Russell v. Easterbrook

Baldwin, J. The answer concludes with a statement that Edward H. Phipps ought to he made a co-defendant, and a demand that the plaintiff transfer to him the shares standing in the name of the defendant. An answer is a statement of defense. It is not its office to demand affirmative relief, unless upon a counterclaim; nor can it properly he made to take the place of a motion to cite in new parties. The defendant’s claim, therefore, that Phipps should be brought in, and a judgment rendered affecting his interests, was not put before the court in such a way as to call for any decision upon it. The gist of the defense set up is that the shares standing in the name of the defendant are really the property of Phipps, and would have been transferred to him upon the books of the company, before it went into the hands of the receiver, had its secretary done his duty; but that although the latter received from the defendant his stock certificate, with a power of attorney for such a transfer, he refused to make it, acting under the direction of Phipps, who was the president of the company, and of another of its directors. Phipps had agreed some months before, on a sufficient consideration, that such a transfer to him might he made. The company, however, was no party to that agreement. If Phipps afterwards broke it, the defendant had his remedy against him; but this could not affect his legal relation to the company as one of its registered shareholders. The obligations which that created could only be discharged by a novation, accomplished through the substitution of another in his place, occupying the same relation; and that required the consent of the party to he substituted. Phipps having refused his consent, there could he no substitution, and the secretary properly refused to make the transfer requested. One man [56] cannot thus be forced to take the place of another as a shareholder in a corporation, against his will. As well could it be claimed that an undelivered deed of land transferred the title, because it was tendered to the grantee under a contract of purchase between him and the grantor, and delivery was only prevented by his wrongful refusal to carry out the bargain. It is a matter of great public importance that the stock-books of business corporations should at all times show who are their shareholders. Each one of these is a participant in a franchise granted by the State. He must be either one of the original grantees, or among their associates or successors. The mode of succession is particularly prescribed by law. When not otherwise provided by the charter, stock can be transferred only on the books of the corporation. General Statutes, § 1928. Whatever equitable rights may be derived from a sale of shares, accompanied by a delivery of the stock certificate with a power of attorney for their transfer, until that transfer is actually made, the legal title, and legal rights and liabilities of the stockholder of record, remain unchanged. Marlborough Mfg. Co. v. Smith, 2 Conn. 579; State v. Ferris, 42 id. 560. The defendant, upon accepting from Phipps a transfer of the shares in question, became bound to pay the Connecticut Pipe Manufacturing Company, when properly required by its directors, whatever remained unpaid upon them under the terms of Phipps’s subscription. The company, could have enforced this obligation, had its directors made a call, even if it had notice that Phipps was the equitable owner of the stock, as between him and the defendant. With their mutual contracts and equities it had no concern. The same right passed to its receiver. The defendant claims the benefit of the exception to the general rule that those and those only are stockholders who appear as such upon the stock-books of the corporation, which has sometimes been recognized in cases where the parties have done everything to entitle them to a transfer, but the recording officer has wrongfully refused to make or permit the entry. Whitney v. Butler, 118 U. S. 655. Under such circumstances, the corporation ought not to profit by its own [57] violation of legal duty. But, here, the stock had never been delivered as between the parties, and the secretary (even were it to he assumed that the company knew all that its president and general manager knew), was in no fault, in declining to permit a transfer upon its books to one who had notified him that he refused to consent to it. The Superior Court is advised that so much of the answer as is demurred to is insufficient. In this opinion the other judges concurred.