Tuttle vs. Walton.

which she then for the first time gave notice, be invalid, it cannot be helped by the notice. If the By-law be bad, it is bad ab initio, and is as though it had never been. If it be bad, then the rights of these parties are as though it had never been. This decision, as to its legality, goes back to the first moment of its adoption, and in its return covers and protects all rights which are sought to be affected by it. If the court is called upon to pronounce upon its validity, then I submit whether these conclusions are not irresistible; and that it is so called upon both parties admit--by which I mean to say, that it is not only admitted by counsel in argument, but it is admitted by the pleadings. "Pleading is the formal mode of alleging, on the record, that which would be the support or defence of the party in evidence."--By Buller J. 3 T. R. 159. I proceed to inquire, having thus defined the position of the question, what kind of lien, if any, is created by this By-law? Liens are either general or particular. A general lien is the right to retain the property of another for a general balance of accounts. A particular lien is the right to retain it, only for a charge on account of labor employed, or expenses bestowed, upon the identical property detained. The latter kind of lien is favored in law, but the former taken most strictly against the party setting it up. --2 Kent. 634; 3 Bos. and Pul. 496; 4 Burrows 2221. These liens are created either by common law, or by usage of trade, or by express agreement of the parties.-4 Burrows, 2221. A lien upon the shares of a stockholder for debts due by him to a corporation, does not exist at common law, nor by usage of trade. When it does exist, it is usually given by statute.-Ang. and Ames, 296. The lien, therefore, of the Augusta Insurance and Banking Company, if it has any at all, which I may once for all deny, is a general lien, created by an implied contract between that Institution and Glendenning. The evidence of this contract is found in the By-law, and in the fact that Glendenning took the stock upon the terms prescribed in it. The parties have in this contract themselves declared what kind of lien the bank is to have. And first, it is declared that the stockholder, (Glendenning,) who may be indebted to the institution, as payer or endorser, upon any rote or notes, lying over and dishonored, shall not be permitted to transfer his stock; and second, in that case the company shall be considered a creditor in possession, and such possession, and such dishonored note or notes, shall constitute a lien upon the stock, which shall be held subject to the payment of such note

or notes.

The lien, then, by the agreement, is that of a creditor in possession for a balance of accounts. Again then, our inquiry returns, Have these parties the right at common law, to create such a lien, through the agency of a By-law, thereby excluding creditors, without notice, and purchasers who claim under the lien of their judgments? Is the By-law good or bad, at common law? If it is bad, then there is no agreement, and no lien. I now return, I trust, with a clearer view of the whole ground, to my primary threefold division of the question made by the record; and first, is the By-law valid as between Glendenning and the company, the original parties? It may be conceded that it is. I can see no good reason, why this company may not prescribe terms to the

of their stock, so long as the terms prescribed affect no rights e of the company and the stockholder. Viewed in the light of

Tuttle vs. Walton.

an agreement between the parties, it is good. As between the original parties, the question of lien does not and cannot arise. As the evidence of an agreement between the parties, the By-law is one thing; as the act of the bank, which is the foundation and proof of a lien, it is a very different thing. It may be good for one purpose, and bad for another. It may restrain the voluntary transfer of the stock, and it may appropriate the dividends, and apply the stock itself, to the extinguishment of the stockholder's indebtedness, so long as such appropriation and application do not interfere with the rights of third persons. Thus far, it may be considered as not against the laws of the Realm, as not repugnant to the constitution and laws of the State and of the United States. This position is sustained by authority.-Ang. and Ames 297; 1 Harrington's Del. Rep. 27; 2 Peere Williams 207. It is true, too, that such a Bylaw as this has been sustained as between the assignees in bankruptcy of the stockholder, and the corporation. It was so adjudged in the case of 2 Peere Williams. This, however, settles nothing as to the rights of third persons, because the assignees of the bankrupt stockholder occupy his place-are subrogated to his rights, and are subject to his contract with the company. They pay no value-are not creditors or purchasers. The question of lien does not arise. In case of the bankruptcy of the stockholder, the question of lien might be made, perhaps, as against both the company and the assignees, by one or more of the creditors. Secondly, Is the by-law valid as between the company and the creditors of Glendenning? In my judgment it is not, and according to the views already given of the character of this issue and circumstances of this cause, it is equally invalid as against a purchaser, who claims, under a creditor's judgment open against Glendenning-that is to say, the lien set up by the bank is not good against the lien of that judgment. I come now to consider, it will be perceived, the By-law as the basis and proof of lien. And before proceeding farther, I remark, that the authorities read by the learned counsel for the defendant in, error, do not make this By-law good as between the bank and third persons. In no case read by him, was the contest between the corporation and the creditors of the stockholder. The case read from Peere Williams, which was relied upon with greatest confidence, as I have before stated, was a case between the assignees of a bankrupt stockholder and the corporation. That case was decided, moreover, upon the express ground that the legal interest in all the stock was in the company, who were trustees for all the members. Angell and Ames, commenting upon this case, state this to be the ground of the decision. The Chancellor in delivering the opinion of the court says, "This is a good By-law, for the legal interest in all the stock is in the company, &c." The By-law in the case in Peere Williams, was substantially the same with that in this case. Now, so far from the legal interest in the stock of the Augusta Insurance and Banking Company being in the company, that interest is in the stockholder, and the company are in the character of trustees of the fund paid for it, to be used by them as such for his benefit. The stock stands in his name on the books of the company. This case cannot therefore negative the position which I last assumed.

To make this by-law, and the lien created by it good, notice of the law to the world, and in this case notice to Tuttle, at the time he gav

Tuttle vs. Walton.

credit to Glendenning, was indispensable. Without such notice it is a fraud upon creditors, and void. It is not pretended that there was notice, either actual or constructive. If there had been notice, I do

not hesitate to say, that much of the difficulty of this question would be removed. There was no notice. The lien is secret, and this is the radical vice of the whole transaction. For the purpose of encouraging trade, commerce, and the arts, particular liens, such as the liens of artisans, factors, bailiffs, consignees, &c., are favorably regarded by the law, and though secret, are protected. Not so with general liens created by contract. The law does in fact abhor a general secret lien; and to be sustained, it must be founded in the clearest and strongest equity. Modern decisions lean against them. The vendor's lien for the purchase money of real estate, founded in that clear principle of equity, that the vendor is entitled to a just equivalent for his property, is not much favored in the late cases, because it is a secret lien. It has been determined by the Supreme Court of the United States, that the vendor's lien cannot be retained against creditors holding under a bona fide mortgage, or conveyance from the vendee, nor against a subsequent purchaser without notice.-7 Wheat. Rep. 46; 3 Gill & Johns. 425; 5 Yerger, 205; 4 Kent, 154.

Chancellor Kent, commenting upon this decision, uses this strong language" As the registry of deeds is the policy and practice in this country, I think the decision in Wheaton is correct, and that this latent equitable lien ought not to prevail over bona fide purchasers from the vendee, and for valuable consideration, and that they are not bound to take any notice of this dormant lien, resting, for its validity, on the state of the accounts between the vendor and his vendee."-4 Kent, 154. n. The opinion is strongly intimated, in this quotation, that the purchaser's title would be good against the vender's lien, even with notice. With what force does not this reasoning apply to the case before this court? Is the lien claimed by the defendant in error within the policy of the rule which recognizes particular liens at Common Law, or the equity of that which allows the vendor's lien? I hope to be able to show that it is not. I say this is a secret lien. How stand the facts? This corporation declare, by a bylaw, that they are creditors in possession of Glendenning's stock, and that possession, with a future indebtedness, if perchance he may become indebted, shall constitute a lien in their favor. The law is recorded on the books of the company, which books are not open to the inspection of the world, but are carefully hid away in its vaults. There is no publication of it, nor is there any notice of Glendenning's indebtedness. That too is, until long after Tuttle has given him credit, a profound secret. Having legislated themselves into a right adverse to all the world, it is not until Tuttle has become the creditor of Glendenning, and reduced his debt to a judgment, and brought the stock to sale, that they make a revelation of that right. They occupy a position wholly anomalous. They are, in a land of laws, the legislators and administrators of justice. Their by-law and their possession is their lien; and at the same time a judgment to which the general administration must yield obedience. Not only is this but whilst it is true, they do give notice, semi-annually, that Glenis, in fact, the owner of the very stock upon which they claim a the holder of the legal estate encumbered with their equity

Tuttle vs. Walton.

but the unqualified owner.-Hotchkiss, 360. That this notice is a requirement of law does not relieve them. Being required to report the names of their stockholders, and the amount of stock owned by each, should, and does constitute a reason why, in good faith to the public, they should give notice also of the encumbrance upon it. Nor is it any answer to say that such publication would be impolitic as to the interest of the bank. As a bank, the law recognizes, in their behalf, no favors nor exemptions but such as are found in their charter. It is a strong legal presumption that it was upon the faith of the ownership of this stock, thus made known, that Tuttle gave credit to Glendenning. The by-law is therefore a fraud in law upon creditors and purchasers, and void. I do not mean to say that notice is indispensable to all liens, but that in the circumstances of this case, notice is indispensable, and the want of it a fraud upon strangers to the corporation. If it be in law fraudulent, it is repugnant to common right and common law, and of necessity void; and in no stage of these proceedings entitled to the sustaining consideration of courts of justice.

But this by-law, in its terms, creates the lien of a creditor in possession, to secure a contingent indebtedness; by which is meant, I suppose, a general balance, which at any time may be found due by the stockholder to the company. Creditors in possession at common law have a lien, under certain circumstances. The facts of this case do not give the company the position of creditors in possession. The lien of creditors in possession arises in cases where property is placed in possession of an individual, or company, upon which labor or expense is to be bestowed by agreement made between the parties, or implied in law.

pository has a lien upon it for his labor and expense. Also, in other cases, when a contract is made or implied, that the property is to be retained to secure a present or continuously recurring indebtedness. Now in this case, at the time of making the by-law, there is no labor to be bestowed on, or expense to be incurred about, the stock. The lien is not claimed on account of either. Nor is there any present indebtedness, or running account between the parties. It is admitted, that at the time the by-law is made, and at the time Glendenning became a stockholder he owed the company nothing, nor did he become its debtor until about eighteen months afterwards. So that the declaration in the by-law, that the company shall be a creditor in possession, does not in fact make them so. They cannot be, by their own act, remitted to the rights of a creditor in possession. On the contrary, the facts in the case show the bylaw to be repugnant to those principles of the common law which recognize the lien of creditors in possession, and is on that account void.See Montague on Liens, Titles-Factor, Common Carrier, Banker, Bailee, Attorneys, Ship-builders, &c. Nor can this be looked upon as a pledge of the stock, which creates a lien upon it. Pledges may create a lien to secure precedent or contemporary debts, or existing debts and future advances. But I believe no case can be found of a lien created by pledge without any existing debt, to secure payment of a future debt, which may or may not exist.-See 2 Kent, 576-7, 583. The same doctrine holds, as to mortgages, only with greater strictness. There can be no mortgage without a present indebtedness, or liability on the part of the mortgagee for the mortgagor. And although a mortgage may

Tuttle vs. Walton,

good for debts to be contracted as well as for debts due, yet notice of such intent between the parties, has been held necessary.-2 Johns. C. R. 309; 2 Viner's R. 52; 4 Conn. R. 158. According to the Napoleon code a conventional mortgage, (that is, a mortgage created by the act of the parties,) is not valid except so far as the sum for which it is granted is certain and determined by the act.-Code Napoleon, 581. No one can fail to have remarked how careful the Legislature of Georgia has always been to require notice of liens created by statute. The policy seems to have been never to create a secret lien, always to maintain the rights of the people, equal under the law. Particularly is it true, that our Legislature has labored to keep the rights of creditors equal. This is apparent in our stringent registry laws. Deeds, mortgages, masons' and carpenters' liens are required to be registered.-Hotchkiss, 420, 623-4-5. All statutory liens are made public in the publication of the law which creates them. The policy of the Legislature is in accordance with the spirit of the age and the genius of our institutions. There is no element of monopoly or favoritism in our fundamental law. Is there anything in corporations to commend them to special favor? Does any consideration of public convenience require that they should be favored? I think not. And were it necessary, this could be demonstrated. Infinitely stronger is the reasoning in favor of conferring special favors upon individuals. The course which enlightened policy suggests, is that which our legislature has taken,-a stern determination to make the laws of the State equal. Can it, therefore, be presumed that the Legislature meant to confer upon this corporation the power of creating for itself a lien which she has nowhere given to the citizen. The idea seems to me to be unreasonable. The power has been exerted in this By-law. It is void in my judgment, because it is repugnant to the whole drift and policy of our legislation.

If this lien is sustained, then the law invites to collusion between the company and stockholder, and patronizes immorality. I need not linger to point out how easily this collusion may be effected, how easy it would be for a dishonest debtor, by the aid of such a By-law, with the co-operation of the company, to cheat his creditors. He is not only an individual, but he is also a corporator--he is, if such a thing can be, part of both parties. Interested, as he is, in the corporation, the arrangement inures as well to his benefit as to the benefit of other stockholders. It increases the strength and resources of the company of which he is a member. It has been decided that the By-law of a corporation, whose charter makes the stockholders individually liable for its debts, permitting the stockholder to forfeit his stock to the company, is void, because a fraud upon his creditors. In the case now referred to, the creditors were creditors of the company, and, at the same time, in the event of its insolvency, creditors of the stockholder. The principles involved are like those involved in the case at bar. The contest was between the creditor of the stockholder, (for it was admitted that the company were insolvent,) and the company, as to the validity of a By-law which forfeited to the use of the company his stock. In this case the court declared the By-law void and re, upon the ground that it was against the fundamental princind equity, and legally fraudulent.-19 Johns. Rep. 477, 478, ciary act of 1799, all the property of a defendant against