25 S.D. 577 | S.D. | 1910
The sole question before us upon this appeal is whether the rights of the respondent Taylor, as pur
The findings herein are quite voluminous, 'but, so far as they are necessary for the determination of the issues before us, they may be condensed into the following statement of a supposed case: On or about August io, 1907, one A., being indebted to B. in the sum of $3,500, gives to B. his promissory note, due October x, 1907. August 9, 1907, a South Dakota corporation, which we will designate as the D. Company, issues to A. four stock certificates representing certain shares of common stock in said D.' Company. In January, 1908, A. indorses said certificates, assigns and delivers each of them to B., such assignments being in form as follows: “For value received, I hereby sell, assign and transfer to B. forty-five and five-sixths (45 5-6) shares of the capital stock, represented by the within certificates, and do hereby irrevocably constitute and appoint B. my attorney to transfer said stock in the books of the within named company, with full power of substitution in the premises. Dated [Date given.] [Signed] A.” On the 9th of August, 1907, D. Company issues to A. a certificate for 162-3 shares of its preferred capital stock; and on March 15, 1908, A. indorses, assigns, and delivers such stock certificates to plaintiff in the same manner and form as in the assignment ol common stock. The assignment of such certificates is intended and received as collateral security for the payment of the above-mentioned note from A. to B. The transfer of said stock certificates to B. are never entered upon the books of D. Company, but such books at all times show said stock as standing in the name of A. A., being indebted to C., gives C. his promissory note, dated October 9, 1907, and, the same remaining unpaid, C. on March 9,
It is the contention of the appellant that the fights of a pledgee take precedence over those of an attachment creditor of the pledgor, even though the attachment creditor had no notice of the pledge prior to the levy of the attachment. On the other hand, respondent contends that under the statute of this state the attachment lien takes priority over any rights of a purchaser who has not had his transfer recorded in the stock transfer book of the corporation; and respondent further claims that, under the facts in this case, the pledge of stock was wholly without consideration, for the reason that the pledgee elected to treat the original note as due, instead of allowing the extension note to 'stand. We do not think there is anything in this last contention, for the reason that it is specifically found by the court that the stock was pledged as security for the original note, and there is no evidence that this security was given for any extension of such note.
This leaves for our consideration the sole question of the effect of our statute upon the rights of an attaching creditor in stock attached, as against an assignee of such stock whose assignment, together with possession of the stock, was taken prior to the attachment, but who has failed to have such assignment noted on the corporate records. This question has been before the courts of the different states many times, and it would be impossible to harmonize their decisions. There is some difference in the statutes of the several states, yet there are several states whose statutes are practically identical with that of this state, and this same lack of harmony is to be found in the decisions of the courts of such states. We shall not attempt to analyze the reasonings found in these varying opinions, but in placing upon our statute the interpretation which seems to us most consistent with the fundamental ideas underlying our laws, not only those pertaining to corporations but those pertaining to other subjects, we shall call attention to some authorities which we deem in point.
The determination of this case must rest upon the construction to be given to sections 423 and 445 of the Revised Civil Code of this state. Section 423 reads as follows: “All corporations for profit must issue certificates of stock when fully paid up, signed by the president and secretary, and may provide in their. by-laws for issuing certificates prior to the full payment, under such restrictions and for such purposes as their by-laws may provide. Whenever the capital stock of any corporation is divided into shares and certificates therefor are issued, such shares of stock are personal property, and may be transferred by indorsement by the signature of the proprietor, or his attorney or legal representative, and delivery of the certificate; but such transfer is not valid except between the parties thereto, until the same is so entered upon the books of the corporation as to show the names of the parties by and to whom transferred, the number or designation of the shares, and the date of the transfer.” Section 445, after providing for certain records that must be kept by a corporation, and providing that "all such records to be open to the inspection of any director, member, stockholder, or creditor of the corporation,” provides by the second paragraph of such section: “in addition to the records above required to be kept, corporations for profit must keep a book, to be known as the ‘stock and transfer book/ in which must be kept a record of all stock; the names of the stockholders or members, alphabetically arranged; installments paid or unpaid; assessments levied and paid or unpaid; a statement of every alienation, sale or transfer of stock-made, the date thereof, and by and to whom; and all such other records as the by-laws prescribe. Corporations for religious and benevolent purposes
Cook, in his, great work on Corporations, at section 486 of the sixth Edition, says: “The courts of the different states are in irreconcilable conflict on this question of whether the unregistered transferee is protected in his purchase. The better rule, and the rule which ultimately will prevail, is that 'an unrecorded transfer of stock is- in this respect like an unrecorded deed of land, and gives good title as against subsequent attachment or executions, even though the latter are levied in ignorance of the unrecorded transfer or deed.” And in section 487 further states: “The decided weight of authority holds that he who purchases for a valuable consideration a certificate of stock is protected in his ownership of the stock, and is not affected by a subsequent attachment or execution levied on such stock for the debts of the registered stockholder, even though such purchaser has neglected to have his transfer registered on the corporate books, thereby allowing his transferror to appear to be the owner of the stock upon which the attachment or execution is levied. Such is the rule prevailing in the federal courts and in the courts of the above-named states [referring to 21 states]. Frequently this rule is
A most exhaustive consideration of this question is found m the case of Lipscomb v. Condon, 56 W. Va. 416, 49 S. E. 392, 67 L. R. A. 670, 107 Am. St. Rep. 938. This case cites Scripture v. Francestown, etc., 50 N H. 571, holding what certainly under our statute must be conceded as true: “That the ownership of the shares passes from the seller to the buyer by force of the contract of sale, and not by operation of law.” In the Lipscomb Case it is said: “If a transfer on the books of a corporation is not required by the charter or by-laws, nor by any general law, it is not necessary to give a transferree a perfect title. In such a case a transfer by delivery of the certificate of stock duly assigned, although not registered on the books of the corporation, will prevail in all jurisdictions over a subsequent attachment by a creditor of the . transferror, whether he had notice of the transfer or not. And the same is true where registration of transfers is required by statute, not for all purposes, nor
It is also urged that the pledge of stock to B. would be absolutely void under section 2369, Rev. Civ. Code, making certain transfers of personal property without immediate change of possession void as against creditors and others. But when we consider that the shares of stock were not tangible property, and that in their case the only tangible evidence of the property were the certificates which were in the possession of B., it becomes Very clear that such section has no application any more than it would to any chose in action evidenced by a writing, where upon transfer of such chose in action the evidence thereof was delivered to the transferee.
Appellant contends that in this case, inasmuch as service of summons and complaint upon A, was under an «order of publication and therefore constructive, and inasmuch as no property of A.’s was levied upon under the attachment, the court acquired absolutely no jurisdiction to render judgment against A., but m this the appellant is clearly in error, as the attachment would be good as against the equity held by A. in and to such stock. It follows that the sale upon the execution would be good as to such equity.
The judgment appealed from is reversed, and the lower court is directed to make conclusions of law and render judgment in conformity with this opinion.