President, Directors of Middlesex Bank v. Minot

A bank made a loan and took a pledge of the borrower’s shares in its stock, as collateral security, with a power of sale if payment should not be made according to the terms of the loan t After the borrower’s decease, the bank sold the shares at auction, for non-payment, became the purchaser, gave credit for the amount of the sale, and claimed the balance of the borrower’s administrator, who refused to sanction the proceeding. Held, that nothing passed to the bank by this form of sale, but that it still held the shares, under its original title, as collateral security. Where a creditor of a deceased insolvent debtor holds property which was pledged to him by the debtor as collateral security, with a power of sale, his claims against the deceased cannot be allowed, unless the property is first sold, and the proceeds deducted, or its value is ascertained, by a jury or otherwise, and that value deducted ; and the balance only, as thus found, is to be allowed against the deceased’* estate.

This was an appeal, under the Rev. Sts. c. 68, § 8, from a decision of the commissioners of insolvency, appointed to receive and examine the claims of creditors against the estate of John K. Simpson, deceased, disallowing the claim of the plaintiffs against said estate, of which the defendant was administrator. The parties submitted the case to the court on the following agreed statement: “ The claim of the plaintiffs, which was presented to said commissioners and by them disallowed, was thus : “ Estate of John K. Simpson to Middlesex Bank Dr. To amount of note which was secured by pledge of Middlesex Bank stock, ........ 3-500 To do.....do. . . 2-400 To do. ... . do. . . . 1-300 7-200 Interest on said 7-200 from Oct. 1,1837, to Aug. 21,1839,1 year, 10 months, 20 days ....... 816 Amount of memorandum check ..... 187-83 Interest on 187-83 from April 19,1836, to Aug, 21,1839, 3 years, 4 months, 2 days ....... 37-63 $8-241-46 Contra. Cr. 1838. May 9th. Proceeds of 72 shares of Middlesex Bank stock sold by Stephen Brown ..... 144-00 Interest on said sum 1 year, 3 months, and 12 days, . . 11-08 155 08 Balance claimed by the bank, . . . . . . $ 8-086-38 “ The debit side of the account is correct. The said Simpson died at Boston in December 1837. The Middlesex Bank stopped payment on the 17th of January 1838. The said Simpson, at the time of the loan to him on his notes referred to in said account, by an agreement, signed by him, pledged to the bank one share in the capital stock of the bank for every hundred dollars lent, amounting to 72 shares in the whole, as collateral security for the loan. A copy of said agreement is in the margin.* On the 6th of April 1838, the administrator of said dui eased’s estate received due notice, by letter put into his hands, that unless the said notes were paid within thirty days, the shares thus pledged as collateral security would be sold at public auction, and the estate of the said deceased be held to pay the balance remaining unpaid after crediting the proceeds. Said notes not being paid within the thirty days, said shares were placed in the hands of Stephen Brown of Boston, auctioneer, who, after advertising them for sale, the usual time, in three or more of the newspapers printed at Boston, sold said shares at auction on the 9th day of May 1838. The said shares were purchased by the president of the bank, he being the highest bidder, for the benefit of the bank. Said administrator had due notice of the time and place of said sale, but never gave his consent to the sale ; nor did he make known his dissent to said sale, until the time when the bank presented its claim, for allowance, before the commissioners of insolvency on the estate of said deceased ; nor had he notice that the sale had been made. The value of said shares was not known at the time of said sale, but they have turned out to be worth something more than they sold for at said sale. Said shares are still held by the officers of the bank, in trust for the bank.” The parties agreed that if the plaintiffs were entitled to recover, they should have judgment for such sum as the court should direct; otherwise, that a nonsuit should be entered.