Mayor, &c., of New York agt. Second Av. Railroad Co.

The right of the common council thus to legislate, even to the injury of grantees holding under them, has been the subject of adjudication.

In the case of The Brick Presbyterian Church agt. The Mayor, &c., of New York, (5 Cowen, 538,) it was held that a grant of land by the corporation, for the purpose of a cemetery, with a covenant of quiet enjoyment, did not prevent the passage of an ordinance prohibiting interments in that part of the city where the land was situated. Chief Justice SAVAGE says: "In ascertaining their rights and liabilities as a corporation, or as an individual, we must not consider their legislative character." Their enactments, in their legislative capacity, are to have the same effect upon their individual acts as upon those of any other person. The same rule was laid down in Coates agt. The Mayor, &c., (7 Cowen, 585.)

These cases, however, not only hold that the grant does not prevent the subsequent passage of a by-law at variance with it, but they go further, and deny the power of the corporation, acting in regard to their property, to make any grant or covenant which would be at variance with their subsequent legislation.

In the case in 5th Cowen, at page 540, Chief Justice SAVAGE says, referring to the corporation, "they had no power as a party to make a contract which should control or embarrass their legislative capacity."

So in Milhau agt. Sharp, (17 Barb., 435,) Mr. Justice HARRIS held that a clause in a grant of a railroad giving the right to charge a particular rate of fare, was in violation of the authority conferred upon them to régulate the rates of fare, and says: "The members of the common council, by which this resolution was adopted, were not authorized thus to invade the legislative power of their

successors."

And in New York & Harlem Railroad Company agt. The Mayor, &c., of New York, (1 Hilton, 585,) HILTON, J., says:

McCready agt. Rumsey.

"The corporation cannot surrender (any power conferred by law) into the hands of private individuals, or of a private corporation, and any attempt to do so without such authority would be utterly void."

The act of 1854, confirming the grant to the defendants and other grantees under these grants by the common council, was not intended, and did not operate to extend, the grant beyond the terms of it. It left them still liable and subject to the general legislation of the city, which did not deprive them of the rights therein granted.

The judgment appealed from should be reversed and judgment ordered for the plaintiffs on the demurrer, with leave to defendants to amend their answer on payment of costs.

NEW YORK SUPERIOR COURT.

WILLIAM R. MCCREADY agt. JOHN W. RUMSEY, President of the Suffolk Bank.

Under the decision of the court of appeals (Mechanics' Bank case, 3 Kern., 599) an assignee of a certificate of stock of an incorporated company cannot thereby acquire any rights against the corporation superior to those possessed by the assignor. He is to be deemed an assignee of a thing in action not negotiable, and as succeeding merely to the rights and equities of the assignor. This rule applied to this case, where the plaintiff, as assignee, brought his action against the bank organized under the general banking law of 1838, for a transfer of certificates of stock on the books of the bank, held that the bank might assert its lien upon the stock as security for the notes given for the stock subscription by the assignor, and had a right to sell the stock to obtain payment of the notes. Complaint dismissed.

General Term, February, 1857.

Before OAKLEY, Ch. J., BOSWORTH and HOFFMAN, Justices.
THE facts of the case will appear sufficiently in the opinion.

Mr. HARDENBROOK, for plaintiff.
Mr. PHELPS, for defendant.

McCready agt. Rumsey.

By the court, OAKLEY, Chief Justice. This action is brought against Mr. Rumsey, as president of a bank, organized under the general banking law of 1838.

The nineteenth section of that act declares that the shares of stock shall be transferable on the books of the association in such manner as may be agreed on in the articles of association. (1 R. S., 4th ed., 1147.)

Sections two and three of article two, and sections one, two, three and four of article five of the articles of association are valid and as efficient as if forming parts of a special charter.

As between the bank and Jenkins, the former, by force of the articles of association, to which the latter was a party, had a lien on this stock as security for the notes. given for the stock subscription, and had a right to sell the stock to obtain payment of the notes.

The plaintiff has not obtained as yet a legal title to the stock. To obtain that a transfer must be made on the books of the association, signed by the shareholder, or his duly authorized attorney, in writing.

Unless by a transfer, made in a different manner, the assignee of a certificate can acquire no rights and equities against the corporation superior to those which the assignor had, the defendant may assert its lien upon the stock as against the plaintiff, precisely as it could have done against Jenkins.

The opinion of the court of appeals in the Mechanics' Bank agt. The New York & New Haven Railroad Company, (3 Kern. Rep., 599, 629,) is explicit in asserting the proposition that an outside transfer of a certificate will confer upon the assignee merely such rights as his assignor possessed. The proposition is argued at great length, and its soundness is so often and directly declared that we are not at liberty to regard it as an obiter dictum.

Applying that rule to the facts of this case, the complaint should be dismissed, unless the plaintiff elects to have a

McCready agt. Rumsey.

transfer of the stock upon the books of the company, upon the terms of ratifying the incumbrances, which are a lien upon it.

Independently of the decision made in the Mechanics' Bank agt. The New Haven Railroad Company, it is not clear that the lien of the defendants could be asserted, if it be conceded that its rights are not weaker than they would have been if the bank was incorporated by a special act containing the provisions formed in the articles of association of the present defendant.

The plaintiff is a purchaser for value without notice of the equitable lien of the defendants.

The Chancellor, in Stebbins agt. The Phenix Fire Ins. Co., (3 Paige, 350, 362,) intimated the opinion " that the defendant could not be permitted to enforce a lien against bona fide purchasers of the stock who had no notice of such equitable lien;" but it was unnecessary to the decision of that case to consider that question. The charter of that company contained a provision in effect like section four of article two of the defendants' articles of association.

The Chancellor's dictum is not necessarily opposed to the decision made in the Union Bank agt. Laird, (2 Wheat. Rep., 390.) In the latter case Laird took the transfer as security against a pre-existing liability. He was not, therefore, a purchaser for value paid for the certificate, and on the faith thereof.

In Bates agt. The New York Ins. Co., (3 J. C., 238,) the decision was put on the ground that all stock dividends declared before the company was notified of the transfer of the stocks being money in its hands, it might equitably apply upon a debt actually due, and owing by the person who held the legal title on the books of the company; but that on the stock being paid for in full by the purchaser, the company could not refuse a transfer until it was paid the whole sum owing to it, by the shareholder having the legal title at the time the transfer was demanded. The VOL. XXI.

18

McCready agt. Rumsey.

purchaser having been compelled to pay the debt to obtain a transfer of the stock to himself on the books of the company, he was allowed to recover the money back in an action for money had and received.

When there is nothing in the terms of a certificate to indicate that the stock has not been fully paid for, and an outside purchaser of the certificate has no notice that it has not been paid for, it is difficult to perceive why he should be any more affected by a lien for that, created by articles of association, than by a lien for an unpaid note, which has been discounted in the ordinary course of business. (Vide the Bank of Utica agt. Smalley, 2 Cowen's Rep., 770, 778; Gilbert agt. The Manchester Iron Manufac turing Company, 11 Wendell's Rep., 627.)

In the Mechanics' Bank agt. The New York & New Haven Railroad Company, (3 Kernan's Rep., 629,) the court said that "before an assignment of a stock certificate could be admitted to confer on the assignee a better title than the assignor had, it must be shown to have not only the negoti able qualities of a bill of lading, but others, also, which that instrument does not possess."

"It is mainly by assuming for these instruments the progression in a greater or less degree, of the peculiar qualities of negotiable securities, that the plaintiffs' claim to have acquired by transfer better rights than their assignor had; and, as that assumption fails, this claim must fall to the ground." (Id.)

"While it may be the effect of a stock certificate to give to the holder a credit, its terms do not request, invite or guarantee it." (Id., 630.)

"But to say that, like a letter of credit, it contains any assurance or guarantee addressed to the dealer of the safety of the transaction, is, in my judgment, to confound plain and long settled distinctions." (Id., 630, 631.)

We think it quite clear that the court of appeals meant to decide, and to be understood as deciding, that an assignee