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tions of the testator; the other firm having gone out of business or been absorbed by these two interests. John H. Costello, the life beneficiary, was apparently permitted to withdraw money from the firm from time to time as he desired, and in excess of the income derived from the trust fund or from his own share.

In March, 1892, Patrick C. and Alfred Costello filed in the Surrogate's Court an account as executors. They had withdrawn funds from the firms to pay debts, expenses, and legacies; otherwise the interests remained intact in the copartnerships. A decree was entered on this accounting, determining the balance of the assets of the testator at the sum of $399,970.18, subject to deductions for commissions, expenses, etc. This property, consisting, not of money or securities of a precise determinate value, was fluctuating in its value, and the surrogate in the Thirty-Second finding stated the amount"will vary from the value of such interests stated in the thirty-first finding according as the sums realized from the different items of the assets of such firms, stated in the inventory herein, differ from the valuations thereof contained in such inventory."

And the surrogate in his decree permitted the trustees to keep the trust property in the copartnership business, as authorized by the will, and directed the executors to transfer the trust estate to the trustees, which was done. This transfer involved no change in the character of the assets. They still constituted an aliquot part of the firms' assets, subject to increase or decrease in value as the general firm property fluctuated in value. In fact, the legal title was held by the surviving partners, and it was to some extent a fiction in transferring the trust estate formally to the trustees; for after the payment of the debts and legacies title passed to them ipso facto, only subject to the control of the surviving partners for the purpose of closing out the business. The executors were copartners, so that they continued the booking along without change, recognizing in the withdrawal of assets or income that the interests of the testator now belonged one half to Alfred Costello and the other half to the trustees who were expected to pay the income to John H. Costello during his life.

In 1892 and 1893 there was much industrial expansion and the centralizing of companies into trusts or combinations. In the early part of 1893 an agreement was entered into by many constituent leather companies with a view to organizing into a trust, which soon culminated into a syndicate comprising more than 75 per cent. of the sole leather tanneries in the United States, and known as the United States Leather Company. The two Costello firms executed this agreement January 25, 1893, and they were among the early projectors of the enterprise. Patrick C. Costello, a veteran in the leather business, investigated carefully the plan devised, and believed in its efficiency, and John H. Costello, after investigation, was satisfied of the propriety of entering into this combination. Within three months the organization was completed, and Patrick C. Costello was on the directorate and a member of the executive committee, the real managing board of the corporation. He, therefore, was familiar with its affairs, had an insight into its business, and believed in its financial standing.

By the agreement of January 25th two Costello firms agreed to assign to the corporation, when formed, all the property and estate, including the good will of the firms, excepting the mineral rights of Alfred Costello & Co. and the merchandise in stock in the store. In this agreement no distinction was recognized between the trust estate and that held by the other copartners. The entire interest wa's expected to pass to the syndicate, if formed. It is clear the trustees at that time had no expectation of selling the property to John H. Costello, or of treating it any differently than the other property held by the copartners. The required signatures to the agreement of consolidation were obtained February 25, 1893, and the corporation created out of these component companies, managed by sagacious men of business, in May elected its directors. The United States Leather Company was a New Jersey corporation, and a statute in the state of Pennsylvania prohibited a foreign corporation owing real property in that state in excess of $10,000,000, which was less than the value of that expected to be owned by it. The Penn Tanning Company was organized to take the title, a mere subsidiary holding company, and stock was issued by it in an amount equal to that issued by the real organization, and each holder of the Penn Company stock exchanged it, dollar for dollar, face value, for the stock of the Leather Company. Some point seems to be made that the agreement of January 25, 1893, was not carried out, because of this intermediary body, created to meet an emergency-not to prevent performance of the original agreement, but to facilitate the execution to the letter of the plan devised by the founders of the enterprise.

On April 25th the three Costellos, designating themselves as copartners in the two companies, entered into an agreement with the Penn Tanning Company, in order that the combination scheme might be carried into operation. A definite plan had been adopted to ascertain the value of the property of each of the companies forming the trust. For instance, tanneries were to be rated at their vat or tanning capacity, and bark lands by the cord. Preferred stock at 8 per cent. was to be issued for two-thirds of the ascertained value of the property when made over to the corporation, and a like amount of common stock for the good will of the company making the transfer. Tlie value of the property of the Alfred Costello firin was appraised at $2,795,252.75, and by subsequent correction it was ascertained to be $2,476,600, and of the firm of Patrick C. Costello & Co. $673,800; and upon the transfers being made 24,766 shares of preferred stock of the corporation were issued and delivered, representing the first company, and 6,378 shares of like stock, all of the par value of $100 a share, for the second company, and the same number of shares of common stock were issued.

Instead of carrying out the agreement of January 25th, as was intended, and permitting the trust estate to be the recipient of its allotment of these shares, a sale was made of all the interest of the trustees in the firm properties to John H. Costello for its value as found subsequently in the decree of the Surrogate's Court in 1897, to wit, $174,708.26, and which was approximately the value according to the de

cree of 1892. His promissory note was taken for that sum, secured by the shares of stock of the United States Leather Company representing his own interest and that for the trust stock as they were issued from time to time. The reason for this shift is that the attorneys, for the Costellos, and they were acting in like capacity for the trustees as well, advised the adoption of this plan. The investment of trust funds in shares of stock of a new corporation like the United States Leather Company is not to be advised or commended, and yet the real motive for the advice given seems to be that the trustees would be“personally liable to John's children for the value of the trust interest sold, for all profits realized from these stocks, and for all losses which result from them."

Let us see if the course pursued avoided the objections to the investment directly in the United States Leather Company stock. The property of John H. Costello was invested in the two Costello companies, and he was a debtor to them by reason of excessive withdrawal of assets. The value of his promissory notes, therefore, depended upon the value of the stock of the United States Leather Company. If that organization proved to be a success, the note would be paid; otherwise, not. In other words, if a profitable venture, John H. reaped the benefit; if a failure, his children might suffer the loss. The sale of this large trust estate to John H. Costello, one of the copartners, secured by these shares of stock, was no more to be justified than the sale of the property to the United States Leather Company. If the note was not paid, the trustees would still be personally responsible to the ultimate owners of the trust estate.

It is obvious that the Costellos had the utmost faith in the new enterprise, and their judgment was fully justified. At the time of the judicial settlement in 1897 John H. had paid on the note $125,675. The record does not disclose what the copartners or John H. received for the stock which they sold. The court found:

"I find that at no time during any of the proceedings before the surrogate was any evidence produced informing him of the amount for which the property of the various firms was inventoried and sold to the United States Leather Company, nor informing him as to the amount of stock of said company which the various partners received, nor of sales of said stock made by the partners, nor of the actual proceeds received."

There is a schedule of sales in evidence (Exhibit Book, page 219 et seq.) of both the preferred and common stock from June, 1894, to 1908. The preferred was sold on the first date at $64.50 a share, and the common at $9. The sales of the former tended upward generally, until in 1908 they reached $120 per share. There was more or less fluctuation in price, and during a brief depression in business they sold at $41.50 a share, but only for a short time. The common stock varied from $6 to $20 a share. It is clear that John H. Costello received for the trust property, which was sold to him, far in excess of the amount he paid for the same.

There is no controversy over the material facts in this action, and we may assume to be true every important fact which the respondents

urge to uphold the judgment. It is claimed that the value of the property, as stated in the inventory and in the decree of 1892, was correctly given. We will so assume. Assets not in money are always liable to change in actual value. The trustees are not held liable for any diminution in value which may ensue and not attributable to their remissness. On the other hand, whatever they receive from the property intrusted to them must be accounted for. This property was interlinked with that owned by the copartners. It was very important for them to sell their interests. Patrick C. testified that the leather business was depressed, and that he appreciated the wisdom of the combination which was made. They could not become members of the new organization unless all the property of the two firms was transferred to it. They agreed to do that at the outset. In order, as they apprehended, to relieve themselves from personal responsibility to the children of John and still accomplish the plan so important to them, the makeshift was advised. Trustees cannot juggle with trust property in that way. Their own personal interests and those in the fiduciary relation may have come in collision. The latter could not be put aside merely because in dollars and cents they were of less value. The fairness of the inventory is not impeached. The vice in the conduct was not in making the inventory or fixing the value on paper in their first account filed. The misconduct is found in their manipulation and exchange of the trust property, so that they were the gainers in effectuating their scheme of organization and enabling John, the other executor and copartner, to reap large financial returns. and all at the expense of the minor children, whose interests they were bound to safeguard.

The respondents lose sight of the controlling fact that, whatever was the value of these tangible assets at the time of the inventory and when transferred to John, they belonged eventually to these three children. An unexpected situation arose, which imparted added worth to all this Costello property. These copartners immediately became active. The enterprise may have been speculative. It is of no importance, for the trust property was sold to the company in fulfillment of the plan for which the trustees were sponsors, and they ought to account for exactly what was realized from the sales of the shares of stock representing the trust estate.

I do not deem it important to consider the question of book values or of the swollen estimates of the property to be taken over by the United States Leather Company. However, on the latter subject, in 1895 Patrick C. Costello, as a member of the executive committee of the new organization, and after he had ample opportunity to investigate its business condition, joined with the other members of the committee in a circular to the stockholders which contained this statement:

"The company paid one dollar of its preferred stock at par for each one dollar in value acquired of real and personal property connected with the tanneries and at a valuation mutually agreed upon as fairly representing its cash worth. The basis upon which the various kinds of property were acquired, to wit, leather, hides, raw and in process, bark, bark lands, tanneries, sawmills, railroads, etc., is on record at the New York Stock Exchange, and was furnished at the time of listing the company's bonds."

It is also to be noted that, simultaneously with the accomplishment of the syndicate plan, the agreement to sell the trust estate to John was entered into. The highest good faith is required of persons acting as trustees. Certain management of an estate committed to them in one instance may clearly denote integrity of purpose, and in another may not measure up to that standard. If the estate has been managed to aid the trustees in an undertaking in which they are personally interested, their conduct will be subjected to rigid scrutiny. In this case I think the facts show that these trustees, in their anxiety to accomplish the sale of all the Costello properties, overlooked their obligation to these infants.

In 1897 the trustees had a judicial settlement of their account in the Surrogate's Court of Oneida county, and a decree was entered adjusting their account and confirming the sale of the property to John and determining the amount of the trust estate at the selling price to him. It is claimed: (1) That this decree is a bar to the maintenance of this action; and (2) that the only remedy available to these beneficiaries, who are now of age, is to open that decree.

At the time the account was rendered the trustees knew the effect of the consolidation of the constituent companies in the United States Leather Company. It had proved to be a success, and its stock was appreciating in value. Patrick C. and Alfred Costello were sworn on the hearing, and in substance testified that the trust estate was inventoried at its fair value, and that the sum of “$174,700.22 was a full and fair value, under all the circumstances, for the trust property which was transferred.” On the basis of the inventory and former accounting, the trustees had converted the assets into cash for all they were worth. These two trustees carefully abstained from giving the details of the transaction which terminated in the organization of the United States Leather Company and the Penn Tanning Company, and the facts connected with the transfer of all the Costello property, and there was no disclosure of the amount John H. Costello received for the shares of stock delivered to him. Had these facts been presented, the special guardian would, unless recreant to his duty, have investigated and ascertained the real purpose of the sale to John H., and the surrogate would not have approved of the action of these trustees. Objections were filed to the account as to three small items, aggregating $198.88, and “generally to all items diminishing the trust estate, but raised no issue as to the right of the trustees to limit the credit to the trust estate to $174,708.26.” (See finding VI). The special guardian made no examination of the witnesses produced, and filed a written report containing this statement:

"As evidence was produced before the court concerning the amount and condition of the trust funds in which said infants are interested, also evi. dence as to the reasons why the executors and trustees should resign their trusts, I do not deem it my duty to report thereon."

The care and extraordinary caution to a finical degree, which have hedged about the transactions connected with the management, apparently affected the special guardian. The decree was entered ratify

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