Johnson v. First Nat. Bank of Franklin

This action is brought to recover the value of five shares of stock of the Delaware National Bank of Delhi claimed to have been converted by the defendant. This stock was held by the defendant as' collateral to a note signed by Robert T. Johnson, the plaintiff’s father, and dated July 30, 1902. In 1891 the said Johnson had borrowed from the defendant bank a sum of $550, and had given as collateral to a note made to secure the loan 10 shares of the stock of the Delaware National Bank. Thereafter the Delaware National Bank failed, and an assessment was made of 50 per cent, on the stockholders, and the stock reduced one-half. Johnson failed to pay his assessment, but upon the sale of the stock, in default of the payment of the assessment, he purchased the same for $500, and took the title in his own name. The 10 shares of stock which was held as collateral to the note in 1891 was originally the property of the wife of Robert T. Johnson and the mother of the plaintiff, who died intestate in 1890. Robert T. Johnson as administrator of her estate had the stock transferred to his own name. At the time of her death, the wife of said Johnson left some real estate in Franklin, the title to which by the laws of intestacy went to his daughter, who was her sole heir, subject to the right of Robert T. Johnson to his tenancy by the curtesy. The $500 which was used by said Johnson to purchase the stock after default in the payment of his assessment was procured by a mortgage upon the said property, signed both by himself and by his daughter. There is evidence to the effect that Johnson agreed to take- this money and buy this stock for this plaintiff, and the jury has found that the plaintiff was the rightful owner of the stock. This finding cannot be disturbed because it rests upon sufficient evidence. The defendant’s contention upon this appeal is that, notwithstanding the fact of the plaintiff’s ownership of the stock, nevertheless, the defendant was entitled to hold the same and to the benefit thereof, because the stock stood in the name of Robert T. Johnson and was transferred to.the bank for value and without notice of the equitable rights of the plaintiff. The claim of the plaintiff is, first, that the defendant could not acquire any superior right by reason of a purchase without notice and for value; and, second, that the defendant’s.purchase was not for value.

Upon the first question, the plaintiff relies upon thé authority of Edwards v. Dooley, 120 N. Y. 540 , 24 N.

“Mere possession of the property by the agent after such purchase does not confer a power of sale, and, it seems, an unauthorized sale by him, although for a valuable consideration, and to one having no notice that another is the true owner, vests no title in the vendee.”

In the case at bar, however, the legal title never vested in plaintiff.

In Weaver v. Barden, 49 N. Y. 286 , the plaintiff furnished the consideration for the purchase of stock. The stock was transferred by Finch, the original owner, to the name of the son of the plaintiff, who was also son-in-law of the defendant, without the knowledge or consent of the plaintiff, who had no knowledge that the transfer had been made in that form until some time in 1864, long after the transfer by the son to the defendant. The son at the time of the transfer by Finch, the original owner of the stock, was, in the language of the report of the referee, “to some extent the agent of the plaintiff in New York.” It was there held that the purchaser from the son to the extent that he was a bona fide purchaser for value was entitled to protection. The two opinions written in the case differ only as to whether the purchaser was a purchaser for value. They both recognize the rule that, if the equities be equal, he who holds the legal title has the superior right. Judge Grover in writing says:

“The counsel for the respondent claims that the equitable title of the plaintiff was available against this title of the defendant, although acquired upon a bona fide purchase, for the reason that L. J. Weaver (the agent) took the title without the knowledge and consent of the plaintiff. But the plaintiff never had the legal title to this stock. That was transferred to L. J. Weaver by the former owner, and his transfer of the same to a bona fide purchaser gave the latter his title and a right in equity equal to that of the plaintiff, and thus the case comes within the familiar principle that, where the equity of the parties is equal the legal title will prevail.”

In the case at bar the plaintiff never had title to this stock. The legal title was given without fault by the corporation to Robert T. Johnson. If the defendant be a purchaser -for value, it has equal equity with the plaintiff, and with equal equity the legal title of the defendant must prevail.

We-reach, then, the question whether the defendant is a holder of this stock for value. There is no question of its bona tides. Upon the question of value we have only the evidence of the president of the bank. From that evidence it appears that on May 6, 1898, Robert T. Johnson had given a note to the bank for $835. This note was for three months, and continued overdue until August 15, 1900, when a renewal note was taken. Meantime, however, and in 1899 some time, this five shares of stock in question was delivered by Robert T. Johnson to the bank as collateral to this overdue note. It was held by the bank..as collateral to.this note until August 15, 1900, when a new note

Judgment and order reversed, and new trial granted, with costs to appellant to abide event. All concur, except SEWELL, J., who dissents, and KELLOGG, J., who concurs in result only.