Carlisle v. Love

• Decision Date: 05 June 1934
• Docket Number: 30679
• Citation: 155 So. 197,170 Miss. 621
• Court: Mississippi Supreme Court
• Parties: CARLISLE et al. v. LOVE, SUPERINTENDENT OF BANKS

155 So. 197

170 Miss. 621

CARLISLE et al. v. LOVE, SUPERINTENDENT OF BANKS

No. 30679

Supreme Court of Mississippi

June 5, 1934

Division A

Suggestion Of Error Overruled July 16, 1934.

APPEAL from chancery court of Monroe county HON. JAS. A. FINLEY Chancellor.

Suit by J. S. Love, superintendent of banks, against W. H. Carlisle guardian, and others. From a decree for complainant, the defendants separately appeal. Affirmed in part and reversed in part.

Affirmed in part and reversed in part.

Paine & Paine, of Aberdeen, for appellant, Julian T. Evans.

The admitted facts in this case clearly demonstrate that after this trust was created by appellant and the stocks transferred to his name as trustee for the benefit of his children that a regular examination of the bank was had several months after the trust was created and that the examination showed and the chancellor so held that the bank was solvent.

Section 3803, Code of 1930, does not, nor does any other section of the code, prohibit the creation of an irrevocable trust in praesenti of bank stock for the benefit of minors.

Section 3815, Code of 1930; 3 R. C. L., page 403, Banks, par. 31; Wells v. Larrabee et al., 2 L. R. A. 471; Smathers et al. v. Western Carolina Bank et al., Ann. Cas. 1912C 398, 155 N.C. 283.

If the corporate books show that the registered holder is a trustee, then it seems that he is not subject to the personal liability.

4 Thompson on Corporations (2 Ed.), sec. 4889.

It may be argued that an irrevocable trust created by the appellant in the case at bar would have no valid existence for the reason that the cestui que trust were minors and could not give their consent. But the consent of the cestui que trust is not required to make an irrevocable trust in praesenti valid.

26. R. C. L. 1190, sec. 26, notes 8 and 9; Fowler v. Gowing, 152 F. 801, 165 F. 891.

Leftwich & Tubb, of Aberdeen, for appellants.

While it is the duty of the guardian or the trustee to so handle the estate as to make it produce an income, yet it is his duty to keep the estate safely within his charge. Safety is the main element.

Section 1885, Code of 1930.

Unless authorized by statute, the guardian has no power to invest the funds of his ward in the stocks of an ordinary corporation, and if he does so the investment is at his peril. If such guardian invests his ward's money in unprofitable stocks he must himself bear the loss, if any; the ward is not obliged to take such stock from the guardian.

4 Thompson on Corporations (2 Ed.), sec. 4034; Perry on Trusts (5 Ed.), sec. 456; 28 C. J. 1141, secs. 236, 237; 12 R. C. L., Guardian and Ward, pages 1128, 1131, 1133, secs. 27, 29 and 30; Robertson v. Robertson's Trustee, 130 Ky. 293, 132 Am. St. Rep. 368.

With respect to the character of investments the rules applicable to trustees generally apply to guardians. Where the character of investments is prescribed by statute, the guardian may lawfully invest in such securities only as the statutes prescribe, and if he receives as guardian securities of other kinds, he must, at his peril, within a reasonable time, dispose of them and reinvest the proceeds in the securities prescribed. The guardian should not invest the ward's property in trade or speculation.

28 C. J. 1141, sec. 236.

The guardian had no power or authority in law to invest the ward's money in the stock of the bank. He had no power to enter into a contract for and in behalf of his ward to purchase stock of the bank and thereby impose upon the ward or upon her estate the double stockholder's liability.

31 C. J., Infants, sec. 148, pages 1058, 1063 and 1064; 14 R. C. L., Infants, 222 et seq., secs. 9, 10, and sec. 23, page 242; Fant v. Dunbar, Admr., 71 Miss. 576; 4 Thompson on Corporations (2 Ed.), sec. 4033.

It was manifest error in the court below to hold the estate of Willie Carlisle Hinds, a minor, liable for this double liability or the statutory liability.

4 Thompson on Corporation (2 Ed.), secs. 4774, 4884, 4889 and 4891; Earley, Receiver, v. Richardson, 280 U.S. 496, 74 L.Ed. 575; Mellott v. Love, 119 So. 913, 152 Miss. 860.

D. W. Houston, Sr. and Jr., of Aberdeen, Flowers, Brown & Hester, of Jackson, and W. G. Roberds, of West Point, for appellee.

We think that the chancery court did have the authority to so authorize the guardian to invest the funds in any way he thought was to the best interest of the ward.

Section 159, Constitution of Mississippi.

Section 1885, Miss. Code of 1930, providing for the disposition of ward's funds not needed for current expenditures, and which is quoted in full by counsel for appellant in their brief, provides in what manner the money or funds may be loaned and the guardian be not liable for same, and the statute goes further and also says: "and the court or chancellor may direct an investment in the bonds of the state or of any county, or municipality thereof, or of a levee board, or of the United States." This merely enumerates some investments that may be made by the guardian, it does not limit the guardian to these alone, and it does not prohibit him from making investments in other securities, with the sanction and permission of the chancery court.

The statute goes further and charges the guardian with eight per cent interest on funds in his hands not needed for current expenditures; and, therefore, it is a reasonable and logical construction of the statute to construe same to give the guardian permission and authority, with the authority and sanction of the court, to invest the funds in any way that appears to the best interest of the ward, the guardian and chancellor using ordinary diligence and intelligence in so doing.

There is no attempt here to hold Mr. Evans liable as trustee. Learned counsel entirely miss the point. Mr. Evans is liable because he attempted to transfer his stock to minors who did not have the legal capacity to make a private agreement with him and accept the stock, nor to assume the stockholder's liability thereon. Incapacity of transferees to agree themselves and right to reject liability based on a private agreement, those are the two pillars under the liability structure of the appellant, not that he is liable as trustee.

4 Thompson on Corporation (2 Ed.), sec. 4449; 6 Thompson on Corporation (3 Ed.), sec. 4900, page 798; 5 Thompson on Corporation (3 Ed.), sec. 4043; Foster v. Chase, 75 F. 797; Aldrich v. Bingham, 131 F. 363-365; Kerr v. Urie, 38 L. R. A. 1119, 63 Am. St. Rep. 493; Johnson v. Laflin, 5 Dill and note, 103 U.S. 800, 26 L.Ed. 532; Foster v. Wilson, 75 F. 797; Early v. Richardson, 280 U.S. 495, 74 L.Ed. 575-8.

Argued orally by T. F. Paine, for appellant.

OPINION

Cook, J.

Appellee, as state superintendent of banks, filed a bill in the chancery court of Monroe county to enforce the statutory stockholders' liability against a number of persons in whose name stock in the Commercial Bank & Trust Company of Aberdeen, Mississippi, in liquidation, stood at the date the said bank closed for business on the 16th day of December, 1930. By agreement, separate records were kept of the proceedings as against each class of defendants in the court below, and from a decree adjudging liability against three classes of the defendants, separate appeals were prosecuted, the separate records of the proceedings against the several appellants being combined in one record in this court. For the purpose of disposing of the questions presented by the separate appeals, the facts of each appeal and the legal conclusions based thereon will be separately stated.

As to the appellant J. T. Evans, Sr., the bill alleged that he was liable for the par value of twenty-four shares of stock, totaling two thousand four hundred dollars, which stock, in the amount of eight shares each, stood in the name of J. T. Evans, trustee, for each of his minor children, when the said bank was closed for liquidation; that this stock was transferred to the said minors by the said J. T. Evans, Sr., on January 29, 1930; that the said Evans was liable for the par value of this stock, because, on account of their infancy, the said minors were without legal capacity to contract for the purchase of said stock, and he could not transfer such stock to them so as to divest himself of the ownership thereof, and avoid liability thereon, as it was unlawful for such stock to be placed in their names, and was unlawful for them to attempt to own it. The bill further charged that the double liability as fixed by statute on the owner of stock in a failed bank is coupled with and follows the ownership of such stock, and is a liability attached to the stock which must be assumed upon the purchase thereof, and must of necessity follow the ownership of the stock; that since the double liability as created by statute is not such as can be enforced against a minor, and is not such liability as can be contracted for and assigned by a minor, the attempted transfer of such stock by the said Evans to his minor children was ineffectual to relieve him from the double liability thereon.

The bill further charged that the said minors did not purchase or attempt to purchase the twenty-four shares of stock in question, but said stock was simply placed in their names by the said J. T. Evans, Sr.; that no consideration was paid by said minors for such stock; that it was in fact actually owned by the said J. T. Evans, Sr., at the time the bank closed, and simply stood in the names of the minors as the nominees of the said Evans; that the said Evans had never ceased to be the owner of the stock, and had never ceased to be liable thereon under the double liability imposed for the benefit of depositors, for the reason that the said transfer to the minors was ineffectual to...