In re First Account of Equitable Trust Co.

• Decision Date: 15 May 1942
• Citation: 26 Del.Ch. 203,26 A.2d 241
• Court: Court of Chancery of Delaware
• Parties: IN THE MATTER OF First Account of Equitable Trust Company, Succeeding Trustee under the Will of Annie Mills, deceased

26 A.2d 241

26 Del.Ch. 203

IN THE MATTER OF First Account of Equitable Trust Company, Succeeding Trustee under the Will of Annie Mills, deceased

Court of Chancery of Delaware, Kent

May 15, 1942

Exceptions overruled.

Caleb R. Layton, 3rd, of the firm of Hastings, Stockly & Layton for exceptant.

Caleb S. Layton, of the firm of Richards, Layton & Finger, for trustee.

OPINION

THE VICE-CHANCELLOR:

The exceptions call in question a sale by the trustee of a tract of about three acres of unimproved land located in Clayton Delaware. The exceptant charges that by this sale the trustee violated its duty in that the price received was inadequate, and in that the trustee failed to offer the property at public sale or with notice to the public or the beneficiaries of the trust, and failed to reinvestigate the value of the land before selling to a person whose services it had solicited to effect a sale.

Annie Mills died in 1922. By her will she gave property, including the land in Clayton, to Jeanette L. Barkley, in trust. At the death of Mrs. Barkley in 1935, Equitable Trust Company succeeded as trustee, pursuant to the provisions of the will.

In August 1936, the trustee applied to one Slaughter to find a purchaser for the property. Slaughter was an active businessman in Clayton. He was an auctioneer, a dealer in building materials, and had bought and sold real estate on numerous occasions. He was recommended to the trustee by one of its employees, as the most likely person to bring about a sale. There was no licensed real estate broker in Clayton. Slaughter informed the trustee that real estate prices were low and that there was no activity in sales of land. He mentioned instances of properties sold or offered for sale at what appear to be very low prices. A year later, in July 1937, the trustee again wrote Slaughter inquiring whether the land could be sold at private sale or public auction. Slaughter recommended against a public sale. He reported that he had tried to interest several people, without success. In the fall of 1937, the trustee made inquiries of a banker in Smyrna, who was known to it, concerning a sale of the land. This banker wrote the trustee to the effect that the property might in time become of value, but that there was no immediate chance for this, and little likelihood of securing higher prices "by holding for a real estate boom." In January 1938, the trustee once more communicated with Slaughter about a sale of the tract. On February 23, 1938, Slaughter wrote the trustee that he had succeeded in selling it for $ 500. He later designated a certain corporation as the purchaser. In fact, Slaughter owned a controlling interest in the corporation, although it does not appear that the trustee was then aware of this. Shortly thereafter, Slaughter notified the trustee that he would take title to the land in his own name and would waive any commissions upon the sale. The trustee made no further investigation but conveyed the tract to him by deed dated March 31, 1938.

The exceptant says that the sale price was grossly inadequate. He contends that the trustee twice recognized and represented that the land had a substantially greater value; in stating its account, the trustee charged itself with the land as a debit item of $ 1,300; again, in the 1938 annual return to the Board of Assessment of Kent County, pursuant to Revised Code of Delaware (1935) Section 1306, an officer of the trustee certified that the land had a value of $ 1,000. As to the first point, a statement in the account makes plain that the trustee charged itself with the principal received, including the land, "as shown by" the account of the predecessor trustee. Thus, it merely adopted the debit items in the amounts set forth in the account filed on behalf of its predecessor. The method of accounting thus followed does not purport to be, and should not be treated as, a representation or acceptance of the stated amounts as the actual value of the property. As to the second point, the officer of the trustee corporation who signed the annual return testified that he believed, at the time, that $ 1,000 was the fair value for tax purposes, but that he had made no examination of the property to determine its value. From the testimony it is apparent that his statement of value was made more as an approximation than as an appraisal arrived at after serious deliberation and consideration of the factors of value. Such a statement should be accorded little, if any, weight for the present purpose of deciding the question of value with some degree of particularity and accuracy.

The exceptant urges that his contention as to value is supported by the assessed valuation for real estate taxes and by the testimony of two witnesses whom he called. For a number of years prior to the sale, the property was assessed for county taxes at the value of $ 1,500, and for town taxes at the value of $ 1,800. Expectant points out that pursuant to Section 1294 of the Revised Code, the Kent County Board of Assessment is required to assess property "at its true value in money." An attorney who had resided for years in Clayton and who had attended many real estate settlements, testified that in 1935 or 1936, at the request of an officer of the bank, he gave an oral opinion that the land was worth $ 2,500, and that none of the seventeen lots into which it was divisible should sell for less than $ 100. Another witness for the exceptant testified that in 1937 he had purchased a tract somewhat smaller than the Mills tract for $ 1,500, and that this property is on the east side of Clayton, which is less desirable for residential purposes than the west side where the Mills property is located.

Prior to the sale by the trustee, the land was vacant, unimproved, and at times grown up in weeds. Part of it was low, and there water accumulated and laid after heavy rains. Trash and refuse were occasionally dumped on the land. The plot of the town of Clayton showed a street, Washington Avenue, traversing the tract. This street, where it passed through the tract, was ungraded and unsurfaced and, although passable, was only infrequently used. On three sides of the tract were sections in which were erected some residences. Across a road which bounds the fourth side was property of St. Joseph's Industrial School for Colored Boys. Barns belonging to this charitable institution were immediately opposite. Since 1923, the land had produced no income, except the sum of fourteen dollars. It was, however, subject to town and county taxes.

There is no evidence that either the original or the successor trustee received an offer to purchase or rent the land from 1923 to 1938, until Slaughter made his offer. Land other than the Mills tract was available for development for residences. During the period mentioned, there was but one house constructed in Clayton. Several improved properties were sold, and the sale prices were uniformly low, some less than $ 1,000. There was no industrial or other activity in or near Clayton making probable an increased demand for residential property. Slaughter as well as a local banker testified that in their opinion the land was not worth in excess of $ 500 or $ 600 at the time...