
    Case 17 — Action by Winn, Trustee, and Others, Asking for a Judgment Authorizing the Trustee to Sell and Transfer Certain Shares of Bank Stock —
    Feb. 27.
    Bank of Kentucky v. Winn and Others.
    APPEAL FROM KENTON CIRCUIT COURT.
    Judgment for Plaintiffs and Defendant Appeals.
    Affirmed.
    Trusts- — Sale of Stocks by Trustee for Reinvestment in Real Estate — Parties to 'Action — Refusal of Corporation to Make Transfer.
    Held: 1. Under Kentucky Statutes, secs. 4706, 4707, empowering persons holding stocks in a fiduciary capacity to sell them, and reinvest the proceeds in real estate, and providing that a corporation in which such stock is held shall not he liable for transferring the stock on its books upon the order of such fiduciary, bank stock held by a trustee having been sol'd by him pursuant to a judgment authorizing him to make the sale ,and reinvest the proceeds in real estate, the bank in which the stock was held can not refuse to transfer .the stock on its books on the ground that it. may become liable to contingent remainder-men, who were not parties to the action in which the judgment was rendered, as they were neither necessary nor proper parties to the action.
    2. The bank may he required by rule to make the transfer, though it was not a párty to the action in which the judgment was rendered, and in which the rule was issued, and though its place of business is in -a county other than that in which the -action is pending.
    ALEX G. BARRETT and O’HARA & ROUSE, for appellants.
    POINTS AND AUTHORITIES.
    1. Persons entitled to a contingent remainder in hank stock are not bound by a judgment rendered on the ex parte petition of the person entitled to the equitable life interest and lier trustee, .though such judgment -authorizes and directs the trustee to sell the stock; the will under which all claim, having given the trustee no power to sell. Johnson v. Jacob, 11 Bush., 646; Edwards v. Woolf oik, 17 B. Mon., 376; McArthur v. Scott, 113 U. S., 340; Calvert on Parties, p. 12.
    
      2. If a corporation refuses to transfer stock at the request of one claiming the right to transfer it, such person can compel recognition of his right only by action to which the corporation is a party defendant, unless specially authorized by statute to proceed summarily. There is no statute authorizing a trustee of stock to compel transfer of stock by summary or ex parte proceeding. Tull v. Geohegan, 3 J. J. M., 377; Gay v. Morgan, 4 Bush., 606; Stephens v. Miller, 80 Ky., 47; Citizens Nat. Bank v. Boswell’s Admr., 93 Ky., 92.
    J, T. WINN, Attorney for appellee.
    QUESTIONS DISCUSSED AND AUTHORITIES CITED.
    1. The trustee in this case holding bank stock as an investment had power under the statute to .sell and transfer such stock and reinvest the proceeds in land. Ky. Stats., secs. 4706, 4707, 4708; Citizens Nat. Bank v. Jefferson, 88 Ky., 651; Fidelity Trust Co. v. Glover, 90 Ky., 355; Durrett v. Commonwealth, 90 Ky., 313.
    2. The trustee having applied to the Chancellor, in an action in which the equitable life tenant joined as plaintiff, neither the bank in which the stocks were held nor the contingent remaindermen, who can not be now ascertained were necessary per-ties to the action for sale of such stock. Ky. Code, secs. 21 and 25; Story’s Eq. Plead. & Prae., (4 ed.), 254 n. 1; Krieger v. Bis- . sell, 80 Ky., 330; Boswell’s Ex. v. Citizens Nat. Bank, 12 Ky. Law Rep., 568; 27 Am. & Eng. Ency. Law, 291; Schley v. Brown, 70 Ga., 464; Kerrison v. Stewart, 93 U. S., 155; Winslow v. Mich. R. R., 27 Am. Dec., 519; Trench in re., 15 Law Rep., Eq., 68 V. C. W.
    3. Construction of Trusts: Will, part 3d, Rec. P., 9-13; Hill on Trustees, 243; Lewin on Trusts, 352; Edwards v. Woolfolk’s Admr., 17 B. M., 381; Jarman on Wills, p. 1155.
    4. A court of competent jurisdiction having ordered a sale and transfer of bank stpck, the proper proceeding against the bank to compel a transfer on its books is by rule to show cause. 14 Ene. PI. & Pr., p. 76; Price v. Shelby Cir. Ct., Hardin, 261; 3d Amer. Eng. Ency. Law, 787, note 1; Ewing v. Riddle, 8 Bush., 568; Bush v. Chenault, Rec. 12, Ky. Law Rep., 292.
    Supplemental brief by J. T. WINN for appellee.
    The doctrine, that the refusal of a corporation without just cause, to transfer stock upon its books at the request of the holder, may in all cases be treated as a conversion of the shares, so that an action for trover will lie, is a rule well established and recognized by the highest authorities.
    
      2. Thompson on Corp., secs. 2445, 2447; 2 Waterman on Corp., see. 220, n. 1; Lowell on Transfer of Stocks, see. il; Sargent v. Franklin Ins. Co., 8 Pickle, (Mass.) S. C., 19 Am. Dec., 306; Ayers v. French, 41 Conn., 142, 151; McAllister v. Kuhn, 96 U. S., 87, 89 (opinion hy Chief Justice Waite); Daggett v. Davis, 53 Mich., 35 (S. C., 51 Am. Rep., 51); (opinion hy Judge Cooley); Bank of America v. O’Neill, 10 Bush., 54; (opinion hy Judge Lindsay); Bailey v. Strohecker, 95 Am. Dec., 388; Cushman v. Thayer Mfg. Co., 76 N. Y., 365.
   Opinion of the court by

JUDGE BURfíAM

Affirming.

¡Charles Eginton died a resident of Kenton county, and his last will and testament was duly probated and admitted to record by the courty court thereof' on the 80th day of October, 1890. .He devised to his granddaughter, Sarah L. Eginton, certain real estate and bank stock owned by him at his death, and appointed Joshua N. Winn, her maternal grandfather, trustee thereof, giving him 'power to collect interest, , rents, dividends and profits, and to have the care, 'custody and management thereof for the exclusive benefit and use of his granddaughter during her minority, and longer should she desire. The will further provides that the granddaughter, under certain restrictions, may dispose of this property by will, but that, in event she fails to do so during her life, and dies leaving a child or children, it should belong to them, but. that if, at the time of her death, she left no child or children, and has made no' disposition thereof by will, then.all that remains of the principal and accumulations of the aforesaid estate should be distributed to other designated persons. After the death of her grandfather, Miss Eginton married H. C. Whitehead; and in February, 1899, J. N. Winn, the trustee named* in the will, Mrs. Whitehead, the beneficiary, and her husband, H. C. Whitehead, filed an ex parte petition in the Kenton Circuit Court, in which they ask for a judgment of the court, authorizing the trustee to sell and transfer certain shares of bank stock which was devised' to him as trustee, and held by him in .trust for Mrs. Whitehead under the provisions of the will of her grandfather, Eginton, and to invest the proceeds thereof, with certain other funds in the hands of the trustee, in a tract of 509% acres of land located in Bourbon county, at the price of $47.75 per acre, it being alleged tliai; the tract of land which they desired to buy adjoined another tract owned by her, which contained about 700 acres of land; that the investment would be a safe and judicious one, and for the best interest of the cestui que trust. It having been made to appear to the chancellor that the change in the investment should be made, the court entered a judgment directing a sale of the 70 shares of bank stock held by appellee in the Bank of Kentucky, which is located in Louisville, and an investment of the proceeds thereof in the Bourbon county land. Appellee, under the judgment, sold the bank stock, but appellant, the B'ank of Kentucky, refused to transfer it upon the books of the bank to the purchaser. Thereupon appellee filed his affidavit setting forth this fact, and a rule was awarded him against appellant to show cause why it had refused to transfer on the books of the bank the 70 shares of stock standing in the name of J. N. Winn as trustee. Thereupon appellant entered its appearance, and objected to the jurisdiction of the court, and by way of response said that the petitioner, Winn, held the stock as trustee for Mrs. Winn only during her life, and denied that he had the right to sell or dispose of it; and that the judgment of the chancellor authorizing the sale was not binding upon the contingent beneficiaries, and would not protect the bank against claims that they might thereafter assert against them. Appellant’s response was held insufficient, and an order was entered directing it to make the transfer of the 70 shares of stock upon the order of J. N. Winn, trustee, and from this order of the court this appeal is prosecuted.

We think appellant’s apprehension or fear that it might become liable to the persons named as contingent remainder-men by the will is groundless'. Section 4706, Kentucky Statutes, provides: "That it shall be lawful for persons or corporations holding funds in a fiduciary capacity for loan or investment, to invest the same in real estate. . . .” Section 4707 provides: "That all persons holding stocks, bonds or other securities, in a fiduciary capacity for loan or investment, shall have power to sell and transfer same whenever in the judgment of such fiduciary such a sale will benefit the trust estate, and reinvest the proceeds as authorized in section four thousand seven hundred and six of this chapter. ... A purchaser in good faith from such <a fiduciary shall not be bound to look to .the application of .the proceeds of the sale, nor shall a corporation in which such stock held by a fiduciary is 'sold as herein authorized be liable for transferring such stock upon its books upon the order of such fiduciary.” The provisions of the statute 'were enacted for the express purpose of facilitating the transfer of trust funds held in a fiduciary capacity from one investment to another, and to exempt corporations from all liability for transferring shares of its stock so held upon the books of the company, when required to do so by the fiduciary or other proper authority. The only limitation upon this power of transfer and change in the investment is provided <by section 4708 of the statute, which says that “these provisions shall not be construed to permit a sale, investment or loan in conflict with the provisions of the will, deed or other instrument creating the trust, under which the funds or property may be held.” There is no provision of the will of Charles Eginton which either expressly,or by necessary implication forbids a change in the investment of the property devised to his granddaughter. On the contrary, the testator reposed great confidence in the judgment of the trustee, and in his solicitude for the best interest of the cestui que trust, who was also his granddaughter, and conferred upon him as trustee unusual powers over the trust property. Besides,. the provisions of the statutes under which this transfer was directed did not materially change the law as it had always existed. In the well-considered opinion delivered by Judge Pryor in the case of Bank v. Jefferson, 88 Ky., 651, (11 S. W., 767), it was held that trustees charged with the management of trusteed funds for the support and maintenance of the beneficiaries not only had the right, but it was their duty, to make such investments of the funds us would be made by prudent business men with a view to secure to themselves and families a safe income, and that they might change the investments from time to time as they deemed the best interest of the beneficiaries required. In this case no question of the wisdom of the proposed investment is even suggested, and we entertain no doubt of the power of the chancellor to have authorized the change of the investment.

The second complaint is that the bank was not before the court until after the judgment was entered, and that upon this account the judgment is void, and not binding upon it. It is also contended that under the ruling of this court in the case of Bank v. Boswell’s Adm’r, 93 Ky., 92, (19 S. W., 174), the Kenton Circuit Court had no. jurisdiction to compel appellant, whose place of business was located in Louisville, to enter its appearance to- a rule issued from the Kenton Circuit Court. All that was decided in the Jefferson case, supra, was that under section 428, Civ. Code Prac., a Louisville bank in which the decedent held -stock was not necessarily a 'party to an action in equity for the settlement of his estate, not being either a representative, legatee, distributee or creditor; and could not be brought before the court in such.a proceeding by the service of process in another county for the purpose of litigating differences with reference to the settlement of the estate. No relief was1 sought in this action against appellant, and it had no beneficial interest in the- stock directed to be transferred. All that has been required of it is that it shall not obstruct the trustee in the performance of his duty to the cestui que trust. In our opinion, neither appellant nor the persons suggested as having a possible interest in remainder were proper parties to this-proceeding. The judgment of the court fully protects the interests of all parties who have or may have any possible interest in ,the property required to be transferred. Judgment affirmed.  