Opinion ID: 1499665
Heading Depth: 1
Heading Rank: 7

Heading: Participation of the 3 1/3 Interests

Text: In our hereinbefore consideration of the propriety of each of the four surcharged items, we have ignored any effect thereon of the right of participation therein of the 3 1/3 remainder interests. Such method of treatment avoided confusion and repetition. However, this method was not intended to affect determination of this issue of participation. Based upon like findings of fact and conclusions of law, the final order and decree, appealed from here, recited: That the credits disallowed and the amounts surcharged against the trustees constitute assets and property of the estate of Ehrhardt D. Franz, belonging to the ten remaindermen under the will of said Ehrhardt D. Franz, in equal shares, and that each of said remaindermen is entitled to share equally in the benefits thereof and to participate in the distribution thereof. Another provision listed the hereinbefore examined surcharges as items  with other items  under the statement: That the assets and property constituting the corpus of the estate of Ehrhardt D. Franz, in the possession of and chargeable to the trustees, after the disallowance of credits and after the addition of surcharges found and imposed by this decree, but subject, however, to such additions, deductions and adjustments as the court may order and direct, as provided in paragraph 12 hereof, are as follows. A further provision stated the individual distributive share of each of the ten remainder interests in this corpus. Appellants contend that, even if the surcharged items are approved, the 3 1/3 interests are barred from participation therein. They present the contentions following: (1) The Status of 3 1/3 interests differ from that of 5 exceptors    in that the former were at all times represented by independent counsel while the action of the Court in sustaining the four exceptions (surcharges) was predicated upon the situation that the 5 exceptors were not represented by impartial counsel before and at the Cornell final accounting in 1931; (2) the judgment of the Cornell accounting report is res judicata as to three (stock rights, advances and counsel fees) of the four surcharges; (3) the Conduct of Mississippi Valley Trust Company and plaintiff estopped them    because each of them accepted and receipted for the full distributive share under the Cornell Report judgment in performance of mutual promises of themselves and of the trustees not to appeal from that judgment; (4) the Mississippi Valley Trust Company, in behalf of its two interests, cannot share in surcharges of advances and of interest since it admitted, in connection with the 1931 accounting report, that the advances were proper deductions by the trustees, and the plaintiff cannot recover as to advances and interest because he took no exception to this deduction of advances  also there has been undue delay; (5) the 3 1/3 interests cannot share in the surcharged attorney fees because that is res judicata as to them, and any relief should be confined to the 6 2/3 interests who paid the $100,000 fee to Buder & Buder. Before we consider these contentions of appellants, we must dispose of a matter which is sharply contested. That matter is the more general contention of whether, irrespective of the merits of any of the above contentions, the 3 1/3 interests must be barred from participation. Appellants urge: that each of the ten remainder interests had a separate, several and ascertainable interest in this trust estate; that the trial court and this court have, throughout this litigation, so treated these interests; and that, where there are such separate interests, the governing law here permits a judgment to be set aside as to some parties affected thereby, confines the relief to the parties seeking it, and this is particularly true where the grounds for relief do not apply to others affected by the judgment. Appellees urge that the corpus of this trust is in the control of the trial court for purposes of administration and closing; that this jurisdiction could be exhausted only by a final decree disposing of all of the property and discharging the trustees  thereby terminating the case; that the decree of 1932 on the Cornell report was interlocutory; that the Court had and exercised (in 1942) jurisdiction to require, of its own motion, a final accounting and report; that the inability of the Mississippi Valley Trust Company to initiate the proceedings which led to the District Court's findings in connection with the 1942 accounting does not preclude it from obtaining its distributive shares therein; and that the nature of the credits surcharged and the circumstances under which they arose were such as to require an allowance or disallowance of each in toto. Appellants cite many cases dealing with various situations where the courts have limited recovery, resulting from vacation of a decree or judgment, to a particular party causing such vacation, although other parties to the litigation were similarly interested. [9] We understand appellees (the 3 1/3 interests) do not dispute that there are various situations where a party securing vacation of a decree or judgment may be the only one entitled to the benefit thereof  a vacation pro tanta  but they assert that such conclusion neither can nor should result where the decree or judgment vacated is interlocutory in a proceeding where the court is administering property in its control. Thus, comparison of these opposed positions shows that the line of cleavage as to the power of the court narrows to situations where the court vacates interlocutory orders, decrees or judgments affecting the rights of parties in or to property in its control for administration. We think the real issue here is even more limited than just stated, as we shall presently make clear. We have read and considered all of the cases (footnote 9) cited by appellants as well as many others. Of the cited cases, only four have any connection with property in judicial control for administration and distribution. Those are the three cases involving the Liggett estate. McIntosh v. Wiggins, 354 Mo. 747, 191 S.W.2d 637, certiorari denied 328 U.S. 839, 66 S.Ct. 1015, 90 L.Ed. 1614; Id., 356 Mo. 926, 204 S.W.2d 770; Id., 8 Cir., 123 F.2d 316, this Court, certiorari denied 315 U.S. 815, 62 S.Ct. 800, 86 L.Ed. 1213, and Southern Railway Co. v. Glenn's Adm'r, 102 Va. 529, 46 S.E. 776. The three McIntosh cases were different phases of a contest between a life tenant and a remainderman over title to property. This property had devolved through a testamentary trust. Before any of this litigation had begun, the trust had expired by its own terms. When the trust period ended the testamentary trustees had a large amount of property on hand. Promptly, the trustees brought an action to have the state court determine the assets of the trust on hand, to approve the final accounts of the trustees, to direct distribution, and to construe the will to the extent necessary therefor. See Wiggins v. Perry, Mo.Sup., 271 S.W. 815, 818. This accounting suit included all of the then living descendants of the testator and there was no appeal from the decree therein. This decree declared the trust period ended; approved the administration of the trust estate by the trustee; vested title to about one-fourth of the property in a grandson of testator; and directed distribution thereof. As to the other three-fourths of the trust property, the Court made no adjudication of title nor construed the will setting up the trust as to such title but directed that the trustees deliver and convey to the three daughters of testator the remaining three-quarters of the property to be held and enjoyed by them under and subject to the provisions of said will and expressly leaving open the right of the daughters and of their descendants to bring actions to construe the will as to whether the daughters took as life tenants or absolutely. 271 S.W. 815, 819. Under this decree, the trustees so delivered most of the three-fourths  for reasons not material here, some of such property was not delivered. Thereafter, an action was brought by the daughters, to which all interested persons (including the trustees) were made parties, to construe the will as to the title of the daughters and of their descendants. The result of this suit was to determine that the daughters took as life tenants and their descendants as contingent remaindermen, Wiggins v. Perry, Mo.Sup., 271 S.W. 815. This decision affirmed the decree of the trial court. The affirmed decree contained a provision which has caused the later litigation, including the McIntosh cases. This provision was, in effect, that, on the death of Mrs. Fowler, one of the life tenant daughters (who was then childless), if she died childless, her one-third interest should pass in undivided halves to the two other sisters for life and on the death of either of them thereafter to the surviving sister for life. Mrs. Fowler died childless. Shortly after her death, a second sister (Mrs. Kilpatrick) died leaving a child and a grandchild (daughter of a deceased child of Mrs. Kilpatrick). The survivor of the three daughters (Mrs. Wiggins) then took over the half interest life estate from Mrs. Fowler which had, under the decree, passed to Mrs. Kilpatrick. A series of litigations has resulted between the daughter or the granddaughter of Mrs. Kilpatrick or both on one side and Mrs. Wiggins and, later, her administrators on the other side. [10] We have set forth these two earlier decisions in the Liggett Estate litigation for a better understanding of the later phases of that litigation in which the cited McIntosh cases had place. The first of these two cases was the accounting case based upon a report of the trustees and their need for directions from the Court as to the proper distribution of the property remaining in the trust which had ended by its own terms. The second was an action to construe the Liggett will, creating the trusts, and was a contest between life tenants and remaindermen as to their respective titles in certain of the trust property. Three later cases set the stage for the cited McIntosh cases. The first of these was an action at law in the federal court by Mrs. Perry (later McIntosh) against Mrs. Wiggins to determine adverse claims to real estate (part of the trust estate). The judgment against Mrs. Perry was affirmed by this Court because of the state of the appeal record without examination of the merits. Perry v. Wiggins, 8 Cir., 57 F.2d 622, certiorari denied 287 U.S. 609, 53 S.Ct. 12, 77 L.Ed. 529. The next matter was a motion by Mrs. Perry and Mrs. Kennard (the granddaughter) filed in the will construction suit for a nunc pro tunc correction of the judgment in that suit. This motion was denied and the denial affirmed because of insufficient evidence to justify a nunc pro tunc order. Wiggins v. Perry, 343 Mo. 40, 119 S.W.2d 839, 126 A.L.R. 949. In a later suit to have declared void the troublesome provision of the decree in the will construction suit, by Mrs. Kennard against Mrs. Wiggins, the plaintiff prevailed and she was held entitled, on the death of her grandmother (Mrs. Kilpatrick), to one-half of the undivided one-half of the property enjoyed by Mrs. Fowler as life tenant and which Mrs. Wiggins had taken over on the death of Mrs. Kilpatrick. The decree was affirmed. Kennard v. Wiggins, 349 Mo. 283, 160 S.W.2d 706. The basis of this last action was that plaintiff was a minor when the will construction decree was entered and she was not properly represented in that matter. The last matter was a further step in the Kennard case which had to do with recovery of interest on the funds recovered by Mrs. Kennard from Mrs. Wiggins, 353 Mo. 681, 183 S.W. 2d 870. We come now to the McIntosh cases cited by appellants. On the day Mrs. Kennard filed her suit in the state court, Mrs. McIntosh filed an equity action in the federal court to enjoin Mrs. Wiggins from having the benefit of the disputed provision in the decree of the will construction case and to require her to turn over the property received from the life estate of Mrs. Fowler. The trial court dismissed the petition on the grounds that the will construction decree was res judicata as to plaintiff and no sufficient showing of fraud, mistake or imposition in connection with the decree had been made. This Court affirmed, McIntosh v. Wiggins, 8 Cir., 123 F.2d 316, certiorari denied 315 U.S. 815, 62 S.Ct. 800, 86 L.Ed. 1213, rehearing denied 315 U.S. 831, 62 S.Ct. 914, 86 L.Ed. 1224. Thereafter, Mrs. McIntosh brought an action for a declaratory judgment against the administrators of Mrs. Wiggins, who had died about the time the Kennard decree became final. The corpus of the property in dispute was then delivered to Mrs. McIntosh along with interest thereon from date of death of Mrs. Wiggins. After this, only the income from the property received by Mrs. Wiggins between the death of the mother (Mrs. Kilpatrick) and Mrs. McIntosh and the death of Mrs. Wiggins was involved. The theory of this action rested essentially upon plaintiff's construction of the effect of the Kennard decree as establishing a like right in her. A judgment for plaintiff was reversed. McIntosh v. Wiggins, 354 Mo. 747, 191 S.W.2d 637, 642. The Supreme Court of Missouri held that plaintiff was not a party to the Kennard suit; that the Kennard decree was no determination that the will construction decree was void as to plaintiff; that the original decree was not such an entirety that it could not be voided as to Mrs. Kennard without being so as to plaintiff; that Mrs. McIntosh could have appealed from the original decree and showed no valid reason for not so doing; that the original decree was res judicata as to her; and that the differences in grounds for relief in this and in the Kennard suit were sufficient to fully explain the difference in the results in the two actions  those differences being the infancy of Mrs. Kennard in her case and the defense of res judicata available in the McIntosh case. The last McIntosh case, 356 Mo. 926, 204 S.W.2d 770, was an appeal from the judgment entered on the mandate from 354 Mo. 747, 191 S.W.2d 637. This last appeal was based upon the two contentions: that certain Missouri statutes were violated by the decision resulting in the mandate and that when a court inadvertently determines the title to the same property is in two different persons at the same time its judgment is void. The judgment was affirmed. The Court stated, 204 S.W.2d 770, 773: In the Kennard case we did not hold the original decree (in the will construction case) void but ruled only that Mrs. Kennard should be relieved of the effect of that part of the decree subjecting her interest to a life estate in Mrs. Wiggins. We have set forth this Liggett Estate litigation with some detail because it has to do with Missouri law, as well as decisions of this Court; and also because it is necessary to determine the authority of these cases here. For the latter purpose, several matters are important. First, the only case involving an accounting by the trustees was the one brought by them wherein all persons interested were made parties, the accounts were approved, no appeal was taken therefrom, and no attack has ever been made thereon during any of the subsequent litigations. Second, all of the subsequent litigations were title contests purely between the beneficiaries of the trusts. In short, none of this litigation had to do with the duties, obligations or rights of the trustees connected with their administration of the trusts. Being of this character, these cases are not pertinent to the present situation which is concerned entirely with the duties, obligations and rights of the trustees connected with their administration of this trust, which actions of the trustees are challenged by beneficiaries or quasi-beneficiaries. This is the more limited issue here, to which we have hereinbefore called attention. The remaining citation by appellants, Southern Railway Company v. Glenn's Adm'r, 102 Va. 529, 46 S.E. 776, is a case involving acts by a trustee in course of administration of a trust estate. There were cross appeals by the representative of the deceased trustee and by a beneficiary. We are concerned only with the appeal by the administrator of the trustee. These appeals were from a decree entered on mandate issuing from an earlier appeal. 98 Va. 309, 36 S.E. 395. The former appeal resulted in reversal of a final decree (allowing compensation to the trustee beyond that expressed in a trust deed for the benefit of creditors) with directions to disallow said additional compensation in settling the accounts of the trustee, as to the appellants in that cause (italics added). The former appeal had been by the Southern Railway Company suing for itself and in behalf of all other creditors except three which were named. When the decree on the mandate was entered, it accorded relief not only to the Southern but to all other creditors except the three expressly not joined in the appeal. The second appeal (from this last decree) was, as concerned the trustee, from the allowance of relief to any but the Southern, which was the only named appellant. The Court stated, 46 S.E. 776, 777, that the former opinion and mandate expressly limit the benefits of the decree then made to the appellants in that cause. Therefore the question presented for our present consideration is, who were the appellants before this court on the former appeal? The Court held that the statutes allowing appeals required that all appellants be named in the petition or petitions for appeal; that there were situations where parties not appealing nor even technically parties to the action might be affected by a decision on appeal if they stood upon the same ground and their rights are involved in the same question so that the decision must of necessity affect all alike 46 S.E. page 778, but that here the rights were separate and not equally affected by the same decree; and, therefore, that only the Southern was intended to and did get relief under the former appeal. We are not concerned with the statutory limitation of appeals in this decision. However, the determination that beneficiaries in the trust there involved may be so separately and unequally affected by a decree disallowing compensation to a trustee has a bearing upon our problem. In the absence of controlling authority in this jurisdiction  none such having been brought to our attention  we incline to follow this decision to the extent of the existence of power in a court administering a trust to treat an interlocutory order or decree concerning such administration as fixed as to some parties and not as to others where interests of the respective parties are sufficiently separate. But the existence of such power does not control the exercise thereof. It does not mean that the trial court cannot treat all interests alike even though they may have such separate quality. Here, the trial court has treated all alike. The burden is upon appellants to show such action to be error. This they seek to do upon the grounds hereinbefore stated. We are not now determining whether these remainder interests are thus separate as we believe that, even if they are such, appellants cannot prevail. We deem it unnecessary to examine separately each of these contentions of appellants, because of a situation which governs all. This large situation is as follows. The decree in the accounting in 1932 was an interlocutory decree in the course of administration of the trust estate. The Court had power to and did order a further accounting report in 1942. The 1942 report and the hearings on exceptions thereto developed that there were four items with which the Court determined the trustees should be surcharged (stock rights, advances, counsel fees and commingled funds). We have hereinbefore determined that all of these surcharges were proper. The Court decreed that these surcharges were parts of the corpus of the trust estate. The Court decreed further that the ten remainder interests should participate in the distribution of that estate. From such decree, no remainder interest appeals. Only the trustees, as such, appeal. Therefore, the purposed effect of the challenge, on this appeal, of the right of participation to the 3 1/3 interest is for the trustees to retain and profit to the extent such participation is denied. No principle in the law of trusts is more settled than that a trustee will not be allowed to profit out of his administration of a trust, even where there is no loss to the estate and no wrong is intended by the trustee. Magruder v. Drury, 235 U.S. 106, 119-120, 35 S.Ct. 77, 59 L.Ed. 151; Woods v. City National Bank & Trust Co. of Chicago, 312 U.S. 262, 269, 61 S.Ct. 493, 85 L.Ed. 820; Jackson v. Smith, 254 U.S. 586, 589, 41 S.Ct. 200, 65 L.Ed. 418; Covey v. Pierce, 229 Mo.App. 424, 82 S.W.2d 592, 598. In the face of this fact situation and of this principle of law, there must be compelling reasons clearly proven before the result sought by appellants can be allowed. Such reasons can be found only in the voluntary acts of the fully informed beneficiaries involved. That these remaindermen were not fully informed as to the large counsel fees paid to Buder & Buder by the 6 2/3 interests is clear. Whether they had knowledge of the repayment of the advancements to the estate of Sophie Franz is, to say the least, doubtful. In this situation, no res judicata, estoppel, laches nor even express release by these remaindermen can be a bar. Michoud v. Girod, 4 How. 503, 561, 11 L.Ed. 1076; Bilton v. Lindell Tower Apartments, Mo. Sup., 213 S.W.2d 952, 958; Clyce v. Anderson, Ex'r of Griswold, 49 Mo. 37, 41-42; 132 A.L.R. 1522 note; and see Mueller v. Grunker, 145 Mo.App. 611, 123 S.W. 469, 472. Nor are we to assume that had these facts been known to the Court in 1932, the decree then entered would have followed. See Weil v. Neary, 278 U.S. 160, 170-171, 49 S.Ct. 144, 73 L.Ed. 243. It is urged that the two interests represented by the Mississippi Valley Trust Company are barred because there was an understanding between the trustees and the Trust Company that the Trust Company would not appeal from the 1932 decree and could accept distribution substantially under that decree if the trustees would not appeal therefrom. No evidence as to such understanding was introduced prior to filing the findings of fact and conclusions of law and entry of the decree. This situation appears only in offers of proof in connection with the motions for new trial. These motions were directed to a new trial or reopening of the case for introduction of the matters covered in the supporting affidavits. There was no claim that this evidence was newly discovered but it was expressly stated by counsel for the trustees that they were addressing these motions and matters to the sound discretion of the Court. Since we have approved hereinbefore the action of the Court in denying the motions, we cannot consider these matters in disposing of the merits of the case. Our conclusion is that this challenge as to participation of the 3 1/3 interests must be denied. [11]