Case Name: The South Western Rail Road Bank vs. Campbell Douglas; The Same vs. McNeill & Blair
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1844-01
Citations: 2 Speers 329
Docket Number: 
Parties: The South Western Rail Road Bank vs. Campbell Douglas. The Same vs. McNeill & Blair.
Judges: O’Neall, Evans, Wardlaw and Frost, JJ. concurred.
Reporter: South Carolina Law Reports
Volume: 29
Pages: 329–343

Head Matter:
The South Western Rail Road Bank vs. Campbell Douglas. The Same vs. McNeill & Blair.
1. Assumpsit on a note against the maker and indorsers, which had been discounted by the plaintiffs, and at maturity protested for non-payment against both. The making and indorsement of the note, the demand, notice of non-payment, and the jurisdiction of the court, were admitted. The maker filed a discount for the value of twenty-nine shares in the Charleston, L. and C. R R Company, and the corresponding number in the bank of plaintiffs, which had been pledged by him with them as security for the payment of the note in suit, and some others of his notes discounted with plaintiffs. The proof was, that on these shares, he had paid two bank instalments, equal to twenty-five dollars on each, and on each of them fifty-five dollars to the Road, to wit: eighty dollars on each share in the Road and Bank; but there was still due and payable, at the time the shares were deposited, twenty dollars on each share to the road. The scrip was left with the Bank, on which was indorsed a blank power of transfer, signed in blank by the maker of the note. There was no agreement that the Bank should pay the remaining instalments. Before the forfeiture of the stock, the maker of the note addressed a letter to the board, saying he had not means to pay the remaining instalments, but if the board would give up the scrip, he had a friend who would take- his stock and pay the balance in ar rear. But the Bank proposed to lend the maker the twenty dollars on each share, if he would sign a stock note, which was refused. The note fell due on the 15th March, 1842, and the stock became forfeited on the 1st April succeeding. There were no instructions by the maker of the note, to sell any stofk. When the note fell payable, much of the stock on which all the instalments were paid, sold at from twenty to twenty-five dollars per share. The jury rendered a verdict for the defendant, giving him the benefit to the extent of his payments on his stock, estimating each share at its then value, but crediting the bank with the note and the amount of the arrearage to the Road, with interest from the time the note fell due: Held, that without an express undertaking, the Bank was not bound, by law, to protect from forfeiture the stock deposited with it as a security for a debt, by the payment of the instalments in arrear.
2. The defendant, even had the Bank been under a legal obligation to sell his stock, could not have been allowed more than it might have brought on an actual sale, either at the time of forfeiture, or when the note fell due. Verdict set aside and new trial granted.
'Tried, in the City Court of Charleston, July Term, 1843, before his Honor M. King, Recorder.
These cases were actions in assumpsit, on a note of three hundred dollars, made by Campbell Douglas, the defendant in the one case, indorsed by M’Neill & Blair, the defendants in the other case, discounted by the plaintiffs, and at maturity protested for non-payment against both the maker and the indorsers.
The making and indorsement of the note, the demand, notice of non-payment, and the jurisdiction of the court, were admitted.
The defendant, Campbell Douglas, filed a discount, applicable to both cases, for the value of twenty-nine shares in the Louisville, Cincinnati and Charleston Rail Road Company, and the corresponding number of shares in the bank of the plaintiffs, pledged by him with them, as security for the payment of this, and some other notes of the defendant, discounted with them.
The defendants called Mr. James G. Holmes as a witness, who said, that he is cashier of the bank; that at one of the periods of renewing this note, the bank required further security; Mr. Douglas held, in his own right, twenty-four shares in the road and the bank, and he owned also in trust, other five .shares, in all twenty-nine shares ; on these shares he had paid two bank instalments, equal to twenty-five dollars on each; these were shares reduced from a larger number; on each of these shares he had paid fifty-five dollars to the road — that is, eighty dollars on each share in the road and bank, two thousand three hundred and twenty dollars in all; there still remained due and payable -to the road, twenty dollars on each share — five hundred and eighty dollars — at the time that he deposited them, they were not formally hypothecated. The witness produced a stock note. The scrip were left with me, says the witness, as security for the note; there is a blank power of transfer on the back of the scrip, which Mr. Douglas signed in blank. I have lost or mislaid the scrip. I know of no agreement, nor do I recollect any, that the bank should pay the remaining instalments; the bank did in this case as in many others; the bank expected the owners of stock, so pledged, to pay the rail road instalments as they should be called for; accordingly he told Mr. Douglas, himself, that the instalments to the road were called for, and that he was required to pay them; the rail road, from time to time, gave indulgence for the payment of instalments in arrear; when the last indulgence was about expiring, Mr. Douglas wrote a letter to the board, the purport of which was, that he had not the means to pay up the remaining instalments ; (the stock was not then forfeited ;) that if the board would give up the scrip, he had a friend who would take them, and pay up the balance on the stock; when the acting president came down, he told me that the board were disposed to grant Mr. Douglas’ request; I suggested to him that it would be better for the bank to lend Mr. Douglas the twenty dollars, and keep the scrip ; and after thinking of this, and consulting some of the other directors, I was authorized to lend Mr. Douglas the twenty dollars on each share, if he would sign the slock note, which is now exhibited ; Mr. Douglas turned and walked out of the bank when this blank was delivered to him ; he never returned to accept the offer, and as the bank had made no agreement to pay up the instalments, they took no further notice of the matter; in due course of time this stock, and much in the same situation, was forfeited by the rail road; the road received fifty-five dollars of it, and the bank twenty-five dollars, at the last moment, when the stock had been actually paid up to one hundred dollars— seventy-five dollars to the road, and twenty-five dollars to the bank ; much of the stock was sold at sixteen and a half dollars, and much more at twenty and twenty-five dollars. I do not know that Mr. Douglas could not pay up the instalments, nor do I think the bank did. I know no one who was allowed time beyond that allowed by the stockholders ; there were special cases on which the stockholders acted.
Cross-examined. — There was no agreement with the bank to pay the instalments; I was never instructed by Mr. Douglas to sell any stock ; he saw me more than once. I believe it could not have been sold for a profit. Mr. Douglas said he had a friend who would take it; the stock is now worth about forty-five dollars a share on the one hundred dollars to the road and bank.
The proceedings of the stockholders of the Louisville, Cincinnati and Charleston Rail Road Company, and of the South Western Rail Road Bank, in November, 1841, were then offered in evidence, and the attention of the court and jury directed to the resolution of the 18th Nov. p. 33.
“That all shares held in the Louisville, Cincinnati and Charleston Rail Road Company, on which all instalments called for are not paid on or before the first of April, 1842, shall be absolutely forfeited to this company.”
The charters of the two companies, and their proceedings in November, 1840 and 1842, were also produced; and here the evidence closed.
The counsel for the defendants insisted to .the jury, that the defendants were entitled to credit for the amount of the instalments that Mr. Douglas had paid to the road and to the bank ; that the bank were, by law, bound to have protected the stock from forfeiture, even though it had been held by a different institution, and the more strongly, that it was held in their own ; and he quoted several authorities in support of his positions.
The counsel for the plaintiffs denied that the defendants were entitled to credit for the amount paid on the stock, or had any claim on the bank for compensation for it; that it was the duty of Mr. Douglas to have paid up the instalments on the stock, as they were called for by 'the road company, and to have prevented the forfeiture of the shares; and that, at all events, the utmost that the defendants could receive credit for, was the amount for which the stock might have been sold immediately before it was forfeited, beyond what was payable on the instalments, which, according to Mr. Holmes’ evidence, could not have been more than five dollars per share, making, in the whole, one hundred and forty-five dollars; and that the bank were certainly entitled to a verdict for the balance.
The court charged the jury, that the contract between the plaintiffs and the defendants, and the stock which had been deposited by the defendant, Mr. Douglas, with the plaintiffs, for the security of the note, were embraced by the general .term, bailment; and that the species of bailment in this case Was a pledge or pawn, and both parties, the pawnor and the pawnee, were answerable for the liabilities which, in their respective characters, the law imposed on them. This bailment is considered beneficial to both parties; to the pawnor, as procuring him credit; to the pawnee, as giving him security; and their responsibilities depend mainly on this ground of mutual advantage. If the pledge be deteriorated or lost, without the fault of the pawnee, then the loss, whether partial or total, falls on the pawnor, and the pawnee is entitled to recover against him the full amount of the debt; and on the other hand, if the pledge be lessened in value, or lost through the fault of the pawnee, then the loss, in like manner, falls on him. Here, according to the evidence of the cashier, the scrip was left with him as security for the note, and the blank power of transfer attached to it was signed by Mr. .Douglas. The bank had agreed to advance twenty dollars on each share, and had proposed that Mr. Douglas should sign a note similar to the one produced, which, on'a default, authorizes the sale and transfer of the stock. This note would have given the bank no authority over the scrip, which they did not then possess under the power of transfer signed on the scrip. The question now arises, were the bank bound to prevent a forfeiture of the stock'? The law on this point is clear, but its application to this case depends on a question of fact, of which the jury are the judges. If, when the note ,became payable, 15th March, 1842, the scrip would have sold in the market for more than the amount payable on it to the rail road, then the bank were bound, in the judgment of the court, either to sell the scrip, and credit the net sales to the defendants, or to pay up the instalments, and prevent a forfeiture. And if, on the other hand, when the note became payable, the scrip would not have sold for more than was payable on it to the road, then the bank were not bound either to sell or to protect from forfeiture; because the defendant suffered no loss from the conduct of the bank. The jury must decide on the fact, and apply to it the law as laid down by the court.
It is not to be overlooked, that the forfeiture, if it produced any benefit to the companies, would go partly to the bank and partly to the rail road. They are two different companies. But by the bank charter, no person can hold a share in the bank that does not hold a corresponding share in the road. Some few persons may hold shares in the road who hold no shares in the bank. The stockholders in the bank are substantially the rail road company. If the jury, on the facts, come to the conclusion, that when the note fell payable, the scrip was worth something to the defendants more than was due on it to the road, then the bank, as they did not make a sale of the scrip, was bound to prevent a forfeiture, and they are assuredly not the less bound to prevent it, that it would benefit their institution. Had they prevented the forfeiture, then the scrip, until sold, would have remained the property of Mr. Douglas, subject to the debt to the bank, and the fluctuations in its market price would have been on his account and risk. As the bank had considered it forfeited, no offer had ever been made to sell it, and if the jury, on the facts, consider that, according to the principles of law laid down, the bank were bound to prevent a forfeiture, then they may consider the scrip yet in pledge to the bank; and it would be the province of the j ury to say what price the bank should be charged for it. The price charged by the defendants in their discount certainly could not be allowed. The jury had facts before them^though not very satisfactory, on which they might form an opinion of the price that ought to be allowed, ac cording to the time at which they might think the scrip ought to be charged to the bank, and it would be their duty to weigh these facts, and to fix that time. When this note fell payable, the cashier states that much of this stock,' on which all the instalments were paid, was sold at from twenty to twenty-five dollars per share; then had the stock been sold, the defendants, upon deducting the twenty dollars of instalments which must have been paid by the bank to the rail road, could only have been entitled to a credit of five dollars on each share. The stock is now worth forty- ■ five, dollars, and at that rate of sale, on the same principles, the defendants would be entitled to a credit of twenty-five dollars per share, making a proper allowance to the bank for the interest on the advance which they would be assumed to have made for the road instalments, and crediting the defendants with any dividends that may have been made on the stock.
The facts and circumstances were before the jury, and they would determine on them. The court had stated the principles of law that were thought to govern the case. The jury would apply these principles to the facts, and would, no doubt, do justice between the parties.
When the court had closed its charge, the counsel of the plaintiffs moved the court to instruct the jury, that the assessment of damages should be governed by, and only equivalent to, the full value of the stock at the date of the forfeiture.
The court declined to give this instruction, on the ground, that as the bank were themselves to derive a benefit from the forfeiture of the shares, if, at the time limited for their forfeiture, they were actually worth more than the instalments due on them, the jury, in their discretion, might consider the bank either as bound to have sold the shares, or to save them from forfeiture, by paying up the instalments ; and had the instalments been paid up by the bank then, as has been said, the fluctuations in the value of the shares would have been on account and risk of the defendant, Douglas; and the court considered all the facts and circumstances of the case, subject to the principles of law laid down, as fit to be submitted to the jury.
The law by which the court considered the case to be governed, is well settled, however difficult may be its application. No doubt the scrip was received as a pledge or pawn. The blank power of transfer, signed by the defendant, Mr. Douglas, on the scrip, gave the plaintiffs entire control over it. The general rules applicable to this contract, are well settled by Bracton, (1569,) Lib. 3, C. 2, Fol. 99.
Creditor qui pignus accepit, re obligatur et ad illam restituendam tenetur, et cum hujusmodi res in pignus data sit utriusque gratia, scilicet debitoris, quo magis pecunia ei crederetur et creditoris, quo magis ei in tuto sit creditum, sufficit ad illius rei custodiam cliligentiam exactam adhibere; quam si praestiterit, et rem casu amiserit, securus esse possit, nec impedietur creditum petere; and this authority has, probably, never been questioned; Coggs vs, Bernard, 2 Lord Ray. 909 ; Jones on Bail. 75; Story on Bail. (1832,) '223; and is, in truth, taken almost verbatim from the civil law. Ins. L. 3, T. 15, sec. 4. Now the exact diligence which Bracton tells us is required in this contract, is well defined by Paulus, Dig. Lib. 13; T. 7,1. 14, as Ea (negotia,) quae diligens Paterfamilias in suis rebus prcestare solet, a creditore exiguntur. Pother confirms this definition. Nantissement, N 34. Le soin auquel le creancierest obliqe un'est que le soin ordinaire qu’ont coufume d'apporter les bons peres defamille a leurs affaires ;■ and in N. 33, speaking of this soin ordinaire, he says H (le Creancier) est en consequence tenu de la faute qu'on appellé legere. Assuredly, a diligent or good father of a family, owning this stock when it was about to be forfeited, had it been worth more — if it would have sold for more than was due on it — either would have redeemed it or sold it. To allow it to be forfeited, would scarcely be called une faute legere ; and yet for such a fault a creditor is liable. The bank say they allowed it to be forfeited. If the stock then would have brought more than the instalments due on it, the bank did not do their duty. In Capel vs.' Butler, 2 Sim. and St. 457, it is held, that if by the neglect of the creditor, the benefit of some securities for the debt are lost, the surety is pro tanto discharged.
It is an important element, in this case, that the bank, if the stock would have sold for more than the instalments due on it, were to derive a benefit from the forfeiture. Now it is clear, Dig. Lib. '50, Tit. 17, I. 23, dolum et culpara, mandatum, &c. pignon acceptum, &c. recipiunt, in his quídam et diligentiam. Dig. Lib. 13, Tit. 7,1.13, sec. 1. Venit autem in hac actione, (qigneratitia) et dolus et culpa, ut in commodato; venit et custodia. And in the great case of Bookman vs. Rothschild, 3 Sim. 151, 224, transactions were set aside which had been closed for years, and which, at the time that they took place, appear to have been done in good faith, on the grounds that the defendants, who had been the agents of the complainant, were at the same time virtually buying from and selling to him, and that this mode of managing these transactions was unknown to him, and the parties were remitted to their original rights as they stood before these transactions, and this decision was confirmed in the House of Lords. The court here considered the position of the plaintiffs as holding a pledge of their own scrip, and the alternative, whether they would or not, on its forfeiture, derive a benefit from it, as sufficient reasons for submitting the whole case to the decision of the jury.
They found for the defendants.
When the jury were about to be discharged, the foreman handed to the court a statement, shewing the principles on which they had founded their verdict. That statement cannot, it is presumed, affect the ultimate decision, but a copy of it is subjoined, .that the court above may have before it all in the case that ñas before the court below.
The court was served with the accompanying notice of appeal.
29 shares at $45 per share, is $1305 00
Deduct,
Note, $300 00
. Instalment, 580 00 — 880 00
Interest from 15th March, 1 1842, to 21st July, 1843, [ 71 28— 951 28 at 6 per cent. 5
Balance in favor of C. Douglas, $353 72
The plaintiffs appealed in these cases, and moved for new trials, on the following grounds :
1. Because his Honor, the Recorder, erred, it is respectfully submitted, in charging, in the alternative, that the bank was bound either to sell the stock deposited as collateral security, upon non-payment of the note, or to protect the same from forfeiture, by payment of the instalments in arrear, and failing to do either, were liable for laches.
2. Because his Honor the Recorder, erred in omitting to charge, as moved by the plaintiffs, (that the assessment of damages should be governed by, and only equivalent to, the full value of the stock at the date of its forfeiture,) and charged that the same belonged to the discretion of the jury.
3. Because the verdict, generally, and more especially as to its assessment of damages, is clearly contrary to law and evidence.
J. B. Campbell, for the motion. J. M. Walker, contra.

Opinion:
Curia, per
Butler, J.
The jury, under the charge of the Judge, who regarded the case as one of fact in the application of the principles of law as laid down by him, and which seem to be unquestionable, have found a verdict for the defendants, by which they have given them the benefit to the extent of payments made by Campbell Douglas on his stock, and have allowed the bank credit for twenty dollars and interest on each share, which it seems to have been concluded that it was under a legal obligation to advance for its creditor; the effect of which was to fix upon the bank a liability to advance for its creditor a larger sum of money, by way of protecting from forfeiture the security held by it, than it had previously loaned to him. In other words, it is requiring the bank to buy a security to save its debt; and this, too, to be done without any risk at all on the part of the borrower. If the bank incurred an obligation by express contract, that, doubtless, ought to govern the case. But without such express understanding, we are of opinion, that the bank was not bound by law to protect from forfeiture the stock deposited with them as a security for a debt, by the payment of the instalments in arrear. Its duty and interest are very distinguishable. The former results from the implications of law, arising out of the bailment; the latter depends altogether on the judgment of those who have the management of the institution.
The pawnor, at the time he deposited his stock, had a qualified interest in it, to be made absolute and indefeasible only by paying up, at the time required, the last instalment. Before that was done, the stock was a perfectable pawn. The right and power of the pawnor to prevent the forfeiture were unquestionable. There was nothing in the contract with the pawnee to prevent his doing so. How far his interest may.have coincided with his rights at the time, was uncertain. It was not certain that the entire stock was worth the risk of paying the last instalment. If he was not able to pay it up, according to the resolution of the company, it may have been his misfortune ; and if he refused to do it, it was the result of his judgment. When he subscribed for the stock, he undertook for himself all the risks of events, and the requirements of the charter. Forfeiture, on certain contingencies, was one of the risks. Suppose the stock to have been pledged to another person or institution, instead of this bank, then how would the pawnor and pawnee have stood, in relation to it 7 "If the pledger has only a limited title to the thing, as for life, or for years, he may still pawn it to the extent of his title; but when that expires, the pledgee must surrender it to the person who succeeds to the ownership." Story, 201. When, therefore, as in this case, the stock became forfeited, who would succeed to the ownership 7 Why, certainly, the party or power that could claim the forfeiture. And can it make any difference that it happened to be the party occupying, in part, the position of pledgee 7 I apprehend not. Why suppose, in such case, that it was the pledgee's duty to protect the pawnor from forfeiture'? Surely not on the ground that the pledger had not the power, or that it was not competent for him to do so.
By the finding of the jury, the pledgee has been required to perform acts for the benefit of the pledger, which the latter might have performed himself; and that too without consideration and without the prospect of legal remuneration. For suppose this case — that the bank had paid at the time of forfeiture, the instalment in arrear, and the stock had ultimately become worthless. In such case could the bank have maintained an action of indebitatus assumpsit against the defendant, Douglas, for money laid out and expended for his use"? In such an action, and under such circumstances, he could have availed himself of a very different position from the one which he now claims, when it has become his interest to claim the benefit of the rise in stocks. There are instances where persons must decide prospectively, and not be permitted to stand still and take advantage of the retrospect, and the more sagacious or fortunate judgment of others.
Suppose another case — 'that instead of the last instalment being $20, it had been $80, would the bank then have been required to advance so much money for its creditor, because it had a demand against him, and that demand smaller in amount than the sum loaned 4 The principle of liability must be one and the same in both instances, and if such should be held to be the duty of the bank, growing out of the legal relations of the parties, this will be the result here; the bank would be made the underwriter of the creditor, to run all the risks and to pay the premiums in the bargain. We think the jury has fixed on the bank liabilities which were not imposed upon it by the law.
It is said, however, that Douglas offered to avoid the forfeiture of his stock, by proposing to the bank to let a friend take it and pay up the instalments in arrear. I do not understand that it was his design to let the bank have the security thus increased by his friend; but the bank was required to give up all claim in, or control over, the scrip. It was nothing more than requiring the bank to give its security away without consideration or benefit to itself.
It seems the president and cashier did offer to lend the defendant the amount of the unpaid instalment, by his giving a stock note, but which he refused to do, preferring, I suppose, to run no more risks, and to incur no further liabilities, on account of his forfeitable pledge. This would go to shew that he was disposed to abandon it to its fate. It was certainly any thing but an authority for the bank to do any thing for him, especially in relation to the power, and it goes very far to shew that he was disposed to negative the duty of the bank to sell at the time. His omission to give further instructions to sell, would indicate that he was wholly indifferent on the subject, or that he was willing matters should go on according to their natural and legal tendency. If the blank indorsements on the scrip gave the bank the right to transfer it, and thereby effect a sale, it was a naked power, which might have been directed, if not entirely controlled, by the pledger; and if he had expressed his wish then, that the stock should be sold, before forfeiture, and it had not been done, he might have had more cause to complain. But giving the defendant the full benefit of this ground of appeal, what should be the consequences'? Why, in no point of view, could he be allowed more than the stock might have brought on an actual sale, either at the time of forfeiture, or when the note fell due, for then he might be entitled to any thing in the way of discount, that would have gone to extinguish it. If it should be understood on another trial, from the facts of the case, that the bank was under a legal obligation to sell, then the defendant would be entitled to all the advantages and benefits that might have resulted from such sale.
We think the verdict, as it stands, is founded on erroneous principles, and, therefore, set it aside.
The motion for a new trial is granted.
O'Neall, Evans, Wardlaw and Frost, JJ. concurred.