National Bank v. Watsontown Bank

• Decision Date: 01 October 1881
• Citation: 105 U.S. 217,26 L.Ed. 1039
• Parties: NATIONAL BANK v. WATSONTOWN BANK
• Court: U.S. Supreme Court

105 U.S. 217

105 U.S. 217

26 L.Ed. 1039

NATIONAL BANK v. WATSONTOWN BANK.

October Term, 1881

APPEAL from the Circuit Court of the United States for the Western District of Pennsylvania.

The facts are stated in the opinion of the court.

Mr. John A. J. Creswell and Mr., William H. Armstrong for the appellants.

Mr. Oscar Foust and Mr. Robert P. Allen for the appellee.

MR. JUSTICE MATTHEWS delivered the opinion of the court.

This is a bill in equity filed by the Cecil National Bank, of Port Deposit, Maryland, and Jacob Tome, the appellants, to compel the Watsontown Bank, a corporation of Pennsylvania, to issue a certificate for two hundred shares of its capital stock to the said Cecil National Bank, to which the latter claims to be entitled.

These shares of stock belonged to Powell & Co., a partnership doing business at Williamsport, Pa., as private bankers, the certificate whereof, then held by them, they assigned and delivered to Jacob Tome, president of the Cecil National Bank, as collateral security for two promissory notes of $5,000 each, of which they were makers, discounted for them by that bank, and which it held at their maturity. One of the notes was dated Dec. 4, 1875, at thirty days, the other Dec. 20, 1875, at forty days, and each contained a stipulation authorizing the sale of the stock in case of default.

These notes becoming due and remaining unpaid, the Cecil National Bank, on Jan. 31, 1876, by its president, J. Tome, transmitted the certificate of stock, in a letter to R. B. Claxton, cashier of the Watsontown Bank, requesting a new certificate in his name, and asking what the stock was worth. To this Claxton replied to Hopkins, cashier of the Cecil Bank, on Feb. 1, 1876, acknowledging the receipt of the certificate, stating that a new board of directors had been elected the day before; that they would organize on February 7, when a president would be elected, and when, as he added, 'I will forward your stock certificate. Mr. Pardee, our present president, is not here, and I have no signatures on the stock book.' He continued: 'I think I can find a purchaser for Mr. Tome's stock at from 100 to 102, and possibly more. If you will let me know exact figures I will endeavor to dispose of it promptly, if he so desires.' On February 9, Tome answered, authorizing a sale, and directing the proceeds to be remitted to him; and wrote again on February 14, enclosing a power of attorney to sell and transfer the stock, and stating that it would not be necessary to forward a certificate to him. This letter was an answer to one from Claxton of February 11, asking for the power of attorney from Tome to transfer the stock, and stating that as he intended to sell, it was useless to forward his certificate. He added that he thought he had arranged for the disposition of $1,000 of the stock that day, and would be as prompt as possible in placing the balance. The power of attorney sent by Tome was in the usual form, and authorized R. B. Claxton 'to sell, transfer, and assign the two hundred shares of stock of the Watsontown bank standing in my name in the books of said bank,' &c.

In point of fact, on February 4 the account of Powell & Co. on the stock ledger of the Watsontown Bank was charged by Claxton, the cashier, with '$10,000 to J. Tome;' and an account opened with J. Tome, on the same book, crediting him, of the same date, 'by Powell & Co., $10,000.' On February 21 this account is debited with two items: 'To Henry Scott $500,' and 'A. Scott $500;' and the same day Claxton, the cashier, remitted to Tome the proceeds of the sale of these twenty shares of stock. On February 16 he had written acknowledging the receipt of the power of attorney previously requested. The accounts of Henry Scott and of Amos Scott, on the same ledger, are credited with the stock sold to them respectively.

It appears that this stock ledger was the only book kept by the Watsontown Bank showing the transfers of stock, except a book of certificates, the stubs of which showed to whom the corresponding certificate had been issued, and what certificate had been surrendered in lieu of it. The stock ledger was kept by the cashier.

Martin Powell, one of the firm of Powell & Co., was a director of the Watsontown Bank, and R. B. Claxton, Jr., its cashier, was also a member of that firm, and known to be such by the directors of the bank. It was his usual practice, as cashier, to make and keep the account of transfers of stock without consulting in each case with the board of directors.

On March 12, 1876, Powell & Co. failed, and April 13, 1876, made a voluntary assignment for the benefit of creditors.

On the next day, April 14, the Watsontown Bank, by its attorney, addressed a letter to J. Tome, as follows:——

'WATSONTOWN, PA., April 14, 1876.

'MY DEAR SIR,—Some time since you sent to our bank a certificate of stock originally issued to Powell & Co., and by them transferred to you for $10,000. This transfer was never approved by our president or board of directors, and we will not do so, or cannot under the act of assembly regulating banks in this Commonwealth, so long as Powell & Co. are indebted to us, either as drawer, maker, or indorser, for matters due and unpaid. And, as this is the existing state of facts, we cannot permit a transfer to be made until we are secured to the satisfaction of our board of directors for all their (Powell & Co.'s) liabilities.'

The statutory provision referred to is sect. 10, art. 10, of an act regulating banks, approved April 10, 1850, and reads as follows:——

'The stock of the bank shall be assignable and transferable on the books of the corporation only, and in the presence of the president or cashier, in such manner as the by-laws shall ordain; but no stockholder indebted to the bank for a debt actually due and unpaid shall be authorized to make a transfer or receive a dividend until...