BAKER, Circuit Judge,
after making the foregoing statement of the case, delivered the opinion of the court.
Dewey’s assignment of his shares to Jewett did not affect the question of his liability, for the transaction was not an out-and-out sale, but merely established agency. National Bank v. Case, 99 U. S. 628, 25 L. Ed. 448.
Jewett for Dewey sold 80 shares out-and-out and the transfers thereof were duly made on the books of the bank. The statute says that national bank shares shall be deemed personal property. The full quality of salability is emphasized in Earle v. Carson, 188 U. S. 42, 23 Sup. Ct. 254, 47 L. Ed. 373. So far as the statute declares, the seller who has his shares transferred on the books of the bank to his purchaser ends his liability as a stockholder. “Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares.” If the English rule, as stated in National Bank v. Case, supra, had been adopted in this country, Dewey could not be held to any liability on account of the 80 shares transferred on the books (for the sale was out-and-out) and the purchasers would have succeeded to all the rights and all the liabilities of Dewey as stockholder.
The American rule is better, we think, and holds the former stockholder under certain conditions, even if he has made an out-and-out sale of his shares and has caused the proper transfers to be made on the books of the bank.
What are the conditions without the existence of which such a former stockholder cannot be held?
He cannot be held, unless the bank was insolvent at the time of the transfer, for the creditors would not be injured. If they should ever sustain loss, it would be by reason of the bank’s subsequently becoming unable to pay its obligations. But the negative does not [531]*531affirm that such a former stockholder is liable to assessment by the comptroller if the bank ultimately (perhaps years later) goes into the hands of a receiver, simply from the fact that the bank, when he transferred his shares, was insolvent in the sense that if it then went into liquidation the assets would not discharge all the liabilities.
He cannot be held, unless he know or ought to have known that the bank was insolvent at the time of the transfer; for an out-and-out sale, found to have been made in good faith, cannot be impeached. But this negative does not affirm that he is liable if merely the two conditions concur, insolvency and his actual or imputed knowledge thereof. In this case, however, it is asserted that the concurrence of the two conditions .establishes liability, and, furthermore, that the liability is not merely for the debts at the time of the transfer which remain unpaid at the time of the ultimate failure and suspension, but is for the amount of the deficiency in the assets to pay the debts at the time of the transfer, which amount flows onward like a river into the ultimate failure and suspension. It is obvious that it is unnecessary to cast even a curious glance at the second contention, if the first is untenable. We apprehend no true reason for holding that the mere concurrence of the bank’s insolvency and the stockholder’s actual or imputed knowledge thereof inevitably and without any other condition establishes the bad faith, the fraudulent intent, of the selling stockholder. His obligation to creditors is contractual, just as much as if he had entered into a written engagement with each person who was a creditor when he became a stockholder and with each person who became a creditor while his name stood on the books of the bank as a stockholder. If at a particular time, as might be proven years later when the bank suspended, the bank, although then a going concern and meeting all its obligations from day to day as presented, should be unable, if then put into liquidation, to pay its debts in full, and if, by reason of his knowledge of such a condition, a stockholder could not dispose of his shares without having fixed upon him a liability to respond in the indefinite future to the comptroller’s assessment after the bank’s ultimate failure and suspension, national bank stock would not be very desirable property to own, its saleability in the market, which is a prominent feature in the statute’s scheme, would be largely destroyed, and a condition would inevitably result which the law should discourage and not create, that the stockholder would be industrious in not knowing the affairs of his bank and very forgetful of anything that obtruded itself upon his attention. The receiver in this case does not concede that the supposed liability (whether for particular unpaid debts or for the stream of debts) would end if, at a time between the transfer and the ultimate failure and suspension (two years and five months in the present instance), the bank should become prosperous and abundantly able to discharge all of its obligations out of its assets. The supposed liability would charge the selling stockholder with the fraudulent intent to cheat the bank’s creditors, even though he had diligently sought and had succeeded in finding a purchaser who was willing [532]*532to take the chances of the bank’s ultimate failure and suspension and who was amply able to respond to an assessment. We conceive that a sale of the character instanced could be made in perfect good faith, that the transfer of the shares could be effected on the books of the bank in accordance with the statute and the by-laws of the bank, and that, again in accordance with the statute, the purchaser would succeed to all the rights and all the liabilities of the former holder of such shares. But even if it were conceded that such a sale, in and of itself, conclusively evidenced the bad faith and fraudulent intent of the seller, a right of action in the receiver as the representative of the creditors would not be established. Surely, if the purchaser responded to the assessment levied on the transferred shares, the receiver should not be permitted to maintain a suit against the seller. Surely, if the purchaser was able and compellable to respond, the receiver should not be permitted to sue the seller or the purchaser at his election, but should be required to collect from the purchaser who had succeeded to all the rights and liabilities of the seller. It is not enough that a sale be fraudulent as to creditors — the creditors must be injured by the fraud; and they are not injured if they have a direct and primary means of collecting their debts, without resort to the secondary means of setting aside the fraudulent sale. The argument results in the conclusion that the mere concurrence of the bank’s insolvency and the selling stockholder’s actual or imputed knowledge thereof does not make out a case. The two conditions named must be accompanied by a third.
He cannot be held unless his out-and-out transfer was made .to an irresponsible person, unable to respond to an assessment, whose financial condition was known or ought to have been known to him.
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BAKER, Circuit Judge,
after making the foregoing statement of the case, delivered the opinion of the court.
Dewey’s assignment of his shares to Jewett did not affect the question of his liability, for the transaction was not an out-and-out sale, but merely established agency. National Bank v. Case, 99 U. S. 628, 25 L. Ed. 448.
Jewett for Dewey sold 80 shares out-and-out and the transfers thereof were duly made on the books of the bank. The statute says that national bank shares shall be deemed personal property. The full quality of salability is emphasized in Earle v. Carson, 188 U. S. 42, 23 Sup. Ct. 254, 47 L. Ed. 373. So far as the statute declares, the seller who has his shares transferred on the books of the bank to his purchaser ends his liability as a stockholder. “Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares.” If the English rule, as stated in National Bank v. Case, supra, had been adopted in this country, Dewey could not be held to any liability on account of the 80 shares transferred on the books (for the sale was out-and-out) and the purchasers would have succeeded to all the rights and all the liabilities of Dewey as stockholder.
The American rule is better, we think, and holds the former stockholder under certain conditions, even if he has made an out-and-out sale of his shares and has caused the proper transfers to be made on the books of the bank.
What are the conditions without the existence of which such a former stockholder cannot be held?
He cannot be held, unless the bank was insolvent at the time of the transfer, for the creditors would not be injured. If they should ever sustain loss, it would be by reason of the bank’s subsequently becoming unable to pay its obligations. But the negative does not [531]*531affirm that such a former stockholder is liable to assessment by the comptroller if the bank ultimately (perhaps years later) goes into the hands of a receiver, simply from the fact that the bank, when he transferred his shares, was insolvent in the sense that if it then went into liquidation the assets would not discharge all the liabilities.
He cannot be held, unless he know or ought to have known that the bank was insolvent at the time of the transfer; for an out-and-out sale, found to have been made in good faith, cannot be impeached. But this negative does not affirm that he is liable if merely the two conditions concur, insolvency and his actual or imputed knowledge thereof. In this case, however, it is asserted that the concurrence of the two conditions .establishes liability, and, furthermore, that the liability is not merely for the debts at the time of the transfer which remain unpaid at the time of the ultimate failure and suspension, but is for the amount of the deficiency in the assets to pay the debts at the time of the transfer, which amount flows onward like a river into the ultimate failure and suspension. It is obvious that it is unnecessary to cast even a curious glance at the second contention, if the first is untenable. We apprehend no true reason for holding that the mere concurrence of the bank’s insolvency and the stockholder’s actual or imputed knowledge thereof inevitably and without any other condition establishes the bad faith, the fraudulent intent, of the selling stockholder. His obligation to creditors is contractual, just as much as if he had entered into a written engagement with each person who was a creditor when he became a stockholder and with each person who became a creditor while his name stood on the books of the bank as a stockholder. If at a particular time, as might be proven years later when the bank suspended, the bank, although then a going concern and meeting all its obligations from day to day as presented, should be unable, if then put into liquidation, to pay its debts in full, and if, by reason of his knowledge of such a condition, a stockholder could not dispose of his shares without having fixed upon him a liability to respond in the indefinite future to the comptroller’s assessment after the bank’s ultimate failure and suspension, national bank stock would not be very desirable property to own, its saleability in the market, which is a prominent feature in the statute’s scheme, would be largely destroyed, and a condition would inevitably result which the law should discourage and not create, that the stockholder would be industrious in not knowing the affairs of his bank and very forgetful of anything that obtruded itself upon his attention. The receiver in this case does not concede that the supposed liability (whether for particular unpaid debts or for the stream of debts) would end if, at a time between the transfer and the ultimate failure and suspension (two years and five months in the present instance), the bank should become prosperous and abundantly able to discharge all of its obligations out of its assets. The supposed liability would charge the selling stockholder with the fraudulent intent to cheat the bank’s creditors, even though he had diligently sought and had succeeded in finding a purchaser who was willing [532]*532to take the chances of the bank’s ultimate failure and suspension and who was amply able to respond to an assessment. We conceive that a sale of the character instanced could be made in perfect good faith, that the transfer of the shares could be effected on the books of the bank in accordance with the statute and the by-laws of the bank, and that, again in accordance with the statute, the purchaser would succeed to all the rights and all the liabilities of the former holder of such shares. But even if it were conceded that such a sale, in and of itself, conclusively evidenced the bad faith and fraudulent intent of the seller, a right of action in the receiver as the representative of the creditors would not be established. Surely, if the purchaser responded to the assessment levied on the transferred shares, the receiver should not be permitted to maintain a suit against the seller. Surely, if the purchaser was able and compellable to respond, the receiver should not be permitted to sue the seller or the purchaser at his election, but should be required to collect from the purchaser who had succeeded to all the rights and liabilities of the seller. It is not enough that a sale be fraudulent as to creditors — the creditors must be injured by the fraud; and they are not injured if they have a direct and primary means of collecting their debts, without resort to the secondary means of setting aside the fraudulent sale. The argument results in the conclusion that the mere concurrence of the bank’s insolvency and the selling stockholder’s actual or imputed knowledge thereof does not make out a case. The two conditions named must be accompanied by a third.
He cannot be held unless his out-and-out transfer was made .to an irresponsible person, unable to respond to an assessment, whose financial condition was known or ought to have been known to him. With respect to knowledge of the purchaser’s insolvency, it might be fair to hold that the seller, having knowledge that the assets of the bank would be insufficient, if the bank were then to go into liquidation, to meet fully its obligations, is chargeable with notice of the purchaser’s insolvency, unless he be able to establish affirmatively that he had made reasonably diligent inquiry and had been misled or had been unable to discover the true financial condition of his intending buyer.
The necessity of the concomitance of the three conditions herein-above stated is established by the case of Bowden v. Johnson, 107 U. S. 251, 261, 262, 2 Sup. Ct. 246, 27 L. Ed. 386.
'
There are some expressions in Stuart v. Hayden, 169 U. S. 1, 18 Sup. Ct. 274, 42 L. Ed. 639, which, if taken out of their context and separated from the pleadings and evidence, might seem to countenance the contention that averment and proof of the third condition is unnecessary. On reference to the case in the Circuit Court of Appeals for the Eighth' Circuit (Stuart v. Hayden, 36 U. S. App. 462, 72 Fed. 402, 18 C. C. A. 618), it will be found that the bill averred that the transferees were insolvent; that the answer of the transferror relied on his ignorance of the bank’s insolvency and his good faith in making the sale, but did not deny the insolvency of his transferees; and that the answer of the transferees “was in effect an admission of the averments of the bill.” There was thus a virtual default as to the third condition, and it is fair to suppose that the transferror’s argument in the Supreme [533]*533Court was confined to the defense made in his answer. And the expressions in the opinion which are relied on have in the main been explained in Earle v. Carson, 188 U. S. 43, 23 Sup. Ct. 254, 47 L. Ed. 373.
In Earle y. Carson, supra, the court quotes the rule as stated by Mr. Thompson:
“A transfer of shares in a failing corporation, made by the transferror with the purpose of escaping his liability as a shareholder, to a person who, from any cause, is incapable of responding in respect to such liability, is void as to the creditors of the company and to other shareholders, although as between the transferror and transferee it was out-and-out.”
And under the third heading of the opinion the court holds that the transferror must be chargeable with knowledge of the transferee’s insolvency.
In this case the bill charges the existence of the third condition. As the finding of the court, in which we agree so far as it goes, is silent respecting the truth of the averment, it has been necessary for us to examine the evidence in that particular. Without stating the items, it is enough to say that we all agree that there is an utter failure of proof of the insolvency of the various transferees, and, on the contrary, there is considerable proof that they were solvent and able to respond to an assessment.
As to the other 25 shares, Jewett for Dewey indorsed the necessary assignments and powers of attorney upon the certificates and delivered them to the purchasers in Chicago, but no transfers on the books of the bank were ever made.
The general rule (see Whitney v. Butler, 118 U. S. 655, 7 Sup. Ct. 61, 30 L. Ed. 266; Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864; Matteson v. Dent, 176 U. S. 521, 20 Sup. Ct. 419, 44 L. Ed. 571; Earle v. Carson, 188 U. S. 42, 23 Sup. Ct. 254, 47 L. Ed. 373) is thus stated in Whitney v. Butler:
“In nearly all of” the cases, “where the issue was between the receiver, representing the creditors, and the person standing on the register of the bank as a shareholder, it is said, generally, that the creditors of a national bank are entitled to know who, as shareholders, have pledged their individual- liability as security for its debts, engagements, and contracts; that if a person permits bis name to appear and remain in its outstanding certificates of stock, and on its register, as a shareholder, he is estopped, as between himself and the creditors of the bank, to deny that he is a shareholder; and that his individual liability continues until there is a transfer of the stock on the books of the bank, even where he has in good faith previously sold it and delivered to the buyer the certificate of stock, with a power of attorney in such form as to enable the transfer to be made. Some of the cases hold that the seller is liable as a shareholder even where the buyer agreed to have the transfer made on the books of the bank, but fraudulently or negligently failed to do so. But it will be found, upon careful examination, that in no one of the eases in which these general principles have been announced, as between creditors and shareholders, does it appear that the precaution was taken, after the sale of the stock, to surrender the certificates therefor to the bank itself, accompanied (where such surrender was not by the shareholder in person) by a power of attorney, which would enable its officers to make the transfer on the register. The position of the seller, in such case, is analogous to that of a grantor of a deed deposited in the proper office to be recorded. The general rule is that the deed is considered as recorded from the time of such deposit. 2 Washburn on Beal Prop. bk. 3, e. 4, par. 52. Where the seller delivers the stock certificate [534]*534and power of attorney to the buyer, relying upon the promise of the latter to have the necessary transfer made, or where the certificate and power of attorney are delivered to the bank without communicating to its officers the name of the buyer, the seller may well he held liable as a shareholder until, at least, he shall have done all that he reasonably can do to effect a transfer on the stock register.”
In Earle v. Carson it was said that the presumption of liability begotten by the presence of the. name on the stock register is overcome by a finding that a bona fide sale had been made and that the seller had performed every duty which the law imposed on him to secure a transfer on the register of the bank. In the Whitney and Earle Cases the certificates, with the proper assignments and powers of attorney, were delivered to the bank. Whether, in view of the comparison of the bank to the office of the registrar of deeds, anything short of an actual delivery to the bank of the certificates with the proper assignments and powers of attorney, would be sufficient, is a question unnecessary to consider, because Dewey’s letters to the bank fall far short of being all that he reasonably could have done to effect a transfer on the books. He failed to identify the various certificates for the 25 shares, to give the names and residences of the purchasers, and to connect each purchaser with the shares purchased by him. So, if the officers of the bank would have been justified, on the mere assertion of Dewey, in making the transfers on the books of the bank, it is evident that they could not have done so in the absence of the necessary data.