Fisher v. President of the Essex Bank , 71 Mass. 373 ( 1855 )

Shaw, C. J.

On the case presented by this report, it is argued, in behalf of the plaintiffs, that by the acts done by Bingham, the former owner, and the plaintiffs, all his legal interest and attachable property in those shares was devested, and had become vested in the plaintiffs before the 7th of May, when the attachment of McLean was made, and therefore that attachment was unavailing to affect them.

We do not consider the plaintiffs’ letter of the 13th of April as bearing upon the question. It does not purport to give notice to the bank that the plaintiffs have purchased the shares; but rather the contrary, that they have the shares with power of transfer annexed. By apologizing for Bingham’s temporary absence, they rather seem to intimate that his nominal ownership on the books still continued, to some extent and for some purpose. But, for reasons hereinafter stated, had this been a more formal notice of the transfer of the shares to the writers, and this given to a proper officer of the bank, it would have been unavailing.

Shares in incorporated companies, such as banks, insurance companies, bridges, turnpikes and railroads, have long been considered in this commonwealth as property of a definite and important character, with many of the qualities of visible, tangible, personal property, and having a value, and as capable of appreciation as vessels, or merchandise, or other personal chattels. But it is not visible or tangible, and therefore not like merchandise, capable of passing by manual delivery.

A nearer analogy perhaps is that of a chose in action, capable, like this, of being assigned in equity, by a delivery over of the certificate, which is the assignor’s muniment of title, with an assignment duly executed, transferring to the assignee all the assignor’s right, title; and interest. And yet it is not like the assignment of a chose in action, which is the transfer of the assignor’s interest in a debt, and vests in the assignee an equi< table right to collect the debt in the name of the assignor.

The right is, strictly speaking, a right to participate, in a certain proportion, in the immunities and benefits of the corporation ; to vote in the choice of their officers, and the management of their concerns; to share in the dividends of profits, and to receive an aliquot part of the proceeds of the capital, on winding ■up and terminating the active existence and operations of the corporation. Again; when a transfer is rightfully made and completed, it vests a right in the transferee, not merely to act in the place of the vendor and in his name, but substitutes him, in all respects, as the legal and only holder of the shares transferred, to the same extent to which they were before held by the vendor. The title therefore, by which such interest is held, is strictly a legal title ; it is created and defined by law ; its benefits are secured by law; it is transferable by operation of law, and may be attached on mesne process and seized on execution, and sold by legal authority to satisfy the debts of the owner.

Before any method was established by positive law, how, by what mode, or by what precise and definite act, such property should be considered as ceasing to be the property of the seller and becoming the property of the purchaser, courts of justice might well resort to the common law modes of transferring similar incorporeal interests, and hold that a delivery of the only muniment of title held by the owner, with the execution and ■delivery of an assignment of his interest, by indorsement on the certificate or otherwise, should by analogy be held to be a valid transfer, and, when notified to the bank, should be considered as' having taken effect at the date of such delivery.

But whatever common law rules courts may have felt bound to adopt, in the absence of any express rule of law, in determining what act constitutes the actual transfer of shares, the point of time at which the one alienates and the other acquires a legal title to such shares, we can perceive no room to doubt that, where it is so regulated, such law must govern. In the present case, there is such an express provision in the act of incorporation itself. The bank is of recent origin, the act was passed in 1851. St. 1851, c. 269. Like most other modern acts of incorporation, the act, after creating the corporation, giving it a name, fixing its location and limiting its capital stock, defines its powers and duties by reference to other acts on the subject. But § 3 is a special provision to this effect: “ The stock of said bank shall be transferable only at its banking house, and on its books.” By the law of this commonwealth, acts of incorporation are deemed public acts. Rev. Sts. c. 2, § 3. Like other public acts of legislation, their provisions constitute laws, by which all courts and magistrates, all citizens and subjects are bound.

But it was strongly urged, in the learned argument for the plaintiffs in this case, that this provision in the charter can have no greater force and effect than a by-law of the corporation in the same terms, and does not make a transfer on the books of the bank necessary to pass the title. There is something in one New York case, which countenances this suggestion ; but perhaps it originated in the peculiar provisions of the New York statutes. If the corporation are fully authorized to make by-laws, regulating the transfer, there would seem to be some ground for holding that they would be binding upon those holding or seeking to hold shares in the same corporation. If a by-law would have the same effect, then it is unnecessary to make the distinction between a by-law binding upon corporators, and all those claiming to stand in the relation of corporators, and a general law of the Commonwealth binding on all its subjects. But if there be such a distinction, then here is a law of the Commonwealth binding upon all.

But the argument goes further, and insists that the transfer at the bank is not essential to transfer the property to a bona fide purchaser, but is merely a regulation for the convenience and protection of the bank.

We can see no ground upon which thus to restrict the plain provision of the statute. If we may judge of the intended operation of an act of legislation from the useful and beneficial purposes it may tend to promote, we should construe it as having a much broader and more comprehensive scope. We are to take it in connection with all other existing laws.

As a great amount of property is held in Massachusetts in the shares of corporations, it is of importance that the title be easily and certainly ascertained, that the mode of acquiring and alienating it be fixed and known, and that it may at any time be made available, by process of law, for the debts of the owner.

In no way can these objects be so well effected as by a transfer at the bank. The law might have provided that the bearer of the certificate should be deemed the holder, so that it might pass from hand to hand by mere manual delivery. But this would be attended with almost inextricable difficulty. It would be impossible for officers and co-proprietors to know who their associates were, and at every meeting nothing could be done till those present should produce their certificates, and thus show who were entitled to vote; and even then, certificates might change owners during the meeting. The shares could never be attached; for the officer could have no means to obtain possession of the certificate from a reluctant debtor adversely interested ; and, without it, the shares might pass the next day to a purchaser without notice.

2. The certificate, in the form now given, may show; who is the legal owner at the date of its issue ; but this outstanding certificate may have been loaned, pledged, assigned in equity, which it is now contended would, as between the parties, be a good and valid transfer. It cannot therefore be known,by the books of the bank,who is proprietor at any one time.

3. It is obviously an object of great importance, that this large amount of property should be attachable and liable to be sold on execution. This has long been the policy of the State by earlier statutes, ultimately embraced in the Rev. Sts. c. 90, § 36; c. 97, §§ 36 & seq. The certificate being in the hands of the debtor, or some other person on his account, and his interest being adverse to that of the attaching creditor, the officer could seldom, if ever, take possession of it as of a chattel. It is therefore provided that the attachment may be effected by leaving written notice at the bank; and, on a sale on execution, it is made the duty of the bank and its officers, on notice and request, to give the purchaser a new certificate. This of necessity supersedes the outstanding certificate to the former holder.

All these objects are most effectually accomplished by making the transfer at the bank, the decisive act of passing the property, the legal, transferable, attachable interest. I do not stop to ask precisely what particular act would constitute such a transfer; whether it must be actually entered on the books, or whether the delivery of the certificate by the holder ready to transfer, or with a written transfer executed, so that nothing remains but the mere executive act of the clerk, is sufficient. In either case, it would show who is at any time the actual owner by the books, and inform a creditor, or other person having occasion to know and right to inquire. It is necessary to fix some act, and some point of time, at which the property changes and vests in the vendee; and it will tend to the security of all parties concerned to make that turning point consist in an act which, whilst it may be easily proved, does at the same time give notoriety to the transfer. It would seem to us to be going beyond the rules of just exposition, to hold that a plain provision of statute law, calculated to promote the security of important legal rights of parties in important particulars, should be construed to be a regulation made for the convenience and protection of banks. The clause' itself is too clear to admit of doubt: “ Shall be transferable only,” that is, capable of being transferred; the largest and broadest term to express alienation on one part, and acquisition on the other; and the word “ only ” carries an implication as strong as negative words could make it, that is, in no other mode. It was not to prescribe one mode, leaving others unaffected; it made that mode exclusive.

Nor is this position without high authority to support it. In Union Bank v. Laird, 2 Wheat. 390, it was held by the supreme court of the United States that, where shares were, by the act of incorporation, made transferable on the books, no person could acquire a legal title in any other mode.

The early Massachusetts cases cited for the plaintiffs, such as Dix v. Cobb, 4 Mass. 508, were mere equitable assignments of choses in action, and held valid as equitable assignments.

Quiner v. Marblehead Social Ins. Co. 10 Mass. 476, was the case of a new corporation, the full amount not paid in, no certificates to proprietors issued, but certain instalments had been paid in by subscribers, for which receipts had been given. The act of incorporation provided that no transfer should be valid till the stock was all paid in. It was held that an assignment of these certificates, with power to complete the payment in the name of the assignor, was a good assignment in equity. Besides there does not appear to have been any clause in the charter or by-law directing how shares should be transferred when the company should be organized and in operation.

In the case of Sargent v. Franklin Ins. Co. 8 Pick. 90, the old certificate, together with an executed assignment of the shares, was tendered to the secretary of the company at their office in business hours, with a power of attorney to transfer on the books, and a new certificate was demanded. This was a full compliance with the by-law on the part of the purchasers ; it was the duty of the company then to enter the assignment, and they could not set up their own wrongful act in refusing to enter the transfer, and an attempt to attach the shares themselves, in their own defence. The reasoning of the court may have gone further in stating the grounds, but these were amply sufficient to warrant the adjudication.

The case of Sargent v. Essex Marine Railway, 9 Pick. 202, is much nearer the present case, and, so far as the requirement that the transfer be made at the bank rests on a mere by-law is in point. The by-law required that all transfers be made in a book, in a specific form, and transferable only ori the books. The court consider this by-law, requiring a transfer in a particular form on the books of the bank, as an arrangement of the corporation for their own convenience. But they add: “ Neither the act of incorporation, nor any other statute, requires that an assignment shall be recorded in order to give it validity.” 9 Pick. 205. This seems to carry a clear implication that if any provision of law, binding on all persons as such, had required it to be recorded, it must be entered in the books, or delivered to the proper officer for record, to give it validity.

We are aware that several of the New York cases cited in the argument are decisions contrary to the rule we now adopt. But it is to be remarked that, in the case of Commercial Bank of Buffalo v. Kortright, 22 Wend. 348, before the court of errors, the chancellor and a respectable minority of the members of the court dissented on this point, and were of opinion that, when the charter contains a provision that no transfer shall be valid unless registered in the books, an unregistered transfer does not convey a legal title, but an equitable interest only, subject to all prior equities.

And we think the authority of the case in New York is more than counterbalanced by the decisions of several of the neighboring states.

In Vermont, the court say: “ We entertain no reasonable doubt that the mode of transfer of stock pointed out in the charter is the only mode which the public are bound to regard as conveying the title. All persons, unaffected with notice to the contrary, are at liberty to act upon the faith of the title being where it appears upon the books of the corporation to be.” Sabin v. Bank of Woodstock, 21 Verm. 362.

In Connecticut, there are several cases precisely in point. The question of actual transfer is considered to be a question of legal title; and in all transfers under such charter and by-law, the change of title is held to take place when the instrument of transfer is received for record by the clerk, and the transfer bears date from that time. Oxford Turnpike v. Bunnel, 6 Conn. 558.

In the present case, it is insisted that the plaintiffs presented the certificate, with a transfer from Bingham, and demanded a transfer before the sale on execution. This is true; but the attachment on mesne process was made before any such notice given and demand made by the plaintiffs; and the title of the attaching creditor relates back to the time of attachment. We are of opinion therefore that the attachment and subsequent sale gave that purchaser the better legal title.

Plaintiffs nonsuit.