81 N.J. Eq. 256 | New York Court of Chancery | 1913
This bill, which is demurred to, is filed by the purchaser of shares of stock in a corporation against the corporation, itself, The Hussong Dyeing Machine Company, and two" individual defendants, William McK. Monis and Joseph Hussong. The general object of the bill is to compel the company to transfer these shares to complainant on the books of the company and to issue to him a new certificate therefor. The following facts appear in the bill:
The corporation was organized: under the general corporation law on October 12th, 1907, and the complainant, Edwin J. Morris, and the said William McK. Morris and Hussong, were stockholders and tire only directors of the company from the time of the organization of the company. At the time of the filing of the bill, the other officers of the company were, the complainant, president, William McK. Morris, treasurer, and Joseph Hussong, secretary. Complainant, in August, 1911,
“Shares of capital stock may be transferred by endorsement of the certificate and its surrender to the secretary for cancellation, -whereupon a new certificate shall be issued to the transferee, if approved by the board of directors.”
The certificate in this case was tendered for cancellation to the secretary, and as the new certificate is to be issued on the surrender of the old certificate, he is presumably the proper
The first substantial ground of demurrer set up is that complainant was not entitled, under these two assignments, to an issue of stock directly to himself, but that a transfer to Wiley himself on the books of the company and an issue of the new certificate to Wiley was first necessary under the first assignment. This claim overlooks the fact that the first assignment to Wiley constituted him attorney irrevocable with power to transfer on the books and “with power of substitution.” This gave Wiley power,, on his subsequent assignment, to substitute complainant as his agent to make the actual transfer on the books, and by the bill it appears that Wiley did so. This transfer, under the second assignment, complainant is entitled to make, and is entitled to access to the transfer book for that purpose. Authorities referred to- by counsel as holding that where a corporation requires that the power of attorney run directly from the former holder and not from an intermediate one — -there must be an actual transfer on each assignment— are not applicable, for this by-law cannot be.so construed.
Under our decisions, the holder of a' certificate of stock accompanied by an irrevocable power of attorney, either filled up or in blank, may fill up the letter of attorney, execute the power and thus obtain legal title to the stock, and such power is not limited to the person to whom it was first delivered, but enures to each bona fide holder into whose hands the certificate and power may pass. Prall v. Tilt (Court of Errors and Appeals, 1877), 28 N. J. Eq. (1 Stew.) 479, 483, 484 The failure
The second and main ground of demurrer relied on is, that under this by-law all transfers of stock to any transferee are subject to the approval of directors, and that until such approval is given by the board of directors no transfer can be compelled. The bill alleges that this by-law is invalid, and prays that it be declared void. It is claimed by defendants that under this by-law- the board of directors has the right in its discretion to refuse to admit a transferee of shares as a stockholder.
Shares of stock in a corporation are, by the Corporation act, section 20, declared to be personal property, and are made transferable on the books in such manner and under such regulations as the by-laws prescribe. But the certificates of stock, regulation for the transfer of which may be made by the by-laws, are only the evidence of the shareholders’ rights in the company, and are not themselves the property of the company in-which the shareholder has rights. Bijur v. Standard Distilling and Distributing Co. (1905), 74 N. J. Eq. (4 Buch.) 546; affirmed on appeal for reasons stated, 78 N. J. Eq. (8 Buch.) 582.
This section of the act must therefore be considered as giving to the directors only power to regulate or approve the formalities of transfer of the certificate or evidence of ownership, and not as giving power to restrict the absolute right of transfer. In the absence of clear express provisions either in the articles or by-laws lawfully restricting or qualifying this absolute right of property and transfer, he has the same absolute right to transfer his shares as to transfer any other personal property. If, however, this bj'-law should be construed as not confined merely.to approval of the formalities of transfer, but
The right to relief in this court, if the directors under this by-law are not entitled to withhold approval, and complainant is entitled to a transfer, was not disputed at the hearing. The right to equitable relief is based on the fact that the oomplainanfis title under the assignments is an equitable title only, as between him and the company, and equitable relief is necessary to acquire the legal title and rights on the shares transferred. Hussong, as the assignor, is a proper party defendant to a suit against the company, being interested as the alleged assignor, and as entitled to have the transfer made on the books, relieving himself and constituting complainant to the obligations to the company as the legal and record holder of the stock.
The demurrer will be overruled.