Robertson v. Hert's Adm'R
| Decision Date | 03 March 1950 |
| Citation | 312 Ky. 405 |
| Parties | Robertson et al. v. Hert's Adm'rs et al. |
| Court | United States State Supreme Court — District of Kentucky |
The Court of Appeals, Sims, C.J., held that where sale of trust property was a necessary step in settlement of estate, and trust instrument did not forbid sale, and price paid by trustee was adequate and fair, trustee had power to purchase trust property.
Judgment affirmed.
1. Executors and Administrators. — Personal representatives of estate have duty to pay federal and state taxes, and personal representatives cannot obtain their final discharge until those taxes are paid. 26 U.S.C.A. secs. 822(b), 825.
2. Trusts. — In order to determine where administration of a trust is located, consideration will be given to provisions of instrument, residence of trustees, residence of beneficiaries, location of property, and place where business of trust is to be carried on.
3. Trusts. — In action for settlement of inter vivos trust, where trust property was located within state, and trustees, executors of estate of deceased settlor, federal and state tax officers, and beneficiaries of trust, as parties to the action, were residents of Kentucky, chancellor had jurisdiction to pass upon validity of sale of trust property to trustee. Civil Code of Practice, sec. 428 et seq.
4. Trusts. — Where first class of beneficiaries under trust were given a vested interest in income and corpus, and interest of second class of beneficiaries was contingent upon death of first class of beneficiaries, and all beneficiaries having vested interest were before court, contingent beneficiaries were neither necessary nor indispensable parties to suit to settle estate. Civil Code of Practice, sec. 428 et seq.
5. Trusts. — In dispute under a trust, tenant of first estate or party in being having a vested interest virtually represents the subsequent estates.
6. Trusts. — As a general rule, a trustee cannot deal for himself in respect to the trust property.
7. Trusts. — In absence of a statute to the contrary, creator of a trust may confer upon a trustee right to deal for himself with respect to trust property and purchase by trustee of trust property under a grant of authority in trust instrument, is valid if price paid is fair, and trustee is not guilty of bad faith.
8. Trusts. — In action for settlement of inter vivos trust by administrators of deceased settlor, where state laws under which trust instrument was administered did not prohibit a trust instrument from granting to trustee right to purchase trust property, and trust instrument did not forbid trustees from purchasing trust property, trustee's action in purchasing trust property in good faith as a necessary step in settlement of estate to pay federal and state taxes, was proper.
9. Trusts. — Where trust instrument expressly authorized trustee to purchase stock of parent company but did not expressly authorize him to purchase stock in that company's subsidiaries, but contained recitation that trustee would not be disqualified as trustee from contracting with trustees and with company to end of management of several companies, and stock in subsidiaries was of small value compared to that of parent, trustee had authority to buy stock in subsidiaries.
10. Trusts. — Where executors, administrators with will annexed and all beneficiaries to trust, with one exception, expressed their satisfaction with sale and price trustee was to pay for stock held in trust, and federal authorities committed themselves to value less than that which trustee agreed to pay, trustee's price was fair and adequate, and sale of the stock to him would be upheld.
11. Amicus Curiae. — Where attorney sought to inject a new issue upon appeal which was not before trial court, his motion to allow him to intervene as amicus curiae would be denied.
Samuel R. Wells and Peter, Heyburn & Marshall for Robertson.
James H. Cartwright and Winston, Strawn, Shaw & Black for Kuehn, individually & U.S. Creosoting Co. Charles I. Dawson, Thomas S. Dawson, Bullitt, Dawson & Tarrant, Loren N. Wood, Wood, Molloy, France & Tully, Laurens L. Henderson, Percy N. Booth, Booth & Booth, Arthur W. Grafton, Wyatt, Grafton & Grafton, James W. Stites, Nelson Helm, William P. MacCracken, Jr. and William T. Baskett for appellees.
Before Lawrence F. Speckman, Judge.
Affirming.
This appeal involves the validity of a contract for the sale of certain securities held by a trust, administered by six trustees, to a corporation controlled by one of the trustees, the purchaser having been authorized by an amendment to the trust instrument to purchase the securities. Four questions are presented: 1. Did the chancellor in the suit to settle the estate have jurisdiction to pass upon the validity of the sale; 2. were the necessary parties before the court; 3. can trustees sell trust assets to a corporation controlled by a fellow trustee; 4. was the purchase price of $3,800,000 fair and adequate?
Mrs. Sallie A. Hert died testate on June 8, 1948, a resident and citizen of Florida. She left an estate worth several million dollars, of which real estate of the approximate value of $750,000 and tangible personal property worth almost $250,000 were located in Kentucky. Her brother, C.R. Aley, and the First National Bank of Palm Beach, Florida, were named and they qualified as executors. Since approximately a million dollars of the assets of the estate were located in Kentucky, Mr. Aley and the Citizens Fidelity Bank & Trust Co., both of Louisville, were appointed ancillary administrators in Kentucky with the will annexed.
Mrs. Hert created two trusts previous to her death, the first was an irrevocable trust dated Aug. 8, 1935, and Alfred L. Kuehn was designated therein as sole trustee. Mrs. Hert retained no interest in the income therefrom or in the corpus but she reserved the right to add thereto.
On June 8, 1944, Mrs. Hert executed the second trust instrument, to which she transferred 98,970 shares of the capital stock of the American Creosoting Company, as well as 25,251 shares of the capital stock of the company's subsidiaries. She owned 85% of the capital stock of the parent company and Alfred A. Kuehn, a business associate of herself and of her late husband, owned the remaining 15% of its stock and was the company's president. Mrs. Hert, Kuehn and the First National Bank of Chicago were named therein as trustees during her life, and upon her death C.R. Aley and J. Matt Chilton were to become trustees to serve with Kuehn and the bank. By an amendment dated April 2, 1947, she added two additional trustees, W.R. Cobb and Charles I. Dawson. By a second amendment dated June 6, 1947, she withdrew 26,931 shares of the capital stock of the Hurstbourne Company which, together with a note for $450,000, she transferred to the irrevocable trust she created in 1935. These two items thus transferred have an aggregate value of approximately $1,500,000, and she provided that any taxes due the federal government by reason of this addition, over and above the gift tax applicable, should be paid out of the trust created on June 8, 1944. This amendment further provided that the fact she had named Judge Dawson as a trustee shall not prevent the other trustees from employing him as attorney.
On April 2, 1947, Mrs. Hert, in consideration of promises and commitments made between her and Kuehn on April 21, 1932, and the additional consideration of valuable services performed and to be performed by Kuehn, gave him a written option to purchase at her death 98,970 shares of the American Creosoting Company stock at the price at which the stock is finally valued by the federal government for federal estate tax purposes, the option to be exercised within six months from the date of such final valuation. The option contained this paragraph: "This option is intended to be read in connection with said Trust Agreement and any modification thereof, and to the extent of any inconsistency this Option shall be controlling."
Mrs. Hert's will, after making disposition of her personal effects, provided that the residue of her estate should go to the trustees of the trust she created on June 8, 1944, and should be disposed of according to the terms of that instrument. The will states that all estate, inheritance and succession taxes shall be paid out of the corpus of the estate and not charged to the respective beneficiaries. There are two classes of beneficiaries created by the trust instrument of 1944. The first class consists of those who are given a vested interest in income and in the corpus of the trust, if living at the time of distribution. The second class of beneficiaries consists of the descendants of the first class, and the interest of each such beneficiary is contingent upon the death of his ancestor, for whom he is substituted, before the termination of the trust.
On Jan. 29, 1949, the administrators with the will annexed, joined by the trustees, brought this suit to settle the estate under sec. 428 et seq. of the Civil Code of Practice. The executors, the Commissioner of Revenue of Kentucky, the Collector of Internal...
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