Campbell v. Woodstock Iron Co.

SOMERYILLE, J. — The ground, upon which the appellant’s right to file the present bill is based, is the alleged ownership of two shares of corporate stock in the Oxford Iron Company, of the par value of two thousand dollars each, which are now claimed by the Woodstock Iron Company, one of the defendants to the bill in the lower court. It is insisted by the defendant, that the complainant’s title to this stock has been divested by sale under a mortgage executed by him to one Thomas K. Eerguson, on December 24th, 1872, to secure a debt of nearly six thousand dollars evidenced by complainant Campbell’s promissory note, payable January 1st, 1874. The first inquiry is, whether this contention on appellee’s part is supported by the evidence. There is no difference of opinion between counsel, as to the general nature of the instrument executed by Campbell to Eerguson. It is admitted to be a mortgage, and not a pledge, although it is denied by complainant that it conveys to the mortgagee, or his assigns, the legal title of the stock. It purports to “ transfer and assign” the stock, as security for the complainant’s debt, and authorizes the mortgagee, Eerguson, or his assigns, to sell or transfer it “so as to satisfy and discharge” the mortgage debt. ' Not only is this instrument a mortgage, but it contains words sufficiently apt to operate as a transfer of the legal title of the stock as between the mortgagor and mortgagee. It is not a mere lien, or equitable charge. It shows an intention to transfer the mortgage property as security for a debt, and imports a conveyance of title in the nature of a condititional sale. Jackson v. Rutherford, 73 Ala. 155; Jones on Chat. Mort., §§ 8-9. There is absent from the transaction one necessary element of a pledge, which is possession, actual or symbolic, of the thing which is the subject of the pledge. That stock of this character may be mortgaged, as well as pledged, admits of no doubt whatever, at least in this State. Gilmer v. Morris, 80 Ala. 78, 85; Code, 1876, §2044; Cook on Stock and Stockholders, §§ 463, 464. And this may be done, as between the parties, without a transfer of the certifi [358] cates of stock, or without a transfer of the stock itself on the corporation books. The certificate does not constitute the stock, any more than a promissory note does the debt which it describes. It is the meré evidence of its existence and ownership.- — Frenkel v. Hudson, 82 Ala. 158, 161. So, there is nothing in the statutes under which the corporation in question was organized, which invalidates any sale or mortgage of stock, as between the parties to such transaction, without a transfer on the books of the company. If in proper form, and otherwise unobjectionable, such a conveyance is good and valid between the parties, although it may be void as against bona jide creditors, or subsequent purchasers without notice, and although, as against the corporation itself, it may convey only an equitable title, conferring no right to vote, draw dividends, or other like incidents of ownership. • It is, in other words, effectual against the transferror, whoever else may complain. — Fisher v. Jones, 82 Ala. 117, 122; Code, 1876, §2044; Duke v. Cahaba Navigation Co., 10 Ala. 82; Cook on Stock and Stockholders, §§374, 379, 358, 308; 2 Addison Contr. (Morgan’s Ed.), p. 283, note 1. It is further contended by appellant, that the execution of the power of sale conferred by the mortgage was void. This instrument, executed, as we have said, by the complainant, Campbell, in December, 1872, authorized a sale under the power to be made by the mortgagee, Ferguson, or his assigns. The power of sale is thus expressly made to follow the mortgage, into the hands of any assignee, which it would perhaps do under the statute, however, even in the absence of any express stipulations. — Code, 1876, §2198. Ferguson assigned the mortgage and note to the Deposit Savings Association of Mobile, and appointed its cashier, one L. C. Fry, to exercise the power of sale. As the assignee had the power to make the sale through its agents, the only way a corporation can act, the appointment of Fry for this purpose, and by its consent, impliedly constituted him the agreed agent of both Ferguson and the Deposit Savings Association, to make such sale. The sale was made by Fry in April, 1874, under the authority of what he designates “ the annexed letters of attorney.”- This may reasonably be construed to have reference to the power conferred by Ferguson, in his written appointment of Fry, or to the power conferred by Campbell, which passed with the assignment of the mortgage, first to Ferguson, and then from him to the [359] Deposit Savings Association, for which Fry was acting. If, therefore, we admit that a reference of the act to the former power destroys the validity of the sale, and to the latter upholds it as valid, it is our duty to refer it to the one that upholds, and not to the one that destroys: The law leans against any construction of an instrument which would render ineffectual the attempted execution of a power contained in it.. — Gindrat v. Montgomery Gas-Light Co., 82 Ala. 596; s. c., 2 Southern Law Rep., 327; Matthews v. McDade, 72 Ala. 377. These views lead to the conclusion, that the sale made under the power cut off the complainant’s equity of redemption, provided he was informed of the intended sale and sanctioned it, as is alleged by the appellee. — Jones on Chatt. Mortg., §709; Erwin v. Lowry, 7 How. U. S. 172. The question recurs, did the complainant sanction this sale under the power which was made by the Deposit Savings Association, of Mobile, to the Woodstock Iron Company? The testimony of the witness Foote, bearing on this point, clearly establishes such consent on complainant’s part, unless it was improperly admitted against the objections urged to it, which we shall presently consider. This consent was alleged to be contained in certain letters written by Campbell, in which he agreed that the stock should be sold to Noble for the Woodstock Iron Company, in consideration of the sum of twenty-five hundred dollars. It is first objected, that the witness never saw Campbell write, and could not testify to the genuineness of the signature to the several letters purporting to have been written by him, which are shown to be in the same hand-writing. This objection was untenable, as it was shown that Foote had acquired a sufficient knowledge of the complainant’s handwriting, by an interchange of correspondence with him. He mailed one or more letters to Campbell, directed to his known place of residence, and received replies purporting to come from that place, and to be signed by him. This was prima facie sufficient evidence of the genuineness of his signature. It must, therefore, be both satisfactory and convincing, in the absence of any denial by the complainant of the authenticity of the letter in question. — Wharton on Ev. §701; 1 Greenl. Ev. § 573 (a). The next objection is, that the predicate was not sufficiently laid tó authorize the introduction of. secondary evidence of the contents of these letters. The testimony of Foote, in [360] our opinion, shows very satisfactorily the loss or destruction of these letters, with other correspondence of the bank, and a sufficiently diligent search for the same, aided by other corporate officers, and in the place where they would probably have been found had they been in existence. On this point we entertain no doubt. In corroboration of the status of this stock, we have the sworn statement of the complainant himself, which we are forced' to construe into an admission that, in September, 1875, more than a year after the mortgage sale, he had parted with his interest in this stock. In his deposition taken in the case of Gunnels v. Heflin, in that month and year, after stating who were stockholders in the Oxford Iron Company, including himself in the number, up to October, 1875, he says: “Since then the stock has passed into other hands.'" The natural import of this declaration is, that the complainant had parted with the title to his stock. And we may add, that this admission derives additional force from the fact that it is unexplained by the complainant, who was a competent witness in this cause had he elected to testify. There is, to our mind, no force in the suggestion, that the mortgage executed by complainant to Ferguson conferred a power to sell the stock only on condition that it should bring enough to satisfy the mortgage debt. The phrase “so as to satisfy and discharge said note,” means nothing more than in order to, or for the purpose of satisfying and discharging the mortgage debt. The settled rule is to construe all such instruments most strongly against the grantor, in case of doubt or ambiguity. These conclusions are fatal to any right of recovery on the part of the complainant, without regard to other questions raised, and justified the dismissal of the bill. In addition to this view, if it be admitted that there were irregularities in the sale, which rendered the transfer of the stock tortious and wrongful, the mortgagee would be guilty of a conversion, for which trover would lie, as would also his vendee, the "Woodstock Iron Company. And this right of action would be barred, at law, in six years from the date of the sale. A court of equity, following the law, would give no relief based on the transaction, but would also adjudge it to be barred by the statute of limitations. — Gilmer v. Morris, 80 Ala. 78. The relation of the complainant and the defendant company, as stockholders in the same insolvent corporation, is not that of trustee and cestui que trust toward [361] eacb other, so far as concerned tlie sale and purchase of this stock. And the facts of the case do not maAe it an exception to this principle. But, if it be admitted that there were irregularities in the execution of the power, the proof is satisfactory that the sale of the property was made by the assignee of the mortgage, and through its agent, with the consent and direction of the mortgagor; and this, according to all the authorities, was a waiver of such irregularities, and was equivalent to a formal foreclosure of the equity of redemption. — Jones on Chat. Mortg. §709, and cases cited on brief of appellee’s counsel. The decree is affirmed. Clopton, J„ not sitting.