It is, therefore, a prerequisite that a company shall be solvent, in the business sense of the term, and that its preferred stock is unimpaired.

Issue of bonds with privilege of conversion into common stock.

The act also provides that bonds may be issued with the privilege of the holder to convert them into common stock. The right of conversion does not appear, by express language, to be restricted to bonds issued for the purpose of retiring preferred stock, but would seem to include any series of bonds as to which the privilege of conversion is given, and whose issue has been authorized in the manner provided by Section 27.

Issue of bonds convertible into stock.

The issuance of bonds by a corporation with an option to convert them into new stock is illegal and will be enjoined as a deprivation of the right of stockholders to participate in the issue of new stock on the same terms as other parties. Wall v. Utah Copper Co., 70 N. J. Eq., 17.

19. Stock certificates.

Every stockholder shall have a certificate, signed by the president or a vice-president, and either the treasurer or an assistant treasurer, or the secretary or an assistant secretary, certifying the number of shares owned by him in such corporation. All certificates heretofore issued which are signed as aforesaid, shall be as valid and effectual for all purposes as if signed by the president and treasurer of the corporation.

P. L. 1846, p. 67; P. L. 1849, p. 303; Act of 1875, §23; P. L. 1911, Ch. 53.

A share of the stock of a corporation is simply the title of the shareholder to his proportion of the corporate property, and the certificate of stock is nothing else than evidence of the shareholder's right to a share of the net produce of all the property of the company. Graydon's Ex'rs v. Graydon, 23 N. J. Eq., 229; Donnell v. Wyckoff, 49 N. J. Law, 48; Jellenik v. Huron Copper Mining Co., 177 U. S., 1.

Where all of the capital stock of a corporation was issued and outstanding, one purchasing from a stockholder an old certificate in lieu of which new certificates had been issued, did not become

a stockholder. But a bona fide purchaser without notice is unaffected by equities which might have affected the stock in the hands of an intermediate holder. New York & Eastern Tel. & Tel. Co. v. Great Eastern Tel. Co., 74 N. J. Eq., 221; aff'd 75 Id., 297.

While a corporation which has issued two certificates for the same stock may not assert the validity of one and the invalidity of the other, so that the rights of the holders cannot be settled in an action by the corporation, there is no objection to defending the relation of the holders in an action by one of the holders to which the corporation and all claimants of the stock are made parties. Id.

A subscriber for stock who has complied with the terms of his subscription and has paid the assessments becomes a stockholder and is entitled as of right to a certificate in the form prescribed by the statute. If the corporation refuses he may compel it to give him a certificate. Am. Pig Iron Storage Co. v. Assessors, 56 N. J. Law, 389, 393.

The holding of certificates of stock creates a legal presumption of rightful ownership which can only be overcome by proof that it was illegally issued or legally forfeited, and the burden of proof is upon the party who alleges that the stock is illegally or fraudulently issued. Downing v. Potts, 23 N. J. Law, 66, 79. In re Election of St. Lawrence Steamboat Co., 44 N. J. Law, 539.

The certificate is evidence of the stockholder's personal and property rights as a member of the corporation, and when the company is dissolved and a decree of a court of equity is entered distributing its assets, the certificates cannot be said to be outstanding. The certificate exists thereafter only as evidence of the right to receive a distributive share from the proceeds held by the trustees. Dissolution of the corporation terminates a stockholder's personal rights, namely, to vote, to attend meetings, etc., but his property rights remain. Bijur v. Standard Distilling & Distributing Co., 70 Atl. Rep., 934.

A statement on a stock certificate that the shareholder is entitled to so many shares, transferable on the corporate books, in person or by attorney, when the certificates are surrendered, but not otherwise, is a notification that whoever in good faith buys the stock and produces the certificates, regularly assigned, with power to transfer, is entitled to have the stock transferred to him, and such notification also assures the holder that no transfer will be made to any one not in possession of the certificates. Bank v. Lanier, 11 Wallace (U. S.), 369.

On the theory that the buyer of stock is the equitable owner and seeks to consummate a legal title thereto, equity will compel the transfer of stock on the books of the corporation. Reilly v. Absecon Land Co., 71 Atl. Rep., 248, citing Archer v. American Waterworks Co., 50 N. J. Eq., 33.

As to the right of a corporation to refuse to issue an unreasonable number of certificates to a stockholder, see Schell v. Alston Mfg. Co., 149 Fed. Rep., 439.

Duties of president and treasurer as to issue of stock certificate.

*

"Their duties, as president and treasurer, respectively, with reference to the execution and delivery of stock certificates, were purely clerical or ministerial. * *The certificate in this case, as in all cases, is a mere voucher, a mere receipt establishing, when regularly issued, a prima facie title in the holder to the shares of stock named therein." Lakewood Gas Co. v. Smith, 62 N. J. Eq., 677.

20. Transfer of shares.

The shares of stock in every corporation shall be personal property, and shall be transferable on the books of the corporation in such manner and under such regulations as the by-laws provide; and whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

P. L. 1846, p. 67; P. L. 1849, p. 303; Act of 1875, §26.

Stock standing in the name of a decedent, or in the joint names of such a decedent and another person or persons, is not assignable, or transferable upon the books of a corporation of this state by a foreign executor, administrator or trustee until the tax provided for by the collateral inheritance tax act has been paid to the State Treasurer. And no corporation of this state shall transfer any such stock without first notifying the State Comptroller and obtaining his consent. P. L. 1909, c. 228, p. 331, §12.

Situs of stock.

The courts have recognized that the property right of a stockholder is an intangible thing, a kind of chose in action, and that stock has no actual situs anywhere. But the general rule appears to be that it is situate at the place where the rights in its ownership can be most effectively administered. It follows that the situs of stock is the state where the corporation is created. Consequently, a court has jurisdiction to determine the question of title to stock of a corporation which is domiciled within the district even if the owner resides outside of the state. The same rule applies when a trustee resides outside of the state. Amparo Mining Co. v. Fidelity

Trust Co., 73 Atl. Rep., 249; Jellenik v. Huron Copper Mining Co., 177 U. S., 1.

To the same effect is Andrews v. Guayaquil & Quito Ry. Co., 69 N. J. Eq., 211; aff'd 71 Id., 768, where it was held that when the proceeding as to stock is in rem or quasi in rem, service may be made upon the holder by publication. The rule was likewise clearly stated by Vice-Chancellor Howell in Sohege v. Singer Mfg. Co., 68 Atl. Rep., 64, where it was held that shares of stock in a New Jersey corporation have a situs here for purposes of attachment or other seizure by the courts. An earlier case in support of the same rule is Voorhis v. Terhune, 50 N. J. Law, 147.

The Court of Errors and Appeals in Neilson v. Russell, 71 Atl. Rep., 286, construed the act for the taxation of collateral inheritances (P. L. 1894, p. 318) as not applicable, where shares of stock of a New Jersey corporation represented by certificates held by a nonresident at his domicile outside the state at the time of his death pass by will to persons not exempt by law from taxation. In this case the testator died before the amendment of the inheritance tax act in 1906. Later, Justice Minturn, sitting in the Supreme Court, in the case of Dixon v. Russell, 73 Atl. Rep., 51, decided that under the amendment of 1906 (P. L. 1906, p. 432) such certificates are taxable. The provision of the act of 1906 upon which this decision was based is still retained in a revision of the collateral inheritance tax act. P. L. 1909, p. 325.

But on appeal, 76 Atl. Rep., 982, the Court of Errors and Appeals reversed this decision and held that the Act of 1906, being defective in title, did not operate to impose taxes on the transfer of property generally, and that the law as stated in Neilson v. Russell, supra, remained unchanged. In accordance with the law of this case it was held, in Astor v. State, 72 Atl. Rep., 78, that stock in a New Jersey corporation belonging to a testator domiciled in a foreign state was not subject to the tax.

Apparently the Legislature anticipated these decisions and accordingly amended the title to the Act (P. L. 1909, Chap. 209), thus making the shares of a non-resident decedent taxable. The act was further amended (P. L. 1909, Chapters 159 and 228), making corporations liable in transferring such stock.

Transfer.

The provisions of charters and by-laws under the statute that stock of the corporation shall be transferable only on the books of the company, are intended for the protection of the company. Matthews v. Hoagland, 48 N. J. Eq., 455, 486.

"A certificate of stock accompanied by an irrevocable power of attorney, either filled up or in blank, is, in the hands of a third party, presumptive evidence of ownership in the holder. And where

the party in whose hands the certificate is found is a holder for value, without notice of any intervening equity, his title cannot be impeached. The holder of the certificate may fill up the letter of attorney, execute the power, and thus obtain the legal title to the stock, and such a power is not limited to the person to whom it was first delivered, but enures to each bona fide holder into whose hands the certificate and power may pass." Prall v. Tilt, 28 N. J. Eq., 479, 483; Rogers v. N. J. Ins. Co., 8 N. J. Eq., 167; Bush v. Warren Foundry Co., 32 N. J. Law, 439; Gibbs v. Craig, 58 N. J. Law, 661, 664.

And such a transfer, if bona fide, is effectual against an attaching creditor of the transferrer. Broadway Bank v. McElrath, 13 N. J. Eq., 24.

This case was approved by the Court of Errors and Appeals in Hunterdon County Bank v. Nassau Bank, 17 N. J. Eq., 496.

The title of the holder is not affected by a provision in the corporate charter or by-laws, that the stock is transferable only on the books of the company. Such a provision is merely a protection for the corporation. Mt. Holly Turnpike Co. v. Ferree, 17 N. J. Eq., 117; Chemical Nat. Bk. v. Colwell, 132 N. Y., 250.

But mere physical delivery of stock certificates indorsed by blank power of attorney to transfer them will not pass title if the purchaser knew that the shares were in pledge, although he paid value for them. N. J. Trust & Safe Deposit Co. v. Bodine, 60 Atl. Rep., 387.

The reason of the rule is stated in Matthews v. Hoagland, supra, to be that the record owner has done everything in his power to effect the transfer, and by such act has assigned all interest he may have had and surrendered all indicia of ownership. As to third parties, holders for value, he is estopped from asserting ownership— as to volunteers, the gift is complete and irrevocable, if inter vivos." Id., p. 486; see Walker v. Dixon Crucible Co., 47 N. J. Eq., 342.

Where the charter provides that stock shall be transferable on the books of the company as the by-laws shall ordain, no legal transfer can be made until books are provided and by-laws adopted for the transfer. McCourry v. Doremus, 10 N. J. Law, 245.

In the absence of provision in the charter creating a lien for indebtedness of stockholders, a by-law, of which a transferee of a certificate of stock had no notice, is insufficient to create such a lien. A provision in the charter that the stock should be transferable in accordance with the by-laws relates only to the formality of transfer. Drexel v. Long Branch Gas Co., 3 N. J. L. J., 250.

It is not necessary to endorse certificates of stock in order to pass the title where a deed has been executed authorizing the transfer on the books of the company. Curtis v. Crossley, 59 N. J. Eq., 358; see also Tarbox v. Grant, 56 N. J. Eq., 199, 204. Nor is a transfer