Argued March 21, 1872
Decided April 16, 1872
Henry Whittaker for the appellant. Charles H. Wesson for the respondent.
This action was brought to recover unpaid calls upon 160 shares, a portion of 400 shares of stock, subscribed by the defendant in the Glenville Woolen Company, a joint stock corporation, organized under the laws of Connecticut. The referee found that the defendant transferred the stock to one Ripley, after having paid fifty per cent of the amount upon previous calls; that such transfer was in good faith, and that the company acquiesced in the same and recognized Ripley as the owner of the stock. These findings of fact, if decisive of the case, are conclusive upon this court, as the evidence was sufficient to justify them.
It is not denied that a legal transfer under such circumstances will operate to release the vendor from personal liability, and substitute that of the purchaser, but it is claimed that this result cannot be accomplished unless the transfer is made in precise accordance with the provisions of the charter and the by-laws of the company. The statute of Connecticut provides that the stock shall be transferred only on the books of the corporation in such form as the directors shall prescribe. The by-laws adopted required certificates and transfers of stock to be signed by the president and treasurer. The statute also declares transfers of stock invalid against creditors, unless a certificate thereof be filed and recorded in the town clerk's office. Some of these formalities were not observed. The original certificate issued to the defendant for 400 shares, with the written request to transfer 160 shares to Ripley, was delivered. The company issued to the defendant a certificate of 120 shares, unsold, of the 400; registered the 160 shares to Ripley, on the stock ledger, as transferred by the defendant, recorded a certificate of such transfer, signed by the secretary, in the town clerk's office, and treated Ripley as a stockholder for a year after the transfer. The transfer was not made in the transfer book, because, as the referee finds, the company had no such book, and the certificate recorded was not signed by the president and treasurer, but it is not disputed that it was done by the direction of the company. Assuming that this is a Connecticut contract, and that the lex loci contractus must prevail, the counsel for the plaintiff claims that, by the rules of law established by the courts of Connecticut, the title to the stock never passed to Ripley in consequence of the non-observance of some of the requirements above referred to.
Strictly, the unwritten law of Connecticut, if controlling, should have been proved as a fact; but as no point was made on this subject, the decisions referred to will be taken and construed as evidence of the law. It cannot be denied that some of the decisions in Connecticut are not in entire harmony with the rule as settled by the courts of this State. These decisions seem to hold that the title to stock in a corporation can only pass by transfer upon the books, in accordance with the requirements of the statute, and that such transfer is necessary "to originate a title;" that a transfer, except in the mode prescribed, does not operate to pass the title as between the parties, and that creditors of the vendor may secure a prior lien by attachment to the rights of the vendor, under an unrecorded assignment. ( Marlborough Manf. Co. v. Smith, 2 Conn., 579; Northrop v. Newtown B. Turnpike Co., 3 id., 544; Oxford Turnpike Co. v. Bunnel, 6 id., 552.) In Colt v. Ives ( 31 Conn., 25), this rule is qualified by limiting it to the legal title only, the court holding that an equitable title enforcible in courts of equity will pass by an unrecorded assignment.
HINMAN, Ch. J., in referring to the above cases, says: "These cases and others to the same effect, being actions at law, conversant only with what at the time was considered the strict legal title to corporate stock, have necessarily no controlling force in a case depending upon equitable instead of legal principles." I infer from the reasoning of the learned judge a tendency of the court to overrule the doctrine of the cases cited, but the decision expressly disclaims an intention to do so. In this State it is well settled that the delivery of the certificate with a power of attorney to transfer, passes the entire title, legal and equitable, in the shares as between the parties, and that the provisions referred to are for the protection of the corporation, in securing its interests in its relations and dealings with stockholders. ( Bank of Utica v. Smalley, 2 Cow., 770; Com. Bank of Buffalo v. Kortright, 22 Wend., 362; Gilbert v. Manchester Co., 11 Wend., 627; 34 N Y, 80.) And in the recent case of McNeil v. Tenth National Bank ( 46 N.Y., 325), this court expressly reiterated the same rule. It is the principle adjudged in the Connecticut cases upon which the plaintiff founds his claim to sustain this action, but it is obvious, giving them the construction claimed, that they do not reach the case. It has never been held that a corporation can avail itself of its own negligence as a basis of a cause of action against a stockholder, nor that it is not competent to waive a performance of its own rules, nor that it may not be estopped by its own acts and official declarations, the same as natural persons. If it did not provide a transfer book or did not transfer the stock according to the prescribed forms, the fault was its own and not the defendant's. It could waive the observance of any other rules which it had adopted.
The company did waive them, and it is too late to assert their binding force. A person may waive provisions for his own benefit in a contract, or a law, and in some cases in the Constitution itself ( 3 N.Y., 197, 511), and such I infer is the rule in Connecticut as well as in this State. ( 2 Conn., 252.)
It is the rule of the common law. I think, also, that the principle of estoppel applies. The company was requested to transfer the stock to Ripley, and by its acts and conduct it asserted that it had complied with the request, and the defendant acted upon it, and would be injured by allowing the company to deny it. He might have procured a proper transfer or sold it to some other person, or at least have availed himself of its influence in managing the affairs of the company. To induce the defendant to believe that the stock had been properly transferred, and treat Ripley as the owner, until the company failed, and then hold the defendant liable, on the ground that its own assertions and acts were false and irregular, would be contrary to law and justice. The plaintiff occupies no better position than the company. He took the claim by assignment, subject to every defence which could be made against it if the company had sued.
The judgment must be affirmed with costs.