Malone v. Merchants' & Farmers' Bank

• Citation: 104 So. 758,213 Ala. 215
• Decision Date: 28 May 1925
• Docket Number: 4 Div. 209
• Parties: MALONE v. MERCHANTS' & FARMERS' BANK et al.
• Court: Supreme Court of Alabama

104 So. 758

213 Ala. 215

MALONE v. MERCHANTS' & FARMERS' BANK et al.

4 Div. 209

Supreme Court of Alabama

May 28, 1925

Appeal from Circuit Court, Bullock County; J.S. Williams, Judge.

Bill in equity by G.H. Malone, as administrator of the estate of E.L Marbury, deceased, against the Merchants' & Farmers' Bank and others, From a decree for respondents, complainant appeals. Reversed, rendered, and remanded.

Farmer Merrill & Farmer, of Dothan, for appellant.

J.D Norman, of Union Springs, for appellees.

GARDNER J.

This cause in equity is prosecuted by the administrator of the estate of E.L. Marbury, deceased, for the foreclosure of a pledge of collateral security consisting of 25 shares of stock in the Merchants' & Farmers' Bank at Union Springs, Ala. This stock was pledged to said Marbury by J.H Rainer, Jr., in April, 1919, for security of a cash loan of $2,500, the balance remaining due on said loan being renewed in October, 1920, by the execution of two notes--one for $2,400, and the other for $96. At the time of these transactions, Rainer was vice president of the Merchants' & Farmers' Bank, owning 340 shares of its capital stock, and indebted to said bank in the sum of $5,890.12. Subsequently Rainer became indebted to the bank in a much larger sum, and the bank seeks to enforce its lien upon this stock, including the 25 shares pledged to Marbury. Section 7000, Code 1923.

Rainer died in 1921, and his administrator is a party to the suit. Marbury's administrator seeks first to have his claim to the 25 shares so pledged to him by Rainer declared superior to the lien of the bank upon the theory that the bank has waived its lien or is estopped to enforce the same. Failing in this, the bill is filed in the alternative upon the further theory that in any event the lien of the bank is superior to Marbury's only to the extent of the indebtedness due by Rainer to the bank at the time Marbury's collateral was pledged--being the sum of $5,890.12--the bank then having notice of the loan and pledge by Rainer of this stock as collateral to Marbury, and, therefore, not entitled to superiority of its lien as to any subsequent indebtedness. Section 7000, supra. Under this theory complainant seeks to have all of Rainer's stock sold and the said debt of Rainer to the bank of $5,890.12 first paid--the stock other than complainant's 25 shares being entirely sufficient for that purpose--and thereby have exonerated the stock so pledged to Marbury.

Upon the theory first above mentioned, that of a waiver of the lien on the part of the bank, we are of the opinion the recent cases of First & Fourth Nat. Bank of Nashville v. Huntsville Bank & Trust Co. (Ala.Sup.) 104 So. 761, and First Nat. Bank of Chattanooga v. Huntsville Bank & Trust Co. (Ala.Sup.) 104 So. 760, present term, are controlling in complainant's favor.

At the time of the transaction involved in the last-mentioned case, Hutton was cashier of the Huntsville bank, while in the first-mentioned case he was vice president; but whether in the one capacity or the other, he was shown to be the bank's general manager, "in a sense, its alter ego." He was the only officer of the bank who had knowledge of the transactions, and notwithstanding his personal and individual interest, it was held that the knowledge acquired by Hutton under these circumstances was notice of the facts imputable to the bank.

We think the instant case is brought within the influence of the principle recognized in these authorities, and those therein cited.

The evidence has been read and carefully considered by the court in consultation, and we are persuaded thereby that J.H Rainer, Jr., who occupied the position of vice president, was in fact the "managing officer" (to use the language of the bill) of the bank, and in a sense therefore its alter ego. The time of the president of the bank was largely consumed by his own private affairs, and while there was a loan committee, we are rather impressed that it functioned only in an advisory capacity. While there was subsequently some qualification of his testimony, we are rather impressed that the...