Warren v. Nix

• Decision Date: 16 January 1911
• Citation: 135 S.W. 896,97 Ark. 374
• Parties: WARREN v. NIX
• Court: Arkansas Supreme Court

135 S.W. 896

97 Ark. 374

WARREN v. NIX

Supreme Court of Arkansas

January 16, 1911

Appeal from Lafayette Circuit Court; Jacob M. Carter, Judge reversed in part.

Judgment affirmed and cause dismissed.

J. W Warren, pro se.

Morris M. Cohn and R. L. Montgomery for appellant Geo. W. Rogers.

1. Rogers, having ceased to be a stockholder on January 8, 1909 by sale of his stock to J. O. Smith on that day, is not liable. He transmitted to Smith his certificate of stock, duly signed in blank--did all that he was called upon to do to have the stock transferred to the purchaser. The transfer of a certificate of stock, with the power of attorney signed in blank by the holder, transfers to the purchaser the stock so evidenced, in the ordinary course of business. Angell & Ames, Corp. (10 ed.), § 564; 1 Morawetz, Corp. §§ 164, 185. It is the duty of the transferee to see that the transfer is noted on the books of the company. 3 How. (U. S.) 483; 1 Morawetz, § 185; 2 Thompson, Corp. §§ 2593, 2594. See also 118 U.S. 655; 132 N.Y. 250; 39 F. 319; 50 F. 394; 75 Ark. 148.

Before the ruling of the lower court can be sustained, it must be presumed (there is no evidence) that Rogers knew the bank was then insolvent, that it had public funds, that it was unable to pay same, that he sold his stock to avoid liability for such funds, and that he knew how J. O. Smith stood on the books of the bank.

2. Appellee is not entitled to maintain this suit. The statute provides that county treasurers, etc., may deposit public funds in their custody in incorporated banks for safekeeping. Kirby's Dig., § 1990. In this case, contrary to the above provision of the statute, the evidence is indisputable that these funds were deposited and received as a general deposit. 36 Ark. 293; 69 Ark. 406; 41 Ark. 393. A deposit for safekeeping would have been a special deposit. 5 Ark. 297; 60 N.W.822. He who receives anything for safekeeping must return the thing received, when demanded. Story on Bailments, §§ 4, 41, 42, 61; 60 N.W.822, 823. If there was any liability, it fell upon the treasurer as well as the stockholders, and he could not maintain an action against them. 13 Ark. 28; Bates, on Partnership § 900; Dicey, on Parties, 79; 125 Mass. 593; 28 Me. 389; 14 N.H. 129.

3. If Rogers had been a stockholder, still he was not liable, because no demand was ever made on the bank for the fund in controversy. A mere inquiry by Nix to know when the money would be paid, at a conference with the cashier and a director of the bank, did not constitute a demand of payment. Moreover, he was not the proper party to make the demand; but the county, the real party in interest, through its court, or some person directed by it, should have made the demand. 13 Cyc. 813; 5 Wyo. 199; 38 P. 926; 29 L. R. A. 226.

Richard M. Mann for appellant T. M. Wallace.

One cannot in a court of law maintain a suit as plaintiff upon an unpaid demand against others as defendants with whom he is jointly liable; and this is true, even though he is plaintiff in one capacity and debtor in another. The statute, Kirby's Dig. § 1990, imposes liability upon "said officers, and the sureties on their official bonds, the bank and the stockholders of the bank." 15 Am. & Eng. Enc. Pl. & Pr. 481-2; 1 Cyc. 644; 53 N.E. 303; 39 Am. Dec. 628; 17 Id. 569; 12 Id. 684; 27 S.E. 352; 38 S.E. 510; Kirby's Dig. § 990.

Powell & Taylor and C. W. McKay, for appellant J. O. Hutcheson.

1. The treasurer and his official bondsmen are jointly liable with the bank and its stockholders. The statute, Kirby's Dig. § 1990, is in derogation of the common law. For rules of construction of such statutes, see 4 Thompson on Corp (2 ed.), § 4774; 192 U.S. 386; 79 N.W.696; 9 Cush. (Mass.) 192; 71 Ark. 556; 82 Ark. 247; 101 U.S. 557; 74 Ark. 302; 71 Ark. 561; 75 Ark. 542; 65 Ark. 521; 113 U.S. 310; 32 U.S. (Law. Ed.) 1060; 34 Id. 767; 46 Ark. 159; 91 Ark. 8. He was therefore not the proper party to bring this action.

2. The stockholders are not liable because the treasurer made a general deposit of the funds. Before any liability could attach to the stockholders, he would have to make a special deposit of the public funds in his hands in the bank. Kirby's Dig. §§ 1163, 2019, 1991. A general deposit is said to be equivalent to a loan. 43 Ala. 115-138; 58 Ky. (1 Metc.) 415-417. If the words "for safe-keeping," used in § 1990, are decided to be superfluous, and if a general deposit is intended, then that section and section 1991 are repugnant, and the latter is rendered meaningless. For distinction between a general and a special deposit, see 60 N.W.822, 823.

3. Hutcheson is not liable, because he was not a stockholder at the time the funds were deposited, nor at any time thereafter.

When a stockholder sells his stock and indorses it for the purpose of transferring title to the transferee, and delivers it to the officers of the bank whose duty it is to make the proper transfers on the books of the corporation, he is relieved from further liability. 30 U. S. (Law. Ed.) 266; 95 F. 99; 10 Cyc. 716, 717. Section 849, Kirby's Dig., is intended for the protection of the individual creditors of the stockholders. The transferrer is in no position to see to the recording of the certificate of transfer. That is delivered to and is in the possession of the transferee.

Henry Moore, Jr, for appellee.

This case was tried, by consent, before the court. His findings of fact are as binding as the verdict of a jury. The court found as a matter of fact that both Geo. W. Rogers and J. O. Hutcheson were stockholders of the bank at the time of its failure. As to Rogers, all the facts and circumstances appearing by the testimony show that he had knowledge of the condition of the bank on the date of the pretended sale, and that in fact no sale was made, but he procured from Smith the money of the bank for the stock he owned. Hutcheson is estopped to deny that he is a stockholder, as between himself and the creditors of the bank, because, while he claims that he sold his stock in January, 1907, yet on February 15, 1907, a month later, in the statement showing the condition of the bank and the names of the stockholders, his name appears as the owner of five shares of the stock. 118 U.S. 660; Kirby's Dig. § 848. Moreover, he knew that the stock had not been transferred into the name of the alleged purchaser, and that the certificate of transfer had not been deposited with the county clerk, as required by Kirby's Dig. § 849, because he kept his original shares of stock in his possession, instead of transferring them to Smith.

2. The funds were deposited in the bank as a general deposit, and properly so under the statute. Kirby's Dig. § 1990. The words "for safekeeping," in this statute are used in their ordinary and common meaning, and these funds were placed in the bank for safekeeping, just as the funds of any other person or corporation would have been placed in a bank for safekeeping and to avoid the danger of fire, theft, etc. "It is the duty of the courts to construe an act as it reads, if it can be done without involving absurdities." 74 Ark. 302. See also 65 Ark. 521.

3. Appellee is entitled to maintain this suit as treasurer of the county. Kirby's Dig. § 1990; 15 Enc. Pl. & Pr., 724-5. And the fact that after the bank's failure he obtained funds elsewhere, or from his own means, out of which he paid the demands coming against him as treasurer, does not preclude him from maintaining the suit. Kirby's Dig. §§ 1165, 1166. Further, as to his right to maintain suit, see 39 Ark. 174; 43 Ark. 41; 15 Enc. Pl. & Pr. 724-6; Kirby's Dig. §§ 4420, 6010; 62 Ark. 391.

FRAUENTHAL, J. HART, J., concurs in the judgment; WOOD, J., dissents as to liability of Rogers.

OPINION

FRAUENTHAL, J.

This was a suit brought by Isaac L. Nix, as treasurer of Lafayette County, to recover from the stockholders of an incorporated bank the public funds belonging to said county which he as such treasurer had deposited in said bank, which later became insolvent and failed to pay same on demand.

In 1908 said Nix was elected treasurer of said county, and duly qualified as such officer on November 1, 1908. His predecessor in office, prior to that date, deposited the public funds of said county in the Merchants & Farmers Bank of Lewisville, Ark., a duly incorporated bank, and on that day gave to said Nix as treasurer his check on said bank for the amount of said public funds then on deposit therein. This check was duly cashed by said bank, and the funds of the county were then left by said Nix as treasurer on deposit in said bank, subject to payment upon his check as such treasurer. On that day the deposit amounted to $ 13,149.63. From time to time he drew upon said deposit by check as such treasurer until January 18, 1909. The bank continued to pay to depositors until January 20, 1909, when it suspended and made a general assignment. Subsequently, said treasurer demanded payment of said public funds from the cashier of said bank; and on the trial of this cause the assignee of said bank testified that it had no moneys or assets with which to pay said public funds remaining on deposit, which, at the date of its suspension and failure, amounted to $ 6,281.28.

The case was tried by the court sitting as a jury, who rendered judgment for the above amount in favor of said treasurer and against all the stockholders who had been sued. Four of said defendants have appealed from said judgment to this court. All the appellants contend that the judgment should be reversed upon grounds that were common defenses to all of them; and two of the appellants, J. O. Hutcheson and G. W Rogers, assign as a further ground for reversal the plea made by them that they were not stockholders of the bank at the time...