Magruder v. Colston

Grason, J., delivered the opinion of the Court. The questions presented by some of the prayers, as to the organization of the Merchants’ National Bank of ³⁵⁴ Washington, having been abandoned by the counsel of the appellant, the only questions before the Court upon this appeal arise upon his third and fourth prayers, which were rejected by the Court below, and the appellee’s second prayer which was granted. The record shows that, some time before the failure of the hank, the appellees, who were hankers and brokers in Baltimore City, lent to Bayne & Company eight thousand dollars, payable on call, and took from them as collateral security for repayment of the loan, one hundred shares of the stock of the Merchants’ National Bank of Washington, fifty shares of which were in a certificate standing in the name of Oscar A. King, and endorsed in blank by him, and the remaining fifty shares in a certificate standing in.the name of Bayne and Company, and endorsed in blank by them. The appellees held these two certificates until the 26th of April, 1866, when, having previously called upon Bayne & Co. for repayment of the loan, and they having made default and instructed the appellees to sell, the latter requested the hank to transfer the stock to them and to issue certificates to them in their own name for it.

The hank transferred the fifty shares standing in King’s name and issued the certificates therefor to the appellees, hut refused to transfer the fifty shares standing in the name of Bayne & Co., because Bayne & Co. were indebted to the 'bank. The appellees sold the whole of the stock to Colston on the second day of May, 1866, for one dollar, and- delivered to him the certificate for the fifty shares originally standing in the name of King, as well as the certificate standing in the name of Bayne & Co., and the bank thereupon issued a new certificate to Colston in his own name for the fifty shares originally standing in King’s name, and delivered it to him on the second day of May, the day before the hank failed, and while it was still open and doing business. The appellees proved that at the time of the sale they did not consider the stock worth anything, and ³⁵⁵ that they intended, when they made the sale to Colston to avoid complications and difficulties, fearing that the hank, which they had heard was in difficulties, might prove insolvent. They further proved that Colston was not pecuniarily responsible for the amount of the par value of the stock so sold and transferred to him.

The hank closed its doors on the 3rd day of May, at 3 o’clock P. M., and turned out to be insolvent, and this suit was brought by the Receiver to recover from the appellees, as stockholders of the hank, the par value of the fifty shares of stock, the certificate of which had been issued to them, and by them transferred to Colston. Upon these facts the appellant’s third and fourth prayers asked instructions that if the jury should find that the transfer of the fifty shares of stock was made by the appellees to Colston with a view and for the purpose of evading, or escaping their responsibility under the twelfth section of the National Banking Act, such transfer constituted no defence to this action, and did not relieve the appellees from the responsibility which would have attached to them in case the transfer had not been made, and that, if they had so sold the stock under their agreement with Bayne & Co. as a pledge to secure a loan of money, they were still responsible in law to the same extent as if they had been the absolute owners and had sold the legal title to the stock. The appellees’ second prayer contained the converse of these propositions. The 12th section of the National Banking Act provides for the personal liability of stockholders of national banks for the debts of the corporation, in proportion to the amount of stock held by them, and enacts that every person, becoming a shareholder by transfer, shall succeed to all the rights and liabilities of the prior holder of such shares.

After a careful examination of the authorities, cited in the argument, we are of opinion that persons, who hold stock in pledge, the certificates of which stand on the books of the ³⁵⁶ bank in the name of the pledgee, are, in contemplation of the Banking Act, stockholders, and, so long as they thus hold the stock in pledge, are responsible to the creditors of the bank in proportion to the amount so held. The reason for this is obvious. The stock stands on the books of the bank in his name and he is thus held out to the public as shareholder, and persons dealing with the bank, have no means of knowing the nature of the contract under which he holds the stock, and have a right to presume, and are led to believe that he is the absolute owner of it, and it is but fair to presume that they deal with the bank upon the faith and credit of parties thus appearing as stockholders. Stockholders are those who appear on the books of the