charter of the company requires the payment of all sums due before registering a transfer, this will embrace all calls made and which are payable at the date of the transfer.5 himself in writing to pay fifty dollars per share, but who has only paid five dollars per share on his subscription, 'indebted' to the company within the meaning of the act? Why should this question receive a negative answer? His engagement to pay money is as much a debt as any other engagement for the payment of money. A debt may be contracted for stock in a railroad company as readily as for anything else. It is true that the debt is payable by instalments when required from time to time by the directors. But it is none the less a debt on that account. It is debitum in presenti solvendum in futuro. It is a present debt payable at some future day. It is well settled that the lien given by statute to a corporation, upon the shares of stockholders' indebted' to it, extends to all debts, whether payable presently or at a future time, except where the statute limits the lien to debts actually due and payable, and that a stockholder indebted to the corporation, although the debt may not be due, cannot transfer his stock without the consent of the corporation. Rogers v. Huntingdon, 12 S. & R. 77; Grant v. Mechanics' Bank of Philadelphia, 15 S. & R. 140; Sewell v. Lancaster Bank, 17 S. & R. 285. It is very clear that the defendants, at the Orpen ex parte, 9 Jur. N. S. 615. This question is elaborately discussed in a recent case in Maryland, with the following results : -- The charter of a bank provided that its shares of stock shall be transferable upon the books of the corporation only according to such rules as shall be established by the president and directors; but all debts actually due and payable to the corporation by a stockholder, requesting a transfer, must be satisfied before such transfer shall be made, unless the president and directors shall direct to the contrary. Held, 1. That this lien on the stock is not waived by the form of a certificate for stock declaring that the stockholder "is entitled to shares of stock transfer able only at said bank personally or by attorney on surrender of this certificate." 2. The assignee of a stockholder takes the equitable assignment subject to the rights of the bank against the stockholder, under its charter, of which he is bound to take notice. 3. This lien attaches to balances due the bank by the stockholder, for overdrafts on checks, but not to notes or bills on which the stockholder may be a party, as maker or endorser, and not due at the time the transfer is demanded. 4. The words "debts actually due and payable,” imply more than mere indebtedness; the indebtedness contemplated is only a debitum solvendum in presenti, not in futuro: 5. Where an assignee demands a transfer, but refuses to pay the debts then due the bank by the stockholder, and afterwards makes a second demand, when other notes of the stockholder had become due and payable, he cannot obtain a transfer without paying all the debts due at the time of the last demand. Reese & Fisher v. Bank of Commerce, 14 Md. R. 271. 5. A corporation has no implied lien upon stock for the liabilities of the stockholders to the company.6 time of the alleged transfer of their stock, were 'indebted' to the company to an amount nearly equal to the whole of their subscription. They had, therefore, no right whatever to transfer their stock without the consent of the board of directors. It is true that as between them and the purchaser, if the latter thought proper to contract for a contingent or uncertain interest, the transfer might be good for some purposes. 8 Pick. 90; 9 Pick. 202; 2 Cowen, 770. But it passes no title to the stock, and confers no 'privileges, immunities, or franchises' whatever upon the purchaser. The consent of the board of directors is of itself the originating act in the change of title, and does not merely operate to perfect the conveyance previously begun. Marlborough Man. Co. v. Smith, 2 Conn. R. 579; Northop v. Newtown & Bridgeport Turnpike Co., 3 Conn. R. 544; Oxford Turnpike Co. v. Bunnell, 6 Conn. R. 552. So long as the stock remains unpaid, the corporation has a right to refuse to receive new members in place of the original adventurers. Until the stock is fully paid up, and the stockholders otherwise free from debt to the company, they have no right whatever to introduce strangers into the company in their places. A right which depends upon the consent of others is no right at all. The transfer to Mr. Stanton was, therefore, of itself, a nullity. An attempt was made to give it vitality by parol evidence, from which the consent of the board of directors was to be inferred by the jury. But there is no evidence tending to show that the question was ever presented to the consideration of the board, or that any action was taken by the board in regard to the transfer. In ordinary business transactions between a corporation and strangers, the authority of agents and the existence of contracts may be implied from acquiescence and other circumstances. So where the assent of the board is required by a by-law only, the execution of the by-law may be modified by the practice of the corporation. Ins. Co. v. Smith, 1 Jones, 126. But when the act of incorporation grants a power, the mode prescribed by the statute for its exercise must be strictly pursued. 5 Barb. S. C. R. 613, 614; 2 Cranch, 127. The question here is whether one member of a corporation has been legally substituted for another. The title of the original stockholder was established by written evidence, and could have no legal existence without it. Thames Tunnel v. Sheldon, 6 B. & C. 341. The title of the substitute must be shown by evidence of the same character. It is the duty of the directors to keep minutes of their proceedings, and the proper evidence of their as * Mass. Iron Co. v. Hooper, 7 Cush. 183; Heart v. State Bank, 2 Dev. Ch. 111; Sargent v. Franklin Ins. Co., 8 Pick. 90, and cases cited supra, note 2. But dividends due and unpaid may be said to be a fund, in the hands of the corporation, which they are not obliged to pay to the assignee of the stock, until their debts from the assignor are liquidated. Dividends are strictly due only to the assignor, and would not probably pass by a mere sale of the stock, unless there were some special ground for giving the transfer of the stock that operation. 6. And when the company wrongfully refuse to record transfers of shares on their books, the vendee may recover the price of such shares, the company having caused them to be sold, as the property of the vendor. *SECTION II. Contracts to transfer Stock. 1. Transfer under English statutes. Regis- 6, 10. Company may compel one to accept tered companies. 2. Contracts to transfer stock valid, where 3. Vendor must have the stock, when due. 4. Force of usages of stock-exchange. shares on contract. 7. Stock standing in joint names belongs to survivors. 8. Mode and effect of correcting registry. 9. If the company vary the contract, spe- 10. 5. Company will reform their registry at its 11. peril. § 33. 1. Questions often arise in regard to transfers of stock sent to a transfer is a recorded resolution adopted when the board was in session. Where the transfer is made by a director, it ought further to appear that the resolution of assent was carried without his vote. If the resolution was adopted and entered on the minutes, the loss or destruction of the entry might be supplied by parol proof. But in no other case can parol evidence be received to show that an assignee has been admitted as a member of the corporation in the place of the assignor. There was no legal evidence of the assent of the board of directors to the transfer, and therefore no legal evidence of a valid transfer of the stock. If there had been, we do not see how the defendants can claim to be discharged by it from 'liabilities' previously incurred. Their subscription to the stock of the company created a liability to be called upon for payment in such instalments as the directors required. Conceding that it was not an obligation for present payment, and supposing, for a moment, that it was not strictly a debt, it was certainly a 'liability,' which is a word of more extensive signification than 'debt.' The act of assembly is express in its direction that a transfer, even with the assent of the board, shall not have the effect of discharging any liabilities or penalties heretofore incurred by the owner of the stock. We see no reason for restricting this proviso to 'liabilities' which had become due and payable before the transfer. It is sufficient to bring a liability' within the proviso that it had been 'incurred' by the owner before the transfer. It is not necessary that it should also have become due and payable." The same principle was reaffirmed in Graff's Exr. v. Pittsburg & Steubenville Railw., 11 Am. Railway Times, No. 14. in incorporated companies, as to the quantity of interest conveyed, the title of the person making the conveyance, and many other incidents. The English statutes in regard to the registration of railway companies are not intended to affect the property in the shares,1 and a transfer is valid, although made before the registration.2 2. It would seem, too, that a contract to transfer stock in railway companies, at a future time, which the party neither has, nor is about to have, but expects to purchase in the market, for the purpose of fulfilling his undertaking, is nevertheless a valid contract, and not illegal, or against the policy of the law,3 and that the intimation of Lord Tenterden, that such contracts were illegal, and not to be encouraged by the law or its ministers, is b 1 The London & Brighton Railw. Co. v. Fairclough, 2 Railw. Cases, 544 s. c. 2 M. & G. 674. 2 The Sheffield, Ashton-under-Lyne, & Manchester Railw. Co. v. Woodcock, 2 Railw. Cases, 522; s. c. 7 M. & W. 574. * Hibblewhite v. M'Morine, 5 M. & W. 462. Mr. Walford, in his treatise, 256 and note, intimates, that the law of France regards this class of contracts as illegal, and cites Hannuic v. Goldner, 11 M. & W. 849, in confirmation. But the case does not expressly decide the point. That was pleaded, and the court held the plea bad, as amounting to the general issue, and the party had leave to amend. Perhaps it is charitable, both to the pleader and to the country, to suppose such is the law there, as Mr. Walford seems to have done. But where the deed of settlement requires the assent of the directors to a transfer of shares, and the vendor did not obtain it, and in the mean time the price of shares fell in the market, held the vendee might recover back his money. Wilkinson v. Lloyd, 7 Q. B. 27. But, where the plaintiffs covenanted to subscribe for stock in a railway, and pay ten per cent. thereon, and then transfer it to defendant, who agreed thereupon to pay the residue and save the plaintiffs harmless, and the plaintiffs subscribed for the stock and paid the ten per cent.; but the bylaws of the company provided for the transfer of the stock on the books of the company only after the payment of thirty per cent. of its amount, unless by the consent of the directors, which they refused to give, in this case, and the plaintiffs tendered the defendant an instrument whereby they assigned and transferred the stock and constituted him their attorney to transfer the same on the books of the company, which was refused as not being a compliance with the contract: It was held, in an action to recover damages for the breach of the contract, that the plaintiffs had complied with their covenant, and might recover not the difference between the value of the stock at the time of refusal, and the sum due upon the subscription, but the whole sum due and interest. Orr v. Bigelow, 4 Kernan, 556. * In Bryan v. Lewis, Ry. & M. 386, and in Lorymer v. Smith, 1 B. & C. 1. not to be regarded, at this time, as sound law, however good sense, or good morality, it may seem to be. 3. It is clearly not a stock-jobbing transaction within the Eng*lish statute. But to the performance of such a contract it seems to be requisite, that the seller should bona fide procure the stock, by the time appointed for the transfer.6 4. The English reports, both in law and equity, and especially the more recent ones, abound in cases more or less affecting transfers of shares on the stock-exchange, and the practice and law governing transactions between brokers. These rules are allowed to have great weight in fixing the construction and effect of contracts made through the instrumentality of brokers. In the sale of shares in companies requiring the consent of the directors or of the company itself to the transfer, it is not understood, according to these rules, that the vendor or his broker undertakes to procure that consent, and if he does all that is requisite to effect a transfer of the equitable interest of the property, and 5 Hewitt v. Price, 4 M. & G. 355; Mortimer v. M'Callan, 6 M. & W. 58. • Hibblewhite v. M’Morine, 2 Railw. C. 51–66; s. c. 6 M. & W. 200. The comments of Isham, J., in Noyes v. Spaulding, 27 Vt. R. 420, 429, may be regarded, perhaps, as giving the present state of the English law upon this subject. "Contracts for the sale of stock of this character on time are valid at common law, and can be enforced by action. The statute 7 Geo. 2, ch. 8, made perpetual by 10 Geo. 2, ch. 8, has rendered some contracts of that character illegal. They are rendered void so far as the public stocks of that country are concerned, when the seller had no stock at the time of making the contract, and none was ever intended to be transferred by the parties, but their intention was to pay the difference merely that may exist between the market value of the stock at the time of the transfer, and the price agreed to be paid. Such contracts are rendered void by that statute, and are treated as wagering contracts; 'the seller virtually betting that the stock will fall, the buyer that it will rise.' Chitty on Bills, 112, note (w). It has been held, that railroad stock is not within the act. Hewitt v. Price, 4 M. & G. 355; s. c. 3 Railw. C. 175; Fisher v. Price, 11 Beav. 194. In the case of Mortimer v. M'Callan, 6 M. & W. 70, Lord Abinger observed, 'that the act was made for the purpose of preventing what is declared to be illegal trafficking in the funds by selling fictitious stock merely by way of differences; but it never was intended to affect bonâ fide sales of stock.' Elsworth v. Cole, 2 M. & W. 31; 2 Kent, Comm. 468, note (b). In the case of Grizewood v. Blane, 20 Eng. L. & Eq. 290, it was held, that a colorable contract for the sale of railroad shares, where no transfer is intended, but merely differences,' amounting to the rise or fall of the market, is gaming within the 8 and 9 Vict. ch. 109, § 18; s. c. 11 Common Bench, 538." |