Chicago Title & Trust Co. v. Chief Wash Co.

• Decision Date: 16 February 1938
• Docket Number: No. 24391.,24391.
• Citation: 13 N.E.2d 153,368 Ill. 146
• Court: Illinois Supreme Court
• Parties: CHICAGO TITLE & TRUST CO. v. CHIEF WASH CO. et al.

368 Ill. 146

13 N.E.2d 153

CHICAGO TITLE & TRUST CO.

v.CHIEF WASH CO. et al.

No. 24391.

Supreme Court of Illinois.

Feb. 16, 1938.

Suit to foreclose a trust deed by the Chicago Title & Trust Company, as successor trustee thereunder, against the Chief Wash Company and others, in which named defendant filed a counterclaim for plaintiff's removal as trustee and damages for wrongful institution of the foreclosure suit and the First National Bank of Ottawa and others filed an intervening petition for plaintiff's removal as trustee, appointment of a successor, and an accounting. A decree removing plaintiff as trustee and appointing a successor, to whom plaintiff was directed to account and surrender the trust property, and an order denying plaintiff's subsequent petition for permission to resign as trustee and vacation of the decree, were affirmed by the Appellate Court, 291 Ill.App. 275, 9 N.E.2d 475, and plaintiff appeals.

Reversed and remanded, with directions.

ORR and JONES, JJ., dissenting.Appeal from Third Division of the Appellate Court, First District, on Appeal from Superior Court, Cook County; Walter T. Stanton, Judge.

Defrees, Buckingham, Jones & Hoffman, Castle, Williams & McCarthy, and Norbert B. Tyrrell, all of Chicago (Don Kenneth Jones, Vincent O'Brien, and John Merrill Baker, all of Chicago, of counsel), for appellant.

John A. Brown, of Chicago (Maclay Hoyne, of Chicago, of counsel), for appellees.

WILSON, Justice.

The plaintiff, the Chicago Title & Trust Company, as successor trustee to the Cody Trust Company, filed a complaint in the superior court of Cook county against the Chief Wash Company (hereinafter designated defendant) and others, to foreclose a bond issue. Defendant answered and also filed a counterclaim seeking the removal of the successor trustee and demages against it on account of an alleged wrongful institution of the foreclosure suit. Subsequently, the First National Bank of Ottawa and others (hereinafter referred to as intervening petitioners), claiming to be the holders of all the unpaid bonds and coupons, conformably to leave granted, filed their joint petition by which they sought the removal of plaintiff as trustee, the appointment by the court of a successor, and an accounting. Plaintiff interposed answers to both the counterclaim of defendant and the intervening petition of the bondholders. The issues raised by the intervening petition and answer were tried before the chancellor, who rendered a decree on June 5, 1936, removing plaintiff as trustee and appointing a successor to whom plaintiff was directed to account and to surrender the trust property. We note that the issues made by the complaint and the counterclaim and the answers thereto were not set for hearing and remain undecided. By a petition filed on June 26, 1936, plaintiff set forth the suggestion of the court that it might resign the trusteeship, expressed its willingness so to do, and accordingly prayed that the decree of removal of June 5 be vacated and that it be permitted to resign as trustee. This petition was denied on July 8, and on July 15 plaintiff filed a second petition which again expressed its willingness to resign the trusteeship, renewed its request to resign, and asked reconsideration of the order of July 8 and the vacation of the decree. The second petition was denied on July 17, 1936. Seeking a reversal of the order of July 17, and also of the decree of June 5, 1936, plaintiff prosecuted an appeal to the Appellate Court for the First District. The appeal resulted in an affirmance. Chicago Title & Trust Co. v. Chief Wash Co., 291 Ill.App. 275, 9 N.E.2d 475. Plaintiff's petition for leave to appeal to this court has been granted and the record is before us for further review.

The bond issue consisting of 150 bonds having an aggregate par value of $65,000, dated June 1, 1928, was secured by a trust deed in the nature of a mortgage upon a parcel of real estate improved by a building used solely by defendant in the operation of its laundry business. Rents, issues, and profits were also pledged to secure the bonds and, in addition, for the benefit of persons making disbursements or incurring costs and expenses under the indenture. The valuable laundry equipment and machinery used in the conduct of defendant's business were not pledged to secure the payment of the bonds. In December, 1933, a receiver was appointed for the original trustee, the Cody Trust Company, and he, in due course, resigned the trusteeship under the trust deed. In February, 1934, defendant, upon a court order, obtained from the receiver of the trust company its list of bondholders, and on February 16, March 22, and April 7, 1934, communicated by letter with the bondholders in an attempt to persuade them to assent to an extension plan. Copies of the plan were enclosed with the letter of April 7. Plaintiff, nominated successor by the trust deed, accepted the trusteeship on or before June 14, 1934. Prior thereto it had been frequently advised of the negotiations in progress relative to the proposed extension. When plaintiff became trustee defaults existed in the payment of the principal maturities due June 1 and December 1, 1933, and June 1, 1934, and of interest installments on the dates specified. The payment of taxes was likewise in arrears. By June 18, 80 per cent. in amount of the outstanding bonds, namely, $45,000 out of $55,900, had been deposited pursuant to defendant's extension plan. On the day last named its attorneys wrote plaintiff formally advising it of the extension proposal, the appointment of the Trust Company of Chicago as depositary and of the consent by owners of 80 per cent. of the bonds outstanding to the plan described in defendant's letter of April 7. Attention of the trustee was particularly directed to a provision of the trust deed to the effect that the trustee was not required to foreclose unless 25 per cent. of the bondholders demanded such action. Defendant's letter continued: ‘It is obvious that no such demand can be made on you, and therefore any foreclosure would be brought on your own initiative, with the attendant risk.’

Because of the defaults in payment of principal, interest, and taxes, plaintiff elected, nevertheless, to declare the principal of all the outstanding bonds due, and, on July 7, without notice to defendant mortgagor or the bondholders, filed its complaint for foreclosure and the appointment of a receiver. The complaint charged that the trustee had rendered and was performing services for which it was entitled to reasonable fees, and that it had advanced moneys and incurred liabilities for costs, fees, and expenses incident to suit, for which it was entitled to a prior lien under the terms of the trust deed. At no time prior to the filing of the bill to foreclose, so far as the record discloses, did any bondholder request or demand that plaintiff institute the litigation or, on the other hand, refrain from such action. One bondholder, at least, protested vigorously to plaintiff against its action shortly after the suit was filed.

Plaintiff moved for the appointment of a receiver on July 25, 1934. An order was entered continuing the motion to September 15, 1934, but directing defendant to pay to plaintiff, as trustee, $100 per month to be applied toward taxes pending disposition of the application for receiver. Other than amending its complaint on August 3, 1934, by joining additional defendants, plaintiff did not further prosecute the foreclosure suit. Defendant's answer filed on August 27, 1934, averred that plaintiff had agreed not to foreclose without first advising it, the defendant. By September 15, 1934, defendant had succeeded in obtaining the deposit of all the bonds, with the exception of $800 in par value. The deposit of the bonds was accomplished, in part, by the purchase of certain bonds of defendant by its secretary and treasurer. The plaintiff's motion for a receiver was denied on September 19. Thereafter, upon defendant's motion, the chancellor ordered plaintiff, as trustee, to apply on taxes the two payments of $100 each, made by defendant to plaintiff prior to disposition of the motion for receiver.

Plaintiff refused to execute the extension agreement because defendant mortgagor declined to pay its bill representing fees and disbursements already incurred in connection with accepting the trust and in bringing the foreclosure suit. Its refusal to execute the extension agreement rendered it necessary for defendant to obtain from intervening petitioners authority for the depositary to cause endorsements to be made upon the bonds evidencing the extension of the time of their payment and to attach extension interest coupons. Thereafter, defendant executed a supplemental indenture as additional evidence of the extension in which the depositary joined. Plaintiff's letter to one of the attorneys for defendant, dated October 18, 1934, set forth costs, expenses, and fees aggregating $1,289.38 which defendant refused to pay. Of this amount $514.63 represented fees of the trustee which included moneys advanced for auditing the account of its predecessor, the Cody Trust Company, acceptance and insurance fees, and $300 for services purported to have been rendered in the foreclosure proceeding, including the execution of the proposed extension agreement and certification of the extended bonds. Additional items listed were $124.75, estimated by plaintiff's attorneys for court costs advanced and examinations of title, and $650 for attorneys' fees to the date of the letter. One of the defendant's attorneys, in a letter to plaintiff dated February 18, 1935, protested that the items were unreasonable and exorbitant, and asserted that since the completion of the extension the foreclosure suit had become one for fees. The suggestion was made that much time and considerable expense could be saved if the trustee resigned and dismissed the suit. No offer to dismiss de...