Heymann v. Hamilton Nat. Bank

• Decision Date: 13 December 1924
• Citation: 266 S.W. 1043,151 Tenn. 21
• Parties: HEYMANN v. HAMILTON NAT. BANK.
• Court: Tennessee Supreme Court

266 S.W. 1043

151 Tenn. 21

HEYMANN v. HAMILTON NAT. BANK.

Supreme Court of Tennessee.

December 13, 1924

Appeal from Chancery Court, Hamilton County; W. B. Garvin Chancellor.

Suit by Paul Heymann against the Hamilton National Bank. From a decree for defendant, complainant appeals. Decree modified and cause remanded.

Joe V Williams and J. L. Levine, both of Chattanooga, for appellant.

Cantrell Meacham & Moon and Finlay & Campbell, all of Chattanooga, for appellee.

GREEN C.J.

The complainant Heymann, who resided in New York, sent to one Silverman, a stockbroker in Chattanooga, 90 shares of Dixie Portland Cement Company stock. This stock was sent to Silverman upon representations of the latter that he had found a purchaser for same at a price satisfactory to complainant, and, upon further representation or promise by Silverman, that he would immediately remit proceeds of the sale to the complainant.

Instead of selling said stock sent to him as above, Silverman pledged 39 shares of it to the Hamilton National Bank, along with some other stock, as security for a loan Silverman obtained from that institution. This record does not show what Silverman did with the remainder of the stock sent him by complainant. Only the 39 shares aforesaid are involved in this suit.

It seems that Silverman was very much involved and committed suicide a day or two after pledging complainant's stock to the Hamilton National Bank.

This suit is brought by complainant to recover said 39 shares of stock or the value thereof from defendant bank. The bank answered and denied complainant's right to the relief sought, on the ground that it had obtained these shares as an innocent purchaser for value. The chancellor sustained this defense and dismissed complainant's bill, from which decree he has appealed to this court.

The stock pledged to defendant bank consisted of several certificates, all issued to complainant Heymann, and on the back of each of the certificates the following appeared:

"For value received, ______ hereby sell, assign and transfer unto ______ ______ shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint ______ to transfer the said stock on the books of the within named corporation with full power of substitution in the premises."

These indorsements had been dated and signed by the complainant when the certificates were sent to Silverman.

Although some criticism is made of the testimony of Preston, the bank officer making the loan to Silverman, we think it fairly appears from this testimony that the bank loaned Silverman $5,500, evidenced by note, and that to secure this note Silverman attached to it, as collateral, 50 shares of Dixie Portland Cement Company stock (39 of which were Heymann's) and 200 shares of Columbia Grafonola Company stock. The proof does not indicate that this is a case similar to Banking Co. v. Hall, 119 Tenn. 548, 108 S.W. 1068, in which the borrower merely got credit for the proceeds of the paper discounted. In the case before us it appears that Silverman actually got the money on the note aforesaid, and used it to take down certain shares of Coca Cola stock attached to a draft he had drawn on parties in New Orleans, which draft had been dishonored and returned.

While certificates of stock are not negotiable instruments, it is well settled in Tennessee that when they are indorsed by the owner, in blank, with an assignment for value, and with a power of attorney to make transfer on the books of the company, and placed in the hands of another person, such other person may confer good title to the shares represented by the certificates upon an innocent purchaser for value. It makes no difference so far as the rights of the innocent purchaser for value are concerned that the delivery to him was unauthorized or was a breach of trust. Good title may pass under these circumstances to an innocent purchaser for value either by way of outright sale or pledge. This is upon the theory that the owner of the certificates by so indorsing them in blank and placing them in the hands of another person has conferred upon that person all the indicia of ownership, and is therefore estopped to question the title of one acquiring such stock for value and in good faith from the apparent owner. Cherry v. Frost, 75 Tenn. (7 Lea) 1; Bank v. Farrington, 81 Tenn. (13 Lea) 336; Caulkins v. Gas Co., 85 Tenn. 684, 4 S.W. 287, 4 Am. St. Rep. 786; Planing Mill Co. v. Bank, 86 Tenn. 252, 6 S.W. 340, 6 Am. St. Rep. 835; Smith v. Railroad, 91 Tenn. 222, 118 S.W. 546; Parker v. Bethel Hotel Co., 96 Tenn. 252, 34 S.W. 209, 31 L. R. A. 706; McClung v. Colwell, 107 Tenn. 592, 64 S.W. 890, 89 Am. St. Rep. 961.

We think there is nothing in the indorsement appearing on the certificates in suit which distinguishes it from the indorsements on certificates involved in the cases just cited. So far then as complainant's stock was pledged to secure money advanced in good faith thereupon by the bank, the bank obtained good title thereto.

It appears, however, from the testimony of Preston, the bank officer, that the proceeds of the collateral deposited to secure the $5,500 loan was not all required for the discharge of this loan. There was a balance left which was applied to other indebtedness due by Silverman to the bank, this being done under authority of a clause in the note executed by Silverman.

We think the bank had no right to make such application of the balance of the proceeds of complainant's stock after the $5,500 note was paid. In other words, the bank was a purchaser or holder for value of complainant's stock only to the extent that said stock was pledged to secure money loaned at the time. As to the past due...