Van Gorden v. Lunt

• Decision Date: 07 March 1944
• Docket Number: 46426.
• Parties: VAN GORDEN et al. v. LUNT et al.
• Court: Iowa Supreme Court

13 N.W.2d 341

234 Iowa 832

VAN GORDEN et al. v. LUNT et al.

No. 46426.

Supreme Court of Iowa

March 7, 1944

Rehearing Denied May 6, 1944.

McCoy & McCoy and Thomas J. Bray, all of Oskaloosa, for Walter L. Lunt, trustee, and appellants.

Vincent Starzinger, of Des Moines, for appellees.

J C. Eichhorn, of Oskaloosa, for Edward L. Butler trustee.

GARFIELD Justice.

This is another of several suits to come before us involving the Henry W. Lunt trust. See In re Lunt's Trust, Iowa, 4 N.W.2d 231, which cites the previous cases. Plaintiffs are Mattie Lunt Van Gorden and Elba Lunt Van Gorden, each the owner of a one-fifth beneficial interest in the trust. Defendants are Walter L. Lunt and Edward L. Butler, trustees Walter L. Lunt, individually, Gordon R. Lunt and Willie C. Lunt. Gordon owns two-fifths and Walter the remaining one-fifth beneficial interest in the trust.

I. Count I is based on payment by plaintiffs of a deficiency judgment against the trust in favor of the Aetna Life Insurance Company. The facts are these: In March, 1925, Willie C. Lunt owned a one-fifth beneficial interest in the trust. (In 1937 Gordon acquired that interest.) Willie became financially involved and in 1923 had assigned or mortgaged his interest in the trust real estate to secure his debt of $7500 to a bank. On March 11, 1925, the trustees and the four children of Henry W. Lunt who were then living (owners of four-fifths of the beneficial interest) made a note for $7500 to the Aetna Life Insurance Co., secured by a mortgage on a farm of 126 acres known as the Gable farm, owned by the trust and occupied by Willie. Application for the loan, signed by the trustees and Willie, was made to raise funds to pay off Willie's debt to the bank. Proceeds of the loan were immediately used for that purpose. The trustees indorsed the draft from the Aetna over to the bank.

The Aetna mortgage was foreclosed. Decree of foreclosure was entered on June 21, 1937. At the execution sale on this foreclosure, the mortgage bid in the Gable farm at $7600 and acquired sheriff's deed thereto. A deficiency judgment was left of $2107. The Aetna caused general execution to be issued and levied on 515 acres of trust real estate, to satisfy this deficiency. The trustees had no funds with which to pay it. Cole R. Van Gorden, then one of the trustees and husband of one of the plaintiffs, asked plaintiffs to pay off the deficiency, which they did in May, 1939.

On count I, plaintiffs' prayer is that their claim for $2389 (the $2107, with interest and costs) be established against the trust, the trustees pay the same, plaintiffs be subrogated to the lien of the Aetna upon the lands of the trust and the lien be established. No other relief is asked. Gordon R. Lunt contends plaintiffs are not entitled to recover because the Aetna loan was made without his knowledge or consent, the transaction was of no benefit to the trust, but was for the accommodation of Willie for whose benefit the proceeds of the loan were used. Plaintiffs rely strongly upon the adjudication in the mortgage foreclosure as establishing the liability of the trust on the Aetna note and contend they were required to prove only that the Aetna judgment was a debt of the trust which they paid at the request of a trustee because he could not pay. The lower court granted the relief asked on count I.

The only defendant to the mortgage foreclosure who filed answer in that suit is Gordon R. Lunt. His principal contention in that suit was that the Aetna note and mortgage were not valid obligations of the trust because not signed by him nor made with his consent. The court held, however, in the foreclosure that under the trust agreement it was necessary that only the trustees and the living children of Henry W. sign the note and mortgage. Gordon is not a son of Henry W. but of Johnson R. Lunt, who in turn was a son of Henry W. In 1922 Johnson died and Gordon later acquired his interest in the trust.

Unquestionably, it was adjudicated in the foreclosure, as between the Aetna on the one hand and the trustee and beneficiaries on the other, that the trust was liable to the Aetna on the note and mortgage. All that was determined in the foreclosure was the liability of the mortgagors to the mortgagee. The rights of the defendants as between themselves were in no way involved or adjudicated. No issue was raised as between them. The trustees and the beneficiaries were coparties, not adverse parties, in that suit. Generally a former judgment held to be res adjudicata in a subsequent suit is rendered in an action in which the parties to the subsequent suit were adverse parties and not merely coparties. While a judgment is res adjudicata as to issues between the judgment creditor and judgment debtors, it is not so as to issues which were not litigated or determined between the debtors themselves. 13 Am.Jur., p. 56, sec. 60; 30 Am.Jur., p. 967, sec. 233; 34 C.J., p. 1041, sec. 1478; Kemerer v. State Farm Mut. Auto Ins. Ass'n, 201 Minn. 239, 276 N.W. 228, 230, 114 A.L.R. 173, and cases cited; In re Ryan's Estate, 157 Wis. 576, 147 N.W. 993, 994, L.R.A.1917A, 443, Ann.Cas.1916D, 840. See First Nat. Bank v. Emmetsburg, 157 Iowa 555, 569, 138 N.W. 451, L.R.A.1915A, 982.

While perhaps this is not strictly a suit for contribution, it is of that nature. A judgment against a number of defendants does not prevent a defendant from showing, in a subsequent action between them, that as between themselves he was not liable and therefore not bound to make contribution. 13 Am.Jur., p. 56, sec. 60; Annotation, 101 A.L.R. 104, 120; Kennedy v. Independent School Dist., 48 Iowa 189, 193; Hedges v. Mehring, 76 Ind.App. 496, 130 N.E. 423, 424. There is not such a merger of the debt in the judgment that the relation of the parties upon the issue of contribution is fixed by the judgment. 13 Am.Jur., p. 55, sec. 59. Further, plaintiffs' cause of action here did not arise until they paid the deficiency judgment. 18 C.J.S., Contribution, p. 7, § 4; 13 Am.Jur., p. 14, sec. 10; Novak v. Dupont, 112 Iowa 334, 336, 83 N.W. 1062; Hedges v. Mehring, supra. At the time of the foreclosure decree it was not even known there would be a deficiency. It can hardly be claimed here that the rights of the parties between themselves, on a cause of action which had not yet arisen, were then adjudicated.

It is our conclusion that the foreclosure decree in favor of the Aetna did not adjudicate the liability which plaintiffs now seek to enforce against the trust. If such liability does not exist independent of the foreclosure decree, it does not exist at all.

The trial court held that even if the doctrine of res adjudicata were not available to plaintiffs, the Aetna note and mortgage were "given to secure a loan which was used for trust purposes" and that the trust is liable to plaintiffs upon count I. We are unable to agree. True, execution of the note and mortgage by the trustees, with the consent of the living children, was authorized by the trust deed. This was determined in the foreclosure. Liability to the Aetna was thereby established. But the trustees had no right under the trust deed, as against a beneficiary who did not consent, to borrow money for the purpose of paying the individual debt of Willie. Trustees can exercise only such powers as are specifically conferred by the terms of the trust or necessary or appropriate to carry out the purposes of the trust and not forbidden by its terms. Restatement of Trusts, section 186. See also sections 254, 255, and comments thereunder, dealing with overpayments and loans by the trustee to one beneficiary. To sanction an overpayment to one beneficiary out of the trust estate would result in unjust enrichment to that beneficiary. 2 Scott on Trusts, section 254.2, page 1443.

It appears that at the time the Aetna note was made it was understood between the mortgagors that it was to be Willie's individual debt, because the proceeds were used for his benefit. When plaintiffs paid off the deficiency judgment they paid a debt that, as between the parties to this suit, was Willie's and not the trustees'. Plaintiffs must have had full knowledge of this fact. Plaintiffs therefore are not entitled to have their claim under count I established against the trust. They ask no relief except against the trust. Whether they are entitled to relief against either trustee individually or the beneficiaries of the trust who consented to the Aetna note and mortgage and joined therein or against the interest formerly owned by Willie are questions that are not before us. It appears without dispute, however, the Aetna loan was made without the knowledge or consent of Gordon Lunt or his grantors of the balance of the one-fifth interest originally owned by his father, Johnson R. Lunt.

II. Count II is a claim for attorney fees and expenses shown to have been incurred in defending against a partition suit in which it was sought to terminate the trust. Plaintiffs in that suit were Gordon, Walter, individually and as trustee, and Willie Lunt. Defendants were Cole R. Van Gorden, the other trustee, and the two plaintiffs in the present suit. These three employed the attorneys who defended the partition suit. That suit came before us on three occasions, 224 Iowa 4, 275 N.W. 579; 225 Iowa 1120, 281 N.W. 743; 229 Iowa 263, 294 N.W. 351. Our opinions make it clear that the suit was primarily an attack upon the trust. Defendants in that suit prevailed. Plaintiffs contend the expense of defending the suit is properly chargeable to the trust. The trial court rejected the claim. We reach a contrary conclusion.

Without doubt it was the duty of Van Gorden, trustee, to resist the attack made upon the trust in the partition suit. A trustee is under duty to...