the back of each certificate; the selling party hands these certificates over to the purchaser, filling in and signing this blank form; and the purchaser presents the certificates at the office of the company, which thereupon furnishes him with fresh certificates, while the old ones are cancelled. But as to the essential part of these formalities there is some uncertainty, and the legislature of a State does well when it lays down some explicit rule on the subject. For it is a general principle that stock may be transferred by any suitable written assignment; and it is even held that a transfer of stock is sufficient where the certificate is handed over indorsed in blank, so that the holder can fill up the back of the certificate by writing an assignment and power of attorney over the signature indorsed.1

But while the strong tendency of modern times, and especially in this country, is towards sustaining the validity of transfers of stock by means of an instrument containing blanks to be filled up, there are some decisions which still favor the old English rule, and regard with abhorrence the execution of any instrument that leaves important words to be afterwards supplied.2 In either case it seems fair enough for a corporation to require something more than an indorsement, some evidence, in fact, of authority for transfer,before permitting the transfer to stand completed.3

§ 497. Informal Transfer of Stock; Equitable Rights of Buyer. But one who sells stock and receives consideration for it, giving the assignment and power of attorney to complete the transfer, cannot afterwards in equity set up any informalities of the instrument to defeat the purchaser's title. And though the legal title to stock cannot ordinarily pass before a transfer is made on the corporation book, provisions to this effect being now usual in corporate charters or general enactments, — yet an equitable, if not a legal

1 See Ang. & Ames, 8th ed. § 564, and cases cited; Kortright v. Buffalo Commercial Bank, 20 Wend. 91; Abb. Dig. Corp. 749; Bridgeport Bank v. New York, &c. R. R. Co., 30

Conn. 231; Day v. Holmes, 103 Mass. 306; Morawetz, § 325.

21 Redf. Railw. 123, 124.

3 See Bayard v. Farmers' &c. Bank, 52 Penn. St. 232; § 498, post.

4 Ang. & Ames, § 564.

transfer may meanwhile have been perfected as between seller and buyer; for such provisions concerning a transfer are for the security of the corporation itself and bonâ fide transferees and perhaps general creditors.1 Indeed a person to whom shares have been bona fide transferred will hold them as against the seller without any certificate; and the purchaser of stock is strongly protected in his purchase; the main question being that of his right to the shares.2

One who is thus entitled as of right may compel the corporation in chancery to give the shares to him;3 and at any rate equity will protect the assignee's interest as a trust as against the assignor; and where the corporation wrongfully refuses to permit a transfer, the assignee of shares has been allowed to sue in assumpsit for damages.5

4

$498. The Same Subject. How much deference is to be paid to the language of the charter or statutes relative to the joint-stock corporation we have already suggested; and we may now add that the usual formalities attending a transfer upon the corporation books leave little to the discretion of its managers; for the purchaser simply makes known his right to a transfer, and the register is made accordingly. To require that the transfer be made at the office personally, or by attorney, and with the assent of the president, would be, without some explicit authority to that effect from the

1 Black v. Zacharie, 3 How. 483; Ang. & Ames, §§ 353, 575; Duke v. Cahawba Nav. Co., 10 Ala. 82; Abb. Dig. Corp. 750.

2 Taylor, § 511. So, too, one may be a subscriber and liable for his subscription without having a stock certificate. 102 U. S. 314, 316.

Gardner, 105 Ill. 436; Black v.
Zacharie, 3 How. 483.

5 Ib.; Commercial Bank v. Kortwright, 22 Wend. 348. See Morawetz, § 338, where objections to this suit at law are stated.

A seal is not essential to the validity of the assignment of shares in a 3 Morawetz, §§ 326, 337; Parrott corporation. Atkinson v. Atkinson, v. Byers, 40 Cal. 614.

4 Ang. & Ames, § 565; Agricultural Bank v. Burr, 24 Maine, 256; Bank of Attica v. Manufacturers' Bank, 20 N. Y. 501; Presbyterian Cong. v. Carlisle Bank, 5 Penn. St. 345; Sargent v. Franklin Ins. Co., 8 Pick. 98; Morawetz, § 326; Otis v.

8 Allen, 15. And the transfer having been made on the corporation books to a bona fide holder for value, though the seller's certificate was not at the time surrendered, it would appear that no subsequent sale or pledge of the seller's old certificate can impair this holder's title. See Abb. Dig. Corp. 750.

legislature, an assumption of power on the part of the corporation to which no purchaser need submit.1 And even where the prescribed formalities have been disregarded by the corporation for a long time, a transfer may be sustained as against it on the ground of usage.2

But as concerns the extent of transfer which is requisite to exempt the stock from claims of the seller's creditors, and still more of subsequent transferees, the rule appears to be more stringent. It is true that in certain States an assignment and delivery of the certificate is considered effectual, as against a subsequent attachment by a creditor without notice, even where the corporate charter makes the stock transferable on the books.3 The generally received doctrine, however, in this country is, in substance, that where a transfer on the books is expressly required, the title of the buyer is not good as against subsequent attaching creditors who received no notice of the sale, unless such transfer has been made on the books before the stock is attached; or, at least, unless due diligence has been exercised in having the formalities of transfer completed. The ground on which the stock is most fairly made subject to attachment under such circumstances appears to be that of a presumed unreasonable delay on the purchaser's part in perfecting his equitable title; but other cases, which deal with some specific restriction or requirement contained in a charter or statute, lay down the rule more absolutely.5 There is considerable difference of opinion as to the point of time from which the transfer of an

1 Ang. & Ames, § 567; Sargent v. Franklin Ins. Co., 8 Pick. 90; Gilbert's Case, L. R. 5 Ch. 559. But where the directors are expressly invested with a discretionary power to approve or disapprove of transfers, they are presumed to have exercised the discretion fairly and not capriciously, and are not bound to state reasons for disapproval. Penny's Case, L. R. 8 Ch. 446.

2 Chambersburg Ins. Co. v. Smith, 11 Penn. St. 120; Bargate v. Shortridge, 5 H. L. Cas. 297,

3 Broadway Bank v. McElrath, 2 Beasl. 24; Hunterdon County Bank v. Nassau Bank, 17 N. J. Eq. 496. And see Black v. Zacharie, 3 How. 483.

4 See Pinkerton v. Manchester, &c. R. R. Co., 42 N. H. 424; Fisher v. Essex Bank, 5 Gray, 373; Pittsburgh, &c. R. R. Co. v. Clarke, 29 Penn. St. 146; 12 Gray, 212; Skowhegan Bank v. Cutler, 49 Maine, 315; Murphy, In re, 51 Wis. 519.

5 Ib.; Colt v. Ives, 31 Conn. 25; Abb. Dig. Corp. 752; 1 Redf. Railw. 3d ed. 152-154.

equitable title should be reckoned, as between such a purchaser for value and attaching creditors, so that the present rule with reference to stock cannot be yet considered precise and positive. A person becomes legally entitled to shares by having them transferred on the corporation books whether the certificate has yet issued to him or not.1

The precautions we have just indicated apply to the case of a pledge of stock; 2 and in that connection it is perceived that where the pledgee, or the owner of a certificate of stock assigned in blank, has confided its possession to another, who disposes of it absolutely or in security to some other bonâ fide third party without notice of the fraud, such pledgee or true owner may in many instances be debarred from recovery.3

§ 499. Whether a Stock Certificate may be deemed Negotiable. This brings us to the inquiry whether a stock certificate may be deemed a negotiable instrument in any sense when indorsed in blank. On this point there is a discordance among the latest decisions; and naturally so, for stock is a creature of general or special statute and conforms to the organic law of its creation. In some States a general statute expressly provides that as against attaching creditors and in some respects the corporation, every sale, assignment, or transfer must be recorded, and a new certificate issued to the transferee; and under such rules a certificate of stock, though indorsed in blank, cannot be regarded as a negotiable instrument. But there are other States where, no such legislation operating, or the statute importing negotiability, the transfer of a certificate in blank is treated as carrying to any bona fide

1 102 U. S. 314; Taylor, § 587. 2 See §§ 395, 396.

8 See Mass. Pub. Sts. (1882) c. 105, § 25; Gray v. Coffin, 9 Cush. 192; Ex parte Boulton, 1 De Gex & Jones, 163; Wilson v. Little, 2 Comst. 443. An executory contract for the transfer of stock as collateral security for a debt will not be enforced in equity to the injury of the other creditors of one who has died insolvent. City Fire Ins. Co. v. Olmsted,

33 Conn. 476. See chapter on Pledges, supra; also next section.

4 Mass. Pub. Sts. (1882) c. 105, § 24 (since altered in favor of negotiability); Shaw v. Spencer, 100 Mass. 382; Sewall v. Boston Water Power Co., 4 Allen, 277; Mechanics' Bank v. N. Y. & N. H. R., 3 Kern. 599. And see Athenæum Life Ass. Co. v. Pooley, 3 De G. & J. 294; Merchants' Bank v. Livingston, 74 N. Y. 223.

transferee for value, whether by way of sale or pledge, the rights of one who holds all the indicia of title. Such a certificate may thereby pass from hand to hand, and the last holder is entitled to fill up the assignment with his own name and have the transfer completed on the books of the company. Whether stock is negotiable in a sense or not, the maxim has sometimes been invoked in favor of its bona fide holder as against the owner assigning the certificate in blank and confiding it to an agent who proves dishonest, that of two innocent parties he must suffer who enabled the fraud to be committed.3

§ 500. Transfer of Stock in Special Instances.

-Where a new

title is acquired to stock under some trust, or through the

1 See Pennsylvania R. R.'s Appeal, 86 Penn. St. 80; Cherry v. Frost, 7 Lea, 1; Morawetz, §§ 328-330, and cases cited; McNeil v. Tenth Nat. Bank, 46 N. Y. 324. It can hardly be said that the doctrine of negotiable or non-negotiable qualities might not hereafter, as applied to stock, be found modified in any State or country by the provisions of some new charter or legislative act; just as the question whether stock was real or personal property has been answered differently in times past by reference to the organic law of such bodies. And in the case of Bank v. Lanier, 11 Wall. 377, it was said that stock certificates declaring the stockholder entitled to so many shares of stock, which can be transferred on the books of the corporation, in person or by attorney, when the certificates are surrendered, but not otherwise, though "neither in form or character negotiable paper," yet "approximate to it as nearly as practicable."

It has been held that where certificates indorsed in blank were stolen from the rightful owner and afterwards came into the hands of a bonâ fide purchaser without notice, the latter obtained a valid title to the

shares. Winter v. Belmont Mining Co., 53 Cal. 48. But see 10 Blatchf. 173. Until, however, a transfer of shares has been executed on the books, the seller remains the nominal owner, and should be treated as a trustee for the buyer; the latter taking the shares with such liabilities, and by implication undertaking to indemnify the seller in such respects. Morawetz, §§ 330, 602; Johnson v. Underhill, 52 N. Y. 203; Brigham v. Mead, 10 Allen, 245; James v. May, L. R. 6 H. L. 328.

A corporation which has issued a negotiable certificate of shares should not permit a transfer to be executed upon the books until the old certificate is surrendered. If it does so, it may be held liable to a bona fide purchaser of the old certificate. Morawetz, § 331; Bank v. Lanier, 11 Wall. 369. But upon suitable indemnity to the company, equity will grant relief where a certificate is lost or destroyed, as in other analogous instances of negotiable instruments. Galveston City Co. v. Sibley, 56 Tex. 269. And see 56 Tex. 439.

2 Leitch v. Wells, 48 N. Y. 586; 47 Iowa, 575; Morawetz, § 328; 91 U. S. 65.

8 But see Mr. Justice Brewer in 134 U. S. 401, 403.