Piff v. Berresheim

• Decision Date: 22 March 1950
• Docket Number: No. 31235,31235
• Citation: 92 N.E.2d 113,405 Ill. 617
• Parties: PIFF v. BERRESHEIM et al.
• Court: Illinois Supreme Court

Page 113

92 N.E.2d 113

405 Ill. 617

PIFF v. BERRESHEIM et al.

No. 31235.

Supreme Court of Illinois.

March 22, 1950.

Rehearing Denied May 15, 1950.

Edward H. S. Martin and James A. Morrison, Chicago, for appellant.

Hubbard, Hubbard & Dorgan, Chicago (Alvin G. Hubbard, Chicago, of counsel), for appellees.

GUNN, Justice.

John Piff, plaintiff filed his suit in equity in the circuit court of Cook County for an accounting against George J. Berresheim, trustee of certain real estate, and Mary P. Daly et al., who were the holders and owners of the beneficial certificates in said trust. The suit is based upon the sale by the trustee, under the direction of the holders of the beneficial certificates, of two certain lots, which the plaintiff had purchased and paid for in full. The court rendered a decree for money damages in favor of the plaintiff because the lots had been conveyed to an innocent purchaser for value, and on appeal to the Appellate Court the decree was reversed and the cause remanded, with directions to dismiss the complaint for want of equity. 337 Ill.App. 658, 86 N.E.2d 411. We have allowed an appeal to this court.

On August 20, 1931, John Piff entered into a contract of purchase with the Foreman Trust and Savings Bank to purchase two lots in a land trust standing in the name of said bank, and agreed to pay $3360 for the same, upon which he received an immediate credit of $2240.06, by the exchange through the trustee of a certain other real-estate contract, and by June 27, 1933, he had made all of the payments in cash, amounting to more than $1100 of principal, and in excess of $65 interest, also taxes and special assessments, amounting to several hundred dollars. The written contract does not disclose for whom the vendor was trustee, but it is executed by one Fred W. Brummel Co. as agent, whose name was signed by George J. Berresheim, one of the present defendants. The contract also bore a printed notice, in bold type, on the front page, to make all payments to Fred W. Brummel Co. George J. Berresheim, the individual mentioned herein, at all times was the person who had contact with the plaintiff. He signed the contracts, endorsed upon plaintiff's copy the receipts for money paid, and at the completion of the payments entered upon the outer margin the words 'Paid in full June 27, 1933, G. J. Berresheim.'

Berresheim became the successor trustee to the Foreman Trust and Savings Bank sometime prior to March 17, 1944, the exact time not being disclosed. It is claimed that the Foreman Trust and Savings Bank ceased doing business in 1933, that a receiver was appointed and all records have become lost and destroyed, but Berresheim admits that the payments endorsed by him upon the contract were made by the plaintiff. The plaintiff testified that after all payments had been made he applied to Berresheim for a deed, and was told he had not yet received it from the trustee, but to wait as the company (Fred W. Brummel Co.) was going to buy up the special assessments and pass the savings on to the owners, and thus save them about one-half of that amount. This is not disputed. The evidence does not disclose anything further about the delivery of a deed, nor whether the taxes had been bought in. In 1942, the plaintiff was inducted into the army and discharged on October 4, 1945 (after three and one-half years of service). The contract between the Foreman State Trust and Savings Bank and Piff does not disclose who owned the beneficial certificates of the land trust. The answer of the defendants discloses it was formed by John P. Harding or Fred Brummel, who are both deceased.

On March 17, 1944, Annette L. Harding, Otto D. Mowry, Mary P. Daly, John H. Sasser, James P. Harding and Mary Rose

Brummel, as majority owners of the beneficial certificates of said land trust, in writing authorized and directed said Berresheim to execute an option to one Paul D. Angell to purchase all of the real estate in said land trust, including plaintiff's two lots, for $3685, and, if exercised, to deed and convey the said property to the said Angell. This option was exercised on October 30, 1944, and Berresheim executed and delivered a deed for all of the lots in said trust, including the two lots purchased and paid for by the plaintiff.

These facts are adequately set forth in plaintiff's complaint. Defendants answered that the lots were of small value; that the plaintiff had abandoned the property and was guilty of laches, and Berresheim claims that he was acting as a mere clerk and not as a trustee. In one of the answers an offer was made by some one of the defendants to reconvey, or to procure the reconveyance of said lots to plaintiff, but later this offer was withdrawn and an amended answer filed, leaving out this offer. Replies were made to all of the answers; the evidence was heard in open court, and at the conclusion thereof the court inquired whether the defendants would still procure the conveyance of said real estate to the plaintiff, and upon receiving a negative answer entered judgment for the plaintiff in the sum of $7874.26, the amount of money, interest, taxes and assessments expended by the plaintiff in the purchase and upkeep of the property. The Appellate Court reversed this judgment upon the theory that there was no liability of the beneficiaries, and because Berresheim was acting as a mere clerk, and further that laches had intervened.

At the outset it is suggested that the defendant Otto D. Mowry did not appeal from the judgment to the Appellate Court at the time the other parties appealed, but some three months after the appeal had been taken the administrator of his estate asked, and obtained leave, to join as appellant in the Appellate Court. This is assigned as disclosing a want of jurisdiction upon the part of the Appellate Court to hear and consider the case. We merely call attention to our opinion in Smith v. Farmers' State Bank, 392 Ill. 456, 64 N.E.2d 879, where we held that if part of the defendants do not join in an appeal, and cannot be injured by the appeal, it is not error to proceed with the case. Since the judgment in the lower court was against Mowry as well as the others he could not be injured by an appeal, because affirmance would not change the situation, and reversal would be beneficial to him. The point is without merit.

In considering the merits of the case we think the Appellate Court misunderstood the foundation upon which plaintiff based his suit. No claim of liability is made in the complaint because of the action of the former trustee, Foreman State Trust and Savings Bank, or the actions of any of the defendants in this case as its assignees. The complaint is directed to the actions of Berresheim, as trustee, and not as a mere clerk, as he now claims, and against the individuals who directed and authorized him to dispose of the plaintiff's property, without any notice, or without his consent. Recurrence to a few fundamental principles is in order.

A successor trustee is not liable to the beneficiaries or otherwise for a breach committed by a predecessor trustee, but he is liable for his own breach of trust committed after succeeding his predecessor. Restatement of the Law of Trusts, sec. 23; Scott on Trusts, vol. 2, p. 1181; In re Kline's Estate, 280 Pa. 41, 124 A. 280, 32 A.L.R. 926; State Street Trust Co. v. Walker, 259 Mass. 578, 157 N.E. 334. It is also settled law in Illinois that unless a trustee exempts himself from personal liability in the instrument creating the trust he is personally liable for his actions the same as though he were an individual, Austin v. Parker, 317 Ill. 348, 148 N.E. 19; Bishop v. Bucklen, 390 Ill. 176, 60 N.E.2d 872, and there is no proof in this case of the terms of the trust under which authority the Foreman State Trust and Savings Bank acted. And if there is any such defense it has not been adduced or produced by the defendants.

The other defendants, aside from Berresheim, are the heirs of the original beneficial owners of the land trust. They step into the shoes of Brummel and Harding, and, of course, take the property subject to the same trusts under which they held it. Lawrence v. Lawrence, 181 Ill. 248, 54 N.E. 918; Grove v. Willard, 280 Ill. 247, 117 N.E. 489. The business of this trust was improving and selling lots in a real-estate addition, and the interests were represented by beneficial certificates. This creates what is known as a business trust. Schumann-Heink v. Folsom, 328 Ill. 321, 159 N.E. 250, 58 A.L.R. 485. The title of the present trustee was placed in him by the heirs of the original beneficiaries of the trust.

In the case of a business trust, which is a somewhat modern method of transacting business, it has been held that the holders of the certificates may become liable for the torts or frauds of the managing trustee, where they participate in or authorize them to be done. Rand v. Morse, 8 Cir., 289 F. 339; Schumann-Heink v. Folsom, 328 Ill. 321, 159 N.E. 250, 58 A.L.R. 485; Horgan v. Morgan, 233 Mass. 381, 124 N.E. 32; First National Bank v. Chartier, 305 Mass. 316, 25 N.E.2d 733, 156 A.L.R. 112. A trustee is liable for his breach of trust, Cadwell v. Brown, 36 Ill. 103; Freer v. Lake, 115 Ill. 662, 4 N.E. 512; Towle v. Ambs, 123 Ill. 410, 14 N.E. 689; White v. Sherman, 168 Ill. 589, 48 N.E. 128, 61 Am.St.Rep. 132; Dingman v. Beall, 213 Ill. 238, 72 N.E. 729, and is liable for torts to the same extent as an individual where, in the conduct of his business, a tort injury is committed. Wahl v. Schmidt, 307 Ill. 331, 138 N.E. 604; Shepard v. Creamer, 160 Mass. 496, 36 N.E. 475; O'Malley v. Gerth, 67 N.J.L. 610, 52 A. 563; 1 Perry on Trusts, sec. 321; Restatement of the Law on Trusts, sec. 264. In the present case, when Berresheim became successor trustee, he held title to all of the lands impressed with the trust of his predecessor, and had been collecting money from the sale thereof for the benefit of the...