APPENDIX B A BILL For the relief of certain officers and employees of the Foreign Service of the United States who, while in the course of their respective duties, suffered losses of personal property by reason of war conditions Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there is authorized to be appropriated and there is hereby appropriated out of any money in the Treasury not otherwise appropriated the following sums of money, which sums represent the value of reasonable and necessary personal property lost by the claimant as a result of war conditions: Mary Ann Braswell.... George R. Canty.. Kenneth C. Krentz... 78TH CONGRESS 2d Session } HOUSE OF REPRESENTATIVES { REPORT No. 2041 REGULATING THE TRANSFER OF SHARES OF STOCK IN CORPORATIONS IN THE DISTRICT OF COLUMBIA DECEMBER 7, 1944.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed Mr. RANDOLPH, from the Committee on the District of Columbia, submitted the following REPORT [To accompany H. R. 5159] The Committee on the District of Columbia, to whom was referred the bill (H. R. 5159) to regulate in the District of Columbia the transfer of shares of stock in corporations and to make uniform the law with reference thereto, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass. The amendments are as follows: Page 2, line 5, the word "of" preceding "a power of attorney" should be changed to "or". Page 2, line 14, the word "provided" should be "provide". The purpose of H. R. 5159 is to provide the District of Columbia with the Uniform Stock Transfer Act. This act, aimed at promoting throughout the United States uniformity of legislation governing the transfer of title to corporate stock, has already been passed, without substantial change, in 39 States. The Uniform Stock Transfer Act was originally drafted by the National Conference of Commissioners on Uniform State Laws and was approved by the American Bar Association in 1909. Maryland and Massachusetts adopted the act in 1910; Pennsylvania in 1911; New York, in 1913; and so on, until at present, only nine States are without it. Though the District of Columbia is surrounded by States having this law, no previous attempt has been made to place it on the statute books of the District. The principal accomplishment of H. R. 5159 is to accord to a certificate of stock most of the qualities of negotiability that are provided for bills and notes under the universally adopted uniform negotiable instruments law. Thus, title to a stock certificate, when properly endorsed, may pass by delivery of the certificate rather than as at common law, being dependent upon a transfer of title on the books of the corporation. In other words, the certificate is the fullest possible representative of the stock itself, and, therefore, in attachment proceedings against stock ownership, it becomes necessary to attach the certificate itself, rather than the books of the corporation, as at common law. By providing that the certificate represents the stock, the bill is then able to give to the certificate the greatest attribute of a negotiable instrument the protection of one who purchased it for value and in good faith. In this way it benefits every member of the general public who purchases stock. Under the bill, acceptance by a bona fide purchaser of a properly endorsed stock certificate carries with it legal title to the certificate and to the stock represented thereby, despite the fact that the owner was induced to endorse the certificate by fraud, duress, mistake, etc. This provision covers the situation in which one of two morally innocent persons (either the owner who, by carelessness, mistake, fraud, etc., endorsed the certificate, or the purchaser, who, with no knowledge of such carelessness, mistake, fraud, etc., paid value for it) must suffer. One of the two has to bear the loss. H. R. 5159 places the loss upon the owner who, by his endorsement sent the certificate out into the commercial world and thus made the loss possible. This change from the common law, however, does not necessarily produce such a marked change in the decision of actual questions as might be supposed. By section 3 of the bill, the corporation, if it so desires, may continue to treat, as owner the person registered on its books as such. H. R. 5159 makes no important modification in the existing law of the District of Columbia. It is needed because an innocent purchaser of stock cannot receive the protection of the uniform stock transfer law, unless the State (or in this instance the District of Columbia) in which the corporation issuing such stock was chartered, has enacted it, regardless of the law of the residence of such purchaser, or regardless of the law of the State in which the purchase took place. This bill has already received the approval of the Commissioners of the District, the Bar Association of the District of Columbia, the District Bankers' Association, the fiduciary section of the District Bankers' Association, and the Washington Stock Exchange. These organizations represent the great majority of those to be affected by this legislation. Their full and unqualified support is evidence of the need for it. In a recent article in the District of Columbia Bar Association Journal, in discussing the desirability of the passage of S. 1979, the Senate companion of H. R. 5159, it is stated: Because then the provisions of the act work little if any real change in existing law in the District of Columbia, but in some important matters clarify doubts and in a number of others supply in advance statutory rules where no applicable statutes or decisions exist in this jurisdiction, and because the act fits naturally into the scheme of the Negotiable Instruments Act and the other commercial uniform acts already adopted in this District, it is believed that the District of Columbia Bar Association has done well to recommend to Congress the passage of the act as contained in the pending Senate bill. OUTLINE OF PROVISIONS Section 1: Title to certificates and to the stock represented thereby may pass by delivery of the certificate endorsed in blank or to a particular person, or by delivery of the certificate with a separate power of attorney. Section 2: The provisions of this act providing for negotiability do not enlarge the powers of those acting under disability or as fiduciaries. Section 3: The corporation itself may continue to treat as owner the person in whose name the certificate is registered. Section 4: The rescission of transfer of a certificate by the owner does not make invalid subsequent transfers to a bona fide purchaser by a transferee in possession. Section 5: Except as stated in section 7, an endorsement and delivery under the terms of section 1 passes title though made by one having no right of possession and having no authority from the owner of the certificate or from the person purporting to transfer title. Section 6: The indorsement of the owner is effectual, except as provi/ed in section 7, though the owner, (a) was induced by fraud, duress, or mistake, to make the delivery; (b) has revoked the delivery of the certificate or authority so to do; (c) has died or become legally incapacitated, or (d) has received no consideration. Section 7: The owner is permitted to rescind in cases of transfers made without his consent, except where the certificate has come into the hands of a bona fide purchaser, or the owner has waived injury or has been guilty of laches. Section 8: The rescission of transfer of a certificate does not invalidate later transfers to a bona fide purchaser by a transferee in possession. Section 9: The delivery of an unendorsed certificate by the apparent owner imposes upon the deliverer an obligation to indorse and this obligation may be specifically enforced. Section 10: An ineffective attempt to transfer amounts to a promise to do so. Section 11: A person who transfers a certificate for value warrants its genuineness, his legal right to make the transfer and that he has no knowledge of any fact which will impair its validity. Section 12: A holder of security makes no warranty by accepting payment of the debt secured by the certificate. Section 13: No attachment of a certificate is effective unless the certificate is surrendered or its transfer enjoined. Section 14: A creditor whose debtor owns a certificate is entitled to legal and equitable remedies in attaching it to satisfy his claim. Section 15: There shall be no lien in favor of an issuing corporation upon the shares represented by such certificate, or restriction upon the transfer unless the right of the corporation to such lien or restriction is written on the certificate. Section 16: The alteration of a certificate, whether fraudulently or not, shall not deprive the owner of his title and a transfer of such certificate passes only what it originally represented. Section 17: Provides for reissue of a lost or destroyed certificate by judicial procedure of the kind now prevailing. H. Repts., 78-2, vol. 5- -79 |