898
'FEDEltAL ltEl"OltTElt;
vol. 63.
tion;i,,:;,onilecessary, last-he 'complainant can ha.ve recourse to the one4e,!already hastc> obtainallneceS6fU'Y relief, I think that fact does 'not deprive him of!the right to resort,to a court of equity, and obtain theordiilary decree ina patent suit against a defendant who istioHlting his rights. A decree is ordered for the, complainant foranillijunction, and for an accounting of damages and profits accruing from the infringements committed since January 11, 1892.. There will be a reference to Anson J. Northrup, of the city of Syracuse, as master, t,o take and report the account. :, , ""
':,"
,.
"
liJANK OF COMM:lJ;RCE v. :BANk OF NEWPqRT.
(qlrcultCourt of ApPeals, Eighth Circuit. October 22, 1894.) 441. . , . ! ", : '
1.
.....;M'MBEBr,.,..WJlO, IS. . ; " " The holders ot certUicates, which stated that the shares were only on tbe,1:I90ks,of :the bank," on surrender of the eel'indorsed,Sold, indorsed, and delivered such certificates to J.,Bfos.,4t 00., whp <iebtors of th,e, bank. .one of the latter firm, alld a).S9?Ile of, notified the bank of the transfer; and the ,cashier:made an entry Quthestock-certUlcate book-which was the only bool(, !!howing whow,ere stock/iolders-that the certificates were transferred to; and owned by, J. Bros. Co. HelfA that the firm of J. Bros. & Co. was a "member" of such corporation, within the meaning of ,Dig. Ar!l:., § 975, provides that" the stoc!l: of every corporation ;!l/il1ll be transferred, only on the books. thereof, in such form as the directors prescribe, and such 'corporation shall "have a lien upon all the stock or property of its'members" for aU debts due from them to it SA.ME-STOCK-LIEN FOR DEBTS DUE FROM MEMBERS-ESTOPPEL.
2.
The facts that the certificates recited that, the shares were transferable only on the books of the bank on the surrender of the certiftca'tes, and that the bank did not adopt or use that mode of transfe,r, did not estop it from cIa1mlng& IleU9u the stol$; for the debts due it from such firm, as ;tgainst a vendee and indO'rsee of such certificates, who took them from such firm.
Appeal frOID the Oircuit OouI't of the United States for the Eastern District' of, Arkansas; Action by the Bank ofOommer'ce against the Bank of Newport to compel defendant to transfer to plaintiff, on defendant's corporate books, certain sha1'eS of its stock. From, a judgment for defendant,plaintiff appeals. U. M.lWse, W. E. Hero4J,g-«ray, and G. B. Rose, {or appellant. J. for appellee. BeforeOALDWELL, SANBORN, and THAYER, Oircuit Judges. THAYER, qrcUit Judge. The question to be decided on this appeal aris6l!1, out of the' following ,facts, which are practically undisputed: On the 3d and 4th days of August, respectively, in the year 1890, the appellee, the Bank of Newport, of Newport, Ark., issued tw():stock certificates, one of which certified that the firm of Jones B,ros., & l\!ask was the owner of 100 shares of stock
BANK OF 'C0MMERCE V. BANK OF NEWPORT.
899
in said bank of Newport, and the other that ·said firm was the owner of 20 shares of stock. Each certificate stated that the shares were "transferable only on the books of the bank, in person or by attorney, on the surrender of this certificate properly indorsed." Subsequently, Jones Bros. & Mask· sold, indorsed, and delivered the two certificates of stock to the firm of Jones Bros. & Co.; and on May 16, 1891, notice of such transfer and sale was given to the Bank of Newport by R.J. Jones, who was a member of the firm of Jones Bros. & !tfask, and also a member of the firm of Jones Bros. & Co. A similar notice of sale was given by W. R. ·Jones, of the firm of Jones Bros. & Co., on July 7. 1891. Thereupon, the Bank of Newport made the following notation on its stock-certificate book, which contained the only record kept by it relative to the ownership and transfer of shares of stock: by Jones Brothers and Company, May 14, 1891.
"Notified by R. J. Jones that this certificate is transferred to and is owned Notified to the same ",!'feet by W. R. Jones, and certificate sbown, July 7th, 1891."
On the 30th day of January, 1892, Jones Bros. & Co. delivered the certificates to the appellant, the Bank of Commerce, of Memphis, Tenn., as collateral for advances made to Jones Bros. & Co. by the appellant. The certificates at that time bore the indorsement of Jones Bros. & Mask, to whom they had been originally issued. On January 30, 1892, and for some months previously thereto, Jones Bros. & Co. were and had been largely indebted to the appellee, the Bank of Newport. After the delivery of the certificates to the Bank of Commerce, the latter bank requested the appellee to transfer said shares of stock to it, upon the corporate books kept by the appellee for that purpose. This request was refused, the Bank of Newport claiming that it had a lien on said stock to the full amount of the indebtedness' due to it from the firm of Jones Bros. & Co., under and by virtue of the following statute of the state of Arkansas, to wit: "The stock of every such corporation sl1l'lll be deemed personn,l rroperty and be transferred only on the boo,ks of such corporation in such form as the directors shall prescribe; and sucb corporation shall at all times have a lien upon all the stock 01' property of its members invested therein for all debts due from tbem to such' corporation." Mansf. Dig. § 975.
Subsequently, the present action was commenced by the Bank of Commerce against the Bank of Newport to compel a transfer of said stock on the corporate books of the last-named bank. The trial in the circuit court resulted in a decree in favor of the defendant. The question to be determined is whether the firm of Jones Bros. & Co. was a member of the defendant corporation on January 30, 1892, in such sense that the. corporation can avail itself of the lien created by the aforesaid statute of the state of Arkansas. The contention of the appellrunt is that the firm of Jones Bros. & Co. was not a member of the defendant corporation, within the meaning of the statute, and that, at most, as between the firm and the cor· poration, the firm only had an equitable title to the stock, which might be transformed into a legal title, and constitute the firm a
900
FEDERAL
\.
member Qf the corporation, 'by surrendering the old certificates, and taking out new certificates in the name of Jones Bros. & 00. lt is very generally held, and it may be accepted as the established view; that a provision that shares of stock shall be transferable only on the books of the corporation, in person or by attorney, on the surrender, of the old certificate properly indorsed,is a provision mtended primarily for the benefit. of the corporation, to enable it to preserve an authentic record ofiits shareholders, and thereby to deal safely a,nd intelligently with<itsmembers, in the matter of paying dividends,giving notice of. cQrporate meetings, and in all other matters relath;rg to the internal affairs and the government of the corporation. Incidentally, nodQubt, a provision of that kind is also intended to preserve 8,. record of the ownership of stock, to which third parties may resort when they have .occasion to 'purchase or otherwise deal in the stock of the corporation. It has never been supposed, however, thataJ stipUlation of that nature, whether it is contained in the charter brthe by-Iaws,operates a:sa prohibiothe.l" modes of trftIlsfer. Such provisions are merely tion cumulative.. They provide a particular mode of transfer, on which the corporation or its assignee may insist, before the shareholder is released from any of his obligatiOns as a member of the company; but as between the shareholder and his vendee a good title to stock may doubtless be conveyed by a simple indorsement and delivery of the certificate, 01' by a bill of sale, or any other conveyance which is adequate to transfer the title to any other species of personal property. It i.e a well-known fact that thousands of shares of stock are daily transferred from hand to band by a simple delivery of th.e stock certificates after they have been indorsed in blank by the registered shareholder, and no doubt can be entertained that, as between the parties to such transactions, a good title is conveyed. Johnston v. Laflin, 103U. S. 800,604; Spring 00. v. Rarw, 20 Mo. 382, 388; Railroad 00. v. Schuyler, 34 N. Y. 30, 80; American Nat. Bank v. Oriental Mills, 17 R.. I. 551, 557, 558, 23 Atl. 795; Fisher v. Jones, 82 Ala. 117, 122, 3 South. 13; Robinson v. Bank, 95 N. Y. 637; Haegele v. M:anufacturing 00., 29 Mo. App. 486, 492; Oook, Stock, Stockb. & Oorp. Law, §§ 378,379, and cases there cited. It follows, no doubt, from what has been said, that a vendee of stock may have a ,goOd title thereto, as against his vendor, although he has not been Ja;ccepted as a member of the company, and although the vendor has not been released from his obligations as a member 0'1.' shareholder. This is the neMssary te-sult of the doctrine that the corporation is entitled to insist upon the mode of transfer specified in its charter or prescribed by its by-laws, if the method pres·cribed is reasonable, and does not impboSe unnecessary restrictions upon the right of the member to sell. We think, however, that it is not true, as seems to be contended in the case at bar, that a mode of tranSfer provided by the charter or by-laws of a corporation must be 'in I;l1l respects strictly pursued, before the title of the vendee of stock is complete as against the corporation. Oonsidering the fact Hlat a regulation requiring. a transfer of stock· on the books of the company, and a surrender of the old certificate, is intended primarily;
BANK OF COMMERCE V. BANK (IF NEWPORT.
901
for the benefit and advantage of the corporation, we think that it is competent for the corporation to waive a strict observance of prescribed forms, and to admit the vendee of stock to full member· ship in the corporation without a literal compliance with such regulations. So much, at least, has already been decided. In the case of National Bank v. Watsontown Bank, 105 U. S. 217, 222, a .statute under which the Watsontown Bank was organized provided, in substance, that its shares should be transferable on its books in the presence of its president or cashier, but that no stockholder indebted to the bank for a debt actually due should be authorized to make a transfer until the debt was discharged, or secured to the satisfaction of the directors. It seems to have been the custom of the bank, on the entry of transfers of stock, to cancel the old certificate and issue a new one. In the case before the court the cashier, on being advised of a sale of certain shares by the purchaser thereof, had made an entry on the stock ledger showing the transfer, but the old certificate was not canceled, nor a new one issued. Moreover, the vendor of the stock was indebted to the corporation at the time the transfer was noted on the stock ledger, and he had not been required to discharge the debt, or to secure it to the satisfaction of the directors. It was held, in substance, that a stock certificate is a mere evidence of title to stock, but is not the stock itself; that, independent of the certificate, a person may occupy the relation to a corporation of a legal owner of certain shares of its stock; and that the action of the cashier in noting the transfer of the shares on the stock ledger, although the old certificate was not canceled, nor a new certificate issued, and although the former shareholder had neither paid nor secured his indebtedness to the bank, constituted the vendee the owner of the shares, and precluded the bank from asserting a lien on account of the indebtedness of the former owner. In the case of Upton v. Burnham, 3 Biss. 431, 520, Fed. Cas. Nos. 16,798 and 16,799, a certificate of stock which had been indorsed in blank by the original owner was transferred for value to the defendant, by an intermediate holder, by mere de· livery. Subsequently, the corporation, on being advised O'f the fact, had entered the defendant's name on its books as a shareholder without canceling the old or issuing a new certificate. The eel" tificate contained a clause to the effect that it was transferable on the books of the corp<lration on the surrender of the certificate. It was held in that case that the entry of the defendant's name on the books of the corporation constituted him the legal owner of the stock, and, as between himself and the corporation, gave him all the rights and subjected him to all of the liabilities of a stockholder. See, also, Insurance Co. v. Smith, 11 Pa. St. 120; Fisher v. Jones, 82 Ala. 117, 3 South. 13; Bank v. Gifford, 47 Iowa, 575, 583; American Nat. Bank v. Oriental Mills, 17 R. I. 551, 558,23 Atl. 795; Cook, Stock, Stockh. & Corp. Law, § 383, and cases there cited. The application of the foregoing principles to the case at bar will serve to demonstrate, we think, that Jones Bros. & 0<1. became members :,f the defendant corporation, within the meaning of the Arkansas statute, above quoted, long prior to January 30, 1892, by
902
FEDERALBEPORTER,
'what had: 'been' done toconsunimate a tranSfer of the stock. The notationimade 'on the stock.certiftcate book of the defendant bank, book:kept "bY! ttshowing were its stockholdeMl to the effect that it,hoo .been "notified by R. J.Jones that this cerl1tlcaieYis: tUQnsferred: to,iJand is owned by, Jones Br-others and Company,'" was tantamollntnto a formal Mknowled.gment by the corpdration·that it had' agreed to release the original shar-e: holder.· frofu'his,:obligationsas la :member of the company, and to accept thestook: ,lisa member. If it was not the intention Ofh:tbe corporation'!fafthus release the former' owner from further liability", as asMckllQlder, or not ,to'acknowledge the full ,legal ownership 'Of thestoClt,bytheTtransferee, it should have given notice to tbateffect ,when theeertiftcate was exhibited to it by the tI'ansfereej:and when the 'above! notation ,was made.: :Not having done so, it clearly relinquished:.its, right to further treat,the original owner as a:rilember;' and it could. Dot th,ereafter successfully'assert, as against the originalstockbolder, any right or claim dependent upon the existence of that relation. Such,· we think,was the neclegal, effect of -that transaCtion. It is, Claimed,however, by,theappellant, that it was prejudiced by the statement contained in: rthestock certificates as to the mode of trans-fer; and by the neglect 'of the defendant bank to adopt that mode of· tr&-nsfer, and by its· failure to require a surrender of the original certificates when it. was' notified of the. sale and transfer of the stock>' On this grouoo.anattempt is made to l,'aise an estoppel against1the defendant..J,With reference to this contention, it ·is sufficient toeay, that the :certificates, when acquired by the appellant, conveyedcorreet infol'mation as to whow'as the owner of the stoek. .·:ltdonbtlessiaccepted the certificates from Jones Bros. & Oo':'inthe belief that that firm was the owner of the stock, and entitl to deal with it as it saw fit, and such was the fact. d If at that time the appellantl.consideredit important to know whether, as between the Bank of Newport and the vendee of the stock, the lamrhad been admitted to full membership in the defendant cofnpim.y, so as to ,give the company a lien upon the stock for any iudebtednes's of .Tones Bros. & Co., it was its plain duty to have Inadeinquiry. The 'appellant was affected with knowledge .that Jones B11os. & might have been admitted to full member-ship in the"eorporation notwithstanding the fact that the old certificate W811otrtstanding, for ,knOWledge of that sort' was a matter of have: ascedained by proper inquiry whether such relation 'of membevship had. in fact been es1ablished. There is no suftlcient ground' :On- :whiCh to base an estoppel It results from what has been said thatthe decree of the circuit court should be, and, iHsnereby,affiJ:lIIl,ed. d
ji
PARSONS V. CHICAGO & N. W. RY. CO.
903
PARSONS v. CHICAGO & N. W. RY. CO. (Circuit Court of Appeals, Eighth Circuit. September 24, 1894.) No. 407.
INTERSTATE COMMERCE ACT-REASONABI,E RATE-UNDUE PREFERENCE.
Two connecting carriers united in putting in force a joint through tariff between given points. Held, under sections 3 and 4 of the interstate commerce act, that such joint tariff was not the standard by which tlIe reasonableness of the local tariff on either line was to be determined, and that the fact that a railroad company charged a local shipper more for transporting property between two points on its. road than it charged for the same services when the property transported was received from aeonnecting railroad, and was carried under a joint tariff established by the con.necting carriers, did not establish the charge of an undue preference or discrimination. Railway Co. v. Osborne, 3 C. C. A. 347, 52 Fed. 912, 10 U. S. App. 430, and Tozer v. U. S., 52 Fed. 917, followed. The C. & N. W. Ry. Co. operated a line of railroad from Chicago to a point in Iowa at which it connected with two roads controlled by it, extending to points in Nebraska. Said company Issued a freight tariff headed "Joint Tariff on Corn and Oats ion Car Loads to R., Illinois, When Destined to New York, Boston, &c.," giving certain rates from points in Nebraskll., and referring, for rates from R. to New York, etc., to a preVious tariff. P. sued the railway company for damages. alleging that while this tariff was in force he was required to pll.y a higher rate for shipments over defendant's road from points in Iowa to Chicago than the rate given from Nebraska poi,nts to R., though for a shorter distance; that the fixing of Ras a terminus was a device to evade the law, R. not being a grain market, and the grain being in fact transported to Chicago; that a brother of defendant's freight agent was interested in the grain business in Nebraska; that the tariff for Nebraska points was not made known in Iowa, and the tariff sheet was not filed with the interstate commerce commission; and that the charge to plaintiff was unlawful because an undue preference was given to Nebraska shippers, and a larger charge made for a shorter than a longer haul; also, that defendant, in combination with other companies, had made a through rate from Nebraska points to eastern ports. less than plaintiff, paying local rates to Chicago, and tlIence to the East, was obliged to pay, no through rates from Iowa points being made; and that an unlawful discrimination was thereby made against Iowa shippers, and the long and short haul clause yiolated. Held, on demurrer, that nocauseof action was stated, since the freight tariff pleaded showed that it was part of a joint through rate, and such a rate is not the standard of reasonableness of a local rate, while the other allegations were eithE;l' immaterial. or insufficient to establish the unreasonableness of the rates or a violation of law.
SAME-SUFFICIENCY OF COMPLAINT.
In Error to the Circuit Court of the United States for the Southern District of Iowa. This was an action for damages founded on the provisions of the act of congress of February 4, 1887, commonly called the "Interstate Commerce Act" (24 Stat. 379). Plaintiff in error, E. 1\1. Parsons, was the plaintiff in the trial court. 'rhere were fiye counts in the declaration. The first of these counts contained, in substance, the follOWing allegations: That the defendant corporation, the Chicago & Northwestern Railway Company, is a common carder of freight and passengers, and operates a line 0:' railroad extending from the city of Chicago, Ill., to Missouri Valley and Council Bluffs, in the state of Iowa; that it also owned the majority of the stock, and, by the same general officers and board of directors, controlled and operated two other railroads, to wit, the Fremont, Elkhorn & Missouri .. alley Railroad and the Sioux City & Pacific Railroad, which latter roads connected with the Chicago