Nicollet Nat. Bank of Minneapolis v. City Bank

• Decision Date: 27 December 1887
• Citation: 35 N.W. 577,38 Minn. 85
• Parties: NICOLLET NAT. BANK OF MINNEAPOLIS v CITY BANK.
• Court: Minnesota Supreme Court

38 Minn. 85

35 N.W. 577

NICOLLET NAT. BANK OF MINNEAPOLISvCITY BANK.

Supreme Court of Minnesota.

December 27, 1887.

(Syllabus by the Court.)

The legislature having borrowed from another state, and adopted into our law, a statute which had been judicially construed in such state, a presumption arises, of greater or less force according to the circumstances, that the legislature intended to adopt the statute with that settled construction.

The act of 1881, prohibiting banks, organized under the laws of this state, from making loans or discounts on the security of the shares of its capital stock, is effectual to prevent a bank from having a lien on the shares of a stockholder for a debt thus created subsequent to that enactment, although a by-law adopted prior to that statute had provided for such a lien.

Although the shares of such stock were made transferable only on the books of the bank, an assignment of the same, without such transfer, will invest the assignee with an equitable title, which will be protected as against all parties not showing a superior right.¹

Such an assignment by the stockholder, for the purpose of collateral security, is effectual as against the bank, asserting a lien for a debt of the stockholder, (contrary to the statute of 1881,) and its refusal, because of such asserted lien, to make the proper transfer on its books, renders it liable to the assignee in an action for damages as for the conversion of the stock.

An attachment of the shares by the bank, after notice of the assignment, is ineffectual to defeat the prior right of the assignee.

Appeal from district court, Hennepin county; HICKS, Judge.

Woods, Hahn & Kingman, for Nicollet Nat. Bank of Minneapolis, respondent.

Smith & Reed, for City Bank, appellant.

DICKINSON, J.

The defendant, a banking corporation created under the laws of this state, adopted a by-law in 1872, embracing the provisions that no transfer of the stock should be made, without the consent of the directors, by any stockholder, who should be liable to the bank, either as principal debtor or otherwise, and that stock should be assignable only on the books of the bank. In 1884 the defendant bank issued to one Kelley stock certificates, which bore upon their face the statement that the stock was transferable only on the books of the bank, and that it was not transferable by any stockholder liable to the bank as principal debtor or otherwise, without consent of the board of directors. In 1886 Kelley, Who was then indebted to the defendant bank, without the consent of the defendant's directors, assigned and delivered to the plaintiff his stock certificates as security for a debt then contracted. This debt being still unpaid, the plaintiff notified the defendant of the indebtedness and assignment. After this the defendant, in an action against Kelley upon his indebtedness, attached the interest of Kelley in this stock; after which the plaintiff, producing to the defendant, and offering to surrender, the stock certificates, demanded that the proper transfer be made on the books of the bank, which was refused. This action was then commenced to recover the value of the stock.

The defendant asserts a lien upon the stock for the indebtedness of Kelley and claims that whatever rights the plaintiff acquired by the assignment or pledge were subject to that lien. It is asserted that the by-law, in terms charging the stock with a lien in such cases, was authorized by the statute in force at the time the by-law was adopted. This law (section 14, c. 33, Gen. St. 1878) was as follows: “The shares in such bank are personal property, and transferable on the books of the bank in such manner as may be agreed upon in the articles organizing such bank, or prescribed in its by-laws; and every person becoming a stockholder therein shall, in proportion to his interest, succeed to all the rights, and be subject to all the liabilities of prior stockholders.” In view of the construction and effect which must be given to a later enactment,-chapter 77, Laws 1881,-which was passed before the issuing of this stock to Kelley, we deem it unnecessary to determine what, independently of this later act, might have been the force of the earlier statute and of the by-law referred to.

By the act of 1881 a now section was added to the prior banking law designated section 48, which is: “No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased or required shall, within six (6) months from the time of its purchase, be sold or disposed of at public or private sale.” This is an exact transcript from section 35 of the national banking act of June 3, 1864, (13 St. at Large, 110; Rev. St. § 5201,) and was undoubtedly intended to be, as it is, a copy of that part of the congressional act. More than 10 years before we thus incorporated this provision in our statute, the federal statute had been authoritatively construed by the supreme court of the United States in Bank v. Lanier, 11 Wall, 369. It was there held that a pledge of stock to a bank by a stockholder, as security for obligations in the nature of a debt, was a violation of the thirty-fifth section of the act of 1864. It was also considered by the court that the claim of the bank of a lien upon the stock, apart from any special agreement, was also opposed to the law of 1864, although a by-law, authorized by the act of 1863 under which the bank had been organized, (but which was repealed by the act of 1864,) provided for such a lien. Again, in 1873, in Bullard v. Bank, 18 Wall, 589, it was decided, following Bank v. Lanier, that a national bank, organized under the act of 1864, could not acquire a valid lien upon the shares of its stockholders for money loaned, even by express provision therefor in its articles of association and its by-laws. This, as the opinion shows, was deemed to be within the prohibition of the thirty-fifth section of the act. In 1871 and 1874 the courts of New York, Maine, and Kentucky were called upon to follow these decisions of the supreme court of the United States as to the effect of section 35 of the act of 1864. Conklin v. Bank, 45 N. Y. 655;Hagar v. Bank, 63 Me. 509;Bank v. Bank, 10 Bush, 367. It is further to be noted that section 12 of the congressional act of 1864 contains, in substance, the same provisions as section 14 of our General Statutes above recited, and upon which the defendant places some reliance.

It is a...