Northrop against The Newtown and Bridgeport Turnpike Company

Northrop against The Newtown and Bridgeport Turnpike Company. June 27. Where the act incorporating a manufacturing company, provided, that the shares of stock should be transferable only on the books of the company, in such manner as the company should, by their by-laws, direct; and a bylaw of the company provided, that the board of directors should prescribe the form of the transfer, to be registered, by the clerk, in the books of the company, and that no transfer should be valid, unless so made and registered ; it was held, that a deed of assignment, in the form prescribed, was of no avail to convey a title, until actually registered in the books. The registry operates, not merely to perfect a conveyance previously begun, or to give notice of a conveyance previously perfected, but is, itself, the originating act in the change of title. An entry of the clerk on a deed of assignment, “ Receivedfor record,'' is not equivalent to a registry. THIS was an action of assumpsit, to recover the amount of four dividends, declared, in the year 1816, by The Newtown and Bridgeport Turnpike Company, on one hundred shares of their stock, of which the plaintiff averred, that he was the. proprietor. / ' ' The cause was tried, on the issue of non-assumpsit, at Fair-field, December term, 1818, before Edmond, Smith, and Gould, Js. The title of the plaintiff to this stock was derived from a conveyance or transfer, by Beebe Hine, in the following words : “ Know all men, by these presents, that I, Beebe Hine, of New-Milfiord, in the county oí Litchfield, for the consideration of 2000 dollars, received to my full satisfaction of David Northrop, of Sherman, in the county of Fairfield, do, by these presents, grant, sell, assign, and transfer unto the said David Northrop, one hundred shares in the stock of The Bridgeport and Newtown Turnpike Company ; to have and to hold the aforeSaid shares in the stock of said company, to him the said David Northrop, his heirs and assigns, together with all the rights, privileges and immunities in any wise pertaining or belonging thereto; and the clerk of said company is hereby requested to transfer said one hundred shares from my name, to the name of said David Northrop, on the books of said company. Witness my hand, in New-Milford, this 27th day of December, 1814. [Signed.] Beebe Hine.” The defendants claimed, that all these shares of stock, were attached, by several creditors of Hine, so that the plaintiff gained no title by the transfer ; and for the purpose of establishing this defence, the defendants adduced in evidence, the charter of the company, the only material part of which, as applicable to this case, was the following: “ The shares in said company shall be transferrable only on the books of said company, and in such manner, as said company shall, by their by-laws, direct.” The defendants, also, read in evidence, a by-law of the company, made in conformity to their charter, which was then in full force, in these words: “ The board of directors, shall prescribe the form of transfer, to be registered by the clerk, on the books of said company; and the shares, being 500, shall be assignable and transferrable ; but no assignment or transfer shall be valid, unless made in the form prescribed by the directors, and registered as aforesaid, by the clerk.” The defendants further read in evidence, the following form of a transfer, made by the board of directors, in pursuance of sach by-law : “ I, D. B. of N. in the county of F., do, by these presents, assign, and make over to G. H. of W., full original shares in the capital stock of The Bridgeport and Newtown Turnpike Company, with all the privileges, and subject to all the burdens, thereunto appertaining; value received of him, the said G. H. Witness my hand, at N., this day of , 1803.” Fairfield, The transfer in question, was drawn at New-Milford, on the the 27th of December, 1814. It was agreed between Hine and five of his creditors, viz. William H. Taylor, William Taylor, Clark Blakeley, U. Everitt, and Noadiah Mygatt, who had severally prayed out attachments, on the same day, against Hine, and had procured Charles S. Masters to be deputed to serve them ; that Masters should be the bearer of the transfer to the clerk of the company, at Newtown, as the agent of Hine, and not as the agent of the plaintiff, who was not present, and was ignorant of the transaction ; and that Masters should first attach all Nine’s stock, by virtue of these attachments, and then hand over the transfer to the clerk, for the plaintiff’s use. Masters, accordingly, attached the stock, on the same day, before he delivered the transfer to the clerk ; the suits on which : attachments were issued, went into judgment; executions were taken out; and the stock was sold. The clerk re-: ceived the transfer, and made thereon this entry : “ Received i for record, December S£yih, 1814.” Copies of the attachments were not left with Hine, until the 28th of December. Sylvanus Noble attached and sold 102 shares of the stock of Hine. The copy of his attachment was left with the clerk, on the 27th of December; but there was a questi on of fact, whether Noble's attachment was levied five minutes before, or five > minutes after, the entry was made on the transfer, by the clerk. On the 28th of December, the clerk copied the transfer into the books of the company; which was the only transfer, that was ever made, by Hine, to the plaintiff, on the books of the company. After the clerk had received the transfer, and made his entry op the back of it, but before it was copied into the books of the company, viz. at two o’clock in the morning of the 28th December, James Nichols caused the whole of the stock to be attached, by virtue of a writ of attachment against Hine, and haying obtained judgment and execution, had 26 shares of the stock sold. All the claims of the attaching creditors were admitted to be bona fide, except Mygatt's, which was controverted. All the transfers, since the act of incorporation, have been made in the form prescribed by the board of directors; which was adopted soon after the company was formed. On these facts, the defendants claimed, that as all the attachments were actually levied on the stock, before the transfer was copied into the books of the company, they ought to hold, in preference to the transfer; and, also, that the stock had never been transferred on the books of the company to the plaintiff; and, at any rate, that all the attachments, which Were levied on the stock, before the entry of the clerk, should hold, in preference to the transfer: and to this effect, they prayed the court to instruct the jury. The charge given, was, in substance, as follows. “ The transfer to the plaintiff, became the act and deed of Hine, when it was delivered to the use of the plaintiff. If, then, it Was so delivered at New-Milford, and if due diligence was used in procuring it to be lodged with the clerk of the company, the plaintiff is entitled to hold, against all the attaching ere-ditors, unless he has lost his priority, by the agreement made with Charles S. Masters, as to the order of entries ; that is, Unless it was agreed by Hine, that the four first named attaching creditors, should be, absolutely, first satisfied. But if you find from the evidence, that it was not the intent of Hine to deliver the transfer to the plaintiff, at the time it was put into the hands of Masters, but only to employ Masters to carry it to the clerk of the company, and there deliver it, for the use of the plaintiff; or if you shall find, that there was negligence in getting the transfer recorded ; you will give effect to the levies of all the bona fide creditors, who had lodged copies of their attachments prior to the delivery of the transfer for record. But if you shall find, that the agreement was only, that the four first-named creditors should have the same priority, that a prior service of their attachments would give in law, the agreement can have no effect against the plaintiff. “ if you find, that any of those persons, who have levied on the shares in question, were not bona fide creditors, these claims must be excluded. A sale of the shares, or any of them, upon a judgment fraudulently obtained, does not pass the title. “As to Mygatl's claim; if he recovered, with the consent of Hine, more than was due to him, for the purpose of satisfying claims due to third persons, his recovery will be of no avail against the plaintiff “ With respect to the claim of Noble; it cannot be let in, although it should appear, that a copy of his attachment was left with the clerk before the transfer was entered ; unless the transfer was fraudulent; or unless there was negligence, on the part of the plaintiff, in recording his transfer ; or unless the delivery of the transfer to the plaintiff’s use, was, in fact, made to the clerk of the company in Newtown. But if service of Noble's attachment, was, in fact, made on the clerk, before the transfer, and the delivery of the transfer, was, in fact, made, for the plaintiff’s use, to the clerk, at his office in New-town, Noble would gain a priority. So, if there was negligence in entering his transfer, and Noble entered first, he would gain a priority. “ With respect to the claim of James Nichols ; if the transfer is found not to be fraudulent, and you find a copy of his a^chment was left, posterior to the plaintiff’s transfer being entered, his claim is ndt to be allowed. But if you find, that ^ transfer was fraudulent, his claim, if you find that he was a bonaJide creditor of Hine, is to come into consideration with the other creditors, whether his attachment was entered prior or subsequent to the entry of the transfer.” The plaintiff obtained a verdict for the amount of the dividends demanded ; and the defendants moved for a new trial, on the ground of a misdirection. Daggett and N, Smith, in support of the motion, waiving the discussion of minor points, arising in the case, contended, That there could be no valid transfer of these shares, except on the books of the company. The mode of transferring this stock, as well the stock itself, is the creature of the legislature. The charter requires, that the shares shall be transferrable only on the books of the company. The form of the transfer, so to be made, is left to the regulations of the company; but the company had no power to prescribe a form not on the books, The copying of a bill of sale into the books, is not a transfer on the books. And if it were, the property would remain in the vendor, until this was actually done. What was done in New-Milford, was strictly a nullity, as to a change of title. The Union Bank of Georgetown v. Laird, 2 Wheal. Rep. 390. The Marlborough Manufacturing Company y. Smith, 2 Conn. Rep. 5,79. There is no room for the application of the doctrine of relation ; as nothing was done, which a subsequent act could relate to. The act, to. which relation is had, in any case, must be an act required by law, The usage of the defendants, will not aid the plaintiff’s title. Though a corporation, authorized by its charter, to contract in a particular mode, may, by a course of practice, render itself liable on contracts made in a different mode, as this court decided, in Bulkley & al. v. The Derby Fishing Company, 2 Conn. Rep. 223.; yet a corporation cannot be discharged irpm an obligation to others, or permitted to defeat the rights of others, on the ground, that it has violated, or departed from its charter. The title of the attaching creditors, is stricti juris ; and it is not to be prejudiced, • by any practice of the defendants ; clearly not, by a course of illegal acts. Sherman and Bissell, contra, contended, That a transfer gistered on the books of the company, is a transfer on the books of the company, within the meaning of the act of incorporation ; and that such transfer, being entered on the books, with due diligence, takes effect from the delivery. They cited Wilkinson v. Myer, 1 Stra. 585. Oades v. Woodward, 7 Mod. 93. S. C. 1IA. Raym. 786. 849. S. C. 1 Salk. 87. Parsons v. Gill, 1 Ld. Raym. 695. Fuller v. Jocelyn, 2 Stra. 822. Robinson & al. v. Tonge & ah 3 P. Wms. 398. Chancey v. Needam, 2 Stra. 1081. Jennings, exr. v. Moore & al. 2 Vern. 609. Taylor v. Wheeler, 2 Fern. 264. They also relied upon the invariable usage of the company, from the time of its formation to the time of trial, a period sufficient of itself to create a right, according to which, transfers like the one in question, have been made, and have been considered as effectual to pass the title ; no other mode of alienation having been attempted. They remarked, that in The Marlborough Manufacturing Company v. Smith, the transfer was held to be void, because it was not conformable to the by-law ; whereas, in this case, the transfer was made in the form which the by-law prescribed. [MAJORITY — Hosmer, Ch. J.] Hosmer, Ch. J. This is an action on the case, brought to recover dividends, made on one hundred shares of stock, in The Bridgeport and Newtown Turnpike Company, which the plaintiff claims, as being his property. A verdict was rendered for the plaintiff, in the sum of 293 dollars, 25 cents ; and the defendants moved for a new trial. The stock was formerly owned by Beebe Hiñe, and the plaintiff claims it, by purchase. On the 27th December, 1814, Iline made to the plaintiff a written assignment in pais, of the shares, for the expressed consideration of 2000 dollars, and therein requested the clerk of the company, to transfer them from his name, to the name of Northrop. Admitting the assignment to have been delivered to the plaintiff, or another person for his use, I will, first, enquire, whether the stock embraced in it, was transferred, by the delivery. If the stock were not the subject of any peculiar provisions relative to its transfer, the delivery of the assignment, of course, would operate a conveyance of the property. The legislature, however, in the charter of the Turnpike Com-panyj has prescribed the mode in which alone the stock must be conveyed ; and it is not to be disputed, that it cannot be transferred in any other manner. I hey have directed, that “ the shares in said company, shall be transferable only on the books of said company, and in such manner, as said company shall, by their by-laws, direct^ On recurrence to the by-laws, it appears, that “ the board of directors, were to prescribe the form of transfer, to be registered, by the clerk, on the books of the company; and the shares were made assignable and trans-ferrable ; but no assignment or transfer was to be valid, unless made in the form prescribed by the directors, and registered by the clerk.” In pursuance of this by-law, the directors of the company, adopted A form, by which, the shares were “ to be assignedand by this, the stock is to be transferred expressly, with all the privileges, and subject to all the burdens, thereunto appertaining and this prescribed form, was the uniform mode of transfer, until the execution of the assignment by Bebee Hine. It is evident, that the assignment of stock in The Bridgeport and Newtown Turnpike Company, must be made in the mode thus authoritatively declared ; and that the method of conveyance at common law, is entirely superseded. The distinguishing features, attending a legal assignment of the stock in The Newtown and Bridgeport Turnpike Company, are, that it must be in the form prescribed, and régistered on the books of the company ; and any mode essentially variant from this, is not according to law, and operates no transfer. The case of the Marlborough Manufacturing Company v. Smith, 2 Conn. Rep. 578. demonstrates the precise exactness, with which the assignment of stock must be made. A question here arises, at what time the transfer shall be considered as being complete ,• and in deciding this point, it is necessary to attend to all the provisions of the law, on this subject ; as the construction cannot be duly made, by concentrating the attention on a particular part. The legislature, in the act of incorporation, has explicitly enacted, “ that the shares in said company, shall be transferrable only on the books of the company.i"* - It follows conclusively, that they cannot be assigned, merely by a deed or writing, executed and deliver ed. The by-laws of the directors, and the form prescribed, must be construed with reference to this fundamental provision ; for if they are not conformable to it, they are wholly void, and without effect. They authorise an assignment by a writing; but expressly declare, that no transfer shall be valid, unless it is registered on the company books, by the clerk. Instead of providing, as the directors did, in the case of the Marlborough Manufacturing Company v. Smith, that the assignment should be made on the books, which, according to the court’s construction in that case, required, that there should be a written transfer on the books, signed by the assignor ,• they have taken a different course. They require, that there be a writing, duly executed, and afterwards registered, on the books of the company; but, as by law it is necessary, that the transfer should be made on the books, it is the fair construction of the by-law, that until the actual registration of the assignment, nothing has effectually been done to convey the property. This, although varying from the mode practised by other companies, in effect, is similar to the signing a transfer on the books; and the registration of a deed of assignment, to commence its legal operation after it has been recorded, is virtually the same. For, the scope and object of the legislative provision on this subject, was, to render the purchase of stock secure to any person, if, at the moment of his pyrchase, the company books did not furnish evidence, that it had previously been transferred. It must be admitted, either that the construction I have given the by-law of the company is correct; or that the by-law is illegal, and the stock of the company locked up, without the possibility of transfer. It is scarcely necessary to add, that an assignment in writing, on which the clerk enters “ received for record, ” is not thereby registered or recorded. Nothing short of copying it, at full length, on the books of the company, either fulfils the words of the by-law, or renders it a transfer on the books. It follows, necessarily, from the principles assumed, and, I trust, established, that the assignment, by Beebe Hine, was of no avail, until it was actually registered on the company books at full length. From the motion, it appears, that the superior court founded their determination on this principle; that the stock was assignable, by a deed or writing delivered, as at common law; and that the registering of it by the clerk, if done without negligence, and within a reasonable time, effectually conveyed it. They considered the assignment as operating by virtue of the delivery ; and that its subsequent registration was required, as it is in case of a grant of land, to give notice of an antecedent conveyance; whereas the transfer of stock on the books of a company, operates not by giving notice of an antecedent con-r J\ . ’ , 5 „ , . • , veyance, but is a fact essentially necessary to originate a title ; before the happening of which registration, no title has been, or can be, transferred. Under the influence of a principle not warranted by law, the charge of the court, by necessary consequence, was materially erroneous. The assignment, if it were duly delivered, and due diligence was used to lod^e it with the clerk of the turnpike company, was considered as operating from its date ; and the priority of the five attachments served by Charles S. Masters, before the assignment was given to the clerk to be registered, was denied, unless it had been agreed by Hine, that the attaching creditors should first bé satisfied. In respect to the claim of Noble, the jury were informed; that although it should appear, that his attachment was entered for record before the entry was made on the transfer, by the clerk, (which was claimed to be the fact,) it could not be let in, if the assignment had before been delivered to the plaintiff, unless there were fraud or neglect. And in relation to the attachment of James Nichols, which was served on the stock after the assignment had been actually copied in the company books, the jury were instructed, if the transfer by Hine was not fraudulent, and had been received for record, and an entry to this effect had been made on it, by the clerk, that it superseded the attachment. The charge given to the jury would have been entirely correct, if the principle on which it is founded had been legal ⅝ but the principle was erroneous, and, of consequence, the direction was altogether unwarranted bylaw. On these grounds, I advise a new trial. Whether the assignment was defective, by reason of variance from the form prescribed, as no question has been made on this subject at the bar, and the decision of it is not necessary, in this case, 1 shall omit to express an opinion. The other Judges were of the same opinion, except Chapman, J., who gave no opinion, having been of counsel in the caase. New trial to be granted.