Boddiker v. McPartlin

• Decision Date: 13 May 1942
• Docket Number: No. 26630.,26630.
• Citation: 379 Ill. 567,41 N.E.2d 756
• Parties: BODDIKER et al. v. McPARTLIN.
• Court: Illinois Supreme Court

379 Ill. 567

41 N.E.2d 756

BODDIKER et al.

v.McPARTLIN.

No. 26630.

Supreme Court of Illinois.

May 13, 1942.

Suit for partition by Anna Boddiker and another against Charles L. McPartlin, successor trustee under a trust deed. From a decree for plaintiff, defendant appeals.

Affirmed.Appeal from Superior Court, Cook County; John C. Lewe, Judge.

Ross S. Welch, of Chicago, for appellant.

Harry A. Biossat of Chicago, for appellees.

WILSON, Justice.

This appeal presents for decision the correctness of a decree of the superior court of Cook county ordering partition of real estate in Chicago. A review of the pertinent facts is necessary.

January 26, 1929, Carl A. and Dora Carlson, owners of an improved parcel of real estate in Chicago, executed bonds having a par value of $45,000, and secured their payment by a trust deed in the nature of a mortgage. Article 16 empowered the trustee in the event of foreclosure, ‘if it shall deem it for the best interest of all the holders of said bonds so to do, * * * in order that no advantage under such foreclosure may be taken by or accrue to any holders of such bonds over any other holders thereof,’ to demand, receive and hold in its own name the certificate issued pursuant to any foreclosure decree, and if the property be not redeemed, to bid for and purchase it at any sale, either for the full amount of the debt evidenced by the certificate, or for any lesser amount, and ‘hold in its own name, as trustee, the deed issued therefor, all for the equal pro rata benefit of the persons interested in said certificate.’ The trustee was authorized, further, in the event it should become the owner of the premises, to sell and convey the property for such price and upon such terms and to such persons as may seem for the best interest of all persons interested therein. Until such sale, article 16 provides the trustee shall be entitled to enter upon and take possession of and protect, use, operate and manage the property, pay taxes, make all necessary repairs, receive rents and other income, pay all proper costs, and, if any moneys remained in its hands after deduction of the charges, costs and expenses of the trust, to divide such funds ratably among those entitled thereto. Upon the resignation of the corporate trustee, Charles L. McPartlin was appointed successor trustee. Default was made in the payment of principal and interest and on April 21, 1937, the successor trustee instituted foreclosure proceedings in the circuit court of Cook county. July 23, 1937, a decree of foreclosure was entered and on August 16, 1937, the foreclosure sale took place. The trustee bid $55,000 on behalf of the bondholders, his bid was accepted and the sale approved on September 15, 1937. In due course, a certificate of sale issued to the successor trustee and, no redemption having been made, a master's deed was issued to the trustee on January 7, 1939. The trustee never issued certificates to the bondholders to replace their bonds which thus constitute the only evidence of the bondholders' interest in the trust estate. Thereafter, the trustee filed a petition in the foreclosure action seeking permission, among other things, to mortgage the trust property. It appears that an insurance company had paid, by mistake, general taxes on the property to the extent of $5,966.87; that the trustee and the company reached a settlement agreement by which the trustee was to pay the company one half of the sum paid by it on account of taxes; that, in addition, the trustee was obligated to pay the costs and fees incurred in the foreclosure proceedings, taxes and other expenses, and that, to pay the items described, the trustee had arranged to obtain a loan of $10,500. Accordingly, the trustee sought a finding that he had power (1) to negotiate and consummate the settlement with the insurance company and (2) to mortgage the trust property. Leave was granted to make the proposed settlement and to mortgage the trust property. Anna Boddiker and other bondholders who had opposed approval of the settlement prosecuted an appeal to the Appellate Court for the First District. In its opinion, the Appellate Court stated that the questions presented for its determination were (1) whether the trustee had the right to make the settlement, under the direction of a court of equity, with the insurance company and (2) whether he had the right to mortgage, under the direction of the court, the trust property in order to pay $3013.65 and other expenses of the foreclosure proceedings. The order of the circuit court was affirmed. McPartlin v. Carlson, 303 Ill.App. 655, 25 N.E.2d 840. We denied leave to appeal on June 17, 1940. Subsequently, on July 1, 1940, the plaintiffs, Anna Boddiker and Raymond E. Carlson, two of the bondholders, filed their complaint in the superior court of Cook county alleging that although legal title to the premises was in the trustee the equitable title was in the other bondholders and themselves. The relief asked was partition of the property, an accounting, and removal of the mortgage for $10,500 as a cloud on the title. The principal defendant, the trustee, answered the complaint, denying plaintiffs' right to partition. The cause was referred to a master in chancery. At the master's hearing, the parties stipulated that defendant had rejected the single offer of sale received, namely, an offer of $14,000. It was further stipulated that the cause should be tried on the pure legal question made by the record; that no question was being urged as to any action taken by the trustee with respect to the offer of $14,000 or the circumstances why it was not forwarded or submitted to the bondholders, and that there was no controverted question of fact involved or any question of the trustee being derelict in his duties. The master found that the trustee had not had a reasonable time to liquidate the trust res; that it was not to the best interest of the trust to sell the property by partition, and, hence, plaintiffs were not entitled to partition. Plaintiffs' objections to the master's report were overruled and orderedto stand as exceptions. The chancellor sustained the exceptions, and rendered a finding that Anna Boddiker and Raymond Carlson owned equitable interests in the premises amounting to a 1/45th and a 1/90th interest, respectively, as tenants in common with the remaining bondholders who were entitled to an undivided 87/90th equitable interest in the property. The decree directed partition on the basis described and reserved jurisdiction of the cause with respect to further proceedings pertaining to the partition of the property, its sale, and an accounting by defendant trustee as to rents and income collected and disbursed on the property. From this decree, defendant prosecutes a direct appeal, a freehold being necessarily involved. Rubin v. Bartel, 371 Ill. 117, 20 N.E.2d 80;Ashton v. Macqueen, 361 Ill. 132, 197 N.E. 561.

The decisive question made by the pleadings and argued by the parties is whether plaintiffs are entitled to partition. They maintain that since the trust deed fixes no definite time for the sale of the property and the determination of the trust the remedy of partition is open to them as equitable owners of the property. On the other hand, defendant insists that the property is subject to a valid trust by which a valid direction can be given, and that, consequently, the purpose of the trust will be defeated by partition. Defendant further contends that the trust in the case at bar is a special purpose trust, express, complete and active, and has a general time limit on the date the trust will expire and within which distribution must occur. He argues, accordingly, that the trust requires no specific time limit, the trustee having a reasonable length of time to accomplish the purpose of the trust. As narrated, defendant, as successor trustee, bid in the property at the master's sale on behalf of those persons holding and owning bonds secured by the trust deed. He did so conformably to authority granted to him under article 16 of the indenture, and, upon acquiring title in 1939, held title subject to its provisions. Although the trust deed, as a security instrument, was merged in the decree of foreclosure, its covenants remained in force to the extent they represented a contract between the trustee and the beneficiaries. Chicago Title & Trust Co. v. Rogers Park Apartments Bldg. Corp., 375 Ill. 599, 32 N.E.2d 137. It follows that the powers of the trustee and the rights of the beneficiaries are fixed by the terms of the trust deed and could neither be enlarged nor diminished by the foreclosure decree. In short, the respective rights of the trustee and of the bondholders must be ascertained from the provisions of the trust deed. In particular, the right to partition depends upon the construction of article 16. Admittedly, article 16 creating the trust contains no definite time for the sale of the property and the termination of the trust. We regard it as definitely settled that the remedy by partition is open to the holder of an equitable estate as well as to the holder of a legal estate. Specifically, partition is permitted to equitable owners where the title to real property is in a trustee and where, as here, no definite time has been set for the sale of the property and the termination of the trust. Yedor v. Chicago City Bank & Trust Co., 376 Ill. 121, 33 N.E.2d 220;Hazlett v. Moore, 372 Ill. 192, 23 N.E.2d 57; Rubin v. Bartel, supra; Ashton v. Macqueen, supra; Fox v. Fox, 250 Ill. 384, 95 N.E. 498. Since article 16 of the trust deed fixes no definite time for the sale of the...