41 A.2d 533 | Pa. | 1945
Plaintiff appeals from the dismissal of her bill charging the defendant with numerous breaches of trust. After an extended trial, Judge BOYER filed an adjudication dismissing the bill. Plaintiff's exceptions were dismissed by the court in banc.
The adjudication and the opinion of the court show that the case was thoroughly considered. There is evidence to support the findings of fact which, approved by the court in banc, are accepted here: Walton Estate,
Appellant complains that the defendant, as trustee, ". . . acquired treasury stock of a corporation for himself individually through the use of preemptive rights *604 which belonged to the trust res and for which he paid no consideration . . ."; that he was permitted to retain these shares of stock on showing that the plaintiff had consented to the purchase, at a time when a confidential relation existed between them, and appellant had no independent advice; that he was permitted to retain a salary, alleged to be excessive, paid to him by the corporation; that the court erred in adjudging the plaintiff guilty of laches.
The business relations of plaintiff and defendant were agreeable and harmonious for the period following the death of her first husband, July 20, 1920, until about 20 years later.1 Defendant had been her husband's attorney since 1918. In October, 1918, her husband, with about $30,000 borrowed from his uncle, Mr. Bowen, purchased 348 shares of stock thus acquiring a majority stock interest in Ward-Davidson, engaged in manufacturing turkish towels and similar textiles. When appellant's husband died, she was 29 years old, with a son about two years of age. Her husband gave his property to her by will of which she and the defendant were named as executors. Their executors' account, filed in the Orphans' Court of Philadelphia, showed a small balance of personalty; in addition, her husband left a small investment in real estate; the learned chancellor was unable to state the value of the real estate with certainty but concluded she received from her husband personal and real estate probably worth from $5,000 to $7,000. Appellant was thus deeply concerned about the sufficiency of her husband's estate to support her and her infant son. *605
The books of the Ward-Davidson Company at the time of Mr. Davidson's death showed a "substantial surplus" though the company owed considerable sums to banks on paper endorsed by Davidson. The active practical men in the business were two comparatively young men, Mr. Ward and Mr. Scott. In 1920 defendant2 was elected a director of the corporation, and became chairman of its finance committee — a position he held at the time of Mr. Davidson's death. After that, defendant was elected president and, by pledging his own credit with the company's bank creditors and with the "aid of Messrs. Ward and Scott made the business a success."
It was considered necessary to supply the plaintiff with an income on which to live, as her husband's estate, if then liquidated, would probably have been insolvent. She had no business experience but, nevertheless, on August 30, 1920, was made Secretary3 of the corporation, and was paid a liberal salary and from time to time received "bonus" payments as other officers received them. Her husband's indebtedness to his uncle, Mr. Bowen, required attention. She advised with him at various times concerning her finances as well as the business of the corporation; she also advised with her father. Her situation and that of the corporation were also considered by the defendant, and one result of the general consideration was the execution of the Deed of Trust *606 dated December 28, 1921, by which she transferred to defendant as trustee, 345 out of 348 of the shares of stock bequeathed to her by her husband. The result of course was that by voting the stock in the trust, defendant could control the corporation, the total number of shares issued being 632. The term of the trust was twenty years, said to have been so fixed to cover the minority of plaintiff's son. There is evidence that the deed of trust4 was suggested by the plaintiff's father. The deed was drawn by counsel who represented her and the defendant as executors of her husband's estate. She signed a letter, drafted by counsel, addressed to the defendant, stating the reasons5 for making this deed of trust. Prior to the execution of the deed, and thereafter defendant received a salary and bonuses from the corporation which the chancellor found were paid for services he rendered to the corporation. From time to time treasury stock was issued. The plaintiff was given the right to take it and declined it. She objected to its being taken in the trust and assented6 to the defendant's *607 purchase of the stock. As a result of new issues of treasury stock and of purchase from other stockholders, defendant, individually and as trustee, became the holder of the majority of the shares. The relations of the parties ceased to be harmonious shortly after she married her present husband in 1941.
The corporation had good years and bad years but on the whole flourished and the evidence supports the chancellor's finding that defendant's services were material elements in its success. In 1932, defendant prepared an account to June 24, 1932, with the intention of filing it in court and so informed plaintiff. She approved it in writing (cf. Wilbur's Estate,
Plaintiff's bill was filed January 30, 1942. In dealing with the preëmptive right8 to purchase treasury stock, the learned chancellor said that while these rights had theoretical value they had no actual value from 1925 to 1930. Concerning this stock, some of which was sold to the defendant, the court found that it was not sold at a price so much below book value "as to throw any light or suspicion on the conduct of the defendant in purchasing the same". He added that, after the interval of from 13 to 17 years since that stock was sold, it was impractical or impossible fairly to ascertain the actual market value of the stock when issued, and that he could not make such a finding from the record. He found specifically that none of the stockholders considered the preemptive right to purchase the stock of any importance or of intrinsic value.
In appellant's brief it is said: "The record is very long and most of it is immaterial to this appeal as the findings of fact of the court below on conflicting evidence are not contested." It is clear that we must overrule the assignments of error complaining that defendant was allowed to retain this stock in the circumstances stated. It is equally obvious, if the case turned on the point, that appellant's 13 years' delay would be a bar. Compare Walton Estate,
The fact that a confidential relation existed between the plaintiff and the defendant, does not militate against the conclusion reached by the learned chancellor; it was only one of the elements in the problem that he was called on to consider. Defendant sustained the burden of proof. It is argued on her behalf that she was entitled *609
to independent advice. This subject was considered at length by the learned court. Specific findings on the subject were made to the effect that she knew what she was doing and understood the reason and the purpose for doing it; that there was no "fraud, deceit, misrepresentation, coercion, undue influence or abuse of confidence . . ."; that the terms of the deed, considering its purpose, "were generally fair, just and equitable"; that she consulted with counsel representing her and the defendant, executors of her husband's estate; that she consulted with her father, "who, on behalf of Plaintiff, had suggested a Deed of Trust to Defendant"; that she "consulted with, and was advised by, her late husband's uncle, Harry Bowen, a man of wealth and business experience, on her business and financial affairs"; that she discussed the affairs of the company with a Mr. Henry, "a member of the Philadelphia stock brokerage firm of Biddle Henry". We must therefore reject the argument based on the assertion that she was not advised. Compare Neal v. Black,
The remaining contention urged by the appellant is stated in her brief to be that "Defendant must account to the Plaintiff for excessive compensation received by him as an officer of companies which, as trustee, he controlled". The salaries were fixed by the Board of Directors of which the plaintiff was a member; that they were paid appeared in the annual reports which she received at the time. The learned chancellor said, "As to what bearing it may have on the question of the Defendant's honesty or good faith, we are impressed with three facts, namely; that his average compensation for the twenty-year period does not on its face appear excessive; that during the less prosperous period following 1929, the compensation was voluntarily reduced to an amount that was clearly inadequate; and that Plaintiff's high salaries were identical with Defendant's, each of which *610 considerations would tend to remove suspicions of dishonesty or overreaching." He was, however, of opinion that if the salaries were excessive, the remedy was with the corporation and that the point was not relevant in this proceeding. He also added that, ". . . excepting as to the last few years, such a remedy in this proceeding, if otherwise valid, would be barred by laches."
We agree that if the point is relevant, a matter we need not discuss, plaintiff's participation in establishing and paying these salaries in the circumstances stated in the record is in itself a complete bar. Compare Walton Estate,
It is unnecessary to discuss cases which the parties have cited. There is no room for dispute of applicable law. There has been no relaxation of the high standard of duty required of a trustee, as set forth, for example, in Restatement, Trusts, sections 170, 173, and 179. If the beneficiary, with knowledge9 and for her own benefit, provides a different standard by contract with the trustee, she may be held to it. The deed contained an exculpatory clause relieving the trustee from liability for conduct except "wilful misconduct or gross negligence" a permissible provision: Gouley v. Land Title Bank Trust Co.,
The learned chancellor stated: "After the termination of the trust, but prior to this litigation, the Defendant, together with Messrs. Ward and Scott, made an alternative offer to sell their stock to the Plaintiff at par, or else to buy her stock at par. This offer was made to end any dissatisfaction as to stock control of the corporation. Both offers were refused by Plaintiff."
Decree affirmed at appellant's costs.
