Source: https://supreme.justia.com/cases/federal/us/118/655/
Timestamp: 2019-04-25 13:50:02+00:00

Document:
blank. The auctioneer paid the purchase money to A. B was employed by the president of the bank to make this purchase for a customer of the bank, who had made a deposit in the bank for the purpose, and he delivered the certificate and the power of attorney to the president, and received from the bank the money for the purchase. No formal transfer of the stock was made on the transfer book of the bank. Shortly afterwards, the bank became insolvent, and eventually went into the hands of a receiver, who made an assessment on the stockholders under the provisions of Rev.Stat. § 5205, to make up the deficiency in the capital. Until after the stoppage, A had no knowledge as to the purchaser or as to the neglect to formally transfer the stock, and no reason to suppose that the transfer had not been made. In an action against A by the receiver to recover the amount of the assessment upon his said stock, held that the responsibility of A ceased upon the surrender of the certificates to the bank and the delivery to its president of a power of attorney sufficient to effect, and intended to effect, as the president knew, a transfer of the stock on the books of the bank.
This, like the case last reported, was an action at law by the receiver of the Pacific National Bank of Boston against an alleged stockholder in that bank to recover an assessment on his stock. The facts in relation to the failure of the bank and the imposition of the assessment by the receiver are the same as those reported in the last case. The material facts upon which the defendant relied to escape liability under the assessment were contained in the "Agreed facts" set forth or referred to in the opinion of the Court.
1882, when it failed and was placed by that officer in the hands of a receiver to be wound up. At the time, the receiver took possession, as well as when this action was brought, March 14, 1883, the above shares of stock stood in the name of Whitney on the books of the bank.
This suit was brought against the executors of Whitney, pursuant to the orders of the Comptroller of the Currency. It is based upon those provisions of the statute which declare that the shareholders of national banking associations shall be individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements to the extent or amount of their stock therein at the par value thereof, in addition to the amount invested in such shares, and that estates and funds in the hands of executors of persons holding stock shall be liable in like manner, and to the same extent, as the testator would have been if living. Rev.Stat. §§ 5151, 5152. The assessment by the Comptroller upon shareholders to meet the bank's debts was for the full amount authorized by the statute.
"This being a suit brought by the receiver, who represents the creditors, and it appearing that the stock was not transferred on the books of the company, as provided by the bylaws, we think the defendants liable. "
prior holder. Rev.Stat. § 5139. The bylaws of this bank provide that its stock should be assignable only on its books, subject to the restrictions and provisions of the statute; that a transfer book be kept, in which all assignments and transfers of stock should be made; that each certificate should state upon its face that the stock is transferable only on the books of the bank, and that when a transfer is made, the certificate shall be returned and cancelled and a new one issued. Whether these bylaws were so far complied with as to release the defendants, as executors, from the liability imposed by statute depends upon the effect to be given to certain acts of the executors and of the president of the bank in connection with the sale of the stock standing in Whitney's name.
"Yours of 20th received, with check $25,000, which we will use pending the purchase of our stock, and will hold on your account as a special deposit securities to the same amount till we succeed in making the purchase. This leaves the amount in your control until invested, and, I trust, will be satisfactory to you."
That the stock might be obtained, Benyon secured the services of one Eager, who had a deposit account with the bank, and that the latter might have money with which to buy the stock, Benyon placed to his credit, as a temporary loan out of the funds of the bank, the exact amount required for the purchase.
"Know all men by these presents that for value received, we, the executors of the estate of Leonard Whitney, of Watertown, do hereby make, constitute, and appoint, irrevocably, ___________, true and lawful attorney (with power of substitution), for and in our name and our behalf to sell, assign, and transfer unto __________ one hundred shares, now standing in the name of L. Whitney, of Watertown, Mass., in the capital stock of the Pacific National Bank, and said attorney is hereby fully empowered to make and pass all necessary acts for the said assignment and transfer. Witness our hands and seals."
"For value received, I appoint, irrevocably __________, as my substitute, with all the powers above given to me. Witness ___ hand and seal, 187_. _____ _____. [Seal]"
The other papers were the two certificates of stock, and the certificate from the proper probate court, showing the appointment and qualification of the defendants as executors. Each stock certificate contained the following words: "Transferable only on the books of the said bank, in person or by attorney, on surrender of this certificate."
"as purporting to be security for and as representing said loan, awaiting the filling of Coburn's order, with the design then to have the stock transferred to him as soon as his order had been filled."
brokers the proceeds of the sale of the Whitney stock. Benyon obtained only fifty additional shares for the purpose of filling the order of Coburn. All this happened before the bank suspended on November 18, 1881.
The executors of Whitney did not know by whom the stock was bought at the auction sale unless the knowledge of the brokers is to be imputed to them. Believing in good faith, and having no reason to doubt, that the purchaser had caused the transfer to be made, neither they nor the brokers took steps to ascertain whether it had in fact been done.
They had no knowledge or information, until after the appointment of the receiver, as to the purpose for which either Benyon or Eager held the before-mentioned papers or the stock.
While the bank did not purchase nor intend to purchase the stock for itself, its president, in execution of Coburn's order, procured Eager to buy this stock with funds furnished him for that purpose. Coburn did not take it, and the receiver, after he took possession, found the before-mentioned papers in an envelope, purporting to represent a security for a demand loan to Benyon.
estopped, as between himself and the creditors of the bank, to deny that he is a shareholder and that his individual liability continues until there is a transfer of the stock on the books of the bank, even where he has in good faith previously sold it and delivered to the buyer the certificate of stock, with a power of attorney in such form as to enable the transfer to be made. Some of the cases hold that the seller is liable as a shareholder even where the buyer agreed to have the transfer made on the books of the bank, but fraudulently or negligently failed to do so. But it will be found upon careful examination that in no one of the cases in which these general principles have been announced, as between creditors and shareholders, does it appear that the precaution was taken, after the sale of the stock, to surrender the certificates therefor to the bank itself, accompanied (where such surrender was not by the shareholder in person) by a power of attorney which would enable its officers to make the transfer on the register. The position of the seller in such case is analogous to that of a grantor of a deed deposited in the proper office to be recorded. The general rule is that the deed is considered as recorded from the time of such deposit. 2 Washburn on Real Prop. B. 3, c. 4, par. 52. Where the seller delivers the stock certificate and power of attorney to the buyer, relying upon the promise of the latter to have the necessary transfer made, or where the certificate and power of attorney are delivered to the bank without communicating to its officers the name of the buyer, the seller may well be held liable as a shareholder until at least he shall have done all that he reasonably can do to effect a transfer on the stock register.
that it had been purchased at public auction by Eager. He knew equally well that the surrender of the certificates, and the delivery of the power of attorney and the certificate from the probate court, could only have been for the purpose of having it appear, by means of a transfer on the books of the bank, that Whitney's executors were no longer shareholders. The right to have the transfer made, and thereby secure exemption from further responsibility, was secured to the defendants both by the statute and by the bylaws of the bank. They did all that was required by either as preliminary to such transfer. Nothing remained to be done except for some officer of the bank to make the necessary formal entries on its books. If, when the agents of defendants delivered the certificates and power of attorney to the president of the bank, the latter had given any intimation of a purpose not to make the transfer promptly or had avowed an intention to postpone action until a sufficient amount of stock was obtained to fill Coburn's order, it may be that the failure of the defendants to take legal steps to compel a transfer would, in favor of the creditors of the bank, have been deemed a waiver of the right to an immediate transfer on the stock register. But no such intimation was given; no such avowal was made. No objection was made to the power of attorney, or to the discharge of the defendants from liability. So far as the record shows, nothing was said or done by the bank's officers to raise a doubt in the minds of the defendant's agents that the transfer would be made at once.
under all the circumstances, that of careful, prudent businessmen, and it would be a harsh interpretation of their acts to hold (in the language in some of the cases, when considering the general question under a different state of facts) that they allowed or permitted the name of Whitney to remain on the stock register as a shareholder. We are of opinion that within a reasonable construction of the statute, and for all the objects intended to be accomplished by the provision imposing liability upon shareholders for the debts of national banks, the responsibility of the defendants must be held to have ceased upon the surrender of the certificates to the bank, and the delivery to its president of a power of attorney sufficient to effect, and intended to effect, as that officer knew, a transfer of the stock on the books of the association to the purchaser.
Reversed and the cause remanded with directions to enter a judgment for the defendants.
Davis v. Society of Essex, 44 Conn. 582; Adderly v. Storm, 6 Hill 624; Anderson v. Philadelphia Warehouse Co., 111 U. S. 479, 111 U. S. 483; Johnston v. Laflin, 103 U. S. 800, 103 U. S. 804; Turnbull v. Payson, 95 U. S. 418; Brown v. Adams, 5 Bissell 181.
Davis v. Stevens, 21 F. 198; Irons v. Manufacturers' Nat. Bank, 27 F. 591; Bowdell v. National Bank, Brown Nat.Bk.Cas. 146.

References: § 5205
 § 5139
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