Court Opinion

ID: 5550826
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:31:13.095308+00
Date Added: 2024-06-11T08:35:05.706178
License: Public Domain

Lumpkin, Judge,
concurring in the affirmance of the judgment below, gave the following opinion :
My opinion in this case is predicated exclusively upon the ground of notice ; and 1 should be content to concur silently in the judgment to bo rendered, did not the law make it obligatory on each of us to express his opinion in all cases where we have the misfortune to disagree. As it is, I shall be brief, as my learned brethren on my right and left, will assign their reasons at length for the different conclusions to which they have respectively come.
It seems to be admitted on all sides that, as between the corporators themselves, a by-law would be good which asserts a lion on the stock of the members for debts due the company. A provision to this effect is frequently contained in the statutes conferring charters, and is a standing bylaw in almost all corporations. Tuttle, the plaintiff in error, purchased at sheriff’s sale, with full and explicit knowledge of the existence of this lien. Does it lie in his mouth to contest its validity, or to claim exemption from its operation ? I think not. As the judgment creditor and plaintiff in execution, had he discontinued the sale when the notice was given by the bank, and gone into Equity, as it was clearly competent for him to have done, my impi’ession is that he would have been entitled to a decree for a sale unencumbered by the lien, unless notice could have been brought home to him of the by-law at the time he contracted with Glendenning ; or, had he, or any one else, bought this stock, publicly or privately, without such notice, theirs, I think, would have been the better Equity.
I am aware that caveat emptor is the settled rule applicable to all judicial sales. It cannot be otherwise, from the very nature of the transaction, because there is no one to whom recourse can be had for indemnity. No warranty, express or implied, can be raised upon the part of the owner as to whom the proceeding is compulsory, nor of the sheriff, who is the mere ministerial agent of the law, nor of the court, under whose authority the sale is made. Of necessity, therefore, the purchaser takes all risks ; and yet, notwithstanding this doctrine, as now advised, I would compel the bank, under the Act of 1822, to transfer the stock in favor of a bidder who was ignorant of their lien. It would be in vain to tell me that all who attend sheriff’s sales should take care and examine into the titles of the property offered in the market. 1 would, in opposition to any suggestion of this sort, plant myself immovably upon the publication of the corporation itself in the gazettes of the State, proclaiming, on oath, semiannually, to all the world, that Glendenning was the owner of the shares standing in bis name. — Prin. Dig., 49; Hotchkiss, 360, 361. Here would not only be the absence of notice, the fundamental and predominant feature in the whole of our legislation creating liens, as in the cases of mortgagees, mechanics, and the like, but direct and positive notice to the contrary, to wit, that the stockholder was the absolute proprietor of the property ; and with no simultaneous act of the company to put persons upon the look-out or inquiry. I repeat that, under such circumstances, I never could yield my consent to see innocent purchasers and creditors suffer.
*54Unfortunately for Mr. Tuttle that is not the case which he makes. He comes- before us as a mere volunteer in this controversy. The lien of the bank was advertised. Bystanders were notified of the existence of the contract made by Glendenning with his partners, that stockholders who were indebted to the institution should not transfer their stock while the liability lasted, and that the company should be considered as creditor in possession, and that this state of facts should constitute a lien on the stock until the debt was discharged ; — -that a note of $3,500, on which Glendenning was the endorser, had been laying over and dishonored since the last of March, 1842, and duly noted and protested for non-payment — a period long prior to the rendition of Tuttle’s judgment. And it was farther made known that a clause was inserted in Glendenning’s scrip, the evidence of his ownership, that his stock was subject to the payment of all debts due, or to become due, from him to the company, either as principal, security, or otherwise, and that the same was transferable only on the books of the bank. In the face of this notice, Tuttle proceeds with the sale, knowing full well that he was buying property thus encumbered, and with the ground of the adverse claim spread out before his eyes. He grasps the stock, it may be to secure his debt, as tabula in naufragio. Thus forewarned, he has not been deceived or ensnared, whoever eke may be. He takes the stock, cum onere, and on that account purchases, necessarily, at a great sacrifice. I do not see that we can help him. This is not'a case of crassa negligently, for which there could be no relief. It is worse. It is the case of one who, in the language of Lord Bacon, traffics for what, in Equity, he knows at the time to belong to another. — 2 Chan. Cas., 246. I have no hesitation in concluding that the purchase at sheriff’s sale, under these circumstances, ought to be adjudged subject to the interest and lien of the corporation ; and it were easy to fortify this position, did the occasion require. A vendor’s lien for the purchase money of land is not only good against the bargainee and his heirs, but third persons, likewise, who purchase with notice. — 10 Yerg., 186; 9 Cowen, 316 ; 4 Black, 339. Indeed this broad and sensible distinction runs through all the law, in every branch of it. — 7 Watts, 332; Powell on Mortgages, vol. 2, c. 14, 561, 662; Notes by Coventry — et passim. The doctrine of the English law of liens is not favored in the American courts, and our Registry Acts are designed to give protection against latent Equities. — 14 Sergt. & Rawle, 333; 3 Pick., 149; 8 Greenleaf, 94.
Profiting as much as my time would permit, since the argument at bar, in searching for authorities, I have been enabled to lay my hands on two cases, bearing directly on the question. And while I cannot concur fully in'all the conclusions at which the court arrived in either ; still, as they both abundantly sustain my own position, I will advert to them. These adjudications, it is true, are not the law; but, like all others from our sister States, they are the evidence of what the law is. One is the case of the administrator of Spence vs. Whitaker and others, decided by the Supreme Court of Alabama. — 3 Port. Rep. 297. A number of individuals of that State associated themselves together, in 1818, by articles of agreement, under the name of the Courtland Company. The object was to lay off, and sell out, a town, on certain lands they purchased. They divided the stock into one hundred and sixty shares, for each of which a certificate issued.
*55By the articles, these certificates were assignable, and the assignee was entitled to all the benefits, and subject to all the conditions and penalties of the original parties. One Tilford being the owner of nineteen shares, deposited the same with one Spence, as collateral security against a heavy responsibility, incurred by Spence for Tilford, who, at the same time, executed a power of attorney to Spence, authorizing him to sell and. transfer said stock. In pursuance of this arrangement, thirteen of the shares were sold. The holder called on the agent and manager for the Company, for the dividends due on those shares, who refused to account therefor until the assignee paid and satisfied a debt due said Company from Tilford. It was admitted that the purchaser was ignorant of the Company’s claim, until long after the transfer, and that, at the formation of the Company, there was no express understanding respecting the lien now set up in its behalf; but that they acted upon consultation with counsel, who advised that it was their legal right.
On the first hearing of the bill, the Chancellor admitted the offset of the Company’s debt to go against the thirteen shares ; the decree was reversed by the Appellate Court. Chief Justice Saffold, in delivering its opinion, says: “ While it must be conceded that the company or trustees had no power to adopt rules which were repugnant to the laws of the land, yet they had the undoubted right to stipulate such terms, and prescribe such rights, forfeitures and conditions, as were not prohibited by law; consequently they had a right, while adopting the articles for their government, and issuing the certificate for the stock, to have provided a lien upon them, for debts due the company from the original, or any subsequent, stockholders.” And the rejection of their claim is put expressly upon the fact of their having declined the insertion of any such stipulation, in cither instmmen tto wit: the a ¡tides, or the certificate. Here it is incorporated in both. Again, “ the decision,” says the Judge, “ must materially depend on the terms of the articles of association under which the certificates issued, and the nature and objects thereof. That it was competent for the company, by their articles, to have retained a lien on the certificates, as well as on the lots sold, to secure the debt due them, cannot be questioned. Yet it may be doubted if they could have done so with good faith, without expressing the lien in the certificates, as they did in the title bonds, or giving it publicity in some other way.” In other words, the comparative rights and equities of the adverse claimants is made to depend, in. the opinion of the Chief Justice, upon the question of notice.
The other is the case of Fitzliugh vs. the Bank of Shepherdaville and others, decided by the Court of Appeals of Kentucky. — 3 Monroe’s Rep., 126. Fitzliugh endorsed a Bill of Exchange to the United Slates Bank for Thomas J. and Henry H. Roberts. It was protested for nonpayment, and on notice thereof taken up by Fitzhugh. Upon application to the drawers to be re-imbursed, they gave him forty-five shares of stock in the Bank of Shephordsville. The Messrs. Roberts held the scrip of the Bank for the shares, or a certificate of the number and amount, stating on its face, that the stock was transferable only at Bank personally, or by attorney. Letters of Attorney to the cashier were executed, authorizing him to make the transfer. He refused to do so, alleging as the only reason in behalf of the Bank, that the Messrs. Roberts were then indebted to the *56Bank a sum of money due by notes endorsed, and it was understood, when the accommodation was given, the stock was a pledge for the payment, although there was no writing to that effect. Fitzhugh brought his bill against the Bank to compel an assignment of the stock to him, and to account to him for the dividends that had accrued since the transfer. The question was which was entitled to the preference. The court below decided in favor of the Bank, from which an appeal was taken. The judgment was reversed on the ground that the Bank “ had no express pledge of the stock.” Judge Mills, who delivered the opinion of the court, says: “ Bank stock is an article of commerce, and the certificate of shares is not only the evidence of title, but the evidence of the negotiability of the stock, and must be taken as conclusive evidence against the Bank that the stock is saleable and free of encumbrance. If the Bank wishes to avail itself of such a pledge, it must take from the holder this evidence of title and transferable quality, and show an express pledge, otherwise the holder of such evidence might delude and impose upon purchasers, and the Bank stand as a tacit accomplicein that delusion, and then be permitted to take from an innocent purchaser the title thus acquired.”
I concur heartily in this opinion and the reasoning by which it is supported. Here it will be perceived that there was no evidence of a special pledge of stock. The point was, had the Bank a general lien by law on the stock held in the institution by their debtors, notwithstanding they had issued the scrip, the existence of the stock and its ?
I return then in conclusion, to the point from which I started, and that is, that the fact of the periodical publication of stock under the act of 1832 will likely, when the proper issue is made, over-ride the lien, secured by the by-law and incorporated in the scrip. But so far as Mr. Tuttle is concerned, we are precluded from any such inquiry by the notice given to him on the 6th day of June, 1843, when, as purchaser, he for the first time became connected with the transaction, and in which character he is now invoking the aid of the court, to perfect his title by compelling the Bank to transfer the stock.
Whereupon it was adjudged and determined that the judgment of the court below stand affirmed.