#### * Henry N. Quiner *versus*The Marblehead Social Insurance Company.

Where a statute incorporating an insurance company provided that no transfer of any share in said company should be permitted or valid until the whole capital stock should have been paid in, it was still holden that a *bond fide*sale by a debtor to his creditor, in satisfaction of the debt, was sufficient to transfer the equitable interest, so far as to justify the company in issuing certificates to the assignee, and to entitle him, when the full amount of the shares should be paid in, to have the transfers entered in the books of the company, and to have a certificate of his shares.

Such a transfer may be by writing without seal; and therefore, where one general partner had subscribed for shares in the name of the irm, and had paid the instalments out of the funds of the partnership, he could transfer the shares without a power, either general or special, from his partner.

*468The declaration was in case, and contained, besides amount foi 5000 dollars, money had and received to the use of the plaintilf, a special count to the following effect:—for that *Dudley S. Bradstreet*and *William Story*were indebted to *Benjamin T. Reed.;*and to reocver his demand, &.c., he caused 150 shares of the capital stock of said company, subscribed, &c., by the said *Bradstreet 8f Story,*to be attached; and the same having been afterwards levied and taken in execution, to satisfy the judgment recovered by the said *Reed*against the said *Bradstreet*Story, their said shares and interest in the said capital stock were sold, &c., and the plaintiff became the purchaser at the price of--per share; and notice having been given, &c., as the law requires, the defendants became obliged, and it was their duty, to admit the transfer, and to grant certificates of the said shares to the plaintiff; and in consideration thereof they promised, &c., but afterwards refused, &c.

At the trial of the cause upon the general issue, which was had before *Sewall,*J., at the sittings here after the last October term, the attachment, judgment, execution, levy, and sale, were duly proved.

The defence at the trial was the supposed interest of *Isaac Story*in the said 150 shares, originally subscribed in the name of *Bradstreet Story,*by a sale and transfer to him previous to the said attachment. A bill of sale, executed June 4, 1811, by *Dudley S. Bradstreet,*for himself, and in the name of *William Story,*as his attorney, and a certificate of the instalments which had been at that time paid on the said shares, endorsed and delivered over to the said *Isaac Story,*to transfer the said shares to him, for a consideration mentioned to be of 7500 dollars, w-ere given in evidence. [ * 477 ] * This, with other evidence of the circumstances of the sale, the consideration paid, &c., were left to the jury, with directions to find a verdict for the defendants, if an actual sale, *bona fide,*and for a valuable consideration, was proved to have been made on the 4th of June, 1811, according to the tenor and intent of those workings ; and the jury having returned their verdict for the defendants, the other questions arising in the cause were reserved upon the following state of facts agreed by the parties, or proved at the trial:—

The shares of stock in question were subscribed by *Bradstreet.*in the name of *Bradstreet Sf Story,*that being the name and firm in which *Dudley S. Bradstreet*and *William Story*did business as general partners in trade; and the subscription was intended for their joint benefit and concern, and the instalments were paid from their joint stock in the management of *Bradstreet,*the other partner having been absent in *Europe*at the time of these transactions, and not having been particularly consulted, either respecting the subscription *469or the transfer. There was no particular or general power from *W. Story*to *Bradstreet*produced at the trial.

On the 7th of June, 1811, after the said intended transfer to *Isaac Story,*and before the said attachment, he informed the secretary of the said insurance company of the transfer made by *Bradstreet,*and that a suit, which he had commenced against *Bradstreet &f Story,*upon which the said shares had been attached at the office of the defendants on the 13th of March preceding, had been relinquished. The attachment at the suit of *Reed*was made on the 8th of June, 1811, and the said *Reed,*and the officer claiming to attach the shares, were informed, at the time, that the same were claimed by the said *Isaac Story*as his property.

Two or three months after the attachment, but before the sale under which the plaintiff claims, a copy of the bill' of sale, under which the said *Isaac Story*claims the shares in question, was left at the said office by him.

In the statute (1) by which the said insurance company was in corporated, there is a provision to this effect, — that no * transfer of any share in said company shall be permit- [ *478 ] ted or valid until the whole capital stock shall have been paid in. And it was agreed that only fifty per cent, of the capital stock, subscribed for by *Bradstreet*for *Bradstreet Story,*had been paid in at the time of the contract with *Isaac Story,*and of the attachment by *Reed.*

If the Court should be of opinion that the plaintiff was entitled, under the sale to satisfy *Reed’s*execution, to the shares of the stock in question, and that this action was maintained against the defendants upon the evidence, then the verdict was to be set aside, the defendants to be defaulted, and judgment to be rendered upon an inquiry of damages, or for such amount of damages as the parties should agree ; or a new trial was to be granted, as the justice of the case might require.

The cause was argued at the last March term in *Suffolk,*by *Dexter*and *Putnam*for the plaintiff, and *Prescott*for the defendants.

*For the plaintiff,*it was argued that the transfer to *Isaac Story*was void, inasmuch as it was made by one only of the original holders of the shares, and this by deed or instrument under seal, without authority from the other under his seal, either general or for this specific purpose, so that at most but half of each share was transferred; and also as the act incorporating the company expressly prohibits transfers of shares, until the whole stock should be *470paid in. And although, in strictly technical language, a transfer may include a taking by attachment and execution, yet, in the more popular use of the word, it is limited to a voluntary act of the owner. That this was the sense in which the legislature intended it in this case, may be understood from the language used in the statute — “ No transfer shall be permitted, or be valid,” &c. The transfer is not to be *permitted*by the company or its directors, nor shall it be *valid,*if so permitted. This construction completely fulfils what must have been the object of the legislature in the restriction, *viz.,*to prevent speculation in the stock. It could never be [ * 479 ] desired to lock up the property of debtors, * and to place it out of the reach of their creditors Thus every supposable purpose of the provision would be answered, and it woylo not militate with the provisions of the general statute of 1804, c. 83, making this species of property subject in all cases to attachment on mesne process, and to a sale by execution.

If this construction be the true one, there is no valid title against the plaintiff’s claim, and his title under the sheriff’s sale is complete. The claim of *Isaac Story*cannot certainly be supported as legal; nor can it be supported as an equitable one, since it is directly con trary to the express provisions of a positive statute.

*Prescott, for the defendants,*

observed that, they having no interest in the issue of the action, the defence was, in fact, on behalf of *Isaac Story;*and for him it was argued that the equitable right to the ' shares in question was out of *Bradstreet f Story*before the attach ment was made under which the plaintiff claims; and if the legal property remained in them, they held it merely as trustees of *I. S*The receipts of the company, commonly known by the name of *scrip,*had been endorsed to *I. S.,*besides the transfer by deed ; and this was done by the same person who had subscribed for the shares, and who had paid the instalments out of the partnership effects. The verdict establishes the transfer to have been *bondfide.*

But if this transfer was invalid, the sale upon execution was no better. Both were equally within the words of the statute, and the only distinction between them is, that one was voluntary, and the other involuntary. The law will regard a voluntary payment or security of an honest debt with as much favor as an attachment and execution having the same object. Both are within the words of the statute.

But, in truth, no shares existed at the time of this transaction The money paid by *B. S.*to the company may be considered as holden by the company, and the interest of *B. &/■ S.*was [ * 480 ] assignable in equity ; giving to *I. S.*all the * equitable *471interest; such an interest as the assignee of a bond has, and which this Court will protect.

Further, no action can be maintained against a corporation for the misconduct of its officers. The statute makes it the duty of officers to give certificates to stockholders, and if they neglect to do this, when a party has a legal right to the certificates, an action lies against them. In the case of' *Gray*vs. *Portland*Bank, (2) which seems to militate with this position, there was a vote of the corporation, amounting to an express promise, and the declaration was framed upon that promise.

The action was continued *nisi*at the present term, and at the following March term in *Suffolk*the opinion of the Court was pronounced to the following effect by

(1)

*Stat*1809, c. 14, § 9.

(2)

3 *Mass. Rep.*364.

Parker, J.

The action is *assumpsit*against the *Marblehead Social Insurance Company,*for refusing to transfer 150 shares of stock in said company, originally belonging to *Dudley S. Bradstreet*and *William Story;*the property in which is alleged to have been legally transferred to the plaintiff, by virtue of the levy of an execution, to satisfy a judgment recovero'3 by one *B. T. Reed*against the said *B. &f S.,*the said shares having been attached on mesne process, as security for the judgment which might be obtained. The defendants probably considered themselves merely as stakeholders, and without interest in the suit; and the action has accordingly been defended by *Isaac Story,*who claims property in these shares, by virtue of a sale and transfer made to him, previously to the said attachment, by the said *Bradstreet,*who assumed to act for himself and as attorney to said *W. Story,*this latter having been at the time absent in *Europe,*and who was his general partner in trade, but from whom he had not any letter of attorney, either general or particular. This transfer is found by the jury to have been *bond fide,*and for a valuable consideration; and the certificates which had issued from the company, acknowledging the payment of the instalments which had been made, were endorsed by *Bradstreet*and delivered over to * said *I. S.,*who [*481 ] thereupon, before the attachment made by *Reed,*as aforesaid, gave notice to the officers of the company of this transfer to him, and that he relinquished an attachment previously made by him to secure a demand which he "had against the said *B. df S.*It appears in the case, that the shares were subscribed for by said *Bradstreet*in the name of *B. S.,*which was the name of their firm, and that the subscription was intended for their joint benefit and concern, and that the instalments were paid from the joint *472stock, of which the said *Bradstreet*had the management, his partnei having been absent, as before stated, and not having been consulted either about the subscription or the transfer.

Upon these facts, if the transfer to *Tsaac Story*should be deemed valid in law, or effectual as a lien upon the company, the plaintiff must fail in his action; because he would in that case have no property in the stock, the attachment under which he derives his title having been made after the transfer was executed.

The dispute is, in effect, between two creditors, both attempting to secure themselves from loss by acquiring this property; and the question before us is, Which is in the best condition, as it respects this particular action ? The defendant (we speak of the real defendant, Story) was the most vigilant, having acquired an inchoate lien upon the stock several months before *Reed’s*attach ment; but having changed his course of measures from an attachment to a voluntary transfer, the plaintiff, by virtue of *Reed’s*attachment and the consequent sale on the execution to him, had" a legal right to hold the property, if that .transfer should be found to be void.

The plaintiff’s objections are, first, that *Bradstreet*had no authority to act for his partner, *Story,*having no power of attorney from him, and that, as to one moiety of the stock attempted to be transferred, the property remained in the partners or in *W. Story*at the time of his attachment.

But we are of opinion that, as this was common prop-f *482 ] erty, *and may indeed be considered joint stock, as it was assignable in its nature, except under the restrictions contained in the charter, it was competent for *Bradstreet*to transfer the whole in payment, or as security of a joint debt; and that the delivery over of the certificates, with an endorsement upon them by *Bradstreet,*was a complete and absolute transfer of the whole stock to *I. Story,*as far as a *chose in action*could be transferred by law. Each partner has complete control over the partnership effects, with the power of disposing of them to the purposes of the copartnership.! The stock in question, being purchased for the joint concern, and paid for out of the common fund, must be considered as partnership effects, and as liable to the attachment of a creditor of the house, or to an assignment to a creditor for the purpose of paying a partnership debt.

f ADDITIONAL NOTE.

[One partner may bind another by a sealed contract, made in the usual course of business, if the latter previously authorize or subsequently adopt and ratify it, even ny parole. — *Cady*vs. *Sheperd,*11 *Pick.*400.

See *Woodward*vs. Winship, 12 *Pick.*430. — *Etheridge*vs. *Binney,*9 *Pick*272 -F. H.]

*473It was not necessary that this assignment should be made by deed. The delivery of the certificate, with an endorsement upon it, for a valuable consideration, was a sufficient transfer of the right to become a stockholder to the amount specified in the certificates. If this had been property which could not be assigned but by deed, the want of a letter of attorney from *W. Story*might deserve more consideration. But being transferable by common assignment, like a written promise not negotiable, and being, as partnership stock, assignable by one of the partners alone, we do not think that, because a bill of sale, purporting to be the act of both the vendors, but turning out legally to be the act of *Bradstreet*alone, was resorted to as the proper mode of assignment, the assignment is therefore invalid. Setting the bill of sale entirely aside, we think there is enough to show an assignment, which, according to decisions in this Court, will protect the property in the hands of the purchaser against a subsequent attaching creditor.

But the objection principally relied on is, that, by the statute in corporating this company, the shares are not to be transferred until the whole subscription is paid in.

#If this is to be considered as a general prohibition [ *483 ] of transfers, it will apply as much to the plaintiff’s claim as to that which is opposed to him. But we apprehend that such was not the intent of the legislature. To prevent speculation in the scrip, and to continue the responsibility of the original subscribers in case of loss beyond the funds actually vested, this provision was introduced. The general statute, providing for the taking of shares in the stock of incorporated companies to satisfy debts, subjects all the interests of members of such corporations to attachment and levy; and we believe that a transfer, made by a debtor to his creditor to secure a debt, was not intended to be effected.

By this provision the transfer cannot be complete and effectual to all purposes, until the full amount is paid in; but the creditor may be substituted for the debtor, and may acquire the right, upon payment of the residue of the subscription, to have the transfer entered upon the books, and to have a certificate of his shares.

It is sufficient, in the case before us, that *Isaac Story*has the equitable interest in the shares; and that the company would be justified in issuing certificates to him. For the consequence is, that they are under no obligations to do the same thing to the plaintiff He has not, therefore, maintained his action.

*Judgment according to the verdict.*

ADDITIONAL NOTE.

[Though the by-laws of a corporation require that all transfers of shares be made in the treasurer’s book, yet a deed, accompanied by a delivery of certificates, will pasa *474(.he property, even against a creditor of the vendor who attaches it, without notice of the sale either to him or the treasurer. — *Sargent*vs. *Essex,*&c. 9 *Pick.*204.

It seems, the purchaser cannot claim a dividend or a certificate from the corporation, without first applying to have the transfer made, according to the by-law *Ibid.*

By statute 1808, c. 65, the proprietor of any share in a manufacturing corporation might alienate the same by a deed under his hand and seal, acknowledged before a justice, and recorded by the clerk of the company. Held, a deed not recorded was so far effectual as to render the grantee liable for a debt of the corporation. — *Eames*vs. *Wheeler,*19 *Pick.*442. — F. H.]