Doherty v. Bartlett, 3052.

• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)
• Writing for the Court: BINGHAM and MORTON, Circuit , and PETERS
• Citation: 81 F.2d 920
• Parties: DOHERTY v. BARTLETT et al.
• Docket Number: No. 3052.,3052.
• Decision Date: 12 February 1936

81 F.2d 920 (1936)

DOHERTY
v.
BARTLETT et al.*

No. 3052.

Circuit Court of Appeals, First Circuit.

February 12, 1936.

81 F.2d 921

Robert J. Peaslee, of Concord, N. H., and Robert G. Dodge, of Boston, Mass. (Franklin Hollis, of Concord, N. H., on the brief), for appellant.

George L. Dillaway, of Boston, Mass. (Oscar F. Moreau, of Manchester, N. H., and Allan Robinson, of Boston, Mass., on the brief), for appellees.

Before BINGHAM and MORTON, Circuit Judges, and PETERS, District Judge.

PETERS, District Judge.

These are separate actions brought in the District Court of New Hampshire for money had and received by Fred G. Bartlett, Leon S. Knowlton, and Joseph O. Tremblay, all of Manchester in the state of New Hampshire, against Henry L. Doherty of the city of New York and state of New York, doing business under the name and style of Henry L. Doherty & Co. In each action the plaintiff seeks to recover money paid for stocks, which it is alleged were illegally sold in New Hampshire in violation of chapter 202 of the Session Laws of 1917, entitled "An Act to protect the public against the sale of worthless securities."

The District Court found for the plaintiff in each case, and the defendant appealed. The cases were heard together in the District Court, and may be disposed of in this court in one opinion.

The defendant in each case filed a motion to dismiss on the ground that there was no valid service made on him. Service was made on the insurance commissioner of New Hampshire during a time when the defendant had consented to this form of service. The defendant also filed a demurrer to plaintiff's declaration in each case, claiming that the statute upon which the plaintiff relied was unconstitutional. The motion to dismiss on the ground of failure to make proper service has been abandoned, and, as counsel for the defendant in their brief do not argue the unconstitutionality of the New Hampshire act, we assume that they have abandoned this contention, as well they might, in view of the decisions of Hall v. Geiger-Jones Co., 242 U.S. 539, 551, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann.Cas.1917C, 643, Caldwell v. Sioux Falls Stock Yards Co., 242 U.S. 559, 37 S.Ct. 224, 61 L.Ed. 493, and Merrick et al. v. Halsey & Co., 242 U. S. 568, 37 S.Ct. 227, 61 L.Ed. 498.

The facts relating to the purchase of the stocks as found by the District Court are as follows: On February 12, 1929, the plaintiff Knowlton gave the defendant's agent, L. O. Parent, who solicited the sale in Manchester, N. H., an order for 20 shares of Cities Service common stock at 95 3/8, an order for 5 shares of common stock at 99, and a check for $2,402.50, as

81 F.2d 922

evidenced by receipt to that effect signed "Henry L. Doherty & Company, L. O. Parent, agent."

On July 26, 1929, the plaintiff Knowlton gave Parent an order for 200 shares of Cities Service common stock. The amount paid was $8,550. The certificates of stock were shipped from the New York office of the defendant, sight draft attached, to the Amoskeag Savings Bank at Manchester, N. H. This was done by direction of the plaintiff.

On or about July 10, 1929, the plaintiff Knowlton gave Parent an order for 50 shares of Arkansas Natural Gas Corporation, the purchase price of which was $525; and on or about July 12, 1929, he gave Parent another order for 50 shares of Arkansas Natural Gas Corporation, the purchase price of which was $600.

Knowlton has received on the above-mentioned stock the sum of $345.67 in cash dividends, which, in accordance with plaintiff's amended specifications, has been credited to the defendant. He has also received some stock dividends. The stock purchased and the stock dividends Knowlton is willing and ready to surrender.

The plaintiff Tremblay, on February 11, 1929, gave Parent a check for $937.50 for 10 shares of Cities Service common stock. Parent forwarded the order to the defendant in New York.

On July 27, 1929, Tremblay gave Parent an order for 50 shares of Cities Service stock and a check for $2,275, and took Parent's receipt for the money. Parent forwarded the order and check to the defendant's Boston office. A certificate for the 50 shares was forwarded to Tremblay at Manchester. Cash dividends have been paid on the 50 shares and credited in plaintiff's amended specifications to the amount of $90.31. The plaintiff also received stock dividends and is ready and willing to surrender the stock purchased and the stock dividends received thereon.

In each of the above transactions the orders for the purchase of stock were solicited by, and given to, Parent at Manchester in New Hampshire, and in every instance the certificates of stock were forwarded from the New York office or through the Boston office to the plaintiffs in New Hampshire. Each transaction was completed in 1929. A printed form unsigned by Henry L. Doherty, which contained the words, "Sale made to you on (date) we confirm," was issued from the New York office, or in some instances from the Boston office, and in each instance a stamp for the transfer tax was affixed in New York to the several certificates of stock before delivery. The date of the sale referred to as "confirmed" was the date on which Parent took the order.

On November 16, 1929, Fred G. Bartlett bought through agent Parent 25 shares of Cities Service stock and paid therefor the sum of $750. This transaction, however, differs from the others and disclosed the following facts: Bartlett called the Boston office of H. L. Doherty & Co. by telephone for information concerning some stock previously purchased. The call was referred to Parent, who was then present in the Boston office. In the conversation over the telephone, Parent urged Bartlett to buy more stock, and the above-mentioned 25 shares were then ordered. A check was mailed by Bartlett to the Boston office, and the stock was delivered and accepted by Bartlett in New Hampshire in November, 1929, being sent by registered mail. As in the case of sales with Knowlton and Tremblay, the stamps for the transfer tax were affixed to the certificates before delivery.

Sections 6, 17, 18, and 38 of chapter 284 of the Public Laws of New Hampshire provide as follows:

"6. No dealer in securities shall, in this state, by direct solicitation or through agents or salesmen, or by letter, circular or advertising sell, offer for sale or invite offers for or inquiries about securities unless registered as a dealer under the provisions of this chapter."

"17. No salesman or agent shall in this state, in behalf of any dealer, sell, offer for sale or invite offers for or inquiries about securities unless registered as a salesman or agent of such dealer under the provisions of this chapter."

"18. Upon written application by a registered dealer, accompanied by a registration fee of ten dollars for each person, the commissioner shall, if he is satisfied that they are suitable persons, register, as agents or salesmen of such dealer, such persons as the dealer may request."

"38. Whoever violates any provision of this chapter, or knowingly files with the commissioner or furnishes to him any false or misleading statements or information, shall be fined not more than two thousand dollars, or imprisoned not more than six months, or both."

81 F.2d 923

It is admitted that, while Henry L. Doherty was duly registered in New Hampshire as a dealer during the year 1929, Parent, who solicited each of the plaintiffs Knowlton and Tremblay in New Hampshire was not registered by the defendant in New Hampshire under section 18 of the act as a salesman or agent of the defendant during the year 1929, when all the sales here involved were made. The names of two agents other than Parent were forwarded by the defendant for registration in November, 1928, for the year 1929, in accordance with the provisions of section 18 of the act, together with the application of Henry L. Doherty & Co. as a dealer under section 6, with the proper fees. Later, in November, the application of one of the agents was withdrawn, but the fee, in accordance with practice in the insurance commissioner's office, was not returned.

No application was ever made by the defendant for the renewal of the registration of Parent as a salesman or agent in New Hampshire for the year 1929. He was for a part of the year 1928 and the first half of the year 1929 working from the New York office, and was later transferred to the Boston office, which may have accounted for the failure to renew his registration as a salesman in New Hampshire during the year 1929.

The District Court was not obliged to consider, and it has no bearing on the validity of the sales, whether he was qualified to register, or whether the failure of the defendant to register him as his agent for that year was due to an oversight. The statute makes no exceptions in such cases. Chattanooga National Building & Loan Association v. Denson, 189 U.S. 408, 416, 23 S.Ct. 630, 47 L.Ed. 870; Johnson v. Railroad, 83 N.H. 350, 362, 143 A. 516, 61 A.L.R. 1178. Whatever may have been the reason, he was not registered as a salesman or agent in New Hampshire during the year in question, and any sales, solicitations, or offers of sale or transactions by him in connection with the sale of stocks for the defendant during that year were severely penalized under section 38 of the New Hampshire statute.

The District Court found as facts that the defendant knew or should have known that no registration for Parent as the defendant's salesman in New Hampshire had been applied for or had been issued, and that no payment therefor had been made; that the defendant, Henry L. Doherty, knew the requirements of the New Hampshire laws respecting the sale of securities, because in previous years, with respect to Parent and other agents, he had complied with the same.

While chapter 284 of the Public Laws of New Hampshire does not in terms declare all contracts made in violation of this chapter to be...