Court Opinion

ID: 3879948
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:11:46.20011+00
Date Added: 2024-06-11T07:41:53.768418
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 93 
March 15, 1928. The opinion of the Court was delivered by
This is an action for actual and punitive damages for the alleged taking, holding and conversion of certain property described in the complaint. The case was tried before Judge W.H. Townsend and a jury at the May, 1925, term of the Court of Common Pleas for Richland County, and resulted in a verdict for plaintiff for the sum of $2,500 actual damages and $2,500 punitive damages. Judgment was thereafter duly entered upon the verdict of the jury, and, within the time required by law, the defendants duly gave notice of their intention to appeal to this Court from the judgment, rulings, and charge of the Court below, and now seek to reverse said judgment upon numerous exceptions, which will be reported. Let the charge of the Circuit Judge also be reported.
                       STATEMENT OF FACTS
The facts out of which this action arose are substantially as follows:
A merger was effected of the Commercial Bank and the Bank of Columbia about February, 1920. The assets of the Commercial Bank, except the real estate, seem to have been sold and delivered to the Bank of Columbia. J. Pope Matthews was instrumental in effecting the said merger. The Bank of Columbia not needing the real estate of the Commercial Bank, consisting of a lot and building thereon on Main street, in the city of Columbia, the said J. Pope Matthews and I.M. Mauldin organized a new corporation, known as the Commercial Investment Company, for the purpose of taking over said real estate of the Commercial Bank. *Page 108 
The Commercial Investment Company was organized and chartered in February, 1920, and on the 28th day of said month and year the Commercial Bank conveyed said real estate to it, for the consideration of $187,000, which appears to have been made up as follows: $162,000, mortgages assumed by the Commercial Investment Company; $20,000, paid in cash; and $5,000 credited on said purchase price as compensation to said J. Pope Matthews for his services in effecting said merger.
Commercial Investment Company was capitalized at $25,000, and its stock divided into 250 shares of the par value of $100 per share. All of said stock was issued in the names of said Matthews and Mauldin, and no transfer was ever made upon the books of the Commercial Investment Company of any of said stock. The plaintiff, through its agent and attorney, A.M. Lumpkin, subscribed to 25 shares of the Commercial Investment Company capital stock at the time of its organization, and paid in $2,500 in cash therefor, and ultimately received a certificate of 25 shares of said stock, issued in the name of J.P. Matthews, but no transfer thereof was made upon the books of said corporation; check for said $2,500 being delivered by plaintiff's agent to said J. Pope Matthews, and said certificate of stock being delivered to plaintiff's agent by said J. Pope Matthews. Fifty shares seem to have been delivered to J.P. Matthews in payment for his services in effecting the aforementioned merger of the Commercial Bank and the Bank of Columbia. The remaining $17,500 was raised by the note of J.L. Nettles, discounted at the Palmetto National Bank, secured by 175 shares of stock in the Commercial Investment Company, which liability was later changed from said Nettles to one E.P. Hodges. It is thus seen that plaintiff paid in $2,500 in cash for its stock. Matthews and Mauldin, the owners of the other 225 shares, paid in not a penny; 50 shares of said stock were held by Matthews as compensation for certain services rendered the Commercial Bank and *Page 109 
the Bank of Columbia, and the other 175 shares were indorsed in blank and put up as collateral to secure Nettles' note for $17,500.
Of the mortgages assumed by the Commercial Investment Company on the property so purchased by it from the Commercial Bank, the Palmetto National Bank then or later held all except $62,000, which latter amount was held by the Mutual Life Insurance Company, of Worchester, Mass.
It appears that in June, 1922, or prior thereto, the note of E.P. Hodges (substituted for the Nettles' note) was canceled by the Palmetto National Bank, and the 175 shares of stock in the Commercial Investment Company were surrendered to the Palmetto Bank, and J. Pope Matthews delivered his 50 shares in said company to the Palmetto National Bank, thus making said bank the holder of all the stock in said company, except plaintiff's 25 shares.
Pursuant to a resolution of the finance committee of the Palmetto National Bank, passed June 22, 1922, the Commercial Investment Company, by its officers, Matthews and Mauldin, conveyed the lot above mentioned to the Palmetto National Bank, by deed dated the 30th day of December, 1922, but said deed was not recorded until the 19th day of May, 1923. On April 4, 1923, after the execution and delivery of said deed, but before its recordation, in further pursuance of said resolution of the finance committee of Palmetto National Bank, the Commercial Investment Company negotiated a loan from Metropolitan Life Insurance Company for $75,000, secured the same by a first mortgage on the property embraced in said deed, and took up the mortgage then held by Mutual Life Insurance Company, of Worcester, Mass. All the other mortgages on said property were held by the Palmetto National Bank.
At the time of the organization of the Commercial Investment Company, J. Pope Matthews and I.M. Mauldin became its sole directors; the former became its president, and the latter its secretary and treasurer, which offices they *Page 110 
continued to hold during the period of time in which the aforementioned transactions were had. It does not appear that said company ever had any other officers. During all that time Matthews and Mauldin were officers and directors in the Palmetto National Bank, one of the defendants herein, the former being president and the latter vice president thereof.
In July, 1923, the Palmetto National Bank was taken over by a newly organized bank known as the Columbia National Bank, one of the defendants herein, and the latter assumed the payments of all liabilities of the said Palmetto National Bank shown by its books.
On the 12th day of June, 1924, the Columbia National Bank entered into a written agreement to sell the property covered by the Commercial Investment Company's deed to I.M. Mauldin and J.P. Matthews. The plaintiff had no actual notice up to this time of the deed from the Commercial Investment Company to the Palmetto National Bank, and, learning of the contemplated sale by the Columbia National Bank of said property, on July 3 gave notice through a letter from its attorneys, Thomas  Lumpkin, to G.M. Berry, president of said Columbia National Bank, of its claim. Thereafter, on the 12th day of July, 1924, the Columbia National Bank conveyed said property to Carolina Realty Trust Company, assignee of said Mauldin and Matthews, for the sum of $175,000. On July 22, 1924, this action was instituted.
By exceptions 1 and 8, appellants contend that Matthews and Mauldin were acting in their own interests, or in the interest of the Commercial Investment Company, during the organization and subsequent operation of said company, and that notice to them, or either of them, of the interest of plaintiff in said company as a stockholder was not notice to the Palmetto National Bank, although Matthews and Mauldin were directors and officers of said bank; and for this reason (1) the presiding Judge *Page 111 
erred in permitting the witness A.M. Lumpkin to testify as to certain conversations with, and facts communicated to, said Matthews with reference to the organization of the Commercial Investment Company and the interest of plaintiff as a stockholder therein; and (2) that the said Judge erred in refusing defendants' motion for nonsuit and for a directed verdict, made upon the ground that the action of said Matthews and Mauldin, as officers and directors of the Commercial Investment Company, could not bind the Palmetto National Bank, although they were officers and directors in said bank.
In support of this contention, reliance is had upon several cases decided by this Court, hereafter to be noticed, and upon the following authorities:
"The general rule is that knowledge acquired or possessed by an officer or agent of a corporation otherwise than in the course of his employment, or in relation to a matter which is not within the scope of his authority, is not notice to the corporation." Fletcher, Cyclopedia Corporations, § 2218.
"Knowledge obtained in connection with a transaction with third persons in which the corporate officer or agent does not even pretend to represent the corporation but instead is acting individually," is not imputed to the corporation. "Individual knowledge of an officer of a corporation acquired in the transaction of his own business, while dealing as if he had no official relation to the corporation is not imputable to the corporation. If the president of a corporation acquires knowledge while dealing in his private capacity and in his own behalf with third persons, it is not imputable to the company." Fletcher, § 2235, pp. 3464, 3465.
"The fact that the officer whose knowledge is sought to be imputed owned practically all the stock and was the general manager of another company which had borrowed money from the first corporation, makes the loan in this own interest and opposed to the interests of the lending *Page 112 
company, so as to make his knowledge of preferential payments by the borrowing bankrupt company not imputable to the lending company. One acting for himself is, of course, acting adversely, where dealing with the corporation." Fletcher, § 2245, p. 3478.
Conceding the correctness of the foregoing propositions of law, we proceed to ascertain whether or not the actions of Matthews and Mauldin were altogether in their own behalf, or in the interest of the Commercial Investment Company, and adverse to the interest of the Palmetto National Bank. Granting that these gentlemen were acting for themselves, or for the Commercial Investment Company, at the time of the conversations with, and communication of facts to, Matthews by Lumpkin with reference to the interests of Equitable Trust Company as a stockholder in the Commercial Investment Company, were they acting for themselves or for said Commercial Investment Company at the time of the execution of the deed from the Commercial Investment Company to the Palmetto National Bank, or were they in reality acting for said bank, although describing themselves in the deed as officers of the Commercial Investment Company? We think an examination of the facts will show the latter to have been the real situation.
Matthews, testifying for defendants, admitted that he knew of the interest of plaintiff as a stockholder in the Commercial Investment Company long before the execution of the deed from said company to the Palmetto National Bank; that he was advised of that fact by Lumpkin. Indeed, the check for said stock was delivered to said Matthews, and he in turn delivered the stock to plaintiff.
The minutes of the finance committee of the Palmetto National Bank of June 22, 1922, are as follows:
"Minutes of regular daily meetings of the finance committee of the Palmetto National Bank of Columbia, S.C. held on the 22d day of June, 1922, in the finance committee room of the banking house. *Page 113 
"Present: Wilie Jones, J. Pope Matthews, I.M. Mauldin, T.J. Cottingham, W.T. Love, F.H. Weston, F.H. McMaster.
"Absent: W.W. Ball and John J. Seibels.
"The daily procedure of reading the loan register and marking the notes was first disposed of by the committee.
"Mr. F.H. McMaster offered the following resolution which was unanimously passed:
"`Resolved by the finance committee that the real estate account of the bank be debited with $86,002.30, and that the following loans aggregating that amount and now carried against the Commercial Investment Company building on the west side of Main street in the 1300 block be taken up:
"`$54,095.59 mortgage and interest taken over from the Merchants' Bank.
"`$5,000.00 three notes to Palmetto National Bank.
"`$17,500.00 stock notes against Commercial Investment Company.
"`$9,406.71 one-half of two notes of Commercial Investment Company, indorsed by Hardin  Tobias.
"`$86,002.20.
"`Resolved further that the committee heretofore handling the Commercial Investment Company matters consisting of Messrs. Love, Seibels, and Mauldin, be authorized to proceed to refinance the Commercial Investment Company lot and building for as large an amount as practical at the best rate and on the best terms obtainable, and that the title to said lot and building be allowed to remain in Commercial Investment Company's name until same is refinanced, and then said title is to be transferred to the bank.'"
Whether or not the $17,500 notes secured by the 175 shares of Commercial Investment Company stock were actually delivered does not clearly appear, but the Palmetto National Bank appears to have taken charge of the 175 shares of Commercial Investment Company stock securing said notes. Indeed, it is alleged in the answer of the defendant, *Page 114 
the Columbia National Bank, that the Palmetto National Bank cancelled said note and acquired said stock prior to June, 1922. Matthews states that he turned his 50 shares of stock in said company over to said bank. It is further admitted by defendants' witnesses that it was known to the officers of said bank that there were 25 shares of said stock not in the possession of the bank, and that, when Matthews and Mauldin executed the deed, as president and secretary of the Commercial Investment Company to the Palmetto National Bank, they were acting for said bank in obedience to the above-mentioned resolution of the finance committee of said bank.
"The rule now adopted in most jurisdictions is this: `Any knowledge or information possessed by an agent at the time of acting as agent for a corporation, with respect to the matter upon which he is to act, is notice to the corporation, whenever and however such knowledge or information may have been acquired, except in cases where express formal notice is required to charge the principal. The point to be regarded is whether the agent actually had the knowledge or information at the time of acting. There is no practical distinction between individual knowledge and official knowledge in such cases.' In other words, if knowledge is acquired by an agent while not acting for the corporation, but afterwards he acts for the corporation in a matter in which it becomes his duty to communicate the fact his knowledge is imputed to the corporation." Fletcher, § 2221, p. 3444.
"Notice given to the cashier of a bank, or to the president of a bank or other officer or agent having general supervision and control over the management of its business, or to any other managing officer or agent, as to any matter within the scope of his authority is notice to the corporation, whether it is communicated to the directors of the corporation or not." Fletcher, § 2216, p. 3436. *Page 115 
"Subject to certain qualifications and exceptions hereinafter noted in this subdivision, it is well settled that, if an officer or agent of a corporation acquires or possesses knowledge of facts, in the course of his employment, and as to matters which are within the scope of his authority, his knowledge is imputable to the corporation." Fletcher, § 2215, p. 3430.
"Notice to, or knowledge of, the president of a corporation, is ordinarily imputable to the corporation. This is equally true as to the knowledge of the president of a bank." Fletcher, § 2235, p. 3463.
At the time of the execution and delivery of the deed by Commercial Investment Company to the Palmetto National Bank, Matthews and Mauldin, as president and secretary of the former company, acted for it in the execution and delivery of said deed, but as president and vice president of said bank they acted for it in receiving and accepting said deed. Indeed, the deed was executed as a result of the resolution passed by the finance committee of the bank on the 22d day of June, 1922, of which both Matthews and Mauldin were members and both were present and voted for its passage. It is therefore difficult to see how it can successfully be maintained that they were acting for themselves or for Commercial Investment Company and not for the Palmetto National Bank. They knew, certainly Matthews knew, that plaintiff was a stockholder in Commercial Investment Company. This knowledge was material. It was gained while they were officers of Palmetto National Bank, and present in their minds when the deed was received and accepted by them as the officers of said bank. In so receiving and accepting said deed, they were not acting adversely to the interest of the bank, but they were acting for it, as it is clearly contemplated by the above-mentioned resolution of its finance committee. Certainly, in accepting this deed for the bank, they were acting within the scope of their authority as its principal officers. It was therefore *Page 116 
proper for plaintiff to show that Matthews and Mauldin, or either of them, knew of the interest of plaintiff as a stockholder in the Commercial Investment Company; and, when it was so shown, it would have been improper for the presiding Judge to have ordered a nonsuit or to have directed a verdict for defendants upon the ground set out in these exceptions.
We do not think the cases cited from this jurisdiction sustain the contention of appellants. These exceptions are therefore overruled.
By exceptions 2 and 3, appellants impute error to the presiding Judge for refusing to grant defendants' motion for a nonsuit, and for a directed verdict made upon the ground:
"That the action should be against the Commercial Investment Company or its stockholders and directors, or at best to set aside the deed of the Commercial Investment Company to the Palmetto National Bank and have an accounting, and that a suit for damages under the evidence brought out in this case will not lie against either of these banks."
Mr. Chief Justice McIver, speaking for this Court inLatimer v. Railroad Company, 39 S.C. 44; 17 S.E., 258, uses the following language:
"While it is true that directors of a corporation are regarded as occupying the position of trustees, or at leastquasi trustees, yet this trust relation is of a twofold character — towards the corporation and towards the stockholders. The corporation having the full legal as well as equitable title to all the corporate property, while the stockholders have such title to their respective shares only, it follows that, so far as the trust embraces or is concerned with the corporate property, the directors occupy the relation of trustees, or rather quasi trustees, for the corporation only; and, as to such property, there is no relation of trust between the directors and stockholders. *Page 117 
Hence it follows that, when the directors are charged with the mismanagement or misappropriation of the corporate property, the action to restrain or redress such wrong must be instituted by the corporation, because the conduct complained of is a breach of the trust relation existing between the directors and the corporation, but is no breach of any trust relation to the stockholders, as no such relation, in regard to the corporate property, exists between the directors and the stockholders. Accordingly, the general rule is that, in such a case, an individual stockholder, or one or more of them, cannot maintain an action for the redress of such wrong. 3 Pom. Eq. Jur., §§ 1090 — 1095. But, with a view to prevent a failure of justice, Courts of equity recognize certain exceptions to this general rule; and these exceptions are nowhere better or more fully stated than in the leading case of Hawes v. Oakland,104 U.S. 450 [26 L.Ed., 827].
"In that case, Mr. Justice Miller, after showing what is the doctrine of the English Courts, as well as many of our state Courts, on the subject, and after saying that the case of Dodge v. Woolsey, 18 How., 331 [15 L.Ed., 401]) relied on by counsel for respondents, does not establish, and was not intended to establish, any different doctrine, proceeds as follows: `We understand that doctrine to be, that to enable a stockholder in a corporation to sustain in a Court of equity, in his own name, a suit founded on a right of action existing in the corporation itself, and in which the corporation itself is the appropriate plaintiff, there must exist as the foundation of the suit, some action, or threatened action, of the managing board of directors or trustees of the corporation, which is beyond the authority conferred on them by their charter or other source of organization; or such a fraudulent transaction completed or contemplated by the acting managers in connection with some other party, or among themselves or with other shareholders, as will result in serious injury to the corporation, or to the interests *Page 118 
of the other shareholders; or where the board of directors, or a majority of them, are acting for their own interest, in a manner destructive of the corporation itself, or of the rights of the other shareholders; or where the majority of shareholders themselves are oppressively and illegally pursuing a course in the name of the corporation, which is in violation of the rights of the other shareholders, and which can only be restrained by the aid of a Court of equity.'
"And he adds, what seems to us to be of especial importance: `But in addition to the existence of grievances which call for this kind of relief, it is equally important that, before the shareholder is permitted, in his own name, to institute and conduct a litigation which usually belongs to the corporation, he should show to the satisfaction of the Court that he has exhausted all the means within his reach to obtain, within the corporation itself, the redress of his grievances, or action in conformity to his wishes. He must make an earnest, not a simulated, effort with the managing body of the corporation, to induce remedial action on their part, and this must be made apparent to the Court. If time permits, or has permitted, he must show, if he fails with the directors, that he has made an honest effort to obtain action by the stockholders as a body in the matter of which he complains. And he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it. The efforts to induce such action as complainant desires on the part of the directors, and of the shareholders, when that is necessary, and the cause of failure in these efforts, should be stated with particularity,' etc."
In Wenzel v. Brewing Co., 48 S.C. 80; 26 S.E., 1, which followed Latimer v. Railroad Co., supra, Mr. Justice Jones, speaking for the Court, said:
"The general rule undoubtedly is that, when the directors or managing board of a corporation are charged with mismanagement or misappropriation of the corporate property, *Page 119 
the action to restrain or redress such wrong must be instituted by the corporation, since the conduct complained of is a breach of the trust relation between the directors and the corporation. But to this general rule there are well-recognized exceptions, viz., when the directors or managing board do, or threaten to do, some act ultra vires, or some act of fraud, oppression or illegality, injurious to the corporation, or in violation of the rights of the stockholders, to prevent injustice, a stockholder is permitted to maintain an action in his own name. This is substantially the rule declared in Latimer v. R.R. Co., 39 S.C. 44
[17 S.E., 258], following and approving the principles announced inHawes v. Oakland, 104 U.S. 450 [26 L.Ed., 827]. Further, before a stockholder can maintain a suit in these exceptional cases, he must show that he has endeavored to get redress of his grievances within the corporation, or he must show facts which would justify a Court in concluding that an effort for redress within the corporation would be unavailing."
After quoting, with approval, the above language, inStahn v. Catawba Mills, 53 S.C. 519; 31 S.E., 498 this court further stated:
"It is also a well-established rule that an application for redress within the corporation, and refusal, need not be alleged, if it be shown that the directors or managing board are themselves the wrongdoers in some alleged breach of trust or fraudulent misappropriation of the corporate property, and have control of a majority of the stock, so as to control corporate action. In such a case it is reasonable to infer that an effort for redress within the corporation would be unavailing.Brewer v. Boston Theater, 104 Mass. 378. Eschweiler v.Stowell, 78 Wis. 316 [47 N.W., 361]; 23 Am. St. Rep., 411. Miner v. Belle Isle Ice Co. [93 Mich., 97;53 N.W., 218]; 17 L.R.A., 417; and cases cited; Wheeler v. PullmanIron  Steel Co. [143 III., 197; 32 N.E., 420]; 17 L.R.A., 821, and cases cited." *Page 120 
In Kickbusch v. Ruggles, 105 S.C. 525; 90 S.E., 163, it is said:
"The general rule is that one or more stockholders cannot maintain such an action, as the right is in the corporation. But the courts have recognized exceptions to the rule. One is that when one or more stockholders make it appear that their rights and interests are jeopardized or are being injured, or have been injured by the unlawful acts of the corporation, or its governing body, and that they have endeavored, in good faith and without effect to have their just grievances redressed within the corporation, by proper appeals to the governing body or the majority of the stockholders; or, when they allege facts and circumstances which induce the conclusion that such appeals would have been useless, they may maintain such action in equity in their own names for their own benefit and for the benefit of all other stockholders in like plight who may come into the action and contribute to the expenses thereof."
The practical question, then, is this: Has the plaintiff alleged facts and circumstances which bring its case within the exception? It is not alleged in the complaint that plaintiff made an effort to have its grievances redressed within the corporation and that such effort was unavailing and useless, but it is alleged that plaintiff owned and held 25 shares of stock in Commercial Investment Company, which was known to the Palmetto Bank; that said bank held all the other shares of stock in said company, and as such stockholder "forced and caused the said Commercial Investment Company to make its deed of conveyance hereinabove referred to, dated the 30th day of December, 1922, recorded in the office of the clerk of court for Richland county, S.C., in Deed Book CD, p. 232, covering the entire property mentioned and described in the complaint"; that such conveyance was made without any knowledge or notice given to the plaintiff; that, "although the said Palmetto National Bank knew that this plaintiff was a stockholder in said corporation *Page 121 
and the said Palmetto National Bank willfully, intentionally, maliciously, and without any knowledge to this plaintiff, negligently, and without regard of the rights of others, without giving any notice of its action in the premises as such stockholder owning and holding ninety (90) percent. of the capital stock of said Commercial Investment Company, received and accepted such deed of conveyance, and failed, refused, and upon demand has failed and refused, to pay over the amount represented by this plaintiff's shares of stock in said Commercial Investment Company, although all other persons interested therein were given full and complete consideration for their interest in said Commercial Investment Company." The answer of the Columbia National Bank alleges that:
"Some time prior to June 22, 1922, the Palmetto National Bank of Columbia acquired the entire outstanding capital stock of Commercial Investment Company, except the 25 shares referred to in the complaint as the property of plaintiff."
We think these allegations of facts and circumstances make it clear that an effort to have the governing body of Commercial Investment Company (composed of Matthews and Mauldin, president and vice president, respectively, of the Palmetto National Bank), or the majority of the stockholders (the Palmetto National Bank), redress the injury done by forcing and causing the Commercial Investment Company to execute and deliver, and the Palmetto National Bank, in receiving and accepting, the deed conveying the corporate assets of said company to said bank would have done no good. The court will infer from such alleged and admitted facts that such an appeal would have been useless. We think the alleged and admitted facts bring the plaintiff's case within the exception recognized in the case above quoted from. to wit, that its right and interests have been injured by the unlawful acts of the governing body of Commercial Investment Company, under the control and direction *Page 122 
of the Palmetto National Bank. The conveyance of such corporate assets to the Palmetto National Bank by the Commercial Investment Company, in the circumstances, operated to perpetrate a fraud upon the rights of plaintiff. In Stahn v. Catawba Mills, supra, it is said:
"Directors are personally liable to the corporation, or in a proper case to any stockholder, for losses arising from their fraud, breach of trust or gross negligence in the management or disposition of the corporate property, and any person or corporation participating in such fraudulent conduct, or corruptly receiving the corporate property fraudulently disposed of, is likewise liable."
These exceptions are overruled.
The fourth and fifth exceptions will be considered together. They impute error to the presiding Judge in not granting defendants' motions for nonsuit and for a directed verdict made upon the ground (1) that the stockholders or directors of the Commercial Investment Company authorized the giving of the deed from said company to the Palmetto National Bank, and therefore any failure to send out notice could not be any grounds for a cause of action; and (2), there never having been a transfer on the stock book of the Commercial Investment Company to plaintiff of the certificate it held, but as said certificate was issued in the name of Matthews, the Commercial Investment Company had no notice of the owner thereof other than that shown by said stock book, and hence could send out notice to no other than to the persons in whose names the stock was issued.
Section 4320, Code 1922, Vol. 3, provides that:
"No transfers of stock shall be valid except as between the parties thereto until the same shall have been regularly entered upon the books of the corporation."
The certificate of stock in the Commercial Investment Company held by plaintiff was issued to J.P. Matthews, *Page 123 
and by him indorsed in blank, and no record of any transfer thereof was made upon the books of said corporation.
"Notwithstanding a provision requiring transfers of stock to be entered on the books of the corporation, a transfer by assignment and power of attorney, indorsed in blank, is valid and binding as between the transferor and transferee, although it is not registered, and even though the corporation wrongfully refuses to transfer the stock and issue new certificates." 14 C.J., 733.
"The legal title to the certificates of stock may, therefore, be transferred as between the parties without the entry of the transfer being recorded upon the books of the corporation. But the question whether the legal title was, in fact, transferred, depends upon the intention of the parties."Maxwell v. Foster, 67 S.C. 377; 45 S.E., 927.
Here there is no question but that it was the intention of the parties that the legal title should pass. As between the parties, therefore, by the express exception made in the statute, no entry upon the books of the corporation was necessary. Nor is there any question of subsequent purchaser or holder for value without notice. Nor did the failure of plaintiff to have an entry made upon said books work an estoppel, as between the parties, since there is no evidence that Matthews disposed of said certificate of stock by pledge or sale, to any other party. It is not claimed that Matthews sold or otherwise undertook to transfer the certificate ofstock, held by plaintiff, to the Palmetto National Bank. It was the corporate property itself that was transferred or conveyed to said bank, and it knew that it owned and held. or owned or held, only 90 per cent. of the capital stock of said company. Manifestly, the purpose of having a transfer entered upon the books of the corporation is to give notice. Matthews and Mauldin were the only officers that Commercial Investment Company appears to have ever had. They knew plaintiff held this certificate of stock for 25 shares. They, and they only, had the right to send out *Page 124 
notices to stockholders. If they had actual notice who the stockholders were, it is difficult to see wherein an entry of the transfer of a certificate of stock upon the books of the corporation would have supplied any notice they did not already have. Matthews and Mauldin were officers of the Palmetto National Bank, and, their knowledge of plaintiff's interest as a stockholder being imputed to said bank, there can be no question of said bank being an innocent purchaser for value, without notice, of the corporate assets of the Commercial Investment Company. The exceptions are overruled.
Appellants' sixth exception imputes error to the Circuit Judge in refusing defendants' motion for a nonsuit and for a directed verdict made upon the ground that plaintiff is estopped on account of the knowledge that its agent, Lumpkin, had or could have obtained, as a director of the Palmetto National Bank, of the transactions said bank had with the Commercial Investment Company.
Let it be conceded for the moment that Lumpkin, as adirector of the Palmetto National Bank, is presumed to have had notice of the transactions of said bank and of the information contained on its records, such constructive knowledge could only operate to affect him as a director of the bank and not as an individual, so as to be imputable to him as an officer or agent of another corporation. There is no evidence here that Lumpkin had actual notice of the resolution of the finance committee and of the entries made upon the records of the bank in consequence thereof. On the other hand, he positively asserts that he had no actual notice thereof. In the absence of express notice of same, it is difficult to see how plaintiff could be estopped. The exception is overruled.
The seventh exception imputes error to the Circuit Judge in refusing defendants' motion for a nonsuit and for a directed verdict upon the ground that there has been a loss to all parties concerned, according to the testimony, and there is no more loss to plaintiff than to any of *Page 125 
the others. The only other parties concerned were Matthews and Mauldin as stockholders and the Palmetto National Bank as holder of the stock of said Matthews and Mauldin. If said stockholders and bank invaded the rights of plaintiff by executing, delivering, and accepting a deed to the corporate property of the Commercial Investment Company, it is no defense that they also lost in the transaction. The exception is overruled.
Exception 9 is overruled, for the reason that there is neither plea nor proof of an ultra vires act herein. Exception 10 imputes error to the Circuit Judge in refusing defendants' motion for nonsuit and for directed verdict made upon the ground:
"That, even if Mr. Lumpkin had been given notice, he could not have prevented the sale under the terms and conditions of which it was made, for he only owned 10 percent. of the stock, and the other stockholders would have outvoted him."
This is, indeed, a very remarkable and unusual proposition. It assumes that minority stockholders are wholly at the mercy of the majority stockholders; that the minority stockholders, since they may be outvoted by the majority, have no right even to be informed of the action of the corporation or of the majority stockholders. Such a proposition is so wholly untenable that it need not be commented upon further than to say that it is not solely a question of voting. The authorities are so numerous upon the remedies of minority stockholders that it is unnecessary to here refer to them. But how could minority stockholders avail themselves of any of these well-recognized remedies unless they knew of the action of the corporation, or of the majority stockholders? Here there was not only no notice given to the minority, but it seems every effort was made to conceal from it the fact that a deed conveying all the corporate assets to the Palmetto Bank had been executed and delivered. The exception is overruled. *Page 126 
Exceptions 11, 12 and 15 complain of error on the part of the Circuit Judge in his charge upon conversion, and contend that there can be no conversion of real estate. While it is well-settled law in this state that there can be no conversion of real property, there may be a conversion of a certificate of stock. Conner v. Hillier, 11 Rich. (45 S.C.L.), 193, 73 Am. Dec., 105.
There can be no question but that the Palmetto National Bank knew of plaintiff's ownership of 25 shares of stock in the Commercial Investment Company at the time of the passage of the resolution of its finance committee, June 22, 1922, and at the time it took a deed from said company to its corporate assets. The books and records of said bank disclosed that at the times mentioned it owned or held only 90 per cent. of the stock in Commercial Investment Company; they also disclosed the resolution of the finance committee, directing that the corporate assets of Commercial Investment Company be taken over by the bank. This knowledge, thus shown by said books and records, was known, or should have been known, to the Columbia National Bank. In addition to this, certain of the officers of the Palmetto National Bank became officers of the Columbia National Bank, and such knowledge as they had, actual or constructive, of the facts disclosed by the records and books of the Palmetto National Bank, was imputed to the Columbia National Bank. The fact that the Palmetto National Bank held only 90 per cent. of the stock in Commercial Investment Company, and yet, by its finance committee, passed a resolution to take over the corporate assets of said company, in payment of alleged indebtedness to said bank from said company, was a circumstance sufficient to put the Columbia National Bank upon inquiry when it took over the assets of Palmetto National Bank and assumed the liabilities as shown by its books, and if pursued with due diligence, would certainly have disclosed that plaintiff owned 25 shares in said company. The very books of *Page 127 
Commercial Investment Company which failed to disclose that plaintiff was a stockholder therein likewise failed to show that the Palmetto National Bank or J.L. Nettles was a stockholder. The entire stock was issued in the names of Matthews and Mauldin. These men were officers and directors of the Palmetto National Bank. Had the Columbia National Bank exercised due diligence, it could easily have ascertained the owner of the other 25 shares. This it did not do, and is therefore deprived of the plea of bona fide
purchaser for value without notice. Kirton v. Howard, 137 S.C. 11;134 S.E., 859. If the Palmetto National Bank perpetrated a fraud upon plaintiff by taking over the corporate assets of Commercial Investment Company, the Columbia National Bank, charged with notice thereof by the books and records of Palmetto National Bank, as well as by the knowledge possessed by certain of its managing officers, became a party to such legal fraud.
The legal title to the property in question was in the Commercial Investment Company, and not in plaintiff; therefore, there is no claim by plaintiff that there was conversion of such property. But the legal title to the certificate of 25 shares of stock in said company was in plaintiff, which fact was known by the Palmetto National Bank, and was also known, or could easily have been known, by the Columbia National Bank. Had plaintiff presented its certificate of stock to the Commercial Investment Company to be transferred upon its books and such application been refused, such refusal would have been a conversion. 14 C.J., §§ 1164 and 1165. When the Palmetto National Bank took over the corporate assets of the Commercial Investment Company, without any legal authority whatsoever, but in conscious violation of plaintiff's known rights as a stockholder, and appropriated such assets to itself in payment of alleged indebtedness to it by said company, it was certainly as much a conversion of plaintiff's stock as it would have been had the Commercial Investment Company refused *Page 128 
to transfer said stock upon its books upon application by plaintiff. When the Columbia National Bank took over this property, as a part of the assets of the Palmetto National Bank, charged with sufficient facts to put it on notice of such conversion, it became a party to the transaction. The exception raising this question are therefore overruled.
The fourteenth exception assigns error in the refusal of the Circuit Judge to grant the motion for a nonsuit as to the Columbia National Bank upon the ground:
"That notice acquired or brought home to said bank after it had acquired the property as a purchaser for value in good faith and without notice of the plaintiff's alleged interest in the property, could not affect its rights to convey such property to a third party, and the conveyance by it of such property to a third person could in no sense amount to a conversion by it or render it liable for damages growing out of such conversion."
We think the Columbia National Bank had notice of sufficient facts to put it upon inquiry, which, if duly pursued, would have disclosed plaintiff's interest. The said bank cannot, in the circumstances, claim to be a purchaser for value without notice. This exception is therefore overruled.
The twelfth and thirteenth exceptions relate to punitive damages, and allege that the Circuit Judge committed error in submitting the question of such damages to the jury and in refusing defendant's motion for a directed verdict as to same, for the reason that there was no evidence of any willful, wanton, or malicious conduct on the part of the defendants, or either of them, and therefore there was no basis for submitting such issue to the jury.
The undisputed testimony is that the purpose of the organization of the Commercial Investment Company was to purchase the property in question and to hold same until some future time when it could be disposed of to advantage. It does not appear that said company had any other excuse for existing. It owned no other property, and engaged in no *Page 129 
other business. The purpose for which it was organized was known to the Palmetto National Bank. At the time of its organization said bank discounted the note of J.L. Nettles for $17,500, which indebtedness was later, at the suggestion of said bank, transferred to one Hodges, with the same security. Later in June, 1922, said indebtedness was by said bank canceled and the said 175 shares of stock acquired by said bank. About this time said bank also acquired the 50 shares of stock of Matthews, thus giving it 225 of the 250 shares of stock in said company. The other 25 shares of said stock were never acquired by said bank. While the books of said company did not disclose that plaintiff owned said 25 shares, those books did disclose that said shares had been issued and were outstanding. The bank not only knew that it did not own or hold said 25 shares, but it knew that plaintiff did own them.
The further undisputed testimony is that, at the time of the organization of the Commercial Investment Company, the only indebtedness against it consisted of the mortgages assumed by it, aggregating about $162,000, that the property purchased by said company was well located in the city of Columbia, and that, from the calculation made, it was assumed the rents accruing therefrom would absorb the interest, insurance, taxes, and other carrying charges. Defendants failed to show that the property was, at any time, not rented. If the rents were insufficient to take care of said carrying charges, no attempt was made to show the amount of such deficiency. And yet, it is claimed that on June 22, 1922, the amount of the indebtedness of said company was $208,108.01. This amount includes not only the mortgages assumed, but the $17,500, indebtedness formerly represented by the J.L. Nettles note and a note for $18,000. The said $17,500 was not the indebtedness of the Commercial Investment Company, and never became such. When the bank canceled the note of Nettles or Hodges and took over the 175 shares of stock, it became a stockholder in the *Page 130 
Commercial Investment Company. If it saw fit to cancel the notes and rely upon the security, it could not thereby be placed in any better position than that of any other stockholder, and had no right to charge the indebtedness against said company. There is no satisfactory evidence that the $18,000 note was the indebtedness of said company. This note was secured by stock of the Bank of Columbia. There is no evidence that the Commercial Investment Company ever owned any stock in said bank, and Matthews and Mauldin, the only officers said company ever had, knew nothing about said stock being the property of said company. There is not a particle of evidence that the note representing this alleged indebtedness was executed by any officer of said company.
It does not appear what rate of interest the mortgages assumed by the Commercial Investment Company bore, but, assuming that they bore interest at the rate of 7 per cent., the interest at this rate from February 28, 1920, the date of the deed to Commercial Investment Company, to June 22, 1922, the date the Palmetto National Bank, by its finance committee, assumed to take over the property of said company, would be $26,271.74. Add this to the principal, and we have $188,271.74, nearly $20,000 less than the alleged indebtedness of said company on June 22, 1922. It is not reasonable to suppose that said mortgages bore interest at a greater rate than 7 per cent. If this be a correct supposition, it is difficult to see how the indebtedness of said company could have amounted to the sum claimed, for surely the rents were sufficient to pay the taxes and insurance. The action of the bank in charging this $18,000 against said company, unexplained as it is, is exceedingly suspicious.
If the $17,500 and the $18,000 be deducted from the alleged indebtedness of said Commercial Investment Company, as we think they should, the real indebtedness of said company could not be as much as the price obtained by the Columbia National Bank for the property in question. But, *Page 131 
assuming for the moment that these amounts were in fact a part of the indebtedness of said company to Palmetto National Bank, what right had said bank to take over the corporate assets of the company in payment of its demands against said company? It held mortgages, which could have been foreclosed. If Commercial Investment Company was in fact insolvent, Palmetto National Bank, as a creditor, had its remedy under Section 18, Art. 9 of the Constitution and Section 4251, Code 1922, against the subscribers to 175 shares of stock in Commercial Investment Company, for the entire amount of said subscription was unpaid. The books of said company show that these stocks were issued to Matthews and Mauldin. They both say they paid in not a cent. The said stock was assigned to J.L. Nettles, and he borrowed from the Palmetto National Bank $17,500 on his note secured by said stock. The bank not only failed to proceed against the persons in whose names the stock was issued, but canceled the note of Nettles and took the stock in payment thereof (Mauldin said it was regarded as canceled), and now claims that said $17,500 was an indebtedness of said company. If the value of the corporate assets of Commercial Investment Company had so depreciated, why did Palmetto National Bank "choose" to cancel the note of Nettles or Hodges and take over the 175 shares of valueless stock in payment thereof? Why did it not proceed against the subscribers to said stock?
Instead of pursuing the legal remedies it had, Palmetto National Bank deliberately took the corporate assets of Commercial Investment Company in payment, not only of valid debts, but also of claims that cannot, under the testimony, be valid debts of said company. It is true that ordinarily a corporation may, by its officers, convey its real estate, for value, without notice to the stockholders. But this is quite a different thing from conveying its real estate at the request of a stockholder to such stockholder in payment of an alleged claim. Indeed, when Palmetto National Bank *Page 132 
took over this 175 shares of stock and canceled the note of Nettles or Hodges, it became a stockholder, and proceeded to take over the corporate property of said company in payment of the amount it had paid for such stock. In addition to this, it took over said corporate property in payment of a claim of $18,000 when there is not a particle of evidence it was the indebtedness of said company. If these acts on the part of the Palmetto National Bank be not "willful," it is difficult to conceive of a willful act.
To convey all the assets of Commercial Investment Company, while not de jure a dissolution of the corporation, defacto
it had that result. If it was desired to dissolve said company, Section 4279 to 4283, Code 1922, prescribe the manner in which it could have wound up its affairs and dissolved. No effort whatever was made to pursue the method prescribed by these statutes. Direct action was determined upon.
The Columbia National Bank had sufficient notice to put it on inquiry, which, if pursued with reasonable diligence would have disclosed that the Palmetto National Bank had taken over the corporate assets of the Commercial Investment Company wholly without legal right. When it accepted this property as a part of the assets of the Palmetto National Bank, with notice of the above mentioned facts, or with notice of sufficient facts to put it upon inquiry, which, if diligently pursued, would have led to a discovery of said facts, it became a party to the legal fraud perpetrated upon plaintiff. Then, after receiving actual notice of the claim of plaintiff, it proceeded to sell and dispose of said property over the protest of plaintiff. How, then, can it be claimed that said bank did not act willfully, in conscious violation of plaintiff's known rights, when it so sold and disposed of said property?
We find no error in the charge of the Circuit Judge, or in his submitting the issue of punitive damages to jury. The exceptions raising this question are overruled. *Page 133 
The dissenting opinion concedes that "this is an action at law, for damages; it was so treated, placed on calendar 1, tried by a jury. * * * " The litigants throughout the trial in the Court below, having regarded the case as one at law, and it appearing that no reversible error of law was committed on the trial below, we do not see why this Court should permit the defendant to change its position, or why this Court should on its own motion regard the action as one other than an action at law.
The judgment of this Court is that the judgment of the Court below be, and the same is hereby affirmed.
MR. CHIEF JUSTICE WATTS and MR. JUSTICE STABLER concur.