shares. After holding these shares for over a year, he transferred them, which transfer was duly registered, and the name of the transferor removed from the register of shareholders. The company was subsequently ordered to be wound up, and the name of the transferor was placed upon the list of contributories. On an application to rectify the list, the lord chancellor (Selborne) stated that if the first holder of these shares paid £100 upon them the transfer was valid. If this payment was not made, the transfer was invalid, for the shares did not vest. Could he, then, be made a contributory by reason of his agreement to take shares? This agreement rested wholly in fieri, and was capable of being discharged by a fresh agreement. The transfer, having been accepted by the company, was such an agreement, operating as a new contract between the transferor, the transferee, and the company. The original holder of the shares was therefore discharged from liability as a contributory.1 § 205. Corporation purchasing its own Shares.- Upon like grounds, it has been held that an arrangement by which a stockholder surrenders his shares to the corporation does not exonerate him from a statutory liability to creditors. The fact that the governing statute provides that the stockholder may exonerate himself from liability on account of existing debts by a bond fide transfer of the stock on the books to a resident of the state, of full age, does not enable the stockholder to exonerate himself by transferring the stock to the corporation itself. The purchaser of the stock must be one who succeeds to a liability, distinct from and in addition to that of the corporation." 1 Morton's Case, L. R. 16 Eq. 104. 2 Matter of Reciprocity Bank, 22 N. Y. 18. To the same effect are Walter's 2d Case, 3 De G. & Sm. 244; Johnson v. Laflin, 6 Cent. L. J. 124; s. c., 17 Alb. L. J. 146; Thompson's National Bank Cases, 331; Currier v. Lebanon Slate Co., 56 N. H. 262. See Zulueta's Claim, L. R. 5 Ch. 444, reversing s. c., L. R. 9 Eq. 270. In Alford v. Miller, 32 Conn. 543, it appeared that the directors § 206. Fraudulent Withdrawal of Premium Notes given to Mutual Insurance Company. - The premium notes given by members of mutual insurance companies under the New York statute of 1849, ch. 308, are deemed to constitute a fund for the security of creditors, in lieu of capital stock; they are payable absolutely, and may be collected without any allegation of losses, and without an assessment; hence an agreement made by the president of such a company, on receiving such a note, that it should be given up at maturity, or that another note of less value should be substituted for it, has been held void. If such a note passes to a receiver of the company, he may sue and recover on it; if it has been given up to the maker, in pursuance of such an agreement, the receiver may maintain trover for it against the maker, who may sue and recover its amount. In such a case, where it appeared that the 5 of a savings and building association, who had borrowed all the money of the association and severally given their notes for the amounts loaned, and for a bonus in each case, in addition, agreed with a stockholder, whose stock they wished to buy in and extinguish, to give one of the notes in exchange for the stock. After the agreement, but before the note was delivered, the directors voted that the amount of the bonus in each case should be cancelled and endorsed on the note. No endorsement was, however, made upon the note delivered to the stockholder, who conveyed the stock with no knowledge of the arrangement. The court held that the agreement among the directors was a fraud upon the association, and of no effect; that if it were not so, the director whose note was delivered to the stockholder must be regarded as either waiving his claim to the release of the bonus or as committing a fraud upon the stockholder, and that, in either view, he had no equitable claim to a deduction of the amount of the bonus from the note. 1 Furniss v. Gilchrist, 1 Sandf. S. C. 53; Brouwer v. Hill, 1 Sandf. S. C. 629; Brouwer v. Appleby, 1 Sandf. S. C. 158; Hone v. Allen, 1 Sandf. S. C. 171; Hone v. Folger, 1 Sandf. S. C. 177; Caryl v. McElrath, 8 Sandf. S. C. 176; Deraismes v. Merchants' Mutual Ins. Co., 1 N. Y. 371; Howland v. Myer, 3 N. Y. 290; Brown v. Cooke, 4 N. Y. 51; Emmet v. Reed, 8 N. Y. 312; White v. Haight, 16 N. Y. 310. 1 Brouwer v. Appleby, 1 Sandf. S. C. 158; Hone v. Allen, 1 Sandf. S. C. 171; Brouwer v. Hill, 1 Sandf. S. C. 629. Tuckerman v. Brown, 33 N. Y. 297. Brouwer v. Appleby, 1 Sandf. S. C. 158. • Tuckerman v. Brown, 33 N. Y. 297. principal object of giving the note was to take out a large policy, on which to vote for trustees at an approaching election; that it was given with an intent and expectation by the maker that it would appear in the company's annual statement as one of the assets, and figure as one of the securities held for the protection of dealers, and it did so appear with the maker's knowledge; and the jury found that it was not an open policy note given in reference to business; it was held that the maker was liable on it to the company, as a note held for the security of its dealers, and that it must be regarded in law either as a note lent by the maker to the company for that purpose, or as a note given under the charter provision in that behalf.1 So, where a joint-stock insurance company desired to reorganize on the mutual plan, and it was necessary, under the statute, to exhibit to the comptroller notes given in advance of premiums to the extent of $100,000, and a note was given for the purpose of enabling the company to exhibit this amount of assets to the comptroller, and so pass the necessary examination, with the secret understanding that it should be returned to the owner and a note of lesser amount substituted for it, which was afterwards done, this transaction was held to be a fraud upon the law; the makers of the fictitious note continued liable thereon, although it had been delivered up and destroyed." 3 § 207. Stock paid up and Money loaned back to Stockholder. The capital stock of a corporation being a trust fund for the security of creditors, this trust cannot be defeated by a simulated payment of the stock subscription, nor by any thing short of an actual payment in good faith.' An arrangement by which the stock is nominally paid and the money immediately taken back as a loan to the stockholder 1 Brouwer v. Hill, 1 Sandf. S. C., 629. 2 Tuckerman v. Brown, 33 N. Y. 297. • Ante, § 10. Upton v. Tribilcock, 91 U. S. 45. is a device to change the debt from a debt impressed with the character of a trust to an ordinary loan, and is not a valid payment as against creditors of the corporation, though it may be good as between the company and the stockholder.1 1 Sawyer v. Hoag, 17 Wall. 610; s. c., 1 Cent. L. J. 43. In this case an insurance company was organized under a charter which authorized it to commence business on a capital stock of $100,000, with $10,000 paid in, and the remainder secured by notes, or mortgages of real estate, or otherwise. Sawyer subscribed for fifty shares, of the par value of $100 each, and gave his check for the full amount, namely, $5,000. He took the check of the company for $4,250, being the amount of his subscription less the fifteen per cent required of each stockholder to be paid in cash, and he gave his note for the amount of the latter check, with good collateral security for its payment, with interest at seven per cent per annum. Sawyer and the company, by its officers, agreed to call this latter transaction a loan, and the check of Sawyer payment in full of his stock. On the books of the company, and in all other respects as between themselves, it was treated as payment of the subscription and a loan of money. Mr. Justice Miller, delivering the opinion of the court, held that this could not be done, saying: "It is the intent and purpose of the transaction which forbids it to be treated as a valid payment. It is the change of the character of the debt from one of a stock subscription unpaid to that of a loan of money. The debt ceases by this operation, if effectual, to be the trust fund to which creditors can look, and becomes ordinary assets, with which the directors may deal as they choose." Sawyer v. Hoag, 17 Wall. 610. 245 CHAPTER XIII. BY TRANSFER. I. Of Transfers in General; and herein of fraudulent, ultra vires, and unregistered Transfers. SECTION 210. Right to transfer Shares. 211. Fraudulent Transfer of Shares. 212. Illustrations of the English Doctrine. 213. Cases in which the Transfer was held good because out and out. 214. Cases in which the Transfer was held void because a Sham. 215. The American Doctrine. 216. Ultra vires Transfers. 217. Unregistered Transfers. 218. Purchaser taking Assignment in blank. 219. In case of a public Registration of Shareholders. 220. Prohibited Transfers. 221. Transfers imperfectly executed. 222. Statutory Provisions respecting Notice of Transfer. II. Of Transfers to Persons incapable of taking. SECTION 227. Divisions of the Subject. 228. Infant Transferees. 229. What if Company wound up during Minority. 232. Continued. 233. Married Woman. 234. Transfers of Shares to the Company itself void. 236. Continued. 237. Exceptions to this Rule. 238. Cases depending on special Circumstances. 239. Want of Knowledge on part of Transferor. I. Of Transfers in General; and herein of fraudulent, ultra vires, and unregistered Transfers. -The leading difference § 210. Right to transfer Shares. between a corporation or joint-stock company and a simple |