Case Name: The Bank of Attica v. The Manufacturers' and Traders' Bank
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1859
Citations: 20 N.Y. 501
Docket Number: 
Parties: The Bank of Attica v. The Manufacturers’ and Traders’ Bank.
Judges: 
Reporter: New York Reports
Volume: 20
Pages: 501–519

Head Matter:
The Bank of Attica v. The Manufacturers’ and Traders’ Bank.
The general banking act invests the stockholders of banks formed under it with the unconditional right of transferring their stock, except as they may agree to limit it by their articles of association.
A delegation by the articles to the board of directors of the general powers of the association and the management of its stock, does not authorize a by-law subjecting the stock to a lien in favor of the bank for the indebtedness of the stockholder.
A stockholder in a bank having such a by-law, assigned his stock to a purchaser for value, without notice of the by-law, and the bank gave him credit before a transfer of the stock on its books and without notice of its assignment: Held, that the purchaser had an equitable title to the stock free from any lien in favor of the bank.
The bank refusing to transfer the stock, the purchaser is entitled to recover its value, and is not restricted to an action to compel an actual transfer.
Appeal from the Supreme Court. Action, by the plaintiff, a corporation organized under the act to authorize the business of banking, against another corporation organized under the same act, to recover the sum of $1,000, and interest from the 1st of September, 1857. The complaint, after setting up the organization of the parties under the act of 18th April, 1838, avers these facts: On the 18th of September, 1856, one Chester Hitchcock became and was the owner of twenty shares of stock of the defendant’s bank, and held a certificate of that date for such stock, numbered 175, in his own name. By the terms of the certificate the stock was transferable, on the books of the bank, by the stockholder or his attorney, on surrender of the certificate. Hitchcock being indebted to the plaintiff for divers loans made in the ordinary course of its business, afterwards, and on the 1st day of July, 1857, for a valuable consideration paid to him by the plaintiff, sold, transferred, assigned and delivered to the plaintiff the said certificate of twenty shares. Afterwards, and on or about the 1st of September, 1857, the plaintiff presented the said certificate of stock co Henry Martin, the defendant’s president, and offered to surrender it, and demanded a transfer of the same on the books of the defendant’s bank: with which demand the defendant by its president then and there refused, and still refuses to comply. The market value of said stock was, at the time, $1,000, and the plaintiff demanded judgment for that sum.
The answer denied all knowledge or information sufficient to form a belief as to the transfer of the certificate; and averred, secondly, that in and by the articles of association under which the defendant was organized, and which were filed in the office of the Superintendent of the Banking Department, in March, 1856, it is provided' as follows: “The rights, powers and privileges now or heretofore conferred by law on this association, and the management of its stock, property and concerns, except the power to increase the capital stock, as hereinbefore provided, are hereby vested in, delegated to and shall be exercised only by, a board of directors to consist of thirteen persons, each of which shall own and hold at least twenty shares in the capital stock of this association.
“ The board of directors shall cause suitable books to be kept for the registry and transfer of the shares of the association, and every transfer to be valid shall be made on such books, and signed by the shareholder or his or her attorney duly authorized in writing, and every transfer shall be made and taken expressly subject to all the conditions and stipulations contained in these articles.
“A majority of the directors shall constitute a quorum for the transaction of business, and may make such by-laws and regulations for the government of themselves, their officers and agents, and for the management of the business of the association, as they may deem . expedient and proper,' not inconsistent with law or these articles of association, and may make such alterations and amendments to such by-laws, from time to time, as they may deem expedient.”
The answer further averred that Hitchcock was one of the original shareholders in said corporation; that he signed and acknowledged the certificate or articles of association, and as such shareholder the certificate in question was issued to him; that thereafter and about the 20th of August, 1856, the board of directors made the following by-law:
“ Ho transfer of shares of stock can be made unless the person making the same shall previously discharge all debts and demands due or contracted by him or her to the bank, unless by consent of the board,” which was and is in full force.
That of said by-law Hitchcock and the plaintiff had notice before the alleged transfer.
That on the 11th of July, 1857, Hitchcock with his partner Powers, under the firm name of 0. Hitchcock & Co., drew their bill of exchange dated that day, on Wells D. Walbridge, payable sixty days after the date thereof, to the order of F. W. Lawson, for the sum of $4,500, which they delivered to Lawson: that it was thereafter accepted by Walbridge and indorsed by Lawson on the 22d of July, 1857, for a valuable consideration to the defendant: that it was presented toWalbridge for payment on the day it fell due, and payment was refused, and notice thereof given to Hitchcock: that it remains wholly due and unpaid, was and is the property of the defendant: that no consent to the sale or transfer of the stock was ever given by the defendant’s directors.
On the trial the plaintiff produced and read in evidence the certificate of stock as follows:
“State of Hew York.
“Ho. 175. Shares twenty.
“Manufacturers’ and Traders’ Bank, )
Shares $50 each. . (
“ Be it known, that Chester Hitchcock is the proprietor of 20 shares in the capital stock of the Manufacturers’ and Traders’ Bank of the city of Buffalo, which is transferable on the books of the bank by the said stockholder or attorney, on the surrender of this certificate.
“Buffalo, Sept. 18th, 1856.
“D. E. ERAZELL, Cask.
H. MARTIN, Pres’t'
On the back of the certificate was the following indorsement:
“For value received, I hereby assign and transfer to the Bank of Attica, all my right, title and interest in twenty shares of the capital stock of the Manufacturers’ and Traders’ Bank, standing in my name on the books of said bank and represented by the within certificate.
“ Buffalo, July 1st, 1857.
“CHESTER HITCHCOCK.”
The signature was proved, and the plaintiff rested.
The defendant then proved all the allegations in the answer, except the notice to the plaintiff and Hitchcock of the by-law, and no proof was offered that the defendant’s directors did not consent to the transfer.
The justice decided, on motion of the plaintiff’s counsel, that the facts proved formed no defence, and the jury, under his direction, found a verdict for the plaintiff for $1,080.68; the value of the stock and interest, and judgment was entered accordingly.
On appeal this judgment was reversed ai general term in the eighth district, and a new trial granted. The plaintiff appealed to this court, stipulating according to the statute that in case the order for a new trial should be affirmed judgment absolute should be rendered for the defendant.
Lorenzo K. HaddocJc, for the appellant.
Sherman S. Bogers, for the respondent.

Opinion:
The opinion of the court was delivered by
Denio, J.
We are of opinion that it was not in the power of the directors of the defendant's bank to restrain the transfer of its stock in the manner proposed by the by-law upon which the defendant relies. The general banking law contemplates an individual ownership of the shares into which the capital stock shall be divided, and their transfer from one person to another. It declares that the shares shall be personal property, though the money which constitutes the capital may be in part invested in real estate. The association, in judgment of law, is seised and possessed of all its real and personal property; but it is not in any sense the owner of the shares,'those being vested in the individual proprietors. The quality of transferability being attached to the shares, the corporate body has no authority to interfere with the disposition which any shareholder may see fit to make, except so far as such authority is conferred by the act itself, or by some general law applicable to the case. Upon the subject of transfers, the nineteenth.section of the statute declares that the shares shall be transferable on the books of the association in such • • • manner as may be agreed upon in the articles of association. {Laws of 1838, 249.) Assuming, without at present deciding, that this provision would allow a restraint to be.inserted in the articles of the character of that contained in this by-law, it does not afford any countenance to the position that it could be imposed in any other form. If we concede that the power to determine the manner in which a transfer on the books may be made includes a power to forbid it in a case in which the shareholder is indebted to the association, the act prescribes very distinctly that it is to be contained in the articles. The manner of the transfer, including, according to this assumption, any qualifications or restraint which it maybe thought expedient to attach to the right to transfer, is to be such as may be agreed upon,—not by^a by-law, or by any act of the. directors, but in the articles of association. It was not necessary to insert negative words to exclude any other manner of performing the same thing; for, by the most common rules of construction, where a matter is authorized to be done in a particular way, every other different method of doing it is excluded. And the difference between a restraint upon alienating the shares in these associations, contained in the articles which must receive the assent of all the primary shareholders, and by which all persons holding derivative interests must be bound, and a like restraint imposed by the agents of the association in the form of. a by-law, which may or may not come to the knowledge of the shareholders, and which, if known, may be disapproved of by them, is very marked. A person may generally agree by express contract to any qualification of his rights of property, not repugnant to the rules of law; but if another person undertakes to attach such qualifications in his behalf, he must show his authority for the act. I am unable to find any authority for the directors in these associations to insert such a provision in a by-law. The Revised Statutes do indeed declare that every corporation, as such, has power to make by laws not inconsistent with any existing law, among other things, for the transfer of its stock. (1 R. S., 600, § 1, subd. 6.) If this would be a sufficient warrant for the by-law under consideration—if the general banking law had been silent upon the subject of transfers of stock—it is quite otherwise when we s'ee that a distinct regulation is contained in that act, assigning the articles of association as the instrument in which the rules respecting transfers are to be contained.
I do not think, therefore, it was in the power of the associates to agree in the articles, that the matters which the Legis- lature had declared might be contained in them, should be the subject of regulation by the directors in forming their by-laws; but if they could so agree, I am of opinion that the delegation of power is not sufficiently comprehensive to meet the case. The articles in this case declare that a majority of the directors may make by-laws and regulations for the government of themselves, their officers and agents, and for the management of the business of the association. The portion of the by-laws relied upon by the defendants, does not relate to these subjects. It does not concern the business of the association, but the private business and individual interests of the shareholders. Ample scope would be given to the delegation of authority, if we hold it to be confined to the affairs which the corporation as such' are concerned in transacting for the common' interest of all the shareholders.
These considerations lead to the reversal of the judgment of the Supreme Court, and it is accordingly reversed.
Johnson, Oh. J., Comstock, S. B. Strong and Grover, Js., concurred.