7 Buch.

Strickland v. National Salt Co.

STEVENSON, V. C. (orally).

In the matter of the appeals of certain claimants from the adjudication of the receivers in the case of Strickland v. National Salt Company, disallowing their claims, my conclusion is that the adjudication of the receivers should be affirmed.

It would be impossible for me at present to traverse the whole of this complicated case, and it is not necessary that I should do so. I understand the case will be carried to the court of appeals; it is very proper that it should. Counsel have, before me, argued carefully and thoroughly all the points involved perhaps, with the exception of one which I intend to touch upon. I doubt if any elaborate opinion of this court would be of great value to the court above. It would be a little more than an argument coming from the bench by the side of arguments coming from counsel, which will fully cover the whole case. There is just one line of thought and investigation, however, which I shall follow out to some extent, in order that, with the suggestions that I shall make, counsel may fully argue this case in the court above.

The first question which perhaps conveniently may be taken up is, what is the character in respect of negotiability of the certificates sued on by these claimants? In my judgment they are not negotiable. They do not exhibit on their face a promise, on the part of the National Salt Company, to pay a sum of money in installments to the holder of the instrument absolutely and at all events, and I find, very much to my surprise, that the difficulty in the way of attributing negotiability to this instrument which impresses me most is not referred to in the opinion of Judge Wallace in the federal court of appeals. 143 Fed. Rep.

805.

I shall not take up the question whether the reference in this instrument to other papers affects this question of negotiability. There were some other objections to the finding in favor of the negotiability presented by counsel which I do not stop to recall. In my judgment it is sufficient to establish the fact that this instrument is not negotiable, to point out the condition which, at the start, confronts the purchaser of this piece of paper. The certificate starts out with an agreement on the part of the National Salt Company to pay to a party named, or to his order,

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77 Eq.

a sum of money, at the office of the American Trust Company, of Cleveland, Ohio, in ten equal semi-annual installments, beginning January 1st, 1900. The paper then provides that "The failure to pay any installment when due shall make all future installments become at once due and payable." It may be conceded that that provision does not affect the negotiability of the paper. The certificate then proceeds as follows:

"Until such default shall have occurred the National Salt Company may at any time cause its liability under this instrument to be discharged by paying the amount of all future installments hereby secured to The American Trust Company, of Cleveland, Ohio, in trust to pay the same to the registered holder hereof upon demand."

Now, who is the "registered holder" of this piece of paper? I confess that I have no difficulty-I do not see how there can be room for argument as to what person is intended by that phrase. The original option agreement, dated July 20th, 1899, signed by all these stockholders, under which they disposed of their holdings to the National Salt Company and took its stock, and took these certificates, provides for the form of certificate which the United stockholders are to receive in case this option is acted upon. The form of certificate is attached to this option agreement, and the agreement provides as follows:

"To evidence the agreement of the National Salt Company to make such payments, it shall execute and deliver to each owner its agreement substantially in the form shown in Exhibit 'A,' attached hereto and made part hereof. New agreements of like tenor shall be issued in lieu of said original or any reissued agreements, upon their surrender and cancellation, for such amounts as the holder may desire"

("the holder may desire," the man who presents the certificate)

"not exceeding in the aggregate the amount then unpaid upon the agreements so surrendered and cancelled, and before such original or reissued agreements shall become binding upon said National Salt Company they shall be registered and countersigned by The American Trust Company, of Cleveland, Ohio, and the said Trust Company shall be required to keep a record of all agreements so registered and countersigned."

The certificate at the end contains this paragraph:

7 Buch.

Strickland v. National Salt Co.

"This instrument shall not be valid until countersigned and registered by the said Trust Company."

Then follow the blank places for the signatures, and then we have these words: "Countersigned and registered,” and then a blank place for the signature of the officer of the American Trust Company, which is required to countersign and register these papers.

Now, isn't that scheme perfectly plain? Every one of these certificates, when it was delivered, was countersigned and registered, and a record thereof kept by the American Trust Company. It was a promise, on its face, to pay the amount mentioned to the party named in the certificate, or his order. The party receiving that certificate could transfer it by endorsement, by delivery could sell it to anybody; but the party who received this paper, it was expected, would come to the trust company, the registrar, and get his own certificate in his own name, and that would be countersigned and registered.

Of course, the paper would pass from hand to hand. It might go through the hands of a dozen owners, no one of whom might deem it worth while to go or to send out to Cleveland, Ohio (I think the trust company was located there), and surrender the certificate thus bought in the market and get a new one, countersigned and registered, in its place.

But during that period, perhaps, while one of these papers was going from hand to hand in New York on the street, there seems to be nothing to prevent the National Salt Company, under the terms of this express provision, from discharging itself from all liability by paying the amount of all future installments secured by this certificate to the American Trust Company, of Cleveland, Ohio, "in trust to pay the same to the registered holder hereof upon demand." "Hereof”—that means that paper. Who is the registered owner of one of these certificates after it has been sold perhaps four or five times and passed through four or five hands? Why, the registered holder is the party who appears upon the books of the trust company as the holder of that paper. There cannot be any other registered holder, according to this scheme, until the purchaser-owner of the paper-deriving title perhaps through half a dozen individuals, his predecessors, has

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surrendered the certificate and obtained a new one which will be countersigned and registered and will show on its face that it belongs to him.

Now, that is an exposition which I am forced to make of the meaning of this agreement, and it seems to me that it is impossible to attribute negotiability to such a paper as that. The paper does not on its face bear a promise to pay the amount named to the holder or owner absolutely and at all events. As it passes from hand to hand every man who gets it by a title from the original registered holder knows right well-is warned-that no promise is made to him that is absolute. The only promise that is made to him is that the money will be paid if the National Salt Company has not seen fit to avail itself of the privilege which it reserves to itself in that paper of paying the entire amount to the trust company in trust for the registered holder, to be paid over to the registered holder on demand. All parties are acquitted if the money is paid by the National Salt Company to the trust company, and then is paid by the trust company to the registered holder on demand.

Now, it seems strange to me that this feature of the paper, affecting so vitally the question of its negotiability, has not been discussed in the series of interesting decisions in the federal court. I find a discussion of the question of negotiability only in the opinion of Judge Wallace, in the last decision of the series, in 143 Fed. Rep., and he deals with the effect of the reference in the certificate to other papers upon this question of negotiability. And, also, I might say, he deals with the effect of the provision in the certificate for the payment of the amount named therein in advance of its terms, but he does not deal with the effect of this particular provision which makes the right of the holder of the paper to receive payment conditional upon the money not having been paid by the National Salt Company to the trust company, and then paid over by the trust company to the registered holder.

If my conclusion on this question of negotiability is correct, then we have to deal with this case precisely as if the claims were made by the original takers of these certificates, and the question is, whether these certificates are enforceable in the hands

7 Buch.

Strickland v. National Salt Co.

of the original parties who took them-the stockholders of the United Salt Company of Ohio-against the National Salt Company of New Jersey..

Four or five different defences were presented to the court, and were the subject of argument pro and con, which was very full and very satisfactory. I have just come from a re-perusal of all the briefs. I do not doubt, with the aid of those arguments, a final decision will be reached by the court of errors and appeals in this case which will certainly give to the parties the benefit of the best thought and the best judgment of that court. I have concluded not to take up these defences in order, not to discuss them, not to set forth any positive opinion in regard to them. I am satisfied that these papers-these certificates-are not enforceable contracts in the hands of the original takers against the National Salt Company, and therefore, as they are not negotiable, these present holders have no claim.

Without discussing very many of these defences, which have been the subject-matter of thorough argument by counsel, I think it worth while to point out perhaps what I might call one additional defect in these papers-one additional defence on behalf of the National Salt Company-which, it seems to me, is conclusive and which ought to be presented to the court above. Of course, it is altogether probable that another court might select some one or other of the defences which I am not going to deal with and sustain the action of the receivers and the action of this court on account of that defence. It seems to me, without dealing with these other defences that I have referred to, that the defence based upon the doctrine laid down by the court of errors and appeals in the case of Volney v. Nixon, 68 N. J. Eq. (2 Robb.) 605, is absolute. I have tried carefully to consider this matter all the more carefully because it was not the subject of argument by counsel, and as a rule I am opposed to disposing of an important case upon a matter which has not been argued. I am not doing that in this case, by any means. I am only touching upon this one defence in order that it may be included in the presentation of the entire cause to the court of errors and appeals.