37 Cal. 15 | Cal. | 1869
Lead Opinion
I. The point that the proceeding is without authority of law is based upon a typographical error in the statutes of 1851, p. 443, Sec. 31. It appears from that section, as printed, that the whole Act of 1850, concerning corporations, was repealed; but the Act, as enrolled, shows that only Chapter III of the Act of 1850 was repealed. Chapter I of that Act, which includes the section under which the proceeding was instituted, was left in full force.
II. The proceeding is clearly of a judicial character. The controversy was heard and determined by the Judge in his official capacity, and his decision was a final determination of the rights of the parties to the proceeding. The fact that the proceeding was instituted before the Judge, and not the District Court, docs not prove that the proceeding was not a judicial, proceeding, nor that the decision does not amount to a judgment, for the Legislature is not prohibited by the Constitution from conferring upon the Judges authority to hear and determine actions and proceedings at Chambers. Such authority is granted in respect to writs of mandamus, certiorari, and quo warranto. We are of the opinion that this is a special proceeding; that the decision is a judgment, and that an appeal therefrom is given by section three hundred and forty-seven of the Practice Act; and such, we judge from the stipulation, was the view of the counsel who appeared before the District Judge.
III. The parties recited in their stipulation all the facts in the case, and agreed that the stipulation should be a part of the judgment roll, and that no other statement on appeal should be required. The facts therein recited took the place and served all the purposes of a finding of facts by the Court. Ho statement on appeal was necessary. All the questions presented arise upon what the parties have agreed shall constitute the judgment roll, and no specification of the errors or ground relied upon is required to be made in the record.
It becomes necessary to ascertain the ownership of the stock voted upon by McLane. For this purpose the resolution of the Board of Directors, the receipt given for the stock and the agreement executed by McLane are to be construed together as constituting one transaction. The substance of the transaction is that Wells, Fargo & Co. advanced to the Plaeerville and Sacramento Valley Railroad Company the sum of two hundred and sixty-eight thousand dollars, and the railroad company, as security for the money so advanced, issued to Louis McLane, as the trustee for Wells, Fargo & Co., ten thousand shares of the capital stock of the railroad company, to be retransferred to the company upon payment of the indebtedness for the money so advanced, and
A pledge is a bailment of personal property as a security for some debt or engagement. (Story on Bailm., Sec. 268.) The general property in the thing pledged remains in the pledgor, and only a special property vests in the pledgee. A delivery to the pledgee of the thing pledged is essential to the contract, and until that act is performed the special property that the bailee is entitled to hold does not vest in him. In respect to most kinds of property, a delivery of the property to the pledgee, without any written transfer of the title, is sufficient to pass the requisite special property. Incorporeal property, being incapable of manual delivery, cannot be pledged without a written transfer of the title. Debts, negotiable instruments, stocks in incorporated companies, and dioses in action generally are pledged in that mode. Such transfer of the title performs the same office that the delivery of possession does in case of a pledge of corporeal property. The transfer of the title, like the delivery of possession, constitutes the evidence of the pledgee’s right of property in the thing pledged. The transfer in writing of shares of stock not only does not prove that the transaction is not a pledge, but the stock, unless it is expressly made assignable by the delivery of the certificates, cannot he pledged in any other manner. In Wilson v. Little, 2 N. Y. 443, the stock was transferred to the defendants, hut the Court held that the contract amounted to a pledge of the stock. (See, also, Jewitt v. Warren, 12 Mass. 300; Bowman v. Wood, 15 Mass. 534; Dewey v. Bowman, 8 Cal. 145; Story on Bailm., Sec. 290, and following; Parsons on Cont. 595.) In Dewey v. Bowman it is said that the pledgee has not the legal title to the property, and lan
The circumstance that the stock was issued to Louis McLane, as Trustee for Wells, Fargo & Co., instead of being issued in the name of the latter, does not alter the real nature of the transaction. McLane is described as the trustee of Wells, Fargo & Co., but his position and duties in respect to the stock, so far as either of the parties to the contract are concerned, is that of agent of the creditors. He is none the less a mere agent in the transaction because he is described as trustee. The transfer of the stock to him was in law a transfer to his principal, Wells, Fargo & Co. Had he been named as the agent of the creditors, there would be no room for doubt on this point. His true position in the transaction is to be determined, not by the title given to him, but by the acts and duties he is to perform; and these show that he bears the relation of agent to the creditors of the corporation.
The transaction lacks one essential element of a mortgage. A mortgage passes the title to the mortgagee, the mortgagor reserving the right to defeat the transfer and revest the title in himself by the performance of an express condition subsequent. Here no time was mentioned for the repayment of the money advanced, and the contract looked to the retrans
It results from this view of the contract that, as between the parties, the general property in the stock is in the pledgor—that the railroad company is its owner.
V. The question here is not whether the pledgee or a trustee to whom stock has been pledged or transferred by a stockholder, and who appears upon the books of the corporation to be the owner, is entitled to vote; but it is whether the agent or trustee of the pledgee, who is described in the Certificate Book of the corporation as a trustee, and who holds as such trustee or agent certain shares of stock which were pledged by the corporation to its creditor, is entitled to vote such stock. The designation of McLane as trustee was sufficient to show that he did not hold the stock in his own right, and as the corporation was one of the parties to the contract, its officers are chargeable with notice of the manner in which he held the stock. The case falls within the principle of Ex parte Holmes, 5 Cow. 426, in which it was held that there could be no vote upon stock owned by the company, though held by trustees; that it was not stock to be voted upon by any one within the meaning of the charter or the general Act relating to that subject. Subsequent cases, like Ex parte Barker, 6 Wend. 510, though qualifying and restricting the broad language of Ex parte Holmes so as not to exclude the vote of a trustee upon the stock held in. trust for a stockholder, have not questioned the doctrine that the stock belonging to the corporation, though held in the
VI. It is objected that an investigation cannot be here collaterally made of the terms and conditions upon which the trustee holds the stock. To what extent evidence, if objected to, would be admissible to prove such terms and conditions, it is unnecessary to inquire, for the case was presented to the Court below upon an agreed statement of facts, without reserving the question of the competency, relevancy, or admissibility of any fact in the statement, and it is now too late to raise the question. The judgment of the Court was invoked upon the facts recited in the statement.
VII. There is another view of the matter which appears to us to be equally decisive of the case. The whole Act proceeds on the theory that the certificates of stock aro to be issued only upon the payment in full for the stock. Section fourteen is as follows: “ Certificates of stock shall be issued, signed by the President and Secretary, in such manner as may be prescribed by the by-laws of the company, for all slock paid up, from time to time, in compliance with the requirements of such Directors, or that may be fully paid in advance of such requirements by the voluntary act of any stockholder of such company.” This provision clearly negatives by implication, the right to issue the certificates of stock in advance of payment. There are many provisions of the Act that lend support to this construction. The “ Book of Stockholders ” is required to contain the amount of cash actually paid to the company by the stockholders respectively for their stock. In the next section (twelve) it is provided that the stock shall be transferable in the manner provided by the preceding section, and upon the books of the company, upon proper assignment and delivery to the assignee
Counsel have discussed the question whether the corporation can issue stock except in pursuance of a subscription; but that is not the question now before us, nor does it afford a test for its solution. It may be conceded that the corporation may issue its stock to its creditor in satisfaction of its debt, and the creditor may not be technically a subscriber to the stock, though he is substantially. In such case the creditor does that which is a prerequisite in every issue of stock —he purchases and pays for the stock. His demand stands in the place of so much money.
The provision of section thirteen, that the Directors may “ call in and demand from the stockholders the sums by them subscribed, in equal installments of not more than ten per cent per month, unless otherwise stipulated in the articles of subscription, at such time as they may deem proper,” instead of lending support to the respondents’ position, that the stock may be issued without payment therefor, implies that payment must be made, and that the calls may be greater than ten per cent per month when the subscribers have so stipulated. The authority given in section four to the Directors to open books of subscription upon such terms as they may direct, does not permit them to receive subscriptions without any terms—that is, without payment or promise of payment
While the position that the corporation may issue its stock in payment of its indebtedness is not questioned, it does not follow that the stock may be issued to secure such indebtedness. Had the stock been issued in the usual manner, and afterwards become the property of the corporation, and been held in such a manner that it did not merge, the corporation might deal with it the same as any stockholder, unless prohibited by the statute; but the claim of authority to pledge the unissued stock necessarily assumes the very point in controversy—the authority to issue the stock without purchase or payment.
The capital stock of a corporation, previous to its being issued, cannot, in any proper sense, be called the property of the corporation. When the certificates of stock are issued to a stockholder, they are, in his hands, the muniments and evidence of his title to a given share in the property, income, and franchises of the corporation. (Mechanics’ Bank v. N. Y. and N. H. R. R. Co., 13 N. Y. 627.) The corporation possesses only the right, the power to issue the stock, and a condition precedent, to the exercise of the power is the purchase and payment for the stock. This restriction, if it may properly be so called, is not more unreasonable than those
We are of the opinion that the shares of stock issued to McLane to secure the payment of the money advanced to the corporation, were illegally issued, and were not entitled to be voted upon at the election for Directors, and that the plaintiffs received a majority of the legal votes cast at the election.
Judgment reversed; and it is further ordered and adjudged that, at the election held on the 5th day of February, A. D. 1868, by the stockholders of the Placerville and Sacramento Valley Bailroad Company, for the election of Directors of said corporation, C. W. Brewster, W. S. Burns, F. A. Bee, A. T. Melvin, B. Landecker, B. B. McBride, J. G-. McCallum, W. H. Cooper, and O. H. Burnham, were duly elected Directors of said corporation.
Concurrence Opinion
This is an appeal from an order or judgment in a summary proceeding under section fifteen of Chapter I of the Act of 1850, concerning corporations, by a portion of the stockholders of a railroad corporation, to set aside an election of Directors. The section is as follows:
“ Hpon the application of any person or persons, or body corporate, that may be aggrieved by or may complain of any*32 election held hy any corporate body, or any proceeding, act or matter in or touching the same, it shall be the duty of the District Judge of the district in which such election is held (reasonable notice having been given to the adverse party, or to those who are to be affected thereby, of such intended application) to proceed forthwith and in a summary way to hear the affidavits, proofs and allegations of the parties, or otherwise inquire into the matters or causes of complaints, and thereupon establish the election so complained of, or to order a new election, or make such order and give such relief in the premises as right and justice may appear to the said District Judge to require; provided, that the said Judge may, if the case appear to require it, direct the District Attorney of his district to exhibit one or more information or informations in the nature of a quo warranto in the premises.”
The respondents object that no appeal is authorized, and this Court, has no jurisdiction to entertain the appeal. I can see no answer to this objection. The proceeding was not bad under the Practice Act, and its provisions are inapplicable. The proceeding authorized by the section cited is special and summary, had before the Judge, as such, and not before the Court. The object, doubtless, is to give a speedy remedy, which may be pursued, in a perfectly clear case, at once before the Judge in vacation, wherever he may be found in the district at the time the emergency arises. The provision makes it “ the duty of the District Judge * * * to proceed forthwith and in a summary way to hear the affidavits, proofs and allegations of the parties,” etc. But it also permits him, in a case of great gravity or difficulty, or when the case is not clear—“if the case appear to require it”—to direct the District Attorney to exhibit an information in the nature of a quo warranto; that is to say, to require the proceeding to be had in the ordinary, regular, more deliberate and solemn mode provided in the Practice Act for determining such questions by the Courts of justice. But, so far as
If the parties choose to adopt this mode of redress, I think they must be content with the remedy afforded. I am of opinion, therefore, that the appeal should be dismissed. But as my associates have disposed of the case upon other than lurisdictional grounds, I will add that, whether the stock in question is regarded as an ordinary pledge or as a trust, I concur in the conclusion that Mr. McLanc was not entitled to vote upon it, upon the grounds somewhat generally stated in the fifth point of the opinion of Mr. Justice Rhodes and upon the authorities therein cited.
Concurrence Opinion
I concur in the judgment and opinion to the effect that the stock held by the trustee did not entitle him to vote at the election of Directors; but I express no opinion as to the validity of the stock in the hands of the trustee, as a security for the debt to Wells, Fargo & Co.
Concurrence Opinion
I concur in the judgment.
Mr. Justice Sandersoh, being disqualified, did not sit in this case.