Leggroan v. Zion's Savings Bank & Trust Co., 7481

• Decision Date: 12 June 1951
• Docket Number: No. 7481,7481
• Citation: 120 Utah 93,232 P.2d 746
• Court: Utah Supreme Court
• Parties: LEGGROAN et al. v. ZION'S SAVINGS BANK & TRUST CO.

Page 746

232 P.2d 746

120 Utah 93

LEGGROAN et al. v. ZION'S SAVINGS BANK & TRUST CO.

No. 7481.

Supreme Court of Utah.

June 12, 1951.

David H. Oliver, Raymond R. Brady, Salt Lake City, for appellant.

H. P. Thomas, Salt Lake City, for respondent.

WOLFE, Chief Justice.

This action was instituted by Peter D. Chambers and Louis Leggroan to compel defendant, respondent bank, trustee of a trust created by Samuel D. Chambers, deceased, to account for the assets of said estate claimed to still remain undistributed in the hands of the trustee or lost through negligence or misfeasance of the trustee, and to make distribution of assets and accruals asserted. The two original plaintiffs died while the action was pending and the present plaintiffs were substituted. Defendant defaulted and the trial court decree an accounting before a referee. The matter was heard and the referee accepted defendant's accounting showing the estate had been entirely distributed. The trial court adopted the referee's findings in toto and gave judgment to that effect. From this decision plaintiff prosecutes this appeal.

The facts, as found by the referee and adopted by the lower court show that in March, 1922, Samuel D. Chambers and Amanda Chambers, his wife, entered into a deed of trust naming defendant bank trustee. By this deed all property of the trustor was transferred to the bank and Chambers and his wife named as life tenants. Three notes, of $11,500 value, constituted the original trust res. The trustee was directed to collect all rents and profits from the res and deposit same in the trustee bank to the credit of Samuel D. Chambers, subject to his order and use so long as he lived. If his wife survived him, she was to have a life estate under the same conditions. Upon the death of the two life tenants, the trustee was to convert the res into cash, pay obligations and distribute the residue to the remaindermen, the children and grandchildren of the life tenants including the two original plaintiffs to the complaint. The time, method and place of conversion was left to the trustee's discretion. It was stipulated that the trustor could include after-acquired property in the fund and that such additions would be described in a list to be attached to the trust deed.

In 1923 defendant bank, as trustee, opened a savings account for the settlor and deposited therein cash accretions of the trust. All income or money from the conversion of trust property went into this account. From 1923 until November, 1929, $28,255.75 was deposited in this account. In November, 1929, when the trustor died, the account balance was $5,066.37. Chambers' wife predecesed him. In addition to the cash balance, there was, at the time of trustor's death, other property in the trust consisting of notes, bonds and stocks valued at $11,805.00. Interest and other credits brought the total to $17,707.00. The referee found the trustee was credited with $4,459.00 for trust expenditures, leaving $13,248.00 for distribution to remaindermen. He further found that this sum was distributed by the trustee according to the terms of the trust, beginning in 1929 and ending in 1935. The two original plaintiffs in this action received payments of $2,000.00 in 1929, approximately $1,000.00 in 1931 and $312.00 in 1935. The present action was begun in 1945. No list, describing property added to the res from 1922 to 1924, was attached to the trust deed.

Defendant pleaded statutes of limitation and laches in addition to asserting that the trust res had been fully distributed in accordance with the trust deed, with the exception of some wholly worthless stocks. Because all persons connected with the bank who had personal knowledge of this trust and its transactions have died since 1935 and because the facts concerning the trust are beclouded by the passing of more than 15 years time and because many records of the trust have been lost, destroyed or are so filed it would take weeks of searching to unearth them, the defendant relied most heavily on limitations barring this action. Plaintiff asserts in rebuttal that no limitations are applicable and in support of this contention he claims the defendant comes under Section 104-2-34 U.C.A. 1943. This section provides: 'To actions brought to recover money or other property deposited with any bank, trust company or savings or loan corporation, association or society there is no limitation.'

This appeal may be resolved on the single issue as to whether limitations, either statutory or equitable, are controlling.

If we were here confronted by a deposit in the ordinary legal sense of that term, that is a transaction in which the bank becomes the debtor of the depositor for the amount placed in the bank, it would seem that the plaintiff would prevail. Under the Utah Code, the statute of limitations does not run as to this type of account. We need not determine whether it would run after demand and refusal. Limitations and laches do, however, run against actions in respect to a trust. In the instant case, money and property was placed in defendant bank, not to form a creditor-debtor relationship, but to create a trustor-trustee beneficiary relationship. As to the latter, the bank holds legal title and has possession of the assets but is not a debtor. Equitable title to the trust fund is in the beneficiaries. The deposit of money to the credit of the beneficiaries was the deposit of money in trust for them and made them cestuis and not creditors. In regard to an ordinary deposit, the bank holds both legal and equitable title and is absolute owner of the fund, subject only to an obligation to repay the depositor upon demand. As trustee, however, the bank cannot use the money as its own but must carry out the terms of the trust, otherwise it commits a breach of its fiduciary duty. No different rule as regards the application of limitations pertains when a trust company is a trustee simply because such company uses the banking side of the institution to deposit monies for safekeeping while it is a trustee. That is simply an intra-institution transaction.

If, as plaintiff contends in his brief, the trust were void, the res might then be an ordinary deposit. But the mere fact the trustor reserves the right to modify or revoke the trust or use the income does not invalidate it. See Allen v. Hendrick, 104 Or. 202, 206 P. 733, 741, where the Supreme Court of Oregon stated:

'Indeed, the test for determining whether a writing has effected a trust or is testamentary in character is whether the maker intended the instrument to have any effect until after his death, or whether he intended to transfer some present interest. (Citing cases.)

'If, therefore, the father intended to pass legal title to the son, as trustee, reserving however, a life estate in the certificates and funds which the certificates represented, with the right to call for a part or all of the funds * * * with remainder over to the son as absolute owner, then the transaction was a valid trust * * *.'

A similar view is expressed by Professor Bogert in Trust and Trustees, Vol. 1, pages 336 and 339. The intent of the trustor in the instant case was to convey a present interest to remaindermen. The deed provided that the trustee was to collect rents and profits from the res and, after paying one-tenth to the Church of Jesus Christ of Latter-Day Saints, to deposit the remainder to the account of Samuel D. Chambers, subject to his order and use so long as he lived.

Plaintiff further urges that the trust was void because of an alleged alteration in the deed, which added the phrase, ' the trustee shall receive reasonable costs and expenses'. This provision of the law would imply in any event and therefore the alteration, if one there was, is not material. Before an alteration will avoid an instrument it must materially alter the sense of the document and be made after execution and delivery.

The plaintiff further contends that even though the trust is valid as to the original res, it is void as to all of the after-acquired property because no list describing the additions was ever attached to the original deed. This defect does not prevent the property in question from being includable in the res. In interpreting the terms of the trust, the inquiry is as to the intent of the trustor. What was intended to be included in this trust? In this case, from 1923 to 1929, the trustor deposited property in the trust of a value of about $28,000.00. Both trustor and trustee treated these accretions as part of the res. The attachment of a list of added items to the deed was not a condition of their inclusion in the res. Failure to attach the list was not fatal to the trust for the intent of the settlor, as shown by his acts and the language of the deed, was to include more than the originally delivered property in the fund. Furthermore, a settlor has the inherent power to add property to his trust with or without a reservation of such right.

When does the statute of limitations or laches begin to run in favor of the trustee of an express trust and against the cestui? It is clear that while an express trust is in force and...