If, after transfer by the plaintiff of the subject of
controversy in a litigation in Louisiana, the court, on being
informed of the transfer, refuses to permit the suit to be
discontinued by the plaintiff, a judgment does not make it
res
judicata as to the assignee.
Dismissal of a suit for want of parties does not make the
subject of it
res judicata.
If a corporation by negligence cancels a person's stock, and
issues certificates therefor to a third party, the true owner may
proceed against the corporation to obtain the replacement of his
stock or its value without pursuing the purchaser or those who hold
under him.
In a suit in Louisiana against a corporation for damages for
refusal to permit a transfer of shares on its books, the
prescription of ten years applies, but that prescription is not
available in this case.
In equity. Decree dismissing the bill. Complainant appealed. The
case is stated in the opinion.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This is a suit in equity instituted in the court below on the
9th of December, 1882, by the appellant, as heir of her mother and
brothers, against the appellee to compel the latter to issue to the
appellant a certificate for sixty-six shares of its capital stock,
which are charged to have been unlawfully cancelled and transferred
to other parties without
Page 127 U. S. 615
authority, and to recover the dividends on said stock since the
year 1853. The bill states that in 1845 the complainant's mother,
Widow de St. Romes, became the owner of said sixty-six shares of
stock, and received two certificates therefor, one for 43 shares,
and the other for 23 shares; but that on the 29th of July, 1853,
the defendant, without authority from the Widow de St. Romes, by
mistake and in fraud of her rights, cancelled said certificates,
and have ever since refused to recognize her, her heirs or assigns
as the owners thereof; that in 1861, Madame de St. Romes sued the
company for the dividends accruing on said stock, and by judgment
rendered in June, 1868, recovered the dividends for 1848, 1849,
1852, and 1853; that in April, 1876, the present complainant, as
owner of said shares, instituted a suit in the Superior District
Court of New Orleans against the appellee, which was ended by a
nonsuit in 1882. The bill then states the amount of dividends
declared by the defendant since 1853, and prays relief as above
stated.
The defendant, in its answer, admits that the Widow de St. Romes
was owner of stock from 1845 to 1853, but that she transferred the
same through her agent on the 29th of July, 1853, and has never
owned it since; that her agent was Pierre Deverges, who acted as
her attorney in fact in the management of her business for many
years, being held out by her to the community as such, with power
to dispose of her property; that the stock in question was sold by
Deverges, as the widow's agent and attorney in fact to one Cohen on
the day mentioned, and transferred to him on the books of the
company, and from that time Cohen and those claiming under him have
been in possession of said stock, with right to all dividends; that
to effect the sale of the stock the Widow de St. Romes delivered
her certificates of stock to her said agent, and he surrendered
them to the defendant, and new certificates were issued to the
purchaser. The answer further states that the books and papers of
the defendant were destroyed by fire in 1859, and that its
secretary, who superintended the transfers of its stock, and
Deverges, have both been dead many years, and that the widow never
assumed to assert any claim to the
Page 127 U. S. 616
stock until the suit brought by her in 1861; it states that
Cohen sold the sixty-six shares to Peschier & Forstall, who
sold them to A. & M. Heine, who transferred them to one H.
Gally, the present owner, and that these persons have successively
owned and possessed said stock in good faith, by just title, and
received the dividends thereon, to the present time. The answer
sets up the prescription of three years and of ten years. It
further states that in 1871, the Widow de St. Romes instituted suit
in the Superior District Court of the Parish of New Orleans against
the defendant and the then owners of the stock, holding under said
sale to Cohen, and claimed said stock and the dividends which
accrued after 1854, which suit was finally decided by the Supreme
Court of Louisiana in March, 1879, and although the widow
attempted, before the decision was announced, to withdraw the suit
(then on appeal) on the pretense of an assignment of her interest
therein to her son Eugene, in November, 1867, the court, under
article 901 of the Code of Practice, refused to dismiss the case on
that account, and gave judgment against the said Widow de St. Romes
on the ground of prescription. The answer sets up this judgments as
res judicata in defense to the present suit. The answer
further states that in April, 1876, the present complainant
instituted suit against the defendant in the Superior Court for the
Parish of New Orleans, claiming the shares and dividends now sued
for; which suit was finally dismissed for want of proper parties.
The answer claims that this decision also makes the case
res
judicata, and precludes the complainant from a recovery in
this suit. Some further supplemental pleadings were filed in the
case, but they need not be stated here.
The material questions are (1) whether the matter in controversy
is
res judicata; (2) whether the suit is defective for
want of proper parties; (3) whether the claim is prescribed; and
(4) if none of these defenses can be maintained, whether the stock
was transferred by authority of Madame de St. Romes.
The first question requires us to direct our attention to the
suits that were brought against the defendant in relation to the
stock and its dividends. The first suit was commenced in
Page 127 U. S. 617
January, 1861, and terminated by the judgment of the Supreme
Court of Louisiana in January, 1868. It was brought by Madame de
St. Romes against the defendant to recover the dividends for the
years 1848, 1849, 1852, and 1853, and to be recognized as holder
and owner of the stock since 1853, and entitled to all dividends
declared thereon since that time, with judgment for the same, or,
in default of payment of said dividends, judgment for the value of
the shares and interest thereon from 1853. The court gave judgment
in the plaintiff's favor for the dividends of 1848, 1849, 1852, and
1853, which accrued before the transfer of the stock, not being
satisfied of Deverges' authority to collect them, but, as the
alleged transferee of the stock was not a party to the suit, it was
held that the plaintiff could not be justly recognized as owner of
the stock in question. Nevertheless her right to claim it in a
direct action was reserved.
It is clear that nothing was determined in this action with
regard to the validity of the sale and transfer of the stock. Near
the close of the proceedings, on the 23d of November, 1867, Madame
de St. Romes executed a transfer to her son Eugene de St. Romes of
all her interest in the case then pending, and subrogated him to
all her rights, claims, and demands that might result against said
company. On June 9, 1868, this transfer was filed of record in the
cause, and the money recovered in the suit was ordered to be paid
to Eugene de St. Romes. On the 20th of June, 1871, the Widow de St.
Romes commenced a new action against the defendant, praying that
she might be recognized as the owner of the stock, that the
canceling of the certificates might be declared void and the
transfer void, and that the defendant, the Levee Cotton-Press
Company, be ordered to pay her all the dividends which had accrued
on the stock since 1853, with legal interest. In pursuance of the
decision of the court in the previous cases, she made the then
holders of the stock parties defendant. During the progress of this
suit, in May, 1874, Eugene de St. Romes died intestate, leaving as
his sole heirs his mother, his brother Victor, and the present
plaintiff, Ermance de St.
Page 127 U. S. 618
Romes. In August, 1874, Victor also died intestate, leaving as
his sole heirs his mother and his sister Ermance. On the 21st of
October, 1874, the Widow de St. Romes, the mother, renounced the
succession of her sons in favor of her daughter Ermance.
The suit still went on in the name of the widow, and in
November, 1874, the superior district court dismissed the
plaintiff's demand on the ground that it was prescribed. The widow
appealed, and the supreme court affirmed the judgment. Quoting the
Civil Code, the court said:
"Shares or interests in banks and other companies of commerce or
industry are considered as movables (C.C. 466). Three years in good
faith, except where the thing was let or stolen, gives a
prescriptive title to movables (C.C. 3472). Ten years without title
or good faith (C.C. 3475). The defendants possessed under a title
and personally, in good faith, for eighteen years before this suit
was brought."
Before this judgment was rendered, the plaintiff wished to
dismiss the bill by reason of having parted with her interest to
her son Eugene, but under article 901 of the Code of Practice, the
court refused to dismiss it. Still, as she had actually parted with
her interest, the decision is not binding on her transferee or his
heirs. So that this judgment also fails to make the present case
res judicata. The decision of the court, however, is
instructive in relation to the law of Louisiana, and may assist us
in the further consideration of the case.
While this suit was in progress, on the 1st of April, 1876, the
present complainant, Ermance de St. Romes, commenced a suit against
the defendant in the superior district court to recover the
dividends on the sixty-six shares of stock which accrued after the
year 1853 down to the commencement of the suit. She based her claim
on the allegation that she was the owner of the said shares of
stock by inheritance from her brother Eugene, who was transferee of
her mother, etc. The supreme court, on appeal, dismissed the action
for want of proper parties, holding that the persons having
possession and claiming to be the owners of the stock should be
made parties, because their adverse right could not be disposed of
in a suit
Page 127 U. S. 619
in which they were not parties; that the ground work of the
plaintiff's action was the ownership of the stock; that if she was
not owner of the stock, she could not claim the dividends; that the
examination of the ownership in the absence of those to whom the
stock had been transferred, and who were in possession of it and
had regularly received the dividends, would be barren of any
practical result. This judgment was rendered in 1882. But a
dismissal of a suit for want of parties does not render the subject
of controversy
res judicata. It leaves the merits
unconsidered and undisposed of. We are of opinion that the defense
of
res judicata cannot be sustained.
In the same year (1882) in which the last judgment was rendered
by the Supreme Court of Louisiana, the complainant filed her bill
in the present suit, again without making the owners of the stock
parties. She founds her claim, as in the former suit, upon her
ownership of the stock, alleging that neither her mother nor her
brothers ever authorized the transfer of it, and that the
cancellation of the certificates was done by mistake and was a
fraud against the Widow de St. Romes.
If the Supreme Court of Louisiana was right in dismissing the
suit for want of proper parties, the present suit is obnoxious to
the same objection. True, it has been developed in the pleadings
that the stock had been so often transferred and had become so
blended with other stock that it could not now be identified, and
the present owners could not be ascertained. But is not that a
result of the long delay of the complainant, and those from whom
she derived her interest? The present suit was not commenced until
nearly thirty years after the transfer of the stock by Deverges as
attorney in fact of Madame de St. Romes. Even if prescription has
been sufficiently interrupted to give the complainant a
locus
standi in court notwithstanding the lapse of time, she may
nevertheless be subject to other disadvantages resulting therefrom
which cannot be cured.
But was the Louisiana court right in its conclusion as to
necessary parties? If a corporation has by negligence cancelled a
person's stock, and issued certificates therefor to a
Page 127 U. S. 620
third party who has purchased it from one not authorized to sell
it, is the true owner bound to pursue such purchaser, or may he
directly call upon the corporation to do him right and justice by
replacing his stock or paying him for its value? The weight of
authority would seem to be in favor of the latter alternative.
See Telegraph Co. v. Davenport, 97 U. S.
369;
Loring v. Salisbury Mills, 125 Mass. 138;
Pratt v. Copper Co., 123 Mass. 110;
Pennsylvania
Railroad Co.'s Appeal, 86 Penn.St. 80;
Loring v.
Frue, 104 U. S. 223;
Salisbury Mills v. Townsend, 109 Mass. 115.
Then will the plea of prescription avail the defendant? The
Supreme Court of Louisiana decided in the second suit brought by
the widow, 31 La.Ann. 224, 229, that three years' possession in
good faith of a movable -- which corporate stock is declared to be,
Civil Code 474 (466) -- is sufficient to give good title, C.C. 3506
(3472). But that decision was based on the theory that the owner
was bound to pursue her stock against those who had obtained
possession of it, and in obedience to that view she had made them
parties, and it was in reference to such persons that the
prescription of three years was allowed. It could not apply to the
defendant, because the defendant never had possession of the stock.
It was answerable for carelessly and negligently allowing the
transferees to obtain possession of it. It follows that the
corporation cannot rely on the prescription of three years, but
only on the prescription of one year, which is applicable to the
commission of offenses and
quasi-offenses (and which was
not pleaded), or on that of ten years, which is applicable to
personal actions generally. Civ.Code 3536 (3501), 3544 (3508). In
Case v. Citizens' Bank, 100 U. S. 466,
which was a suit to recover damages for refusal on the part of the
Crescent City Bank to permit a transfer of shares on its books, Mr.
Justice Clifford, delivering the opinion of the Court, cited a
number of Louisiana authorities to show that in such a case as
that, the prescription of one year did not apply, but that the
prescription of ten years did. The present case seems to belong to
the same category. One of the cases referred to by Justice Clifford
was that of
Percy v. White, 7 Rob. 513, which was
Page 127 U. S. 621
a suit of stockholders against the directors of a bank for
damages and losses sustained through their negligence, fraud, and
mismanagement of the affairs of the bank. The Supreme Court of
Louisiana held this to be an action for damages
ex
contractu against mandataries or agents. We have looked into
the Louisiana Reports to some extent, and have not been able to
find any decisions contrary to the general tenor of those on which
this Court relied in
Case v. Citizens' Bank. If,
therefore, the defendant can only plead prescription of ten years,
the question remains whether it is available in this case, and it
would seem to be clear that it is not. For though the transfer
complained of took place in 1853, the Widow de St. Romes brought
her action in 1861, after the lapse of only eight years, and it was
not terminated until 1868. The complainant commenced her action in
the state court in 1876, and after an interval of only eight years,
and this action was not terminated until 1882. The present action
was commenced in the same year. So that there has never been an
uninterrupted period of ten years in which prescription could run.
It follows that the defense of prescription fails. Civil Code, art.
3518 (3484);
Riviere v. Spencer, 2 Martin 79, 83;
Badon v. Bahan, 4 La.Ann. 467, 470;
Turner v.
McMain, 29 La.Ann. 298, 300.
The defendant's counsel, feeling, no doubt, the uncertainty of
the defenses referred to, dwelt with much emphasis and ingenuity
upon the presumptive proofs of the transfer of the stock being made
by Deverges with the knowledge and authority of Madame de St.
Romes. It is unnecessary to say more on this subject than that the
proofs referred to fail to satisfy us that any authority was given,
or that the transfer was acquiesced in. The Supreme Court of
Louisiana entertained the same opinion in the case brought in 1861,
and very clearly expressed it, although they made no decision on
the subject, in consequence of what they considered a want of
proper parties.
The decree of the circuit court is reversed and the cause
remanded with instructions to take further proceedings in
conformity with this opinion.