Mudd v. Lanier

• Citation: 24 So.2d 550,247 Ala. 363
• Decision Date: 01 November 1945
• Docket Number: 6 Div. 363.
• Parties: MUDD et al. v. LANIER et al.
• Court: Supreme Court of Alabama

24 So.2d 550

247 Ala. 363

MUDD et al. v. LANIER et al.

6 Div. 363.

Supreme Court of Alabama

November 1, 1945

Rehearing Denied Jan. 24, 1946. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Horace C. Wilkinson and Sadler & Sadler, all of Birmingham, for appellants.

Lange, Simpson, Brantley & Robinson and Bradley, Baldwin, All & White, all of Birmingham, for appellees.

FOSTER Justice.

This is one of a series of suits relating to the will and estate of Edward Wilkinson, Sr., deceased, who died November 6, 1941. It is known in the series as case No. 55708, in the Circuit Court, in Equity (M. R. No. 2, page 461). It is an original bill in equity, and comes here on appeal by the respondents from a decree on their demurrer, and on their motion to dissolve the injunction which had been issued pending the cause.

The complainants are two adults and one minor, children of Mrs. Elizabeth Wilkinson Lanier, who is a daughter of decedent and one of his four children. The bill alleges that decedent had prior to his death created five living trusts, whose assets consisted of respective shares of the common stock of the Western Grain Company, one for his wife and one for each of his four children, of which he was trustee. It provides that in event of his death, resignation, failure or inability to act, Edward Wilkinson, Jr., and Elizabeth Wilkinson Lanier, two of the children, shall be successor trustees.

The trust instrument (M. R. No. 1, page 39) provides in substance that if Mrs. Lanier died before the termination of the trust, the income should go to her surviving lineal descendants, per stirpes. It also provides conditions upon which it may terminate during the life of Mrs. Lanier. And that upon the termination of the trust, the remaining corpus shall vest in the then beneficiary or beneficiaries of said trust in their respective proportionate interest. The trust has apparently not terminated, and Mrs. Lanier is still in being. The will of decedent (M. T. No. 1, page 6) also sets up a trust including one hundred and fifty-one shares of common stock of the Western Grain Company, and of which Edward Wilkinson, Jr., and Mrs. Lanier are named trustees. In paragraph 8 it is provided that the net income was to be payable to his widow, Mrs. Grace Wilkinson, during her entire life in sufficient amount to maintain her as directed. The excess to be distributed to his said four children, in equal parts, as provided in paragraph 7, which was that 'In event of the death of anyone or more of the above named beloved children, leaving lineal descendants surviving, the respective share of each deceased parent shall be distributed per stirpes to his or her lineal descendant,' or if she leaves no lineal descendants surviving, but leaves a will, her legatees become entitled to her share in the income. All of that is with reference to the income during the continuance of the trust. The will makes provision for the termination of the trust concerning the stock of the Western Grain Company, in substance that it shall continue during the life of the widow, and terminate at her death if twenty years shall have expired. If not, then it is to continue for the twenty-year period, provided 'each adult direct descendant of this testator and each guardian of each minor interested in this estate shall unanimously consent and agree in writing to terminate this trust.'

It then provides in substance, so far as here material, that on the termination of the trust, the assets in it shall be distributed among the four named children, or those of them surviving, per capita, or in event of the death of any of them intestate leaving surviving lineal descendants, they shall inherit per stirpes the share of the deceased parent; or in event of such death testate, with or without lineal descendants, the share shall pass acording to the will of said decedent. That trust has not terminated, and their mother Mrs. Lanier is in being. Whether she shall be living at the termination of the trust, or if dead, whether she shall be testate or intestate, cannot be known at the present time.

The interest of these complainants as the lineal descendants of Mrs. Lanier in the common stock of the Western Grain Company is controlled by the terms of the two trusts to which we have referred. They claim that they have rights of remaindermen, which they seek to protect by the bill of complaint.

The bill (M. R. No. 2, page 461) alleges that Mr. J. P. Mudd, the husband of Mrs. Marguerite Mudd, one of the four children, owned a large amount of both common and preferred stock in the Western Grain Company, and was a director, and became very insistent upon imposing his views in its management (M. R. No. 2, page 468). The executors and trustees had two hundred and seventy-one shares of common stock, and Mr. and Mrs. Mudd owned one hundred and eighty-four shares of common stock, all of which had general voting righs. There were outstanding five hundred such shares. So that treating the common stock as alone having general voting rights, the executors and trustees would have a majority of it.

But there were also outstanding one hundred and fifty shares of preferred, of which Mr. Mudd owned fifty-nine shares. That none of the preferred stock had for twenty years been treated as voting stock (paragraph vii-f). A special meeting of the directors of Western Grain Company was held on December 17, 1941 (M. R. No. 1, page 67). At said meeting Mr. Mudd made many charges against and demands upon the trustees and executors; also claimed that decedent was indebted in a large sum to the Western Grain Company. The directors were McCall, Edward Wilkinson, Jr., J. P. Mudd, Mrs. Mudd, Mrs. Lanier and Sterling Lanier. They elected Edward Wilkinson, Jr., president, McCall, vice-president. They ordered the payment of a bonus of $15,000 for the employees, in separate amounts to be fixed by the president. The salary of McCall was fixed at $10,000 for the ensuing year: a bonus of $7,500 for McCall and Edward Wilkinson, Jr., each; and $5,250 as the bonus to the estate of decedent. On all those matters the directors voting for them were Mr. and Mrs. Lanier, McCall and Edward Wilkinson, Jr.; and those voting against each such proposal were Mr. and Mrs. Mudd, except the election of McCall as vice president, and the fixation of his salary, as to which the vote was unanimous.

The instant bill also alleges that soon afterwards Mr. Mudd, joined by his wife and the widow of decedent, then a non compos mentis, acting by Mrs. Mudd as next friend, filed an original bill of complaint (known as case No. 53010), purporting to protect the Western Grain Company from threatened mismanagement and dissipation of its assets and from the alleged incompetent and improvident control of the co-executors. Neither of these complainants, nor anyone in their immediate class or group, was joined as a party to that suit, and had no part in it whatsoever. But the co-trustees and co-executors, supra, as such and individually, and Mr. Lanier, were among the respondents.

On May 25, 1942, there was an agreement entered into for a decree to be entered in settlement of that suit. These complainants were not parties to that agreement in person or by guardian, or counsel. But the said Edward Wilkinson, Jr., and Mrs. Lanier as the co-executors and co-trustees were parties to it (M. R. No. 1, page 171). The case was not tried upon its merits, but the decree of the court was based solely upon the agreement in writing by the parties to it.

The bill (M. R. No. 2, pages 470-473) complains that it is prejudicial to their rights in several respects.

It is pointed out (a) that the consent decree enjoined Edward Wilkinson, Jr., as a trustee under the living trust from voting the stock in the trust for any trustee or co-trustee under the trust instrument or any executor or co-executor of the estate of Edward Wilkinson, Sr., as a salaried officer of the Western Grain Company, other than as director, which was in violation of the terms of the trust instrument, which confers upon the trustees or trustee power to vote all shares of stock of the Western Grain Company held in trust as if they were sole owners of them.

(b) That it also enjoined the said Edward Wilkinson, Jr., as trustee from using his own judgment in voting the stock belonging to the estate under the authority of the will of decedent.

(c) Under the consent decree Mrs. Lanier as co-trustee and co-executor was ousted, though no complaint was made of her, and Edward Wilkinson, Jr., the remaining co-trustee and co-executor, was enjoined from naming her successor notwithstanding the living trust instrument and the will provide that in event of one of them resigning, the remaining co-trustee should have power to fill the vacancy.

(d) Said decree enjoined Western Grain Company from retiring, calling or redeeming any of the preferred stock for a period of five years (M.R. No. 1, page 174 [3]); and it was forced to issue a large number of preferred shares at eight percent. when it needed no money and had just collected $112,000 insurance on the life of decedent and had unlimited borrowing capacity at low rates of two or three percent.

(e) Said decree awarded Mr. Mudd a judgment against the Western Grain Company for $15,000 when there was in truth no basis for said judgment and no such claim was made in the pleading in the cause; and it is alleged that there was a wrongful distribution of the assets of the corporation.

(f) Sied decree sanctioned the issue of

(f) Said decree sanctioned the issue of stock to Mr. Mudd in satisfaction of that judgment, alleged in the decree to be with the assent and concurrence in open court of all holders of common stock in said corporation. The...