Pratt v. American Bell Tel. Co.
| Decision Date | 26 February 1886 |
| Citation | 141 Mass. 225,5 N.E. 307 |
| Parties | PRATT v. AMERICAN BELL TELEPHONE CO. and others. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
W.G. Russell and Prince & Peabody, for plaintiff.
E.R Hoar and J.E. Judson, for defendants.
The plaintiff held certain notes, with coupons attached, payable to the bearer thereof in three years after their date issued by the defendant corporation, October 20, 1882. Each note contained this provision: "The holder thereof may on the twentieth of April, 1884, or on the twentieth of October, 1884, and at no other time, exchange this note, coupons not due being attached, for the stock of the company, at par; that is, for one share." At a meeting of the stockholders of the corporation held March 27, 1883, it was voted to increase the capital stock, and the stockholders were given the right to take shares at par therein, in the proportion of one new share to three old shares held by them respectively. The bill alleges that at the time the convertible notes were issued there was in the hands of the defendant trustees a sufficient amount of full-paid stock of the company, subject to its control, and not otherwise appropriated, to enable it to perform its contract to deliver stock for said notes, and that there was no other way in which said corporation could lawfully perform its contract than by the delivery of said shares so held by said trustees; that the vote to issue the notes, and the issuing thereon, was an appropriation of said stock to the fulfillment of said contract; and that the contract became, in substance, a contract to deliver said stock in exchange for said notes, and charged said stock in the hands of trustees with a trust for the benefit of the holders of said notes. The plaintiff, as holder of a large number of these convertible notes, claims that he had the right to share on equitable terms in the benefit of the issue of said additional shares.
The first inquiry respects the construction of the contract between the parties. This is in writing, and is embraced in the convertible note which the plaintiff holds against the defendants. It will be seen that this writing contains no reference to the shares of stock held by the trustees when the note was issued. There is no agreement therein that the option which was given the holder should apply to any particular shares of stock of the corporation. No express trust is created therein in relation to any shares of the defendants' stock. In all these respects the contract is bald and naked. The plaintiff contends that the words "stock of the company," as used in the contract, have reference to the shares there held in trust for the company, and that the contract is to be construed as a contract to sell a specified portion of said shares; that, inasmuch as the parties must be presumed to have intended that which was legal, rather than illegal, their contract will be construed accordingly; that the only possible legal contract was a contract to sell shares then owned by the company, and hence the presumption is that the company intended to contract to sell a given number of the shares of which it was the owner. The presumption is without doubt that the parties must have intended that which was legal, rather than illegal, and their contract will be construed accordingly. But the presumption that the company intended to contract to sell a given number of the shares, of which it was the owner when the contract was entered into, does not necessarily follow. The stock-jobbing act (Pub.St. c. 78, § 6) declares a contract for the sale or transfer of the stock of corporations like that of defendants to be void, unless the party contracting to sell or transfer the same is, at the time of making the contract, owner, or has the control thereof. It is a well-recognized rule that the adjudged construction of a statute by a foreign state or country, where it was enacted, is to be given to it, when it is afterwards passed by the legislature of another state or country. Com. v. Hartnett, 3 Gray, 450. Before the stock-jobbing act of New York was enacted here, in substantially the same form as there, the courts of New York had decided that, if a party contracting to deliver stock at a future day, had stock in his possession or control when he made the contract, he was not obliged to keep the stock, or to deliver that identical stock, but that the contract could be performed by the delivery of any other shares of the same stock. Frost v. Clarkson, 7 Cow. 24.
A contract to sell shares owned by the company at the time the contract was made, was not, as the plaintiff argues, the only possible legal contract. The party promising to deliver the stock at a future time must, under the statute, be the owner or have the control of sufficient stock to fulfill his contract at the time the contract is made. It is not to sell the same shares, because the contract can be performed by the delivery of any other shares of the same stock. The presumption claimed by the plaintiff does not logically follow, that the company intended to contract to sell a given number of the shares of which it was the owner. The stock-jobbing act did not entitle the bearer of the convertible notes to receive any specific shares, to keep them idle and useless during this three years, to...
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