Curtice v. Crawford County Bank

• Decision Date: 20 September 1901
• Citation: 110 F. 830
• Parties: CURTICE v. CRAWFORD COUNTY BANK et al.
• Court: U.S. District Court — Western District of Arkansas

110 F. 830

CURTICE v. CRAWFORD COUNTY BANK et al.

United States Circuit Court, W.D. Arkansas.

September 20, 1901

Miles &amp Miles and Scarrit, Griffith & Jones, for complainant.

Reid &amp McDonough and Jesse Turner, Jr., for respondent Crawford County Bank.

E. B Pierce, in pro. per.

ROGERS District Judge.

The controlling inquiry in this case is whether the plaintiff, J M. Curtice, has a first lien on the stock of Robert S. Hynes in the Crawford County Bank, it being evidenced by stock certificates numbered 108 and 133. Both certificates were issued to defendant Hynes. He was cashier of the bank when certificate 108 was issued, but had ceased to be cashier when certificate 133 was issued. Certificate 108 was issued June 16, 1891, and was for 200 shares of $25 each,-- $5,000; certificate 133 was issued March 15, 1894, for 40 shares of $25 each, or $1,000. Plaintiff claims a lien on said stock by way of pledge as collateral for a loan to defendant Hynes, evidenced by note bearing date March 15, 1894, for $8,400, and on which is now due something over $6,000. This note, it is alleged, was a renewal note for money, a part ($2,000) loaned Hynes in the spring of 1888, and a part ($3,000) in the spring of 1889, and subsequently renewed annually until principal and interest amounted to $8,400; and that the stock certificates represented other certificates anterior in date, which had been taken up and canceled, and these issued in their stead. The bank, on the other hand, claims a statutory lien (Sand. & H. Dig. Ark. Sec. 1342) on the same stock to secure advances made to Hynes after he ceased to be cashier, in the fall and winter of 1893 and 1894, as well as for some small loans made to him anterior thereto. The question is, which has the prior lien?

Section 1342 of Sand. & H. Dig. Ark. reads:

"The stock of every such corporation shall be deemed personal property, and be transferred only on the books of such corporation in such form as the directors shall prescribe; and such corporation shall at all times have a lien upon all the stock or property of its members invested therein for all debts due from them to such corporation."

This statute has been construed by the supreme court of Arkansas in two cases (Springfield Wagon Co. v. Bank of Batesville, 57 S.W. 257; Oliphint v. Bank, 60 Ark. 198, 29 S.W. 460), but the precise question here presented was not determined in these cases. The consensus of judicial opinion on the construction of statutes substantially the same as this establishes the following principles of law: (1) The bank has a statutory lien on the stock of a stockholder the moment he becomes indebted to the bank. (2) As between a stockholder in a bank and a third person, the former may, by assignment in writing and delivery, pledge his stock to such third person as collateral security without regard to the provisions of the statute regulating the transfers of stock. (3) The lien of such a pledgee, acquired before the stockholder becomes indebted to the bank, will prevail over the lien of the bank, provided the bank had notice of the pledgee's lien before or when its debt was contracted; contra, if the bank had no notice. (4) A third party accepting the stock of a stockholder in pledge for his indebtedness must be held to have notice of the lien of the bank on the stock for all then existing indebtedness of the stockholder to the bank. (5) In a contest by a pledgee asserting a lien on the stock of the bank against the bank claiming a lien on the stock for the stockholder's indebtedness to the bank, the burden is on the pledgee to show notice to the bank of the existence of his lien before or at the time the indebtedness to the bank was created. In support of these principles, I cite: Masury v. Bank, 35 C.C.A. 476, 93 F. 603; Lowell, Stocks, Sec. 175; Conant v. Reed, 1 Ohio St. 298; Birmingham Trust & Sav. Co. v. Louisiana Nat. Bank (Ala.) 13 So. 112, 20 L.R.A. 600; Bank v. Laird, 2 Wheat. 390, 4 L.Ed. 269; Hammond v. Hastings, 134 U.S. 401, 10 Sup.Ct. 727, 33 L.Ed. 960; 1 Cook, Stock & S. § 533; Gemmell v. Davis (Md.) 23 A. 1034. Many other authorities might be cited bearing upon and illustrating the principles of law above stated. It is believed, however, these principles are established by the great weight of judicial opinion, and I do not understand either or any of them are controverted by the learned counsel on either side of this case. Moreover, there seems to be no controversy as to the validity of the indebtedness of the defendant Hynes to both Curtice and the Bank. It follows, therefore, from an examination of this record, that, if the bank had no notice at the time its indebtedness was created that Hynes had previously pledged the stock in controversy to Curtice (assuming such to be the case), its statutory lien must prevail over that created by the pledgee to Curtice. As to whether the bank had such notice on this record is perhaps a mixed question of law and fact. So far as the plaintiff's case on the facts, as it relates to notice, is concerned, it depends solely on his own evidence as to alleged interviews between himself and defendant Hynes and Judge Jesse Turner, Sr., both of whom died before this suit was begun. In weighing the testimony of a party to a suit, there are some elementary principles which should not be passed over lightly. They rest upon long experience, and until a comparatively recent date received the sanction of the best and wisest minds. In 1 Greenl.Ev. § 326, the author says:

"It (the common law) rejects the testimony (1) of parties; (2) of persons deficient in understanding; (3) of persons insensible to the obligations of an oath; and (4) of persons whose pecuniary interest is directly involved in the matter in issue,-- not because they may not sometimes speak the truth, but because it would ordinarily be unsafe to rely on their testimony."

Such was the law in this country in all the courts, state and federal, until within the memory of some of us. In 1864 congress passed this statute (section 858):

"In the courts of the United States no witness shall be excluded in any action on account of color, or in any civil action because he is a party interested in the issue tried: provided, that in actions by or against executors, administrators, or guardians, in which judgment may be rendered for or against them, neither party shall be allowed to testify against the other, as to any transactions with, or statement by, the testator, intestate or ward, unless called to testify thereto by the opposite party, or required to testify thereto by the court. In all other respects the laws of the state in which the court is held shall be the rules of decision as to the competency of witnesses in the courts of the United States in trials at common law, and in equity and admiralty."

Schedule, section 2, Const. Ark. 1874, provides:

"In civil actions no witness shall be excluded because he is a party to the suit or interested in the issue to be tried. Provided, that in actions by or against executors, administrators or guardians, in which judgment may be rendered for or against them, neither party shall be allowed to testify against the other as to any transactions with or statements of the testator, intestate or ward, unless called to testify thereto by the opposite party. Provided, further, that this section may be amended or repealed by the General Assembly."

The right of parties to a suit to testify had been previously conferred by the Arkansas Code of 1869, now incorporated in Sand. & H. Dig. Secs. 2915, 2916. By section 2917, Sand. & H. Dig., it is provided:

"All other objections to witnesses (referring to persons made incompetent by the previous sections, but not including parties) shall go to their credit alone, and be weighed by the jury or tribunal to which their evidence is offered."

I call attention to these statutes merely that we may know the inroads on the common law, and get at the present status of the law in this state. But if it was not 'ordinarily safe' to rely on the testimony of a party to a suit simply because he was a party, and that only, how much more unsafe is it when his right to recover depends solely upon his narration of what took place between himself and other persons who are no longer alive? In that event all restraint except that of conscience, is removed, because there are none to question; and the temptation to deceive, to suppress, to prevaricate, is not held in check by the fear of contradiction or exposure, and immunity from the penalty of false swearing is made practically sure. Nor must it be forgotten that the removal of the barrier which disqualified a party to a suit to testify at all does not add anything to his credibility, or remove any temptation previously existing to deviate from the truth. It is just as unsafe after the disqualification is removed to rely upon the testimony as it was before, the only difference being that the court or jury trying the case is required to pass upon the credibility of the party. No doubt, in many cases the ends of justice have been subserved by permitting parties to a suit to testify. The statutes removing the bar as to parties to a suit becoming witnesses was a recognition of the harshness of the common-law rule; but those who are called upon to witness the administration of justice in the courts can scarcely have escaped the suspicion that the fountains of justice have not been purified thereby. The legislatures have recognized this danger by forbidding a party to a suit in cases where the opposite party is an executor, administrator, or guardian, and wherein judgments may be rendered for or against them, to testify as to transactions with or statements of the testator, intestate, or ward,...