First Trust Co. of Lincoln v. Carlsen
| Citation | 261 N.W. 333,129 Neb. 118 |
| Decision Date | 17 May 1935 |
| Docket Number | 29272. |
| Parties | FIRST TRUST CO. OF LINCOLN v. CARLSEN ET AL. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. Where a trustee for bondholders of a real estate mortgage entered into an agreement for an extension of the maturity date of the mortgage without authority from the bondholders and they subsequently, without objection, permitted copies of the extension agreement and new interest coupons to be attached to the original bonds, presented all of the coupons for payment as they fell due and received payment of the same, they thereby ratified the extension agreement and made it valid by adoption.
2. It is the duty of a trustee to fully inform the cestui que trust of all facts relating to the subject-matter of the trust which come to the knowledge of the trustee and which are material for the cestui que trust to know for the protection of his interests.
3. Where it appears that a trustee has practiced concealment evasion or misrepresentation, thereby depriving the cestui que trust of material information relative to the subject-matter of the trust to his injury, the trustee together with the persons participating in the wrong, may be required to respond in damages.
4. " The degree of participation in the commission of an actionable tort does not affect the extent of liability, and all persons who instigate, promote, encourage, advise, countenance, cooperate in, aid, or abet the commission of an actionable wrong by another are liable as principals to the party injured to the same extent and in the same manner as if they had performed the wrongful act themselves." Dickinson v. Lawson, 125 Neb. 646, 251 N.W. 656.
5. The officers of a corporation are responsible for the fraudulent acts of the corporation in which they participate, and in a suit for fraud, if fraud is proved, the law will look through the corporation to the officers who acted in the matter, and the officers who acted in the premises are proper parties defendant.
6. Every violation by a trustee of a duty required of it by law, whether willful and fraudulent, or done through negligence, or arising through mere oversight or forgetfulness, is a breach of trust.
7. Evidence examined, and held insufficient to sustain the judgment in the amount rendered by the trial court.
Appeal from District Court, Lancaster County; Shepherd, Judge.
Action by the First Trust Company of Lincoln against Carl C. Carlsen and others. From an adverse judgment and from an order denying a motion for a new trial, defendants appeal.
Judgment reversed, and cause remanded for a new trial.
Frank A. Peterson and Perry, VanPelt & Marti, all of Lincoln, for appellants.
Beghtol, Foe & Rankin, of Lincoln, for appellee.
Heard before GOSS, C. J., and ROSE, GOOD, EBERLY, DAY, PAINE, and CARTER, JJ.
This is an action at law brought by the appellee, First Trust Company, as successor trustee of the Lincoln Trust Company, against the appellants for damages for the breach of a trust agreement in which the Lincoln Trust Company was named as trustee. The jury returned a verdict for appellee for $28,867, and judgment was entered for that amount. Each of the appellants filed a motion for a new trial, from the overruling of which this appeal is taken.
The record discloses that the Lincoln Trust Company was organized as a trust company with its principal place of business at Lincoln, Nebraska, and that its operations were directed and controlled by a board of directors, an executive committee, a loan committee and various officers including a president, vice-president and trust officer. The appellant Carl C. Carlsen was president, a director and member of the executive and loan committees. The appellant John A. Reichenbach was vice-president, a director and member of both committees heretofore mentioned. The appellant William R. Mellor was trust officer, a director and member of both committees; and the appellant Paul H. Holm was a director and member of the executive and loan committees.
The record further discloses that the Lincoln Safe Deposit Company was a corporation authorized to own and hold real estate. It was a holding company for the Lincoln Trust Company and was owned and managed by the officers, directors and stockholders of that company.
It appears from the evidence in this case that on June 30, 1919, the Lincoln Safe Deposit Company loaned Webb Kellogg the sum of $45,000 and took as security therefor a mortgage for a like amount on 480 acres of land in Dixon county, Nebraska, due March 1, 1925. The bonds accompanying the mortgage were sold to customers of the Lincoln Trust Company. This suit is brought by the First Trust Company for the benefit of the present owners of these bonds.
The mortgage contained the following provision: " And it is further agreed herein, by and between said parties, their heirs, devisees, administrators, executors and assigns, that whenever any of the bonds hereby secured, shall have passed into other hands than said mortgagee, by indorsement, assignment or otherwise, then and in that case, the Lincoln Trust Company, is hereby constituted a trustee, to demand payment thereof, both principal and interest; to demand payment also of any and all losses occasioned by or through insurance or otherwise; to bring actions at law for the recovery thereof; and to foreclose this mortgage for and on account of breach in its conditions; and when any money as above mentioned shall have come into the hands of said trustee, to disburse the same as required; and, generally, under said trust to do and to perform each and every act in respect of said indebtedness that said mortgagee could do and perform."
On January 12, 1920, Webb Kellogg sold the lands covered by the mortgage to J. F. Whittemore, subject to the mortgage lien of $45,000. On August 18, 1922, Whittemore conveyed said lands to the Farmers National Bank at Wakefield, subject to the $45,000 mortgage, and on January 31, 1925, the Farmers National Bank conveyed the land to R. H. Mathewson subject to the same lien. On February 2, 1925, Mathewson entered into an extension agreement with the Lincoln Safe Deposit Company whereby the loan was extended to March 1, 1930. The outstanding bonds were called in and a copy of the extension agreement and interest coupons for the additional five-year period were attached to the original bonds. The interest coupons thus attached all bore the signatures of R. H. Mathewson and Elizabeth M. Mathewson. On February 26, 1925, Mathewson conveyed the land back to the Farmers National Bank of Wakefield subject to the mortgage of $45,000. The Farmers National Bank of Wakefield subsequently became insolvent and was placed in the hands of a receiver. On August 16, 1929, the receiver conveyed said lands to the Lincoln Trust Company for a consideration of $25 subject to the mortgage of $45,000. On March 1, 1929, a default in the payment of interest occurred and the same was advanced by the Lincoln Trust Company. On November 15, 1929, the Lincoln Trust Company conveyed the mortgaged premises to the Lincoln Safe Deposit Company subject to the mortgage for $45,000, but did not have the deed recorded. On or about March 1, 1930, some person connected with the Lincoln Trust Company caused certain coupons to be prepared bearing the unauthorized facsimile signatures of Webb Kellogg and Margaret Kellogg and caused them to be attached to the original bonds. Advancements were made to pay interest coupons falling due on and prior to September 1, 1931, but after this date no further interest was paid. On July 9, 1932, the Lincoln Trust Company and the Lincoln Safe Deposit Company were adjudged bankrupts by the United States District Court, District of Nebraska. On September 7, 1932, the deed conveying the mortgaged premises from the Lincoln Trust Company to the Lincoln Safe Deposit Company was placed of record by the trustee in bankruptcy.
The appellee contends that it was the duty of all the appellants by virtue of their offices to deal honestly and fairly with persons having relations with the Lincoln Trust Company; to diligently protect the interests of beneficiaries of trusts; to abstain from profiting personally or from permitting the Lincoln Trust Company to profit from trust relations; and to conduct the business of the Lincoln Trust Company so as not to defraud beneficiaries of trusts. The allegations of the petition are to the effect that the appellants failed to perform the duties required of them by law and the prayer is for the damages resulting to the beneficiaries of the trust.
The answers of the appellants allege in substance that the conveyance of the mortgaged premises to the Lincoln Trust Company was for the benefit of bondholders and that the holders of the bonds acquired and still have a valid lien on the premises; that the value of the security was in excess of the amount of indebtedness and that the extensions of the mortgage granted by the Lincoln Trust Company or the Lincoln Safe Deposit Company deprived the bondholders of no rights under the mortgage and therefore did not cause them a loss.
The reply denies that the security of the mortgage was not impaired or lost by the conduct of the Lincoln Trust Company and the Lincoln Safe Deposit Company; denies, also, that the mortgage is still a lien on the lands covered by the mortgage and that the bonds are valid and enforceable obligations; and alleges that by the fraudulent manipulation of said bonds by the appellants, as officers and directors of the Lincoln Trust Company and the Lincoln Safe Deposit Company, the bonds were avoided and the mortgage lien extinguished.
The evidence is not disputed that the original loan of $45,000 was made and the mortgage taken...
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