Elgart v. Mintz

• Citation: 197 A. 747
• Parties: ELGART v. MINTZ et al.
• Decision Date: 17 March 1938
• Court: New Jersey Court of Chancery

197 A. 747

ELGART

v. MINTZ et al.

Court of Chancery of New Jersey.

March 17, 1938.

Syllabus by the Court.

1. At common law shares of corporate stock were not the subject of attachment and levy.

2. Such shares have by statute been subject to attachment and levy in New Jersey since 1842, Rev.St.1847, pp. 977, 978, § § 7, 8; and under 2 Comp.St.1910, p. 2244, § 4 et seq., a valid levy could be made at the office of the corporation irrespective of the location of the stock certificate or residence of the stockholder; but since the adoption by our Legislature of the Uniform Stock Transfer Act, P.L.1916, p. 398, Rev.Stat. 1937, 14:8-23 et seq., p. 15, Comp.St.Supp. 1924, § 47 —150 et seq., a valid attachment or levy upon such shares could be made only by actual seizure of the stock certificate by the attaching or levying officer, unless the certificate be surrendered to the corporation which issued it, or its transfer by the holder be enjoined.

3. For the purpose of attachment and levy, the situs of corporate stock is now where the certificate is found and the certificate is the res.

4. In the absence of actual seizure or surrender of the certificate as provided in the Uniform Stock Transfer Act, an effective injunction against the "transfer by the holder" is required.

5. An injunction against transfer by a nonresident, who has possession of the stock certificate in another state, served upon such holder in such other state, either personally or by publication, is ineffective.

6. Quæ re: May not the situs of corporate stock for purposes other than attachment and levy still be at the corporate domicile?

Suit by Abraham Elgart against J. Elgart Mintz and others to recover money due under a contract, wherein the complainant filed an amended and supplemental bill on which an order to show cause was served on the named defendant. On motion of the named defendant appearing specially to set aside service of order to show cause.

Motion granted.

Israel B. Greene, of Newark, for the motion. Milton M. Unger, of Newark, opposed.

BERRY, Vice Chancellor.

The facts giving rise to this controversy are correctly stated by counsel for the defendant Mintz in his brief as follows:

The original bill of complaint alleged that complainant and defendant are both residents of the State of New York; that complainant instituted his suit in our Supreme Court against the defendant to recover $10,850 due him under a contract; that the defendant owns 160 shares of stock in the Elblum Holding Corporation, a domestic corporation, which he threatened to put beyond the reach of complainant; and that complainant knows of no other assets of defendant out of which his claim at law, if reduced to judgment, could be satisfied. The bill prayed that the defendant be restrained from disposing of his stock until such time as complainant shall obtain a judgment at law against the defendant. The corporation was not joined as a party to the original bill.

The defendant having been served with a copy of the order to show cause in the city of New York, where he resides, applied for and was granted leave to enter a special appearance "for the purpose of asserting want of jurisdiction of this court over him, and to move to set aside the service of the bill of complaint and order to show cause."

On the return day of the defendant's motion to quash and before the determination thereof, the complainant filed an amended and supplemental bill, reiterating the substance of the original bill and alleging further that since the filing of the original bill he obtained a writ of attachment out of the Morris county circuit court, under the authority whereof the sheriff attached said shares on the books of said corporation. The amended bill admits, however, that the defendant-holder resides in the city of New York, and that the certificate of stock is in the possession of the defendant outside the State of New Jersey, and that the certificate "was not actually seized by the officer making the attachment, and has not been surrendered to the corporation." The amended bill is obviously filed under the Uniform Stock Transfer Act, P.L.1916, p. 398, R.S.1937, 14:8-23 et seq., Comp.St. Supp.1924, § 47 —150 et seq., and added the corporation as a party defendant, praying that it be enjoined and restrained from "making or permitting any transfer of said shares of stock upon the books or records of said company or from paying any dividends thereon or permitting any change in the status thereof, until the further order of the court * * *."

The order to show cause on the amended bill having also been served upon the defendant J. Elgart Mintz, in the city of New York, he again applied for and was granted leave to enter a special appearance to challenge the jurisdiction of the court over him and to move to set aside the service of that order to show cause. Such a motion is now before the court.

The proofs before the court show, and it is conceded, that at the time of the service of said papers upon him, the defendant J. Elgart Mintz was a resident of and domiciled in the State of New York, that the certificate of stock was and is in the State of New York, and that the defendant corporation was incorporated, and the said certificate was issued by it, after the taking of effect of the Uniform Stock Transfer Act.

The disposition of this motion turns upon the narrow question of what is the situs of the corporate stock here involved for the purpose of attachment and levy.

At common law, and in New Jersey prior to 1842, shares of corporate stock, being intangible and incapable of physical seizure, and not being debts due and collectible from the corporation at the stockholders' will, were not the subject of attachment and levy. Princeton Bank v. Crozer & Moore, 22 N.J.L. 383, 53 Am. Dec. 254; Voorhis v. Terhune, 50 N.J.L. 147, 159, 13 A. 391, 7 Am.St.Rep. 781; Cook, Corporations, § 480.

The Act of March 9th, 1842, P.L. 1841-42, p. 130, entitled, "An Act to abolish imprisonment for debt," prescribed the method of levying upon corporate stock under an execution, and in the revision of 1846 the provisions of that act touching levies upon corporate stock passed into the act respecting executions. Rev.St.1847, pp. 977, 978, § § 7 and 8. Under the provisions of these early acts and subsequent legislation, a valid levy upon corporate stock could be made at the office of the corporation irrespective of the location of the stock certificate or residenpe of the stockholder. See 2 Comp.St.1910, p. 2244, § 4 et seq.; Princeton Bank v. Crozer & Moore, supra; Voorhis v. Terhune, supra; Mulock v. Ulizio, 102 N.J.L. 251, 131 A. 622. But. since the adoption of the Uniform Stock Transfer Act by our Legislature, P.L.1916, p. 398, Rev.St.1937, 14:8-23 et seq., p. 15, Comp.St.Supp.1924, § 47 —150 et seq., a valid levy or attachment upon shares of corporate stock could be made only by actual seizure of the stock certificate by the levying or attaching officer, unless the certificate be surrendered to the corporation which issued it, or its transfer by the holder be enjoined. Section 13 of that act, Rev.St.1937, 14:8-39, Comp.St.Supp.1924, § 47 —162, reads as follows: "Attachment or levy upon shares. No attachment or levy upon shares of stock for which a certificate is outstanding shall be valid until such certificate be actually seized by the officer making the attachment or levy, or be surrendered to the corporation which issued it, or its transfer by the holder be enjoined. Except where a certificate is lost or destroyed, such corporation shall not be compelled to issue a new certificate for the stock until the old certificate is surrendered to it." And see Wallach v. Stein, 102 N.J.L. 517, 133 A. 81, affirmed 103 N.J.L. 470, 136 A. 209.

Prior to that act, our courts held that the situs of the stock of a New Jersey corporation was at the domicile of the corporation, irrespective of the location of the stock certificate, Andrews v. Guayaquil & Quito Railway Company, 69 N.J.Eq. 211, 60 A. 568; Amparo Mining Company v. Fidelity Trust Company, 74 N.J.; Eq. 197, 71 A. 605, affirmed 75 N.J.Eq. 555, 73 A. 249; and that such stock was subject to attachment under our statute, although the certificate of stock was in the possession of the debtor outside the state, Curtis v. Steever, 36 N.J.L. 304; Cord v. Newlin, 71 N.J.L. 438, 59 A. 22. But since the adoption of the Uniform Stock Transfer Act by our Legislature the situs of corporate stock, for the purpose of attachment and levy, has followed the certificate and is now where the certificate is found. Amm v. Amm, 117 N.J.Eq. 185, 175 A. 186, 187; Johnson v. Wood, 189 A. 613, 15 N.J.Misc. 150, 151; Klein v. Wilson & Co., D.C., 7 F.2d 769, affirmed 3 Cir., 7 F.2d 777. The Uniform Stock Transfer Act has made certificates of stock fully negotiable (Williston, Sales of Goods, 2d Ed., p. 797, note 4; Harbridge v. American National Bank of Racine, 177 Wis. 206, 187 N.W. 853; Peckinpaugh v. Noble & Company, 238 Mich. 464, 213 N.W. 859, 52 A.L.R. 941; and see Commissioner's notes to Uniform Stock Transfer Act (9 U.L.A.), and constitutes them the res for purposes of attachment and levy. Johnson v. Wood, supra; Lockhart v. Dickey, 161 La. 282, 108 So. 483; Newell v. Tremont Lumber Company, 161 La. 649, 109 So. 344; Goodrich, Conflict of Laws, p. 406; Ballantine, Private Corporations, 470; Mulock v. Ulizio, supra; Wallach v. Stein, supra; Klein v. Wilson & Co., supra; American Surety Company v. Kasco Mills, 262 N.Y. 585, 188 N.E. 75; Bloch-Daneman Company v. J. Mandelker & Sons, 205 Wis. 641, 238 N. W. 831; Peckinpaugh v. Noble & Company, supra; Guaranty Trust Company v. Fentress, 7 Cir., 61 F.2d 329. And for federal estate and inheritance tax purposes the situs of corporate stock has been held to be at the domicile of the owner and not at the domicile of the issuing corporation. First National Bank v. Maine, 284 U.S. 312, 52 S.Ct. 174, 76 L.Ed. 313, 77...