would not be in accordance with sound rules of construction to infer, from the provisions of several different statutes passed for the purpose of obtaining information needed to secure the taxation of such property, or for the purpose of subjecting stockholders to a liability for the debts of a corporation, or for protecting the corporation itself in its dealings with its own stockholders, that the legislature intended thereby to take from the stockholder his power to transfer his stock in any recognized and lawful mode. If a change in the mode of transfer be desirable, for the protection of creditors, or for any other reason, it is for the legislature to make it by clear provisions, enacted for that purpose."

§ 161. The convenience of unrestricted transfers of stock is so great that it may be said that such transfers are now a necessity. Transfers of stock, not only for purposes of speculation but also for the purposes of security, have now become so important an element in the business transacted every day in all the centers of commerce and trade that it is almost a matter of necessity that the mere delivery of the certificate with a power of transfer should be effectual, not only as between the parties to the transaction, but also as against the assignor's creditors. This practical necessity for an unrestricted transfer of shares of stock has been generally recognized by the courts, in the absence of statutes making a transfer upon the books of the company requisite to the validity of the transfer. Thus, in a recent case in Louisiana the court say: "There is an immense amount of the wealth of the country invested in stocks of the numberless corporations, which have sprung into existence within a few years past. These stocks afford a most convenient and valuable basis of credit; and they are sold to a large amount daily, at all the great commercial centers. The holder who does not wish to sell may pledge his certificates for loans and discounts to an amount approximating their market value, with a reasonable margin for possible depreciation.

'Smith v. Slaughter House Co., 30 La. Ann. 1378, 1383.

The pledgee does not desire to become the owner of the stock; and he would not think it necessary, nor would he have the right to surrender the pledged certificates and have the stock transferred to him on the books of the corporation. Nor do we think the validity of the pledge could be made to depend on the giving of notice to the corporation, because the corporation has no power or authority to dispose of the stock or to transfer it, so long as the certificates are not produced and surrendered. If the pledgee were required to have the transfers made on the books of the corporation or to give notice, the value of these certificates as a basis of credit would be greatly impaired, particularly where the pledge is made at a distance from the domicil of the corporation."

There is a very great convenience, not only to persons dealing in stocks, but to merchants and bankers who have occasion to use them as collateral, to be able to give or take an indisputable title without an actual transfer of the shares upon the books of the corporation.' The office of the corporation may be far away from the place at which the transaction is had; or the transaction may be one for a temporary purpose, such as a loan for a few days upon stock as security. Then, again, it is customary with all large corporations to close the transfer books whenever dividends are declared, and to keep them closed, perhaps, for weeks at a time; and consequently, during such periods, all transactions must necessarily be had without an actual transfer of the shares.

The latest decisions, as well as those having the highest authority, establish the rule, that in the absence of legislative enactment restricting the transfer of stock to a particular mode, a transfer is complete on delivery of the certificate with a power to transfer, not only between the parties themselves, but when the corporation has unjustifiably refused to make the transfer on its books, against a creditor of the vendor, who, without notice of the transfer, has attached the stock."

1 Cornick

(Tenn.) 1.

2

v. Richards, 3 Lea 74 Mo. 77, affirming 6 Mo. App. 454; and cases cited in §§ 159-161.

2 Merchants' Nat. Bank v. Richards,

§ 162. A mere rule of a corporation not authorized by statute can not affect the rights of purchasers or pledgees of stock. Thus an unauthorized by-law of a corporation, forbidding a transfer of stock when the holder is indebted to the corporation, does not relieve the corporation from the duty of making a transfer upon its books upon the request of one to whom the certificate, accompanied by a power of attorney, has been assigned.' "There is no presumption in favor of the right of a corporation to refuse to transfer on its books stock of the company which the shareholder has sold to a bona fide purchaser. The certificate represents the property, and if any secret lien upon the property exists, such lien must be shown. The burden is on him who asserts the peculiar privilege to prove it, as restrictions on the free transfer of personal property are not favored, especially as against an innocent purchaser who has paid for the certificate. At common law, and independently of positive provisions of the legislature granting or authorizing the exercise of the power, a corporation can not prohibit the transfer of its shares on account of the indebtedness of the shareholder to the corporation. Where the stock is personal property, restrictions upon its transfer must have their source in legislative action, and the corporation itself can not create these impediments.""

1 Carroll

v. Mullanphy Savings stock should be transferable according Bank, 8 Mo. App. 249, 252. to such restrictions as the board of directors should establish, subject to the laws of the state; St. Louis Ins. Co. v. Goodfellow, 9 Mo. 149. And see Spurlock v. Pacific R. Co., 61 Mo. 326, where the power to make by-laws was general.

In this case the by-law under which the corporation refused to make the transfer was one adopted by the directors, and not one made by the corporation. The by-law was considered as of no effect, because the power to make by-laws ordinarily resides solely in the corporation. It would be otherwise where the charter of the corporation gives express power to the directors to make by-laws for the transfer of its shares of stock; Mechanics' Bank v. Merchants' Bank, 45 Mo. 513, 100 Am. Dec. 388; or where a company's charter provided that its

2 Carroll v. Mullanphy Savings Bank, 8 Mo. App. 249, per Hayden, J., citing Chouteau Spring Co. v. Harris, 20 Mo. 382, 387; Moore v. Bank, 52 Mo. 377, 379; Bank of Attica v. Manufacturers' Bank, 20 N. Y. 501, 505; Rosenback v. Bank, 53 Barb. 495; Steamship Dock Co. v. Heron, 52 Pa. St. 280.

IV. Transfers in Blank.

§ 163. By general commercial usage a transfer of a stock certificate may be made in blank. An indorsement in blank of a certificate, or a signing in blank a power of attorney to make a transfer upon the company's books, authorizes any subsequent holder to fill up the assignment or the power of attorney. This right to fill up the blank is not limited to the first taker of the instrument, but may be exercised by any one into whose hands the certificate may come in this way. The blank in the assignment or power may be subsequently filled up by the holder with his own name, so as to entitle him to a transfer upon the books of the company, although the assignment or power be executed under seal. The commercial usage to this effect is well established and judicially recognized in this country. But even without the aid of this usage, assignments in this form would doubtless be upheld by some courts.

In a leading case upon this subject it appeared that the owner of certain shares of bank stock, which were transferable only upon the books of the bank, sent his certificate with a blank power of attorney under seal, and his own promissory note, to

1 Kortright v. Commercial Bank, 20 Wend. (N. Y.) 91, 22 Wend (N. Y.) 348; Leavitt v. Fisher, 4 Duer (N. Y.) 1; Persch v. Quiggle, 57 Pa. St. 247, Finney's App., 59 Pa. St. 398; United States v. Cutts, 1 Sumner 133; Continental Nat. Bank v. Eliot Nat. Bank, 7 Fed. Rep. 369; New Orleans Nat. Banking Asso. v. Wiltz, 10 Fed. Rep. 330; German Union Building Asso. v. Sendmeyer, 50 Pa. St. 67; Holly Turnpike Co. v. Ferree, 17 N. J. Eq. 117; Broadway Bank v. McElrath, 13 N. J. Eq. 24, 105 Ill. 436; Otis v. Gardner (Ill. 1883), 15 Rep. 332.

2 Bridgeport Bank v. N. Y. & N. H. R. Co., 30 Conn. 231, 273; Strange v. H. & T. C. R. Co., 53 Texas 162; Sewall v. Boston Water Power Co., 4 Allen (Mass.) 277, 81 Am. Dec. 700;

Walker v. Detroit Transit Co., 47
Mich. 338, 11 N. W. Rep. 187.

When a general usage has been judiciously ascertained and established, it becomes a part of the law merchant "which courts of justice are bound to know and recognize." Brandao v. Barnett, 12 Cl. & F. 787, 805, per Lord Campbell; Pitot v. Johnson, 33 La. Ann. 1286; Blouin v. Hart, 30 La. Ann. 714; State v. Jeffersonville Nat. Bank, 89 Ind. 302; Merchants' Nat. Bank v. Richards, 74 Mo. 77, affirming 6 Mo. App. 454; Baldwin v. Canfield, 26 Minn. 43, 1 N. W. Rep. 261; McClintock v. Central Bank, 120 Mo. 127, 24 S. W. Rep. 1052; Van Cise v. Merchants' Nat. Bank, 4 Dak. 485, 33 N. W. Rep. 897; Spreckels v. Macfarlane, 9 Hawaii 166.

an agent to use in obtaining a loan. Subsequently this agent obtained a large loan upon these securities and absconded with the money. The pledgee filled up the blank transfer and power of attorney and demanded a transfer of the shares to himself upon the books of the bank; but the bank refused to allow this. In a suit by the pledgee against the bank for such refusal the pledgee was held to be entitled to recover. Chief Justice Nelson, in denying a motion for a new trial, said that the filling of the blanks in the transfer and in the power of attorney was in strict conformity with the universal usage of dealers in the negotiation and transfer of stocks, according to the proof on trial. "Even without the aid of this usage there could be no great difficulty in upholding the assignment; the execution in blank must have been for the express purpose of enabling the holder, whoever he might be, to fill it up. If intended to have been filled up in the name of the first transferee, there would have been no necessity of its execution in blank; the owner might have completed the instrument. The usage, however, is well established, and was fully understood by the owner, as he made the transfer in conformity to it, and he, or those setting up a claim under him, should not now be permitted to deny its validity. The filling up is but the execution of an authority clearly conveyed to the holder, is lawful in itself, and convenient to all parties, as it avoids the necessity of needlessly multiplying transfers upon the books. ""

If the owner of shares of stock indorses the certificate in blank and intrusts it to an agent to obtain a loan upon a pledge of the certificate as collateral security, one dealing with the agent without knowledge of the principal's instructions would doubtless be justified in purchasing the shares; and if the transaction as between the agent and purchaser was an absolute sale, the principal would doubtless be estopped to set up his secret instructions to his agent, and would not be allowed. to redeem the stock as held upon a pledge.

1 Kortright v. Commercial Bank, 20 Wend. (N. Y.) 94, per Nelson, C. J.; approved in Matthews v. Massachusetts Nat. Bank, 1 Holmes 396, 407.

3

2 Kortright v. Commercial Bank, on appeal, 22 Wend. 348.

3 See Morrell v. Kelley, 157 Mass. 126, 31 N. E. Rep. 755. In this case it