Fourth National Bank v. Manchester Real Estate & Mfg. Co.

The plaintiffs, as pledgees of stock as collateral security, sue for two dividends declared on the stock after the date of the pledge. The first dividend was paid over by the defendants upon the order of the stockholder of record; the second is now in the hands of the corporation. It is conceded in argument that dividends upon stock pledged as collateral are the property of the pledgee. Meredith Village Savings Bank v. Marshall, 68 N.H. 417. But the parties to the contract of pledge may agree that the dividends may be drawn by the pledgor and held as his property. Guarantee Co. v. Company, 96 Ga. 511; Farmers etc. Bank v. Mosher, 63 Neb. 130, 138. By the law of this state and that of the place of the corporation's organization, the unrecorded transfer of the stock certificates did not affect the right of the corporation to pay the dividends to the stockholder of record. P. S., c. 149, s. 14; Laws 1887, c. 16; Maine R. S., c. 47, s. 35; Meredith Village Savings Bank v. Marshall,68 N.H. 417.

It is said that the pledgor was president of the corporation and knew of the pledge, and hence that the corporation had notice. But it must be assumed that the contract of pledge was made in view of the statutory provisions cited, and, in the absence of evidence to the contrary, that it was understood that until a transfer of the stock was at least asked for the corporation might pay the dividends to the pledgor. If as between Mason and the bank, it was understood that the dividends should be paid to Mason, the knowledge of Mason, if imputable to the defendant corporation, would not require the defendants to withhold the dividends from him. If such was not the mutual understanding, Mason, in withholding from the corporation knowledge of the transfer so as fraudulently to obtain payment of the dividends to himself, was interested adversely to the corporation. Neither was the knowledge sought to be charged to the corporation obtained by Mason while acting for the defendants. Hence the defendants are not chargeable with his knowledge. Clark v. Marshall,62 N.H. 498, 500, 501; Brookhouse v. Company, 73 N.H. 368, 374; Warren v. Hayes, 74 N.H. 355. A verdict should have been ordered for the defendants as to the dividend declared March 29, 1910.

The defendants still hold the dividend of September 25, 1911. The stock has been transferred. The only defence to the claim for this dividend is that on April 22, 1910, Mason assigned to S. H. Mead all dividends due or thereafter to become due upon all stock standing in his name, which included the stock in question then held by the plaintiffs, and that the plaintiffs had waived their right to dividends. The evidence of waiver relied upon is the failure of the plaintiffs to ask for transfer of the stock or to demand the dividends. But it is not necessarily to be inferred from the failure of the plaintiffs to demand the first dividend before it was paid that they waived their admitted right to the second dividend which they did demand before payment.

As the plaintiffs from the prior transfer of the stock were entitled to the dividend should they demand it, Mason's assignment of future dividends gave Mead no right as to the second dividend, after the demand. As the case is transferred, the suit is between the plaintiffs and the defendant corporation. The record speaks of the defendant S. H. Mead, and it appears from the argument that S. H. Mead, to whom the first dividend was paid upon Mason's order, was a defendant to the suit and that the jury returned a verdict for him, and it appears also to be admitted that the plaintiffs excepted to a refusal to order a verdict for them against Mead.

In Meredith Village Savings Bank v. Marshall, 68 N.H. 417, the pledgee of stock held as collateral security was permitted to recover of the pledgor's administrator, "the question of the rights of third parties without notice" not being presented. There was evidence that Mead had no knowledge of the pledge of the stock to the plaintiffs, that there was no constructive notice from the record, and that there was a consideration for the assignment to Mead in his indorsement of a note of Mead, Mason Co., upon which he has since paid the interest and upon which he is still liable. The plaintiffs received the stock as collateral for a preexisting debt. Upon these facts it could be found that the legal title to the money passed to Mead, that his equitable title was equal, if not superior, to the plaintiffs', and that the plaintiffs, having assented to the payment to Mead of the first dividend, are estopped to question his disposition of it. No ground appears upon which to disturb the verdict for Mead. Whether the plaintiffs can recover this dividend of Mason is not now in issue.

The first dividend should be struck out of the verdict. The exception to the instructions given has not been argued and does not appear to be material. As there was no evidence from which it could be found that the plaintiffs were estopped to demand any dividends, the request for instructions substantially to that effect were properly denied. The plaintiffs' exceptions are overruled. The defendants' exception to the refusal to order a verdict for them as to the first dividend is sustained; their other exceptions are overruled.

Case discharged.

All concurred.