Opinion ID: 2232236
Heading Depth: 1
Heading Rank: 2

Heading: Insurance Commissions.

Text: Dick & Reuteman Company contends that it should not be required to account for commissions realized from acting as insurance broker in insuring the trust property. In support of this contention, it argues that the original trust deed authorized it to write this insurance, and that there has been no extinguishment of the trust deed. The underwriting agreement between the mortgagor and Dick & Reuteman Company expressly required the mortgagor to insure the mortgaged property through Dick & Reuteman Company, and the trust deed contained a like provision. However, the trust deed contains no provision which expressly required the trustee to insure the property if the mortgagor defaulted in performing its covenant to insure. There is a provision which granted the trustee a lien upon the mortgaged property, having priority over the lien of the bonds, for any moneys advanced by the trustee for taxes and insurance. At best, these documents only impliedly gave trustee the right to insure through itself.  So long as the mortgagor was a party to the trust, any authorization embodied in the trust deed, permitting self-dealing by the trustee, was binding upon the bondholders. However, once the mortgagor was entirely eliminated as a party to the trust, and it was provided that the trust was to be administered under the direction and control of the court, any prior right of self-dealing disappeared. This court will assume that when it is provided that a trust will be administered under the direction and control of a court, the court will apply the general principles of trust law, including the prohibition against self-dealing, unless there is an express provision permitting an exception thereto. The circuit court's order confirming the foreclosure sale had the effect of extinguishing any covenants of the mortgagor under either the underwriting agreement or the trust deed. This order made no direct reference to insurance, but the declaration of trust did. This instrument requires the trustee to protect and insure the premises against loss or damage by fire and windstorm and against other hazards as is [sic] usually and customarily carried on similar property, all subject, however, to the direction and control of this court. If there existed theretofore an implied right in the trustee to insure through itself, it was supplanted by this express provision. We cannot believe that, when the circuit court approved this declaration of trust, it contemplated self-dealing and retention of profits by the trustee. In view of this determination, we hold that the trial court's order properly required Dick & Reuteman Company to account for the insurance commissions. By the Court. Order affirmed.