45 S.E. 927 | S.C. | 1903
Lead Opinion
November 19, 1903. The opinion of the Court was delivered by
This is the second appeal in this case. The first is reported in
The National Bank of Greenville denied certain allegations of the complaint, and set up two defenses:
1. That it was a creditor for valuable consideration without notice; and
2. That the plaintiff by his own conduct put it in the power of R.C. Foster to dispose of said stock, and should be estopped from asserting any title thereto as against this defendant.
The facts are more fully set out in the report of the special referee, which will be reported. His Honor, the Circuit Judge, confirmed the said report in a formal order.
While the exceptions are numerous, they raise practically but two questions, to wit: 1st. Was there error on the part of his Honor, the Circuit Judge, in not holding that the defendant, National Bank of Greenville, took the bank stock in question subject to whatever equities the plaintiff had against R.C. Foster, its assignor? and 2d. Was there error in sustaining the defense that the defendant bank was a purchaser of the stock for valuable consideration without notice?
We proceed to the consideration of the first question. It is true, section 133 of the Code provides that "in the case *385 of the assignment of a thing in action, the action by the assignee shall be without prejudice to any set-off or other defenses, existing at the time of, or before notice of, the assignment; but this section shall not apply to a negotiable promissory note or bill of exchange transferred in good faith, and upon good consideration before due," and that certificates of stock have been held in this State to be non-negotiable. Nevertheless, the principle is now too well settled in this State even to admit of controversy, that the holder of certificates of stock will be protected, when he can show that he is a purchaser thereof, for valuable consideration, without notice of equities existing between the original parties.
The rule of law is thus aptly stated by Mr. Chief Justice Pope, in the case of R.R. Lumber Co. v. Bank,
There is another reason why the assignee is placed on a different footing from the assignor. The assignee in all cases embraced within the provisions of section 133 of the Code, may show acts of negligence, not known by him though known by his assignor, which estop the rightful owner from the assertion of his title. Westbury *386
v. Simmons,
We will next consider the second question, whether there was error in sustaining the defense of purchaser for value, without notice. The respondents upon request were granted leave to review the case of R.R. Lumber Co. v.Bank,
Section 1894 of Code 1902, provides that "no transfers of stock shall be valid, except as between the parties thereto, until the same shall have been regularly entered upon the books of the corporation." The legal title to the certificates of stock may, therefore, be transferred as between theparties without the entry of the transfer being recorded upon the books of the corporation. But the question whether the legal title was, in fact, transferred, depends upon the intention of the parties. In this case we are satisfied that Maxwell did not intend to transfer the shares of stock to R.C. Foster. He is, however, estopped from asserting his rights, if the testimony shows that the defendant bank became the holder of the shares of stock, for valuable consideration without notice. The testimony shows that the defendant bank, unquestionably, occupies the position of a purchaser of the certificates and that it parted with value for them. The testimony does not disclose the fact that the bank had actual notice of the plaintiff's rights, but it is contended that it had notice of such facts as were sufficient to put it upon inquiry, which if pursued with due diligence would have led to knowledge of those rights. The main testimony relied upon to establish this fact is as follows: While W.E. Beattie, cashier of the defendant bank, was on the stand, counsel for the defendants asked him this question: "Q. Did you know of anything, Mr. Beattie, that *387 would impeach the title of Mr. Foster to that property or his right to transfer that stock?" To this question Mr. Beattie answered: "No, none at all. I think I recollect at the time, I am not absolutely positive as to this, but that is my recollection, I think I advised him as to the advisability of having that stock transferred into his own name on the books of the American Bank at the time, and he told me — but as to this I am not positive — that Dr. Maxwell asked him to hold it in that shape and give him a reasonable time in which to redeem it." On cross-examination, counsel for plaintiff asked said W.E. Beattie this question: "You say, Mr. Beattie, according to your recollection, at the time Mr. Foster offered you this certificate of bank stock indorsed by Dr. Maxwell, that you discussed with him the advisability of having the stock transferred upon the books of the American Bank?" To this question Mr. Beattie answered: "That is my recollection." Said W.E. Beattie, after the argument closed, was recalled by counsel for defendant bank, and testified as follows in regard to what Foster said about Maxwell redeeming the stock: "As I said in my testimony before, I am not absolutely clear in regard to my request at that time to have him get the American Bank take up this certificate and issue a new one in his name, but my recollection is that I did make this request of him, and that his reply was, that Dr. Maxwell had requested him to keep the certificate in that shape and give him an opportunity to redeem it. I am not attempting to state Foster's words, but the impression that he left on my mind." Let us see what facts this testimony disclosed. It showed:
1st. That the transfer of the shares from Maxwell to R. C. Foster had not been entered upon the books of the American Bank, in compliance with Maxwell's request that they be not so recorded. *388
2d. That the reason why Maxwell did not wish the transfer recorded upon the books of the corporation was because he wanted an opportunity to redeem them.
The fact that he wanted an opportunity to redeem the shares, tended to show that the title of R.C. Foster to the certificates of stock was not absolute and unconditional. In our opinion, these facts were sufficient to put the defendant bank on inquiry.
The special referee found that the foregoing facts were not sufficient to put the bank on inquiry when considered in connection with other testimony in the case. In his report he says: "Mr. Beattie further testifies that he did not have any notice whatever of any rights that the plaintiff had in the stock. He testified that Foster gave him to understand that he was the owner and the title was in him. Mr. Beattie further testifies as follows: `My understanding was that Mr. Foster was the absolute owner of the stock at that time; the transfer of Mr. Maxwell on the stock in blank confirmed me in that belief.' Mr. Beattie further testifies that his recollection is, that Foster told him Maxwell had transferred it to him for a certain amount he owed him. Since it has developed that Foster was not the owner of the stock, the reasons which he gave for not transferring it to his own name on the books of the American Bank may seem significant of bad faith on the part of Foster, and it may seem that the bank should have so construed them. After the event we can see many things which it seems plain indicated its approach, but which no prudence or diligence would have suspected before the event, was leading to it or indicated its approach. The defendant bank had many transactions with Foster, and had no reason to suspect his honesty. Regarding him as an honest man, what he said about Maxwell's request to be allowed to redeem was not sufficient to put the bank on inquiry, when what he thus said was coupled with the statement that he was absolute owner, especially when these statements were accompanied by the production of the certificate *389 of stock with Dr. Maxwell's unqualified indorsement thereon, which is the usual evidence of absolute ownership."
We cannot accept this view of the testimony. After being apprised of the facts hereinbefore mentioned, R.C. Foster was not the party from whom the bank should have sought information as to Maxwell's rights. It should have made inquiry of the plaintiff whose rights were to be affected by the transfer; and, if this had been done, it is but reasonable to suppose that the plaintiff would have given the desired information; in any event, if he had failed to do so, he would thereafter have been estopped from asserting his title to the stock. Facts sufficient to put a party on inquiry which if pursued with due diligence would have led to knowledge of other facts, are equivalent to notice of the facts that would have been disclosed by the inquiry. The testimony fails to sustain the finding of the Circuit Judge that the bank was without notice of the plaintiff's rights.
As this is a case involving the defense of purchaser for valuable consideration without notice, we take this opportunity of stating that such defense is always equitable in its nature, and that when the Court, in Aultman v.Utsey,
It is the judgment of this Court, that the judgment of the Circuit Court be reversed and the case remanded for such further proceeding as may be necessary to give the plaintiff the relief to which he is entitled.
Dissenting Opinion
I think that the judgment of the Circuit Court should be affirmed, for the reasons stated in the report of the special referee. The referee finds that the bank is the purchaser of the stock in question in good faith, and without notice of any rights of the plaintiff to the same and without notice of any fact sufficient to put the bank on inquiry as to the claims of plaintiff. In this finding the Circuit Court concurs. In order to overthrow this conclusion *390 it is incumbent upon appellant to satisfy the Court that the preponderance of the evidence is against that conclusion. The testimony upon which it is sought to reverse the Circuit Court is that of Mr. Beattie, an officer of the bank, who without being positive said that when Foster transferred the stock to the bank as collateral for a loan, Foster informed him that the reason why the stock had not been transferred to Foster on the books of the company was that Maxwell, plaintiff, had asked him to hold it in that shape and give him a reasonable time in which to "redeem" it. Then an argument is built upon the use of the word "redeem," as showing that the bank was thus put upon inquiry, as that term indicated that the title of the stock was not absolute and unconditional in Foster. But "redeem," while it may mean recover frompledge primarily, means to purchase back, and when the investigation is to ascertain what notice or knowledge Mr. Beattie had as representing the bank, and it is sought to infer knowledge from his use of a word, it is but fair that Mr. Beattie's explanation be noticed, as shown by the following taken from the "Case:" "Q. What do you mean by the word `redeem?' A. My understanding was that Foster was the absolute owner of the stock at that time; the transfer of Dr. Maxwell on the stock in blank confirmed me in that belief. And in regard to what I said about what Mr. Foster said about Dr. Maxwell redeeming the stock, I meant redeeming from Mr. Foster, not that he had any right to redeem from us, but to get it back from Mr. Foster in its original shape, my understanding was that Dr. Maxwell would have to give Mr. Foster full value for the stock. Q. Did you understand that Dr. Maxwell had any claim on that stock, from what Foster told you? A. I did not understand that Dr. Maxwell had any claim whatever on it. My understanding was from conversation which I had with Mr. Foster, as I recollect it, that Dr. Maxwell had asked of Foster that he would hold that original certificate just as it was and give him (Dr. Maxwell) an opportunity of paying to Foster the value of the stock and getting it back in its original *391 shape. I don't remember that Foster used the word `redeem.'"
It seems to me that the only proper inference to be drawn from Mr. Beattie's testimony is that he believed that Foster was absolute owner of the stock, and had reason to so believe from the blank indorsement thereon by Maxwell and the representation of Foster, the holder; and if Maxwell had any rights with respect to said stock, it was merely to buy it back for full value. Conceding that the bank is chargeable with notice of such a claim in favor of Maxwell, the equity of Maxwell is abundantly protected by the judgment of the Circuit Court.
The present case is not materially different from the case of Bank v. Cox, 11 Rich. Eq., 344, recognized in Fraser v.Charleston,