Kellow v. Bumgardner

• Decision Date: 08 September 1954
• Citation: 83 S.E.2d 391,196 Va. 247
• Court: Virginia Supreme Court
• Parties: GLADYS E. KELLOW v. RUDOLPH BUMGARDNER, JR., ADMR. C.T.A. OF THE ESTATE OF GEORGE D. CRABBS, DECEASED

Page 391

83 S.E.2d 391

196 Va. 247

GLADYS E. KELLOW v. RUDOLPH BUMGARDNER, JR., ADMR. C.T.A. OF THE ESTATE OF GEORGE D. CRABBS, DECEASED.

Supreme Court of Appeals of Virginia

September 8, 1954.

George M. Cochran, Leonard A. Weakley and Taft, Stettinius & Hollister, for the appellant.

Timberlake & Smith and Sanford A. Headley, for the appellee.

JUDGE: SMITH

SMITH, J., delivered the opinion of the court.

This suit was instituted by Rudolph Bumgardner, Jr., administrator c.t.a. of George D. Crabbs, deceased, against Gladys E. Kellow, to establish a resulting trust in certain real estate in Augusta and Rockingham counties, Virginia, known as the Grand Caverns, the legal title to which was conveyed to Gladys E. Kellow on September 20, 1943, by Holly Stover, Incorporated. The bill of complaint also sought an accounting of the rents and profits from the operation of this property from the time it was acquired by Miss Kellow.

A demurrer to the bill on the ground that the devisees of George D. Crabbs, deceased, were necessary parties to the suit, was overruled. Thereupon, Miss Kellow filed her answer in which she asserted that she had paid for the property with her own funds and that Crabbs had not paid any part of either the down payment or subsequent payments to the seller. Accordingly, she denied that Crabbs or his estate had any interest in the property. Although she admitted that she had received from Crabbs 49 percent of the purchase price, she claimed these sums were received from him in discharge of obligations or by way of gifts.

Voluminous depositions were taken and many exhibits introduced. The trial court, in its decree of June 8, 1953, held that the estate of Crabbs was the beneficiary of a resulting trust in the Grand Caverns property to the extent of an undivided 49/100 interest and was entitled to an accounting of the rents and profits during the period that Miss Kellow held legal title.

The assignments of error raise two basic questions. 1. Did the trial court err in overruling the demurrer and holding that the devisees of Crabbs were not necessary parties? 2. Did the court err in finding that the evidence established a resulting trust in favor of the estate of Crabbs to the extent of an undivided 49/100 interest in the Grand Caverns property?

The evidence discloses that Crabbs was a resident of Cincinnati, Ohio, and a leading figure in the industrial, commercial and social life of that city. His principal business connection was with The Philip Carey Manufacturing Company of Cincinnati, in which he held the position of president. He also held the position of director in several other large corporations, and as a civic leader achieved great prominence for his successful leadership in the organization, development and construction of a combined railroad terminal in Cincinnati.

In 1929 and subsequent years Crabbs suffered financial reverses culminating in 1940 in a composition agreement with his creditors under which his assets were turned over to a trustee for the benefit of his creditors. During the same year he lost control of The Philip Carey Manufacturing Company but was retained as chairman of the board of directors at a salary of $50,000.00 a year and was later retired on a pension of $25,000.00 a year. By the time of his death in 1948, Crabbs had rallied financially and left an estate of more than $800,000.00, exclusive of any claimed interest in the property involved in this litigation, but including $245,200.00 inherited from his wife upon her death on February 7, 1947.

Miss Kellow, who was 43 years of age when the Grand Caverns property was bought in 1943, began work in 1915 as a stenographer for The Philip Carey Manufacturing Company and in 1920 became private secretary to Crabbs, a position she held until his death on September 29, 1948. Miss Kellow saved her money, invested wisely and accumulated a substantial estate, from which she made numerous loans to Crabbs during his financial distress.

In 1943 Miss Kellow began a search for a business enterprise to provide a livelihood for herself and her dependent mother and in June of that year learned that the Grand Caverns property was for sale. On August 12, 1943, she inspected the property and submitted an offer to the real estate agent, J. G. Sheets. This offer was accepted and a contract of sale was executed on August 26, 1943, at Cincinnati, by Miss Kellow and Holly Stover, Incorporated, by Holly Stover, president and owner, and a deposit of $500.00 was made by her. The sale was completed by delivery of a deed to Miss Kellow on September 20, 1943, in Staunton, Virginia. In payment of the purchase price, she paid, in addition to the $500.00 deposit, $24,500.00 in cash and the balance of the agreed purchase price of $150,000.00 was evidenced by her bonds in the aggregate sum of $125,000.00, payable to Holly Stover, Incorporated and secured by a contemporaneous deed of trust.

The deferred purchase money bonds were paid as they matured by personal checks of Miss Kellow until the outstanding debt was reduced to $92,000.00, which was settled in full on December 10, 1947 for the sum of $85,000.00. Although all payments on account of the purchase price were made by Miss Kellow, 49 percent of these payments consisted of money furnished her by Crabbs from his Lincoln National Bank checking account. The first advancement was made on September 15, 1943, in the form of his check payable to her in the sum of $12,250.00, being 49 percent of the cash payment made by her for the property.

After the property was acquired, Crabbs executed and delivered to Miss Kellow his notes payable to her in amounts representing 49 percent of each of the deferred purchase price bonds executed by her, which notes matured simultaneously with her bonds. These notes were paid by him to her as they matured until the final settlement between Miss Kellow and Holly Stover, Incorporated. During the month prior to this final settlement, Crabbs made four payments to Miss Kellow in the aggregate sum of 49 percent of $85,000.00 or $41,650.00. He also delivered to her his checks representing 49 percent of the fees and expenses incident to and incurred by her in connection with the acquisition of Grand Caverns. In addition, he made small payments to her from time to time which she used to defray operating expenses of the property.

The stubs of the checks used to make payments to Miss Kellow contained various notations, the first of which bears this language: 'G. E. Kellow 49% interest in Grand Caverns.' Thereafter the stub notations read: 'G. E. Kellow note.' 'G. E. Kellow 49%,' '49% on G.C.,' 'G. E. Kellow G.C.,' or 'G. E. Kellow.'

From the time Miss Kellow became interested in the Grand Caverns, Crabbs extended to her his advice and assistance and through his efforts substantial concessions were secured from the owner, not only at the time of the purchase of the property but also thereafter in securing without cost certain personal property, a waiver of interest, and a reduction of the balance of the purchase price. However, from the beginning of Crabbs' connection with the acquisition of the property he made it clear, both orally and in writing, to all with whom he dealt that his only interest in the Grand Caverns was that of friend and adviser of Miss Kellow. Also, he at no time reported in his income tax returns any income or claimed any deductions for operating expenses or depreciation of the property.

On May 15, 1947, Crabbs executed his will, the first bequest of which was $25,000.00 to Miss Kellow. After providing for bequests to two other employees, the residue of his estate was divided into thirds and left in trust for the benefit of or outright to his next of kin, consisting of a brother and nieces and nephews. The Lincoln National Bank of Cincinnati, Ohio, and Homer Gray, a nephew, were named and qualified as executors and trustees and given full power and authority to sell and convey any and all of his real estate. The will contained no reference to the Grand Caverns property.

On January 12, 1948, which was after the death of his wife, final payment of the debt on Grand Caverns, and the release of the deed of the trust, Crabbs gave Miss Kellow the following signed memorandum:

'To Whom it May Concern:

'In connection with the several checks issued to Miss Gladys E. Kellow from my Lincoln National Bank checking account, I now wish to state that said checks were issued in re-payment of loans of cash and stocks that Miss Kellow made to me from time to time several years ago and that said payments to her discharge said indebtedness, and at this time there are no existing unpaid loans or obligations between us.

George D. Crabbs.'

The first question presented by the assignments of error is whether the trial court erred in overruling the demurrer, which was based upon the contention that title to the real estate of Crabbs passed to his devisees at his death and that this suit could only be maintained by them. This contention ignores the plain language of the decedent's will which gave his executors full and complete power and authority to sell, exchange and mortgage his real estate.

In Mills v. Mills, 28 Gratt. (69 Va.) 442, the testator created various trusts in the residuum of his estate and made certain bequests to named individuals. The executors, besides being designated trustees to execute the various trusts, were empowered to liquidate the estate and to sell the testator's real estate. It was there said:

'The effect of the will was to break the descent and devolve the title to the land upon the executors, instead of the heirs of the testator. The executors had not a mere naked power of sale, but a power coupled with an interest, and most important trusts. The estate did not devolve on the heirs for an instant, either at law or in equity, but enured at once to the executors for the purposes of the will.' 28 Gratt. (69 Va.) at page 460....