Shelton v. McHaney

• Citation: 119 S.W.2d 951,343 Mo. 119
• Decision Date: 28 September 1938
• Docket Number: 34626
• Parties: William Frank Shelton, III, an infant, by Edith Shelton, his guardian, and Frank Joseph Shelton and Miriam Claire Shelton, infants, by Ruby Shelton, their guardian, and Ruby Shelton, Appellants, v. Hal H. McHaney, A. J. Langdon, Jr., and Lee Shelton, Trustees of the Estate of William Frank Shelton, Jr
• Court: Missouri Supreme Court

119 S.W.2d 951

343 Mo. 119

William Frank Shelton, III, an infant, by Edith Shelton, his guardian, and Frank Joseph Shelton and Miriam Claire Shelton, infants, by Ruby Shelton, their guardian, and Ruby Shelton, Appellants, v. Hal H. McHaney, A. J. Langdon, Jr., and Lee Shelton, Trustees of the Estate of William Frank Shelton, Jr

No. 34626

Supreme Court of Missouri

September 28, 1938

Appeal from Circuit Court of City of St. Louis; Hon. Julius R Nolte, Judge.

Affirmed.

Wayne Ely, Tom Ely and Lyon Anderson for appellants Leahy, Walther, Hecker & Ely of counsel.

(1) The evidence shows that at the time of the execution of the will creating the trusts involved herein defendant Hal H. McHaney as a part of a scheme on his part to defraud the beneficiaries of said trusts, did by false and fraudulent representations and undue influence practiced upon the testator, induced Frank Shelton to refrain from naming Ruby Shelton executrix and trustee under the will. (a) Under the law a cestui que trust is not prohibited from occupying the office of trustee. 65 C. J. 572; 1 Bogert, Trusts & Trustees, sec. 129; 1 Restatement of the Law of Trusts, sec. 99, p. 269. (b) There are numerous decisions by the appellate courts of Missouri involving trusts, where beneficiaries have been named as trustees. Bixby v. St. Louis Union Trust Co., 22 S.W.2d 813; Rose v. McHose's Executors, 26 Mo. 59; Trautz v. Lemp, 72 S.W.2d 104; Owen v. Ellis, 64 Mo. 77; Hook v. Dyer, 47 Mo. 214; Murphy v. Carlin, 113 Mo. 12; Marshall v. Myers, 96 Mo.App. 643, 70 S.W. 927; Foote v. Sanders, 72 Mo. 616; Dozier v. Dozier, 81 S.W. 890; Turney v. Sparks, 88 Mo.App. 363; Cook v. Couch, 100 Mo. 29. (c) Where a lawyer undertakes to advise a client as to his legal rights, and makes statements regarding the law that are false and misleading, and the client is thereby induced to execute an obligation to his injury, such conduct on the part of the lawyer constitutes a fraud. Security Savs. Bank v. Kellems, 9 S.W.2d 970; Jones on Evidence (2 Ed.), pp. 208, 209. (2) The evidence shows that McHaney, as a part of his scheme to defraud, by false and fraudulent representations, induced Frank Shelton to prolong the terms of the trusts estates of Little Frank and Miriam Claire until they should, respectively, reach the age of 30 years. Where a lawyer induces certain action on the part of his client and himself benefits by such transaction, the transaction will be looked upon with suspicion by a court of equity. Ryan v. Rutledge, 187 S.W. 877; Mowry v. Norman, 204 Mo. 173, 103 S.W. 115; Cook v. Higgins, 290 Mo. 402, 235 S.W. 807; Cadwallader v. West, 48 Mo. 483; Bradford v. Blossom, 190 Mo. 110, 88 S.W. 721. (3) The evidence shows that McHaney, as a part of his scheme to defraud, falsely and fraudulently represented to the testator that under the terms of the will the combined fees of the trustees and executors could not, in any one year, exceed ten per cent of the net income from the trust estate during that year. (a) The ten per cent for trustees' fees which McHaney induced testator to provide in the will was exorbitant. 4 Bogert on Trusts, sec. 976. (b) Under the Missouri law, it was not necessary for Frank Shelton to nominate an executor of his will. Kelley's Probate Guide, (5 Ed.), sec. 109, p. 136; Sec. 7, R. S. 1929. (4) A trustee cannot use property which he holds in trust for his own personal advantage. Bent v. Priest, 10 Mo.App. 554; Newman v. Newman, 152 Mo. 398, 54 S.W. 20; Davis v. Hoffman, 167 Mo. 573; Newton v. Rebenack, 90 Mo.App. 650; Bent v. Priest, 86 Mo. 475. (a) If there are several trustees, each trustee is under a duty to prevent a cotrustee from committing a breach of trust. 1 Restatement of the Law of Trusts, sec. 184. (b) The taking of unauthorized compensation by a trustee is a clear ground for removal. 3 Bogert, Trust & Trustees, sec. 527, p. 1671. (5) Trusts are always imperative, and a court of equity will not permit a trustee to so exercise his discretion as to defeat the substantial purpose of the trust. Plummer v. Brown, 287 S.W. 316. (a) Where the instrument creating the trust provides for support and maintenance for a beneficiary in absolute terms, as in the case at bar, the beneficiary is entitled to the same without regard to his personal circumstances, possessions, or other means of support. This rule is none the less effective because the amount is not stated, but must be determined by reference to extraneous conditions and circumstances. In re Gatehouse, 149 Misc. 648, 267 N.Y.S. 808; Crocker v. Crocker, 11 Pick. 252; McKenzie v. Ashley, 145 Mass. 577; Conant v. Stratton, 107 Mass. 474; Riley's Estate, 4 Misc. 338, 24 N.Y.S. 309; Macknet v. Macknet, 26 N.J.Eq. 258; Forman v. Whitney, 2 Keyes, 165; Holden v. Strong, 116 N.Y. 471, 22 N.E. 960; Rezzemini v. Brooks, 236 N.Y. 184, 140 N.E. 237; Stewart v. Cuyler, 17 Barb. 482; Freeman v. Cost, 27 Hun, 447, affirmed 96 N.Y. 63; In re Wood, 1 Dem. 559; Nahmens v. Copely, 2 Dem. 253; In re Reed, 22 A.D. 328, affirmed 57 N.E. 1123; In re Parsons, 39 Misc. 126, 78 N.Y.S. 975; Manning v. Sheehan, 75 Misc. 374, 133 N.Y.S. 1006; In re Ward, 186 A.D. 261, 174 N.Y.S. 182; In re Allen, 111 Misc. 93, 181 N.Y.S. 398, affirmed 202 A.D. 810; Bueff v. Rochester Trust Co., 118 Misc. 394; In re McVicar, 231 A.D. 381; In re Shea, 140 Misc. 710, 250 N.Y.S. 288; In re Epys, 232 A.D. 361; In re Manufacturers Bank, 245 A.D. 120. (6) Shortly after the death of Frank Shelton, the trustees, acting as directors of the Shelton Store Company, discharged one H. S. Wells, who was secretary of said company, drawing a salary of $ 150 per month, and hired Hal McHaney in his stead, paying him, according to defendant's testimony, the sum of three thousand dollars ($ 3000) for the year 1930. Where a trustee uses shares of stock held by him in trust to elect himself a salaried officer of the corporation, it is grounds for removal. 3 Bogert on Trusts, sec. 527, p. 1670; Gartside v. Gartside, 113 Mo. 348; Overell v. Overell, 78 Cal.App. 251, 248 P. 310; Pyle v. Pyle, 122 N.Y.S. 256, 137 A.D. 568; Crummey v. Murray, 224 N.Y.S. 49, 130 Misc. 568; In re Kirkman's Estate, 256 N.Y.S. 495, 143 Misc. 342; Elias v. Schweyer, 40 N.Y.S. 906, 17 Misc. 707. (7) The evidence shows that the interests of Lee Shelton are antagonistic to the interests of the beneficiaries of the trusts, and that he has developed a hostile attitude toward said beneficiaries, to such an extent that there is grave danger that if Lee Shelton remains a trustee and a division of the property is made, as provided in the will, the division will be made in such a way as to prove detrimental to the plaintiffs. (a) The evidence conclusively shows that Lee Shelton is given to excessive use and habitual indulgence in intoxicating liquor to such an extent that it incapacitates him in the discharge of his duties as trustee. This alone is grounds for disqualification. Boyles v. Staats, 5 N.J.Eq. 513. (b) All three of the trustees are hostile to the beneficiaries. This fact, when considered with the other facts developed by the evidence, warrant their removal. Gartside v. Gartside, 113 Mo. 348, 20 S.W. 669; Selleck v. Hawley, 56 S.W.2d 387; McDonald v. O'Donnell, 8 F.2d 792; 45 A. L. R. 328, 331; Gaston v. Hayden, 98 Mo.App. 683, 73 S.W. 938; Besphanis Equity (8 Ed.), sec. 143, pp. 223-227. (8) The evidence shows that the trustees of Frank Shelton's estate have paid out large sums of money for witness fees, and counsel fees, in defense of the will contest, and that said sums of money were paid without authority of law. Burnett v. Freeman, 125 Mo.App. 683, 134 Mo.App. 709; State v. Bell, 212 Mo. 111; Klepper v. Klepper, 199 Mo.App. 294, 202 S.W. 593; Ex parte Demente, 63 Ala. 389, 25 Am. Rep. 611; Dixon v. People, 168 Ill. 189, 48 N.E. 108; North Street Ry. Co. v. Zeigler, 182 Ill. 9, 54 N.E. 1006; Commissioners v. Lee, 3 Colo.App. 177, 32 P. 841; Flinn v. County, 60 Ark. 204, 29 S.W. 459. (9) The defendant trustees have violated the terms of the will and have breached the trust imposed in them by failing to personally manage the affairs of the estate and by hiring W. T. Ray to look after and manage the farm lands owned by the estate. (a) A trustee invested with powers, the execution of which call for the exercise of discretion and judgment, cannot delegate such powers. Markel v. Peck, 144 Mo. 701, 129 S.W. 243; Graham v. King, 50 Mo. 22; Stevens v. Home Ins. Co., 199 Mo. 536, 204 S.W. 44; Powell v. Tuttle, 3 Const. 396; Vail v. Jacobs, 62 Mo. 33. (b) The power of a court of equity to remove a trustee, and to substitute another in his place, is incidental to its paramount duty to see that trusts are properly executed. May v. May, 167 U.S. 310, 32 L.Ed. 179.

Ward & Reeves, Orville Zimmerman, John W. Noble and Alletha B. Noble for respondents.

(1) The property amounting to seven or eight hundred thousand dollars in value belonged to the testator, and the beneficiaries under the will took this property burdened with the conditions imposed by the testator. (a) "Beneficiaries under a will must take what is given them, burdened with the conditions which the testator has imposed, whether wise or unwise. . . . An equity court cannot relieve the beneficiaries under a will from an unfortunate condition, not foreseen by their testator, which results in the impairment of the estate and to the injury of all, etc. The jurisdiction of a court of equity is within the limitations of the statutory law of the state and the chancellor is as much bound to obey that law as the judge in a law court." Stevens v. DeLaVaulx, 166 Mo. 20. (b) The situation of the beneficiaries established by a deed is analogous to that of beneficiaries under a will to take land burdened with trust provisions imposed by testator. The court will not interfere...