Pitts v. Weakley

• Citation: 155 Mo. 109,55 S.W. 1055
• Parties: PITTS et al. v. WEAKLEY et al.
• Decision Date: 14 March 1900
• Court: United States State Supreme Court of Missouri

55 S.W. 1055

155 Mo. 109

PITTS et al. v. WEAKLEY et al.

Supreme Court of Missouri, Division No.

March 14, 1900.

TRUSTS—CORPORATE STOCK—EVIDENCE.

Plaintiffs sought to establish a trust in stock of a corporation formed to administer their father's property and pay creditors' claims. The father, believing he was to die before the claims were paid, caused certain of the stock to be delivered to plaintiffs' sister, and the only evidence as to the terms of the delivery was the alleged statement by the sister that the father, when handing her the stock, told her to keep it; that it was all he had on earth. Plaintiffs refused to allow the sister to testify as to the terms of the delivery, and failed to offer a deposition made by her, in which she fully explained the terms thereof. Shortly before decedent's death, the sister transferred the stock to her husband, in whom the father had great confidence; and the husband, who claimed no interest therein, managed the corporation after the father's death. One of the plaintiffs testified that shortly after the father's death the sister had voluntarily stated to her that decedent had delivered the stock to her for "business reasons," and that she was to hold it for herself and certain of the plaintiffs; but the sister did not state in what proportions they were to share it, or for what reasons the stock was held. Other witnesses stated that the sister had declared that she was willing to turn over the share of one of the plaintiffs to a trustee, if plaintiff's husband could not get hold of it, and that the sister's husband had stated in her presence that she held the stock in trust for the children. Held insufficient to establish a trust of the stock in plaintiff's favor.

Appeal from circuit court, Buchanan county; Charles F. Strop, Judge.

Action by Edna Pitts and others against A. B. Weakley and others to establish a trust. From a judgment in favor of plaintiffs, defendants appeal. Reversed.

Brown & Dolman, for appellants. Thos. F. Ryan, Jas. W. Boyd, and John M. Stewart, for respondents.

VALLIANT, J.

Plaintiffs and defendant Susan Weakley are the children and only heirs at law of Dudley M. Steele, deceased. The object of this suit is to establish by decree a trust in favor of plaintiffs and their sister, Mrs. Weakley, in 794 shares of stock, which were given to the latter by their father shortly before his death, which occurred March 10, 1896. The petition states that plaintiffs' father caused the certificate of the stock to be made out in the name of his daughter, defendant Susan Weakley, in August, 1895, but did not deliver it to her then, nor inform her of it, but retained it in his possession until March 1, 1896. The act of creating the alleged trust and its terms are thus stated in the petition: "That on or about the 1st day of March, 1896, said Dudley M. Steele, being then aged and infirm, and desiring to make some suitable provision for all his children alike, handed to her, said Susan Weakley, the said certificates of stock, and gave her possession thereof, not for her own use and benefit, but in trust for the use and benefit of all his children in equal proportions." The petition also states that at the time this stock was the only property Dudley M. Steele owned; that, after receiving the certificate, Mrs. Weakley transferred it to her husband, without consideration, under his influence and persuasion, in order to avoid the trust, and he now holds it; that defendants Woodson, Lemon, and McDonald, as a committee or trustees, have some interest in the stock as collateral for the security for certain debts of which the plaintiffs are not particularly informed, but that those debts are otherwise sufficiently secured. The prayer is that the title to the stock be devested out of Weakley, and vested in plaintiffs and Mrs. Weakley in equal proportions; that the old certificates be canceled, and new ones issued to the parties respectively as their interests appear, to be held subject to any lawful claim of the defendants Woodson, Lemon, and McDonald. The answer of defendants was a general denial. The trial resulted in a decree for the plaintiffs as prayed, from which in due course the defendants have appealed.

In order to properly appreciate the evidence upon which the respondents rely to prove the terms of a trust as charged in their petition, which evidence consists alone in the testimony of witnesses as to admissions alleged to have been made by Mrs. Weakley after her father's death, it is important that we should weigh it in the light of the circumstances which surround the case. The following is a fair history of the case, taken from appellants' statement (the figures in brackets refer to the pages in the printed record):

"In 1894 the wholesale grocery firm of Steele & Walker and a corporation named the Midland Coffee Company failed, and severally assigned their property for the benefit of their creditors to the defendant Armstrong B. Weakley and one W. W. Wheeler. Mr. Dudley M. Steele seems to have been practically the owner of the corporation as well as of the partnership, and, his private fortune and credit being, of course, involved with the latter, he made at the same time a personal assignment to the same assignees. These proceedings were all in Buchanan county, Missouri, where Mr. Steele resided, and the business was situated. Although the amount of the property and indebtedness involved in these transactions is not stated in the record, there is enough to show that it was very large. The formation of the defendant corporation, the stock of which is the subject of this suit, grew out of these assignments under the following circumstances: On the 8th day of August, 1894, the creditors of these insolvent concerns * * * made him a proposition in writing, which is set out at pages 132 to 140, inclusive, of this record, providing that a corporation be formed under the laws of the state of Missouri, of which he should be president, with a salary of $5,000 per year. The corporation was to execute its notes to each of the creditors of the several assignors for an amount to be ascertained by a schedule of percentages set forth in the proposition, divided into three equal amounts payable in six, twelve, and eighteen months, with interest at five per cent. per annum. These notes were to be delivered to the defendants John S. Lemon, S. C. Woodson, and R. L. McDonald, constituting a committee on behalf of the creditors, clothed with extraordinary powers over the corporation and its directors and officers; and upon the execution and delivery of the notes the indebtedness was to be assigned to the corporation. It was further provided that the corporation should cause all its capital stock, with the exception of one share, to each of its directors, to be placed in the name of some person, to be selected by the committee, on the books of the corporation, the `certificate to be indorsed and accompanied by irrevocable transfer in blank, and so delivered to the committee; and shall also cause to be delivered to the committee, with the certificate, the irrevocable powers of the proxies of the holders on said books to said committee, authorizing them, and each of them, to vote the stock at all stockholders' meetings, so long as any of said notes remain unpaid, and shall provide by said contract to be made by the corporation that the stock shall be held by the committee as collateral for the payment of the notes, and that, if default be made in the payment of the notes, or any of them, or of the interest thereon, the committee may sell the stock, or so much thereof as may be necessary, at public auction, in the city of St. Joseph, Missouri, first giving notice by twenty days' publication in a newspaper published in the city of St. Joseph, and apply the proceeds to the payment of the notes unpaid and interest pro rata.' It was further provided that the committee should continue until all the notes to be given by the corporation should be paid, and that `then the committee shall transfer or cause to be transferred said stock to D. M. Steele, or any other person or persons whom he may designate in writing addressed to said committee. This corporation was organized in December, 1894. The entire property of the assigning concerns was turned over to it, and it entered upon the performance of the unique object of its existence,— the payment of the debts represented by its notes out of the assigned property,—and it was engaged in that business up to the time of the trial. [109.] Mr. Weakley was allowed by the court $5,000 for his services as assignee, which he turned over to Mr. Steele to assist him in the liquidation of his indebtedness. [106.] He took Mr. Steele's personal note for this, which was never paid, Mr. Steele having nothing to pay it with. [123, 124, 10.] At the time the assignments were made, there was a private banking firm doing business at Bellville, Republic county, Kansas, under the firm name of Davis, Steele & Co., which was placed in the hands of a receiver. Its liabilities were about $50,000, with assets sufficient to pay possibly 50 or 60 per cent. [56.] About $12,000 of these claims were presented to and allowed by the Missouri assignees, and it was necessary to the acquisition of the assigned property by the corporation that these allowances be otherwise secured. The family homestead was the property of Mrs. Dudley M. Steele, who had died between the time of the assignment and the settlement, and this property had consequently passed to Mr. Steele and her children, Webb Steele, the minor, and Mrs. Pitts and Mrs. Weakley. Mr. Steele, Mrs. Pitts, and Mrs. Weakley joined in a deed of trust upon this property [64] to Edward C. Smith, trustee, to secure any deficiency of these debts after the application of the Davis, Steele & Co. assets. This instrument was executed by the two daughters at the request of Mr. Steele, and to prevent the compromise from...