A. borrowed of a bank money on call and deposited with it as
collateral security certain mining stocks, with written authority
to sell them at its discretion. The loan remaining unpaid, the bank
notified him that unless he paid it, the stocks would be sold. He
failed, after repeated demands, to pay it, and they were sold for
more than their market value to three directors of the bank, and
the proceeds applied to the payment of the loan. A., who was
advised of the sale and that enough had been realized to pay his
indebtedness, made no objection. The stocks were transferred to the
purchasers. Nearly four years after the sale, the stocks having in
the meantime greatly increased in value, A. notified the bank of
his desire and purpose to redeem them, and subsequently filed his
bill against it asserting his right so to redeem, and praying for
general relief.
Held that he is entitled to no relief.
In the year 1863, Hayward, "for the purpose of opening a credit
with the Eliot Bank," deposited certain securities with it, giving
it power to transfer the same, as well as any bullion, coin, or
other securities which he might thereafter deposit, and expressly
waiving
"all and every objection to the manner in which said securities
may be sold, whether at public or private sale, or at the board of
brokers, without any demand or notice
Page 96 U. S. 612
whatever."
Subsequently, the bank was converted into a national banking
association under the name of the Eliot National Bank, and, in the
latter capacity, loaned, in October, 1866, to Hayward, first
$6,500, and then $20,000, receiving in pledge, as security, four
hundred and fifty shares of stock in the Hecla Mining Company,
incorporated under the laws of Michigan, but having an office in
the city of Boston. The loans were merely temporary, and were
entered upon the demand loan account of the bank. In order that the
bank might have full control of the stock so pledged, Hayward
caused it to be transferred to R. B. Conant, to whom, as cashier,
certificates, absolute in form, were issued for the whole four
hundred and fifty shares. Hayward did not meet the loans as he had
agreed, but made provision for the interest up to April 1, 1867.
After that date, he paid no interest. During that year various
assessments were made by the company upon its stock. He was
notified of and requested to meet them, but failed to do so, and
the bank, in order to save the security and for its own indemnity,
was compelled to pay them, amounting in the aggregate to
$9,972.15.
On the 9th of November, 1867, Hayward executed and delivered to
the bank the following paper:
"BOSTON, Nov. 9, 1867"
"I hereby authorize the president and directors of the Eliot
National Bank to sell, at their discretion, four hundred and fifty
shares of stock of the Hecla Mining Company held as collateral
security for loan, proceeds of sale to be applied upon said
loan."
"To the President and Directors of the Eliot Bank."
"CHAS. L. HAYWARD"
This paper was obtained because doubts were entertained whether
the power of attorney given in 1863, when the bank was a state
institution, was sufficient to authorize a sale of the stock by the
national bank to pay Hayward's indebtedness to it.
After the transfer in October, 1866, the stock was at times
greatly depressed in value, ranging from $15 to $70 per share. The
latter was the ruling market price in August, 1868, but it was
insufficient to reimburse the bank for its loan and interest and
the assessments on stock it had paid. The board of
Page 96 U. S. 613
directors, on the 18th of the latter month, passed an order
directing the president of the bank to sell forthwith the Hecla
mining stock, so held as collateral, unless Hayward paid upon his
said loans $5,000 during that week, and a like amount during the
following week. Hayward was notified of this order, but did not
comply with its terms. Thereupon the president determined to
dispose of the stock, in discharge of the bank's claim. Three of
the directors, for the purpose, as the bank officers say, of
preventing loss to the bank, in which they were stockholders, but
for the further reason, doubtless, that they regarded it a safe
investment, proposed to the bank to take the stock at $87 per
share, which was above the market price, each director to take one
hundred and fifty shares, and pay one-third of Hayward's
indebtedness to the bank. But before they would carry this
arrangement into effect, they insisted that Hayward be advised of
their proposition. The sale was consummated on the 8th of
September, 1868; and on that day, each of the directors paid, by
assuming absolutely one-third of the bank's claim against Hayward,
and received in consideration thereof a new certificate for one
hundred and fifty shares of stock.
Immediately after this sale, the bank sent to Hayward a
statement of his account showing its claim against him on account
of his loans, interest, and assessments paid, to be $39,257.16, and
closing with this credit: "Sept. 8, 1868, by cash, $39,257.16."
In 1871, the Hecla Mining Company and the Calumet Mining
Company, also a Michigan corporation, were consolidated under the
name of the Calumet and Hecla Mining Company. New stock was issued
from time to time, and at the commencement of this action, instead
of the four hundred and fifty shares originally held, the three
directors held nine hundred shares in the consolidated company.
After the transfer of Sept. 8, 1868, they met all assessments upon
the stock and received individually such dividends as were declared
thereon.
Other facts are states in the opinion of the Court.
This suit was instituted by Hayward against the bank, on the
14th of March, 1872, for the purpose of obtaining a decree,
authorizing him to redeem the nine hundred shares of stock, and
requiring the bank to transfer them to him, and to pay
Page 96 U. S. 614
over whatever might be due him, upon taking an account of the
moneys received on the stock, and of his indebtedness to the bank
by reason of said loans.
Neither the mining company nor the directors who purchased the
stock were made defendants.
The bill was dismissed on a final hearing, and Hayward appealed
to this court.
MR. JUSTICE HARLAN delivered the opinion of the Court.
This bill seems to have been prepared upon the supposition that
the bank held and owned the nine hundred shares of stock in the
Calumet and Hecla Mining Company at the commencement of this
action. It is evident, however, that the bank's connection with the
stock ceased Sept. 8, 1868, when it was sold to three of the bank
directors. After that date, the purchasers claimed and controlled
the stock as their individual property, paid all assessments laid,
and received all dividends declared. The evidence shows that the
sale to them was absolute and unconditional, and the title which
them unquestionably passed to them has ever since been uniformly
recognized by the bank and the company. If the appellant is
entitled, upon any ground whatever, to a transfer of the stock,
such relief can only be given in a suit against the holders of
it.
A large portion of the very elaborate argument made in behalf of
the appellant was in support of the proposition that the bank,
having received the stock in pledge to secure his indebtedness to
it, could not, consistently with settled principles, buy from
itself, and consequently could not sell to its directors. If these
principles were at all applicable to this case, it would only
follow that the bank, by violating its duty, had become liable to
him for the value of the stock. But such liability is not charged,
nor is such relief asked. The specific relief sought is a decree
requiring the bank to transfer the stock to him -- a thing now
beyond its power to do. It is true that the bill contains a general
prayer for such relief as may be consistent with equity and good
conscience, but we incline to the opinion that
Page 96 U. S. 615
its whole frame and structure are inconsistent with a right in
this suit to a decree for the value of the stock, even if the facts
justified any such relief. 1 Dan.Ch.Pr. (3 d Am. ed.) 382;
Chalmers et ux. v. Chambers, 6 Har. & J. (Md.) 29;
Hobson v.
McArthur, 16 Pet. 182;
English v.
Foxall, 2 Pet. 595;
Thomason v. Smithson,
7 Port. (Ala.) 144;
Driver v. Fortner, 5
id. 9;
Strange v. Watson, 11 Ala. 324.
But, waiving the consideration last mentioned, we discover
nothing in the evidence which would entitle Hayward to a decree
against the bank in any form of proceeding. The bank had the
unquestionable right to sell the stock in satisfaction of his
indebtedness. It is equally clear, that, with his assent, the stock
could have been taken by the bank in discharge of such
indebtedness, or sold to any of its directors. Where such assent is
clearly shown, and the sale to them was unattended by circumstances
of fraud, unfairness, or imposition, we perceive no sound reason
why it should not be upheld, especially after an unreasonable and
unexplained lapse of time, without objection or complaint by him.
Prior to the sale, he was often requested by the bank to take up
his notes, and meet the assessments upon the stock. He failed to do
either, and the bank was compelled to provide for the assessments.
The indulgence extended to him by the bank was characterized by the
utmost liberality. It was all that he could have expected or
demanded. When, therefore, he was informed (as we do not doubt he
was) of the settled purpose of the bank to sell the stock, and of
the proposition of the three directors to purchase it, it was his
duty, if he disapproved of the latter arrangement, to give
expression in some form to that disapproval. So far from expressing
disapproval, the weight of the evidence is that he gave his
consent. It is quite certain that the directors made the purchase
in the belief that he had been advised of their proposition, and
had assented to its acceptance by the bank. The most favorable
construction for him which can be put upon the evidence is that he
was silent when notified of the proposition, and made no objection
to its acceptance. His silence, however, under the circumstances,
taken in connection with his subsequent conduct, should be held as
conclusive as if he had originally assented, in express terms, to
the sale. If it be suggested that after having
Page 96 U. S. 616
been informed of the proposition of the directors, sufficient
time was not allowed him for deliberation before the sale was made,
and if he could have repudiated it for that reason and reclaimed
the stock, there is still no satisfactory explanation of his course
after he learned that a sale had actually occurred. He was promptly
advised of it, and of the amount realized therefrom. He received at
the same time an itemized account showing the amount claimed by the
bank upon the original loans as well as for interest and for
advances to meet assessments. That account, it is true, contained
no statement, in terms, of the sale, nor did it give the names of
the purchasers. But he admits in his cross-examination that he was
informed by the person who delivered the account that the stock had
been sold, and that he understood the credit of $39,257.16 to
denote the sum realized from such sale. There was no other mode, as
he well knew, by which he could entitled to so large a credit. He
disputed no item in the account, expressed no disapproval of what
had been done, and made no complaint to the bank of its action.
Although he was well acquainted with the bank officers, and met
them frequently after the sale, often upon terms of familiar
intercourse, he made no inquiry on the subject. He gave no
intimation either of dissatisfaction or of any purpose to repudiate
the sale and look to the bank for the value of the stock. He says
that he felt "too castaway to speak to anybody; . . . couldn't help
himself, nor pay the loan; cared very little about anything." If,
as soon as he was notified of the sale, he had the right to
repudiate it and compel the bank to recover the stock, such a
course would have profited him nothing, since the three directors
paid more for the stock than it was then worth, and the bank, under
its express authority to sell, could have put it at once upon the
market. It was this consideration which perhaps induced him to
remain silent and inactive for more than three years and a half.
During all that period, he neither paid nor offered to pay any
interest to the bank, although his present suit rests upon the
basis that the bank had an unsettled account with him embracing a
valid subsisting debt, upon which, he now concedes, it is entitled
to interest; and he permitted the bank and the purchasing directors
to act in the belief that he was content with their action,
Page 96 U. S. 617
and that the money realized from the sale had been properly
applied to the payment of his indebtedness. Although all the time
conversant with the market value of such stock, he made no demand
upon the company for dividends declared, nor did he protest against
the payment of them to others. Finally, the extraordinary advance
in the market price of the stock caused him to break the silence
which he had so long and so persistently maintained, and, in March,
1872, he formally notified the bank of his desire and purpose to
redeem the stock, although he knew, or could have ascertained upon
inquiry, either at the bank or at the office of the company in
Boston, that the bank had not held or controlled the stock in any
form, directly or indirectly, after the sale in September,
1868.
The facts present insuperable obstacles to any decree in favor
of the appellant. If the sale made by the bank was originally
impeachable by him, the right to question its validity was lost by
his acquiescence. He was in a condition, immediately after the
sale, to enforce such rights as the law gave him, as he was fully
apprised of their nature, and of all the material facts of the
case. He now claims that the sale was in derogation of his rights
and injurious to his interests, and yet his conduct was uniformly
inconsistent with any purpose to repudiate the sale or assert
ownership of the stock. His course was continuously such as to
induce a reasonable belief of his fixed determination to abide by
the action of the bank. He remained silent when he should have
spoken. He will not be heard now, when he should be silent. He must
be held to have waived and abandoned the right, if any he had, to
impeach the transaction of Sept. 8, 1868.
But the appellant is equally concluded by the lapse of time
during which that transaction has been allowed to stand, without
any effort upon his part to impeach it. It must now be regarded as
unimpeachable.
Courts of equity often treat a lapse of time, less than that
prescribed by the statute of limitations, as a presumptive bar, on
the ground "of discouraging stale claims, or gross laches, or
unexplained acquiescence in the assertion of an adverse right." 2
Story, Eq.Jur., sec. 1520.
In Smith v. Clay, Amb. 645,
Lord Comden said:
"A court of equity, which is never active
Page 96 U. S. 618
in relief against conscience or public convenience, has always
refused its aid to stale demands when the party has slept upon his
right, and acquiesced for a great length of time. Nothing can call
forth this court into activity but conscience, good faith, and
reasonable diligence. When these are wanting, the court is passive,
and does nothing. Laches the neglect are always
discountenanced."
These doctrines have received the approval of this Court in
numerous cases.
Twin Lick Oil Co. v. Marbury, 91 U. S.
587;
Badger v.
Badger, 2 Wall. 87;
Marsh v.
Whitmore, 21 Wall. 178;
Harwood
v. Railroad Company, 17 Wall. 79. I n the
last-named case, this Court said that without reference to any
statute of limitation, equity has adopted the principle that the
delay which will defeat a recovery must depend upon the particular
circumstances of each case. The question of acquiescence or delay
may often be controlled by the nature of the property which is the
subject of litigation.
"A delay which might have been of no consequence in an ordinary
case, may be amply sufficient to bar relief when the property is of
a speculative character or is subject to contingencies, or where
the rights and liabilities of others have been in the meantime
varied. If the property is of a speculative or precarious nature,
it is the duty of a man complaining of fraud to put forward his
complaint at the earliest possible time. He cannot be allowed to
remain passive, prepared to affirm the transaction if the concern
should prosper, or to repudiate it if that should prove to his
advantage."
Kerr, Mistake and Fraud (Bump's ed.), pp. 302, 306;
Twin
Lick Oil Co. v. Marbury, supra.
If Hayward was defrauded of his stock -- if the title did not
pass from him or the bank because of the peculiar relations which
the purchasers held to him and the property; if he had the right
originally upon any ground to repudiate the sale and reclaim the
stock -- it was incumbent upon him by every consideration of
fairness to act with diligence, and before any material change in
the circumstances and in the value of the stock had intervened. No
sufficient reason is given for the delay in suing. His poverty or
pecuniary embarrassment was not a sufficient excuse for postponing
the assertion of his rights. He in must be deemed to have made a
final election not to disturb the sale of 1868, and a court of
equity should not permit him,
Page 96 U. S. 619
under the circumstances, to recall that election. Upon the
grounds, then, both of acquiescence and lapse of time, he should be
held to have forfeited all right to relief in a court of
equity.
For the reasons given, and without discussing other questions of
minor importance, the decree should be affirmed, and it is
So ordered.
