62 A. 971 | N.H. | 1906
No question is made that as against Bibber the bank became the owner of the stock in February, 1901, when Bibber transferred and assigned to it his certificate. He did all it was possible for him to do to vest the absolute title to the stock in his vendee. "It seems too clear for argument, 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; and if that be so, the buyer's title, so far as the seller is concerned, attaches the moment this contract is fully consummated between them." Scripture v. Soapstone Co.,
The bank when it purchased the Bibber stock was entitled to believe that by complying with certain reasonable regulations it would be recognized as, and in fact become, a stockholder in the corporation, possessing all the rights of other stockholders. Bibber's certificate which he assigned to the bank contained the solemn statement of the corporation, by its authorized officers and agents, that Bibber was the owner of 350 shares of its stock, and that the stock was fully paid and non-assessable. The principal reason now assigned by the corporation for refusing to register the transfer to the bank and to issue to it a new certificate, is that *475
Bibber paid nothing for the stock, and that under the laws of South Carolina he was not for that reason the owner of the stock represented by his certificate. If that conclusion of law is correct so far as Bibber is concerned, and if while he held the certificate he could not legally act as a stockholder or claim to be the owner of the stock, it would be most inequitable to hold that his vendee, having no notice of any infirmity in his title and relying upon the unequivocal assertion of the corporation contained in the certificate that he was the owner of the stock represented thereby, should be deemed to be in the same position with reference to the corporation that Bibber occupied. Under such circumstances, the most obvious principles of equity and justice require that the corporation should be estopped from denying the title of the innocent vendee who has given value for the stock. "The reason arises from the nature of a share certificate, which, as already stated, is a continuing affirmation of the ownership of the specified amount of stock by the person designated therein, or his assignee, until it is withdrawn in some manner recognized by law; and a purchaser in good faith has a right to rely thereon and to claim the benefit of an estoppel in his favor as against the corporation." 2 Thomp. Corp., s. 2599. "If the certificates state upon their face that the shares have been fully paid up, the corporation will be estopped from denying the truth of this representation, and cannot charge the purchaser and transferee with further liability, although the shares have never in fact been paid up." 1 Mor. Corp., s. 306; 2 Cook Corp., s. 416; Scripture v. Soapstone Co., supra; Boston Albany R. R. v. Richardson,
The fact that since the plaintiff is a national bank it has no authority or power to invest its funds in the stock of other corporations, does not demonstrate its inability, or want of corporate power, to become a stockholder in another corporation upon receiving the stock in payment of a legitimate claim against the former owner of it. "In the honest exercise of the power to compromise *476
a doubtful debt owing to a bank, it can hardly be doubted that stocks may be accepted in payment and satisfaction, with a view to their subsequent sale or conversion into money so as to make good, or reduce, an anticipated loss. Such a transaction would not amount to a dealing in stocks." First Nat'l Bank v. Bank,
As the plaintiff's right to relief, either legal or equitable, seems to be clear, it becomes necessary to consider whether the superior court had jurisdiction of the subject-matter of the suit. No claim is made that the defendant was not regularly a party at the beginning of the litigation, hence it thereby became amenable to such orders as justice might require. Justice required the allowance of the amendment by which the action at law became an action in equity. To the ruling allowing the amendment the defendants took no exception, and they cannot now claim that they are not as fully parties defendant as they were when they appeared in the action at law. Nor is the position tenable that the court will not entertain jurisdiction in behalf of a foreign corporation. Kidd v. Traction Co,
"In the exercise of these functions, any crimes committed, penalties, fines, or forfeitures incurred by the violation of our laws, or any contractual liability to a citizen incurred, may be redressed in our courts, and in such case the jurisdiction does not depend on whether the corporation is doing business generally in this state, but the jurisdiction attaches in the one case to enforce a public law of the state against an offender, and in the other to enforce a contract, and in any case falling under either of these classes it is wholly immaterial from what foreign state or government the company derives its chartered powers, or to what extent it is doing business in this state. But where the act complained of affects the complainant only in his relation as a shareholder or *478
officer of the corporation, and no public right is involved, then the controversy must be said to relate to the internal affairs of the company; and in case of a foreign corporation, the great weight of authority is opposed to the jurisdiction of the court of equity." Bradbury v. Mining Co.
The plaintiff is not a stockholder of the defendant corporation, in the full and proper sense of that term. When it became the owner of the stock it occupied the position of a stranger to the corporation; and what it now seeks is the enforcement of the obligation of the corporation then incurred, if at all, to recognize it as a stockholder. As the corporation is estopped to urge as against the bank that the stock was not legally issued, it must be treated as valid stock when the bank became the owner of it. The case then stands as though the stock was valid and binding on the corporation in the hands of Bibber when he sold it to the bank. In that aspect, the plaintiff acquired a right by the transaction to have the stock transferred on the books of the corporation, so that it would possess as against the corporation and as against the world all the privileges of a stockholder, which it is conceded are valuable. 2 Cook Corp., s. 442. The right to a transfer of the stock on the books of the corporation was one of the rights acquired by the bank at the time of the sale. The corporation had in effect agreed to make such transfer upon the presentation of the former certificate by a bona fide vendee and a demand for such transfer. In order to make its stock conveniently salable and thus to enhance its value as an investment, it represented to all who might desire to purchase its stock, and to all stockholders who might wish to sell their stock, that it would invest the purchasers thereof with all the rights of stockholders by making a record on its books of the fact of each sale as made. Having made such representations and assumed such obligations, it would be highly inequitable for it to repudiate the same to the prejudice of innocent purchasers of its stock.
In this respect the law of South Carolina is not peculiar. The statute of that state, providing that "no transfers of stock shall be valid except as between the parties thereto, until the same shall have been regularly entered upon the books of the corporation" (Code, s. 1894), was not intended to limit the power of a corporation to agree with a bona fide purchaser of its stock to enter the transfer on its books upon demand and notice, when no legal reason exists for its refusal. Such a construction of the statute would render *479
stock issued by corporations of that state of little value as investments in commercial dealings. For some purposes, and as against parties having prior claims or liens on the stock, an unrecorded transfer may be invalid, and is so regarded in South Carolina. State Bank v. Cox, 11 Rich. Eq. 344; State v. McIver,
The plaintiff's right to a transfer therefore depends on the contract of the corporation. The bank is merely seeking the enforcement of a contractual obligation. It is not attempting in this proceeding to interfere with the essentially internal affairs of the corporation. It asks merely that the corporation — a party to the suit — shall recognize it as a stockholder, by virtue of its representation to the bank at the time of the sale that it would do so. The court is not asked to determine what the rights of a stockholder may be in this foreign corporation, or to exercise a discretion in behalf of the plaintiff in regard to the corporate management of the defendant. The relief sought is merely the enforcement of a contractual right which accrued to the plaintiff when it bought the stock of Bibber. It then impliedly promised that it would permit the transfer. 3 Clark Marsh. Priv. Corp., s. 603; Pinkerton v. Railroad,
It is further argued in behalf of the defendants that the New York judgment against Bibber bound the plaintiff; in other words, that the plaintiff, although not in fact a party to that suit, is concluded thereby, because according to the books of the bank Bibber alone was the owner of the stock in controversy, and because the sale of the stock by him vested no title in the bank. But the last reason, in view of the foregoing discussion, is not supported by reason or authority. The entire title which Bibber had to the stock passed to the bank at the time of the sale, February 25, 1901. May 1, 1902, the bank notified the defendant corporation that it was the owner of the Bibber stock; so that the corporation was apprised of the claim of ownership by the bank long before January 3, 1903, when the New York suit was instituted. The bank's title to the stock for all purposes then depended upon the mere formality of a record, since, as above suggested, the corporation had no legal ground for objecting to the record. Under such circumstances, at least it cannot be said that the bank had no legal title to the stock in January, 1903, as against the corporation; and since Bibber was not only not the owner of the stock at that time, but was not in any sense the agent or representative of the bank — the true owner — in that litigation, the binding effect of the New York judgment upon the plaintiff is not apparent. The effect of the defendants' contention is to deprive the plaintiff of valuable vested rights by a judgment against a third party in. a suit to which it was not a party, either directly or indirectly. It is unnecessary to cite authorities to show that such a result cannot be sustained. Holbrook v. Zinc Co.,
It is also contended that the plaintiff is not entitled to a decree for specific performance since he has a plain and adequate remedy at law. In view of the authorities to the contrary, that proposition does not demand extended discussion. It is "contrary to the overwhelming weight of authority. An action for damages does not always afford an adequate remedy for refusal of a corporation to recognize a person as a stockholder; and it is well settled, therefore, that if a corporation wrongfully refuses to recognize and register a valid transfer of stock, and issue a new certificate to the transferee, he may maintain a bill in equity to compel it to do so." 3 Clark Marsh. Priv. Corp., s. 605; 1 Cook Corp., s. 13. It is to be observed that this is not a proceeding to compel a vendor of stock to assign and deliver his certificate to the vendee under contract of sale (Eckstein v. Downing,
So far as the claim that the plaintiff is guilty of laches in not bringing its suit sooner presents a question of fact, it has been found untenable by the superior court, and so far as a question of law is involved, it is sufficient to say that it does not conclusively appear that the plaintiff's delay in this respect was unreasonable or that the defendants have been prejudiced thereby in any respect. Douglass v. Railroad,
The exception to the exclusion of the testimony of the witness relating to an admission made by Greenwood, a director of the bank, who was also its vice-president, is unavailing. The ruling of the court was based upon the fact that it did not appear that the official of the bank was authorized to bind the bank by the proffered admission. Since there is no presumption of law that his official relation to the bank furnished or proved such authority (Low v. Railroad,
Exceptions overruled.
All concurred.