First Nat. Bank of Spartanburg, S.C., v. Dougan

• Decision Date: 16 April 1918
• Docket Number: 20.
• Citation: 250 F. 510
• Parties: FIRST NAT. BANK OF SPARTANBURG, S.C., et al. v. DOUGAN et al.
• Court: U.S. District Court — Southern District of Georgia

250 F. 510

FIRST NAT. BANK OF SPARTANBURG, S.C., et al. v. DOUGAN et al.

No. 20.

United States District Court, S.D. Georgia, Eastern Division.

April 16, 1918

Lyles &amp Daniel, of Spartanburg, S.C., and Hitch & Denmark and Edwards & Lester, all of Savannah, Ga., for plaintiffs.

Wilson & Rogers, of Savannah, Ga., for defendants.

BEVERLY D. EVANS, District Judge.

This is an action by creditors of cestuis que trust to subject to the payment of complainants' debts the equitable interests of the cestuis in certain railroad stock hypothecated to secure their debts. The facts are not in dispute, and the case is submitted to me for final decree on the bill and answer.

By the will of Mrs. Elizabeth H. Mills there was devised:

'To Mrs. Elizabeth A. Dougan, wife of P. M. Dougan, of Savannah, in trust for herself and her children, born and to be born, for their sole and separate use, share and share alike, the sum of forty-five thousand ($45,000.00) dollars, child or children of a deceased child to represent parent.'

The estate so created by the will now consists wholly or in large part of 260 shares of the capital stock of the Southwestern Railroad Company.

There were born to Mr. and Mrs. Dougan eight children, seven of whom, to wit, Arthur, Alfred, Elsie, Alice, Margaret Frederick, and Mary, are in life. A son Paul died at the age of 13 and his interest was inherited by his father P. M Dougan, and his surviving brothers and sisters. At the time of the filing of the bill (1915) Mrs. Dougan was 60 years of age, and her youngest child was between 19 and 20 years of age.

On August 30, 1911, Mrs. Elizabeth Dougan, her husband, P. M. Dougan, and her four children, Arthur, Alfred, Elsie, and Alice, executed three notes, respectively, to the First National Bank of Spartanburg, S.C., the Merchants' & Farmers' Bank of Spartanburg, and the Bank of Spartanburg, wherein they promised to pay the several banks the respective principal sums of $5,537.57, $4,570.83, and $3,801.60. To secure these sums they deposited with the first-named bank certificates of stock for 260 shares issued by the Southwestern Railroad Company to 'Elizabeth A. Dougan, trustee for herself and children under item 4, section 14, will of Elizabeth H. Mills,' under a written contract that the bank holding the certificates shall hold them in trust for the three banks as a pledge and collateral for the payment of all the notes. The notes are past due, and, after crediting certain payments, there remains stated amounts unpaid.

The defendants do not contest the complainants' right to have judgment for their respective debts as described, but deny that the equitable interests of the cestuis que trust, who signed the notes, can be sold, so as to pay the judgment, before the trust becomes an executed one.

This item of the will of Mrs. Elizabeth H. Mills has been construed by the Supreme Court of Georgia as creating an executory trust, which will become executed only upon the death of Mrs. Elizabeth A. Dougan. In re Dougan, 139 Ga. 351, 77 S.E. 158, 48 L.R.A. (N.S.) 868, Ann. Cas. 1914B, 868. That ruling was made on the application of some of the cestuis to have a division of the trust estate, on the theory that under the facts Mrs. Dougan was incapable of bearing other children. The court adopted the common-law rule, that the possibility of issue is commensurate with life. The decision goes no further than to hold that so long as the trust is executory there can be no division in kind, awarding full title and possession in severalty to the respective cestuis que trust.

The first question to be considered is the power of five of the cestuis to pledge, either by delivery of the pledge or by contract, their interest in the trust estate, because of the uncertainty of such...