Le Roy Sargent & Co. v. McHarg

WHITING, J. This appeal is from an order refusing" to quash the alleged constructive service of summons upon defendant Tudor, who, it is conceded, is a nonresident of this state. No personal service was had in this state, but service -was made in •another state in strict compliance with 'our statutes providing method of constructive service 'upon nonresident defendants. [310] In his affidavit in support of the motion to quash the service of the summons, Tudor alleged that the subject-matter of this action is not personal property in which he has any lien or interest. Plaintiff’s complaint set forth the existence of the Commonwealth Finance Corporation, a South Dakota corporation; the nature of its business and where transacted; the amount of its stock; that plaintiff is the owner of a large part of such stock; that the three individual defendants became and were, by virtue of a writing executed by plaintiff and others, the holders of the legal title to, and the voting trustees of, the stock belonging to plaintiff and such other parties, with power up to a time long subsequent to the bringing of tire action, to vote such stock at the meetings of such corporation. The complaint then set forth certain alleged wrongful conduct of Tudor and another of the trustees, whereby it is alleged such trustees have shown their unfitness to discharge the trust reposed in them. It also alleged that a stockholder’s meeting was soon to. be held at Pierre, and that these wrongdoers intended to vote the stock held by them as voting trustees. Plaintiff prayed judgment: (a) That the alleged wrongdoers be removed as voting trustees ; (b) That the court provide for election or appointment of other voting- trustees; or (c) That the court declare the trust void; and (d) That the said wrongdoers be enjoined and restrained from voting the stock which they hold as trustees. [1] For the purposes, of the motion to quash, the trial court has a right even if it was not bound, to assume that the complaint stated a good cause of action against Tudor — the motion in no manner presenting that question. Neither did the motion, nor does the appeal, present any question as to the original validity of the voting-trust agreement. It will therefore be assumed, for the purposes of this appeal,,. that the 'voting-trust agreement was lawful in its inception, but that, owing to the wrongful conduct of Tudor, plaintiff was lawfully entitled to the relief, and all the relief prayed for; and that [311] the trial court can grant such relief if, by the constructive service, it has acquired jurisdiction so to do. [2] It is conceded that such service was insufficient to give the court jurisdiction to grant relief purely personal in its nature. But if any of the relief sought is in its nature in rem, then the motion to quash was properly denied. [3-5] We assume, from a reading of Tudor’s affidavit in support of his motion, that he concedes — what clearly is the law — that, if the subject-matter of this action is personal property situate in this state and in Which he had, or claimed, an interest, the trial court acquired jurisdiction to grant such of the relief prayed for as would affect such interest. Section 2338, Rev. Code 1919. That Tud'or, the holder of the legal title to and possessed of the power to vote the stock in question, had an interest in such stock seems too clear for question. This is evident from the fact that, after the creation of the trust, one of the rights of plaintiff which was incident to and -based upon ownership of stock — the right to vote same — had passed from him to the trustees. Where is the situs of this stock? It is alleged, in the moving affidavit, that the Commonwealth Finance Corporation has no property in this state. As said in Andrews v. Guayaquil & Q. Ry. Co., 69 N. J. Eq. 211, 60 Atl. 568: “His general denial that the property is located here is the mere statement of an erroneous legal conclusion. If the company is a New Jersey company, then the situs of its stock is in New Jersey, and any question relating to it may be determined here.” Whether its assets were in this state or somewhere else is entirely immaterial. The fact remains that its stock is property, whatever its value may be, and the situs of such property is in this state. This is so conclusively settled by authority as to be beyond quibble. The leading authority on the proposition that the situs of corporate stock is in the state that creates the •corporation, and also on the proposition that an action to determine rights in such stock may be based on constructive service of process- on nonresident defendants, is the case of Jellenik vs. Huron Copper Mining Co., 177 U. S. 1, 20 Sup. Ct. 559, 44 L. Ed. 647. The reasoning in that case is unanswer [312] able, and, in so far as it is based on the statutes of Michigan, it would find like support in the statutes of this state. Section, 2443, Rev.’ Code 19x9. That court said: “As the habitation or domicil of the company is and must be in the state that created it, the property represented by its certificates of stock may be deemed to be held by the company within the state whose creature it is, whenever it is sought * * * to determine who is its real owner.” As supporting the above propositions, see Gamble vs. Dawson, 67 Wash. 72, 120 Pac. 1060, Ann. Cas. 1913D, 501; Lockwood v. Brantly, 31 Hun (N. Y.) 155; Patterson v. Farmington St. Ry. Co., 76 Conn. 628, 57 Atl. 853; People’s National Bank v. Cleveland, 117 Ga. 908, 44 S. E. 20; Fahrig v. Milwaukee & Chicago Breweries, 113 Ill. App. 525; Andrews v. Guayaquil & Q. Ry. Co., supra; Sohege v. Singer Mfg. Co., 73 N. J. Eq. 567, 68 Atl. 64; Cook on Corporations (4th Ed.) § 485; Fletcher’s Cyclopedia on Corporations, vol. 5, § 3434. In the Patterson case the court said: “The capital stock of the defendant corporation is property which exists only by virtue of the laws of this state; * * * this is true notwithstanding certificates of shares of stock in many business corporations have some of the qualities of negotiable instruments, and are treated for some purposes as property.” [6] The relief sought in this case, except it be the injunction relief, is purely in rem- — -to determine who should hold the legal title to the stock and have the power to vote same. It is as purely an in rem action as an action to determine a right, title, or interest claimed in any other personal property. It is true that there is no dispute as to where the legal title now is or as to who is possessed of the voting power dependent upon such title; but the very purpose of this action is to have such legal title, with the voting power incident thereto, transferred to some ’other party. It is true, as urged iby appellant, that what this action really seeks is the termination of the voting trust. But this power to vote the stock only exists as an incident to, and is inseparable from, the legal title to this stock. It is only by declaring the trust void — and thus restoring title [313] to plaintiff; or by appointing a new trustee in place of Tudor, thus passing legal title to such new trustee — that Tudor’s voting power can be terminated. Suppose it should be conceded, which it is not, that this action presented nothing but the question of right to vote the stock, and that this question was in no manner dependent upon any determination of interest in ' or title to. the stock. What other court but a South Dakota or a federal court would have jurisdiction of the subject-matter? Clearly none, any more than any court of another state could render a valid decree determining the suffrage rights of a citizen of this • state. But the fact is, the voting of stock depends on title thereto, and is a matter solely within the jurisdiction of those courts having jurisdiction of such property, just as the right of suffrage is dependent on citizenship and is a matter to be determined solely by the courts where the votes are to be cast. The order appealed from is affirmed.