Pank v. Chicago Title & Trust Co.

40 N.E.2d 787, 314 Ill. App. 53, 1942 Ill. App. LEXIS 934
CourtAppellate Court of Illinois
DecidedMarch 23, 1942
DocketGen. No. 41,849
StatusPublished
Cited by1 cases

This text of 40 N.E.2d 787 (Pank v. Chicago Title & Trust Co.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pank v. Chicago Title & Trust Co., 40 N.E.2d 787, 314 Ill. App. 53, 1942 Ill. App. LEXIS 934 (Ill. Ct. App. 1942).

Opinion

Mr. Justice O’Connor

delivered the opinion of the court.

September 23, 1938, plaintiffs filed their complaint in chancery alleging that Ella Gibson Pank, plaintiff, is a co-trustee with defendant, Chicago Title and Trust Company, of a testamentary trust created by the last will and testament of Christopher Waller Pank,. her deceased husband, the other plaintiffs being the children of plaintiff, Ella Gibson Pank and the deceased. The complaint charged deféndant with a breach of duty in carrying out the trust and prayed that it be required to account and to pay personally to the trustees of the trust estate what amount should be found due; that defendant be removed as one of the trustees and a successor appointed.

Defendant filed its answer denying it had been guilty of any breach of duty. Sometime thereafter, defendant filed its counter claim in which it alleged there was in the trust estate $19,331.29 in cash which was uninvested and that plaintiff, Mrs. Pank, its - co-trustee failed to carry out her duties as such so that defendant whs unable to comply with the instructions of the '.testator as. to the investment of the money. The prayer was that the court advise and.direct it as to its. duties. . The case was heard by the chancellor who found in .favor or defendant, a decree was entered dismissing the complaint for want of equity, and plaintiffs appeal.

The record discloses that January 23,1922, Christopher Waller Pank executed his will. He died June 21, 1926. The will was admitted to probate in the Probate court of Cook county July 27, 1926, and the estate closed September 30,1927. Both trustees qualified and proceeded to carry out the trust. The will, after making provision for the payment of his debts and after leaving certain of his property to his wife designated her and the Chicago Title and Trust Company co-trustees. The income of the trust estate was to be paid to the widow and after her death to their children, etc. The material part of the will involved in this appeal provides: “Said Trustees shall convert said trust estate into cash as rapidly as the same can be done after my decease and without unnecessary sacrifice, providing, however, that said Trustees shall be authorized to retain as a part of said estate, so long as they may see fit to do so, any first mortgage real estate securities and any shares of capital stock in the MacWhyte Company, Fairbanks Morse & Co., and in any corporation subsidiary to or affiliated with the said Fairbanks, Morse & Co., which I may own at the time of my death. . . . Said trustees are directed to invest such part of said trust estate as may from time to time be converted into cash, in first mortgage real estate securities.”

At the time of his death, the testator held 120 shares of 7 per cent cumulative preferred stock and 395 shares of common stock in Fairbanks, Morse & Company and 104 shares of preferred and 3,000 of common stock «in the MacWTiyte Company.

The stockholders of Fairbanks, Morse & Co. amended its charter and offered to the shareholders of the 7 per cent preferred stock share for share, one share of new 6 per cent convertible preferred, one share of common and $2 in cash. The offer was accepted by the stockholders including the trustees of the trust estate. They received in exchange for the 120 shares of 7 per cent preferred, 120 shares of 6 per cent cumulative convertible preferred, 120 shares of common and $240 in cash. The common stock and the cash represented what was due for dividends then in arrears. The 6 per cent convertible preferred might be converted into common stock on the basis of 3 shares of common for one of preferred until February 28, 1937; 2% shares of common for one of preferred after February 28,1937, and until February 28, 1939, and 2 shares of common for one share of preferred after February 28,1939, and until February 28, 1941, when the conversion rights expired.

March 1, 1937, defendant the Chicago Title & Trust Co. as trustee, caused the 120 shares of 6 per cent cumulative convertible preferred to be exchanged for 360 shares of common of the Fairbanks, Morse & Company. Plaintiffs contend this exchange was made without consulting Mrs. Pank, the co-trustee, was a breach of trust on the part of defendant, the other trustee, and as a result of such breach, plaintiffs are entitled to recover “the difference between the value of the preferred stock at the time it was converted and the proceeds realized from the sale of the common stock, ’ ’ which was sold by agreement without prejudice June 21 and 22,1938.

Plaintiffs ’ theory of the case as stated by their counsel is that the exchange of the 120 shares of preferred for the 360 shares of common stock without the consent of Mrs. Pank “was a breach of trust on the part of the Chicago Title and Trust Company for two reasons: first, the common stock was an unauthorized investment under the terms of the trust pursuant to which the Chicago Title & Trust Company was acting, and second, regardless of the nature of the securities acquired in exchange for the preferred stock, the Chicago Title and Trust Company had no power or authority to act in the matter unless its co-trustee joined in the action” and therefore the Chicago Title & Trust Co. is liable to the trust estate for the amount of such loss. On the other side, defendant’s theory is (1) that the will authorized the trustees to retain the testator’s interest in Fairbanks, Morse & Co. and the MacWhyte Co., “not merely the particular certificates held by the testator but meant the substance of those interests.” That changes had been made in the form of the holdings in these two companies, in the Fairbanks, Morse & Co. in 1935 and in 1937, “In substance, there was continued retention of the interests in these companies.” (2) “That the corporate trustee, the custodian of the trust assets, is entitled to take reasonable action during the absence from the country of its co-trustee, for the preservation of trust assets pursuant to policies of retention of assets clearly laid down by the two trustees jointly.” And since Mrs. Pank was on a Caribbean trip at the time the conversion of the stock should be made it had the right and it was its duty to make the exchange to prevent loss.

The only question involved on this appeal is whether defendant is liable because of its exchange of the 120 shares of 6 per cent preferred for 360 shares of common stock of the Fairbanks, Morse Co. Other charges made in the complaint, which we have not mentioned, and defendant’s counter claim have apparently been abandoned.

The evidence shows that Mr. Pank, the testator, had been employed by Fairbanks, Morse & Co. from the time he was about 17 years of age and continued in its employ for about 39 years. He was vice president and director of sales of the company but resigned two years before he died, at which time he was 58. The assets turned over to the trustees by the executor were about $45,000 in cash; notes and bonds aggregating $13,500; 120 shares of Fairbanks, Morse & Co. 7 per cent preferred; 395 shares of common stock in the same company; 104 shares of MacWhyte Company preferred and 3,000 shares of common. Afterward the trustee received for the 120 shares of 7 per cent preferred Fairbanks, Morse & Co. stock, 120 shares of 6 per cent convertible preferred, 120 shares of common and $240. March 1, 1937, the 120 shares of preferred were exchanged for 360 shares of common, so that the trustees held 875 shares of the common stock of Fairbanks, Morse & Co.

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Bluebook (online)
40 N.E.2d 787, 314 Ill. App. 53, 1942 Ill. App. LEXIS 934, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pank-v-chicago-title-trust-co-illappct-1942.