Fisher, Parker & Co. v. Jones , 82 Ala. 117 ( 1886 )

SOMEEYILLE, J.

— The subject of controversy in this ca-e is one hundred shares of the capital stock of an incorporated street railroad company in the city of Mobile, standing on the books of the company in the name of one B. Moog, as owner. The controversy arises between the conflicting claims of the appellants, as attaching creditors and purchasers under execution sale made in due course of the attachment proceedings, on the one hand, and of the appellee, Jones, on the other, as prior transferree of the stock taken as collateral' security for money loaned.

Many questions arise in the cause, and were discussed at the bar, but, in the view which we take of it, we need decide but one.

Our statutes provide, that the shares or interest of any person, in any incorporated company, are to be deemed personal property, and transferrable on the books of the company in such manner as may be prescribed by the charter or by-laws of such company ; and that such shares or interest may be levied on by attachment or execution, and be sold as goods and chattels. The levy is made by indorsing it on the writ, “stating the number' of shares, or other interest levied on.” — Code, 1876, § 2041. The levy is ineffectual to create a lien on the stock, however, until notice is given the .corporate custodian of the books, of the issue of the writ and the name of the defendant. — Code, § 2046.

The statute further provides, in reference to the registration of transfers of corporate stock — which is here the particular point ' of contention — in substance as follows: Whether the charter or by-laws of the company require the transfer of such stock to be made or registered on the books of the company, or not, the statute requires that it shall be done, at the risk of being void as to all bona fide creditors, or subsequent purchasers without notice. The language expressly embraces in the word transfer any “hypothecation, mortgage, or other lien;” and the requirement is, that such transfer must “be"made ox registered on the books of the company, or, upon failing to do so within fifteen days, all such transfers, hypothecations, mortgages, or other liens, shall be void as to bona fide creditors, or subsequent purchasers without notice.” — Code, 1876, §§ 2043, 2044.

The company is shown to have had. no by-law regulating such transfers. The course pursued was to keep, as the only stock book, a book of stock certificates, with stubs attached, in the common mode. When the certificates were issued, containing a statement of the date of issue, the serial numbers, and the number and aggregate amount of shares, a memorandum of these items was also made on the stub. This also contained a receipt, signed by the party to whom the certificate was delivered. In case of a pledge, or hypothecation of any certificate, the blank transfer printed on the' back of the paper was signed and attested; and upon presentation of this to the proper officer of the company, he made on the stub a registration or note of the fact, including the nature of the transfer, and name of the transferree. This was done in the present case, and the question is, whether it was a proper registration of such transfer within the meaning the law.

It is our opinion that it was, and, therefore, that the- attaching creditor obtained no lien on the stock which would displace, or have priority over the lien of the appellee, acquired by the pledge made to the bank, to whose rights he succeeds. There is nothing in the statute prescribing the nature of the book to be kept for the 'purpose by the company. The certificate book -was certainly appropriate for this use ; and it is matter of common knowledge, that many, if not most corporations, adopt it for this purpose, from principles of business convenience.

Such transfers are required to “be made or registered” on the books of the company. If, as is sometimes done when an absolute sale of stock is made, the original transfer is made and signed on the books, if in proper form, no question can scarcely arise as to its sufficiency. But it is contended that the word registered is used in the sense of recorded, and that the transfer should be copied on the proper book in htee verba. This, we think, was not intended. The word registration, in our judgment, is used here in the sense of entering in a book a statement or memorandum of facts to serve as memorials, or evidence. Tbe purpose of the statutes on this subject is obviously to give notice of the title to creditors and purchasers, so as to prevent fraudulent transfers, and to protect the' corporation itself in determining tbe questions of membership, the right to vote, the payment of dividends, and other incidents of ownership. — Scripture v. Francestown Soapstone Co., 50 N. H. 571; Cheever v. Meyer, 52 Vt. 66; Cook on Stock and Stockholders, §§ 486-490; P. & M. Mutual Ins. Co. v. Selma Savings Bank, 63 Ala. 585; Jones v. Latham, 70 Ala. 164; Black v. Zacharie, 3 How. (U. S.) 527. A written memorandum, in proper form, would as w'ell answer the purposes thus intended, as a.formal record. There may, moreover, be verbal transfers of stock certificates, accompanied by deliver’}', and creating equitable liens, intended only for brief collateral securities, which would not be susceptible of being registered in this mode, and are not capable of being recorded in a formal sense. Tire statute, it will be noticed, does not declare that stock may be transferred only on the books of the company, as in some of the States, but simply, that it is so transferrable, which would be the rule without the statute. Fisher v. The Essex Bank, 5 Gray, 373; Broadway Bank v. McElrath, 13 N. J. Eq. 24, 26; Duke v. Cahawba Navigation Co., 10 Ala. 82.

Under these principles, the registration of the transfer to the appellee, Jones, was sufficient to charge appellants w'ith notice of the then prior lien ; and the action of the chancellor adjudging this fact, and rendering a decree in favor of appellee on his cross-bill, was free from error.

Affirmed.