Dudley A. Tyng & Co. v. Woodward

Boyd, C. J., delivered the opinion of the Court. This is an appeal from a judgment rendered in favor of the appellee, in a suit brought against him by the appellant, on a verdict rendered in pursuance of an instruction granted by the lower Oourt. The declaration originally included six common counts and four special counts and it was amended by adding an additional one.' The foundation for the suit is the claim by the appellant that it sold to the appellee fifty shares of the capital stock of the Burroughs Adding Machine Company at four hundred dollars per share, and upon his refusal to accept and pay for them it resold them at $301.00 per share, — the suit being for the difference between the contract price and the amount realized at the resale. As the appellant claims that it is entitled upon the evidence in the record to recover upon the first, seventh, ninth and the additional (eleventh) counts and does not contend that the others apply, we will briefly state what they are.

The first is the common count “For goods bargained and sold by the plaintiff to the defendant.” In the seventh it is simply alleged that the defendant purchased from the plaintiff the fifty shares of stock at $400.00 per share and the defendant agreed to pay said sum for the same, and the plaintiff offered ⁴²⁵ and tendered them to the defendant hut he refused to pay for them or any part thereof. The ninth alleges that the defendant offered to pay the plaintiff $400.00 per share for fifty shares of that stock and the plaintiff accepted the offer and tendered them, to the defendant, who thereupon refused to accept and pay for them. The eleventh count is substantially in the language of the ninth with this addition: “and the plaintiff then, after due notice to the defendant, sold said fifty (50) shares of stock in the usual and customary manner in which said stock is sold in the market for the sum of three hundred and one dollars ($301.00) per share, being the best price then obtainable for the same by the plaintiff.” The defendant filed the general issue pleas of never indebted and never promised. There are eleven bills of exception containing rulings on evidence and the twelfth contains a prayer granted at the conclusion of the plaintiff’s case, instructing the jury “that the plaintiff has offered no evidence in this case legally sufficient under the pleadings to entitle the plaintiff to recover, and therefore the verdict of the jury must be for the defendant.” We will first consider that prayer.

The theory of the appellee in offering that prayer seems to have been that the resale was invalid because there was no public sale and no such notice given to the public as justified the resale. Eor that he relies on a number of decisions of this Court, which we will refer to. In Maryland Fire Ins. Co. v. Dalrymple, 25 Md. 242 , the plaintiff sued the insurance company for damages for the sale and conversion of certain shares of stock of the B. & O. R. R. Co., which he had pledged to secure the payment of a sum of money lent to him by the defendant.

It was agreed by the parties that if the loan was not promptly paid the president of the insurance company could, without further notice, sell the collaterals for the purpose of satisfying the loan. Notice was given the plaintiff to return the loan by the 14th of November, 1860, and on the 20th of that month the defendant procured the stock to be sold at the Board of Brokers, and became the purchaser thereof at $55.00 per share — the stock ⁴²⁶ having from the date of loan to November loth, varied in price from $79.00 to $56.50 per share. The stock was held by the defendant until the spring of 1862, when it was sold publicly at the Board of Brokers, fairly and in the usual wav., in parcels to different persons at prices rangiug from $60.00 to $67.00 per share — the ruling market prices. It was held that under the terms of the contract the notice given on the 13th of November was sufficient to entitle the defendant to sell on the 20th, that a sale “publicly and fairly made” at the Board of Brokers to a third person would have been a legal sale under the contract, but that the doctrine that persons holding fiduciary relations are incompetent to purchase the property held by them in trust was applicable to the relation of pledgor and pledgee.

The sale on the 20th of November, 1860, therefore did not operate to vest the title in the defendant as purchaser, or to work a conversion of the stock — the plaintiff not having elected to treat that sale as a tortious conversion. But it was also held that as the bailmentcontinued and the defendant caused the stock to be sold publicly at the Board of Brokers and transferred to the several purchasers, the latter sales were valid. It was said that no further notice was required by the contract, and no valid objection could be made to the place and mode of sale — not being impeached on the ground of unfairness or bad faith. In Balto.

Marine Ins. Co. v. Dalrymple, 25 Md. 269 , some of the same questions were involved. Certain of the stock held by that company was sold to other persons, after notice of such intended sales at the Board of Brokers, but 770 shares of the B. & O. R. R. Co. stock was bought by the defendant through the agency of a broker employed for the purpose. On the next day the defendant sold the 770 shares to a Mr. Denison, and it was held “the defendant had not the legal right to dispose of the stock af private sale.

The sale so made to Denison on the 21st of November, 1860, was therefore contrary to the duty of the defendant as pledgee and in law tortious, for which the plaintiff is entitled to maintain his action either in trover or case.” ⁴²⁷ In Bryson v. Raynor, 25 Md. 424 , in which there was a hill in equity to compel the appellee to return 19 shares of stock transferred to him as collateral security for the repayment of loans, it was held that a sale of nine of those shares made hy a broker at private sale was valid — the appellant having authorized the appellee “to give the stock to any broker to sell on said day” in case they were not redeemed hy a certain time named, but as to the other shares which the pledgee purchased, he still maintained the character of bailee and they could be redeemed. It was said: “In the absence of this special authority, according to the rulings of this Court in the cases referred to (Dalrymple cases, supra), it would have been the duty of the pledgee to have disposed of the stock at public sale, after a reasonable notice to the public of the time and place of sale, or at the public stock board.” It may be well, in order to avoid any misunderstanding, to refer at this point to Manning v. Shriver, 79 Md. 41 , where it was said: “We agree that one being a trustee, executor or agent, or in any other like fiduciary relation, will not be allowed to purchase property sold by him in that character. The rule is one of general application, and the reason of the rule is, that one will not he permitted to purchase an interest where he has a duty to perform inconsistent with the character of purchaser. We agree too that both upon reason and authority the relation of pledgor and pledgee comes within the operation of this rule.” The opinion then went on to say: “But. it is equally well settled that this rule does not apply where the pledgor expressly authorizes the pledgee not only to sell the pledge, but to purchase it in his own right. * * * The purchase by a pledgee in such cases is exempted from the operation of the general rule upon the same ground that a mortgagee will be allowed to buy at his own sale, if the mortgagor so agrees.

In this case it will he observed that the plaintiff was authorized to sell as agent, but at the same time he was authorized to buy in his own right.” In Rosenstoch v. Tormey, 32 Md. 169 , the appellee, a stock broker in Baltimore, was ordered upon October 4, 1866, ⁴²⁸ by N. Hoflin to buy 100 shares of Illinois Central Railroad stock on the joint account of Louis Rosenstock, J. Iiollin, and himself. Tormey immediately and, as he stated, “according to the course of trade and the regular custom of the business2’ directed his correspondents, who were brokers in New York, to make the purchase, which they did at $128.00 per share, and Tormey paid the purchase money ($12,825.00) therefor. The defendants failed to pay him, and on April 16th, 1867, “after notice to the defendants, and according also to the due course of trade and the custom of the particular business” the plaintiff directed his correspondents to sell the stock in New York, which they did and realized only $11,-400.00. The suit was to recover the difference between the amount paid on the purchase and that realized from the resale of the stock.

The Court said the plaintiff had the right to make the purchase through correspondents, brokers or sub-agents in New York, and having made the purchase and expended his money, it was his duty to notify the principals of the fact and request them to receive the stock and pay him the price he had paid for it, with usual and reasonable commissions for making the purchase. Hpon receiving the notice it was the duty of the defendants to pay.for and receive the stock, and on their failure to do so the plaintiff had “the clear right after a reasonable time, and after giving notice to that effect to the defendants, to direct it to be sold in New York, and upon showing, by legal and competent proof, that it was actually sold by his agents, either at public sale in market overt, or at a sale publicly and fairly made at the stock exchange or stock board, or a broker s board, where such stocks are usually sold, at its fair market value, on the day of sale, he is entitled to recover from the defendants the amount, if any, of the resulting loss.” In Worthington v. Tormey, 34 Md. 182 , the suit was also to recover the difference in the price of stock purchased by appellee for appellant and the amount at which it was resold, together with commissions and interest. The appellee purchased for appellant 200 shares of stock of the Canton Com ⁴²⁹ pany through his brokers in New York. Notice of the purchase was sent by mail to the defendant at Reisterstown on March 10th, 1868, who some days afterward called at the office of plaintiff in Baltimore and refused to recognize the transaction but requested Mm to do nothing until he could see Mr. Jenkins.

The plaintiff held the stock until the 17th instant when defendant notified Mm he would have nothing to do with the transaction. Immediately after the interview, plaintiff wrote to the defendant that he would sell the stock, without naming the place of sale, on or after the 19th instant, unless he deposited with him sufficient margin, and also told him he was prepared to deliver the stock on the tender of the purchase 'money, commissions and interest, and would hold it subject to his orders until the 19th. The letter reached Reisterstown next day, but possibly by reason of the plaintiff having asked the postmaster in Baltimore to send it to the postmaster at Reisterstown with request that he would note its delivery to the person addressed, it was not delivered until the 24th instant. In the absence of any response to Ms letter of the 17th, the plaintiff on the 21st sold the stock in New York through the brokers who had purchased it for him.

It was held that the letter of March 17th addressed to the defendant at his postoffice was a sufficient notice to bind Mm, notwithstanding he was in Baltimore on that day, and a personal notice might by the exercise of reasonable diligence have been served on him, and it was said: “It was not necessary to name the place of sale in the notice, even if, in the sales of other kinds of stocks held in pledge, it is necessary to do so. But we think that in the case of sales of stock by bailees, it is not obligatory upon them to give notice to the bailor of the place of sale.” In Regester v. Regester, 104 Md. 1 , the plaintiff advertised and sold 200 shares of the capital stock of the J. Reg-ester Sons Co., which the defendant had agreed to buy from him but failed to pay for it, by public auction at the sales rooms of some auctioneers in Baltimore City. The suit was to recover the difference between the contract price still un ⁴³⁰ paid and the net amount realized from the resale of the stock. The declaration alleges amongst other things that “after due notice to the defendant and after due advertisement thereof, the plaintiff sold said two hundred shares 'of stock at public auction for the sum of nineteen hundred dollars.” Ifow or when such sales could be validly made was not discussed in the opinion, but it was said by Judge Burke, who spoke for the Court, that “The plaintiff’s second prayer asserted a sound legal principle, and he was entitled to a verdict, if the jury fopnd the facts therein stated.

The doctrine upon which the instruction rests is abundantly supported by authority.” Of course it was only necessary in passing upon that prayer to determine whether what was done was sufficient, and the Court was not called upon to say, and did not say, whether such a sale made in any other way than by public auction after a public advertisement would have been sufficient, although the method adopted in that case was distinctly approved. It was also said that “whether an unpaid seller has exercised reasonable diligence in the conduct óf a resale upon the default of the buyer is a question of law for the Court on facts to be found by the jury.” It will be observed that the cases in 25 Md. cited above were all between pledgor and pledgee. In that class of cases it has been distinctly decided that the pledgee has not the right- to dispose of such stock at private sale, although that would be subject to the same modifications made in reference to the pledgee becoming purchaser at his own sale, for if the pledgor had agreed that the sale could be made privately it could be done, provided of course it was fairly done. The relation of pledgor and pledgee differs materially from that' of seller and purchaser.

A pledge' partakes of the nature of a mortgage and is subject to an equity of redemption. The terms of sales made by pledgees are now,in most cases fixed by the parties, as the use of collateral notes is so general that it is unusual to meet with such loans where the conditions-under which sales' can be'made are not prescribed,' and although in the absence of agreement.it has-'been held .that. ⁴³¹ goods pledged cannot be sold at private sale, yet- they may be so sold by agreement of tbe parties. This Court has not, however, decided that such a sale as we are now concerned with cannot be made at private sale. It is true that in Regester v. Regester we approved of the sale at public auction, but we did not say that was the only way such sales could be made.

In Rosenstock v. Tormey, supra, we have pointed out several ways, other than by public auction, in which they could be made. Tt would necessarily result in a great sacrifice if stocks had to be sold at public auction and cou.d not be “where such stocks are usually sold.” The stock now in question was not- listed on any exchange, according- to Mr. Andrews, who is connected with the plaintiff, and he testified: “It is either bought and sold by mail or telegram or long distance telephone with the individual holders or other brokers representing the individual holders,” and in answer to the question how they advertised that stock when they had it for sale, he said: “We have a list of stockholders and brokers who deal in it, and we send out bids and offerings to this list.” His company was in the regular business of dealing in unlisted bonds and stocks, and amongst others they had dealt in the stock of the Burroughs Adding Machine Company for about seven years. He named brokers in Chicago, New York and Detroit (the home of the Burroughs Company! who dealt in it. The testimony shows that the appellee had previously dealt with the appellant in this stock.

On August 31st, 1911, the appellant company sent out a circular offering 20 shares of this stock at $418.00 and requesting parties in the market to buy at or near that price to communicate with them. A return postal was enclosed and the appellee ‘ on September 2nd, 1911, wrote' that he was interested in that stock and would like to be advised as to any changes in the market, and added “I would buy some shares at what I consider right prices, but not at 418.” On September 5 plaintiff telegraphed'him, “Please wire best bid and amount Burroughs Adding Machine,”.- to which he replied, “Four hundred dol ⁴³² lars per share, any part of fifty