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account of bad debts, but the debts are afterwards realized, a stockholder cannot claim his proportion of the amount realized; yet after the capital is actually reduced, the bank cannot retain as surplus the portion of the capital which remains over and above the reduced capital. The stockholder who has subscribed to the increase and paid in his subscription and has been entered on the books as a stockholder of a national bank is a stockholder in spite of the fact that his certificates of stock have never been issued to him.10 The increased capital is not void although through fraud it has not all been paid in," as required by law.

§ 48. Original subscription.-As a general rule any paper which shows a purpose to subscribe to the stock of a corporation will be binding. Whether an oral subscription be valid or not must depend on the provisions of the governing statute, or in the absence of such provisions on the general principles governing the law of corporations. The whole subject of the binding force of a subscription,3 as well as the remedy of the subscriber to avoid the same for fraud or for an alteration in the charter," are not properly a part of this particular treatise. The rights of parties under statutes in over-subscriptions have received some consideration from courts in the cases cited in the note. The state was

8 McCann v. First Nat. Bank, 112 Ind. 354.

9 Seeley v. Nat. Ex. Bank, 78 N. Y. 608; s. c., 8 Daly, 400.

10 Pac. Nat. Bank v. Eaton, 141 U. S. 227. The laches of a subscriber may defeat his right to object. Olson v. State Bank, 67 Minn. 267. 11 Latimer v. Bard, 76 Fed. R. 536. See note 4, supra.

1 See next note. This binding effect the board of directors cannot release. McNulta v. Corn Belt Bank, 164 Ill. 427.

3 See 1 Thomp. on Corp., sec. 1216 et seq.

4 See 1 Thomp. on Corp., sec. 1360 et seq. A subscription or a purchase of stock may be rescinded for fraud even after insolvency where there is no negligence or estoppel. Wallace v. Bacon, 86 Fed. R. 553; Stufflebeam v. De Lashmutt, 83 Fed. R. 449. But Wallace v. Hood, 89 Fed. R. 11, holds that the receiver cannot agree to a rescission.

5 See 1 Thomp. on Corp., secs. 1267

2 See 1 Thomp. on Corp., secs.1136- 1299. 1194.

6 Meads v. Walker, Hopk. Ch. 587;

held not liable as a stockholder for personal liability,' but was held liable as a trustee for diverting capital.R

49. Stockholders by transfer.- Shares of stock are from their nature alienable, and, subject to the limitations lawfully imposed upon their alienability by law, or by the corporation or by the holder, are transferred by indorsement and delivery of the certificate. Ordinarily such a transfer makes the transferee a stockholder and the transferror ceases to be such, where the transfer is in good faith and recorded on the books of the company.1 The books of the corporation are the controlling evidence as to the ownership of shares; but if the transferror in good faith has done all that he is required to do to make the transfer complete on the books of the company, the failure of the proper officers to record the transfer will not continue him as a stockholder. It seems to be sufficient even if the officers knew of the transfer. If, however, the transfer is collusive or for the purpose of escaping liability, the transferror as well as the transferee will be held as a stockholder; certainly in the case of national banks, and on principle under state statutes. An apparent exception seems to be that of a pledgee,

Clarke v. Brooklyn Bank, 1 Edw. Ch. 361; State v. Lehre, 7 Rich. Law, 234. A subscription in another's name was not permitted to escape a scaling-down statute. Union Bank v. McDonough, 5 La. 63.

7 Consolidated Bank v. State, 5 La. Ann. 44. This opinion is a singular exhibition of folly.

8 Dabney v. State Bank, 3 S. C. 124. 1 Johnson v. Laflin, 103 U. S. 800; S. C., 5 Dill: 65. But statutes sometimes prescribe a different rule. Chatam Bank v. Brobston, 99 Ga. 801; Harper v. Carroll, 69 N. W. R. 610.

2 Man v. Cheeseman, Fed. Cas. No. 9002a; Irons v. Manuf. Nat. Bank, 121 U. S. 27; s. c., 27 Fed. R. 591;

In re Emp. City Bank, 18 N. Y. 199. They make the transferee liable as stockholder even in case of collusive transfers. Foster v. Lincoln, 74 Fed. R. 382, 79 Fed. R. 170; Robinson v. Beall, 26 Ga. 17.

3 Snyder v. Foster, 73 Fed. R. 136, 19 C. C. A. 406; Hayes v. Shoemaker, 39 Fed. R. 319. Compare Price v. Whitney, 28 Fed. R. 297.

4 Whitney v. Butler, 118 U. S. 655. 5 National Bank v. Case, 99 U. S. 628; Barden v. Johnson, 107 U. S. 251; Stuart v. Hayden, 169 U. S. 1; S. C., 72 Fed. R. 402; Witters v. Sowles, 32 Fed. R. 130; Foster v. Lincoln, 74 Fed. R. 382; s. c., 79 Fed. R. 170.

6 So held in case of a transfer to

who takes stock merely as collateral security, and does not receive title himself but has the stock stand in the name of some irresponsible third party. In such a case the pledgee is not liable as a stockholder. The same result is obtained by the entry of the pledgee's name on the books "as pledgee,” 8 and, on principle, with any other words which showed the holding as a trustee, if the fact was as represented. If the transfer be collusive, both the transferror and the transferee are liable as stockholders," and the same result follows if the transfer be made after insolvency of the bank with notice of the fact.10 In some of the states statutes render bank stockholders liable for all debts created while they were stockholders and require all transfers of stock to be recorded in some proper office. This liability is unaffected by a transfer. One may become a stockholder if he is the real owner of the

the bank itself, which would assume no liability to answer to the statute. In re Reciprocity Bank, 22 N. Y. 9.

7 Anderson v. Phila. Warehouse Co., 111 U. S. 479. This case is absolutely irreconcilable with National Bank v. Case, 99 U. S. 628. In the latter case the transfer was made to the corporation and then to the dummy. In the other case the transfer was to the president of the corporation for the corporation and then to the dummy. In the Anderson case the two ablest judges in the court dissented. Nat, Park Bank v. Harmon, 79 Fed. R. 891, follows the case. See Chatam Bank v. Brobston, 99 Ga. 801, under a state law, contra.

8 Pauly v. State Loan & Trust Co., 165 U. S. 606. The law therefore ought to be that unless the pledgee causes the proper entry to be made on the books, he will be liable as stockholder. Chatam Bank v. Brobston, 99 Ga. 801; State v. Bank of

New England, 73 N. W. R. 153; Harper v. Carroll, 69 N. W. R. 610; Moore v. Jones, 3 Woods, 53; Bowden v. Farmers' Bank, 1 Hughes, 307; Hale v. Walker, 31 Iowa, 344; Magruder v. Colston, 44 Md. 349. But the rule is said to be that the pledgee may show he is not the holder (Williams v. Am. Nat. Bank, 85 Fed. R. 376), and that he is liable only by estoppel. Baker v. Nat. Bank, 86 Fed. R. 1006. But if the pledgee proved that he ordered the entry correctly made, would he escape? See cases in notes 3 and 4 of this section.

9 Foster v. Lincoln, supra, note 2. See Laing v. Burley, 101 Ill. 591, which holds the transferee liable when the transfer was not recorded. 10 Robinson v. Beall, 26 Ga. 17; Cox v. Montague, 78 Fed. R. 845; but see Sykes v. Halloway, 81 Fed. R. 432.

11 See Illinois statutes, 1 Starr & Curtis, ch. 16a, sec. 9, and see note 1 to this section.

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shares regardless of what the books show or the apparent form of the transfer. A father who bought shares for his minor children and put them in their names was held to be a stockholder. 13

§ 50. Stockholder by estoppel. It has been said that "those persons who hold themselves or allow themselves to be held out as owners of stock are liable whether they own stock or not," and that the rules applying to ownership of national bank stock are about the same as those which apply to partnerships. But the more correct statement is this: One who allows himself to be represented as owner by the books of the corporation, when he has knowledge of facts that put him upon notice that he is so held out, will not be heard to dispute his liability. Certain instances of this rule were noticed in the last section. In accordance with this rule, one who receives checks for dividends upon the stock, even though she merely indorses them without knowledge of their contents, will not be heard to deny her liability." One who acts as an officer of a national bank, with constructive knowledge of the fact that to act as officer he must be the owner of at least ten shares, will not be heard to dispute knowledge of the fact that the books represented him to be the owner of fifty shares, even though he were in fact ignorant of the matter. One who acts as a stockholder with the knowledge that is imputed to him by the receipt of dividends will be held as a stockholder. He is none the less a stockholder, though as officer of the bank he

12 Davis v. Stevens, 17 Blatch. 259; Horton v. Mercer, 71 Fed. R. 153; Case v. Small, 10 Fed. R. 722; Hubbell v. Houghton, 86 Fed. R. 547.

13 Foster v. Chase, 75 Fed. R. 797. It was put on the ground that the minors could not consent. See also Kerr v. Urie, 37 Atl. R. 789.

1 Pardee, Cir. Judge, in Case v. Small, 10 Fed. R. 722. This case is a very good instance of the recklessness of judges in using language.

The point of holding out was not involved at all, but the case was decided on the point that a man was liable as stockholder, because while the stock was held in the name of another, which other was held out as owner, he was yet the real owner.

2 Keyser v. Hitz, 133 U. S. 138. 3 Finn v. Brown, 142 U. S. 56. 4 Stephens v. Follett, 43 Fed. R. 842.

took the stock in order to protect the bank;" nor is he exonerated by an agreement of the bank officer that if the stock would be taken by the stockholder the bank would buy the shares at any time he wished. So a man will not be heard to say that he was a trustee of the stock and thus exempt from liability, if he knowingly permit the books to show him to be the owner; but even if the books show him to be a trustee, he will be liable if he be the real owner. Where there was an over-issue of stock, a party having bought stock of the president of a bank, who issued to the party new certificates, and, having retained the old certificates, hypothecated them, thus over-issuing the stock, it was held that the new stockholder was liable as such. As to transfer by descent or by will, see the next section.

§ 51. Executors, administrators, guardians and trustees. As already seen, section 5152, Revised Statutes of the United States, exempts from personal liability as national bank stockholders persons holding stock as executors, administrators, guardians or trustees. The statute does not in express terms require the books to show the trust relation of the stockholder toward his beneficiary. No case has yet held that the fact cannot be shown contrary to the books of the bank. In one case it is implied that such fact could be shown. It follows that if the proper orders as to the transfer have been given to the bank officers and the trustee is

3 Bundy v. Jackson, 24 Fed. R. 628. But stock held by the cashier as cashier is not chargeable against him personally. Baker v. Old Nat. Bank, 86 Fed. R. 1006. This case is clearly wrong unless the words "as cashier" would be notice of the trusteeship.

8 Burt v. Bailey, 73 Fed. R. 693, 36 U. S. App. 676. This case seems to be correct, for the canceled stock ceased to be stock, its place being taken by the new stock. If the old certificates had been sold to a bona fide purchaser, he would not have obtained stock by the over-issue.

6 Bowden v. Santos, 1 Hughes, It seems plain, too, that he could 158, Fed. Cas. No. 1716.

7 Lewis v. Switz, 74 Fed. R. 381; Davis v. First Baptist Society, Fed. Cas. No. 3633; Welles v. Larrabee, 36 Fed. R. 866.

not have been held as a stockholder. Scovil v. Thayer, 105 U. S. 143.

1 Horton v. Mercer, 71 Fed. R. 153. A pledgee is personally liable only on the ground of negligence or

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