Dailey v. Wight

McSherry, C. J., delivered the opinion of the Court. John H. Wight was, by the will of Edward Hyatt, appointed trustee to hold sixty-seven shares of the capital stock of the Sherwood Distilling Company. Fifty of those sixty-seven shares were to be held in trust for the widow of the testator and the remaining seventeen shares were to be held for Mrs. Vanneck, a daughter of the testator by a former marriage. Mr. Hyatt died early in November, eighteen hundred and ninety-four, and his will was duly admitted to probate by the Orphans’ Court of Baltimore City.

In June of the following year Mr. Wight filed a petition in the Circuit Court of Baltimore City and asked the Court to take jurisdicdiction over the trusts above alluded to and a certain other trust under the same will; but the latter does not concern this proceeding and no further mention of it will be made. The Court thereupon assumed jurisdiction over the trusts, and two months later an order was passed fixing the compen ²⁷¹ sation of the trustee at eight per cent on the income reported by him. On January the eleventh, eighteen hundred and ninety-nine, the widow of Mr. Hyatt, who had in the meantime married William F. Dailey, filed a petition in the Circuit Court in the trust proceedings case, and in that petition she set forth a variety of charges against the trustee and then prayed that Mr. Wight be either removed as trustee, or else that some other person be appointed co-trustee so far as concerned the fifty shares of Sherwood Distillery stock held for the benefit of the former Mrs. Hyatt. The petition further prayed that the order previously passed fixing the rate of the trustee’s commissions might be rescinded ; and it finally asked that the petitioner or somé reputable, fit and competent person representing her be allowed full and free access to the books of the Sherwood Distilling Company, and that John H. Wight and all other persons connected with the company be enjoined and strictly prohibited from in any wise interfering with or obstructing her or her said representative in the exercise of such right.

The petition was fully answered by the trustee ; and on the tenth of March, eighteen hundred and ninety-nine, the petitioners filed three motions which are substantially the same as the prayers of the petition, with the exception of the prayer asking for a rescission of the order fixing the rate of commissions. Subsequently another petition was filed which was also answered ; but it need not be farther adverted to as it does not affect the ultimate questions at issue. Finally considerable testimony was taken and the cause was heard before Judge Ritchie, who, on April the nineteenth, nineteen hundred and one, dismissed the petition of January the eleventh, .eighteen hundred and ninety-nine, and overruled the motions of March the tenth; and from that order the present appeal was taken. There are no disputed legal propositions involved in the case.

We have nothing to deal with but questions of fact. Whilst the argument on behalf of the appellants took a wide range it will not be necessary to follow it in detail, because the case can be satisfactorily disposed of without discussing ²⁷² each suggested or alleged wrongful act imputed to the trustee. A brief and condensed statement of the salient facts disclosed by the record will show the origin of the trust, the purpose and design of the testator in creating it; the peculiar relation of the trustee to the trust property and with the settlor during the latter’s lifetime; and when these circumstances have been set forth as they are, and not as they have been mistakenly assumed to be, there will be not the slightest difficulty in determining whether the learned Judge of the Circuit Court was right in passing the order from which the pending appeal was taken. If. the examination of a question of fact be approached with the preconceived conviction that fraudulent conduct is hidden somewhere behind it, it is altogether likely that an entirely false coloring will be involuntarily given to perfectly innocent transactions.

The assumption that fraud has been practiced, and the assumption of this in advance of an actual knowledge of the facts really existing, is often apt to mislead the judgment of the otherwise cautious investigator when he comes to the consideration, not of the supposed, but of the actual events and occurrences; and thus, frequently, “ trifles light as air” become “ confirmations strong as proofs of holy writ.” Now, what are the facts?” In January, eighteen hundred and eighty-two, the Sherwood Distilling Company was incorporated with a capital stock of thirty thousand dollars divided into three hundred shares. All of the stock was held by Hyatt, by John J. Wight, his brother-in-law, and by John H. Wight, the appellee—the latter owning sixteen shares. In eighteen hundred and eighty-eight John H. Wight bought at par eighty-four shares from his father John J. Wight and from his uncle, Edward Hyatt; and then each of the three owned one hundred shares. Subsequently Hyatt transferred to his dáughter Mrs. Vanneck thirty-three shares of his one hundred shares ; and John J. Wight transferred to his two sons, John H. and William jointly, seventy-five of his one hundred shares, and to William, individually, the remaining twenty-five shares ; but these trans ²⁷³ fers by John J. Wight were made under and in accordance with some arrangement between the father and the two sons which does not appear in the record.

At the time of Hyatt’s death the stock stood in the way just indicated. Hyatt was president of the company up to the time of his death, and John H. Wight was secretary and treasurer. Both served without salaries. From the year eighteen hundred and eighty-two to eighteen hundred and eighty-eight John H. Wight received a commission as salesman which, with the dividends on his sixteen shares of stock, amounted to some ten or eleven thousand dollars a year; but when he acquired the additional eighty-four shares of stock as above stated, his commissions ceased, and it was understood between him and Hyatt that as long as the latter lived the former was not to be entitled to any salary.

As very large sums of money were required to conduct the distilling business, it had grown to be a custom for Hyatt and the Wights to allow a considerable portion of the earned profits to remain in the concern. The proportions of those profits to which the stockholders were entitled were carried each year to their credit, and interest at the rate of six per cent per annum was allowed thereon. In that way there had accumulated to the credit of Hyatt at the time of his death some eighty odd thousand dollars, and there stood to the credit of John J. Wight nearly or quite one hundred thousand dollars. Occasionally some of the earned profits thus carried to the credit of the parties was withdrawn and upon the sums-withdrawn the shareholder making the withdrawal would be-charged six per cent interest.

The business was conducted up to the time of Hyatt’s death rather as a family partnership than as a corporation. A sudden withdrawal of the earned profits standing to the credit of Hyatt and the Wights would probably have caused a collapse of the whole business, inasmuch as there was no cash capital or surplus fund, other than those credits, to which the corporation could look for the means to meet its large demands for available money. This being the relation of the parties to each other and to the company, and this being the condition of the business, it was quite ²⁷⁴ natural and highly prudent that Hyatt, when he made his will, should, as far as his foresight would enable him, guard against the probable dangers and disasters that were likely to overtake the concern if his sixty-seven shares of stock were to go into .the possession of individuals hostile or unfriendly towards his former associates ; or if his eighty odd thousand dollars of earned credits were immediately taken out of the hands of the company. Obviously he had the utmost confidence in the integrity of his nephew, theappellee, upon whom he was aware the whole management of the affairs of the company would ultimately devolve; and he accordingly made the following provisions in his will, viz. “ Fifth.

I bequeath to my nephew,' John H. Wight, sixty-seven (67) shares of stock of the Sherwood Distilling Company standing in my name; In Trust, as ■to fifty shares thereof for the use and benefit of my wife, Charlotte Hyatt; and as to the remaining seventeen shares thereof for the úse and benefit of my daughter, Amy Vanneck ; said stock or any part thereof during the period of ten years from the date of my death may be sold only by the joint assent and transfer of said John H, Wight, trustee thereof and of said Charlotte Hyatt or Amy Vanneck respectively, as the case may be, and in no other manner. After the lapse of that time, my said wife and daughter, or their personal representatives shall be at liberty to dispose of their respective shares as they may desire. ********* Sixth. I bequeath the money due to me by the Sherwood Distilling Company to my wife, Charlotte, and my daughter, Amy Van-neck, equally to be divided between them share and share alike, but I will that the same shall be allowed to remain in the hands of said company at interest and not to be withdrawn from it without its consent for the period of ten years after my death—Provided always that if the said company shall meanwhile desire to pay off the whole or any part of its current indebtedness and equalize thereby the amounts due to its creditors, or reduce the same, then my wife and daughter shall be entitled to demand and receive their just pro rata proportion of the amount so paid off by said company.” ²⁷⁵ The trust created by the fifth clause was not an ordinary trust. The testator had two distinct ends in view.

He considered not only the interests of the cestui que trustent, but likewise the welfare of the company. And whilst the trustee was to hold the sixty-seven shares of stock for the purposes indicated, the equitable owners were not permitted to dispose of their interests for a period of ten years ; just as the legatees of the earned credits were not allowed, under the sixth clause, to draw out those credits until after the expiration of the same length of time. Both of these restrictions were imposed for the benefit of the company and due weight must be given to them in considering the accusations made against the trustee. After the death of Mr. Hyatt the management of the whole of the business devolved upon the appellee.

At that time he was the owner in his own right of one hundred shares of the company’s stock ; he and his brother, William Wight, held in their joint names seventy-five shares of their father’s stock; William held in his own name twenty-five shares ; Mrs. Van-neck held thirty-three shares and the appellee also held under Hyatt’s will, in trust, the remaining sixty-seven shares. Whilst the stock stood in this way the corporation voted to the appellee as president, a salary of ten thousand dollars a year, and to his brother William, as treasurer, a salary of five thousand dollars a year ; and it is alleged as one of the grounds for the removal of the appellee from his position as trustee, that he, by voting the sixty-seven shares which he held in trust together with the one hundred shares which he held in his own right—the two holdings aggregating one hundred and sixty-seven shares, or a majority of the three hundred shares—made use of his fiduciary relation to secure for himself a large salary at the expense of the cestui que trustent, though no reason existed for paying him a salary that did not exist with respect to the late Edward Hyatt, who never received or demanded any salary as president. The facts do not sustain the allegations. Seven-ninths of the company’s stock stood in the names of the appellee, his brother and his ²⁷⁶ cousin, Mrs. Vanneck, when the salaries were voted, and Mrs. Vanneck has filed a petition in the case