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coin deposited as collateral, and that this judgment might be discharged in treasury notes.'

§ 436. If the pledgor take the property pledged from the pledgee by replevin before the debt is satisfied, the latter, under the laws of Missouri, is entitled, upon judgment in his favor, to damages to the extent of his interest in it, instead of taking back the property. The judgment in such case should be for the value of his interest, and not for the total value of the property, because this course settles the rights of the parties and leaves nothing open for further litigation between them. But if judgment is entered for the full value of the property, and this exceeds the amount of the debt secured, the pledgee will hold the remainder of the money received, after satisfying his claim, to the use of the pledgor. Such judgment for the full value of the property does not determine the question of title to the property, but only the question of possession. The pledgee holds the money recovered by such judgment in place of the specific thing pledged. He has no better title to the money than he had to the thing pledged before that was wrongfully taken from him. He can not receive and retain the total value of the collateral to his own use."

1 Warner v. Sauk County Bank, 20 Wis. 492.

2 Miles v. Walther, 3 Mo. App. 96; Dilworth v. McKelvy, 30 Mo. 149. 3 Miles v. Walther, 3 Mo. App. 96.



I. His rights and liabilities as a stockholder, 437-460.

II. His rights acquired in good faith from the apparent owner, 461473.

III. His rights when dealing with one holding a fiduciary relation, 474-494.


His rights as broker carrying stock upon margin, 495–500. V. His right to use and hypothecate pledged stock, 501–512.

I. His Rights and Liabilities as a Stockholder.

§ 437. The liability one incurs as a stockholder, by taking shares as collateral security, is often a matter of importance. In general, it may be said that one to whom a certificate of stock has been issued absolutely, but in fact as collateral security, assumes the liabilities of a stockholder so far as concerns the creditors of the corporation, and must bear all the burdens that relation imposes. Having voluntarily assumed the relation of stockholder, it makes no difference that he has done so with a view to assist the corporation itself by a loan of money or credit.' The legal title to the stock being in him by his

National Bank v. Case, 99 U. S. Ill. 68; Moore v. Jones, 3 Woods 628; Pullman v. Upton, 96 U. S. 328; 53; Ball Electric Light Co. V. In re Empire City Bank, 18 N.Y. 199; Child, 68 Conn. 522, 37 Atl. Rep. Holyoke Bank v. Burnham, 11 Cush. 391. In National Bank v. Case, 99 (Mass.) 183; Crease v. Babcock, 10 U. S. 628, Mr. Justice Strong specifies Met. (Mass.) 525, 545, 34 Am. Dec. the grounds of the pledgee's liability: 61; Magruder v. Colston, 44 Md. 349, "One is, that he is estopped from de22 Am. Rep. 47; Hale v. Walker, 31 nying his liability by voluntarily holdIowa 344, 7 Am. Rep. 137; Thomp- ing himself out to the public as the son's Liability of Stockholders, c. 13. owner of the stock, and his denial of See, also, Kellogg v. Stockwell, 75 ownership is inconsistent with the

own procurement, a creditor of the corporation is not bound to seek out the equitable owner, and enforce the stockholder's liability against him. A pledgee in whom the legal ownership appears to be is subject to the same liabilities any other stockholder is subject to unless exempted by statute.' The pledgee remains liable as a stockholder even after the debt has been paid and the certificate of stock indorsed and delivered back to the pledgor, if the latter neglects to make a retransfer upon the books of the company. Until such retransfer the pledgee remains the legal owner, and the court will not look beyond the legal ownership in determining the liability of a stockholder, except, perhaps, in case there has been a fraudulent transfer by the real owner to avoid liability. Even a statute declaring that the term "stockholder," as regards personal liability, shall apply not only to those appearing by the books to be such, but also to every equitable owner of stock standing in the name of another, would seem to be limited to cases where the registered owner is merely a nominal holder; such for instance, as a trustee who has invested funds of another in his own name, or perhaps a pledgee after he has given the pledgor a power of attorney to transfer the stock. But a pledgor, after transferring the stock, though having still an equitable interest, is not in any proper sense an owner. He has the same interest that he would have under an executory agreement to purchase stock before paying the price and obtaining a transfer."

representations he has made. Another is that by taking the legal title he has released the former owner; and a third is, that after having taken the apparent ownership, and thus become entitled to receive dividends, vote at elections, and enjoy all the privileges of ownership, it would be inequitable to allow him to refuse the responsibilities of a stockholder."

1 Wheelock v. Kost, 77 Ill. 296; Aultman's Appeal, 98 Pa. St. 505; Holyoke Bank v. Burnham, 11 Cush.

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And so where a person loaned money to a national bank and received as collateral security a certificate of the bank's own stock, and he afterwards received dividends thereon, he was held liable as a stockholder.'

A pledgee holding shares of stock as security has the same right as any stockholder to maintain a bill against the corporation and its officers for relief against a misappropriation of the corporate funds, by which his security is impaired.'

§ 438. A pledgee can not escape personal liability by transferring pledged stock to an irresponsible person to hold for his benefit. Therefore, a bank which has taken the shares of another bank as collateral security for a loan, and has afterwards, while the latter bank was in a failing condition, transferred them on the books of the latter bank to one of its own clerks, with the understanding that he should retransfer them on request, is liable to contribute as a stockholder for the benefit of the creditors of the bank whose shares were taken in pledge.

§ 439. But if the stock is transferred in the first instance to a third person, to hold for the benefit of the pledgee, the latter is not responsible as a stockholder. And so where a borrower who had already obtained a loan from a warehouse company upon a transfer of gas stock to its president, desiring to obtain a further loan, sent to the company certificates of stock made out in the name of its president, but the board of directors objecting to certificates in this form on the ground that the company might be liable as a shareholder, at their request the president transferred the stock to an irresponsible person in the employment of the company; upon the subsequent insolv ency of the bank, it was held in a suit to charge the company as a shareholder, that it was not liable as such, unless it had authorized or ratified the transfer to its president as a trans

1 Wheelock v. Kost, 77 Ill. 296; also Pullman v. Upton, 96 U. S. 328; Johnson v. Laflin, 5 Dill. 65.


2 Green v. Hedenberg, 159 Ill. 489, 42 N. E. Rep. 851; Baldwin v. Canfield, 26 Minn. 43, 1 N. W. Rep. 261.

fer to the company itself; and that whether it had authorized such a transfer was a question for the jury.'

§ 440. If a pledgee of stock sell it in pursuance of a power of sale upon his debtor's default, although he make the sale because he believes the corporation to be insolvent, and in order to escape personal liability as a stockholder, the sale is not voidable as having been made in fraud of the creditors of the corporation. It is a material element in such a case that the sale is made in pursuance of a contract of the parties made at the time of the transfer to the pledgee.'

§ 441. The right to vote upon stock belongs to the person in whose name it is registered, although he may have pledged it as collateral security by an assignment of the certificate. The records of the corporation must necessarily determine who are its stockholders. Even after a stockholder has been declared a bankrupt and his property was vested in his assignee, he has the right to vote on stock still standing in his name."

It follows from this that a pledgee of stock not transferred to his name on the books of the company, is not ordinarily regarded as so far the owner of stock as to be entitled to notice of the meetings of the corporation. The pledgor still remains a member of the corporation and must be so treated."

1 Anderson v. Phila. Warehouse Co., 4 Fed. Rep. 130.

2 Magruder v. Colston, 44 Md. 349, Thompson's Nat. Bank Cases, 554, 22 Am. Rep. 47; Holyoke Bank v. Burnham, 11 Cush. (Mass.) 183, 187.

3 Becher v. Wells Flouring Mill Co. (C. C. D. Minn. 1880), 1 Fed. Rep. 276; Ex parte Willcocks, 7 Cow. (N. Y.) 402, 17 Am. Dec. 525; In re Barker, 6 Wend. (N.Y.) 509; Vowell v. Thompson, 3 Cranch C. C. 428; Franklin Bank v. Commercial Bank, 36 Ohio St. 350; Commonwealth v. Dalzell, 152 Pa. St. 217, 25 Atl. Rep. 535; State v. Smith, 15 Ore. 98, 14 Pac. Rep. 814, 15 Pac. Rep. 137, 386.

* State v. Ferris, 42 Conn. 560; Hawaiian Com'l & Sugar Co. v. Waikapu Sugar Co., 9 Hawaii 694.

5 McDaniels v. Flower Brook Mfg. Co., 22 Vt. 274.

6 Merchants' Bank v. Cook, 4 Pick. (Mass.) 405.

In several states it is provided by statute that a pledgor of stock may represent it and vote upon it at all meetings of the stockholders, unless the right to vote be expressly given to the pledgee.

Colorado: Mills' Annotated Stats. 1891, § 496.

Delaware: 21 Laws (1899), c. 273,

§ 23.

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