Parker v. Rogerson
| Decision Date | 15 January 1970 |
| Docket Number | 2 and 3,Nos. 1,s. 1 |
| Citation | 33 A.D.2d 284,307 N.Y.S.2d 986 |
| Parties | William PARKER, Guardian of the Persons and as Co-Guardian of the property of Bertram B. Parker and Geraldine M. Parker, Appellant, v. J. Russell ROGERSON, Individually and as Executor and Trustee of the Estate of Geraldine Gebbie Bellinger, Deceased, Respondent, and the Manufacturers Hanover Trust Company, Individually and as Executor and Trustee of the Estate of Geraldine Gebbie Bellinger, Deceased, Respondent-Appellant, and the Phelps Can Co., Respondent, and Marine Midland Chautauqua National Bank (formerly the Chautauqua National Bank of Jamestown), Appellant. (646). William PARKER, Guardian of the Persons and as Co-Guardian of the property of Bertram B. Parker and Geraldine M. Parker, Respondent, v. J. Russell ROGERSON, Individually and as Executor and Trustee under the Last Will and Testament of the Estate of Geraldine Gebbie Bellinger, deceased, Appellant, and the Manufacturers Hanover Trust Company, Individually and as Executor and Trustee under the Last Will and Testament of the Estate of Geraldine Gebbie Bellinger, Deceased, Respondent, and the Phelps Can Co., Appellant, and Marine Midland Chautauqua National Bank (named herein as Chautauqua National Bank of Jamestown), Respondent. (752). In re ESTATE of BELLINGER. Application of J. Russell ROGERSON, Co-executor, for the Judicial Settlement of the First Intermediate Account of Proceedings of the Executors of the Last Will and Testament of Geraldine G. Bellinger, Deceased. (753). William PARKER, Guardian of the Persons and Co-Guardian of the Property of Bertram B. Parker and Geraldine M. Parker, Appellant, v. J. Russell ROGERSON, Individually and as Executor and Trustee under the Last Will and Testament of the Estate of Geraldine Gebbie Bellinger, Deceased, and the Phelps Can Co., Respondents, and Manufacturers Hanover Trust Company, Individually and as Executor and Trustee under the Last Will and Testament of the Estate of Geraldine Gebbie Bellinger, Deceased, and the Marine Midland Chautauqua National Ba |
| Court | New York Supreme Court — Appellate Division |
In 1929 the father of Marion Gebbie and Geraldine G. Bellinger died owning 250 of the 500 outstanding shares of stock in the Phelps Can Co. (Phelps). The remaining 250 shares were owned by the Phelps family. Mr. Bellinger bequeathed 125 shares to each daughter. Marion Gebbie died in 1949, leaving her 125 shares in trust for the benefit of her sister with the remainder to the Gebbie Foundation, Inc. Rogerson, who was named executor and trustee under the Will, at that time was also attorney for Mrs. Bellinger, a director of Phelps, and President of the Gebbie Foundation.
In 1960 the Phelps family disposed of its 250 shares by selling one-third thereof each to the company itself, Mrs. Bellinger and Rogerson, thus leaving 417 shares outstanding. Before her death in 1963, Mrs. Bellinger had conveyed to Rogerson 83 shares so acquired. Rogerson and Manufacturers Hanover Trust Company (Manufacturers) were named co-executors and trustees under Mrs. Bellinger's Will which left two-thirds of her residuary estate in trust for the benefit of her grandchildren (plaintiffs in Action No. 1), and one-third to the Gebbie Foundation.
In 1963 in order to raise money to pay estate taxes, Rogerson and Manufacturers agreed to sell the Phelps shares held by the Bellinger Estate to the company, purportedly for later resale to the executives of Phelps.
The sale price per share was $1800, although the executors had shortly before the sale engaged a professional appraisal company which determined the sale value to be in excess of $2400 per share for majority interest shares and $2000 per share for minority interest shares. The net worth of the company was appraised at $4040.84 per share.
At the shareholders meeting which approved this purchase, Rogerson voted all the outstanding shares of the company either in his individual or representative capacity. Four days later, he purchased the Phelps shares owned by the Gebbie Estate although he was sole executor and trustee of that estate. At this point in time, therefore, Rogerson or members of his family owned all the outstanding shares. Shortly thereafter, Phelps was liquidated at a per share value substantially in excess of both the previous sales.
It is against this background that the main action was commenced and the various cross-claims were interposed.
Parker, as guardian of the persons and as co-guardian of the property of the infant beneficiaries of the trust created under the Will of Geraldine Bellinger, commenced an action in Supreme Court, Erie County, against Rogerson, Manufacturers, Phelps and Marine Midland Chautauqua National Bank (Marine), the other co-guardian of the property of the infant beneficiaries, seeking an accounting by Rogerson, Phelps and Manufacturers for the alleged self dealing in Phelps stock by Rogerson. Manufacturers cross-claimed against Rogerson and Phelps, also seeking an accounting and alleging that any self dealing occurred without its knowledge or acquiescence. Motions for summary judgment were made by Parker, Manufacturers and Marine. Rogerson opposed all the motions on the ground that facts essential to his defense were within the exclusive possession and knowledge of the moving parties. These motions were denied and the moving parties in each case have appealed to this court.
Rogerson also moved to transfer this action to Surrogate's Court, Chautauqua County but this motion was denied by Special Term (Mahoney, J.).
Although Rogerson appealed from this order, he subsequently moved in this court to withdraw his appeal because the relief sought had been granted by the later order of Special Term (King, J.). The motion to withdraw the appeal is denied and the order appealed from is affirmed on the basis of our discussion of the proper place of trial under Action No. 2, Infra.
The foundation and basis for plaintiff's action rest on the well-established rule that (regardless of fairness or motive), a fiduciary may not personally profit from dealing with trust assets (Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 A.L.R. 1); a rule created, jealously nurtured and enforced in order to insure undivided loyalty by a fiduciary to the beneficiary. As stated by Chief Judge Cardozo in Meinhard, supra, at p. 464, 164 N.E. at p. 546, The breach of a fiduciary's duty will be strictly condemned without regard to whether the beneficiary has suffered damage (Diamond v. Oreamuno, 24 N.Y.2d 494, 301 N.Y.S.2d 78, 248 N.E.2d 910; Matter of People (Bond & Mtge. Guar. Co.), 303 N.Y. 423, 431, 103 N.E.2d 721, 725). Rogerson claims that the infant beneficiaries consented, via their guardian, to the sale of the Phelps stock to the company but this contention finds no support in the record. The exhibits submitted on the motion for summary judgment clearly indicate that this consent, if given, was induced by representations that Rogerson would in no way acquire any interest in the shares. If, as Rogerson argues, the purchase of the shares by Phelps executives became impossible, the fiduciary had a Minimal duty to inform the beneficiaries or offer to arrange for the return of the stock to the estate, and not convert a failure of the executive stock plan to his own personal profit. The retirement of approximately thirty per cent of the outstanding shares not only substantially increased Rogerson's equity in the corporation, but also gave him a majority of the remaining shares and, therefore, control of the corporation. Certainly the actions of the fiduciary should have been subjected to judicial scrutiny where he had so many conflicting interests (cf. In re Scarborough Properties Corporation, 25 N.Y.2d 553, 307 N.Y.S.2d 641, 255 N.E.2d 761 (decided December 11, 1969)). There is nothing in the record to indicate that the movants possess facts unavailable to Rogerson.
The movants have not shown that Manufacturers consented to or actually knew of Rogerson's self dealing. Before Manufacturers may be held liable for any loss sustained, one of those two elements must...
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