Opinion ID: 1499665
Heading Depth: 1
Heading Rank: 3

Heading: The Stock Rights

Text: The estate of Ehrhardt D. Franz consisted of real and personal property inventoried as of a total value of $95,624.54. Included therein were 210 shares of stock in the American Arithmometer Company, valued at $21,000. Thereafter, that Company declared stock dividends of a like amount. This augmented stock was included in the residue of this estate turned over to Sophie on the close of the administration of the Ehrhardt D. Franz estate in 1900. In 1905, the Burroughs Adding Machine Company exchanged 4200 of its shares for these 420 shares in the Arithmometer Company. January 30, 1909, Sophie created the present trust estate, expressly including therein these shares of Burroughs stock. By 1920, this Burroughs stock held in the trust had, through stock dividends, increased to 12,600 shares, standing in the name of Sophie Franz. For the purpose of increasing its capital, Burroughs declared rights to subscribe for new stock to the then stockholders. These rights were on the basis of one half share to each share of stock then held. Each new share was for $100 value and subscriptions were to be at par. Each right to subscribe (for one half share) had, at that time, a value of seventy-five dollars. In January, 1920, Sophie and nine of the ten remainder interests [3] entered into a contract for distribution of these subscription rights by the trustees to these nine remaindermen. This contract provided that, the said Trusteees shall receive and may retain five per cent of all such rights received from said Burroughs Adding Machine Company on account of any distribution made to the parties hereto as their compensation and commissions, the same as if final distribution or transfer of such part thereof had been made to the executor or legal representative of said Sophie Franz, in accordance with the terms of said trust conveyance or any other distribution which may be effected by agreement under said trust agreement or the supplemental agreement above referred to. Under this contract provision, the trustees took 600 of these subscription rights of the then value of $45,000. The Court sustained the exceptions to this item and surcharged the trustees therefor. The basis of this action by the Court was that the trustees were not entitled to a commission; that G. A. Buder (one of the trustees and a member of the law firm of Buder & Buder, then counsel for Sophie, for the trustees, and for these five remaindermen) had represented to these remaindermen that the trustees were entitled to a commission; that these remaindermen had executed the contract relying upon such statement. Appellants do not and cannot contend that they were, because of their position as trustees, entitled to a commission upon these rights. Fiske v. Buder, 8 Cir., 125 F.2d 841, 847; Buder v. Franz, 8 Cir., 27 F.2d 101, 113 and see Missouri Central Building and Loan Ass'n v. Eveler, 237 Mo. 679, 141 S.W. 877, 879, Ann.Cas.1913A, 486. They rely upon this contract as establishing their right and upon other defenses (res judicata, splitting cause of action, laches, and waiver) as barring present challenge. As to the contract, appellants contend: That Buder & Buder did not represent these exceptors at the time this contract was made; that the life tenant and her trustees were then at liberty to deal with the remaindermen at arm's length; that the remaindermen could and did enter into a valid contract; that the contract was valid even though made under an erroneous view of the law; and that the law as to the status of such rights was then uncertain. The testimony of Mr. Oscar Buder (a member of Buder & Buder) is clear that Buder & Buder considered themselves to be and acted as counsel for the remaindermen in matters concerning the trust estate and not requiring litigation. This relation was from the very beginning of the trust agreement in 1909 and continued after 1920 when this contract was executed. They regarded such services as covering advice of all sorts to all the beneficiaries in the estate and as coming within the annual retainer paid them under their employment in accordance with the provisions of the trust agreement. Also, the testimony supports the view that the remaindermen sought and received legal advice from them in matters affecting these estates. In addition to this relationship, Mr. G. A. Buder was one of the trustees. In this situation as to commissions on distribution of these stock rights, the interests of the trustees and of the remaindermen were clearly opposed. Also Buder & Buder could not act as counsel for both the trustees and the remaindermen without fully informing the remaindermen, at least, of this status of opposition. Fiske v. Buder, 8 Cir., 125 F.2d 841; Baker v. Humphrey, 101 U.S. 494, 499-502, 25 L.Ed. 1065; and compare Sluggett v. Phillips, Mo.App., 178 S.W.2d 458, 462; Moffett Bros. Partnership Estate v. Moffett, 345 Mo. 741, 137 S.W.2d 507, 511, and Hoffman v. Hogan, 345 Mo. 903, 137 S.W.2d 441, 446. It is not material here whether the life tenant and her trustees might have dealt at arm's length with the remaindermen nor that the remaindermen might have entered into a contract such as this. Nor is it material that the contract was entered into under an erroneous view of the law. Nor that the legal status of the rights was then uncertain. The crux is that Buder & Buder, as attorneys for all of these parties, did not inform the remaindermen of this opposition of interests and that there was this uncertainty in their rights so that they might have had opportunity to take a position to protect themselves. We need not impugn the motives of Buder & Buder in misleading all parties to believe a commission was legally due the trustees. It is enough to vitiate the contract that Buder & Buder, while acting as counsel for all, did not inform the remaindermen of this opposition of interests. Another aspect of this situation is that this action of the trustees in insisting upon this compensation was detrimental to the remaindermen. Whether the trustees, as to these remaindermen, were trustees or quasi-trustees (as standing in the place of the life tenant, being trustees of an estate created by her) their duty was to turn over this corpus unimpaired by any act of theirs Fiske v. Buder, 8 Cir., 125 F.2d 841, 847; Buder v. Franz, 8 Cir., 27 F.2d 101, 114; Warfield v. Bixby, 8 Cir., 51 F.2d 210, 213, 214; Collins v. Hartford Accident & Indemnity Co., 178 Va. 501, 17 S.E.2d 413, 137 A.L.R. 1054. This contract does not defeat the surcharge. The contentions of appellants as to res judicata and laches have been directly ruled against them by this Court in Fiske v. Buder, 125 F.2d 841, and (as to laches) see Bickel v. Argyle Inv. Co. 343 Mo. 456, 121 S.W.2d 803, 807. The waiver urged here is one implied from alleged knowledge and delayed action. A necessary element of waiver is the intentional relinquishment of a known right. Masden v. Travelers' Ins. Co., 8 Cir., 52 F.2d 75, 76, 79 A.L.R. 469; Liggett & Myers Tobacco Co. v. DeParcq, 8 Cir., 66 F.2d 678, 686. While waiver may be implied by acts or a course of conduct from which an intention to waive may reasonably be inferred (56 Am.Jur. p. 117, § 17 and citations in footnote 8), yet such intention is a question of fact, Masden v. Travelers' Ins. Co., supra, 52 F.2d page 76 with the burden of proof upon the party alleging waiver, Masden case, 52 F. 2d page 76, and doubtful situations will not support waiver, 56 Am.Jur. p. 118, § 17. Here, the basis of the claim of waiver is knowledge and delayed action. Under the evidence here, the ruling on laches, Fiske v. Buder, supra, even more strongly applies to implied waiver where intention to waive depends upon practically the same evidence as urged for laches. The contention as to splitting of causes of action is based on the situation that the five of the 6 2/3 remainder interests sought to vacate the settlement order of 1932 only in so far as a 5% commission was allowed upon the entire remaindermen interests  another item in the settlement than this stock rights transaction which had occurred years before. This effort to vacate resulted in litigation reaching this Court. Fiske v. Buder, 8 Cir., 125 F.2d 841. Few problems of practice have produced the multiplicity of cases as have that of splitting of actions. The doctrine is in the nature of a rule of repose with the double purposes of protecting both the courts and the litigants from the harassment of repetitious litigation. Examination of any good legal digest will reveal the various difficulties which have arisen in applying the rule. See 1 Am.Jur. pp. 480-502. Some guides have been recognized. One of these is that the rule does not apply where the two causes of action are separate, even though they might have been joined in a single action. Woodbury v. Porter, 8 Cir., 158 F.2d 194, 195; Chamberlain v. Missouri-Arkansas Coach Lines, 354 Mo. 461, 189 S.W.2d 538, 539, 161 A. L.R. 204. Also, One of the tests for determining whether the cause of action asserted in a suit is the same as that prosecuted in a prior suit is whether or not proof of the same facts will support both actions. Woodbury v. Porter, supra, 158 F.2d at page 195. It is true that the earlier proceeding and this proceeding each requires setting aside certain  though different  provisions of the order of 1932. However, the proof under each proceeding divides at that place and from there on is entirely different and has to do with items distinctly different in every essential. Accumulative consideration is here present in that this matter is concerned with the administration of a trust estate and, in proper cases, settlements of trustees' accounts may be reopened and restated. Fiske v. Buder, 8 Cir., 125 F.2d 841; 54 Am.Jur. p. 406, § 511; Seawell v. Greenway, 22 Tex. 691, 75 Am.Dec. 794. This is such a proper case. Fiske v. Buder, 8 Cir., 125 F.2d 841. Also, it has been held that the rule against splitting actions will be liberally applied to accomplish justice. United States v. Pan-American Petroleum Co., 9 Cir., 55 F.2d 753, 776; State ex rel. White Pine Sash Co. v. Superior Court, 145 Wash. 576, 261 P. 110. The surcharge of this item is sustained.