U.S. Supreme Court
Rankin v. Fidelity Trust Co., 189 U.S. 242 (1903)
Rankin v. Fidelity Insurance, Trust and Safe Deposit Company
Argued February 26-27, 1903
Decided April 6, 1903
189 U.S. 242
The following propositions may be considered as settled in regard to the liability of shareholders of national banks. under section 5151, Rev.Stat.:
1. Liability may be established by allowing one's name to appear upon the books of the corporation as owner, though in fact he be only a pledgee. Nor can the real owner exonerate himself from responsibility by making a colorable transfer of the stock, with the understanding that at his request it shall be retransferred.
2. Stockholders of record are liable for unpaid installments, though in fact they may have parted with their stock, or held it for others.
3. A mere pledgee, however, who receives from his debtor a transfer of shares, surrenders the certificate to the bank and takes out new ones in chanroblesvirtualawlibrary
his own name, in which he is described as "pledgee," and holds them afterwards in good faith, and as collateral security for the payment of his debt, is not subject to personal liability as a shareholder. But it is otherwise, if he allow his name to appear on the book as owner, or being the owner, makes a colorable transfer of the stock.
Where it was shown that a trust company loaned on shares of a then solvent and dividend paying. national bank, and accepted its stock as collateral, and subsequently the pledgor failed, and the trust company caused the stock to be transferred to one of its employees, paid an assessment subsequently levied upon the stock, and charged it to the pledgor, and frequently wrote to ascertain if there was any market for the stock, stating that it was held as collateral, Held, that, although the construction of written instruments is one for the court, where the case turns upon the proper conclusions to be drawn from a series of letters, particularly of a commercial character taken in connection with other facts and circumstances, it is one which is properly referred to a jury, and as this case really turned upon the actual ownership of the shares, such question of ownership was properly left to the jury as one of fact.
Held, that the pledgee is not bound by statements made without its knowledge by the assignees of the pledgors upon the schedules of liability to the effect that the pledgee had converted the stock.
This was an action at law by the receiver of the Keystone National Bank of Erie, Pennsylvania, against the defendant company, as the actual owner and holder of 172 1/2 shares of the capital stock of the bank, standing upon its books in the name of one William W. Hand, to recover an assessment upon the shareholders of one hundred percent made by the Comptroller of the Currency pursuant to Rev.Stat. sec. 5151.
The facts of the case are substantially as follows: on November 15, 1890, Delamater & Co., a banking firm of Meadville, Pa., borrowed $15,000 of defendant company, in renewal of prior loans, giving therefor their note for sixty days, and as collateral security deposited 230 shares of the capital stock of the Keystone National Bank of the par value of $100 per share, standing in the name of the individual members of the firm. The shares were valued at the time at par, $23,000; the bank was in good credit, and for twenty-seven years had regularly, and was then paying, semiannual dividends. With its certificates of stock thus deposited, powers of attorney signed by the individual holders of the stock were also delivered to the defendant. These documents empowered the defendant to chanroblesvirtualawlibrary
transfer the shares -- the name of the transferee and the attorney being blank.
Twenty days thereafter, and on December 5, 1890, Delamater & Co. failed and made a general assignment for the benefit of their creditors, and on December 17, defendant having received notice of the assignment, wrote to the assignees declining to renew the note, but offering to anticipate its payment and return the collaterals. It seems the assets of Delamater & Co. were insufficient for this purpose.
On January 10, 1891, defendant sent to the Keystone National Bank of Erie the original certificates, deposited as collateral, and requested the bank to transfer the shares to William W. Hand, a clerk in the employ of the defendant. Three days later, and on January 13, the bank paid a semi-annual dividend of two percent, but it does not appear who received this dividend, which proved to be the last one paid by the bank. The transfer was made on the books of the bank, and new certificates issued in the name of Hand, dated January 15, 1891, and were transmitted by the bank to the company, which acknowledged receipt of the stock, and stated that it would like to have a bid for the stock "if you know of a purchaser." Hand signed the transfer in blank on the back of these certificates, and in that form they were retained by the defendant. There was no receipt for the certificates except a memorandum in the handwriting of the clerk on the stub of the stock book: "Sent to the Fidelity Insurance, Trust, and Safe Deposit Company, Philadelphia, Penn., 1/17/91."
Fourteen months thereafter, and on March 16, 1892, the Comptroller of the Currency, finding that the capital of the bank was impaired, ordered an assessment of twenty-five percent on the capital stock to make good the deficiency. The assessment upon these shares amounted to $5,750. This amount was paid by the defendant and charged on its books to Delamater & Co. as an additional advance. Its check was sent to the bank in a letter signed by Mr. Hand.
On December 22, 1892, pursuant to Rev.Stat. sec. 5143, and with the approval of the Comptroller of the Currency, the capital stock of the bank was reduced from $250,000 to $150,000, chanroblesvirtualawlibrary
divided into 1,500 shares of $100 each. Thereupon, and on January 24, 1893, the defendant sent to the bank the certificates for 230 shares, and on February 7 received the certificates in the name of Hand, for 172 1/2 shares, being the reduced number. Hand signed a transfer in blank on the back of the certificates, and in that form they remained in the possession of the defendant. On March 20, 1894, the vice-president of the defendant company addressed a letter to the bank, stating that the company held 172 1/2 shares of the stock registered in the name of W. W. Hand, and requesting a copy of their last statement and any other information regarding the business of the bank, and as to whether there were any sales of stock, saying "We would like to sell our holdings, if marketable." No reply being received to this letter, the defendant company repeated its substance in another letter of April 4, stating that "as we have a loan of $22,000 depending upon the value of 172 1/2 shares, we desire the above information." Several other letters were written to the same purport.
On June 20, 1897, the Keystone National Bank closed its doors, on July 26, the Comptroller of the Currency appointed a receiver, and on November 3 ordered an assessment of 100 percent on the stockholders. Whereupon this action was brought to recover an assessment receiver, and on November 3 ordered an assessment of 100 percent on the stockholders. Whereupon this action was brought to recover an assessment receiver, and on November 3 ordered an assessment of 100 percent on the stockholders. Whereupon this action was brought to recover an assessment of $17,500 on the shares registered in the name of Hand.
The case was tried before a jury, and the question submitted to them
"whether, before this Keystone National Bank failed, the defendant company, the Fidelity Trust Company of this city, was the real owner of these shares of stock, or whether it continued to be the pledgee of the stock -- whether the stock had become theirs in the sense in which we use in ordinary speech the word 'owner,' or whether it had been continued to be pledged to them as collateral security for the payment of the note which has been offered in evidence."
Upon the issue thus submitted, the jury returned a verdict for the defendant, upon which judgment was entered, and the case taken to the circuit court of appeals upon writ of error. That court affirmed the judgment. 108 F.4d 5. chanroblesvirtualawlibrary