MANOR v. ALDRICH, 126 F. 934

SHELBY, Circuit Judge, after stating the case as above, delivered the opinion of the court. The question to be decided is whether or not Manor assumed the obligations of Weatherred as a stockholder in the association. The only writing in the record to which Manor is a party, and of which he is shown to have knowledge, that shows he assumed any liability, is the deed made by Weatherred and wife to Manor.

It is recited in that instrument that its consideration is $1,050, of which $650 was paid in cash, and the remainder was to be paid by the assumption and payment by Manor of “one promissory note for the sum of $400, said note being executed by the said Weatherred, and payable to the order of T. E. Duncan, and dated June 27, 1893, and indorsed by the said Duncan to the Michigan Loan & Savings Company, of Detroit, Mich.” The $400 note, added to the cash paid, makes the entire consideration of the conveyance. There is no language in the deed requiring Manor to assume the payment of any premiums.

The appellee contends that Manor is bound by the obligations of the bond executed by Weatherred with Vinson as surety. We find no language in the deed accepted by Manor that produces such result. That bond is for the sum of $400 only. It is true that in the condition of the bond the obligation of Weatherred, as a holder of four shares of stock, is recited, and also his obligation to make payments of interest and of premiums, as well as his liability for fines, charges, and penalties, and Weatherred, as a stockholder, may have been liable by the terms of the bond for these several sums in addition to the $400.

The penalty of the bond, however, is only $400. But Manor is not a party to the bond. The bond, in its condition, contains a stipulation that Weatherred, the stockholder, should “fully comply with all the other provisions of said by-laws of said association.” It cannot be said that Manor assumed any such obligation, unless it be found that he became a stockholder of the association. The only reference in the bond to the note which was assumed by Manor is that on the maturity of the shares of stock they were to be transferred to the association in satisfaction of “one vendor’s lien note,” describing the $400 note.

We look in vain in the record for satisfactory evidence that Manor assumed the obligations of this bond. He clearly assumed the payment of the $400 note. The fact that such note is described in the bond surely cannot make him liable for the premiums, fines, charges, and penalties which may under the by-laws of the association be imposed on a member. The receiver seeks to fasten an obligation on Manor as a shareholder in the association. Manor denies that he is a shareholder. • The burden of proof, therefore, is on the receiver. It is not shown that Manor ever made an “application for membership” under

section 16 of the by-laws, or ever subscribed for stock, or ever participated in the election of the officers of the association, or attended a meeting of the stockholders, or that he signed any writing indicating his membership in the association. He never received or asked for any of the benefits of membership. It is true that he knew that the association held the $400 note, and that he was to be permitted to pay it in small installments, but on one occasion he paid as much as $184.80 in one payment.

The former secretary of the association produces the certificate of stock issued to Weatherred with a transfer thereon to Manor without date. It is not shown that Manor ever had the certificate in his possession. The transfer, however, is made on the books of the association, but it is not shown that Manor had knowledge of this fact. The transfer of stock is often the evidence of a contract of much importance.

If one buys stock and secures its transfer to him on the books of the corporation, he steps into the shoes of the transferror, and is liable usually for unpaid subscriptions, and besides assumes all of the responsibility of a shareholder. But if the transfer is made to him without his knowledge or consent, and without his having purchased the stock or assumed the position of a stockholder, the'transfer imposes on him no liability.

It would be intolerable to permit one who had subscribed for and received stock to avoid the liability and burdens of his position by loading them on another without the other’s knowledge or consent. The approval of such transfer by the corporation would not bind the transferee. If the transferee did not authorize, contract for, or accept the transfer, clearly he cannot be liable as a shareholder, unless he subsequently in some way assumed to act as such. Under such circumstances a court of equity should relieve the transferee of all obligations as a shareholder. Gray’s Case, i Ch. Div. L,. R. 664.

If a transfer of stock always carried a benefit, a different rule might prevail, for it might be presumed that the transferee acquiesced in that which was to his interest. But the ownership of stock in a building and loan association by a debtor to the association is often burdensome. Where the ownership, as in this case, imposes a burden, and enables the association to apply payments made on a land purchase to a worthless stock contract, justice requires that the burden should not be imposed without clear proof that the defendant agreed to become a stockholder.

The evidence,, we think, considered as a whole, shows that Manor only assumed to pay the $400 note, and that it was understood that he was to pay it in installments as drafts were drawn by the association. It is not shown, we think, that he made any contract to make payments on shares in the association or to pay premiums. The payments, therefore, that he has made should be applied to the satisfaction of the note for $400.

If after making such application some part of the note remains unpaid, the receiver would be entitled to a decree against Manor for such sum, together with a vendor’s lien upon the lot, and if such sum is not paid the lot should be sold under decree to satisfy it. If the amount of the payments is not clearly shown, and is not agreed on by the parties, the court should decree a reference to a master. We think the court erred in permitting the application of parts of the payments made by Manor to the stock contract with Weatherred.

The decree of the Circuit Court is reversed, and the cause remanded, with instructions to proceed in conformity with the opinion of this court.