seller has done this, his power and duty in the matter are ended, and it is at the option of the purchaser whether the transfer shall be recorded or not. If the purchaser omits to have the record made, he can claim no rights as a member of the corporation; and he also incurs the further risk of having his title defeated by a subsequent attachment or sale to a bona fide purchaser.' As between the transferor and the transferee, the delivery of the certificate of stock with the assignment is sufficient to convey the legal as well as the equitable title. This assignment may be in blank and the certificate pass from hand to hand, affecting a transfer of the interest in each case. The purchaser, however, cannot claim any rights of membership in the corporation until the final steps have been taken, viz, the surrender and cancellation of the old certificate, with the issue of the new and the registration of his name upon the books of the company. Forged and Unauthorized Transfers. The universal rule obtains that an owner of personal property cannot be deprived of his interest therein by forgery, theft or otherwise. The rule is also well settled that a bona fide purchaser of a negotiable instrument, payable to bearer, although he buys from a thief, acquires a good title if he pays value for it and has no notice of the infirmity of his vendor's title. The statement of these two rules will enable the reader to determine the consequences of a forged and unauthorized transfer of shares of stock. A certificate of corporate shares of stock, it is well settled, in the ordinary form, is not negotiable paper, and the purchaser of such stock, although endorsed in blank by the owner, where no question arises under the by-laws respecting registration, obtains no better title to the stock than his vendor had in the absence of negligence on the part of the owner or his authority to make the sale. On the question of negotiability of a certificate of shares of stock, Judge Comstock, in a New York case, 10 said: Scripture v. Soapstone Co., 50 N. H. 571. 10 Mechanics Bank v. R. R. Co., 13 N. Y. 599. "Such certificates contain no words of negotiability. They declare simply that the person named is entitled to certain shares of stock. They do not, like negotiable instruments, run to the bearer or order of the party to whom they are given. They are, in some respects, like a bill of lading or warehouse receipt, being merely representative of the property existing under certain conditions and the documentary evidence of title thereto. In an Alabama case11 it was said: 11 "The most that can be said is that all such instruments possess a sort of quasi-negotiability, depending upon the custom of merchants and the convenience of trade. They are not, in the matter of transferability protected strictly as negotiable paper.' It will be seen, therefore, that the first rule stated in this section applies and determines the rights of parties where there has been a forged or an unauthorized transfer of shares of stock. The owner cannot be deprived of his property, though his certificate passes into the hands of an innocent purchaser. He may, if he so elects, collect the value of the stock from the corporation, with his damages; but he cannot, on the other hand, if he does not so elect, be deprived of his ownership of an interest in the corporation. These principles apply universally, in the absence of negligence on the part of the owner. This may alter the rights of the parties, as stated above. These rules apply where certificates have been stolen or lost with the owner's name signed to an assignment in blank upon the back thereof, as in the case of a forged signature. There are many cases where the holder of a certificate of stock endorsed in blank is clothed with power as agent or trustee to deal with such stock to an unlimited extent. It may be transferred in breach of trust or in excess of powers under which the stock is held. It has been held frequently, in this class of cases, that the true owner, having conferred on the actual holder by contract all the external appearances of title and apparently unlimited power of dis 11 East Birmingham Land Co. v. Dennis, 85 Ala. 565. posal, is estopped to assert his title against a third person who, acting in good faith, acquires it for value from the apparent owner. These cases rest upon the principle that it is more just and reasonable, where one of two innocent parties must suffer loss, that he should be the loser who has put trust and confidence in the deceiver than a stranger who has not been negligent in trusting any one. On the other hand, shares of stock may be held in the name of one as trustee, agent, executor, or guardian and there is a sale or transfer for an unauthorized purpose or in excess of the powers conferred. In these cases, the courts have repeatedly held that the true owner cannot be deprived of his property, and may recover damages from the corporation for its loss. The principle controlling here is that where the external appearances exist of a limited or restricted power of transfer on the part of the holder, the corporation is bound to inquire and to satisfy itself of the authority of the trustee or agent to sell and dispose of it. Effect of Transfer. A transfer of shares in a corporation, when complete, effects a substitution of a new stockholder in place of the outgoing one in the company, and the transferee assumes and acquires all the rights and obligations which attach to the purchaser by reason of his ownership of shares. The transaction involves a novation of the contract of membership. The transferor ceases to be a shareholder in the corporation. He is discharged, ordinarily, from further liability and loses all his right to share in the company's profits or to participate in the management of the corporation. The transferee, on the other hand, becomes the stockholder in place of the retiring mem.. ber and assumes, impliedly, all of the obligations which rested upon his vendor, and is liable to the extent of the interest in the company which he has acquired. Lien of Corporation. The absolute right to transfer shares of stock may be limited by statutory provisions granting to the corporation a lien on the capital stock of a member for debts due it by him. In the absence of provisions of this character, a corporation has no lien upon member and cannot prevent a transfer merely obligation due and owing to it from him. Refusal to Transfer. Ordinarily, a corporaght to refuse registration to one who presents f stock for cancellation and the entry of his e books and records of the company. It has some cases, though, that it has the right to nsfer stock to a person non sui juris, but it o refuse to transfer stock held by an adminisr person occupying a trust or a fiduciary relaproper authority is shown for the transfer. e is true when applied to dealings by a trustee a guardian. The corporation may require tity and the genuineness of signatures to the ment. The courts go far in holding that it etect a forgery of the name of a stockholder. e to transfer stock where it has, by lien or sion, a lien upon it for the debts of a member , in some cases, the transfer may be effected still subject to the lien. In case of a wronge person presenting the certificate may bring ty to establish his rights, or may, by mandahe corporate officers to formally complete the f the stock presented for transfer; or he may on at law for the conversion of the stock and mages which he can prove he has sustained. tion may lawfully, however, refuse to issue a e, except upon surrender of the old, as he by-laws of the corporation. Where it is a certificate has been lost or destroyed, it is the corporation to require the giving of a ng it against loss in case the old certificate ented for transfer. In some States, by statu1, it is obligatory upon the corporation, in r destroyed certificates, to issue a new one e of a certain prescribed time and without a bond of indemnity by the one receiving the SUBSCRI § 114. Legal Na the stock of a corpo governed by the sa The subscription n in an existing corp general rule obtain merely is a continu proposed corporati which, until such a "A subscription a corporation to be 1 Minneapolis, etc., Co. r merely im. corporapresents y of his It has right to 5, but it adminisry rela ransfer. trustee require to the that it holder. lien or ember ffected te the e may kand ained. sue a 1, as it is it is of a ficate atu in one out the CHAPTER XIV SUBSCRIPTIONS TO CAPITAL STOCK § 114. Legal Nature of Transaction. A subscription the stock of a corporation, when accepted, is a contract, a governed by the same principles of law as other contra The subscription may be made either for shares of st in an existing corporation or in one to be organized. general rule obtains that in the latter case the subscript merely is a continuing offer which may be accepted by proposed corporation when its organization is complete, which, until such acceptance, may lapse or be revoked. "A subscription by a number of persons to the stock a corporation to be thereafter formed by them has in a double character. First, it is a contract between subscribers themselves to become stockholders, with further act on their part, immediately upon the format of the corporation. As such contract it is binding a irrevocable from the date of the subscription, at least the absence of fraud or mistake, unless cancelled by c sent of all the subscribers before acceptance by the corpo tion. Second, it is also in the nature of a continuing of to the proposed corporation which, upon acceptance by after its formation, becomes, as to each subscriber contract between him and the corporation."" In the case of the subscription to the stock of a corpo tion already formed, the contract, of course, results u the acceptance of the offer, and the first point to be ex ined is always as to which party made the offer. If corporation merely opens books for subscriptions, it is that the subscriber for shares is the one making the of and that the contract does not result until there has b an acceptance on the part of the corporation. But if 1 Minneapolis, etc., Co. v. Davis, 40 Minn. 110. |