Bank of Culloden v. Bank of Forsyth , 120 Ga. 575 ( 1904 )

Lamar, J.

(After stating the foregoing facts.) The Bank .of Culloden was incorporated under the. Civil Code, § 1903, and not under the act of 1891 (Acts 1890-1, p. 172). It can not, therefore, claim a.charter lien by virtue of the amending act approved December 20, 1893 (Acts 1893, p. 78). Its defense to the present suit must rest solely upon the by-law lien, under the Civil Code, § 2825. If the face of the scrip had indicated the existence of such lien, every purchaser or pledgee would thereby have been put on inquiry, and would have taken subject to the claim of the bank for any debt due at the date of the transfer, and subject to any debt that might arise between the holder of the stock and the bank before the latter received notice of a sale or a pledge. But the same reasons which protect bona fide purchasers against secret liens generally apply with peculiar force to prevent the enforcement of secret incumbrances on corporate shares. For while they are not negotiable in the full sense, yet the custom of business, the necessities of commerce, and the multitude of transactions, tend more and more to force the transfer of stock under the rule applicable to the sale of negotiable instruments. Indeed, the Civil Code, § 2825, recognizes that the by-law lien would not be good as against a creditor without notice. It being admitted that the Bank of Forsyth in the present -case was an innocent pledgee, on that branch of the case it must prevail, unless, as claimed by the plaintiff in error, the words “transferable only on the books of the corporation, in person or by attorney, on surrender of the certificate,” charged the pledgee with notice of what could be learned by examining the books, including the by-law, and the amount of the bank’s claim against the Allen Merchandise Company. Exactly the contrary was true. The notice, instead of operating only as a warning of the company’s rules, was also, a promise that, the bank would not make a transfer to any one who did not produce and surrender the scrip itself. Bank v. Lanier, 11 Wall. 378. When, therefore, the pledgee received the certificate, it took that which the Bank of Culloden recognized as the main muniment of title. And while, for the purpose of sending notices of meetings, paying dividends, voting, and the like, the transfer on the books was important between the bank and the stockholders, yet, as between the buyer and the seller, the title could pass and the transfer be otherwise completed. Civil Code, § 18£>5. In some jurisdictions the title may pass upon the payment of the purchase-money and the delivery of the certificate, without any written assignment ; in others, by the delivery of the eertificaté with an assignment thereof on the same or on a separate paper. Here there was a delivery, an assignment by the very terms of the. note secured by the stock, and a power of attorney therein to make sale on default. This was sufficient between the borrower and the lender; and after default and a sale under the power, the purchaser was entitled to a transfer on the-books, and a new certificate. Had the pledgee demanded a transfer before the sale,.the measure of damages for a failure to comply would have been his debt and interest. But at the sale it acquired the pledgor’s title free from any equity of redemption, and the measure of damages for the refusal to make the transfer was the value of the shares at the time of the refusal. 3 Clark and Marshall on Private Cor. §§ 602, 603 b, 582. Judgment affirmed.

All the Justices concur.