Tourtelot v. Stolteben

SHIRAS, District Judge. In the case of Pauly v. Trust Co., 165 U. S. 606, 17 Sup. Ct. 465, 41 L. Ed. 844, the supreme court reviewed the previous decisions of that court upon the question of who can ,be: deemed to be owners of stock in national banks in such sense that they may be held liable for assessments imposed by the comptroller under the provisions of section 5151, Rev. St., and deduced therefrom the following rules: “That the real owner of the shares of the capital stock of a national banking association may, in every case, be treated as a shareholder within the meaning of section 5151.” “That if the owner transfers his shares to another person as collateral security for a debt due to the latter from such owner, and if, by the direction or with the knowledge of the pledgee, the shares are placed on .the' books of the association in such way as to imply that the pledgee is the real owner, then the pledgee may be treated as a shareholder within the meaning of section 5151 of the Revised Statutes of the United States, and therefore liable upon the basis of that, section for the contracts, debts, and engagements of the association.” The facts stipulated in this case show clearly that the 50 shares of stock now represented by' certificate Ho. 670 are the property of George B. Clifford, and that he, as the actual owner thereof, is liable for the assessment levied by tike comptroller under the first of the rules just cited from the decision of the supreme court in Pauly v. Trust Co. It no less clearly appears that the defendant is not now, and never has been, the actual owner of these shares of stock, nor has he had any interest therein even as a creditor. He holds the stock, as a trustee and as collateral security for the indebtedness due 'from Clifford; the actual owner of the shares, to George A. Burden. Under thése circumstances, to "hold him liable he must be brought within the rule laid down in Pauly v. Trust Co. in the following language: ■ “It is true that one who does not in fact invest his money in such shares, but who, although receiving them simply as collateral security for debts or obligations, holds himself out on the books of the association as true owner, may be treated as the owner, and therefore liable to assessment, when the association becomes insolvent and goes into the hands of a receiver. But this is upon the ground that, by allowing his name to appear upon the stock list as owner, he represents that he is such owner; and he will not be permitted, after the bank fails, and when an assessment is made, to assume any other position as against creditors.” ! In other words, the liability of the defendant, if it exists, is because he knowingly permitted himself to appear upon the books of the bank to be the real owner of the shares of stock, and to now permit him to aver the truth — i. e. that in fact he is not the owner — would work a fraud upon the creditors of the insolvent association. In .cases of this nature the estoppel is based upon the fact that the person sought to be held liable has been derelict in his duty, in that he has caused or allowed his name to be carried on the books of the (bank as an owner 6f stock therein, whereas in fact he was not such [365] owner. To recover, therefore, in this case, the burden is upon the receiver, representing the creditors, of proving that the defendant has been derelict in the particular named, for, unless that be shown, there is no ground upon which to base an estoj)pel as against the defendant. The query is, therefore, whether the plaintiff has proven that the defendant, with his knowledge, appears upon the books of the bank to be the owner in fact of the 50 shares of capital stock represented by stock certificate No. 670, and the first question to be considered is, what is meant by the books of the hank? In section 5210 of the Revised Statutes it is provided that: “The president and cashier of every national banking association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association and the number of shares held by each, in the office where its business is transacted. Such list shall be subject to the Inspection of all the shareholders and creditors of the association.” The evidence in this case is wholly silent with respect to what is shown upon the stock list of the Grand Forks National Bank, and it is strongly contended on behalf of defendant that this is the only hook to which reference can be made in determining who are to be deemed to be stockholders in the association. It certainly must be true that if, upon the list of the Grand Forks Bank, it is shown that Clifford, and not the defendant, is the owner of the shares of stock represented by certificate No. 670, then liability as owner cannot be imposed upon the defendant by showing entries made upon other books of the bank in conflict therewith; but it does not necessarily follow that liability may not he incurred by one whose name does not appear upon the stock list required to he kept by section 5210. Thus, in a given case, it might appear that through the negligence of the bank officials no stock list had been kept, or only a partial list had been made out, and which contained no reference to the particular shares of stock in controversy. Under these circumstances, if the other hooks of the bank, such as the transfer hook or stock register, should clearly show that the party sought to be held had permitted his name to appear as a stockholder in fact, he might be held liable, under the rule stated in Pauly v. Trust Co., supra, that “those may be treated as shareholders, within the meaning of section 5151, who are the real owners of the stock, or who hold themselves out, or allow themselves to be held out, as owners in such way and under such circumstances as, upon principles of fair dealing, will estop them, as against creditors, from claiming that they were not, in fact, owners.” But the failure to prove what the stock list does show with reference to the shares of stock in question must have weight in deciding the issues in this case. The evidence is wholly silent upon this matter. In the absence of evidence, the court cannot presume that there is in fact no stock list showing the shareholders in the Grand Forks Bank. On the contrary as the duty to keep a proper stock list is one imposed by the statute upon the president and cashier of the association, the presumption would be that the list was kept as required by the statute. Presumably, the hooks and papers of the insolvent bank are under the control of the receiver. He has not chosen to inform the court as to the contents of the stock list. For aught the court knows, [366] there may he such a stock list, and that upon its face the truth is stated, to wit, that George B. Clifford is the actual owner of the stock, and that the defendant has no interest therein. Under these circumstances the rule might he invoked that when a party has under his control material evidence upon a question in dispute, and he fails to produce it, the presumption is that, if produced, it would be against his contention. Instead of producing the stock list, or accounting for its absence, the receiver places his right of recovery upon the matters shown upon the stock certificate book. It will be kept in mind that the real contention of the receiver is that upon the face of this book it is made to appear that the defendant is the owner in fact of the shares of stock represented by the stock certificate No. 670. What, then, is made to appear by the entries on this book touching the ownership of these shares of stock? The first entry shows that'the original certificate, No. 579, was issued, under date of June 29, 1892, to George B. Clifford, thus causing him to appear to be, what he in fact was, the full and actual owner of the 50 shares of stock represented by the certificate then issued to him. The next entry, under date of June 22, 1898, shows that this certificate was taken up, and a new certificate, No. 657, wras issued in place of it to George A. Burden, the. entry on the stub showing that the transfer to Burden was as security only for the indebtedness due to Burden from Clifford. The effect of this entry on the stock register showed that Clifford continued to be the actual owner of the 50 shares of stock, and that Burden held the same as collateral security for the debt due him; or, in other words, his title was that of pledgee only, and as such pledgee Burden could not be held liable for an assessment levied under the provisions of section 5151 of the Revised Statutes, that fact appearing on the face of the register. Pauly v. Trust Co., 165 U. S. 606, 17 Sup. Ct. 465, 4 L. Ed. 844. The next entry is under date of December 14, 1893, showing that certificate No. 657, issued to George A. Burden as collateral security, was assigned by Burden to the defendant, and a new certificate, No. 670, was issued to the defendant in lieu of that assigned to him by Burden, the. record on the stub in the stock register showing that certificate 670 was issued in lieu of No. 657, which was returned to the bank, and pasted onto the proper stub in the register; thus causing the register to show that the defendant derived his title only from Burden, who was not the owner of the shares, but only the pledgee thereof. The register, therefore, on its face showed just what the truth is,- — that Clifford, since June 29, 1892, has been, and is now, the owner in fact of the 50 shares of stock in question; that the title and interest conveyed to Burden was that of a pledgee only, and that the only title held by the defendant is that derived from Burden. It is, however, contended on behálf of the receiver that the creditors were not required to look beyond the single entry on the register which shows that a certificate for 50 shares of stock had been issued to the defendant, and that this entry justified them in assuming that the defendant was in fact the owner of the 50 shares represented by the certificate then issued. If the entry relied on was part of the stock list required to be kept by the provisions of section 5210, it might [367] ■well' be that the creditors would not be required to look further than to the bare entry on that list, but that is not the fact in the present case. It is now urged that the court shall hold that the creditors, ignoring what may appear on ihe stock list, can hold the defendant bound as a stockholder because; the stock register shows that he is a shareholder; and "it is not held that this may not he done, but it is held that the rights of the parties are to be determined by what fairly appears on the stock register, and the inquiry is not to be limited to the effect of a single entry thereon, when that entry, by its terms, shows that it has a connection with and relation to another and preceding entry. The theory on which the claim of the receiver is based is that the parties dealing with the Grand Forks National Bank had the right to assume that all persons whom the stock certificate register showed to he owners of shares were in fact stockholders within the meaning of section 5151 of the Revised 'Statutes. If, however, this book is to be taken as a criterion for determining who are stockholders in the association, it must be taken as a whole; that is to say, in determining from its contents who are stockholders, all entries throwing light upon the ownership of particular shares must he taken into account. The entry relied on by the receiver simply recites that certificate No. 670 was issued to the defendant in lieu of certificate No. 657. This entry does not recite that certificate 670 was issued to defendant as the owner of the stock. The entry is silent upon the character of the certificate issued to defendant, except that it recites that it is issued in lieu of certificate No. 657. This was sufficient to challenge the examination of certificate 657 on part of any one who should examine the stock register for the purpose of ascertaining who in fact were shareholders in the association, and that examination would have disclosed the fact that the only title to the stock held by the defendant was that derived from Burden, who was not the owner, hut only a pledgee. Under these circumstances it must he held that the evidence fails to show that the defendant permitted his name to appear as the actual owner of the stock upon the books of the hank in such a manner as to render him liable to creditors under the rule laid down in Pauly v. Trust Co., supra, and therefore judgment must he for the defendant.