Davis v. Smith , 23 N.C. App. 657 ( 1974 )

209 S.E.2d 852 (1974) 23 N.C. App. 657

James W. DAVIS
v.
Jack D. SMITH.

No. 7426SC602.

Court of Appeals of North Carolina.

November 20, 1974.

Caudle, Underwood & Kinsey by C. Ralph Kinsey, Jr., Charlotte, for plaintiff-appellee.

Hatfield & Allman by R. Bradford Leggett, Winston-Salem, for defendant-appellant.

BROCK, Chief Judge.

Defendant relies upon G.S. § 1-76(4) for removal of this action to Forsyth County. G.S. § 1-76(4) provides that

"Actions for the following causes must be tried in the county in which the subject of the action, or some part thereof, is situated, subject to the power of the court to change the place of trial in the cases provided by law: . . . (4) Recovery of personal property when the recovery of the property itself is the sole or primary relief demanded."

There are no cases in North Carolina which apply G.S. § 1-76(4) to stock certificates. The defendant contends that the fact that stock certificates are specifically identifiable as personal property, the fact that Cloverdale Ford, Inc., is situated in Forsyth County, and the fact that there is no forum shopping involved in this action should dictate a change of venue to Forsyth County pursuant to the provisions of G.S. § 1-76(4) and G.S. § 1-83(1).

The plaintiff asserts that the primary relief sought by this action is the specific performance of contract rights; the delivery of the stock certificates is said to be only incidental to that relief. The plaintiff relies on the cases of Woodard v. Sauls, 134 N.C. 274, 46 S.E. 507 (1904), and Flythe v. Wilson, 227 N.C. 230, 41 S.E.2d 751 (1947), as being analogous to and determinative of the question on appeal. In Woodard an action was brought in Wilson County for the recovery of monies and for possession, by ancillary proceeding of claim and delivery, of certain promissory notes owing to the defendant. The defendant had given the notes to the plaintiff as security for a loan and subsequently had recovered the notes. The defendant filed an affidavit averring that he was a resident of Johnston County, that the notes were situated in Johnston County, and moved for a change of venue on the theory that the action was for the recovery of personal property. The trial court denied the motion. On appeal the court affirmed the ruling on the ground that the action was not for the recovery of personal property. The court found that obtaining personal judgment for the plaintiff, determining the liability incurred by the plaintiff as surety, and an adjudication of the collaterals that should be applied thereto were the chief causes of action. Recovery of possession of the collateral notes was only incidental. In Flythe the defendant filed a motion for change of venue on similar grounds in a second cause of action to recover monies paid by the bankrupt to the defendant as a voidable preference. The court found that the trial court's denial of the venue motion was proper, as the action was "not for the recovery of specific tangible articles of personal property." 227 N.C. at 233, 41 S.E.2d at 752 (emphasis supplied). Due to the involvement of other important considerations, these cases, although helpful, are not dispositive of the question on appeal.

A certificate of stock, as distinguished from the stock it represents, is undoubtedly property. See generally 11 Fletcher Cyc. Corp. (Perm. Ed.), § 5093; First Nat. Bank of Boston v. Commissioner of Internal Revenue, 63 F.2d 685 (1st Cir. 1933). It has a value distinct from the value of the shares it represents. In North Carolina it has been held that a certificate of stock has only such value as is derived from the company issuing it. Rhode Island Hospital Trust Co. v. Doughton, 187 N.C. 263, 121 S.E. 741 (1924).

Although certificates of stock are tangible personal property, they are merely tangible evidence of the shares they represent. They are, in short, a symbol of a stockholder's incorporeal rights in a corporation. Castelloe v. Jenkins, 186 N.C. 166, 119 S.E. 202 (1923). See generally Robinson, North Carolina Corporation Law and Practice, § 61 (1964). For this reason and for reasons of policy, we are not persuaded that certificates of stock represent the kind of personal property which would require a change of venue under G.S. § 1-76(4) and G.S. § 1-83(1). We are aware, however, that certain federal cases have held stock certificates "to be such property as would support jurisdiction through substituted service in an action to determine the ownership of the stock . . . in the district where the stock certificates are located." Christy and McLean, The Transfer of Stock, § 12 (1940).

We believe stock certificates to be a kind of intangible, the situs of which is merely the legal conclusion to the problem of which county "can most expeditiously handle the particular case and should, therefore, have. . . jurisdiction." Comment, 37 Minn. L.Rev. 285, 286 (1953). The question is best answered in terms of policy. In the hypothetical case of an action to enforce a preincorporation agreement concerning contingent forfeiture of shares in a four-stockholder closed corporation, with each shareholder living in a different county, the most convenient venue is in the county of plaintiff's domicile, the county of incorporation, or the county of corporate domicile. The first is convenient to the aggrieved party; the latter two are convenient due to the presence of corporate records. To hold that G.S. § 1-76(4) requires the action to be brought in the county wherein the stock certificates are located would require the aggrieved plaintiff to bring three separate actions in the counties where the other three shareholders have their certificates. See generally Comment, 37 Minn.L.Rev. 285 (1953). But see Hine, 87 U.Pa.L.Rev. 700 (1939); Comment, 45 Yale L. J. 379 (1935). Similarly, a plaintiff who filed a suit in Wake County against a resident of Durham County could have the action removed to Cherokee County if the defendant chose to place his certificates of stock in that county.

We do not sanction a rule which obviously would be unfair and inconvenient to aggrieved parties and which would raise serious impediments to the right to sue. The action for the recovery of stock certificates in the case at bar is only incidental to the specific performance action for recovery of the stock itself. The defendant's assignment of error to the trial court's finding that Forsyth County is not the county of proper venue is without merit.

Affirmed.

PARKER and MARTIN, JJ., concur.