Elliott v. Landis Mach. Co.

• Decision Date: 31 March 1911
• Citation: 139 S.W. 356,236 Mo. 546
• Parties: ELLIOTT et al. v. LANDIS MACH. CO. et al.
• Court: Missouri Supreme Court

139 S.W. 356

236 Mo. 546

ELLIOTT et al. v. LANDIS MACH. CO. et al.

Supreme Court of Missouri, Division No. 1.

March 31, 1911.

On Motion for Rehearing July 6, 1911.

Respondents' Motion to Modify Denied July 12, 1911.

1. LIMITATION OF ACTIONS (§ 39) — LIMITATION APPLICABLE — ACTIONS NOT OTHERWISE PROVIDED FOR — ACTIONS BY CESTUI QUE TRUST.

An action by a cestui que trust against a trustee ex maleficio is within Rev. St. 1909, § 1888, providing that actions for relief not otherwise provided for shall be commenced within 10 years.

2. LIMITATION OF ACTIONS (§§ 72, 73) — ACCRUAL OF CAUSE OF ACTION — DISABILITIES — INFANCY — COVERTURE.

Under Rev. St. 1909, § 1894, providing that, if one entitled to sue be at the time of the accrual of the cause of action an infant or a married woman, such person may bring the action within the time limited after the removal of the disability, a cestui que trust, who is an infant or a married woman when the cause of action accrued, has 10 years after the removal of the disability within which to sue.

3. TRUSTS (§ 95) — TAKING TITLE TO PROPERTY SUBJECT TO TRUST — "TRUSTEE EX MALEFICIO."

One who knowingly takes title to property subject to a trust is a trustee ex maleficio.

4. LIMITATION OF ACTIONS (§ 102) — ACTIONS BY CESTUI QUE TRUST — CONSTRUCTIVE TRUST.

Where a trustee without power of sale sold trust property and applied the proceeds to his own use, and the purchaser knew of the character of the trust and dealt with the trustee in an attempt to acquire the property freed from the trust, he perpetrated a legal fraud on the beneficiaries, who might sue him to impress the property in his hands with a trust, though the trustee was barred by limitations.

5. FRAUDULENT CONVEYANCES (§ 172) — RIGHT OF GRANTOR TO RECOVER PROPERTY.

A grantor, conveying property for a fraudulent purpose, may not plead his fraudulent act in an action to recover the property from the grantee.

6. LIMITATION OF ACTIONS (§ 102) — TRUSTS — ENFORCEMENT.

The statute of limitations does not run in favor of a trustee against the beneficiaries.

7. TRUSTS (§ 356) — FOLLOWING TRUST PROPERTY — PURCHASERS — TRUSTEE EX MALEFICIO.

A patentee conveyed his patent to a trustee to secure certain loans to him and for the benefit of his heirs. Third persons organized a corporation to operate under the patent, and they gave $20,000 in stock for it with knowledge of the fact that the patent belonged to the heirs of the deceased patentee. The third persons organized a second corporation, and in place of the stock first given for the patent, which they bought from the trustee by misrepresenting the value, they issued stock in the new corporation therefor. Held, that the stock first issued became impressed with a trust in the hands of the third persons, and the beneficiaries could follow the trust into the stock issued by the new corporation and recover their interest, on the theory that the third persons were trustees ex maleficio.

On Motion for Rehearing.

8. TRUSTS (§ 356) — RIGHTS OF BENEFICIARIES — FOLLOWING FUNDS — TRUSTEE EX MALEFICIO.

Where property in trust for five children and the widow of the deceased owner was acquired by third persons with knowledge of the trust, and they converted the property into other property, the children were entitled to recover five-sixths of the latter property together with any profits paid thereon, together with interest on such profits from the date of their payment to the third persons, subject to an allowance to the third persons of the amount paid by them for the property which was used to discharge a prior lien thereon.

Appeal from St. Louis Circuit Court; Jesse A. McDonald, Judge.

Action by Eva L. Elliott and others against the Landis Machine Company and others. From a judgment for defendants, plaintiffs appeal. Reversed and remanded, with directions.

Bond & Bond, for appellants. Holmes, Blair & Koerner, for respondents.

GRAVES, P. J.

Plaintiffs state that their suit is one in equity to declare a trust and to compel an accounting. For brevity of statement, pleading and proof may best be commingled. Plaintiffs are children and heirs at law of Benjamin F. Landis, deceased. Landis was an inventor, and possessed with the idea that there could and should be a sewing machine in which could be used waxed thread, such as is used in the manufacture of harness and other leather goods. To this end he bent his energies. He obtained some patents along this line. In doing so he borrowed some money from one of his daughters, Eva Lee Elliott, and one Thomas W. Evans. The whole sum was less than $1,000, i. e., $700. In 1886 Mr. Landis died. Thereafter defendants Fleming and Dobyne, being desirous of using the Landis patents, sought to organize and did organize a corporation under the laws of the state of Illinois, known as the "Landis Wax Thread Sewing Machine Company." It should be stated here that prior to his death Landis conveyed his patents to one Charles A. Taylor as trustee. The purpose of this instrument was to secure the debts aforesaid. When Fleming and Dobyne concluded to organize the corporation above named, they set about to procure the title to the Landis patents. They were advised by W. K. James, their agent and attorney, that the legal title was in Taylor, and through him and Mrs. Elliott and Mr. Evans the title could be perfected and procured. To get these patents Fleming and Dobyne agreed to give one-fifth or 20 per cent. of the capital stock of the corporation. This one-fifth amounted to 200 shares. The whole negotiations were had through their agent and attorney, Judge James of St. Joseph. Mrs. Landis and others of the family lived in St. Joseph, and Fleming and Dobyne lived in Chicago. Judge James had to deal with Mrs. Landis, the widow, as well as Mrs. Elliott and Mr. Evans, the creditors. On January 9, 1891, he wrote Fleming and Dobyne, his clients, thus: "Answering yours of the 7th in re incorporation of Landis Wax Thread Sewing Machine Company issuing of stock, &c. I must say the stock coming to B. F. Landis' successors may be all issued to Kate Landis who will transfer it as collateral security for what is due to Mr. Evans and Mrs. Elliott. After Payt. she Mrs. L. will hold it for all her children." Taylor, the trustee, conveyed to Mrs. Elliott and Mr. Evans, and they in turn conveyed to the corporation aforesaid. The stock was issued to Mrs. Kate Landis, the widow. The corporation never got thoroughly upon its feet, at least it failed to make a success of marketing a machine built upon the patented ideas of Mr. Landis. In 1895 Fleming and Dobyne conceived the idea of organizing another corporation in Missouri under the same name. They had succeeded in interesting J. C. Moon, C. H. Brown, and C. R. Crawford of St. Louis, Mo., in such corporation. These parties, however, demanded that Fleming and Dobyne procure all the stock of the Illinois corporation, and then surrender or cancel its charter. When this was done, Moon and his friends, Brown and Crawford, were to furnish $50,000 in cash for a working capital of the new corporation, to be repaid out of the earnings of the corporation. The stock in the new corporation was to be equally divided between Fleming and Dobyne and Moon and his associates. As a matter of fact, Fleming and Dobyne each got 250 shares of stock in the new corporation, J. C. Moon, 350 shares, C. H. Brown, 83 shares, and C. R. Crawford, 67 shares. Before the corporation could be organized, Fleming and Dobyne had to procure the outstanding stock of Mrs. Landis in the Illinois corporation. It is averred, and the evidence tends to show, that Fleming and Dobyne knew just how and in what capacity Mrs. Landis held this stock. That with such knowledge, they, by representing to her that the stock was worth but little, and withholding from her the fact that it was necessary to have this stock in order to enable them to organize the new corporation, purchased such stock for the price and sum of $1,000. It is charged that by reason of these facts Fleming and Dobyne took such stock charged with a trust; that their 500 shares in the new corporation was the outgrowth and representation of the stock in the old corporation; that the 200 shares held in trust for plaintiffs, being one-fifth of the stock in the old corporation, purchased and paid for one-fifth, or 100 shares of stock in the new company, as held by Fleming and Dobyne; that said Fleming and Dobyne held such 100 shares in trust for plaintiffs, and that they were not only entitled thereto, but also to the dividends realized thereon, amounting to more than $40,000. As to these profits, they asked for an accounting.

The answer made by defendants can be thus outlined: Taking the answer by paragraphs, we find: (1) A specific denial that the Landis Machine Company is the successor of the Landis Wax Thread Sewing Machine Company, and further a specific denial that the former company assumed any obligations whatever of the latter. (2) An admission that the plaintiffs are the sole surviving children of Benjamin F. Landis, but a further averment that they are not the sole heirs, inasmuch as the widow was yet living. (3) An admission of the death of Benjamin F. Landis in St. Joseph, Mo., in August, 1886, and further, that he left no property, and that there has been no administrator of the estate; also, that there are now no debts. (4) An admission that Benjamin F. Landis was the inventor of the various inventions set out in the petition, and that letters patent were duly issued to him therefor. (5) An admission that Benjamin F. Landis executed the instruments of conveyance to Taylor, and that Taylor conveyed to Thomas W. Evans and Eva Lee Landis, and that the effect of such conveyance was to vest a fee-simple title to said letters patent and applications to the said Thomas W. Evans and Eva Lee Landis, now Eva Lee Elliott. (6) An admission that Fleming and Dobyne did organize the original company in...