Source: https://openjurist.org/165/us/606
Timestamp: 2019-04-23 01:02:36+00:00

Document:
STATE LOAN & TRUST CO.
Edward Winslow Paige, for plaintiff in error.
W. P. Gardiner, for defendant in error.
This was an action to recover the amount of an assessment made on the shareholders of a national banking association in the hands of a receiver.
Is the defendant in error, the Srate Loan & Trust Company, a 'shareholder' of the California National Bank of San Diego, within the meaning of the statute relating to national banking associations? That is the sole question presented by the pleadings.
The comptroller of the currency appointed the plaintiff in error receiver of the California National Bank of San Diego, Cal. Rev. St. § 5234. He gave bond as required by law, and thereafter entered upon the discharge of the duties of his trust.
In virtue of the authority conferred upon him by law, the comptroller made an assessment on the shareholders of the bank for $500,000, to be paid by them on or before the 18th day of June, 1892. The assessment was equally and ratably upon shareholders to the amount of 100 per centum of the par value of the shares of the capital stock of the bank held and owned by them respectively at the time of its failure or suspension, and the receiver was required by an order of the comptroller to institute suits to enforce against each shareholder his personal liability to that extent.
The receiver gave due notice of the assess ment, in writing, to the State Loan & Trust Company, which is a corporation of California, having its principal place of business at the city of Los Angeles, in that state, and made demand upon it therefor, but the company did not pay the same, or any part thereof.
The facts upon which the claim against the defendant company is based are these: S. G. Havermale and J. W. Collins, owners and holders respectively of certificates numbered 286 and 297, issued to them for 100 shares, each, of the capital stock of the California National Bank of San Diego, were indebted to the State Loan & Trust Company upon their promissory note for $12,500, besides interest. These certificates, having been indorsed by the respective holders by writing their names across the back thereof, were transferred and delivered to the State Loan & Trust Company as collateral security for the payment of the above note, and, so indorsed, were, in ordinary course of mail, transmitted and surrendered to the California National Bank of San Diego. New certificates, numbered 308 and 309, respectively, were thereupon issued to the State Loan & Trust Company of Los Angeles as 'pledgee,' in lieu of certificates 286 and 297.
Each of the new certificates showed upon its face that it was issued to the 'State Loan & Trust Company of Los Angeles, Pledgee,' and each purported to be for 100 shares of the capital stock of the California National Bank of San Diego.
Otherwise than as just stated, the State Loan & Trust Company of Los Angeles never had, owned, or held any shares of the capital stock of the California National Bank of San Diego, and never was entitled to hold the usual stock certificate as such shareholder to the amount of 200 shares, or to any other amount.
Except as pledgee of the stock represented by certificates 308 and 309, respectively, the name of the State Loan & Trust Company never appeared upon or in the stock or other corporate books of the California National Bank of San Diego as a shareholder. The entries in the books of the bank showed that the new certificates were issued to the State Loan & Trust Company as pledgee, and not otherwise.
A jury having been waived by the parties in writing, the case was tried in the circuit court, and judgment was rendered for the defendant. 56 Fed. 430. Upon appeal to the circuit court of appeals that judgment was affirmed. 15 U. S. App. 259, 7 C. C. A. 422, and 58 Fed. 666.
Is one who does not appear upon the official list of the names and residences of the shareholders of a national banking association otherwise than as 'pledgee' of a given number of shares of the capital stock of such association—nothing else appearing—liable as a 'shareholder' of such association, under section 5151 of the Revised Statutes of the United States, declaring that 'the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such association, to the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares'?
As both sides contend that their respective positions are in harmony with decisions heretofore rendered in this court, it will be necessary to refer to some of the cases cited by counsel.
It may be here observed that in Pullman v. Upton the person who sought to escape liability as a shareholder appeared on the books of the insolvent insurance company as the owner of the stock; and that in Bank v. Case the Germania National Bank, after the original transfer under the power of attorney executed by its debtor, appeared on the books of the other bank as the owner of the stock; and that the liability arising therefrom could not be defeated or avoided by a transfer, however regular in form, to another, who acquired no beneficial interest in it, and was to hold the stock simply for its benefit. Nothing appeared upon the stock list, in either case, to indicate that the person or corporation who appeared on such list as a shareholder was not, in fact, the actual owner.
But the case to which our attention has been particularly called is Anderson v. Warehouse Co., 111 U. S. 479, 483-485, 4 Sup. Ct. 525, in which the question was as to the liability of the Philadelphia Warehouse Company as a shareholder of a national bank that had become insolvent. The facts in that case were these: Blumer & Co. (the senior member of that firm being president of the bank) arranged with the warehouse company for a loan or banker's credit, to be secured by collaterals. Kern, a member of the firm, transferred 450 shares of the stock of the bank, standing in his name on the books of the bank, and caused a new certificate to be issued in the name of Henry, as president of the warehouse company, and it was taken or sent to that company as further security for the credit extended to Blumer & Co. The fact of this transfer of stock to the name of Henry, as president, having come to the knowledge of the directors and executive committee of the warehouse company, they caused a transfer to be made on the books of the bank to one McCloskey, an irresponsible person, and a porter in its employment, and a new certificate to be issued in his name, because they deemed it inadvisable to have the stock stand in the name of the company's president, and thus incur the liability imposed upon shareholders of national banks. McCloskey never had possession of the certificate, and gave to the warehouse company an irrevocable poser of attorney for the sale and transfer of the stock. Upon MeCloskey's death the stock was transferred on the books of the bank to Ferris, also an irresponsible person, and an employe of the warehouse company. A new certificate was issued to him, and delivered to the company, Ferris indorsing thereon an irrevocable power of attorney for its transfer. When the bank failed, the stock stood in the name of Ferris, the warehouse company holding the certificate. That company never received any dividends on the stock, and never acted as a shareholder, but held the stock as security for the debt due it.
It appeared, according to the opinion in that case, that there was no evidence of actual fraud or bad faith; that the warehouse company never was the owner of the stock in question, and never held itself out as such; that the transfer of Kern and Blumer & Co. was only by way of pledge, and the company was bound to return the stock whenever the debt for which it was held was paid; that the company never consented to a transfer of the stock to its name on the books, or to that of its president, and that for seven years before the failure of the bank, and at least five years before its embarrassments were known to the company or the public, the stock, with the assent of Kern, Blumer & Co., and the officers of the bank, stood in the name of McCloskey or Ferris; that during all that time neither the registered holders nor the warehouse company claimed dividends, or in any way acted as shareholders; that either Kern or Blumer & Co. took the dividends as they were paid, and to all intents and purposes controlled the stock; that there was no concealment on the part of the warehouse company, and no effort to deceive; that it has possession of the certificates representing the stock, with full power to control them for all the purposes of its security, but never was, or pretended to be, anything else than a mere pledgee; that those who examined the list of shareholders would have found the name of McCloskey or Ferris as the registered holder of 450 shares. There was nothing on the books of the bank to connect them, or either of them, with the warehouse company, and therefore no credit could have been given on account of the apparent liability of the company as a shareholder.
It is apparent that the precise question before us was not involved in any of the above cases, although the principles announced in them bear upon the issue here presented.
That the real owner of the shares of the capital stock of a national banking association may, in every case, be treated as a shareholder within the meaning of section 5151.
That, if the owner transfers his shares to another person as collateral security for a debt due to the latter from such owner, and if, by the direction or with the knowledge of the pledgee, the shares are placed on the books of the association in such way as to imply that the pledgee is the real owner, then the pledgee may be treated as a shareholder, within the meaning of section 5151 of the Revised Statutes of the United States, and therefore liable upon the basis prescribed by that section for the contracts, debts, and engagements of the association.
That if the real owner of the shares transfers them to another person, or causes them to be placed on the books of the association in the name of another person, with the intent simply to evade the responsibility imposed by section 5151 on shareholders of national banking associations, such owner may be treated, for the purposes of that section, as a shareholder, and liable as therein prescribed.
That the pledgee of personal property occupies towards the plegor somewhat of a fiduciary relation, by virtue of which, he being a trustee to sell, it becomes his duty to exercise his right of sale for the benefit of the pledgor.
The present case differs from those cited in the important particular that the stock list of the bank gave information to all who examined it that the State Loan & Trust Company was not the real or absolute owner of the shares in question, but held them only as 'pledgee'; that there was no 'out and out' transfer of the stock, whereby the transferror, as between him and the transferee, parted with his interest; and that the real ownership remained with the pledgor, the pledgee acquiring only a lien upon the stock to secure its debt.
Does the statute, in letter or spirit, require that the word 'pledgee,' appended to the name of the party to whom certificates 308 and 309 were issued, should be entirely ignored? Is the holder of such certificates in no better condition, in respect of liability as a shareholder, than if such list had imported absolute ownership in the transferee? The statute requires that there shall be kept at all times, in the office where the business of a national banking association is transacted, and subject, during business hours, to the inspection of shareholders and creditors of the association, as well as of officers authorized to assess taxes under state authority, a full and correct list of the names and residences of all the shareholders of the association, and of the number of shares held by each. Section 5210. Manifestly, one, if not the principal, object of this requirement, was to give creditors of the association, as well as state authorities, information as to the shareholders upon whom, if the association becomes insolvent, will rest the individual liability for its contracts, debts, and engagements. Referring to this provision, this court said, in Waite v. Dowley, 94 U. S. 527, 534, that the act of congress 'was merely designed to furnish to the public dealing with the bank a knowledge of the names of its corporators, and to what extent they might be relied on as giving safety to dealing with the bank.' And, let it be observed, the liability upon shareholders is to the extent of the amount of their stock at the par value thereof, 'in addition to the amount invested in such shares.' The word 'invested' plainly has reference to those who originally or by subsequent purchase become the real owners of the stock, and cannot refer to those who never invested money in the shares, but only received the certificates of stock, or it may be the legal title thereto, as collateral security for debts or obligations already or to be contracted.
It is true that one who does not in fact invest his money in such shares, but who, although receiving them simply as collateral security for debts or obligations, holds himself out on the books of the association as true owner, may be treated as the owner, and therefore liable to assessment, when the association becomes insolvent, and goes into the hands of a receiver. But this is upon the ground that by allowing his name to appear upon the stock list as owner he represents that he is such owner; and he will not be permitted, after the bank fails, and when an assessment is made, to assume any other position as against creditors. If, as between creditors and the person assessed, the latter is not held bound by that representation, the list of shareholders required to be kept for the inspection of creditors and others would lose most of its value.
But this rule can have no just application when, as in this case, the creditors were informed by that list that the party to whom certificates were issued was not in fact, and did not assume to be, the owner of the shares represented by them, but was and assumed to be only a pledgee having no general property in the thing pledged, but only a right, upon default, to sell in satisfaction of the pledgor's obligation. Upon inspecting the stock registry, or any list of shareholders or of transfers kept by the bank, creditors will know that they cannot regard a pledgee as the actual owner. If the certificates in question had been extended so as to give the name of the pledgor, it would not be supposed that, upon any principle of justice, or upon grounds of public policy, the pledgee could have been held to the liability imposed by section 5151 upon shareholders. But, the liability being purely statutory, the result ought not to be different because of the circumstance that the name of the pledgor was omitted from the certificates, since that which did appear in them was sufficient to inform creditors that the State Loan & Trust Company was only a pledgee, and by slight diligence they could have ascertained the name of the pledgor.
It may be suggested that, if the pledgee is not held liable as a shareholder in respect of the shares of stock standing in its name as pledgee, then no one is liable to assessment as the owner of such stock. But it is a mistake to suppose that Havermale and Collins ceased to be shareholders for the purposes of the liability imposed by section 5151. They remained, notwithstanding the pledge, the actual owners of the stock; a right which they would have promptly asserted if the pledgee had assumed to be the owners, and had sold the stock, appropriating to itself all the proceeds of sale. The object of the statute is not to be defeated by the mere forms of transactions between shareholders and their creditors. The courts will look at the relations of parties as they actually are, or as, by reason of their conduct, they must be assumed to be, for the protection of creditors. Congress did not say that those only should be regarded as shareholders, liable for the contracts, debts, and engagements of the banking association, whose names appear on the stock list distinctly as shareholders. A mistake or error in keeping the offical list of shareholders would not prevent creditors from holding liable all who were, in fact, the real owners of the stock, and as such had invested money in the shares of the association. As already indicated, those may be treated as shareholders, within the meaning of section 5151, who are the real owners of the stock, or who hold themselves out, or allow themselves to be held out, as owners in such way and under such circumstances as, upon principles of fair dealing, will estop them, as against creditors, from claiming that they were not, in fact, owners.
It was under this construction of the statute that one was held liable as a shareholder who, in the belief that the bank was about to fail, and whose liability as a shareholder had equitably attached, collusively transferred his stock to an irresponsible person, in order to escape responsibility as a shareholder. This was held to be a fraud upon the statute, and the transferror was held, as between him and the creditors, as the real owner of the stock, and therefore liable, although the transferee appeared on the stock registry as the shareholder. Bowden v. Johnson, above cited. Under the same interpretation, a corporation was treated as a shareholder who held shares of stock only as collateral security, but who allowed its name to appear and remain on the stock registry of the insolvent national bank association as owner, without anything indicating that it held such stock as collateral security. Bank v. Case, above cited. So, in another case, it was held that the transferrors 'remained the owners of the stock, though registered in the name of others, and pledged as collateral security for their debt.' Anderson v. Warehouse Co., above cited.
Our conclusion is that the defendant in error cannot be regarded otherwise than as a pledgee of the stock in question, is not a shareholder within the meaning of section 5151 of the Revised Statutes, and is not, therefore, subject to the liability imposed upon the shareholders of national banking associations by that section.

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