Ottenberg v. Ottenberg

• Decision Date: 02 May 1961
• Docket Number: Civ. A. No. 3013-58.
• Citation: 194 F. Supp. 98
• Parties: Gilbert OTTENBERG, Assignee of Fanny Ottenberg, Plaintiff, v. Florence OTTENBERG, Individually, and as Executrix, etc. et al., Defendants.
• Court: U.S. District Court — District of Columbia

194 F. Supp. 98

Gilbert OTTENBERG, Assignee of Fanny Ottenberg, Plaintiff, v. Florence OTTENBERG, Individually, and as Executrix, etc. et al., Defendants.

Civ. A. No. 3013-58.

United States District Court District of Columbia.

May 2, 1961.

COPYRIGHT MATERIAL OMITTED

Wilkes & Artis, Washington, D. C., for plaintiff.

James M. Earnest, Washington, D. C., for defendants.

LEONARD P. WALSH, District Judge.

This matter comes before the Court on a complaint for payment of money and transfer of corporate stock filed by the plaintiff, as assignee,¹ under an agreement dated November 26, 1958, of the claim of his mother, Fanny Ottenberg, arising out of an alleged agreement between Joseph and Fanny Ottenberg and their son and his wife, Melvin and Florence Ottenberg (hereafter often referred to by their first names). A chronology of events leading up to the filing of this suit is attached as Exhibit A.

The problems involved in this controversy are complicated by the fact that of the five parties having knowledge of the alleged agreement, three of them are deceased, namely: Louis Ottenberg, a son of Joseph and Fanny, and an attorney, who drew up the agreement; Joseph Ottenberg, the father, and a party to the agreement; and Melvin Ottenberg, a son, and a party to the agreement. And further, the mother, Fanny Ottenberg, by reason, among others, of the infirmities of old age, is too ill to testify; and further, Fanny Ottenberg and Florence Ottenberg, it seems fair to infer, were not nearly as knowledgeable of the facts surrounding the agreement as were the decedents.

For a number of years Joseph Ottenberg conducted a sole proprietorship bakery business in the District of Columbia, in which he was assisted by his wife, Fanny. About 1930, the son, Melvin, was employed in the business, and some time later a Florence Samler was also employed. Melvin and Florence were married on October 7, 1945.

In December, 1946, Ottenberg's Bakers, Inc., a defendant herein, was formed as a District of Columbia corporation. Joseph Ottenberg was issued 250 shares of stock (Certificate No. 1, Joseph Ottenberg, 249 shares, and Certificate No. 2, Fanny Ottenberg, 1 share) in consideration of his contribution of the bakery business to the corporation. Melvin Ottenberg was issued 150 shares of stock (Certificate No. 3, Melvin Ottenberg, 149 shares, and Certificate No. 4, Florence Ottenberg, 1 share), in consideration of his transfer to the corporation of certain real estate and the equipment of another bakery (Sunrise), which he had just purchased, subject to the assumption by the corporation of a named indebtedness of Melvin Ottenberg.

With respect to Melvin's contribution to the corporation, it is plaintiff's claim that a majority of such contribution was underwritten and indeed furnished by Joseph Ottenberg prior to the transfer from Melvin to the corporation.²

Some time between January 3 and March 1, 1947, Joseph Ottenberg, Fanny Ottenberg, Melvin Ottenberg, and Florence Ottenberg entered into an agreement under seal. The two basic provisions of this agreement, which are in controversy here, provided substantially as follows:

1. That if, while either Fanny or Joseph Ottenberg is living, the sums received by them, or the survivor of them, from the defendant, Ottenberg's Bakers, Inc., by way of compensation, bonus, dividends, or otherwise, shall be less than $6,000 per year, Melvin Ottenberg shall pay to his parents, Fanny and Joseph Ottenberg, or the survivor of them, such sum or sums as may be necessary to provide them, or the survivor of them, with an income of not less than $6,000 per year from said corporation and/or from Melvin Ottenberg; and

2. That all of the stock of the corporation should be endorsed in blank and delivered to the attorney, Louis Ottenberg, as trustee. It was then provided that upon the death of Joseph and Fanny Ottenberg, the trust should cease, and the stock should be delivered to Melvin Ottenberg. However, if Melvin Ottenberg were to die before the termination of the trust as noted, then all of the stock was to be delivered to Fanny Ottenberg and Joseph Ottenberg, or the survivor of them.

Fanny Ottenberg was sent a check each week from January, 1947 through December, 1955 in the sum of $100 each week. (A number of which were returned to Ottenberg's Bakers, Inc.; see letter of Fanny Ottenberg quoted below).³

No action was ever taken to transfer the stock certificates to Louis Ottenberg. However, on June 30, 1948, Joseph made a gift of 125 shares of the stock to Melvin and 124 shares of the stock to Florence. Meanwhile, Fanny Ottenberg, sometime in 1947 endorsed certificate No. 2, 1 share, of the stock and transferred it to Joseph. Joseph in turn, in February of 1955, apparently effected the issuance of the one share to Florence.

With respect to this gift of stock, Joseph filed a Federal Gift Tax Return for the tax year 1948 for the stock transferred to Melvin and Florence. Melvin and Florence in turn filed a Federal Donee's Information Return covering the same gift.

Meanwhile, Joseph Ottenberg died on October 26, 1955. About three months later, by a letter dated January 10, 1956, Fanny notified Melvin that she was waiving the $100 weekly payment previously made to her, subject to further notice. She also enclosed seven uncashed checks for $100 each, dated November 18 through December 30, 1955. This letter was placed by Melvin and Florence in the safety deposit box of their bank. The letter reads as follows:

"Last week I went over my financial affairs with Mr. Brady of the American Security & Trust Co., and I find that for the present at least I have no need of the payments of $100. you have been sending me. You may stop making those payments until such time as I shall ask you to resume them. I waive my rights to payments not made.

"I enclose for cancellation the following 1955 checks for $100. as I do not need them: No. 1321 of Nov. 18; No. 1360 of Nov. 25; No. 1395 of Dec. 1; No. 1462 of Dec. 9; No. 1488 of Dec. 15; No. 1937 of Dec. 22; and No. 1947 of Dec. 30."

Melvin Ottenberg died on August 22, 1956. His widow, Florence, was named executrix and sole beneficiary under his will. She qualified as executrix by giving a special bond, conditioned, among other things, upon the payment of all of the decedent's debts. The publication of the administration of the estate of Melvin Ottenberg was made against the claims of creditors in accordance with statutory provisions, and no claims were made on account of the agreement at that time, and the assets of Melvin's estate were distributed according to the dictates of his will. The alleged value of the securities received by Florence under Melvin's will was approximately $165,000. Since Melvin's death, Florence has been the sole stockholder of Ottenberg's Bakers, Inc.

About November, 1957, Fanny Ottenberg verbally demanded that Florence resume the payments previously waived by Fanny's letter of January 10, 1956. Such payments were not resumed, and subsequently a letter, dated August 27, 1958, was forwarded by Fanny to Florence demanding resumption of the payments. The letter demand did not result in the resumption of payments, and for that reason, among others, this suit was filed.

The agreement in this case is basically one designed to provide for the care and support of the aging parents, Joseph and Fanny Ottenberg, and to leave the business to their son, Melvin, and of course his wife Florence, or other legal representatives. A fair reading of the instrument, the facts, and reasonable inferences drawn from the facts can lead to no other conclusion. The basic question thus facing the Court is whether it can give effect to the obvious intent of the parties, or, whether the agreement must fail for the reason that the parties failed to make their agreement legally binding, despite the obvious intent of the parties.

One of the first problems presented is whether there was consideration for the agreement such as to amount to a binding contract. As noted in the instrument itself, the consideration was stated to be for the "love and affection, and of the mutual undertakings, promises and agreements therein contained * *". It is noted that there was an undertaking by Melvin Ottenberg that Joseph and/or Fanny Ottenberg should receive $6,000 a year from the operation of the bakery, i. e., "from said corporation and/or from Melvin." There was also the undertaking by Joseph and Fanny that in the event of their death, all their stock in the company should be delivered to Melvin or "his legal representative". It seems fair to infer that they intended Melvin's heirs should receive the stock of the company, among whom the wife, Florence, could normally be expected to be numbered, especially inasmuch as she was a co-signor of the agreement and presumably undertook to do certain things as the wife and legal representative of Melvin.

It is true that the agreement speaks of a trustee, Louis Ottenberg, who drew the instrument in question, but the role of the attorney-son, as suggested by the plaintiff, appears to be one of a stakeholder or escrow agent rather than trustee.

It seems clear to the Court that any attempt to create a trust here has failed. There was no transfer of the legal interest, Chicago, Milwaukee & St. Paul Railway Co. v. Des Moines Union Railway Co., 1920, 254 U.S. 196, 41 S. Ct. 81, 65 L.Ed. 219, and lacking the complete transfer or conveyance in trust, the Court cannot uphold the agreement here as a valid trust. Scott on Trusts, Vol. I, §§ 32.1, 32.2; see also, Restatement, Trusts, § 26. Furthermore, it is the finding of the Court that the parties intended the agreement as a contract for support and care rather than as a trust instrument.

The writing entitled "An Agreement" involved in this case is under seal, and in the opinion of the Court is a valid bilateral contract entered into with the mutual assent of the parties whose signatures are affixed...