Garber v. Beachy

• Decision Date: 08 March 1919
• Docket Number: 22,001
• Citation: 179 P. 365,104 Kan. 445
• Parties: W. R. MITCHELL and C. A. GARBER, Appellees, v. RICHARD BEACHY, THE STATE BANK OF ESBON et al., Appellants
• Court: Kansas Supreme Court

179 P. 365

104 Kan. 445

W. R. MITCHELL and C. A. GARBER, Appellees, v. RICHARD BEACHY, THE STATE BANK OF ESBON et al., Appellants

No. 22,001

Supreme Court of Kansas

March 8, 1919

Decided January, 1919.

Appeal from Jewell district court; RICHARD M. PICKLER, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. CONTRACT--Stockholders of Bank--Agreement Relating to Purchase of Outstanding Shares of Stock. A contract entered into by the holders of all the stock of a bank except three shares, terming themselves "parties of the first part" and "party of the second part," that should the three shares or any of them be purchased by the bank "or any part of them" each party to the instrument should be entitled to one-half thereof, and that when all three shares should be purchased by the bank "each party to this contract" should own one-half of the stock thereof, was binding on the shareholders who executed the contract, and after each faction had bought one of such shares the purchase by one faction of the third share still left the other faction owner and entitled to control of one-half thereof.

2. BANK STOCK--Transfer--Method of Assignment. An officer of the bank owning five shares executed a written assignment for one-half of one share to the cashier, who was the second party to the contract referred to in paragraph 1 hereof. Such assignment expressly authorized the proper officers of the bank to make the necessary transfer on the stock-certificate book, and the assignor promised to deliver the certificate for the five shares within a day or two, but failed so to do. Held, that the cashier in issuing to himself a certificate for the one-half share and in marking the old certificate canceled when finally delivered acted within the authority expressed in the assignment.

3. SAME--Assistant Cashier Had No Authority to Issue Certificates of Bank Stock. When the assignment and transfer were executed and made, the stock books showed the assignor to be the holder of five shares, and the only method provided in the by-laws for the issuance of stock was by the act of the president and cashier. After the transfer was made another officer of the bank and the assistant cashier executed to the former a certificate for the five shares. Held, that the assistant cashier had no authority to issue certificates, and that for this reason and because of the attempted issuance of one-half of one share more than there was outstanding, such certificate was void as to such one-half share, and the cashier cannot be compelled to treat such issue as valid.

4. SAME--Corporate Stock is Nonnegotiable. Corporate stock is not negotiable, and whoever takes it does so subject to the equities and burdens thereof.

5. SAME--Duty of Bank Cashier to Notify Bank Commissioner of Transfer of Bank Stock. It is the duty of the cashier of a bank upon the transfer of any of its stock to certify immediately to the bank commissioner such change of ownership.

6. SAME--Passing of Title to Bank Stock. Neither the fact that the assignment of the one-half share was not written upon the back of the certificate nor the failure of the assignor to surrender up the old certificate for cancellation precluded the passing of title to such half share.

7. SAME. One having no title to corporate stock cannot by a pretended or attempted sale thereof pass title thereto.

8. SAME--Action to Compel Transfer. Whether the action be regarded as strictly one in mandamus or as one of equitable consideration, the plaintiffs are not entitled to prevail.

J. R. White, of Mankato, F. W. Mahin, and I. M. Mahin, both of Smith Center, for the appellants.

R. W. Turner, Donald F. Stanley, both of Mankato, and W. D. Vance, of Belleville, for the appellees.

OPINION

WEST, J.:

The plaintiffs sued to compel the defendants to issue to them certain certificates of stock in the State Bank of Esbon and to cancel outstanding certificates then held by Richard Beachy. The issues were so framed as to include a much wider controversy than indicated by what is called the application for the writ, and the trial resulted in a judgment for the plaintiffs, from which the defendants appeal.

H. B. Keim, R. S. Beachy and M. J. Beachy were in the banking business at Esbon and owned all the capital stock of the State Bank except three shares, one of which was owned by W. E. Mallory, one by A. S. Poulson and one by J. C. Hershner, represented respectively by certificates No. 1, No. 2 and No. 3, each for $ 100, there being 153 shares in all.

Early in 1903 a contract was entered into by which H. B. Keim, R. S. Beachy and M. J. Beachy sold to Richard Beachy an interest in the bank, and in which it was agreed that the total capital should be $ 30,300, divided into shares of $ 100 each, of which $ 15,300 should be shown as capital stock and the remainder placed to the credit of Beachy, Keim & Co., and used by the bank as though it were capital stock. The $ 15,300 capital stock was to be divided one share each to R. S. Beachy, Hershner, Mallory, and Poulson, 59 shares to H. B. Keim, 15 to M. J. Beachy and 75 to Richard Beachy. It was also agreed that should the three shares of stock not owned by the parties be purchased by the Bank of Esbon "or by any part of them," then each party to the contract should be entitled to one-half of such stock as might be purchased from time to time, and when all such outstanding stock should be purchased by the bank each party to the contract should own one-half of the stock thereof. It was also agreed that neither party to the contract should join the stock not owned by either of them when it should come to a matter of voting on any issue that might arise in the bank, but that all matters should be decided wholly by both parties to the contract and by them only. The contract was signed by H. B. Keim, M. J. Beachy and R. S. Beachy, "Parties of the First Part," and Richard Beachy, "Party of the Second Part." In 1906 the stock was increased to $ 25,000, each faction holding 123 1/2 shares.

The plaintiffs alleged that the defendant Richard Beachy was cashier; that they had bought 125 1/2 shares of the bank stock; that the original shares were delivered to them properly signed and registered by the owners thereof; that after they delivered their certificates to the defendant Richard Beachy he caused to be executed and delivered to them 119 1/2 shares and refused to deliver the other 6 shares, for the purpose of keeping in himself and immediate members of his family the control of the bank; and that the 6 shares were represented by certificates No. 31 and No. 34.

The answer alleged that on the 14th day of October, 1916, when certificate No. 34 purported to have been issued, the full 250 shares were outstanding and No. 34 was void as an overissue and because of not being properly executed. The same allegation was made regarding certificate No. 31. It was denied that Richard Beachy had ever refused to issue new certificates to the holder of any valid certificate; that when the contract was entered into certificates No. 1, No. 2, and No. 3 stood in the names of Mallory, Poulson, and Hershner.

The provision of the contract already referred to was pleaded, and it was further alleged that on or about December 3, 1908, H. B. Keim bought the Mallory share, to the certificate of which there was attached a written assignment by Mallory to H. B. Keim, who, for the purpose of covering and concealing the fact of his purchase, inserted before his name in the assignment the letters "Mrs.," but that no assignment was ever made to Mrs. Keim; that on or about January 7, 1914, H. B. Keim fraudulently attempted to assign this certificate to one Albert Jelinek, writing on the back thereof an assignment, and signing it "H. B. Keim"; that at this time Jelinek was an employee of the bank and had knowledge that Richard Beachy was the owner of one-half of this share of stock, and that the pretended assignment from H. B. Keim to Albert Jelinek was never entered on the books or records of the bank; that at the time of executing this assignment Jelinek promised to deliver on the following day certificate No. 30, but that it was not delivered until October 14, 1916, when it was marked canceled; that on or about October 14, 1916, H. B. Keim, who was then president, wrongfully and in the nighttime, and not in the presence of Richard Beachy, the managing officer in control of the bank and in possession of the books and records, entered the bank and issued to himself a pretended certificate for five shares, numbering it 34; that on or about January 14, 1914, H. B. Keim fraudulently attempted to issue to L. G. Keim, his wife, certificate No. 31 for one-half a share, when the full amount of authorized stock was already outstanding; and that these fraudulent certificates were the ones on which the plaintiffs based their claims, although when purchasing them "the plaintiffs had full knowledge of all matters and things herein alleged." Then followed numerous averments of misconduct on the part of the Keim faction, and of H. B. Keim himself, which need not be set forth.

The record shows that Keim bought the Mallory share January 3, 1908, but let it stand in the name of Mallory until January 17, 1914, the dividends being paid to Mallory during all that time. The assignment by Mallory was made to read "Mrs." H. B. Keim. Six years thereafter H. B. Keim assigned the certificate to Albert Jelinek. After Richard Beachy learned that the Mallory share had been purchased, he bought the Poulson share for his son. This left the two crowds equal, with the Hershner share to be bought and divided to keep them equal, or to be acquired by one and thereby gain the controlling interest in the bank.

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