Earle v. Coyle, No. 82

No. 82 | U.S. Circuit Court for the District of Eastern Pennsylvania | Jun 22, 1899

McPHERSON, District Judge

(after stating the facts). Upon these facts, I am of opinion that judgment must be entered in favor of the defendant. The decision of the supreme court, in Whitney v. Butler, 118 U.S. 655" court="SCOTUS" date_filed="1886-11-01" href="https://app.midpage.ai/document/whitney-v-butler-91723?utm_source=webapp" opinion_id="91723">118 U. S. 655, 7 Sup. Ct. 61, seems to be controlling. In that case a stockholder sold his shares at auction, and the auctioneer delivered to the purchaser the certificate therefor, with a liower of attorney to transfer, duly executed in blank. The purchaser paid the auctioneer for the shares, and the auctioneer delivered the money to the stockholder. No formal transfer of the shares was made upon the'books of the bank. The stockholder did not know who the purchaser was, or that the transfer had not been formally made, and had no reason to suppose that the duty to transfer had been neglected. Thus far the facts of the case now before us are identical with the facts just stated. In Whitney v. Butler, however, the purchaser was a broker that had been employed by the president of the bank to buy the stock for a customer. In the present case the purchaser was the cashier of the bank, and was himself one of its transfer officers. In both cases the certificate and the power of attorney were delivered to a transfer officer, in order that the proper entries might be made upon the books. In Whitney v. Butler the certificate was delivered to the president, although it was known that he was not the purchaser; but the supreme court held that, as the other requirements of the by-laws had been complied with, the seller had done all that he was required to do, and was not bound to see that the transfer was actually made upon the books. In the case before us the cashier, who was equally with the president an agent to supervise the transfer of stock, was also the purchaser. He was the person to whom the stock was sold by the auctioneer; and, although the auctioneer mistakenly supposed that the purchase was being made on behalf of the president of the bank, this gratuitous supposition is of no weight in the determination of the controversy. In reality the cashier was doing precisely what the apparent facts of the transaction indicated. He was buying the stock for himself, and was paying for it with his own money. When, therefore, the certificate was delivered to him, with a power of attorney, properly signed in blank, the seller had done everything in his power to do, except that he did not insist upon seeing the actual entries made in the transfer books of the bank. Under the facts agreed upon, we do not think he was bound to go so far. Unless the by-law to be considered immediately put the seller upon notice, there was nothing about the transaction, either at the time the sale was made or after-wards, to cause the seller to suspect that the purchase would not be followed by the ordinary formal transfer of title on the books.

The plaintiff seeks to avoid the force of these facts by pointing to the by-law, just referred to, which forbids the cashier to buy the shares of the bank without permission from the directors. He argues that, as the seller was a stockholder, he was bound to know the by-laws, and must therefore have been aware that the cashier could not transfer the stock to himself upon the books of the bank. We do not think that either conclusion is inevitable. It may be a fair subject for dispute whether a stockholder is chargeable with knowledge of such a by-law; but, even if it be assumed that such knowledge should be imputed to Mr. Coyle, we .see no reason why he might not properly suppose that the cashier had received permission from the directors to buy the stock. Certainly he was not bound to assume that the cashier was acting in violation of the rules of the bank. On the contrary, the ordinary presumption that men are acting lawfully might, with propriety, lead him to suppose that the cashier had received authority to make the purchase. The fact that the minutes of the directors are silent upon this point is not de-dsive. In spite of this negative evidence, authority might, nevertheless, have been given, and such a supposition would be strongly supported by the fact that dividends ceased to be paid to the seller, and were thereafter paid to the cashier. The natural inference would be that the bank had either authorized or had ratified the transaction. The by-law was evidently framed for the protection of the bank, and the bank could waive it either by resolution or conduct.

We can see no ground, therefore, upon which to hold that the liability of Mr. Coyle continued. He did everything required by the usual course of business and by the rules of the bank to pass 1lie formal title to the purchaser. He had not only no reason to suppose that the transfer had not been made, but he had every reason to believe that the necessary formalities bad been observed. We are not prepared to decide that the seller of shares of a national bank is always bound to see that the transfer is made upon the books, and continues to be liable until such a transfer is made: Sometimes he may be thus bound. But in the present case we think the facts agreed upon furnish a complete defense to the plaintiff’s claim. We direct judgment to be entered in favor of defendant.