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3 F.(20) 618 plus the value of that of which the dece- been carved out of it. The direction to the dent had dispossessed herself in her life- trustees to convey to the remainderman the time, which dispossession was not to become legal title was under the law of Pennsyleffective until her death. The conveyance vania wholly superfluous. The trust was of an estate in remainder after the death then a dry trust, and the statute of uses of the grantor, or the conveyance of prop- made as effective a conveyance of the leerty reserving a life estate in the grantor, gal title as the trustees could do. When, is claimed to be (although property which and indeed before, the trustees made the is not a part of the decedent's estate) nev- contemplated conveyance, it had already ertheless the kind of property which is to been made by the law. The act of Conbe included in the measure of the tax. gress does not, however, use the word

This takes us to the act of Congress. "property" of common speech, but the Act Feb. 24, 1919, § 402, 40 Stat. 1097 word "interest,” which is a word of legal (Comp. St. Ann. Supp. 1919, § 633634c). import and a word of art. What was the Its pertinent language is that there is to be “interest” which (before the grant) the added to that of other property the value grantor had in the real estate premises ? of "any interest” which the decedent had Her “interest” or estate was a fee simple, in any property "with respect to which" the full and absolute ownership. This gave the decedent had "at any time created a her several rights of property. One was to trust, in contemplation of or intended to possess and enjoy the physical premises for take effect in possession or enjoyment at or life or as long as she chose, another was to after" the death of decedent. The real diffi- part with her ownership for a consideration culty in all cases of this general type is that if she so chose, another was to pledge it for words are used in wholly different senses. a loan, and still another was to transmit it

The word "property" is one of them. to her heirs or to devise it to whom she There are physical things, and the concept chose. All of these rights, except only the of the right of property in things. The first, she granted absolutely and irrevocably word "property” is indiscriminately used to to another. The grant was not in futuro, convey the thought of either. When the but in presenti. What she granted was word is used, in which of these two senses real estate. This is not a thing, but a is it used ? Inasmuch as this grantor re- right, interest, or estate in land, and what served to herself the right and power to oc- has become so far incorporated with land cupy as long as she lived the premises, the as to be a part of it. The possession and title to which she had conveyed away, it enjoyment of this estate or interest was can be said with perfect truth that the immediate, and not postponed to the time grant to the remainderman was "intended of the death of the grantor, because 'admitto take effect in possession or enjoyment” tedly the estate conveyed was a vested inof the physical premises "after the death” terest. of the grantor. Inasmuch, however, as (ig- These distinctions are so well known, and noring the trust features) there was an ab- indeed so obvious, that they must have been solute conveyance in presenti of an estate in the legislative mind. The thought at in fee in remainder to the grantee, it can once obtrudes that if Congress had meant be said with equal truth that the interest that for which the defendant contends, it or estate or “property" granted to the re- could have been and would have been unmainderman at once took effect in both pos- mistakably expressed. What is expressed session and enjoyment, and was not post- is, as already quoted, “any interest." Here poned until the death of the grantor.

the "interest” was in land. Land in its law We do not see that the circumstance that phase is not a corporal, physical, tangible the conveyance took the form of a convey- thing. It is a concept—the concept of the ance of the legal title in trust, nor that the right to appropriate a described portion of trustees are directed to convey the legal ti- space. It is associated, of course, with matle to the remainderman upon the death of terial things, which have some more or less the grantor, works any real difference in re- permanent relation to this space. What is sults. Disrobed of all its form features, commonly called ground is one of them. what the deed of conveyance did was to vest Brick and mortar, in the form of a buildin the remainderman an estate in fee (that ing reared upon the ground, is another. is, all the estate and interest and all the Almost anything in the form of what is right of ownership which a citizen of Penn- called personal property may (coupled with sylvania can have in real estate) in re- the concept of a fixture) be thus associated mainder after a particular life estate had with, and in this sense become incorporated

with, the concept of land. The land would der the land law of the state the "interest." remain, if everything upon the ground were of this remainderman was a vested interest, razed and removed. It would remain, even the "possession and enjoyment" of which if it were possible in some cataclysm of na- passed to her before the death of the life ture that the very ground itself should dis- tenant, is undoubted. A sufficient citation appear. So it is with the “possession and is the case of Houston's Estate, 276 Pa. 330, enjoyment" of any "interest” in land. This 120 A. 267. "possession and enjoyment" may be and It must, however, be conceded that this commonly is unconnected with any physical is not altogether the question now presentcontact with the material thing. The phy- ed. The question rather is: What did sical thing itself is divisible by lines of Congress mean to be the measure of this cleavage in any direction. The right, es- tax? Did it mean that, when an interest tate, or interest is likewise divisible. What- was created which did not pass to the granever the interest is, it passes at the time of tee until the death of the grantor, this the grant, whenever it is what is called should be included in the measure of the vested, and the grantee is in the “posses- tax, or did it mean that, whether an intersion and enjoyment" of the right, although est passed by the grant or not, the thing in he may not touch the thing to which the which the estate was given should be inright relates.

cluded, if the grantor reserved a life estate [1,2] This is true of this remainderman. to himself or herself? The conclusion inShe never received anything more than dicated is that, if Congress had meant the passed to her by the grant. She could not latter, it would have said so. have been given anything more in what she Two other features have been brought inhad by any deed or will or other instrument to the discussion. It happened in the inof conveyance. She could, of course, have stant case that the remainderman died bebeen granted something else, as, for in- fore the life tenant, and this "interest” of stance, this particular estate for life; but the remainderman figured in the measurethis would have been another “interest in ment of the tax which her estate paid. Anthe real estate. There is not merely a dis- other fact is that they died within five years tinction, but a real difference, between the of each other. These features we pass withtransfer of an interest and the ending of it out comment. It only remains to inquire by its own limitations. Under the facts of whether the conclusion indicated is in acthis case this particular life estate ended cord with the decided cases. Houston's Eswith the life of the grantor, but in no real tate, supra, is, of course, not authoritative sense did it pass to the remainderman. It upon the tax question before us. It has no more added to what the remainderman none the less great informative value. already had than the ending of the term of We have been referred to a number of a lease adds to the estate or interest of the cases, some of which we do not deem to be owner of the real estate. It is, of course, in point; others turn upon the meaning true that there is an accompanying or in- of a statute in respect to whether what has cidental practical result or consequence of passed to a grantee is to be viewed from the death of the life tenant, which may be the standpoint of its practical results, afand usually is of benefit to the remainder- fecting the physical enjoyment of the subman, just as the "falling in” of leases may ject-matter of the grant, or whether it is be of benefit to the owner. This is not, to be viewed from the standpoint of the however, always even the practical result. legal estate or "interest" which has passed. If rentals were higher when the rent was These latter cases are helpful, but not aureserved than at the expiration of the lease, thoritative. Houston's Estate, supra, is one the landlord owner might well regret the of them. The cited cases are: Todd's Estate, close of the term. So, also, when (as here) 237 Pa. 466, 85 A. 845, 43 L. R. A. (N. S.) the life tenant had assumed the obligation 869; Reish v. Commonwealth, 106 Pa. 521; to keep down incumbrances, by paying tax- People v. Danks, 289 Ill. 542, 124 N. E. es and other current charges, the remainder- 625, 7 A. L. R. 1023; Vanderbilt v. Eidman might under some conditions be worse man, 196 U. S. 480, 25 S. Ct. 331, 49 L. off by the ending of the life estate. The Ed. 563; Blodgett v. Union & New Haven expression "and poor” is often more than Trust Co., 97 Conn. 405, 116 A. 908; a phrase. It may be a truth as well as a Schuh's Estate, 66 Mont. 50, 212 P. 516; fact. What is an "interest" in land is a Fulham's Estate, 96 Vt. 308, 119 A. 433; question of land law, which is determined Masury's Estate, 28 App. Div. 580, 51 N. here by the law of Pennsylvania, That un- Y. S. 331; Douglas County v. Kountze, 84

3 F.(20) 621 Neb. 506, 121 N. W. 593; Keeney v. Comp- 4. Pledges On 25–Agreement on condition of troller, 222 U. S. 525, 32 S. Ct. 105, 56 L.

guaranty, not delivered, not binding. Ed. 299, 38 L. R. A. (N. S.) 1139; Safe

An agreement to waive right of immediate

possession of securities pledged to defendants Deposit v. Tait (D. C.) 295 F. 429; Shu- by brokers through whom plaintiff purchased kert v. Allen (D. C.) 300 F. 754. In addi- them, being conditional on plaintiff receiving a tion there is the T. D. case of Mercantile satisfactory guaranty, was not binding; DO Trust Co. v. Hellmich (oral opinion).

guaranty being delivered. In some of these cases the grant was held to be testamentary in substantial effect, and Action by Jacob L. Fisher and another in others not. We are thus brought back against James F. A. Clark and others. Verevery time from the perusal of any case to dict directed for plaintiffs. the effect of this deed of conveyance. The Everett, Clarke & Benedict, of New York test applied in Fulman's Estate, supra, and City (Herman S. Hertwig, of New York the accompanying expression is very illu- City, of counsel), for plaintiffs. minating. It is whether the estate or in- Guggenheimer, Untermyer & Marshall, of terest or property or right which passed New York City (Clarence J. Shearn, of to the grantee "took effect independently New York City, of counsel), for defendants. of the death of” the grantor, and whether the grantee had the uncontrolled right or power to dispose of his "interest” at any sion of plaintiff's case both sides moved for

GARVIN, District Judge. At the conclutime after the grant. Such was the effect

a direction of a verdict. The jury was • of the grant here in question.

We think the plaintiff may recover back thereupon excused, under a stipulation that the tax paid, but to give definiteness of tion of the court in the absence of the jury.

the verdict might be rendered by the direcdate to the judgment none is now rendered,

The action is brought to recover for the but formal judgment may be entered in accordance herewith.

alleged conversion of securities belonging to plaintiffs, who were customers of the firm

& , ing traded through the Philadelphia office 295. . of that firm for several years. Defendants

are stockbrokers, having their principal ofFISHER et al. v. CLARK et al.

fice in New York City. In 1921 and for (District Court, S. D. New York. October 22, some time prior thereto they did a consider1924.)

able amount of business, representing the

Chandler firm. Plaintiffs had bought the 1. Brokers am 23-May pledge securities bought securities involved in this action through by them on orders of margin account custom

Chandler Bros. & Co., who carried the same ers. Brokers may pledge securities bought by

on margin and apparently hypothecated them on orders of customers maintaining a them with the defendants, in connection with margin account, as security for advances made their account with the latter, upon which by them or by other brokers, for their account, defendants were making advances upon in the execution of such orders.

which security was required. In the early 2. Pledges em 24—Security of pledgee not for. part of the year 1921 Chandler Bros. & Co.

feited by statute making broker criminally Il. became financially involved, and the defendable for pledging customer's property.

Penal Law N. Y. & 956, as amended in 1913 ants' firm, to which they were heavily in(Laws 1913, c. 500), making a broker criminal- debted, took over the management of their ly liable, under certain circumstances, for business. pledging property of a customer, does not for

At about this time the plaintiffs desired feit any security which a pledgee in good faith

to withdraw their securities from Chandler and without notice would otherwise have.

Bros. & Co. to place them elsewhere, and 3. Estoppel em 70(3)—Brokers' pledgees held accordingly paid that firm the entire amount

estopped to claim /lien on securities by not due on the securities which said firm was asserting it when securities were demanded carrying for plaintiffs' account. This entiby owner. Brokers' pledgees, who took over the man

tled the plaintiffs to the possession of their agement of the business of the brokers are es- securities upon demand. They demanded topped to assert lien on stock of customer, possession, were referred to defendants' firm which they failed to assert when the customer

as managers of the Chandler Bros. & Co. demanded the securities; the customer being prejudiced because he refrained from taking business, and plaintiff, Jacob L. Fisher, had steps which would have resulted in investiga- several interviews with defendant James F. tion by the Stock Exchange.

A. Clark. During these interviews the lat

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ter repeatedly stated that plaintiffs could company or association belonging to a cusnot have their stocks, except under an ar- tomer on which he has a lien for indebtedrangement which was proposed, but never ness due to him by the customer, pledges the fully carried out. The conversion is alleged same for more than the amount due to him to have occurred on May 25, 1921.

thereon, or otherwise disposes thereof for It is contended by defendants: (1) That his own benefit, without the customer's conany claim held by plaintiffs against Chand- sent, and without having in his possession or ler Bros. & Co. was assigned by the former subject to his control, stocks, bonds or othto the Interstate Assets Corporation. (2) er evidences of debt of the kind and amount That the securities had rightfully come into to which the customer is then entitled, for their possession, hypothecated by Chandler delivery to him upon his demand therefor Bros. & Co. to secure the latter's account and tender of the amount due thereon, and with defendants, and that they are entitled thereby causes the customer to lose, in whole to retain them under the pledges so made, or in part, such stocks, bonds or other evinotwithstanding the fact that they were the dences of debt, or the value thereof, property of plaintiffs when pledged. (3) "Is guilty of a felony, punishable by a That plaintiffs have waived all right to pos- fine of not more than five thousand dollars session of the securities alleged to have been or by imprisonment for not more than two converted.

years, or by both. The first contention was not pressed at “Every member of a firm of brokers, who the trial, is not urged in defendants? briefs, either does, or consents or assents to the doand need not be considered.

ing of any act which by the provisions of [1] 'Defendants have discussed in great this or the last preceding section is made a detail the facts surrounding the purchases felony, shall be guilty thereof." for plaintiffs by Chandler Bros. & Co. of This section makes a broker criminally the securities involved and of the deposit liable, if he pledges specified property of a thereof with, or transfer to defendants by, customer without complying with the reChandler Bros. & Co., from time to time, to quirements of the law, but the pledgee who secure the defendants for advances made by in good faith and without notice advances them in connection with the Chandler Bros. money upon such property does not thereby account. These facts are not in dispute, forfeit.the security. The broker has comand the legal proposition asserted by de- mitted a crime, but the law, as settled by fendants, that "Chandler Bros. & Co., as the foregoing decisions, remains unchanged. brokers, had a right to pledge securities The position of the defendants is the same bought by them on orders of customers as to all securities bought by them on maintaining a margin account, as security Chandler Bros.' order for advances made by for advances made by them or by other defendants in the execution of such orders, brokers, for their account, in the execution without regard to whether the orders were of such 'orders," is correct. In re Ennis, transmitted by Chandler Bros. as a princi187 F. 720, 109 C. C. A. 468; In re Toole pal or were understood to be for unidenti(C. C. A.) 274 F. 337.

fied customers. Le Marchant v. Moore, 150 [2] Plaintiffs rely upon the 1913 amend- N. Y. 209, 44 N. E. 770; Skiff v. Stoddard, ment (Laws 1913, c. 500) to section 956 of 63 Conn. 198, 26 A. 874, 28 A. 104, 21 A. the Penal Law (Consol. Laws, c. 40) of the L. R. 102. state of New York. That section now reads [3] Some, at least, of the statements as follows:

made by James F. A. Clark, supra, were "Hypothecation of Customers' Securities. made subsequent to May 10, 1921, and in A person engaged in the business of pur- reply to plaintiffs' demands for possession chasing and selling as a broker stocks, bonds of the securities. It was on that day that or other evidences of debt of corporations, defendants took over the management of companies or associations, who

the business of Chandler Bros. & Co. De"1. Having in his possession, for safe fendants contend that they held the securikeeping or otherwise, stocks, bonds or other ties in pledge prior to May 10, and that all evidences of debt of a corporation, company the securities of the kind involved had been or association belonging to a customer, converted prior to said date by Chandler without having any lien thereon or any spe- Bros. & Co. cial property therein, pledges or disposes This date, May 10, 1921, is of no consethereof without such customer's consent; or quence, in view of the point upon which "2. Having in his possession stocks, bonds this case must be decided.

The plaintiff, or other evidences of debt of a corporation, Jacob L. Fisher, testified clearly, with em

8 F.(20) 623 phasis, and, as the court believes, truthfully, thereof. The difficulty with this contention that defendant Clark repeatedly, on and be- is that the agreement referred to was condifore May 25, 1921, told him that defend- tional upon plaintiffs' receiving a satisfacants' firm had the securities and that they tory guaranty. As no guaranty was delivwould be delivered upon certain specified ered the agreement was not binding. conditions. No suggestion of a lien of any If the foregoing conclusions are correct, character was made. The court is con

it follows that the motion to direct a verstrained to accept this testimony as true. dict in favor of plaintiffs should be and Clark was available, and he made no denial. hereby is granted. Thus are the defendants estopped from now relying upon the actual facts as set forth, in view of Clark's failure to disclose them to Fisher at the time of his demands. Good

FIRST NAT. BANK OF COLUMBUS, OHIO,

v. OBION COUNTY, TENN., et al. man v. Purnell, 187 F. 90, 109 C. C. A. 408; Rand v. Morse (C. C. A.) 289 F. 339;. (District Court, W. D. Tennessee, E. D. Oc

tober 28, 1924.) Railway Co. v. McCarthy, 96 U. S. 258, 24 L. Ed. 693.

No. 27. The claim of estoppel was presented as a

I. Courts em 264(1)-Jurisdiction of court exresult of an amendment to the complaint, tends to matters incidental to main issue. allowed by the court, upon plaintiffs' mo- A federal court which has jurisdiction of tion, during the trial. An amendment of a suit to recover on county bonds may detersuch a character was not allowed, of course,

mine all incidental questions necessary to ren

der its judgment effective. until the court had carefully inquired whether defendants claimed surprise, in order 2. Counties @ 173(1)-County without power that, if such claim were made, ample time

to issue bonds except as expressly authorized

by state Constitution and statutes. might be allowed to meet plaintiffs' new

A county in Tennessee is without power to contention. Defendants did not claim sur

issue negotiable bonds except under authority prise, and did not object to the trial pro- expressly conferred by the Constitution and ceeding without interruption. The defend- statutes of the state. ants were in no way prejudiced by the 3. Counties w 173(1)-Laws authorizing counamendment and it was the duty of the court ties to issue bonds strictly construed. to permit the facts, as each party claimed State laws authorizing issuance of bonds by they existed, to be pleaded, taking care that counties are strictly construed. neither side was surprised and prejudiced, 4. Counties w 183(1)-County bonds issued as a consequence.

without statutory authority are void. It is urged by defendants that plaintiffs Bonds issued by a county without statutory were not misled to their prejudice by Clark's authority are void and nonenforceable. failure to assert that his firm had a lien on 5. Counties 124 (2)--County cannot ratify the securities. This contention does not

void action. seem to be well founded. Fisher testified, tract which it was wholly without authority to

A county is without power to ratify a conand the court accepts his testimony, that as

make. a result of his talks with Clark he refrained from giving an order to Block, Maloney &

6. Counties en 183(3)–County estopped to do.

ny recital in bond that it was issued under Co. to demand the stock from defendants.

statute giving the county authority. If that demand had been made, defendants.

If any authority exists in a county to issue would have had to comply therewith, or an bonds and a bond is issued which by its recitals immediate investigation would have been purports to have been issued under such aumade by the Stock Exchange. The same re

thority, the county is bound by such recitals

and estopped to deny its liability, as against a sult would have followed a complaint by bona fide holder. Fisher to the committee on business con

7. Courts 367_Settled construction of duct of the Stock Exchange. Neither was

statutes by state courts will be followed by desired by defendants—indeed, was to be the federal courts. avoided at all cost if their plans to reorgan- A settled construction of state statutes by ize and rehabilitate the business of Chandler the state courts, which has become a rule of Bros. & Co. were to succeed. Undoubtedly property or of action, has all the effect of law

and will be followed by the federal courts. plaintiffs were prejudiced. [4] Defendants claim that on May 4, 8. Counties @183(1)→Validity of bonds de

termined by law as settled at time of issu. 1921, plaintiffs made an agreement covering their securities, as a result of which they

Under the settled law of Tennessee, the waived the right to immediate possession validity of a county bond must be determined

ance.

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