Van Cise v. Merchants' Nat. Bank

• Decision Date: 26 May 1887
• Citation: 4 Dak. 485,33 N.W. 897
• Parties: Van Cise v. Merchants' Nat. Bank and others.
• Court: South Dakota Supreme Court

33 N.W. 897

4 Dak. 485

Van Cise

v.Merchants' Nat. Bank and others.

Supreme Court of the Territory of Dakota.

May 26, 1887.

Appeal from district court, Lawrence county.

Complaint in the nature of a bill in equity to quiet title in Edwin Van Cise, plaintiff and respondent, to 4,278 shares of the capital stock of the Iron Hill Mining Company, to compel a transfer by the company of the stock to plaintiff, and the issue of a new certificate therefor, and to require the defendants, Alvin Fox and others, to exhibit their claim or lien, if any, and that it be declared inferior to plaintiff's title, and for general relief. There was a decree that the plaintiff be entitled to redeem the shares upon payment of the defendants' lien thereon.Van Cise & Wilson, Hamilton & Rice, and Mr. McKingsley, for plaintiff. McLaughlin & Steele and E. W. Martin, for defendants.

PALMER, J.

The Iron Hill Mining Company was a corporation duly organized under the laws of the territory of Dakota. The Merchants' National Bank of Deadwood, Dakota, was a corporation, likewise organized under the laws of the United States, and Alvin Fox was its cashier. Stebbins, Mund, and Alvin Fox were copartners, and located at Central City, Dakota. This action was originally instituted against one William H. O'Reilly and the defendants above named. Before judgment was obtained, William H. O'Reilly deceased, and Edward Reilly was substituted as administrator. September 30, 1885, one Martin W. McDonnell recovered judgment against the decedent, William H. O'Reilly, for the sum of $2,226.50. On the fifth day of October, 1885, an execution was issued on said judgment, and delivered to the sheriff of said Lawrence county, who on the sixth day of October, 1885, levied the same upon 4,278 shares of the capital stock of the Iron Hill Mining Company, defendant, for which a certificate had been issued to decedent, O'Reilly. The levy was made by leaving a certified copy of the execution with D. A. McPherson, secretary of the Iron Hill Mining Company with a notice showing the property levied upon; whereupon the said McPherson furnished a certificate as such secretary, stating that certificate No. 1,216, for 4,278 shares, stood registered on the stock-book of said company in the name of W. H. Reilly (who was the same person as decedent, William H. O'Reilly.) On the same day a copy of the execution was served upon the judgment debtor, William H. O'Reilly, together with a notice thereon of the property levied upon under the execution. At this time said certificate No. 1,216 was in the hands of defendant Fox as a part of certain “pool stock.” As soon as this fact became known to the judgment creditor, and in the afternoon of October 6, 1885, the sheriff served a copy of said execution on said cashier, Fox, with the following indorsement thereon:

“ To Alvin Fox: Take notice that under and by virtue of an execution now in my hands, and of which I certify that the within is a true copy, I have levied upon the following described personal property now in your hands as the property of the within named defendant William H. O'Reilly, to-wit: Four thousand two hundred and seventy-eight shares of the stock of the Iron Hill Mining Co., Deadwood, D. T.

James W. Garland, Sheriff.

“ October 6, 1885.”

At the time the above notice was served upon Fox, he notified the sheriff that the bank claimed a lien upon the stock for indebtedness due it from O'Reilly. This information was on the same day communicated to the attorney for the execution creditor, and on the ninth day of October this plaintiff was informed of said claim by the bank. The sheriff proceeded to advertise the property, and, in pursuance of the execution and levy aforesaid, he, on the fourth day of November, 1885, at the front door of the court-house, in Deadwood, sold the same to this plaintiff (he being the highest bidder) for the sum of $2,266.34, that amount satisfying the execution. The sheriff did not have the certificate of stock in sight at the time of the sale, and in fact never had it in his manual possession. The purchase was made in the name of the plaintiff, in trust for the execution creditor, Martin W. McDonnell, subject to certain conditions unnecessary here to mention. At the time and before the stock was sold by the sheriff, Fox protested against the sale, and gave public notice that the Merchants' National Bank, the firm of Stebbins, Mund & Fox, and himself, had a claim or lien upon the stock. The stock was sold, and a certificate or bill of sale was executed by the sheriff to this plaintiff. Whereupon, on the fifth day of November, 1885, the plaintiff took his certificate of sale to said D. A. McPherson, secretary of the Iron Hill Mining Company, at his office, read the same to him, and there demanded of him that he make to the plaintiff, upon the books of the corporation, the proper transfer of the said 4,278 shares of stock so sold, etc., and that he issue a new certificate to this plaintiff for said stock, and cancel that standing in the name of Reilly. This McPherson refused to do, giving as his reasons that he had learned that cashier Fox claimed a lien on the stock, and held said certificate No. 1,216 as collateral security, etc.

The foregoing is sufficient to show the proceedings under and by virtue of the execution.

It will be remembered that the judgment was rendered September 30, execution issued October 5, levied October 6, sale on execution November 4, all in the year 1885; that on the fifth day of November, 1885, demand was made to transfer the stock upon the books of the corporation to the plaintiff herein, and refused because the secretary, McPherson, had been informed that the defendant bank had some claim upon it, and held the certificate representing the stock in some manner as collateral security. It becomes important, then, to know how this property was in fact held by the defendant bank. The respondent insists it was pledged. The 4,278 shares of stock in controversy seem to have been in the possession of Stebbins, Mund & Fox, or the bank, either for safe-keeping or otherwise, since April, 1883. But it is unnecessary for our purpose here to determine the character of the holding prior to the nineteenth of May, 1885, at which time the old certificate (No. 372) representing this stock was surrendered, and certificate No. 1,216 was issued, which was the certificate outstanding at the time the sheriff made the levy.

On April 13, 1885, the “pool-stock” contract was entered into, whereby certain stockholders of Iron Hill stock agreed to each indorse and deposit a quantity of said stock with trustees, naming them; said Alvin Fox being one. These trustees were clothed with certain powers concerning the management of the stock, which we need not stop to consider. This pool contract was to go into effect July 6, 1885. This contract was signed by defendant Fox and the other trustees named therein, by the decedent, William H. O'Reilly, and other stockholders; and, by virtue of another portion of said contract, when the stock was all thus “pooled,” the said trustees were to make a list of the same, securely inclose and seal up said stock, and deposit the same in the vault of the Merchants' National Bank of Deadwood.

The portion of stock thus pooled by the decedent, William H. O'Reilly, was 4,278 shares, the stock here in controversy; and on the nineteenth day of May, 1885, the decedent, O'Reilly, indorsed his name upon the back of his certificate, No. 1,216, at the request of Fox, and the same was then wrapped or sealed, and deposited as above set forth; at which time, by verbal agreement between said Fox and O'Reilly, said certificate No. 1,216 was to be held as collateral security for said O'Reilly's indebtedness to said Stebbins, Mund & Fox and the Merchants' National Bank of Deadwood. On the fifteenth day of August, 1885, the amount of individual indebtedness, exclusive of assessments paid for the decedent, O'Reilly, by the Merchants' National Bank, and the firm of Stebbins, Mund & Fox, was figured up with interest, and found to amount to $1,665.40; whereupon, the whole amount was taken by the bank at Central City, and the decedent, O'Reilly, gave his note therefor in words and figures following, to-wit:

“$1,665.40.

Deadwood, Dakota, August 15, 1885.

“30 days after date, for value received, I promise to pay to F. M. Clary, cash or order, sixteen hundred sixty-five and 40-100 dollars, at the Merchants' National Bank, at Deadwood, Dakota, with interest at the rate of 2 per cent. per month until paid; having deposited with him, as collateral security, 4,278 shares of Iron Hill and segregated stock, in pool at Mchts'. Nat. Bank, Deadwood, D. T.; which I hereby authorize him to sell at public or private sale, or otherwise, without notice, on the non-performance of this promise, and also authorize him to use, transfer, or hypothecate the same, at his option; he being required, on payment of the amount loaned as herein specified, at any time before said collateral security shall have been sold, to surrender the same.

“W. H. O'Reilly.”

On the fifteenth day of September, 1885, the decedent, O'Reilly, made and delivered to the defendant Fox the following memorandum in writing:

“Central City, D. T., September 15, 1885.

“ Mr. A. Fox, Cash.: I hereby instruct you to sell for my ac., and credit on indebtedness to yourselves and Central Bank, a part or all of my Iron Hill mining stock, at best figures obtainable; said stock now being held in the Iron Hill pool, of which you are trustee.

W. H. O'Reilly.”

Upon the question of transfer of the shares of stock upon the books of the company the court finds as follows:

“No transfer of the 4,278 shares of the stock of the Iron Hill Mining Company, standing in the name of W. H. Reilly, and belonging to the decedent, O'Reilly, and for which certificate 1,216 was issued, as before stated, has ever been made on the stock and transfer book of the ...