Wells v. Wood

• Decision Date: 17 January 1928
• Parties: WELLS et al. v. WOOD.
• Court: Oregon Supreme Court

263 P. 54

125 Or. 38

WELLS et al. v. WOOD.

Supreme Court of Oregon

January 17, 1928

Department 1.

Appeal from Circuit Court, Multnomah County; George Rossman, Judge.

Action by Louise A. Wells and and others against Mary C. Wood individually and as trustee under the last will of John Wood deceased, and as guardian of the estate of John Wood, Jr., a minor, now deceased. Decree for defendant, and plaintiffs appeal. Reversed, with directions.

This suit was instituted to compel an accounting by defendant Mary C. Wood, of the profits received by her in the purchase of certain corporate stock bequeathed to her son, John Wood Jr., and for judgment against her for the sum of $4,000, the amount the legacies bequeathed to plaintiffs were discounted by her while she was executrix of the will of John Wood deceased, and as such a trustee for plaintiffs. John Wood died testate. He left surviving him his widow, defendant, Mary C. Wood, who was his second wife; a minor son, John Wood, Jr., who was the son of his said widow. He also left five daughters by his first wife, all of mature age, to wit: Louise A. Wells, Margaret Schmeer, Gwendolen Nelson, Elizabeth A. Ewing, and Ada Weiss. Said Mary C. Wood was confirmed executrix February 13, 1915. She filed her inventory May 1, 1915. Among other property belonging to said deceased and included in the inventory are 95.36 shares of the capital stock of the John Wood Iron Works, appraised at $200 per share, which is the par value. The total capital stock of said iron from works consists of 100 shares. Indorsed on the inventory is the following statement:

"The foregoing appraisal of the value of the shares of stock of John Wood Iron Works is based upon the grounds that, while the physical assets of the corporation show a present value of something more than $40,000, yet the former head of the concern, John Wood, is dead, and the business is run down to such an extent that the corporation not only is not making money at this time, but is run at a loss, and the earning power of the stock at this time is nothing. If the business of the corporation can be built up to something like its former condition, the value of the stock will be more, but in view of the present conditions which prevail in business generally and with regard to this corporation in particular, the appraisers do not believe that the present value of the stock is more than par, namely, $200 per share."

This inventory is dated May 1, 1915.

April 9, 1915, a public accountant, after examining the books, reported assets of $76,330.10 and a surplus of $54,167.48. At that time the indebtedness amounted to $2,162.62, making the total value of the 100 shares of stock to be $74,167.48, or a book value of over $740 per share. This total equals the par value of the stock and the surplus. Defendant, Mary C. Wood, did not call a meeting of the stockholders of said corporation for a long period of time. Plaintiffs importuned defendant executrix to call said meeting to have a dividend declared in order to pay the legacy of $1,000 to each of plaintiffs, as provided in the will. January 26, 1916, plaintiffs presented a petition to the circuit court of Multnomah county, sitting in probate, to require defendant executrix to make a report and to submit the accounts, books, and other documents of said corporation for examination. They alleged that said defendant executrix was mismanaging the corporate affairs, would dissipate the funds belonging to the estate, and would thereby deprive the plaintiffs of their legacies. Thereupon negotiations were entered into between executrix and plaintiffs looking to an adjustment and settlement of their differences. Defendant executrix controlled at that time over 95 per cent. of the capital stock. She continued to operate the iron works and during the year 1915 operated at a loss of about $9,000. At the time of the inventory the cash on hand amounted to over $6,000. This amount had been entirely used and additional funds borrowed to carry on the business. A second attempt was made to make defendant executrix account, which failed. Thereafter, to wit, June 24, 1916, plaintiffs presented their petition to said court, requesting the removal of defendant executrix and for the appointment of some disinterested and fair person to execute the will and administer the estate. Further negotiations were entered into by the parties following this last petition. These negotiations resulted in the parties entering into a contract in words and figures as follows:

"This agreement made and entered into this 28th day of June 1916, by and between Mary C. Wood, acting as the duly qualified executrix of the estate of John Wood, deceased, and in her own private capacity and as trustee for her minor son, John Wood, Jr., as the first party, and Louise A. Wood, Margaret Schmeer, Gwendolen Nelson, Ada Weiss, and Elizabeth A. Ewing, as second parties, witnesseth:

"That, whereas, the said John Wood, by the terms of his will, directed that there should be paid to each of his five daughters the sum of one thousand dollars ($1,000.00), in cash, said amount to be paid as soon as his executrix could conveniently pay the same, and he further directed in said will that there should be paid to each of his said daughters an additional sum of one thousand dollars ($1,000.00) within two years from and after the date of his demise, or as soon thereafter as his said executrix could conveniently pay the same; and

"Whereas, the said will contained this provision, 'All of which said sums shall be paid to my said daughters out of the dividends that shall be declared to the shares of stock now owned by me in John Wood Iron Works, a corporation of Portland, Oregon, which shares of stock I hereinafter dispose of to my beloved wife, Mary C. Wood, and to my son, John Wood, Junior, and I direct that immediately after my demise, or within a reasonable time thereafter, my said wife, Mary C. Wood, under authority of the ownership of the shares of stock hereinafter given her as her own, and by reason of her authority as trustee of the shares of stock hereinafter given to my son, John Wood, Junior, call and hold a legal meeting of the board of directors of said corporation, and declare such dividends as may be deemed advisable, so as to provide for the payment of the above mentioned bequests;' and

"Whereas, the said John Wood died in Multnomah county, state of Oregon, on the 12th day of January, 1915, and his will was, thereafter, admitted to probate, and the said Mary C. Wood appointed as executrix thereof, and approximately one and one-half years have passed since the date of the admission to probate and no payments or attempt to make payments upon said bequests have been made by said executrix or said estate, and a dispute has arisen between the daughters of the said deceased, the second parties herein, and the executrix, as to how and when said payments should be made and proceedings have been taken into court to test said question and asking for the removal of said first party herein as executrix of said estate, which proceedings are now pending undetermined; and

"Whereas, the said Mary C. Wood, as such executrix and on behalf of herself and as trustee for the said minor heir, has proposed that she will procure a loan to be secured by a mortgage upon the assets of the said John Wood Iron Works, a corporation, with which to discharge and settle the claim and demands of the second parties herein against said estate, providing said second parties will accept and receive in full of said claim the sum of six thousand dollars ($6,000.00) and release said estate and the said John Wood Iron Works from any and all further liability to them by reason of the terms of said will, to which proposition the said second parties have agreed:

"Therefore, in consideration of the premises, it is hereby agreed as follows:

"First. That the first party, acting for herself, as executrix, and as trustee of the said minor child, will apply to the court for permission to procure a loan in the sum of ten thousand dollars ($10,000.00) for such time and upon such terms as may be considered advisable by the court and by the parties interested, which loan shall be secured by a mortgage upon the plant of the said John Wood Iron Works, a corporation; that said loan shall not exceed the sum of ten thousand dollars ($10,000.00); that out of said loan when procured, the said first party, with permission of the court, shall pay over to the second parties, or their attorney, the sum of six thousand dollars ($6,000.00) in cash; and that upon the receipt of said payment, the said second parties shall each and all execute a good and sufficient release, discharge, or assignment of all of their right, title, claim, interest, or estate in and to the assets and property of the said John Wood, deceased, and all of their right, title, interest, claim or demand, of any kind whatsoever, against the stock, assets, profits, or dividends of the said John Wood Iron Works, a corporation, which they now have or might, at any time, assert or claim under or in pursuance of the terms of the last will and testament of the said John Wood, deceased (and all of their rights, title, claim, and interests that are contingent and mentioned in paragraph 'sixth' of said last will of John Wood, deceased, or by reason of their relationship with the said John Wood, deceased).

"Second. That they, each, consent and agree to the procuring of said loan and the authorization thereof by the county court and that, pending such proceedings and the payment of the said amount and the discharge of said interest, the petition and other proceedings now pending before said court, having for their object the construction of said will...