Boyd v. Redd

• Decision Date: 13 April 1897
• Citation: 27 S.E. 35,120 N.C. 335
• Parties: BOYD v. REDD et al.
• Court: North Carolina Supreme Court

27 S.E. 35

120 N.C. 335

BOYD v. REDD et al.

Supreme Court of North Carolina

April 13, 1897

Appeal from superior court, Rockingham county; Hoke, Judge.

Action by Samuel H. Boyd, guardian, against E. M. Redd administrator of A. J. Boyd, and the Bank of Reidsville. Judgment for plaintiff, and defendant Redd appeals. Reversed.

J. T Pannill, for appellant.

J. T Morehead and Johnston & Johnston, for appellee.

CLARK J.

"It is clear that at common law a corporation has no lien upon the shares of its stockholders for debts due from them to the company. The policy of the common law has always been to discountenance secret liens, inasmuch as they hinder trade and restrict the safe and speedy transfer of property." Cook, Stock & S. § 521; 2 Thomp. Corp. § 2317; 2 Wat. Corp 227; Heart v. Bank, 17 N.C. 111. The statute, in such cases, being in derogation of common right, must be strictly construed to the purpose of its enactment. That purpose is thus clearly stated in Bank v. Smalley, 2 Cow. 770: "This clause in bank charters is intended merely for the protection of the bank, i. e. to give them a lien on the stockholder for what he owes the bank." It is conceded that for any indebtedness a stockholder incurs to a bank directly, whether as principal or surety, his stock in the bank is collateral security, by virtue of the terms of such charters. The stockholder knows that fact when he makes the bank his creditor. By such voluntary act he gives the lien, and waives his constitutional right to a personal property exemption. As to the direct indebtedness of A. J. Boyd to the bank, it holds 37 shares of his stock, which is admittedly sufficient to pay that indebtedness. A. J. Boyd, however, executed the note to the plaintiff, as guardian, on the 4th of August, 1893, which is the subject of this action, and, to secure the same, deposited with him 40 other shares of stock of the bank as collateral. In April, 1893, A. J. Boyd had executed his two notes, aggregating $7,300, to the Hermitage Cotton Mills, which notes, together with many others, were deposited in June, 1893 (being indorsed in blank), by said cotton mills, with the bank (of which said A. J. Boyd was president), as collateral to secure an indebtedness of the cotton mills to the bank. The question is whether, as to this indirect indebtedness of A. J. Boyd to the bank by reason of its taking his paper to another party, it acquires a lien upon the 40 shares of stock, and thereby renders worthless his deposit of the stock with the plaintiff as collateral. When the stockholder, as we have said, makes the bank his creditor, knowing the statute, he voluntarily assents to the stock being impounded, and waives his personal property exemption. But he cannot be thus taken as giving a lien on his stock, and waiving his constitutional exemption, when he executes a bond or contracts a debt to other parties; and the fact that such other party transfers the indebtedness of the stockholder, either by sale or as...