Spering's Appeal

The opinion of the court was delivered, by Agnew, J. — What was the true character of the transaction of 29th April 1861 ? To determine this, let me state the facts admitted or clearly proved. Drexel & Co. had lent to Coulter $16,000 on a pledge of stocks as collateral security, with a power of sale to reimburse the loan. Both parties were stock-brokers and bankers familiar with affairs of this sort. When the transaction of the 29th April took place, the loan of $16,000 was due, and Drexel & Co. had the power to sell the pledge absolutely to pay the debt. They were boná fide holders of the -security for a valuable consideration, to wit, the money lent. It is not pretended they had any notice of Coulter’s agency, or of the saving-fund company’s ownership. Nor can it be pretended that a sale by them of the stocks to repay the loan would not have passed title. It is equally clear that they could -sell to themselves by the agreement of Coulter. Then what is paper A., the first of the two executed on the 29th April 1861 ? On its face it is a distinct, [209] clear and absolute sale by Coulter to Drexel & Co. of the stocks held in pledge in consideration of the payment of the debt of $16,000, and $428 interest added. The proof is, that the stocks were then barely worth the debt. Thus far the clearly-expressed intention of the parties contained in the paper coincides with their relations and the power of Drexel & Co. This brings us to the debated question of actual extinguishment of the debt. It is argued by the plaintiff that the testimony of Coulter and A. J. Drexel fails to establish this fact, and that the proof of extinguishment must be more than the averment of the paper itself. But this averment is in the first place corroborated by the coincident relations of the parties at the time of the execution of the paper, the power of Drexel & Co. to produce this result, and the absence of motive on their part to produce any other. It is scarcely to be believed that a party holding a power to sell absolutely to pay an overdue and pressing debt, would extend the debt upon a mere mortgage of the same security without a power of sale. But the testimony of Coulter and Drexel supplements this, and proves the extinguishment. In answer to the question whether, on the 29th April 1861, he had sold the securities to Drexel & Co., Coulter replied, “Yes, sir, I understood that my debt at that time was extinguished, the loan was due and Drexel & Co. had the power of sale.” Anthony J. Drexel says, “My recollection is, that the evidence of the debt taken by us was an ordinary stock-note, of which this is a copy (containing a very express power of sale). I presume the note was surrendered to Mr. Coulter at the settlement, April 29th 1861. We have not got it. We had pressed Mr. Coulter previous to that to pay the .debt. He was unable to do so. We finally offered to take the stocks for the debt, to which he agreed. The stocks were unsaleable except at a great sacrifice; prices were nominal; we could not have got our money out of them by selling them on the market.” These statements are explicit that the debt was satisfied by the transaction of the 29th April 1861. Two objections are made to this testimony. Coulter says that pledge was collateral for the single sum of $16,000, and not for a running loan increased or diminished from time to time. This, the plaintiff alleges, is contradictory to the answer of Drexel & Co., that the debt arose from numerous short or call-loans. But the next sentence of the answer proceeds to say, “ and which at the time of settlement amounted to $16,248,” indicating a settlement and single sum due before the 29th April 1861, for the sum had then arisen by accrued interest to $16,428. If it should be a transposition of figures by misprint, still the discrepancy between Coulter’s testimony and the answer cannot prevail over the undoubted character of the transaction, as proved by all the testimony and the cor [210] roborating nature of the circumstances. The running loans were all reduced to a single sum on the 29th April 1861, if not before; and a confusion of dates in Coulter’s memory is not surprising after the lapse of time before he was examined. The second objection is to the form of Drexel’s expression, when he says, “ I presume the note was surrendered.” It is argued this falls within the rule requiring a party having a positive knowledge of a fact to state it positively, and not according to his mere remembrance and belief. But the argument loses sight of the true character of Drexél’s testimony. He states the main fact of a settlement and extinguishment of the debt positively in these words, “ We finally offered to take the stocks for the debt, to which he agreed,” and this is expressly corroborated by Coulter himself. The surrender of the note was but one circumstance of the transaction, and was a fair presumption in the mind of Drexel, who was testifying six or seven years after the transaction, arising from the main fact of payment which he well knew, and from the circumstance he also stated, to wit, that they had not the note. If to this we add the usages of that business, and the familiarity of Drexel and Coulter with all such transactions, it becomes impossible to doubt that the evidence of debt was surrendered on the execution of paper A. Upon the whole case we must conclude, therefore, that the parties actually intended, and did, by the transaction of April 29th 1861, make an absolute sale of the stocks in payment of the debt for which they had been held in security. This brings us to consider the effect of paper B., of the same date, by which Drexel & Co. agreed to sell to Coulter at any time he might demand their delivery within sixty days and not beyond, the same number of shares and kinds of stock for the price of f>16,592 cash on delivery. It is argued upon the authority of Colwell v. Wood, 3 Watts 188, Kunkle v. Wolfersberger, 6 Id. 130, and kindred cases, that paper B. converts paper A. into a mortgage, against the actual and expressed intent of the parties. We do not think so. The principle of all these cases is, that when the real transaction is a loan of money upon the security of property it is to be deemed a mortgage or pledge, and not a sale of the property without regard to the forms in which the parties choose to veil their transactions. The true character of the transaction being that, then even the actual intention that it shall operate otherwise cannot prevail. But I know of no rule of law or equity, if there be no loan of money on security, and the true character and intention of the transaction is to make an absolute sale, which frustrates the intention of the parties. The rule which prevents the conversion of a security for a loan into a sale is intended for the protection of the needy debtor against the rapacity of ,a inerciless creditor. But this never can be the case where the transa.P.tj.pn partakes not of the character of a loan, and the [211] sale is for a fair price. How then is this case ? The transaction of 29th April 1861 was no loan, and no pledge on security. The parties did not meet to negotiate a credit on one side and a security on the other, but the reverse; they met to adjust payment for an existing overdue debt, pressing for payment and armed with the means of enforcing it. The loan had been made long before, and the property was then held in pledge. Its nature was already that of a mortgage, and the subject of sale was the equity of redemption. Drexel & Co. had the power of foreclosure, and did not need to extort anything from the necessities of Coulter as the consideration of a hard loan. It was their right to convert the stocks by an absolute sale freed from the equity of redemption, and this they did by a sale to themselves, with the assent and agreement of their debtor. On what principle, therefore, of law or equity should we interpret paper JB. into a defeasance of paper A. ? There is none, and on the contrary there is every reason to adopt its own literal expression, to wit, an agreement to sell and deliver so many independent shares of stock within sixty days for a specified cash sum. This accords with the proof and the form of the instrument. The proof is undeniable that it followed an absolute sale, and was merely a concession of liberality to Coulter of the rise in the market within sixty days. The form of the paper accords with the intent. The stocks mentioned in paper A. are specific shares, by number of the certificate, as well as by number of shares. Paper B. merely proposes to sell a given number of shares. Paper A. transferred specific shares. Paper B. promised independent shares. Thus both form and proof strip paper B. of the character of a defeasance, and establish it as a mere promise to sell other stocks in conformity to the actual intent of paper A., as well as its language. But it is said shares of stock are all alike, and an agreement to sell an equal number of like stocks is consistent with the idea of redemption, and therefore that this form should not prevent the operation of paper B. as a defeasance. Certainly this would be so if it were a part of a transaction of loan and security. In that case the intention to redeem could well be inferred as consistent with the instrument. But here we should not hold that to be a defeasance which is not so' in form or in fact, but which only followed the adjustment and payment of a precedent debt, and was intended for a different purpose, to wit, to secure to Coulter the rise in the market for a specified time. We can easily understand how a 'debtor, whose property is already pledged for his debt and liable to be sold, may agree to pass it over in payment, and yet obtain from his creditor a concession of any advance in price it will bring in a limited time. Such, we think, was the true character of this transaction, and it follows that the decree at Nisi Prius must be affirmed, with costs.