Foote v. Utah Commercial & Savings Bank

• Citation: 17 Utah 283,54 P. 104
• Decision Date: 09 July 1898
• Docket Number: 907
• Court: Utah Supreme Court
• Parties: GEORGIA FOOTE, RESPONDENT, v. UTAH COMMERCIAL AND SAVINGS BANK AND MELVIN E. CUMMINGS, APPELLANTS

54 P. 104

17 Utah 283

GEORGIA FOOTE, RESPONDENT, v. UTAH COMMERCIAL AND SAVINGS BANK AND MELVIN E. CUMMINGS, APPELLANTS

No. 907

Supreme Court of Utah

July 9, 1898

Appeal from district court, Salt Lake county; Ogden Hiles. judge.

Action by Georgia Foote against the Utah Commercial & Savings Bank impleaded with another. From a judgment for plaintiff, the bank appeals.

Affirmed.

C. W Morse, Bennett, Harkness, Howatt, Bradley & Richards, and Moyle, Zane & Costigan, for appellant:

The amount of proof required to show that a deed absolute is a trust or a mortgage is proof beyond all reasonable controversy. Chambers v. Emery, 13 Utah 378; Ewing v. Keith, 52 P. 4.

Even taking the strained construction that Foote's presence was Mrs. Foote's presence and possession, nevertheless the possession of the grantor in a warranty deed, after the execution of the deed, is presumptively under the deed and is not notice of any claim of the grantor. Dawson v. Danbury Bank, 15 Mich. 489; Koon v. Tramel, 32 N.W. 243 (Iowa); McNeel v. Jordan, 28 Kan. 7; Van Kuen v R. R. Co., 38 N. J. Law 165; Dodge v. Davis, 52 N.W. Rep. (Iowa) 2; Exor v. Dancke, 32 P. 1045 (Or.) ; Scott v. Gallegher, 14 Ser. & Rawle 333; Hafter v. Strange, 3 So. Rep. 190 (Miss.); Eyler v. Eyler, 60 Tex. 315; Newhall v. Pierce, 5 Pick. 450; Bloomer v. Henderson, 8 Mich. 404.

The pledge, as soon as the certificates were delivered, became a valid pledge against everybody, provided the bank then did not have notice. Parshael v. Eggert, 54 N.Y. 18; Nelson v. Edwards, 40 Barb. 279; Greeff v. Dickerhoff, 5 N.Y.S. 16.

In order to charge the bank with notice, it is necessary that the notice should have come to the executive officers of the bank, at a time when they were acting about this loan. Nothing of this kind is shown, and Cummings expressly disclaims that he ever said anything in regard to the matter to the officers of the bank. We have already cited 4 Thomp. Corp. sec. 5197, to the effect that notice must come to the directors while acting about the particular transaction. The knowledge of Cummings, of course, could not be imputed to the Bank. Bank of Nephi v. Foote, 12 Utah 157.

The requisites of notice are well settled. It must be strictly proven because the act is a fraud. Peeples v. Reading, 8 S & R. 484; Rogers v. Wiley, 56 Am. Dec. 491; McMechan v. Griffing, 3 Pick. 149.

So the supreme court of the United States says that the question in such a case is not whether he had the means of obtaining, and might by prudent caution have obtained, the knowledge in question, but whether not obtaining it was an act of gross negligence. Wilson v. Wall, 6 Wall 83; Lamont v. Stimson, 5 Wis. 443; De Voss v. Richmond, (Va.) 98 Am. Dec. 646.

In this case what evidence is there to charge the bank with notice of the interest of Mrs. Foote? Simply the inquiry made by Jennings as to what had become of Foote's (not Mrs. Foote's) interest in the mine. Cummings positively assured him that the Foote interest had been lost, and the executive committee had the right to rely upon their vendor's statement, unless there was something in the statement to excite suspicion. Boyce v. Grundy, 3 Pet. 210; Bulluck v. Holden, 13 Met. 355; Kerr on Fraud, 237, 238; Rogers v. Jones, 8 N.H. 264; Jones v. Smith, 1 Hare 43.

Notice to the clerk keeping accounts would not be notice to the bank. Goodloe v. Godley, 51 Am. Dec. 159.

Notices contained in newspapers are not notice to the corporation. Bank v. Whitehead, 10 Watts 397; 36 Am. Dec. 186; Vernon v. Manhattan Co., 17 N.Y. 524.

These shares were mining stock, and the strictest rule is held in regard to that species of property, because its value is fluctuating, and as here, liable to sudden changes. Twin Lick. Oil Co. v. Marbury, 91 U.S. 587; Clarke v. Hart, 6 H. L. Cas. 633, 656; Johnston v. Standard Mfg. Co., 39 F. 304.

C. S. Varian and E. B. Critchlow, for respondent:

That the transaction whereby Cummings agreed to procure and deliver the stock certificate was not a pledge, see the following authorities. Jones on Pledges, (1883) sec. 29-30; City v. Olmstead, 33 Conn. 476; Christian v. Railroad Co., 133 U.S. 241; Casey v. Caverarock, 96 U.S. 477, 490; 2 Thompson Corporations, sec. 2615; Cook on Stockholders, sec. 465; National Bank v. Nelson, 38 Ga. 391; Bidstrup v. Thompson, 45 F. 453.

A simple direction to the corporation does not constitute a pledge. Cook on Stockholders (Supra); Lallande v. Ingram, 19 La. Ann. 364.

Affirming the act of its cashier, and claiming title through that act, it is bound by its knowledge of an infirmity in the title. By the act of ratification his agency is affirmed. Bank v. New Milford, 36 Conn. 93; Atlantic Mills v. Indian Mills, 147 Mass. 272; Thomson H. Elec. Co. v. Capital Co., 126 C. C. A. 646.

The power of sale was not exercised fairly. The provision in the contract for a public or private sale must be interpreted in the light of reason and the policy of the law. Whatever may be the terms of a contract for a sale of pledged property, it is always understood that a fair sale is contemplated. If the sale is private, it is none the less expected that opportunity for bids shall be given. If it be public, a competition of bidders is implied from the very word itself. The provision, "without notice," must be construed to mean without notice to the debtor. This is in accordance with the rule requiring a construction favorable for the interests of the pledgor, so far as is consistent with the rights of pledges. Colebrook Collateral Securities, sec. 118; Sparhawk v. Drexel, 12 Bank Reg. 450; Union Trust Co. v. Rigdon, 93 Ill. 466.

MINER, J. BARTCH, J., concurs. ZANE, C. J., concurs. in the conclusion.

OPINION

MINER, J.:

This action was brought by the plaintiff and respondent to declare and hold the defendant bank as trustee for the plaintiff's use and benefit of 6,250 shares of the capital stock of the Diamond Coal & Coke Company, standing in the name of the bank. The trial court adjudged the bank a trustee for the plaintiff, and ordered it to deliver the stock, properly indorsed, to the plaintiff, subject to the payment of $ 843.91 to defendant Cummings. From this decree the bank appeals to this court, assigning errors upon the admission of testimony and upon the findings of the court.

The testimony tends to show, and the court found, among other things: That defendant Cummings was an officer and cashier of the defendant bank until May 13, 1895. That plaintiff was a married woman, and the wife of James E. Foote, and that the matters referred to concerned her separate property. That in November, 1892, plaintiff, Georgia Foote, being the owner of 80 acres of coal land in Wyoming, subject to the paramount title in the United States, entered into an agreement with defendant Cummings whereby, in consideration of the expenditure of money by Cummings, and further considerations for her benefit, plaintiff agreed to sell to Cummings the undivided one-half of said coal land, when the title thereto should be obtained from the United States, for the sum of $ 1,000, $ 250 of which sum was to be paid down. That thereafter said plaintiff and Cummings entered into the possession of said property as partners under the name of the Diamond Coal Company, and expended money in working and developing the mines and selling the output thereof until May or June, 1893, when they ceased to operate the mine. That at this time the defendant bank had knowledge and notice that plaintiff had an interest in said 80 acres of land, and that the Diamond Coal Company was composed of Cummings and the plaintiff. That, when it became necessary to procure title to said lands from the United States, it was agreed between the plaintiff and Cummings that the sum of $ 1,600, necessary to pay the United States therefor, should be paid by Cummings, and as security for one-half of said sum so advanced by him, and other moneys which had been, or would thereafter be, advanced and expended on the property, the plaintiff would cause title to said lands to be vested in Cummings, by way of a mortgage, and that the legal title to one-half thereof should be held in trust for plaintiff, as security to Cummings. That this agreement was carried out and upon the final purchase the plaintiff and her husband, in the year 1894, conveyed by warranty deed to Cummings the whole of said 80 acres, to be so held as security in trust for the plaintiff. That the title thereto remained in Cummings until conveyed to the Diamond Coal & Coke Company, hereinafter named. That in March, 1894, plaintiff and defendant Cummings entered into an agreement with other persons for the purpose of establishing the Diamond Coal & Coke Company. That the basis of such corporation was an agreement between plaintiff and Cummings and others whereby said 80 acres owned by the plaintiff and Cummings, the title of which was in Cummings, with other lands adjacent thereto, should be acquired in payment of its capital stock, which stock should be issued to the various owners of the land so conveyed to the corporation. That said Diamond Coal and Coke Company so formed still exists, with a capital stock of 100,000 shares. That said Cummings subscribed to said articles of incorporation, as incorporated, for 12,500 shares, and the name of plaintiff is nowhere mentioned in said articles. That in payment for said 12,500 shares, Cummings conveyed to the corporation said 80 acres of coal land, and there was issued to him 12,500 shares of stock, as representing the 80 acres of coal land. That, plaintiff being still indebted to Cummings, it was agreed that the stock should all be issued to Cummings, he to hold 6,250 shares thereof to secure said indebtedness from plaintiff, in lieu of the one-half interest...