Appeal by petitioners-objectors from the Circuit Court of
Peoria county; the Hon. JOHN T. CULBERTSON, JR., Judge,
presiding. Heard in this court at the February term, 1952.
Affirmed in part, and reversed in part, and remanded with
directions. Opinion filed May 20, 1952. Rehearing denied June 6,
1952. Second petition for rehearing filed June 14, 1952 and
denied December 10, 1952. Released for publication December 10,
MR. JUSTICE ANDERSON DELIVERED THE OPINION OF THE COURT.
1952 and denied December 10, 1952
Opinion filed May 20, 1952 Rehearing denied June 6, 1952 Second petition for rehearing filed June 14,
Claude U. Stone, appellee, executor and trustee under the will of Fannie G. Baldwin, deceased, filed his resignation and first and final report as trustee in the circuit court of Peoria county where the trust was pending. Helen Baldwin Smith and Margaret Baldwin Holley, appellants, made objections to the reports. After a lengthy hearing (the abstract of the record of the proceedings consisted of 441 pages), on July 31, 1951, the chancellor overruled all objections to the report. The court decreed that the fair value of Stone's services as a trustee from January 1, 1939 to January 1, 1944 should be $10,000 a year, but that he should be surcharged for the amount of compensation that he received as executor, for the money he received as president of the Star, and for the amount indicated in his report that he had advanced to himself as part payment on his fees, leaving a balance due him for fees of $10,923.75. Appellants have appealed from this decree.
The trust involved was created by the last will and testament of Fannie G. Baldwin. She died in 1938 at the age of 95. Shortly thereafter her will was admitted to probate in the probate court of Peoria county and Claude U. Stone, designated in her will as executor and trustee, was appointed executor in December 1938, and continued to act as executor until his discharge by the probate court in January 1946. His first and final account as executor was approved by the probate court who fixed his fee at $7,126.25. The probate court order directed that all assets in his hands be turned over to himself as trustee. At the time of his discharge the estate was $77,000 in debt and the probate court had entered an order authorizing the executor to pledge the Peoria Star stock with the bank to secure the above mentioned debt. The major part of the decedent's estate consisted of 798 shares of stock in the Peoria Star Company. The total shares in this company were 940. The value of this stock at the death of the decedent was approximately $600,000.
The Peoria Star for many years had published an afternoon newspaper in the City of Peoria. Fannie G. Baldwin had been active in publishing this paper and was for many years president of the corporation. For some years prior to her death, Claude U. Stone was her attorney and had charge, in a large measure, of her financial affairs. He was vice-president of the Star and as such officer had large control over its policies and of its business affairs.
The will and codicil of Fannie G. Baldwin devised in trust practically all her property to Claude U. Stone as trustee and gave him broad powers as follows: It provided that he should manage and control the trust estate so as to produce the greatest amount of net income consistent with the reasonable security and safety of the trust estate; it gave him power to vote all shares of corporate stock and to convey or mortgage the property of the trust for the best interests of the estate; it provided that he might nominate his successor in trust. The will further provided:
"My object and purpose in continuing this trust for the period indicated is for the reason I most ardently desire the newspaper known as the Peoria Star, which constitutes the greater part of the property that will come to this trust estate, to be and remain strictly a Peoria institution, controlled at all times by Peorians for as long a period as it is possible for me to fix under the Will, provided, however, it is not my intention or purpose by the foregoing statement to limit the power of my said trustees to sell my stock in the Peoria Star Company at any time or to whomsoever they deem proper if my trustees in their judgment think it advisable and beneficial to said trust estate to do so."
The creator of the trust further provided that the trust was to continue for twenty years after the death of the last surviving granddaughter: that sixty per cent of the net income was to go to Sidney Baldwin, her unmarried daughter; and forty per cent to go equally to her granddaughters, Helen Smith and Margaret Holley. At the termination of the twenty-year period, the corpus of the trust was to go to the granddaughters if living, otherwise to their descendants. The will further provided that the trustee was to give bond to be approved by the circuit court and to file annual reports with the court.
From the death of the testatrix until 1945 the estate was involved in a great deal of litigation. Stone, the executor and trustee, successfully defended this litigation, which cost the estate large sums of money, largely for attorneys' fees. Some of the litigation went to the Appellate and Supreme Courts. George Z. Barnes, now deceased, was attorney for Stone through all this litigation. This litigation was finally terminated and various settlements concerning the same are incorporated in the decree of the circuit court entered in September 1945, as hereafter mentioned.
After the death of Mrs. Baldwin, at the annual stockholders' meeting of the Peoria Star, Stone voted the stock of the Star to elect himself and Barnes as Directors. The Directors later elected Stone president and publisher and Barnes vice-president. This was in 1939. That year Stone received no salary as president of the Star, but from 1940 to 1943, the Board of Directors voted him a salary of $5,000 per year. The aggregate salary received by him from 1940 to 1943 was $20,500. He continued as president of the Star until 1950, but claimed no salary for the period from 1944 to 1950.
The fees claimed by Stone as trustee cover a period from January 1, 1939, to January 1, 1944. Stone was trustee until June 17, 1949, but makes no claim for trustee's fees from 1944 to 1949. During this latter period he was receiving a large salary and commissions as Chairman of the Board of Directors of Peoria Newspapers, Inc. From 1939 to 1943 the Baldwin estate and the Peoria Star went through a period of great financial distress. This was partly owing to the facts that the newspaper was losing money and that the estate had paid out or was obligated to pay large sums of money in defense of the litigation above mentioned. The Board of the Star held various meetings with their creditors and discussed whether or not the Star should be sold to pay its debts. It appears from the evidence through this period that Stone was doing everything in his power to carry on the newspaper for the benefit of the trust.
In 1943 the Peoria Journal was likewise being published in Peoria. A plan was devised between the Boards of Directors of the two newspapers to merge. Much thought, investigation, and many conferences were held over this plan in all of which Stone, the trustee, took a principal part, and the merger was accomplished. Stone, as president of the Peoria Star, agreed to the merger, and it was subsequently unanimously approved by the Directors of the Star and its stockholders. The merger agreement provided that the Peoria Star Corporation and the Journal Corporation were to remain as corporate entities. The Peoria Star was to operate a morning paper and the Journal an evening paper, and the policies of the papers were still to be controlled by the Star and Journal companies. The assets were to be pooled, and the Peoria Newspapers, Inc. was to receive the profits and disburse them to the stockholders of the two other corporations, one-third to the Star and two-thirds to the Journal. The by-laws of Peoria Newspapers, Inc. provided: that the initial Board of Directors should consist of five persons, three to be elected by the stock held by the Journal and two by the Star stock; that the Board of Directors should consist of a president, two vice-presidents, and a chairman, among others; that the Journal Board of Directors should have exclusive power to elect the president, the vice-presidents, the secretary, and to fill vacancies in those offices; that the Peoria Star Directors should have exclusive power to elect the chairman of the board, the vice-chairman, the treasurer, the assistant treasurer, and to fill vacancies of said offices. Under these by-laws, by virtue of his voting the stock of the Star, Claude U. Stone was elected chairman of the Board and continued to act in that capacity from the date of the merger to April 15, 1950. From about July 17, 1949 to April 15, 1950, Stone acted as chairman of the Board and drew compensation therefor. During this time he was no longer acting as trustee. George Z. Barnes was vice-president of the Peoria Star and later a paid officer of the merged corporation. Under the merger agreement (which was approved by the circuit court on petition of the trustee), the chairman of the Board was to receive a salary of $12,500 per year and three and one-third per cent of the amount accumulated for distribution as provided by the merger agreement. Stone, as chairman of the Board, from 1944 to 1950, received as salary and bonus payments $194,107.15. During that period the trust received from the operation of the newspaper $273,055.97. It is apparent that after the merger the Star came into a period of unprecedented prosperity, which has continued to this date.
The circuit court had approved the merger plan and directed the trustee to proceed to carry out the order as entered December 31, 1943. In September 1945, Stone, the trustee, asked the circuit court to take jurisdiction of the trust, and for other relief. Proper notice having been given to all parties interested, the court took jurisdiction of the trust, and in its decree dated September 19, 1945, the trustee was authorized to borrow money and pledge the stock. The settlement of ...