{ "id": 1584461, "name": "Robert P. Butts and Company, Claimant-Appellee, v. Estate of Robert P. Butts, Jr., Defendant-Appellant", "name_abbreviation": "Butts v. Estate of Butts", "decision_date": "1970-02-17", "docket_number": "Gen. No. 11,080", "first_page": "242", "last_page": "249", "citations": [ { "type": "official", "cite": "119 Ill. App. 2d 242" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "54 NE2d 394", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "322 Ill App 244", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 4974103 ], "opinion_index": 0, "case_paths": [ "/ill-app/322/0244-01" ] }, { "cite": "143 Ill App 361", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 2673414 ], "opinion_index": 0, "case_paths": [ "/ill-app/143/0361-01" ] }, { "cite": "19 NE2d 585", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "370 Ill 617", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2560905 ], "opinion_index": 0, "case_paths": [ "/ill/370/0617-01" ] }, { "cite": "33 NE 955", "category": "reporters:state_regional", "reporter": "N.E.", "opinion_index": 0 }, { "cite": "144 Ill 507", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 3079033 ], "opinion_index": 0, "case_paths": [ "/ill/144/0507-01" ] }, { "cite": "88 Ill 566", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5338919 ], "weight": 2, "opinion_index": 0, "case_paths": [ "/ill/88/0566-01" ] }, { "cite": "88 Ill 490", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 5336301 ], "opinion_index": 0, "case_paths": [ "/ill/88/0490-01" ] }, { "cite": "18 NE2d 563", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "298 Ill App 313", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 5614313 ], "opinion_index": 0, "case_paths": [ "/ill-app/298/0313-01" ] } ], "analysis": { "cardinality": 576, "char_count": 10592, "ocr_confidence": 0.603, "pagerank": { "raw": 1.6406407758738674e-07, "percentile": 0.6910202100585787 }, "sha256": "318b9e4650acdefe9779c24247e01d471d8c36e83def935d457bd3b4530d1c09", "simhash": "1:79fffafdc370bf31", "word_count": 1779 }, "last_updated": "2023-07-14T18:00:25.222000+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "Robert P. Butts and Company, Claimant-Appellee, v. Estate of Robert P. Butts, Jr., Defendant-Appellant." ], "opinions": [ { "text": "TRAPP, J.\nDefendant appeals from an order of the Circuit Court allowing a claim of $95,298.63 against the Estate of Robert P. Butts, Jr., as a preferred 5th-class claim under the statute, in favor of Robert P. Butts and Company.\nRobert P. Butts and Company, a corporation, hereinafter designated claimant, had commission contracts for sale of insurance policies of various insurance companies, including Lincoln Casualty Company of which it was the controlling shareholder. Claimant is in receivership and the casualty company is in rehabilitation under the jurisdiction of the Illinois Insurance Department.\nThe 1,500 shares of outstanding stock of claimant corporation were owned as follows: Robert P. Butts, Sr., 1,200 shares; Robert P. Butts, Jr., the decedent here, 100 shares; two brothers of the decedent, 100 shares each. Robert P. Butts, Sr. was president of the claimant company, and the decedent, Robert P. Butts, Jr., was secretary-treasurer and also a director. The decedent was also president and director of Lincoln Casualty Company. There is no dispute that decedent owed claimant $95,298.63 in respect to variously labelled advances at the time of his death, August 8,1964.\nUpon appeal it is urged that the claim may only be allowed as a 7th-class general claim, rather than a 5th-elass preferred claim, under chapter 3, \u00a7 202, Ill Rev Stats 1967, and that as to the total amount claimed the sum of $17,250 is barred by the 5-year statute of limitations which is effective as to unwritten contracts and the conversion of property.\nSection 505 of the Illinois Insurance Code (Ill Rev Stats 1967, c 73, par 1065.52), provides in part:\n\u201cThat portion of all premiums or monies which an agent, broker or solicitor collects from an insured and which is to be paid to a company, its agents or his employer because of the assumption of liability through the issuance of policies or contracts for insurance, shall be held by the agent, broker or solicitor in a fiduciary capacity and shall not be misappropriated or converted to his own use or illegally withheld by the agent, broker or solicitor.\u201d\nRule 31.13 of the Illinois Insurance Department, after repeating that portion of the statute, quoted above, provides in part:\n\u201cEffective as of the date hereinafter fixed, all such funds hereinafter referred to as \u2018premium funds\u2019 shall not in any manner be commingled with any other funds or monies not of such fiduciary character and such funds shall be deposited in a special demand (checking) account which shall be established for such purpose and shall be titled \u2018Premium Fund Trust Account.\u2019 Such account shall, in the case of resident brokers and all agents, be maintained with a national banking association or state banking corporation having banking offices at and within the State of Illinois.\u201d\nThis rule also requires the keeping of complete records of the source of funds and all disbursements subject to the inspection of the Department of Insurance for three (3) years.\nClaimant company maintained a Premium Fund Trust Account, but did not deposit all premiums received in said account as required by the Department rule. Albert 0. Eck, Jr., certified public accountant, testified to year-end deficiencies, that is amounts by which the Premium Fund Trust Account was short deposits of premiums actually collected as follows:\nMarch 31, 1959 $107,153.44\nMarch 31, 1960 276,493.14\nMarch 81, 1961 232,107.60\nMarch 31, 1962 432,797.85\nMarch 81, 1963 422,051.75\nMarch 31, 1964 368,615.54\nSince the deficient premium sums were actually collected, they were in fact, contrary to the departmental rule, commingled with general funds of the claimant company. All sums paid to the decedent were paid from the general funds with which the premium funds were commingled.\nDefendant contends that since decedent was not an \u201cexpress trustee\u201d of funds with respect to claimant, the claim cannot be allowed as a 5th-class claim. The definition of a 5th-class claim under 111 Rev Stats 967, c 3, \u00a7 202, is:\n\u201c5th. Money and property received or held in trust by decedent which cannot be identified or traced; . . . .\u201d\nDefendant relies upon In the Matter of Estate of Reiter, 298 Ill App 313, 18 NE2d 563, where a deceased broker had been given a mortgage note to collect for claimant. On his death it appeared the proceeds had been commingled with his general bank account and half of the proceeds were identifiable as part of the bank account, whereas the other half was not traceable. The court ordered the traceable portion paid over forthwith, and allowed the untraceable portion as a preferred claim under the statute which then provided:\n\u201cFifth. Where the deceased has received money in trust for any purpose, his executor or administrator shall pay out of his estate the amount thus received and not accounted for.\u201d\nThe appellate court reversed as to the untraceable portion saying, at p 323:\n\u201c \u2018It has been repeatedly held by the courts of this state that the word \u201ctrust\u201d as used in the 6th clause (now 5th clause) applies only to technical or express trusts, and that it has no application to trusts which the law implies as growing out of contracts (citing cases).\u2019 \u201d\nThe origin of the narrow interpretation of preferred claims of this class is somewhat obscure. On the face of the statute, the only conditions are that they be trust funds which are not traceable. If they are traceable they need not be allowed as a claim, but may be ordered paid over as they are not the property of the estate. In Weer v. Gand, 88 Ill 490, on 493, where claimant had accepted a note and there was really no trust at all, the court said:\n\u201cwhere one person employs another as an agent, loans money or sells property on credit, a confidence and trust is imposed, to a greater or less extent, and yet such transactions have never been regarded by courts as falling within any recognized class of trusts.\u201d\nIt would seem that the early cases were determined on the basis of whether or not a technical trust existed. The Reiter case above quoted is especially difficult because a trust was, in fact, recognized as to the traceable money and logically, if a trust existed, the untraceable portion should have been allowed as a preferred claim. There is no doubt that if one received money as an executor, administrator or guardian and died without accounting, such was charged against his executor as a preferred claim. Wilson v. Kirby, 88 Ill 566, on 569. The statute was then broadened in 1871-2 to include instances, \u201cwhere the decedent has received money in trust for any purpose, his executor or administrator shall pay out of his estate the amount so received and not accounted for, . . . .\u201d Of this change the court in Wilson v. Kirby, 88 Ill 566, on 569 said:\n\u201cIt is certain that the legislature, by the phrase \u2018in trust for any purpose,\u2019 intended to extend the class of preferred claims, but how far, admits of question.\u201d\nThat receipt of money as executor, administrator or guardian was clearly receiving money \u201cin trust for any purpose\u201d is confirmed in Svanoe v. Jurgens, 144 Ill 507 on 511, 33 NE 955.\nWe do not find that the cases cited by defendant or, for that matter any Illinois authorities discovered, hold that in order to be a 5th-class claim the trust must be an express trust in the sense that requires a written trust instrument. From the origin of the present statute and its predecessors, trusts arising from an official capacity such as executor, administrator or guardian qualified for preferred classification.\nHere the situation is that of a broker who is by statute subject to the regulation of the Insurance Department of the State of Illinois and whose particular acts as a receiver of insurance premiums are declared by statute to be in a fiduciary capacity. He is, by rule of the Department of Insurance, ordered to segregate, identify and account for the fund in a particular manner. There is no doubt that in reference to the broker this situation meets all the qualifications of a technical trust. The public character of the trust gives it added significance in reference to consideration of its status as a preferred claim.\nThe next step is to consider whether this trust maintains its character in the hands of the decedent in question. It has frequently been held that one who takes from a trustee who is violating his trust while having notice of such violation becomes himself a trustee. Harris v. Ingleside Bldg. Corp., 370 Ill 617 on 624, 19 NE2d 585; Perry on Trusts, 7th ed, \u00a7 334; Wobbe v. Schaub, 143 Ill App 361, on 367.\nIt would be difficult to imagine a situation more appropriate to charge the decedent transferee with notice and thus to make the transferee a trustee, than the situation at hand. The decedent was the financial officer, the secretary-treasurer of the brokerage company which was charged with the statutory trust, and his very transfer to himself for nonbusiness purposes or purposes which resulted in an officer being indebted to the company, was the trust violation. In a very real sense the decedent was the defaulting trustee of a statutory trust.\nDefendants object that claimant had other income and that it has not been established that the money paid to decedent came from trust monies. We do not think that this burden is on the claimant. It is well established, beyond the requirement of citation of authority, that one who commingles trust funds with nontrust funds assumes the burden of segregation of the funds.\nThe issue of the 5-year statute of limitations is controlled by Auer v. William Meyer Co., 322 Ill App 244, 54 NE2d 394, which holds that where directors of a corporation violate a trust in a situation where the directors are in complete control of the affairs, and where no notice of the violation has reached a minority stockholder, the statute of limitations is not a bar to the assertion of the rights of such minority stockholder. Claimant was a family company charged with a public trust. Until the collapse of the claimant company or the death of the decedent, there was no one to assert the trust.\nThe judgment of the circuit court is affirmed.\nAffirmed.\nCRAVEN, P. J. and CREES, J., concur.", "type": "majority", "author": "TRAPP, J." } ], "attorneys": [ "Sorling, Catron & Hardin, and Giffin, Winning, Lindner, Newkirk & Cohen, of Springfield (James M. Winning, of counsel), for appellant.", "J. Waldo Ackerman, of Springfield (Simon L. Friedman and Robert S. O\u2019Shea, of Springfield, of counsel), for appellee." ], "corrections": "", "head_matter": "Robert P. Butts and Company, Claimant-Appellee, v. Estate of Robert P. Butts, Jr., Defendant-Appellant.\nGen. No. 11,080.\nFourth District.\nFebruary 17, 1970.\nSorling, Catron & Hardin, and Giffin, Winning, Lindner, Newkirk & Cohen, of Springfield (James M. Winning, of counsel), for appellant.\nJ. Waldo Ackerman, of Springfield (Simon L. Friedman and Robert S. O\u2019Shea, of Springfield, of counsel), for appellee." }, "file_name": "0242-01", "first_page_order": 248, "last_page_order": 255 }