Court Opinion

ID: 6678927
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:18:49.599227+00
Date Added: 2024-06-11T16:00:47.146861
License: Public Domain

Mr. Justice Gary.
The plaintiff and the National Land Improvement and Manufacturing Company, of Charleston, S. C., entered into an agreement in January, 1893, whereby the plaintiff agreed to transfer $50,000 of its stock to said National Land Improvement and Manufacturing Company, and to deliver to it for sale certain first mortgage bonds on plaintiff’s road. The said National Land Improvement and *133Manufacturing Company agreed in consideration thereof to negotiate and dispose of said bonds to the best advantage, and from the proceeds of sale to build and equip a part of said road, also to accept and pay drafts from time to time, to an amount not to exceed $25,000, for material, labor, &c. These advances were to be repaid from the sales of the bonds, which were to be held as collateral security for said advances. The National Land Improvement and Mánufacturing Company also agreed that, on failure to negotiate or sell said bonds in twelve months, in sufficient sums for the completion of the road, the bonds and stock should be returned to plaintiff after ninety days notice. 500 shares of the par value of $100 each were delivered to the National Land Improvement and Manufacturing Company under said agreement. Drafts were made and accepted but were not paid. The bonds were not sold, and demand was made for a return of the stock.
On the 15th of May, 1893, the defendant discounted, for the National Land Improvement and Manufacturing Company, a note made by said National Land Improvement and Manufacturing Company, dated 13th May, 1893, payable thirty days after date to J. H. Steinmeyer or order, for the sum of $8,000, with interest - after maturity at the rate of eight per cent, per annum. The note was executed by J. H. Steinmeyer, as president, and by J. N. Mallonee, as secretary and treasurer of the National Land Improvement and Manufacturing Company, and was endorsed by J. H. Steinmeyer. The note was secured by two scripts, Nos. 13 and 17, for 100'shares each of the stock of said railroad company, which were delivered to the defendant when the note was discounted. The certificates of stock are sealed with the company’s seal, signed by Wm. H. Mauldin, president and treasurer, and each certifies that the National Land Improvement and Manufacturing Company is entitled to 100 shares in the capital stock of the Hampton and Branchville Railroad and Lumber Company. The certificates are both endorsed by the company. The proceeds of *134the discount were placed to the credit of the National Rand Improvement and Manufacturing Company upon the books of the defendant, and were checked against at once. The amount placed to the credit of the National Rand Improvement and Manufacturing Company, with about $1,900 of exchange sold, went to pay checks of the National Rand Improvement and Manufacturing Company for $1,717.62, notes of said company for $5,812.87, a note of Steinmeyer Number Company for $447.34, and a note of Mallonee & Co. for $2,000, all of which notes so taken up were held by the defendant. The National Rand Improvement and Manufacturing Company is insolvent, and is now in the hands of a receiver.
The Circuit Judge held that the defendant was an “innocent bona fide holder for value without notice,” of the said stock, and ordered that the plaintiff do transfer upon its books to the said defendant the said 200 shares of stock,, arid that the complaint be dismissed.
The plaintiff appeals upon several exceptions, which,, however, will not be considered separately, as they raise practically but the single question, whether the defendant was an “innocent bona fide holder for value without notice.”
Certificates of stock are not negotiable. Maybin v. Kirby, 4 Rich. Eq., 105; Hammond v. Hastings, 134 U. S., 401; 10 S. C. R., 727; Union Bank v. Laird, 2 Wheat., 390.
Although they are not negotiable, a bo7ia fide vendee for valuable consideration without notice will be protected. State Bank v. Cox & Co., 11 Rich. Eq., 344; Fraser & Dill v. Charleston, 11 S. C., 486. We do not question the principles announced in these cases, but they are not applicable to this case.
The act chartering the plaintiff (20 Statutes, 1169,) is a public act, and, therefore, all persons are chargeable with notice of its provisions. 23 Am. & Eng. Enc., 696; Hammond v. Hastings, 134 U. S., 401. Section 8 of said act provides: “That the stock of said company may be transferred in such manner and form as may be directed by the *135by-laws of said company,” &c. It seems that a man of ordinary prudence, having notice of such provision, would have made inquiry as to the manner and form in which the by-laws directed that transfers of stock should be made. Section 9 of said act provides: “No subscription to capital stock of this company shall be valid unless the sum of $10 per share be paid thereon at the time of subscribing; and that if any stockholder shall fail to pay the instalment required of him, on his share or shares, by the president and the majority of the stockholders, within one month after the call for same, it shall be lawful for said president and directors to sell at public auction, and convey to the purchaser, the share or shares of said stockholder so failing or refusing, giving fifteen days notice of time and place of sale. Any purchaser of said stock shall be subject to the same rules and regulations as the original owner, and no sales by the original owner of the stock or his assigns shall relieve the original owner from his obligations to the company to pa}' the whole of his subscription.” If the defendant, having notice of these provisions, had made inquiry, it would also have had notice that the National Land Improvement and Manufacturing Company did not have the right to make the transfer of the certificates of stock as aforesaid. As there certainly was enough to have put the defendant on inquiry, it is chargeable with notice of such facts, as the inquiry, if pursued with due diligence, would have disclosed. Black v. Childs, 14 S. C., 312; Aultman v. Utsey, 34 S. C., 561. Lhe defendant is, therefore, not a bona fide holder without notice.
For these reasons, I concur in the opinion of Mr. Justice Pope.