Terre Haute Trust Company v. Scott

• Decision Date: 03 June 1932
• Docket Number: 14,145
• Citation: 181 N.E. 369,94 Ind.App. 461
• Parties: TERRE HAUTE TRUST COMPANY ET AL. v. SCOTT, RECEIVER
• Court: Indiana Appellate Court

181 N.E. 369

94 Ind.App. 461

TERRE HAUTE TRUST COMPANY ET AL. v. SCOTT, RECEIVER

No. 14,145

Court of Appeals of Indiana

June 3, 1932

From Vermillion Circuit Court; William C. Wait, Judge.

Intervening petition by the Terre Haute Trust Company and another in the receivership of the Clinton Trust Company, Matthew M. Scott receiver, seeking the allowance of a preferred claim against the receiver. From an allowance of the claim as a general claim, without preference, the interveners appealed.

Reversed.

C. A Royse, for appellants.

James Douglas, for appellee.

OPINION

WOOD, C. J.

Appellants filed an intervening petition against appellee in the receivership proceedings of the Clinton Trust Company seeking the allowance of a claim asserted by them against the trust company as a preferred claim, also seeking to have certain assets of said trust company which passed into the hands of the appellee as such receiver impressed with such preference. Appellee filed objections to the allowance of appellant's claim as a preferred claim. Trial was had upon the issues thus tendered, resulting in a judgment allowing the claim as a general claim and denying it preference. Motion for a new trial was overruled and this appeal followed. Appellants assign as errors for reversal the overruling of their motion for a new trial, and in various methods the refusal of the court to allow their claim as a preferred claim.

The facts are undisputed; they were stipulated between the parties in the following language: "1. That on, to wit, the 18th day of October, 1916, said Clinton Trust Company became the trustee of an express trust for the use and benefit of one Charles Whitcomb and said Ren W. Allen, created as follows: That one Lydia A. P. Whitcomb, prior to said date, was the owner of a certain tract of real estate in Vermillion County, Indiana, described as follows: (describing it).

"That in consideration of $ 3,000.00 paid to her by said Charles Whitcomb and Ren W. Allen said Lydia A. P. Whitcomb, a widow, conveyed said land to the Clinton Trust Company, as trustee, for the use and benefit of said Charles Whitcomb and Ren W. Allen, by a deed dated October 18, 1916, and recorded in the Recorder's office of Vermillion County, Indiana, in deed record 59, page 396, with power to plat said land into lots and sell and convey same on contract or otherwise and collect the purchase money thereof, the net proceeds to be paid to said Whitcomb and Allen.

"2. That a plat of said property was duly made and filed for record, known as North Modoc Park Place; that said trustee proceeded to sell said lots on contracts and collect the purchase price thereof and from time to time made settlement with said beneficiaries.

"3. That said Charles Whitcomb died on the 1st day of February, 1917, a resident of Vigo County, Indiana, leaving a last will whereby he devised and bequeathed all the residue of his estate to the Terre Haute Trust Company as trustee on certain trusts therein specified; that said will was duly probated in the Circuit Court of Vigo County, Indiana, on February 7, 1917, and the Terre Haute Trust Company was duly qualified as executor of said will, and also as trustee thereunder, and is now the duly qualified and acting trustee under said will. That the residue of said estate of Charles Whitcomb and said trust fund included all property belonging to said Charles Whitcomb located in Vermillion County, Indiana, and included his equitable interest in the above-named trust held by the Clinton Trust Company, trustee; and the Terre Haute Trust Company, as such trustee, is now the beneficial owner of all the interest in said North Modoc Park Place formerly vested in said Charles Whitcomb and said the Terre Haute Trust Company, as trustee, and Ren W. Allen are now the beneficiaries of said trust.

"4. That prior to the appointment of the Receiver herein said Clinton Trust Company, trustee, sold and conveyed to various purchasers the real estate included in said trust and made final collection of the purchase money from all of said property; that said sums were collected and received by said trustee at various times and from various purchasers and over a period of several years, and prior to the appointment of the Receiver herein said trust fund was in part distributed to said beneficiaries, but not in equal amounts; that at the time said Clinton Trust Company became insolvent and was closed by the Bank Commissioner of the State of Indiana and the Receiver herein was appointed said Clinton Trust Company held in said trust fund the sum of $ 1,506.58 as trustee for said beneficiaries; that of said sum the Terre Haute Trust Company, as such trustee, was the equitable owner of and entitled to the sum of $ 1,365.79, and said Ren W. Allen was the equitable owner of and entitled to the sum of $ 140.79, and all the proceeds of said trust property so held by the Clinton Trust Company, trustee, were collected and held by said Clinton Trust Company in a fiduciary capacity only and as trustee as aforesaid. That said sums have heretofore been allowed as general unpreferred claims.

"5. That all sums so collected by said trustee, when received, were mingled with and held in the general cash resources of said trust company and kept in the general cash fund of said Clinton Trust Company.

"6. That the Clinton Trust Company during all of its existence engaged extensively and generally in the business of receiving deposits of money, checks or drafts from its patrons and paying out money on checks drawn upon it by its patrons against such deposit accounts, and further acted generally in a fiduciary capacity as trustee, receiver, executor, administrator and guardian of estates, and received funds in such fiduciary capacity, and paid out same by checks; that all such trust funds when received were commingled with other funds in said Clinton Trust Company, and not kept separate.

"7. That said Clinton Trust Company kept its accounts on loose sheets kept in certain files and posted by machine; that the account of said trust was kept and carried under the name of the Clinton Trust Company, trustee of North Modoc Park Place, and the accounting sheet showing the account of said trust was kept and carried in the file containing general commercial deposit accounts, and moneys paid out by said trustee were paid on checks drawn by said trustee on the Clinton Trust Company and charged to said account, and in addition vouchers were taken for the payments.

"8. That at the time said Clinton Trust Company became insolvent and the Receiver herein was appointed it had on hand in its vaults cash in the amount of $ 5,524.63, and had cash on deposit to its credit in other solvent banks and trust companies in the amount of $ 6,145.74, making total cash resources at that time of cash on hand and due from banks of $ 11,670.37. That said funds, together with other assets of said Clinton Trust Company, came to the hands of said Receiver. That at all times prior to the appointment of the Receiver herein the cash resources of said Clinton Trust Company was in excess of the amount on hand at the date of insolvency and in excess of the trust funds belonging to said Whitcomb and Allen, and also all other trust funds of the same class.

"9. That certain claims have heretofore been allowed in said receivership as preferred claims as follows: Claim of Ferguson Coal Company on account of a collection made for and in behalf of said claimant in the sum of $ 422.76, claim of Samuel Johnson, on account of money held in escrow by said Clinton Trust Company for said claimant in the amount of $ 1,550.00, and claims of various persons on account of bond coupons held by said Clinton Trust Company for collection in the aggregate sum of $ 663.39, making a total of preferred claims heretofore allowed in the sum of $ 2,636.14.

"Further, at the time the Receiver was appointed herein, said Clinton Trust Company was trustee of other express trusts and guardianships and there was due and payable to the beneficiaries of said several trusts the sum of $ 2,391.63, and in addition thereto there was due and payable to the Terre Haute Trust Company, as trustee, and said Ren W. Allen, as heretofore found, the sum of $ 1,506.58, making the total amount of trust funds held by said Clinton Trust Company the sum of $ 6,534.35."

The sole question in this case, submitted for consideration, is whether or not under the facts (all of which were stipulated, as above set out), the appellants are entitled to have their claim against the Clinton Trust Company allowed as a preferred claim.

No relation, guarded with more care and circumspection, is recognized by the law than that of trustee and cestui que trust. As the words themselves imply, it involves the exercise of trust, confidence and utmost good faith upon the part of the trustee for the benefit and furtherance of the interest of the beneficiary under the trust. Whether the trustee be a corporation or an individual, the same rules must of necessity apply. The abuse of the trust can confer no rights on the trustee abusing it or on those claiming privity with him. Neither can he voluntarily or at his option without the consent of the beneficiary repudiate the trust, to the disadvantage or injury of such beneficiary. Kimmel v. Dickson (1894), 5 S.D. 221, 58 N.W. 561, 25 L. R. A. 309, 49 Am. St. 869.

The receiver took the assets of the trust company subject to all legal and equitable claims of others. Lamb, Rec., v. Morris (1888), 118 Ind. 179, 20 N.E. 746, 4 L. R. A. 111; Shopert v. Indiana Nat. Bank (1907), 41 Ind. App. 474, 83 N.E. 515; Crowder v. Story (1929), 90 Ind.App. 598, 169 N.E. 470.

While the first impression created by a reading and investigation of the...