Van Gorp v. Van Gorp

• Decision Date: 18 February 1941
• Docket Number: 45413.
• Citation: 296 N.W. 354,229 Iowa 1257
• Parties: VAN GORP v. VAN GORP.
• Court: Iowa Supreme Court

296 N.W. 354

229 Iowa 1257

VAN GORP v. VAN GORP.

No. 45413.

Supreme Court of Iowa.

February 18, 1941

Appeal from District Court, Marion County; Norman R. Hays, Judge.

Action in equity to foreclose mortgage upon certain trust property. All of the defendants defaulted with the exception of Catherine Van Gorp, who defended on the grounds that the manner in which the plaintiff acquired the notes and mortgages constituted a breach of trust on the part of the defendant, H. P. Van Gorp, trustee of the P. H. Van Gorp Trust Estate. Decree as prayed. Catherine Van Gorp has appealed. Opinion states the facts.

Reversed.

BLISS STIGER, and MITCHELL, JJ., dissenting.

Havner, Flick & Powers and Margaret I. Cunningham, all of Des Moines, for appellant.

Stipp Perry, Bannister & Starzinger, of Des Moines, for appellee.

Vander Ploeg & Heer, of Knoxville, for H. P. Van Gorp.

MITCHELL Justice.

Nina Van Gorp commenced this action in equity to foreclose a mortgage on certain trust property. Catherine Van Gorp was the only defendant that appeared. She filed answer asking that the claim of the plaintiff be disallowed on the grounds that the manner in which plaintiff acquired the notes and mortgage sued upon constituted a breach of trust on the part of H. P. Van Gorp, trustee of the P. H. Van Gorp Trust Estate. There was a trial, and the court entered a decree of foreclosure as prayed. Catherine Van Gorp, or as she is referred to in the record as Kate Van Gorp, has appealed.

H. P Van Gorp and D. P. Van Gorp, now deceased, became the qualified and acting trustees of the P. H. Van Gorp Trust Estate, which trust was executed on the 29th day of November, 1930.

In January, 1932, the said trustees acting in behalf of the estate executed four notes which were secured by the mortgage now in question. The first of said notes was in the sum of $3,000 payable on or before January 15, 1935, to Kate Van Gorp. The second note was in the sum of $4,500 payable to the Kuyper Lumber Company on December 10, 1931. The third note was in the sum of $2,000 payable on January 15, 1935, to Anna Taylor. The fourth note was also payable to Anna O. Taylor in the sum of $3,000 on the 1st day of April, 1932. All of said notes were secured by the mortgage in question, which mortgage covered the premises locally known in Pella, Iowa, as the Garden City Feeder Works. Harve P. Van Gorp, otherwise known in the record as H. P. Van Gorp, is the husband of the appellee in this action.

D. P. Van Gorp, otherwise known as Dick Van Gorp, passed away in March, 1932, and since that time H. P. Van Gorp has acted as the sole trustee of the P. H. Van Gorp Trust Estate.

The note for $3,000 payable to Kate Van Gorp and the mortgage securing the same were assigned by Kate Van Gorp in blank on the 20th day of November, 1936. This assignment was secured by Harve P. Van Gorp through H. E. DeReus, attorney for Kate Van Gorp. The sum of $1,700 was the sole consideration for the assignment of Kate Van Gorp's interest in said mortgage and for an assignment of the note in the sum of $3,000. The negotiations for the purchase of the Kate Van Gorp note were not carried on by Nina Van Gorp, but by her husband, H. P. Van Gorp, trustee of the P. H. Van Gorp Trust Estate.

Anna O. Taylor, payee of the notes evidenced by exhibits " C" and " D", passed away and both of said notes were endorsed to Glen W. Taylor, the sole heir of Anna O. Taylor, in accordance with an order of the Lancaster County Nebraska court on February 14, 1936. The two notes known in the record as Exhibits " C" and " D" payable to Anna O. Taylor were assigned and all of the interest which Glen W. Taylor had in the mortgage in question was assigned to Nina Van Gorp on the 24th day of November, 1936. The sum of $2,500 was the sole consideration for the notes which were originally payable to the mother of Glen Taylor-one for $3,000 and the other for $2,000.

The note for $4,500 payable to the Kuyper Lumber Company and the Kuyper Lumber Company's interest in the mortgage in question was assigned to Nina Van Gorp on the 24th day of November, 1936. At the time L. A. Kuyper made this assignment of the mortgage, the instrument which he signed was blank as to assignee but it was his recollection that he knew Nina Van Gorp was the purchaser. The Kuyper Lumber Company, prior to the transfer of the note and mortgage, had owed Henry Grundman $8,000 and by way of compromise settlement with Grundman, the Kuyper Lumber Company transferred the note which it held from the P. H. Van Gorp Trust Estate to Henry Grundman. Grundman received $2,500 for his note and mortgage from Nina Van Gorp.

The transaction complained of is the purchase of trust obligations by Nina Van Gorp, the wife of the trustee.

Catherine Van Gorp, one of the beneficiaries under the trust, is the only one complaining. She was the owner of a $3,000 note, an obligation of the trust, secured by a mortgage on the trust property. No interest had been paid to her for several years, in fact to none of the parties holding obligations of the trust. She had been pressing her note for payment, and knew that she had a mortgage which she had a right to foreclose and she was threatening to do so. She had consulted and employed an attorney. No one claims that her attorney did not properly represent her. He negotiated with Mr. H. P. Van Gorp, the trustee. The record shows that the trustee tried to refinance the mortgage, but was not able to do so.

The trustee suggested to his wife, Nina Van Gorp, that she might borrow the money from the bank, if a certain friend of the wife would sign the note. The bank loaned the money to the appellee and a man of considerable means signed with her. The record shows the loan was made due to the signer. With the money borrowed from the bank, Nina Van Gorp purchased the notes from the various owners, including Catherine Van Gorp, who received the sum of $1,700.

The negotiation for the purchase of Catherine Van Gorp's note was with her attorney. The attorney testified, and it is not disputed, that he made a careful investigation of the entire situation. Appellant's attorney knew the value of the property, and testified that he considered the deal a good one for Catherine Van Gorp at the time it was made, and at the time of the trial still considered the deal an advisable one for her. While there is some dispute, as there always is, as to the value of the property covered by the mortgage, a reading of the record convinces us that Catherine Van Gorp received a fair and reasonable amount for her note and that her attorney went into all matters involved in the settlement, including the sale of the other notes, and was fully convinced his client was getting a fair and equitable sum for her note and mortgage. He fully advised his client, Catherine Van Gorp, and she was satisfied with the settlement.

The assignment of the mortgage was in blank. Neither Catherine Van Gorp or her attorney knew that Nina Van Gorp was the purchaser of her note and mortgage. We find no fraud on the part of anyone connected with this transaction. Fault is found by the appellant with the manner in which the trust property was managed by the trustee, but that question is not now before this court. Another case is pending in which appellant asks for an accounting by the trustee.

In Iowa, as in almost every state in the Union, the law expressly prohibits a trustee from dealing with the trust property for his personal advantage.

One of the leading cases is Linsley v. Strang, 149 Iowa 690, 694, 126 N.W. 941, 942, 128 N.W. 932, in which this court said:

" It is a general principle that a trustee must act with the most scrupulous good faith. The one great duty arising from this fiduciary relation is to act in all matters relating to the trust wholly for the benefit of the beneficiary. A trustee will not be permitted to manage the affairs of his trust, or to deal with the trust property, so as to gain any advantage, either directly or indirectly, for himself. These principles require no citation of authority in their support. The common sense of honesty dictates such rules. As applied to the sale of trust property, the decisions, not only of this court, but of practically all courts speak with no uncertain sound.

In the early case of the Bank of Old Dominion v. Dubuque & P Ry. Co., 8 Iowa 277, 74 Am.Dec. 302, it was held that if a trustee became the purchaser at his own sale, a court of equity would set the sale aside. The rule was reannounced in Sypher v. McHenry, 18 Iowa 232, in the following concise and vigorous language: ‘ If the trustee becomes interested in the purchase, the cestui que trust is entitled, as of course, to have the sale set aside. Davoue v. Fanning, 2 Johns.Ch.(N.Y.) 252; Bank of Old Dominion v. Dubuque & P. R. Co., 8 Iowa 277, 74 Am.Dec. 302. A trustee cannot act for his own benefit in a matter connected with the trust. Holt v. Holt, 1 Ch.Cas. 190. When a trustee undertakes to act for others, he undertakes not to manage for his own benefit. Ex parte Laney, 5 Vesey, 625. It is not permitted that the agent shall buy for himself or for another. To allow this, would permit him to apply the information acquired by the trust to his own benefit. Ex parte Bennett, 10 Vesey, 385. The principle referred to is admitted, not only as established by...