[266 U.S. 131, 132] Mr. Wm. Marshall Bullitt, of Louisville, Ky., for Mackenzie.
[266 U.S. 131, 136] Mr. J. Verser Conner, of Louisville, Ky., for A. Engelhard & Sons.
Mr. Justice HOLMES delivered the opinion of the Court.
This is a bill brought by Mackenzie to compel the defendant corporation, A. Engelhard & Sons Co., to deliver to the plaintiff one hundred and thirty shares of [266 U.S. 131, 141] stock formerly represented by certificate numbered 24, to the defendant, or to pay to him the value of the same, and the amount of all dividends declared upon the shares since July 15, 1918. The grounds are these:
The plaintiff, being holder of a note for $7,500 and of the above mentioned certificate then standing in the name of F. W. R. Eschmann and unendorsed but stated in the note to be security, brought a suit against Eschmann, and others, makers of the note, and the corporation, in the Jefferson Circuit Court of Kentucky, to recover upon the note, to have it declared a lien upon the said stock and to have the lien enforced. He filed the certificate as an exhibit. The corporation was dismissed from the suit upon its demurrer, but of course had notice thereafter that the suit was pending and that the plaintiff claimed an interest in the stock. Indeed the plaintiff had previously sought to have the certificate that he held transferred to him as pledgee but had been refused. On November 7, 1914, judgment was rendered for the defendants and it was further adjudged that the defendant F. W. R. Eschmann be 'permitted' to withdraw the certificate from the exhibits, leaving a copy in the record. The plaintiff prayed an appeal but did not obtain a supersedeas, as he might have by giving a bond.
Eschmann withdrew the certificate and on February 20, 1915, obtained in place of it new certificates to his wife and his attorney. On April 26, 1915, the plaintiff perfected his appeal to the Court of Appeals of Kentucky. On March 6, 1917, the Court of Appeals reversed the judgment below (174 Ky. 450, 192 S. W. 521), and on October 31, 1917, final judgment was entered in the Jefferson Circuit Court that the plaintiff should recover the sum demanded and that he had a lien upon certificate No. 24, and the shares represented by it and upon any certificates that might have been issued by the corporation to the defendants, [266 U.S. 131, 142] then the executors of F. W. R. Eschmann, deceased, in lieu of No. 24, to secure the plaintiff in the payment of the debt and costs. It was adjudged further that the shares should be sold and that the defendants should return the certificate to the court. On July 15, 1918, a sale was had, but the attorney for the defendants who also is attorney for the corporation attended and gave notice that the certificate had been sold by Eschmann and had been cancelled. The plaintiff bought for one hundred dollars and on October 30, 1918, the sale was confirmed by the court. Subsequently he demanded a certificate from the corporation but was refused. All its stock has been issued.
In the present case the District Court decreed that the plaintiff recover his original debt and interest with a dividend declared after the purchase by the plaintiff, in all $13,354.75, with interest from the date of the decree until paid. Both parties appealed to the Circuit Court of Appeals. That court, while agreeing that the plaintiff was entitled to relief against the corporation, held that as the plaintiff had not obtained a supersedeas to the first judgment in the former suit and had taken no proceedings before the sale to establish what title would pass by it, his relief in equity should be limited to the amount of the debt, interest and costs in the other suit up to the time of sale, although the plaintiff's right was absolute at law. 286 F. 813. Writs of certiorari were issued on the petitions of both sides. 262 U.S. 739 , 43 S. Ct. 701
It does not seem to us to need argument to establish that the sale to the plaintiff was effectual as against the parties to the suit. The decree confirming the sale was final and not appealed from. We believe the rule in Kentucky to be that purchasers pendente lite would stand in the defendant's shoes. An appeal is a proceeding in the original cause and the suit is pending until the [266 U.S. 131, 143] appeal is disposed of. Therefore, apart from more special considerations applicable here but not needing mention, the assignees of the stock stood no better than Eschmann unless they were helped by the provision that 'an appeal shall not stay proceedings on a judgment unless a supersedeas be issued' in the Kentucky Civil Code, 747. But there was no question here of any proceedings on the judgment. When the final judgment was reached it determined the rights of Eschmann ab initio, and it seems to us impossible to believe that it did not also determine the rights of the assignees. We understand that this would be the view of the Kentucky Court of Appeals. Golden v. Riverside Coal & Timber Co., 184 Ky. 200, 205, 211 S. W. 761.
The liability of the corporation rightly was found to exist by both courts below. The company might be liable even without fault, and if for any reason it were unable to restore the stock it might be answerable for its value. Telegraph Co. v. Davenport, 97 U.S. 369 , 372; Moores v. Citizens' National Bank, 111 U.S. 156, 166 , 4 S. Ct. 345. But here, as we have said, it had notice of the suit. It knew that the first judgment might be reversed, as it was, upon appeal, and was entitled to protect itself, as it might have and for all that appears may have done, when it issued the new certificates. We perceive no reason in the Kentucky Civil Code for distinguishing between its position and that of the assignees.
We come then to the question whether equity requires any diminution of the rights acquired by the plaintiff under the judicial sale to him. It is adjudged that his rights are absolute. It is a strong thing to cut down his rights under the judgment of the state court. The parties stood upon equal ground. Without going further into the facts each seems to have been trying to get the better of the other and neither can get much help from atmospheric considerations. The plaintiff did not care [266 U.S. 131, 144] to assume the liabilities of a supersedeas bond, but if the defendant took no steps to protect itself it might have done so. The plaintiff was not bound to pursue the assignees of the stock before looking to the corporation. St. Romes v. Levee Steam Cotton Press Co., 127 U.S. 614, 620 , 8 S. Ct. 1335. It is immaterial what were the limits of the plaintiff's original interest; he comes before this court as absolutely entitled to the stock and the preliminaries to his acquiring the title have no bearing on the case. He got it at a better bargain than he would have done had his adversaries taken a different course, but he got it and his right is not to be impugned. See Miller v. Doran, 245 Ill. 200, 91 N. E. 1039.
Mr. Justice McREYNOLDS, Mr. Justice SUTHERLAND, and Mr. Justice SANFORD dissent.