Scoville v. Vail Investment Co., Civil 4204

Decision Date17 June 1940
Docket NumberCivil 4204
PartiesKENNETH S. SCOVILLE, Administrator De Bonis Non of the Estate of CARRIE VAIL, Deceased, Appellant, v. VAIL INVESTMENT COMPANY, a Corporation, THIRZA J. GARVEY, HARRIETT E. LEECH, GEORGE M. VAIL and ROBERT W. VAIL, Appellees
CourtArizona Supreme Court

APPEAL from a judgment of the Superior Court of the County of Pima. E. W. McFarland, Judge. Judgment affirmed.

Messrs Moore & Romley, for Appellant.

Messrs Conner & Jones, Mr. Tom K. Richey and Mr. Paul J. Cella, for Appellees.



By agreement of the parties, the three appeals which are discussed in the opinion were presented to the court for consideration as a whole. Based upon the rule that the trial court is presumed to have found every fact necessary to sustain its judgment that may reasonably be deduced from the evidence, the general factual situation may be stated as follows, with more details given as this opinion requires.

Carrie Vail, hereinafter called deceased, had for many years been a resident of Pima county. She had been married twice, and by the first marriage had one child, Maude Vail Merriam, and by the second four children,Thirza J. Garvey Harriett E. Leech, George M. Vail and Robert W. Vail. In 1932 she was a widow approximately seventy-three years of age, and possessed property, real and personal, of the value of about $125,000. In that year she consulted with Tom K. Richey, who had been her attorney for a number of years, as to how she could make disposition of her property so that after her death there would be no expense of probate which, if the estate was handled in the ordinary manner, would amount to some ten or twelve thousand dollars. She also told Richey that if she disposed of her property by will her children would press her from one side or the other to change its terms, and she wanted to put it beyond her power to make a change, in order to avoid such pressure and the necessary unpleasant conditions arising therefrom. Richey suggested that the best way would be to organize a corporation, turn her property over to it in consideration of all of its stock, and then have the stock issued as she might wish.This, he said, might be in one of two ways, (a) the stock might be issued to her immediately and she might then endorse the certificates and place them in the hands of a third party irrevocably, for delivery after her death, or (b) she might agree with the corporation that all of the stock should be issued in accordance with her orders, and then make on order distributing the stock in the way she wanted, and turn it over to some person so its delivery was irrevocable, and the stock could then be issued in accordance with the order to the parties designated therein, after her death. She adopted the last of the two plans, and in accordance therewith in November, 1932, the Vail Investment Company, hereinafter called the company, was incorporated with an authorized capital stock of $50,000, devided into 50,000 shares of the par value of $1 each. At the organization meeting of the company three shares were actually issued, one each to Mrs. Vail, Thirza J. Garvey, her daughter, and Dan E. Garvey, her son-in-law, who were elected directors and constituted the entire board. Mrs. Vail was then elected president and treasurer of the company, and Garvey secretary. By resolution of the board of directors it was provided that deceased, as treasurer, should place the funds of the company on deposit in a designated bank, and that she should have sole and irrevocable power and authority to draw on such funds. At the same time she submitted a written offer to the company, which reads as follows:

"To the Board of Directors of

"Vail Investment Co.,

"Tucson, Arizona.

"I hereby offer to sell, transfer and assign unto your corporation all of the following described real and personal property, to-wit:

"(Here follows a description of real estate and an enumeration of eight promissory notes aggregating $70,000, each secured by mortgage).

"For and in consideration of which you shall issue and deliver as I may order same, 49,997 shares of the capital stock of your corporation, fully paid and non-assessable."

Thereupon the board of directors accepted the offer and by resolution

"... the President and Secretary were instructed and empowered to issue 49,997 shares of the capital stock of this corporation to the order of Carrie Vail, upon delivery of proper instruments of conveyance by the said Carrie Vail to this company for said property."

A conveyance to the company of the property described in the offer was made by deceased, and at the same meeting she signed and delivered to Garvey, in a sealed envelope, with oral instructions for him to deliver it to the company on her death, the following letter:

"Tucson, Arizona

"November 28th, 1932

"To the Board of Directors of

"Vail Investment Co.,

"Tucson, Arizona.

"You are hereby ordered and directed, upon my death, to issue and deliver the 49,997 shares of the capital stock of your corporation of which I am the owner and to which I am entitled, under my offer and your acceptance thereof, of date November 28th, 1932, as follows, to-wit:

"Robert W. Vail


"Thirza J. Garvey


"George M. Vail

12,500 shares, and

"Harriett E. Leech



"(Signed) CARRIE VAIL."

Garvey accepted the letter and placed it in his safe deposit box, to which the deceased did not have access except with his permission, where it remained until after she passed away, when it was delivered by Garvey to the company, and thereupon the stock mentioned in the letter was issued as it directed.

At a later time deceased, without further consideration, transferred to the company other property of the value of between forty and fifty thousand dollars, which at the time constituted all the remainder of her property, except a life interest in her residence in Tucson and certain stock in the American Telephone and Telegraph Company and other corporations, which she desired to pass to various donees. Acting under the advice of Richey, she endorsed on the certificates of stock the names of the donees, and delivered them to Garvey with instructions to hand them to the donees upon her death, which was done. However, certain dividends, which had been made before her death, had been mailed to her in the form of checkspayable to her, and these checks were on hand at the time of her death. The transfer of the stock referred to on the books of the company did not take place until after her death, and of course did not carry the previously declared dividends. The board of directors of the company by resolution had fixed a salary for Mrs. Vail in the sum of $350 per month, which resolution remained in force until her death. This amount was not paid to a separate account of hers at fixed periods, but she drew checks on the account of the company from time to time as she desired. At the time of her death the amount of this salary, at the rate of $350 per month, exceeded by nearly $5,700 the sums which she had drawn for her personal use from the funds of the company. Mrs. Vail died intestate in Tucson on January 7, 1937.

It was recognized by the four children who received the stock of the company as above that federal and state inheritance taxes would have to be paid on its full value, and accordingly Garvey, who apparently represented Mrs. Vail in all her business affairs during the last years of her life, drew from the funds of the company approximately $8,000 for the payment of these taxes and for the funeral expenses of Mrs. Vail. These payments were made without any probate of Mrs. Vail's estate, or the direction or approval of any court. A question arose later, however, as to what should be done in regard to the dividend checks above referred to, amounting to some $369, and it was decided that it would be necessary to probate Mrs. Vail's estate in order to handle them. Garvey, therefore, applied for and was granted letters of administration in 1937, setting up that the total estate consisted of not to exceed $400, and later inventorying only the checks above mentioned. The matter was carried through probate in the regular manner required for estates of that size, and on October 11, 1938, the court settled the accounts and distributed the proceeds of the dividend checks above referred to. Nothing appears in the record of these proceedings indicating in the slightest degree that the estate of deceased had any assets except the dividend checks.

On January 10, 1939, there was filed in the superior court of Pima county a petition by Kenneth S. Scoville for his appointment as administrator de bonis non, upon the nomination of Maude Vail Merriam, the oldest daughter of deceased, who, as it appears above, was omitted by her mother from any participation in the distribution of the stock of the company. Mrs. Garvey opposed the application, but her objection was overruled, and Scoville was appointed. Thereafter he caused a citation to issue for various witnesses to appear for examination, at which time most of the facts above set forth were developed.

On March 21, 1939, Scoville filed suit against the Vail Investment Company for $5,709.57, being the accrued salary of deceased above referred to, and on the same day filed another suit against the company and the children of deceased to whom the stock of the company had been delivered, asking that the issuance of the stock to them should be declared void. Thereafter all of the children, except Mrs. Merriam, filed a petition to vacate all the proceedings in the estate subsequent to the discharge of the former administrator, on the ground that the court had no jurisdiction to appoint an...

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