Case ID: va_29/html/0289-01.html
Source: Caselaw Access Project
Author: {"author": "CABRLL, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Leavell v. Robinson.
    May, 1830.
    (Absent Ooai/tkk, J.)
    Bank Stock — Transfer of — Security or Conditional Sale’ — Quaere.—Question, whether a transfer of bank stock was, under all circumstances of transaction, a security or indemnity provided for the transferee, and therefore redeemable; or a conditional sale, which became absolute by non-per-forxnance of the condition ?
    This was a bill exhibited in the superiour court of chancery of Fredericksburg, by Robinson against Leavell, praying to redeem eight shares of stock of the Farmers’ Bank of Virginia, which Robinson bad previously transferred to Rea veil.
    The case was thus: Robinson, being possessed of the eight shares of stock, had obtained from the office of the bank at Fredericksburg, a loan of 560 dollars, on the credit of the stock, that is, on a pledge thereof, by way of security; he executed what is called a stock note for the debt, in the usual form. Stock having afterwards fallen in value, and Robinson’s personal security not being good at the bank, he was required to give additional security, as a condition of the continuance of the accommodation; which he accomplished by transferring the stock to Johnson, who thereupon pledged the same stock, and gave his own stock note, for the debt, in lieu of that which had been before given by Robinson. This was done by Johnson for Robinson’s accommodation. Some differences having subsequently arisen between Robinson and Johnson, it became materially desirable to them, that Johnson should be relieved from the responsibility he had thus incurred for Robinson. The bank, however, was still unwilling to take a pledge of the stock, and Robinson’s own stock note, for the debt, without some farther security'; and he was, therefore, compelled to find some other friend to take Johnson’s place. He applied to Leavell. Leavell was very reluctant to involve himself in this responsibility: but he was at length persuaded to take *a transfer of the stock to himself, and to pledge the same, and give his own stock note, to the bank, for the debt of S60 dollars, in lieu of that which had been given by Johnson, upon an express, clear and definite understanding, between him and Robinson, reduced to writing the day before the note was given, that if at the expiration of 60 days when the note was made payable, Robinson should fail to make arrangements for relieving Leavell from all responsibility on the note, the stock should then be the absolute property of Leavell. Of this agreement, there was also positive and distinct parol evidence.
    Sometime before this note of Leavell came to maturity, he called at the bank, to know the terms on which the directors would agree to release him, and take Robinson’s note instead of his; and was'informed, that this would be done on the debt being reduced from 560 to 480 dollars. A few days before the note became due, Leavell again called at the bank, and left there a power of attorney for transferring the stock to Robinson, or any other person he might appoint; saying, he expected Robinson would be prepared to take up the note. But so far from making any arrangement for that purpose, Robinson did not even offer to pay the discount for the renewal of the accommodation; neither did he ever make an offer to pay either the principal or interest due on the note, or make any demand for the stock,, till about twelve months afterwards, when the stock had risen above its par value of 100 dollars the share.
    At the time Leavell received the transfer of the stock, it was worth only 64 or 65 dollars the share; that is, less by five or six dollars per share, than the sum he became bound for to the bank: there was, however, some expectation that it would rise. And although by the time the note came to maturity, stock had been sold at Richmond for 76 dollars the share, yet it did not appear, that any such rise had taken place, or was even known, at Fredericksburg: on the contrary, a witness for Robinson, speaking of the price ot stock at Fredericksburg, a few days before the note became due, *as compared with what it had been at the date of the note, said, “Bank stock was a little better, or there was more confidence in the stock.”
    After the note given by Leavell for the debt came to maturity, it was renewed at bank, from time to time, on Leavell’s own account and for his accommodation, he paying the discounts; and the principal was still due to the bank, at the time Robinson’s bill was filed. And Leavell received all the dividends that accrued on the stock from the time of the transfer to him.
    Chancellor Browne declared, that the transfer of the stock by Robinson to Leavell, was only a pledge or security to indemnify Leavell from loss, in case the former should fail to discharge the stock note executed by the latter to the bank for his accommodation, and that Robinson had | a right to redeem, on payment of the debt of 560 dollars with such interest thereon as Leavell had paid to the bank, subject to a deduction of ,the dividends which Leavell had received on the stock: and he decreed redemption accordingly. From which decree Leavell appealed to this court.
    The cause was argued here by Stanard for the appellant, and Briggs and Harrison for the appellee.
    There was some controversy as to the facts of the transaction: but, in the opinion of this court, the above was, without doubt, the true state of the case. And then, the question was, Whether the transfer of the stock by Robinson to Leavell was (as the chancellor held it to be) a pledge thereof, to indemnify T_,eavell from loss by reason of the responsibility he incurred to the bank for Robinson’s accommodation, and therefore redeemable? or a conditional sale of the stock, defeasible by the performance, and absolute on the non-performance of the condition stipulated in the agreement between the parties?
    
      
      Tlie principal case was cited in Moss v. Green, 10 Leigh 867.
      Mortgages and Conditional Sales — Distinction.—See foot-note to Robertson v. Wheeler, 2 Gall 421.
    
   CABRLL, J.

I cannot regard the transfer of the stock in this case, as a mere security for the payment of the note. *The circumstances of the case, and the conduct of the parties, forbid such a construction. The understanding between them, before the execution of the note, as evinced by their written memorandum, and clearly proved by the evidence, compels me to regard the transfer of the stock, as a sale; subject, however, to the condition, that if Robinson should, at any time before the note became due, relieve Leavell from his responsibility to the bank, the stock should be returned to him. Considering the agreement, as at the time it was made, there certainly was nothing in this construction of it, that Robinson could complain of; for although there seems to have been a hope that stock would rise, yet nobody believed it would rise high enough to pay off the note. As to Leavell, he came into the arrangement with great reluctance, and was determined, from the beginning, to extricate himself from it at the end of the 60 days, even at the loss he might sustain by the probable deficient value of the stock.

The other judges concurred, and the decree was reversed, and the bill dismissed with costs.