First National Bank v. Gifford

1. Corporation: act of officer: notice. Where, by an agreement between the president and cashier of a bank, which was unknown to the other officers of the bank, certain stock of the corporation was purchased by the cashier with money borrowed from the bank for which he gave his note indorsed by the president, held, that the bank was not chargeable with notice of the agreement and not bound to hold the note for the protection of the president. 2. -: -:-. The officers of a corporation cannot at the same time and with respect to the same transaction, in which both the corporation and they themselves individually are interested, act for themselves and the corporation, and if they assume so to act, their acts are not binding upon the corporation. 3. -: transfer of stock. The transfer of stock by means of a transfer ticket and an entry of the transfer upon the books of the corporation, accompanied by a surrender of the certificate by the transferer and cancellation thereof, gives to the transferee as between himself and the corporation a complete title to the stock, although no certificate was issued to him in lieu of that which had been canceled. 4. -. G., who was president of a bank, indorsed the note of P., the cashier, the proceeds of which were used in the purchase of stock, although no certificate of the stock was ever issued to P. in place of the certificate of the former owner which was surrendered and canceled; P. subsequently assigned the stock to S. as securityfor a loan and after-wards made an agreement in writing with W. to sell him the stock for a sum with which to pay S.; thereupon G. notified the officers of the bank of the circumstances of the purchase by P. and of his claim on the stock: Held, that the bank was bound to issue a certificate of the stock to W. and was not liable in damages to G. therefor.

Appeal from Seott District Court. Action on a promissory note executed by D. C. Porter and guaranteed by tbe defendant. The answer alleged that Porter purchased of one Ochs ten shares of plaintiff’s stock, and that the note was given for money loaned by the plaintiff to .pay therefor; that in consideration of defendant’s indorsement of said note i'fe was agreed between plaintiff, defendant and Porter that the latter should deliver the said stock to be held as collateral security for the payment of said note as well as for the protection and security of defendant against liability upon his indorsement of said note, and that in pursuance of said agreement the certificate for said stock was delivered to plaintiff and the same accepted for the uses and purposes aforesaid; that plaintiff, with full notice and knowledge of the rights of defendant, permitted said stock to be transferred on its books to one Whitaker, thereby wholly destroying defendant’s security. By way of counter-claim the defendant sought to recover the value of said stock. There was a trial by the court, by whom a finding of facts was made as follows: I. That the plaintiff is, and was prior to 1870, an incorporated national bank, organized and existing under and by virtue of the laws of the United States of America, and doing business at the city of Davenport, in the county of Scott, and State of Iowa. II. That on November 3d, 1872, one D. C. Porter, for value received, executed and delivered to said plaintiff’ his promissory note, being as alleged and set out in the petition. III. That at the time of the making and delivery of said note said defendant, for the purpose of guarantying its payment, indorsed his name upon the back of the same, as alleged and set out in the pétition. IY. That at the time of the making and delivery of said note said D. 0. Porter was the cashier and said Ira M. Gifford the president of the plaintiff. Y. That said note was duly presented for payment at maturity and payment refused, of which defendant had due notice. • YI. That the expense of said demand and protest paid by plaintiff at the time was two dollars and twentj'-five cents. YII. That no part of said note or protest has been paid. YIII. That the original transaction out of which said note arose took place in 1871, and while said Porter was cashier and said Gifford was president of the plaintiff'. That at said time a similar note was given by said Porter to said plaintiff and renewed from time to time until the note, in suit was given, said parties continuing to be said officers during this time, the interest being paid from time to time to the maturity of the note in suit. IX. That said original note was given for money borrowed and which was used by Porter in the purchase of ten shares of the capital stock of the plaintiff of one Lipman Ochs and which was and still is worth the sum of two thousand dollars, said stock being assigned to said Porter by a transfer ticket and an entry thereof made in the transfer books of the plaintiff and the certificate of stock held by said Ochs delivered to him and the stock credited to said Porter on plaintiff’s ledger. X. That after the purchase by said Porter of said stock, as stated in paragraph nine hereof, he voted upon said stock at all stockholders’ meetings. It was treated as his. He drew the dividends thereon, and it formed the basis upon which he was elected a director of plaintiff, all with the knowledge and consent of the defendant, but no certificate of stock was ever issued to him. XI. That at the time said Gifford indorsed the original note, and from time to time, as the same was renewed, including the time the note in suit was made, it was the understanding and agreement between said Porter and said Gifford that said ten shares of stock was to stand as security to Gifford for his indorsement or guaranty, and that it should, as to Gifford, take care of and provide for the payment of said note. XII. That the plaintiff and none of its officers, except Porter and Gifford, had officially any knowledge or notice of the agreement between Porter and Gifford, mentioned in paragraph eleven hereof, until after January 15th, 1873. XIII. That some time before January 15th, 1873, the said Porter borrowed of one S. E. Smith a certain sum of money, to-wit: twelve hundred dollars, and put up with him as collateral security therefor the said stock, assigning it to him by a transfer ticket and an entry upon the'transfer books of plaintiff, and delivered to him the transfer ticket received by him from Ochs, and on January 15th, 1873, the said Porter borrowed twelve hundred dollars of one Chas. Whitaker to pay Smith, and for other purposes, and at the same time entered into an agreement in writing with said Whitaker, to sell to said Whitaker said ten shares of stock for sixteen hundred dollars, if he should so elect in a given number of days, in which case he was to pay said Porter four hundred dollars in addition to the amount borrowed; and if said Whitaker did not so elect the twelve hundred dollars was to be and remain a loan, and the stock collateral to it, and by said contract said Smith was to and did hold said stock as before, as trustee for the parties, to execute and see that the agreement was carried out. XIY. That after the 15th day of January, 1873, and before the 21st day of January, 1873, said defendant informed and told said S. F. Smith, said Chas. Whitaker and Hiram Price, the president of the plaintiff, of the agreement between himself and said Porter in relation to said stock, as set out in paragraph eleven hereof, and that he should insist upon his rights in the premises. XY. That on the 21st day of January, 1873, the defendant duly served on the plaintiff a notice in writing, being exhibit attached to the evidence filed in this cause. XYI. That on February 4th, 1873, the said Charles Whitaker, in pursuance of the agreement mentioned in paragraph thirteen hereof, paid to the said Porter four hundred dollars, balance of the purchase price of said stock. XYII. That on February 17th, 1873, there was issued and delivered to said S. F. Smith, by plaintiff, a certificate for said ten shares of stock, in pursuance of the request of said Whitaker and said Porter and their said contract, and the following resolution passed by the board of directors of plaintiff', on February 13th, 1873, it being for the purpose of making a transfer to Whitaker, as purchaser, to-wit: “ Whereas, Ira M. Gifford, the former president of this bank, has filed with the present officers of the bank a protest against the transfer, by D. C. Porter, of ten shares of the stock of this bank in the name of said. D. C. Porter; and whereas, it appears from the books and proceedings of said bank that the said Porter, with the knowledge and consent of the said Gifford, has voted said stock at all elections of stockholders, and been by the said stockholders, including the said Gifford, elected a director of said bank when it was well known by all the stockholders, including the said Gifford, that said Porter could not have been legally elected a director unless he had been the real owner of said ten shares of stock; and whereas, the said Porter has always, with the knowledge and consent of said Gifford, drawn all the dividends of the said ten shares of stock; now, thérefore, be it Resolved, in view of the foregoing facts, that the president be and is hereby directed to transfer the said ten shares of stock to such person or persons as he, said Porter, may direct.” ' XYIII. That thereafter the said certificate issued to said Smith was surrendered and canceled, and said Smith transferred said stock on the bank’s books to said "Whitaker, and a new certificate for said stock was issued to said Charles Whitaker, who now holds the same. XIX. That the articles of association and by-laws of the plaintiff',are, and have been since its organization, as follows: (Such thereof as are pertinent to this case are set forth in the evidence, on pages 10 and 11.) XX. That the instruments referred to in paragraphs nine and thirteen hereof, and described therein as transfer tickets, were in form as follows: “ 10 Shares. Eor value received, I hereby assign and transfer to D. C. Porter all my right, title and interest in ten (10) shares of the capital stock of the First National Bank of Davenport, standing in my name on the books of said bank. “ L. L. Ochs.” “Witness:” The .one given by Porter to Smith being in the same form, except the names of the parties, XXI.That the said plaintiff kept a transfer book upon which transfers of its stock were made, and which contained printed forms of such transfers in the same form as the instrument above copied, with a stub attached to each said transfer, which, when filled up in accordance with the transfer, showed the particulars thereof, and from which the transfers were posted in the stock ledger. It was customary, in said plaintiff’s bank, on such transfers being made, but was not always done, to permit the instrument of transfer to be cut out from the transfer book, and be delivered to and kept by tlie transferee, the stub thereof being left in the book, and such transfer was then called a transfer ticket; and such was tlie case in respect to the transfer tickets referred to in paragraphs 9 and 13 hereof. XXII. That said defendant retired from the bank as president about the 10 th of January, 1873, and was succeeded by Hiram Price, and was not in the bank when Porter made the transfer ticket to Smith. XXIII. That at the time Smith made the loan to Porter he took as security, in addition to the ten shares referred to, two shares of stock then held by Porter, and on which certificates had been issued, and which were worth four hundred dollars. XXIY. That the loan for which the note in suit was given as a renewal was passed upon and approved by the board of directors of plaintiff. XXY. That the money received by Porter from Smith on said stock was applied by Porter in payment of a deficit then owing by him to the plaintiff. XXYI. That about the day and immediately before the defendant notified Smith and Whitaker of his alleged rights in the ten shares of stock, he had negotiated a sale of the same to one Stephenson for two thousand dollars, and went to the bank of plaintiff to have it transferred, and the money applied on the note in suit, when Porter, who was then in the bank as an employe, informed him of the loan of twelve hundred dollars from Smith, and the circumstances, of the loan. As a conclusion of law, the court rendered a judgment against the defendant, and for the amount duo on the note, and he appeals.