Richardson v. Commissioner of Internal Revenue, 183
| Decision Date | 20 March 1942 |
| Docket Number | No. 183,184.,183 |
| Citation | 126 F.2d 562 |
| Parties | RICHARDSON v. COMMISSIONER OF INTERNAL REVENUE (two cases). COMMISSIONER OF INTERNAL REVENUE v. RICHARDSON (two cases). |
| Court | U.S. Court of Appeals — Second Circuit |
Carter, Ledyard & Milburn, of New York City (Leslie D. Dawson and Allin H. Pierce, both of New York City, of counsel), for taxpayers.
Samuel O. Clark, Jr., Asst. Atty. Gen., and J. Louis Monarch and Newton K. Fox, Sp. Assts. to the Atty. Gen., for Commissioner.
Before L. HAND, CHASE, and FRANK, Circuit Judges.
These cases are companions and were argued together. The evidence in the case of H. Smith Richardson and in that of Lunsford Richardson was substantially the same. We shall, for convenience, consider them together.1
Early in 1932, Lunsford Richardson and his brother, H. Smith Richardson, were the owners of many shares of Vick Financial Company, a Delaware Corporation.2 They were also the owners of all the shares, and were respectively president and vice-president, of Piedmont Financial Company (a New York Corporation with its offices in New York), which handled matters for them on their instructions.
H. Smith Richardson owned 98,758 shares of Vick Financial, evidenced by certificates in his name which were unendorsed and kept in his safe deposit box in Greensboro, North Carolina. Lunsford Richardson owned 53,599 shares of Vick Financial, evidenced by unendorsed certificates in his name and kept in his separate safe deposit box in Greensboro. The box of H. Smith was accessible only to himself or to his brother if accompanied by George Dawson (who was also secretary-treasurer of Piedmont), or by Pearle Hubbard (who was an employee of Vick Chemical Company). The box of Lunsford was accessible only to Lunsford or to H. Smith if accompanied by Dawson or Pearle Hubbard.
As to 48,780 additional shares of Vick Financial owned by H. Smith Richardson, and 2,100 additional shares of that company owned by Lunsford, the following steps had been taken in 1931: The certificates for those shares had been delivered to Bankers Trust Company of New York as "depositary." The bank had caused those certificates to be registered in the names of its nominees,3 and kept the certificates in its possession, in certain so-called "accounts," one for Lunsford and one for H. Smith. The bank was directed to deliver stock out of these accounts on written instructions from Piedmont. The relation of the Richardsons and Piedmont to Bankers Trust as "depositary" appears principally in the following exhibit, a certified copy of a corporate resolution of Piedmont:
The evidence shows that, as Bankers Trust knew, "Piedmont Account No. 2" consisted of certificates for the 48,780 shares belonging to H. Smith Richardson, and "Piedmont Account No. 3" consisted of certificates for the 2,100 shares belonging to Lunsford. The resolution shows that the bank was authorized to rely on written instructions from Piedmont as to the disposition of the certificates. There is no evidence, however, that Piedmont could give any such instructions without, in each instance, receiving specific authority to do so from H. Smith as to his certificates or from Lunsford as to his. On the contrary, the evidence is that Piedmont was, as to the Richardson brothers, merely "their financial advisor and agent."
Pearle Hubbard, who lived in Greensboro, kept there a set of records showing the various securities owned by Lunsford and those owned by his wife. Similar records were kept by Piedmont in New York as to Lunsford and his wife and also as to H. Smith and his wife. Piedmont also kept records of the income and disbursements of, and prepared the income tax returns for, Mrs. Margaret B. Richardson, wife of Lunsford, and Mrs. Grace Jones Richardson, wife of H. Smith, and acted generally for them in divers financial matters.
In the Spring of 1932, the Richardson brothers learned that Congress might soon enact a statute taxing gifts. They conferred with one another as to the advisability of each making a gift to his own wife prior to any such enactment. Because of some differences, we shall recite separately the pertinent acts of the two brothers:
Lunsford Richardson, on May 18, 1932, was in Greensboro, where he lived. On that day, he told Pearle Hubbard that he was making a gift to his wife of all his Vick Financial stock, and directed her to make, and she then did make, notations to that effect on the cards she kept. He at once reported to his wife what he had done, and she told him she accepted the gift. But he did not then go to his box in Greensboro or then in any other way attempt to make physical delivery of the certificates to his wife or to cause them to be transferred to her name on the books of Vick Financial.
Nine days later, on May 27, 1932, while he was in New York, he told the officers of Piedmont that he had given his Vick Financial stock to his wife, and asked Dawson to prepare whatever papers were necessary to have it transferred of record to his wife's name. Accordingly, Dawson at once prepared, and Lunsford then executed, assignments in blank transferring to his wife his shares in Vick Financial, it being understood that these assignments related to the certificates standing in Lunsford's name and which were in his Greensboro box. These assignments were forthwith delivered to Dawson, but Lunsford told him "to hold" them until he returned to Greensboro and had forwarded to Dawson the certificates in the safe deposit box, whereupon Dawson "should have the stock * * * transferred to the name of Mrs. Richardson."
Dawson told him that it would not be necessary for him to execute any assignment as to the 2,100 shares held by the Bankers Trust as "depositary," because this stock was held in the name of the bank's nominees and no transfer of record ownership was necessary, but that he, Dawson, as an officer of Piedmont, could have this stock removed from Lunsford's account at the bank and placed in his wife's account. Lunsford asked Dawson to have this change made when the certificates still in his safe deposit...
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