McDowell v. Rees

• Decision Date: 02 June 1938
• Parties: McDOWELL v. REES et al.
• Court: Tennessee Court of Appeals

122 S.W.2d 839

22 Tenn.App. 336

McDOWELL v. REES et al.

Court of Appeals of Tennessee, Middle Section.

June 2, 1938

Certiorari Denied by Supreme Court December 17, 1938.

Appeal from Chancery Court, Lincoln County; Hon. Thos. B. Lytle Chancellor.

Action by John D. McDowell, receiver of the Elk National Bank of Fayetteville, against Roy W. Rees and others to obtain a judgment against the named defendant for the par value of shares of the Elk National Bank's stock, and to set aside, as voluntary and fraudulent, a conveyance of realty and also a transfer of corporate stock. From an adverse decree, the plaintiff appeals.

Decree reversed and cause remanded for entry of decree in accordance with opinion.

W. T McCown, Jr., of Fayetteville, for appellant receiver.

J. W. Holman, of Fayetteville, for adult appellees.

Robert W. Stevens, of Fayetteville, for minor defendants.

FAW Presiding Judge.

Elk National Bank of Fayetteville was duly chartered and organized under the banking laws of the United States many years ago, with its situs and principal place of business in the town of Fayetteville, Lincoln County, Tennessee, and operated as such banking association until March 1, 1933, when it suspended business and was placed in the hands of a conservator, under whose control it remained until March 30, 1934, on which latter date the complainant John D. McDowell was, by reason of its insolvency, appointed receiver thereof by the Comptroller of the Currency of the United States, and was duly qualified as such, and since that time has, as such receiver, been in possession of the books, records and assets of said bank and administering its affairs for the purposes of said receivership, with all the rights and powers vested in such receivers of insolvent national banks by the laws of the United States.

On July 30, 1934, the Comptroller of the Currency, pursuant to law, made an assessment and requisition upon the shareholders of said Elk National Bank for $75,000 to be paid by them on or before the 16th day of August, 1934, and made demand upon each and every one of the shareholders for the par value ($100) of each and every share of the capital stock of said Association held by them, respectively, at the time of its failure; and directed said John D. McDowell, the Receiver, to take all necessary proceedings, by suit or otherwise, to enforce to that extent the individual liability of the shareholders of said Banking Association.

On a day in January, 1923, Roy W. Rees, a resident citizen of Fayetteville, Tennessee, acquired, by transfer from trustees under the will of his father, an absolute title to thirty shares of stock in the Elk National Bank, evidenced by a certificate issued to him at that time by the Bank, and by the entry of his name on the records of the Bank as the owner of said shares. Roy W. Rees held and owned said thirty shares of stock in the manner stated, until January 7, 1926, when he delivered his said certificate for thirty shares to the Bank and, on his request, the Bank issued in lieu thereof three certificates for ten shares each, viz: one certificate to "Roy W. Rees, Trustee for Celista Rees" (an infant daughter of said Roy W. Rees); one certificate to "Roy W. Rees, Trustee for John H. Rees" (an infant son of said Roy W. Rees); and one certificate to "Roy W. Rees". The ten shares evidenced by the last named certificate (to "Roy W. Rees") are not involved in this litigation.

The bill in this case was filed by John D. McDowell, Receiver as aforesaid, in the chancery court of Lincoln County, on February 29, 1936, and its primary purpose was to obtain a judgment against Roy W. Rees, one of the named defendants, for the par value of the aforesaid twenty shares of Elk National Bank stock which he had transferred to himself as trustee for his two minor children as aforesaid, with interest thereon since August 11, 1934, and to set aside, as voluntary and fraudulent, a conveyance of described real estate, in the town of Fayetteville, to his wife, Mrs. Margaret F. Rees, and also a transfer of one hundred and three shares of stock in the Elk Cotton Mills to his two infant children, Celista Rees and John H. Rees, and to have said real estate and cotton mill stock, or a sufficiency thereof, sold for the satisfaction of the judgment sought against defendant Roy W. Rees.

Mrs. Margaret F. Rees and the said two minors, Celista Rees and John H. Rees, were made defendants to complainant's bill. The minors had no regular guardian, and a guardian and litem was appointed, filed answer, and made defense for them.

Elk Cotton Mills and Rose Hill Cemetery (both Tennessee corporations with situs in Lincoln County) were also made defendants. The sole relief sought against Elk Cotton Mills was an injunction to restrain it from transferring on its books the aforementioned one hundred and three shares of cotton mills stock, or any part thereof. It was alleged in the bill that, according to complainant's information and belief, Rose Hill Cemetery holds a lien or mortgage to secure a debt of $687.50, and interest, against the real estate conveyed by defendant Roy W. Rees to his wife as aforesaid, and, for that reason, Rose Hill Cemetery was made a party defendant.

Before the issues were finally made up, the complainant, by leave of the court, amended the prayer of his bill so as to pray, in the alternative, that, if the court should hold that defendant Roy W. Rees is not liable for the assessment on said twenty shares of Elk National Bank stock, and should further hold that the minor defendants are the owners of said one hundred and three shares of Elk Cotton Mills stock, or are the beneficiaries of any trust estate, that so much of said cotton mills stock, or trust property as may be necessary to pay the full amount of said assessment on said twenty shares of Elk National Bank stock, with interest thereon, and the costs of the cause, be sold under the orders of the court.

The defendants, except Elk Cotton Mills, filed answers to complainant's bill; and a pro confesso was entered against Elk Cotton Mills.

We think the determinative issues may be sufficiently indicated as we proceed with their disposition, without undertaking at this time to state the contents of the pleadings.

Proof was taken and filed on behalf of the parties, respectively, and the cause was thereafter heard upon the entire record, from which the chancellor found and decreed as follows:

"I. That the defendant, Roy W. Rees, did not hold himself out as the real or true owner of said twenty shares of Elk National Bank Stock; that he is not liable individually for said assessment, because he transferred the bank stock from himself individually to himself as trustee for the minor defendants; and that the said Roy W. Rees only held said bank stock in his capacity as trustee for the benefit of the minors.

"II. That the one hundred and three shares of Elk Cotton Mills stock are not liable for said assessment as said stock is the individual and separate property of the minor defendants and does not constitute a part of the trust estate held for them by Roy W. Rees, Trustee, under the transfer of said bank stock.

"III. That the transfer of the house and lot described in the bill is and was not a voluntary or fraudulent conveyance and that the transfer of the one hundred and three shares of Elk Cotton Mills stock was not a fraudulent or voluntary conveyance.

"IV. That the trust estate created by the transfer of said bank stock would be liable for said assessment but as no other funds were ever placed in the trust estate and it consisted entirely of the twenty shares of Elk National Bank stock therefore no judgment could be made out of said trust estate as said bank stock is now a liability instead of an asset.

"V. It is, therefore, ordered, adjudged and decreed by the Court that the bill with the amendment thereto be, and the same is, hereby dismissed and that all the costs of the cause except one-half of the fee of the Guardian and Litem as hereinafter set out are adjudged against the complainant, John D. McDowell, Receiver, and;

"VI. It appearing further from the oral testimony and statements of counsel in open court that the sum of one hundred and fifty dollars, ($150.00) is a reasonable fee for the services rendered by Robert W. Stevens, Guardian ad Litem for the minor defendants; it is, therefore, ordered and decreed that said sum of one hundred and fifty dollars, ($150.00) be paid to Robert W. Stevens, the same being in the opinion of the Court a reasonable fee and that one-half of said amount be taxed as costs of the cause against the complainant, John D. McDowell, Receiver, etc., and the other one-half of said fee be, and the same is, hereby adjudged against the one hundred and three shares of Elk Cotton Mills stock owned by the minor defendants, Celista Rees and John H. Rees, and that a lien to secure the payment of same is hereby given the said Guardian and Litem against the one hundred and three shares of said stock; and it is further ordered that the defendant, Elk Cotton Mills, or its agents, pay one-half of said fee to Robert W. Stevens out of the first dividends payable to said minors or their representatives."

The complainant excepted to the foregoing decree of the chancellor, and prayed, obtained and perfected an appeal to this court, and has filed assignments of error here, through which he asserts that the several findings and rulings adverse to him in the chancellor's decree were, and are, erroneous, and should be reversed. We will dispose of the material questions raised by the assignments of error in the order which seems to us most convenient, without following the order of their assignment.

1. Did the chancellor err...