Court Opinion

ID: 7816284
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:37:20.287564+00
Date Added: 2024-06-11T16:28:42.323030
License: Public Domain

Carleton Harris, Chief Justice (dissenting in part). I disagree with those portions of the opinion which hold: (1) that the bank holds a first lien on the Cape County Milling Company stock; (2) that Lester Gill has a lien on the Cape County stock. Testimony on the part of appellant reflects that E. J. Butler, Secretary of the insurance company, contacted A. B. Reese, a vice-president of the First National Bank in Blytheville, for the purpose of determining the amount of payment that would be required by the bank before the latter released Noble Gill’s Cape County Milling Company stock. Butler stated that Reese advised that a payment of $74,000 would release the stock, together with a lien on certain real estate in Mississippi County. Since about $80,000 had been raised through the sale of Noble Gill’s insurance shares, Butler, around the middle of March, and in reliance upon Reese’s statement, sent $74,000 to the bank. This remittance was represented by a $67,000 cashier’s check and Butler’s personal check on his special account for $7,000. While the method of payment1 is not established, it is undisputed that the $67,000 cashier’s check was payable to Butler, as Trustee, and endorsed by him in that capacity. The $7,000 check was signed by Butler and drawn on “E. J. Butler Special Account.” After cashing these remittances, Reese sent Butler two promissory notes and a junior mortgage (which were of no value to the company as far as I can see), each instrument being assigned by the bank, to E. J. Butler. This would certainly indicate that Reese knew that someone other than Noble Gill had a beneficial interest in these funds. The related facts are not commented upon by the majority, so I take it that there is no finding that Butler did not communicate with. Reese and obtain the assurances that he testified to. The majority opinion on this point is predicated on the delay and laches of American Insurers, i.e., the return of the $74,000 was not demanded, and for two and one-half years, the insurance company took no action to enforce its claim to the stock. Let it be borne in mind that Noble Gill, as the founder and president of the company, actually had charge of the operations and the failure of the company to make demand was apparently because of the fact that Gill did not desire to do so. It would appear that Gill continued to receive personal advancements from the bank on the basis of the fact that the latter was holding the stock, but Gill, having assigned this stock to the insurance company, was in no position to use it for personal purposes. It is difficult for me to understand why Reese, or other bank officials, would not have known that the stock had been assigned by Noble Gill to the insurance company, inasmuch as brochures announcing this fact had been circulated widely in Eastern Arkansas.2 This testimony incidentally, was not admitted, not considered by the trial court, (nor mentioned by this court) and I consider it competent and relevant evidence, and quite pertinent to the issue of whether the bank knew that someone else was making a claim to the stock. It appears to me that the bank applied Butler’s remittance, either according to its own wishes, or according to the wishes of Gill, whereas, according to the testimony of Butler, the bank, through its vice-president, had knowledge that the money was sent for the purpose of acquiring the milling stock. In fact, it can hardly be disputed that the bank, somewhere along the way, acquired knowledge of the stock transfer since, in filing its suit against the Gill estate to foreclose its alleged lien on the stock, the insuranee company was made a party defendant under the following allegation: “The plaintiff has been informed, and therefore alleges, that prior to his death the said H. Noble Gill entered into an agreement by which he transferred all of his rights in the shares of corporate stock that have been mentioned herein, subject to the right of this plaintiff therein, to the defendant, American Insurers’ Life Insurance Company.” If it developed that Mr. Reese underestimated the amount necessary to pay the bank’s lien on the Cape County stock, it is apparent to me that subsequent payments were more than adequate to cover the indebtedness. On the basis of the testimony of E. M. Regenold, President of the bank, it would appear that on the date the Butler remittance was applied by Reese, the Cape County stock was encumbered to the extent of $98,551.41; therefore, the estimate of Reese would have been short in the amount of $24,551.41. But it is admitted by the bank in its complaint that it had subsequently made collections totaling $29,687.11 on the balance of the indebtedness secured by the stock. It appears to me that the instant suit by the bank was predicated on additional advances made to Gill against the stock after the bank became apprised of the insurance company’s interest in such stock. A study of the liability ledger sheet shows that as of September 19, 1959, (which was more than a year after Butler protested to Reese that the $74,000 had been misapplied), Noble Gill’s debt had gone up to $65,200, including an obligation of $5,200, represented by a demand note which was an entirely new loan. Riley Jones, a vice-president of the bank, testified that in July, 1958, Gill’s debt was increased from $30,450 to $60,000. While, as stated, I disagree with the majority holding as heretofore set out, I do recognize that, because of the failure of the insurance company to take steps to enforce its rights, there is something to be said for the view taken by the court majority. However, I much more strongly disagree with the court’s holding that Lester Gill is entitled'to a lien on the Cape County stock. Aside from the fact that I feel that the hank had notice that Noble Gill had previously assigned the stock to the insurance company, I cannot see how Lester Gill, under the facts and circumstances herein, is entitled to such a lien. This transaction took place on February 25, 1957. Let it be borne in mind that Noble Gill did not receive one dime by virtue of the note executed from Lester Gill to the bank; he had already obtained his statutory limit from the bank (then $60,000), and the note given by Lester Gill was entirely for the benefit of the banlc. Here again the transaction was handled for the bank by Mr. Reese, and according to Lester Gill, “Mr. Reese told me the bank was in the process of helping Noble with some refinancing, but that his line of credit had been exceeded; that the bank was expecting examiners and that the matter of Noble’s account had to be straightened up before they could further proceed.” I do not understand how the bank could create a lien on Noble Gill’s stock for the benefit of Lester; in my view, some overt act on the part of Noble Gill Avould have been required, and no such overt act appears in the record. Noble Gill gave to Lester his note to cover the $25,000, bu,t this note was unsecured. To me, the facts set forth in the preceding paragraph preclude any lien on the stock in favor of Lester Gill; in addition, further actions of the bank indicate that that institution did not consider that Noble Gill’s note to Lester Avas secured by the Cape County stock for, (1) The bank sued Lester on February 3, 1961, in Circuit Court, asking judgment against Lester, but ashing no lien on the Cape County stock. (2) The bank filed the suit here on appeal to foreclose a lien on the Cape County stock, but in this suit it made no claim that it held an additional lien on the stock arising out of the Lester Gill transaction. (3) The bank’s liability ledger sheet, eoAmring Lester’s borroAvings, does not reveal the alleged lien. The majority is relying upon the “anaconda”3 mortgage executed by Noble Gill. I cannot agree that this instrument lends any weight to the contentions made by appellee, Lester Gill. In the first place, the instrument was not signed by Noble Gill; rather, it was signed by O. E. Hunnicutt, acting as attorney-in-fact, and Hunnicutt, in affixing his signature purportedly acts on behalf of the “Gill Gin Company” and “H. Noble Gill,” the company and Gill being joint signers. I think, under a proper interpretation, the instrument would apply only to such line of credit as the bank might extend to Gill Gin Company and Noble Gill, as joint obligors. In addition, I feel that the majority has reached a strained construction of this document when they hold that the stock securing Noble Gill’s original loan would also secure a subsequent note of Noble Gill’s which the payee (Lester Gill) merely hypothecated to the bank. Lester Gill testified that (at the time of the trial) he had in his possession 10,000 shares (2,000 of which he held as trustee for his two sons) of the insurance company stock, which he had received from Noble Gill. When asked if the 10,000 shares were given to him in payment of the obligation that was due him from his brother, he replied, “It was not mentioned to me by him.” He then stated he had helped Noble financially at prior times, and that on a previous occasion he had loaned $25,000, and had been given 2,000 shares of American Insurers’ stock by Noble, who said, “Here is what you bought.” He testified that the insurance company stock was not issued to him in connection with this particular loan, but he stated that he did not know why the note given to him by Noble did not provide that it was secured by the Cape County stock. Finally, the transcript reveals that the cross-examination of Lester Gill concluded as follows: “ Q. Do you have any record of these loans that you stated a while ago you previously made to Noble for which the American Insurers’ stock was issued to you? A. American Insurers’ Insurance Company stock was not issued to me in connection with this loan. Q. I say, do you have any record of the other loans you made to him for which you say this stock was issued?” A. I didn’t say the stock was issued in connection with any loan. Q. Do you say he gave it to you? A. He handed it to me and said, ‘ This is what you bought.’ I did not know I was going to receive it and didn’t want it. Q. Was it for the $25,000.00 note? A. There was not anything mentioned.” Irrespective of the significance of this testimony, I feel, for the reasons set forth in the preceding paragraphs, that Lester Gill is not entitled to a lien on the Cape County stock. I am authorized to state that Mr. Justice Johnson joins in this dissent.   It was never established whether Butler sent these checks through the mail with a letter of transmittal, or whether the checks were taken and delivered to Reese, personally, by Noble Gill. Butler’s office had been destroyed by fire, and many records were burned.    Butler testified that he personally gave Reese a copy of the brochure which stated that the Cape County stock had been transferred to American Insurers’ Co. — though this was subsequent to the $74,000 transaction.    So characterized by this court in Fuller v. Berger, 180 Ark. 372, 21 S. W. 24 419.