Lovewell v. Schoolfield

• Decision Date: 09 October 1914
• Docket Number: 2376,2391.,2377,2375
• Citation: 217 F. 689
• Parties: LOVEWELL et al. v. SCHOOLFIELD et al.
• Court: U.S. Court of Appeals — Sixth Circuit

217 F. 689

LOVEWELL et al. v. SCHOOLFIELD et al.

Nos. 2375, 2376, 2377, 2391.

United States Court of Appeals, Sixth Circuit.

October 9, 1914

On Petitions for Rehearing, December 16, 1914. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Wm. M Randolph, of Memphis, Tenn., for appellants Lovewell and others.

Caruthers Ewing, of Memphis, Tenn., for appellant Hill.

G. J. McSpadden, of Memphis, Tenn., for Mr. and Mrs. Schoolfield.

J. H. Poston, Jr., of Memphis, Tenn., for appellant Poston.

A. W. Biggs, of Memphis, Tenn., for John Wade & Sons.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

KNAPPEN Circuit Judge.

Louis Hanauer, of Memphis, Tenn., died August 21, 1889, without issue, leaving a will, which is printed in the margin. ^[1] He was at the time a member of the firm of Schoolfield, Hanauer & Miller, wholesale grocers and cotton factors, each partner having a one-third interest. The testator's brother, Jacob Hanauer, then deceased, who had at one time been a member of the firm, left an estate of some value, and two of his children were still under Louis Hanauer's guardianship. The latter was also trustee for the estate of his niece, Mary Hampson (a daughter of Jacob Hanauer, and beneficiary under the 6th item of the will), consisting of upwards of $18,000 personal and an amount of valuable real estate. A few months before the testator's death the copartnership ceased active business, upon the formation of a corporation under the name of the Schoolfield-Hanauer Company. This corporation had a capital stock of $67,000, Hanauer holding $21,000, Schoolfield and Miller each $19,000, the remaining $8,000 being divided between four others. In payment of its capital stock, it took over the stock in trade of the copartnership, which was dissolved by Hanauer's death, Miller and Schoolfield being thereupon the surviving partners, as well as in practical control of the affairs of the corporation. Schoolfield was also one of the executors and trustees under testator's will, which was admitted to probate August 29, 1889. Poston, the other executor and trustee, had been Hanauer's attorney. The executors immediately qualified, and filed an inventory October 2d thereafter. The estate consisted of: (a) Cash in bank, $9,534.42; (b) nearly $6,000 (net) life insurance; (c) one-third of the net assets which should remain after the liquidation of the affairs of the partnership, Hanauer's apparent or book credit therein being $97,859.13; (d) the Kerr avenue homestead mentioned in the seventh item of the will, together with other real estate interests; (e) a considerable amount of personal property, consisting largely of notes, stocks and bonds, carried in the executors' inventory at about $250,000, treating the corporate stocks at par value. The latter included $54,000 in the National Cotton Seed Oil & Huller Company (hereafter called the Cotton Company); $13,500 in the Brush Electric Light & Power Company (hereafter called the Electric Company); and $21,000 in the Schoolfield-Hanauer Company. The Kerr avenue homestead was duly conveyed by Mrs. Hampson to the trustees under the will, as provided by the seventh paragraph thereof, to be held for her benefit and that of her children.

In October, 1890, the executors filed in the probate court their first annual account, and in the same month Mrs. Hampson's husband was, by order of the court, made trustee of his wife's interests formerly held by testator in trust for her. In 1891, Poston, one of the executors died, Schoolfield being thereafter sole executor and trustee. He, in 1891, filed a second annual account, covering transactions both before and after Poston's death, and also filed annual accounts in 1895, 1896, 1898, 1901, and 1903. Each of these accounts purported to contain in detail a statement of all the receipts and disbursements connected with the execution of the will and the administration of the entire estate. The first account showed, among other things, payment of $18,837.18 in discharge of testator's liability as guardian of the children of Jacob Hanauer, payment in full of the money legacies under the fourth and fifth items of the will, amounting to $5,500; payment of debts and liabilities of the testator amounting to $8,304.70, including liabilities of $2,075.29 on guaranty and $878.23 as surety; also $36,195.05 as loans and advances to the Cotton Company and Electric Company. The second report showed, among other items, payments of more than $7,000 to Mrs. Hampson on the testator's liability as trustee, and advances of $9,000 to the legatees, against their distributive shares, under the eighth item of the will. Others of the reports included payments to or for the benefit of the legatees under the eighth item, as well as payments to or for Mrs. Hampson, both on account of the testator's liability to her and as beneficiary under the will. The seventh report showed, among other items, payments both to Mrs. Hampson and to the beneficiaries under the eighth item, to make good losses on lands and to equalize advances. In 1891, under partition proceedings between the beneficiaries under the sixth and eighth items of the will, certain real estate of the testator, valued at about $18,000, was, by order of the court, conveyed to Schoolfield, as trustee for Mrs. Hampson and her children under the sixth item. So long as the corporation Schoolfield-Hanauer Company did business, collections and disbursements, as well as distributions to the copartners and their representatives on account of partnership affairs, were made through the corporation, which also furnished Mrs. Hampson large amounts of supplies and money, which were used in support of herself and family. It was wound up by insolvency proceedings in 1896, paying 39 cents on the dollar. When it failed it owed the copartnership, as well as Hanauer's estate, and held a large balance of account against Mrs. Hampson, which was transferred to Schoolfield. The capital stock was of course wiped out. Among the assets of the copartnership at Hanauer's death were: (a) The business property on Front street in Memphis, used as a place of business by the copartnership and later by the successor corporation. This property was sold in 1897 by the two surviving copartners, reaching by mesne conveyances the firm of John Wade & Sons. (b) A debt of one Townsend of $1,653.81, which, together with $4,912.84 owing to W. W. Schoolfield, was secured by a trust mortgage upon land in Shelby county, Tenn., which, in 1898, was sold on foreclosure to Mrs. Schoolfield, wife of the executor, trustee, and partner. By her death her son, Dudley T. Schoolfield, succeeded to her interest, and he later conveyed the property to his wife, Edith Brooks Schoolfield. (c) An indebtedness of $18,529.05 from Ferguson & Hampson, the latter being the husband of Mary Hampson. This was secured ratably with an indebtedness from that firm to testator of $17,776.03, the two debts being subject to a purchase-money lien held by testator of $21,114.60 upon Nodena Plantation, so-called, in Mississippi county, Ark. Foreclosure proceedings were pending at testator's death, and in 1891 the premises were sold thereunder to Frank P. Poston and Dudley T. Schoolfield, as trustees, for the benefit of the creditors named, for $45,000, which was less than the total of all the claims. Hanauer's estate was thus the beneficiary under the trust conveyance, except only an apparent interest on the part of Miller and Schoolfield, each in the amount of $4,796.24. In 1897, six years after the foreclosure sale, the beneficiaries under the eighth item of the will conveyed their interests in the plantation to Schoolfield, trustee, to be held by him for Mrs. Hampson and her children, under the sixth item, subject to the amounts due Schoolfield and Miller, which the trustee, together with Mrs. Hampson and her husband, assumed. Miller transferred his interest in Nodena Plantation to Susan Thomas, now Mrs. Norfleet.

Miller died in 1903. Schoolfield died about October 1, 1905, while still executor and trustee, leaving his son, Dudley T. Schoolfield, as his sole heir, devisee, and legatee. A summary of receipts and expenditures by the executors and trustees, based upon the master's report, is shown in the margin. ^[2] Schoolfield's death, complainant Lovewell, a son-in-law of Mrs. Hampson, upon application of the latter and her children, through their attorney, was appointed trustee as successor to Schoolfield. No successor executor has been appointed.

Lovewell as trustee, filed his bill in the court below on April 8, 1907, to obtain an accounting of the administration of the Hanauer estate, the enforcement of the trusts created by the will, and the recovery by the several devisees and legatees there under of the sums claimed to be due them upon an account and settlement of the administration and of the trusts created by the will; also an accounting of copartnership affairs and of the administration thereof by the surviving partners, as well as a confirmation of their title to Nodena Plantation against all claims of Schoolfield and Mrs. Norfleet. The beneficiaries under the eighth item of the will filed a cross-bill, asking the same relief, so far as pertinent. The causes were put at issue and reference made to a special master for an accounting, under express directions that the inventory of the executors and the various partial settlements made with the probate court should be taken as prima facie correct, the defendants not to be held for any item not set out in the inventory and settlement, except upon specific allegations of the special items and sufficient proof supporting the same. The master made a comprehensive and painstaking report, embracing detailed schedules and...