Long v. Earle

• Decision Date: 09 November 1936
• Docket Number: No. 120.,120.
• Citation: 277 Mich. 505,269 N.W. 577
• Parties: LONG et al. v. EARLE et al.
• Court: Michigan Supreme Court

277 Mich. 505

269 N.W. 577

LONG et al.

v.EARLE et al.

No. 120.

Supreme Court of Michigan.

Nov. 9, 1936.

Action by F. Earle Long and others against Herbert R. Earle, Charles H. Bennett, and others, in which defendant Bennett filed a cross-bill. From the decree, defendants appeal.

Affirmed.Appeal from Circuit Court, Wayne County, in Chancery; Adolph F. Marschner, Judge.

Argued before the Entire Bench, except BUSHNELL, J.

Sempliner, Dewey, Stanton & Honigman, of Detroit (Thomas L. Poindexter, of Detroit, of counsel), for appellant Herbert R. Earle.

Harvey S. Durand, of Detroit, for appellee Charles H. Bennett.

Emmons, Oren, Sleeper & Krise, of Detroit (David A. Howell, of Detroit, of counsel), for other appellees.

POTTER, Justice.

This controversy grows out of the purchase, improvement, and sale of property on Merritt Island, opposite the city of Melbourne,Fla. Prior to April 27, 1922, Ernest Kouwen-Hoven and wife had acquired most of the land in controversy and platted it as Indialantic-by-the-Sea, and owned and controlled the highway toll bridge from the island to Melbourne. The plat as it existed at the time Herbert R. Earle and his associates became interested therein included Indialantic plat, with reservations for the Indian river bridge, boardwalk, golf course, and other proposed improvements. Its value consisted in its natural location and desirability for recreational and residential purposes, and it was thought it had, in addition, a reasonably certain and predictable speculative value which would be enhanced by the transformation and development of the property.

Defendant Herbert R. Earle and wife resided in Oakland county, but he was engaged in business in Detroit. There is some suggestion he was familiar with real estate transactions, and in the incipient stages of this matter some of plaintiffs had advanced to him substantial sums of money for use by a contemplated real estate syndicate in Wayne county.

Defendant Herbert R. Earle and others became interested in Indialantic-by-the-Sea and, April 27, 1922, he purchased of Kouwen-Hoven and wife on land contract the original Indialantic property for $200,000, payable $15,000 down and the balance in installments. The property was taken subject to certain real estate mortgages, and the purchaser assumed and agreed to pay the sum of $27,600 in bridge bonds and to protect those who had already purchased lots in the plat by the observation of the restrictions and the making of promised improvements. Upon the execution of the contract, the defendant Herbert R. Earle took possession of the purchased property. Plaintiffs were or subsequently became interested in the project. May 25, 1923, defendant Herbert R. Earle executed a declaration of trust and agreement in relation to the property, which, after reciting the acquisition of Indialantic-by-the-Sea as a joint venture and the making of large payments thereon by him and the sale of certain lands and the collection of moneys therefor, as representative of the joint adventurers, acknowledged he held in trust all the right, title, and interest in and to the premises purchased by the land contract hereinbefore mentioned, subject to the sales which had been made, the proceeds of which were held in trust. There were many other stipulations in connection therewith, among which was that defendant Herbert R. Earle was, as trustee, to improve, subdivide, and sell Indialantic-by-the-Sea, and desired also to protect the beneficiaries of the trust from his death or inability to act. In connection with this instrument, defendant Earle executed and delivered an assignment of his vendee's interest in the contract of purchase and of his interest as vendor in all contracts of sale of lots, and also executed and delivered a deed of all of the real estate involved to the Security Trust Company, of Detroit, to become effective in case he, as trustee, should so indicate or become subject to legal disability, or upon his death. The Security Trust Company was in general, in case it should be substituted for the defendant Herbert R. Earle as trustee, authorized to carry out and perform in all particulars the trust which had been declared.

The affairs of the joint adventure apparently prospered in the boom days of Florida real estate but eventually the boom collapsed, values deflated, property depreciated in value, and conditions among the beneficiaries of the trust were none too good. With the collapse of the stock market and consequent deflation of credit here, the beneficiaries of this trust sought to find out what they had to represent their investment. Dissatisfaction with the results of the joint adventure were rumored, and in October, 1928, many plaintiffs filed a bill against the defendant Herbert R. Earle for his removal as trustee, an accounting, an injunction restraining him from disposing of any more of the property or assets of the trust, and for other purposes. October 23, 1928, an order was entered appointing a custodian of the property and directing an audit of the affairs of the trust. November 28, 1930, an interlocutory decree was entered reciting that Herbert R. Earle, defendant, had resigned as trustee; that plaintiffs held a majority in interest of the outstanding certificates of beneficial interest in the trust, and their rights and interests were such as to make them properly representative of all such certificates and the holders thereof so the suit might proceed to be determined as if every holder of such certificates was in court in person by due service of process, and with like force and effect as to each and every certificate holder; that the beneficiaries of the trust, the holders of the outstanding trust certificates, had caused a corporation to be formed under the laws of Florida,under the name of ‘Indialantic Corporation,’ to which they desired all of the assets of the trust to be conveyed; and ordering that defendant Herbert R. Earle and Florence C. Earle, his wife, execute and deliver to the Indialantic Corporation such deeds, conveyances, assignments, and other transfers as were necessary to vest the absolute title and ownership of the property and assets, real, personal or mixed, of the trust in the corporation. The decree removed the defendant Herbert R. Earle as trustee of the trust and divested him of all authority and control in connection with the Indialantic Corporation, and provided that, upon the execution of proper conveyances by defendant Herbert R. Earle and wife and the Detroit & Security Trust Company, successor to Security Trust Company, such corporation was to become the absolute owner of the trust property. It provided the Detroit & Security Trust Company should thereupon file its account and be discharged. It provided the court should retain jurisdiction for an accounting between the plaintiffs and defendant Earle and wife in relation to the trust, and also that there should be an accounting between the parties and Charles H. Bennett to the end that each of said parties should be credited and charged with the proper items and should account for all the property which belonged to the trust. The court reserved jurisdiction over all the parties to make further adjudication in relation to the accounting and for the purpose of modifying the temporary decree. There were other reservations of jurisdiction in the decree. February 16, 1929, an amended bill of complaint was filed joining Florence C. Earle, wife of the defendant Herbert R. Earle, as defendant. An audit of the books of the trust was made by Price, Waterhouse & Co., which audit was reported, and July 7, 1930, a petition for leave to file an amended and supplemental bill of complaint was filed, and on the same date an amended bill of complaint was filed by all plaintiffs herein against Herbert R. Earle, Florence C. Earle, his wife, Charles H. Bennett, and Detroit & Security Trust Company as defendants.

Answers were filed by all of the defendants other than Charles H. Bennett, who filed an answer in the nature of a cross-bill. The case, being placed at issue, came on to be heard before the circuit court for Wayne county, and the trial court filed an opinion therein and a decree was entered based thereon. This decree found the amount due from Herbert R. Earle, as trustee, to be the sum of $233,725 principal and $98,154.73 interest. It also fixed liens upon the real estate standing in the name of Herbert R. Earle and Florence C. Earle, his wife, and held by them as tenants by the entirety and used and occupied by them as a homestead in Oakland county, as follows: Lien for plaintiffs in the amount of $16,908.27; lien in favor of Charles H. Bennett in the sum of $62,424.88. Such liens were to be of equal rank.

Defendant Florence C. Earle made a motion for a rehearing and a motion to amend the decree filed herein, and by such motions claimed she was made a party to the original bill of complaint only for the reason plaintiffs alleged her signature was necessary to effect a proper conveyance of the real estate in Florida; that, in pursuance of such decree, she had deeded over each and every parcel of such real estate belonging to the trust of which her husband, Herbert R. Earle, was trustee; that the only relief asked against her in the amended bill of complaint was that she account for the funds of the trust in her hands, and under the pleadings and proofs there was no showing she ever had any of the trust funds in her hands, or any control over any of the funds or property belonging to the trust; that no decree for an accounting would lie against her unless a showing was made that funds of the trust came into her possession; that the court was without jurisdiction to fasten a lien upon the real estate in Oakland county standing in the names of defendants Herbert R. Earle and Florence C. Earle; that the title to this property was local in its nature and not within the jurisdiction of the circuit court for Wayne...