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The full case caption appears at the end of this opinion. Plaintiff-Appellant Kathleen Carr appeals from a judgment of the United States District Court for the Northern District of New York (Frederick J. Scullin, Jr.,Judge) entered June 12, 1998, denying Carr’s motion for summary judgment and granting Defendant-Appellee Marietta Corporation’s (“Marietta”) cross-motion forsummary judgment. Carr seeks to enforce her rights as the purported owner of 10,000 shares of stock in Marietta. She alleges that Marietta wrongfully refused topurchase the stock from her pursuant to a tender offer (the “Tender Offer”) in conjunction with Marietta’s privatization plan. Marietta responds that Carr’s allegedright to sell the stock to Marietta is unenforceable because the party to whom it was originally issued never paid for it. For the reasons set forth below, we affirm. I. FACTUAL BACKGROUND Marietta is a New York corporation specializing in the manufacture and marketing of products for the hotel and guest service industries. Marietta’s stock waspublicly traded on the NASDAQ Stock Exchange from 1986 until March 1996. In 1996, Marietta’s stock was delisted pursuant to a privatization plan (the “Plan ofMerger”), which included a tender offer by the company to repurchase all publically held shares. Thomas Walsh, Carr’s brother and the party to whom the disputed shares were first issued, served on Marietta’s board of directors from 1980 until 1996. In 1989,Marietta offered Walsh, along with other directors on the board, certain “bonus” Marietta stock, certain options to purchase Marietta stock, and the right topurchase additional Marietta stock in exchange for a small cash downpayment and a promissory note payable to Marietta. Pursuant to this offer, Walsh purchased10,000 shares of stock (the “Walsh Shares”) in exchange for an initial $1,000 cash payment and a promissory note for $121,500 (the “1989 Note”). The WalshShares are unregistered, [FOOTNOTE 1] restricted Marietta shares, which are represented by a single share certificate dated July 9, 1989. The restriction on the share certificatestates: THE SHARES REPRESENTED HEREBY (I) ARE SUBJECT TO THE PROVISIONS OF A CERTAIN STOCK PURCHASEAGREEMENT, DATED AS OF FEBRUARY 9, 1989, BETWEEN THE HOLDER HEREOF AND MARIETTA CORPORATION . . .WHICH AGREEMENT PERMITS, INTER ALIA, THE COMPANY TO REACQUIRE THE SHARES UNDER CERTAINCIRCUMSTANCES AND (II) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANDTHE RULES AND REGULATIONS PROMULGATED THEREUNDER, AND MAY NOT BE SOLD, OFFERED FOR SALE OROTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR ANEXEMPTION THEREFROM. Paragraph 4 of the Stock Purchase Agreement provides that 20% of the Walsh Shares would vestannually on each anniversary of the Stock Purchase Agreement. It further states that: all Shares are vested in the Director if he has not resigned from the Board or given notice to thecompany of his refusal to stand for re-election of the Board of the Company on or prior to thefifth anniversary of the date hereof. All Shares which shall have vested shall be free and clearof the restrictions of this Agreement. . . . In the event that the Director shall sell any of the Shares, the portion of the principal amountof the Note, together with accrued interest, corresponding to the number of the Shares sold shall,to the extent not previously paid, immediately be due and payable and no transfer in the stockledger of the company will be made until such payment is received. Seven months after Walsh obtained the Walsh Shares, he pledged them to Sequoia National Bank inMaryland pursuant to a Security Agreement dated September 14, 1989 (the “Sequoia SecurityAgreement”). [FOOTNOTE 2] Plaintiff concedes that Sequoia had notice of the two restrictions on alienationthat appear on the share certificate legend, but nonetheless contends that Sequoia was a bona fidepurchaser (“BFP”) of the Walsh Shares. Neither Walsh nor any other party has ever paid Marietta the $121,500 due under the 1989 Note.According to Carr, Walsh nonetheless became 100% vested in the Walsh Shares in accordance withParagraph 4 of the Stock Purchase Agreement in February 1994, even though he had not made anyprincipal payments on the 1989 Note. [FOOTNOTE 3] Instead of requiring payment on the Note, the Board ofDirectors decided to extend the repayment date on the 1989 Note by canceling it and issuing a newone. On February 9, 1994, Walsh executed a new non-negotiable promissory note to Marietta in theamount of $121,500 (the “1994 Note”), which replaced the 1989 Note. On April 1, 1994, Walsh borrowed $108,470.06 from Sequoia Bank and executed a promissory note (the”Sequoia Promissory Note”), which contained a security/pledge agreement stating “[t]his Note issecured by 10,000 shares of Marietta Corporation common stock.” According to the terms of theSequoia Promissory Note, Walsh was responsible for repaying the loan, with interest, by August 1,1994. In 1995, Marietta entered discussions with a Barry W. Florescue that led to a merger and theprivatization of Marietta. Under the Plan of Merger that was eventually approved by proxy,Marietta was to purchase all of its 3,319,788 shares of outstanding stock at the offered price of$10.25 per share. The proxy solicitation that explained the Plan of Merger stated that, “[f]romand after the Effective Time, the shares held by former shareholders of Marietta [would] representthe right to receive $10.25 per Share in cash but [would] not represent any equity interest in theSurviving Corporation.” At the time the Plan of Merger was being formulated, the officers of Marietta were aware thatWalsh still owed Marietta $121,500, and they appear to have made some effort to collect paymentfrom him. According to Marietta, Walsh repeatedly represented to Marietta’s directors that hewould deliver his share certificate to Marietta in partial payment of the 1994 Note. Walsh furtherrepresented that he would pay the balance of his stock debt to Marietta prior to the mergerclosing. Walsh apparently neglected to mention that he was no longer in possession of thecertificate, having surrendered it to Sequoia in either 1989 or 1994. See supra, note 2. In reliance on these representations, Marietta once again extended Walsh’s time to pay his stockdebt. Walsh’s 1994 Note was replaced by a third note dated February 9, 1996 (the “1996 Note”),which had a maturity date of March 15, 1996. The Plan of Merger specifically stated that it hadaccelerated payment of the 1996 Note. The merger closed on March 8, 1996, and since March 11, 1996, no share of Marietta has beenpublicly traded. The privatization of Marietta essentially renders the Walsh Shares worthlessunless Marietta purchases them from their current owner under the Plan of Merger. According to Carr, sometime in early 1996 Sequoia sought to redeem the Walsh Shares because Walshwas unable to repay the Sequoia Promissory Note. With Walsh’s cooperation, Sequoia attempted totender the shares to Marietta. Because Walsh was not actually in possession of the sharecertificate, having presented it to Sequoia in 1989 or 1994, he had his attorney attempt to tenderthe Walsh Shares certificate and irrevocable stock power “on behalf of Sequoia.” Marietta refusedSequoia’s tender, and Marietta has since maintained that it owes no payment to Sequoia (or toCarr) because the value of the Walsh Shares was to be offset against the sum due on the 1996 Note. In the meantime, Sequoia attempted to collect on the $108,000 that Walsh owed Sequoia by virtue ofthe Sequoia Promissory Note. At a date unspecified in the record, Sequoia secured a consentjudgment against Walsh in the Circuit Court of Montgomery County, Maryland, for the sum of$132,633.62, plus post-judgment interest. Sequoia also secured a consent judgment for the sameamount in the Combined Court of Routt County, Colorado. By this point, it had become obvious to all parties involved that Walsh was virtually insolvent.Marietta reports that: in the early summer of 1996, Sequoia continued collection efforts against Walsh [to collect on the$108,000 loan]. Carr again intervened “on her brother’s behalf,” contacted the President ofSequoia Paul McNamara . . . and initiated a transaction with Sequoia to “stop” Sequoia and its”henchmen” from “hounding” her brother Walsh with legal action to enforce Sequoia’s Judgmentsagainst Walsh. Appellant’s Br. at 7-8 (citations omitted). On August 5, 1996, Carr purchased all of Sequoia’s rights against Walsh, including the SequoiaPromissory Note (face amount $108,407.06), the Security Agreement, the Walsh Shares, and thejudgments Sequoia had obtained against Walsh for $132,633.62 in both the Circuit Court ofMontgomery County, Maryland and the Combined Court of Routt County, Colorado. As a Senior VicePresident at Washington Area Banks, Carr had more than sixteen years experience in commerciallending, investment management, trusts and loans. Carr was also well aware that Marietta hadrefused Sequoia’s tender of the shares, but she nonetheless paid Sequoia $27,500.000 “and othergood and valuable consideration” to become the assignee of all of Sequoia’s rights against Walsh.The agreement between Carr and Sequoia stated that: This sale is made on an “AS IS,” “WHERE IS” BASIS, “WITH ALL FAULTS” AND WITHOUT REPRESENTATIONS,EXPRESS OR IMPLIED, OF ANY TYPE, KIND, CHARACTER OR NATURE, AND WITHOUT WARRANTIES, EXPRESS ORIMPLIED, OF ANY TYPE, KIND, CHARACTER OR NATURE AND WITHOUT RECOURSE, EXPRESS OR IMPLIED, OF ANYTYPE, KIND, CHARACTER OR NATURE . . . In the agreement, Sequoia also disclaimed “any express or implied warranty of ‘Merchantibility’”and “any express or implied warranty of ‘Fitness For a Particular Purpose’ ” with respect to thecollateral mentioned in the agreement. In the meantime, Marietta filed a complaint against Walsh in the New York Supreme Court to enforceits rights under the 1996 Note. On April 29, 1997, the Supreme Court for Cortland County, NewYork, granted Marietta’s motion for summary judgment and entered final judgment in the amount of$149,258.31 against Walsh. Carr now maintains that Marietta was and is legally obligated to repurchase the Walsh Shares fromCarr at a price of $10.25 per share pursuant to the Plan of Merger, on the ground that Carr is theassignee of Sequoia’s rights to the Walsh Shares. On February 28, 1997, Carr filed a complaint inthis action in the United States District Court for the Northern District of New York, seeking adeclaration that she is the legal owner of the Walsh Shares and $102,500 in damages againstMarietta. The complaint alleges that Carr is a BFP of the Walsh Shares and bases her claim againstMarietta on three theories: (1) violation of “the securities laws of the United States”; (2)breach of contract; and (3) breach of fiduciary duty. In its response, Marietta denies Carr’sallegation that she is a BFP and alleges five affirmative defenses. On January 9, 1998, after considerable discovery, Carr moved for partial summary judgment onCounts I and II, which concerned her declaratory judgment claim, based on securities lawsviolations stemming from Marietta’s refusal to acknowledge her as the owner of the Walsh Shares,and her breach of contract claim for Marietta’s refusal to repurchase the shares under the TenderOffer. Marietta filed a cross-motion for summary judgment. Judge Scullin conducted a hearing inMarch 1998 and announced his decision in court on June 10, 1998, in which he granted Marietta’scross-motion and dismissed Carr’s complaint. In applying Article 8 of the New York Uniform Commercial Code (“UCC”), the district court foundthat Sequoia was not a BFP of the Walsh Shares largely because Sequoia had notice of therestrictions on the shares. The court noted that Sequoia had notice as early as 1989 of therestrictions on alienation, which were listed on the share certificate legend. Furthermore, whileit was true that all of the Walsh Shares had vested by April 1, 1994, Sequoia also possessed acopy of the Stock Purchase Agreement. Therefore, Sequoia had notice of the two restrictions in theStock Purchase Agreement, and “[s]pecifically, Sequoia had notice that of the $122,500 owed toMarietta for the shares, Walsh had only paid $1,000.” The court also stated that “while it isclear that complete ownership vested in Walsh on February 9, 1994 pursuant to Section 4 of theStock Purchase Agreement, it is equally clear that the same section gives rise to an ‘adverseclaim’ unless and until Marietta received full payment for the shares.” The court additionallyfound that the transfer from Sequoia to Carr violated the Securities Act of 1933, since Walsh hadnot paid for the shares in full prior to transferring the shares to Sequoia. Applying former N.Y. UCC � 8-301, [FOOTNOTE 4] the district court reasoned that “Sequoia acquired only thoserights its transferor, Walsh, had in the shares. As transferee of Sequoia, Plaintiff Carr acquiredonly those rights Sequoia received from Walsh. Therefore, Plaintiff Carr stands in the shoes ofher brother, Thomas Walsh.” Although Walsh was entitled to receive $10.25 per share for the WalshShares, as the shareholder of record, he still owed Marietta $121,500 as consideration for theshares. “A shareholder of shares is liable to the corporation for the amount of considerationwhich has not been paid,” and because this liability was passed to Walsh’s transferee, the courtconcluded, Sequoia was not a BFP of the shares and neither was Carr. In reaching this conclusion,the district court found it especially significant that much of the $27,500 Carr paid to Sequoiacame from her brother, Walsh, and thus Carr’s right in the Walsh Shares should be subject to thesame offset as her brother’s. II. DISCUSSION On appeal, Carr raises various arguments regarding the district court’s application of New YorkUCC law and federal securities law. We need not address these arguments, as the district court’sruling with regard to New York Business Corporations Law Section 628 ultimately governs theresolution of this case. For the reasons below, we affirm the district court’s decision grantingMarietta’s summary judgment motion on this basis. In granting Marietta’s summary judgment motion, the district court held that N.Y. Bus. Corp. Law �628(a), when read in connection with Section 628(b), establishes that a person who obtains stockwith notice that full consideration has not been paid by the original purchaser is liable to thecorporation for the unpaid portion of the purchase price. The district court concluded that Carrdid not purchase the Walsh shares from Sequoia in good faith, [FOOTNOTE 5] and she therefore remained liableto Marietta for the unpaid consideration for the Walsh Shares. The district court further ruledthat any payment Carr might be entitled to under the Tender Offer is subject to offset for theremaining amount due on the 1996 Note. On appeal, Carr raises three arguments regarding the district court’s application of Section 628.First, Carr argues that the district court erred in applying Section 628 in this case becauseWalsh’s execution of the 1989 Note constituted full consideration for the Walsh Shares, making thestatute inapplicable by its terms. Second, Carr maintains that even if Section 628 applies in thiscase, the statute does not create any liability encumbering the Walsh Shares. Third, Carrchallenges the district court’s interpretation and application of the “good faith” element set outin Section 628(b). For the reasons discussed below, we reject each of these arguments. A. The Applicability of Section 628 Carr maintains that the district court erred in applying Section 628 in this case because thestatute is inapplicable by its terms. Section 628 of the New York Business Corporation Lawprovides: � 628. Liability of subscribers and shareholders (a) A holder of or subscriber for shares of a corporation shall be under no obligation to thecorporation for payment for such shares other than the obligation to pay the unpaid portion of hissubscription which in no event shall be less than the amount of the consideration for which suchshares could be issued lawfully. (b) Any person becoming an assignee or transferee of shares or of a subscription for shares ingood faith and without knowledge or notice that the full consideration therefor has not been paidshall not be personally liable for any unpaid portion of such consideration, but the transferorshall remain liable therefor. (c) No person holding shares in any corporation as collateral security shall be personally liableas a shareholder but the person pledging such shares shall be considered the holder thereof andshall be so liable. No executor, administrator, guardian, trustee or other fiduciary shall bepersonally liable as a shareholder, but the estate and funds in the hands of such executor,administrator, guardian, trustee or other fiduciary shall be liable. N.Y. Bus. Corp. Law � 628. Carr contends that by executing a valid promissory note, the 1989 Note,Walsh provided full consideration for the shares. Hence, Carr argues, Section 628′s provisions donot apply in this case. Carr cites N.Y. Bus. Corp. Law � 504 in support of her contention that the 1989 Note constitutedfull consideration for the Walsh Shares. [FOOTNOTE 6] In her opening brief, Carr recognizes that thelegislature has amended Section 504 following the relevant events in this action, but maintainsthat “the changes are not relevant to this appeal.” Marietta responds that N.Y. Bus. Corp. Law �504(b), [FOOTNOTE 7] which was in effect at the time of the creation of the Share Purchase Agreement and 1989 Note,governs in this case and specifically precludes Carr’s reliance on Section 504(a). In her replybrief, Carr urges that “[t]his Court should simply apply existing New York law which makes itclear that an unsecured promissory note is full and adequate consideration for stockcertificates.” We conclude that the former Section 504(b) governs in this action and therefore that “obligationsfor future payment” do not “constitute payment or part payment for shares of a corporation.”Carr’s argument that we should apply Section 504 as it exists today, without provision (b), runscounter to well-settled New York law regarding the presumption against retroactive application ofstatutory changes. See Murphy v. Board of Educ., 104 A.D.2d 796, 797, 480 N.Y.S.2d 138, 139 (2dDep’t 1984) (“As a general rule statutes are to be construed as prospective only in the absence ofan unequivocal expression of a legislative intent to the contrary, and where a statute directsthat it is to take effect immediately, it does not have any retroactive application or effect.”)(citing McKinney’s Consol. Laws of N.Y., Book 1, Statutes, � 51, subd. b); see also Dorfman v.Leidner, 76 N.Y.2d 956, 959, 565 N.E.2d 472, 474, 563 N.Y.S.2d 723, 724 (1990) (Mem.) (“Statutesare applied prospectively in the absence of express or necessarily implied language allowingretroactive effect.”). Carr makes no argument that the legislature intended the repeal oramendment of Section 504(b) to have retroactive effect, and in light of the amendment’s expresslystated effective date of February 22, 1998, see N.Y. Bus. Corp. � 504 Historical and StatutoryNotes (McKinney 1986 & Supp. 1999), we cannot conclude otherwise. See Dorfman, 76 N.Y.2d at 959,565 N.E.2d at 474, 563 N.Y.2d at 724 (stating that statute should not be given retroactiveapplication when effective date indicates otherwise). Thus, we hold that Section 504(b) governedat the time the Share Purchase Agreement and the 1989 Note were signed, and therefore the 1989Note did not constitute full consideration for the Walsh Shares for purposes of Section 628. B. Shareholder Liability under Section 628 Carr is also incorrect insofar as she maintains that Section 628 does not create liability.Section 628(a) states that a shareholder remains liable to the corporation for the unpaid portionof the stock price, and at least one New York court has recognized that this provision does indeedcreate liability. See Chrysler Corp. v. Fedders Corp., 73 A.D.2d 504, 507, 422 N.Y.S.2d 876, 880(1st Dep’t 1979) (“Coordinately, [defendant corporation] could also recover [on its counterclaim]under BCL � 628(a) for the unpaid portion of the subscription price shown to be due [to it].”).Thus, if Carr currently owns Marietta shares, she remains liable under Section 628(a) to thecorporation for the unpaid portion of the subscription price. In order to escape this liability,Carr bears the burden of demonstrating that she satisfies the requirements of Section 628(b) byvirtue of having taken the Walsh shares in good faith and without notice or knowledge that theshares were not fully paid for. To the extent that Carr argues that Section 628 does not create any affirmative liability, butinstead merely cabins the liability of a shareholder for corporate debts, we reject this argumentas well. Our understanding of Section 628 is illuminated by an examination of the common law as itexisted before the enactment of Section 628. At common law, a person who acquired stock for whichthe issuing corporation had not been fully paid was liable to the corporation for the originalpurchaser’s deficiency. See Pullman v. Upton, 96 U.S. 328, 330-31 (1877) (Mem.) (holder of stock,who possesses stock as collateral security, is liable to corporation for unpaid portion of shareprice); Webster v. Upton, 91 U.S. 65, 70 (1875) (Mem.) (“We think, therefore, the transferee ofstock in an incorporated company is liable for calls made after he has been accepted by thecompany as a stockholder, and his name has been registered on the stock books as a corporator;and, being thus liable, there is an implied promise that he will pay calls made while he continuesthe owner.”). The common law imposed upon the shareholder an implied promise to satisfy any unpaidportion of the stock purchase price upon the corporation’s demand. See Sigua Iron Co. v. Brown,171 N.Y. 488, 502-04, 64 N.E. 194, 198-99 (1902) (shareholder responsible for unpaid portion ofshare price because of “implied promise” inherent in becoming shareholder). Additionally, atcommon law, a transferee of unpaid shares became liable to the corporation for the unpaid portionof the subscription price, even if the transferee was not aware that the corporation was stillowed money for the shares. Early v. Richardson, 280 U.S. 496, 499 (1930); Harr v. Wright, 164Misc. 395, 397, 298 N.Y.S. 270, 272 (N.Y. Sup. Ct. 1936), aff’d, 250 App. Div. 830, 296 N.Y.S. 463(4th Dep’t 1937); Dayton v. Borst, 31 N.Y. 435 (1865). By enacting Section 628, the New York legislature limited the common law liability of ashareholder to the corporation and the corporation’s creditors to the total value of theshareholder’s committed investment. See N.Y. Bus. Corp. Law � 628 Legislative Studies and Reports(McKinney 1986). In Section 628, the legislature included protections for individuals who receivedsecurities from other individuals either as pledgees or as transferees without knowledge thatmoney was still owed the corporation for the shares. See N.Y. Bus. Corp. Law � 628(b) (providingprotections for innocent transferees of shares for which money is still due the corporation). Inorder to protect creditors who acquired shares as collateral security, the New York legislatureenacted Section 628(c). Thus, in light of the plain reading of Section 628, its legislativehistory, and the common law, which all suggest that Section 628 creates liability, Carr cannotescape liability under the statute unless she can bring herself within the protections of Section628(b) or (c). Because Carr does not currently hold the Walsh Shares as collateral security and isnot a pledgee, Section 628(c) does not relieve her of liability. Carr makes no argument thatSection 628(c) does apply, and she therefore must satisfy the provisions of Section 628(b) toescape liability. C. The Good Faith Requirement of Section 628(b) Turning to Carr’s arguments concerning the “good faith” element found in Section 628(b), ouranalysis of the statute convinces us that in order to secure its protection from liability to thecorporation for the unpaid portion of the share price, a shareholder must establish that sheacted: (1) in good faith; and (2) “without knowledge or notice that the full consideration . . .has not been paid.” N.Y. Bus. Corp Law � 628(b). Because the statute speaks of the requirements inthe conjunctive, Carr must satisfy both requirements. New York courts have not construed the “good faith” requirement of Section 628(b), and wetherefore look for guidance in how New York courts have interpreted the good faith requirementunder Article 8 of the UCC, which governs transfers of securities. Under New York law, a partydoes not act in good faith if she acts with knowledge and disregard of suspicious circumstances.See Savings Bank Trust Co. v. Federal Reserve Bank of N.Y., 738 F.2d 573, 574 (2d Cir. 1984) (percuriam) (holding that good faith does not exist if party has “knowledge and disregard ofsuspicious circumstances”); In re Legel Braswell Gov’t Secur. Corp., 695 F.2d 506, 512 (11th Cir.1983) (construing New York law and holding that “disregard for suspicious circumstances, of which[defendant] had actual knowledge, constituted a taking [of the disputed securities] in badfaith”); Gutekunst v. Continental Ins. Co., 486 F.2d 192, 194-96 (2d Cir. 1973) (per curiam) (“NewYork law is that only actual knowledge or disregard of suspicious circumstances may constituteevidence of bad faith.”); Otten v. Marasco, 235 F. Supp. 794 (S.D.N.Y. 1964), aff’d, 353 F.2d 563(2d Cir. 1965); Scarsdale Nat. Bank and Trust Co. v. Toronto Dominion Bank, 533 F. Supp. 378, 387(S.D.N.Y. 1982) (party that acts with “willful ignorance” of adverse claim cannot be said to actin good faith); Fallon v. Wall St. Clearing Co., 182 A.D. 245, 250, 586 N.Y.S.2d 953, 956 (1992)(transferee of security “is under obligation to investigate suspicious circumstances which mightsuggest the existence of an adverse claim”); Manufacturers & Traders Trust Co. v. Sapowitch, 296N.Y. 226, 230, 72 N.E.2d 166, 169 (1947) (purchaser of securities is not protected from liabilityfrom adverse claim if “it clearly appear[s] that the inquiry suggested by the facts disclosed atthe time of the purchase would if fairly pursued result in the discovery of the defect existingbut hidden at the time”) (citing Birdsall v. Russell, 29 N.Y. 220, 250 (1864)). Thus, we mustconsider whether, given the circumstances surrounding the issuance and transfer of the WalshShares, Carr was aware of facts such that her failure to inquire as to the legal status of theshares constituted willful ignorance on her part of any possible adverse claim evidencing badfaith. In reviewing these circumstances, we conclude as a matter of law that if Carr was not actuallyaware of Marietta’s adverse claim, it was only because she was willfully ignorant of this fact. Inreaching this conclusion, we find several facts highly probative of Carr’s mental state. First,Carr admitted that she read the restrictive legend appearing on the face of the share certificateand was aware that it constituted a restriction on the transferability of the shares. Second, Carrobtained the shares with full knowledge that the transfer agent [FOOTNOTE 8] had refused to repurchase theshares from Sequoia on a prior occasion and that Marietta refused to repurchase the shares aswell. Third, as someone involved in the banking industry, Carr was a sophisticated investor whowas well aware of the laws and regulations governing securities. See Catizone v. Memry Corp., 897F. Supp. 732, 738 (S.D.N.Y. 1995) (party’s knowledge and experience with securities make itunlikely that party acted in good faith in the face of suspicious circumstances); Otten, 235 F.Supp. at 798 (party who was “sophisticated in business transactions” had duty to inquire onceaware of suspicious circumstances). Fourth, Carr knew that Sequoia believed that Marietta refusedto purchase the Walsh Shares because they had previously been pledged. Fifth, Carr was aware thatWalsh signed a promissory note to Marietta on February 9, 1996 (the 1996 Note) for $121,500 andthat her brother had other outstanding debts. Cf. Garner v. First Nat. City Bank, 465 F. Supp.372, 383 n.15 (S.D.N.Y. 1979) (knowledge of transferor’s troubled financial status relevant indetermining whether transferee acted in good faith). [FOOTNOTE 9] Sixth, Carr purchased both the WalshShares and Sequoia’s judgments against Walsh in the amount of $132,633.62 for a purchase price of$27,500. Cf. Second Nat. Bank of Morgantown v. Weston, 172 N.Y. 250, 257, 64 N.E. 949, 951 (1902)(party’s purchase of note at large discount supports inference that party acted in bad faith).Seventh, Carr maintains that she never spoke with her brother regarding any encumbrance on theshares, despite her admission that she speaks with him as a family member on a regular basis. Cf.Scarsdale Nat. Bank, 533 F. Supp. at 387 (concluding that transferee did not act in good faithsupported by fact that transferee was “good friend” with transferor). Given these facts, the only way that Carr could not have known that Walsh had failed to payMarietta for the Walsh Shares, or that there was an adverse claim, was if she engaged in apurposeful effort to avoid knowing these facts. As a result, Carr did not act in “good faith”under the meaning of Section 628(b). The district court was correct to grant defendant’s motionfor summary judgment and dismiss the complaint since plaintiff is subject to the same offset aswas her brother Thomas Walsh and accordingly can take nothing from this action. Finally, we also reject Carr’s argument that she is entitled to the “good faith” protections ofthe “shelter rule” found in the UCC. As we understand Carr’s position, she argues both that the”shelter rule” found in the UCC trumps whatever liability Section 628 imposes and that Section 628should be read to provide protection to those who obtain stock from pledgees of shares. We expresssome doubt as to whether Carr is correct in her interpretation of the “shelter rule” [FOOTNOTE 10] found inthe UCC, given authority to the contrary. See William M. Fletcher, 12 Fletcher Cyclopedia of theLaw of Private Corporations, � 5478 (1996) (“Whether a transferee takes from a bona fide purchaseror from a protected purchaser, the transferee who was involved in fraud or had notice of anadverse claim does not thereby improve its position.”) (citing UCC � 8-302(c)(1994)). We need notaddress this question of UCC interpretation, however, since regardless of what the UCC provides,there is no indication of an analogous “shelter rule” in N.Y. Bus. Corp. Law � 628. [FOOTNOTE 11] Thus, itwould be improper to read the general provisions of the shelter rule as supplanting the specificprovisions of Section 628, which pertain directly to the circumstances in this case. Cf. CrawfordFitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987) (” ‘[w]here there is no clearintention otherwise, a specific statute will not be controlled or nullified by a general one,regardless of the priority of enactment.’ “) (quoting Radzanower v. Touche Ross & Co., 426 U.S.148, 153 (1976)); Germain v. Germain, 25 A.D. 568, 569, 267 N.Y.S.2d 789, 791 (2d Dep’t 1966)(“When a particular statue conflicts with a general one, the particular statute will be deemed anexception where it is incompatible with the provisions of the general statute.”) (citingMcKinney’s Consol. Laws of NY, Book 1, Statutes, � 238). III. CONCLUSION For the above reasons, the decision of the district court is affirmed. :::FOOTNOTES::: FN1 Unregistered securities are securities that were not issued or transferred pursuant to aregistration statement filed with the Securities and Exchange Commission. 15 U.S.C. � 77e.Unregistered securities can only legally be transferred pursuant to an exception to theregistration requirement. Id. FN2 There is a factual question as to exactly when Walsh first delivered the share certificate toSequoia. Carr argues that Walsh initially pledged the shares in September of 1989, but that at thevery latest, Sequoia had the share certificate and notice of the restrictions in the StockPurchase Agreement and the 1989 Note by April 1, 1994, when Walsh used the shares as collateralfor a loan. The district court did not specifically address the circumstances surrounding the 1989pledge, and we are unable to determine from the record why Walsh pledged these shares in 1989.Thus, we cannot determine whether Walsh’s 1989 pledge included physical delivery of the sharecertificate and the Stock Purchase Agreement to Sequoia. FN3 Curiously, the 1989 Note requires payment in five yearly installments on February 9th of eachyear following the agreement, but Walsh’s rights to the corresponding one-fifth of the sharesappears to vest under the Stock Purchase Agreement regardless of whether he makes the requiredpayment. FN4 N.Y. UCC � 8-301. Rights acquired by purchaser. (1) Upon transfer of a security to a purchaser . . . the purchaser acquires the rights in thesecurity which his transferor had or had actual authority to convey unless the purchaser’s rightsare limited by subsection (4) of Section 8-302. (2) A transferee of a limited interest acquires rights only to the extent of the interesttransferred. The creation or release of a security interest in a security is the transfer of alimited interest in that security. N.Y. UCC � 8-301, repealed by L.1997, c.566, � 5. See N.Y. UCC � 8-301 Historical and StatutoryNotes (McKinney 1990 & Supp. 1999). FN5 The district court specifically noted that Carr “admitted that she purchased the bundle ofrights that Sequoia had against Walsh on her brother’s behalf and for his benefit.” The districtcourt also observed that evidence suggested that some of the $27,500 Carr paid to Sequoia was fromWalsh. FN6 N.Y. Bus. Corp. Law � 504(a) provides: Consideration for the issue of shares shall consist of money or other property, tangible orintangible; labor or services actually received by or performed for the corporation or for itsbenefit or in its formation or reorganization; a binding obligation to pay the purchase price orthe subscription price in case or other property; a binding obligation to perform services havingan agreed value; or a combination thereof. In the absence of fraud in the transaction, thejudgment of the board or shareholders, as the case may be, as to the value of the considerationreceived for the shares shall be conclusive. N.Y. Bus. Corp. Law � 504(a). FN7 Section 504(b), which was modified in 1997 and repealed in its entirety in 1998, provided that”[n]either obligations of the subscriber for future payments nor future services shall constitutepayment or part payment for shares of a corporation.” N.Y. Bus. Corp. Law � 504(b), amended byL.1997, c. 449, � 9 (deleting provision regarding future payments), repealed by L.1998, c.17, �1.See N.Y. Bus. Corp. � 504 Historical and Statutory Notes (McKinney 1986 & Supp. 1999). FN8 The transfer agent, Continental Stock Transfer & Trust Company, was an entity retained byMarietta to oversee the repurchase of Marietta stock pursuant to the Plan of Merger. FN9 Carr admitted during a deposition that she had the Stock Purchase Agreement and the 1996 Noteprior to purchasing the Walsh Shares from Sequoia. The Stock Purchase Agreement specificallystates that the purchase of the shares was financed by a promissory note for $121,500 (the 1989Note), and the 1996 Note for the identical amount also refers to the Stock Purchase Agreement.Given these facts and the knowledge that Marietta had previously refused to repurchase the shares,no objectively reasonable person would fail to inquire as to whether the 1996 Note was connectedwith the purchase of the Walsh Shares and whether this note had been paid. FN10 UCC � 8-302 Rights of Purchaser (1) A “bona fide purchaser” is a purchaser for value in good faith and without notice of anyadverse claim (a) who takes delivery of a certificated security in bearer form or of one in registered formissued to him or indorsed to him or in blank; or (b) to whom the transfer, pledge or release of an uncertificated security is registered on thebooks of the issuer; or (c) to whom a security is transferred under the provisions of subparagraph (c), (d)(i) or (g) ofsubsection (1) of Section 8-313. (2) “Adverse claim” includes a claim that a transfer was or would be wrongful or that a particularadverse person is the owner of or has an interest in the security. (3) A bona fide purchaser in addition to acquiring the rights of a purchaser (Section 8-301) alsoacquires his interest in the security free of any adverse claim. (4) Notwithstanding subsection (1) of Section 8-301, the transferee of a particular certificatedsecurity who has himself been a party to any fraud or illegality affecting the security or who asa prior holder of that certificated security had notice of an adverse claim cannot improve hisposition by taking from a later bona fide purchaser. N.Y. UCC � 8-302, repealed by L.1997, c. 566, � 5. See N.Y. UCC � 8-302 Historical and StatutoryNotes (McKinney 1990 & Supp. 1999). FN11 We agree with Carr’s contention that Section 628 must be read to provide greater protectionfor commercial pledge transactions, see N.Y. Bus. Corp. Law � 628(c) (providing protection forthose holding security as collateral), and we believe nothing in this decision calls thatprotection into question. We disagree with Carr, however, in her assertion that she is somehowentitled to the same commercial “good-faith” exemption that a bank enjoys in a similar situation.We find no authority, nor do we see any principled reason, why Carr should be afforded the sameprotections as a commercial entity since Carr is neither a commercial entity or a pledgee, butrather a private transferee. Cf. Brown v. Rosetti, 66 Misc.2d 239, 239-40, 319 N.Y.S.2d 1001, 1002(1st Dep’t 1971) (stating that because banks regularly engage in securities transactions, it ismore likely that they act in good faith in taking securities since it is their “usual course ofbusiness”) (citing Canajoharie Nat. Bank v. Diefendorf, 25 N.E. 402, 404, 123 N.Y. 191, 201(1890)). Thus, we need not consider the effect of a commercial “good faith” exception in thiscase.
Carr v. Marietta Corp. United States Court of Appeals for the Second Circuit Argued: March 26, 1999 Decided: May 05, 2000 No. 98-7961 KATHLEEN CARR, Plaintiff-Appellant, v. MARIETTA CORPORATION, Defendant-Appellee. Before: Feinberg, Parker, and Pooler Appeal From: United States District Court for the Northern District of New York Counsel for Appellant: Robert E. Greenberg, Thomas Buckel, Jr., and Eric Nordby Counsel for Appellee: Thomas E. Myers and Henry Morris
 
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