Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/629

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 607. § 607. In another case a bank charter contained the follow- ing provision : k ' The stock of the bank shall be assignable and transferable on the books of the corporation only, and in the presence of the president or cashier, in such manner as the by- laws shall ordain ; but no stockholder indebted to the bank for a debt actually due and unpaid shall be authorized to make a transfer or receive a dividend until such debt is discharged, or security to the satisfaction of the directors given for the same.'" A., a shareholder indebted to the bank, delivered his stock certificate with power of sale to B. as collateral security for a debt. On default of payment, B. sent the certificate to the cashier, who made the requisite entries on the stock- ledger, where it was his practice to keep account of transfers without consulting in each case the directors, who had adopted no by-law regulating the matter. The cashier then sold a por- tion of the shares for B. on B.'s power of attorney, having told B. that he needed no certificate. Subsequently A. became insolvent, being indebted to the bank. It was held that as between A. and B. the title to the shares passed by A.'s delivery of the certificate ; also, that the acts of the cashier were binding on the bank, and the transfer made by him on the stock-ledger vested in B. a complete and unincumbered title to the shares with a right to the usual certificate; and it was further held that even if B. had acquired merely an equity based on an executory contract for a transfer, the right of the bank to assert its lien was lost by its laches, and the enforce- ment of its lien would have operated as a fraud. 1 Birmingham T. & S. Co. v. Louisiana Nat. Bk., 99 Ala. 380. See, also, Loan & Trust Co. v. Bank, 97 Iowa, 6G8. A clause in a charter that no shareholder shall sell his shares without giving the corporation ten days' refusal of them, applies only to voluntary sales ; and does not affect the rights of a purchaser at a sheriffs sale on an execution. Bar- rows i National Rubber Co., 12 R. I. 173. A railroad company issued conditional stock certificates, for which ordinary stock certificates were to be exchanged when the 39 notes given to secure the payment of the subscription were paid. It negotiated these notes, and after- wards issued unconditional certifi- cates to the original subscribers, who were the makers of the notes. The makers failed to pay the notes, and the company was held liable to pay the judgments recovered by the holders against the makers, to the extent of the value of the uncon- ditional certificates. Houston, etc., Ry. Co. i). Bremond, 66 Tex. 159. 1 National Bank o. Watsontown Bank, 105 U. S. 217. 609