31 Conn. 25 | Conn. | 1862
The attaching creditors, who are the real parties in interest in this cause, assume that by a course of decisions in Connecticut, stock in a corporation is held to be so peculiar in its nature and character that no transfer can be made of it, or even any equitable interest acquired in it, as against attaching creditors, unless by an actual transfer made upon the corporation books, or recorded in them, in the mode prescribed by the charter or by-laws of the institution ; and the cases of The Marlborough Manufacturing Co. v. Smith, 2 Conn., 579, Northrop v. Newtown & Bridgeport Turnpike Co., 3 id., 544, and Northrop v. Curtiss, 5 id., 246, subsequently sanctioned by more modern cases in our reports, as is claimed, are relied upon in support of the position. The first two of these cases, and the case of The Oxford Turnpike Co. v. Bunnel, 6 Conn., 552, do undoubtedly decide that, in actions at law, in cases where the legislature in the act of incorporation either prescribe the mode of transferring stock, or authorize the company to do it in their by-laws, and the company do in their by-laws prescribe a mode as the only one to be pursued, that mode must be followed, or the legal title will not pass by an assignment which would be good at common law had no particular and exclusive mode of transfer been prescribed. These cases, and others to the same effect, being actions at law, conversant only with what at the time was considered the strict legal title to corporate stock, have necessarily no controlling force in a case depending upon equitable instead of legal principles. And although the case of Northrop v. Curtiss was upon a bill in chancery praying that the
Shares in the stock of a corporation are the subjects of sale, mortgage or pledge, and are liable to attachment and execution like other personal property. And when the question is between a vendee and an attaching creditor of the vendor, as to which of them has the better title, and it appears, as it does here, that the instrument of transfer or assignment was executed prior in point of time to the service of the attachment, then, if the vendee’s purchase was made in good faith and for a valuable consideration, as to which no question is made in
The application of these suggestions to the case in hand
But the respondents claim that, so long as this bare legal title remained, with no knowledge on the part of his creditors that he had made the assignment, it was open to their attachments as his to the same extent as before the assignment. We think this too broad a claim. The ground on which stock sold but not legally transferred is open to attachment by the creditors of the vendor, is, as has been suggested, the same upon which personal chattels sold but retained in the possession of the vendor are liable to attachment by the vendor’s creditors. The principle in each case is, that the retention of possession is a badge of fraud — that is, is evidence of a fraudulent. secret trust. This is the reason given in the recent case of Shipman v. Aetna Ins. Co., 29 Conn., 245, why certain stock, sold by a written bill of sale but not transferred, was held to pass to the trustee in insolvency of the vendor; the trustee being held to have taken precisely as an attaching creditor would have done.
But it is well settled that this retention of possession in every case is only a badge, that is, is evidence of fraud, to be regarded as conclusive where the retention of possession is voluntary and unnecessary.
And it is to be observed that it is the policy of the law which forbids this retention of possession; and the liability of the property to attachment is in a measure a punishment, either for the actual fraud, or the negligence of the vendor. Hence it is said in the-cases on this subject that “ proof of the payment of a full consideration, or of ihe justice of the debt for which the property is taken on legal process, accompanied with the highest evidence of the honesty of the transaction, will not, in general, be sufficient to repel the legal effect of neglecting an actual removal of the property.” Mills v. Camp, 14 Conn., 219. Kirtland v. Snow, 20 id., 23. The rule therefore is, to a certain extent, punitive in its character,
We do not feel, therefore, that we are under any obligation, without any substantial reason being given for it, to place the rights of an attaching creditor above those of a bona fide purchaser, where the utmost diligence has been used, as in this case, by both purchaser and vendor to make the sale and delivery as complete as possible. If the retention of the bare legal title to the stock, so merely formal as it was here, does not furnish a reason for holding the purchase to have been colorable and conclusively fraudulent against creditors, as we think it does not, then it seems quite clear that there can be no other which would subject this property to attachment that would not apply in all its force to any property in the hands of a trustee and subject that also to liability for the trustee’s debts. Eor these reasons we are satisfied that Mrs. Colt is equitably entitled to the stock ; and that the attaching creditors should be enjoined against proceeding to levy their executions upon it. And so we advise the superior court.
In this opinion the other judges concurred ; except Sanfobd, J., who did not sit.