Opinion of the Court.

the maximum prescribed in the articles of association. They are found in section 5142 of the Revised Statutes, which declares that any banking association may, by its articles, provide for an increase of its capital from time to time, but adds, no increase of capital shall be valid until the whole amount of such increase is paid in, and notice thereof has been transmitted to the Comptroller of the Currency, and his certificate obtained specifying the amount,' etc. This clause would have been violated by an issue of $500,000 of new stock, when only $461,300 was paid in; but not by an issue of the exact amount that was paid in. The clause in question was intended to secure the actual payment of the stock subscribed, and so as to prevent what is called watering of stock. In the present case the statute was strictly and honestly complied with. The argument of the defendant asks too much. It would apply to the original capital of a company as well as to an increase of capital. And will it do to say, after a company has been organized and gone into business, and dealt with the public, that its stockholders may withdraw their capital and be exempt from statutory liability to creditors, if they can show that the capital stock of the company was not all subscribed?" Again: "The stock was lawfully created, the defendant subscribed for the shares in question and paid for them, and received his certificate; and nothing was afterwards done by the directors, the Comptroller of the Currency, or the stockholders in meeting assembled, which they had not a perfect right to do. The defendant became a stockholder; he held the shares in question when the bank finally went into liquidation; and, of course, became liable under section 5151 of the Revised Statutes to pay an amount equal to the stock by him so held."

In Pacific National Bank v. Eaton, 141 U. S. 227, 233, 234, the court, again speaking by Mr. Justice Bradley, said: "The defendant in error was just as much bound by her subscription to the new stock as if the whole $500,000 had been subscribed and paid in. The only question to be considered, therefore, is whether the fact that the defendant in error did not call for and take her certificate of stock made any difference as to her status as a stockholder. We cannot see how it could make the

Opinion of the Court.

slightest difference. Her actually going or sending to the bank and electing to take her share of the new stock, and paying for it in cash, and receiving a receipt for the same in the form above set forth, are acts which are fully equivalent to a subsc:iption to the stock in writing, and the payment of money therefor. She then became a stockholder. She was properly entered as such on the stock book of the company, and her certificate of stock was made out ready for her when she should call for it. It was her certificate. She could have compelled its delivery had it been refused. Whether she called for it or not was a matter of no consequence whatever in reference to her rights and duties. The case is not like that of a deed for lands, which has no force, and is not a deed, and passes no estate, until it is delivered. In that case everything depends on the delivery. But with capital stock it is different. Without express regulation to the contrary, a person becomes a stockholder by subscribing for stock, paying the amount to the company or its proper officer, and being entered on the stock book as a stockholder. He may take out a certificate or not, as he sees fit. Millions of dollars of capital stock are held without any certificate; or, if certificates are made out, without their ever being delivered. A certificate is authentic evidence of title to stock; but it is not the stock itself, nor is it necessary to the existence of the stock. It certifies to a fact which exists independently of itself. An actual subscription is not necessary. There may be a virtual subscription, deducible from the acts and conduct of the party." To the same effect was Thayer v. Butler, 141 U. S. 234.

It is supposed that Concord First National Bank v. Hawkins, 174 U. S. 364, 372, is in opposition to the views herein expressed. We do not think so. In the case referred to it appeared that the bank, located at Concord, New Hampshire, purchased, for purposes of investment, one hundred shares of the stock of the Indianapolis National Bank, doing business at Indianapolis, Indiana, and after such purchase appeared upon the books of the latter bank as the owner and holder of the shares so purchased. The bank at Indianapolis suspended and was put into the hands of a receiver. The question presented was whether,

Opinion of the Court.

in respect of the stock standing in its name, the bank in New Hampshire could be held as a shareholder in the other bank under section 5151. This court, following the decisions in prior cases, including California Bank v. Kennedy, 167 U. S. 362, 367, held that a national bank had no power or authority to invest its surplus funds in the stock of another national bank. It was also adjudged that in the case of such a purchase the purchasing bank could plead its want of power, and thereby protect itself against the liability imposed upon shareholders by section 5151. The court said: "If the previous reasoning be sound, whereby the conclusion was reached that, by reason of the limitations and provisions of the national banking statutes, it is not competent for an association organized thereunder to take upon itself, for investment, ownership of such stock, no intention can be reasonably imputed to Congress to subject the stockholders and creditors thereof, for whose protection those limitations and provisions were designed, to the same liability by reason of a void act on the part of the officers of the bank, as would have resulted from a lawful act. It is argued, on behalf of the receiver, that the object of the statute was to afford a speedy and effective remedy to the creditors of a failed bank, and that this object would be defeated in a great many cases if the Comptroller were obliged to inquire into the validity of all the contracts by which the registered shareholders acquired their respective shares. The force of this objection is not apparent. It is doubtless within the scope of the Comptroller's duty, when informed by the reports of the bank that such an investment has been made, to direct that it be at once 'disposed of, but the Comptroller's act in ordering an assessment, while conclusive as to the necessity for making it, involves no judgment by him as to the judicial rights of the parties to be affected. While he, of course, assumes that there are stockholders to respond to his order, it is not his function to inquire or determine what, if any, stockholders are exempted."

The difference between that case and the present one is apparent. In the case before us there was no want of power in the defendant to subscribe for stock in the bank at Sedalia

Syllabus.

and to assume the position of a shareholder. An individual may become a shareholder in a national bank by his own voluntary act. He can, if he choose, so act as to be estopped from saying that he is not a shareholder and liable as such for the contracts, debts and engagements of the bank. But a national bank is without authority to use its funds for the purchase of the stock of another national bank merely for purposes of investment, and therefore, as held in the Hawkins case, it could not under such circumstances become a shareholder within the meaning of section 5151. Of the powers of a national bank under the statutes providing for their creation every one must take notice. Whether a national bank may not be deemed a shareholder, within the meaning of section 5151, if it holds shares of another bank as security for previous indebtedness, is a question suggested in former cases, but not decided, and upon which, in this case, no opinion need be expressed.

The judgment is

Affirmed.

INTERNATIONAL NAVIGATION COMPANY v. FARR AND BAILEY MANUFACTURING COMPANY.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE THIRD

CIRCUIT.

No. 193. Argued March 12, 13, 1901.-Decided April 22, 1901.

The Harter act, so-called, does not relieve the ship owner from liability for damages caused by the unseaworthy condition of his ship at the commencement of her voyage.

Nor is the ship owner exempted from liability under that act, "for damage or loss resulting from faults or errors of navigation, or in the management of said vessel," unless it appears that she was actually seaworthy when she started or that the owner had exercised due diligence to make her so in all respects.

The mere fact that the owner provides a vessel properly constructed and equipped is not conclusive that the owner has exercised due diligence within the meaning of the act, for the diligence required is diligence on

Statement of the Case.

the part of all the owner's servants in the use of the equipment before the commencement of the voyage and until it has actually commenced; and the law recognizes no distinction founded on the character of the servants employed to accomplish that result.

Whether a ship is reasonably fit to carry her cargo is a question to be determined on all the facts and circumstances, and the difference in the facts of this case from those in The Silvia, 171 U. S. 462, was such that the Court of Appeals was at liberty to reach a different result.

THIS was an action brought by the Farr and Bailey Manufacturing Company against the International Navigation Company, owner of the steamship Indiana, in the District Court of the United States for the Eastern District of Pennsylvania, in admiralty, to recover the sum of $2084.15, for damages to twenty bales of burlaps which were delivered to the Navigation Company at Liverpool, England, on board that steamship, in good order and condition, for carriage to the Manufacturing Company at Philadelphia. Upon the arrival of the steamship at Philadelphia the burlaps were found to have been damaged by sea water. The case was heard in the District Court and the libel sustained, and the cause referred to a commissioner to determine the extent of the loss. 94 Fed. Rep. 675. The Navigation Company applied for a reargument, which was had, and thereupon the libel was dismissed. 94 Fed. Rep. 678. From this decree the Manufacturing Company appealed to the Circuit Court of Appeals for the Third Circuit, and that court, one of its members dissenting, reversed the decree of the District Court, and held the Navigation Company liable. 98 Fed. Rep. 636. The case was then brought to this court on certiorari.

In the first opinion of the District Court it was stated that"In May, 1895, twenty baies of burlaps in good condition were received by the vessel at Liverpool, consigned to the libellant, in Philadelphia, and a bill of lading was given therefor. The bales were stowed with some other goods in compartment No. 3 of the lower steerage deck; but the compartment was not full, only one tier of cargo, two or three feet high, covering the floor, so that access to the ports was very easy and unobstructed. Four or five days after the vessel left Liverpool water was discovered in the compartment; and when the hatches were opened, a day or two later, it was found that the after