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ownership as tenant in common with the assignor. Joint ownership had incidents, as Professor Williston rightly says, that were not adapted to the end sought.109 If assignor and assignee were tenants in common, each had a separate interest. On common law principles, how could they join? If not, then, as Professor Williston says, to “hold that the partial assignee is the legal owner of a part of the claim ... is to subject the debtor to an indefinite multiplication of claims.” 110
Consequently the common law courts surrendered in despair and left the assignee to courts of equity.
The chancellor, however, was entirely accustomed to permitting persons having separate property interests to join in suits in equity where that seemed convenient.111 He therefore had no difficulty in protecting the assignee by holding that in equity there was an equitable duty on the part of the debtor owed to the assignee to pay him his share, and another duty to the assignor to pay him the remainder, and that the two might join in a suit in equity for the enforcement of the claim.112 In other words, the equitable doctrine is that assignor and assignee each own separate interests but may join in a suit against the debtor to compel payment. What has happened in states having codes of civil procedure is that the rules as to parties have been so modified as to apply to many common law actions the equitable rule as to joinder of plaintiffs having separate interests. 113 With “the real party in interest” clause to rely upon, it is therefore not surprising that some courts permit the assignee to join with the assignor in a suit at law. Since the assignor's claim is primarily, before assignment, enforceable at law, this seems a convenient rule although it thereby makes the partial as
109 It must not be overlooked that on the orthodox common law theory that the partial assignee's ownership is exclusively equitable, the assignor retains an exclusively legal power to release the claim, even after notice to the debtor. Being exclusively legal, however, this power is ultimately ineffective if the assignee calls equity to his aid.
30 HARV. L. Rev. 108. 1 For example, separate owners of separate pieces of land may join in a bill to restrain acts which constitute a nuisance affecting all. Murray o. Hay, 1 Barb. Ch. (N. Y.) 59 (1845).
112 Some of the cases are cited in 5 CORP. JUR. Iboo, notes 89 and 93. Dean Ames suggested that a partial assignment is “in effect" an equitable charge. Ames, CASES ON Trusts, 2 ed., 148. If so, it seems that the debtor would still owe the whole sum in equity to the assignor. Apparently this is not the principle upon which the cases rest.
113 See cases and references cited in n. 108, supra.
signee's ownership concurrently legal and equitable.114 It has the great advantage of not changing the trier of fact from jury to judge just because a portion only of a claim is assigned. This is especially important where the claim assigned is for damages due to a tort. It fully protects the debtor from a multiplicity of suits. It has the additional advantage, from Professor Williston's point of view, that it makes it less difficult to persuade a court that a prior partial assignment has precedence over a subsequent total assignment. The argument now runs: Since the partial assignee under the new doctrine gets a legal ownership of a portion of the claim, the assignor has left the legal ownership of a portion only, and the subsequent “total assignee" gets only that remainder. Needless to say, the present writer does not indorse such reasoning as conclusive, for the problem ought to be settled on a less mechanical basis; but undoubtedly it would appeal to many courts.
It was originally my intention to discuss in this second article the so-called rule in Dearle v. Hall 115 and to show how the analysis here presented enables one to visualize the real problem involved. The rule referred to is the one which prefers, as between two or more total assignees, the one who first notifies the debtor. Recurring to the discussion above of the situation before notice of an assignment has been given to the debtor, it is clear that in jurisdictions where the rule in question is in force the assignor after the first assignment retains, in addition to the powers mentioned, a power to confer upon a second assignee a power to acquire a valid title to the claim by giving notice first. There is no difficulty of conceiving of the existence of this power even though many concurrently legal and equitable rights and other jural relations vested in the first assignee in spite of the lack of notice. Which one of the two innocent assignees should be preferred should depend not upon whether the first assignee acquired a concurrent or exclusively equitable incomplete ownership, but upon those broader questions of policy already referred to so frequently. An example of
114 It is immaterial to the debtor how assignor and assignee divide the money. Apparently the judgment reads that each recover his share. If they cannot agree how the judgment should be entered, the code procedure provides a method for determining this. Bliss, Code PLEADING, 3 ed., § 74; School District o. Edwards, 46 Wis. 150, 158, 49 N. W. 968 (1879). 115
3 Russell 1, 48 (1827). The rule in question is discussed in AMES, CASES ON Trusts, 2 ed., 326; also in 60 U.Pa.L. REV.668, where some of the recent cases are cited.
the type of reasoning which ought to prevail is found in cases which hold that, although under the code provisions of the jurisdiction in question the assignee acquires a "legal title” (i. e., concurrently legal and equitable), the rule as laid down in Dearle v. Hall prevails, the decision being put on grounds of policy rather than mere logic. 116
In closing this somewhat long discussion the present writer wishes to emphasize again the importance of both an exact scientific analysis of fundamental legal concepts and an equally exact scientific terminology in which to express them. It is fully realized that this goal is an ideal one, difficult to attain, and that doubtless in the present discussion many lapses have occurred. At the present time, when we are attempting not only to adapt our law to modern social and industrial conditions, but also to restate much of it in the form of codes of uniform state laws, the need for analytical jurisprudence is greater than ever before. If this work is to be done worthily, it must be carried on by men adequately trained to analyze with accuracy the fundamental concepts which lie at the basis of our legal system in a terminology which will not mislead. Thus and thus only will genuine progress be made.
Walter Wheeler Cook. YALE UNIVERSITY SCHOOL OF LAW.
116 Graham Paper Co. v. Pembroke, 124 Cal. 117, 56 Pac. 627 (1899); Widenmann v. Weniger, 164 Cal. 667, 130 Pac. 421 (1913). See the comment on the California cases in 1 Cal. L, REV. 364.
HARVARD LAW REVIEW
Published monthly, during the Academic Year, by Harvard Law Students
JURISDICTION TO ADJUDICATE THE OWNERSHIP OF A SHARE OF STOCK.
A recent decision of the United States Supreme Court brings into the foreground the much-tried question of jurisdiction to adjudicate the ownership of a share of stock in a corporation. Baker v. Baker, Eccles & Co., U.S. Sup. Ct., Oct. Term, 1916, No. 115.
The court decided that in a suit concerning the right to certain stock in a Kentucky corporation, the Kentucky court was not bound by the Constitution of the United States to extend full faith and credit to a finding of fact made by a Tennessee court in a prior adjudication of the ownership of the stock, where the Tennessee court had the certificates of stock before it, but no jurisdiction over the corporation. Indirectly this is a holding that the decree of the Tennessee court was made without jurisdiction.
Any answer to the question presented to the court in this case depends primarily upon the view adopted as to the nature of a share of corporation stock. One might conceivably regard it as a property interest in the assets of the corporation. Courts have sometimes talked this way,'
1 For a ful statement of the facts of the case, see RECENT CASES, p. 516.
? There was no question of lack of proper service or notice, so that the decision must go on grounds of lack of jurisdiction in the sovereign, and hence lack of jurisdiction in the courts of that sovereign.
3 See Jellenik v. Huron Copper Co., 177 U. S. 1, 13; Matter of Bronson, 150 N. Y. 1, 8, 44 N. E. 707, 709. See 25 Harv. L. Rev. 719.
but the theory is so clearly erroneous, involving as it does an utter disregard of the corporate entity, that it has had no real currency in our law and need not be considered.
Another more tenable suggestion is that the share is a property interest in the legal unit, in the corporate entity itself. The French notion of collective property is perhaps responsible for this idea. Under this theory, the property devoted to an enterprise is emphasized. It is looked upon as a unit, dedicated to this particular business by the contributors and collectively owned by them. The corporate entity when raised is regarded as a legal unit created to own and manage more efficiently the collective unit of property, -- in essence, a legal unit predicated upon the collective property. Where this view is held, the above analysis of the nature of a share of stock is very applicable. But where, as with us, the legal entity is regarded as predicated upon the group of persons or person, there is more difficulty with the idea.
If a share of stock is so regarded, however, the question of jurisdiction to adjudicate its ownership becomes comparatively simple. No sovereign can have jurisdiction of the property but the sovereign of the territory where the property is. The legal entity, the corporation, can have no existence except at the place where it was created. So that this sovereign only should have jurisdiction to adjudicate its ownership.?
Perhaps the most logical explanation of the nature of a share of corporate stock in our law, and the one most commonly accepted, is that the share of stock is a chose in action of a complicated character obligor-obligee relation between the corporate entity and the shareholder. Taking this view the question of jurisdiction assumes a more difficult aspect.
Let us look at a simple chose in action-a contract by R. to pay money to E., unevidenced by any instrument. A clear and constant recognition of the nature of a chose in action is essential to reach any true result. In our simple case above, E., the obligee, has a legal right against R., the obligor, to have R. pay him money, and R. on his side has a legal duty to pay
the money to E. This is the totality of the legal situation. When a court assumes to adjudicate that E. no longer has this right against R., but that R. is now so obligated to X., or, to speak loosely, to adjudicate the “ownership” of the debt, what is it doing? It is adjudicating two things, – that there is a legal obligation upon R., and that E. has been divested of a legal right. Now in a situation where R. is domiciled in state A. and physically there, and E. is domiciled in state B. and physically there, what state has jurisdiction to adjudicate as suggested above?
PLANIOL, DROIT Civil, 88_3005 et seq. • See Arndt v. Griggs, 134 U. S. 316, 323; 3 BEALE, CASES ON CONFLICT OF Laws, SUMMARY, $ 37.
• See Shepard & Morse Lumber Co. v. Burleigh, 27 App. Div. 99, 101, 50 N. Y. Supp. 135, 136; 2 MORAWETZ, PRIVATE CORPORATIONS, $ 959. The intangible nature of this property offers no objection to its having a situs. There are many examples where intangible property may properly be said to be situated at a certain place, e. 8., good will of a business. If there has been an incorporation by other states, then the question becomes more difficult.
. The purchase of shares of stock, in a corporation of a certain state, would be sufficient consent by a non-resident owner to subject his interest to the jurisdiction of that state.