Sidebilder
PDF
ePub

8. Trusts 210-Contract with third persons binds trustee personally, in absence of agreement, to look to funds of estate exclusively.

A trustee, by a contract with third persons, binds himself personally, unless the person contracted with agrees to look to funds of estate exclusively; that being true whether or not

the charge is one for which the trustee may be

reimbursed from the trust estate.

9. Contracts 178-"Trustee" is but descriptio personæ, in absence of agreement in contract, to look to trust estate.

In the absence of language in a contract, by which the parties specifically agree that the third party shall look to the trust estate alone for his compensation, the word "trustee" is but descriptio persona.

10. Joint-stock companies and business trusts 18-Trust estate held not liable on quantum meruit for services of one employed by trustee.

Where one of three trustees of "commonlaw trust" employed plaintiff to render services in obtaining control of certain corporations, of one of which he was to be made president, with no agreement that trust estate should be bound, and there was no express ratification of the agreement, trust estate held not liable on quantum meruit for his services.

11. Trusts 210-That trust estate receives benefit of contract made by trustees does not render it liable to third parties upon implied liability.

That trust estate receives benefit of contract made by trustees does not render it liable to third parties upon theory of implied liability.

Appeal from Third Branch, Appellate Court, First District, on Appeal from Circuit Court, Cook County; George F. Rush, Judge.

Bill by Harry G. Austin against Harrison Parker and others, as trustees of the Cooperative Society of America, a common-law trust. The circuit court's decree for complainant was affirmed by the Appellate Court, and defendants appeal. Judgment of Appellate Court and decree of circuit court reversed.

Stedman, Kesler & Dingle, of Chicago (John A. Leitch, of Chicago, of counsel), for appellants.

Cleland, Lee & Phelps, of Chicago (Robert G. Phelps, of Chicago, of counsel), for appel

lee.

STONE, J. Appellee recovered a money decree against appellants Harrison Parker, Seymour Stedman, and George H. Wilkins, as trustees of the Co-operative Society of America (a common-law trust), for services rendered in procuring a controlling interest in an insurance company and a certain building in the city of Chicago. An appeal was taken from this decree to the Appellate Court

for the First District, where it was affirmed, and that court issued a certificate of importance and allowed an appeal to this court.

The Co-operative Society of America was created by a declaration of trust executed on or about February 20, 1919. The instrument creating the trust provided that its assets

and business should be in charge of three
trustees. It also provided for the issuance
of certain certificates of beneficial interest,
which were widely sold to the public, the re-
ceipts of which sales constituted assets of
the trust estate. The trustees at the time of
the filing of complainant's bill were Harri-
son Parker, N. A. Hawkinson, and John Coe.
At the time of the trial Hawkinson and Coe
had resigned and appellants Seymour Sted-
man and George H. Wilkins had been named
as trustees and were made parties defendant.
After the decree was rendered, Parker and
Wilkins resigned and Edward C. Kessler and
John Coe were made trustees. The latter ap-
Neither
pears to have been reappointed.
Stedman nor Kessler was a trustee at the
time of the supposed agreement with the com-
plainant.

The instrument creating the trust gave to the trustees, collectively, full control and management of all matters involving the administration of the trust estate. It provided that they hold the legal title to its property, and gave them full right and power to alienate, mortgage, or otherwise incumber or dispose of the real estate belonging to the trust estate, and power to employ the funds and other property of the trust estate at any time in the establishment and operation of grocery or other stores, wholesale or retail, in Chicago or elsewhere. The instrument also provided that the trustees, to the extent of the trust estate held by them, but not personally, should indemnify and hold harmless the beneficiaries, and such other persons as might be associated with them, against loss or liability by reason of any contract, obligation, or liability entered into by them as trustees. They were also empowered to sue for and receive all moneys coming due to the trust estate, to prosecute or defend suits at law or in equity, to compromise, or refer to arbitration, claims in favor of or against the trust estate.

They were given power, by unanimous consent of the trustees, to exchange stock or securities held by them in any corporation or trust, taking over the property of such corporation or trust by consolidation or otherwise. They were authorized to loan money to any corporation or trust of which they might own shares of capital stock, or embark in any lawful business, and subscribe for, purchase, or otherwise acquire shares in the capital stock of any corporation or trust engaged in lawful business.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(148 N.E.)

The eighth paragraph of the instrument proval of Hawkinson and Coe, the other truscreating the trust provided that

"All acts to be done by the trustees, including the alienation or incumbering of real estate, may be performed by any two of the trustees; the acts or signatures of all three trustees not being necessary."

By the sixteenth paragraph it was provided that, in every written contract, order, or obligation which the trustees should give, it was their duty to stipulate that neither the trustees nor the holders of the beneficial interest should be held to any personal liability by reason of such contract, and to convey notice in that language to third parties that the trustees were not dealing on their own responsibility as individuals, but as trustees in an express trust under the common law.

The facts as we gather them from the record are that appellant Parker called upon one Craig, who conducted an employment agency, for assistance in securing a man to act as president of a small insurance company owned by this trust estate. Through Craig's efforts, Parker and appellee, Austin, were brought together, and, after discussing the matter with Austin, Parker decided not to develop this small insurance company, known as the Rockdale Insurance Company, but that Austin should endeavor to find a company which Parker and his associates could purchase. Austin's testimony is that Parker, in his dealings with him, purported to represent the trustees, and, pursuant to this agreement with Parker, he investigated a number of different concerns and ultimately made a contract for the purchase of the controlling interest in the People's Life Insurance Company and in the Randolph Building Company, taking the contract in his own name. It appears that, by an agreement with Parker, he incurred liability for legal services. It is undisputed that, as consideration for his services, Austin was to be appointed president of the new insurance company when purchased. After Austin had made the contract for the purchase of the controlling interest in the insurance company and building, a dispute arose between him and Parker concerning the terms upon which Austin was to become president of the insurance company, by reason of which dispute the relations between them were terminated. After Austin had procured a release from his contract of purchase of the stock referred to, appellants, as trustees of the Co-operative Society of America, took over the stock contracted for by Austin at the terms upon which he was to purchase it, and he therefore claims that he is entitled to a money decree against the trust estate, by reason of his services in securing the purchase of this stock.

There is nothing in the record which shows a meeting of the trustees or the express ap

tees, concerning the employment of Austin for the purposes for which Parker employed him. Austin testified that he was introduced to Hawkinson and Coe as the man who was putting over the stock deal for the trustees. This is vigorously denied by Coe. Hawkinson was not called as a witness. All three of the trustees participated in the subsequent purchase of the stock for which Austin had contracted. The record does not show that Coe and Hawkinson had anything to do with the contract existing between Parker and Austin; nor does it show that they ratified that contract, which was, as we have seen, that Austin was to receive the presidency of the new insurance corporation as compensation for his services in bringing about the deal. He was to receive as such president a salary of $25,000 per year and certain commissions on business done.

The circuit and Appellate Courts were evidently of the view that the trustees of the estate having later purchased for the estate the stocks contracted for by Austin, though, after Austin had been relieved of his contract with the owners of such stock, the trust estate, by reason of having had the benefit of Austin's services, is under an implied liability to pay a reasonable fee for that service, which fee, together with expenses and attorneys' fees incurred by Austin were fixed in the decree at $17,400. Appellants urge that this trust estate can be bound only by an express agreement of the trustees to subject the assets of the estate to liability; that, in the absence of such express agreement, the trustees are personally liable on the contracts entered into, by them, and this being so, a court of equity has no jurisdiction to enter a decree against the estate; that, while a trust estate may be sued only in equity, that court has jurisdiction only where the contract is with the estate and not with the

trustees.

The prayer of the bill in the instant case was that the complainant be held to be entitled to receive from the trustees reasonable compensation for his services and that the trustees may be required to pay the same to the complainant. The decree entered on this prayer was as follows:

"And the defendants, as such trustees, are hereby ordered to pay the complainant, within 10 days from the entry of this decree, the sum of $17,400."

[1-7] A trustee cannot create a lien on the trust estate in favor of a creditor, or charge the trust estate, even by his contract, without express authority by the instrument creating the trust. Property of the trust estate cannot be used to reimburse the trustee for expenses or losses incurred, unless he has used good faith and common prudence. If losses occur in cases where the trustee has

exhibited this care he may be allowed to charge his accounts with whatever expense or loss he has been required to meet. Johnson v. Leman, isi Ill. 609, 23 N. E. 435, 7 L. R. A. 656, 19 Am. St. Rep. 63; 2 Perry on Trusts (6th Ed.) art. 14, § 9. The fact that a trustee is indemnified by the estate in this manner does not in anywise create a direct liability on the part of the trust estate for the benefit of third persons dealing with the trustee. The remedy of third persons is, in general, a remedy against the trustee, only. Johnson v. Leman, supra; Norton v. Phelps, 105 U. S. 393, 26 L. Ed. 1072. An exception to this rule exists where the estate is either indebted to the trustee, or would be if he should pay the demand, and the trustee is insolvent or nonresident. In such case the trust estate may be reached directly by a proceeding in chancery. Wahl v. Schmidt, 307 Ill. 331, 138 N. E. 604. Norton v. Phelps, supra. If the trustee binds himself for the benefit of the estate, the contract is his personal contract, though he describes himself as trustee. He is liable in an action at law, and a bill in equity will not lie against the trust estate in such a case, for the right of action is one not against the estate, but against the trustee personally. Wahl v. Schmidt, supra; Duvall v. Craig, 2 Wheat. 45, 4 L. Ed. 180; Taylor v. Mayo, 110 U. S. 330, 4 S. Ct. 147, 28 L. Ed. 163.

[8] The rule is well settled that a guardian executor, administrator, trustee, or other person acting in such relation, in a contract with third persons binds himself personally, unless he exacts an agreement from the person with whom he contracts to look to the funds of the estate exclusively; and this is true regardless of whether the charge is one for which the trustee may be reimbursed from the trust estate, as that is a matter wholly between him and the beneficiaries of the trust. Bradner Smith & Co. v. Williams, 178 Ill. 420, 53 N. E. 358.

In Power v. Briggs, 79 Ill. 493, 22 Am. Rep. 175, the trustees of a church gave a note for the payment of a church organ. The note recited that they, as "trustees of the Seventh Presbyterian Church," promised to pay the sum specified. It was signed by four trustees over the designation of their title. It was there held that, though the statement that they were trustees of the Seventh Presbyterian Church appeared in the body of the note and the word "trustees" was appended to their signatures, there were no words in the instrument implying an undertaking on the part of the corporation, and

that it is not to be assumed that it was acting by or through the trustees. The language

of the note indicated that the trustees, and not the corporation, promised to pay. To the same effect is Dunham v. Blood, 207 Mass. 512, 93 N. E. 804.

[9] In the absence of language in a contract by which the parties specifically agree that the third party shall look to the trust estate, alone, for his compensation, the word "trustees" is but descriptio persona. Trustees of Schools v. Routenberg, 88 Ill. 219; Nolin v. Mooty, 29 Ga. App. 97, 113 S. E. 814; Schuling v. Ervin, 185 Iowa, 1, 169 N. W. 686.

[10] In this case it does not appear by the bill or the evidence offered that either Parker, or he and his cotrustees, Hawkins and Coe, stipulated with Austin that the trust estate should be bound. Both Parker and Coe testified there was no meeting of the trustees or act ratifying or authorizing the negotiations with Austin and that the trustees made no contract with Austin. The contract between Parker and Austin was that Austin was to be president of the new insurance corporation when taken over. There was no contract by which either Parker, the trustees, or the estate agreed to pay Austin any sum of money for his services. The only ground, therefore, upon which Austin could recover anything from anybody for his services, is that there was an implied promise to pay him a reasonable fee. The circuit and Appellate Courts held the estate liable on quantum meruit under an implied liability arising because the estate got the benefit of this contract. The evidence does not show an express ratification of this contract by the trustees. There was no agreement sufficient to charge the estate before the work was done. The most that could be said of the contract was that it was a charge against Parker or the trustees, personally or individually.

[11] A trust estate cannot, because it receives the benefit of a contract made by the trustees, be held liable to third parties upon a theory of implied liability. It is, as we have seen, only where the estate would be required to pay the trustee if he paid the claim, and the latter is insolvent or nonresident, that the estate can be directly held in a proceeding in chancery. Wahl v. Schmidt, supra; Norton v. Phelps, supra. case appears here. The evidence does not show the contract to have been one binding the trust estate to pay Austin anything. Whether he has a valid claim against Parker

No such

or any other of the trustees is not before us.

The judgment of the Appellate Court and the decree of the circuit court are therefore

reversed.

Judgment reversed.

[blocks in formation]

6. Constitutional law 210-Foreign insurance corporation is not citizen, entitled to equal protection of laws, until it has complied with conditions of statute.

Though foreign insurance corporation may be citizen, it is not citizen of state, entitled to equal protection of laws under Fourteenth Amendment to United States Constitution, un

1. Insurance 20-Tax on net receipts of for-til it has complied with statutory conditions en

eign insurance companies need not be equalized with personal property tax.

Taxes imposed under Fire and Marine Insurance Act, § 30, as amended, on net receipts of foreign insurance companies at same rate as personal property, held not subject to reduction to equalize it with personal property assessment.

titling it to come and remain in state.

7. Constitutional law 230 (3)-Statute imposing annual tax on net receipts of foreign insurance corporations held not to violate equal protection clause of United States Constitution.

Fire and Marine Insurance Act 1869, § 30, as amended, imposing annual tax on net receipts of foreign insurance corporation for priv2. Corporations 636-General assembly may ilege of doing business within state, held not vioprescribe conditions under which foreign cor-lative of equal protection clause of Fourteenth porations may do business within state, and Amendment to United States Constitution. may exclude them entirely. Duncan, C. J., and Thompson and Dunn, JJ., dissenting.

General Assembly has power to prescribe conditions under which foreign corporations, other than those engaged in interstate commerce or constituting instrumentality of United States government, may do business within state, and may exclude them entirely.

3. Insurance 20-Statute taxing net receipts of foreign insurance corporations held privilege and not property tax.

Fire and Marine Insurance Act 1869, § 30, as amended, is tax on business of foreign corporation, based on its net receipts, for privilege of doing business within state, and is not property tax, though method of collection is same as that of personal property; that it is privilege tax does not necessarily require that it be paid as condition precedent to entering state, and nothing in Laws 1919, p. 628, imposing annual gross premium tax, is inconsistent with holding that tax on net receipts is also privilege tax.

4. Insurance 20-Certificate from state insurance superintendent, showing payment of privilege tax, is condition precedent to doing business in state by foreign insurance company.

Under Fire and Marine Insurance Act 1869, § 22, and Smith's St. 1923, c. 73, § 67, foreign insurance company, as condition precedent to doing business in state, must procure annual certificate from state insurance superintendent, showing that it has paid tax required by section 30.

5. Insurance 20-Statute taxing foreign corporations for right to do business in state held not unconstitutional, as not imposing uniform taxes.

Fire and Marine Insurance Act 1869, § 30, as amended, taxing foreign insurance corporations for right to do business within state, is not violative of Const. art. 9, § 1, requiring such taxes to operate uniformly, because domestic corporations of same character are not SO taxed.

Appeal from Superior Court, Cook County; Charles M. Foell, Judge.

Injunction suit by the Hanover Fire Insurance Company against Patrick J. Carr, County Collector, to restrain the collection of taxes. From a decree on stipulated facts, making injunction permanent as to certain tax items, and dismissing bill as to the remainder, complainant appeals. Affirmed.

Charles S. Deneen, Oscar B. Ryon, and Bates, Hicks & Folonie, all of Chicago, Charles E. Woodward, of Ottawa, and Silber, Isaacs, Silber & Woley, of Chicago (C. J. Doyle, of Springfield, and E. M. Griggs, of Chicago, of counsel), for appellant.

Robert E. Crowe, State's Atty., of Chicago (Francis X. Busch, Leon Hornstein, Hiram T. Gilbert, William H. Duval, and Bulkley, More & Tallmadge, all of Chicago, of counsel), for appellee.

STONE, J. Appellant, a private corporation organized under the laws of the state of New York for the purpose of carrying on the business of fire, marine, and inland navigation insurance, filed its bill against appellee, as county treasurer and collector of Cook county, praying for an injunction to restrain the collection of a certain tax hereinafter referred to. A temporary injunction was granted as prayed, and on final hearing a stipulation of facts was entered into, and the court entered a decree making the injunction permanent as to a certain amount of the tax not in dispute here, and dismissed the bill of complaint as to the remainder for want of equity.

The tax complained of was that assessed under section 30 of the Fire and Marine InCahill's surance Act of 1869 as amended. Stat. par. 169, p. 73. It is shown by the

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

with the provisions of their respective charters, on the gross receipts, of such agency, to be applied exclusively to the support of the fire department of such city."

Section 1 of article 9 of the state Constitution is as follows:

stipulation of facts that from May 1, 1922, to April 30, 1923, and for some years prior thereto, appellant conducted the business of fire insurance in the town of South Chicago, in Cook county, through agencies which it maintained there. It regularly procured the license issued by the department of trade "The General Assembly shall provide such and commerce, and has annually paid the revenue as may be needful by levying a tax, by tax of 2 per cent. on its gross premium re-valuation, so that every person and corporation ceipts to the state under an act in relation shall pay a tax in proportion to the value of his, to the taxation of nonresident corporations, her or its property-such value to be ascertainetc., approved June 28, 1919. Laws 1919, p. ed by some person or persons, to be elected or 628. In 1923 the agents of appellant in the appointed in such manner as the General Astown of South Chicago made no return of sembly shall direct, and not otherwise; but the net receipts to the board of assessors of General Assembly shall have power to tax pedCook county. That board therefore entered dlers, auctioneers, brokers, hawkers, merchants, commission merchants, showmen, jugglers, innas appellant's net receipts the sum of $90,- keepers, grocery keepers, liquor dealers, toll 000, added thereto a penalty of $45,000, and bridges, ferries, insurance, telegraph and extook one-half of this total amount, or $67,- press interests or business, vendors of patents, 500, upon which to assess the tax required. and persons or corporations owning or using The board of review fixed the net receipts franchises and privileges, in such manner as it of appellant at the sum of $90,824, and took shall from time to time direct by general law, the same at its full amount for assessment uniform as to the class upon which it operates." purposes. All personal property in Cook county, except the net receipts of foreign fire insurance companies, was scaled and debased in value; one-half the "full value" being

taken for assessment purposes.

It is contended by appellant that section 30 of the Fire, Marine, and Inland Naviga

tion Insurance Act is unconstitutional and void, for the reason that it violates section 1 of article 9 of the Constitution of Illinois, by imposing a tax which is not imposed on domestic fire insurance companies or casual

[1] Some of the questions involved here were before this court in People v. Kent, 300 Ill. 324, 133 N. E. 276, and People v. Barrett, 309 Ill. 53, 139 N. E. 903, and were there decided against appellant's contentions here. Appellant argues, however, that what was said in the Kent Case pertaining to the questions involved here was not necessary to the decision of the case, and was wrong, and should not be adhered to, and that the Barrett Case, having been based on the Kent that case, as in the case at bar, extended Case, is wrong, and should be overruled. In briefs were filed by able counsel, some of whom appear here, and the points involved

ty companies; that such tax is not a privilege tax, but is either a tax on property or a tax on business; and that, as either, it violates the constitutional provision as to uniformity. It is also said this section is were fully argued. An examination of the void, in that it violates the equal protection briefs filed in the Barrett Case shows that and due process clauses of the Fourteenth counsel for various foreign insurance comAmendment to the Constitution of the Unit-panies, appearing either as representing pared States. The further contention is made

that, even though the statute be held valid, the tax on net receipts must be assessed as personal property, and scaled and debased

as such.

Section 30 is as follows:

"Every agent of any insurance company, incorporated by the authority of any other state or government, shall return to the proper officer of the county, town or municipality in which the agency is established, in the month of May, annually, the amount of the net receipts of such agency for the preceding year, which shall be entered on the tax lists of the county, town and municipality, and subject to the same rate of taxation, for all purposes-state, county, town and municipal-that other personal property is subject to at the place where located; said tax to be in lieu of all town and municipal licenses; and all laws and parts of laws inconsistent herewith are hereby repealed: Provided, that the provisions of this section shall not be construed to prohibit cities having an organized fire department from levying a tax or a license fee, not exceeding two per cent. in accordance

ties or as amici curiæ, there attacked this act on the ground that it is unconstitutional, as violating section 2 of article 4 and sections 9 and 10 of article 9 of the state Constitution and the Fourteenth Amendment of the United States Constitution. It was there also contended that, if the statute was valid, the net receipts must be taxed as personal property, to be scaled and debased as in other cases of personal property taxed. It was argued in the Barrett Case, as here, that contemporaneous construction on the part of the executive department of the state has continued for a sufficient length of time to be of controlling force.

People v. Kent, supra, was an action in mandamus against the respondent, as agent for various foreign fire insurance companies, to require him to make return of net receipts to the board of review in accordance with section 30 of the Fire, Marine, and Inland Navigation Insurance Act. ing the writ of mandamus it was held as a basis of that decision, and not as obiter dic

In award

« ForrigeFortsett »