Case Name: Thomas N. Gadsden vs. Francis Lance
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1841-02
Citations: 1 McMul. Eq. 87
Docket Number: 
Parties: Thomas N. Gadsden vs. Francis Lance.
Judges: Heard before Johnston, Chancellor.
Reporter: South Carolina Equity Reports
Volume: 16
Pages: 87–93

Head Matter:
Thomas N. Gadsden vs. Francis Lance.
1. The contract set out in the hill, was, that on the 4th Feb’y. 1837, the complain, ant “undertook that he would transfer to defendant his right of subscription to one hundred shares of the new Stock of the Bank of Charleston, S. C., as soon as hooks should be opened for subscription for the same; and the defendant undertook to pay him $33 for each share — and upon the opening of the books in January, 1839, the complain, ant subscribed for the one hundred shares, and tendered them, and an assignment, to the defendant, which he refused to accept.” It was held to be the rule, that when the goods contracted for, exist in solido, andaré capable of delivery at the time, it is within the statute of Frauds; hut when they are to he made, or something to he done to put them in a condition to be delivered, according to the terms of the contract, it is not within the statute.
2. It is well settled, that when the agreement is to be performed on a contingency, which may or may not happen within the year, anote in writing is not necessary, unless it appear from the agreement, that it was tobe performed after the year.
Heard before Johnston, Chancellor.
Charleston,
June Term, 1840.
The hill states that the complainant was the owner of one hundred, shares in the Bank of Charleston, So. Ca., which was incorporated hy an act of the Legislature, passed in December, 1834, with a capital of two millions of dollars, which provided also, that the corporation might, at any time during the continuance of their charter, on certain conditions, increase their capital to the amount of two millions more. That in consequence of his being the owner of the said one hundred shares of the original stock, he would be entitled to subscribe for the like number of shares in the increased capital, when the corporation should determine so to increase it. Tháton the 4th February, 1837, the corporation then having it in contemplation so to increase their capital, the complainant entered into an agreement with the defendant, by which the complainant sold to defendant his right of subscription to the new stock; and it was agreed that complainant should transfer to defendant said stock as soon as books should be opened for subscriptions for the same, and that defendant should! pay him $33 for each share. That complainant, on the said 4th February, 1837, made and delivered to the defendant a memorandum in the form of an account sales, in which the substance .of the agreement was recited, and defendant accepted the same. That in January, 1839, books were opened for subscriptions for the new stock, and that on the 7th day of that month complainant subscribed for, and became the owner of one hundred shares thereof, and offered to transfer the same to the defendant, who refused to accept the same or to pay therefor the sum stipulated by the agreement. That complainant instituted an action in the Court of Common Pleas, against the defendant, to recover damages for the breach of the said agreement, which is still pending; but as the said agreement, and tire terms thereof, Were only known to the parties, the complainant cannot otherwise obtain evidence to support his action at law; and therefore, prays a discovery from the defendant, to enable him to prosecute his said action.
The defendant has pleaded the statute of frauds and perjuries, to the discovery sought; and no earnest having been given, no note or memorandum of the bargain, signed by the defendant, and the event, (the opening of books for subscriptions for stock,) did not occur within a year and day from the time of the contract.
The question therefore is, whether the defendant was bound to perform this agreement. The statute of 29 Charles 2, made of force, in this State by the act of 1712, Pub. Laws, provides, that “no contract for the sale of any goods, wares and merchandize, for the full price of £10, or upwards, shall be allowed to be good, except the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the bargain or in part of payment, or that some note or memorandum of the said bargain be made and signed by the parties to be charged by such contract, or their agents thereunto lawfully authorized.” The question, whether a contract for the sale of stock in existence at the time, and capable of being transferred, does not seem to be well settled, and it would be unprofitable to consider it here, as it is not necessarily involved in the case. Here the stock contracted about, was not in existence, and could not be delivered or transferred; and I have not been able to find a case, nor was any cited at the bar, in which it has been ruled that such a contract was within the statute. Towersvs. Osborne, Str. 506, was an action for the value of a chariot, which the defendant had engaged the plaintiff to make, but refus ed to take when made; and it was held that it was not within the statute ; and the same doctrine was adopted in Clayton vs. Andrews, 4 Bur. 2101, where the contract was for the delivery of a quantity of wheat not then threshed, and therefore, not in a condition to he delivered. The reasoning on which the Court proceeded in both these cases, was that the contracts were executory. But in Cooper vs. Elsten, 7 D. andE. 14, Mr. Justice Grose repudiates the doctrine as applied to executory contracts generally, and declares that such a construction would repeal the statute : and adds, that if it only meant such contracts as were incapable of being executed at the time, the decision was right. And so in Groves vs. Buck, 3 Maul, and Selw. 178, which was a contract for the sale of a quantity of oak pins, thereafter to be made, in which Lord Ellenborough observes, that the subject matter did not exist in rerum natura. It was incapable of delivery, and of part acceptance, and that when that was the case, the contract had not been considered as coming within the statute. That the English Courts finally settled down on this doctrine is, I think, manifestly deducible, from the stat. 9 Geo. 4th, ch. 14, sect. 7, which provides for the very case, and declares that all contracts for the sale of goods of the value of £10, to be delivered at a future day, should be void, unless the requisitions of the stat. of 29th Ch. 2d, were complied with, although the goods to be delivered were not in existence, and were incapable of delivery at the time. Leigh's N. P. 1050. The same doctrine is held in New York. Sewell vs. Buck, 8 Cowan, 217. There is no question that this contract and all others of the same character, are within the mischief intended to be guarded against by the statute, but not within the letter -; and as the question has not been decided in our own Courts, the necessity of so construing the statute, as to embrace them, has been earnestly pressed on the Court. But I do not feel warranted in departing from a construction so long and so universally acted on. The remedy, if it be an evil, is in the hand of the Legislature.
It is therefore, ordered and decreed, that the defendant's plea of the statute of frauds be over-ruled, and that he do answer the complainant’s bill.
From this decree of his Honor the Chancellor, the defendant appealed on the annexed grounds:
1. That a contract for the sale of stock is entirely within the mischief which the statute was framed and enacted to prevent; the words of the statute are sufficiently comprehensive to include it.
2. That a contract for assigning a subscription to stock is substantially and really a contract for assigning the stock itself, and should receive the same construction.
3. That as the statute makes no distinction in favor of contracts for the sale of things in expectancy, none should be made by construction. And that the exception of the sale of things not in rerum, natura, out of the operation of the statute, is an arbitrary distinction against the policy of the act: unless the contract is for work and labor, to give existence to the thing contracted for.
4. That by the true construction of the statute, a memorandum in writing, is always necessary where the subject matter of the sale is incapable of delivery.
Simons, for the motion,
cited 18 John. 58 ; 2 H & K. 41; 1 Comyn Rep. 353; 2 P. Wms. 303; Pr. Ch. 533; 2 H. Black, Bouden vs. Wyatt; 8 Cowan, Sewell v. Finch.
. The right of subscription existed. But the contract was to subscribe, and then transfer the shares.
Hunt, contra.
This falls within the description of contracts to be performed; and by the decisions, unless it was to be performed after the expiration of a year, it requires no writing. It was in fact a contract in reference to the subscription to be made Feb’y. 1837, and to be performed within the year. 10 Peter's D. 106. 12 Mod. 176. 1 Lord Ray. 316. 2 Salk. 280. 2 Leigh’s Nisi Prius, 1045. 10 Johns. 244, 364.
Thompson, same side.
Bank stock, existing, may be goods, wares and merchandise, capable of symbolical delivery. But a chartered right to create stock, and by subscription appropriate shares in it, cannot be. Comyn on Con. 112. 1 Dane’s Abr. 239. 2 Kent, 494, 4 Wheat. 89, note.

Opinion:
Curia, per Johnson, Chancellor,
It seems at one time to have been doubted whether stocks fall within the description, " goods, wares and merchandizes" used in the 17th section of the statute of frauds. In Pickering vs. Appleby, Com. Rep. 354, cited at length in Com. on Contracts 89, the Court of' Common Pleas were equally divided on the question, whether stocks of the Governor and Company of the copper mines in England, were or were not within the statute, and in Colt vs. Netterville, 2 P. W. 308, the Lord Ch. King reserved the question, whether York buildings stock was or was not within the statute, declaring that all the Judges of England were divided upon it, in Pickering vs. Appleby; the point was too difficult for him to determine ; and decided the cause upon another ground. But in Mupell vs. Cook, the Ld. Chancellor expressed the opinion that South Sea stock was within the statute.
It is not probable that at the time the statute was passed, stocks were so generally the subject of traffic in England as at this day, and were probably almost unknown here, when in 1712, it was incorporated in our statute book; and it may be that neither the Parliament of Great Britain nor our Legislature, had them in contemplation at the time ; nor are the terms used the most apt that might be selected to describe them ; but it is notwithstanding true, that there is nothing in this country or in England, not even a bale of goods, more commonly the subjeet of traffic, barter and exchange, and the fluctuation in the price is frequently greater than in goods, and the dealers in them are exposed to all the temptations to perjury against which the statute is intended to provide. But it is not necessary to settle the question here.
Conceding that stocks are merchandize, the question is whether the defendant is bound.
In addition to what has been said in the circuit Court decree, it will only be necessary to add, that it is now the settled rule,*that when the goods contracted for exist in solido, and are capable of delivery at the time, it is within the statute; but where they are to be made, or something is to be done to put them in a condition to be delivered, according to the terms of the contract, it is not within the statute. The cases of Towers vs. Osborn, Clayton vs. An drews, and Groves vs. Buck, referred to in the circuit decree, furnish examples of the rule. The work and labour to be done, or the expense to be incurred, enters into consideration, and in that consists the distinction; without the work, labor, or expense, however trifling, there is no contract.
It is equally well settled, that when the agreement is to be performed on a contingency which may or may not happen within the year, a note in writing is not necessary, unless it appears from the agreement that it was to be performed after the year. Peter vs. Compton, Sken. 353. Fenton vs. Emblers, 3 Bur. 1278. Moore vs. Fox, 10 John, 254. Cruikshanks vs. Burrell, 18 John. 58.
The contract set out in this bill, is that on the 4th Feb. 1837, the complainant undertook that he would transfer to defendant his right of subscription, to one hundred shares of the new stock, as soon as books should be opened for subscriptions for the same, and the defendant undertook to pay him $33 for each share, and it is averred that on the opening of the books in January, 1839, the complainant subscribed for the one hundred shares, and tendered an assignment of them to the defendant, which he refused to accept or pay for.
Now the act incorporating the bank, left it entirely discretionary with the bank to increase its capital or not, and the time in which it might be done is only limited by the duration of the charter, nor is there any thing in it to control the bank in opening its books for subscriptions to the community at large, or limiting it to the stockholders. The new stock was not in existence at the time of the contract; it depended on the contingencies : 1st. that the bank would increase its capital. 2nd. on the time when it might open books for subscribtion, and 3d. whether it would or would not limit the subscriptions to the stockholders ; and until all this had been done, there was nothing which complainant could transfer or assign to the defendant. The books for subscriptions were opened to the stockholders alone, and to enable the complainant to perform his part of the agreement, he was obliged to subscribe for the stock, and for which, of course, he was bound to pay. Here then, the thing contracted about, was not at the time in rerum natura; the time of performance not limited by the contract beyond the year, and might have happened in a month; an act to be done by the vendor; the subscription for the stock, and his liability to pay for it, which but for the contract might not have been done.
Appeal dismissed.
DAVID JOHNSON.