Magruder v. Colston. by witness, and that he sold a number of these labels with his stock of tobacco to Braun, one of the appellees, in 1864. Braun; who is produced as a witness on the part of the complainant, says: "the label now used by him is the same which he found together with other labels among the stock purchased by him of Seitz.' It must be admitted, then, that the testimony in regard to the right of Falk to the ownership of this label is conflicting and contradictory, and in fact it is no easy matter to determine on which side the weight of evidence preponderates. Under such circumstances, we do not think a court of equity ought to interfere by a writ of injunction, and the decree below will be affirmed. Decree affirmed. MAGRUDER V. COLSTON. (44 Md. 849.) National bank-liability of pledges of stock. Stock in a national bank was pledged to secure a debt, with power to the pledgee to sell it on default of payment. Held, that a sale by him pursuant to the power was not voidable as a fraud on creditors of the bank, though he sold because he believed the bank insolvent, and in order to escape personal liability as a stockholder. Persons who hold stock of a national bank in pledge, the certificates of which stand on the books of the bank in the name of the pledgee, are, in contemplation of the national banking act, stockholders, and so long as they thus hold the stock in pledge are responsible to the creditors of the bank in proportion to the amount so held. A CTION by Magruder, as receiver of the Merchants' National Bank, of Washington, against Colston and others, to recover, from the defendants, as stockholders of the said bank, the par value of stock in said bank. The opinion states the case. The jury rendered a verdict for the defendants, and from the judgment entered thereon plaintiff appealed. William M. Merrick, for appellant. The holder of stock, knowing a bank to be insolvent, for the purpose of escaping Magruder v. Colston. his responsibility to the creditors of the bank, cannot lawfully transfer his stock for nominal consideration to a man of straw, and thereby rid himself effectually of his obligation to contribute an amount equal to the value of his stock to satisfy the debts of the bank under the 12th section of the banking law. Fraud vitiates every thing, as well an assignment of stock as any other act intended to prejudice the rights of innocent parties. Marcy v. Clark, 17 Mass. 334; Holyoke Bank v. Burnham et al., 11 Cush. 183 to 186; Roman v. Fry, 5 J. J. Marsh. 634; Moss v. Oakley, 2 Hill, 270; Adderly v. Storm, 6 id. 624 to 628; Hale v. Walker, 31 Iowa, 344, 354; Matter of the Empire City Bank, 18 N. Y. 223; Rosevelt v. Brown, 1 Kern. 148; Onslow v. Corrie, 2 Madd. 340; Ex parte De Pass, 5 Jurist (N. S.), 1193, 1194; Angell & Ames on Corporations, § 623; Crease et al. v. Babcock et al., 10 Metc. 547. Charles Marshall, for appellees. GRASON, J. The question presented by some of the prayers, as to the organization of the Mechanics' National Bank of Washington, having been abandoned by the counsel of the appellant, the questions before the court upon this appeal arise upon his third and fourth prayers, which were rejected by the court below, and the appellee's second prayer, which was granted. The record shows that, some time before the failure of the bank, the appellees, who were bankers and brokers in Baltimore city, lent to Bayne & Company eight thousand dollars, payable on call, and took from them, as collateral security for repayment of the loan, one hundred shares of the stock of the Merchants' National Bank of Washington, fifty shares of which were in a certificate standing in the name of Oscar A. King, and indorsed in blank by him, and the remaining fifty shares in a certificate standing in the name of Bayne & Company, and indorsed in blank by them. The appellees held these two certificates until the 26th day of April, 1866, when, having previously called upon Bayne & Co. for repayment of the loan, and they having made default and instructed the appellees to sell, the latter requested the bank to transfer the stock to them and to issue certificates to them in their own name for it. The bank transferred the fifty shares standing in King's name and issued the certificates therefor to the appellees, but refused to transfer the fifty shares standing in the name of Bayne & Co., because Bayne & Co. were Magruder v. Colston. indebted to the bank. The appellees sold the whole of the stock to Colston on the 2d day of May, 1866, for one dollar, and delivered to him the certificate for the fifty shares originally standing in the name of King, as well as the certificate standing in the naine of Bayne & Co., and the bank thereupon issued a new certificate to Colston in his own name for the fifty shares originally standing in King's name, and delivered it to him on the 2d day of May, the day before the bank failed, and while it was still open and doing business. The appellees proved that at the time of the sale they did not consider the stock worth any thing, and that they intended, when they made the sale to Colston, to avoid complication and difficulties, fearing that the bank, which they had heard was in difficulties, might prove insolvent. They further proved that Colston was not pecuniarily responsible for the amount of the par value of the stock so sold and transferred to him. The bank closed its doors on the 3d day of May, at 3 o'clock, P. M., and turned out to be insolvent, and this suit was brought by the receiver to recover from the appellees, as stockholders of the bank, the par value of the fifty shares of stock, the certificate of which had been issued to them, and by them transferred to Colston. Upon these facts the appellant's third and fourth prayers asked instructions that if the jury should find that the transfer of the fifty shares of stock was made by the appellees to Colston, with a view and for the purpose of evading or escaping their responsibility under the twelfth section of the national banking act, such transfer constituted no defense to this action, and did not relieve the appellees from the responsibility which would have attached to them in case the transfer had not been made, and that, if they had so sold the stock under their agreement with Bayne & Co., as a pledge to secure a loan of money, they were still responsible in law to the same extent as if they had been the absolute owners and had sold the legal title to the stock. The appellees' second prayer contained the converse of these propositions. The 12th section of the national banking act provides for the personal liability of stockholders of national banks for the debts of the corporation, in proportion to the amount of stock held by them, and enacts that every person, becoming a shareholder by transfer, shall succeed to all the rights and liabilities of the prior holder of such shares. After a careful examination of the authorities, cited in the argument, we are of opinion that persons who VOL. XXII. - 7 Magruder v. Colston. hold stock in pledge, the certificates of which stand on the books of the bank in the name of the pledgee, are, in contemplation of the banking act, stockholders, and, so long as they thus hold the stock in pledge, are responsible to the creditors of the bank in proportion to the amount so held. The reason for this is obvious. The stock stands on the books of the bank in his name and he is thus held out to the public as shareholder, and persons dealing with the bank have no means of knowing the nature of the contract under which he holds the stock, and have a right to presume, and are led to believe that he is the absolute owner of it, and it is but fair to presume that they deal with the bank upon the faith and credit of parties thus appearing as stockholders. Stockholders are those who appear on the books of the bank as owners of shares, and who are entitled to manage its affairs, and they can only throw off the liabilities incident to that relation by transferring the stock. Until this is done they continue to be stockholders within the meaning of the banking act. If we depart from the terms of the law and inquire into the equities which may exist between the stockholders and third persons, it cannot fail to embarrass creditors in seeking a remedy for the wrongs which may have been done by the corporation. If creditors must look beyond the legal title, as exhibited by the books of the bank, they can never know against whom to proceed. Rosevelt v. Brown, 1 Kern. 153; Adderly v. Storm, 6 Hill, 624; Worrall v. Judson, 5 Barb. 210; Crease et al. v. Babcock et al., 10 Metc. 545; United States Trust Co., of New York, Receiver, v. The United States Fire Ins. Co., 18 N. Y. 224; Holyoke Bank v. Burnham et al., 11 Cush. 187. These cases arose under State laws making stockholders in corporations personally liable for the debt of the corporation, but the principles announced in them are applicable to cases arising under the act of Congress of 1864, ch. 106. That act makes stockholders only personally liable, and the appellees had parted with their stock when the bank failed, and had, therefore, ceased to be stockholders. But it was contended by the counsel of the appellant that inasmuch as the assignment and transfer of the stock was made to Colston, under the circumstances detailed in the proof and for a nominal consideration, and with the view and purpose of avoiding any complications and difficulties in which a failure of the bank might involve them, the transfer was a fraud upon the creditors of the bank, and the appellees ought, therefore, to be held to the game Magruder v. Colston. liability to which they would have been subjected had they never made the transfer. It must be recollected, however, that they had no right, under their contract with Bayne & Co., to hold the stock as their own property, but had to sell it after the default of the latter in repaying the loan. The only case that bears directly upon this question to which we have been referred, or which we have been able to find, is that of Holyoke Bank v. Burnham, reported in 11 Cush. 187. In that case Joseph Burnham transferred certain shares of stock of a manufacturing company to Charles Burnham, who gave his note to Joseph for eight hundred dollars, and the agreement between the parties, provided that any time within two years either party should have the right to rescind the sale by a re-transfer of the shares and a surrender of the note. Within the two years the sale was rescinded by Joseph surrendering the note, and Charles re-transferring the shares. Suit was brought against Charles as shareholder of the corporation, by one of its creditors under the personal liability act of the legislature of Massachusetts, and it was held that as the shares of stock had been re-transferred under a stipulation which formed part of the original contract between the parties, Charles Burnham was not liable, notwithstanding the transfer had been made for the purpose of avoiding liability under the act. The case was heard by five of the six judges of the Supreme Court of Massachusetts, and Judge DEWY, in delivering the opinion of the court, says: "As to the second question, the right of the defendant to re-transfer to Joseph Burnham the eleven shares and thus divest himself of subsequent liability arising from his holding stock, the contract between the parties made at the time of the transfer, authorizing such re-transfer at the election of the parties at any time within two years, becomes material, and we are of opinion that under the agreement made at the time of the transfer, and the re-transfer being only an act in execution of it, it is not obnoxious to the charge of having been done in fraud of creditors, although its leading object and purpose might have been, on the part of the defendant, to avoid liability as a member of said corporation. * It is unnecessary to consider, therefore, the general question how far persons owning shares in a manufacturing company may, by transferring them to some third person with a view to avoid lia bility as such owner to the creditor, effectually do so in the absence of such original contract for a re-transfer." In this case it was part of the original contract between Bayne & |