Gilbert v. Manchester Iron Manufacturing Co.

Majority

p. 628

H. S. Gilbert as. Manchester Iron Manufacturing Company.

Headnote

Á transfer by a stockholder of his stock in an incorporated or joint stock company passes his interest to the purchaser, although the transfer be not made in conformity to the rules and by-laws of he company.

After such transfer, the former owner is a competent witness for the defendants in an action against the company, without showing that the transfer was made in conformity to the by-laws.

On the hearing of this cause before referees, in July, 1831, a witness offered by the defendants was objected to by the plaintiff, on the ground of interest; and it was proved that he had been reputed to be a stockholder, and had acted as the president of the company. The defendants proved that the mode of transferring stock, as used by the company was, for the stockholder to surrender his scrip or certificate of stock to the company, who issued new scrip to the purchaser; that an entry of the transfer was made on the margin of the scrip book and signed by the seller, and that the company or owners of the stock had no other evidence of the ownership of stock; and then proved an entry made in the margin of the certificate of scrip, signed by the witness, that the witness had transferred in the early part of the month of June, then last, *all his stock in the company. This evidence was objected to by the plaintiff as insufficient, unless the defendants produced the bylaws of the company, so that it might seem that the transfer was in conformity

p. 629

to such laws ; the plaintiff alleging that by the by-laws of the company, a stockholder, intending to make a transfer, was required to give notice of such intention to the secretary of the company a certain number of days previous to the transfer ; to obtain the consent of the trustees to the transfer; and that no transfer could take place while the stockholder was indebted to the company. The by-lays were not produced, and the witness was excluded. The referees having made a report in favor of the plaintiff, the defendants, on the ground that the referees had erred in excluding the witness offered, and also upon the merits, moved to set aside the report.

M. T. Reynolds, for the defendants.

N. P. Randall and J. A. Spencer, for the plaintiff.

By the Court,

When it was proved that the witness had transferred all his stock, he was then devoid of any interest in the event of the suit, which is the point of inquiry when a witness is presented; whether he had so parted with his interest as to transfer it free from all encumbrances to the assignee is not the question. The rules and by-laws of a company which prohibit any transfer except upon the books of the company and upon notice, and sometimes all transfers, unless a certain number of days intervene before an election, have reference either to the right of voting, or to the security of the company by way of a lien upon the stock for any indebtedness of the stockholder, and do not incapacitate such stockholder from parting with his interest. The purchaser acquires the right of the property which the seller had. _ If the stock is under encumbrance, it remains so; if it cannot be voted upon unless transferred twenty days before an election, and the transfer is made ten days previous, then it cannot be represented in that election ; but the owner is not compelled to be owner against his will and against his interest. This very *question arose in the case of the Utica Bank v. Smalley, 2 Cowen, 770, where a witness, who in court after he was called to testify transferred-his stock in a bank, was held to be competent. The report must therefore be set aside for the error of the referees in excluding the witness. Upon the merits the court gave no opinion.