SEAMAN, District Judge
(after stating the facts). I have reached a conclusion upon the merits of this case by which I am relieved from a consideration of the objection raised in behalf of the defendant that the plaintiff, as a receiver appointed by the court in the state of Michigan, cannot maintain his action in this forum, but is barred by the ruling in Booth v. Clark, 17 How. 322. See, also, High, Rec. § 239; Beach, Rec. § 680. Whether a distinction must be made in reference to the enforcement of liability against a stockholder under proceedings authorized by the statute of the state creating the corporation, and entering into the obligation which was assumed by the taking of stock, will not be passed upon in this opinion. See, for a distinction, Relfe v. Rundle, 103 U. S. 222; Railway Co. v. Gebhard, 109 U. S. 527, 3 Sup. Ct. 363; Parsons v. Insurance Co., 31 Fed. 305; Fry v. Insurance Co., Id. 197.
The defendant was not an original subscriber or stockholder of the corporation, and is not a direct purchaser or transferee under any original subscriber or stockholder. He was not a member at the time the arrangement was made out of which came the issue of stock in question.. He had no actual knowledge of the facts which govern the issue of this stock, or any of the stock of the corporation; and there was nothing upon the face of the certificates from which notice could be inferred that the stock was not paid up, or of any infirmity in the issue. The question of Ms liability is not therefore within the ruling of the Upton Cases, 91 U. S. 45-72, and is not directly ruled by any decision of the supreme court cited on the argument or found in my research. The doctrine is well settled and strictly enforced that “the capital stock of an insolvent corporation is a trust fund for the payment of its debts; that the law implies a promise by the original subscribers of stock who do not pay for it in money or other property to pay for the same when called upon by creditors; and that a contract between themselves and the corporation that the stock shall be treated as fully paid and nonassessable, or otherwise limiting their liability therefor, is void as against creditors.” Handley v. Stutz, 139 U. S. 417, and cases cited page 427, 11 Sup. Ct. 530. If the original stockholder transfers his unpaid stock, this [437]*437trust and subsequent liability follow it into the hands of any assignee who has notice or against whom notice can be implied. Webster v. Upton, 91 U. S. 65. But the decisions exempt the holder of such stock who purchases or takes as creditor bona fide, and^ clearly so in the absence of recitals or circumstances to give notice. Clark v. Bever, 139 U. S. 96, 11 Sup. Ct. 468; Fogg v. Blair, 139 U. S. 118, 11 Sup. Ct. 476; Handley v. Stutz, 139 U. S. 417, 11 Sup. Ct. 530; Sanger v. Upton, 91 U. S. 56; Steacy v. Railroad Co., 5 Dill. 348, Fed. Cas. No. 13,329; Phelan v. Hazard, 5 Dill. 45, Fed. Cas. No. 11,068; Foreman v. Bigelow, 4 Cliff. 508, Fed. Cas. No. 4,934; Young v. Iron Co., 65 Mich. 125, 31 H. W. 814; Brant v. Ehlen, 59 Md. 1; 1 Cook, Stock, Stockh. & Corp. Law, §§ 50, 257. The certificates of stock are not, strictly speaking, negotiable paper, but “they approximate to it as nearly as practicable” (Bank v. Lanier, 11 Wall. 377); and the cases above cited recognize that they possess so much of the attributes of negotiability that purchasers 'in the open market may accept as true the clear representation on their face that they are full paid. In Steacy v. Railroad Co., supra, Judge Dillon cleariy points out this right of a bona fide purchaser to rely upon corporate representations thus made in the certificate, and "that the creditors of a corporation have no equities superior to “the obvious equities which exist in favor of such a purchaser.” Answering the claim that a purchaser of stock was bound to ascertain aliunde the truth of the representations, and must look to the records, the opinions say: “What more value is to be placed upon facts stated in the records than upon-those stated under the corporate seal, by the authorized officers, as respects matters infra vires?” The decision in that case, in which Judge Caldwell concurred, exempts the bona fide transferee from liability under circumstances which do not raise equities in his favor of equal strength with those which are presented in favor of this defendant, but they are at least so far analogous that the rule and the reasons for its adoption there are clearly applicable here, and would discharge this defendant from liability unless the Michigan statute and the proceedings thereunder in the chancery court of that state (which will be presently considered) create a special liability.
The case at bar presents a feature in aid of the defendant which impresses me as entitled to great weight, in the conceded fact that this “treasury stock,” out of which the defendant's purchase came, was produced by the deliberate surrender and contribution to the company by all the original subscribers of a portion of the original shares, which were taken by each to fill his subscription, and with direction that it be issued by the company, and placed on sale for its benefit, certified as full-paid stock. In view of that action, it is not necessary to carry the rule in favor of a bona fide transferee to the extent of relieving Mm from examination or from implied knowledge of the corporate records or proceedings., The stockholders have by this transaction applied upon these surrendered shares the general credit to which they were entitled on account of the property which they conveyed to the corporation as the only payment on their subscription, so far as it would be required to pay up the shares which [438]*438were thus segregated and sold; and an inspection of the record would justify the purchaser in the understanding that his shares were therefore cleared from liability. There is no proof here of the actual number of shares thus passed to bona fide purchasers, and clearly no proof of any deficiency in the payment of the defendant’s shares after such application. The shares must therefore be regarded as full paid, according to their purport, and there is no common-law liability upon the holder for the corporate indebtedness.
The statutes of Michigan, which must govern in respect to this corporation, created under them, do not impose any additional liability. The supreme court of Michigan is clear and controlling authority for this construction of the statute. Young v. Iron Co., 65 Mich. 125, 31 N. W. 814, and the cases cited are directly in point. The rule held in Steacy v. Railroad Co. is there broadly adopted, and the opinion in Young v. Iron Co.
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SEAMAN, District Judge
(after stating the facts). I have reached a conclusion upon the merits of this case by which I am relieved from a consideration of the objection raised in behalf of the defendant that the plaintiff, as a receiver appointed by the court in the state of Michigan, cannot maintain his action in this forum, but is barred by the ruling in Booth v. Clark, 17 How. 322. See, also, High, Rec. § 239; Beach, Rec. § 680. Whether a distinction must be made in reference to the enforcement of liability against a stockholder under proceedings authorized by the statute of the state creating the corporation, and entering into the obligation which was assumed by the taking of stock, will not be passed upon in this opinion. See, for a distinction, Relfe v. Rundle, 103 U. S. 222; Railway Co. v. Gebhard, 109 U. S. 527, 3 Sup. Ct. 363; Parsons v. Insurance Co., 31 Fed. 305; Fry v. Insurance Co., Id. 197.
The defendant was not an original subscriber or stockholder of the corporation, and is not a direct purchaser or transferee under any original subscriber or stockholder. He was not a member at the time the arrangement was made out of which came the issue of stock in question.. He had no actual knowledge of the facts which govern the issue of this stock, or any of the stock of the corporation; and there was nothing upon the face of the certificates from which notice could be inferred that the stock was not paid up, or of any infirmity in the issue. The question of Ms liability is not therefore within the ruling of the Upton Cases, 91 U. S. 45-72, and is not directly ruled by any decision of the supreme court cited on the argument or found in my research. The doctrine is well settled and strictly enforced that “the capital stock of an insolvent corporation is a trust fund for the payment of its debts; that the law implies a promise by the original subscribers of stock who do not pay for it in money or other property to pay for the same when called upon by creditors; and that a contract between themselves and the corporation that the stock shall be treated as fully paid and nonassessable, or otherwise limiting their liability therefor, is void as against creditors.” Handley v. Stutz, 139 U. S. 417, and cases cited page 427, 11 Sup. Ct. 530. If the original stockholder transfers his unpaid stock, this [437]*437trust and subsequent liability follow it into the hands of any assignee who has notice or against whom notice can be implied. Webster v. Upton, 91 U. S. 65. But the decisions exempt the holder of such stock who purchases or takes as creditor bona fide, and^ clearly so in the absence of recitals or circumstances to give notice. Clark v. Bever, 139 U. S. 96, 11 Sup. Ct. 468; Fogg v. Blair, 139 U. S. 118, 11 Sup. Ct. 476; Handley v. Stutz, 139 U. S. 417, 11 Sup. Ct. 530; Sanger v. Upton, 91 U. S. 56; Steacy v. Railroad Co., 5 Dill. 348, Fed. Cas. No. 13,329; Phelan v. Hazard, 5 Dill. 45, Fed. Cas. No. 11,068; Foreman v. Bigelow, 4 Cliff. 508, Fed. Cas. No. 4,934; Young v. Iron Co., 65 Mich. 125, 31 H. W. 814; Brant v. Ehlen, 59 Md. 1; 1 Cook, Stock, Stockh. & Corp. Law, §§ 50, 257. The certificates of stock are not, strictly speaking, negotiable paper, but “they approximate to it as nearly as practicable” (Bank v. Lanier, 11 Wall. 377); and the cases above cited recognize that they possess so much of the attributes of negotiability that purchasers 'in the open market may accept as true the clear representation on their face that they are full paid. In Steacy v. Railroad Co., supra, Judge Dillon cleariy points out this right of a bona fide purchaser to rely upon corporate representations thus made in the certificate, and "that the creditors of a corporation have no equities superior to “the obvious equities which exist in favor of such a purchaser.” Answering the claim that a purchaser of stock was bound to ascertain aliunde the truth of the representations, and must look to the records, the opinions say: “What more value is to be placed upon facts stated in the records than upon-those stated under the corporate seal, by the authorized officers, as respects matters infra vires?” The decision in that case, in which Judge Caldwell concurred, exempts the bona fide transferee from liability under circumstances which do not raise equities in his favor of equal strength with those which are presented in favor of this defendant, but they are at least so far analogous that the rule and the reasons for its adoption there are clearly applicable here, and would discharge this defendant from liability unless the Michigan statute and the proceedings thereunder in the chancery court of that state (which will be presently considered) create a special liability.
The case at bar presents a feature in aid of the defendant which impresses me as entitled to great weight, in the conceded fact that this “treasury stock,” out of which the defendant's purchase came, was produced by the deliberate surrender and contribution to the company by all the original subscribers of a portion of the original shares, which were taken by each to fill his subscription, and with direction that it be issued by the company, and placed on sale for its benefit, certified as full-paid stock. In view of that action, it is not necessary to carry the rule in favor of a bona fide transferee to the extent of relieving Mm from examination or from implied knowledge of the corporate records or proceedings., The stockholders have by this transaction applied upon these surrendered shares the general credit to which they were entitled on account of the property which they conveyed to the corporation as the only payment on their subscription, so far as it would be required to pay up the shares which [438]*438were thus segregated and sold; and an inspection of the record would justify the purchaser in the understanding that his shares were therefore cleared from liability. There is no proof here of the actual number of shares thus passed to bona fide purchasers, and clearly no proof of any deficiency in the payment of the defendant’s shares after such application. The shares must therefore be regarded as full paid, according to their purport, and there is no common-law liability upon the holder for the corporate indebtedness.
The statutes of Michigan, which must govern in respect to this corporation, created under them, do not impose any additional liability. The supreme court of Michigan is clear and controlling authority for this construction of the statute. Young v. Iron Co., 65 Mich. 125, 31 N. W. 814, and the cases cited are directly in point. The rule held in Steacy v. Railroad Co. is there broadly adopted, and the opinion in Young v. Iron Co. expressly states' that the defendants there sought to be charged as stockholders “must be treated as good-faith purchasers, for value, of stock, from the original holders of the same”; that, being bona fide transferees of shares of this stock, which purported upon its face, in clear and unmistakable terms, to be fully paid up and nonassessable, their shares thus acquired are exempt from any liability to further assessment, to pay the debts of the corporation. But the plaintiff invokes the case of Dynamite Co. v. Andrews, 97 Mich. 466, 56 N. W. 858, because it was an appeal from a judgment rendered against one of the stockholders of the American Iron Company in the same insolvency proceedings in the Michigan court upon which this action is founded. That case arose upon demurrer by a stockholder (Andrews) against whom liability was charged by the bill of complaint, and the opinion states that “the sole question presented by the record is the right to enforce an assessment by a personal judgment or decree against the stockholder.”. It was there enforced against one apparently a general stockholder, and the question of a bona fide holder of stock issued as full paid did not arise, and the opinion distinguishes it from Young v. Iron Co. upon that ground. The decision is not applicable. It fails to support the plaintiff’s contention here, but, making the distinction ns noted, is inferentially against it
The further claim is made in behalf of the plaintiff that the decree in the Michigan court relative to the principal insolvency matter is, in some unexplained manner, conclusive upon this defendant, and establishes his liability, although it is conceded that he was not served as a party, and was not before that court, except as an integral part of the corporation. It is true, as held in Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739, and in Glenn v. Liggett, 135 U. S. 533, 10 Sup. Ct. 867, that, “in the absence of fraud, stockholders are bound by a decree against their corporation in respect to corporate matters, and such a decree is not open to collateral attack”; and that “the stockholder is to be deemed privy to the proceedings touching the body of which he is a member.” But this rule applies only so far that he cannot question the findings of insolvency and the foundations of an assessment upon the stockholders. Upon any question of individual liability in which are involved his rights as a [439]*439bona Me holder, or in respect to his special holding of stock, a stockholder is entitled to his day in court, and cannot be bound by any ex parte adjudication of liability. There is no adjudication affecting the defense interposed by tbis defendant, and he is not liable upon his shares of stock.
Findings may be prepared in accordance witb tbis opinion, and judgment will be entered in favor of the defendant accordingly.