Davis v. Hoffman

• Court: Missouri Supreme Court
• Writing for the Court: Marshall
• Citation: Davis v. Hoffman, 167 Mo. 573, 67 S.W. 234 (Mo. 1902)
• Decision Date: 19 February 1902
• Parties: DAVIS et al. v. HOFFMAN.<SMALL><SUP>†</SUP></SMALL>

67 S.W. 234

167 Mo. 573

DAVIS et al. v. HOFFMAN.^†

Supreme Court of Missouri, Division No. 1.

February 19, 1902.

TRUSTEE — LIABILITY — PURCHASE OF LAND — SECRET PROFITS.

C. and J., partners, having a contract to sell land for D., they to have as commissions one-half of anything realized over a certain amount, agreed to sell the land to H. for $72,000. H. formed a syndicate, composed of himself, J., M., and plaintiffs, to buy it; H., J., and M. agreeing to share therein on the basis of a price of $72,000; the price, however, being represented to plaintiffs as $93,000. The agreement between C. and J. and D. in the meantime was rescinded, and D. agreed with J. to sell for $61,000. Deed was made to H., who was made trustee for the others. The difference between the $61,000 and $72,000 H. either paid to C., or secured to him by mortgage on the property, with knowledge of the facts. Held, that all right of C. and J. to share in the profits of sale for D. having been lost when their contract with him was rescinded, and J. entered into the agreement to form the syndicate, H. was liable as trustee to plaintiffs for all sums paid by them on the basis of a price greater than $61,000, though the secret profit had been divided with others.

Appeal from St. Louis circuit court; Horatio D. Wood, Judge.

Suit by George W. Davis and others against Samuel H. Hoffman. Defendant's motion for a new trial was denied, and plaintiffs' motion sustained. Defendant appeals. Reversed.

This is a bill in equity by George W. Davis, Hubert P. Taussig, John Low, and Alfred M. Baker for an accounting and recovery of profits alleged to have been made by defendant in a real estate transaction in East St. Louis, Ill. The circuit court rendered judgment for the plaintiffs for $16,211. Both parties excepted and each filed a motion for new trial; the plaintiffs claiming that the judgment should have been in their favor for $15,897.65, with interest from November 20, 1892; and the defendant claiming in his brief, but not in his motion for new trial, inter alia, that the judgment should have been against him for only $3,500, with interest. The circuit court overruled the plaintiffs' motion for a new trial, and sustained the defendant's motion for a new trial, assigning as ground for so doing "that the judgment is against the law, in including as damages against the defendant profits made by other associates, whereas it should have been for the profit made by himself only, to wit, the sum of thirty-five hundred dollars, with interest." This point is not made in the defendant's motion for a new trial, but that motion was based upon alleged errors in the admission and exclusion of evidence; that the judgment was against the evidence, the law, and the weight of the evidence; and that the judgment should have been for the defendant, instead of for the plaintiffs. The plaintiffs appealed from the order granting the new trial.

The case made below was this: On April 15, 1892, George Denison and J. S. Dobyns purchased from Lucie Beekin a tract of land just outside of East St. Louis, called "Beacon Heights," for $57,600, of which $10,000 was paid by them in cash, and the balance evidenced by notes secured by a deed of trust. Denison and Dobyns did not take the title in their own names, but had it conveyed to one Gunn, and he executed the notes and deed of trust. Afterwards Denison and Dobyns caused Gunn to execute a second mortgage on the land, securing a note for $28,800, which was made payable to Dobyns. Then they caused Gunn to execute a quitclaim deed to Denison, conveying to him the equity of redemption. Then Denison entered into a contract with C. O. and J. T. McCasland wherein it was agreed that they should sell the land, and after paying Mrs. Beekin the balance due her, of $47,600, with interest, and after paying Denison the $10,000 that had been paid Mrs. Beekin as the cash payment, with interest, whatever was left of the $28,800, represented by the second mortgage and all benefits arising from the sale of the equity of redemption, was to be divided between the McCaslands, on the one side, and Denison and Dobyns, on the other, in equal parts. This agreement was recorded August 5, 1892. The McCaslands agreed to sell the property to the defendant for $72,000. The defendant formed a syndicate to buy it, composed of himself, J. T. McCasland, George W. Davis, William H. Miltenberger, Hubert P. Taussig, who each agreed to take and pay for a sixth part thereof, and John Low and Alfred Baker, who each agreed to take and pay for a twelfth part thereof. The defendant represented to the syndicate that the price to be paid for the property was $93,000. The defendant was constituted the trustee to receive the amounts each member of the syndicate was to pay, and to purchase the property and take the title in his name as trustee. The $93,000 purchase price, by the terms of the syndicate agreement, was to be made up as follows: "$42,000 cash; assume an incumbrance now on the property, running one and two years, of $42,600, together with interest due thereon; and make a second mortgage of $8,400, due in sixty days." In point of fact the incumbrance then due on the property amounted, with accumulated interest, to $47,588. This agreement was signed November 9, 1892. In accordance with this arrangement and upon demand of defendant, Taussig paid first $300, and later $7,000, Davis paid $6,700, Baker paid $3,350, and Low paid $3,350, aggregating $21,000, which was collected from them upon the theory that $42,000 cash had to be paid, and that the defendant, J. T. McCasland, and W. H. Miltenberger would pay the other $21,000; that is, $7,000 each. In fact, none of these three paid a cent of the alleged $42,000 cash payment, nor was any such amount to be paid to Denison, Dobyns, and McCasland for the property, as will more fully appear hereinafter. There was, however, a syndicate within a syndicate, — a wheel within a wheel. On the 15th of October, 1892, the defendant, Miltenberger, and J. T. McCasland formed the inner circle, and agreed to buy the property for $72,000, and to share equally all the emoluments and profits of every nature arising therefrom. In the meantime the agreement between Denison, Dobyns, and McCasland was modified, and Denison and Dobyns agreed to sell the property for $61,204.70, made up of the balance due Mrs. Beekin, $47,588, the $10,000 cash paid by Denison and Dobyns, with six months' interest, amounting to $350, some expenses Denison and Dobyns had paid, amounting to $266.70, and $3,000 profit to Denison and Dobyns; aggregating $13,616.70 to Denison and Dobyns, and $47,588 to Mrs. Beekin. Thus McCasland was getting the property from Denison and Dobyns for $61,204.70, and was selling it to the inner syndicate, composed of himself, the defendant, and Miltenberger, for $72,000, and the inner syndicate was selling it to the outer syndicate, composed of they three and the plaintiffs, for $93,000! And all the time neither the defendant nor McCasland nor Miltenberger was paying a cent! Finally, after collecting the $21,000 from the plaintiffs, the defendant, acting as trustee, purchased the property. It was done in this way: McCasland released on the record the agreement of August 5, 1892, relating to dividing the profits arising from the $28,800 mortgage and from the sale of the equity of redemption; Denison and Dobyns released and canceled the mortgage for $28,800; Denison made a deed to Hoffman, the consideration being stated to be $93,000; and, with the $21,000 contributed by the plaintiffs, the defendant paid as follows: Lucie Beekin, note and interest (part of deferred purchase price), $5,175.00; Denison, $13,616.70; C. O. McCasland, $2,395.30. Thereafter, on the same day, November 16, 1892, the defendant made a note for $8,400 to the order of C. O. McCasland, and secured it by a second mortgage on the property. The note was discounted, and the inner syndicate (J. T. McCasland, Miltenberger, and the defendant...