Opinion
Argued October 17, 1890
Decided December 2, 1890
DeB. Wilmot for appellant. Chas. Howard Williams for respondent.
The rights and powers arising out of the ownership of corporate shares are those which belong to their owners as individuals, to be enjoyed and exercised in severalty, and those which are collective and are exercised in common with all of the shareholders pursuant to the powers conferred by the statute under which the corporation is organized, or by its articles of association. The right to sell shares is a personal one, and so is the right to grant or withhold assent to change their relative value. The right to vote in corporate elections, and to assent to mortgaging the property of manufacturing corporations are collective, to be exercised in common with other shareholders and in the mode prescribed by the statute or by the articles of association. The articles of association divided the capital of the corporation into 7,500, shares, equal in amount and value. At the date of the agreement of May 22, 1885 (by which it was provided that 3,000 of the shares should have priority over the remaining 4,500), all of the shares save twenty had been sold, and were then registered in the names of their purchasers. The right of every shareholder to his proportion of the profits of the corporation was vested, and in the absence of some power to change the relative value of the shares conferred by statute or by the articles of association, no change could be made without the consent of all the shareholders. ( Kent v. Quicksilver Mining Co., 78 N.Y. 159.) It is insisted by the defendant that the consent of Edwin M. Felt, a registered shareholder, was binding on Gadsden, his assignee, who held certificate No. 13 under an unregistered assignment, and to support its contention it relies on the rule that a corporation acting in good faith and without notice of the rights of others may treat registered shareholders as the actual owners of the shares standing in their names. This rule is only applicable to such transactions as are within the express or implied powers conferred upon the company or its shareholders. Collective or corporate powers common to all stockholders may usually be exercised by a registered shareholder, though he has assigned all of his shares, and his action will bind his assignee holding under an unregistered transfer and all others. These powers being conferred on corporations and their shareholders, purchasers are bound to know that they may be exercised by their assignors until the transfers are registered in their names. But the assignees of shares having possession of the certificates, though holding under unregistered transfers, are not bound by contracts between the registered shareholder, the corporation and all other shareholders which are not within the express or implied powers of corporations, or of their shareholders. As between the assignor and the assignee the unregistered assignment was not void under the 25th section of chapter 40 of the Laws of 1848. ( Johnson v. Underhill, 52 N.Y. 203.) It follows that the change in the relative value of the shares which this corporation and its registered shareholders sought to effect was not within the express or implied powers conferred upon the corporation or shareholders, and that their action is not binding upon this plaintiff, who is entitled to an unconditional certificate for one hundred shares.
The judgment should be reversed and a new trial granted, with costs to abide the event.
All concur except VANN, J., dissenting.
Judgment reversed.