Bartlett v. Calvert Bank , 123 Md. 628 ( 1914 )

This action was brought by the appellant against the appellee bank, in the Superior Court of Baltimore City, to recover the possession of a certificate dated, May 20th, 1912, for twenty shares of stock of the United States Fidelity Guarantee Company, which had been pledged to the appellee bank, by one Edgar M. Noel, now deceased, as collateral security for certain loans, made by the bank to Noel, in his lifetime.

The certificate of stock belonged to the appellant, but had been loaned to Noel, for the purpose of pledging it to the appellee bank, as collateral security, under a blank power of attorney dated the 20th day of May, 1912.

The case was tried before the Court, sitting as a jury, and from a judgment in favor of the defendant, the plaintiff has taken this appeal.

During the trial two bills of exception were taken by the appellant, one to the granting of the defendant's motion to strike out certain testimony which had been admitted subject to exception, and the second to the ruling of the Court, in rejecting the plaintiff's first prayer, and in granting the defendant' second prayer.

These two exceptions bring up for review, the only questions presented by the record, and which will now be considered by us.

As the plaintiff's second exception contains the rulings upon the prayers and as these present the substantial questions in the case, we will consider it first.

The defendant's second prayer which was granted by the Court, we think, correctly states the law of the case. It ruled as a matter of law, under the facts of the case, that the legal effect of the delivery by E.M. Noel of the stock, and the power of attorney attached thereto, and the collateral note, was to pledge the stock not only for the $3,000 mentioned in the collateral note of July 23, 1912, but also for any other indebtedness then or thereafter owing by E.M. Noel to the defendant bank.

The plaintiff's first prayer, was the converse of the defendant's second prayer, and was properly rejected. The reporter will set out these two prayers in his report of the case.

The substantial facts of this case are practically undisputed, and may be thus stated. The record discloses, that sometime in July, 1908, the plaintiff loaned Edgar M. Noel, thirty shares of the capital stock of the United States Fidelity and Guaranty Company, belonging to him. Noel subsequently secured a loan of $3,000 from the defendant bank, by pledging the stock, as collateral security for the loan. This loan was renewed from time to time, the last renewal note being dated July 23rd, 1912. The note which was delivered to the bank and signed by E.M. Noel, is as follows:

"$3,000.00. Baltimore, July 23, 1912.

"Four months after date I promise to pay to the Calvert Bank or order, at the Banking House of said Bank, three thousand xx/100 dollars, for value received, having deposited as collateral security for the same following named securities:

"20 shares U.S.F. G. Co.

"* * * agree that the above named securities, and any others needed to or substituted for them, all cash at any time to the credit of our account, and all notes and drafts deposited by us for collection, and all other property of the undersigned in said bank, may be held as collateral security for all the obligations and liabilities of the undersigned and of the endorsers hereof, due to the said bank or to become due, or that may hereafter be contracted, with the understanding that a margin of ____ per cent. on the market value of the collateral security shall be maintained on demand, and if said demand for margin is not promptly met, or said obligations and said liability are not promptly paid at maturity, ____ hereby authorize said bank or its President or its Cashier to sell the collateral security, or the property represented by the same, either at private or public sale, at any time thereafter, without advertisement or notice to ____, and with the right on the part of said bank to become purchasers thereof at such sale, freed and discharged of any equity of redemption, the proceeds to be applied to the payment of the above-mentioned obligations and liabilities, any excess or deficiency to be paid or received by ____ as the case may be, and ____ further authorize the said bank, or its President or its Cashier to use, transfer or hypothecate the collateral security, they being required on payment or tender at maturity of the amount of the said obligations and liabilities to return an equal amount of said securities, and not the specific securities pledged.

T/D50.25 Demand.

"E.M. NOEL.

(Reverse Side.)

"For value received ____ hereby agree to become surety for the faithful performance of the obligations contained in the within note."

The certificate for the twenty shares of stock, is in the name of J. Kemp Bartlett, dated the 20th of May, 1912, and is in the usual form. It was delivered to the bank as collateral security for the note of July 23rd, 1912. To this certificate of stock was attached the following power of attorney dated the 20th day of May, 1912, and signed by J. Kemp Bartlett.

"Know All Men By These Presents, That I, J. Kemp Bartlett, for value received, have granted, bargained, sold, assigned, and fully and irrevocably transferred, and do by these presents, grant, bargain, sell, assign and fully and irrevocably transfer for all purposes unto ____ twenty (20) shares of the capital stock of the United States Fidelity and Guaranty Co., standing in ____ name, on the books of ____, and do hereby constitute and appoint ____ irrevocably for ____ to be ____ true and lawful attorney, and in ____ name and stead, to sell, hypothecate or dispose of in any manner and for any purpose, assign, transfer and set over to any person or persons the whole or any parts of said stocks at once or from time to time, and for that purpose to make all necessary acts or assignment or transfer, and with power to substitute one or more persons in ____ stead, as to the whole or parts of said stock, with all the powers herein mentioned ____ hereby ratify and confirm all acts that ____ said attorney, or any substitute or substitutes under ____ shall lawfully do by virtue hereof.

"In witness whereof, have hereunto set my hand and seal this twentieth day of May, A.D. 1912.

"J. Kemp Bartlett. (Seal)

"Signed, sealed and delivered in the presence of:

"F. Aloysius Michel."

The bank also holds a demand collateral note of Noel's, dated July 1, 1909, for an additional loan of $3,000. The collaterals held, by the bank, are insufficient to pay this last named note, and it claims the right to hold the twenty shares of stock as collateral security for the payment of both notes, under the terms of the contract and pledge by Noel, at the time of the loan. The facts and history of the two loans are thus stated by the appellee in his brief. "The notes which the bank now holds are a four months' collateral note of July 23, 1912, for $3,000, and a demand collateral note of July 1, 1909, each note being for $3,000. The specific certificate of twenty shares sued for in this case was pledged and delivered with the note of July 23, 1912, but the note of July 23, 1912, evidenced a debt which originated in July, 1908, at which time there was pledged a certificate for thirty shares of stock of the United States Fidelity Guaranty Company. The bank held this certificate for thirty shares of stock at the time when the loan of July 1, 1909, evidenced by the demand note for $3,000 was made, and Mr. Page, the president of the Calvert Bank, testified that it was part of the inducement for making the loan of July 1, 1909, that there was considerable margin in the thirty shares held as collateral for the first loan. The original note of July, 1908, was renewed from time to time, the last being the note of July 23, 1912. In the early part of 1912, the appellee permitted the certificate for 30 shares to be withdrawn and a certificate of twenty shares substituted in its place. At that time the stock had advanced so much in value that the twenty shares were worth about as much as the thirty shares were when originally pledged."

There is no dispute as to the loan of the stock by the appellant to Noel, but it is contended, there was a distinct understanding and agreement between them that Noel should not borrow upon the stock a sum in excess of $3,000.

While this restriction and limitation may have been understood between the appellant, and Noel, there is no evidence whatever, that it was ever communicated to the bank or to any of its officers. The plaintiff testified that he never informed the bank of the agreement, and the testimony as to what Noel in his lifetime told the appellant, which had been admitted subject to exception, was properly stricken out at the conclusion of the testimony.

The evidence upon the part of the defendant was to the effect, that the bank never had any notice of the agreement between the appellant and Noel that the stock should not be pledged for more than a $3,000 loan.

The witness Page, president of the bank testified as follows: "Q. Did you or the bank have any notice of any agreement that the stock should not be hypothecated for more than $3,000? A. No, sir; on the contrary, I figured to Mr. Noel, when the second loan was made, the margin on it, when the second loan was made I figured it, I went and got the envelope and figured it up and he was thoroughly conversant of the fact that we were holding it for that purpose. Q. He never told you Mr. Bartlett said it was not to be pledged generally, but only for that loan of $3,000? A. No, sir; never, as I said a moment ago, he knew it could be pledged for more because he knew it could be figured on the margin."

It is very manifest, we think, that under the power of attorney, given Noel by the appellant, he had the right and power to pledge the stock as collateral security not only for the loan of $3,000, but also for any other debt he might owe the bank. The very face of the instrument itself shows that Noel had this power. The language of the power of attorney is "do by these presents, grant, bargain, sell, assign and fully and irrevocably transfer for all purposes unto ____ twenty (20) shares of the capital stock ____ and do hereby constitute and appoint ____ true and lawful attorney, ____ to sell, hypothecate or dispose of in any manner and for any purpose, assign, transfer and set over ____"

There was nothing upon the face of the certificate of stock, the collateral notes or the power of attorney, that would put the bank on inquiry or impart notice, that Noel was limited or restricted in any way in the disposition or the hypothecation of the stock. On the contrary, any one examining the power of attorney would see that he had power to transfer the stock "for all purposes," and to sell, hypothecate or dispose of it in any manner and for any purpose.

The cases of Taliaferro v. Bank, 71 Md. 204, and GermanSavings Bank v. Renshaw, 78 Md. 475, relied upon by the appellant, will be found upon an examination to be unlike this case. In those cases there was no power "to hypothecate or dispose of in any manner and for any purpose," as in this case, but the power was merely to sell, transfer and set over to blank but not to pledge for debt.

In Merchants' Bank v. Williams, 110 Md. 352, it is said: "The stock was pledged not for the $216.45 only, the amount required by Mrs. Williams to complete her purchase, but also for the general debit account of Mr. Williams with the firm of Wilson, Colston Co., and therefore, the defendant is entitled to have deducted such amount, with interest, to date of trial as Mr. Williams may owe that firm."

In the absence of any notice by the bank of the alleged restrictions which the appellant claims, he placed upon Noel at the time of the transfer of the stock to him, we think, it is clear, that the bank, has the right to rely upon and to hold the stock here in question, not only for the $3,000 mentioned in the collateral note of July 23, 1912, but for all other indebtedness of Noel to it.

It follows, for the reasons stated, that the Court below committed no error in rejecting the plaintiff's prayer, and in granting the defendant's second prayer. There was no error in granting the defendant's motion to strike out the testimony set out in the first bill of exception. The judgment will be affirmed.

Judgment affirmed, with costs.