Chicago Title & Trust Co. v. Mercantile Trust & Sav. Bank

• Decision Date: 02 May 1939
• Docket Number: Gen. No. 40221.
• Court: United States Appellate Court of Illinois
• Parties: CHICAGO TITLE & TRUST CO. v. MERCANTILE TRUST & SAVINGS BANK ET AL.

300 Ill.App. 329

20 N.E.2d 992

CHICAGO TITLE & TRUST CO.

v.MERCANTILE TRUST & SAVINGS BANK ET AL.

Gen. No. 40221.

Appellate Court of Illinois, First District, Second Division.

May 2, 1939.

Appeal from Superior Court, Cook County; Walter T. Stanton, Judge.

Creditor's bill by the Northern Trust Company to reach land held in trust of which the Chicago Title & Trust Company was trustee and Harold S. Shrader was beneficiary, which was instituted in circuit court, and which subsequently was transferred to superior court and consolidated with proceeding by the Chicago Title & Trust Company, as trustee under terms of trust agreement dated December 31, 1928, and known as trust No. 22146, against the Mercantile Trust & Savings Company, as trustee, etc., and others, to foreclose trust deed against the property which the Northern Trust Company sought to reach in the creditor's bill. From a portion of the decree denying claim of lien made by the Northern Trust Company and the priority thereof, the Northern Trust Company appeals.

Affirmed.

Julian C. Ryer, of Chicago, for appellant.

Stearns & Jones, Lloyd McBride, and Norbert B. Tyrrell, all of Chicago, for appellees.

JOHN J. SULLIVAN, Justice.

The Northern Trust Company, trustee under Trust Agreement No. 7313 (hereinafter for convenience referred to as the Lauth Trust), having recovered a judgment for $5,501 against Harold S. Shrader, pursuant to which an execution was issued and returned wholly unsatisfied, filed its complaint in the nature of a creditor's bill in the circuit court to reach principally the land held in Trust No. 24797 (hereinafter referred to as the Land Trust), of which Chicago Title & Trust Company was trustee and Shrader was the sole beneficiary. Shortly thereafter Chicago Title & Trust Company, trustee under Trust Agreement No. 22146 (hereinafter referred to as the Morton Trust), the owner of a first mortgage note for $16,000 and the trust deed securing same, filed its complaint in the superior court to foreclose said trust deed against the property which was the subject of the aforesaid Land Trust, being the same property which the Lauth Trust sought to reach by its complaint against Shrader. In such complaint in the nature of a creditor's bill the Lauth Trust claimed a prior lien on the mortgaged land by reason of its judgment against Shrader. The proceeding instituted by the Lauth Trust in the circuit court was transferred to the superior court and there consolidated with the foreclosure suit brought by the Morton Trust. A decree was entered finding that the Lauth Trust, the judgment creditor of Shrader, had no lien on the land which was the subject of the Land Trust and that the mortgage of the Morton Trust was a first lien thereon, and ordering the sale of the property for the satisfaction of the mortgage indebtedness. The Lauth Trust appeals from that portion of the decree which denied its claim of lien and the priority thereof.

The facts briefly stated are that the Lauth Trust obtained a judgment for $5,501 against Harold S. Shrader October 22, 1930; that Shrader was then living in the premises, which prior to the entry of said judgment had been conveyed by deed in trust from Nels Shoan and Hilma Shoan to the Chicago Title & Trust Company, as trustee under Trust Agreement No. 24797; that Shrader was the only person beneficially interested in that agreement and that he had various rights and powers thereunder, including the right to direct the trustee to mortgage the land described therein, as will hereinafter be fully set forth; that shortly after the Lauth Trust judgment against Shrader was rendered, the latter directed his trustee to make the mortgage, the foreclosure of which was ordered by the decree entered in this cause; and that the mortgage note and trust deed securing same is owned by the Morton Trust, of which Chicago Title & Trust Company is also trustee under its Trust Agreement No. 22146.

As heretofore stated the real estate in question was conveyed by deed in trust by Nels Shoan and Hilma Shoan to Chicago Title & Trust Company, on April 2, 1930, under Trust Agreement No. 24797. This land trust agreement recited that the trustee “is about to take title” to the real estate and “will hold it for the uses and purposes herein set forth.” The other pertinent provisions of said trust agreement are:

“The following named persons shall be entitled to the earnings, avails and proceeds of said real estate according to the respective interests herein set forth, to]wit:

“Harold S. Shrader

“It Is Understood and Agreed between the parties hereto, and by any person or persons who may become entitled to any interest under this trust, that the interest of any beneficiary hereunder shall consist solely of a power of direction to deal with the title to said property, and to manage and control said property, as hereinafter provided, and the right to receive the proceeds from rentals and from mortgages, sales or other disposition of said premises, and that such right in the avails of said property shall be deemed to be personal property, and may be assigned and transferred as such; that in case of the death of any beneficiary hereunder during the existence of this trust, his or her right and interest hereunder shall, except as herein otherwise specifically provided, pass to his or her executor or administrator, and not to his or her heirs at law; and that no beneficiary now has, and that no beneficiary hereunder at any time shall have any right, title or interest in or to any portion of said real estate as such, either legal or equitable, but only an interest in the earnings, avails and proceeds as aforesaid * * *.

“It is understood and agreed by the parties hereto and by any person who may hereafter become a party hereto, that said Chicago Title and Trust Company will deal with said real estate only when authorized to do so in writing and that (notwithstanding any change in the beneficiary or beneficiaries hereunder), it will on the written direction of Harold S. Shrader or such other person or persons as shall be from time to time named in writing by the beneficiary or beneficiaries, or on the written direction of such person or persons as may be beneficiary or beneficiaries at the time, make deeds for, or otherwise deal with the title to said real estate. * * *

“The beneficiary or beneficiaries hereunder, in his, her or their own right shall have the management of said property and control of the selling, renting and handling thereof, and shall collect and handle the rents, earnings, avails and proceeds thereof, and said trustee shall have no duty in respect to such management or control, or the collection, handling or application of such rents, earnings, avails or proceeds, or in respect to the payment of taxes or assessments, or in respect to insurance, litigation or otherwise, except on written direction as hereinabove provided, and after the payment to it of all money necessary to carry out said instructions. * * * If any property remains in this trust twenty years from this date it shall be sold at public sale by the trustee on reasonable notice, and the proceeds of the sale shall be divided among those who are entitled thereto under this trust agreement.”

The position of the Lauth Trust, the judgment creditor of Shrader, as stated in its brief is as follows: “The only question to be determined in this proceeding is entirely one of law. The lien of the appellant's judgment is or is not superior to that of the trust deed. If this court determines that the Statute of Uses did not vest title in Harold S. Shrader to the premises in question then the decree should be affirmed, but should the court adjudge that appellant's position is legally sound then this court should and, of course, will reverse the decree in that particular and remand the cause to the Superior Court of Cook County so that a decree may be entered therein finding and fixing the lien of the judgment as a first and superior lien and directing the sale of the premises to satisfy the lien of the judgment in the first instance and the balance over to be applied on account of the mortgage indebtedness.”

In support of its position appellant insists that no duties or obligations are imposed upon the trustee under Trust Agreement No. 24797, heretofore set forth, and that, therefore, said agreement constitutes a mere nominal, naked, dry or passive trust, which was executed by the Statute of Uses (Sec. 3, ch. 30, Ill.Rev.Stats.1937), immediately vesting the legal title to the property in Shrader, the beneficiary of the trust and the judgment debtor; and that the legal title to the property being in Shrader when appellant's judgment was entered against him and the rendition of said judgment having preceded the execution of the trust deed securing the mortgage indebtedness, appellant's lien on the property involved was prior and superior to the lien of the trust deed. Many authorities are cited to sustain the proposition that although words of express trust are used in the grant or devise of an estate in land to a trustee, where such trust is a passive one, imposing no active duties upon the trustee, the Statute of Uses operates to vest the legal title in the cestui...