George Rankin v. Fidelity Insurance, Trust Safe Deposit Company

• Decision Date: 06 April 1903
• Docket Number: No. 178,178
• Citation: 189 U.S. 242,23 S.Ct. 553,47 L.Ed. 792
• Parties: GEORGE C. RANKIN, Receiver, etc., Plff. in Err. , v. FIDELITY INSURANCE, TRUST & SAFE DEPOSIT COMPANY
• Court: U.S. Supreme Court

189 U.S. 242

23 S.Ct. 553

47 L.Ed. 792

GEORGE C. RANKIN, Receiver, etc., Plff. in Err.,

v FIDELITY INSURANCE, TRUST & SAFE DEPOSIT COMPANY.

No. 178.

Argued February 26, 27, 1903.

Decided April 6, 1903.

This was an action at law by the receiver of the Keystone National Bank of Erie, Pennsylvania, against the defendant company, as the actual owner and holder of 172 1/2 shares of the capital stock of the bank, standing upon its books in the name of one William W. Hand, to recover an assessment upon the shareholders of 100 per cent made by the Comptroller of the Currency pursuant to Rev. Stat. § 5151 (U. S. Comp. Stat. 1901, p. 3465).

The facts of the case are substantially as follows: On November 15, 1890, Delamater & Co., a banking firm of Meadville, Pa., borrowed $15,000 of defendant company, in renewal of prior loans, giving therefor their note for sixty days, and as collateral security deposited 230 shares of the capital stock of the Keystone National Bank of the par value of $100 per share, standing in the name of the individual members of the firm. The shares were valued at the time at par, $23,000; the bank was in good credit, and for twenty-seven years had regularly, and was then paying, semiannual dividends. With its certificates of stock thus deposited, powers of attorney signed by the individual holders of the stock were also delivered to the defendant. These documents empowered the defendant to* transfer the shares—the name of the transferee and the attorney being blank.

Twenty days thereafter, and on December 5, 1890, Delamater & Co. failed and made a general assignment for the benefit of their creditors, and on December 17, defendant having received notice of the assignment, wrote to the assignees declining to renew the note, but offering to anticipate its payment and return the collaterals. It seems the assets of Delamater & Co. were insufficient for this purpose.

On January 10, 1891, defendant sent to the Keystone National Bank of Erie the original certificates, deposited as collateral, and requested the bank to transfer the shares to William W. Hand, a clerk in the employ of the defendant. Three days later, and on January 13, the bank paid a semiannual dividend of 2 per cent, but it does not appear who received this dividend, which proved to be the last one paid by the bank. The transfer was made on the books of the bank, and new certificates issued in the name of Hand, dated January 15, 1891, and were transmitted by the bank to the company, which acknowledged receipt of the stock, and stated that it would like to have a bid for the stock 'if you know of a purchaser.' Hand signed the transfer in blank on the back of these certificates, and in that form they were retained by the defendant. There was no receipt for the certificates except a memorandum in the handwriting of the clerk on the stub of the stock book: 'Sent to the Fidelity Insurance, Trust, and Safe Deposit Company, Philadelphia, Penn., 1/17/91.'

Fourteen months thereafter, and on March 16, 1892, the Comptroller of the Currency, finding that the capital of the bank was impaired, ordered an assessment of 25 per cent on the capital stock to make good the deficiency. The assessment upon these shares amounted to $5,750. This amount was paid by the defendant and charged on its books to Delamater & Co. as an additional advance. Its check was sent to the bank in a letter signed by Mr. Hand.

On December 22, 1892, pursuant to Rev. Stat. § 5143 (U. S. Comp. Stat. 1901, p. 3463), and with the approval of the Comptroller of the Currency, the capital stock of the bank was reduced from $250,000 to $150,000 divided into 1,500 shares of $100 each. Thereupon, and on January 24, 1893, the defendant sent to the bank the certificates for 230 shares, and on February 7 received the certificates in the name of Hand, for 172 1/2 shares, being the reduced number. Hand signed a transfer in blank on the back of the certificates, and in that form they remained in the possession of the defendant. On March 20, 1894, the vice president of the defendant company addressed a letter to the bank, stating that the company held 172 1/2 shares of the stock registered in the name of W. W. Hand, and requesting a copy of their last statement and any other information regarding the business of the bank, and as to whether there were any sales of stock, saying 'We would like to sell our holdings, if marketable.' No reply being received to this letter, the defendant company repeated its substance in another letter of April 4, stating that 'as we have a loan of $22,000 depending upon the value of 172 1/2 shares, we desire the above information.' Several other letters were written to the same purport.

On June 20, 1897, the Keystone National Bank closed its doors, on July 26, the Comptroller of the Currency appointed a receiver, and on November 3 ordered an assessment of 100 per cent on the stockholders. Whereupon this action was brought to recover an assessment of $17,500 on the shares registered in the name of Hand.

The case was tried before a jury, and the question submitted to them 'whether, before this Keystone National Bank failed, the defendant company, the Fidelity Trust Company of this city, was the real owner of these shares of stock, or whether it continued to be the pledgee of the stock,—whether the stock had become theirs in the sense in which we use in ordinary speech the word 'owner,' or whether it had been continued to be pledged to them as collateral security for the payment of the note which has been offered in evidence.'

Upon the issue thus submitted the jury returned a verdict for the defendant, upon which judgment was entered, and the case taken to the circuit court of appeals upon writ of error. That court affirmed the judgment. 46 C. C. A. 509, 108 Fed. 475.

Mr. Asa W. Waters for plaintiff in error.

Mr. Richard C. Dale for defendant in error.

Mr. Justice Brown delivered the opinion of the court:

There being but little conflict in the testimony as to the actual facts, the question really is whether the court should have submitted the case to the jury, or instructed a verdict for the plaintiff.

By Rev. Stat. § 5151 (U. S. Comp. Stat. 1901, p. 3465), 'the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements for such association to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares;' and by § 5234 (U. S. Comp. Stat. 1901, p. 3507), the receiver may, upon order of the proper court, enforce this individual liability.

Most of the cases arising under this section have turned upon the question whether defendant was in fact the owner of the shares. In this connection the following propositions may be considered as settled:

1. That liability may be established by allowing one's name to appear upon the books of the corporation as owner, though in fact he be only a pledgee. Pullman v. Upon, 96 U. S. 328, 24 L. ed. 818. Nor can the real owner exonerate himself from responsibility by making a colorable transfer of the stock, with the understanding that, at his request, it shall be retransferred. U. S. 628, 25 L. ed. 448; Bowden v. Johnson, U. S. 628, 25 L. ed. 448; Bowden v. Johnson, 107 U. S. 251, Sub nom. Adams v. Johnson, 27 L. ed. 386, 2 Sup. Ct. Rep. 246; Stuart v. Hayden, 169 U. S. 1, 42 L. ed. 639, 18 Sup. Ct. Rep. 274.

2. Stockholders of record are liable for unpaid instalments, though in fact they may have parted with their stock, or held it for others. Hawkins v. Glenn, 131 U. S. 319, 33 L. ed. 184, 9 Sup. Ct. Rep. 739.

3. A mere pledgee, however, who receives from his debtor a transfer of shares, surrenders the certificate to the bank and takes out new ones in his own name, in which he is described as 'pledgee,' and holds them afterwards in good faith, and as collateral security for the payment of his debt, is not subject to personal liability as a shareholder. Pauly v. State Loan & T. Co. 165 U. S. 606, 41 L. ed. 844, 17 Sup. Ct. Rep. 465. But it is otherwise if he allow his name to appear on the book as owner, or, being the owner, makes a colorable transfer of the stock. Germania Nat. Bank v. Case, 99 U. S. 628, 25 L. ed. 448.

Three cases in this court are specially pertinent to the one under consideration, and we have little more to do than to point out the salient facts of each and determine by which one of them this case is controlled.

In Germania Nat. Bank v. Case, 99 U. S. 628, 25 L. ed. 448, it appeared that the Germania Bank lent $14,000 to the firm of Phelps, McCullough, & Co., who, to secure the payment of the loan, pledged to the bank 100 shares of the stock of the Crescent City Bank, with power, on nonpayment of the note, to dispose of the stock for cash at public or private sale, without recourse to legal proceedings. At the same time a power of attorney was given, authorizing a transfer of the stock to the Germania Bank. The note not being paid at maturity, a transfer was made to the Germania Bank on the transfer books of the Crescent City Bank. The stock was subsequently transferred to one of the clerks of the Germania Bank with an understanding between him and the officers of the bank that he should retransfer it at their request. It was held that, notwithstanding the transfer to the clerk, the stock remained subject to the bank's control; that the transfer was made to evade the liability of the true owners; and that, as Phelps, McCullough, & Co. had ceased to be the owners of the stock, the bank was liable. The liability was put by the court upon the ground that the stock was transferred to the Germania Bank upon the transfer books of the Crescent City Bank, and thereby the bank became subject to the liabilities of a stockholder, and that, as a transfer of the stock to its clerk, Waldo, was colorable, it had not exonerated...