219 F. 663 | 2d Cir. | 1914
The First National Bank of Mineral Point, Wis., was a national banking association duly organized and existing under and by virtue of the laws of the United States. And on October 11, 1909, it was found by the Comptroller of the Currency of the United States to be insolvent and unable to pay its debts. There
It appears that one Laura A. Cobb became the registered owner and holder of certain shares of the capital stock of the bank and retained the same at the time of her death on April 11, 1904. In her last will and testament she appointed John P. Cobb, the defendant herein, and one Calvert Spensley, her executors, and directed them to invest the sum of $2,000 of her estate in interest-bearing securities, and to pay the income thereof to one Catherine Monohan during the life of the said Catherine Monohan, and upon the latter’s decease to pay the same over to certain persons designated in the will.
The will was duly admitted to probate in the county court of Iowa county in the state of Wisconsin, and Cobb and Spensley qualified as executors. The executors, instead of investing $2,000 in interest-bearing securities, as directed by the testatrix, caused and procured the transfer and registry, upon the books of the bank, of 20 shares of the capital stock of the bank to themselves as trustees for Catherine Monohan, and they remained so registered at the time when the Comptroller took possession of the bank, and they so remain at the present time. The stock so transferred was stock which, at the time of the death of the testatrix and at the time of the transfer, stood on the books of the bank in the name of the testatrix.
In order to pay the debts, the Comptroller of the Currency found it necessary to make an assessment upon the shareholders for $100,000, and such an assessment was made on November 3, 1909, to be paid by the shareholders ratably on or before November 17, 1909, and demand was made upon each and every one of the shareholders for $100 upon each and every share of the capital stock of the bank held or owned by them, respectively, at the time the bank was found to be insolvent. The receiver was directed to take all necessary proceedings to enforce the individual liability of the shareholders.
The suit was commenced against the defendant Cobb upon the theory that the estate of Laura A. Cobb was liable upon this assessment upon the 20 shares of the stock which the executors had transferred to themselves as trustees. The receiver contends that the executors had no authority, either under the terms of the will or the statutes of Wisconsin, to invest trust funds in the stock of a national bank, and that the transfer of the stock from themselves as executors to themselves as trustees was wrongful and did not constitute Catherine Monohan the beneficial owner of the stock, and that therefore she could not be compelled to pay the assessment. It is alleged in the bill, and upon the demurrer must be taken as true:
“That said Catherine Monohan had no knowledge of the fact that the defendant Cobb and said Spensley had caused the transfer and registry upon the books of said association to themselves as trustees for said Catherine Monohan of said twenty (20) shares of the capital stock of said association as aforesaid.”
The court was therefore asked to adjudge and decree that the transfer of the stock made by the executors to themselves as trustees was unauthorized and void, and ineffective to divest the estate of the de
It appears that, prior to the time when the Comptroller found the bank was insolvent, Cobb and Spensley had filed their final account as executors on July 28, 1908, and had at that time made oath that the estate of Laura A. Cobb had been wholly distributed, with the exception of the shares of stock held by them and registered in their names-as trustees, and that no other property or assets of Laura A. Cobb remained in the hands of said executors as such:
It further appears that this suit has been brought against John P. Cobb individually because of a provision contained in a statute of Wisconsin, which provides that where a claim against the estate of any deceased person remains contingent until after the time limited for filing claims has expired, and then subsequently becomes absolute, and the assets of the estate have been paid to the distributees as legatees or next of kin, an action will lie in favor of the claimant against such legatees or next of kin to recover the full value of such assets or sufficient thereof to satisfy such claim; and that actions against the next of kin or legatees of any deceased person to recover the value of any assets that may have been paid to them by any executor or administrator may be brought against all of said next of kin jointly, or one or more of them, or against all of said legatees jointly, or one or more of them. The statute provides that any such next of kin, against whom such recovery shall be had, may maintain an action against the other relatives of the decedent, to whom assets may have been paid, for a just and equal contribution in such an amount as shall be in the same proportion to the whole sum collected of the plaintiff as the value of the assets delivered to such defendant in such action bore to the value of all the as-' sets delivered to all the relatives of the deceased.
The defendant Cobb was, as we have said, one of the executors of Laura A. Cobb, whose son he was, and was also one of-the'distributees under the will, and as such received from the executors more than $12,000. _
_ The court below sustained the demurrer to the bill and filed the following memorandum:
“It may be that under the law of Wisconsin the executors of Mrs. Cobb-were not authorized in investing trust funds in shares of a national bant, nor in assigning to a trust fund created by Mrs. Cobb’s will any part of her property consisting of shares of a national bank. But tho only persons injured by such infraction of Wisconsin law are the cestuis que trustent and (perhaps) the state of Wisconsin. It is no concern at all of this receiver, who owns those shares, as long as they were actually owned by the persons-pretending to own them. On the face of the bill it is to me plain that they were actually owned by Cobb and another as executors, but the suit is not against the executors. On complainant’s own theory, if the assignment of these shares to a trust fund was a nullity, then they remained undistributed assets, for which the executors are responsible as executors, so that in any event the bill shows no cause of action against Cobb individually. The demurrer is sustained, with costs, and leave to amend is not granted. Final' judgment will be entered for defendant”
In Wisconsin the courts appear to have followed the English rule. In Simmons v. Oliver, 74 Wis. 633, 636, 637, 43 N. W. 561, 562 (1889), the court, after calling attention to the English rule that trustees can only invest the trust fund in real estate or government securities says:
“We prefer to adhere to the well-established rule in relation to the investment of trust funds, and if a change is to be made let the Legislature make it.”
See, also, Pabst v. Goodrich, 133 Wis. 43, 76, 113 N. W. 398, 14 Ann. Cas. 824 (1907).
In 1903 the Legislature of Wisconsin passed an act specifying the securities in which such funds may be invested and modified the English rule to some extent. It authorized the investment of trust funds in the mortgage bonds or preferred stock of railroad corporations, subject to certain restrictions, but it conferred no authority to invest in the stock of hanks. Laws of Wisconsin 1903, c. 317.
The legal difference between the two relations of executor and trus
Not only did the executors transfer the stock to themselves as trustees, but as executors of the estate they filed their final account in a proper court in Wisconsin on July 28, 1908 — more than a year before the bank failed — and made oath that’said estate had been wholly distributed prior to that date, with the exception of the 20 shares of stock registered in their names as trustees for Catherine Monohan, and that no other property or assets of the estate remained in their hands.
“Persons holding stock as executors, administrators, guardians, or trustees, shall not be personally subject to any liabilities as stockholders; but the estate and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward or person interested in such trust funds would be, if living and competent to act and hold the stock in Ms own name.”
If she rejected the investment or still has a right to reject it, about which no opinion is expressed, then it would seem that the trustees hold the stock in their individual right and would themselves be liable as such upon the stock.
If we understand the opinion of the court below, the shares of stock which the executors held as a part of the estate of Mrs. Cobb they continued to hold as executors, notwithstanding their transfer of the stock to themselves as trustees of Catherine Monohan. This conclusion is based on the theory that the transfer to’ themselves as trustees was a nullity, as trustees are not authorized in Wisconsin to invest trust funds in the stocks of a national bank. We have seen that such investments are unauthorized in Wisconsin, but it does not follow, as already stated, that the transfer of the stock by the executors to themselves as trustees was a void transaction. The trustees took the title; and so long as that transaction is permitted to stand, the estate in the hands of the executors is not liable to the receiver for any assessments made on the stock; and if the estate is not liable, then no legatee of the estate is liable under the provisions of the Wisconsin statute. We do not find it necessary to express any opinion concerning the liability of the defendant Cobb as a legatee of the estate under the Wisconsin statute in case the transaction is set aside. . At the time he received his share of the estate of the testatrix, the bank was apparently amply solvent and continued to be solvent for many months afterwards. Whether the title he then took can be affected by what happened after-wards is a question which does not need to be determined so long as •the title stands in the trustees.
The decree dismissing the bill and entering judgment for defendant is affirmed.