Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

RICE v. RICE

November 19, 1954

JOSEPHINE RICE, PLAINTIFF,
v.
ROYAL A. RICE, J. A. RICE, COMMERCIAL NATIONAL BANK, NATIONAL BANKING ASSOCIATION, BANK OF MONTGOMERY COUNTY AND MONTGOMERY COUNTY INSURANCE AGENCY, DEFENDANTS.



The opinion of the court was delivered by: John E. Miller, District Judge.

This is a suit instituted by plaintiff on March 16, 1954, in which she seeks a recovery against the defendant, Royal A. Rice, hereinafter referred to as R. A. Rice, based upon certain judgments heretofore obtained by plaintiff against the said defendant in the State of New York. In her original complaint plaintiff sought to recover the sum of $12,008.19, being the amount of a judgment obtained by plaintiff against R. A. Rice on February 24, 1954, in the Supreme Court of the State of New York, Westchester County, in the City of White Plains. Plaintiff further alleged that R. A. Rice owned an interest in the Montgomery County Insurance Agency, and also owned certain shares of stock in the Bank of Montgomery County, said shares having been transferred by R. A. Rice to the defendant, J. A. Rice, for the purpose of hindering, delaying and preventing the collection of plaintiff's New York judgment. Plaintiff sought judgment against R. A. Rice in the sum of $12,008.19; that the transfer of the stock be set aside; and that the assets of J. A. Rice be marshalled to free the certificates of stock owned by R. A. Rice from the lien of a pledge of a portion of the said stock to the defendant, Commercial National Bank.

On April 7, 1954, the defendants, R. A. Rice, J. A. Rice, Bank of Montgomery County, and Montgomery County Insurance Agency, filed an answer admitting the recovery of the $12,008.19 judgment by plaintiff, but denying that the Court had jurisdiction to render said judgment. The said defendants denied that R. A. Rice owned any interest in the Montgomery County Insurance Agency and denied that he had transferred any stock in an effort to prevent the collection of plaintiff's judgment.

The defendant, Commercial National Bank, on April 10, 1954, filed its answer alleging that it had a valid lien upon the 311.4 shares of stock of the Bank of Montgomery County that had been pledged to it by J. A. Rice.

On September 17, 1954, plaintiff amended her complaint to include three additional judgments she had previously obtained against R. A. Rice, making the total amount sued for $19,821.08. Plaintiff also alleged that R. A. Rice was the owner of an undivided one-half interest in certain lands in Montgomery County, Arkansas, and prayed that said interest be made subject to the payment of plaintiff's judgments. Plaintiff further prayed that R. A. Rice be declared to be the owner of 434 shares of the stock of the Bank of Montgomery County, and that said stock be subjected to the payment of plaintiff's claim.

Upon these issues, the case was tried to the Court, without a jury, on October 18, 1954, and at the conclusion of the trial the Court took the case under advisement pending receipt of briefs from the attorneys for the respective parties.

The briefs have been received, and now the Court, having considered the pleadings, ore tenus testimony of the witnesses, depositions, exhibits, stipulations, and briefs of the parties, makes and files herein its findings of fact and conclusions of law, separately stated.

Findings of Fact

No. 1.

The plaintiff is a citizen and resident of the State of New York. The defendants are all citizens and residents of the State of Arkansas. The amount in controversy, exclusive of interest and costs, exceeds the sum of $3,000.

No. 2.

The plaintiff and the defendant, R. A. Rice, were married in 1910 in the State of New York. They lived together until 1936, when they separated, and on October 16, 1940, plaintiff obtained a decree in the Supreme Court of Westchester County, awarding her separate maintenance in the sum of $10 per week. On August 3, 1943, the decree was modified by increasing the award to $15 per week. On August 4, 1951, the decree was again modified and the award was increased to $100 per week.

No. 3.

The defendants, R. A. Rice and J. A. Rice, are brothers, and prior to 1944 had been engaged in business together. On May 20, 1944, the said defendants, together with their mother, Mrs. Lula V. Rice, entered into a partnership agreement which purportedly gave the parties the following respective interests: Lula V. Rice, 50%; Joel A. Rice, 40%; and Royal A. Rice, 10%. This agreement, of course, was entered into subsequent to the time plaintiff obtained her decree in 1940, as well as the modification in 1943. The parties operated as a partnership styled Rice Bros. Mfg. Co. until June 15, 1945, at which time they purchased the controlling interest in the Bank of Montgomery County in Montgomery County, Arkansas. The sum of $25,050 was paid for 501 shares of the stock of said bank, the total number of outstanding shares being 1,000. The money was paid by check drawn upon the account of Rice Bros. Mfg. Co.

After the purchase of the stock by the Rice family, a controversy developed between them and the Bank officers, culminating in the case of Rice v. Beavers, 213 Ark. 656, 212 S.W.2d 30. The decision in that case left the way clear for the Rice family to take over the management of the Bank, which they did on August 3, 1948. At that time the officers were: R. A. Rice, President; J. A. Rice, Vice President; Amos Horn, Secretary-Treasurer and Cashier. Mrs. L. V. Rice became a director and remained in that capacity until her death in 1950, at which time her 20.2 shares were transferred to Sam G. Smith and he became a director.

As reflected by the annual reports made by the defendants, R. A. Rice and J. A. Rice, to the State Bank Commissioner, together with the testimony of Oscar W. Luebben, Certified Public Accountant, the stock ownership of the said Rice brothers remained substantially the same from December, 1946, until July 17, 1952. In the meantime, plaintiff had obtained two judgments against R. A. Rice in the Supreme Court of Westchester County, New York, one in the amount of $1,179.02 rendered on October 26, 1951, and one in the amount of $2,320.22 (including costs) rendered on January 8, 1952. On January 3, 1952, plaintiff instituted an action in the Circuit Court of Garland County, Arkansas, upon the judgment entered by the New York Court on October 26, 1951. Then, on February 13, 1952, plaintiff filed suit in the Circuit Court of Garland County upon the New York judgment rendered on January 8, 1952.

No. 4.

While R. A. Rice was faced with the efforts of plaintiff to collect the judgments she had obtained against him, he had a conversation with Amos Horn, Secretary-Treasurer of the Bank, about the matter. Horn advised him to attempt to settle the controversy with plaintiff, but R. A. Rice stated that he did not intend to pay anything else to plaintiff, and that he intended to transfer his stock to his brother, J. A. Rice.

During this time, R. A. Rice and John Beavers, with the assistance of Beavers' attorney, Alfred Featherstone, negotiated for the purchase by the Rice brothers of 323.4 shares of the Bank stock still owned by the Beavers family and their friends. This negotiation resulted in the sale to the Rices of the 323.4 shares in July of 1952. At that time the two suits against R. A. Rice were pending in the Garland County Circuit Court, and the Rice brothers evidently thought it would be wise to have everything possible placed in the name of J. A. Rice rather than R. A. Rice.

On July 15, 1952, R. A. Rice and J. A. Rice issued a joint financial statement to the Commercial National Bank of Little Rock, Arkansas, said statement showing ownership of 509 shares of Bank stock and a Net Worth of $72,700. This financial statement was signed "R. A. & J. A. Rice, by R. A. Rice." On July 16, 1952, a note in the sum of $12,936 was executed by J. A. Rice and R. A. Rice, payable to the Commercial National Bank. The note appears on its face to be the joint note of the said Rice brothers, but the records of the Commercial National Bank indicated that the Bank considered R. A. Rice's signature on the note to be an endorsement. However, both R. A. Rice and J. A. Rice were equally interested in the purchase of the stock. The note was secured by the pledge of certain stock of the Bank of Montgomery County then in the name of J. A. Rice. The purchase price of the 323.4 shares of Beavers' stock was paid on July 17, 1952, with the money obtained from the Commercial National Bank, and said shares were placed in the name of J. A. Rice. On the same date, R. A. Rice, without consideration, transferred all his stock to J. A. Rice, who, in turn, re-transferred 20 shares to R. A. Rice in order that he would still be qualified to serve as an officer and director of the Bank.

In an effort to make the records reflect a bona fide transaction, on July 20, 1952, R. A. Rice executed a note in the sum of $1,000, payable to J. A. Rice, without interest, said note purportedly being in consideration of the transfer of 20 shares of the Bank stock from J. A. Rice to R. A. Rice. Also, upon the back of the note in the sum of $10,935 executed by R. A. Rice on December 16, 1946, payable to J. A. Rice, the following penciled notation appears: "Paid 7/1252 J. A. Rice."

As a result of these transactions, as of December 31, 1952, the annual report made to the State Bank Commissioner revealed that 789.4 shares of the Bank stock were in the name of J. A. Rice and only 20 shares were in the name of R. A. Rice.

Early in 1953, Amos Horn learned that he could purchase 72.4 shares of the bank stock then owned by the Whittingtons, although they would not sell the stock to the Rices. Horn conferred with R. A. Rice and was advised to lose no time in purchasing the said stock. On or about April 9, 1953, Horn purchased the 72.4 shares of stock with money secured from the Commercial National Bank upon the execution by Horn of a note in the sum of $3,620, payable to said Commercial National Bank. The note was secured by the pledge of the 72.4 shares of stock.

On May 4, 1953, Horn resigned from his position with the Bank of Montgomery County. At that time he agreed with R. A. Rice to turn over his 72.4 shares of stock to the Rices if they would execute a new note to the Commercial National Bank in lieu of his note then held by said Bank. On May 11, 1953, a note in the sum of $3,620 payable to the Commercial National Bank was executed by J. A. Rice and endorsed by R. A. Rice, and upon the same date the note previously executed by Horn in the same amount was marked paid by the Commercial National Bank. The 72.4 shares of stock were then placed in the name of J. A. Rice.

R. A. Rice continued as President of the Bank of Montgomery County until February 1, 1954, when he resigned. On that date he transferred his remaining 20 shares of stock to J. A. Rice, without consideration. In keeping with the effort to make the records reflect a bona fide transaction, the following notation was placed upon the $1,000 note ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.