70 F.2d 172 (7th Cir. 1934), 5040, Clark v. City of Chicago, Ill.

Docket Nº:5040.
Citation:70 F.2d 172
Party Name:CLARK v. CITY OF CHICAGO, ILL., et al.
Case Date:April 12, 1934
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 172

70 F.2d 172 (7th Cir. 1934)

CLARK

v.

CITY OF CHICAGO, ILL., et al.

No. 5040.

United States Court of Appeals, Seventh Circuit.

April 12, 1934

H. S. Hicks, of Rockford, Ill., and Essington & McKibbin and Walter E. Beebe, all of Chicago, Ill., for appellant.

Page 173

William H. Sexton, Corp. Counsel, and Albert H. Veeder, Sp. Asst. Corp. Counsel, both of Chicago, Ill., for appellees.

Before ALSCHULER, SPARKS, and FITZHENRY, Circuit Judges.

SPARKS, Circuit Judge.

Appellant filed a bill in equity asking that certain property in the possession of the city of Chicago be declared to be held in trust by it, that a new trustee be appointed to carry out the terms of the trust, that the city be required to account for all moneys received by it in liquidation of the indebtedness of David A. Gage to it, and that any money remaining over be paid to appellant as sole surviving heir of Gage.

The facts which gave rise to appellant's alleged cause of action began in 1873 when her father was city treasurer of the city of Chicago. Upon the expiration of his term of office, December 16, 1873, it was found that there was a deficit in his accounts amounting to approximately $500,000. This deficit arose out of certain illegal loans of the funds of the city to banks which closed during the panic of 1873. In order to liquidate the indebtedness, Gage turned over all his property in trust for the benefit of the city. The real property was conveyed by a deed of trust executed by Gage and his wife, December 27, 1873, to George Taylor as trustee. It provided that the trustee take over the possession and control of all the property, collecting the rents and paying the taxes, and, under the direction and with the concurrence of the comptroller of the city of Chicago, sell the properties as soon as possible upon whatever terms seemed best to the trustee and comptroller, applying all rents and profits as well as the proceeds of the sale to the liquidation of the indebtedness. There was a further trust provision that upon the satisfaction of the entire indebtedness, if any pieces of the real property or any proceeds derived in any way from the property remained in the possession of the trustee, he should turn them back to Gage or his heirs. The instrument also provided that if the properties should not be sold within eight months, the comptroller should have the power to order a preemptory sale on such terms as he considered best for the interests of the city, and that if for any reason Taylor should be unable to act in accordance with the terms of the trust deed, one John De Koven should become the successor in trust. The property conveyed by the deed included several parcels in the city, and one, known as the Gage farm, a 254-acre tract, outside the limits of the city.

The personal property of Gage was conveyed to the same trustee by a deed of assignment of the same date authorizing him to collect all bonds, bills, notes, accounts and choses in action or to sell them or any part of them as seemed for the best interests of the city, and apply the proceeds on the debt. The assignment also authorized the trustee, with the concurrence and consent of the comptroller, to exchange any of the securities or evidences of indebtedness for other securities, or for lands or other property, real or personal, all of which should be subject to the same provisions as the original properties conveyed by the assignment.

Taylor accepted the trust and took possession of all the properties, real and personal, conveyed to him by the two instruments. He sold part of the real estate pursuant to the terms of the trust deed. He also acquired another parcel of real property known as the Brookfield tract as the result of foreclosure proceedings based on a series of bonds which came into his possession under the assignment of personal property.

By a suit brought by the city against Gage and his sureties in 1877, the amount of the indebtedness was determined to be $507,703.

A few years after the conveyances to Taylor, Gage moved to Colorado where in 1878 he filed a voluntary petition in bankruptcy, listing as a liability, the claim of the city of Chicago in...

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