Court Opinion

ID: 8655444
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:15:29.384444+00
Date Added: 2024-06-11T16:56:41.337401
License: Public Domain

TRICK, J.
(concurring).
I concur with the conclusions reached by Mr. Justice McCarty. I must confess, however, that I arrived at the conclusion that appellant cannot recover against the defendant J esse Knight after some hesitation,- and for that reason desire to add something to what has been well said by my Brother.
After mature reflection and a thorough examination of the authorities, I am forced to the conclusion that, in view of the facts and circumstances of this case, appellant never had a cause of action against the defendant Jesse Knight either in law or in equity. As appears from the undisputed facts, the stock in question was transferred by the Success Company to Pearson as having been forfeited by plaintiff and one Heintz for nonpayment of an alleged assessment levied against the stock; that the stock, in fact, was not sold for the assessment, but it was nevertheless transferred by the corporation to one Pearson, and a new certificate issued to him in place of the old certificates, which had been issued and were held by plaintiff and Heintz; that afterwards Pearson sold the stock issued to him to the defendant Knight and assigned the certificate to him, and Knight presented the same to the Success Company for transfer. The company allowed the transfer and issued to him a new certificate which was finally surrendered' by Knight, and for it he received his proportion of the Colorado stock, as stated by Mr. Justice McCarty in the opinion written by him. The plaintiff and Mr. Heintz could have treated the action of the Success Company in canceling their certificates as a conversion and could have forthwith sued that company for damages, or they could have brought an action in equity against both the company and Mr. Pearson so long as he held the stock and could have required’ the company to repay Mr. Pearson what he had *101paid tbe company, and then cancel tbe certificate issued to him in place of plaintiff’s and Mr. Heintz’s certificates and have tbe company reinstate them as stockholders. (2 Clark & Mar. Cor., section 495; Mitchell v. Vermont, etc., Co., 67 N. Y. 280.) However, after Mr. Pearson bad sold tbe stock for value in due course of business (and there is not tbe slightest claim that tbe transfer between Pearson and Knight was not for value and in good faith,'but, on tbe contrary, tbe evidence shows that it was) to Mr. Knight, and tbe company bad issued to him a new certificate, tbe plaintiff, in view of tbe allegations contained in bis complaint, and under tbe evidence, could not follow tbe stock into tbe bands of Mr. Knight. If tbe stock bad been actually stolen from appellant and bad been presented with tbe name forged, and tbe Success Company bad transferred tbe same by issuing a new certificate to a third person, appellant, as tbe owner, could not have followed tbe stock into tbe bands of Mr. Knight if be bad purchased it for value and without notice. Machinists’ Nat. Bank v. Field, 126 Mass. 345, in principle is strictly in point. True, tbe action in that case was prosecuted by tbe corporation which bad issued tbe stock, but it is made clear in tbe opinion itself that tbe result would have been tbe same if tbe former owner bad brought tbe action. Such is tbe law, as appears from tbe following text-writers: In 2 Cook on Corporations (6th Ed.), section 370, tbe law is laid down in tbe following language:
“It lias also been shown that he who applies to the corporation for a registry of transfer, such registry being the first one since the forgery was committed, is not allowed to retain the stock. An entirely different rule prevails as regards all subsequent bona fide holders of the new certificate obtained by the first registry. The person who obtains the first registry has no rights except as against his transferrer. But all subsequent purchasers without notice are fully protected. They cannot be compelled to give up the stock, either to the corporation or to the person who lost it by forgery.”
In 3 Cl. & Mar. Cor., section 597e, tbe rule is stated thus: “Tbe owner of shares wbicb bave been transferred by tbe corporation on its books under a forged power of attorney *102bas no right of action against a bona fide purchaser of the shares who purchased, not the original certificates, but a new certificate issued by the corporation.” The rule that applies under the facts and circumstances just stated also applies, as we have seen, in case the corporation illegally attempts to forfeit the stock. (2 Cl. & Mar. Cor., supra.) This no doubt is logical, for the reason that, as against the corporation, and perhaps as against one who obtains the stock directly from the corporation in case of an illegal forfeiture, and against the person who in case of theft and forgery has the forged assignment of the original certificate, the original owner always has his choice of action either to be reinstated as a stockholder or for damages until cut off by the statute of limitations. In both the foregoing instances the corporation commits a wrong against the stockholder by interfering with his property rights, and in both the owner of the stock has his remedy as before stated. But this remedy in case of a conversion, or the unauthorized transfer of corporate stock (which is no more than a conversion), cannot be enforced as against one who obtains a new certificate from one to whom it was issued by the corporation and who holds the same for value and without notice of the wrong. Such a purchaser may rely upon the face of the certificate not only as against the corporation, but as against the former owner. The reason why a special rule is applied to the shares of stock which are transferable on the books of a corporation in case of a conversion thereof is well stated by Mr. Justice Davis of the Supreme Court of the United States in the case of Bank v. Lanier, 11 Wall. 377, 20 L. Ed. 172, in the following language:
“It is no less the interest of the shareholder than the public that the certificate representing his stock should be in a form to secure public confidence, for, without this, he could not negotiate it to any advantage. It is in obedience to this, requirement that stock certificates of all kinds have been constructed in a way to invite the confidence of business men, so that they have become the basis of commercial transactions in all the large cities of the country, and are sold in open market the same as other securities. Although neither in form or character negotiable paper, they ap*103proximate to it as nearly as practicable. If we assume that the certificates in question are not different from those in general use by corporations, and the assumption is a safe one, it is easy to see why investments of this character are sought after and relied upon. No better form can be adopted to secure the purchaser that he can buy with safety.”
Tbe real claim made by tbe appellant is that Mr. Knigbt, as an officer of tbe Success Company, owed appellant tbe duty of exercising ordinary care and diligence in mailing distribution of tbe assets of tbe Success Company so as not to pay appellant’s share to some one else. No doubt it is tbe duty of corporate officers to exercise reasonable diligence and ordinary care to protect tbe interests of tbe stockholders. But tbe court found, and tbe finding is sustained' by sufficient evidence, that Knigbt was not guilty of negligence in anything,that be did. But what duty did Mr. Knigbt owe appellant in distributing tbe assets of tbe Success Company? As we have seen, in view of tbe law applicable to tbe facts, Mr. Knigbt bad become tbe lawful owner of tbe stock claimed by appellant long before tbe Success Company sold and transferred its property and received tbe consideration therefor which Knigbt assisted in distributing. Mr. Knight’s name then appeared on the stock books of tbe Success Company as a stockholder. To this stock Mr. Knigbt bad succeeded in due course of business. Any stockholder of tbe Success Company, therefore, could just as well have claimed Mr. Knight’s stock as appellant. Under tbe facts and circumstances, Mr. Knight’s right and title to tbe particular stock was no more assailable by appellant than by any other stockholder. This being so, Mr. Knigbt, in receiving bis proportion of tbe assets of tbe Success Company, was simply obtaining tbe fruits of bis purchase of tbe stock from Pearson — no more, no less. If appellant could not have assailed Mr. Knight’s right and title to tbe stock, bow can be attack Mr. Knight’s right to share in what tbe stock represented, namely, a proportionate part of tbe assets of tbe Success Company ? It seems to me that tbe right to assail *104the latter must necessarily depend upon whether appellant had the right to attack the former.
The facts of this case do not constitute it one of overissue of stock which could not be made effective against anyone, except, under peculiar circumstances, the corporation issuing the same. When the stock in question was issued it was intended that it should, and it in fact did, take the place of the stock that had been issued to appellant and Heintz, and which was evidenced by the certificates held by them and which were attempted to' be forfeited for nonpayment of the assessment. The stock sold to Mr. Knight, therefore, in no sense constituted overissued stock, and hence cannot be asailed on that ground. (Kinnan v. Forty-second, etc., Co., 1 Misc. Rep. 457, 21 N. Y. Supp. 789-792, affirmed in 140 N. Y. 183, 35 N. E. 498.) But, if the four thousand shares of stock which were issued to Mr. Knight shall be deemed as an overissue, then there would have been issued an outstanding three hundred and four thousand instead of three hundred thousand shares of Success Company stock. Mr. Knight would thus have held such overissue all of which would have been worthless. This is clearly established because when the assets of the Success Company were divided there were only three hundred thousand shares of stock recognized and permitted to share in the division. The four thousand shares of so-called over-issued stock were thus ignored and received nothing. If nothing was awarded to the four thousand shares, then the holder thereof, Mr. Knight, obtained nothing for them, and, if he obtained nothing, he could have wronged no one: From this it follows that the four thousand shares originally owned by plaintiff and his assignor were either represented by the so-called over-issue, or by the Pearson stock, which was transferred to Mr. Knight. If the former theory be accepted as true, then the four thousand shares did not participate in the distribution, , and the holder thereof received nothing for them, and, if the latter theory be correct, then Mr. Knight succeeded to the Pearson stock in the manner and under the circumstances already stated, and for the reasons heretofore *105stated the plaintiff cannot follow tbe stock into tbe bands' of Mr. Knigbt. Tbe same reasons wbicb afford protection ■ to Mr. Knigbt also apply to tbe Colorado Mining Company.
This brings ns back to tbe proposition already advanced that wbat was done by tbe Success Company and its secretary amounted to a wrongful interference with tbe property rights of appellant, and in law constituted a conversion of bis stock. If we now permitted appellant to recover in face of tbe fact that Mr. Knigbt purchased after tbe new certificate bad been issued to Mr. Pearson, to whom tbe first certificate was issued after tbe attempted forfeiture of appellant’s stock, we would have to go contrary to all tbe law upon tbe subject. I have not been able to find any well-considered case that bolds that appellant can recover under tbe undisputed facts and circumstances in this case, and my associate has found none.
While my inclinations have always been in favor of permitting appellant to recover as against Mr. Knigbt, yet these considerations are of secondary importance. As has well been said by an eminent jurist: “No one supposes that a judge is at liberty to decide with sole reference even to bis strongest convictions of policy and right. His duty in general is to develop' tbe principles wbicb be finds with such, consistency as be may be able to attain.” Kecognizing this duty, and applying tbe law as I understand it to tbe facts of this case, I cannot see bow appellant can recover either in an action at law or in equity. In arriving at this conclusion, I place no stress upon tbe theory on wbicb this action was tried in tbe district court. My own view is that under our Constitution and statutes a party is entitled to whatever relief bis pleadings and tbe evidence based thereon entitle him, regardless of tbe theory of bis counsel. True, an appellant may not by changing bis theory predicate error in this court upon tbe rulings of tbe trial court wbicb be induced 'that court to make, or wbicb it made in response to bis contentions, but this doctrine is not involved where a party comes into court by setting up tbe facts and by asking relief upon them to wbicb be is not entitled. Tbe fact that be may not *106be entitled to what be demands is no reason why be should not receive wbat tbe law and tbe facts entitle bim'to.
For tbe foregoing reasons, I am of tbe opinion that tbe conclusion reached by Mr. Justice MoOaety is tbe only one permissible under tbe facts and tbe law applicable thereto.