Court Opinion

ID: 8296399
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:07:53.683489+00
Date Added: 2024-06-11T16:44:05.721313
License: Public Domain

McFarland, J.,
delivered the following dissenting-opinion :
It is not my purpose to enter into a full discussion of the question involved in these causes, but in view of the fact that the question is unsettled in this-State, and of the first importance, I deem it not improper to state briefly my conclusions. It is important that we adopt rules in regard to-the transfer of stocks as near in accord with the rules generally prevailing in this country as we can consistently with such positive enactments as our own Legislature has adopted, so as to place stocks in our incorporated companies as near as possible upon a like footing with others in the general stock markets. Upon questions of this character general uniformity is desirable, though often not attainable. ’
By our statutes the officers of the corporation are required to keep stock books, which shall show the names of the stockholders and the stock owned by them, and make the proper entries showing the transfer of stock. These books are open to the inspection of any one applying, although the corporation be *28strictly a private one, and the stock is made subject to levy and sale by execution, the officers of the corporation in such case being required to make the entry showing the transfer in pursuance of the execution sale. How far do these provisions charge the general principles of law upon the subject? These acts do not in terms say that all transfers of stock not entered upon the books of the company shall be void as to creditors, and therefore I am of opinion that they should not be construed as having that effect. To so hold would prevent the transfer of stocks as collateral security, for it is doubtful whether the as-signee in such case has the right to have the stock transferred to him upon the books of the company, and if he do so, the result is that the original stockholder is released and the assignee becomes liable as a stockholder in favor of creditors. Germania National Bank v. Case, Receiver, 96 U. S. R. But the transfer is not in all respects complete so as to constitute the assignee a member of the corporation, and entitled to act as such in stockholders’ elections or otherwise, until the transfer be properly entered upon the stock books. The assignee, however, may acquire a right and beneficial interest in the stock, although the transfer be not thus complete. A transfer of the stock by assignment and delivery of the certificate or other means evidencing the contract ought to be good between the parties so as to give the assignee the right as between them. The question then recurs, can such transfer be made effectual as to creditors, and if so, whether notice of the assignment is neces*29sary to perfect the assignee’s right ? We1 have, in this State, adopted. a rule upon the subject at variance with the weight of American authority, but in accord with the English rule, that is to say, an assignment of a mere chose in action (that is other than negotiable or assignable paper) is not complete in itself so as to vest the title absolutely in the assignee until notice of the assignment to the debtor, and this not only as regards the debtor himself, but likewise as to third parties who may acquire rights. The leading case on this subject is Clodfelter v. Cox, 1 Sneed, 330. The question is whether the assignment of stocks stand upon this ground, or does a different rule apply? In ' some respects stocks resemble ordinary choses in action, in other respects they are unquestionably different, and mi generis. They are not in the nature of debts against the corporation. The corporation is not in the attitude of debtor to the stockholder, and notice of the assignment given to the corporation is not in all respects identical in its purposes and effect to notice given to a debtor of an assignment of a debt due from him. Still, certificates of stock are not negotiable, and their assignment, as we have seen, does not vest the assignee with an absolute title so as to constitute him without more a member of the corporation with the full rights of a stockholder. It is, therefore, an incomplete assignment or transfer, and it is in some respects in the nature of an ordinary chose in action. That is to say, while it is personal property it is not a chattel capable of actual manual delivery from one person to another, it is a mere *30right, incorporeal in its nature. It is not a title to any part of the property of the corporation, but a mere right growing out of the organization. The certificate of stock, it is true, is legitimate evidence of the right, but so also is a certified transcript of a judgment at law evidence of the right of the plaintiff in the judgment. A duly certified copy of a will would be legitimate evidence of a legacy, and other instances might be given of similar papers which are conceded to be legitimate evidence of mere choses in action, but their transfer does not vest the assignee* without moi’e, with a perfect right to the thing assigned. As has been said, negotiable paper, or paper .assignable so as to authorize the assignee to sue and recover in his own name, stands upon a different footing; as to these the assignment or transfer of the paper is complete in itself. To which class shall certificates of stock belong? It is very obvious that in these States which have not adopted the English rule, the question is wholly different, as the transfer is complete in itself, even conceding it to stand as other mere choses in action, for no notice is necessary in any such cases. But as we have adopted the English rule, shall we apply it to transfer of stock, or shall we place them upon the footing of negotiable or assignable paper, or shall we, while admitting that they do not belong to this class, make them an exception to the general rule requiring notice, and adopt a rule applicable to stocks alone growing out of the peculiar' character of these securities? We have no positive legislation, in terms adopting either course, and the *31difference between stocks and other ordinary choses in action are such that a distinction might be made as to their transfer, and a different rule adopted, founded upon the difference in the nature of the property, but looking to the spirit of our legislation as well as the inconvenience of adopting too many exceptions to general rules, I think it best to make no exception, and apply the rule of Clodfelter v. Cox to this as well as other choses in action. "While our acts do not in terms declare all transfer of stock not entered upon the books void as to creditors, still it is manifest that the rights. of creditors- were had in view first, the stock books, although the corporation be private, are required to be kept open to the inspection of any one applying. This may have been intended to afford the public dealing with the corporation the opportunity to inform themselves of its solvency and condition, but it is also probable that it was intended to give to creditors an opportunity by this means to ascertain whether or not his debtor owns stock. But in addition to this our legislation is, upon this point, positive, that is, the stock is subject to levy and sale by execution. This is a radical innovation upon the rule generally applicable in such cases, for without this positive legislative act a mere right or chose of this character could not be subject to levy and sale by execution. Now, to make the transfer of stock by secret assignment and delivery of the certificate without more, absolutely perfect and complete, would, in a great measure, if not entirely, defeat the right of the creditor to reach it by execution; for it would be *32most difficult, if not impossible, to find the stock, and the levy and sale would be generally delusive, and lead to other complications and litigation. It is true that these difficulties would not be altogether obviated by mere notice to the corporation. The corporation not having any special interest in the transfer, and there being no positive law requiring the officers to keep a record of such notices, it might not always be a protection to others, or enable the debtor to know to whom the stock belonged. It is further true that notice to the corporation is not necessary to protect it as in case of a debtor, .or at least not for the same reason,' but such notice would be a good excuse for its failing or refusing to transfer the stock to a subsequent assignee, or make the corporation liable for an unauthorized transfer, and it would also afford some means, imperfect though it be, to the creditor by which to ascertain if his debtor has transferred his stock, and again, it is apparent that in cases of ordinary ■ choses in action, notice to the debtor is not always a protection to subsequent assignees or attaching creditors, it simply furnishes a certain rule by which their rights are to be determined. Further, having adopted the English rule, it is better to follow it out to its legitimate results upon the reasons upon which the rule is founded, that is, in case of the transfer of rights of this character, where actual possession cannot accompany the transfer as evidence of the ownership, such rules ought to be adopted as will require the as-signee to go as far toward asserting and exercising his ■ right as the nature of the property is susceptible of. *33That is, in case of an ordinary chose in action, notify the debtor, or where an equity is assigned, notify the trustee, or in a case of this character notify the corporation, through whom the right is to come. In other words, the reason of the rule grows largely out of the nature of the property, or right to be transferred; that is to say, it is not a chattel capable of delivery as such, and in this respect stocks are identical in their nature and character with ordinary choses in action, to which the rule is conceded to apply. It appears that where the English rule has been adopted by other States, they have applied it to stocks.
I concede the importance of making the transfer of such securities as free as possible consistent with the spirit of our own laws, especially in view of the large traffic carried on upon this basis in the large money centres and stock markets, and if we look alone to the policy of encouraging the trade and commerce based upon these securities, and removing all obstacles in the way of such transfers, and conforming to' the rules of the stock-jobbing commercial world, then it is manifest that these ends would be best accomplished by making the transfer and assignment of the certificate complete in itself, not only between the parties, but as to all the world. But on the other hand it seems to me that - such a rule would in effect render nugatory the positive provision of our statute mak-idg stocks subject to levy and sale under execution. And to this provision of our statute we must give effect. We should not adopt a construction that prac-renders it But for the fact that we *34have in this State adopted the rule laid down in the •case of Clodfelter v. Cox, and the fact that our statutes make stocks subject to levy and sale by execution, I .■should concur in the opinion of the majority as the ■better view of the question, and more in accord with the rules prevailing elsewhere in the United States, ■but for the reasons stated I am constrained to dissent.