O'Connor v. Burns, Potter & Co.

Citation36 N.W.2d 507,151 Neb. 9
Decision Date18 March 1949
Docket NumberNo. 32244.,32244.
CourtSupreme Court of Nebraska
PartiesO'CONNOR v. BURNS, POTTER & CO.

151 Neb. 9
36 N.W.2d 507

O'CONNOR
v.
BURNS, POTTER & CO.

No. 32244.

Supreme Court of Nebraska.

March 18, 1949.


Appeal from District Court, Douglas County; English, Judge.

Suit by Marion Tyler O'Connor against Burns, Potter & Company, a partnership, Burns, Potter & Company, a Nebraska corporation, and others, for an accounting of the acts and doings of defendants in relation to cash and securities delivered to defendants and for judgment for losses suffered by plaintiff resulting from alleged violation of agreement and duties and obligations owing to plaintiff by defendants growing out of relationship created by the agreement. From an adverse judgment, plaintiff appeals.

Affirmed.

[36 N.W.2d 509]


Syllabus by the Court.

1. A transaction for the sale or purchase of securities between a customer and a dealer in stocks and bonds is ordinarily that of buyer and seller.

2. Ordinarily a trust is not created where the transaction is as consistent with another relationship as with that of a trust.

3. A trust, when not qualified by the word ‘charitable,’ ‘resulting,’ or ‘constructive,’ is a fiduciary relationship with respect to property, subjecting the person by whom the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.

4. The manifestation of intention of the settlor is the external expression of his intention as distinguished from his undisclosed intention.

5. In construing an agreement to determine if it created a trust, regard will be had to its provisions as expressed and the interpretation given it by the parties as manifested by their acts and conduct in performing it.

6. Agency is formed with the thought of constant supervision and control by the principal. Trust is based on the idea of discretion in the trustee and guidance by the settlor or cestui only to limited extent and when expressly provided for.

7. The use of the terms ‘trust,’ ‘trustee,’ or ‘trust fund’ is not essential to the creation of an express trust where facts exist which establish that a trust actually existed. Likewise, the use of these terms does not create a trust where the evidence establishes that a trust was not intended.

8. The use of the words ‘held in trust’ in letters and receipts, and the use of symbols representing such words in the books and records of the party alleged to

[36 N.W.2d 510]

be a trustee, constitute evidence of a trust relation. They are not conclusive, however, and may be explained.

9. The use of the words ‘for safekeeping’ and ‘investment’ in an agreement is not controlling in determining whether the party charged is a trustee of an agent. They will be considered together with all the other facts and circumstances in determining that question.

10. Where a party to an agreement is designated as ‘manager’ of funds and securities, he will be considered an agent unless other evidence and circumstances are sufficient to show that a different relationship was intended.

11. The fact that an agreement is subject to cancellation on thirty-days notice by either party does not establish that the party charged was either a trustee or an agent. It is a circumstance which may be considered with all the other evidence in determining that fact.

12. The power to ‘invest or re-invest the funds from time to time and buy, sell or exchange any of my securities at such times and prices as your best judgment may dictate’ is consistent with both an agency and trust relation. It, also, may be considered with all the other evidence in the case in determining that question.

13. Where the purpose of the agreement is plainly stated, it will be given great weight in determining the intention of the parties when the agreement was made.

14. Where the agreement states that the purpose of the arrangement is to relieve the settlor of handling his investment affairs, it ordinarily evidences a principal and agent relation, although it is not conclusive.

15. Where the legal title and control of the property involved is not transferred, an essential element of a trust is lacking.

16. Where the evidence shows that the title to securities was transferred only for purposes of convenience, control remaining with the owner to be exercised when and if he desired, a trust relation is not ordinarily created.

17. The agreement before us, when viewed with all the evidence and circumstances shown by the evidence, is held to be a managerial agreement and not a trust.

18. The high degree of care required of a trustee cannot properly be imposed upon a managerial agent except by contract.

19. An agent is required to act in good faith and exercise reasonable skill, care, diligence, and judgment in acting for his principal.

20. Where an agent holds himself out as specially skilled in the undertaking assumed, he is required to exercise that degree of care and skill which would ordinarily be exercised at the time by one performing similar functions under like circumstances.

21. In the absence of specific instructions to the contrary, an agent is not required to change the nature of the securities in which his principal has invested, if he acted in good faith upon the information available to him.

22. In the absence of instructions to so do, a managerial agent is not required to diversify the securities of his principal when he follows the general pattern of investment pursued previously by such principal and acted in good faith upon available information.

23. An agent is not liable in the absence of bad faith for losses sustained by investing in open-end investment trust stocks, foreign bonds, utility, industrial and rail stocks, or local bonds where they were the subject of investment by the principal and no instructions to discontinue the purchase of such securities were given.

24. An economic depression does not excuse negligence or bad faith. It is a condition, however, which may be considered in determining whether or not a breach of duty and its consequent liability has been established.

[36 N.W.2d 511]


William Ritchie, of Omaha, for appellant.

Kennedy, Holland, DeLacy & Svoboda, of Omaha, for appellee.


Heard before SIMMONS, C. J., and PAINE, CARTER, MESSMORE, YEAGER, CHAPPELL, and WENKE, JJ.

CARTER, Justice.

This is a suit for an accounting of the acts and doings of the defendants in relation to the cash and securities delivered to them under an agreement and understanding between plaintiff and the defendants, and for a judgment for losses suffered by the plaintiff resulting from violation of the agreement and the duties and obligations owing to the plaintiff by the defendants growing out of the relationship created by such understanding and agreement, and inhering therein. The trial court found for the defendants and the plaintiff appeals.

The evidence shows that Burns, Potter & Company was a partnership prior to January 1, 1932, composed of Arthur C. Potter, Plummer P. Purdham, and Cedric Potter, which partnership continued in existence until the death of Cedric Potter in 1939. On January 1, 1932, Burns, Potter & Company was incorporated under the laws of Nebraska for the purpose of taking over all the assets and assuming all the liabilities of the partnership. Such transfer of assets and assumption of liability was perfected and the liability of the corporation for the obligations of the partnership is not in issue here. Defendants Arthur C. Potter and Plummer P. Purdham, the sole surviving members of the partnership, are and have been since January 1, 1932, the managing officers of the corporation. Both the partnership and the corporation carried on a stock and bond business in Omaha and the latter is presently engaged in said business.

The plaintiff prior to 1930, had engaged in the buying and selling of stocks and bonds as a matter of investment and reinvestment of assets inherited from her father. Plaintiff claims that she reposed great trust and confidence in the ability and integrity of Arthur C. Potter and made investments including the purchase and sale of stocks and bonds on the advice and at the suggestion of Potter. Because of this relationship she says she transacted all of her investment business since 1927 with Burns, Potter & Company.

On February 13, 1930, plaintiff turned over to Burns, Potter & Company all her securities and cash to be held by it for investment and reinvestment in accordance with the best judgment of said Burns, Potter & Company with the further understanding that the remuneration should be $1.00 per $1,000 face value per annum for such securities as were held by the defendant in addition to the usual profit in buying or selling securities from and to customers. Such understanding is evidenced by a certain letter-agreement which will be discussed in detail in a subsequent portion of the opinion.

Plaintiff asserts that she turned over to Burns, Potter & Company, pursuant to the aforesaid agreement, between February 13, 1930 and January 1, 1932, securities and cash of the value of $79,722.80. She alleges also that from January 1, 1932 to November 30, 1939, securities and cash delivered to or collected for her by Burns, Potter & Company amounted to $24,867.27. Interest and dividends collected on certain mortgages and on sold securities during this period amounted to $5,858.35. A tax refund of $184.37 is alleged to have been collected. Plaintiff claims that a fair, reasonable, and proper return to plaintiff from a proper investment of these funds is 3 1/2 percent per annum and that such earnings, so calculated, amount to $29,761.82. The total amount for which plaintiff claims that the defendants should account amounts to $140,394.61.

It is the contention of plaintiff that the defendant Burns, Potter & Company accepted

[36 N.W.2d 512]

and held plaintiff's funds and securities in trust and that the duties and obligations of Burns, Potter & Company to the plaintiff were those of a trustee; that Burns, Potter & Company handled...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT