Summary
In State ex rel. North American Co. v. Koerner, 357 Mo. 908, 211 S.W.2d 698, this court had under consideration the Uniform Stock Transfer Act, Laws 1943, pp. 495-502, Sec. 5563.1 to 5563.
Summary of this case from Union Electric Co. v. MorrisOpinion
Nos. 40643, 40644, 40645.
April 12, 1948. Rehearing Denied, May 27, 1948.
1. CORPORATIONS: Situs of Capital Stock: General Rule. The general rule is that the situs of shares of stock is in the state which is the domicile of the corporation, regardless of where the stock certificates may be located.
2. ATTACHMENT: Corporations: Attachment of Shares of Stock. Under statutory provisions in effect since 1860, the stock of a Missouri corporation may be attached in Missouri.
3. ATTACHMENT: Corporations: Uniform Stock Transfer Act: Prior Attachment Method Retained. The Uniform Stock Transfer Act, as modified and adopted in Missouri, retains the former statutory method of attachment of shares of corporate stock.
4. CORPORATIONS: Uniform Stock Transfer Act: Negotiable Instrument Not Created: Nature of Stock Certificate. The Uniform Stock Transfer Act, as modified and adopted in Missouri, does not convert stock certificates into negotiable instruments within the meaning of the Negotiable Instruments Act. A stock certificate is the tangible evidence of title to a unique type of intangible property having a situs at the domicile of the corporation.
5. CORPORATIONS: Statutes: Uniform Stock Transfer Act: Title Consistent: Situs of Stock at Domicile of Corporation: Act Not Nullified. The title of the Uniform Stock Transfer Act, as modified and adopted in Missouri, is consistent with Section 13 retaining the prior methods of attachment. The legislature could retain the situs of the stock in Missouri without nullifying the rest of the act.
6. CORPORATIONS: Uniform Stock Transfer Act: Uniformity With Other States Not Essential. The Uniform Stock Transfer Act does not fail in its purpose because it does not include all of the provisions of the recommended Uniform Act.
7. CORPORATIONS: Constitutional Law: Uniform Stock Transfer Act: No Fictitious Increase in Stock. The Uniform Stock Transfer Act does not violate constitutional prohibitions against a fictitious increase in stock because two stock certificates might be outstanding representing the same stock.
8. PROHIBITION: Jurisdiction of Circuit Court. Since the circuit court has jurisdiction in the three actions, the preliminary rules in prohibition should be discharged.
PRELIMINARY RULES IN PROHIBITION DISCHARGED.
Frank Y. Gladney, J.C. Jones, Jr., Lon O. Hocker, Fred L. Williams and Roland F. O'Bryen for relator; Jones, Hocker, Gladney Grand and Williams, O'Bryen Schlafy of counsel.
(1) Under provisions of the Uniform Stock Transfer Act, the right of property in the shares, the title to the shares, is embodied in the certificates representing such shares. Such title and possession of the certificates is one and inseparable. Since such certificates were and are beyond the territorial jurisdiction of the court, the attempted attachment is an obvious abuse of power and an assumption of jurisdiction over property held and owned in New York and thereby is a violation of relator's rights as secured to it by the due process clause of the Fourteenth Amendment to the Constitution of the United States. Pennoyer v. Neff, 95 U.S. 714; State ex rel. v. Barnett, 245 Mo. 99. (2) The property right in shares of stock of a Missouri corporation under principles of the common law had the characteristics following: The right or interest was intangible; Title to the shares was held by the issuing corporation for the benefit of the shareholder; The situs of the shareholder's beneficial interest was immovably fixed with the issuing corporation; there could be no change of possession; Legal title and beneficial ownership were split apart; the title being in the issuing corporation and the beneficial interest in the shareholder. Foster v. Potter, 37 Mo. 525; Armour Bros. Banking Co. v. St. Louis Natl. Bank, 113 Mo. 12; Tufts v. Volkening, 122 Mo. 631; Richardson v. Busch, 198 Mo. 174. (3) The exclusive subject matter of the Uniform Stock Transfer Act of 1943 is the property in shares of stock in a Missouri corporation. Its obvious purpose, as indicated by the scope and character of its provisions, is to supplant the common law and bring the law of the subject matter into harmony with the actual course of business in owning and transferring shares of stock. As such alteration of the common law it is valid and is to be liberally construed. Sec. 645, R.S. 1939. (4) Under the substantive provisions of the Act, the property in shares of stock has the characteristics following: It is tangible: embodied in and inseparable from the certificate, which is a physical chattel; The title is wholly dissevered from the issuing corporation, embodied in and identified with the certificate; Situs of the shares circulates with the certificate; Possession of the certificate and title to the shares are one and inseparable. The certificate representing the shares is negotiable. Uniform Stock Transfer Act of 1943, Secs. 1, 5, 7, 8, 15, 16; Turnbull v. Longacre Bank, 249 N.Y. 159, 163 N.E. 135; Haughey v. Haughey, 305 Mich. 356, 9 N.W.2d 575; Mills v. Jacobs, 333 Pa. 231, 4 A.2d 152; American Surety Co. v. Cunningham, 275 N.W. 1; Edmund Wright, etc. Co. v. Ribbon Mills, 148 A. 178; Priess v. Terazzo Co., 309 Ill. App. 475, 33 N.E.2d 504; Swain v. Martin, 302 Ky. 381, 194 S.W.2d 855. (5) The positive, substantive provisions of the Uniform Act legislate out of existence the sole subject matter of the remedy formerly afforded by Sections 1345 and 1346. Nothing is left for the old remedy to act upon. The very subject of the court's jurisdiction is destroyed. Chastleton v. Sinclair, 264 U.S. 543; Railway Co. v. Walters, 294 U.S. 405. (6) Section 13 of the Uniform Act, both as originally passed in the House and as subsequently amended in the Senate, is altogether procedural or remedial in scope and character. It does not purport to define, create or alter the property right in shares of stock. It does not purport to qualify or limit any substantive provision of the Act. Just as Sections 1345 and 1346 presupposes as subject matter the common law property right in such shares, so likewise Section 13 presupposes as subject matter the statutory property right as set forth in the Transfer Act. Maurizi v. West Coal Mining Co., 321 Mo. 378. (7) Section 13 as amended is directly contradictory and repugnant in its provisions in that it attempts and purports to treat shares of stock for purposes of attachment both as negotiable under the Transfer Act and as non-negotiable under the common law. A statute so badly drawn as to vest a right to the same property in hostile claimants, would itself be a nullity. City of Mobile v. Esclava, 16 Pet. 234. (8) Sections 1345 and 1346, R.S. 1939, and the Transfer Act "cannot stand together"; it is legally impossible to give effect to and enforce both. A purchaser at an execution sale pursuant to Sections 1345 and 1346 would not contribute one dime to the issuing corporation and could not be entitled to any of the rights and privileges of a shareholder. For, it is beyond the power of the court to compel an increase in the number of shares or an issue of shares without payment therefor in money, labor or property; the Constitution of Missouri forbids it. Constitution of Missouri, Art. XI, Sec. 7; Berry v. Rood, 168 Mo. 316; Parkhurst v. Almy, 222 Mass. 27, 109 911 N.E. 733; Cook on Corporations (7th Ed.), sec. 284, p. 815. (9) The second sentence of Section 13 is unconstitutional and void in this: The statute makes no provision whatever for giving notice of the attachment to an innocent holder of the certificate who is not a party to the attachment proceeding. For this reason the provision is void. Security Trust Co. v. Lexington, 203 U.S. 323; Wuchter v. Pizzuti, 276 U.S. 13. (10) The court cannot compel a non-resident to come in and submit his property rights to its jurisdiction. Sheedy v. Second Natl. Bank, 62 Mo. 17; State ex rel. v. Blair, 238 Mo. 132; Baker v. Baker, Eccles Co., 242 U.S. 394. (11) The fact that the Legislature by Section 13 mistakenly supposed that it could authorize an attachment both by seizure of the certificate under the Transfer Act and by constructive seizure under Sections 1345 and 1346 does not affect the old law or the new. A mistaken opinion of the Legislature does not make or change the law. Tilford v. Ramsey, 43 Mo. 410; State ex rel. v. Lincoln Trust Co., 144 Mo. 562; Kern v. Legion of Honor, 167 Mo. 471; State ex inf. v. Goffee, 192 Mo. 670; Hall v. Sedalia, 232 Mo. 344; Knickerbocker Ice Co. v. Stewart, 253 U.S. 149. (12) Conceding that implied repeals are not favored yet, it is settled doctrine that a subsequent statute necessarily repeals a prior one when there is between them a conflict and repugnancy so clear that the two cannot stand together. State ex rel. v. Shields, 230 Mo. 91; Pac. R. Co. v. Cass County, 53 Mo. 17; State ex rel. v. Buckner, 300 Mo. 359, 254 S.W. 179; State ex rel. v. Rutledge, 321 Mo. 1090, 13 S.W.2d 1061; State ex rel. v. Smith, 345 Mo. 1158, 139 S.W.2d 929. (13) The court will interpret and apply the Transfer Act in a way to carry out the object and purpose of the enactment so far as that can be ascertained from the language of the statute. Cummins v. K.C. Public Service Co., 334 Mo. 672; White v. Greenlee; 337 Mo. 514; Rust v. Missouri Dental Board, 348 Mo. 616. (14) The declared general purpose of the Transfer Act is to make certificates representing shares of stock negotiable throughout the boundaries of all states that adopt either the Act or equivalent legislation bringing about the same result. Secs. 19, 22; Haughey v. Haughey, 305 Mich. 356, 9 N.W.2d 575; Chatz v. Midco Oil Corp., 152 F.2d 153. (15) The principle of reciprocity is the essence of the Transfer Act. The Act as adopted by the Missouri Legislature has either made certificates negotiable and is thereby consistent with the law of other states; or it leaves such certificates non-negotiable as at the common law and is thereby inconsistent with the law of the other states. The reciprocal operation of the Act must be recognized or rejected. There is no middle ground. Mills v. Jacobs, 33 Pa. 231, 4 A.2d 152; Rand v. Hercules Powder Co., 223 N.Y.S. 383; U.S.F. G. Co. v. Newberger, 188 N.E. 141; Pennington v. Commonwealth Hotel, 156 A. 259; Castro v. Wreen, 150 N.E. 898. Sebastian C. Pugliese, Paul Dillon and Claude O. Pearcy for respondent.
(1) Writs of execution and attachment may be levied on shares of stock in a domestic corporation owned by an individual or corporation under the Missouri Stock Transfer Act of 1943 without a levy upon and seizure of the certificates evidencing such shares. Secs. 1345, 1346, 1457, R.S. 1939; Laws 1943, p. 495, 499; Mo. Rev. Stat. Ann., Vol. 14, Cumulative Annual Pocket Part, 1947 (for use during 1948), title Corporations, Chap. 33, Art. 17, Stock Transfers, Sec. 5563.1 Sec. 5563.24; Uniform Laws Annotated, Vol. 6, Uniform Stock Transfer Act, Secs. 13, 23, published by Edward Thompson Company (1922) and supplement for use during 1947; State ex rel. Auchincloss, etc. v. Harris, 349 Mo. 190, 159 S.W.2d 799; Tufts v. Volkening, 122 Mo. 631, 27 S.W. 522; Armour Bros. Banking Co. v. St. Louis Natl. Bank, 113 Mo. 12, 20 S.W. 690; Jellenik v. Huron Copper Min. Co., 177 U.S. 1, 20 S.Ct. 559, 44 L.Ed. 647; In re Finn, 40 F. Supp. 607; Thompson v. Terminal Shares, Inc., 89 F.2d 652; Wilson v. St. Louis S.R. Co., 108 Mo. 588, 18 S.W. 286; Restatement of the Law — Conflict of Laws, Secs. 53, 104; see also Missouri Annotations to the same, Sec. 104; 7 C.J.S., sec. 92 (b), p. 263. (2) Section 13 of the Act cannot be disregarded in determining the question of jurisdiction over the shares and must be given force and effect as enacted. Relator's point that it is impliedly repealed by the clause repealing "All acts or parts of acts inconsistent with this Act" is self destructive, since Section 13 is a part of the Act itself, and a repeal cannot be implied as to an express provision of the Act. The Legislature cannot be presumed to destroy at birth its own enactment. Sutherland, Statutory Construction (3d Ed. by Horack), sec. 4932; State v. Williams, 237 Mo. 178, 140 S.W. 894; Commonwealth v. Kendall, 11 N.E. 425; Culver v. People, 161 Ill. 89, 43 N.E. 812; State ex rel. Bair v. Producers Gravel Co., 341 Mo. 1106, 11 S.W.2d 521; Renner v. Bennett, 21 Ohio St. 431. (3) The adoption of Sections 1345 and 1346, R.S. 1939, by reference thereto in the Stock Transfer Act of 1943, by sections and subject-matter by the Legislature, and its construction thereof, is entitled to consideration in interpreting such statute. The Legislature is presumed to know the existing state of the laws with which it deals at the time it acts and to have dealt with the matter in the light of the state of the laws then existing. State ex rel. Case v. Wilson, 151 Mo. App. 723, 132 S.W. 625; State ex inf. Gentry v. Long-Bell Lbr. Co., 321 Mo. 461, 12 S.W.2d 64; Crohn v. Kansas City Home Tel. Co., 131 Mo. App. 313, 109 S.W. 1068; Morgan v. Jewell Construction Co., 230 Mo. App. 425, 91 S.W.2d 638; State ex rel. Lamkin v. Hackmann, 275 Mo. 47, 204 S.W. 513; State ex rel. Great American Home Savings Inst. v. Lee, 288 Mo. 679, 233 913 S.W. 20; State ex rel. Atlantic Horse Ins. Co. v. Blake, 241 Mo. 100, 144 S.W. 1094, Ann. Cas. 1913 C, 1283. (4) The constitutionality of parts or sections of an act of the legislature cannot be questioned by one who seeks to avail himself of the general rights conferred thereby. Oren v. Swift Co., 330 Mo. 869, 51 S.W.2d 59; Hurley v. Commission of Fisheries, 257 U.S. 223, 66 L.Ed. 206, 42 S.Ct. 83; Buck v. Kuykendall, 267 U.S. 307, 69 L.Ed. 623, 45 S.Ct. 324. (5) Respondent cannot be convicted of error (much less can he be prohibited by this writ) without showing that the petitioner is not only interested in the particular litigation, but also, that it has been, or is likely to be, deprived of its property without due process of law. The fact that other persons with whom it has no present connection or interest and who do not appear in the case may possibly suffer is not sufficient. Tyler v. Judges of the Court of Registration, 179 U.S. 405, 45 L.Ed. 252; State ex rel. Jones v. Mallinckrodt Chemical Works, 249 Mo. 702, 156 S.W. 967; affirmed 238 U.S. 41, 35 S.Ct. 67, 59 L.Ed. 1192; Gange Lumber Co. v. Rowley, 326 U.S. 295, 90 L.Ed. 85; Plymouth Coal Co. v. Pennsylvania, 232 U.S. 531, 58 L.Ed. 713; Castillo v. McConnico, 168 U.S. 674; Frothingham v. Mellon, 262 U.S. 447; New York ex rel. Hatch v. Reardon, 204 U.S. 152; American Power Light Co. v. Securities Exchange Commission, 329 U.S. 90; Bourjois, Inc., v. Chapman, 301 U.S. 183, 81 L.Ed. l.c. 1033, 57 S.Ct. l.c. 695. (6) Relator cannot invoke the unconstitutionality of a statute on the ground that by that statute the rights of others will be violated. It is necessary for it to show that its own legal rights are violated. State ex rel. Crandall v. McIntosh, 205 Mo. 589, 103 S.W. 1078. (7) The justice, wisdom, policy, necessity or expediency of a law which is within its powers are for the Legislature and are not open to inquiry by the courts, except as an aid to proper construction. 16 C.J.S., Title, Constitutional Law, sec. 154, p. 471; 7 West Mo. Dig., sec. 48, Constitutional Law, also Pocket Parts for use during 1947-48 entitled "Presumptions and Construction in favor of Constitutionality"; Egan v. United States; Union Electric Co. v. United States, 137 F.2d 369, l.c. 375, par. (7); certiorari denied 320 U.S. 788, 88 L.Ed. 474, 64 S.Ct. 195; Palko v. State of Connecticut, 302 U.S. 319, 82 L.Ed. 288, 58 S.Ct. 149, affirming State v. Palko, 191 A. 320, 122 Conn. 529. (8) The statute is not unconstitutional because it authorizes a ministerial act by which possession of the property is taken before the right to it has been legally determined, as in attachment and replevin cases, and is a matter in the discretion of the legislative power. While a party must not be deprived of his property without a judicial hearing, yet the stage of proceedings at which that hearing shall take place and the manner in which the cause of the parties shall be brought before the judicial tribunal are within the legislative power. Wilson v. Standefer, 184 U.S. 399, 22 S.Ct. 384. 46 L.Ed. 612; Flournoy v. Jeffersonville, 17 Ind. 169, 79 Am. Dec. 468; Garfein v. McInnes, 248 N.Y. 261, 162 N.E. 73; 6 R.C.L., Constitutional Law, sec. 447, p. 451; Staten Island Edison Corp. v. Maltbie, 296 N.Y. 374, 73 N.E.2d 705; Cantor v. Sachs, 162 A. 73. (9) The state of domicile of the corporation determines jurisdiction over its shares of stock, whether held by citizens of its own state or of other states. The habitation or domicile of the company is and must be the state that created it, and the shares of stock are deemed to be held by the company within the state whose creature it is whenever it is sought by suit to determine who is the real owner; especially where, under the statute, the state has retained jurisdiction over such shares for any purpose. The law remains the same as before the adoption of the Stock Transfer Act insofar as determination of ownership of shares is concerned. Held v. Reis, 193 S.W.2d 17; Sylvania Industrial Corp. v. Lilienfeld's Estate, 132 F.2d 887, 145 A.L.R. 612; Nashville Trust Co. v. Cleage, 21 So.2d 441; Harris v. Chicago Title Trust Co., 338 Ill. 245, 170 N.E. 285; Martin v. Central Trust Co., 327 Ill. 622, 159 N.E. 312, 145 A.L.R. 612; 72 A.L.R. 179 (n); State Tax Comm. v. Aldrich, 316 U.S. 174, 86 L.Ed. 1358, 62 S.Ct. 1008, overruling First Natl. Bank v. Maine, 284 U.S. 312, 76 L.Ed. 313, 52 S.Ct. 174, 77 A.L.R. 1401; 122 A.L.R., note l.c. 338-340, Subdivision III; Benton's Apparel, Inc., v. Hegna, 7 N.W.2d 3, 143 A.L.R. 1148; Partch v. Adams, 130 P.2d 244, 55 Cal.App.2d 1; Knight v. Shutz, 47 N.E.2d 886, 141 Ohio St. 267; 131 A.L.R., note 192 (situs and conflict of laws); 7 C.J.S., sec. 92 (b), p. 263; In re Finn, 40 F. Supp. 607; Seymour v. Natl. Biscuit Co., 107 F.2d 58. (10) The State of Missouri by the Uniform Stock Transfer Act as it was modified by amendment has retained its original jurisdiction over the shares of a domestic corporation for the purposes of levy and attachment. Such jurisdiction is plenary and must control. Restatement of the Law — Conflict of Laws, secs. 53, 104; see also Missouri Annotations to the same, Sec. 104; 122 A.L.R., p. 338; 131 A.L.R., p. 192. (11) The law as to bona fide purchaser remains as it has been always, his rights being preserved, and when shares are sold under execution all that is conveyed is the right, title and interest of the execution defendant; that is all that can be sold and all that is levied on under the attachment in the instant case. Tufts v. Volkening, 122 Mo. 631, 27 S.W. 522; Wilson v. St. Louis S.R. Co., 108 Mo. 588, 18 S.W. 286; Taff v. Tallman, 277 Mo. 157, 209 S.W. 868; Davis v. Owenby, 14 Mo. 170; Sturdivant Bank v. Schade, 195 F. 188; Valentine v. Havener, 20 Mo. 133; Stilwell v. McDonald, 39 Mo. 282; Potter v. McDowell, 43 Mo. 93; Reed v. Ownby, 44 Mo. 204; Sappington v. Oeschli, 49 Mo. 244; Black v. Long, 60 Mo. 181. (12) The petition for prohibition should be dismissed because the relator has an adequate remedy by entry of appearance and defense on the merits. State ex rel. Crouse v. Mills, 231 Mo. 493, 133 S.W. 22; Mertens v. McMahon, 334 Mo. 175, 66 S.W.2d 127; Hitchens v. Phillips Packing Co., 35 A.2d 502; Sec. 1442, R.S. 1939. (13) The attachment as levied does not violate the due process requirement of the Fourteenth Amendment to the Constitution of the United States. Ownbey v. Morgan, 256 U.S. 94, 41 S.Ct. 433, 65 L.Ed. 837, 17 A.L.R. 873; Wilson v. Standefer, 184 U.S. 399, 22 S.Ct. 384, 46 L.Ed. 612; Sec. 1442, R.S. 1939 (providing for dissolution of attachment on entry of appearance).
The North American Company, a New Jersey corporation, the relator in these prohibition proceedings, is seeking a determination of the question whether the long existing section of our statutes permitting the attachment of shares of stock in a Missouri corporation by serving the writ on an official of the corporation at the office of the corporation was rendered ineffective by the adoption in 1943 of the Uniform Stock Transfer Act. (Laws 1943, pp. 495-502, Sec. 5563.1-Sec. 5563.24 Mo. R.S.A.)
Relator's theory is that the Uniform Stock Transfer Act has changed the old doctrine that a certificate of stock is merely evidence of the holder's property interest in the corporation with its situs in the state of the corporation's domicile, and that under the act the entire property interest is now embodied in the certificate, like a bearer bond for instance, so that the situs of the holder's property interest is necessarily the same as the situs of the certificate. We issued writs of prohibition to determine the question as it bears directly on the jurisdiction of the Circuit Court of the City of St. Louis over relator, a non-resident corporation, as defendant in three cases pending there where jurisdiction was obtained by attaching relator's stock in the Union Electric Company, a Missouri corporation with its principal office in the City of St. Louis.
The question arises under these circumstances. One Frank J. Boehm as plaintiff, filed three actions in the Circuit Court of the City of St. Louis against relator and [700] others, in which he alleged a conspiracy to defame, libel and slander, and he also alleged malicious prosecution. He seeks damages aggregating $24,500,000. Relator, as we said, is a New Jersey corporation, having its principal office in New York City. Boehm sought to obtain jurisdiction over relator in each of the three actions by attaching relator's shares of stock in the Union Electric Company by serving writs on the secretary of the Union Electric Company at its office in St. Louis as provided by statute.
The attachment levies followed the procedure prescribed by Sections 1345, 1346, and 1457, R.S. 1939, Mo. R.S.A. which authorize such an attachment at the office of the corporation without actual seizure of the stock certificates themselves. The certificates which have been issued to relator are presumably in a vault in New York City but, at any rate, were not seized by the sheriff.
Relator, making special appearances, moved to quash the sheriff's returns. The grounds stated in the motions are lengthy, but may be resolved into the single issue whether the stock had a situs in Missouri so that jurisdiction of the circuit court could be obtained by attachment without violating relator's right to due process under the Fourteenth Amendment. In substance, relator argues that since the adoption of the Uniform Stock Transfer Act in this state stock certificates of themselves constitute the shares of stock and embody the holder's whole property interest in the corporation, and are tangible, negotiable instruments having a situs only in the jurisdiction where the stock certificates are actually located. Therefore, relator concludes the statutes under which the attachments were made have been either repealed by the Transfer Act or have become ineffective because such shares no longer have a situs in Missouri which could subject them to attachment here.
When the trial judge overruled the motions to quash in each of the three actions, three separate prohibition proceedings were instituted in this court and have been consolidated for the purpose of argument and opinion.
Prior to the enactment of the Transfer Act, it was well settled in Missouri and elsewhere that the situs of shares of stock is in the state which is the domicile of the corporation, regardless of where the stock certificates may be located.
In 7 C.J.S., Attachment, Section 92(b), the general rule is stated: "It seems to be well settled that, for purposes of attachment, the situs of shares of stock is within the state where the corporation resides, and that they may lawfully be levied on in such state. Accordingly, the stock of a domestic corporation is subject to attachment in the state of its domicile, although it is owned by a non-resident, and although the certificate of stock is in the possession of a debtor outside of the state."
Section 1457 authorizing attachment of shares of stock has been in force in this state since 1860. Laws 1859, p. 3. In Armour Brothers Banking Company v. St. Louis National Bank, 113 Mo. 12, 20 S.W. 690, where it was held that stock certificates issued by a New York corporation could not be attached in Missouri under the same attachment statutes here involved, but such statutes applied to Missouri corporations alone, the opinion states that ". . . certificates of stock are not the stock itself — they are but evidence of the stock; . . ." and quotes with approval from Cook on Corporations, Section 485: "Shares of stock in a corporation are personal property, whose location is in that state where the corporation is created. . . . Considered as property separated from its owner, stock is in existence only in the state of the corporation."
In Richardson v. Busch, 198 Mo. 174, 95 S.W. 894 the public administrator of the City of St. Louis was held not entitled to administer upon stock certificates of a New York corporation which had been owned by a New York decedent but which were located in St. Louis, since the situs of the stock was in New York. The opinion quotes with approval from Jellenik v. Huron Copper Mining Co., 177 U.S. 1, 44 L.Ed. 647, where the Supreme Court of the United States upheld the jurisdiction of the Federal Circuit Court for the Western District of [701] Michigan over stock in a Michigan corporation, although the owners of the stock and the holders of the certificates lived in Massachusetts, stating: "The certificates are only evidence of the ownership of the shares, and the interest represented by the shares is held by the company for the benefit of the true owner. As the habitation or domicile of the company is and must be in the State that created it, the property represented by its certificates of stock may be deemed to be held by the company within the State whose creature it is, whenever it is sought by suit to determine who is its real owner." And see the comment on the latter opinion by Judge Learned Hand in Direction Der Disconto-Gesellschaft v. U.S. Steel Corporation, 300 F. 741.
Relator, while conceding that the situs of the shares of stock was in Missouri prior to the adoption of the Transfer Act, contends that the nature of the property in shares of stock has been entirely changed by the Transfer Act; that the shares of stock are the certificate itself and have become tangible personal property; that stock certificates are negotiable instruments with a situs no longer at the domicile of the corporation but having a situs solely where the certificates themselves are located; that even though the Transfer Act expressly retains the right to attach under the old statutes, this provision of the act is so much in conflict with the remainder of the act that it must be disregarded.
On the contrary we agree with the views of the learned trial judge who in upholding the attachment in the three cases filed a memorandum opinion which states in part as follows: "The act of 1943 does not change the substantive law with reference to the relationship between corporation and stockholder. It is still a contractual and trust relationship, an intangible; the certificate merely evidences it. This 1943 act purports to regulate the 'endorsement, transfer and delivery of shares of stock in corporations'; and it does just that, nothing more. If it were to be construed to alter the pre-existing property rights of the stockholders it might be challenged on constitutional grounds. So far as this Court can discern, neither expressly nor by implication does the act do more than provide how stock may be transferred, both voluntarily and by legal procedure, and one of the methods which may legally be followed is set forth in Section 13 (of the Act) reaffirming Sections 1345 and 1346, R.S. Mo. 1939."
Section 13 of the proposed model Uniform Stock Transfer Act as recommended for adoption by the various states contains a provision requiring actual seizure of stock certificates as the method of attachment of shares of stock. That section provided in part: "No attachment or levy upon shares of stock for which a certificate is outstanding shall be valid until such certificate be actually seized by the officer making the attachment or levy, or be surrendered to the corporation which issued it, or its transfer by the holder be enjoined . . ." The original bill embodying the Transfer Act as introduced in the legislature contained this section as set out, but through a Senate Committee Amendment Section 13 was entirely rewritten. Section 13 of the act as finally adopted commences as follows: "In addition to the remedies provided by Section 1345 and 1346 and related sections of the Revised Statutes of Missouri 1939 providing for attachment or execution upon shares of stock . . ." The section then goes on to authorize seizure of the stock certificate as an additional method of attachment, and contains lengthy provisions for adjusting disputed title claims and staying one proceeding where there have been attachments by both methods.
It is clear the legislature intended to preserve the former attachment jurisdiction of Missouri courts over shares of stock even though the sheriff did not or could not actually seize possession of the stock certificates, and to continue to permit title to stock to be transferred through judicial proceedings pursuant to such attachment. But relator asserts that this provision of Section 13 of the act is inconsistent with Section 1 which recites "Title to a certificate and to the shares represented thereby, can be transferred only . . .", and then follow three sub-paragraphs each of which involves actual delivery of the stock certificate. [702] While Section 13 appears to be in apparent conflict with the attempt to make the methods of transfer set out in Section 1 exclusive, still we regard the attachment procedure retained under Section 13 as an exception to Section 1. It might have been better draftsmanship if in rewriting Section 13 an amendment had been added to Section 1 by having it commence with the words "Except as hereinafter provided in Section 13." But the intent of Section 13 is so clear that it must be held that attachment proceedings under the prior statutes were intended to constitute an additional method to those set out in Section 1, whereby shares of stock might be transferred.
Relator's brief discusses various paragraphs of the act which it contends converts a certificate of stock embodying the complete property interest of the holder into a negotiable instrument, and subject to the same rules as to situs that would be applicable under the Negotiable Instruments Act. The Transfer Act nowhere states that stock certificates shall be considered as negotiable instruments. Clearly a stock certificate cannot comply with at least two requirements of the definition of a negotiable instrument contained in Section 3017 R.S. 1939, Mo. R.S.A. namely, the instrument "must contain an unconditional promise or order to pay a sum certain in money," and "must be payable on demand, or at a fixed and determinable future time." While the Transfer Act gives the stock certificate some elements of negotiability, it does not constitute the certificate a negotiable instrument within the meaning of the Negotiable Instruments Act.
There are some cases where stock certificates under the Uniform Stock Transfer Act have been held negotiable instruments. See: Turnbull v. Longacre Bank, 249 N.Y. 159, 163 N.E. 135; Edmund Wright-Ginsberg Co. v. Ribbon Mills (N.J.), 148 A. 178; Priess v. Terrazzo Co., 309 Ill. App. 475, 33 N.E.2d 504. We may assume without deciding that in the broad sense of the word, stock certificates under the Transfer Act as adopted in Missouri may be regarded as a type of instrument which is negotiable. But that does not mean that decisions applying to instruments coming within the scope of the Negotiable Instruments Act must also be applied to stock certificates. There is a substantial difference in the nature of the instruments. Checks, notes, drafts, and bills of exchange are intimately tied in with the monetary system of the country. Notes and other commercial paper are rediscounted by the Federal Reserve Banks in exchange for Federal Reserve notes which swell the monetary supply of the Nation. A large majority of all the obligations payable in money are discharged through a check or other form of commercial paper and not through the payment of currency. Such commercial paper freely passes from hand to hand as the equivalent of money and it is suitable that the law should give it a situs similar to that of currency. Another type of negotiable instrument, a bearer bond, freely changes hands like an ordinary chattel without even the formality of an endorsement, and may appropriately have a situs like that of a chattel.
However, a stock certificate has for many years been recognized as a different type of instrument. It is the tangible evidence of title to a unique type of intangible property having a situs at the domicile of the corporation. The legislature by passing the Transfer Act has made a stock certificate more freely transferable without changing the nature of the property right of the stockholder and without changing the situs of the property. This it had the right to do. The stock certificate remains a title document, not the property itself.
The title of the act as adopted, is as follows: "AN ACT to Regulate the Endorsement, Transfer and Delivery of Shares of Stock in Corporations, providing for the method of transferring title to shares, who may deliver certificates of stock, the method of endorsing certificates and the validity thereof, providing for rescission of transfer of shares of stock, prescribing warranties in connection with stock transfers, prescribing requirements for the validity of attachment or liens upon shares of stock and creditors remedies in relation thereto, providing for the issuance of lost or destroyed [703] certificates of stock pursuant to order of court, and defining the terms herein contained." This title says nothing about changing the nature of property rights in stock or changing the situs of shares of stock. It is consistent with the opening part of Section 13 which evidences the intent of the legislature to retain the situs of shares of stock in Missouri.
There are other sections of the act which indicate a fundamental distinction between stock certificates and commercial paper. Section 3, for example, permits a corporation to treat the stockholder registered on its books as the owner of the shares for the purpose of the right to vote and to receive dividends, and for the purpose of imposing liability for calls and assessments, even though the stock certificate may have changed hands through endorsement and delivery.
Sections 3070 and 3072 R.S. 1939, Mo. R.S.A. protect the holder in due course of commercial paper even though a prior negotiation of the instrument has been obtained by "fraud, duress or force and fear, or other unlawful means, or for an illegal consideration, or when" the prior negotiation is in breach of faith or under circumstances amounting to a fraud. Section 7 of the Transfer Act protects an innocent purchaser for value where the endorsement or delivery of the certificate was procured by fraud or duress, or was made under such mistake as to make the endorsement or delivery inequitable, or if the delivery was made without authority from the owner, or after the owner's death or legal incapacity. But it does not give protection, as in the case of negotiable instruments, when a negotiation has been obtained by force and fear, or by other unlawful means, or for an illegal consideration. Assuming, but not deciding, that the stock certificate under the Transfer Act is, in a broad sense, a negotiable instrument, we think it sufficient for the decision of this case merely to say that such instrument is a freely transferable evidence-of-title to shares of stock whose situs remains unchanged at the domicile of the corporation. We think the legislature could retain such situs in Missouri under Section 13 without nullifying the rest of the act.
The cases of Haughey v. Haughey, 305 Mich. 356, 9 N.W.2d 575 and Mills v. Jacobs, 333 Pa. 231, 4 A.2d 152 hold that under the Uniform Stock Transfer Act the situs of the share is the situs of the certificate. Those decisions might be persuasive if the legislature had not adopted the Transfer Act with a title giving no indication of any change in the nature of the property right or change in the situs, and containing a different Section 13 which clearly evidences the intent of the legislature that the situs shall not be changed. Giving full effect to Section 13 does not destroy the balance of the act, which can be given a useful and substantial scope without changing the situs of the shares.
In two jurisdictions which have adopted the Uniform Stock Transfer Act but have failed to adopt Section 13 as contained in the recommended act, conclusions have been reached which are in accord with our views. In Central Mortgage Company v. Buff, 278 Mass. 233, 179 N.E. 628, an action was brought under a Massachusetts statute which is analogous to the Missouri attachment statutes, and which permitted a debt to a plaintiff to be determined and satisfied out of the defendant's stock interest in a Massachusetts corporation. The opinion states that under the statute it was not necessary to prove that the certificates for the shares of the debtor were in possession of the debtor, and that the provisions of the Uniform Stock Transfer Act, as adopted in that state, did not require a different conclusion. The Massachusetts Transfer Act appears in General Laws of Massachusetts, Chapter 155, Sections 24-44, and does not include Section 13 of the recommended model Uniform Act. In Partch v. Adams, 55 Cal.App.2d 1, 130 P.2d 244, California had an attachment statute similar to the Missouri statute and then adopted the Uniform Stock Transfer Act, but without Section 13 of such act. The opinion states that it was not necessary for the sheriff to take possession of the certificates in order to hold a valid sale on attachment of the shares. The principal question involved was which of two attachment [704] sales in two different counties in California passed the superior title.
It appears to us that one of the purposes of the Transfer Act was to provide better protection to a purchaser in good faith of a duly endorsed stock certificate or a certificate accompanied by a properly executed stock power. This purpose is accomplished through a number of provisions contained in the act as adopted one of which, Section 7, has been heretofore discussed. The legislature could thus facilitate the use of a stock certificate as an evidence of title without destroying the situs of the shares in Missouri and the jurisdiction of Missouri courts to attach the shares under the pre-existing attachment statutes. Section 13 although clearly out of harmony with the evident intent of the framers of the model act is not so contradictory as to destroy the remainder of the Transfer Act as adopted by our legislature.
Relator points to certain provisions in the Transfer Act for reciprocity with other states and contends that the statute must fail in its purpose unless it complies with the recommended Uniform Act adopted in other states. It is doubtful whether the act is so uniform in other states as relator contends. We find from the opinions previously cited that at least Massachusetts and California have repudiated Section 13 of the model Uniform Act which limits attachment to actual seizure of the stock certificates. In varying degrees these other states have done the same, Colorado, Florida, Georgia, Kansas, and Montana. And it is clear that our legislature did not intend to adopt all of the provisions as proposed in the model Uniform Act. Several amendments were made, and the title was also amended so as to eliminate the words "and to Make Uniform the Law with Relation Thereto" which had been contained in the title of the bill as originally introduced.
Relator urges that Section 13 of the Transfer Act as adopted creates the possibility of two certificates being outstanding representing the same stock, which would create an unconstitutional fictitious increase in stock in violation of Section 7, Article XI, 1945 Constitution, citing Berry v. Rood, 168 Mo. 316, 67 S.W. 644 construing a similar provision of the 1875 Constitution. We do not agree. Such a situation would be analogous to two conflicting chains of title to a tract of real estate, one perhaps commenced by a sheriff's deed. The courts would ultimately have to determine which chain of title is superior. A similar determination would have to be ultimately made as to the conflicting claims of the holders of two different certificates purporting to represent the same shares of stock.
Relator has raised some constitutional points that we do not believe are involved in this case and not properly before us for determination, so we will not discuss them.
Since the circuit court has jurisdiction in the three actions, the preliminary rules in prohibition heretofore issued should be discharged.
It is so ordered. All concur.