Johnston v. Laflin
| Decision Date | 01 October 1880 |
| Citation | 26 L.Ed. 532,103 U.S. 800 |
| Parties | JOHNSTON v. LAFLIN |
| Court | U.S. Supreme Court |
APPEAL from the Circuit Court of the United States for the Eastern District of Missouri.
The facts are stated in the opinion of the court.
Mr. John B. Henderson and Mr. George H. Shields for the appellant.
Mr. A. W. Slayback, contra.
The questions raised in this case are important to owners of shares in the national banks, but they are not difficult of solution. The delay in their decision has been caused by the great pressure of business upon the court, and not from any doubt as to their proper disposition. The appellant, the complainant below, is the receiver of the National Bank of the State of Missouri, appointed by the comptroller of the currency on the 27th of June, 1877. The bank failed on the 20th of that month. The defendant, James H. Britton, was its president, and had been so for some years. On the 16th of May, 1877, and for some time previously, the defendant Laflin was a stockholder of the bank, owning eighty-five shares of full-paid stock. He was not a director of the bank, nor had he any personal knowledge of its actual financial condition. It is to be presumed that he regarded that condition as sound, for up to the time of the failure he continued to deposit funds with it for a company of which he was a resident director at St. Louis. On the day mentioned, May 16, 1877, he sold his eighty-five shares to a broker, to whom he delivered his certificate of the stock, with a blank power of attorney indorsed thereon, authorizing the attorney, whose name might be subsequently inserted by the broker, or any other party becoming the owner of the certificate, to transfer it on the books of the bank in such form and manner as might be necessary or required by its regulations. Laflin did not at the time know for whom the stock was bought; information on the subject was withheld from him. He received for the price agreed the broker's check on a an king-house in St. Louis, which was paid the same day on presentation. The broker was, however, in fact acting for Britton, the president of the bank, who represented that he was purchasing for himself or for a party whose name he did not disclose. There was no intimation that he was making the purchase for the bank or in its interest. He gave the broker his individual check on the bank for the price of the stock, which was paid on presentation. Subsequently, but on the same day, he received the certificate, and thereupon directed a book-keeper in the bank, named Geralt, to fill up the power of attorney with his, the book-keeper's, name, and to transfer the certificate to his, Britton's, name, as trustee on the transfer book or stock register of the bank, which was accordingly done. He had at the time, to his individual credit at the bank, several hundred dollars more than sufficient to meet his check. He had for years dealt largely on his own account in its stock, and there was nothing in the transaction between the broker and himself to awaken suspicion as to its legality or propriety. Some days afterwards, on the 29th of the same month, at an election of directors, he represented and voted on the stock purchased.
It appears, however, that whilst the shares stood on the official stock register in the name of Britton as trustee, without stating for whom he was trustee, the transaction was entered on the stock ledger in an account with him as 'trustee of the bank.' And by his directions the book-keeper credited his individual account with the amount of the check given for the shares, and charged the same amount to the 'sundry stock account.' In other words, the entries on the books—other than the official stock register—showed that the stock was purchased by Britton for the benefit of the bank and paid for with its funds. But neither Laflin nor the broker had any notice of the manner in which the transfer was made, or of the entries on the books of the bank, or that the purchase had been made with its funds. The book-keeper, Geralt, who made the transfer and the entries, had, however, actual knowledge of the facts.
The present suit is brought by the receiver of the bank to set aside the purchase of the eighty-five shares, to compel Laflin to repay the money received and Britton to retransfer to him the shares on the books of the bank, and to have him declared to be still a stockholder in respect of those shares.
The statute declares that the capital stock of every national banking association shall be divided into shares of one hundred dollars each, and be transferable on its books in such manner as may be prescribed by its by-laws or articles, and that every person becoming a stockholder, by such transfer, shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder. There was no by-law of the association here regulating transfers of its shares, but each certificate of stock contained this provision: 'Transferable only on the books of the said bank, in person or by attorney, on the return of this certificate, and in conformity with the the provisions of the laws of Congress and the by-laws which may be in force at the time of such transfer.'
The statute also declares that no association shall be the purchaser of any shares of its own capital stock, unless the purchase be...
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...court for adjudication; but see Bank v. Laird, 2 Wheat. 390; Black v. Zacharie, 3 How. 483; Bank v. Lanier, 11 Wall. 369; Johnston v. Laflin, 103 U. S. 800; Iron Co. v. Lissberger, 116 U. S. 8, 6 Sup. Ct. Rep. 241. There is a class of cases frequently cited as holding that laws providing fo......
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