McCrocklin v. Fowler

• Decision Date: 05 June 1968
• Docket Number: No. 67-C-221.,67-C-221.
• Parties: James W. McCROCKLIN and the Board of Trustees of Racine College, Plaintiffs, v. Henry H. FOWLER, in his capacity as Secretary of the Treasury of the United States; the Secretary of the Treasury; William T. Howell, in his capacity as Deputy Treasurer of the United States; and the Treasury Department, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

285 F. Supp. 41

James W. McCROCKLIN and the Board of Trustees of Racine College, Plaintiffs, v. Henry H. FOWLER, in his capacity as Secretary of the Treasury of the United States; the Secretary of the Treasury; William T. Howell, in his capacity as Deputy Treasurer of the United States; and the Treasury Department, Defendants.

No. 67-C-221.

United States District Court E. D. Wisconsin.

June 5, 1968.

Gerald T. Flynn, Racine, Wis., for plaintiffs.

James B. Brennan, U. S. Atty., Milwaukee, Wis., for defendants.

DECISION ON MOTIONS

MYRON L. GORDON, District Judge.

This action was commenced by the plaintiff, James W. McCrocklin, against the Secretary of the Treasury of the United States and the Deputy Treasurer. The Board of Trustees of Racine College has been joined as an involuntary plaintiff, pursuant to rule 19(a), Federal Rules of Civil Procedure.

The second amended complaint alleges that Charles Durkee owned certain paramount lien bonds issued to finance the construction of the Pacific railroads; that the railroads, pursuant to acts of Congress (20 Stats. 56, May 7, 1878 and 24 Stats. 488, March 3, 1887), deposited funds for the retirement of the bonds into a sinking fund held in the U. S. Treasury, and that the funds are carried as trust assets by the Treasury. It is alleged that Charles Durkee personally deposited his bonds with the Treasury during the years 1868-1869 as security for the completion of the railroads.

The plaintiff contends that the defendants are trustees by virtue of express and statutory trusts, and that their failure to account to the beneficiaries constitutes an unlawful taking without just compensation in violation of the 5th amendment. The plaintiff requests a determination that Charles Durkee was the owner of the bonds in question and also seeks an accounting.

Charles Durkee died in 1870, leaving his estate to his wife, Caroline. Caroline Durkee died in 1911, leaving her entire residuary estate to the Board of Trustees of Racine College. Neither Charles nor Caroline Durkee's will mentions the bonds which are the subject of this lawsuit. On November 6, 1912, the Kenosha county court awarded the sum of $6,904.58 to the Board, said sum being accepted by the Board on the same day.

The plaintiff avers that the Board assigned to him a 25% interest in any funds which might be recovered from the Treasury; the remaining 75% is owned by the Board.

The defendants have moved for summary judgment on the grounds of (1) res judicata, (2) laches, and (3) collateral estoppel. The defendants have also moved to dismiss for failure to state a claim upon which relief can be granted and for failure to join an indispensable party. No answer has been filed; the record consists of the complaint, affidavits, and exhibits filed by both parties.

I. RES JUDICATA

On May 3, 1945, Mr. Foulkes was appointed administrator of the estates of Charles and Caroline Durkee by the Kenosha county court. In 1964, Mr. Foulkes commenced an action in the United States court of claims to recover the funds allegedly held in trust by the Treasury for the estate of Caroline Durkee. The suit was brought in Mr. Foulkes' representative capacity, and the United States was the named defendant.

The court of claims granted the government's motion for summary judgment and dismissed the suit, holding the claim to be barred by the statute of limitations (28 U.S.C. § 2501) and also by laches. Foulkes, Administrator v. United States, 173 Ct.Cl. 1179 (1965), cert. den. 383 U.S. 944, 86 S.Ct. 1200, 16 L.Ed.2d 207 (1966).

A judgment on the merits, rendered in a former suit between the same parties or their privies, on the same cause of action, by a court of competent jurisdiction, operates as a bar in a subsequent suit. Liddell v. Smith, 345 F.2d 491, 493 (7th Cir. 1965). The prior suit in the court of claims was on the merits; the cause of action was the same; and the court of claims was a court of competent jurisdiction. 28 U.S.C. § 1491; Drier v. United States, 70 F.Supp. 888, 108 Ct.Cl. 487 (1947).

Is the dispute in the case at bar "between the same parties or their privies?" In my opinion, the Board, as beneficiary of the estate of Caroline Durkee, is in privity with, and is bound by the acts of Mr. Foulkes, the administrator. See 1b Moore's Federal Practice, 2d Ed., p. 1665. Likewise, Mr. McCrocklin, as an assignee, is in privity with the Board. In addition, there is privity between the defendants in the case at bar and the defendant in the prior action. United States v. Willard Tablet Co., 141 F.2d 141, 152 A.L.R. 1194 (7th Cir. 1944).

Mr. McCrocklin contends that Mr. Foulkes was not a validly appointed administrator and that his actions do not bind the plaintiff. In support of this position, the plaintiff has produced certain recent orders of the Kenosha county court, dated January 15, 1968, which state that the estates of Charles and Caroline Durkee were closed by judgments of that court on March 21, 1882 and November 6, 1912; that there was no need for the appointment of an administrator after November 6, 1912; that the Board is the lawful owner of Caroline Durkee's residuary estate; and that the Board is in no way bound by the acts of the various administrators since November 6, 1912. (See plaintiff's exhibits 94-95). The same court also relieved Mr. Foulkes of his duties.

The defendants have called this court's attention to another recent order of the Kenosha county court, dated March 19, 1968, whereby the orders of January 15, 1968 are specifically vacated, and Mr. Foulkes is reinstated. Notwithstanding any uncertainty concerning Mr. Foulkes' current status, the court is of the opinion that his actions before 1966 were binding on the Board for purposes of applying the doctrine of res judicata. By way of analogy, it has been held that if letters of administration are revoked because they were issued to one not entitled thereto, his acts prior to revocation are valid and binding to the extent necessary to protect those who have dealt with him in good faith. Simpson v. Cornish, 196 Wis. 125, 218 N.W. 193 (1928).

Mr. Foulkes was at least a de facto administrator. He was appointed by a court of competent jurisdiction. His action in the court of claims determined with finality that the claim against the Treasury was unsuccessful because of laches. Even if the plaintiff were found factually correct in his allegation that Mr. Foulkes brought the suit without authority from the Board, it would not negate his de facto competence to have pursued the suit in the court of claims. Thus, even if there is a factual dispute, it is not of such significance that it would render summary judgment inappropriate at this time.

II. LACHES

The upholding of the defense of res judicata necessitates dismissal of the plaintiff's action; nevertheless, I deem it worthy of mention to express my agreement with the determination of the court of claims with respect to the application of laches.

The judgment of the Kenosha county court awarded Caroline Durkee's residuary estate to the Board and stated that the Board was to receive "any and all other property * * * which might be a part of the residue of her estate". However, it does not appear that the Board made a timely effort to discover the existence of such property. Had the Board in 1912 exercised reasonable diligence, it could well have discovered that several abortive attempts had been made to collect the alleged claim against the Treasury. Kuykendall v. Union Pacific Railroad Co., 163 F. 819 (8th Cir. 1908). The court is advised that there are other cases reflecting such claims made against the Treasury reported in 35 Ct.Cl. 639 (1900); 31 Ct.Cl. 464 (1896). There is an additional claim reported in the supreme court of the District of Columbia (Docket entry—April 2, 1902, eq. No. 22,296).

In 1914, the Treasury issued a press release which stated that certain persons were attempting to sell shares in the Charles Durkee bond claim; that there was no basis for the claim; and that "money paid for a share or interest in this so-called claim will be money thrown away." (Defendants' exhibit "C", p. 12).

In 1927, George W. Stearn and others were convicted of mail fraud in connection with their activities in promoting the Durkee claim. Stearn v. United States, 18 F.2d 465 (4th Cir. 1927). At page 467, the court said:

"Assignments 18 and 19 relate to alleged error of the court in permitting witnesses to testify as to the records of the Treasury Department, and to reports of committees of Congress bearing on the subject of the alleged Durkee claim * * * (T)here can be no doubt that it was entirely

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