Opinion
April 7, 1922.
Bouvier Beale [ Julian B. Shope of counsel; B.F. Norris with him on the brief], for the appellants.
Patterson, Eagle, Greenough Day [ Carroll G. Walter of counsel; J. Rhodes O'Reilly with him on the brief], for the respondent.
On the trial appellants contended that the law of Massachusetts governed, on the theory that the note was made and negotiated by the brokers there and that they there delivered the certificates as collateral for the payment of the note; and the plaintiff claimed that the law of New York, where the stock was issued to the brokers, governed. Appellants now claim that the law of Delaware governs. They pleaded that the Sugar Company, pursuant to its authority under the law of its incorporation, adopted a by-law to the effect, as stated on the certificates, that they were transferable only on the books of the company on surrender of the certificates by the holder in person or by his duly authorized attorney. Appellants offered to prove the by-law but made no offer with respect to the statutory law of Delaware. In Union Bank v. United States Exchange Bank ( 143 App. Div. 128) it was held that the delivery of a certificate of stock by an assignment in blank and a power of attorney indorsed thereon passes the entire legal and equitable title, even though the charter or by-laws of the company provide that the stock is transferable only on the books of the company and on surrender of the certificates and even though there be a provision to that effect on the face of the certificates, and that at common law a corporation retains no lien on the stock issued by it and, therefore, it retains no right or lien in the absence of a statute conferring it. (See Hammond v. Hastings, 134 U.S. 401.) We cannot take judicial notice of the statutory law of another State and it is not to be presumed that the laws of Delaware authorized the Sugar Company to make a by-law protecting it against its own voluntary act in issuing stock and affecting the negotiability of its stock and manifestly, without clear statutory authority therefor, such by-law could not affect the title of a purchaser in due course and for value. ( Kinnan v. Sullivan County Club, 26 App. Div. 213.) In the absence of a statute reserving rights in favor of a business corporation after the issuance of its stock, such a general provision requiring a surrender of the certificates as a condition precedent to the transfer of the stock should be construed merely as protecting the corporation with respect to recognizing the owner and as giving to the certificates a certain degree of negotiability by assuring the holder that his rights cannot be impaired by the transfer of his stock or the issuance of other certificates therefor excepting upon surrender of the certificates and that is the most recent view taken thereof by the Court of Appeals. ( Zander v. N.Y. Security Trust Co., 178 N.Y. 208, 211.) One object of this provision is for the benefit and protection of the corporation with respect to the payment of dividends and the holding of its corporate meetings, and of course until it has notice of the transfer of the stock it is warranted in recognizing the holder of record, and the liability of stockholders to creditors at times is dependent upon their being holders of record. ( Johnson v. Underhill, 52 N.Y. 203; McHenry v. Jewett, 26 Hun, 453; revd., on another point, 90 N.Y. 58; Commercial Bank of Buffalo v. Kortright, 22 Wend. 348; Matter of Long Island R.R. Co., 19 id. 37; New York N.H.R.R. Co. v. Schuyler, 34 N.Y. 30; Shellington v. Howland, 53 id. 371; Sinclair v. Fuller, 158 id. 607, and Elyea v. Lehigh Salt Mining Co., 169 id. 29.) The Legislature has declared the public policy of this State with respect to the transfer of certificates of stock by section 162 of the Personal Property Law (as added by Laws of 1913, chap. 600). It is therein provided that the title to such certificates can be transferred only by delivery thereof indorsed either in blank or to a specified person appearing thereby to be the owner or by the delivery of the certificate and a separate document containing a written assignment thereof or a power of attorney to sell, assign or transfer the same or the shares represented to be signed by the person appearing by the certificate to be the owner of the shares, which assignment or power of attorney may be either in blank or to a specified person and that these provisions shall be applicable although the charter or articles of incorporation or code regulations or by-laws of the corporation issuing the certificate and the certificate itself provide that the shares represented thereby shall be transferable only on the books of the corporation or shall be registered by a registrar or transferred by a transfer agent. The statutory law of Massachusetts was the same. (Mass. Acts of 1910, chap. 171, § 1.) It thus appears that in this jurisdiction where the certificates were issued by the corporation to the brokers and in Massachusetts where they were diverted by the brokers, the statutory law protects the title of the purchaser against any right attempted to be reserved by the corporation. I am of opinion, however, that neither under the law of New York nor under the law of Massachusetts is the provision in the certificates to the effect that they were only transferable on the books of the company on surrender thereof of any importance in the case at bar, for here the corporation has not been induced, on the theory of loss of the certificates or otherwise, to issue new certificates in place of these to another claiming to be both the record and true owner and it not only authorized the brokers to negotiate these certificates, but it certified that they were the owners thereof, and, therefore, it is estopped as against a purchaser without notice, such as the plaintiff is, from claiming that the delivery of the certificates to the brokers was made conditionally and that they did not comply with the conditions. ( Driscoll v. West Bradley C.M. Co., 59 N.Y. 96; New York N.H.R.R. Co. v. Schuyler, supra, 80; McNeil v. Tenth National Bank, 46 N.Y. 325; Union Trust Co. v. Oliver, 214 id. 517; Talcott v. Standard Oil Co., 149 App. Div. 694; Holbrook v. New Jersey Zinc Co., 57 N.Y. 615; Hudson Trust Co. v. American Linseed Co., 190 App. Div. 289; Fifth Ave. Bank v. F.S.S. G.S.F.R.R. Co., 137 N.Y. 231; American Exchange Nat. Bank v. Woodlawn Cemetery, 194 id. 116, 126, 127; Baker v. Davie, 211 Mass. 429; Russell v. American Bell Tel. Co., 180 id. 467.) It is quite clear, I think, that the Sugar Company after having issued the stock to the brokers, certifying that they were the owners thereof, cannot now be heard to say that one purchasing in good faith and for value from the brokers could not acquire title as against it without first having the certificates surrendered and obtaining its consent to the transfer and to the issuance of new certificates; and it was, I think, plainly the duty of the defendant to make the transfer when duly requested by plaintiff ( New York N.H.R.R. Co. v. Schuyler, supra, 80; Travis v. Knox Terpezone Co., 215 N.Y. 259), and since it maintains a stock transfer agency in this jurisdiction the transfer may be enforced here ( Lockwood v. U.S. Steel Corporation, 209 N.Y. 375) and it could be enforced here against the officers authorized to make the transfer. ( Travis v. Knox Terpezone Co., supra.)
The judgment is, therefore, right and should be affirmed, with costs.
CLARKE, P.J., SMITH, MERRELL and GREENBAUM, JJ., concur.
Judgment affirmed, with costs.