Knight v. Shutz
| Decision Date | 24 March 1943 |
| Docket Number | 29281. |
| Citation | 47 N.E.2d 886,141 Ohio St. 267 |
| Parties | KNIGHT v. SHUTZ et al. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. The Uniform Stock Transfer Act, Section 8673-1 et seq., General Code, applies to all certificates of stock issued by Ohio corporations since July 1, 1911. 102 Ohio Laws, p 505.
2. The Uniform Stock Transfer Act is all inclusive and admits of no exception.
3. Stock certificates issued by Ohio corporations since July 1 1911, possess the quality of negotiability.
4. The title to a stock certificate and the shares represented thereby can be transferred only by delivery of the certificate properly endorsed or accompanied by a separate document containing a written assignment or a power of attorney to assign or transfer the certificate or the shares represented thereby. Section 8673-1, General Code.
5. Where a stock certificate has been procured by fraud or duress, any court of appropriate jurisdiction may enforce specifically the right to reclaim the possession of the certificate or to rescind the transfer thereof and, pending litigation, may enjoin the further transfer of the certificate or impound it. Section 8673-7, General Code.
6. Except where a stock certificate is lost or destroyed the issuing corporation may not be compelled to issue a new certificate for the stock until the old certificate is surrendered to it. Section 8673-13, General Code.
7. The doctrine of lis pendens does not apply to a suit to compel a corporation to transfer a stock certificate or the shares represented thereby.
8. The rules and regulations of an Ohio corporation, not in contravention of any statutory provision, have all the force of contracts as between the corporation and its members. State ex rel. Schwab, Pros. Atty. v. Price, 121 Ohio St. 114, 167 N.E. 366, 63 A.L.R. 1100, approved and followed.
9. A stock certificate issued by a corporation is a contract between the corporation and the holders of certificates of stock so far as not in conflict with any statutory provision. Geiger v. American Seeding Machine Co., 124 Ohio St 222, 177 N.E. 594, 79 A.L.R. 614, approved and followed.
10. Certificates for shares of corporate stock and shares represented thereby are transferable on the books of the corporation in such manner as the corporate regulations may provide which are not inconsistent with the Uniform Stock Transfer Act, Section 8673-1 et seq., General Code, or other statutory provisions existing at the time of the transfer. Section 8623-31, General Code.
11. A court is without authority to compel a corporation to pay dividends to anyone except a registered holder of its stock. Sections 8623-30a and 8673-3, General Code.
The Court of Common Pleas of Stark county in cause No. 71087 found that Margaret C. Shutz obtained the assignment and delivery of certain stock certificates by duress and fraud upon one George F. Knight, who had since died. She was ordered to assign and deliver such stock certificates to Paul L. Knight, as executor of the estate of George F. Knight, deceased, and was enjoined from transferring or assigning them or any part thereof to any other person whomsoever.
Upon the failure of Mrs. Shutz to comply with the order of the court she was found guilty of contempt and was imprisoned pending performance. The court also appointed a receiver to take possession of the property and assets and Mrs. Shutz. The receiver was unable to obtain possession of the certificates.
Without surrendering the certificates, Mrs. Shutz was, according to the statements of counsel, released from jail and thereafter sold and delivered one of the certificates in question in the open market.
Mrs. Shutz was again committed to jail and later released without having complied with the order of the court to surrender the certificates.
Thereupon the instant action was brought in the Court of Common Pleas of Stark county by Paul L. Knight as executor of the estate of George F. Knight, deceased, against the several corporations which had issued the certificates which Mrs. Shutz had refused to surrender, to enjoin such corporations and their transfer agents from transferring the shares to any other person and from paying to Margaret C. Shutz any dividends on such stock. It was further sought to compel each of the corporations and their transfer agents to issue in the name of Paul L. Knight, as executor, certificates of stock in lieu of the certificates held by Mrs. Shutz.
After hearing, the trial court entered its decree enjoining the corporations and their transfer agents from assigning and transferring upon their corporate books and records the shares of stock in question and from paying any dividends thereon to Margaret C. Shutz. The court, however, found that it was without authority to issue an order or decree compelling the defendant corporations to transfer upon their books and records such shares of stock to plaintiff or to order such corporations to pay the dividends to plaintiff. The journal entry of the trial court's decree contains the following: 'It is therefore ordered, adjudged and decreed that the defendants and each of them are hereby enjoined from transferring upon the books and records of said defendants any of said stock or any part thereof to any other person, firm or corporation, and from paying the dividends accrued thereon or accruing hereafter to any such person, firm or corporation, and the prayer of plaintiff's petition to compel the said defendants to transfer said stocks and shares upon their records, and to pay the plaintiff the dividends accrued thereon and accruing hereafter is hereby denied.'
Paul L. Knight, as executor, thereupon appealed to the Court of Appeals which affirmed the judgment of the trial court.
The cause is here following the allowance of a motion to certify the record.
William Simpson and Charles S. Weintraub, both of Canton, for appellant.
James L. Amerman, of Canton, and Randolph R. Fawcett, of North Canton, for appellee Republic Stamping & Enameling Co.
Brown & Sanger, Sholto M. Douglas, and Otto H. Spengler, all of Toledo, for appellees Harbauer Co. and Toledo Trust Co.
Hauxhurst, Inglis, Sharp & Cull, of Cleveland, Kenneth B. Cope, of Canton, Raymond G. Hengst, James C. Weir, and J. Hall Kellogg, all of Cleveland, and Lynch, Day, Pontius & Lynch, of Canton, for appellees Eaton Mfg. Co., Cleveland Trust Co. and Central Nat. Bank of Cleveland.
F. K. Pickering, of Cleveland, for appellee Superintendent of Banks.
The questions presented are whether it was error for the Court of Common Pleas to refuse to order the appellee corporations and their registrars and transfer agents, (1) to transfer the shares of stock in question to appellant, (2) to issue him new certificates therefor, or (3) to pay him the accrued dividends thereon. If the trial court did not so err then the judgment of the Court of Appelas affirming the decree of the trial court should be affirmed.
We shall resist the temptation which this case holds to delve into the extensive bibliography on the subjects of transfer and issuance of corporate shares and stock certificates and the rights to dividends being content to call attention to the fact that some confusion exists by reason of the failure to observe the line of demarcation between those certificates of stock, the transfer of which is governed by the Uniform Stock Transfer Act, and shares of stock, the transfer of which is not subject to the act. As the act is not effective in all states, and not applicable to all certificates in states where effective, text and decided cases must be examined to determine whether the case arose under of independently of the act.
Whether the Uniform Stock Transfer Act is, as claimed by some, a mere codification of the prior law or whether it is a code of new law need not disturb us--certain it is that in Ohio the transfers of certificates of corporate stock subject to the act are governed by the act and such statutory enactments are to be read in the same way and interpreted and construed when necessary in the same manner as other statutory enactments.
Section 8673-22(1), General Code, provides that: "Certificate' means a certificate of stock in a corporation organized under the laws of this state or of another state whose laws are consistent with this act.'
Section 23 of the Uniform Stock Transfer Act, 102 Ohio Laws, p. 505, provides: 'The provisions of this act apply only to certificates issued after the taking effect of this act.'
While Section 24, ibid, provides: 'This act shall take effect on the first day of July, one thousand nine hundred and eleven.'
Checking the record we find that all of the corporate appellees are Ohio corporations and that all certificates in question were issued since July 1, 1911.
Under the Uniform Stock Transfer Act, a stock certificate has become something more than mere evidence of title. The title to the certificate and the shares represented thereby can be transferred only by delivery of the certificate duly endorsed or accompanied by a written assignment or power of attorney to assign. Sections 8673-1 and 8673-10, General Code.
Neither attachment nor levy may now be made unless the outstanding certificate be actually seized, or the transfer enjoined. Section 8673-13 and 8673-14, General Code.
While some authorities admit only 'quasi-negotiability' Peckinpaugh v. Noble & Co., 238 Mich. 464, 213 N.W. 859, 52 A.L.R. 941; Jackson v. Peerless Portland Cement Co., 238 Mich. 476, 213 N.W. 863; Edgerly v. First National Bank of Boston, 292 Mass. 181, 184, 197 N.E. 518; 18 Corpus Juris Secundum, Corporations, p. 919, §§ 389, 390; 12 Fletcher, Cyclopedia Corporations, 463, Section 5542, the weight of authority holds that Section 5...
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