Opinion
Argued March 13, 1882
Decided April 11, 1882
A.J. Vanderpoel for appellant.
Henry S. Bennett for respondent.
This action was originally brought against the Mechanics Traders' Savings Institution, a corporation organized under chapter 368, Laws of 1852, to recover damages sustained by the plaintiff for the non-delivery by the corporation of five hundred shares of stock of the Atlantic Mail Steamship Company, sold by the plaintiff at the board of brokers in the city of New York, for its account, and, as alleged, by its authority. The defendant Best, having been appointed receiver of the bank subsequent to the commencement of the action, was substituted as defendant, and the action was continued against him. The bank on and prior to May 8, 1871, held 1,750 shares of the stock of the Atlantic Mail Steamship Company, and by a resolution of the board of trustees, passed on that day, directed that the stock "be sold by the president for the best interests of the bank, without further delay, and in such form as will protect the bank in its claim against Joslyn Co., and that he report his proceedings at the next meeting of the board." The relation of Joslyn Co. to the stock, is not disclosed by the proof. The defendant on the trial, offered to prove that the stock was held by the bank as security for a loan made to Joslyn Co., but the evidence was excluded. The fact that the bank held the stock in pledge from Joslyn Co., must be assumed in determining the case. Mr. Conklin, the president of the bank, in June, 1872, sold three hundred shares of the stock at ten per cent on its par value, and in August of the same year, five hundred shares at fifteen per cent, and reported the several sales at or about the time they were made to the board of trustees, as having been made in pursuance of the resolution of May 8, 1871, and the transactions were entered in the minutes of the board. On the 2d of March, 1872, eight hundred of the shares being still unsold, the president of the bank authorized the plaintiff, who was a member of the New York Stock Exchange, to sell five hundred shares of the stock, at the board of brokers, at twenty-five per cent on its par value, and to offer it daily at that price, "seller sixty," until sold. The ruling price was then below twenty.
The plaintiff, pursuant to the authority, offered the stock for sale, and on March 5, 1872, it was sold at the price limited, and the president of the bank was immediately notified of the sale. But before this, and on the 3d of March, the president of the bank sold the eight hundred shares at private sale, at twenty. The bank, in consequence of such sale, being unable to furnish the five hundred shares to meet the contract made by the plaintiff, the president declined to complete it, and the stock was bought in under the rule at thirty-three, and the plaintiff, as required by the rule of the board, paid the difference of about $4,000, which sum he seeks to recover in this action. The plaintiff, when he sold the five hundred shares, had not been notified of the prior sale by the bank, nor had his authority to sell the five hundred shares been revoked. It is claimed that the president of the bank was not authorized by the resolution of May 8, 1871, to make an optional contract, or to employ another to enter into a contract of that kind. The bank was a savings bank, and there can be no doubt that speculative contracts entered into for the sale of stock by the bank at the stock board, or elsewhere, subject to the hazard and contingencies of gain or loss, would be ultra vires, and a gross perversion of the powers conferred by its charter. But the bank, as the owner of stock, could sell it, as any other owner of similar property, and could employ a broker to sell it at the board. The sale made by the plaintiff was optional in the sense that the seller reserved the privilege of delivering the stock at any time within sixty days, in pursuance of the contract. If the bank had owned the stock when the plaintiff contracted to sell it, as it did when he was employed to sell, there would be nothing speculative in the transaction. The sale in the case supposed would, so far as the seller is concerned, have been a sale immediately for cash, or for cash within sixty days at his election. The seller could have tendered the stock at any time, and demanded the purchase-price. Short sales, as they are called, when made by persons who do not own the stock sold, are mere speculations in the chances and fluctuations of the market, but a sale upon seller's option, when the seller owns the stock contracted to be sold, has no feature of hazard, or chance, except the ordinary risk incurred in all executory sales, that the purchaser may not complete his contract. An optional sale by the bank of stock owned by it would not therefore be an act beyond the general scope of its corporate powers, and if the bank, as between the plaintiff and itself, was the owner of the stock which the plaintiff was employed to sell, and his employment by the president of the bank to make the sale was an employment by the corporation, it is plain that the private sale of the stock subsequently, without notice to the plaintiff, or revocation of his authority, by which the bank was disabled from furnishing the stock to meet the contract made by the plaintiff, is no defense to the action.
We are of opinion that the employment of the plaintiff to sell the stock at the board of brokers was within the authority conferred upon the president of the bank by the resolution of May 8, 1871. It was proved that the Stock Exchange was the recognized market for the sale of stocks in the city of New York. The resolution authorized the president to sell the shares "for the best interest of the bank." The donee of the power was also the chief executive officer of the bank, and a director therein. The resolution in directing him to sell the stock, "for the best interest of the bank," vested a discretion in respect to the manner of sale, and a sale in the customary way, at the Stock Exchange, was, we think, authorized. The direction to sell "in such form as will protect the bank in its claim against Joslyn Co." is relied upon as showing that only a public sale, upon notice to the pledgee, was contemplated. This direction was in the nature of an injunction, but it was left for the president of the bank to determine how the rights of the bank should be protected. Whether Joslyn Co. advised or consented to the act of the bank in disposing of the stock, does not appear. The prior sale on the third day of March, was a private sale. Joslyn Co., so far as appears, have never questioned the right of the bank to sell the stock in any manner the bank should deem best. The presumption, in the absence of any evidence upon the subject, is that the president complied with the injunction contained in the resolution, and that before employing the plaintiff to sell the stock, he had, by agreement with Joslyn Co., or other-wise, protected the bank against any claim on their part.
The bank, by its charter, was prohibited from loaning money on "notes, bills of exchange, drafts or any personal security whatever." (Act of 1852, chap. 368, § 2.) It is said that the loan to Joslyn Co., on the security of the stock, was in violation of the charter, and the conclusion is claimed to follow, that the contract made with the plaintiff to sell stock thus acquired, was void. There is, we think, no foundation for this conclusion. This is not an action founded upon the illegal contract. The title of the stock was vested in the bank as pledgee, by the transfer from Joslyn Co. It was not void; at most it was voidable only. Whether the pledgors could reclaim the stock without paying the loan, we need not consider. The plaintiff, in accepting the employment was not bound to inquire in respect to the title of the bank to the stock. The transaction between the bank and Joslyn Co. was res inter alios acta.
We think the judgment should be affirmed.
All concur.
Judgment affirmed.