Smith v. American Coal Co.

Fancher, J.

When Gowdy, the owner of the stock, on the 30th August, 1859, signed the power of attorney, and delivered the certificate, with the power indorsed, to his creditor Martin, he transferred all his title, legal and equitable, to the stock, and, by virtue of the power and of the transfer contained in the same instrument, the holder of the certificate and power alone had authority thereafter to cause a transfer to be made on the books of the corporation. As Gowdy had thus parted with all his interest in the stock, he had no interest in it which could be the subject of attachment, after he parted with it. The attachment issued at the suit of Bramhall, on the 28th September, 1863, was ineffectual to reach the stock or any interest in it, and the sale by the sheriff of the assumed interest and title of Gowdy in the stock amounted to nothing. There was no interest or title of Gowdy in or to the stock which could be the subject of the attaclnnent or the sale made by the sheriff, and the transfer by the sheriff conveyed no interest in or title to the stock to the purchaser.

In McNeil v. Tenth National Bank (46 N. Y., 331), Rapallo, J., in delivering the opinion of the court, said: “It has also been settled by repeated adjudications that, as between the parties, the delivery of the certificate, with the assignment and power indorsed, passes the entire title, legal and equitable, in the shares, notwithstanding that by the terms of the charter or by-laws of the corporation the stock is declared to' ’be transferable only on its books; that such provisions are intended solely for the protection of the corporation, and can be waived or asserted at its pleasure, and that no effect is given to them except for the protection of the corporation; that they do not incapacitate the shareholder from parting with his interest, and that his assignment, not on the books, passes the entire legal title to the stock, subject only to such liens or claims as the corporation may have upon it, and excepting the right of voting at elections, etc.”

By section 234 of the Code it is provided that the rights or shares which a defendant may have in the stock of any corporation shall be liable to be attached and levied upon and sold to satisfy the judgment and execution. But this provision of law cannot aid an attachment against a defendant who has no rights or shares in the stock of a corporation. If, previous tp the issuing of the attachment, the defendant has assigned all his interest in the rights or shares, and delivered over the certificate with transfer and power, it is thenceforth the holder of these indicia of title who is possessed of the property in the shares, and not the original stockholder.

It is claimed by the defendant that by a provision in the by-laws of the corporation “no transfer of stock shall be valid unless made upon the books of the company by -the person owning the stock or his attorney,” and that because of that provision no title could pass to the stock unless the transfer was thus made on the books of the company. The doctrine of the Court of Appeals is, that the provision referred to is intended solely for the protection of the corporation, and does not incapacitate the shareholder from parting with his interest, and that his transfer, though not on the books of the company, passes the entire legal title to the stock, subject to any liens or claims of the corporation. Until the transfer be made on the books of the corporation it would be protected in the payment of dividends to the original stockholder, assuming that no notice of his transfer had been given, and the corporation would also be protected in admitting the original stockholder who appeared as owner on the books to vote at elections. But if an act were suffered by the corporation that invested a third party with the ownership of the shares, without the production and surrender of the original certificate, it would be justly and properly liable to the real owner of the certificate. It is the duty and right of the corporation to resist a transfer of stock on its books without the production and surrender of the outstanding certificate representing the stock. The corporation would be protected in such resistance unless it be shown that the certificate has been lost or destroyed, and proof is made that the real owner of it has applied for a new certificate.

When, therefore, the plaintiff, as the owner and holder of the certificate in question, applied to the defendant for a transfer of the shares, and produced the certificate, with the power of the original stockholder, he was entitled to have the transfer made. The refusal of the corporation gave him a right of action for his damages. (Com. Bank of Buffalo v. Kortright, 22 Wend., 348.)

We think the judgment should be affirmed.