Moore v. Bowes

Some of the plaintiffs are stockholders of the Six-twenty Jones Corporation and as such are beneficiaries under a certain voting trust agreement. Two of the trustees under said agreement are also plaintiffs. By this action it was sought to remove the defendants, W. K. Bowes, E. L. Bowes and Arthur H. Garland, the remaining trustees under the agreement. The plaintiff beneficiaries expressly sued on behalf of themselves and all of the other numerous stockholders and beneficiaries under the agreement. The court

On the appeal the defendants contend that the court made no specific finding of unfitness or abuse of trust on their part and that their removal as trustees without such specific finding was reversible error, that all of the stockholders who were beneficiaries of the voting trust agreement should have been joined in the action and that the order overruling the defendants’ demurrer was error, that the court had no power to enjoin the defendants from naming their successors; that it was error to allow attorney fees to the plaintiffs, and that the defendants are entitled to.,an allowance for counsel fees for services rendered in the trial court and on the appeal.

From the findings the following facts appear: Of the 3,-285 outstanding and issued shares of the capital stock of the corporation, 3,272 shares were represented by voting trust certificates owned by numerous purchasers of the capital stock of the Six-twenty Jones Corporation. The voting trust agreement names W. K. Bowes, E. L. Bowes, E. C. Smith, Chas. Schaeffer and Arthur H. Garland as second parties and “Voting Trustees”.' In the exercise of their powers under the agreement the voting trustees elected themselves directors. Bowes Brothers & Company, consisting of the defendants Bowes, were employed by the directors as supervisors of the management of the hotel property of the corporation at a salary of $100 per month. On June 22, 1934, W. K. Bowes, without authority or the consent of any of the directors, withdrew $600 from the corporation funds, one-half of which he delivered to his brother, and this sum was used for their own purposes. In August, 1934, a check of Bowes Brothers & Company for that amount, payable to Six-twenty Jones Corporation, was delivered to the corporation with a written memorandum to hold for further instructions. The check was paid on September 5th following. On October 1, 1934, by vote of the three defendants the board of direc

It is undoubtedly true that the court based its conclusion that the defendants should be removed as trustees on the facts found with respect to the misappropriation of the sum of $600. The defendants justify the taking of the $600 by the statement, that they thought the board was going to raise their salary at its next meeting and when that action failed to materialize they returned the amount. The plaintiffs contend that the defendants may not now complain that the court did not include a specific finding of their unfitness as trustees. The plaintiffs have made a motion in this court for a diminution of the record to include therein an affidavit' of the court reporter, who was present but did not take stenographic notes, that during the proceedings and after the court’s decision was announced the defendants objected to the inclusion of the use of such language in the court’s findings on the ground that it would stigmatize the defendants and be an injury to them in their business. The plaintiffs seek to show that it was at the defendants’ special request that such a finding was omitted. We are of the opinion that it is unnecessary to grant the motion even if the inclusion of the affidavit be proper. The facts found by the court fully support its conclusion. Trustees are subject to removal whenever, as here, it appears that their private interests conflict with their trust duties, and when it also appears, as here, that trust property has been appropriated to their own use, whether or not they purported to act honestly under an assumption that they would become entitled to it and the money was returned when the contrary proved to be the fact. The purpose of removal is not the infliction of a penalty for past behavior, but is the preservation of the trust property. (Overell v. Overell, 78 Cal. App. 251 , 257 [ 248 Pac. 310 ]; Barbour v. Weld, 201 Mass. 513 , [ 87 N. E 909 ]; 3 Bogert on Trusts and Trustees, (1935 ed.) p. 1672.)

A sufficient answer to the second ground of appeal is that the beneficiaries not made parties plaintiff were represented pursuant to section 382 of the Code of Civil Procedure and by appropriate allegation in the complaint. That section provides that “when the question is one of a common or general interest, of many persons, or when the parties are

The court did not err in enjoining the removed trustees from exercising any of the powers as such including the exercise of the right conferred by the voting trust agreement of designating their own successors. The voting trust instrument was drawn by the trustees themselves. The record shows that the parties could not come to any agreement on the appointment of a successor under the exercise of the trustees’ power in that respect. The court could properly conclude that the continuation of their power was inconsistent with their removal and the purpose thereof, viz., the preservation of the trust corpus. The court under its equity jurisdiction could therefore restrain the exercise of an unlimited power by the trustees to appoint their own successors. (Yates v. Yates, 255 Ill. 66 [ 99 N. E. 360 , 362, Ann. Cas. 1913D, 143]; Griswold v. Sackett, 21 R. I. 206 [ 42 Atl. 868 ].)

Counsel for the appellants also in the trial court represented the defendant Garland, whom the court found had not violated any of his duties as trustee. They were awarded $2,000 for their services in the trial court as counsel for the defendant Garland. It is contended that they are also entitled to fees for defending the trustees who were removed, including an appropriate fee for their services per

An allowance to the plaintiffs for counsel fees to be paid out of the trust was proper. (Mitau v. Roddan, 149 Cal. 1 [ 84 Pac. 145 , 6 L. R. A. (N. S.) 275 ]; Trustees v. Greenough, 105 U. S. 527 [ 26 L. Ed. 1157 ].)

The .motion for diminution of the record is denied. The judgment is affirmed.

Edmonds, J., Langdon, J., Thompson, J., Waste, C. J., Curtis, J., and Seawell, J., concurred.

Rehearing denied.