Bank of America v. McNeil
| Citation | 73 Ky. 54 |
| Parties | Bank of America v. McNeil. |
| Decision Date | 21 January 1873 |
| Court | Kentucky Court of Appeals |
APPEAL FROM LOUISVILLE CHANCERY COURT.
BODLEY & SIMRALL, For Appellant,
Angell & Ames on Corporations, ed. 1871, secs. 354, 353, 575.
2 Conn 579, Marlboro Manufacturing Co. v. Smith.
3 Conn 544, Newton B. T. Co.
6 Conn 552, Oxford Turnpike Co. v. Burmell.
5 Conn 246, Northrop v. Curtis.
1 R. I. 40, Cross v. Phœ nix Bank.
2 Wheaton, 390, Union Bank v. Laird.
6 Pick. 324, Nesmith v. Washington Bank.
8 Pick. 90, Sergeant v. Franklin Insurance Company.
3 How. 513, Black v. Zacharie.
7 Cowen, 770, Bank of Utica v. Smalley.
9 Pick. 202, Sergeant v. Essex Manufacturing Co.
1 Parson's Eq. S. L. Cases, 247, Bank of Ky. v. Schuylkill Bank.
2 Greenleaf on Evidence, section 520.
1 Dana, 84-5, Letcher v. Commonwealth's Bank.
11 Wendell, 627, Gilbert v. Manchester I. M. Co.
10 Mass. 324, Quiner v. Marblehead Insurance Co.
| 14 Ala. 82. | 6 Peters, 51. | 8 Peters, 12. |
H. C. PINDELL, For Appellee,
CITED
Angell & Ames on Corporations, secs. 353, 354, 305.
| Story's Equity, sec. 409. | 22 Wend. 348. |
Bank By-laws, secs. 9, 17, 24.
9 Mo. 155, St. Louis Perpetual Ins. Co. v. Goodfellow.
3 Howard, 453, Black v. Zacharie.
7 W. & S. 331, Boggs v. Lancaster Bank.
1 Green's Ch'y, 128, Trenton Banking Co. v. Woodruff.
20 Wend. 93, Kortwright v. Buffalo Commercial Bank.
14 Wend. 271, Ruse v. Bank of Commerce.
10 Ohio St. 298, Conant v. Seneca Bank.
December 29, 1871, Robert Atwood sold and assigned to Malcolm McNeil the promissory note of A. Shoefel & Co. Said note was for twelve thousand dollars. It bore date as above, and was due six months thereafter.
To secure the payment of this note Atwood transferred to McNeil certain securities, among them a certificate for twenty shares of the capital stock of the Bank of America. The transfer was made to Alexander, agent for McNeil, to whom was executed a power of attorney authorizing him to transfer the stock to himself upon the books of the bank. Alexander was induced to accept as security this certificate of stock by the production to him by Atwood of the following statement in writing, given by the cashier of the bank, viz.:
" LOUISVILLE, KY., December 29, 1871.
??The twenty shares of stock owned by R. Atwood in Bank of America, represented by certificate No. 107, is unencumbered, and this bank has no claim on the same, and releases all claim for six months.
CLINTON MCCLARTY."
On the 2d of July, 1872, when the note of A. Shoefel & Co. matured, one thousand dollars were paid, and a new note for eleven thousand dollars, due in sixty days, executed. This note was also made payable to Atwood, and by him indorsed to McNeil. The pledge of the bank-stock was continued to secure its payment.
May 27, 1872, Atwood contracted a debt to the Bank of America for the sum of five thousand dollars, and on the 7th of August, 1872, another debt for the same amount.
About the 27th of that month he failed in business. A. Shoefel & Co., of which firm he was a member, also became insolvent about the same time. As soon as the fact of Atwood's failure became public Alexander applied to the bank to be allowed to transfer the bank-stock to himself, as he was authorized to do by the terms of the power of attorney indorsed on the certificate. The bank refused to allow the transfer to be made. Such other collaterals as were held by McNeil were sold, and the proceeds applied to the satisfaction of the eleven thousand dollar note. A large balance remaining unpaid, he instituted this action, making the Bank of America a party defendant, and asking judgment against it for the market value of the twenty shares of stock, claiming that the refusal of the bank to allow the transfer was in effect a conversion of the stock.
The bank answered, setting up its claims against Atwood, and insisting that its charter gave it a lien upon the stock superior to any right acquired by McNeil under and by virtue of the transfer to his agent of the certificate.
It is not seriously insisted that the cashier of the bank did not have actual knowledge of the transfer to Alexander at the time the loan of May 27, 1872, was negotiated; but the proof does not show actual knowledge upon the part of any officer of the bank of the continuance of the pledge to secure the eleven thousand dollar note at the time of the negotiation of the loan made on the 7th of August, 1872.
The provision of the charter under which the bank claims its superior lien is in these words: " The stock shall be deemed personal property, and shall be assignable only on the books of the bank, upon such rules as the board of directors shall from time to time establish; but said corporation shall have a lien on the stock to secure any indebtedness by the stockholder to said corporation." The indebtedness this lien is intended to secure is such as may exist at the time the stockholder attempts to dispose of his stock. It is manifest that the lien can not become effectual for any purpose until the stockholder contracts a debt to the bank. Until this is done his power to sell, give, devise, or encumber his stock is as perfect and complete as is his right so to dispose of or encumber any other personal property he may own.
He can not pass the complete legal title to his stock except by a transfer entered upon the books of the bank, nor can he by any arrangement not made known to the bank deprive it of the right to look to his stock as an ultimate security for the payment of any indebtedness it may innocently permit him to incur; but he may by bargain and sale, by gift, devise, or pledge, divest himself of title, and when he has done so, and notice has been given to the bank, it has no right to extend credit to him upon the faith of its charter lien upon his stock.
The assignment to Alexander of the certificate, with power to transfer to himself, on the books of the bank was a symbolical delivery of the stock. The transfer upon the books would have made perfect his evidence of title, but as...
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