Ferguson v. Wachs

• Decision Date: 12 May 1938
• Docket Number: 6344.,No. 6343,6343
• Citation: 96 F.2d 910
• Parties: FERGUSON et al. v. WACHS et al. (two cases).
• Court: U.S. Court of Appeals — Seventh Circuit

96 F.2d 910 (1938)

FERGUSON et al. v. WACHS et al. (two cases).

Nos. 6343, 6344.

Circuit Court of Appeals, Seventh Circuit.

May 12, 1938.

George B. McKibbin, Walter E. Beebe, and Dwight S. Bobb, all of Chicago, Ill. (Hamilton K. Beebe and Fred L. Wham, Jr., both of Chicago, Ill., of counsel), for appellees.

David K. Cochrane, Edgar L. George, Frederick A. Brown, and G. Gale Roberson, all of Chicago, Ill., for appellants.

Before EVANS and TREANOR, Circuit Judges, and LINDLEY, District Judge.

TREANOR, Circuit Judge.

These causes were consolidated for trial by order of the District Court, and by order of this court the separate appeals have been consolidated for briefing and hearing in this court.

The complaint in each case is brought to recover one-half of the sale price of certain shares of the capital stock of the Ferguson Coal Company, a corporation, claimed by the plaintiffs as residuary legatees under the last will and testament of Lawrence W. Ferguson, deceased. The trial court found that the plaintiffs were entitled to recover and entered a decree in the case of Elinor Ferguson for $53,625.59, and in the case of Clarence E. Ferguson for $51,546.44.

Lawrence W. Ferguson died June 1, 1931, leaving a last will and testament dated December 23, 1927, which was admitted to probate in the probate court of Cook county, Ill., June 12, 1931; and letters testamentary were issued to the First Union Trust & Savings Bank (afterwards consolidated and merged with the First National Bank of Chicago) and Claire Ferguson as coexecutors, and said estate is still pending.

Claire Ferguson, one of the executors and the widow of Lawrence W. Ferguson, died March 23, 1936, leaving a last will and testament which was admitted to probate in the probate court of Cook county, Ill., on April 13, 1936; and letters testamentary were issued thereon to the defendants herein, Edward H. Wachs and Harry Lampert.

On January 18, 1932, Clarence Ferguson, as contingent beneficiary under the will of Lawrence Ferguson, filed a petition in the probate court of Cook county, Ill., in the matter of the estate of Lawrence Ferguson, deceased, denominated "Petition for Citation to Discover Assets," in which he alleged that there were 304 shares of stock in the Ferguson Coal Company which belonged to the estate (but which had not been brought into the estate), and that Claire Ferguson claimed the same as her property. Claire Ferguson answered denying she had any assets belonging to the estate. On April 28, 1932, the probate court entered a finding and judgment that the estate had no right or interest in the 304 shares. An appeal was prayed from this order and taken to the Cook county circuit court but later was dismissed. Inheritance tax proceedings were taken in the estate also, and there was a determination that the shares were not taxable on the ground that they had been transferred by decedent to his wife and were not a part of the estate. Thereafter on January 9, 1933, Clarence Ferguson executed a release of all claims he might have in respect to the 304 shares.

The will of Lawrence Ferguson created a trust which was to terminate at the death of his wife, Claire Ferguson; and upon her death the property in the trust was to pass to his sister, Eva Ferguson, or to her surviving issue. In case of the death of Eva Ferguson without surviving issue, the trust property was to pass to the plaintiffs, Clarence Ferguson and Elinor Ferguson. Eva Ferguson died without issue in 1933, and before the death of Claire Ferguson which occurred in March, 1936.

Thereafter on September 18, 1936, the two suits involved in these appeals were filed in the United States District Court, one by Elinor Ferguson and one by Clarence Ferguson. The defendants in each case were the executors of Claire Ferguson's estate, and the coexecutors of Lawrence Ferguson's estate. Each complaint alleged diversity of citizenship and jurisdictional amounts; that Lawrence Ferguson was the holder of 304 shares in the Ferguson Coal Company prior to his death, the total issue of shares being 500; that about three weeks before his death he caused a new certificate for 304 shares to be prepared in the name of Claire Ferguson and caused same to be dated back to December 23, 1930; that this new certificate was indorsed in blank by Claire Ferguson but was never delivered to her and remained in possession of Lawrence Ferguson until his death, and that the purpose of such action was to prevent execution of a judgment in a case then pending against Lawrence Ferguson; that after Lawrence Ferguson's death Claire Ferguson illegally possessed herself of the stock and sold and converted it to her own use and retained the proceeds until her own death; that Claire Ferguson acted in such a way by herself and by conspiracy with her "advisers" that the true facts had been concealed from plaintiffs. Elinor Ferguson alleged the additional facts that when Lawrence Ferguson died she was an infant of 14 years; that under the will her interest did not vest until Claire Ferguson's death in 1936; that she had no knowledge of the actual facts relating to the stock of the Ferguson Coal Company and of Claire Ferguson's appropriation until 1936 when her attorney made the discovery. Clarence Ferguson alleged that he was ill in California at the time of the death of Lawrence Ferguson and caused to be filed in the probate court of Cook county the petition for discovery of assets, and that on hearing thereon Claire Ferguson caused certain false evidence to be given (setting out same); that certain persons having knowledge of the facts were not called and that one witness did not state all the facts because of duress; that as a result of these circumstances the probate court found as it did; and that as a result of these same circumstances and without knowing that the facts were other than as developed at the hearing he (Clarence) executed the release before mentioned; that until 1936 he had no knowledge of the true facts or that false evidence had been given; that on coming to Illinois in 1936 he discovered that Claire Ferguson had actively concealed the facts. Both plaintiffs asked for an accounting from the estate of Claire Ferguson, and Clarence Ferguson also asked for the setting aside of the release which he gave, upon his repayment of the consideration he received therefor.

Defendants moved to dismiss Elinor Ferguson's action on the ground, among others, that Lawrence Ferguson's estate was still pending and that the funds involved here are solely within the jurisdiction of the probate court. Also that the Illinois statute gives the probate court jurisdiction and outlines the procedure for determining adverse claims to property, and provides that such claims are triable by jury; that as to Clarence Ferguson's action, the probate court's finding is a final adjudication of the matter; that his release is a bar, and that he is guilty of laches in waiting four and one-half years after the probate court decree. All motions were overruled. Defendants answered Elinor Ferguson's complaint denying most of the material allegations and setting up the adjudication of the probate court. They allege that the executors of Lawrence Ferguson's estate initiated an inheritance tax proceeding and that an issue was formed in such a proceeding as to the ownership of the stock; that Elinor Ferguson was made a party thereto and a guardian ad litem was appointed for her; that evidence was taken and it was concluded by the court that Claire Ferguson was the owner, and that the same is res judicata as to her. The answer to Clarence Ferguson's complaint is practically the same and includes the probate court's finding, the release, and the inheritance tax proceeding. The coexecutor of Lawrence Ferguson's estate also asks that, in case plaintiffs recover judgments, the money be ordered paid to the estate of Lawrence Ferguson and not to plaintiffs. Thereafter that part of defendants' answer relating to the inheritance tax was stricken out on motion. But prior to this striking a transcript of the inheritance tax proceedings was introduced in evidence.

Trial of the issues then took place and the District Court entered its findings of facts and of law and its decree. The finding of facts bears out substantially the allegations of the complaint, and the statements of law follow the facts as found by the court.

The trial court concluded that the 304 shares of stock belonged to Lawrence W. Ferguson at the time of his death. The court based its conclusion largely upon the testimony of Helen Wickel, and supporting testimony of other witnesses which tended to prove an intention on the part of Lawrence W. Ferguson to retain the ownership of the stock and yet create a situation which, in the event of a certain contingency, would cause Claire Ferguson to appear to be the owner of the stock. The following statements of facts are included in the court's findings:

"15. That early in May, 1931, upon his return from California, Lawrence W. Ferguson instructed Helen E. Wickel, secretary of the Ferguson Coal Company to make out a certificate of stock in the name of Claire Ferguson for 304 shares of stock and to date the same back to December 23, 1930; that in accordance with such instructions, Helen E. Wickel made out certificate of stock No. 36, in the name of Claire Ferguson, for 304 shares, dated the same December 23, 1930 and delivered the said certificate of stock, together with the stock book, to Lawrence W. Ferguson; that on the same day, said Lawrence W. Ferguson took said certificate of stock No. 36, together with the stock book, with him when he left the office and a day or so later returned to the office the stock book, the stub of which said Claire Ferguson had signed, together with said certificate No. 36, which bore the endorsement in blank of Claire Ferguson; that said certificate No. 36 for 304 shares of stock, together with certificates...