Bank of Atchison County v. Durfee

• Decision Date: 07 December 1893
• Parties: Bank of Atchison County, Appellant, v. Durfee et al., Appellants
• Court: Missouri Supreme Court

24 S.W. 133

118 Mo. 431

Bank of Atchison County, Appellant, v. Durfee et al., Appellants

Supreme Court of Missouri, Second Division

December 7, 1893

Appeal from Atchison Circuit Court. -- Hon. C. A. Anthony, Judge.

Affirmed.

McKillop and Lewis & Ramsay for plaintiff, appellant.

(1) The court erred in finding for Deitz and Kenirim, as to the twenty-five shares of stock embraced in certificate number 28, and in refusing to enforce plaintiff's lien thereon for the following reasons: First. Under the by-laws agreed to, adopted and used by all the stockholders, directors and officers of the bank, Wanschaffe among them, a lien was reserved upon all the stock for all debts of every kind, due or undue, held by the corporation against the stockholders and no stock could be transferred until such liabilities were paid. It was only under and by virtue of the by-laws that any certificates at all were issued for the stock in controversy. These by-laws were formally adopted by all the stockholders who were also all directors. Their regular use in all the business of the bank would have been sufficient without formal adoption. 2 American and English Encyclopedia of Law p. 709, sec. 5, and note. Second. The by-laws regulating transfer of stock and retaining lien on same were valid. Revised Statutes, of 1879, secs. 720, 739; Ins. Co. v. Goodfellow, 9 Mo. 149; Spring Co. v. Harris, 20 Mo. 383; O'Brien v. Cummings, 13 Mo.App. 197; Bank v. Bank, 45 Mo. 513; Spurlock v. Railroad, 61 Mo. 319; Kahn v. Bank, 70 Mo. 262; Bank v. Laird, 2 Wheat. 390; Moores v. Bank, 111 U.S. 156; Goddard v. Merchants' Exchange, 78 Mo. 609; Cook on Stock and Stockholders, secs. 525-531. Third. Said by-laws, even if they had never been passed as such, would with the recitals on face of stock certificate, still constitute a contract, binding upon said Wanschaffe and all parties who accepted such certificates. Vansands v. Bank, 26 Conn. 144; Walus' Assignees v. Bank, 8 S. and R. 73-78; S. C., 11 Am. Dec. 575; Bank v. Railroad, 13 N.Y. 597; Savings Association v. Printing Co., 25 Mo.App. 642; Jennings v. Bank, 21 P. 852. The certificates were notice to those who acquired them that they were only transferable on the books of the bank in person or by attorney, on surrender of old certificate, and all parties were bound by them. Farrington v. Railroad, 150 Mass. 406; Moores v. Bank, 111 U.S. 156. Deitz was already a stockholder of the corporation and supposed to know its rules and by-laws. McLellan v. Schools, 15 Mo.App. 362; Inhabitants v. Morton, 25 Mo. 593. Fourth. The certificate of stock was in no sense a negotiable instrument and could not give Deitz and Kenirim any greater rights than Wanschaffe had. Land Co. v. Dennis, 28 Central Law Journal, No. 18, 402; Hammond v. Hastings, 134 U.S. 401; Hallins v. Railroad, 29 N.Y.S. R. 268. It was not even quasi negotiable; it was not accompanied with any authority to anyone to make transfer on the books of the bank. Bank v. Railroad, 13 N.Y. 597. Fifth. The mortgage of the stock, not acknowledged nor recorded, containing no authority to transfer on books, describing the note as only for $ 300 instead of $ 3,000, accompanied by the mere delivery of the unindorsed certificate, amounted, at most, only to an equitable transfer, and being inferior in point of time to plaintiff's equity, was therefore inferior to plaintiff's lien and subject to it. Bank v. Railroad, 13 N.Y. 297; Railroad v. Howard, 7 Wall. 415; Daniel on Negotiable Instruments [2 Ed.], secs. 1708, 1709. Sixth. The knowledge or acts of Wanschaffe, though an officer, were not binding on the bank when he was acting in his own personal interest. Johnson v. Shortridge, 93 Mo. 227; Moores v. Bank, supra. (2) Under the law and the evidence and the equities in this case the finding should have been for plaintiff as to all the stock in controversy, and the court erred in not so finding. Bank v. Railroad, 13 N.Y. 597. (3) The court erred in not sustaining plaintiff's motion for a new trial. The judgment should have been for plaintiff upon all the issues involved. (4) The fact that part of the defalcation occurred while the bank went under the name of Durfee & Wyatt before incorporation is immaterial. The corporation was simply a continuation of the old concern in a new form. The corporation succeeded to the private concern, absorbed and continued the use of the assets and books, and was the owner thereof.

Huston & Parrish for defendants, appellants.

(1) The stock in suit is personal property. The right of Wanschaffe therefore, to make sale of his shares of stock, or assign them or pledge them in good faith as collateral, or otherwise, the bank being solvent, was not in any manner subject to the control of the bank, and a delivery of the instrument transfering the stock from Wanschaffe to Kenirim and Deitz, together with the delivery of the certificate to them, passed the title, notwithstanding Wanschaffe may have been indebted to the bank. Revised Statutes, 1879, p. 122, sec. 739; Bank v. Richardson, 6 Mo.App. 454. This opinion of court of appeals was adopted by the supreme court, and judgment affirmed without comment. 74 Mo. 77; Bank v. Lanier, 11 Wall. 369; Johnson v. Claflin, 5 Dillon C. C. 75; S. C., 103 U.S. 800-806, and authorities cited; Moore v. Bank, 52 Mo. 377; Spring Co. v. Harris, 20 Mo. 382; O'Brien v. Cummings, 13 Mo.App. 197; Carrol v. Savings Bank, 8 Mo.App. 249-251; Johnson v. Underhill, 52 N.Y. 203; McNiel v. Bank, 46 N.Y. 325. (2) The purpose of requiring the transfer of stock on the books of the bank is for the benefit of the bank and those dealing with it, that the bank may know who are the shareholders and entitled to vote, receive dividends, etc. But the right of the owner of stock to transfer it is not thereby restricted, or the title thereto, when bona fide transferred or pledged, in any manner affected. Bank v. Lanier, 11 Wall. 369; Johnson v. Claflin, 5 Dillon, C. C. 65-76, and authorities cited; Black v. Zachrie, 3 How. 483; Bank v. Laird, 2 Wheat. 390; Ins. Co. v. Cummings, 13 Mo.App. 76; Bank v. Richardson, 6 Mo.App. 454-460. (3) Restrictions on the right of a stockholder to sell, bona fide, and transfer his shares of stock must be found in express legislative enactments, either expressly given or the power expressly conferred upon the company to so provide by by-laws. Johnson v. Claflin, 5 Dillon, C. C. 74; O'Brien v. Cummings, 13 Mo.App. 197, 198; Carrol v. Mullanphy, 8 Mo.App. 249-252, and authorities cited; Bank v. Bank, 20 N.Y. 505; Moore v. Bank, 52 Mo. 379. (4) The defendants in this case had no notice of any secret lien or indebtedness from Wanschaffe to the bank, nor of the existence of any pretended by-laws. There is a vast difference between the statute laws of the state and the by-laws of the bank. The first are a part of the laws of the land, of which strangers, as well as the bank itself, would have to take notice. The latter are for the government of the affairs of the bank and of which strangers are not bound to take notice. O'Brien v. Cummins, 13 Mo.App. 197; Carrol v. Mullanphy, 8 Mo.App. 249. (5) A lien created by by-law can only bind those who take the stock with actual notice of the by-law. Cook on Stock and Stockholders, sec. 523; Morawetz on Corporations [2 Ed.], sec. 203, cases cited; Driscoll v. Co., 59 N.Y. 96; Bank v. Pinson, 58 Miss. 421; Bank v. Bank, 63 Cal. 359; Adley v. Stable Co., 17 Vesey, 316; Slee v. Bloom, 19 Johns. 456. (6) The certificates have a quasi negotiable character. Bank v. Richardson, 6 Mo.App. 461; Kortnight v. Bank, 20 Wend. 91; 22 Wend. 348; McNeil v. Bank, 46 N.Y. 325; Matthews v. Bank, 1 Holmes, 396; Bank v. Lanier, 11 Wall. 377. (7) The agreement between Wanschaffe, Hunter and Deusers that Wanschaffe would leave his stock in bank as collateral to indemnify them against the payment of the notes which they signed as security for him to enable him to raise the money to buy his stock, and which was left in bank in the stock book, operated as an equitable assignment of the stock to them. Johnson County v. Bryson, 27 Mo.App. 341; May v. Bank, 80 Mo. 675; Bank v. Bogy, 44 Mo. 13; Williams v. Ingersol, 89 N.Y. 508; Smith v. Sterrett, 24 Mo. 260; Lanigan's Adm'r v. Bradley, 24 A. 505. (8) These defendants furnished the money to Wanschaffe to purchase his stock. To secure them, the stock was to stand in pledge -- to be left in the bank for them. This was the understanding before the money was furnished, and upon this understanding the parties acted. This understanding existed before there was any indebtedness to the bank -- before the stock was issued, and the sureties acted on it all the way through. Their equity is superior to that of the plaintiff, and their right attached before the plaintiff claimed to have any. May v. Bank, 80 Mo. 680. What is agreed to be done, must, in equity, be considered as done. Snider v. Bank, 51 Mo. 175. It is not considered necessary to cite further authorities on this familiar equitable rule. (9) The court erred in admitting as evidence the pretended by-laws offered by the plaintiff. They were not the by-laws of the bank. They were not passed by its authority, or by any authority having the legal right to pass them, nor were they adopted by the plaintiff, but were passed and adopted by private citizens at a mass meeting, before the plaintiff had a legal existence -- ten days before the plaintiff was incorporated, and ninety days or more before it was organized. Revised Statutes, 1879, p. 117, sec. 710; Carrol v. Savings Bank, 8 Mo.App. 249; Albers v. Merchants' Exchange, 39 Mo.App. 583; Company v. Wysong, 51 Ind. 4; Angell and Ames on Corporations, p. 323, sec. 1. (10) The court erred in charging the stock with the amount of shortage, $ 3,196.94, accruing prior to the...