Otis v. Gardner

• Decision Date: 31 January 1883
• Citation: 105 Ill. 436,1883 WL 10147
• Parties: XAVIER L. OTIS, Admr.v.JEFFERSON GARDNER et al.
• Court: Illinois Supreme Court

105 Ill. 436

1883 WL 10147 (Ill.)

XAVIER L. OTIS, Admr.

v.JEFFERSON GARDNER et al.

Supreme Court of Illinois.

Filed at Ottawa Jan. 31, 1883.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Circuit Court of Cook county; the Hon. MURRAY F. TULEY, Judge, presiding.

Messrs. HERBERT, QUICK & MILLER, for the appellant, made the following among various other points:

The transaction between Sheridan and Bowen is at most only a power to make a transfer of the stock, and is not a transfer until executed. Boyd v. Rockport Mills, 7 Gray, 406.

No title to the stock passes until a transfer has been made upon the books of the company, as the stock was, by the charter and by-laws of the company, transferable only on its books. Fisher v. Essex Bank, 5 Gray, 373; Stebbins v. Phœnix Fire Ins. Co. 3 Paige, 350; Sabin v. Bank of Woodstock, 21 Vt. 353; Pinkerton v. Railroad Co. 42 N. H. 424; Shaw v. Spencer, 100 Mass. 382; Pittsburg and Connellsville R. R. Co. v. Clarke,29 Pa. St. 146; Union Bank v. Laird, 2 Wheat. 391; Kellogg v. Stockwell, 75 Ill. 68; People's Bank v. Gridley, 91 Id. 457; 1 Am. Railway Cases, *154, Redfield's note.

The transfer on the books is the originating and essential act in the change of title. Oxford Turnpike Co. v. Bunnell, 6 Conn. 552; Marlborough Manf. Co. v. Smith, 2 Id. 579; Northrop v. Newtown Turnpike Co. 3 Id. 544; Dutton v. Connecticut Bank, 13 Id. 493; Pittsburg and Connellsville R. R. Co. v. Clarke,29 Pa. St. 146; Union Bank v. Laird, 2 Wheat. 390.

Certificates of stock have none of the qualities of negotiable paper,--they are mere choses in action. Shaw v. Spencer, 100 Mass. 382; Sewell v. Boston Water Power Co. 4 Allen, 282; Mechanics' Bank v. New York and New Haven R. R. Co. 13 N. Y. 599; Weaver v. Borden, 49 Id. 286; Covell v. Tradesmen's Bank, 1 Paige, 131; Kellogg v. Stockwell, 75 Ill. 68; People's Bank v. Gridley, 91 Id. 457.

The certificates carried notice to Gardner that the title to the stock was in Wait. Anon. Freeman's Ch. 137; Vattier v. Hinds, 7 Pet. 252; Shaw v. Spencer, 100 Mass. 382; Sergeant v. Ingersoll,7 Pa. St. 340.

The title which Bowen had, appearing and being but an equitable one, Gardner could take no greater interest than Bowen had, and took subject to all the infirmities of Bowen's title. Poillon v. Martin, 1 Sandf. Ch. 569; Maybin v. Kirby, 4 Rich. Eq. 105; Fortier v. Darst, 31 Ill. 212; Walker v. Dement, 42 Id. 272; Olds v. Cummings, 31 Id. 188; Sumner v. Waugh, 56 Id. 531; Covell v. Tradesmen's Bank, 1 Paige, 135; Stebbins v. Phœnix Fire Ins. Co. 3 Id. 350; Cutts v. Guild, 57 N. Y. 229; Weaver v. Borden, 49 Id. 286; Schafer v. Reilly, 50 Id. 61; Green v. Warnick, 64 Id. 220.

Where the equities of the parties are equal, the legal title must prevail. Story's Eq. Jur. sec. 64.

Costs are never allowed against one suing as administrator, or otherwise in auter droit, except under very special circumstances. 1 Hoffman's Ch. Pr. 73; Goodrich v. Pendleton, 3 Johns. Ch. 520.

Mr. HOWARD HENDERSON, for the appellees:

Where the owner of certificates of stock indorses them in blank, and allows them to fall into the hands of an innocent holder for value, the original owner will not be allowed to reclaim them. ( Leavitt v. Fisher, 4 Duer, 1; Field on Corporations, 128; Fatman v. Lobach, 1 Duer, 354.) And if he, by his voluntary act, through misplaced confidence, confers the apparent right of property in stock upon a third party, a bona fide purchaser of such stock from such party will be protected against any secret trust in favor of the real owner. Bank v. Lanier, 11 Wall. 369; Bridgeport Bank v. New York and New Haven R. R. Co. 30 Conn. 270; Bridgeport Bank v. Schuyler et al. 34 N. Y. 30; Weaver v. Borden, 49 Id. 288; Field on Corporations, 148, sec. 133.

A provision requiring transfers of stock to be made on the books of the corporation, is solely for the protection of the corporation, and does not prevent title from passing by indorsement in blank, and delivery of the stock certificate. Kartright v. Buffalo Commercial Bank, 22 Wend. 347; McNeil v. Tenth National Bank, 46 N. Y. 33; Smith v. American Coal Co. 7 Lans. 317; Leitch et al. v. Wells et al. 48 N. Y. 605; Chambersburg Ins. Co. v. Smith,11 Pa. St. 120; Stone v. Hackett, 12 Gray, 231; Salsbury Mills v. Townsend, 109 Mass. 121; Choteau Spring Co. v. Harris, 20 Mo. 387; Duke v. Cohawba Nav. Co. 10 Ala. 82.

Mr. CHIEF JUSTICE SCOTT delivered the opinion of the Court:

Sheridan Wait, in his lifetime, was the owner of one hundred shares of the capital stock of the Calumet and Chicago Canal and Dock Company, of the par value of $10,000, represented by certificates issued to him. Written on the back of each certificate was a blank assignment and power of attorney, that would authorize the assignee to have the stock represented by such certificates formally transferred to him on the books of the company. On the 16th day of March, 1875, Sheridan Wait indorsed the certificates by signing his name below the blank assignment and power of attorney, and then delivered them to Chauncey T. Bowen, and took therefor his written receipt, in which it is recited, “which said one hundred shares of stock I have borrowed of him, and agree to return on demand.” Concerning the use Bowen might make of such stock the receipt is silent, nor does the use to be made of it by the borrower appear from any testimony in the case. Afterwards, on the 9th day of November, 1875, James H. Bowen, being indebted to Jefferson Gardner on two promissory notes, each for $4262.25, for borrowed money, pledged these certificates of stock as collateral security for the payment of such notes, and delivered them to Gardner, indorsed in blank, as they had been received by Chauncey T. Bowen. As the notes of James H. Bowen were indorsed by Chauncey T. Bowen, he was, of course, liable for the indebtedness to Gardner. Neither the blank assignment nor the power of attorney, which was all one instrument, had ever been filled up. It does not appear the notes of Bowen have ever been paid, and since they were pledged these certificates have been held either by Gardner or his agent for him. Both the maker of the notes and the indorser are insolvent, and the only security Gardner has for his claim, either on the maker or the indorser, is the stock pledged for its payment. Since the death of Sheridan Wait, the original owner of the stock, his administrator, Xavier L. Otis, has demanded the stock of Chauncey T. Bowen, and also made application to the company to have the stock transferred to him on the books of the corporation, and failing to obtain it, he thereupon exhibited his bill in the circuit court of Cook county, making Chauncey T. Bowen, the Calumet and Chicago Canal and Dock Company, Jefferson Gardner, and George Van Zant, defendants. The bill asked for a decree that such stock be declared to have belonged to the intestate at the time of his death, and to now constitute a part of his estate; that the old certificates be canceled, and that new certificates be issued by the company, and placed on the books of the corporation in the name of complainant, and that Gardner, Van Zant and Bowen be enjoined from negotiating or interfering with such stock. The corporation and Chauncey T. Bowen failing to answer, they were defaulted, and a decree pro confesso rendered as to them. Gardner and Van Zant answered the bill, stating the principal facts, about which there is no dispute, and for himself Gardner says, that at the time the notes and certificates were delivered to him by James H. Bowen, the certificates had written on the back the usual assignment, in blank, with power of attorney to transfer the stock on the books of the corporation, which was signed by Sheridan Wait, and that he received such certificates as collateral security for the debt of Bowen, in the usual course of business, without notice of the prior rights or equities of any person in such stock, and that he believed then, and does now believe, that Bowen had full right and authority to transfer to him the stock in question. On the hearing the circuit court found complainant was not entitled to relief, and dismissed his bill at his costs, and ordered execution therefor. That decree was affirmed in the Appellate Court, at the costs of complainant, to be paid in due course of administration. Afterwards, and at the same term, on the attention of the court being called by defendant's counsel to the fact the circuit court had inadvertently awarded execution against the administrator for costs, that court so amended its judgment that the decree of the circuit court should stand affirmed in all respects except as to awarding execution for costs against such administrator, which part of the decree was reversed, and it was then further ordered that each party pay one-half the costs in the Appellate Court. Complainant brings the case to this court on appeal.

The act incorporating the Calumet and Chicago Canal and Dock Company provides the stock shall be transferable in such manner as the directors shall determine, and section 12 of the by-laws of the company provides the secretary shall keep a book for the transfer of such stock, upon which all transfers of stock must be made by the holder or holders, or ...