In re Lunt

• Citation: 16 N.W.2d 25,235 Iowa 62
• Decision Date: 17 October 1944
• Docket Number: 46478.
• Parties: In re LUNT.
• Court: United States State Supreme Court of Iowa

16 N.W.2d 25

235 Iowa 62

In re LUNT.

No. 46478.

Supreme Court of Iowa

October 17, 1944

[Copyrighted Material Omitted]

McCoy & McCoy and Thomas J. Bray, all of Oskaloosa, for appellants, Walter L. Lunt, Trustee of the Henry W. Lunt Trust, Walter L. Lunt, Gordon R. Lunt, and Willie C. Lunt.

Stipp Perry, Bannister & Starzinger, of Des Moines, for appellees, Elba Lunt Van Gorden and Mattie Lunt Van Gorden.

J C. Eichhorn, of Oskaloosa, for appellee Edward L. Butler, Trustee of the Henry W. Lunt Trust.

MANTZ, Chief Justice.

I. The present controversy had its inception on July 6, 1943, when E. L. Butler and Walter Lunt, trustees of the Henry W. Lunt Trust, filed in the district court of Mahaska County, Iowa an application stating that they had on hand in a checking account of said trust about $4,600, and that in their judgment $3,750 of that account could be divided into five equal shares of $750 to each of the beneficiaries of said trust. They further stated that they were informed that there was a dispute as to the disposition of the share formerly owned by Willie C. Lunt, and that according to their information such share had been assigned to Gordon Lunt. The trustees prayed that the application be set down for hearing and notice given and upon hearing that they be authorized and directed to whom the respective shares should be distributed.

Following the filing of such application two of the beneficiaries of such trust, to wit, Elba Lunt Van Gorden and Mattie Lunt Van Gorden, made answer to the application and stated that Willie C. Lunt was a beneficiary in the Henry W. Lunt trust deed and tha about April 7, 1925, that trust, through its trustees paid out $7,500 for the use and benefit of said Willie C Lunt, borrowed the same from the Aetna Life Insurance Company and evidenced the same by note signed by the living beneficiaries and trustees payable to the Aetna Life Insurance Company, and secured by a mortgage on 126 acres of trust land known as the Gable Farm in Mahaska County; that Willie C. Lunt agreed to pay said note and mortgage and was primarily liable for the same; that on June 21, 1937, the mortgage was foreclosed and judgment rendered on the note against Willie C. Lunt and the other signers of the note, including the trustees of the Henry W. Lunt Trust in the sum of $9,385.85; the land was sold under special execution on July 31, 1937, leaving a deficiency judgment of $2,107.98. They further answered that in equity and good conscience Willie C. Lunt's share and interest in said trust fund should be charged with the amount of said judgment with interest at 5% from June 21, 1937.

They alleged that on June 16, 1937, in violation of the trust agreement, Willie C. Lunt conveyed his interest in such trust fund to Gordon R. Lunt, which conveyance was recorded July 9, 1937; that Gordon R. Lunt was not an innocent purchaser for value of said interest and took the conveyance subject to the charge against the same which existed as to Willie C. Lunt.

The answering beneficiaries prayed the court to order and establish a lien or charge against the share and interest of Willie C. Lunt and his successor and grantee, Gordon R. Lunt, as to said 1/5 interest of Willie C. Lunt, in the sum of $9,385.85 with interest from June 21, 1937 and that the amount of any distribution ordered made in the trust payable to said 1/5 interest be credited upon said charge until the amount thereof is fully repaid to said trust.

On August 16, 1943, Gordon R. Lunt filed a reply to the answer of Elba Lunt Van Gorden and Mattie Lunt Van Gorden, and denied all allegations except those expressly admitted; admitted that Willie C. Lunt, beneficiary, on June 16, 1937, conveyed his interest in the trust property held by the trustees to him; admitted the recording of the conveyance and denied the allegation of the answer that he was not an innocent purchaser for value of the interest of Willie C. Lunt and stated he purchased said interest for valuable consideration and without knowledge or notice of the claim as set forth by the answering beneficiaries and pleaded further that the so-called action against him was barred by the statute of limitations and laches.

Walter L. Lunt, as trustee and individually, adopted the pleadings of Gordon R. Lunt and amended the reply and alleged that the $7,500 paid out for the benefit of Willie C. Lunt was obtained on a note to the Aetna Life Insurance Company by the then trustees of the Lunt Trust and all of the beneficiaries of said trust except Gordon R. Lunt. That said note was secured by a mortgage on 126 acres of trust land signed by the trustees and all of the beneficiaries of the trust and their spouses, except Gordon R. Lunt; that the money was paid to the Rose Hill Savings Bank to satisfy indebtedness then owing by Willie C. Lunt; that the payment of said money to the bank did not create or constitute a debt from Willie C. Lunt to the trust, is not recoverable and that the interest transferred by Willie C. Lunt to Gordon R. Lunt is not chargeable therewith; that Elba Lunt Van Gorden and Mattie Lunt Van Gorden are estopped to assert or claim that the money voluntarily paid to the bank to discharge the debt of Willie C. Lunt is a debt owing by him to said trust and are also estopped to assert or claim that the share of Willie C. Lunt conveyed to Gordon R. Lunt is subject to or chargeable with the money paid to the creditor of Willie C. Lunt.

In short, it was the claim of Gordon R. Lunt that Elba Lunt Van Gorden and Mattie Lunt Van Gorden had asked the court to establish a lien against the 1/5 interest of Willie C. Lunt and his grantee in the sum of $9,385.85 but that the court ordered the lien be established in the sum of $30,000.

In its decree the court ordered the trustees to withhold any distribution on the interest Gordon R. Lunt acquired from Willie C. Lunt until after the other four beneficiaries of said trust had been paid the sum of $7,500 each and that the distribution of the $750 proposed to be paid to said Gordon R. Lunt on said share of Willie C. Lunt be applied to the payment and distribution of the other interests.

From this decree appeal was taken by Gordon R. Lunt, Willie C. Lunt, Walter L. Lunt, as an individual and also as trustee. Appeal was also taken by Elba Lunt Van Gorden and Mattie Lunt Van Gorden from an order of the court authorizing Walter L. Lunt, trustee, to appeal from the decree of the court and for that purpose to employ counsel to represent him at the expense of the trust.

Herein the first named will be referred to as appellants; the last named as appellees.

The other trustee, Edward L. Butler, did not join in either of the appeals.

We will first consider the appeal of Gordon R. Lunt, Willie C. Lunt, and Walter L. Lunt, as an individual and a trustee.

II. In essence, the principal controversy relates to the disposition to be made of the trust income going to the share formerly owned by Willie C. Lunt and later by him conveyed to Gordon R. Lunt. Appellees claim that the entire amount paid by the trust in 1925 for and on behalf of Willie should be charged to his former share.

Appellants contend that no such claim can be legally granted and urge as a defense the statute of limitations, laches, estoppel, and that Gordon purchased the share of Willie in good faith and for a valuable consideration.

As above stated the lower court charged the 1/5 share formerly owned by Willie, and its income, with the payment of $7,500 advanced to Willie in 1925.

Few of the facts are in dispute. The creation of the trust and its operation; the properties included therein, the beneficiaries; the death of Johnson R. Lunt, a beneficiary, in 1922, and of Henry W. Lunt in 1923; the occupancy and control of a certain 126 acres included in said trust by Willie C. Lunt, a beneficiary; the financial difficulties of Willie at and prior to 1925; his obligation to the bank for a sum in excess of $7,500; the meeting of the trust beneficiaries to discuss the financial situation of Willie; the securing of a loan of $7,500 on the 126 acres from the Aetna Life Insurance Company, and its use in paying off the obligations of Willie at the bank; the signing of the note and mortgage by all of the trustees and living children of Henry W. Lunt; the foreclosure of the mortgage in 1937, the judgment and special execution sale of the 126 acres to the mortgagee with a deficiency judgment of $2,107 against the makers of the note and mortgage; the conveyance by Willie to Gordon of his share and interest in the trust before the judgment of foreclosure; and the accumulations of trust income of over $4,600 on July 6, 1943, are matters not in dispute.

While this trust was created in 1910, it seems to be conceded that prior to 1943, the trustees did not seek to make distribution of any of the trust income. Under the trust agreement the income was pledged to the care, support, and maintenance of Henry W. Lunt, the grantor therein. The record shows that following the foreclosure sale of the 126 acres in 1937, leaving the deficiency judgment of $2,107, there were no funds on hand in the trust to pay said deficiency, and that appellees herein at the request of one of the trustees paid said deficiency out of their own funds. It is quite evidence that the $3,750 offered for distribution was from income following 1937.

The trust agreement creating the same provided that the trustees should manage the trust properties and receive the income therefrom and pay expenses and upkeep and contains the following '* * * and after paying all expenses annually as hereinbefore provided, my trustees shall pay and divide all income remaining among my five children in equal shares, and should any of my five children depart this...