London, Paris & American Bank v. Aronstein

117 F. 601, 54 C.C.A. 663, 1902 U.S. App. LEXIS 4464

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 7, 1902
• Docket: No. 803
• Status: Published

Opinion

HAWLEY, District Judge

(after stating the facts as above). This suit was commenced by Rosalie Aronstein, as executrix of the last will and testament of Adolph Aronstein, deceased, to recover damages against the London, Paris & American Bank, Limited (plaintiff in error herein), for the conversion of 50 shares of the capital stock of the corporation, owned by her deceased husband at the time of his death, she having demanded from the officers of the corporation at its place of business in the city and county of San Francisco, state of California, that said shares be transferred to her as such executrix upon the books of the corporation, and said demand having been met by a refusal. From the averments in the complaint it appears that Adolph Aronstein was a resident of San Francisco at the time of his death, the 27th day of August, 1901; that the defendant is a corporation organized under the laws of England, and is engaged in carrying on a banking business in San Francisco, and “has books in said city and county for the transfer of its capital stock”; that at the time of the demise of Adolph Aronstein he was the owner and possessor of 50 shares of the capital stock of the defendant corporation of the value of $8,500. To this complaint the corporation interposed a general demurrer, which was overruled by the court. Thereafter the corporation filed an answer, setting up the acts of parliament and laws of England, its charter and by-laws (a reference to which is made in the statement of facts), under which it claims that it is not authorized and cannot be compelled to make any transfers of shares of its stock in California which are held by executors or administrators of deceased persons who were residents of this state at the time of their death, “without administration upon such property under the laws of England and Great Britain.” Upon the coming in of this answer the plaintiff in the court below (defendant in error herein) moved the court for judgment in her favor upon the pleadings, which motion was granted. Plaintiff in error contends: (1) That the court erred in overruling the demurrer; (2) that it erred in granting the motion for judgment on the pleadings.

1. Plaintiff in error, in support of its first assignment of error, contends that under the laws of California an executor or administrator does not obtain title to personal property belonging to the estate, but is only entitled to the possession thereof for the payment of debts against the estate and expenses of administration, and argues that the defendant in error had no legal right to have the shares of stock belonging to her husband’s estate transferred to her own name. The answer to this is that she did not demand the transfer of the stock in her own individual name, but did demand “that the officers of said corporation should transfer the said shares of stock on the books of said corporation to plaintiff as executrix of the last will of said Adolph Aronstein, deceased.” Although the plaintiff in the suit might not, at the time she made the demand, have been entitled to have a transfer made to herself individually on the ground that she was the owner, having title to the shares of stock, she, nevertheless, as executrix, had such a special right to the property as would enable her to bring a suit to recover its value if it was wrongfully converted. Halleck v. Mixer, 16 Cal. 574; Jahns v. Nolting, 29 Cal. 507, 510; Ham v. Henderson, 50 Cal. 367, 369. The fact suggested by the defendant in error that Mrs. Aronstein might vote the stock (Railway Co. v. Hellman, 109 Cal. 571, 42 Pac. 225), or be eligible to a corporate office (Cook, Stock & S. § 623; Schmidt v. Mitchell [Ky.] 41 S. W. 929, 72 Am. St. Rep. 427), without having the transfer made on the books of the corporation, does not change the rule. The transfer of the shares of stock is a right to which, under the law of California, she is entitled, irrespective of other privileges given her by law. In Ralston v. Bank, 112 Cal. 208, 213, 44 Pac. 476, 477, the court said:

“Wo are not convinced that there is any fiction in ascribing the term ‘conversion’ to the defendant’s refusal; but, however this may be, there is at the present day no difficulty in applying the remedy which was afforded by the common-law action of trover to a case where the owner of corporate shares has been wrongfully deprived thereof, even though his possession of the certificate evidencing his title has not been disturbed. Payne v. Elliot, 54 Cal. 339, 35 Am. Rep. 80. See People v. Williams, 60 Cal. 1; Dodge v. Meyer, 61 Cal. 405. ‘It may be stated as a rule,’ says an eminent author, though he dissents from its principle, ‘that, where a corporation refuses to allow a transfer of shares upon its hooks, the assignee may treat this as a conversion of his shares, and sue the company for their value.’ Mor. Priv. Corp. § 217. Such is the law as declared and enforced in this state. Kimball v. Water Co., 44 Cal. 173, 13 Am. Rep. 157; Fromm v. Mining Co., 61 Cal. 629. A suit in equity, where registration of the transfer may he compelled, or damages recovered as an alternative, may he preferable, but it is not exclusive of the remedy invoked in this action. Mor. Priv. Corp. §§ 216-221; Cook, Stock & S. §§ 289-292.”

The executrix was entitled to the dividends, if any, on the shares of stock, and she was entitled to have the shares of stock transferred upon the books of the company to enable her to draw such dividends. In Low. Tr. Stocks, § 137, it is said:

“If a corporation refuses, without lawful excuse, to transfer stock upon its hooks .* * * to the purchaser, the latter may treat the refusal as a complete denial of his ownership, and he may, therefore, sue the corporation, and recover the full value of the stock, as in a suit for the conversion of a chattel at common law.”

The court did not err in overruling the demurrer.

2. The second assignment of error presents the question whether the constitution and statutes of the state of California or the acts of parliament and laws of Great Britain govern the question at issue. In the consideration of this question it must be remembered that during the time of all the transactions between the parties relative to the shares of stock in controversy Adolph Aronstein was, in his lifetime, a citizen and resident of the city of San Francisco, Cal., and that all of said business transactions occurred between the parties in the city and county of San Francisco. Preliminary to any discussion on the main point involved herein, it is deemed best to refer to a few of the many provisions in the charter and by-laws of the corporation. The prohibition against the transfer of the shares of stock where the holder thereof is indebted to the corporation has no application to a case like the present. Mrs. Aronstein legally represents the decedent. As such she is entitled to the possession of the shares of stock held by him in his lifetime as a part of the estate. If the corporation had any lien thereon for any part of the unpaid purchase price, it would not be lost by a transfer of the stock to her on the books of the company as the executrix of the estate. The lien on the shares, if any existed at the time of his death, would remain after such a transfer the same as before. The clause as to the form of the transfer has relation only to cases where the transferror and transferee are both living. How could the owner of the stock after his death join with his executrix in signing the form prescribed by the by-laws for the transfer of the stock on the books of the corporation? The application for the transfer of the shares of stock as demanded by the defendant in error .did not have to be presented to the home secretary of the corporation for examination. Article 14 of the by-laws of the corporation, and the resolution passed on the 15th day of May, 1899, allow the transfer of the stock, if otherwise legal, to be made in San Francisco, Cal., and the constitution of California requires it to be so transferred. It is deemed unnecessary to notice any of the other provisions of the bylaws of the corporation. It is evident from a perusal thereof that they constitute no defense to this action, except upon the theory that the corporation was not required to make the transfer until there was an administration upon the estate of Dr. Aronstein, deceased, in Great Britain. If the defendant in error be compelled to have the estate administered upon in England, she will, in addition to the expense incident thereto, be required to pay an inheritance tax to the English government of about $600; but if the law, as applied to the facts herein, demands that such steps must be taken, she will have to bear this extra burden. Does the law require it ? It must be conceded that, if there were no provisions in the constitution or statutes of California relating to or governing this question, the laws of Great Britain and the articles or memorandum of association of the plaintiff in error, which constitute its charter, would prevail.

In Relfe v. Rundle, 103 U. S. 222, 225, 26 L. Ed. 337, the court said:

“No state need allow the corporations of other states to do business within its jurisdiction unless it chooses, with perhaps the exception of commercial corporations; but, if it does, without limitation, express or implied, the corporation comes in as it has been created. Every corporation necessarily carries its charter wherever it goes, for that is the law of its existence. It may be restricted in the use of some of its powers while doing business away from its corporate home, but every person who deals with it everywhere is bound to take notice of the provisions which have been made in its charter for the management and control of its affairs both in life and after dissolution.”

In Railroad Co. v. Gebhard, 109 U. S. 527, 537, 3 Sup. Ct. 363, 369, 27 L. Ed. 1020, the same principle is announced with greater elaboration. Among other things, the court said:

“A corporation ‘must dwell in the place of its creation, and cannot migrate to another sovereignty’ (Bank v. Earle, 13 Pet. 588, 10 L. Ed. 274), though it may do business in all places where its charter allows and the local laws do not forbid (Railroad Co. v. Koontz, 104 U. S. 12, 26 L. Ed. 643). But wherever it goes for business it carries its charter, as that is the law of its existence (Relfe v. Rundle, 103 U. S. 226, 26 L. Ed. 337), and the charter is the same abroad that it is at home. Whatever disabilities are placed upon the corporation at home it retains abroad, and whatever legislative control it is subjected to at home must be recognized and submitted to by those who deal with it elsewhere.”

See, also, Phosphate Co. v. Perry, 20 C. C. A. 490, 74 Fed. 425, 428, 33 L. R. A. 252; Murfree, Foreign Corp. § 18; Story, Confl. Laws, § 23. _

_ In line with these general principles it has been held that the validity of the assignment to pass title to stock in a corporation depends upon the law of the domicile of the corporation. Black v. Zacharie, 3 How. 483, 511, 11 L. Ed. 690; Green v. Van Buskirk, 7 Wall. 139, 19 L. Ed. 109; George H. Hammond & Co. v. Hastings, 134 U. S. 401, 10 Sup. Ct. 727, 33 L. Ed. 960; Masury v. Bank (C. C.) 87 Fed. 381. These and other authorities of like import are cited by the plaintiff in error as sustaining the proposition that the laws of Great Britain are paramount. Within the limits stated, they are recognized as controlling; but not beyond. The constitution and statutes of California, which are copied in the statement of facts, must also be examined, construed, and given the full weight to which they are entitled. What is the result? When the plaintiff in error came to California for the purpose of transacting its business, it brought its charter with it as evidence of the laws of its existence, of its right to do business. It might, if the state of California had deemed it proper, have been excluded from the transaction of business in this state. But under its laws she chose to permit such corporation to do business within her borders, subject to certain conditions and regulations prescribed by her constitution or imposed by statutory regulations., Recognition of its existence in other states, and enforcement of its contracts made therein, rest upon comity, and not upon inherent right. Under this comity California extends to foreign corporations the privilege of exercising the powers conferred by their charters beyond the limits of the country wherein they have their origin and existence. The only restriction on this rule of comity is that in giving effect to the foreign laws the state has properly taken the precaution to prescribe regulations and impose certain conditions, in order that no wrong, injury, or injustice may be done to its own citizens, and to see that the policy of its own laws is in no way contravened or impaired. This comity embraces and recognizes the artificial person which the foreign country created with all its capacities, obligations, liabilities, and powers. In Hooper v. California, 155 U. S. 648, 655, 15 Sup. Ct. 207, 210, 39 L. Ed. 297, the court said:

“The state of California has the power to exclude foreign insurance companies altogether from her territory, whether they were formed for the purpose of doing a Are or a marine business. She has the power, if she allows any such companies to enter her eonAnes, to determine the conditions on which the entry shall be made. And, as a necessary consequence of her possession of these powers, she has the right to enforce any conditions imposed by her laws as preliminary to the transaction of business within her eonAnes by a foreign corporation, whether the business is to be carried on through officers or through ordinary agents of the company, and she has also the further right to prohibit a citizen from contracting within her jurisdiction with any foreign company which has not acquired the privilege of engaging in business therein, either in his own behalf or through an agent empowered to that end. The power to exclude embraces the power to regulate, to enact and enforce all legislation in regard to things done within the territory of the state which may be directly or incidentally requisite in order to render the enforcement of the conceded power efficacious to the fullest extent, subject always, of course, to the paramount authority of the constitution of the United States.”

Noble v. Mitchell, 164 U. S. 367, 370, 17 Sup. Ct. 110, 41 L. Ed. 472; Insurance Co. v. Spratley, 172 U. S. 602, 621, 19 Sup. Ct. 308, 43 L. Ed. 569; Waters-Pierce Oil Co. v. Texas, 177 U. S. 28, 46, 20 Sup. Ct. 518, 44 L. Ed. 657; Insurance Co. v. Cravens, 178 U. S. 389, 396, 20 Sup. Ct. 962, 44 L. Ed. 1116; Diamond Glue Co. v. United States Glue Co. (C. C.) 103 Fed. 838; Williams v. Gaylord, 42 C. C. A. 401, 102 Fed. 372, 375, affirmed in decision of supreme court (recently decided) 22 Sup. Ct. 798, 46 L. Ed. 1102.

We are of opinion that the constitution and laws of California, as quoted in the statement of facts, apply to the present corporation, and govern and control its business conducted within the state.

It is true that the courts in California cannot control the internal affairs of any foreign corporation. Such matters are to be conducted in pursuance of and in compliance' with the provisions of the charter of the foreign corporation, and the laws of the country where it was created; but in the management and method of its business affairs in California with the citizens and residents thereof, in the sale or disposition or transfer of the shares of stock, it must conform to the laws of California in relation to such matters, and is bound thereby. In the recent case of Williams v. Gaylord, supra, the supreme court of the Unitéd States said:

“When a corporation sells or Incumbers Its property, incurs debts, or gives securities, It does business; and a statute regulating such transactions does not regulate the internal affairs of the corporation. And it is certainly within the power of a state to say what remedies creditors of corporations shall have over property situated within the state. * * * And we have no doubt of the power of the state to so prescribe, not only from its power over the manner of conveyance and the disposition of property situated within the state, but from its power over foreign corporations doing business within the state.”

The defendant in error was entitled to have the transfer of the stock made upon the books of the company in her name as executrix of the estate of her deceased husband, under the laws of the state of California, and this right could not be denied to her because the estate was not administered upon at the domicile of the corporation in Great Britain.

The principles applicable to this case are analogous to those which are found in many insurance cases where the doctrine contended for by the insurance corporations was that letters of administration upon the estates of parties insured must be taken out at the domicile bf the corporation. In Insurance Co. v. Woodworth, in U. S. 138, 144, 4 Sup. Ct. 364, 366, 28 L. Ed. 379, the court said:

“In the growth of this country, and the expansions and ramifications of business, and the free commercial intercourse between the states of the Union, it has come to pass that large numbers of life and fire insurance companies and other corporations, established with the accumulated capital and wealth of the richer parts of the country, seek business and contracts in distant states which open a large and profitable field. The inconveniences and hardships resulting from the necessity on the part of creditors of going to distant places to bring suits on policies and contracts, and from the additional requirement, in case of death, of taking out letters testamentary or of administration at the original domicile of the corporation debtor, in order to sue, has led to the enactment in many states of statutes which enable resident creditors to bring suits there against corporations created by the laws of other states. * * * In view of this legislation and the policy embodied in it, when this corporation, not organized under the laws of Illinois, has, by virtue of those laws, a place of business in Illinois, and a general agent there, and a resident attorney there for the service of process, and can be compelled to pay its debts there by judicial process, and has issued a policy payable on death to an administrator, the corporation must be regarded as having a domicile there, in the sense of the rule that the debt on the policy is assets at its domicile, so as to uphold the grant of letters of administration there.”

The averments in the answer constitute no defense to this suit. The j'udgment of the circuit court is affirmed, with costs.

. See Corporations, vol. 12, Cent. Dig. §§ 513, 514.

4. Foreign corporations “doing business” in state, see note to Wagner v. Meakin, 33 C. C. A. 585.