Turner v. Kirkwood

• Decision Date: 18 May 1931
• Docket Number: No. 357.,357.
• Citation: 49 F.2d 590
• Parties: TURNER et al. v. KIRKWOOD.
• Court: U.S. Court of Appeals — Tenth Circuit

49 F.2d 590 (1931)

TURNER et al. v. KIRKWOOD.^*

No. 357.

Circuit Court of Appeals, Tenth Circuit.

April 2, 1931.

Rehearing Denied May 18, 1931.

R. W. Stoutz, of Tulsa, Okl., for appellants.

Preston C. West, of Tulsa, Okl. (John D. DeBois, of Searcy, Ark., and West, Gibson, Sherman, Davidson & Hull, of Tulsa, Okl., on the brief), for appellee.

Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.

PHILLIPS, Circuit Judge.

Julia A. Turner was the owner of certain lots in Muskogee, Indian Territory. She deeded an undivided one-half interest in such lots to her son, Fred E. Turner. She and Fred E. Turner incorporated the Old Homestead Company under the laws of Arkansas, which were then in force in the Indian Territory, with a capital stock of 2,000 shares of the par value of $25.00 per share. The capital stock of the Homestead Company was issued in exchange for such lots. Julia A. Turner and Fred E. Turner each received 999 shares and Gunter M. Turner, wife of Fred E. Turner, and James M. Givens each received one share.

In 1909, Julia A. Turner mortgaged certain real estate and pledged her 999 shares of Homestead Company stock to the National Bank of Commerce in St. Louis to secure an indebtedness of approximately $450,000 owed to the bank by her son, Clarence W. Turner. The contract of pledge provided that Julia A. Turner should be entitled to all dividends earned on such stock during her lifetime and that the pledge should not be foreclosed or the stock sold to pay the indebtedness of Clarence W. Turner until sixty days after her demise.

In August, 1914, Julia A. Turner and Fred E. Turner incorporated the Eureka Realty Company under the laws of Oklahoma, with a capital stock of 8,000 shares of the par value of $25.00 per share. 7,997 shares were issued in exchange for property of the Homestead Company valued at $200,000.

On August 4, 1914, the directors of the Homestead Company declared a dividend of the Eureka Company stock and distributed it as follows: Fred E. Turner, 3,996 shares; Julia A. Turner, 3,996 shares; J. M. Givens, 4 shares, and Gunter M. Turner, one share. On August 6, 1914, Julia A. Turner surrendered her certificate of Eureka stock and caused two new certificates to be issued, each for 1,998 shares, one to Fred E. Turner individually and one to him as trustee for Mrs. Kirkwood, and delivered both certificates to Fred E. Turner.

Julia A. Turner died April 9, 1915, and Fred E. Turner was appointed administrator of her estate.

At the expiration of the sixty day period stipulated in the contract of pledge, the bank commenced a suit against the Homestead Company, the Eureka Company, Fred E. Turner, Gunter M. Turner, J. M. Givens, Geo. W. Stoutz, R. W. Stoutz, Thomas A. Bell, Fred E. Turner as administrator of Julia A. Turner, deceased, Effie T. Kirkwood and Clarence W. Turner in the United States District Court for the Eastern District of Oklahoma to foreclose such mortgage and pledge, and to obtain a judgment against Fred E. Turner, individually and as administrator of the Turner estate, for the conversion of 3,996 shares of the Eureka Company stock paid as a dividend to Julia A. Turner. This suit resulted in a judgment and decree for a foreclosure of the mortgage and the pledge, and for a money judgment against Fred E. Turner, individually and as administrator of the Turner estate, for $135,724.14 with interest from August 4, 1914, at 6% per annum, amounting in the aggregate to $157,982.89, on account of the conversion of the stock of the Eureka Company paid to Julia A. Turner as a dividend. This decree was dated April 28, 1917. Clarence W. Turner's indebtedness to the bank on that date amounted to $298,596.58.

On October 10, 1917, Fred E. Turner and the bank entered into a compromise agreement which provided that he should pay the bank $220,000, as follows: $18,560 by securities of Clarence W. Turner held by the bank, $112,440 in cash and $89,000 in deferred payments of not less than $1,000 per month, with interest on such deferred payments at 6%; that he should secure the note evidencing the deferred payments by a pledge of all the capital stock of the Eureka Company; and that the bank should cause the decree in the foreclosure suit to be modified by eliminating the personal judgment against Fred E. Turner and in lieu thereof requiring him to deliver to the bank the 3,996 shares of Eureka stock paid to Julia A. Turner as a dividend of the Homestead Company. It further provided that, upon the modification of the decree, the bank should cause the stock and real property pledged and mortgaged to be sold pursuant to such decree, and, unless some one at the sale bid more than certain stipulated sums therefor, the bank should buy in such stock and real property at the foreclosure sale and transfer the same to Fred E. Turner.

On November 12, 1917, the bank notified counsel of record for Mrs. Kirkwood that on November 14, 1917, it would apply to the court for modification of the decree in the foreclosure suit. On the latter date, the court entered a modified decree in the foreclosure suit as of April 28, 1917, which eliminated the money judgment against Fred E. Turner individually and as administrator, and provided that, in lieu thereof, he should deliver to the bank the 3,996 shares of Eureka stock paid to Julia A. Turner as a dividend of the Homestead Company on August 4, 1914, and all dividends declared on such Eureka stock after such date; and that such Eureka stock should be foreclosed and sold under the pledge of Julia A. Turner to the bank to satisfy the indebtedness of Clarence W. Turner.

Thereafter, the foreclosure sales under the decree were made by W. H. Clark, a commissioner appointed by the court, and were confirmed in due course. The bank purchased the stock and real property at such foreclosure sales and thereafter transferred the same to Fred E. Turner.

Fred E. Turner paid the bank the sum stipulated in the contract of compromise out of his own means, with the exception of $19,001.79 which was paid out of the accumulated dividends on stock of the Homestead and Eureka Companies in his hands as administrator. These dividends accrued after the death of Julia A. Turner and pending the foreclosure litigation, and became a part of the collateral security held by the bank.

It will be noted that the effect of the compromise agreement was to restore the 3,996 shares of Eureka stock to the Homestead Company and to exonerate Fred E. Turner, individually and as administrator, from liability on account of the conversion thereof. It did not affect the Eureka stock paid to Fred E. Turner as a dividend.

At the time of the foreclosure sales, the Turner estate had neither the funds nor the credit with which to secure funds to redeem the mortgage on the real estate or the pledge of the stock of the Homestead Company, and the indebtedness of Clarence W. Turner to the bank exceeded the value of such stock and real estate.

Fred E. Turner did not advise Mrs. Kirkwood of such compromise agreement either before or after it had been consummated. Upon learning the facts with respect to such compromise agreement, and of the acquisition of the stock of the Homestead and Eureka Companies by Fred E. Turner, Mrs. Kirkwood commenced two actions, one against him to establish a trust in the 1,998 Eureka shares and for an accounting; and another against him and Clarence W. Turner to establish a trust in her interest in the property belonging to the Turner estate acquired by Fred E. Turner through such foreclosure sales and for an accounting. These suits were consolidated for trial. Pending the trial, Fred E. Turner dissolved the Homestead and Eureka Companies and transferred their assets to himself and Gunter M. Turner. Thereupon, the latter was made a party defendant to such suits.

The court found that Mrs. Kirkwood was the owner of a 24.975% interest in the real estate formerly owned by the Eureka Company and a 50% interest in the real estate formerly owned by the Homestead Company, which had been conveyed to Fred E. Turner and Gunter M. Turner; that, after charging Fred E. Turner with the rents and profits thereof and crediting him with the amount paid to the bank, $202,086.16 was due him on June 1, 1930, and that he was entitled to a lien on the interest of Mrs. Kirkwood in such real estate for one-half of such amount. It adjudged that if, within nine months from the date of such decree, to wit, June 26, 1930, Mrs. Kirkwood should pay into the registry of the court $101,043.08 with interest thereon at 6% from the date of such decree, then Fred E. Turner and Gunter M. Turner should forthwith execute and deliver to Mrs. Kirkwood a good and sufficient deed, with special warranties of title, conveying to her a 24.975% interest in the real estate formerly owned by the Eureka Company and a 50% interest in the real estate formerly owned by the Homestead Company. It further adjudged that, in the event Mrs. Kirkwood failed to pay such sum within such time, the property should be sold to satisfy the lien of Fred E. Turner, and that any balance remaining after satisfying such lien should be paid into the registry of the court to be disposed of by the court.

Counsel for Mrs. Kirkwood contend that the contract of October 10, 1917, between Fred E. Turner and the bank was in substance and effect a sale by the administrator to himself of the property of the estate, and is within the prohibition of section 1305, C. O. S. 1921, which provides:

"No executor or administrator must directly or indirectly, purchase any property of the estate he represents, nor must he be interested in any sale."

The compromise agreement, in effect, provided that the bank, as the agent of Fred E. Turner, should bid in the property at the foreclosure sales. Therefore, in legal effect, Fred E. Turner was the purchaser of the stock and the real estate sold at such foreclosure sales.

Our attention has not been directed to any ...