McGehee v. Dorman
| Decision Date | 16 March 1937 |
| Citation | 267 Ky. 720,103 S.W.2d 279 |
| Parties | McGEHEE v. DORMAN et al. |
| Court | Kentucky Court of Appeals |
Appeal from Circuit Court, Fulton County.
Action by J. R. Dorman, banking and securities commissioner, and others against John R. McGehee. Judgment for plaintiffs, and the defendant moves for an appeal and the named plaintiff moves for a cross-appeal.
Motion for appeal sustained and judgment reversed on original appeal and affirmed on cross-appeal.
Herschel T. Smith, of Fulton, for appellant.
Steve Wiley, of Fulton, for appellees.
STANLEY Commissioner.
Under the provisions of section 595, Kentucky Statutes, the banking and securities commissioner has sued the appellant, John R McGehee, to recover $500 as his double liability on five shares of stock in the insovent Farmers Bank of Fulton. Judgment was rendered for $250. The defendant has moved for an appeal and asks a reversal of the judgment. The commissioner has moved for a cross-appeal from that part of the judgment which denied full recovery.
On the question before the court, the petition, in summary, states that on April 3, 1905, five shares of stock in the bank were issued to the defendant's wife. She remained the owner until her death in the year 1925. The stock has continued to be registered in her name. Since her death, dividends on it were received and collected by the defendant, who has held and used the same as his own personal property. Recovery for $500 was prayed upon the ground of estoppel to deny ownership. The wife died intestate possessed only of this bank stock, and there was never any administration of her estate. It was further pleaded that if the court should hold the defendant not liable for the full sum due on the stock assessment, then since he was entitled to and became the owner of one-half the stock under the statutes of descent and distribution, section 2132, Statutes, he was liable for $250.
The answer presented a traverse qualified by affirmative allegations, the essential part of which may also be stated in abridgement. The defendant's wife left surviving as her heirs at law two sisters and the descendants of another who predeceased her. Immediately after her death, her sisters claimed the five shares of stock, and the defendant "agreed and consented that it was theirs and that they might have it." The defendant also owned eight shares of stock in the bank, and, without his suggestion or solicitation, its officers had made out checks for the dividends on thirteen shares payable to him. This included the five shares standing in his wife's name. The defendant cashed the checks and paid over that declared on the five shares to his wife's sisters and retained the balance declared on the eight shares owned by himself. He received and used no part of the dividends on the five shares and has not profited or benefited financially or otherwise in any sum by reason of his wife's ownership of the stock.
A demurrer was sustained to the answer. The defendant declined to plead further. Judgment was rendered against him for $250 with interest. This obviously was upon the ground that he was liable as a distributee of one-half of the personal property owned by his deceased wife.
As we stated upon abundant authority in Fitzpatrick's Guardian v. First National Bank of Whitesburg's Receiver, 256 Ky. 93, 75 S.W.2d 754, 756:
Since this obligation is contractual, assent or agreement is an essential element. So when it comes to transferring the stock with the attendant statutory liability for assessment, that cannot be done without the express or implied assent or agreement of the transferee. Thus it cannot be assumed by or unloaded upon an infant personally because of his contractual disability. And where there has been merely a transfer on the register without the transferee's knowledge or consent he cannot be held to have assumed or incurred the liability, and may repudiate the transfer. Clark v. Ogilvie, 111 Ky. 181, 63 S.W. 429, 23 Ky.Law Rep. 552; Fitzpatrick's Guardian v. First National Bank of Whitesburg's Receiver, supra; Michie on Banks and Banking, Vol. 2, page 170, §§ 132, 448; vol. 7, page 92, § 109; Zollman on Banks & Banking §§ 1622, 1721, 1731, 1734; Williams v. Vreeland, 250 U.S. 295, 39 S.Ct. 438, 63 L.Ed. 989, 3 A.L.R. 1038; Mellott v. Love, 152 Miss. 860, 119 So. 913, 64 A.L.R. 968; Early v. Richardson, 280 U.S. 496, 50 S.Ct. 176, 74 L.Ed. 575, 69 A.L.R. 661; Austin v. Strong, 117 Tex. 263, 1 S.W.2d 872, 876, 3 S.W.2d 425, 79 A.L.R. 1528; Seabury v. Green, 294 U.S. 165, 55 S.Ct. 373, 79 L.Ed. 834, 96 A.L.R. 1463.
The transferor continues liable to the creditors of the bank until he has had the transfer put upon the books of the institution. He is the apparent owner and is estopped to deny that he is in fact what he represents himself to be. Michie, Banks & Banking, vol. 7, § 108, 109; Zollman, § 1682. To avoid confusion, we may observe, however, that there may be an exception, as where he has reasonably done everything he could to have it transferred on a good faith sale. Bracken v. Nicol, 124 Ky. 628, 99 S.W. 920, 11 L.R.A. (N.S.) 818, 14 Ann.Cas. 896, 30 Ky.Law Rep. 864. The purchaser also becomes liable because he is the owner. The creditors have the right of election whom they will pursue, or they may commence the action against both, but can have satisfaction only against one. Zollman, § 1731. This dual liability rests not only upon the statute, but as well upon the conception that the owner cannot avoid responsibility simply by neglecting to have the transfer recorded on the books of the corporation and thereby benefit by his own wrong. It is also to circumvent possible deception of the creditors. Robinson-Pettit Company v. Sapp, 160 Ky. 445, 169 S.W. 869; Zollman, § 1691.
This rule is applicable where the stock descends to the heirs of a deceased stockholder of record or is bequeathed by him. Responsibility of the registered owner for the super-added liability does not terminate with his death even though his estate was settled and distributed prior to the insolvency of the bank. Zollman, § 1721; Michie, § 98, vol. 7; Fitzpatrick's Guardian v. First National Bank of Whitesburg's Receiver, supra. The heirs or legatees may be liable, either as owners who have not had the stock transferred of record or as recipients of the estate chargeable with the debts of the ancestor or bequeather.
In this case there is no attempt to fasten liability by following assets of the deceased. The petition seeks to charge the defendant not as the successor of the original stockholder, but as an unregistered transferee. The defendant's pleading affirms that he never was, and is not presently, the owner in whole or in part, and alleges that the sisters of the stockholder claimed and received the stock. Whether this was made under a claim of previous ownership or as heirs of Mrs. McGehee does not appear. But it does not seem material, for there was no legal obstruction to the husband's making a gift of his distributable share in the stock to the sisters. It is to be borne in mind that this was six years before the bank was closed. At that time it was a solvent institution. Heirs and distributees capable of contracting may by agreement dispense with administration and agree upon division of personal property of an intestate, there being no debts. Trent v. Griffy, 193 Ky. 124, 235 S.W. 22. The defendant alleges, in effect, that the dividends were received by him merely as agent of the real owners.
Because of this factor of nonacceptance, the case is...
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