Mercer v. Buchanan

• Decision Date: 24 September 1904
• Docket Number: 14
• Citation: 132 F. 501
• Parties: MERCER et ux. v. BUCHANAN et al.
• Court: U.S. District Court — Western District of Pennsylvania

132 F. 501

MERCER et ux. v. BUCHANAN et al.

No. 14

United States Circuit Court, W.D. Pennsylvania.

September 24, 1904

Weil &amp Thorp, for complainant.

Henry A. Miller, for respondents.

BUFFINGTON District Judge.

This is a bill in equity filed by Mrs. Helen B. Mercer, the second life tenant in a certain deed of trust dated January 16 1900, against the trustees named therein. Her mother, Mrs Kate B. Bingham, now deceased, was the maker and first life tenant under said deed. Mrs. Bingham, when it was expected resided in New York City. She was apprehensive that death might result from Bright's disease, from which she was supposed to be suffering. Her husband had lost his mind and was in a sanitarium. He had but one daughter, the complainant, who was married, and whose husband's employment necessitated residence in Western Pennsylvania. In this state of health, with no male relative near her to depend on, being possessed of very considerable estate, and Mrs. Bingham, as stated in her deed of trust, 'being inexperienced in business myself, and feeling the necessity of having some competent person to take charge of my estate and of my business,' executed the deed of trust here in question 'for the purpose of securing a safe and secure income. ' By it she conveyed, inter alia, all her stock in the Apollo Iron & Steel Company (which company will in this opinion be styled the 'Apollo Company') to the respondents, 'in trust nevertheless to invest and keep invested the same and pay to me the income thereof, * * * which said net income shall be so paid to me if possible, quarterly, during the term of natural life, and from and after my decease to pay over the same net income quarterly, as near as may be, unto my said daughter, Mrs. Helen B. Mercer, for and during the term of her natural life,' with remainder to the latter's children, and in default thereof to certain collaterals. Mrs. Bingham died Paril 7, 1900. The present suit concerns certain dividends declared upon stocks of the Apollo Company, which dividends Mrs. Mercer alleges are payable to her as life tenant. It is well at this point to note that the keynote of construction of this deed of trust is the intent of the donor. The deed was not only voluntary and made without money consideration, but it contained a power of revocation by the donor during life. It was not the result of negotiation between her and Mrs. Mercer. The rights of the complainant beneficiary depended wholly upon the will and intent of the donor. Consequently the law raises no presumption or equities in the donees not expressed in the instrument or implied by the language or conduct of the donor. In deeds of gift, as in wills, the intent of the donor or maker prevails. Spooner v. Phillips, 62 Conn. 66, 24 A. 524, 16 L.R.A. 461; Gibbons v. Mahon, 136 U.S. 549, 10 Sup.Ct. 1057, 34 L.Ed. 525.

Mrs. Bingham, the creator of the trust, its primary beneficiary and first life tenant, was, as we have seen, when the deed was executed, a citizen and resident of New York; the three trustees and Mrs. Mercer, the second life tenant, were citizens and residents of Pennsylvania; the stocks covered by the trusts were in corporations chartered by the states of New York, New Jersey, West Virginia, and Pennsylvania respectively; the deed was executed and acknowledged in New York state; it was delivered by Mrs. Bingham, accepted by the trustees, and the securities turned over to them in New York. Mrs. Bingham subsequently came to Pittsburg and stayed at a hotel in that city until her death. It is alleged that her coming to Pittsburg, in connection with certain alleged declarations of an intent to reside there, and the fact that the trustees, who were residents of Pennsylvania, would transact the operations of the trust in that state, made this a Pennsylvania trust. The status of the deed, however, was fixed in January preceding, when it was executed, and we fail to see how may subsequent change of residence by the donor, if established, would affect such status. Nor, to our mind, is the conclusion warranted that the duties of the trustees were to be performed in any particular state. It was their duty to represent stock in corporations chartered by and located in four different states, to collect the dividends from these companies, and pay them to the beneficiary, who resided in New York. Under such conditions, and in view of the fact that the deed neither expressly or impliedly designated a place of performance, we think it is to be regarded as a New York state instrument, since it was there executed, acknowledged, delivered, and accepted, and that it is presumed to have been made with reference to the law of such state; Benners v. Clemens, 58 Pa. 24; Brooke v. Railroad Co., 108 Pa. 529, 1 A. 206, 56 Am.Rep. 235; Allshouse v. Ramsay, 6 Whart, 331, 37 Am.Dec. 417; Watson v. Brentner, 1 Pa. 381. Moreover, the mere fact that the trustees were citizens of Pennsylvania would not make it a Pennslyvania trust; Fowler's Appeal, 125 Pa. 392, 17 A. 431, 11 Am.St.Rep. 902. While the nature, validity, and construction of this contract should be determined in the light of New York law, there are strong arguments for asserting that the question of what, under the facts of this case, fall under the term 'income'-- which is, after all, the crucial question-- is one of such general character that a federal tribunal would solve that question in the light of its own reasoning and decisions. As, however, the federal and New York decisions are not conflicting when applied to the facts of the present case, we are not required to determine which system is controlling.

Let us now turn to the facts. The Apollo Company was chartered June 21, 1886, by the state of Pennsylvania, with a capital stock of $300,000, for the purpose of the 'manufacture of iron or steel or both, or of any other metal or article of commerce from metal, and the galvanizing of iron or steel, or both, or of any other metal. ' Its operations were highly successful, and its capital had been, prior to the creation of this trust, increased to $2,000,000. Its principal business had been the making of sheet steel, which it carried on at its plants at Vandergrift, which it owned, and at Apollo, which it leased. The plant at Vandergrift had been built on a large farm, on which a new town was laid out. In carrying out this work of development, certain subsidiary companies for exercising public utilities, disposing of land, furnishing fuel, etc., had been formed, the stocks of which were owned by the Apollo Company. The operations of the latter company were successful, and its stock made dividend-paying. On March 16, 1900, a short time after the creation of this trust, the company gave an option on its Vandergrift plant, and its lease of the Apollo plant, on its material in stock and in course of manufacture, its good will, trade-marks and formulas, and on all of the stock of the Apollo Gas Company, the subsidiary company that furnished the plants with fuel. This option resulted in a sale thereafter made to the American Sheet Steel Company, and in payment the Apollo Company received $6,000,000 in the preferred stock of the American Sheet Steel Company, $6,000,000 in its common stock, and $1,119,000 in cash, being for material, etc., on hand and in course of manufacture. The Apollo Company stipulated not to engage in the sheet steel business for 15 years. On May 5, 1900, the directors declared a dividend of 1 1/2 shares of preferred stock of the American Sheet Steel Company (that is, $3,000,000 in all) and a cash dividend of 50 per cent. (that is, $1,000,000 in all) to each share of the Apollo Company, which said cash dividend was declared by resolution, and was in fact 'paid to the stockholders thereof out of the cash consideration received for the sale of contracts, supplies, materials, etc., at said works. ' This sale was made in pursuance of a circular letter addressed to the stockholders by the directors, in which it was announced the company had sold 'its mill and plants, its sheet business * * * the capital stock of the Apollo Gas Company and the contract made by this company with the said Apollo Gas Company for gas to the American Sheet Steel Company and has surrendered to said Sheet Steel Company the lease this company held of the works at Apollo. ' It was further stated:

'These sales and transactions are deemed fair and advantageous to this company and its stockholders. Thus, while the company has disposed of a large portion of its property and business, yet it has received a reasonable consideration for the same, and still has valuable assets and property remaining, including the stock of the Chilled Roll Foundry, Vandergrift Land & Improvement Company, and other subsidiary companies, with which a profitable business may be carried on. Every precaution which the experience and prudence of the officers of this company have suggested have been taken to secure a proper organization of the American Sheet Steel Company, in order to place it on a sound financial basis, and to insure to it a successful, prosperous and profitable business, and we confidently believe that the holding of the stockholders of the Apollo Iron & Steel Company in the preferred stock of the American Sheet Steel Company will be more profitable to them than the retention of the property so sold by the Apollo Iron & Steel Company would or could have been.'

The circular further stated:

'As these are unusual and extraordinary dividends, and as the transactions are of very great importance to all our stockholders, it has been deemed best to have these dividends declared on condition that all the stockholders express their assent thereto, and approval of the sales, transfers and surrender above mentioned, to

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