Frost v. Davis

• Decision Date: 31 March 1961
• Docket Number: No. 18511.,18511.
• Parties: Jack FROST and Hidrocarburos de Cuba, S. A. v. Arthur Vining DAVIS.
• Court: U.S. Court of Appeals — Fifth Circuit

288 F.2d 497 (1961)

Jack FROST and Hidrocarburos de Cuba, S. A. v. Arthur Vining DAVIS.

No. 18511.

United States Court of Appeals Fifth Circuit.

March 31, 1961.

Royal H. Brin, Jr., Fred S. Abney, Dallas, Tex., Strasburger, Price, Kelton, Miller & Martin, Dallas, Tex., of counsel, for appellants.

H. Wayne Wile, Pinkney Grissom, Dallas, Tex., Thompson, Knight, Wright & Simmons, Dallas, Tex., of counsel, for appellee.

Before TUTTLE, Chief Judge, and RIVES and JONES, Circuit Judges.

JONES, Circuit Judge.

The appellant, Jack Frost, is a resident of Dallas County, Texas. The appellant, Hidrocarburos de Cuba, S. A., herein referred to as the corporation, is a Cuban corporation of which Frost is President and chief executive officer. The appellee, Arthur Vining Davis, is a resident of Dade County, Florida. The appellants instituted suit in the District Court of Dallas County, Texas, a state court of general jurisdiction, against the appellee, alleging a breach of a contract for the payment of money and praying for a judgment in the amount of $44,284.70. No personal service was made. Writs of garnishment were issued and served on the Republic National Bank of Dallas, as Garnishee. The Bank answered that it had in its possession a certificate for 161,739 shares of the capital stock of Three States Natural Gas Company issued in the name of Jack Frost and indorsed for transfer to Arthur V. Davis. The certificate of stock remained in the possession of the Bank. The appellee removed the action to the United States District Court for the Northern District of Texas upon the ground of diversity of citizenship and asserted that no jurisdiction was obtained by the issuance and service of the writs of garnishment. The court granted the motion on this ground and entered an order of dismissal. This appeal is from that order.

The effectiveness and effect of the service of the garnishment are to be determined by the law of Texas. In 1943 Texas adopted the Uniform Stock Transfer Act, Vernon's Ann.Tex.Civ.Stat. Arts. 1358-1 to 1358-26. Section 13 of this statute provides:

"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." Vernon\'s Ann.Tex.Civ.Stat. Art. 1358-13.

This section has been construed in the case of Snyder Motor Co. v. Universal Credit Co., Tex.Civ.App., 199 S.W.2d 792. 797. In the opinion in that case are stated principles which we think are controlling here, notwithstanding factual differences. In Snyder it was stated that the main purpose of the Uniform Act is to make certificates of stock the sole representative of the shares they represent. The Texas Court states that the Act has made certificates of stock fully negotiable and that the certificates constitute the res for the purpose of attachment and levy. Pertinent to our decision here is the statement that "no attachment or levy of stock is valid unless the stock itself is seized by the officer serving the writ." This is stressed in the further statement that,

"We therefore find that by the passage of the Uniform Stock Transfer Act it portrays the commercial view that the shares of stock are identified with the certificate which we regard as the stock itself. We further construe the first part of Sect. 13 Art. 1358-13 of said Act to mean that before the levy or attachment of shares of stock in domestic corporations is valid the same must first be seized by the officer serving such writ." 199 S.W.2d 792, 797.

There is, we think, more reason for the application of the rule to the stock of a foreign corporation than to the stock of a domestic corporation.

To the appellants' contention that the statutory provision does not apply in this case because the process was a writ of garnishment rather than attachment or levy as covered by the Act, we think it is sufficient to say that the writ in the Snyder case was one of garnishment, and there it was held that because the certificate was not seized the garnishment was ineffective. From the opinion in the Snyder case we quote:

"Under such Act a valid attachment, levy and/or garnishment upon such shares could be made only by actual seizure of the stock certificate by the officer,

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