Smith v. Kelley

56 N.E.2d 360, 387 Ill. 213
CourtIllinois Supreme Court
DecidedMay 16, 1944
DocketNo. 27956. Reversed and remanded.
StatusPublished
Cited by5 cases

This text of 56 N.E.2d 360 (Smith v. Kelley) is published on Counsel Stack Legal Research, covering Illinois Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Kelley, 56 N.E.2d 360, 387 Ill. 213 (Ill. 1944).

Opinion

Mr. Justice Stone

delivered the opinion of the court:

Appellants, as holders of what are known as “certificates of beneficial interest,” under a certain deposit agreement, entered into by holders of bonds secured by a trust deed on certain described property known as No. 538-40 Highland Park, in Lake county, filed a bill in the circuit court of that county seeking partition, an accounting, termination of the trust by carrying out the terms thereof prescribed by the deposit agreement, for other relief there specified, and for other and further relief as to the court shall seem just. Defendants, appellees, who were a bondholders’ committee, filed a motion to strike the complaint as amended, and that motion was sustained. Appellants abided their complaint and the same was dismissed for want of equity. A freehold being involved, the appeal comes directly to this court.

The complaint consists of two counts and alleges appellants to be the holders of certificates of beneficial interest evidencing the deposit by them of $11,500 in bonds under the deposit agreement hereinafter referred to.

The trust deed securing the bonds was issued by the Udell Printing Company on May 1, 1928. The bonds were 375 in number, of $500 each, aggregating $187,500. Default of the conditions of the trust deed occurred on November 1, 1932, and on January 19, following, appellees, or their predecessors, as such, formed a bondholders’ protective committee and solicited deposit of the bonds under the deposit agreement. This agreement was dated January 19, 1933. There was thereafter deposited with the committee, bonds in the sum of $174,500. Certificates of beneficial interest were issued by the committee, reciting the facts referred to, giving the aggregate amount of the bonds issued, and stating that the holder of the deposit certificate is entitled “to share in the benefits of said Agreement in respect of the number of beneficial interests represented by the Certificate of the Deposit of bonds in lieu of which this certificate is issued and to the rights and interests as a depositor as the same are specified and defined in said Deposit Agreement.” The certificate also recites that the holder thereof assents to and is bound by the provisions of the deposit agreement. On July 12, 1933, appellees, as the bondholders’ committee, purchased the equity of redemption in the property mortgaged, with the $174,500 in bonds deposited with it, and took up or settled with the holders of the $13,000 of bonds remaining outstanding, thereby acquiring the fee-simple title to the property, consisting of one lot with a building thereon, containing a number of apartments and two store rooms.

The complaint also alleges that no definite time was fixed in the deposit agreement in which the committee was to sell or dispose of the premises, but that more than a reasonable time, to-wit, nearly ten years, has elapsed without liquidation or sale of the property, contrary to the intent and purpose of ther deposit agreement. It also appears from the pleadings that on April .1, 1936, the committee issued certificates of beneficial interest, which were distributed to the bondholders in lieu of the certificates of deposit, which were taken up by the committee. The complaint alleges that under the provisions of the deposit agreement the committee was empowered, either to create a corporation to hold the property in trust, or to appoint a trustee for that purpose; but, although nearly ten years have elapsed, they have failed to appoint a trustee or form a corporation to sell or liquidate the premises. It is further charged on information and belief that the committee has misused and improperly diverted the funds in that they purchased land other than that involved under the trust deed, and used funds of the certificate holders to purchase outstanding certificates of beneficial interest. It is also charged they paid themselves and their agents and employees large and excessive fees.

Appellants owned 23/349ths of the bonds deposited and claim that they are entitled to receive a conveyance of that fractional interest in fee simple. They pray for partition and an accounting, appointment of a receiver, restraint of the committee from conveyance or expenditures pending further orders of the court; or, in the alternative, that the committee as trustee be required to carry out the terms of the trust created by the deposit agreement, or that a new committee or trustees be appointed so to. do, • and that the estate be brought into court and be administered upon by the court; that the deposit agreement and the trust created thereby be “construed, and that the duties and obligations of the parties be defined and a sale had, and, as we have seen, for further relief such as to the court shall seem just. Appellees’ motion to strike the complaint was based on the ground that it failed to state facts entitling appellants to any relief; that there is no showing that plaintiffs have title, either legal or equitable, in the premises, and that the interests of the plaintiffs are only in the proceeds, rents, issues and profits and not an interest of any sort in the real estate.

It is urged here by appellants that they are entitled to partition as ■ owners of an undivided equitable interest in the premises; that the appellee committee should not be allowed to remain in possession or control of the property for an indefinite period, or a period of time to be determined by them alone; or it should be required to account and the estate be brought into court and administered as a trust that has terminated.

Appellees, on the other hand, claim that under the deposit agreement and action taken by the committee after the execution of that agreement, an active trust was created which was to be terminated not later than twenty-one years from the date of the creation of such trust, and that this is not a case in which a trust was created with no definite time for its termination fixed.

Principal and first among the questions to be considered is the construction of the deposit agreement. The purpose of this agreement, as stated therein, was to obtain united action for the protection of all bondholders who had deposited their bonds with the bondholders’ committee, to obtain title to the property by purchase, foreclosure or otherwise, collect and conserve the income and to dispose of the corpus for the benefit of all depositing bondholders. It provided that the committee might take title to the property as joint tenants with survivorship among its members, with power to manage, control and operate the property, or to vest the management in a corporation or a trustee, and provided reasonable compensation for members of the committee.

By the deposit agreement the depositors sold and transferred to the committee the full legal, equitable and beneficial title to all the bonds deposited by them, for the purposes set forth in the deposit agreement, and each agreed that the committee be vested with all necessary authority to carry out and perform the purposes contained in the agreement, with the right to exercise absolute ownership of the property. By this agreement the committee was authorized to do whatever it deemed expedient to procure the sale or exchange of all or any part of the property, to purchase it either on foreclosure or at private sale, whichever in the judgment of the-committee would promote the interests of the depositors.

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Bluebook (online)
56 N.E.2d 360, 387 Ill. 213, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-kelley-ill-1944.