Dean Rapid Telegraph Company v. Howell

• Court: Kansas Court of Appeals
• Writing for the Court: JOHNSON, J.
• Citation: Dean Rapid Telegraph Company v. Howell, 144 S.W. 135, 162 Mo.App. 100 (Kan. App. 1912)
• Decision Date: 05 February 1912
• Parties: DEAN RAPID TELEGRAPH COMPANY, Respondent, v. D. C. HOWELL, Defendant, ELMER E. FREEMAN and W. A. MARSHALL, doing business under the name of FREEMAN & MARSHALL, Appellants

144 S.W. 135

162 Mo.App. 100

DEAN RAPID TELEGRAPH COMPANY, Respondent, v. D. C. HOWELL, Defendant, ELMER E. FREEMAN and W. A. MARSHALL, doing business under the name of FREEMAN & MARSHALL, Appellants

Court of Appeals of Missouri, Kansas City

February 5, 1912

Appeal from Jackson Circuit Court.--Hon. W. A. Powell, Judge.

REVERSED AND REMANDED (with directions).

Judgment reversed and cause remanded.

Silvers & Silvers and W. F. Guthrie for appellants.

S. S Gundlach for respondent.

OPINION

JOHNSON, J.

Plaintiff, a corporation, filed a bill of interpleader in the circuit court of Jackson county, the prime object of which is to obtain an adjudication respecting the ownership of certain shares of the capital stock of the corporation.

The defendants, Howell on one side and Freeman and Marshall on the other, are rival claimants of the stock and prior to the filing of the bill, each had made a formal demand of the secretary of the corporation for the issuance of a certificate. Each defendant appeared and filed an interplea. A trial of the issues resulted in a judgment awarding the stock to Howell and the cause here on the appeal of Freeman and Marshall.

There is no controversy over the material facts of the case. Plaintiff was incorporated in Arizona and in May, 1909, was licensed to do business in this state, under the provisions of section 1025, Rev. Stat. 1899. Its articles of incorporation, filed in Arizona, authorized it to "establish branch offices within or without the territory of Arizona, where meetings of the board of directors may be held," and provided that "the principal branch office without the territory of Arizona where the business of said corporation is to be transacted (is to be) in Kansas City, Jackson county, Missouri." And further that "thereafter the board of directors shall be elected from among the stockholders on the first Tuesday in September, in each year, at the annual meeting of the stockholders to be held in Kansas City, Jackson county, Missouri." It is agreed by the parties "that at all times after its organization the principal office of said corporation was and still is in Kansas City in charge of its duly elected and qualified officers, that the books of said company, including the stock certificate, transfer books and ledgers are and at all times have been kept in its offices in Kansas City."

The statutes of Arizona, duly pleaded and put in evidence, provide that transfers of stock in corporations "shall not be valid except as between the parties thereto until the same are regularly entered upon the books of the company so as to show the names of the persons by whom and to whom the transfer is made, the number or other designation of the shares and the date of the transfer," etc. The substance of this statutory requirement was embodied in one of the by-laws of the corporation.

Frank Dail, a resident of Kansas City, owned 15,000 shares of the stock of the company and appeared on the stock transfer book as such owner. Certificates were issued to him one of which was certificate No. 286 for 5,000 shares. He borrowed $ 100 from Howell, who also is a resident of Kansas City, and placed certificate No. 286 in Howell's hands as security for the debt and after he had defaulted in paying the debt, agreed that Howell should have the full ownership of the certificate and, of course, of the stock it represented. Howell neglected to have the transfer made on the books of the corporation. Afterward Dail became indebted to Freeman and Marshall and they recovered a judgment against him for the debt in a justice court. They had an execution issued and on April 7, 1909, the constable served notice on plaintiff, under the provisions of section 2202, R. S. 1909, of levy of the execution on all the stock owned by Dail. A sale of the stock was made under the execution and Freeman and Marshall became the purchasers and received a certificate of sale. Then they served a written demand on plaintiff for the issuance to them of a new certificate. The next day Howell served a similar demand and this suit followed.

The first question we shall discuss is whether or not Freeman and Marshall acquired any title to or interest in the stock of Dail represented by certificate numbered 286, by virtue of their purchase at the execution sale. Counsel for Howell argue that since the situs of the stock must be regarded in law as being in Arizona, where the corporation was domiciled and the levy of the execution was an attempt to seize the stock,--the res,--here in Missouri, it was abortive, for the reason that the rei sitae was not here but in Arizona. On the other hand the position of counsel for Freeman and Marshall is that since the stockholder Dail, the respective claimants, and for all practicable purposes, the corporation itself, together with all of its domiciliary possessions, including (most important of all) its stock books, were in Missouri, the situs of the stock for the purposes of seizure under attachment or execution, must be regarded as being in Missouri, and, consequently, under the hypothesis that the title to the stock was vested in Dail at the time of the levy, the purchasers at the execution acquired the full legal title to the property and were entitled to have a new certificate issued to them.

At common law, stock in a corporation was not subject to levy and sale under attachment or execution. [Foster v. Potter, 37 Mo. 525; 2 Cook on Stock & Stockholders (5 Ed.), sec. 480.] This was on the theory that a share of stock is in the nature of a chose in action and such intangible property could not be reached by or made subject to a levy. Therefore, we must look to the statutes for any right the execution creditor had in the present instance to impound the stock in controversy.

The statutes relating to the subject are sections 2201 and 2202, R. S. 1909. They establish the right of a creditor of a stockholder to reach stock in a corporation owned by his debtor by levy under execution and provide a method for the enforcement of such right which method was followed in the present case. In the case of Armour Banking Co. v. St. Louis Nat'l Bank, 113 Mo. 12, 20 S.W. 690, the Supreme Court considered the question of the right of a creditor of a stockholder in a foreign coporation to impound the stock of the debtor by a levy upon and seizure of the certificate of stock. The right was denied for the reasons that the statutes providing for the levy of an attachment or execution on stock in private corporations relate only to stock in domestic corporations and make no provision for a levy upon certificates of stock, nor in any way alter the common law doctrine that a certificate of stock is not the stock itself, i. e., the interest or right that the stockholder has in the corporate entity, but is only evidence of such interest or right and, consequently, is not subject to physical seizure by attachment or execution. Speaking of the statutes we have quoted the opinion says:

In regard to these provisions we remark in the first place that in our judgment they apply to domestic corporations alone. It is true, they are general enough to embrace corporations of other states and countries, but their details, prescribing the manner of seizing and conveying the shares of stock, point unerringly, not only to corporations organized under the laws of this state, but also to corporations alone whose place of business is within the county and jurisdiction of the officer making the levy and sale." And the court expressly approved the opinion of the Court of Appeals of New York in Plimpton v. Bigelow, 93 N.Y. 592, which, later, we shall discuss at length as it has been regarded as a leading case by the courts of last resort in many jurisdictions and by text writers.

And in the recent case of Richardson v Busch, 198 Mo. 174, 95 S.W. 894, the Supreme Court reaffirmed the doctrine of the Armour case that a certificate of stock in a foreign corporation cannot be the subject of the levy of an attachment or execution in this state. "Our process," says Judge Valliant in the opinion, "cannot reach beyond our state boundaries, and, as suggested in the quotation from the Pennsylvania court, if our General Assembly should pass on act essaying to authorize the levy of an execution on land in another state by seizing the title deeds that happened to be within our...