individual stockholders. And the pledgee of shares does not, of course, stand in a better position in this respect than that occupied by his pledgor. If the shares have been transferred to the pledgee on the books of the corporation, he becomes the legal owner as between the corporation and himself, and has, prima facie, the right to vote in respect of the shares for directors, which right the pledgor has not. But it is held that equity will in a proper case compel him to give the pledgor a proxy.2 § 2625. Taking such a Pledge from a Married Woman. It is reasoned in a case before the late commission of appeals of New York, that as coverture does not prevent the acquisition of property by a married woman, the fact of coverture does not affect the title to stock transferred by her; that where the stock stands in her name the certificate is evidence of its absolute ownership by her; and that, if nothing indicates a trust in favor of another person, one from whom a loan is solicited, upon pledge of the stock as security, is warranted in making the loan upon the assumption of such ownership. He is not bound to inquire and ascertain how she obtained it." If § 2626. Effect of Pledge upon Lien of Corporation. the corporation has a valid lien upon the shares, it may be assumed, on the most elementary principles of justice, that no act of the shareholder, done without the privity of the corporation, will divest such lien. While, no doubt, the corporation may waive or divest itself of such lien by overt corporate action,* yet clearly the act of a subordinate ministerial officer, not a member of the board of directors, such as the assistant secretary, in certifying that the corporation has no such lien, will not have this effect. It is also a sound view that, where the corporation issues certificates stating that the shares are paid up, and without reserving a lien for any unpaid balance on the face of the 1 Howe v. Barney, 45 Fed. Rep. 668. 2 Re Argus Printing Co. (N. Dak.), 1 N. Dak. 434; s. c. 26 Am. St. Rep. 639; 12 L. R. 781; 48 N. W. Rep. 347. See also McDaniels v. Manufacturing Co., 22 Vt. 274, 284; Re Barker, 6 Wend. (N. Y.) 509; Ex parte Willcox, 7 Cow. (N. Y.) 402, 410; s. c. 17 Am. Dec. 525. Leitch v. Wells, 48 N. Y. 585. 4 Ante, § 2537, et seq. 5 Kenton Ins. Co. v. Bowman, 84 Xy. 430. certificates, it ought to be estopped from asserting a lien against an innocent purchaser or pledgee without notice. But where the certificate itself contains a recital that no transfer shall take place on the books of the corporation until after payment of all indebtedness due to the corporation by the persons in whose name the shares stand on the books of the corporation, then one who takes such a certificate, in pledge or otherwise, holds the shares subject to any lien of the corporation for any indebtedness of the pledgor to the corporation, and this is so, although no lien is given to the corporation, either by its charter, by statute, or by its bylaws. It is simply the case where two parties create a lien by a compact between themselves, and where third persons having notice of it take subject to it. If the case is one of a banking corporation, the acceptance of such a certificate by the shareholder and a subsequent loan to him by the bank effects a contract which creates an equitable lien on his shares for the amount of the indebtedness. Hence, if there is a delivery of the certificates in pledge, and the pledgee gives no notice to the bank of his rights, and the pledgor afterwards becomes indebted to it, its lien will be superior to the equities of the pledgee.3 § 2627. Construction of Particular Agreements of Pledge.— Where an owner of bank stock directs another to obtain all the money possible thereon, and pay the owner's debts to a bank, and adds, "You may apply any and all balance towards the payment of my indebtedness to you," there is no assignment of stock to the latter, and, after his debt is paid, he cannot maintain an action for dividends due thereon.4 S. assigned and delivered to R. a certificate of shares of the capital stock of a corporation as collateral security for the payment of a note, and at the same time executed an irrevocable 1 Jennings v. Bank of California, 79 Cal. 323; s. c. 12 Am. St. Rep. 145; 21 Pac. Rep. 852; Vansands v. Middlesex Bank, 26 Conn. 144, 145. 2 Ibid. As to the lien of a banking corporation upon the shares of its stockholders, see Waln v. Bank of North America, 8 Serg. & R. (Pa.) 89 3 Jennings v. Bank of California, supra. In Louisiana, a pledge of Shares of stock in a corporation is valid by the delivery of the certificatc, and will not be defeated by the fact that the pledgor afterwards becomes indebted to the corporation, the charter of which prohibits trans ́ers in case of the shareholder being indebted to the company. Shares of stock are not "credits" within the meaning of art. 3158 of the Civil Code of that State. Pitot v. Johnson, 33 La. An. 1286. 4 Ware v. Merchant's National Bank, 151 Mass. 445; s. c. 24 N. E. Rep. 328. power of attorney authorizing R. to transfer the shares to his own name on the books of the corporation. At the same time, the parties executed an agreement that, upon default in payment of the note, R. might sell or dispose of the stock upon such terms as he saw fit. Before maturity of the note, R. caused the stock to be transferred to his name upon the books of the corporation. It was held that the assignment and the accompanying agreement should be considered together in fixing the rights of the parties; that R. had no right thereunder to cause such transfer to be made before the note matured, and that his attempted transfer did not divest S. of his right to vote upon the stock.1 § 2628. Illustration of an Instrument held to be Neither a Pledge nor a Mortgage. The following instrument was held to -- be neither a pledge nor a mortgage, - not a pledge because there was no delivery of the share certificate; not a mortgage, because it did not purport to convey the legal title to the mortgagee: "To secure the payment of my promissory note of even date herewith, in favor of E. R. Vanstone, for the sum of eighteen hundred dollars, payable twelve months after date, with interest from date, at the rate of ten per cent. per annum, I hereby pledge to said E. R. Vanstone, as collateral security for said note, the following personal property, to-wit: Twenty shares of the capital stock of the First National Bank of Marshall, Missouri, now standing in my name on the books of said bank, and represented by certificate of stock number twelve; and, in case default be made in the payment of said note and interest, I hereby appoint A. S. Van Anglen, as my true and lawful attorney in fact, for me, and in my name to sell said stock without notice at public or private sale, at his option, applying the proceeds to the payment of my said note and interest, and accounting to me for the surplus, if any. And the board of directors of said First National Bank are hereby requested to confirm such sale by cancelling said certificate number twelve, and issuing new certificate to the purchaser thereof." It was therefore held that, the bank having gone into liquidation for the purpose of reorganizing as a State bank, its assets being in the hands of its president and cashier as trustees, this instrument could not be made the foundation of a suit in equity for the purpose of compelling the treasurer and cashier to pay into court the value of the shares at the time of the dissolution of the bank and the profits arising from the use thereof, etc., nor for any other equitable relief. The opinion is not at all clear or 1 State v. Smith, 15 Oreg. 98; s. c. 19 Am. & Eng. Corp. Cas. 496; 14 Pac. Rep. 814; 2 Rail. & Corp. L. J. 398. satisfactory, and the court concludes by saying: "It would seem that the plaintiff has been badly treated, in consequence of which she has perhaps lost her debt; but while this is so, we are unable, upon the facts presented to us, to suggest any principle in equity which would afford her any relief." The ordinary jurisdiction of equity to enforce liens would seem to suggest an appropriate road to the doing of justice in so plain a case. § 2629. Status of the Pledgee where the Debt has been Paid. Where the debt for which the shares had been pledged has been paid, and the legal title is still allowed to stand in the name of the pledgee, his trust relation is not determined, but he holds the shares in trust for the pledgor, subject to the obligation of returning the same upon the demand of the latter. When, therefore, shares of stock of an incorporated company had been conveyed by the plaintiff to the defendant as collateral security for a debt, and the debt was afterwards paid, but nevertheless the shares continued to stand in the defendant's name, and while so standing, were assessed under an act of the legislature, were sold for the non-payment of the assessment, and the defendant became the purchaser, it was held that the sale was invalid, and that the defendant was liable in trover for the value of the shares at the time of the alleged sale, and for the dividends he had received thereon, together with interest, after deducting the amount of the asessments and expenses of the sale.2 SECTION - ARTICLE II. VALIDITY AS AGAINST THIRD PARTIES. 2633. Assignment in pledge without delivery not good against creditors without notice. 2634. Rights of attaching creditors of pledgor. 2635. Illustration of an attempted pledge by a writing not good against a judgment creditor. SECTION 2636. Power of pledgee to pass title to innocent purchaser. 2637. Purchasers with notice take sub- 2638. What imports notice: addition § 2633. Assignment in Pledge without Delivery not Good against Creditors without Notice. The principle that a 1 Vanstone v. Goodwin, 42 Mo. App. 39. 2 Freeman v. Harwood, 49 Me. 195. pledge, valid as against creditors, can only be created by delivery, has resulted in the holding that where a stockholder, for the purpose of securing his creditor, made an assignment of his shares by a separate writing, but never indorsed or transferred the certificates on the books of the company or otherwise, but retained possession of them as before, in which condition they were seized by a receiver appointed under a creditor's bill against him, the receiver having no notice of the attempted assignment, the receiver could hold the certificates; since the assignment was merely a secret lien and passed no title as against the creditors whom the receiver represented. Wilkins, J., said: “That a sale of personal property without delivery is invalid as against subsequent purchasers and creditors, will not be denied. That a pledge of property can only be sustained against such parties when the thing pledged is actually delivered to the pledgee, must be admitted. In fact, a pledge, strictly speaking, can only be made by delivery. The fact that the property is seized through the intervention of a receiver can make no difference as to the rights of a creditor." 1 § 2634. Rights of Attaching Creditors of Pledgor. — If, therefore, the shares are not regularly transferred to the pledgee on the books of the corporation, the pledge will not, according to the prevailing opinion,2 be valid as against subsequent attaching or execution creditors of the pledgor; but such an unrecorded transfer in pledge vests such a title in the pledgee as equity will protect against one attaching the stock in a suit against the pledgor with knowledge of facts sufficient to put him on inquiry regarding the so-called equitable ownership.* 1 Atkinson v. Foster, 134 Ill. 472, 480; s. c. 25 N. E. Rep. 528; Bidstrup v. Thompson, 45 Fed. Rep. 452. 2 Ante, § 2409. 3 Fort Madison Lumber Co. v. Batavian Bank, 71 Ia. 270; s. c. 60 Am. Rcp. 789; 32 N. W. Rep. 336; s. c. on subsequent appeal, 77 Ia. 393; s. c. 42 N. W. Rep. 331; State Ins. Co. v. Sax, 2 Tenn. Ch. 507; Noble v. Turner, 69 Md. 519; s. c. 16 Atl. Rep. 124. 4 Cheever v. Meyer, 52 Vt. 66; Wes ton v. Bear River &c. Co., 6 Cal. 425; ante, § 2410. An entry in a stock book of a corporation, that certain stock has been assigned as collateral security, is sufficient to protect the assignee against the claims of judgment creditors of the assignor, under Iowa Code, § 1078, providing that a transfer of corporate stock is not valid as to third persons until regularly entered in the company's books. Moore v. Marshalltown &c. Co., 81 Ia. 45: s. c. 46 N. W. |