Majority
Headnote
Corporations — stockholder’s action — action against directors of a foreign corporation for procuring fraudulent transfer to themselves of stock of domestic corporation then held by the foreign corporation — such action a proceeding in rem — when order of publication may be issued in such action for service of process upon non-resident defendants, individually and as executors of estate of deceased foreign director.The appellants seek to sustain under the provisions of subdivision 5, section 438 of the Code of Civil Procedure, an order permitting service of the summons without the state upon respondent, a foreign executor, and which order'has been set aside by the order appealed from. Such section and subdivision provide that “An order directing the service of a summons upon a defendant, by publication, may he made in either of the following cases: * "x" *
“5. Where the complaint demands judgment, that the defendant be excluded from a vested or contingent interest in or lien upon, specific real or personal property within the state; or that such an interest or lien in favor of either party he enforced, regulated, defined, or limited; or otherwise affecting the title to such property.”
If the appellants are right in their contention that this action was one in which service of the summons could be made by publication under said subdivision, said service might have been made without the order which has been vacated. (Code, section 443, suhd. 3.) Nevertheless an order of publication having been obtained and vacated, I shall assume that the various questions argued on this appeal are presented by the order appealed from vacating the order of publication.
At all the times mentioned in the complaint there were two corporations known, respectively, as the Doe Bun Lead Company and the Saint Joseph Lead Company, the former a foreign corporation and the latter a corporation organized under the laws of this state and legally located therein. Several years prior to the commencement of this action the first corporation was the owner and holder of a large amount of the capital stock ' of the latter corporation and the respondent’s testator,
More briefly summarized, these allegations are to the effect that various individuals, including respondent’s testator, took advantage of their position as directors of the foreign corporation to procure a fraudulent transfer to themselves of capital stock held and owned by it in the domestic corporation, thereby inflicting injury on stockholders, and that these appellants being the owners and holders of stock in both corporations, and having vainly attempted to procure action by said corporations to enforce a restitution of said property, now bring an action in behalf of said injured corporation to effect restitution of such stock as may still be in the possession of the parties who fraudulently procured it or their respective representatives through relieving it from the effect of the fraudulent transfer. Those facts constitute the substance of a well-recognized cause of action which falls within the equitable jurisdiction of our courts.
But for the-purposes of this appeal the particular inquiry also presents itself whether an interest in the capital stock of a domestic corporation is property having its location or situs in the state wherein the corporation is organized or located, for of course it must be conceded that the allegations of the complaint which have not been summarized and which would lead, if anywhere, to a personal judgment against the respondent cannot sustain an order for service of the summons by publication. Such order in this case must rest upon a cause of action affecting property located within the state and within the jurisdiction of our court.
The essential characteristics of an interest in the capital stock of a corporation have been so well and often defined that it is unnecessary to spend any considerable time in traveling over the ground now. Outside of his
Our statutes pertaining to attachments provide that ‘c The rights or shares which the defendant has in the stock of an association or corporation * * * may be levied upon; and the sheriff’s certificate of the sale thereof entitles the purchaser to the same rights and privileges, with respect thereto, which the defendant had when they were so attached. ” (Code of Civil Procedure, section 647.)
“ A levy under a warrant of attachment must be made as follows: * * * Upon other personal property, by leaving a certified copy of the warrant, and a notice showing the property attached * * * if it consists of a right or share in the stock of an association or corporation, * * * with the president, or other head of the association or corporation.” (Code Oiv. Pro., section 649.)
In Plimpton v. Bigelow ( 93 N. Y. 592 -600) it was said: “ The right of a shareholder is derived from the corporation under its charter, or the laws of the State which created it. * * * It seems impossible to regard the stock of a corporation as being present for the purpose of judicial proceedings, except at one of two places, viz.: • The place of residence of the owner or the place of the residence of the corporation.”
We have not overlooked the case of Simpson v. Jersey City Contracting Co. ( 165 N. Y. 193 ), where it was held by a divided court that certificates of stock of a foreign corporation belonging to a non-x’esident in the possession of a resident of this state as security for a debt and the interest of the owner or pledgor therein was a property right within the state which might be levied upon under wax’rant of attachment. While that decision perhaps is in conflict with some of the cases cited which hold that certificates of stock are not property and subject to proceedings in the state wherein they are located, I do not see that it in any manner conflicts with the proposition established by so many decisions that the interest of a stockholder in a domestic corporation is property which may be regarded as 1 aving its situs in this state.
Determining, therefore, that a stockholder’s ixxterest in
In Patterson v. Farmington Street Ry. Co. ( 76 Conn. 628 ), which was an action in equity to determine the title to stock of a Connecticut railroad, the record owners
In Sohege v. Singer Mfg. Co. ( 73 N. J. Eq. 567 ), which was an action of a like nature, it was said: “ It appears that the shares in suit are shares of a New Jersey corporation having a situs here for purposes of attachment or other seizure by the courts of this state; they are in fact in such a situation as that the courts of this state may for many purposes obtain and hold control over them. * * * The subject-matter of this suit is within the general equity powers of courts of chancery. If the necessary parties are present a decree may undoubtedly be made which will dispose of the controversy. One of the questions in this case is whether the seizure of the subject-matter of the litigation gives the court jurisdiction to dispose of the property which It has in its custody without personal service of process within the jurisdiction on the defendants holding the paper title. * * * Such service (substituted service) may also be sufficient in cases where the object of the action is to reach and dispose of property in the state or some interest therein, by enforcing a contract or a lien respecting the same, or to partition it among different owners. * * * In other words, such service may answer in all actions which are substantially proceedings in rem.” (See, also, in addition to cases already cited, Morgan v. Mutual Benefit L. Ins. Co., 189 N. Y. 447 ; People's Nat. Bank v. Cleveland,
It is possible that the practical benefits of any judgment which appellants may obtain in this action may be substantially curtailed through transfer of the certificates representing the stockholders’ interest which is the subject of this suit because of the possession by said certificates of some of the characteristics of negotiability. Those questions of course are not now before us and are not to be considered. The possibility of our courts being engaged in rendering futile judgments in such an action as this where there are outstanding certificates not within its jurisdiction or control is now and for the future limited by our adoption of the Uniform Stock Transfer Law with its various provisions relating to proceedings against the interest of a stockholder represented by such outstanding certificates.
There remain to be considered two further claims made by the respondent in denial of the right of appellants to maintain this action.
The respondent received his letters testamentary from fche courts of another state. It may be assumed that ordinarily courts of one state will not entertain jurisdiction of a suit against executors appointed in another state and affecting the administration of the assets confided to their care, and it is in reliance upon this general principle that the argument is now made by the respondent that this action cannot be maintained against him. I do not think that it is sustainable in this action.
In the first place, the appellants rely for an answer upon section 1836a of the Code of Civil Procedure which provides that 1 ‘ An executor or administrator duly appointed in any other state, * * * of the United States * * * may sue or be sued in any court in this state in his capacity of executor or administrator in like manner and under like restrictions as a nonresident may sue or he sued, if, within twenty days ” a copy of the letters testamentary
But in the next place and independent of any statute and without questioning the general rule, I regard it as established that in exceptional cases suits will be enter-' tained against foreign administrators where it is essential to the administration of justice, and an equity suit for the purpose of determining the ownership of property within our jurisdiction in my opinion comes within those exceptions. (Callanan v. Keenan, 158 App. Div. 84 ; Bergmann v. Lord, 194 N. Y. 70 .)
We also agree that section 1836a merely related to procedure and was remedial and retroactive to the extent of being applicable to the facts of this case and entirely unlike the statute under discussion in Jacobus v. Colgate ( 217 N. Y. 235 . Provost v. International G. S. C. Co., 152 App. Div. 83 ; affirmed on opinion below, 208 N. Y. 635 .)
The other claim urged is that the appellants being nonresidents of the state, this action against the Doe Bun Company, a foreign corporation, is in violation of the provisions of section 1780 of the Code, which provides that an action against a foreign corporation may be maintained by a resident of the state or by a domestic corporation or by a non-resident in certain specific cases which do not include the present one. I think there are several effective answers to this proposition.
Second. I do not believe that said section applies to a case where our courts having possession and jurisdiction of. property are attempting to determine its ownership, and the presence of a foreign corporation as a formal party at least is necessary to the complete disposition of a case and to the accomplishment of justice. (Trotter v. Lisman, 209 N. Y. 174 .)
And in the third place and irrespective of these answers, it would seem to be clear that if an attempt has been made improperly to bring an action against said corporation it is the one to make this claim and the present respondent is not interested in so doing on this motion.
In accordance with these views it is concluded that the orders of the Special Term and of the Appellate Division, respectively, should be reversed, with costs .in both courts, and the motion denied, with ten dollars costs, and that of the questions certified to us the second and third ones should be answered in the affirmative and the first one should not be answered because it assumes facts which do not appear in the record.
Chase, Ouddeback, Hogan, Cardozo and Pound, JJ., concur; Willard Bartlett, Ch. J., absent.
Orders reversed, etc.
Cases cited
- Jellenik v. Huron Copper Mining Co. 177 U. S. 1 p. 359, p. 368
- Leask v. McCarty 208 N. Y. 635 p. 360, p. 372
- United States Radiator Corp. v. State 208 N. Y. 144 p. 361, p. 367
- In re the Appraisal, under the Legacy & Inheritance Tax Act, of the Property of James 144 N. Y. 6 p. 361
- In re the Appraisal for Taxation of the Property of Bronson 150 N. Y. 1 p. 361
- In re the Appraisal, under the Transfer Tax Act, of the Property of Palmer 183 N. Y. 238 p. 361
- In re the Appraisal, under the Transfer Tax Act, of the Estate of Cooley 186 N. Y. 220 p. 361
- Plimpton v. Bigelow 93 N. Y. 592 p. 361, p. 367
- In re the Appraisal, under the Transfer Tax Act, of the Estate of Jones 172 N. Y. 575 p. 361
- Simpson v. Jersey City Contracting Co. 165 N. Y. 193 p. 361, p. 368
- Lockwood v. United States Steel Corp. 209 N. Y. 375 p. 361
- Pennoyer v. Neff 95 U. S. 714 p. 361, p. 362, p. 369, p. 370
- Jacobus v. Colgate 217 N. Y. 235 p. 362, p. 372
- Miller v. Quincy 179 N. Y. 294 p. 362
- Trotter v. Lisman 209 N. Y. 174 p. 362, p. 373
- Gorham Co. v. United Engineering & Contracting Co. 202 N. Y. 342 p. 362
- Freeman v. Alderson 119 U. S. 185 p. 362
- Arndt v. Griggs 134 U. S. 316 p. 362
- Wetyen v. Fick 178 N. Y. 223 p. 362
- Chesley v. Morton 9 App. Div. 461 p. 362
- Lyon v. Park 111 N. Y. 350 p. 362
- Bergmann v. Lord 194 N. Y. 70 p. 362, p. 372
- Bostwick v. Carr 165 App. Div. 55 p. 362
- International Text Book Co. v. Connelly 206 N. Y. 188 p. 363
- Riverside & Dan River Cotton Mills v. Menefee 237 U. S. 189 p. 363
- Wait v. Kern River Mining, Milling, & Developing Co. 157 Cal. 16 p. 368
- Morgan v. Mutual Benefit Life Insurance 189 N. Y. 447 p. 370