Harrison v. Kamp

• Decision Date: 14 November 1946
• Docket Number: No. 29603.,29603.
• Citation: 69 N.E.2d 261,395 Ill. 11
• Parties: HARRISON et al. v. KAMP et al.
• Court: Illinois Supreme Court

395 Ill. 11

69 N.E.2d 261

HARRISON et al.

v.KAMP et al.

No. 29603.

Supreme Court of Illinois.

Sept. 18, 1946.

Rehearing Denied Nov. 14, 1946.

Appeal from Circuit Court, Putnam County; Joseph E. Daily, judge.

Suit by W. S. Harrison, trustee, and Kathryn Krenz and others, against Helena Kamp, Fred Potter, and others for a decree that trust was valid, for confirmation of the title of W. S. Harrison, trustee, to realty covered by the trust, and to have owners of trust certificates adjudged to have no interest in the realty itself, but merely a personal property interest. Fred Potter and others filed a cross-complaint to have the owners of stock certificates adjudged to have an interest in the realty itself and for a partition thereof, and all but one of the plaintiffs answered the cross-complaint. From a decree ordering partition, Kathryn Krenz and six other plaintiffs appeal, and Fred Potter and others move to dismiss the appeal.

Motion denied, and decree affirmed.

W. C. Overbeck, of Henry, and Clyde Mitchell and Fremont M. Kaufman, both of La Salle, for appellants.

Arber, Swain & Johnson, of Peoria (Frederick V. Arber, of Peoria, of counsel), for appellees.

WILSON, Justice.

A decree of the circuit court of Putnam county ordered partition of an improved parcel of real estate. From this decree, seven plaintiffs prosecute this appeal, a freehold being necessarily involved.

Walter S. Harrison was the successful bidder at a mortgage foreclosure sale on December 15, 1933. The purchase was made in behalf of the legal owners and holders of mortgage notes aggregating $32,000, secured by the property foreclosed. A master's deed was obtained on July 23, 1935, and caused to be placed of record. Although title was taken in Harrison's name, individually, it is admitted that he took title as trustee for the noteholders, and at their direction. Thereafter, on August 8, 1935, a trust agreement was entered into between the noteholders and Harrison, as trustee. By the terms of the agreement, the trustee was empowered to control and manage the property, to lease it from year to year, to collect rents, pay insurance premiums and taxes, and keep the property in a substantial state of repair. The agreement provides that upon receiving the written consent and on the direction of the former noteholders, or their assignees, representing seventy-five per cent of the total amount, the trustee shall sell the real estate constituting the corpus of the trust, in whole or in part, and upon payment of the expenses of the trust, make prorata distribution of the balance. The trustee, it is provided, shall deliver to the former noteholders a ‘Participation Trust Certificate’ setting forth their interest in the trust estate. He is required to furnish each of the former noteholders an annual written report on or about March 1 and, at this time, make distribution of any moneys the beneficiaries are then entitled to receive. Paragraph (i) declares that the interest of each of the former owners of the mortgage notes, and their assignees, in an amount to be received under the trust, shall be determined by giving to him the proportion which his principal amount bears to the total principal amount, represented by the signers, and ‘The holder of a Participation Trust Certificate shall have no interest, legal or equitable, in any specific property, but his right hereunder shall be to share in the proceeds of said Trust as herein provided, and his right and interest shall, for the purposes of inheritance and transmission, or otherwise, be taken and considered as personal property.’ The purpose of the trust as described as the protection and preservation of the beneficiaries from loss on their original investment. Paragraph (k) adds, ‘It is the desire of the First Parties (owners of mortgage notes) that the property be sold as soon as conditions warrant, distribution of the proceeds be made, and the Trust terminated. Should seventy-five (75%) per cent of the aggregate represented by the First Parties or their assignees agree to accept an offer or offers received by the Trustee * * *, for the purchase of said real estate or any part or parts thereof, then and in such case, said Trustee, * * * shall be authorized, to accept such offer or offers, and give, execute and deliver to the purchaser or purchasers thereof a good and sufficient deed or deeds of conveyancethereto.’ The agreement was signed by twenty-six persons, parties of the first part, and by Harrison. The agreement was not signed by the executor of the will of Catherine G. Peterman, deceased, owner of a note for $500, although it was signed by Walter C. Overbeck, as attorney in fact, for Fred Potter, as executor. Michael Ziegler, the owner of a note for $1000, did not sign the agreement until 1943. The trust certificates recite that the holders have no interest, legal or equitable, in any specific property, but only the right to the proceeds of the trust, as provided in the declaration of trust.

Between August 8, 1935, and the fall of 1943, several owners of notes, who signed the trust agreement, died. None of the devisees or legatees, or heirs, signed the trust agreement. On January 4, 1944, Harrison, as trustee, together with the owners of all participation trust certificates, except two, namely, the estate of Catherine Peterman and the estate of Michael Ziegler, holding in the aggregate a 3/64 interest, filed their complaint in the circuit court of Putnam county, seeking a construction of the trust agreement. Later, on June 15, 1944, an amended complaint was filed, setting out the interests of the holders of trust certificates based upon the construction of the agreement that a valid equitable conversion was effected. Plaintiffs alleged that since the delivery of the master's deed and the execution of the trust agreement Harrison, as trustee, had a purchaser for the assets of the trust at a price acceptable to each cestui, but, the agreement not containing a specific termination date, a question had arisen with respect to the power of the trustee to sell the real estate. The relief sought, so far as relevant, was that the court (1) decree the validity of the trust and confirm Harrison's title, as trustee, for the benefit of the certificate holders, and (2) adjudge that the owners of the trust certificates have no interest in the real estate itself and, conversely, that their interest is personalty only, and in the proceeds of the sale of the property.

Fred Potter, as executor of the will of Catherine G. Peterman, deceased, answered, denying that he executed an instrument authorizing Overbeck to sign his name, as executor, by Overbeck, as his attorney in fact, and averring that he could not delegate his fiduciary duties to an agent or attorney in fact. Answering further, Potter averred that the persons named in the amended complaint owned undivided equitable interests in the real estate involved. The answer sets forth the alleged owners of equitable interests in the land, these owners being different from those named in the amended complaint as owners of trust certificates, to the extent that certificates were assigned and several persons died testate or intestate, and names their successors in interest. The answer avers, further, that Harrison has no power or authority to sell the real estate except to convey an undivided interest therein to the persons named in the agreement in the undivided proportions set forth, and to those who succeeded by will or descent to the rights of an original owner of an interest in the real estate.

Plaintiffs replied, denying that Potter, as executor, did not sign the trust agreement either by himself or his duly authorized agent and attorney in fact, and adding that they are not advised when Michael Ziegler signed the agreement but that he did sign it.

Subsequently, Potter, as executor of Catherine Peterman's will, with the parties in interest under her will joining therein, and Augusta Ziegler, as executrix of the will of Michael Ziegler, deceased, with the heirs, devisees and legatees in the will joining therein, filed a cross complaint. By this pleading, the cross plaintiffs alleged that the trust agreement failed to create an equitable conversion of the land involved, because it was not signed by all persons having an interest in the land, and for the reason the agreement contains no specific termination date, thereby violating the rule against perpetuities; that an equitable conversion having failed and the agreement being invalid, the persons named in the cross complaint are equitable owners of the real estate, and their interests are not personal property. The cross complaint describes the fractional interest of all parties, including Potter, as executor of the will of Catherine Peterman, in trust for the persons named in the will, and also including 2/64 to Augusta Ziegler as life tenant under the will of Michael Ziegler, deceased, with remainder to his children. Additional allegations are that all the legatees and devisees named in the will of Catherine Peterman had conveyed their interest by quitclaim deed to Potter, as executor, in trust, to sell and dispose of their undivided equitable interest in the real estate.

All but one of the parties plaintiff in the amended complaint, representing 58/64 of the total interests involved, answered the cross complaint, denying that the trust agreement was not executed by all parties in interest, but if signed by an agent or attorney in fact in behalf of a principal who did not have such authority, the parties in interest ratified the act of execution by accepting the participation trust certificates issued by the trustee and annually accepting dividends from him, and were estopped to challenge the validity of the execution. The answer set forth special defenses, first, that the agreement was signed by Potter, as executor, by Overbeck, his attorney in fact, at the specific direction of the...