with the charter or some controlling statute;' but, naturally, the decisions present no uniform test of reasonableness. In this respect, however, there is a well-defined difference between the business corporation and others. In the latter, where there is a co-operative or social element more or less present, the by-laws may reasonably provide for the qualifications, loyalty and good behavior of a member and for his expulsion, if found delinquent. In the business corporation, the rights are regarded as inherent in the share rather than in the holder; his personality is a matter of indifference; and the settled tendency of the law is to strike down as unreasonable ary by-law which interferes with the full ownership and free alienation of the share. But while this distinction between member and shareholder is aidful, it by no means solves all the difficulties which arise when the scope and reasonableness of a by-law are in question. The following cases illustrate a few phases of a large subject.2

§ 54. Illustrative cases. In Insurance Co. v. Lodge, 58 Md. 465, the appellee relied upon a usage to give notice of the amount and time for the payment of premiums. There was a by-law which fixed the time and amount. It was held that the policy had lapsed; that the by-law and not the usage prevailed; and that "when a party takes out a policy in a mutual fire insurance company and the contract is completed, he at once becomes a member and is bound

1 Darrin v. Hoff, 99 Md. 491.

2 See the cases collected in I Thompson, Corp., sec. 1022; and the notes to Trust Co. v. Abbott, 27 L. R. A. 271.

3 But a usage which does not conflict with any by-law is binding. Miller v. Eschbach, 43 Md. 1.

by the rules and provisions of the by-laws and is presumed to have knowledge of them all."

In Pearsall v. Western Union Telegraph Co., 124 N. Y. 256, the directors had adopted a by-law limiting the liability of the company in the case of unrepeated messages. The plaintiff was both customer and shareholder and it was sought to charge him with constructive notice of the bylaw. But the court said that this was merely a regulation. of the mode in which the business should be transacted with customers and that it would be unreasonable to hold the plaintiff bound by it. In Mottu v. Primrose, 23 Md. 483, the directors were invested with the power of enacting bylaws and in exercise of the power they postponed the date previously fixed by an existing by-law for the corporate meeting thereby extending their term of office. This was declared to be unreasonable. In Flint v. Pierce, 99 Mass. 68, a by-law made the members individually liable for the company's debts; but it was held that this gave a creditor no right of action that he did not already possess, unless he acted on the faith of it. In People v. Live Stock Exchange, 170 Ill. 566, a by-law was declared to be invalid as against public policy which prohibited the members of the association from employing as solicitors persons who were not members. In Cross v. R. R. Co., 37 W. Va., 342, 18 L. R. A. 582, a by-law was upheld which provided that no one should be elected a director, who was attorney for the plaintiff in any litigation against the company. The following cases bring out clearly the distinction between the charter and the by-laws in respect to their binding force upon persons dealing

1 To the same effect is Webb v. Insurance Co., 63 Md. 213. In a mutual insurance company the by-laws form part of the contract. Dale v. Brumley, 96 Md. 677.

with the corporation, who are not members. In Reese v. Bank of Commerce, 14 Md. 271, the charter of the appellee gave it a lien on its shares for any indebtedness due by a shareholder. The appellant was an endorsee for value of a certificate belonging to a shareholder who was indebted to the bank; and he was charged with constructive notice of the lien. In Bloede Company v. Bloede, 84 Md. 129, there was a by-law requiring a shareholder, before disposing of his shares, to give his fellow shareholders the right to buy at the price obtainable elsewhere. This was said to be void as in restraint upon alienation. In Grafflin v. Woodside, 87 Md. 146, a by-law provided that no stockholder owing a matured debt to the corporation should transfer his shares until the debt was paid. This was held to be valid as against transferees with notice, but not as against innocent purchasers for value.2

§ 55. The by-law making power: proof of by-laws. In the absence of special provision, the right to make and alter by-laws belongs to the corporation at large, and not to the directors. And such is the statutory law in this State. The Act of 1908 (Code 1911, Art. 23, sec. 12) provides that "the power to make, alter and repeal by-laws shall reside in the members and not in the directors." And by sec. 13: “A copy of the by-laws of any corporation incorporated under the laws of this State, certified to be a true copy under its seal by the president and secretary or treasurer thereof,

1 See note to Trust Co. v. Abbott, 27 L. R. A. 271; and post $56. 2 In Bullard v. Bank, 18 Wall, 589, there was a by-law giving the corporation a lien on its shares. But the court declared it to be invalid because national banks are not permitted to lend money on shares of their own stock. And see Hammond v. Hastings Co., 134 U. S. 401; and post $56.

shall be received as prima facie evidence of such by-laws in the courts of this State."

§ 56. Further statutory provisions. By the revision of 1908 (Code 1911, Art. 23, secs. 3 and 33), restrictions upon the transferability of shares are authorized, if provided for in the certificate of incorporation and plainly stated on the certificate of stock. And the Uniform Stock Transfer Act of 1910 (Art. 23, sec. 52) changes, so far (but only so far) as Maryland corporations are concerned, the rule in Reese v. Bank of Commerce, 14 Md. 271, and Hammond v. Hastings Co., 134 U. S. 401, which imposes constructive notice of liens and restrictions in the charter: "There shall be no lien in favor of a corporation upon the shares represented by certificates issued by such corporation, and there shall be no restriction upon the transfer of shares so represented, by virtue of any by-law of such corporation or otherwise, unless the right of the corporation to such lien or the restriction, is stated upon the certificate."

1 See post, Chap. XVII—“Transfer of Stock." The Act governs certificates issued after July 1, 1910.

CHAPTER IX.

THE STATUS OF A MEMBER.

§ 57. When created and terminated. Where there is a capital stock, the owner of a share is, for the time of such ownership, a member of the corporation. The share comes into existence by a subscription contract; it is property and membership is its attribute. For the full enjoyment of his rights an assignee must have the share transferred into his name on the corporate books,-because, for most purposes, the company is entitled to treat the registered holder as the real owner; but recording the transfer is a matter of duty and not of grace on the part of the corporation. And the status continues so long as the member has the desire or the financial ability to hold on to the share. On the other hand, where there is no capital stock, membership depends upon election; it is not transferable as of right1 and may be terminated by expulsion for good cause.

1 There are, of course, membership corporations such as mutual insurance companies in which the feature of election is more or less attenuated. The fact that membership involves a property right does not make it transferable. See Commission Co. v. Exchange, 143 Ill. 210, and the notes to the same case in 18 L. R. A. 191. Membership in a stock exchange is property within the meaning of the bankruptcy act-Page v. Edmunds, 187 U. S. 596; but it is not subject to taxation-Baltimore v. Johnson, 96 Md. 737; or executionLowenberg v. Greenbaum, 21 L. R. A. 399.