The stock of a national bank is said to be a species of chose in action, or an equi table interest which the shareholder, pos sesses, and which he can enforce against the corporation. See Taggart v. Murray, 53 N. Y. 237. "If a share in a bank is not a chose in action, it is in the nature of a chose in action, and is personal property;" per Shaw, C. J., in Hutchins v. Bank, 12 Mete. (Mass.) 421. Shares are not, strictly speak ing, chattels ; they bear a greater resem blance to choses in action; or, in other words, they are merely of prop erty; Ang. & A. Corp. § 560. They are now universally considered to be personal prop erty; Ang. & A. Corp. § 557; Moraw. Priv. Corp. 119, 200; though in some earlier cases it was held otherwise. See Cook, St. & Stockh. § 12, u. They are not a debt ; Dos Passos, St. Brokers 590. Shares in a corpo ration are said to be incorporeal personal property; Allen v. Pegram, 16 Ia. 173, per Dillon, J. In Louisiana, stock is property and not a credit ; New Orleans Nat. B. Ass'n v. P. S. Wiltz & Co., 10 Fed. 330.
It is settled in England that shares in a joint-stock company are not goods, wares and merchandise within the statute of frauds ; 11 A. & E. 205; it has been other wise decided in Massachusetts ; Tisdale v. Harris, 20 Pick. (Mass.) 9, uniformly follow ed in this country; Cook, St. & Stockh. 339.
Stock is issued for money, in payment for property or labor, or as a stock dividend. It is established in that stock may be issued for property, and such was the common law; Thomas v. Mueller, 106 Ill. 43. See Sanger v. Upton, 91 U. S. 60, 23 L. Ed. 220. The subject is usually regu lated by statute in this country. Stock can be issued by way of a stock dividend, which "is lawful when an amount of money or property equal in value to the stock dis tributed as a dividend has been accumulat ed and is permanently added to the capital stock of the corporation." Cook, St. & Stockh. § 536.
It is generally held that stock cannot be issued at a discount, and made full paid ; Handley v. Stutz, 139 U. S. 429, 11 Sup. Ct. 530, 35 L. Ed. 227 (see ftfra); [1897] A. C. 299 ; 38 Ch. Div. 415'; 2 De G. F. & J. 295 ; 11 Manitoba 629; but it has been held that an agreement with the company that the holders should never be called upon to pay any further assessment upon stock is valid as between the parties; Scovill v. Thayer, 105 U. S. 143, 26 L. Ed. 968. See Lorillard v. Clyde, 86 N. Y. 384; L. R. 14 Ch. Div. 394.
Directors issued stock at a discount; its market price went above par; It was held that the issue was unlawful and that the directors were liable, but only for the dif ference between the price at which they is sued it and its par value; [1894] A. C. 654.
Where stock is issued for property which is overvalued, the transaction may be set aside for fraud; Brant v. Ehlen, 59 Md. 1; Coit v. Amalgamating Co., 14 Fed. 12. The corporation, after issuing its stock as full paid cannot complain; Scoville v. Thayer, 105 U. S. 143 ; unless the entire transaction is such that equity will rescind it for actual fraud. See, as to overvaluing property, 7 Am. & E. Corp. Cas. 652 ; Elyton Land Co. v. Elevator Co., 92 Ala. 407, 9 South. 129, 12 L. R. A. 307, 25 Am. St. Rep. 65.
It has been held that a railroad company in need of funds may settle with a con tractor by issuing stock to him as full-paid at twenty cents on the dollar, and that cred itors of the company could not afterwards collect the difference between that and par ; Clark v. Bever, 139 U. S. 96, 11 Sup. Ct. 468, 35 L. Ed. 88. This decision has been much criticised. The same court said subse quently, in Camden v. Stuart, 144 13. S. 104, 12 Sup. Ct. 585, 36 L. Ed. 363, that "the trust arising in favor of creditors by subscription to the stock of a corporation cannot be de feated by a stipulated payment of such a subscription nor by any device short of ac tual payment in good faith." While any settlement might be good between the corpo ration and the stockholders it is unavailing against creditors. As against creditors, a corporation cannot give away its stock or dis tribute it among shareholders, without re ceiving a fair equivalent therefor; Handley v. Stutz, 139 U. S. 417.
A contract by which directors of a street railway company, acting in the name of a third person, are to construct the road, and divide between them the stock and bonds not required therefor, is fraudulent, and bonds issued pursuant thereto are void ; Vanderveer v. R. Co., 82 Fed. 355.
A corporation has no power, in the ab sence of statutory authority, to increase or diminish its capital stock; Scovill v. Thay er, 105 U. S. 148, 26 L. Ed. 968; Salem Mill Dam Corp. v. Ropes, 6 Pick. (Mass.) 23; Grangers' L. & H. Ins. Co. v. Kamper, 73 Ala. 325 ; Winters v. Armstrong, 37 Fed. 508.
Where a corporation had a reserve fund which was not kept separate, and then sus tained a loss which impaired its capital, held, that in reduction of its capital the loss of assets should be ratably apportioned between its reserve and its capital account ; [1904] 2 Ch. 208.