Anglo-Californian Bank, Ltd. v. Grangers' Bank

Sharpstein, J. The court found that prior to and at the time of the transfer of thirty shares of the capital stock of the corporation defendant, by one Fowler to the corporation plaintiff, said Fowler was indebted to the defendant in a sum greatly in excess of the value of said stock, and that said indebtedness had never been paid, and that by virtue of a by-law of said corporation defendant, it was justified in refusing to enter said transfer upon its books until said indebtedness should be paid. Said by-law reads as follows:—

“All transfers of stock shall be subject to all debts and equities in favor of the corporation, against the person or corporation making such transfer, and existing or arising prior to the regular transfer thereof upon the books of the corporation, and no transfer of shares shall be made upon the books of the corporation until all dues and demands thereon due to the corporation from the party or parties representing such shares shall have been paid.”

The court also found that the plaintiff had no actual knowledge of that by-law, and that it never tried by inquiry or otherwise to obtain any such knowledge. It is not found that prior to said transfer the appellant was informed or knew of the indebtedness of said Fowler to the respondent.

It is found that many of the banking corporations of this city, including the corporation plaintiff, had by-laws similar to the one above quoted, and that the latter corporation had such a [363]by-law printed upon its certificates of stock, from which the court drew the conclusion “that the corporation plaintiff, its managers and other officers, had actual notice of circumstances sufficient to put a prudent man upon inquiry as to the contents of the code of by-laws of the corporation defendant herein.”

The only circumstance, however, of which the plaintiff had actual notice was that it had a similar by-law of its own, a copy of which it had printed upon every stock certificate issued by it. As' the defendant did not print a copy of said by-law upon any stock certificates issued by it, we do not think that the circumstances of the plaintiff’s having a similar by-law, coupled with the fact that a copy thereof was printed upon all certificates of stock issued by it, was equivalent to actual notice of the fact of the defendant having such a by-law, although the plaintiff neglected to make any inquiry, and might have ascertained if it had, that the defendant had such a by-law.