Court Opinion

ID: 8741345
Source: CourtListenerOpinion
Date Created: 2022-11-26 10:49:34.592459+00
Date Added: 2024-06-11T17:00:25.160045
License: Public Domain

TIIAYER, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
When a person subscribes for stock either in a domestic or a foreign corporation, he thereby consents to be governed by the provisions of its charter or the general law under which it is incorporated, and by such by-laws of the corporation as may be lawfully enacted, and that his rights and liabilities as a stockholder shall be tested and determined with reference to such laws. The fact that a stockholder of a corporation is not a citizen or resident of the state or country where the corporation was incorporated does not exempt him from the operation of any of those provisions of the act of incorporation, be it a general or special act, which determine tho rights and liabilities of domestic shareholders, and regulate their dealings with the corporation. Every corporation carries its charter wherever it goes and is allowed to transact business; and, while a corporation may be restricted in the exercise of some of its powers while doing business in a foreign state, yet every one who deals, with it is bound 1o take notice of the authority that is conferred upon it by the act from which it derives its corporate existence. This is especially true of one who subscribes for stock, and thereby becomes a member of the company. Relfe v. Rundle, 103 U. S. 222, 226, 26 L. Ed. 337; Silver Mines v. Brown, 19 U. S. App. 203, 208, 7 C. C. A. 412, 58 Fed. 644. It has also been held that when a foreign sovereignty, having authority so to do, confers upon one of its corporations the right to readjust its indebtedness in a given manner, or to liquidate its affairs, or to make assessments upon shareholders, the right so conferred will be recognized and enforced by the courts oí the United ¡States, provided the foreign statute accords to all creditors and shareholders equal privileges, without reference to- their place of residence or citizenship-, and does not contravene the general poliev of our laws. Railway Co. v. Gebhard, 109 U. S. 527, 3 Sup. Ct. 363, 27 L. Ed. 1020. See, also, Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739, 33 L. Ed. 184; Glenn v. Liggett, 135 U. S. 533, 10 Sup. Ct. 867, 34 L. Ed. 262; First Nat. Bank of Deadwood v. Gustin-Winerva Con. Min. Co., 42 Minn. 327, 44 N. W. 198, 6 L. R. A. 676. It follows, therefore, that the defendant was and is *588subject to all tbe provisions of tbe companies act of 1862 and tbe subsequent amendments thereof, that bis rights are to be determined thereby, and that be can only avoid liability as a' shareholder by showing that, prior to the commencement of the liquidation proceedings against the plaintiff company, he had done whatever was necessary under the provisions of that act to have his stock transferred upon the company’s books, and his name stricken from the list of registered shareholders or contributories. The findings by the trial court show that the defendant did nothing personally, prior to the commencement of the liquidation proceedings, to have his name removed from the list of registered shareholders. It is true that he had indorsed his stock certificate, and had subsequently executed a written assignment of his shares in the company, but he had made no application to it to have the stock transferred on its books; and it seems obvious, from the fact that he receipted for dividends for more than two years after he had sold and assigned his stock, -that he must have been aware that his transferee had not made an application to have the stock transferred on the company’s books, or that, if such application had been made, it had been for some reason denied, and that his name was still borne on the books as a registered shareholder. In point of fact, the stock was not transferred on the books when a transfer was solicited in December, 1891, because the transfer fee prescribed by the by-laws of the company was not paid; and, under the findings by the trial court, it is also manifest that the transfer of the stock could not have been lawfully made when it was solicited by the transferee, because the assignment of the shares was not stamped as it should have been to entitle it to registration. Under these circumstances it is clear, we think, in view of the construction that has heretofore been placed on the companies act by the courts of Great Britain, that the defendant, Giesen, cannot successfully claim exemption from liability as a stockholder. In the leading case of Oakes v. Turquand, L. R. 2 H. L. 325, 345, 349, the principle was established, and has since been firmly adhered to, that under the companies act a person who is liable to assessment, and to have his name placed on the list of contributories in liquidation proceedings, is any person who has agreed to become a member of the company, and whose name is upon the register of stockholders. A person whose name so appears upon the register of stockholders when liquidation proceedings are instituted (the same having been placed there originally with his consent) cannot avoid liability as a shareholder, and is estopped from so doing, although he was induced to become a subscriber through fraud. And in Gustard’s Case (In re European Central Ry. Co., L. R. 8 Eq. 438, 443), wherein it appeared that a stockholder had sold and assigned his stock prior to liquidation proceedings, and had sent the transfer to the company’s office to be recorded, and had not been notified that the company had declined to transfer it because of the alleged nonpayment of calls, it was held that the company was under no obligation to send a notice of its refusal to make the transfer, and that it was the stockholder’s duty to see that everything was complete, or, in other words, that everything had *589been done to entitle him to a transfer of the shares upon the company’s books. In this country it has also been decided, under statutes requiring transfers of stock to be made on the books of the corporation, that the corporation may treat those persons as shareholders whose names appear as such on the books of the company, notwithstanding the fact that they have sold and assigned their stock to a third party, who has not perfected the transfer. Richmond v. Irons, 121 U. S. 27, 58, 59, 7 Sup. Ct. 788, 30 L. Ed. 864; Hawkins v. Glenn, 131 U. S. 319, 334, 335, 9 Sup. Ct. 739, 33 L. Ed. 384. This court has also pointed out on several occasions that a transfer of stock which is good and effectual, as between the vendor and the vendee, to vest the latter with a complete equitable title, may not be effectual to relieve the vendor from his liability to the corporation or its creditors, because in all matters relating to the internal government of the corporation the latter are entitled to treat those persons as shareholders whose names appear upon the register of shareholders, until their shares are transferred upon the books in the mode prescribed by the company’s charter and by-laws. Bank of Commerce v. Bank of Newport, 27 U. S. App. 486, 489, 11 C. C. A. 484, 63 Fed. 898; Horton v. Mercer, 36 U. S. App. 234, 238, 239, 18 C. C. A. 18, 71 Fed. 153.
The claim is interposed on the part of the defendant that when, in December, 3.893, the American Mortgage & Security Company, the assignee of the stock, transmitted the assignment thereof to the plaintiff company, and asked to have it transferred upon the company’s books, the latter company had- no power to demand a fee for recording the assignment, and that, having made the demand without authority, the stock should be treated as having been duly transferred upon the books at that time. This contention is based on the ground that the provision contained in the company’s articles of association, requiring the payment of a fee of two shillings and sixpence for entering transfers, is in conflict with the companies act. We are unable to hold, however, that there is any conflict between the act and the articles of association; for while it is true that the act provides, in substance, that a company shall, on application of the transferror of any share in the company, enter in its register of members the name of the transferee in the same manner as if the application for such entry was made by the transferee, yet it cannot be inferred, we think, that this provision of the companies act was intended to prevent the members of a company from establishing by their articles of association reasonable rules and regulations governing the transfer of stock. A rule like the one now under consideration, exacting the payment of a small fee to cover the necessary expense of making such transfers in an orderly manner and keeping a suitable record thereof, cannot be said to be unreasonable, and on that account void. But, even if this view were erroneous, there seems to be no escape from the conclusion, in view of the findings by the trial court, that the American Mortgage & Security Company was not entitled to have the assignment of the stock registered upon the books a,t the time such request was made, or at any time thereafter, because the assignment was not stamped *590in conformity with. English laws, and because the officer of the plaintiff company who was requested to enter and record the assignment would have incurred a penalty by so doing.
Upon the whole, we feel constrained to hold that the defendant’s name was properly placed on the list of contributories in the liquidation proceedings, because he was a registered shareholder when those proceedings were inaugurated, and had not therefore taken the necessary steps to make it the legal duty of the plaintiff company to transfer his stock upon the books. The creditors of the plaintiff company are entitled to treat the defendant as a stockholder, under the provisions of the act from which the company derived its corporate existence, and by becoming a stockholder the defendant agreed to become bound and to have his rights determined by the provisions of that act. The judgment below being for the right party, it is accordingly affirmed.