Commissioners of the Clinton & Port Hudson Rail Road v.Kernan

Bullard, L The plaintiffs, as Commissioners for liquidating the affairs of the Clinton and Port Hudson Rail Road Company, allege that the defendant is indebted to that institution in the amount of his note for $3200, with interest, payable to their cashier. That the defendant, after the note had become the property of the bank, induced the cashier to take the note of one Charles Black, who was notoriously insolvent, for the same amount of money, in lieu of his own note, and thereby got pos [175] session of his own note, under the pretext of selling and transferring to said Black fifty shares of the cash stock of said institution, which were pledged for the payment of said note, but which, at the time of the transfer, had become worthless. They allege that said transaction was unauthorized by the Company, and not warranted by the charter, and was a fraud upon the Company. They annex to their petition the note of said Black, to be returned to the defendant Kernan. They pray for judgment for the amount of the note first given, with interest and costs. The defendant first answered by a general denial, and then pleaded, as a peremptory exception, that proper parties had not been made, and prescription. The facts alleged in the petition are substantially proved. The note sued on was given and secured by a pledge of stock. The note of Black was taken in lieu of it, on a transfer of the stock to him, and the defendant released by the cashier alone, without the express consent of the Board of Directors. There was, therefore, a novation, if the cashier was competent to give the consent of the corporation to the contract by which one debtor was released and another accepted in his place. It is clear that neither the charter nor the by-laws confer such authority on the cashier; and it only remains to enquire, whether its exercise has been sanctioned by usage and the acquiescence of the Directors. Some of the witnesses testify that similar transactions had been made by the cashier without the authority of the Directors, but with their knowledge. The cashier at that time testifies, that he notified both parties that the Board disapproved the transaction; and a copy of a resolution of the Board to that effect is in the record. It is shown further, that Black voted as a stockholder after the transfer to him of the stock by Kernan. The evidence is far from satisfying us that the cashier had any authority to bind the corporation, by a release of a debt due to the bank, either derived from the charter or sanctioned by usage. His powers are administrative only. A mere transfer of stock so as to entitle the transferree to vote at a meeting of the stockholders, does not require the consent of the corpo [176] ration; but that is a very different thing from the release of the obligation of the original stockholder to pay his note secured by a pledge of the same stock. The plea of prescription is not sustained. Defendant having made a note in favor of a bank, obtained from the cashier possession of the note and a release from the debt, on substituting another debtor in his place. In an action against the maker to recover the amount of the note, on the ground that the cashier had no authority to release him : Held, that plaintiffs were under no obligation to cite the maker of the second note as a party to the suit, The release of a debtor is an act of ownership, which the cashier of a bank is not authorized to do, under his general administrative powers. We conclude that the court erred in giving judgment for the defendant. The plaintiffs claim interest at the rate of ten per cent per annum. Their right to recover any rate of legal interest above five per cent, in the absence of any stipulation, depends upon the charter of the bank. The 8th section of the act of 1834, entitled An act to amend the act incorporating the Clinton and Port Hudson Rail Road Company, (See acts of that year, page 114,) declares that they shall not receive more than eight per cent per annum on any loan or discount. It is true the 17th section of the same act provides, that the mortgages for stock and loans granted by this act shall bear ten per cent after maturity, until paid. But we understand the last provision to apply to subscriptions for that part of the stock to be secured by mortgage. We conclude that eight per cent is the rate of legal interest, arising ex mora, on a note given for money loaned, this being a loan upon a pledge of cash stock. 2 La. 61. It is, therefore, ordered and decreed, that the judgment of the District Court be reversed; and it is further adjudged and decreed that the plaintiffs recover of the defendant, John Kernan, the sum of $3200, with interest at eight per cent from the maturity of the note, and the costs in both courts.