Cates v. Cates, 21525

• Decision Date: 09 February 1962
• Docket Number: No. 21525,21525
• Citation: Cates v. Cates, 217 Ga. 626, 124 S.E.2d 375 (Ga. 1962)
• Parties: Albert B. CATES et al. v. Nina Belle CATES, Executrix, et al.
• Court: Georgia Supreme Court

Page 375

124 S.E.2d 375

217 Ga. 626

Albert B. CATES et al. v. Nina Belle CATES, Executrix, et al.

No. 21525.

Supreme Court of Georgia.

Feb. 9, 1962.

Syllabus by the Court

For the reasons set forth in the opinion the trial court did not err in granting summary judgment with respect to the matters set out in paragraphs 1, 2, 3, 4, 5, 6, 7, and 9 of the trial court findings. Nor was it error to deny the petitioner's prayers for an injunction enjoining the executors and trustees of the estate in question from comingling the assets, disposing of the assets, from setting up the marital trust; and the prayers for the appointment of a receiver and removal of the executors and trustees, were also properly denied.

The exception is to the granting of a summary judgment in favor of the defendants, the executors and trustees of the estate of Russell R. Cates, who were also legatees and devisees under the will and beneficiaries of a trust created by the will, in an action brought by brothers and sisters of the testator and beneficiaries under the residuary trust created by the will, to set aside the marital trust in favor of the testator's widow and the deed from the executors to the trustees creating the marital trust, to set aside the sale of the Albany Amusement Company to James Cates, one of the executors of the will and a brother of the testator, and for an accounting, receiver, injunction and other relief.

As stated by counsel for plaintiffs in his brief, 'basically and mainly the suit was brought by the legatees and devisees of Russell Cates, deceased, to set aside the marital trust which the executors had set aside to Mrs. Nina Belle Cates, co-executor, which included all the real estate of the testator in a marital trust deed placed on record by the executors to the wife and co-executors, and also included in the marital trust to the wife a sale of the Empire Produce Company to the said wife and co-executrix; and also to set aside the sale of the Albany Amusement Company by the executors to James Cates, co-executor.'

At an interlocutory hearing the parties agreed that the evidence, including affidavits, documents and the testimony of witnesses introduced at the hearing, was to be considered on all matters which the court could properly consider and on the motion for summary judgment. The trial judge, after the hearing, granted the summary judgment with respect to all complaints made by the plaintiffs and relief based thereon with the exception that he construed the will as giving the brothers and sisters a right to the income from the residuary trust and entered judgment ordering the trustees to pay the income to them. The present writ of error does not include that ruling but it is the subject matter of a separate writ of error now pending in this court.

S. B. Lippitt, Albany, for plaintiffs in error.

Perry, Walters & Langstaff, Eugene C. Black, Albany, for defendants in error.

MOBLEY, Justice.

1. The plaintiffs contend that the trial judge erred in making the following finding and ruling in granting the summary judgment: '(1) That under the provisions of ITEM IX of the Will of Russell R. Cates, deceased, the deceased gave to his brother, James Cates, one of the Executors, an option to purchase his business known as the 'Albany Amusement Company' at its book value less 20%, which amount would represent the reasonable market value of said business;' that by the use of the term 'book value,' the testator meant the value of said business as shown by the books kept by the testator in connection with the operation of said business and not the 'market value' thereof; that under the undisputed evidence the amount charged by the Executors and paid by James Cates for said business was the 'book values' within the foregoing meaning of said term as used in the testator's will 'less 20%'; and that therefore said sale was made in conformity with the provisions of the will of the testator and is not subject to attack for any reason set out in the plaintiff's petition.'

The uncontradicted evidence is, as the court stated, that the amount charged and paid by James Cates for the business was the 'book value' of the business as shown by the books of the company at the time of the sale, less 20%. The question is whether the court's ruling that the meaning of the term 'book value', as used by the testator, meant the value of the business as shown by the books of the company, kept in connection with the operation of the business, is correct, or whether the words 'book value less 20%, which would represent the reasonable value of said business' mean market value, or whether the provision was ambiguous, thus raising an issue of fact for a jury to decide.

The terms 'book value' and 'market value' are not synonymous. While they may be the same, they may just as well not be. As was said in Opdyke v. Security Savings & Loan Co., 157 Ohio St. 121, 105 N.E.2d 9, 'The book value of an asset ordinarily merely represents the cost of that asset. Such book value may be reduced by book entries for depreciation or obsolescence but, except as reserves may be set up to recognize decrease in value, the rise or fall in the value of an asset is not usually recognized by its book value. Thus, the book value of an asset at any given time may be more or less than its value.'

While this court has never passed upon the question of what is 'book value' of a business, the term itself obviously means the value of a business as shown by its books, which would be determined by comparing the assets and the liabilities, the difference being the 'book value'. This is the construction generally placed upon the term by courts of this country which have passed upon the question.

In Succession of Jurisich, 224 La. 325, 69 So.2d 361, 362 it was held: 'The term 'book value' in contract giving surviving partner right to buy interest of deceased partner in partnership business at its then book value meant only value as shown by books of business.' See also Rubel v. Rubel, 221 Miss. 848, 75 So.2d 59, 49 A.L.R.2d 1410, where the court in considering a partnership agreement which gave the surviving partner the right to purchase the deceased partner's share at 75% of book value, held that in determining book value it was proper to exclude from the book value furnishings and equipment which had been fully depreciated on the books prior to the partner's death.

The will under consideration was executed on March 13, 1956. The evidence shows that for many years prior to the testator's death, both before and after the execution of the will, his auditor, John W. Crouch, a certified public accountant, furnished him annual statements of the business expressly showing the book value of the business. These statements showed the rate of depreciation of machines and other equipment used in the business so the testator knew that in arriving at the book value of his business the depreciated value of the equipment was used.

Thus it seems palpably clear that the term 'book value' as used by him in his will meant book value as shown on his books. The books were audited by a certified public accountant whose ability and integrity have not been questioned. The correctness of the books is not in question, and there is no charge of fraud in the keeping of the books. Plaintiffs' contentions are that the book value as shown by the books is not the true value of the business, and they urge that there should have been a reappraisal of the value. Similar contentions were rejected in Schaffer v. Below, D.C., 174 F.Supp. 505, aff'd in 3 Cir., 278 F.2d 619. See also Borg v. International Silver Co., 2 Cir., 11 F.2d 147; Barson v. Pioneer Savings & Loan Co., 163 Ohio St. 424, 127 N.E.2d 614; Aldrick v. Geahry, 367 Pa. 252, 80 A.2d 59; Lowenstein v. Schiffer, 38 App.Div. 178, 56 N.Y.S. 674; Sands v. Miner, 16 App.Div. 347, 44 N.Y.S. 894, (affm'd 160 N.Y. 693, 55 N.E. 1100).

The evidence of the accountant, Mr. Crouch, was that the depreciation taken on the assets of the business was a normal rate of depreciation taken in the industry. There is no evidence in the record that would justify a contrary conclusion.

Did the fact that the testator, after using the words 'at book value less 20%', added thereto 'which would represent the reasonable market value of said business', modify or change the meaning of the term 'book value', or create an ambiguity? We think not. The testator expressly authorized the sale of the business to his brother at 'book value less 20%'. The added words were simply an expression of his opinion that such price would constitute the market value of the business. At the time he made his will he knew the book value of his business as shown by his books, as the auditor's report reflected such value, and from the annual statements he continued to know the book value until his death. The added words did not modify or qualify the term 'book value less 20%' and consequently did not create an ambiguity.

The court properly construed this item of the will. The executors were authorized under the terms of the will, and it was their duty to convey the business to James Cates at the book value less 20% as shown by the books of the company. This they did. There is no evidence of fraud or other misconduct on their part in carrying out this provision of the will. There was no genuine issue of fact raised by the pleadings, affidavits or testimony of witnesses on this question, and accordingly the court properly granted summary judgment thereon. Code § 110-1203.

2. Exception is made to the following finding of the court and granting motion for summary judgment thereon: '(2) That under the undisputed evidence the Executors were justified in treating the sale of the 'Albany Amusement Company' to James Cates as having been effectuated as of the date of the death of the testator, and that therefore the estate was not entitled to any of the income of said business after the date of...