1. All acts done in aid of the rebellion were illegal and
void.
2. Pursuant to a statute of the Confederate States, and to an
order of the Confederate District Court for the District of South
Carolina, certain shares of the stock of a corporation of that
state were, upon the ground that the owners of them were alien
enemies, sequestrated and sold in 1862 at public auction, and the
company was required to erase from its stock books the names of
such owners, insert those of the purchasers, and issue stock
certificates to them. All dividends thereafter from time to time
declared were paid to the purchasers, against whom, or their
assignees, and the company, this bill was filed by an original
stockholder, praying for a decree that the certificates so issued
be cancelled as null and void, and the defendants enjoined from
selling them, bringing suits to effect the transfer thereof, or
collect dividends thereon, and the company from allowing such
transfers, issuing new certificates for the same, or paying such
dividends. The court decreed accordingly.
Held:
1. That the order of sequestration, the sale, the transfer on
the stock books of the company, and the new certificates were void,
giving no right to the purchasers or to their assignees and taking
none from the original owners.
2. That the bill was well brought, and the corporation a proper
party defendant.
3. That the purchasers or their assignees have no claim against
the company for indemnity, but if under the circumstances entitled
to any redress, they must seek it by suit against the parties by
whom they claim to have been defrauded.
The facts are stated in the opinion of the Court.
MR. JUSTICE SWAYNE delivered the opinion of the Court.
There is no controversy about the material facts of this case.
At the beginning of the late civil war, the Charleston Gaslight
Page 96 U. S. 194
Company was a body politic and corporate of the City of
Charleston, in the State of South Carolina. Its capital stock
consisted of thirty thousand six hundred and sixty four shares of
$25 each. A part of the stock was held by citizens of other states.
Pursuant to a statute of the Confederate States, and an order of
the Confederate District Court for the District of South Carolina,
three thousand seven hundred and seventy six shares were
sequestrated, and sold at public auction on the 11th of April,
1862, for the alleged reason that they belonged to "alien enemies."
Of this stock the complainant owned thirteen hundred and fifty one
shares. The defendants, except the gas company, were purchasers at
this sale, or are the assignees of such purchasers. The Confederate
authorities required the company to erase from its stock book the
names of the loyal owners, to insert those of the purchasers, and
to issue stock certificates to the latter, all which was
accordingly done. Dividends were declared from time to time, and
paid to those parties or their assignees. The company acted under
duress. The slightest resistance or hesitation would not have been
tolerated by the Confederate authorities.
In February, 1865, the military forces of the United states
captured the City of Charleston and seized all the property and
effects of the gas company. The president of the company was
relieved from his duties and ordered to deliver all the records of
the company to a lieutenant of the army, who was appointed to
succeed him. In May, 1866, the property of the company which had
been seized was restored to it. The conditions of the restoration
were that the company should erase from its books the names of
those who bought the sequestrated stock and of the assignees and
replace the names of the prior stockholders, and also pay to the
latter the amount of the dividends declared upon the stock since
January, 1861. These requirements were fully complied with by the
company.
The bill was filed by Perdicaries for himself and such other
stockholders in the same situation as might choose to come in and
contribute to the expenses of the litigation. The stock
certificates of the original holders and those of the purchasers or
their assignees are still outstanding.
The complainant prays that the sale may be vacated, that
Page 96 U. S. 195
the certificates still outstanding issued to the purchasers and
their assignees may be declared invalid, and ordered to be
delivered up and cancelled, that the claimants may be enjoined from
transferring or selling the shares and from bringing suits to
effect such transfers or for dividends, and that the company be
enjoined from allowing such transfers, from issuing new
certificates, and from paying dividends on the shares to those
parties.
Subsequently an amended bill was filed. It alleged that some of
the defendants had commenced actions on the case against the
company, alleging that it had issued the certificates fraudulently,
and that it was bound to make them good or to indemnify the
holders. It was prayed that all the parties be enjoined from
prosecuting or instituting such suits, and that their rights should
be finally settled in this suit. There was a decree for the
complainants, whereupon the defendants brought the case here.
Nothing is better settled in the jurisprudence of this court
than that all acts done in aid of the rebellion were illegal and of
no validity. The principle has become axiomatic. It would be a mere
waste of time to linger upon the point for the purpose of
discussing it.
Texas v.
White, 7 Wall. 700;
Hickman v.
Jones, 9 Wall. 197;
Hanauer v.
Doane, 12 Wall. 342;
Knox v.
Lee, id., 457;
Hanauer v.
Woodruff, 15 Wall. 439;
Cornet v.
Williams, 20 Wall. 226;
Sprott v.
United states, id., 459.
The transactions here in question were clearly within the
category thus denounced. The order of sequestration, the sale, the
transfer, and the new certificates, were all utterly void. They
gave no rights to the purchasers, and took none from the loyal
owners. In the view of the law, the rightful relations of both to
the property were just the same afterwards that they had been
before. The purchasers had not then, and they have not now, a
scintilla of title to the stock.
The transferees can be no better off than their vendors. This is
necessarily so, for several reasons.
A thing void as to all persons, and for all purposes, can derive
no strength from confirmation. 13 Comyns Dig., tit. Confirmation,
D. 1, 4, pp. 144, 145;
Blessing v. House's Lessee, 3 Gill
& J. (Md.) 290.
Page 96 U. S. 196
It is a
caput mortuum, and nothing can give it
vitality. The assignor could give no title to his assignee, when he
had none himself.
The stock of such corporations may be held by a valid title
without a certificate. The certificate is only one of the indicia
of title. The right to the stock is in the nature of a
non-negotiable chose in action. Angell & A. on Corp., sec. 560.
The assignee takes it subject to all the equities which existed
against it in the hands of the assignor.
Mechanics' bank v. The
New York & New Haven Railroad Co., 13 N.Y. 599. Such is
the rule applied to all choses in action not having the element of
negotiability.
National Bank of Washington v.
Texas, 20 Wall. 72.
Even where a negotiable note is void
ab initio, because
made so by statute, or by public policy on account of the
consideration, or is so by reason of the incapacity of the maker,
it can no more be enforced against the maker by a
bona
fide holder than by the payee. It is alike void in the hands
of both. 1 Parsons, Bills and Notes (ed. 1873), pp. 276, 277.
It is needless to pursue the subject further. The assignors and
assignees occupy exactly the same ground. Neither has any right or
title to the stock in question.
The suit was well brought by the complainant. The capital stock
and all the other property and effects of a corporation are a trust
fund. The corporation owns and holds them as a trustee. The shares
are a distinct and separate property. This subject was fully
considered in
Farrington v. Tennessee, 95 U. S.
679. What was there said need not be repeated. Where a
cause of action affects the entire interests of a corporation as
such, the corporation is the proper party to sue. Where it affects
specially a stockholder, he has the same right to sue
pro
interesse suo as any one else. In the latter case, it may or
may not be necessary to make the corporation a party. As between
the complainant and the party who bought his stock at the pretended
sale, the conflict was primarily between them. The question was one
of
meum and
tuum. But the shares represented
aliquot parts of the trust fund. It was, therefore, proper that the
corporation, as the trustee of that fund, should be brought before
the court, that it might have
Page 96 U. S. 197
effectual notice of the litigation, and be bound by the results.
The corporation, as the owner and representative of the trust fund,
had, however, an interest of its own to be litigated. So far as the
prior and the latter holders of the stock were concerned, it might
have made them parties, and had their rights settled by a bill of
interpleader. There were also questions affecting all the
stockholders alike. They were (1) whether both sets of claimants
could not hold the stock claimed by them respectively, and the
aggregate of the capital stock be so much increased; (2) whether
the corporation, by reason of the conduct of its officers, was or
was not bound to indemnify the purchasers or their assignees, if
they lost the stock which they claimed to own; and (3) whether
dividends should be paid to both sets of claimants, and, if not, to
whom such payments should be made. In such a proceeding the
original owners of the confiscated stock must have been made
parties. This would have brought the same questions before the
court as are now presented for consideration. The liberality and
flexibility of the doctrines and practice of courts of equity are
such that this could as well be done in this case as in a separate
and independent proceeding instituted by the corporation. The
complainant had a clear right, on account of the cloud cast upon
his title, and of the injury otherwise special to himself, of which
he complained, to be heard upon his bills. The entire subject and
the necessary parties being before the court, and the court having
jurisdiction for one purpose, might well take and exercise it as to
every thing involved in the controversy. This saved time, expense,
circuity of proceedings, perhaps a multiplicity of suits, and
promoted the ends of justice. There is clearly no misjoinder or
multifariousness in the bill.
There are cases in which a corporation having refused to do its
duty by suing to avert a threatened wrong, a stockholder was
permitted to intervene in its stead, making the corporation a
party.
Dodge v.
Woolsey, 18 How. 331, is one of this kind. Cases
are more numerous where the directors having made themselves
personally liable for neglect or breach of duty, and the
corporation refusing to proceed against them, a stockholder has
been permitted to sue in its behalf. In such cases, the
corporation
Page 96 U. S. 198
is an indispensable party. The refusal must be made distinctly
to appear; and the avails of the litigation, if there be any, go to
the corporation, and are a part of its means, as if it had itself
sued and recovered.
See Hodges v. New England Screw Co., 1
R.I. 312;
Foss v. Harbottle, 2 Hare 461;
Hersey v.
Veazie, 24 Me. 1;
Cunningham v. Pell, 5 Paige (N.Y.)
607;
Smith v. Hurd, 12 Metc. (Mass.) 371;
Austin v.
Daniels, 4 Den. (N.Y.) 299. But this bill does not belong to
either of these classes. It is founded upon the wrong and injury
special to the complainant; but it happens that his case and that
of the corporation, if the latter had sued, would depend upon the
same considerations, and that the decision of either would decide
the other, except perhaps as to a single point, in regard to which
we entertain no doubt. That point is the claim of a part of the
appellants for indemnity from the company. To this, aside from the
state of the pleadings, there are fatal objections. If they are
paid by the company, they must be paid in part out of the money of
the loyal men who have been wronged and forced into this litigation
for the vindication of their rights. A court of equity cannot be
expected to entertain such a proposition. If those who make the
claim are, under the circumstances of this case, entitled to any
remedy, it must be sought against the parties personally by whom
they say they were defrauded.
The Western Bank of Scotland v.
Addie, Law Rep. 1 Scotch App. 145. That question would be
alien to those arising and proper to be decided in this case. The
litigation as to that subject would be multifarious.
The rights and claims of all the parties before us, as respects
both the corporation and the original stockholders, may therefore
well be disposed of in this case.
We think the decree of the Circuit Court is right, and it is
Affirmed.