Bixby v. Security-First National Bank

THOMPSON, J.

This is an appeal from a judgment for the defendants in an action to set aside a decree of distribution in the estate of Fanny Bixby Spencer on the ground that the entry of the decree was procured by the fraud of the executrix Empsie C. Freeman, the defendant bank, its trust officer, P. C. Scott, the attorneys for the executors and Chandler P. Ward, attorney for the plaintiff.

Fanny Bixby Spencer died testate on March 31, 1930, leaving an estate valued by the inventory and appraisement at $2,558,216.35. The will named W. Carl Spencer, her husband, and Empsie C. Freeman executor and executrix and, in brief, set up trusts for certain minors during the period of their minority and education, dividing the residue into seven parts. The seven residuary legatees are W. Carl Spencer, Claire Whitaker (who had a life interest only in one-seventh of the residue), Lillian Odisho (Bajón), Kamea Okamoto, Mary R. Munson, Elizabeth Irving Bixby and Elizabeth Spencer White. The bulk of the estate was composed of stock in the Jotham Bixby Company and two other “family” corporations, none of which were listed on the stock exchange. At the time of Mrs. Spencer’s death she was indebted to the Security-First National Bank of Los Angeles, defendant here, in the sum of $35,869.01, evidenced by notes and secured by 2,917% shares of stock of the Jotham Bixby Company, and to that company in the amount of' $87,844.36. Creditors’ claims were filed and approved on both these claims. The executors thereafter borrowed from the bank, with the approval of the probate court, for the purpose of paying off and refinancing these debts, the sum of $123,713.37 and secured it by a pledge of 1458% shares of Jotham Bixby Company stock.

All of the residuary legatees, including the plaintiff Elizabeth Irving Bixby, appear to have been almost entirely

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dependent upon the bounty of the deceased even in her lifetime and almost immediately after her death, they individually, but with the help of the executors and their attorneys, arranged with the defendant bank for monthly loans with the understanding that repayment would be made upon distribution of the estate. On December 22, 1930, plaintiff executed a declaration of trust, in which the other residuary legatees joined, setting up a trust known as “trust L. B. 904” and, in pursuance of which the interests of the residuary legatees were assigned to the defendant bank as trustee. In November, 1932, the executors petitioned the probate court for and received authority to sell not to exceed 2,200 shares of the Jotham Bixby Company stock, of an appraised value of $382.95 a share, for $100 or more a share and, in January, 1933, 2,100 shares were sold for $100 a share to the Jotham Bixby Company. The plaintiff had instructed her attorney, Ward, to appear and protest the making of the order for sale, but Ward did not do so because he had been assured by the executrix, Mrs. Freeman, that no sale would be made without the consent of the legatees. This agreement was, however, approved by the plaintiff prior to the hearing on the application for authority to sell. At a meeting held on January 11, 1933, and attended by all the residuary legatees. other than Kamea Okamoto, a minor for whom Spencer, and later the bank, was guardian, a draft of a decree of distribution was read and explained and a consent to the entry thereof signed by all of the legatees except the plaintiff, who signed it the next morning. At this meeting it was made clear that the board of directors of the Jotham Bixby Company was to act on the purchase of the 2,100 shares of stock at their meeting the next morning and they would not make the purchase unless all the legatees consented to the sale and signed the agreement to the entry of the decree distributing the estate to the bank in trust to make the monthly payments to the minors as directed by the will and hold the residue for the benefit of the residuary legatees. On February 3, 1933, the probate court entered a decree of distribution substantially in accordance with the agreement and approved the final account of the executors.