that State1 providing that the transfer of shares is not valid, except as between the parties thereto, until it is regularly entered on the books of the company, so as to show the name of the person by and to whom transferred, the number or other designation of shares, and the date of the transfer," was intended in part for the protection of creditors. These and other like decisions also proceed upon that clause in corporate charters or governing statutes which provides that the shares of the corporation shall be transferred on the books, or only on the books, of the corporation. Their policy was thus expressed by Waite, J., in a case in Connecticut: "An attaching creditor is not bound to look beyond the books of a corporation to ascertain whether his debtor has made any assignment of the stock standing in his name. The books of the corporation are the appropriate place to determine the ownership of its stock."3 But this view, which makes the stock and transfer books public records, open to the inspection of the public, is plainly untenable unless the statute law (as it does in some States) obliges the corporation to expose such records to the inspection of the public. Otherwise they are strictly private records, sustaining no analogy to the records of transfers of title required to be made and kept in public recording offices; and even these last records import no notice except in those cases where the statute law expressly so provides.

§ 2412. View that Unrecorded Transfers Prevail over Subsequent Attaching or Execution Creditors of the Transferor.There is a difference of judicial opinion upon the question whether an unrecorded transfer of stock, made to a taker for value in the mode already pointed out, will prevail over a subsequent attaching or execution creditor, or one purchasing at a sale under a subsequent attachment or execution. One class of cases holds that, in the absence of a statute which, in express terms or by reasonable implication, makes a transfer on the books of the corporation necessary as against third persons-in other words,

1 Code Ia., ed. 1880, § 1078; ed. 1888, § 1628.

2 Fort Madison Lumber Co. v. Batavian Bank, 71 Ia. 270; s. c. 60 Am. Rep. 789; 32 N. W. Rep. 336.

3 Dutton v. Connecticut Bank, 13 Conn. 493, 498. Compare Johnston v. Laflin, 103 U. S. 800, 804.

3

makes it analogous to the recording of a deed under a recording act, such a transfer will be good as against subsequent attaching and execution creditors and those claiming through them.1 These cases proceed upon the view that an attaching creditor gets no higher rights, by levying on shares standing on the books of the corporation in the name of his debtor, than his debtor has in them at the time of the levy. This view has been taken, even where the governing statute declared the stock of the corporation personal property and "transferable on the books," and that "books of transfer of the stock should be kept, and should be evidence of the ownership of said stock in all elections," etc., by the stockholders." This view of course prevails in those jurisdictions where an unrecorded transfer is held to pass the legal title as between the transferor and transferee; and where a complete legal title, under this theory has thus passed, it must follow that the service of an attachment against the transferor on the officers of the company will hold nothing,unless the theory prevails in the particular jurisdiction that any equities which may remain in the assignor are leviable. A statute declaring that transfers of corporate stock shall not be valid, except as between the parties thereto, until regularly entered upon the corporate books, has been held not to have been intended for the protection of the creditors of shareholders; and the conclusion was that a transfer might be valid against such creditors, notwithstanding the statute, although not entered upon the corporate books. This is in accordance with the theory that such statutory restraints upon transfers are intended only for the protection of the corporation. In Minnesota such a ruling has been expressly put upon that ground.' In Louisiana

1 Clark v. German Security Bank, 61 Miss. 611; Seeligson v. Brown, 61 Tex. 114; Broadway Bank v. McElrath, 13 N. J. Eq. 24; Cornick v. Richards, 3 Lea (Tenn.), 1; Bank v. Richards, 6 Mo. App. 454; s. c. aff'd, 74 Mo. 77; Wilson v. St. Louis &c. R. Co., 108 Mo. 588; s. c. 32 Am. St. Rep. 624; Beckwith v.Burrough,13 R. I. 294; Hazard v. Exchange Bank, 26 Fed. Rep. 94; Comean v. Guild Farm Oil Co., 3 Daly (N. Y.), 219.

2 Broadway Bank v. McElrath, 13 N. J. Eq. 24.

3 Ante, § 2391.

4 As to which see post, § 2774.

5 Thurber v. Crump,86 Ky. 408; s.c. 6 S.W.Rep. 145; 3 Rail. & Corp. L. J. 149. 6 Ante, § 2387, et seq.

Lund v. Wheaton Roller Mill Co., 50 Minn. 36; s. c. 36 Am. St. Rep. 623. Compare Joslyn v. St. Paul Distilling Co., 44 Minn. 183; s. c. 46 N. W. Rep. 337; 8 Rail. & Corp. L. J. 332; Bald

in order to the perfection of a bona fide sale and delivery of stock as against the vendor's creditors, if coupled with a power of attorney to the buyer to transfer on the books, it is not necessary that notice of the sale be served on the corporation, or an actual transfer be made on its books.1 In Missouri, it has been held that, in the absence of a legislative enactment restricting the transfer of stock to any particular mode, the transfer is complete on delivery of the certificate with power to transfer and payment of the purchase money, not only between vendor and vendee, but, when the corporation has unjustifiably refused to make the transfer on its books, against a creditor of the vendor, who, without notice of the transfer, attaches the stock. "The plaintiff," said the court," had done all that lay in his power to perfect his title by transferring on the books of the defendant before any attachment was levied; the defendant by an unjustifiable refusal to make the transfer could not defeat the rights of plaintiff to the stock, nor give the attaching creditor any advantage, which it would never do had the defendant done his duty and made the transfer to the holder of the stock upon its books." A similar ruling was made by the Supreme Court of Pennsylvania in a case where the officers of the company had notice of the assignment as soon as it was made, though there was no transfer on the books. Under this view it has been held that, inasmuch as a sale and assignment of shares of the capital stock of a corporation, attended by a delivery of the certificate, vests in the buyer the title to the stock, notwithstanding a provision contained in the certificate that the stock was transferable only upon the books of the company, it follows that the service. of the attachment against the assignor by the sheriff on the officers of the company, after such assignment, vests no equity in the sheriff; the company cannot refuse, on the ground of such attachment, to make a transfer on its books to the vendee; and that for such a refusal, the company is hence liable to the vendee for the value of the stock.1

win v. Canfield, 26 Minn. 43; s. c. 1 N. W. Rep. 261.

1 Smith v. Crescent City &c. Slaughter House Co., 30 La. An. 1378.

2 Merchants' Bank v. Richards, 6 Mo. App. 454; s. c. aff'd, 74 Mo. 77.

3 Telford &c. Turnp. Co. v. Gerhab, 21 Am. & Eng. Corp. Cas. 471; s. c. 13 Atl. Rep. 90; 3 Rail. & Corp. L. J. 439 4 Comeau v. Guild Farm Oil Co., 3 Daly (N. Y.), 218.

It

§ 2413. Some Holdings under this View. - Where this view is taken, a by-law providing that stock can only be transferred on surrender of the certificate to the president or secretary, who shall write "cancelled" thereon before issuing a new certificate, is regarded as having been intended merely to protect the interests of the corporation. A delivery of a certificate by A. to B., without transfer on the books, as collateral security, with A.'s name signed thereon to a blank transfer, is valid against C., an attachment creditor of A. ; and on garnishment thereof the court may order the shares to be sold, and the proceeds paid first to B., to the extent of his debts and the overplus, if any, to be applied to C.'s judgment.1 In another case B. transferred, on the books of a corporation, his shares to G. as collateral security. Afterwards, the necessity for the security being at an end, G., at B.'s request, indorsed and transferred the certificate to D., a creditor of B. Before any record of this transfer had been made on the corporation books, another creditor of B. attached the shares as B.'s property. was held that the attachment could not be maintained.2 Another court holds that, in the absence of a legislative enactment restricting the transfer of stock to any particular mode, the transfer is complete on delivery of the certificate with power to transfer, and payment of the purchase money, not only between vendor and vendee, but when the corporation has unjustifiably refused to make the transfer on its books, against a creditor of the vendor, who, without notice of the transfer, attaches the stock. So, it has been held that the unrecorded transferee of shares has no lien on them, which can prevail against a trustee of the shareholder in insolvency, where he becomes insolvent subsequent to the transfer; and it makes no difference that he is a transferee for value. Under a statute of Alabama 5 shares which the purchaser fails to have transferred within fifteen days after the purchase are liable to attachment at the suit of any creditor of the person in whose name the stock stood on the books, and an attaching creditor who perfects his lien upon stock by recovering a judgment is a bona fide creditor from the inception of his lien.6

to

§ 2414. Rights of Attaching Creditor Paramount Those of Subsequent Purchaser Without Notice.- Generally, though not always, priority in time gives priority of right.

1 Seeligson v. Brown, 61 Tex. 114. 2 Beckwith v. Burrough, 13 R. I. 294.

3 Merchants Nat. Bank v. Richards, 74 Mo. 77; affirming s. c. 6 Mo. App. 454.

Shipman v. Etna Ins. Co., 29 Conn. 245.

5 Ala. Code 1876, §§ 2041, 2043, 2044.

Berney Nat. Bank v. Pinckard, 87 Ala. 577; s. c. 6 South. Rep. 364.

Shares of corporate stock are not negotiable instruments, though they partake to some extent of the qualities of such instruments. Therefore, as a general rule, a purchaser of such shares gets no higher title or interest than his vendor has to convey. From these premises it follows that where shares are levied upon by attachment, the attaching creditor acquires a right superior to that of a subsequent bona fide purchaser of such shares for value without notice of the attachment.2 And this is so, even where the corporation is a foreign corporation, provided there is a statute, such as now frequently enacted subjecting foreign corporations doing business within the State to the operation of the statutes governing domestic corporations. Thus, in the case of a foreign corporation. doing business in Tennessee, where there was such a statute, the stock of one of its shareholders, himself a non-resident of Tennessee, was attached in that State for a debt. The stock certificates were in his possession in the State of his residence. After the attachment, he sold them to a bona fide purchaser for value, who had no notice of the attachment, and transferred to such purchaser the certificates. It was nevertheless held that the rights of the plaintiff in attachment were paramount to those of such purchaser. Somewhat in the same line of legal thought, it has been held that after one's shares of stock have been attached, and the corporation served with notice, a transfer to a creditor of more shares than are necessary to secure his debt, for which there has been an equitable hypothecation, cannot be made as against the attaching creditor.1

§ 415. Distinction Between Statute and By-law Provision Requiring Transfer on Corporate Books. A distinction has been taken, in respect of this question, between the case where it is provided in the charter that transfers shall be made only on the books of the corporation, and the case where such a provision is found only in the by-laws of the corporation. The charter, being a public law, of which all persons are bound to take notice,

1 Ante, § 2353; post, § 2587.

2 Shenandoah Valley R. Co. v. Griffith, 76 Va. 913.

3 Young v. South Tredegar Iron

Co., 85 Tenn. 189; s. c. 4 Am. St. Rep. 752.

Kyle v. Montgomery, 73 Ga. 337.