Johnson v. Laflin. such cash value is to be estimated by the taxing officers upon an inquiry inter alia into the actual value of the property of the banks, so far as this imparts or confers a value upon the shares, and that this is the purpose which should be judicially ascribed to the Legislature rather than a purpose to impose taxes upon an illegal valuation. The proofs do not show that the valuation of the shares by the taxing officers is excessive; at all events an excessive valuation in fact is not made an object of relief in the bills. Inasmuch as the shares are taxable, and no excessive valuation is complained of, equity would not restrain the collection of the taxes, even though the assessing officers may have arrived at a correct result by some erroneous method. A decree will be entered in each case Dismissing the bill of complaint. JOHNSON, Receiver, etc., v. LAFLIN. (17 Alb. Law Jour, 146.) Shareholder's right to transfer shares in a National bank Elements of a complete transfer — Certificates — Blank power to transfer-Registration of transfer-Rev. Stat., §§ 5139, 5141, 5201, 5251, construed. Under the National Banking Act, a shareholder has the right to make an actual and bona fide sale and transfer of his shares to any person capable in law of taking and holding the same, and of assuming the transferor's liabilities in respect thereto; and, in the absence of fraud, this right is not subject to a veto by the directors or the other shareholders. Where such a sale of shares is made and the transfer entered on the books of the bank, the transfercr ceases to be a shareholder, and is freed from liability in respect of such shares. The provision of the National Banking Act (Rev. Stats., § 5139) that shares shall" be transferable on the books of the association," construed; and held not to give the directors the power to refuse to register a bona fide transfer of stock without some valid and sufficient reason for such refusal. As between the seller and purchaser of shares in a National bank, the sale is complete when the certificate of the shares duly assigned, with power to transfer the same on the books of the bank, is delivered to the buyer, and payment therefor is received by the seller; and either the purchaser or seller may compel a registration of the transfer on the books of the bank, unless the bank has some valid and sufficient ground for refusing to register the transfer. Johnson v. Laflin. The defendant Laflin, owning full-paid shares of stock in a National bank of which his co-defendant, Britton, was the president, employed a broker to sell the same in the market; the broker, without Laflin's direction or knowledge at the time, sold the same at the market value to Britton individually, and received in payment his individual check on the bank for the purchaseprice, and delivered to the purchaser the share certificates assigned in blank, with blank powers of attorney thereon indorsed, authorizing the transfer of the shares on the books of the bank; subsequently, after the amount of the check had been collected, but on the same day, the president, without the knowledge of Laflin or the broker, directed the book-keeper of the bank to credit his individual account with the amount of the check which he had given for the shares, and to transfer the shares (the book-keeper inserting his own name in the blank power of attorney as attorney to make the transfer) to Britton, "trustee," not specifying for whom he was trustee, and charg. ing the sum to the "sundry stock account" of the bank, all of which was done. The bank, although it had not committed any act of insolvency, was then insolvent, but this fact was not known by Laflin or the broker. Held, that, although the bank, or its officers for it, was prohibited from purchasing its own shares (Rev. Stat., § 5201), yet that Laflin having sold in good faith, without notice of the illegal purpose of Britton in buying the stock, or of his intended misappropriation of the funds of the bank in paying therefor, was not liable to pay back to the receiver the money received in payment of the shares. (Circuit Court, Eighth Circuit.) THE plaintiff is the receiver of the National Bunk of the State of Missouri, appointed June 23, 1877, by the Comptroller of the Currency. That bank suspended payment and closed its doors June 20, 1877. The defendant Laflin had, for some years prior to May 16, 1877, been the owner of 85 shares of full-paid stock in that bank, but was not a director. The defendant Britton was the president of the bank. On the 10th day of May, 1877, Mr. Burr, the president of another bank in which Laflin was a director, wrote a letter to a correspondent, who was the owner of stock in the National Bank of the State of Missouri, stating (without giving the grounds of his advice), "you had better sell your stock in that bank, because you can buy it back again at a profit if you wish to do so." Mr. Burr casually showed Laflin this letter and said, "Go do likewise." An election was to be held for directors on the 29th day of May, 1877, which it was supposed would give the stock a greater value in the market before the election than it would have after that event. Johnson v. Laflin. Acting upon this general advice of Mr. Burr, and without personal knowledge of the actual financial condition of the bank, Laflin, on the 16th day of May, 1877, authorized one Keleher, a broker, to sell in the market his 85 shares of stock. Keleher sold the same at private sale for $5,037.50 to James H. Britton, who then was, and for some years had been, the president of the bank. Mr. Britton gave Keleher to understand that he was buying either for himself or a party whose name he did not disclose. Britton paid Keleher the $5,037.50 by his individual check on the bank of which he was president, and Keleher thereupon delivered Britton the certificates assigned in blank for the 85 shares of stock, together with a blank power of attorney, indorsed thereon, signed by Laflin, authorizing the transfer of the stock on the books of the bank. The stock certificates contained this provision: "Transferable only on the books of the said bank in person, or by attorney on the return of this certificate, and in conformity with the provisions of the laws of Congress and by the by-laws which may be in force at the time of such transfer." There were no by-laws on the subject of the transfer of stock. Keleher immediately presented Britton's check at the counter of the bank, and received thereon $5,037.50, and deposited the amount in his own name with his bankers, the Messrs. Bartholow, Lewis & Co., upon whom he gave Laflin his own check for $4,995-being the proceeds of the sale to Britton less his commission of 50 cents per share. Keleher did not inform Laflin to whom he had sold the stock, and even declined to do so. Laflin did not actually know that it had been sold to Britton until some time afterward. Keleher supposed Britton was making the purchase for himself or for some other person, and did not know that he was buying it as "trustee for the bank." After Keleher had delivered the stock certificates for the 85 shares assigned in blank, with the blank power to transfer indorsed thereon, and had collected the check and had left the bank, but on the same day, Britton delivered the stock certificates, together with the blank powers of attorney signed by Laflin, to one E. Girault, the general book-keeper of the bank, with instructions to credit from the general funds of the bank, Britton's individual account with the amount paid for the stock, viz., $5,037.50, which was done, and to charge the like amount in the books of the bank to "sundry stocks" account, and to transfer Johnson v. Laflin. the 85 shares on the stock transfer book to "James H. Britton, trustee." Girault obeyed these directions. The transfer of the stock on the transfer book was accordingly made to "James H. Britton, trustee," not stating for whom he was the trustee. But in the stock ledger the transaction was entered in an account entitled, "James H. Britton, trustee for bank," meaning Britton's own bank. Girault, in making the transfer of the shares, filled in his own name as attorney in the blank powers of attorney signed by Laflin, and signed the transfer to Britton as trustee thus, "S. H. Laflin by E. Girault, attorney." Girault had actual knowledge at the time that this stock had been paid for in the manner herein before stated. No new certificate of stock for the 85 shares were ever issued to Britton or any one else. Neither Keleher nor Laflin knew of the foregoing directions of Britton to Girault, nor what Girault did in respect thereto. Other stock to a very large amount was from time to time purchased from other persons by Britton and paid for in the same way, and transferred and entered in the same manner. No formal resolution of the directors appears authorizing this to be done, but directors knew of and assented to Britton's acts in this regard. At the time of the suspension of the bank, June 20, 1877, there were, it seems, 4,599 shares of its own stock standing in the name of "James H. Britton, trustee," which had been purchased by him with the funds of the bank, under circumstances more or less similar to the purchase from the defendant Laflin. All of the stock thus standing in the name of Britton, trustee, including that purchased from Laflin, was voted by him at the election of directors, held May 29, 1877. Britton had been for years the owner of a large amount of stock in the bank in his own name and right, and thus owned 1,542 shares when the bank suspended. Britton's credit was good at the time of this transaction, and there was nothing in the nature of the transaction in the fact of the purchase, the amount or mode of payment or the price paid calculated to awaken suspicion on the part of Keleher, that it was not a regular transaction on Britton's own account. Laflin did not receive more than the stock was then considered worth in the market. Laflin did not know that the bank was insolvent, and his firm continued to deposit money with it until it closed. Keleher testifies that he considered the bank "sound in Johnson v. Laflin. all respects" when he made the sale to Britton. The bank had not at that time committed any act of insolvency. This is a bill in equity by the receiver against Laflin & Britton, to compel Laflin to pay back the $5,037.50; to set aside the transfer of the 85 shares of stock; to have Laflin declared to be still a stockholder in the said bank in respect of said shares, and to have Britton ordered to re-transfer the shares to Laflin on the book of the bank. The bill as to Britton stands confessed. Laflin answered denying the material charges in the bill. Replication was filed and proofs taken. The cause is before the court on final hearing. The following provisions of the National Banking Act, taken from the Revised Statutes, are those which more directly relate to the questions arising in this case: SEC. 5139. The capital stock of each association shall be divided into shares of $100 each, and be deemed personal property, and be transferable on the books of the association in such manner as may be prescribed in the by-laws or articles of the association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabili ties of the prior holder of such shares, and no change shall be made in the articles of association by which the rights, remedies or securities of the exist. ing creditors of the association shall be impaired. * * * * * * Again, SEC. 5151. The shareholders of every National banking association shall be held individually responsible, equally and ratably, and not one for the other, for all contracts, debts and engagements of such association to the extent of the amount of their stock therein at the par value in addition to the amount invested in such shares. * SEC. 5201. No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith, and stock so purchased or acquired shall within six months from the time of its purchase be sold or disposed of at public or private sale, or in default thereof a receiver may be appointed to close up the business of the association, according to section 5234. * But SEC. 5204. No association or member thereof shall, during the time it shall continue its banking operations, withdraw, or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. * nothing in this section shall prevent the reduction of the capital stock of the association under section 5143. SEC. 5152. Persons holding stock as executors * or trustees, shall not be personally subject to any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, * * or person interested in such trust funds would be, if * living and competent to act and hold the stock in his own name. |