Pauly v. State Loan & Trust Co. - 165 U.S. 606 (1897)
U.S. Supreme Court
Pauly v. State Loan & Trust Co., 165 U.S. 606 (1897)
Pauly v. State Loan & Trust Company
Argued January 29, 1897
Decided March 1, 1897
165 U.S. 606
A creditor who receives from his debtor a transfer of shares in a national bank as security for his debt, and who surrenders the certificates to the bank and takes out new ones in his own name, in which be is described as pledgee, and holds them afterwards in good faith as such pledgee and as collateral security for the payment of his debt, is not a shareholder, subject to the personal liability imposed upon shareholders by Rev.Stat. section 5151.
The previous cases relating to the liability of such shareholders examined and held to establish:
(1) 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.
(2) 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 prescribed by that section for the contracts, debts, and engagements of the association.
(3) That if the real owner of the shares transfers them to another person or causes them to be placed on the books of the association in the name of another person with the intent simply to evade the responsibility imposed by section 5151 on shareholders of national banking associations, such owner may be treated, for the purposes of that section, as a shareholder and liable as therein prescribed.
(4) That if one receives shares of the stock of a national banking association as collateral security to him for a debt due from the owner, with power of attorney authorizing him to transfer the same on the books of the association, and being unwilling to incur the responsibilities of a shareholder as prescribed by the statute, causes the shares to be transferred on such books to another under an agreement that they are to be held as security for the debt due from the real owner to his creditor, the latter acting in good faith and for the purpose only of securing the payment of that debt without incurring the responsibility of a shareholder, he, the creditor, will not, although the real owner may, be treated as a shareholder within the meaning of section 5151. And
(5) That the pledgee of personal property occupies towards the pledgor somewhat of a fiduciary relation, by virtue of which, he being a trustee to sell, it becomes his duty to exercise his right of sale for the benefit of the pledgor.
The case is stated in the opinion.