Germania National Bank of New Orleans v. Case, Receiver. tion, "Was not the transfer made (to Waldo) with the view to avoid the liability under the National Bank Act in case of suspension of the Crescent City Bank?" that it was not exactly in that way. "We simply transferred," says he, "because we are not in the habit of holding any bank stock. We did not want to have any bank stock in our name. That was the object." When further asked whether he was well aware of the fact that the stockholders of National banks were liable to contribute to the payment of their debts in case of insolvency, he replied in the affirmative. When asked whether he did not have that in contemplation at the time of the transfer, he answered "That may be one of the reasons why we did not want to own any stock.” And when further asked, "Was not that one of the principal motives of this transfer to Waldo?" his reply was, "Yes." From this testimony, as well as from other in the record, it is evident that Waldo held the stock as a cover for the Germania Bank; that notwithstanding the transfer to him, it remained subject to the bank's control, and that the transfer to him was made to evade the liability of the true owners. It was not a sale. The bank continued after it was made a pledgee with the legal title in itself or in its representative, and Phelps, McCullough & Co. were no longer the owners. We Such being the facts of the case, there can be no serious controversy respecting the principles of law applicable to them. It is thoroughly established that one to whom stock has been transferred in pledge or as collateral security for money loaned, and who appears on the books of the corporation as the owner of the stock, is liable as a stockholder for the benefit of creditors. so held in Pullman v. Upton, 96 U. S. 328, and like decisions abound in the English courts, and in numerous American cases, to some of which we refer: Adderly v. Storm, 6 Hill, 624; Roosevelt v. Brown, 11 N. Y. 148; Holyoke Bank v. Burnham, 11 Cush. 183; Magruder v. Colston, 44 Md. 329; s. c., 22 Am. Rep. 47; Crease v. Babcock, 10 Metc. 545; Wheelock v. Kort, 77 Ill. 296; Empire City Bank, 18 N. Y. 199; Hale v. Walker, 31 Iowa, 344; s. c., 7 Am. Rep. 137. For this several reasons are given. One is that he is estopped from denying his liability Germania National Bank of New Orleans v. Case, Receiver. by voluntarily holding himself out to the public as the owner of the stock, and his denial of ownership is inconsistent with the 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. This subject is well treated in Mr. Thompson's recently published work on "The Liability of Stockholders," where may be found not only a full collection of authorities, but a careful analysis of what the authorities contain. Vide chap. 13. When, therefore, the stock was transferred to the Germania Bank, though it continued to be held merely as a collateral security, the bank became subject to the liabilities of a stockholder, and the liability accrued the instant the transfer was made. At that instant the liability of Phelps, McCullough & Co. ceased. We have then only to inquire whether the bank succeeded in throwing off that liability by its transfer to its clerk, Waldo. It certainly did not thereby divest itself of its substantial ownership. It is not every transfer that releases a stockholder from his responsibility as such. While it is true that shareholders of the stock of a corporation generally have a right to transfer their shares and thus disconnect themselves from the corporation and from any responsibility on account of it, it is equally true that there are some limits to this right. A transfer for the mere purpose of avoiding his liability to the company or its creditors is fraudulent and void, and he remains still liable. The English cases, it is admitted, give effect to such transfers, if they are made (as it is called) "out and out," that is, completely, so as to divest the transferor of all interest in the stock. But even in them it is held that if the transfer is merely colorable, or as sometimes coarsely denominated, a sham-if in fact the transferee is a mere tool or nominee of the transferor, so that as between themselves there has been no real transfer, "but in the event of the company becoming prosperous the transferor would become interested in the profits, the transfer will be held for nought Germania National Bank of New Orleans v. Case, Receiver. and the transferor will be put upon the list of contributories." Williams' case, L. R. Eq. 224, note, where the transfer was, as in the present case, made to a clerk of the transferor without consideration. Payne's case, id. 223; Kintrea's case, L. R., 5 Ch. App. 95; see, also, Lindley on Partnership, 2d ed., p. 1352; Chinnock's case, 1 Johns. Eng. Ch. 714; Iyam's case, De Gex, F. & J. 75; Budd's case, 3 id. 297. The American doctrine is even more stringent. Mr. Thompson states it thus, and he is supported by the adjudicated cases: "A transfer of shares in a failing corporation, made by the transferor with the purpose of escaping his liability as a shareholder, to a person, who, from any cause, is incapable of responding in respect to such liability, is void as to the creditors of the company and as to other shareholders, although as between the transferor and the transferee it was out and out." Nathan v. Whitlock, 9 Paige, 152; McClaren v. Franciscus, 43 Mo. 467; Marcy v. Clark, 17 Mass. 334; Johnson v. Laflin, by DILLON, J., Thomp. N. B. Cas. 331. The case in hand does not need the application of so rigorous a doctrine. While the evidence establishes that the Crescent City was in a failing condition when the transfer to Waldo was made, and leaves no reasonable doubt that the Germania Bank knew it and made the transfer to escape responsibility, it establishes much more. The transfer was not an out and out transfer. The stock remained the property of the transferor. Waldo was bound to re-transfer it when requested, and all the privileges and possible benefits of ownership continued to belong to the bank. No case holds that such a transfer relieves the transferor from his liability as a stockholder. We are therefore compelled to rule that the decree of the Circuit Court against the Germania Bank was correct. Its case, no doubt, is a hard one, but it is not in our power to give relief without a sacrifice of the well-established rules of law and equity both in this country and in England. There is nothing in the argument on behalf of the appellant that the bank was not authorized to make a loan with the stock of another bank pledged as collateral security. That is an ordinary mode of loaning, and there is nothing in the letter or spirit of the National Banking Act that prohibits it. But if there were, the Germania National Bank of New Orleans v. Case, Receiver. lender could not set up its own violation of law to escape the responsibility resulting from its illegal action. In support of the other appeals which were taken from the decree of the court below no argument has been submitted, and they require only brief remarks. Alcus, Scherck, and Autey in their first answer to the bill, after setting forth several matters perfectly immaterial, admit that they were at one time the owners of seventy shares of the stock of the Crescent City National Bank, but aver that on the [blank] day of [blank], 1873, they sold them all to one Julius Fox, a white person, about twenty-one years old, and a clerk by occupation; that the price paid to them by Fox for the stock was five dollars, and that they never offered to Fox any money or other valuable consideration or promise to induce him to accept the stock. The utter worthlessness of this as a defense sufficiently appears in what we have said respecting the appeal of the Germania Bank. Subsequently what is called a supplemental and amended answer was filed, quite inconsistent with the one first made. It admits the ownership of the stock by the respondents at the time of the bank's insolvency and suspension, and merely denies any unlawful confederacy. That no defense was shown by this supplemental answer we need spend no time to prove. The only material averment in the answer of the Crescent Mutual Insurance Company was in substance that they had owned shares of the stock of the Crescent City Bank before it became a National bank, and that though the State bank had become a National bank with their consent, and they had received dividends, they had not received new certificates. The stock ledgers of the bank, however, show that one hundred and thirty shares stood in their name when the bank failed, and therefore, taking their averment to be true, it is impossible to find any reason why they are not subject to the liabilities of stockholders. The appeal of Benjamin J. West is equally without merit. It was admitted by his answer and proved by his own testimony, that on the 13th of March, 1873, the day before the bank ceased paying its depositors, he was the owner of fifty-eight shares of its stock. On that day he transferred it to one Vincent, whom he Germania National Bank of New Orleans v. Case, Receiver. describes as a white man, about thirty-five years old, a salesman by trade, for the price of about ten dollars a share. Nothing more than the testimony of Mr. West himself is needed to show that this is what is called in the English books a sham sale, made to conceal his liability. Vincent was West's clerk at the time, and so far as it appears, without any pecuniary responsibility. No certificate of the stock was issued to him. He paid nothing at the time of the alleged transfer, and never has paid any thing since. He gave no note or other written acknowledgment of indebtedness, and West continued to pay his salary as a clerk six or eight months after the transfer, without deducting any thing for the price of the stock. Indeed, the price of the stock was never charged against Vincent in West's books. And to this the fact plainly visible in his testimony, that the alleged transfer was made when Mr. West had become alarmed about the condition of the bank, and nothing more is needed to show that it was inoperative, as against the creditors of the bank, according to the doctrine of the cases herein before cited. There are some other averments in the answer of the appellants of which it is hardly necessary to say any thing. Former decisions of this court have ruled that the determination of the Comptroller of the Currency and his order to the receiver are conclusive of the extent to which the liability of stockholders of insolvent banks may be enforced in suits against such stockholders. The several appeals in this case are not sustained, and the decrees of the Circuit Court are affirmed. NOTE BY THE REPORTER.-The Master of the Rolls in Reynolds v. Cleveland Extension Mineral Railway Company, decided as to the absolute right of a shareholder in a railway company incorporated by act of parliament, to transfer his shares to a pauper. There is no very modern reported case on this subject, and no English case as to the right of the transferee to a mandamus in a case of the above description. Reynolds' case was a motion for a mandamus to the company to register a transfer of 1,000 shares to him, it being admitted that all calls had been paid up, and that he was a man of no means, and to whom a consideration had been given to undertake the uncalled liability on the shares. The company objected to the transfer on the ground that Reynolds was a person of no substance, and one who would be quite unable to pay any future calls. The requisites of the act had all been duly complied with, and the Master of the Rolls was clear that the mandamus must issue. He said that the right of every shareholder in a railway company to transfer his shares was absolute, subject only to |