Shipman v. Ætna Insurance

Sanford, J. This is a bill in equity brought by the trustee of the estate of John W. Seymour, an insolvent debtor, to procure the transfer by the .¿Etna Insurance Company to the petitioner, of eighty-three shares of the capital stock of that company, now standing in the name of Seymour, in order that it may be disposed of for the benefit of Seymour’s creditors. That the petitioner is the duly appointed trustee of the insolvent’s estate is not denied, but the insurance company refuses to make the transfer, because the petitioner, not being possessed of the stock certificates, can not surrender them to the company as the regulations of the company require, and, because Mark Howard, Benjamin W. Greene, and Eliphalet A. Bulkeley, Esq., respectively, claim a lien upon large portions of the stock. No claim is made to the stock by any other person. Howard, Greene and Bulkeley, as well as the insurance company, are made parties to the bill, and have been fully heard upon the merits of their respective claims, so that the final decree of the court in this case will afford to the insurance company all the protection which it needs, in the execution of such order in relation to the transfer of the stock in question, as the court shall make. The superior court has found that, in 1855, Seymour and Bulkeley were indebted to the Society for Savings in the sum of twenty-one thousand dollars, by their joint and several promissory notes, secured by the pledge of stocks and bonds, furnished by said debtors in equal portions; and that it was agreed between Seymour and Bulkeley, at the time of giving said notes, that the securities so furnished by said Seymour, should, subject to the lien of said Society for Savings, be for [252] security to the said Bulkeley for his other liabilities on the sole account of said Seymour, which were then of large amount; that in January, 1858, the savings society being dissatisfied with the security which it held for the payment of said notes, demanded of Bulkeley further security, and threatened to sue the notes unless its demand should be complied with; that thereupon Bulkeley informed Seymour of the demand of the society, spoke of his own liabilities on Seymour’s account, told him something must be done, and suggested to him that if he, Seymour, would transfer to the society fifteen shares of iEtna insurance company stock for further security on said notes, and, subject to the lien of said society, as security to said Bulkeley for his liabilities on Seymour’s account, he, Bulkeley, would also transfer to said society other fifteen shares of the stock of said insurance company as security for the payment of said notes, and that said Seymour, in consequence of the demands of said savings society and the suggestion of said Bulkeley, promised said Bulkeley to transfer fifteen shares of said insurance company stock to said savings society on those conditions; that Bulkeley soon after transferred his fifteen shares to the society according to his proposition, and informed Seymour of the fact, and that Seymour thereupon attempted to transfer his, but was unable to do it because all his stock had been attached by another creditor. The claims of Mr. Bulkeley, therefore, seem to rest entirely upon an unexecuted parol contract, and we can discover no foundation for any lien, legal or equitable, upon the stock in question. No assignment or power to transfer was ever made, no stock certificate was ever delivered to Mr. Bulkeley, and, at the time Seymour proposed to make the transfer, he had no power to do it, because of the prior levy of said attachment. In these respects the position of Mr. Bulkeley is less favorable than that of either Greene or Howard. But we think their claims also are not sustainable. Mr. Greene had incurred liabilities for Seymour, and to secure him for so doing, in July, 1855, Seymour gave him a written assignment of thirty shares of the stock in question, together with a power of attorney to transfer it, and delivered to him the stock certificates. The stock stood [253] in Seymour’s name on the books of the corporation, no transfer was in fact made, and no notice was given to the insurance company of the assignment or power of attorney until after the stock had been attached by another creditor of Seymour, and after Seymour had become insolvent and absconded in January, 1858. In the summer of 1857, the insurance company, under the authority of the legislature, increased its capital, and Greene delivered the stock certificates which he held to Seymour to enable him to obtain new certificates for the increased number of shares to which he was entitled, Seymour. undertaking51 to return to Greene certificates for thirty other shares of the stock, to be held by Greene upon the same terms and for the same purpose as the former. Seymour surrendered the certificates thus received from Greene to the company, and procured new ones for the increased number of shares, but always retained them in his own possession, and was never requested to deliver any of them to Greene, pursuant to his promise. By the regulations of the company the actual transfer of its stock could be made only on its books and upon surrender of the stock certificate. It is undeniable therefore, and is conceded, that the legal title to this stock remained in Seymour, up to the time of the appointment of this trustee. And whatever the effect of these transactions as between Seymour and Green themselves, as to attaching creditors of Seymour they could be of no validity. This stock, beyond all doubt, was liable to their attachments. “ An attaching creditor is not bound to look beyond the books of the corporation to ascertain whether his debtor has made an assignment of the stock standing in his name. The books of the corporation are the appropriate place to determine the ownership of its stock.” Waite, J., in Dutton v. Connecticut Bank, 13 Conn., 498. In order to protect a sale of tangible personal property, capable of immediate delivery, against the creditors of the seller, the purchaser must take and retain possession of the goods. If he does not, his purchase may be treated as fraudulent and void. The vendor’s retention of possession is a badge of fraud which vitiates the sale. [254] Most striking and decisive badges of fraud, in our judgment, attach to these transactions in the case before us. Seymour held the apparent title on the books of the insurance company, he held for months the stock certificates, and dealt with both at the office of the company as with his own, thus exhibiting to the world every indicium of ownership, and exercising the same control and dominion over this stock as before its assignment to this respondent. We entertain no doubt but that this stock was liable to attachment by any creditor of Seymour, notwithstanding the claims of Greene. It was in fact attached by tbe Western Bank, one of Seymour’s creditors, and we see no reason why that bank would not have held it against Greene and all other claimants, but for the appointment of this trustee, and the operation of the statute under which he derives his title and his powers. Under that statute the petitioner is trustee for the insolvent’s creditors. He is the instrument by which, instead of by attachment, the insolvent’s property is secured for the benefit of creditors, and the agent of the creditors, as well as of the law, for the appropriation of that property to the payment of their debts. And a conveyance which is deemed fraudulent and void as against an attaching creditor himself, must be invalid also as against a trustee who stands in the place of and represents such creditor. Swift v. Thompson, 9 Conn., 63. Chamberlain v. Thompson, 10 id., 243. Rood v. Welch, 28 id., 157. Liens created by attachment, and levies of execution, in certain cases, are by the express provisions of the statute dissolved, not for the benefit of the individual claimant of the property attached or levied on, but i.n order to increase the common fund arising from the insolvent’s assets, for the common benefit of all his creditors. And the same statute which declares that such liens shall be dissolved, provides that the property “ shall vest at once, free from such attachment ” or levy of execution, “ in such trustee.” Rev. Stat., (Comp. 1854,) 514, § 3. The question in this case is, not whether as between Greene and Seymour the former had such a title to the stock that he [255] could have enforced it against the latter, but whether the conveyance was of such a character that the creditors of Seymour, and this trustee in their behalf, might safely treat it as fraudulent and disregard it. The case of Howard is in all material points like that of Greene and requires a like determination. The fact that the stock assigned to Howard originally stood in the name of Beckwith instead of Seymour, seems of no importance in the result, because it was with Howard’s assent transferred to Seymour in 1854, and then a new certificate was issued to Seymour, and ever afterwards retained in his possession. We have not been inattentive to the arguments addressed to us, nor have we overlooked the numerous authorities cited by the learned counsel for these respondents, to persuade us that the trustee’s title to this stock is of course subject to the respondents’ claims, because as against Seymour himself those claims could have been in a court of equity protected and enforced. But we think the views which we have thus expressed in relation to this question more in harmony with our own decisions, and more in consonance with the spirit and policy of our statute laws relating to attachments and to insolvency, than those which were so earnestly and ably pressed upon our attention by the respondents’ counsel at the bar. In our judgment the petitioner is entitled to the stock in question, and we advise the superior court to order and decree accordingly. In this opinion the other judges concurred. Decree for petitioner advised.