Court Opinion

ID: 9444207
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:45:53.430746+00
Date Added: 2024-06-11T17:29:46.060870
License: Public Domain

McLAUGHLIN, Circuit Judge
(dissenting).
There is little difficulty in resolving this case once the synthetic atmosphere of goodness betrayed is eliminated from it. And eliminated it should be not only because it is not even a false issue but because it has been .created solely from the conception of plaintiff giving no consideration for his stock units and defendant’s delay in his offer to purchase them which resulted in dividends to plaintiff during the interval.
Actually what happened was that in 1938 defendant bought all the stock of the then insolvent corporation involved for twenty cents a share, a total of $5,-000. A year later with the company’s position little if any improved he divided the stock into units, one for each share. Retaining the majority of these he distributed the balance under the trust agreement, as the court opinion states, among the company’s key employees. Eventually that shrewd employee incentive project literally paid big dividends. For the year 1948 the latter amounted to $36 a unit. It had been early in that year (February) that defendant tried to buy up plaintiff’s units under the fair price term of the trust at $10 a unit. When the attempt was made defendant was still in control of the company and active in its affairs. Plaintiff had been retired since 1944. It can be reasonably inferred that defendant knew more of the financial status of the corporation during that stage of its affairs than did plaintiff. It is the fact that the 1948 dividend was the highest paid by the company to that date. The same rate of $36 continued yearly thereafter through 1951, the latest year of which we have record. The year plaintiff retired there had been no dividend nor had there been any the year before. In 1945, the year after, again there was no dividend. In 1946 there was a $2 dividend and in 1947 a $15 dividend. From the bare figures the advisability of exercising the right to put any money into the purchase of plaintiff’s units for the first few years after his retirement might have been questionable to one possessing inside knowledge of the corporate picture but by 1948 that right was worth while, particularly if it could be exercised at some nominal amount.
After the $10 offer had been rejected defendant increased it to $30 under the self same fair price condition of the trust. That was also refused. The district judge assumed the $30 to be “substantially below the actual value” and this court now assumes that “[t]he valuation placed on the units by the defendant was less than their ‘true value’ ”. Though proof of the value of the units was deferred by stipulation of counsel pending the trial court’s decision whether the transfer price of the units should be redetermined by the court, there is evidence showing the value of the stock to have been $228 a share at the time the $30 per unit proposition was iriade. This suggests some faint idea of the value of plaintiff’s units.
The question as conceded by the majority opinion is whether appellee acted within the authority given him by the trust agreement of May 24, 1939 or as stated in the opinion, whether he went beyond that authority and devoted “[t]he trust to persons other than beneficiaries and to matters other than those which he himself has specified in his own trust deed * * *There is no dispute on the controlling trust law.
The solution of course turns on the language of the trust deed. In its paragraph 4 the beneficiaries are clearly designated. The pertinent part of this reads:
“The beneficiaries of this trust, subject to the conditions and provisions hereinafter set forth, shall be the holders named in certificates of interest, * * *
Succeeding paragraphs 5, 6, 7, 8, 9, 10, 12 and 13 expressly support this desig*839nation. Paragraph 12 makes a sharp distinction between a “beneficiary” and a “person eligible to be a beneficiary.” Paragraph 13 emphasizes that distinction saying: “A purchaser from the Trustee of an interest of a beneficiary of this trust, or portion thereof, shall become a beneficiary of this trust to the extent of the interest or portion thereof purchased by him, with all the rights and subject to all the limitations herein provided with respect to the original beneficiaries named herein.” There is nothing in the agreement in any way departing from or obscuring in the slightest degree the trust’s definitive statements of just who its beneficiaries are.
Admittedly defendant has devoted the trust to others than the beneficiaries, namely, to the corporation and employees not unit holders but who might become such. By such inclusion, varying as it does the unambiguous designation of beneficiaries in the agreement, defendant violated the trust. His consideration of the corporation and of prospective purchasers of plaintiff’s units in fixing a fair price for them was contrary to his agreed duty to plaintiff. It was to plaintiff’s serious damage as those improper factors according to the frankly disclosed theory of defendant himself depressed the value of the units to the point where their agreement fair price was the nominal one óf ten dollars. Defendant’s action in using those unjustified elements in his calculation is construed as entirely proper by the court opinion though it is directly opposed to the governing trust rule, above quoted, set out in that same opinion.
The majority finds excuse for what defendant did first, by reference to his answers to interrogatories in this suit and to a letter he wrote plaintiff in 1949. His later ideas expressed in those writings can hardly be accepted as radically changing a precise complete instrument executed back in 1939 on which plaintiff rightfully relied. The second clearance for defendant is said to follow from the various clauses of the agreement referring to the method of acquiring and disposing of the units, to the authority of the trustee to sell the trust corpus, to the continuance of the trust, to the non-liability of the trustee under certain conditions and to the discretion of the trustee as regards the time of sale of the units. Jointly or severally those items do not conflict with, they do not touch the agreement’s carefully designated beneficiaries, the holders of the units. They give no authority to the trustee to bring into the agreement as beneficiaries either the corporation or prospective beneficiaries whose interest of necessity is hostile to the actual beneficiaries.1
There was never anything the matter with the agreement. It was simply misused. If defendant had originally desired that the corporation and prospective purchasers of units be included as beneficiaries he had only to insert it in the trust deed, already so heavily weighted in his favor. And in fact he never needed it until the unexpected happened. This plaintiff, alone of the employees, dared to stand up for his rights under the agreement, meager as they were. When that did occur the defendant, ten years after the agreement had been drawn to his exact specifications, endeavored to interpret it contrary to its plain mandate.
Plaintiff, having contributed his full share towards developing the enterprise into a valuable property, asked the trustee to live up to his solemn inducing commitment. The latter not only refused but seeks to characterize the in*840sistence of plaintiff as some sort of mean effort to take advantage of his philanthropy. However, that is not what the record shows. Clear as clear we have before us an agreement extremely practical and mutually advantageous, performed by plaintiff and breached by defendant to plaintiff’s damage.
I think the judgment of the district court should be reversed and the cause remanded for the fixing of the fair price of the plaintiff’s units as called for by the trust deed and for any necessary accounting between the parties.

. One minor point especially stressed in the majority listing of the above agreement terms relates to the clause having to do with where a beneficiary leaves the corporation’s employ “[u]nder circumstances which, in the ojdnion of the Trustee, are inimical to the interests of the Corporation, * * That has no bearing whatsoever on the issue at bar. Plaintiff had retired four years previously. He had been recognized by defendant as qualified to receive a fair price for his units.