Reese v. Bank of Commerce

The charter of a bank provided that its shares of stock “shall be transferable on the books of the corporation only, according to such rules as shall be established by the President and Directors, but all debts actually due and payable to the corporation, by a stockholder requesting a transfer, must be satisfied before such transfer shall be made, unless the President and Directors shall direct to the contrary. Hioi.d: 1st. That this lien on the stock is not waived by the form of a certificate for stock declaring that the stockholder “is entitled” to-shares of stock “transferable only at said bank, personally or by attorney, on surrender of this certificate.” 2nd. The assignee of a stockholder takes his equitable assignment, subject to the rights of the bank, against the stockholder, under its charter, of which he is bound to take notice. 3rd. This lien attaches to balances due the bank by the stockholder, for overdrafts on checks, but not to notes or bills on which the stockholder may be a party, as maker or endorser, not due at the time the transfer is demanded. 4th. The words, “debts actually due and payable,” imply more than mere indebtedness; the indebtedness contemplated is only a debitum solvendum in presentí, not in futuro. 5th. Where an assignee demands a transfer, but refuses to pay the debts then due the bank by the stockholder, and afterwards makes a second demand when other notes of the stockholder had become due and payable, he cannot obtain a transfer without paying all the debts due at the time of the last demand. It is no objection to a decree for the sale of stock, to pay debts due by a stockholder to the bank, that it did not give the defendants a day within which to pay the same; the Act of 1785, ch. 72, sec. 3, has no application to such a case.

Appeal from the Circuit Court for Baltimore City. The bill in this case, filed on the 17th of November 1855, by the Bank of Commerce against the appellants, alleges that Francis M. and Henry F. Baughman were owners of sixty, and Jacob F. Kridler of thirty-two, shares of its capital stock; that the defendant, Fisher, on the 4th of December 1854, presented to the cashier of the bank a power of attorney from the Baughmans, accompanied by the certificate for the stock for the transfer to the defendant, Reese, of forty shares of stock, but the bank declined to allow the transfer to be made' until a debt of the Baughmans, of $830.44, due the bank, was first paid; that Fisher, on the same day, also presented a power of attorney from Kridier, for the transfer to Fisher of thirty-two shares of stock, standing in the name of Kridier, but the bank also declined to allow this transfer to be made-until a debt of $277.48, due by Kridier to the bank, was first paid, and that Fisher refused or neglected to pay either of these sums. The bill further charges that, since the 4th of December 1854, the Baughmans have become further indebted to the bank, upon paper discounted prior to that date, in the-sum of $1130.44, making their entire indebtedness, now due the bank, $1960.88, and that Kridier, since that date, has also become further indebted to the bank, upon paper discounted prior to that day, in the sum of $400, making his entire indebtedness, now due the bank, $677.48. The bill then alleges that the bank, by its charter, has a lien upon the stock of the Baughmans and Kridier for the payment of the amounts now due by them respectively, and prays that a decree may be passed for a sale of this stock for payment of the amounts so-claimed. The defendants, in their answer, admit that Fisher, acting as agent for Reese, presented to the bank the respective powers of attorney and certificates mentioned in the bill, and that the bank, through its officers, refused to permit the transfers to be made until the debts alleged in the bill to be due by the Baughmans and Kridier, respectively, were first paid, and that such transfers have never yet been made. They then state that these powers were executed by the Baughmans and Kridier,respectively, on the 27th of September and the 23rd of October 1854, and, with the accompanying certificates, were delivered to Fisher, as agent of Reese, as collateral security for' two notes of the Baughmans and Kridier, respectively, of $700 and $500, discounted on those days by Reese, which notes are now due and wholly unpaid and unsecured except by these powers and certificates. They further state that on the 4th of December 1854, whilst so refusing to permit the transfers to be made, the officers of the bank declared that the bank held sundry collaterals in its hands, out. of which, or some of which, as suggested by them, the respective accounts of these parties would probably be made good to the bank, and the then president of the bank advised that matters should be permitted to remain in their then condition for the time being, until it should be ascertained what might or would be realized by the bank front'such collaterals, and that Fisher acquiesced in the course so advised, and, for a period of some months, nothing further was said or done in the premises; that afterwards, and shortly before this bill was filed, Fisher again called and desired the transfers to be made, when the bank again refused, unless the full augmented amounts of the alleged respective debts of the Baughmans and Kridler to the bank, were first paid, and as the sums, then demanded, greatly exceeded, in each case, the value of the stock embraced in each certificate, payment thereof was declined and refused by the respondents. Fisher, answering for himself, says that if, upon investigation, he had found the asserted indebtedness of Kridler to be, as alleged on the 4th of December, he would undoubtedly have paid it on that day, and procured a transfer of the thirty-two shares, inasmuch as the value of the stock exceeded the alleged debt, but, in consequence of the aforesaid statement that the bank held sundry collaterals, he forebore to make any investigation, at that time, into the alleged indebtedness of either of these stockholders, and readily acquiesced in the advice of the then president of the bank, as being judicious and expedient, and so acquiesced, in confidence, that such representations were, in all respects, true. The answer does not admit the alleged indebtedness of the Baughmans or Kridler, and does not. concede that the bank, according to the tenor and effect of these certificates, has any such lien, as claimed in the bill. It further states that, at the time these powers and certificates were received, they were accepted in good faith, without notice of any indebtedness of the respective stockholders to the bank, and without notice of the dealings or transactions of them, or either of them, with the bank; that, when the application was made for the transfers, on the 4th of December 1854, no notice or intimation was given or made to either of the respondents, that the alleged indebtedness of either of these parties would, or might be, augmented by, or in consequence of, any other dealings and transactions of either of them with the bank; but, on the contrary, the suggestion was, that col-laterals were held by the bank, out of which, as suggested, the bank would probably realize funds to extinguish or diminish the asserted claims of the bank against both of these stockholders, and respondents are advised that even if the alleged lien of the bank is good in law, as to the amounts really due when the transfers were applied for, still the subsequently accruing indebtedness of these parties, even if shown to exist, cannot be validly claimed as against the respondent, Reese, first, because the right of lien is limited to what was then due when the transfers were applied for, and, secondly, because even if the law be otherwise, under other circumstances, yet the statement and declaration aforesaid, and the absence of notice of the material fact, that, by delay, the indebtedness of these stockholders might become augmented, would debar the bank from enforcing such lien. The cashier and book-keeper of the bank were examined as witnesses, and proved that on the 4th of December 1854, the Baughmans were liable to the bank for $830.44, on account of repeated previous over-drafts, by checks, and that Kridler, on that day, was liable to the bank for 277.48, also, on account of such over-drafts; that the bank, at that time, kept no tickler or other book, to show the state of the accounts of its customers; the books were probably a month behind; when- a party over checked, and the fact became known to the book-keeper, it was reported to the president or cashier, and the latter says he thinks the fact that these parties had over-checked, was reported to him several times. The additional claim against the Baughmans arises from a note of Edward Wools, for $350, by them endorsed, and discounted for their benefit. This note, dated the 13th of October 1854, at four months, became’due on the 16th of February 1855. The additional claim against Kridler, arises upon his note for $400, endorsed, by the Baughmans and discounted by the bank. This note, dated the 11th of October 1854, at three months. became due on the 14th of January 1855, and is, also, by the bill, made a claim against the Baughmans. The cashier also proves that the application for the transfers, on the 4th of December 1854, was not made by Fisher, but by some one in his behalf, and that witness declined transferring the stock on account of the indebtedness of the Baughmans and Kridler to the bank,- he did not state the amount of such indebtedness to the person making the application; that question was not asked him; at the time this application was made, the bank held no collaterals of either of the holders of the stock, and witness did not make any statement to that effect to the person applying for the transfer; the application was made to the transfer clerk in the first instance, who referred the person making it to witness; the refusal to transfer was absolute—there was no condition; just before the institution of this suit, an offer was made to pay Kridler’s debt, of $277.48 and interest, but witness declined to make the transfer. The powers of attorney to transfer the stock were in blank, and the certificates for the stock are signed by the president and cashier, and under the corporate seal of the bank, and are in this form: “Be it known, that F. M. &H. F. Baughman are entitled to forty shares in the capital stock of the Bank of Commerce, transferable only at said bank, personally or by attorney, on surrender of this certificate. Witness, the seal of the President, Directors & Co., of the said Bank of Commerce, this fourteenth day of J.uly 1854.” By its charier, (Act of 1854, ch. 235,) it is provided that the aforesaid bank “ shall be entitled to all the rights, powers and privileges, and be subject to all the duties, restrictions, limitations and conditions of the several banks comprehended in the Act of 1853, ch. 441, entitled “an Act to continue the corporate existence of the several banking institutions therein mentioned.” The provision of this latter Act, in relation to the tranfer of stock, is the 16th Art. of sec. 4, as follows : “Art 16. That the shares of the capital stock of the corporation shall be transferable on the books of the corporation only, according to such rules as shall be established by the president and directors, but all debts actually due and payable to the corporation by a stockholder requesting a transfer, must be satisfied before such a transfer shall be made, unless the president and directors shall direct to the contrary.” The court (Krebs, J.) passed a decree that the stock mentioned in the proceedings, “ be sold to pay the several claims against said stock, of the complainant,” and appointed a trustee to make the sale, on ten days’ notice, “for cash,” and that the stock should be transferred to the purchaser, “'free, clear, and discharged of all claims of the parties.” From this decree the defendants appealed.