Whitehead v. Gormley

• Decision Date: 12 January 1926
• Docket Number: 15221.
• Citation: 245 P. 562,116 Okla. 287,47 A.L.R. 171,1926 OK 32
• Parties: WHITEHEAD et al. v. GORMLEY et al.
• Court: Oklahoma Supreme Court

245 P. 562

116 Okla. 287, 47 A.L.R. 171, 1926 OK 32

WHITEHEAD et al. v. GORMLEY et al.

No. 15221.

Supreme Court of Oklahoma

January 12, 1926

Opinion Withdrawn, Corrected, and Refiled and Rehearing Denied March 30, 1926.

Syllabus by the Court.

Where G. places a certificate of stock in the hands of W., who is acting as G.'s attorney, and no definite date is fixed whereon W. is to return the certificate to G., a demand by G or his agent for the return of the certificate is necessary before a cause of action accrues to G.

Where a demand is necessary to perfect the right of action, the statute of limitations runs only from the time of demand by the plaintiff and the refusal of the defendant to deliver the certificate in response to such demand.

A "certificate of stock" is a written instrument signed by the proper officers of the corporation, stating or acknowledging that the person named therein is the owner of a designated number of shares of its stock. It is not the stock itself, but merely written evidence of ownership thereof, and of the rights and liabilities resulting from such ownership. It is merely a paper representation of an incorporeal right and stands on the footing similar to that of other muniments of title.

It is the established rule in this state that, where there is any evidence that reasonably tends to support the verdict, it will not be disturbed on appeal, but, where there is an entire failure of any evidence to support the verdict, the verdict and judgment will be set aside.

Commissioners' Opinion, Division No. 3.

Appeal from District Court, Oklahoma County; George W. Clark, Judge.

Action by Earl Gormley against J. E. Whitehead and another for the value of stock, the certificate for which was alleged to be retained by the defendants, in which the Osage Oil & Refining Company intervened. Judgment for plaintiff against J. E Whitehead and the Osage Oil & Refining Company, and the defendant Whitehead and the Osage Oil & Refining Company appeal. Reversed and remanded with directions.

W. N Redwine, of McAlester, for plaintiffs in error.

J. C. Helms and Charles H. Garnett, both of Oklahoma City, for defendant in error.

RUTH C.

In this opinion Earl Gormley will be designated as plaintiff, J. E. Whitehead as defendant, the First National Bank as the bank, and the intervener, Osage Oil & Refining Company, as "the company."

On October 3, 1922, plaintiff filed his action against the defendant and the bank, and the petition alleges that on March 15, 1918, plaintiff deposited with the bank certificate No. 301, for 6,000 shares of the capital stock, of the Osage Oil & Refining Company; that the certificate was unindorsed, and was to be held by the bank until January 2, 1919, and was to be returned to plaintiff, by virtue of a written agreement, on or after January 2, 1919, and the bank issued its receipt therefor, wherein it was agreed the bank would return the certificate upon surrender of the receipt; that about October 1, 1918, the bank, without the knowledge or consent of plaintiff, or without permission or authority, delivered the certificate to the defendant, and took his receipt therefor, and defendant "retains" same. That demand has been made upon both defendant and the bank for the return of the certificate, but return has been refused.

The petition then alleges as follows:

"That said certificate was,

on the said 15th day of March, 1918, and ever since has been, and is now of a reasonable value of $6,000, and that by reason of said breach of contract and wrongful and fraudulent acts and conduct of the defendants as hereinabove set forth the plaintiff has been damaged in the sum of $6,000, with interest at the rate of 6 per cent. per annum from the 1st day of October, 1918,"

-and prays judgment. There was a second cause of action for the wrongful retention of shares of stock, but this was abandoned and dismissed by plaintiff.

The defendant filed answer consisting of a general denial; a plea of the statute of limitations, and for further answer states that, even if it be true that plaintiff had possession of the said certificate and the same was deposited with the bank, the certificate was void, for that the company was incorporated under the laws of the state of South Dakota, and section 8, article 17, of the Constitution of South Dakota, provides:

"No corporation shall issue stocks or bonds except for money, labor done, or money or property actually received," etc.

That it is void for the further reason the statutes of South Dakota provide:

"All corporations for profit must issue certificates of stock when fully paid up, signed by the president and secretary, and may provide in their by-laws for issuing certificates prior to the full payment, under such restrictions and for such purposes as their by-laws may provide. Whenever * * * certificates therefor are issued, such shares of stock are personal property, and may be transferred by endorsement by the signature of the proprietor, or his attorney or legal representative, and delivery of the certificate," etc. Rev. Civ. Code 1903, § 423.

That the certificate is further wholly void, and of no force and effect, because the transactions complained of all occurred in the state of Oklahoma, and the Constitution of Oklahoma provides:

"No corporation shall issue stock except for money, labor done, or property actually received to the amount of the par value thereof." Article 9, § 39.

Defendant's answer then states that the certificate was issued without any consideration therefor, and without the par value thereof having been paid by plaintiff in money, labor done, or money or property actually delivered.

The answer further sets forth that the bank was authorized to deliver the certificate to the defendant, and defendant was fully authorized to receive and hold the same as he was at all times throughout the transactions acting for the Osage Oil & Refining Company, and for the plaintiff Earl Gormley, and had full authority from the company and plaintiff to receive and retain the certificate, and the company had the right to retain the stock under article 1, section 5, of its by-laws until the shares of stock represented by the certificate were fully paid for; that article 1, section 7, of the bylaws of the company, provided the company should have a lien upon any and all certificates of stock until the stock was fully paid for, etc.; that the certificate was issued to plaintiff in consideration of further services by plaintiff, who had refused to perform the services, and the consideration had wholly failed. Defendant then alleges the Osage Oil & Refining Company is a necessary party, and prays the company be made a party, and be required to file its answer herein, and defendant tenders the certificate into court.

The company filed its petition in intervention, in which it alleges that certificate No. 301 was issued by the company, but was never delivered to plaintiff, but was deposited in the bank, by the company, and the receipt taken in the name of the plaintiff, but by the company, and the receipt of the bank was given to the company in the name of plaintiff, and was returned by the company to the bank, and the bank, upon delivery of the receipt, delivered the certificate to the company, and the certificate was the property of the intervener, and was never delivered to plaintiff, and plaintiff never had any right, title, or interest therein.

The intervener then tenders the certificate into court that the title and ownership may be determined, and pleads the Constitution and laws of the states of Oklahoma and South Dakota and the by-laws of the company as set up in the answer of J. E. Whitehead, president of the intervener company, and prays the said certificate be canceled.

Plaintiff for reply alleges collusion between the defendant and the bank, and fraud in the delivery of the certificate, and that he did not discover the fraud until December 17, 1921, when he made demand upon the bank for the certificate, and its return was refused.

The cause was tried to a jury and a verdict returned in favor of the plaintiff and against the defendants Whitehead and the Osage Oil & Refining Company, and these defendants bring this case here upon petition in error and case-made for review. Thirty-one specifications of error are assigned in the defendant's brief, but it will not be necessary to consider all the propositions presented. The first error assigned is that the action was barred by the statute of limitations, and the court should have so held.

Defendants admit in their brief that, if Whitehead was representing Gormley, and holding the certificate for him and for his benefit, then Gormley could not sue for possession of the stock or certificate until demand made and delivery refused. We think this is determined by the defendant's answer, wherein he alleges as follows:

"That this defendant was fully authorized to receive and hold said certificate, for the reason that this defendant was, throughout the whole transaction, acting for the said corporation, the Osage Oil & Refining Company, and for the plaintiff Earl Gormley, and each and all of the other parties interested in the deposit of the shares in said bank at the time, and that this defendant did receive said stock from said bank with authority of plaintiff," etc.

The evidence amply sustains the allegations of the answer. It appears the company was organized under the laws of the state of South Dakota with an authorized capital of 2,000,000 of dollars divided into 2,000,000 shares, of a par value of $1 each, and the certificate issued in Gormley's name describes him as the owner of 6,000 shares, and is dated January 18, 1918. On March 22, 1918, p...