Hale v. Walker

| Iowa | Apr 21, 1871

Day, Oh. J.

i. national ity of share-'1" holders. — In section 12 of the act to provide a national currency, “it is enacted that the capital stock of any association formed under the act shall be deemed personal property, and transferable on boofcg 0f the association in such manner as may be prescribed in the by-laws or articles of the association; and that every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such 'shares; and that the shareholders of each association formed under the provisions of the act shall be held individually responsible for all contracts, debts, and engagements of such association to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares.”

The petition avers “ that at the time said bank closed its doors and refused to pay its liabilities, the defendant, Joel "Walker, was the transferee of H. K. Love, and owner of fifty shares of stock of $100 each in said bank, * * as will fully appear from the stock books in said bank.”* A careful scrutiny of the answer of defendant shows that he does not deny the allegation that he is the transferee upon the books of tbe bank of H. K. Love. In one parar graph of tbe answer be “ denies that at tbe time tbe said banking association closed its door and failed to redeem its circulation and pay its liabilities, that the sand Joel Walker became the owner (as tbe transferee of H. K. Love, or otherwise) of fifty shares of stock of $100 each in said bank.” Tbe statement in tbe petition that Joel Walker “ was the owner of fifty shares of stock ” is tbe mere legal conclusion of tbe pleader, from tbe averment of tbe fact that be was tbe transferee of H. K. Love. This conclusion of law, but not tbe averment of fact, tbe defendant denies.

Tbe agreement referred to in tbe answer as exhibit “ B ” states, “ that tbe said Walker has this day purchased of tbe said Love fifty shares of tbe First National Bank of Keokuk,” and stipulates that “ the said stock will appear upon the books of sand bank and certificate Wo. 46, in the name of said Walker for fifty shores, amounting to $5,000.”

It is quite apparent from tbe entire answer that tbe fact of transfer is conceded, and that tbe defendant relies foi immunity upon tbe fact that tbe transfer was made as security to defendant for a loan to H. K. Love. Tbe question thus presented upon tbe record, though a new one here, has been tbe subject of judicial determination in some of tbe sister States. In tbe case of Creese et al. v. Babcock et al., 10 Metc. 525, it was held, under a statute containing provisions as to tbe liability of a shareholder, substantially tbe same as those of tbe one under consideration, that tbe bolder of stock at tbe time of tbe dissolution of tbe charter, although be held tbe shares as collateral security, or as trustee for other persons, was individually responsible for tbe debt of the corporation. This doctrine was re-affirmed in tbe same court in tbe ease of Grew v. Breed et al., 10 Metc. 569, in which it was held, that those who bold stock as collateral security, and those who bold it in trust, whether tbe-trust does or does not appear on the books of the bank, are liable for the payment and redemption of unpaid bills.

In Adderly v. Storm, 6 Hill, 624, it was held, that the transferee of shares of stock, as collateral security, was liable for a debt of the corporation contracted after the debt, as security for which the transfer was made, had been paid, and after a power of attorney had been given to make a re-transfer, but before such re-transfer was executed. In Roosevelt v. Brown, 1 Kern. 148, the ease of Adderly v. Storm was cited and approved, and the liability of the holder of stock as collateral security re-affirmed.

In the matter of The Empire City Bank, 18 N.Y. 199" court="NY" date_filed="1858-12-05" href="https://app.midpage.ai/document/united-states-tr-co-of-new-york-v--us-fire-ins-co-3629224?utm_source=webapp" opinion_id="3629224">18 N. Y. 199, the same doctrine was announced.' We have been referred to no adjudication at variance with these eases.

Counsel for appellant concede their correctness, but claim that they are not applicable to this case. We are unable to distinguish them in principle from the case under consideration. In Crees et al. v. Babcock et al. a plea and. answer strikingly similar to the answer in this case were held to constitute no defense. The doctrine of these cases will doubtless work a hardship in some instances; yet this hardship is, particular while that of the converse doctrine would be general. As was said in Adderly v. Storm, “ if we depart from the terms of the law, and inquire into the equities which may exist between the stockholder and some third person, it cannot fail to embarrass creditors in seeking a remedy for the wrongs which may be done by the corporation. If creditors must look beyond the legal title, they can never know against whom to proceed.”

It is urged that the defendant should be exonerated in consequence of the fraud of Love.

a pleading : fraud. No such allegation of fraud is contained in the answer, as will enable the defendant to rely upon it as a substantive ground of defense. The answer alleges in general terms that “ if by any construction or intendment of law the said instrument shall seem to hold this defendant to be a purchaser and not a mortgagee of said stock, then said^ instrument, so set forth, which was then and there written by said Love, was either false and fraudulently so written or so done by mistake.” The answer does not state that any provision has been fraudulently incorporated into or omitted from said contract. The averment is simply that, if certain legal consequences flow from the agreement, the agreement was by fraud or mistake so written as to admit of these consequences. The agreement is signed by defendant. It is not averred that he was not fully advised of its entire contents at the time of signing it, nor that he supposed it contained any provision variant in any respect from what its terms now import. That he was mistaken as to its legal effect may well be admitted. And that Love was aware of such legal effect, and failed to disclose the same to defendant, may also be conceded. But this mistake and this concealment of matter of law afford the defendant no ground of relief. Ignorcmbia legis nommem exeusat. In order to admit evidence of fraud there should, under our system of pleadings, be at least a general statement of the facts constituting the fraud.

The averment in the answer, that if the stock books of the association contain the entries set out in the petition, the said entries are untrue and fraudulently made, is neutralized and avoided by the stipulation in the agreement, made part of the answer, and marked exhibit “ B,” that the said stock shall appear on the books of the bank in the name of said Walker.

Our attention has been directed to section 40 of the currency act, which provides; “ That the president and cashier of every such association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association and the number of shares held by each, in the office where its business is transacted; and such list shall be subject to the inspection of all the shareholders and creditors of the association, and tbe officers authorized to assess taxes under State authority, during business hours of each day in which business may be legally transacted, and a copy of such list, on the first Monday in July in each year, verified by the oath of such president or cashier, shall be transmitted to the comptroller of the currency.”

"We do not believe the provisions of this section afiect the question of the defendant’s liability. The evident purpose of this section is to furnish persons interested facilities for determining who are shareholders. A failure upon the part of the officers of the bank to comply with it surely would not exonerate from liability persons otherwise chargeable as shareholders. ' If so, through the mere misfeasance or malfeasance of the president and cashier, parties might reap all the benefits without being chargeable with any of the burdens of the association.

In our opinion the demurrer was properly sustained.

Affirmed.