Yeager v. Bank of Kentucky

106 S.W. 806, 127 Ky. 751, 1908 Ky. LEXIS 20

• Court: Court of Appeals of Kentucky
• Decided: January 9, 1908
• Status: Published

Opinion

Opinion op the Court by

Judge Lassing

Affirming.

W. H. Yeager, a resident of Jefferson county, Ky., died in 1891. His will was probated in the county court of that county. By the terms of his will his wife, Nannie R. Yeager, was entitled to receive all of the income from the estate during her life. No disposition was made of the remainder of his estate after the death of his wife, and it therefore passed to and vested in his collateral heirs. A portion of his estate consisted of 10 shares of the capital stock of the Bank of Kentucky, and the appellee the National Bank of Kentucky is the successor of the Bank of Kentucky. Some six years after the death of her husband. Nannie R. Yeager, his wife, made known to the bank that she desired to sell these shares of stock, and the bank procured a purchaser for her for said stock. In 1904 Nannie R. Yeager died. This action was instituted against the Bank of Kentucky and the National Bank of Kentucky, seeking to recover of them for. the conversion of these shares of stock. (General and special demurrers were filed by the defendant banks to this petition, and, the court having sustained both', the plaintiffs appealed, and this court reversed the judgment; the opinion being found in 100 S. W. 848, 30 Ky. Law Rep. 1287. In that opinion two questions are decided: First, that the administrator de bonis non did not have the right to maintain the suit, but that it mnst be brought in the name of the heirs and remaindermen; and, second, that the statute of limitations, to be available, must be pleaded affirmatively. Upon the return of the ease the pleadings were amended, so that the heirs and remaindermen were made parties plaintiff to the action. To the petition as thus amended an answer was filed pleading the statute of limitations. To this answer a reply was filed, denying that the plea of limitation was available, and also stating that the cause of action was on a continuing and subsisting trust. To this reply a demurrer was interposed and sustained. The plaintiffs declining to plead further, their petition was dismissed, and they again appeal.

The question in issue in this case is sharply drawn, the facts all being admitted. For appellee it is contended that the statute of limitations begins to run against remaindermen before the termination of the particular estate. This proposition is denied by appellants. The pleadings show that the sale and transfer of these shares of bank stock was made on February 6, 1897, and that the plaintiffs, appellants, learned of this- sale in 1899. The suit was instituted M'ay 13, 1905; hence it is admitted, not only that the ■sale had been consummated and the title passed to the purchaser by Nannie R. Yeager more than eight years before the institution of this suit, but that appellants had actual notice, more than five years before the institution of their suit, that she had so sold and divested herself of the title to said stock. The petition charges that the bank assisted Mrs. Yeager in selling and transferring this stock, and thereby enabled- her to convert it to her own use; that it was charged with notice of the provision of the will of her husband, and knew that she had no-power to sell the stock; that such a sale was a constructive, if not actual, fraud upon the rights of the: remaindermen in said estate. The1 action being based upon fraud, it is insisted for appellees that section. 2515 of the Kentucky Statutes of 1903 applies. For appellants it is contended that limitation does not begin to run from the time of the sale and transfer of the stock, or from the time that notice of such sale and transfer was brought home to them, but that it can only begin to run from the death of the life tenant, as she was. entitled to the free use and enjoyment of the proceeds of such sale during her lifetime.

In the case of Coffey v. Wilkerson, v Metc. 101, plaintiffs were the owners of some slaves, subject-to the life estate of their father in said slaves. They alleged • that the defendant, Coffey, had purchased their father’s.life estate and afterwards sold the absolute title to the slaves to Southern traders, and they sought to recover of Coffey the value of the slaves with interest. The sale to Coffey by their father had been made more than five years before the action had been brought, but the action was brought less than two years after the death of their father. In passing upon the right of plaintiffs to maintain that suit, this court said: “The tenant for life of slaves, or any purchaser under him, will be restrained by a court of equity, on the application of the owners of the estate in remainder, from doing any act that will jeopardize their interest, upon the representation of such a state of case as shows the existence of good grounds to apprehend that the person holding the life estate has the commission of such an act in contemplation; and where, as in this case, the person holding the-life estate converts not merely the life estate, but the absolute and entire estate, in tbe property to bis own use, and that with tbe effect of defeating tbe enjoyment of tbe estate in remainder, be becomes immediately responsible for tbe act to tbe persons entitled in remainder, wbo bave a right to recover against bim tbe full value of tbeir estate. Tbe cause of action accrues so soon as tbe wrong has been committed. It consists in tbe injury wbicb bas been done to tbe estate in remainder. It exists independent of tbe life estate, and is not affected in any manner by its termination. An action for tbe injury can be maintained during tbe existence of the life estate, or after it has ended; but, as tbe cause of action accrues at tbe time of tbe conversion, the statute of limitations runs from that time, and consequently forms a bar to tbe present action.” Tbe case at bar is very similar to tbe case from wbicb we bave just quoted. Tbe subject-matter under consideration in tbe two cases is' tbe sale of personal trust property. In each a life estate was created — in the one in favor of tbe father of the plaintiffs, and in the present case in favor of the wife of tbe decedent. In each case the property was sold and transferred to tbe purchaser more than five years before tbe institution of tbe action seeking its recovery, although in each ease the life tenant had died less than five years before the institution of tbe action. We are unable to draw any distinction or see any difference between tbe facts in these two cases. They are as nearly identical as could well be found.

We are aware that a contrary rule has been adopted and followed by courts of last resort in some of our sister States, wherein it is held that the statute of • limitations does not begin to run against remainderurcn until the death of the life tenant; but sneh is not the rule in this State. Our courts have for a period of more than 50 years followed the rule laid down in Coffey v. Wilkerson, and the principles therein announced have been followed with approval in some of the State courts and in the United States courts; hence the opinion of the lower court must be affirmed, unless, as insisted upon by appellants, this is a continuing and subsisting trust, and therefore not subject to the limitations which would otherwise apply. Practically the same question raised in.this case was before this court in the ease of Wilson v. Louisville Trust Company, in which case land had been conveyed to one Schrader in trust for Mrs. Phillips for life, with remainder to her children, but no power of sale was conferred upon the trustee. Thereafter the trustee, in 1863, sold 33 acres of this property to one Roth, and conveyed it to him in fee. In 1898 an action was brought to forclose a mortgage executed by Roth, the purchaser, on this 33-acre- tract. The land' was sold, and the purchaser filed exceptions to the report of sale on the ground that Roth had not only constructive, but actual, notice of the trust, and of the trustee’s want of power to sell, and that therefore the equitable remaindermen could recover this land at any time within 15 years after the life tenant’s death, which occurred only 3 years prior to the institution of this suit. In that case, as in this, the purchaser charged in his exceptions to the report of sale that Roth, who purchased from the trustee, knew of the existence of the trust, and therefore became a party with the trustee to the wrong done the remaindermen, and pleaded, further, that because the trustee, in his conveyance to Roth, united with Roth in the breach of trust, he was estopped from suing for the property, and that therefore the remaindermen were not affected by the statute of limitations, but could sue at any time within 15 years after the death of the life tenant. In passing upon the exceptions, upon appeal to this court, it was said: “It has been expressly held by this court that, when a trustee holds the legal title to real estate which is barred by the statute of limitation, the equitable interests dependent upon it will also be defeated, notwithstanding the cestui que trust is an infant; * * * and this seems to.be the general rule of construction. The question in this case is: Does this rule apply where the trustee has joined in the conveyance under which the vendee claims, and does the fact of his having united in such a conveyance estop him from any proceedings to recover, notwithstanding such action on his part?” The court then quotes, with approval, from the case of Meeks v. Olpherts, 100 U. S. 566, 25 L. Ed. 735, wherein it is said that, “wherever the .right of action in the trustee is barred by the statute of limitation, the right of the cestui que trust, which is represented, is- also barred.” And, continuing: “In this case the right of action accrued to the trustee, who held the legal title for the benefit of all those beneficially interested, as soon as Roth took possession. The vendee has admittedly been in possession -of the land for more than 32 years, holding adversely both to the trustee and the cestui que trust, and has obtained by the statute of limitation a complete title which cannot be disturbed. Any other construction would destroy the purpose and intention of the statutes, which are statutes of repose, and the rule ‘that, if one purchases property of a trustee with notice of the trust, he shall be charged with the same trust in reference to the property as the trustee from whom he purchased, even if he pays a valuable consideration, with notice of equitable rights of third persons, and shall hold the same subject to the equitable interests' of such persons (which is so strongly invoked by the appellant herein), does not apply to a purely constructive trust, and such a person may apply the statute, though in other respects equity will treat him as if he were the trustee. ’ By the sale of the •bank stock in 1897 Mrs. Yeager repudiated the trust, and there was not, nor could there have been, a continuing and subsisting trust, after the sale of the stock by her as trustee, for the reason that the trust relation no longer existed.

Our courts have uniformly held that a sale by the trustee for his own benefit is a repudiation of the trust, and from the date of the sale limitation begins to run in favor of the trustee and against the cestui que trust. The case of Wickliffe v. Lexington, 11 B. Mon. 155, is an interesting case directly in point. In 1782 the Virginia Legislature conveyed the land whereon the city of Lexington now stands to trustees, who were required to make conveyances to the settlers on the lots. By contract among themselves each settler was entitled to one inlot and one outlot. In 1832 Mrs Wickliffe brought suit against the city .of Lexington, as successor to the original trustees, in which she sought, as sole heir of her father, to recover an inlot and an outlot to which he was entitled as one of the original settlers. The city claimed in its answer that an inlot and an outlot had been allotted to plaintiff’s father, and sold by his executrix, and conveyed to the purchaser by the trustees. Plaintiff denied the right of the executrix of her father to sell the lots, and denied .the right and authority of the trustees to convey the title to the purchaser. In reviewing this case npon appeal this court said: “If the trustees of the town conveyed the lots to those who had no right to them, although the act was wrongful, and amounted to a breach of trust, yet it 'conferred no right on the heir at law to demand other lots, although it may have rendered the trustees liable for the value of the lots so improperly conveyed to them. But, if such liability was incurred by the trustees, it cannot be enforced at this late period; more than 40 years having elapsed after the execution of the deeds by them before this suit was instituted. It is argued, however, that in cases of trust there is no limitation, and that the lapse of time does not bar this claim against the city. This doctrine, however, applies alone to cases where there is a direct, express, and subsisting trust of a purely equitable nature, and not in eases where the trust which once existed has been violated, and a suit is brought to obtain redress for the injury resulting from the breach of trust. Had the title to the property still remained with the trustees or their successors in office, they would have held' it in trust for those entitled to it, and the doctrine' contended for would then have had a direct application in a proceeding against the trustees in a court of chancery to compel them to convey the legal title. But, when they had conveyed away the legal title wrongfully, what trust existed between, them and the rightful owner of the lots'? The trust had ceased by the execution of the conveyance. The act by which it was terminated had imposed a new liability upon the trustees; but that liability was not in the nature of a trust, either expressed or implied. The trust had been openly renounced, and it no longer subsisted; but in its stead a liability had arisen of a different character, and one that had to be enforced, if at all, within the time allowed by law for redressing similar injuries by a resort to a proper tribunal for that purpose.” It will thus be observed that in this case the court held that a sale of the trust property by the trustee, though wrongful, nevertheless operated as a breach of the trust, and that therefore the trust relation between the trustee and the cestui que trust no longer existed. This principle was also recognized in the cases of Williams v. Williams’ Ex’r. 25 Ky. Law Rep. 838, 76 S. W. 413, Roberts v. Roberts, 7 Bush, 104; Hall v. Ditto, 11 Ky. Law Rep. 667, 12 S. W. 941, and Blades v. Grant County Bank, 101 Ky. 163, 19 Ky. Law Rep, 340, 40 S. W. 246, 41 S. W. 305.

It is insisted for appellants that, inasmuch as the bank procured a purchaser for this stock and enabled and assisted the life tenant, Mrs. Yeager, to make disposition thereof, it is liable, for the reason that it was a trustee holding the title to this property for the benefit of appellants. The same reasoning that would support the plea of the statute of limitations as to Mrs. Yeager would apply with equal force to the bank. The fact that the bank and M'rs. Yeager acted together in the disposition of this stock does not enlarge appellants’ rights, and it is immaterial whether one or both was acting in the capacity of trustee for appellants in its management of this stock. When it was sold, and the trustee had parted with her title thereto, and the stock had been transferred and delivered to the purchaser, there had been a breach of the trust, a renunciation thereof by the trustee, in which the bank joined, and a cause of action at once arose in favor of the remaindermen. With a full knowledge of all of these facts, appellants permitted more than five years to run before they instituted their suit seeking to recover for its wrongful sale and conversion,- and they have thereby lost their right to recover.

Being of opinion that the defendant presented a< valid defense in the plea of the statute of limitations, set up in its answer, and the reply being insufficient for the reasons given, the trial- court- properly sustained the demurrer to the reply.

The judgment is'affirmed.