Court Opinion

ID: 6816795
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:02:22.039818+00
Date Added: 2024-06-11T16:03:54.944700
License: Public Domain

West, J.,
delivered the opinion of the court.
In an action by notice of motion, brought by James S. Easley against Reaves Warehouse Corporation, a judgment was entered against the defendant for $315.00 to which this writ of error was allowed. Among the material facts are these:
Independent Warehouse Company, a corporation located at South Boston, Virginia, was engaged in selling leaf tobacco. There was a lack of co-operation among the stockholders and they agreed to place the company in liquidation. W. S. Nichols' and D. T. Lacy, Jr., two of the largest stockholders, were appointed a liquidating committee, which was authorized to sell the warehouse building and other property of the company, pay its obligations and distribute the net assets among those entitled to receive the same. D. T. Reaves was also a stockholder in the corporation.
At a sale by public auction, Reaves and Nichols became the purchasers of the warehouse at a cash bid of $85,200.00. They executed a deed of trust on the property upon which they borrowed from the Virginia Trust Company $50,000.00, which was applied in part payment of the purchase price.
Reaves and Nichols then secured a charter for the Reaves Warehouse Corporation and deeded the warehouse property to it, subject to the deed of trust in favor of the Trust Company. Reaves and Nichols; *240owned all the stock in the new corporation except five shares which were owned by a third party.
The Reaves Warehouse Corporation executed a deed of trust upon the property to secure the payment of the sum of $32,800.00, represented by two notes of $16,400.00 each, which were signed by Reeves Warehouse Corporation and endorsed by it and by W. S. Nichols and D. T. Reaves. These notes were discounted, one by the Boston National Bank and the other by Planters and Merchants National Bank, both of South Boston, Virginia.
At the time the money was borrowed on these notes, "there was delivered to the banks as collateral security stock of the Independent Warehouse Company, owned by Nichols and Reaves, of the par value of $25,125.00, then in liquidation; $30,500.00 of the capital stock of the Reaves Warehouse Corporation; and $7,600.00 of the capital stock of the Nichols Lumber Company.
In addition, Nichols and Reaves entered into a written agreement with the banks, to which the Reaves Warehouse Corporation was not a party, in which they not only guaranteed the payment of the notes, but also agreed that they should be “bound for the payment of said notes as fully and to the same extent as they would be bound were they makers thereof.”
The liquidating committee thereafter paid several liquidation dividends upon the stock of the Independent Warehouse Company. The cheeks for the first two dividends in distribution of capital assets, upon shares of stock of the old company listed in the names of Nichols and Reaves, were delivered to the two banks and this method of handling the matter was acquiesced in by all parties. Through error, the third dividend checks were mailed direct to Nichols and Reaves. Reaves delivered his cheek for $315.00 to the Planters *241and Merchants National Bank, and Nichols promised to deliver his check, for the same amount, to the bank, but, in violation of that promise, endorsed the check and delivered it to James S. Easley in payment of an attorney’s fee which he owed him. Nichols informed Easley that some question might be raised as to his (Nichols’) right to the check, but if he would present it to the bank it would be paid.
The bank refused to pay the check and the liquidating committee corrected its error and paid the $315.00 over to the Planters and Merchants National Bank, which applied it, as other payments of capital assets had been applied, as a credit on the amount due the bank for money borrowed, for which this stock in the Independent Company was pledged as collateral.
A trial by jury was waived and all matters o.f law and fact were submitted to the court. Upon the hearing, the court entered the judgment complained of.
The only assignment of error is the action of the eourj; in entering the judgment for the plaintiff.
 The cheek in controversy was signed by Independent Warehouse Company and payable to W. S. Nichols, for $315.00. It was not a dividend check given in payment of the stockholder’s share of the current earnings of a corporation which was a going concern. The owner of stock has a right, as against a person who holds the stock as collateral security, in the absence of agreement to the contrary, to receive all dividends which are declared out of the current earnings of the corporation. But, where the stock has been assigned to a third party as security for the payment of a debt, and the corporation goes into liquidation, the owner of the stock is not entitled, as against his assignee, to receive a cheek which is given in distribution of the capital assets of the company. The assignee *242of the stock so pledged is entitled to receive all such distribution checks until his debt is paid in full.
The endorsement of the check by Nichols and its delivery by him to Easley did not vest in Easley title to any part of the money which was in bank to the credit of the Independent Warehouse Company. The shares of Reaves and Nichols in this money had already been transferred to the banks to secure the payment of the amount borrowed from them.
Code of Virginia, section 5751, provides: “A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder unless it accepts or certifies the check.”
The bank, in the instant case, refused to pay the check, and there was no agreement or contract between Easley and the bank by which he could hold the bank liable to him.
Reaves Warehouse Corporation was not a party to the check, and had not entered into any contract with Easley. The bank having refused to pay the check, and Easley, not having acquired title to any funds in the bank, cannot say that the money which the bank received in payment of the check belonged to hint.
The Reaves Warehouse Corporation not having received any money which was the property of Easley, it cannot be said that he has been compelled to pay a debt which Reaves Warehouse Corporation was bound for as principal, and there can be no recovery by him against the corporation, for money had and received.
Under the terms of the written agreement, supra, Nichols was bound as maker of the notes held by the banks, and when the $315.00 was applied as a credit upon one of those notes, it was a payment pro tanto of *243an obligation for •which Nichols was bound as principal. Besides, it was agreed by and among Nichols, Reaves, the banks and D. T. Lacy, Jr., of the liquidation committee, that the capital dividends declared upon the stock listed in the names of Nichols and Reaves should be paid to the banks on the notes given for the money borrowed. (D. T. Lacy, Jr., was cashier of the Boston National Bank and the active member of the liquidation committee.)
The burden was on Easley to prove by a preponderance of the evidence that Reaves Warehouse Corporation was indebted to him in.the sum sued for. He has failed to carry this burden.
The judgment will be reversed and final judgment entered here for the defendant.

Reversed.