Raffety v. Parker

• Decision Date: 07 February 1957
• Docket Number: No. 15617,15618.,15617
• Citation: 241 F.2d 594
• Parties: George Hunter RAFFETY, Individually and as Trustee of the Raffety estate, Pauline Raffety, Ellot Hunter Raffety, Martha Raffety, Mary Raffety, Captola Raffety and Mildred Smith, Appellants, v. Bessie B. Raffety PARKER, Appellee. Victor B. HARRIS, Guardian ad litem for the minor defendants, Joe Grant Raffety, Fred Dennis Raffety, Phillip Stephen Raffety, Daniel Raffety, John Ulysses Raffety and Julia Elizabeth Raffety, Appellant, v. Bessie B. Raffety PARKER, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

241 F.2d 594 (1957)

George Hunter RAFFETY, Individually and as Trustee of the Raffety estate, Pauline Raffety, Ellot Hunter Raffety, Martha Raffety, Mary Raffety, Captola Raffety and Mildred Smith, Appellants, v. Bessie B. Raffety PARKER, Appellee.

Victor B. HARRIS, Guardian ad litem for the minor defendants, Joe Grant Raffety, Fred Dennis Raffety, Phillip Stephen Raffety, Daniel Raffety, John Ulysses Raffety and Julia Elizabeth Raffety, Appellant, v. Bessie B. Raffety PARKER, Appellee.

Nos. 15617, 15618.

United States Court of Appeals Eighth Circuit.

February 7, 1957.

COPYRIGHT MATERIAL OMITTED

L. D. Joslyn, Charleston, Mo. (T. B. Russell and Joslyn & Joslyn, Charleston, Mo., were with him on the brief), for appellants Raffety and others.

Victor B. Harris, St. Louis, Mo., for appellant Harris.

David E. Blanton, Sikeston, Mo. (Blanton & Blanton, Sikeston, Mo., were with him on the brief), for appellee.

Before SANBORN, WOODROUGH and WHITTAKER, Circuit Judges.

WHITTAKER, Circuit Judge.

This is an action to construe a trust, and to require an accounting by the Trustee of his stewardship of the trust, brought by the widow of the Trustor who is one of several life income beneficiaries of the trust, and the principal question involved is whether, under the language of the instrument creating the trust and the circumstances, the Trustee was authorized to set up, as he did, an annual depreciation charge to cover the wear-out of buildings, machinery and equipment consumed in operating the trust's business, and to charge the same against gross income in determining the "net income" of the trust, which alone was distributable to life income beneficiaries.

Federal jurisdiction rests upon diversity and requisite amount. For convenience, we will refer to the parties as they appeared in the trial court.

The significant facts are that E. F. Raffety had accumulated a large plantation and affiliated industries in and near the village of Wyatt, in Mississippi County, Missouri, which he operated as as integrated business. He had a wife but no children, and his nephews, George Hunter Raffety and U. G. Raffety, sons of his deceased brother, had for many years lived with him and worked in his enterprise.

Being ill from an incurable disease, E. F. Raffety, as grantor (hereafter called Trustor), joined by his wife, on October 15, 1943, entered into an Indenture of Trust with his nephew, George Hunter Raffety, as Trustee. That Indenture, in its preamble, stated Trustor's reasons for, and purposes in, creating the trust, in the following language:

"Whereas, said Grantor has built a large business which has become a part of the community life of the village of Wyatt, Missouri, and adjacent community; and whereas, the Grantor by virtue of his business success has been able to contribute and assist in the welfare and prosperity of said community; and whereas, said Grantor desires that his said business and its contribution to the life of the community be continued after his death and remain in charge of persons competent to manage and preserve same; and whereas, said Grantor desires to insure an adequate income for his wife throughout her life; and whereas, George Hunter Raffety, Trustee herein, has given faithful service to the Grantor in the management, operation and building of said business to the extent that the said grantor deems he is capable of continuing the management and growth of the same." (Emphasis supplied.)

The Indenture then conveyed to the Trustee, and his successors in trust, 17 described tracts of land, and also a cotton gin and appurtenant buildings, machinery and equipment, and a warehouse and its appurtenant equipment, located on lands, in Wyatt, leased from the Cotton belt Railroad, and also a ¾ interest in a partnership, known as "Raffety and O'Rourke" that owned and operated, in Wyatt, an alfalfa dehydrating plant.

The Indenture next provided:

"Within sixty-five days after the close of each taxable year the Trustee shall pay out of the net income of the trust estate for the then immediate past taxable year, out of the principal thereof if the net income is insufficient, to the beneficiaries herein named or to their successor beneficiaries as designated in Section 5 of this Indenture of Trust, as follows:

"(1) To Bessie Beck Raffety, wife of the Grantor, Twenty Four Hundred ($2,400) Dollars or a sum equal to fifty percent (50%) of the entire net income of the trust estate for the then immediate past taxable year, whichever amount is the greater.

"(2) To George Hunter Raffety a sum equal to twenty percent (20%) of the entire net income of the trust estate for the then immediate past taxable year.

"(3) To U. G. Raffety a sum equal to ten percent (10%) of the entire net income of the trust estate for the ten immediate past taxable year.

"The balance of the said net income, if any, shall be accumulated by the Trustee and shall be added to the principal of the trust estate and become a part thereof."

The Indenture next provided that, to enable the Trustee to carry out "the express purposes of this trust" and to aid in its execution and proper administration and management, "the Trustee is vested with the following additional powers and discretions:"

"At his option and as long as he may deem advisable, to retain any property and to continue and operate any business which he may receive hereunder * * *

* * * * * *

"To invest the principal (and income if accumulated) in any property whether or not permissible by law as investment for trust funds.

"To determine in his discretion what is principal, gross income, or net distributable income of the trust estate."

"All discretions in this trust conferred upon the Trustee shall, unless specifically limited, be absolute and uncontrolled and their exercise conclusive on all persons interested in this trust or the trust estate. The powers and discretions of the Trustee enumerated herein are not to be construed as a limitation upon his general powers and discretions; but the Trustee in addition thereto is hereby vested with and shall have for the full duration of this trust, as to the trust estate, the income therefrom, and in the execution of this trust, the same and all powers and discretions that an absolute owner of property has or may have." (Emphasis supplied.)

The Indenture then provided that, before making any distribution, the Trustee shall pay, out of "gross income", or out of principal if the gross income is insufficient, all general and special taxes, and all expenses and liabilities of every kind expended or incurred in the administration of the trust, "including the protection of this trust and its defense against legal attack", and the fees of the Trustee, which were fixed at 5% of the "yearly income", and, if the Trustee devotes the major part of his time to the management of the business of the trust, he was to have a "reasonable salary."

The Indenture then provided that upon the death of Trustor's wife the trust shall end, and that thereupon the Trustee shall make a final settlement, and shall pay over and convey 60% of the trust estate to George Hunter Raffety or, if dead, to his descendants, in equal shares per stirpes, and, if no descendants, to his widow; and 40% to U. G. Raffety, or, if dead, to his descendants, in equal shares, per stirpes, and, if no descendants, to his widow.

The Indenture then provided that the Trustor might, by his last will, devise or bequeath other property to the Trustee to become a part of the corpus of the trust; that should any beneficiary of the trust or of his will contest, or incite a contest, of either, they would thereby forfeit all interest in the trust; that the Trustee shall, as soon as practicable after the close of each taxable year, render a complete statement to the beneficiaries containing a complete inventory of the trust estate and showing all transactions, income and disbursements of the trust in the past taxable year.

The Indenture then provided:

"The Trustee if he deems it to be for the best interest of the trust estate, shall by executing and duly acknowledging an instrument in writing, appoint as co-Trustee hereunder any person who he may deem suitable. Such co-Trustee so appointed shall exercise jointly with the Trustee herein named, all of the duties, powers, discretionary or otherwise, herein granted to the Trustee.

"The Trustee by will, or by executing and duly acknowledging an instrument in writing, may appoint his successor Trustee hereunder. The successor Trustee so appointed shall have all of the duties and powers, discretionary or otherwise, granted to his predecessor Trustee hereunder."

The Indenture then provided that it should be governed by the laws of Missouri, and concluded with the statement that Bessie Beck Raffety, wife of the Trustor, joined in the Indenture for the purpose of conveying all of her dower, statutory and other legal interest, in the property conveyed to the Trustee, and that the Trustee would faithfully perform and fulfill the trust.

E. F. Raffety died testate on November 26, 1943, and, by his will, after making a number of specific bequests, left the residue of his estate to the Trustee under the said Indenture, and it became a part of the corpus of the Trust.

The result was that the trust estate then consisted of about 2,300 acres of farm lands with numerous tenant houses, barns and similar farm buildings thereon; more than 40 mules (which were later replaced with tractors); a number of tractors and trucks and the necessary complement of farm machinery and equipment; two cotton gins and appurtenant buildings, machinery and equipment; a warehouse and appurtenant equipment; a general store; and a ¾ths interest in the partnership known as "Raffety and O'Rourke" which owned and operated an alfalfa mill and appurtenant buildings, machinery and equipment, all in or near the village of Wyatt, Missouri, which the Trustee, as contemplated by the provisions of...