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The Green Bag

guished from its bonds, is that stock is not an obligation, but a proprietary interest in the assets of the company which issues it. "A share of stock rep resents a fraction of all the rights and duties of the stockholders composing the corporation."18 A bond is an obliga tion. The exact nature of preferred stock has not been carefully worked out by the courts. Indeed there is a sur prising lack of clearness in the defini tions of the nature of stock in general. When courts have considered the ques tion, however, they seem to have agreed that ownership of stock is essentially a proprietary interest of some sort in the assets of the corporation, to which per haps should be added, as a distinct characteristic, certain personal rights inci dental to membership in an association.14 It is true, of course, that a contract may be implied from the acceptance by a grantee of a document of title contain ing an express contract running from the grantee to grantor, as in the case of a mortgage. It is possible likewise to imply from the delivery and ac>.eptance of a stock certificate, containing limitations on or additions to the crdinary rights of a stockholder, a contrac tual obligation embodying what might otherwise be regarded as a proprietary right incidental to the ownership of the "Lowell, Transfer of Stocks, Sec. 40. '•"The rights of the stockholder evidenced by the certificate are all comprised in two classes: First, the personal rights inherent in a stockholder as member of the corporation, being the right to attend meetings, vote, and the like, including all personal rights as member: and second the prop erty rights which are the rights to share in the divi dends of the corporation and in the distribution of its assets. These rights, with those conferred by law as incidental solely to their protection, comprise, I think, all the rights of the stockholder and the certificate of stock is as between the stock holder and the company and all its other share holders, the evidence of this membership and right to share in the property and assets." Bijur v. Standard Co., 70 At. 934, 938, 939. (N. J., 1908.) See Koin v. Angle, 69 S.E. 356 (Va.).

stock.16 Such doctrine, however, is unnecessary, because the same result can be reached by defining the stock holder's rights in terms of property. Since, in any event, most of the stock holder's rights must be defined in terms of property, it is simply confusing to try to work out limitations on the obligations of ownership by describing them in terms of contract. Thus, while many courts have enforced the rights of preferred stockholders on the theory that they are founded in contract,18 and other respectable judges even de scribed the rights of all stockholders as contractual,17 these all occurred in cases where the same result would have been reached on the principle that the stock holder's rights are proprietary and inci dent to ownership. In cases where it was important to decide whether a stockholder was ipso facto a creditor, "Subscription for stock has been held to be an acceptance of an offer of the corporation, in its by-laws, to redeem the stock on demand. But Shaw, C.J., carefully explained that the contract "arose out of the defendant's vote and the plaintiff's subscription. The certificate issued under the seal of the president and clerk was not the contract, but merely established or evidenced the relation of the plaintiff as a stockholder." Davis v. Congregational Meeting House, 8 Met. 321, 326. An obligation on the holder printed on his certifi cate requiring his estate on his decease to sell his shares to the corporation at an appraisal, by reason of his acceptance of the certificate, implies a con tract of the holder to do this. N. E. Trust Company v. Abbott, 162 Mass. 148, 151. "An amendment to a charter reducing preferred dividend was said to impair the obligation of con tract. The difficulties the court found in applying this theory, in the face of the express power of amendment reserved by general law, could have been avoided by treating the right to the dividend as a vested property right. Pronick v. Spirits Distributing Co., 58 N. J. Eq. 97. 100. In another case the two theories were stated in the alternative. Roberts v. Roberts Wicks Co. 184 N. Y. 257, 264. ""The relation of a stockholder to his corporation, to its officers and to his co-stockholders is one of contract and confidence." Sanborn, J., in Jones v. Missouri Company, 144 Fed. 765, 770 (C. C. A. Mo., 1906.) See Cleanvater v. Meredith, 1 Wall. 25, 45.