Tide Water Pipe Co. v. Kitchenman

Mr. Justice Gordon delivered the opinion of the court, March 9th, 1885. The attachment in this case was served upon the plaintiff in error on the 9th of April, 1884. The attached stock, as appears by the answers, had been regularly assigned, by D. B. Stewart, the defendant in the Kitchenman judgment, on the 3d day of December 1883, to George W. Colton, with an irrevocable power of attorney to W, S. Benson to make the necessary transfers, and on the same day a like assignment was made, by Stewart to Colton, of all and every other claim or claims-which the former then had against the Tide Water Pipe Company, garnishee as aforesaid. Thus before the levying of the attachment every interest which Stewart had previously owned in or against the company, whether in the shape of stock or indebtedness, had passed to Colton. About the facts as above stated there seems to have been no controversy in the court below. Nevertheless the learned judge of that court was of opinion that no transfer of the stock could be made effectual without a strict compliance with the company’s tenth rule, and that as the transfer and acceptance of the 11th of August, 1884, were the first and only formal papers executed according to the provisions of the rule, no title passed, either to the shares or dividends, to Colton before that time, and, therefore, entered judgment against the company on its answers. We cannot see how a judgment of this kind can be sustained either on authority or the facts of the case. We held in Finney’s Ap., 9 P. F. S., 398, on the author [636] ity of the Commonwealth v. Watmough, 6 Wharton, 117, and of the Building Association v. Sendmeyer, 14 Wr., 67, that title to the stock of a corporation passed to a purchaser at the time, of the delivery of the certificate and power of attorney, and the fact that the stock was transferable only on the books of the company made no difference. So, in the case of the United States v. Vaughan, 3 Bin., 394; when stock of the' United States Bank had been transferred in a similar manner, it was held that it could not be attached as the property of the vendor. The garnishee however, in this case, is not a corporation but a limited partnership, organized under the Act of June 2d, 1874-, (Ph. L. 271), and it follows that unless there is in the Act some prohibition of the transfer of a partner’s interest, such transfer may be made by a simple assignment. Section 4, however, authorizes such a disposition of a partner’s stock “under such rules and regulations as the association may prescribe.” .Of course this gives force to rule 10, under which the learned judge ruled this case against the garnishee, and as that rale is an important element in the pending action we give it in full, as follows: “interests in said association shall only be transferred upon the transfer book of said association in person or by proxy, and in such form as shall be prescribed or adopted by the board of managers, and upon the surrender of the certificates therefor; but no transfer shall be made of any fractional part of a share or of a less amount of capital than one hundred dollars. No change of ownership can be accomplished in any other mode or form, or by any other means than a transfer as above specified; provided, however, that until some other form shall be prescribed by the board of managers, such transfers shall be in the following form.” Then come the prescribed forms which were duly executed by David B. Stewart and< George W. Colton, by their, several attorneys, on the 11th of August, 1884, and are the papers referred to in the opinion of the court below. Now, the learned judge emphasizes the expression “-No change of ownership can be accomplished in any other mode or form, or by any other means than a transfer as above specified.” But this change of .ownership is one affecting the partnership alone, and beyond this the operation of the rule cannot extend; as to the association no one can claim such ownership until he complies with its regulations by which a new partner may be admitted to the rights of partnership. But it was just so with the corporations referred to in the cases cited. As to them no one could be a share holder and enjoy the privileges of a corporator until'he had complied with their rules respect [637] ing the transfer of stock. But in the meantime Colton had the right of Stewart, and when he complied with the rule he could compel the partnership to admit him, just as the shareholder did in Finney’s Appeal. The rule was made for the protection of the company, but it was not operative until after the assignment. When Stewart assigned to Colton and executed the irrevocable power- of attorney he certainly parted with something he had a right to sell, and that something was Ms interest in the’ partnership, and if to that sale the association did not object, we are at a loss to know who else had the right so to do. Indeed, even the company had no right to object in advance to the assignment; its only right in the premises was to refuse a transfer on its books until its rule was complied with, and when that was done it had no alternative but to receive Colton as a partner. Moreover, Stewart could not plead this rule to defeat his own contract, and especially as 'a compliance with the rule at any time would fully execute that contract. He had given to his assignee the power to comply with the rule and thus become a member of the partnership, and he could not afterwards prescribe the time when Colton should thus comply and secure his membership. That was a matter between himself and the association with which Stewart had nothing to do, on at least only so far as the exercise of the right would operate to relieve him from the responsibility of membership. We need hardly add, that the attaching creditor stands on the foot of his debtor; the equities which bind the one in like manner bind the other, and it hence follows, that as Stewart cannot in equity annul the contract with Colton neither can Kitchenman. The judgment is reversed and a procedendo awarded.