National City Bank v. Fairbank State Bank

Evans, C. J. 1. Corporations: transfer of shares: collateral security: dual method of perfecting lien: statute. In the district court, the question at issue between the parties was presented in the motion to dissolve a temporary injunction, and was tried in a hearing upon such motion. The parties stipulated, however, that such hearing should be deemed a final hearing upon the.merits, and that the decree upon this hearing should be a final decree. The effect of this stipulation is to treat the ’ allegations of the petition as true, and to leave the one question whether upon such allegations the plaintiff is entitled to injunctional relief. It appears that, long prior to the levy of defendant’s execution, the execution debtor had transferred the shares in [491] question to the plaintiff bank as security for a loan of $12,500. Such transfer was indicated upon the books of the corporation by entering upon each stub of the certificate book from which the certificates in question had been detached, the following notation: “Assigned to National City Bank of Chicago, Illinois, as collateral security.” This notation was made in the handwriting of the secretary of the corporation. The contention for appellant is that this notation was not sufficient compliance with the requirements of Section 1626. Such section is as follows: “The transfer of shares is not valid, except as between the parties thereto, until regularly entered upon the books of the company, showing the name of the person by and to whom transferred, the numbers or other designation of the shares, and the date of the transfer; but such transfer shall not exempt the person making it from any liability of said corporation created prior thereto. Its books must be so kept as to show the original stockholders, their interests, the amount paid on their shares, and all transfers thereof; which books, or a copy thereof, so far as the items mentioned in this section are concerned, shall be subject to the inspection of any person desiring the same. [When any shares of stock shall be transferred to any person, firm or corporation as collateral security, such person, firm or corporation may notify in writing the secretary of the corporation whose stock is transferred as aforesaid, and from the time of such notice, and until written notice that said stock shall have ceased to be held as collateral security, said stock so transferred and noticed as aforesaid shall be considered in law as transferred on the books of the corporation which issued said stock, without any actual transfer on the books of such corporation of such stock. In such case, it shall be the duty of the secretary or cashier of the corporation or of the person or firm to which such stock shall have been transferred as collateral security at once, upon its ceasing to be so held, to inform the secretary of the corporation issuing such stock of’such fact. The secretary of the [492] company whose stock is transferred, as collateral shall keep a record showing such notice of transfer as collateral, and notice of discharge as collateral, subject to public inspection. No holder of stock as collateral security shall be liable for assessments on the same.] ” 2. Corporations transfer of shares: stock held as collateral: entry on books: sufficiency. [493] • 3. Corporations: transfer of shares cofiateral: omission of date of transfer: effect. [492] That part of the statute which we have enclosed in brackets was not included in the original statute, but was enacted as an amendment thereto by Chapter 81 of the Laws of the 26th G. A. The first premise in the argument of appellant is that the method detailed in such amendment is exclusive and that the method of transfer set forth in the original statute is not applicable or available to a transferee of stock shares as collateral security. We think that the premise cannot be sustained. The original statute was clearly available tó a transferee of collateral before the adoption of the amendment. The purport of the amendment was to relieve the transferee of collateral security from the strict requirements of the original statute, and to permit him to serve a written notice upon the secretary of the corporation. There is nothing in the terms of the statute as amended which would forbid such transferee to pursue either course at his option. It is still permissible to the proposed lender to take an absolute transfer of shares and to show such transfer upon the books of the corporation, even though the purpose of such transfer be as security only. The question herein is, then: Was there a sufficient compliance by the appellee with either statutory method? The appellant contends that neither method was sufficiently complied with. The appellee contends that both were. As to the second method, it is conceded that there was no written notice by the transferee to the secretary of the corporation; but it is urged for appellee that there was actual notice to such secretary, and that the secretary acted thereon and made the record upon his books, which was required by the statute; that a written notice had no other function to ;:erve than to accomplish such record; that the secretary was [493] not bound to make the record until he should receive the written notice; and that such written notice was for his protection. On the other hand, the argument of the appellant is that, under the second method, the duty of the transferee was to serve the written notice and that this was his only duty; having failed to do this, it was equivalent to doing nothing. Because of our conclusion upon the other question presented, we do not find it necessary to determine this one. We therefore turn our attention to the. first method. The principal defect of proceeding under this method pointéd out by appellant is that the , ,, , ... transfer indicated upon the books of the corporation did not show the date of such transfer. The whole question under this method is ruled by Perkins v. Lyons, 111 Iowa 192. The notation in that case was “ ‘With Brattleboro S. B. as collateral.’ ” It was held in that case that the omission of the date was not fatal to the entry, it being made to appear that it had been made long ■ prior to the levy. Such is the situation herein. The notation under consideration herein is much more definite than that in the Perkins case. It is argued for the appellant - that the Perkins case was wrongly decided. It has stood for 15 years as our construction of this statute. The parties herein presumably relied upon it and adapted themselves to it in their original transaction. Bights of property have arisen under it, and we would not be justified in opening to new argument the question then settled. The course adopted by the transferee in this case complied with the substantial requirements of the statute as construed in the Perkins case. The judgment below will therefore be — Affirmed. ■ Ladd, Gaynor, Preston and Salinger, JJ., concur. Deemer and Weaver, JJ., dissent.