Opinion
12-06-1877
CHESAPEAKE & OHIO R. R. CO. v. PAINE & CO.
Wm. J. Robertson and H. T. Wickham, for the appellant. Cannon & Courtney, for the appellees.
1. The shares of a stockholder in a joint stock company, incorporated by and conducting its operations, in whole or in part, in the state are such estate as is liable to be attached in a proceeding instituted for that purpose, by one of the creditors of such stockholder; and such estate may properly be considered, for the purpose of such proceeding, as in the possession of the corporation in which the shares are held, and such corporation may properly be summoned as garnishee in the case.
2. Of such a proceeding a court of law has jurisdiction as well as a court of equity.
3. Where, along with the answer of the corporation in such proceeding, an affidavit is filed, alleging that some third person claims the said stock, and that the corporation claims no interest therein, nor colludes with such claimant, but is ready to dispose of the stock as the court shall direct, the court should require such third person to appear and state the nature of his claim, and maintain or relinquish the same.
4. If, in such a proceeding, the stock should appear to be liable to the lien of the attachment, it ought to be sold for the satisfaction of the same under an order of the court made for that purpose in the attachment proceeding; but it is error for the court to render a judgment against the garnisheed corporation for the value of the stock, unless it appears that the lien of the attaching creditor on the stock was lost by the act of the corporation.
On the 28th May, 1872, Paine & Co. sued out from the clerk's office of the circuit court of the city of Richmond a summons, commanding the defendants therein named, viz: Trice & Hunter, to appear and answer a plea of trespass on the case in assumpsit.
On the same day, upon affidavit that the defendant Trice was a non-resident of the state of Virginia, and that the affiant believed that the said defendant had estate or debts due him in the city of Richmond, an attachment was issued in said cause of Paine & Co. v?? Trice & Hunter, and was executed the same day by delivering to the vice-president and cashier of the Chesapeake and Ohio Railroad Company copies thereof, and summoning them to appear as garnishees and answer said attachment.
On the 20th November, 1872, judgment was rendered in favor of Paine & Co., against Trice & Hunter for the sum of $520.38, with interest thereon from 20th February, 1872.
On the 16th December, 1873, the railroad company filed their answer to the attachment under the corporate seal of said company, alleging that at the time of the service of said attachment the said company was not indebted to the said Trice, nor had in its possession or control any goods, chattels, money, securities, or other effects belonging to said Trice.
Thereupon Paine & Co., by counsel, objected to the receiving of said answer on the ground that said garnishee had not fully answered, and the court sustained said objection and required said railroad company, garnishee as aforesaid, to answer further.
Whereupon the said Chesapeake and Ohio Railroad Company answered further, that on said 28th May, 1872, the said Trice was a stockholder in said company, and on that day had fifteen shares of stock standing on the books of the company in his name; but that it was advised and so insisted that the said shares created no indebtedness from said company to said Trice, nor were they goods, chattels, money, securities or other effects, belonging to said Trice, in the possession or control of said company; and in addition to said answer, filed the affidavit of the vice-president of said company that one John H. Oley, a resident of the town of Huntington, in the state of West Virginia, had a claim to the said fifteen shares of stock; that the said company had and claimed to have no interest whatever in said shares, and that it did not collude in any manner with said claimant, but was ready to dispose of the said fifteen shares of stock as the court might direct.
Thereupon the railroad company moved the court to require said Oley to appear and state the nature of his claim to said stock, and maintain or relinquish it, and in the meantime to stay proceedings against the said company. Which motion the court overruled; to which decision of the court the company excepted.
Thereupon a jury was waived, and the facts agreed, whereby it appeared that said fifteen shares of stock remained registered on the books of the company, in the name of said Trice, until the 20th January, 1873, when they were transferred to the name of said J. H. Oley, in the manner prescribed by the fifty-seventh chapter of the Code of 1860, (see Code of 1873, ch. 57, § 29-30); that said transfer was accomplished under a power of attorney to transfer said stock, given by Trice to Oley in January, 1873; that the market value of said shares of stock on the 21st January, 1873, was $35 per share; that Trice was indebted to said Oley, and said transfer was made in part payment of said indebtedness; and that Oley had no knowledge at the time of transfer of the attachments, both he and Trice being residents of West Virginia; that the president of the railroad company resides in the city of New York, at which place is the principal office of the company out of Virginia, and that the stock-ledger on which the transfer of the shares of stock was registered was kept in the New York office.
On consideration whereof, and of the answer of said company, the court being of opinion that at the time the attachment was served on the railroad company there was a liability on said company for the fifteen shares of the stock of said company then standing on the books of said company in the name of said Trice, and that at the time of the transfer of the said stock to the said Oley, it was of the value of $525, rendered judgment against said company for said sum of $525, with interest thereon from the 15th day of December, 1873. To this judgment the Chesapeake and Ohio Railroad Company obtained a writ of error and supersedeas from one of the judges of this court.
Wm. J. Robertson and H. T. Wickham, for the appellant.
Cannon & Courtney, for the appellees.
OPINION
MONCURE, P.
1. The court is of opinion, that a person's whole estate, real, personal and mixed, subject to such exemptions as are made by law, is liable for the payment of his debts, and may be subjected thereto by judgment and execution, and such ancillary proceedings at law or in equity as may be necessary or proper to enforce such execution. When the debtor is a non-resident of the state, but has estate within the commonwealth, such estate may be subjected by attachment to the payment of the debt.
Such attachment may be levied on the estate itself, if it be tangible and in the debtor's possession, or in the actual possession of no person. But if it be in the possession of another person than the debtor, such other person must be summoned as garnishee. Such attachment becomes a lien on the debtor's interest in the estate from the time of the attachment thereon, or of the service of the summons on the garnishee, respectively, as aforesaid.
2. The court is further of opinion, that shares of a stockholder in a joint stock company, incorporated by and conducting its operations in whole or in part in the state--such stockholder being himself a non-resident of the state-- are such estate as is liable to be attached in a proceeding instituted for that purpose by one of his creditors in a proper court of the state; and such estate may properly be considered for the purpose of such proceeding as in possession of the corporation in which the shares are held, and such corporation may properly be summoned as garnishee in the case.
Whether shares of a stockholder in a joint stock company be chattels or choses in action, has been a vexed question. The better opinion seems to be that they partake of the nature of choses in action. Angel & Ames on Corporations, § 560 et seq. and notes. Barksdale & als. v. Finney & als., 14 Gratt. 338, 357. But whether they be the one or the other, they certainly constitute a part of the owner's estate, and as such are liable to the payment of his debts, and to a proceeding by attachment against him. The statute declares that they shall be deemed personal estate. Code, p. 550, § 21.
Several cases were cited by the counsel of the plaintiff in error in the argument of this case, to show that stock in a corporation is not subject to a proceeding by attachment against the owner--viz: Haley & c. v. Reid, 16 Ga. 437; Ross & c. v. Ross, 25 Id. 297; Foster v. Potter, 37 Mo. 525. See also the Planters and Merchants Bank of Mobile v. Leavens, 4 Alab. R., New Series, 753.
But these cases depend entirely upon the statute law of the states in which they were decided. Of course it depends upon the statute, wherever the subject is governed and regulated by statute, whether stock in a corporation shall be liable to an attachment against the owner, and if so, in what manner and to what extent. Titcomb v. The Union Marine and Fire Ins. Co., 8 Mass. 326.
In this state, the statute law subjects to the proceeding by attachment against a non-resident debtor, all his estate within the commonwealth which could be subjected to the payment of his debt if he resided therein. Before the revision of our statute law in 1849, the only remedy against a foreign debtor, owning or having an interest in property within the state, to subject such property or interest to the payment of the debt, was in equity, by a proceeding known by the name of a " foreign attachment."
But in the revision of our Code in 1849, a radical change was made, at least in the form of proceeding in our attachment law. No change was made, for none was needed, in regard to the liability of a debtor's whole estate, including his stock, if he had any, in a corporation within a state; for that was liable to the remedy by foreign attachment as that remedy aforetime was. But by the change then made, it was provided that, to subject the property within the state of a debtor residing out of it to the payment of the debt, the proceeding by attachment should be at law, if the debt be recoverable by action at law; but should be in equity, if the debt be recoverable in equity. See the report of the revisors, ch. 151, pp. 753-763, and notes.
Very soon after that revision was made, the former equitable remedy by foreign attachment was restored in regard to legal demands, but concurrently with the legal remedy given in such cases at the revision. Though our attachment law in other respects has ever since remained, and yet remains, substantially the same, or nearly the same, as it was recommended by the revisors in their report, and adopted by the legislature in the revision aforesaid. As it now stands, it may be found in the Code of 1873, pp. 1008, 1016, ch. 148.
By reference to that chapter, it will be seen that the legislature has therein used the most comprehensive terms in describing the estate made liable to attachment; thus plainly showing its intention to embrace all estate of the debtor within the jurisdiction of the court, including his shares, if any, of such stock in a corporation. In the first section the word used is " estate," without limitation or restriction, and the same word, or other words sufficiently comprehensive to embrace shares of stock in a corporation, are used in most of the sections of the same chapter; thus plainly showing that such shares are within the letter, as they certainly are within the spirit, of the law. In addition to § 1, see §§ 7, 9, 11, 12, 13, 15, 17, 18, 19, 23, 24, 25, 27, and 28 of the chapter.
That a corporation may be summoned and proceded against as a garnishee, in such cases, was expressly decided by this court in Baltimore & Ohio R. R. Co. v. Gallahue's adm'rs, 12 Gratt. 655. That the corporation in which the shares are held in this case was properly summoned and proceeded against as a garnishee, seems to be very clear. The corporation is a trustee of the corporate property for the benefit of the corporators, who are the stockholders. They receive the profits of it in the form of dividends while the corporation continues to exist, and when it ends, the surplus which then remains of said property and profits is subject to be divided among them. The corporation alone, while it exists, is in possession of the corporate property. If these shares of stock in such corporations are liable to attachment, as we have seen they are, how can they be attached but by summoning the corporation as garnishee?
We have examined the case of Rollo, assignee, v. Andes Ins. Co., 23 Gratt. 509, but as there is nothing which is at all in conflict with this opinion, it is unnecessary to make any comment thereon.
3. The court is further of opinion, that although a court of equity might, and no doubt would, have had jurisdiction in this case, yet the court of law in which it was brought also had jurisdiction in it, and ample provision is made by law for obtaining relief in an action at law in such a case. Indeed, the same provision is made by law in regard to the mode and measure of relief in an attachment case, whether it be an action at law or a suit in equity.
4. The court is further of opinion, that the circuit court did not err in requiring of the garnishee a further and fuller answer than the one first given. But no exception was taken to the action of the court in that respect, and therefore no error can be assigned thereon.
5. But the court is further of opinion that the circuit court erred in not making an order requiring J. H. Oley to appear at such time as the court should have appointed, and state the nature of his claim to the stock in controversy and maintain or relinquish it. The transfer to him of the shares of the said stock on the books of the corporation was made on the 20th day of January, 1873, which was long after the 20th day of May, 1872, when the attachment was issued and served on the Chesapeake and Ohio Railroad Company, and thus became a lien on and from that day, on the interest of the defendant, A. J. Trice, in said stock, which then stood and remained in his name on the books of the said corporation; so that it would appear that the right of the said attachment creditors is prior and paramount to that of the said Oley. But the latter might possibly be able to show, if he had an opportunity, that he had some prior equitable right to the stock.
6. And the court is further of opinion, that the circuit court erred in rendering a judgment against the garnishee for the value of said stock, at least unless it had appeared that the lien of the attaching creditor on the said stock was lost by the act of the said corporation; which does not appear from the record. If the stock be liable to the lien of the attachment, it ought to be sold for the satisfaction of the same, under an order of court made for that purpose in the attachment proceeding.
7. The court is further of opinion, that there is no other error than as aforesaid in the judgment and proceedings aforesaid. But for the errors aforesaid, the said judgment is reversed, and the cause remanded to the said circuit court for further proceedings to be had therein to a final judgment in conformity to the foregoing opinion.
JUDGMENT REVERSED.