Keyes v. American Life & Accident Ins. Co.

• Decision Date: 17 August 1932
• Docket Number: No. 1353,1383.,1359,1362,1360,1353
• Citation: 1 F. Supp. 512
• Parties: KEYES v. AMERICAN LIFE & ACCIDENT INS. CO., and four other cases.
• Court: U.S. District Court — Western District of Kentucky

1 F. Supp. 512

KEYES v. AMERICAN LIFE & ACCIDENT INS. CO., and four other cases.

Nos. 1353, 1359, 1360, 1362, 1383.

District Court, W. D. Kentucky.

August 17, 1932.

Nichols, Morrill, Wood, Marx & Ginter, of Cincinnati, Ohio, for plaintiff.

Edw. G. Klemm, of Louisville, Ky., for defendant American Life & Accident Ins. Co.

W. W. Thum and Perry B. Miller, both of Louisville, Ky., for defendants Hattie B. Speed and Jennie L. Robbins.

Simmons & Barker, of Louisville, Ky., for defendant Harvey M. Graybill.

David R. Castleman and Selligman, Selligman & Goldsmith, all of Louisville, Ky., for defendant Joseph S. Laurent.

ANDREW M. J. COCHRAN, District Judge.

These are five actions at law brought by the plaintiff to recover assessments made by him on the stockholders of the National Bank of Kentucky to pay the debts thereof. The assessment is to the full extent of the par value of the stock. They have been submitted to me for trial and judgment. The question in them is as to whether the several defendants are subject to the assessment. The National Bank of Kentucky and the Louisville Trust Company had merged by the stockholders of the former exchanging 30 per cent. of their stock with the stockholders of the latter for 70 per cent. of theirs. Thereby the stockholders in the one became stockholders in the other, and vice versa. Thereupon the stockholders in each placed their stock in the name and legal ownership of six trustees to hold for their benefit under the terms of a trust agreement, the terms of which need not be set forth, and the trustees issued to them negotiable trust certificates, designated "Trustees Participation Certificates." Each certificate represented 70 per cent. of the stock of the National Bank of Kentucky, and 30 per cent. of the stock of the Louisville Trust Company. The assessment made is only to the extent of 70 per cent. of the stock represented by them. The trustees were empowered to vote the stock in each institution subject to the control of the certificate holders, and they were to collect the dividends and distribute them amongst those holders. The defendants claim that the trust so created was an active trust, and in the disposition of the case it will be accepted that such was the case. The Banco Kentucky Company, whose receiver is sued in the last of the five cases, was not an original stockholder of the National Bank of Kentucky. It became interested in its stock by purchasing trustees' participation certificates from the holders, giving in exchange therefor stock in it. It thereby acquired and held at the time of the failure about 95 per cent. of such certificates. The ground upon which it is claimed on behalf of all five defendants that they are not subject to the assessment is that the case is covered by section 66, title 12, USCA which is in these words: "Persons holding stock as executors, administrators, * * * or trustees, shall not be personally subject to any liabilities as stockholders; but the estates 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 his own name."

The defendants contend that the effect of the provision that the trust estate in the hands of a trustee shall be liable to assessment is to relieve the beneficiary of any liability thereto. The effect of this contention here is that no person or fund is liable to assessment. The trustees and the beneficiaries are not liable, and there is no fund to be assessed. The whole estate consists of the stock in the bank, and that has no value. I cannot accept this...