Court Opinion

ID: 7000585
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:41:21.537565+00
Date Added: 2024-06-11T16:09:54.740401
License: Public Domain

Mr. Presiding Justice Sears delivered the opinion of the court. But one question is presented upon this appeal, viz.: was the release by Louis Pregler, trustee, of the Emily Lucand trust deed, operative to discharge the lien of such trust deed, and thereby make the trust deed given by Mary Pregler and Louis Pregler to secure appellee’s loan, a first lien upon the property ? Louis Pregler was, under the terms of the will of Babaclr, given general power to invest the trust fund from time to time as he might deem best. Hence, if the Lucand note, representing the trust fund, had in fact been paid to Pregler, the trustee, at the time of the release, whether with or without knowledge or consent of the eestui que trust, the payment would have been sufficient and no obligation would have rested upon appellee to see to the application of the money thus paid. And this would, we think, be equally true, whether Mrs. Lucand had before the release paid the mortgage debt, or appellee had paid it to the trustee by giving to the trustee moneys advanced by him on the loan. But the difficulty with the case presented is, that there is no evidence that Mrs. Lucand, or any one on her behalf, ever paid the debt. The master finds that “ the evidence does not disclose whether or not anything was paid to Louis Pregler on account of the principal note.” It is clear from the evidence that the eestxd que trust has never received any part of it; but it is not disclosed whether it was paid to the trustee or not. It does not appear from the master’s report whether any estate equal to the fund of $4,500 was left by Louis Pregler. Neither can it be determined from the evidence that the moneys advanced by appellee as a loan to Mary Pregler, wife of the trustee and then the owner of the legal title to the land in question, were paid to Louis Pregler as trustee. On the contrary, it does appear that those moneys were paid to Mary Pregler, and that Louis only received a part of them, and that part only under a written authority as agent for his wife, Mary Pregler, and not at all as trustee under the will of Baback. The question is therefore reduced to the following: If the Lucand note was never paid to the trustee, did the unwarranted and hence fraudulent release by Louis Pregler operate to make appellee’s loan a first lien over the trust deed thus wrongfully released ? The note secured by the trust deed had not, by its terms, matured when the release was executed. It was not canceled. It was not in the hands of the maker, who would naturally possess it if it had been paid. It was payable to a trustee. These facts, we think, were enough to put appellee upon notice of the conditions which actually obtained and which he could have learned by inquiry of Mrs. Lucand. We do not think the position of counsel for appellee can be sustained, that because the trustee, under the provisions of his trust, had power to manage and invest the fund as he deemed best, therefore it is immaterial whether the money had been paid to him or not when he released. If the money had in fact been paid to the trustee, then because of his power to control it, it might be immaterial here whether he had applied it properly or. not. But the power of control and management carried with it no power to abandon all right to it in violation of the trust. Hor do we regard the fact that Pregler, the trustee, then said that the note was paid, and then canceled the note, as relieving appellee from the effect of such notice. Appellee must have known that the trustee could not lawfully release the trust deed for the benefit of his wife unless the debt represented by the trust deed had been paid. The fact of the uncanceled note not yet matured and in the possession, not of the maker, but of the payee, was sufficient to put appellee to an inquiry as to whether the note was in fact paid. Keohane v. Smith, 97 Ill. 156; Jummel v. Mann, 80 Ill. App. 288, and cases therein cited. The above authorities bear upon the sufficiency of notice to appellee of the conditions which existed in relation to the release of a mortgaged debt not matured. That appellee had notice that the note in question was part of a trust fund, is settled by the form of the note, which was payable to Pregler, trustee. Appellee knew that Pregler, the trustee, was releasing the Lucand mortgage for the benefit of Mary Pregler, his wife. It seems to be well established that the very fact that an executor applies estate assets in payment of his own debt, is of itself a circumstance of suspicion, which ought to put a purchaser upon inquiry as to the propriety of the transaction. Hill v. Simpson, 7 Ves. Jr., 152; Petrie v. Clark, 11 Serj. & R. 377; Walker v. Taylor, 4 Law Times (N. S.), 845; Field v. Schiefflin, 7 John. Ch. 150; Shaw v. Spencer, 100 Mass. 382. In Field v. Schiefflin, supra, Chancellor Kent said: “ The great difficulty has been to determine how far the purchaser dealt at his peril, when he knew, from the very face of the proceeding, that the executor was applying the assets to his own personal purpose, as the payment of his own debt. The later and better doctrine is, that in such a case, he does buy at his peril,” etc. Here appellee knew that Pregler, as trustee, was releasing a mortgage, part of the trust fund, and not matured, for the sole benefit of Mary Pregler, his wife. We are of opinion that appellee was put to inquiry as to whether the debt secured by such mortgage was paid, and that he could not rely alone in that respect upon the act or statement of the trustee, who, as he knew, was aiding the procurement of an advance for the benefit of Mary Pregler, and not for the benefit of the trust estate. If the notice to appellee is sufficient, and if the release was executed by Pregler for the benefit of his wife and in violation of his trust, then the rights of appellant, disclosed bv her cross-bill, would be apparent. “No doctrine is better settled than that a trustee has no power to sell and dispose of trust property for his own use and at his own mere will. One who obtains it from him or through him with actual or constructive notice of the trust can acquire no title, and it may be recovered by suitable proceedings for the benefit of the cestui que trust.” Third Nat’l Bank v. Lange, 51 Md. 138. In that case there was involved the disposition of a promissory note by a trustee in violation of his trust. It was contended that the purchaser was innocent of knowledge and without notice. The court said further: “ In the case of the present note, it can not be read understanding^ without seeing upon its face that it is connected with a trust and is part of a trust fund. It was the duty of the bank before purchasing it to have made inquiry into the right of the trustee to dispose of it. But this it wholly failed to do, and, as it turns out he was disposing of the note in fraud of his trust, the bank must suffer the consequences of the risk it assumed.” Upon another trial of this cause it may be more satisfactorily determined whether Mrs. Lucand had ever paid any portion of the debt evidenced by her note to the trustee, and there may also be a finding of fact as to estate left by the trustee, Pregler, at his decease. Upon the evidence as now presented, the decree can not be sustained. The decree is reversed and the cause is remanded.