notice of such execution or attachment, who shall have received the certificate of stock with a written transfer thereof endorsed thereon (or with a written power of attorney to sell, assign or transfer the same), signed by the person named as stockholder in such certificate. And such purchaser or pledgee shall have power to name any person as attorney to transfer the shares to him on the books of the corporation; and upon and after the production and delivery of the original certificate to the corporation, he shall be entitled to a new certificate for said shares and the rights of a lawful holder thereof.

The Uniform Stock Transfer Act (1910), which in terms repeals "all Acts or parts of Acts inconsistent with this Act," contains two relevant provisions:

50. No attachment or levy upon shares of stock for which a certificate is outstanding shall be valid until such certificate be actually seized by the officer making the attachment or levy, or be surrendered to the corporation which issued it, or its transfer by the holder be enjoined. Except where a certificate is lost or destroyed, such corporation shall not be compelled to issue a new certificate for the stock until the old certificate is surrendered to it.

51. A creditor whose debtor is the owner of a certificate shall be entitled to such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching such certificate or in satisfying the claim by means thereof as is allowed at law or in equity, in regard to property which cannot readily be attached or levied upon by ordinary legal pro

cess.

The effect of these provisions on the Act of 1908 is doubtful and they are no improvement. They apply, of course, only where the shares are represented by an out

standing certificate; and to certificates of Maryland corporations issued after July 1, 1910. Apparently, the creditor can in no case start execution proceedings unless the certificate belonging to his debtor can be "actually seized" by the execution officer. Section 50, it is true, contemplates two other situations, namely (1) where the certificate has been surrendered to the corporation; and (2) where its transfer by the holder has been enjoined. The first situation is improbable and the modus operandi is left to the imagination; the section postulates a preliminary injunction proceeding, and this will hardly give the plaintiff a prior lien. Section 51 seems to be a frank confession of despair.1 § 141. Situs of share property for the purpose of execution. Almost uniformly this is held to be the state of the corporation's domicil. Where, however, a statute identifies the share with the certificate, and the certificate can be seized and sold, such a proceeding may pass the interest of the owner therein. Shares in a national bank located within the state may be reached in the way provided by the statute of that state for its own corporations.*

1Compare the situation in Morton v. Grafflin, 68 Md. 545

2 2 Cook, Corp. sec. 485; and see Morton v. Grafflin, 68 Md. 545. 3In Simpson v. Jersey City Co., 165 N. Y. 193 (reported with a valuable note in 55 L. R. A. 796), the court, treating the corporation as a debtor to the shareholder, reached the result without the aid of a statute; contra, Winslow v. Fletcher, 53 Conn. 390; Pinney v. Nevills, 86 Fed. 97. An execution statute can only effectively regulate shares of domestic corporations.

This is doubted, obiter, in Sowles v. National Union Bank, 82 Fed. 696, on the ground that such property owes its existence to the laws of the United States. It is difficult to see how this creates any exemption from seizure for the debts of its owner. The right is expressly upheld in Re Braden's Estate, 165 Pa. St. 184; and Oldacre v. Butler, 116 Ala. 652.

§ 142. The vendee's duty to transfer.

Registration is

the move of the vendee; but a prudent vendor will see that it is made wherever the shares may be subject to a liability. If by reason of being still on the books, the vendor is called upon to pay, he may demand reimbursement from the person who was the real owner at the time the liability became fixed. This person may or may not be his immediate vendee.1

§ 143. The rights of the corporation. On any question involving the inter sese rights and liabilities of stockholder and corporation, the latter may safely deal with the apparent as the real owner and it is not bound to require production of the certificate. It may pay him the dividends; it may recognize him only, or his proxy, as the person entitled to vote; and it may for a reasonable period close its books against transfers.2

§ 144. Summary. The risk assumed, under the Maryland law, by an unregistered holder and by the person dealing with him. In Bloede v. Bloede Co., 84 Md. 141, it is stated broadly that: "The entry of the transfer on the books of the company is required, not for the translation of the title, but for the protection of the parties and others dealing with the company; and to enable the company to know who are its stockholders entitled to vote at meetings and to receive dividends when declared." Specifically, we have seen: (1) Except in the case of the delivery of endorsed

1 See the cases collected in 1 Cook, Corp. sec. 262; Brinkley v. Hambleton, 67 Md. 169; Hutzler v. Lord, 64 Md. 534.

2 This is commonly done prior to the day fixed for an election or for the payment of a dividend. In Tome v. Railroad Co., 39 Md. 39, it appears that the defendant corporation closed its books pending investigation into a fraudulent over-issue of stock.

certificates governed by the Uniform Stock Transfer Act, registration or some equivalent act is still essential to the validity of a gift of shares. (2) In the case of shares subject to liability, there is no novation without formal transfer. (3) The liability for calls and that imposed by statute in favor of creditors attaches to the registered owner. (4) Where by charter or statute the corporation is given a lien upon its shares or some restriction on alienation is imposed, a transfer on the books or some equivaleni act on the part of the corporation is necessary to constitute a waiver of the lien or restriction.

One dealing with the holder (not being the person to whom it was issued) of an endorsed certificate takes, in addition to the risks (1) and (3) above given, the further risk: I. 1. That the endorsement of the registered holder on the certificate may be a forgery or otherwise not binding upon him; 2. That the assignment and power of transfer endorsed on the certificate may, as in Bank v. Renshaw, 78 Md. 475 and Merchants' Bank v. Williams, 110 Md. 334, be held to give notice of a restriction upon the rights of the holder.

CHAPTER XVIII.

DIVIDENDS.

§ 145. The nature of a dividend.

It has been pre

viously shown that a dividend is the distribution among stockholders of the surplus, as distinguished from the capital, assets. It may be payable out of current profits or out of the accumulated surplus; it has no existence until it is "declared" by a formal resolution of the directors; they are, in the absence of fraud, the exclusive judges of whether and how much of a dividend shall be declared; and their action is limited only by the rules which forbid the impairment of the capital stock and any discrimination among stockholders of the same class. After declaration, a dividend becomes a debt due from the corporation to its stockholders, payable at the time named in the resolution declaring it; but interest will not be chargeable against the corporation nor will limitations run in its favor until a demand is made; and being a debt it may be applied in whole or in part to any indebtedness due from the stockholder to it."

1 State v. Railroad Co., 6 Gill 363.

2 State v. Railroad Co., 6 Gill 363. Of course, in the case of preferred stock, a dividend may, by contract, be compulsory if earned. For the liability of directors who participate in the declaration of unearned dividends, see ante, § 66; and for the special provisions governing state banks and trust companies, see Code (1911), Art. 11, secs. 65-68. For what constitutes the fund available for dividends, see the learned discussion in Machen, Corporations, sec. 1313, et seq.

3 Gemmell v. Davis, 75 Md. 546. This was the case of a dividend in liquidation. As against an unregistered holder the corporation