First National Bank v. Jones

Russell, J.

The difficulties which move this controversy arise over the misdoings of Hadley Jones, once a lawyer at Little Falls, N. Y., in pledging and repledging seventy shares of the stock of the Herkimer County Natioria.1 Bank of. that city belonging to his wife, Emily E. Jones, mainly by using forged certificates purporting to represent the single genuine certificate originally issued. After he had parted with the real certificate to the plaintiff, he secured subsequent loans by using deceptive forms of the same certificate, with forged signatures of the officers of the Herkimer Bank, so that the lenders, upon inquiry by wire or post to that bank, asking if Emily E. Jones owned certificate No. 198 of the stock of that bank, would receive affirmative response. The loans so obtained aggregate over $31,000; the stock is worth only $12,000. The inquiry comes here as to which claimant the proceeds shall go.

The plaintiff took the genuine certificate and is first in time. On the 28th of December, 1899, it held for value the note of Emily E. Jones, the owner of the stock in question, for $4,500, on which were two responsible indorsers, and discounted that day the note of Maria L. Jones, indorsed by Hadley K. Jones and Emily E. Jones. The note of Emily E. Jones was surrendered "by the plaintiff and. a bond, in the sum of $10,000, taken from Emily E. Jones to pay the two notes. The bond provided that, for the purpose of securing such payment, “ The said Emily E. Jones has pledged, assigned and transferred to' said Bank as collateral security seventy (70) shares of the capital stock of the National Herkimer County Bank of Little Falls, R. Y., with full power and authority to said First National Bank of St. Johnsville, N. Y., to sell said stock (now in its possession) on nonpayment of the notes aforesaid or renewals returning balance of proceeds to me after deducting amt due.” The original certificate of stock indorsed in blank was delivered with the bond.

I cannot agree with counsel for some of the defendants that the transaction did not constitute a pledge. The certificate was simply the evidence of ownership of seventy shares, but that ownership could pass by appropriate contract, even if oral. When a contract is evidenced by a signed declaration in writing that it has been made, and the certificate of title is delivered, the transaction is complete, and Emily E. Jones can no longer pass to others any rights except as subordinate to those she had parted with. The plaintiff holds the first lien on the thing pledged.

On the 28th of March, 1900, Hadley Jones borrowed of the Farmers’ Rational Bank of Ashtabula, Ohio, $7,500, and in the note given pledged the seventy shares of stock of his wife, leaving a forged certificate to represent those shares. The lien is challenged because on two renewals of the loan the notes maturing were surrendered. The certificafe was not surrendered, and the displacement of the old note by a simple renewal did not discharge the note or release the lien.

On the 16th of April, 1900, the Bank of Huntington,- R. Y., loaned Hadley Jones $6,500 oñ a pledge of the same seventy shares evidenced by a false certificate, and on the 25th of June, 1900, the Tarrytown Rational Bank suffered by a similar transaction to the extent of $8,000. Other banks which were also victimized do not appear in this action, as their claims are beyond hope of sharing. That of McLaughlin is of doubtful character and inferior to the others named.

Does it need the citation of precedent to- show that these banks got valid liens on what was left to- Emily E. Jones at the time of each transaction? They all acted in good faith. The wrong of her husband, which she suffered him to commit, cannot prevent the legal effect of the transaction to be other than that which appeared to the innocent lender to be" its result. And, had she, by her own writing, certified that she was the owner of the certificate, which she could not produce from loss or other cause, and assigned or pledged it for a loan, she would just as effectively have transferred, subjéct to existing liens, her seventy of the 2,500 parts of ownership in, the Herkimer Bank as though she had formally written an assignment on the back of a proper certificate of stock.

The plaintiff will take the first right in the proceeds of sale of the stock, the Farmers’ Rational Bank second, the Bank of Huntington third and the Tarrytown Rational Bank fourth. A sale should be had by a referee, whose report will be subject to confirmation. This action was properly brought to foreclose the lien, to solve all disputes, and to render a title conferred upon a purchaser so free from doubt as to bring the best price for the benefit of all interested. Costs are awarded the plaintiff, payable out of the proceeds.

Ordered accordingly.