The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1856-06-30

ever, COmpensatOn by The
sSrpofation "a the innocent holders who by dealing in
them have suffered ~ uniary loss. The issue Of false
certificates il Is ns,eu was failure OF corporate duty,
act OF negligence by the corporation, for which It
habe o. the party Grct. The company it is also said,
Bound by an estoppei ~ favor OF the innocent share
holder, and must either gnze him stakeholder,
respond IN damages - wrong doer Tor withholding
hs apparent right.
thoee who assert tina th action can be maintain ed
nd been able TO agree upon for that opinion
Mere would be fewer propo' nos 70 discuss ban sha
have already stated IN gene al Tel my own conclu
70 be the side OF the inysdiy OF the called
spurious shares upon the ground Of w.nt Of corporate
sewer them, and will give further
s~pessnn my views that question BY the oh rter
It's railroad mpany is capital stock was limited 70
SS COO 600 be divided ,ato shares Of $40 each II Is
admitted that the whole capital subscribed and paid
h. that certificates OF stock issued representing
she 600 shar, actually subscribed and paid for Now
tH pn all concede that the capital could not be
Increased beyond the So 900 900 seems TO me equally
pa that more than 80 600 shares could Dc created
Beth unaierably fixed by the charter; the capital by
expressing the aggregate amount and the numoer OF
shares by expressing the amount Of each, The whole
sapal divided into shares Of 500 each and the mathe
nAstical result 70 600 in ALL Viewing the question,
therefore,, as one of abstract power, nothing appears
- be wanting = compete demonstration that add
sra could be created. There is, under the
shartr capacity 10 increase the nominal capital
by maitgy ing the shares indefinite than
screase ne CAPITAL by actual subscription indie
ennely beyond he specified limit
tut il h important observe that the question has
sser relations taD those which belong TO it Of
smp capacity power. The 80 0OO shares OF orgi
nal stock subscribed and paid for by the persons to
hem in their individual right, and We're much their
separate and naivdua property as any other possession
which they could acquire The entire capital was req &C.
eentsd the property and franchises of the corporation,
end the OF each share was entitled TO fixed IND
anaterabe proportion OF that capital And from this
1oiows that any attempts TO create greater number
e shares the issue OF additional certificates Is not
emily violation OF the organic law Of the cor poraton
but direct INVASION oil the contract between II and each
Aoder Of IT, original stock. Now while il cannot be de-
aied that the waite Of every share may be reduced by mis-
brtune in the management OF the business
Of corporate BY the neglect an misconduct Of
~ agents acting within their lodged powers it is
eq,alIy ain that this result cannot be effected by
ehal, xeu proportion which each share bears 10
ne az rgte number. II has heen said that the Iimita
don Of the capital number OF shares imposed
rom con Of public policy alone. This j. not
Those who asked for the cha ter and proposed To in
gel tlr pryie captal ia tue enterprise which il con
seulps ed required such limitation for their pro
section every individual who subscribed and paid
for shares OF stock must be deemed 70 have done
rely ing upon the charter tor the safety Of his invest
ueLt
The conclusion to which am brought upon this ques
hon impeached by the consideration (f such is the
nc there shares and certificates OF stock beyond
orig limit which cannot be traced 10 issue
BY the fraudulent agent of the company know not how
Me fact may be in this respect nor Is material 10 the
argument The corporation may be compelled to respond
the holders Of certificates sntng in the aggregate
than its capital, because II cannot distinguish
shose which spurious and those which are genuine
Thus the Of shares be recognized may be prac
aeay increased, not for the reason that all issues
are not void but because, given instance the corpo
alton show tat the shares claimed Of that
cha acter No question OF this kind arises in the case be-
fore
have also stated in general terms OF my
cions, that the certificate issued 10 Kyle void in
has hands upon the special ground that the agent
not certify except upon conditions which did not
exist respect to that transaction observe fur
tber that third person, dealing with Kyle, and taking
from transfer OF the certificate doubtless had
suppose that II had been duly issued Whether
dealing with him under that belief created rights
sgairst corporation shall presently examine. But
Kyle himself dealt directly with The agent Of the company
and he knew the conditions had not arisen in which the
power cert depended he knew this, because he sur
rendered previous certificate and bad transfer
che ooJks other wise from any actual shareholder Now
dc net 10 be Claimed the part OF the
plaintiffs hat the of the agent In issuing the
spurious certificates within any actual power
which The corporation attempted to confer upon
nm that all persons rropos deal in the stock
chargeabie with kncweige of the extent and
Emit Of HI, authority He wa known be transfer
agent merely Of existing and genuine shares and in that
char his 10 the certificate in ques
and al others What il claimed understand 70 be
precisely this That the false certificates being regular
Their ace arc the same iG form as those which
g-uuine, pres 10 third parties dealing in them all
the appearances al having Dc,n duly issued although
fact the agent had no authority 70 issue them aud al
though the extent of his authority known. But
these appearances known 10 be false by those who
dealt directly with the agent and with that knowledge
pretended that they can assert any claim against
he corporation. Such wa the situation Of Kyle
X Is as well this connection any other 10 notice
specia feature Of the transaction which think mparts
eether strength wea~aess 10 the plaintiffs case The
r a. they appear the finding Of the Judge that
Kyle received the certificate not for h own but the agent
-se and having negotiated with the plaintiffs loan ~
p,err = il as -ecu.,tt u-l the proceeds o. the trans
2oan over tee agent But these facts not known
~ tie plaintiff. Th,y vea!t with Kyle the
Upon that lleory tn! have right Low 70 rely ana
understand Thorn r. Z 20. II Is the best the cas- VIII al
init Of they c % take the facts "a they really
regard hyic a ncgotator merely between them
and the fraudulent agent Of the corporation, they would
hen stand in tht position Of immediate dealer will tie
AGENT receiving from, bin certificate ofsock issued with
authority tnis position, a. have shown would
their claim. They Justly prefer 70 be regarded,
and regard them the third parties dealing with
Kyle the apparent owner OF stock
In order 70 keepin view the exact conditions Of tne
general question, think 1t proper to state u concu
shns hich consider thus far established They
follow: j. The certificate was void in the hands Of
Kye the first holder because rraudueny is led,
be paid )tbing for il. 2. IL was also void N hi
bands because sued by agent without authority,
there being render Of previous certificate ana no
trans him the books Of actual stock, and this
want Of authority was known to him 3 j was VOID be
the protested to represent had existence
ard could exit under the charter Of the company all
the powers Of the corporation "a the creation and issue Of
stock being exhausted. IN respect to tns conclusion ast
mentioned Il be, and think Is conceded that rs
further result the certificate is void under all possible
tnces that person. IN whatever situation.
can under the rights Of stakeholder, damages
the ground Of a refusal 70 admit him 20 such rights.
az the law will not require the eetenants y v9ae their
by ting excess OF stool ~ supply this spu
rious certificate VII. not punish them IN damages for
refusing Simply to be guilty q srcn violation. consider
this necessary and so evident as not 10 require
further discussion.
win proceed however. to a more particular examina-
son Of The plaintiffs rights the transferees Of Kyle,
and giving them the most favorable view Of the case,
Will the certificate void IN his hands only on
Me grounds that IL was issued fradduenty without
consideration and hout any authority contained IN the
terms IL Schuyer's appointment a. transfer agent In
tha view the defendants corporation i regarded A.
coupeent 10 recognise the certificate, and II they are
bouro Il do 90 they respond ii damages dpon their
rea-a. The question therefore, VIII be, are they 20
oount state It IN another form, are the plaintiffs "a
situation 70 assert any rights against the company
VIII kyle thcr assignUr did not possess,
bS tA charter Of this corporation, the shares OF its
capt stock made transferable IN such manner AMI
IN su places rs the by laws should direct AMI the by
law declared all transfers should be made IN the
TRANSFER book kept nj the proper ONCE and where GER
t1tatc OF tho took had been issued hatthe should
be surrendered prior W the transfer being made The
certificate IN question: as all others declared on ~
face the came conditions This certificate has in fact
never been surrendered and such transfer has ever
beer made The plaintiffs, on making their loan 70
KyIe took from him assignment and power ~ at
torney 10 blank, but paid regard 10 the oundaneuta
eonaions on which legal title TO the stock could
be transferred " these conditions oi course they had
notice
lam aware il is common TO deal in th. manner in the