East Birmingham Land Co. v. Dennis

• Decision Date: 15 January 1889
• Parties: EAST BIRMINGHAM LAND CO. ET AL. v. DENNIS.
• Court: Alabama Supreme Court

5 So. 317

86 Ala. 565

EAST BIRMINGHAM LAND CO. ET AL. v. DENNIS.

Supreme Court of Alabama

January 15, 1889

Appeal from city court of Birmingham; H. A. SHARPE, Judge.

The bill in this case was filed by J F Dennis against J P. Mudd and the East Birmingham Land Company, a private corporation and sought to compel the transfer, on the books of the corporation, of a certificate for 10 shares of stock, of which the complainant claimed to be the owner, and to compel the delivery of the certificate to him by said Mudd, who had the possession of said certificate, and claimed the ownership of it. The certificate was issued in the name of A. R Dearborn, and was indorsed by him in blank. The complainant claimed that he had bought the certificate, with the blank indorsement thereon, from a holder who had acquired it by purchase from said Dearborn; and that it was lost by him, or stolen from him, without fault on his part. Mudd purchased the certificate for value from Wilson, Sage & Clark stock-brokers in Birmingham; and, while denying complainant's ownership, claimed that he acquired a good title by the custom and usage of brokers and merchants in Birmingham. A decree pro confesso was taken against the corporation. On final hearing on pleadings and proof, the court rendered a decree for the complainant, and this decree is now assigned as error by each of the defendants separately.

S.D. Weakley, for appellants.

W. R. Houghton, for appellee.

SOMERVILLE J.

We concur in the conclusion reached by the judge of the city court, that the appellee, Dennis, complainant in the bill, is the owner of the 10 shares of stock which are the subject of litigation in the present suit. The testimony satisfactorily proves that the certificate of stock, indorsed in blank by Dearborn, who was the owner on the books of the defendant corporation, was the property of the appellee, and was taken or stolen from his possession without any negligence on his part whatever, several months before it was purchased by the defendant Mudd, who innocently bought and paid value for it some time in March, 1888. The only question is whether Mudd, who paid full value for this stock, without notice of the complainant's claim to it, acquired a title superior to that of complainant. The established rule is that no person can ordinarily be deprived of his ownership of property save by his own consent or his negligence. The only exception to this rule is the case of a bona fide purchaser for value of negotiable paper. We have no reference, of course, to the taking of property for public uses by judicial condemnation, which may be done without the owner's consent.

It cannot be contended, with any degree of plausibility, that, under the facts of this case, the complainant was guilty of negligence or the want of ordinary care in the custody of the certificate. He kept it in a box in the vault of a banking-house, whence it was abstracted by some unknown person, apparently without any fault on his part. Nor does any question arise involving the rights of a subsequent bona fide purchaser of stock from one shown to be the owner on the corporate books, who has already made a prior unregistered transfer of it to another purchaser. All such transfers made by the true owner, and not registered on the books of the corporation within 15 days, are declared by statute to be "void as to bona fide creditors or purchasers without notice." Code 1886, § 1671, Fisher v. Jones, 82 Ala. 117, 3 South. Rep. 13. If the defendant Mudd had claimed by a subsequent purchase from Dearborn, the owner of the stock on the corporate books, this question would arise. But he does not so claim, his title being derived through the complainant, Dennis, himself, by two or more intermediate transferees, the first of whom was a fraudulent holder without title.

Whether Mudd's title to the stock, therefore, is superior to that of Dennis, depends on whether a certificate of stock, indorsed in blank by the owner, is to be treated as negotiable paper. The rule is well settled that a bona fide purchaser of a negotiable bill, bond, or note, although he buys from a thief, acquires a good title, if he pays value for it, without notice of the infirmity of his vendor's title.

The authorities are clear in support of the view that a certificate of corporate shares of stock, in the ordinary form, is not negotiable paper; and that a purchaser of such certificate, although indorsed in blank by the owner, where no question arises under the registration laws, obtains no better title to the stock than his vendor had, in the absence of all negligence on the part of the owner, or his authority to make the sale.

This question arose and was decided by the New York court of appeals in Bank v. Railroad Co. (1856,) 13 N.Y. 599. It was there held that such a certificate does not partake of the character of a negotiable instrument, and that a bona fide assignee, with full power to transfer the stock, takes the certificate subject to the equities which existed against his assignor. Such certificates, said COMSTOCK, J., "contain no words of negotiability. They declare simply that the person named is entitled to certain shares of stock. They do not, like negotiable instruments, run to the bearer or order of the party to whom they are given." They were said to be in some respects like a bill of lading or warehouse receipt,...