author: NEARN, Judge.

text:
    Norma Frances Raoul CLARK et al. (Original Appellants), v. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHATTANOOGA (Original Appellee).
    Court of Appeals of Tennessee, Western Section.
    Aug. 30, 1974.
    Certiorari Denied by Supreme Court July 7, 1975.
    Supreme Court Denied Petition to Rehear Aug. 11, 1975.

      Leonard R. Tanner, Jr. and Richard P. Jahn, Chattanooga, for appellants.
    Jere T. Tipton, Miller, Martin, Hitching, Tipton, Lenihan & Waterhouse, John P. Gaither, Witt, Gaither, Abernathy & Wilson, Chattanooga, for appellee.
   NEARN, Judge.

This is a trust case involving an alleged breach of trust and it is the second time that the matter has come before this Court. Previously, this Court remanded for additional findings by the Chancellor.

In the original complaint, filed in 1964, the beneficiaries of express trusts charged the defendant Trustee, American National Bank and Trust Company of Chattanooga, Tennessee, with negligence in the exchange of certain stocks held in trust; in failing to prevent the redemption of the exchanged stock by appropriate court action; and breach of trust.

The main thrust of the complaint was that the Trustee had committed a breach of trust in 1944 when certain shares of trust stock were exchanged for a different type of stock in the same corporation. Prior to the complained of 1944 transfer of stock the Trustee held shares of Cavalier Corporation “no-par” common stock. These shares were voting shares with no dividend preference and would share equally on dissolution of the Corporation. In 1944 the “no-par” common stock was voluntarily exchanged by the Trustee for a like number of what was termed “$100.00 par value common stock”. The par value stock enjoyed dividend preference and was subject to redemption by the Corporation.

In 1963 Cavalier called in and redeemed the $100.00 par value stock at $100.00 per share. Approximately four months thereafter Cavalier was sold to Seeburg Corporation for approximately 12 million dollars and Cavalier was liquidated. The holders of common stock in Cavalier participated in the division of the sale proceeds upon dissolution while the former holders of $100.00 par value stock did not. This fact precipitated this suit.

In addition to charging a breach of trust in the 1944 transaction, complainants contended at the first trial that the “$100.00 par value common stock” had the right to participate with other common shareholders on liquidation.

At the first trial the Trustee contended that the breach of trust claim was barred by the doctrine of laches and even if it were not, there had been no breach. Further, the $100.00 par value stock was not entitled to share upon liquidation with the no-par common stock.

The Chancellor held: (a) the “$100.00 par value common stock” was not true common stock but was preferred as to dividends and its par value; (b) upon liquidation it did not share with the common stock in the overage after payment of its par value; and (c) the plaintiffs were barred by the doctrine of laches on the breach of trust issue and, consequently, made no fact finding on that point.

On appeal, we affirmed the Chancellor’s holding regarding the nature of the “$100.00 par value common stock”, but reversed the Chancellor’s holding regarding the application of the doctrine of laches and remanded for a finding of fact on the pre-termitted issue.

On remand, the Trustee, having lost the issue regarding laches, raised the issue of the statute of limitations as set out in T.C.A. § 28-309, and again insisted that the facts did not constitute a breach even if the claim was not barred by the statute of limitations.

The Chancellor has filed his finding of fact and conclusions and held that T.C.A. § 28-309 was not a bar to the suit and that the Trustee had committed a breach of trust in 1944 in exchanging the “no-par” value stock for the “$100.00 par value stock”. Judgment in the amount of $3,941,-799.74 was rendered against the Trustee.

Now the Trustee appeals and insists that the Chancellor erred in not sustaining the plea of the statute of limitations as well as in holding there had been a breach of trust. In addition, it is also insisted that the Chancellor erred in the manner of assessment of damages and interest.

For an understanding of this matter it is necessary to give some history of the trusts involved.

Gaston C. Raoul, uncle of Anne Raoul and Norma Raoul, planted the seed of the trusts in 1932. In that year, Gaston Raoul, the President of Tennessee Furniture Company and its prime movant, gave in trust to the defendant Trustee 124 shares of the company’s no-par value common stock. The trust was for the benefit of his nieces, Anne and Norma Raoul, the complainants, and their father, Norman Raoul, who was Gaston’s brother.

Subsequently, Gaston purchased from Norman his brother’s interest in their father’s (W. G. Raoul) estate. Gaston then gave in trust as additional corpus this interest, which included 160 shares of Cavalier no-par value common stock.

Complainants’ grandmother, Mary M. Raoul, by testamentary disposition increased the trust corpus by 39 shares of Cavalier no-par value common stock.

Thus, it may be seen that at this point there were 323 shares of Cavalier no-par value stock held in trust. The trust provided that it was to terminate upon the youngest of the nieces reaching twenty-five years of age and the death of their father Norman Raoul, but in no event prior to Norman’s death. Beneficiary Anne Raoul was born June 2, 1921, and Norma was born August 15,1929. Norman Raoul died October 15, 1956.

In late 1949, prior to Norman Raoul’s death, Gaston Raoul, the settlor became of the opinion that it would be better if the corpus was held in trust for the lifetime of his nieces instead of being distributed to them upon the death of their father, Norman Raoul. Therefore, Gaston proposed to deposit 50 shares of $100.00 par value shares of Cavalier stock in a trust if Anne Raoul, who was over 21 years of age, would agree to place her expected share of the first trust, when that trust terminated, in trust with the 50 shares offered by Gaston. He also proposed to deposit an additional 50 shares of the same stock in that trust if Norma would likewise agree and would ratify the agreement upon reaching 21 years of age. Both Anne and Norma agreed; with Norma confirming the new trust arrangements subsequent to attaining majority. Of course, Norman Raoul, a beneficiary of the first trust, was not and could not be a party to the agreement as the first trust, according to its terms, was to terminate upon his death and the corpus distributed to his daughters. Gaston Raoul had in this manner placed 100 shares of $100.00 par value Cavalier stock in trust; which trust existed contemporaneously with the first trust until the first fell in upon the death of Norman in 1956. The named trustee of the second trust was the same as the first, that is, the defendant, the American National Bank and Trust Company of Chattanooga.

Hence, at one point in time there existed two separate trusts with the same named Trustee. One, the first in time, consisting of 323 shares, which is the subject of this suit, and the second consisting of 100 shares with which this litigation is not concerned.

While the Trustees of the trust were the same, neither the corpora, settlors, beneficiaries, or terms were the same. In the first trust, we may consider Gaston C. Raoul as the settlor with Anne, Norma and Norman Raoul as named beneficiaries with termination conditioned upon the death of Norman. In the second trust Gaston, Anne and Norma Raoul are the named settlors with Anne and Norma as the named beneficiaries with termination upon the death of Anne and Norma. The general purpose of the first trust was to provide for the maintenance and education of Norma and Anne Raoul and the maintenance of their father, Norman, if needed. However, the dominant purpose of that trust was to provide for Norma and Anne. The sole purpose of the second trust was to provide for Norma and Anne. The second trust contained a spendthrift clause while the first did not. Also, there existed contemporaneously for a time two distinct corpora; the first consisting of 323 shares and the second consisting of 100 shares.

Upon the death of Norman Raoul on October 15,1956, the defendant Trustee transferred the 323 shares from the first trust to the corpus of the second.

Now, a brief summary of the events of 1944. Cavalier Corporation represented the life’s work of Gaston C. Raoul. He was justly proud of his business and in 1944 began to contemplate about its future when death would remove him as captain of the ship. Over the years Cavalier had done its banking with the defendant bank. Mr. E. Y. Chapin, a director of the bank and a trust officer, became a personal friend of Gaston Raoul. Chapin also owned a few shares of Cavalier stock. In the year 1944 both Chapin and Raoul were members of the board of directors of both the defendant bank and Cavalier. Gaston conceived the idea of the $100.00 par value stock. His fear was that after his death the Corporation would be “absentee” owned, that is, those who were actively engaged in the day to day operation of the Corporation would not be common shareholders and as a consequence the business would suffer for lack of real concern by those who were operating it. Also, as will be later shown, the exchange of common stock for par value stock would have definite tax benefits for Gaston Raoul. Therefore, he proposed that the Corporation offer to exchange $100.00 par value stock with dividend preference on a share-for-share basis for common stock. ■The ultimate hoped for result would be that those who did not actively contribute to the running of the business would exchange their common stock for the preferred stock, which would have the effect of making the common ownership stock available by purchase or bonus incentive to those who actually ran the business. Gaston Raoul discussed and conferred with E. Y. Chapin about this plan. The offer was made to the stockholders in 1944 and nearly all of the “absentee” owners, including the defendant Trustee and Gaston Raoul, exchanged the no-par value common stock for the $100.00 par value preferred.

It is not in dispute that.T.GA. § 28-309 is applicable to trusts. See Third Nat. Bk. v. Nashville Trust Co. (1950), 191 Tenn. 123, 232 S.W.2d 7. The statute provides in effect that this action “shall be commenced within six (6) years after the cause of action accrued.”

It has been generally stated that a statute of limitations does not apply to express trusts. However, the misconception that the foregoing generality has created, was interred by our Supreme Court in the case of Third Nat Bk. v. Nashville Trust Co., supra, when the Court stated:

“The rule that no statute of limitations applies to express trusts, has been widely and loosely stated. The equitable theory upon which the rule was based was that since in equity, the possession of the trustee was the possession of the cestui que trust and so could not be adverse, that no legal statute of limitations could commence to run until the possession was adverse. That the rule is limited to the time that the trustee is in possession of trust funds, and to the continuing relation of the parties as trustee and cestui que trust, is abundantly clear from the early cases cited in Judge Catron’s opinion in Armstrong’s Heirs v. Campbell, 11 Tenn. 201, 24 Am.Dec. 556. Our research was limited by the availability of these old cases to Beekford v. Wade, 17 Ves. 96, and Melvy v. Cawley, 4 Price 107. In the course of his opinion, Judge Catron said, 11 Tenn. at page 227: ‘Although a trustee cannot, in general, set up his possession in opposition to his cestui que trust, or plead the statute of limitations against him, so long as the relation of trustee and cestui que trust subsists between them, yet if that relation is once dissolved, or if the trustee to the cestui que trust notice that he intends to hold in opposition to him, the statute of limitations will run.’ ”

In the course of that Opinion the Court quoted with approval the rule as set out in Corpus Juris as follows:

‘In order to set the statute in motion in favor of the trustee the trust must terminate, as by its own limitation or by settlement of the parties, or there must be a repudiation of the trust by the trustee and an assertion of an adverse claim by him, and the fact made known to the cestui que trust. This proposition is well established by all the numerous cases in which the question has arisen, there is no conflict of authority whatever upon the subject.’ 37 C.J., Limitations of Acts, Section 267, pp., 903-904-905; 54 C.J.S. Limitations of Actions, § 178.” (191 Tenn. 130-31, 232 S.W.2d 10) (Emphasis supplied).

By its terms, the first trust terminated on October 15,1956, upon the death of Norman Raoul. The second trust was already in existence on that date. The second trust cannot be simply an extension of the first trust as argued by counsel for the beneficiaries. The only common denominator between the two trusts is the name of the Trustee, American National Bank and Trust Company of Chattanooga. There is no proof in this record that the Trustee attempted in any manner to induce the beneficiaries of the first to create the second for any reason, much less for the reason of “covering up” any past mistakes. The second trust was based on the agreement between the nieces and their uncle, that the nieces would place in a trust what was theirs personally when they were entitled to it, if their uncle would also place in that trust 100 shares. On October 15,1956, the corpus of the first trust became the personal property of the nieces to do with it as they saw fit. They saw fit to place that corpus in another trust already created. Therefore, the statute of limitations in this case would begin to run on the first trust on the date of its termination, October 15, 1956, for the Trustee no longer had any duties under that trust and, in effect, turned over the corpus to the beneficiaries, who had by prior agreement agreed to place it in another trust; unless it can be said that fraud is involved.

In Bates v. Preble, 151 U.S. 149, 14 S.Ct. 277, 38 L.Ed. 106, cited in Hall v. DeSaussure (1956 W.S.), 41 Tenn.App. 572, 297 S.W.2d 81, it was said, “* * * if the fraud be secret in its nature, and such that its existence cannot be readily ascertained, or if there be fiduciary relations between the parties, there need be no evidence of a fraudulent concealment other than that implied from the transaction itself.’ ”

We must therefore determine if the 1944 exchange itself was a fraudulent transaction. Evidently the Chancellor was not of the opinion that the transaction of 1944 was a fraudulent transfer for he did not so find. The Chancellor held, after an exhaustive finding of fact, that the Trustee in the 1944 transaction failed in its duties as set out in Section 174 of the Restatement of Trusts, to wit:

‘“The trustee is under a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property; and if the trustee has greater skill than that of a man of ordinary prudence, he is under a duty to exercise such skill as he has.’ ”

In other words, the Chancellor found that the Trustee violated the prudent man rule.

Expert testimony was adduced on both sides of this controversy concerning the prudent advisability of exchanging or not exchanging the stock. The experts properly viewed the exchange in the light of circumstances existent in 1944. The Trustee’s expert witnesses testified in that light and not judging by hindsight were of the opinion the exchange was prudent. On the other hand, expert witnesses for the beneficiaries viewed the exchange in the same light and through the same sight and were of the opinion the exchange was not prudent. The Chancellor accepted the testimony of the latter and we cannot say the evidence preponderates against the finding that the exchange was imprudent. However, an imprudent mistake, even a bad one, does not make out a case of fraud and we hold the proof does not warrant such conclusion.

Nevertheless, it is argued that whether a mistake be fraud or not, if the cause of action is concealed from the beneficiaries, the concealment thereof is fraud and a fraudulent concealment will toll the statute. “It is not the fraud, but its concealment by the party perpetrating it, unmixed with fault or negligence on the part of him who complains, which works this result.” Woodfolk v. Marley (1897), 98 Tenn. 467, at page 471, 40 S.W. 479, at page 480.

Absent a fiduciary relationship that concealment must be evidenced by some overt act, but where a fiduciary relationship exists and there is the duty to speak, mere silence may constitute a fraudulent concealment. Pomeroy, Equity Jurisprudence, 5th Edition, § 902, page 550; Simmons v. Evans (1947), 185 Tenn. 282,206 S.W.2d 295; Sewing Machine Company v. Jackson (1885), 83 Tenn. 418.

Immediately prior to the 1944 transfer of stock, the Trustee, through a trust officer (not Mr. Chapin) discussed the matter of the exchange of stock with Norman Raoul, beneficiary of the first trust and father of the co-beneficiaries, Anne and Norma. Norman gave the Trustee permission for the transfer and stated: “It is entirely satisfactory with me to exchange any Cavalier old stock for the new Cavalier stock that you are holding in trust for my children.” The exchange in 1944 was in no manner hidden from anyone. After the exchange, the records of the Trustee indicated that the stock was $100.00 par value stock where before it had been listed simply as shares. In short, there was no physical concealment from anyone of the transaction itself.

It is the position of the beneficiaries that Mr. Chapin was of the opinion that the exchange was not in the best interest of the beneficiaries and he was under a duty to reveal to the beneficiaries any uncertainty in his mind regarding the soundness of the stock exchange. This brings us to the Chancellor’s finding that the Trustee breached its duty of loyalty. On that point we copy from the Chancellor’s opinion:

“The Court now deals with the contention of the plaintiffs that the Trustee violated its duty of loyalty. See: Bogert, Law of Trusts, Sec. 95, (Hornbook Series); 54 Am.Jur. 247, Trusts, Sec. 312. That duty is stated in Section 170 of the Restatement of Trusts as follows:

‘(1) The trustee is under a duty to the beneficiary to administer the trust solely in the interest of the beneficiary. (Emphasis added.)
(2) The trustee in dealing with the beneficiary on the trustee’s own account is under a duty to the beneficiary to deal fairly with him and to communicate to him all material facts in connection with the transaction which the trustee knows or should know.’

Further, under Comment ‘p’ to said Section 170, is the following, to wit:

‘Action in the interest of a third person. The trustee is under a duty to the beneficiary in administering the trust not to be guided by the interest of any third person. Thus, it is improper for the trustee to sell trust property to a third person for the purpose of benefiting the third person rather than the trust estate’ (Emphasis Added.) See also: Cowan v. Hamilton Nat. Bank, 177 Tenn. 94, 146 S.W.2d 359, 367.
“It is obvious that in this case Mr. Gaston Raoul, while acting as a director of the Trustee Bank and thus onerated with the duties of undivided loyalty owed by a Trustee to his beneficiaries (Plaintiffs) was at the same time acting in his own personal interest in carrying out his personally devised scheme of recapitalization, the ultimate aim of which was to place equity ownership of the Cavalier Corporation in his son and close associate, Mr. Lane, while paying little or no Federal taxes.
“Eleven years later on August 2, 1954, Mr. Raoul, in a personal memorandum, stated:
‘Incidentally, Mr. Chapin disapproved of the idea in toto as being a giveaway of the then principal owners to the no par stockholders who might elect not to exchange. I disagreed with him, and after 11 years still do. He went along with the plan, however, like the loyal friend he always was. W.C.R.’ (Emphasis added.)
This memorandum of Mr. Raoul was with respect to the 1944 stock exchange. Said memorandum is very revealing in two respects. First, it tells us that ‘Mr. Cha-pin disapproved of the idea in toto as being a giveaway’, and, secondly, that Mr. Chapin, who handled these trusts for defendant Bank, failed to exercise in behalf of the trust beneficiaries his said judgment of disapproval but ‘went along with the plan however, like the loyal friend he always was.’ These actions by Mr. Raoul and Mr. Chapin appear to be precisely what Section 170 of the Restatement of Trusts states is a violation by the Trustee of its duty of loyalty.
“It appears that Mr. Raoul viewed the plan almost solely from a standpoint of achieving his own personal estate objectives rather than from the standpoint of Trustee for the plaintiffs. It is understandable how Mr. Raoul could disagree with Mr. Chapin as indicated by said memorandum because to Mr. Raoul the plan was accomplishing his estate plan objectives. He did not wish his estate to enlarge as the company grew. From the standpoint of death taxes, the plan had the effect of shifting high value assets (no par common stock, book value of $298.05) out of his estate so that he might hold low value assets ($100.00 par common stock) and thereby defeat death taxes. If he had made an inter vivos gift he would have incurred Federal gift taxes and the objectives of his bounty would not have received as much as they would have received under his plan. But Mr. Chapin must have viewed the whole scheme from a different aspect; his only personal interest was friendship for Mr. Raoul. The new stock was subject to redemption for $100.00 per share, representing a “give away” of $198.05, of book value and the earnings and dividends that went with it. Mr. Gaston Raoul did not regard this as a give away for him because he was giving to his son and business associate, Mr. Lane, and his family was retaining what he deemed sufficient voting control to protect their remaining investment. Finally, the Trust assets were always vulnerable to redemption for the sum of $32,300.00.
“Nowhere does the record indicate that the Trustee Bank ever disclosed to anyone acting on behalf of the plaintiffs the effects that the exchange of stock herein-above outlines would have on these trusts. See: Knox County v. Fourth & First Nat. Bank, supra [181 Tenn. 569, 182 S.W.2d 980], at P. 986. It seems of great importance to the Court that the Trustee Bank was chargeable with notice not only of what Mr. Chapin knew, but also of what Mr. Gaston Raoul knew about the recapitalization plan, the prospects for Cavalier and the advantages, and disadvantages of the two stock issues, and he knew just about all there was to know.”

It should be noted that in Gaston Raoul’S memorandum, upon which the Chancellor placed so much weight, it was stated that Chapin “disapproved of the idea in toto, as being a giveaway by the then principal owners to the no par stockholders who might elect not to exchange.” The memorandum was a note written by Gaston to himself evidently in 1956 when he was in a reminiscing mood and was in reference to a letter of 1944 that had been transmitted to the directors of Cavalier explaining the nature of the then proposed new issue of $100.00 par value stock. The letter had nothing to do with trust stock but was the embodiment of the idea for the “new” stock. It appears to us that Gaston Raoul was saying that Chapin disapproved the idea of the new $100.00 par value stock because it was a “giveaway” of ownership by the then principal owners but that Cha-pin eventually went along with the plan. If this be a proper interpretation of the minds of Gaston Raoul and Chapin, both now being dead and unable to tell us differently, what does that opinion of disapproval of the stock issue and the “giveaway” feature of equity ownership have to do with the manner which Chapin was obligated to view the securities from an investment standpoint? Issues of non equity ownership stock, with preferred dividends could legitimately be considered by a trustee as a better trust investment than equity ownership stock, dependent upon circumstances. In other words, Chapin may have felt that Gaston and the other large equity owners may have been cutting their own throats as to real ownership in the Corporation; but as Trustee entrusted only with relatively few shares of stock with no real ownership say-so, also have felt that the interests of his beneficiaries would be better served with preferred income. Chapin could disagree with the wisdom of Gaston’s plan in so far as Gaston was concerned, and still be of the opinion that the new stock issue was best for his beneficiaries. It is interesting to note that Chapin also exchanged the few shares of common stock that he and his wife owned for the $100.00 par value stock about the same time the trust stock was exchanged. Chapin handled his personal stock in the same manner as he did that of the trust. If he intended to help Gaston at the expense of the trust by the exchange he also intended to injure himself.

There is no proof in this record, other than the various interpretations placed by counsel on the Gaston memorandum, that would indicate that Chapin ever acted as Trustee without the best of motives. His judgment and that of the other members of the trust committee of the defendant bank may have been wrong, as evidently it was; and they may not have given the then present and future prospects of Cavalier their proper due, as evidently they did not; but we are unable to find proof upon which we could base the conclusion that Chapin had knowledge of his mistake and failed to reveal such to the beneficiaries.

Therefore, in so far as the actions of Chapin are concerned, we disagree with the Chancellor and do not find that Chapin breached his duty of loyalty to the trust.

We now turn to that portion of the Chancellor’s holding wherein he held that since Gaston was a director of the Trustee bank he was also a Trustee of the trust and any knowledge he had concerning the advisability of the exchange was imputed to the bank as Trustee.

Gaston Raoul was not a trust officer of the bank. He was a director and, as far as this record is concerned, he did not act in an advisory capacity or otherwise in the management of the trust department. Nothing that he knew about his own Corporation was ever acquired by virtue of his capacity as director of the bank. There is no proof that Gaston Raoul ever assumed to act in any manner in the capacity of a Trustee.

The general rule as stated in Fletcher’s Cyclopedia, Corporations, Permanent Edition, Yol. 3, § 808, p. 72, is as follows:

“Information not acquired in the course of his employment, or by or in performance of some duty as agent or director owing to the corporation, is not imputed to the corporation, because the director is under no obligation to communicate such knowledge to the corporation, and the corporation is not presumed to have been informed by the director of what he ascertained in that transaction. Accordingly, the knowledge of a member of the board of directors of a banking corporation cannot in law be attributed to the bank, where it does not appear that at the time he was in any way engaged in the bank’s business, or acting in its behalf, ...”

We are of the opinion that the general rule, as above stated, is the rule of this State.

The Chancellor seemed to consider the tax advantages to Gaston’s estate as the personal motive which induced Gaston in some manner to sway the mind of Chapin so that the shares held in trust would be exchanged. This theory will not bear scrutiny. Whether or not the shares in trust were exchanged would have no bearing on Gaston’s estate or the tax liability thereon. Gaston had already parted with the ownership of those shares, when, during his lifetime he placed them in trust. They never could become part of his estate and there would be no tax advantage to him one way or the other.

Therefore, we hold that the Chancellor was in error when he held that Gaston Raoul as Trustee had breached his duty of loyalty.

All of what we have said before being true, counsel for beneficiaries argues that the reasons we gave in our first opinion for overruling the Chancellor on the question of laches are good and sufficient reasons for not applying the statute of limitations.

It should be noted that the Chancellor was of the opinion that the statute of limitations was a good plea in bar, but he was convinced that the Court of Appeals would deny the application of the statute for the same reasons it denied application of the rule of laches in the first appeal and commented as follows:

“It is perhaps the duty of the Court to state, however, that, were it free to do so, it would sustain the plea of the statute of limitations as insisted by the defendant Bank.”

In the first appeal of this case, the beneficiaries of the trust had lost in the lower court on the basis of the Chancellor sustaining the plea of laches. The appeal was directed to the Chancellor’s error in applying the doctrine of laches. Of course, the appellant-beneficiaries did not raise the additional defense of the statute of limitations. Nor did the Trustee on that appeal raise the defense of the statute of limitations. The first appeal was determined on the question of laches with no mention of the statute of limitations. The issue of the statute of limitations has been first raised in this Court on this appeal. On remand, the Chancellor was perfectly free to rule upon that issue as he saw fit and it is our opinion that he should have followed his inclinations and sustained the plea.

Laches is a defense peculiar to Courts of equity and the doctrine is usually applied where no statute of limitations governs the case. However, on occasions the doctrine is applied to bar a stale claim prior to the running of the statute of limitations; but it should be applied in such cases when there is gross laches in the prosecution of the claim. See Bogert on Trust, Section 169 (Hornbook series); State ex rel. v. Abernathy (1929), 159 Tenn. 175, 17 S.W.2d 17; Carpenter v. Wright (1929), 158 Tenn. 289, 13 S.W.2d 51.

Laches is actually based on equitable estoppel and is dependent upon the facts and the equities of each individual situation. State ex rel. v. Abernathy, supra and Hamilton Nat. Bank v. Woods (1948 E.S.), 34 Tenn.App. 360, 238 S.W.2d 109. Contrariwise, there is little, if any, equity involved in a statute of limitations. Statutes of limitations are arbitrary time periods fixed by the Legislature to put at rest possible litigation after the lapse of that period fixed by the Legislature for the benefit of society in general in order to promote certainty and repose.

Long delay alone in the prosecution of a claim is insufficient for the application of the doctrine of laches. The present circumstances of the parties must be considered. There must be actual acquiescence or that implied from the circumstances of the case, in the conduct of the defendant. Whether or not such exists is dependent upon the facts. And whether the facts are sufficient is dependent upon the Court applying those facts. One Court may reach a different conclusion than another. Initially, we could find no factual condition in the record, as we reviewed it, that would put the complainant-beneficiaries on reasonable inquiry or notice of the complained of exchange which, therefore, “tolled the running” of the doctrine of laches.

However, the question of the reasonableness of the opportunity to discover is not a matter for judicial conclusions when dealing with statutes of limitations as they are statutes of repose. See and compare West v. Moore (1952), 193 Tenn. 431, 246 S.W.2d 74; Lee v. Harris (1949), 188 Tenn. 373, 219 S.W.2d 892. A plea of laches and a plea of the statute of limitations are not the same thing. As in this case, laches may not bar the claim; but the statute of limitations will. See and compare In re Estate of Darwin (Tenn.1973), 503 S.W.2d 511.

Able counsel for the beneficiaries also argues that even if all the foregoing is true, which by no stretch of the imagination is conceded, the defendant bank as Trustee was obligated to sue itself when it received the corpus of the first trust on the death of Norman Raoul. This position is based on the theory that when the bank accepted the corpus from the old trust, it was obligated to check the manner in which it had previously handled the first trust, and if irregularities were discovered to sue the prior Trustee which happened to be itself. Since the second trust was an express trust and not terminated, the statute of limitations has not yet begun to run against the Trustee as Trustee of the second trust. We are cited to cases which involve the duties of successor trustees. However, the bank as Trustee under the second trust was not and is not a successor trustee. Any cause of action for the mismanagement of the first trust belonged to the beneficiaries thereof upon its termination and never became the right or duty of the Trustee under the second trust, which trust was not and is not the same as the first trust.

For the reasons stated, we are of the opinion that the claim of the beneficiaries is barred by the statute of limitations and the Chancellor erred in not so holding. We do not reach the other Assignments of Error.

The result is that the suit will be dismissed.

The Court is of the opinion that in this case the costs below and costs of appeal are to be adjudged against the defendant bank.

So order.

Judge WILLIAM P. PURYEAR, by designation of the Supreme Court of Tennessee, took part in the hearing of this appeal in the absence of Presiding Judge C. S. CARNEY, Jr.

MATHERNE, J., and PURYEAR, Special Justice, concur.

      . In an effort to have this Opinion conform to some degree of reasonableness in length, we will not reiterate here our reasons for our previous holding, as a copy of our previous Opinion may be obtained from the Clerk of this Court by those who have an interest in that portion of these proceedings.

      . Tennessee Furniture later came to be known as Cavalier Corporation and in all references in this Opinion all stock will be referred to as that of Cavalier.

      . In the 1944 transaction, both the trustee and Gaston Raoul had voluntarily exchanged their no-par value stock for $100.00 par value stock, so at the time of the new agreement the 100 shares offered by Gaston and the 323 held by the Trustee were all $100.00 par value shares.


source: Caselaw Access Project

author: DOUGHTY, Justice.

license: Public Domain

text:
    HUMANE SOCIETY OF AUSTIN AND TRAVIS COUNTY, Petitioner, v. The AUSTIN NATIONAL BANK, Executor of the Estate of Mary Mayfield Gutsch, Deceased et al., Respondent.
    No. B-5044.
    Supreme Court of Texas.
    Dec. 10, 1975.
    Rehearing Denied Jan. 7, 1976.

      Davenport & Davenport, Jack F. Cook, Jr. and John Davenport, Austin, for petitioner.
    Hart, Keahey & Hart, James P. Hart and James H. Keahey, Austin, for respondent.
   DOUGHTY, Justice.

This is a case in which petitioner, the Humane Society of Austin and Travis County, is challenging commissions and attorneys’ fees claimed by Austin National Bank as dependent executor of the estate of Mary Mayfield Gutsch, deceased. The probate court allowed the claims as submitted and disallowed all offsets claimed by the Humane Society, and the Court of Civil Appeals affirmed. Tex.Civ.App., 517 S.W.2d 323.

By its first three points of error the Humane Society contends that the Bank was guilty of self-dealing in investing the estate’s funds in its own certificates of deposit pending distribution of those funds. In points four and five the Humane Society contends that the Bank incurred unnecessary expenses for maintenance and storage of property in the estate. In point six the Humane Society contends that the Bank is not entitled to claim attorneys’ fees incurred in a prior suit seeking a construction of decedent’s will because the work performed by the attorneys was of no benefit to the estate. We overrule all points of error and affirm the judgment of the Court of Civil Appeals.

Mary Mayfield Gutsch died on October 19,1971, in Travis County, Texas, leaving a holographic will in which Austin National Bank was named executor. The will was probated in Travis County on November 1, 1971, and the Bank qualified as dependent executor. The Bank instituted suit seeking a declaratory judgment to determine the rights of the named beneficiaries under the will. The outcome of that suit was finally determined by this Court in our decision of December 13, 1973, City of Austin v. Austin National Bank, Tex., 503 S.W.2d 759. As it was finally construed, the will devised to a godchild all tangible personal property found in Mrs. Gutsch’s house at her death; the house and the land upon which it was located was devised to the City of Austin to be used as a public park; and the remainder of the estate (approximately two-thirds) was devised to the Humane Society in fee.

On September 11, 1972, the Bank made an application to the probate court, joined by the Humane Society, to sell certain bank and other stock of the estate and re-invest the funds in other securities yielding a better return, pending the outcome of the will construction suit. On September 15, 1972, the probate court entered an order authorizing such sale and listing the types of securities in which the Bank could re-invest the proceeds, including certificates of deposit in banks and savings and loan institutions. Pursuant to this order the Bank sold the estate’s stock and, in September and November of 1972, purchased certificates of deposit from its own commercial department with the proceeds. These certificates, in the total amount of $883,000.00, were renewed from time to time over the succeeding sixteen months.

The Humane Society contends that under the common law of trusts and the provisions of the Texas Trust Act, the Texas Banking Code, and the regulations of the Federal Comptroller of Currency, the Bank was absolutely prohibited from investing funds of the estate with itself. For this alleged breach of the Bank’s fiduciary duty the Humane Society seeks to deny the bank its commission as executor and to recover any profits made by the bank from use of the money invested in the certificates of deposit.

First, it is clear that the Texas Trust Act, Tex.Rev.Civ.Stat.Ann. articles 7425b-l through 7425b-47, is not applicable here. Article 7425b-2 states that a “trust” for purposes of the Act “means an express trust only, . . . ” In City of Austin v. Austin National Bank, supra, we held that Mrs. Gutsch’s will did not create a perpetual charitable trust, but vested the residuary estate in the Humane Society in fee. Even though the estate’s funds were held by the Bank in a fiduciary capacity for the benefit of the Humane Society as beneficiary of the estate, the duties of the Bank arose by reason of its position as executor of the estate, not as trustee of any express trust created by the will. An express devise of property to another as trustee for named beneficiaries is required for creation of an express trust. Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256 (1951). Moreover, the trustee of an express trust is given authority, absent limiting provisions in the instrument creating the trust, to exchange and invest property of the trust, article 7425b-25; a dependent executor of an estate has no such power absent an authorization from the probate court or an express grant of authority from testator. Tex.Prob.Code Ann. § 234 (Supp.1974).

Even though the Texas Trust Act is not applicable, the executor of an estate is held to the same fiduciary standards in his administration of the estate as a trustee. Section 37 of the Probate Code provides, in part, that the executor “shall recover possession of and hold such estate in trust to be disposed of in accordance with law.” As trustee of the property of the estate, the executor is subject to the high fiduciary standards applicable to all trustees. In Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377 (1945), this Court quoted with approval the following excerpt from Magruder v. Drury, 235 U.S. 106, 35 S.Ct. 77, 59 L.Ed. 151 (1914), 235 U.S. at page 119, 35 S.Ct. at page 82:

It is a well-settled rule that a trustee can make no profit out of his trust. The rule in such cases springs from his duty to protect the interests of the estate, and not to permit his personal interest to in any wise conflict with his duty in that respect. The intention is to provide against any possible selfish interest exercising an influence which can interfere with the faithful discharge of the duty which is owing in a fiduciary capacity.

By purchasing its own certificates of deposit with funds of the Gutsch estate which it held in trust as executor, the Bank in effect borrowed the funds for its own use. Austin National Bank contends that it was expressly authorized to invest the estate’s funds in its own certificates of deposit by the provisions of 12 U.S.C.A. § 92a (Supp. 1975), and Tex.Rev.Civ.Stat.Ann. art. 342-604 (1973). 12 U.S.C.A. § 92a provides that the Comptroller of the Currency shall be authorized to grant to national banks the power to act as executor of estates to the same extent that state banks are permitted such power. The statute requires national banks to segregate all assets held in a fiduciary capacity, and provides that

. funds deposited or held in trust by the bank awaiting investment shall be carried in a separate account and shall not be used by the bank in the conduct of its business unless it shall first set aside in the trust department United States bonds or other securities approved by the Comptroller of the Currency.
12 U.S.C.A. § 92a(d).

The Comptroller of the Currency has issued regulations pursuant to section 92a granting to national banks power to act as executor coextensive with the authority of state banks. 12 C.F.R. Chapter I, Part 9. Thus federal law allows a national bank to deposit trust funds with itself when such funds are “awaiting investment,” provided that (1) it sets aside in its trust department approved securities equal in face value to the amount of the fund, and (2) local law authorizes such a deposit.

Article 342-604 of the Texas Banking Code provides:

Unless the trust instrument provides otherwise, funds received in trust by a state bank awaiting investment shall be carried in a separate account and shall not be used by the bank in the conduct of its business, unless it shall first set aside in the trust department United States government bonds or other securities eligible under the laws of this State for the investment of funds by guardians or trustees of a market value equivalent to the amount so used. .

“[F]unds received in trust” within the meaning of this statute includes funds received by a bank as executor. Under these state and federal statutes, a bank may temporarily deposit with itself funds of an estate “awaiting investment” provided it sets aside adequate security. It is undisputed that Austin National Bank complied with the security requirement by setting aside in its trust department qualified securities equal in value to the certificates of deposit. The question to be decided, therefore, is whether the funds used to purchase the certificates of deposit were “awaiting investment” within the meaning of Article 342-604 and the corresponding federal law.

The Comptroller of the Currency has issued the following regulation, at 12 C.F.R. § 9.10, pursuant to 12 U.S.C.A. § 92a:

§ 9.10. Funds Awaiting Investment or Distribution
(a) Funds held in a fiduciary capacity by a national bank awaiting investment or distribution shall not be held uninvested or undistributed any longer than is reasonable for the proper management of the account.
(b) Funds held in trust by a national bank, including managing agency accounts, awaiting investment or distribution may, unless prohibited by the instrument creating the trust or by local law, be deposited in the commercial or savings or other department of the bank: Provided, that it shall first set aside under control of the trust department as collateral security:
(1) Direct obligations of the United States, or other obligations fully guaranteed by the United States as to principal and interest; or
(2) Readily marketable securities of the classes in which state banks exercising fiduciary powers are authorized or permitted to invest trust funds under the laws of the state in which such national bank is located; or
(3) Other readily marketable securities that qualify as investment securities pursuant to the Investment Securities Regulation of the Comptroller of the Currency, 12 C.F.R., Chapter I, Part 1. The securities so deposited or securities substituted therefor as collateral shall at all times be at least equal in face value to the amount of trust funds so deposited, but such security shall not be required to the extent that the funds so deposited are insured by the Federal Deposit Insurance Corporation. The requirements of this section are met when qualifying assets of the bank are pledged to secure a deposit in compliance with local law, and no duplicate pledge shall be required in such case.

It is apparent from this regulation that the Comptroller has interpreted the term “awaiting investment” in § 92a to mean “awaiting investment or distribution.” The Comptroller’s broad interpretation of § 92a comports with the interpretation of Article 342-604 urged by the Bank in this case.

In American Legion Post No. 90 of Village of Mamaroneck v. First National Bank and Trust Co. of Mamaroneck, 113 F.2d 868 (2nd Cir. 1940), the Court construed the term “awaiting investment” in the statute from which § 92a was derived, 12 U.S.C.A. § 248(k). In that case some investors had placed proceeds from the sale of land with the bank pending their distribution to the investors. Because of litigation concerning the proper allocation of taxes arising from the sale, the proceeds remained in the bank’s trust department for several years, during which time the bank paid three percent interest on the funds. The bank had set aside securities to secure the trust fund as required by § 248(k) and the corresponding regulations. When the bank became insolvent the investors attempted to claim their lien on the securities so set aside, and the general creditors of the bank challenged the lien, contending that the funds were not “awaiting investment” within the meaning of § 248(k). The Court agreed with the investors, stating, at page 872:

Perhaps more serious is the further claim that these were not funds held in trust “awaiting investment” and hence without the statute. We think, however, that this is too narrow a construction of the statute, and really defeats its intent. If trust funds held for investment are subject to the statute, but trust funds held for distribution are only general assets of the bank, then we find a serious difference in result following from a very slight, even formalistic, change in the relations of the parties. It would be no great stretch to term this a fund held “for investment,” particularly since the desire of the subscribers for some increment on their funds was made so clear.
Moreover, a broader interpretation should be given to the statute. We think that the provisions for security include in general the fiduciary funds which the bank is required to keep segregated from its general assets.

We agree with the construction placed upon § 92a by the Court of Appeals for the Second Circuit and by the Comptroller, and we believe that the same interpretation should be placed upon article 342-604 of the Banking Code. The Gutsch estate’s funds were held by the Bank in its fiduciary capacity as executor of the estate, and the Bank was required to keep the funds segregated from its general assets. The Bank held the funds temporarily, pending the outcome of litigation which would determine whether it would place them in a charitable trust or distribute them to the beneficiaries. We hold that these were funds “awaiting investment” within the meaning of article 342-604 and 12 U.S.C.A. § 92a, and that the Bank was thereby authorized to invest the funds in its own certificates of deposit pending final determination of their proper dispersal. This interpretation most fully effectuates the purpose of the statute to allow efficient temporary investment of funds held in trust by a bank pending their ultimate disposition, while providing maximum security for those funds.

The Humane Society next contends that, even if the Bank’s purchase of its own certificates of deposit was not wrongful per se, the Bank should be liable for profits which it could have realized by investing the funds in certificates of other banks and savings and loan institutions. The Humane Society offered proof at trial that the higher interest rates offered by other banks would have yielded $3,775.66 more over the sixteen months during which the funds were invested.

Although article 342-604 and 12 U.S.C.A. § 92a authorize the Bank to use the trust funds in the conduct of its business provided it sets aside the proper security, these statutes do not relieve the Bank of its fiduciary duty to the estate. The Bank holds the estate funds in trust for the beneficiaries, and in its dealings with the fund the Bank must act in scrupulous good faith, casting aside completely its personal interest and opportunities for gain resulting from the fiduciary relationship. See Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786 (1938); Tex.Prob.Code Ann. § 230(a) (1956). Austin National Bank’s conduct in carrying out the probate court’s order to sell the estate’s bank stock and re-invest the proceeds must be measured by these strict fiduciary standards.

The order of the probate court authorized the Bank to invest the estate’s funds in:

. certificates of deposit in banks and savings and loan institutions; day-in, day-out savings accounts; commercial paper in prime-rated corporations; U. S. Treasury bills, bonds or notes due within two years; and U. S. agency securities due within two years.

Mr. George K. Meriwether, senior vice-president and trust officer of the Bank, who was in charge of the administration of the Gutsch estate, testified that at the time the estate’s bank stock was sold the interest rates for day-in, day-out savings accounts, U. S. Treasury bills, bonds and notes due within two years, and U. S. agency securities due within two years were less than interest rates offered by Austin National Bank on its certificates of deposit. He testified that he believed the interest rates for commercial paper in prime-rated corporations were lower than the Bank’s rates also. This testimony was not challenged by the Humane Society. Another officer of the Bank testified that the interest rates paid on certificates of deposit purchased with estate funds were always at least equivalent to or more than the Bank’s “published rates,” the rates offered general customers of the Bank. This testimony is uncontra-dicted. Mr. Meriwether also testified that the Bank allowed him to cash in some certificates of the estate before their maturity dates and purchase new certificates at higher rates when it was advantageous to do so, and that other banks in the area would not have allowed him to do so.

The Humane Society offered evidence that other banks and savings and loan institutions in the Austin area were offering interest rates as much as one percent higher than rates offered by Austin National Bank on comparable certificates of deposit during the seventeen-month period that the estate’s funds were invested in Austin National Bank’s certificates. Based on this evidence, the Humane Society contends that by investing in these other institutions’ securities the estate funds could have earned $3,775.66 more in interest during these seventeen months. While the Bank contests this figure, its officers admitted that other institutions were offering higher interest rates on certificates of deposit, and that the funds would have returned a better profit if invested in certificates of other institutions.

The rate of return, however, is not the only criterion for determining the propriety of the Bank’s investment decision in this case. The safety of the trust fund is also a primary consideration of the fiduciary. Republic National Bank & Trust Co. v. Bruce, 130 Tex. 136, 105 S.W.2d 882 (Tex.Comm.App.1937, opinion adopted). This is especially true of funds of an estate held by an executor, whose primary duty is preservation of the estate for distribution. Austin National Bank set aside in its trust department qualified securities equivalent in value to the certificates of deposit purchased with the estate’s funds, as required by the regulations of the Comptroller. Mr. Meriwether testified that other banks and institutions were prohibited by law from providing security for their certificates of deposit issued to general customers over the $20,000.00 limit set by the Federal Deposit Insurance Corporation and state law. This testimony, which was not challenged or contradicted, indicates that the Bank could not have obtained one hundred percent security by investing the estate’s funds in certificates of deposit of any other financial institution. The total interest earned on the Austin National Bank certificates of deposit during the sixteen-month period was $85,-815.11, the interest rates varying from six to ten percent. Thus the extra interest of $3,775.66 to which the Humane Society contends it is entitled constitutes less than five percent of the total interest paid. The Bank’s decision to forego this extra income and obtain instead the full security offered by its own certificates of deposit was not, we believe, in furtherance of its own self-interest to the detriment of the estate.

The Bank was investing the estate’s funds in short-term certificates of deposit in order to be in a position to make prompt distribution of the money upon final conclusion of the court proceedings in the will construction case. From the time of the first investment in the certificates of deposit to the time the funds were delivered to the Humane Society was slightly less than sixteen months. During all of this time the estate was in litigation. The bank officers testified that they intentionally made short-term investments so they could be ready to deliver the estate on short notice. The distribution promptly occurred as soon as the litigation ceased.

Under the circumstances of this case the Bank did not breach its fiduciary duty as executor by preferring its own certificates of deposit over those of other institutions. The portion of the offset seeking $3,775.66 in lost income was properly denied by the probate court.

The Humane Society also seeks offsets against the Bank’s claims for $8,731.13, the cost of taking care of the house and land given to the City of Austin and the storage fee for furniture and other personal property given to Mrs. Gutsch’s godchild. The Bank had the duty to take care of the estate’s assets as a prudent man would take care of his own property. Tex. Prob.Code Ann. § 230(a) (1956). This duty con inued until the suit seeking a construction of the will was finally disposed of. These offsets were properly denied by the probate court.

Finally, the Humane Society challenges the Bank’s claim for $8,100.00 in attorneys’ fees and legal expenses for representation of the estate through the appeal of the will construction suit, on the ground that the representation was only for the benefit of the Bank and not the estate. We do not agree. There were serious questions concerning the construction of the will. The Bank’s duty as executor was to determine the testatrix’s intent and distribute the estate in accordance therewith; the actions of the Bank were in good faith and in accord with its duty to the estate. There is no contention that the amount of the claim for attorneys’ fees is not reasonable. The Bank’s claim was properly allowed. Rowe v. Dyess, 213 S.W. 234 (Tex.Comm.App.1919).

The judgment of the Court of Civil Appeals is affirmed.

GREENHILL, C. J., not sitting.


author: SAM D. JOHNSON, Justice.

text:
    AMERICAN SAVINGS AND LOAN ASSOCIATION OF HOUSTON, Petitioner, v. Mary Ann MUSICK et al., Respondents.
    No. B-5081.
    Supreme Court of Texas.
    Dec. 17, 1975.
    Rehearing Denied Jan. 21,1976.

      Lee, Brown & Wylie, Charles B. Wolfe, Anderson, Brown, Orn & Jones, Nelson Jones, Houston, for petitioner.
    Cox, Pakenham & Roady, Joe G. Roady, Houston, for respbndents.
   SAM D. JOHNSON, Justice.

This is a trespass to try title case involving three tracts of land and turning on the construction and validity of three legal instruments: (1) a deed to the mortgagor; (2) a deed of trust; and (3) a trustee’s deed conveying the three tracts of land to the mortgagee. American Savings and Loan Association of Houston, the mortgagee, brought this action against several claimants, including the mortgagors (Meyer Jacobson and T. S. Kent), and the parties through whom the mortgagors claimed title (TWI Development Company and Mary Ann Musick, individually and as administra-trix of the estate of her husband, Levoy Musick, deceased). The trial court instructed a verdict awarding one tract, 618.7 acres, to American Savings, one tract, 41.4305 acres, to Mary Ann Musick, individually and as administratrix of the estate of Levoy Musick, deceased, and one tract, 16.6 acres, to TWI Development Company. The Houston Court of Civil Appeals [14th Dist.] affirmed the trial court’s award of the two smaller tracts but reversed the judgment as to the 618.7-acre tract and remanded that portion of the case. 517 S.W.2d 627. We reverse the judgment of the court of civil appeals and affirm that of the trial court.

Prior to the transactions from which this controversy arose, the 41.4305-acre tract was owned by Levoy Musick in his own name and the other two tracts were owned by TWI Development Company, a corporation solely owned by Levoy Musick. In June 1964 Musick and TWI conveyed the three tracts to Harry Holmes, Jr. and W. M. Wheless, Sr., reserving options to repurchase their respective tracts. Four months after the conveyance to Holmes and Wheless, Levoy Musick died and under the terms of his will his wife, Mary Ann Mu-sick, became the owner of the TWI stock as well as the repurchase options. The will named Meyer Jacobson, an attorney, as independent executor. During the course of this litigation Jacobson resigned as independent executor and Mary Ann Musick was appointed administratrix with will annexed.

Upon advice from Jacobson and T. S. Kent, an old friend and business associate of her husband, Mary Ann Musick agreed to a plan for exercising her repurchase options. The plan called for her to convey some of the land in question to Kent and Jacobson so that they could use it as collateral in securing the funds necessary to exercise the options. In accordance with the plan, on December 18, 1964 the following three conveyances were made.

1. TWI and Mary Ann Musick exercised their respective options, and Holmes and Wheless thereupon executed warranty deeds conveying the 41.4305-acre tract to Mrs. Musick and the other two tracts to TWI.

2. Mary Ann Musick, as president of TWI conveyed to Kent and Jacobson, by a general warranty deed, property described therein as follows:

“618.7 acres of land, more or less, out of the WILLIAM WHITE SURVEY, Abstract No. 829, Harris County, Texas, more particularly described by metes and bounds in deed of trust of even date herewith from T. S. Kent and Meyer Jacobson to Ralph B. Lee, Trustee, recorded in the office of the County Clerk of Harris County, Texas.” [Emphasis added.]

3.Kent and Jacobson executed a deed of trust to Ralph B. Lee as trustee for the benefit of American Savings. The deed of trust purported to convey the three tracts of land in question, labeled as Tract A, 618.7 acres; Tract B, 41.4305 acres; and Tract C, 16.6 acres. Metes and bounds descriptions were provided for each tract.

The deed of trust secured a loan of $150,-000 from American Savings to Kent and Jacobson. No payments were ever made on the promissory note executed by Kent and Jacobson and it fell into default. On February 1, 1966 the property was sold at a trustee’s sale to American Savings for $25,-000, and a trustee’s deed to American Savings was executed.

American Savings originally brought this action against TWI, Mary Ann Musick, Kent, Jacobson, and several other parties who were involved in a dispute within the Musick family as to the ownership of the land. TWI and Mary Ann Musick filed a cross action against American Savings, Kent, Jacobson, and Elliott & Waldron Title & Guaranty Company claiming title to the three tracts of land and seeking to set aside the deed to Kent and Jacobson, the deed of trust, and the trustee’s deed to American Savings. Subsequently, the cross action against Elliott & Waldron Title & Guaranty Company was nonsuited and the dispute among the remaining parties to the cross action was severed from the claims and issues among the members of the Musick family. American Savings, TWI, and Mary Ann Musick appealed from the judgment of the trial court; Kent and Jacobson did not appeal.

We will consider, first, what, if any, property passed under the warranty deed to Kent and Jacobson and the deed of trust from Kent and Jacobson to Ralph B. Lee. Next, we will determine the validity of the trustee’s sale and the trustee’s deed to American Savings. Finally, we will consider whether election of remedies or judicial estoppel precludes judgment for American Savings.

I.

The court of civil appeals apparently concluded that the 618.7-acre tract passed under the deed to Kent and Jacobson as well as under the deed of trust to Ralph B. Lee. The court held, however, that the 41.4305- and the 16.6-acre tracts were not conveyed by the aforesaid instruments. American Savings, TWI, and Mary Ann Musick filed applications for writ of error objecting to the lower court’s holding.

American Savings contends that the deed to Kent and Jacobson conveyed all three tracts described by metes and bounds in the deed of trust because the deed referred to the deed of trust for a more particular description of the land. American Savings further contends that the metes and bounds description in the deed of trust must prevail over the call for acreage in the deed to Kent and Jacobson. We conclude, however, that the lower courts correctly decided that the 41.4305- and the 16.6-acre tracts did not pass under the deed and the deed of trust; only the 618.7-acre tract was conveyed by the two instruments.

Although the deed did refer to the deed of trust for a more particular description of the land conveyed, the deed did not purport to convey all of the tracts described in the deed of trust. This is not a case where a metes and bounds description should prevail over a call for acreage, Texas Pacific Goal & Oil Company v. Masterson, 160 Tex. 548, 334 S.W.2d 436 (1960); there is no inconsistency between the call for acreage in the deed and the metes and bounds description in the deed of trust. The 618.7-acre call in the deed can be harmonized with the deed of trust because Tract A in the deed of trust contained the identical call for acreage. In Winters v. Slover, 151 Tex. 485,251 S.W.2d 726 (1952), this court stated:

“The petitioners’ contention that the specific description of the entire 165V2 acres tract should control over the general description which referred to the deed from T. J. Slover to Chilton expressly reserving one-half of the minerals, is answered by the well recognized rule that a general description will not be disregarded where it can be harmonized with a particular description.” 251 S.W.2d 726 at 728.

Sharp v. Fowler, 151 Tex. 490, 252 S.W.2d 153 (1952), relied upon by American Savings, is not apposite. In Sharp this court summarized the property description in the deed as follows:

“Following the grant there is designated the number of acres granted and the county and survey in which the land is located. . . . But the description is made certain by the language ‘being the same land described in’ the Frost deed.” [Emphasis added.] 252 S.W.2d 153 at 154.

The distinction between Sharp and the instant case is that in Sharp the deed incorporated all of the land described in the deed to which reference was made. The deed to Kent and Jacobson simply referred to the deed of trust for a more particular description without incorporating all of the property described therein.

In their application TWI and Mary Ann Musick contend that American Savings failed to prove a chain of title to the 618.7-acre tract because the deed of trust and the promissory note secured thereby were materially altered and therefore void. Mary Ann Musick filed an affidavit of forgery in the trial court claiming that the deed of trust was altered after execution by addition of the 41.4305- and the 16.6-acre tracts. Furthermore, it is evident that the figure “618.7” in the note’s description of the acreage provided as security was erased and retyped “676.7305.” We hold however, that the alleged alterations of the deed of trust and the promissory note did not make the instruments void because the alterations were not material. The 41.4305- and the 16.6-acre tracts did not pass under the deed to Kent and Jacobson; consequently, Kent and Jacobson could not have conveyed them under the deed of trust, nor could they have been made security for the promissory note executed by Kent and Jacobson. The inclusion of the additional tracts in the deed of trust and the promissory note had no legal effect. See Reed v. Roark, 14 Tex. 329 (1855).

II.

The court of civil appeals remanded the case for a determination whether the foreclosure sale and the trustee's deed of the 618.7-acre tract should be set aside. The court stated that fact issues were presented as to whether the price paid by American Savings was inadequate and whether certain irregularities tainted the foreclosure sale. TWI urges that we declare .the trustee’s deed void as a matter of law, while American Savings contends that the trustee’s deed should be upheld.

American Savings argues that TWI has no standing to challenge the trustee’s sale because it was not a party to the deed of trust. The court of civil appeals held, however, that TWI possesses standing under the rule set forth in Estelle v. Hart, 55 S.W.2d 510, 513 (Tex.Com.App., 1932). Estelle v. Hart held that a junior lienholder has standing to show the invalidity of a trustee’s sale because his interest in the property is affected by such a sale. The court of civil appeals interpreted Estelle v. Hart “to mean that third parties have standing to challenge such a sale of their rights are effected [sic] thereby.” We agree with this statement of the law, but the question remains whether TWI’s rights were affected by the trustee’s sale of the 618.7-acre tract.

American Savings claims that TWI’s interests were not affected by the trustee’s sale because in 1964 TWI conveyed all of its interest in the 618.7-acre tract to the mortgagors, Kent and Jacobson. We would agree with American Savings’ contention but for the evidence in the record indicating that Kent and Jacobson took title to the 618.7 acres as trustee for the benefit of TWI pursuant to a verbal agreement with Mary Ann Musick. The testimony regarding the verbal agreement is conflicting, but in any event, it is undisputed that TWI retained some interest, equitable or otherwise, in the 618.7-acre tract. For this reason we are unable to hold on the present record that TWI lacks standing to challenge the trustee’s sale of the 618.7 acres.

We hold that TWI’s attack on the trustee’s sale is without merit. TWI’s principal objection to the trustee’s sale is that the substitute trustee, who conducted the sale, was not properly authorized. Ralph B. Lee, the original trustee, was both an attorney and president of American Savings. He was named trustee on most if not all deeds of trust securing American Savings’ loans. Lee testified that he instituted the following procedure for handling trustee sales: (1) American Savings would send the notice of default to his law firm; (2) a “Resignation of Trustee” form was automatically prepared for his signature by an employee of the firm; and (3) an associate in the law firm was automatically appointed substitute trustee. Lee admitted that in the instant case, as with most defaults, he was not personally requested to act by American Savings.

The deed of trust provides:

“In the case of the absence, death, inability, refusal, or failure of the Trustee herein named to act, a successor and substitute may be named, constituted, and appointed by the Association, or other holder of said indebtedness, or any part thereof, . . . and such right to appoint a successor or Substitute Trustee shall exist as often as, and whenever from any of said causes any Trustee, original or substitute, cannot, does not, or will not act.” [Emphasis added.]

TWI contends that the appointment of the substitute trustee was not caused by “absence, death, inability, refusal, or failure” of the original trustee, Ralph B. Lee, and therefore the appointment of the substitute trustee was not authorized by the deed of trust. The question narrows to whether there was a refusal or failure to act within the meaning of the deed of trust, the remaining causes for appointment of a substitute trustee being clearly inapplicable. According to TWI, there was no refusal or failure to act by Lee because, as Lee admitted in his testimony, he was not personally requested to act. The court of civil appeals declined to hold that the alleged irregularity in the appointment of the substitute trustee made the trustee’s deed void, but held instead that the alleged irregularity combined with an inadequate consideration received at the trustee’s sale would afford the basis for an attack under Cline v. Cline, 323 S.W.2d 276 (Tex.Civ.App. — Houston 1959, writ ref’d n. r. e.).

We hold that there was no irregularity in the appointment of the substitute trustee, The “Resignation of Trustee” form executed by Ralph B. Lee constituted a refusal to act. A trustee may resign and thereby refuse to act even though no request has been made upon him. Bracken v. Bounds, 96 Tex. 200, 71 S.W. 547 (1903), relied upon by TWI, is distinguishable from the instant case. In Bracken, as here, the deed of trust authorized the appointment of a substitute trustee if the trustee failed or refused to act. The mortgagee never requested the trustee to act. Instead, the mortgagee requested that the trustee resign and permit the appointment of a substitute trustee. Following the trustee’s resignation, the mortgagee appointed his brother as substitute trustee. This court held that the substitute trustee was not properly authorized, emphasizing that the mortgagee “could not, for his own convenience, bring about the condition to authorize himself to select another trustee . . . .” 71 S.W. 547 at 548. The instant case does not involve an allegation that American Savings prompted Ralph B. Lee to resign as trustee.

We further hold that Lee’s resignation was preceded by a request from American Savings that he sell the property. Although the request was not made upon Lee personally, it was made upon Lee’s law firm which, according to the office procedure instituted by Lee, prepared the “Resignation of Trustee” form. Lee could have handled the default notice and prepared the “Resignation of Trustee” form himself, but instead he quite properly assigned these duties to his employees who were following his instructions. It is true that the powers conferred upon a trustee in a deed of trust must be strictly followed, Slaughter v. Qualls, 139 Tex. 340, 162 S.W.2d 671 (1942), but a trustee may delegate certain ministerial duties to his employees and persons under his supervision. See Wilson v. Armstrong, 236 S.W. 755 (Tex.Civ.App. — Beaumont 1921, no writ).

In addition to the alleged irregularity in the appointment of the substitute trustee, the court of civil appeals found several other irregularities in the trustee’s sale. The court remanded the case to resolve fact issues concerning the alleged irregularities and the adequacy of the consideration paid by American Savings at the sale.

The court noted that appraisal testimony indicated a value of all three tracts on the date of foreclosure at $338,365, though American Savings bought the three tracts for $25,000. However, the rule is well established that mere inadequacy of consideration is not grounds for setting aside a trustee’s sale if the sale was legally and fairly made. Tarrant Savings Association v. Lucky Homes, Inc., 390 S.W.2d 473 (Tex.1965). There must be evidence of irregularity, though slight, which irregularity must have caused or contributed to cause the property to be sold for a grossly inadequate price. Sparkman v. McWhirter, 263 S.W.2d 832, 837 (Tex.Civ.App. — Dallas 1953, writ ref’d).

We have already held that the method of appointment of the substitute trustee did not constitute an irregularity in the trustee’s sale. The other alleged irregularities cited by the court of civil appeals lack substance. The court stated that the alleged alterations of the deed of trust and the promissory note constituted an irregularity and it also noted that Meyer Jacobson was an officer in the title company that American Savings requested to close the transaction on December 18, 1964. We do not view either of these circumstances as affecting the legality or fairness of the trustee’s sale. An additional irregularity cited by the court of civil appeals was that neither TWI nor Mary Ann Musick received notice of the foreclosure sale. However, the deed of trust did not provide for personal notice to Mary Ann Musick or TWI. There is no requirement that personal notice be given to persons who were not parties to the deed of trust. Finally, the court of civil appeals found an irregularity in the fact that American Savings knew at the time of the sale that title to the three tracts was in dispute among members of the Mu-sick family. We do not construe this circumstance as detracting from the legality or fairness of the trustee’s sale. A mortgagee is not required to await a final resolution of such title disputes before conducting a trustee’s sale.

III.

Elliott & Waldron Title & Guaranty Company issued to American Savings a mortgagee’s title policy in the face amount of $150,000 covering the property conveyed by the deed of trust dated December 18, 1964. Elliott & Waldron subsequently entered receivership proceedings in Travis County. In May 1966 American Savings filed a proof of claim against Elliott & Waldron seeking $150,000. The proof of claim stated in part: “In making our preliminary check, we discovered that neither Kent nor Jacobson had title to the property in question.” What American Savings apparently discovered in its preliminary check was the controversy among various members of the Musick family about ownership of the three tracts. The receiver for Elliott & Waldron allowed the claim to the extent of $75,000, and American Savings executed an agreement, releasing Elliott & Waldron and the receiver from any obligations under the policy. The court of civil appeals remanded the case to determine whether the facts establish an election of remedies by American Savings, and the court further held that the trial court erred in excluding the documents and evidence tending to prove election of remedies.

This court defined the scope of the election of remedies doctrine in Custom Leasing, Inc. v. Texas Bank & Tr. Co. of Dallas, 491 S.W.2d 869 (Tex.1973):

“An election of remedies is the act of choosing between two or more inconsistent but coexistent modes of procedure and relief allowed by law on the same state of facts. When a party thus chooses to exercise one of them he abandons his right to exercise the other remedy and is precluded from resorting to it.” 491 S.W.2d 869 at 871.

Election of remedies is not a favorite of equity and its scope should not be extended. Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 393 (1945).

In Custom Leasing we quoted the following rule from 28 C.J.S. Election of Remedies 8, at 1073:

“ ‘Where remedies pursued against different persons are repugnant and inconsistent, the election of one bars the other, but concurrent and consistent remedies may all be pursued until satisfaction is had. The bar of an election does not apply to the assertion of distinct causes of action against different persons arising out of independent transactions with such persons.’ ” 491 S.W.2d 869 at 871.

The question therefore is whether a suit for trespass to try title is inconsistent with a claim against a title insurance company alleging failure of title. We find no inconsistency between these remedies. The claim against the title insur-anee company is based on a contractual right that exists separate and distinct from any final determination of ownership of the property. A claim against a title insurance company invokes the insurer’s obligation to pay the claim or defend title to the property. There is certainly no inconsistency between seeking a defense by the insurance company and filing a trespass to try title action.

The instant case is quite similar to Liberty Mut. Ins. Co. v. First Nat. Bank in Dallas, 151 Tex. 12, 245 S.W.2d 237 (1951). In that case a bank depositor suffered a loss because of unauthorized checks written on its account. This court held that the depositor did not pursue inconsistent remedies by first claiming indemnity from its insurer and then suing the bank to recover the amounts paid out on the unauthorized checks. The court reasoned that the depositor suffered a loss covered by the insurance policy until the bank could be compelled to make payment. Similarly, in the instant case American Savings sustained a loss covered by its title insurance, namely inability to obtain title to the property, and the loss continues to exist until title to the property is finally established.

The court of civil appeals also erred in holding that American Savings is estopped from claiming title to the property by the statement in its proof of claim that a preliminary check revealed that title was not in Kent and Jacobson. One of the requirements for application of the doctrine of judicial estoppel is that the statement must be deliberate, clear, and unequivocal. Griffin v. Superior Insurance Company, 161 Tex. 195, 338 S.W.2d 415 (1960). The statement by American Savings in its proof of claim was not clear and unequivocal. American Savings merely stated the results of its preliminary title check; it did not admit that its title had failed.

In summary, we agree with the lower courts that the 41.4305- and the 16.6-acre tracts should be awarded to Mary Ann Mu-sick and TWI respectively. With respect to the 618.7-acre tract, we reverse the court of civil appeals and render judgment for American Savings.

The judgment of the court of civil appeals is reversed and that of the trial court is affirmed.


author: DANIEL, Justice.

text:
    Mrs. Seb S. WILCOX et al., Petitioners, v. ST. MARY’S UNIVERSITY OF SAN ANTONIO, INC., et al., Respondents.
    No. B-5297.
    Supreme Court of Texas.
    Dec. 17, 1975.
    Rehearing Denied Jan. 28, 1976.

      McGinnis, Lochridge & Kilgore, John W. Stayton and George D. Byfield, Austin, for petitioners.
    Patrick J. Kennedy, San Antonio, W. W. Allen, Laredo, for respondents.
   DANIEL, Justice.

This suit was filed by the State of Texas on behalf of the Texas Library and Historical Commission to determine the ownership of an extensive collection of historical documents known as “The Laredo Archives.” The defendants were St. Mary’s University and the late Sebron S. Wilcox’s widow and heirs, who had presented the archives along with other documents, books, and papers (known as the Wilcox Collection) to St. Mary’s in 1960. The City of Laredo intervened, claiming title to the Laredo Archives against all of the other parties.

Thereafter, on July 18, 1972, the City of Laredo and St. Mary’s University entered into a written settlement agreement with the State whereby they quitclaimed to the State all right, title, and interest in the Laredo Archives, with care, custody, and possession to remain at St. Mary’s and with microfilm copies to be furnished to the City of Laredo. Thereupon, St. Mary’s moved for a severance and separate trial of the issue between it and the Wilcox defendants as to “whether the title, whatever its character and quality,” claimed by the Wilcox defendants “in and to the subject documents became the sole and exclusive property of St. Mary’s University by virtue of an unconditional and irrevocable gift of such documents to St. Mary’s in 1960.” The severance and separate trial of this issue was agreed to by all of the parties, and in such separate proceeding the trial court granted St. Mary’s motion for a summary judgment against the Wilcox defendants on December 14, 1972. On appeal by the defendants, the court of civil appeals affirmed. 497 S.W.2d 782, Tex.Civ.App. Upon writ of error, this Court dismissed the appeal holding that no final appealable judgment had been rendered because it failed to dispose of the other parties. 501 S.W.2d 875, Tex. On October 10, 1974, the trial court rendered another judgment reentering the summary judgment for St. Mary’s against the Wilcox defendants and disposing of the other parties and issues in accordance with their agreement of settlement. This second judgment was affirmed by the court of civil appeals “for the reasons stated in its earlier opinion.” 521 S.W.2d 157, Tex.Civ.App. Because of the failure of St. Mary’s to make summary judgment proof showing that no material issues of fact exist between it and the Wilcox heirs, we reverse the judgments of the lower courts and remand the case for trial on the merits.

At the outset, it should be noted that the proceeding below and this appeal does not deal in any manner with the claim of title asserted by the State to be superior to any claims of Sebron S. Wilcox and his heirs insofar as concerns the Laredo Archives. This part of the so-called “Wilcox Collection,” which has been in the possession of St. Mary’s since 1960, is entirely separate and distinguishable from the rest of the massive historical collection assembled by Mr. Wilcox. The Laredo Archives are the only documents within the “Wilcox Collection” which are claimed or sued for by the State, and they are identified in the title settlement between the State, the City of Laredo, and St. Mary’s as follows:

“The historical papers and documents commonly referred to as the ‘Laredo Archives’ consisting of municipal records pertaining to the City of Laredo, which was founded in 1755, the earliest document bearing date of 1749 and the most recent document bearing date of 1868, such records being comprised of 3,245 documents containing a total of 13,343 pages . . . [Covering seventeen enumerated subjects.]

On the other hand, the severed issue of title as between St. Mary’s and the Wilcox defendants relates to the entire “Wilcox Collection” which was delivered and presented by said defendants to St. Mary’s in 1960, including the Laredo Archives. St. Mary’s contends that the “presentation” was a gift under which it acquired whatever title the Wilcox defendants had; and if not by gift, then by limitation under its claim of ownership and possession for more than two years after any Wilcox cause of action arose. The Wilcox heirs claim that the “presentation” was a loan; that this was known to St. Mary’s officials from the beginning and that they did not have notice of any claim of ownership by St. Mary’s until 1970.

As indicated, the judgment below was not based upon a trial on the merits at which the parties could fully develop their respective contentions with oral testimony. Rather, it was a summary judgment based solely upon the pleadings, an affidavit of Brother Paul Novosal, Librarian at St. Mary’s, in support of the summary judgment; an affidavit of Mrs. Mary Genevieve Wilcox in opposition to the summary judgment; and oral depositions of the defendants, Mrs. Sebron S. Wilcox, Mary Genevieve Wilcox, and William S. Cox, with accompanying exhibits.

From these documents it appears undisputed that Sebron S. Wilcox, long-time court reporter and historian at Laredo, discovered the “Laredo Archives” in the basement of the Webb County courthouse in 1934; that he probably saved them from destruction; that they were kept in eight metal boxes in his office at the courthouse as long as he was court reporter, and thereafter in the county clerk’s office, where they were found after his death in 1959. During the intervening years, Mr. Wilcox worked with the archives, helped in the W.P.A. transcription of them, made his own notes concerning them, and added writings of his own which he produced as a result of his research and evaluation of the materials. He and his widow, Stella Marie Wilcox, apparently claimed title to the Laredo Archives by reason of a gift from the Sheriff of Webb County as custodian of the courthouse, the validity of which title is disputed by the State and the City of Laredo.

In addition, Mr. Wilcox also assembled a mass of historical writings, documents, photographs, newspapers, books, and artifacts which relate to Laredo but which were separate from the “Laredo Archives.” He was an avid and capable historian and preserver of historical records and resources. Prior to his death, Mr. Wilcox indicated to his wife and to officials of St. Mary’s University that he wished the University to have his collections and to spend his remaining years working with the documents in the University library. He delivered or sent some materials to St. Mary’s, but any title which he held to the bulk of the collection at the time of his death in May of 1959, passed by his will to his surviving spouse, Stella Marie Wilcox. She and her daughter, Mrs. Mary Genevieve Wilcox, began making arrangements with officials of St. Mary’s to place the collection in the University library a few months after the death of Mr. Wilcox, and by September of 1960, the bulk of the collection, including the Laredo Archives, was delivered.

A public ceremony for presentation of the Wilcox Collection, honoring the memory of Sebron S. Wilcox, was held at S'1- Mary’s on December 10, 1960, at which the grandson, William S. Cox, made the presentation on behalf of Mrs. Stella Marie Wilcox. This ceremony was followed by considerable newspaper publicity referring to the “gift” or “donation” as well as letters from officials of St. Mary’s to all of the Wilcox family thanking them for the “gift.” According to the affidavit of the librarian, the University spent more than $40,000 housing, indexing, and preserving the collection during the ten years following delivery of the documents. For other details concerning the summary judgment proof and the manner in which the court of civil appeals arrived at its conclusion that title by limitation had been shown as a matter of law, see the court of civil appeals opinion in the first appeal. 497 S.W.2d 782. That opinion forms the basis for the judgment of the court of civil appeals in this second appeal. 521 S.W.2d 157, Tex.Civ.App.

The court of civil appeals failed to recite portions of the summary judgment proof which disputed the contentions of St. Mary’s, both as to the gift and the applicability of the statute of limitations. For instance, Mrs. Stella Marie Wilcox stated in her deposition that “it was not a gift, it was a loan, and that is what I specifically told Brother Paul . . . . I told him that I was going to bring the documents and let them use them for the research of the students but I was not making them a gift, it was not a gift . . . . And the President also, I told him also . . . . They were on loan and the word loan was used over and over and over again in our conversations with Brother Novosal and the president.” Her daughter, Mary Genevieve Wilcox, stated in her deposition that she accompanied her mother at these meetings with St. Mary’s officials and at the presentation ceremony and says that both she and her mother spoke in terms of a loan rather than a gift when the documents were delivered. She stated that her mother told Brother Paul, the librarian, “I am putting them up there but if I want them I’ll take them back.” The grandson, William S. Cox, whose efforts in 1970 to find a purchaser of the documents seems to have precipitated this lawsuit, stated in his deposition that he had heard his grandmother correct Father Buehler’s use of the word “gift” at the dedication luncheon on December 10, 1960, and that she said it was only a loan but that she might some day let the school purchase the collection.

By affidavit, Mrs. Mary Genevieve Wilcox stated, “About the year 1965 my mother came on hard times and we began to talk to the officials of St. Mary’s about making a final settlement of the documents and give full title to St. Mary’s in return for whatever price we could agree upon.” She listed subsequent negotiations on May 3, 1969, June 23, 1969, January 4, 1970, and April 9, 1970, stating that on each occasion one or more St. Mary’s officials talked about a purchase of the documents. She further stated that her son, William S. Cox, was buying a house in Austin during this period; that her mother had agreed that the money from a sale of the Laredo Archives would be used to pay for the property; and that Father Blume of St. Mary’s told her son’s banker “that St. Mary’s would probably buy the papers for approximately $50,000.00.”

In reviewing a summary judgment record it is the duty of appellate courts to apply the following rules which are applicable to this case:

1. The movant for summary judgment (St. Mary’s) has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Rule 166-A(c), Texas Rules of Civil Procedure; Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970).
2. In deciding whether or not there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant (Wilcox defendants) will be taken as true. Cowden v. Bell, 157 Tex. 44, 300 S.W.2d 286 (1957).
3. Every reasonable inference must be indulged in favor of the non-movants and any doubts resolved in their favor. Hudnall v. Tyler Bank & Trust Co., 458 S.W.2d 183 (Tex.1970); Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929 (1952); Womack v. Allstate Ins. Co., 156 Tex. 467, 296 S.W.2d 233 (1956).

Applying these standards, we are compelled to hold that St. Mary’s has failed to carry its burden, because the summary judgment proof reveals a genuine fact issue as to whether the delivery and presentation of the Wilcox Collection was a gift or a loan. The court of civil appeals did not reach this question. Rather, it held that St. Mary’s had acquired title under the two year statute of limitations as a matter of law, even if the presentation was originally a loan. This was in error because the summary judgment proof shows a disputed fact issue as to whether St. Mary’s claimed ownership of the Wilcox Collection for a two year period after putting Mrs. Stella Marie Wilcox on notice of such adverse claim. The deposition testimony about St. Mary’s negotiations to purchase as late as 1965, 1969, and 1970, although well after its first two years of possession and claim of ownership, raises a fact issue as to whether St. Mary’s was asserting ownership adverse to the defendants during the earlier two year period. Bruni v. Vidaurri, 140 Tex. 138, 166 S.W.2d 81, 88 (1942); Warren v. Fredericks, 83 Tex. 380, 18 S.W. 750, 751 (1892); Nelson v. Morris, 227 S.W.2d 586 (Tex.Civ.App. 1950, writ ref. n. r. e.). The weight, if any, to be given such evidence depends upon a full development of the facts and conditions surrounding the purchase negotiations. Warren v. Frederichs, supra; Cuellar v. Dewitt, 5 Tex.Civ.App. 568, 24 S.W. 671 (Tex.Civ.App.1893, writ ref.).

Accordingly, the judgments of the lower courts are reversed and the case is remanded for trial on the merits.