Winslow v. Fletcher

• Decision Date: 30 April 1886
• Citation: 53 Conn. 390,4 A. 250
• Parties: WINSLOW and others v. FLETCHER and another.
• Court: Connecticut Supreme Court

4 A. 250

53 Conn. 390

WINSLOW and others

v. FLETCHER and another.

Supreme Court of Errors of Connecticut.

April, 1886.

The Connecticut Mutual Life Insurance Company, of Hartford, loaned Fletcher & Sharpe, bankers, of Indianapolis, Indiana, $150,000, and took, as collateral security for the loan, $200,000, par value, of the stock of the Indianapolis National Bank, of Indianapolis. Soon after this transaction, Fletcher & Sharpe became indebted to Winslow, Lanier & Co., of New York, in the sum of $75,000, and afterwards went into insolvency. William Wallace, of Indianapolis, was appointed receiver of the defunct bank. Winslow, Lanier & Co. then sued Fletcher & Sharpe for $75,000 in Connecticut, in the superior court of Hartford county, and factorized the Connecticut Mutual Life Insurance Company, hoping thereby to secure the margin of $50,000 of the stock pledged over and above what was necessary to secure the loan.

Henry C. Robinson and William F. Henney, for defendants.

Hyde, Gross & Hyde, for plaintiffs.

CARPENTER, J. Complaint for a money demand, served only by process of foreign attachment. The plaintiffs and defendants are nonresidents. No property was attached except that alleged to be in the hands of the garnishee. The defendants appear for the sole purpose of pleading to the jurisdiction. The plea alleges that the plaintiffs are residents of the state of New York; that the defendants are residents of the state of Indiana; that no personal or other service of process has ever been made upon the defendants, or any of them; that no service of the original process was ever made otherwise than upon the Connecticut Mutual Life Insurance Company, named therein as garnishee; that said garnishee was not indebted to the defendants, or either of them, and had not, at the time of the service, any effects or estate of the defendants, or either of them, in its hands, that could be attached or secured by the process of foreign attachment. The reply denies that part of the plea which alleges no indebtedness by the garnishee, and no estate in its hands. The finding shows that, at the time of the service, the defendants were indebted to the garnishee in the sum of $200,000, and that the garnishee held, as collateral security therefor, certificates of stock in the Indianapolis National Bank, located in the state of Indiana, to the value of $240,000, with a blank power to sell and transfer the same. This stock was transferable only on the books of the bank, and had not been transferred. Upon these facts the superior court found the issue for the defendants, and dismissed the complaint. The plaintiffs appealed.

The question is whether the attachment will hold any surplus there may be in the bank stock after paying the defendant's indebtedness to the garnishee.

The case of Middletown Sav. Bank v. Jarvis, 33 Conn. 372, throws some light on this question. Jarvis pledged certain stock in the Middlesex Insurance Company to the savings bank to secure a loan. The stock was transferred to and stood in the name of the bank. Rowland, a creditor of Jarvis, attached his equitable interest in the stock in the mode provided by statute for attaching stock, and sold it on an execution, the officer transferring such interest to the purchaser. Jarvis afterwards assigned his interest in the stock to others. On a bill of interpleader brought by the bank, the attaching creditor held the stock subject to the lien of the bank. Counsel for the assignees claimed that Jarvis' interest in the stock could only be taken by a bill in equity, or by the process of foreign attachment. Counsel for the attaching creditor contended, in an elaborate brief, that foreign attachment would not reach it. Of course, the main question was whether the stock was well attached. The court held that it was. Strictly speaking, the court had no occasion to say that it could not be attached by foreign attachment; but the court, by McCurdy, J., says: "We do not see very well how the case comes within the provisions of the law of foreign attachment, but it certainly does come precisely under the statute to which we have referred."

Now, if the stock in the present suit was the stock of a domestic corporation, that case is a precedent for holding that it might have been attached directly by the ordinary process. That being so, it was not subject to the law of foreign attachment, for it was not concealed. In its nature, it was as incapable of concealment as real estate. It was at all times visible, accessible property, and open to attachment.

Does the fact that it is stock of a foreign corporation change the law in this respect? We think not. No good reason occurs to us why the rule should be different in the two cases. The stock in Indiana is just as accessible to these creditors as it would have been if located in this state. The statute law of Indiana provides for an attachment of stock. Rev. St. Ind. 1881, § 723. Section 931 makes the corporation liable as garnishee in respect to "any share or interest in" its stock. Legally, there is no hardship in requiring them to go there where, in contemplation of law, the stock is situated, instead of coming here. By coming here they can only succeed upon the theory that the stock is in some sense located in this state. Such a theory is inconsistent with a familiar and well-settled rule, that stock in a corporation, for the purposes of an attachment, has its situs where the corporation is located.

Again, if the insurance company held the stock in its own name simply as security for the debt, it would have held nothing that it could have been compelled to deliver to the officer to be seized and sold on an execution. There was no indebtedness that it could have been compelled to pay, because it was not owing the defendants. Whatever liability there was hinged upon two contingencies: that the stock should be sold by the garnishee, and that it should bring enough to leave a surplus after paying its claim against the defendants. Surely such a liability is not subject to the law of foreign attachment. If the defendants redeem the stock, as they may, they will be entitled to an unconditional retransfer of the stock to them. The obligation to reconvey is not a debt subject to a garnishee process. The only way in which a surplus in such a case can be reached before it is ascertained and becomes a debt, is to attach the stock, as was done in the case of Savings Bank v. Jarvis, supra, subject to the pledge.

Thus far we have assumed that the title to the stock stands in the name of the garnishee. But it does not. That fact, and one other, namely, that this is stock in a foreign corporation, distinguish this case from the case referred to. The distinction in both respects is unfavorable to the plaintiffs.

We think it is very clear that the insurance company was not indebted to the defendants. It had not become the owner of the bank stock, or any part of it, and so was not indebted to the defendants for any surplus. No part of the stock had been sold; consequently nothing had been received to apply on the debt of the defendants,—much less to pay over to the defendants. It will hardly do to say that the insurance company was the owner because it had control of the stock, and had it in its power at any time to become the owner. There is a difference between the possession of property and the mere naked power to possess it. The power to possess it in this case was not to be exercised except in a certain contingency, and that contingency had not happened. The parties contemplated a permanent loan, to continue at their pleasure. Should the debtors desire to pay, or should the creditors require it, it was supposed that the money would be paid, and that the bank stock would never in fact be transferred or sold. The power of sale was given simply as a means of compelling payment. Manifestly it cannot be said, in a legal sense, that the creditor now owns the stock, or owes for it. The law will not regard that as done which the parties, under existing circumstances, intended should not be done. The defendants, for all practical purposes, still own the stock. They alone can vote on it and receive the dividends. They have the substance, while the garnishee has but the possibility of a title.

The only other ground on which the garnishee can be held, is that it has the goods and effects of the defendants in its hands so concealed that they cannot be attached by ordinary process. That the stock itself is not in the garnishee's hands is, we think, a proposition that requires no further argument. That the certificate, with authority to sell, and a power of attorney to transfer, are in its hands, must be considered. But the certificates are not the stock. "The stock of a corporation," says Mr. Lowell, "may be defined as the sum of all the rights and duties of stockholders. * * * Each share, therefore, is but a fraction of all the rights and duties which compose this sum. * * * A share of stock in a corporation...