Court Opinion

ID: 6819874
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:05:57.588839+00
Date Added: 2024-06-11T16:04:04.723370
License: Public Domain

Hudgins, J.,
dissenting.
When A. Horsley Easley was called into the conference,, held on October 1, 1923, between E. P. Miller, President of the First National Bank of Lynchburg, and Charles B. Easley, the only subject then in the minds of the parties was the security to be offered on a contemplated loan of $11,000' *108to be used by Charles B. Easley in the purchase of 55 shares of Craddock-Terry Company’s stock. A. Horsley Easley went into his lock box in the vault of the bank, took therefrom 100 shares of Norfolk and Western Campany’s common stock and 50 shares of Northern Pacific stock, gave it to the officer of the bank, or to Charles B. Easley in the officer’s presence, and asked Miller if that was sufficient collateral to secure the one loan. On being assured by Miller that the security was ample, A. Horsley Easley signed the power of attorney in blank, surrendered his stock and left the conference. The contract between the bank and Charles B. Easley was then prepared and executed by the parties in the absence of A. Horsley Easley.
The bank knew that the stock was owned by A. Horsley Easley, and that he had surrendered possession for one purpose only; namely, to secure to the bank the payment of $11,000, a direct obligation of Charles B. Easley. The fact that A. Horsley Easley personally assumed other obligations of his brother, Charles B. Easley, and gave other security for his own obligations to the bank, did not change the original agreement as to the stock.
The doctrine of estoppel is invoked when the rights of an innocent third party are involved. The bank is no innocent third party. It had actual—not constructive—knowledge of the fact that the stock in question was the property of A. Horsley Easley, and had been given to it for one particular purpose. The subsequent conduct of A. Horsley Easley was entirely consistent with that purpose. It reveals that he did not at any time seek to evade the responsibility of the $11,000 obligation. But, when informed of the bank’s intention to change the purpose for which the stock had been pledged, by holding it as security for other personal obligations of Charles B. Easley, he promptly registered vigorous objection.
The fact that A. Horsley Easley knew that his brother was not in good financial circumstances and had not fully discharged the $11,000 obligation seems a reasonable explana*109tion of his failure to say anything, prior to February, 1936, to the bank about the stock pledged for the payment of the one loan.
Another reason assigned in the majority opinion for applying the doctrine of estoppel in favor of the bank is that the bank, with A. Horsley Easley’s consent, consolidated his different obligations to It, and retained all collateral to secure any and all of his obligations. A complete answer to this is that the collateral held to secure A. Horsley Easley’s obligations was his absolute property, and he had executed an agreement for the bank to so deal with his property. The collateral here in question was not the property of Charles B. Easley, the maker of the $11,000 note, but was loaned to him in the presence of the bank official for one purpose. If A. Horsley Easley had repeated this fact every time he saw an official of the bank, it would have gained no additional information.
Before the bank is entitled to invoke the doctrine of estoppel, it is incumbent upon it to prove that it has been misled to its prejudice. “An estoppel is that which prevents one from showing the truth in defense of his rights. Call it by what name we will, it is that which shuts out evidence of the actual truth of the case.” Baker v. Preston, Gilmer (21 Va.) 235, 300. The purpose of the doctrine is to prevent that which deals in duplicity and inconsistency, and to establish some evidence as so conclusive a test of truth that it shall not be gainsaid. Whether legal or equitable, the doctrine should not be extended by construction. Bower v. McCormick, 23 Gratt. (64 Va.) 310.
In the pertinent cases cited in the majority opinion, the courts were dealing with bona fide holders of collateral. The doctrine of estoppel was applied to prevent the true owner from asserting a title to property that, on the strength of his prior act, another had acquired for value, in good faith and without notice. In the case at bar the bank at all times had full notice of A. Horsley Easley’s interest in the stock. This fact is established by the testimony of E. P. Miller, an official of the bank. I think that *110it would be a breach of good faith and fair dealing, under the circumstances, to permit the bank to retain this stock for any other purpose than that for which it originally acquired it.
For these reasons, I am constrained to dissent from the views expressed in the majority opinion.
Campbell, C. J., concurs in this dissent.