Simpson v. Jersey City Contracting Co.

• Decision Date: 11 December 1900
• Citation: 165 N.Y. 193,58 N.E. 896
• Parties: SIMPSON et al. v. JERSEY CITY CONTRACTING CO.
• Court: New York Court of Appeals Court of Appeals

165 N.Y. 193

58 N.E. 896

SIMPSON et al.

v.JERSEY CITY CONTRACTING CO.

Court of Appeals of New York.

Dec. 11, 1900.

Appeal from supreme court, appellate division, First department.

Action by Louis M. Simpson and others against the Jersey City Contracting Company. An order vacating a levy under a warrant of attachment was reversed by the appellate division (61 N. Y. Supp. 1033), and the appellate division certified certain questions of law. Affirmed.

Landon and O'Brien, JJ., dissenting.

Woolsey Carmalt and Albert B. Kerr, for appellant.

Alfred B. Cruikshank, for respondents.

GRAY, J.

The appellate division of the supreme court, in the First department, has certified the following question of law to this court: ‘Whether, where the certificates of stock of a foreign corporation belonging to a nonresident of the state are in possession of a resident of this state, as pledgee, the interest of the owner and pledgor can be levied upon under a warrant of attachment against such owner, made by service of a notice on the pledgee in the manner prescribed by subdivision 3 of section 649 of the Code.’ The circumstances out of which the question arose were these: The plaintiffs, commencing an action against the defendant, a foreign corporation, to recover for professional services, procured a warrant of attachment to be issued, and the levy to be made upon its interest in certain shares of the capital stock of the New Jersey & Pennsylvania Telephone Company, a foreign corporation, which belonged to it, and the certificates for which it had delivered to the Produce Exchange Trust Company, of the city of New York, as security for the payment of a note. The levy was made pursuant to the provisions of subdivision 3 of section 649 of the Code of Civil Procedure, and, if the interest of the defendant constituted property, which was the subject of attachment under our laws, then there is no question but what the levy was properly made, and that the property was impounded. Section 649 provides, in its first and second subdivisions, for a levy upon real property, and upon personal property ‘capable of manual delivery, including a bond, promissory note, or other instrument for the payment of money’; and then, in its third subdivision, it provides for a levy ‘upon other personal property, by leaving a certified copy of the warrant, and a notice showing the property attached, with the person holding the same; or, if it consists of a demand, other than as specified in the last subdivision, with the person against whom it exists,’ etc.

The argument of the appellant is, in effect, that this was an attempt to levy an attachment on its shares of stock, and that the legal principles which underlie the ownership of capital stock preclude the idea that jurisdiction could be obtained in that manner. It is insisted that ‘the stock of a foreign corporation is not property within the state subject to levy of attachment against a nonresident owner.’ Thus generally stated, and within such a state of facts as is shown in the case cited, of Plimpton v. Bigelow, 93 N. Y. 592, the proposition may be true. In that case the plaintiffs were nonresidents of the state, but they brought an action therein against the defendant, who was also a nonresident. It was attempted to attach shares of stock of a foreign corporation which were owned by the defendant, and the certificates of which were in his possession at his domicile, by causing the sheriff to make a levy upon an officer of the corporation in the city of New York, under the provisions of section 649 of the Code. It was held that the section did not apply, for the reason that the fundamental condition of an attachment proceeding did not exist, viz. that the res must be within the jurisdiction of the court for an effectual seizure. The right which the shareholder has by reason of his ownership of corporate shares is not a debt or duty of the corporation, existing in a foreign jurisdiction, wherever its officers may be found engaged in the prosecution of the corporate business. The decision was manifestly correct. A corporation is incapable of leaving the place of its domicile, whatever may be its officers and agencies in other states. As it was said, it ‘is not here because its agents are here.’ That case differs materially, but it was pointed out in the opinion that intangible rights of interests, or choses in action, are made by the statute susceptible of seizure by attachment when they can be said to be constructively present within the jurisdiction. It was said that where a debtor ‘is out of the jurisdiction, and the debt or duty owing to him or the right he possesses, exists against some person within the jurisdiction, attachment laws fasten upon that circumstance, and, by notice to the debtor or person owing the duty or representing the right, impound the debt, duty, or right, to answer the obligation which the attachment proceeding is instituted to enforce. In the case supposed, the debt, duty, or right, for the purpose of attachment proceedings, is deemed to have its situs or locality in the jurisdiction.’

This foreign defendant, in order to secure the payment of its indebtedness to the trust company in New York, pledged with it the shares of stock in the foreign corporation of which it was the owner, and, as we must assume, by an assignment of the certificates representing the same in some form of transfer, which conferred apparent title, and which would enable the assignee or pledgee to enforce the security by its sale and transfer. Thus, the defendant's interest in the stock was held by a title and with a right which authorized the trust companyto possess it until the indebtedness was paid, and in the event of nonpayment to sell it in satisfaction of its claim. The relation of the parties was that of pledgor and pledgee, and the special property which the latter had in the pledge entitled it to its possession against all the world. It stood accountable to the former for its acts with respect to the security. It could be compelled to pay over any surplus realized upon a sale, or to return any of the stock not sold for payment of the debt. Wheeler v. Newbould, 16 N. Y. 392;Warner v. Bank, 115 N. Y. 251, 22 N. E. 172. It is true that the corporate property represented by the shares of stock was not within this jurisdiction; but how is that a controlling consideration, and can it reasonably be said that this defendant had no property here, whether we regard it as in the transferred certificates of stock, or as in the claim or demand which it had against the trust company? What is the reasonable view, and therefore the one which the law should take? Jurisdiction, certainly, is founded upon the presence of the thing in respect to which it is exercised. The action is in rem, and the question seeks the place rei sitae. That the defendant had conditionally parted with its interest in the stock to the trust company is true. That it had transferred to it the possession of the certificates evidencing that interest,-its muniments of title,-with the right to transfer the same upon a sale in satisfaction of the debt secured, is true. That the defendant's interest in the pledge was of a residuary nature, and constituted a claim upon the pledgee, is true. The defendant had, to the extent of its ability, transferred to the trust company, as security for the payment of its indebtedness, whatever was its interest in the foreign corporation, as evidenced by the delivery of the certificates of stock. Did it not, therefore, clearly have property rights or interests within this state, which could be impounded by our courts to abide the result of the litigation over the plaintiff's claim? I think so. The distinctions sought to be drawn are largely artificial. The truth is that it did have property here, in the common acceptation of the term, as well as in the eye of the law. Certificates of stock are treated by business men as property for all practical purposes. They are sold in the market, and they are transferred as collateral security for loans, and they are used in various ways as property. They pass by delivery from hand to hand, and they are the subject of larceny. See In re Whiting's Estate, 150 N. Y. 27, 44 N. E. 715,34 L. R. A. 232.

I think that the case of Warner v. Bank, 115 N. Y. 251, 22 N. E. 172, is much in point. In that case a New York bank, having a claim against a Pennsylvania bank, attached certain promissory notes and bills of exchange which the latter had pledged with another New York bank to secure a loan of money. The case turned upon the effectiveness of the levy made under the warrant; that is to say, whether the sheriff should have taken the property into his actual custody, or whether he had sufficiently acted under the warrant in serving a certified copy of it, and a notice showing the property attached, with a demand for a certificate, etc. It was held that the pledgee was entitled to the possession of the property as against the sheriff, and his form of levy was upheld; and it was observed that ‘what was the subject of the attachment was the right of the Penn Bank [the debtor] to compel its pledgee to account to it as to the pledged paper, and to receive the surplus of the proceeds of collection, after satisfying the pledgee's claim for advances. That right is a chose in action, and, in the nature of things, is intangible. It is the subject of attachment as a demand against the person, within the spirit of the language of the Code.’ It was further observed that ‘while the debt remains undischarged the pledge belongs to the pledgee, and the title is subject to the...