Case Name: In re G. A. Buder and Oscar, E. Buder
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1949-01-07
Citations: 358 Mo. 796
Docket Number: No. 40277
Parties: In re G. A. Buder and Oscar, E. Buder.
Judges: 
Reporter: Missouri Reports
Volume: 358
Pages: 796–818

Head Matter:
In re G. A. Buder and Oscar, E. Buder.
No. 40277.
217 S. W. (2d) 563.
Court en Banc,
January 7, 1949.
Rehearing Denied, February 14, 1949.
Thos. B. Curtis for informant.
Taylor Bandison for respondent G. A'. Buder.
Jones & Jones and JÁngáon B. Jones for respondent Oscar E. Buder.

Opinion:
[565]
CONKLING, J.
This disbarment proceeding against G. A. Buder and Oscar E. Buder, practicing attorneys at the bar of this Court, hereinafter called respondents, was instituted under our. Rule 5 by The Advisory Committee, hereinafter called Informants. We granted Informants' application for leave to file the information in this Court. It was filed on January 10, 1947. Respondents filed their separate answers. We appointed Honorable Justin Ruark,. of the Newton County Bar, as Special Commissioner to hear the evidence and to report findings of fact and conclusions of law. That was done! Respondents filed their separate exceptions to that report. The matter was briefed and we heard oral argument.
Counts I, II, III and IV of the information charged generally that respondent G. A. Buder was a trustee of a trust estate created in 1909 by Sophie Franz; that respondents, practicing law in St. Louis under the firm name of Bnder & Buder, were attorneys for the Ehrhardt D. Franz estate, for the widow Sophie Franz, who had a life estate under the will of Ehrhardt D. Franz, and for certain remaindermen of-that estate; that they represented also the trustees of the above trust estate; that they'endeavored by instruments drawn for certain remaindermen to extinguish the remainder interests of their clients; that.with respect to certain claims of the trustees for commissions as compensa-, tion (and as to which claims respondents had a financial interest)' the respondents represented conflicting interests to the injury and detriment of their clients; that knowing they were not legally entitled thereto, trustees claimed and respondents had allowed as compensation for the trustees not only five per cent on the trust res owned by Sophie in her own right but also- five per. cent .on the remainder interests of certain of respondents-' clients.. The- abare will be hereinafter- ' referred to as "the trustees'-commission matter".. ., .
= On Counts V and VI, the Denyer-National Bank matter, and as to which--the Special Commissioner -found in/favor of .Oscar E. Buder, the only respondent charged in said counts, it is our considered conclusion upon the record now before us that no other finding is, war-, ranted. The issues now before us inthis proceeding are not. those of Buder et al. v. Denver National Bank, 151 Fed. (2d) 520; . In the record now before us are many facts and-circumstances (unnecessary to detail here) which, from the statement-of facts in the. just-above cited opinion, were not in the record in'the-above'reported case. :W'e therefore do not burden this opinion with either, a statement of facts with reference thereto, .or any discussion thereof. Counts V and VI of the information .will be. dismissed.
.Count VII against respondent G. A, Buder,-. alone,--as., executor-of' th.e estate of Sophie Franz,- pending in-the- Probate; Court of the City, of St. Louis, charged that he removed "from the assets of said estate" $124,917.40, and substituted "in lieu thereof" certain allowed claims of doubtful value which were due Buder & Buder. This will be later referred to as "the administration matter'".
The Special- Commissioner-found for''Informants and against both' respondents on Counts I/III and-IV,-but only insofar as those counts' pertain to'representation-of conflicting interests-in respect to 'thé trustee's commission matter. No charge was'-made in the information As to Oscar E. Buder on Count II, but upon'that count a¡3 to G-. A;'Budér) the Special Commissioner's finding was'for Informants. Upon'Count VIT, the administration matter;-the' finding-' of'the'Special Cominis*-sioner was in favor of Informants.
The facts are long, involved ahd difficult to'condense. They eovér-many years and have been laboriously- ahd painstakingly drawn' fróm many volumes of transcript and exhibits.' Ehrhardt D'. Franz died testate in St. Louis 'in 1898. - He was- survived'by his widow Sophie; and their ten children-." "Amdng 'then!'were G. A. Franz and E.' W: Franz, sons, ánd Mrs'. Zimmerman and Johanna Fiske, daughters; I-lié; residuary-elausé bequeathed a-l'L his 'estate to -the widow, Sophie/for life,' with-remainder over -to'his ten-'children in 'equal -shares/: His' estate inventoried less'than $100,000.' - • • • • '
In the assets of his estate'wéré 210 -shares of stock of 'Ámei-icán Arithometer Company ,[566] of a then-value-of about $20,000'. Soon thereafter that company- -declared'--a' 100-[ per cent stock dividend/ Thereupon the estate held -420 shares:- In. 1905' Arithometer was reorganized and changed its' flame to Burroughs Adding Machine Company. The Franz estate'was thereupon-issued 4200 shares of Burroughs stock. By numerous stock dividends' the'-original 210 shares of' Arithometer had-grown by March 1, 1929 To be 282,500' shares of Bur roughs with a value estimated at $25,000,000. That figure does not' include, certain stock rights nor certain preferred stock dividends issued and redeemed above par.
• Prior to 1898 respondent G. A. Buder was attorney for Ehrhardt D: .Franz: After Franz' death he represented Sophie. The respondents-organized the law firm of Buder & Buder in 1908 and that firm was.thereafter her personal, counsel. Buder & Buder dissolved their law partnership in 1945. Each respondent is now represented by separate-- counsel.
At her request, respondent G. A. Buder, in January, 1909, prepared and Sophie executed a trust instrument'conveying her property, including her life interest in her deceased husband's estate, in trust to' G.- A: Franz (one ¡of her sons) and to respondent, G. A. Buder, as' trustees - of the trust. Among the other property conveyed to ' the trustees was her life estate in the 4200 shares of Burroughs.-- In the trust instrument certain payments were provided from income for Sophie and ¡for each=of the-ten remaindermen. It was also provided therein that Buder-& Buder should serve as counsel for trustees. In May,. 1909 the Franz children, or a representative of each (excepting only E..W.- Franz, who refused to attend, and Mrs. Zimmerman and Mrs.: Holdaway, daughters) met with their mother, Sophie, and respondent Oscar E. Buder, at Las Vegas, New Mexico, so that the-trust instrument ¡"could be explained to the children". The question of the commission-of .the trustees was'there discussed. Without formal or definite agreement, those present seem to have understood and assumed that the trustees-' commissions under the Sophie Franz trust would be five per cent. - The understanding was based on the then existing 4200' shares of .Burroughs. There was no discussion respecting and no explanation made as to the possibilities of future stock dividends. Respondents .contend, however, that at that conference of nearly forty years ago there was a meeting of minds and a valid oral agreement fixing compensation- of the trustees at five per cent of thé corpus of the entire trust property.. They-further claim their view of the result' of that conference is supported- by the action ' of the. remaindermen in the¡ >1920: Burroughs stock rights matter. - 1
. In 192Q Burroughs issued certain stock rights. In an agreement of January 7, 1920,-between the trustees, Sophie and all the remainder-men,, providing for the exercise of certain stock rights, the remainder-men-.agreed and.'the trustees received a five per cent commission on the distribution-of 12,600 rights to subscribe to Burroughs stock.
.•In July,.-1924.Burroughs issued a 100% stock dividend and Certain preferred stock. The1 preferred was' called in 1926 at $105 per share.: In connection therewith respondents were paid a special fee of $81,000, which, was charged against Sophie: Respondents also ivere paid-an annual-retainer-as counsel for the trustees. As-the trust estate increased in yalue the retainer increased in size. • '
• About 1924 there arose some dissention between-the trustees and the owners of A 2/3 shares of the remainder estate1 on the one hand and the owners of 3 1/3 shares on the other. In-an action filed in. March, 1924, by remainderman E. W. Franz, in the. Federal-District-Court át St. Louis, it was alleged that'the trustees -were denying-any title in the remaindermen. That action prayed a disclosure of -assets, adjudication of title thereto and accounting. The trustees, Sophie and >all¡other remaindermen or surviving -remainder interests were 'finally made! defendants. In an answer filed by Buder & Buder, for ¡ defendant G. A. Buder, as trustee,, it was -contended that the -increase of the estate through stock dividends was-income and therefore property of-the life tenant; and that petitioner remainderman-by. advancements had'-relinquished any remainder interest.. The. other trustee "-and" [567]' Sophie, represented by -Buder-& Btider, by their answers made: the same contentions. Respondent's were-then (in 1926) first employed as'counsel for 6-2/3 of -the total- remainder interests; and'filed their answers in that case making'the- same--contention--for-those clients: The net affect of'their answers was that those remaindermen,'by -Buder- & Buder as their counsel, denied the existence- of their own interests.. Respondents continued-to. represent those-'6-.2/3 remainder interests-until-19.35.' In December, 1931, respondents'were-paid a fee of $100,-. 000 for legal services.to the remaindérmen." * '< -
On June 25, 1927 this Court in Hayes v. St. Louis Union Trust Company, 317 Mo. 1028, 298 S. W. 91, -first- ruled that -the- stock dividends were not-income of the trust -estate -but an accretion'to the corpus -. ." On May-16-, 1928, in the-'above mentioned-Federal Court case'filed--in 1924 by-E.. Wv-Fraiiz, 'an i opinion '.of the Federal-appellate court in Buder v. Franz, 27 Fed. (2d) 101, written ¡by Judge Stone, ruled-for pl-ainti-ff, held the- remainder interests' had. vested, that, prior agreements- had not expunged the remainder 'interests, criticized .the trustees-for-compelling that litigation and adjudged costs of the. litigation against the trustees individually.
By April,'. 1929, respondent'G.- A¡ Buder;-ás trustee was voting the estate-'s -282,500 shares of .Burroughs.He "held i-and voted considerable Burroughs stock of his own: -He-was.oh the Board-of'Directors Of.that company,-was one of its counsel, 'and- therefore hot-without infihenee in the"-determination of Burroughs-policies'. After' our opinion in the-Hayes caser supra-, -and after Judge Stone's opinion, G.--A. Buder voted for two Burroughs -stock dividends.-- G. A. Buder had owned-100 shares ¡in¡the. original: Aritliometer ¡Company; : '
i In -1929 Sophie and-most of the'remaindermen met'inLong Beach to discuss the possibility of distribution-of assets.-• Respondent Oscar-'E.' Buder-attended that meeting but no agreement resulted.- ' •
.Sophie died testate-oh April 14, 1930: Her will bequeathed her' estate, in equal'parts to her-surviving children-. One child was then deceased, having died without issue. - Respondent G. Á. Budér Wa's named as executor in Sophie's will. ' Her estate was probated in the City of-St:-Louis.'-
"The owners of the remainder interests were anxious to obtain distribution. On Ma^:16,"1930 respondents met with the remaindermen at the Chase Hotel in St. Lotiis." To that-family meeting trustee G. A. Franz, presented ' a draft o'f' a' petition proposed-to" be filed in'the United States Bistrict Court. 'That petition approved all previous acts of trustees, -recited that -petitioner, G. A. Franz, with other remainder-men- had agreed'to pay-a five per cent trustees''commission upon remainder: interests, asked allowance thereof, and prayed distribution of corpus. Bach respondent testified he-did not'prepare that petition. Some remaindermen testified that'p'ayment of such commissions'was protested at--that'meeting-. • It- appears that Respondents there repre: sented to -the remaindermen that the 'trusees by law/rere entitled to receive a-five per cent commission on all remainder interests; that the Remainder interests were'legally'bound to pay su'ch commissions ; fhat if the remaindermen did-not agree to the payment -of commissions "on their remainder--interests at five'-per cent of the corpus thereof' the distribution'-of such-interests would be indefinitely'delayed; that if remaindermen--reftised to agree1 to'five per cent, upon the trustees' application therefor the court would allow more than five per cent; and that it was advisable to sign at Anee to -avoid additional taxes and to facilitate'"distribution. -Some remaindermen there requested a copy of -the -petition -for -perusal'- and- study over the noon hour but that request was' refused.:= That afternoon a final draft of that petition was presented 'to the1 remaindermen -at 'that family conference. - Some remaindermen testified 'that further statements and representations to the above import were' there made 'by respondents; Remaindermen Johánna Fiske,- Amanda Wheeler, Otto Bv Franz, Henrietta Holdaway and Adelaide Zimmerman' signed the: petition that afternoon.
-.Each respondent'denied-making the' statements attributed to him at the Chase [568] -Hotel meeting.; G: A.'-Buder- denied he attended the Chase Hotel-meeting át'SllU'There^wa's at that time,however, an' existing- controversy 'between G. A. Buder'and the remaindermen respecting the trustees' commissions.' G. A-.'-Budef testified-that just prior to that meeting some of the remaindermen had tried to have him waive his-elaimto a-part-of the commissions. He declined to do so.
The -above mentioned p'etition was filed in court on May 17, 1930. Thedrustees later filed in'that 'Caiíse in-the Federal Court their finál report in which they claimed'credit -for a five per cent commission on the-remainder estates:" Exceptions' were filed by -3 1/3 remainder, interests to- portions of the-'trustees'',report including the claim for commissions. "'In May,'1931 trustees filed in the Probate Court in St. Louis- an- alternative claim for $810,001.22 for commissions against the Sophie vFratíz-estate,--as' á five'per b'ént' commission upon both the life' estate and 'the"remainder-interests -as -constituting a trust fund'. It clearly appeared therein that they were also making such, claim for commissions in the Federal Court action for distribution, and did not desire to twice collect such commissions. It was trustees' theory that if. the Federal Court disallowed their commission claims,, they then claimed the entire amount thereof against the. Sophie Franz estate.
On April 1, 1932 a decree was entered by Judge Faris in, that. .Federal Court action upon the then pending pleadings and motions.. No evidence was heard. The court noted that at the beginning of the litigation between the parties (in 1924) it was unsettled in Missouri whether stock dividends were income or corpus; decreed' that the trustees were entitled to take credit for the -five per cent commissions as against those remaindermen who had signed the petition at the Chase Hotel meeting, but disallowed the commissions upou the-.3 1/3 shares of the objecting remaindermen. The objecting remainder interests, were represented by the Mississippi Valley Trust Company and a guardian ad litem. This allowed the commissions, against 6 2/3 remainder interests because those interests had signed at the Chase Hotel meeting. We cannot otherwise, construe Judge Faris'-oral opinion and his decree. Judge Faris' decree allowed Buder & Buder an attorneys' fee of $115,000. There was.no appeal-from. Judge Faris' decree. > .'
In 1935 the owners of five of the above mentioned 6 2/3 interests discharged respondents as their counsel. Thereafter (1939) Johanna Fiske and others of five remainder interests moved to have -vacated the portion of Judge Faris' decree which'directed payment .of the five per cent commissions by the remainder interests, on the grounds, among others, that respondents, while acting as their counsel and for the purpose of enhancing trustees' commissions, made the- above set out representations to them, that those representations were fraudulent,fraudulently induced them to sign the petition at the Chase Hotel meeting, failed to except to the allowance of such commissions against their remainder interests and appeal therefrom, prevented them from asserting a defense and thus suffered judgment to go against them. Those contentions of those remaindermen were upheld on February 1.6, 1942, in Fiske v. Buder, 125 Fed. (2d) 841.
On July 23, 1946, the United States District Court at St. Louis wherein this litigation between these parties has been pending since 1924, in cause No. 6682 'entitled "Ehrhardt W.-. Franz v.-Gustavus A...Buder," et ah, upon then pending exceptions, made additional findings of fact, conclusions of law and entered,a further-déeree. That court therein found that respondents were employed by remaindermen in 1926;«that the interests of trustees and respondents were adverse and antagonistic to the interests of remaindermen; that for'their remaindermen clients respondents should have -filed-exceptions--to Judge Faris ' decree of April 1, 1932; that the-representation of - respondents' remaindermen clients in the proceeding before'Judge Faris was u on-adversary in Character;' disallowed credits to trustees for certain payments from estate funds and surcharged the trustees with $100,795.46' therefor." •
.-[569] The court there further--found that as-to the stock rights distribution agreement of January 7-,'1920, -the interests of the trustees and tho remaindermen were adverse-; that the latter were not therein represented by counsel; that neither in-fact nor in law were the trustees entitled to- any stock: rightsTcommissions and surcharged back against- the trustees the $45,0-00 commission- then paid by remainder-men to .trustees-on that matter. The court thére also disallowed and surcharged back against the trustees the $115,000 fee allowed respondents by Judge Paris -holding '-'that-the said remainder interests were not chargeable with the payment of-(attorneys' fees for any services rendered to -the trustees for the life .tenant"; and that Buder & Buder failed to disclose -to Judge'Paris that they had received $100,000 in fees from the remaindermen personally for services "so closely related to and connected with- the services alleged to have been- rendered to the trustees". The! court there.-also surcharged back against the trustees $14,671.14 aá interest oh éstate-funds commingled with funds of Buder & Buder.- -
In addition to cases above noted, other litigation having its inception in the fabulous prosperity of Burroughs and presenting a varied three-decade- view of willingness to -litigate, though some of its collateral to any instant issue, marched in-review through the courts. The curious may read.
ADMINISTRATION 'MATTER FACTS. As to the above noted administration matter- charged in Count VIT against respondent G. A. Buder alone. This traiisaction occurred in'April of 1941.
' Respondents ' then owned " ahd' held five' notes of- G. A. Franz, deceased; (former co41-ustee) in the total amount of $124,914.70. T-hoáé notes had been filed and allowed against the G. A. Franz estate in a total ¿indúÜt' (including interest ae'erued'and Unpaid) of $172,-616.12. These allowed claims w'ére' unpaid. The notes were in part secured by collateral pledge' and assignments (attached to the notes) purporting to transfer '7-500 shares of Bui roughs, being a portion of thé shares G. A. Frank had expected to receive on eventual distribution of his'father's e'state. -
'• From-the evidence before-iis the probable condition on final settlement uf-the G: -A. Franz estate' is not-determinable. It does appear, however, that on April 15, 1941 its assets were so frozen as that it was not then solvent in ordinary course. As of that date any possible immediate realization to apply on the notes would have had to be a resort to the undistributed shares pledged. Burroughs stock was then barely above $8.00 per share. By no proper method of calculation were the notes in question the equivalent of $124,917.40 in cash.
In handling the assets of the Ehrhardt D. Franz estate, the Sophie Franz trust, the Sophie Franz estate and other fiduciary monies it was the practice of Buder & Buder to deposit and carry (or commingle) those monies held in such fiduciary capacities in a common account with other monies of the Buder & Buder law firm. However, the office kept separate ledger sheets showing the detail of credits and debits and the balance due each such client, fiduciary and other person. G. A. Buder had also opened a separate bank account for the Sophie Franz estate. The method of transfer of funds, if any were transferred, from one aeount to the other does not clearly appear.
In 1939 6. A. Buder filed his executor's thirteenth settlement of the Sophie Franz estate in the Probate Court. It appears from the summary thereof that he then [570] had $181,922.76 in cash and collateral loans of $40,500.00; and that the assets of that estate then totaled $1,610,128.81.
On April 18, 1941, G-. A. Buder, as such executor, filed his fourteenth settlement. The summary thereof showed he then had in cash $87,639.06 and collateral loans of $165,414.70, as property of the Sophie Franz estate. Included in the collateral loans total was an item marked, "Loans of G. A. Franz, $124,914.70''. All assets totaled $1,619,085.15. The cash balance difference in the two settlements is explained by other transactions not of importance here. This fourteenth settlement was approved by the Probate Court on July 17,1941.
The fifteenth settlement filed by G. A. Buder as executor on October 19, 1942 carried forward the collateral loan item of $124,914.70 as, "G. A. Franz, collateral with Buder and Buder, $124,914.70". ( This settlement was approved November 10, 1943.
On March 23, 1943, Johanna Fiske and certain other legatees of Sophie's estate filed in Probate Court a motion alleging that G. A. Buder, as executor, had attempted to purchase the G. A. Franz notes from himself with Sophie Franz estate funds and prayed an order on the executor to give bond. In July, 1943 that motion was dismissed without prejudice but of its own motion the Probate Court ordered the executor to give a bond of $100,000, and to submit the estate's assets for inspection.
On October 11, 1943 G. A. Buder filed his sixteenth settlement. The item of the G. A. Franz notes of $124,914.70 does not appear therein. The summary shows collateral loans then reduced to $40,500 (the 1939 amount), and an increase in the treasury bond account of $124,914.70. The Probate Court had made no order whatever per mitting the G. A. Franz notes to be purchased with Sophie Franz estate funds, nor authorizing respondent G. A. Buder to place the notes in the estate, or to withdraw or decrease cash. After objections had been filed the Franz notes were removed from the face of the settlements and United States bonds were shown in the record of the . estate assets. The record further shows that the executor drew his own personal checks to himself as executor and deposited such checks in the account of G. A. Buder, Executor of Sophie Franz. He then drew five cheeks against that account, each for $25,000 and purchased United States bonds of $125,000 face value, which bonds were placed to the credit of the estate and shown as estate assets. The above facts respecting the administration matter are undisputed. But the explanation of G. A. Buder is important.
Respondent G. A. Buder testified that the $181,922.76 of cash in the firm account to the estate's credit was not earning any interest lying on deposit in the bank; that under a former agreement between the trustees, Sophie and the remaindermen, the latter could and had borrowed estate funds at two per cent; that the five G. A. Franz notes bore six per cent interest;'that he felt the G. A. Franz estate should not be compelled to pay six per cent interest on these notes when other remaindermen borrowed from the, estate at two per cent; that he turned the notes over to Sophie's estate as a character of voluntary collateral intending thereby to permit Sophie's estate to earn two per cent on the face of the notes, intending that Buder & Buder would therefore charge the G. A. Franz estate only two per cent on the notes and that Buder & Buder would forgive the other two per cent of the interest. He testified he did not take $124,914.70, or any sum, out of the estate's funds and the ledger sheets of the Sophie Franz estate account show no such deduction was made. He contends it was only an accounting or bookkeeping transaction.
On April 15,1941 G. A. Buder made á memo in his own handwriting as follows: "4-15-41. Memo. Please hold Coll, notes on Est. G. A.
F. Deceased to extent of about $125M to be deposited by me as voluntary collateral or security pending payment or distbn.-List attached G. B." Miss McCoy, his secretary, thereafter typed the memo and G. A. Buder signed it. Subsequently the memo was attached to the notes and they were placed in safe deposit. The five notes of G. A. Franz [571] were never.endorsed by the payees. There was no physical appropriation of the funds. No actual transfer of funds was made. The transaction was an open one.
We first consider the administration matter. It is difficult to believe this transaction upon the part of any lawyer. Respondent G. A. Buder was first unmindful of that portion of the Code of Legal Ethics, embodied in our Rule 4.11, and providing: "The lawyer should refrain from any action whereby for his personal benefits or gain he abuses or takes advantage of the confidence reposed in him by his client. Money of the client, or collected-for the'client or-cither, trust property coming into .the possession- of the lawyer should be reported and accounted for promptly, and should, not under any circumstances be commingled'with,'his own or be .used .by-him." See also, Cornet v. Cornet, 269 Mo. 298, 190 S. W. 333, 343.
The'facts are undisputed that while-acting as, a, fiduciary G.-A. ^ Buder .entered upon his executor 's settlement a. transaction which, upon its face, appeared to benefit him .-and'damage his cestuis. The legatees -were justified in questiohingeit -and in filing their., motion. Had the estate's money not been carried in the, Buder & Buder bank account perhaps this unfortunate transactiou would not have occurred. Informants contend that by the showing upon the face of. the. summary of the fourteenth settlement, i. e., the reduction of: tbe Cash'balance shown.to be in-the estate funds, the appearance'thereon of the G.-A. Franz notes and, the increase of. collateral loans in-the amount-of $124,914.70; and- by the-.further fact that .the new money-to purchase the government bonds .came from G. A. Buder's ¡personal account; they made a prima facie- showing as to this .¡matter. =-, Their contention -is not without merit: Informants-further.-insist that it was - highly improper for G.A. Buder, withoufany, authority of the Probate Court, to show his own property-in the. estate assets-and to deduct •a.credit upon the face of the settlement-. That- should' never be .done. The situation, presented by the'se "facts-as .fraught with temptation ¡and danger for attorneys in fiduciary capacities. 'Respondents' action-can-pot be too strongly condemned. Cornet v. Cornet, supra, Garesche v. Levering Inv. Co., 146 Mo. 436, 48 W. 653; 46 L. R. A. 232.
The fiduciary relationship of.exéeutór and legatees connotes trust and confidence. It-contemplates good faith in all transactions rather than-mere naked legal obligation. . It ¡comprehends -integrity) loyalty, fidelity and trustworthiness more than it relates to credit or .ability: This relationship need not be based upon ¡some .technical'relation.'created or defined in hiw-but exists-where a-special-confidence ha's been reposed-in one ¡who in. equity and good ¡conscience- is bou-nd-to act not only in good faith but also-with utmost-fidelity to the-interests of those reposing such special confidence. -Of - necessity it .must comprehend the safekeeping and separate, holding; of alimonies received which the fiduciary is in law and: good conscience bottnd,to pay over to those for whom he is acting. Regardless of how good the intention-or how safe in fact the transaction,- a lawyer fiduciary must avoid -even 'the- appearance of irregularity or any variance whatever from the ¡established course. Garesche v. Levering Inv. Co., supra, Cornet v. Cornet, supra.
To characterize this particular transaction • as most-unwise is to .draw over it the.mantle-of -charity¡with-.understatement.' Bút-there are-many facts and circumstances, of ¡record which we feel justify the conclusion we have reached as:to ¡Count-VIL . -: . ' •
> 'Without .pausing to here analyze the many possible motives behind this transaction (and many motives have been suggested to us by 'counsel for.G. A'. -Buder and for Informants) we must decline to find from this-record-that respondent G. A. Buder did "remove from the assets' of said estate, so -held by him as executor money . . in the sum of'$124,914.70 (or any other sum) and substitute in lieu thereof, allowed claims due . . . Buder and Buder ' . . . . which . : -had practically--no value-".- From the very openness of the transaction it would be > difficult to believe that any such intention ever ex-isfed. These facts however are not denied. -Respondents' explanation is [572] -not so contrary to human probability as that we would be warranted in rejecting it in toto. We accept G. A. Buder's explanation that it was an accounting transaction. Portions of . his explanation is supported by- documentary evidence. No debit of $124,914.70 appears on the estate ledger sheet. The G; A.-Franz notes were never endorsed by payees. -Of course, G. A. Buder was.aware that .his estate settlements would be public records open to inspection by th'e legatees and their thén counsel.
• When we consider all.the circumstances of this matter in the light of the -background of respondent and his evidence of prior good reputation; when we' further consider that "where one of two views are open; . . . the one noble and the other ignoble, courts of justice out of-tenderness to humanity will not belittle mankind by taking the ignoble rather than the noble view", we are constrained to dismiss Count VII of the information with this admonition and reprimand. That will be done.
THE TRUSTEES COMMISSION MATTER. We now return to a consideration of the above noted trustees commission matter. ' We agree -that it is the general rule that trustees are always entitled to reasonable compensation. That is true even though the basis for computing such compensation, as is the case here, is- not set out in the .trust instrument itself. We also agree that eonscionable trustees' commissions may be a proper subject matter of a binding contract between -the beneficiaries on the one hand, and the trustees of a trust upon- the other. -
- We cannot agree -with respondents' next contention that a contract with the remaindermen resulted from the May, 1909 meeting at Las Vegas, . Each respondent largely premises his position in this Court upon' an assumption that the record now before us is sufficient to establish such -a contract. Much space in the brief of each respondent is devoted to that proposition.. We have carefully analyzed and considered all the testimony. At most the-Las Vagas meeting produced no more than a sort of tacit assumption by all present (and three'of the Franz remaindermen did not attend at all) that the trustees would be paid five per cent on the then (1909) value of the assets. In May, ,1909, it was not contemplatéd nor even dreamed by any one that the 4200 «liares of Burroughs then-in- the-trust-éstate-would eventually "mushroom" to 282,500 shares of a value of - about $25,000,000. Tt was likewise not then settled, nor was the question even-considered or dismissed, that stock dividends would be held-not "inbome but corpus. In 1909 neither the trustees nor the remaindermen could have known enough about the long range picture to. have made a contract. The written minutes of the 1909 meeting are in evidence. There was no agreement between the remaindermen and the trustees as-to any such commissions as trustees later claimed against the remainder interests. We do not find any testimony anywhere in ¡the record which would warrant us in "holding that the contract which respondents now -contend was entered into in 1909 in L'as Vegas, was-in fact ever agreed to between the trustees and remaindermen. -
Respondents contend that the stock rights-distribution agreement. of January 7,1920 should be -construed as binding the remainder-men to thereafter surrender five per cent-of each remainder interest as trustees' commissions. It cannot-be- so construed. It -was an independent agreement covering only an independent matter. In an attorney's dealing with his cestuis- the policy" of the law considers it to be wholly inconsistent with-the; basic principles entering into -that fiduciary relationship to torture independent collateral agreements or mere incidents of the relationship into either foundation or leverage for the attorney's financial' gain. Rather than the contrary, it is a lawyer's duty to respect and "defend"the integrity of the eestuis' financial interests. Supreme "Court Rule- 4.15. The contention must be ruled against respondents.
It is next contended that the-trustees "were; entitled under the law "to compensation for services-based upon:the entire trust property ; and each interest in the trust property (including each remainder interest) . . . was chargeable with its proportion of-the total compensation of the [573] trustees, in this instance- with five per cent of the value of each remainder interest". This brings us into the heart of this controversy.
Tn Fiske v. Buder, 125 Fed. (2d) 841 (1942), an opinion by the 8th Circuit. Court of Appeals upon the instant facts, that court unanimously held contrary to respondents last above stated contention. Respondents seek to minimize-the force of that case. " But-for reasons therein clearly stated we here adopt the reasoning and conclusions stated in that opinion. Tn 1927 in Hayes v. St. Louis Union Trust Co., supra, we settled that stock dividends were corpus. - But after our decision in'the Hayes case. respondents took-a contrary position with -their remaindermen- clients, .particularly at the Chase Hotel meeting, and thereafter. They also" took contrary -action. In 1-928 in Buder v. Franz, 27 Fed. (2d) 101, and in which case G. A. Buder was a party and wherein he was represented by these respondents as counsel, Judge Stone's opinion specifically called respondents' attention to. our ruling in the-Hayes cavSO, and upon the facts then before that (ioui't, again pnt-tho entire. matter at Test. That ease determined many issues respecting'these facts which 'it -is - unnecessary to' re-examine here,'or restate herein.-' -The'record then before that court, and it is now before us,; fully warranted'the findings and conclusions of that. Court in-that-¿ase'. " •
•As evidence of Sophie's intention, the trust instrument gave trustees the'right "TO expend; disburse,-retain, and pay out of said Trust Estate-and funds, any1 an'd all assessments, charges and taxes . . . attorneys' 'fees,' outlays,' compensation,'charges and costs of .administration; necessary,.-incident or essential to and for the care, protection,- preservation, adriiinistration, management and distribution of the-assets'hereby conveyed or hereafter acquired . . ' . etc. We find1 no- other-reference in that instrument to- any compensation to trustees. - • 1
In the absence of any express provision in the trust instrument fixing the' trustees-' fees' or providing any- basis for computing the same, and in the further absence of any later contract upon that matter, it is the general rule in Missouri that trustees' commissions'afe based upon the amount-of the yearly income received and paid out by them. Kilpatrick v. Robert, 278 Mo. 257, 212 S. W. 884, Cornet v. Cornet, supra, In re Estate of Mary C. Mays, 197 Mo. App. 555, 196 S. W. 1039, Fiske v. Buder, 125 Fed. (2d) 841, 847. See also, 2 Scott on Trusts § 233.3, page 1269, 2.Perry on Trusts, (-7th.Ed.-) § 919, Bridgeport-City Trust Co. v. First National Bank & Trust Co., 124 Conn. 472, 200 Atl. 809, 117 A. L. R. 1148, 1154, and cases there cited. In the absence of á statute-fixing the compensation of trustees (Missouri has no such statute) the courts always allow trustees reasonable compensation; due regard being- had-for the-character of the services rendered. Absent a contract and-absent a provision indhe-trust instrument fixing -the basis for computing trustees' commissions, the allowance as a trustees' commission of a portion of corpus : upon final distribution to the beneficiaries (or- remaindermen) does not go as a matter of right but is a matter wholly within the discretion of the court. There could be circumstances,-of-course, of unusual or • extraordinary character in .the matter of the services rendered which would justify a court in departing1 from the general practice of allowing trustees' commissions only out-of the-yearly-income received and disbursed. That, however, is a question >f ór the court- -to determine- in each such case before it. See cases last above cited.; • 1 - •
As supporting their contention respondents rely upon such cases as Loud v. St. Louis Union Trust Co., 313 Mo. 552, 281 S. W. 744, In re McKinney's Estate, 351 Mo. 718, 173 S. W. (2d) 898, Ladd v. Pigott, 215 Mo. 361, 114 S. W. 984, and Estey v. Commerce-Trust Co., 833 Mo. 977, 64 S. W. (2d) 608. All cited eases and-texts have been carefullv examined aiid-are. distinguishable.- Space forbids.a full dis- cushion. In tbe Loud case, there here for the second, time, and then upon exceptions to the trustee's accounting' after the purported trust theretofore had been held void ab initio, the trustee prayed a further' trustee's allowance of $57,162.43. Upon that claim the Chancellor.had allowed $22,000, but neither the trial court nor this Court directed that any particular amount of that allowance be charged against either corpus or income. There was no issue in [5.74] that case as to whether corpus or income should pay the allowance, or whether it be- pro rated. It does not appear how it was finally ordered to be charged. Nothing in that case supports respondents' contention. In. the McKinney case the will creating the trust provided the method of computing the amount of trustees.' commissions. In the Ladd case there was an.express contract between a court appointed trustee and .the beneficiaries of the trust. The Estey case concerned executors' commissions, which are fixed by statute, and merely recognized the almost universal-rule that' expenditures should be charged against the estate benefitted. These eases simply do not support respondents' contention. The Missouri rule is as we have above stated it. . . '
Before Judge Faris, upon the matter of the exceptions- of .the 3 1/3 remainder interests to the allowance of trusteees' commissions as against the remainder interests, respondents there conceded the bare bones of the law to be "according to the contentions of the exceptors'', and against such allowance and, charge as against the remainder interests. Respondents there relied, however, upon a "specie's of es-toppel partly resting in former recognition of the trust and partly upon the request, of practically all of the beneficiaries". ;The estoppel was denied. The trustees' later plea of laches was likewise adversely ruled in 125 Fed. (2d) 841.
As respects the remaindermen, a lifé tenant stands in the shoes of a quasi-trustee liable for waste. Buder v. Franz, 27 Fed. (2d) 101, 114. It is clear that under the circumstances of record here the: commissions of the trustees were lawfully chargeable only against the life, tenants' income from the trust property. The trustees' commissions were charges created by the life tenant. The trustees did not create or enhance or preserve the remainder estates. They had nothing to do with those remainder estates except as mere trustees to receive and to hold the stock dividends (the certificates for the shares)- and to receive dividends thereon. Having done nothing more' their commissions could not lawfully be charges upon the remainder estates other than by contract. There was no such contract. - - .
Respondents next contend that in seeking and securing the allowance of trustees' commissions against -the remainder interests theré was no representation of conflicting interests. . Respondents assert that to be true because remaindermen knew they-were counsel-for trustees, knew they were seeking to collect trustees' commissions from the remainder.interests, and, as counsellor both remaindermen and- trustees they made, full disclosure and-that nothing was withheld from remaindermen which might have "influenced, remaindermen's selection of other.counsel.<'
.The-policy of the law, the ¡rules-of this Court,- the Canon of Ethics and,-the adjudicated cases have, long held that a-lawyer can have but one client in any-, .given matter.- - Not even the most versatile lawyer "•can-serve two masters"-.. He cannot represent interests that are or may be. conflicting except by.-express consent of -all concerned given after .full disclosure of all facts! The law abhors a" breach of fidelity to .theclient's interest. . Hoffman v. Hogan, 345 Mo. 903, 137 S. W. (2d) 441, 446, Moffett Bros. Partnership Estate v. Moffett, 345 Mo. 741, 137 S. W.(2d.) 507, 511, Rochester v. Gonterman, (Mo.) 49 S. W. (2d) 71, National Hollow Brake Beam Co. v. Bakewell, 224 Mo. 203, 123 S. W. 561, 567, In re Pfiffner's Guardianship, (Mo. App.) 194 S. W. (2d) 233, In re Conrad, 340 Mo, 582, 105 S. W. (2d) 1, Supreme Court Rule 406, Fiske v. Buder, 125 Fed. (2d) 841.
It matters not.that one.of .the -two interests-so represented by the lawyer in the-.given--matter-may be his "own interest. Lawyers always owe-their, clients the-very highest duty to fully inform them of all rights and -interests, of--all possibilities of conflicting financial interests,, of all pertinent rules of-law applicable to the subject-matter of-the action and of the nature and effect of-the transaction itself in order that the-clients, should-they'desire or need-to do so, may be enabled to deal with their lawyers "at arms length, or secure other counsel.. For apparent reasons of-public policy,: for--'the maintenance of-public confidence..in.the-bar andtheí'cohrts, and based upon some recognition- of human frail-ities and some knowledge of the motives, which inspire the actions of unen,-it is also-the further policy [575] of the law that if any lawyer -in a given matter- has any personal financial interestitherein so that to .contend .for his".client's welfare is to contend against his own financial -interesty or- contra,""if to contend for his .own financial inter est is to contend against his client's financial interest and welfare,-there-is (if possible) an even greater duty-of full disclosure--. AVe--further hold thht'for reasons above stated,-to preserve the;-orderly administration-of justice and "to preclude the honest; ipraetioner from putting-himself- in a- position where he may be-required".to choose between . . - o-•< his own"-interests and-those of his client" an. attorney may not by an employment place himself where he could-contend for his own and against his client's financial interest and welfare. If an attorney" should do that he would bring the- courts and his profession into disrepute. See, 7 C. J. S.-Attorney and-Client'§ ,47j p. 824, Gillette v. Newhouse Realty Co., 75 Utah 13, 282 Pac. 776, Morris v. Glaser, 106 N. J. Eq. 570, 151 Atl. 760, Hunter v. Troup, 315 Ill, 293, 146 N. E. 321. The fiduciary relationship of lawyer and client demands no -less. It- must exact no -less. But under the-ciri-.umstancek. now of'-record'before us. did respondents even so much'as accord their remaindermen clients that candor, fairness and full disclosure which the law demanded?
From 1926 to 1935 respondents represented the 6% remainder interests. During that entire period respondents claimed those trustees' commissions against the remainder interests and advised those clients their interests were subject to those payments. By advice, by action, by pleadings filed in court upon behalf of those clients respondents steadily sought to extinguish their clients' interests entirely and to merge the remainder interests into Sophie's life estate. G-. A. Buder testified that such was his purpose. That purpose was blocked by the decision of the court reported in 27 Fed. (2d) 101. Only because . of the confidence reposed in them by their clients were respondents in a position to make the effort to extinguish those estates. Respondents have sought to excuse that action by pointing out that those answers were filed in Buder v. Franz, 27 Fed. (2d) 101, prior to our 1927 decision in the Hayes case. Prior to the Hayes case decision-there could have been an honest question in respondents' minds as to whether, stock dividends were corpus or income.
But even after the Hayes case decision respondents continued to claim and acted to secure the allowance of commissions against the remainder estates. After the Hayes case decision (and respondents admit they knew of that decision), there could have been no excuse whatever for respondents' further actions or contentions to the contrary.
We find that we are unable to escape the conclusion that at the Chase Hotel meeting in 1930, that in the filing in court of the petition there signed by their remaindermen clients, that in securing the allowances made by Judge Faris of trustees' fees against the remainder -interests of their clients, that in the filing in May, 1931, in the Sophie Franz estate in the Probate Court of the trustees' claim for $810,001.22 for commissions from the remainder interests, the respondents in fact were representing the trustees to the financial detriment of their remaindermen clients. The financial interests of G. A, Buder as a trustee and the financial interest of Buder & Buder as counsel for the trustees was in direct conflict with the fiduciary duty of Buder & Buder as counsel for the remaindermen. By the filing of the Probate Court claim respondents confessed their doubt that the District Court had any right to allow commissions as against the remainder interests.
- This voluminous record and the exhibits have been carefully examined and the conclusion is irrestible that these remaindermen trusted their counsel, and relied and acted upon their advice. But respondents did not even advise the remaindermen that in the proceeding before Judge Faris, they had a legal right to contest the trustees' claims for commissions as against the remainder interests. Nor were the remaindermen advised that the law did not authorize any claim by the trastees against, the-remainder interests for commissions. That, however, is:but a small part of the picture showing respondents in fact were representing the. trustees instead of their re-maindermen elieiits. ' '
[576] Thus it-was that in the proceeding before Judge Faris respondents, in effect, secured .judgment for the trustees against their own clients (the 6% remainder interests) and, as respondents were counsel for those remaindermen no exceptions were filed to those allowances. Of course, no appeal was taken.
'After Judge Faris' oral opinion and decree no lawyer could say (and'respondents will not be heard to contend) that the liability of thé remáinder interests for trustees' commissions was not doubtful. Respondents sent their, clients a copy of Judge Faris' opinion. There w.as time to do so, but respondents did not advise their remaindermen clients that other'counsel be secured while there was yet time in which such remaindermen could file exceptions and take an appeal.
At the bar of this Court respondents have, had a long and successful career. 'Before Informants, before the Special Commissioner and in this Cou-rt the respondents have been accorded every right and every courtesy. They have been, patiently heard. This record has been carefully examined.To all of that respondents are indeed entitled as of course. Each respondent has testified at great length and with much latitude. Each has 'been ably represented by eminent counsel. Persons of high business and .professional standing testified to respondents' prior good professional reputation and to their great learning.. There is little dispute in the facts before us except as to what occurred at the Chase Hotel conference in 1930. In the consideration of this case ours has been an unpleasant responsibility. However, this Court can but face its duty and reach its conclusions upon the facts made by the acting parties and brought here by their counsel.
Under these facts and circumstances, from the greater weight of the evidence and under the applicable principles, we can reach but one conclusion. "We rule that, omitting to use that fairness and full disclosure which the íaw> our Rule 4.06, good conscience and the fiduciary relationship of attorney and client have ever demanded, the respondents in the matter now before us represented conflicting interests, one of which such interests was the financial interest of respondents. In so doing the'respondents violated their legal and ethical duty to their clients which, as attorneys-at-law, they owed to those clients. Respondents are therefore, guilty of professional misconduct as charged in Counts I, III and IV of the information. Respondent G. A. Bud.er is also found and' declared to be guilty as charged in Count II of the information. All' exceptions filed' as to Counts I, II, III and IV are overruled. As hereinabove noted Counts V and VI of the information are hereby' dismissed. With the reprimand above noted Count VII of the information is hereby dismissed.
It will therefore be the order and judgment of the Court that the separate licenses of the respondents, G. A. Buder and Osear E. Buder, to practice law in the State of Missouri, shall be suspended for a period of one year from the effective date of the judgment herein and until payment has been made of the costs of this proceding. It is so ordered. All concur.
PER CURIAM:
-Variously denominated motions have been filed
by' respondents. Each respondent has filed a motion for rehearing and to modify our opinion previously filed. Suggestions in support of the various motions have been filed. Among other things, respondents direct our attention particularly, and ask re-examination of the letter dated September 16, 1931, from an officer of Security-First National Bank of Los Angeles and addressed to Mississippi Valley Trust Company of St. Louis. We have re-examined and carefully considered that letter and all the other matters set out in the various motions and in all suggestions filed.
After full and careful consideration there appears no reason whatever why we should extend this opinion with a detailed discussion of the letter mentioned above, or of any of the other matters suggested by respondents. We find nothing which would justify setting aside our judgment or granting a rehearing or modification.
In disposing of the charges of this information we feel that we were lenient with respondents and that we considered the unusual [577] circumstances of the age and length of practice of each respondent
All matters presented having been fully considered, all motions filed to set aside our order and judgment, for rehearing, for new trial and to modify our opinion are denied and overruled. It is so ordered.
Franz v. Franz, 15 Fed. (2d) 797; Franz v. Buder, 11 Fed. (2d) 854, 34 Fed. (2d) 353, 38 Fed. (2d) 605; Mississippi Valley Trust Co. v. Buder, 47 Fed. (2d) 507; Franz v. Mississippi Valley Trust Co., 51 Fed. (2d) 1047; Fiske v. State of Missouri, 62 Fed. (2d) 150; Wallace v. Franz, 66 Fed. (2d) 457, 68 Fed. (2d) 313; Fiske v. State of Missouri, 69 Fed. (2d) 683; Wallace v. Fiske, 80 Fed. (2d) 897; Fiske v. Wallace, 117 Fed. (2d) 149; In re Franz Estate, 344 Men 510, 127 S. W. (2d) 401; State of Missouri v. Fiske, 290 U. S. 18, 54 S. Ct. 18, 78 L. Ed. 145.