Scott v. Flint River Pecan Co.

126 S.E. 769, 159 Ga. 668, 1925 Ga. LEXIS 36

• Court: Supreme Court of Georgia
• Decided: January 14, 1925
• Docket: No. 4144
• Status: Published

Opinions

Hill, «I.

The judgment complained of in this ease was rendered at an interlocutory hearing. No demurrer was filed to the original petition, complaining that an equitable petition would not lie, and that the plaintiff had an adequate remedy by mandamus. Indeed had there been such a demurrer it could not have been expressly ruled upon at the interlocutory hearing before the first term. The trial judge, in refusing the injunction prayed for, put his decision upon the ground that the petition seeks mandatory relief. This ordeT of the court is excepted to, “because the same is contrary to law and that the plaintiffs were not entitled to the relief sought as a matter of law.” The relief sought was twofold: first, an injunction was prayed to prevent the defendants from interfering with the alleged right to examine the books of the company; and second, a decree requiring the company to make a transfer of the stock involved in the present case on the books of the company in the name of the plaintiffs. The question arises, first, whether the mandatory relief is forbidden by the statute as contained in our code and the decisions of our courts. Our attention has been called to certain decisions of this court which hold that in a case like the present mandamus will not lie, but that an equitable petition praying for injunction and incidentally for equitable relief is a proper remedy. Thus, in Bank of the State of Georgia v. Harrison, 66 Ga. 696, it was held that “Mandamus will not lie to compel the officers of a bank to transfer stock from a vendor to a purchaser, under a judicial sale; in that case the bank official becomes a public officer pro hac vice.” Following the decision in the Harrison case was Terrell v. Ga. R. &c. Co., 115 Ga. 104 (41 S. E. 262), where the Harrison case was cited with approval, and where this court held: “1. The remedy of mandamus does not lie to compel the transfer of stock in an incorporated company, except in the case of a judicial sale thereof. 2. An order granted by a judge of the superior court, appointing a trustee for a designated person and authorizing such trustee to sell described stock in a railroad company, in which that person has an interest, does not bring the case within the exception indicated above, and, as a consequence, afford a proper basis for a mandamus against "the company compelling it to transfer the stock in question to the trustee, in order that he may make a sale of the same under and by virtue of such order of the court.” In delivering the opinion of the court in the Terrell case, Fish, J., said: “¥m, IT. Terrell was appointed trustee of Elise Beattie et al., by the judge of the superior court of Fulton County, who also granted an order authorizing the trustee to sell certain shares of the capital stock of the Georgia Railroad & Banking Company and to reinvest the proceeds of the sale in other property, to the use of the 'beneficiaries, under the direction of the court. Although the stock belonged to the beneficiaries, it stood upon the books of the corporation in the names of two other persons, the trustee holding certificates of stock which were in the names of such persons. The trustee, for the purpose of selling the stock, in accordance with the order granted by the judge, demanded of the railroad company that it should transfer the stock on its books to himself as such trustee, and issue to him a certificate for the same. The company refused to comply with this demand; whereupon the trustee petitioned the judge of the superior court of Eichmond County, in which county the principal office of the company was established, for the writ of mandamus to compel the company to comply with his demand above stated. The railroad company demurred to the petition, one of the grounds of demurrer being that mandamus was not the proper proceeding for the relief which the petitioner sought. The court sustained the demurrer and refused to grant the writ of mandamus, to which ruling the petitioner excepted.” In affirming the judgment of the court below it was further said: “Whatever may be the rulings of other courts upon the subject, it is unquestionably true that, under the statutes of this State and the former adjudications of this court, his honor committed no error in the decision to which exception was taken. Our Civil Code contains the following provisions: 'All official duties should be faithfully fulfilled, and whenever, from any cause, a defect of legal justice would ensue from a failure or improper fulfillment, the writ of mandamus may issue to compel a due performance, if there be no other specific legal remedy for the legal rights’ (§ 4867). 'Mandamus does not lie as a private remedy between individuals to enforce private rights, . . ’ (§ 4868). 'A private person may by mandamus enforce the performance by a corporation of a public duty as to matters in which he has a special interest’ (§ 4869). Basing the decision upon these provisions of the code, this court, in Bank v. Harrison, 66 Ga. 696, held: 'Mandamus will not lie to compel the officers of a bank to transfer stock from a vendor to a purchaser, except under a judicial salé; in that case the bank official becomes a public officer pro hac vice.’ The ruling in that case, we think, is conclusive of the case in hand. While a railroad company is a quasi-public corporation, and, as such, owes many im: portant duties to the public, the duty of transferring its stock from one person to another is no more a duty which it owes to the public than it is the duty 'of the officers of a bank to transfer its stock from a vendor to a purchaser. In Bailey v. Strohecker, 38 Ga. 259 (95 Am. D. 388), it was held that where a sheriff sold capital stock of a corporate company, and, in accordance with the statute, gave a certificate of purchase to the highest bidder, on presentation of such certificate to the proper officer of the corporation it was his duty to make the necessary transfer of the stock to the purchaser on the books of the company; that in such a case the proper officer of the corporation is, under the statute, pro hac vice, a public officer charged with the duty of making the transfer; and if he refuses to do so, mandamus is a proper remedy to compel performance oE the duty. It will be seen, however, that the decision in that case Avas put upon the statute (now embodied in the Civil Code, § 4537), providing that 'certificates of purchase shall be granted by the officer selling [corporate stock] as prescribed in eases of executions, and on presentation of such certificates to the proper officer of such corporation, it shall be his duty to make such transfer on his books, if necessary, and afford the purchaser such evidence of title to the stock purchased as is usual and necessary to other stockholders.’ Counsel for the plaintiff in error contend that 'the trustee here is not acting in his individual capacity, but is the agent of the law, and it is the duty of .the court that appointed him to place him in possession, just as much as it was the duty of the sheriff in the 66 Ga. case, and the officers in the one case (of the corporation) are acting in a public capacity for the law just as much as in the other. In other words, the trustee in this case is a representative of the court and the laAV, and it is the duty of the law to put him in possession of what the court and the law has constituted him the custodian of,’ and mandamus is the proper remedy. We can not agree to this contention. The decision in the 38 Ga., as we have said, was based solely upon the statute.The facts of the present case do not bring it within the scope of the statute. If the trustee had sold the stock in accordance with the order authorizing him to do so, and the company had, upon demand of the purchaser, refused to transfer the stock to him and to give him a certificate therefor, such a case would be more nearly analogous to the case of Bailey v. Slrohecker, supra, than the ease made by the facts in this record; but we are not prepared to say that even in such hypothetical case the writ of mandamus would lie ¡n behalf of the purchaser, against the company refusing to make the transfer.”

In Thornton v. Martin, 116 Ga. 115 (42 S. E. 348), it Avas held: “Where one purchases shares of stock in a railroad company, and the vendor and the agents of the company refuse to recognize the validity of the sale or to allow a transfer on the books of the company, the purchaser may bring an equitable proceeding against the vendor and the company to restrain the former from disposing of the stock or interfering with its transfer, and to compel the company to make the transfer and receive the purchaser as a shareholder. There is in such a case no misjoinder of parties or of causes of action.”

We are unable to distinguish the principle ruled in these cases from the one involved in the case at bar; and applying those principles here, we are forced to the conclusion that mandamus will not lie, but that an equitable petition seeking the relief win lie. We are of the' opinion that the relief sought in the present case is not of such mandatory character as is forbidden by the statute as contained in our code. Of course mandatory relief could not be granted at an interlocutory hearing. The relief sought is by those who hold stock in a corporation by assignment, to examine the books of the corporation at reasonable hours and under reasonable circumstances in order to protect their own interests.

The transfers on the certificates of stock attached to the amendment were, at the time of the trust agreement, signed by Foy & Shemwell, by H. H. Hedrick, in blank, and were delivered to the plaintiffs, who later filled in the blanks by inserting the words “Townsend Scott and Arnold Elzey Waters as trustees,” and also the words “the proper officers of the Flint River Pecan Co.” The following is a copy of one of the certificates of stock and the transfer of the same as appears in the record; the other certificates and transfers being in like form:

“Certificate for 40Ó Shares of the Capital Stock Flint River Pecan Company, Albany, Georgia.

“Issued to Foy & Shemwell, Date Mch. 22, 1922.

“Incorporated under the laws of Georgia.

“Number 142 ' Shares 400.

“Flint River Pecan Company, Albany, Ga.

“This certifies that Foy & Shemwell is the owner of four hundred shares of the capital stock of Flint River Pecan Company, transferable only on the books of this corporation in person or by attorney upon surrender of this certificate properly endorsed.

“In witness whereof, the said corporation has caused this certificate to be signed by its duly authorized officers and its corporate seal to be hereunto affixed, this 22nd day of March, A. D. 1922. Corporate Seal

“Flint River Pecan Company, Albany, Georgia.

“Attest: [Signed] Dermot Shemwell, President, fm. L. Lee,

Jr., Secretary.

“Shares $100.00 each.

“For value received, we hereby sell, assign, and transfer unto Townsend .Scott and Arnold Elzey Waters, as trustees, four hundred (400) shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint the proper officers of Flint River Pecan Co. attorney to transfer the said stock on the books of the within named corporation with full power of substitution in the premises. Dated-19--.

[Signed] Foy & Shemwell, by H. H. Hedrick.

“In Presence of W. L. Crawford (Signed).

“Notice: The signature of this .assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever.”

The question, is, therefore, what is the effect of this transfer of the stock by Foy & Shemwell in blank to the plaintiffs in the court below? In this State it is not necessary that stock in a corporation be reissued on the books of the company, in order for the holder to be entitled to the rights of a stockholder. Civil Code (1910), § 2219. In Thompson v. Selcer, 142 Ga. 809 (83 S. E. 965), it was held: “If an owner of corporate stock transferred the certificate thereof to another under an agreement that the latter should negotiate, use, or hypothecate the stock and use the proceeds for the benefit of the transferor in the advancement of an enterprise in which both were interested, and if such stock was levied on under an execution against the transferee and sold at sheriff’s sale to a purchaser bona fide, for value, and without notice of any equity in the transferor, the purchaser obtained a title superior to the claim of tire transferor growing out of the agreement as to the application of the proceeds.” In delivering the opinion of the court Mr. Justice Lumpkin said: “Where an owner of a number of shares of stock in a corporation endorsed the certificate thereof in blank and delivered it to another person for the purpose of being negotiated, with an agreement that the proceeds should be used for the benefit of the original owner, this passed' the title to the stock into such transferee. A transfer of a stock certificate may be made without naming the transferee; and, except as against the claims of the corporation, the transfer of stock does not require a transfer on the books of the company. Cook on Stock and Stockholders (3d ed.), § 380; Civil Code (1910), § 2219.” A stockholder may exercise the right as such though the beneficial interest in such stock is in another. Sylvania & Girard R. Co. v. Hoge, 129 Ga. 734 (2) (59 S. E. 806).

In 7 R. C. L. 265, § ,243, it is stated: “In America the courts, have held that it is only necessary to a valid transfer, as between the parties, that the assignment and power of transfer should be in writing. The common practice of passing the title to stock by delivery of the certificate, with blank assignment and power, has been repeatedly shown and sanctioned in cases which have come before our courts. It has also been stated by- repeated adjudications that, as between the parties, the delivery of the certificate with assignment and power passes the property in the shares, notwithstanding that by the terms of the charter or by-laws of the corporation the stock is declared to be transferable only on its books.” The same author (p. 274, § 252) says: “The transfer and assignment of stock in a corporation, either by absolute sale or by way of pledge as security for a deht, passes to the vendee or pledgee the title thereto.” And-see, to the same effect, Parker v. Bethel Hotel Co., 31 L. R. A. 706, 713. In 7 R. C. L. 281, § 258; the same author declares that “There can be no doubt but that a pledgee of stock has a right to cause a proper entry of the transaction between himself and his pledgor to be entered upon the books of the corporation for his protection, although the contract may be silent on the subject. A pledgee of corporate stock has such an interest therein as entitles him to be heard in a court of equity concerning the preservation and protection of the assets and property of the corporation. His rights in this respect would seem to be essentially the same as those of the owner of stock, for a loss of corporate assets must result in a depreciation in the value of the stock and a consequent impairment of his security.” In 2 Cook on Corp. (7th ed.) 1279, § 466, the author says: “Where certificates of stock endorsed in blank are delivered to a person as pledgee as collateral security for a debt, or for any other purpose, the pledgee has a right to fill in the blanks and have the stock registered in his own name on the corporate books.”

In Guarantee Co. v. East Rome Town Co., 96 Ga. 511 (23 S. E. 503, 51 Am. St. R. 150), it was held: “Where stock of a corporate company is pledged by the owner as collateral security for the payment of a debt, the pledgee is, as a general rule, entitled to collect- and receive the dividends thereof, unless this right is reserved by the pledgor at the time the pledge is made.” In Hardman v. Barrow, 147 Ga. 617 (95 S. E. 209), it was held: “Where oshares of stock were unqualifiedly assigned in writing, with express power to have them transferred on the books of the corporation, and the assignee received the certificates of stock as collateral security for a negotiable promissory note made to him by the assignor, the former or his assigns could surrender' the certificates to the corporation, and receive a certificate of the same character for an equal number of shares in his own name, to be held as collateral security for the debt, and, while so holding, could vote the stock at corporate elections held under the by-laws of the corporation, which provided that no person should have the right'to vote stock except those in whose names the stock stood on the books of the company. 22 Am. & Eng. Enc. of Law, 907; Jones, Col. See. (3d ed.) § 441; Colebrooke, Col. Sec. 493; 10 Cyc. 332.”

The petition in the present case comes within the requirements of Winter v. So. Securities Co., 155 Ga. 590 (118 S. E. 214), where this court held: “A bona fide stockholder has the legal right to inspect the books and records of the company, where the examination is asked for in good faith for a specific and honest purpose, and not to gratify curiosity, or for speculating or for vexatious purposes; and provided further that the purpose of the stockholder desiring to make the examination is germane to his interest as a stockholder, proper and lawful in character, and not inimical to the interests of the corporation itself, and the inspection is made during reasonable business hours. 14 C. J. 855; 7 R. C. L. 322, § 298 et seq.; Cook on Corporations (7th ed.), § 511; Thompson on Corn. (2d ed.) § 4515.”

From the foregoing facts and authorities we reach the conclusion that the title to the stock is in the pledgee; and that being so, the owner of the title would have the right to investigate the books of the company in order to ascertain the condition of the company, and whether its assets are being properly protected.

As to the relief sought, viz., a decree requiring the corporation to make a transfer of the stock on the books of the corporation, that was not a subject-matter of relief at the interlocutory hearing, and the court did not err in refusing the injunction for this reason. But inasmuch as the stockholders have .the right to examine the books of the corporation under reasonable regulations, and the evidence showed that they were denied this right, the injunction for this reason should have been granted.

Judgment reversed.

All the Justices concur.