ate to create a superior lien as against creditors whose rights accrued prior to such ratification. It is said in Cook v. Tullis, 18 Wall. 332, 338:

"The general rule as to the effect of a ratification by one of the unauthorized act of another, respecting the property of the former, is well settled. The ratification operates upon the act ratified precisely as though authority to do the act had been previously given, except where the rights of third parties have intervened between the act and the ratification. The retroactive efficacy of the ratification is subject to this qualification: The intervening rights of third persons cannot be defeated by the ratification. In other words, it is essential that the party ratifying should be able, not merely to do the act ratified at the time the act was done, but also at the time the ratification was made."

See, also, Galloway v. Hamilton, 68 Wis. 651, 32 N. W. 636.

I therefore conclude that the liens of the complainant and of R. D. Wood & Co. are superior and paramount to any rights of Andrews and Whitcomb in the property, that their judgments are valid and effectual, and should be enforced.

Fourth. An interesting question to be determined is whether, under the circumstances disclosed by the evidence, Andrews and Whitcomb are liable to the creditors of the corporation as stockholders of the company. It is essential that the facts should be precisely stated, with a view to a correct application of the law to the case in hand. At the organization of the company in July, 1890, its entire capital stock was subscribed for as follows: By C. C. Garland, 990 shares; by F. H. Todd, 7 shares; by F. B. Barnes, J. W. McCabe and W. E. Krippene, 1 share each. Certificates of stock were issued to these parties, respectively, on the 1st and 2d days of October, 1890. It may be fairly said that none of this stock was actually paid for by parties subscribing, and that they were severally liable to the company and its creditors for the amount of their respective subscriptions. By the memorandum contract of the 13th day of September it was agreed by the company that the entire $100,000 of stock should be transferred to Andrews and Whitcomb as collateral security for the money to be advanced. On the 2d day of October, 1890, Garland sent to Andrews and Whitcomb the certificates issued to himself and to Todd, transferred in blank, and promised to remit the three certificates for one share each within a few days, unless Andrews and Whitcomb should prefer that they should be retained by Garland. On the 7th day of October Andrews and Whitcomb returned the certificates, requiring that the stock should be transferred to themselves upon the books of the company. On the 18th day of October, 1890, Garland surrendered those certificates, and the company issued certificates for 97 shares to Andrews and Whitcomb, and Garland forwarded the certificates to them. On the 22d day of October, 1890, Andrews and Whitcomb executed to Garland a receipt therefor, acknowledging the receipt from Garland individually of certificates representing 997 shares of the capital stock of the company, and stating that such stock was held as collateral to secure the payment of all moneys which may be advanced under contract, Exhibit A thereto attached, which contract was like the memorandum agreement of September 13th. On the 20th day of December, 1890, at the request of Andrews and

Whitcomb, the secretary of the company indorsed upon the appropriate stubs of the stock book memoranda that the shares of stock represented were owned by Garland, and issued to Andrews and Whitcomb merely as collateral. On January 12, 1891, Andrews and Whitcomb being dissatisfied with Garland's management of the company declined to arrange for the advance of any further funds unless. his connection was severed, and it was arranged that Garland should resign as president and as director of the company and assign all of his interest in the stock and all his interest of every kind in the company to one George W. Sturtevant, in consideration of which Andrews and Whitcomb released Garland from liability as indorser upon the notes given them by the Oconto Water Company to the amount of $40,000 for so much money loaned the company. At the same time Wheeler, Elkins, and Todd, who had on October 15, 1890, respectively, become the transferees of the shares of stock issued to Barnes, McCabe, and Krippene of one share each, assigned their respective shares of stock as follows: Wheeler assigned to the defendant Whitcomb, Elkins assigned to S. W. Ford, and Todd assigned to the defendant Andrews. Neither Sturtevant nor Ford paid any consideration for the stock. They were mere dummies in the enterprise, acting in the interest of Andrews and Whitcomb, and the transfer was made to give the latter full control of the management of the corporation, which they thereafter exercised. By this transaction Andrews and Whitcomb became the absolute owners of the stock. The transfer to Sturtevant was not recorded upon the books of the company, although he appears by the minutes to have acted at the meetings as the holder of the 990 shares of stock, but in fact acted as the dummy and agent of Andrews and Whit

comb.

It has been repeatedly held that the transferee of stock who causes the transfer to be made to himself on the books of a corporation, although he holds it merely as collateral security for a debt of his transferer, is liable for unpaid balances thereon due to the company or to the creditors of the company. Pullman v. Upton, 96 U. S. 328; Bank v. Case, 99 U. S. 631; Sleeper v. Goodwin, 67 Wis. 592, 31 N. W. 335. But it is said here that the company itself pledged this stock to Andrews and Whitcomb for a debt by the company to them. It is true that by the agreement dated September 13th, the company undertook to make immediate transfer in trust to Andrews and Whitcomb of its entire capital stock as collateral. The true reading of that agreement, judged in the light of the subsequent conduct of the parties, is that the company agreed to procure the subscribers o transfer to Andrews and Whitcomb all the stock of the company.. Andrews and Whitcomb took the stock, not from the company, but from the stock subscribers holding it. They required for their protection against the creditors of the stockholders an absolute transfer of the stock on the stock book of the company, but they were careful afterwards to have it recognized that they held that stock merely as collateral, and that Garland and Todd owned the stock subject to the debt for which it was pledged.

If the case rested here, there might be reason to uphold the con

tention that the authorities cited, holding liability of the pledgee of the stock, are distinguishable from the case in hand. In those cases the pledgees received their stock directly from the stockholders, and as collateral to the debt due by the stockholders. Here the stock was caused to be transferred by the company as collateral to a liability of the company, the stockholders acquiescing to enable the company to keep its obligation. Creditors stand in the right of the corporation, and they can only enforce the obligation of the stockholder where the corporation could do so. This I think is the extent to which the case of Burgess v. Seligman, 107 U. S. 20, 2 Sup. Ct. 10, has gone. The whole discussion there was whether persons to whom a corporation pledges its stock as collateral were within the exemption of the statute of Missouri which provided that:

"No person holding stock in any such company as executor, administrator, guardian, or trustee, and no person holding such stock as collateral security, shall be personally subject to any liability as a stockholder of such company; but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly, and the estate and funds in the hands of the executor, administrator, guardian, or trustee shall be liable, in like manner and to the same extent, as the testator or intestate, or the ward or person interested in such funds, would have been if he had been living and competent to act, and held the stock in his own name." 1 Wag. St. c. 37, art. 2, § 9.

The court held that the case was within the exemption of the statute, notwithstanding the supreme court of Missouri, after the decision of the case in the court below, had taken a contrary view. It will be observed that the statute there under consideration carefully provided that the liability to creditors should remain somewhere, and that the holder of the stock merely as collateral should not be held. There the corporation pledged its unissued and unsubscribed stock; here the company caused to be pledged stock issued to subscribers. There the corporation had no recourse to subscribers; here it had. One of the reasons assigned for holding the transferee of stock liable is "that the creditors of the bankrupt company are entitled to the whole capital of the bankrupt as a fund for the payment of the debts due them. This they cannot have if the transferee of the shares is not responsible for whatever remains unpaid upon his share, for by the transfer on the books of the corporation the former owner is discharged." Pullman v. Upton, supra. Here Garland and the other original owners of the stock had simply consented to the transfer of their stock as collateral. Under the Missouri statute they would be, in law, the owners of it, subject only to the equities of Andrews and Whitcomb, and would remain liable to the company for whatever was unpaid upon that stock, notwithstanding its transfer. By the transaction of January 12, 1891, Garland and the others conveyed their equitable interest in that stock in fact to Andrews and Whitcomb, although nominally to Sturtevant and others. The use of the names of Sturtevant and Todd was a mere makeshift, the whole purpose of the transaction being, in consideration of the release of Garland from his indorsement and of his resignation as president and director, to put absolutely in Andrews and Whitcomb the ownership of that stock. The transfer

was impressed with a secret trust in favor of Andrews and Whitcomb. A stockholder cannot escape liability by the use of the name of a dummy. Aultman's Appeal, 98 Pa. St. 505; Roman v. Fry, 5 J. J. Marsh. 634. That such was the transaction is manifest from the fact that Andrews and Whitcomb thereafter took actual management and control of the corporation. I think, therefore, that by that transaction they became the absolute owners of the stock, and with it took upon themselves the liability which the law imposes upon such owners, even if, as is not the case, a statute like that of the state of Missouri obtained in the state of Wisconsin.

In Pullman v. Upton, supra, it was asserted that, by the transfer upon the books of the corporation "the former owner is discharged." If this be correct, in the absence of any statute like that of Missouri, Garland and his co-subscribers were discharged from liability to stockholders upon transfer of their stock to Andrews and Whitcomb, and unless the latter be liable the recourse of creditors would be gone, a result which the law would not favor. But, when Garland and Todd subsequently dispossessed themselves of all interest in the stock and property of the company, nominally to Sturtevant but actually to Andrews and Whitcomb, the latter became the absolute owners of the stock standing in their names upon the books of the company, and with such absolute ownership assumed the liability to creditors which the law imposes upon such ownership, if they were not primarily liable as holders of the stock as collateral security. I conclude, therefore, that Andrews and Whitcomb are liable for all unpaid amounts upon the stock standing in their name, so far as may be necessary to discharge the indebtedness of the company.

ors.

Fifth. I am of opinion that the instruments executed by the company to Andrews and Whitcomb were made in good faith and for a valuable consideration,—that they were not withheld from record by their procurement, nor with their consent, nor in fraud of creditI need not enter into discussion of the vexed question of what passed to Andrews and Whitcomb under these instruments, because the conclusions heretofore suggested furnish the complainant and the intervening creditors an adequate remedy, and render any decision of that subject unnecessary and perhaps unprofitable. shall assume for the purposes of the decree that the instrument conveying the franchise also conveyed the plant.

I

Sixth. The bonds issued are, in accordance with the previous ruling upon a motion for injunction, and in accordance with the decision of the supreme court of the state, held to be void, and they should be delivered up to be canceled.

Seventh. I need not decide the question whether Andrews and Whitcomb are entitled in equity to any priority over the lien of the complainant and R. D. Wood & Co. by reason of their subsequent advances for the completion of the plant. That question passes out of the case upon the holding of their personal responsibility, and under the decree that must necessarily be entered upon the conclusions which I have reached.

THE SEGURANCA.

GUIMARAES et al. v. PROCEEDS OF THE SEGURANCA.

(District Court, S. D. New York. May 2, 1895.)

NONDELIVERY OF OIL CARGO-LEAKAGE-LIGHTERAGE-SHIPPER'S RISK-GOVERNMENT CUSTODY-CONSIGNEE'S LACHES - CUSTOM HOUSE REPORT NOT EVIDENCE.

Five thousand cases of oil were deliverable at Rio in lighters at shipper's risk; the local regulations required it to be put in the custody of customs officers till the duties were paid. The consignees, though duly notified of the ship's delivery in lighters to the customs authorities, delayed for nine weeks to pay the duties and take the oil ashore, and then claimed nondelivery of 1,132 cases, and loss and damage to other cases. The ship proved delivery into lighters and to the government officers of all the oil save 102 cases broken: Held, that the delivery to the officers in lighters was a good delivery, and that the ship was responsible only for loss by breakage and from leakage for a reasonable time in which to pay the duties and land the goods; that the custom house report of missing cases nine weeks after, was not competent evidence of nondelivery; and that upon the whole evidence a loss of 250 cases only was chargeable against the ship.

This was a libel by Zelmira de Castro Guimaraes, and others, against the proceeds of the steamship Seguranca, to recover for alleged loss and damage upon a consignment of oil in cases.

Cary & Whitridge and W. P. Butler, for petitioners.

Carter & Ledyard and E. L. Baylies, for mortgagee of steamer.

BROWN, District Judge. The above libel was filed against the proceeds of the steamer Seguranca deposited in the registry of this court, for the recovery of an alleged loss and damage of part of a consignment of 5,000 cases of oil shipped from New York to Rio on board the Seguranca in January, 1893. The claim is contested by the Atlantic Trust Company, a mortgagee of the vessel, which claims the proceeds in the registry.

The petition alleges the nondelivery of 1,132 cases out of the 5,000; that 1,005 other cases were damaged, so that a part of contents was lost; and that 209 cans were delivered without the wooden cases which should have inclosed them.

The steamer arrived at Rio in February, and owing to her draft of water, her cargo had to be discharged by lighters. The cases of oil being inflammable, were required, under the local authority, to be delivered at the government warehouses, unless at once removed and the duties paid. The twelfth clause of the bill of lading for the oil in question provided, that it should be "lightered ashore at shipper's risk, but at company's expense, provided it did not lie in lighters or hulks for longer than 48 hours after it is discharged into said lighters, and for demurrage thereafter." The oil was all discharged from the ship into lighters by the 24th of February; and there is general testimony on behalf of the ship from those who took part in the delivery, and superintended it, that all the oil was delivered into the lighters in accordance with the manifest, and that