May v. Cleland

117 Mich. 45 | Mich. | 1898

Grant, C. J.

(after stating the facts). The sole question is: Does the transfer of shares in a corporation at an execution sale take precedence of a previous bona fide sale and transfer not entered on the books of the corporation? The authorities are in conflict. In 30 Am. Law Rev. 223 et seq., the decisions in the various States are collected. In that article the author argues forcibly for the execution creditor, and reaches the conclusion that the weight of authority supports that theory. He, however, says: “As a theory, this ground is opposed by most of the text-writers, including Cook, Morawetz, Lowell, and Pomeroy.” Counsel for the defendant have given us the benefit of an able and exhaustive examination of the decisions in the States where the question has arisen. We deem it unnecessary to discuss or to distinguish them. We think our own court has settled the question. Mandlebaum v. North American Mining Co., 4 Mich. 465; Newberry v. Detroit, etc., Manufacturing Co., 17 Mich. 141; McLean v. Charles Wright Medicine Co., 96 Mich. 479. In the Newberry Case it was held that a transfer of stock, though unrecorded, conveys the interest of the holder, and is valid, except as against persons having equities; and that a judgment creditor buying at an execution sale, with notice of the transfer, can get no better title than his debtor had. One Russell was the owner of the stock, as appeared by the books of the corporation, but had sold and transferred his shares to two other parties before Newberry’s levy was made. Chief Justice Cooley said: “The levy was entirely ineffectual.” Justice Campbell said: “No title passed under the execution sale, as Russell’s rights had been already divested.” In the Mandlebaum Case it was held that these certificates of stock are “not commercial paper, in the strict sense of the term, but that the holder is entitled to every right respecting them, as against third parties, which the law confers upon the holder of commercial paper.” In the McLean Case we cited with approval the Mandlebaum Case, and held that the transfer upon the books is not essential to the validity of the purchaser’s title. An execution creditor has no prior equities, nor are we able to see that he has any existing equities in consequence of his levy. He has parted with no interest or right, and is in no worse condition by the failure of the levy than he was before. If his debtor has no title, he can acquire none by a levy and sale, any more than he could by a levy and sale of land, the title to which, upon the record, stood in the debtor, but with which he had parted, or by a levy and sale of personal property in his possession, but to which he had no title. Cook, Stock, Stockh. & Corp. Law, §§ 486, 487; 1 Mor. Priv. Corp. §§ 193-195.

The decree is affirmed.

The other Justices concurred.