Owen v. Potter

• Decision Date: 25 January 1898
• Citation: 115 Mich. 556,73 N.W. 977
• Court: Michigan Supreme Court
• Parties: OWEN ET AL v. POTTER ET AL.

73 N.W. 977

115 Mich. 556

OWEN ET AL v. POTTER ET AL.

Supreme Court of Michigan

January 25, 1898

Appeal from circuit court, Wayne county, in chancery; William L Carpenter, Judge.

Suit by Orville W. Owen and others against Orrin W. Potter and others to compel an accounting of certain assets of the estate of Eber Ward, deceased. From a decree for defendants, plaintiffs and Tubal C. Owen, defendant, appeal. Affirmed.

Moore & Moore (J. B. Tuttle, of counsel), for appellants Orville W. Owen and others.

Timothy E. Tarsney, for appellant Tubal C. Owen.

Wells Angell, Boynton & McMillan (John P.

Wilson of counsel), for appellee Orrin W. Potter.

Edward A. Gott (William W. Gurley and Horace G. Stone, of counsel), for appellees Catherine L. Cameron, John B. Lyon, and Thomas R. Lyon.

HOOKER J.

The bill in this cause is filed upon the theory that, through a collusive arrangement between them, Orrin W. Potter, the executor of the estate of Eber B. Ward, deceased, and the other defendants, have unlawfully acquired large sums at the expense of the estate. It is alleged that this has been accomplished by the allowance and payment of unjust claims, and by purchasing assets at prices below their fair value. Ward died in 1875, leaving a large estate, seriously incumbered, at a time when gold was at a premium, and values were as greatly depressed as they have been at any time within 50 years. He owned stock in various concerns, notably the North Chicago Rolling Mill, the Pneumatic Steel Company, the Milwaukee Iron Company, the Wisconsin Iron Company, the Wyandotte Rolling Mill, the New England Mining Company, and the Flint & Pere Marquette Railroad Company. He also owned Burlington & Southwestern Railroad bonds, lands in Chicago, Lucas county, Ohio, and other places (including Michigan), and a valuable tract of pine land known as "Ludington." He also owned vessel property and other interests, which need not be specifically mentioned. Among his obligations were a personal guaranty upon bonds of the Milwaukee Iron Company to the amount of $400,000, a similar guaranty upon Flint & Pere Marquette Railroad notes about $203,000, and some personal bonds called "Ward Loan Bonds," secured by mortgage upon real estate. It is claimed that his obligations aggregated a million and a half dollars, and that his assets amounted to six million dollars, though the complainants maintain that his indebtedness was much less, and defendants insist that six million is a most extravagant valuation of his property. The relation of the several parties to the testator and each other, and their interests under the will, are as follows: By his first wife, Ward's children were Charles H. Ward, who assigned his claim to Mrs. Cameron; Milton D. Ward, who died about 1880, without issue; Lizzie and Henry,-both insane,-the latter having died without issue; and Mary, who married William B. Ely, and subsequently died, leaving a son, Alfred B. Ely. By his second wife, Catherine L. (who is now Catherine L. Cameron), Ward had two children, viz. a son, Eber B. Ward, Jr., and a daughter, who became Princess du Chimay. "Aunt Emily Ward," was a sister of the testator. She died before this suit was commenced. Abbey Owen and Sally Brindle were also Ward's sisters. Their children, with the exception of Tubal C. Owen, 2d, and Ellen Potter, wife of the executor, are complainants. Tubal C. Owen, 2d, is a nominal defendant, though a complainant in interest. Alfred B. Ely is also a complainant. The other descendants of Ward's first wife appear to have adjusted their interests through litigation, or sale. The defendants are Orrin W. Potter, the executor, Emily Potter, his wife (a daughter of Abbey Owen), Catherine L. Cameron (Ward's widow), her brother Thomas J. Lyon, her half-brother John B. Lyon, and the Illinois Steel Company, an Illinois corporation, successor to the North Chicago Rolling Mill Company. Eber B. Ward left a will and two codicils, the will proper and the first codicil being admitted to probate by the circuit court, the case having been appealed from the probate court, where the will and both codicils were sustained. The following summary of the will and codicils, taken from the complainants' brief, sufficiently shows the interest of the parties:

"By the original will the widow and her two children received about $1,000,000 of real and personal property, specifically devised and bequeathed. The executors were directed to pay the debts, and some comparatively small legacies, to sell all the property, and reduce the remainder to interest-bearing securities, and to turn over these securities to themselves, Potter, Wyman, Mumford, and Owen, as trustees (page 75), who were to divide the income into six parts, and distribute it equally to Captain Ward's five children by his first wife, and his sister, Aunt Emily Ward. At the death of Aunt Emily, one-sixth was to be paid to the surviving children of his sisters Abbey Owen and Sally Brindle, and at the death of the last of Ward's five children by the first wife the whole body of the trust was to go to these children of said sisters, provided, however, if either of the said five children left children, each family of grandchildren should inherit one-sixth.

"First codicil: This made certain provisions for guardianship of the children named, and declared the devises to his wife to be in lieu of dower.

"Second codicil: The second codicil provided: 'After mature deliberation, I do hereby direct that my executors named in my said last will, whether acting as executors or trustees, as therein provided for, shall pay to each of my children, Henry S., Milton D., Chas. H., Elizabeth V., and Mary E. Ward, a sum not to exceed $200.00 per month, for their support; the same to be paid out of the income from my estate. *** This limitation is made, as in my judgment it will tend to their advantage.' (Page 79.)"

Our understanding is that the appeal to the circuit court was taken on behalf of two of the children by Ward's first wife, who attacked the competency of the testator. The question was tried twice by jury, and finally compromised upon the second trial by the payment of about $100,000 to the contestants, who withdrew opposition, and the will and first codicil were then proved. It is claimed that this arrangement was collusive on the part of the widow and executor, and had the effect of permitting the division of the entire income as provided by the will, instead of adding any surplus to the body of the trust, as might have been done under the second codicil, had the estate produced an income of more than enough to pay the sum of $200 per month to each of the first set of children. In this connection it may be well to add that, under the will and two codicils, the estate must have been disposed of in the following order: First, payment of debts; second, Ludington, and some other property, to the widow and her children; third, the dwelling and other property to the children by his first wife; fourth, 1,130 shares of the North Chicago Rolling Mill stock, which was specifically bequeathed; fifth, the remainder was to constitute a trust fund, and it was from this fund only that possible benefits to the complainants were to be expected. It is apparent that, if there was not sufficient property to pay the debts, there could be no trust fund, and that the second codicil would not become operative; and, under the entire instrument, the complainants would have no interest in the estate. If, however, there should have been a trust fund, these complainants are interested, and under the second codicil their interest might be greater than under the terms of the will as first executed. The evidences of fraud mainly cluster about the items mentioned, and it is urged that, taken together, the various transactions justify the inference of a collusive arrangement between the executor Potter, the widow, and her brothers.

Among the points made by counsel for the complainants, is the allegation that the executor was a party to the fraudulent disposition of the estate's interest in four concerns known as the Wisconsin Iron Company, the Milwaukee Iron Company, the Pneumatic Steel Company, and the North Chicago Rolling Mill. It is said that this was done by aiding, if not causing, the latter to absorb the three former, and then selling the latter for an inadequate price. The concern known as the Wisconsin Iron Company consisted of the North Chicago Rolling-Mill Company, the Milwaukee Iron Company, and Ward. Counsel say that they owned the property in partnership, Ward owning one-fifth, and each of the others two-fifths. It consisted of iron mines, furnaces, about 1,000 acres of land within 40 miles of Milwaukee, and a body of land near the entrance of the harbor at Milwaukee. Counsel disagree as to its value, one side maintaining that the water front of the last-mentioned parcel made it of "enormous value" the other insisting that it is a swamp, of little value, and that the plant was out of date, and not adapted to the methods of the day. This property was all bought of the Sweedes Iron Company for about $985,000, subject to a mortgage of $200,000. It would, therefore, seem that at the time of its purchase, in 1869, it was considered worth about $1,000,000. We may reasonably conclude that the effect of the panic of 1873 caused a great depreciation in its value. The purchasers assumed proportionate shares of the $200,000 obligation, and the North Chicago Company paid its two-fifths, while Ward and the Milwaukee Company did not pay their shares. We may here profitably drop the subject of the Wisconson Iron Company for the time being, to consider the Milwaukee Iron Company, one of the partners. The Milwaukee Iron Company was a competitor in business...