Curtice v. Crawford County Bank

• Decision Date: 27 October 1902
• Docket Number: 1,698.
• Citation: 118 F. 390
• Parties: CURTICE v. CRAWFORD COUNTY BANK et al.
• Court: U.S. Court of Appeals — Eighth Circuit

118 F. 390

CURTICE v. CRAWFORD COUNTY BANK et al.

No. 1,698.

United States Court of Appeals, Eighth Circuit.

October 27, 1902

W. C Scarritt and O. L. Miles, for appellant.

James F. Read (James B. McDonough, on the brief), for appellees.

This action was brought by James M. Curtice, the appellant against the Crawford County Bank and E. B. Pierce administrator of Robert S. Hynes, deceased, the appellees, to foreclose a lien on two certificates of stock, being certificate No. 133, dated March 15, 1894, and certificate No. 108, dated July 16, 1891, representing together 240 shares of stock, both of which had been issued by the Crawford County Bank, on the dates aforesaid, in favor of R S. Hynes. It will suffice to say, concerning the bill of complaint, that it alleged the following facts, in substance: That in 1888 Curtice had loaned to the Crawford County Bank, hereafter referred to as the bank, and to Robert S. Hynes, its then cashier, the sum of $5,000, taking as collateral security for the loan certain certificates of stock in the bank to the amount of $7,500; that in 1889 the note of the bank for $3,000 was retired, and that, in place of the two notes originally executed, Hynes gave his individual note to Curtice in the sum of $5,000, which was secured by the stock originally pledged; that on March 15, 1894, the amount due on said note, with accumulated interest, was $8,400, for which sum a new note was executed by Hynes, which latter note was secured by a pledge of three certificates of stock, being certificates Nos. 106, 108, and 133, representing stock to the amount of 340 shares in the defendant bank, standing in the name of Hynes; that on July 17, 1895, a portion of the latter note having been paid, Curtice surrendered to Hynes certificate No. 106, representing 100 shares of stock, but retained certificate No. 133, for 40 shares, and certificate No. 108, for 200 shares, as collateral security for the balance of the indebtedness then due; that on the filing of the bill there was due to Curtice, on the aforesaid note, the sum of $7,000, which was secured by the shares of stock last aforesaid; and that, notwithstanding the fact that the bank had knowledge of all the transactions aforesaid, whereby the stock was pledged by Hynes to Curtice, it was asserting a superior statutory lien on the stock for a sum largely in excess of its value, for loans which it had made to Hynes after it had knowledge that he had pledged the stock. In its answer to the money to Hynes and received the aforesaid certificates in pledge, Hynes was indebted to the bank in the sum of $16,845.92, and that at the time it made such advances to Hynes it had no knowledge whatever that Hynes was indebted to Curtice, or that he had pledged his bank stock to secure the payment of such indebtedness, as was alleged in the bill. The bank accordingly prayed that its lien might be declared superior and paramount to the lien asserted by the complainant, if he had any. The case was tried on the aforesaid issues, and upon a cross-bill which was interposed by the bank, wherein it prayed for a foreclosure of its lien, not only upon certificates of stock Nos. 108 and 133, but upon three other certificates, Nos. 106, 107, and 134, which had also been issued in the name of Hynes. The lower court decreed that the lien of the defendant bank on certificates Nos. 108 and 133 was superior and paramount to the lien or claim which was asserted by the complainant. To reverse such decree the complainant prosecuted an appeal to this court.

Before SANBORN and THAYER, Circuit Judges, and LOCHREN, District Judge.

THAYER Circuit Judge, after stating the case as above, .

On the trial in the circuit court there was no substantial controversy over the fact that Curtice, the complainant, loaned a considerable sum of money to Robert S. Hynes, he being at the time the cashier of the defendant bank, as far back as the year 1888, 1889, or 1890, and that this indebtedness had never been fully discharged. For the purposes of the trial it was admitted that, when Hynes died (an event which seems to have occurred during the summer of 1896), he owed the complainant, Curtice, and the defendant bank, the sums which they respectively claimed; and by its decree the lower court found that the amount due to Curtice, when the decree was entered, was $5,791.26, and that the amount due to the bank was the sum of $17,608.92, most of which latter sum consisted of advances made by the bank to a firm of which Hynes was a member, subsequent to September 23, 1893. Nor was there any controversy over the fact that Curtice had in his possession two certificates of stock, namely, certificate No. 108, for 200 shares, issued by the defendant bank on July 16, 1891, and certificate No. 133, for 40 shares, issued by it on March 15, 1894, and that these certificates had been pledged by Hynes, at least as early as March 15, 1894, to secure his indebtedness to Curtice, which at that date amounted to $8,400. The note for $8,400 executed on March 15, 1894, was produced, and it contained a pledge of the two certificates in question, as well as a pledge of certificate No. 106, which was surrendered to Hynes on July 17, 1895; a part of the indebtedness having at that time been paid. The real controversy in the case arose over certain issues of fact, namely, whether either of the aforesaid certificates, Nos. 108 and 133, was given in pledge to Curtice prior to September 23, 1893, and whether the bank had notice of the pledge when it began to make large advances to the firm of which Hynes was a member, subsequent to the last-mentioned date.

Before considering these issues of fact it should be stated that the laws of the state of Arkansas, under which the defendant bank was organized (Sand. & H. Dig. Ark. Sec. 1342), gave the bank a lien upon the stock in controversy for all of Hynes' indebtedness to it; but the lower court held, and we think correctly, that, notwithstanding this statute, the lien of a pledgee of its stock would prevail over the lien of the bank, so far as those debts of the shareholder to the bank were concerned that were contracted by the stockholder subsequent to the pledge and after the bank had notice thereof. It followed from this ruling, which is not seriously challenged, that if Curtice acquired either of the certificates aforesaid from Hynes as security for his claim prior to September 23, 1893, and the bank had knowledge of the fact, its lien for such advances would have to be postponed in favor of the superior lien of the pledgee. It is proper to observe, further, in this connection, that Curtice admitted that he did not acquire certificate No. 133 until March 15, 1894; and as Hynes was at that time indebted to the bank for an overdraft to...