American Nat. Bank v. Dew

• Decision Date: 23 December 1917
• Docket Number: 300.
• Citation: 94 S.E. 708,175 N.C. 79
• Parties: AMERICAN NAT. BANK v. DEW ET AL.
• Court: North Carolina Supreme Court

94 S.E. 708

175 N.C. 79

AMERICAN NAT. BANK v. DEW ET AL.

No. 300.

Supreme Court of North Carolina

December 23, 1917

Appeal from Superior Court, New Hanover County; Bond, Judge.

Action by the American Nat. Bank against H. P. Dew and others. From judgment for defendants, plaintiff appeals. New trial.

Judgment of a court having jurisdiction of the cause and parties sustaining general demurrer to a complaint, is conclusive upon the parties.

Plaintiff brought this action to compel a transfer on its books by the defendant United Development Company of 25 shares of its stock purporting to have been issued by it to the defendant H. P. Dew, and which the plaintiff received from him, as a purchaser for value and without notice of any defect in his title to the same, as collateral security to a note given by Dew for money borrowed from it. Other relief was prayed against H. P. Dew's codefendants. The following issues were submitted to the jury:

"(1) Is the defendant H. P. Dew indebted to the American National Bank in the sum of $1,750, with interest from October 11, 1912, upon the note sued on in this case?

(2) Was the stock referred to of the United Development Company ever issued and delivered to H. P. Dew or to any one for him?

(3) Was the plaintiff the owner as pledgee of certificate No. 8 for 25 shares of stock in the United Development Company?

(4) Did the plaintiff bank in due course of business and without notice of any fraud, if any existed, receive said certificate of stock as collateral security to note given in renewal of unpaid balance on prior note, which prior note was originally given to said bank for money borrowed and in consideration of extension of time for payment of said balance?

(5) Did the United Development Company wrongfully refuse to transfer said stock on the books of said corporation?

(6) Was the real estate set forth in the complaint conveyed by the United Development Company to the Chatham Estates Incorporated, without valuable consideration? (No answer.)

(7) Was the real estate set out and described in the complaint fraudulently and wrongfully conveyed to the Chatham Estates Incorporated? (No answer.)

(8) At the time that Chatham Estates, Incorporated, took the conveyance of the property from the United Development Company, did it have notice of the rights of H. P. Dew or of this plaintiff? (No answer.)

(9) Did defendants, or any of them, acting in concert with each other, wrongfully convey the land of the United Development Company to Chatham Estates, Incorporated, and thereby cause injury to plaintiff? (No answer.)

(10) What was the value of the 25 shares of stock sued on at time property of said corporation was conveyed away? (No answer.)

(11) Is the plaintiff estopped by the judgment which is pleaded in the further defense set up by defendants in their answer to this suit?

(12) What damages, if any, is plaintiff entitled to recover of the defendants, United Development Company, Chatham Estates, Incorporated, Chatham Park Land Company, Paul Chatham, and W. A. Ebert?"

The jury answered the first issue "Yes," second issue "No," third issue "No," fourth issue "Yes," fifth issue "No," eleventh issue, "Yes, except as to the United Development Company, as to whom nonsuit was taken," and the twelfth issue "Nothing," and under the direction of the court, did not answer the sixth, seventh, eighth, ninth, and tenth issues.

The court instructed the jury as to the first, fourth, and eleventh issues that, if they believed the evidence, those issues should be answered "Yes," otherwise, "No," and as to the second, third, and fifth issues that, if they believed the evidence, they should be answered "No," otherwise, "Yes," and as to the twelfth issue that, if they believed the evidence, they should answer it "Nothing," otherwise such an amount as they should find to be due.

The court was of opinion, upon the verdict, that the plaintiff was not entitled to recover at all, and judgment was entered accordingly, and for costs against the plaintiff, whereupon it appealed to this court.

Rountree & Davis and McClammy & Burgwin, all of Wilmington, for appellant.

H. L. Taylor, of Charlotte, and Kenan & Wright, of Wilmington, for appellees other than H. P. Dew.

WALKER, J. (after stating the facts as above).

First. As to the estoppel and the eleventh issue: We are of the opinion that the presiding judge ruled correctly when he held that upon the result of the prior suit in the superior court of Mecklenburg county the plaintiff was estopped by the judgment therein as to all the defendants in this case, who were parties to that action, except the United Development Company. It appears from a perusal of the record in that case that the complaints in the two cases are at least substantially alike, and that the same questions were determined in the former case as are now raised in this case, and the judgment of the superior court of Mecklenburg county is a complete and final adjudication of all matters embraced within its scope, and settled conclusively against the plaintiff, and in favor of the defendants who had not been nonsuited and who were parties defendant, every question covered by the complaint and involved in the cause of action. This does not apply to the United Development Company, for, as to it, the demurrer was overruled. The legal effect of sustaining a demurrer to a complaint, as an estoppel or res judicata, in any subsequent action brought for the same cause, if the former judgment is properly pleaded, has been considered by this court several times. A recent case is Marsh v. Railroad Co., 151 N.C. 160, 65 S.E. 911, where it is said:

"As applied to domestic judgments, it is a principle universally recognized that when a court has jurisdiction of a cause and the parties, and on complaint filed a judgment has been entered sustaining a general demurrer to the merits, such judgment, while it stands unreversed and unassailed, is conclusive upon the parties and will bar any other or further action for the same cause"--citing Johnson v. Pate, 90 N.C. 334; Willoughby v. Stevens, 132 N.C. 254, 43 S.E. 636; Alley v. Nott, 111 U.S. 472, 4 S.Ct. 495, 28 L.Ed. 491; Gould v. Railroad Co., 91 U.S. 526, 23 L.Ed. 416; and Miller v. Leach, 95 N.C. 229, the last case holding that the doctrine applies to a judgment recovered in the court of another state having jurisdiction of the subject-matter and the parties, and where, of course, there is no fraud in its procurement.

The charge of the court upon the eleventh issue, in respect to the Mecklenburg judgment, was therefore correct.

Second. But we think that the court erred in its charge to the jury upon other issues, as there were phases of the case which, if the evidence was believed by the jury, entitled the plaintiff to their verdict. We presume the presiding judge was of the opinion that the plaintiff, though a pledgee of the certificate of the stock, was not a bona fide holder of it for value and without notice. Whether the plaintiff, when it received the stock as collateral for the debt owing by H. P. Dew to it, had actual notice of the equity claimed by the United Development Company, was a question for the jury to determine upon the facts and circumstances, as there was nothing which in law would constitute notice. If the development company by its own negligence, or the negligence of its officers, to whom the possession of the stock made out to H. P. Dew in proper form, and signed by the proper person, was intrusted, allowed it to fall into the hands of H. P. Dew, with such evidence appearing on its face of his lawful or rightful ownership, and thereby permitted him to use it, in open market, as collateral security for a loan which the plaintiff made to him, it is bound by the act of its agents, and the holder who has taken the stock in good faith, without notice of any defect in the title of the pledgor and for value, will be entitled to hold it as against the company by which it purported to have been issued. We so held in Havens v. Bank, 132 N.C. 214, 43 S.E. 639, 95 Am. St. Rep. 627, where the subject was fully considered and many authorities cited in support of the principle. Titus v. Railroad Co., 61 N.Y. 237; Railroad Co. v. Bank, 60 Md. 36; McNeill v. Bank, 46 N.Y. 325, 7 Am. Rep. 341; Allen v. Railroad Co., 150 Mass. 200, 22 N.E. 917, 5 L. R. A. 716, 15 Am. St. Rep. 185; Bank v. Lanier, 11 Wall. 369, 20 L.Ed. 172. A strongly reasoned case is N.Y. & N.H. R. Co. v. Schuyler, 34 N.Y. 30. In McNeill v. Bank, supra, the court stated the rule with great force, as follows:

"The holder of such a certificate and power possesses all the external indicia of title to stock and an apparently unlimited power of disposition over it. He does not appear to have, as is said in some of the authorities cited, concerning the assignee of a chose in action, a mere equitable interest, which is said to be notice to all persons dealing with him that they take subject to all equities, latent or otherwise, of third parties, but apparently the legal title and the means of transferring such title in the most effectual manner. Such, then, being the nature and effect of the documents with which the plaintiff intrusted his brokers, what position does he occupy toward persons who, in reliance upon those documents, have in good faith advanced money to the brokers or their assigns on a pledge of the shares? When he asserts his title and claims, as against them, that he could not be deprived of his property without his consent, cannot he be truly answered that, by leaving the certificate in the hands of his brokers, accompanied by an instrument bearing his own signature, which purported to be executed for a consideration, and to convey the title away

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