U.S. Supreme Court Union Bank of Georgetown v. Laird, 15 U.S. 2 Wheat. 390 390 (1817)
Union Bank of Georgetown v. Laird
15 U.S. (2 Wheat.) 390
APPEAL FROM THE CIRCUIT COURT
FOR THE DISTRICT OF COLUMBIA
By the act of incorporation of the Union Bank of Georgetown, ch. 86, sec. 11, the shares of any individual stockholder are transferable only on the books of the bank according to the rules established by the president and directors, and all debts due and payable to the bank by a stockholder must be satisfied before the transfer shall be made unless the president and directors should direct to the contrary. Held that no person could acquire a legal title to any shares except under a regular transfer according to the rules of the bank, and if any person takes an equitable assignment, it must be subject to the rights of the bank under the act of incorporation, of which he is bound to take notice.
A creditor may lawfully take and hold several securities for the same debt, and cannot be compelled to yield up either until the debt is paid; therefore the bank has a right to take security from one of the parties to a bill or note discounted by it, and also to hold the shares of another party as security for the same.
James Smith, on 19 March, 1811, drew a bill at sixty days sight on James Patton in favor of Andrew Smith for $1,800. This bill was accepted by Patton and was discounted in the Union Bank of Georgetown at the instance of Andrew Smith, and when it became due, another bill of the same tenor was drawn and accepted by Patton and discounted for the purpose of paying the preceding acceptance. This last acceptance became due on 14 and 17 July, and was protested for
nonpayment, and at the time that it became due Patton held 50 shares of stock in the Union Bank, which the bank considered liable to the payment of this acceptance under their act of incorporation.
At this time also, James Patton had another debt pending in the bank. Being one of the original subscribers to the bank, for the above-mentioned 50 shares of stock, he borrowed of the bank, in January, 1811, the sum of $1,500, and to enable him to obtain the loan, procured Marsteller and Young, and the defendant, Laird, to become his endorsers. This loan was renewed from time to time, and was continued, without any default of payment, until about 29 July, 1811.
On 26 March, 1811, Patton obtained from the officers of the bank a certificate of his 50 shares of stock, and on that day delivered it to the defendant Laird to secure him, as it was alleged, against his endorsement for Patton.
On 10 July, 1811, Patton executed a power of attorney authorizing the defendant Laird to make a transfer of his stock, and on 22 August, 1811, he executed a deed of assignment to the defendant Laird of his stock; but as this assignment was not made upon the books of the bank, it was not considered a valid assignment according to the rules of the bank.
Laird, considering himself entitled to the benefit of these shares under the circumstances, applied to the bank to transfer upon their books the shares for his own benefit. But the bank, upon the ground that the acceptance which Patton had failed to pay
operated as a lien upon those shares, refused to suffer the transfer to be made until that debt was paid.
Laird, sometime after this refusal, to-wit, on 22 February, 1812, paid the $1,500 for which he was endorser for Patton, reserving nevertheless his equitable claim upon the stock, and then instituted this suit in chancery against the Union Bank to compel it to suffer the transfer to be made on its books for his benefit and to account with him for the intermediate profits. He charged in his bill that when Patton obtained the certificate of his shares of stock, it was with a view of pledging those shares with him for his indemnification, and that the officers of the bank had a knowledge of this fact. He also alleged that the power of attorney was granted with the same view.
The directors of the bank filed their answer to this bill and denied any knowledge of the object for which the certificate of shares was obtained, and alleged that they knew nothing of any claim of Laird upon those shares until after the protest of Patton's acceptance.
The court below made a decree in favor of Laird that the bank should suffer him to transfer the shares for his own benefit and have an account for the intermediate profits.
MR. JUSTICE STORY delivered the opinion of the Court.
The principal question is whether, under the circumstances of this case, Laird, the original plaintiff, has a right to a transfer from the bank of the fifty shares of its capital stock standing in the name of Patton without paying the acceptance of Patton -- or, in other words, whether Laird has a priority of lien upon these shares. By the 11th section of the act of incorporation, Act of 18 February, 1811, ch. 86, it is enacted
"That the shares of the capital stock at any time owned by any individual stockholder shall be transferable only on the books of the bank according to such rules as may conformably to law be established in that behalf by the president and directors, but all debts actually due and payable to the bank (days of grace for payment being passed) by a stockholder, requesting a transfer must be satisfied before such transfer shall be made unless the president and directors shall direct to the contrary."
The certificate, issued to Patton for the 50 shares held by him, which is in the usual form, declares the shares to be "transferable at the said bank by the said Patton or his attorney on surrendering this certificate." No person, therefore, can acquire a legal title to any shares except under a regular transfer according to the rules of the bank, and if any person takes an equitable assignment, it must be subject to the rights of the bank under the act of incorporation, of which he is bound to take notice. The president and directors of the bank expressly deny that they have waived or ever intended to waive the right of the bank to the lien for debts due to the bank by the form of the certificate, and
that they ever directed any transfer to be made to Patton which should stipulate to the contrary. Under such circumstances, it must be held that the shares are responsible for the debts due to the bank.
The next inquiry is whether the bank has done anything to deprive itself of the lien upon the shares for the acceptance of Patton since the same became due, and to let in the equitable title of the plaintiff. The acceptance is not yet paid, and nothing has been done by the bank affecting its rights unless the subsequent taking of security for the acceptance from Smith can be construed so to do. Certainly the bank had a right to require additional security from the endorser of the acceptance, and it cannot be perceived upon what principles this can be construed an extinguishment of its lien upon the shares of the acceptor. A creditor may lawfully take and hold several securities for the same debt from his joint debtors, and he cannot be compellable to yield up either until his debt is paid. And in this case, there is no want of equity in holding the shares of Patton, who is the immediate debtor to the bank, liable in the first instance, rather than resorting to the security of an endorser, who is only liable upon the default of the acceptor.
The decree of the circuit court must therefore, be reversed and the bill be dismissed.