147 Pa. 422 | Pa. | 1892
STEVENS’ APPEAL.
Opinion by
The appellant sold his stock in the Columbian Bank on Jan. 4, 1887, and the learned auditor finds that the bank was the purchaser of it and then insolvent. In these findings he is well sustained by the evidence. The Columbian Bank began business about March 1, 1883, as the successor of a partnership
The appellant was a director and vice president of the bank when he threatened to sell his stock at auction, and advised with Phillips in relation to the sale of it, and it is clear from the testimony that the latter was anxious that the former’s dissatisfaction with the condition and management of the bank, and his purpose to sever his connection with it, should not be generally known. It is worthy of note that, in the interviews between them concerning the sale of the stock, no person was named as the probable purchaser of it, that the appellant made no inquiries on this point, and that the only parties known to him in the transaction were the president of the bank and its cashier, to whom he delivered the stock, and who gave him, in exchange therefor, interest-bearing obligations of the bank payable to his order. These facts, considered by themselves, are persuasive evidence that the stock was sold to the bank, and the subsequent formal transfer of it to the cashier for his worthless note is confirmatory of this view, because it was manifestly a device to hide the real nature of the transaction. The appellant is chargeable with knowledge of the insolvency of the bank and of its purchase of his stock. The sale was the result of his investigation of its affairs, and was completed four days after its acceptance of his resignation as director and vice president. As a director it was his duty to participate intelligently in its management, and he must be considered as possessed of the information respecting its condition which the discharge of that duty would have given him. In such case the duty to know is, in its legal effects, the same as actual knowledge. The circumstances connected with the sale of his stock were sufficient to put him on inquiry as to the purchaser, and it is reasonable that he should be held to have 'the knowledge to which such inquiry would have led him.
But, aside from these circumstances and the duty they imposed, his agent to sell the stock was the president of the bank which purchased it, and the law imputes to the principal the knowledge acquired by the agent in the course of his employment. In Johnson v. Laflin, 103 U.S. 800, a case cited by the appellant, Mr. Justice Field said: “The general doctrine that the principal in a transaction is chargeable with notice of mat
We have, then, the case of a stockholder in an insolvent bank who, with knowledge of its insolvency, sold his stock to it, and, in the distribution of its assets, claims a dividend on the price or sum the bank agreed to pay him for it. It is obvious that an allowance of this claim will injure the creditors of the bank by reducing the dividends they would otherwise receive from its assets, and proportionately increase their losses. It is well settled in England that a purchase by a corporation of its own stock is ultra vires, unless the power to purchase it is clearly conferred by its charter. In our country the decisions on this point are conflicting, but they are practically unanimous in holding that an insolvent corporation cannot buy its own shares to the detriment of its creditors. As its capital stock is a trust fund for the payment of its debts, the use of this fund in the purchase of shares, in itself, is destructive of a security intended primarily for the creditors, and a plain misappropriation of it. If the corporation was permitted to so use the trust fund, it might in this way distribute its capital among its shareholders, extinguish their personal liability and leave its creditors without security or remedy. We cannot concede that it has a power which would make such results practicable. The certificates of deposit on which the appellant bases his claim to a dividend, were received by him from the bank in part payment for the stock which he sold to it, and they gave him no better standing to participate in the distribution of its assets than he had as a shareholder. It follows that the learned auditor was right in rejecting his claim.
Decree affirmed, and appeal dismissed at the cost of the appellant.
mcgkath’s appeal.
Opinion by
February 22, 1892.
The appellant owned stock in, and was a director of, the
Decree affirmed, and appeal dismissed at the cost of the appellant.
steward’s appeal.
Opinion by Mr.
February 22, 1892.
Charles Phillips was one of the executors of the estate of John Steward, Jr.; he was also the president of the Columbian Association and Savings Fund, and of its successor in business, the Columbian Bank. His coexecutors in the management of the estate were Mary A. Steward, the appellant, and John Stevens. The will under which they acted authorized them to dispose of real and personal property belonging to the estate, and to make such investments of the proceeds as any two of their number approved. Prior to March 1,1888, the moneys of the estate received by Phillips were deposited by him with the loan association. He had three deposit accounts with it, one in his individual name, one in his own name as “ trustee,” and one as executor of the estate of Annie Miller. These accounts were transferred to, and continued with, the Columbian Bank after it succeeded to the business, assets and liabilities of the loan association. The bank made an assignment for the benefit of its creditors, on July 27,1887, and the aggregate amount of the balance to his credit in these accounts was, at that time, §372.40, of which sum §94.99 belonged to the account as “ trustee.” If all the trust moneys he deposited, exclusive of the moneys of the Miller estate, entered into the “ trustee ” account, it included the moneys of the Steward estate and of other trusts managed by him during the period covered by it. It is impossible to ascertain, from this account, the dates and amounts of the Steward deposits, as distinguished from deposits of other trust moneys, and these
In Stevens’ Appeal, supra, we held that a purchase by an insolvent bank of its own stock was invalid as to its creditors, and that the seller’s right to the assets as against them was no greater than a shareholder’s. This ruling was based on the familiar principle that the capital stock of a bank is a trust fund for the payment of its debts, and that the claim
If it be conceded that the stock sold to the bank, and for which the certificate of deposit was issued, was purchased by Phillips with the moneys of the estate, and that the investment was unauthorized, it does not follow that the estate can recover as against these creditors, the price the bank agreed to pay for the stock or the moneys expended by Phillips in its purchase. The moneys deposited bjr Phillips in his own name, as “ trustee ” or as executor, were paid out on his checks and such payments discharged the obligation created by the deposits. If the moneys so paid were invested in the purchase of the stock of the bank, its liability thereafter was to the owner of the stock, not as a creditor, but as a shareholder. The sale of the stock to the bank was really made at the instance of the appellant, who, by her agent, N. Harper Steward, directed Phillips “ to take the moneys of the estate invested in the stock out and pay off the mortgages against the property of the estate.” Her possession of the certificate of deposit, which is the basis of her present claim, is a result of the direction so given, and it was prompted by her agent’s investigation of the affairs of the bank, six months before the sale. For three years before the assignment by the bank, its books showed that eighty shares of its capital stock were in the name of Charles Phillips, as executor of the John Steward estate. John Stevens, a coexec
We need add nothing to what the learned auditor has said concerning the identification of the trust moneys. On this branch of the ease his views are in line with the doctrine of Thompson’s Ap., 22 Pa. 16, and kindred cases.
Decree affirmed, and appeal dismissed at the cost of the appellant.