of salary, and 1 share was issued to Sarah B. Scarlett for cash actually paid. Augustus Scarlett, William Scarlett, and John B. Scarlett were the directors,-Augustus being president; William, the vice president; and John B., secretary and treasurer. The busi

ness and assets of the copartnership were thereupon turned over to the corporation, and the copartnership dissolved, notice of such dissolution being published in the newspapers. The corporation was therefore but the evolution of the partnership. The name of the latter became the distinguishing feature of that of the former. The assets were transferred, and the business continued at the same place. The old style and letter heads being used. The two brothers were, in interest, practically the company, together controlling all corporate action, as they constituted a majority of the directors; and under the by-laws each was clothed with absolute power, in the absence of the president, their father, and he was, in fact, absent from every meeting from October 3, 1891, to September 19, 1892.

In the transac

tion of the purchase of the shares, and the signing and indorsement of the notes, so far as appears, there was no mention made of the corporation, nor of the partnership; but Charles Selvage states, distinctly, that he indorsed the notes with the understanding at the time that he was going security for William Scarlett and John B. Scarlett.

Walter Selvage became a stockholder of the Newark Land & Improvement Company by the transfer to him by Charles Selvage of a portion of his stock; and the two Selvages and two Scarletts were made directors in the place of those representing the Scheerer and Roe interests, leaving a vacancy in the board of directors. Walter Selvage was elected president, Charles Selvage, treasurer, and John B. Scarlett, secretary, of the company. On the 11th of April, 1892, the certificates of the Scheerer and Roe stock were surrendered, and certificates No. 15, for 24 shares, No. 16, for 1 share, No. 17, for 24 shares, were issued in the name of Scarlett & Scarlett, the receipt of which is acknowledged on the respective stubs by John B. Scarlett. These certificates were afterwards returned to the land company, and are marked "Canceled," on their face, in the handwriting of John B. Scarlett, and certificates No. 25, for 24 shares, No. 26, for 1 share, No. 27, for 24 shares, were issued in the name of Scarlett & Scarlett, the receipt of which is acknowledged by John B. Scarlett. The stock at this time was equally divided between the Scarlett interest, on the one hand, and the Selvage interest, on the other. I have thus stated the stock transactions and conditions in detail because they indicate the true object of this suit, and demonstrate that it is not what it purports to be, a contest for one share of the stock, but is for the control of the corporation.

As the result of an invitation, Mr. Freder

ick W. Ward, on April 23, 1892, attended at the office of the land company, which was also the office of "Scarlett & Scarlett, Incorporated," etc. All the directors of the land company, namely, the two Scarletts and the two Selvages, were present, and an informal meeting was held, in which the appointment to fill the vacancy was discussed. There is a conflict in the testimony as to the detail. of what took place at that meeting. With out going into an analysis of the evidence, or giving in detail my reasons for such conclusions, I am satisfied, from the manner of the witnesses, the probabilities of their stories, corroboration, and other considerations, that the true history of the transaction that evening is as follows: On the 16th of April, 1892, a resolution was passed by the directors that the president be requested to have Frederick W. Ward attend the next meeting of the board, on April 23, 1892, to ascertain how the charter could be amended, with general legal advice, which was communicated to Mr. Ward by Walter Selvage, the president, and in response thereto he did attend the meeting of April 23, 1892. An informal meeting was first held, and the subject of Ward's being elected a director was brought up. He expressed to them his willingness to act, but stated that it would be necessary for him to become a stockholder in order to be legally qualified to act as such. director. That some one suggested to issue him a share of stock, to which Ward replied that that could not be done legally, and, further, that he would not act as a director unless he was the absolute owner of at least one share of stock. There was then discussion as to which one of the parties should sell Ward a share. Charles Selvage objected to parting with any more of his, as he had already disposed of some, and John B. Scarlett also objected to part with any of his, on the same ground; and it was then said by some one that either Walter Selvage or William Scarlett must let Ward have a share. This was assented to, and, in order to determine which of the two should do so, it was proposed that a cent should be tossed up. John B. Scarlett then tossed the cent, and picked it up, and said to his brother William, "You have lost," to which William Scarlett expressed no dissent. There was then talk with reference to the price to be paid for this share, Ward desiring to know what was to be the price. Charles Selvage said that it ought not to be less than $120, as that was the rate which they had paid for the Scheerer and Roe stock. Ward remarked that he thought $120 was a good deal to pay for a $50 share of stock, but finally said: "All right. I will take it." John B. Scarlett and Charles Selvage then, in the presence of the others, went over to th safe, and took therefrom the stock book. John B. Scarlett thereupon wrote the name of "Scarlett & Scarlett" to the blank power of attorney on the back of certificate No. 26,

and surrendered the same, and drew a new certificate, No. 29, for one share, to Frederick W. Ward. On this being handed by John B. Scarlett to Charles Selvage for signature, as treasurer, the latter noticed that qertificate No. 26 did not stand in the name of William Scarlett, but in the name of Scarlett & Scarlett, and said in an undertone, and not in Ward's hearing, to John B. Scarlett: "This is not right. It was one of William's shares that was to be sold." John B. Scarlett then asked Charles Selvage if he had any of those certificates with him. (It

is to be here remembered that all the stock standing in the individual names of William or John B. Scarlett was held in hypothecation by Charles Selvage.) Charles Selvage told John B. Scarlett that he did not have them with him. Thereupon, John B. Scarlett said, "That is all right," and a new certificate, No. 29, was signed by the president and treasurer, and certificate No. 26 marked "Canceled," and retained. Mr. Ward took no part whatever in this proceeding, did not hear the conversation, and did not have certificate No. 26 in his possession. The new certificate, No. 29, issued in his name, was then taken over to where he was, and delivered to him. After certificate No. 29 had been delivered to Mr. Ward, he said: "I haven't the money with me, nor my check book. I will have to pay you some other time." And William Scarlett said: "All right. Any time will do." Ward was then elected a director, and acted as such at that meeting. He afterwards attended every other meeting of the directors, and acted as such; either William or John B. Scarlett, or both of them, being always present. This continued without objection until a meeting held October 28, 1892, when Ward, having discovered that $3,000 had been paid out of the company's funds to meet notes,-one given by Scarlett & Scarlett, and two by Selvage, the checks for which were signed by John B. Scarlett alone, without any apparent authority, said he would not consent to that transaction, and that the matter must be straightened up, or he would resign his office, and have nothing more to do with the company. At this meeting a proposition was made by John B. Scarlett to approve of the payment by him, from the company's funds, of one note of Charles Selvage, and one of Scarlett & Scarlett, of $1,000 each, and to "charge the amount to Charles Selvage and Scarlett as dividends." This was opposed by Ward, and lost, and then a resolution was offered by John B. Scarlett that "Charles Selvage and Scarlett & Scarlett be and are hereby demanded of to return to the company the money which belonged to the company, and was used to pay the personal notes of Charles Selvage and the note of Scarlett," setting out two notes of Charles Selvage and one of Scarlett & Scarlett, each for $1,000, "and that the directors hereby declare a dividend of forty per cent., payable

immediately on the receipt of the money advanced to Charles Selvage and Scarlett & Scarlett." Ward objected to this resolution, and offered an amendment leaving out the part referring to a dividend, but instructing the treasurer to take proceedings for the return of the money at once, and the resolution, in that shape, was passed; John B. Scarlett, alone, voting against it. John B. Scarlett then offered a second resolution to the same purport, declaring a dividend. Ward still refused to favor it, when Scarlett turned to him, and said that he desired that he should vote in favor of it, to which Ward replied that he would never vote for a dividend when the money was not there to pay it; and, after some further proceedings, John B. Scarlett challenged Ward's right to vote, or to act as a director, on the ground that he was not a stockholder, and insisted that he should not vote. Ward, however, continued to act, resulting in this action being brought to restrain Ward from acting as director of the land company, and for a retransfer of the stock. The claim of the complainant corporation is that the one share in dispute was, at the time it was transferred to the defendant Ward, the property of the corporation, &ad that John B. Scarlett had no authority to surrender or dispose of it. It was one of the shares of stock which John B. Scarlett had purchased from William Scheerer on the 11th of April, 1892, paying therefor, as part of the said purchase, the notes signed by John B. Scarlett, "Scarlett & Scarlett," to the order of Charles Selvage, and indorsed by him.

There is nothing in the case to impeach the entire good faith of Ward in the transaction. He stated to them all that he would not consent to serve as a director unless he was the absolute owner of stock. The transaction by which he was to acquire this stock was therefore carried on with full notice to all that it was to be no simulated or temporary transfer, but an actual sale. The price was not nominal, but at the premium of $70 on a $50 stock. He did not hear the conversation between John B. Scarlett and Charles Selvage as to certificate No. 26, and did not have it in his possession; nor was he informed, nor did he know, in whose name it stood on the books of the company. He took the new certificate, and assumed the liability to pay the agreed price, and accepted the psition of director of the land company, and immediately entered on the discharge of its duties. He has, as director, faithfully devoted his time, experience, and knowledge to the interests of the company. At the time of the purchase of the stock by John B. Searlett, April 11, 1892, so far as the minutes of the board of directors of Scarlett & Scarlett, Incorporated, show, John B. Scarlett had not been authorized by the corporation to make such purchase for it; and he testifies that prior to a meeting held on the 30th of April, 1892, he had no authority to negotiate a sale

or purchase of the shares of stock of the Newark Land & Improvement Company on behalf of the company of Scarlett & Scarlett, Incorporated; that he acted entirely without authority in that regard from the company. He reiterated again and again that he had no authority to act for the company in the premises on April 11, 1892. If this is so, when, if ever, did this company acquire these shares of stock? The legal title was not in the complainants, for the certificate was not issued in the corporate name of the company, nor does it, by its name, appear as a stockholder upon the books of the land company. Neither does it appear, by satisfactory proof, that it had the equitable title. As no part of the consideration was paid in cash, an equitable title could only arise in favor of the complainant by its being at the time absolutely liable for the purchase price. The cor porate name of the complainant does not appear on the notes, as maker or indorser. Throughout the whole transaction, John B. Scarlett used the old partnership name of Scarlett & Scarlett. He had no authority to bind the company in the purchase, and none whatever to execute a note which was obligatory upon the company. Whether he attempted so to do is not clear. It is true that he gave an affirmative reply to a question as follows: "The shares, then, were purchased wholly on the credit of the corporation of Scarlett & Scarlett, and on the credit of Charles Selvage, and the purchase money was wholly represented by the notes that were given?" But this is a mixed question of law and of fact, depending on whether the notes were drawn in proper form to impose an obligation upon the company, and, next, whether they were executed by one having authority to that end. The complainant failed to produce a single one of these notes. Their contents, which would have been conclusive upon the question as to whether they were, in form, of binding force upon the company, could only be properly proved by their being put in evidence. It was a material point for complainant to prove, for the right of the complainant to an equitable title depended upon the company's liability being satisfactorily established; and, not having proved it by the production of the notes, the conclusion must be that these notes were, in form, as the whole drift of the evidence tends to show, only the obligations of Scarlett & Scarlett, and not made in the corporate name of the complainant.

Again, the probabilities all indicate that the complainant corporation was not a party to this purchase. The deal involved the amount of $12,000, for one-half of which Scarlett & Scarlett were to be principal debtors, and security for the other half. There is no pretense that any mention of a corporation was made at the time, and it is not likely a corporation with an actual capital

of only $5,500 would have been accepted as debtor and indorser for $12,000. The fair presumption, I think, is that the vendors supposed they were dealing with the individuals, William and John B. Scarlett. It is certain Charles Selvage so understood when he became indorser. While the old copartnership may have been dissolved, John, who alone had anything to do with the transaction,-William being at the time in the west, -could have acted in the name of Scarlett & Scarlett on the assumption that his brother would join him on his return in the purchase as a joint adventure; and that John so regarded it is clearly shown by his directions to Ward, as late as September, 1892, for drawing an agreement with reference to the stock, he then representing it to Ward to belong to the brothers, as copartners.

But if John B. Scarlett, when he signed "Scarlett & Scarlett" to the notes, really intended the corporation as the maker, and if we assume the corporation could be made liable on the notes signed in that way, yet, if John B. Scarlett had no authority in the premises, the company was not bound by the notes signed by him until it adopted them as its own act. On the 30th of April, a meeting of the directors of Scarlett & Scarlett, Incorporated, was held, at which William Scarlett and John B. Scarlett, alone, were present, and at which, according to the minutes, John B. Scarlett reported the purchase for the corporation of Scarlett & Scarlett of $2,500 par value of the stock of the Newark Land & Improvement Company for the sum of $6,000; and it was moved to accept the action of John B. Scarlett, treasurer, as the act of Scarlett & Scarlett, and confirm the same, "with a distinct understanding that in future the treasurer be requested to make no contract outside of the regular business of the company, where the company assumes any liability beyond $500," which was carried. Until this action by the company, the unauthorized act of John B. Scarlett had imposed no liability on the corporation, and it had acquired no rights from such act. What is the effect of this resolution? It ratified and adopted the unauthorized action of John B. Scarlett in respect of the purchase by him, in the name of Scarlett & Scarlett, of the stock from the Scheerers, and the giving of notes for $6,000, and transferred to it all title which John B. Scarlett at that time controlled over the stock thus purchased; and its title thus acquired undoubtedly related back to the time of the purchase, with reference to the stock which he was in a position on the 30th of April to deliver to it. But it acquired no more of that stock than so much thereof as John B. Scarlett was in a position to transfer to the company. The ratification of the purchase could not affert any portion thereof which he had actually disposed of. If, without notice to the company that he had sold

part, ne induced it to assume a responsibility to pay for stock, all of which he could not deliver, his act, to that extent, was a fraud upon the company, for which they would have had their remedy against him, but cannot affect the title to that so previously disposed of. But the only two directors present at the meeting at which the act of John B. Scarlett was ratified were himself and his brother, William, both of whom had full notice of, and were parties to, the transfer to Ward; and this brings up the inquiry as to the legal effect of the transaction by which Mr. Ward acquired the share in dispute.

At the time of the transfer, John B. Scarlett having no authority whatever from the company for his action with reference to this stock, its purchase by him, until adopted by the company, was his personal transaction. Although the certificates stood in the name of Scarlett & Scarlett, John, individually, had possession of them; surrendered them by his personal act and indorsement; had new certificates issued, which he also receipted for, and of which he had possession and control on April 23d, when one was transferred to Ward. It is true that it was supposed that Ward was purchasing a share of stock from William Scarlett; but, if John B. Scarlett was willing to carry into effect such understanding by a transfer of his own stock, no one can raise any objection to his doing so. It was frankly admitted by counsel on the argument, in answer to a question from the court, that if John B. Scarlett had disposed of this stock, or any portion of、it, prior to the passage of the resolution on April 30, 1892, to a person who had paid the cash therefor, the company would have acquired no title by the subsequent ratification of the purchase by John B. Scarlett. But it is claimed that such rule would be adopted to protect a bona fide purchaser for value paid, and that Mr. Ward has not parted with anything of value for his share. Ward bas not, in fact, paid for the stock, although he did at one time offer his check, which was declined, but not on the ground that such was not a legal tender; and by his answer he tenders himself ready and willing, at any time, to pay the purchase price agreed. Besides, he has, on the faith of this transfer, materially changed his position. He accepted the office of director; acted as such; giving his time, attention, knowledge, and services to the corporation from that time to this. But I do not understand that the rule of a bona fide purchaser for value is to be applied in this case. If the company had in fact title, either legal or equitable, which, by apparent authority, had, in fraud of its rights, or other wrong, come into the possession of another, the rule of a purchaser for value would be invoked with success. But in the case suggested the stock is sold before the company acquires any title, and its power to get it by subsequent action

is gone.

The conclusiveness of the transfer by the assumed agent prior to ratification depends on whether such party had the right of disposal, and whether the formalities of the transaction were sufficient to pass the title. The giving of an unauthorized note for the stock to Scheerer gave him a right of action against John B. Scarlett; but, as stated, it gave the company no right to the stock until it ratified Scarlett's act. Until that time the company was not liable for the purchase money, and could suffer no loss; and, so far as the company was concerned, the stock was John B. Scarlett's stock, individually, and to which he could give title. Did he do so? As stated, Ward never had possession of the original certificate issued to Scarlett & Scarlett, in the possession of John B. Scarlett. He had no knowledge to whom that original certificate had been issued, or notice that it stood in the name of Scarlett & Scarlett. The land company ac cepted the surrender as properly made by John B. Scarlett, and issued a new certificate to Frederick W. Ward. What he got was a certificate of the company, regularly issued, that he was entitled to one share of the capital stock.

The general rule, as stated in Cook, Stock, Stockh. & Corp. Law, § 369, is that the rights and equities of all holders of stock back of the registry and issue of the certificates in existence are not allowed to affect the stockholdership or rights of purchasers of these new certificates, citing Sugar Co. v. Alberger, 22 Hun, 349; Mandlebaum v. Mining Co., 4 Mich. 465. It is true he further says at section 443, with reference to certificates which have been stolen or misappropriated, and the indorsement forged, that "the person who obtains registry first, after the ille gal act has been done, is not protected" by the rule stated. This exception, I take it, is founded on the fact that the person who so obtains registry has had possession of the certificate and forged indorsement, and has thus been put on inquiry as to whether it is genuine, and has used it without such inquiry, and still holds the fruit of the fraud effected by the forgery. Here, however, there was no notice brought to Ward. He did not obtain the registry. He had not even constructive notice. Nothing is shown to attack his good faith, or his character as a bona fide purchaser. Besides, this is not a case of a stolen certificate, or one transferred in breach of trust. It has been shown that John B. Scarlett must be considered as having at the time the right to dispose of it, and the only question is, did he dispose of the stock in such manner as to transfer the title? A certificate for the one share of the stock was surrendered by him, accepted by the land company; and a new one, issued to Ward in his own name, in proper form, under the seal of the corporation, signed by the officers, was actually de