Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/800

 § 794.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. § 793. A party selling as his own personal property of which he is in possession, impliedly warrants his by trans- title to the thing sold. 1 This doctrine applies to the sale of such choses in action as shares of stock. The certificate is the evidence of ownership, and if the certificate is forged, or the holder is not a bona fide holder, and from the circumstances transfers no valid claim as against the corpora- tion, he will be liable to his vendee on this implied warranty of title. For his possession of the certificate is as to the vendee possession of the stock. But when the holder is such in good faith, and the certificate is in the usual form, regular on its face, sealed with the genuine corporate seal, and issued by the duly constituted officers of the corporation, the vendor's warranty does not cover the case, but the vendee, if there is anything wrong with the stock, has a remedy for damages against the corporation. 2 § 794. It has been held that, in cases of pledge, the pledgee must be put into possession of the thing pledged, or shares 6 of if that be a claim, the evidence of the obligation must be delivered, and, accordingly, that shares can- not be pledged unless they are evidenced by certificates, which must be delivered to the pledgee. 3 In the absence of specific agreement to the contrary, the pledgee of shares is entitled to have them transferred to his own name on the books of the company, and when such transfer is made, he is not bound to Co., 165 N. Y. 108. A person who agrees to purchase shares of a share- holder at a future date certain can- not plead, that before that date the company mortgaged it? road or con- solidated with another, in pursuance of powers contained in its charter. Noyes v. Spaulding, 27 Vt. 420. A transfer of shares fraudulently pro- cured from the owner when drunk may be set aside. Thackrab v. Haas, 119 U. S. 499. 1 A person selling shares does not impliedly warrant that the corpora- tion is a corporation de jure, but only de facto. Harter v. Eltzroth, 111 Ind. 159. 780 2 People's Bank v. Kurtz, 99 Pa. St. 344. See §§ 592 et seq. The transferrer of shares does not im- pliedly warrant the corporation's title to its property, nor is there any implied warranty to that effect when the corporation is itself the nominal transferrer, if it is only the medium through which its then shareholders transfer their shares to the transferee. State of Louisiaua v. North Louisiana & T. R. R. Co., 34 La. Ann. 947. 3 Lallande v. Ingram, 19 La. Ann. 364. Compare Cherry v. Frost, 7 Lea (Tenn.), 1.