Sharp v. Stalker

• Decision Date: 06 September 1902
• Citation: 52 A. 1120,63 N.J.E. 596
• Parties: SHARP et al. v. STALKER et ux.
• Court: New Jersey Court of Chancery

52 A. 1120

63 N.J.E. 596

SHARP et al.

v. STALKER et ux.

Court of Chancery of New Jersey.

Sept. 6, 1902.

Suit by Willoughby W. Sharp and another against John Stalker and wife. Decree for defendants.

Alan H. Strong, for complainants.

Willard P. Voorhees, for defendants.

STEVENS, V. C. This is a suit brought to set aside a fraudulent conveyance made by John Stalker to his wife. On July 26, 1894, the plaintiffs recovered judgment against the defendant John Stalker for $2,071.64. The judgment is based upon two promissory notes, for $1,000 each, made by Stalker to complainants, dated November 1, 1893. On November 3d of that year Stalker conveyed certain real estate In New Brunswick to Charles B. Herbert, and on November 4, 1893, Herbert conveyed it to Margaret I. Stalker, wife of John Stalker. In each deed the consideration is stated to be $1. Without discussing the evidence, I may say that I think it shows that the conveyances were fraudulent as against the complainants, and that complainants could avoid them if they held a judgment enforceable as against Mrs. Stalker. In the words of the court of appeals in Menzesheimer v. Doolittle, 60 N. J. Eq. 397, 45 Atl. 611, although the judgment fixes as against all the world the status of the plaintiffs as judgment creditors of the defendant, it does not prevent defendant's wife, who was not a party thereto, and who has had for the first time in this cause an opportunity to raise the defense, from showing the real character of the debt. It is contended by Mrs. Stalker that the debt arose out of a stock-gambling transaction, that the facts are substantially the same as those proved in Menzesheimer v. Doolittle, and that relief must be refused complainants on the grounds there indicated. I think that this contention is correct.

It appears from the correspondence that on July 2, 1888, an account, for purposes of speculation, was opened by Stalker with the firm of W. H. Calhoun & Co., who were stockbrokers in New York City, and that $1,000 was deposited with them as a margin. This firm of which the complainant Sharp was a member, dealt with Stalker until July, 1891, when it was succeeded by the present firm of Sharp & Bryan. The account with the latter was continued until the close of the year 1893 or the early part of 1894. During all this time stocks were bought and sold for the account of Stalker. The purchases were at times very large,—far beyond the ability of Stalker to pay. In September, 1891, the month in which the purchases were the largest, they amounted to over $600,000. The money to buy was in every case supplied by the brokers. During the five years of their dealings, nothing was ever called for but a margin. The contention of counsel for complainants is that, inasmuch as the evidence does not show affirmatively that there were to be no deliveries as between broker and customer, the transaction was not proved to be a dealing in differences, and therefore a gambling transaction. In order to test the soundness of this contention, I will state the legal effect of the transaction as I understand it. It is beyond question that, as between the brokers and those of whom they bought or to whom they sold, the purchases and sales were real purchases and sales. When the transaction was a "long" transaction, the stocks were bought and paid for by the brokers out of their own moneys, and there was an actual delivery of the stock certificates. When the transaction was a "short" one, although the brokers did not have the stock when they sold it, they would be able to borrow it, and so to make an actual delivery at the time stipulated. They received the price of the stock so sold, and they presumably used the money received in the purchase of other stock sufficient to replace that borrowed. I say, therefore, that, as between the brokers and those with whom they dealt, the transactions were real transactions, and not dealings in differences. And if the complainants stood simply in the position of agents of Stalker, buying and selling only on his behalf, the transaction could not be regarded as unlawful. This was the view taken of it by the English courts in Thacker v. Hardy, 4 Q. B. Div. 685, and is the view held by the New York courts. It is not the view taken by our court of appeals. Flagg v. Baldwin, 38 N. J. Eq. 29, 48 Am. Rep. 308, is the leading case. It is there held that, where a broker is ostensibly engaged in buying and selling stock for a customer, he is not necessarily the agent of that customer. He may stand towards him in the character of principal, and therefore the mere fact that the transactions, as between the broker and those of whom he buys stocks or to whom he sells stocks, are real transactions, is not decisive. To determine the true character of the transaction as between broker and customer, we must look elsewhere. As between them, are they merely dealings in differences, or are they purchases and sales really made on behalf of the customer? There are obviously two guides to the determination of this matter: First, the agreement between the parties made at the beginning of the transaction; and, second, their subsequent correspondence and acts. Our court of last resort holds that the ostensible...