De Comeau v. Guild Farm Oil Co. , 3 Daly 218 ( 1870 )

By the Court.

Van Brunt, J.

Upon the trial of this action before the referee, and on the argument of the appeal in this court, the question of the validity of the attachment issued against Edward Flash was presented, but we do not think it necessary to pass upon this question in deciding this case. The principal question to be determined is, were the defendants justified in their refusal to transfer the fifteen hundred shares of stock because of the service of the warrant of attachment issued against the property of Edward Flash. It was claimed by the defendants, upon the argument, that because the certificates of stock which were sold and delivered by Edward Flash to the plaintiffs, bore upon their face the provision that the stock therein represented could be transferred only upon the books of the company, upon the surrender of the certificate, that the plaintiff could acquire no title whatever, legal or equitable, to the stock until such transfer had taken place.

The law of this State, as settled by the decisions of the courts, is contrary to this proposition.

The cases in this State hold that, notwithstanding a provision contained in the charter of the company itself, that the stock shall be transferable only on the books of the company on the surrender of the certificate, an assignment of the stock, attended by a delivery of the certificate, is valid as between the parties to it, and vests in the vendee the equitable title to the stock, and the right to be substituted upon the books of the corporation as the legal holder of it. Had the plaintiffs in this action, on the same day of the assignment of the stock to them, demanded the formal transfer of this stock upon the books of the defendants, they would have asked for nothing but their legal rights, and an action could have been maintained for the refusal (Bates v. New York Insurance Co., 3 Johns. Cases, 238; Bank of Utica v. Smalley, 2 Cow. 770; Stebbins v. Phoenix Fire Insurance Co., 3 Paige, 350; Commercial Bank of Buffalo v. Kortwright, 22 Wend. 348; and affirming same case, 20 Id. 93).

These cases hold that the assignee and holder of the scrip or certificate of stock is the holder of the stock as against the assignor, and as against all persons not having a prior equity and the legal title, is only not transferred as respects the corporation, and for' its protection. The corporation, until such transfer has taken place, may recognize the seller as such owner by so far as the payments of dividends, and the giving him, in the conduct of the affairs of the corporation, the rights of a stockholder, are concerned.

It has been expressly held, in the cases cited, that the sole object and purpose of this formal transfer is to protect the corporation to this extent, and that the provision does not in any manner interfere with the rights of ownership as between the original stockholder and his vendee. Thus it would appear that, as between the parties to the sale and third persons, the same effect is given to a conveyance of stock outside of the books as is given by law to the assignment of choses in action, or rights not negotiable.

It is true that in Massachusetts (see Fisher v. Essex Bank, 5 Gray, 383, and cases,there cited) a different rule prevails; but we cannot follow the principles adopted in those cases, without directly overruling the cases in our own courts, and the rule of our own State would seem to be the most just and equitable.

In this case it is claimed that the defendants were merely stakeholders; but it is difficult to see how they could be stakeholders, when, as we have seen, by the law of this State, there was only one party who had any right whatever as owners of the stock, of which they claimed to be merely stakeholders.

The plaintiff in this action, in May, 1865, had become the purchaser of this stock, and at that time held all the muniments of title thereto, and would have been entitled at that time to demand from the defendants a transfer of the same.

This right could be defeated only by some person who had a prior equitable title to this stock, and the sheriff, under an attachment issued after the purchase and assignment of the stock to the plaintiffs, certainly does not acquire any such prior equity. He, by the levy of such an attachment, could not acquiré any better or greater title tb the stock, than a person would have done who had purchased this stock of the person in whose name it stood on the day of the levy of the attachment; and the principle is well settled in this State that such a purchaser would not acquire any interest whatever as against a prior purchaser for value. It seems to be clear, therefore, that the plaintiffs had a perfect right to demand the transfer of the stock to them, and that the defendants subjected themselves to this action by their refusal to accede to the demand.

The judgment must be affirmed.

Judgment affirmed.