of fact the great weight of authority may clearly be against him, and the cases cited do not always sustain the law as laid down. Even so reputable a writer as Mr. Pomeroy is in error on this point as to the rule really laid down in the great majority of cases. In answer to the proposition that the attachment creditor takes precedence over the equitable transferee, he says: "A different rule, however, must be regarded as settled by the great majority of decisions, which hold that this mode of assignment is valid as against creditors of the assignor, and gives the assignee a precedence over their subsequent judgments, executions, and attachments."

1

After a careful examination of each one of the cases cited by him we find that only three courts,- those of New Jersey, Pennsylvania, and New York (divided),— sustain the proposition set forth. The courts of Pennsylvania and New Jersey give clear and satisfactory decisions; but the decisions of New York are anything but satisfactory. In the case of McNeil v. Tenth National Bank the question under discussion was not raised, and the decision is not at all in point. In the other New York case,- Kortright v. Bank,— the question of priorities was not involved. The case was decided by a majority of the New York Senate, then the Supreme Court of the State, in opposi

Hall v. Corey, 129 Mass. 435; Central N. B. v. Williston, 138 Mass. 244; Boyd v. Rockport, 7 Gray, 406; Blanchard v. Dedham Gas Co., 12 Gray, 213; Johnson v. Somerville, 15 Gray, 216. New Hampshire: Pinkerton v. Manchester Co., 42 N. H. 424-456; Scripture v. Soapstone Co., 50 N. H. 571, 585; Buttrick v. N. & L. R. R. Co., 62 N. H. 413. Nevada: Beruth v. Marys, 9 Nev. 318; State ex rel Guerrero v. Pettineli, 10 Nev. 141. Tennessee: State Insurance Co. v. Sax, 2 Tenn. Ch. 567. Vermont: Sabin v. Bank of Woodstock, 21 Vt. 353, 362; Cheever v. Myer, 52 Vt. 56. Wisconsin: Application of Thomas Murphy, 51 Wis. 519; State v. Conklin, 34 Wis. 21; Schufeldt v. Pease, 16 Wis. 659; Single v. Phelps, 20 Wis. 398. The following cases are cited as

sustaining one side or the other by different writers; but as a matter of fact do not do so: Fraser v. Dill, 11 S. C. 503; Johnson v. Laflin, 103 U. S. 800; Black v. Zacharie, 3 How. 483; Bridgewater Iron Co. v. Lissberger, 116 U. S. 8.

12 Pomeroy Equity Juris., § 700. In support of this view he cites the following cases: Mt. Holly v. Ferrie, 17 N. J. Eq. 117; Rogers v. New Jer sey Ins. Co., 8 N. J. Eq. 167; Broadway Bank v. McElrath, 13 N. J. Eq. 24; Kortright v. Bank, 22 Wend. 348; McNeil v. Tenth Nat. Bank, 46 N. Y. 325; Grymes v. Hone, 49 N. Y. 17; Commonwealth v. Watmough, 6 Whart. 117; People v. Elmore, 35. Cal. 653; Dale v. Kimpton, 46 Vt. 76.

tion to Chancellor Walworth, who wrote a vigorous dissenting opinion. He cites his decision in Stebbins v. Phoenix Insurance Co., where under similar circumstances he held that the assignee obtained merely an equitable lien. "Indeed it would be impossible to give any other effect to such a transfer without rendering the provision of the statute a dead letter." In the other cases cited by Mr. Pomeroy the rights of attaching creditors were not involved, and the priority of liens was not raised or discussed in them. From this it will be seen that the "great majority of decisions" spoken of consists of those rendered by two States, and the conflicting opinions of a third.

.

The case of Johnson v. Laflin,2 is cited by a great many textwriters, and sometimes in the opinions of courts, as supporting the theory that the rights of an unregistered transferee are superior to those of an attaching creditor; while, as a matter of fact, that point was not decided in that case. The rights of creditors were not discussed, and nothing more than a mere dictum is to be found in the opinion of the court upon that subject. However, what the court does say rather supports the opposite view, and goes to sustain the title of the attachment creditor. The only part of the decision of interest here is the following: "Purchasers and creditors, in the absence of other knowledge, are only bound to look to the books of the registry of the bank; but as between parties to the sale, it is enough that the certificate be delivered, with authority to the purchaser, or any one who may come to transfer it on the books of the company."

It is claimed by way of argument in some decisions that corporate stock possesses a certain negotiability; and some cases have gone a great way in giving it that character. It is generally said to be "quasi-negotiable," though this term is so easily made to fit almost any degree of restricted negotiability that it is not of much value. Stock can be indorsed in blank and thus passed from hand to hand, and be perfectly safe in the hands of any holder, because the transfer can be completed only upon the books of the company, upon the surrender of the original

13 Paige, 350.

2 103 U. S. 800.

certificate. The corporation by this means has abundant power to protect itself, and must protect the lawful owner of the stock; because it need not register a transfer until the old certificate is delivered up to be canceled. The forgery of a certificate of stock does not in any way affect the holder of the bona fide certificate, since the corporation is bound to ascertain the genuineness of a certificate before it permits a transfer on its books; and if it allows a forged certificate to be recorded it is liable to the owner of the bona fide stock.1

66

The same arguments are put forth in urging the negotiability of stock as are used against the rule requiring registration, that public policy and business requirements make it necessary to place as few restrictions as possible on the free circulation of this class of investments. It has been held that stock certificates are nearly as negotiable as commercial paper." 2 Another case from the same State, however, held that "certificates of stock are not securities for money in any sense; much less are they negotiable securities." 3 Another case,— from Massachusetts, says: "No commercial usage can give such an instrument (a stock certificate) the attributes of negotiability.' The clear weight of authority seems to be that stock certificates are not in any sense negotiable paper, and not entitled to the privileges of such.4

As shares of stock can be transferred only on the books as provided by the charter or by-laws, an assignment without the proper entry on the books is evidence of a secret trust; and if unexplained, is to be deemed fraudulent and void as against creditors of the assignor, like an assignment of personal property without the delivery of possession.5

In answer to this, Mr. Morawetz says: "This argument shows a singular ignorance of the true state of affairs. It has already been pointed out that possession of the certificates confers the apparent ownership of the shares, and that the stock books of a

1 Lowell, Trausfer of Stock, § 114, and cases cited; Cook, § 365, and cases ofted.

2 Mechanics Bank v. New York R. R., 13 N. Y. 599, 627.

3 Shaw v. Spencer, 100 Mass. 382. 4 Barstow v. Savage, 62 Cal. 388.

5 Pinkerton v. Manchester, etc., 42 N. H. 424; Colt v. Ives, 31 Conn. 25; 1 Morawetz, § 198.

corporation are not a record for the public." This very thing of the possession of the certificates is what an attaching creditor most desires to know, and if the stock books of the company is not a safe criterion for his purpose, he is entirely at the mercy of his debtor and has no possible way of enforcing his claims against him if he be unscrupulous and dishonest.

"By protecting the purchaser against subsequent attachments and executions, the law removes one of the chief risks incurred by holding certificates of stock without registry, and thereby increases the safety and desirability of such investments." But an equal, if not a greater degree of safety would be guaranteed to purchasers of stock by requiring a strict adherence to the transfer laws; and requiring registration to complete the title as to third persons; and at the same time cut off a fruitful source of fraud in the way of secret transfers.

It is argued with seeming justice that an attachment creditor ought to get no greater or better title than his debtor had; and all agree that as between the parties to the transfer the entire interest of the transferor passes; therefore, there is nothing left upon which an attachment may be levied. Now this assumes that every transfer that is complete as between the immediate parties to it is complete as against the world, because the transferor is estopped to claim any further title to the thing he has transferred; but I think no one will attempt to substantiate such a proposition as a general principle.

It has been held in several cases that in a pledge or transfer of stock the transfer on the books is analogous to the delivery of possession of a corporeal chattel,- that it must be made in such a way as to invest the transferee with

all the marks and

indications of ownership; "2 and that as a matter of fact the transferee gets no title at all as against creditors of the transferor until there has been "such a delivery as the nature of the thing is capable of, and to be good against subsequent attaching creditors the pledgee must be clothed with the usual muniments and indicia of ownership." 8

1 Cook, § 487.

2 Pinkerton v. Manchester, etc., 42 N. H. 424; Colt v. Ives, 31 Conn. 25.

31 Morawetz, p. 170, and cases cited; Pinkerton v. Manchester, etc., 42 N. H. 424.

"It is necessary to fix some act, and some point of time, at which the property changes and vests in the vendee; and it will tend to the security of all parties concerned to make that turning-point consist in an act which, whilst it may be easily proved, does at the same time give notoriety to the transfer. It would seem to us to be going beyond the rules of just exposition, to hold that a plain provision of statute law,1 calculated to promote the security of important legal rights of parties in important particulars, should be construed to be a regulation made for the convenience and protection of banks. The clause itself is too clear to admit of doubt: Shall be transferable only,' that is, capable of being transferred; the largest and broadest term used to express alienation on one part, and acquisition on the other; and the word 'only' carries an implication as strong as negative words could make it, that is, in no other mode. It was not to prescribe one mode, leaving others unaffected; it made that mode conclusive." 2

After an exhaustive examination of the text-books and the decisions upon this point, the student will find one, and only one reason urged against giving the rule requiring a transfer on the books the meaning it evidently bears upon its face, namely: that a transfer, to be valid as to all parties, must be recorded,— and that reason is that it would be an undue restriction on the business of the world, and for that reason would be against public policy. It is not claimed that any one would suffer an injury by an adherence to the principle contended for. It is simply placing the convenience of the stock-jobbers over against a sound and salutary requirement that cannot possibly harm any The requirement is a simple one, without expense, and is a privilege which must be accorded for the asking.

one.

The immense amount of property invested in stocks makes the question one of vital importance, especially in view of the

1 Where there is no express statutory provision of this kind, a rule set forth in the articles of incorporation or adopted in the by-laws, should have the force of a statute, especially where these regulations are made under a general statute.

2 Leaving it to the charter, or the action of the board of directors to determine the mode of transfer: See Peoples Bank v. Gridley, 91 Ill. 457; Central N. B. v. Williston, 138 Mass. 244; Lowell Transfer of Stock, 994, and cases cited.