184 S.E. 823 | N.C. | 1936
Civil actions to restrain execution of stock assessment levy, to recover of trustee for faithless management of trust estate, and to establish preference or priority of claim to funds in hands of liquidating agent of insolvent bank.
The cases were consolidated for trial and heard, without the intervention of a jury, upon uncontroverted facts or those found by the court.
In the first case, for brevity, called the "Young Case," the plaintiffs, who are grandchildren of A. B. Andrews, Sr., deceased, seek to restrain execution of judgment for stock assessment against the trust estate of their grandfather in the sum of $160,000, to require an accounting, and to secure the appointment of a competent trustee to manage said estate.
In the second action, for short called the "Cheshire Case," the newly appointed trustee seeks to repudiate the holding and purchase of stock *803 in the North Carolina Bank and Trust Company by the former trustee, to recover for the faithlessness of the said trustee or trustees, and to establish a preference or prior claim upon the assets in the hands of the liquidating agent of the North Carolina Bank and Trust Company.
On 17 April, 1915, A. B. Andrews, Sr., died a resident of Wake County, leaving a last will and testament by the terms of which he created a trust estate for the benefit of his children and grandchildren, and appointed the Raleigh Savings Bank and Trust Company trustee of his estate.
Item Three of the will empowers the trustee to change investments in the trust estate by sale and purchase, provided it first obtain the consent, in writing, of a majority of testator's children living and having issue, but that in case of the sale of the 800 shares of stock in the Citizens National Bank, held by the testator at the time of his death, the consent of Joseph G. Brown, president of the bank, shall also be secured in addition to the consent of a majority of the children living and having issue.
This item concludes as follows:
"Having been one of the organizers of said Citizens National Bank of Raleigh, N.C. and having been a director in that institution ever since its organization, over forty years ago, and being anxious to hold my stock in said bank for the benefit of my family, and especially of my grandchildren, I suggest that said trustee do not sell any of said bankstock unless the further holding of said stock would, in the opinion of said trustee, be detrimental to the best interests of said trust estate, and it would be gratifying to me for Mr. Joseph G. Brown to remain president of said bank as long as he lives and for the trustee holding said stock in trust to vote for him as such president; and in case of his death it would be pleasing to me for the said bank to make my son, Graham H. Andrews (who is now in said bank and expects to make it his life work), president or some other prominent officer of said bank; but these statements as to the holding and sale of said stock and as to officers of said bank are mere expressions of my personal preferences and are not to be taken as obligatory or as binding or enforceable in a court of law."
Item Twelve of the will provides that in the event of the death of any person whose consent is required to effect any change or sale of investments, the will shall be construed as though such consent were not required. Joseph G. Brown died in January, 1927.
The income from the trust estate was to be paid to the trustor's children so long as they should live, and the corpus of the estate was then payable to their children (grandchildren of trustor) per stirpes.
The holding of stock in the Citizens National Bank, which amounted to 800 shares at the time of trustor's death, was increased to 2,000 shares *804 in 1927, (1) by reason of a stock dividend of 400 shares, and (2) by the exercise of stock subscription rights, amounting to 800 shares.
In 1929 the Citizens National Bank of Raleigh combined with other banks of the State to form the North Carolina Bank and Trust Company, and the trustee exchanged the 2,000 shares of Citizens National Bank Stock, which it then held, for 16,000 shares (par value $10.00) of the stock of the North Carolina Bank and Trust Company.
This bank stock was held by the Raleigh Savings Bank and Trust Company, as trustee, until 1932, when it was merged with the North Carolina Bank and Trust Company, and thereafter the North Carolina Bank and Trust Company took over the management of the trust estate under authority of chapter 207, Public Laws 1931, and continued to act as such trustee, paying the income to the income beneficiaries, until its insolvency in March, 1933.
A stock assessment was levied against the bank stock, held for the benefit of the trust estate, which the plaintiffs in the "Young Case" seek to restrain and vacate.
The court found that the former trustee, or trustees, "did not exercise a sound discretion and act in good faith and to the best interest of the trust estate in the attempted purchase of the 800 shares of stock of the Citizens National Bank with trust assets in August, 1927, nor in the exchange of the stock of the Citizens National Bank for the stock of the North Carolina Bank and Trust Company in October, 1929, nor in the retention of the stock of the Citizens National Bank after August, 1927, nor in the retention of the stock of the North Carolina Bank and Trust Company after October, 1929." Exception No. 119.
Judgment was entered, and preferential claim decreed, against the assets in the hands of the defendants in the sum of $284,616.37, less dividends previously paid on said bank stock, agreeably to the prayer in the "Cheshire Case"; and the stock assessment levy was declared null and void as asked in the "Young Case."
The defendants appeal, assigning errors. A reversal of the present judgment was adumbrated or foreshadowed by the decisions in Hood, Comr., v. Trust Co. and Brand, ante, 367, and Parker v.Hood, Comr., ante, 494.
The Brand case, supra, is a direct authority against the position taken in the "Young Case," and the decision in Parker v. Hood, Comr., supra, is contrary to the preferential part of the judgment rendered in the "Cheshire Case." *805
It should be observed that here the trustor himself placed several restrictions upon the trustee. Investments were not to be changed without the written consent of certain of the income beneficiaries, and in case of a sale of the bank stock, the consent of the president of the bank, if living, was also to be obtained. These restrictions ought to be considered in passing upon the management of the estate. Hester v. Hester,
In the instant case, the trustee is held to have breached his trust in exchanging the Citizens National Bank stock for stock in the North Carolina Bank and Trust Company "without first procuring the consent of the children of A. B. Andrews as required by the will," which seems to be at variance with the written proxy authorization appearing of record; and again the trustee is charged with a breach of trust for holding the bank stock when there is no evidence that the requisite consent to sell could have been secured at any time, or that the trustee deemed "the further holding of said stock detrimental to the best interest of said trust estate." Stroudv. Stroud,
It appears somewhat inconsistent to hold the investment in the bank stock valid as to the income beneficiaries and invalid as to their children in the "Young Case," and then void as to both in the "Cheshire Case," yet this is the effect of the judgment entered below. It would seem, therefore, that, in result, the income beneficiaries win both ways and on opposite theories. Lannin v. Buckley,
The case turns on the alleged mala fides of the former trustee, or trustees, in the management of the estate. It is conceded the defendants' *806
119th exception, above set out, goes to the heart of the case. This exception must be sustained, as it is not supported by the record. Sheetsv. Tob. Co., supra; Carter v. Young, supra. The trustor had a peculiar interest in retaining the bank investment, not only because of his long association with the business, but also on account of the hope he cherished for the promotion of one of his sons in the same enterprise. The situation partakes of the unusual, which equity regards. McNinch v. Trust Co.,
It would serve no useful purpose to consider the remaining exceptionsseriatim, as the trial court apparently was misled by the application of inapposite principles. The judgment will be stricken out and the causes remanded for judgment accordant herewith.
Error.
