# Marie v. Garrison

> The Superior Court of New York City · November 15, 1883 · 13 Abb. N. Cas. 210

URL: https://www.frixlaw.com/law-library/cases/7346116

## Case

- **Full name:** MARIE v. GARRISON
- **Court:** The Superior Court of New York City
- **Decided:** November 15, 1883
- **Citations:** 13 Abb. N. Cas. 210
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Bwightref
- **Judges:** Bwight, Ref
- **Cited by:** 9 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

Bwight, Ref.
This is a motion made by the defendant to exclude evidence of the contracts alleged to have been made by Mr. Garrison with the plaintiffs, and at issue in this case, on the ground that they are obnoxious to the Statute of Frauds of the State of New York, and if not, to the provisions of that statute as prevailing in Missouri. For the purpose of clearness, it will be necessary to distinguish between the first alleged agreement, assumed to have been made March 39,1876, signed C. K. Garrison, and dated at St. Louis, Mo., and the latter oral agreement set forth in the complaint, and alleged to have been made in the month of June, 1876, at the city of New York. The first agreement is stated in the fifth paragraph of the complaint, to be evidenced in pari by a letter written by Garrison to some of the plaintiffs. The letter is attached to and made a part of the complaint. *
*217 The agreement supposed to be contained in the letter is resorted to in this action by the plaintiffs either as supplying a consideration for the later and oral con *218 tract, or as an original agreement modified by the oral contract. The introduction of the letter in evidence is objected to by the defendant as not complying with *219 the Hew York Statute of Frauds, on the ground that it does not “ express the consideration.” Its introduction in evidence is not otherwise objected to. It seems *220 to comply with the statute in other respects. It is sub- • scribed by the defendant and apparently contains a complete statement of the acts to be done and performed on the part of the parties to the contract.
*221 The plaintiffs allege that the consideration for the “letter” (for so the original contract is termed) is the compromise or adjustment of a doubtful cause of action on the part of the defendant against them as stockholders of the Pacific Railroad in Missouri. Their theory is that the defendant stood, as a large bondholder of this railroad, in the position of plaintiff in a suit to foreclose a mortgage on the Pacific Railroad of Missouri, pending in the year 1875 in the United States circuit court of Missouri, while the present plaintiffs were, as stockholders, substantially defendants in that suit. They assert that they had at least a plausible defense to the foreclosure, and that the adjustment of this controversy was a sufficient consideration for the promise of the present defendant, Garrison, contained it the so-called letter. This is a correct proposition upon general rules of law, and was so decided by the Court of Appeals in this cause on demurrer to the complaint (Marie v. Garrison, 83 N. Y. 14, 26 ). *
The next stage in the plaintiff’s theory is, that this letter being a good and valid contract, enforceable in *222 law, it was at the instance or request of the defendant Garrison modified or surrendered, and that this modification or surrender was a sufficient consideration for the oral modification or promise hereinafter set forth and concerning the same subject. To this proposition the defendant objects that the later oral agreement is in its turn subject to" the provisions of the Statute of Frauds, and that this cannot be' proved in this court even though the letter should be held provable. To this the plaintiffs reply that the court of appeals, in the decision just cited, in fact passed upon the question of the Statute of Frauds. For this statement they appeal to the briefs of counsel and to some references in the opinion of the court, tending to show that this tribunal was aware of the fact that the second contract was oral, while the defendant meets this suggestion by urging that there was nothing on the face of the complaint showing that the modified contract was oral, and that accordingly the Statute of Frauds could not, for that and perhaps other reasons, be considered on demurrer.
I shall discuss the question as though the matter were still open and without reference to any supposed decision of it by the court of appeals.
The defendants have set up the Statute of Frauds in' their answer, so that the question is fairly before me so far as the statute is sufficiently pleaded.
There appear to be four questions to be considered in this case:
I. Was there a consideration for the “letter,” so as to make it a valid contract %
II. Can the New York Statute of Frauds be applied so as to exclude evidence of the consideration of the “letter,” though the contract was made in Missouri, and to be performed there and the railroad property is situated there %
*223 III. If the New York statute is applicable, is the contract contained in the letter within the condemnation of the statute \ This includes the inquiry whether the consideration is “ expressed” in the letter within the meaning of the statute.
IV. Assuming that the New York statute is applicable and the letter is within its terms, and that the contract is void in law, was there any equitable right in the plaintiffs when the oral contract was made, sufficient to supply a consideration for that contract ? Beyond this, was there any form of consideration to which the plaintiffs can resort as supplying a sufficient basis for the defendants’ substituted promise.
To these propositions may be added the supplementary inquiry whether, if the New York statute is out of the way, the Ci letter” is within the Statute of Frauds of Missouri, and whether that statute can be invoked in the New York courts % I ought to say that the Missouri statute has not yet been proved in the case, as it strictly should have been, to authorize me to consider it. Yet, as the counsel on both sides have requested me to consider it by way of discussion or argument, I shall express my opinion upon it.
I approach the discussion of these questions with a sense of much responsibility, owing to the great amount in controversy, the thoroughness and extent of the discussions before me, and the ability and legal learning of the counsel in the case. Several of the questions raised are new and difficult. The great labor lavished upon them by the counsel admonishes me of the importance of bestowing much study and reflection upon the points at issue.
To avoid obscurity, I shall name each of the leading propositions above stated as a division of the iirst part of the opinion. The validity of the oral agreement will be discussed separately.
*224 PART I.
Division I.
Was there a sufficient apparent consideration for the letter so as to make it a valid contract %
In considering this branch of the subject, it will be necessary to refer to the allegations of the complaint, and to the testimony- already given in this cause, so far as it sheds light on the surroundings of the parties at the time the “letter” was written. It should be said that any conclusions at which I may arrive as to the present effect of the testimony are upon the evidence as it now stands, being evidence only on the part of plaintiffs. I am now simply determining whether I shall allow them to go on with their case or bring it to an abrupt conclusion by excluding all evidence of the contracts on which they rely. To do this, I must take their case as it now appears before me, reserving my opinion as to the true effect of the evidence until the case is closed.
It is right that I should consider the question of consideration for the “letter” before taking up the Statute of Frauds, since there must be a true contract before the question can be considered as to whether it is properly written-. There must be something to write before it, is to be written, and thus the Statute of Frauds adds one more requisite to a contract than existed prior to its enactment. This rule is laid down with distinctness in the opinion of Comstock, Ch. J., in Mallory v. Grillett ( 21 N. Y. 414 ), where he says, “ there can be no question under the Statute of Frauds in any case, until it is ascertained that there is a consideration to sustain the promise.”
The case to be dealt with is in substance as follows : The plaintiffs, prior to the date of the letter of March 29, 1876, were, in connection with one of the defendants, John T. Denny, owners, either absolutely or in trust for others, of 36,000 shares of the capitál *225 stock of the Pacific Railroad (of Missouri), a corporation organized under the laws of that State. Each share represented $100. Their holdings thus amounted to $3,600,000 of the capital stock stated at its par value.
Denny is made defendant because he refused to be one of the paintiffs {Code Civ. Pro. § 448).
The defendant Garrison was at the same time the holder of a large number of “Third Mortgage ” bonds of the same road, $2,200,000 out of a total issue of $4,000 000, secured by mortgage upon the road. There was, however, a controversy as to these bonds, considered as a valid obligation against the railroad, and particularly as to the validity of the third mortgage. The stockholders, as represented by the plaintiffs, claimed that the bonds were collusive and fraudulent, and thus the mortgage given to secure their payment was unauthorized by law. They further maintained that the directors of the road were parties to those collusive and fraudulent proceedings, and in fact hostile to the interests of the stockholders. They also maintained that Mr. Garrison was not a holder for value and in good faith ; that he held the bonds not as owner but as collateral security for advances, and that he had notice of the infirmity in the bonds before he advanced his money. It was on such grounds as these, that they maintained that they had a defense to the action for foreclosure of the third mortgage. At the time the letter was written, March 29, 1876, they had intervened in the action to protect their interests. They had filed an answer a„nd a cross-bill alleging collusion and fraud on the part of the directors of the railroad in the issue of these bonds as well as in the execution of the mortgage, and in the failure to make an efficient defense to the foreclosure. They had filed a petition to be made defendants in the cause, and had asked to be allowed to intervene and to defend the suit in their own behalf and that of other stockholders.
*226 I now proceed to give a general view of the testi-. mony so far as it bears npon these questions. The-rules of law permit the use of oral testimony for the purpose of showing the position and surroundings of the parties at the time the contract was entered into, • though not for the purpose of varying the terms of-the contract. In this respect there is no distinction between contracts actually in writing, but not required to be written, and the agreements to which the Statute of Frauds applies (Browne on Stat. Frauds, § 409, and cases cited).
Two railroad organizations are closely connected with the matters in controversy ; the Atlantic and Pacific Railroad on the one hand, and the Pacific Railroad (of Missouri). The latter, after the foreclosure of the third mortgage bonds, became the Missouri Pacific.For the sake of brevity in considering the transactions that led up to the letter, I will call the first the “ Atlantic,” and the other the “Pacific,” until it assumes its new name.
The “ Atlantic” road was originally chartered by the Government of the United States. Its eastern terminus was at Springfield, in south-western Missouri ;■ its western was San Francisco, California. It possessed a land grant covering land from Springfield to the Pacific Ocean. The “ Pacific” had a main line from St. Louis, Missouri, to Kansas City. There was also a southwest branch connecting with.it at the town of Pacific or Franklin, thirty-seven miles west of St. Louis andrnnning thence south-westerly through Springfield to the State line. There was here also a land grant from the United States covering land from the above-named town of Pacific to the Indian Territory. The land grants of the two roads (“Atlantic” and “Pacific”) interlocked, the one having Government lands southwesterly from Springfield of odd-numbered sections and the other with the even numbers. The “Pacific” road *227 forfeited its southwestern branch in 1865, or thereabouts, giving it up to the State. By a series of transfers (having become known as the South Pacific) this branch became merged with the “ Atlantic ” road. The latter railroad company was thus brought to the town . of Pacific, on the main line of the Pacific Railroad, and extending thence to the State boundary and thence into the Indian Territory, it had a road actually constructed of three hundred and twenty miles.
So far for the Atlantic road. Turning now to the “Pacific” road, at the time of the lease hereafter referred to, it appears that its line, commencing on the west bank of the Mississippi River within the limits of St. Louis, ran westerly to the western boundary of the State at Kansas City, a distance of two hundred and eighty-three miles. In addition to this main line, it had certain leaseholds. It ran through a very productive region of the State and through important cities. Its main line passed through the capital (Jefferson City), Sedalia and Warrenburg, to Kansas City; its leased line through Leavenworth, Atcheson, and Lexington. The “ Atlantic ” road passed through a much newer country and not so densely populated.
In the year 1872 the bonded indebtedness of the - Atlantic road consisted of a first mortgage of $7,250,000, and of a second mortgage of $3,000,000. There was also a mortgage on the land grant of $3,000,000. A portion of these bonds were in the treasury as unsold bonds. The amounts above stated were the authorized issues. The aggregate of the actual bonded indebtedness was $12,147,000. There was, in addition, a funded indebtedness incurred for the purchase of the South Pacific, amounting to $1,718,438. In later years the funded debt increased, so that on Dec. 31, 1874, it was $17,141,046. The floating debt was, on the same day, $1,405,513. The gross earnings of the At- *228 Ian tic road for the year 1872 $1,157,863.24; in the year 1873, $1,276,311.40 ; in 1874, $1,360,977.90.
I now turn to consider the gross earnings of the “Pacific” road. These were, for the year 1874, $3,713,-452.93 ; for 1873, $3,707,941.69; for the last half of 1872 (being that portion of the year embraced within the terms of the lease hereafter referred to), $1,924,; 918.92. The net earnings for 1873 were $1,402,715, and for 1874, $1,451,846. The bonded indebtedness of the “ Pacific ” road, in the early part of 1871, was $7,000,000, and a real estate mortgage of $500,000. It owed the County of St. Louis $700,000. The whole debt thus amounted to $8,200,000.
In the year 1871 there was a change in the management of the “Pacific ” road. New directors were introduced into the board. They were the chief owners of the “Atlantic” road, and directors of that company. They had become large purchasers of the stock of the “ Pacific ” road. After this change, one Andrew Pierce, a director in the “Atlantic,” became the managing operator of the “ Pacific ’ ’ road. In 1871, prior to the lease, a second mortgage was placed on the “ Pacific” road to the amount of $3,000,000. This was subsequent to the change above referred to in the ownership of the stock and the controlling management of the Board of Directors. The real estate bonds vtfere increased in 1872 from $500,000 to $800,000.
The “Atlantic” party are to be considered as having the control of the “Pacific ” from the time that they made the large purchase of stock in 1871, the sellers having agreed that the men who formerly represented their interest, and still remained directors, should vote as the “ Atlantic ” party directed them to vote.
In June, 1872, the directorship in the two roads was substantially the same, consisting mainly of the . same persons. On the 29 th day of that month these persons, in their character of directors of the “Pa *229 cific” road, directed a lease of that road to be made to the “Atlantic” road, which they accepted in turn as directors of that road for that company.
I pause here, in the narration of facts, to call attention to the proposition that these men, while holding a trust relation for each company, were assuming at the some moment to act both for the lessee and the lessor This double action on their part was inconsistent with their legal duty to each company. In plain language, it was a clear breach of trust, and their action was capable of being impeached in a court of equity, on the part of any stockholder who felt himself aggrieved.
It is unnecessary to charge these persons with an. intentional act of wrong. They were, however, bound to know the law, and to recognize the great and salutary rule that no person having a legal duty to perform toward another can voluntarily take a position inconsistent. with the performance of that duty. If employed to buy, he cannot sell; if employed to sell, he cannot buy ; so he cannot act both for a lessor and a lessee, particularly when discretion or judgment is involved in his action. The peculiarity of the present case was that the directors not only represented themselves and their friends, but the minority of the stockholders, including the plaintiffs, and that not of their own choice, but by force of a positive rule of law., which permits the holders of one more share than half of a railroad corporation to control its action. This rule is founded, no doubt, on wise, but certainly "on unfathomable reasons. Its existence could only be tolerated on the supposition that a majority clothed with this enormous power should not forget their trust obligations,- but should act in good faith and on sound principles of equity toward the minority, whom they thus arbitrarily represent.
I entertain no doubt that this lease was voidable at *230 the election of any or all non-assenting stockholders on the day it was made, and during the whole period allowed by the law or statute of limitations.
The general principle governing the subject is nowhere more satisfactorily stated than in the case of New York Central Ins. Co. v. National Protection Ins. Co. ( 14 N. Y. 85 *). The court of appeals was at , that time (1856) composed of uncommonly able men, including Judges Denio, Alexander S. Johnson, and Samuel S. Selden among its permanent members, and William B. Wright and Thomas A. Johnson among its temporary members. There has been no better court in this State since its organization. The opinion of the court was written by the chief judge, Hiram Denio, inferior to none of them. One Stevens in that case assumed to act as agent between two corporations as in this case. On the one hand he represented an insurer, and on the other an insured. It was his duty in the one character to get the highest rate of premium and the most favorable terms for the insurer ; in the other capacity, he was bound to obtain the insurance at the lowest rate of premium and the most favorable terms for the insured. How could he hold the scales even between the two parties to the contract % The court said, on p. 91: “ The parties to the contract in this case are both corporations, and must of course transact their business through the instrumentality of agents, and Mr. Stevens was the agent of both parties. The plaintiffs were entitled to all his skill and ability, and the defendants had the like claim upon him. Neither required the services of an indifferent person whose object might be to secure equal advantages to both tké contractors . . . There was'a manifest inconsistency in attempting to negotiate this insurance as the agent for the insurers and the insured.” The court *231 then proceeded to hold the transaction voidable on principles of equity law as applied to trusts, p. 92. An even stronger case might be presented in such an instance as the present, than that contained in the above cit.ed insurance case. There the agent acting between the two companies was a mere intermediary ■and without any interest in the subject matter of the contract. How much more cogent must such a principle be, where a majority of directors of a corporation, being at the same time owners of a majority of the shares of stock, are successful in obtaining a majority of shares in another railroad, and a corresponding control, and thus succeed in obtaining a power to impoverish and in common parlance to “wreck” the latter for the interest of the former! The principle does not require that the power should be exercised corruptly. The power must not be allowed to exist at all. The court must hold with unflinching steadfastness that the dual directorship shall be disabled from representing the two corporations in any transaction requiring skill or judgment to be exercised for each. There is no middle course whereby solvent associations can be saved from the greedy grasp of unprincipled adventurers.
*230 Reversing 20 Barb. 468 .
*231 I must accordingly, on the testimony now before me, hold this lease to be voidable at the election of the plaintiffs, unless I find sufficient evidence of their ratification of it.
It is to be noticed that the principle, as above stated, does not require that any unfair advantage be taken or, in the present instance, that any injury should be worked by the lease, to the non-assenting stockholders. They are not obliged to show any reasons for asking to have the contract set aside. They may simply plant themselves on the legal disability of the directors to do the act in question. The case cited shows that actual fraud is not a necessary ingredient *232 in the plaintiff’s case, p. 91. Still, 1 think that there are strong circumstances to show in the present case that the “Atlantic” directors intended to use and actually used the control acquired over the “ Pacific,” •for the advantage of the former, and with little, if any reference to the interests of the latter corporation.
I see no way of making such a lease binding on the non-assenting stockholders, except by ratification by them of the unlawful act. Such a ratification would require a clear understanding of the terms of the lease, and a distinct, unequivocal act on their part. I find in the case no evidence of sufficient knowledge of the facts, nor of the necessary acts of ratification. As to the necessity of such knowledge I refer to Pacific Rolling Mill Co. v. Dayton (7 Sawyer, 61).
There is another element of doubt which ought to be referred to.
There is strong reason to believe that a railroad company even with the full assent of the stockholders, has no power to make a lease, in. the absence of an enabling statute. It appears' to be clearly held in this state that a railroad corporation has no such power. Abbott v. Railroad Co. ( 80 N. Y. 27 ; S.C., 6 Am. R. 572), confirmed by a later case ( 68 N. Y. 107, 117 ). The opinion of Church, Ch. J., in the case first cited places the disability on common law grounds, see p. 80. He there says, “It has been repeatedly held in the English courts that one road cannot lease itself to another without the consent of parliament, citing Beman v. Rufford (1 Simons N. S. 550); Great Western Railway Co. v. Eastern Counties Railway Co. (9 Hare, 306) ; Winch v. Company (5 De G. & S. 562), as well as a number of American cases. The case in 86 IV. Y. 107, is one of a direct action between the lessor and lessee companies, and the lease was pronounced invalid, there being no express statutory authority to enter into it. As this is declared to be a general *233 rule of law, it must be assumed that this is the law of Missouri, until there is some proof to the contrary. In any event, there is strong reason, growing out of the semi-public character of railroads, why the courts should watch leases with great care. A lease may involve the shifting of responsibilities, waste of property, and injury to the commercial prosperity of the country traversed by the road. It ought not to be tolerated, unless fair in its terms, nor unless made to a responsible corporation, nor unless the rights of stockholders and bondholders are properly guarded and protected.
Finding a vice at the root of this lease, I do not think it necessary at this stage of the case to go into a detailed examination of the management of the board representing both companies. In general terms, it may be said that the whole conduct of the leased road displays the wisdom of the rule, to which reference has been made, disabling trustees from so dealing with trust property. Now, as “Atlantic” directors they dealt with themselves as “Pacific ” directors ; then they turned the tables, and as “ Pacific” directors dealt with themselves as “Atlantic” directors. The distinction between the two roads resolves itself practically into a matter of bookkeeping. Formally they were distinct; substantially they were one. Debts increased, then income bonds were issued, but could not be successfully floated. Then the same bonds were issued under the broader and more enticing name of improvement bonds, but they possessed an equal alacrity of shrinking. There was but one resource left to gain money and to defer bankruptcy, and that was the issue of third mortgage bonds. As the agreement in question in this action arose out of the foreclosure of these third mortgage bonds, it is desirable to consider these in their origin and progress toward conversion into ownership of the road with some fullness of detail.
*234 The third mortgage bonds were in form authorized to the amount of $4,000,000 by a stockholders’ vote, at a meeting held on July 10, 1875.
It is, however, claimed by the plaintiffs that there was in point of fact no sufficient authorization.
At the meeting above referred to, the stockholders were for the most part represented by proxy. The meeting was held in Missouri, at St. Louis, and the directors were still holding office, substantially as already detailed, and acting under the lease of 1872. The form of the proxy was follows : “ Know all men by these presents that stockholder of the Pacific Bailroad (of Missouri), owner of shares, have made, constituted and appointed lawful agent and attorney for and in name, to appear at a special meeting of stockholders of said Pacific Bailroad of Missouri, to be held in the city of St. Louis on the 10th day of July, 1875, for the purpose of voting upon the action of the directors of said Pacific Bailroad in authorizing the issue of $4,000,000 of bonds, and for the transaction of any other business which may come before said meeting, or at any adjournment thereof, and then and there, for me and in my name, to cast the vote to which is entitled as a stockholder, and which might cast if present. Witness, &c.”
This proxy was issued to the stockholders for their signatures. Assuming that it was necessary for the stockholders to assent to the issue of third mortgage bonds, there was a most extraordinary omission in failing to mention in the proxy the fact that a mortgage was to accompany the bonds to be authorized. It must be borne in mind that there were already bonds,out in various names, “Income,” “Improvement,” etc. A stockholder would naturally infer that one more attempt was to be made to find a bond under some still more captivating, name, which capitalists *235 would take. I think that there is a total failure in this case to confer upon the person holding the proxy the power to vote for a mortgage. This so-called “proxy” is nothing more than a power of attorney, and must be governed by the rules applicable to that class of instruments. “It is a well settled rule that all written powers such as letters of attorney, or letters of instructions, receive a strict interpretation, the authority never being extended beyond that which is given in terms or is absolutely necessary for carrying the authority so • given into effect” (Paley on Agency, by Dunlap, 4 Am. ed. 192, 193 ; North River Bk. v. Aymar, 3 Hill, 262 ; Cobbold v. Chilver, 4 Mann. & Gr. 62). It is the duty of one who acts on the basis of the powers granted in the letter of instructions to inspect it, and if the attorney or proxy goes beyond the written authority, his excess of authority is nugatory, and has no binding effect upon the principal (same cases). Applying this rule to the facts of the present case, it would seem clear that the proxy conferred no authority upon the holder of it to vote for third mortgage bonds. As the very great majority of the votes were given upon these proxies, I see no way of upholding the mortgage, provided the assent of the stockholders was necessary.
But more than this; the notice of the stockholders’ meeting which was published in the newspapers of St. Louis, and in reference to which the proxies were issued, contained information that the issue of mortgage bonds was contemplated. It was as follows: “A special meeting of the stockholders of the Pacific Railroad of Missouri will be held on Saturday, J uly 10, 1875, at 10 o’clock A.M., at the office of the company, in the city of St. Louis. The action of the directors in authorizing the issue of bonds to be used for the redemption and cancellation of bonds heretofore issued, and the execution of a mortgage to secure the *236 same, will be submitted to the stockholders for their approval,” etc., etc.
The notice sent out by mail to the New York and other stockholders out of St. Louis, omitted the word “mortgage,” and all the information that they could gather from the notice was that bonds were to be issued.
I have carefully considered whether any explanation of this difference between the notice as published in the St. Louis newspapers and that sent to the stockholders by mail, can be made consistent with good faith and fair dealing on the part of the directors. Up to this time I have sought for the explanation in vain.
I may pause here for a moment to summarize the conclusions which I have thus far arrived at. I regard the lease of the “Pacific” road to the “Atlantic” as voidable at the election of the stockholders who did not assent to it. I see no sufficient evidence that stock: holders appearing here as plaintiffs did assent to it. I think it extremely doubtful whether the one corporation had any power to make a lease to the other, even with the consent of the stockholders, unless some distinction is shown between the law of New York and Missouri, which, as yet, has not appeared. I am further of opinion that the requisite assent of the stockholders to the issue of the third mortgage was not obtained, and that the fact that it was about to be issued was withheld from them, or some of them, in the mailed notice of the special meeting, and in the proxy offered for their signature, and which they signed.
Had the third mortgage bonds been held by a person having full knowledge of the facts, they would have been, in my view, impeachable in a court of equity by the stockholders. It may be that they would .have been void in law as issued by persons claiming under a lease which was ultra vires, i. e., which the “ Pacific ” company had no inherent power to make, and which- *237 the “ Atlantic” company had no power to receive. In this view, the relation of lessor and lessee never existed, and the subsequent proceedings based on that relation must fall with it. But I do not place my decision upon this ground. I can hardly think that the mortgage was utterly void, unless there was a total want of power to make it. If the legal power existed, but it was abused, it would, I presume, be valid as to such of the stockholders as were directors and engaged in furthering it. They might be estopped from attacking its validity. I prefer to regard it as voidable. I proceed accordingly to consider the question as though there were merely a right in equity on the part of the stockholders to have the mortgage set aside, or to make an equitable defense in case of foreclosure. In that aspect, it might be of consequence that Mr. Garrison and others, bondholders, should occupy the position of holders in good faith.
It will be conceded that if these bonds were issued inequitably or even fraudulently, yet, as they were in the form of negotiable paper, if there was an apparent power to issue them, they might be enforced by a holder for value and in good faith.
Mr. Garrison held only $2,200,000 out of an'issue of $4,000,000. He might be a bona fide holder while others might not be. It would be competent for the stockholders to defend the action of foreclosure, in order to reduce the amount of the decree as well as to defeat it altogether.
This was the position of Commodore Garrison when the foreclosure of the third mortgage bonds was commenced. The stockholders were in a position to resist a foreclosure. They were defended by highly able counsel, as able, we are told, as there were practicing law in the city of St. Louis. They were likely to discover every flaw in the plaintiff’s case in that action. There were solid grounds for believing in a substantial *238 defense. Mr. Garrison’s only hope was to establish that he was a holder for value, and perhaps also show, on account of the fraudulent element in the case, that he was a holder in good faith. Even if he could show that, the foreclosure could only be for' $2,200,000, unless similar proof were offered by other bondholders ; if he could at most show $2,200,000, it would be comparatively easy for the stockholders to raise that amount and thus become active competitors in the purchase of the road, and thus perhaps prevent it from passing into his hands. Again, it might be dangerous for him to repose on showing that he was a holder for value, as the bonds might appear to be held as collateral, and accordingly only the amount actually advanced by him could be enforced.
It is thus evident that there might be strong reasons of a prudential nature, acting on the mind of a man of affairs, to justify a settlement by him with the stockholders and prevent the discussion of the legal questions involved in the case.
The theory on which I have proceeded thus far is that the proceedings of the directors, up to the time of executing the mortgage and incuding it, were voidable. It may be urged that the settlement was not. then a compromise. Conceding that, the case of the: present plaintiffs is not unfavorably affected. Instead' of a doubtful defense they had a clear defense which they were in a position to urge to the court. The surrender of such á defense must be even a more meritorious consideration than if the matter were doubtful. It is a settled rule of law that any inconvenience or injury to the promisee on the faith of the promise is a sufficient consideration to bind the promisor. White v. Baxter ( 71 N. Y. 254 ). * Nothing can be clearer within this rule than that the surrender of a good *239 defense would be a sufficient basis for an express promise.
It is now necessary to consider the position of Mr. Garrison as a holder for value and in good faith, at the time the foreclosure proceedings were pending. If their defense had been pressed by the plaintiffs, the burden of proof would have been upon him to show that he was a holder for value. (The cases on this subject are fully collected in Pars. on Bills, 188-191.) If he only advanced a part of the face of the bonds he could only recover so much as he advanced upon them. (Nash v. Brown, Chitty on Bills, 74; Allaire v. Hartshorne, 1 N. Y. 665 ; Brown v. Mott, 7 Johns. 361 , and other cases cited in 1 Pars. on Bills, 191, note 1.) The defendant in this case has not yet had the opportunity to prove how much value he paid. The evidence thus far shows that he held many of the bonds as collateral security for the sum of fifty cents on each dollar of the face value of the bonds. Even if he had bought them at that price, in the case of fraud on the part of the directors, he would only recover in the foreclosure what he had paid, even though he purchased without notice of the fraud. (Same authorities.)
. There was, however, some evidence tending to show, that he had notice to put him upon inquiry as to the conduct of the directors and the qualities of the whole transaction through the contents of a speech delivered by one Mr. Bowman of St. Louis, an attorney at law, in Mr. Garrison’s presence and within his hearing, and that this speech preceded the defendant’s acquisition of the bonds or some of them and the foreclosure of the mortgage. I do not at this stage of the case lay much stress upon this evidence, as independently of it, I am of the opinion that there is sufficient evidence to cast the burden .of proof upon the defendant to show that he paid full value for the bonds. This has not so far appeared.
*240 The conclusion at which I have arrived is, that if the plaintiffs in their character of stockholders had continued their defense to the foreclosure, they would have had at least a plausible and perhaps good defense to the action or at least to a part of it. «
I shall now take up the foreclosure, and show the way in which the “letter” came to be written by the defendant to the plaintiffs.
The third mortgage, with accompanying bonds, was executed by the directors of the “Atlantic” road, in the name of the “ Pacific,” on July 10,1875. The first six months’ interest was made to fall due November 1, 1875, only three months and twenty days after the execution of the mortgage and the accompanying bonds. The interest falling due November 1 was paid. An action to foreclose the mortgage was commenced in the circuit court for the eastern district of Missouri on November 3 (three days later) by one George E. Ketchum, a bondholder under the third mortgage, proceeding in his own behalf, and that of other persons similarly situated. This will be termed the “Ketchum” suit. The mortgage ran for twenty years—only one semi-annual payment of interest was then due. The whole stockholders’ ownership was at stake for want of the insignificant sum of $140,000.
There is here something well nigh inexplicable. The prior bonds, for which these were a substitute, were “income” or “improvement” bonds, the equivalent of the “ incomes.” They were no lien on the road or its franchise, but only on the income—the net income. If no such income was earned, then no payment was to be made. In place of those already actually issued to creditors, there was now substituted a mortgage on the road and its franchises, which in three short months, for the non-payment of one installment of interest, was treated as wholly due (both principal and interest), although there was no clause in *241 the mortgage making the principal due and payable on non-payment of an installment of interest. Still the “Ketchum” suit treated the whole as due, and the foreclosure and sale were conducted on that basis. The “ Pacific ” company, by James Baker, their attorney, on February 7, 1876, made answer. Among other things, they stated in their answer that a portion of the stockholders claimed that the bonds were fraudulent, and that the directors were guilty of fraud in issuing them.
On March 25 of the same year the plaintiffs, or some of them, filed a petition to be allowed to come into the suit and defend, in behalf not only of themselves, but of all other holders or owners of shares of the stock who might come in and contribute to the expenses of the litigation.
Prior to this date there had been interviews between some of the plaintiffs and the defendant, in respect to the foreclosure and some mode of completing it whereby the plaintiffs would withdraw their opposition to it, and permit the brother of the defendant, Oliver Garrison, to be made a receiver, and allow the proceedings to go on to a decree and culminate in a sale. After much negotiation, the “ letter” now in question was signed by Garrison and delivered to the plaintiffs, as they allege, as a mode of settlement of the controversy. They were to withdraw their defense, as they say, and permit Oliver Garrison to become receiver, and this they did in pursuance of the letter. The defendant, however, objects to the introduction of all evidence of the consideration, on the ground of the Statute of Frauds. All I have now to decide is whether, if the Statute of Frauds be not in the way, there was a sufficient consideration for the promises in the letter in the action of the plaintiffs. The letter itself will be more conveniently stated at a later stage of this opinion.
*242 Considering the condition of the mortgage, the doubt of its validity, the burden of proof upon the defendant to prove that he acquired the bonds for value, and it may be to prove good faith, and that the action of the plaintiffs, at his request, relieved him from all difficulties, and enabled him to carry forward the foreclosure suit "with efficiency and certainty of ' result, I am of the clear opinion that there was not merely a technical but an adequate consideration for the promises made by him in the “letter” to the plaintiffs.
I say an adequate consideration, as that may become important in the view of a court of equity in upholding the contract.
Division IL
I have now arrived at the second inquiry. This is whether the New York Statute of Frauds can be applied in this case to exclude evidence of the consideration.
This question concedes, at least for the time being, that the, contract is valid by the law of Missouri, where it was made and to be performed, and where the prinpal subject-matter of the contract is situated. It is urged by the defendant that evidence of the consideration cannot be introduced, since the New York Statute of Frauds requires the consideration to be expressed in the writing, and that it is not so expressed. It is maintained by them as a proposition of law that the New York Statute of Frauds, as it now exists, is a rule affecting the remedy upon a contract within its terms—a rule prescribing evidence and accordingly a rule of procedure. If this be so, they further argue that a rule of evidence is a branch of the law of the forum—i. e., of the place where the action is pending —and that its rules must be followed in this case. It is, on the other hand, insisted by the plaintiff that this *243 New York law is so framed as to be a rule of substance, entering into the very existence of the contract. If so, they argue that as a question of validity the existence of the contract, according to established rules, is to be determined by the law of the place where the t contract is made. If valid there, it is valid everywhere ; if void there, it is void everywhere. It is thus a contest between the claims of the lex loci conlraetus and the lex fori—between substantive law and auxiliary law.
This question has, as far as the'researches of counsel extend, never been passed upon by the courts of this State.
The “letter” of Mr. Garrison is as follows :
To Messrs. N. A. Cowdrey, Robert L. Cotting, Jr., Peter Marie, Frank A. Otis, George R. Fearing, and John T. Denny.
“ Gentlemen,—In the event that the Pacific Railroad of Missouri is sold under foreclosure proceedings in the suit of George R. Ketchum, or any foreclosure suit now pending to foreclose the so-called third mortgage bonds of said Pacific Railroad Company, and in the event that I, or anyone for me, become the purchaser thereof, then I will agree to sell and convey said railroad as follows:
' “If at any time within six months from the date of such purchase by me you shall organize a successor company under the laws of the State of Missouri, and said company shall pay to me all sums of money (with interest thereon at the rate of seven per centum per annum from the date of my payment of the same) which I shall have expended in procuring or making-good the title to said railroad, and shall further pay to me all sums of money, with interest of seven per cent., that I may have expended, up to the date of the said purchase by said successor company organized by you, in the care, custody, control, and running of said rail *244 road, over and above the income received by me therefor, then I will convey to you or the said successor company, organized by you, the said- railroad purchased by me at said foreclosure sale, upon the further condition, however, that said successor company shall, immediately upon the making of the said conveyance to it of the said-railroad, make and issue its bonds, maturing in thirty years from their date, in sums of $1,000 each, and to an amount not exceeding $4,500,000, bearing seven per cent, interest, payable semi-annually, in lawful money of the United States, the first installment of interest to be payable in May 1, 1877, which said bonds are to be secured by a mortgage, or deed of trust, on the said railroad and franchises, which shall be conveyed by me to said successor company.
“ Of the said $4,500,000 new bonds, $2,431,000 shall be delivered to me or such associates as I represent, for their face value, and eighteen months’ interest of 2,200 third mortgage bonds, which I now hold. The remainder of said new mortgage bonds, viz., $2,069,000 shall either be given in exchange for a like amount of old third mortgage bonds or outstanding ‘improvement’ and ‘ income’ bonds, or the same may be sold upon the best available terms for the interest of the stockholders of the said successor company, and the proceeds of the sale applied to the payment of the money that may be required to purchase or pay any outstanding third mortgage bonds not represented by me, or any of the outstanding ‘ income ’ or ‘ improvement ’ bonds.
“It is understood that I may, if I desire, advance or loan the amount necessary to purchase any of the outstanding third mortgage bonds, or income or improvement bonds, above mentioned, and to hold the said $2,069,000, or a proportionate part of them, as collateral to secure 'the advances and interest thereon, .at seven per cent., so made by me. If there are any *245 bonds remaining after accomplishing the above object, they are to belong to the said successor company.
“The said new mortgage, and the bonds issued thereunder, shall be made under the advice of counsel learned in the law, and shall give as ample and full security for the payment of the bonds secured thereby, as can be given upon the premises mortgaged or conveyed to the said successor company. And if it can be lawfully done in the articles of association of said successor company, or otherwise, then the holders of said new mortgage bonds shall be entitled to ten votes at all stockholders’ meetings of said successor company for each bond so held by them.
“ The. said successor company shall issue a capital stock to the extent of $7,200,000, and you are to transfer the said stock to such of the present stockholders of the Pacific Railroad of Missouri as shall have co-operated with you, and to such as you think have any legal or equitable claims upon you for such stock; in both cases the holders of said Pacific Railroad stock are to transfer the same to the- successor company, or . to the trustees for their use. Any stock remaining in your hands, after satisfying the claims upon you, as above, shall belong to the successor company, and shall by you be transferred to said company as unissued stock.
“All expenses of the various litigations shall be paid from the earnings of the railroad, either by the receiver or by the successor company.
“My services and expenses shall be paid by the successor company, and your services, and expenses shall be paid by the successor company, or you may sell sufficient of the capital stock remaining in your hands, which would otherwise be returned to the successor company, to repay yourselves for your services and expenses.
“I wish it understood, that you or either of you, *246 or any other person at your instance or solicitation, may purchase said premises at said foreclosure sale, and I will do nothing to prevent competition, orto prevent others from bidding “at the sale ; I simply agree, that if the premises 'are sold in the said foreclosure suit, and I become the purchaser, that I will sell the same to you, or the successor company organized by you upon the terms above set forth. But I expressly stipulate, that unless all sums of money which I may have expended in the purchase of said railroad as aforesaid, and all sums which I may have expended.for.and on account of the same as aforesaid, shall be paid to me by you, or by said successor company, within six months after the date of mybecoming the purchaser of said railroad, then this agreement is to be null and void, and there shall be no right of purchase by you, or by any company organized by you of the said railroad.
“Time is the essence of this agreement, and the payment to me of the said sums of money laid out and expended by me as aforesaid with interest within the said period of six months is a condition precedent to your right or to that of said successor company, to purchase said railroad from me in the event that I become the purchaser thereof as aforesaid.
“St. Louis, March29, 1876. C. K. G-abbisou.”
The substantial part of this “ letter” is that the defendant, on a specified contingency (viz., should he purchase the railroad at the foreclosure sale), then, on the performance of certain acts by the plaintiffs, he agrees to “sell and convey” the railroad to them or to a successor railroad company organized by them. The “successor company ” is thereupon immediately to issue its bonds to a specific amount, to be secured by mortgage. A certain number of these bond are to belong to the defendant. The plaintiffs are to *247 become the holders of stock. The amount of stock issued is to be $7,200,000. The plaintiffs are to have enough to satisfy their claims, and the balance is to belong to the company. In other words and briefly, the scope of the transaction is to give bonds to the defendant and stock to the plaintiffs—practically all the stock in the road.
The defendant makes a preliminary criticism upon the whole trsnsaction. He argues that it is in substance no contract, as it depends wholly on the defendant’s will whether he will acquire the road. The theory seems to be that the defendant, being under no obligation to buy, there is no binding contract. Reference is also made in this connection to the fact that it is expressly provided in the “letter” that the plaintiffs may bid at the foreclosure sale, and that the defendant will do nothing to prevent, competition. The argument thus is, there is nothing to bind the defendant ; there is nothing to prejudice the plaintiffs. The whole field of purchase is as open to the them as to the defendant.
All this, in my opinion, does not prevent the letter from being a binding contract, assuming that there was a sufficient consideration. It falls under the head of a conditional contract—a contract with a condition precedent.
Contracts of this kind are common in law. One that is well known in commercial law is a sale of goods “to arrive.” If the goods arrive in port, they are sold ; otherwise not. The only distinction perceivable between this contract and the’ one at bar, is that while non-“ arrival ” may depend on an accident, non-purchase here depends on the will of the de. fendant. This would, however, seem to be an immaterial cirumstance. In some of the “arrival” cases the transaction was confined to goods shipped on the seller1 s account. Here the element of human, will is *248 introduced, for the seller can determine whether they shall be shipped on his. account or not. Still if they are so shipped the contract attaches and the transaction is valid (Vernedo v. Weber, 1 Hurls. & N. 311; Simon v. Braddon, 2 C. B., N. S. 324 ; Benj. Sales, 4 Am. ed. 1883, pp. 761, 762. So there maybe a contract on a condition that a third person shall do an act, as in Brogden v. Marriatt, 2 Bing. N. C. 473; Thurnell v. Balbirnie, 2 M. & W. 786.
It would be very strange and inconvenient if the law were otherwise. It is a frequent occurrence that a purchaser cannot obtain stocks or other like property without buying a larger amount than he desires. What is there in logic or law, to prevent him from contracting with other persons, that in case he buys the whole block of stock, they will take of him so much as he would like to spare? In such a case the. person supposed does not positively agree to buy. He leaves that open. What he does do is to bind himself that in the event that he purchases, the sub-purchasés from him shall take effect. All such arrangements I deem to be valid conditional contracts. The contract becomes absolute when the condition is performed. The only question then remaining is the Statute of Frauds.
The section on which stress is laid is the following (Rev. Stat., Part II., Chap. 7, Title I, Sec. 8; 2 R. S. 134, § 8 [3 Id. 7 ed. 2326]): “Every contract for the leasing for a longer period than one year, or for the sale of any lands or any interest in lands, shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, be in writing and be subscribed by the party by whom the lease or sale is to be made.”
It is assumed by the defendant that the “letter” of March 29,1876, is in substance and effect a contract for the sale of land. Adopting that conclusion for the *249 moment, I have to consider whether the New York statute is applicable.
Before considering the question, it will be useful to quote in full the corresponding section of the English ' Statute of Frauds—the so-called fourth section: il No action shall be brought . . upon any contract for the sale of lands, tenements, and hereditaments, or any interest in or concerning them . . unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing, and signed by the party tó be charged therewith, or some'other person thereunto by him lawfully authorized.’ ’
The seventeenth section of the English statute is also to be noticed : “No contract for the sale of any goods, wares, or merchandises for the price of £10 sterling 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 payment, or that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such contract,” etc.
Here, are three diverse forms of expression. In the fourth section (English) it is provided “ that no action shall be brought ” unless the statute is complied with ; in the seventeenth (English) no contract in violation of it shall be “ allowed to be good;” in the New York statute an agreement in contravention of its provisions is declared to be “ void.”
It is an obvious remark that it by no means follows as a matter of necessity that decisions upon one of these forms of expression shall be allowed to govern in construing another. The greater part of the discussion in the courts upon the question whether the Statute of Frauds is a rule of procedure or of substance, has been upon the fourth English section. The *250 controversy has been as to the meaning of the words “ no action shall be brought,” etc. These words came up for construction in the well-known case of Leroux v. Brown, 12 C. B. 801 (a.d. 1852). The facts are brief and well disclose the principle underlying them. It ■appeared that an oral agreement had been entered into in Calais, France, between the plaintiff and the defendant, under which the latter, who resided in England, contracted to employ the former, who was a British ' subject resident at Calais, at a salary of £100 per annum, to collect produce in France for transmission to the defendant in England—the employment to commence at a future day, and to continue for one year. It appeared that by the law of France such an agreement is capable of being enforced though it is not in writing. The defendant, however, insisted that although the contract was made and was valid in France, yet when an effort was made to enforce it in England, the English Statute of Frauds must be applied and all enforcement refused. This seemingly harsh, and inequitable doctrine was adopted and rested by the judges on the proposition that the statute supplied a rule of procedure—in this case a rule of evidence— and that the rules of evidence are to be sought in the law of the place where the action is brought. Thus Maulé, J., on page 805, said : “ The fourth section of the Statute of Frauds entirely applies to procedure.” Jervis, Ch. J., on page 824, in like manner declares that the fourth section applies not to the solemnities of the contract but to the procedure. He contrasts the words of the fourth with those of the seventeenth, and lays much stress upon the special words, “No action shall be brought.” Maulé, J., again recurs to the subject on pp. 826, 827, and further says, “ We have been pressed with cases which, it is said, have decided that the words ‘No action shall be brought’ in the fourth section are equivalent to the words ‘ no contract *251 shall be allowed to be good ’ which are found in another part of the statute. Suppose it had been so held as a general and universal proposition, still I apprehend it .would not be a legitimate mode of construing the fourth section to substitute the equivalent words for those actually used. ... It may be that for some purposes the words used in the fourth and seventeenth sections may be equivalent; but they clearly are not so in the case now before us. . . . Dealing with .the words of the fourth section as we are bound to deal with all words that are plain and unambiguous, all we say is that they prohibit the courts of this country from enforcing a contract made under circumstances like the present—just as we hold a contract incapable of being enforced where it appears upon the record to have been made more than six years. It is parcel of the procedure, and not of the formality of the contract.”
These last words show the theory of the court. That section of the statute does not enter into the contract at all—not even into its form. It is as much a rule of evidence as the old English rule, that a note complete in all respects could not be read in evidence without a stamp.
It is impossible not to perceive, in reading the opinions in this case, that the court proceeded solely on the special phraseology of the fourth section, and that the theory of the decision has no bearing upon the words of the seventeenth section. The later decisions in England show this to have been the judicial theory. This matter came up for consideration in this very year (1883). Adams v. Clutterbuck, 10 Q. B. Div. 403. The court in this case (which will be considered more at large hereafter), in commenting on Leroux v. Brown, at p. 406, says, “ that it turns on the provisions of the Statute of Frauds, the very *252 language of which indicates that it is part of the lex fori, and. not of the lex loci.”
The whole subject, as far as this section is concerned, is thoroughly considered in the very recent case of Britain v. Rossiter, L. R. 11 Q. B. Div. 123, by the court of appeal, composed of very able men, Beett, Cotton, and Thesiger, Lords Justices.
This case was one arising under the fourth section of the statute, and the question was whether the contract was void under that section. Carrington v. Roots, 2 M. & W. 248, and Reade v. Lamb, 6 Exch. 130, were cited to that effect, as they were also in the present case on the argument. The court, however, disposed of the remarks in those cases by stating that they were only dicta, unnecessary to the decision of the case, pp. 128, 130, 132 of the report. They then proceeded to hold that under the fourth section the contract, at all events, was not void. Thesiger, who wrote the most satisfactory opinion, said onp. 132, “it is impossible to say that the words of the statute make the verbal contract void.” The court added that the words only provided “ that no action should be brought,” etc., that the contract existed as a true contract, though not enforceable by a court of justice. Leroux v. Brown, supra, was cited with approval. Snelling v. Lord Huntingfield, 1 Cromp. M. & R. 20, ms referred to as containing a correct exposition of the law. This case also holds that though the contract cannot be enforced for want of a writing under the fourth section, still the oral contract is a true and existing contract. Kleeman v. Collins, 9 Bush (Ky.) 460 , is a case upon a Kentucky statute, corresponding with the English fourth- section, and agrees with Leroux v. Brown, supra.
Thus far for judicial decision. The most approved text writers take the same view, and carefully distinguish between the fourth and the seventeenth sec *253 tion. Mr. Pollock in Ms excellent work on contracts (p. 574, 2d. English ed.), discusses the whole subject with much care and thoroughness, and while he states that the fourth section applies to the remedy, and disapproves on p. 575 of what he calls the dicta in Carrington v. Roots, supra, and in Reade v. Lamb, supra, making contracts under this section void, says this about the seventeenth section: “ The effect of the seventeenth section is generally understood to be different. It does not only prevent contracts for the sale of goods of the value of £10 or upwards, from being sued upon under the conditions specified, but enacts that they shall not ‘be allowed to be good,’ and although it has never been actually so decided, it is the accepted opinion in this country, that where the conditions (of that section) are not satisfied, the agreement is absolutely void” (574, 575). Professor Holland, of Oxford University, in his comprehensive work on “ Jurisprudence,” takes the same view on p. 207, where he says : “The English Statute of Frauds renders void any contract for the sale of goods for the price of £10 and upwards, unless there be a part delivery,” etc. The same statute, though it does not avoid the contract, allows no action to be brought unless it has been written down and signed, as for example, when it relates to an interest in land. Mr. Parsons has the same general view in his work on “ Contracts,” vol. III., 5th ed., pp. 56, 57.
It would appear, accordingly, that the decisions in England on th & fourth section of the Statute of Frauds depend upon the peculiar language of the statute. The statute affects the remedy simply and solely because it so provides in equivalent terms by stating that “ no action shall be brought unless the contract shall be in writing.” It is now proper to consider the decisions upon the terms of the seventeenth section.
That séction provides that a contract of sale of goods *254 “ shall not be allowed to be good,” unless the statute is complied with. Does this mean that the contract shall be absolutely void if not written 2 An ingenious suggestion has been made by Mr. Browne in his work on the Statute of Frauds, that this means good for the purpose of bringing an action upon it. This would make the words substantially equivalent to the fourth section (Browne Stat. Fr. §115). This construction seem to be adopted by the supreme court of Massachusetts, in the case of Townsend v. Hargraves ( 118 Mass. 325, 334 ). With all due respect it seems to me that such a mode of interpreting a statute is inadmissible. It interpolates words not found in it, and violates a settled principle of statutory construction which is to confine the meaning to the words used. The remarks of Maulé, J., already quoted in Leronx v. Brown, are very pertinent in this connection. I cannot follow such a method of interpretation. I must think that the words “shall not be allowed to be good,” mean that an unwritten contract within the statute is absolutely void.
Authority is not altogether wanting upon this point, the precise question having been adjudicated in Upper Canada, where the seventeenth section is enacted ; in so many words. Greene v. Lewis, 26 Upper Canada (Q. B. 618, a. d. 1867). The facts in that case were' that a contract for the sale of goods to the plaintiffs at a certain price, payable in Toronto, was made by the defendant at Chicago through his agent there. The goods were to be shipped by the Grand Trunk Railway from Chicago. No sale-note was signed by the broker who negotiated the sale before the action was brought. It was proved at the trial that the seventeenth section of the English Statute of Frauds was not in force in Illinois; and this is still the law there. The court held that the contract being valid in Illinois, where it was made, could be enforced in Canada, *255 though not in writing. The court said, “ We have seen no case in which, if the parties had bound themselves by a contract, lawful and obligatory in the place of making, its performance in another country would be refused, because certain solemnities, required by the law of the latter had not been observed in the original contract. If the parties have once bound themselves lawfully for any universally lawful purpose, such as in this case for the sale of goods at a fixed price, it appears to us that our courts must hold them bound here as they would be in the place of the contract.” The court then proceeds to distinguish the case under discussion from that of Leroux v. Brown, supra, making that turn upon the peculiar form of expression in the fourth section.
I regard this as a well-reasoned case, and very strongly in favor of the plaintiffs in this cause. The English court of exchequer in Noble v. Ward, L. R., 1 Exch. 122, said: “The expression £allowed to be good ’ is not a very happy one, but whatever its meaning may be, it includes this at least, that it shall not be held valid or enforced,” and held that a contract within its terms was not good for any purpose, p. 117.
To the same effect is Houghtaling v. Chapin, 20 Mo. 563 (a.d. 1855.). It is conceded by one of the counsel that the opinion in this case was delivered by one of the ablest of the judges that have adorned the bench of Missouri. Judge Scott, in his opinion, distinguishes between the words of the fourth and the seventeenth section, holding under the latter, that a contract for the sale and delivery of goods which is so completed as to be valid in the State where it is made will be enforced in Missouri, unaffected by the English seventeenth section (sixth section of Missouri statute). Leroux v. Brown, supra, was cited in that case and distinguished. The case of Smith v. Smith, 14 Vt. 440, 446 , makes the construction of language equivalent to *256 the fourth section of the English statute turn upon the form of words used.
It is true that the Massachusetts cases in recent years hold that the words “not good and valid,” in the Massachusetts statute are equivalent to the words “ not allowed to be good” in the English seventeenth section, and that the latter words mean not good for the purposes of bringing the action, and that accordingly these words only affect the remedy on the contract (Townsend v. Hargraves, 118 Mass. 336 ; Norton v. Simonds, 124 Id. 21). If the court had reached the conclusion that the Legislature intended the words in their usual sense, it would undoubtedly have arrived at the same conclusion as the Upper Canada and Missouri courts. The difference between the courts is merely one of interpretation in the use of words not altogether plain in their meaning, and possibly admitting with some plausibility of an artificial or non-natural signification.
I think it proper to add that Mr. Justice Story has in several instances lent the weight of his great authority to the view that the seventeenth section 'makes the contract void if its requirements are not obscured. He first raised a query upon the point in Reimsdyk v. Kane, 1 Gall. 641 , 642 (a.d. 1813). In Low v. Andrews ( 1 Story, 38, 42 , a.d. 1839), he had definitely reached the conclusion in his own mind that the statute (seventeenth section) did not apply in the United States circuit court of Massachusetts to a contract of sale of goods made in France.
The result of this investigation appears to lead to the conclusion that the correct construction of the English seventeenth section is that it goes to the root of the contract when made in England, but has no effect whatever on a contract made in another State or country where it appears that a different statute exists, or that there is no statute at all. This qualification *257 must be made, for it is an open question whether it .can be assumed by the court in an action in one State, that the Statute of Frauds of that State is applicable to a contract made in another State where no proof is made that there is any statute of this kind in the latter State (Wilcox v. Green, * 72 N. Y. 17, 22 ). It is now time to consider more directly the exact provisions of the Hew York statute. It declares that a contract for the sale of land not “ expressing the consideration” shall be “void.” This-word “ void” is of infrequent occurrence in statutes of this kind, being found only besides in the case of a few of the Western and Southern States.
Can it fairly be said that a contract declared “ void” by statute still subsists as a contract, and that the only effect of the statute is to deprive a party of a remedy? Is such a word as “ void” a mere word of evidence ?
I think not. I regard the word “void” as a word of substance, and. not as a mere word of procedure. In that view, the statute cannot, by accepted rules under the “Conflict of Laws,” be applied to contracts made in other States, and accordingly not to the present case. The following arguments seem to me to affect this subject and to be decisive of it. (1) This is the natural meaning of the word “void” in a statute: “ The words of a statute, if of common use, are to be taken in their natural, plain, obvious and ordinary signification and import .... The current of authority at the present day is in favor of reading statutes according to the natural and most obvious import of the language, without resorting to subtle and forced constructions for the purpose of either limiting or extending their operation” (1 Kent’ s Comm. 463, star p. 12th ed. ; Waller v. Harris, † 20 Wend. 561 . In *258 accordance with this general principle, it was declared in Mallan v. May, 13 M. & W. 511, to be the ordinary-rule • of construction that words were to be construed according to their strict and primary acceptation, unless from the context of the instrument and the intention of the parties to be collected from it, they appear to be used in a different sense, or unless in their strict sense they are incapable of being carried into effect. Following this rule, the word “void” should receive its natural signification. It was the apparent object of our Legislature to avoid the verbal distinctions of the English statute and to place all the cases in the statute on the distinct and intelligible proposition, that a contract in derogation of its provisions should be utterly void and of. no effect considered as a contract.
If the Legislature had a distinct purpose to declare the contract void, it is difficult to see how any other words could be employed The word “void” is used in a considerable number of our statutes, as in the usury ' law, the law against betting and against gaming and other acts deemed to offend against public policy. It is believed that no decision can be found that these statutes simply affect the remedy upon the contract, i They are of its very substance and life. The correct principle seems to be that the New York Statute of Frauds does not merely affect procedure, but is a great rule of public policy governing all contracts made and to be performed within the State. This doctrine is maintained by the supreme court of the United States in Mahan v. United States, 16 Wall. 143 .
(2) The rule of Leroux v. Brown, supra, ought net to be extended to new cases not within the precise scope of this decision. It is a harsh rule and has met with adverse comment. It is a highly inconvenient rule in this country. Its sole effect is to deny to suitors in a sister State a remedy which they would *259 have in the State where the contract is made. Some of the distinctions of the New York Statute of Frauds are quite fine and perplexing. One is, that in the purchase of goods over $50 in value, if the contract is to be withdrawn from the operation of the statute by , the payment of a portion .of the price, such payment must be made at the time the contract is entered into. This is nob the general rule in the statutes of other States. If the construction claimed by the defendant in this case is to prevail, a farmer who sells wheat in Dakota to a New York buyer would have to know this intricate rule of New York law in order to hold the purchaser to his contract in our courts. So,Jay parity of reasoning, if he should happen to sue him in some third State having special rules, in making his contract he must have conformed to the laws of that State. If, on the other hand, the opposing rule should prevail, the Dakota seller would only have to know the laws of his own State in order to hold the buyer elsehere. I think that it deserves very serious consideration in our appellate courts, whether Leroux v. Brown, supra, ought not to be discarded altogether as highly technical and inconvenient. It is, of course, my duty, acting as a judge of first instance, to follow it in eases where it is distinctly applicable, but I do not feel willing to go further, and to extend its principle to new cases.
(3) The New York decisions, carefully considered, are in favor of the view that the contract under the present statute is wholly and absolutely void. I was strongly pressed on the argument with the case of Justice v. Lang, * 42 N. Y. 593 ; 52 Id. 323 . The defendant insists not merely that the point decided in *260 that case should be adopted as law, but that the reasoning of the judge who wrote the opinion should be followed.
The point actually decided in that case was that if one of the parties to a contract within the New York statute subscribed the instrument containing it, he would be bound by it although the other did not. The course of reasoning, in part, by which the judge arrived at this conclusion, was that the Statute of Frauds was a rule of evidence, pp. 501, 522. This was not the whole of his reasoning. Much stress was laid upon the fact that the statute expressly stated that it was to be subscribed by the party to be charged, from which the judge inferred that it need not tie subscribed by both parties' as a means to charge the one who actually subscribed. It seems as though that was an intelligible proposition. It might be put in this form: while the statute requires the whole contract to be in writing, it does not necessarily require it to be authenticated by the subscripton of both parties. The law of mutuality usually prevailing in contracts may have an arbitrary modification by the statutes, which, like many other statutory provisions, cannot be vindicated by any course of reasoning. When the judge asks us to go further and to say that the existing Statute of, Frauds throughout all its branches supplies merely a rule of evidence when the word “void” is blazoned all over its provisions, we may-safely decline to follow him. The present case, be it observed, is a new one, and quite unlike the question in Justice v. Lang, not referring at all to the subscription, but to the body of the contract itself. Lord Tewtebdeit appears to have stated the rule as to the binding effect of former decisions correctly in this way: “I do not think the want of a satisfactory reason to be a sufficient ground for overturning a rule grounded upon the authority of decisions and of a practice long continued. But when *261 a question arises whether such a rule shall be applied to a new case, I think the want of such a reason authorizes me to say that it ought not to be so applied, if any distinction between the.cases can- be observed.” (7 Barn. & Cress. 195, 196.)
Something more than this must be said of the case of Justice v. Lang, supra. When the case came up a second time before the present court of appeals, there was evident dissatisfaction with the theory of the decision. The great difficulty with the case was that the decision amounted to the proposition that a promise void in law made by one party was a good consideration for the promise made by the other party ( 52 N. Y. 825 ). The first decision was followed on the second appeal, not because it was right but because it was res adjudicóla between the parties to the action. Still, Justice v. Lang is no doubt law as to the precise point decided by it (Mason v. Decker, * 72 N. Y. 598 ).
Dismissing, then, Justice v. Lang from consideration as not governing the present case, we come to a series of later decisions which appear to give the natural meaning to the statute. One of the earliest of these cases is Dung v. Parker † ( 52 N. Y. 494 ). This is an instructive case. In that case, the defendant falsely represented himself as being an agent for a land owner to lease land. He leased it orally for two years, in violation of the statute, to a tenant who put up fixtures and made other expenditures on the faith of the lease. The owner having repudiated the transaction, the lessee sued the professed agent for damages. It was conceded that he would have had a good cause of action if the lease had not been within the statute. The court held that the professed agent was not liable, on the ground that even if he had had authority to *262 . lease, the oral lease would have been void. The court said, “ A contract void by the statute is void for all purposes. It confers no right and creates no obligation, and no claim can be founded on it as against. third persons. It cannot be enforced directly or indirectly. The plain intent of the statute is that no person shall be subjected to any liability upon any agreement” within its terms.
In Bice v. Manley* ( 66 N. Y. 87 ) Dung v. Parker was distinguished, on the ground that in the first-named case there was a fraud, and that the invalidity of the contract could not be resorted to as a shield to, avoid the consequences of a fraud. .In Wheeler v. Beynolds† ( 66 N. Y. 227 ), the proposition is maintained that a contract not authorized by the statute is void in a court of equity, as well as in law. The invalidity of the contract is also maintained in Roe v. Barker ‡ (82 Id. 431).
The whole question came up in a decisive form in the case of O’Neill v. New York Central R. R. Co., § 60 N. Y. 138 . It was there held that the defense of the Statute of Frauds was not confined to the parties to the contract. A common carrier, for example, sued by the purchaser under a contract void by the statute, for the loss of the goods, could set up in his defense that no title passed to such purchaser. This proposition would seem to dispose of the question. If the invalidity of the contract can be set up in this collateral way, it would seem to be absolutely void (Pitney v. *263 Glen Falls Ins. Co., * 65 N. Y. 6 ; Ely v. Ormsby, 12 Barb. 570 ; Hicks v. Cleveland, † 48 N. Y. 84 ; Young v. Blaisdell, 60 Me. 72 , are to the same effect). Mahan v. United States, 16 Wall. 143 , agrees with this view, under the words of a statute where the contract was declared “ not good or valid.” Consistently with this view, courts of chose states that decide that their own form of the statute affects the remedy, also hold that a third person or stranger cannot take advantage of it. (Townsend v. Hargraves, 118 Mass. 366 ; Norton v. Simonds, 124 Id. 21; Richards v. Cunningham, 10 Neb. 417 ; Davis v. Inscoe, 84 N. C. 396 ; Chicago Dock Co. v. Kinzie, 49 Ill. 289 ).
The only case, so far as appears, in which this particular question has been before a court sitting in this state is Allen v. Schuchardt, 1 Am. Law Reg. N. S. 14. This cause was in the United States circuit court for the southern district, before Nelsoet, J. The facts, were that an oral contract for the sale of goods was-made in Rhode Island, where the Statute of Frauds on that subject does not prevail, and it was sought to be enforced in New York. The court held that the New York Statute of Frauds did not affect the transaction, and that the contract could be enforced here. The opinion is very brief, and it does not appear from the report that the Statute of Frauds was pleaded, though that may reasonably be assumed. The case was affirmed on appeal to the supreme court of the United States, no mention being made in the opinion of that court upon this point.
It appears from the examination of the record in this cause in the circuit court, that the action was in assumpsit, and that the “general issue” was pleaded, and there was no specific reference in the plea to the Statute of Frauds. Still under the general issue in this *264 class of cases, advantage might be taken by the defendant of the Statute of Frauds under the plea of nonassumpsit (Gould Pl. 307, 4 Am. ed. ; 1 Chitty Pl. 500, 16 Am. ed. ; Browne Stat. Fr. § 411, and cases cited in note 3 to that section). The case was appealed to the supreme court of the United States on a bill of exceptions. The only exceptions noted were to “a refusal of the circuit judge to charge in accordance with the requests of the defendants solely on points concerning an alleged warranty in the sale. I regard the case simply as a circuit court decision, and yet entitled to much weight owing to the learning and ability of the eminent judge who rendered it. I also happen to know from a conversation with Judge Nelson, that he considered the point a highly important one, and that he had formed deliberate opinions concerning it.
I now proceed to state some special reasons why the New York Statute of Frauds, even though it might be held to be properly applied to some contracts made abroad, ought not to be extended to interests in land created under executory contracts for the sale or conveyance of land situated in another State or country: it is conceded by counsel on both sides that if any interest in land was created by the “letter” it was of an executory rather than of an executed nature.
Assuming, for the moment, the view most favorable for the defendant, that this was a contract for the sale of land situated in Missouri, made there, to be enforced there, and valid there, as soon as it was made, by ordinary rules of law, it created a trust in the land, and nothing more. This trust, it is to be assumed, was enforceable in the Missouri courts if the defendant remained there.
The general rule of law undoubtedly is that all questions as to the burdens and liabilities of real estate situate in a foreign country or another State depend *265 upon the law of the country where the real estate exists and upon nothing else. It may perhaps be questioned by some whether this rule is applicable to trust interests as vrell as to strict legal estates, for it may be plausibly argued that a trust is a matter of personal confidence, and therefore does not depend upon locality. The authorities upon this point are not very clear, and are certainly not very numerous. It must, accordingly, be considered upon principle.
It would seem that the same general rule should apply to trusts as to legal titles, so far as the subject under consideration is concerned. Lewin defines a trust to be “ A confidence reposed in some other, not issuing out of the land, but a thing collateral annexed, in privity to the estate of the land and to the person touching the land, for which the cestui que trust has no remedy but by subpoena in chancery,” p. 15. The words “annexed in privity, etc.” make it a burden upon the land as to any one in privity with the trust, as the present defendant xmdoubtedly is. One way of stating a trust is that it is a claim upon the land in the nature of a lien or superior right which may be sometimes enforced specifically, where there is a contract to that effect, or at other times may be worked out by a sale and payment of enough of the proceeds to the cestui que trust to satisfy his claim or equitable lien. This last remedy would apply to a vendor’s lien or implied trust, as in Day v. Roth, 18 N. Y. 448 . The same rule has been applied to a vendee under a contract of sale. He has .alien for payments made, and if the vendor refuses to give a deed in violation of the contract, the vendee may have a sale to satisfy his lien (2 Washb. Real Prop. 4 ed. 98, 99).
The point was really decided in Waterhouse v. Stansfield, 9 Hare, 234. The facts of that case were no stronger than in the case at bar. One Moody agreed *266 by contract to purchase from one Grant real property in Demarara for a specified sum, and subsequently borrowed money, mortgaging the • contract, and then, getting into pecuniary difficulties, mortgaged it to another person. The mortgagees engaging in litigation, before the legal title was obtained, Moody the contractee became bankrupt. The assignees in bankruptcy completed the legal title, sold the land and transmitted the proceeds to England. Then Grant appeared upon the scene and claimed to enforce a trust against the proceeds, resting his claim upon the contract. Grant’s counsel maintained, as is claimed in the case at bar, that whilez the coney anee must no doubt depend for its validity upon the law of Demarara, yet. that the contract was of force in England as creating a trust, and as affecting the conscience of Moody or his assgnee, the court of England acting in personam, and further insisted that as the purchase money was within the jurisdiction of the court it ought to be applied for and accounted for according to English equities. The court held that the interest in the proceeds was in substance and effect an interest in the estate itself, and that no rule was more universal than that the lex loci rei sitce governs the disposition of the estate, p. 2S9. It was also held that whether there was an equitable lien or not, was a question of Demarara law.
This case certainly decides that if lands be situated in another State, if no trust arises there by means of a contract, it cannot arise here. It does not precisely decide that if a trust does arise there it can be enforced here. If, however, resort must be had to a foreign law to determine the existence of a trust, the “comity of nations” or of states would seem to require that if the trust existed abroad we should enforce it, if there were no positive statute or rule of law opposed to it. So, in the well-known case of Penn v. Lord Baltimore, 1 Ves. 444, the Lord Chancellor (Hardwicke) enforced *267 in England a contract between the parties for ascertaining the boundaries of Maryland and Pennsylvania. The foreign contract will be enforced, not against the land strictly, but in personam and by process of contempt.
In Harrison v. Harrison, L. R. 8 Chan. Appeals, 342, the question arose as to whether the English court would enforce, against parties within the jurisdiction, English equities against Scotch land. It was held that it would not, in general, since “ against the real estate in Scotland the courts of England hate no jurisdiction at allf p. 349. “ Any jurisdiction which they can exercise as to the real estate in Scotland can only be through the medium of some personal equity attaching to the owner in Scotland of that real estate.” As the court found there was no such personal equity, they dismissed the case for want of jurisdiction. The court in this case was composed of very able men, Lord Selbourne and the Lords Justices James and Mellish.
Mr. Westlake, in his able work on the Conflict of Laws, devotes paragraphs numbered 98 and 99 to this subject. In paragraph 98 he inquires, “What [is the rule] if any law, like the English, so subdivides the property into an equitable and bare legal one that the former is transferred by the contract of sale, yet so as to leave room for the suit of specific performance in order to obtain the transfer of the latter ? A question arises, How must the contract be evidenced in order that the equitable dominion may pass by it from the moment of sale % . . . We shall hereafter see that in the general conflict between the lex loci contractus and lex fori on solemnities, contracts must ordinarily be fortified by all the proofs required by either, since they will otherwise fail, either by the lex loci contractus as never having been originally binding, or by the lex fori as not having been originally evidenced. The latter part of the proposition is strictly applicable *268 to our case, with the observation that in it the lex fori is the lex situs, since it is only in the situs that the question whether the land is bound can be tried, and thus we conclude, for example, that English land cannot be transferred in equity by a foreign contract which does not comply with the English Statute of Frauds.”
This • principle would relegate the whole subject of the existence of the trust in this case to the law of Missouri, since, according to this author, Missouri is the only State where the question whether the land is bound can be tried.
A still further question is raised by Mr. Westlake in the 99th paragraph. He goes on: “ But is the former fact equally applicable, so that English land could not be transferred in equity by a contract satisfying that statute, but not also satisfying forms imposed by the lex loci contractus ? I apprehend that the reason here fails, for though we grant that a person not bound at the time,¡ and in the place of contracting, . cannot become so ex post facto by the accident of the former, yet the land in our case is not bound through any binding of the person, but by an independent operation of the lex situs on the right of property. We have seen that all dismemberments of the property in land are themselves immovable subjects of property, and as such alienated by the forms of transfer prescribed by the lex situs. The more obvious instances are dismemberments in duration, as successive estates, or in value, as charges, but the equitable dominion, entire both in duration and value, yet severed from the legal dominion, is but another kind of dismemberment, and the contract of sale, evidenced according to the law of the situation, is the appropriate form of its conveyance, and as such immediately and necessarily efficacious. Hence also it appears necessary to conclude that even the remedy by specific performance could be pursued *269 in our (English) chancery in such a case, notwithstanding the absence of the form of contracting required in he place of the contract. If not entitled ex contractu to a conveyance of the legal estate, the purchaser would at least be entitled to it as equitable owner, and this appears to be the opinion of Burge,” citing 2 Colonial and Foreign Law, 865,
This view, though expressed in a style somewhat obscure and rugged, is, in brief, that a contract, no matter where made, if complying with the forms of the State where the land is situated, makes the contractee dt least an equitable owner. It conveys the equitable estate to him as completely as a regular form of conveyance does the strict legal title, and the same reason exists for recognizing in another forum the equitable as well as the legal estate. All that a foreign court has to do, is to explore the law of the State where the land is situated, and to see whether a trust is created there. If satisfied on that point, nothing remains but to follow the “ comity of nations,” and to enforce the trust in personam against any one within its jurisdiction bound to perform it.
For the purposes of .this branch of the case, it is not necessary to go so far at this stage of the opinion as this author does, for the contract was both made in Missouri and to be performed there. I think that the reasonable view is that the Statute of Frauds in each State refers, as a matter of construction, only to the land situated in that State, as if those words had been set forth in the statute. It certainly must mean that as to conveyances. Why not as to executory contracts, so far as they create an interest in land % From that point of view, Mr. West-lake’s theory would be clearly correct. This point will be more fully elucidated when the oral contract is hereafter discussed.
Much practical inconvenience would Aoav from the *270 adoption of the theory claimed by the defendant. A man has entered into a contract in Missouri, which imposes upon him a conscientious obligation concerning his land. This obligation is, according to accepted principles of law, binding upon him in all places where he may be subsequently found, and where a court of equity exists. Under a technical, narrow construction of the Statute of Frauds, the duty cannot be enforced in a State to which he may have perhaps withdrawn for the purpose of evading it. The man thus has, in law, a territorial conscience—a conscience in Missouri, but no legal conscience in New York, and a reviving conscience perhaps in some other State, where there is no Statute of Frauds, or no such straight-laced construction of its terms. Such a doctrine confounds sound distinctions, and reduces equity law to a barren technicality. When the question is new in a State, as this is here, a judge may well pause before he gives his assent to a doctrine so destitute of correct moral sentiment, and so abhorrent to a philosophical administration of justice.
On the whole, I think that the New York Statute of Frauds is applicable in no respect to this “letter,” and particularly not to that aspect of it which might tend = to create an interest in the real estate to which the -• “letter” applies.
Division III.
I propose now to consider this subject on the hypothesis that the New York Statute of Frauds is applicable, and then ascertain whether the case falls within the statute. In other words, is this a “contract for the sale of land or any interest in land, etc.”
It may be well enough to refer to the well-settled rule of law, that contracts may almost, without exception, be made orally, unless the Statute of Frauds requires them to be in writing. To this proposition, *271 land is no exception. Abolish the Statute of Frauds and other kindred statutes, and every interest in land known to modern law.except an incorporeal hereditament may be created by word of mouth. Accordingly, it is not enough to bring this contract within the eighth section of the statute to show that it concerns an interest in land. It must, in substance, be a sale. A sale may include an exchange; but unless the transaction be in substance and spirit a sale, it is nob within the section governing the creation of executory interests in lands and may be made orally.
The question then is, was there a contract of sale in the present case % In order to have a sale, there must be a vendor and a vendee, and a thing or subject matter of sale. These are not present in this case.
(1) I do not regard the promise of the defendant to purchase at the foreclosure as a contract for a sale to him by the master in chancery within the statute. He was not by this contract bound to purchase. If he had definitely agreed to buy, it might become material to inquire whether the statute reached it. Thispoint will be presented under the modified or substituted oral contract, and will be considered in that connection. (2) I think it clear that the proposed successor company cannot be regarded as a vendee. It advances no consideration, and is merely an ingenious piece of machinery to carry out a plan for the mutual ^benefit of the contracting parties.
In order that a clear idea of this point may be obtained, it is necessary to recall for a moment the relations of the parties when the contract was made. The defendant was substantially a mortgagee, having the control of the foreclosure as he had the apparent ownership of a majority of the bonds. These bonds were, so to speak, “off color”—they were of doubtful-validity and válne. The plaintiffs, though not mortgagors in the strict legal sense, held under the mort *272 gagor, and would be deprived of their interest if a foreclosure took place. It was of the highest importance to them to be protected if a foreclosure occurred, and to still remain as nearly as possible in their original position. If this could happen, a foreclosure might be of advantage, as they would become disentangled from the moribund “Atlantic.” It was in turn of equal importance to the defendant to have his bonds made valid and placed beyond the breath of imputation. The arrangement was thus for mutual benefit, and a substantial continuation of the existing relations of mortgagor and mortgagee fortified' by a consideration advanced by the plaintiffs. To accomplish all that was desired, the breath of life must be breathed into a non-existent corporation, and the railroad and its franchises transferred to it to hold for the parties interested. The fair test of this executory transaction is to suppose it to have been executed in all its parts, and then to analyze it. This mode of treating the question is sanctioned by a great judge (Blackburn) in Wright v. Stavert, 1 Ell. & Ell. 729.
Proceeding in this way, assuming that this agreement had been carried out, neither the plaintiffs nor the defendant would have had any interest in land. The defendant would not, for he would have owned new bonds secured by a mortgage, it is true, but still his interest in the mortgage would have been a continuation of what he already possessed. It would have been personal property (Kortright v. Cady, * 21. N. Y. 343; Trustees of Union College v. Wheeler, † 61 N. Y. 88, 118 ; Trimm v. Marsh, ‡ 54 Id. 599, 604, and other cases). If he acquired an interest in- land it would not be by a sale, for the corporation was but a fiction *273 created for his benefit. The plaintiffs would have had no interest in land. This point is thoroughly considered by a very able court in Watson v. Spratley, 10 Exch. R. 222 (a.d. 1854), in which elaborate opinions were written. The question came up there in its most abstract form, no corporation being interposed, but the title being vested in an individual for shareholders. It was a pure question of common law, and so treated by the court.
The facts of the case were, that Ah granted to B. a right to mine and carry away ore, minerals, metals, etc., on certain land. The legal right or title was thus vested in B. This person was really the instrument whereby the mining business was carried on by a number of capitalists who paid in their money, holding their capital in shares by agreement, depending on the amount of their contributions. These shares, by the agreement, could be sold, and the purchaser was placed in the position of the original shareholder. The expectation was that profits were to be made and divided among the shareholders according. to their respective interests. This-arrangement is called in England “the cost-book principle.” It is purely voluntary, and without corporate instrumentality. It was held that none of the shareholders had any interest in land within the Statute of Frauds; It had been well settled before this case that this was the correct theory of incorporated companies, created by Act of Parliament (Bligh v. Brent, 2 Y. & C. 294; Duncraft v. Albrecht, 12 Simons, 189). Here the question was, whether the rule was merely a statutory one, or whether it was a matter of common law, extending even to unincorporated companies. As put by Pabke, B., the rule of corporation law extends to all joint-stock companies where the persons seized of the realty hold in trust to use the land, make profits as part of the stock in trade, and then to divide those profits between the share- *274 holders whose only interest is in those profits, p. 344. Martin, B., discusses the whole subject from the same point of view at much length (see to the same effect, Hayter v. Tucker, 4 Kay & J. 243).
Gluided by these principles, I must hold it as a rule of the common law that the shares to be created for the plaintiffs under this “ letter ” were of the usual character of railway shares, and that whether the law of Missouri or New York is to prevail, they are not an interest in land within the Statute of Frauds.
(3) The only person having an interest in land under this contract is “ the successor company.” But how does this company acquire it ? not, under all the circumstances, by purchase. The transaction is not, as I regard it, a sale to the company, but a conveyance in trust. The company is nothing but a trustee for the defendant and his party, and for the plaintiffs and their party. Apply here again the test of Mr. Justice Blackburn, already stated, and inquire what would have been the position of “ the successor company ” if the title to the property had been conveyed to it, and it had refused to carry out the agreement. Would not any action to enforce its duty against it have been against it as a trustee % I „do not say that it is impossible for a company to be a vendee and also to be charged with a trust. What I maintain is, that under the circumstances there was n,o sale contemplated to the successor company. It was as far as the defendant was concerned, a conveyance to a trustee to pay a debt, and as far as the plaintiffs were interested, a conveyance to a trustee to enable the plaintiffs to make a profit from the busines of carrying goods and passengers by rail, subject to a prior claim against the property employed. There is at the utmost nothing in the “letter,” so far as the land is concerned, but a declaration of trust. The only section of the Statute of Frauds which can be applied, is that concerning *275 declaration of trusts in land. It is very doubtful, as will be shown hereafter, whether the statute on that subject can be applied to executory contracts. A doubt has even been raised whether a “ declaration of trust” can be made by way of anticipation and before a title has vested ; I do not rest at all upon the doubt. It is said in Jackson v. Moore ( 6 Cow. 706,726 ), that a trust may be declared either before or after a conveyance is made. The difficulty is whether, if there be an executory contract, it is necessary to declare the trusts upon which that contract is held in writing. This point may also be raised under the Missouri statute. An authority or two will be cited under that division of the argument.
If this “letter” be a declaration of trust, it would appear that the rule that “the consideration must be expressed” has no application. The conveyance of the land with the direction to use it in a specified way, and the acceptance of it by the grantee constitute the trust, and so the statute is satisfied. The statute only requires that the declaration of trusts shall be proved by any writing subscribed by the party declaring the same. The party declaring the trust in the case at bar is the defendant or the company whose title is taken. Assuming that he purchased at the foreclosure sale the trusts would at once attach, and on his conveyance to the company the trusts would continue. If there is any detail omitted in the letter which is necessary to carry out the intent of the parties, the court would under the doctrine “of executory trusts,” direct the needed thing to be done (Perry on Trusts, ch. 12; Lewin on Trusts, 144; Hill on Trustees, § 328). I am thus led to the conclusion that the letter does not come within any prohibition of the New York Statute of Frauds concerning sales or trusts of land.
There is one thing further to be noticed. Assuming that the contention of the defendant is correct, and *276 that the transaction is a sale of an interest in land, and that it is necessary to have the consideration expressed, is it not sufficiently expressed f The phrase “ expressing the consideration ” does not mean expressly stating it. It is enough if it be found or contained in the instrument by fair intendment. Is there enough in this “ letter” from which to infer the consideration? Remember that the consideration was the consent to the foreclosure, withdrawal of the defense, and the consent to the appointment of the receiver. I find that a foreclosure is referred to in the letter, and I think it could be shown by- parol evidence what this foreclosure was. It is stated that the plaintiffs were stockholders, and that certain persons were 1 ‘ co-operating with them.” Under that it could probably be made to appear that they were resisting a foreclosure. It is further said that the expenses of the various litigations are to be paid from the earnings of the railroad. This looks like a compromise of the suit. It seems to me, however, that the indispensable thing is wanting. It does not appear that all these things were done in consideration of the withdrawal of the defense by the plaintiffs. It is possible that an explanation of the word “ co-operating” would let in that evidence. Still, that is not certain and accordingly I am not prepared to hold that the consideration of the letter is expressed in it
There is the still further question raised by the defendants that the writing, though subscribed by the defendants, was not subscribed in accordance with the terms of the statute, viz., “ by the party by whom, the lease or sale is to be made^
If I understand the argument upon this point, it is that no one can properly “subscribe” under the statute but one in whom the title is vested at the time of the contract. In this case, that would be the old company or the Master in Chancery at the judicial sale. It would appear, if that were the correct con *277 straction, that the sale was “to be made” by him, so that perhaps both would have to subscribe to the contract.
Considering the great ability and acumen of the senior counsel for the defense, I can scarcely believe that this contention was serious. It certainly ignores the language of the statute. The subscription must be by a “party,” manifestly a party to the contract. The subject treated of in the first part of the section is an executory contract of sale ; the final words, “ sale to be made,” refer to the executed contract. In other words, A. agrees to-day that he will convey, thirty days hence, to B. The conveyance thirty days hence is “ the sale to be made.” There is nothing in law or reason to prevent A. from making the executory contract to-day, though he has no title, and only expects to be able to have the title when the appointed day for completion of the transaction arrives. It has been frequently held that it is no objection to compelling the vendor to perform, that he did not own the lands contracted when he agreed for the sale, if he owns them at the time of the action (Allerton v. Johnson, 8 Sand. Ch. 72 , a. d. 1845). So where he owns a part he can be compelled to convey that part and make compensation for the residue (Morss v. Elmendorf, 11 Paige, 277 , a. d. 1844). These decisions were made long after the present statute was enacted. If the defendant’s objection were well founded, these contracts would have been void and no action for specific performance against the vendor could have been entertained (Dung v. Parker, 52 N. Y. 494 ). To adopt the defendant’s theory would bring with it very serious consequences. Ordinary real- estate transactions would receive a new interpretation. If a man contracted to sell, having no title, how would the purchaser recover expenses of search or damages, the con *278 tract being utterly void for want of the subscription of the true owner to the contract ?
For these and other reasons, which it is unnecessary to pursue in detail, I do not think it necessary that the contract of sale should be subscribed by the owner of the land.
It is claimed by the plaintiffs at this point that the Statute of Frauds is not sufficiently pleaded to raise the questions involved here.
It is well settled under the code rules of pleading, that the Statute of Frauds must be set up in the answer. A general denial or issue under this system of pleading will not suffice, as it once did (Towle v. Topham, 37 L. T. N. S. 308).
Under these new rules now prevailing in England, as well as in this State, the language of the plea or answer must be clear and explicit (Browne Stat. Frauds, § 519, and cases cited).
The answer of the defendant as to this branch of this case seems to plead the statute only to the seventh division of the complaint. The seventh division of the complaint refers only to the oral contract, to be hereafter considered. It would appear that the statute was not pleaded explicitly to the “ letter,” as that is stated in the fifth division of the complaint. I do not desire, however, to place my decision upon this ground, but upon the broader grounds s§t forth in this opinion.
Division IY.
I now propose to examine the point whether the .Statute of Frauds of Missouri has been violated so as to affect the validity of the contract or its provability in this court.
Considering still the subject of the real estate embraced within the letter, I find that the statute of Missouri differs from our own in important respects. It has not yet been proved in the cause, but I have *279 been requested by counsel on both sides to consider the statute as far as the present question is concerned.
I have already indicated my opinion that this statute bears upon the present question, and that the real inquiry is, whether there is a valid trust by the law of Missouri.
• I do not think it necessary, however, to elaborate this point, since several of the inquiries to be made are similar to those already discussed. I only indicate the propositions which seem to apply to the" cáse.
(1) The contract for the sale of land is not made void in Missouri, if the statute is not complied with. It is only enacted that no “ action shall be brought,” in that case. Under the rule in Leroux v. Brown, supra, the remedy in Missouri only is affected by these words.
(2) There is nothing in the Missouri law requiring the consideration to be expressed. This brings up the point whether, independent of all express enactments, it is still not necessary to express the consideration by force of the word “agreement” used in the statute. On this question there is a great diversity of opinion among jurists, and in the courts of the several states. It is urged, on the one hand, that the word “agreement” from the very force of the term, includes the consideration, and that accordingly the consideration must be stated in the writing as well as the promise. Wain v. Walters (p Mast, 10), is the leading case on the subject, and was early followed in the courts of New York. The rule has been found inconvenient in England, and has been abrogated in part by statute, 19 and 20'Vict. c. 97. The courts of Missouri, on the other hand, have rejected the doctrine of Wain v. Walters, supra, holding that it is not necessary to satisfy the statute that the consideration should be expressed. Although these decisions have not been put in evidence yet, I am at liberty to refer to them as evidence of *280 Missouri law, for the purpose now under discussion. It is accordingly no objection to the contract in Missouri that the consideration is not expressed.
Bean v. Vallé ( 2 Mo. 126, 140 , a.d. 1829), is a case quite in point. This was a case of a contract for the sale of land, to enforce which a suit for specific performance was brought. There was no statement of the consideration in the written memorandum, and the question was distinctly raised that the Statute of Frauds was applicable. Wain v. Walters, supra, was cited (see p. 137). The court said, among other things, that the word “agreement” was used by the Missouri legislature in its popular sense, without reference to the consideration of the promise or reason for making •it ,(p, 140). One of the judges dissented upon this point. This case seems to be a direct adjudication upon the point in question.
The question was again before the Missouri court in Halsa v. Halsa, 8 Mo. 303 (a. d. 1843). The court by Scott, J., treated the question as disposed of by the elaborate argument and discussions in Bean v. Vallé, supra. This was also an action for specific performance to enforce a contract for the sale of land.
In the case of Ivory v. Murphy ( 36 Mo. 534 , A. D. 1865), the two cases already cited were reviewed. This was an action in the land court of St. Louis county for specific performance. It was claimed that there was a want of mutuality in the contract and that it did not comply with the Statute of Frauds. The cases of Bean v. Vallé, supra, and of Halsa v. Halsa, were approved by the court. It was said on p. 539, that Wain ». Walters, supra-, “ had never met the approbation of the courts of Missouri.”
(3) Assuming that the letter is a “declaration of trust ” in land, there is nothing in Missouri law to impair their validity or to lead to a doubt as to its compliance with the Missouri statute. , The statute *281 concerning declarations of trust does not differ materially from the provisions of a similar nature in the Statute of Frauds in England, nor from our own in New York. It is enough to show that the trust is mainfested or proved by some writing. I have already given my reasons for the belief that the trust is sufficiently declared to satisfy the New York statute. It is unnecessary to repeat them in this connection. It may be added that a case in the court in which this reference is ordered holds that a contract for the sale of land, being in its nature merely executory, is but a chose in action, and that a trust fastened upon it may be proved by parol evidence and that the statute concerning uses and trusts of land has nothing to do with it. Hazewell v. Coursen, * General Term, Monell, Sedgwick and Curtis, JJ. (a. d. 1873), 36 N. Y. Super Ct. (J. & S.) 460,468. It would seem from this decision that if Garrison had agreed to buy this road simply, and left all the purposes for which the purchase was to be made to an oral understanding, it could all have been established by parol evidence. Assuming this to be the meaning of this case, I suppose that it would be necessary to hold that so far as the trust was written, so far the writing would have to be followed ; so far as it was imperfect on its face, it might be supplemented by parol evidence. It is also held in other authorities that the doctrine of resulting trusts does not apply to executory contracts for the sale of land (Jackson v. Morse, † 16 Johns. 197 ).
The conclusion then is that this letter, whether tested by the law of New York or Missouri, does not trench upon any provision of the Statute of Frauds.
*282 Division V.
' I now propose to consider this subject from a different point of view. Assuming that this contract is void under the statute of either State and incapable of enforcement here for that or any other reason, have the acts" of the plaintiffs on the faith of the contract been such as to withdraw the case in view of a cov,rt of equity from the operation of the statute, and thus supply an equitable consideration for the subsequent or oral contract to be hereafter considered?
It is plain that if the “letter” is to be treated merely as a consideration for the oral' contract, it is quite immaterial whether it is good simply in equity or both in law and equity. The surrender of an equitable cause of action is just as good a consideration for a subsequent promise as the surrender of a legal cause of action. Any detriment which the plaintiff may receive (Williamson v. Clements, 1 Taunt. 523), or any benefit which the defendant may receive by the permission or act of the plaintiff, is a sufficient consideration (Davis v. Morgan, 4 B. & C. 8 ; Scotson v. Regg, 6 H. & N. 295). Chitty says, that any damage or any suspension or forbearance of right or any possibility of a loss occasioned to the plaintiff by the promise of another, is a sufficient consideration for such promise (1 Chitty Cont. 35, 11 Am. ed.).
From this point of view the allegations of fact are, that the plaintiffs on the faith of the promises of the defendant, did actually consent to the appointment of Oliver Garrison as receiver, withdrew their defense to the foreclosure suit, and submitted to a decree of sale, and that the sale actually took place to Mr. Baker, acting as they say, for the defendant. It is not necessary to discriminate between these acts so as to say that they are to be imputed separately either to the “ letter ” or the oral contract. So far as they relate to *283 this letter now under discussion, they are in the nature of an executed consideration. Though I am inclined to regard the oral contract as a modification of the letter rather than a new contract by way of substitution, yet in whichever way it is treated, it remains true that the whole consideration was executed and made over to the defendant on the faith of his promise. I shall accordingly, to avoid repetition, consider the subject of performance as raising an equity in favor of the plaintiffs, once for all, without discussing it anew at any length when the oral contract is directly reached.
This is not a case of payment of the consideration in money, which might be recovered back by the plaintiffs on the breach of contract by the defendant, and they be restored to their original position. It is, and has been ever since the decree, impossible to restore them to the place in which they were prior to the acceptance of the letter. Their defense, whatever its merits may have been, was thenceforth forever precluded. No court could or would relieve them, there being no fraud in the making of the contract, and no case in their favor except the failure on the part of Garrison to fulfill his agreement. The remedy for that is not the cancellation of the transaction, but solely the enforcement of the contract. On such facts, courts of equity constantly and uniformly hold that there is a constructive or equitable fraud in not fulfilling the engagement made. The fraud in such cases is not-in the concoction of. the contract, but rather in obtaining and retaining its advantages, and still refusing to fulfill one’s own stipulations^ The rule that the court will interfere in favor of the injured party, on the ground of this inferential or “ constructive fraud,” gives him an equitable cause of action. It is on this ground that the courts say that the jurisdiction of equity in such case is bottomed in fraud.
*284 The authorities upon this question are clear and distinct. In Malins v. Brown, 4 N. Y. 403 , it appeared that A. was drawn into a purchase of land from B., which he wnuld not have made but for the oral agreement of C., a mortgagee of the land, to discharge the lien of his mortgage. It was held that a recovery from C.of the money paid to him would not restore A. to his former situation, and that this would operate as a fraud upon him unless the oral agreement were carried into complete execution. Accordingly he was entitled to relief notwithstanding the statute.
Ryan v. Dox, 34 N. Y. 307 * (cited and commented upon fully in the argument by the plaintiffs in this cause), is an important authority. The substance of this case is, that Ryan and another were owners of an equity of redemption subject to a mortgage, and that, a foreclosure being about to take place, Dox promised orally to attend the sale, bid in the premises for Ryan, and his associate, and to hold them as security for the money advanced. Dox purchased accordingly with the understanding of the mortgagors and others present at the sale, who abstained from bidding on the supposition encouraged by Dox that the purchase was really for the benefit of the mortgagors. Dox in this way bought for $100 premises worth $4,000, and refused to fulfill his promise. The court held that this course of action was a practical fraud on the mortgagor and relief was granted.
The court, on pages 318 and 3

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/7346116. Public record. Not legal advice.