Cox v. Montague

78 F. 845 | 6th Cir. | 1897

SAGE, District Judge,

after stating the facts as above, delivered the opinion of the court.

Montague’s letters and telegrams to the Johnson City Bank make it evident that he knew months before he made the transfer of his stock to his sister that the bank was in imminent danger of insolvency. That transfer was not only without consideration, but, at the time, without even the knowledge of his sister. It was made on the 28th. of April, 1894. She testified that, according to her recollection, she was informed of it in May or June, 1894, but added that it might have been in April. Her testimony as to her financial condition is altogether unsatisfactory. Her unwillingness at first to give any testimony on the subject was enough to warrant the most unfavorable inferences. At last she admitted that she liad no property in Tennessee. Said that she did own some property somewhere, which she thought was in her own name, but did not know whether it was or not. That she did not take sufficient interest in the case to make any answer, and that she suffered decree against her by default, strongly indicates that she was utterly irresponsible financially, or that she bad herself no faith in the integrity of the transaction. She was not even a witness of her own volition, or upon the call of the defendant, but was subpoenaed and examined on behalf of the complainant. Montague himself was not a witness in the case, — a circumstance which, in view of the evidence against him, is of great weight. A. like circumstance in Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, cited later in this opinion, was so characterized by the supreme court. In bis answer Montague set up tbat a few' days prior to the transfer of his stock he was offered by a responsible party in Johnson City 50 cents on the dollar for a portion thereof, with the assurance that a great part, if not all, of the residue would be taken at the same price. That averment undoubtedly relates to the offer above referred to, for it does not appear that any other was made. It does not appear from the evidence that the person who made the offer was insolvent, although one person is said to have declared that he had good credit in the Jonesborough Bank. The offer was for $1,000 of the stock at 50 cents on the dollar. It was not made until the 27th of April: Montague’s letter inclosing to the bank the certificates for his shares with an order for their transfer to his sister was dated and mailed the next day, April 28, 1894, at which time the offer to Mm could not have been received. That fact alone is sufficient explanation of his declination. It may have been also that, while he had abundant reason to apprehend the failure of the bank, he still hoped that it would pull through, in which event the stock could be transferred to him by his sister. If there were any doubt as to the motive which induced him to make the transfer, it would be removed by his letter under date of November 8,1894, to the bank examiner, who had on the previous day written him a confidential letter inquiring concerning the president of the Johnson City Bank, and asking for the name of some thoroughly reliable and well-posted person at or near Johnson City to consult "on credits,” etc. The learned judge who heard the case below was of opinion that this letter could not be properly used against the defendant, because it was a confidential letter, and voluntarily turned over by the bank examiner to the receiver. We do not concur in that view. The letter was in no sense a privileged communication, and the mere fact that it was in answer to a letter marked “Confidential” cannot, in our opinion, be regarded as a legal objection to its use as testimony. The authorities are the other way. In Wilson v. Rastall, 4 Term. R. 753, Lord Kenyon said:

“But if a friend could not reveal what was imparted to him in confidence, what is to become of many cases even affecting life, e. g., Doctor Ratcliff’s Case, 9 State Tr. 582. And if the privilege now claimed extended to all cases and persons, Lord W. Russell died by the hands of an assassin, and not by the hands of the law, for his friend, Lord Howard, was permitted to give evidence of confidential conversations between them.” 3 State Tr. 715.

In the same case, Buller, J., said that it was indeed hard in many cases to compel a friend to disclose a confidential conversation, but that the privilege must be confined to the cases to which it extends. In Loyd v. Freshfield, 2 Car. & P. 329, it was held that a banker is bound to disclose a communication, however confidential.

The letter to Montague was written by Miller in his official capacity, and signed by him as examiner. Montague’s answer is addressed to the examiner in his official capacity. It may well be doubted whether such letter, whatever may have been the intention of the writer, can be regarded as confidential in the sense in which the court below regarded it, and in the sense which counsel for ap-pellee seek to apply Jiere. Besides, the information called for by (he examiner was with reference to the president of the Johnson City Bank. Montague's answer volunteered, in addition, among other things, this very significant statement respecting the Johnson City Bank: “I became alarmed after seeing several of his reports as made to the comptroller, showing his cash often below the required reserve, and disposed of my stock some time ago." We know of no reason founded upon any principle of the law of evidence why this statement, which is a distinct and unequivocal admission of a fact, should be excluded. It tells the reason for the transfer of the stock in plain, direct words, which cannot be mistaken. This statement, taken in connection with the letters first above referred to, the testimony of Ciara W. Montague, and the omission of defendant, Montague, to testify as a witness for himself in answer to the evidence against him, brings the case clearly within the rule stated in Bowden v. Johnson, 107 U. S. 261, 2 Sup. Ct. 254, that:

“Where the transferror, possessed of information showing that there is good ground to apprehend the failure of the bank, colludes and combines, as in this case, with an irresponsible transferee, with the design of substituting the latter in his place, and of thus leaving no one with any ability to respond for the individual liability imposed by the statute, in respect of the shares of stock transferred, the transaction will be decreed to bo a fraud on the creditors, and he will be held to the same liability (o the creditors as before the transfer. He will l»e still regarded as a shareholder quoad the creditors, although he may be abb' to show that there was a full or a partial consideration for the transfer as between him and the transferee.”

The rule does not require proof that the transferror had actual knowledge of the insolvency of the bank, and that the transfer was made with a purpose to avoid individual liability. It is enough if the transferror had “good ground to apprehend the failure of the bank,” and made the transfer to an irresponsible person, with intent to relieve himself from individual liability. Proof of actual knowledge of the insolvency of the bank was not made in Stuart v. Hayden, 18 C. C. A. 618, 72 Fed. 402, but the court of appeals of the Eighth circuit held the transferror liable. In Foster v. Lincoln, 74 Fed. 382, the defendant was president of the National Bank of Lyndon, Vt., and held 25 shares of stock in the First National Bank of Leming, N. M., which telegraphed to the Lyndon Bank, also a stockholder, for §5,000, to be sent by telegraph, for its aid. Within a week afterwards defendant made a voluntary transfer of his stock to his children, all of whom were financially irresponsible. The facts above stated were put in evidence, and it was shown, in addition, that the telegram for aid, when it was received, came to the knowledge of the defendant, who was sued to enforce his individual liability as a stockholder. That was all the evidence against him. The court regarded the telegram, which was received and came to defendant’s knowledge six days before the transfer of his stock, as sufficient warning to him of the straits of the bank, and entered decree for the complainant. That case was not so strong for the complainant as is this case. There the defendant was a witness. Here the defendant was silent, and, although the transfer was voluntary, and made to his own sister, without her knowledge, she being financially irresponsible, and so little interested in the result as to make no defense, he declined to be a witness, made no explanation, and rested solely upon the contention that the complainant had not succeeded in making specific proof of the insolvency of the bank at the date of the transfer of the stock; and that, if the bank was then insolvent, it was not proven that he knew it or had notice of any other facts from which such knowledge could be inferred. That the contention is not well founded is apparent from what has been already expressed in this opinion. The appellant is entitled to decree as prayed in the bill. The decree below will be reversed, with instructions to enter a decree in accordance with this opinion.