as laid down by the text-writers is not borne out by the weight of decided authorities, or by the better reason.

The method by which corporate stock may be transferred is pointed out by statute in some States; and in others a general provision is made providing that transfers shall be executed as directed in the charter or by-laws of the corporation. The managing agents of a corporation are impliedly authorized to make reasonable rules regulating the method of transferring shares; and a by-law requiring a transfer to be recorded in the books of the company is valid.1

The common method of transferring stock among business men is for the shareholder to indorse the certificate, leaving the name of the assignee blank; and a power of attorney to complete the transfer on the books is also included in the indorsement, and the name of the attorney is also left blank. A certificate thus indorsed may be passed from hand to hand, and any one into whose hands it may come can fill in his own name as assignee, and have the transfer completed by being entered upon the books of the company. All subsequent purchasers have the same rights, against previous holders of the certificates, as though their names appeared on the certificates.3

The policy of the law seems to be to place as few restrictions upon the transferability of stock as is consistent with security in dealing with that sort of property; and a great many decisions that have been made against the adherence to transfer rules have been based upon the objection that the requirement that each transfer should be registered would place too great a restriction upon the free circulation of this class of securities.1

The articles of incorporation usually contain a provision that shares of stock in the company shall be transferable only in a particular manner, or upon certain conditions. A provision of

1 Morawetz, Vol. I, § 164; Farmers Bank v. Wasson, 48 Ia. 399; Chouteau Spring Co. v. Harris, 20 Mo. 383.

2 Kortright v. Bank, 22 Wend. 398; Bank v. Lanier, 10 Wall. 377; Johnson v. Laflin, 103 U. S. 800; Cook, § 375, et seq., with notes and cases cited. 1 Morawetz, § 185, and cases cited.

3 Broadway Bank v. McElrath, 13 N. J. Eq. 24; Matthews v. Mass. N. B., 1 Holmes, 396; Kortright v. Bank, 20 Wend. 91; s. c. 22 Wend. 348; Mt. Holly". Ferrie, 17 N. J. Eq. 117.

4 Broadway Bank v. McElrath, 13 N. J. Eq. 24, a leading case.

this kind is a part of the contract of membership in the corporation; and the mutual consent necessary to a novation of this contract cannot be implied, but the prescribed conditions must be fulfilled. "A complete transfer of shares in a corporation involving a novation of the contract of membership, can therefore be effected only in the manner prescribed by the charter or articles of association." 1

It is well settled that corporate stock is personal property, and is transferable as such.2 There have been a few decisions that gave it the nature of real estate, but they are no longer considered good law. Mr. Williams treats stock as "incorporeal, personal property," and this is the doctrine that is generally adopted by the courts. The courts of England hold that shares of stock do not come within the seventeenth section of the Statute of Frauds; but the courts of this country have taken a directly opposite view.1

Shares of stock are evidenced by certificates, issued to the shareholders in proportion to the amount of capital invested by them. These certificates of stock are considered, not as the stock itself, but simply as the evidence of its ownership by the person in whose name the certificate stands. "Stock is one thing, and certificates another. The former is the substance, the latter the evidence of it."5 It is not absolutely essential that a certificate be issued at all. A person may be a stockholder, and liable as such, without having a certificate. He can transfer his stock and pass a good title; and if his transferee is accepted by the corporation the transfer is complete."

Shares of stock can be attached only at the domicile of the corporation; since the certificates are mere evidences of title to the stock, and the stock itself exists only at the place where the corporation was created."

1 Northop v. Turnpike Co., 3 Conn. 544; Fisher v. Essex Bank, 5 Gray, 373; State v. Pettineli, 10 Nev. 141; 1 Morawetz, § 169.

2 Williams v. Lowe, 4 Neb. 382, 397; Cook, § 6, and cases cited.

3 Williams on Real Property, p. 155.

VOL. XXX.

15

4 Cook, §§ 333, 340, and cases cited; Morawetz, §§ 225, 226; Lowell, Transfer of Stock, § 10.

Hawley v. Brumagin, 33 Cal. 394. 6 Hawley v. Brumagin, 33 Cal. 394. * Cook, § 485, and cases cited.

Until a transfer of stock be entered on the books of the company, the transferee is not recognized as a shareholder in the corporation, and is not liable for subscriptions due the corporation; nor for the debts due to corporate creditors, or other stockholders. The transferor is not released from liability until the transfer is recorded on the books of the company. If, however, the corporation recognizes the transferee, and pays dividends to him, or negligently fails to make a transfer when requested, the transferor is released; and the transferee becomes liable on the stock. As between the parties themselves a transfer is good, even if made without the formalities required by charter, by-laws, or statute; and the assignor is estopped to claim any further title to stock so transferred, and cannot impeach such transfer for informalities."

4

Mr. Morawetz, in his work on corporations, takes a very strong position in favor of the theory that the equitable transferee, both in law and in good conscience, holds the better title. He says: "So shares in a corporation are mere contract rights, or choses in action, while the certificates are treated as the embodiment of the rights, and may be considered as chattels. The assignment of a certificate ought, therefore, to have the same effect as to creditors of the assignor as the indorsement. and delivery of a bill or note."

"A creditor does not, by levying an attachment or execution on property, occupy the position of a bona fide purchaser for value. A creditor is entitled only to step into the place of his debtor in respect to the latter's property and contract rights. He is not entitled, upon any principles of justice and common honesty, to pay his debt out of property which does not in truth belong to the debtor. A creditor, therefore, ought not to be

1 Marlborough Mfg. Co. v. Smith, 2 Conn. 579; Topeka Co. v. Hale, 17 Pac. Rep. 601; Midland, &c. Co. v. Gordon, 16 Mees. & W. 804.

2 Cook, § 258.

3 Isham v. Buckingham, 49 N. Y. 216; Cook, § 258, p. 284.

4 Courtright v. Deeds, 37 Ia. 503; Smalley v. Bernard, 2 Cowen, 770;

McNeil v. Tenth, N. B., 46 N. Y. 325;
Grymes v. Hone, 49 N. Y. 17; Johnson
v. Laflin, 103 U. S. 800; Wilmington
Co. v. Bush, 1 Har. 44.

5 Kortright v. Bank, 22 Wend.
348; Johnson v. Laflin, 103 U. S. 800;
Cook, § 378, and notes.
6 1 Morawetz, § 193.

allowed to levy upon shares after the real, substantial, and equitable ownership has been transferred to a purchaser for value. It is wholly immaterial, for this purpose, whether the shares have been transferred on the company's books or not. After the assignment the debtor would retain at most a naked legal claim against the corporation, and this is all that the creditor would be entitled to take." 1

Mr. Cook announces his pòsition on this subject in the very outset of his discussion of the transfer upon the books. In Section 381, of Chapter XXII, he states: "As a general rule, it may be said that a purchaser of a certificate of stock is usually protected as fully without a registry on the corporation books as he would be by a registry, so far as subsequent attachments are concerned. This is the rule in New York, and most of the States. In a few other States a contrary rule prevails."

In making this statement Mr. Cook mistakes the number and weight of authorities which oppose the position he assumes. As a matter of fact, after a careful and exhaustive examination of the decisions of every State in the United States, we find that seven States sustain the rule as laid down by Mr. Cook, while sixteen take the opposite view.

1 Morawetz, § 196.

2 The decisions of the courts of the various States are as follows: The courts of New York and Louisiana have pointed both ways on this question, but they tend toward a disregard of transfer rules, and to sustain the title of the equitable transferee. New York: Robison v. Bank, 95 N. Y. 637; McNeil v. Tenth National Bank, 46 N. Y. 325; New York, etc., R. Co. v. Schuyler, 34 N. Y. 30-80; Pres. & Dir. Bank of Utica v. Smalley, 2 Cowen, 770; Leitch v. Wells, 48 N. Y. 585; Cutting v. Damerel, 88 N. Y. 410; Comeau v. Oil Co., 3 Daly, 218; Smith v. American Coal Co., 7 Lans. 317; Commercial Bank v. Kortright, 22 Wend. 384; Stebbins v. Phoenix Ins. Co., 3 Paige, 350;

The rest of the States either

Union Bank v. Georgetown, 2 Wheat. 391; Grymes v. Hone, 49 N. Y. 17. Louisiana: Smith v. Crescent, etc., 30 La. Ann. 1378; Freidlander v. Slaughter House Co., 31 La. Ann. 523; Crescent City v. Deblieux, 40 La. Ann. 155. The following courts have decided in favor of the title of the equitable transferee, and against the adherence to transfer rules. Kentucky: Thurber v. Crump, 86 Ky. 408. Minnesota: Lund v. Wheaton Roller Mills, 52 N. Y. Rep. 268; Joslyn v. Distilling Co., 46 N. W. Rep. 337; Baldwin v. Canfield, 26 Minn. 43. Mississippi: Clark v. German Security Bank, 61 Miss. 611. New Jersey: Broadway Bank v. McElrath, 13 N. J. Eq. 24; Rodgers, Ketchum & Grosvenor v. Stevens, 4

have no settled rule upon this point, or have never decided the question at all.

It is sometimes the case that a text-writer takes what he thinks to be a fair and equitable stand, and then cites a great many authorities that ostensibly sustain his views, when as a matter