Court Opinion

ID: 4894333
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:54:57.573039+00
Date Added: 2024-06-11T08:12:36.426401
License: Public Domain

West, Associate Justice.—
This case bears evidence of having been very carefully and faithfully briefed by both parties. The appellants seem to have presented the merits of their case as fully and as satisfactorily as could be done, or as was desirable it should be done. We have ourselves given a great deal of attention to the main question discussed, and have considered it with more than usual care.
We have no time at present to give at length the reasons why we believe the judgment in the case should be affirmed. We must content ourselves, therefore, with stating as briefly as possible the conclusions on the subject that we have reached.
We are, then, of the opinion.that the delivery and transfer, in good faith, for a valuable consideration, in the manner disclosed in the evidence, of the certificates in question to the appellee, carried with it all the rights of the holder, Hobby, to them, and invested the appellee with the ownership, and entitled him to demand from the proper officers of the corporation such action as was necessary for their books to show him to be the true owner.
In other words, by the delivery and transfer of the certificates by Hobby to the appellee, as detailed in the evidence, the appellee became the owner of them, and Hobby was divested of any further right or interest in them, at least so long as the debt they were intended to secure remained unpaid.
Hobby, then, having no interest in the certificates that could be reached either by attachment or execution at the time the writ of garnishment was served, the appellants acquired no rights by the service of such writ as against the prior claim of the appellee.
Speaking of the effect of these transfers of stock, that, like the one under consideration, are not made regularly on the books of the corporation, in the last edition of Angell & Ames on Corporations (11th ed., 1882), the author says: “The charter and by-laws frequently provide that the stock of the company shall be transferable on the books of the company only, or that, to be valid and effectual, the transfer must be registered by the clerk or treasurer of the corporation on the company books; and where the charter required the transfer to be made on the books, the requisition was considered satisfied by a by-law requiring the transfer to be regis*118tered on the books of the company. A very literal construction has been given in Connecticut to such clauses, either in the charter or by-laws of a corporation; the scope and object of such provisions being, in the view of the supreme court of that state, ‘ to render the purchase of stock secure to any person, if, at the moment of his purchase, the company books did not furnish evidence that it had been previously transferred.’ The settled law of Connecticut is that, where such clauses are found in the charter and by-laws, or either, the transfer is invalid and of no effect for any purpose unless made or registered on the books of the company. The registry is there deemed the originating act in the change of title; and an entry by the clerk on the deed, ‘receivedfor record,’ is not considered equivalent to a registry.”
“A more liberal construction, and one far more in accordance with their spirit and meaning, has been given to such clauses in charters and by-laws of corporations by the courts of other states, and by the supreme court of the United States. As they are intended merely for the protection of the interests of the corporation no effect is given to them further than is necessary to effect that purpose. It is necessary that an incorporated company should have the means of knowing who are stockholders and members in order that they may know to whom dividends are to be paid, and who are entitled to vote upon the stock; and where the company has a lien upon the stock for debts due to it from a stockholder, that it should have the means of preventing a transfer in derogation of its own rights. To secure this knowledge, and to enable corporations to avail themselves of their lien upon the stock of the company without danger to the rights of purchasers, these clauses are usually inserted in their charters or form a part of their by-laws. Accordingly, where transfers of stock are made without conforming to the requisitions of the charter or by-laws in making them, or having them registered on the books of the company, the better opinion decidedly is that the transfer passes to the purchaser all the right that the seller had; that such provisions were not intended to, and do not, incapacitate the owner of the stock from transferring it at his pleasure, by way of equitable assignment of his interest in it, subject to the charter rights of the corporation, which all must notice, or compel him to own it, unless the corporation allow him to sell, against his will; and the only effect allowed to them seems to be that the purchaser cannot claim a certificate of or a dividend upon the shares, unless he first applies for a transfer, according to the charter and by-laws. Any other proper transfer is equally valid *119as between vendor and vendee, and even as against a creditor of the vendor, who attached the shares before he or the corporation, through its officers, had notice of the transfer. In other words, ■such provisions, whether by charter or by-law,, apply solely to the relation between the corporation and its stockholders,— to the questions who shall vote, to whom dividends shall be paid; and enable the corporation to protect any lien it may have upon the stock, or equity in it, as between itself and the stockholder transferring it. They constitute a privilege of the corporation, which may be waived or asserted, at the pleasure of the directors and president.” Sections 353, 354.
This is now believed to be the rule most generally adopted. Judge Drake in his fifth edition (1878) of his now standard work on Attachment, indorses strongly the same doctrine. Secs. 527 and 608. In the last edition (1882) of Daniel on Negotiable Instruments, the same rule is pronounced to be the best. Vol. 2, sec. 1708e, 1708f, pp. 720, 721. See, also, Stone v. Brown, 54 Tex., 338; Strange v. H. & T. C. R. R. Co., 53 Tex., 169; Igleheart v. Moore, 21 Tex., 502; Le Gierse v. Moore, 59 Tex., 471.
There are, no doubt, to be found decisions of courts, the opinions •of whose judges are entitled to the very highest respect, who seem to hold differently; yet we are satisfied that, both upon principle and authority, the rule above laid down is more correct in point of law, and is the wiser and safer rule to follow in practice.
We do not think it necessary to consider any of the other questions raised and discussed in the briefs of counsel.
We believe that the judgment, under all the circumstances of the case, ought to be affirmed, and it is accordingly so ordered.
Affirmed.
[Opinion delivered February 12, 1884.]
•Chief Justice Willie did not sit in this case.