Cornell Law Review

Volume 17
Article 2
Issue 1 December 1931

Situs of Stock
Robert Pomerance

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Robert Pomerance, Situs of Stock, 17 Cornell L. Rev. 43 (1931)
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 THE 'SITUS' OF STOCK*
ROBERT POMERANCEt
INTRODUCTORY
This paper proposes to examine critically the concept of 'situs'
as applied to stock, with the purpose of determining whether that
concept is sufficiently precise to be of any real utility. If the concept
of 'situs' proves to be so variable and nebulous that it must be
redefined every time it is used, it is simply a superfluous terminologi-
cal intermediate which serves only to mislead. But if 'situs' emerges
from the investigation as an exact and well-founded legal concept,' it
ought to be retained and recognized as a valuable aid to legal think-
ing.
a. What is stock
To the ordinary layman a stock certificate is the stock. Does he
not buy and sell the stock certificate on the Stock Exchange? Will
not his banker loan him money on it, and take it away if he fails to
repay the loan? Has not a cashier of a bank who ran away with a2
pocketful of certificates been sentenced to prison as an embezzler?
It is hard to convince the layman, and perhaps equally hard to con-
vince many a lawyer, that a certificate of stock is, after all, only a
piece of paper. Respectable legal authorities have termed the certi-
ficate "the stock itself, practically, in business transactions...
property in itself," 3 "a constituent of title", 4 and "a concrete physical
representation of [an] interest" in property.5
This identification of the certificate with the stock results from a
psychological habit whereby a simple concrete object, usually a part
*The author is indebted to Professor Robert S. Stevens of the Cornell Law
School for his criticism and aid. Thanks are due also to Professor Elliott E.
Cheatham of Columbia Law School for his many pertinent suggestions.
tMember of the New York Bar.
1Cf. CARDOZO, PARADOXES OF LEGAL SCIENCE (1928) 6I: "A fruitful parent of
injustice is the tyranny of concepts. They are tyrants rather than servants when
treated as real existences and developed with merciless disregard of consequences
to the limit of their logic. For the most part we should deal with them as pro-
visional hypotheses to be reformulated and restrained when they have an out-
come in oppression or injustice."
'That the illegal sale of certificates received as collateral constitutes grand
larceny, not merely petty larceny, see People v. Katz, 154 App. Div. 44, 139
N. Y. Supp. 137 (1st Dept. 1912).
32 CooK, CORPORATIONS (8th ed. 1923) 1o9.
'Hatch v. Reardon, 204 U. S. 152, I6I, 27 Sup. Ct. 188, 191 (i9o6).
6.Iein v. Wilson & Co., 7 F. (2d) 769, 771 (D. N. J. 1924).
43
 CORNELL LAW QUARTERLY

or attribute of the whole, is used to represent or symbolize something

more complexandless easily objectified. Of thishabitonecourt hassaid:
"It is a familiar experience that things which exist at first and
are spoken of as theories or mere concepts soon become recog-
nized facts, and are given in thought and words body and
substance. Physical science abounds in illustrations of this,
and in both business affairs and in the law we meet with them.
It is really the same tendency as the disposition to personify
things, and to reduce the abstract to the concrete." 6
Upon examination, however, it becomes apparent that stock is
something more than the paper certificate. In the old common law, a
bond was a sealed specialty which was treated as if it were the obli-
gation itself; if aught destroyed the paper on which the obligation
was written, the obligation perished as well. But to-day it is well
settled that, if a bond or stock certificate is destroyed, its owner may
obtain a new one. The stock certificate is not identical with the
obligation, but represents it in some manner. 7 Thus, suppose that a
newly organized corporation delays sending to a shareholder
certificates representing stock that he has bought-the shareholder
is none the less a shareholder, and has a right to a portion of the
corporation's earnings. 8 Though each certificate is earmarked by
the number it bears, the corporate property is an undivided whole,
and no shareholder could pick out the exact portion that corresponds
to his certificate. Hence, although the certificate can be bought,
sold, stolen, pledged, and sued for, stock is something more than the
certificate; whatever stock may be, the certificate is not the share of
stock. It is, if you like, a 'representation', or 'evidence' of the share.
This distinction is fundamental. Its significance will appear as we
progress. 9
We are not to understand that the layman's identification of the
certificate with the share has no legal significance. The courts always

7
De Ganay v. Lederer, 239 Fed. 568, 572 (E. D. Pa. 1917).
Blodgett v. Silberm4n, 277 U. S. 1, 15, 48 Sup. Ct. 410, 415 (1925); CHRISTY,
THE TRANSFER OF STOCK (1929) §§ 4, 12.
8
CHRISTY, op. cit. supra note 7; (1926) II CORNELL LAW QUARTERLY 237. And
see Pacific National Bank v. Eaton, 141 U. S. 227, 'I Sup. Ct. 984 (i891); Amer-
ican, etc., Co. v. State Board, 56 N. J. L. 389, 29 Ati. 16o (1893).
9" 'Shares' are the units into which the rights of members, to participate in
the control of the corporation, in its profits or in the distribution of corporate
assets, are divided .... A 'Certificate of Stock' is a written instrument sealed
with the corporate seal, signed by the proper corporate officers, as required by this
Act, and evidencing the fact that the person therein named is the registered
owner of the share or shares therein described." UNIFORm BUSINESS CORPO-
RATION ACT (1928) j .
 THE SITUS OF STOCK

are concerned with how the layman looks at things, and his point of
view becomes important when the court is attempting to find out
what he meant by the words he used in a contract, deed, or will. In re
Clark' O presents an unusual, striking illustration of the importance
which may be attached to the popular conception of stock. The
testator owned shares in a mining company which was incorporated
in South Africa, but which maintained transfer offices both in Africa
and in London. The-certificate was kept at the testator's London
residence. By his will, the testator bequeathed his personal property
in England to A, his personal property in Africa to B. It was held
that, since the stock was represented .by certificates located in
England, the intention of the testator must have been to bequeath
the property to A, and hence it passed under the bequest of property
in England."
It is not easy to pin down the exact definition of the term 'stock'.
It is bewilderingly elusive. Stock has been tagged, at one time or
another, with many labels--it has been called quasi-property, a
contract right, a chose in action, and a host of other names. Most of
these terms are in themselves so ambiguous that they only heighten
the confusion. Furthermore, they are true only by way of analogy, if
at all. The use of these terms would be misleading, and an effort
will be made to avoid them so far as possible in the course of this paper.
Since the corporate fiction is firmly embedded in our law, a share-
holder in a corporation owns, in legal contemplation, only his shares,
the corporation alone possesses the corporate property." The veil
of corporate fiction seldom is dropped unless necessary to prevent
fraud.13 The shareholder has an interest in or right against the
1[I9O4] 1 Ch. 294.
UCf. Matter of McMullen, 114 Misc. 505, 187 N. Y. Supp. 248 (Surr. Ct.
1921) in which a New York transfer tax was held to apply to shares in a foreign
corporation which had among its assets realty in New York, even though the
certificates were owned by a non-resident and were kept outside the state. Aimed
against the evasion of taxes through the use of the corporate device, this pro-
vision, in substance, treats shares as real property. The case was reversed in i99
App. Div. 393, 192 N. Y. Supp. 49 (ist Dept. 1922), in which the court held
that the state lacked jurisdiction to tax shares of such corporations. See also
Matter of Gates, 243 N. Y. 193, 153 N. E. 45 (1926) noted (1926) 12 CORNELL
LAw QUARTERLY io8. Subsequently this portion of the tax statute was repealed.
Cf. Rhode Island Hospital Trust Co. v. Doughton, 270 U. S. 69, 46 Sup. Ct. 256
(1926); (1925) 38 HARv.L. Rnv. 809.
""The title to corporate assets is not vested in the shareholders. The title is in
the corporation, ..." Cardozo, C. J., in Marr v. Tumulty, 256 N. Y. 15, 24,
175 N. E. 356, 358 (I931).
UWoRmsER, DiSREGARD OF T=E CORPORATE FICTION (1928) 47 et seg.
 CORNELL LAW QUARTERLY
corporation, which interest or right is his stock. The term stock
defines and characterizes the relation between the corporation and
the shareholder, a relation, in the words of Mr. Justice Holmes,
"complex and abiding". 4 In this sense stock is intangible, and "can
have no spatial character except by virtue of the parties to the
relation,"' 5 and it is sui generis, because it is characterized by a
unique set of rights and duties. The sum of the-rights and duties
that inhere in the corporation-shareholder relationship defines a
share of stock, the term labels that, and nothing more. Stock can be
defined more exactly only by determining the rights and duties
involved in the relationship.

b. What is 'siWtus'.
The word 'situs', in its dictionary usage, means physical location
or situation. But the law has perverted and misused the word until
it is scarcely possible to tell what it signifies. Like many other legal
expressions, such as 'property', 'trust', and 'domicile', it has been
expanded to include so many novel situations that it no longer has
an exact meaning. The law has made the 'situs' of real estate equiva-
lent, simply enough, to its actual physical location. But the 'situs'
of personal property has been defined, for -many purposes in the law,
as its owner's domicile. The fiction mobilia sequunturpersonam is at
the root of this doctrine. Now it is apparent that, from the moment
we speak of a 'situs' divorced from the physical location of a chattel,
we have begun to use 'situs' in a sense different from the dictionary
meaning. It has become the result of certain legal contacts or situa-
tions by virtue of which one jurisdiction or another assumes control
over property. 'Situs' has ceased to express a physical fact from which
to reason.
To-day, the fiction that movables follow the owner, as applied to
tangible chattels, is not followed for most purposes. 6 But the same
problem of the perverted, expanded use of the term 'situs' is in-
volved in discussions of the 'situs' of intangible personality such as7
stock. For, although courts still talk about the actual 'situs' of stock,
it is utterly inconceivable that an abstract, intangible, right-duty
relationship should have an actual physical location. The stock
' 4Modern Woodmen v. Mixer, 267 U. S. 544, 551, 45 Sup. Ct. 389 (1924).
' 5Direction der Disconto-Gesellschaft v. U. S. Steel Corp., 3oo Fed. 741, 746
(S. D. N.Y. 1924), opinion by Judge Learned Hand. Cf. note IO3 infra.
'8 Frick v. Pennsylvania, 268 U. S. 473, 45 Sup. Ct. 603 (1925). But see Old
Dona. S. S. Co. v. Virginia, 198 U. S. 299, 25 Sup. Ct. 686 (igo5).
17Lockwood v. U. S. Steel Corp., 2o9 N. Y. 375, 1o3 N. E. 697 (913).
 THE SITUS OF STOCK

certificate has a physical location, but we have seen that the share is
not identical with the stock certificate. To talk about the physical
location of an abstract relationship is highly metaphysical and
utterly futile.
There can be no actual 'situs' of a share of stock. If 'situs' is to be
used in the sense of physical location it might better be abandoned
entirely. What Professor Powell has said of the debt is equally ap-
plicable to the corporate share: "It isn't that kind of an animal.
Any talk about its location is necessarily a medley of metaphor and
analogy."' 8 'Situs' simply means the place where shares "may
effectually be dealt with."'19 Or perhaps one should say places, because
it is not impossible that several jurisdictions may deal effectually
with the same shares of stock. 0 Nor need the place be the same for
every purpose, for perhaps a jurisdiction which cannot deal effectu-
ally with shares for one purpose can for a different purpose. 'Situs'
would seem to be pretty much what the courts make it.2" At differ-
ent times, and for different purposes, they have made it the domicile
of the owner, the place where the certificate is located, the state of
incorporation, the place where the corporation owns property and
does business. Because 'situs' is not necessarily single, and may turn
out to be multiple, this paper will attempt to make separate analyses
of the term in varying circumstances. If there be any correlation
among the results, it should grow visible as we progress. But if there
be no correlation, the concept of 'situs' as applied to stock will prove
to be a useless intermediate.
TRANsprRS OF STOCK
The Uniform Negotiable Instruments Law defines a negotiable
instrument as an unconditional promise or order to pay a sum certain
8
" Powell, Business Situs of Credits (1928) 28 W. VA. L. QUART. 89, 90.
1
gIbid.
2"See infra pages 54, 6o, 63, 68. For comments on the situs problem, see
(1925) 38 HARV. L. REv. 809; (1926) 39 ibid. 485.
"Cf. the statement of Mr. Justice Holmes in Safe Deposit and Trust Co. of
Baltimore v. Virginia, 28o U. S. 83, 97, 98,50 Sup. Ct. 59, 62 (1929): "To say
that a debt has a situs with the creditor is merely to clothe a foregone conclusion
with a fiction."
22The RESTATEMENT OF PROPERTY (Am. L. Inst. 1929) § i, defines property as a
person's rights against the world in a thing. If this definition be accepted, situs
becomes the place or places which adjudicate these rights in things. The place
where land is physically located adjudicates rights in land. Similarly, the
place where chattels are physically located usually adjudicates rights in them.
But property in stock, under the definitions in the RESTATEMENT, must mean
rights in intangible rights, and hence it is much more difficult to fix upon a single
forum which adjudicates rights in stock than in tangible property.
 CORNELL LAW QUARTERLY
in money at a fixed or determinable future time.? The narrowness of
this definition has prevented the classification of bills of lading,
warehouse receipts, and stock as 'negotiable instruments'. But the
Uniform Bills of Lading Act 2 4 substantially has endowed bills of lad-
ing with the quality of negotiability-i.e., a bona fide holder for
value of a bill of lading endorsed in blank takes it free of equities
between the maker and the previous holder. At common law, bills of
lading were not negotiable, although the doctrine of estoppel might
bar the claim of one who voluntarily parted with the indicia of owner-
ship. The common law doctrine permitted the true owner to recover,
however, in the situation where no estoppel could be raised against
him-e.g., if the bill of lading had been stolen from him.
In a very similar manner, the Uniform Stock Transfer Act25 makes
stock certificates, when properly endorsed, negotiable, in the sense
of cutting off equities. Section 5 of the Act provides:
"The delivery of a certificate to transfer title in accordance
with the provisions of section i is effectual... though made by
one having no right of possession and having no authority from
the owner of the certificate or from the person purporting to
transfer the title."
Although the Act is in derogation of the common law and does not
mention specifically the rights of the bona fide purchaser of a stolen
certificate, 2 it has been construed as changing the common law
doctrine of estoppel or quasi-negotiability,2 7 as it is sometimes called,
to true negotiability.28 Thus, a bona fide purchaser or pledgee for
value of a certificate is protected against the owner even though the
endorsement was obtained by fraud, 29 or the certificate was stolen
from or lost by the owner.A0
As to negotiability, then, stock certificates are classifiable with

25 U. L. A. (NEGOTIABLE INSTRUMENTS LAW) § I.

244 U. L. A. (BILLS OF LADING AcT) § 32 eCt se.
256 U. L. A. (STocE TRANSFER AcT) § 5.
2
1See the vigorous dissenting opinion in Jackson v. Portland Cement Co., 238
Mich. 476, 213 N. W. 863 (1927).
2'Baker v. Davie, 211 Mass. 429, 97 N. E. 1094 (1912); 2 CooK, CORPORATIONS
(8th ed. 1923) 1272.
2s1 WILLISTON, SALES (2d ed. 1924) 717, n. 4; BALLANTINE, CORPORATIONS
(1927) 473, n. 70.
29Jenkans v. Continental Trust Co., I5O Md. 416, 133 Ati. 6Io (1926).
3
"Peckinpaugh v. Noble & Co., 238 Mich. 464, 213 N. W. 859 (1927); Jackson v.
Portland Cement Co., supra note 26; Nicholson v. Morgan, II9 Misc. 309, I96
N. Y. Supp. 147 (Mun. Ct. 1922); Turnbull v. Longacre Bank, 249 N. Y. 159, 163
N. E. 135 (1928); and see Wilson v. Shear Co., 3 S. W. (2d) 849 (Tex. Civ. App.
1927). The cases are collected in (1928) 52 A. L. R. 947.
 THE SITUS OF STOCK

notes, bills of exchange, bills of lading, and warehouse receipts.

Under Section One of the Uniform Stock Transfer Act, delivery of
the certificate plus endorsement in blank or specifically, or delivery
of the certificate plus a separate written power of attorney to transfer
or a written assignment are the only means of transferring stock. 3'
Wherever the Act is in force,31a the transferable value of the stock
is bound up in the certificate. The chief change made by the Act
is one of theory. True negotiability is substituted for so-called "nego-
tiability by estoppel," the doctrine whereby one who had clothed
another with the indicia of ownership was estopped to assert his
ownership against a bona fide purchaser for value. A practical differ-
ence is that a bona fide purchaser of a stolen endorsed certificate now
is protected against the true owner. A shareholder still may collect
dividends before certificates have been issued, or may ask for replace-
ment of certificates which have been destroyed. A number of writers3 2
and a few courts,3 however, have pressed the analogy with bills and
notes to the extent of asserting that the stock is identical with the
certificate.
One discussion34 says that under the Uniform Stock Transfer Act
".... the shares are so completely identified with the certifi-
cates that it seems inconsistent with this identification for [the
state of incorporation] to exercise in any manner jurisdiction in
rem over the shares except through and by means of the certifi-
cates."
Such statements are not strictly accurate. That the stock certificate
merely has been endowed with the same degree of negotiability as
commercial paper does not mean that the share has been made
identical with the certificate. Power to transfer title to the obliga-
tion by doing specific acts has been given to the holder of the paper-
a power not given to the casual possessor of tangible chattels, except
coin. By endorsing and delivering the certificate, he transfers the
3'Quaere, how would the courts treat an attempt to transfer shares of stock for
which no certificates had been issued? By analogy with the attempted sale of
goods not yet in existence, the attempted transfer might be treated as a contract
to transfer when the certificates are issued. An actual transfer of the certificates
to a bona fide purchaser for value then would cut off the right, which the buyer
otherwise would have, to specific performance.
alaIn 1930 it had been adopted in twenty-one states. See 6 IT. L. A. (1930
Supplement) 2.
2
3 GooDRICn, CONFLICT OF LAWS (1927) 407; (1927) 15 CALIF. L. REV. 145.
33
Blake v. Foreman Bros. & Co., 218 Fed. 264 (N. D. Il. I914); Newell v.
Tremont Lumber Co., i61 La. 649, 109 So. 344 (1926); Lockwood v. U. S. Steel
Corp., supra note 17.
34(1927) 15 CALIF. L. REv. 145, 15o, n. 28.
 CORNELL LAW QUARTERLY

intangible rights which it evidences. The transferability of the share

is governed solely by the transferability of the certificate. The other
characteristics of stock, the rights and obligations which it involves,
still constitute, however, the intangible relationship of which the
certificate is only a representation. Even the Uniform Stock Transfer
Act does not make the certificate the obligation. Stock still is in-
tangible, hence it remains impossible, even under the Act, to give the
share of stock a physical location.

a. Applicability of the Uniform Stock Transfer Act

The Act has been adopted in twenty-one states, including New
York, New Jersey, Pennsylvania, and Illinois, but not including
Delaware. Because of the change to negotiability and of certain
other changes hereinafter to be discussed which the Act introduces,
it is necessary to discuss here the situations in which the Act applies.
Does the Act apply a) if it is in force at the state of incorporation,
but not at the place where the certificate is transferred? b) If it is
in force at the place of transfer, but not at the state of incor-
poration?
The question which law governs the transfer of commercial paper
presents an analogous problem. The weight of authority, distin-
guishing between rights against the maker and rights as between
transferor and transferee, makes the law of the place of issue govern
the former, but holds that the law of the place where the present
holder acquired the instrument governs the validity of his title.36
This holding recognizes business needs-the maker of the note or
bill naturally is familiar with the law of the place where he makes it,
rather than of some foreign state or country, and in a sense relies
upon local law governing the instrument which he makes. But those
who accept or transfer a note or bill in a foreign state or country are
familiar only with the law of that state or country, and expect the
laws of that place to govern their transfers. It is hardly practical, for
example, to expect a transferee in Belgium of a check made by a New
York citizen to know whether the New York law permits a corporate
3
See supra note 31a.
112 WHARTqN, CONFLICT OF LAWS (3d ed. 19o5) § 447b; Roland M. Baker Co. v.
Brown, 214 Mass. 196, 202, oo N. E. 1025, 1028 (1913) (bill of lading); Weissman
v. Banque de Bruxelles, 254 N. Y. 488, 494, 173 N. E. 835, 837 (1930) (check);
Embiricos v. Anglo-Austrian Bank, [19051 1 K. B. 677 (bill of exchange). See
(1928) 37 YALE L. J. 8o3. The RESTATEMENT OF CONFLICT OF LAWS (Am. L.
Inst. 393o) §§ 2oo, comment (a), 282, comment (a), seems to recognize the same
rule as to stock. Cf. the rule in England, infra note 38.
 THE SITUS OF STOCK

officer to endorse checks payable to the corporation.37 The New York

law creates the contract and makes it transferable; if New York
should make notes written in New York non-transferable, a trans-
feree would, under the rule of comity, have no rights no matter where
the transfer was made. But so long as New York pennits the trans-
fer, it seems proper that the validity of an attempt to transfer should
be governed by the law of the place where the attempt is made.
Although, as has been pointed out, the analogy between notes and
stock certificates is imperfect, the same arguments as to the law which
should govern transfer are applicable to both. Today shares of stock
are bought and sold in enormous quantities, and a distinct policy in
favor of ease of transfer has grown up. When a state passes a statute
making certificates negotiable, it seems natural that the state should
make that statute apply to all transfers within the state, so that in-
habitants may determine by local law the validity of transfers made
within the state. That is the rule in England.3 8 The Uniform Stock
Transfer Act, as interpreted by the courts, adopts a different rule.
Section 22 of the Act, a compendium of definitions, contains the
following:
"(i) In this act, unless the context or subject matter other-
wise requires-'Certificate' means a certificate of stock in a
corporation organized under the laws of this state or of another
state whose laws are consistent with this act."
To this section the following commentary is appended:
"As to the definition of a certificate.... it should be said that
it seems impossible for a state to make effectual enactment as to
the nature and effect of certificates for shares, issued by cor-
porations chartered in other states, unless such states have a
similar act."'3 a
The policy here expressed against extra-territorial operation of the
Act has been interpreted by the courts, in conjunction with the
definition of a certificate under the Act, to mean that the Act does not
apply to stock in corporations incorporated in states which have not
adopted the Act.3 9 Practically every court confronted with the ques-
37Weissman v. Banque de Bruxelles, supra note 36.
38
Wiams v. Colonial Bank, [1888] L. R. 38 Ch.Div. 388.
31a U. L. A. (1922) 25, 26.
39
Paterson v. Fitzpatrick McElroy Co., 247 Ill.App. 8I (1927); Barstow v.
City Trust Co., 216 Mass. 33o, io3 N. E. 9ii (1914); Boston Safe Deposit Co.
v. Adams, 224 Mass. 442, 113 N. E. 277 (1916); Casto v. Wrenn, 255 Mass. 72,
x5o N. E. 898 (1926); Rand v. Hercules Powder Co., 129 Misc. 891, 223 N. Y.
Supp. 383 (Sup. Ct. 1927). See also Seymour, The Proposed Uniform Stock Trans-
fer Act, (1921) 9 CALIF.L. REv. 186, 205.
 CORNELL LAW QUARTERLY

tion has so held, and their holdings seem to carry out the intention of
the Commissioners on Uniform Laws. The interpretation which has
been given is not, however, absolutely necessary, because the phrase,
'unless the context or subject matter otherwise requires' seems to
allow sufficient latitude to permit of a contrary interpretation.
It is submitted that the approach taken by the Act is inconsistent
with the requirements of modern business. In a single day, a broker
may buy or sell ontheNewYork StockExchange stock in corporations
incorporated in a dozen or two dozen different states. It is utterly
impractical to require that in each transaction the broker look to the
law of the state of incorporation in order to discover whether the
transfer he has made is effective. The Act might easily be amended
to bring the rule as to stock into conformity with the rule as to bills
and notes; and in the interests of present-day business, it ought so to
be amended.
If the Act is in force in the state of incorporation, but not at the
place of transfer, the Act ought not, under the English rule above,
govern the transfer. The policy against extra-territorial application
of the Act would seem to have no bearing upon this situation. A
recent writer on stock transfer argues that it follows conversely from
the policy against extra-territoriality that "if the Act is in force at
the domicile of the corporation, the certificates of stock of the cor-
poration are entitled to the benefits of the Act regardless of where
they are negotiated." 40 Nothing in the Act itself lends support to this
holding, and no cases on the point have been found. The doctrine of
negotiability would be extended by such a holding, and therefore it
possibly may find favor with the courts. It does not accord with the
English rule, nor with the majority rule in the United States as to the
law governing the transfer of commercial paper; and it does not seem a
desirable rule.41 If the rule is to be uniform, the place of transferring
In Turnbull v. Longacre Bank, supra note 30, the parties assumed at trial
that the Uniform Act governed. On appeal, the contention was made that the
law of the state of incorporation should have been. proved, but the court held
that the contention was raised too late. Cf. Iowa Securities Corp. v. Ridgwood
Natl. Bk., io6 Misc. 335, 175 N. Y. Supp. 776 (Sup. Ct. i919), in which, although
the corporation apparently was incorporated in Iowa, wherein the Uniform Act
was not in force at the time, the parties assumed that the Uniform Act in New
York, the state of transfer, governed.
40
CHRISTY, op. Cit. supra note 7, at IX8.
41
The RESTATEMENT OF CONFLICT OFr LAWS (Am. L. Inst. 193o) takes a con-
trary view. See supra note 36. Cf. Bridgeport Bank v. N. Y. etc., Co., 30 Conn.
231, 275 (186), an early case in which the question of the validity of a transfer of
stock under a blank power of attorney was held to be governed by the law of the
place where the power was executed.
 THE SITUS OF STOCK

the certificate, and not the place of issue, always should govern the
validity of transfers of shares.

THR TAXATION MUDDLE

The writer does not intend to discuss the subject of multiple taxa-
tion of intangibles in its entirety, for many of the ramifications of the
subject are beyond the scope of this paper4 The taxation muddle
will be examined here only in so far as it bears, or may bear, upon the
problem of the 'situs' of stock.
First, a distinction between inheritance taxes and property taxes
should be noted. Inheritance taxes are indirect and upon the privi-
lege of inheriting, whereas property taxes are direct and the emphasis
is rather upon the property itself. Both, however, ordinarily are
measured by the amount of property within the control of the juris-
diction, and, as a matter of practice, are levied only when property
exists within such control. When a state seeks to tax stock, the
property is intangible and incapable of physical location. Hence the
question becomes: Which jurisdiction has sufficient contact with or
control over these intangible rights to treat them as property within
its control? The discussion which follows is with reference to in-
heritance taxes in the main, but, in so far as our problem is concerned,
it seems equally applicable to property taxes and income taxes based
upon property within the control of the jurisdiction.
In I896, Judge Vann of the New York Court of Appeals, with
extraordinary and refreshing frankness, wrote:O
"When the design of the legislature is to tax the transfer of
everything that it has power to tax, there is no inconsistency in
taxing in one form, if another is not available. Indeed, perfect
consistency is not always practicable in a scheme of taxation
that is intended to let nothing escape that can be owned or
transferred. Thus, the legislature intended, as I think, to repeal
the maxim mobilia personam sequuntur, so far as it was an
obstacle, and to leave it unchanged, so far as it was an aid, to the
imposition of a transfer tax upon all property in any respect sub-
ject to the laws of this state... That dominant purpose is the
key to the construction of the act, and it should not be thwarted
by the conservatism of the courts, even if, in order to embrace
all kinds of property, it is necessary to make it so pliable in
application as to conform to all methods of doing business and all
ways of holding property."

4For an excellent historical resume of the subject, see (i93o) 15 CORNELL LAW
QUARTERLY 457.
43
In re Whiting's Estate, i5o N. Y. 27, 30, 3i, 44 N. E. 715, 716 (1896).
54 '$- ,CORNELL LAW QUARTERLY

Although in this case Judge Vann was with the minority," the atti-
tude towards taxation which he expressed has been characteristic of
state legislatures and courts until recent years.4 Legislatures were
gunning for every species of bird, courts were abetting them by
refraining from 'conservative' interpretations of tax statutes. As a
consequence, at least four types of inheritance taxation were tried.
Taxes were imposed not only at both ends of the stock relationship,
but also in states where the certificate was located, and in those
where the corporation owned property and did business.
The tax by the state of incorporation was justified because its laws
kept alive the corporation's obligation to the shareholder. The tax
by the state of the owner's domicile was based upon nobilia sequuntur
personam, a fiction later rejected in the taxation of tangible chattels.
Taxation by the state in which the certificate was kept was based
on the analogy with tangible chattels, and justified further on the
theory that its law sanctioned transfers of the certificate. Taxation
by the state in which the corporation owned property and did busi-
ness was accomplished by disregard of the corporate fiction, whereby
the shareholder became partial owner of a business within the state.
The validity of this last tax is a problem in the corporate fiction, not
included in our discussion. Suffice it to mention that, in 1926, the
United States Supreme Court, in Rhode Island Hospital Trust Co. v.
8
Doughton,4 found the tax unconstitutional. The veil of corporate
fiction evidently was diaphanous enough to permit states of penetra-
ting vision to tax shareholders as owners of corporate businesses and
property.
It is still possible that three states may tax-the state of incor-
poration, the state of the domicile of the stock owner, and the state
where the certificate is located. Each of these finds some logical
justification for taxing. Might goes a long way towards making right,
and so long as a state has something to seize upon, however slippery,
it has an excuse for taxing. The domicile of the owner is the historic
AThe opinions in this case are curious. Judge Vann wrote the prevailing
opinion, but stated that he did so by "direction" of "a majority of my associates,"
and decided the case contrary to his own expressed views. One judge con-
curred, three concurred in result, two dissented on the ground that the multiple
taxation was unsound public policy.
4
5For statistics on the number of states taxing each 'situs' of shares, see Brad-
ford, Death Duty Legislation (1925) II VA. L. REv. 585; (1930 15 CORNELL LAW
QUARTERLY 457.
46
Supra note ii. Accord: Matter of Gates, supra note xi. Cf. TI re Bronson's
Estate, ixo N. Y. 1, 44 N. E. 707 (x896).
 THE SITUS OF STOCK

tax-place of intangibles ;47 even abstract waifs must have a tax home
at some place; so, like obedient shadows, they trail their owners.
The state in which the owner was domiciled seizes upon his end of
the stock relationship, and surprisedly discovers that it has jurisdic-
tion to tax. In much the same way, the state of incorporation takes
hold of the other end of the relationship, which is anchored to the
corporation. Finally, the certificate being the only tangible evidence
of the stock, the state in which the certificate is located inevitably
discovers that it has jurisdiction to tax.
The imposition of this tax by the state in which the certificate is
located is hard to defend. Tangible chattels may be taxed wherever
found, but, as we have seen, stock is intangible property of which
the certificate is merely transferable evidence. Some justification for
the tax may be found in the protection which the state law gives
(if it does) to the transfer inter vivos of the certificate within the state.
But a certificate is not property, not the thing in itself; hence, al-
though the state may tax its transfer as a certificate, and although
it is the sole means of transferring the stock, it seems harsh that the
state should be allowed to tax its transfer as if it were the property
itself, and to collect a heavy inheritance tax merely because the
certificate happens to have been left within the state. When the tax
sought to be imposed is levied, not upon the full value of the relation-
ship, but merely upon the formal transfer of the certificate, rather than
the property represented by the certificate, it is a different matter.
The validity of such a stock-transfer tax (vhen imposed on the transfer
of a non-resident's certificates representing shares in a foreign cor-
poration, was upheld in People ex rel. Hatch v. Reardon.48 The New
York court properly emphasized that the tax was imposed upon the
privilege of formally transferring the certificate under New York law,
not upon the property evidenced by the certificate. It was, in fact,
merely a stamp tax.
The Uniform Stock Transfer Act, as has been pointed out, did not
identify the stock with the certificate, although it did make the
transfer of the certificate the sole means of transferring the stock.
An interesting, but wholly unsupported case in Louisiana, Newell v.
Tremont Lumber Co.,49 adopts the opposite view. The Louisiana
inheritance tax law imposed a tax on property of non-residents which
was physically within the state. The court held that stock in a
47
Estate of Hodges, 170 Cal. 492, 150 Pac. 344 (1915); Matter of Estate of
Romaine, 127 N. Y. 80, 27 N. E. 759 (i891).
48184 N. Y. 431, 77 N. E. 970 (I906).
49
Supra note 33.
 CORNELL LAW QUARTERLY

Louisiana corporation, the certificates evidencing which were located

in Illinois, was not taxable under the Louisiana statute. The effect
of the Uniform Stock Transfer Act the court expressed thus:
"The transferable value of the stock lies... wholly in the
certificates; and thus the certificates are by law made the cor-
poreal or physical representatives of the stock itself, so that,
where the said certificates
' '49 are, there also the stock itself is
physically located. a
This argument assumes that the Uniform Act makes stock tangible;
for otherwise it would be absurd to speak of its physical location. The
decision seems to exaggerate the effect of the Act, and courts in other
5
states have shown no inclination to agree with the Louisiana court.
Recent attempts of the United States Supreme Court to curb
multiple taxation raise more interesting problems. Several times in
the last few years the Court has expressed a definite aversion to
multiple taxation,"' and in the recent case of Farmers' Loan &5Trust
Co. v. Minnesota reiterates that aversion. The case decided ex-
pressly, Mr. Justice Holmes dissenting, that Minnesota, the state of
the debtor, lacked power to impose an inheritance tax on negotiable
bonds issued by itself and its municipalities, the owner being domi-
ciled and the.instruments located in New York. It has already been
pointed out that bonds have had a history quite different from that
of stock. Only three years ago did the Supreme Court decide, in
Blodgett v. Silberman,"s that bonds were intangibles, and could be
taxed at the domicile of their owner despite the Union Refrigeratoru
and the Frick" cases. But memories of the time when the bond was
the obligation still linger. The stock certificate comes of baser lineage,
and only with the advent of the Uniform Stock Transfer Act has it
risen to the status of a negotiable instrument.
Both are intangibles, both belong in the mysterious class of 'choses
in action'; and Judge Learned Hand 56 has intimated that negotiable
bonds "are now to be considered in the same class" as shares of stock.
49abid. at 652, io9 So. at 345.
5
oBellows Falls Power Co. v. Commonwealth, 222 Mass. 51, io9 N. E. 891
(1915); Re Pantlind Hotel Co., 232 Mich. 330, 205 N. W. 99 (1925); Callery's
Appeal, 272 Pa. 255, 116 Atl. 222 (1922); ef. De Ganay v. Lederer, supra note 6.
5
Frick v. Pennsylvania, supra note x6; Blodgett v. Silberman, supra note 7;
Safe Deposit & Trust Co. v. Virginia, 28o U. S. 83,50 Sup. Ct. 59 (1929).
528o U. S. 204, 50 Sup. Ct. 98 (1930).
53Supra note 7.
64Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194, 26 Sup. Ct. 36
(1905).
55Supra
5
note 16.
6Moore v. Mitchell, 30 F. (2d) 6oo, 603 (C. C. A. 2d, 1929).
 THE SITUS OF STOCK

Whether the Supreme Court would so consider them is a matter of

conjecture, however. In the light of recent agitation against multiple
taxation, 7 the enactment of reciprocal tax statutes," and the Court's
known antipathy toward multiple taxation, it is quite possible that
the Court might forbid Minnesota to tax stock as well as bonds in the
situation presented in the Minnesota case. Should the Court make
that decision, it would represent a most interesting shift of theory;
59
for in Frick v. Pennsylvania, decided only five years ago, the Court
treated the state of incorporation as the primary taxing power,
saying:
"The decedent owned many stocks in corporations of States,
other than Pennsylvania, which subjected their transfer on death
to a tax and prescribed means of enforcement which practically
gave those States the status of lienors in possession. As those
States had created the corporations issuing the stocks, they had
power to impose the tax and to enforce it by such means, ir-
respective of the decedent's domicile, and the actual situs of
the stock certificates. Pennsylvania's jurisdiction over the
stocks necessarily was subordinate to that power... We think it
plain that such value as the stocks had in excess of the tax is all
that could be regarded as within the range of Pennsylvania's
taxing power."
To-day the state which creates the corporation has no power to tax
its bonds when the instruments and holders are outside the state;
and logically no greater justification exists for taxing the corporation's
outstanding stock. The state creates the corporation and sanctions
its obligations as much in one case as in the other. The abruptness
with which the Supreme Court overturned Blackstone v. Miller 0 in
deciding the Minnesota case indicates that policy rather than history
guided its decision. If policy is the guiding consideration-and in
this instance it should be-the rule of the Minnesota case ought to
apply to stock as well as bonds. Whether the Court actually will
desert the position it took in the Frick decision is not easy to prog-
nosticate. A case squarely presenting the question should make
history.
Does the Minnesota case bar an inheritance tax by the state where
the stock certificate is located? In that case, both the bond-paper
and the owner's domicile were located in New York. In remarking
that New York had power to tax, the Court laid stress on the doctrine
57
Bradford, loc. cit. supra note 45.
5
' CHRIsTy, op. cit. supra note 7, c. X, passim.
5
Supra note 16, at 497, 45 Sup. Ct. at 607.
60188 U. S. i89, 23 Sup. Ct. 277 (1903).
 CORNELL LAW QUARTERLY

mobilia sequuntur personam, and made clear that its statement was
based upon the fact that New York was the domicile of the owner.
The manner in which the Court enumerated every possible tax-situs,
animadverted upon multiple taxation, and expressly approved of only
one tax-situs, the domicile of the owner, might lead to the inference
that the court disapproved of taxation by the state in which the
certificate was located. But the Court did not expressly disapprove;
in fact, it did not discuss the question at all, and even if it had, the
discussion would have been dictum. Taxation by the state where a
bond instrument is located still is possible, although perhaps its doom
is near."' Hence, however indenfensible it may seem, the place where
a stock certificate is located still has power to tax.12
Perhaps this is only a restatement of the issue between policy and
history; but the longer one puzzles over the taxation muddle, the
more one wonders why it has been regarded as a question of power or
jurisdiction at all. State courts desirous of upholding state taxes
never found any difficulty in locating shares, and discovering juris-
diction to tax, wherever expediency required. Now, when the
Supreme- Court discovers that multiple taxation is malodorous,
presto! the state of incorporation has lost its power to tax. Does
jurisdiction vary, or does the definition of due process pulsate, con-
tracting and expanding with the needs of the time? In De Ganay v.
6
'Subsequent to the writing of this paper, the writer's attention was called to the
recent case of Baldwin v. Missouri, 281 U. S. 586, 50 Sup. Ct. 436 (193o), which
holds unconstitutional a transfer tax by the State of Missouri on bonds and
notes, the certificates for which were located in Missouri at the time of the death
of the testatrix domiciled in Illinois. The Court, at 593, 50 Sup. Ct. at 438, finds
that the bonds and notes had a "situs at the domicile of the creditor", and hence
"were not within Missouri for taxation purposes." This case and the Minnesota
case seem effectually to limit the taxation of bonds, at least, to the state in which
the owner is domiciled.
Mr. Justice Holmes dissents in a typically candid opinion. He concludes, at
596, 50 Sup. Ct. at 439: "Very probably it might be good policy to restrict tax-
ation to a single place, and perhaps the technical conception of domicil may
be the best determinant. But it seems to me that if that result is to be reached
it should be reached through understanding among the States, by uniform legis-
lation or otherwise, not by evoking a constitutional prohibition from the void
of 'due process of law,' when logic, tradition and authority have united to declare
the right of the State to lay the now prohibited tax."
62
1n re Sack's Estate, 232 App. Div. 433, 250 N. Y. Supp. 113 (2d Dept. 1931),
The New York Appellate Division, 2nd Department, on the authority of In re
Bronson's Estate, supra note 46, upheld a transfer tax on shares of stock in a
domestic corporation, although the certificates were in the possession of a non-
resident decedent. The court recognized the reasoning of the Minnesota case, but
refused to upset the settled law of New York "without direct authority to the con-
trary."1
 THE SITUS OF STOCK

Lederer,6 a Federal income tax upon a non-resident alien who owned

and kept in Europe certificates of stock in a United States corpora-
tion was upheld. If the Minnesota case (supposing, for the moment,
that it applies to stock) expounded a doctrine of absolute lack of
jurisdiction, the Federal income tax, based upon presence of the
alien's property within the United States, should not apply, and the
De Ganay case ought to be decided differently today.6 But Mrs.
De Ganay probably would have to pay her tax now, just as she did in
i917; for limitations upon multiple taxation appear to be based
rather upon policy-lack of due process, the Supreme Court calls it-
than upon lack of jurisdiction. "I[T]he jurisdiction of the taxing power
over the rem as a practical fact"65 exists wherever the share is, and
without logical inconsistency the share may be in at least three dif-
ferent places at the same time. The impossibility of treating the
problem as one of jurisdiction is apparent the moment one tries to
decide logically which of the three jurisdictions should emerge from
the fray the sole survivor. As a matter of due process it really makes
very little difference, so long as the other two die on the field of honor.
That does not, however, dispose of the matter; for the battle will be
long and bitterly fought, and each of the three candidates will claim
the right to be sole survivor. But policy, not jurisdiction, is the nub
of the matter; intangible rights have no physical location from which
jurisdiction may be deduced. Hence convenience should determine
which state or states ought to tax. If multiple taxes are millstones
about the public neck, they are contrary to "due process of law".
In that phrase the Supreme Court may discover the means of straight-
ening out the taxation muddle.

ADMINISTRATION

Upon the death of a person, testate or intestate, administration of

his estate ordinarily is had in the state of his last domicile." Under
the principle of comity, the right of succession to personalty which
67
he leaves outside his domicile is governed by the law of the domicile.
For this outside personalty ancillary administration frequently is
necessary, however. The ancillary administrator acts in cooperation
with the domiciliary administrator, and usually pays over to him
"Supra note 6.
"Old Doam. S. S. Co. v. Virginia, supra note 16.
6De Ganay v. Lederer, supra note 6, at 574.
684 SCHOULER, WILLS (6th ed. 1923) § 3520.
67bid. § 3516. Illinois and Mississippi are contra. See Ewing v. Warren, 144
Miss. 233, 1o9 So. 6oi (1926).
 CORNELL LAW QUARTERLY

whatever surplus remains after the property in the state of ancillary

administration has been settled up.68 The need for ancillary admin-
istration results from the fact that the state of principal administra-
tion has no jurisdiction over property in another state.
For purposes of administration, a simple debt is treated as though
it were located at the debtor's domicile-the place where he can be
found most easily. 69 Actually the debt has no physical location, but
control over the debtor furnishes a basis for jurisdiction to adminis-
ter.70 Promissory notes have been treated, in some decisions, in the
same manner as simple.debts. 7' Negotiable bonds, on the other hand,
have been regarded as tangible chattels,--as assets wherever the
instruments are found.72
Where is stock to be administered? The usual view, in accordance
with the holdings as to debts and notes, makes the state of incorpora-
tion the place at which stock is administered, on the theory that it is
the proper place for the enforcement of obligations against the cor-
poration.7 3 It is argued further that administration at the state of
incorporation protects local creditors of and claimants against the
shareholder by keeping property in the state until all claims against
it have been satisfied.7 4 The view taken by a few recent cases, 75 and
championed by Professor Goodrich," treats a share of stock, like a
negotiable bond, as tangible property wherever the certificate is
68
ScHOULER, op. cit. supra note 66, § 3526. This is purely a matter of comity,
discretionary with the courts of the state of ancillary administration. Trans-
mission sometimes has been refused. State of Iowa v. Slimmer, 248 U. S. 115, 39
Sup. Ct. 33 (1918); Estate of Bliss, 121 Misc. 773, 202 N. Y. Supp. 185 (Surr. Ct.
1923); In re Lorillard, 127 L. T. Rep. 613 (1922).
692 WHARTON, op. cit. supra note 36, § 612a. Cf. Colorado v. HarbeCk, 232
N. Y. 71, 133 N. E. 357 (1921).
70"It is evident that the law for purposes of jurisdiction is not interested in the
spatial quality of property, that is, the fact that the property has extension, or
occupies space, except in so far as that quality affords the state a power of control
over it... It is power of control and not location that is the basis of jurisdiction."
Carpenter, Jurisdictionover Debtsfor Purposeof Administration, Garnishment, and
Taxation (1918) 31 HARV. L. REv. 905, 907.
7
aWyman v. Halstead, io9 U. S.654, 3 Sup. Ct. 417 (1884).
72
Goodrich, Problems of Foreign Administration (1926) 39 HARV. L. REV. 796,
802. Quaere,is this rule affected by the Supreme Court's decision that, at least for
tax purposes, bonds are intangibles?
7 2 WHARTON, op. cit. supra note 36, § 612a; Grayson v. Robertson, 122 Ala.
330, 25 So. 229 (1898); Murphy v. Crouse, 135 Cal. 14, 66 Pac. 971 (19oi).
74
Murphy v. Crouse, supra note 73.
7
6Norrie v. Lohman, I6 F. (2d) 355 (C. C. A. 2d, 1926); Lockwood v. U. S.
Steel Co., supra note I7; (1925) 25 COL. L. REV. 232.
76
Goodrich, op. cit. supra note 72, at 805.
 THE SITUS OF STOCK

found. A third view, based upon the maxim mobilia sequuntur

personam, hits upon the domicile of the owner as the proper place for
administration. 77
Against each of these views something may be said. The necessity
for protecting creditors seems somewhat exaggerated. Certainly it has
not influenced the development of the rule as to bonds. Moreover,
under the Uniform Stock Transfer Act, 71 shares may be attached at
the state of incorporation, if the owner is enjoined from transferring
the certificates, or the certificates are impounded. The majority rule
at common law is the same except that the impounding or injunction
is not necessary. 79 If the creditor can attach shares in the state of
incorporation, that should protect his interest sufficiently, and ad-
ministration in that state should be unnecessary. The possibility
of having to sue the corporation must be reckoned with, but it seems
exceptional rather than usual. It must be remembered that the
shareholder-corporation relationship differs vastly from a simple
debtor-creditor relationship; with stock negotiable and freely nego-
tiated, the administrator in the ordinary case simply sells the certifi-
cates, and has no need to bring suit against the corporation. Finally,
if these are the only grounds for administration in the state of in-
corporation, administration there should be unnecessary when there
is no need of suit and no creditors are claiming. This was the inter-
pretation given a Missouri statute which made stock in Missouri
corporations "personal estate" for the purpose of administration in
Missouri.80 Creditors and distributees having consented to forego
administration in Missouri, the court suggested that the domicile
of the owner would administer the stock.
The treatment of a stock certificate as a tangible for purposes of
administration is objectionable, first, because the share is an ab-
stract relationship, not identical with the certificate, and second,
because no special convenience favors so treating it. Analogies with
the place for taxation and the place for attachment prove little;
control for taxation involves different considerations from control
for administration, hence control for one purpose does not neces-
sarily predicate control for the other. We have seen that the certifi-
cate is not identical with the share of stock, and should not be taxed
as if it were. Why should the certificate be administered as if it
were the stock itself?

" state of Miller, go Kan. 8i9, 136 Pac. 255 (1913).

786 U. L. A. (SToCm TRANSFER Act) § x3.
79Infra note 85.
$'Fairchildv. Lohman, I3 F. (2d) 252 (W. D. Mo. 1926).
 CORNELL LAW QUARTERLY

Mobilia sequuntur personam has been condemned as a fiction-

Professor Goodrich dismisses it summarily as a criterion for adminis-
tration because it is "not true either as a matter of fact or legal
doctrine."'8 It might be answered that the taxation analogy is as
valid here (if not more valid, in the light of the possible implications of
the Minnesota case) as when it is used in support of the place where
the certificate is located. But there is a better answer. No matter
where shares are administered, if jurisdiction to administer be based
upon physical location, we must resort to a fiction, for shares have no
physical location. If the problem thus resolves itself into a choice of
fictions, should not the one that works best be selected? If we admit
that administration is based upon control over property rather than
upon physical location of property, ultimately we are led to the same
conclusion; control being essentially a practical term, control for
administration should rest with the state that can administer most
efficiently. That state, it is submitted, is the domicile of the owner.
Ancillary administration is cumbersome, slow, expensive-so much
red tape. A testator may leave stock in corporations incorporated in
six or eight different states, or in one corporation incorporated in a
number of states. To what purpose six or eight ancillary administra-
tions when, in the ordinary case, the entire estate might be settled
under a single administration issued at the owner's domicile?
Of course, these statements need qualification. If an administrator
wants to contest an inheritance or transfer tax, he still may find it
necessary to secure the appointment of an ancillary administrator.
Perhaps the solution lies in statutes allowing foreign administra-
tors to sue or to secure local administration without the usual elabo-
rate proceedings. 82 But as the law of ancillary administration exists
to-day, there is ample justification for following the maxim mobilia
sequunturpersonam in fixing the place where shares of stock should be
administered.
ATTACHMEMNT AND EXECUTION
The problem of the attachment of stock really is two-fold: mingled
with the problem of attachment and execution as a means of enforcing
personal judgments is the problem of attachment for the purpose of
acquiring jurisdiction in rem and quasi-in-rem. But the two problems
lend themselves to treatment as one, because jurisdiction over
property is acquired only when it is within the control of the state,
8
Goodrich, op. cit. supra note 72, at 806.
82Gray v. Franks, 86 Mich. 382, 49 N. W. z3o (i89i): i WomxNER, ADmIms-
TRATION (3d ed. 1923) § x63.
 THE SITUS OF STOCK

and is subject to seizure.Y If stock may be attached in a state, it

should follow both that that state may acquire jurisdiction quasi-in-
rem by virtue of the attachment and that an execution against the
stock may there be enforced. The two problems therefore will be
treated as one.
The traditional place for the attachment of stock, like that of the
simple debt, has been the state of incorporation.8 ' In 1913, Professor
Beale wrote :"
"The courts.. .almost unanimously hold that the presence of
a certificate of stock within the jurisdiction gives no power to
take the right evidenced by the certificate; existing only on the
books of the corporation, it can be attached only in that place
where the corporate books legally exist, that is, at the domicil
of the corporation."
In 19oo, however, the New York Court of Appeals had driven an
entering wedge of dissent in Simpson v. Jersey City Contracting
Company.88 Certificates of stock in a foreign corporation, owned by a
non-resident, had been pledged to a resident of New York. A creditor
of the pledgor sought to levy upon the pledgor's interest under a
warrant of attachment. The court, recognizing that for many busi-
ness purposes stock certificates were regarded as property, held that
for the purpose of attachment they might be considered property
within New York. The case has been cited frequently, and has been
followed in New York 87 and in a few other states. 88 The Supreme
Court of the United States, in the Yazoo case, 89 upheld a Mississippi
statute which permitted execution on stock certificates within the
state. Mr. Cook, in his work on corporations, approves the doctrine:
"... in view of the fact that certificates of stock have gradu-
ally grown to be more than mere receipts or evidence of stock,
and have come to be the stock itself, practically, in business
transactions, especially in America, and, like a promissory note,

"Pennoyer v. Neff, 95 U. S. 714, 727 (1877); Martin v. Bryant, lo8 Me. 253, 80
Ati.
8
702 (i911).
Gundry v. Reakirt, r73 Fed. 167 (E. D. Pa. 19o9).
uBeale, Exercise of Jurisdictionin Rem to Compel Payment of a Debt (1913) 27
HARV. L. REV. 107, III.
"165 N. Y. 193, 58 N. E. 896 (19oo).
8
"General Motors Corporation v. Ver Linden, i99 App. Div. 375i 192 N. Y.
Supp. 28 (ist Dept. 1922).
8
Merritt v. American Barge CO., 79 Fed. 228 (C. C. A. 8th, 1897); Mitchell v.
Leland Co., 246 Fed. 103 (C. C. A. 9th, 1917); Puget Sound Bank v. Mather, 60
Minn. 362, 62 N. W. 396 (1895); Griswold v. Kelly-Springfield Tire Co., 94 N. J.
Eq. 3o8, 12o Atl. 324 (1916).
"3Yazoo& Miss. Valley P. R. v. Clarksdale, 257 U. S. 10, 42 Sup. Ct. 27 (1921).
64 CORNELL LAW QUARTERLY
a certificate of stock is property in itself and carries title, ir-
respective of the corporate books and of transfer on the cor-
porate books."9 0
The weight of authority, however, has clung to the common law view
expressed by Professor Beale. By statutes in Delaware and New
Jersey, stock in Delaware and New Jersey corporations is in con-
templation of law located in those states (except for purposes of taxa-
tion), and is subject to attachment there 91
In one respect the traditional view proved impractical. The owner
of the certificate, as soon as he heard that the share had been attached
at the domicile of the corporation, was likely to attempt to sell the
stock by endorsing and delivering the certificate. Since at common
law certificates were not negotiable, the question of priorities between
the attaching creditor and the bona fide transferee of the certificate
without notice was an annoying one, with the trend of decisions in
favor of the latter.12 The necessity of protecting the transferee prob-
ably explains why a promissory note may be attached only where the
note itself is found, 93 although a simple debt may be attached at the
domicile of the debtor. The drafters of the Uniform Sales Act and
Uniform Warehouse Receipts Act were confronted with the some-
what similar problem of the attachment of merchandise represented
by an outstanding negotiable bill of lading or warehouse receipt.
Their solution was a provision that the goods could be attached only
if the outstanding instrument which represented them was impound-
ed or its negotiation enjoined. 4 This makes difficult the attachment
of goods for which a bill of lading or warehouse receipt is outstanding,
since an attachment sufficient against a bona fide purchaser of the
document of title can be perfected only when both the goods and
either the document of title or the holder thereof are in the state.
But it seems a reasonable way out of the difficulty which inevitably
arises when attachment of tangible property represented by a negoti-
able instrument is attempted.
The Uniform Stock Transfer Act, since it made certificates negoti-
able had to provide some method of attachment which could not be
902 CooK, op. cit. supra note 3, § 485.
91
Bouree v. Trust Francais, 14 Del. Ch. 332, 127 Atl. 56 (1924); Skinner v. Edu-
cational Pictures Corporation, 14 Del. Ch. 417, 129 AtI. 857 (1925); Andrews v.
Guayaquil Co., 69 N. J. Eq. 21i, 60 Ati. 568 (19o5); Amparo Mining Co. v. Fidel-
ity Trust Co., 75 N. J. Eq. 555, 73 Atl. 249 (1909).
22 COOK, op. cit. supranote 3, § 486 et seg.
9Oakdale Mfg. Co. v. Clark, 29 R. I. 192,69 Atl. 681 (z9o8).
9I U. L. A. (SALES ACT) § 39; 3 U. L. A. (WAREHOUSE REcEIpTs Acr) § 25.
See especially the comments of the Commissioners, i U. L. A. (1931) § 39.
 THE SITUS OF STOCK

defeated by negotiation of the certificate to a bona fide purchaser.

Influenced by a desire for uniformity,"s the framers of the Act fol-
lowed the rule of the Sales Act and Warehouse Receipts Act in Sec-
tion 13 of the Uniform Stock Transfer Act:
"Sec. I3.-No attachment or levy upon shares of stock for
which a certificate is outstanding shall be valid until such
certificate be actually seized by the officer making the attach-
ment or levy, or be surrendered to the corporation which issued
it, or its transfer by the holder be enjoined. Except where a
certificate is lost or destroyed, such corporation shall not be
compelled to issue a new certificate for the stock until the old
certificate is surrendered to it."
In accordance with the intention of the framers, this section has been
interpreted as re-enacting the common law rule that the state of in-
corporation has power to attach, but adding, as a condition precedent
to attachment, the seizure of the certificate or an injunction against
its transfer. Thus, a Federal court sitting in Wisconsin has jurisdic-
tion under Section 57 of the Judicial Code96 to clear the title to shares
of stock in a Wisconsin corporation, even though both the certifi-
cates and the adverse claimants thereto are in Ohio.9 7 Curiously
enough, Holmes v. Camp,98 one of the few cases discussing Section 13,
was a New York case. The New York Court of Appeals thought it
not inconsistent with the Simpson case99 to hold that shares of stock
in a New York corporation could be attached in New York, and
viewed Section 13 merely as a preventive against the rendition of
100
futile judgments.
What, in the light of these decisions, does Section r3 accomplish?
A court has jurisdiction to enjoin the transfer of the certificate only
9"See 6 U. L. A. (STOCK TRANSFER ACT) § 13, commentary.
"636 STAT. 1102, 28 U. S. C. (1926) § II8.
9"Harvey v. Harvey, 290 Fed. 653 (C. C. A. 7th, 1923).
9s2 1 9 N. Y. 359, 114 N. E. 841 (1916).
"Supra note 86.
1
°°Although this case arose subsequently to the enactment of the UNIFoR1
STOCK TRANSFER ACT into law in New York, the Act was not applicable, since the
certificates involved were issued before the Act took effect. See N. Y. CONS.
LAWS c. 42 (PERs. PROP. LAW) § 184.
The Court did, however, discuss the effect of Section i3 of the Act: "The possi-
bility of our courts being engaged in rendering futile judgments in such an action
as this where there are outstanding certificates not within its jurisdiction or
control is now and for the future limited by our adoption of the Uniform Stock
Transfer Law with its various provisions relating to proceedings against the in-
terest of a stockholder represented by such outstanding certificates."
Quaere, whether N. Y. Civ. Prac. Act § 915 is not inconsistent with § 13 of the
Uniform Act?
 CORNELL LAW QUARTERLY

when the defendant is within the state, hence the injunction cannot
be resorted to in commencing a quasi-in-rem action. The injunction
can be used in an in personam action wherein the property is attach-
able as security, provided the holder of the certificate is within the
state. But, despite the issuance of the injunction, the defendant still
has the power to defy the court and transfer his certificates, and thus
to render the attachment futile. The doctrine of lis pendens had no
application to stock at common law, 101 and a fortiori does not apply
now that stock certificates have become negotiable. As to seizure
of the certificate: if the analogy with the Uniform Warehouse Receipts
Act and the Uniform Sales Act is carried out to its logical extremity,
it would seem that the certificate must be seized in the state of in-
corporation in order that attachment be valid. The language of
Section 13 is equivocal, and no cases on the point have been found;
but the necessity of seizing the certificates in the state of incorpora-
tion seems to be the logical outcome of the adoption of the common
law rule and the addition of a condition precedent thereto.
It is submitted that Section 13 is based upon a false analogy.
Bills of lading and stock certificates are both, under the Uniform
Acts, negotiable, and both represent something else. But there the
parallel ceases. Behind the bill of lading lie, in addition to legal
relationships, actual tangible chattels having form, shape, and
substance. Behind the stock certificate hovers only a shadowy,
intangible relationship which the certificate evidences. The share of
stock is separate from the certificate, yet the two are more intimately
related, the one being the sole manifestation of the other, than are
the merchandise and the bill of lading. Stock certificates, indeed,
are much more analogous to promissory notes than to bills of lading,
since the note, like the stock certificate, represents an intangible
obligation. The rule of the Simpson case, which follows the rule as to
promissory notes, is a more practical thing than the rule of Section 13.
In this situation, the business man's point of view properly may be
urged; for if the whole transferable value of stock is bound up in the
certificate, ought not a creditor, as a practical matter, be able to
reach that value wherever the certificate is found? Attachment made
only at the place where the tangible evidence is found appears to be
practicable as applied to promissory notes, and there is no reason why
it should not be equally practicable as applied to stock certificates.
The rule of the Simpson case, that the presence of the certificate
alone, is a basis for attachment, removes the possible objection
that under Section 13 only the state of incorporation can attach, and
10'Holbrook v. N. J. Zinc Co., 57 N. Y. 6x6 (1874).
 THE SITUS OF STOCK
its general adoption would eliminate much confusion. The state of
the law at present is anything but clear. New York, for example,
followed the Uniform Act in Holmes v. Camp,where the attachment
was of shares in a New York corporation, disregarding the certificate;
but will New York cling to the rule of the Simpson case? If so, sup-
pose that New Jersey, acting under the Uniform Act and having
personal jurisdiction over the shareowner, enjoins the transfer of
certificates located in New York, but representing stock in a New
Jersey corporation. Suppose now that attachments are levied in
both New York and New Jersey; may there not be a conflict be-
tween the rule of the Simpson case and the Uniform Act?
The attachment of stock is not limited, as a matter of jurisdiction,
to any single place; we have seen that to-day several competing juris-
dictions may attach. But practical convenience urges the adoption
of a workable rule which will fix upon a single place of attachment.
The frequency with which certificates are negotiated and the fact
that they represent the sole means by which, under the Uniform Act,
stock may be transferred, combine to indicate that the rule of the
Simpson case would best conform to the needs of modem business.
Though by no means a universal panacea, the adoption of that rule
would introduce certainty into a field of commercial law that sadly
needs it. Because it is most convenient, the state where the certificate
is located should have the sole right to attach stock which the certifi-
cate represents.
SEIZURE BY THE SOVEREIGN

As an aftermath of the World War, some interesting and rather

unusual cases concerning seizure of shares owned by non-resident
alien enemies have come up. A parallel between seizure by the state
and attachment by a court in favor of a private individual readily
suggests itself. In both instances, the state must have control over
the property sought to be seized, or its acts will not receive legal recog-
nition elsewhere. And somewhat the same confusion exists in both
instances, although perhaps it is easier to reconcile the cases on
seizure.
A number of cases decided within a few years after the World War
(and perhaps influenced a bit by wartime psychology) held that the
United States Alien Property Custodian could confiscate German-
owned shares in United States corporations regardless of the location
of the certificates. 1 These holdings apparently were based upon the
inGarvan v. Certain Shares, etc., 276 Fed. 2o6 (S. D. N. Y. x92I); Columbia
Brewing Co. v. Miller, 281 Fed. 289 (C. C. A. 5th, 1922); Miller v. Kaliwerke,
 CORNELL LAW QUARTERLY

common law rule that a share is attachable in the state of incorpora-

tion. They emphasize the distinction between the share and the cer-
tificate, dismissing the certificate as mere evidence of the share. In
marked contrast with these cases is the Disconto case,'I ' in which the
Supreme Court was confronted with the problem of the validity of
the seizure by the English Public Trustee of German-owned stock
certificates representing shares in the United States Steel Corpora-
tion, which were in England, pledged with London bankers. The
Supreme Court held that the law of the place where the certificates
were located governed their transfer;134 and since by the law of Eng-
land the seizure was proper, the Supreme Court held that it would
be recognized in the state of incorporation, and that the corporation
should register the British rather than the German owner. The
Disconto case has been inuch discussed, 10 and has been followed
in later cases." 8 Yet at the same time the federal courts have con-
07
tinued to uphold seizure by the state of incorporation.
This prima facie inconsistency in the principle behind these later
holdings is fairly easily explained. We have seen that the certificate
represents and is the transferable evidence of the share; the share
represents an interest in the corporation; and the corporation is the
creature of the state of incorporation. Under the doctrine of comity,
the law of the place of transfer ordinarily governs transfers, provided
that the law of the state of incorporation permits the certificates to
represent the shares and to be transferred. So long as that law
sanctions the embodiment of the transferable value of the share in the
certificate, the certificate may be seized where found, or the holder
of it may be compelled to surrender it to the state. The state of
incorporation, however, may seize the stock because, as the state
which creates and sanctions the existence of the corporation, it has
the power to divorce the share from the certificate. 1 8 Wartime
283 Fed. 746 (C. C. A. 2d, 1922). Cf. Gt. Northern Ry. v. Sutherland, 273 U. S.
182, 47 Sup. Ct. 315 (1927).
'ODirection der Disconto Gesellschaft v. U. S. Steel Corp., 267 U. S. 22, 45
D. N. Y. 1924).
Sup. Ct. 207 (1925), affirming 300 Fed. 741 (S.
I'0 Cf. cases supra note 36.
10'(1927) 15 CALIF. L. REv. 145; (1927) 9 MINN. L. REv. 66I. Cf. (1925) 25
COL. L. REv. 366 (1925). The RESTATEMENT OF CONFLICT OF LAWS (Am. L.
Inst. 1930) § 57 adopts the rule of the Disconto case.
06
2 Pilger v. U. S. Steel Co., 102 N. J. Eq. 506, I4I Atl. 737 (1928).
107United Cigarette Machine Co. v. Canadian Pac. Ry., 12 F. (2d) 634 (C. C.
A. 2d, 1926).
108
"New Jersey having authorized this corporation like others to issue certifi-
cates that so far represent the stock that ordinarily at least no one can get the
benefits of ownership except through and by means of the paper, it recognizes as
 THE SITUS OF STOCK

seizure of the shares of domestic corporations by reason of the Alien

Property Act can be explained by saying that the Act impliedly
repeals or overrides the significance of the certificate, and, despite
the Uniform Stock Transfer Act, makes the share transferable with-
out the certificate. 09 Having severed the relationship between the
share and the certificate, the state proceeds to seize the share. The
alien certificate-holder is left with a worthless piece of paper, and a
bona fide transferee, even though not an alien enemy, fares no better
unless the state is willing to reunite the severed ties between the share
and the certificate." 0
The Supreme Court's acceptance in the Disconto case of the rule
that the law of the state of transfer governs the transfer of stock
certificates forms an interesting commentary upon the limited appli-
cability of the Uniform Stock Transfer Act. The decision appears to
support the writer's contention that the scope of the Act is needlessly
limited, and that it should apply to all transfers made in states in
which it is in force whether the certificates are the issue of domestic
or of foreign corporations.
This whole group of cases is illustrative of the difference between
control and 'situs'-the one a practical question of power to act,
the other a technical question of imaginary location. More clearly
than in any of thefields previously discussed, 'situs' here proves itself
to be only a name signifying the result of the exercise of power to
control, and not a basis for or justification of power to control. In
this field, control strikes the keynote. In war, if not in peace, might
makes right.

owner anyone to whom the person declared by the paper to be the owner has
transferred it by the endorsement provided for, wherever it takes place. It allows
an endorsement in blank, and by its law as well as by the law of England an en-
dorsement in blank authorizes anyone who is the lawful owner of the paper to
write in a name, and thereby entitle the person so named to demand registration
as owner in his turn upon the corporation's books. But the question who is the
owner of the paper depends upon the law of the place where the paper is...
upon the things done being sufficient by the law of the place to transfer title."
Mr. Justice Holmes in the Disconto case, supra note lO3, at 28, 45 Sup. Ct. at
208. See also the instructive opinion of Judge Learned Hand in the Circuit
Court of Appeals, supra note 15.
' 09Miller v. Xaliwerke, supra note io2.
0
n The apparent conflict between the Disconto holding and the policy, of the
Trading With the Enemy Act, under which the Alien Property Custodian was
empowered to proceed as stated in the text, is explained by a remark in the
course of Holmes, J.'s opinion. He says, at 29,45 Sup. Ct. at 2o8: "If the United
States had taken steps to assert its paramount power.. . a different question
would arise .... The United States has taken no such steps."
 CORNELL LAW QUARTERLY
CONCLUSION

This paper, it is hoped, has demonstrated that the problem of

'situs' is too complex successfully to be attacked with sweeping
geperalizations. Because we have been inclined to think of 'situs' in
terms of physical location, we have been too apt to conclude that a
share of stock must have a single, definite location for all purposes.
A contemporary school of thought champions the theory that the
'situs' of a share is changing from the state of incorporation to a
"more realistic" 'situs' at the place where the certificate is located.
This theory is based largely upon the Simpson and Disconto cases
and upon cases allowing ancillary administration at the place where
the certificate is located. Since New York holds that the state of
incorporation may attach the share without doing violence to the
principle of the Simpson case, and since, in the Disconto case, the
Supreme Court of the United States expressly admits that the law of
the state where the certificate is transferred governs its transfer only
insofar as the state of incorporation permits transfer, neither of those
cases seems to the writer to prove any tendency towards "realism".
The cases on ancillary administration represent a decidedly minority
view.
Although it certainly is possible to decide every case on the theory
that the share is where the certificate is, that arbitrary solution is too
seductive. It is not practical, and in many circumstances it is not the
desirable rule. In the preceding discussion it has been suggested that:
i) Taxation should be limited to one state. Which state should tax is
not nearly so important as that taxation should be single. 2) The
jurisdiction in which the certificate is located, alone, should be
allowed to attach shares of stock. 3) The domicile of the deceased ordi-
arily should be the place where his shares of stock are administered.
4) The state where the certificate is located may seize it, but the state
of incorporation may seize shares of stock, regardless of the location
of the certificate which represents them. On almost all of these points
the law is unsettled. The idea of a single, fixed 'situs' of stock has
proved a source of great confusion; results indicate that there is
no such thing. 'Situs' is a term applied to a number of juristic
results, which differ from one another quite properly, since they
involve different considerations and are based upon varying policies.
It is a legal as well as a psychological error to lump them together
under a single concept, 'situs'.
If any tendency has been visible in the decisions, perhaps it is to
give more weight to considerations of expediency and less to stubborn
legal theory, to treat the latter as raw material from which expediency
 THE SITUS OF STOCK 71

is to refine the ultimate law. No certain truth lights the way to a

solution of the problem of 'situs' of stock. Any theory is necessarily
either a fiction or an assumption, and hence policy properly is given
considerable weight. The suggestions in this paper as to the desirable
rule in each situation are largely opinionative, and the reader is at
liberty to disagree with them. A lack of uniformity among different
fields such as taxation and attachment, or even a lack of uniformity
within each field, is not to be deplored, so long as it results from
differences in opinion as to the policy which should govern. What is
important is that artificial theories of 'situs' should cease to rule and
should be abandoned as misleading and worse than useless, that
control over stock always should be justifiable as a matter of policy
and convenience.