Strange v. H. & T. C. R. R. Co.

• Decision Date: 23 March 1880
• Docket Number: Case No. 688.
• Citation: Strange v. H. & T. C. R. R. Co., 53 Tex. 162 (Tex. 1880)
• Court: Texas Supreme Court
• Parties: BENJAMIN A. STRANGE v. H. & T. C. R. R. COMPANY.

53 Tex. 162

BENJAMIN A. STRANGE

v.H. & T. C. R. R. COMPANY.

Case No. 688.

Supreme Court of Texas.

Mar. 23, 1880.

ERROR from Harris. Tried below before the Hon. James Masterson.

The facts necessary to a proper understanding of the opinion will be found contained in it.

Stewart & Barziza, for plaintiff in error.--We contend that the written stipulations and conditions, as set forth in the original certificate of stock, ought to be strictly complied with by the officers of defendant. They are presumed to know more about the charter of their company and the rules set up in their certificates of stock than any other person; and if anybody ought to suffer, it ought to be themselves.

These remarks, let it be remembered, are not made solely because it appears that two officers of this company have been dealing in this stock to the prejudice of plaintiff, but are meant to urge the principle, that as the new certificate of stock to Mr. Richardson which was issued, and as the new certificate to Mr. Hutchins which was issued, their acts were done by the officers of the defendant, who are presumed to know the charter of the company, and the stipulations in the company's certificate. Therefore we say, that it is not a question so much of an innocent purchaser (upon which we could confidently claim) as of principle and right and plain and common justice and law.

It is like a negotiable instrument which is not due; it may be assigned; the holder thereof is presumed to be the owner for value if it is indorsed to him; the holder for value of that paper without any assignment, stands in a better condition than does the one who claims to be an assignee upon another piece of paper and not possessing the original.

We contend that the holder and owner for value of that original certificate of stock, could and can, at any time, demand the same or its value, and cannot be affected with notice of any transfers or transaction had and made upon the books of said company, or by its officers. And we contend that the issuing of another certificate to Richardson, while the original was out, was utterly void as to the owners of the original; and that the issuance of the certificate to Hutchins was utterly void as to the owners of the original, and that the owners and holders of such original can, at any time, claim their rights.

F. Barnard also for plaintiff in error:

I. The transfer by assignment in writing, and delivery of the certificate for said stock by Browder to Fletcher, and by Fletcher to Coryell, and by Coryell to Strange, divested Brow der of all title and right to said stock. Pasch. Dig., 222; Durat v. Swift, 11 Tex., 140-279; Angell & Ames on Corp., 564, and cases cited.

II. The issuance by defendant of a second certificate for the stock, in lieu of the certificate issued to Browder, without the return and delivery of the Browder certificate, did not affect or impair the right and title of the assignee and holder of the Browder certificate under transfer in good faith, without notice of adverse claims by Browder, or his second transfer.

III. The terms of the certificate and the by-laws of the defendant company bound it to recognize plaintiff as the owner of the stock, and the defendant was estopped from issuing a new certificate to Hutchins, and plaintiff ought to have had judgment for the stock or the agreed value thereof.

IV. Where a party delivers a certificate of stock, with the assignment thereof in blank, to an agent, to be sold or disposed of, a purchaser of such stock, with or without notice of the agency, takes a good title, and is not bound for the proper application of the purchase money. Kottright v. Buffalo Com. Bank, 14 Md., 299.

Baker & Botts for defendant in error.--As counter propositions to the propositions made by plaintiff in error, we make the following:

I. Certificates of stock are simply the muniments and evidence of the holder's title to a given share in the property and franchises of the corporation of which he is a member as between him and the corporation.

II. The certificate is merely the evidence of his interest, as the title deeds are of title to the land, but not of the possession. Griffin v. Howell, 5 Barr, 77.

III. When Browder sold to Merriman, Fletcher held the certificate with power to sell; but the transfer of Browder to Merriman was a revocation of the power of sale previously given to Fletcher, and its filing in the office of the company was notice to the world. The community interested have the same notice of transfers registered as they have of deeds of lands recorded. After the date of Browder's sale, the sale of Fletcher was unauthorized, and an unauthorized sale, although for a valuable consideration, and without notice, vests no higher title in the vendee than was possessed by the vendor. Browder transferred to Fletcher as his agent to sell in 1867; Browder sold to Merriman in 1868; the transfer to Merriman filed in the office of company in 1871, and Fletcher's sale to Coryell in 1873. Dodd & Co. v. Arnold, 28 Tex., 97;Saltus v. Everett, 20 Wend., 275;Prescott v. Deforrest, 16 Johns., 159;Wheelwright v. Depeyster, 1 Johns., 471; Williams v. Merle, 11 W. R., 80; Brower v. Peabody, 13 N. Y., 121.

IV. Certificates of stock are not negotiable instruments, so as to come within the rules of bills of exchange and promissory notes. No rules which belong to negotiable securities belong to them. Railroad Co. v. Howard, 7 Wall. (U. S.), 415; Wilson v. Little, 2 N. Y., 447;Mechanics' Bank v. N. Y. & N. H. R. Co., 13 N. Y., 625;Weaver v. Borden, 49 N. Y., 288; Dustin v. Livingston, 9 J. R., 96; Arnold v. Ruggles, 1 R. I., 165.

George Goldthwaite also for defendant in error.

BONNER, ASSOCIATE JUSTICE.

This case is one of first impression in this court, and we have endeavored to give it that full consideration in the light of authority, consistent with the pressure of other business, which its importance demands.

It involves the question of the liability of a railroad company for damages for having issued new shares of stock to one claiming under the first shareholder, when the original certificate is still outstanding in the hands of an innocent third party, but who had not presented the same, with his transfer, to the office of the company, previous to the issuance of the new stock.

To determine the liability of the company, to some extent necessarily involves the merits of the respective titles of the two claimants, though but one is before the court.

The original certificate of stock issued on April 1, 1861, to J. M. Browder, and reads as follows:

“HOUSTON & TEXAS CENTRAL RAILWAY COMPANY,

+--------------------+
                ¦No. 19.¦Four shares ¦
                +--------------------+
                

This certifies that J. M. Browder, proprietor of share No. 917 in the capital stock of the Houston & Texas Central Railway Company, established by acts of incorporation passed by the legislature of the state of Texas, subject to which, and the by-laws, this certificate is transferable by assignment, and upon surrender hereof to the directors a new certificate of proprietorship of said share will be delivered to the assignee.”

Plaintiff Strange holds possession of this original certificate for a valuable consideration, under the following chain of title:

1. A transfer from J. M. Browder, the original grantee, to E. S. Fletcher, dated March 14, 1862. 2. A transfer from E. S. Fletcher to J. R. Coryell, dated May 10, 1873. 3. A transfer from J. R. Coryell to plaintiff B. A. Strange, dated August 29, 1873.

The title under which Hutchins holds the new stock is as follows:

Browder sold and transferred said certificate of stock on May 6, 1868, for valuable consideration, to C. H. Merriman. In pursuance of said assignment from Browder, Merriman transferred the stock on the books of defendant's company to A. S. Richardson, and certificate of the stock was issued to Richardson on July 27, 1868, and afterwards Richardson transferred the stock to W. J. Hutchins, on or about January 14, 1871. The certificate to Richardson was surrendered, and a new certificate for the same stock was delivered to Hutchins, who holds and represents the stock in defendant's company.

The by-law of the company authorized by its charter, upon the subject of the transfer of stock, reads:

“Section 4. The transfers of any share may be made by an instrument in writing signed by the owner, which writing may be indorsed on the certificate or made on a separate paper. The assignee must cause his transfer to be presented and delivered to the secretary of the company before it will entitle him to be recognized as the owner; and upon presentation of such transfer, with the certificate of stock, the secretary shall record the same in books to be kept for that purpose and called “Report of Transfers,” and the president and secretary shall issue new certificate or certificates to the assignee as he may be entitled, unless they have notice of fraud or invalidity of said transfer.”

Subsequently to the issuance of the new stock to Hutchins, a demand was made upon the company by the plaintiff, Strange, for the issuance of stock to him, he having presented the original certificate with the transfer to himself, which demand was refused. On the trial below a jury was waived and judgment rendered by the court for the defendant, the R. R. Co.

From the above statement, it will be seen that the original certificate of stock was transferable by assignment, either indorsed on the certificate itself or on a separate piece of paper, and was not required to be made, as in some cases, on the books of the company.

By the terms of the certificate and by-law, there was a continual affirmation made by the company, that they would hold, for the use and benefit of the rightful owner of the certificate, the amount of stock therein specified, until it was...