Grumley v. Webb

44 Mo. 444

• Court: Supreme Court of Missouri
• Decided: October 15, 1869
• Status: Published

Opinion

Wagner, Judge,

delivered the opinion of the court.

This was a bill in equity to have a renewed lease, procured by the defendant while agent of the plaintiff, declared a trust for the plaintiff, and for an account. The record shows that the plaintiff leased from John O’Fallon an unimproved lot of ground in 1844, and in 1855 completed the building of fifteen houses on it. The lease was to expire January 1, 1864, with a privilege in plaintiff of removing his improvements at any time before its expiration. Just before completing the building of the houses, the plaintiff, by a power of attorney, made defendant, who was in the real estate business, his agent to collect the rents and manage his property, and then departed for Europe. While plaintiff was absent, the defendant, his agent, bought in three judgments for himself, which were outstanding against the plaintiff. Upon these judgments he caused executions to be issued, had the fifteen houses levied on, and sold at sheriff’s sale, and bought them in himself, talcing a deed therefor, while plaintiff was absent in Europe. The sale was made in January, 1857, and the evidence is uncontradicted that bidders were kept away and competition warded off by defendant’s declaring that he was purchasing the buildings for his principal, the plaintiff. The buildings were purchased at sheriff’s sale, and, as the evidence show's, for less than a tenth of their real value. The defendant stated on different occasions that he purchased the buildings for the plaintiff, but it seems that he really bought them for himself, with the intention of keeping them; and when plaintiff, on hearing of the sale, returned home, he refused to give him any account of the rents of the houses except up to the time of the sheriff’s sale to him. Plaintiff then sued defendant, as his agent, for an account, and in May, 1864, recovered a judgment for $11,522.54, for rents collected and appropriated by defendant up to January 1, 1864, the date that the lease expired.

In the month of November, 1863, and before the expiration of the lease, both parties (the plaintiff and defendant) applied to the lessor for a renewal of the lease. The lessor, O’Eallon, refused to continue the lease to the plaintiff, but granted a lease of the premises for ten years from January 1, 1864, to the defendant; .and he has ever since enjoyed the rents and profits of the lot, together with the buildings thereon erected by the plaintiff.

O’Eallon is dead, but the testimony of Keber, his chief clerk, a disinterested witness, states that he knew' of no objection to the plaintiff, but that O’Eallon made it a rule to grant a new lease to the one already in possession. The defendant was in possession, to the exclusion of his principal, the plaintiff; he exhibited his deed to show title, and it is charged that he made use of his wrongful possession and pretended title to acquire his lease.

After the procurement of this lease by the defendant, and at the September term, 1864, of the St. Louis Circuit Court, the plaintiff brought suit against the defendant for $7,000, in which lie set up that under the first lease he had a right to remove the improvements at any time before the 1st of January, 1864, and that the defendant refused to let him remove them after that date, thereby damaging him in the above amount, for which he asks judgment. A demurrer was filed and sustained to this last petition. While- this last suit was pending, and the prior judgment remained unsatisfied, negotiations were entered into for a compromise. It appears that an appeal was taken from the judgment as rendered, and it was agreed by the attorneys on both sides that there was a mistake in the calculation as to amount, and that it was rendered for too much. They finally agreed on six thousand five hundred dollars, and the plaintiff executed to the defendant the following receipt:

“ Received from William G. Webb six thousand five hundred dollars, which is in full satisfaction of a judgment recovered by me against said Webb and David S. Bigham, in the St. Louis Circuit Court; and said sum is in full satisfaction of all claims and demands I have or hold against said Bigham and Webb, or either of them, up to this date.

“ (Signed) William Grumley.

“ St. Louis, March 7, 1865.”

It should bo stated that Bigham was in partnership with defendant Webb in the real estate business when the plaintiff intrusted his business to their care, but they dissolved partnership before plaintiff’s return from Europe, and the whole matter passed into the hands of the defendant, who alone was sued in this suit.

Upon the facts as above set forth, the case was heard in the court below, and the bill dismissed for want of equity.

It is contended by the counsel for the plaintiff that the defendant, at the time he acquired the lease, stood in a fiduciary capacity, and was disabled from taking and holding the same on his own account, and that it inured in equity to plaintiff’s benefit. Defendant’s counsel insists that the lease in controversy did not inure to the benefit of the plaintiff upon its procurement, and that, if it did, the receipt shows a settlement of all matters in difference between the parties, and includes - this as well as all other claims. Nothing is better settled than that an agent or a trustee, or any person acting in a fiduciary capacity, can not speculate for his private gain with the subject matter committed to his care, to the prejudice of his principal. He can not be allowed to purchase.an interest in property where he has a duty to perform which is inconsistent with the character of purchaser. The law does not presume that such a transaction will always be impressed with fraud, but it furnishes an inducement to fraud, and affords opportunities to persons, who should always act with the most conscientious and scrupulous good faith, to abuse their trust; and therefore a total disability is enjoined, to take away all temptation. (Jamison v. Glascock, 29 Mo. 191; Boardman v. Florez, 37 Mo. 559 ; Jacques v. Edgell, 40 Mo. 77 ; Thornton v. Irwin, 43 Mo. 153 ; State, etc., v. McKay, 43 Mo. 594.)

Lord St. Leonards, in his work on vendors and purchasers, lays down the rule with great clearness. He says : “It may be laid down, as a general proposition that trustees, who have accepted the trust (unless they are nominally such to preserve contingent remainders), agents, commissioners of bankrupts, assignees of bankrupts or their partners in business, solicitors to the commission, auctioneers, creditors who have been consulted as to the mode of sale, counsel, or any persons who, being employed or concerned in the affairs of another, have acquired a knowledge of his property, are incapable of purchasing such property themselves, except under the restrictions w-hich will be shortly mentioned. For if persons having a confidential character were permitted to avail themselves of any knowledge acquired in that capacity, they might be induced to conceal their information, and not to exercise it for the benefit of the persons relying on their integrity. The characters are inconsistent. Empior emit quam minima potest, venditor vendil quam maximo potest.” (Sugd. on Vend. and Pur., 13th ed., 566.)

In New York it has been decided that the clerk of a broker employed to make sale of land, who has access to the correspondence between his principal and the vendor, stands in such a relation of confidence to the latter that if he becomes the purchaser he is chargeable as trustee for the vendor, and must reconvey or account for the value of the land. (Gardner v. Ogden, 22 N. Y. 325.)

/ That the defendant in this case occupied a relation of trust and jconfidence toward the plaintiff is undisputed. For a certain ¡remuneration he undertook to collect the rent and exercise control lover the property. His principal was absent, and relied entirely ion his discretion, judgment, and integrity. Under such circumstances he had no right to interfere with the title to the property, or place himself in an attitude of antagonism to the interests ¡of his principal. But this is not all. It was expressly agreed that the rents, as they were collected, after paying taxes and ground-rent, should be applied to the payment of the judgments. But, instead of pursuing this course, the defendant, as agent, purchases up the judgments, has them assigned to him, orders out execution, and buys the property in his own name. This, too, while the plaintiff was in Europe, relying on the defendant’s honesty and diligence to protect his rights. That the deed was taken in the defendant’s name, and that he afterward refused to account for rents beyond the time that he acquired the deed, shows that the purchase was made ex maleficio. Had there been no agency, under the facts in this case, the defendant would still have been placed in the position of a trustee. He obtained the property at a sacrifice, by representing that he was buying for his principal; and no principle is clearer than that where one becomes a purchaser under such circumstances as would make it a fraud to permit him to hold on to his bargain — as by representing that he is buying for the benefit of the embarrassed debtor in the execution, or that he intended to reconvey the property, and thereby obtains it at a sacrifice — courts will relieve against such fraud, and the person who has gained an advantage by means of such fraudulent act will be converted into a trustee for those who have been injured thereby. (McNew v. Booth, 42 Mo. 189, and cases referred to.)

We think, then, the proposition may be fairly stated that at the time the purchase was made, at sheriff’s sale, the defendant was disabled from acting on his own account, and that for whatever ho did he will be held liable as a trustee.

When he acquired the lease from O’Eallon he was dealing as a trustee; and he obtained a renewal of the lease of his cestui que trust in his own name before the lease had expired; and the evidence leaves no room to. doubt that the possession and title which he had got by reason of his being agent or trustee were the agencies which superinduced the execution of the lease to him.

A uniform series of decisions, both English and American, have adjudged that under such circumstances the trustee can not take the lease to himself; and if he does, he will be obliged to assign it to the cestui que trust, and account for the profits. The-leading case on this question is Keoch v. Sandford (Selw. Cas. in Ch. 61), which was tried in 1726, before Lord Chancellor King. In that case, a person being possessed of a lease of the profits of a market, devised his estate to a trustee in trust for the infant. Before the expiration of the term the trustee applied to the lessor for a renewal for the benefit of the infant, which he refused, in regard that, it being only of the profits of the market, there could be no distress, and must rest singly in covenant, which the infant could not do.

There was clear proof of the refusal to renew for the benefit of the infant, and the trustee then got a lease made to himself. Bill was brought by the infant to have the lease assigned to him, and for an account of the profits, on the principio that wherever a lease is renewed by a trustee it shall be for the benefit of the cestui que use. This principle was not denied in the argument for the trustee, but it was endeavored to be avoided on the ground of the express refusal of the lessor to renew to the infant. But the Lord Chancellor said: “ I must consider this as a trust for the infant, for I very well see that if a trustee, on the refusal to renew, might have a lease to himself, few trust estates would be renewed to cestui que use. Though I do not say there is fraud in this case, yet he (the trustee) should rather have let it run out than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease; hut it is very proper that the rule should be strictly pursued, and not in the least relaxed; ‘ for it is very obvious what would be the consequences of letting trustees have the lease on refusal to renew to cestui qua use.’"

And a decree w’as accordingly entered that the lease should be assigned to the infant, and that the trustee should be indemnified from any covenant comprised in the lease, and that an account should be taken of the profits made after the renewal.

Keech v. Sandford, sometimes called the Rumford Market case, is cited by the learned authors of the Leading Cases in Equity (see White & T. Lead. Cas. in Eq., 36) as the leading authority on the doctrine of constructive trusts arising upon the renewal of a lease by a trustee or executor in his own name and for his own benefit.

The rule inflexibly laid down by Lord King has been invariably followed, namely: that a lease renewed by a trustee or executor, in his own name, even in the absence of fraud, and upon the refusal of the lessor to grant a new lease to the cestui que trust, shall be held upon trust for the person entitled to the old lease. For this position the authors cite the following cases: Fitzgibbon v. Scanlan, 1 Dow, 261, 269; Rawe v. Chichester, 1 Amb. 715 ; 1 Bro. Ch. C. 198 ; 2 Dick, 480 ; Pickering v. Vowles, i Bro. Ch. C. 198 ; Pierson v. Shore, 1 Atk. 480 ; Nesbitt v. Tredennick, 1 Ball & B. 46 ; Abney v. Miller, 2 Atk. 597 ; Edwards v. Lewis, 3 Atk. 538 ; Killick v. Flexney, 4 Bro. Ch. C. 161; Moody v. Mathews, 7 Ves. 174 ; James v. Dean, 11 Ves. 383 ; Parker v. Brooke, 9 Ves. 583 ; Lovatt v. Knipe, 12 Ir. Eq. Rep. 124 ; Walley v. Walley, 1 Vern. 484; Holt v. Holt, 1 C. C. 190.

The reason assigned for decreeing renewals by trustees and executors, to inure to the benefit of the cestui que trust, is public policy, to prevent persons in such situations from acting so as to take a benefit for themselves. (Griffin v. Griffin, 1 Sch. & L. 354, per Lord Redesdale; Blewett v. Millet, 7 Bro. P. C. 367, Toml. ed.)

The same doctrine applies to partnerships, where one partner obtains a renewal of a partnership lease for his own benefit, and to a person having a limited interest in a renewable lease, as a tenant for life. If he renews it in his own name, he will be held trastee for those entitled in remainder in the old lease.

In American jurisprudence the principle is equally as well settled as in England. In an early day, the ablest of all American chancellors (Kent) gave the subject a thorough and profound discussion, and fixed the rule on a strong basis. It would too much extend the length of this opinion to attempt a review of the American authorities, but they will be found collated by the American editors, Hare & Wallace, in a note to Keech v. Sandford, above referred to.

In the case of Zilkin v. Carhart (3 Bradf. 376), the intestate having owned a lease for years, without covenant of renewal, but with a stipulation that the right of the lessee to take away the building on the premises should not be impaired, and the administratrix having taken a renewal in her own name, it was held that the new lease inured to the benefit of the estate, and that the administratrix was bound to account to the next of kin for its value and for the rents which had accrued, less the current charges, repairs, and ground-rent.

The surrogate, in his opinion, said there was always a beneficial interest connected with a tenancy as an inducement toward a renewal, which in equity was regarded as valuable; and a trustee could not avail himself of his position, and use the good-will for a renewal in his own right, in exclusion of the parties for whom he was trustee. (See, also, Thomas v. Zumbalen, 43 Mo. 471.)

In general, however, where the trustee buys an estate, or renews a lease which inures to the benefit of the cestui que trust, he will be entitled to reimbursement for his outlay. (Quackenbush v. Leonard, 9 Paige, 334, 344; Mathews v. Dragaud, 3 Desau. 25-8; McClanahan v. Henderson, 2 Marsh. 388 ; Morrison v. Caldwell, 5 Monr. 426 ; Kellogg v. Wood; 4 Paige, 578.)

One question alone remains to be considered, and that is-whether the receipt concludes this suit, and amounted to a final adjustment of all matters in controversy between the parties. The plaintiff alone signed the receipt, and it expressed full satisfaction of the judgment, which was the principal object of negotiation between the parties, and also of all claims and demands which the defendant had or held against the plaintiff. The language is exceedingly broad and comprehensive, but, like all other contracts, it must be interpreted and construed from existing facts, and in the light of surrounding and cotemporaneous circumstances. Evidence was taken at the trial in the court below as to what was actually settled between the parties, and what was intended to be released. . Some of the evidence is in conflict and irreconcilable. The opposing attorneys understand the matter differently. But upon a review of all the evidence bearing upon this point, and the statement of the parties themselves, the conclusion is irresistible that the plaintiff thought he was compromising only the judgment actually obtained, and that he was receiving satisfaction and releasing his claim to that judgment only. He had no idea that the settlement included the second suit, which Ayas pending and undisposed of in the Circuit Court.

The receipt, acknowledging satisfaction of the judgment rendered, he signed; and on the same day his attorneys, on their oavu responsibility, and without consulting him, signed an order for the dismissal of the pending suit. It is undoubted that he Avas ignorant of this dismissal for some time after it occurred. On the other hand, the defendant’s testimony tends to shoAV that defendant considered the settlement a complete adjustment of all differences growing- out of plaintiff’s claim on defendant; but I am impelled to the belief that neither party at the time apprehended that a suit of this character would be instituted. It Avas not contemplated nor thought of. Such being the case, Ave must see what construction the law will place upon the terms of the receipt.

In the case of Vedder v. Vedder (1 Den. 257), where the receipt Avas “one dollar in full of all demands to date,” Judge Beardsley quoted the language of Lord Coke, that the word “demand” Ayas the largest word in law except “claim,” and said that a “release of all demands discharges all sorts of actions, rights and titles, conditions before or after breach, executions, appeals, rents of all kinds, covenants, annuities, contracts, recognizances, statutes, commons,” etc.; and, as authorities to sustain this view, he cites Bac. Abr., tit. Release, I; Litt. § 508 ; Co. Litt. 291, b, Edward Althan’s case, 8 Rep. 299. But the receipt in that case was simply for one dollar in full of all demands to date, nothing being said respecting the particular demand which was paid; and, as it was received on an adjustment between the parties of mutual cases of tort, it was held to be binding on all cases of mutual dispute. The case, when properly examined and rightfully understood, 'does not militate against the universally-recognized doctrine that language, however general in its form, when used in connection with a particular subject matter, will be presumed to be used in subordination to that matter, and will be construed and limited accordingly.

In an old book o£ great merit it is said: “ On the rule of law that every man’s deed shall be taken strongest against himself, and on what is laid down in Althan’s case (8 Coke, 148) generalis dauszda,” etc., “ it hath been insisted that general words in a release are to be taken strongest against the releasor, and are not to be qualified or restrained by any special recital. But herein the sure rule and distinction seems to be that where there are general words all alone in a deed of release they shall be taken more strongly against the releasor; but where there is a particular recital in a deed, and then general words follow, the general words shall be qualified by the particular recital.” (Bac. Abr., tit. Release, K.)

In 2 Roll. Abr. 409, it is said that if a man receives 4210 of another, and by his deed acknowledges the receipt thereof, and therefore releases, acquits, and discharges him of all actions, suits, debts, duties, and demands, by this release nothing is discharged but the 4210, and the action and demands thereof; for the last words have reference to the first, and are so limited by them.

In Jackson v. Stackhouse (1 Cow. 122) the release given in evidence by the defendant discharged the judgment obtained against the mortgagors for two years’ interest on the bond; it also contained general words: “in full of all debts, demands, judgments, executions, and accounts, of whatsoever nature, in law or equity.” Notwithstanding the extensive scope of this language, the court declared that it was settled that where there were general words alone in a deed of release they should be taken most strongly against the releasor; but where there was a particular recital, and then general words followed, the general words should be qualified by the particular recital. So, also, in Littlefield v. Winslow (19 Maine) 394), Shepley, J., in speaking on this subject, says: “Persons often use general language when speaking of the subject on which the mind is then employed. If another subject be presented to the mind in connection with it, the language usually gives some indication of it. And when it does not, if general language were not limited to the subject then under consideration, it would occasion mischiefs not only in the common business of life, but in the construction of contracts, and even in judicial proceedings. It ivas so clearly perceived that the language used should be considered as applicable to the subject of thought only, that it introduced the maxim, ‘ sensus verborum ex causa diceniis accipiendus est et secundum subjectum materiamd ” (S. P. Moore v. Magrath, Cowp. 9, per Lord Mansfield; Butcher v. Butcher, 4 Bos. & Pul. 113; Payler v. Homersham, 4 Maule & S. 425; Lyman v. Clark, 9 Mass. 237; McIntire v. Williamson, Edw. Ch. 38.)

It necessarily follows that the receipt furnishes no obstacle to the plaintiff’s asserting his rights in this suit. The judgment will be reversed and the cause remanded for further proceedings, to be had in conformity with this opinion.

Reversed and remanded.

The other judges concur.