Doherty v. Bartlett, 3052.

• Citation: 83 F.2d 259
• Decision Date: 10 March 1936
• Docket Number: No. 3052.,3052.
• Parties: DOHERTY v. BARTLETT et al.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

83 F.2d 259 (1936)

DOHERTY v. BARTLETT et al.

No. 3052.

Circuit Court of Appeals, First Circuit.

March 10, 1936.

Robert J. Peaslee, of Concord, N. H., Robert G. Dodge, of Boston, Mass., and Franklin Hollis, of Concord, N. H., for petitioner.

Frank J. Wideman, Asst. Atty. Gen., and J. Louis Monarch and Carlton Fox, Sp. Assts. to Atty. Gen., for respondent.

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

BINGHAM, Circuit Judge.

The defendant has presented a motion for rehearing. The ground of the motion is that this court, in its opinion, did not state whether or not it overruled its prior decision in Doherty v. McAuliffe (C.C.A.) 74 F.(2d) 800, 803. The reason is not far to seek.

In Doherty v. McAuliffe this court had under consideration the construction and application of section 8 of chapter 110A of the General Laws of Massachusetts (Ter.Ed.), and section 15 of that chapter. Section 8 prohibited a registered dealer from selling securities in that state on "an instalment or partial payment plan contract except as such plan is approved by the commission," and section 15 of the act imposed a penalty of fine and imprisonment for violation of section 8. In applying these provisions of law, and following the decision of the Massachusetts court in Bowditch v. New England Mutual Life Ins. Co., 141 Mass. 292, 4 N.E. 798, 55 Am.Rep. 474, it was held that: "Installment contracts made in violation of section 8 may be voidable by the buyer while executory, but we do not think it was intended that they should be void, nor that, after they have been fully performed, there is any right to rescind."

In the present case, in suits arising in the New Hampshire district, we have had under consideration section 2 of chapter 202 of the Laws of 1917 prohibiting a salesman of a registered dealer from selling or offering for sale in that state securities, unless registered as a salesman of such dealer, and section 12 of that chapter imposing a penalty of fine or imprisonment or both in case of a violation of section 2. And, following the decisions of the Supreme Court of New Hampshire in construing the provisions of this identical act (Karamanou v. H. V. Greene Company, 80 N.H. 420, 124 A. 373, 374; Kenalos v. H. V. Greene Company, 81 N.H. 426, 128 A. 335), we held that a contract of sale of securities made in New Hampshire by an unlicensed agent of the defendant was void.

In the Karamanou Case the action arose on a demurrer to a declaration. The declaration alleged that the defendant, on October 22, 1918, had received from the insurance commissioner, acting under chapter 202 of the Session Laws of 1917, a license to sell certain securities; that on the 19th day of April, 1919, the commissioner had canceled the license of the defendant and notified it to that effect, yet the defendant thereafterwards "sold to the plaintiff certain certificates for the purchase of stock" to the plaintiff's damage. Section 9 of the act gave the commissioner authority to revoke a dealer's registration "in case of violation of any provision of this act"; and section 8 of the act, while it did not require as a condition precedent to the sale of securities by a registered dealer that he should first obtain the permission of the commissioner to sell any particular stock, it did authorize the commissioner to require the dealer to file with him a list of securities which he was offering or about to offer for sale, and if, after examination, he was of the opinion that the securities or any of them were of a "character that there is a serious financial danger to the purchaser in buying them," he was authorized to "prohibit the dealer from selling or offering the securities" for sale, but not otherwise. The declaration left it doubtful whether the violation complained of was a sale by an unlicensed dealer, his registration having been revoked under section 9, or whether it possibly alleged a sale of securities after the commissioner had prohibited the sale of them under section 8. But the court, in its opinion in the Karamanou Case, in view of its liberal exercise of the power of amendment and to dispose of the case, treated the declaration as though it alleged the doing of some act entering into the contract prohibited by the statute, subject to penalty. This is shown by the concluding sentence of the opinion where it is said: "An amendment of the declaration by the addition of a count for money had and received, with a specification of the facts relied upon, will meet the objections taken by the defendant" (italics supplied), and in stating the question to be determined the court stated it broadly as follows: "The question is of the rights of the parties under a contract of sale made in violation of law." It then went on and pointed out that the parties were not in pari delicto; that "the statute under consideration was passed for the protection of men such as the plaintiff. The sale only is penalized, not the purchase." It then held that: "If the plaintiff has paid money or other thing to the defendant under the prohibited contract, the defendant cannot set up a title to such money or thing under the contract made in violation of law, and the plaintiff will be entitled to recover without proof of the defendant's bad faith or the lack of value in the securities if he returns them."

In Albertson & Co. v. Shenton, 78 N.H. 216, 98 A. 516, the New Hampshire court had under consideration sections 1 and 8 of chapter 76 of the New Hampshire Laws of 1897. Section 1 reads: "No...