Court Opinion

ID: 8260105
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:52:59.429739+00
Date Added: 2024-06-11T16:43:09.289784
License: Public Domain

Biggs, J.
( dissenting). — I concur in the reversal of the judgment for the reason only, that the circuit court failed to require the plaintiff to give a bond. This was a condition precedent to plaintiff’s right to relief.
According to my view, the treatment of the legal questions in the opinion is unsatisfactory, and utterly fails to meet the exigencies of the case. The conclusion is that Keller is entitled to duplicate certificates, but that it Should be stated in them, that they had been issued in pursuance of a decree of the circuit court in •this case, wherein it had been ascertained that the originals had been actually lost and not negotiated by Keller. If this decree stood by itself, I would not ¡seriously object. The trouble with me is, that such a ■decree would be founded on the opinion of this court, which discredits Keller’s title to his stock, and necessarily casts doubt upon his ability to convey to another an absolute and indefeasible title. The reading of the opinion would deter any prudent business man from buying from Keller. I think that Keller has not only the right to a finding that his original certificates had been actually lost and not negotiated by him, but the ■court should also find and decree that he is now the Ibonajide owner of the stock.
My associates have misapprehended the record in this case in some respects, and, as a consequence, the opinion fails to state the facts. It is stated, in the opinion, that the circuit court in its decree required a bond from the plaintiff, and that in compliance therewith a bond in the penal sum of $20,000 was tendered. I do not so read the record. It is for the reason that the *99court failed to require the bond, that I concur in a reversal. The true facts are that there were two counts in the' petition. In the first, the plaintiff asked the court to compel the defendant to issue to him new certificates in lieu of those lost. In the second, the averment was made that the defendant had agreed to issue to the plaintiff the new certificates demanded, provided he would furnish a bond of sufficient indemnity to secure the defendant against any contingent liability by reason of the issuance of the ■ new certificates ; that the plaintiff had delivered such a bond, which was accepted by the defendant, and that afterwards the defendant refused to comply with its part of the agreement. The bond referred to is the only one in the case. . The trial court evidently regarded it sufficient to protect the defendant, and for this reason it failed to provide in the-decree for an additional bond. In this I think the court-committed error. My reasons are: First. That such a bond ought to be given in pursuance of the decree second, that the bond given provided for the issuance of duplicate certificates, whereas the decree required new certificates. The obligation of the sureties in the bond- is strict is simi juris, and this variation between the conditions of the bond and the terms of the decree-would, in my opinion, render the bond worthless as an. indemnity, in so far. as the defendant should comply with the judgment of the court.
As a defense, the defendant pleaded one of its: by-laws to the effect, that its capital stock could only be transferred on the books of the' company upon the surrender of the outstanding certificates representing the stock sought to be transferred ; that the issue of a new certificate to the plaintiff, without the surrender and cancellation of the old certificates, would be ultravires, inasmuch as there were then outstanding certificates for the entire authorized capital of the defendant corporation.
*100Practically there is no controversy as to the facts. The evidence tended to show that the plaintiff was one of the original incorporators of the defendant company, and that the certificates, which were alleged to have been lost, were issued to him as one of the original stockholders; -that, on or about the first day of July, 1889, the plaintiff was about to enter into some kind of a contract with parties in St. Joseph, Missouri, and to secure the faithful performance of his part of the contract, if it should be entered into, he placed the certificates in the hands of one George O. Hull, the cashier of a national bank at St. Joseph ; that the contemplated contract was abandoned; that the plaintiff demanded of Hull the return of the certificates, but that they could not be found, although search had been diligently made in all places where they would likely be found. The plaintiff testified positively that the certificates ■were not indorsed, while Hull said that his impression was that they were'indorsed ; that his reason for thinking so was that, according to his usual method of transacting such business, an indorsement would have been .required. He also testified that the certificates were ■delivered to him after business hours, and that he placed them for safe keeping in the safe of his brother, who was at that time collector of revenue for Buchanan county. His brother testified that he had no recollection of ever seeing the certificates, but he had made repeated searches for them among his papers. The loss of the certificates was as clearly established as it is possible to do by human testimony; the witnesses by whom this fact was established were in no way discredited ; and there is not a fact or circumstance in the case that has the remotest tendency to even create a suspicion of bad faith. As evidence of the good faith of the Hulls, who are prominent and worthy citizens of Buchanan county, they have manifested their readiness to give any kind of bond required. So much for the facts.
*101Now let us examine the defendant’s theory of the main, and only, defense made by it. If the defendant is right in his view as to the effect of the mere transfer of a certificate of stock, I am free to say that the issuance of new certificates to Keller .would be idtra vires of the corporation, and no court could rightly compel it to do so. Case v. Kelley, 138 U. S. 21. This position, if it has any foundation in law at all, must rest on the legal assumption, that the transfer and delivery of a certificate of stock to a bona fide purchaser, without more, constitutes such purchaser a stockholder in the corporation. Arguing from this premise, the defendant’s counsel insist that, when the corporation issues new certificates without requiring the' surrender' of the old ones, even though it be done in obedience to an order of court, it amounts to a double issue of stock; that, even though proof of the most convincing character be produced that the originals have been lost, the issuance of duplicates only could be lawful, because it could not be said with certainty that the certificates, claimed to have been lost or destroyed, were not outstanding in the hands of a bona fide stockholder. While the majority of the court decline to express an opinion' on this subject, yet it is stated in the opinion, and the statement is made unconditionally, that, if a corporation refuses to recognize the holder of its certificates as a stockholder, he may either pursue his right of action for damages, or by a suit in equity may compel the corporation to issue a new certificate and admit him to all the rights of a stockholder. This could only be true as to the latter remedy, under the defendant’s idea of the law. To illustrate : If the original certificates issued to Keller should be produced by a bona fide purchaser either from Keller or Hull, the defendant' would be compelled to recognize him as a stockholder, regardless of any action of the courts in reference to the lost certificates, or as to who was the then owner of the new certificates issued under the order of court. I will be able to show *102further on in this opinion that the authorities, cited in support of this statement of the law, do not sustain it, when it is made to appear that the new certificates of stock have passed into the hands of bona fide purchasers, and there has been a transfer on the stock books of the corporation.
The effect of a mere delivery of a certificate of stock, without more, has been discussed by the text-writers and by some of the courts. Helm v. Swiggett, 12 Ind. 194; New Albany Ry. Co. v. McCormick, 10 Ind. 499; Marlborough Mfg. Co. v. Smith, 2 Conn. 579; Coleman v. Spencer, 5 Blackford, 197; Shaw v. Spencer, 100 Mass. 382; Moore v. Bank, 52 Mo. 377; Chouteau v. Harris, 20 Mo. 382; St. Louis Ins. Co. v. Goodfellow, 9 Mo. 149. The most satisfactory exposition of the law is to be found in the case of New York & New Haven Ry. Co. v. Schuyler, 34 N. Y. 30, from which Judge Thompson quotes in his opinion. It will be observed by a reference to the quotation that when the by-laws provide that stock can only be transferred on the books of the company, a sale and delivery of a certificate do not constitute the transferee a stockholder ; that, as between him and the assignor, the title passes ; but that, before it can be said that he is a stockholder, he must present his certificate to -the company and have the stock transferred on the books ; that, until this is done he is subject to none of the liabilities of a stockholder; neither does he acquire any of the rights of a stockholder until he has been recognized as such by the corporation ; that, if he neglects to have the stock thus transferred to himself, and the owner of it on the books induces the corporation to issue a new certificate and makes a transfer to a second bona fide purchaser, then the latter acquires the title to the stock, and the first purchaser has only a right o faction for damages against the corporation for making the transfer without requiring the original certificates to be surrendered. The foregoing is the recognized law in all the courts, so far as my *103research has gone, except a mere dicttom in the case of Hall v. Road Co., 70 Ill. 673. This case is cited in the main opinion, and is relied on by my' associates as asserting a contrary doctrine. The statement of the facts in the reported opinion is very meager and unsatisfactory. I gather from it. that the real and only question in the case was, whether the plaintiff Hall «or one Turner was the true owner of certain stock in the defendant company. Both parties claimed under the original stockholder. Just how or under what circumstances Turner became the owner of the original certificate does not appear. ■ Hall had by some means induced the defendant to issue to him a new certificate, and to transfer the stock to him on the books. The only issue submitted to^the jury was, whether the transfer to Hall was regular. The court in passing on the question said: “It was essential that the stock should have appeared by the record of the company or by a by-law to have been regularly issued. This was a suit by’ the person to whom the certificate was issued and he was bound to know whether the stock was legally transferred; and his certificate informed him that such stock could only be transferred by record in the books of the company ; and while the certificate was prima facie evidence that it had been regularly transferred, still, that was overcome by showing that it did not appear in the record of the proceedings of the company ; and to have restored his prima facie case he should have proved that the order for the transfer was in fact passed, but never reduced to record. This he attempted, but the jury found he had failed to do.” • The'foregoing is all that the court decided. It is quite manifest that the decision fails to sustain the defendant’s theory. In a preceding-paragraph the judge made this loose remark: “The stock first issued, until taken up, or at least canceled, would be still valid and binding.” This remark was not necessary to the decision of the case, and the court failed to support it by the citation of a single authority.
*104The only case'cited by the defendant in support of its position, that is in any way analogous, is Smith v. Mining Co., 1 Nev. 423. When the opinion in that case is examined, it will be found to contain good law, and it in no way helps the defendant. The circuit court ordered the defendant company to issue to the plaintiff' certificates of its capital stock, although there was no pretense that any of the original certificates had been lost or destroyed,, or that any of the certificates which had been issued to the stockholders were void. The supreme coui’t very ■ properly held that this action of the court, if carried out, would result in an over-issue of the defendant’s capital stock, and, therefore, could not be sustained.
Unless the authorities cited in the opinion support the declaration that a court of equity will compel a corporation, under all circumstances,' to recognize a bona fide holder of an uncanceled certificate as a stockholder, the defendant’s plea of ultra vires is without any authority to support it.
The first case cited in the opinion is Cushman v. Mfg. Co., 76 N. Y. 365. The question in issue was, whether the plaintiff or one Beals, who had obtained a transfer on the books of the company, was the true owner of certain stock in the defendant company. The' court decided in favor of the plaintiff for the following reason : ‘ ‘ Beals was a witness to the original assignment to the plaintiff ; he was an officer of the company, and took the second transfer to himself with full knowledge of plaintiff’s claim, for a very trifling consideration, and in fraud of plaintiff ’ s rights as owner of the stock. In view of the facts Beals has no reason for questioning the plaintiff’s title, and the defendant certainly has no valid grounds for claiming that Bealswas the owner instead of the plaintiff.”
In the case of Iron Ry. Co. v. Fink, 41 Ohio St. 321, I find the following state of facts : Fink was the purchaser-from the residuary legatee of the original *105stockholder; the stock was subscribed for in 1849 ; the original stockholder paid some of the assessments prior to his death in 1851 ; subsequently his administrators paid other assessments, but they neglected to pay the stock in full. Nothing 'further was done about the stock either by the company, the administrators or by the residuary legatee until 1873, when the legatee, who was the only heir, sold the stock to Pink, the defendant in error. Pink tendered the amount due on the stock together with interest, and demanded of the company the issuance of certificates to him, and he also asked for an accounting for dividends. The defendant refused to do either, and the supreme court merely held that a court of equity would compel the defendant to do both.
The next and last case cited is Chew v. Bank, 14 Md. 299. The facts in that case were substantially as follows : Certain stock of the defendant bank belonged to the estate of a deceased stockholder. The only heir was an imbecile. The administrator of the estate procured a power of attorney from the idiot, authorizing him to sell and have transferred on the books of the defendant company the stock standing in the name of his intestate. This power of attorney was presented to the defendant, and upon the faith of it the administrator was permitted to have the stock transferred to himself. Subsequently, the heir was declared to be of unsound mind, and a curator appointed to také éharge of his estate. " This action was brought by the heir through his curator to recover from the bank the value of the stock. The court held that the act of the lunatic in executing the power of attorney was an absolute nullity, and that the bank must account to him for the value of the stock, although it acted in good faith and’ without notice of the condition of the plaintiff’s mind. The first and second cases were properly decided; whether the third is good law, it is not necessary for me to stop to discuss. It is sufficient for the purposes *106of this case that none of the cases are authority for the proposition stated in the opinion.
My conclusion is that the defendant’s plea of ultra vires is unsupported by the authorities, and must fall to the ground. Whenever a certificate of stock is lost or destroyed, and satisfactory evidence of the fact is produced, the corporation may reissue the certificate without subjecting itself to the charge of issuing more stock than the charter authorizes. But, in doing so, it asserts that the holder of the new certificate is the stockholder, and it incurs the risk of having to account in damages to any bona fide transferee for value of the original certificate. Hence in no case should the corporation issue, or be compelled to issue, new certificates, unless it is first reasonably indemnified by a good bond. The officers of a corporation, .who act in a fiduciary capacity, would be justified in all such cases in refusing* to act, until the owner cf the lost certificate has, at his own expense, established the fact of such loss, and his right to another certificate, by the decree of a court of competent jurisdiction. Such a decree was entered in this case, but as I have shown, the circuit court failed to require a bond.
My associates and I do not disagree as to the right of a court of equity to assume jurisdiction in this case. The remedy undoubtedly is in equity and not at law. The matter of disagreement between us is the kind of decree and the form of the certificate, to which the plaintiff is entitled. I have no objection to the defendant writing in the certificates that they have been issued under the decree of the court, provided the right kind of a decree is entered. As I have heretofore stated, the plaintiff is entitled not only to a decree that his original certificates have been lost, but the court ought to go further and decide that, as between him and the defendant, he is and must be regarded as the absolute owner of the stock. It is only in this way that its market value can be maintained. Anything short of it would *107discredit the plaintiff’s title and prevent him from selling in the market. In this case the plaintiff has asked us for bread, and we have given him a stone. The opinion, together with the emasculated certificate which it is proposed to issue, will deter any prudent business man from buying his stock.
But it may be asked why not have the plaintiff to indemnify a purchaser against this contingent liability, rather than compel the defendant to assume the risk of the continued solvency of bondsmen. My answer is this : That a purchaser is not bound to buy ; he owes the plaintiff no duty; consequently, he will rightly' decline to take any risk, however remote it might be. But not so with the defendant. It stands in a fiduciary relation to the plaintiff ; its officers are his trustees, and it is their duty to relieve him as a stockholder from loss, if it can be done without appreciable loss or danger of loss to the other stockholders.
.The evidence in this case is so convincing, and comes through such trustworthy channels, that it appears to me that the risk, which would be assumed by the issuance of a clean certificate to the plaintiff, would be reduced to the remotest contingency. It may be true, as stated in the opinion, that the only direct precedent for the issuance of a new certificate is the case of Phillips v. Gaslight Co., 25 La. Ann. 418; but all the analogies of law support the case. Almost every day the courts of this state render judgments upon lost notes, and the only protection offered the makers is the statute requiring suitable bonds to be given. The makers must pay the judgments and take the risk of the bondsmen becoming insolvent. Our statute but follows the equity practice which prevailed prior to its enactment. Before the enactment of the statute, an action at law could not be maintained on a lost note. The owner’s remedy was in a court of equity, where a recovery was permitted, provided reasonable indemnity was given. Eans v. Bank, 79 Mo. 182. It is upon the same *108equity principle that I claim the plaintiff ought to be fully restored to all that he has lost. I can see no greater hardship in the one case than the other; nor can I see any difference in principle in the two classes of cases.
For the reasons stated, I am compelled to dissent from the disposition made of this case by my learned colleagues