Court Opinion

ID: 5168748
Source: CourtListenerOpinion
Date Created: 2022-01-02 04:51:12.080979+00
Date Added: 2024-06-11T08:25:58.885446
License: Public Domain

QUARLES, C. J.,
Dissenting. — Some of the probative facts upon which the findings of the lower court are based do not fully appear in the majority opinion. On June 30, 1894, the corporation C. Bunting and Co., Bankers, borrowed of McCornick & Co., of Salt Lake ‘City, Utah, the sum of $10,-000, and executed therefor two notes of $5,000 each, and delivered to said payee, as collateral security for the payment of said notes, 500 shares of the capital stock of the corporation, C. Bunting & Co., Merchants, of the par value of $100 per share. On February 1, 1897, the intervener, the Ogden Savings Bank, loaned to said C. Bunting & Co., Bankers, $15,000, and took a note therefor. On March 2, 1897, the intervener commenced an action against said corporation, C. Bunting & Co., Bankers, upon said note, to recover judgment for the principal and interest due thereon and attorney fees, in the district court of the second judicial district in and for Weber county in the state of Utah, and had summons issued in said action, and the same duly served on C. Bunting, vice-president and general manager of said corporation defendant, but designated in the sheriff’s return as president thereof. In said action, an attachment was issued and levied upon the said stock so pledged to the' said rMcCornick & Co., and the intervener paid to McCornick & Co., the balance due on said notes to secure which said stock was pledged, and thereupon, said notes were assigned to the intervener by McCornick & Co., and the said collateral security turned over to it with said notes. On April 16, 1897, the,corporation defendant in said action having failed to answer or otherwise plead, the default of said defendant was duly entered, and thereupon judgment was duly rendered and entered in favor of the plaintiff, the Ogden Savings Bank, and against the defendant, C. Bunting & Co., Bankers, for the sum of $16,812.50. On October 11, 1897, the intervener here, the- Ogden Savings Bank, com*27menced an action in the district court of the third judicial district of the state of Utah, in and for Salt Lake county, to obtain a judgment for the balance due upon the notes assigned to the said plaintiff by said McCorniek & Co., and to have said pledge enforced by judicial sale against C. Bunting & Co., Bankers, and summons therein was duly issued and served upon the said corporation defendant by serving the same upon John Flowers, secretary of the said corporation defendant. Thereafter, and on October 29, 1897, the default of the defendant corporation C. Bunting & Co., Bankers, was duly entered in said action, the said defendant having failed to answer or otherwise plead therein, and on November 1, 1897, said Utah district court regularly rendered and entered judgment in favor of the plaintiff therein, the Ogden Savings Bank, and against the defendant therein, C. Bunting & Co., Bankers, for the sum of $7,882.07, and decreeing a sale of said 500 shares of stock pledged to secure said indebtedness.
A number of sections of the Compiled Laws of Utah, relating to the issuance of attachments, levies thereof, property subject to attachment, and to matters of practice in relation to the entry, etc., of judgments were introduced and received in evidence in the lower court, and are in the record before us. A careful inspection of the judgment-roll in both of the cases decided by the Utah courts show that the proceedings therein were fair and regular on their'face, and show’apparent jurisdiction in both cases. In the first action named, the jurisdiction of the Utah court as to person and subject matter is unquestionable, and the validity of the service upon the corporation defendant by serving the summons upon C. Bunting, president, or vice-president and general manager, of said corporation, is not seriously questioned. But the receiver here attacks the service made upon the said corporation defendant in the latter case by serving summons upon John Flowers, secretary of the corporation defendant, as invalid and insufficient to give the Utah court jurisdiction. The sheriff’s return to said summons is as follows:-
*28“State of Utah, i
County of Salt Lake. $
gg
“Sheriff’s Office.
“I certify that I served the within and hereunto annexed summons in the city and county of Salt Lake, state of Utah, on the fifteenth day of October, 1897, upon the within named defendant, C. Bunting & Co., a corporation, by delivering to, and leaving with, John Flowers, personally, the secretary of the said C. Bunting and Company, a corporation defendant, a true and certified copy of the annexed summons, attached to a certified copy of the complaint referred to in the annexed summons; and I further certify that, after due search and diligent inquiry, I was unable to find in Salt Lake county, state of Utah, the president of said company, corporation defendant, George Y. Wallace, and I am reliably informed and believe that he is at present out of the state of Utah.
“Fees,-$1.20, paid.
“THOMAS P. LEWIS,
“Sheriff.
“By BOWMAN CANNON,
“Deputy Sheriff.”
The evidence shows that John Flowers was elected a director in, and secretary of, said corporation defendant, C. Bunting & Co.,‘ Bankers, at its organization in 1892 and actively served as such for about eighteen months following, when he turned the books Over to 0. Bunting, vice-president and general manager, who took them to Idaho; that he never resigned, was never removed, and his successor was never elected. The evidence simply shows that he ceased to act as said officer; but by reason of article 9 of the articles of incorporation of said corporation defendant, in evidence before us, he remained secretary de jure, although another officer was keeping the books of the corporation. Said article 9 is as follows: “The term of office of all directors or other officers, except when a vacancy is filled, and except as provided in section 10, shall be one year and until their successors are elected and qualified.” Flowers was a stockholder, as shown *29by the books of the defendant corporation, at the time he was elected and at the time he was served with summons. He had qualified and gave bond as said secretary. Hnder a statute passed by the legislature of TJtah in 1396, which was introduced in evidence upon the trial in the lower court it is provided as follows: “The directors or other officers may be removed from office in the manner prescribed by the agreement of incorporation or by the by-laws and all such officers after being qualified to act may continue to act unless removed, until their successors are elected or appointed and qualified, and the sureties on their official bonds shall remain liable thereon until that time.” (See Sess. Laws Utah 1896, p. 298, sec. 11.) From the facts and conditions shown, it is my opinion that the service upon said corporation defendant made by the service upon John Flowers, secretary, was sufficient, and gave the Htah court jurisdiction of person and subject matter of the action. Subsection 5 of section 268 (No. 3208) of the Compiled Laws of TJtah, in relation to the service of summons, is as follows: “If the suit be against any other corporate body incorporated under the laws of the territory [Htah], service must be made on the president, or chief officer, or his secretary, or clerk, if such officer, secretary or - clerk can be found within the district, and if not so found then on any agent of said company, or person having in his charge or custody any property of such company. When the defendant is a foreign corporation, and has any acknowledged agent in this territory, service may be made on such agent, or if no such agent is found, on any person in its employ, or who has any of its property in charge.” The statute provided for substituted service. The return of the sheriff showed that the president could not be found, and that John Flowers, on whom service was made, was the secretary of the corporation defendant. This was sufficient. In 19 Encyclopedia of Pleading and Practice, at page 659, it- is said: “Where no new officers have been elected or appointed, service on those last in office will bind the corporation, although their term of office may have expired.” And at page 661 of the same book it is said: “Sometimes the- statutes provide for service upon the secre*30tary, or secretary and treasurer; and, even when there is no statutory provision for service on such officer, he is a proper 'chief officer’ on whom the process may he served in the absence of the president.” See, also, cases cited in the notes to the texts on both pages. See, also, the following authorities: City of Ft. Scott v. Schulenberg, 22 Kan. 648; Evarts v. Manufacturing Co., 20 Conn. 447; Railroad Co. v. Brown, 17 Wall. 445, 21 L. ed. 675; Lewis v. Glenn, 84 Va. 947, 6 S. E. 866; Parker v. Hotel Co., 96 Tenn. 252, 34 S. W. 209, 31 L. R. A. 706. The Utah courts had jurisdiction in both cases, and the judgments were valid, and should be recognized here as valid and binding. It is not shown that the judgment in either of those eases, or the proceedings therein, had been annulled, reversed, or modified by the courts of Utah; and, the same being regular upon their face, the court of this state cannot annul them nor disregard them.
The appointment of a receiver by the district court below did not affect the property of the corporation 0. Bunting & Co., Bankers, in Utah. Courts of this state cannot extend their jurisdiction into another state by the appointment of a receiver or otherwise. Both of the corporations, C. Bunting & Co., Bankers, and C. Bunting & Co., Merchants, were Utah, corporations, and that state was the domicile of both of them. Shares of stock held in either of said corporations could be seized under attachment or execution in Utah, and there alone. Subsection 4 of section 415 (No. 3313) of the Compiled Laws of Utah provides: “Stocks or shares, or interest in stocks or shares, of any corporation or company, must be attached by leaving with the president, or other head of the same, or the secretary, cashier or other managing agent thereof, a copy of the writ, and a notice stating the stock or interest of the defendant is attached in pursuance of such writ.” But, aside from the writ of attachment and judgment in the first suit brought by the intervener in Utah, the purchase by it of the 500 shares of pledged stock under the order of sale in the last s.ction brought by it in Utah vested title to said shares of stock in the intervener. The 500 shares of stock in controversy here never came into the hands of the receiver, and the *31Idaho court never obtained possession, control, or jurisdiction over them. The judicial proceedings in Utah under which the intervener obtained title to said shares of stock are, under the provisions of the federal constitution, binding upon the courts of this state, and the courts of this state are not authorized to ignore the same in order to advance the interests of resident creditors of this state.
The majority opinion is based upon the erroneous theory that the shares of stock in controversy were merely muniments of title to two-thirds of the corporate property of C. Bunting & Co., merchants, situated in Idaho. It is somewhat remarkable that my associates should fall into this error. The certificate of stock is merely a muniment of title to the shares of stock, not to the corporate property. The certificate is prima facie evidence of ownership of the stock named therein, but the owner of stock need not necessarily possess a certificate showing that fact in order to entitle him to the benefits thereof. The owner of shares of stock, whether evidenced by a certificate of stock or not, does not make the shareholder an owner or part owner of the corporate property. This is true where one owns all of the stock of a corporation. (See Parker v. Hotel Co., supra.) Mr. Cook, in his work upon the Law of Stock and Stockholders, at section 5, quotes with approval from the decision of the New York court of appeals in the case of Plimpton v. Bigelow, 93 N. Y. 592, as follows: “The right which a shareholder in a corporation has, by reason of his ownership of shares, is a right to participate according to the amount of his stock in the surplus profits of the corporation on a division, and ultimately on its dissolution, in the assets remaining after payment of its debts.” And Judge Thompson, in his Commentaries on the Law of Corporations (volume 3, section 3292), says: “It must be kept in mind that when all the shares of stock of a corporation pass into the ownership of one person the corporation is not thereby ipso facto dissolved, nor its stock merged, so to speak, so as to make him the legal owner of the tangible property of the corporation.” (See same author, sections 5096, 6653, 6654.) It will thus be seen that the passing of all the stock into the hands of one shareholder does not work *32a dissolution of the corporation, nor give the sole holder of stock title over the corporate property, which, until a dissolution, judicially determined, remains in the directors of the corporation, who have control over the same. The shares of stock in question were properly in Utah; were never in Idaho at any time during the receivership; could be sold under judicial proceedings in Utah, as the record shows was done; and the said judicial sale, and purchase thereunder, vested title to said 500 shares of stock in the intervener; and said proceedings, until annulled or reversed by the Utah courts, are binding upon the world, including the district court of the fifth judicial district of Idaho in and for Bingham county, and its receiver, and vested in the intervener the rights which C. Bunting & Co., Bankers, had therein at the time the same were pledged to secure the Mc-Cornick & Co. debt — i. e. the right to share in dividends and in the corporate property remaining on a dissolution of the corporation. Courts of this state have no right or authority to seize the corporate property of C. Bunting & Co., Merchants, a solvent corporation, and apply the same to the satisfaction of debts of C. Bunting & Co., Bankers, another and distinct corporation, which is insolvent, without regard to the rights of the owners of the stock in the former corporation; nor can the court seize and sell the corporate property of a corporation for the purpose of satisfying the debts of an insolvent shareholder therein. The receiver is simply the agent of the court, and as such he succeeds to the rights which C. Bunting & Co., bankers, had in and to the 500 shares of stock in controversy, but has and can assert no rights in or thereto which said corporation itself could not assert or maintain if there was no such receivership.
(September 25, 1901.)
For the reasons stated, I am of the opinion that the judgment of the district court is correct, and that the same should be affirmed.