Dunfee v. Terwilliger

• Court: U.S. Court of Appeals — Ninth Circuit
• Writing for the Court: GILBERT and RUDKIN, Circuit , and NETERER
• Citation: Dunfee v. Terwilliger, 15 F.2d 523 (9th Cir. 1926)
• Decision Date: 08 November 1926
• Docket Number: No. 4887.,4887.
• Parties: DUNFEE v. TERWILLIGER.

15 F.2d 523 (1926)

DUNFEE v. TERWILLIGER.

No. 4887.

Circuit Court of Appeals, Ninth Circuit.

November 8, 1926.

Augustus Tilden, of Ocean Beach, Cal., and John F. Kunz, of Reno, Nev., for appellant.

H. R. Cooke, of Reno, Nev. (Cooke & Stoddard, of Reno, Nev., on the brief), for appellee.

Before GILBERT and RUDKIN, Circuit Judges, and NETERER, District Judge.

GILBERT, Circuit Judge (after stating the facts as above).

The ordinary expectancy of a renewal of a lease is regarded in equity as a valuable interest, and, if one who stands in a fiduciary relation to a person entitled to such beneficial interest secures a renewal to himself, a court of equity will treat him as holding the new lease in trust for the persons entitled to the beneficial interest in the original lease. This rule is well settled, and is accepted in both English and American courts. Holt v. Holt, 1 Chan. Cas. 190; Phyfe v. Wardell, 5 Paige (N. Y.) 268, 28 Am. Dec. 430.

As applied to the present case, the rule amounts to this: The appellant herein may not secretly or clandestinely take a lease on the mining property to himself, at the expense of those who became associated with him under his agreement with the appellee; that is to say, he cannot secretly or inequitably obtain for himself a lease to which all of his associates were equally entitled. In Chittenden v. Witbeck, 50 Mich. 401, 15 N. W. 526. Judge Cooley expressed the principle here applicable: "But the pivotal fact on which all such cases turn is that there has been underhand and secret dealing by one of the partners in fraud of the other, whereby he has obtained a special advantage to himself during the continuance of the partnership, which fair dealing required that he should have taken for the benefit of the firm; and equity takes notice of the fraud and declares him trustee for the firm."

As applied to the facts in that case the court said it was not understood or expected "that one shall put his property and responsibility at stake upon the results of the business, and that the others shall share in the profits while escaping responsibility for the losses. But this is what in effect is demanded of this complainant. It is insisted that he shall take a lease, in which he will be sole lessee and solely responsible for all the contingencies of depreciation and loss, and that at the same time he shall account to another, who incurs no risk and no responsibility, for some share in the anticipated but altogether contingent profits."

In Marks v. Merrill Paper Mfg. Co. (C. C.) 188 F. 850, where a corporation was insolvent and doing a losing business, and its stockholders were unwilling to furnish additional capital, and a new corporation of certain of its stockholders purchased the company's equity in mortgaged property, pursuant to a plan whereby all of the stockholders of the old company might become stockholders of the new, it was held that the majority stockholders had not obtained any unfair advantage over the minority.

In Tygart v. Wilson, 39 App. Div. 58, 56 N. Y. S. 828, the court said: "It would be unreasonable to hold that, after the dissolution of a copartnership, or the fixing of a time when it is to be dissolved, neither member of such copartnership should be at liberty to lease the premises theretofore occupied by them for his own benefit, but could only take it for the joint benefit of those who were no longer to continue in the business. The sum and substance of the principle is that a partner shall not secretly or clandestinely take advantage of his position to better himself at the expense of his associates; that he shall not, as some cases express it, `go behind the back' of his copartner to obtain that, solely for himself, to which all of his associates are equally entitled."

In Green v. Hall (Tex. Com. App.) 228 S. W. 183, it was held that the general...