Court Opinion

ID: 8047613
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:01:09.195558+00
Date Added: 2024-06-11T16:37:34.173230
License: Public Domain

Ladd, J.
The sale and transfer of these shares were made by Barton to the plaintiff May 24, 1867 ; and the case shows that the plaintiff paid $95 per share for them, the par value being $100.
It is alleged in the declaration, that on February 3,1868, the plaintiff caused the certificate and assignment to be delivered to the treasurer of the company; and it appears that the reason assigned for not issuing to him a new certificate was, that prior to that time, namely, on the 28th day of January, 1868, said shares had been attached as Barton’s property on a writ in favor of the company against him.
If by the attachment a valid lien was created in favor of the company, it was under no obligation to enter the transfer on its books at the time the certificate was presented; and the plaintiff cannot maintain this suit.
The question then is, What effect shall be given to the attachment made January 28, 1868 ?
The plaintiff offered to prove that at the time of the sale said Barton was president of the corporation, and acted as its general agent in superintending the affairs thereof, and continued so to act until January 27, 1868, the day before the attachment was made ; that the agent who succeeded Barton, and who procured the attachment and caused a levy to be made on the shares, was a director in 1867, and knew of the sale and transfer of the shares from Barton to the plaintiff prior to the time of the attachment; and that the treasurer of the company had actual notice of the sale and transfer as early as June, 1867 ; and other facts tending to show knowledge of the sale by the corporation at or about the time of the transaction.
We think this evidence was clearly admissible for the purpose *584proposed. The president and treasurer, by the by-laws, were directors ex-officio ; and it is fair to suppose that they were active members of the board, participating largely in the control and management of the affairs of the corporation. But even if those officers had not been members of the board of directors, there would probably be no difficulty in holding that notice to a general agent, who has the superintendence of the affairs of a corporation, is notice to the corporation, and therefore that the defendant is chargeable with knowledge possessed by its president and general agent, Barton.
Angell and Ames on Corp., § 305, and cases in note; Hovey v. Blanchard, 13 N. H. 145; Marshall v. Ins. Co., 27 N. H. 157; Campbell v. Ins. Co., 37 N. H. 35; Patten v. Ins. Co., 40 N. H. 375; Fitzherbert v. Mather, 1 T. R. 12; N. Y. & N. H. Railroad Co. v. Schuyler, 34 N. Y. 84.
We are thus brought to the question whether the attachment -made by the defendant, with knowledge that the shares had been previously sold and transferred by Barton to the plaintiff, will hold them, for the reason that the transfer had not been made oh the books of the company according to the provision contained in the certificate.
It does not appear .that any mode of transfer is provided in the charter, and the only provision in the by-laws on that subject is contained in Art. 10, as follows : “ Shares may be transferred by assignment on the back of the certificate, and surrender of the certificate to the treasurer.” This corresponds with the provision in the certificate, except that the words “ only on the' books of the company ” appear in that instrument.
It is not necessary to inquire whether the provision contained in the by-laws was authorized by the charter; nor whether there is any difference in legal effect between a provision in the charter and one in the bylaws which have been adopted in pursuance of an authority conferred by the charter ; nor whether the provision in the certificate should have any effect by way of contract between the share owner and the corporation ; for we think that, by a fair construction of the general law of the State in force at the time of this transaction, a transfer of shares in a corporation of this sort, to be complete and perfect for all purposes, must be entered upon the books of the company — Rev. Stats., chap. 141; Pinkerton v. The M. L. & Railroad, 42 N. H. 424 — the object being, as is well said by defendant’s counsel in their brief, “ not only to give notice of the title, but to furnish an authentic record that would determine membership in the corporation, the right to vote, private liability for debt, liability to taxation, and all other incidents of ownership,” &c.
It being admitted, then, that, for the protection of these various rights and interests of the corporation, the public, and creditors of the stockholders, the law provides that the title of a purchaser of shares shall not be complete, as against those having these various interests, until the transfer is entered on the books of the company, it becomes a very .important inquiry to ascertain what is, in point of fact, the origin and basis of a purchaser’s title to such shares when they pass from' seller to *585buyer. Does it originate in and rest upon the contract of sale between the parties, or is it a creation of law, dating its birth from the record of the transfer on the company books ?
A share in a corporation, which has for its object a division of profits among its stockholders, has been defined to be “ a right to partake, according to the amount of the party’s subscription, of the surplus profits from the use and disposal of the capital stock of the company to the purposes for which the company is constituted.” Angelí and Ames on Corp., § 557.
It cannot be disputed that this right is property of a definite and important character, with many of the qualities of visible, tangible, personal property, and having a value, and as capable of appreciation as vessels or merchandise, or other personal chattels. Shaw, C. J., in Fisher v. Essex Bank, 5 Gray 377. From this it follows, by inevitable inference, that it may be the subject of sale as much as any other species of property, real or personal, so that, as between vendor and vendee, the title may pass by their own act, and be thereby vested absolutely in the vendee.
It seems too clear for argument, that the ownership of the shares passes from the seller to the buyer by force of the contract of sale, and not by operation of law; and if that be so, the buyer’s title, so far as the seller is concerned, attaches the moment this contract is fully consummated between them.
This kind of property, being an intangible right, somewhat akin to the right to receive money due upon a bond or other chose in action, is incapable of actual manual delivery. All the seller can do, that corresponds at all to the delivery of personal chattels in other cases of sale, is, to hand over to the buyer his certificate, with a sufficient assignment by deed or otherwise to entitle him to a transfer of the shares on the books of the company. When the seller has done this, his power and duty in the matter are ended, and it is at the option of the purchaser whether the transfer shall be recorded or not.
If the purchaser omits to have the record made, he can claim no rights as a member of the corporation; and he also incurs the further risk of having his title defeated by a subsequent attachment or sale to a bona fide purchaser.
It is difficult to see any substantial difference between the position of this plaintiff after the sale and assignment of the shares to him by Barton and before a transfer was made on the' books, aiid that of the grantee in a deed of land before his deed is recorded. In. both cases the seller has parted with his title, and, as to him, the buyer lias acquired it. It is only third persons in either case whose rights or interests are affected by the omission.
In the case of an unrecorded deed, the grantor continues to be clothed with evidence of ownership after the conveyance, very similar to that which remains with the seller of shares before the transfer has been entered on the books. The record shows that he is still the owner of the land, when in fact he is not; and, so far as any interest a creditor can have in the matter is concerned, the same is *586precisely true in the case of shares in a corporation sold but not transferred on the books.
The statutes which we hold require the transfer of shares to be entered on the books of the corporation kept for that purpose, are certainly no more explicit and absolute than that which requires the recording of deeds. The object of the law, so far as creditors are concerned, is the same in both cases.
As between the parties the title passes by contract and not by the record in both.cases alike.*
*587It is difficult to suggest any reason for holding that actual notice of an unrecorded deed to a subsequent purchaser or attaching creditor shall be equivalent to a record, so far as that .purchaser or creditor is *588concerned, which does not with equal force require us to hold, in the present case, that actual notice -to the defendant of a sale of these shares was equivalent, so far as its rights las a creditor are concerned, *589to a transfer entered in due form upon its books. This view is sustained by Gooding v. Riley, 50 N. H. 400, where the chief justice, upon an exhaustive review of the authorities bearing upon the question, arrives.at the conclusion that purchasers or mortgagees of personal property, having notice of a prior outstanding equitable title, are affected by such knowledge in the same way and to the same extent as the grantee of land is affected by knowledge of a prior unrecorded deed ; that both stand upon the same equitable principle.
The same result, substantially, is reached, if we consider that the omission of the plaintiff to have the transfer recorded places him in the same position as a purchaser of chattels, who permits them to remain in the hands of the seller after the sale.
Taking that view, the consequence contended for by defendant’s counsel does not follow. The circumstance of such retention of possession may be explained. It is true that, in the absence of explanation, a secret trust will be presumed ; but when an explanation is offered, it is for the jury to say, under proper instructions, whether the explanation is sufficient; and the fact that possession was so retained, is for them to weigh in connection with all other evidence bearing upon the actual character. and complexion of the transaction between the parties.
*590Here the defendant had notice of the sale and assignment, and, as we hold, of all the facts attending the transaction, for the reason that Barton, its general agent, by whose knowledge it is bound, was a party to the transaction and knew all about it. Under these circumstances it can hardly be heard to say that it inferred fraud from the plaintiff’s conduct, as a conclusion of law, when it knew, as matter of fact, that no fraud did really exist.
Suppose, after the sale by Barton to the plaintiff, Barton had sold the same shares again and applied the proceeds of such sale to his own uses. If .the second purchaser were ignorant of the prior sale, he would get a good title, although Barton would have been guilty of a fraud against the plaintiff of the. most gross and flagrant character. But if this second purchaser had notice of the former sale — was aware of the situation of the title as between Barton and Scripture — by concerting with the former to deprive the latter of his property he becomes a party to the fraud, and no process of reasoning, in logic or morals, will lead to any other res'ult but that he would be equally guilty with the seller. To hold that such a purchaser acquired a good title would be to countenance the most scandalous bad faith and encourage dishonesty.
The difference between an attempt to gain a title under such circumstances by purchase and by an attachment is not very apparent, and certainly not very broad. At all events, we think it entirely clear that what cannot be accomplished in one way cannot be brought about in the other.
In any view we are able to take of the case, we think the question for the jury is, whether the sale by Barton to Scripture was a bona fide sale, or whether it was so tainted with a secret trust, or other element of fraud in fact, that it cannot be sustained ; and upon that question the price paid for the shares as compared with their actual value, the omission of plaintiff to have the transfer recorded, and all other facts and circumstances tending to throw light upon the actual character of the transaction, will be proper evidence for the jury to consider. In short, that the sale may be attacked in the same manner and upon, the same grounds as though the transfer had been entered upon the books of the corporation at the time the fact of the sale was brought to its knowledge.

Case discharged.

 The case of John C. Durgin against William T. Mitchell, tried before Judge Woodman, in Grafton county, at the (Plymouth) May term, A. D. 1855, illustrates one phase of this question:
This was a writ of entry, to recover about thirty-eight acres of land, with the appurtenances, in Orange, in the county of Grafton.
Plea, nul disseizin.
In the trial, the demandant alleged that a deed in his claim of title was not truly recorded, and for that reason a copy could not be used; that the original deed was in the hands of the counsel for the tenant.
It appeared also that a notice had been served to produce the same on trial.
The demandant then proved the deed in the possession of tenant’s counsel. After proving the execution of the deed, the witness stated its contents, and that he sent it to the register’s office to be recorded. The demandant then proposed to prove, by the same witness, that after it was returned there was a certificate on the back of the deed that it had been recordedalso to prove the contents of the certificate; which was objected to, and ruled out by the court, for the reason that the demandant had admitted that the deed had not been truly recorded; to which the demandant excepted.
After the above ruling of the court, the counsel for the tenant delivered the original deed to the demandant’s counsel.' The demandant then offered the said original deed, with the following certificate on the back of it:
“Rec’d, May 25.. 1849, 6 h. P. M. Recorded liber 202, folio 319, and examined.
“Attest: LUKE AIKEN, Reg.”
Also a copy of a deed same parties as in the above, with the same description, except in the original deed the conveyance is of the “ southerly half of the first hundred acre lot,” &c., and in the copy, the conveyance is of the “ northerly half”’ &c., of the same lot.
On the copy of the deed there is a copy of the certificate of reception, same as on the original. On the back of the copy is the following certificate:
“ Grafton, ss., Aug. 5,1854; the within is a copy of the record. See lib. 202, folio 319, and examined.
“Attest: SILVESTER REDING, Reg’r.”
*587The demandant offered the above deed and copy for the purpose of' showing that said original deed was recorded ; which was objected to, on the ground that the copy described a different piece of land from the original, and ruled out by the court; to which the demandant excepted.
The original deed with the certificate on its back, as above mentioned, was also offered, to prove the record, by the demandant; but objected to and ruled out by the court, for the reason of the allegation of the demand-ant that the deed was not truly recorded; to which the demandant excepted. „
The tenant claimed the premises, by virtue of an attachment and levy thereon, as the property of the grantor in the aforesaid deed, — the attachment on his writ being made after the aforesaid deed was received by the register of deeds, but before the existence of the deed came to his actual knowledge.
A verdict was taken for the tenant, by direction of the court, which the demandant moved to set aside because of errors in said rulings and directions of the court.
It was ordered that the questions arising in this case be reserved and assigned for the determination of the superior court of judicature.
C. W. WOODMAN, Pi-es. Justice.
A true copy, — Attest : J. D. SLEEPER, Clerk C. C. Pleas.
A true copy, — Attest .- J. D. SLEEPER, Clerk S. C. J..
Pike & Barnard, for the demandant.
Kittredge, for the tenant.
The counsel for the demandant furnished the following brief, citing-numerous authorities:
The case finds that the deed on which the questions arise in this case was in the possession of the tenant’s counsel, and after a notice to produce-it it was- withheld. Under such circumstances we should have been allowed to put in not only the contents, but also the certificate of registry on the back of the deed. In other words, we should have been permitted to-show, if we could by secondary evidence, all there was in and upon the deed, and to stand just as well when that was shown as if the deed itself had been offered in evidence in the usual manner.
A mere allegation of counsel, stating for the information of the court the-reasons for pursuing a particular course, should not be construed into admissions superseding the necessity of the opposite party’s showing by proper evidence what they would otherwise be bound to prove. The demand-*588ant at the trial of the case at bar alleged, as a reason for pursuing the course he did, that there was an error as he supposed in the record of his deed, but distinctly stated he made no admissions to go into .the case with the intention of throwing the proof of that fact, if such it was, upon the tenant, where it rightfully belonged. The case also finds that he proposed to put in the original deed, which he had a right to do.
The original deed, with the certificate of registry which the case finds was upon it, would undoubtedly have been prima facie evidence on an enrollment. The ruling of the court was therefore wrong in excluding the evidence of the certificate of record.
The other question raised in this case we understand to be, substantially, whether the grantee in a deed, or a subsequent attaching creditor of the grantor, is to suffer from the misconduct of the recording officer. The deed in the case at bar had been recorded; as the grantee supposed, but, as appears by comparing the office copy with the original, the word “ southerly ” in the original deed was placed upon the record “northerly.”
We say first, as between the grantee and the public, the register of deeds is the servant of the latter — for he is a public officer chosen by ballot by the inhabitants of the towns and places in the county, — Comp. Stats., chap. 21, sec. 2 — and before entering upon his duties must give a bond with sureties for their faithful performance. Same, chap. 23, sec. l.
And secondly, as between the grantor and grantee, the registry of a deed adds nothing to its validity, — the object of the enrollment being to give public notice of the sale and transfer of the property. Brown v. Manter, 22 N. H. 468.
The statute, then, requiring deeds to be recorded, is made for the benefit of the public, who do not otherwise know of the sale and transfer of real estate. It in no way adds to or takes from the title already obtained by ■the grantee from the grantor, but it is so far a duty, imposed upon every purchaser of real estate, not for his own but for others’ benefit.
This being so, we think it must follow that where a grantee carries his deed to the register’s office, and receives it again from the register with a certificate on it signed by him stating that it had been “received for record,” •“ recorded,” and “ examined,” as is the custom at this present time, he must be regarded as having complied with the law; and if, through fraud or negligence, the deed is not recorded correctly, the grantee should not suffer. This also throws the loss, if any there be, or trouble arising from the neglect or misconduct of the register, on the proper person, — the subsequent purchaser or the attaching creditors of the grantor: they are a part of the public for whom the register acts as a public officer or agent, and to whom he should be responsible.
*589Elaborate oral arguments were made by the counsel on both sides, the minutes of which, now in my hands, show that every case which up to that date could be found in any text-book, report, or digest, and which could be supposed to throw any light upon the questions, was brought to the attention of the court. The court were unanimous. The able and exhaustive opinion was never published, having gone the way of many others. Judge "Woods, in alluding to the fact, was accustomed to say, in a playful way, that his best opinions and soundest law had failed to be published. The pith of the opinion (July term, 1855) was:
Woods, C. J. 1. The certificate of the recording officer, made on the original deed in pursuance of the duties of his office, was at least prima facie evidence that the deed had been properly recorded, and should have been received.
2. That when the grantee properly placed (through his agent) a deed properly made and lawfully executed in the hands of the register, his duty was done. He had exercised due diligence, and laches could not be imputed to him.
3. That the grantee’s title rests not on the statute of enrollments, but the contract embodied in the deed; that the register was not the agent of the grantee; that the tenant was one of the public for whom the register acts officially, and to whom he is responsible for such gross carelessness or fraud; and that the demandant must prevail. “ Verdict set aside.”
Reporter.