A company is bound to require the surren der of the old certificate before allowing a transfer, and may refuse to act till it is sur rendered; National Bk. v. R. Co., 21 Ohio St. 221; where a certificate cannot be found the company may refuse a new one or to make a transfer without proper indemnity, unless it be a clear case of loss; Galveston City Co. v. Sibley, 56 Tex. 269.
In a joint stock corporation, each stock holder, whether by purchase or original sub scription, has the right, unless restrained by the charter or articles of association, to sell and transfer his shares, and, by transferring them, to introduce others in his stead; Mor gan v. Struthers, 131 U. S. 246, 9 Sup. Ct. 726, 33 L. Ed. 132.
On a wrongful refusal to transfer stock the party may apply for a mandamus to make the transfer, or sue in equity for a decree of trans fer, or for damages if a transfer is impossible, or bring an action at law for damages.
It is said that the rules for the protection of bona fide purchasers are based on estoppel, which extends not only as against previous owners, but against the corporation itself. It is said that the doctrine is being extended and that it may In time render certificates of stock more negotiable than negotiable instru ments themselves; Cook, St. & Stockh. § 416; but it is also held that, as a certificate of stock is not negotiable either in form or char acter, whoever takes it, does so subject to its equities and burdens like every non-negoti able paper; and though ignorant of such equities and burdens, his ignorance does not enable him to hold it discharged therefrom; Hammond v. Hastings, 134 U. S. 401, 10 Sup. Ct. 727, 33 L. Ed. 960.
One who surrendered a share certificate bearing a forged transfer, and obtained in ex change a new certificate, must not only re turn the new certificate, but also pay dam ages to the company, although he bought the old certificate from his transferor and re ceived the new one from the company in ig norance of the forgery; Boston & A. R. Co. v. Richardson, 135e Mass. 473. This liability of the innocent purchaser was based upon his implied representation or warranty of title, the court finding an analogy between the pre sentment of the certificate to the company for the purpose of substituting the purchaser in the place of the former registered shareholder and the transfer of a certificate to a third person by way of sale. See an article on
"Forged Transfers of Stock" in Ames, Lec tures on Legal History 393.
In Fry v. Smellie, [1912] 3 K. B. 282, A. C., shares with a transfer signed in blank were handed to an agent to use as collateral to borrow a certain sum ; the agent borrowed a less sum ; held, that the lender could hold the shares until payment of his loan. Vaugh an Williams, L. J., distinguished France v. Clark, 22 Ch. D. 830, on the ground that there the party misusing the shares was merely a pledgee of the owner, and not, as in the case at bar, an agent with limited au thority, as to which it was the duty of the owner to give notice to any one from whom the agent might borrow on the shares. He rested his decision, not on estoppel, but on the rule that, where one of two innocent persons must suffer, he who enables the fraud must bear the loss. This ruling was said to be in accord with the New York rule, and 15 App. Cas. 267 was cited to that effect. In 64 L. J. R. 473, a broker who received shares with a transfer in blank, with in structions to sell them, pledged them for his own debt ; held, that the pledgee took no title.
A business corporation cannot make it a condition of transferring stock that the hold er shall first have offered it to the directors, and shall have paid all his indebtedness to the corporation; Brinkerhoff-Farris T. & S. Co. v. Lumber Co., 118 Mo. 447, 24 S. W. 129. See note in 27 L. R. A. 272.
The unregistered pledgee of stock has pri ority over a subsequent attaching creditor; Tombler v. Ice Co., 17 Tex. Civ. App. 596, 43 S. W. 896; the same rule obtains in New York, Pennsylvania, New Jersey, South Carolina, Kentucky, Louisiana, Minnesota, and most other states except Connecticut; and in the federal courts, see Cook, St. & Stockh. § 487; Scott v. Bank, 15 Fed. 494: but see Williams v. Bank, 5 Blatchf. 59, Fed. Cas. No. 17,727.
Stock certificates may be attached in a state other than the home state of the com pany; Merritt v. Steel-Barge Co., 79 Fed. 228, 24 C. C. A. 530. See GARNISHMENT.