A transferee of stock is not liable either to the corporation or to its creditors until he has accepted the stock1 and has been recognized by the corporation as the holder of the shares." But an unregistered transferee may become liable as a stockholder by an express or implied waiver of the formalities of registration. The transferee of an agent can not avoid liability by denying the agent's authority. § 132. (d) Pledgees.- A person holding stock as pledgee is under no obligation to pay calls thereon, although upon failure of payment the shares be subject to forfeiture. But it is thoroughly established that one to whom stock has been transferred in pledge or as collateral security for money lent, and who appears on the books of the company as the owner of the stock, is liable as a stockholder for the benefit of creditors. 1 Cover v. Manaway, (1886) 15 Pa. St. 338; s. c. 2 Am. St. Rep. 552; Tripp v. Appleman, 35 Fed. Rep. 19, where it was held that the blotter of the company's treasurer and the stubs of his check book, containing entries to the effect that the assignee had paid calls on the shares, were not admissible to prove an acceptance of the transfer, the defendant being a stranger to the corporation. 2 Bell's Appeal, (1887) 115 Pa. 88; Williams v. Hanna, 40 Ind. 535; Midland Counties Ry. Co. v. Gordon, 16 Mees. & W. 804. 3 Upton v. Burnham, 3 Biss. 431; Isham v. Buckingham, 49 N. Y. 216; Bernard's Case, 5 De G. & Sm. 283. ♦ Wakefield v. Fargo, (1882) 90 N. Y. 213. 'Southwestern R. Co. v. Douglas, 2 Spear, (S. C.) 329; Newry &c. R. Co, v. Moss, 14 Beav. 64. National Bank v. Case, (1878) 99 U. S. 628; Pullman v. Upton, (1877) 96 U. S. 328; Sleeper v. Goodwin, (1887) 67 Wis. 579; Moore v. Jones, (1877) 3 Woods, 53; Adderley v. Storm, (1844) 6 Hill, 624; Crease v. Babcock, (1846) 10 Metc. 525; Hol yoke Bank v. Burnham, (1858) 11 For this several reasons are given. One is that he is estopped from denying his liability by voluntarily holding himself out to the public as the owner of the stock, and his denial of ownership is inconsistent with the representations he has made; another is that by taking the legal title he has released the former owner; and a third is that after having taken the apparent ownership, and thus become entitled to receive dividends, vote at elections, and enjoy all the privileges of ownership, it would be inequitable to allow him to refuse the responsibilities of a stockholder. The pledgee continues liable even after payment of the debt secured by the shares, so long as they remain registered in his name. In New York under the General Manufacturing Act of 1848 and the General Railroad Act of 1850, the pledgee of shares is relieved from liabil ity to corporate creditors; and in Maryland he enjoys a similar exemption. In Massachusetts he is liable only when the certificate fails to show that he holds as pledgee. In Missouri it is held that one does not become a stockholder by issuing to him stock as collateral security; that to make him answerable as a stockholder to creditors he must be a stockholder as between himself and the corporation; and that voting as a stockholder at an election will not estop the voter from showing that he was not actually a stockholder." And this has been determined to be the law of that State even where shares were issued directly to a pledgee to secure moneys lent by him to the company. 3 (1883) 89 Ind. 178. But see Anderson Receiver v. Philadelphia Warehouse Co., 111 U. S. 479, and Henkle v. Salem Manuf. Co., (1883) 39 Ohio St. 547. 6 Case of Reciprocity Bank, (1860) 22 4 Matthews v. Albert, 24 Md. 527. 5 Barre National Bank v. Hingham Manuf. Co., (1879) 127 Mass. 563; 1 National Bank v. Case. (1878) 99 Davis v. Essex Baptist Society, (1877) U. S. 628, 631. 2 Bowdell v. Farmers' & Merchants' National Bank of Baltimore, (1877) 25 Nat. Bank. Reg. 405. 3 N. Y. Laws of 1848, ch. 40, § 16; N. Y. Laws of 1850, ch. 140, § 11; McMahon v. Macy, (1872) 51 N. Y. 155. Cf. Guest v. Worcester &c. Ry. Co., L. R. 4 C. P. 9; Stover v. Flack, (1864) 30 N. Y. 64; s. c. 41 Barb. 162; § 133. (e) Legatees and distributees.- Legatees accepting bequests of stock are liable thereon to the corporation and its creditors. They must pay all calls made after the death of the testator,' also those made before his death and payable thereafter, and even those due and unpaid at the time of his death. But a distributee of the estate of a deceased shareholder, none of the shares having been distributed, can not be subjected to liability as a shareholder by motion under the Missouri statute, on a judgment against the corporation, even though in the capacity of administrator he refused to inventory the stock, alleging that it was not an asset but might become a liability." 4 § 134. (f) Bankrupts' estates.-The liability of a stockholder for the unpaid balance of a subscription, is a "provable' debt against his estate within the meaning of the federal Bankruptcy Act, even though no call has been made by the corporation. Every subscriber when he makes his subscription agrees to take and pay for his shares. The directors have no authority as against creditors to release him from the obligations; and conditions in the contract of subscription are unavailing after the superior equities of creditors have intervened. The fact that the balance due may have been pay man, (1880) 72 Mo. 110. Cf. Melvin v. Lamar Ins. Co., (1875) 80 Ill. 446; Wheelock v. Kost, 77 Ill. 298; Chapman's &c. Case, L. R. 3 Eq. 365; In re Anglesea Colliery Co., L. R. 2 Eq. 379; In re International Contract Co., Ind's Case, L. R. 7 Ch. 485. 1 Day v. Day, (1860) 6 Jur. (N. S.) 365. Cf. Witters v. Sawles, (1885) 25 Fed. Rep. 168. Pacif. Rep. 607. A complaint in the nature of a creditor's bill, by a judgment creditor of a corporation against the assignee for the benefit of creditors of a stockholder, which sets out judgments in favor of plaintiff recovered against the corporation while the subscriptions of defendant's assignor were unpaid, and alleges that executions were issued thereon and returned nulla 2 Addams v. Ferick, (1859) 26 Beav. bona, sufficiently shows an indebted 384. 'Jacques v. Chambers, 2 Coll. 435. Mo. Rev. Stat., § 736. 470. ness of the corporation to plaintiff to entitle him to maintain his action against defendant. Samainego v. Simmons v. Ellis, 17 Mo. App. Stiles, (1889) 20 Pacif. Rep. 607. 6 U. S. Rev. Stat., § 5067. Glenn. Abell, (U. S. Circ. Ct. 1888) 6 Ry. & Corp. L. J. 230; Samainego v. Stiles, (Arizona, 1889) 20 8 Sanger v. Upton, 91 U. S. 60; Sagory v. Dubois, 3 Sandf. Ch. 501; Upton v. Tribilcock, 91 U. S. 48. 9 Sawyer . Hoag, 17 Wall. 628; Curran v. Arkansas, 15 How. 307. able on calls by the company does not destroy the absolute character of the obligation; although solvendum in futuro, it is none the less debitum in præsenti.' Here then, is an absolute promise to pay whenever called; that is to say, a demand existing, the accrual of the cause of action thereon dependent upon a contingency; and as such it is provable in bankruptcy.2 If the corporate creditors, or their representatives, the assignee of the company, fail to enforce the demand against the bankrupt's estate prior to his discharge, he can not be held liable thereon at any subsequent time. The fact that his assignment was not recorded on the books of the company does not impair the effect of his discharge. The assignee of the shareholder is not personally liable to corporate creditors, nor need he accept shares which may prove a burden rather than an asset." 1 Glenn v. Abell, (1888) 6 Ry. & holding generally that a demand for Corp. L. J. 230. 2 French v. Morse, 2 Gray, 111. In Glenn v. Abell, (1888) 6 Ry. & Corp. L. J. 230, the court said: "Let us assume that a call was necessary before payment could be required; that such call might never have been made, either through neglect of the corporation, its assignee, or its creditors; that thus the remainder of the subscription was 'payable upon an event which might never have occurred' yet the contract of subscription and the liability of the defendant to pay were in full force when the petition of bankruptcy was filed. The sum for which he could be made liable was certain in amount - $80 per share. In the language of Waite, C. J., in Wolf v. Stix, 99 U. S. 1, this clearly is such a case as was provided for in section 5068, Rev. St., and the debt was provable in bankruptcy. See also Parbury's Case, 64 Eng. Ch. 87." 3 Glenn v. Abell, (1888) 6 Ry. & Corp. L. J. 230; U. S. Rev. Stat., § 5119. The State courts are in conflict with the federal in this regard, an unpaid subscription to stock pay- 342. Amory v. Lawrence, 3 Cliff. 523; Rugeley & Harrison v. Robinson, 19 Ala. 404; Streeter v. Sumner, 31 N. H. 542; South Staffordshire Ry. Co. v. Burnside, 3 Exch. 129; Ex parte Davis, 3 Ch. Div. 463; Furdoonjees' Case, 3 Ch. Div. 268. In American File Co. v. Garrett, 110 U. S. 288, B., a stockholder in a corporation, pledged bonds of the corporation to C. to secure a debt. B. became bankrupt. The assignee in bankruptcy demanded the bonds, but finally withdrew his demand, C. agreeing to prefer no further claim against the estate in bankruptcy, and to indemnify the estate against any claim that might be asserted against it to enforce B.'s individual § 135. (g) Decedents' estates. Unless the shares of a deceased stockholder have been bequeathed and accepted by a legatee,' the estate continues liable thereon to creditors of the corporation until final distribution and settlement, whether the shares be inventoried as an asset or not. Even a statutory liability in addition to that attaching by common law, provided it be not in the nature of a penalty, survives against liability as a stockholder, and it was held that the estate in bankruptcy incurred no such liability, the assignee not having accepted the stock, and that therefore stockholders against whom C. sought to enforce an individual liability upon the bonds could avail themselves of no defense by virtue of the transaction between C. and B.'s assignee in bankruptcy, In which case the legatee becomes answerable. Vide § 133. matured at its dissolution, and not at the maturity of the claim against the corporation, and a suit upon it, begun in 1883, was barred by the statute of limitations. Garesche v. Lewis, (1888) 93 Mo. 197. In Larkin v. Willi, (1884) 12 Mo. App, 135, a corporation became insolvent pending the settlement of the estate of a stockholder whose stock was only half paid up at the time of his death. No call was made on him or on his executors, and it was held that after settlement and distribution, a creditor of the corporation could not maintain an action against the executor who was legatee and devisee as well. As to the distribution of the estate of a deceased shareholder in an English unlimited banking company, see 54 Law Times, 264. 2 Marks v. Hardy, (1886) 86 Mo. 232; Lewis v. Glenn, (1888) 84 Va. 947; In re North of England Banking Co., Thomas' Case, (1849) 1 De G. & Sm. 579; Baird's Case, (1870) L. R. 5 Ch. 725; Buchan's Case, (1879) L. R. 4 App. Cas. 549; Hoare's Case, (1862) 2 John. & H. 229. It is provided by Mo. Rev. Stat., §§ 185, 189, that where a claim against an 3 Lewis v. Glenn, (1888) 84 Va. 947, estate is exhibited to an adminis- was an action by a trustee against trator within two years from date the administrator of a stockholder of administration, it may be proven on the unpaid stock of his intestate. during the third year. Sections 205 It appeared that the subscription and 206 provide for the proving of had been made many years before claims not yet due. Defendant's in- by intestate's brother, as her agent. testate died in 1877, owning unpaid There was some evidence that he stock in a railroad company that be- had been acting as her agent in busicame insolvent in 1878, and that had ness matters, and her name apguarantied the bonds of an insolvent peared on the books as a stockholder railroad company maturing at a cer- and as having paid three assesstain date, but which were not due at ments. Her estate consisted printhe death of intestate. It was con- cipally of stocks; but the stock in ceded that the proper notice to cred- this company, which had long since itors of the intestate had been pub- ceased to do business, was not inlished, June, 1877. It was held that ventoried. It was held that there intestate's liability to the creditors was sufficient evidence that deceased of the company on his unpaid stock was a stockholder. |