Agar v. Orda , 264 N.Y. 248 ( 1934 )

Is the Uniform Sales Act, also referred to as the Sales of Goods Act, article 5 of the Personal Property Law (§ 144), applicable to the sales of corporate stock? Section 82 of the act provides that a contract to sell "goods" is a contract whereby the seller agrees to transfer the property in "goods" to the buyer for a consideration called the price. A sale of "goods" is a contract whereby the seller transfers the property in "goods" to the buyer for a consideration called the price. Section 144, subdivision 1, provides that where, under a contract to sell or a sale, the property in "the goods" has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for "the goods" according to the terms of the contract of sale, the seller may maintain an action against him for the price of "the goods."

The act in section 156 has defined for us in very plain language what is meant by "goods." The definition is, "`Goods' include all chattels personal other than things in action and money. The term includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale."

Certificates of corporate stock are choses in action. A separate article (Art. 6) of the Personal Property Law, known as the "Transfers of Shares of Stock Corporations," or the "Uniform Stock Transfer Act," deals with the transfer of these choses in action. Section 162 provides that the title to a certificate and to the shares represented thereby can be transferred only by delivery of the certificate indorsed either in blank or to a specified person by the person appearing by the certificate to be the owner of the shares represented thereby. The transfer may also be made by power of attorney. Section 171 reads as follows: "An attempted transfer of title to a certificate or to the shares represented thereby without delivery of the certificate shall have the effect of a promise to transfer and the obligation, if any, imposed by such promise shall be determined by the law governing the formation and performance of contracts."

The drafters of the Uniform Acts and the Legislature, which has embodied them into our Personal Property Law, were careful that the words selected should exactly express their meaning. Strange indeed would it be if choses in action were turned into chattels by the mere use of the word "goods" and nothing more definite said about it. Turning to the Statute of Frauds, as we call it, section 85 of the Personal Property Law, we find the Legislature using the words "choses in action" when property of this nature was intended: "A contract to sell or a sale of any goods or choses in action of the value of fifty dollars or upwards shall not be enforceable by action unless the buyer shall accept part of the goods or choses in action so contracted to be sold," etc. Every rule of construction known to the law directs that the same word shall have the same meaning in the one enactment. This Personal Property Law deals with goods and chattels, also with stocks — choses in action — and when it intends to cover both goods and choses in action it says so.

That goods — tangible personal property — has, throughout the law and all the decisions, a separate and distinct identity from shares of stock or choses in action, is well illustrated in the struggle which the United States Supreme Court has had in getting rid of double taxation upon intangible property. In First Nat.Bank v. Maine (284 U.S. 312, 327, 328) it was said of stocks and bonds, "Both are intangibles and both generally have been recognized as resting in contract, or, technically, as `choses in action,'" Again, "In which state, among two or more claiming the power to impose the tax, does the taxable event occur? In the case of tangible personalty, the solution is simple: the transfer, that is, the taxable event, occurs in that state where the property has an actual situs, and it is taxable there and not elsewhere. In the case of intangibles, the problem is not so readily solved, since intangibles ordinarily have no actual situs. But it must be solved unless gross discrimination between the two classes of property is to be sanctioned; and this court has solved it in respect of the intangibles heretofore dealt with by applying the maxim mobiliasequuntur personam." In a word, the court recognizes the distinction between tangible and intangible personal property, between goods and choses in action. Goods and chattels are taxed in the State where they exist or are, while shares of stock — choses in action — are taxed at the domicile of the owner. While we are not dealing with a tax case these recognized distinctions exist in the law from the nature of the property.

Therefore, I conclude that the Sales of Goods Act, referring as it does to goods and chattels, does not include shares of capital stock of a corporation. Not only do I find this distinctly stated in the statute itself, to which reference has been made, but the weight of authority, wherever this question has arisen, favors this interpretation.

In 1929 the Supreme Judicial Court of Massachusetts inGoodhue v. State Street Trust Co. (267 Mass. 28, 34), said, "A contract for sale or the sale of `receipts' or `certificates' is not governed by the uniform sales act."

In 1920 the Supreme Court of Errors of the State of Connecticut, in Millard v. Green (94 Conn. 597, at p. 609), in referring to the Uniform Sales Act, Uniform Negotiable Instruments Act, the Uniform Bills of Lading Act and the Uniform Stock Certificate Act, says, "None of these Acts, except the latter, so far as we can discover, either in terms or by necessary implication, include certificates of stock within their provisions."

And the Supreme Court of Wisconsin, in Smith v. Lingelbach (177 Wis. 170 [1922]), said: "The Uniform Sales Act does not include within its provisions certificates of stock (Millard v.Green, 94 Conn. 597). In addition to the fact that the Uniform Sales Act by its terms excluded certificates of stock, there is the additional consideration that in 1913, two years after the adoption of the Uniform Sales Act, the legislature adopted the Uniform Stock Transfer Act, which by its terms relates specifically to the transfer of shares of stock in a corporation and would therefore seem to be exclusive of the Uniform Sales Act."

And the Supreme Court of Pennsylvania, in Guppy v. Moltrup (281 Penn. St. 343), in an action where the plaintiff sued to recover the purchase price because of the defendant's refusal to comply with his oral contract to purchase certain shares of corporate stock, took the same view, holding that shares of stock in a corporation are choses in action.

In Davis Laundry Cleaning Co. v. Whitmore (92 Ohio St. 44) there is a dictum that shares of stock fall within the definition of goods. The case itself dealt with the Statute of Frauds. Mr. Williston, in his work on Sales (2d ed.), section 619, says that this dictum is not to be followed as it is incorrect and that the right conclusion was reached in Millard v. Green (94 Conn. 597).

There is also a decision by the intermediate court of Illinois,Postel v. Hagist (251 Ill. App. 454), stating that the provisions of the Sales Act are applicable to the sales of corporate stock.

In the case of Corwin v. Grays Harbor Washingtoman, Inc. (151 Wn. 585) the court held that where stock could not be readily resold, the exception in the Sales Act applied, and that an action for the price could be maintained.

On the other hand, we find the Federal courts following the main line of authorities. In Henderson v. Plymouth Oil Co. (13 Fed. Rep. [2d] 932, 937) it was held that the Uniform Sales Act does not apply to the sales of stock. The courts which have followed the plain meaning of these Uniform Acts embodied in our Personal Property Law have, in my judgment, correctly decided the question and preserved a distinction which necessarily exists in the very nature of the property.

The courts below were of the opinion that we had taken a different view in our decision in Wills v. InvestorsBankstocks Corp. (257 N.Y. 451). That case related to the passing of title to stock and nothing else. The action was one in conversion on the claim that title to stock had passed to the plaintiff although there had been no delivery of the stock as required by article 6 of the Personal Property Law. Reference was made in the opinion to the Sales Act merely by way of analogy and illustration. The point, whether or not the Sales of Goods Act applied to shares of stock in a corporation where concededly title had not passed, was not before the court and was not decided. On the facts this court held that the action of conversion could not be maintained as title was not in the plaintiff.

Neither does Pierpoint v. Hoyt (260 N.Y. 26, 29) conflict in any way with our present holding. That was an action of willful conversion of certificates of stock, a refusal to deliver them up to the rightful owner. We said, "Wrongful acts affecting property rights in corporate stock can ordinarily be committed only through the medium of the certificates which evidence those rights. For the purpose of redressing such wrongs, the law must and does treat the symbol as though it were the thing symbolized. A conversion of a certificate of stock, whether indorsed or not, is, therefore, a conversion of the stock itself." In fact, the authorities for this proposition cited in our opinion long antedated the passage of the Uniform Sales Act into our Personal Property Law.

Now for the facts of this case. The defendant agreed to purchase 200 shares of the Firestone Tire and Rubber Company six per cent cumulative preferred stock, Series A, at the agreed price of $99 per share and accrued dividend. The stock was tendered to the defendant but he refused to accept it and this action was brought to recover the purchase price. The complaint was dismissed under the holding that action for the price could not be maintained as "property in the goods" had not passed to the buyer. Prior to this enactment (Personal Property Law, § 144) a tender of the property and a demand for the price were sufficient to maintain an action therefor, (Ackerman v. Rubens, 167 N.Y. 405,408; Van Brocklen v. Smeallie, 140 N.Y. 70, 75.) Since the enactment an action cannot be maintained for the price unless title in the goods has passed. I need not refer to the exceptions. The only question, therefore, presented upon the motion for judgment on the pleadings was the one asked at the beginning of this opinion: Are shares of corporate stock "goods" within the meaning of section 144 of the Personal Property Law? If they are, this complaint was properly dismissed. If they are not, the plaintiff may maintain an action for the purchase price. In accordance with what I have already stated, the Sales of Goods Act does not apply to shares of corporate stock, and this complaint was improperly dismissed.

POUND, Ch. J., O'BRIEN, HUBBS and CROUCH, JJ., concur with LEHMAN, J.; CRANE, J., dissents in opinion; KELLOGG, J., not sitting.

Judgment affirmed.