First Nat. Bank of Birmingham v. Ingalls

• Decision Date: 26 June 1952
• Docket Number: 6 Div. 193
• Citation: 59 So.2d 914,257 Ala. 536
• Parties: FIRST NAT. BANK OF BIRMINGHAM et al. v. INGALLS.
• Court: Alabama Supreme Court

Page 914

59 So.2d 914

257 Ala. 536

FIRST NAT. BANK OF BIRMINGHAM et al. v.INGALLS.

6 Div. 193.

Supreme Court of Alabama.

June 26, 1952.

Cabaniss & Johnston, Birmingham, for appellant First Nat. Bank of birmingham.

Lange, Simpson, Robinson & Somerville, Reid B. Barnes, and Jas. A. Simpson, all of Birmingham, for appellantEllen Gregg Ingalls.

Chas. W. Greer and Francis H. Hare, Birmingham, for appellee.

STAKELY, Justice.

Robert I. Ingalls, Jr., as trustee and as beneficiary of a trust indenture, referred to in the record as Trust A, instituted this suit in the Circuit Court of Jefferson County, Alabama, Equity Division, to remove The First National Bank of Birmingham as cotrustee of the foregoing trust estate.The trustees administering the estate were Robert I. Ingalls, Jr., The First National Bank of Birmingham and Mrs. Ellen Gregg Ingalls.Originally Robert I. Ingalls, Sr., had been one of the trustees, but he resigned as trustee and The First National Bank of Birmingham was appointed to succeed him on January 2, 1946 in conformity with the provisions of the trust indenture, which expressly designated The First National Bank of Birmingham to be the successor trustee in such a situation.The theory of the bill is (1) that The First National Bank of Birmingham had willfully refused to distribute to the beneficiary Robert I. Ingalls, Jr., income from the estate as required by the provisions of the trust indenture and (2) that The First National Bank of Birmingham in allowing its vice president and trust officer to vote as proxy at the annual meeting of the stockholders of Ingalls Iron Works Company in February 1949 acted in violation if its duties as trustee.It is contended that hostility and inharmonious relationship between the cotrustees is also made an issue in the case.We shall consider this last contention later.

The First National Bank filed an answer to the bill.Mrs. Ellen Gregg Ingalls, who was made a partyrespondent but whose removal as trustee was not prayed for in the bill, demurred to the bill of complaint.When her demurrer was overruled she answered denying the allegations of the bill.After an oral hearing before the court, the court removed all of the trustees of Trust A including Robert I. Ingalls, Jr.The First National Bank of Birmingham and Mrs. Ellen Gregg Ingalls have prosecuted this appeal.We think it well at this point to show the allegations of the bill which set up the two theories, numbered (1) and (2) respectively, to which we have referred.'Complainant says that the respondent The First National Bank as said Trustee and as said managing trustee, has wilfully, defiantly, unlawfully and in direct contradiction of said implicit provision of said trust instrument, refused to pay over to the said Robert I. Ingalls, Jr. any sums whatever out of the proceeds of said trust estate although the said Robert I. Ingalls, Jr. has, during the years 1948 and 1949, repeatedly requested it so to do.

'Complainant further says that the action of the respondent, The First National Bank, in joining with the said Ellen Gregg Ingalls in the execution of said proxy to the said Zukoski and in authorizing the said Zukoski to vote the said stock belonging to said Trust A for the removal of Robert I. Ingalls, Jr., as beneficiary under said trust from the board of directors of the said Ingalls Iron Works Company was over the objection and protest of the said Robert I. Ingalls, Jr., and was in wilful defiance of the provisions of said Trust A, that so long as the three original trustees should administer the trust thereby created the decision of any two of them should govern in all cases where all the trustees were unable to agree, and constituted a wilful and malicious refusal to follow the clear instructions of the creator of said trust as expressed in said trust instrument.'

Certain facts which form the background of the present controversy and which are undisputed should be understood.The Ingalls Iron Works Company was organized in 1909 by Robert I. Ingalls, Sr.The bulk of the assets of the trust which is here involved consists of shares of the capital stock of the Ingalls Iron Works Company.Ever since its organization Robert I. Ingalls, Sr., has been the managing head and chief executive officer of the company.The company has grown and prospered.For approximately ten years before the filing of this suit the company paid annual dividends of $5 per share on its outstanding shares of capital stock and since its organization has accumulated assets of millions of dollars.

The trust involved in this suit was created in 1932 by Robert I. Ingalls, Sr.The trust assets consisting of 1,000 shares of common capital stock of Ingalls Iron Works Company and 1,800 shares of common capital stock of Security Realty and Investment Company were conveyed to the trustees by Robert I. Ingalls, Sr., as grantor.This trust is referred to as Trust A to distinguish it from the other so-called Ingalls Trusts.In later years there were created additional trusts known as Trusts B, C, D, E, F and G, all of which hold shares of common capital stock of Ingalls Iron Works Company and all of which, other than Trust D, were created by Robert I. Ingalls, Sr., or his wife Ellen Gregg Ingalls, as grantors.Trust D was created by Robert I. Ingalls, Jr., as grantor.The beneficiaries of Trust A are named as Mrs. H. P. Ingalls, the mother of Robert I. Ingalls, Sr., Ellen Gregg Ingalls, the wife of Robert I. Ingalls, Sr., and Robert I. Ingalls, Jr.Each of these beneficiaries was given an interest for life.Following their deaths, the trust estate is to be held for the benefit of the lineal descendants of Robert I. Ingalls, Jr.All of the other trusts name as beneficiaries the children or lineal descendants of Robert I. Ingalls, Jr.

Until early in 1948 there were no disagreements or difficulties in the administration of any of these so-called Ingalls Trusts and no controversy of any kind arose in connection therewith.Until that time relations between Robert I. Ingalls, Sr., and Robert I. Ingalls, Jr., appear to have been harmonious and pleasant.In May 1948 there was a serious disagreement between father and son which culminated in the father causing the son to be discharged as president of Ingalls Iron Works Company and as an officer of the various subsidiary corporations.Thereafter there followed a multiplicity of legal and equitable actions instituted by the son against the father.

Since the court removed as trustees both The First National Bank of Birmingham and Ellen Gregg Ingalls and each has appealed from the ruling, we shall first consider the case as it relates to The First National Bank of Birmingham and then consider the case as it relates to Ellen Gregg Ingalls.

I.While The First National Bank of Birmingham interposed no demurrer to the bill, it should be pointed out at this point of the discussion that taking the allegations of the bill as true, the bill states a case in either aspect of the bill against the bank as trustee.In either situation set forth in the bill, a sufficient violation of the trust is shown and the bank would not be a suitable person to serve as trustee and would fall within the ban of the statute.§ 65,Title 58, Code of 1940.As pointed out in Ex parte Jonas, 186 Ala. 567, 64 So. 960, the statute is substantially a declaration of the law as it existed, so far as it concerns the powers of an equity court after such court has assumed jurisdiction of a trust estate.In this connection we refer to the following general statements of the law.

'Before the court will order removal, some cause must be shown why the trustee ought to be removed.'Bogert, Trusts and Trustees, § 527.

'A court which has supervision over the administration of trusts has power to remove a trustee for proper cause * * *.If the court of first instance orders the removal of a trustee without sufficient reason * * * the appellate court will reverse its action.'Scott on Trusts, § 107.

'It is certainly competent under some circumstances for a court of equity to remove an old trustee and appoint another in his stead * * * but the bill in the present case contains no allegation against the trustees * * * nor is there anything in the record to show that they have not acted with entire propriety or that they are unfit persons to execute the trust.'Chambers v. Mauldin, 4 Ala. 477.

Until the disagreement between Robert I. Ingalls, Sr., and Robert I. Ingalls, Jr., there had been no controversy of any kind about the administration of the trusts and Robert I. Ingalls, Jr., received funds from the trust whenever he requested that such funds be made available to him.From the time Robert I. Ingalls, Jr., had his disagreement with his father in May 1948he made no written request for distribution of funds from Trust A until March 1949, but there are tendencies of the evidence to show that verbal requests were made during the latter part of 1948 and in the early part of 1949.Letters were introduced in evidence which passed between The First National Bank of Birmingham and Robert I. Ingalls, Jr., which constitute the basis of the charge against the bank now under consideration.We set these letters out chronologically and their respective dates.Charles Zukoski was at the time of the letters the Vice President and Trust Officer of The First National Bank of Birmingham.

'March 15, 1949

'Dear Bob:

'We have some cash to invest in the above trusts.The trustees should reach a decision as to how the money should be invested and for that purpose I would appreciate having you come by my office at your convenience to give me your views.Please call me in advance so that I can arrange to be on hand.

'Sincerely yours

Charles Zukoski, Jr.

'March 31, 1949

'Dear Mr. Zukoski:

'I have your letter of March 15th, 1949, relative to the cash on hand in the above Trusts.You request my views as to how the money should be invested.

'It occurs...