assignee under a voluntary general assignment for the benefit of creditors, each of whom represents creditors as well as the insolvent, acquires any right to enforce a collateral obligation given to a creditor, or to a body of creditors, by a third person for the payment of the debts of the insolvent. The demurrer is sustained.

$400. In general.-The statutory liability of individual shareholders of a corporation must be strictly enforced. Sumner v. Marcy,* 3 Woodb. & M., 105.

§ 401. The individual liability of the stockholders of a corporation for the payment of its debts is always a creature of the statute. It does not exist at common law. The statute which creates it may also declare the purposes of its creation, and provide for the manner of its enforcement. Pollard v. Bailey, 20 Wall., 526.

§ 402. Cannot question the judgment.― Where a suit is brought against the stockholders of a bank to enforce a judgment rendered against it, the stockholders cannot ask to go behind the judgment and question the original cause of action, unless they can show collusion between the plaintiff and the bank, entered into for the purpose of defrauding the stockholders. Marsh v. Burroughs, 1 Woods, 470.

§ 403. Bill in equity.- Under the Oregon law a stockholder's liability for an unpaid subscription to the stock of a corporation can only be enforced by a judgment creditor of the company by a bill in equity. Patterson v. Lynde,* 16 Otto, 519. See §§ 330, 332.

§ 404. Where the charter of a bank provided that the stockholders should be "bound respectively for all the debts of the bank in proportion to their stock holden therein," one creditor of the bank, after it becomes insolvent, cannot sue a stockholder at law for the purpose of recovering the full amount of his debt, without regard to the other creditors, or the ability of other stockholders to respond to their obligations under the charter, and especially so where the charter seems to contemplate a resort to equity in such a case. Pollard v. Bailey,

20 Wall., 524.

§ 405. Joinder of parties. In a suit by creditors against a stockholder for unpaid subscriptions, all the stockholders need not be joined; in case of the insolvency of the company, all such stockholders may be reached through proceedings in bankruptcy. Ogilvie v. Knox Ins. Co., 22 How., 380 (§§ 189-191). See $335, 346.

§ 406. Where it does not appear by the record that there are other creditors or other stockholders, a single stockholder cannot, by demurrer, defeat the remedy of a single creditor seeking to enforce a personal liability of a stockholder of a corporation. Marsh v. Charleston,* 1 Hughes, 258.

§ 407. Meaning of "debts."— The Massachusetts act of 1821, chapter 28, making stockholders individually liable for the corporate debts, is remedial and is to be construed as such. "Debts contracted," as employed in it, means not only debts in the strict sense of the term, but any liabilities incurred by the company. If the liability be for unliquidated damages arising from contract or tort, it relates to the time of its origin, and not of its liquidation. Carver v. Braintree Manuf'g Co., 2 Story, 433.

§ 408. Pleading.— An allegation of the facts necessary to make stockholders personally liable under their charter is essential to a bill which seeks to charge them individually. United States v. Globe Works, 7 Fed. R., 530. See $$ 345, 346.

§ 409. A charter provided that in all cases of losses exceeding the means of the corporation, each stockholder shall be held liable to the amount of unpaid stock held by him. Held, that to hold a stockholder responsible for unpaid stock to creditors of the corporation, the declaration must allege that the corporation is insolvent or that there is a deficiency of assets. Blair v. Gray, 14 Otto, 769.

§ 410. In bankruptcy.- The United States court, sitting in bankruptcy in the case of an insolvent insurance company, has full power to equalize payments between stockholders. It can compel each stockholder to pay what in equity and good conscience he ought to pay, and distribute the proceeds of such payments among those entitled to receive them, whether creditors or stockholders, who have paid more than their ratable share, and it may allow interest on claims proven against such company under circumstances where equity requires it. In re Republic Ins. Co., 3 Biss., 457.

§ 411. A non-resident creditor of a Missouri corporation, who has obtained judgment in a federal court, is entitled to the same or similar remedies by execution or otherwise to enforce it, that creditors have who obtain like judgments in the state courts; and it is not indispensable or necessary, in order to give this right, that there should be a rule of court adopting those portions of the state statutes which provide the manner in which the individual liability of the stockholders shall be summarily enforced. Haskins v. Harding,* 2 Dill., 99.

§ 412. Limitations.- The statute of limitations of Georgia of March 16, 1859, is constitutional, and is a good defense to an action brought subsequent to January 1, 1870, to enforce the individual liability of a stockholder of a bank which became insolvent prior to June 1, 1865, for the ultimate redemption of its bills, or to recover the unpaid balance due on stock subscriptions at the time of failure. Terry v. Anderson, 5 Otto, 628. See § 164.

§ 413. Chapter 62 of the statutes of Missouri relates to the general powers and liability of private corporations, and provides by section 11 for a summary proceeding by execution to enforce the personal liability of stockholders of a corporation where a creditor has recovered judgment against such corporation, on which execution has been returned nulla bona. Chapter 63 of those statutes relates to railroad companies; chapter 64, to plank-road companies; chapter 65, to telegraph companies; chapter 67, to eminent domain; chapter 68, to savings banks and fund companies; and chapter 69, to manufacturing and business companies. Section 13 of chapter 69 provided for enforcing the personal liability of stockholders in manufacturing and business companies by suit. Held, that the general provisions of chapter 62, and especially of section 11 therein, as to enforcing the personal liability of stockholders summarily by execution, were general provisions relating to private corporations, and were controlled by the subsequent chapters with reference to particular classes of such corporations. That the personal liability of stockholders in a gas, stove and boiler company, that being a manufacturing and business corporation, could only be enforced by suit as provided in section 13, chapter 69, and not summarily by execution; that section 13 of said chapter 69 also made a suit brought against the corporation within one year after its creditor's debt matured a condition precedent to enforcing a stockholder's personal liability for the payment of any debt contracted by any company formed under this chapter (69); that a creditor who brought such a suit against the corporation within a year, but took a non-suit therein and did not bring another suit against the corporation until after the year had elapsed, lost by his delay his remedy against the stockholder personally, notwithstanding that by the provisions of the general statute of limitations the one year allowed such creditor might be extended to one year from the date of the non-suit. Haskins v. Harding,* 2 Dill., 99.

§ 414. On February 20, 1865, the Planters' Bank of Georgia failed to pay its notes in lawful money. On July 9, 1866, the directors made an assignment for the benefit of creditors. Stockholders in the bank were personally liable for unpaid balances due upon their stock, and for outstanding notes of the bank. The statute of limitations fixed the time for bringing suit upon these demands at twenty years, but on March 16, 1869, the legislature of Georgia, on account of the confusion that had “grown out of the distracted condition of affairs during the late war," passed an act which barred actions accruing before June 1, 1865, unless they should be commenced before January 1, 1870. Held, that this enactment applied to the liability of shareholders of the bank, and was not an unreasonable exercise of the power of the legislature to change the time fixed for the limitation of actions, since at the time the statute was passed (March 16, 1869) it allowed a period of nine months and seventeen days (to January 1, 1870) in which to bring the action, the causes of which, in this case, had been running four years or more. Terry v. Anderson, 5 Otto, 632. § 415. Pro rata liability. A remedy of a creditor against a stockholder personally is limited and defined in California by section 322 of the Code of Civil Procedure, providing that the individual liability of a stockholder of a corporation is limited to such proportion of its debts and liabilities as the amount of the stock and shares owned by him bears to the whole stock of the corporation. On payment by him of his proportion of the debt due from the corporation he is relieved from any further personal liability for such debt, and his liability cannot be extended beyond these limits. In re South Mountain Con. Mining Co.,* 7 Saw., 30. See § 331.

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§ 416. Under a clause in a charter of a bank, that the stockholders shall be "bound respectively for all the debts of the bank in proportion to their stock holden therein," each stockholder is bound for the debts of the bank in proportion to his stock. His liability is not limited to the par value of his stock, neither is he bound absolutely for the payment of the full amount of that. He must pay a sum which shall bear the same proportion to the whole indebtedness that his stock bears to the whole capital, and this proportion can only be ascertained by resort to a court of equity. Pollard v. Bailey, 20 Wall., 524. 417. Liability for bills of bank. The fact that the holders of unpaid subscriptions to the capital stock of a bank have severally redeemed their share of the bills of the bank, but have taken no legal proceedings on them, does not relieve them from liability for the amount due on their stock subscriptions. As far as the bills which they thus hold are concerned, they can present them to the receiver of the bank, if one has been appointed, and receive their pro rata dividends, or they may obtain judgment thereon and sue the other stockholders who owe unpaid balances for stock. Marsh v. Burroughs, 1 Woods, 473.

§ 418. Where stockholders are by statute made personally liable for bank notes issued by

their corporation, debt lies in favor of the holder of one of the notes which has been dishonored, to recover the amount of such note. Bullard v. Bell, 1 Mason, 243.

§ 419. Where the charter of a bank contains a provision binding its stockholders for the ultimate redemption of its bills, in proportion to the number of shares held by them respectively, the liability of the stockholder arises when the bank refuses or ceases to redeem and is notoriously insolvent. Such a liability operates only in favor of the billholders. Terry v. Anderson, 5 Otto, 628.

§ 420. Where the charter of a bank provides "that the individual property of the stockholders shall be bound for the ultimate redemption of the bills issued by said bank in proportion to the number of shares held by them respectively," the liability for the "ultimate redemption" of the bills arises when the bank refuses or ceases to redeem, and is notoriously and continuously insolvent. It is not necessary first to exhaust the assets of the bank by legal proceeding. Terry v. Tubman, 2 Otto, 156.

§ 421. In order that a suit may be maintained against a stockholder of a bank in his individual capacity for the payment of any portion of the regular notes issued by the bank, and protested for non-payment, it is essential, under the statute of Indiana, enacted May 28, 1852, "to authorize and regulate the business of general banking," and the act of March, 1855, amendatory thereto, that it be shown that the stocks deposited with the auditor of the state to secure the redemption of the circulation are first exhausted, or that the bank is insolvent. Toucey. Bowen, 1 Biss., 81.

§ 422. Change in the law - Obligation of contracts.-The general banking law of a state, under which a banking corporation was created, declared that no shareholder should be individually liable for the debts of the bank, unless the articles of association declared that he should be liable. Another section of the general banking act provided that the legislature might at any time alter or repeal the act. The articles of association of the bank provided that the shareholders should not be liable in their individual capacities for the debts of the corporation. It was held that this incorporation of the provision of the law into the articles of association did not form a contract that the state could not alter, and that a subsequent law making the shareholders individually liable impaired no contract. Sherman v. Smith, 1 Black, 587. See §§ 355-359.

§ 423. Where a charter makes shareholders liable only for the amount of their shares, a subsequent constitutional provision, not accepted by the company, making them liable for twice the amount of their stock, will not increase their liability. Steacy v. Little Rock, etc., R. Co., 5 Dill., 348 (§§ 167-171).

§ 424. The repeal of a clause in a charter making stockholders of a company personally liable to its creditors is, as to creditors, within the protection of such clause, unconstitutional, because, (1) it impairs the contracts made by the company and its shareholders with such creditors; (2) because the legislature, by subjecting the shareholders to personal liability for debts of the company, thereby removed the corporate protection from them as corporators, and left them liable as partners and associates at common law, which liability the repealing act destroyed, and (3) because the personal liability of shareholders was a security to creditors in the nature of a mortgage for their benefit, and that the legislature could not destroy it. (Citing Corning v. McCullough, 1 Comstock (N. Y.), 47, 49; Conant v. Van Schaick, 24 Barb., 87; Bronson v. Kinzie, 1 How., 311.) Hawthorne v. Calef, 2 Wall., 23.

§ 425. Transactions of the president.— The Marine and River Phosphate Mining and Manufacturing Company, of South Carolina, made a bond to one Gayer to pay $20,000, with ten per cent. interest annually, and agreed that it should constitute a lien upon its property. It was not paid at maturity, and the receiver sold and delivered it to one Coe, who purchased it at the instance, and with the means, of Corbin, president of said manufacturing company. Coe paid for the bond with $30,000 of stock in the company, which was the property of Corbin, to whom Coe delivered the bond, it having been assigned to "bearer." Corbin, as president of the company, informed it that an extension would be granted upon the bond if the rate of interest should be advanced to twelve per cent. per annum, which was the then current bank rate of interest. This was agreed to, and an indorsement written upon the back of the bond, which was signed by the president and treasurer, with the seal of the company attached, by which it was agreed to extend the bond and pay the interest at the rate of twelve per cent. per annum in consideration of such forbearance. In an action to make the stockholders of the company personally liable upon the bond, held, that the purchase of the bond with the stock of the company, which stock was the private stock of Corbin, was not a payment of the bond; that the fact that Corbin was president of the company at the time of making his purchase of the bond did not invalidate the sale to him, there being no fraud on his part, and no wrong done by him to the company or its stockholders, and the purchase being made with his The fact that Corbin was president of the company did not prohibit him from dealing with it, either by purchasing the bond or otherwise. A corporation may make a valid

own means.

contract with its own president modifying the terms of its liability on an obligation held by him. (Manufacturing Co. v. Bradley, 15 Otto, 175.) Bradley v. Williams,* 3 Hughes, 26.

§ 426. Creditor holding stock.- Where a creditor takes from his debtor bonds and stock in a company, and upon the debtor becoming bankrupt agrees with his assignee to indemnify the assignee for loss, either on such bonds or on the stock, such an agreement does not make the creditor liable to contribute as a shareholder upon the bankruptcy of the company whose bonds and stock are taken. Garrett v. Sayles,* 1 Fed. R., 371.

§ 427. Issue of bonds.- Stockholders are not relieved from personal liability by the issuance of bonds of their corporation, secured by mortgage. Ibid.

§ 428. Reducing stock. Some time in the latter part of the year 1870, the directors of the Republic Insurance Company concluded to withdraw its business agencies from the city of New York and other eastern points, and to extend its business correspondingly in the west and northwest. In order to prevent dissatisfaction among the stockholders in the places from which the business of the company was so withdrawn, it was deemed best to purchase the stock held there, if it could be done, at not over twenty per cent., with the intention of reissuing such stock in the new localities where agencies or branches were established. In pursuance of this resolution, $217,000 of stock was so purchased in at from fifteen to seventeen cents on the dollar; and at the annual meeting, in January, 1871, $200,000 of this stock not having been reissued, was, for the purpose of showing no reduction of outstanding capital during the year, placed in the name of the treasurer of the company upon the books, but with the express understanding that he held it in trust for the company, who had the right to cancel it, if deemed expedient to do so by the board. This the board subsequently did, thereby reducing the outstanding stock on the books to the amount actually held by the stockholders. Held, that as all this action took place while the company was in a solvent condition, the bankruptcy court would not, in proceeding against stockholders to compel them to pay unpaid balances due on their stock, go behind the action of the constituted authorities of the company, while in full control of its affairs, and attempt to rectify any errors of judgment or even frauds then perpetrated. No fraud or misconduct by the managers of a corporation can be set up by stockholders to defeat their liability to creditors on unpaid stock. In re Republic Ins. Co., 3 Biss., 457.

IV. TRANSFER OF STOCK.

SUMMARY-By executor; inquiry as to authority, SS 429, 433, 431, 436.— Rights of pledgee, § 430.- Purchaser may rely upon certificate of transfer, § 431.— Liable for negligence of officers, §§ 432-431, 437.— By a trustee; notice, § 435.— Priority of assignment over attachment, 438. To be made on books, § 439–441.- Not transferable till debts paid, §§ 442– 446.— Transfer under forged authority, $ 447, 448.- By guardian, § 449. — Officers custo lians of books, § 450.— Accepting a substituted stockholder, § 451.— Rights and liabilities of assignee, § 452-454.- New certificate not necessary, § 455. — Assignment with notice to company; creditors, § 456.- Recognition of transferee as a stockholder, §§ 451– 457.- Liability of original holders, § 453.- Transferee liable for calls, §§ 459, 461.— Duty of vendor to make transfer, § 460.— Transferee liable to creditors, § 461.— When assignees become shareholders, § 462.— Rights and liabilities of pledgees, §§ 443, 463–466.

$429. The fact that a person who, as executor, asks a transfer of bank stock, but does not present an order of the court authorizing such transfer, should put bank officers who are requested to make the transfer upon inquiry as to the executor's authority. Lowry v. Commercial & Farmers' Bank, §§ 468-480.

§ 430. One who advances money on a pledge of stock, having no notice, actual or constructive, of any breach of trust, may sell the stock upon forfeiture of the pledge. Ibid. § 431. The purchasers of bank stock may rely upon the certificate of transfer shown to them without examining the books of the corporation whose stock is transferred. Ibid. § 432. The bank whose stock is transferred is trustee of the stockholder, and is responsible for negligence or misconduct in transfers made by its officers. Ibid.

§ 433. It is not per se negligence for a bank to permit an executor holding its stock in trust to transfer the same on its books. Ibid.

§ 434. If a bank dealing with an executor who holds its stock in trust has at the time reasonable grounds for believing that he intends to misapply such stock, or is in the very transaction applying it to his own private use, instead of to the use of the cestui que trust, the bank so dealing is liable to the person injured. Ibid.

§ 435. A bank affected with notice that a transfer of stock on its books is made by a trustee in fraud of the owner of the stock is as fully liable as if it had shared in the proceeds of the transfer. Ibid.

§ 436. The fact that a transfer of stock is made by an executor who holds it in trust is notice to the bank on whose books such transfer is made that there is a will, and puts it upon inquiry as to the contents of the will and the right of the executor to make such transfer. Ibid.

§ 437. A bank is responsible for the negligence of its transfer officer as well as for that of its president. Ibid.

§ 438. A prior assignment of an equitable interest in stocks supersedes the rights of attaching creditors who attach with full knowledge of the assignment. Black v. Zacharie, $ 481-484.

§ 439. A regulation that no transfer of stock shall be valid or effectual until entered or registered on the books of the company is designed for the security of the company itself and of third persons taking transfers of the stock without notice of any prior equitable transfer. It relates to the transfer of the legal title and not of any equitable interest in the stock subordinate to that title. Ibid. See § 515.

$440. The provision requiring transfers of stock to be upon the books of the company is for its benefit and the company can waive it. Upton v. Burnham, §§ 491–495.

§ 441. The waiver of the right to have stock transferred upon the books of the company, at the transferee's request or with his consent, expressed or implied, may render him liable directly to the company for future assessments. Ibid.

§ 442. When an equitable transferee of stock in a bank comes to the bank to claim a transfer to him of the stock on its books, then is the time for the bank to insist on its right to hold the stock as security for the debts of the transferrer due the bank. Delay will be laches that will discharge the lien. National Bank v. Watsontown Bank, $$ 485-487. See § 519.

§ 443. Where bank stock is hypothecated by the holder to his creditor, upon default of the debtor the title passes to the creditor on the delivery of the certificate of stock and a power of attorney. Ibid. See §§ 509, 594.

§ 444. The clause which denies to the stockholder the privilege of making a transfer of his stock, while a debtor, until his debt is discharged or secured to the satisfaction of the bank directors, does not forbid the bank to waive its rights. Ibid.

§ 445. A bank cashier may, by virtue of express or implied authority, act for the directors and waive their right to hold stock as security for the stockholders' debts. Ibid.

§ 446. Where a banking corporation has power to regulate the transfer of stock, it may make a by-law forbidding the transfer of stock until all indebtedness of the holder to the bank is paid. Pendergast v. Stockton, § 488.

$ 447. The neglect of a guardian, whereby a person was permitted access to certificates of stock belonging to a ward, and who forged an authority to transfer it, does not estop such ward from recovering the stock, or its value, either from the transferee under such forged authority or from the corporation permitting the transfer. Telegraph Co. v. Davenport, $$ 489, 490.

§ 448. Corporate officers who transfer stock upon a forged authority to make the transfer do so upon their own responsibility and risk, and the corporation will be compelled either to replace the stock on its books in the name of the lawful owner and pay him dividends accrued on the stock after its unlawful transfer, or to pay him the value of the stock and dividends in cash. Ibid.

§ 449. A guardian cannot authorize a sale of a ward's stock. Ibid.

§ 450. Corporate officers are the custodians of the books of the corporation. Ibid.

§ 451. Where a company accepts and substitutes another party as stockholder, the rights and liabilities of the original stockholder terminates. Upton v. Burnham, §§ 491–495.

§ 452. The assignment of a certificate of stock does not of itself constitute the assignee a stockholder, or create a liability on the part of the transferee to pay the company assessments on the stock. Ibid. See § 511.

§ 453. Where there is testimony tending to show that there was a request or assent on the part of a transferee of stock to the entry of his name upon the stock book as a stockholder, and also that the company entered his name as such stockholder in its stock register, the question whether the company has not given him the position of a legal member and recognized the transfer to him as sufficient, notwithstanding its want of conformity to the formal transfer upon the stock book contemplated by the by-laws of the company, should be left to the jury. Ibid.

§ 454. The registry of the name of the transferee of stock upon the books of the company as a stockholder gives him all the rights of a stockholder, including the right to vote and participate in dividends, and converts that which was before an equitable into a legal relation, upon which his liability for assessments attaches. Ibid.

$455. A new certificate is not necessary to constitute an equitable transferee a stockholder. Ibid.