author: PORTERIE, District Judge.

text:
    ERNEST M. LOEB CO., Inc., v. AVOYELLES DRAINAGE DIST. NO. 8 OF PARISH OF AVOYELLES, LA., et al. (FEIBLEMAN, Intervener).
    Civil Action No. 220.
    District Court, W. D. Louisiana, Alexandria Division.
    May 2, 1945.

      A. M. Suthon, of New Orleans, La., for plaintiff.
    W. E. Couvillon and S. Allen Bordelon, both of Marksville, La., for defendant.
    Titche & Titche, of New Orleans, La., for intervenor.
    Maxwell J. Bordelon, of Marksville, La., for opponent.
   PORTERIE, District Judge.

On December 29, 1939, The Ernest M. Loeb Co., Inc., the plaintiff, filed a civil action against the Avoyelles Drainage District No. 8 of the Parish of Avoyelles, Louisiana, defendant, alleging that it is the owner of some sixteen (16) bonds issued by the defendant, each in the principal sum of $500, which were past due and unpaid at the time of the suit. Of these bonds declared upon by plaintiff, three matured June 1, 1929; three, June 1, 1930; two, June 1, 1931; three, June 1, 1936; one, June 1, 1937; and four, June 1, 1939. Plaintiff also sued upon seven other bonds of the same series, also of the principal amount of $500 each, which were not yet matured, but which it alleged would mature June i, 1940.

The petition fully describes these bonds, and shows that the twenty-three bonds owned by the plaintiff company were all of the same issue of one hundred and fifty bonds, each in the principal sum of $500, dated June 1, 1919, all of like tenor and effect except as to maturity and serial number. Paragraph II of plaintiff’s petition gives the form and wording of the bonds, which show that they were issued by the drainage district for the purpose of constructing canals and ditches and such other things pertaining to or necessary for the proper and efficient drainage of the land of the district, as authorized by law, and also for the government of said district. The language of the bonds further shows that they were issued in compliance with the constitution and laws of the state of Louisiana, and especially Article 281 of the Constitution of Louisiana (Constitution of 1913), Acts 256 and 317 of the General Assembly of the State of Louisiana of the year 1910, as subsequently amended, and certain ordinances of the Board of Commissioners of the Avoyelles Drainage District No. 8 of the Parish of Avoyelles, Louisiana, specifically referred to by date.

Plaintiff also alleges that it is the owner of thirty-seven past due interest coupons, each in the sum of $25 (this series of bonds bore interest at five per centum per annum from date payable annually on the 1st of June of each year during which the interest on the particular bond would run). The bond numbers and the due years of the interest coupons are, as follows: 107— 1936; 108 — 1936; 116 — 1937; 130-1937-8-9; 131-1937-8-9; 132 — 1937-8-9; 133— 1937-8-9; 143 — 1936-7-8-9; 145 — 1937-8-9; 146-1937-8-9; 147 — 1937-8-9; 148-1937-8-9; 149 — 1937-8-9; 150-1937-8-9.

On the trial of a motion to dismiss because of failure to state a claim for which relief can be granted, filed by the defendant, diversity of citizenship being conceded, the court overruled defendant’s motion, for reasons set forth in the judgment signed on May 9, 1941.

Thereafter, on June 30, 1941, the defendant drainage district filed its answer. Previously, on January 13, 1941, upon order of the court of January 11, 1941, T. Jeff Feibleman intervened, alleging that he is the owner of seventeen bonds of the same issue, and seeks against the defendant drainage district similar relief to that prayed for by plaintiff.

The description of the seventeen bonds, given in Paragraph II of the petition of intervention filed by Feibleman, shows that four of them matured June 1, 1936; six of them matured June 1, 1937; four of them matured June 1, 1938; one of them matured June 1, 1939; and two of them matured June 1, 1940. The listings of coupons attached show that the attached coupons include only those due June 1, 1936 and on various subsequent dates.

A stipulation, filed on September 8, 1941, between the defendant drainage district and T. Jeff Feibleman, admits that the proper jurisdictional facts appear, that the intervenor is a proper party and is the holder and owner for value of the seventeen bonds; that these bonds are past due and unpaid and consequently in default; and further that the answer filed to plaintiff’s petition shall be deemed, insofar as applicable, as filed with reference to the petition of intervention, and, expressly, the issue shall be regarded as having been joined on the petition of intervention.

After various attempts at amicable settlement of the issues, and after extensions of time granted by the court in view of such attempts, the then parties to the suit, namely, (1) The Ernest M. Loeb Co-., Inc., plaintiff, (2) T. Jeff Feibleman, intervenor adopting the position of plaintiff, and (3) Avoyelles Drainage District No. 8 of the Parish of Avoyelles, State of Louisiana, defendant, filed on October 20, 1944, a joint motion of all parties for a partial distribution of funds. The following judgment was rendered and signed:

“This cause came on to be heard on the joint motion of The Ernest M. Loeb Company, Inc., T. J. Feibleman, and Avoyelles Drainage District No. 8, of the Parish of Avoyelles, being, respectively, Plaintiff, Intervener, and Defendant, and constituting all of the parties hereto, and good cause appearing:

“It is ordered, that Defendant, Avoyelles Drainage District No. 8, of the Parish of Avoyelles, pay on account of the principal of each of the seventy-two bonds of the issue sued on, the sum of Two hundred fifteen and 27/100 ($215.27) dollars, payment to be made upon the presentation of each of said bonds to the Union Bank at Marksville, Louisiana, for proper endorsement of payment thereon; that there be paid to W. E. Couvillon and S. Allen Bordelon, Esqs., jointly, Attorneys for Defendant, as attorneys’ fees, the sum of Seven hundred fifty ($750.00) Dollars; further attorneys’ fees, if any, to be fixed by the Court.

“It is further ordered, that the remaining sum of One thousand two hundred forty-eight and 82/100 ($1248.82) dollars be retained by the Defendant, Avoyelles Drainage District No. 8, of the Parish of Avoyelles, subject to the further orders of this Court, and that nothing be paid therefrom except upon order of this Court after due proceedings herein.

“It is further ordered, that these proceedings remain on the docket without prejudice to any claim asserted herein, or any defense made, save that proper credit be given for the payments made by Defendant.

“It is further .ordered, that after the payments herein ordered be made, the parties hereto be given until February 15th to further plead or appear herein.

“It is further ordered that a written notice of the pendency of this motion and application be mailed by the defendant Avoyelles Drainage District No. 8 of the Parish of Avoyelles, to each bond holder at his last known address allowing 30 days to file any opposition thereto and if no such opposition be made that said defendant proceed to make the payments as herein ordered.”

Within the thirty days allowed by this judgment, C. W. J. Neville filed a motion to dismiss this action and the proposed distribution of funds as contained in the order or judgment quoted above, “for the reason that most of the bonds in the series are prescribed by the limitation of five years.” He further alleged that all of the bonds matured more than five years prior to the date of his motion, are prescribed, and that he, as owner of bonds No. 138 and No. 139, should be paid in preference and priority over all other claims, for the reason that he has protected his rights by obtaining a judgment against the defendant on May 3, 1940. Neville further cited the provisions of Article 3540 of the Revised Civil Code of Louisiana in support of his plea of prescription and motion to dismiss. His prayer asked that the order or judgment approving the joint distribution proposed by plaintiff, intervenor and defendant be annulled, voided and set aside and that mover’s claim be paid by preference and priority over all other claims in this proceeding and that plaintiff’s suit be dismissed at its cost.

On date of argument on this motion, counsel for Neville filed, alternatively, a petition for a writ of mandamus, in which he seeks from the court an order upon the defendant, commanding it to pay to Ne1ville and by preference and priority over all other claims, the amount of $500 each for his bonds Nos. 138 and 139, plus the sum of $50 on each bond to cover two interest coupons attached, or else to show cause to the contrary. Without signing the order directing that alternative writs of mandamus issue, the court heard argument as to whether or not mandamus would lie, and this question was submitted along with those involved in the consideration of the motion to dismiss on the ground of prescription.

I. The opponent, Neville, claims that Article 3540 of Civil Code of Louisiana, with provision of five years, controls the issue.'

Opponent has mistaken his remedy, if indeed he has any remedy. Of the twenty-three bonds on which pláintiff declares, only eight matured before June 1, 1936. The present suit was filed on December 29, 1939. Although as to those eight bonds of earlier maturity, the last two of which matured June 1, 1931, the opponent’s motion might have some merit on the face of it (and it has no actual merit in any respect, for reasons we shall give later), it is obvious that any prescription that might otherwise have accrued on the fifteen bonds maturing June 1, 1936, and various dates thereafter, was interrupted when this suit was filed on December 29, 1939, before prescription had fully run on any of them.

It has been decided that the prescription of five years established by Article 3540 applies to bonds, unless, of course, there has been some acknowledgment or •other interruption. However, Article 3518 of the Revised Civil Code of Louisiana provides that a legal interruption of prescription takes place by citation before a court of justice, and whether the court is one of competent jurisdiction or not. Although this Article applies by its terms, when taken literally, to an interruption of prescription acquirendi causa, Article 3551 declares that the prescription releasing debts is interrupted by all such cases as interrupt the prescription by which property is acquired.

A legal interruption results from a citation to appear before a court, whether competent or not, on account 'of the right, claim, or possession to which the prescription would attach. The rule applies to prescription liberandi causa and causa acquirendi. Prall v. Peet’s Curator, 3 La. 274; White v. McQuillan, 12 La. 530; Flower v. O’Connor, 17 La. 213; Hill v. Barlow, 6 Rob. 142.

By Act 39 of 1932 (Dart’s Statutes, Section 2062.1), the filing of a suit in a court of competent jurisdiction shall interrupt all prescriptions affecting the cause of action sued upon. All of the parties here, including'the opponent, have accepted the jurisdiction of this court.

The filing of suit has the effect of interrupting prescription. Long v. Chailan, 196 La. 380, 199 So. 222.

It is evident, therefore, that there could be no basis whatsoever for the motion to dismiss this action and the proposed distribution of funds on the ground of prescription of the bonds sued on by plaintiff. On the face of the pleadings and by the fact that suit was filed December 29, 1939, fifteen of the twenty-three bonds sued on, and all of the coupons, are of such dates that any prescription that might have otherwise run upon them was clearly interrupted by the filing of this suit. Opponent has offered no evidence to contradict the pleadings and the record in these respects. It is plain, therefore, that he is not entitled to dismiss either the action or the judgment or order of distribution. One who pleads prescription must prove the facts necessary to sustain his plea. Phipps v. Snodgrass, 31 La.Ann. 88. To sustain the plea of prescription, the proof must be clear. White v. White, 50 La.Ann. 104, 23 So. 95. Burden was on defendant to sustain his plea of prescription against notes sued on. Commercial National Bank v. McDaniel, La.App., 156 So. 43.

The only question that perhaps remains is whether or not he could seek to have the distribution modified by elimination therefrom of the eight bonds, three maturing on June 1, 1929, three on June 1, 1930, and two on June 1, 1931. Opponent has not sought this relief in any specific manner, and it could be considered only under the general prayer of his motion, “for full and general relief,” if it could be granted at all.

II. Although opponent’s plea is contrary to the equities, in that as holder of two of a series of bonds, he is seeking to prevent payment of other bonds of the same series still outstanding; and although opponent must, in order to sustain his plea of prescription, establish clearly the facts that would justify it, nevertheless it is the general rule that any creditor, having an interest that prescription should be acquired by his debtor, may plead it; and this, whether liberandi causa or causa acquirendi. Revised Civil Code of Louisiana, Article 3466; Larthet v. Hogan, 1 La.Ann. 330; Succession of McGill, 6 La.Ann. 327; Jones v. Jones, 51 La.Ann. 636, 25 So. 368. In Walker v. Simon, 21 La.Ann. 669, the Supreme Court of Louisiana held that an intervenor must establish a sufficient interest, before he can plead prescription as against plaintiff’s demand.

Prescription is a defense which must be pleaded and as to which there must be a hearing, since the defense may be waived. White v. Davis, 169 La. 101, 124 So. 186.

Consequently, although ordinarily prescription is a defense which the debtor alone may plead or waive, as he sees fit, nevertheless his creditor who can show that his interest would be benefited by the claim of another creditor being held prescribed, may under su'ch circumstances plead prescription himself against that other creditor of his debtor.

It also follows, however, in view of the rule that prescription may be interrupted by an acknowledgment of the debt before prescription has accrued, and the further rule that prescription may be waived and the - obligation revived even after prescription has accrued by a written acknowledgment coupled with a promise to pay, and that such promise may be implied as well as express, that unless and until a creditor who can show he has an interest actually does plead prescription to the claim of another creditor against his debtor, the debtor may act in such a way that the plea of prescription cannot be sustained when it is filed. That is precisely the situation here.

III. Let us first notice a few facts and clear inferences established by the pleadings filed before any plea of prescription was filed by opponent.

The intervenor, Feibleman, has declared on seventeen bonds, all of which matured within less than five years before he filed his intervention on Janu'ary 13, 1941.

Neither the plaintiff nor the intervenor have sued on any coupons due prior to June 1, 1936. All coupons attached to the bonds declared upon by the intervenor, dated June 1, 1935, or earlier, were paid by the defendant Avoyelles Drainage District No. 8 of the Parish of Avoyelles. The proceedings of the joint motion for part distribution to all unpaid bondholders are full proof of the fact.

All interest coupons attached to the bonds now sued upon by the plaintiff, and likewise all interest coupons attached to the bonds now sued upon by the intervenor, were paid by the defendant board through the interest coupons maturing June 1, 1935.

It was still less than five years after June 1, 1935, when plaintiff filed its suit on December 29, 1939. When the coupons due June 1, 1935, matured, prescription had not yet accrued on any of the bonds sued upon by plaintiff, since under the prescription omnia rite acta, the defendant board had paid these interest coupons as they matured up to and including those due June 1, 1935, and since the payment of interest on bonds still unmatu'red admits the obligation to pay the principal of other bonds of the same issue which have already matured and to which no interest coupons are still attached.

Payment of interest on note interrupts prescription. Agurs v. Putter, 19 La.App. 550, 137 So. 640, 140 So. 833; Heard v. Heard (La.App.) 149 So. 156. A partial payment is an acknowledgment of the debt and interrupts prescription. Holmes Co., Ltd. v. Hiller, 7 La.App. 590; American Furn. Co., Inc. v. Patterson (La.App.) 157 So. 174.

This rule of interruption of prescription likewise applies where interest is paid on bonds, since the jurisprudence in all other respects connected with the subject of prescription assimilates a bond to a promissory note. It therefore follows that prescription had never accrued on any of the bonds sued upon by either plaintiff or intervenor, even on the bonds sued on by plaintiff which matured prior to June 1, 1936.

Similarly, it follows that all the bonds remaining outstanding and unpaid (seventy-two in number), and their interest coupons, are alive, not prescribed, due and exigible.

IV. It may be that, under a doctrine which is to be found in some cases in our jurisprudence, the payment of a coupon once attached to a bond does not constitute an acknowledgment of the debt represented by the bond and will not interrupt prescription on the latter, under the theory that the coupon is usually severed from the bond before collection and both are negotiable instruments. If this be the true doctrine, it is necessary for us to look further for other acknowledgments of the indebtedness represented by those bonds sued on by plaintiff which matured prior to June 1, 1936. The record is full of evidence of such acknowledgments.

In the stipulation of counsel for defendant and intervenor filed September 8, 1941, prior to the filing of the plea of prescription by opponent, are to be found admissions that the bonds and coupons sued on by the intervenor have been • issued by the Avoyelles Drainage District No. 8, that there is no contestation as to their validity, and that they are past due and unpaid and are consequently in default. This judicial admission would clearly take these bonds and coupons out of prescription, even if it had accrued as to them.

We submit that a consideration of the answer to plaintiff’s petition filed by the defendant board has admitted therein that all of the outstanding bonds of the series dated June 1, 1919, have been issued by the Avoyelles Drainage District No. 8, that there is no contestation as to their validity, and that (at the time the answer was filed, June 30, 1941) all of these outstanding bonds of this issue, in principal and coupons representing interest, had become past due and unpaid and were and are, consequently, in default.

The following paragraph near the end of the answer by the defendant drainage district is a revival of the whole obligation, even if prescription has run on a part, because it is a written acknowledgment (of judicial dignity), coupled with a promise to pay:

“Further avers that this Board having exhausted all means to make such adjustment now understands and avers that the only course under the law is to prorate the present funds among the bondholders as pointed out by the Supreme Court of the State of Louisiana in Board of Commissioners v. Wilkins [Cou'nty], 125 La. page 127, [51 So. 91]; that such an order or judgment of this Honorable Court might ,be carried out.”

This averment, we repeat, shows a definite acknowledgment of the validity and obligation of the bonds and coupons still remaining outstanding and unpaid of this series of June 1, 1919, made judicially long prior to the filing of opponent’s plea of prescription.

It is true that in allegations IV, V and VI of the answer, the defendant board alleges that it is without information to form a belief as to the truth of the averments of the corresponding articles of plaintiff’s petition, in which plaintiff alleged its ownership of the bonds and coupons. However, many parts of the answer, and particularly the one quoted above, show that the averments of articles IV, V and VI of the answer are made merely to require plaintiff to prove ownership and that defendant admits the validity and its obligation to pay (to the extent of its ability out of present funds) all of the bonds of the series remaining outstanding.

In article VIII of the answer, after referring to "a suit filed in the state district court of the parish of Avoyelles, defendant board alleges that the plaintiff in that suit had satisfied himself with regard to the “regularity of the levy, collection, management and preservation of its funds,” referring to the levy, collection, management and preservation of the acreage tax imposed to secure this bond issue and dedicated to its payment. In the same article, and in articles IX, X and XI of its answer, defendant board refers in detail to its efforts to adjust its affairs with the bondholders when it found that it could not pay all in full for their bonds and coupons; alleges that during the years 1936 to 1939 efforts were being made by the defendant district to satisfy all bondholders under the existing circumstances; and alleges the passage of various resolutions looking towards refunding the bonds outstanding, which resolutions clearly and necessarily implied an acknowledgment of the indebtedness evidenced by the outstanding bonds and coupons and a promise to pay them, in whole or in part, by refunding.

These allegations of the answer show that the plan to refund through the Reconstruction Finance Corporation required the cancellation of the full outstanding bond issue of the District, that all proceedings were perfected, and that the refunding failed only through the inability of the defendant district and others interested to locate the holder of four bonds aggregating $2000. The fact of' this failure due solely to the requirement of the Reconstruction Finance Corporation and through no fault on the part of the board or of the holders of outstanding bonds and coupons, should not be deemed to lessen the acknowledgment of its indebtedness to the holders of outstanding bonds and coupons .of the series of June 1, 1919, made by the board, or the effect of its promise to pay such holders; but this acknowledgment and this promise should be deemed sufficient to take all of the bonds of this series and the coupons attached out of any prescription which might have already accrued prior thereto.

The efforts to refinance were several, all of them importing an acknowledgment of indebtedness and a promise to pay. The allegations of the answer referred to show that these efforts took place at least as early as 1936 and continued into 1939.

There is other evidence in the record substantiating the points just referred to and giving more specific detail about the acknowledgments of the validity" of indebtedness to these holders of bonds and coupons contained in various resolutions of the board. There have also been offered in evidence copies of letters written by or for the board, in which its difficulties because of adjudication of properties subject to the acreage tax to the state and the legislation enacted in Louisiana permitting redemption of these properties by the tax debtors without payment of taxes of intervening years, are set forth. Its indebtedness to the holders of various of the bonds was acknowledged even before any prescription herein contended for by opponent could have accrued, and' its many plans to meet its obligations evidenced by these bonds are set forth.

Acknowledgment of a debt will interrupt the course of prescription, but a mere acknowledgment of the existence of the debt will not operate as the renunciation of an acquired prescription. Succession of Slaughter, 108 La. 492, 32 So. 379, 58 L.R.A. 408. “There must be a new promise made to pay the debt in order to nullify an accrued prescription.” Burdin v. Burdin, 171 La. 7, 129 So. 651, 655, and authorities cited; Waterman v. Dupeire, 180 La. 320, 156 So. 405, 406. An acknowledgment or promise must be made either to the creditor or to some one acting for him, or to some third person with intent that it be known by and influence the action of the creditor, in order to take a case out of the statute of limitations. Cunkle v. Heald, 6 Mackey 485, 17 D.C. 485.

The judicial admissions of the board are binding on it and, by themselves, are sufficient ground for overruling opponent’s plea of prescription. The correspondence of the board was clearly intended to be known by and influence the action of all the holders of outstanding bonds.

There is no provision under Louisiana law for the appointment of a receiver, or other administrator in insolvency proceedings, of a drainage district. The Board of 'Commissioners of Avoyelles Drainage District No. 8 of the Parish of Avoyelles continue to be the administrator of its affairs, even though its inability to pay, out of funds in hand, the outstanding bonds and coupons of the issue of June 1, 1919, is admitted, and has been admitted for some years. Under these circumstances the board is in the position of a receiver.

The situation presented by the plea of prescription filed by opponent presents a striking similarity to the situation presented by the similar plea filed by one of the creditors in the receivership proceedings of Picard v. Geismar, Ltd. In International Shoe Co. v. Picard & Geismar, Ltd., D.C., 30 F.Supp. 570 (the same organ for the court as here), it was held that, although the appointment of a receiver or the existence of a receivership does not operate to interrupt the running of prescription on claims against the corporation for which the receiver was appointed, nevertheless, the filing of claims with the receiver who had been appointed suspended prescription as to claims so filed in that it placed each creditor on a legal, parity with the original creditor by suit, and also that the correspondence by the receiver with various creditors, definitely and accurately fixing their claims, constituted the continued and repeated acknowledgment of the debt by the debtor to the creditor and thus interrupted the running of prescription. We quote a part of the opinion (30 F.Supp. 576) :

“For further illustration of the above reasoning, we quote below several annotations found under Article 3520 of Dart’s edition of the Civil Code of Louisiana. The article reads as follows:

“ ‘Prescription ceases likewise to run whenever the debtor, or possessor, makes acknowledgment of the right of the person whose title they prescribed.’ (Italics by the court)

“Quoting the annotations:

“ ‘Acknowledgment by Third Person.

“ ‘Executor’s acknowledgment of succession debt suspends its prescription while succession property remains in executor’s possession. Johnson v. Waters, 111 U.S. 640, 4 S.Ct. 619, 28 L.Ed. 547.

“ ‘A tutor, curator or other administrator may acknowledge a debt so as to interrupt prescription. Executors of Morgan v. Metayer, 14 La.Ann. 612.

“ ‘The written acknowledgment, or judicial admission of a judgment debt of a succession, made by the executor, will interrupt prescription. Succession of Patrick, 30 La.Ann. 1071.’

“The Louisiana books are replete with cases verifying the doctrine, from the early case of Renshaw v. Stafford, 1878, 30 La.Ann. 853, to that of Succession of Willis, 1903, 109 La. 281, 33 So. 314.”

In the instant suit, the judicial acknowledgments by the defendant, and particularly the effect of the answer filed, before prescription was pleaded by opponent, in admitting the validity of the outstanding bonds and coupons of the series dated June 1, 1919 and the promise of the defendant board to pay those bonds and coupons to the extent of its ability out of funds in hand, are analogous.

The decision was affirmed by the Court of Appeals for the Fifth Circuit in Mayer v. Gros, 5 Cir., 116 F.2d 733. We quote the following paragraph as particularly pertinent here (116 F.2d 735, 736):

“The receiver testified without contradiction that after the filing of the auditor’s report he recognized as creditors of the corporation all persons and firms whose claims were listed by the auditor; that from time to time during the pendency of the receivership he sent letters to all these creditors advising them of the status of the receivership; and that on many occasions he discussed the situation with creditors and their attorneys. In equity receivership creditors whose debts have been recognized need not bring suits to establish their claims. The claims of creditors who did not file suits or intervene in this proceeding were not barred. Richmond v. Irons, 121 U.S. 27, 7 S.Ct. 788, 30 L.Ed. 864; Johnson v. Walters, 111 U.S. 640, 4 S.Ct. 619, 28 L.Ed. 547; Russell v. Todd, 309 U.S. 280, 60 S.Ct. 527, 84 L.Ed. 754; E. C. Palmer & Co., Ltd. v. Louisiana Printing Co., 192 La. 757, 189 So. 126; Renshaw v. Stafford, 30 La.Ann. 853, 856.”

VI. Counsel for opponent cite as authority for the sustaining of the plea of prescription and the granting of the motion to dismiss, the case of Littlefield v. City of Shreveport, 148 La. 693, 87 So. 714. In that case it was held that under Article 3540 of the Louisiana Civil Code, where the City of Shreveport had issued its bonds payable October 1, 1879, with interest at eight per cent per annum, pledging its faith and property to performance of the obligation, and ordering a tax to be levied annually to pay interest and to create a sinking fund, prescription began to run against suit on such bonds on October 1, 1879, their due date, and that the failure of the City to provide the promised sinking fund did not prevent such running of prescription, that failure being mere passivity which cannot arrest the course of prescription. The decision also rested on the point that, under Article 3550 of the Civil Code, good faith is not required on the part of the person pleading prescription.

There is a vast difference between the facts in the Littlefield case and the facts in the case at bar. In the Littlefield case, a pledge was promised by the City of Shreveport but never actually carried out. In the case at bar the proceeds of the acreage tax levied and collected to meet payment of the bonds and coupons of the issue under consideration were pledged and dedicated, in accordance with law and the resolutions of the defendant board to the payment of the bonds and coupons. In paragraph XIV of the petition, plaintiff avers that the defendant has annually since the year 1920, through and including the year 1939, levied and collected taxes specially dedicated to the payment of the principal and interest of these bonds. The article of the Constitution, Acts of the Legislature and the resolutions of the Board of Commissioners of the Avoyelles Drainage District No. 8 of the Parish of Avoyelles referred to in the body of each of the bonds of this series (see paragraph II of plaintiff’s petition) show that the dedication and pledge alleged by plaintiff in paragraph XIV were legal and duly authorized and were made. Indeed, all of this and the fact that the taxes were collected and that at least a part of these taxes have, presumably, been on hand at all times in the custody of the defendant board, and that a substantial balance is still thus on hand,. pledged and dedicated to the payment of the outstanding bonds and coupons of this series, are fully borne out by the answer of defendant, by the joint motion of plaintiff, intervenor and defendant for a partial distribution, and by the judgment of the court.

The wrong done by the City of Shreveport cannot be taken advantage of in the case at bar in view of the fact that the Avoyelles Drainage District No. 8 fulfilled its pledge. This dutiful action has constituted an uninterrupted preservation of its pledge and dedication and this amounts to a continuing acknowledgment of the whole debt evidenced by the bonds and coupons of the series and has had the effect of a continuing interruption of a prescription.

Of the original issue of 150 bonds, 78 are now paid; the order of the court, now being opposed, is to pay 42% on the 72 bonds remaining unpaid.

A case citing the Littlefield case and following it, and equally inapplicable here, is Morrissey v. Police Jury of Vermilion Parish (La.App.) 13 So.2d 744, 745.

The pledgor himself may be in some cases the detainer ad hoc of the pledge for account of the pledgee; prescription does not run during the existence of a pledge. Conger v. City of New Orleans, 32 La.Ann. 1250. It is true that the court also held that when the pledgor, under these circumstances, has sold the property pledged it cannot be held that prescription of the debt remains interrupted by the existence of the pledge.

Chief Justice Bermudez said, in the Conger case (32 La.Ann. 1252, 1253) :

“Possession, though essential to the validity of the pledge, need not be always in the creditor. It is sufficient that the thing pledged be in the possession of one occupying ad hoc, the position of a trustee. The debtor himself may, in some cases, be considered as such trustee and be given possession of the thing by him pledged, provided his tenure be precarious and clearly for account of the creditor. The Louisiana doctrine is in-perfect accord with both the common, the Roman and French laws.” (Many authorities cited in the opinion, are omitted here.)

“So that it is not correct to say, that the statutory pledge in this case (the stock remaining in the hands of the city) is not a valid pledge, and would not interrupt prescription, see (United States v. New Orleans) 98 U.S. [381], 396 (25 L.Ed. 225), because not in the hands of the creditors.”

In a recent decision, Reconstruction Finance Corporation v. Holloway, 191 La. 583, 186 So. 35, the Supreme Court of Louisiana said (186 So. 37):

“It is the settled jurisprudence of this State, that prescription does not run during the existence of a pledge. Wilson v. Bannen, 1 Rob. 556; Montgomery v. Levistones, 8 Rob. 145; Latiolais v. Citizens’ Bank, 33 La.Ann. 1444; Conger v. City of New Orleans, 32 La.Ann. 1250, and many other cases.” (Emphasis ours.)

Again, still more recently, in Pelican State Bank v. Bogle, 202 La. 721, 12 So.2d 793, the Louisiana Supreme Court held that if a debtor gives something in pledge to the creditor to secure the payment of the debt, prescription does not run against the debt so long as the creditor retains the thing in pledge, with consent of the debtor, citing the Conger case and many other authorities in support of this proposition.

In the case at bar, the debtor, Avoyelles Drainage District No. 8, as detainer ad hoc of avails of taxes pledged and dedicated to the payment of the bonds of the series of June 1, 1919, has continued to make that acknowledgment of the right of the holders of the outstanding and unpaid bonds and coupons which interrupts the running of prescription under the provisions of Article 3520 of the Louisiana Civil Code, reading as follows :

“Prescription ceases likewise to run whenever the debtor, or possessor, makes acknowledgment of the right of the person whose title they prescribed.”

VII. Writ of. mandamus. By his petition for a writ of mandamus, Neville attempts to obtain from the court an order upon the defendant, Avoyelles Drainage District No. 8, commanding it to pay Ne-ville as relator in that petition and by preference and priority over all other claims in this matter, the amount of the two bonds of the district which he holds and certain coupons attached thereto, or else to show cause to the contrary. The petition for mandamus plainly seeks an unjust and illegal preference.

Particularly if the plea of prescription fails, and it should be dismissed for the reasons pointed out above, there is no reason why payment of the two bonds held by Neville should be made ahead of payment of any of the other bonds.

Mandamus properly issues to direct the performance of a purely ministerial duty, and this means a duty which is so clear and simple that it does not call for the exercise of judgment and discretion by the officer or body at whose hands performance is required. La.Code of Practice, Arts. 899, 834; State ex rel. Daboval v. Police Jury, 39 La.Ann. 759, 2 So. 305; Badger v. New Orleans, 49 La.Ann. 804, 21 So. 870, 37 L.R.A. 540.

Not only is there no semblance of the existence on the part of Avoyelles Drainage District No. 8 of a purely ministerial duty to pay Neville the full amount he claims, but for the Drainage District to make this payment would clearly be an illegal preference in favor of the holder of two bonds which rank equally with all the other outstanding bonds of the same issue. No evidence has been submitted in support of the petition for mandamus to show that Neville is entitled to any preference.

Under these circumstances the authorities cited do not support the prayer for the relief sought. Rather, as the Supreme Court of Louisiana said in the case of State ex rel. Howard v. Burbank, 22 La.Ann. 298, of a petition for a writ of mandamus to compel a public officer to pay a sum of money out of funds to be thereafter received by him, we should say of the petition of Neville for a writ of mandamus herein, “The proceedings in this case are extraordinary and anomalous” (22 La.Ann. at page 299).

The principle followed by the Supreme Court of Louisiana in dismissing the application for the writ of mandamus in the Howard case, is applicable here. In the case cited, it was stated in the following language (22 La.Ann. at page 300) :

“And the law never contemplated that one creditor should get a preference over another by applying for a writ of mandamus to command an officer to pay a sum of money out of funds to be thereafter received by him. This is a degree of diligence not favored or countenanced by the law.”

The conclusion of the Supreme Court of Louisiana is based on the unwillingness of the law to favor one creditor over another by allowing him to use the extraordinary remedy of mandamus to gain a preference. It is particularly applicable under such facts as we are now considering, where the record plainly discloses that the defendant against whom the mandamus is sought does not have sufficient funds to pay all creditors of equal rank in full.

In State ex rel. Merle v. Dubuclet, 26 La.Ann. 127, the Supreme Court of Louisiana said (page 131):

“All men are equal before the law, and all men, having equal claims upon the State for the payment of a common debt, have equal rights upon the common treasury.”

In the case just cited, a mandamus was directed to the State Treasurer, commanding him to pay the warrants annexed to the relator’s petition, out of any funds in the treasury appropriated for that purpose, without any reference to any injunctions to the contrary that might have been issued to him. However, this mandamus was granted to the relator, Merle, because the Court found that the business of the State Treasury Department had been conducted in the interest of certain other holders of warrants and that, in effect, they had been given an' illegal preference and priority over the relator by receiving payment of their warrants when relator was repeatedly refused payment of his on the excuse that there were no funds to be used for that purpose and that the State Treasury was restrained from making payment to him by decrees of court rendered between other parties. The Supreme Court of Louisiana has sanctioned the use of mandamus directed to a public officer to prevent a preference among creditors, but never to grant a preference.

The authorities cited by counsel for Neville do not support his position. In State ex rel. Smit v. Lafayette Building Association, 147 La. 526, 85 So. 228, it was stated to have been repeatedly held that mandamus is the proper proceeding to control the proceedings of corporations. This is certainly true, but the case is not in point; the decision merely enforces the duty of a private corporation to transfer stock standing in the name of one deceased to a true owner. All this has no bearing on whether or not a drainage district is under a duty to pay the holder of two bonds of a certain issue by preference and priority over a holder of other bonds of the same issue, even where the one seeking such preferential treatment has obtained a judgment.

In State ex rel. Sewerage and Water Board v. Commission Council of City of New Orleans, 151 La. 938, 92 So. 392, the Supreme Court of Louisiana in its original decision granted a mandamus to compel the City to appropriate sufficient money to the use of the relator board requisite for maintenance and operation of its drainage system — all under legislation interpreted by the court as so requiring.

In State ex rel. Perry v. Board of Drainage Commissioners (La.App.) 151 So. 141, also cited by counsel for Neville, the Louisiana Court of Appeal for the Parish of Orleans said (page 144):

“There is no doubt whatever that a public board or commission, which has collected money which by law is dedicated to a particular purpose, may, by mandamus, be compelled to devote that money to that purpose. In 2 Bailey on Habeas Corpus and Special Remedies, page 1065, appears the following:

“ ‘Mandamus is the appropriate remedy to compel municipal authorities to pay to a “bona fide” holder of municipal bonds the money that has been collected pursuant to law for the purpose of meeting the payment of such obligations, where such authorities refuse.’ ”

In the Perry case a mandamus was issued to compel payment in,full to Perry of the amount he sought to be paid, because there were sufficient funds to the joint credit of the district and of a certain bondholders’ committee but belonging to the district, after payment of a pro rata distribution agreed to by other bondholders, for payment in full to Perry, who had not entered into the agreement. The money ordered to be paid to Perry was found to be dedicated to the payment that was ordered by the mandamus to be made, and could not be considered the subject of a common pledge or dedication by the defendant Board of Commissioners for the Fourth Jefferson Drainage District h> all of the holders of the series of bonds under consideration in the case cited. Those who entered into the agreement through the bondholders’ committee had estopped themselves by receiving their pro rata distribution from making any further claim upon the fund; and there was enough left in the fund to pay all bondholders who had not joined in the agreement.

Under the facts the case is not applicable. The money in the case at bar is not dedicated to pay the two particular bonds and coupons attached belonging to Neville, but to all the seventy-two bonds and coupons. There is no proof otherwise in this record. In view of the order or judgment of distribution signed by this court on joint motion of plaintiff, defendant and the intervenor, Feibleman, the fund is in custodia legis and should not be depleted in a manner contrary to law and equity.

Under the circumstances of the Perry case, the money he sought to be paid was by law dedicated to the purpose of paying him in full; under the circumstances of the case at bar, the fund now subject to the orders of this court is the common pledge of all of the bondholders, and it would be contrary to justice and equity for it to be depleted for the special benefit of one bondholder.

It is unnecessary to notice in detail the other authorities cited by counsel for Ne-ville in support of the application for mandamus. They are inapplicable to the situation here presented.

We are impressed with the honesty of the members of the board of commissioners of the drainage district and of the taxpaying landholders they represent, by the fact that they do not now, or ever did, make the attempt to plead prescription of the debt for the district.

This fact distinguishes strikingly and fundamentally the instant case from the Littlefield—Shreveport case, supra, wherein the city of Shreveport itself pleaded prescription. Not that we mean that the city of Shreveport favored the dishonest thing, but it was the want of value received that actuated its plea. Therefore, value received for the bonds in the instant case is to be inferred.

The defendant drainage district, by filing an answer and a brief, has placed at issue the application by Neville for a writ of mandamus; it has not pleaded on the plea of prescription filed by opponent.

We'agree with the following contentions made by the district:

(a) If Neville be a bondholder, the court has ruled with reasons hereinabove that his plea of prescription against other bondholders falls.

(b) In the alternative, then, he seeks payment by writ of mandamus on his judgment. He is an ordinary judgment creditor. He has merged his two bonds into a money judgment and does not show that the district has any funds out of which it is permitted by law to pay this judgment. There are no funds with the drainage district which are not dedicated to the special purpose of paying the bond issue. The dedication of the taxes to the payment of the bonds and interest is a “sacred trust”, and only administrative expenses, necessary to the bare legal existence of the district, are permitted. See Sections 24, 25, and 26 of Act 256 of 1910.

(c) We quote the substance of paragraph “2.” of the district’s answer:

“Even if he be still the owner of the two bonds notwithstanding his judgment, he may not obtain from the funds on hand, more than his pro rata portion, for the reason that all the bonds outstanding exceed the amount on hand or to be distributed and no one may receive the entire payment of his bonds, since such procedure results in depriving other “bondholders of equal rank of their just part.”

See State ex rel. Fidele Eugster v. City of New Orleans, 36 La.Ann. 726.

“Want of funds is a complete answer to a petition for mandamus to compel governing authority of a political corporation to pay a judgment against the corporation, unless the corporation has authority to collect revenues with it to pay the judgment. * * *

“The decree commanding the defendant board to pay the judgment adds nothing to the original judgment, which ordered the defendant board to pay the amount of the judgment, with interest and costs. The mandate to take such steps as are incidental and necessary to enable the board to pay the judgment is also unenforceable and without effect, because it leaves it optional with the members of the board to do whatever they may deem necessary. As a matter of fact, the board of commissioners had no funds with which to pay the judgment, at the time the suit was tried.” State ex rel. Ascension Red Cypress Co. v. New River Drainage District, 148 La. 603, 87 So. 310.

For the reasons above, singly, cumulatively, in part or in whole, we overrule and dismiss the motion to dismiss and the plea of prescription of opponent, Neville, at his cost; and, further, we rule that the alternative writ of mandamus, also prayed for by Neville, should be refused and dismissed at his cost. Further, the distribution ordered on joint motion of plaintiff, intervenor (Feibleman), and defendant, should then be made forthwith, in accordance with the judgment rendered and signed by us on October 19, 1944, and filed in the record on October 20, 1944.

To follow, then, for trial will be the original issue of this case as to whether or not additional annual acreage taxes are to be levied and collected by the district, etc., in order to pay the final balance due on the bond issue.

Upon presentation we shall sign formal judgment in conformity with the above opinion.


source: Caselaw Access Project

author: DE VANE, District Judge.

license: Public Domain

text:
    RANDALL et al. v. RANDALL.
    No. 231.
    District Court, S. D. Florida.
    Dec. 20, 1944.

      Addison L. Williams and Clark W. Jennings, both of Orlando, Fla., for plaintiff.
    W. H. Poe, of Orlando, Fla., for defendant.
   DE VANE, District Judge.

1. This action was instituted for the purpose of dissolving an irrevocable trust.

2. Plaintiff Mary Bell Randall is the donor and the life beneficiary of a certain trust created by a trust agreement executed August 23, 1932. George DeGolyer Randall, Laura Randall Huttig, Walter Doane Randall, Donald Treat Randall, a minor, and Herbert Thomson Randall, all being children of the donor, are named in said trust agreement as the beneficiaries of said trust. All of said named beneficiaries, with the exception of Donald Treat Randall, were adults at the time said trust was created, and are parties to this action.

3. The trust agreement provides that the trust shall terminate upon the death of the donor and that:

“(a) Upon the death of the donor, the trustees shall pay ¡the expenses of the don- or’s last illness and burial and any unpaid compensation of the trustees and expenses of this trust and thereupon this trust shall terminate and the remainder of the trust estate remaining in the hands of the trustees, including all accumulated income, shall pass to and be delivered, transferred, conveyed, and assigned to, and divided among, the five surviving children of the donor, to-wit: Herbert Thomson Randall, George DeGolyer Randall, Laura Randall Huttig, Walter Doane Randall, and Donald Treat Randall, in equal parts, share and share alike.

“(b) In the event that at the time of my death, my son Donald Treat Randall shall not have attained the age of twenty-five years, then this trust shall not terminate as to his share, but the said trustees shall retain and hold the share of said Donald Treat Randall in trust, with all the powers herein conferred on said trustees and said trustees shall use so much of the income or corpus of his share of the trust estate as they may deem wise or necessary, for his support, care, maintenance and liberal education, the balance thereof to be transferred and delivered to him when he attains the age of twenty-five years.

“(c) In the event that any of 'the said five children of the donor should die before the death of .the donor, leaving no surviving child or children, or surviving issue of a deceased child or children, and leaving no surviving husband or wife with whom such child was living at the time of his or her death, then the share of this trust estate which would otherwise have passed to such child, shall pass to and be paid over to and divided among the remaining children of the donor, or their issue, in equal parts, share and share alike, per stirpes and not per capita.

“(d) In the event that any of the said five children of the donor should die before the death of the donor, leaving a surviving child or children, or surviving issue of a deceased child or children, such surviving child or children or surviving issue of a deceased child or children, shall be entitled .to, and shall take, share and share alike, per stirpes, the share of the trust estate that his, her or their father or mother would have taken, if living at the time of .the donor’s death.

“(e) In the event that any of the said five children of the donor should die before the death of the donor, leaving no surviving child or children, or surviving issue of a deceased child or children, but leaving a surviving husband or wife with whom such child was living at the time of his or her death, then this trust will not terminate as to the share of the trust estate which would have been received by such child if living, and the said trustees shall hold said share in trust, for the use and benefit of such surviving husband or wife, with all the powers as hereinbefore granted, and shall pay the full net income from said share to such surviving husband or wife, until he or she either dies or remarries, whichever event first occurs. Upon the death or re-marriage of such surviving husband or wife, whichever shall first occur, the said .trust as such share shall thereupon terminate, and the corpus thereof, together with any accumulated and undistributed income, shall pass and be turned over and delivered to, the remaining children of the donor, or their issue, share and share alike, per stirpes and not per capita.”

4. Only one of the named beneficiaries is under disability, namely, Donald Treat Randall, a minor, whose natural father was duly appointed by the County Judge’s Court of Orange County, Florida, as guardian of his person and estate, and, as such guardian, is a party to this action.

5. Plaintiffs George DeGolyer Randall, Laura Randall Huttig, and Walter Doane Randall, and defendant, Herbert Thomson Randall, are the trustees named in said trust agreement, were duly qualified as such, and have actively administered the trust; and all of said trustees are parties to this action.

6. The evidence discloses that the trust was created for the purpose of relieving the donor of the responsibility of managing the assets conveyed thereto, and of providing for a collective control of said assets by the adult beneficiaries, thereby enabling them to gain desirable experience and responsibility in the management of said property, and, at the same time, of assuring the donor that she would have a sufficient income for her own needs.

The purposes for which the trust was created have been accomplished, and the trust is no longer necessary.

It is the desire of the donor, the adult beneficiaries, and the guardian of the minor beneficiary that the trust be dissolved, for the following reasons: By selling her life estate to the beneficiaries and obtaining $264,350 .therefor, Mrs. Randall is assured of sufficient assets for her support. Her children have become experienced in the management of the property, and she desires each of them to receive his own share. The war has vitally affected the lives of three of her children who have been in active service in the Army and Navy of the United States, and are subject to active service abroad. If there is a present distribution of the trust assets, adequate provision for these individuals will be made, and their families assured of economic independence. All of the beneficiaries, with .the exception of Donald Treat Randall, who is eighteen years of age, have reached a mature period in life, and are well qualified to look after their property.

The donor has entered into a contract with the beneficiaries dated October 10, 1944, the original of which was received in evidence as plaintiffs’ Exhibit 2. By the terms of this contract, the adult beneficiaries and the guardian of the minor beneficiary purchased. from the donor, Mary Bell Randall, in the form of undivided one-fifth interests therein, all of her life estate in the .trust corpus for a total sum of $264,350.

7. The donor, the guardian of the minor beneficiary, all the adult beneficiaries, and the trustees named in the trust agreement have consented to the dissolution of said .trust, with the exception of the defendant, Herbert Thomson Randall, who filed an answer and counterclaim in his individual capacity and as one of the trustees of said trust. The following questions were presented to the Court:

(a) Have all parties necessary to a proper adjudication of this action been joined as parties plaintiff and defendant?

(b) What interests did the trust agreement give the children of the donor?

(c) What was the result of the consent of the donor and her children to a dissolution of the trust?

(d) What effect did the consent of the donor and her children to a dissolution of the .trust have upon the interests of the contingent beneficiaries, in esse and unborn?

(e) Were the contingent beneficiaries, in esse and unborn, necessary parties to this action ?

(f) Were the contingent beneficiaries, in esse and unborn, properly represented in this action?

(g) Were the interests of the contingent beneficiaries, in esse and unborn, subjected to the jurisdiction of the court?

(h) Are the contingent beneficiaries, in esse and unborn, bound by the decree in this action?

(i) There being no purposes of the trust unfulfilled, what was .the effect on the trust of the consent to its dissolution by the donor, the trustees, the adult named beneficiaries and the guardian of the minor named beneficiary?

(j) What was the effect of the purchase by .the named beneficiaries of the life estate of Mary Bell Randall in the trust assets ?

(k) Was the valuation placed upon the trust assets fair and reasonable?

(l) Was the valuation placed upon the life estate of Mary Bell Randall fair and reasonable ?

(m) Was that certain proposed trust indenture, signed as of August 23, 1932, a photostatic copy of which was received in evidence as plaintiffs’ Exhibit 22, ever consummated by the parties thereto, and has it ever had any force and effect as a validly executed trust agreement?

8. The trust herein sought to be dissolved is an active trust, and, by its terms, irrevocable. However, the donor or settlor is alive, and has entered into an agreement with her four adult children and the guardian of her minor child, by the terms of which the children and guardian have agreed to purchase her life interest in the assets of the trust; and all of said parties have consented to the dissolution of .the trust By the terms of the trust instrument, these children took vested interests in the assets of the trust, subject only to the life estate therein of the donor. There are no vested interests in the trust property other than the interests of said children. Therefore, the donor, her four adult children, and the guardian of her minor child, all of whom have been made panties hereto, are the only necessary parties to a proper adjudication of this action. See Restatement of the Law, Trusts, Vol. 2, page 1033, Sec. 338(1), which states the rule as follows: “If the settlor and all of the beneficiaries of a trust consent, and none of them is under an incapacity, they can compel the termination or modification of the trust, although the purposes of the trust have not been accomplished.”

9. The court is of the opinion .that the fact of the mi’nority of Donald Treat Randall should not prevent a dissolution of the trust in question, insofar as his interest therein is concerned. The record discloses that the guardian of said minor was authorized by the County Judge’s Court of Orange County, Florida, which áppointed said guardian, to enter into the contract dated October 10, 1944, whereby the donor’s life estate was purchased by the adult vested beneficiaries and the guardian of said minor vested beneficiary, and .to consent to the dissolution of the trust. The Florida Constitution/ statutes, and cases all hold that the County Judge has complete and broad supervisory powers over all matters pertaining ,to a minor’s estate. Article 5, Section 17, Florida Constitution; Section 36.01 F.S.A.; Krivitsky v. Nye, 152 Fla. 614, 12 So.2d 595; Crosby v. Burleson, 142 Fla. 443, 195 So. 202; Pournelle v. Baxter, 142 Fla. 517, 195 So. 163; Tyre v. Wright, 144 Fla. 90, 197 So. 846; State ex rel. North v. Whitehurst, 145 Fla. 559, 1 So.2d 175.

The record discloses, furthermore, that the dissolution of the .trust is to the decided benefit of the minor beneficiary. Under the circumstances, equity will not prevent a dissolution of the interest of a beneficiary in a trust merely on the ground that said beneficiary is a minor. Blocker v. Blocker, 103 Fla. 285, 137 So. 249. See, also, Riedlin’s Guardian v. Cobb, 1928, 222 Ky. 654, 1 S.W.2d 1071, in which case a trust agreement was executed among several parties, whereby one of them was given the beneficial interest for life, the corpus upon her death to be divided into three parts, two of which were to be paid .to two adult beneficiaries and one part to two infant beneficiaries, for whom a guardian was appointed. The court held as follows: “Where it appears that it is to the advantage of the minor remaindermen that the trust should be terminated during the lifetime of the life beneficiary and the corpus divided among the various beneficiaries, it can be so terminated by and with the consent of all the parties interested, namely, the life beneficiary, the trustee of the trust, the adult remaindermen beneficiaries, and the guardian of the minor remaindermen.”

The decision in the Riedlin case, supra, cited as its authority the case of Maclay v. Equitable Life Assurance Society, 1893, 152 U.S. 499, 14 S.Ct. 678, 680, 38 L.Ed. 528. The Supreme Court of the United States in that case held that the guardian had authority to surrender an insurance policy and receive its surrender value on behalf of his ward, where such action on the part of the guardian appeared to be for the benefit of the ward, and went on to say: “There is nothing to show, or even to raise a suspicion, that the action of the guardian was not for the best interest of the ward, upon the state of facts then existing.”

10. When the children of the don- or purchased her life estate, and she and her said children consented to a dissolution of the .trust, the equitable and legal estates outstanding in the trust assets were merged, and the trust was thereby legally terminated. By such action, the contingent interests of all persons, in esse and unborn, who would or might have taken upon the death of the donor had any of the vested beneficiaries predeceased her, were destroyed.

The rule that the -immediate parties to a- trust indenture or settlement may, by mutual consent, change or revoke the same, and that persons having no vested interest under the trust have no ground for complaint, is approved in the annotations on “Revocation of Trust by Consent,” in 131 A.L.R. 469; 91 A.L.R. 114, and 38 A.L.R. 965, and also by the following recent decisions: Commissioner of Internal Revenue v. Bacher, 1939, 6 Cir., 102 F.2d 500; Botzum v. Havana National Bank, 1937, 367 Ill. 539, 12 N.E.2d 203; Simon v. Reilly, 1940, 126 N.J.Eq. 546, 10 A.2d 474; McEvoy v. Central Hanover Bank & Trust Co., 1937, 274 N.Y. 27, 8 N.E.2d 265; Thatcher v. Empire Trust Co., 1935, 243 App.Div. 430, 277 N.Y.S. 874; Beam v. Central Hanover Bank & Trust Co., 1936, 248 App.Div. 182, 288 N.Y.S. 403; Dunnett v. First Nat. Bank & Trust Co., 1938, 184 Okl. 82, 85 P.2d 281; In re Donnan’s Trust Estate, 1940, 339 Pa. 43, 13 A.2d 55; Bottimore v. First & Merchants Nat. Bank, 1938, 170 Va. 221, 196 S.E. 593; Fowler v. Lanpher, 1938, 193 Wash. 308, 75 P.2d 132.

In Dunnett v. First Nat. Bank & Trust Co., 1938, 184 Okl. 82, 85 P.2d, 281, 282, the court held: “In order for a person to have such beneficial interest that the trust cannot be revoked without his consent it must be an interest taken by purchase under the terms of the trust agreement; if the interest is one which the person takes by descent rather than by purchase, it is not such an interest as to require his consent to revoke the trust.”

In Thatcher v. Empire Trust Co., 1935, 243 App.Div. 430, 277 N.Y.S. 874, 876, the court held: “ * * * the mere possibility that at some time in the future the class may be opened to let in other possible beneficiaries does not require their consent, as all that is necessary is that those shall consent who would .take if the trust were terminated at that moment.”

In 131 A.L.R. 470 it is stated: “* * * the unborn heirs were not beneficially interested in the trust to such an extent as to prevent a revocation of the trust effected with the consent of the settlor’s wife and daughter, who were the only parties who would be entitled to share in the distribution of his personal property if he died intestate at that time. Beam v. Central Hanover Bank & Trust Co., 1936, 248 App.Div. 182, 288 N.Y.S. 403.”

In Fowler et al. v. Lanpher et al., 193 Wash. 308, 75 P.2d 132, 136, which was a suit to terminate two trusts, the first made by the deceased husband of the donor of the second trust, the court, after quoting from “Restatement of Law, Trusts”, said:

“The rule that an active trust cannot be terminated upon the consent of all the interested parties does not apply when the trustor is living.

ik # % * W

“Respondent’s contention that the grandchildren have a contingent interest in the trust estate cannot be sustained. The trust agreement makes a definite provision for the division of property and designates just who shall have the divided shares. It makes no provision for grandchildren unless one of the children dies before the death of the maker of the trust agreement.

sji * ❖ * *

“Courts can only ascertain the intent of the parties to an agreement by the language used, and from that used * * * by Mrs. Fowler, we conclude that she did not desire to give at that time any property to her grandchildren, some of whom were living when the trust agreement was executed. Had Mrs. Fowler intended the grandchildren to have an interest in the trust she would, without doubt, have mentioned them in the agreement.

“It is our opinion that those interested in the Fannie Fowler trust were Mrs. Fowler and her living children, and all being of age and competent were entitled to have her trust determined.”

11. The contingent beneficiaries are not necessary parties to this action. See cases above cited.

12. Assuming, however, that the contingent beneficiaries are necessary parties, they are properly represented by the trustees and the vested beneficiaries, all of whom are before the court. Their interests are therefore subjected to the jurisdiction of the court, and they are bound by the decree in this action.

The rule was laid down by Lord Hardwicke in the leading case of Hopkins v. Hopkins (1783) 1 ATK 581, 26 Eng. Reprint 365, as follows: “If there are ever so many contingent limitations of a trust it is an established rule that it is sufficient to bring the .trustees before the court, together with him in whom the first remainder of the inheritance is vested, and all that may come after will be bound by the decree, though not in esse unless there be fraud and collusion between the trustees and .the first person in whom a remainder of inheritance is vested.”

This rule has been followed by numerous leading cases in the United States.

In 120 A.L.R. 887 appears the following: “The rule is stated in Franklin Sav. Bank v. Taylor, 1893, 7 Cir., 53 F. 854, that where the successive interests are all equitable and supported by a legal estate devised or granted to a trustee, the latter may well be regarded as representing, for the purposes of a suit effecting the trust property, the remote and contingent interest of the beneficiaries.”

In Blocker et al. v. Blocker, 103 Fla. 285, 137 So. 249, 252, it is stated:

“ ‘If an estate is vested in persons living, subject only to the contingency that persons may be born who will have an interest therein, the living owners of the estate, for all purposes of any litigation in reference .thereto, represent the whole estate and stand, not only for themselves, but also for the persons unborn, and a judgment entered in such litigation binds their interest, if it provides for and protects them, and also if .the court determines that they have no interest to be protected. * * * The doctrine of representation applies for reasons not only of convenience and justice, but of necessity also, because it is impossible to make them personally parties. Necessity is recognized as an all sufficient reason for it wherever such necessity exists.’ 23 R.C.L. 583, 584. See, also, Ridley v. Halliday, 106 Tenn. 607, 61 S.W. 1025, 53 L.R.A. 477, 82 Am.St.Rep. 902.

“ * * * In thi9 connection, we quote with approval and apply to this case the following language of the annotator as used in 8 L.R.A.,N.S., 62:

“ ‘* * * Thus to shackle estates without the power of relief, unless every person having a contingent and possible interest could be brought before the court, would be to sacrifice the rights and interests of the present generation to those of posterity. If the whole property of the country were thus situated, it is obvious that all improvement and advance would be completely checked.’ ”

13. It is .the court’s opinion that the factors considered in computing the value of the trust assets were properly considered, and that the value of the trust assets shown by the record is fair and reasonable. The court is also of the opinion .that the method used in computing the value of the life estate of Mary Bell Randall was proper and that the value placed thereon was likewise fair and reasonable. The method of computation used in arriving at the value of her said life estate was that used by the parties interested in computing the value of the interests of the life beneficiaries in the two trusts involved in the case of Bell’s Estate v. Commissioner of Internal Revenue, 8 Cir., 1943, 137 F.2d 454.

As held in the Bell case, supra, and in the case of Blair v. Commissioner of Internal Revenue, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465, the life estate of Mary Bell Randall was a capital asset, which she was entitled to sell for its reasonable value.

14. The only remaining question in this action involves that certain proposed trust indenture, a photostatic copy of which was received in evidence in this cause as plaintiffs’ Exhibit 22, signed as of August 23, 1932, by Mary Bell Randall, Herbert Thomson Randall, George De-Golyer Randall, Laura Randall Huttig, J. W. Huttig, and Walter Doane Randall, and delivered to the representative of the Fifty-Third Union Trust Company of Cincinnati, Ohio, which was then and, as far as the record discloses, is now the transfer agent for corporate stocks which were a part of the trust assets. The record discloses that this trust indenture was an earlier draft which was never accepted or acted upon by the parties, but was delivered to said trust company, and that, by mistake, the representative of said trust company, who is now dead, failed to destroy it as he was subsequently instructed to do by the parties interested therein. Neither said trust company nor any other party acquired rights of any nature as a result of the delivery to said trust company of said proposed trust indenture, which is hereby declared null and void.

Findings of fact and conclusions of law in conformity with this opinion will be filed in this action.


author: SMITH, District Judge.

text:
    UNITED STATES v. 194,717 SQUARE FEET, MORE OR LESS, OF BUILDINGS, etc., OCCUPIED BY BREWSTER AERONAUTICAL CORPORATION AT NEWARK AIRPORT et al.
    No. 857a.
    District Court, D. New Jersey.
    March 29, 1945.
    Joseph Kraemer, Sp. Asst, to the Atty. Gen., for the United States.
    Herbert J. Hannoch, of Newark, N. J., for Brewster Aeronautical Corporation.
    Philip J. Schotland, of Newark, N. J., for City of Newark.
   SMITH, District Judge.

The City of Newark, hereinafter referred to as the City, the owner of a large tract of land, known as the “Newark Airport,” leased the hangar thereon to the Brewster Aeronautical Corporation, hereinafter referred to as Brewster. The agreement, dated May 16, 1940, reserved to Brewster “the option to renew the lease for two (2) successive periods of one (1) year each, followed by two (2) further successive periods of five (5) years each, on the * * * terms and conditions” therein prescribed. This option was exercised by Brewster on-the expiration of the original term, and again on the expiration of the two successive periods of one year each, thereby extending the term of the lease to March 1, 1948.

Thereafter the City leased the Newark Airport to the United States of America, hereinafter referred- to as the Government, for a term of three months, “beginning April 1, 1942 and ending June 30, 1942.” The agreement, dated April 1, 1942, reserved to the Government an option to renew the lease “from year to year * * * upon the terms and conditions (therein) specified.” This option was exercised by the Government from year to year, thereby extending the term of the lease to June 30, 1944.

The City, by this lease, granted to the Government the “exclusive use of the said airport, subject to the existing leases,” and, in addition thereto, assigned to the Government “all interest * * * in and to the (said) leases.” This assignment, however, was subject to the provisions of clause 9 of the lease wherein it was stated: “It is expressly understood, however, that the Government shall enforce all of the terms, conditions and agreements of the said leases, with the exception of the terms, conditions, etc., pertaining to the payment of rent to the lessor, during the life of this present lease, and any renewal or extension thereof, and that upon its termination the Government will forthwith reassign the leases aforesaid to the lessor; provided that the rights of the tenants only under said leases as in force or as hereafter amended shall he recognised hy the Government.” (Emphasis by the Court.) It is clear that under this provision the rights and liabilities of Brewster and the City, except for the temporary interposition by the Government, were to remain unchanged.

Brewster, as tenant and lessee, remained in possession of the hangar until May 23, 1944, when, pursuant to Section 201 of Title II of the Second War Powers Act of March 27, 1942, SO U.S.C.A.Appendix § 632, the Attorney General, at the request of the Secretary of War, instituted these proceedings “to acquire by condemnation” the “temporary use” of the hangar for “a term for years beginning February 1, 1944 and ending June 30, 1945, extendible for yearly periods thereafter during the existing national emergency.” The Government thereupon entered into immediate possession of the hangar thus condemned and acquired.

These proceedings are before the court at this time on the petition of Brewster. The said petitioner, asserting a right to compensation under the Fifth Amendment of the Constitution, seeks an adjudication of the rights and liabilities of the respective parties. The Government, disputing the asserted right to compensation, urges the dismissal of the said petition.

It is well settled that upon the condemnation and acquisition of a leasehold, independent of the fee, there vests in the owner thereof a right to compensation. A. W. Duckett & Co. v. United States, 266 U.S. 149, 45 S.Ct. 38, 69 L.Ed. 216; see also United States v. General Motors Corporation, 323 U.S. 373, 65 S.Ct. 357. This is conceded by the Government, but it is contended that the Brewster leasehold terminated under the express terms of its lease on the institution of these proceedings, thereby terminating the right to compensation otherwise enforceable. We cannot agree with this contention.

The Government rests its contention wholly on clause 24 of the lease, which provides: “In the event that the premises, or any part thereof, are taken or condemned for a public or quasi-public use, this lease shall, as to the part so taken, terminate as of the date title shall vest in the condemnor, and rent reserved shall abate proportionately as to the part so taken or shall cease if the entire premises demised be so taken.”

This clause, strictly construed, is determinative of only the rights and liabilities of the respective parties to the lease, the City and Brewster. It seems reasonably clear that its provisions contemplated nothing more than the complete termination of the mutual rights and liabilities of the parties upon the condemnation and acquisition of the fee, the estate held by the City. This clause cannot be extended by implication or otherwise so as to embrace the present condemnation and acquisition of the leasehold, an event which was clearly not contemplated by the parties.

The Government, by these proceedings, condemned and acquired nothing more than the “temporary use” of the hangar for “a term of years beginning February 1, 1944 and ending June 30, 1945,” an estate less than that held by Brewster. The right, title, and interest of the City were not affected. The only “property” taken was that of Brewster, and for this taking Brewster must be compensated.

The many cases cited by the Government are easily distinguishable from the case now before us. In the cited cases clauses similar to the one here in question were invoked by the lessor against the lessee as determinative of their mutual rights and liabilities. The question decided in those cases is not analogous to the question here presented.

This court, pursuant to the provisions of the statute, will appoint three qualified, competent, and disinterested persons to appraise the value of the temporary use and assess the damages for its taking. These persons will be guided by the decision of -the Supreme Court in United States of America v. General Motors Corporation, supra.