Mr. Justice Scholfield
delivered the opinion of the Court:
This case comes before us by appeal from the Appellate Court of the Third District.
The facts are: The fourth section of the charter of the Bloomington and Normal Horse Railway Company provides that the capital stock of that company “shall be divided into shares of §100 each, and shall be issued and transferred in such manner and upon such conditions as the board of directors may direct.” And the sixth section provides, that “ The said corporation, by its board of directors, shall have power to make, ordain and establish all such by-laws, rules and regulations as said directors shall deem needful and expedient to carry into effect the purposes of this act, and for the well ordering, regulation and management of the affairs, business and interests of said corporation: Provided, the same be not repugnant to this act, or to the laws or constitution of the State or the United States. ”
Under the authority of these provisions, on the 28th of March, 1867, the board of directors of that company adopted the following by-law: “ The transfer of stock shall only be made upon the books of the secretary, on the presentation of the stock certificates properly indorsed.”
In the summer of 1867, William A. Pennell became- the ■ owner of 100 shares of stock in that company, and ten certificates, each representing ten shares of stock of the par value of $1000, were issued to him. In the body of each certificate was this language: “ Subject to the by-laws of said company-transferable only on the books of the company, on the surrender of this certificate.”
On the 10th of November, 1873, Pennell and the Ruttan Heating and Ventilating Company being indebted to the appellant for $7400, borrowed money, Pennell assigned and delivered these certificates of stock to the appellant to secure that indebtedness, and also to procure subsequent advances to be made. The appellant has since held possession of the certificates, but no transfer of the stock of which they evidence ownership has been made on the books of the company. Of the indebtedness existing when they were assigned and delivered, there remains due $2650; and there has also been advanced $1400 since, which remains due and unpaid.
On the 7th of May, 1877, in vacation of the McLean circuit court, the appellees, Asahel and Edward B. Gridley, as “A. Gridley & Son,” recovered . a judgment, by confession, against William A. Pennell and others for $1000, and costs of suit. On the same day execution was issued on the judgment, and the sheriff of McLean county, by virtue thereof, levied upon Pennell’s shares of stock in the horse railway company, making his levy in conformity with the directions of the statute relating to levies of that description.
The appellees, Asahel and Edward B. Gridley, and the horse railway company had no actual notice that the certificates of stock had been assigned and delivered to appellant until after the levy of the execution.
The Appellate Court held that, the stock not having been transferred on the books of the horse railway company before the levy was made, the levy is entitled to priority over any claim in behalf of appellant, and this ruling presents the only question to be now determined.
Appellant insists that Kellogg v. Stockwell et al. 75 Ill. 68, settles that the ruling below was erroneous. That was a bill in equity to protect the original owner of corporate stock from assessments made by the corporation after he had sold his stock, filed by such owner against his vendee. There had been no transfer of the stock upon the books of the corporation, and there was a clause in the charter providing that shares of stock should be transferable only on the books of the corporation. It was said that this provision in the charter was designed for the protection of the company, and, perhaps, a purchaser without notice; but, it was held, as between the vendor and vendee, a sale and transfer will be good without being entered upon the company’s books, and will be enforced in equity, and a decree requiring the vendee of the stock to pay or indemnify the vendor, on account of the assessments, was affirmed.
But there is no question, here, between vendor and vendee, or pledgor and pledgee. The question is between two parties having equally meritorious claims against the original owner of the stock, each claiming a prior lien over the other,—the one by virtue of the pledge, the other by virtue of the levy of the execution.
Our statute provides, (Rev. Stat. 1874, p. 628, cliap. 77,):
“ § 52. The shares or interest of a stockholder in any corporation may be taken on execution, and sold as hereinafter provided.
“ § 53. If the property has not been attached in the same suit, the officer shall leave an attested copy of the execution with the clerk, treasurer or cashier of the company, if there is any such officer, otherwise with any officer or person having the custody of the books and papers of the corporation; and the property shall be considered as seized on execution when the copy is so left, and shall be sold in like manner as goods and chattels.” * * *
“ § 55. The officer of the company who keeps a record or account of the shares or interest of the stockholders therein, shall, upon the exhibiting to him of the execution, be bound to give a certificate of the number of shares or amount of the interest held by the judgment debtor. If he refuses to do so, or if he willfully gives a false certificate thereof, he shall be liable for double the amount of all damages occasioned by such refusal or false certificate, to be recovered in any proper action, unless the judgment is satisfied by the original defendant.
“ § 56. An attested copy of the execution and of the return thereon shall, within fifteen days after the sale, be left with the officer of the company whose duty it is to record transfers of shares; and the purchaser shall thereupon be entitled to a certificate or certificates of the shares bought by him, upon paying the fees therefor and for recording the transfer.” * * *
It is too obvious to justify extended comment, that these pr-ovisions contemplate that, as against a judgment creditor, title to the stock can only pass by transfer on the books of the company, for if it might be otherwise transferred, as, by indorsement and delivery of the certificates alone, these provisions could have no practical operation.
If the mere transfer of the certificate, under contract of sale, shall sufficiently pass title, of what worth can the certificate required by § 55 be?
How can a certificate of shares purchased on execution, as provided by § 56, be of any avail, if the original certificate be out and be transferable from hand to hand, by indorsement and delivery?
Unless the books of the company is the proper place to ascertain the title of the purchaser or assignee of stock, what possible end can be subserved by requiring a copy of the execution to be left with the clerk, treasurer or cashier of the company, etc., and with what sense could it be said this should be regarded as a seizure of the stock on execution, etc.?
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Mr. Justice Scholfield
delivered the opinion of the Court:
This case comes before us by appeal from the Appellate Court of the Third District.
The facts are: The fourth section of the charter of the Bloomington and Normal Horse Railway Company provides that the capital stock of that company “shall be divided into shares of §100 each, and shall be issued and transferred in such manner and upon such conditions as the board of directors may direct.” And the sixth section provides, that “ The said corporation, by its board of directors, shall have power to make, ordain and establish all such by-laws, rules and regulations as said directors shall deem needful and expedient to carry into effect the purposes of this act, and for the well ordering, regulation and management of the affairs, business and interests of said corporation: Provided, the same be not repugnant to this act, or to the laws or constitution of the State or the United States. ”
Under the authority of these provisions, on the 28th of March, 1867, the board of directors of that company adopted the following by-law: “ The transfer of stock shall only be made upon the books of the secretary, on the presentation of the stock certificates properly indorsed.”
In the summer of 1867, William A. Pennell became- the ■ owner of 100 shares of stock in that company, and ten certificates, each representing ten shares of stock of the par value of $1000, were issued to him. In the body of each certificate was this language: “ Subject to the by-laws of said company-transferable only on the books of the company, on the surrender of this certificate.”
On the 10th of November, 1873, Pennell and the Ruttan Heating and Ventilating Company being indebted to the appellant for $7400, borrowed money, Pennell assigned and delivered these certificates of stock to the appellant to secure that indebtedness, and also to procure subsequent advances to be made. The appellant has since held possession of the certificates, but no transfer of the stock of which they evidence ownership has been made on the books of the company. Of the indebtedness existing when they were assigned and delivered, there remains due $2650; and there has also been advanced $1400 since, which remains due and unpaid.
On the 7th of May, 1877, in vacation of the McLean circuit court, the appellees, Asahel and Edward B. Gridley, as “A. Gridley & Son,” recovered . a judgment, by confession, against William A. Pennell and others for $1000, and costs of suit. On the same day execution was issued on the judgment, and the sheriff of McLean county, by virtue thereof, levied upon Pennell’s shares of stock in the horse railway company, making his levy in conformity with the directions of the statute relating to levies of that description.
The appellees, Asahel and Edward B. Gridley, and the horse railway company had no actual notice that the certificates of stock had been assigned and delivered to appellant until after the levy of the execution.
The Appellate Court held that, the stock not having been transferred on the books of the horse railway company before the levy was made, the levy is entitled to priority over any claim in behalf of appellant, and this ruling presents the only question to be now determined.
Appellant insists that Kellogg v. Stockwell et al. 75 Ill. 68, settles that the ruling below was erroneous. That was a bill in equity to protect the original owner of corporate stock from assessments made by the corporation after he had sold his stock, filed by such owner against his vendee. There had been no transfer of the stock upon the books of the corporation, and there was a clause in the charter providing that shares of stock should be transferable only on the books of the corporation. It was said that this provision in the charter was designed for the protection of the company, and, perhaps, a purchaser without notice; but, it was held, as between the vendor and vendee, a sale and transfer will be good without being entered upon the company’s books, and will be enforced in equity, and a decree requiring the vendee of the stock to pay or indemnify the vendor, on account of the assessments, was affirmed.
But there is no question, here, between vendor and vendee, or pledgor and pledgee. The question is between two parties having equally meritorious claims against the original owner of the stock, each claiming a prior lien over the other,—the one by virtue of the pledge, the other by virtue of the levy of the execution.
Our statute provides, (Rev. Stat. 1874, p. 628, cliap. 77,):
“ § 52. The shares or interest of a stockholder in any corporation may be taken on execution, and sold as hereinafter provided.
“ § 53. If the property has not been attached in the same suit, the officer shall leave an attested copy of the execution with the clerk, treasurer or cashier of the company, if there is any such officer, otherwise with any officer or person having the custody of the books and papers of the corporation; and the property shall be considered as seized on execution when the copy is so left, and shall be sold in like manner as goods and chattels.” * * *
“ § 55. The officer of the company who keeps a record or account of the shares or interest of the stockholders therein, shall, upon the exhibiting to him of the execution, be bound to give a certificate of the number of shares or amount of the interest held by the judgment debtor. If he refuses to do so, or if he willfully gives a false certificate thereof, he shall be liable for double the amount of all damages occasioned by such refusal or false certificate, to be recovered in any proper action, unless the judgment is satisfied by the original defendant.
“ § 56. An attested copy of the execution and of the return thereon shall, within fifteen days after the sale, be left with the officer of the company whose duty it is to record transfers of shares; and the purchaser shall thereupon be entitled to a certificate or certificates of the shares bought by him, upon paying the fees therefor and for recording the transfer.” * * *
It is too obvious to justify extended comment, that these pr-ovisions contemplate that, as against a judgment creditor, title to the stock can only pass by transfer on the books of the company, for if it might be otherwise transferred, as, by indorsement and delivery of the certificates alone, these provisions could have no practical operation.
If the mere transfer of the certificate, under contract of sale, shall sufficiently pass title, of what worth can the certificate required by § 55 be?
How can a certificate of shares purchased on execution, as provided by § 56, be of any avail, if the original certificate be out and be transferable from hand to hand, by indorsement and delivery?
Unless the books of the company is the proper place to ascertain the title of the purchaser or assignee of stock, what possible end can be subserved by requiring a copy of the execution to be left with the clerk, treasurer or cashier of the company, etc., and with what sense could it be said this should be regarded as a seizure of the stock on execution, etc.?
What we regard as the correct doctrine is well stated by the late Judge Redfield in his note to Fisher et al. v. President, Directors, etc., of the Essex Bank, 1 Am. Railway cases, 127. He says: “ It seems to be agreed, upon all hands, that in the case of a mere pledge of shares for the security of a debt, a formal delivery will be required to create or to consummate the contract, since it is of the very essence of a pledge that the possession be transferred to the pledgee; for as the gem eral title of the thing still remains in the pledgor, unless the possession were transferred, there would be nothing to uphold the contract. Redfield on Bailm. §§ 659—674, and cases cited. This may be effected by a formal or even a blank indorsement or assignment of the certificate, and delivery of the same to the assignee. Nothing more is ordinarily required to complete the contract as between the immediate parties. But, as to third parties, something more is commonly required. Some such visible or ascertainable index of the change of ownership as will naturally put those interested in the question upon inquiry, and thus lead them to correct information upon the subject, must exist. 1 Story Eq. Jur. § 421b, and cases cited in note. Some of the American States have attempted to maintain a different rule, as, that the assignment, being complete between the parties, will be held good as to third partiéh whose rights are subsequently acquired and perfected by actual possession, without knowledge of the prior transfer. Muir v. Schenck, 3 Hill (N. Y.), 228, and case cited by Cowen, J.in the opinion of the court. But this rule has never obtained in England, and only to a very limited extent in this country, and is repudiated by all the best authorities. 1 Story Eq. Jur. § 412c, and cases cited. But we think there can be no fair question that where the law of the State, as applicable to corporations, whether it be by a provision in the charter of the particular company or by a general statute, or settled course of decisions in the courts, requires that shares shall be transferred in a particular mode, as, in the present case, that they shall be transferable only at its banking house and ón its books,’ there must be a substantial compliance with the requirement, in order to protect the property against future assignments or levies.”
These views are sustained by Fisher et al. v. President, etc., of the Essex Bank, 5 Gray, 373; Sabin v. Bank of Woodstock, 21 Vt. 353; Oxford Turnpike v. Bunnell, 6 Conn. 558; Pinkerton v. Manchester and Lawrence Railroad Co. 42 N. H. 424; Pittsburgh and Connellsville Railroad Co. v. Clarke, 29 Penn. St. 146; Dutton v. Connecticut Bank, 13 Conn. 498; Skowhegan Bank v. Cutter, 49 Maine, 315; Lockwood v. Mechanics’ National Bank, 9 R. I. 308; Agricultural Bank v. Burr, 24 Maine, 256; Blanchard v. Dedham Gas Co. 12 Gray, 213. And in People ex rel. v. Devin et al. 17 Ill. 86, this court, by implication, indorses the doctrine.
Ho point is made, nor is any tenable, that the resolution of the board of directors, and not the express declaration of the charter, prohibits a transfer of stock otherwise than on the books of the company. The board of directors were expressly empowered, by the charter, to provide for the mode of transfer, and that was all that was necessary. Lockwood v. Mechanics’ National Bank, supra.
The cases in New York and New Jersey, relied upon by Counsel for appellant, recognizing a doctrine not in harmony with that above indorsed, do not commend themselves to our approval.
The judgment of the Appellate Court is affirmed.
Judgment affirmed.