158 N.E. 19 | NY | 1927
Action to compel defendants to surrender stock certificates for cancellation.
In June, 1920, Polish Mechanics Co., a foreign corporation, sought to purchase five hundred shares of the treasury capital stock of plaintiff, a domestic corporation, of the par value of $10 a share. It requested Anthony Misiewicz to purchase the stock and take the same in blocks of one hundred shares in the names of himself and four other persons to hold it for and on behalf of the purchasing corporation and gave him $5,000 which he agreed to use for that purpose. He made the purchase. The number of distributees was increased to six. One certificate, No. 111, was issued to him for ninety shares, and one, No. 112, to his wife, the defendant Sophie Misiewicz for seventy-one shares, without consideration and merely to hold for the corporation. Defendant Louis Ehrenberg as receiver of Anthony Misiewicz now holds the certificate for ninety shares. The wife still holds the certificate issued to her. In the following November the Polish Mechanics Co., desiring to make a new arrangement as to the form of its stock holdings, requested Misiewicz to retransfer the stock so held in his name and that of his wife and to surrender the certificates. He promised but failed to do so. The other persons to whom certificates had been issued surrendered their certificates and plaintiff issued to certain other persons designated by Polish *61 Mechanics Co., five hundred shares of its capital stock in place of all the first set of certificates including the certificates in suit. Misiewicz still failed and refused to surrender the certificates. As a result there are now outstanding both the Misiewicz certificates and the certificates issued in their place. Polish Mechanics Co. has meantime transferred its stock to a purchaser with knowledge of the facts.
The complaint has been dismissed on the ground that defendants were under no duty to plaintiff. The principle has been relied on that a corporation may not, where it has issued and recognized two certificates for the same holding, be heard to assert the validity of one and the invalidity of the other and that the rights of two holders may not be properly settled in the suit, particularly as they are not here parties. (N.Y. Eastern T. T. Co. v. Gt. Eastern Tel. Co.,
The contention is made that the proper remedy for plaintiff is to bring an action to compel the holders of the new certificates to surrender them and to cancel them until the first outstanding certificates are surrendered. But the Misiewiczs are committing a wrong against the plaintiff in refusing to surrender their certificates. As Chancellor KENT said in Hamilton v. Cummings
(1 Johns. Ch. 517, 522): "It is every day's practice * * * to order instruments to be delivered up, of which a bad use might be attempted to be made at law." In the hands of defendants the certificates, valid on their face, are from their nature liable to abuse. The stock has become fictitious. They have no true ownership therein but only the indicia of ownership. While their certificates were not fraudulently issued, they now hold them without right. It is against conscience and equity that the certificates should be kept outstanding and they ought to be canceled to protect the corporation and its genuine stockholders. (N.Y. N.H.R.R. Co. v. Schuyler,
The judgment of the Appellate Division and that of the Special Term should be reversed and judgment ordered in favor of plaintiff for relief demanded in the complaint, with costs in all courts.
CARDOZO, Ch. J., CRANE, LEHMAN, KELLOGG and O'BRIEN, JJ., concur; ANDREWS, J., absent.
Judgment accordingly. *63