Union Bank of Georgetown v. Laird - 15 U.S. 390 (1817)
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
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.