Bird v. Stein

• Decision Date: 09 September 1958
• Docket Number: No. 16826.,16826.
• Citation: 258 F.2d 168
• Parties: Mrs. Brynia BIRD and Mrs. Ethel Gold, Appellants, v. Lawrence STEIN and Sam Stein, Individually as Co-Partners of the Partnership Known as Stein Brothers, and L. B. Stein, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

258 F.2d 168 (1958)

Mrs. Brynia BIRD and Mrs. Ethel Gold, Appellants, v. Lawrence STEIN and Sam Stein, Individually as Co-Partners of the Partnership Known as Stein Brothers, and L. B. Stein, Appellees.

No. 16826.

United States Court of Appeals Fifth Circuit.

June 30, 1958.

Rehearing Denied September 9, 1958.

Frank E. Everett, Jr., C. Delbert Hosemann, Brunini, Everett, Grantham & Quin, Vicksburg, Miss., for appellants.

W. C. Keady, Roy D. Campbell, Jr., Edward J. Bogen, Farish, Keady & Campbell, Greenville, Miss., for appellee.

Before RIVES, BROWN and WISDOM, Circuit Judges.

WISDOM, Circuit Judge.

This is a suit for an accounting by two sisters against their brother as trustee. The sisters, Mrs. Brynia Stein Bird and Mrs. Ethel Stein Gold, describe their brother, Lawrence Stein, as "a modern Esau who in sheep's clothing * * * deprived them of their rightful inheritance". Lawrence accuses his sisters of wanting to "crush out his economic life in order that they may plunder the product of a lifetime's toil".

The case is before us for the second time. The sisters, successful on the first appeal but appellants again, charge the trial judge with "again gulping hook, line and sinker the wriggling, slippery, elusive and double-tongued oral testimony of Lawrence Stein" and "throwing the same white cloak of immunity over the black testimony of Lawrence Stein * * * this Court of Appeals ripped away". This, say the complainants, is "the first instance of a district court reversing the decision of a Circuit Court of Appeals." Appellants put this Court on notice, in the first sentence of their brief, that "the whole philosophy and jurisprudence of fiduciary accounting are at stake in this case".

The briefs are long, exhibits numerous, the Master's Report detailed, the record hefty. We have gone through all of this painstakingly, and the twenty-seventh Chapter of Genesis besides.¹ We reach these conclusions. Fiduciary accounting is not imperiled. The district court has not reversed this Court. Instead, with the patience of Job, the able, conscientious trial judge complied with the mandate of this Court as fully as the involved facts of the case and inter-Stein hyperbolic jeremiad permitted. The case turns on questions of fact. We hold that the findings of the trial judge are not clearly erroneous.

I.

V. A. Stein and his wife bought Little Hope Plantation in Washington County, Mississippi, in 1904. The tract consist of 378 acres of which 280 were open cultivatable acres in 1935. The Steins raised eight children² in comfortable circumstances. Several helped on the farm and in the store, but Lawrence worked more closely with his father than the other children and was the favored son. V. A. Stein died August 27, 1933. Under his will he left a life estate in his property to his wife, Sara, with the remainder in trust for his seven surviving children and two grandchildren. Lawrence and Ethel were named co-trustees. The trustees were instructed to hold, operate, or rent the property for ten years after Sara's death, no distribution to be made for three years. The trust came into existence when Sara died, March 10, 1935. According to Lawrence, he rented Little Hope from his mother for $3,000 a year; after his mother's death, he stated to his brothers and sisters, assembled in a family meeting, that he would not serve as trustee but would continue to rent and operate Little Hope as he had done before his mother died. Two sisters and a brother corroborated him; the complainants deny that there was any rental agreement. Lawrence never married. His sister, Mrs. Ethel Gold, after being widowed, resided with him for twenty-two years. It was a close, happy family until 1949, when Lawrence refused to give Mrs. Gold's son sufficient money to establish himself in business. May 19, 1950 Mrs. Gold, a cotrustee, and Mrs. Brynia Bird, another sister, filed suit against Lawrence.³

The complaint alleges that Lawrence took over Little Hope Plantation and other trust property, managed all of it for his own benefit, commingled trust property with his property, and has never made any accounting. Lawrence defended on the ground that there was no valid trust, since at the time of his death his father had only some personal property (willed to Lawrence) and an interest in Little Hope; that Little Hope was acquired under a deed creating an estate by entirety and therefore this property passed to Mrs. Stein on V. A. Stein's death. Lawrence defended also on the ground that he had refused to act as trustee. The district court agreed with Lawrence and dismissed the complaint. 1953, 102 F.Supp. 399.

On appeal, this Court reversed and remanded the case "with directions that a full accounting be made, discovery had, a division of the estate effected as the interests of the parties may appear, and judgment rendered against the appellee Lawrence Stein for any amount that may be due to the beneficiaries of the trust". 5 Cir., 1953, 204 F.2d 122, 124.⁴ A rehearing was refused. 5 Cir., 1953, 205 F.2d 512.⁵

In compliance with this decision, Lawrence filed an original account and, to meet various objections of the appellants, three supplementary accounts. The accounts were prepared by his auditors on the basis that in 1935 Little Hope Plantation was the only property in the trust. Appellants requested appointment of a receiver, raising the new contention that the V. A. Stein trust included not only Little Hope Plantation but the Johnson Place, the "Stein Brothers" cotton gin, the "Stein Brothers" store, and all other assets which Lawrence claimed were his individual property or assets of Stein Brothers. The trial court found that in 1935 the trust consisted solely of Little Hope.

The district judge, at the appellants' request, appointed a master and referred the trustee's account to him with instructions designed to carry out the mandate of this Court. The master audited the account and found that the trust was entitled to "a part of the grand total net income based upon the contribution of the said trust (Little Hope) in the production of the overall net income" of Lawrence Stein and Stein Brothers. The court below adopted the master's report.

Appellants attack: (1) the court's determination of the property ownership and (2) the court's adoption of the master's report. They contend that in 1935 the trust included the Johnson Place, store, gin and other assets Lawrence claims; that because of the commingling of trust property with Lawrence's property, all of Lawrence's property falls in the trust.

II.

The decisive question in the case is, what property constituted the trust estate in 1935? The storm center of this controversy is the ownership of the Johnson Place consisting of 794 acres, of which 502 acres were open cultivatable acres in 1935.

Lawrence went to work for his father in 1918 at $150 a month. He assisted in the store, kept records, aided in the farming, gradually became more important to his father. He testified that his father kept his money for him, except for a little spending money amounting to about $30 or $40 a month. In 1926 he became Postmaster at Chatham. From the first, he was able, industrious, thrifty. While working for his father, he engaged in side ventures, trading mules, livestock, scrap iron, anything he could make a dollar out of. He began to make enough dollars to be of help to his father from time to time — shifting funds from his account to his father's account.⁶

According to Lawrence, he had been interested for some time in buying the Johnson Place. To obtain sufficient funds for the down payment on the purchase price, he asked his father to pay the money withheld over the years. V. A. Stein told him to "go ahead with your transaction and I will make the money available". Both went to the First National Bank at Greenville, owner of the property, and spoke with W. H. Negus, president of the bank. After several meetings, they agreed on a price of $31,500, less a first mortgage indebtedness of $16,500 owed the Federal Land Bank to be assumed by Lawrence. The deal was closed October 22, 1929, when $5,000 was paid to bind the transaction. Mr. Negus on behalf of the bank executed a deed to Lawrence on the same day, but held it in escrow until December 2, 1929, when the remainder of the cash payment was paid. By resolution dated November 12, 1929 the Board of Directors of the Bank approved the sale to Lawrence Stein. The district court found that Lawrence was "without doubt the real purchaser and was thus understood to be so by the bank".

There is evidence that V. A. Stein recognized that Lawrence had an interest in V. A.'s principal savings, a certificate of deposit for $10,000 at the Citizens Bank. V. A. Stein cashed this certificate and made a $10,000 first mortgage loan. The mortgage notes were left for collection at the Old Citizens Bank, under a memorandum written by the Bank's President but signed by V. A. Stein: "On Wynn & Hafter $10,000, — a/c V. A. Stein and Lawrence Stein, ½ and ½, 9/11/28". This is an independent record that V. A. had at least $5,000 which he regarded as Lawrence's. These mortgage notes had a bearing on the down payment for the Johnson Place. March 22, 1930 V. A. Stein sold the notes to his daughter, Mrs. Gold. The proceeds were placed the same day in the V. A. Stein account at the bank and used to retire a $7,500 demand note V. A. Stein had made at his bank December 2, 1929. The proceeds of this demand note had been used by Lawrence that same day to complete the down payment on the Johnson Place.

There is a great deal of evidence corroborating Lawrence. Two sisters, Mrs. Cornblatt and Mrs. Schwartz, and Sam testified for Lawrence.⁷ Neil Magruder, an accountant who set up books for Stein Brothers in 1941, testified that he set up accounts for each heir based on a one-eighth interest "in the home place" only. On the first trial Mrs. Gold testified that Little Hope was the only property...