Spratt v. Security Bank of Buffalo, Wyo.

• Decision Date: 01 December 1982
• Docket Number: No. 5720,5720
• Citation: 654 P.2d 130
• Parties: Charles R. SPRATT, as trustee, Appellant (Plaintiff), Gail Weinert-Fanning (Plaintiff), v. SECURITY BANK OF BUFFALO, WYOMING, a Wyoming Banking Corporation, and Charles B. West, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 130

654 P.2d 130

Charles R. SPRATT, as trustee, Appellant (Plaintiff) Gail Weinert-Fanning (Plaintiff), v. SECURITY BANK OF BUFFALO, WYOMING, a Wyoming Banking Corporation, and Charles B. West, Appellees (Defendants).

No. 5720.

Supreme Court of Wyoming.

Dec. 1, 1982.

Charles R. Spratt, Buffalo, pro se.

Timothy S. Tarver of Koester & Tarver, Sheridan, signed the brief and appeared in oral argument on behalf of appellees.

Before ROSE, C.J., and RAPER, THOMAS, ROONEY and BROWN, JJ.

RAPER, Justice.

This appeal is brought by Charles Spratt (appellant), in his capacity as trustee, from the judgment of the district court upholding the Security Bank of Buffalo's (appellee's) set-off against a certificate of deposit, issued in appellant's name as trustee, for the due debts of Gail Fanning, the bank's debtor. Gail Fanning was both the settlor and beneficiary of the trust, which had the certificate of deposit as its only asset.

Appellant phrases the issues he raises on appeal to be:

"1. Does the appellant as trustee have standing to bring suit against the appellees who seized the corpus of a trust to satisfy a debt owed by the beneficiary?

"2. Are the appellees precluded by law from asserting a right of set-off against assets deposited with them because of their knowledge of the existence of a trust in the case at bar?"

We will affirm.

This matter was submitted to the district court on the stipulated facts and briefs of both parties. Mike and Gail Weinert had lived in Buffalo as husband and wife. During their marriage the Weinerts twice borrowed money from the Security Bank of Sheridan: in January, 1979, $40,000 and in November, 1979, an additional $24,617.51. Each loan was evidenced by a promissory note secured by a mortgage on the same piece of real property located in Buffalo, Wyoming. The Weinerts both signed the notes and mortgages so were jointly and severally liable on both promissory notes.

Five days after the second note and mortgage were signed by the Weinerts, Gail Weinert filed for divorce from her husband. In December, 1979, the divorce was granted by decree in which Gail Weinert's maiden name of Fanning was restored and a house and lot in Buffalo were awarded to her. The house and lot were not part of the property which had been mortgaged to secure the two loans from the bank in Sheridan. In January, 1980, Gail Fanning sold the house in Buffalo and received a downpayment of approximately $13,000.

After selling the house, Gail Fanning and her attorney, appellant, who was also her employer, created a trust under which she was both the settlor and the beneficiary with the appellant named as trustee. The corpus of the trust was a certificate of deposit purchased from the Security Bank of Buffalo in the name of "Charles R. Spratt--Trust/45 North Main/Buffalo, WY 82834" made in the amount of $13,802.15, payable in six months, on July 7, 1980. The certificate of deposit was purchased with the proceeds of the house sale. Gail Fanning signed as depositor the agreement describing the bank's obligation in the event of early withdrawal located on the back of the certificate of deposit. The trust agreement was to be for two years but could be terminated at any time upon fifteen days' notice by the settlor. The trust instrument's only distribution provision provided:

"The Trustee may make distributions from such trust as requested by the Settlor [Gail Fanning] but in such amounts as are necessary in the discretion of the Trustee. Such discretion can be overrode by unanimous decision of those individuals listed on attached exhibit 'C'. [Exhibit C lists Gail Fanning and both of her parents.]"

At the time the certificate was purchased, the bank was not given a copy of the trust agreement but was made aware that the money used to buy the certificate belonged to Gail Fanning and that appellant was only acting as her trustee. The purpose of the trust was to put the money in trust beyond the reach of Gail Fanning's ex-husband, his creditors, and the Internal Revenue Service. The latter purpose apparently failed because in February, 1980, Gail Fanning was forced to borrow approximately $5,000 from the Security Bank of Buffalo to pay a tax deficiency to the I.R.S. To secure the $5,000 loan, Gail pledged approximately $5,000 of the certificate of deposit to the Security Bank of Buffalo.

Sometime during this period, the Weinerts defaulted on the two promissory notes held by the Security Bank of Sheridan and a foreclosure action was instituted by that Bank. On July 2, 1980, the Security Bank of Sheridan sold and assigned the two notes and mortgages to the Security Bank of Buffalo for full value. At that time, the Security Bank of Buffalo was substituted as the plaintiff in the foreclosure action initiated by the Sheridan bank.

On July 3, 1980, the Security Bank of Buffalo, believing the value of the mortgaged property to be inadequate to cover the balance remaining on both notes, asserted a right to set off against the certificate of deposit. At the same time, the bank notified appellant and Gail Fanning that because the two notes signed by the Weinerts were in default, it deemed itself at risk and was, under the terms of the note, accelerating the payment due date of Gail Fanning's own note. Her $5,000 note was made due immediately and, because the bank felt itself insecure, the collateral used to secure the note was liquidated--approximately $5,000 worth of the certificate of deposit. The remainder of the certificate of deposit and accrued interest was applied against the two notes in default.

On July 7, 1980, appellant demanded payment of the certificate of deposit. Payment was refused because the bank had already set off against the deposit represented by that certificate; appellant filed suit. ¹

The mortgage foreclosure action was subsequently completed and a judgment of $67,798.16 was entered against Mike Weinert and Gail Fanning, jointly and severally. At the later sheriff's auction, the mortgaged property was sold for $41,000, leaving a deficiency of $27,798.17.

In its judgment in this case the district court in part found and held:

"2. and that upon consideration of the stipulation of facts and the Record, Gail Weinert-Fanning was the owner of the certificate of deposit, the funds of which were applied by the Bank [Security Bank of Buffalo] to the payment of the notes upon which Gail Weinert was liable;

"3. and that said Gail Weinert would have had no cause of action against the said Bank for its actions, and Charles Spratt [appellant] as trustee has no better standing than Gail Weinert as settlor and therefore, Mr. Spratt as trustee has no standing to maintain such action;

"4. and that Judgment should be entered in favor of the Defendants and against the Plaintiffs and the Defendants to recover their costs."

The first issue appellant would have us consider was prompted by the district court's language dealing with appellant's standing to maintain the action. In Guernsey v. City of Casper, 67 Wyo. 473, 226 P.2d 523 (1951), this court stated that it was a sound principle that a trustee must defend and intervene in actions to protect trust property. The Restatement, Trusts 2d § 280 provides:

"The trustee can maintain such actions at law or suits in equity or other proceedings against a third person as he could maintain if he held the trust property free of trust."

Section 4-8-103, W.S.1977, provides in part that:

"(c) A trustee has the power, subject to subsections (a) and (b):

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"(xxv) To prosecute or defend actions, claims or proceedings for the protection of trust assets and of the trustee in the performance of his duties."

Finally, where there is no conflict of interest between the beneficiary and the trustee, or between beneficiaries, the trustee may sue and be sued in suits dealing with trust property without joining the beneficiary. Bogert, The Law of Trusts and Trustees § 593 (Revised Second Edition, 1980). Since the joinder of the beneficiary is not at issue here, we merely cite the aforementioned for the proposition that trustees have standing to sue to protect trust property. That the claim may fail is irrelevant.

For a party to have standing to sue means that he has sufficient stake, in an otherwise justiciable controversy, to obtain a judicial resolution; whether a party has such a personal stake in the outcome to insure the dispute must be presented in an adversary context. In the Matter of Various Water Rights in Lake DeSmet, Wyo., 623 P.2d 764 (1981); Sierra Club v. Morton, 405 U.S. 727, 731-732, 92 S.Ct. 1361, 1364, 31 L.Ed.2d 636, 641 (1972).

Appellee in its brief concedes that appellant had standing to sue in this case and, in fact, was allowed standing to sue. Appellee argues that the district court did not mean to imply that appellant was without standing to sue; it only meant, by the language in its order, that appellant was in no better position to recover from the bank than the beneficiary was since any defenses that applied to the beneficiary also applied to the trustee.

We need not try to interpret the language used by the district court because the action brought against the bank by appellant was allowed by the district court. A decision was rendered on the merits of the case. In answer to the question raised by appellant, however, we hold in fact and law that he, as trustee, had standing to sue to protect the corpus of the trust. We make this preliminary decision because if appellant did not have standing, then we would need go no further. Standing to sue is jurisdictional in nature and can be considered at any time in the course of litigation. In the Matter of Various Water Rights in Lake DeSmet, supra. Parties cannot confer jurisdiction by consent. Pioneer National Title Insurance Company v. Langdon, Wyo., 626 P.2d 1032 (1981).

Appellant next asks us to consider the effect of the bank's knowledge of the trust relationship between him and Gail...