People's Bank of Talbotton v. Exchange Bank of Macon

• Decision Date: 13 December 1902
• Citation: 43 S.E. 269,116 Ga. 820
• Parties: PEOPLE'S BANK OF TALBOTTON v. EXCHANGE BANK OF MACON.
• Court: Georgia Supreme Court

43 S.E. 269

116 Ga. 820

PEOPLE'S BANK OF TALBOTTON v. EXCHANGE BANK OF MACON.

Supreme Court of Georgia

December 13, 1902

Syllabus by the Court.

1. A bank, the charter of which provides that the total liability to it of any person "for borrowed money *** shall at no time exceed one-tenth part of the capital stock of said bank paid in," and also that the stock of any stockholder in such bank "shall be held bound to the bank for any dues or other indebtedness by said stockholder to the bank," and it shall have a lien "upon the same superior to all other liens," has, by virtue of its charter, a lien of the highest dignity upon the stock of a stockholder to an amount not exceeding 10 per cent. of the capital stock of the bank actually paid in, notwithstanding it may have violated the terms of its charter by loaning to such stockholder a sum largely in excess of that which it was thereby authorized to permit him to borrow.

2. Where the charter of the bank further provides that no assignment of stock shall be valid, as against it, unless a formal transfer of the same be made on its books, it is the right of the bank to treat a stockholder as the true owner of stock issued to him, and to deal with him accordingly, until it receives notice that the stockholder has assigned his stock to a third person; aliter, after notice is brought home to the bank, even though there has been no attempt on his part to secure a formal transfer of the stock upon its books.

3. A corporation is not to be charged with notice of facts of which its president acquires knowledge while dealing in his private capacity and in his own behalf with third persons nor is knowledge on his part thus acquired imputable to the corporation when, acting through another official, it deals with him at arm's length, as with any other individual representing himself alone.

4. While a bank which has violated its charter by allowing a stockholder to borrow a sum of money larger than that which it was authorized to loan him cannot, as against an assignee of such stockholder, assert a lien for a greater amount than that provided for in its charter, yet it is not the right of the assignee, if unwilling to himself pay the amount necessary to discharge the lien, to demand a transfer of the stock on the books of the bank until his assignor has fully paid all of his indebtedness to the bank which was contracted prior to the date it received notice that he had assigned his stock. (a) In an accounting to determine whether such indebtedness has been fully paid off, the sole inquiry should be whether or not the bank has applied payments made by the assignor as he directed, or, in the absence of any direction on his part, in the manner prescribed by law. (b) The assignee has no right to insist that payments shall be applied otherwise than as the assignor directed, or that a credit voluntarily given to him by the bank, to which he was not entitled, shall go to the extinguishment of a debt arising before it received notice that he had assigned his stock, rather than to the discharge of an indebtedness thereafter contracted by him.

Error from superior court, Talbot county; W. B. Butt, Judge.

Action by the Exchange Bank of Macon against the People's Bank of Talbotton. Judgment for plaintiff, and defendant brings error. Reversed.

Persons & McGehee and J. H. Martin, for plaintiff in error.

A. L Miller, Hatcher & Carson, and J. J. Bull, for defendant in error.

FISH J.

The Exchange Bank of Macon presented to the superior court of Talbot county a petition in which were set forth the following allegations of fact: On the 10th day of January 1896, G. H. Estes, who was then, and was for some time thereafter, the president of the People's Bank of Talbotton, "made and executed to petitioner his two notes for the sum of eight hundred and three and 37/100 dollars, and eight hundred and six and 25/100 dollars respectively, *** and, for the purpose of securing the payment of the said notes, deposited with petitioner fifteen shares of the capital stock of said defendant bank, after having transferred and assigned said shares to petitioner, and giving the necessary power of attorney to have the same transferred upon the books of said defendant bank." Estes subsequently made default in the payment of these notes, and petitioner "demanded of the proper officers of said defendant bank that it transfer upon its books said fifteen shares of stock to petitioner, as required by the charter and bylaws," but with this demand they refused to comply, assigning as a reason for their refusal that Estes was indebted to the People's Bank "in a large sum, and that by the charter of said bank a lien is created on the stock held by any stockholder for any indebtedness due by him, which is superior to any lien that may be created thereon." Petitioner "was an innocent purchaser for value of said stock, without notice of any such conditions in said charter, and without notice of any indebtedness of said Estes to said bank; and therefore its title to said stock is superior to the lien claimed by said bank, if any such lien exists." Furthermore, "even if the said G. H. Estes was so indebted to said defendant bank, he has paid to it, in money and property, a sufficient amount to have discharged said indebtedness in full, and any lien which said bank may have had on said stock has been thereby discharged." At "the time of the creation of the indebtedness of said G. H. Estes to your petitioner, and from that time until the maturity of the debt so created, said defendant bank had allowed the said G. H. Estes to become indebted to it in the sum of twelve thousand dollars, or other large sum, and, under the requirements of the charter of said defendant bank, no person could become indebted to it in any sum greater than one-tenth of the capital stock of said bank; that said capital stock, under the provisions of the charter of said defendant bank, is twenty-nine thousand dollars; and that by reason of the conditions hereinbefore referred to in said charter, said bank could not allow said Estes or any other person to become indebted to it in any sum more than twenty-nine hundred dollars." The said Estes "has more than repaid to said defendant bank the amount which he was legally entitled to borrow from it, or had become indebted to it; and by reason of said payment any lien that said bank may claim" under the above-mentioned provision of its charter "has become discharged, and by reason thereof petitioner is entitled to have a transfer of the stock held by it," and accordingly "prays that a decree may be rendered requiring defendant bank and its proper officers to accept the surrender of said fifteen shares of stock, and in lieu thereof issue to petitioner new stock for the same amount, and of the same face value." The People's Bank filed an answer in which it admitted that its capital stock was $29,000, and that under its charter "the total liabilities of any person to said bank for money borrowed cannot exceed one-tenth of the capital stock"; but it therein alleged that its charter also provided that "the discount of bills of exchange drawn in good faith, and the discount of commercial paper actually owned by the person discounting the same, shall not be considered as borrowed money," and that, while Estes became largely indebted to the bank, his indebtedness to it "for money borrowed at no time, from date he became indebted to plaintiff to maturity of the claim of plaintiff, exceeded, nor did it reach, $2,900, and that his large indebtedness arose by reason of the defendant discounting in good faith commercial paper actually owned by Estes." The People's Bank also in its answer admitted the demand made upon it by the plaintiff to transfer to it the 15 shares of stock in controversy, but pleaded as a justification for refusing to comply with this demand the following matters of defense: Estes was indebted to the defendant bank "at the time plaintiff claims that the 15 shares of stock" were deposited with it, "also at the time plaintiff demanded a transfer of said stock, and is now indebted." Section 6 of the charter of the People's Bank of Talbotton provides "that the board of directors shall issue to each stockholder certificates of stock which shall be held bound to the bank for any dues or other indebtedness by said stockholder to the bank, and a lien is hereby declared upon the same in favor of the bank superior to all others, which may be foreclosed upon the same as a mortgage upon personal property, and sold in the same way; and no stockholder who may be indebted to said bank, either as principal or security or indorser, shall, while so indebted, sell or transfer the stock held by him or her without the consent of the president and directors of the bank, and all sales and transfers of stock in said bank must, in order to be valid, be made on the books of the bank by the owner of the stock, or his or her lawfully appointed attorney in fact, under such rules and regulations as may be declared by the by-laws of the bank, and any other transfer is void as against the company." This provision being contained in a charter which constituted "a part of the public law," and the world being therefore charged with notice thereof, "the plaintiff could not have been 'an innocent purchaser for value, without notice of the conditions in defendant's charter."' The amount of Estes' indebtedness to it "at the time plaintiff demanded transfer of stock was, and now is, sufficient to cover the value of said 15 shares of stock," and accordingly "the plaintiff is not entitled to a transfer of the same," for, under the charter provision above quoted, the assignment to plaintiff "of said stock while the stockholder, G. H. Estes, was indebted...