Bank of Louisville v. Gray

JUDGE HOLT delivered the opinion of the court. Lucy A. Gray, upon the death of her brother, became entitled to a portion of his estate. Her husband, George Gray, being absent, it was, on October 3, 1872, through her friend, invested in thirty-five shares of stock of the Bank of Louisville, and the certificate made out in the nadie of “George Gray as trustee for Lucy A. Gray.” When the husband returned, he approved the investment; and until January, 1875, the dividends were received by her, he always recognizing the trust. The stock stood in his name as trustee upon the books of the bank, At some time not definitely shown, and without the knowledge of. the wife, the husband pledged the stock to Thomas H. Hays for a small loan; and thereafter the following power of attorney was executed, the wife being then a resident of Kentucky, and signing it here: “New Yobk, January 2d, 1874. “Know all men by these presents, that I hereby constitute and appoint Thos H. Hays my attorney in fact, for the purpose of selling and transferring thirty-five shares of stock in the Bank of Louisville, in Kentucky, — 571 — hereby ratifying and confirming all my said attorney may do in the premises. Witness my hand, “George E. H. Gray, Trustee. “Lucy A. Gray.” Upon January 18,. 1875, Hays, claiming to have purchased the stock from the husband, had it transferred to himself upon the books of the bank; and on April '29, 1876, he, as the attorney'in fact of Lucy A. Gray •and her trustee, George Gray, transferred it for value to the bank. This suit was- brought on October 17, 1882, after demand, to compel the bank to account to tlie trustee for dividends upon the stock from the year 1874. Three questions are.presented. First. Was the stock the separate estate of the wife ? If not, it is manifest that the judgment for her can not be sustained. If, however, it was, then, secondly, was the power of attorney valid as to her ; and does the bank occupy such an .attitude that it can insist upon its purchase? Third.. Under the facts proven, is she estopped from asserting the claim or barred by time ? Separate estate is the creature of modern equity. No particular form of words is necessary to its existence. It is only needful that an intention to invest the property in the wife, to the exclusion of the husband, shall clearly appear. It may be based upon a writing, or' created by parol by a third party. In the case of a' note executed to a married woman, or in the purchase of stocks, it may be shown by evidence aliunde the writing, that the creation of a separate estate was intended ; and this character need not be imparted to it by the writing which invests her with the right to it. — 572 — The paper need not, in itself, show an intent to exclude the husband. The case now presented is unlike that of Petty v. Malier, 14 B. M., 198, and some kindred Kentucky cases, where it was properly held that where a separate estate is claimed in land under a conveyance, it must be expressed in the deed, or the intention to create it therein shown. It is urged, however, that the expression of the trust merely, in the stock certificate, without expressing a separate use in the wife, did not create a separate, but merely a general trust estate; and that the husband could, at any time, assert his marital rights and convert the property. If it be conceded that the mere raising of a trust for a married woman does not alone create a separate estate in her as to personalty, yet it is certainly one circumstance to be regarded in arriving at the intention of the parties, and whether one was in fact created. It is the usual, and was formerly the only, mode of creating one in personalty. It is not absolutely essential to it, because, although, by the common law, a married woman can not hold the title to personal property acquired by her, but it flows through her into the husband, yet equity, intent upon justice, will treat him as a trustee for her as to it, and thus, if invoked, give her the beneficial use of it. The intervention of a trustee is, however, at least a circumstance tending strongly to show an intention to invest the wife with the exclusive use of the property. Unless so intended, the trust is entirely at the mercy of the husband. — 573 — Here, the trust for the wife was created. She, with the approval of her husband, intercepted the estate before it came to his hands, and by raising a trust, which was assented to and recognized by him, settled it upon herself as her separate estate. This was the intention of the parties, and in accordance with it she received the profits of it. This character having been impressed upon it, the inquiry next arises, whether she has, in any way, lost her right to it. A power of attorney is a writing of an- executory character. At common law a married woman could not execute such a paper. It is essentially the act of one sui juris ; and the right to do so, if it exists, must be found in the statute. Her right to convey is so derived, as indeed are all her powers. A conveyance by her must be made in conjunction with her husband and upon privy examination. In the absence of these requisites she is not bound, because the statute has prescribed the particular mode in which she may do it. There is no statute in' this State giving a resident married woman the right to execute a power of attorney. In it she would not convey or acknowledge a conveyance, or be privily examined. She is only authorized by the statute to convey upon privy examination ; and the grant of power in this mode must be held to exclude any other. Our statute expressly provides that a non-resident married woman may convey any interest in any real or personal estate which she may own in Kentucky, by an agent under a proper power of attorney; and this implies that the resident can not do it. — 574 — We are not to judge whether the absence of this, power is the result of -wisdom or not. We must construe the statute as we find k. Nor can we, in Turkish manner, decide, according to the hardship of the case, whether it be one way or the other. “Hard cases make shipwreck of the law.” It is proper, however, to say that the object in creating separate estates was not to enable the wife to dispose of her property, but to protect her against the dominion of her husband and to enable her to keep it; and a proper policy perhaps dictates that her power to convey, which has been expressly given to her upon certain conditions, should not be delegated by her to others. We conclude that the so-called power of attorney was, as to Mrs. Gray, void. There is another reason, however, why it could not avail the bank. Hays transferred the stock to himself' and then to the bank. It knew the character in which he was acting. The trust and his agency all appeared upon its books. It had notice. • An agent can not sell to himself the property of his principal. He is not allowed to create such an antagonism. Such a sale is void at the option of the principal, and one who purchases from the agent, with notice or knowledge of the' facts, holds as a trustee for the principal. The stock appears to have been first pledged to Hays by the husband ; and Mrs. Gray is not shown to have received any benefit from the transfer. It is true that, although Hays had already transferred the stock to himself upon the bank books, yet when he transferred it to the bank, he did so as the attorney of the trustee and Mrs. Gray; the • certificate showed the trust, — 575 — and the bank could easily have ascertained its nature and extent by an inquiry of Mrs. Gray. The act of Hays was a tortious one ; and while the bank doubtless acted in good faith, yet the circumstances were, such as to charge it with such notice that it became its .duty to inquire as to the nature and extent of the trust. No innocent purchaser is involved, or any one holding under any commercial instrument; and the bank is not, therefore, so sheltered, It does not appear that Mrs. Gray has done any thing to estop her from now asserting her right; nor can the plea of limitation avail. A bank is a trustee for its stockholders. Its transactions with them are to be closely scrutinized. Its possession is friendly. In this case, however, the bank, as a purchaser, took with notice of the trust — with knowledge that it was purchasing from an agent, who had perverted his agency, and it does not appear that the cestui que trust had knowledge of the adverse claim of the bank until shortly before the bringing of this action. Under these circumstances, the bank, standing in the attitude of a trustee for Mrs. Gray, can not be considered as having held adversely to her, either as to the stock or the dividends. The latter, like deposits, are payable upon demand. They do not draw any interest until then; until demanded, the bank holds them in trust for the stockholder; and until then, time does not begin to run against the owner’s right to them. Judgment affirmed.