Birmingham Trust & Savings Co. v. Strong

• Decision Date: 23 November 1939
• Docket Number: 6 Div. 497.
• Citation: 194 So. 200,239 Ala. 118
• Court: Alabama Supreme Court
• Parties: BIRMINGHAM TRUST & SAVINGS CO. v. STRONG ET AL.

194 So. 200

239 Ala. 118

BIRMINGHAM TRUST & SAVINGS CO. v. STRONG ET AL.

6 Div. 497.

Supreme Court of Alabama

November 23, 1939

Rehearing Denied March 7, 1940.

Appeal from Circuit Court, Jefferson County; E. M. Creel, Judge.

Suit in equity by Lillian Strong, Irene Strong Gulledge, Edgar Strong, James Morgan Strong and Ernest Strong, against Birmingham Trust & Savings Company, to surcharge appellant as trustee on account of alleged breaches of trust. From a decree granting certain relief to complainants, respondent appeals, and complainants file cross assignments of error and move to dismiss the appeal.

Motion overruled. Reversed and rendered.

The purchase by banking institution, as trustee for one trust, of participations held by other trusts administered by the banking institution, was not a breach of trust.

The bill alleged breach of trust by the respondent as trustee in that it had invested in participations in loans secured by mortgages on real estate, that the procedure followed by respondent in making some of the loans constituted selfdealing and that it had purchased investments for the Strong trust from other trusts of which it was trustee; and seeks to surcharge the trustee on this account. It is further alleged that respondent received compensation for its services as trustee in excess of the amount to which it was entitled, and that the amount paid by respondent as executor to the United States as estate taxes was in excess of the amount for which it was liable; and seeks to recover such excessive amounts.

Respondent by answer denied that any breach of trust had been committed and that it had received more than reasonable compensation for its services as trustee, detailing its practice and methods in administration of the trust. And it was asserted by respondent that, in any event, complainants had by various acts and at divers times ratified respondent's actions as trustee and were estopped to assert the claims made the basis of the suit, and upon the principle of res adjudicata the claim relating to federal estate taxes was foreclosed by final decree of the circuit court in the cause in which the estate was administered.

By its decree the trial court granted the relief prayed as to certain of the mortgage investments assailed as being illegal trust investments, set aside said investments and charged respondent with the amount of the principal of said investment plus interest. It was decreed that complainants have and recover of respondent the amount held to be excessive compensation received by respondent. It was further decreed that complainants had accepted certain benefits in interest payments from said investments, and suffered certain losses, and ordered a reference by the register to ascertain and state an account between the parties, limited to receipts and disbursements made by the trustee resulting from the investments set aside. It was further decreed that all right title, interest and claim of complainants in and to the property embraced in the mortgages constituting the investments so set aside be divested out of complainants and invested in respondent.

The cause was reserved for the purpose of rendering such final judgment as might be required after report of the register on the account in the decree ordered.

Exhibit 10 to respondent's answer is as follows:

"Whereas, on, to-wit: the 15th day of February, 1935, the undersigned Lillian Strong, individually and as trustee for Ernest Strong; Irene Strong Gulledge; Ernest Strong; Edgar Strong, and James Morgan Strong executed a certain indenture of trust with Birmingham Trust and Savings Company, a body corporate, as trustee, whereby certain property, including participations in real estate mortgages and certain real estate, was conveyed to said Company in trust, and,

"Whereas, said indenture provides that the trust thereby created may be revoked at any time by an instrument in writing signed by a majority in interest of the said Trustors, which instrument shall be delivered to said Trustee, and a copy thereof filed for record in the Probate Office of Jefferson County, Alabama, and,

"Whereas, the undersigned, being all of the Trustors and grantors executing said trust indenture, are now desirous of exercising their right to revoke said trust, wherefore, they now execute this instrument in duplicate, one copy thereof to be delivered to said Trustee, and the other to be filed in the said Probate office.

"Now, therefore, in consideration of the premises the undersigned Lillian Strong, individually and as Trustee for Ernest Strong, Irene Strong Gulledge, Ernest Strong, Edgar Strong and James Morgan Strong do hereby and by these presents forever revoke and cancel the said trust indenture above described, so that the title, free from trust, of all of the property conveyed by said trust indenture shall now vest in said parties in the proportions in which it was originally held at and before the execution of the same.

"In witness whereof the said parties have hereunto set their hands and seals on this 10th day of September, 1935."

Wm. B. White, Douglas Arant, B. A. Monaghan and Bradley, Bladwin, All & White, all of Birmingham, for appellant.

Wm. S. Pritchard, David R. Solomon, and Winston B. McCall, all of Birmingham, for appellees.

THOMAS Justice.

The submission was on motion to dismiss the appeal and on the merits.

In consideration of the motion to dismiss the appeal as not being final (Huie et al. v. Smith, Ala.Sup., 189 So. 729), it is observed, that a decree may be a final decree in part and merely interlocutory in part. It is necessary that a decree be final to support an appeal. Michie's Code, § 6078; De Graffenried v. Breitling, 192 Ala. 254, 68 So. 265. In this sense there may be several final decrees. Fleming v. Copeland, 210 Ala. 389, 98 So. 128; First Nat'l. Bank of Opp v. Cotton, 231 Ala. 288, 164 So. 371. This decree was final in the sense that it settled the equities presented and supports the appeal.

The motion to dismiss is overruled:

The statement of facts is as follows:

Appellant, Birmingham Trust & Savings Company, a banking institution which has existed under the laws of Alabama since 1887, is engaged in the banking business in Birmingham, and maintains, separate from its commercial banking department, a Trust Department, which is and for many years has been engaged in the business of administering trusts. The Strong trust was administered by said Trust Department. Throughout the period here involved, appellant was a member of the Federal Reserve System and as such was subjected periodically to examination by the Federal authorities; and, of course, it was likewise under supervision of the Superintendent of Banks of the State of Alabama.

James E. Strong, a resident of Birmingham, Alabama, died on January 9, 1929. At the time of his death he was a stockholder in the appellant bank. He appointed the appellant, Birmingham Trust & Savings Company, executor of his will. The will created a trust to continue until February 14, 1935, when his youngest son, Ernest Strong, became twenty-one years of age. The appellant was designated trustee. The will provided that the income be used for the maintenance and support of the testator's widow, Lillian Strong, and for the maintenance, support and education of his said son, Ernest Strong. In a separate decree September 30, 1930, prior to the commencement of this trusteeship, the Circuit Court entered a decree construing the will to entitle Lillian Strong to all the income from the trust. The trustee was directed "to distribute, as soon as practicable after February 14, 1935, all of the trust estate then being administered by it" equally among five persons: the widow, Lillian Strong, a daughter, Irene Strong Gulledge, and the testator's three sons, Edgar Strong, James Morgan Strong, and Ernest Strong. The share of Ernest Strong was to be distributed to his mother, Lillian Strong, as trustee for him until he became twenty-five years of age. Item 4(b) of the will provides, among other things, as follows:

"To keep the said property together and manage the same as fully and to the same extent as I could if living, to which end the said trustee is hereby authorized and empowered to sell, upon such terms and conditions as to it may seem best, any of the said property, real or personal, and to invest the proceeds of such sale in such other property as it may select, the property so purchased by it to constitute a part of said trust estate, or to lend the proceeds of such sale, taking as security therefor first mortgages on real estate at such rate of interest as it may see fit to fix. And the said trustee is further authorized and empowered to repair and in anywise to better or improve any of the said property, real or personal."

Item 4(g) of the will is as follows:

"The said Trustee shall be entitled to a reasonable compensation for its services, in this behalf, and shall be under no responsibility except for wilful wrong or wilful breach of trust."

The trusteeship under the will commenced December 9, 1930. The executor was discharged and the trust created by the will terminated February 14, 1935.

The trust department of the appellant is a unit separate and distinct from the commercial department. With the exception of three senior supervisory officers, the Chairman, the President, and the Senior Vice President, through their membership on the Executive Committee, the staff of the commercial department performs no functions in the administration of the trust department. The mortgage loan department, the investment department and the real estate department are sections or divisions of the trust department.

Continuously since 1919 the chief executive...