CBI Industries, Inc. v. Horton
United States Court of Appeals for the Seventh Circuit
682 F.2d 643 (1982)
Horton (defendant) was a director of CBI Industries, Inc. and co-trustee of a trust created for the benefit of his two children. Horton was a contingent remainderman of the trust; if both his children, then aged 19 and 22, died before age 25 without issue, Horton would receive all the assets of the trust. In 1980 Horton sold 3,000 shares of CBI stock. Within six months, he caused the trust to purchase 2,000 shares of stock at a lower price. The difference in price for the 2,000 shares totaled $25,000. CBI sued Horton to recover the $25,000 pursuant to §16(b) of the Securities Exchange Act of 1934. CBI argued that the transactions benefitted Horton both emotionally and financially. By obtaining a $25,000 net profit, Horton lowered the amount of money he would later be obliged to give to his children. The trial court awarded CBI the $25,000. Horton appealed, arguing that income to the trust was not “realized by him” under the statute.
Rule of Law
Holding and Reasoning (Posner, J.)