Auten v. City Electric St. Ry. Co.

• Decision Date: 25 October 1900
• Citation: 104 F. 395
• Parties: AUTEN v. CITY ELECTRIC ST. RY. CO. et al.
• Court: U.S. District Court — Eastern District of Arkansas

104 F. 395

AUTEN v. CITY ELECTRIC ST. RY. CO. et al.

United States Circuit Court, E.D. Arkansas, Western Division.

October 25, 1900

H. F Auten, receiver of the First National Bank of Little Rock Ark., filed two bills to foreclose deeds alleged to be mortgages executed to Nick Kupferle for the benefit of the bank. The Atlantic Trust Company intervened, and also filed cross bills, claiming a prior lien on the realty in controversy by virtue of a general mortgage executed to it by the street-railway company to secure an issue of $300,000 of bonds. By consent, the two cases were consolidated, and at the hearing it was conceded that the trust company's mortgage did not include any of the lands sought to be foreclosed in this proceeding, and that its cross bill should be dismissed. For convenience the complainant will be referred to as the 'Bank,' and the defendant as the 'Street-Railway Company.'

The facts, as found by the court are: 'The street-railway company was a corporation existing under the laws of the state of Arkansas, operating electric street cars in the city of Little Rock. A large majority of its stock was owned by Horace G. Allis, who was its president and general manager. The board of directors consisted of his friends, selected by him, who gave but little, if any, attention to the management of the corporation, leaving that entirely to him. Afterwards Allis, having been elected as president of the First National Bank of Little Rock, resigned as president of the street-railway company, but continued to act as its manager retaining absolute control of all its affairs. The directors attended no meetings, except when called together by Allis and then only ratified such resolutions as were prepared by Allis and submitted to them by him. At times proceedings of meetings which were never held by the board were prepared by Allis, and sent to the secretary of the corporation, who entered them as proceedings of regular meetings. In short Allis continued until 1893 to act as the corporation. The street-railway company at different times purchased the lands in controversy taking the title as to some of them in the name of Allis as trustee, others in the name of H. P. Bradford as trustee, who succeeded Allis as president of the corporation, and the balance of them in the name of S. J. Johnson as trustee. While none of the deeds specified who the grantees were trustees for, nor the objects of the trusts, it is conceded by all parties that they were trustees for the street-railway company, who was the true owner, and who paid the purchase money therefor. In 1891, the street-railway company being indebted in large sums of money to the bank, principally evidenced by overdrafts on the bank's books, Mr. Kupferle, vice president of the bank, called on Mr. Allis, and insisted either on payment of these debts or security therefor. The street-railway company being unable to pay, Allis agreed to have these lands conveyed to the bank, or Kupferle as trustee for the bank, to be held as security for the then existing indebtedness, or any money thereafter borrowed by the street-railway company from the bank. In pursuance of this agreement, Allis, on the 21st day of July, 1891, by proper deed, conveyed the lands held by him as trustee as aforesaid to Mr. Kupferle, describing him as trustee for the bank, but otherwise the deed was in usual form, without any limitations or description of the trust. The other parties, Bradford and Johnson, failing to execute promptly deeds to Mr. Kupferle for the lands held by them as trustees, Mr. Kupferle, as vice president of the bank, on the 15th day of April, 1892, wrote a letter to Mr. Bradford, as president of the street-railway company, which letter was written on the bank's paper, informing him that the board of directors of the bank had directed him to demand from the persons holding property of the street-railway company, as trustees, a conveyance thereof to the bank, as security for the debts due it from the street-railway company. In compliance with this request, Bradford and Johnson each executed deeds for the realty held by them, respectively, as trustees for the street-railway company, to Kupferle, describing him as trustee, but not mentioning the beneficiary nor the object of the trust. In consideration of these conveyances, payment of the debts due the bank from the street-railway company was extended, and new credits granted. There is now a large sum of money due the bank, which was by the comptroller placed in the hands of the receiver, and the complainant is the receiver of the bank, and the object of these bills is to have these lands subjected to the payment of the bank's debt, the deeds to Kupferle being treated as mortgages. Mr. Kupferle makes no claim to the lands, but, on the contrary, in his answer and deposition, which are signed by him, declares that he held the legal title to all of these lands as trustee for the bank, to secure any and all indebtedness due the bank from the street-railway company at the time the deeds were executed and delivered to him or thereafter contracted. Nor do the grantors of Kupferle make any claim to the property, it being agreed that they merely held them as trustees for the street-railway company. None of the parties pleaded the statute of frauds, but in the argument on the final hearing the defenses were that the deeds to Kupferle are absolutely void, for the following reasons: First, that none of the deeds disclose the object of the trust, nor is there any evidence in writing on that subject; second, that the deeds from Bradford and Johnson fail to show for whose benefit Kupferle was the trustee; third, that Allis, Bradford, and Johnson holding the legal title as trustees for the street-railway company, which fact was known to the bank, the deeds from the trustees are void, unless authorized by the beneficiary, the street-railway company, to execute them; fourth, that such authority must be in writing, and, the street-railway company being a corporation, it could only be granted by resolution of its board of directors, which was never obtained.

John McClure and Auten & Hill, for complainants.

Rose, Hemingway & Rose, for defendants.

TRIEBER District Judge (after stating the facts).

Without determining whether the statute of frauds can be considered on final hearing, if not pleaded, which is very doubtful (see Wood, St. Frauds, Sec. 537), the claim that the failure of the deeds to Kupferle to show for whom he was trustee, or the object of the trust, vitiates the deeds for failure to comply with the statute of frauds, cannot be sustained.

The Arkansas statute of frauds, following that of England, provides:

'All declarations or creations of trust or confidences of any lands or tenements shall be manifested or proven by some writing signed by the party who is or shall be by law enabled to declare such trusts or by his last will in writing, or else they shall be void. ' Sand. & H. Dig. Sec. 3480.

Counsel for defendants refer to Grafton v. Cummins, 99 U.S 100, 25 L.Ed. 366; Littell v. Jones, 56 Ark. 146, 18 S.W. 497; Freeport v. Bartol, 3 Greenl. 345; Robinson v. Robinson, 45 Ark. 481; and other cases of that kind,-- to sustain their contention; but a reference to those authorities shows that they were all cases wherein the party holding the legal title was sought to be held as a trustee against his wishes, or where, as in Grafton v. Cummins, it was sought to enforce an alleged purchase of real estate where the contract for the purchase was not made in writing, nor any sufficient memorandum thereof made in writing and signed by the party sought to be charged. In Robinson v. Robinson, the land was purchased by the plaintiff, and the deed therefor executed, at plaintiff's request, to the defendant, who was his son, and the court held that, as there was no evidence that the defendant, before or at the time the deed was executed or delivered, made any declaration, promise, or agreement in writing to hold the land in trust for his father...