Loud v. St. Louis Union Trust Co.
| Decision Date | 22 December 1925 |
| Docket Number | No. 26135.,26135. |
| Citation | 281 S.W. 744 |
| Parties | LOUD v. ST. LOUIS UNION TRUST CO. |
| Court | Missouri Supreme Court |
Appeal from St. Louis Circuit Court; M. Hartmann, Judge.
Action by Ida Mary Loud against the St. Louis Union Trust Company. From a decree upon exceptions of plaintiff to an accounting filed by defendant as trustee under will of Mary J. Blanke, deceased, both parties appeal. Reversed and remanded, with directions.
Rassieur & Goodwin, of St. Louis, for Loud.
Bryan, Williams & Cave, Foristel, Mudd, Hezel & Habenicht, and Tames T. Blair, all of St. Louis, for St. Louis Union Trust Co.
These are cross-appeals from IN decree rendered by the circuit court of the city of St. Louis after a hearing upon exceptions filed by plaintiff to an accounting filed by defendant of its management of an estate, which it had administered as trustee under the will of Mary J. Blanke, deceased, and upon exceptions filed by plaintiff to defendant's claims for allowances for compensation for its services and attorney's fees in the administration of said trust estate. The suit was originally instituted on January 16, 1920, by plaintiff, Ida Mary Loud, who is the daughter and sole heir of Mary J. Blanke, deceased, to have declared void a trust created by the will of Mary J. Blanke, on the ground that it violates the rule against perpetuities. This court, in Loud v. St. Louis Union Trust Co., 249 S. W. 629, 298 Mo. 148, held the trust void, and remanded the cause, with directions to the trial court to enter a decree for plaintiff as prayed, and to take an accounting from defendant, St. Louis Union Trust Company, the trustee named in said will, and turn over to plaintiff the property of the trust estate, and to pay the attorneys for defendant, trust company, reasonable counsel fees for services rendered in the circuit court and in this court, and that all costs of the case be taxed against plaintiff.
Pursuant to the mandate and directions of this court, the circuit court entered an order requiring defendant to file a true and correct account of its administration of the assets received by it as trustee under the will of Mary J. Blanke, and thereafter defendant filed its, accounting, covering its administration of the estate from June 3, 1914, to the date of filing the account, June 14, 1923, approximately 9 years. The account is voluminous, and is set out in great detail. Among the assets owned by Mary J. Blanke at the time of her death, and passing to defendant as trustee under her will, were 1,735 shares of the capital stock of the Granby Mining & Smelting Company, a Missouri corporation, which corporation, for brevity, will be referred to hereafter as the Granby Company. This stock had a par value of $100 per share, and defendant, upon taking charge of the estate, charged itself upon its books with $173,500, the par value of said 1,735 shares. During the year 1916, defendant sold the 1,735 shares of Granby Company stock, receiving therefor the sum of $300 per share, or the aggregate sum of $520,500. Plaintiff's first exception is based upon the sale of said shares of stock, and defendant's appeal is from that portion of the decree sustaining plaintiff's first exception to defendant's accounting and a judgment thereon in favor of plaintiff and against defendant. We will therefore first consider the matters raised on defendant's appeal, No. 26135, arising out of the findings and decree of the court pertaining to plaintiff's first exception to the account filed by defendant in the circuit court.
As to the facts bearing upon plaintiff's first exception to the account and defendant's appeal from the trial court's action thereon, we gather the following from an unusually lengthy and voluminous record: The Granby Company was organized in the late '50s or early '60s, at least before the year 1865. Its capital stock in 1916 was $2,000,000, divided into 20,000 shares of the tar value of $100 each. It owned certain mineral lands or ore deposits, mainly in the Joplin district in southwest Missouri, but also owned some ore and natural gas deposits in Arkansas and Kansas, as well as certain coal deposits in Illinois. It also owned plants or smelters at or near East St. Louis, Ill., Granby, Mo., and Neodesha, Kan. It is referred to by counsel as a "close corporation"; e., its stock was largely owned by a comparatively small and selective number of stockholders. During the years 1914, 1915, and 1916 from 65 to 70 per cent. of its stock was owned and controlled by the Burnes estate of St. Joseph and members of the Burnes family, so that, as one witness expressed it, "it was practically impossible to interest outsiders in it." In 1909 a voting trust agreement was entered into by the holders of $900,000 of the stock, and subsequently enough additional stock was added so as to place 10,015 shares of the Granby stock in the voting trust, resulting in the control and management of the corporation being placed in this group of majority stockholders. The 1,735 shares held by defendant as trustee under the Blanke will was not represented in the voting trust or group control of the Granby Company. The Granby stock was not listed on any stock exchange, and "there wasn't any quoted market on it at any time." A stipulation in the record shows that some transfers of the stock were made during the years 1909, 1910, and 1911, the sale price per share, with four exceptions, never exceeding par value of $100, and, as to the four exceptions, one sale was for $110, another for $100.25, another for $102.50, and another for $105 per share. No transfers of the stock were recorded between December 18, 1911, and November 9, 1915, a period of about 4 years. Only one transfer is shown to have been made during the year 1915, when 25 shares were transferred on November 9, but no sale price was then recorded for that transfer. In the late fall of 1915, the Columbia & Fidelity Trust Company of Louisville, acting as trustee for the Ewald estate, sold 500 shares of Granby stock at a price of $140 per share to G. H. Walker & Co., a brokerage firm of St. Louis, hereinafter referred to. This transfer was recorded on the corporation books on January 4, 1916. In February, 1916, three transfers of 25 shares at $200 each and, in March, 1916, three transfers of 33 shares at $192 each, are recorded. The corporation paid no dividends on its capital stock in the years 1896 to 1901, inclusive, 1903, 1914, and 1915. The per annum average of dividends paid in 22 years from 1894 to 1915, inclusive, was 2 1/5 per cent. The average per annum payment of dividends for 10 years from 1906 to 1915, inclusive, was 3½ per cent. A 15 per cent. dividend was paid on March 14, 1916, the day defendant executed the option hereinafter referred to, but, including this dividend, the average dividend for 11 years was only 4½ per cent. This dividend for 1916 upon the 1,735 shares of Granby stock owned by the Blanke estate was actually paid to defendant and credited to the account on March 15, 1916.
In the latter part of 1914 or early in 1915 Mr. J. Lionberger Davis became an active director in defendant trust company. He had been in the active practice of the law for some years before, and was at one time president of the St. Louis Chamber of Commerce. His duties with the trust company appear to have been to assist in the administration of its trust matters, and his particular interest was with the investment of the trust company's funds and securities, and those over which the trust company acted as trustee. Among his several duties, it was his duty to "study the assets of trust estates, with a view of making recommendations as to any changes in the assets that he thought ought to be made." In looking over the various securities held by the trust company in its capacity as trustee, Mr. Davis recommended from time to time the sale of such securities. and the purchase of other securities, as he deemed wise under existing conditions. In looking into the investments of various trust estates, he came across the Blanke estate and the Granby Company stock held by defendant as trustee of that estate. He considered the Granby Company stock as a "highly speculative stock," and, while he did not know much about the Granby Company, he proceeded to get all the statistical information he could obtain on the subject, and talked with brokers, bond salesmen, and banking houses, so as to ascertain if there was any market for the stock, and came to the conclusion, from his preliminary investigation, that it was "a character of security that ought not to be held by the trustee," and recommended to defendant that the stock should be sold, if a market could be found for it. After making his preliminary investigation, Mr. Davis was asked by defendant to make a more careful investigation, which he did. He interviewed Mr. Elias Gatch, president of the Granby Company, and Mr. James Grover, a stockholder and director of that company, and talked With two or three of the active banking or brokerage houses in St. Louis, and tried to find out if there was a market for the stock. Mr. Davis learned that the stock had no established market value. In interviewing Mr. Gatch, Mr. Davis inquired, "If you, acting as trustee for women and. children, and held stock of this character, would you feel that you were justified in continuing to hold it under present conditions?" and Mr. Gatch replied, "I think you would be greatly criticized if you didn't sell at least half of it." Mr. Davis then asked Mr. Gatch what he thought the stock was worth and what the trust company would be justified in selling the stock for, whereupon Mr. Gatch replied, "I wouldn't buy any at $300 a share, and I wouldn't sell any at that price." No officer of the Granby Company could suggest to Mr. Davis any possible purchaser of the stock. During the fall of 1915, Mr. Davis, in the course of his...
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