ment against the trust company as against it as a transfer agent subject directly to an action brought by a shareholder.

There is nothing, however, in the Dunham case that intimates that the trust company would not be liable to the corporation for any loss that might be recovered by Dunham in an action against it. If it would be, it becomes apparent, as I have stated supra, that the words I have quoted from Bank of Kentucky v. Schuylkill Bank supra, inadequately portray the responsibility of a transfer agent.

The Denny case, however, was against a bank in New York, which was a transfer agent according to the usage described in Bank of Kentucky v. Schuylkill Bank, supra, and not against a trust company empowered by statute to carry on business as a transfer agent. Nevertheless the rule there announced is applied to such a company as a transfer agent in the Dunham case. It seemed, however, to be conceded that could the act of the transfer agent have been deemed a misfeasance, and not a mere nonfeasance, it would have been held liable.

§ 82. Liability as Transfer Agent-Concluded. Whether a trust company as a transfer agent may incur a direct liability to the shareholder of a corporation for which its acts as transfer agent appears to me to be involved in doubt. The old distinction between acts of misfeasance and nonfeasance on the part of an agent has been spoken of as the "now exploded distinction.”26 it would not seem unjust to revive it against a corporation with express powers under statute to carry on a particular business, even should the corporation not be held, as an agent, for acts of nonfeasance as well.

26. Wharton's Agency, Sec. 537.

But

It does not seem to me so very clear that such a corporation holding itself out to the world as competent to carry on the business of a transfer agency should be regarded as the mere agent of the corporation that employs it. The policy of the law that vests it with such powers is to make it responsible to whomsoever its acts, whether of omission or commission, affect. Its selection as such an agency, just as is stated in the McClure case, involves a duty "under the sanction of its name and the confidence invited by its standing"-a justification of the law's policy.

Furthermore as its employment, especially by a foreign corporation, at favored centers will be judicially noticed to be for the benefit of shareholders fully as much as for the corporation itself, courts will impose on it an implied obligation to them along with the express obligation to it.

§ 83. Liability as "Registrar" of Stock. What, if any, distinction there may be between the liability of a registrar of stock and the liability of a transfer agent has not yet appeared in judicial decision. Henry J. Bowdoin, of the Maryland Trust Company, has stated that in his opinion the duties and liability of a registrar do not differ in any marked degree from those of a transfer agent, that "in guarding against an over-issue of stock, it becomes necessary for the registrar to scrutinize all transfers since the issue of a certificate, except against one, legally cancelled, for the same number of shares would necessarily result in an over-issue. This duty the registrar impliedly, by its acceptance of the office and fee agrees to discharge. Obviously, if the registrar cer

27. Address, Proceedings, American Banking Association, 1900.

tifies the issuance of a certificate, thereby placing upon it the last and highest indicia of validity, and loss results to the principal therefrom, the registrar has failed to fulfill the purpose of its appointment; if, by such action, loss enures to a stockholder whose property rights have been wrongfully divested thereby, cannot such stockholder recover from the registrar, the signature of the latter in acceptance and approval of the evidences of the transfer being essential to the transfer and being the last act in consummation of the transaction by which the stockholder is injured?"

This responsibility of a registrar was expressed by Mr. Jordan J. Rollins as follows:2

28

"While the officers of some companies which act as registrars undoubtedly believe that the responsibilities connected with the discharge of the office are not as great as are those of a transfer agent, that opinion is probably not generally held. According to the practice in New York, at least, a registrar seldom requires more than the exhibition of a cancelled certificate of stock for a given number of shares, and the presentation therewith, either by the issuing corporation or by its transfer agent, of a new certificate for the same number of shares in the name of the transferee of the cancelled certificate. Thereupon the registrar signs the new certificate without requiring other evidence of the correctness of the transfer. Now, if, as a fact, the transfer agent has been induced to cancel the old certificate and to issue the new by a forged or otherwise invalid transfer, the stock does not follow the new certificate. In other words, the new certificate represents no stock. The counter-signature

28. Address on "The Protection of Trust Companies Acting as Transfer Agents and Registrars" before the Trust Company Section, American Bankers' Association, Sept. 14, 1905.

of the registrar, which, in effect, certifies to the public that the certificate upon which it appears does not represent an over-issue, would, therefore, in such case be false and might be held to constitute grounds for a suit for damages."

§ 84. Importance of Terms Used by Trust Company in Describing its Capacity-Contracts in Limitation of Liability. The foregoing definitions and cases show the extent of the liability assumed as dependent upon acting as "a transfer agent" a "registrar of transfers," a "registrar" or a "countersigning agent." A trust company must use these terms with discrimination or it will assume responsibilities not contemplated. A magazine article" speaks of some of these terms and fearing the obligations they imply, advises that: "The most obvious remedy is to change the vital word, using one which means less, and in this regard we probably cannot do better than follow the English example, and adopt the word 'entered.' On its face this means merely that the transaction has been noted on the books, and guarantees nothing as to the signatures of the corporation officials."

The liability of a transfer agent and registrar to the public, i. e., to transferors and transferees of stock, so far as such liability exists, cannot be directly affected by the terms of the agreement between the corporation and the agent, to which they are not parties. This contract, however, may, in the absence of gross negligence or fraud, fix the liability of the agent to the corporation, and, it is submitted, in such a way as to permit recovery by the agent against the principal, where the agent has been compelled to make payment with respect to an un

29.

10 Case and Comment (1903) 73, by Charles A. Greene of New

York City.

authorized or illegal transfer; except, as stated, where the agent has been guilty of fraud or gross negligence.

A reasonable provision in such a contract would be the terms of the Vermont statute on the liability of transfer agents. (Chap. 150 Acts of Vermont, 1915). This statute provides that the liability of a transfer agent shall be "only to act in good faith and with reasonable care and skill so as not to register any securities which are in excess of the amount authorized to be issued by the issuing corporation; or to transfer any securities to which the transferee is not entitled."

This may or may not be the true measure of a transfer agent or registrar's liability to its principal without a special clause in the contract to that effect. In the absence of decisions in point, it is at least a proper precaution against excessive liability.

A far more radical provision for protection of the agent is mentioned by Charles A. Greene of New York, in 10 Case and Comment (1903) 73. He says that "The best method hit upon for protecting the agent in such case is by way of special clauses in the contract of agency." He then quotes the following as being clauses of this nature:

"In case any question shall arise, or any doubt shall exist, on the part of the agent, as to the propriety, regularity, legality, or otherwise of the proposed transfers, or any matter connected therewith, whether of prior indorsement, title, or otherwise, then and in such case the agent reserves the right to refer such questions to your company for instructions."

"The agent assumes no responsibility or liability for the regularity, legality, or genuineness of any indorsement on certification of stock, or otherwise, or for the