Joslin v. Shareholder Services Group

948 F. Supp. 627, 1996 U.S. Dist. LEXIS 18114, 1996 WL 699497
CourtDistrict Court, S.D. Texas
DecidedOctober 28, 1996
DocketCivil Action No. H-96-0537
StatusPublished
Cited by1 cases

This text of 948 F. Supp. 627 (Joslin v. Shareholder Services Group) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Joslin v. Shareholder Services Group, 948 F. Supp. 627, 1996 U.S. Dist. LEXIS 18114, 1996 WL 699497 (S.D. Tex. 1996).

Opinion

MEMORANDUM AND ORDER GRANTING MOTION TO DISMISS

HOYT, 'District Judge.

The Court considers the defendants’ motion to dismiss the plaintiffs complaint for failure to state a claim upon which relief can be granted. Based upon a review of the complaint and the facts as alleged by the plaintiff, as well as the responses and briefs by both parties, the Court grants the defendants’ motion to dismiss.

I. Statement of Facts and Procedural History

The plaintiff in this suit, Dennis Joslin, purchased from the Federal Deposit Insurance Corporation (FDIC) a promissory note and a security interest in shares of stock pledged as collateral for the note. The stock consisted of 22,904 shares of stock in Distributive Network of America, Inc. (Distributive), which had merged with a subsidiary of The Shareholder' Services Group (TSSG) to form Actuarial Computer Technology, Inc. (ACTI). The FDIC had acquired the note and the security interest when it was appointed receiver for the defunct Metropolitan National Bank (Metropolitan). The note, made payable to Metropolitan, was executed by John Thomas Pass for the principal amount of $300,252.97. The note matured in 1990, but remained unpaid while Pass was engaged in bankruptcy proceedings. When Pass was discharged from bankruptcy in 1991, the debt was also discharged as a personal obligation. However, the FDIC’s lien on the stock survived the discharge, and in 1992, the bankruptcy court permitted the FDIC to foreclose its lien.

Unbeknownst to the FDIC, on October 29, 1993, Pass presented TSSG with an affidavit claiming that the original stock certificates had been mislaid, lost, stolen, or destroyed and sought payment for the stock. He also failed to mention the FDIC’s lien on the stock. TSSG paid Pass a total of $97,000 for the stock, without knowledge that the original stock certificates were in the possession of the FDIC.

At issue in this case is the written restriction on alienation printed on the face of the stock certificates. The restriction states,

NONE OF THE SHARES EVIDENCED BY THIS CERTIFICATE SHALL BE SOLD, TRANSFERRED, PLEDGED OR ASSIGNED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, AS A SALE, TRANSFER, PLEDGE OR ASSIGNMENT OF SUCH SHARES MAY BE CONSTRUED TO CONSTITUTE A VIOLATION OF THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, AND/OR THE SECURI[629]*629TIES OR “BLUE SKY” LAW OF ONE OR MORE STATE JURISDICTIONS.

The question for resolution is whether the Metropolitan Bank, and later the FDIC and the plaintiff, received any interest in the stock when Pass pledged the stock to the bank in violation of this express restriction.

The plaintiff seeks a declaratory judgment that he is the owner of the stock certificates. He also seeks all dividends and stock splits that have accrued since the FDIC acquired the shares. In the alternative, the plaintiff requests an accounting of all monies paid by or to the defendants and a judgment against the defendants, jointly and severally, for that amount. The plaintiff also prays for a foreclosure of his security interest.

The defendants,1 TSSG and ACTI, counter that the plaintiffs complaint on its face shows that he is not a stockholder entitled to any relief because his claim to the stock is only as an assignee, having taken the stock as collateral for a loan. Because of the stock restriction that conspicuously appears on the face of the stock certificates, the bank never received a valid pledge and the plaintiff acquired no greater rights than the bank.

II. Discussion and Authorities

A The Standard for Granting a Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The Court initially denied the motion, but upon reconsideration, is of the opinion that the motion should be granted. In considering whether to grant a motion to dismiss, a court considers the allegations in the complaint, as well as any attached exhibits. Burch v. Apalachee Community Mental Health Services, Inc., 840 F.2d 797, 798 (11th Cir.1988); 5A Wright & Miller, Federal Practice and Procedure § 357 (1990); see also Case v. State Farm Mutual Automobile Insurance Co., 294 F.2d 676, 676-77 (5th Cir.1961) (dismissing complaint based on written contract attached to complaint as an exhibit). The court must construe the complaint in the light most favorable to the plaintiff, taking the allegations as true. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Miller v. Stanmore, 636 F.2d 986, 988 (5th Cir.1981). Because courts disfavor motions to dismiss for failure to state a claim, Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982), it must appear “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

In the instant case, the plaintiffs allegations are immaterial and fail to state a claim, if he never obtained an interest in the stock. Pass’s pledge of the stock to Metropolitan Bank, in violation of the express restriction on the face of the stock certificates, requires this Court to determine whether any interest in the stock passed to Metropolitan and, subsequently, to the plaintiff when he purchased the instruments.

To determine whether any interest in the stock passed to Metropolitan, and eventually to the plaintiff, the Court must first determine whether Pass violated the restriction on the face of the stock certificates when he pledged the certificates to Metropolitan as collateral for his note. Assuming that the restriction is enforceable under Delaware law, what is the effect of the violation on subsequent takers of the certificates? The Court begins with a discussion of whether the stock restriction was violated.

B. Was There a Violation of the Stock Restriction?

The stock certificates provide, in boldface, capitalized type on the front of the certificates, that the shares shall not be “SOLD, TRANSFERRED, PLEDGED OR ASSIGNED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY.” When Pass gave the certificates to Metropolitan as collateral for the note, he [630]*630undoubtedly “pledged” them to the bank. A “pledge” is a “bailment of goods to a creditor as a security for some debt or engagement,” or “a security interest in a chattel or intangible represented by an indispensable instrument ..., the interest being created by a bailment for the purpose of securing the payment of a debt or the performance of some other duty.”

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Timberland Bancshares, Inc. v. Garrison (In re Lee)
462 B.R. 666 (W.D. Arkansas, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
948 F. Supp. 627, 1996 U.S. Dist. LEXIS 18114, 1996 WL 699497, Counsel Stack Legal Research, https://law.counselstack.com/opinion/joslin-v-shareholder-services-group-txsd-1996.