This is an appeal from a decree overruling respondent's demurrer to the bill as a whole and to each of three separate aspects of the bill as amended.
The original bill was filed by the South Carolina National Bank, appellee, alleging that it cashed a certified check for $500 for one Walter Crain drawn on The Hancock Bank of Gulfport, Mississippi, and at the same time, Crain deposited with appellee for collection a savings certificate of deposit in the amount of $10,000 which had been issued to him by the respondent-appellant, Mobile Federal Savings and Loan Association. It was alleged that Crain endorsed the certificate in blank, and the certificate with the endorsement is made an exhibit to the bill; that relying on this endorsement, appellant advanced the sum of $500 to Crain by cashing the check with the understanding that if the check was not paid, the $500 would be charged against the proceeds of the certificate issued by appellant.
It was also alleged that the certified check was not paid because the certification had been forged; that the $10,000 certificate was presented to appellant, and payment refused on the ground that there was a failure of consideration to appellant for the issuance of the certificate; that this was the first notice or knowledge of appellee that appellant denied the ownership of Crain in the certificate or in the capital of appellant represented by the certificate. Exhibits to the bill showed demand by appellee on appellant and a letter by appellant stating that Crain had given a worthless check in payment for the certificate, that his account with appellant had been cancelled, and that appellant denied any liability. The bill also alleged that appellant was estopped to plead failure of consideration.
In its prayer for relief, appellee asked:
1. That the court ascertain and determine the amount of appellee's loss; and determine the interest of appellee in and to said certificate of ownership in the capital of appellant;
2. Enter a judgment against appellant in appellee's favor in the amount of $500, together with interest and costs, or in such other amounts as the court may deem the appellee to be entitled;
3. Enter a decree directing appellant to transfer to appellee on the books of appellant the certificate of ownership in the capital of appellant, in a paid up amount equal to the amount of appellee's loss as determined by the court, and direct appellant to issue in the name of appellee a valid certificate evidencing appellee's said interest in the capital of appellant to be surrendered and cancelled against the payment to appellee of the face amount thereof in accordance with the statutes, regulations and by-laws governing the operation of appellant, and awarding appellee interest and costs on its behalf in this cause incurred.
The trial court sustained the demurrer to the bill as a whole and appellee amended paragraph 3 as follows:
Appellant again filed demurrers, which were overruled. This appeal followed.
The assignments of error charge separately that the court erred in overruling the demurrer to the bill as a whole and to the several aspects. However, our decision as to the correctness of the action on the demurrer to the bill as a whole will suffice for all the assignments of error presented.
Appellant argues, and appellee concedes, that the $10,000 certificate issued by appellant is not negotiable as is an instrument payable to order or bearer. Tit. 39, § 8, Code 1940.
The face of the certificate shows that "Walter Crain holds a Savings Account representing share interests of Ten Thousand and No/100 Dollars in Mobile Federal Savings and Loan Association, subject to its charter and By-Laws, the Rules and Regulations for the Federal Savings and Loan System, and to the laws of the United States of America." We think it clear that the certificate representing the "savings account" is in fact evidence of ownership in the association. It has been held that the holder of such a certificate is a stockholder and not a creditor. In re Puget Sound Savings & Loan Ass'n, D.C., 49 F.2d 922.
We have referred to shares in a Federal Savings and Loan Association as "stock," Woodlawn Federal Savings & Loan Ass'n v. Williams, 237 Ala. 446, 187 So. 177; and in Clardy v. Jefferson County Building & Loan Ass'n, 234 Ala. 658, 176 So. 368, 369, it was said:
See, also, Central Nat. Bank of Wilmington v. Rubenstein, 5 W.W.Harr., Del., 154, 160 A. 871; Hillers v. Local Federal Saving & Loan Ass'n, 204 Okl. 615, 232 P.2d 626.
Appellant insists that appellee has no cause of action because the bill affirmatively shows that there was no transfer of the certificate on the books of appellant and that the rules require such a transfer to be binding on appellant.
Most stock certificates are restricted in that they are transferable only on the books of the corporation. But this and other courts have held that where a certificate in a Building and Loan Association has been endorsed and turned over to another as collateral security, the ownership was transferred and the association was required to transfer the stock in the name of the transferee. Richards v. Montgomery, 230 Ala. 307, 160 So. 706; Jones v. State, 236 Ala. 30, 182 So. 404; First National Bank in Fort Lee v. Englewood Mutual Building & Loan Association, 124 N.J.Eq. 360, 1 A.2d 871; Lilley v. First Federal Savings & Loan Ass'n, La.App., 194 So. 901.
We come now to the question of the rights of appellee as an innocent purchaser of the certificate for value without notice of the failure of the consideration for its issuance by appellant. This court has recognized that certificates of stock in corporations are not negotiable, but has held that a species of negotiability attaches to them in Nelson v. Owen, 113 Ala. 372, 21 So. 75, 77, where it was said:
In Cyclopedia of the Law of Private Corporations, Fletcher, Vol. 11, § 5168, it is stated:
And § 5265 of the same work reads, in part:
We think the demurrer was properly overruled since the allegations in the amended bill show appellee to be an innocent transferee for value of a quasinegotiable certificate without any notice of any equities existing between the appellant and the transferor, Crain.
LAWSON, STAKELY and GOODWYN, JJ., concur.