Lennartz v. Estate of Popp

Mr. Presiding Justice Ball delivered the opinion of the court. In directing the jury to return a verdict in favor of the estate of the deceased, we are of the opinion the trial court committed reversible error. The evidence tended to show that the deceased was duly appointed trustee of an express trust for the benefit and the protection of appellant; that his duties in this regard were plainly set forth in the deed of trust, namely, that he should not release the lien of the trust deed until the note secured thereby was fully paid; that the deceased, before the maturity of the note, executed and delivered a release of the trust deed without seeing to it that the note was paid; that after the recording of such release, the premises described in the trust deed were conveyed by the debtors to a bona fide purchaser, thus wholly preventing appellant from having recourse thereto for the satisfaction of her debt; that said note has never been paid, and the makers thereof are insolvent. Being thus cut off from all resort to the land for indemnity, and the trustee being dead, appellant is without remedy for her loss except by an action against the representatives of him whose wrongful acts occasioned the loss. The evidence in this case, prima faoie, ■ entitled appellant to recover in this action, and it therefore was error to direct a verdict for appellee. The deceased, at his peril, was bound to know that the indebtedness to appellee was paid before he executed a release of her security. A trustee who unwarrantably releases the lien of his trust deed is. liable to his principal for the damages which necessarily flow from his wrongful act. This rule is so clearly equitable and so familiar that it does not require discussion, and ought not to call for the citation of authorities. However, from among the many cases, we refer to the following: It is a clearly established principle in equity jurisprudence that, whenever the trustee has been guilty of a breach of the trust, and has transferred the property, by 1 sale or otherwise, to any third person, the cestui que trust has a full right to follow such property into the hands of such third person, unless he stands in the predicament of a bona fide purchaser, for a valuable consideration, without notice. Oliver v. Piatt, 3 Howard, 479; Jennings v. Hunt, 6 Ill. App. 523; Barbour v. Mortgage Co., 102 Ill. 121; Stiger v. Bent, 111 Ill. 337. In Lennartz v. Quilty, 191 Ill. 174, appellant in this case filed a bill to foreclose the trust deed herein mentioned against Nora Behrend, Bernhard Behrend and Johanna Quilty. The evidence showed that the last named defendant, after the recording of the release deed executed by the deceased, in entire good faith, without notice or ground of suspicion, and relying upon the recording laws, as she had a right to do, purchased the premises for an adequate consideration, which she then paid in cash, and by the assumption of a prior incumbrance. In this state of the proof the Supreme Court affirmed the decree of the Circuit Court dismissing the bill for want of equity. In so doing the Supreme Court said : “The release of the trust deed securing the note of appellant by Popp, the trustee, was unauthorized, for the reason that the note was not paid.” Where the cestui que trust elects to hold the trustee personally responsible, or where that is his only remedy, as in the case here, and the trustee is dead, his position as to the estate of the trustee is that of a simple contract creditor with a naked claim for damages arising out of the breach of the trust. Lathrop v. Bampton, 31 Cal. 23. Where a trustee sells or releases the trust property so that it can no longer be followed, he is liable to the cesttii que trust for the actual value of the trust property so lost, disposed of or converted. Calhoun v. Burnett, 40 Miss. 604; Roberts v. Mansfield, 38 Ga. 456; Docker v. Somes, 2 Mylne & K., 655; Freeman v. Cook, 6 Ired Eq., 379; Norman’s Ex’rs v. Cunningham, 5 Gratt. 72; Flagg v. Mann, 3 Sumner, 93; Bradley v. Luce, 99 Ill. 234; Long v. Fox, 100 Ill. 43. It is true that under the statute neither Behrend nor appellant, when called in behalf of appellant, was a competent witness against the estate of the deceased; but both or either of them might have been called by appellee, had it so desired. The judgment of the Circuit Court is reversed and the cause is remanded. j"Reversed and remanded.