Opinion ID: 1197637
Heading Depth: 1
Heading Rank: 12

Heading: Interest payable by trustee on Midtown rent. Interest payable to trustee on funds advanced by him to trust.

Text: Plaintiffs' complaint alleged that each year Leo Gorger collected $840 in rent due under a lease of trust property known as the Midtown Annex; that he deposited such money in his personal account, and that he should be required to fully account therefor and to reimburse the trust for interest therefor compounded quarterly. Defendants admitted that these funds had been deposited in the personal account of Leo Gorger and that no interest had been paid on them, but offered evidence that each year the trust account statement included an item showing that he owed the trust for these moneys and that eventually he paid such moneys to the trust. The trial court found that this withholding and commingling of funds was done knowingly and ordered that the trustee pay interest on such funds at six percent per annum in the amount of $3,350.85. Defendants contend that it was error to enter judgment against the trustee in that amount, not because his handling of the Midtown rental payments was proper, but because he had personally made advances to the estate of his wife and to the trust of funds for payment of administrative expenses in excess of $156,000, for which he had charged no interest, and because he had not withdrawn over $100,000 from the business, as he was entitled to do, but left such funds in the business as working capital. Defendants also cite our decision in Hull v. Heimrich, 138 Or. 117, 127, 3 P.2d 758, 6 P.2d 41 (1931), for the application in a suit against a trustee by the beneficiaries of a trust of the familiar rule that one seeking equity must also do equity. Thus, defendants contend that all that Leo Gorger is asking is that he be treated equitably, but that neither the plaintiffs nor the trial court have been willing to do so by giving him credit for interest due as a result of these far more substantial advances by him of funds to and for the benefit of the trust. We hold that the trial court did not err in ordering the trustee to pay the trust the sum of $3,350.85 for interest on the Midtown rentals collected by him. We agree with defendants, however, that the trial court was in error in refusing to give the trustee credit for interest on funds advanced by him to and for the benefit of the trust estate. A trustee may advance his own money in discharging trust obligations where there are insufficient funds in the trust estate. The trustee will be entitled to reimbursement of such advances and may also be entitled to interest on them. Scott, Trusts § 244 (2d ed. 1956). The same rule may apply to advances by a partner. See Annot., 66 A.L.R. 4, 17 (1930). See also Kraus v. Kraus, 250 N.Y. 63, 68, 164 N.E. 743 (1928) (opinion by Cardozo, J.). Defendant Leo Gorger offered the testimony that in 1962 he advanced personal funds in the sum of $156,010.89 for payment of inheritance taxes on the estate of his deceased wife; that there were insufficient liquid assets to pay the estate taxes at that time; that if such an advance had not been made the Pendleton ranch would have had to be sold; and that the children agreed with his decision that the Pendleton ranch should not be sold to pay such taxes, but that he should advance the funds for payment of such taxes. We hold that under these circumstances Leo Gorger is entitled to interest on such advances and that upon remand of this case to the trial court it should determine the amount of such advances by Leo Gorger and credit his capital account in the partnership with interest at six percent per annum on such advances. [13]