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Callwood v. Virgin Islands National Bank

decided.: April 26, 1955.

CLIFFORD W. L. CALLWOOD, APPELLANT,
v.
THE VIRGIN ISLANDS NATIONAL BANK, OSMOND KEAN, AUGUST BETZ, EXECUTOR OF THE ESTATE OF ANNA R. PEIFFER, DECEASED, IZA CALLWOOD AND ELSA E. CALLWOOD.



Author: Maris

Before BIGGS, Chief Judge, and MARIS and WOODBURY, Circuit Judges.

MARIS, Circuit Judge.

This case involves conflicting claims to a fund which was on deposit in the Virgin Islands National Bank comprising the net rents of realty situate in the town of Charlotte Amalie in the island of St. Thomas. This court has heretofore had occasion to review the interests in this realty which passed under the will of Richard Edgar Clifford Callwood when he died on January 17, 1917 in Germany.*fn1 Thirteen parcels of real estate were involved, title to all of which had been taken in the name of the testator's sister, Anna R. Peiffer. Ten of the parcels belonged to the testator alone and three of them to the testator and Mrs. Peiffer. Richard E. C. Callwood's will provided that Mrs. Peiffer should have a life estate in all this realty provided she transferred title to Elsa E. Callwood, his widow, and paid an annuity for life, or a lump sum, to Iza Callwood, his daughter. Mrs. Peiffer complied with both conditions. She conveyed the properties to Mrs. Callwood by deed dated June 7, 1924,*fn2 reserving a life estate for herself, and she paid her niece, Iza Callwood, who lived with her in Germany, the lump sum required. Osmond Kean of St. Thomas was employed by Mrs. Peiffer as her agent for the collection of the rents and the management of these properties. She enjoyed the income from her life estate until 1941, when upon the entry of the United States into the war with Germany, the income could no longer be transmitted to her in Germany. Accordingly from 1941 until July 11, 1947, the date of her death, Kean deposited the net amounts of rentals in the Virgin Islands National Bank in St. Thomas. The balance in the bank account at the time of Mrs. Peiffer's death was $7,706.12.

Clifford W. L. Callwood, nephew of the life tenant Mrs. Peiffer and son of Richard E.C. and Elsa E. Callwood, claimed this fund of $7,706.12 by virtue of an assignment dated January 31, 1947, executed by Iza Callwood, as attorney in fact for her aunt, Mrs. Peiffer. The assignment purported to transfer the claim to all the funds then on deposit in the bank, stated to be approximately $6,700.00, and the future income from Mrs. Peiffer's life estate in the realty in St. Thomas. On July 27, 1948, Callwood, accompanied by Kean, presented the assignment to the bank. Upon Callwood's direction, Kean thereupon opened a new account in the amount of $5,206.12 entitled "Osmond Kean, in trust for Elsa Callwood & C. W. L. Callwood" and another new account in the amount of $2500.00 in the name of "Osmond Kean in trust for C. W. L. Callwood" alone. Subsequently, on July 18, 1949, Kean, without authority from Callwood, transferred these two accounts into a checking account entitled "The Estate of Anna Peiffer (born Callwood), German National, deceased, by Osmond Kean."

On June 27, 1951 Clifford W. L. Callwood instituted the present suit in the District Court of the Virgin Islands against the Virgin Islands National Bank and Osmond Kean to recover the balance of $7,706.12 in the account just referred to, claiming that he was entitled to it as assignee of Anna R. Peiffer. The complaint sought a judgment directing the defendants to pay the plaintiff the said sum of $7,706.12. On July 5, 1951 the bank before filing an answer moved to interplead as parties defendant August Betz, of Wiesbaden, Germany, the executor of the estate of Anna R. Peiffer, Iza Callwood of Wiesbaden-Biebrich, Germany, and Elsa E. Callwood of St. Thomas, all of whom had asserted claims to the fund. The district court granted the motion and all three of these parties subsequently appeared in the action by counsel. On July 13, 1951 the bank filed its answer and counterclaim for interpleader, admitting the deposit account and asserting that it was a mere stakeholder. At the same time it paid the amount of $7,706.12 into the registry of the court.

On August 3, 1951 Mrs. Callwood filed her answer asserting that the assignment under which the plaintiff claimed was invalid and that she was entitled to $5,200.00 of the fund by virtue of a verbal assignment to her by Mrs. Peiffer in August, 1939. Thereafter on March 5, 1952 Iza Callwood and August Betz filed joint answers denying the validity of the assignments relied on by Callwood and Mrs. Callwood, respectively, and a cross claim that Iza Callwood as sole heir and next of kin of Anna R. Peiffer, deceased, should be adjudged entitled to the fund. On March 6, 1952 Callwood filed a reply to the answer of Mrs. Callwood, denying her allegations in toto. On November 6, 1952 Callwood filed a reply to the answer and cross claim of Iza Callwood denying her allegations.

On December 8, 1952 Mrs. Callwood with leave of court filed an amended answer setting up by way of counterclaim her claim to $5,200.00 of the fund under the verbal assignment alleged in her original answer and a further claim for an additional award out of the fund to reimburse her for the cost of repairing waste alleged to have been committed by the life tenant, Mrs. Peiffer, to the realty in St. Thomas. Thereupon all the other parties filed amended pleadings. Callwood in his amended reply to Mrs. Callwood's amended answer and counterclaim reiterated his prior denial of the validity of her alleged verbal assignment and also denied her allegations of waste on the part of Mrs. Peiffer. Iza Callwood in a separate amended answer to the plaintiff's complaint reiterated her allegations of the invalidity of Callwood's assignment but no longer sought a direct award of the fund to herself. Betz, on the other hand, in a separate amended answer to the plaintiff's complaint not only realleged the invalidity of Callwood's assignment but prayed for judgment declaring the fund to be the property of the estate of Anna R. Peiffer, of which he was executor. Moreover in an amended answer to the counterclaim of Mrs. Callwood he not only reiterated the allegation that the alleged verbal assignment to her was invalid but asserted that her additional counterclaim for waste was premature since it was a claim against the estate of Anna R. Peiffer which must be adjudicated in a probate proceeding under the local law. Shortly thereafter defendant Kean filed his first and only pleading, which he described as an "interpleader", in which he claimed the sum of $418.00 which he alleged he had paid to Mrs. Callwood in connection with his accounting in the previous case of Callwood v. Kean, 3 Cir., 189 F.2d 565, and as to which he asserted he was entitled to be reimbursed from the fund here in litigation.

It will thus be seen that the issues presented to the district court for determination at the trial included the validity and effectiveness of the assignment of January 31, 1947 by Mrs. Peiffer through her attorney in fact Iza Callwood to Callwood of the fund in controversy, the validity and effectiveness of the alleged verbal assignment by Mrs. Peiffer to Mrs. Callwood in August, 1939, whether the fund should be determined to belong to the estate of Anna R. Peiffer, deceased, and whether Mrs. Callwood was entitled to an award out of the fund to compensate her for waste committed by Mrs. Peiffer as life tenant. As to this last issue the pleadings also posed the question whether the claim for waste could properly be presented in this action or whether it must be presented later in a probate proceeding involving the estate of Anna R. Peiffer. There were also subsidiary questions as to the rights of the various parties to be awarded counsel fees and costs.

After trial of the issues the district court filed an opinion, holding that the assignment under which Callwood claimed the fund was invalid upon a number of grounds, and that the assignment under which Mrs. Callwood claimed a portion of the fund was likewise invalid, but that she was entitled to an aware of $2500.00 to reimburse her for the expense of repairing waste to the St. Thomas realty committed by Anna R. Peiffer as life tenant. 121 F.Supp. 379. The district court accordingly entered a judgment awarding to Mrs. Callwood $2500.00 plus $700.00 to cover attorneys' fees and costs, a total of $3200.00, to the Virgin Islands National Bank $400.00 to cover attorneys' fees and costs, and to the estate of Anna R. Peiffer $1400.00 to cover attorney's fees and costs plus the balance of the fund, $2504.62, a total of $3904.62. The court had previously awarded $201.50 out of the fund to cover the cost of the transcript of the testimony taken at the trial. From the judgement thus entered the plaintiff Callwood appealed to this court.

The primary question raised upon this appeal is whether the district court erred in holding that the assignment made on January 31, 1947, in Wiesbaden, Germany, by Iza Callwood, as attorney in fact for Mrs. Peiffer, to Clifford Callwood was invalid and of no effect. We are satisfied that the district court correctly decided this question.

As pointed out earlier the assignment dealt with two things, the accumulated rents then on deposit in the Virgin Islands National Bank and the right which Mrs. Peiffer had to receive future rents during the remainder of her life. We consider first the attempted assignment of the bank deposit. The generally accepted common law rule of conflict of laws is that the effect of an assignment of a chose in action is determined by the law of the place where the assignment is executed. This is the rule laid down in the Restatement of Conflict of Laws.*fn3 It is, therefore, to be applied in the Virgin Islands in the absence of a local statute or rule to the contrary. For the Virgin Islands have adopted the rules of the common law of England as followed and understood in the United States*fn4 and we think that the district court in applying those rules is justified in following the well considered expressions of them which the American Law Institute has incorporated in its Restatements of the Law.

Here the assignment under discussion was of a chose in action to the extent that it related to the rents collected prior to January 31, 1947, and then on deposit in Mrs. Peiffer's account in the Virgin Islands National Bank. Wiesbaden, the place where the assignment was executed, was in the zone of Germany under occupation by the American military forces and was then under American Military Government. Among the laws promulgated by the Military Government and then in force in Wiesbaden was Law No. 53,*fn5 Article I of which expressly prohibited, except as duly licensed by or on instructions of the Military Government, any transaction with respect to or involving any foreign exchange assets owned by any person in Germany or any property wherever situated if the transaction was between or involved any person in Germany and any person outside Germany.*fn6 Article VII of Law No. 53 defined "Foreign Exchange Asset" to include any property located outside Germany including specifically any bank balances outside Germany.*fn7 Article V of the same law provided that "Any transfer effected in violation of this law and any agreement or arrangement made, whether before or after effective date of this law, with intent to defeat or evade this law, or the objects of Military Government, is null and void."*fn8

On January 31, 1947 Mrs. Peiffer and Iza Callwood resided in Wiesbaden and each was, therefore, a person in Germany. Callwood then resided in London and was, therefore, a person outside Germany. Mrs. Peiffer's deposit account in the Virgin Islands National Bank in St. Thomas was, of course, property located outside Germany and a foreign exchange asset within the meaning of Law No. 53. It is, therefore, clear that the attempted assignment of that bank account by Iza Callwood as attorney in fact for Mrs. Peiffer in Wiesbaden at that time was in direct violation of Law No. 53 and was null and void by virtue of the express provisions of Article V of that law.

Callwood argues that the assignment cannot be treated as invalid under Article V of Law No. 53 because it has not been shown that it was made with intent to defeat or evade that law. In making this contention, however, he misreads Article V which clearly was intended to invalidate two different types of transactions, the first, any transfer effected in direct violation of Law No. 53, and the second, any agreement or arrangement not in direct violation of the law but made with intent to defeat or evade it or the objects of Military Government. A transaction of either kind is expressly invalidated by Article V.In the present case the ...


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