Prince Investment Company v. St. Paul & Sioux City Land Company

• Court: Minnesota Supreme Court
• Writing for the Court: BUCK, J.
• Citation: Prince Investment Company v. St. Paul & Sioux City Land Company, 70 N.W. 1079, 68 Minn. 121 (Minn. 1897)
• Decision Date: 06 May 1897
• Docket Number: 10,311--(31)
• Parties: PRINCE INVESTMENT COMPANY v. ST. PAUL & SIOUX CITY LAND COMPANY

70 N.W. 1079

68 Minn. 121

PRINCE INVESTMENT COMPANY v. ST. PAUL & SIOUX CITY LAND COMPANY

Nos. 10,311--(31)

Supreme Court of Minnesota

May 6, 1897

Appeal by plaintiff from a judgment for defendant entered in the district court for Ramsey county, pursuant to the order of Otis, J. Affirmed.

Judgment affirmed.

John E Stryker, for appellant.

Registration of transfers of stock is for the benefit of the corporation alone. Baldwin v. Canfield, 26 Minn. 43; Joslyn v. St. Paul, 44 Minn. 183. The lien of a corporation upon shares of its stock for debts due it, under G. S. 1878 c. 34, §§ 114 and 135, attaches whether the debt accrued before or after the debtor acquired the stock. Schmidt v. Hennepin, 35 Minn. 511. Notice, if given would not defeat the lien. Upon the question of who is entitled to vote corporate stock this court held, construeing the effect of a by-law similar to the one in this case, that the books of the company are conclusive as to the ownership of stock. Morrill v. Little Falls, 53 Minn. 371. No good reason is apparent for making a distinction between the effect of the by-law upon the conclusiveness of the records, as to the duty of the corporation to permit the registered holder to vote, and the right to claim a lien. President v. Smalley, 2 Cowen, 770. The legal title to the stock did not pass to the land company. New London v. Brocklebank, 21 Ch. Div. 302. See also, Stockwell v. St. Louis, 9 Mo.App. 133; Becher v. Wells, 1 F. 276; Scott v. Pequonnock, 15 F. 494; Bradford v. Briggs, 31 Ch. Div. 19, and 2 Thompson Corp., § 2398. Equity will not compel a transfer of stock upon an equitable title when the holder of that title has been guilty of laches. Newberry v. Detroit, 17 Mich. 141; York v. Passaic, 30 F. 471; Wonson v. Fenno, 129 Mass. 405; Hammond v. Hastings, 134 U.S. 401. Notice of an equitable claim like that of respondent operates only for a reasonable time. Societe General v. Tramway, 14 Q. B. Div. 424. The knowledge of the directors and officers of the land company was not notice to the investment company of the agreement to transfer the stock. In a transaction where a corporate officer or agent is acting in his own interest, the corporation is not charged with his knowledge. Bang v. Brett, 62 Minn. 4; Wickersham v. Chicago, 18 Kan. 481; Barnes v. Trenton, 27 N.J.Eq. 33, and West v. Thompson, 124 Mass. 506.

Young & Lightner, for respondent.

The statutory lien claimed by appellant must be postponed to the prior right of respondent, if appellant had notice of that right when the debt to it was created. The lien given by G. S. 1894, § 2799, upon "the stock or property of its members invested therein" does not exist until the debt is incurred. This section does not prevent a stockholder from effectually transferring his whole interest in the stock without a transfer on the company's books, and after such transfer the transferee becomes the full equitable owner and the transferror a mere naked trustee of the legal title, and a transfer on the books may be compelled by the equitable owner. As regards the company, the transferror remains, until the transfer on the books, the holder of the stock, as far as voting and receiving dividends is concerned; but this is very different from saying that the company, knowing the equitable transfer, and that the transferror is a trustee, may either, by contract or under the statute, take security on shares equitably belonging elsewhere. Baldwin v. Canfield, 26 Minn. 43; Nicollet v. City, 38 Minn. 85; Joslyn v. St. Paul, 44 Minn. 183. As a general rule it is unquestionably true that the company gets no greater lien by the statute than it could acquire under express contract with the stockholder. Since, until transfer on the books, the original holder continues as to the corporation to hold the legal title, and as the equity of the company is equal to the equity of the buyer or pledgee, its lien on the legal title, a legal lien, must prevail over the merely equitable title or lien of the buyer or pledgee. This doctrine has been applied where a corporation claimed a lien on its stock as against a prior unregistered buyer or pledgee of whose equities it had cognizance when the debt to itself was contracted. Bradford v. Briggs, L. R. 12 App. Cas. 29; Bank v. McNeil, 10 Bush. 54; Conant v. Reed, 1 Ohio St. 298; Mechanics v. Seton, 1 Pet. 299; Nesmith v. Washington, 6 Pick. 324. See also 1 Morawetz, Priv. Corp. § 206. The investment company had, or was chargeable with, knowledge or notice of the rights of the land company when the debt to it was incurred. The case can not be brought within any of the exceptions to the rule that notice to the secretary is notice to the company, and that the secretary's knowledge is chargeable to the company. It is not a case where the secretary was an adverse party to his company in a transaction with it. It is not a case of information acquired by him when not acting for the company, and not present to his mind when acting for the company. It is not a case of information acquired by him which was outside the scope of his functions, and which he was under no duty to communicate to the company. As to the claim of laches, the land company can not be prejudiced by reason of any delay in giving notice to the investment company, for the debt was incurred after that company had notice.

OPINION

BUCK, J.

The following are the stipulated facts upon which this controversy depends. On November 14, 1891, one Moore purchased of the Prince Investment Company 56 shares of the capital stock of that company, of the par value of $ 50 each, and paid therefor by conveying to that company certain land of which he held the legal title. He was thereupon duly registered as a stockholder in that company, and a certificate for said shares was duly made out in his name, and executed by the proper officers of the company, but he never requested or received a delivery thereof. Prior to his purchase of said stock the said Moore had agreed for a valuable consideration, to wit, the issue to him of certain shares of stock of the St. Paul & Sioux City Land Company, to transfer to it, or to a trustee for its use, should it so direct, the above-described stock in the Prince Investment Company. The St. Paul & Sioux City Land Company thereupon issued to said Moore the said shares of its stock, registered on its books in his name as owner, and by Moore's direction the bookkeeper of said St. Paul & Sioux City Land Company entered upon its books, as an asset of said company, the said shares in the Prince Investment Company. Each of the above-named companies was organized as a corporation in 1891 under title 2, c. 34, of the general statutes of this state, and the acts amendatory thereof. A by-law of the Prince Investment Company required that all transfers of its stock be made upon its books, and such requirement was indorsed on each of its certificates of stock.

At the time of the said agreement between said Moore and the St. Paul & Sioux City Land Company, and at all times thereafter, three of the directors of each company were also directors of the other, one of whom was also president, and another secretary, of each company. These three persons knew of the said agreement and its terms between Moore and the St. Paul & Sioux City Land Company, and of the said issue to Moore of the stock of that company. They acquired such knowledge in their capacity of officials of the St. Paul & Sioux City Land Company at the respective dates of said transactions. After the purchase of said stock in the Prince Investment Company by said Moore, and the execution of said certificate thereof to him, the said common secretary of the two companies, who, as secretary of the Prince Investment Company, had in his custody said undelivered certificates of said shares, called the attention of said Moore to the fact that he so held said certificate, and asked Moore's directions as to transferring it to the St. Paul & Sioux City Land Company, whereupon said Moore replied that he would communicate his directions by letter. This conversation was at the office of the Prince Investment Company, immediately following a meeting of its board of directors. No such directions were, however, given by said Moore, and said certificate remained in possession of said secretary down to the death of said Moore in May, 1894, and still remains in his possession, and no transfer of said shares of the Prince Investment Company has ever been made upon the books of that company.

After the said conversation between said Moore and said secretary,...