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Still further difficulties arise in deciding as to which issue is good stock, where a transfer has been made with a certificate outstanding. If the unregistered transfer be recognized as binding on the corporation, the stock issued without a surrender of the outstanding certificate is a nullity. But if the new stock is recognized as good stock, because issued pursuant to a sale which amounts to a judgment in rem, e. g. a tax sale, or a forfeiture for non-payment of assessment, or, in some jurisdictions, a transfer under an order of the court in an action to which the unregistered transferee was not a party, or because of a judicial sale which is held in the particular jurisdiction to bind the unrecorded transferee, in all such cases the new stock becomes the valid stock and the outstanding certificates represent over-issued and void stock."

$ 54. Bank's lien on shares.- It is settled that a national bank cannot have a lien upon its own shares for claims against its stockholders. But in the case of other banks such a lien. is provided for in some cases by the charter or the governing statute, in others by a by-law, in others by the words of the stock certificates. In the absence of such a provision the bank can have no lien. The lien where permitted does

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If stock is transferable on the books, the phrase must mean that by a transfer on the books the title passes, and not till then. This is the legal title, and the unregistered transferee has an equitable title until transfer on the books.

bank could have a lien on its own shares. Bath Sav. Inst. v. Sagadahoc Nat, Bank, 36 Atl. R. 996. The court cited Knight v. Bank, in 3 Cliff., expressly overruled by the Supreme Court, Judge Clifford dissenting, and Bank v. Laird, 2 Wheat.

8 Smith v. Northampton Bank, 4 390. Probably the Maine court preCush. 1.

See 1 Cook on Corp., secs. 284, 388.

1 Bullard v. Bank, 18 Wall. 589. See also Bank v. Lanier, 11 Wall. 369; Evansville Nat. Bank, v. Met. Nat. Bank, 2 Biss. 527. But in Maine it appears that the bench and bar have not access to any report of recent date, because that court lately held that a national

ferred to follow Judge Clifford.

2 Jennings v. Bank of Cal., 79 Cal. 323; Waln v. Bank of N. America, 8 S. & R. 89; Vansands v. Bank, 26 Conn. 144.

3 Merchants' Bank v. Shouse, 14 Wkly. Notes Cas. 133; Dana v. Brown, 1 J. J. Marsh. 304. See also Neale v. Janney, 2 Cranch C. C. 86; Duncan v. Biscoe, 7 Ark. 175.

not extend to dividends upon the stock. Where the lien is provided for by charter or by general statute, which is, of course, a part of the charter, the unregistered transferee of stock takes subject to the lien," and the bank may refuse to make a transfer until its claim is satisfied. Such a lien is general in its nature. It covers all indebtedness of every kind of the stockholder to the bank - overdrafts,' individual and partnership liabilities, liability as principal debtor, whether secured by indorsement or not,10 contingent liability as an indorser." But the lien does not reach the indebtedness of an intermediate assignee who is not entered on the books,12 nor the indebtedness of a stockholder contracted after notice to the bank of a transfer by him.13 It has been held that the lien does not give the power to sell. The lien seems to apply also on the principle of subrogation for the benefit of the sureties or indorsers of the debtor.15 This lien the bank may waive by permitting a transfer without insisting upon its right.16 One aberrant case has held that the lien is waived by taking security; " another, that it is

4 Brent v. Bank of Washington, 2 Cranch C. C. 517.

5 Union Bank v. Laird, 2 Wheat. 390; Mohawk Nat. Bank v. Schenectady Bank, 151 N. Y. 665; Rogers v. Huntingdon Bank, 12 S. & R. 77; Farmers' Bank v. Iglehart, Gill, 50; Hammond v. Hastings, 134 U.S. 401; Reese v. Bank of Commerce, 14 Md. 271.

6 Leggett v. Bank of Sing Sing, 24 N. Y. 283; Downer v. Zanesville Bank, Wright, 477.

10 In re Morrison, Fed. Cas. No. 9839.

11 Leggett v. Bank of Sing Sing, 24 N. Y. 283; Bank of Ky. v. Bonnie, 43 S. W. R. 407; Brent v. Bank of Washington, 10 Pet. 596. Contra, Reese v. Bank of Commerce, 14 Md. 271.

12 Helm v. Swiggett, 12 Md. 194. 13 Nesmith v. Washington Bank, 6 Pick. 324; Conant v. Reed, 1 Ohio St. 298.

14 Tete v. Farmers' Bank, 4 Brewst. 308. Contra, In re Farmers' Bank,

7 Reese v. Bank of Commerce, 14 2 Bland, 394; Hammond v. Hast

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waived by issuing certificates without making some mention of the right thereon,18 an absurdly wrong conclusion. Where a bank releases its lien for a specified time its lien is postponed to any claim created in the released period.19 Where the lien is created by a by-law of the bank, a stockholder is charged with notice of the by-law.20 But where the by-law provided that the certificates of stock should contain on their face notice of the provision in the by-law for the bank's lien that no transfer should be made by any stockholder indebted to the company, and the certificates of stock contained no such notice, and the transferee had no notice of the by-law, it was held that he took by an assignment a good title free from any lien of the bank. Where the by-law prevented a transfer so long as the holder of the stock was in arrears or in any form indebted to the bank, the strict construction was adopted that arrears meant unpaid calls, and other indebtedness meant indebtedness other than the stock subscription, and that, therefore, a transfer could not be refused where no call had been made which remained unpaid and where no other indebtedness existed.22 Where the statute provided that holders of bank shares might transfer them unconditionally unless otherwise agreed in the articles of association, a lien in favor of the bank cannot be created by a by-law. The doctrine has been ventured by another court that a by-law of this kind does not bind judg ment creditors of the stockholders, but that position is, of course, untenable. The bank has no lien in the nature of

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McLean, 587; Fitzhugh v. Bank, 3 transferee were charged with noT. B. Mon. 126, semble.

18 Lee v. Citizens' Nat. Bank, 2 Cin. R. 298, 5 Ohio Dec. 21. Contra, Reese v. Bank of Commerce, 14 Md. 271. 19 Bank of America v. McNeil, 10 Bush, 54.

20 Tete v. Farmers' Bank, 4 Brewst. 308.

21 Bank of Holly Springs v. Pinson, 58 Miss. 421. This case is certainly wrong. Both transferror and

tice of the by-law. How could
either be prejudiced by a failure to
state the fact on the certificate?
But see note 18 to this section.
22 Kahn v. Bank of St. Joseph, 70
Mo. 262.

23 Bank of Attica v. Manuf. Bank, 20 N. Y. 501.

24 Byron v. Carter, 22 La. Ann. 98; Sewell v. Lancaster Bank, 17 S. & R. 285.

a set-off to apply the dividends accruing upon stock after the death of the stockholder upon notes indorsed by him.25

$55. Statutory prohibition of transfers.- Where the statute prohibits a transfer, as, for example, before the whole amount of subscription has been paid in, no legal transfer of the stock can be made until it is fully paid.' So where the right of the subscriber to his stock is forfeitable for failure to pay an instalment or call, no right in the stock can be transferred before the instalment is paid, even though the assignee paid the instalment.?

$56. Prohibition of transfers by agreement. There seems to be authority for the proposition that the corporators or shareholders may agree not to dispose of their stock for a certain time, and that such a contract may be specifically enforced by a court of equity. A court has specifically enforced an agreement of a stockholder to sell to other stockholders. But the enforcement of such a contract belongs to that receptacle which has been made the custodian of many remarkable decisions, to wit: the discretion of the court.3 But such contracts do not bind a bona fide purchaser, nor do they prevent a legal title in the stock from passing to the transferee, although he had notice. But a by-law of the corporation cannot restrain the absolute right of the stockholder to transfer his stock. If the provision against alienability is incorporated in the articles of agreement, it would seem to follow that it would be valid under some of the above decisions, which have entirely lost sight of the general principle of law that any restraint on alienation of real or per

25 Brent v. Bank of Washington, 2 Cranch C. C. 517.

1 Merrill v. Call, 15 Me. 428.

2 Coleman v. Spencer, 5 Blackf. 195. This case cannot be considered sound. See also 2 Cook on Corp., sec. 621a.

1 Williams v. Montgomery, 148 N. Y. 519.

2 Jones v. Brown (Mass.), 50 N. E. R. 648.

3 Re Argus Co., 138 N. Y. 557.

4 Brinkerhoof-Farris Co. v. Home Lumber Co., 118 Mo. 447.

5 See 2 Cook on Corp., sec. 621a, note 2.

62 Cook on Corp., sec. 621a.

sonal property held in absolute ownership is void. The obvious expedient of putting the stock in the hands of a trustee does not restrain the alienation by the beneficiary of his equitable interest. Yet if the stock is put in the hands of a trustee, who is given the voting power, it is probable that some courts would refuse to compel the trustee to transfer to the real owner.

57. Right of stockholders in bank.-A state statute granting to stockholders access to and the right of inspection of the books is binding upon national banks, and does not conflict with sections 5240 and 5241 of the Revised Statutes. Stockholders in banks have the usual remedies as against the directors to prevent a breach of duty. In the case of state banks the United States courts are governed by the rules as to their jurisdiction laid down in Hawes v. Oakland, 104 U. S. 450, and the rule of the Supreme Court in pursuance thereof. The remedies to inquire into elections and abuse of powers given by statute do not call for particular mention.*

§ 58. Liabilities of stockholders. The first and original liability of a stockholder is that upon his stock subscription, to pay the full amount subscribed. But in addition to this liability various statutes have added an additional liability to stockholders for debts of the corporation. It is, of course, a matter of common legal knowledge that no liability upon a stockholder as such, except for the stock subscription, exists at common law. But as a general rule statutes have

7 See Gray, Restraints on Alienation, sec. 105 et seq.

If this device was taken merely to destroy the alienability, no court ought to enforce it.

1 Winter v. Baldwin, 89 Ala. 483. Compare as to the general right to inspect, Hatch v. City Bank, 1 Rob. (La.) 470; Cockburn v. Union Bank, 13 La. Ann. 289.

2 Reese v. Bank of Mont. Co., 31 Pa. 78; Manderson v. Comm. Bank, 28 Pa. 379; Dodge v. Woolsey, 18 How. 331.

3 Quincy v. Steel, 120 U. S. 245; Dimpfell v. Railroad Co., 110 U. S. 211.

4 See Albert v. State, 65 Ind. 413; Wiltz v. Peters, 4 La. Ann. 339.

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