LaNdwehr v. Holland City State Bank

• Decision Date: 04 May 1938
• Docket Number: No. 98.,98.
• Citation: 284 Mich. 243,279 N.W. 497
• Parties: LANDWEHR et al. v. HOLLAND CITY STATE BANK et al.
• Court: Michigan Supreme Court

284 Mich. 243

279 N.W. 497

LANDWEHR et al.

v.HOLLAND CITY STATE BANK et al.

No. 98.

Supreme Court of Michigan.

May 4, 1938.

Action by Edgar P. Landwehr, next friend of August H. Landwehr, mentally incompetent, and Louise Landwehr, general guardian of August H. Landwehr, against the Holland City State Bank of Holland, Mich., and others, to have a contract decreed a nullity and to recover shares of stock or value thereof. From a decree dismissing the bill, plaintiffs appealed, and following the death of the incompetent, Louise Landwehr, as executrix of the estate of the incompetent, was substituted as plaintiff.

Affirmed.

POTTER, J., dissenting.

Appeal from Circuit Court, Ottawa County, in Chancery; Fred T. Miles, judge.

Argued before the Entire Bench.

Alexander, McCaslin & Cholette, of Grand Rapids (Clare J. Hall, of Grand Rapids, of counsel), for appellant.

Diekema, Cross & Ten Cate, and Elbern Parsons, all of Holland, for appellees.

WIEST, Chief Justice.

August H. Landwehr was a prominent business man at Holland, Mich., and held 78,923 shares of no-par value stock of the Holland Furnace Company. He was adjudged mentally incompetent by the probate court of Ottawa county on September 15, 1932, and his wife, Louise Landwehr, and the Holland City State Bank were appointed guardians of his estate and qualified and acted as such.

The affairs of the Holland Furnace Company were in such condition, on account of the general business depression, that the guardians deemed it advisable to have representation in the management of the company affairs, both on the board of directors and the executive committee, and, to such end, entered into an agreement with Bernard P. Donnelly and Charles Kirchen, who were directors of the Holland City State Bank and men of affairs and business experience, to give their attention to the management of the furnace company and become members of its board of directors. The guardians, having reached such an agreement with the two men, reduced the terms thereof to writing and petitioned the probate court for approval and authority to so employ Donnelly and Kirchen. The probate court granted the petition and Donnelly and Kirchen performed services. The agreement,¹ approvedby the probate court on November 18, 1932, engaged the services of Donnelly and Kirchen to protect the interests of the estate of the incompetent and, in order to qualify them for the position of directors and in payment of their services, they were each to receive 1,500 shares of the stock of the furnace company at that time, 1,000 shares three months after that date, and other shares at stipulated periods until 5,000 shares in all had been received, and ‘No payments in stock as herein provided, shall be made by party of the first part in the event of the death or withdrawal of either of said parties of the second part, their entire compensation in such event to consist of such stock as shall have been received by them prior to such death or withdrawal. * * *’

Mr. Donnelly received 1,500 shares of the stock and died December 23, 1932. Mr. Kirchen received 2,500 shares of the stock up to the time of his resignation on March 22, 1933.

After the death of Mr. Donnelly, Mrs. Landwehr requested Mr. Kirchen to resign as a director of the furnace company and he complied. She also requested the bank to resign as coguardian and, thereupon,

‘On March 29, 1933, the final account of the Bank and the first annual account of Louise Landwehr as guardians of said estate were filed in the Probate Court for Ottawa County. In the final account of the Bank the following item appeared as a credit to it:

“Office expense, special service compensation, 2,500 shares of stock delivered to Charles Kirchen, 1,500 shares of stock delivered to B. P. Donnelly as per court order dated November 18, 1932, $35,113.00.'

‘An order for publication was made on March 29, 1933, and an order allowing said account, including said item, was made on May 2, 1933.

‘Also included in said account and allowed by the Court was the sum of $1,000.00 to the Holland City State Bank for its fees as guardian.’

This suit was brought, in behalf of the incompetent by next friend and Louise Landwehr, guardian, to have the mentioned contract decreed a nullity and to recover from the Donnelly estate and Mr. Kirchen the shares of stock or the value thereof. In the circuit court the bill was dismissed, and an appeal taken by the then plaintiffs. Following the death of the incompetent, on July 15, 1937, suggestion thereof was made of record by plaintiff and Mrs. Landwehr, as executrix, substituted as plaintiff.

The record has been reviewed, and we are in accord with the findings of the circuit judge, inclusive of the thought that, except for the subsequent success of the Holland Furnace Company, and reflected in the present value of its stock, this suit would not have been brought.

When the contract was made, the affairs of the furnace company were at low ebb, and it was good business management on the part of the guardians to secure the services of Donnelly and Kirchen and shrewd forethought in tying the compensation to the result of efforts they should make in behalf of increase in value of all the stockholdings.

Counsel for plaintiff contend that the contract between the Holland City State Bank, as one of the guardians, and two of its directors to perform services for the estate of the incompetent was contrary to public policy.

The very purpose of the contract negatives the contention. The directors of the bank, engaged to act under stockholdings as directors of the furnace company, brought no conflicting interest and the whole tenor and purpose was to engage their business acumen to the advantage of the furnace company and thereby benefit the estate of the incompetent as a large shareholder. If the relation under the contract be considered in the nature of an action by Donnelly and Kirchen under proxy, that does not render the contract a nullity.

We are urged to hold that, inasmuch as a corporation can only act through its officers and, as Donnelly and Kirchen were directors of the bank, the coguardian of the incompetent, and to them had fallen the duty of tending to the interests of the estate of the incompetent in the furnace company, that the contract, under which they obtained shares of stock, was without consideration and, as it bound them to act as directed by the guardians, it was contrary to public policy, in that it was a curb upon the obligation resting upon stockholders to act for the benefit of all shareholders.

The mentioned directors of the bank were not obligated to act as stockholders of the furnace company nor, by proxy, to represent the estate of the incompetent, but were at liberty to assume such position and obligation if they cared to do so, and there was no violation of public policy in the terms of the contract, and there were services for which a consideration could be paid.

We fail to find any agreement under which Donnelly and Kirchen assumed to act in any manner contrary to recognition of the obligation to serve for the best interests of the furnace company and all of its stockholders. In fact, that was the purpose to be carried out, and the only one that could possibly be of advantage to the estate of the incompetent.

Upon motion and showing we permitted amendment of the record to disclose events subsequent to entry of the decree, and it has been made to appear that August H. Landwehr died July 15, 1937, leaving a last will, executed October 11, 1924, under which, in case of her survival, Louise Landwehr was constituted sole legatee of his estate; that Mrs. Landwehr survived her husband and the will has been duly admitted to probate. Time for presenting claims against the estate has expired and the estate, to a substantial amount, has become vested in Mrs. Landwehr, unless she declines to take under the will and, therefore, any recovery in this action under the present state of the record will be for the sole benefit of Mrs. Landwehr, who now, as executrix, is the plaintiff herein.

The mentioned motion was opposed on the ground that Mrs. Landwehr has right, until July 15, 1938, to elect not to take under the will, and has expressed her intention to not so take, and if such an election is made, then the estate goes to the children and widow.

The showing of the intention of the widow not to take under the will is by her son, on account of the absence of his mother from the United States.

Taking the record as our guide, we have a situation where Louise Landwehr is sole legatee, with estate vested, and the suit at present prosecuted by her as executrix to annul the contract she made as coguardian of her husband under authority granted by the probate court, and if the decree below is reversed and relief granted plaintiff herein, she will be the beneficiary.

While we granted the amendment and have stated the import thereof, we do not find it necessary to employ it for the purpose sought, inasmuch as we are of opinion that the decree, under the record in the circuit court, should be affirmed and, therefore, it is immaterial, under such issue, whether the widow elects not to take under the will.

The decree in the circuit is affirmed, with costs to defendants.

BUTZEL, BUSHNELL, SHARPE, CHANDLER, NORTH, and McALLISTER, JJ., concurred with WIEST, C. J.

POTTER, Justice (dissenting).

The bill of complaint herein was filed against defendants by the next friend and general guardian of August H. Landwehr, to set aside the contract hereinafter discussed, the orders of the probate court approving the same, for enforcement of the surrender of stock in the Holland Furnace Company mentioned in said contract, and to hold in abeyance the orders of the probate court in the Donnelly estate, and for other relief. Defendants answered, denying plaintiffs were entitled to any relief whatever, and claiming the proceedings attacked herein were res adjudicata.

On March...