capital stock of a company incorporated under the laws of another State, by a person not the owner or assignee thereof, nor authorized by the owner, etc., to make such transfer, is void, notwithstanding that such person has previously, while acting as broker, sold such shares by mistake, and makes the contract for the purpose of indemnifying the owner.1 A contract for the sale of any of the stocks enumerated in the statute of New York, relating to stock-jobbing, to be transferred at a future day, is absolutely void, if the party contracting for such sale and transfer, though in possession of the certificate or other evidence of the title to such stock, as required by the statute at the time of the contract, is then already under a liability or obligation for the sale or transfer of an equal or greater number of shares of the same stock. The New York stock-jobbing act does not apply to sales of distributive shares in the effects of a corporation previously dissolved.3 § 2711. Dealing Prohibited by Statute: When Purchaser not in Pari Delicto.- Where a law prohibits a cashier of a bank from dealing in stock, as the Pennsylvania act of 1850, it invalidates all his contracts contrary to its mandates. A party purchasing stock from a cashier stands in pari delicto, and cannot recover back the consideration paid. Otherwise, if the purchaser supposed he was purchasing from a cashier as the agent of a stockholder." § 2714. Loan of Shares Declared to be a Mutuum.— In dealings among brokers, shares of corporate stock are frequently loaned for two purposes: 1. Where a broker has sold particular stocks for future delivery and is called upon to make delivery in kind, instead of settling on the basis of "differ 1 Barrett v. Mead, 10 Allen (Mass.), 337. 2 Stebbins v. Leowolf, 3 Cush. (Mass.), 137. 3 James v. Woodruff, 10 Paige (N. Y.), 541. 4 Burkholder v. Beetem, 65 Pa. St. 496. 66 ences" between the selling price and the market price at the time of delivery. 2. Where the parties desire to speculate in the rise or fall of particular stocks, and the holder, believing that they will rise in value, is willing to lend them to a solvent person, he paying the interest on the loan until the holder shall see fit to call for them; the borrower, on the other hand, believing that they will depreciate, intending to sell them on a falling market and to buy other stocks of the same kind at a lower rate in order to replace them, when called upon by the lender so to do. A lending of corporate stocks for the lastmentioned purpose has been classed with that kind of contracts which, in the language of the civil law, is denominated a mutuum. A mutuum is a loan for use and consumption, the thing being bailed to be consumed, and an equivalent in kind subsequently returned." In case of a loan, by way of mutuum, the borrower is bound to restore, at the time agreed upon, or within a reasonable period after request, an article of the same kind and quality as the one originally lent to him." 2 While the lending of corporate stocks for the purpose last mentioned is not strictly a mutuum, since the shares are not to be consumed in use, yet it is a mutuum in the sense that the particular shares may be sold by the borrower and he may discharge his obligation by returning the same number of shares of the same kind upon demand; in other words, he is not required to return the identical certificates.3 § 2715. Illustration: Transaction Held to be in the Nature of a Mutuum.-G., owning shares of the Marietta & Cincinnati Railway Company, in 1856, transferred the same to F., who gave G. written obligations for their return, reciting substantially as follows: "Borrowed of W. G. 109 shares of Marietta & Cincinnati railroad stock, drawing interest at 8 per cent., to be returned on demand." Afterwards the Marietta and Cincinnati Railroad Company became insolvent; in 1860 a mortgage upon the road was foreclosed; all its property and rights were sold; the sale was affirmed and a deed made to the purchaser; and afterwards all its property, rights and franchises were conveyed to a new corporation, so that the old corporation ceased to exist in fact, and its stock from that time ceased to have any legal existence and became of 1 Add. Contr. 347. 2 Ibid. 468. 3 Fosdick v. Greene, 27 Oh. St. 484; s. c. 22 Am. Rep. 328. no value. It was held that the transaction was in the nature of a mutuum, and that payment in discharge of the loan could be made by a return of an equal number of shares of stock in the Marietta & Cincinnati Railway Company, without regard to its market value.1 § 2716. Doctrine that the Lender Loses his Right of Action by Waiting until the Stock which he has Loaned has Become Extinguished. In the case stated in the preceding paragraph, it was held that the lender of the stock had, by his laches, lost his right of action against the borrower, both as to the return of the stock and as to the recovery of pecuniary damages. But the view of the court, though forcibly stated, does not seem to be sound. The case would seem rather that of a continuing trust or bailment, in which case the statute of limitations would not run, nor laches be imputable, until a repudiation of the trust relation by the bailee. SECTION 2 ARTICLE IV. SALES. 2719. Whether shares of stock within the statute of frauds. 2720. Motive of purchase immaterial. 2721. Purchases by officers of stockholders. 2722. Whether agreement to purchase construed to be at par or market value. 2723. Conditional sales of shares. 2724. Measure of damages for failure to deliver shares. 2725. Interpretation: contract held to be executed and to pass title. 2726. Measure of damages for deceit inducing purchase of shares. SECTION 2727. Market price of stock on a given day. 2728. Specific performance of contract for sale of shares. 2729. When equity will grant relief to the vendor. 2730. Circumstances under which specific performance not decreed. 2731. Interpretation of contract of sale reserving "all profits and dividends." 2732. Sale or executory agreement. 2733. Various decisions touching sales of shares. § 2719. Whether Shares of Stock within the Statute of Frauds. Although there is some conflict of decision on this question, yet the tendency of American courts seems to be to 3 1 Fosdick v. Greene, 27 Oh. St. 484; s. c. 22 Am. Rep. 328. 2 Fosdick v. Greene, 27 Oh. St. 484; s. c. 22 Am. Rep. 328, 336, 339. 8 See Somerby v. Buntin, 118 Mass. 279; s. c. 19 Am. Rep. 459; ante, § 1068. hold that corporate shares are "goods, wares and merchandise," within that section of the statute of frauds which requires contracts for the sale of goods, wares and merchandise to be in writing unless accompanied by delivery.1 Some of the courts likewise apply a liberal construction to the statutes against fraudulent conveyances, and hold that they extend to every species of property which is liable to be taken by legal process for the payment of debts, — construing the words "goods and chattels " as employed in the statute so as to include corporate stock and other choses in action.2 § 2720. Motive of Purchase Immaterial.— Parties who are interested in opposition to a corporation have the right to purchase its stock in order to defeat a contract which it is about to make.3 § 2721. Purchases by Officers of Stockholders.- While the officers of a corporation occupy, in a certain sense, a fiduciary relation to the stockholders, yet it has been held that a purchase of shares from a stockholder by an officer cannot be avoided on the ground of fraud, from the mere fact that the officer had knowledge in his official capacity of favorable sales of other stocks, which enhanced the value of the stock generally, of which fact the seller was ignorant. This is in conformity with the view taken by the Supreme Court of Indiana, that the directors of a corporation are trustees for the stockholders only in respect of the management of the business of the corporation; and that when they undertake to deal with individual shareholders in the purchase of their shares they deal with them at arm's-length, as though no trust relation existed between them.5 1 Tisdale v. Harris, 20 Pick. (Mass.) 9; Boardman v. Cutter, 128 Mass. 388. 2 Sims v. Thomas, 12 Ad. & El. 536, 554; Barrack v. McCulloch, 3 Kay & J. 110; Stokoe v. Cowan, 29 Beav. 639; Pinkerton v. Manchester &c. R. Co., 42 N. II. 424, 457. This construction was criticised in Doyle v. Sleeper, 1 Dana (Ky.), 531, as being too elastic; but the Supreme Court of Rhode Island was inclined to think that the cases first above cited were rightly decided and that the statute of fraudulent conveyances of that State extended to fraudulent transfers of corporate stock. Beckwith v. Burrough, 14 R. I. 366; s. c. 51 Am. Dec. 392. 3 Carson v. Iowa City Gaslight Co., 80 Iowa, 638; s. c. 45 N. W. Rep. 1068; ante, § 2303. 4 Crowell v. Jackson, 23 Atl. Rep. 426; 8. c. 53 N. J. L. 656. 5 Board of Commissioners v. Rey The Supreme Court of New York took the same view of the question where one of the trustees of a corporation purchased of the plaintiff certain shares of its stock, and the action was brought to have the sale declared void and to have the contract rescinded on the ground of fraud and undue influence. It was held that the relation of trustee and cestui que trust did not exist.1 § 2722. Whether Agreement to Purchase Construed to be at Par or Market Value.— In the view of the Supreme Court of Georgia, an agreement to purchase stock of a corporation, without anything being said as to whether it is to be purchased at its par or market value, should be construed as an agreement to purchase at its par value.2 But with more sense, the Kansas City Court of Appeals, of Missouri, held that where corporate stock is sold without any stipulated price, the law implies a promise to pay the market value, and in order that it should have a market value, it is not necessary it should be the subject of daily traffic; it is enough if it was occasionally the subject of sale or exchange in the community, so as to fix at different times a customary price. It is believed that, as between individuals, the latter interpretation ought to prevail where the shares clearly have a market value, and that where they have no market value, then the contract ought to be construed like any other contract where the price is not named and there is no market value, as a contract to pay a fair price-what the thing is worth. But if the vendor is the corporation itself, disposing of its hitherto unissued shares, then, for reasons elsewhere given, it should be held that the par value is intended. § 2723. Conditional Sales of Shares. Where a sale of stock of a corporation was made in consideration, in part, of a promise that the corporation would not set up any claim against the vendor of such nolds, 44 Ind. 509, 516; s. c. 15 Am. Rep. 245. 1 Carpenter v. Danforth, 52 Barb. (N. Y.) 581. As to when the purchase of the shares of one of the stockholders by the other two is a purchase for the two, and not for the corporation, see Schilling & Schneider Brewing Co. v. 2 Tilkey v. Augusta &c. R. Co., 83 Ga. 757; s. c. 10 S. E. Rep. 448. 3 Deck v. Feld, 38 Mo. App. 674. |