Thompson v. Grace

Wood, J., (after stating the facts.) First. The proof showed that the Post-Dispatch Publishing Company was a corporation having a capital stock of $3,000 issued in shares of $25 each. John H. Page finally became the owner of all except sixteen shares, and he transferred all of his shares except one to H. M. Jacoway. Jacoway became the owner of 104 shares of the stock of the nominal value of $2,600. Jacoway sold all of his stock to appellant for $2,750. Two thousand of this was furnished by appellee. JacoWay had a mortgage to secure him for the balance of the purchase money, but there is an agreement in the record between him and appellee to the effect that appellee’s mortgage should have precedence over his. Appellant testified “that it was his understanding that Jacoway owned the Post-Dispatch, and that Jacoway sold it to him; that the only evidence of the transaction was the note and mortgage; that there was no written transfer of the' stock; that he had several times demanded the stock of Jacoway, and he stated that he did not have it; that the stock certificates and books were lost; that Jacoway may have stated that he owned $2,600 in it, would not say that he did not; that at the time Jacoway sold him the Post-Dispatch he did not tell him anything about there being other stock; that he (appellant) may have had knowledge of that before, may have known that there was $3,000 of stock, and, of course, that there was $400 more of stock outstanding.” The finding of the court that appellant was the owner of 104 shares of stock in the Post-Dispatch Publishing Company was amply sustained by this evidence. Appellant was put in possession of the plant, and, whether he supposed that he owned the whole plant or the entire capital stock (which carried the right to the corpus) or not, it is evident that he intended by the note and mortgage to transfer to appellee the entire interest he had purchased from Jacoway, to secure appellee for the money he had advanced to appellant to enable the latter to make the purchase. It is also true that the only interest he acquired from Jacoway was the 104 shares of stock, for that was all the interest Jacoway had. This evidence, we think, is ample to support the finding of fact by the court that appellant “transferred his shares of stock for value to appellee, and undertook to incumber same with a mortgage on the physical property of the Post-Dispatch Publishing Company.” The court was also correct in holding upon these findings of fact that the transaction constituted an equitable mortgage in favor of appéllee on the shares of stock or interest that appellant owned. It is clear that both parties' intended that the mortgage should cover appellant’s interest, and the court properly construed and enforced the mortgage accordingly. Second. Section 6011 of Kirby’s Digest provides that the court may determine any controversy between parties before it when it can be done without prejudice to the rights of others, or by saving their rights. It also provides that when a determination of the controversy between the parties before the court can not be made without the presence of other parties the court must order them to-be brought in. “The obvious intention of the statute,” says the court in Smith v. Moore, 49 Ark. 102, “is to require all persons to be made parties to an action who will be necessarily and materially affected by its result, and to forbid the court from determining any controversy between the parties before it where it cannot be done without prejudice to the rights of others or by saving their rights.” There were no other mortgagees of this stock except Jacoway, and he acknowledged appellee’s superior rights. His agreement in the record shows that he did not question the transfer to appellee. Page was a witness, and his evidence was such as to warrant the chancellor in finding that he had no interest. The interest of the few outstanding small stockholders could not possibly have been affected by the transfer of appellant’s shares of stock, and the corporate entity could not have been in any manner affected by the transfer and by the sale of the stock under the mortgage. Appellee was in no wise concerned with any grievance that appellant claimed to have against Jacoway. No one who was in any wise connected with the corporation was affected by the controversy except appellant and appellee, and appellant wás in no position to ask for a postponement of the proceedings. The court of chancery had plenary power to protect the purchaser of the stock at the sale ordered and to see that he secured a correct transfer on the books of the corporation and a- perfect legal title. No mere irregularities in the transfer of stock can defeat the rights of the purchaser thereof. Helliwell on Stock and Stockholders, § 159. See Home Stock Ins. Co. v. Sherwood, 72 Mo. 461; Rio Grande Cattle Co. v. Burns, 17 S. W. 1043; 26 Am. & Eng. Ency. Law (2d Ed.) 876. There is therefore no merit in appellant’s contention that bidder s would be deterred and the stock sacrificed unless the parties named were brought in. The court did not err in overruling the motion to have others made parties. _The decree is in all things correct, and is affirmed. Hart, J., not participating.