Metropolitan Trust Co. v. Stallo

166 A.D. 649, 14 Mills Surr. 484, 152 N.Y.S. 173, 1915 N.Y. App. Div. LEXIS 7331
Appellate Division of the Supreme Court of the State of New York·Decided March 12, 1915·No. No. 2·Published·Cited by 6 cases

Opinions

Scott, J.:

The demurrer of three of the defendants has been sustained on the grounds that there is a misjoinder of parties plaintiff, and also a misjoinder of causes of action. The plaintiff, the Metropolitan Trust Company of the City of New York, sues both as an individual and as the administrator of the goods, chattels and credits of Alexander McDonald, deceased. The condition of the estate of said McDonald, as disclosed by the complaint, is a very complicated one, and the professed purpose of the present action is to clear up and disentangle these complications, to determine the proper disposition of certain funds now in plaintiff’s hands, to obtain an adjudication as to the sums for which it is justly chargeable, and to permit it to account therefor. The defendants embrace all persons who appear to have any claim to any portion of the estate. The following summary of the complaint (adopted from one of the briefs) fairly presents the questions upon which this appeal turns:

“Alexander McDonald died intestate in March, 1910, leaving as his only next of kin, his granddaughters, Laura McDonald Stallo and Helena McDonald Stallo Murat, both of whom were then minors. Their father and general guardian was Edmund K. Stallo. Stallo was appointed administrator of the McDonald estate in October, 1910. The plaintiff, Metropolitan Trust Company, upon Stallo’s petition, was appointed co-administrator with him. In December, 1910, Stallo’s letters were revoked, leaving the trust company sole administrator. Stallo, while acting as administrator; filed an inventory of which a copy is annexed to the complaint as Exhibit I, and after his removal filed a report which is annexed to the complaint as Exhibit II. Both in the inventory and report Stallo claims that there was a partnership between himself and McDonald, and classifies as partnership assets securities valued by him at the sum of $2,111,112.60, and classifies as partnership indebtedness debts amounting to $2,685,119.28. Stallo, however, after the appointment of the plaintiff as administrator, did not in any way act as liquidator of the alleged partnership, or take any steps for the settlement of its affairs. The trust company did not know and has never been able to [651]*651ascertain whether or not the partnership which Stallo claims to have existed, did in fact ever exist. It alleges, however, that for some years prior to McDonald’s death, he and Stallo were engaged in joint undertakings having to do with the construction of the Mobile, Jackson and Kansas City Railroad and the Gulf & Chicago Railway Company (afterwards reorganized into the New Orleans, Mobile and Chicago Railroad), and that some at least of the indebtedness which Stallo classes as partnership indebtedness was incurred for the purposes of such undertakings, and that many of the securities which he classes as partnership property were acquired in connection therewith.
Several years before McDonald’s death the Metropolitan Trust Company began lending money on notes of which McDonald and Stallo, or one of them, were makers or indorsers, and to secure which stock, bonds, etc., of the Mobile, Jackson & Kansas City Railroad Company and of the Gulf & Chicago Railway Company were pledged. When McDonald died the Trust Company held a promissory note made by McDonald & Stallo (McDonald’s name being signed by Stallo as attorney), dated December 8th, 1909, for $2,700,000, payable twelve (12) months from date. As collateral security for this note there were pledged 2,000 shares of the capital stock of the Standard Oil Company (New Jersey) and bonds and stock of the New Orleans, Mobile & Chicago Railroad Company. The 2,000 shares of Standard Oil Company stock were the individual property of Alexander McDonald. The Metropolitan Trust Company never has known what the respective interests of McDonald and Stallo in the railroad stocks and bonds were. In the summer and fall of 1911 the Trust Company, being then sole administrator of the McDonald estate, sold the Standard Oil stock and the railroad stocks and bonds. These sales produced enough to pay the amount due on the note held by the Trust Company and to leave a balance of $434,250.93. This amount is in the hands of the Trust Company.
“ The New Orleans, Mobile & Chicago Railroad Company which issued the railroad stocks and bonds pledged with the Trust Company as collateral for the $2,700,000 note, was the result of a reorganization perfected about December, 1909, of the Mobile, Jackson and Kansas City Railroad Company and of [652]*652the Gulf and Chicago Railway Company.. According to the plan of reorganization the bonds of the new company were issued for bonds, notes and other indebtedness of the old companies, dollar for dollar. The holders of the stock of the old companies had to- pay a 20 per cent assessment on their stock and upon such payment became entitled to receive new common stock to the amount of the old stock held by them, bonds to the amount of the assessment and preferred stock to the amount of 20 per cent of the assessment. At the time of the reorganization, 10,000 shares of the stock of the old companies were owned or claimed by General Brayton Ives. The assessment on this stock was $200,000, and this assessment was paid by McDonald and Stallo out of the proceeds of the $2,700,000 note, and on payment of this assessment there were issued in respect to the 10,000 shares of old stock 10,000 shares of common stock of the new company, 400 shares of its preferred stock and $200,000 par value of its bonds. The stock of the new company so issued, never came into the possession of the Trust Company. The bonds and preferred stock were retained by Ives as his own property, but on or about February, 1912, he delivered said bonds and preferred stock and also $20,000 (the amount of coupons collected by him on the bonds) to the attorneys of the Trust Company for and on its behalf as if deposited with it, as additional security for the loan made by it to McDonald and Stallo, and the loan having been paid, to be held by it for whomsoever might be' entitled thereto, and in June, 1913, he sent a communication to the Trust Company stating that he had decided to relinquish any and all claims'to said bonds, preferred stock and moneys. These bonds, shares of preferred stock and moneys are now in the hands of the Trust Company.
“In March, 1913, the defendant Edward V. Harmon, claiming to be a judgment creditor of the Alabama Securities Company, brought an action against the Alabama Securities Company, Metropolitan Trust Company, individually and as administrator, Edmund K. Stallo and others, and also other actions against the Trust Company as administrator. The defendant, Charles E. Levy, also brought an action against the same parties. The facts which formed the basis for these [653]*653actions are as follows: In December, 1908, that is to say, about a year before the $2,700,000 note was given, McDonald and Stallo and one William D. Stratton made and delivered to the Trust Company a promissory note for $2,250,000 and pledged as collateral therefor various stocks, bonds, etc., of the two old companies. Part of this note had been paid and part of the collateral therefor had been surrendered before the $2,700,000 note was given in December, 1909. The balance due was paid by McDonald and Stallo out of the proceeds of the latter note, and there was also paid out of said proceeds, the assessment payable under the plan of reorganization on the securities of the old roads, that had been held up to that time as collateral for the $2,250,000 note.

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Metropolitan Trust Co. v. Stallo, 166 A.D. 649, 14 Mills Surr. 484, 152 N.Y.S. 173, 1915 N.Y. App. Div. LEXIS 7331 (N.Y. Ct. App. 1915).

166 A.D. 649 (Metropolitan Trust Co. v. Stallo) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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