Clark v. Western Feeding Co.

ROTH, J.,

pro tem.

Merl R. Clark, respondent herein, as plaintiff, brought this action to quiet his title to eighty-one shares of the stock of- Western Feeding Company, a corporation, hereinafter referred to as “corporation”, to compel said corporation to issue to him in his name a new certificate for shares of its stock in that number, and to cancel a certificate for said number of shares which had been issued by said corporation to defendant W. A. Teagarden.

[728]

Upon a judgment in favor of respondent against both defendants, the latter prosecute this appeal.

The evidence shows that a

bona fide

pledge of the stock in question was made by L. G. Clark, the original owner thereof, on January 10, 1933, to his brother Merl R. Clark, the respondent herein, as security for the payment of a promissory note, by delivery of the stock certificate duly endorsed by L. G. Clark. There is some controversy as to whether defendant corporation had notice of this transfer at any time before the accural of the claim of defendant Teagarden, but it is established without controversy that the stock was never transferred on the books of the corporation at any time. L. G. Clark defaulted in payment of the note for which he had pledged the certificate of stock as security, and a default having been declared by respondent, the stock pledged as security for the note was thereupon sold by respondent as a pledge on June 8, 1934, and purchased by respondent on that date at the pledge sale. On May 17, 1934, pursuant to a writ of execution issued by the Superior Court of Los Angeles County, the sheriff thereof served defendant corporation, and. levied upon the stock of L. G. Clark which still stood iiV the name of L. G. Clark on the books of the corporation. The stock was sold at execution sale and purchased by defendant Teagarden. Thereafter, the corporation issued to Teagarden a new certificate for the eighty-one shares.

The primary question presented on the appeal is whether the assignment accompanied by the physical delivery of the duly endorsed certificate of stock for value as a pledge to respondent takes priority over the title to said stock acquired by Teagarden, by virtue of his purchase thereof at the execution sale.