Simpson v. Jersey City Contracting Co.

The Appellate Division of the Supreme Court, in the first department, has certified the following question of law to this court: “ Whether, where the certificates of stock of a foreign corporation belonging to a non-resident of the state are in possession of a resident of this state, as pledgee, the interest of the owner and pledgor can be levied upon under a warrant of attachment against such owner, made by service of a notice on 'the pledgee in the manner prescribed by subdivision 3 of section 649 of the Code.”

The circumstances out of which the question arose were

• The argument of the appellant is, in effect, that this was an attempt to levy an attachment on its shares of stock and that the legal principles, which underlie the ownership of capital stock, preclude the idea that jurisdiction could be obtained in that manner. It is insisted that “ the stock of a foreign corporation is not property within the state subject to levy of attachment against a non-resident owner.” Thus generally stated, land within such a state of facts as is shown in the case cited of Plimpton v. Bigelow, ( 93 N. Y. 592 ),jthe proposition may be true. ! In that case, the plaintiffs were non-residents of the state; but they brought an action therein against the defendant, who was, also, a non-resident. It was attempted to attach shares of stock of a foreign corporation, which were owned by the defendant and the certificates of which were in

This foreign defendant, in order to secure the payment of its indebtedness to the trust company in Hew York, pledged with it the shares of stock in the foreign corporation of which it was the owner and, as we must assume, by an assignment of the certificates representing the same in some form of transfer, which conferred apparent title and which would enable the assignee, or pledgee, to enforce the security by its sale and transfer. Thus, the defendant’s interest in the stock was held by a title and with a right which authorized the trust com

I think that the case of Warner v. Fourth National Bank, ( 115 N. Y. 251 ), is much in point. In that case a Eew York bank, having a claim against a Pennsylvania bank, attached certain promissory notes and bills of exchange, which the latter had pledged with another Eew York bank to secure a loan of money. The case turned upon the effectiveness of the levy made under the warrant; that is to say, whether the sheriff should have taken the property into his actual custody, or whether he had sufficiently acted under the warrant in serving a certified copy of it and a notice showing the' property attached, with a demand for a certificate, etc. It was held that the pledgee was entitled to the possession of the property as against the sheriff and his form of levy was upheld; and it was observed that “ what was the subject of the attachment was the right of the Penn bank, (the debtor), to compel its pledgee to account to it as to the pledged paper and to receive the surplus of the proceeds of collection, after satisfying the pledgee’s claim for advances. That right is a chose in action, and, in the nature of things, is intangible. It is the subject of attachment as a demand against the person, within the spirit of the language of the Code.” It was, further, observed, that “ while the debt remains undischarged the pledge belongs to the pledgee and the title is subject to the pledgee’s lien and right of possession ; but the pledgor’s residuary interest in the pledge constitutes a claim, or demand, upon the pledgee, which is property and, hence, may become the subject of attachment.”

The Bronson Case, ( 150 N. Y. 1 ), is suggested as negativing the idea that an attachment could lie in this case. The question there considered related to the interest which a non-resident shareholder in a domestic corporation might be said to

But it is further argued, in support of the proposition that the court was without jurisdiction, that a judicial sale of the defendant’s property or interests, here, would be ineffectual; because a transfer of the shares upon the corporate books could not be effectuated through any order of the court. The argument, again, rests upon Plimpton v. Bigelow ; where it was observed in the opinion that “ it could scarcely be expected that the courts of another state would recognize a title to corporate stock in one of its own corporations, founded upon a sale under an attachment issued by our courts against a nonresident, when the only semblance of jurisdiction over the property was the service of notice in the attachment proceedings, upon an officer or agent of the corporation here.” The facts of that case, as I have already intimated, make it inapplicable here , It is an incorrect idea that the managing agents of the corporation, 'or joint stock company, might have some discretionary authority to refuse a proposed transfer. Such a proposition is not sanctioned by the common law, and

For the reasons which I have given, I think that the question certified to us should be answered in the affirmative and, therefore, that the order appealed from should be affirmed, with costs.

(dissenting). The defendant is a corporation organized and doing business in the state of New Jersey, and having no place of business in this state. The summons was personally served upon it and it has appeared in the action. It deposited and pledged with the Produce Exchange Trust Company, a domestic corporation, certificates of 3,220 shares of stock in the New Jersey and Pennsylvania Telephone Company, a corporation organized and doing business in New Jersey, as collateral security for the payment of a loan by that

The Appellate Division has certified the following question:

Whether, where the certificates of stock of a foreign corporation belonging to a non-resident of the state are in possession of a resident of this state as pledgee, the interest of the owner and pledgor can be levied upon under a warrant of attachment against such owner, made by service of a notice on the pledgee in the manner prescribed by subdivision 3 of section 649 of the Code.

' The certificates of stock of a foreign corporation are capable of manual delivery, and when the person to whom they! have been issued indorses upon them an assignment in blank pursuant to the rules of the corporation and the laws of the country of its domicile, they may be transferred by such delivery, and then the property or rights of property of which they are the evidence may be transferred.

If the record had shown that these certificates were thus indorsed, then the question certified could be answered in the affirmative upon the authority of Warner v. Fourth National Bank ( 115 N. Y. 251 ). That was the case of a levy upon the pledgor’s interest in certain promissory notes, pledged-by a non-resident to a resident pledgee as collateral to a loan. The levy was not upon the notes themselves, and thus the sheriff was not required to take possession of them, but upon the pledgor’s intangible right to redeem the notes, or to receive from the pledgee the surplus in his hands after satisfying his lien upon them, and thus the levy was properly made — in the same manner as in the case before us— under subdivision 3 of section 649 of the Code, by leaving a certified copy of the warrant, and a notice showing the property attached, with the resident pledgee. The non-residen t’s thing in action would be against a resident and enforcible here, and thus within our jurisdiction, and, therefore, the subject pf levy under the attach

If the resident pledgee should sell the certificates and realize a surplus, the surplus would be within our jurisdiction: But the question certified does not present that situation. Nothing can be rightfully realized under this levy unless the sheriff can sell either the shares of capital stock, of which the certificates are the evidence, or such intangible rights respecting the same and proceeding therefrom as will ultimately result in compulsorily transferring the title to the stock itself to his vendee.

| it has been settled by abundant decisions in this and other jurisdictions that the certificates of shares in the capital stock of a foreign corporation are mere evidences of the owner’s rights in such stock, and are not the stock itself, and although the certificates may be within this state, the stock itself is not, but is held and owned by the corporation in the foreign state, and, therefore, is incapable of seizure or levy under attachment here, and that although the right to shares thereof may be held by the owner wherever he may make the right available, still that right finds its value and quality as property in the right to require the corporation at its domicile to discharge the obligations which it has assumed and for which it holds the capital stock and assets. The sheriff can levy upon nothing which he cannot actually seize within his jurisdiction, or so constructively seize as to enable him by a sale thereof to give such title to his vendee as the debtor himself held; that is, such as will, in the ease before us, give to the vendee the same right of recourse to the foreign corporation as the debtor had.( Plimpton v. Bigelow, 93 N. Y. 592 ; Christ

■ It is true that our law, notably section 4 of the Statutory Construction Law, in effect declares stock certificates property, and so they are wherever we are able to enforce our law, namely, within this state. As to the stock and interests therein of domestic corporations they cannot exist, except under and subject to our laws, and, therefore, our jurisdiction is complete over them.

But we cannot enforce our law in a foreign state as to the stock of its corporations, and the interests therein of its holders, and we cannot, therefore, give title to it otherwise than by our jurisdiction over its owners. An attachment is directed against property and not against persons, and whatever control the court may exercise over all persons, resident or nonresident, who are brought within its jurisdiction, such control is not attachment process against vendible property, or interests in or through it.

It is suggested in the opinion below that the sheriff can make the sale, and the vendee can take his purchase for what it is worth. The sheriff did not attach the paper certificates, for he did not take them into his actual custody; he, therefore, cannot sell them as paper or manuscripts. Whatever he sells is intangible. He can make and deliver a certificate of sale (Code, section 647), but his vendee, or at least the ultimate vendee, must repair to Eew Jersey to recover what he supposes he has bought. Our courts cannotjjgive him possession. The New Jersey court could give full faith and credit to our judicial proceedings by adjudging that our sheriff levied upon nothing outside of his jurisdiction, and, therefore, his certificate of sale does not give the right to possession of anything

The question certified should he answered in the negative, and the order appealed from reversed, with costs.

Parker, Ch. J., Haight, Cullen and Werner, JJ., concur, with Gray, J., for affirmance; O’Brien, J., concurs with Landon, J., for reversal.

Order affirmed.