Tuck, J.,
delivered the opinion of this court.
It is not denied, on the part of the appellants, that the bank has a lien on stock for the payment of debts of stockholders; but it is insisted, 1st, that the lien in this case was waived by the form of the certificate: and 2nd. that if not [281]*281Waived, the lien does not attach to balances due for overdrafts on checks, nor to notes or bills on which the stockholder may be a party as maker or indorser, not due at the time the transfer may be demanded.
The first of these positions must be determined against the appellants upon the authority of Farmers Bank of Md. vs. Iglehart, 6 Gill, 50. That charter provides, that, “all debts actually due to the company by a stockholder offering to transfer, must be discharged before such transfer shali be made.” It was held that the power to withhold the transfer could not be questioned, and that the predicament of Iglehart was precisely that of the stockholder under whom he claimed. “For dealing with a stockholder of the company in reference to his stock, he is held to have taken his equitable assignment subject to the rights of the bank, under the Act of incorporation, of which he was bound to take notice.” The same doctrine had been established in the cases of Union Bank vs. Laird, 2 Wheat., 393. Brent vs. Bank of Wash., 10 Peters. 616, where the bank charters provided that, “all debts actually due and payable to the bank, (days of grace for payment being passed,”) should be satisfied before the transfer could be made, unless the president and directors should direct to the contrary. As the debts alleged against the stockholders were overdue, no question was made as to the phraseology of the clause under which the transfer was resisted. The charter of the present appellee, provides for the payment, before the transfer, of “all debts, actually due and payable, to the corporation.” The first proposition of the appellants must be- taken as covered by the decisions referred to, because, if the form of the certificates had been deemed as a waiver of the lien, the claims of those banks could not have been enforced. They are substantially the same with the one before us, as far as concerns the present question, and should receive the same interpretation. The 16th Article looks to an express waiver by the president and directors, and, although in 7 Gill & Johns., 310, Hodges vs. Planters Bank, the court held that the privilege might be waived, there was no intimation that the certificate had [282]*282such effect, notwithstanding the charter of the bank—Act of 1817, ch. 16—contained a similar provision.
We do not concur with the appellants, that this lien cannot be asserted against stock for balances due by the owners for over-checks. As far as the defence may rest on want of notice on the part of the assignee, it can make no difference to him how the indebtedness may have arisen—whether by over-drafts or as maker or endorser of notes, because the same means of information are open to him in either aspect of the transaction. His condition, at the time of the assignment, would be the same. He is presumed to have taken his equitable assignment, subject to the rights of the bank against the stockholder, of which he is bound to take notice. The certificate furnishes no information what these rights may be; his reliance must be on application at the bank, and if he proceeds in ignorance, it is his own fault. Can it be said that a customer whose checks are honored at the counter, is not indebted to the bank for amounts so overdrawn? It may be done inadvertently, or to save the credit of the drawer, when it becomes a debt of the highest degree, though not entitled to greater respect in the courts. The charter speaks in general terms of “all debts actually due and payable.” Over-payments on checks are due and payable immediately, and as much within the protection of the charter, as being secured by the stock, as if they originate in any other way. It is true, that a bank officer cannot pay over-checks without committing a breach of duty, for which his official bond may be liable. Minor vs. Mechanics Bank of Alexandria, 1 Peters, 46; but that is not the only remedy. In the very case mentioned by (he counsel, Merchants Bank of Balto. vs. The Farmers Bank of Va., not reported, but set out in the case of Boyd vs. McCann, 10 Md. Rep., 124, the holder of a check, endorsed “good,” by the cashier, when the drawer had no funds to his credit, recovered against the bank on which the check was drawn. The unauthorized act of the officer was not allowed to prejudice an innocent party. Can it be possible that whilst the bank is liable to pay the check, and has a remedy over against the officer, the party benefitted [283]*283may escape ? Such a transaction docs not belong to the class in which a corporation seeks to recover on a contract not authorized by its charter; it docs not rest on contract at all, but on the principle, that the person charged is in possession of funds or property of another, 'which should be surrendered or returned to the true owner.
But we are of opinion that the lien did not attach to paper not due at, the time the transfer was demanded. The words are, “debts actually due and payable to the corporation.” They imply more than mere indebtedness, and it has been so decided in a similar case. By the 9th sec. of the charter of the United States Insurance Company, it is declared, “No stockholder, indebted to the company, shall be permitted to make a transfer or receive a dividend, until such debt be paid or secured.” In Hall vs. U. S. Ins. Co., 5 Gill, 499, it was held that “instalments, not called in, constituted no such indebtedness as was contemplated by the Act of Assembly. It contemplated only a debitum solvendum in presentí, not in futuro.''’’ There the words might have embraced any indebtedness; here they are restricted to “debts actually due and payable.” We think that the language admits of no other construction. It is true, that, in the case of Brent vs. Bank of Washington, 10 Peters, the court said that “the signature of a party to a note is an inchoate pledge of his stock for security; his stock gives credit to his name, and the bank grants the loan on its faith;” but that was a controversy between the bank and the United States, in fact, claiming priority under an Act of Congress, the deed of (rust which covered the stock having become inoperative by non-acceptance by the trustees, and did not involve any question between the bank and parties, as here, claiming under an assignment executed before the note became due. It was held, that as between the bank and the government, the equitable lien of the former should prevail.
This view, however, cannot aid the appellants, because they did not pay what the bank liad a right to demand at the time the certificates were first presented for a transfer of the stock; [284]*284and when a second demand was made, other notes of the stockholders had become due and payable, which the assignees declined paying. The words in rvhich this privilege is given, are plain, and admit of no doubt; they are obligatory, and require payment before the transfer can be made, except, of course, in those cases where the privilege is waived, and here there is no such waiver. The stock stood as security for the debts, and the assignee could not demand a transfer of the stock, which would be a surrender of the security before the corporation was satisfied.
Free access — add to your briefcase to read the full text and ask questions with AI
Tuck, J.,
delivered the opinion of this court.
It is not denied, on the part of the appellants, that the bank has a lien on stock for the payment of debts of stockholders; but it is insisted, 1st, that the lien in this case was waived by the form of the certificate: and 2nd. that if not [281]*281Waived, the lien does not attach to balances due for overdrafts on checks, nor to notes or bills on which the stockholder may be a party as maker or indorser, not due at the time the transfer may be demanded.
The first of these positions must be determined against the appellants upon the authority of Farmers Bank of Md. vs. Iglehart, 6 Gill, 50. That charter provides, that, “all debts actually due to the company by a stockholder offering to transfer, must be discharged before such transfer shali be made.” It was held that the power to withhold the transfer could not be questioned, and that the predicament of Iglehart was precisely that of the stockholder under whom he claimed. “For dealing with a stockholder of the company in reference to his stock, he is held to have taken his equitable assignment subject to the rights of the bank, under the Act of incorporation, of which he was bound to take notice.” The same doctrine had been established in the cases of Union Bank vs. Laird, 2 Wheat., 393. Brent vs. Bank of Wash., 10 Peters. 616, where the bank charters provided that, “all debts actually due and payable to the bank, (days of grace for payment being passed,”) should be satisfied before the transfer could be made, unless the president and directors should direct to the contrary. As the debts alleged against the stockholders were overdue, no question was made as to the phraseology of the clause under which the transfer was resisted. The charter of the present appellee, provides for the payment, before the transfer, of “all debts, actually due and payable, to the corporation.” The first proposition of the appellants must be- taken as covered by the decisions referred to, because, if the form of the certificates had been deemed as a waiver of the lien, the claims of those banks could not have been enforced. They are substantially the same with the one before us, as far as concerns the present question, and should receive the same interpretation. The 16th Article looks to an express waiver by the president and directors, and, although in 7 Gill & Johns., 310, Hodges vs. Planters Bank, the court held that the privilege might be waived, there was no intimation that the certificate had [282]*282such effect, notwithstanding the charter of the bank—Act of 1817, ch. 16—contained a similar provision.
We do not concur with the appellants, that this lien cannot be asserted against stock for balances due by the owners for over-checks. As far as the defence may rest on want of notice on the part of the assignee, it can make no difference to him how the indebtedness may have arisen—whether by over-drafts or as maker or endorser of notes, because the same means of information are open to him in either aspect of the transaction. His condition, at the time of the assignment, would be the same. He is presumed to have taken his equitable assignment, subject to the rights of the bank against the stockholder, of which he is bound to take notice. The certificate furnishes no information what these rights may be; his reliance must be on application at the bank, and if he proceeds in ignorance, it is his own fault. Can it be said that a customer whose checks are honored at the counter, is not indebted to the bank for amounts so overdrawn? It may be done inadvertently, or to save the credit of the drawer, when it becomes a debt of the highest degree, though not entitled to greater respect in the courts. The charter speaks in general terms of “all debts actually due and payable.” Over-payments on checks are due and payable immediately, and as much within the protection of the charter, as being secured by the stock, as if they originate in any other way. It is true, that a bank officer cannot pay over-checks without committing a breach of duty, for which his official bond may be liable. Minor vs. Mechanics Bank of Alexandria, 1 Peters, 46; but that is not the only remedy. In the very case mentioned by (he counsel, Merchants Bank of Balto. vs. The Farmers Bank of Va., not reported, but set out in the case of Boyd vs. McCann, 10 Md. Rep., 124, the holder of a check, endorsed “good,” by the cashier, when the drawer had no funds to his credit, recovered against the bank on which the check was drawn. The unauthorized act of the officer was not allowed to prejudice an innocent party. Can it be possible that whilst the bank is liable to pay the check, and has a remedy over against the officer, the party benefitted [283]*283may escape ? Such a transaction docs not belong to the class in which a corporation seeks to recover on a contract not authorized by its charter; it docs not rest on contract at all, but on the principle, that the person charged is in possession of funds or property of another, 'which should be surrendered or returned to the true owner.
But we are of opinion that the lien did not attach to paper not due at, the time the transfer was demanded. The words are, “debts actually due and payable to the corporation.” They imply more than mere indebtedness, and it has been so decided in a similar case. By the 9th sec. of the charter of the United States Insurance Company, it is declared, “No stockholder, indebted to the company, shall be permitted to make a transfer or receive a dividend, until such debt be paid or secured.” In Hall vs. U. S. Ins. Co., 5 Gill, 499, it was held that “instalments, not called in, constituted no such indebtedness as was contemplated by the Act of Assembly. It contemplated only a debitum solvendum in presentí, not in futuro.''’’ There the words might have embraced any indebtedness; here they are restricted to “debts actually due and payable.” We think that the language admits of no other construction. It is true, that, in the case of Brent vs. Bank of Washington, 10 Peters, the court said that “the signature of a party to a note is an inchoate pledge of his stock for security; his stock gives credit to his name, and the bank grants the loan on its faith;” but that was a controversy between the bank and the United States, in fact, claiming priority under an Act of Congress, the deed of (rust which covered the stock having become inoperative by non-acceptance by the trustees, and did not involve any question between the bank and parties, as here, claiming under an assignment executed before the note became due. It was held, that as between the bank and the government, the equitable lien of the former should prevail.
This view, however, cannot aid the appellants, because they did not pay what the bank liad a right to demand at the time the certificates were first presented for a transfer of the stock; [284]*284and when a second demand was made, other notes of the stockholders had become due and payable, which the assignees declined paying. The words in rvhich this privilege is given, are plain, and admit of no doubt; they are obligatory, and require payment before the transfer can be made, except, of course, in those cases where the privilege is waived, and here there is no such waiver. The stock stood as security for the debts, and the assignee could not demand a transfer of the stock, which would be a surrender of the security before the corporation was satisfied. It was not then satisfied, and had not been when the bill was filed to enforce the lien. And it is not until the bank is seeking to avail itself of the security, that the appellants are willing to submit to the terms of the charter. We are not prepared to say that, if they had, before the other notes became due, offered to redeem the stock, by paying the indebtedness up to the 4th of December, they would not have been allowed to do so; but they cannot, after the charge upon the stock has been increased bjr the falling due of other paper, claim to be remitted to their condition on the 4th of December. The stock must stand pledged for all the indebtedness due at the time the last demand for transfer was made.
There was no obligation on the court to have given the defendants a day to pay the debts. The Act of 1785, ch. 72, sec. 3, has no application. It was within the discretion of the court to prescribe the terms of the sale, and the assignees might have paid the claim at any time after the decree. Actual sales of stock are usually made for cash, and when these shares became forfeited, there was no right in the debtors, or those claiming the stock, to have a day appointed, within which it might be redeemed.
The objection that the decree allowed the claims of the bank, when the bill had claimed the same sum twice, is of little importance, and does not entitle the defendants to a reversal, since the Act of 1832, ch. 302.
As part of the debt was due, the decree should be allowed 1b stand. In sending the cause back, the court can protect the parties against a sale for more than is necessary to pay [285]*285the sums due, or the decree may be reformed, or, if a sale has been made, pending the appeal, injustice may be prevented by stating the accounts of the trust in accordance with the opinion of the court above. To tin’s end the cause will be remanded without affirming or reversing the decree.
(Decided July 15th, 1859.)
Cause remanded.