fore he could, by the affirmance of his contract, deprive himself of the right to rescind it. Knowledge of the fraud itself was sufficient ground for the rescission of his contract, and equally so for its affirmance. Benj. Sales (2d Am. Ed., by Perkins) §§ 452, 453; 1 Add. Cont. § 312; Campbell v. Fleming, 28 E. C. L. 40; Bach v. Tuch, 126 N. Y. 53, 26 N. E. 1019; and Improvement Co. v. Brady, 92 Va. 79, 22 S. E. 845.

The defendant claimed the right to avoid his subscription upon the further ground that he was also induced to subscribe by the representation that Byrd Warwick and Fred S. Myers, who were well known and prosperous business men of the city of Richmond, had each subscribed to the stock of the company to the amount of $10,000, when in fact they had not done so, and their subscriptions were wholly fictitious. In this contention he is not sustained by the evidence. It was proved that their subscriptions were regular, and not made upon any agreement or understanding whatever inconsistent with their import, though for some reason, not appearing in the record, they were subsequently allowed by the company to withdraw their subscriptions.

But, if it had been shown that their subscriptions were fictitious or colorable only. and were made and used with the intent to induce other persons to subscribe, with the secret understanding that no liability should attach to them by reason of their subscriptions, or that they should thereafter be allowed to withdraw them, this could not have operated as a fraud upon the defendant, or injured him, for subscriptions made under such circumstances are, in the eye of the law, as valid and binding upon the subscribers as if they had been originally made in good faith, and will be upheld and so treated by the courts. 2 Thomp. Corp. $$ 1404-1406; 1 Mor. Priv. Corp. § 107; Tayl. Corp. §§ 105, 521.

The defendant having, by affirmance of his contract of subscription, precluded himself from thereafter rescinding or repudiating it, the next inquiry is whether he could maintain his cross action against the company for damages for the deceit.

A person who has been induced by fraud to enter into a contract may, upon the discovery of the fraud, as we have seen, elect to rescind the contract, and recover back the consideration he has paid or given, if he is able to restore in an unchanged state what he has received; or he may elect to retain what he has received, and bring an action to recover any damages he has sustained by reason of the fraud. This is undoubtedly the rule with respect to contracts that pertain to goods and chattels, but it has been laid down as the law by the tribunal of last resort in England, the house of lords, that a person who has been induced by the fraudulent misrepresentations of an agent of a company to take shares in it, cannot, after

he discovers the fraud, elect to retain the shares, and sue the company for damages.

In Houldsworth v. City of Glasgow Bank, 5 App. Cas. 317, the distinction between contracts relating to goods and chattels and contracts of subscription to shares of stock was distinctly pointed out, and it was there decided, as was foreshadowed in the previous case of Addie v. Western Bank of Scotland, L. R. 1 H. L. Sc. 146, that a shareholder in a joint-stock company, who has been induced to purchase his shares by the fraud of an agent of the company, cannot maintain an action against the company for damages for the deceit, so long as he is a member of the company, upon the ground that such an action is at variance with the contract entered into by him with his fellow shareholders or partners in becoming a member of the company. The same principle was followed in Re Addlestone Linoleum Co., 37 Ch. Div. 191.

The effect of these decisions is that, if the shareholder is debarred from a rescission of his contract by the insolvency of the company, or from any other cause, he is without remedy against the company, and is left to his action against the agent who induced him by the fraudulent representation to subscribe for the stock. Benj. Sales (6th Am. Ed.) §§ 705, 709; Tayl. Corp. § 523; 1 Cook, Stock, Stockh. & Corp. Law, § 159, note.

A subscription to the capital stock of a joint-stock company is not only an undertaking to the company, but with all other subscribers. It is of the essence of the contract between the shareholders that they shall all contribute ratably to the payment of the company's debts and liabilities. The amount which each pays or agrees to pay for his stock is, by his contract of membership, dedicated to that end. If a subscriber, who has been induced by fraud to purchase his shares, elects, after the discovery of the fraud, to affirm his contract of subscription, he thereby, in effect, says: "Notwithstanding the fraud by which I was induced to become a member of the company, I shall still stand in with it, and take my chances." If he could thereafter maintain an action against the company for damages for the fraud, which, if right in principle, might go to the extent of allowing him to recover back by way of damages all that he had paid in on account of his shares, he would thereby recoup his entire loss; and, notwithstanding his election to retain his shares, and to continue a member of the company, he would contribute, in fact, not one cent to the payment of the debts and liabilities. The effect, therefore, of allowing an action to be maintained by a shareholder against the company for fraud would be to throw the burden of the payment of the debts and liabilities on the other shareholders, who are as innocent of the fraud as he.-a result which would be wholly at variance with his contract of membership

1

The defendant in error, in consequence of having elected to remain a member of the company, could not thereafter maintain an action against it to recover damages for the alleged fraud.

Applying the foregoing principles to the case before us, it follows that the circuit court erred in its ruling upon the instructions to be given to the jury, and also in its ruling upon the motion for a new trial.

In reaching our conclusion the question of the constitutionality of the act of the general assembly of December 19, 1895 (Acts 1895-96, p. 25), or of the act of December 22, 1897 (Acts 1897-98, p. 16), which was much argued at the bar, was not involved, and any discussion of it would be inappropriate, even if we could consider the latter act, but which could not be done, as it was enacted several months after the rendition of the judgment; and the writ of error must be decided according to the law as it was at the time that the judgment was rendered. Anderson v. Hotel Co., 92 Va. 687, 24 S. E. 269.

The judgment of the circuit court must be reversed, the verdict of the jury set aside, and a new trial awarded, upon which new trial, if the evidence be the same, or substantially the same, as on the last trial, and instructions be again asked for, the jury are to be instructed in accordance with the views expressed in this opinion.

1. An agreement, whereby a manufacturer purports to appoint a firm his agent, stipulated that the title to the goods was to remain in the former, but that the latter was to guaranty the sale of the goods, and remit for all goods consigned at the end of 60 days, whether sold or not, or whether collected for or not, without making any provision for the return of any unsold goods or any report of sales. Held a contract of sale, and not of agency.

2. A reservation of title, in an agreement of sale, not docketed as required by Code, § 2462, is void as to subsequent purchasers for value without notice.

3. A trustee held goods under a deed of trust to secure creditors. A manufacturer claimed title to a portion under contract of sale with the assignor. The evidence showed that the trustee had been his assignor's bookkeeper, and as such had received the invoices; that no notice was given to him that the goods were the property of the manufacturer; that he had seen the contract, but had no knowledge of its contents. Held, that the trustee was a purchaser for value, and without notice.

4. The burden is upon a party asserting a purchase with notice to prove notice.

Appeal from chancery court of Richmond. Bill by Arbuckle Bros. against Gates &

Brown. From a decree in favor of defendants, plaintiffs appeal. Affirmed.

Wyndham R. Meredith, for appellants. Christian & Christian and Leake & Carter, for appellees.

RIELY, J. The correct determination of this case depends mainly upon the construction that must be given to the agreement in writing of February 1, 1895, between Arbuckle Bros. and Gates & Brown,-did it create a mere agency in Gates & Brown for the sale of their coffee, or did it constitute a sale of the coffee to them? The solution of this question is to be arrived at from a close scrutiny of all the provisions of the agree ment and the consideration of them as a whole.

The agreement purports on its face to be a "Special Selling Factor Appointment," and to constitute Gates & Brown the factors of Arbuckle Bros.

It starts out by declaring that all goods consigned by Arbuckle Bros. to Gates & Brown, on their requisition, shall, until sold in regular course of business, remain the property of Arbuckle Bros., with the title in them, and be merely held by Gates & Brown as their factors, and that they shall never purchase the goods for their own account.

It is next stipulated that Gates & Brown shall sell and bill the goods in their own names, but only at such prices and on such terms as Arbuckle Bros. may give them from time to time.

Then follow a number of stipulations that are irreconcilable with the relation of a factorship or an agency between the parties.

Gates & Brown are required, not only to assume all risk as to the credit of the persons to whom they may sell the goods and to make all collections at their own expense, but they are to guaranty the sale of each "consignment," and the payment therefor, within 60 days from its date. They are required to remit the full amount of each "consignment," less a paltry sum designated as commissions, by the end of 60 days, whether the whole "consignment" shall have been sold or not, and whether the proceeds of sale shall have been collected or not. They are further required to insure Arbuckle Bros. against decline in the price of unsold goods, and shall be entitled to the benefit of any advance in the price of them.

No provision whatever is made for the return of any goods that may not be sold, nor for the reclamation of any moneys paid by Gates & Brown for the coffee. No account of their sales is required to be rendered to Arbuckle Bros., and they acquire no infor mation as to the persons to whom Gates & Brown may sell the goods; but Gates & Brown become primarily the absolute debtors of Arbuckle Bros. for the goods, whether they ever dispose of them or not. They are

required to pay for them at the price fixed at the date of each "consignment," and at a fixed time, whether they have then sold them or not, or whether they have collected the proceeds of sale or not.

It is very plain that this was not an ordinary transaction between a consignor and a consignee. Where goods are consigned to a factor for sale, they remain, until sold, the property of the consignor, and are not subject to the debts of the factor, and no ingenious contract, such as that under consideration, is required to protect them from his creditors. The agreement was an attempt to accomplish that which cannot be done, to make a sale of personal property, and at the same time constitute the buyer simply an agent of the seller to hold the property until it is paid for. The two things are incompatible and cannot co-exist. The agreement had in it every element of sale. It was, in substance and effect, a sale, and must be so declared. It does not matter by what name the parties chose to designate it. That does not determine its character. The courts look beyond mere names, and within, to see the real nature of an agreement, and determine from all its provisions taken together, and not from the name that has been given to it by the parties or from some isolated provision, its legal character and effect.

In Heryford v. Davis, 102 U. S. 235, the agreement purported to be a loan of cars for hire, but the court held that it was a contract of sale. Said Mr. Justice Strong, in delivering the opinion of the court: "What, then, is the true construction of the contract? The answer to this question is not to be found in any name which the parties may have given to the instrument, and not alone in any particular provision it contains, disconnected from all others, but in the ruling intention of the parties, gathered from all the language they have used. It is the legal effect of the whole which is to be sought for. The form of the instrument is of little account." See, also, Harvey v. Locomotive Works, 93 U. S. 664; Sturm v. Boker, 150 U. S. 312, 14 Sup. Ct. 99.

In Tiedman on Sales (section 8) it is said: "Whenever the result of the transaction is that the transferee is the primary debtor, even where the title to the goods does not pass out of the consignor until the sale, the sale of the goods by the consignee will necessitate a previous transfer to the consignee, and the consignment is thus changed into a sale."

In Ex parte White, 6 App. Cas. 402, Sir George Mellish, Ld. J., said: "But if the consignee is at liberty, according to the contract between him and his consignor, to sell at any price he likes, and receive payment at any time he likes, but is to be bound, if he sells the goods, to pay the consignor for them at a fixed price and at a fixed time, in my opinion, whatever the parties may think, their relation is not that of principal and 30 S.E.-32

agent. The contract of sale which the alleged agent makes with his purchasers is not a contract made on account of his principal, for he is to pay a price which may be different, and at a time which may be different, from those fixed by the contract. He is not guarantying the performance, by the persons to whom he sells, of their contract with him, which is the proper business of a del credere agent, but he is to undertake to pay a certain fixed price for those goods, at a certain fixed time, to his principal, wholly independent of what the contract may be which he makes with the persons to whom he sells; and my opinion is that, in point of law, the alleged agent in such a case is making, on his own account, a contract of purchase with his alleged principal, and is again selling."

In the case at bar, Gates & Brown, as we have seen, were to pay Arbuckle Bros. a fixed price for the goods, and at a fixed time, without regard to the price or terms at or upon which they might sell them to other persons, and irrespective of the fact whether they had sold them at all or not, or had collected the proceeds of sale or not. Prohibition against selling below the trade price, or reserving the right to fix, from time to time, the price at which the buyer shall sell the goods, is a very common device to prevent competition and maintain prices. It has, however, but little tendency to prove an agency, and cannot control or neutralize the distinct elements of a sale contained in other provisions of the agreement.

In Williams v. Tobacco Co., 44 S. W. 185, an agreement, which was very similar in its essential features and provisions to that under consideration, was construed by the court of civil appeals of Texas. The agreement purported that the Drummond Tobacco Company appointed A. H. Schluter & Co. as agents to sell its tobacco at such prices as the company should from time to time prescribe, and that the title to the tobacco should remain in the tobacco company until sold by the said agents. The latter were to receive a commission for selling, and, in consideration thereof, warranted that every shipment made to them should be paid in full. The company, in shipping the tobacco, invoiced it to A. H. Schluter & Co. as agents, and used a billhead that designated the shipment as a "consignment." It was shown that, after the shipment of each bill of tobacco, the company would draw an acceptance of the same date as the invoice of the tobacco for the amount of the bill, less the commission, payable 60 days after date, which Schluter & Co. would accept, and the company at the maturity thereof would present for payment, and Schluter & Co. would pay, whether they had sold the tobacco or not. The court decided that the transaction was a sale, and did not create an agency.

In Mack v. Tobacco Co., 67 N. W. 174, a contract, similar in its terms to the one construed in the above-cited case from the Tex

as court, was held by the supreme court of Nebraska to be a sale, and not an agency.

An instrument identical in every respect with the one under discussion was before the supreme court of Tennessee for construction in the case of Arbuckle v. Kirkpatrick, 98 Tenn. 221, 39 S. W. 3, where the court, in an elaborate opinion and after a review of the authorities, decided that the agreement between the parties amounted, in legal effect, to a sale. "The contract," said the court in concluding its opinion, "is certainly a remarkable one, partaking in many of its provisions of a contract of agency and in many others of a sale. It is evidently intended as either or both, as might suit the convenience or serve the purposes of the complainants. * * 2 In construing such a contract, whenever it affects the rights of others, it will be so construed as to protect such rights, and not to enable the complainants to carry out any double purpose."

Similar contracts were construed in the following cases to constitute a sale, and not an agency: In re Linforth, 4 Sawy. 370, Fed. Cas. No. 8,369; Chickering v. Bastress, 130 Ill. 206, 22 N. E. 542; Powder Co. v. Hildebrand, 137 Ind. 462, 37 N. E. 136; Manufacturing Co. v. Johnson, 97 Mich. 531, 56 N. W. 932; Braunn v. Keally, 146 Pa. St. 519, 23 Atl. 389; Kellam v. Brown, 112 N. C. 451, 17 S. E. 416.

A number of cases were cited to us by the learned counsel for the appellants to sustain his contention that the agreement in question created a mere agency, and not a sale. An examination of them discloses that the provisions of the contracts construed in those cases were materially different from the provisions of the one we have been considering. It must suffice to refer to a few of those mainly relied upon and deemed most apposite.

In Burton v. Goodspeed, 69 Ill. 237, Burton agreed to furnish Holbrook with coal on board of vessel at his dock, and the latter agreed to hoist it from the vessel, put it on the dock, and pay the Lake freight, charging the cost of hoisting and putting the coal on the dock and the freight against the coal, and to receive for docking, screening, selling, and delivering the coal, including his commissions, the sum of $1.50 per ton on all coal delivered at any point outside of the yard requiring carting, and $1 per ton for all delivered on the yard, with an additional 50 per cent. of the net profits of sale. Holbrook agreed to guaranty the payment of all sales, to advance to Burton $3 per ton on the coal as it was shipped, and to pay over the balance of the proceeds of sale as the coal was sold. He also agreed to keep correct accounts, render monthly statements, and not to sell below the market price.

Holbrook was thus required to keep regular accounts of his transactions with respect to the coal as any factor or commission merchant would be obliged to do, and to render

to Burton monthly statements, showing the amount of the coal sold and the prices obtained. He did not have to pay for any coal until he had sold it, and only guarantied such sales as he might make. It is evident that this was an ordinary consignment contract, and the court so held.

In Conable v. Lynch, 45 Iowa, 84, Berry agreed to sell machines for Conable to such persons only as were perfectly responsible, take notes for the deferred payments, indorse them, and guaranty their payment. He was to send to Conable the notes of purchasers as he sold the machines, and to remit promptly the proceeds of all cash sales, less the amount of his commissions. All the machines, until paid for, were to remain the property of Conable, and at the expiration of the contract Berry was to pay for all machines not sold. The court held that the effect of the contract was to make Berry the agent of Conable until the termination of the contract, but after that time it was a conditional sale.

It thus appears that, until the expiration of the contract, the relation of creditor and debtor did not arise. Until then Berry sold the machines for and on account of Conable, and the relation between them was that of principal and agent, but when the contract expired by limitation, and Berry came under the obligation to pay for all unsold machines, the court held that the contract made the transaction a conditional sale.

In Bayliss v. Davis, 47 Iowa, 340, Bayliss, under the agreement there construed, appointed one Stinson his agent to sell harvesters, and agreed to allow him a commission of $40 on each harvester. Stinson agreed to advance one-third of the price, and give his notes for the residue, and to sell on the same terms. All notes taken for machines sold by him were to be made payable to Bayliss, the proceeds of sales were to be remitted by him to Bayliss as fast as received, after deducting his advances, and his own notes were to be taken up by exchanging for them the notes of farmers to whom he had sold machines. It was said by the court that, while the advance of money and giving notes would ordinarily, without explanation, indicate a sale, yet when considered in connection with the fact that Berry was to be repaid his advances from the cash payments made by farmers to whom he sold machines, and that his own notes were to be taken up and paid by their notes, it was not inconsistent with the agency which was set out in other parts of the contract.

Those peculiar provisions, which determine the nature of the agreement between Arbuckle Bros. and Gates & Brown, are absent from the contract construed in the above case. As in the previous case, the harvesters were to be sold for and on account of Bayliss; the notes of purchasers were to be made payable to him, and the proceeds of sales remitted to him; and the contract im

posed no obligation on Stinson to pay for the machines at a fixed time, whether he had sold them or not, or whether he had collected the proceeds of sales or not, without any provision for reclamation, as required by the terms of the agreement before us.

The case of Thompson v. Barnum, 49 Iowa, 392, is very similar in its general features to the two preceding cases. The goods were to be paid for in farmers' notes, and to be indorsed and their payment guarantied by the agents. All notes for sales made by the agents were to be taken payable to the principals, and reports and remittances to be made to them by the agents on the 1st of each month.

In Norton v. Melick, 66 N. W. 780, which was also an Iowa case, the agreement was that Norton & Co. should furnish certain brands of flour at specified prices to Melick, to be sold by him as their agent, and he agreed to sell the same at not less than given prices, to render account of sales ev ery 30 days, and to remit with report the proceeds of sales. He also agreed to buy at end of 90 days, at prices at which it was invoiced, any flour that had not been sold, and that the title, ownership, and right of possession of the flour should remain in Norton & Co. until paid for in full. The flour having been destroyed by fire within the 90 days, Norton & Co. sued Melick for its value. The court decided that the contract was one of agency, and that Melick was not liable. This would seem to be very clearly

so.

The relation of seller and buyer, of creditor and debtor, would not arise until the expiration of the 90 days, when Melick came under an obligation to buy any flour that then remained unsold. Until then the relation was simply that of principal and agent. Until then Melick was to sell the flour for Norton & Co. at prices given by them, render to them monthly accounts of sales, and remit the money for all flour sold.

In Bank v. Benedict, 20 C. C. A. 377, 74 Fed. 182, the Stern Auction & Commission Company agreed with Benedict & Co., who were manufacturers of clothing, to sell a consignment of clothing at prices given, without any charges of commissions, freight, or other charges, and that no part of the consignment should remain unsold or not paid for by a specified date. It was held that the contract was not a sale, but a contract of factorage. There was no provision binding the commission company to pay for the clothing as purchasers, but only to account for the proceeds of sale at prices fixed by the contract. There was no agreement by it to pay for the clothing at a stipulated time, but only a covenant that no part of the consignment should remain unsold or be unpaid for by a fixed time, for whose breach Benedict & Co. might recover any damages they had sustained.

It is unnecessary to proceed further to distinguish the cases cited by counsel for the

appellants from the case at bar. Those to which we have not referred are still less apposite than those which we have reviewed. The contracts construed in them were even more dissimilar in their provisions, and were materially different in substance from the agreement out of which this controversy has arisen.

Conceding, for the purposes of this case, that, although the agreement constituted a sale and not an agency, there was a valid reservation by Arbuckle Bros. of the title to the coffee until the same was paid for, it was still necessary that the agreement be duly docketed according to the provisions of section 2462 of the Code as amended, or such reservation was void as to creditors and purchasers for value without notice.

A trustee in a deed of trust to secure creditors is, under many decisions of this court, a purchaser for value. Chapman v. Chapman, 91 Va. 400, 21 S. E. 813, and the cases there cited. It was, however, earnestly contended by the counsel for the appellants that H. C. Boudar, the trustee in the assignment of Gates & Brown, was a purchaser, not without, but with, notice. The burden was on the appellants to prove notice. The only evidence relied on to establish it was the testimony of Boudar himself, which was taken by the appellants themselves. He testified that he was the bookkeeper of Gates & Brown; that he received the invoices of the goods after they had been examined and approved by Mr. Brown; and that it was his duty to remit the amount called for by the invoices at the maturity of the bills, less rebates and discounts. He further testified that no notice was given to him, either before or at the time of the assignment, that the coffee was the property of Arbuckle Bros., and not the property of Gates & Brown. He also testified, when interrogated as to the agreement in question, that he had seen such a paper, and, though unable to say when, he thought it was after the assignment; that he knew he had seen it since the assignment, but was in doubt whether he had seen it before. He did not need to know its conditions in order to perform the duties of his position, and was without any interest to make inquiry obligatory.

It also appeared in evidence that Gates & Brown did a wholesale grocery business in the city of Richmond; that they treated the coffee just as they did all their other goods; that they sold it to their customers in the usual course of business, and charged it to such purchasers in their general accounts, along with other groceries of every character and description; and that no separate account was kept of the sales of the coffee to distinguish them from the sales of any other goods sold by them.

It was held by this court in Vest v. Michie, 31 Grat. 149, that while the fact of notice may be inferred from circumstances as well as proved by direct evidence, yet the proof