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still proceed to sell under his mortgage, or he may claim the property before the sheriff, or he may assert his rights in any other way known to the law. His conveyance, upon a sale under his power, may be effectual to pass the whole property in the stock. Notwithstanding the sale under execution, the purchaser takes the property subject to the incumbrance.1 Under a statute of Texas, providing that where the garnishee is an incorporated company, and the defendant is the owner of shares, the court shall order the sale of such shares, corporate stock held as collateral security is subject to garnishment.3

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§ 2778. Levy upon Stock Held in the Name of a Nominal Owner. The principle that the execution creditor gets only the title which his debtor has, has been applied to the case where the stock which was the subject of the levy stood in the name of the debtor, but had been placed in his name by a mistake; whereas it really belonged to his wife, so that, in equity, he held it as her trustee, though upon a secret trust so far as the creditor was concerned. It was held that, in the absence of evidence that the creditor had been misled or deceived to his disadvantage by the stock being so held, his levy gave him no right to subject the same, and that a sale of the same thereunder would be enjoined. A similar view has been taken under an English statute which provides in substance that the shares of a debtor, against whom a judgment has been recovered, "standing in his name, in his own right or in the name of another person in trust for him," may be charged with the payment of the judgment debt, by procuring what is known in the English practice as a "charging order." It has been lately held in the English Court of Appeal, that where certain shareholders have transferred certain shares to a person not a shareholder, to qualify him to act as "managing director," and in order to enable them to hold him out to the public as managing director, upon an agreement that he is to be merely the nominal owner of the shares, he executing to them in return blank transfers of their respective holdings,he is not a holder of shares "standing in his name, in his own

1 Foster v. Potter, 37 Mo. 525, 531. 2 Tex. Rev. Stat., art. 208.

3 Smith v. Traders' Nat. Bank, 74 Texas, 457; s. c. 12 S. W. Rep. 113.

Mowry v. Hawkins, 57 Conn. 453.

right, " within the meaning of the statute; so that the shares. thus held by him can not be charged with a judgment rendered against him.1 In an earlier English case, where a transfer of shares was made from a father to his son to qualify the son as director of the company, it was held that a charging order could not be made upon the shares in respect of the son's debts, because he did not own them in his own right, but owned them as trustee for his father, although they stood in his own name.2

§ 2779. Pennsylvania Statute Requiring Affidavit and Recognizance. A statute of Pennsylvania 3 requires the plaintiff issuing an attachment-execution against stock held in a name other than that of defendant, to file an affidavit and enter into a recognizance. This statute was intended to apply only to those cases where there is a claimant disputing the defendant's title, and not to those cases where the defendant's title is conceded.4

§ 2780. Rights of Corporation as Against Attaching Creditor. Where, under principles already discussed, a company has a lien to more than its value upon the stock standing on its books, in the name of a judgment debtor, and such stock is sold under an execution against the debtor, there is nothing to be transferred to the purchaser, except upon the payment by the latter of the amount secured by the lien."

§ 2781. Continued: Decisions on Particular States of Fact. A subscriber for ninety bank shares, of $100 each, paid $2,750 towards an installment of eighty per cent., and drew a draft in favor of the bank for the balance, and transferred to the bank all his rights, etc., in his shares (excepting and reserving the sum he had paid in money), as collateral security for payment of the draft. The draft

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was not paid, nor did the bank pass to the subscriber's credit any stock, nor give any certificates for shares. It was held that the subscriber was once an owner of the shares, and that the effect of the reservation in his conveyance to the bank was, that an amount equal to thirty-four shares, of the par value of $80 a share, remained his property, and was liable to be sold on an execution against him.1

In

another case a note drawn by C. to the order of A. and B., and jointly indorsed by them, was discounted at a bank where A. held stock, was protested for non-payment, and judgment confessed by A. and C. to the bank for the amount. Afterwards D. obtained a judgment against A. upon which he issued execution, and levied upon and bought the stock at the sale. The bank then obtained judgment against A. and B. on their joint indorsement, and issued executions on both of their judgments, upon which A.'s stock was again levied on; when B., one of the indorsers, paid the debt to the bank, took an assignment of the judgments to his use, and on the execution against A. and C. purchased A.'s stock. The bank refusing to transfer the stock to B., he brought suit; when D. interpleaded, claiming it under the sheriff's sale to him. It was held that the payment of the debt by B.,with the assignments of the judgments, did not extinguish the lien of the bank on the stock which attached upon the protest of the note; that, by virtue of the assignments, B. acquired all the rights of the bank and became entitled to all its remedies; and that, under the second sale, he took a good title to the stock notwithstanding the previous sale to D.2

§ 2782. Rights of Subsequent Bona Fide Purchaser where Corporation Issues a New Certificate to the Purchaser at a Void Judicial Sale of the Shares. Let us recur to the case considered in the previous section, where there has been a void judicial sale of the corporate shares, and the corporation, without taking the pains to advise itself of the legality of the sale, cancels the old certificates, and on the demand of the purchaser issues new ones to him, and he subsequently sells them to a bona fide purchaser without notice of any informality attaching to What are his rights? In order to determine this question it is necessary to recur to the doctrine of a preceding chapter. A certificate of stock is a continuing affirmation by the corporation which has issued it that the person named therein, or his lawful

them.

1 Hussey v. Bank, 10 Pick. (Mass.) 415.

2 West Branch Bank v. Armstrong, 40 Pa. St. 278.

3 Ante, 2350, 2544.

assignee, is entitled to the rights of a shareholder in the corporation in respect of the number of shares therein stated. But suppose (and that is the case we are considering) that the corporation issues such a certificate falsely, when some other person is really the owner of the shares therein named, and entitled to the rights of a shareholder in respect of the same. Clearly the holder of the new certificate cannot claim the rights of a shareholder as against the real owner, and it may be doubtful whether he can claim them as against the corporation; for to admit such a principle would be in some cases to concede that a corporation might be compelled, as the result of its inadvertent and illegal act, to issue certificates of its shares in excess of the amount allowed by law. But clearly the holder of the new certificates has an action against the corporation for the damages which he has suffered through its failure to make good to him the representation which the certificate contains. Of this there is no question. Nor is the bona fide purchaser of the shares under such circumstances liable to account to the real owner. To this extent shares partake of the qualities of negotiable paper.2

SECTION

ARTICLE II. PROCEDURE.

2786. Situs of corporate stock for the purpose of seizure by attachment or execution.

2787. Effect of statute making foreign corporations domestic corporations.

2788. Statutes authorizing execution against corporate stock must be substantially complied with.

2789. Duties and responsibilities of
levying officers.

2790. Manner of making levy.
2791. Duty of secretary of corporation
to give information.

2792. Notice to officer of corporation.

SECTION

2793. Sheriff's return and conveyance must identify the number of shares.

2794. Remedy of execution purchaser to compel transfer.

2795. Duty and responsibility of the corporation in respect of such sales.

2796. Equitable action to subject railway shares held by the county. 2797. Action for permitting transfers in contravention of a charging order.

2798. When transfer to purchaser not compelled.

§ 2786. Situs of Corporate Stock for the Purpose of Seizure by Attachment or Execution.

1 Ante, § 2595.

2 Citizens' Street R. Co. v. Rob

So far as the writer knows,

bins, 128 Ind. 449; s. c. 25 Am. St. Rep. 445; 12 L. R. A. 498; 9 Rail. & Corp.

all the States which prescribe the manner of levying upon shares of corporate stock by execution or attachment, prescribe that it shall be done by giving notice to the corporation, or to its secretary, or to the officer having charge of its books,-1this notice to the officer in charge of the corporate books being essential to the validity of the seizure. The effect of such a statutory provision necessarily is to make the situs of corporate shares for the purpose of the levy of an execution or attachment the situs of the corporation itself. It follows that shares owned by a nonresident defendant in the stock of a foreign corporation cannot be reached and levied upon by virtue of an attachment, although officers of the corporation are in the State of the forum, engaged in carrying on the corporate business there. But when the foreign company has, by appropriate legislation, been vested with the character and status of a domestic corporation, then its stock has been held to be within the jurisdiction of the local court and subject to execution.5

3

§ 2787. Effect of Statutes Making Foreign Corporations Domestic Corporations. — In Tennessee there is a statute, such as now exists in many of the States, providing for the registration of the charters of foreign corporations doing business within the State, and also providing that "such corporations shall be deemed and taken to be corporations of this State, and shall be subject to the jurisdiction of the courts of this State, and may sue and be sued therein in the mode or manner that is or may be by law directed in the case of corporations created or organized under the laws of this State." Under this statute it is held that the situs of a foreign corporation, and the situs of its shares

L. J. 155; citing Salisbury Mills v.
Townsend, 109 Mass. 115; Bank v.
Field, 126 Mass. 346; Turnpike Co. v.
Ferree, 17 N. J. Eq. 117; Pratt v. Man-
ufacturing Co., 123 Mass. 110; s. c. 25
Am. Rep. 37; Allen v. South Boston
R. Co., 150 Mass. 200; s. c. 15 Am. St.
Rep. 185.

1 Code Tenn., § 3035; Code (M. & V.) 1884, § 3748.

2 Young v. South Tredegar Iron Co., 85 Tenn. 189; s. c. 4 Am. St. Rep. 752.

Plimpton v. Bigelow, 93 N. Y. 592; s. c. 66 How. Pr. (N. Y.) 131; 13

Abb. N. Cas. (N. Y.) 173; reversing
s. c. 29 Hun (N. Y.), 362; 12 Abb. N.
Cas. (N. Y.) 202, and affirming s. c. 11
Abb. N. Cas. (N. Y.) 180; 63 How.
Pr. (N. Y.) 484. The provision of
N. Y. Code, sec. 647, only applies to
domestic corporations. Ibid. See also
Moore v. Gennett, 2 Tenn. Ch. 375.

4 Tenn. Code (Mill. & V. 1884), §§ 1992-2003. See Railroad Co. v. Harris, 12 Wall. (U. S.) 82; Ohio &c. R. Co. v. Wheeler, 1 Black (U. S.), 297.

5 Young v. South Tredegar Iron Co., 85 Tenn. 189; s. c. 4 Am. St. Rep. 752.

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