Warner v. Florida Bank & Trust Co.

• Decision Date: 10 April 1947
• Docket Number: No. 11733.,11733.
• Citation: 160 F.2d 766
• Parties: WARNER et al. v. FLORIDA BANK & TRUST CO. AT WEST PALM BEACH et al.
• Court: U.S. Court of Appeals — Fifth Circuit

160 F.2d 766 (1947)

WARNER et al. v. FLORIDA BANK & TRUST CO. AT WEST PALM BEACH et al.

No. 11733.

Circuit Court of Appeals, Fifth Circuit.

April 10, 1947.

R. C. Alley, E. Harris Drew, C. Robert Burns and Elwyn L. Middleton, all of West Palm Beach, Fla., for appellants.

M. L. Mershon and W. O. Mehrtens, both of Miami, Fla., C. D. Towers and Cecil C. Bailey, both of Jacksonville, Fla., William Q. Cain, of Palm Beach, Fla., Jos. D. Farish, of West Palm Beach, Fla., and Raymond A. Scallen and Samuel H. Maslon, both of Minneapolis Minn., for appellees.

Before SIBLEY, WALLER, and LEE, Circuit Judges.

LEE, Circuit Judge.

This action was begun as a bill of interpleader by the Florida Bank & Trust Company at West Palm Beach, Florida, and the Florida National Bank of Jacksonville, Florida, as executors of the estate of Ellsworth C. Warner, deceased, to determine the ownership and rights to possession of a stock certificate for fifty-five shares of capital stock of Ellsworth Company, a Florida corporation, constituting the corpus of a trust created by Roslyn C. Warner, wife of Ellsworth C. Warner, some years prior to his death.

The trust agreement was executed by Mrs. Warner¹ at Minneapolis, Minnesota, on October 27, 1937, and conveyed the shares of stock in trust to her husband. The agreement provided that Roslyn Warner would receive the net income during her lifetime and upon her death the corpus remaining would go to certain children, grandchildren, and a daughter-in-law of her husband and their survivors.² The trust was subject to amendment or revocation during the life of the husband-trustee but not thereafter.³ On May 10, 1940, at Palm Beach, Florida, the trust was amended so as to give the trustee, in the exercise of his discretion, authority to pay over to Mrs. Warner installments of principal determined by the trustee to be necessary or appropriate to her maintenance, welfare, and comfort.⁴ After her husband's death Mrs. Warner claimed that the trust was invalid and demanded of the Florida Bank & Trust Company at West Palm Beach⁵ that the stock be delivered to her. The remainder beneficiaries maintained the validity of the trust and demanded that its provisions be complied with. The executors thereupon filed the interpleader suit making the life beneficiary, the remainder beneficiaries, and the successor trustee parties defendant. The successor trustee filed an answer refusing to qualify as trustee and refusing to defend the trust. The suit thereupon became a contest between the life beneficiary and the remainder beneficiaries, the former asserting the invalidity of the trust, the latter, its validity.

After a trial on the merits the district court found that the trust agreement was valid and entered judgment: (1) decreeing the trust agreement in full force and enforceable, and the fifty-five shares of capital stock of Ellsworth Company to be owned and held in trust for the uses and purposes provided in the trust agreement; (2) allowing the interpleading executors $1,500 for their services, all court costs, and $7,500 for attorney's fees, and taxing these costs and all other costs one half to the life beneficiary and one half to the remainder beneficiaries; and (3) fixing the fees of the guardian ad litem of the minor remaindermen at $7,500, to be paid by them. From this judgment all defendants appealed.

Mrs. Warner on her appeal asserts that the court below erred: (1) In upholding the trust agreement and decreeing the shares of stock to be owned and held in trust as provided in that agreement; (2) in increasing the allowance for the attorney's fees of the interpleaders in the final decree from $5,000 to $7,500; and (3) in taxing her with one half the allowances made the executors and one half all other costs. The remainder beneficiaries in their appeal assign as error the action of the court below: (1) in taxing the fees for the guardian ad litem against the minor remainder beneficiaries, and (2) in taxing one half the interpleaders' compensation, costs, and attorney's fees against the remaindermen.

Ellsworth C. Warner, prior to the fall of 1935, was a citizen and resident of Minneapolis, Minnesota. He amassed a fortune of several million dollars during his lifetime. He was twice married, Mrs. Roslyn Warner being his second wife. By his first marriage, which ended in divorce, he had four sons; two sons were left with their mother and lived with her; the other two remained with their father, and they and their children and the wife of one of them are the remainder beneficiaries named in the trust agreement. Roslyn Warner, prior to her marriage to E. C. Warner, had been married to a man who was engaged in the stock and grain brokerage business. During this marriage she acquired stock in her own name in the Household Finance Company. At the time she married Mr. Warner in 1930, her separate estate consisted of approximately $5,000, in addition to the Household Finance Company stock. She and Mr. Warner prior to their marriage executed an antenuptial agreement which provided that if he predeceased her she would receive ten per cent of his estate, but not less than half a million dollars or more than a million dollars.

Ellsworth Company, a Minnesota corporation, was formed by Mr. Warner in the fall of 1930 as a depository for his fortune. It was a family corporation, and out of three hundred outstanding shares he owned two hundred fifty-nine shares. In 1931, he gave Mrs. Warner a certificate for fifty-five shares of this stock. The Warners subsequently moved to Florida, and in 1936 a reorganization of the Ellsworth Company took place. Under the reorganization the assets of the Minnesota corporation were transferred to the Ellsworth Company, a Florida corporation, and the stockholders of the Minnesota corporation exchanged their stock for equal amounts of stock in the Florida corporation.

At the time the trust agreement was executed in Minneapolis, Minnesota, the certificate for the fifty-five shares of Ellsworth Company stock (Florida corporation) was physically in Mrs. Warner's possession in Minneapolis and was endorsed by her in blank and delivered to the husband-trustee. This stock remained in a safe at the home in Minneapolis until the fall of 1939, at which time this stock, together with other valuables of husband and wife, was carried from Minneapolis to Florida, and placed in a private safe in the Warner home in Palm Beach. The Warners first evidenced their intention to become residents of Florida in the fall of 1935, but, until their new home was acquired in Palm Beach, the record indicates that they spent a part of each year in Minneapolis, representing themselves, however, as residents of Florida.

Mrs. Warner contends that the trust agreement is presumptively void, as it was executed by her while a confidential relationship existed between her and her husband; that the burden of proof, therefore, is upon the remainder beneficiaries asserting the validity of the agreement to establish by clear and convincing evidence that she acted voluntarily in executing it and with full knowledge and understanding of the facts; and that this burden has not been met. The remainder beneficiaries, to the contrary, contend that Mrs. Warner executed the trust agreement and assigned and delivered the certificate of stock forming the trust res in Minneapolis, Minnesota, hence, the transaction was governed by the Minnesota law; that under Minnesota law no presumption against validity existed; and that, under Minnesota law, the burden of proof was upon Mrs. Warner to sustain the ground of the nullity alleged and relied on by convincing evidence. They further contend that, if it be held that the burden of proof was upon them, then that burden had been met, as the trial court has found, upon ample evidence, that no fraud or undue influence was practiced upon Mrs. Warner, and that in executing the trust agreement she acted voluntarily and with full knowledge of the facts.

In Florida at the time of the execution of the trust agreement and at the time of the execution of the amendment thereto, a wife could convey by gift her personal property to her husband and through him to others, but the confidential relationship existing between husband and wife placed upon him, and those claiming through him, the burden of showing that she acted wholly voluntarily and with full understanding of the facts. With respect to confidential relationship between parties to a contract, the Supreme Court of Florida, in Adams v. Saunders, 139 Fla. 730, 191 So. 312, 316, said: "The general rule is that the person alleging that a contract, deed or gift was procured through the exercise of undue influence has the burden of proving that fact. But there is an exception to that general rule, to the effect that where the evidence clearly shows the existence of confidential or fiduciary relations between the parties, the burden of proof shifts, and it then becomes incumbent upon the party who procures the contract or who receives the deed or gift, to show affirmatively that the transaction was entered into fairly, openly, voluntarily, and with full understanding of the facts. See Black on Rescission of Contracts, section 253, and 12 R. C.L., 972, both of which authorities are cited in Rich v. Hallman, 106 Fla. 348, 143 So. 292. As was said in 12 R.C.L., 972, `Where a confidential relation existed between the donor and the donee at the time of the gift, it is generally considered to be presumptively void, and the burden of proof is on the donee to show the absolute fairness and validity of the gift, and that it is free from the taint of undue influence, and this rule is the same at law as in equity.'"

In Minnesota, where the trust agreement was executed, a wife could convey by gift her personal property to her husband, and through him to others with impunity. The marital relation imposed no restrictions. In that State the common-law doctrine...