Poling v. Belington Bank, Inc., 25336.

• Decision Date: 13 July 1999
• Docket Number: No. 25336.,25336.
• Court: West Virginia Supreme Court
• Parties: William F. POLING and Candace L. Jacques, Plaintiffs Below, Appellants, v. BELINGTON BANK, INC., Dorothy F. Poling, V.L. Smithson, A. Houston Booth, Thomas M. Pitsenberger, Dorward L. Matlick, Robert B. Reger, Barbour County Bank, and Other Unknown Persons, Defendants and Third-Party Plaintiffs Below, Appellees, v. Jeanne E. Poling, Executrix of the Estate of Herman J. Poling, Jr., Third-Party Defendant Below, Appellee.

529 S.E.2d 856

207 W.Va. 145

William F. POLING and Candace L. Jacques, Plaintiffs Below, Appellants, v. BELINGTON BANK, INC., Dorothy F. Poling, V.L. Smithson, A. Houston Booth, Thomas M. Pitsenberger, Dorward L. Matlick, Robert B. Reger, Barbour County Bank, and Other Unknown Persons, Defendants and Third-Party Plaintiffs Below, Appellees, v. Jeanne E. Poling, Executrix of the Estate of Herman J. Poling, Jr., Third-Party Defendant Below, Appellee.

No. 25336.

Supreme Court of Appeals of West Virginia.

Submitted May 4, 1999.

Decided July 13, 1999.

Dissenting Opinion of Chief Justice Starcher March 1, 2000.

David A. Sims, Esq., Debra Tedeschi Hall, Esq., Sims & Hall, Elkins, West Virginia and Dwight R. Hall, Esq., Elkins, West Virginia, Attorneys for Plaintiffs Below, Appellants.

Harry A. Smith, III, Esq., Jory & Smith, Elkins, West Virginia, Attorney for Belington Bank, Inc., Dorothy F. Poling, V.L. Smithson, A. Houston Booth, Thomas M. Pitsenberger, Dorward L. Matlick, and Robert B. Reger, Defendants and Third-Party Plaintiffs Below, Appellees.

Jerald E. Jones, Esq., West & Jones, Clarksburg, West Virginia, Attorney for Barbour County Bank, Defendant and Third-Party Plaintiff Below, Appellee.

H. Gerard Kelley, Esq., Philippi, West Virginia, Attorney for Jeanne Poling, Executrix, Third-Party Defendant Below, Appellee. MAYNARD, Justice:

The appellants, William F. Poling and Candace L. Jacques, filed a declaratory judgment action in the Circuit Court of Barbour County, West Virginia, requesting that the court declare them to be the owners in fee simple of bank stock issued by Belington Bank, Inc.¹ and left to them by their grandfather in his will. The appellants' father, Herman Poling, Jr., following the death of his father and while acting as executor of his father's estate, had the bank stock issued in his name, not as the owner of a life estate but as the absolute owner. The circuit court determined that the Uniform Act for Simplification of Fiduciary Security Transfers, W.Va.Code §§ 31-4D-1 to 11, controls this case and, consequently, dismissed the action. During the pendency of the action, the appellants moved to amend their complaint, which request was denied by the court in its dismissal order.²

At the time of his death in 1967, Herman Poling, Sr. owned 20 shares of stock in the Belington Bank, Inc. Over the years, new stock issuances and stock splits increased the number of shares and the value of the stock dramatically.³ Herman Poling, Sr. died testate. Paragraph Six of his holographic will reads as follows: "Sixth: I bequeath my bank stock in Belington Bank to my son Herman Poling, Jr. and at his death shall go to my granddaughter, if living, and grandson, William F. Poling." Thus, the will gave Herman Poling, Jr. a life estate in the bank stock with the remainder interest left to the testator's grandchildren. In January 1967, following his father's death, Herman Poling, Jr., acting as executor of his father's estate, requested and received from Belington Bank, Inc. a transfer of the shares of stock which was issued to him absolutely. The transfer was made pursuant to written consent from the Tax Commissioner.

Herman Poling, Jr. died of his own hand in June 1997. At that time, the appellants asked the bank to issue the shares of stock to them as fee simple owners. The bank directors and officers refused to issue the stock certificates, stating that the shares of stock no longer belonged to their father.

The appellants filed a declaratory judgment action, requesting that the circuit court declare them to be the owners of the bank stock and that the bank be directed to issue the shares in their names. The complaint alleges that their grandfather, in his will, left their father a life estate in his shares of Belington Bank stock and that at their father's death, they became entitled to the shares of stock. The complaint also alleges that the appellants' father, during his lifetime, sold or encumbered his life estate in several shares of the bank stock and that the individually named defendants and other unknown persons are the owners of the life estate, which estate extinguished at the time of their fathers' death.

Belington Bank, Inc. and the individual purchasers of the stock answered the complaint, stating that the complaint failed to state a claim upon which relief could be granted. The answer states that the appellants' claim, if any, is not against the appellees, but, rather, is against their father's estate for breaching his fiduciary duty while acting as executor. The individual purchasers answered that they are bona fide purchasers for value, without notice of adverse claims, as to the shares of stock they now own. The appellees raised the affirmative defenses of laches, statute of limitations and estoppel. The bank concluded, in its answer, that it could not issue any stock to the appellants—the stock had been sold by their father to bona fide third party purchasers for valuable consideration which presumably benefitted their father and his estate.

Belington Bank, Inc. and the individual purchasers filed a motion to dismiss the complaint pursuant to West Virginia Rule of Civil Procedure 12(b)(6). The bank asserted that Herman Poling, Jr. was responsible for the stock transfer, and the bank simply acted in accordance with his directions as the personal representative of his father's estate. The individual purchasers asserted the complaint made no allegation that they were anything but bona fide purchasers for value, without notice, at the time they acquired bank stock from Herman Poling, Jr.; therefore, no cause of action existed against them. The bank and the individual purchasers asserted that if the appellants have a cause of action, it is against their father's estate. On September 16, 1997, a notice of hearing was filed with the motion to dismiss stating that a hearing was set for October 16, 1997.

On October 14, 1997, the appellants answered the motion to dismiss to which they attached a motion to amend and an amended complaint. In their answer, they stated that they needed to conduct discovery in order to properly present their claims and that the amended complaint alleged claims upon which relief could be granted. They did not contend the original complaint stated a claim upon which relief could be granted.

The amended complaint alleged the following: the individual purchasers of the bank stock were not bona fide purchasers without notice and, thus, purchased only a life estate; the bank negligently breached its fiduciary duty to the appellants, the public and people who might be defrauded by Herman Poling, Jr. by failing to require him to post a sufficient indemnity bond when he stated "the shares were lost and caused them to be reissued"; the bank had notice that Herman Poling, Jr. owned a life estate but did not require notification of that fact to be placed on the stock certificates; the bank, through its officers and directors, was negligent in the re-issuance, maintenance and control of the stock certificates; the appellees' conduct was fraudulent in the re-issuance and in the purchase of the stock; and Barbour County Bank holds shares of the Belington Bank stock which it wrongfully refuses to turn over to the appellants.

A hearing was held on October 16, 1997. The result of that hearing was that the parties were directed to brief the court on whether Belington Bank, Inc. acted properly in 1967 when it transferred the shares of stock to Herman Poling, Jr. After receiving and considering the briefs of the parties, the court entered an order on December 19, 1997 dismissing the complaint and denying the motion to amend. The order specifically states:

Regardless of whether the Motion to Dismiss is considered under West Virginia Rules of Civil Procedure Rule 12(b)(6) or as a Motion for Summary Judgment under Rule 56 of said rules, the Court does not believe that the Belington Bank owed a duty to the Estate of Herman J. Poling, Sr. or any beneficiaries of said estate, including the Plaintiffs, to insure that the shares were transferred in accordance with the terms of the will.

West Virginia Code 31-4D-3 authorized the Belington Bank to assume without inquiry that the assignment of the shares of stock to the fiduciary, Herman J. Poling, Jr., in his personal capacity, was within his authority and capacity and was not in breach of his fiduciary duties. Further, even though the Plaintiffs claim that Belington Bank, Inc. had notice of the will, which the Defendant Bank denies, Paragraph (c) of that section provides that even if the will was in the possession of the Bank, that the Bank would not be charged with notice of the will and neither would it have been bound to examine the will.

The above cited Uniform Act was enacted in 1961 and the transfer of the shares of stock in question took place in 1967.

Therefore, the Court concludes as a matter of law that Belington Bank, Inc. did not owe a duty to the Estate of Herman J. Poling, Sr., or the beneficiaries of said estate, including the Plaintiffs, to insure that the shares of stock were transferred in accordance with the directives of the will. As a result, the action against Belington Bank, Inc., as well as the additional defendants for claims that arose due to the original transfer of stock, must fail.

The Court does therefore GRANT the Defendants' Motion to Dismiss the declaratory judgment action of the Plaintiffs, and does now ORDER that the Plaintiffs' action against the Defendants be dismissed.

Further, the Court has examined the amended complaint and finds that the amendment would also be precluded on the basis of lack of duty owed.

The Court therefore DENIES the motion of the Plaintiffs to file an amended complaint.

It is from this order the appellants appeal.

On appeal, the appellants contend the circuit court erred by entering an order which dismissed the complaint and denied the motion to amend the complaint....