167 F. 281 | 4th Cir. | 1908
(after stating the facts as above). Two questions are presented for determination by the court; First, whether the contract entered into on the 25th of November, 1902, by which the appellant secured to himself the large interest that he did in the estate óf his father, by having his sister release to him all her interest in the stock referred to in the contract as the Booth-Bowen Coal & Coke Company and the Norfolk Coal & Coke Company, .is a Valid and binding one1 between the parties under the facts and circumstances under which it was entered into; and, secondly, the validity of the assignment of the stock of the Norfolk Coal & Coke Company set up in appellant’s amended answer. We will first consider the law applicable to contracts entered into between parties related one to the other as these parties were, and made in the circumstances under which this contract was executed.
The fact that a contract between brother and sister-may be lawfully entered into cannot be disputed. They have the same right to contract to and with each other relative to their property as other individuals. But in such contracts sight ought never tp be lost of the fact of the relationship that exists between them, arid of the duty they owe one to the other to deal with the utmost frankness and good faith. AYe have in this case an only and elder brother, dealing with his only sister, in making a settlement of their interests in their father’s estate, by which contract it is conceded that the great bulk of the property of the deceased parent is parted with by the sister, and acquired by the brother, without consideration, and which she now charges was procured by fraudulent conduct and representations, and without her being- informed as to her real interests, or the value of the same. Such a transaction should always be scrupulously guarded by parties occupying the relation and securing one an unfair advantage over the other. In Pomeroy on Contracts, § 269, in discussing what will be a sufficient concealment to warrant the rescission of a contract, it is said:
“If there is a relation of trust or confidence between trie parties; if trie person knowing the facts occupies a fiduciary relation towards the other— then the duty to disclose is clear. It is not necessary that such fiduciary relation should be expressed; in many eases it has been held to exist from the general circumstances.”
*287 “Mere concealment to afford general ground for rescission for fraud must bo a willful suppression of sucli facts in regard to 1he subject-matter of the contract as the party making it is bound to disclose.” Beach on Contracts, vol. 1, § 799.
“Where relations of Ixust and confidence exist, the duty to disclose is clear.” Id.
And, in discussing inadequacy coupled with other inequitable incidents, Pomeroy says:
“If there is nothing but mere inadequacy of price, the ease must be extreme, in order to call for the interposition of equity. When the inadequacy does not thus stand alone, but is accompanied by other inequitable incidents, the relief is much more readily granted.” Pom. Eq. Jur. (3d Ed.) § 928.
“On the other hand, in transactions between this same class of parties (near relations) the circumstances may be such as raise a strong inference, if not win a presumption of bad faith, and especially where the party obtaining the benoiit is in a position of natural superiority and command over the other, as father and child, an elder brother and younger sister, might raise a strong presumption of undue influence, and this calls for the interposition of a court.” Id.
In Story’s Equity Jurisprudence, vol. 1 (12th Ed.) § 251, it is said:
“Cases of surprise, and sudden action without due deliberation, may properly be referred to the same head of fraud or imposition. An undue advantage is taken of the party under circumstances which mislead, confuse, or disturb the just result of his judgment, and thus expose him to be the victim of the artful, the importunate, and the cunning. * * * The surprise here intended must he accompanied with fraud and circumvention, or at least by such circumstances as demonstrate that, the party had no opportunity to use suitable deliberation, or that there was some influence or management to mislead him. If proper time is not allowed to the party, and ho acts improvidently, if lie is importunately pressed, if those; in whom he places confidence make use of strong persuasions, if lie is not fully aware of the consequences hut is suddenly drawn in to art, if he is not permitted to consult disinterested friends or counsel before he is called upon to act, in circumstances of sudden emergency, or unexpected right or acquisition ; in these and many like cases, if Hiero has been great inequality in the bargain, courts-of equity will assist the party upon the ground of fraud, imposition, or unconscionable advantage.”
The leading English case on this subject is Huguenin v. Baseley, 14 Ves. 273, reported in White & Tudor’s Leading Cases in Equity (Ed. 1887) 1184, to which, with the notes, reference is especially made. In the latter case, Lord Eldon said:
“The question is not whether she; knew what she was doing, had done;, or proposed to do, but how that intention was produced; whether all that care and providence was placed round her as against those who advised her, who from their situation and relaiion with respect to her they were bound to exert in her behalf.”
In Pomeroy’s Equity, §§ 951 to 957, inclusive, will be found a general review of the same subject. The Virginia cases are Statham v. Fergusson, Adm’r, et al., 25 Grat. 28, 69 ; Davis et al. v. Strange’s Ex’r, 86 Va. 793, 11 S. E. 406, 8 L. R. A. 261; Jones v. McGruder, 87 Va. 360, 12 S. E. 792; Todd v. Sykes, 97 Va. 143, 33 S. E. 517. The Virginia decisions referred to each contain a full consideration of this general doctrine; and in the first-named case, of Statham v. Fergusson, the facts bear a striking resemblance to those in this case, but in which the party to the contract sought to be, and which was
“It was the duty of the administrators of her husband, invested as they were by law with the title to his whole personal estate, and standing as they did in the confidential relation in which they stood towards her, to take care that before she made a donation of her estate, or a large portion of it, to themselves, as she did, she should be fully informed of her rights on the subject, and the effect of her act, or at least should have ample time and opportunity to consult counsel and advise with disinterested friends; and they should have advised her to avail herself of those advantages. That uberrima fides, which the law expects and exacts of persons standing in such a confidential relation to another, required them to do so. Instead of doing so, if they did not advise and encourage, they, at least by their acts, facilitated the preparation and execution of the deed, when they must have known that she had not the necessary information and proper advice to enable her to act so wisely and discreetly in so important a transaction.”
In Parker v. Parker, 45 N. J. Eq. 224, 16 Atl. 537, it is said:
“The doctrine of equity concerning undue influence is very broad, and is based upon principles of the highest morality. It reaches every case, and grants relief where influence is acquired and abused, or where confidence is reposed and betrayed. * * * It is especially active in dealing with gifts.”
What has been stated applies to contracts generally between parties having the relation that these bore one to the other — one securing an advantage over the other; but it is doubly true when, as in this case, the one securing the advantage occupied a favored position of being thoroughly posted in and about what was being done, and the other in total ignorance thereof; one an experienced business man, engaged in the transfer of the stock of the corporation of which he was secretary and treasurer, and in the business of which he had been largely engaged, and the other an innocent woman, a sister living in a distant community. In such a case, the former receiving such infinite advantage, every presumption would be against the validity of so improbable a contract; and the beneficiary should, as it ought to be his pleasure to do, be required to fully establish his contract, and’' remove from it every element of doubt or suspicion that may attach to its execution; and the law thus rightfully places the burden upon him. Pomeroy, Eq. Jur. § 928; Todd v. Sykes, 97 Va. 143, 146, 33 S. E. 517, and authorities cited.
Coming to the consideration of the facts, we cannot fail to be impressed, upon a careful review of the pleadings and testimony in this cause, with the strong presumptions that exist in favor of the plaintiff against the defendant arising from the improbability that she would have done what it is now claimed she did; that is to say, in her poverty, strip herself mainly of her inheritance in the large and valuable
Request for Secrecy.
Complainant avers in her bill that her brother enjoined upon her the importance of secrecy as to what they were doing, and she makes the same statement in her deposition. This charge is denied by the appellant in his deposition, while in his answer on the same subject he says:
“Respondent denies the allegation in complainants’ bill that he manifested to complainant, Alice Kutener, any undue concern in respect to having their*291 business relations kept private. The whole intent and purpose of this respondent while arranging with complainant, Alice Kutzner, for a division between them of the estate inherited from their father, was to carry out and respect his father’s wishes. It was a characteristic of Jonathan P. Bowen, well known to all 1ns friends, and particularly to liis family, that he never desired the public to have knowledge of his private business, and, when it came to dividing his estate, this respondent felt that the lifelong business method of his lather ^should be respected and followed, and for that reason it was mutually agreed between the complainant, Alice Kutzner, and this respondent, that they would keep private the business pertaining to the division of the estate between them.”
This answer in effect admits what the sister charges, though it attempts to show that it was by agreement that privacy was to be observed. The answer concedes that the respondent felt that he was carrying out his father’s desires in keeping the matter secret, and since he, and not his sister, as is manifest from the terms of this contract, is interested in so keeping it, he cannot escape the consequences of an effort to prevent being known what was done between them.
Complainant’s Cross-Examination.
Complainant is clear and explicit in her statement that at the time-of the execution of this contract she was alone, her brother having his lawyer and friends present; that she was shown no papers; that no discussion of the terms of settlement were had; that all that was done was to read the contract to her, and she admitted signing the same freely. It was especially attempted to establish the defendant’s case by her, and these significant questions were asked by the draftsman of the contract, Mr. Rucker:
“X. Q. 7. At the time the contract was signed, do you remember my reading the contract over in full, and after I had read it, in the presence of your brother, the defendant, Harry Bowen, Jenkin Jones, and J. B. Perry, asking you if you understood the terms of the contract, and your reply that you did; and my then asking you if you understood that by this contract you gave to your brother all of your interest in the 325 shares of stock in the Booth-Bowen Coal & Coke Company, and 260 shares of stock in the Norfolk Coal & Coke Company, which belonged to your father at the time of his death, and that you got nothing in exchange for your interest in these stocks, except your brother’s undivided one-half interest in the old home place at St. Clair, and your replying that yon understood that; and my then asking you if, witli this understanding, you were perfectly willing to sign and enter into this contract, to which you replied in the affirmative; do you remember these questions and your reply thereto as I have stated? A. Now, as to the first part, when you read it, when iUr. Rucker read it, ho asked me if I understood what he had read, and I said, ‘yes.’ There was no further explanation, or anything that would give me to understand any more about it. I have no recollection of ill'. Rucker putting questions that would have explained that to me. X. Q. 8. In order that you may have your memory refreshed, T will ask again if you do not remember of my asking you particularly if you understood that your brother was to get all of your father’s interest in the Booth-Bowen Coal & Coke Company and the Norfolk Coal & Coke Company, and that the other property should be divided, except the house at St. Clair. A. I do not remember your putting the question. I remember your reading it in the contract.”
These questions sought to commit the witness to having admitted in the presence of her brother, his attorney, and his two friends: (a) That she understood the terms of the contract; (b) that she especially understood that by signing it she gave up to her brother all in
“Q. 13. You have stated that the said contract between Harry Bowen and Alice Kutzner was read to Mrs. Kutzner by Edgar P. Rucker before Mrs. Kutzner signed said contract. Please state what, if anything, was said or done by Mr. Rucker in connection with the reading of said contract to Mrs. Kutzner. Ans. In a general way, I would say that the contract was read over by Mr. Rucker, and the various objects or statements set forth therein were explained to Mrs. Kutzner.”
But upon cross-examination he says that he means by “explanation” “that certain property went to her, and certain other property went to Mr. Bowen.” The complainant has never disputed that; she at the time supposed' she understood the contract. The question was whether she knew what she was doing, 'the nature and effect of her act, and was not induced thereto by any fraud or undue influence; in other words, whether she acted with full information in and about the matters under consideration; whether those upon whom she had a right to rely did not abuse her confidence, mislead her, and fail to exercise towards her the providence, protection, and care which, from their situation and relation with respect to her, they were bound to exercise in her behalf. She thought that her brother was to receive the coal stocks, upon terms and conditions stated by him to her, as to caring for her, and as to which she supposed he had obligated himself, and that she would share with him certain of the other property. The questions indicated above are not such as would have been asked this witness, nor would there have been a failure to produce Rucker as a witness, if any such explanation was made as is set forth in the seventh question of her cross-examination. The asking of such a question, and the failure .to follow it up, is apparent, and is entitled to much significance in reaching a conclusion as to what occurred at the time of the execution of the contract.
Parties having the relation the appellant does to the appellee, holding the favored position as to knowledge, experience, and peculiar
One occupying such position to his sister, and securing from her such advantages in dealing with her father’s estate, cannot enjoin secrecy, or avoid the consequences of an effort so to do, by placing the same upon the otherwise high grounds of observing the wishes of his deceased parent. When in the absence of a will, or of a word of any sort in writing of a testamentary character, and without a single witness other than himself, he is seeking to secure from his sister virtually one-half of au estate worth over $250,000, upon the alleged ground that his father intended him to have it, he must hide nothing, but remove doubt, and allay suspicion, otherwise so unnatural a thing, something so unknown to the law, and out of keeping with what is the general experience of mankind, ought not, and should not, be sanctioned.
The Stock Transfer.
Coming now to the effect of the transfer of stock of the Norfolk Coal & Coke Company, alleged to have been made to the appellant by his father in his lifetime, and which it is claimed J:he appellant had no knowledge of at the time of entering into the contract aforesaid with liis sister, or indeed until after the 28th of July, 1905, when it developed in the taking of testimony on her behalf, and which assignment he claims the benefit of, and attempts to set up in this case by his amended answer of the 16th of January, 1906, the filing of which complainant excepted to, and the court overruled, and allowed the answer to he filed. 'Hiere was much force in the exception, as it is highly improbable, considering the business connections existing between appellant and the officers of the company in which the stock was held and by whom it was transferred, the amount involved, and the connection lie necessarily had with the property, that appellant could have remained in ignorance from September, 1902, until July, 1905, of the fact of the gift and the transfer, had he exercised any diligence whatever regarding the same. Nor does there appear to he any good reason why, under the circumstances of this case, a delay of six mouths should have occurred after the alleged discovery before the filing of his amended answer. McKay v. McKay, 33 W. Va. 736, 11 S. E. 213; Foutty v. Poar, 35 W. Va. 72, 12 S. E. 1096; Daniel’s Chan. Prac. vol. 1, p. 777; Beach, Modern Equity, § 414; Bates, Federal Procedure, vol. 1, § 343 et seq.; Barton’s Chan. Prac. vol. 1, p. 420.
The facts regarding this transaction as developed in the record are briefly: That Jonathan P. Bowen in his lifetime, to wit, on the 3d of January, 1898, being the o'wuer of 3 certificates of stock in the Nor
“For value received -- have .bargained, sold, assigned and transferred, and by these presents do bargain, sell, assign and transfer unto -the stock named in the within certificate, and do hereby constitute and appoint -true and lawful attorney irrevocable for-and in —— name and stead, but to-use, to sell, assign, transfer and set over all or any part of the said stock and for that purpose to make and execute all necessary acts of assignment and transfer, any one or more persons to substitute with like full power. Dated-. Signed and acknowledged in presence of--
These powers of attorney thus in blank had the signatures attached of J. P. Bowen and J. B. Perry, the latter the cashier of the bank, as attesting witness. The certificates remained in the custody of the cashier of the bank until the debt was paid off, some time in the fall of 1902, the date not given, when they were delivered by him to Isaac T. Mann, secretary and treasurer of the Norfolk Coal & Coke Company, who was also vice president of the Bank of Bramwell. From this time these certificates appear from this record to have been lost sight of until upon the examination of J. Walter Graybeal, secretary and treasurer of the Pocahontas Consolidated Company, of which the Norfolk Coal & Coke Company was a constituent company, on the 28th of July, 1905, the witness testified, upon being asked as to the number of shares Jonathan P. Bowen owned in the Norfolk Coal & Coke Company at the time of his death, that:
“The stock certificates were transferred from J. P. Bowen to Harry Bowen September 26, 3902. and were transferred on the books of the Norfolk Coal & Coke Company on December 36, 1902.'’
Not until after this deposition did even the appellant claim to know of this transfer, and complainant, of course, knew nothing of such transaction, as the stock was in the contract between her brother and herself as a part of her father’s estate, and so treated in subsequent proceedings in this case. It now appears that the blank power of attorney on each of these certificates as signed by J. P. Bowen, and filed at the bank, had been filled up as of the 26th day of September, 1902, the name of Harry Bowen inserted therein as transferee, Isaac T. Mann’s name as attorney in fact, and the necessary words of “I,” “me,” and “my” also filled in to complete the power of attorney. In two of these certificates, the name of J. P. Bowen appears to have been erased by one ink line drawn through each of the sarhe, and one with two ink lines. Isaac T. Mann appears to have filled up these certificates, and as he claims, on the 26th of September, 1902, which was 14 days before the death of Jonathan P. Bowen; and subsequent to his death, on the 16th of December, 1902, he also appears to have caused a new certificate of stock to issue by the Norfolk Coal & Coke Company, in the name of. Harry Bowen, for 260 shares of stock. This certificate is signed by Isaac T. Mann as secretar);-, and Jenkin Jpnes as president, of the company; being the same Jenkin Jones that witnessed the contract between
“I do not recollect whether Mr. J. P. Bowen was present, but I do not believe I would have made the transfer unless in his presence, or by authority by him.”
And to a further inquiry as to whether Mr. Perry was present or not, he answered:
‘T am not able to state that Mr. Perry was present at the time the transfer was filled out, 2Gth September, 1902.”
“I believe that the same ink was used in writing the assignments as was used in the dates, and I believe all of the writing made on the back of these certificates by me was made the same day.”
He was then asked:
“Q. 22. State, if you can, where you were when Mr. J. P. Bowen directed you to fill up the assignments on the three certificates mentioned. A. X do not recollect. Q. 24. Was it at the Bank of Bramwell? A. I do not remember.”
The witness then testified that the transfer company returned the certificates of stock to him, the originals as well as the new No. 436, in favor of .Harry Bowen for 260 shares, which latter certificate he said was issued by him as secretary of the Norfolk Coal & Coke Company on the 16th December, 1902, and transferred by the transfer company on the 22d of December, 1902; that he properly recorded the three canceled certificates in the stock certificate book, but did not remember to whom certificate No. 436 was delivered; that it was returned to him along with the others by the transfer company, and he thereupon filed as a part of his deposition certificate No. 436.
Assuming this pretended'transfer of stock to have been bona fide made, and otherwise legally and properly executed, there seems never to have been any delivery of the stock, which would have been necessary to make effectual the gift of the same. The specific question to whom Mr. Isaac T. Mann, who apparently was engaged in making this transfer, delivered the certificate, was not put to Mr. Mann, and it was an all-important one to those seeking to establish the validity of such a gift; and its consequence cannot be avoided by his statement that he did not remember to whom it was delivered. It does not follow that it was delivered to any one. On the contrary, the irresistible inference from Mr. Mann’s testimony is that it was never delivered, and it could not have been until it was issued on the 16th of December, 1902, more than 60 days after the death of Jonathan P. Bowen. Nor is there the slightest suggestion that the original certificates of stock with the assignments on the back thereof, either while they were in blank, or after they had been filled, up by Isaac T. Mann, were ever delivered to Harry Bowen. Indeed, from this record it does not appear that the donor, Jonathan P. Bowen, was ever in possession of these certificates of stock after their deposit with the bank as collateral some five years previously, and the evidence of Harry Bowen himself precludes the idea of any delivery to him, as he says he knew nothing of the alleged assignments until after the 28th day of July, 1905. Gifts inter vivos of personal property, to be effective, must be accompanied by the delivery of the possession, the donor parting with all present and future dominion over it; the donor must be divested of, and the donee invested with, the right of property in the subject of the gift; it must be absolute, irrevocable, without any reference to its taking effect at some future time; and without such proof, clear and explicit, the gift'fails. No mere promise or declaration of intention to give will suffice, however
This transaction as to the alleged transfer of stock, whereby Jonathan P. Bowen is alleged to have parted with property worth $150,000, is a most unusual one, and may he said to be shrouded from beginning to end in mystery and doubt. Had it ever been the purpose of Jonathan P. Bowen to part with more than half of his estate, and make a gift thereof to his sou, it is hard to believe, considering the business relations between the father and the son, that the latter would not have known about it, and still more improbable that the father would have sought to perfect such a gift by a verbal direction to some one to fill up the blank powers of attorney upon certificates of stock that had been deposited in batik in blank some five years before; that there should have been no witness to such an occurrence, and the party in whom the trust was reposed of making the transfer of property of such magnitude should have been so little impressed by it that he does not know when or where it occurred, whether at the bank or not, nor indeed does he positively swear that it ever happened at all. The information that we are vouchsafed on this subject by the witness Mann is:
“I believe the assignments as made by me were at tlie instance of Mr. J. P. Bowen, and it was for the purpose of transferring the stock to Harry Bowen.”
And he further states, in answer to the question of whether J. P. Bowen was present at the time he filled up the alleged assignment, that:
“I do not. recollect as to whether Mr. J. P. Bowen was present, but I do not believe I would have made the transfer unless in his presence or by authority by him.”
It will be observed in the last answer that the witness not only does not pretend that he was present, but clearly indicates that he would not have considered it necessary to have him present if he had his authority; and it is monstrous to suppose that a transaction of this size and unusual character would not have so impressed itself upon this witness that lie would have been able to give us the minutest details of what occurred. Isaac T. Mann is not an ordinary witness; he was the secretary and a director of a great coal company, and vice president of the Bank of Bramwell; and it will not do for him within a period of four years to he uncerfain as to such an important occurrence as the filling up of blank powers of attorney left with his hank, and tlie purpose for which had ended, thereby transferring from the estate of an
The date, 26th of September, 1902, when it is claimed the assignments on the stock certificates were filled up, was important, and the status of the indebtedness of Jonathan P. Bowen with the Bank of Bramwell at that time was important, and would have thrown at least some light on when it was that this important transfer of property was made; but we are not favored with this information. Perry, one of the attesting witnesses to the contract, on the 25th of November, 1902, was also cashier of the bank, and he says the custodian of these certificates of stock of Jonathan P. Bowen until the loans were discharged, the exact date of which he says he cannot give, but that it was some time in the fall of 1902. That is very indefinite language— “some time in. the fall of 1902.” The books of the bank should have shown when this indebtedness for which these certificates were deposited as collateral was discharged, and at least it could have been as
The whole transaction respecting this transfer of stock is but a companion of the contract entered into between the brother and sister heretofore fully considered, and is entitled to less weight and consideration because of the many circumstances of doubt, improbability, and suspicion which surround it; and the same, as well as the said contract, should be vacated, annulled, and set aside as fraudulent and void, and the said appellees awarded their full half interest in the
In conclusion, it must be borne in mind in this case that the appellant is apparently claiming this property in three different ways, ea.ch inconsistent with the other: First, if he, and not his father, bought the stock, then it is his, and does not belong to his father’s estate; secondly, his claim under the assignment of the Norfolk Coal & Coke Company stock, alleged to have been made a few days before the death of his father, is inconsistent alike with his individual ownership of it, or of his father’s ; thirdly, the effort to secure under the contract with his sister the entire coal stock as part of his father’s estate is utterly at variance with either of the other contentions. He must maintain his right to this stock, and thereby secure, as against his sister, the great bulk of his father’s estate, upon some one, and not all three, of these contentions ; and, as neither of the three are supported by any such evidence as he must produce to place him in the favored position that he apparently desires to occupy, all three should be denied. The devolution of estates left by deceased persons to those to whom they rightfully belong under statutes of descents and distributions cannot and will not be avoided by any such varying, uncertain, and inconsistent efforts so to do as is attempted in this case. Especially is this true where the effect of the effort would be to deprive a sister, in the interest of a brother, of her share of the estate under such circumstances as are attempted here. Brothers and sisters occupy a peculiarly delicate relation one to the other, when they come to a division of their ancestor’s estate.,. They are usually fresh from the scene of affliction and sorrow; some of them not infrequently are for the first time called on to act for themselves, and admonished of their personal and individual responsibility in meeting the grave and serious affairs of life. This was strikingly true in this case; the female complainant had been raised as a poor girl; her father was a laboring man, and never until he had long passed the meridian of life had he been able to accumulate any property of consequence, and not then until he had removed some 500 miles away to another state, where he quickly accumulated a large fortune. His daughter remained at the old homestead, and the son accompanied his father, and became his business associate. The father died, and the daughter was summoned within less than a month to come to her brother’s home, with a view of settling the estate’s affairs. He knew everything as to the condition of the property jointly theirs; she in effect nothing. And she was thus called upon by him, while staying at his house, away from her home and husband, amid the scenes and surroundings in which her father had spent the declining and prosperous years of his eventful life, and with his death then fresh and vivid in her memory; and, naturally deeply affected and saddened by the memories that such environments would likely produce, she was but too easily amenable to any suggestion that appeared to her to be carrying out the wishes of her dead parent, and that she thus felt is only evidence of the higher motives and instincts that ac-
The decree of the lower court is plainly right in all respects, and is affirmed, with costs.
Affirmed.