Henderson v. Mayfield Woolen Mills

ANDERSON, J. — While it is a settled principle of law that a stockholder is liable for am unpaid subscription for stock which he has subscribed, it is also settled [628] in this state that he can discharge himself from liability by bona fide transfer of the stock to a solvent party with the assent of the corporation, which is at the time solvent. — Allen v. Montgomery R. R. Co., 11 Ala. 437; 26 Am. & Eng. Ency. Law, 1035. The evidence shows that the’ First Bank of Elba was solvent at the time Henderson sold his stock to Malone, does not show that Malone was insolvent, and it is clear that the corporation ratified the transfer by continuous acquiescence. Under the transfer Henderson ceased to be liable for the unpaid balance of his subscription, and Malone, in purchasing, assumed the liability. It is insisted that Henderson did not, by the sale and transfer of the stock, relieve himself from liability for the unpaid balance of his subscription, because the transfer was not formally made and registered upon the books of the corporation, as required by sections 1262 and 1263 of the Code of 1896. These statutes do not render the transfer void for a failure to comply therewith, except as to the class therein contemplated. This court has often held that a transfer, though not registered, was good as between the parties thereto. — Duke v. Cahaba Co., 10 Ala. 82, 44 Am. Dec. 472; Fisher v. Jones, 82 Ala. 117, 3 South. 13; Campbell v. Woodstock Co., 83 Ala. 351, 3 South. 369. It has also been held that sections 1262,1263, and 1265 should be construed in connection with each other. In the case of Fisher v. Jones, supra, it was said: “The purpose of the statute, on this subject, is obviously to give notice of the title to creditors and purchasers, so as to prevent fraudulent transfers, and to protect the corporation itself in determining the question of membership, the right to vote, the payment of dividends, and other incidents of ownership.” We do not think that these statutes were intended for the protection of creditors of the corporation, but [629] creditors of and purchasers from the stockholders. A creditor of the corporation is fully protected as to any unpaid balance due upon subscriptions, whether there has been a formal transfer or not, as the transferee would he liable and answerable if solvent, and if insolvent and the corporation was insolvent at the time of the transfer the transferror Avould he liable, whether the transfer was formally made and registered or not. It is clear, from the very terms of section 1263,- that the registration of the stock is intended to protect creditors of and purchasers from the transferror, as it makes it the duty of one getting the stock to have the transfer registered — not the transferror — -in order to protect himself against creditors of the corporation. There can be no donbt bnt that a creditor of a corporation can, by the terms of section 2182 of the Code of 1896, subject the unpaid subscription of a stockholder by process of garnishment; hut the garnishment must be directed against the one liable for the unpaid subscription, and Avill not lie against one Ayho ceased to be liable by making a bona fide transfer of his stock. This cause having been tried by the final court upon a special finding of facts, the judgment of the circuit court is reversed, and one is here rendered discharging the garnishee, Henderson. Reversed and rendered. Tyson, C. J., and Doavdell and McClellan, JJ., concur.