Pound v. Lawrence

HARPER, C. J. This suit was brought by appellee, C. H. Lawrence, Jr., against appellants, George H. Pound, H. R. McDowell, and J. O. Crockett, stockholders in George H. Pound & Co., a corporation dissolved prior to the institution of the suit, to recover of them individually the sum of $1,440, which he-alleges to be due and owing to him under a contract for 1,600 shares of stock of the American Oil & Refining Company, at 90 cents per share. To charge defendants individually, he alleges that defendants are the owners and holders of practically all of the stock of said corporation, and that they had not fully paid for their shares of stock in the corporation, and plaintiff seeks to have defendants pay over the said unpaid amounts to have same held to meet the debts of the corporation. The pertinent portions of the petition stating the cause of action, and from which the matters in controversy presented here arise, are as follows: “(3) That on the said 23d day of January, 1920, the said George H. Pound & Co., as said corporation, was then and there more especially engaged in and in charge of the promotion and sale of the shares of stock of the said American Oil & Refining Company to then-customers and to the public generally, at and for the price of $1 per share, and for which services in so promoting and selling the said shares of the said American Oil & Refining Company, as plaintiff is informed and believes and so charges the facts to be, it, the said George H. Pound & Co., obtained and received from the said American Oil & Refining .Company large sums of money as commission on said sales. “ (4) That the said defendants were also the owners and in control of practically all of the capital stock of the said American Oil & Refining Company, and the officers and managers of tho said George H. Pound & Co., as well as the said American Oil & Refining Company, and that in truth and in fact the said George H. Pound & Co. was then acting as the underwriter and sales agent of the said American Oil & Refining Company, and that the said corporation and the said American Oil & Refining Company were practically one and the same company, managed and controlled by the same officers, manager, and directors. “(5) That at said time, to wit, on the 23d day of January, 1920, this plaintiff was able, ready, and willing to sell on said date, and intended to sell the said 1,600 shares of stock of the American Oil & Refining Company owned by him as aforesaid, at and for the price of 75 cents per share; and at said time and at said date there were purchasers who were ready, able, and willing to purchase the said I,600 shares owned by him, aforesaid, at and for the price of 75 cents per share, and that on said date and at said time he intended to sell, and he could have sold, the said 1,600 shares owned by him as aforesaid at and for the said sum of 75 cents per share net, and without the payment of any commission on said “(6) That George H. Pound and the defendants learned of plaintiff’s intention and purpose to sell the said 1,600 shares owned by him as aforesaid, at said price of 75 cents per share, and they, the said defendants, knowing and believing that the sale by the said plaintiff of said shares at said price of 75 cents per share would tend to embarrass and hinder the said George H. Pound & Co. in their sale of said stock at $1 per share, and would depreciate the price of the stock then- owned and controlled by the said George PI. Pound & Co., agreed with said plaintiff that in consideration of said plaintiff forbearing and refraining from selling his said 1,600 shares of stock at said price of 75 cents per share and withholding the same from sale at said price, it, the said George H. Pound & Co., guaranteed to the said plaintiff that fyp,, the said plaintiff, within 60 days from said date, would receive, and agreed that it, the said George H. Pound & Co. would, within 60 days from said date, pay unto the said plaintiff, the sum of 90 cents per share for the said *360 1,600 shares owned by the said plaintiff aforesaid; and thereupon this plaintiff, in consideration of the said agreement on the part of the said George IT. Pound & Co., and acting upon the said agreement and guaranty, did refrain and forbear from selling any of his said 1,600 shares of stock.” ( The defendants answered by general demurrer and general denial. The case was submitted to the jury on one special issue, viz.: “Do you find from a preponderance of the evidence that it was agreed in substance by and between George H. Pound, acting in behalf of George H. Pound & Co., and the plaintiff, C. IT. Lawrence, Jr., that in consideration of the said C. II. Lawrence, Jr., forbearing and refraining from selling 1,600 shares of stock of the American Oil & Refining Company at a price of 75 cents per share, George II. Pound & Co. would, within 60 days from January 23, 1920, pay unto the said Lawrence the sum of 90 cents per share for said 1,600 shares aforesaid? Answer yes or no.” The jury answered the question in the affirmative. Judgment was rendered for the plaintiff for the amount sued for, viz. $1,440. Appellants present two assignments of error. The first assignment is directed to the overruling of the general demurrer; the second assignment claims error in rendering judgment for plaintiff on the ground that the pleadings and the evidence show that the alleged agreement on which the, suit is based is illegal, void, and contrary to public policy, being in violation of the Texas Anti-Trust Act, as found in articles '7796 to 7799, Vernon’s Sayles’ Texas Civil Statutes. The two assignments present the same questions, and will be considered together. Appellee Lawrence testified: “I am acquainted with George H. Pound. I saw him on or about the 23d day of January, 1920, in my place of business. * * * At that time I was the owner of 1,600 shares of stock in the American Oil & Refining Company. On that date I had an opportunity to sell my 1,600 shares of stock at the price of 75 cents per share. * * * Stock of the American Oil & Refining Company at that time was being sold for $1 per share. * * * (Pound) said he did not like to have me sell my stock because it would hurt their sales, as they were promoting the stock, and selling other stock for $1 per share,- and he wanted to know if we could not come to some kind of an agreement so I would hold my stock and not sell it. I told him I would if he would guarantee me $1 per share. We were speaking of stock in the American Oil & Refining Company. * * * I told him I was willing to knock off 10 cents per share if he would make me a guaranty, guaranteeing me 90 cents per share, and I would hold the stock for the time he wanted, and -then he stated 60 days; said if I would hold the stock 60 days that he would pay me 90 cents per share, or, if I demanded the money before that time, they would try to sell it and give me the money; but they guaranteed me 90 cents per share within 60 days, and agreed to pay me that within 60 days. I relied upon that agreement at that time. At that time I agreed to refrain from selling my stock upon his representation and agreement. * * * I waited 60 days for him to pay the 90 cents per share. * * * I had several opportunities to sell the stock. I cannot mention their names, several parties. * * * He was to have 60 days in which time I was to make no effort to sell my stock. * * * After the 23d day of January I made no effort to sell the stock at all.” Is the agreement pleaded and proved inhibited by the provisions of title 130, c. 1, Rev. Civ. Statutes of Texas because it constitutes a trust or “conspiracy against trade”? Article 7796 of said chapter defines a trust as a “combination of capital, skill or acts, by two or more persons * * * for either, any or all of the following purposes: “1. To create or which may tend to create, or carry out restrictions in trade or commerce. * « * “2. To fix, maintain, increase or reduce the price of merchandise; produce or commodities. «■ « * “3. To prevent or lessen' competition in the * * * sale or purchase of merchandise, produce or commodities. * * * “4. To fix or maintain any standard or figure whereby the price of any article or commodity of merchandise * * * shall be in any manner affected, controlled or established. “5. To make, enter into, maintain, execute or carry out any contract, obligation or agreement by which the parties thereto bind, or have bound, themselves not to sell * * * any article or commodity * * * or by which they shall agree in any manner .to keep the price of such article or commodity * * * at a fixed or graded figure, or by which they shall in any manner affect or maintain the price of any commodity * * * between * * * themselves and others, to preclude a free and unrestricted competition among themselves or others in the sale * * * of any such article or commodity * * * whereby- its price * * * might be * * * affected.” Article 7799 of same chapter reads: “Any and all trusts, monopolies and conspiracies in restraint of trade, as herein defined, are prohibited and declared to be illegal.” We think that from the whole record, pleadings and proof recited above (1) that the appellee and appellant were owners of shares of stock in the appellant company; (2) that both desired to sell upon the market; (3) that they entered into an agreement whereby appellee agreed not to sell his shares of stock for 60 days for the purpose of maintaining the price of such shares, both of appellee and appellants, at $1 per share; and (4) that *361 such agreement was in violation of ttie letter of tiloso portions of the statute above quoted, and therefore void. It is the contention of appellee that the buying and selling of shares of stock in a corporation is not “trade,” or “commerce,” or “aids to commerce,” within the meaning of the Tesas Anti-Trust Statute; and that the terms “merchandise,” “produce” and “commodities,” as used in the statute, do not apply to mere evidence of property or value, such as shares of stock, but only to articles of trade and commerce of prime necessity commonly bought and sold in the market by merchants. If they are either they come within the statute. We have concluded that shares of stock are within the meaning of the term “commodities.” The Supreme Court of this state, in Queen Insurance Co. v. State, 86 Tex. 265, 24 S. W. 397, 22 L. R. A. 483, said that— The word commodity “is ordinarily used in the commercial sense of any movable or tangible thing that is ordinarily produced or used as the subject of barter or sale; and we think that this was the meaning intended to be given to it by the Legislature in the statute in question. This clearly appears by the context.” The word “commodity” is a broader term than merchandise, and in referring to commerce it may m'ean almost any article of movable or personal property. Shuttleworth v. State, 35 Ala. 415; State v. Henke, 19 Mo. 225. A share of stock in a corporation, while itself not the tangible property of the corporation, yet it is a tangible thing, perceptible to the touch, a thing capable of being possessed and owned, and while incorporeal in its nature, it is personal property, a thing subject to barter and sale, mortgage and pledge, liable to attachment and execution like other personal property, and a subject of conversion. Hewson v. Peterman Mfg. Co., 76 Wash. 602, 136 Pac. 1158, 51 L. R. A. (N. S.) 398, Ann. Cas. 1915D, 346, the Supreme Court of the State of Washington said that it is established by the great weight of authority that corporate stock is goods, wares, and merchandise within the meaning of the statute of frauds of that state, which provides: “No contract for the sale of any goods, wares or merchandise, for the price of $50.00 or more shall be1 'good and valid, unless the purchaser shall accept and receive part of the goods, * * * or shall give something in earnest to bind the bargain, or in part payment, or unless some note or memorandum in writing of the bargain be made or signed by the party to be charged thereby, or by some person * * * by him lawfully authorized.” Tb the same effect is the holding of the Supreme Court of Massachusetts in Tisdale v. Harris, 37 Mass. (20 Pick.) 9. In People v. Federal Security Co., 255 Ill. 561, 99 N. E. 668, the Supreme Court of Illinois held that the word “commodities” was broad enough to include stocks and bonds, and that a corporation engaged in buying and selling stocks and bonds is engaged in a mercantile pursuit, or business. The next counter proposition urged by the appellee is: “That it is not necessary for him to base the validity of the contract upon this ground, for, conceding that such shares of stock are such commodities as to be included within the statute, the contract pleaded does not come within the meaning of the statute, because it was merely an agreement upon the part of'Lawrence to sell and George H. Pound & Co. to buy his 1,600 shares at 90 cents per share, but Pound & Co. was not prohibited from selling all or any part of its stock to any person at any price.” The vice in the agreement pleaded and imoved is that the appellee agreed not to sell for 75 cents per share at the time, and not for any price for 60 days, because he by so doing would injure the sales of Pound & Co. of its stock at $1 per share. Thus it clearly appears that he made the agreement for a twofold purpose, to secure an increased price of his own shares and to accommodate Pound & Co., or assist them in keeping all shares of stock up to at least the value of $1 per share, and it is noted that Lawrence nowhere alleges or testifies to any agreement to sell to Pound & Co. in all events, but agrees not to sell for 60 days upon the guaranty. We take it the term “guaranty,” in the connection used, simply means the assurance from Pound that he by so doing should have at least 90 cents per share. So not being bound to sell to Pound & Co. at the end of 60 days, he then would have been .at liberty to sell his 1,600 shares for any price more or less than 90 cents per share as he chose, so the primary purpose upon the part of both parties to this .agreement was as to Pound & Co. to maintain the price of $1 per share, and as to Lawrence to increase the price which he could have obtained, both expressly inhibited by subdivision No. 2, of the statute quoted. Star Mill & Elevator Co. v. Fort Worth G., etc., Co., 146 S. W. 604. We are therefore of the opinion that the cause should be reversed and dismissed; and it is so ordered. Footnotes [1] És»For other eases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes