SECTION V. Sale of spurious Shares. 1. Vendor, who acts bonâ fide, must refund 4. Rule of the stock-exchange, made after the money. 3. No implied warranty in such case, which will entitle the vendee to special damage. sale, not binding upon parties. n. 1. Discussion of the extent of implied warranty. § 36. 1. Where one employed a share-broker to sell in the market what purported to be scrip or certificates of shares in a projected railway company, which subsequently proved to have been forged, and the broker paid the price at which he sold them to the defendant, but being called upon by the purchaser to make good the loss, repaid the money, and a further sum, according to a resolution of the committee of the stock-exchange, as to the value of genuine shares in the same railway company, which resolution was passed after the sale of the spurious shares; the defendant declining to pay this further sum, the broker brought an action, claiming to recover, as upon a warranty, that the shares were genuine, with a count for money paid.1 mont & Mass. Railw., 8 Gray, 575. See, also, White v. Vt. & Mass. Railw., 21 How. (U. S.) 575. 1 Hodges, 4th ed. (1865). This writer thus defines the rule. "If a sharebroker, directed to buy shares, buys what is ordinarily bought and sold in the stock-market as shares, he has fulfilled his commission, and cannot be made responsible for the fraud or misconduct of parties, who may have issued the shares without authority. There is no warranty or undertaking, on the part of the broker employed to buy shares or scrip, that the article which merely passes through his hands is any thing more than what it purports on its face to be, and what it is generally understood to be in the market. Addison on Cont. 5th ed. 191. But if a broker sell stock-shares or debentures for an undisclosed principal, and sign the sold note, he is responsible for any loss sustained by the purchaser, through the fraud of the undisclosed principal, although the purchaser knew that he was dealing with a broker. Carr v. Royal Exchange Insurance Co., 5 B. & S. 666; s. c. nom. Royal Exchange Insurance Co. v. Moore, 11 Weekly Rep. 592. We know of no good reason why the vendor of shares in a joint-stock company should not be held responsible for the genuineness of the article the same as any other vendor. It may not follow that either of the brokers of the contracting parties could be so held, since, in general, they act merely in a representative capacity. But the ultimate vendor must be responsible upon an implied warranty to that extent. And as was held, in the last case cited, if the broker withholds the name of his principal he thereby assumes that responsibility, personally. *125 *2. Upon the latter count the defendant paid into court the money received upon the original sale, with interest. 3. It was held, the plaintiff could not recover upon the ground of the warranty, there being no promise, express or implied, that the certificates were genuine; and that under the other count he could only recover the money paid defendant. 4. It was also held, that the resolution of the committee of the stock-exchange, made after the transaction was completed, however it might bind the members of that body, could not affect the defendant.2 § 37. 1. The obligation resting upon the vendor of railway shares is to have, at the time specified in the contract for delivery, a good title to the requisite number of shares, and to manifest his readiness to convey, which is usually done by tendering the proper conveyance. But this is not necessary. Any other mode of showing readiness is sufficient.1 2. The corresponding obligations upon the vendee are readiness to receive the proper conveyance, at the specified time and 2 Westropp v. Solomon, 8 C. B. 345. We think it probable that the cases, in this country, would be regarded as favoring the view, that upon a sale of this kind there is an implied warranty that the article is what it purports to be, and, consequently, that the seller is liable to pay its value in the market at the time its spuriousness is discovered. Post, § 235. It would seem that in England it is an indictable offence for persons to conspire to fabricate shares, in addition to the limited number of shares of which a company consists, in order to sell them as good shares, notwithstanding any imperfection in the original formation of the company. Rex. v. Mott, 2 C. & P. 521; post, § 37, n. 3. 1 Humble v. Langston, 7 M. & W. 517 ; s. c. 2 Railw. C. 533; Hannuic v. Goldner, 11 M. & W. 849; Hare v. Waring, 3 M. & W. 362; Hibble white v. M'Morine, 2 Railw. C. 51. In Munn v. Barnum, 24 Barb. 283, it is held that mere readiness to transfer is sufficient in such cases, and that an actual transfer is never requisite, where the purchaser declines to pay the price. place, and to pay the price, and it would seem to prepare a proper conveyance, and tender the same for execution, upon having a good title made out.2 3. But the incidents of such contracts are liable to be controlled by general and local customs, and usages of trade, the same as other similar contracts.3 Hence any general known* usage of those * Lawrence v. Knowles, 5 Bing. (N. C.) 399; Stephens v. De Medina, 4 Ad. & Ellis (N. s.), 422; Bowlby v. Bell, 4 Railw. C. 692. 3 Stewart v. Cauty, 2 Railw. C. 616; 8 M. & W. 160. And one who employs a share-broker, at a particular place, to purchase shares, is bound by a usage, affecting the broker, at that particular place. As where the plaintiff, a share-broker in Leeds, bought for defendant ten railway shares to be paid for on delivery. The defendant not being ready to pay the money, the vendor made a resale, at a less price, and called upon the plaintiff for the difference, which he paid without communicating with defendant, all which was done according to the custom of the Leeds stock-exchange. It was held the plaintiff might recover of defendant the difference, in an action for money paid. Pollock v. Stables, 5 Railw. C. 352; s. c. 12 Q. B. 765. And where shares had been purchased by a stock-broker, upon which a call had been made, but not then due, by the rules of the stock-exchange it was the duty of the vendee to pay the call, the vendor having paid it, to enable him to convey, the broker paid the amount to him, and it was held he might recover it of the vendee, as money paid for his use. Bayley v. Wilkins, 7 C. B. 886. And it would seem the party is bound by such usage, though not cognizant of it. Parke and Rolfe, BB., in Bayliffe v. Butterworth, 1 Exch. 425; s. c. 5 Railw. C. 283; Sutton v. Tatham, 10 A. & E. 27. And where the broker could not obtain the certificate of shares for some months, on account of the delay in having them registered by the company, and in the mean time a call was made which he paid, the person for whom he purchased, having, from time to time, urged the forwarding of the scrip without delay, it was held that he could not repudiate the contract, and recover the money advanced to the broker to pay the price of the purchase. McEwen v. Woods, 11 Q. B. 13; 5 Railw. C. 335. And where 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 a time when no shares of the company were in the market, or had in fact issued, but letters of allotment were then, according to the evidence of persons on the stockexchange, commonly bought and sold as shares, and the plaintiff bought for the defendant a letter of allotment of fifty shares, it was held that a jury might well find that this was a good execution of the order. Mitchell v. Newhall, 15 M. & W. 308; s. c. 4 Railw. C. 300. And where the broker bought scrip certificates, which were sold in the market, as "Kentish Coast Railway Scrip," and were signed by the secretary of the company, but which were afterwards repudiated by the directors, as having been issued by the secretary, without authority, in an action to recover back from the broker the price paid him by the plaintiff for the scrip, and his commissions, on negotiating similar business, and which may be fairly presumed to have been known to the parties, or which ought to have been, and 66 * the ground of its not being genuine, it was held that the proper question for the jury was, whether what the plaintiff intended to buy was not that which went in the market as Kentish Coast Railway Scrip," there being no other form of that scrip in the market at the time. Lamert v. Heath, 15 M. & W. 486; s. c. 4 Railw. C. 302; Ante, § 36. The remarks of Lord Campbell, Ch. J., in the very late case of Humfrey v. Dale, 7 El. & Bl. 266, 20 Law Rep. 227, in regard to the necessity of relaxing the rule of the admissibility of oral evidence to explain the import of commercial terms and memoranda in written contracts between merchants and business men, are certainly worthy of his lordship's eminent reputation for wisdom and learning: "The only remaining question is, having stated a purchase for a third person as principal, is there evidence on which they themselves can be made liable? Now neither collateral evidence, nor the evidence of a usage of trade, is receivable to prove any thing which contradicts the terms of a written contract; but subject to this condition both may be received for certain purposes. Here the plaintiff did not seek, by the evidence of usage, to contradict what the tenor of the note primarily imports; namely, that this was a contract which the defendants made as brokers. The evidence, indeed, is based on this. But the plaintiff seeks to show that, according to the usage of the trade, and as those concerned in the trade understand the words used, they imported something more; namely, that if the buying broker did not disclose the name of his principal, it might become a contract with him, if the seller pleased. The principle on which evidence is admissible is, that the parties have not set down on paper the whole of their contract in all its terms, but those only which were necessary to be determined in the particular case by specific agreement, and which of course might vary infinitely, leaving to implication and tacit understanding all those general and unvarying incidents which an uniform usage would annex, and according to which they must in reason be understood to contract, unless they expressly exclude them. To fall within the exception, therefore, of repugnancy, the incident must be such as, if expressed in the written contract, would make it insensible or inconsistent. Brown v. Byrne, 3 Ell. & Bl. 703. [After alluding to several cases, especially Trueman v. Loder, 11 Ad. & Ell. 589, in which case is found a dictum adverse to admissibility of this evidence, the learned judge continued:] We may refer to Hodson v. Davies, 2 Camp. 530, not as a legal decision opposed to Trueman v. Loder, - for Lord Denman, in his judgment in the latter case, showed that it could not be supposed to carry with it the weight of Lord Ellenborough's decision, but because both cases, we think, disclose how entirely the minds of lawyers are under a different bias from that which, in spite of them, will always influence the practice of traders which creates the usage of trade. Lawyers desire certainty, and would have a written contract express all its terms, and desire that no parol evidence beyond it should be receivable; but merchants and traders, with a multiplicity of contracts preparing on them, and meeting each other daily, desire to write little, and leave unwritten what they take for granted in every contract. It is the business of courts -- any local custom, or usage of trade, which was in fact known to both parties, is regarded as if incorporated into the contract, the parties being presumed to have contracted with reference to it.3 But it may be questionable, perhaps, whether the custom in regard to sales of stock, in this country, would require the purchaser to be at the sole expense of preparing the proper con veyance. 4. It is safe, perhaps, to say, that the party tendering a conveyance, or he who demands it, in practice, ordinarily causes the instrument, required to be * executed, to be prepared in the one case and executed in the other. But less will often suffice, where the other party refuses to proceed.1 reasonably to shape these rules of evidence so as to make them suitable to the habits of mankind, and such as are not likely to exclude the actual facts of the dealings between parties, when they are to determine on the controversies which grow out of them. The rule to enter a nonsuit must be discharged." See Taylor v. Stray, 29 Law Times, 95; s. c. 2 C. B. N. S. 175. 4 Walford, 262, note, where it is said, "It would seem, that if the vendor fails to make out a title, this dispenses with a tender of conveyance." But if stock is to be delivered on demand, it is necessary to show an actual request to deliver, in order to sustain an action for non-delivery. Green v. Murray, 6 Jur. 728. Where the contract is to deliver stock in a reasonable time, or no time being specified, which the law regards as in a reasonable time, or on or before a day named, it is presumed each party is entitled to the whole time in which to perform. Stewart v. Cauty, 2 Railw. C. 616; s. c. 8 M. & W. 160. It seems that where the deed of settlement required the consent of the directors to the validity of the transfer of shares, it is incumbent upon the vendor to obtain such consent; and where the transfer was duly made, executed, and delivered, and the money for the price paid, but the directors refused to give their assent, it was held the purchaser might recover back the money paid, and that the return of the transfer was collateral to the contract of purchase, and not a condition precedent to the plaintiff's right to recover. Wilkinson v. Lloyd, 7 Q. B. 27. And where the charter of the company, or the statute, prohibits the transfer of the shares while calls remain due, it has been held that a deed of transfer made, while calls remained unpaid, was altogether null and void, so that the company may refuse to register such a transfer, although the calls have been subsequently paid. It is said it would be necessary to re-execute the deed, after the payment of the calls, before the company could be compelled to register it. Hodges, 121, 122. But it has been said, that if a deed be delivered as an escrow in such case, to take effect when the calls are paid, it may be good. Patteson, J., in Hall v. Norfolk Estuary Co., 7 Railw. Cas. 503; s. c. 8 Eng. L. & Eq. 351. * 130 |