Wilson v. Equitable Trust Co.

Mr. Presiding Justice Windes delivered the opinion of the court. The first question presented for decision is as to whether Wilson, who was either the owner of the equity of redemption, or entitled to all the rights and interests of such owner by reason of the assignment of Samuel A. Jennings of date July 27, 1896, mentioned in the statement, during all the "time between December 27, 1890, and March 28, 1892, the period of redemption, was entitled to the fund in the bands of the Trust Company, and particularly specified in the statement, leaving out of consideration for the time being any question as to w’hether he should be debarred, as claimed by the Trust Company, by reason of a prior adjudication of his rights, by his laches or because of the statute of limitations. It appears from the statement that the fund here in question, viz., $3,995.05, came into the hands of the Trust Company by virtue of the order of the Circuit Court appointing it receiver in the foreclosure case brought by it and Hatheway, the trustee, to foreclose the trust deed made by Baldwin to Hatheway, and conveying the premises to which Wilson or his grantor acquired title pending that foreclosure. The Trust Company was also the owner of the note secured by said trust deed, and was in fact the purchaser of the same property at the master’s sale, thouo-h the bid thereat was made in the name of, and the certificate of the master issued to, Thomas A. Hall on behalf of The Trhst Company as trustee under the will of John D. Jennings. Hall subsequently assigned the certificates to the company and the property was conveyed by the master to it as trustee under the will of John D. Jennings after the time for redemption had expired. The fund in question arose from the rents collected by the Trust Company as receiver, after the master’s sale and during the period of redemption, and was the net procéeds of such rents, during that time, after deducting disbursements for taxes, necessary charges and expenses. The amount of this fund was paid over in February and March, 1892, by the Trust Company, as receiver, to itself as purchaser at the master’s sale, and as trustee under the will of John D. Jennings. Tbe company has ever since retained and still retains said money as a part of said trust estate, and claims the right to hold it by reason of the provision in the trust deed foreclosed, which requires that, in the event of a foreclosure, any rents that might be collected after the sale and before the time of redemption should expire, should be paid to the purchaser of the premises sold; also because the order of the court appointing the receiver made it his duty to collect the rents of said realty and directed him, until the -further order of the court, to pay the net proceeds of the rents, issues and profits of said premises, after the payment of a second mortgage to Anna Ball, to the holder of the certificate of sale; also because the Trust Company was the purchaser at said sale, and as such purchaser received said rents from itself as receiver, pursuant to the order of the court in that behalf, and because the action of the receiver in that regard had been approved by the court. A similar question to the one here presented was very thoroughly and fully considered by this court, Mr. Justice Sears delivering the opinion, in the case of Carroll v. Haigh et al., 97 Ill. App. 576, in which we held that the owner of the equity of redemption was entitled to the rents of property sold on a foreclosure during the period of redemption, where the property sold for the full amount of the mortgage debt, as is the case here, notwithstanding a provision in the mortgage that the purchaser at the master’s sale should be entitled to such rents during that period. Mo argument nor authority has been presented in the case at bar which seems to justify a change of the conclusion there reached. But it is said that Wilson is here debarred of any relief, because his rights have been adjudicated in the foreclosure suit, he having acquired his title pendente lite, and is therefore bound by the adjudication in that case. However sound that contention may be, as a general rule, we are of opinion it can not be applied here. The first order relied upon is the order appointing the receiver, which is quoted in the statement. It does not purport to be an adjudication of the rights of any one, but is simply a direction to pay the rents to the holder of the certificate of sale. The next order relied upon is the order confirming the receiver’s final report, also set out in full in the statement. The order does not purport to be an adjudication of the right of any one to the fund in question, but only approves the acts of the receiver in paying over the fund in question in accordance with the previous order of the court to the holder of the master’s certificate and discharging the receiver. We are at a loss to perceive how these orders constitute any adjudication that the Trust Company was entitled to the fund here in question. It is next contended that Wilson is barred by his laches, not having filed his bill for more than eight years after the Trust Company, as trustee of the Jennings estate, received the fund in question. The doctrine of laches is not applied in equity when to do so would be inequitable. No notice was given by the Trust Company, either in its capacity of complainant, receiver, or purchaser in the foreclosure case, to the owner of the equity of redemption of the application to confirm the receiver’s report, notwithstanding the fact that its solicitor at that time bad knowledge that Samuel A. Jennings, the grantor of Wilson, had acquired the equity of redemption and was not a party to the cause; nor does it appear that Wilson or his grantor had any notice of said orders prior to the filing of the bill herein. Moreover, the rights of no innocent third person have intervened during the lapse of time since the receiver was discharged, and the money is still in the hands of the Trust Company. It can make no difference that the company holds the money in a different capacity. Under such circumstances it would certainly be highly inequitable to apply the doctrine of laches. Stiger v. Bent, 111 Ill. 330-41; Harris v. McIntyre, 118 Ill. 275-89; Sutherland v. Reeve, 151 Ill. 384-95; Coryell v. Klehm, 157 Ill. 462-73; Farwell v. Gt. Wes. Tel. Co., 161 Ill., 522-95 and cases cited. In the Stiger case, supra, the court say: “ A court of equity applies the doctrine of laches in denial of relief prayed where the statutory period of limitations has not expired, only where, from all the circumstances in evidence, to grant the relief to which the complainant would otherwise be entitled will, presumptively, be inequitable and unjust, because of the delay to the defendants.” In the Harris case, supra, the court say: “ In cases, however, where there is no statute applicable, the time in which a party will be barred from relief in a court of equity must necessarily depend upon the peculiar circumstances of each case.” In the Farwel'l case, 'supra, it was held that the doctrine of laches does not apply in equity in cases of fraud, until the discovery of the fraud, or from the time when the fraud could have been discovered by the use of reasonable diligence. In the Sutherland case, supra, the court, in speaking of when the statute of limitations would be applied in equity, said, “A court of equity will not apply the law statute where it would be inequitable to do so,” and held, under the circumstances of that case, not only that the statute of five years did not apply, but also that laches did not apply, although there had been a lapse óf a much longer time, because, under the circumstances, to apply that doctrine would have been inequitable. The money still being in the hands of the Trust Company and the rights of no innocent third parties having intervened, it would certainly be unconscionable to permit the company, because of mere lapse of time, to retain money which it had received without any basis of consideration, and which rightfully and equitably belongs to Wilson, when the company can and will be fully protected in making payment to Wilson under a decree in equity. It is further contended that Wilson is barred by the statute of limitations from any relief, but we think this contention is untenable, for two reasons: first, because the Trust Company, as receiver, obtained the fund in question in the capacity of a trustee, and that relation has not changed merely because the money was paid over to itself in a different capacity.. The statute of limitations is not applicable to such a case — will not be allowed to be interposed as a defense by such a trustee as this Trust Company is shown to be. High on Eeceivers, Sec. 1; 2 Perry on Trusts, Sec. 82; Angelí on Limitations, Secs. 166, 168, 174; 1 Pomeroy’s Eq. Juris., Secs. 156, 157; King v. Goodwin, 130 Ill. 102-10; Henry Co. v. Winnebago Swamp Drainage Co., 52 Ill. 299; Albretch v. Wolf, 58 Ill. 186-90; Farman v. Brooks, 9 Pick. 212; Houseal v. Gibbes, 1 Bailey (S. C.), Eq. 482. In section 166, supra, of Angell, the author says : “ To exempt a trust from the bar of the statute, it must be, first, a direct trust; second, it must be of the kind belonging exclusively to the jurisdiction of a court of equity; and third, the question must arise between the trustee and cestui que trusty The statement of the author as to the rule is followed and confirmed by the Supreme Court of this State in the following cases: King v. Hamilton, 16 Ill. 190-5; Albretch v. Wolf, supra; Governor v. Woodworth, 63 Ill. 254-8; Hayward v. Gunn, 82 III. 385-9; People v. Oran. 121 Ill. 650-5. That the trust here in question is a direct or express trust appears clear, though there seems to be no direct adjudication on the matter. In the section from High referred to above, the author says that a receiver holds the fund or property intrusted to his care for the benefit of whoever may finally establish title thereto. In the section from Perry on Trusts, supra, the author says that a trust, speaking of an express trust, may be proved by any subsequent acknowledgment by the trustee in writing, or u by any writing (of the trustee) in which the fiduciary relation between the parties and its terms can be clearly read.” In this record appears the report of the Trust Company in writing, signed by it, which shows it acquired the fund here in question as receiver. In that capacity it held the fund, as Mr. High says, for the benefit of whoever may establish title to it. In- section 168, supra, of Angelí, the author says : “ The most common mode of creating direct trusts, not cognizable at law, is by the appointment and qualification of executors and administrators.” In King v. Goodwin, supra. the Supreme Court in speaking of a receiver on a creditor’s bill, said: “ The receiver is a quasi trustee, holding the fund-for the benefit of whoever may establish title thereto.” In 1st Pomeroy’s Eq. Juris., Sec. 156, the author says that there is included within express trusts, “ the relation subsisting between executors and administrators on the one hand, and legatees, distributees and creditors on the other.” The same author, in section 157, says that this equitable doctrine of trusts includes guardians of infants, committees or guardians of the insane, receivers, directors, and other managers of stock corporations and the like, and that such persons are in a general sense trustees, or rather quasi trustees in respect of the particular person toward whom they stand in a fiduciary relation. In view of these authorities, we are of opinion that the Trust Company was not only a trustee for Wilson, but that the trust is express or direct. The trust is of a kind exclusively within the jurisdiction of equity, for the reason that Wilson could not sue the receiver without the permission of the chancery court that appointed it. The question here arises between the trustee and the cestui que trust, and therefore the trust fulfills all the requisites, as laid down by the authorities, so as to relieve it from the bar of the statute. It is also said in the Henry Co. case, supra, “ There are cases in which a court of equity will not permit the bar of the statute to be interposed against conscience, and it will supply and administer a remedy within its jurisdiction and enforce the right for the prevention of a fraud.” (Citing cases.) Also in the Albrecht case, supra, the court say: “ The rule seems to be general and well settled bv authority that so long as the duties of the trustee remain undischarged the trustee can not avail of the statute of limitations for his defense,” and held in the case, which was an express trust under a will for the payment of certain debts, that the statute of limitations was not a defense, so long as the duties of the trustee had not been discharged and he bad not repudiated the trust. The duties of the trust in the case at bar have not been discharged and the trustee did not repudiate the trust imposed upon it before the filing of the bill. 2. It would be so far fraudulent as to be inequitable to allow the defense of the statute of limitations to be made against Wilson’s claim. Henry County v. Winnebago D. Co., 52 Ill. 299; Long v. Thompson, 60 Ill. 27; Anderson v. Anderson, 178 Ill. 160-4; Johnson v. Waters, 111 U. S. 640-68; Arrowsmith v. Gleason, 129 H. S. 86-100; Sutherland v. Reeve, 151 Ill. 384. In the Long case, supra, it was held that an order of distribution of the suplus in the hands of an administratrix directing one-third of such surplus to be paid to her without notice to the heirs, was void for want of such notice, and was set aside. In the Arrowsmith case, supra, an order of a Probate Court to sell an infant’s land, which was procured by fraud, was set aside in equity, though the proceeding appeared to have been regular in matter of form. The court say: “The fact of being a party does not estop a person from obtaining in a court, of equity relief against fraud. It is generally the parties that are the victims of fraud. * * * In such cases the court does not act as a court of review, nor does it inquire into any irregularities or errors of proceeding in another court; but it will scrutinize the conduct of the parties, and if it finds that they have been guilty of fraud in obtaining a judgment or decree, it will deprive them of the benefit of it, and of any inequitable advantage which they have derived under it.” In the Anderson case, supra, the court quotes from Nelson v. Rockwell, 14 Ill. 375, the following: “ Fraud is one of the broadest grounds of equity recognized by the courts, and relief may be obtained against a judgment at law, although the party might find a remedy in a court of law; ” and affirmed a decree which set aside a judgment of the County Court between .a guardian and his ward on account of fraud, which consisted of a concealment by the guardian of certain facts within his knowledge, and which the ward did not know, and in making false representations. The court quotes from Perry on Trusts, as follows: “It is, however, his (trustee’s) duty to inform the court fully of all material facts within his knowledge, for a decree procured by any concealment or other 'management would be opened and the trustee might be held responsible.” In the Sutherland case, supra, the court, in speaking of a like defense of the statute of limitations, said : ■ “ It is sufficient to say that this is an attack upon a decree or order of this court, obtained without notice to the petitioner and under circumstances which it is alleged amount to a fraud. A judgment obtained by fraud is not only a fraud upon the party, but upon the court. The statute of limitations, in cases of this nature, is applied in equity only -by analogy to the limitations at law and a court of equity will not apply the law statute where it would be inequitable to do so.” ' In this case the failure of the Trust Company to give notice to the court, to Wilson or to his grantor, although its solicitor at the time the order of distribution was entered, knew that Wilson’s grantor had Acquired the equity of redemption, was, to say the least, such a fraud as would make it inequitable to allow the statute of limitations to be interposed as a defense. Other matters urged by counsel, and not especially referred to herein, have been fully considered, but they are not, in our opinion, sufficient to modify the conclusions reached by us. The-decree of the Circuit Court .dismissing the bill is reversed, and that court is directed to enter a decree in favor of the plaintiff in error for $3,9.95.05, together with interest thereon from April é, 1892, at five per cent per annum, with annual rests thereafter on the fourth day of April each year. Reversed.