Davenport v. Burke

• Decision Date: 02 July 1917
• Citation: 30 Idaho 599,167 P. 481
• Parties: HORACE M. DAVENPORT, MILTON J. FLOHR, CHARLES W. BETTS, CHARLES F. ASP, CHARLES W. BETTS, Administrator of the Estate of BARRY N. HILLARD, Deceased, WILLIAM M. CLARK, THOMAS KEELY, BEN STANLEY REVETT, JOHN H. WOURMS and CONSOLIDATED INTERSTATE-CALAHAN MINING COMPANY, a Corporation, Respondents, v. PATRICK BURKE, Appellant
• Court: Idaho Supreme Court

167 P. 481

30 Idaho 599

HORACE M. DAVENPORT, MILTON J. FLOHR, CHARLES W. BETTS, CHARLES F. ASP, CHARLES W. BETTS, Administrator of the Estate of BARRY N. HILLARD, Deceased, WILLIAM M. CLARK, THOMAS KEELY, BEN STANLEY REVETT, JOHN H. WOURMS and CONSOLIDATED INTERSTATE-CALAHAN MINING COMPANY, a Corporation, Respondents, v. PATRICK BURKE, Appellant

Supreme Court of Idaho

July 2, 1917

CONFLICT IN EVIDENCE - PRINCIPAL AND AGENT - FRAUD BY AGENT-BENEFITS RETAINED BY PRINCIPAL-CONSTRUCTIVE TRUSTS.

1. In a suit in equity, as well as in an action at law, a finding of fact made by the trial judge, who has had the benefit of observing the demeanor of witnesses upon the stand and of listening to their testimony, will not be disturbed, because of conflict, if the evidence in support of the finding, if uncontradicted, is sufficient to sustain it.

2. The fraud of an agent is within the course of his employment where, in committing it, he is endeavoring to promote his principal's business within the scope of the actual or apparent authority conferred upon him for that purpose.

3. Acts of fraud by an agent, committed in the course of his employment, are binding on his principal, even though the principal did not in fact know of or authorize their commission.

4. A principal who retains benefits derived from the fraudulent conduct of his agent is chargeable with the instrumentality employed by the latter in carrying out the fraudulent purpose, and will not be permitted to disclaim responsibility and retain the fruits of the fraudulent transaction.

5. Constructive trusts are raised by equity for the purpose of working out right and justice, where there was no intention of the trustee to create such a relation. Where a party obtains the legal title to property by fraud, violation of confidence, or of a fiduciary relation, or in any other unconscientious manner, so that he cannot equitably retain it, because it really belongs to another, equity will impress a constructive trust upon it in favor of the one who in good conscience is entitled to it, and will recognize him as the beneficial owner.

[As to effect of principal's retention of benefit of loan procured by agent without authority, see notes in Ann.Cas 1913E, 1115; Ann.Cas. 1916A, 184]

APPEAL from the District Court of the First Judicial District, for Shoshone County. Hon. John M. Flynn, Presiding Judge.

Suit to quiet title and for injunction. Judgment for plaintiffs and cross-defendant. Reversed.

Judgment reversed with directions. Costs awarded to appellant. Petition for rehearing denied.

Fred L Tiffany and Robertson & Miller, for Appellant.

A principal cannot claim the fruits of fraud perpetrated by his agent, whether he knew of the fraud or not, and even when the agent acts within the scope of his authority and is instructed to make no false statements. (Nelson v. Title Trust Co., 52 Wash. 258, 100 P. 730; Griswold v Gebbie, 126 Pa. 353, 12 Am. St. 878, 17 A. 673; Salina Merc. Co. v. Stiefel, 82 Kan. 7-14, 107 P. 774; Freeman v. F. P. Harbaugh Co., 114 Minn. 283, 130 N.W. 1110; Dresher v. Becker, 88 Neb. 619, 130 N.W. 275; Reed v. Halloway (Tex. Civ.), 127 S.W. 1189; 20 Cyc. 85.)

Where a trustee, agent or employee cannot purchase in his behalf as against his principal or cestui que trust, he cannot purchase for a third person. (Michoud v. Girod, 4 How. (U.S.) 504, 11 L.Ed. 1077.)

James E. Gyde, Frank H. Graves and W. G. Graves, for Respondents.

In a suit of equity, as well as in an action at law, the findings of a trial judge will not be disturbed where there is a conflict in the evidence and the witnesses were produced in court. (Stuart v. Hauser, 9 Idaho 53, 72 P. 719; Morrow v. Matthew, 10 Idaho 423, 79 P. 196; Hufton v. Hufton, 25 Idaho 96, 136 P. 605; Cameron Lbr. Co. v. Stack-Gibbs Lbr. Co., 26 Idaho 626, 144 P. 1114; Darry v. Cox, 28 Idaho 519, 155 P. 660; Jensen v. Bumgarner, 28 Idaho 706, 156 P. 114; Wolf v. Eagleson, 29 Idaho 177, 157 P. 1122.)

When an agent undertakes to represent two principals, and their interests conflict in the subject matter of the agency, if both are equally innocent there is no rule of reason or law which permits one principal to be charged with all the consequences of the agent's double dealing, and the other to obtain all the benefits of what the agent did. ( Kennedy v. Green, 3 Mylne & K. 699, 40 Eng. Reprint, 399; 2 R. C. L. 965; Benedict v. Arnoux, 154 N.Y. 715, 49 N.E. 326; Melms v. Pabst Brg. Co., 93 Wis. 153, 57 Am. St. 899, 66 N.W. 518.)

Where there are equal equities, the first in order of time shall prevail. (1 Pomeroy, Eq. Jur., 3d ed., 413.) Where there is equal equity, the law must prevail. (1 Pomeroy Eq. Jur., 3d ed., 417.)

MORGAN, J. Budge, C. J., and Rice, J., concur.

OPINION

MORGAN, J.

This case has heretofore been before this court upon appeal from a judgment on the pleadings. (Davenport v. Burke, 27 Idaho 464, 149 P. 511.) That judgment was reversed and the cause remanded for further proceedings. Whereupon appellant, defendant in the court below, applied for and procured an order of the trial court permitting him to file a third amended answer and cross-complaint and to make the Consolidated Interstate-Calahan Mining Company, a corporation, hereinafter referred to as the mining company, a party. The answer and cross-complaint was filed and the plaintiffs and the mining company jointly answered the cross-complaint. Upon the issues framed by the complaint, the substance of which will be found in the opinion in Davenport v. Burke, supra, the third amended answer and cross-complaint and the answer to the cross-complaint, a trial was had before the court without a jury, which resulted in judgment for the plaintiffs and the mining company, from which the defendant has appealed.

In June, 1912, and prior thereto, Horace M. Davenport, Milton J. Flohr, Charles W. Betts, Charles F. Asp, William M. Clark, Thomas Keely, Ben Stanley Revett and the estate of Barry N. Hillard, deceased, of which Charles W. Betts was administrator, hereinafter referred to as the original owners, owned certain mining claims located in Shoshone county, title to which is the subject of this action.

Some time prior to June, 1912, negotiations were entered into between appellant and these original owners which resulted in a contract being executed, dated June 3, 1912, whereby appellant procured an option to purchase the mining claims for the sum of $ 160,000. This contract, for the purpose of convenience, was expressed in two papers. One providing for the payment of $ 115,000 to certain of the owners, the other of $ 45,000 to certain others, and by the terms thereof $ 16,000 was to be due and payable on or before December 3, 1912, $ 32,000 on or before April 3, 1913, $ 32,000 on or before October 3, 1913, and $ 80,000 on or before April 3, 1914. By the terms of the contract appellant was to be let into immediate possession of the property; however, it appears from the record, as a matter of fact, he was already in possession and had been for sometime prior to its execution. It was further provided that appellant should have the right to mine, extract and ship such ore as was encountered during the course of development work, not lying or contained within the boundaries of the underground works as the same existed at the time of the execution of the agreement, but that no right was given him to stope upon the ore bodies discovered, or thereafter to be discovered. Time was made the essence of the agreement, and it was provided that if appellant should fail to make the payments or any of them when due, the contract should be void and the amounts theretofore paid should be retained by the original owners and that appellant's right to possession of the property should cease.

On the 4th day of December, 1912, appellant having failed to fully make the first payment, the owners declared his rights forfeited and entered into a contract with respondent, John H. Wourms, similar in all important particulars to that theretofore entered into with appellant, except that the first payment of $ 16,000 was made immediately upon the signing of the agreement and the subsequent payments were to be made on or before the 3d day of August, 1913, the 3d day of December, 1913, and the 3d day of June, 1914, respectively. The first payment, as well as those subsequently falling due, was made by Wourms with money furnished him for that purpose by the mining company. The original owners conveyed title to the property by deed to Wourms and he, subsequently, deeded it to the mining company.

Appellant's assignments of error, which are numerous, will not be separately discussed. He makes two principal contentions, a consideration of which, we believe, will be decisive of this case:

(1) That it was orally agreed between himself and the original owners that the date of his first payment should be February 19, 1913, and that he was to be permitted to extract and ship ore from the mine other than in the course of development work; that through a fraud, perpetrated upon him by and on behalf of the original owners, the date of his first payment was expressed in the written contract as December 3, 1912, and he was prohibited from extracting and shipping any ore, except that necessary to be removed in legitimately exploring and developing the mine.

(2) That Wourms, who was his attorney, regularly employed to safeguard his interests under the contract, acting for and in collusion with the mining company, defrauded and misled him into allowing his rights to be forfeited and then, in hostility to him, purchased the property.

It may be said, with respect to appellant's contention first above stated, that the trial court found the facts against him and, while there is...