due by him to the bank, includes liabilities not yet matured, and creates a valid lien as against an assignee of the shares, who takes with notice while the shareholder is under a contingent liability as indorser, and does not inform the bank of his claim until after the indorser's liability has become fixed.1 And when a bank has a lien on its shares for all indebtedness of the shareholder, its lien covers not only the indebtedness of the legal holder, but also of a subsequent transferee whose title has not yet been perfected, but who has become the equitable owner.2

§ 605. After a bank, which has, by its charter, a lien on its shares, has applied the proceeds arising from a sale of shares to the satisfaction of a debt due from the holder, it will be postponed until the general creditors of the holder shall have been made equal out of his other estate, the residue of which will thereupon be distributed pro rata.3

Waiver of lien.

§ 606. By issuing a new certificate to a transferee of shares in which certificate is expressly stated that the shares are transferable after the liabilities of the holder to the bank are discharged, a bank waives any lien it may have had for the debts of the prior holder.' But when a bank has a lien by its charter, it does not waive its lien by using stock certificates (on their face transferable only on the books of the bank) which make no mention of the lien; for a person purchasing or lending money on the security of the shares is affected with notice of the lien. When a bank releases its lien for a specified time, and within that time the shares are pledged for a debt, the right of the bank after the expiration of the time to re-acquire its lien is subordinate to the right of the pledgee, until the debt for which the shares were pledged is paid, or the pledge released."

607. In another case a bank charter contained the following provision: "The stock of the bank shall be assignable and transferable on the books of the corporation only, and in the presence of the president or cashier, in such manner as the bylaws shall ordain; but no stockholder indebted to the bank for a debt actually due and unpaid shall be authorized to make a transfer or receive a dividend until such debt is discharged, or security to the satisfaction of the directors given for the same." A., a shareholder indebted to the bank, delivered his stock certificate with power of sale to B. as collateral security for a debt. On default of payment, B. sent the certificate to the cashier, who made the requisite entries on the stockledger, where it was his practice to keep account of transfers without consulting in each case the directors, who had adopted no by-law regulating the matter. The cashier then sold a portion of the shares for B. on B.'s power of attorney, having told B. that he needed no certificate. Subsequently A. became insolvent, being indebted to the bank. It was held that as between A. and B. the title to the shares passed by A.'s delivery of the certificate; also, that the acts of the cashier were binding on the bank, and the transfer made by him on the stock-ledger vested in B. a complete and unincumbered title to the shares with a right to the usual certificate; and it was further held that even if B. had acquired merely an equity based on an executory contract for a transfer, the right of the bank to assert its lien was lost by its laches, and the enforcement of its lien would have operated as a fraud.'

Birmingham T. & S. Co. v. Louisiana | notes given to secure the payment Nat. Bk., 99 Ala. 380. See, also, of the subscription were paid. It Loan & Trust Co. v. Bank, 97 Iowa, negotiated these notes, and after668. A clause in a charter that no wards issued unconditional certifishareholder shall sell his shares cates to the original subscribers, without giving the corporation ten who were the makers of the notes. days' refusal of them, applies only The makers failed to pay the notes, to voluntary sales; and does not and the company was held liable to affect the rights of a purchaser at a pay the judgments recovered by the sheriff's sale on an execution. Bar-holders against the makers, to the rows v. National Rubber Co., 12 R. I. 173. A railroad company issued conditional stock certificates, for which ordinary stock certificates were to be exchanged when the

extent of the value of the uncon-
ditional certificates. Houston, etc.,
Ry. Co. v. Bremond, 66 Tex. 159.
1 National Bank v. Watsontown
Bank, 105 U. S. 217.

Rights of shareholders in respect of winding up.

§ 608. Although it would seem that there is no method by which a shareholder can, against the will of the majority, force the corporation to continue its operations, a shareholder has important rights respecting the manner of discontinuing the business and winding up the corporate affairs. On the dissolution of a corporation, as by expiration of its charter, any shareholder ordinarily may insist that its assets shall be turned into money; and where a statute provides a way for winding up a company or reducing its capital stock, the company cannot in a way unauthorized by the statute, against the will of a dissentient shareholder, purchase its own shares with a view to dividing its assets; and in such a case a clause in the articles of association, that the shares of any shareholder who begins directly or indirectly a suit against the company or the directors, shall be forfeited on payment to him of their full market value, cannot avail the company. It has also been held that the directors and a majority of shareholders cannot sell out the entire property of a solvent and paying railroad company against the consent of a minority. And a railroad

1 But a subscriber who has never paid anything on his shares, and whose shares have been forfeited, has no standing as a shareholder to object to the disposition made of corporate funds on dissolution. St. Louis, etc., Coal, etc., Co. v. Sandoval Coal, etc., Co., 116 Ill. 170.

ceeds, became the purchasers of such property at an unfair price, through a new corporation, in which they were shareholders, to the exclusion of the minority shareholders in the old corporation. In a suit in equity by the latter against the new corporation, it was held that plaintiffs had

2 Mason v. Pewabic M'g Co., 133 a lien, to the extent of the moneys U. S. 50.

8 Hope v. International Financial Society, L. R. 4 Ch. Div. 327.

4 Kean v. Johnson, 9 N. J. Eq. 401. See People v. Ballard, 134 N. Y. 269; Morris v. Elyton Land Co., 125 Ala. 263; Plant v. Macon Oil & Ice Co., 103 Ga. 666; Forrester v. B. & M. Min. Co., 21 Mont. 544. But see Waldoborough v. Railroad Co., 84 Me. 469.

The owners of a majority of shares of a corporation under the form of dissolving it and disposing of its property and distributing the pro

of which they had been deprived by the sale, on the property of the old corporation in the hands of the new. Ervin v. Oregon Ry., etc., Co., 23 Blatchf. 517. The court followed the idea that when a majority combine, they constitute themselves the corporation, and so are bound to exercise their powers with due regard to the interests of the minority. See, also, Meeker v. Winthrop Iron Co., 17 Fed. Rep. 48; cf. Phillips v. Providence S. E. Co., 21 R. I. 302; Bartholomew v. Derby Rubber Co., 69 Conn. 521.

company has no authority to sell, or lease in perpetuum, all its property and business to another corporation, and compel a dissenting shareholder to accept stock in the other company, or a fixed and arbitrary price per share of its own stock.1

§ 609. Nevertheless, if under the authority of the board of directors, whose action is ratified by the holders of all the stock represented at a shareholders' meeting, a conveyance is made of the total assets of a corporation in payment of its sole debt, the conveyance will be valid as against other shareholders, when there is no fraud and a continuance of the business would have been ruinous.2

3

dissolve; of

§ 610. The majority of shareholders, moreover, acting as the body corporate, may, when the rights of the state Power of do not prevent, dissolve the corporation and wind majority to up its affairs. Likewise it is held competent for minority. the shareholders by a by-law adopted at their first meeting to limit the term of the corporate existence.1 But a minority cannot compel a dissolution unless there exist more substantial reasons against the further prosecution of the corporate enterprise; nor has the minority, in the absence of fraud or wrong1 Boston & Prov. R. R. Co. v. New Valley R. R. Co., 30 Pa. St. 42; York & N. E. R. R. Co., 13 R. I. 260; Merchants,' etc., Line v. Wagner, 71 Mason v. Pewabic M'g Co., 25 Fed. Ala. 581; Trisconi v. Winship, 43 Rep. 882; Byrne v. Schuyler, etc., La. Ann. 45; Berry v. Broach, 65 Co., 65 Conn. 336. See, also, Froth- Miss. 450; Skinner v. Smith, 134 N. ingham v. Barney, 6 Hun, 366; Tay- Y. 240. See Webster v. Turner, 12 lor v. Earle, 8 Hun, 1; Lauman v. Hun, 264; Ervin v. Oreg. Ry., etc., Lebanon Valley R. R. Co., 30 Pa. St. Co., 23 Blatchf. 517; Price v. Hol42; In re Empire Assur. Co., Ex comb, 89 Iowa, 123; Pringle v. Eltparte Bagshaw, L. R. 4 Eq. 341; ingham Cons. Co., 49 La. Ann. 301. Clinch . Financial Co., L. R. 4 Ch. In regard to national banks the stat117; McCurdy v. Myers, 44 Pa. St. ute (U. S. Rev. St., § 5220) provides 535. Compare Buford v. Keokuk that they may go into liquidation Northern Packet Co., 3 Mo. App. and be closed by a vote of the share159. But see Sawyer v. Dubuque holders owning two-thirds of the Printing Co., 77 Iowa, 242. stock.

2 Hancock v. Holbrook, 9 Fed. Rep. 353. See, also, Buford v. Keokuk Northern Packet Co., 3 Mo. App. 159; Sheldon Hat Blocking, Co. v. Eickemeyer Hat Blocking, etc., Co., 90 N. Y. 607.

8 Treadwell v. Salisbury M'f'g Co., 7 Gray, 393; Lauman v. Lebanon

* Merchants,' etc., Line v. Wagner, 71 Ala. 581.

5 See Matter of Pyrolusite Manganese Co., 29 Hun, 429; O'Connor v. Hotel Co., 93 Tenn. 708, in which demurrer to complaint was overruled. It has been held that an insolvent corporation may be dissolved

doing on the part of the directors, an absolute right to have a receiver of the corporate property appointed, although the corporation be utterly insolvent; this last being discretionary with the court. Thus, it is no ground for dissolving a manufacturing corporation on the petition of shareholders—a majority in number though a minority in interest—that a person owning a majority of stock has for many years controlled the election of officers and elected himself agent; and that he has for a long time "managed the affairs of said corporation according to his own will and choice, regardless of the wishes and interests of the other stockholders; " that, according to his statement, the corporation had been doing a losing business, that he refuses to purchase the shares of complainants, and that if the affairs of the corporation were properly managed the business might be a source of profit to all. 2

Jurisdic

§ 611. Independent of statute, moreover, a court of equity has no power to dissolve a corporation and divide its tion of equity. property at the suit of a shareholder, or remove corporate officers. Under statutes in some of the states, however, an information in the nature of a quo warranto may be filed at the relation of a shareholder against an illegally exist

at the suit of a shareholder. Masters v. Eclectic Life Ins. Co., 6 Daly, 455. But see Denike v. New York, etc., Lime Co., 80 N. Y. 599; Hardon v. Newton, 14 Blatchf. 376.

1 Denike v. New York, etc., Lime Co., 80 N. Y. 599. See Hardon v. Newton, 14 Blatchf. 376.

2 Pratt v. Jewett, 9 Gray, 34. See, also, Burnham v. S. F. Fuse Mfg. Co., 76 Cal. 24.

3 Strong v. McCagg, 55 Wis. 624; Bayless v. Orne, 1 Freem. Ch. (Miss.) 161; Howe v. Deuel, 43 Barb. 504; Belmont . Erie Ry. Co., 52 Barb. 637; Waterbury v. Merchants' Un. Exp. Co., 50 Barb. 157; Fountain Fry Tr'npk Co. v. Jewell, 8 B. Mon. (Ky.) 140; Morrows v. Edwards, 20 Dist. Col. 475; Coquard v. Nat. L. O. Co., 171 Ill. 480. See Gibson v. Thornton, 107 Ga. 545; Oldham v.

Mt. Sterling Imp. Co., 103 Ky. 529. Compare Baker v. Backus, 32 Ill. 79; Terhune v. Midland R. R. Co., 38 N. J. Eq. 423; Baker v. Louisiana Portable R. R. Co., 34 La. Aun. 754. Compare Hitch v. Hawley, 132 N. Y. 212. It has recently been held that a court of equity, when a shareholder is aggrieved by oppressive and fraudulent action of the officers and holders of a majority of shares, may, in entertaining his suit for relief, if carrying on the business is impracticable, proceed and appoint a receiver and wind up the corporation. Miner v. Ice Co., 93 Mich. 97. Compare Benedict v. Columbus Cons. Co., 49 N. J. L. 23; Ulmer v. Maine R. E. Co., 93 Me. 324.

4 Neall v. Hill, 16 Cal. 146. See § 581.