Argued March 14, 1955.
[141 N.Y.S.2d 440] Hellings, Ulsh, Morey & Stewart, Buffalo (Dana B. Hellings, Buffalo, of counsel), for petitioner-respondent.
Brown, Kelly, Turner & Symons, Buffalo (Franklin R. Brown and Mark Turner, Buffalo, of counsel; and George E. Brand, George E. Brand, Jr., Detroit, Mich., of counsel), for objector-appellant.
Theodore G. Kenefick, Buffalo, for Mary E. Griffith (Davis) and Sarah Louise Griffith (Bowden).
Before McCURN, P. J., and VAUGHAN, KIMBALL, WHEELER, and VAN DUSER, JJ.
VAN DUSER, Justice.
The will of the late Hoyt R. Shehan created two trusts, of which his uncle, one Roberts, was life income beneficiary. Roberts' administrator c.t.a. has filed objections to the account of the surviving trustee, and now appeals from an order of Surrogate's Court providing for the examination of the trustee. The question on this appeal concerns the permissible scope of the examination.
Shehan's will, correctly interpreted, placed his residuary estate in the following two trusts: (1) The income from one quarter was to be paid to Roberts for life, remainder to testator's wife if she survived Roberts (which she did not), otherwise the income should be paid to testator's sister-in-law for life, with remainder to her daughter. (2) The income [141 N.Y.S.2d 441] from three-quarters of the residuary estate was to be paid to the wife for the life of Roberts, remainder to the wife if she survived Roberts (and she did not), otherwise the income should be paid to Roberts for life, with one-fourth of the remainder to testator's cousin. The remaining three-fourths of the second trust fund was not specifically disposed of, but paragraph 4 of the will provided: 'The balance of my estate, not otherwise disposed of, I give to my friend, Welles V. Moot'. Mr. Moot and the wife were named executors and trustees. They were discharged as executors by a decree dated August 11, 1944. The wife died on February 28, 1947, and Mr. Moot has continued as surviving trustee. Upon her death, he acquired a vested interest in nine-sixteenths of the residuary estate (three-fourths of the second trust), and his petition for an accounting prays for (1) a decree judicially settling and allowing his accounts for the period from June 16, 1947, to July 5, 1950, and (2) a distribution of the principal of the second trust.
In his lifetime Hoyt R. Shehan was the owner of 19,656 of the outstanding 45,463 shares of common stock of Wildroot Co., Inc., a domestic corporation. Mr. Moot and his wife owned 1,000 shares. Mr. Moot appears in this case in several capacities. He is, and at all times relevant has been, a director and officer (secretary) of Wildroot Co., Inc., and of its subsidiaries. He is also attorney for those corporations. He is executor, trustee, and remainderman under the Shehan will. His law firm drew the wills of Hoyt and Mrs. Shehan, and is counsel to their executors and trustees. Mr. Moot himself was also a voting trustee of certain voting trusts holding control of Wildroot Co., Inc. He says that he approved of the Wildroot management 'and wished to stabilize it and make it constant'. A voting
trust was accordingly formed, embracing a majority of the voting shares of Wildroot, with Mr. Moot and the Shehans among the five voting trustees. That agreement was made in 1933. It included the Shehan stock. Mr. Shehan died in 1942. A second voting trust agreement was entered into shortly after his death. It included the same stock, and Mr. Moot and Mrs. Shehan transferred the 19,656 shares from the estate to five voting trustees, including Mr. Moot, his law partner, and Mrs. Shehan, who, it is claimed, has been largely dominated by Mr. Moot. The stock deposited under the voting trust was transferred on the corporate books into the names of the voting trustees. According to the objections, the agreement provided that the vote of a majority of the voting trustees present at any meeting should control, that the trustees were expected to (and did) vote for themselves as directors of Wildroot, and that the sole right remaining to the certificate holders (including Mr. Moot and Mrs. Shehan, as executors and trustees) was to receive the dividends after deduction of the expenses of the voting trust.
Enough has been stated to indicate the important position held by Mr. Moot in the affairs of Wildroot, and the variety of interests which he [141 N.Y.S.2d 442] has undertaken to represent. One objection to the settlement of his accounts as surviving trustee concerns the charge, by the life tenant's administrator c.t.a., that Mr. Moot placed himself in inconsistent fiduciary positions. It is asserted he surrendered the estate stock to the voting trust; as voting trustee, he voted for his own election as director of Wildroot; and in the latter capacity he 'voted, aided and assisted in withholding the declaration of dividends by said company, and thereby enabled said corporation to accumulate from time to time a large and unnecessary surplus which should have been distributed to the stockholders'; as directors Mr. Moot and Mrs. Shehan 'continued a policy of limited declaration of dividends and transfer of large portions of corporate earnings to surplus and the use thereof for permanent capital purposes, thereby greatly reducing the income to said Roberts, to the advantage and enrichment of said Mr. Moot as beneficiary of the remainder interest in said stock ...