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ency of the company,' to a solvent transferee,' who is competent to take, and who has contracted to accept the shares," relieves the transferrer from further liability to the company. and to corporate creditors," provided it be duly registered on the company's books. It has been said that the registration

N. Y. 415; "Who are Chargeable as Stockholders," 8 Cent. L. J. 182.

552. An original stockholder who has been compelled to pay calls upon

1 Billings v. Robinson, (1884) 94 stock after having assigned it, is not N. Y. 415.

2 A stockholder, who, in good faith, eells and transfers his stock to one who afterwards becomes insolvent, is liable to creditors of the corporation for such portion only of the debts existing while he held the stock, and remaining due (not in excess of the amount of stock assigned), as will be equal to the proportion which the capital stock assigned by him bears to the entire capital stock held by solvent stockholders within the jurisdiction, liable in respect of the same debts, to be ascertained at the time judgment is rendered. Harpold v. Stobart, (Ohio, 1889) 21 N. E. Rep. 637. In Maryland, (Hagar v. Cleveland, 36 Md. 476) and in Pennsylvania, an original subscriber to the stock of companies formed under the General Railroad Act of 1849, continue liable upon the unpaid balance of the subscription notwithstanding a transfer made in good faith to a solvent transferee. Graff v. Pittsburgh &c. R. Co., 31 Pa. St. 489; Pittsburgh &c. R. Co. v. Clarke, 29 Pa. St. 146; Aultman's Appeal, (1881) 98 Pa. St. 505. Cf. West Philadelphia Canal Co. v. Innes, 3 Whart. 198, decided before the enactment of that statute.

3 Vide infra, §§ 128, 129.

But the liability of a subscriber of stock is not discharged by an ex parte transfer of stock entered upon the books. Cover v. Manaway, (1886) 115 Pa. St. 338; s. c. 2 Am. St. Rep.

entitled to be subrogated to the rights of the corporation against the delinquent assignee 146. Contra as to stockholders not original subscribers. Bunn's Appeal, 105 Pa. St. 49; Aultman's Appeal, 98, without clear proof of his having accepted the transfer. Tripp v. Appleman, 35 Fed. Rep. 19.

5 Under Va. Code, 1873, ch. 57, § 26, an assignor of shares of stock is still liable for unpaid subscriptions, whether the instalments accrue before or after the assignment. Hambleton v. Glenn, (Va. 1889) 9 S. E. Rep. 129.

Webster v. Upton, 91 U. S. 65; Johnson v. Laflin, 5 Dill. 65; Billings v. Robinson, 94 N. Y. 415; s. c. 28 Hun, 122; Wakefield v. Fargo, 90 N. Y. 213; Johnson v. Underhill, 52 N. Y. 203; Isham v. Buckingham, 49 N. Y. 216; Moss v. Oakley, 2 Hill, 265; Cole v. Ryan, 52 Barb. 168; Cowles v. Cromwell, 25 Barb. 413; Haynes v. Palmer, 13 La. Ann. 240; Allen v. Montgomery &c. R. Co., 11 Ala. 437; Bend v. Susquehanna Bridge & Bank Co., (1823) 6 Harr. & J. 128; s. c. 14 Am. Dec. 261, holding that parol evidence is inadmissible to show that a transfer absolute on its face and duly made on the company's books was in fact a mere mortgage of the shares; McClarin v. Franciscus, 43 Mo. 452; Hartford &c. R. Co. v. Boorman, 12 Conn. 530; Weston's Case, L. R. 4 Ch. 20; Aylesbury Ry. Co. v. Mount, 5 Scott,

may be made by the company even against the protest of the transferee.1

§ 127. Transfers to a man of straw do not relieve the transferrer.- A transfer to a man of straw made to avoid liability is a nullity, and the transferrer remains liable upon the stock as before. So that where a purchaser of shares

N. R. 127; Huddersfield Canal Co. v. Buckley, 7 Term Rep. 36; McKenzie v. Kittridge, 24 U. C. Com. P. 1; Grissell v. Bristowe, L. R. 3 C. P. 112; In re Pennant & Craigwen Consol. Lead Mining Co., (1854) 5 De G. M. & G. 837, 818, where the Lord Chancellor said in regard to a disputed transfer of shares in a costbook mining company: "It seems to me that when a partnership is constituted of several hundred persons, and its articles stipulate that any shareholder may transfer, the meaning necessarily is, that he may so transfer as to put the transferee in the place of him the transferrer; otherwise it is holding a nugatory inducement which can never be realized. . . . The liability of the transferrer is entirely divested from him and passes to the transferee;" Croxton's Case, 1 De G. M. & G. 600; Sutton's Case, 3 De G. & Sm. 262; Birmingham &c. Ry. Co. v. Locke, 1 Q. B. 256; London &c. Ry. Co. v. Graham, 1 Q. B. 271; London &c. Ry. Co. v. Freeman, 2 Man. & G. 606; Sheffield Ry. Co. v. Woodcock, 2 R. C. 522. It has become a part of the statutory law of England that until the deed of transfer is delivered to the secretary of the company for registration, the vendor remains liable for calls. 8 Vic. ch. 16, § 15.

either a fictitious or an irresponsible party, such as insolvents, infants, or married women. Bowden v. Johnson, 107 U. S. 251; Bowden v. Santos, 1 Hughes, 158; Provident Savings Inst. v. Jackson Place Skating Rink, 52 Mo. 557; McClaren v. Franciscus, 43 Mo. 452; Rider v. Morrison, 54 Md. 429; Central Agricultural &c. Assoc. v. Alabama Gold Life Ins. Co., 70 Ala. 120; Madison v. Fireman's Ins. Co., 11 Rob. (La.) 177; Marcy v. Clark, 17 Mass. 330, Nathan v. Whitlock, 9 Paige, 152; Payne v. Stewart, 33 Conn. 517; Dauchy v. Brown, 24 Vt. 197; Castleman v. Holmes, 4 J. J. Marsh. 1; Roman v. Fry, (1831) 5 J. J. Marsh. 634; West Chester &c. R. Co. v. Jackson, 28 Pa. St. 339; Veiller v. Brown, 18 Hun, 571; Aultman's Appeal, (1883) 98 Pa. St. 505; "Transfer of Company Shares to Paupers,” 56 Law Times, 67; Who are Chargeable as Stockholders," (1879) 8 Cent. L. J. 182; Arthur v. Midland Ry. Co., (1857) 3 Kay & J. 204; Muskingum Valley Turnpike Co. v. Ward, (1841) 13 Ohio, 120; In re The Companies Act, Cox's Case, 4 De Gex, J. & S. 53; Pugh & Sarman's Case, (1872) L. R. 13 Eq. 566. Cf. In re Provincial Marine Ins. Co., Maitland's Case, (1869) 38 L. J. Ch. 554; Richardson's Case, L. R. 19 Eq. 588; King's Case, L. R. 6 Ch. 196. In England, however, a contrary rule prevails with respect to transfers to infants and irresponsible parties, of straw," meaning provided only that the transfer be

1 Webster v. Upton, 91 U. S. 65; Upton v. Burnham, 3 Biss. 520; London &c. Ry. Co. v. Fairclough, 2 Man. & G. 674, 706.

2" A man

66

assuming to take them in the name of an infant, had the certificates made to a fictitious person, the vendor remained liable. But it has been held that a sale of stock in a national bank under authority conferred by the terms of a pledge, may relieve the pledgee, although done for the purpose of avoiding liability under the national banking act.2

§ 128. Transfers to infants and married women do not relieve the transferrer. To relieve the transferrer from liability, the transferee must not only be a real person, but must be legally competent to take the shares. Upon the winding up the transferrer must be able to show that at some time or other there was a transferee of his upon the register who could be made liable in respect of the shares. Accordingly transfers to the corporation itself, to a married woman and to infants, do not discharge the transferrer from liability to creditors of the company. Thus where the vendor allowed

absolute, with no secret trust between the parties for the benefit of the transferrer in the event that the contemplated insolvency does not occur. In re Taurine Co., 25 Ch. Div. 118; Chynoweth's Case, 15 Ch. Div. 13; King's Case, 6 Ch. Div. 196; William's Case, 1 Ch. Div. 576; Regina v. Midland Counties &c. Ry. Co., 15 Ir. Ch. 525. And in Missouri under Wag. Mo. St. p. 291, § 13, providing that where execution against a corporation can not be satisfied on the corporate property, it may be levied on the property of the stockholders to the extent of their shares, but only upon an order from the court in which the action has been brought, and upon motion after notice to the stockholders, it is held that the stockholders' liability depends upon the amount of shares held at the return of the execution, and not at the time of making the motion. Skrainka v. Allen, (1883) 76 Mo. 384.

Maitland's Case, (1869) 38 L. J. Ch. 554.

2 Magruder v. Colston, 44 Md. 349. Cf. Anderson v. Philadelphia Warehouse Co., 111 U. S. 479.

3 In re Imperial Mercantile Credit Assoc., Curtis' Case, (1868) L. R. 6 Eq. 455; Reid's Case, (1857) 24 Beav. 318. Cf. In re Joint-Stock Discount Co., Mann's Case, (1867) L. R. 3 Ch. 459, note.

4 Vide infra, § 129.

5 Where, however, a femme covert has statutory competency to become a stockholder, a transfer to her will be effective to discharge her transferrer. Simmons v. Dent, (1884) 16 Mo. App. 288.

6 Roman v. Fry, (1831) 5 J. J. Marsh. 634; Castleman v. Holmes, (1830) 4 J. J. Marsh. 1; Capper's Case, (1868) L. R. 3 Ch. 458; In re Joint-Stock Discount Co., Mann's Case, (1867) L. R. 3 Ch. 459, note; Weston's Case, (1870) L. R. 5 Ch. 614; Richardson's Case, (1875) L. R. 19

1 In re Provincial Marine Ins. Co., Eq. 588; "Who are Chargeable as

the certificate to be made to the infant son of his vendee, and the son upon attaining majority repudiated the stock, the vendor was made liable upon it. And a father transferring shares to an infant son continues liable if they be repudiated by the latter. It is immaterial that the transferrer to a minor was entirely innocent of a fraudulent intent in the transaction and not aware that the shares were transferred to a minor. And although the transferee may affirm the transaction after becoming of age, the liquidators may elect to enforce the claim against the transferrer. Even a broker purchasing for an infant subjects himself to the claims of corporate creditors." But where shares have passed through several hands the ultimate transferee is liable even though his title be derived through an infant."

§ 129. Transfers to the corporation itself, when effective to relieve the transferrer.- When, as in England,' and under charters and statutes in some American States, corporations

Stockholders," (1879) 8 Cent. L. J.

182.

1 Hennessey's Case, (1850) 3 De G. & Sm. 191. Acc. Maitland's Case, (1869) 38 L. J. Ch. 554.

2 Litchfield's Case, (1850) 3 De G. & Sm. 141; Weston's Case, (1870) L. R. 5 Ch. 614. Cf. Roman v. Fry, (1831) 5 J. J. Marsh. 634.

Continental Exchange, Ward's Case, (1866) L. R. 2 Eq. 226; Eyre's Case, 31 Beav. 177; Morgan's Case, 1 De G. & Sm. 750; Ex parte Morgan, 1 Mac. & G. 225. In England the validity of such a transaction is dependent upon "a clear, distinct, undoubted and special" grant of authority by the corporate charter, the

3 Weston's Case, (1870) L. R. 5 Ch. deed of settlement, or some enabling 614.

statute. Zulueta's Claim, L. R. 5 Ch.

4 Symon's Case, (1870) L. R. 9 Eq. 444. Cf. Cockburn's Case, 4 De G. 363.

5 Ruchizky v. De Haven, (1881) 97 Pa. St. 202; In re Joint-Stock Discount Co., Mann's Case, (1867) L. R. 3 Ch. 459, note.

& Sm. 177. But see Singer's Case, Week. Notes, (Eng. 1869) 206, where the authority was implied from a grant of power to the directors to enter into any contract that seemed

6 Gooch's Case, (1872) L. R. 8 Ch. best for the company. 266.

7 Hope v. International &c. Soc., 4 Ch. Div. 327; In re Marseilles Extension Ry. Co., L. R. 7 Ch. 161; Zulueta's Claim, L. R. 5 Ch. 444; In re General Provident Assurance Co., Cross's Case, (1869) 38 L. J. Ch. 583; Evans v. Coventry, 25 L. J. Ch. 489, 501; In re London, Hamburg &

8 In New York it is declared unlawful for any railway company formed under the act of 1850, "to use any of its funds in the purchase of any stock in its own or in any other corporation," (N. Y. Laws of 1850, ch. 140, § 8) “except so far as the same may be agreed upon in its articles of association." N. Y. Laws

are incompetent to acquire shares of their own stock, a stockholder who sells his shares to the corporation itself, or to one whom he, or his agent making the sale, knows to be acting in behalf of the company, he is not relieved thereby from his liability to corporate creditors. Even in those jurisdictions

of 1881, ch. 468, § 12. In the absence of such statutory or charter restrictions, however, it is the rule in nearly all the American States, with the exception of Kansas, probably alone, where the English rule is followed, (German Savings Bank v. Wulfekuhler, 19 Kan. 60) that a solvent corporation may buy and sell shares of its own stock, receive them in payment of debts, or by way of pledge, gift or bequest. State Bank v. Fox, 3 Blatchf. 431. Lake Superior Iron Co. v. Drexal, 90 N. Y. 87, where the legality of a gift to a corporation of shares of its own stock was assumed; City Bank v. Bruce, 17 N. Y. 507; Robinson v. Beale, 26 Ga. 17; Hartridge v. Rockwell, Charlt. R. M. 260; Dupre v. Boston &c. Co., 114 Mass. 37; Leland v. Hayden, 102 Mass. 542; Crease v. Babcock, 51 Mass. 525, 557; s. c. 34 Am. Dec. 61; Farmers' &c. Bank v. Champlain Transp. Co., 18 Vt. 131, 139; s. c. 16 Vt. 52; s. c. 43 Am. Dec. 491; s. c. 23 Vt. 185; s. c. 56 Am. Dec. 68; Early & Lane's Appeal, 89 Pa. St. 411; Eby v. Guest, 94 Pa. St. 160; Coleman v. Columbia Oil Co., 51 Pa. St. 74; State v. Franklin Bank, 10 Ohio Rep. 91, 97; Taylor v. Miami Exporting Co., 6 Ohio Rep. 176; s. c. 5 Ohio Rep. 162; s. c. 22 Am. Dec. Rivanna Navigation Co. v. Dawsons, 3 Gratt. 19; s. c. 46 Am. Dec. 183, where it was held that a corporation may receive shares of its own stock by bequest; Clapp v. Peterson, 104 Ill. 26; Chicago &c. R. Co. v. Town of Marseilles, 84 Ill. 145; Fraser v. Ritchie, 8 Bradw. 554; Iowa Lumber Co. v. Foster, 49 Iowa, 25.

785;

But see Barton v. Port Jackson &c. Plank Road Co., 17 Barb. 397, where the purchase was held to be against public policy and ultra vires ; Cappin v. Greenlees, 38 Ohio St. 275. Cf. Thompson on Liability of Stockholders, §§ 234, 242.

1 Case of the Reciprocity Bank, (1860) 22 N. Y. 9; Currier v. Lebanon Slate Co., (1875) 56 N. H. 262; Johnson v. Laffin, (1878) 5 Dill. 65; s. c. 6 Central Law Jour. 124; s. c. (1880) 103 U. S. 800; In re Vale of Neath & South Wales Brewing Co., Walter's Second Case, (1850) 3 De G. & Sm. 244; Zulueta's Claim, (1870) L. R. 5 Ch. 444; South Eastern Ry Co.'s Claim, (1872) L. R. 14 Eq. 10; In re Patent Paper Manuf. Co., (1870) L. R. 5 Ch. 294.

2 Richmond's Case, (1849) 3 De G. & Sm. 96.

3 Daniell's Case, (1856) 22 Beav. 43; Munt's Case, 22 Beav. 55; Bennett's Case, 5 De G. M. & G. 284; In re Vale of Neath & South Wales Brewing Co., Walter's Second Case, (1853) 3 De G. & Sm. 244; Richmond's Case, (1849) 3 De G. & Sm. 96; "Who are Chargeable as Stockholders," (1879) 8 Cent. L. J. 182; Lawe's Case, (1852) 1 De G. M. & G. 421; In re Royal British Bank, Nicols' Case, (1859) 3 De G. & J. 387, 433. Cf. Johnson v. Laffin, (1878) 5 Dill. 65; S. C. Thompson National Bank Cases, 331; s. c. (1880) 103 U. S. 800; Crandall v. Lincoln, (1884) 52 Conn. 73. Conversely, if neither the vendor, nor his agent, knew that he was selling to an agent of the company, he will be discharged from his liability. Johnson v. Laffin, (1880) 103 U. S.

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