Oakland County Savings Bank v. State Bank

Montgomery, J. Complainant, on the 23d of March, 1893, extended a credit to Samuel S. Walker, a stockholder in the defendant corporation, upon his promissory-note of $3,000, and took as collateral three certificates, each representing $1,000 worth of stock in the defendant bank. Subsequently $1,000 of the principal was paid, and one of the certificates bf stock surrendered. This bill is filed, after a refusal by the defendant bank to recognize the complainant’s ownership in the stock, and to transfer the same upon the books of the bank, to compel such transfer. After receiving the certificates, and on the next day, the complainant’s cashier wrote to the cashier of the defendant, saying: “We have taken 30 shares of stock of your bank, represented by certificates 83, 84, and 85, issued to Samuel S. Walker, as collateral security to a loan. Please advise us if you have any lien on said stock.” To which the defendant’s cashier replied: “Your favor of the 24th to hand, in relation to bank stock. In reply, would say I do not hold any lien on said stock. “Yours truly, “E. C. Cummings, Cashier.” At the time of the transfer of the stock by Walker to the complainant, Mr. Walker stated to the cashier of complainant that he was not indebted to the defendant bank. It now appears that at the time this letter of Cummings was written to the cashier, and at the time of the loan, Walker was indebted to the defendant bank, and under the statute a lien existed in favor of the defendant bank upon the stock. At the time the loan was procured, Mr. Walker was financially responsible, and it is resfeonably clear that, if the defendant’s cashier had informed the complainant of the true situation, the complainant would have been able to secure its claim. Walker has since become insolvent. Two contentions are made on behalf of complainant: [286] First, that complainant, in the first instance, as transferee of the stock, is entitled to priority over the defendant bank, as a bona fide purchaser of such stock; second, that, if this be not true, still the defendant has, by the letter of its cashier, estopped itself from asserting a lien upon the stock entitled to priority over complainant. The first question is ruled against the complainant’s contention by Michigan Trust Co. v. State Bank of Michigan, 111 Mich. 306, and Citizens’ State Bank of Monroeville v. Kalamazoo Co. Bank, Id. 313. We think, however, that the defendant should be held estopped from asserting the priority of its lien upon this stock. The defendant’s contention is that under section 3208a8, 3 How. Stat., a transfer of the stock upon the books of the bank can be made only by the consent of the directors, in a case where the owner of the stock is indebted to the bank on matured paper at the time of the attempted transfer, and that the assignee takes the stock subject to this right. From this it is contended that, as the transfer of the stock subject to such a lien can only be made with the consent of the board of directors, it necessarily follows that the bank can only estop itself through the action of the board of directors. We think this contention cannot be maintained. Undoubtedly, as to one having knowledge of the fact of an indebtedness owing by the owner of the stock to the bank, the cashier would be without authority to waive the bank’s lien. But that is not this case._ It is the common practice for cashiers to have control of the books of the bank, and to conduct its correspondence. It cannot be doubted that the purchaser of stock not incumbered by a lien in favor of the bank might have it transferred upon the bank’s books without the consent of the board of directors; and the estoppel in this case arises out of the failure of the proper officer, who is custodian of the books of the bank and of its bills receivable, to truthfully answer a question relating to facts peculiarly within his knowledge. The case of Cochecho Nat. Bank v. Haskell, 51 N. H. [287] 116 (12 Am. Rep. 67), is instructive upon this question. Two questions were presented in that case: One ,was whether the cashier of the bank had power to discharge a debtor of the bank without payment, or to bind the bank by an agreement that a surety should not be called -upon to pay a note he had signed, or that he should have no further trouble from it; and, second, whether the bank could be estopped by his declaration that the note was paid. It was held, as to the first question, that it could not be inferred that the power to discharge an obligation due to the bank without payment, or to make such an agreement with a surety as that suggested, was within the scope of the cashier’s authority; but the court say: “It would be otherwise, we think, as to his declaration that the note was paid. It is his duty to receive payment, and to keep the account of it, and he is the proper person to apply to, to ascertain whether a note has been paid or not. It would, indeed, be peculiarly within the scope of the business confided to him, to give such information.” So here the complainant addressed the custodian of the books and of the bills receivable of the bank for information, and, when the cashier spoke in response to this request for information, the bank spoke, and should be held estopped from now asserting the facts to be otherwise than as stated to complainant in response to its inquiry. See, also, Merchants’ Bank v. State Bank, 10 Wall. 604. To assert that the law says that the cashier may not permit the transfer of stock of the bank while the lien exists upon it, that it follows from this that he cannot deprive the bank of a lien, and that, therefore, every one is bound to know that, if the bank is to be estopped by any one, it is the directors, is to describe in sections the circumference of the same circle. The question is not what steps should be taken by the purchaser of stock with knowledge that it is subject to a lien in favor of the bank, but the question is what are proper steps to be taken to ascertain tohether such a lien exists. If one may not do this by correspondence with the bank, or with the officer of the bank uni [288] versally recognized as representing the bank in its correspondence, there would seem to be an end to legitimate transactions in stock of corporations. The fault in this assertion lies in a failure to recognize that, preliminary to the question of whether there shall be a transfer, preliminary to the purchase of the stock, common prudence suggests that the purchaser may inquire in the usual channels for the purpose of ascertaining whether the stock is subject to a lien. If such an inquiry be directed to the party who conducts the correspondence of the bank, it is bare assertion to say that, because he has not the power under the law to compel the board to consent to the transfer of the stock, he cannot, through a simple lie, estop the bank. The point is that in the correspondence upon the subject the bank speaks, through the cashier. It is the bank that speaks, itself, by an assertion which it makes by a perfectly proper and competent agency in that behalf. The decree should be reversed, and a decree entered in this court for complainant. Long, C. J., and Moore, J., concurred with Montgomery, J.