Earle v. Carson, 188 U.S. 42 (1903)

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Earle v. Carson

No. 83

Argued November 11, 1902
Decided January 19, 1903
188 U.S. 42

ERROR TO THE CIRCUIT COURT OF

APPEALS FOR THE THIRD CIRCUIT

Syllabus

1. The presumption of liability of a stockholder of a national bank begotten by the presence of the name on the stock register may be rebutted if the jury finds the fact to be that a bona fide sale of the stock had been made and every duty had been performed which the law imposed in order to secure a transfer on the registry of the bank. The mere reduction of the reserve of a national bank below the legal limit does not affect with a legal presumption of bad faith, all transactions made with or concerning the bank during the period whilst the reserve is impaired.

2. The power of a stockholder to transfer stock in a national bank, like other personal property, is not limited by the mere fact that, at the time of the transfer the bank, which was a going concern, was insolvent in the sense that its assets, if liquidated, would not discharge its liabilities, unless it be shown that the seller was aware of the facts and had sold the stock in order to avoid the impending double liability.

3. Nor is such a bona fide sale void if the person to whom the stock is sold is, owing to his insolvency, unable to respond to the double liability, if the fact of such insolvency was at the time of the sale, unknown to the seller.

When the Chestnut Street National Bank of Philadelphia suspended payment and its doors were closed, there stood on the stock register ten shares in the name of the defendant in error. A call having been made by the Comptroller for the sum of the double liability, this suit was commenced to recover the amount. The defense was: first that, prior to the suspension of the bank, the defendant had, in good faith, sold the stock standing in her name for a full market price, which had been paid her; second, that in consummation of such sale, she had, by her agent, delivered to the proper officer of the bank in its banking house at the place where transfers were made, the stock certificate, with an adequate power of attorney to make the transfer, and requested that the stock be transferred; third, that the officer of the bank said that the transfer would be made as requested, and the defendant was ignorant of the fact that the officer had failed to discharge his duty; fourth, that, as the defendant had done everything which the law required her to do to secure the transfer, she had ceased to be a stockholder, and was not responsible.

In submitting the case to the jury, the court instructed first that the presence of the name of the defendant on the stock register created a presumption of liability. This, however, the jury was informed, was not conclusive, but might be rebutted. Such rebuttal, the court charged, would result if it was proved that the defendant had made a bona fide sale of her stock, and had, at the proper time and place, handed to the proper officer of the bank a power to transfer the same, although the officer of the bank had neglected to fulfill his duty in the premises. Second, after charging fully and accurately as to the proof essential to show a bona fide sale of stock in a national bank, the court having, during the trial, applied a like rule in passing on the admissibility of evidence, instructed the jury if the evidence established that a sale of such character had been made while the bank was a going concern, the defendant would not be liable because, unknown to her, the bank was, at the time of the sale, in fact insolvent. And the same principle was applied to the unknown insolvency of the person to whom the stock was sold. There was verdict and judgment for the defendant, which was affirmed by the circuit court of appeals; thereupon this writ of error was prosecuted.