132 F. 485 | U.S. Circuit Court for the District of Western Missouri | 1904
As to the adoption of the children and the rights of inheritance, the laws of Missouri alone control. So far as I am apprised by the briefs of counsel, there was no statute in 1867 providing for the consent by the children of Daniel D. Burnes, Sr., or for the consent by some one for them, for their adoption. Some of the states have such provisions. And in Missouri there was no judicial proceeding required for the adoption of the children. All that the statutes seem to require was the signing by the adopting parent of an instrument, its due acknowledgment, and recording. This was done by James N. Burnes, Sr., and Calvin F. Burnes. It was done without consideration, because Daniel D. Burnes, Sr., in his will, was specific in stating that his bequests to his brothers were not to be burdened or made subject to any conditions. So that it cannot be said, as argued by respondents’ counsel, that there was any contract that could be enforced by any court.
It is not a question of the education of the children, nor their control, nor of exacting obedience. Nor can the adoption paper be construed as a will. Nor can it be enforced as a contract. Nor can the child inherit from one person’s estate in the dual capacity of a blood relation and as an adopted child. But the child can inherit from his foster parent, even though he was adopted without his knowledge or without his consent. And he can inherit both from his natural father and the adopting father. Such is and has been the law of Missouri. As bearing upon the different phases of the foregoing, see Moran v. Stewart, 122 Mo. 295, 26 S. W. 962; Sarazin v. R. R. Co., 153 Mo. 479, 55 S. W. 92; Clarkson v. Hatton, 143 Mo. 47, 44 S. W. 761, 39 L. R. A. 748, 65 Am. St. Rep. 635; Fosburgh v. Rogers, 114 Mo. 122, 21 S. W. 82,19 L. R. A. 201; Delano v. Bruerton, 148 Mass. 619, 20 N. E. 308, 2 L. R. A. 698.
There are cases holding that where the agreement to adopt was with the child, acted on and relied on by the child, it will be enforced as a contract. Sharkey v. McDermott, 91 Mo. 647, 4 S. W. 107, 60 Am. Rep. 270; Healey v. Simpson, 113 Mo. 340, 20 S. W. 881; Van Duyne v. Vreeland, 12 N. J. Eq. 142. But the adopted child has the rights, no greater and no less, of the natural child. Davis v. Hendricks, 99 Mo. 478, 12 S. W. 887. This being so, the father, natural or adopting, can disinherit the child, allow him to take a full share, or give him his entire estate, subject to the right of his wife, to the exclüsion of his natural children. The adoption paper undertakes to limit the right of inheritance, by a recital somewhat involved, but understood, so that the six children would not take from the estate of James N., Sr., wholly, as if his children, but Calvin’s children and his estate must be considered. 1
But Calvin F. Burnes was yet alive. What would have become of his estate? Aside from what his wife would take under the laws of the states where the property was situated, Calvin F. Burnes had the right to dispose of his property in any way he deemed best. He could buy, sell, or give during his lifetime. He could by will devise and bequeath to whomsoever he pleased. He could disinherit his daughter, Mary V. He could disinherit one, two, or all of the children of Daniel D. Burnes, Sr. In July, 1889, a few months after the death of James N., Sr., the formation of the corporation and an agreement as to its ownership was proposed. So far as disclosed by the evidence there was no concealment of any fact, unless it be with reference to some advancements presently to be mentioned. There was and could have been no fraud by concealment or false statement as to the assets or their value, because the property was divided by parts, and not by value. Even as to Mrs. Moore, there was set apart to her the same number of shares as to each of her brothers and sisters. And whether she was wronged when she refused to take her shares, and was paid comparatively a pittance, is no longer a question. And if it were a question, both complainants and respondents would occupy a like position as to her.
But Calvin F. was determined that there should be a reckoning, and an adjustment; and such was his right. He had the right to say that his future efforts should not be mortgaged. He had the right to say that by will he would disinherit C. C., or D. D., or Mary V., or any one or all of complainants or respondents. He had the legal right to say that the parties would take such shares, or that “they would take the drippings from the eaves of the last courthouse in Missouri” — a statement he is said to have made. The amount received from the estate of Daniel D. Burnes, Sr., was or could have been a controverted question then, as it now is. The validity or.invalidity of the adoption paper of May 10, 1867, was then, or could have then been, a question for the courts, as it now is. The interpretation of that paper was then, as it now is, a question for the courts. That paper expressly says that
Payments had been made to C. C. and D. D. for alleged services rendered after becoming adults. They were large sums in fact, but small considering the station of the parties and the magnitude of the estate. Fraud is not charged as to these, other than that they were not made known. It can hardly be that the purpose of James N., Sr., or Calvin F., was to conceal the matters, because the proofs were purposely left where the matter would soon be made known. Some of the witnesses say these advancements were discussed at the time of the family settlement. Others deny it. Some say that, as D. D. and C. C. had only received $89,000 of the $200,000 promised, they were surrendering their claims to the remaining $111,000. Others deny this. But it is a fact that, whatever was or was not said at the family settlement, D. D. and C. C. had not received the one-half of the so-called “advancements,” and that afterwards neither received nor asked for any of the balance of the $200,000.
Six months had elapsed from the death of James N., Sr. Mr. Moore and Mr. Winningham, husbands of two of the daughters of Daniel D., Sr., were lawyers, and Mr. Moore, it is claimed, a lawyer of ability. If there had been a common purpose “to take the drippings from the eaves of the last courthouse in Missouri,” the respondents would have gotten a larger per cent, of the estate of James N. Burnes, Sr., and nothing from the estate of Calvin F. Burnes. Would they have a larger estate today? Would there not have been a winding up of the copartnership of James N., Sr., and Calvin F. Burnes? Would there not have been the distressing and bitter and expensive litigation which follows family feuds ? Would there not have been partitions, and forced sales by sheriffs and receivers? Would not the business have been brought to an end, and would not Calvin F. have given his skill and energies for himself and family, and relatives who loved him? Or would he have continued amassing wealth for the benefit of those in litigation with him? Such was the situation when the family settlement was made. All the parties signed the settlement paper. All were adults.
James N. Burnes, Jr., says:
“There was much discussion as to the settlement. Calvin F., D. D., and C. C. and wife asked all to sign; and Uncle Calvin said it was that or nothing, and that, if we did not sign, he would administer upon the estate as surviving partner, and would see that we got nothing.”
D. C. Burnes testified in effect:
“There was talk about my father’s will and the adoption papers when we formed the Burnes Estate. I had not known of them before. Q. Why did you sign that [settlement] paper? A. Because I understood that I either had to sign that paper or there would be a fight in the family. Uncle Calvin told Gen. Moore thát he could take the stock that was allotted to him, or take the drippings from the eaves of the last courthouse in Missouri.”
Mrs. Mary Moore testified in effect that, after the death of her uncle James, the division of the property was the subject of discussion. Her husband, Gen. Moore, had a copy of the will of her father and of the adoption papers, and from the advice of Gen. Moore she refused to sign the settlement paper, and took a money consideration in lieu of corporation stock.
Mrs. Gatch testified that she was never advised of her rights of inheritance, nor her father’s will, nor of the adoption papers. The settlement paper was brought to her for signature by her brother James, and at his instance she signed it. She was asked by her brother to read it. This she declined, stating that she would not understand it, and then her brother explained it to her. She was much pleased, as she thought it was a gift, and generous. Her husband was present at the time.
Neither Mrs. Winningham nor her husband was called as a witness.
Relations of confidence had existed between Calvin F. and these respondents. He was their father by adoption, and since the death of James N., Sr., was the head of the household. But this relation had changed to one of threatened hostility. Gen. Moore was advising and dominated Mrs. Mary Moore in the matter. Husbands of two others were on the ground. So that I conclude, under the rule stated, supported by the authorities cited, that the parties and all of them are bound by the settlement agreement, the formation of the corporation, and the allotment of shares, unless they were controlled by duress or fraud. But a threat to hold back money justly due, or to make other arrangements, is not such duress as to avoid a contract. Gibbons v. U. S., 8 Wall. 269, 19 L. Ed. 453. Nor will want of money, nor distressing circumstances, avoid a contract of settlement. French v. Shoemaker, 14 Wall. 314, 20 L. Ed. 852; United States v. Huckabee, 16 Wall. 431, 21 L. Ed. 457; Mason v. United States, 17 Wall. 74, 21 L. Ed. 564. To be duress, the act must be physical violence, threats of violence or harm, or imprisonment, or threat of imprisonment. Brown v. Pierce, 7 Wall. 215, 19 L. Ed. 134; Baker v. Morton, 12 Wall. 158, 20 L. Ed. 262; Radich v. Hutchins, 95 U. S. 213, 24 L. Ed. 409.
The contention that some of the parties signed without reading the contract merits but little attention. Upton v. Tribilcock, 91 U. S. 45, 50, 23 L. Ed. 203, was a case where a party sought to avoid his subscription for corporate stock. Justice Hunt said:
“That defendant did not read the charter and by-laws, if such were the fact, was his own fault. It will not do for a man to enter into a contract, and, when called to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained. If this were permitted, contracts would not be worth the paper on which they are written. But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission.” '
When the settlement was made, it was the result of thought, consideration, argument, and some bitterness, although the bitterness was kept from the public. Gen. Moore, a lawyer, the husband of one and the brother-in-law of the other five, was advising and with influence. His wife kept out, and refused to take the stock allotted her. The other five remained out for months. Then some of them concluded to and did sign the agreement and took the stock. The jarrings and wranglings of the family were thereby concealed from the public and, as was supposed, forever put out of sight. Whether the settlement was what a court of equity would have decreed is not the question. It was an agreement of settlement, and was supported by a consideration. It was a family settlement, and such settlements are seldom corrected or canceled. In 2 Pom. Eq. § 850, it is said:
“Compromises, where doubts with respect to individual rights, especially among members of the same family, have arisen, and where all the parties, instead of ascertaining and enforcing their mutual rights and obligations, which are yet undetermined and uncertain, intentionally put an end to all controversy by a voluntary transaction in the way of a compromise, are highly favored by courts of equity. They will not be disturbed for any ordinary mistake either of law or of fact, in the absence of conduct otherwise inequitable, since their very object is to settle all such possible errors without a judicial controversy.”
Eor reforming or canceling a contract, courts require stronger proofs in cases of family settlements than in any other, and will even hunt for reasons to sustain such contracts, to the end that family secrets, disputes,, and wranglings may be kept from the gaze of a curious and gossiping; public. The law is stated by Justice Story, in his work on Equity (section 132):
“There are cases of family compromises, where upon principles of policy, for the honor of peace of families, the doctrine sustaining compromises ha® been carried further; and it has been truly remarked that in such family arrangements the court of chancery has administered an equity which is not applied to agreements generally. Such compromises, fairly and reasonably made to save the honor of a family, as in case of suspected illegitimacy, to prevent family disputes and family forfeitures, are upheld with a strong hand, and are binding when in cases between mere strangers the like agreements-would not be enforced.”
Lewis C. Burnes, a respondent, is the moving party herein, and for years has been the adviser of the other respondents, as he was of complainants. He was an administrator of the estate of Calvin F. Burnes. He charged himself with all of Calvin’s stock, and took credit when he turned it over to the corporation. His statements of account were under oath. The estate was pending for two years. Presumably he had access to Calvin’s books and correspondence. If he did not, it was because of his negligence in making no effort. He in particular, and his brother and four sisters and two brothers-in-law in general, either knew or had the means of knowledge of the estate of James N., 'Sr., the will of their father, and of the adoption record. The case of
James N., Sr., and Calvin F. Burnes, in the year 1887, had given stocks, bonds, and mortgages to D. D. and C. C. Burnes, the two sons of James N., Sr. A joint letter of the father and uncle was written to each (C. C. and D. D.), stating that $100,000 was to be given to each of them “as a token of our appreciation of your courtesy, friendly assistance, and uniform devotion to our interests.” The following day (1887) the father and uncle wrote a letter to C. C. and D. D., stating inclosures for them jointly aggregating $100,000 in notes and evidences. What was realized on them does not clearly appear. But there is a reason for believing that $89,000 was the aggregate of what the two received pursuant to the purpose expressed by James N., Sr., and Calvin F. It is contended that these sums, whatever they were, were “advancements” under the laws of Missouri; and it is said that neither James N., Sr., nor Calvin F., the donors, nor C. C. nor D. D., the recipients, ever made known such advancements, and therefore a fraud was practiced upon the six children of Daniel D., Sr., and such a fraud as will allow them to avoid the family settlement of 1889. On this question I am impressed with the importance of several facts:
(1) On the charge of fraud, the four parties to the transaction are dead.
(2) The gift was made because of “your courtesy, friendly assistance, and uniform devotion to our interests.” Many doubts exist, aside from the other facts, whether in turning over to C. C. and D. D. advancements were made to them; and, if they were advancements, a decree could go no further than to charge their heirs with the amount in fact received, with interest thereon.
(3) D. D. and C. C., after attaining their majority, had given services, and talents, and energy to the business of James N., Sr., and Calvin F. Burnes.
(4) The written evidence of the transaction was placed where it should have been, and was left where it would be seen by all having interest in, or to do with, the estate of James N., Sr., or Calvin F., or with the corporation. The respondents say they knew nothing of it until in 1899. If this be so, then Lewis C. and James N., Jr., who were administrators of Calvin’s estate, and Lewis C., who was intimately connected with the corporation after Calvin’s death, were guilty of inattention, of their duties.
(5) Many years had elapsed before complaint was made, and several years more before the evidence is offered relating to it.
(6) Of the persons living, Gen. Moore knows as much or more than any other person as to the facts leading up to the family settlement. His testimony was not taken. He was the legal adviser of some or all respondents. He is, and then was, the husband of one of the six
(7) Such matters should weigh with a court before declaring of record that James N. Burnes, Sr., and Calvin F. Burnes, long since deceased, practiced a fraud upon their nephews and nieces.
(8) Some of the facts of the last preceding paragraphs are true as to the widow and daughter of Calvin F. Burnes, whose only appearance in the case is by counsel and also by filing an answer not under oath.
In view of the foregoing, no other finding can be made than that James N., Sr., and Calvin F., did not, by making the gifts to C. C. and D. D., practice a fraud on the six children of Daniel D., Sr.; and it cannot be said that Calvin F. concealed this fact to bring about the family settlement, or that such fact entered in the settlement. And it is not made to appear but that C. C. and D. D. were entitled to an allowance because of “your courtesy, friendly assistance, and.uniform devotion to our interests,” as well as for services rendered. All, or nearly all, of respondents testify that they knew, during their life at Ayr Dawn, that C. C. and D. D were given extravagant sums of money, while they were held down to the necessaries and comforts of life; and yet, in making the family settlement, no question was raised as to these matters. The family settlement was made and the corporation formed upon the basis of the property owned by James N. Burnes, Sr., at his death, and not of what he once had owned, adding all the property Calvin F. Burnes owned in 1899. He was then free to do as he deemed best. He said he would put all in, and he kept nothing back. In my judgment the family settlement cannot be avoided by the gifts, or advancements, so called, to C. C. and D. D. Burnes.
By the Constitution of the state, corporations are created only under general laws; and by the same instrument it is provided that preferred stock cannot be issued excepting by unanimous consent of the stockholders, nor can the capital stock be increased other than by majority vote of the stockholders. I am unable to find any inhibition by statute upon the right of a corporation to take, hold, or own its corporate stock, or to reduce it by purchase and cancel it. Impliedly such rights are conferred, because provision is made that, before the stock can be diminished, the corporate debts must be cared for; and as the statutes also make provision as to stock that is pledged to a corporation, the corporation may and will become the owner thereof, if redemption is not made. The indebtedness of the Burnes Estate corporation is nominal. No creditor of the corporation has heretofore complained, and no creditor is now complaining, of the purchase of the Winning-ham or the taking of the Calvin F. Burnes stock. And, as all the creditors can be paid any day by check against moneys on hand, there can' be no complaint by a creditor. Not only so, but the Constitution of Missouri provides against liability of a stockholder if the stock is fully paid up, making it immaterial whether there are few or many, or solvent or insolvent stockholders. And the stock of this company was many times paid for when it was organized. Therefore cases like that of Scovill v. Thayer, 105 U. S. 143, 26 L. Ed. 968, are without force in the case at bar, and throw no light upon the question as to the validity
The case at bar presents a question as to the right to cancel or purchase its own stock by a corporation, when no creditor is affected, when the corporate assets are not diminished, when no harm is done any stockholder, but when it is to the very great advantage of every remaining stockholder. The annual earnings of the 375 shares will more than pay the annuity of $12,000, and still add to the surplus fund; and the annuity after a few years will cease. But, whether the 375 shares subject to the annuity is an asset or liability, all the stockholders, including respondents, agreed to their purchase. Therefore the question, and the only question, is: Was the act of the corporation in taking the Calvin F. Burnes stock ultra vires, in the sense it could be avoided either by suit or by the directors?
There are many and ample provisions in the Missouri statutes requiring the Attorney General to take action against a corporation that exceeds its corporate powers. Chancellor Kent decided in Silver Lake Bank v. North, 4 Johns. Ch. 370, that an individual contracting with a corporation could not raise the question as to the corporate powers; and the Supreme Court has several times held the same. National Bank v. Matthews, 98 U. S. 621, 25 L. Ed. 188 (and see notes to that case in 9 Rose’s Notes, 677); Railroad v. Lewis, 53 Iowa, 101, 4 N. W. 842.
This is not a case wherein one corporation is buying the stock of another corporation in like business, nor one corporation by contract merging with another; nor does it involve the charter duties of a public corporation, engaged in the performance of duties to the public. Respondents rely upon the cases of De La Vergne Refrigerating Mach. Co. v. German Sav. Inst., 175 U. S. 40, 20 Sup. Ct. 20, 44 L. Ed. 66; Pullman Co. v. Transportation Co., 139 U. S. 62, 11 Sup. Ct. 489, 35 L. Ed. 69; Pullman Co. v. Transportation Co., 171 U. S. 139, 18 Sup. Ct. 808, 43 L. Ed. 108. The facts of those cases were within the lines as above stated, and therefore are in no manner in point.
The powers of the Burnes Estate corporation, in part, as recited by the articles of incorporation, are as follows:
“Ninth. The purposes for which this corporation is formed shall be as follows, to wit: To buy, deal in, handle, hold, lease, mortgage, convey, pledge, and otherwise dispose of and acquire real estate, personal property, and choses in action, and all other kinds of property, including bank stocks of every kind or corporation whatever, whether mentioned herein or not, or whether of the same kind or character as herein mentioned.”
So that the power to take the stock of Calvin F. Burnes has some support from the articles of incorporation. No harm to the public was done. The commonwealth makes no complaint. When not harmful to creditors, the Supreme Court of Illinois in Clapp v. Peterson, 104 Ill. 26, expressly held that a corporation can purchase its own stock. The opinion was based on the prior case of Railroad v. Town of Marseilles, 84 Ill. 643, in which several authorities are cited. Dupee v.
The arrangement to pay the annuity to the widow and daughter of Calvin F., and to take Calvin’s 375 shares, was not ultra vires. And if there were any doubt about these questions, such doubts would be removed because of the long delay, the death of the actors in the transactions, the long acquiescence, either with knowledge of the facts, or without knowledge of such facts, which, if put to use, would have uncovered the entire situation. The fact that the corporation, as such, seeks by interested officers to urge the defense, is not controlling. After having the advantageous contract, and enjoying the benefits for years, it will not be allowed to urge the defense of ultra vires.
And if the contract with the widow and daughter of Calvin F. by the corporation was ultra vires, why was not the contract with Mrs. Winningham? By the unsigned will of Calvin she was to have an annuity. She declined to accept it. Then the corporation bought her stock and her interests, and Lewis C. has been holding them for years in trust for the corporation. And now he and his brothers and sisters, the corporation joining, want the contract with Mrs. Winningham for her stock to stand as valid, and a like contract with the Widow and daughter of Calvin F. to be decreed as ultra vires!
The respondents are most earnest in their defense, upon the alleged invalidity of the transaction of the widow and daughter turning the 375 shares over to the corporation in consideration of the promised annuity, and upon the unfairness and invalidity of the original allotment of the shares. Yet for 15 years they have voted their stock. For years some of them have been officers; and at the last annual meeting they voted their stock, and over the protest of complainants they allowed Lewis C. to vote the Calvin F. stock. Lewis C. still votes the Winningham' stock, paid for by the corporation. This corporation as a whole is legal or illegal. These transactions, not in part, but in entirety, are either legal or illegal. These matters must stand or fall as a whole, and respondents cannot challenge those against their interests and by the same reasoning be allowed to hold fast to that which is good. If it were ultra vires to buy Calvin’s stock with a life annuity, it was ultra vires to buy Mrs. Winningham’s stock; and yet the purchase has many times over been ratified by all the parties.
It is said that the life of the corporation may end long before the annuities cease. That question is foreclosed by the Union Pacific Bridge Case (Union Pac. Ry. Co. v. Chicago, R. I. & P. Ry. Co.) 163 U. S. 564, 16 Sup. Ct. 1173, 41 L. Ed. 265, wherein Chief Justice Fuller quoted with approval the views of Judge Sanborn in the same case when it was before the Court of Appeals, 51 Fed. 309, 2 C. C. A. 174. The Burnes Estate may not be rechartered; but if it ends by limitation, or is dissolved' by its stockholders or by decree of court, who that has belief in the powers of a court of chancery can doubt but that the daughter of Calvin F. Burnes will be protected and given her annuities ?
C. C. Barnes, one of the sons of James N., Sr., died in 1893. He ■was the husband of Mrs. Frances Burnes, and the father of Marjorie Burnes, complainants herein. He and Lewis C. were devoted to each
There were then five directors, viz., Lewis C., James N., Jr., Mrs. Gatch, Mrs. Frances Burnes, and Kennett. The latter was not at home. No one was present but the four. Much of what occurred is in controversy; but that Mrs. Frances Burnes was in a rage, and not in frame of mind to consider anything is told by all. Upon the resolution to surrender back the stock of Calvin F. to the widow and daughter of Calvin F., three directors, Mrs. Gatch, James N. Burnes, Jr., and Lewis C., voted aye. Being financially interested, had any of them the right to vote? Mrs. Frances Burnes is recorded as not voting. Ken-nett was not notified of the meeting and was absent from the country. Soon thereafter complainants went to Europe, where they remained over a year. During that time the nature of what had been done does not appear in the correspondence of Lewis. The stock book shows the 375 shares of stock to stand in the name of Lewis C. But none of the books show the nature of the trust. The widow and daughter of Calvin F. were to turn back to the corporation something over $50,000 in annuities they had received from the corporation. They did not do this; but it was done by the obligation of Lewis C. to the corporation, on which some payments have been made. The alleged trust between Lewis and the widow and daughter of Calvin F. 'was part of the same transaction as the action of the board and the attempted.
I have not reviewed all the evidence in the case. There are other items of evidence that could be cited to strengthen the conclusions reached; and there are other items of evidence that, if cited, would tend to impair the conclusions reached. But such othera evidence, both for and against the conclusions, are in no sense pivotal or controlling. The main questions of both law and fact have now been presented. Such is this case, of much interest to me because of the questions presented, the history of the parties, and their ancestors, and the development and growth of this vast estate, and of interest, because of the ability of counsel and of the eloquence in argument when the case was being submitted; but the case is a sad one, when we reflect that these three families once lived together in such happy union at Ayr Lawn, but now three families, divided, and with enmity and hatred one toward another. There remains for this court to order a decree in favor of the complainants and respondent Kennett Burnes, canceling as retired the Winningham and Calvin F. Burnes stock, confirming in them their respective shares, confirming the family settlement, the formation of the corporation, and the allotment of shares, declaring a liability' against the corporation of $12,000 per annum during the life of the daughter of Calvin F., and to send the case to a master, to the end that Lewis may be reimbursed for his payments on account of the annuities, and that the exact situation may be made known to the court
And such a decree will be entered.