Nourse v. Prime, Ward & Sands

7 Johns. Ch. 69 | New York Court of Chancery | 1823

The Chancellor,

the prayer of the bill is confined to two specific objects of relief, and no other general or particular relief is asked. The objects were, to set aside the sale by the defendants, of the 430 shares, and to grant an injunction staying the suit at law.

But the bill specifies two errors, or mistakes, in the general account current, rendered by the defendants to the' plaintiff on the' 6th of February, 1818, and which account was settled, and admitted by the plaintiff to be correct,when he gave the note for the balance therein stated. The one item is, that 50 shares of United States Bank stock, purchased on the 23d of June, 1817, were debited under the date of the 5th of July following," and that no credit was given for the dividend declared payable on the 4th of July, and which the bill charges to have been received by the defendants. The answer denies the truth of the charge that any such dividend was received, and gives a satisfactory explanation of the transaction. It states, that on the 23d of June, 1817, (but after the closing of the transfer books,) the defendants purchased the 50 shares, and they deny that any dividend for July was payable to the purchaser; and they aver, that the stock was actually transferred on the 5th of July, and was not transferable' before; and that the seller was entitled to the dividend,* as being the person in whose name the stock stood when the books were closed. This denial of any mistake, or error in the item in question, is conclusive in the absence of all proof in support of the allegation* in the bill, and more especially, when it relates to a stated account which the plaintiff seeks to falsify, and which he had admitted when the transaction was recent and fresh in the memory,- and in the observation of the parties.

The other objection raised in the bill to the account rendered, is, that on the 18th of February, when the agreement of the 6th of I ebruary was about to be carried into effect, the defendants added to the balance there struck, the sum of282 dollars and 95 cents as for cash, though not more than thirteen or fourteen dollars in cash were advanced. The defendants, in their answer, state, that in that sum they included their commission, or a compensation of one half per cent, on the amount of their payments, (and which commission amounted to 269 dollars and 58 cents,) and paid the residue in cash, in order to make the even sum of 54,200 dollars ; that residue must have been 13 dollars and 37 cents. This commission was charged as a customary commission for the agency of the defendants in making or procuring the advance, and for their other . services in relation to the stock, and in negotiating the arrangements mentioned in the bill. In their account current, rendered on the 6th of February, the defendants charged a commission on the purchase of the 50 and the 60 shares of stock for the plaintiff, and on the sale of the 30 shares. This commission amounted, as charged, to 43 dollars . and 43 cents ; but there was nothing charged for the negotiation with Messrs. Biddle, Wharton &f Co. of Philadelphia, in procuring the transfer of the 350 shares, which stood pledged to them for upwards of 44,000 dollars. The defendants were entitled to a reasonable compensation for that negotiation; and there is no colour for the suggestion of the counsel for the plaintiff, that this charge was usurious, and intended as a colourable evasion of the statute of usury. The plaintiff made no such charge on the bill; he must have known the ground of the charge in the account; and the explanation which was given of it at the time the account current was rendered and admitted; must have been received as satisfactory. He only says in the bill, that though the sum of 282 dollars and 95 cents was set down as cash, there was very little cash advanced to justify the charge; but he does not pretend to say it was an unjust, oppressive, unlawful, or usurious charge. When a party seeks to open a settled account, by falsifying any particular item, he is bound to state the real objection, if any there be; and it is not sufficient for his counsel, upon the hearing, to supply the omission: the cause is to be decided upon the allegations in the pleadings and upon the proofs. The plaintiff has afforded us no proof in relation to the charge; and he rests contented with the explanation given in the answer. Whether money was demanded or received usuriously, is a matter of fact, and rests upon the intent, and that intent ought at least to be charged, and confessed or proved. The Court ought not to undertake, gratuitously, to deduce such intention, when the case is susceptible of another and better construction.

To constitute, usury, then; must be arxuaalawful or coi" nipt intent*

The commission was for the agency of the defendants in the negotiation relative to the stock, and the rate of it was fixed by agreement between the parties. If one man requires another to go into the market to buy goods, or produce, or stock for him, and he docs it, and advances the money, he is certainly entitled to a compensation for his services in making the purchase, besides the repayment of his money, with interest, from the time it was advanced. In this case, the negotiation extended to another state, by direction of the plaintiff; and whether the commission for procuring the stock from Philadelphia was high or low, was a question for the parties to settle by their agreement. It is very evident, that nothing like usury for the future loan, or upon advance of the money, was in contemplation; and there must be the unlawful or corrupt intent confessed or proved, before we can pronounce a transaction to be usurious.

In the case Ex parte Henson, (1 Maddocks Ch. Rep. 112.) a bill-broker, in the country, received, in part payment of money loaned, a bill of exchange on London, and he' charged a commission of ten ver cent, for transmitting the "* bill to his agent in London, to receive the money due thereon when at maturity. His banker in London charged him only five per cent.- It was contended that this security, taken for forbearance of a debt at more than five per cent. was usurious.- But the Vice-Chancellor observed, that many cases had decided, that if a sum, claimed for corn- . . mission, was bona fide claimed, and not done colonrably w¡th a view to avoid the statute* it was not usurious. If the commission be usual, and not unreasonable, it is not usurious. In that case, there was no loan of money, nor any thing done colourably, and as a veil for usury. In the case of Dunham v. Gould, decided in the Court of Errors, (16 Johns. Rep. 367.) the jury found the fact, that the exchange of notes between the parties “ was for the purpose of raising money at a greater rate of interest than seven per cent, per annum.” And, in delivering the opinion of the Court in that case, I observed* that it was a case distinct in principle from that class of cases in which the allowance of a reasonable sum beyond interest to country bankers, for re-exchange and remittance of the money from a distance, and the allowance of a reasonable sum for incidental expenses, or extra trouble* in the particular case, and when there was no colour for usury, had been exempted from the operation of the charge and the' consequences of usury. I referred to the case Ex parte Jones, (17 Ves. 332.) as one of the class of excepted cases $ there a country banker, who had, in the usual course of his business, discounted bills for a London merchant, charged a commission at the rate of 2s. 6d. per cent. per month, for the time the bills had to run, besides the lawful interest. It was held by Lord Eldon to be a lawful and reasonable commission, as the country banker had to provide funds in London to meet the bills, and there was yo colour or device in the case to evade the statute. The case of Hammett v Yea, (1 Bos. & Pull. 144.) was also referred to by me in that case, as forming another exception. The country banker took more than lawful interest; but the small surplus was referred to the expense of remitting part of the loan in bills on London. If the party, says fíh. J Eyre, intentionally takes more than lawful interest, for the forbearance of a loan, it is usury; “ but whether more than lawful interest is intentionally taken upon any contract for such forbearance, is a mere question of fact for the consideration of the jury, and must always be collected from the whole of the transaction as it passes between the parties.” “ A banker is entitled to a recompense for the accommodation he affords to his customer, in remitting to London, by bills of thirty days. It is a fair measure of recompense, supposing there is no device in the transaction; and that the remittance is not intended to be used as a colour for putting more money into the banker’s pockets, for the mere forbearance of a loan, than is allowed by law.” Where money is advanced under particular circumstances, a man (says Rook, J. in that same case) may be warranted in taking more than five per cent., if the surplus be taken for additional expense, risk, and trouble.

A bona fide banker o^brotra sum, for expense and trouble, &c. is not usunous.

The defendants, in the case before us, had, under the directions of the plaintiff, taken up United States Bank stock, that stood pledged to a mercantile house in Philadelphia, and procured the transfer and transmission of it to them at New-York, and they had to provide funds at Philadelphia for that purpose, and the extra charge may be considered as a reasonable compensation for this extra expense, risk, and trouble. If the commission stands charged upon the whole balance of 53,917 dollars and 5 cents, instead of the 44,000 dollars, a sufficient explanation may be presumed to have been given at the' time; and we may adopt the words of Ch. J. Eyre, in one of the fiases cited, that it is a question of fact, under all the circumstances, (and which at law is for a jury,) whether the overplus “ be not properly referable to some lawful collateral consideration ?” There may be a few dollars in that item beyond the rate of one half per cent, on the Philadelphia negotiation ; but there is no ground to conclude it was intended to be usurious. This would be utterly absurd, when we consider the nature and magnitude of the transactions. And as the plaintiff has not so much as hinted that the charge was unlawful or usurious, and as the defendants have referred it to the head of a customary commission for their agency, it would be equally unjust and unwarrantable, to stain the account with the imputation of usury. I am persuaded that an usurious intention never existed in the case; and that the suggestion is entirely without foundation in point of fact.

The great object of the bill is to set aside the sale of 430 shares by the defendants, in January, 1819, by having the same declared void. This is the prayer of it; but the points presented in writing at the hearing, by the counsel for the plaintifij have a more correct and intelligible object. They do not state any objection to any items in the account current, for the balance of which the note was taken. They confine the claim to an account to be rendered of tlie 430 shares at the highest market price of United States Bank shares, during the year 1818, with interest; and that the sale of that number of shares by the defendants, in January, 1819, shall not be deemed to aflect the rights of the plaintiff. The claim - assumes, that the defendants sold the shares of the plaintiff during the year 1818; and the answer denies the charge, and avers that the shares of the plaintiff, deposited with them as collateral security for the note, were not sold until January, 1819, when they were authorized to sell them upon default of payment of the note.

The plaintiff, on the 11th oí February, 1818, owned 430 shares of United States Bank stock, in the possession of the defendants, and which stood in the name of the defendants, without any certificates or other marks, designating them as the property of the plaintiff. This fact is to be inferred from the manner in which the shares came to the possession of the defendants, and from the language of the pleadings, and from the absence of all proof in opposition to this inference. They purchased 50 shares for the plaintiff in June, and sold 30 of them in August, 1817. It is to be presumed the whole 50 stood in their names; for nothing is said of any power of attorney, by which a portion of them was sold. The facility of negotiation would probably have dictated such a course; and the confidence which appears to have been reposed in the defendants, warranted it. In September, 1817, they purchased 60 shares for the plaintiff; and in December, 350 shares were actually transferred to them, for and on account of the plaintiff. These 350 shares stood in the names of Biddle, Wharton Co. without any declaration of trust, designating them as the property of the plaintiff; for no power was given to Biddle, Wharton fy Co. to transfer them to the defendants. The evidence is also to this effect. They were undistinguished and mixed together by B., W. Co. with their own stock; and with knowledge of this, the plaintiff directed that they should be transferred, and they were transferred, in the same condition, to the defendants. These are irresistible conclusions of fact to be drawn from the case. When the note was given by the plaintiff, the defendants retained in their possession, (to use the language of the bill,) as collateral security, the before mentioned bank shares, and they gave a receipt to that effect to the plaintiff; and this is all the evidence we have, distinct from the pleadings, of the terms upon which the shares were to be retained.

By the receipt, the defendants acknowledge “ to hold. 430 shares of stock in the Bank of the United States, as collateral security for the payment of the note; on pay-meat of which, they engage to re-transfer the said 430 shares to the plaintiff,” &c. The receipt does not refer to any specific shares designated as belonging to the plaintiff ; they only hold 430 shares of United States Bank stock, which the receipt assumes to stand in their names, because* upon payment of the note, they are to re-transfer them to the plaintiff; and when they engaged to re-transfer the said 430 shares, that part of the receipt referred to the former part of it, and could not mean to mark as particular, what, in the antecedent, was general in description; nor could the said 430 shares mean any thing more than 430 shares. It meant that the given number of shares should be transferred, and it meant nothing more; for there was nothing specific, but the number, and the quality of the stock. There was nothing else to which it could apply.

Here, then, we have the plain case of a plaintiff consenting that the defendants should retain 430 bank shares, which they then held in their own names for him, until the happening of a certain event; and yet the plaintiff complains that the defendants did not procure certificates for them from the proper bank office in the name of the plaintiff; or, by some other way, ■ mark, designate, and identify 430 shares, so that they should appear upon the face of them to belong to the plaintiff, and to be held by the defendants in trust merely. The obvious answer to that complaint of the plaintiff is, “ why did you not identify them yourself, before you consented to this deposit ? You knew that they stood in the names of the defendants, and you acquiesced in it; and the presumption is, that you intended that they should continue to be so held, as nothing was done by you to designate them, or separate them from the mass of other shares of like stock in the possession of the defendants; and, as no instructions were given to them on the subject, they were to retain.” They were to hold 430 shares, as collateral security for the note; and they retained and held 430 shares for that purpose during the whole year, 1819; and this was all they were required to do by their contract. It was the business of the plaintiff, and not of the defendants, to designate his own property, and to give it such description and character as he thought proper. If the plaintiff was apprehensive of the casualties of trade, and wished to have his shares separated from the common fund with other shares held by the defendants, he should have directed or requested that act to be done. The defendants were not bound, without his direction or desire, to change the situation or condition in which the shares were, when the contract was made; and which situation was known to the plaintiff.

I am perfectly satisfied, from the history and nature of the transaction, that the parties intended that the 430 shares should continue to stand in the name of the defendants. This was the usual course with brokers in like cases, and stock was generally left standing to their credit on the transfer books, without taking out certificates. It was the most convenient way to render stock pledged as a collateral security, an efficient security under the authority to sell. If the stock had stood in the plaintiff’s name, a power of attorney to transfer, in case of default, would have been requisite; and none is mentioned as having existed in this case.

It is contended, on the part of the defendants, that, considering the manner in which the stock in this case was acquired and held, as well by B., W. fy Co. as by the defendants ; and considering the established usage and practice of brokers in similar cases, and the general and known course and extent of business of the defendants, as dealers in stock, there was an impliéd authority from the plaintiff to the defendants to sell or pledge the stock to raise money to meet their advances in respect to this very plaintiff; and that the plaintiff only reserved to himself a right to call for a re-transfer to him of a simiiiar number of shares on payment of his note. I think the facts in the case well warrant this inference; and the assent of the plaintiff to leave the stock with the defendants, without designation or direction, is pretty conclusive evidence that such a trust and confidence was within his contemplation. It is proved by the witnesses, that the defendants carried on very extensive operations as stock-brokers; and that it was their practice, and one well known to those who dealt with them, to use the stock deposited with them, for the purpose of raising money for advances upon it. This was understood to be within the general and implied powers of the defendants, and other dealers in stock, in cases where there was no express prohibition to the contrary ; and the stock held by them in their own names, or with blank powers of attorney, for and on account of others, they could hypothecate or sell, under the same implied power, to sustain their advances. There was nothing unreasonable in this; for it was founded on mutual consent and understanding, and was beneficial to the owner, by enabling him to borrow, with facility, money upon the stock; and beneficial to the broker, by enabling him to supply the wants of his customer. It was in the power of the owner of the stock to prohibit the exercise of such a power, and to have the stock identified and placed in his name, if he deemed that course the most eligible; and it was equally in the power of the broker to refuse the loan cn those restricted terms of deposit. It was an affair of mutual concert and arrangement; and no one had any right or cause to complain of it. The only question here is, was not this arrangement and authority fairly to be inferred from the transactions in this case, when taken in connexion with the known usage and practice in this particular business? I think go; and that there is not any sufficient ground upon which to raise a doubt, as to the correctness of this conclusion. I cannot, and do not believe, that this arrangement with the plaintiff was intended as a mere loan of 54,200 dollars for a year; and that the stock was intended to be withdrawn from circulation, and to be locked up, and to be idle during that period, without any power in the defendants to apply it to the exigencies of their business, arising, in part, from these large advances for the use of the plaintiff. The good sense and obvious policy of the transaction, speak a different language. There was perfect reliance placed by the plaintiff in the ability and integrity of the defendants to replace the stock when the note was paid; and there is nothing in the words of the receipt that is inconsistent with this conr struction of the contract. To hold a given number of shares without note, certificate, or mark, to distinguish them from a large, undefined, and constantly varying mass of shares belonging to the defendants, or under their entire control, evidently implies that they were to be used like the other parts of the fund; and that all that ought to be required, or was intended to be required, in this case, was a readiness and ability to replace the stock when duly called for.

But it is unnecessary to press this point any further, for the defendants, in their answer, deny that they did sell or pledge any part of the 430 shares belonging to the plaintiff, until he had failed to pay his note. They admit, however, that all the shares so transferred to them, were indiscriminately placed in their hands, and constituted one common mass, or fund, subject to their control, and from which they were authorized to make, and did make, such transfers and appropriations as the exigencies of themselves and others required. They aver, “ that there was no time during the year 1818, at which they were not possessed of shares standing in their own names, at their absolute and uncontrolled disposition, to an amount far exceeding 430 shares in number; nor any moment in which they would not have been ready, willing, and able to have transferred the said shares to the plaintiff, upon payment of the note/3 They deny every allegation in the bill to the contrary ; and they further aver, that during the period of the note, from its date to the default, “ they had always held, and considered themselves as holding, a much greater number of shares, (than those belonging to the plaintiff,) ready to be transferred to the plaintiff, whenever he should entitle himself to require such a transfer.” They deny that “ there was any period, during the year 1818, at which they had not shares or certificates for such stock in their possession, in their own names, and under their rightful control, to an amount exceeding 430 shares, over and above those which, though standing in their names, may have been the property of other persons.” They also aver, “ that there was no time at which they had not at their rightful command and control, more shares than were sufficient to meet all the demands, which any person or persons could lawfully make on them, for the transfer and delivery of shares.” They further aver, “that 1930 shares was the lawful number of shares of such stock which, since the 11th of February, 1818, they had in their possession, standing in their own names, and under their absolute control, and for the sale of which no bargain was made by any person with them; yet they admit the whole of them were not absolutely their own property, but they had good right and lawful authority to sell and dispose of them as they might have thought proper.” The defendants deny “ that they, at any time, committed any breach of trust towards any of the owners of shares in their possession, by any unauthorized disposition of the same; or that the general mass or fund of shares under their control was, by any breach of trust or otherwise, rendered inadequate to the performance of the trusts committed to them by the owners; or, that they were, by any means, incapacitated to replace the shares of the plaintiff, without committing any injury, or' breach of trust, towards some other person.”

Every allegation in tiie bill, material to the claim of the plaintiff, is thus fully and explicitly denied in the answer; and the proof which has been produced, tends to corroborate, and there is none to contradict it. The lowest number of shares standing in theirnames, at one time, was 1074, and by means of powers, not less than 1930. I am aware that the answer has been subjected to minute and severe criticism, by the learned counsel for the plaintiff; but as I read it and understand it, the answer is sufficiently precise and explicit. We are to give to the language of it the plain and ordinary interpretation ; and I should apprehend, that if I were to weigh every word and sentence in an answer, with piercing and critical jealousy, I should be dealing with it “ too curiously,” and, perhaps, with great injustice.

What more could the plaintiff require, under the circumstances of this case; and what injury has he sustained ? If the shares had been identified, and certificates taken for them in the name of the plaintiff, and the trust explicitly declared on the face of them, they would have remained unsold, until the time they were actually sold, under the contract. It is not to be supposed, the defendants would have undertaken to sell shares marked with the name of -another owner, and under the difficulty and delay of procuring the requisite powers, duly verified, so long as they had other shares, standing in their own names. It was sufficient, in this case, under the contract between the parties, that the defendants had always an adequate number of shares on hand to satisfy the plaintiff, during the period of his note, and according to the terms of their engagement ; and that they were always under a legal and moral, as well as actual capacity, in point of fact, to transfer the 430 shares to the plaintiff, upon due demand. I have seen no reason to doubt of the construction which I gave to the contract, and of the equity and justice of the doctrine which was applied to the case, when the cause was formerly before the Court, on a motion to dissolve the injunction. (4 Johns. Ch. Rep. 490.) There is no kind of analogy between this case and the tortious mixture of another’s property with one’s own, so that a separation cannot be made. The shares of the plaintiff and of the defendants were mixed together by common consent; there was no doubt in the case ; and the plaintiff agreed that his shares should remain in that situation; and all that justice could require, is, that the defendants should be answerable for the given number of shares, when the plaintiff entitled himself to demand them. Nor have the cases of Bostock v. Blakeney, and Forrest v. Elwes, (2 Bro. 653. 4 Ves. 492.) referred to by the plaintiff’s counsel, any application ; for these cases and the general rule, so fully admitted in Devaynes v. Noble, (1 Merivale, 580, 581.) suppose a breach of trust, in the trustee selling stock, contrary to his duty. But here, the breach of trust is denied, and there is no proof of it. On the contrary, the case shows, that the defendants always retained on hand as many as 430 shares, and which the defendants had a right to say, and which the law will say for them, were the shares deposited by the plaintiff.

The case of Le Croy v. Eastman, (10 Mod. Rep. 499.) contains principles much more pertinent. JYeve, the defendant, held 990 pounds in South Sea stock, in trust for the plaintiff. The stock stood in his name, and he gave a note, declaring the trust. Five hundred pounds of it was afterwards transferred to the plaintiff, and a bill was filed for an account of the residue, at the then price of stock. The defendant admitted, in his answer, that he had mortgaged 1000 pounds of stock, and had sold out all the stock in his own name, except 80 pounds; but he had more than enough, in another person’s name, to have answered the trust, if the plaintiff had insisted upon a transfer; and he offered the residue of stock due to plaintiff, to 490 pounds, with the dividends. Lord Chancellor Parker held, that the defendant was accountable only for the stock and dividends, and not for the price at which the stock was held. He observed, that, as 100 pounds South Sea stock was not to be “specificated” from another, equity will never adjudge a man to have broken his trust in a higher degree, when he may, with equal reason, be adjudged to have broken it in a lower; and that the stock mortgaged must be esteemed the stock of the plaintiff, and the stock sold that of the defendant.

To apply the doctrine of Lord Parker to this case, as there was no criterion agreed on by the parties, or declared by the plaintiff, by which 430 shares of United States Bank stock, were to be distinguished from other 430 shares, the 430 shares remaining with the defendants during the year 1818, must be esteemed the shares of the plaintiff, and the shares sold, those of the defendants. The conclusion is just as natural, proper and reasonable, in this case, as in the other; and in this respect, the decision of Lord Parker is an authority directly bearing on the case.

I shall, accordingly, declare, that there is no just ground for the charge, or suggestion, made on the part of the plaintiff, that the defendants had received, or ought to have received, or were accountable for, the July dividend, on, the 50 shares mentioned in the pleadings, and debited under the date of the 5th of July, in the general account current, therein also referred to; or, that the charge of 2S3 dollars and 95 cents, in the said account, of the date of the 11th of February, 1817, was usurious, unlawful, or unjust. And I shall further declare, that the defendants are not guilty of any breach of trust, as charged in the bill; anct1' that 430 shares of United States Bank stock, belonging to the plaintiff, and held by the defendants as collateral security, according to the terms of the contract of the 11th of February, 1818, between them and the plaintiff, and stated in the pleadings, continued to be held by them, according to the said contract, until the sale thereof, in January', 1819, under a provision of the said contract. The bill i£, accordingly, to be dismissed, with costs.

Decree accordingly.

Case Details

Case Name: Nourse v. Prime, Ward & Sands

Court Name: New York Court of Chancery

Date Published: Jul 1, 1823

Citation: 7 Johns. Ch. 69