Mitchell v. Banking Corporation of Montana

• Decision Date: 10 July 1933
• Docket Number: 7086.
• Citation: 24 P.2d 124,95 Mont. 23
• Parties: MITCHELL et al. v. BANKING CORPORATION OF MONTANA et al.
• Court: Montana Supreme Court

24 P.2d 124

95 Mont. 23

MITCHELL et al. v. BANKING CORPORATION OF MONTANA et al.

No. 7086.

Supreme Court of Montana

July 10, 1933

Appeal from First Judicial District Court, Lewis and Clark County Wm. E. Carroll, Presiding Judge.

Action by Grace Mitchell and others against the Banking Corporation of Montana, the First National Bank of Missoula, and others. From a judgment for defendant last named, plaintiffs appeal.

Affirmed.

See also, 22 P.2d 155, 175, 23 P.2d 978.

C. E Pew, of Helena, for appellants.

Raymond T. Nagle, of Helena, Walter L. Pope, of Missoula, and William B. Jones, of Helena, for respondent.

ANDERSON Justice.

Plaintiffs as creditors, on behalf of themselves and all other creditors, of the insolvent Banking Corporation, brought this action to recover the stockholders' statutory liability against numerous stockholders, among whom was the defendant the First National Bank of Missoula. This case was once before this court, but not on the question here involved. Mitchell v. Banking Corporation of Montana, 83 Mont 581, 273 P. 1055. The trial court found the issues in favor of the defendant First National Bank of Missoula and entered judgment accordingly, dismissing the action as to this defendant. The appeal is from the judgment in favor of the defendant bank.

One Morse was the owner of fourteen shares of the capital stock of the Banking Corporation. He, prior to November, 1922, pledged the certificate for these shares of stock in the Banking Corporation owned by him to the defendant bank as collateral security for a loan made to him by it. On November 22, 1922, the defendant wrote the Banking Corporation the following letter: "We herewith hand you your Certificate No. 522 issued to G. W. Morse for fourteen shares of the Banking Corporation of Montana. Please issue new certificate in the name of this bank, as any dividends accruing should come to us although the stock belongs to Mr. Morse subject to a loan. Yours very truly, A. R. Jacobs, President."

An abortive attempt had been made to reduce the capital stock of the Banking Corporation by one-half. Mitchell v. Banking Corporation of Montana, supra. The stock ledger of the Banking Corporation disclosed that a certificate was issued to the defendant on December 9, 1922, for seven shares of the capital stock of the Banking Corporation. It was sought in this action to hold the defendant liable as the holder of these shares for the stockholders' statutory liability in the sum of $700. No entry appeared on the ledger of the Banking Corporation indicating that the stock was held by the defendant in any other capacity than as an absolute owner thereof. The foregoing facts are not in dispute.

The trial court found in accordance with the foregoing facts, and that the pledgor, Morse, was at all times the owner of fourteen shares of the defendant corporation, was not a party to the action, and had never appeared therein.

This appeal presents the question whether or not a pledgee of stock who has it transferred on the books of the bank in his name, and certificate thus issued, is liable for the stockholders' statutory liability.

Section 6036, Revised Codes of 1921, as amended by chapter 9 of the Laws of 1923, after providing for the statutory stockholders' liability of the holders of stock in banking corporations, provides, "and no person holding such stock as a pledge or collateral security, shall be personally subject to any liability as stockholder in such corporation; but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly."

Plaintiffs contend that the foregoing statute does not absolve a pledgee from the statutory liability, unless it appears from the stock ledger of the bank that he is a pledgee. They assert that this contention is fully sustained by the decision of the Supreme Court of the United States in the case of Germania National Bank v. Case, 99 U.S. 628, 25 L.Ed. 448. The court there had under consideration the statutory liability of a stockholder in a national bank, and it was there held that the pledgee of stock was liable where the stock was issued in his own name and a record of the issuance thereof appeared in the stock ledger without indication that the stockholder held the same as pledgee.

The federal banking law contained a provision exempting certain persons holding stock in national banks in a representative capacity, from stockholders' liability. United States Rev. St. § 5152, 12 USCA § 66. Pledgees are not enumerated among those persons who are relieved from the statutory stockholders' liability in that exempting section. Subsequently it was held by the Supreme Court of the United States that a pledgee who secured a transfer of the stock in a national bank to his own name--and the record of this transfer on the books of the bank disclosed that he held the stock as pledgee--was absolved from the statutory liability of a stockholder. Pauly v. State Loan & Trust Co., 165 U.S. 606, 17 S.Ct. 465, 41 L.Ed. 844.

Plaintiffs rely upon the decision of the Supreme Court of California in the case of Hurlburt v. Arthur, 140 Cal. 103, 73 P. 734, 98 Am. St. Rep. 17, wherein it was held that a pledgee of stock in a banking corporation, in order to exempt himself from personal liability as a stockholder, must appear to be a pledgee of the stock on the books of the corporation, and that the books of the corporation are conclusive evidence on the subject of the ownership of the stock. The same court, however, subsequently held that the entry of the name of a person as a stockholder on the books of the corporation did not preclude him from proving that in fact he was not a stockholder and that the issuance of the stock in his name was unauthorized. Welch v. Gillelen, 147 Cal. 571, 82 P. 248; Shattuck & Desmond, etc., Co. v. Gillelen, 154 Cal. 778, 99 P. 348.

Under the California statutes at the time of the rendition of the opinion in the case of Hurlburt v. Arthur, supra, banking corporations were required to keep in their offices, in a place accessible to the depositors and creditors, a list of all stockholders in such corporation and the number of shares held by each; the particular statute (Civ. Code, § 321) further provided that "the entries on such book shall be conclusive evidence against each director and stockholder of the number of shares held by each." This particular statutory provision was to a large extent the basis of the California decision in the case of Hurlburt v. Arthur, supra.

An identical statutory provision prevailed in this state (section 3917, Rev. Codes 1907) until a general revision of the banking laws in 1915 (section 28, c. 89, Laws of 1915 which became section 6047, Revised Codes 1921; section 33, c. 89, Laws of 1927). This new...