Description
In 1852, the Florida Supreme Court considered the case of the Southern Life Insurance & Trust Company v. Charles Cole. This case came to the high court on appeal from Leon County Circuit Court.
This case involved the transfer of stock between two individuals, via a third party (the insurance company), and whether the transaction was legitimate and occurred in the customary manner. In the early 1840s, Charles Cole "being desirous to raise a sum of money to meet some urgent necessity," concluded to become a property stockholder in the [Southern Life Insurance & Trust Company], in order to avail himself of the privilege granted to shareholders therein of borrowing two-thirds or three-fifths the amount of stock.
According to an agreement with the company, Cole would acquire the stock by way of an exchange with another stockholder, William L. Tooke. Despite these plans, it does not appear that any formal contract was issued; this failure became an important part of the case. Supposedly the transaction and details about the sale were noted in a ledger described as the "Bond and Mortgage Ledger," however, neither the company nor the court found this to be a credible record of the business specified.
Cole believed that he would purchase 65 shares of stock, at $100 each, from Tooke, who himself owned 150. The number of shares sold by Tooke was based on an appraisal of Cole's property in the amount of $13,000. The company would issue a mortgage on the property and, since he was a stockholder, would allow Cole to acquire the shares in question. The exchange of shares would also allow Tooke to satisfy part of his mortgage with the company. Tooke, like Cole, had acquired his shares using the mortgage issued by the company as collateral.
However, the exchange did not take place in an expedient manner. About 12 months passed between the time of the agreement and the issuance of stock. At this point, Cole disputed the transaction because the value of the shares had plummeted owing to the "pecuniary embarrassments of the company." The company then pursued a foreclosure of mortgage against Cole, which led to the original case and subsequent appeal.
The court found that several irregularities occurred during the transaction, most of which were unknown to Cole at the time. In the end, the court ruled that the company had acted improperly and that Cole could not be expected to accept the shares 12 months past the conclusion of the deal, regardless of the issue of value. And, since the shares had dropped in value, he could also rightly call into question whether the company had acted in good faith.
Because the chain of events required to execute did not occur as all parties are believed to have originally agreed, the sale was void and the court found in favor of Cole.
Source
State Archives of Florida, Series 49, Box 473, Folder 854
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