Stone v. James M. Brown & the First Nat'l Bank of Galveston

• Decision Date: 22 March 1881
• Docket Number: Case No. 1064.
• Citation: 54 Tex. 330
• Parties: THOMAS M. STONE v. JAMES M. BROWN AND THE FIRST NATIONAL BANK OF GALVESTON.
• Court: Texas Supreme Court

54 Tex. 330

THOMAS M. STONE

v.JAMES M. BROWN AND THE FIRST NATIONAL BANK OF GALVESTON.

Case No. 1064.

Supreme Court of Texas.

Mar. 14, 1881.

Mar. 22, 1881.

APPEAL from Galveston. Tried below before the Hon. Wm. H. Stewart.

Suit by Thomas M. Stone against appellee, J. M. Brown, the president of the First National Bank of Galveston, to recover twenty-one land certificates of 640 acres each, issued by the state of Texas to T. M. Stone, W. H. Kyle and C. C. Kyle, on a contract for improving the navigation of the Sabine river. Appellant claimed to be the owner of these land certificates. About the 1st day of May, 1877, he deposited the same with Hobby & Post for safe keeping and sale, together with a transfer to each certificate, signed by each of the grantees and acknowledged before a notary public. The transfers were complete, except that there were blanks for the name of the purchaser, and the consideration was not filled up. The appellee claimed that it had in good faith and without notice of appellant's claim thereto, made a loan of $4,275 to Hobby & Post, and accepted the land certificates as collateral security, and prayed for judgment against Hobby & Post, and a foreclosure of its lien upon the certificates.

A jury was waived and the case tried by the court. Judgment in favor of appellees as prayed for.

George Mason, for appellant.

I. The possession of the land certificates in controversy, together with the possession of such incomplete assignments or transfers as accompanied them, did not import, imply or warrant the assumption that the person having such possession was the owner of the certificates, or was vested with authority to hypothecate them for his own debt; such certificates not being negotiable instruments. And any one dealing with a person having possession of certificates, on their face the property of a third party, although accompanied by such blank transfers, was put upon inquiry as to the rights and authority of the person having such possession; and if he should deal with such person, upon the assumption that he was the owner of such certificates, or had authority to hypothecate them for his own debt, he would do so at his peril. Merlin v. Manning, 2 Tex., 352, 353, 354;Boyd v. Tarrant, 14 Id., 230;Ross v. Smith, 19 Id., 172, 173, 174;McCown v. Wheeler, 20 Id., 373;Wells v. Groesbeck, 22 Id., 431;Parker v. Glover, 23 Id., 471, 472, 473; Shanks v. The State, 25 Tex. Sup., 341; Dodd v. Arnold, 28 Tex., 101;Viser v. Rice, 33 Id., 156; Miller v. Race, 1 Smith's Leading Cases, notes, 258; Girard v. La Coste, 1 American Leading Cases, notes, 323; 2 Robinson's Practice, p. 132.

II. The law determines what are and what are not negotiable instruments; and land certificates, accompanied by assignments in blank, not being negotiable by law, cannot be made so by custom. Meaher v. Lufkin, 21 Tex., 393; Dunlap's Paley's Agency, 5, notes; 2 Greenl. on Evidence, § 251.

III. The defendant, the First National Bank of Galveston, being a national bank under the laws of the United States, and a corporation created thereby, was not capable of acquiring a lien upon the land certificates in controversy, except to secure an antecedent debt; such certificates being regarded by the judicial department of the United States as real property. R. S. of U. S., sec. 5137; Ripley v. Withee, 27 Tex., 18;Stevenson's Heirs v. Sullivant, 5 Wheat., 207;Brush v. Ware, 15 Pet., 111, 112.

Albert N. Mills, for appellee.

WATTS, COMMISSIONER.

The appellant had by his own voluntary act placed Hobby & Post in such a position that, as to others they appeared to be the ostensible owners of the land certificates which constitute the subject matter of this litigation. He had placed the same in their hands, together with transfers for each, signed by all the grantees, and acknowledged before a notary public, with authority to sell and deliver the same.

These transfers were in every respect complete, save and except the blank for the name of the vendee and consideration were not filled. In our opinion this did not render the transfers invalid. See Hollis v. Dashiell, 52 Tex., 187. Aside from this view, our supreme court has from the first held and treated unlocated land certificates as personal property, so far considered chattels, that they are the subject of verbal sale and delivery, and that such sales are not within the statute of frauds and need not be in writing. Randon v. Barton, 4 Tex., 292;Cox v. Bray, 28 Tex., 247;Johnson v. Newman, 43 Tex., 640.

In the transfer of non-negotiable notes, the statute charges the assignee with notice of every discount and defense against the same which it would have been subject to in the hands of any previous owner; but these discounts and defenses relate to and mean such only as might be asserted against the collection of the note by the maker. And in this respect there is no analogy between the transfer of an unlocated land certificate and the assignment of a non-negotiable note; the one is governed by the statute and the principles or rules of mercantile law, while the other is governed by the general principles of law applicable to the transfer and sale of personal property.

However, in cases where the suit is brought to recover such note itself, as the property of plaintiff, then the analogy would be complete; and in such cases, as a general rule, if the holder purchased or procured the same from the ostensible owner in good faith, for value, and without notice of any adverse claim, he will be held to be the true owner.

There is nothing in the transfers or the manner of hypothecation in this case that would put the bank upon inquiry as to the rights or claims of the appellant, and unless it had actual notice of his rights at the time of the hypothecation, under the familiar rule in equity, that “he who trusts most must lose most,” he has no cause of complaint against the bank.

In this case a jury was waived, and the facts as well as the law were submitted to the judge. The only evidence in the record as to actual notice is the testimony of James M. Brown, the president of the bank. He says that he had no notice of appellant's claim or right; that he in good faith, acting for the bank, advanced the money to Hobby & Post, and accepted the certificates as collateral security. The judge found in favor of appellee upon this point, and his conclusions are entitled to the same weight as the verdict of the jury. Bailey v. White, 13 Tex., 118.

In our opinion this finding of the judge was fully sustained by the evidence.

The proposition that as appellee is a national bank, created by and organized under the laws of the United States, it could not acquire a lien upon the land certificates in controversy, because such certificates are considered by the federal courts as real and not personal property, and that such banks are prohibited from taking real estate securities for loans, is not tenable. In the first place, land certificates issued under and by virtue of the laws of this state are by our supreme court held to be personal property, and this construction of our own laws by our own courts fixes the status of this property.

In the second place, the question is one that cannot be raised by an individual, as it has been held by the supreme court of the United States that this is a matter solely between the bank and the government, and that if these banks should make loans upon lands, notwithstanding the prohibition in the federal statutes, that such contracts are good as between individuals, though the government may institute legal proceedings against the bank, on account of the violation of the law, to forfeit its charter or franchise.

In our opinion there is no error in the judgment, and it ought to be affirmed.

AFFIRMED.

MOORE, CHIEF JUSTICE.

On a former day of the term this case, under the provision of the statute adopted February 9, 1881, entitled “An act to amend ‘An act to create a commission of arbitration and award, and to define the powers and duties thereof, and make appropriation to pay the salaries of the judges thereof,’ ' DDD”' was referred by this court to the commissioners of appeals for examination and report thereon, and said commissioners having reported to us a synopsis of the case and their opinion of the law applicable thereto, together with the judgment which should be rendered thereon, the case is now before us upon the record and synopsis and opinion of the commissioners for our determination.

In announcing for the first time our action in this class of cases, it will not be amiss to say that it was not the purpose and intent of this law to relieve this court from the duty and responsibility of considering and deciding the causes which may be referred to it by the commissioners of appeals, but that the court, by the aid of the reports of the commissioners, might the more rapidly, as well as the more correctly, dispatch the business with which its docket is so greatly overburthened. If on an examination of the report of the commissioners, in connection with the transcript, the case is found to be correctly decided, the opinion of the commissioners will be adopted and published, as other opinions of this court. But if in any case the opinion reported exceeds or falls short in any essential particular of the measure of our approval, it is our duty to disregard it in toto, or so modify or change it as to have it conform to our view of the law and facts of the case.

It is impossible, however, for all men to reason in the same channel or deduce precisely the same conclusions from like premises, or that different persons, though they agree in the facts of a case and judgment which should be pronounced upon it, should not often disagree in some matters of deduction and inference which would be found in the opinion, whether written by the one or the other. Hence, as a general rule, in passing upon the opinions of the commissioners, we shall not undertake to review...