In re Receivership of Selway Steel Post & Fence Co.

• Decision Date: 11 November 1924
• Docket Number: 35943
• Citation: 200 N.W. 621,198 Iowa 950
• Parties: IN RE RECEIVERSHIP OF SELWAY STEEL POST & FENCE COMPANY. v. JOHN H. JOHNSON et al., Appellees MARK L. JOHNSON, Receiver, Appellant,
• Court: Iowa Supreme Court

200 N.W. 621

198 Iowa 950

IN RE RECEIVERSHIP OF SELWAY STEEL POST & FENCE COMPANY.

MARK L. JOHNSON, Receiver, Appellant, v. JOHN H. JOHNSON et al., Appellees

No. 35943

Supreme Court of Iowa, Des Moines

November 11, 1924

Appeal from Polk District Court.--LESTER L. THOMPSON, Judge.

INTERVENER John A. Thompson, filed a motion in the receivership case to release the levy of an execution on certain corporate stock on a judgment against defendant John H. Johnson, rendered in May, 1922. The motion was sustained, and the receiver appeals.

Affirmed.

Howard L. Bump and James C. Hume, for appellant.

Casper Schenk and Burnstedt & Hemingway, for appellees.

PRESTON J. ARTHUR, C. J., and EVANS and FAVILLE, JJ., concur.

OPINION

PRESTON, J.

The main controversy is between the receiver and John A. Thompson. The receiver has a judgment against Johnson for something over $ 10,000. The worth of the stock is not sufficient to satisfy the judgment. The receiver filed a resistance to intervener's motion, to which intervener filed a reply. The facts are not complicated, nor is there any serious dispute therein.

Thompson, intervener, is a stock broker, and, under the trade name of Thompson & Company, conducted a general brokerage business in the purchase and sale of corporate stocks, in Des Moines. September 24, 1920, defendant Johnson owned 50 shares, of the par value of $ 100 each, of the stock of the Great Republic Re-Insurance Fire Company, an insurance company, of the city of Des Moines. Two stock certificates, Nos. 99 and 190, of 25 shares each, were issued to him. In January, 1921, the company's name was changed to Great Republic Insurance Company. The company's home office remained at the same location and in the same building, and the current telephone directory, issued in December, 1922, continued to list it under the old name. We do not regard the last named two circumstances as of controlling importance.

On March 16, 1921, Johnson and five other officers and directors of said new insurance company, in their individual capacities, entered into a written agreement by which Johnson agreed to transfer his shares of stock in the company to them as trustees, they to hold and vote the same and to pay him profits and dividends accruing thereon, for a period ending January 1, 1931. On April 26, 1921, Johnson assigned his stock to the five trustees, and his certificates Nos. 99 and 190 were assigned and delivered by Johnson to the trustees, and by them in turn surrendered to the company. The trust agreement recites that it was entered into because the stockholders are widely scattered, and are unacquainted with the insurance business, and that it is the desire of the stockholders subscribing to the agreement that the present management of the company be uninterrupted, and continuity in its business policy secured, etc. The agreement also contains the following provisions:

"(3) The trustees shall receive and collect all profits and dividends accruing to the said stock and shall pay over the same with all convenient speed after the receipt of the same to the respective equitable owners thereof. And the trustees shall issue to each stockholder becoming a party hereto one or more transferable trustees' certificates covering the number of shares of stock assigned by each stockholder to the trustees, who shall recognize the validity of the sale and transfer of the trustees' certificates to other parties as the lawful assigns and successors of the original owners thereof and entitled to all their rights in the premises. * * *

"(6) This agreement shall be and continue in force and binding on all parties hereto, their heirs, administrators, executors, successors and assigns until January 1st, 1931. However, the same may be terminated before said date by a three-fourths vote of all the trustees or by a three-fourths vote of all trustees' certificates issued to the stockholders under this agreement, at the discretion of the owners of said trust certificates. On the question of dissolution of this agreement each voting trust certificate shall have one vote for each share of stock represented by it. * * *

"(8) At the termination of the trusteeship, the trustees shall cause 'the company' to issue to the lawful holders of the trust certificates their respective proper number of shares of stock in 'the company.'"

Other stockholders made similar assignments to the five, and the new stock certificate, No. 502, for 829 shares, was issued by the company to the said trustees on May 13, 1921. Johnson's stock was included in the 829 shares. On April 26, 1921, the trustees issued to Johnson a trustees' certificate in the new company, as follows:

"This certifies that, J. H. Johnson of Stratford, Iowa, is entitled to 50 shares of the par value of $ 100.00 each, of the beneficial interest in the capital stock of the Great Republic Insurance Company, certificates for which have been issued to us, the undersigned, as trustees, pursuant to and by virtue of a certain agreement made by and between certain stockholders of 'the company' and by and between the said certain stockholders and the undersigned as trustees, and dated the 16th day of March, A. D. 1921. The holder of this certificate is entitled to the beneficial interest provided in and by said agreement, including his proportionate share of all dividends declared and paid on the stock of 'the company' held in trust as aforesaid (less his proportionate share of the expense incident to this trust.) In witness whereof the said trustees have hereunto set their hands this Apr. day of 26, A. D. 1921."

The trust agreement was printed on the back of this certificate. Since that time, the new company has issued no further certificates to Johnson, and up to the time of the levy and the trial, this stock still stood in the name of the trustees. The company kept a card index of its stockholders. When Johnson transferred his stock to the trustees, his stock certificate was canceled and his card as a stockholder was taken out of the so called live file and put into a dead file, and a card for the trustees' stock was put in the live file in its stead. The trustees kept a book, Exhibit A, from which they issued trustees' certificates. One of them testifies that the company had nothing to do with that, except they were members of the company. On January 4, 1923, Johnson, in writing, nominated Ode, one of the trustees, his attorney or proxy for the stockholders' meeting to be held January 24, 1923, unless he should be personally present. Notice of such meeting had been given by the president of the company, December 30, 1922. On March 24, 1923, defendant Johnson sold his stock or trustees' certificate to intervener, Thompson, for $ 1,750 cash, and on the same day assigned the same in writing to intervener, Thompson, in the following words:

"Assignment.

"For good and valuable consideration, I hereby sell, transfer, set over and assign all my right, title and interest in and to this trustees' certificate to John Thompson, his executors, administrators, heirs and assigns; and I hereby authorize and direct the trustees hereof to recognize said assignee herein named as my successor and lawful assignee hereof and entitled to all my rights and interests in the premises. "

There is no evidence that Thompson had knowledge, notice, or information of any claim against the trustees' certificate when he took the assignment from Johnson, and he alleges that he had no such knowledge or notice, and paid for it in good faith and for reasonable value and in the ordinary course of his business. After intervener, Thompson, purchased the trustees' certificate from Johnson, and on March 28, 1923, the sheriff was directed by attorney for the receiver, among other things, to garnish Thompson and Thompson & Company, and this was done; and to levy on Johnson's purported rights or interest in the new insurance company's stock. The notice of levy on the stock by the sheriff is directed to Great Republic Re-Insurance Fire Company (a corporation) and John H. Johnson, defendant. It recites:

"The stock of said John H. Johnson, in said Great Republic Re-Insurance Fire Co. (a corporation) has been and is hereby levied on (and attached) under and by virtue of said general execution and directing that the stock be dealt with hereafter in accordance with this notice. Dated March 28, 1923."

The return of the sheriff recites, among other things:

"By virtue of the laws of Iowa (see Section 2967 of the Code) I served said notice on within named Great Republic Re-Insurance Fire Co., on March 28, 1923, by reading the said notice to F. M. Marigold, secretary of said company," etc.

There was no corporation of that name at that time, and of course Johnson had no such stock in such a company upon which a levy could be made. It is one of the contentions of intervener, Thompson, that, because of this, the notice to the wrong company and the levy were invalid. He also contends that at that time Johnson had disposed of all his rights, both legal and equitable, in the stock.

Service of notice of the levy was made at the office of the new company in the presence of Becker, treasurer of the company, and one of the trustees, who testifies:

"My office is next to Mr. Marigold's, whose office is in the northeast corner of the building. When the sheriff came into Marigold's room, Marigold called...