Hayward v. National Bank
APPEAL from the Circuit Court of the United States for the District of Massachusetts.
In the year 1863, Hayward, 'for the purpose of opening a credit with the Eliot Bank,' deposited certain securities with it, giving it power to transfer the same, as well as any bullion, coin, or other securities which he might thereafter deposit, and expressly waiving 'all and every objection to the manner in which said securities may be sold, whether at public or private sale, or at the board of brokers, without any demand or notice whatever.' Subsequently, the bank was converted into a national banking association, under the name of the Eliot National Bank; and, in the latter capacity, loaned, in October, 1866, to Hayward, first $6,500, and then $20,000, receiving in pledge, as security, four hundred and fifty shares of stock in the Hecla Mining Company, incorporated under the laws of Michigan, but having an office in the city of Boston. The loans were merely temporary, and were entered upon the demand-loan account of the bank. In order that the bank might have full control of the stock so pledged, Hayward caused it to be transferred to R. B. Conant, to whom, as cashier, certificates, absolute in form, were issued for the whole four hundred and fifty shares. Hayward did not meet the loans as he had agreed, but made provision for the interest up to April 1, 1867. After that date he paid no interest. During that year, various assessments were made by the company upon its stock. He was notified of and requested to meet them, but failed to do so; and the bank, in order to save the security, and for its own indemnity, was compelled to pay them, amounting in the aggregate to $9,972.15.
On the 9th of November, 1867, Hayward executed and delivered to the bank the following paper:--
'BOSTON, Nov. 9, 1867.
'I hereby authorize the president and directors of the Eliot National Bank to sell, at thir discretion, four hundred and fifty National Bank to sell, at their discretion, Company, held as collateral security for loan; proceeds of sale to be applied upon said loan.
'To the President and Directors of the Eliot Bank.'
'CHAS. L. HAYWARD.'
This paper was obtained because doubts were entertained whether the power of attorney given in 1863, when the bank was a State institution, was sufficient to authorize a sale of the stock by the national bank to pay Hayward's indebtedness to it.
After the transfer in October, 1866, the stock was at times greatly depressed in value, ranging from $15 to $70 per share. The latter was the ruling market price in August, 1868; but it was insufficient to reimburse the bank for its loan and interest, and the assessments on stock it had paid. The board of directors, on the 18th of the latter month, passed an order directing the president of the bank to sell forthwith the Hecla mining stock, so held as collateral, unless Hayward paid upon his said loans $5,000 during that week, and a like amount during the following week. Hayward was notified of this order, but did not comply with its terms. Thereupon the president determined to dispose of the stock, in discharge of the bank's claim. Three of the directors, for the purpose, as the bank officers say, of preventing loss to the bank, in which they were stockholders, but for the further reason, doubtless, that they regarded it a safe investment, proposed to the bank to take the stock at $87 per share, which was above the market price, each director to take one hundred and fifty shares, and pay one-third of Hayward's indebtedness to the bank. But, before they would carry this arrangement into effect, they insisted that Hayward be advised of their proposition. The sale was consummated on the 8th of September, 1868; and on that day each of the directors paid, by assuming absolutely, one-third of the bank's claim against Hayward, and received in consideration thereof a new certificate for one hundred and fifty shares of stock.
Immediately after this sale, the bank sent to Hayward a statement of his account, showing its claim against him on account of his loans, interest, and assessments paid, to be $39,257.16, and closing with this credit: 'Sept. 8, 1868, by cash, $39,257.16.'
In 1871, the Hecla Mining Company and the Calumet Mining Company, also a Michigan corporation, were consolidated under the name of the Calumet and Hecla Mining Company. New stock was issued from time to time; and at the commencement of this action, instead of the four hundred and fifty shares originally held, the three directors held nine hundred shares in the consolidated company. After the transfer of Sept. 8, 1868, they met all assessments upon the stock, and received individually such dividends as were declared thereon.
Other facts are states in the opinion of the court.
This suit was instituted by Hayward against the bank, on the 14th of March, 1872, for the purpose of obtaining a decree, authorizing him to redeem the nine hundred shares of stock, and requiring the bank to transfer them to him, and to pay over whatever might be due him, upon taking an account of the moneys received on the stock, and of his indebtedness to the bank by reason of said loans.
Neither the mining company nor the directors who purchased the stock were made defendants.
The bill was dismissed on a final hearing, and Hayward appealed to this court.
Mr. E. F. Hodges and Mr. Jonathan F. Barrett for the appellant.
Mr. A. A. Ranney, contra.
MR. JUSTICE HARLAN delivered the opinion of the court.