81 N.W.2d 615 | Minn. | 1957
In an express trust proceeding, we have three separate appeals, one appeal by the objector from two separate orders whereby the court by one order confirmed the appointment of the trustee and assumed jurisdiction of the trust pursuant to M. S. A. 501.33, and by a second order allowed the trustee’s account and discharged him; and then two other and separate appeals, one by the settlor-trustee
The appeal from the first two orders confirming the trust and allowing the trustee’s account was taken by Joseph B. Crowther, as objector, in his capacity as administrator of the estate of Audrey Arnold Johnson, deceased beneficiary, by virtue of letters of administration issued to bim in the State of Kansas. The appeals from the vacating or final order were taken by Archibald Gr. Bush, the alleged settlor-trustee, and by Ellen F. Bassler, special administratrix of the estate of William B. Bassler, father and heir of Audrey Arnold Johnson.
The appeal by the objector from the order confirming the appointment of a trustee and from the order allowing the trustee’s account and discharging him raises issues (1) as to whether an express trust of corporate stock was ever created over which the court could acquire jurisdiction and (2) if a trust was created, whether the court was divested of its trust jurisdiction by the voluntary act of the trustee in transferring the res to the settlor after the purpose of the trust had been fulfilled. If an express trust was created, and if the trial court was not divested of its jurisdiction over the trust by the trustee’s act of transferring the rest to the settlor, then it will follow that the court’s order vacating, for lack of jurisdiction, its first two orders was erroneous and must be reversed.
If an express trust was ever created, the requisite intent to create it, as well as the other essential trust elements, must be inferred from the following transactions between Archibald G-. Bush, as alleged settlor-trustee and his wife’s niece, Audrey Arnold Johnson (who died in 1953 and is herein referred to as Audrey or as the beneficiary). Bush, a major stockholder of the Minnesota Mining and Manufacturing Company (herein designated as 3M) and the chairman of its executive committee, motivated by a desire to give various nieces and nephews property which would yield them a fixed
In December 1941, Bush transferred to the name of Audrey 50 shares of the 3M common stock but did not deliver the new stock certificate to her. Again in December 1942, he similarly transferred to her an additional 50 shares of 3M stock. In both instances the transfer in registration was made on the records of the First Trust Company of St. Paul, transfer agent for the 3M company; but the uncontradicted evidence establishes that the new certificates were delivered by the transfer agent to Bush and that he thereafter kept them in his possession. When the 1942 stock transfer took place, on December 16 of that year, Bush wrote Audrey (whose married name was then Arnold) the following letter:
“Dear Audrey:
“I just wanted you to know that your Aunt Edyth and I are having put away for you, transferred to your name, 50 shares of 3M stock. I shall Tceep this certificate here along with the certificate transferred to you last yecur. It is registered in your name, care of W. B. Bassler, San Diego, so your dividend checks will flow in that direction. The next dividend, we hope, will come through next March. “I hope you and the Major will have as pleasant a Christmas as is possible during the war period.
“Sincerely yours,” (italics supplied).
May the above letter be construed as a trust instrument? In passing upon the basic question of trust or no trust, we must consider not only this letter and the two transfers of stock registration referred to therein but also the acts of the parties with the respect to the issuance in the name of Audrey of additional shares of stock resulting from a split-up by the 3M company of its common stock. In November 1945, by reason of a split-up of two shares for one,
In 1950 or 1951 Audrey married Johnson. In order to change the registration of the stock to her new married name, Bush, without delivering the stock certificates to her, sent to her, for her execution, assignment blanks and stock powers. These assignments and stock powers were signed by Audrey and returned to Bush, who then arranged to have new certificates issued in her new married name. Again the transfer agent, upon the request of Bush, delivered the new certificates to him. All stock dividends were, however, at all times paid directly to Audrey until her death on October 5, 1953.
Upon Audrey’s death, Bush had the stock certificates transferred back to his name. In February 1955, he petitioned the court for confirmation of his appointment as trustee, and in March 1955, for his discharge after the allowance and settlement of his account as trustee. On March 7, 1955, the court issued an ex parte order confirming Bush as trustee, and by a subsequent order of January 3, 1956, his accounts were settled and he was discharged. Both of these orders were vacated by an order of the court dated January 31,1956. The appeals herein are from these orders and were, with the exception of the one by the special administratrix, taken prior to the expiration of the 30-day stay applicable to the vacating order.
Although under the parol evidence rule (in the absence of fraud or other ground for reformation or rescission), extrinsic evidence may not be used to contradict or vary the settlor’s written declaration of intent, it is nevertheless admissible in interpreting and clarifying a writing which is ambiguous and uncertain as to the settlor’s intended meaning. Thus, for the sole purpose of resolving ambiguity, extrinsic facts and surrounding circumstances — inclusive of the conduct of the parties and any practical construction which
When in the light of the extrinsic evidence as a whole, the ambiguity in the settlor’s writing is clarified in a manner which reasonably sustains a finding of an intent to create a trust, the essentials of a trust relationship must clearly appear.
In applying these principles, we have no difficulty in concluding here that the 1942 letter, in the light of the surrounding circumstances and the practical construction placed on that letter by both Bush and Audrey, sustains a finding that Bush intended to create a trust relationship. Despite his general intention, the critical issue, with which we shall later deal, is whether as a matter of law he conveyed the entire title and estate to the trust res, as well as the beneficial interest therein, to Audrey, so that the essential separation of the legal estate from the beneficial interest is missing. Before dealing with this critical point, we shall consider what intent Bush manifested by his letter in the light of the surrounding circumstances.
The letter itself is not free of ambiguity. By his writing Bush tells Audrey that, although he has transferred the 3M stock to her name so that the dividends will flow to her, he has nevertheless put the stock away for her and that he will keep the stock certificates in his possession. Assuming for the nonce that he has not conveyed the entire estate and legal title to Audrey, the surrounding circumstances indicate a trust purpose. Significantly, after Audrey had dissipated the 3M stock, which he had transferred to her on the books and the certificate for which he had delivered to her in 1937 as an outright gift, Bush sought in 1941 and 1942 to adopt an arrangement whereby she would receive the income from the stock but would be unable to dissipate the source of the income, the stock itself. In carrying out the new arrangement, he had new stock certificates issued and registered in her name on the corporate books but he made no delivery to her of the certificates but kept them under his control. Although he provided for the needs of other members of
His manifest intention to exercise exclusive domination and control of the stock, and to give Audrey only the beneficial interest of the dividend income, is demonstrated by his subsequent action in dealing with the additional shares resulting from a corporate split-up of common stock. The corporate transfer agent had no knowledge of the new plan and therefore sent the certificate for the first split-off shares to Audrey directly as the registered owner of record. Audrey promptly sold these shares as she had done with the shares given to her in 1937. Obviously, Bush had overlooked the fact that the transfer agent, in the absence of instructions, would send the certificates for the split-off stock directly to her. When he learned what had taken place, he took corrective action before the next stock split-up occurred; by letter he instructed the transfer agent to send the new certificates to him. In this letter, Bush made no mention of a trust but stated that the arrangement was desirable because Audrey was ill. His failure to explain his conduct on the basis of a trust is of little significance; what is important is that he insisted on an arrangement which gave him possession and control of the new stock.
When Audrey married Johnson, Bush had new certificates issued in her name but again he was careful to retain possession of the certificates. Audrey’s conduct in not protesting his retention of the stock certificates, and in executing and forwarding to Bush upon his request the necessary assignments and powers of attorney so that new certificates could be issued in her name without delivery of the new certificates to her, confirms the fact that she understood that the arrangement was one which gave Bush the exclusive control of the stock and that she was in fact only an income beneficiary. The testimony by the secretary of Bush, who had the responsibility of carrying out the mechanics of the transaction, confirms the arrangement. Thus, Bush and Audrey, by their own practical construction, in effect recognized the existence of a trust. We hold, therefore, that the extrinsic evidence, as applied to the 1942 letter, reason
Does the intended trust fail, however, because the essential element of a separation between the trustee’s estate and the beneficial interest is missing? Did Bush retain for himself as trustee the entire ownership of the stock and give Audrey only a beneficial interest, or did he, by having the stock registered in her name on the corporate books, give her the absolute ownership of the stock? If he did the latter, there is no trust since Audrey then, as a matter of law, became a donee of the stock instead of a mere holder of a beneficial interest. We have, therefore, this question: When a stockholder turns in his certificate of stock and has a new certificate issued and recorded on the corporate books in the name of another as transferee, but has the new certificate delivered into his own hands and retains possession thereof until the death of the recorded transferee, does the legal and equitable title to the stock remain in the transferor or does it pass — without any actual delivery of the new certificate — to the transferee as a gift inter vivos?
Whether a gift is completed by a bare transfer on the books of the corporation, when the transferor takes and retains possession of the new certificate, is an open question in Minnesota. Among the other jurisdictions there is a division of authority.
In Minnesota we have never held that a stock certificate is but secondary evidence of ownership. It is the law of this state that a transfer of stock is good between the parties and that the title passes to the purchaser without the transfer being entered on the corporate books.
“The mere direction by the owner to the corporation to change the corporate records regarding ownership, followed by such change to the name of another, would seem to be inadequate proof of a gift, when not followed by delivery of the new certificate. The change of the corporation transfer books is not ordinarily necessary to a completed gift or conclusive evidence that a donation has occurred.” 1A Bogert, Trusts and Trustees, § 142, p. 18.
In view of the basic importance of the certificate as a badge of ownership and as a symbol of a transfer of title between the parties, and further in view of the fact that the recording of a transfer of stocks on the corporate books, by the great weight of authority,
Was the trial court without jurisdiction? Did the trustee upon completion of the trust purpose, by his voluntary act of procuring the transfer of the trust res (the 3M stock) back to himself as remainderman, so completely terminate the trust that it ceased to exist for all purposes with the result that there was no trust existing over which the court could exercise jurisdiction when it purported to enter orders confirming the trust, allowing the account, and discharging the trustee? Obviously, the answer must be in the negative. Once an express trust has been created, the trustee is subject to the jurisdiction of the court and, pursuant to that jurisdiction, he can be compelled to render to the court an account of his administration of the trust, and no act on his part, such as a dissipation or a conveyance of the trust res, can divest the court of its jurisdiction and thus render him immune from court supervision in the discharge of his fiduciary responsibility. Any other rule would defeat the basic purpose of the principle that a trustee is always accountable for his administration of the trust property.
There is no merit in the contention that the court’s proceeding is wholly in rem and that, once the trustee has disposed of the trust res, there is nothing to which the court’s jurisdiction can attach. It is true that § 501.33 provides that once a trustee has been confirmed thereunder the district court shall have jurisdiction of the trust
Not only can the trustee be compelled to give an account of his trust administration, but he himself as trustee has an interest in the settlement of his accounts and has a right to insist that the accounts shall be examined and settled by the proper court. This right is important to the trustee since a settlement gives him protection against further litigation with respect to matters in the accounting and give him the defense of res judicata as to those matters.
That a trustee has it in his power at any and all times to come of his own motion and secure from a court of equity a settlement of his account is a principle so well settled that it was upheld in Dyer v. Waters, 46 N. J. Eq. 484, 19 A. 129, without statement of authority. More recently another New Jersey case held that correlative with a duty to keep and render accounts is the right to secure repose by judicial settlement. In re Rothenberg, 129 N. J. Eq. 377, 19 A. (2d) 639.
Affirmed in part and reversed in part.
Upon Appeal prom Clerk’s Taxation op Costs.
On April 5, 1957, the following opinion was filed;
As To Costs and Disbursements Awarded To Appellant Bush
Objector contends that the trustee is not entitled to an award of his costs and disbursements because M. S. A. 519.11 provides that, in actions prosecuted or defended by a trustee, costs and disbursements shall be chargeable to the trust estate unless the court directs them to be charged against the trustee personally because of mismanagement or bad faith. Pursuant to our holding in Malcolmson v. Goodhue County Nat. Bank, 198 Minn. 562, 571, 572, 272 N. W. 157, 162, we do not here have an action prosecuted or defended by the trustee within the meaning of this statute but instead a special proceeding brought by a trustee asking for the allowance of his account and for his discharge which is concluded by a final order. It is settled that
There is no merit in the contention that the brief filed in behalf of appellant Bush contained unnecessary, irrelevant, and Immaterial matter so as to justify or require a reduction in the allowance of disbursements for printing. See, Albert Lea Ice & Fuel Co. v. United States Fire Ins. Co. 239 Minn. 198, 205, 58 N. W. (2d) 614, 619; see, also, In re Guardianship of Maloney, 234 Minn. 1, 12, 48 N. W. (2d) 313, 49 N. W. (2d) 576.
The disbursement item of $20 awarded to the trustee for the bond premium is not excessive since such item covered two annual bond premiums. The clerk’s award of $117.85 for printing trustee’s reply brief is, however, reduced by one-third since only two-thirds of such reply brief was reasonably necessary.
As To Costs and Disbursements Awarded To Appellant Bassler
Objector contends the clerk’s award of taxation of costs to appellant Bassler should be disallowed. Where a party litigant has no financial interest or other right which could be affected either adversely or favorably by the outcome of the litigation, he is a mere interloper, and if he takes an appeal, or participates in an appeal taken by others, he is not entitled to an award of his costs and disbursements. Appellant Bassler admittedly, when he took his appeal, had no interest or right which was in need of either advancement or protection. In fact, Bassler could be affected adversely only if his own contentions prevailed upon appeal. Moral indignation at the possible outcome of litigation is not of itself sufficient to give a litigant standing as a bona fide appellant entitled to costs and disbursements. The award of costs and disbursements to Bassler is disallowed in its entirety.
Am undisclosed intention is wholly ineffective since it is not admissible of proof in a judicial proceeding. See, Restatement, Trusts, § 4, comment a, and § 23, comment a; 1 Scott, Trusts (2 ed.) § 23.
The expression of the intent and the formation of the trust relation must concur. A subsequent intention is ineffective. See, Restatement, Trusts, § 4, comment a; 1 Bogert, Trusts and Trustees, § 45.
Farmers State Bank v. Sig Ellingson & Co. 218 Minn. 411, 418, 16 N. W. (2d) 319, 323; 19 Dunnell, Dig. (3 ed.) § 9884; 1 Scott, Trusts (2 ed.) § 2.8.
Jordan v. Jordan, 193 Minn. 428, 431, 432, 259 N. W. 386, 388; 19 Dunnell, Dig. (3 ed.) § 9884; Restatement, Trusts, § 23, comment a; 1 Bogert, Trusts and Trustees, § 45; 1 Scott, Trusts (2 ed.) § 24.
It has been appropriately said: “A bear well painted and drawn to the life is yet the picture of a bear,'although the painter may omit to write over it, ‘This is the bear.’ ” Fox v. Faulkner, 222 Ky. 584, 586, 1 S. W. (2d) 1079, 1080, quoting from Prewitt v. Clayton, 21 Ky. (5 T. B. Mon.) 4, 5.
Farmers State Bank v. Sig Ellingson & Co. 218 Minn. 411, 16 N. W. (2d) 319.
Jordan v. Jordan, 193 Minn. 428, 259 N. W. 386; Farmers State Bank v. Sig Ellingson & Co. supra; 19 Dunnell, Dig. (3 ed.) § 9884; Restatement, Trusts, § 38; 1 Scott, Trusts (2 ed.) § 12.2; 1 Bogert, Trusts and Trustees, § 51.
Jordan v. Jordan, supra.
Jordan v. Jordan, supra.
Farmers State Bank v. Sig Ellingson & Co. supra.
Stacey v. Taylor, 196 Minn. 202, 209, 264 N. W. 809, 813; Mattson v. United States Ensilage Harvester Co. 171 Minn. 237, 243, 213 N. W. 893, 895; 19 Dunnell, Dig. (3 ed.) § 9888.
Wertin v. Wertin, 217 Minn. 51, 13 N. W. (2d) 749, 151 A. L. R. 1302; Farmers State Bank v. Sig Ellingson & Co. supra.
First and American Nat. Bank v. Higgins, 208 Minn. 295, 311, 312, 293 N. W. 585, 594; Farmers State Bank v. Sig Ellingson & Co. 218 Minn. 411, 416, 417, 16 N. W. (2d) 319, 322; Merriam v. Wagener, 74 Minn. 215, 220, 77 N. W. 44, 45; see, 1A Bogert, Trusts and Trustees, § 183; 2 Scott, Trusts (2 ed.) § 130.
The leading cases holding that a mere transfer on the books of the corporation, without delivery of the certificates, passes title are: Robert’s Appeal, 85 Pa. 84; Chicago Title & Trust Co. v. Ward, 332 Ill. 126, 163 N. E. 319; Phillips v. Plastridge, 107 Vt. 267, 179 A. 157, 99 A. L. R. 1074; Thomas v. Thomas, 70 Colo. 29, 197 P. 243; Copeland v. Craig, 193 S. C. 484, 8 S. E. (2d) 858.
Leading cases to the contrary are: Besson v. Stevens, 94 N. J. Eq. 549, 120 A. 640; Figuers v. Sherrell, 181 Tenn. 87, 178 S. W. (2d) 629, 152 A. L. R. 420; Hudgens v. Tillman, 227 Ala. 672, 151 So. 863; see, Barnhouse v. Dewey, 83 Kan. 12, 109 P. 1081, 29 L.R.A.(N.S.) 166; Southern Industrial Institute v. Marsh (5 Cir.) 15 F. (2d) 347, certiorari denied, 273 U. S. 747, 47 S. Ct. 449, 71 L. ed. 872; White v. White, 229 Ky. 666, 17 S. W. (2d) 733.
Robert’s Appeal, supra, and associated cases cited in preceding footnote.
Dennistoun v. Davis, 179 Minn. 373, 378, 229 N. W. 353, 355, and cases therein cited; 4 Dunnell, Dig. (3 ed.) § 2044.
L. 1933, c. 331 (now M. S. A. 302.02 to 302.22).
Dennistoun v. Davis, supra.
This section is identical with § 1 of the Uniform Stock Transfer Act. 6 Uniform Laws Annotated, § 1.
The Commissioners’ note to § 1 of the Uniform Stock Transfer Act (identical with the provisions of M. S. A. 302.02) reads as follows (6 Uniform Laws Annotated, p. 2):
“The provisions of this section are in accordance with the existing law (see Cook on Corporations, section 373 et seq.), except that the transfer of the certificate is here made to operate as a transfer of the shares, whereas at common law it is the registry on the books of the company which makes the complete transfer. The reason for the change is in order that the certificate may, to the fullest extent possible, be the representative of the shares. This is the fundamental purpose of the whole act, and is in accordance with the mercantile usage. The transfer on the books of the corporation becomes thus like the record of a deed of real estate under a registry system.” (Italics supplied.)
Although the soundness of the commissioner’s analogy between a corporate record of a stock transfer and the recording of a real estate deed may be questioned in certain respects, it is significant to note that the act of recording a real estate deed merely raises a presumption of the deed’s delivery. See, Babbitt v. Bennett, 68 Minn. 260, 71 N. W. 22; Hooper v. Vanstrum, 92 Minn. 406, 100 N. W. 229; 5 Dunnell, Dig. (3 ed.) § 2668, and cases therein cited.
Figuers v. Sherrell, 181 Tenn. 87, 93, 94, 178 S. W. (2d) 629, 631, 152 A. L. R. 420.
See, 13 Am. Jur., Corporations, §§ 352 to 354; M. S. A. 302.02.
M. S. A. 501.35; Restatement, Trusts, §§ 172 and 260; 4 Bogert, Trusts and Trustees, § 969; 3 Scott, Trusts (2 ed.) § 260; Lewin, Trusts (15 ed.) pp. 403, 404.
See, also, United Towns Bldg. & Loan Assn. v. Schmidt, 23 N. J. Super. 239, 92 A. (2d) 844.
None of the cases cited by the parties to this appeal are actually in point. In First Trust Co. v. Matheson, 187 Minn. 468, 246 N. W. 1, 87 A. L. R. 478, the plaintiff trustee asked the court to establish the validity of a trust. It was held only that substituted service on the beneficiary confers jurisdiction to make a determination binding on the beneficiary as to the ownership