McKinney v. Mechanics' T. & S. Bank

• Decision Date: 09 December 1927
• Parties: McKinney v. Mechanics' Trust & Savings Bank, et al.
• Court: United States State Supreme Court — District of Kentucky

Page 264

222 Ky. 264

McKinney v. Mechanics' Trust & Savings Bank, et al.

Court of Appeals of Kentucky.

Decided December 9, 1927.

1. Corporations. — In absence of provision in articles of incorporation or general law governing corporation stock issued by it for any indebtedness due it by stockholders, or of something therein to put purchaser on inquiry, or unless corporation calls attention to by-law providing therefor by indorsement on stock certificate, it has no lien on indebtedness due by stockholder where stock has been pledged to bona fide holder as security for indebtedness.

2. Corporations. — Corporation held not authorized, under Ky. Stats., section 545, to adopt by-law creating lien on stock issued by it for indebtedness due by stockholders as against an innocent holder for value, in that such section has reference merely to way in which stock shall be transferred.

3. Corporations. — Corporation not being authorized by articles of incorporation nor by statute to pass by-law creating a lien on corporate stock for indebtedness due by stockholders, pledgee of stock having no actual notice of such by-law has lien prior to that of corporation.

Appeal from McCracken Circuit Court.

J.D. MOCQUOT for appellant.

W.F. McMURRY, JR., and BRADSHAW & MacDONALD for appellee.

OPINION OF THE COURT BY JUDGE REES.

Affirming.

During the year 1925 and for some time prior thereto, T.P. Guedry was the president of and a stockholder in the T.P. Guedry Company, a corporation. He became indebted to the appellee Mechanics' Trust & Savings Bank in the sum of $1,500, and executed to the bank his notes for $1,000 and $500, respectively. As collateral security on the notes, he assigned to the bank 25 shares of stock of the T.P. Guedry Company and signed an agreement authorizing the bank or its assigns, in the event the notes were not paid at maturity, to sell the stock at private or public sale, with or without notice to him, and to apply the proceeds to the payment of the notes. After this transaction the T.P. Guedry Company turned over to the appellant, R.W. McKinney, as liquidating agent, all of its affairs for the purpose of converting its assets into cash, paying its debts, and terminating its corporate existence. There were sufficient assets to pay all of the company's indebtedness, and there are sufficient funds in the hands of appellant, R.W. McKinney, to pay a substantial liquidating dividend to the stockholders of the T.P. Guedry Company. At the time the affairs of the company were turned over to the liquidating agent, T.P. Guedry was indebted to the corporation in the sum of more than $5,000, which was evidenced by notes to the corporation.

This action was instituted in the McCracken circuit court by the appellee, in which it sought judgment against T.P. Guedry for the notes executed by him to it, and also against the appellant, R.W. McKinney, as liquidating agent of the T.P. Guedry Company, for that portion of the funds in his hands representing the liquidation dividend upon the stock originally issued to T.P. Guedry and transferred to and held by the bank as collateral.

One of the by-laws of the T.P. Guedry Company provided:

"The corporation shall have a first lien on all shares of its capital stock and upon all dividends declared upon same for any indebtedness of the respective holders thereof to the corporation."

The appellant, R.W. McKinney, claimed that by virtue of this by-law the T.P. Guedry Company had a lien upon the stock originally issued to T.P. Guedry and assigned by him to appellee bank, and consequently upon that portion of the assets of the company available for distribution on the stock prior to the lien claimed by the bank as pledgee of the stock. By the judgment rendered in the lower court, the bank as pledgee was given the prior lien, and from that judgment the defendant, R.W. McKinney, liquidating agent of the T.P. Guedry Company, has appealed.

It is conceded that the appellee Mechanics' Trust &...