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death or bankruptcy, or in some cases the marriage, of the shareholder, the formalities requisite will depend somewhat upon local laws which regulate the subject. Administrators

can execute a transfer, their letters being sufficient evidence of authority for that purpose; and so can executors generally, and the assignees of a bankrupt.1 But as to trusts, there is a disposition sometimes manifested in the courts to protect the corporation which deals solely with the registered owner of its shares; and at all events the corporation may take proper precautions by requiring the trustee who seeks to deal with the shares to produce evidence of his authority. A corporation is not bound to see to the application of proceeds of its stock; and so long as the executor or other person making a transfer has authority to do so, and the corporate officers have no reasonable ground for believing that a misapplication of money is intended, there is no ground of complaint against the latter. But a corporation has been held bound to inquire whether the trustee who transfers had any authority to make such transfer.4

As regards marriage, stock standing in the wife's name does not belong to the husband, nor is he liable with respect to it, until he has transferred it to his own name.5 And a married woman has in these days the legal capacity recognized to receive a transfer of stock, whether the consideration proceeded wholly from her husband or from some third party. But a transfer to an infant is held to leave the transferrer liable; on the ground that the person succeeding to shareholding membership must be one who can assume the shareholder's full legal liability.7

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§ 501. Lien of Corporation on Stock for Unpaid Dues. Among the restrictions upon the transfer of its stock which a corporation may sometimes impose, that of practically securing a lien for its unpaid dues deserves a passing notice. That no lien upon stock in favor of the corporation which issues it exists at the common law, is generally admitted; yet such an advantage is often given by general statutes or the special act of incorporation. The policy of the English "Companies Clauses Consolidation Act," and of many of our American statutes, is to require the payment of dues to the corporation before any valid transfer of stock can be allowed.2 Local banks were formerly peculiarly favored in this respect among corporations in our own country; though the same. can hardly be affirmed of our existing national banks. If a former owner be indebted to the corporation, and the charter requires all such indebtedness to be liquidated before a transfer of the stock, the corporation's lien for this indebtedness holds good against the debtor's assignee. The effect of restrictions of this sort is rather to give the purchaser the property right of the seller, subject to the same incumbrances, than to incapacitate the seller from disposing of his stock. And the lien usually covers all assessments due and payable upon the stock at the date of the new transfer; and it may apply to the owner's liability to pay for the amount of stock subscribed, although the instalments were not collected before the time of transfer.4 While, moreover, a corporation cannot resort to unlawful contrivances, or abuse its chartered privilege in order to secure a lien, we generally find that this lien, when once conferred by law, receives a liberal construction in the courts and is held valid and enforceable

1 Morawetz, § 332, and cases cited; Farmers' Bank v. Wasson, 48 Iowa, 340; Sargent v. Franklin Ins. Co., 8 Pick. 90; 2 Cranch, C. C. 188; Vansands v. Middlesex Co. Bank, 26 Conn. 144.

2 See Ang. & Ames, §§ 355, 570; 1 Redf. Railw. 111-115; Abb. Dig. Corp. 757; Morawetz, §§ 333, 334.

8 See Bank v. Lanier, 11 Wall. 369; chapter on Liens, supra; Ang. & Ames, §§ 355, 569, 8th ed.

4 Pittsburgh, &c. R. R. Co. v. Clarke, 29 Penn. St. 146; Ang. & Ames, § 355, 575, and cases cited; Ex parte Mayhew, 5 De G. M. & G. 837; v. Bank of Commerce, 14 Md. 271; 1 Redf. Railw. 3d ed. 114.

Reese

against all the world, while, like other liens, it may be lost by waiver.1

§ 502. Transfers made under a Forged Power; Careless Transfers. If a corporation allows a transfer of shares to be executed on its books without the consent of the owner, the latter will nevertheless remain a stockholder; and such owner is entitled to have his shares replaced on the books unless concluded by his own fraud or culpable negligence in the transaction. For, in general, the contract of a stockholder in a corporation cannot be rescinded without his own express or implied assent.2

3

So, too, in registering transfers the corporation must exercise due care, as otherwise it will be liable to the shareholder injured; and it must observe, besides, its own regulations. But rights of others which did not come seasonably to its notice cannot constitute ground of liability.5 § 503. Contracts for Stock; Stock Speculations. So great are the temptations to fraud where persons speculate largely in fluctuating stocks, that important questions are constantly arising at the present day, with reference to the validity of

1 See Morawetz, § 336; Higgs v. Assam Tea Co., L. R. 4 Ex. 387; Hill v. Pine River Bank, 45 N. H. 300; Hammond v. Hastings, 134 U. S. 401. A statute forbidding a stockholder to transfer his stock on the books of a bank so long as he is indebted thereto does not prevent the bank from waiving its privilege through its proper officer. Cecil Bank v. Watsontown Bank, 105 U. S. 217. So may a corporation be estopped, as against certain third parties, to assert its lien. Moore v. Bank of Commerce, 52 Mo. 377. But mere ignorance of the lien by a third party does not have this effect. 134 U. S. 401.

By virtue of a by-law (though qu. whether the charter or a statute must not, by implication or expressly, confer authority to make it) transfers of shares may be prohibited while one is indebted to the company. Morawetz,

§ 332; Mechanics' Bank r. Merchants' Bank, 45 Mo. 513; Brent v. Bank of Washington, 10 Pet. 616. But no such lien can be claimed as against the bona fide purchaser of a certificate who had no notice of such bylaw. Driscoll v. West Bradley Co., 59 N. Y. 109. Dividends declared by the company may be retained as a set-off. Hagar v. Union Nat. Bank, 63 Me. 509; Sargent v. Franklin Ins. Co., 8 Pick. 90.

2 Morawetz Corp. § 339; Dewing v. Perdicaries, 96 U. S. 193; Taylor, § 594; Telegraph Co. v. Davenport, 97 U. S. 369; Pratt v. Taunton Copper Co., 123 Mass. 110; Hambleton v. Central Ohio R., 44 Md. 551.

8 Taylor, § 592; Pennsylvania R.'s Appeal, 86 Penn. St. 80. Taylor, § 594. 5 Taylor, § 595.

stock contracts. Speculations in stock are conducted according to peculiar usages which those outside of financial circles cannot readily comprehend; and considering the great fortunes which are so often at stake, the favorite modes of doing such business are rather loose; so that we find contracting parties pretty much at the mercy of their brokers.1 A contract for the sale of stock should have a good consideration to support it; and the usual rules apply as in other contracts.2 And where such a contract is tainted with fraud, courts will set it aside, notwithstanding the parties used words which might be thought susceptible of two meanings.3

§ 504. The Same Subject. - In these days we often hear of persons who attempt to make what is called "a corner" in stock; which is, as we understand it, to buy in secretly, by a combination of funds, the stock of some company, and force its sudden rise in the market by reason of the scarcity thus occasioned; the object being to profit by selling out

1 One inquiry pertinent to such contracts is connected with the Statute of Frauds. It was for some time a matter of doubt in England, whether shares in an incorporated company were "goods, wares, or merchandise" within the Statute of Frauds, so as to require an agreement for their transfer to be in writing, where the value exceeded a certain sum, and the buyer neither accepted nor received any part, nor gave something in earnest to bind the bargain, or in part payment. But it would now appear that such shares are not within the statute, and that no written memorandum is necessary. Wms. Pers. Prop. 5th Eng. ed. 186, 209; Humble v. Mitchell, 11 Ad. & E. 205; Duncuft v. Albrecht, 12 Sim. 189. In Massachusetts the law is decided otherwise; and such agreements must be in writing, on the ground that the contract is one for the sale of goods, wares, or merchandise. Tisdale v. Harris, 20 Pick. 9; Baldwin v. Wil

liams, 3 Met. 365. See post, vol. ii. pt. vi.

2 See Abb. Dig. Corp. 763; Ang. & Ames, § 563.

Thus an agreement to transfer stock is not satisfied by a transfer of half-paid stock to that nominal amount, when the certificate was taken on a supposition, fraudulently induced, that it represented full-paid stock. Johnson v. Hathorn, 2 Keyes, 477. And see Gore v. Mason, 18 Me. 84. If one agrees to sell to another a number of shares at a future day, having that number at the time of making the agreement, he is free to sell them before the day to a third person; for unless the contract was for the sale of those particular shares, he complies with the agreement sufficiently by having the requisite number on hand to transfer when the time comes. Frost v. Clarkson, 7 Cow. 25; Hare v. Waring, 3 M. & W. 362; 1 Redf. Railw. 127.

again before the stock falls, as it soon must, once more to its natural level. Such agreements are declared to be illegal, like betting contracts.1

The buyer who is interested in the rise of stocks has long been known among financiers as a bull; the corresponding seller interested in depressing stock is a bear; either party, if unable to pay his difference, becomes a lame duck; and the stock business is often conducted on the basis of a mere nominal sale and transfer at some future day, the difference between the then ruling rates and those agreed upon being made up by the losing party. It is easily perceived that under these circumstances the managing officers of a company, if sufficiently unprincipled, have special opportunities for making money in stock speculations from their intimate knowledge of its condition; and such is too frequently found to be the result, as defrauded stockholders can testify. The gambling feature of stock speculations, as manifested in the case of those who figure upon a natural rise or fall of stocks or securities according to the fluctuations of trade and public confidence, was early noticed by the legislators; and attempts have been made, both in England and parts of this country, to suppress the so-called "infamous practice of stock-jobbing" by the strong arm of the law; but such legislative efforts usually prove abortive.2

1 Accordingly, where one had authorized another to use a fund in the hands of the latter, and belonging to the former, for these purposes, it was held that he could not recover by suit what had been actually thus expended, but only the balance remaining, as for money had and received. Sampson v. Shaw, 101 Mass. 145.

2 The most famous of these acts (since repealed) is Sir John Barnard's Statute, which was passed in the reign of George II.; Stat. 7 Geo. II. c. 8. This act was directed especially against the practice of fictitious sales of stock for a future time, where the seller had not the stock he

sold, neither intended to procure it,
and the buyer had no intention to
purchase the amount he contracted
for; while the real and only object
of the parties was, that if the stock
should rise the seller should pay the
buyer the difference occasioned by
the increase in price, and should it
fall the buyer should pay the seller
the difference occasioned by the in-
crease. See Wms. Pers. Prop. 5th
Eng. ed. 185. A similar statute
formerly existed in New York, which
is also repealed. See Thompson v.
Alger, 12 Met. 428; Washburn v.
Franklin, 28 Barb. 27.
The great
difficulty found with such legislation
is that it interferes too much with

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