Detroit Bank and Trust Co. v. Grout

• Decision Date: 30 October 1945
• Parties: The DETROIT BANK AND TRUST COMPANY, Trustee under an Agreement with Louise G. Hill, dated
• Court: Court of Appeal of Michigan — District of US

Page 898

289 N.W.2d 898

95 Mich.App. 253

The DETROIT BANK AND TRUST COMPANY, Trustee under an Agreement with Louise G. Hill, dated October 30, 1945, Plaintiff, Counter-Defendant and Appellee, v. Gardner K. GROUT, II, Louise Grout Brigham, Gardner K.

Grout, III, Wilber M.Brucker, Jr., Administrator with Will

Annexed of the Estate of Louise GroutHill, Deceased, Defendants, Cross-Plaintiffs, Counter-Plaintiffs andAppellants, v. Joyce D. DAUME, Daphne M. Daume, Selden B. Daume, Jr., Samuel D. Daume, SusanD. Lambrecht and Selden B. Daume, Jr.,

Administrator with the Will Annexed ofthe Estate of Selden

B. Daume, Deceased, Defendants, Cross-Defendants andAppellees.

Docket No. 78-2361.

Court of Appeals of Michigan.

Feb. 5, 1980.

Released for Publication April 4, 1980.

Wilber M. Brucker, Jr., Detroit, for defendants, cross-plaintiffs, counter-plaintiffs and appellants.

Gilbert Gove, Detroit, for Detroit Bank-Estate Hill.

Warren W. Gerald, Detroit, for Daumes and Lambrecht.

Before GILLIS, P. J., and BEASLEY and WEBSTER, ^* JJ.

WEBSTER, Judge.

This cause is an appeal from a decision of the Wayne County Circuit Court instructing plaintiff The Detroit Bank and Trust Company as to the disposition of certain funds subject of an inter-vivos trust agreement and dismissing counter and cross-claims asserted by defendants Gardner K. Grout II, Louise Grout Brigham, Gardner K. Grout III, and Wilber M. Brucker, Jr., Administrator with Will Annexed of the Estate of Louise Grout Hill, deceased. These defendants will be collectively referred to, hereinafter, as the defendants Grout.

The following factual summary frames the present controversy.

Louise Grout Hill, deceased, was the settlor in a certain trust agreement dated October 30, 1945, in which Detroit Trust Company was designated trustee. This action arises from a complaint filed by the bank seeking instructions as to whom the proceeds being held under Paragraph III(E) of that trust should be paid. That paragraph provides:

"Property constituting one-twelfth (1/12th) of the appraised value of the corpus shall be paid over and delivered by the Trustee to Selden B. Daume of Grosse Pointe Farms, Michigan, his heirs and assigns, and for purposes which he understands and which have been thoroughly discussed between said Donor and the said Selden B. Daume. I do not, however, create or impose any condition, trust, duty or obligation with respect to such one-twelfth (1/12th) but, on the contrary, give the same to Selden B. Daume in absolute legal and equitable ownership."

Selden B. Daume was the President of Detroit Trust Company, which was later merged into The Detroit Bank and Trust Company. Defendant Gardner K. Grout II is the adopted son of Louise G. Hill, and Louise Grout Brigham and Gardner K. Grout III are his children and all are residuary legatees under the Will of Louise G. Hill. Wilber M. Brucker, Jr., is the Administrator with Will Annexed of the Estate of Louise Grout Hill.

Joyce D. Daume is the widow of Selden B. Daume, and Daphne M. Daume, Selden B. Daume, Jr., Samuel D. Daume and Susan D. Lambrecht are the children of Selden B. Daume. These defendants will be collectively referred to, hereinafter, as the defendants Daume.

Louise G. Hill, born in 1872, died in Pasadena, California, on December 6, 1969, at age 97. Mrs. Hill had been married to Arthur Hill in 1898 and widowed from him in 1909. Arthur Hill was a prominent Michigan lumberman. Subsequent to his death, Mrs. Hill married Landon C. Rose in 1912 and was divorced from him in 1925. She remained single until her death. In 1925 Mrs. Hill began doing business with the Detroit Trust Company. She established a Trust, known as No. 14367 in January, 1940, which was subsequently modified by supplemental agreements dated April 27, 1942, and May 23, 1945. On October 30, 1945, a new trust instrument was executed, also being known as Trust No. 14367. Selden B. Daume was born in 1897 and subsequently became an attorney. He first became employed by the Detroit Trust Company in 1927, and became its president in 1941. After a series of mergers, Mr. Daume became Vice-Chairman of the Board of The Detroit Bank and Trust Company in 1956. He suffered a slight stroke in that year but continued his employment to his retirement in 1962 at the age of 65. He died on December 23, 1966, at the age of 70.

Mr. Daume had first met Mrs. Hill in 1931 and became the trust officer assigned to her accounts from 1933 to 1960, when he was succeeded by Andrew Davison. He served at her request as a member of the Board of Directors of several companies in which she held a controlling interest.

Gardner K. Grout II was born in 1904. He was the son of Louise G. Hill's sister. The sister was divorced subsequently and Mr. Grout was adopted by Mrs. Hill in 1915. He graduated from the United States Naval Academy and served in World War II in the Navy in California near where Mrs. Hill resided. He was employed from 1946 to 1958 in his own corporation, Grout and Horn, a distributor for Union Carbide Co. He also served as a member of the Board of Directors of various Hill interest companies. His children, Gardner Grout III and Louise Grout Brigham were born on January 21, 1933, and March 26, 1930, respectively.

The record in this cause indicates, and the trial judge found, that during the period of Mr. Daume's relationship with Mrs. Hill, a close fiduciary relationship developed between them as well as a close personal friendship. From 1931 when Mr. Daume first became a trust officer assigned to Mrs. Hill, through October 30, 1945, when the trust agreement which is the subject of this action was executed, the record in this cause indicates that Mrs. Hill consulted regularly with Mr. Daume and was deeply grateful for his services to her. During this period Mrs. Hill relied on Mr. Daume for advice relative to her financial affairs and the disposition of her estate. She expressed deep gratitude for his services and offered gifts to him periodically. She developed a social relationship with Mrs. Daume and in 1938 gave her a Packard convertible. Additionally, she made gifts to the Daume children during this period.

There was a policy at the Detroit Trust Company prohibiting acceptance of gifts by trust officers from trust customers without executive committee approval. Both Mrs. Hill and Mr. Daume were obviously aware of this policy as exemplified by correspondence between them.

On January 18, 1940, Mrs. Hill entered into a new trust agreement with the Detroit Trust Company, Trust No. 14367. Selden B. Daume executed the agreement on behalf of the Detroit Trust Company. It provided for family members in various fractions, and assets of value $1,229,241.11 were contributed to this trust. On April 27, 1942, Mrs. Hill executed a supplemental trust agreement with Detroit Trust Company, executed on behalf of the company by Mr. Daume. This supplemental agreement did not fundamentally alter Mrs. Hill's estate plan for her family. In 1944 there was correspondence between Mrs. Hill and Mr. Daume in which she sought advice relative to the making of gifts during her lifetime for certain individuals. She apparently requested a list of Mr. Daume's children for the purpose of making gifts. It is believed by Mrs. Daume that Mrs. Hill gave $5,000.00 bonds to the Daume children at approximately this time.

On May 23, 1945, a supplemental agreement was executed between Mrs. Hill and the Detroit Trust Company involving the disposition of one-twelfth of the corpus of the trust and making other changes. No fundamental changes were made in the basic estate plan in this document. At this time, however, there was correspondence indicating that Mr. Daume had made a trip to California, where Mrs. Hill resided, at a time that was apparently most difficult for Mrs. Hill. She expressed her deep gratitude to Mr. Daume for his sacrifices in connection with this trip. This letter was dated May 26, 1945, three days after the execution of the supplemental agreement. Later that year the series of events leading to the execution of the instant trust agreement of October 30, 1945 occurred.

On October 17, 1945, Mrs. Hill addressed a letter to the Detroit Trust Company informing the company that she wished Mr. Daume to become a beneficiary to the extent of one-twelfth of the residuary property in the trust. That letter read as follows:

"The death of my sister Harriet E. Grout, and other changed conditions has led me to feel that it would be well to make some changes in my trust agreement with the Detroit Trust Company which is numbered 14367. These changes I have carefully discussed with the president, Selden B. Daume, who has been closely associated with my affairs and the companies in which I am interested for many years, and is also a close personal friend. One of these changes in my trust is the inclusion of Mr. Daume as a beneficiary to the extent of 1/12 of the residuary property which will constitute my trust after death. In phrasing this provision I have asked that the words 'for purposes which he understands' be included.

"It has occurred to me that Mr. Daume may in some way be embarrassed by the inclusion of his name and as a matter of fact he has shown considerable hesitancy in the matter. Therefore I am writing this letter so that in the event it is ever necessary it can be exhibited by him, or by you to explain my position. There are certain matters which I wish carried out after my death with which Mr. Daume is perfectly familiar. These are things that I wish done without including them in any Will or Trust agreement, and I know he will meticulously follow my wishes. I do not however, wish him to be accountable to to (sic ) any person or persons, or to have his actions subject to review which could only lead to embarrassment for him which I most certainly wish to avoid.

"There is complete understanding between us, and Mr. Daume is included as a beneficiary at my very...