
    JOHN DRISCOLL, Plaintiff and Respondent, v. THE WEST, BRADLEY, & CARY MANUFACTURING COMPANY et al., Defendants and Appellants.
    I. Corporation organized under General Manufacturing Corporation Act.—Transfer of Stock, By-laws concerning.
    1. Power to make, whence derived.
    
    1. Solely from the seventh and eighth sections of the act authorizing the formation of corporations for manufacturing, etc., purposes, passed February 17, 1848, and section 1, title 3, chap. 18, part 1 Revised Statutes.
    2. What by-laws such corporation has power to make respecting the transfer of stock.
    
    1. None but such as relate solely to the manner, form, and mode in which the transfer must be made.
    3. What by-laws on this subject the corporation has no power to make.
    
    1. No power to make any by-law which will prevent an owner from transferring Ms stock, and seriously embarrass him in so doing, and wMch will deprive him of any substantial right whatever.
    Therefore,
    1. A by-law which prohibits a tranffer of his dock by an owner beccmse he is in debt to the company is ultra vires and void.
    
    EL Stock, Certificate of, having annexed thereto a Power of Attorney to transfer executed in Blank by the Person
    NAMED IN THE CERTIFICATE AS OWNER OF THE NUMBER OF SHARES THEREIN SPECIFIED.
    1. Delivery of, effect. <
    
      a. It is a good and valid symbolic delivery of the stock itself, and the purchaser of the stock upon such delivery becomes possessed of all the vendor’s property and interest therein, wholly independent of any act of ratification or dissent on the part of the company.
    
    2. JSstoppelby.
    
    
      a. When one purchases stock in good faith, relying upon a certificate stating in effect that A. was the owner of the number of shares therein specified, and that'the same were transferable in the books of the company to the person entitled thereto, upon the surrender of the certificate, and wMch contains no condition other than such, surrender,
    
      Before Barbour, Ch. J., Monell and Freedman, JJ.
    
      Decided December 31, 1874.
    THE COMPANY IS ESTOPPED
    from claiming that the stock was not transferable to a purchaser upon complying with the sole condition expressed in the certificate.
    Appeal from judgment entered on a decision "by a single judge upon a trial of an equity case.
    This action was brought to compel the defendant to transfer to the plaintiff two hundred shares of defendant’s stock upon its books, and to have the plaintiff declared to possess and enjoy all the rights, privileges, and franchises of a stockholder in said company.
    The two hundred shares in question at one time belonged to J. W. Bradley. An action was commenced in August, 1871, by Matthew Bartlett as plaintiff against said Bradley as defendant.
    In that action a judgment was rendered directing the sale of the stock under the direction of a referee named in the judgment. Pursuant to this judgment, the stock was sold by the referee, and the plaintiff in this action became the purchaser, and thereupon said referee executed and delivered to the plaintiff herein an assignment and transfer of said stock, which after various recitals was as follows :
    “In consideration of the said sum of three thousand dollars, I hereby sell, assign, and transfer to the said John Driscoll the said two hundred shares in the capital stock of the West, Bradley & Cary Manufacturing Company, and do hereby constitute and appoint him attorney to transfer the same bn the books of the company ; and I do hereby assign and transfer to him the certificate for said stock delivered to the said Matthew Bartlett by Joseph W. Bradley, as aforesaid, together with an assignment and power of attorney executed "by said Bradley to said Bartlett, and dated New York, October 21st, 1869.
    “In witness whereof, I have hereunto set my hand and seal, the second day of February, 1872.
    “Joseph B. Flahders,
    “ Beferee. [l. s.]
    “In the presence of
    “War. Myers Hoes.”
    The stock at the time of said, sale and transfer to plaintiff stood on the books of the company in the name of said Bradley.
    The plaintiff on the transfer to him applied to defendant to transfer the stock to him on its books. The application was denied, and thereupon the action was brought.
    The defence is that the defendant is a corporation duly incorporated under and in pursuance of an act of the legislature of the State of New York, entitled, “ An act to authorize the formation of corporations for manufacturing, mining, mechanical, or chemical purposes,” passed February 17, 1848 ; that in pursuance of the provisions of the aforesaid act the said corporation passed by-laws in and by which it was among other things provided that “all certificates of stock shall be “signed by the president and secretary, and all trans-" fers of stock shall be made on the books of the com- “ pany by the holder of a certificate, or his lawful representative, upon a surrender of such certificate.” “No stock shall be allowed to be transferred on the ‘' books of the company if the person in whose name “ the stock shall stand shall be indebted to the com“pany, unless with the consent of the president or “ treasurer, or by a vote of the board of trustees,”
    That said by-laws were adopted at the time of the organization of the company, and before the capital stock thereof was issued or allotted to the subscribers thereto, and before any of the capital stock of the said company was issued to or owned by Joseph W. Bradley, mentioned in the complaint, and said by-laws have ever since been in force, and that all the capital stock issued by said company was subject,to the said condition, and that said condition was annexed to the ownership thereof; that prior to and on the 21st day of October, 1869, the said Joseph W. Bradley was indebted to the said company to a large amount, to wit, to the sum of eleven thousand seven hundred and twenty-four dollars and eighty-eight cents ; that on the 2d day of February, 1872, said Bradley was indebted to said company in the sum of twelve thousand four hundred and thirty-three dollars and fifty-three cents; that on the 18th day of April, 1872, said Bradley was indebted to the said company in the sum of twelve thousand six hundred and eighty-three dollars and fifty-three cents ; that on the 25th day of January, 1873, said Bradley was indebted to said company in the sum of twelve thousand six hundred and twenty-five dollars and thirty-four cents, and that said indebtedness continued from the month of September, 1869, and still so continues unpaid or discharged ; that at the various times mentioned in the complaint the stock therein mentioned was held by said defendant under the lien created by said by-laws, for the indebtedness aforesaid, and ever since has been and still is so held, and was so held at the several times of the demand for the transfer thereof alleged in said complaint, and that the refusal to make such transfer was in consequence of such indebtedness of said Bradley to said corporation; of all of which the plaintiff had notice.
    The action was tried before a single judge at the Special Term for the trial of issues in equity cases.
    
      The judge decided that the ■ plaintiff was entitled to the relief demanded.
    From the judgment entered in conformity with the decision defendant appealed.
    
      Sterling & Walden, and Daniel T. Walden, of counsel for appellant, urged:
    I. Under the general expression of power contained in the statutes, courts have lield a by-law forbidding transfer under indebtedness to the corporation was authorized, and therefore valid (McDowell v. Bank of Wilmington, 1 Harr. 27, 31; Cunningham v. Alabama L. Ins. Co., 4 Ala. (N. S.) 652, 666, 658, 659; St. Louis Per. Ins. Co. v. Goodfellow, 9 Mo., 149, 152; Mechanics’ Bank v. Merchants’ Bank, 45 Ibid. 513, 516 : See also Tuttle v. Walton, 1 Geo. R. 43; Allen, J., Bank of Attica v. Manfs. and Traders’ Bank, 20 N. Y., 514: Also S. C. 501, 505).
    II. The by-law is reasonable, and is not “ inconsistent with any existing law,” and as a protection to the corporation and its property and credit, it is salutary, and for the security and advantage of stockholders. “The “public has a concern in the Solvency and security of “these institutions, and the means should be allowed “to indemnify themselves against losses.” “The re- “ straint imposed is like giving a right of set-off against “those who maybe indebted to it. If an individual “holds the money of another, the person entitled to it 5 c cannot make any transfer or assignment of the money “to another which will deprive the depositary of his “right of set-off against debts due before notice of the “assignment. The dividends on stock accruing after “an assignment and before notice thereof maybe regained by a corporation against the assignee, to be u applied in payment of a debt actually due from the “ assignor at the time of notice of the assignment ” (Bates v. N. Y. Ins. Co., 3 Johns. Cas., 238; Per Scott, J., St. Louis Ins. Co. v. Goodfellow, 9 Mo. 152, 153; Angell and Ames on Corp. 9th ed.) § 355 ; McDowell v. Bk. of Wilmington, 1 Harr. 32, per curiam ; Per Warren, J., Tuttle v. Walton, 1 Geo. 48, 49 ; Gibson v. Hudson Bay Co., 1 Str. 645; Savage, Ch. J., Gilbert v. Manhattan Iron Co., 11 Wend. 628 ; Verplanck, Senator, Com. Bk. v. Kortright, 22 Wend. 362 ; Per Allen, J., Bank of Attica v. Manft’s Bk., 20 N. Y. 515).
    TTT. This by-law being valid, it gave the corporation a right to detain the stock until the indebtedness was paid; it did- not forfeit the stock, but created a restraint upon the full disposition and complete change of ownership (Angell and Ames on Corp. [9th ed. 356]).
    It is, in effect, a lien, whether it be strictly so or not. Gilbert v. The Manhattan Iron Manufacturing Co., 12 Wend. 628 ; Arnold v. Suffolk Bank, 27 Barb. 429; Leggett v. Bank of Sing Sing, 24 N. Y. 287; Bank of Attica v. Manufacturers’ Bank, 20 N. Y, 515 ; Bank of Utica v. Smalley (2 Cow. 770).
    Whatever it may be called, there is under this by-law an equity given to the corporation as security for the indebtedness. That equity is enforced by a refusal to transfer the stock, and the court will not require a transfer to be made until the indebtedness is discharged (Union Bank v. Land, 2 Wheat. 360, 393 Brent v. Bank of Washington, 10 Peters, 596, 614; Reise v. Bank of Commerce, 14 Maryland, 277; McCready y. Rumsey, 6 Duer. 574; Leggett v. Bank of Sing Sing, 24 N. Y, 283; Bank of Attica v. Manufacturers’ Bank, 20 N. Y., 510, etc., per Allen, J.).
    Steamship Dock Co. v. Heron, Administratrix (52 Penn. 280), is not in conflict with the above; in that case there was no by-law p’assed imposing the restriction until after the assignment, per Thompson, J. (p. 282).
    This lien, or claim of the corporation, is not waived or impaired by the form of the certificate declaring that the stockholder is entitled to so many shares, transferable only on the books of the company, personally or by attorney, on surrender of the certificate (Reese v. Bank of Commerce, 14 Mayhew, 217; Farmers’ Bank v. Inglehart, 6 Hill, 50).
    IY. The capital stock of an incorporated company is personal property, and it has not, neither has the certificate or other evidence of title or ownership, any of the qualitiés of commercial or negotiable paper (Weaver v. Barden, 49 N. Y. 286, 288 ; McNeil v. Tenth National Bank, 46 Ibid. 332; N. Y. & N. H. Railroad Co. v. Schuyler, 34 Ibid. 80, per Davis, J. ; Mechanics’ Bank v. N. Y. & N. H. Railroad Co., 13 Ibid. 600, 622, 626, 627, 630).
    Y. The delivery of the certificate with assignment and power endorsed to the plaintiff vested in him the entire title, legal and equitable, which was held by Bradley at the time of the assignment, subject to such liens or claims as the company had upon it (Angell and, Ames on Corp. [9th ed.] § 354; Child v. Hudson Bay Co., 2 P. Wms. 207; Bank of Utica v. Smalley, 2 Cow. 760; Kortright v. Com. Bank of Buffalo, 22 Wend. 362; N. Y. & C. R. R. Co. v. Schuyler, 34 N. Y. 80; Bank of Attica v. Mfrs. Bank, 20 N. Y. 515, 516, per Allen, J., and cases cited; McNeil v. Tenth Nat. Bank, 46 N. Y. 326, per Rapallo, J., 331, 332, 335; Leitch v. Wells, 48 Ibid. 585, 592, 606; Weaver v. Barden, 49 Ibid. 288, 289, per Allen, J. ; McCready v. Rumsey, 6 Duer, 574).
    YI. The plaintiff, as assignee of the stock, is chargeable with notice of the restrictions that may exist to his acquiring the complete title (Per Allen, J., Bank of Attica v. Mfrs. Bank, 20 N. Y. 517; McCready v. Rumsey, 6 Duer. 577, per Hoffman, J).
    Where a person has information sufficient to put him upon inquiry, he is presumed to have made the inquiry or to have been guilty of a degree of negligence fatal to his claim to be considered a bona fide purchaser (Williamson v. Brown, 15 N. Y. 354; Kellogg v. Smith, 26 
      Ibid. 18; Baker v. Penner, 39 Ibid. 70, 74; Hoyt v. Thompson’ s Ex., 19 Ibid. 208, 222).
    In McCready v. Rumsey (6 Duer, 574) the general' statutes under which the corporation was created provided that every transferee of stock should succeed to all the rights' and liabilities of prior shareholders (p. 577), and this is supposed by Justice Sedgwick to distinguish that case from this.-
    That case is not distinguishable from the one now before the court.
    The provision of the Banking Act of 1838, to the effect above, is but a declaration of the legal effect of any transfer of stock. It does not create any rule peculiar to those corporations, or give a more limited title to the assignee of a certificate of shares in a banking corporation than such an assignee would have of any other corporation. Ho transferee of any stock obtains, as against the corporation, any better title than his assignor, and is subject to all the liabilities of the-assignor, so far ’as regards the stock (McCready v. Rumsey, 6 Duer, 582, Bosworth, J.).
    
      Flanegan & Bright, attorneys, and Osborne E. Bright, of counsel for respondent, urged :
    I. Bradley was the legal owner of the stock, and had the right to transfer it to Bartlett (Bank of Utica v. Smalley, 2 Cow. 770; Com. Bank of Buffalo v. Kortright, 22 Wend. 348 ; Fatman v. Lobach, 1 Duer, 354).
    II. The plaintiff, through the pledge and the judgment, became the legal and equitable owner of the stock.
    He had no notice of any lien of the company upon it. The restriction upon the right of transfer being contained in a by-law, he could be affected only by actual notice (Morgan v. Bank of North America, 8 Serg. & R. 172).
    It is also to be remembered that the certificate, in its common use in the market, approximates as nearly as possible to negotiability.
    
      III. Assuming that the by-law created a lien upon the stock, still the company have lost the right to assert it against this plaintiff. Such by-laws must have only reasonable scope (Angell & A. on Cor. §§ 354, 355, 567; Robinson v. Chartered Bank, Law Rep., 1 Eq. 32).
    1. The company has impaired its right to the enforcement of the by-laws:
    
      (a). By leaving the certificate in the hands of Bradley, thus conferring upon him an apparent title (McNeil v. Tenth Nat. Bank, 46 N. Y. 325).
    IV. The by-law does not by its terms create a lien. It merely provides that if Bradley is indebted to the company, Ms stock shall not be transferred without the consent of the treasurer. Its utmost effect would be to give the company fair opportunity to protect its claim by attachment or by equitable proceedings.
    V. The by-law could not create a lien, because statutory authority is wholly wanting (Steamship Dock Co. v. Heron’s Admx., 52 Penn. State R., 280; Gribson v. Hudson Bay Co., 1 Str. 645; Stebbins v. Phoenix Ins. Co., 3 Paige, 350; McCready v. Rumsey, 6 Duer, 574).
    In the case of manufacturing corporations, the trustees are authorized to make prudential by-laws for the “ management and disposition of the stock and business affairs of the company, not inconsistent with the laws of this state;” and the “stock shall be transferable in such manner as shall be prescribed by the by-laws of the company (3 Gen. Statutes, Edm. Ed., p. 734, §§ 7, 8).
    These provisions are intended to enable the company always to determine who are stockholders entitled to vote and receive dividends. They authorize, for example, such a regulation as that which governs the certificate in this case, viz., that the transfer shall be on the • surrender of the certificate. They cannot be intended to encourage secret liens, nor to clothe trustees with a discretion to legislate contrary to the common law. The only restriction upon the right to sell and transfer stock is expressly stated in section 8, viz. : “No shares shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited-for the non-payment of calls thereon.”
   By the Court.—Barbour, C.J.

The only power expressly given to companies organized under the general Manufacturing Corporations Act touching the transfer of their stock, is found in the seventh and eighth sections of that act, and in the first section of title 3, chapter 18 of the Revised Statutes, which are as follows:

§ 7. The trustees of such company shall have power to make such prudential by-laws as they shall deem proper for the management and disposition of the stock .and business affairs of the company, not inconsistent with the laws of this State, etc.

§ 8. The stock of such company shall be deemed personal estate, and shall be transferred in such manner as shall be prescribed by the by-laws of the company (Laws of 1848, page 56.)

By § 1 of title 3d, every corporation, as such, is given power “To make by-laws not inconsistent with any existing law, for the management of its property, the regulation of its affairs, and for the transfer of its stock’’ ’ (subdiv. 6, 2 R. S. [5th ed., 596]).

The seventh section was designed, no doubt, to authorize each company to regulate and fix, through bylaws, the manner in which the stock that would constitute its capital when sold or subscribed and paid for, ■should be distributed and disposed of upon its organization, and also, probably, to provide by fixed rules for the manner in which stock subsequently acquired by the company as owner should be sold or held. It is quite clear that the legislature could not have intended Tby that section to empower the company to control or prohibit the sale or disposition of stock not belonging io"itself, but owned as “personal estate” bv others.

The stock of a corporation, like the corporation itself, is an artificial, invisible, intangible thing, and is, therefore, incapable of actual delivery. In practice, however, certificates are issued by the company stating that certain persons are, respectively, stockholders or owners of a certain number of shares, and that the same are transferable on the books of the company by the owner in person, or by his attorney, on the surrender of the certificate, and to that is usually annexed a blank power of attorney ; and the delivery of such certificate and power, properly executed, to the purchaser upon a sale of the stock, is considered, and in law is, a good and valid symbolic delivery of the stock itself. Upon a sale of the stock and the delivery of the certificate and power, therefore, the purchaser becomes the absolute owner of the stock described in it; or rather, of all the vendor’s property and interest in such stock, wholly independent of any act of ratification or dissent on the part of the company (See McNiel v. The Tenth National Bank, 46 N. Y. 331, and cases there cited). But it seems to have been assumed by legislators from the earliest times that corporations should have the power or means of ascertaining by certain evidencé to be placed and perpetuated upon their own books what persons were in fact stockholders, and the number of' shares owned by each, so that their respective rights as voters and sharers of dividends could be determined, and the company thereby saved from vexatious litigation touching those matters ; and it was for that purpose, probably, that the provisions authorizing the company to prescribe by a by-law the manner in which stock should be transferred, was inserted in the eighth section of the Act of 1848, and in the Revised Statutes above referred to.

The defendants claim, however, that those provisions-, also empowered the company to enact the by-law which declares that11 no stock shall be allowed to be transferred on the "books of the company if the person in whose name the stock shall stand shall "be indebted to the com]Dany, unless with the consent of. the president and treasurer, or by a vote of the board of trustees,” and that such by-law is binding upon the plaintiff. For the following brief reasons, I am satisfied that this claim of the defendants cannot properly be sustained.

First. The Act of 1848 expressly declares that the stock “ shall be deemed personal estate, and shall be transferable,” with one single exception, which is made in the act itself in these words : “ but no shares shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited for the non-payment of calls thereon.” Upon the principle of the maxim exjpressio unius est exelusio alterius, it must be held that the legislature could not have intended to empower a company to make another and further exception by means of a by-law. The entire question as to the right of the owner to transfer his stock, together with the exceptions to that right, was before the minds of the legislators, and it must be assumed they provided for all the exceptions'they intended to make. Besides, nothing short of a direct and positive authority given by the act, in clear and explicit terms, would be sufficient to empower a company to prohibit the transfer of stock which the legislature, in the same act, had declared to be personal estate, and, with one exception, transferable. Such authority cannot be implied from the general power given to the corporation to make by-laws for the transfer of its stock, or to prescribe the manner in which it shall be transferred.

Second. It is only the manner, form, or mode in which the transfer must be made that is the subject of regulation by the company through its by-laws ; and the mode of manner of transferring thereby provided for must be a reasonable one, and not such a method as will prevent an owner from transferring his stock or seriously embarrass him in so doing, nor such a one as will deprive him of any substantial right whatever. A by-law, therefore, which, at the will of all or of any of the officers or directors of the corporation, prohibits a transfer of his stock by an owner because he is in debt to such company is not only unreasonable, but wholly ultra vires and void. The law does not confer upon corporations the power of thus coercing payments under pretence of a by-law prescribing the manner in which stock shall be transferred upon its books.

Third. Sufficient evidence was presented upon the trial to show that the plaintiff purchased the stock in good faith, relying upon the certificate, which stated in effect that Bradley was the owner of the two hundred shares, and that the same were transferable upon the books of the company to the person entitled thereto upon the surrender of the certificate, and which contained no condition other than such surrender. The defendants, therefore, were estopped by their certificate from subsequently claiming that the stock was not transferable to a purchaser upon complying with the sole condition expressed therein. A contrary doctrine would open the door to the perpetration of great frauds.

The by-law relied upon by the defendants furnished no justification for their refusal to permit a transfer of the stock to be made upon the books of the corporation; and it follows that the judgment appealed from was correct, and should be affirmed, with costs.,  