Garesche v. Levering Inv. Co.

• Decision Date: 15 November 1898
• Parties: GARESCHE et al. v. LEVERING INV. CO. et al.
• Court: Missouri Supreme Court

48 S.W. 653

146 Mo. 436

GARESCHE et al. v. LEVERING INV. CO. et al.

Supreme Court of Missouri, Division No. 1.

November 15, 1898.

TESTAMENTARY TRUSTS — INCORPORATION OF ESTATE — ESTOPPEL — COMMISSIONS OF EXECUTOR — ACCOUNTING.

1. Under a will giving trustees power to manage the estate, and to sell the property, and to reinvest it, during the life estate of testator's wife, and directing a distribution among the remainder-men at her death, the trustees have no power to incorporate the estate, without the consent of the remainder-men, and to require them to accept stock in lieu of the property, thereby depriving them of the power to control the property after the death of the life tenant, though the trustees act in good faith to save the expense and sacrifice to the property that would be occasioned by a suit in partition.

2. The fact that a devisee received from a trustee under the will certain shares of stock of a corporation, into which the trustee had converted the property of the estate by incorporating the estate, and had allowed the trustee a certain bonus for his compensation, does not estop the devisee from subsequently questioning the legality of the incorporation, where he acted on the strength of the trustee's misrepresentation that he had power under the will to incorporate the estate.

3. An executor is entitled to no commissions on the value of corporate stock, into which he had illegally converted testator's land.

4. The accounts of a trustee under a will should be surcharged by a bonus that was allowed him for his services by a remainder-man without full knowledge as to what services had been performed, and where the trustee had incorporated the estate while the remainder-man mistakenly supposed he had power to do so under the will.

5. A trustee under a will must account for salary received out of the estate for acting as president of a corporation which had been illegally formed by incorporating the estate.

Appeal from St. Louis circuit court; John A. Talty, Judge.

Suit by Alice L. Garesche and others against the Levering Investment Company and others. Decree for plaintiffs, and defendants appeal. Affirmed.

This is a proceeding in equity to devest the title to property, real and personal, out of the Levering Investment Company, and vest it in the devisees under the will of Lawrason Levering, and to secure an accounting. On the 20th of September, 1889, Lawrason Levering died testate, and seised of a large estate, real and personal. After specific legacies, not here involved, the will provided: "All the rest and residue of my estate, real, personal, and mixed, of whatever kind, and wherever situated, I give, devise, and bequeath to my wife, Brianna Levering, and Robert B. Whittemore, and the survivors or survivor of them, upon the following uses and trusts: In trust to pay my wife Brianna Levering, in cash, so long as she shall live, and for uses and support, and in such sums and such times as she may desire and deem proper. I also give my executors hereinafter named full authority to sell, exchange, lease, convey, or in any other way dispose of the property, real, personal, and mixed, given to my wife during her life, and to invest and reinvest the proceeds arising therefrom, as they may deem best for the interest of my wife and others interested in this, my last will and testament. It is my will and desire upon the death of my wife, and I give, devise, and bequeath, all the remainder of the property given to my wife during her life, real, personal, and mixed, to be equally distributed among my daughter, Kate Whittemore, and our grandchildren, share and share alike," etc. He appointed his wife, Brianna Levering, and his son-in-law, Robert B. Whittemore, executors, to serve without bond. The will was duly admitted to probate, and letters testamentary granted to the executors selected by the will, in September, 1889. The devisees were a daughter (Kate Whittemore) and 14 grandchildren. Mrs. Levering took no active part in the management of the trust estate, but let Mr. Whittemore control it, ratifying, however, whatever he did. The executors, pending the administration, without permission of any court, and pursuant to the power contained in the will, sold parts of the real estate, and reinvested the proceeds in other real estate. Before the close of the administration, and on June 23, 1890, Robert B. Whittemore (the co-executor), his two sons, Robert B., Jr., and Lawrason L., together with John S. Parrish, a clerk and stenographer in the office of Mr. John F. Lee, attorney for the executors, organized the Levering Investment Company, under chapter 8 of the corporation laws of this state, with a capital stock of $300,300, divided into 3,003 shares of a par value of $100 each, of which Mr. Whittemore and his two sons subscribed for 1 share each, and John S. Parrish subscribed for 3,000 shares, of the par value of $300,000; and it was stated in the articles of agreement that one-half of the stock was paid up in lawful money of the United States, and was in the custody of the first board of directors. Mr. Parrish was not a capitalist, and was used as a means of organizing the corporation, and was to profit or lose nothing by the transaction. To secure the money to pay up the 50 per cent. of the 3,000 shares subscribed for by him, Mr. Whittemore and his two sons made their joint note to a bank, the proceeds of which were placed to their credit, they three being the first board of directors of the new company. The said board of directors then purchased from Mrs. Levering and Mr. Whittemore, as executors and also as trustees under the will, practically all the property of the Levering estate, at the price of $150,000, and the property was conveyed by them to the company, and the company turned over to them the $150,000, which was secured from the bank as aforesaid, and thereupon Mrs. Levering and Mr. Whittemore, as such trustees, purchased from Mr. Parrish the 3,000 shares of the capital stock of the Levering Investment Company, for which he had subscribed for $150,000, but, instead of paying Parrish the money, he agreed that the executors and trustees should apply the money ($150,000) to the payment of the note of Mr. Whittemore and his two sons, given to and discounted by the bank in the manner described, which was accordingly done. In this way the $150,000 was employed to pay up Parrish's subscription for $300,000 worth of stock, and to pay the executors for all the property of the Levering estate, and to buy Parrish's stock in the new company, and to pay the Whittemore note to the bank, and actually no part of the money ever left the bank for an instant. The devisees were not consulted, and their consent was not asked or given to this arrangement and scheme. Howbeit the new company became the owner of all the property of the Levering estate, the executors reported that the personal property of the estate amounted to $315,850.24 (of which $300,000 was the stock so acquired), and they were allowed 5 per cent. commission thereon, amounting to $15,000. They made final settlement, turned over the stock to themselves as trustees. and were discharged as executors. The executors and trustees say that the purpose of this transaction was to prevent and avoid the expense of a partition of the property, and to preserve the estate intact, and prevent a sacrifice of the property at a public partition sale. As Mrs. Levering had a life estate, the trustees held all the 3,000 shares of stock, and voted it at all elections held by the company. Mr. Whittemore was made president of the company, and paid a salary of $200 a month from July 1, 1890, to July 1, 1892, amounting to $4,800, and of $250 a month from July 1, 1892, to February 1, 1896 (when this suit was brought), amounting to $10,500, and aggregating $15,300. Mrs. Levering was paid the income from the estate thus corporationized, until her death, August, 1895; having received in this way some $38,000. She, having taken no part in the management of the estate, turned over her share of all commissions allowed the executors to Mr. Whittemore. Thus the matter stood in August, 1895, when Mrs. Levering died. In September, 1895, all the remainder-men were invited to the house of Mr. Whittemore. Statements were made by him and his attorney as to the management of the estate. It was represented that under Mr. Whittemore's wise management the estate had nearly doubled in value since Mr. Levering's death. The matter of compensation to Mr. Whittemore was then brought up. It was stated that he had received the commissions allowed by the probate court, and it was also understood that he had been receiving a salary as president of the company, but it was asserted that he had received nothing as trustee, and that a proper compensation to him as trustee could either be allowed him by the devisees, or the matter would have to be settled in court. Thereupon the sum of $10,000 was agreed to be allowed him, one half to be paid in cash and the other half in stock. After deducting the stock so allowed, the stock of the company was distributed among the remainder-men according to their respective shares under the will. Between September, 1895, and February, 1896, the dividends on plaintiff's interest in the estate, which is valued at from $20,000 to $25,000, amounted to $530.33, of which $333.33 was applied as her part of the $5,000 cash allowance to Whittemore, and $197 was paid to her. She and her husband were shown to be inexperienced in business matters, and do not seem to have a very clear idea of the workings of a corporation. No one even attempted to explain to her how the estate of her grandfather came to be vested in a corporation, nor had she ever seen the will; but when Whittemore undertook to explain the matter to her husband he told Whittemore he could talk to him until doomsday, and not convince him that it was to the interest of Mrs. Garesche that Mr....