H. W. Wright Lumber Co. v. Hixon

• Decision Date: 15 December 1899
• Citation: 105 Wis. 153,80 N.W. 1110
• Parties: H. W. WRIGHT LUMBER CO. v. HIXON ET AL.
• Court: Wisconsin Supreme Court

105 Wis. 153

80 N.W. 1110

H. W. WRIGHT LUMBER CO.

v.HIXON ET AL.¹

Supreme Court of Wisconsin.

Dec. 15, 1899.

Appeal from circuit court, Lincoln county; W. C. Silverthorn, Judge.

Suit by the H. W. Wright Lumber Company against Frank P. Hixon and others. From a decree for plaintiff, defendants appeal. Affirmed.

Plaintiff is a Wisconsin corporation. Between August 15, 1885, and May, 1894, the defendant Rudolph Weidauer was a stockholder and officer of plaintiff. During that time he became indebted to it in the sum of $2,660.85, of which amount $2,119.54 became due prior to May 4, 1891. The plaintiff obtained judgment against him for the amount first above stated on March 30, 1898, which remains unpaid. Weidauer at first owned 252 shares of plaintiff's capital stock, of the par value of $100, and on January 2, 1892, by a distribution of surplus, became the owner of 246 other shares. The complaint alleges the facts as stated, and further alleges that such stock has never been transferred on the books of the company, the plaintiff has never waived its lien, and that the defendants claim to be bona fide purchasers of said stock from Weidauer without notice of plaintiff's lien, and claim that, by reason thereof, their respective interests in said stock are superior to plaintiff's lien. The defendants Hixon answered substantially as follows: That Weidauer ceased to be an officer of plaintiff in April, 1894; that he immediately set about making preparations to invest his means in business, to plaintiff's knowledge; and that he had no material amount of means other than his interest in the plaintiff company; that he applied to the Hixons for a loan, and offered as security the 252 shares of stock; that between May 10 and July 7, 1894, the Hixons loaned him $13,500, and took an assignment of said stock as security, without any knowledge of plaintiff's claim, and believing that Weidauer's interest therein was clear and unincumbered; that Weidauer became insolvent in 1895, and, not having paid the loan from the Hixons, on March 25, 1896, they sold the stock under the pledge, and became the purchasers thereof; that no action was commenced to foreclose plaintiff's lien until April 30, 1898. They also set up that plaintiff had an adequate remedy at law. A demurrer was interposed to the answer, on the ground that it failed to state facts sufficient to constitute a defense, which was sustained. The Hixons have appealed.Curtis, Reid & Smith, for appellants.

Van Hecke & Smart, for respondent.

BARDEEN, J. (after stating the facts).

Upon the theory that the demurrer to the answer reaches back to the complaint, the defendants have attacked it on the ground that a court of equity has no jurisdiction to enforce the statutory lien which the plaintiff claims. This lien is based upon section 1751, Rev. St. 1878, which says: “Every such corporation shall at all times have a lien upon all shares of stock for all debts due from the owners to such corporation.” Another part of this same section provides that no transfer of the stock shall be valid, except between the parties thereto, until the same shall have been so entered upon the books of the corporation as to show the names of the parties by and to whom transferred. It is argued that the lien so created cannot be enforced in equity. The statute points out no way in which the lien can be enforced. No doubt it might be foreclosed by securing a judgment for the indebtedness and levying execution on the stock, but that would hardly be an adequate remedy to the plaintiff, under the circumstances stated. The defendants claim to hold the stock as bona fide purchasers, and as such under a title paramount to the plaintiff's lien. After a sale under an execution, the question of priorities would still have to be litigated, and no good reason appears why the lien may not be foreclosed, and the priorities of the parties determined in one suit. One of the ordinary branches of equity jurisprudence is to determine priorities among conflicting claimants. Questions of this kind have frequently arisen in connection with transfers of shares of stock in business corporations. 2 Pom. Eq. Jur. § 699. If no one but Weidauer claimed any interest in the stock in question, the sale on execution would afford a complete remedy; but, the defendants claiming a paramount right to the same, a suit to establish the plaintiff's rights, and to determine the priorities of the parties, would seem to be a very proper exercise of the jurisdiction of a court of equity. Des Moines Loan & Trust Co. v. Des Moines Nat. Bank, 97 Iowa, 668, 69 N. W. 914.

We come now to the question of whether the answer states a defense. Defendants' claim of priority rests upon the fact that by chapter 414, Laws 1891, section 1751 was so amended that no lien was preserved to the corporation for debts due from stockholders, and a delivery of the stock certificate to a bona fide purchaser or pledgee for value, with a written transfer of the same, was sufficient to transfer the title as against all parties. This act went into force on May 4, 1891. Prior to this amendment, plaintiff had an absolute lien at all times, and against all persons, for all debts due from the owner of the stock to the corporation, and that lien continued until the stock was transferred upon the books or was waived by it. Williamson v. State, 74 Wis. 263, 42 N. W. 111. It was not a mere inchoate right to be perfected and enforced in accordance with some prescribed statutory method. It was a right, absolute in itself, given by positive enactment, and concerning which every person dealing with the owner of the stock was bound to take notice. Cook, Stocks & S. § 523; Bishop v. Globe Co., 135 Mass. 132;Bohmer v. Bank, 77 Va. 445. Such a lien is valid and enforceable against all the world. Hammond v. Hastings, 134 U. S. 401, 10 Sup. Ct. 727, 33 L. Ed. 960. As stated in 74 Wis. 263, 42 N. W. 111: “All persons purchasing the stock certificate or dealing with it in any manner were chargeable with notice of these provisionsof the statute, and must have known that the plaintiff in error could only pledge his residuary interest in the certificate. There could be no complete and valid transfer of the stock, except between the parties thereto, until the stock had been transferred on the books of the corporation,...