The People's Bank of Bloomington v. Gridley

• Decision Date: 31 January 1879
• Citation: The People's Bank of Bloomington v. Gridley, 91 Ill. 457, 1879 WL 8425 (Ill. 1879)
• Parties: THE PEOPLE'S BANK OF BLOOMINGTONv.ASAHEL GRIDLEY et al.
• Court: Illinois Supreme Court

91 Ill. 457

1879 WL 8425 (Ill.)

THE PEOPLE'S BANK OF BLOOMINGTON

v.ASAHEL GRIDLEY et al.

Supreme Court of Illinois.

January Term, 1879.

APPEAL from the Appellate Court of the Third District; the Hon. CHAUNCEY L. HIGBEE, presiding Justice, and the Hon. OLIVER L. DAVIS, and Hon. LYMAN LACEY, Justices.

This was a bill in equity brought by the appellant against the appellees, to enjoin the sale of stock referred to in the opinion, and praying to have the stock transferred to the bank on the books of the railway company. The bank, after the levy upon the stock, applied to the officers of the railway company for a transfer of the stock, which was refused on account of the prior levy. The other material facts appear in the opinion.

Messrs. WILLIAMS, BURR & CAPEN, for the appellant:

1. Although the charter of an incorporated company provides that all transfers of its capital stock, to be valid, shall be made on the books of the company, this provision is one between the company and its stockholders exclusively, and does not affect third parties. Kellogg v. Stockwell et al. 75 Ill. 68; Broadway Bank v. McElrath, 2 Beasley (N. J.), 24; Bank of Utica v. Smalley, 2 Cow. 770; Gilbert v. Manchester Iron Manufac. Co. 11 Wend. 628; Commercial Bank of Buffalo v. Kortright, 22 Id. 348; Kortright v. Commercial Bank of Buffalo, 20 Id. 91; Black v. Zacharie, 3 How. 483; Bruce v. Smith, 44 Ind. 1; McNeil v. Tenth National Bank, 46 N. Y. 325; Liech v. Wells, 48 Barb. 637; Isham v. Buckingham, 49 N. Y. 216; Boatman's Ins. and Trust Co. v. Abel, 48 Mo. 136; Choteau Spring Co. v. Harris, 20 Mo. 283; People v. Elmore, 35 Cal. 653; Weaver v. Barden, 49 N. Y. 286.

2. The authority in a charter to regulate the transfer of stock by by-laws, can not confer the power to prohibit all equitable transfers, nor to provide what shall be evidence of an equitable transfer. United States v. Vaughan, 3 Binney (Pa.), 402.

3. An incorporated company may provide as to what shall be evidence of a transfer of its stock between itself and its stockholders, but beyond this it can not go. Cases cited above.

4. Even where a charter provides that no transfer of stock shall be valid except on the books of the company, an assignment and delivery of the stock for a valuable consideration by a stockholder passes a good title in equity to the stock. See above cases.

5. An assignment of the equitable title before a levy or lien acquired by a creditor, gives a court of equity jurisdiction to enjoin a sale under a levy and to compel an assignment of the stock. Broadway Bank v. McElrath, 2 Beasley, 24.

6. A judgment creditor is not an innocent purchaser for value. Bassett v. Nosworthy, Leading Cases in Equity, with Hare & Wallace's note, vol. 2, p. 75, 79, where the authorities will be found collected.

7. If a judgment creditor have a right to sell the equity of redemption of mortgaged property, but claims the right to, and attempts to sell the property discharged from the lien of the mortgage, his sale will be enjoined at the suit of the mortgagee. Christee v. Hale, 46 Ill. 117.

8. Where the charter or by-laws of a corporation provides that its stock is only transferable by assignment on the books of the corporation on the presentation of the certificate duly indorsed, and the corporation permits an assignment to be made on its books without presentation of the certificate so assigned, it is liable to the owner of the certificate by indorsement for the value of such stock. Bank v. Lanier, 11 Wall. 369.

9. Nothing but the interest of the defendant in execution can be sold by a levy on capital stock. Rev. Stat. 1874, p. 628, sec. 52.

Mr. W. S. COY, and Messrs. STEVENSON & EWING, for the appellees, made the following points:

1. The stock in question is personal property. 3 Parsons' Contracts, 34; Walker's Am. Law, 233; Angell & Ames on Corp. 554; Proffatt on Corp. 70; Arnold v. Ruggles, 1 R. I. 165; Bligh v. Brent, 1 Y. & Coll. 268; Tippetts v. Walker, 4 Mass. 595.

2. The appellant did not take possession of the stock by the assignment of the certificates. Fisher v. Essex Bank, 5 Gray, 377; Ex parte Wilcox, 7 Cow. 411; Colt v. Ives, 31 Conn. 35; Proffatt on Corp. sec. 323; Angell on Private Corp. 70; Angell & Ames on Corp. sec. 557.

3. The stock was not mortgaged to appellant by appellees. Angell & Ames on Corp. sec. 580.

4. The lien on the stock, acquired by the assignment of the certificate, was void as to the execution of the appellees. Rev. Stat. 1874, p. 711. sec. 1.

5. The stock in question was subject to mortgage. Colt v. Ives, 31 Conn. 35; Durkee v. Stringham, 8 Wis. 124.

6. Where the charter of a corporation provides that the stock shall be transferable only on the books of the corporation, no transfer, except it be made on said books, will convey the title to the stock of said corporation, as against third persons. Dutton v. Connecticut Bank, 3 Conn. 498; Skowhegan Bank v. Cutler, 49 Maine, 317; Sabin v. Bank of Woodstock, 21 Vt. 360; The People ex rel. v. Devin, 17 Ill. 86; Wilson v. Little, 2 N. Y. 447; Brown v. Kneeland, 5 Bissell, 181; Heath v. Erie Railroad Co. 8 Blatchford, 347; Fisher v. Essex Bank, 6 Gray, 373; Oxford Turnpike Co. v. Bunnell, 6 Conn. 552; Strout v. Natoma Co. 9 Cal. 78; Blanchard v. Dedham Gas Co. 12 Gray, 213; Agricultural Bank v. Burr, 24 Maine, 263; Williams v. Mechanics' Bank, 5 Blatchford, 59; Shipman v. Ætna Ins. Co. 29 Conn. 251; Bank v. N. Y. & N. H. R. R. Co. 13 N. Y. 621; N. Y. & N. H. R. R. Co. v. Schuyler, 38 Barb. 440; 1 Redfield's American Railway Cases, 136; Bowden v. F. & M. Bank of Baltimore, 1 Hughes, 307; 1 Schouler on Personal Property, 635; 1 Redfield's Am. Railway Cases, 110; Boyd v. Rockport Steam Cotton Mills, 7 Gray, 406.

7. Where the charter of a corporation gives authority to the board of directors to select the mode of the transfer of stock, a by-law passed by said board has the same effect as if the by-law was a part of the charter. Proffatt on Corp. sec. 301; Oxford Turnpike Co. v. Bunnell, 6 Conn. 558; Lockwood v. Mechanics' Bank, 9 R. I. 308.

8. Where certificates of stock issued by a corporation show on their face the mode of transfer required by the corporation, such notice has the same effect as if the mode of transfer so stated was incorporated into the charter. Townsend v. McIver, 2 Richardson, 43; Williams v. Mechanics' Bank, 5 Blatch. 50.

9. If a person takes an assignment of certificates of stock, it is his duty to immediately cause the stock to be transferred to him on the books of the company, and if he does not do so, the assignment is void as to a creditor of the assignor, who levies an execution on the same as the property of the assignor. Pinkerton v. Lawrence and Manchester Railroad Co. 42 N. H. 415; Colt v. Ives, 31 Conn. 35; Boyd v. Rockport Steam Cotton Mills, 7 Gray, 406.

10. Where stock stands in the name of a person on the books of a corporation, a levy on the same and a sale thereof will convey a perfect title to the purchaser as against a person who has an assignment of the certificate but no transfer on the books. Agricultural Bank v. Burr, 24 Maine, 263; Fisher v. Essex Bank, 5 Gray, 373; Blanchard v. Dedham Gas Co. 12 Id. 215; Strout v. Natoma Co. 9 Cal. 78; Shipman v. Ætna Ins. Co. 29 Conn. 253; Cady v. Potter, 55 Barbour, 467.

11. An execution creditor stands, in regard to the property levied on, as a bona fide purchaser for value. And a purchaser of stock, where the mode of transfer prescribed is, on the books of the company, will hold the same against an assignment which is not recorded on the books. Massy v. Walcott, 40 Ill. 163; N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y. 80; N. Y. & N. H. R. R. Co. v. Ketchem, 3 Keyes, 363; N. Y. & N. H. R. R. Co. v. Schuyler, 38 Barb. 534.

12. When the legislature of the State enacts a statute of another State, it is presumed to adopt the construction which that statute has received by judicial decision in the courts of the State from which it is taken. Campbell v. Quinlan, 3 Scam. 288; Rigg et al. v. Welton et al. 13 Ill. 15; Tyler v. Tyler et al. 19 Id. 151.

13. The statute of this State in regard to the levy and sale of capital stock on execution, is a substantial copy of the statute of New Hampshire, which has been construed to require a transfer on the books in order to protect the stock from sale on execution, even when the charter and by-laws were silent on that question, long before the statute in this State was passed. Rev. Stat. 1874, 628; Comp. Stat. of N. H. 1868, pp. 470, 499; Pinkerton v. Manchester and Lawrence Railroad Co. 42 N. H. 445. 14. Under the statutes of Illinois capital stock in an incorporated company is personal property, and its transfer must be governed by the rules of law applicable to that kind of property. Rev. Stat. 1874, p. 287, sec. 7.

15. The assignment of the certificates of stock by Pennell to the People's Bank, was only a chattel mortgage of the stock. Herman on Chattel Mortgages, 40, 56; Huntington v. Mather, 2 Barbour, 528; Schouler on Personal Property, 536; Wilson v. Little, 2 Comstock, 443; City Fire Ins. Co. v. Olmstead, 33 Conn. 476; Nevan v. Roupe, 8 Clarke (Iowa), 207.

16. In order to make the assignment valid as against judgment creditors, it should have been acknowledged and recorded, or the property should have been delivered to the assignee. Rev. Stat. 1874, p. 711; Gregg v. Sandford, 24 Ill. 17; Forrest v. Tinkham, 29 Id. 141; Henderson v. Morgan, 26 Id. 431; Duke v. Jones, 6 Jones Law, 14; Loffan v. Garnett, 9 Dana, 389.

17. A symbolical delivery will not preserve the lien of the assignment. Herman on Chattel Mortgages, 199; Frey v. Miller,45 Pa. St. 441; Morse v. Powers, 17 N. H. 286; Bank v. Nelson, 38 Geo. 391; Beeman v. Lawler, 37 Maine, 543; Walcutt v. Keith, 22 N. H. 196.

18. A certificate of stock is not a negotiable instrument. Shaw v. Spencer, 100 Mass. 382; Sewall v. Water Power Co. 4 Allen, 277; Bank v. Railroad Co. 3 Kernan, 599; Life Ins....