Germania National Bank of New Orleans v. Case, Receiver. this, that he must have paid any calls previously made. This right of transfer was one of the most valuable adjuncts of railway property, and no railway company could object to a transfer to a man of straw. The company were unable to suggest that there was not an out-and-out transfer, or that the deed did not show the consideration that had been paid to the plaintiff to undertake the liability. For our own part we see no distinction between this case and that of an original purchase of shares by an insolvent. A similar question arose and was similarly decided some years ago at the Rensselaer Circuit, in New York, where a stockholder in a manufacturing corporation, anticipating a suit in the future to render him personally liable gave away his stock to his gardener, an irresponsible person. There being nothing to show that the transfer was not absolute, the late Justice Gould held it valid. The remarks on this point in the principal case seem obiter. Mr. Thompson, cited by the court as their authority, however admits, § 211, that the English doctrine is as above stated. In addition to the four cases above cited, ho cites several other American cases, which we will examine, namely Paine v. Stewart, 33 Conn. 516; Dauchy v. Brown, 24 Vt. 197, 210; Roman v. Fry, 5 J. J. Marsh. 634; Mandion v. Fireman's Ins. Co., 11 Rob. (La.) 177; Provident Savings Inst. v. Jackson Place Skating and Bathing Rink, 52 Mo. 557; Miller v. Great Republic Ins. Co., 50 id. 57. such an arrangement having the effect of a withdrawal of so much of the capital of the corporation, and being a violation of the statute to prevent fraudulent bankruptcies of incorporated companies." This is not an authority for the broad proposition of the text, in a case where the stockholder has paid for his stock. Even in England the decision would have been the same, probably, for the stockholder was still liable to calls by the company. In McClaren v. Franciscus, 43 Mo. 467, the court, as was said in Miller v. Great Republic Ins. Co., 50 id. 57, "held the stockholder liable because the transfer he had made was not complete on the books of the company. He had merely transferred his certificate of stock, and did not have the transfer entered on the books; so he was still held a stockholder as to the execution-creditors of the company." The latter case, also cited by Mr. Thompson, simply holds that "where before execution against a corporation, the stockholder, honestly and without any intention to defeat the creditors of the company, sells and transfers his stock, the mere fact that the purchaser was insolvent at the time is not sufficient to hold such stockholder still liable for the debts. The question in such cases is, whether the transfer was fraudulent and void as to creditors of the company. If the stockholders knew of the insolvency at the time of the transfer, it would be very strong evidence of fraud." The latter remark is manifestly obiter. Provident Savings Institution v. JackNathan v. Whitlock, 9 Pai. 152, de- son Place Skating and Bathing Rink, cides that "a solvent stockholder, who 52 Mo. 557, decides that a stockholder has given a stock note to a corporation cannot escape his liability under the for the purchase-money of his stock, former double liability clause of the cannot, upon the insolvency of the Constitution of Missouri, by transfercompany, or in contemplation of that ring his stock in the corporation to an event, even with the consent of the insolvent, or with a view of exoneratdirectors, transfer his stock to an irre- ing himself from his personal responsisponsible person, and be discharged bility. But this was founded on the from his liability upon substituting two Missouri cases above cited, and ou the note of such person for his own; the assumption that McClaren v. Fran Germania National Bank of New Orleans v. Case, Receiver. ciscus decided the same doctrine. which we bare seen was not the fact. The court entered into no discussion of the principle nor examination of authorities. In Johnson v. Laflin, Thomp. N. B. Cas. 331, the precise question did not arise. Laflin had paid for his stock in a National bank, and employed a broker to sell it. The broker, without Laflin's knowledge, sold it to the president of the bank, individually. The president transferred it to the bank, causing the bank to pay for it. The bank was then insolvent, but this was not known to Laflin or his broker. Ileld, that although the statute prohibited the bank from buying its own shares, yet, as Laflin sold in good faith, he was not liable in a suit by the receiver of the bank for the money received for his shares. The court did not undertake to decide what would have happened if Laflin's transfer had been in bad faith or with knowledge that the sale was really to the bank, although it is easy to see that the prohibition of the statute would have rendered such a transfer void. The court do indeed say: "And on general principles there may also be an implied prohibition against the transfer of shares to a pauper or man of straw, or insolvent person, for the fraudulent purpose of escaping liability;" but adding, "but this is a matter that need not now be considered." transfer his stock, but did secretly and fraudulently transfer it; held, in a suit brought more than a year after such transfer, that it was inoperative against P." The court say only this upon this point: "The delay in commencing the suit was directly induced by the promise by the defendant that he would not transfer his stock and deprive the plaintiff of the rights which he then had to institute the suit. Under such circumstances the transfer was wrongful and fraudulent, and as against the plaintiff inoperative." (That is to say, the defendant was estopped by his conduct.) Citing Middleton Bank v. Magill, 5 Conn. 70, which does not involve the doctrines of estoppel, and does not involve the doctrine under examination. The question of fraudulent transfer did not arise, but the question was whether an action could be maintained against transferees of stock acquiring it subsequently to the contracting of the debt, and it was held that it could not. The court then remarks: "One objection still remains to be encountered, viz.: that if a member, by transferring his interest, exonerates himself from all personal liability, then the members may, at any time (in case the corporation becomes insolvent) defeat the claims of creditors, by transferring their interests to bankrupts. Were this true, tho argument derived from it would be indeed formidable. But no principle is better settled than that a conveyance made with intent to defeat a creditor is void. If then the members dispose of their interests with such intentions, the creditor may treat them as members; and of course they will remain liable to the same extent that they would have been had they made no such conveyVide Marcy v. Clark, 17 Mass. 330." This is obiter; and besides, it probably refers to a transfer after the liability is fixed." As we interpret Paine v. Stewart, 33 Conn. 516, the question under examination was not passed upon. The syllabus correctly states the decision as follows "Where a general banking law of a State imposed upon the stockholders of banks, which should be organized under it, individual liability to double the amount of their stock, while they continued stockholders, ance. and one year thereafter, and P., a creditor of the bank, made demand of S., a stockholder, for the payment of his debt, the bank being insolvent, and S. requested delay, promising not to VOL. II-5 Marcy v. Clark, 17 Mass. 330, contains language strongly supporting the view Germania National Bank of New Orleans v. Case, Receiver. taken by Mr. Thompson, but we think it will be discovered to have been unnecessary to the decision. The case showed a transfer without adequate consideration and for the purpose of escaping liability. The court remarked: "Since this statute was enacted, all who deal with such companies look, for their security, to the individual members, rather than to the jointstock; and to suffer those members to avoid their responsibility, by parting with their stock, would be to deprive the creditor of a vested right, and of the means of satisfying his debt. For such a measure would not be resorted to, but in case of the actual or expected insolvency of the company. We cannot doubt, then, that a transfer of an interest in the stock of such corporations, not bona fide, but for the purpose of defeating the creditors of the company, is fraudulent and void. Otherwise the wholesome provision of tho statute for the security of creditors would be unavailing, at the very time, and in the very circumstances in which it was intended to operate. Under the statute we have been considering, those who are liable must be members when the execution is levied. But the Legislature have thought that a further security was necessary; for there may be bona fide sales, by which the shares may be transferred from those who are able, to those who are unable to pay debts existing at the time of the transfer, and it was reasonably thought that it was to the credit of those who were members when the debt was incurred that the creditor trusted. It was therefore provided by the statute of 1817, ch. 183, that the bodies and estates of those who were members at the time any debt accrued, as well as of those who were members when the execution issued, should be liable. So that even a bona fide transfer of shares will not relieve the member from any debt which accrued while he was a member of the corporation." The last sentence shows that what was said about fraudulent transfers was obiter, for the trausferor was still liable at all hazards. Roman v. Fry, J. J. Marsh. 634, is so inadequately reported that we cannot tell what really was decided. The court said "this was an attempt " to escape individual responsibility as a stockholder, and referred, for the settlement of the principles governing the case, to Dallam v. Holmes, which seems not to be reported. They continue: "If Dallam were permitted to escape by taking stock in the names of infant children, the whole object of the charter in securing the community against the insolvency of the corporation might be defeated." This intimates that it was not a case of transfer, but of original taking out of stock in the names of infauts not really the owners. What we have said of Middleton Bank v. Magill is applicable to Dauchy v. Brown, 24 Vt.197, 210. That case did not involvo that question; but the court, obiter, after holding that a prior judgment against the corporation was necessary, in answering the argument that the purpose of the statute might be defeated by a fraudulent transfer by the stockholder pending that action, took it for granted that such a transfer could not be sustained. They said "it has been too frequently decided to be considered as an open question," but cite only Marcy v. Clark, Middleton Bank v. Magill, and Roman v. Fry; in none of which, as we have seen, is any such doctrine held. It is to be remarked that none of the English cases are mentioned in any of the American. On the other hand, in Magruder v. Colston, 44 Md. 349; s. c., 22 Am. Rep. 47; Thomp. N. B. Cas. 554, it was held that where National bank stock was pledged to secure a debt, with power to the pledgee to sell it on default of payment, a sale by him pursuant to the power was not voidable as a fraud on Oates v. First National Bank of Montgomery. the creditors of the bank, although he sold because he believed the bank insolvent, for a nominal consideration, and in order to escape personal liability under the statute as a stockholder. This holding was adopted on the authority of Holyoke Bank v. Burnham, 11 Cush. 187, and the basis of it is that the second transfer was made in execution of the agreement at the time of the original transfer, and therefore was not obnoxious to the charge of a fraud on creditors, although its leading object and purpose might have been to avoid personal liability as a stockholder. The court expressly decline, in the latter case, to consider the question of a transfer to avoid liability, when not based upon an original contract for a re-transfer. We believe it would be difficult to distinguish the two last cases from the principal case, when the fact of the rominal consideration of the second or re-transfer is considered. Whatever we may think of the question upon principle, it is clear that the doctrine, as stated by Mr. Thompson, can hardly be regarded as authoritatively settled in this country. See Bowden v. Santos, Thomp. N. B. Cas. 271. OATES V. FIRST NATIONAL BANK OF MONTGOMERY. (100 U. S. 239.) Statutory construction— Usury. The statutes of Alabama examined, and held to place bills of exchange and promissory notes, payable in money, at "a certain place of payment designated therein," upon the same basis as to immunity from set-off, discount, or equities, as bills and notes payable at a bank or private banking-house. Such declared to be the intention and effect of the act of April 8, 1873, amending section 1833 of Revised Code of Alabama. The intention of the legislature, clearly expressed in a constitutional enactment, should not be defeated by too rigid adherence to the letter of the statute, or by technical rules of construction. Any construction should be disregarded which leads to absurd consequences. The Federal courts are not bound by decisions of State courts upon questions of general commercial law. A creditor who takes a negotiable note, before maturity, so indorsed that he becomes a party to the instrument, as collateral security for a pre-existing debt, in consideration of an extension of time to the debtor, actually granted, is, according to the law-merchant, a holder for value, and his rights as such are not affected by equities between antecedent parties of which he had no notice.* A National bank, at the request of its debtor, gave further time in consideration of the transfer, before maturity, of a negotiable note, as collateral security, and in consideration also of the payment, in advance, of usurious interest, for the period of extension. The note was so indorsed as to make * See Brooklyn City and Newtown R. R. Co. v. Nat. Bank of Republic, post. Oates v. First National Bank of Montgomery. the bank a party to the instrument, responsible for its due presentation, and for due notice of non-payment. The consideration was, in part, legal and, in part, vicious. The former was itself sufficient to sustain the contract of extension and transfer, and to constitute the bank a holder for value. While the bank was subject to the penalties, denounced by law for taking usurious interest, the statute under which it was organized had not declared the contract of indorsement void. No such penalty being prescribed, the courts could not superadd it. IN N error to the Circuit Court of the United States for the Middle District of Alabama. The opinion states the case. HARLAN, J. This is a writ of error to a judgment in behalf of the First National Bank of Montgomery, against Oates, the plaintiff in error, upon a promissory note for $5,200, executed by him at Eufala, Alabama, on the 25th day of July, 1873, and made payable on the 1st of December thereafter, to the order of B. H. Micow, president, at the office of the Tallassee Manufacturing Company, No. 1, in the city of Montgomery. The consideration of the note was fifty shares of the capital stock of that company purchased by Oates, and for which, at the time, he received a certificate in the customary form. As part of the contract of purchase he took from the company a separate written obligation, reserving to him the option, on the 1st of December, 1873, at the maturity of the note, of surrendering the certificate of stock and receiving his note duly cancelled. It appears that Oates was induced to buy the stock upon certain representations of the special agent of the company as to its financial condition. These representations were subsequently ascertained by him to have been false and fraudulent. On or about November 4, 1873, Micow applied to the bank for an extension of time upon certain indebtedness then held by it against the company, amounting to about $40,000, and all of which matured thereafter and in that month. That indebtedness had been previously extended, on several occasions, at usurious rates of interest, paid invariably in advance. The bank signified its willingness to give an extension for 30, 60, 90, and 120 days, upon collateral security being furnished, and upon the payment in advance for such extension, of interest at the rate of one and one |