Kellogg v. Stockwell
| Decision Date | 30 September 1874 |
| Citation | 1874 WL 9191,75 Ill. 68 |
| Parties | AMHERST KELLOGGv.DAVID W. STOCKWELL et al. |
| Court | Illinois Supreme Court |
OPINION TEXT STARTS HERE
WRIT OF ERROR to the Circuit Court of Kane county; the Hon. SILVANUS WILCOX, Judge, presiding.
Mr. WALTER M. HOWLAND, and Mr. CHARLES HITCHCOCK, for the plaintiff in error.
Messrs. WHEATON, SMITH & MCDOLE, for the defendants in error.
This was a bill in equity, brought by Daniel W. Stockwell, in the circuit court of Kane county, against Amherst Kellogg, The Republic Insurance Company, Charles T. Trego and Helmert S. Kellogg, to compel Amherst Kellogg, who had purchased certain stock in the Republic Insurance Company, to protect the complainant, who was the original owner and vendor of the stock, from assessments made by the company after the sale of the stock.
The complainant, Stockwell, in 1867, subscribed for one hundred shares of stock in the Republic Insurance Company; he paid twenty per cent and received a certificate of stock. In February, 1871, complainant sold this stock to Trego & Kellogg, and delivered to them the certificate of stock, which he obtained of the company, and a power of attorney executed by him in blank, authorizing the transfer of the stock upon the books of the company.
In June, 1871, Trego & Kellogg sold the stock to Amherst Kellogg, and transferred the certificate of stock and power of attorney to him.
At the time the complainant sold, there were no assessments against the stock, and it was regarded by the secretary of the company to be worth $1,800.
No transfer of the stock was, however, made upon the books of the company.
The Chicago fire of October, 1871, rendered the insurance company insolvent. The complainant, in order to protect himself from future calls or assessments, called upon Amherst Kellogg, the assignee of the stock, and requested him to have it transferred upon the books of the company. This he refused to do.
After the filing of the bill, the company was put into bankruptcy, and an assessment of sixty per cent was made upon each share of stock upon all who appeared by the books to be stockholders, including complainant.
The circuit court, on the hearing, entered a decree that Amherst Kellogg indemnify the complainant against all loss on account of the assessment made, and all future assessments that might be made, by giving complainant a good and sufficient bond of indemnity, with security, to be approved by the court, in the penal sum of $12,000.
The principal question presented by the record is, whether the sale of the stock, no transfer having been made upon the books of the company as required by the charter, is valid, between the complainant and the defendant Amherst Kellogg, to pass the equitable title and to render the assignee liable for all future calls and assessments.
It may be true, as between complainant and the insurance company, the legal title to the stock did not pass by the sale made, and yet that does not in the least affect the question arising between the complainant and the purchaser of the stock.
The provision in the charter that shares are transferable only on the books of the company, is designed for the protection of the corporation, or perhaps a purchaser without notice.
The theory upon which the complainant bases his bill is, as between him and the purchaser, there has been a sale of the stock which, in equity, is good, and which a court of chancery ought to enforce.
In Angell & Ames on Corporations, 3d edition, page 513, the author, in discussing this question, says: “A transfer of stock will be valid, however, as between the vendor and vendee (subject to the claims of the corporation) though the act of incorporation provide that no such transfer shall be valid until registered in a book kept for the purpose, and the debts due from the vendor to the company be first paid.”
The doctrine announced may be regarded as the settled law of the country.
The stock owned by a party in an incorporated company may be regarded similar in its nature to a chose in action, the equitable title of which, as between the parties, may be transferred without observing the requirements of the charter or by-laws of the company.
In Sargent v. Franklin Ins. Co., 8 Pick. 90, it was held that the doctrine that the right to the shares in the capital stock of an incorporated company could not be transferred without a compliance with the by-laws of the company, cannot be maintained. See, also, Black v. Lusharin, 3 How. 514; Bank of Utica v. Smalley, 2 Cow. 777; Gilbert v. Manchester Iron Co., 11 Wend. 628.
If the defendant Amherst Kellogg became the owner in equity of the stock, it follows that the complainant...
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