Chicago Crayon Co. v. Pease

Mr. Presiding Justice Baker delivered the opinion of the court. The answer sets up as a defense to the bill that four of Hamell’s shares of the capital stock,of defendant were levied on by a constable under a writ of attachment and afterwards sold, and that the remaining eleven shares were levied on by the sheriff, under a writ of attachment, and sold. These allegations are not sustained by the proofs. There was no attempt in either case to levy on or seize any shares of stock under the writ of attachment. The respective returns of the constable and the sheriff on the writ of attachment issued to each show that no attachment of the shares of Hamell was made or intended under either writ, for. each return states only that the Crayon Company was summoned as garnishee. In each case appellant here answered as garnishee; the subsequent proceedings in each case are based on the answer of the garnishee and are, in the main, such proceedings as may be had under section 20 of the Garnishment Act, and not such as are proper where property is seized on an attachment writ. The proceeding in each case must be regarded as a garnishment proceeding, and the question presented is, whether the interest of a stockholder in an Illinois corporation, where a certificate for his stock has been issued and delivered to the stockholder, can be reached by that proceeding. By that proceeding a creditor may reach debts owing to his debtor from the garnishee, or lands, tenements, goods, chattels, moneys, choses in action, credits, effects or estate of the debtor in the possession, custody or charge of the garnishee. "We think that stock cannot, where the certificate has been issued, be reached by garnishment proceedings, and this view is supported by the great weight of authority. “The process of garnishment is proper only where a debt is due from a third person to the defendant debtor. It is not a proper remedy for reaching shares of stock owned by the debtor. The corporation owes the stockholder no debt, and by no fiction of law can it be held to be a debtor of the defendant debtor. Consequently, where the sheriff levies an attachment, not according to procedure governing attachments, but ac-' cording to the procedure of garnishment, the whole proceeding is void, and a subsequent transfer of the stock by the defendant debtor is valid.” Cook on Corporations, 5th ed., 491. See, also, 14 Amer. & En. Encyc. of Law, 2nd ed., 796; Clark & Marshall on Corp’ns., 1149; 2 Wade on Attachment, sec. 408; Planters & Mer. Bank v. Leavens, 4 Ala. 753; Foster v. Potter, 37 Mo. 526; Ross v. Ross, 25 Ga. 297; Mooar v. Walker, 46 Iowa 164; Netter v. Board of Trade, 12 Ill. App. 607. In Ill. Anglo-Amer. Storage Battery Co. v. Long, 41 Ill. App. 333, where no certificate for the stock had been issued, it was held that shares of stock might be reached by garnishment against the corporation. But in such case the stockholder has a right of action against the corporation, either in equity for specific performance, or in assumpsit to recover the value of the shares at the time their issue is demanded and refused. 1 Cook on Stockholders, sec. 74; Birmingham Bank v. Roden, 97 Ala. 404. The proofs show that appellee purchased said shares from Scanlan, the agent of Hamell, at the price of $1,200, and paid for the same by his check to the order of Scanlan for said sum, dated November 28, 1904; that the same was paid through the clearing house November 30, 1904; that appellee purchased and paid for said shares in good faith, without any notice of any adverse claim to the same; that it was not until he had so paid for said shares that he learned from appellant of the claim that Hamell’s shares had been sold; that he then notified Scanlan of said claim and asked Scanlan to protect him. The sale was completed when the check was delivered, and the fact that Scanlan, on learning of the claim that Hamell was not the owner of. the shares when they were sold to appellee, retained the proceeds of the check, cannot affect appellee’s right as against appellant. Finding no error in the record, the decree will be "affirmed. 'Affirmed.