7. A fraudulent transfer of the shares held by the shareholder, in order to avoid liability for the debts of the corporation, leaves such shareholder still liable. Marcy v. Clark, 17 Mass. 330; Bowden v. Santos, 1 Hughes, 158, Fed. Cas. No. 1,716.

8. An arrangement by which the stock is nominally paid, and the money immediately taken back as a loan to the stockholder, is a device to change the debt from a stock debt to a loan, and is not a valid payment against creditors of the corporation, though it may be good as between the company and the shareholder. The capital stock or shares of a corporation constitute a trust fund for the benefit of the general creditors of the corporation, which cannot be defeated by a simulated payment of the stock subscription, or by any device short of actual payment in good faith. Sawyer v. Hoag, 17 Wall. 610, 21 L. ed. 731.

9. As to the liability of a transferee of shares, it was held in National Bank v. Case, 99 U. S. 628, 25 L. ed. 448, that a party who, by way of pledge or collateral security for a loan, accepts stock of a national bank which he causes to be transferred to himself on its books, incurs immediate liability as a stockholder, and he cannot relieve himself therefrom by making a colorable transfer of the stock with the understanding that at his request it shall be re-transferred. See also Pullman v. Uptown, 96 U. S. 328, 24 L. ed. 818; Alderly v. Storm, 6 Hill, 624; Hale v. Walker, 31 Iowa, 344, 7 Am. Rep. 137.

10. In the absence of fraud, a mere pledgee of stock in a national bank is not liable to its creditors, where he is not registered as owner, and this where he takes the security for his benefit in the name of an irresponsible trustee, for the avowed purpose of avoiding individual liability. Anderson, Receiver, v. Philadelphia Warehouse Co., 111 U. S. (3 Davis) 479, 28 L. ed. 478, 4 Sup. Ct. Rep.

525.

11. Where the certificates of stock in a national bank declare that stock is transferable on the books of the bank in person or by attorney, on surrender of the certificates and not otherwise, and which, notwithstanding, suffers a holder to transfer on the books his stock without such surrender, is liable to a bona fide transferee for value of the same stock, who produces such certificates with power of attorney to transfer, and it makes no difference that the bank has not been given notice of the transfer. Bank v. Lanier, 11 Wall. 369, 20 L. ed. 172.

12. Persons holding national bank stock as trustees, etc., to relieve themselves from liability as individual stockholders, must cause it to appear on the books that they hold as such trustees. Creditors have a right to know who have pledged their personal liability, and if a trustee fails to disclose his trusteeship, he is guilty of laches for which others should not suffer. Davis v. Essex Baptist Society, 44 Con. 582, Fed. Cas. No. 3,633. This case, although cited in a State report, was decided in the United States District Court for the district of Connecticut. SHIPMAN, J.

13. When the charter of a corporation provides that the stock should be transferred in such manner as the board of directors may prescribe, and the board enact a by-law that the stock shall be transferred only on the books of the company, and that in each certificate issued must be "transferable only on the books of the company subject to the by-laws of the company," a creditor of a person in whose name stock stands on the books of the company, who causes an execution to be levied on such stock, will hold the same as against one who has assign

ment of the stock certificates, but not a transfer on the books. People's Bank v. Gridley, 1 Mo. Jur. 589.

14. A person is presumed to be the owner of stock when his name appears on the books of a company as a stockholder; and when sued as such, the burden of disproving that presumption is cast upon him. Turnbull v. Payson, 5 Otto, 418, 24 L. ed. 437.

15. The signing of a transfer in blank on a certificate of stock is a warranty of the genuineness of the certificate. Matthews v. Massachusetts National Bank, 1 Holmes, 396, Fed. Cas. No. 9,286.

16. Whatever rights the purchaser of a certificate of stock may acquire as between himself and his vendor, it is well settled, as between himself and the corporation, he acquires only an equitable title; and until he secures a transfer on the books of the company he is not a stockholder, and has no claim to act as such. N. Y. and N. H. R. R. Co. v. Schuyler, 34 N. Y. 80; Grymes v. Hone, 49 id. 17, 10 Am. Rep. 313.

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17. As between a corporator and the corporation, the records of the corpora tion, or its stock-book, as it is called, is the evidence of their relation. Meetings of the stockholders, elections and dividends, etc., are regulated by this record. The certificate is but secondary evidence, and is never demanded except when the stockholder deals with the corporation in a contract relation." Bank of Com merce's Appeal, 73 Penn. St. 59.

18. In Johnston v. Laflin, 17 Alb. L. J. 146, Fed. Cas. No. 7,393, affirmed 103 U. S. 803, 26 L. ed. 534 (see note 1 above), the United States Circuit Court said of a sale by transfer of the stock of a bank, "that the transaction between Laflin and Britton was complete without registration of the transfer, and that it is equally complete as to the bank, unless the bank had some valid reason for refusing to register the transfer."

19. While it may be that a national bank would not be bound to admit a purchaser of shares of its stock "to all the rights, etc., of the prior holders of such shares," unless the transfer to him was made on the books of the association in such manner as may have been prescribed in the by-laws or articles of associa tion, nevertheless, when the association does issue certificates of shares of stock to a subsequent purchaser in lieu of the certificate of the prior owner, without observing its by-laws in regard to transferring stock on its books, certainly, so far as its creditors are concerned, a party holding such stock will be subject to the liabilities imposed by section 5151, U. S. Comp. Stat. 1901, p. 3465. Laing v. Burley, 101 Ill. 591; Wheelock v. Kost, 77 Ill. 296.

A party having dealt with the cashier of a national bank individually, and loaned him money for his private use, and received from him as security therefor a certificate of stock in the bank, in the party's own name, which stated that shares were transferable on the books of the bank, and on surrender of former certificates (the cashier appearing at the time on said books as the owner of a larger number of shares than that mentioned in said certificate, and the party, accepting such certificate, as a transfer of shares of which the cashier represented himself as owner), and no certificate having been surrendered by the cashier or party so dealing with him, the bank not having ratified or received any benefit from the transfer, such party cannot, the said certificate being worthless by reason of the cashier as matter of fact owning no stock at the time it was issued by him (and he being insolvent), recover its value from the bank. Moore t

Citizens' National Bank, 111 U. S. (3 Davis) 156, 28 L. ed. 385, 4 Sup. Ct. Rep. 345. In this case the court cited Merchants' Bank v. State Bank (10 Wall. 604, 644), 19 L. ed. 1008, 1018, in which case the general doctrine was stated to be that "where a party deals with a corporation in good faith the transaction is not ultra vires - and he is unaware of any defeat of authority or other irregularity on the part of those acting on the part of the corporation, and there is northing to excite suspicion of such defect or irregularity, the corporation is bound by the contract although such defect or irregularity exists."

20. Where a shareholder in a national bank sells his stock in good faith, indorses the certificate and surrenders it to the cashier with full notice of the sale, and instructs the cashier to transfer the stock on the books of the bank, he does all that is incumbent on him and is discharged from further liability as a shareholder. It makes no difference whether the instructions to the cashier are oral or in writing, or that the cashier fails to actually transfer the stock on the books. Hayes v. Shoemaker, 39 Federal R. 319 (following Whitney v. Butler, 118 U. S. 655, 30 L. ed. 266, 7 Sup. St. Rep. 61.)

§ 5140. [U. S. Comp. Stat. 1901, 3461.] At least fifty per centum of the capital stock of every association shall be paid in before it shall be authorized to commence business; and the remainder of the capital stock of such association shall be paid in instalments of at least ten per centum each, on the whole amount of the capital, as frequently as one instalment at the end of each succeeding month from the time it shall be authorized by the Comptroller of the Currency to commence business; and the payment of each instalment shall be certified to the Comptroller, under oath, by the president or cashier of the association.

§ 5141. [U. S. Comp. Stat. 1901, p. 3462.] Whenever any shareholder, or his assignee, fails to pay any instalment on the stock when the same is required by the preceding section to be paid, the directors of such association may sell the stock of such delinquent shareholder at public auction, having given three weeks' previous notice thereof in a newspaper published and of general circulation in the city or county where the association is located; or if no newspaper is published in said city or county, then in a newspaper published nearest thereto, to any person who will pay the highest price therefor, to be not less than the amount then due thereon, with the expenses of advertisement and sale; and the excess, if any, shall be paid to the delinquent shareholder. If no bidder can be found who will pay for such stock the amount due thereon to the association, and the cost of advertisement and sale, the amount previously paid shall be

forfeited to the association, and such stock shall be sold as the directors may order, within six months from the time of such forfeiture, and if not sold it shall be cancelled and deducted from the capital stock of the association. If any such cancellation and reduction shall reduce the capital of the association below the minimum of capital required by law, the capital stock shall, within thirty days from the date of such cancellation, be increased to the required amount; in default of which a receiver may be appointed, according to the provisions of section fifty-two hundred and thirty-four, to close up the business of the association.

§ 5142. [U. S. Comp. Stat. 1901, p. 3462.] Any association formed under this title may, by its articles of association, provide for an increase of its capital from time to time, as may be deemed expedient, subject to the limitations of this title. But the maximum of such increase to be provided in the articles of association shall be determined by the Comptroller of the Currency; and no increase of capital shall be valid until the whole amount of such increase is paid in, and notice thereof has been transmitted to the Comptroller of the Currency, and his certificate obtained specifying the amount of such increase of capital stock, with his approval thereof, and that it has been duly paid in as part of the capital of such association.

See Act of May 1, 1886, § 2, post.

1. The approval of the Comptroller, as required by this section, is absolutely essential to the increase of the capital stock of a national bank, and a resolution of the stockholders to that end is no more than a proposition among themselves, the effect of which is subject to the assent of the Comptroller, and until obtained the capital remains as originally fixed. Charleston v. People's National Bank, 5 So. Car. 114, 22 Am. Rep. 1. In this case the bank, on July 1, 1871, voted to increase its capital stock from $750,000 to $1,000,000, which, by virtue of section 5139, U. S. R. S., U. S. Comp. Stat. 1901, p. 3461, would require the issue of 2,500 additional shares. These additional shares were subscribed for by the first day of January following, and the amount thereof ($250,000) was secured to be paid by securities held by the cashier in trust for the purpose, and a semi-annual dividend was declared and paid on said additional stock, for the half year ending January 1, 1872. The Comptroller did not make his certificate required by section 5142, U. S. Comp. Stat. 1901, p. 3462, till January 5, 1872, and the city of Charleston levied a tax on said additional shares assessed from January 1, 1872. Held, that the additional shares were not valid and properly constituted shares of the association, and consequently not taxable.

2. Directors of national banks have no authority to increase their (banks') capital stock; nor can the assent of individual shareholders or subscribers to

such new stock, to their action in attempting so to do, confer the requisite authority or make such increased stock valid under the provisions of this section or of the Act of May, 1886, post. Winters v. Armstrong, 37 Fed. Rep. 508.

3. Unless all the requirements of both this section and the act of May, 1886, are complied with, proceedings to increase the capital stock of a national bank are invalid, and subscriptions thereto cannot be enforced and a deposit made at the time of the subscription, to comply with a statutory requirement in respect thereto, is recoverable. Winter v. Armstrong, supra,

4. The clause in this section to the effect that "no increase of capital shall be valid until the whole amount of such increase is paid in, etc.," was intended to secure actual payment of the stock subscribed, and so to prevent watering of stock." The clause is not violated by an issue of the exact amount of stock paid for, although it does not equal the amount of increase voted for by the directors, and the fact that some of the stock remains unsubscribed is not sufficient ground for a particular stockholder to withdraw his capital. Equity might however interpose to protect subscribers to stock where a large and material deficiency in the amount of capital contemplated had occurred. Aspinwall v. Butler, 133 U. S. 595, 33 L. ed. 779, 10 Sup. Ct. Rep. 417.

5. This section is not violated by an issue of the exact amount of stock paid in. It was intended to prevent watering stock. Aspinwall v. Butler, 133 U. S. 595, 33 L. ed. 779, 10 Sup. Ct. Rep. 417.

6. There is no implied condition that the individual subscriptions shall be void if the whole of the new stock is not subscribed. The Comptroller may assent to an increase of the capital stock less than that originally voted by the directors, but equal to the amount actually subscribed and paid for by the shareholders. Id. See also Pacific Nat. Bank v. Eaton, 141 U. S. 227, 35 L. ed. 702, 11 Sup. Ct. Rep. 984; Mayer v. Butler, 141 U. S. 234, 35 L. ed. 711, 11 Sup. Ct. Rep. 987; Butler v. Eaton, 141 U. S. 240, 35 L. ed. 713, 11 Sup. Ct. Rep. 985.

§ 5143. [U. S. Comp. Stat. 1901, p. 3463.] Any association formed under this title may, by the vote of shareholders owning twothirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the formation of associations; but no such reduction shall be allowable which will reduce the capital of the association below the amount required for its outstanding circulation, nor shall any such reduction be made until the amount of the proposed reduction has been reported to the Comptroller of the Currency and his approval thereof obtained.

1. A national bank cannot, after reducing the amount of its capital stock, retain as a surplus, or for other purposes, the whole or any portion of the money which it received for the stock that is retired. Seeley v. New York National Exchange Bank, 4 Abb. N. C. 61.

2. Where stock of a national bank is reduced pursuant to § 5143, but beyond the amount required to meet an impairment of capital, and the reduction is by charging off bad assets, the stockholders of record on day of reduction are entitled to the assets set free, and they and their proceeds may be set aside as a trust