further calls, C. would take the $11,000 stock off his hands. The company decided to increase its transportation facilities, and the decedent was unable to meet further calls on stock made in consequence. The court held that C. was bound to take the stock, and that, having refused to do so, and the stock having been sold, he was liable for the difference between its par value and the amount it sold for.1 1 Lewis v. Coates, 93 Mo. 170; s. c. 5 S. W. Rep. 897. Fraudulent conveyances of shares.-State of facts under which conveyances of the paid-up shares of the stockholders of a corporation and also a deed conveying the corporate property to its president were held not fraudulent as to a creditor: Parke County Coal Co. v. Terre Haute Paper Co., 26 N. E. Rep. 884. Construction of a contract under which three persons form a corporation, two paying their shares in cash and the third giving his note and pledging his stock as security, under which, although the note was not made, nor the stock issued, he was held to be as against the others a shareholder, they having waived their formal rights against him: Chater v. 1976 San Francisco &c. Co., 19 Cal. 219. Construction of a contract by which one party agrees to deliver certain shares to the other party on or before a future date in consideration of a conveyance of property by the other party: Faulkner v. Hebard, 26 Vt. 542. Construction of a contract with a servant of the corporation by which he was to receive a pro rata of a certain number of shares for his services in case he should "die or leave the corporation "— holding that his dismissal was not a leaving, and that he was entitled to the full amount: Price v. Minot, 107 Mass. 49. Rulings in an action on a contract to assign and transfer stock subscriptions: Rand v. Wiley, 70 Iowa, 110; s. c. 29 N. W. Rep. 814. SECTION CHAPTER XLI. EXECUTION AND ATTACHMENT AGAINST SHARES. ART. I. IN GENERAL, $$ 2765-2782. ARTICLE I. IN GENERAL. 2765. Shares of corporate stock subject to execution and attach ment. 2766. When shares in foreign corporation leviable. 2767. Attachment of shares not an incumbrance of the property of the corporation. 2768. Rights of the purchaser at the execution sale. 2769. Attachment by the corporation itself. 2770. Circumstances charging the corporation with notice. 2771. Whether equitable title of unregistered transferee subject to attachment. 2772. Shares of stock fraudulently transferred liable to attachment although transfer registered. 2773. Or to seizure and sale under execution. SECTION 2774. Same result under view that statute is declaratory of common law. 2775. Whether purchaser entitled to maintain bill in equity before acquiring possession. 2776. View that attachment seizes only the legal title as shown by the corporate books. 2777. View that equity of redemption in shares is attachable. 2778. Levy upon stock held in the name of a nominal owner. 2779. Pennsylvania statute requiring affidavit and recognizance. 2780. Rights of corporation as against attaching creditors. 2781. Continued: decisions on particular states of fact. 2782. Rights of subsequent bona fide purchaser where corporation issues a new certificate to the purchaser at a void judicial sale of the shares. § 2765. Shares of Corporate Stock Subject to Execution and Attachment. While it was the rule of the common law that an execution could not be levied upon shares of stock in a corporation, unless the officer could get possession of the certificate in the hands of the shareholder, which might be seized just as a note, bill, or other chose in action might be,1 yet statutes 1 Foster v. Potter, 37 Mo. 525; post, § 2788; ante, § 1072. now exist, it is supposed, in all the States, providing that writs of fieri facias may be levied upon such shares of stock, and pointing out the manner in which the officer shall proceed in making the levy. Thus, by statute in Tennessee, stock in all corporations is declared to be personal property and subject to execution. In that State all corporate stocks which are made subject to execution by statute are subject to attachment in equity under the provisions of the code of that State, providing for an attachment in suits in chancery. In Illinois corporate stock is not subject to attachment. Under the Civil Code of California, stock purchased by a corporation at a sale for delinquent assessments is held "subject to the control of the stockholders," and cannot be levied on under an execution against the corporation.' § 2766. When Shares in Foreign Corporation Leviable. It has been held that the situs of corporate stock follows the situs of the corporation. Therefore, where a corporation is organized under the laws of one State of the Union, but has its office in another State, shares of its capital stock are not within the local jurisdiction of the latter State for the purpose of the levy of an execution thereon.8 9 § 2767. Attachment of Shares not an Incumbrance of the Property of the Corporation. It has already been pointed out that the shareholder is not a part owner of the property of the corporation, but that the capital stock of the corporation is one species of property and the shares of the members are a different species of property.10 Thus, although the property of the corporation may consist of land, yet the shares of the corporation are the personal property of the respective shareholders."1 1 Ib. See Rev. St. Mo., 1855, p. 742, secs. 23, 24. 2 Code Tenn., §§ 1487 and 3097; Code 1884, §§ 1715 and 3810. 3 See Memphis Appeal Pub. Co. v. Pike, 9 Heisk. (Tenn.) 697. Cornick v. Richards, 3 Lea (Tenn.), 15; Young v. South Tredegar Iron Co., 85 Tenn. 189; s. c. 4 Am. St. Rep. 752. 5 Rhea v. Powell, 24 Ill. App. 77. 6 Cal. Civ. Code, § 344. Robinson v. Spaulding Gold & Silver Mining Co., 72 Cal. 32. 8 Plimpton v. Bigelow, 93 N. Y. 592. 9 Ante, § 1071. 10 Morgan v. Railway Co., 1 Woods (U. S.), 15; Arnold v. Ruggles, 1 R. I. 165; Bradley v. Holdsworth, 3 Mees. & W. 422. 11 Bradley v. Holdsworth, supra; ante, § 1066. From this it follows that the attachment of the shares of a particular shareholder does not in the least incumber the property of the company or restrain it from assigning or conveying it.1 § 2768. Rights of the Purchaser at the Execution Sale.According to one view, one who purchases such shares under execution acquires no higher right, by virtue of his purchase, than the execution debtor himself had. If, therefore, the execution debtor, at the time when the shares are thus purchased, stands indebted to the corporation, and if the by-laws of the corporation prohibit the transfer of shares by shareholders who are indebted to the corporation, it is clear that the purchaser cannot claim the rights of a shareholder as against the corporation, without paying to the corporation the indebtedness of the previous shareholder; and, until this is done, he cannot maintain an action. against the corporation as for a conversion of the shares which he has thus purchased.2 Where this theory prevails, an unregistered transfer is effectual as against an execution creditor of the transferor, in the absence of a statutory prohibition, although there is a by-law forbidding transfers except upon the books of the company. Under this theory, an attachment-execution in Pennsylvania would become a lien on the debtor's stock from the date of its service on the company; and upon judgment thereon, and a sheriff's sale, the purchaser of the stock would take the same title the judgment debtor had when the attachment was served. But by the more widely prevailing theory,5 an unrecorded transfer is ineffectual to pass the property as against an attaching creditor without notice. And where such attaching creditor is a corporation, it is not chargeable with knowledge of such transfer on the part of one of its directors, who had no knowledge of the attachment. It is scarcely neces 3 sary to add that the purchaser acquires all the rights of the exe cution debtor, although he may have paid for the shares much less than their nominal or their real value; since shares of stock, like other property, are liable to bring less than their value at forced sales. In such a case the rights of other shareholders are not infringed, the case being entirely different from that where a corporation originally issues its shares at less than their par value.1 § 2769. Attachment by the Corporation Itself. If the shareholder is indebted to the corporation, that body is in as good a position in respect of a right to subject his shares to an attachment as any other creditor; and where the shares of the debtor member have been pledged as collateral security, but have not been conveyed on the books of the company to the pledgee or to his vendee, the corporation may attach the stockholder's interest, compel a sale, and have the surplus, remaining after the payment of the debt for which the shares stand pledged, applied to the payment of the debt due the corporation; and the attachment will take precedence over a later attachment by another creditor, by garnishment of the pledgee.2 § 2770. Circumstances Charging the Corporation with Notice.-B., who was president and one of the directors of a corporation, on the 24th day of May, 1867, sold and transferred to the plaintiff a certificate for forty-five shares of the capital stock of the company, for which the plaintiff paid him $95 per share, the par value being $100 per share. The certificate provided that the shares were "transferable in person, or by attorney, only on the books of the company, on the surrender of this certificate." B. continued to act as president and director until January 27, 1868. On the following day the shares, not having been transferred on the books of the company, were attached on a writ in favor of the company against B., as the property of B. was held that the company were chargeable, under the circumstances, with notice of the sale and transfer of the shares by B. to the plaintiff, and that, in the absence of fraud in fact on the part of the plaintiff, he was entitled to hold the shares against the attachment. It appeared that the agent who succeeded B., and who procured the attachment and caused the levy to be made on the shares, was a director in 1867, 1 See the forcible observations of Mr. Justice McLean on this subject. Sturges v. Stetson, 1 Biss. (U. S.) 246; 10 Myer Fed. Dec., § 145. 2 Norton v. Norton, 43 Ohio St. 509. |