DocketNumber: Nos. 19,900—(142)
Citation Numbers: 134 Minn. 272
Judges: Brown
Filed Date: 10/13/1916
Status: Precedential
Modified Date: 9/9/2022
The Security State Bank of Warroad, defendant in the action, was duly organized under and pursuant to the general statutes of the state as a banking.corporation. One Joseph Gibbons was a stockholder of the bank and held and owned two shares of stock therein. Gibbons was indebted to the plaintiff in this action in the sum of about $500 and plaintiff brought an action in the district court to recover thereon. Such proceedings were thereafter had in the action, that on November 15,1915, judg-. ment was duly rendered for plaintiff and against Gibbons for the full amount of plaintiff’s claim with costs. Thereafter, under and pursuant to an execution duly issued on the judgment, the sheriff of the county duly levied upon the stock so owned by Gibbons and in due course of procedure the same was sold and struck off to plaintiff as the highest and best bidder at the sale. The levy and sale under the execution occurred in the month of December, 1915. Plaintiff thereafter demanded of the bank a transfer of the stock to him upon its books, which demand the bank refused on the claim that it held the stock as security for the payment of an indebtedness due from Gibbons, and that its claim was superior to any right acquired by plaintiff at the execution sale. Plain
Plaintiff demurred to this defense and defendant appealed from an order sustaining it.
The only question presented is whether the assignment of the stock to the bank was, at the time plaintiff caused the same to be levied upon, valid and superior to the rights acquired by plaintiff as purchaser at the execution sale. This question is answered by the construction to be given to and the force and effect of section 6357, G. S. 1913, which reads as follows:
“It (the bank) shall make no loan or discount on the security of its own capital stock, nor be the purchaser or holder thereof unless necessary to prevent loss upon a debt previously contracted in good faith, and all stock so acquired shall be disposed of at public or private sale within six months after it is so acquired.”
Defendant contends (1): That the period of six months within which the bank was by the statute required to sell and dispose of the stock did not commence to run until the maturity of the secured obligation; and (2) that the failure of the bank to comply with the statute in respect to a sale of the stock cannot be set up or invoked by plaintiff in defeat of the rights of the bank; that the question of the invalidity of the bank’s title can only be raised by the state. Neither contention can be sustained.
The statute controlling the case is plain and unambiguous. It prohibits banking corporations from making loans or discounts upon their own stock as security, and from taking such stock as security except when necessary to prevent loss to the bank, and in that case its right to hold the stock so pledged is limited to the period of six months from the time
The second point made by defendant, namely, that the failure of the bank to comply with the statute can only be complained of by the state, does not require extended discussion. The situation is that of two creditors claiming the same fund in discharge of their respective claims. The state has no interest in that controversy; it is purely personal. The lien and claim of the bank was valid for the period of six months and no longer, and no sound reason can be assigned for holding that, though the bank failed to perfect its rights within the time fixed by the statute, yet the claim remains valid until the state shall step in and raise the objection. As suggested the state has no interest in the matter; the bank committed no ultra vvres act in its failure to sell the stock and there exists no basis for interference by the state. This view is sustained by Buffalo German Ins. Co. v. Third Nat. Bank, 162 N. Y. 163, 56 N. E. 521, 48 L.R.A. 107. A different question would be presented in the
Judgment affirmed.