Opinion
April 20, 1939.
1. TAXATION: Inheritance Tax: Oral Testimony. The burden of proving that certain property was subject to the inheritance tax was upon the State.
The trial court in a proceeding affecting an inheritance tax was privileged to believe or reject oral testimony though uncontradicted and unimpeached.
In such case a jury being waived the weight of the oral testimony and the finding thereon is peculiarly the province of the trial court.
2. TAXATION: Inheritance Tax: Remaindermen. Where a life tenant placed certain stocks in trust to be held during her lifetime, under an agreement which was upheld in a judgment by the circuit court, the remaindermen and all persons interested being parties, the Supreme Court in a later case affecting the property could not pass upon a transaction between the life tenant and the remaindermen prior to the agreement so upheld.
3. GIFTS: Causa Mortis: Delivery: Consideration. A delivery to the donee or to someone for him during the lifetime of the donor is necessary to the validity of a gift causa mortis as well as a gift inter vivos.
In a gift of stock by the remaindermen to the life tenant delivery was not necessary to its validity because the life tenant was entitled to possession.
But such gift must be established by clear and convincing testimony especially where such gift is not asserted until after the death of the alleged donor.
Gifts thus preferred after the death of the alleged donor are regarded with suspicion by the court.
If there was a consideration for the alleged transfer of stock from the remaindermen to the life tenant no delivery would be necessary nor any particular formality.
4. GIFTS DELIVERED BY REMAINDERMEN. Where a life tenant placed certain stock in trust whereby certain incomes should be paid to the remaindermen and where, by a supplemental agreement, the yearly payments to the remaindermen were increased, but to be made only out of the income and earnings of the estate, such supplemental agreement was a gift from the life tenant to the remaindermen of income due her.
The life tenant had a right to give her property to her children and grandchild without affecting their rights to the remainder as remaindermen.
5. LIFE TENANT: Remaindermen. Where a life tenant executed an indemnity agreement with the trustees appointed by her by which she authorized the trusteees to lend each heir a certain sum of money, the transaction could not be considered as a transfer of any interests the remaindermen had in the estate to the life tenant.
The rights of the remaindermen constituted a part of the corpus of the estate and the only interest the life tenant had was the income from the stock purchased under such rights.
6. LIFE TENANT: Remaindermen. In an inheritance tax proceeding where the remaindermen alleged that the three and one-third interests in the estate seeking relief had no interest, remainder or otherwise, because of certain advancements, and the remaindermen alleged in their answer that the three and one-third interests claimants did not have any interest in the estate, it did not have the effect of conveying the interests of the remaindermen to the life tenant.
7. LIFE TENANT: Remaindermen: Estoppel. To constitute estoppel in pais, three things must occur: First, an admission, statement, or an act inconsistent with the claim afterwards asserted; second, action by the other party on the faith of such admission, statement or act; and, third, injury to such other party, resulting from allowing the first party to contradict or repudiate such admission, statement or act.
In a proceeding affecting an inheritance tax on stock held by the life tenant the remaindermen were not estopped to assert their interests as such.
The doctrine of election of remedies can only properly be invoked where an election has been made as between inconsistent remedies. After it has been made, the party invoking election as a defense need not show he will suffer disadvantage if his adversary is not required to stand by his election.
8. LIFE TENANT: Remaindermen: Estoppel. Where a life tenant placed certain securities in trust for the benefit of herself and the remaindermen, the latter were not estopped to claim an interest in such securities because of an agreement of the life tenant that the stock distributed under a right to take it might be treated as partial distribution of her estate.
9. LIFE TENANT: Disqualified Witness: Waiver. In a proceeding affecting an inheritance tax where certain witnesses were claimed to be disqualified by the death of the testatrix, life tenant, the State waived their disqualifications by having first introduced them in another case.
Other witnesses who did not testify as to transactions with the testatrix, the life tenant, but only to their representation by a law firm and the extent of that firm's authority, were competent.
Appeal from Circuit Court of City of St. Louis. — Hon. James M. Douglas, Judge.
AFFIRMED.
Roy McKittrick, Attorney General, and Edward H. Miller, Assistant Attorney General, for appellant.
(1) A defense of res adjudicata cannot be successfully urged by respondents. State ex rel. Bixby v. St. Louis, 241 Mo. 231, 145 S.W. 801; State ex rel. Lashly v. Becker, 290 Mo. 560, 235 S.W. 1017; Carr v. United States, 98 U.S. 433; United States v. Lee, 106 U.S. 222; Tindal v. Wesley, 167 U.S. 223; McClellan v. Carland, 217 U.S. 282. (2) The six and two-thirds remainder interests have been in fact released and extinguished. Byrne v. France, 131 Mo. 647, 33 S.W. 178; R.S. 1929, sec. 2957; Hamilton v. Armstrong, 120 Mo. 624, 25 S.W. 545; Tiffany on Real Property (2 Ed.), p. 1625; Gosney v. Costigan, 326 Mo. 1229, 33 S.W.2d 947; Roethemeier v. Veith, 334 Mo. 1030, 69 S.W.2d 930; 28 C.J. 638, 640; Graham v. Plotner, 151 N.E. 735; Burt v. Second Natl. Bank, 241 Mich. 216, 217 N.W. 71; Grissom v. Sternberger, 10 F.2d 764; Roe v. Roe, 124 So. 734; In re Brady's Estate, 239 N.Y.S. 5, 228 A.D. 56; McCredie v. McCredie, 134 Or. 517, 294 P. 361; Warner v. Keiser, 177 N.E. 369; In re Trapp's Estate, 269 Ill. App. 269; Carter v. Carter, Mosely, 365, 25 Eng. Reprints 442; Allen v. Papworth, 1 Ves. 163, 27 Eng. Reprints 958; Irwin v. Farrar, 19 Ves. Jr. 86, 34 Eng. Reprints 450; Fortescue v. Gregor, 5 Ves. Jr. 553, 31 Eng. Reprints 734; Burke v. Lambert, 15 Wkly. Rep. 913; Weston v. Second Orthodox Cong. Soc., 79 N.H. 245, 110 A. 137; Dighton v. Tomlinson, 1 Comyns, 194, 92 Eng. Reprints 1030, 10 Mod. 31, 88 Eng. Reprints 612, 1 P. Wms. 149, 24 Eng. Reprints 335, 1 Salk. 239, 91 Eng. Reprints 212; Bruton, 39 Yale Law Journal 854; Mechem, 21 Ill. Law Review 568; 20 Cyc. 1197; 34 Harvard Law Review 664; 28 C.J. 642, 649; Castleman v. Smith, 155 La. 367, 99 So. 293; Tiffany on Real Property (2 Ed.), pp. 1568-70, 1588, 1618; Pray v. Pierce, 7 Mass. 381; Havens v. Sea Shore Land Co., 47 N.J. Eq. 365, 20 A. 497; Lynch v. Livingston, 6 N.Y. 422; Linville v. Greer, 165 Mo. 380, 65 S.W. 579; Grooms v. Morrison, 249 Mo. 544, 155 S.W. 430; R.S. 1929, sec. 1723; Burt v. Second Natl. Bank, 241 Mich. 216, 217 N.W. 71; Roethemeier v. Veith, 334 Mo. 1030, 69 S.W.2d 930; Burke v. Lambert, 15 Wkly. Rep. 913; Dighton v. Tomlinson, 1 Comyns, 194, 92 Eng. Reprints 1030, 10 Mod. 31, 88 Eng. Reprints 612, 1 P. Wms. 149, 24 Eng. Reprints 335, 1 Salk. 239, 91 Eng. Reprints 212; Weston v. Second Orthodox Cong. Soc., 79 N.H. 245, 110 A. 137; Jones on Evidence (Horwitz' Ed., 1913), secs. 24, 25-A; Jones on Evidence (Horwitz' Ed., 1913), sec. 25; Dowzelot v. Rawlings, 58 Mo. 75; Carter v. Carter, Mosely 365, 25 Eng. Reprints 442; Allen v. Papworth, 1 Ves. 163, 27 Eng. Reprints 958; Irwin v. Farrar, 19 Ves. Jr. 86, 34 Eng. Reprints 450; Fortescue v. Gregor, 5 Ves. Jr. 553, 31 Eng. Reprints 734; Smith Drug Co. v. Saunders, 70 Mo. App. 227; Laclede Const. Co. v. Moss Tie Co., 185 Mo. 25, 84 S.W. 76; Nelson v. Nelson, 90 Mo. 460, 2 S.W. 413; Williston on Contracts, sec. 623; Gunn v. Thruston, 130 Mo. 339, 32 S.W. 654; Armstrong v. Farrar, 8 Mo. 451; Restatement of the Law of Agency, secs. 82, 97, 290; Mechem on Agency (2 Ed.), secs. 348, 434, 446, 451; Clark v. Clark, 59 Mo. App. 532; Alexander v. Wade, 106 Mo. App. 141, 80 S.W. 19; Shinn v. Guyton Herrington Mule Co., 109 Mo. App. 557, 83 S.W. 1015; Beagles v. Robertson, 135 Mo. App. 306, 115 S.W. 1042; Edgar v. Breck Corp., 172 Mass. 581, 53 N.E. 1083; Tingley v. Bellingham Bay Boom Co., 5 Wn. 644; Daugherty v. Burgess Son, 118 Mo. App. 569, 94 S.W. 594; Kirkpatrick v. Pease, 202 Mo. 471, 101 S.W. 651; Mercantile Trust Co. v. Niggeman, 119 Mo. App. 56, 96 S.W. 293; Soames v. Spencer, 1 Dowl. Ry. 32; 5 Harvard Law Review 1; Wolff v. Horncastle, 1 Bos Pul. 316, 126 Eng. Rep. 924; Spittle v. Lavender, 2 Brod. B. 452, 129 Eng. Rep. 1041; Jones on Evidence (Horwitz' Ed.), sec. 76; R.S. 1929, sec. 94. (3) Respondents cannot be heard to deny that they have released their remainder interests. O'Reilly v. Nicholson, 45 Mo. 160; Pemberton v. Pemberton, 29 Mo. 408; Wood v. Conqueror Trust Co., 265 Mo. 511, 178 S.W. 201; Stevens Mfg. Co. v. United States, 8 F. Supp. 720; Tide Water Oil Co., 29 B.T.A. 1208; Moran v. Commissioner, 67 F.2d 601; Paul Mertens, Law of Federal Income Taxation, 53.05, 53.12; Mechem on Agency (2 Ed.), sec. 454; Stearns v. United States, 291 U.S. 54; Mahoning Inv. Co., v. United States, 3 F. Supp. 622; Ramsey v. Comm. of Internal Revenue, 66 F.2d 316; Cousins v. Bowling, 100 Mo. App. 459, 74 S.W. 168; Provines v. Wilder, 87 Mo. App. 162; Otrich v. Railroad, 154 Mo. App. 420, 134 S.W. 665; Bushnell v. Farmers' Mut. Ins. Co., 91 Mo. App. 523; Barber v. Stroub, 111 Mo. App. 57, 85 S.W. 915; Summet v. City Realty Co., 208 Mo. 501, 106 S.W. 614; Walser v. Wear, 141 Mo. 443, 42 S.W. 428; Dorrance v. Thayer-Martin, 115 N.J. Eq. 268, 170 A. 601, affirmed. 116 N.J.L. 362, 184 A. 743 certiorari denied 298 U.S. 678; "Fortune" Magazine, November, 1935; Potter v. Adams, 24 Mo. 159; Donnan v. Intelligencer Prtg. Pub. Co., 70 Mo. 168; Lilly v. Menke, 143 Mo. 137, 44 S.W. 730; R.S. 1929, secs. 764, 776; Equity Rule 25, 28, U.S.C.A., p. 16; Overton v. White, 117 Mo. App. 576, 93 S.W. 363. (4) Certain evidence of respondents was incompetent. R.S. 1929, sec. 1723; Patton v. Fox, 169 Mo. 97, 69 S.W. 287; Fisher v. Fisher, 203 Mo. App. 45, 217 S.W. 845; Smith v. Smith, 201 Mo. 533, 100 S.W. 579; Sanford v. Van Pelt, 314 Mo. 175, 282 S.W. 1022; Leeper v. Taylor, 111 Mo. 312, 19 S.W. 955; Davis v. Robb, 10 S.W.2d 680.
E.J. Doerner and Jesse T. Friday for Johanna F. Fiske, Amanda F. Wheeler, Henrietta A. Holdoway, Adelaide F. Zimmermann and Otto B. Franz.
(1) The full faith and credit clause of the Constitution of the United States (as well as an Act of Congress and a Statute of Missouri) requires that full "faith and credit" be given here to the "judicial proceedings" in the Federal forum. Fiske v. State of Mo., 62 F.2d 150; Fiske v. State of Mo., 69 F.2d 683; U.S. Const., Art. IV, sec. 1; R.S.U.S., sec. 905; Davis v. Davis, 83 L.Ed. 56; In re Estate of Thompson v. Coyle Co., 339 Mo. 423; R.S. 1929, sec. 1700; Clark v. Sec. Ben. Assn., 121 S.W.2d 148; Sovereign Camp v. Bolin, 83 L.Ed. 58. (2) The decree of the United States District Court of May 5, 1927, is itself also res adjudicata of the question as to the ownership of the Burroughs Adding Machine Company stock. Buder v. Franz, 27 F.2d 101; State ex rel. v. Fid. Deposit Co., 317 Mo. 1078; Stoll v. Gottlieb, 83 L.Ed. 116; In re Guardianship of McMenamy, 307 Mo. 98; State ex rel. v. Mining Co., 262 Mo. 490; Fiske v. State of Mo., 62 F.2d 150; Fiske et al. v. State of Mo., 69 F.2d 683; Chouteau v. Gibson, 76 Mo. 38; In re Cherokee Pub. Serv. Co., 94 F.2d 536; Deppe v. General Motors Corp., 98 F.2d 813; Miss. Valley Trust Co. v. Begley, 310 Mo. 287. (3) The appellant State is undertaking, collaterally, to attack the adjudication of stock ownership in the Federal forum. The Missouri, as well as the Federal, cases are to the effect that no such attack can be allowed for any irregularity in the form, entry or record (and, at the most, that is all that can be contended for the appellant State) but only for want of jurisdiction of parties or of the subject matter apparent on the face of the record. Cooper v. Reynolds, 77 U.S. 315; Winston v. Affalter, 49 Mo. 267; Schneiderheinze v. Berg, 269 Mo. 263; Jefferson City Bridge Tr. Co. v. Blaser, 318 Mo. 377. (4) If it be assumed that the appellant State introduced any substantial evidence below (in support of its contention as to the ownership of the stock) it remains that there was much evidence to the contrary — stipulated facts, records and the testimony of divers witnesses who were heard orally and through deposition; and this being admittedly a case at law with jury waived the long established practice here is that that evidence will not now be weighed in this court, in a re-determination of who owns the stock, as now prayed by the appellant's Assignment of Error No. 14. Bachman v. Railroad Co., 310 Mo. 48; State ex rel. v. Trimble, 327 Mo. 773; Clark v. Commerce Trust Co., 62 S.W.2d 874.
Buder Buder for Sherman H. Kleinschmidt, Helen Kleinschmidt and G.A. Franz.
(1) The title of the respondents to their respective remainder interests in the estate of Ehrhardt D. Franz, deceased, was adjudicated years ago in the Federal Courts and the question cannot be reopened by the appellant. Buder v. Franz, 27 F.2d 101; Fiske v. State of Mo., 62 F.2d 153; Fiske v. State of Mo., 69 F.2d 684; Wallace v. Fiske, 80 F.2d 908. The Franz estate litigation in the Federal Courts in which the title of the respondents was adjudicated was an action in rem and is, therefore, conclusively binding upon the appellant even though it was not a party to that proceeding at the time the decree was entered. Franz v. Buder, 11 F.2d 859; State ex rel. Gott v. Fid. Deposit Co., 298 S.W. 88; State ex rel. Hudson v. Trammel, 106 Mo. 520; Tilt v. Kelsey, 207 U.S. 56; Hilton v. Guyot, 159 U.S. 167; Pitman v. Commr. of Internal Rev., 64 F.2d 741. (2) Under the Constitution of the United States and statutory provisions passed in keeping therewith, the courts of the State of Missouri will accord full faith and credit to, and will, therefore, abide by the decree of the Federal Court in the Franz estate litigation adjudicating the title of respondents to their remainder interests in the estate of Ehrhardt D. Franz, deceased, and the inclusion in said interests of the shares of stock mentioned and involved in this proceeding. U.S. Const., Art. IV, Sec. 1; 28 U.S.C.A., Sec. 687, R.S. 1905; Thompson v. Coyle Co., 339 Mo. 423, 97 S.W.2d 93; Stoll v. Gottlieb, 59 Sup. Ct. 136; Davis v. Davis, 59 Sup. Ct. 6; Sec. 1700, R.S. 1929; State ex rel. Wilson v. Rainey, 74 Mo. 233. (3) In order to constitute an executed gift, a transaction must be established by clear and convincing testimony and the burden of proof is upon the party seeking to establish the gift. Hunter v. Wabash Ry. Co., 149 Mo. App. 252; Cremer v. May, 8 S.W.2d 115. (4) An attorney employed by his client to represent the latter in litigation has authority to do all acts and enter into all agreements necessary to the conduct of the litigation, but has no authority to dispose of or contract away his client's substantial rights. Wonderly v. Martin, 69 Mo. App. 86; Ratican v. Union Depot Co., 80 Mo. App. 533; Krug v. Bruckman, 213 Mo. App. 639. (a) Estoppel cannot arise from the pleadings filed or the position assumed by a party in a former trial unless he was successful therein and the parties were the same; and estoppel can never arise therefrom where the position taken involved solely a question of law and both parties were equally in possession of or had access to the facts, nor where the party seeking to set up the estoppel has not been misled to his disadvantage. Rhoads v. Rhoads, 119 S.W.2d 251; Charter Oak Inv. Co. v. Felker, 60 S.W.2d 657; Runnels v. Lasswell, 219 S.W. 981; Sturm v. Boker, 150 U.S. 337; Lapeer Trailer Corp. v. Freuhauf Trailer Co., 24 F.2d 597; McLaughlin v. Western Union Telegraph Co., 7 F.2d 181; State ex rel. v. Sevier, 73 S.W.2d 373; Laughlin v. Wells, 283 S.W. 990; Grafeman Dairy Co. v. Northwestern Bank, 290 Mo. 311, 235 S.W. 435; Spence v. Renfro, 179 Mo. 417, 78 S.W. 597; Bales v. Perry, 51 Mo. 453; Brandt v. Virginia Coal Iron Co., 93 U.S. 326; Ladd v. Brown, 108 Mich. 105; Keith Lbr. Co. v. Houston Oil Co., 257 F. 6; Blanke v. Klein, 53 F. 437; Owensboro v. Owensboro Waterworks Co., 243 U.S. 173; Traitel Marble Co. v. Hungerford Brass Copper Co., 34 F.2d 671; Cook v. Automatic Fire Protection Co., 228 F. 203; Egbers v. Northern Pac. Ry. Co., 167 P. 1073; Todd v. Interstate Mtg. Bond Co., 196 Ala. 169; Yates v. Hurd, 8 Colo. 350. (b) The purpose of estoppel is to place both parties in the same relative position they would have occupied if the ground of the alleged estoppel had never existed. Estoppel may be invoked only to preserve rights previously acquired, and not to create new ones. State ex rel. City of Sikeston v. Pub. Serv. Comm., 82 S.W.2d 108; State ex inf. Shartel v. Mo. Utilities Co., 53 S.W.2d 394. (5) There can be no ratification of a void act. Macfarland v. Heim, 127 Mo. 333. (a) One who is trustee of a life estate only has no power over the remainder and cannot bind the remaindermen. Such trustee cannot dispose of the remainder by estoppel or the ratification of a void deed. DeLashmutt v. Teeter, 261 Mo. 440. (b) There can be no ratification unless the alleged agent in reference to the transaction sought to be ratified in fact intended and purported to act for the alleged principal pursuant to an existing agency. Bank of Commerce v. Bernero, 17 Mo. App. 316; Herd Son v. Bank of Buffalo, 66 Mo. App. 646; Hammerslough v. Cheatham, 84 Mo. 22. (6) Admissions arising out of an abandoned pleading, although admissible in evidence, are the weakest kind of evidence and are subject to explanation and rebuttal. Trask v. Insurance Co., 58 Mo. App. 439. (7) Under the first part of Section 1723. Revised Statutes 1929, a surviving party is incompetent only to the extent that his testimony might be questioned or refuted by the deceased. Elsea et al. v. Smith, 202 S.W. 1073; Goodrich Rubber Co. v. Bennett, 281 S.W. 77; Robertson Bros. v. Garrison's Estate, 21 S.W.2d 203; Jobe v. Buck, 31 S.W.2d 100. (a) The second part of Section 1723, Revised Statutes 1929, applies only to a "contract in issue" and has no bearing where the controversy concerns solely the legal effect of facts which are admitted or concerning which there is no dispute. Freeman v. Berberich, 60 S.W.2d 401. (b) Where the party for whom an agent acted is dead but the agent is living, the surviving party to the contract is a competent witness. Miller v. Wilson, 126 Mo. 48, 54; Roeder v. Shryock, 61 Mo. App. 489; Weary v. Wittmer, 77 Mo. App. 554. (c) Even if a surviving party would be otherwise incompetent under Section 1723, Revised Statutes 1929, his incompetency is waived by his adversary introducing in evidence testimony of the survivor from a transcript of a former hearing, and the survivor may in turn introduce other portions of his testimony from the same transcript. Lampe v. Franklin Amer. Tr. Co., 339 Mo. 361, 96 S.W.2d 714; Levy v. Simon, 119 Wn. 179, 205 P. 429; In re Smith, 52 Mich. 415, 18 N.W. 197; Lilley v. Mut. B.L. Ins. Co., 92 Mich. 153, 52 N.W. 632; Lange v. Klatt, 135 Mich. 262, 97 N.W. 708; Cady v. Burgess, 144 Mich. 523, 108 N.W. 415; Cole v. Sweet, 187 N.Y. 488, 80 N.E. 355; De Laurent v. Townsend, 243 N.Y. 130, 152 N.E. 700. (d) Appellant in the present proceeding occupies the position of a creditor of the Sophie Franz Estate and as such is not entitled to the protection of Section 1723, Revised Statutes 1929. Lennert v. Cross, 241 N.W. 788; Buckley v. Brewer's Admr., 9 Ky. Law. Rep. 1013; In re Le Baron, 67 How. Pr. 346.
In the Probate Court of the City of St. Louis, the State of Missouri filed exceptions to the report of the appraiser of the estate of Sophie Franz, deceased, appointed under the inheritance tax laws of the State. The basis of these exceptions were that the appraiser failed to include in his report 188, 333 1/3 shares of stock of the Burroughs Adding Machine Company which the State claimed were owned by Sophie Franz at the time of her death. The State's exceptions were overruled in the Probate Court. On an appeal to the Circuit Court, the exceptions were again overruled and judgment entered accordingly. The State has duly appealed to this court.
On February 11, 1898, Ehrhardt D. Franz, a resident of St. Louis, Missouri, died. By his will he gave all his property, real and personal, to his wife, Sophie Franz, for life, with the remainder over to his ten children in equal shares. Included in the personal property of his estate were 210 shares of stock of the American Arithmometer Company. Shortly after his death, this company declared a one hundred per cent stock dividend. In the year 1905 the assets of this company were taken over by the Burroughs Adding Machine Company, and the Burroughs Company issued to Sophie Franz 4,200 of its shares in payment of the original shares held by her in the old company. The Burroughs Company declared various stock dividends and rights to purchase stock to its stockholders so that at the time of the death of Sophie Franz on April 14, 1930, the shares of stock of the Franz estate had increased to 282,500. Several of the children of Ehrhardt D. Franz and wife, Sophie Franz, died prior to their mother's death.
It is the contention of the State that six and two-thirds interests of the remaindermen under the will of Ehrhardt D. Franz had transferred their interest in their father's estate to their mother, Sophie Franz, during her lifetime, and that under the will of their mother they now own the 188, 333 1/3 shares in question and are, therefore, subject to the State inheritance tax.
The reason that the State does not contend that the remaining three and one-third interests of the remaindermen of Ehrhardt D. Franz owe an inheritance tax is on account of a decree of the United States District Court for the Eastern District of Missouri where the judgment of that court held that the three and one-third interests had not transferred their interests to their mother. The style of that case is Franz v. Buder, which, in its various phases, reached the United States Circuit Court of Appeals twelve times, and the Supreme Court of the United States twice. [These cases are as follows: Franz v. Buder, 11 F.2d 854, 858; Franz v. Franz, 15 F.2d 797; Buder v. Franz, 27 F.2d 101; Franz v. Buder, 34 F.2d 353; Id., 38 F.2d 605; Mississippi Valley Trust Co. v. Buder, 47 F.2d 507; Mississippi Valley Trust Co. v. Franz, 51 F.2d 1047; Fiske v. State of Missouri, 62 F.2d 150; Wallace v. Franz, 66 F.2d 457; Id., 68 F.2d 313; Fiske v. State of Missouri, 69 F.2d 683; Wallace v. Fiske, 80 F.2d 897; Buder v. Franz, 273 U.S. 756, 47 Sup. Ct. 459, 71 L.Ed. 876; and State of Missouri v. Fiske, 290 U.S. 18, 54 Sup. Ct. 18, 78 L.Ed. 145.]
In 1905 there was organized under the laws of Missouri a corporation known as the E.D. Franz Estate. To this corporation Sophie Franz conveyed both the real and personal property left her by the will of her husband and also all the property she owned in her own right. The ten children conveyed their interests which they had in the real estate derived from their father. Each child received twenty-five shares of stock in the corporation and the mother received two hundred and fifty shares of stock.
On January 30, 1909, Sophie Franz, by trust agreement, transferred certain stocks, including the Burroughs Company stock, and other property and securities to G.A. Buder and G.A. Franz, her son, as trustees, to hold the same during her lifetime. These trustees were empowered to collect the income and profits from the trust property. Out of such income and profits they were directed to pay Sophie Franz $4,000 per annum, and to pay to each of her nine surviving children and the guardian of the child of a deceased daughter $2,500 per annum.
Shortly after the trust estate was created, Ehrhardt W. Franz filed an action to set aside the trust estate created by his mother. However, in the year 1910 the Circuit Court of the City of St. Louis entered a decree sustaining the validity of the trust agreement. It also held that Sophie Franz held a life estate under the will of Ehrhardt D. Franz and that each child that survived him had a one-tenth vested remainder in that estate.
In 1913 a supplemental trust agreement was prepared and executed for the purpose of increasing distributions provided in the original agreement so that Sophie Franz would receive $8,000 annually and the ten remainder interests would each receive $5,000 per annum.
In 1920 the Burroughs Adding Machine Company issued to its stockholders the right to subscribe to shares of its capital stock. At that time this court had not decided whether stock dividends were income and belonged to the life tenant or whether they were part of the corpus of the estate and belonged to the remaindermen. It was therefore necessary for the life tenant and the remainder interests to execute receipts which would protect the Burroughs Company for these additional shares of stock issued.
In 1924 Ehrhardt W. Franz filed in the U.S. District Court for Missouri an action in equity for an accounting against Buder as trustee, and after several appeals to the Circuit Court of Appeals, that court entered a judgment for an accounting and held that the three and one-third remainder interests had not transferred their interests to their mother, Sophie Franz. The answer of the defendant Buder, among other things, alleged that the three and one-third interests were estopped to assail the trust agreement and were bound by the receipt of payment thereunder; that they were estopped because of the agreements of January 7 and January 30, 1920, in reference to the stock rights issued by the Burroughs Company; and that the parties seeking relief had "no interest remainder or otherwise, under the will of Ehrhardt D. Franz" because of certain advancements and payments in excess of the value of their shares in the estate of Ehrhardt D. Franz, deceased. In that case, the six and two-thirds interests filed an answer adopting the answer of the defendant Buder. The decree in that case, among other things, determined that the increase of Burroughs Company stock belonged to the corpus of the residuary estate of Ehrhardt D. Franz, deceased; that the plaintiff had one-tenth vested right, as remainderman under the will (the complaining defendants having similar rights); that such remainderman would be entitled to possession thereof upon the death of Sophie Franz, the life tenant; and that the trustee should file an accounting and give a bond of $500,000 within 30 days.
For the purpose of this opinion, it will not be necessary to give a history of the various Federal Court decisions except to say that the six and two-thirds remainder interests claim that their interests were necessarily determined to be the same as the three and one-third interests by the Federal Court judgment. [See the Federal Circuit Court opinions above cited.] And they have claimed that right since the judgment was entered in that case.
This case was tried without the aid of a jury. The trial court found that the stock in question was not a part of the estate of Sophie Franz and, therefore, was not subject to the State inheritance tax.
Under this condition of the record, only the documentary evidence in this case is for our review for the reason that the burden of proof was on the State. Since the trial court found the issue for the respondents (defendants), it is not necessary that the oral evidence be sufficient to support the findings of the trial court. It was privileged to believe or reject, in whole or in part, the oral testimony of any witness, even though uncontradicted and unimpeached. [Dempsey v. Horton, 337 Mo. 379, 84 S.W.2d 621.] In a jury waived law action, the weight of the oral evidence and the finding thereon is peculiarly the province of the trial court as the trier of the fact. [Ferguson v. Long, 341 Mo. 182, 107 S.W.2d 7.]
It is the contention of the State (1) that the respondents did in fact release or convey away their remainder interests in their father's estate to their mother during her lifetime, either by the way of a gift or for a valuable consideration, and (2) that even if respondents did not release or convey away their remainder interests, they are now estopped to say in this proceeding that they did not so convey them.
We cannot pass upon any transaction prior to 1909 between the life tenant and the remaindermen because of the Circuit Court judgment entered in 1910. In that case, Ehrhardt W. Franz was plaintiff, and the trustees, the life tenant, and all remaindermen were parties to that action. The Court upheld the trust agreement of 1909 and found that each of the children of Ehrhardt D. Franz had one-tenth vested remainder in his estate, subject to the life estate of Sophie Franz.
The State in its brief states that it "has not committed itself to the position that the conveyance by the six and two-thirds interests were gifts to the life tenant on the one hand, or on the other hand were conveyed for consideration, valuable or good. It makes no difference to the State's case which of these views is adopted."
A delivery to the donee or to someone for him during the lifetime of the donor is necessary to the validity of a gift causa mortis as well as a gift inter vivos. There are exceptions to this rule, as where the donee already has possession of the property. [28 C.J. 689.] If the six and two-thirds interests gave the property in question to Sophie Franz, a delivery was not necessary because she, being the life tenant, was entitled to possession. But "such transactions must be established by clear and convincing testimony," and, further, "the general rule requiring gifts inter vivos to be established by conclusive evidence is especially applicable, where such gift is not asserted until after the death of the alleged donor, and gifts thus preferred after death of the alleged donor are regarded with suspicion by the court." [Cremer v. May, 8 S.W.2d 110, l.c. 115. See, also, Jones v. Falls, 101 Mo. App. 536, 73 S.W. 903; Hunter v. Wabash Ry. Co., 149 Mo. App. 243, 130 S.W. 103; 28 C.J. 676.] Of course, if there was a consideration for the alleged transfer of stock from the remaindermen to the life tenant, no delivery would be necessary; nor would any particular formalities for such a conveyance be necessary, since the necessity of seals on contracts or conveyances is no longer required. [Sec. 2957, R.S. 1929.]
During oral argument of this case in this court, the attorney for the State stated that his client would not say at what time or by what instrument the transfer (either by gift or for a consideration) took place except to say it was sometime between the time of the death of Ehrhardt D. Franz in 1898 and the time of the death of his widow, Sophie Franz, in 1930.
We will proceed to examine the documentary evidence subsequent to the Circuit Court decree of 1910.
The supplemental trust agreement of 1913 had as its object increasing the annual payment of Sophie Franz from $4,000 to $8,000, and the yearly payments of the remaindermen from $2,500 to $5,000. As did the trust agreement of 1909, it provided that such payments were to be made only out of the income, rents and earnings of the estate, which, of course, belonged to the life tenant. As we see this supplemental agreement, it was a gift by the life tenant to the remaindermen of income due her. In other words, the income from the trust estate belonged to the mother. She had a right to give her property to her children and grandchild if she saw fit to do so without affecting their rights as remaindermen. The remaindermen did sign this supplemental trust agreement, but this was done solely to protect the trustees. We fail to see any transfer by this instrument from the remaindermen to the life tenant.
In 1918 Sophie Franz executed an indemnity agreement with the trustees. By this agreement, she expressed a desire to aid her children and her grandchild. She authorized the trustees to lend each heir the sum of $25,000 as an advancement which "shall be charged against the respective interests of said beneficiaries, legatees and distributees under my last will . . . and deducted from their respective interest in my estate." This could not be considered as a transfer of any interests the remaindermen had in the estate of Ehrhardt D. Franz, even though they did accept the $25,000 mentioned in the agreement.
In 1920 the Burroughs Company gave to each stockholder the right to purchase additional stock. It had not been determined at that time in this State whether stock dividends belonged to the life tenant or the remaindermen. In 1927, we decided the case of Hayes v. St. Louis Union Trust Co., 317 Mo. 1028, 298 S.W. 91, wherein we held that stock dividends belonged to the remaindermen. In January, 1920, certain agreements were entered into between the trustees, the remaindermen, Sophie Franz and the Burroughs Company so that additional stock might be purchased. In the case of Buder v. Franz, 27 F.2d 101, l.c. 113, these agreements are set out in detail, and are briefly summarized as follows:
"The bare bones of this agreement are that these stock `rights' attached to stock `appearing in the name of Sophie Franz' which stock was subject to the trust agreement; that the trust agreement provided no method by which such `rights' could be taken therefromunder; that the trust estate lacked available funds to realize upon these `rights;' that the life tenant and all of the remaindermen wished distribution of such `rights' among the remaindermen in order that they might realize thereon; that some of such remaindermen were minors; that to secure this desired result and to protect the trustees in executing it, an agreement was advisable; that such distribution of the `rights' was authorized and such protecting indemnity contracted."
We think that court correctly held that these "rights" constituted part of the corpus of the estate belonging to the remaindermen, that the only interest the life tenant had therein was to the income from the stock purchased under such rights, if such purchase was by funds from the corpus of the trust, and that the life tenant and her trustees could not appropriate these rights through exercise thereof with the life tenant's money.
These agreements were only for the protection of the Burroughs Company and they could not be tortured into a release of the remaindermen's interests, either by gift or for a consideration.
The State stresses the answer filed in the Federal District Court in the case of Ehrhardt W. Franz, v. Buder, supra. That case was filed in 1924 and these respondents' answer alleged that the three and one-third interests were estopped to claim any interest in the remainder estate because of the agreements made January 7 and January 30, 1920, and that the three and one-third interests seeking relief had "no interest, remainder or otherwise, under the will of . . . Ehrhardt D. Franz" because of certain advancements and payments in excess of the value of their shares in the estate of Ehrhardt D. Franz.
There are several reasons why such an answer could not be considered a transfer of the six and two-thirds interests; however, it seems to us the fact that the six and two-thirds interests did not allege in the answer that they had no interest as remaindermen is sufficient. All that the respondents alleged in their answer in that case was that the three and one-third interests did not have any interest in the estate of Ehrhardt D. Franz, deceased, which we think is far short of being a conveyance of their remainder interests to their mother.
There are some unsigned instruments in the record which we do not deem necessary to discuss, but we have come to the conclusion that the respondents did not convey their interests in this estate to their mother, either by gift or for a consideration.
As previously stated, the State contends that even if the respondents "did not release or convey their remainder interests, they cannot be heard to say in this proceeding that they did not so convey them." The State bases its contention, first, on the doctrine of estoppel, and second, on the doctrine of election.
To constitute estoppel in pais, three things must occur; First, an admission, statement, or act inconsistent with the claim afterwards asserted and sued on; second, action by the other party on the faith of such admission, statement or act; and, third, injury to such other party, resulting from allowing the first party to contradict or repudiate such admission, statement or act. [McLain v. Mercantile Trust Co., 292 Mo. 114, 237 S.W. 506; Vette v. Hackman, 292 Mo. 138, 237 S.W. 802.]
In 21 Corpus Juris, section 233, page 1229, the author says:
"In order to work an estoppel the position assumed in the former trial must have been successfully maintained. In proceedings terminating in a judgment, the positions must be clearly inconsistent, the parties must be the same, and the same questions must be involved. So the party claiming the estoppel must have been misled, and have changed his position; and an estoppel is not raised by conduct of one party to a suit unless, by reason thereof, the other party has been so placed as to make it unjust to him to allow the first party to change his position. There can be no estoppel where both parties are equally in position of all the facts pertaining to the matter relied on as an estoppel; where the conduct relied on to create the estoppel was caused by the act of the party claiming the estoppel; or where the positions taken involve solely a question of law. And in no event can estoppel be extended beyond the natural and reasonable import of the acts or conduct relied on to create the estoppel. It has been held that what a defendant may do in a criminal court cannot be pleaded as an estoppel against him in a civil action; but there is authority to the contrary. The general rule may apply, although the position assumed in the first instance was erroneous. A party cannot deny the validity of steps taken by him in another proceeding which would impute to him fraud upon administration of justice in such other proceeding."
The doctrine of election of remedies can only properly be invoked where an election has been made as between inconsistent remedies. After it has been made, the party invoking election as a defense need not show he will suffer disadvantage if his adversary is not required to stand by his election, but may profit by his election. [U.S. Fidelity Guaranty Co. v. Fidelity Nat. Bank Trust Co., 109 S.W.2d 47.]
From what we have already said, it follows that no estoppel could arise from the supplemental trust agreement of 1913 or the indemnity agreement of 1918.
The State contends that on account of the agreements of January 7 and January 30, 1920, in reference to the "rights" to purchase additional stock of the Burroughs Company, the respondents are estopped from claiming that they did not transfer their interests in the Ehrhardt D. Franz estate to Sophie Franz.
This identical question was passed on by the Eighth Circuit Court of Appeals in Buder v. Franz, 27 F.2d 101, l.c. 113, wherein that court said:
"These `rights' were not income belonging to the life tenant but corpus belonging to the remaindermen. [Miles v. Safe Deposit Trust Co., 259 U.S. 247, 42 Sup. Ct. 483, 66 L.Ed. 923; Hite's Devisees v. Hite's Executor, 93 Ky. 237, 267, 20 S.W. 778, 19 L.R.A. 173, 40 Am. St. Rep. 189.] The only interest therein, if any, of the life tenant was to the income from the stock purchased under those rights, if such purchase were by funds from the corpus of the trust. The life tenant nor the trustees had any right to appropriate these `rights' and make them the property of the life tenant through exercise of such `rights' with her own money. The only substantial thing acquired by the remaindermen through this contract was the protection of and realization upon their own property — the `rights.' For such a consideration we are asked to determine that they gave up all rights and claims to any other property in the trust estate. That is, for the immediate privilege of exercising the right to subscribe $100 per share for 6,300 new shares in the Burroughs Company they gave up all claim to 12,000 outstanding fully paid shares in that company and rights in other property as well. We must decline to travel such an uninviting course.
"It is contended, also, that an agreement (dated January 30, 1920), by all parties to the above agreement, made to the Burroughs Adding Machine Company to induce it to comply with the agreement of January 7, 1920, and to indemnify it for so doing, contains language upon which an estoppel should arise. The language relied upon is used for and in connection with Sophie Franz and not by these remaindermen. It is that `the said Sophie Franz, individually and for herself, her heirs and assigns, hereby agrees' that the rights and stock distributed under the agreement of January 7, 1920, `may be treated as a partial distribution of her estate under the terms of her last will and testament. . . .' In crushing contrast, is the undertaking of the remaindermen to waive all rights to such `rights' or resulting stock `whether acquired under the last will and testament of E.D. Franz, deceased, or in any manner.'
"It is urged, also, as bearing on this contention that one of the trustees, G.A. Buder, testified that the payment to the trustees of 5 per cent of the stock `rights,' provided for in the agreement of January 7, 1920, `was done on the assumption that this was all property of Sophie Franz which was distributed . . . and not the property of E.D. Franz estate.' We think the agreement of January 7, 1920, must govern and not the `assumption' as to its meaning and effect indulged by one of the parties seeking to establish the estoppel."
We think the reasons assigned in that case are correct and we overrule the State's contention on that point.
We have already set out the substance of the answer filed in the Federal Court in which the State claims that the respondents have made an election and that they are now estopped to claim that they own any interest as remaindermen in the Ehrhardt D. Franz estate. As previously stated, that answer only denied that the claimants in that case did not have any interests as remaindermen; at least, it does not directly say that these respondents no longer have any interests as remaindermen.
From the views that we have already expressed, it will be unnecessary for us to pass on the respondents' contention that their rights in the estate of Ehrhardt D. Franz, deceased, have been adjudicated.
The State contends that the court erred in permitting the respondents to introduce evidence of G.A. Buder, G.A. Franz and Sherman H. Kleinschmidt because of the death of Sophie Franz. In the State's case in chief, it introduced their testimony given in the Federal Court case. Assuming that they were disqualified under Section 1723, Revised Statutes 1929, the State waived such disqualification by first introducing their testimony in the Federal Court. [Lampe v. Franklin American Trust Co., 339 Mo. 361, 96 S.W.2d 710.]
For the same reason, the State contends that error was committed when the trial court permitted Mrs. Wheeler, Mrs. Fiske, Mrs. Holdoway, Mrs. Zimmerman and Otto B. Franz to testify. The witnesses did not testify as to transactions they had had with Sophie Franz; they testified only as to their representation by the law firm of Buder and Buder, and the extent of the power and authority conferred by them upon that firm. Therefore, the objection to these witnesses should be overruled.
From what we have said, it follows that the judgment of the trial court should be affirmed. It is so ordered. All concur.