the plaintitf, and have sold 
 the stock and given a good title. The possession of the 
 certificate and full power of attorney wouj^l have given him 
 the apparent authority to sell."^ 
 
 3. Cases in lohich tlic hona fide purchaser or holder ac- 
 quires the right to hold the certificate hy reason of the negli- 
 gence or carelessness of the oicner. 
 
 The owner of stock certificates may also lose his title to 
 the same by his own negligence or carelessness in respect 
 thereto, the rule of law being that, where one of two in- 
 nocent persons nmst suffer by the fi-aud or negligence of a 
 third, whichever has accredited him must bear the loss.^ 
 And a question as to whetherit was negligence in the [)laiii- 
 tiffs to leave their certificates with their clerk or bookkeeper, 
 so that the latter could fill in the blanks and transfer them 
 to innocent purchasers, is one for the jury.^ A few of the 
 leading cases will fully illustrate the rule up<m this sub- 
 ject. 
 
 In Davis vs. Bank of England * Hest, C. .1., says : " It has 
 ever been an object of the legislature to give facility to 
 the transfer of shares in the i)ublic fun<ls. This facility 
 
 ' Sm- iilso I'ortfT VH. ParkH, -19 X. 2 Wr-ck. Not. -s (its . In . ;i_'J; Mim- 
 
 Y. .Wl, which Ih u chho. of a<tual (l<trfT vh Wickorsham, 03 Pa. St. 87. 
 
 notice. ' Aiili vs Colki't, Hupru. 
 
 » Aiill VH. Colkift, :W Log. Int. -IJ; ' J Hii.n. H'M, «0S.
 
 720 Stock-brokers jukI Slock Kxclianses. 
 
 of transfer is one of the advantages belonging to this species 
 of property, and this advantage would be entirely destroyed 
 if a purchaser should b(^ re(|uii'ed to look to the regularity 
 of the ti'ansfei's to all the various persons through whom 
 such stock had ))ass('(l. Indeed, from the manner in which 
 stock passes from man to man, from the union of stocks 
 bought of different persons under the same name, and the 
 impossibility of distinguishing what was regularly trans- 
 ferred from what was not, it is impossible to trace the title 
 of stock as you can that of an estate." These views are 
 well illustrated Ijy the history of the Bank of England 
 stock. There was a time when the Bank, in dealing with 
 executors or trustees under a will, had to take cognizance 
 of the will and of the limitations of the trust therein con- 
 tained ; but this became so onerous when almost every 
 man in the kingdom became the owner of its stock that a 
 relaxation of the rule became a necessity. As was re- 
 marked by the Lord Chancellor, in Ilartga vs. Bank of Eng- 
 land,^ " All the former strictness of practice in the Bank 
 could not have prevented the stock from being put into the 
 name of Stonehouse [executor] ; Avhen once put into his 
 name, to which he was distinctly entitled, could the Bank 
 look farther aud inquire whether the stock standing in his 
 name was trust stock? If so, the Bank would be charged 
 with all the trusts in the kingdom. It was enacted by 1 
 Geo. I. c. 19, that such portion of a will as related to the 
 disposition of stock should be registered in the office of the 
 chief accountant of the Bank of England ; and in default 
 thereof the Bank need take no notice of it, but might allow 
 the executor full control as to the transfer and disposition 
 
 ' 3 Ves. .55.
 
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