Foster v. Potter

• Decision Date: 31 March 1866
• Citation: Foster v. Potter, 37 Mo. 525 (Mo. 1866)
• Court: Missouri Supreme Court
• Parties: WALTER B. FOSTER, Respondent, v. JOHN C. POTTER, IMPLEADED, &c., Appellant.

37 Mo. 525

WALTER B. FOSTER, Respondent,

v.JOHN C. POTTER, IMPLEADED, &c., Appellant.

Supreme Court of Missouri.

March Term, 1866.

Appeal from St. Louis Court of Common Pleas.

Knox & Smith, for appellant.

The appellant insists that the well recognized principles of the common law, that the interest of the mortgagor in goods and chattels mortgaged by him cannot be seized under a writ of attachment, or sold under execution, are not at all applicable to the case of stocks or shares in incorporated companies; such shares and stocks could not, at common law, be sold under execution.

The statutes of Missouri expressly authorized the seizure, under writs of attachment and execution, of choses in action, and the sale of “the rights and shares” of the debtor in the stock of corporations. &c.--R. C. 1855, p. 245, § 22, subd. 4; p. 247, § 28; p. 244, § 19; p. 742, § 24; p. 740, § 17; 741, § 18; p. 748, § 55.

By reference to the above provisions of the statutes, it will be seen that “rights and shares in the stock of incorporated companies” are subject to sale under execution; the manner of the levy and sale is distinctly provided for. After a sale, the purchaser is substituted for the debtor in all “rights and shares” the debtor may have in incorporated companies.

Even at common law, shares in the stock of a corporation were not regarded as other personal property, for the reason that such shares were intangible, and the officer could not actually seize them, or take them into his possession--5 Ed. Ang. & A. Corp. §§ 589, 590; 16 Mass. 318, 402.

Grover, for respondent.

I. It is insisted that by the execution of the deed of trust by McDowell to Foster, and the transfer on the books of the Pacific Insurance Company, the legal ownership of and title to the one hundred shares of stock passed from McDowell to Foster, leaving to McDowell a mere equity of redemption.

II. This equity of redemption was not subject to seizure or sale under an attachment or execution at law, and Potter acquired no right or interest in said stocks by virtue of the sheriff's sale and deed, under which he claims title.

III. At the time of issuing the last execution in favor of Lyon et al. against McDowell, and of the garnishment of Foster under said execution, and of the commencement of the suit by Lyon and others to compel the appropriation of the funds in the hands of Foster to the satisfaction of their judgment and execution against McDowell, no steps had been taken by Potter to enforce any supposed right which he had acquired under the sheriff's sale of said stocks.

IV. Until the sale of stocks by Foster on the 31st December, 1862, the interest of McDowell therein was purely equitable. By that sale all his interest in the stocks became divested, and the deed to Foster out-dating all attachments and executions, the sale by him conveyed a good title to the purchaser, unaffected by any of the attachments, judg ments, or executions, through which Potter claimed to have derived title.

V. If the balance in Foster's hands is to be treated as an equitable fund, then Lyon and his co-plaintiffs in said judgment have secured by the commencement of their suit on the 20th March, 1863, their right in equity to have the fund appropriated to the satisfaction of their judgment and execution. (Sexton v. Marks, 16 Mo. 156; Yeldell v. Stemmons, 15 Mo. 443; Boyce v. Smith, 16 Mo. 317.)

HOLMES, Judge, delivered the opinion of the court.

This is a petition in the nature of a bill in equity to compel the par ties defendant to interplead and establish their rights to a fund held by the plaintiff, and which he is ready to pay over to the party entitled to it. It appears that the firm of J. & W. McDowell, owners of certain shares of stock in the Pacific Insurance Company (of which John McDowell afterwards became sole owner), gave to the plaintiff, as trustee for the benefit of the corporation, a deed of trust in the nature of a mortgage upon this stock, to secure the payment of certain notes held by the company. The deed was duly executed and recorded, and the transfer was entered on the books of the company, and signed by the grantors. Afterwards, the defendant Potter caused an attachment to be levied upon these shares of stock as the property of McDowell, and other attachments followed. The manner of the levy does not appear; but judgments were obtained in the attachment suits, and executions were issued thereon, under which this stock was levied upon and sold by the sheriff, in pursuance of the act concerning executions, as the property of McDowell, the defendant therein, Potter becoming the purchaser; and an instrument in writing was executed and delivered to him by the sheriff, as provided by the statute, purporting to convey all the interest of McDowell in these shares of stock. Subsequently to these proceedings, and when the notes became due, there was a sale by the trustee under the deed of trust, which realized a balance, over and above the debt secured, amounting to $1,644.46, which sum remained in the hands of the trustee. Some time after this, the trustee (the plaintiff here) was garnished as the debtor of McDowell, under an execution issued upon a judgment in favor of John Lyon and others against him; and while proceedings in the matter of the garnishment were still pending, this suit was commenced against all the parties concerned. The court below ordered the fund to be paid to John Lyon and others, and Potter was decreed to pay the costs of the suit. Potter appeals to this court.

The court below refused to instruct the jury for the defendant Potter to the effect, that the levy of the attachment (in the manner provided in the act concerning executions) created a lien upon the balance of the proceeds of the trustee's sale after payment of the notes secured, and that the levy and sale to Potter, under the executions issued in the attach ment uits, gave him a good title to the fund remaining in the hands of the trustee; and further, that the equity of redemption in the shares of stock was subject to levy and sale in the same manner as the shares themselves would have been, if they had been standing in the name of the defendant without any encumbrance thereon.

The statute subjects shares of stock in incorporated companies to levy and sale under execution, and prescribes the manner in which the thing may be done; but there are no such provisions in the act concerning attachments. At common law, such property could not be the subject of attachment or execution. This principle has been recognized by this court, and applied to a levy under execution upon an equity of redemption in movable personal chattels, where the mortgagor retained nothing more than a permissive possession, determinable at the will of the mortgagee, or upon an equitable interest in personal property assigned; and it has been held that such mere equitable interests could not be reached by process of law, nor be bound by execution, and that no title or interest in the chattels could pass to the purchaser under such levy and sale, even where the chattels were actually seized by the officer and delivered to the purchaser--King v. Bailey, 8 Mo. 332; Yeldell v. Stemmons, 15 Mo. 443; Boyce v. Smith, 16 Mo. 317. The defendant in the execution having no property in the thing, but a bare possession only, no interest could pass to the purchaser; and a mere right of redemption could not be actually seized. An attachment creates a lien upon property that can be attached and seized, or garnished; and a sale under execution, in such case, will be effectual to pass the property levied on, where such lien exists. It is not made to appear in what manner this attachment was undertaken to be levied on these shares of stock. The statute provisions, authorizing a levy of an execution, did not therefore authorize the levy of an attachment also.

In general, stock owned by an individual in a corporation cannot be subjected to the payment of his debts by the process of attachment, nor by garnishee process, served on the corporation. Such property is neither a specific chattel, nor a debt, but a mere chose in action. A certificate of stock is merely an evidence of an interest or property owned in the corporation, but not of a debt due as a liquidated money demand--Planters' Bank v. Leavens, 4 Ala. 753; Titcomb v. Union Mar. Fire Ins. Co., 8 Mass. 326. It does not appear that any certificate was actually seized. The property interest of the shareholder is an intangible and invisible thing, and cannot be actually seized by the officer. There can be no change of possession; and the sale of such interests under execution or attachment was a mode of transfer unknown to the common law--Ang. Corp. § 588. The...