is that under the national bank act a shareholder has the unrestricted right to make an out-and-out bona fide and valid sale and transfer of his shares to any person or corporation, capable in law of taking and holding the same, and of assuming the transferor's liability in respect thereto.

The right to transfer shares in a corporation is usually recognized or given in express terms in the charter or constituent act, which also, not unfrequently, prescribes the manner in which the transfer shall be made. The capital stock of a corporation is invaria bly divided into shares of a fixed amount for the purpose, among others, of allowing it to be readily transferred. In an ordinary partnership the consent of all the partners to the admission or retirement of a member is necessary, and every such change involves the dissolution of the old and the formation of a new partnership. But in incorporated companies this is different. Indeed, it is one of the leading objects of an incorporated body to avoid the operation and effect of this doctrine of the law of partnership. Accordingly, in this country, shares in corporations are universally bought and sold without reference to the consent of the other shareholders.

The restrictions on the right bona fide to sell and transfer shares must be found in express legislative enactment, or in authorized by-laws. The national banking act (Rev. Stats., § 5139), by providing that shares shall be transferable on the books of the association, in such manuer as may be prescribed in the by-laws or articles of the association," recognizes the right of the shareholder to transfer his shares. There is nothing peculiar in this provision. A similar pro. vision is found in nearly all the incorporating acts and charters in this country. The right to transfer is given or implied, in the section just referred to (Rev. Stats., § 5139), and that right, the association cannot take away or defeat. It contemplates a transfer on the books of the association, and all that the association is authorized to do is to prescribe the manner in which the transfer shall be made on its books. There is here no limitation whatever upon the right of transfer, and none exist except such as is implied from the nature of the transaction, or from other provisions of the act. Another section (Rev. Stats., § 5201) prohibits the bank from dealing in its own shares. This implies a restriction on the shareholder from selling his shares to the bank itself, or to a known trustee for the bank. And a shareholder cannot transfer his shares colorably, and thereby cease to be a shareholder as respects creditors and other shareholders, who would be injured by such a transfer. There may also be an implied prohibition against the right to transfer shares to an infant or person not capable in law of assuming the liabilities, as well as enjoying the rights of the transfer or the shares in respect thereto, but we have no occasion to determine this point. Rev. Stats., § 5139; compare ib., § 5152, Weston' case, Law Rep., 5 Ch. App. 614, 620. And on general principles there may also be an implied prohibition against the transfer of shares to a pauper or man of straw, or insolvent person, for the fraudulent purpose of escaping ability, but this is a matter that need not be now considered.

Subject, however, to such prohibitions and limitations, the right of the shareowner to make an actual and bona fide sale and transfer of his shares to any person, capable in law of taking and holding the same and of assuming the liabilities of the transferor in res

spect thereto, is plainly deducible from the national banking act itself. But if any doubt could exist on this subject, it would be removed by the judicial decisions, construing the provisions of the banking act in this regard, and similar provisions in other legislative enactments.

In the Bank v. Lanier, 11 Wall. 369, arising under the national banking act, it was expressly held by the Supreme Court of the United States that the owner of shares in a national bank may transfer the same by an assignment and delivery of the certificates, and the transferee may compel the bank to register the transfer on its books. The learned justice who delivered the opinion of the court in that case, after speaking of the additional value given to this species of property by reason of its transferable quality, says, "Whoever in good faith buys the stock and produces to the corporation the certificates, regularly assigned, with power to transfer, is entitled to have the stock transferred," even if the transferor is the debtor of the bank. The duty of the bank to make the transfer in such a case is held to be a corporate duty, in respect of which the bank is liable for the wrongful acts and omissions of its officers.

It was urged in the argument at the bar, in the present case, that the provision that the shares should "be transferable on the books of the bank," gave the directors of the bank the power to approve or disapprove of any given transfer of shares, and to register or refuse to register the same, as in their judgment the interests of the bank or of the other stockholders might require. Such, however, is not the object of this very common provision in charters and acts of incorporation. The purpose of requiring a transfer on the books of the bank, is that the bank may know who are the sharehholders and as such entitled to vote, receive dividends, etc., and for the protection of bona fide purchasers of the shares, and of creditors and persons dealing with the bank. That such is the meaning of the provision in question, and that it does not restrict the right of the owner to transfer his stock or clothe the corporation with the power to refuse to register bona fide transfers, is settled beyond all question by numerous decisions in the English, and the Federal and State courts. Black v. Zacharie, 3 How. 483; Union Bank v. Laird, 2 Wheat. 390; Webster v. Upton, 1 Otto, 65, 71; Bank v. Lanier, 11 Wall. 369; St. Louis, etc., Ins. Co. v. Goodfellow, 9 Mo. 149; Chouteau Spring Co. v. Harris, 20 id. 382; Moore v. Bank, 52 id. 377; Hill v. Pine River Bank, 45 N. H. 300; Re London, etc., Tel. Co., Law Rep., 9 Eq. 653.

The general subject of the right to transfer shares has been much discussed in the cases in England arising under the various Companies' Acts. Some of these acts give the directors express power to refuse to assent to or register transfers of shares, and some do not. The result of the English cases is that the directors cannot refuse to register a bona fide transfer of stock unless the power to do so is expressly given in the act of Parliament or the articles of association. The leading authority on this point is Weston's case, Law Rep., 4 Ch. App. 20. See also Gilbert's case, Law Rep., 5 Ch. App. 559. In Weston's case, Law Rep., 4 Ch. App. 20, Lord Justice Page Wood, in considering this subject, said:

"I have always understood that many persons enter these companies for the very reason that they are not like ordinary partnerships, but that they are partnership from which members can retire at once, and free

* *

I

themselves from responsibility at any time they please, by going into the market and disposing of and transferring their shares without the consent of directors or shareholders, or anybody, provided only it is a bona fide transaction; by which I mean an outand-out disposal of the property, without retaining any interest in them. But if it is desired by a company that such unlimited power of assignment shall not exist, then a clause is inserted in the articles by which the directors have powers of rejection of members. Shortridge v. Bosanquet, 16 Beav. 84, which went to the House of Lords, was a case of that kind. In the absence of any such restriction, I think it is perfectly plain that the companies act, 1862, in the 22d section gives a power of transferring shares. think there is no such power given to the shareholders, and that the shares are at once transferable under the statute, unless something is found to the contrary in the articles of association. ** It would be a very serious thing for the shareholders in one of these companies, to be told that their shares, the whole value of which consists in their being marketable and passing freely from hand to hand, are to be subject to a clause. of restriction, which they do not find in the articles. And I may add that if we were to hold that such powers were vested in the directors it would be a very serious thing for them, and would impose upon them much more onerous duties than any which are really imposed upon them by this clause." In Gilbert's case, Law Rep., 5 Ch. App. 559, 565, Lord-Justice Giffard said: "I agree that according to Weston's case, and according to what I have always considered to be the law, there is no inherent power in the directors, apart from the provisions of the articles of association, to refuse to register a proper and valid transfer, if that proper and valid transfer is submitted to them."

And although there is express power to the directors to refuse to assent to or register a transfer, this power must be exercised in a reasonable manner and bona fide, and they must have some valid and lawful reason for refusing to register. Ex Parte Penny, Law Rep., 8 Ch. App. 446: Nation's case, Law Rep., 3 Eq. 77; Fyfe's case, Law Rep., 9 Eq. 589; Allin's case, Law Rep., 16 Eq. 449; id. 559; Weston's case, Law Rep., 5 Ch. App. 614, 620; Ex parte Elliot, Law Rep., 2 Ch. Div. 104.

In a case where the directors had power to approve or reject the transfer of shares, one of the vice-chancellors, speaking of the right of a shareowner to dispose of his shares, said: "One of the incidents (of this class of property) is the right to transfer it—a right to make a present and complete transfer of it. It is the duty of the directors to receive and register the transfer or to furnish some (valid and sufficient) reason for refusing to transfer." In re Stranton, etc., Co., Law Rep., 16 Eq. 559, per Bacon, vice-chancellor.

Similar observations are made by the Supreme Court of the United States in the Bank v. Lanier, supra. Mr. Justice Davis then says: "The power to transfer their stock is one of the most valuable franchises conferred by Congress. * * It enhances the value of the stock. Although neither in form nor character negotiable paper, they (the share certificates) approximate to it as nearly as possible."

It would be a new, and I apprehend, a startling doctrine to proclaim that the holder of shares in a corporation, where the only provision on the subject of transfers was one requiring them to be made on its books, had no right to make a complete and effectual

disposition of them without the consent of the directors or other shareholders. No such power over the right of transfer has been given in the national banking act. Such a power is so capable of abuse and so foreign to all received notions and the universal practice and mode of dealing in these stocks that it cannot, in the absence of legislative expression, be held to exist.

For these reasons and upon these authorities the proposition must be considered as established that a shareowner in a national bank, while it is a going concern, has the absolute right in the absence of fraud to make a bona fide and actual sale and transfer of his shares at any time, to any person capable in law of purchasing and holding the same, and of assuming the transferor's liabilities in respect thereto, and that this right is not, in such cases, subject to the control of the directors or other stockholders.

Our second proposition is that Laflin did make a complete and effectual sale and transfer of his shares to James H. Britton individually, and that as to Laflin, it was not a sale and transfer of the stock to the bank. Laflin sold through the broker or agent, Keleher; and the latter dealt with Britton as an individual, without knowledge that Britton intended to turn over the shares to the bank, and he received in payment for the shares the personal check of Mr. Britton, and delivered to him at the same time the certificates of stock assigned, in blank, with powers of attorney in blank thereon indorsed, authorizing the transfer of the shares on the books of the bank. As between Laflin and Britton, the transfer was complete by the sale, assignment, delivery and payment, without registration, and this whether it gave Britton before the registration, the legal title to the shares as against Laflin, or only a complete equitable title. Union Bank v. Laird, 2 Wheat. 390; Webster v. Upton, 1 Otto, 65, 71; Black v. Zacharie, 3 How. 483; Bank v. Lanier, 11 Wall. 369, 377; Chouteau Spring Co. v. Harris, 20 Mo. 382; Moore v. Bank, 52 id. 377; N. Y., etc., R. R. Co. v. Schuyler, 34 N. Y. 80; McNeill v. Bank, 46 id. 325; Grimes v. Howe, 49 id. 17, 22; Bank of Utica v. Smalley, 2 Cowen, 778; Bank of Commerce's Appeal, 73 Penn. St. 59; Ross v. S. W. R. R. Co., 53 Georgia, 514; Hoppin v. Buffum, 9 R. I. 513; Bank of America v. McNeil, 10 Bush (Ky.), 54; Davis v. Lee, 26 Miss. 505; German, etc., Ass. v. Sendemeyer, 50 Penn. St. 67; Leavett v. Fisher, 4 Duer, 1.

That the transaction is complete as between seller and purchaser of stock by the assignment and delivery of the certificate, with the power to transfer, and the receipt of payment is fully shown by these cases, and is also evident from the fact that thereupon each of them has the legal right to have a transfer of the shares made on the books of the bank. The seller of the shares, for his protection against creditors of the bank in case of insolvency, may transfer the same on the books to the vendee, the purchase being the authority to the seller to do this. Webster v. Upton, 1 Otto, 65, 71.

And for like reason the seller of shares who has done all that is necessary to enable the purchaser to transfer the shares on the books, may file a bill to compel the vendee to record the transfer. Shaw v. Fisher, 2 De Gex & S. 11; Cheale v. Kenward, 3 De Gex & J. 27; Wynne v. Price, 3 De Gex & S. 310; Webster v. Upton, 1 Otto, 65, 71.

So, also, the vendee of the shares, where the vendor has done all that is necessary to enable the transfer to

be registered, may for his own protection compel the bank to register the transfer, or hold it liable in damages for a wrongful refusal. Bank v. Lanier, 11 Wall. 369; Hill v. Pine River Bank, 45 N. H. 300; Bank of Utica v. Smalley, 2 Cowen, 778; Commercial Bank v. Kortright, 22 Wend. 348.

The delivery of the share certificates and blank transfers will entitle the bona fide vendee to have the transfer registered. "Whoever in good faith buys the stock and produces to the corporation, the certificates regularly assigned with power to transfer, is entitled to have the stock transferred (per Davis, J., Bank v. Lanier, 11 Wall. 369), unless there exists some valid and legal reason in favor of the bank for refusing to register the transfer as in the case of the Union Bank v. Laird, 2 Wheat. 390. In that case the charter gave the bank a lien for the shareholders' debt to it, and provided that "stock shall be transferable only on the books of the bank." Under these circumstances, the bank was held to have a lien on the shares to secure the shareowner's indebtedness to it, which was superior to the right of the unregistered transferee of the stock. Black v. Zacharie, 3 How. 483.

If the foregoing propositions are sound, Britton against Laflin had the right immediately on delivery and payment to register the transfer of the shares, and had the power to fill up the blank transfers, and have the transfer registered. Re Tahite Cotton Co., Law Rep., 17 Eq. 273; German Union Ass. v. Sendmeyer, 50 Penn. St. 67; Leavitt v. Fisher, 4 Duer, 1; Commercial Bank v. Kortright, 22 Wend. 348. Nothing more was required to be done by Laflin or needed to enable Britton to make his title complete. And Laflin could have compelled Britton to register the transfer. If Laflin had proceeded against Britton he could have forced him to have accepted a transfer of the stock in his own name or in the name of some person capable of taking and holding the same. Maxfed v. Payne, Law Rep., 6 Exch. 132. It would have been no answer to Laflin for Britton to have said: "I bought this stock, not for myself, but for the bank." Laflin could have rejoined: "You purported to act for yourself. I supposed you were so acting, and you had no authority, and could have had none, to act for the bank."

It is held in England under the companies acts that the transferor of shares is liable to be treated as a stockholder, until he transfers to one who is in law capable of holding, and liable in respect of the shares, and whose purchase is registered, unless, perhaps, where the neglect to register is entirely the fault of the corporation or its officers. Fyfe's case, Law Rep., 4 Ch. App. 768; Lowe's case, Law Rep., 9 Eq. 589; Shropshire, etc., R'y and Canal Co. v. The Queen, Law Rep., 7 House of Lords Cases, 496, 513; McEwen v West London Wharves, etc., Co., Law Rep., 6 Ch. App. 655; Weston's case, Law Rep., 5 Ch. App. 614, 620; Gooch's case, Law Rep., 8 Ch. App. 266; Gilbert's case, Law Rep., 5 Ch. App. 559; Master's case, Law Rep., 7 Ch. App. 292; Nickalls v. Merry, Law Rep., 7 House of Lords Cases, 530; Symonds' case, Law Rep., 5 Ch. App. 298; Heritage's case, Law Rep., 9 Eq. 5.

Assuming without deciding, that this principle applies in all its force under the national banking act, if Laflin had sold to an infant, his liability would remain, notwithstanding the transfer was registered. Nickalls v. Merry, Law Rep., 7, House of Lords Cases, 530; Symonds' case, Law Rep., 5 Ch. App. 298. If he had sold to the bank, he would remain prima facie if

not actually liable, if the bank should so elect. And if the seller of shares remains liable under the national banking act until there is a registered valid transferthat is, until some person succeeds to the stock who is capable of bolding it and liable in respect to it-this principle will not make Laflin liable under the facts of the present case. Here the transfer was registered, but Britton, instead of registering it in his own name, as it was his duty toward Laflin to do, registered it in his name as "trustee," without Laflin's knowledge. But the act (Rev. Stats., § 5152) authorizes the holding of stock by a trustee. If Laflin, in order to relieve himself of liability, is bound to see the transfer of the stock registered, the registry actually made would not charge him with constructive notice that the bank was in reality the cestui que trust.

Britton is responsible personally, inasmuch as he had no authority to act for the bank, and as there is no cestui que trust who is liable. He is liable for the unauthorized investment and use of the trust moneys of the bank, and can be compelled to refund it. Great Eastern Ry. Co. v. Turner, Law Rep., 8 Ch. App. 149. If it becomes necessary to assess the stockholders he will be estopped to say that he is not individually responsible, since he was not acting by authority of any cestui que trust capable of taking and holding the shares. If the sale of this stock has been registered to Britton individually, it is clear that Laflin would not have been liable to the bank or its creditors; and as the matter now stands, the bank and its creditors have every right and remedy against Britton, which they would have had if the shares had been transferred to him individually, instead of to him as "trustee."

Our third proposition is, that Laflin is not liable, because the money received for the stock was unlawfully taken by Britton from the bank. The reason for this conclusion is that Laflin parted with value-with his shares, with his power of control over them and the right to sell them to others, and had no notice at, or prior to the consummation of the transaction that Britton was acting ultra vires and intended to misappropriate the funds of the bank. If he had dealt directly with the bank, or if he or his agents had known what took place inside the counter before the transaction with Britton had been completed, he would have been liable.

It is urged by the receiver's counsel that Laflin had constructive notice. Mr. Shields, in his argument, bases Laflin's liability on the proposition that, being a shareholder in the bank, he is charged with constructive notice of the condition of the bank, and of what was done by the president in violation of law and of his official duty in respect of these shares. I admit that if in a transaction directly with the bank, he had received moneys to which he was not entitled, he could be made to pay back the same irrespective of the question of knowledge on his part. sas, 15 How. 304; Railroad Co. v. 392.

Curran v. ArkanHoward, 7 Wall.

But it is to be remembered in this case that Laflin is sought to be made liable in respect of the sale and transfer of his shares, which sale and transfer he had the perfect right to make, if he acted bona fide; and he has the same right to sell his shares to another shareholder, that he would have to sell them to a person not a shareholder.

Even directors have the right to make a bona fide sale of their shares and thus get rid of liability, if they pursue the articles or charter, and take no advantage

UNITED STATES SUPREME COURT ABSTRACT.

AGENCY.

Revocation of authority of insurance agent: payment of premium to agent by one not having notice of revocation. A policy of insurance was issued by the S. Company upon the life of C., by an agent of the company authorized to receive premiums. Subsequently the second premium due on the policy was paid to the same person, who was not then agent of the company, which fact was not known to the assured. This person rendered an account to the company of the receipt of the second premium; but the company did not notify the assured of the termination of the agency. Held, that the company could not, after the death of the assured, repudiate the payment of the premium; but that such payment would bind the company. Judgment of Circuit Court, S. D. Alabama, affirmed. Southern Life Ins. Co., plaintiff in error, v. McCain. Opinion by Field, J.

APPEAL.

Judge alone can take security required on.-The security required upon writs of error and appeals must be taken by the judge or justice.-(Rev. Stat., § 1,000.) He cannot delegate this power to the clerk. Motion to dismiss appeal from Circuit Court, S. D. Mississippi, granted conditionally. O'Reilly, appellant, v. Edrington. Opinion by Waite, C. J.

EVIDENCE.

1. Burden of proof: presumptionfin revenue cases from failure to make proper entries.-In a prosecution, or under the revenue law to recover taxes and penalties for the fraudulent manufacture of tobacco, the government introduced evidence showing that large quantities of tobacco were sold or removed from the defendant's premises without his making any entry of the same in the books kept as required by law for the purpose, and that no accurate account of the manufactures so removed was kept in any manner in said books; that seventeen monthly returns were furnished to the assistant assessor as true and accurate abstracts of all such sales and removals, and that they were not true nor accurate statements of the manufactured products sold and removed; and it was also shown that his annual inventories were false. Held, that the burden of proof was thrown upon the defendant, that the sales and removals not accounted for were not made in fraud of the internal revenue laws. Judgment of Circuit Court, S. D. New York, affirmed. Lilien thal, plaintiff in error, v. United States. Opinion by Clifford, J.

2. Rule as to burden of proof in criminal case: rule in civil cases.-In criminal cases the true rule is that the burden of proof never shifts; that in all cases, before a conviction can be had, the jury must be satisfied from the evidence beyond a reasonable doubt, of the affirmative of the issue presented in the accusation that the defendant is guilty in the manner and form as charged in the indictment. Com. v. McKie, 1 Gray, 64; Com. v. York, 9 Medc. 125; Com. v. Webster, 5 Cush. 305; Bennet & Heard's Lead. Cr. Cas. 299. Com. v. Eddy, 7 Gray, 584. But while the general rule is that the burden of proof in civil cases lies on the party who substantially asserts the affirmative of the issue, the burden may shift during the progress of the trial. (1 Bish. Cr. Law (6th ed.), § 835; U. S. v. Three Tons of Coal, 6 Biss. 391; Schmidt v. Ins. Co., 1 Gray, 533; Knowles v. Scribner, 57 Me. 497.) Ib.

3. Construction of revenue laws.-Revenue laws are not penal laws in the sense that requires them to be construed with great strictness in favor of the defendant. They are rather to be regarded as remedial in their character, and intended to prevent fraud, suppress public wrong, and promote the public good. (Cliquot's Champagne, 3 Wall. 145.) Ib.

FIRE INSURANCE.

1. Construction of policy containing contradictory proposition. When a policy of insurance contains contradictory provisions, or has been so framed as to leave room for construction, rendering it doubtful whether the parties intended the exact truth of the applicant's statements to be a condition precedent to any binding contract, the court should lean against that construction which imposes upon the assured the obligations of a warranty. Judgment of Circuit Court, W. D. Missouri, reversed. First National Bank of Kansas City, plaintiff in error, v. Hartford Fire Ins. Co. Opinion by Harlan, J.

2. Conditions as to estimate of value: contradictory provisions. By the terms of the application the assured was required to state separately "the estimated value of personal property and of each building to be insured, and the sum to be insured on each; * * the value of the property being estimated by the applicant." The applicant was also directed to answer certain questions and sign the same as a description of the premises on which the insurance will be predicated." Among the questions to be answered, were: "What is the cash value of the buildings? What is the cash value of the machinery?" The answer was: "$15,000, building; $15,000, machinery." The application contained this: "And the said applicant hereby covenants and agrees to and with said company that the foregoing is a just, full, and true exposition of all the facts and circumstances in regard to the condition, situation, value, and risk of the property to be insured, so far as the same are known to the applicant and are material to the risk." The policy contained this: "Special reference being had to assured's application and survey on file, which is his warranty, and a part hereof." The policy further recited: "If an application, survey, plan, or description of the property herein insured is referred to in this policy, such application, survey, plan, or description shall be considered a part of this policy, and a warranty by the assured; and if the assured, in a written or verbal application, makes any erroneous representation or omits to make known any fact material to the risk, * *then, and in any such case, this policy shall be void. * * Any fraud or attempt at fraud, or any false swearing on the part of the assured shall cause a forfeiture of all claim under this policy." The policy also declared that it was made and accepted upon the above, among other, express conditions. When the policy issued, as well as at the date of the destruction of the property by fire, the cash value of the building, aside from hand and water power, was $8,000, and no more; and the cash value of the machinery, at the same dates, was $12,000, and no more. But the court found that "the answers made by the assured to the questions contained in the application were made by him in good faith, without any intention on his part to commit any fraud on the defendant." Held, that the beneficiary of the policy was entitled to a judgment, notwithstanding the overvaluation of the property by the assured. Ib.