Snyder Motor Co. v. Universal Credit Co.

• Decision Date: 24 January 1947
• Docket Number: No. 14807.,14807.
• Citation: 199 S.W.2d 792
• Parties: SNYDER MOTOR CO. v. UNIVERSAL CREDIT CO.
• Court: Texas Court of Appeals

199 S.W.2d 792

SNYDER MOTOR CO. v. UNIVERSAL CREDIT CO.

No. 14807.

Court of Civil Appeals of Texas. Fort Worth.

January 24, 1947.

Rehearing Denied February 28, 1947.

Appeal from District Court, Tarrant County; Walter L. Morris, Judge.

Garnishment suit by Universal Credit Company against Snyder Motor Company. From an adverse judgment, the garnishee appeals.

Judgment affirmed in part and in part reversed and rendered.

Lem Billingsley, of Fort Worth, for appellant.

H. C. Ray, of Fort Worth, for appellee.

HALL, Justice.

This is a garnishment suit. The appellant in his motion for rehearing presents in his written argument and connects the same to his Points of Error Nos. 1, 2 and 4 the question that the passage of Art. 1358 — 1 et seq., Vernon's Ann.Civ.St. Art. 1358 — 1 et seq., the same being the Uniform Stock Transfer Act, has in effect repealed Rule 671, Texas Rules Civil Procedure and all other statutes pertaining to garnishment, attachment and/or levy upon shares of stock in domestic corporations. The appellee contends that this court is without authority to consider said Statute because the appellant did not raise same in his Points of Error or in his motion for new trial. We find under Rule 418 and under the case of Fambrough v. Wagley by the Supreme Court, 140 Tex. 577, 169 S.W.2d 478, we do have authority to consider the question and substitute this opinion in the place of the one heretofore written.

The appellee Universal Credit Company alleged it was the owner of an unsatisfied judgment against one D. H. Snyder, Jr. in the sum of $1,597. It garnisheed the Snyder Motor Company, a domestic corporation, requiring same to answer by reciting the number of shares of stock, if any, the judgment debtor Snyder, Jr. owned in said garnishee corporation. The garnishee corporation answered under oath in substance that said D. H. Snyder, Jr. was not the owner of any stock or shares in said corporation when the writ was served. The evidence showed that the stock which the judgment debtor owned in said corporation was transferred by said owner to his father, D. H. Snyder, Sr. to secure purchase price money advanced him. This hypothecation and transfer of the stock upon the books and to the pledgee occurred before the writ was served upon said garnishee corporation. Neither Snyder, Sr., the pledgee, nor Snyder, Jr., the owner, were made parties to the suit.

The case was tried before the 67th District Court of Tarrant County upon its merits; judgment was rendered in favor of appellee, wherein the court found that the defendant D. H. Snyder, Jr. was the owner of an interest in 83 shares of the capital stock in said Snyder Motor Company. That he was indebted to the appellee in the sum of $1,597. The judgment further ordered the sale, as under execution, in favor of the appellee, of the interest in and to such shares of stock and interest owned by said Snyder, Jr. in the said Snyder Motor Company; that the officer making such sale shall execute a transfer of such shares and interest to the purchaser as required by law, and that such sale shall pass to the purchaser all right, title or interest owned by the said D. H. Snyder, Jr. in such shares of stock; that such sale be subject to any valid, outstanding unpaid lien indebtedness against said stock, and that the proper officer of such corporation shall enter such sale and transfer on the books of said corporation in the same manner as if the sale had been made by defendant himself. Said judgment further denied appellant attorney's fees, but did allow the sum of $25 each to the garnishees, the City National Bank of Denison, Texas and the State National Bank of Denison, Texas.

Such a situation under said Act presents a new legal question in our State, towit, under said Act, did the judgment of the trial court have the authority to order the stock sold, as under execution, and order the garnishee Motor Company to transfer said stock to the purchaser, as though the owner had ordered it done himself.

Being unable to find any expression from our State courts upon the Act, we have confined our study of the decisions rendered by courts of our sister states to those that have adopted the Uniform Stock Transfer Act. We find the courts in all the states, where the Act is adopted, holding, in effect, that a levy of an execution or the service of a writ of garnishment upon the company issuing the stock is insufficient to pass title or to impound the stock under a writ of garnishment, unless the stock is actually seized by the officer serving the writ. We find under said Act that even though the garnishee company had answered, in the affirmative, that the judgment debtor had stock in said company, yet the garnishment proceedings would have been of no force or effect without the seizure of the stock itself.

Most of the cases hereinafter cited grew out of attachments and/or levy suits, but we find that garnishment is a form of attachment, designed to reach debts due by the defendant, Fletcher Cyc. on Corporations, Vol. 10, p. 19, Sect. 4732, and under the Act and the authorities we find the trial court committed error in ordering the sale, as under execution, of the stock which he found the judgment debtor owned, as well as of error by the court in ordering in his judgment that the proper officer of the corporation shall enter such sale and transfer of the stock on the books of said corporation in the same manner as if the sale had been made by the defendant.

Sect. 13 of the Uniform Stock Transfer Act, Vernon's Ann.Civ.St. Art. 1358 — 13, provides, in effect that no attachment or levy upon shares of stock for which a certificate is outstanding shall be valid until such certificate is actually seized by the officer making the attachment or levy; or is surrendered to the corporation which issued it; or its transfer by the holder is enjoined.

Snyder Motor Company is a domestic corporation having been organized since the Uniform Stock Transfer Act was adopted in this State. The officer serving the writ of garnishment did not seize the stock certificates which were in the hands of Snyder, Sr. Said stock was not surrendered to the corporation. Under the laws of our State, prior to the enactment of said Act, a valid levy upon corporate stock could only be made at the office of the corporation, irrespective of the location of the stock certificate. Rule 671, Texas Rules Civil Procedure. A levy upon the certificate would not have been a levy upon the interest in the corporation. Presnall et al. v. Stockyards National Bank, Tex.Civ.App., 151 S.W. 873, writ dismissed. The passage of the Act by our Legislature completely reversed the situs of shares of stock in domestic corporations. Under such Act a valid attachment, levy and/or garnishment upon such shares could be made only by actual seizure of the stock certificate by the officer, unless the certificate be surrendered to the corporation which issued it; or its transfer by the holder be enjoined, and it has been held that said injunction must be against the owner of the stock. Amm v. Amm, 117 N.J.Eq. 185, 175 A. 186. The Act further provides that such corporation shall not be compelled to issue a new certificate for the stock until the old certificate is surrendered to it, except wherein one is lost or destroyed.

We find the purpose of the Act correctly expressed in the case of Wallach v. Stein, 102 N.J.L. 517, 133 A. 81, by the Supreme Court of New Jersey, affirmed by their Court of Errors and Appeals in 103 N.J.L. 470, 136 A. 209. The constitutionality of the Act was also upheld in the Court of Errors opinion. We further find the case to be directly in point with the instant case at bar. It was a replevy case and the Supreme Court decision outlines the facts, and after applying the Act to the facts came to the following decision:

"The plaintiff appellant was the purchaser at execution sale. The levy was made by the sheriff at the office of the corporation and without seizure of the certificates — i. e., in the manner customary before the act of 1916 [N.J.S.A. 14:8-23 et seq.] * * *.

"It seems, plainly enough, to require actual seizure of the certificate as a condition precedent to a valid levy, and in fact we so held in the Mulock case [Mulock v. Ulizio, 102 N.J.L. 251, 131 A. 622], going so far as to say that a mere momentary seizure followed by a surrender of possession by the officer is not enough. Indeed, the principal argument now made is that the act of 1916 was intended only for the benefit of the corporation and not to apply as between rival claimants; but it should be quite obvious that any such idea is not only logically faulty, but would, if applied, lead to endless confusion in practice; for, after all, what should pass under a levy and sale is the right to be recognized as a stockholder on the books of the corporation.

"Dealing with the statute, therefore, as an act in force and unimpugned, the levy and sale passed no title to the stock. There is no claim that the certificates were surrendered to the corporation, or that there was any injunction as contemplated by the last clause of the section under consideration."

The purpose of the Act as set out in the above case by the Court of Errors and Appeals is as follows: "The act is one of a number recommended by the American Bar Association to the various state Legislatures, and upon such sponsor it was adopted by our own Legislature. As its title indicates, its purpose is `to make uniform the law of transfer of shares of stock in corporations,' and, as we think, to cover the range of titles whereby this result could be effected. Shares of stock are now possibly the most widely prevalent form of title to joint interest in property, and their certificates are to the possessor the evidence of his right. As is commonly known, millions of shares are transferred daily from one owner to another, and in the stock exchanges...