HAVENS v. BANK. HAVENS v. BANK OF TARBORO. (Filed March 24, 1903.) BANKS AND BANKING-Corporations-Stock-Certificates of StockIssuance. Where the president of a bank signs certificates of stock in blank and leaves them with the cashier, all the stock having been issued, who fraudulently issues such certificates to himself and pledges them as collateral for a loan, the bank is liable to the pledgee for the value of the stock, although the certificates of stock recite that they are transferable only on the stock book of the bank. ACTION by Lucy E. Havens against the Bank of Tarboro and others, heard by Judge Francis D. Winston at October Term, 1902, of the Superior Court of EDGECOMBE County. This action was brought by the plaintiff to recover the value of a certificate for thirteen shares of stock which she alleged was issued by the defendant to James G. Mehegan, and which she received from him as collateral security for a loan of $500. The case was tried in the court below upon certain facts which were agreed upon by counsel of the parties and submitted to the court for its decision, the said facts being as follows: 1. That the defendant bank was organized under act of General Assembly in the spring of 1895 for the conduct of a general banking business in Tarboro, N. C. 2. That the defendant bank organized by the election of John F. Shackelford, President, and the defendant J. G. Mehegan, Cashier; that said Shackelford has served continuously since then as president, and said Mehegan served as cashier until the month of October, 1897. 3. That it was provided by the act of incorporation of said bank that the capital stock thereof should not be less than twenty-five thousand dollars, in shares of one hundred dollars each, with authority to increase the same to an amount not HAVENS v. BANK. exceeding two hundred and fifty thousand dollars, and that the stockholders therein should have the authority to adopt such by-laws and regulations for the government of said bank as they might deem necessary and proper; that said act of incorporation (chapter Private Laws of 1895) is made part of this agreed state of facts. (The same need not be printed, but the bound volume may be used in the Supreme Court). 4. That the stockholders of said bank thereafter adopted the following by-law and regulation in regard to the issuing of certificates of stock therein, to-wit: "Certificates of stock signed by the President and Cashier may be issued to stockholders and the certificates shall state on the face thereof that the stock is transferable only on the books of the bank, and when the stock is transferred the certificate thereof shall be returned to the bank and cancelled and preserved, and new certificates issued. But no certificate shall be delivered to any stockholder until his stock is fully paid. Upon the payment, however, of the first assessment of 40 per cent. of said stock the same shall be issued in the name of each shareholder as he shall have subscribed for the same, and retained by the bank until the same is fully paid. There shall be issued to said stockholders a certificate certifying the number of shares of capital stock that said shareholder is entitled to upon a payment of the remaining 60 per cent. of the par value of said stock, which certificate shall state in its face the amount paid on said stock, and shall be assignable and transferable in the same manner as herein provided for capital stock, and shall be signed by the Presi dent and Cashier." 5. That the plaintiff had no knowledge of the provisions of the foregoing by-law and regulation other than such as was derived from the certificate of stock assigned to her by James G. Mehegan as hereafter stated. HAVENS v. BANK. 6. That John F. Shackelford signed a number of blank certificates like that in question, as president of the bank, to be filled out in the name of the purchaser when called for, and placed them in the safe of the bank, which was under the control of the defendant Mehegan, the bank cashier, to be held as set out in fact 4; that the said Mehegan filled out, signed and issued to himself one of these certificates which the president had previously signed in blank; and that the said Mehegan did this without the knowledge of any other officer of the bank than himself, and without the knowledge of any other person, without having paid the said bank anything for the said certificate. 7. That on the 22nd day of November, 1895, the defendant James G. Mehegan individually borrowed of the plaintiff the sum of five hundred dollars, and in evidence thereof executed his promissory note for the payment of the same one year after date, with interest payable quarterly, and as collateral security for the payment of the said note the said Mehegan assigned by written endorsement and delivered to the plaintiff the said stock certificate, which, with the endorsement thereon, is in the following language: Number 10. THE BANK OF TARBORO, TARBORO, N. C. Shares 13. This certifies that Jas. G. Mehegan is the owner of thirteen shares of the capital stock of THE BANK OF TARBORO, transferable only on the books of the corporation in person or by attorney on surrender of this certificate. In witness whereof, the President and Cashier have hereunto subscribed their names and caused the corporate seal to HAVENS v. BANK. be hereto affixed at Tarboro, N. C., this 22d day of November, 1895. JOHN F. SHACKELFORD, President. JAS. G. MEHEGAN, Cashier. That there appeared on the back of said certificate the following entries and endorsements, to-wit: "This certificate is subject to an assessment of 60 per cent., payable on call of Board of Directors. JAS. G. MEHEGAN, Cashier." "For value received....... ..hereby sell and transfer and assign to........ the shares of stock within mentioned, and hereby authorize. . to make the necessary trans fer on the books of the corporation. "Witness...hand and seal, this ... .day of... ..., 189.. JAS. G. MEHEGAN.” 8. That said certificate of stock, assigned as aforesaid, was taken from the stock certificate book of the said bank, and this is the only stock book we had in the bank. 9. That the said loan of five hundred dollars was made by the plaintiff upon the faith and credit of the said certificate of thirteen shares of the capital stock in said bank, and in the full confidence and belief that the said certificate of stock was in all respects genuine and valid, and without notice of any irregularity or fraud in the issuance of the same. 10. That the defendant James G. Mehegan is wholly in⚫ solvent. 11. That the plaintiff made demand upon the defendant bank to authorize and effect the transfer of the said certificate of stock upon the proper book of said bank according to its HAVENS v. BANK. 6. That John F. Shackelford signed a number of blank certificates like that in question, as president of the bank, to be filled out in the name of the purchaser when called for, and placed them in the safe of the bank, which was under the control of the defendant Mehegan, the bank cashier, to be held as set out in fact 4; that the said Mehegan filled out, signed and issued to himself one of these certificates which the president had previously signed in blank; and that the said Mehegan did this without the knowledge of any other officer of the bank than himself, and without the knowledge of any other person, without having paid the said bank anything for the said certificate. 7. That on the 22nd day of November, 1895, the defendant James G. Mehegan individually borrowed of the plaintiff the sum of five hundred dollars, and in evidence thereof executed his promissory note for the payment of the same one year after date, with interest payable quarterly, and as collateral security for the payment of the said note the said Mehegan assigned by written endorsement and delivered to the plaintiff the said stock certificate, which, with the endorsement thereon, is in the following language: Number 10. Shares 13. THE BANK OF TARBORO, TARBORO, N. C. This certifies that Jas. G. Mehegan is the owner of thirteen shares of the capital stock of THE BANK OF TARBORO, transferable only on the books of the corporation in person or by attorney on surrender of this certificate. In witness whereof, the President and Cashier have hereunto subscribed their names and caused the corporate seal to |