Court Opinion

ID: 7116615
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:33:01.752295+00
Date Added: 2024-06-11T16:13:56.173225
License: Public Domain

Deemer, J.
(Dissenting) — Under the rule in this state, statutes regarding the transfer of corporate stock must be *494strictly followed, in order that a sale or pledge thereof may be binding upon anyone save the parties to such sale or pledge. Moore v. Marshalltown Opera-House Co., 81 Iowa 45; Ft. Madison Lumber Co. v. Batavian Bank et al, 71 Iowa 270; Ottumwa Screen Co. v. Stodghill, 103 Iowa 437; Perkins v. Lyons et al., 111 Iowa 192. It is entirely immaterial that a stranger had actual notice of the transfer or pledge, for the statute provides the only methods of transfer. See cases just cited. Before the amendment to the statute by the 26th General Assembly, which amendment is pointed out by the majority, one who took an assignment of stock in pledge or as collateral security might, it seems, have the stock so pledged or assigned transferred to him, either as if he were owner or as pledgee or bailee, and such transfer was regarded sufficient. But this character of transfer produced much confusion because of the questions arising as to the voting power of the stock, the rights of the holder or pledgor or assignor thereof after such transfer, and the liability of the pledgee or holder for assessments or calls thereon after transfer of the stock. That such transfer was valid as to strangers was held in First National Bank of Waterloo v. Park, 117 Iowa 552; Perkins v. Lyons, supra. The manifest object and purpose of the amendment to the statute was to provide a method for the transfer of stock which was assigned or pledged as collateral security, other than a transfer upon the stock books of the company, and, as I view it, the only question in this case is whether or not this new method is exclusive, or is it simply a cumulative remedy? The original method was by absolute transfer upon the books of the company, and this evidently meant the stock books; the new method does not contemplate any transfer of the stock upon the books, but written notice of the transfer to the secretary of the company and an entry by him upon another book or books showing the notice, and also a like entry showing the discharge of the ■stock. Such form of transfer in no manner complicates' the situation regarding the voting powers of the stock, or the *495liability for assessments. The mischief which the amendment to the statute was intended to cure is apparent, and the act itself is clear and unambiguous. Tierney v. Ledden, 143 Iowa 286. Was it intended as an exclusive method of giving notice of the transfer of corporate stock as collateral? In Tierney v. Ledden, supra, we said:
“The design of the last-quoted section was to enable stockholders to hypothecate their shares of stock without cancellation thereof and the issuance of new stock, and yet protect the pledgee against the claims of the creditors of the pledgor and purchaser without notice. Moore v. Marshalltown Opera-House Company, 81 Iowa 45; Ft. Madison Lumber Co. v. Batavian Bank, 71 Iowa 270; Ottumwa Screen Co. v. Stodghill, 103 Iowa 437; First National Bank of Waterloo v. Park, 117 Iowa 552. In any event, our duty ends in construing the statute in accord with the manifest purpose of the lawmakers which, as seen, results in exempting the holders of stock as collateral security from liability as stockholders."
So that, under the law as amended, no transfer of shares upon the books of the company is to be made where the stock is assigned as collateral security.
Much reliance is placed upon the use of the word “may" in the amendatory statute, because the term is' permissive rather than mandatory. Fortunately or unfortunately, the word has no such significance. All depends upon the nature and purpose of the act in which it is found. Minor v. Mechanics’ Bank of Alexandria, 1 Pet. (U. S.), 44, 64; President, Director & Company of the Newburgh and Cochecton Turnpike Road v. Miller, 5 Johns. Ch. 101. The word is quite as often used in an imperative as in a permissive sense. As a rule, whenever there is a grant of right, either to the public or to particular individuals, the use of the word “may” is regarded as mandatory. Wendel v. Durbin, 26 Wis. 390. Perkins v. Lyons, supra, relied upon by the majority, instead of being an authority in support of the proposition that the amendment to the statute prescribes a cumulative method of transfer or *496notice thereof, is, to my mind, an inferential holding to the contrary; for the court deemed it material .to ascertain whether or not the amendatory act of the 26th General Assembly was retroactive so as to be applicable to the facts as found. That question was of no importance whatever if the amendment to the statute provided simply a cumulative remedy. My thought is this: The statute now provides the method for the transfer of stock, one where the sale thereof is absolute, and the other where it is qualified as a pledge or assignment for collateral security. In the former case, the stock is actually transferred upon the books of the company, and in the other, it is not transferred at all, save that possession is delivered to the pledgee or bailee, and such a holder gives notice of the pledge to the secretary of the company, and the secretary enters such notice, not upon the stock books, but upon another book kept for the purpose of showing such transfers. To hold that an assignee or pledgee of stock held as collateral may now adopt either method at his election is to return to the confusion which existed prior to the amendment to the statute and to add thereto, because an inspection of the corporate records would be likely to be more confusing than if there had been no change in the statutes. I am not now including cases of transfer as collateral security where the parties by contract agree to a, complete transfer of the stock upon the books of the company for the purpose of giving the pledgee or an assignee a right to vote and to absolutely control the stock; for that question is not now before Us. There is no doubt that the assignment of the stock in this case was purely as collateral security. Under the statute as amended, creditors or others interested in knowing, whether stock , has been assigned as collateral have the right to rely upon notice’s being given to the secretary of the corporation, as required by the amendment to the statute, and have a right to. be informed of fhat fact by the books which the secretary is required to keep, showing all such assignments. If these provisions of the law have not been followed, a creditor is justi*497fied in believing that no such assignments have been made. On the other hand, one dealing with stock has the right to purchase it from the holder of record, and, if there be nothing on the record showing an assignment as collateral, one has the right to buy stock standing in the name of the holder, although he may have actual notice that the transfer was as collateral only. As the remedies are not, in my opinion, cumulative, and as the transferee in this ease did not comply with the statute, as amended, I think the plaintiff should be defeated, and for that reason vote to reverse. *