Davis. v. Davis Trust Co.

• Decision Date: 19 March 1929
• Docket Number: (No. 6204)
• Citation: 107 W.Va. 141
• Court: West Virginia Supreme Court
• Parties: Bessie A. Davis et al. v. Davis Trust Company

107 W.Va. 141

Bessie A. Davis et al.

v.Davis Trust Company

(No. 6204)

Supreme Court of Appeals of West Virginia.

Submitted March 12, 1929.

Decided March 19, 1929.

1. trusts Beneficiary Ca, nnot Complain in Equity of Subse-

quent Change of Status of Trust Estate to Which He Knowingly Assented.

The beneficiary under a deed of trust which assigns to a trustee certain personal property interests for the benefit of the beneficiary can not be heard in equity to complain of a subsequent change of status of the trust estate, to which change, with full knowledge thereof, he assented before the change was made. (p. 145).

2. Appeal and Error Fact Finding by Circuit Court in Equity

Will Not Be Disturbed on Appeal Unless Contrary to Plain Preponderance of Evidence.

In equity the finding of any fact by the circuit court will not be disturbed on appeal, unless contrary to the plain preponderance of the evidence. (p. 147).

3. Trusts Husband, Creating Trust Fund for Paying Annuity for Which he is Primarily Liable Under Separation Agreement, Held Not Entitled to Reimbursement Out of Fund for Payments Made While Fund Produced No Income.

Where, under a separation agreement a husband assumes primary liability for an annuity which he provides for his wife, and he creates a trust fund from which the annuity is to be paid when the fund produces sufficient income for that purpose, and the husband pays the annuity for a period of months during which there is no income from the trust fund he is not entitled to be reimbursed from subsequently earned income of the trust fund for the installments of annuity paid by him during the period aforesaid. (p. 148).

Appeal from Circuit Court, Randolph County. Suit by Bessie A. Davis and others against the Davis Trust Company. From the decree, plaintiffs appeal.

Reversed and remanded.

Henry M. Earle, Rummell, Blagg & Stone and H. O. Kump, for appellants.

S. T. Spears, R. S. Irons and Frank Cox, for appellee.

Maxwell, Judge:

By the terms of an agreement dated January 1, 1905, John T. Davis and the other stockholders of Davis Colliery Company sold to Coal & Coke Railway Company all of the capital stock (20, 000 shares) of the colliery company at the price of $2,000, 000 to be paid at the option of the purchaser, and until the exercise of the option, which was indefinite as to time, the purchaser was to pay, after the year 1908 (there being less amounts stipulated for the years 1905-1908, inclusive), the sum of $80,000 per annum as interest on the amount of said purchase price. The contract required the delivery of the certificates of said stock to the Trust Company of West Virginia at Elkins (now Davis Trust Company) to be held by the trust company in escrow and to be delivered by it to the railway company when the latter should pay the purchase money. The trust company was to disperse the annual interest among the owners of said stock in proportion to their holdings. John T. Davis owned nearly one-half of said stock. The option to purchase was never exercised, but the interest was fully paid until about 1915.

On the 25th day of May, 1914, an agreement was entered into between John T. Davis of the one part, and his wife, Bessie Armstead Davis, and Alice M. Armstead and Henry H. Armstead, relatives and trustees of Mrs. Davis, of the other part, under the terms whereof Mr. Davis agreed to pay to his wife the sum of $7,500 annually in equal monthly installments during her life, the same to be secured by a deed of trust executed contemporaneously with said agreement.

The trust, duly executed on the last mentioned date by John T. Davis to Davis Trust Company, Trustee, carried an assignment by the grantor to the trustee of a portion of the grantor's share of the $80,000 annual interest to be paid by the railway company to the stockholders of the colliery company, sufficient to pay to Mrs. Davis the annuity above mentioned, and, in event the railway company should consummate the purchase of said stock by paying the agreed price of $2,000, 000, there was assigned to the trustee $175,000, part of the share of John T. Davis in said purchase money, "in trust for the purpose of securing and paying to the said Bessie A. Davis the said annuity." Said fund, if it should arise by the exercise of said option, was to be invested by the trustee in good securities, and out of the income therefrom the annuity was to be paid to Mrs. Davis, and at her death the fund with unused income thereon was to be paid in equal shares to Hallie Elkins Davis and Henry G. Davis, children of John T. and Bessie A. Davis, if of age, otherwise to their guardian. The trustee by formal endorsement duly accepted the trust and proceeded in the discharge of the duties thereby imposed.

Senator Henry G. Davis, father of John T. Davis, died in 1916. Following his death it became apparent not only that the Davis Colliery Company and the Coal & Coke Railway Company, of the latter of which Senator Davis was president, and in both of which he was largely interested, were very seriously involved financially, but that by reason of extensive endorsements for those companies by Senator Davis, his estate was also considerably involved. The executors of the Senator's will found it necessary to evolve some plan by which the estate could be relieved from this entanglement. Consequently, with the assistance of Mr. Charles D. Norton of New York, and his associates, there was developed in 1917 the so-called Norton Syndicate Plan under which, among other things, there was turned over to the syndicate by the executors of the Davis estate all of the preferred and common stock of the Coal & Coke Railway Company owned by said estate, also all claims of the estate against the railway company and the colliery company. The rights of the railway company under the aforementioned contract of January 1, 1905, were likewise assigned to the syndicate. On the other hand, the Davis estate was relieved of all liability on account of endorsements of Senator Davis for the railway company and the colliery company, and there were delivered to the executors and interested parties $941,000 of the mortgage bonds of the railway company and $2,167, 700 preferred stock of the newly organized West Virginia Coal & Coke Company. In the consummation of this plan all of the capital stock of the colliery company was turned over to the Norton Syndicate, and after the re-adjustment Mr. Davis placed with the trustee $175,000 of the capital stock of the new company to be held by the trustee, in trust, for the benefit of Mrs. Davis and as an assurance for her annuity.

Through the years from 1914 to February, 1927, Mrs. Davis' annuity was regularly paid to her. The institution of this suit interrupted further payments.

This suit was instituted by Mrs. Davis and her two children against the trust company in February, 1927. The plaintiffs allege, among other things, that they did not know until early in the year 1925 that the trust company had accepted stock of the West Virginia Coal & Coke Company in lieu of the moneys and funds provided for by the trust agreement of May 15, 1914; that such action on the part of the defendant constituted a plain violation of the trust and is without effect as to the plaintiffs. The principal object of the suit is to declare null and void the action of the defendant in accepting the stock of the new company, and to require the trustee to make whole the said trust fund in the amount of $175,000; also that there be an accounting, and a new trustee appointed.

The circuit court found for the defendant and dismissed the plaintiffs' bill. The plaintiffs appeal.

It is abundantly proven by the evidence that immediately prior to the adoption of the Norton Syndicate Plan the stock of the colliery company was practically worthless because of the large indebtedness of that company. It cannot be said therefore that the sale or transfer of the capital stock of that company to the Norton Syndicate entailed any loss to the plaintiffs or prejudiced their rights.

In fact it is not apparent that the plaintiffs Henry G. Davis and Hallie Davis Percy (nee Hallie Elkins Davis) could on any theory maintain this suit. Their interest in the aforesaid sum of $175,000 was contingent entirely upon the railway company's exercising its option of purchase of the stock of the colliery company and paying the $2,000, 000 consideration provided for by the contract of January 1, 1905. The trust provides, in event the railway company shall pay the $2,000, 000 purchase price for the colliery stock, that $175,000 of the share of John T. Davis should be paid to the trustee; and that after the death of Mrs. Davis (her annuity being paid to her from the income from said fund), the trustee should "turn over whatever sum shall yet remain of said fund to Hallie Elkins Davis and Henry Gassaway Davis, in equal shares, or to their guardian if they shall not then have arrived at the age of twenty-one years * * *." The railway company not having exercised its option to pay the agreed purchase price for the stock of the colliery company and the $175,000 capital stock of the latter company not being replaced with cash as contemplated by the trust agreement, the contingency failed on which the contemplated interest of the two children was predicated. They therefore have no interests involved in this suit.

When the Norton plan was under discussion, counsel for...