Elliott v. Landis Machine Company

• Decision Date: 12 July 1911
• Parties: EVA L. ELLIOTT et al., Appellants, v. LANDIS MACHINE COMPANY et al
• Court: Missouri Supreme Court

139 S.W. 356

236 Mo. 546

EVA L. ELLIOTT et al., Appellants, v. LANDIS MACHINE COMPANY et al

Supreme Court of Missouri, First Division

July 12, 1911

Rehearing Denied 236 Mo. 546 at 573.

Appeal from St. Louis City Circuit Court. -- Hon. Jesse A. McDonald Judge.

Reversed and remanded (with directions).

Bond & Bond for appellants.

(1) The 200 shares of stock in the Landis Wax Thread Sewing Machine Co. were issued to Mrs. Landis, as trustee for the benefit of certain small creditors and then for the benefit of her children. (2) The trust was executed by the transfer of the property, i. e., the delivery of the stock to Mrs. Landis the trustee. And being an executed trust, it needs no consideration to support it, and is irrevocable by the settlers. Leeper v. Taylor, 111 Mo. 312; 1 Perry on Trusts, sec. 98; 1 Breach on Trusts and Trustees, sec. 41; 28 Am. & Eng. Ency. Law (2 Ed.), 889. (3) The defendants are purchasers with notice. Notice to an agent obtained in the course of his employment is notice to the principal. Smith v. Boyd, 162 Mo. 157; Meier v. Blume, 80 Mo. 183; Hedrick v. Beeler, 110 Mo. 100; Fowler v. Randall, 99 Mo.App. 412; 2 Pomeroy's Eq. J. (2 Ed.), sec. 666; 2 Huffcutt on Agency, pp. 186-192. (4) A trustee has no power to sell the trust property, unless such power be conferred either by the instrument itself, or by an order of court. 28 Am. & Eng. Ency. Law (2 Ed.), 992 and 994. (5) One who purchases trust property from a trustee with notice of the trust, is charged with the same trust in respect to the property as the trustee from whom he purchases. 1 Perry on Trusts (5 Ed.), sec. 217, p. 314; 2 Pomeroy's Eq. J. (2 Ed.), sec. 1048; 1 Beach on Trusts and Trustees, sec. 98. (6) The acquisition of the 200 shares of stock standing in the name of Mrs. Landis, was absolutely essential to enable Fleming and Dobyne to carry out their contract with Moon and his associates, which said contract resulted in a personal profit to Fleming and Dobyne. Feld v. Invest. Co., 123 Mo. 603; 10 Cyc. 967. (7) Trustees occupy a position of trust and confidence, and cannot use the trust property, nor their relation to it, for their personal advantage, and all profits so realized belong in equity to the beneficiaries, to whom the trustee must account. 1 Perry on Trusts (5 Ed.), sec. 429; Simons v. Bank, 5 Rich. Eq. 270; Cruce v. Cruce, 81 Mo. 676; Ins. Co. v. Smith, 117 Mo. 261; Landis v. Saxton, 89 Mo. 375; Parker v. Straat, 39 Mo.App. 616. (8) The beneficiaries may follow the trust property, but the fact that the substantial property is more valuable than the original trust property does not affect the right of the cestui que trust to take it in place of the trust property. This is so, for otherwise, the trustee would reap a profit for himself out of the trust property. 28 Am. & Eng. Ency. Law (2 Ed.), 1110; also 1108-9-11. (9) The Statute of Limitations does not bar the suit of any of the plaintiffs in this action. It does not bar the suit of Eva Lee Elliott, Caroline Burton and Jeanette C. Weakley, because they were, and at all times since this action accrued have been, married women. R. S. 1899, sec. 4279; R. S. 1909, sec. 1894; Real Est. Co. v. Lindell, 142 Mo. 61. It does not bar the suit of Rachael Evans Bird because she did not attain the age of 21 years, until four years prior to the institution of this suit, to-wit, Sept. 29, 1903. R. S. 1899, sec. 4279; R. S. 1909, sec. 1894. Riesse v. Clarenbach, 61 Mo. 310. It does not bar the suit of Lila Landis because the ten year Statute of Limitations is the only one which could apply to this case, and she did not attain the age of 21 years until February 4, 1897, which was less than 10 years prior to the institution of this suit. R. S. 1899, sec. 4274; R. S. 1909, sec. 1888.

Holmes, Blair & Koerner for respondents.

The plaintiffs are barred by the Statute of Limitations. Cholmondely v. Clinton, 2 Merivale, 357; Elmendorf v. Taylor, 10 Wheat. 152; Hill on Trustees, 403; Lewin on Trusts, sec. 3, par. 14, chap. 11; Meeks v. Olpherts, 100 U.S. 564; Herndon v. Pratt, 6 Jones Eq. 327; Clayton v. Cagle, 97 N.C. 300; Wooldridge v. Bank, 1 Sneed, 297; Smile v. Biffle, 2 Barr, 52; Williams v. Otey, 8 Humph. 563; Wingfield v. Virgin, 51 Ga. 139; Brady v. Walters, 55 Ga. 25; Knorr v. Raymond, 73 Ga. 749; Molton v. Henderson, 62 Ala. 426; Walton v. Ketchum, 147 Mo. 209; Schiffman v. Smith, 154 Mo. 204; Simpson v. Erisner, 155 Mo. 157; Chase v. Cartwright, 53 Ark. 356; Wilson v. Trust Co., 102 Ky. 522.

GRAVES P. J. Valliant, J., absent.

OPINION

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 one thousand dollars, i. e., seven hundred dollars. 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 twenty 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, etc., I must say the stock coming to B. F. Landis's successors may be 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, Missouri, 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 $ 1000.

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 two hundred 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 forty thousand dollars. 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...