puts it in his pocket. A pickpocket steals it from him and sells and delivers the certificate to B, an innocent purchaser for value. As between A and B who is stockholder in X Company?

(Note: The above provisions assimilate indorsed certificates of stock to negotiable bearer paper. The cases establish that if one indorses stock in blank and hands it to an agent, the agent may give a good title in violation of his trust if he sells to an innocent purchaser for value, for the owner has clothed him with apparent ownership and is estopped to assert his title. But if the owner had not so delivered it, but had indorsed it in blank and had it in his own possession then by earlier authorities (see Sarin v. Wilson) a thief of such indorsed certificate could not give good title to it, but the owner could recover it from such thief. But by the Uniform Act quoted above a thief of a certificate so indorsed in blank by the person appearing therein to be the owner can give good title thereto. Of course a certificate upon which the indorsement of the owner is forged or written without authority, cannot be transferred, for the purchaser then traces his title through a forgery or through an unauthorized indorsement.)

Case 678. Otis, Adm'r, v. Gardner, 105 Ill. 436.

Facts: Sheridan Wait, in his lifetime, was the owner of 100 shares of stock in Calumet & Chicago Canal & Dock Co., of par value of $10,000 represented by certificates issued to him. Written on the back of each certificate was a blank assignment and power of attorney, that would authorize the assignee to have the stock represented by such certificates formally transferred to him on the books of the company. March 16, 1875, Wait indorsed the certificates below the blank form of transfer and delivered them to Chauncey T. Bowen, and Bowen gave back a receipt reciting he had "borrowed" the stock and that it was to be returned on demand. The purpose of this loan did not appear. Afterwards Bowen wrongfully pledged these two certificates as collateral security for the payment of his notes to Jefferson Gardner, the defendant in this case. The blank form of transfer consisted in an assignment and a power of attorney. Otis, as administrator of Wait, filed this bill against Gardner and the corporation. The bill asked for a decree

that the stock be declared to belong to Wait's estate; that the old certificate be cancelled, and a new certificate be issued to the administrator by the company, and that he be recognized as a stockholder on the books.

Point Involved: Whether placing in the hands of an agent, a stock certificate, so indorsed that it may be transferred by mere delivery, estops the true owner to set up his title against an innocent purchaser or pledgee for value of such certificate to whom such agent has without actual authority transferred it.

MR. CHIEF JUSTICE SCOTT: "The intestate placed the certificates in the hands of Chauncey T. Bowen, with a blank assignment written thereon, authorizing an absolute transfer of the stock to the assignee, under the bylaws of the company. It was pledged to Gardner, in the usual course of business, as collateral security for the indebtedness of the holder, and was taken in good faith, without the slightest knowledge that any one other than the pledgor claimed or had any interest in the stock represented by the certificates. As has been seen, the certificates of stock were placed in the hands of Bowen by the intestate in such condition they could be readily sold or hypothecated by him, and if his assignee made an improper use of them, the assignor, if living, could get no relief against that which he deliberately authorized to be done, if it would affect injuriously an innocent purchaser for value, and his personal representative can have no relief that could not be granted on a like bill by the intestate, if living. The principle is, that when one of two or more persons must suffer loss, upon him whose conduct made it possible for loss to occur should the consequences ultimately rest."

Question 678: What is the point involved in this case, on what facts did it arise, and how did the Court decide?

§ 711. (Corporations, Sec. 75.) Liability of transferee to corporation.

(Note: The transferee is liable to the corporation if he knows the shares are not paid up. If the shares recite they are fully paid, a transferee may rely thereon.)

§ 712. (Corporations, Sec. 76.) Liability of transferee to creditors.

Case 679. French v. Harding, 235 Pa. St. 79.

Facts: A proceeding was brought in the New Jersey courts to establish the insolvency of the Agnew Company, collect its assets, enforce stockholders' liability on unpaid stock so far as the indebtedness of the company should require, pay off its creditors and wind up its business. French was appointed receiver and brings suit in the Pennsylvania court to enforce Harding's liability as shareholder, the stock held by him having never been paid for. Harding defends that he is not an original subscriber, but a purchaser from a shareholder of stock already issued; that he bought the stock in the market through a broker at Philadelphia, and had no knowledge said stock was unpaid.

Point Involved: Whether a transferee of issued stock, who does not know that it is unpaid, can be held for the benefit of the creditors of the corporation.

"(1) From Cook on Corporations, Vol. 1, Sec. 50, where may be found a general discussion of this question, supported by many notes and citations, we quote the following: 'A bona fide purchaser, for value and without notice, of stock issued by a corporation as paid up, cannot be held liable on such stock in any way, either to the corporation, corporate creditors or other persons, even though the stock was not actually paid up as represented. The law goes still further and holds that where a person in open market, in good faith and without notice, purchases certificates, such stock is to be deemed "paid up" in his hands, and he is protected as a bona fide purchaser, even though there is nothing on the face of the certificates stating that they are paid up. This can now be laid down as the established rule. It is based on sound public policy, favoring as it does the transfer of personal property and the quasi-negotiability of stock

and discountenancing secret liens and constructive notice.'

Question 679: If A owns stock upon which he is liable for payment to the corporation, does a transferce of his share become liable?

Case 679a. Edwards v. Schillinger, 230 Ill. 373. (Set out as Case No. 655, supra.)

Question 663: Was the transferee held in this case? Why?

§ 713. (Corporations, Sec. 77.) Liability of transferror to transferee.

Case 680. Burwash v. Ballou, 230 Ill. 34.

MR. CHIEF JUSTICE HAND: 66#

"The International Copper and Gold Company was a de facto corporation, and the appellant having purchased its stock of the appellees, in a proceeding like this, no warranty having been made by the appellees that the corporation issuing such stock was a de jure corporation, the appellant cannot escape the payment of the consideration agreed to be paid by him for such stock, by showing that the International Copper and Gold Company, which issued said stock, was not legally organized, or that its increase of stock of which that purchased by appellant formed a part, was illegally issued. (Marshall v. Keach, 227 Ill. 35.) In Higgins v. Illinois Trust & Savings Bank, 193 Ill. 394, it was held that the vendor of stock in a corporation impliedly warrants that the stock is genuine and that he is the owner thereof and authorized to transfer title, and that if the assignee desires further protection he must exact a special warranty. See also First Nat. Bank of Sterling v. Drew, 191 Ill. 186."

Question 680: What are the implied warranties of a seller of corporate stock!

§ 715. Declaration of dividends within discretion of directors.

§ 716. Payment of dividends.

§ 717. Who entitled to dividends.

§ 718. Dividends upon preferred stock.

8714. (Corporations, Sec. 78.) Definition and kinds.

Case 681. Eisner v. Macomber, 252 United States Reports, 189.

Facts: This case arose under the Revenue Act of 1916, which attempted to tax stock dividends as "income. Held: that stock dividends are not income. A portion of the opinion is given as containing a statement of the stockholders' relationship to the corporation and the definition and nature of dividends.

MR. JUSTICE PITNEY delivered the opinion of the Court:

"Can a stock dividend, considering its essential character, be brought within the definition? To answer this, regard must be had to the nature of a corporation and the stockholder's relation to it. We refer, of course, to a corporation such as the one in the case at bar, organized for profit, and having a capital stock divided into shares to which a nominal or par value is attributed.

"Certainly the interest of the stockholder is a capital interest, and his certificates of stock are but the evidence of it. They state the number of shares to which he is entitled and indicate their par value and how the stock may be transferred. They show that he or his assignors, immediate or remote, have contributed capital to the enterprise, that he is entitled to a corresponding interest