124 Ky. 628 | Ky. Ct. App. | 1907
Lead Opinion
Opinion op the Court by
Affirming.
There is no issue of fact involved in this controversy.
The appellee, Nicol, became the owner of 10 shares of stock of the par value of $100 each in the J. A. McGoodwin Banking Company, on the date of its organization in June, .1893, and retained possession of the stock until February 15, 1899, when he sold.it to J. K. Caldwell, then president of the institution,
In December, 1904, the bank became insolvent, and made a general assignment, and an examination of the stubs of the certificate book showed that there had been issued to appellee 10 shares of stock. There was no record that this stock had been sold or transferred to Caldwell, and this action was instituted by the assignee to require appellee to pay for the benefit of creditors the amount of the par value of the stock issued to him. The double liability of stockholderin banks being fixed by section 595 of the Kentucky Statutes of 1903, which provides that: “The stockholders of each bank organized under this, article shall be individually responsible, equally and ratably, and not one for the other, for all contracts and liabilities óf such bank to the extent of the amount of their stock at par value in addition to the amount of such stock, * * * and no transfer of stock shall operate as a release of any such liability existing at the time of such transfer, provided the action to enforce such liability shall be commenced within two years from the time of the transfer; and the directors of each bank shall in January of each year file with the Secretary of State a correct list of the stockholders and officers of such bank”
Conceding the facts to be as stated, appellant insists that appellee is liable under the statute because the shares of stock were not transferred in the manner provided in section 545 of the Kentucky Statutes of 1903, reading as follows: “The shares of stock shall be transferred on. the books of the corporation in such manner as the by-laws thereof may direct, and every person becoming a stockholder by such transfer shall in proportion to his shares succeed to all the rights and liabilities of prior stockholders..” And
It is insisted by counsel for appellant that sections 545 and 546 are mandatory, and that the Legislature, in authorizing the creation of corporations, and providing for the issual of stock and fixing the liability of shareholders, declared the manner in which the stock might be transferred, and that it cannot be transferred in any other way so as°to relieve the assignor from liability. These sections of the statute are important and useful, not only to the corporation, but to all persons having business with the corporation, and especially is this true respecting corporations upon the shareholders of which a double liability has been imposed by statute. The rights of persons dealing with corporations will be better protected when a corporation is required to and does keep a true and correct record of the names of its' shared-holders, and the other essential facts relating to the issual and transfer of stock, so that they may, if necessary, ascertain who the shareholders are, what
The disposition of the question before us is simplified very much by the controlling fact that this transaction is entirely free from any suggestion of bad faith, or a desire to evade or escape the responsibility attaching to shareholders.- All persons concerned in the transfer, including the president and cashier of the bank, who ought to have known what was necessary to perfect it, honestly believed that everything had been done that was necessary, and it would be most unreasonable to hold that appellee, who in the utmost good faith had done everything that he believed necessary, and all that he was told was necessary by the officers of the bank, should be held liable for their ignorance of the law relating to transfers of stock. The cashier was the custodian of the books of the bank, and it was his duty to note in proper form transfers of stock, and, when a shareholder sells his stock, and the cashier is directed to do everything necessary to make the transfer effective for the benefit of the bank and the public, and the transferer in good faith believes that he has done, or will do, this, the care or diligence required of him is discharged, and he will not be required to do more.
Appellee was a director in the bank, and it is argued that it was his duty as director to see that the law was observed, and that the book provided by sec
Questions similar to this have been often the subject of judicial review, and the decided weight of authority is in favor of relieving from statutory liability stockholders whose conduct has been marked by the integrity of purpose manifested by appellee. Thus, in Cook on Corporations, section 258, it is said: “The general rule is that the transferer is not released from liability until the transfer is duly registered on the corporate books. This rule, however, is subject to an important exception, and this exception is that where a corporation accepts the transferee as a stockholder, and pays dividends to him, or where through the negligence or fault of the corporation no transfer
And so we hold that a shareholder in a corporation, although he may be a director, who in perfect good, faith, and under circumstances free from any suspicion of fraud, or a desire to escape liability, sells his stock, and does everything connected with the transfer that he honestly believes is necessary to make it effective, and that a prudent business man should do, and who requests the officers in active charge of the corporation, and who have the control of its books in making the transfer, to do everything that is necessary to perfect it in a legal way, and is informed by them that there is nothing more to be done, will be relieved from future liability as a shareholder.
Wherefore, the judgment of the lower court is affirmed.
Dissenting Opinion
(dissenting): I am of the opinion that the statutes referred to in the opinion are mandatory, and should be so held for the protection' of persons dealing with the hank.