Page images
[merged small][merged small][ocr errors][merged small][merged small][merged small]

[Superior Court of Cincinnati, Special Term, 1889.)

A stockholder's indebtedness against a national bank can not be set-off against the

claims of a pledgee of the stock of the former, who received it in pledge to
secure the payment of a loan made on the faith of such pledge, without knowl.

edge of the claims of the bank, or that it was insolvent. PECK, J.

The plaintiff in this action filed a petition in which te alleges that he is, under the laws of the United States, the duly qualified and appointed agent of the shareholders of the bank; that all its debts have been paid or provision made for them, and that the remaining assets should now be reduced to money for the benefit of the shareholders; that many of the shareholders are indebted to the petitioner, as the agent of the stockholders, and that they have pledged their shares, or part of them, to secure loads from others--who are also made defendants—who hold the certificates of stock as collateral security for the payment of the loans made upon the faith of them, and who claim the distributive share of the assets applicable to such stock, by reason of their interest in the stock as such pledgees.

The plaintiff further says that he is entitled to apply the distributive share, or dividend, on each share of stock, to the indebtedness of the shareholders to him, as agents, so far as may be needed for that purpose; and denies that the pledgees of such certificates are entitled to the dividends as against himself. And he asks the judgment of the court as to whether he shall pay the dividends to such pledgees, or whether he shall apply them to the indebtedness of the shareholders of the bank, regardless of the claim of the pledgees.

To this petition, the defendant George Gerke, has filed an answer and cross-petition, in which he admits, substantially, the averments of the petition, and further avers that he is the owner of 675 shares of the stock of said bank, in his own right, and of 737 other shares as trustee ; that he has pledged 1087 shares of the stock so held by him to secure loans obtained by him from various persons; that he is also indebted to the bank, or to the petitioner as its agent, and that the persons with whom he has pledged the 1087 shares claim the dividends on such shares, by reason of their interest as pledgees; that the certificates representing the shares of stock held by him, were each in the ordinary form, certify. ing that the person named therein was the owner of the rumber of shares specified, and that the shares were transferable according to the 'acts of congress in that behalf provided. Each certificate had endorsed upon it a printed blank form of transfer, assignment, and power of attorney authorizing the assignee, or person holding the certificate, have the shares transferred upon the books of the bank; that, in each instance, the defendant duly executed one of said forms of transfer auc assignments and power of attorney, at the time he delivered the certifi cate as collateral security to his loans; that he, in good faith, pledged 987 shares of the stock aforesaid, on account of such loans, prior to the date when the bank ceased to do business, and without any notice or kuowledge that the bank was in any way embarrassed. The persons

[blocks in formation]

and number of shares and time when the loans were made, and amounts thereof, are specifically set forth in the answer and cross-petition.

It is further averred that the loans have not been paid, and are still due the pledgees, and that such persons claim their distributive share of the assets of the bank, as holders of such stock.

It is further alleged that, after the suspension of the bank, and while its affairs were being wound up by the receiver, certain of the pledgees demanded additional security upon their loans, and that, in order to save the stock already pledged, he, Gerke, delivered 100 additional shares of stock to said parties, as further collateral security, which is still held by them, and upon which they claim the dividends.

Delerdant admits that the amount due him on the stock in his name which has not been pledged, should be applied to his indebtedness.

He further alleges that prior to the time when the bank ceased to do business, he, in good faith, loaned to one J. R. DeCamp, $5,000, and received from him a promissory note for the same, together with a certificate representing fifty shares of the stock of the bank, on the back of the certificate of which shares was a duly executed power of attorney to transfer, as aforesaid ; that the defendant still holds the note and certificate, and the vote is overdue and unpaid; and that lie claims that, as such pledgee, he is entitled to the distributive share of the assets of the bank payable to the owner of such stock; that the bank never adopted any by-law, or regulation, for the reservation of any lien, of any kind, upon its stock, or for any indebtedness due to it by the owner or holder of such stock.

And he prays an order of the court directing the plaintiff to distribute the amount due upon the shares, the certificates of which are in his possession, toward the payment of his indebtedness to the bank; and, as to the certificates held be the pledgees, the amount due upon such shares be ordered paid to the holders thereof.

To this answer and cross-petition, the plaintiff has filed a general demurrer.

The question sought to be raised by the demurrer is, whether the pledgees of the certificates belonging to Gerke, are entitled to the distributive portion of the assets of the bank applicable to the shares the certificates of which are held by them, or whether the plaintiff, as agent of the bank, is entitled to have such distributive portion of the assets applied to the payment of Gerke's indebtedness to the bank, it being admitted that Gerke is indebted to the bank.

It seems clear, under the decisions of the U. S. Supreme Court especially the case of Bank v. Lanier, 11 Wallace, 369, that the bank has no liev upon the shares of the stockholder to secure any indebtedness to itself. In Bullard v. The Bank, 18 Wallace, 589, it is held that even a by-law giving to a bank a lien on the stock of its debtors, is not such a regulation as, under the National Banking act, the bank has a right to make. In the case at bar the answer avers that there was no such bylaw, and the demurrer necessarily adınits the facts alleged in the answer and cross-petition. But it is claimed that, as the stock pledged to the holders thereof was not transferred on the books of the bank, they can not be recognized by the agent as stockholders, and have no riglits as such. In many respec's this claim would be well grounded. If it were a question as to the right te at a corporate election, or to exercise other rights with reference to corporate affairs, or to be charged with liability as a stockholder, in pirap the pirnicions of the Supreme Court of

[ocr errors]

Superior Court of Cincinnati.


the United States, on the effect of the National Bank law on those points, I should have no hesitation in holding that these pledgees could not exercise the rights, or be subject to the liabilies of such stockholders, and that only the person, or persons, in whose name the stock stood on the books of the bank would be entitled to exercise such rights, or subject to such liabilities. The doctrine contended for by counsel is most strongly set forth in the case of Richmond v. Irons, 121 U. S., 27, where, the question being whether one who had sold his shares to a bona fide purchaser prior to the insolvency of the bank, but had not transferred the same on the books prior to the insolvency, could be assessed upon his additional liability on such shares, as a stockholder. The question was resolved in the affirmative, for the reason that, under the act organizing and regulating National Banks, only those whose names appear upon its books as stockholders are to be treated by the bank as such, and that those whose names do appear are liable. But this case appear's in a different aspect:

Gerke is still the stockholder, for certain purposes, of that stock, and if it were a question whether Gerke or the pledgees should be assessed upon the additional liability, if such an assessment were necessary, there could be no question as to Gerke's liability upon such assessment. But these pledgees have an equitable right to subject the value of the stock so held by them to the payment of their claims. They are not stockholders in the sense that they are members of the corporation in any way. The plaintiff having no lien could, in any event, have only the equitable right of set-off, whereas the pledgees have acquired a lien upon the stock pledged, and this lien was acquired by them, in good faith, for a valuable consideration, without any notice of the claims of the bank against Gerke, and before the bank was placed in the hands of a receiver.

It is claimed that the bank, having ceased to do business, and passed into the hands of the plaintiff, as agent, is practically a corporation dissolved by decree of a court of competent jurisdiction. This claim, in view of the authorities on the subject, seems quite doubtful; for there are many cases which hold that a corporation may lose all its property, and may cease to transact any business, and yet remain a corporation and take corporate action as such. Bank v. Bank, 14 Wall., 383; Green v. Bank, 7 Hun., 63. In fact, it is difficult to perceive how there is any necessary connection between the ownership of property as a corporation, or even the transaction of business as such, and the existence of the corporation as a legal entity. But, however this may be, the corporation was in existence, and was the owner of property, and was transacting business when these pledgees acquired their claims upon this stock; and the fact that it has subsequently ceased to do business, or to hold property, can hardly be sufficient to change the rights which they then acquired. They had the right, at any time, under the powers of attorney which were endorsed upon the back of the certificates of stock, aud executed by the defendant Gerke, to present those certificates for transfer, to the bank, and demand transfer of the shares to themselves, and, notwithstanding any indebtedness of Gerke to the bank, under the decisions heretofore cited, the officers of the bank could not have successfully resisted the claim of the pledgees to have the stock transferred to themselves. And, if the bank has a corporate existence now, there appears to be no reason why such action might not still be taken by such pledgees, if necessary. In other respects, at any rate, there is no difference in the position of the parties now as compared with what it

[blocks in formation]

was before the bank ceased to do business. Gerke held the stock then, as the legal owner thereof. The pledgees then, as now, were the equitable holders of a lien upon the value of the stock to secure their loans. The bank was the creditor of Gerke. And, if the bank could not then set up its claims against Gerke as a reason why its officers should not transfer the stock to the pledgees, if the same were demanded, it is difficult to perceive why the agent of the bank, who no longer represents any creditors, but only the stockholders, should have any greater rights than the corporation, itself, had during its period of business activity.

The foregoing disposes of the questions relating to the stock pledged by Gerke, and to that held by him as pledgee, and there remains only the question as to the 100 shares pledged by him after the bank had passed into the hands of the receiver.

At the time that the receiver was appointed, Gerke was indebted to the bank, and the bank, or its agent, in winding up its affairs, would have had the rigbt to set-off his indebtedness against his claim to a distributive share of the assets, as to such stock as was then held by him, and a subsequent assignment of such shares would not divest the agent's right of equitable set-off. R. S., 4993. These pledgees took the stock pledged after the appointment of the receiver subject to the receiver's right to set-off Gerke's indebtedness against his claim to a distributive share of the assets of the bank which would be due to the holder of that stock.

The order as to that will be that the portion of the assets due upon the 100 shares so pledged will be first applied to the indebtedness of Gerke to the bank, and, if any balance remains, that may be paid to the pledgees.

W. B. Burnet, for the plaintiff.
Paxton & Warrington for Gerke.


[Superior Court of Cincinnati, General Term, 1889.]

ZIEVERINK V. Kemper. 1. A petition to set aside a conveyance as in fraud of creditors of the grantor, Superior Court of Cincincati.

brought more than four years after the execution of the deed, containing an allegation that the creditors in whose behalf the suit is brought had no knowledge of the fraudulent character of the conveyance until within less that four years prior to the filing of the petition, is not demurrable on the ground that The statute of limitations has run. The particularity required in pleading an exception to the statute of limitations in equity is not required under the code

in pleading the express statutory exception. 2 Creditors charged with notice of a deed are charged only with notice of what it

contains, and if the deed is for a full consideration on its face, it is not notice

that the deed is fraudulent. Tarr, J.

This is a proceeding to reverse a decree of the court at special term setting aside a conveyance from J. Henry Zieverink through a trustee to his wife as in fraud of creditors. Zieverink was the owner of a share of stock of the par value of

Judgment affirmed by Supreme Court; opinion 50 O. S., 208. For decision on a demurrer in this case, see ante 229.


$2,000.00 in the Western Furniture Company. The company failed in June, 1878, and Zieverink became liable for $2,000.00 on his stock to the creditors of the company. The petition alleged that the conveyances complained of were made in May, 1878, and averred that the creditors of the company did not know of or discover the fraud uutil within four years from the date of the filing of the petition, which was January, 1887. The plaintiff was the receiver appointed to collect judgments against stockholders of the insolvent corporation.

Defendant denied the fraud and pleaded the statute of limitations. At the trial, the plaintiff offered his evidence. The defendant offered none. Decree was for the plaintiff on the case so submitted. It is claimed that this was error ou two grounds, first, that there was no evidence to show fraud, and second, that the evidence did not take the case out of the statute of limitations. Error is also assigned for the overruling of a demurrer of defendant to the petition on the ground of the statute of limitations.

First, as to the evidence of fraud. A judgment was recovered against Zieverink in 1832, and an execution issued was returned "no goods." A fellow stockholder of Zieverink testifies that an assignment of the corporation was impending in May, 1878, that he and Zieverink consulted as to what course was best to pursue in regard to their property to avoid creditors of the company; that on his advice Zieverink went to a lawyer to convey his property away, and returned shortly thereafter say. ing that he had fixed it. The deeds of conveyance to the trustee from Zieveriuk and from the trustee to his wife recite $6,000.00 as the consideration. The trustee testifies that no money passed. In October, 1879, Mrs. Zieverink conveyed the property to Casimir bauman for the recited consideration of six thousand dollars, with a secret agreement by him to convey back on payment of $1,000.00 which had been borrowed of him for Zieverink. The money was paid back, and in December, 1888, at the request of Zieveriuk and wife, Bauman conveyed to Lucas, who was a son-in-law of Zieverink. Lucas gave a note for $4,000.00 to Zieverink to protect Zieverink in case of accident to Lucas. In April, 1885, Lucas conveyed to Mrs. Zieverink at the request of Zieverink. Ziererink and his wife occupie, the buildings and collected the rents down to the beginning of the suit. In the absence of any evidence to explain or contradict this evidence just recited, we are clearly of the opinion that all these conveyances were made to defraud Zieverink's creditors, aud that as to the wife they were voluntary. Counsel contends that the relation of creditor and debtor did not exist between Zieverink and those whom plaintiff represents until after the assignment of the company, and that, as this conveyance was made before the assigument, to set it aside there must be the same evidence which is, required to set aside a conveyance made to defraud future creditors. Even if it be conceded that the relation of debtor and creditor did not exist until the assignment, we think the evidence quite sufficient to show that the conveyance was made with actual intent to defraud the creditors of the corporation, and so quite within the requirevient of evidence, in cases of a conveyance to defraud future creditors.

Secondly, as to the statute of limitations, should the demurrer to the petition have been sustained? The limitation of this section is found in section 4982. "Within four years,

an action for relief on the ground of fraud ; but the cause of action in such case shall not be deemed to have accrued until the discovery of the fraud.” Zieverink's liability as a stockholder accrued at the time of the assignment of the corporation in June, 1878. The right of the company's creditors, whom plaintiff represents, therefore, to begin an action to set aside this convey. ance accrued at the same time.

The allegation of the auiendment to plaintiff's petition is that certain named creditors of the corporation had no “knowledge of the lack of consideration for the conveyances set out in plaintiff's petition nor of the fraudulent intent therein set forth until a time within four years prior to the filing of said petition." Counsel for defendant claims that this is not a sufficient averinent of facts constituting the exception in the statute of limitations; that tiie rules of equity pleading as to such exception apply and that under them it was necessary for the pleader to state the facts as to his discovery of the fraud and date thereof, so that the court may judge of his diligence in prosecuting his rights. Whatever the requirements in equity where an exception was sought to a statute containing no exception, the Supreme Court of our state has laid down no such rule for pleading under the code. In Comhs v. Watson, 32 Ohio St. 228, 235, the court say: "In as much, then, as it appeared on the face of the petition that the fraud upon which the action was based, occurred more than four years before the action was brought, to save it from the statutory bar, it was necessary to aver that the fraud was not discovered until a time within that period in order to come within the saving of the statute, that “the cause of action in such cases shall not bed emed to have accrued until the discovery

[ocr errors]
« PreviousContinue »