Perry v. Perry

• Citation: 339 Mass. 470,160 N.E.2d 97
• Parties: Alonzo Wright PERRY v. Herbert G. PERRY et al. (three cases).
• Decision Date: 30 June 1959
• Court: United States State Supreme Judicial Court of Massachusetts

Page 97

160 N.E.2d 97

339 Mass. 470

Alonzo Wright PERRY v. Herbert G. PERRY et al. (three cases).

Supreme Judicial Court of Massachusetts, Plymouth.

Argued May 6, 1959.

Decided June 30, 1959.

J. Elmer Chisholm, Medford (Isadore O. Goverman, Boston, with him), for petitioner.

George B. Rowell, Boston (Winslow A. Robbins, Franklin N. Cunningham, Boston, Maurice J. Murphy, Brockton, with him), for respondents.

Before WILKINS, C. J., and RONAN, SPALDING, COUNIHAN and WHITTEMORE, JJ.

WHITTEMORE, Justice.

The records in these three cases, including a master's report, show these facts: Alonzo Wright Perry (hereinafter sometimes referred to as grandson Alonzo) is the son and only child of Butler F. Perry, who died April 9, 1952. Butler had been entitled for his life to income under two trusts of stock of A. W. Perry, Inc. (the corporation), a Massachusetts corporation engaged in the business of owning and managing real estate, created by the will of Butler's father, Alonzo W. Perry, late of Rockland, who died in 1928. The trustees were Butler's brothers, Winthrop I. Perry and Herbert G. Perry, and Old Colony Trust Company. Winthrop and Herbert were two of the three directors of the corporation and all its business was conducted under Herbert's sole supervision. Butler was a director until 1932. The trust under article 18 was of 1,200 shares for Butler's benefit for his life, distributable on his death, as the event occurred, to his son. There was a similar trust under article 19 of 800 shares for Winthrop's benefit for his life. The other trust in which the petitioner is interested is the residual trust under article 20 for the benefit of the testator's sons and other issue. Trustees' accounts 1 through 6, under articles 18 and 20, covering the period from the establishment of the trusts July 14, 1930, through July 20, 1948, were allowed prior to Butler's death, after due notice and the appointment, and receipt of the favorable reports, of guardians ad litem. Each account bore Butler's assent. These accounts showed the holding of shares of A. W. Perry, Inc., the receipt of dividends, the distribution of income and the other payments made by the trustees.

Grandson Alonzo on September 17, 1952, filed in the Probate Court a 'petition to remove trustees [under articles 18 and 20] and for an accounting.' It contained allegations that the trustees in control of the corporation had acted fraudulently and negligently in derogation of their trust duties. Amendments joined issue of the testator, the executrix of Butler's estate (his widow), the corporation, and also Welch Company, a family corporation of Herbert, and enlarged the prayers to ask that each of the corporations be ordered to turn over to the trustees all illegal and improper profits. The executrix answered that she had no claim and 'is satisfied with the accounting,' and on June 12, 1956, her 'plea * * * that the estate of * * * Butler * * * has been settled and that she has been discharged' was sustained and she was 'discharged as a respondent * * *.'

Grandson Alonzo filed on July 28, 1954, a petition for the appointment of a temporary receiver of the assets of the trust and on September 14, 1956, a petition that accounts 1 through 6 under articles 18 and 20 be reopened and disallowed and the trustees surcharged.

The probate judge, in the proceedings to remove trustees, entered an order stating the appointment of a master. The same attorney was also appointed auditor in respect of the filed but unallowed accounts of the trustees (7 through 15 under article 20 for the period ending July 20, 1957, and 7 through 10 under article 18 for the period ending June 13, 1952).

A master's report was confirmed and a decree was entered on May 5, 1958, which ordered that the prayers in the petition for removal of trustees 'be, and hereby are, denied' and allowed counsel fees, costs and expenses and a guardian ad litem's fee. The petitioner appealed from the decree generally and the trustees and adult beneficiaries appealed therefrom in respect of certain aspects of the allowances.

On March 3, 1958, the probate judge entered a decree which ruled that the allowance of accounts 1 through 6 was res adjudicata of all matters which might have been tried at the time each decree was entered and denied the petition to reopen the accounts. The petitioner appealed.

The judge on April 16, 1958, denied the petition for appointment of a temporary receiver and the petitioner appealed.

1. Nothing in the findings supports the view that it was error to decline to remove the trustees. The report shows that the trustees carried on the family business in certain respects as it had been conducted during the lifetime of the testator, and that the overall management had been able and successful with the result that there was a very substantial increase in the worth of the corporation.

The findings of the master in respect of conduct on which the petitioner principally relies as ground for removal may be summarized as follows: Continuing a practice approved by the testator during his life, the corporation made loans to his three sons from time to time. Some of the loans were for the year end accommodation of the corporation. Except as to three items of Herbert's, totaling $105,000, neither Herbert nor Winthrop paid interest. Winthrop lent the corporation sums from time to time without charging interest. When grandson Alonzo received distribution of the 1,200 shares held under article 18 on the death of his father in 1952, he, then living in Mexico, appointed J. Elmer Chisholm, Esq., his attorney in fact, under a general power, and the latter borrowed from the corporation for Alonzo $105,000, repayable $10,000 a year, but only out of dividends on the 1,200 shares, with interest at four per cent a year. Herbert, with his daughters, owned another corporation, Welch Company. The corporation paid insurance premiums due from Welch Company in the total sum of $73,723.40, or about $4,000 a year for eighteen years, and Welch Company repaid the advances. The corporation had no security other than an open account and received no interest. In 1940 and through March, 1942, the corporation lent Welch Company sums totaling $85,000 without security or interest. The loans were repaid. Herbert was the sole owner of Converse Building, Inc., by virtue of a bequest from the testator of such shares as Herbert did not already own, and was known as such sole owner to the trustees. The corporation made advances to Converse. At the end of 1936, the corporation owed Converse $26,000 plus and Converse owed it $40,000 plus. The directors voted to charge off the balance of $14,121.55 having determined the claim worthless. But Herbert had assumed the debt and therefore the amount is due to the corporation. (The insufficiency of the evidence to support the finding was specified in an objection, and the evidence was summarized. It included the testimony of Herbert that 'he expected to pay every dollar that building lost,' and testimony that Herbert had more coming to him as salary than was charged off.) The corporation bought coal from Welch Company from 1937 through 1948 in substantial amounts and in small amounts thereafter through 1953. The prices were at market; there was an overcharge, 'which could very well have been through inadvertence or mistake,' of $3.54. Herbert, because of his interest in Welch, Company, profited, but the master could not find the amount. Francis W. Perry, son of Winthrop, was employed from 1935 through 1955. A. P. Wilcox, son-in-law of Herbert, was employed from 1933 through 1955. J. H. Spurr, son-in-law of Herbert, was employed from 1943 through 1955. '[F]rom 1946 Herbert * * * and Winthrop * * * drew nominal amounts in salaries and * * * the difference between the drawings and the amounts of the salaries [to] which they would be entitled * * * were added to the salaries of Francis W. Perry, A. P. Wilcox and J. H. Spurr. * * * Whether * * * Herbert * * * and Winthrop * * * legally had the right * * * [to do this] becomes a question of law.' 'Reasonable salaries were paid to the executives of A. W. Perry, Inc., before the year 1947. From 1947 on, the increases could be called excessive were it not for the fact that the amount of business done * * * showed a total of executive salaries amounting to less than five per cent and if material, I find that five per cent is the usual amount charged for executive salaries so, therefore, I am impelled to find that under the circumstances said increases were not unreasonable.' In the years 1947 through 1955 the questioned salaries were in the range of $15,000-$17,500. Spurr was paid $20,000 in 1948. Each of the three men had complete charge of one or more buildings. Herbert's salary was $2,900 in each year from 1948 through 1953, and was $2,700 in 1954; Winthrop's was $3,500 from 1948 through 1951 and $2,500 thereafter through 1954. Earlier they had drawn salaries much in excess of those paid to the junior executives. R. B. Woodsum, an employee who was elected director to succeed Butler in 1932, drew $15,000 in each year from 1948 through 1954. Francis W. Perry was in the service from 1942 to 1945. The directors paid him $3,000 a year, and on his return in 1945 voted and paid him a bonus of $10,000. 'While this was liberal treatment of an employee, I find that under the circumstances the payment was made in good faith * * * and it was not unusual for large concerns to make payments of the kind herein set out. * * * I find no evidence of similar payments to other employees.' On Butler's resignation in 1932, he was paid over a five-year period $33,600 'in the nature of a pension fund for a retired employee' which the petitioner contends was unearned salary for which the trustees should be charged. Herbert was the 'absolute head' of the corporation. The Old Colony relied on Herbert for the running of the business of the trusts, the will...