Equitable Securities Company v. Sheppard

• Decision Date: 19 November 1900
• Court: Mississippi Supreme Court
• Parties: EQUITABLE SECURITIES COMPANY ET AL. v. ANN T. SHEPPARD

28 So. 842

78 Miss. 217

EQUITABLE SECURITIES COMPANY ET AL. v. ANN T. SHEPPARD

Supreme Court of Mississippi

November 19, 1900

October 1900

FROM the chancery court of Bolivar county HON. A. McC. KIMBROUGH Chancellor.

Ann T Sheppard, the appellee, was the complainant in the court below; the Equitable Securities Company and another, the appellants, were defendants there. From a decree of the court below in complainant's favor the defendants appealed to the supreme court. The facts are stated in the opinion of the court.

Reversed and cause remanded.

Miller Smith & Hirsh, for appellants.

Mr. Scott acted as the attorney of Mrs. Mason, as administratrix of Deason, in procuring the sale in 1883-4, and on the fifteenth day of May, 1884, the decree confirming the sale was made by the chancellor, and the deed was dated the sixteenth day of June, 1884. Mr. Scott's certificate to the abstract of title is dated the twenty-first day of January, 1891, and his final certificate is dated the second day of February, 1891, nearly seven years after the sale had been made to W. B. Mason.

While it is true that notice to an agent is notice to the principal, this general rule is subject to the following qualifications, to wit:

1. Notice to an agent, in order to affect the principal, must have been acquired by the agent during the transaction of the business for his principal, but, if the agent had prior to this acquired knowledge, the principal is affected by this knowledge only if it is present to the agent's mind during the transaction of his business. 1 Am. & Eng. Enc. L. (2d ed.), 1149, 1150.

2. When it is not the agent's duty to communicate such knowledge, or when it would be unlawful for him to do so-as, for example, when it has been acquired confidentially, as an attorney for a former client in a prior transaction-the reason of the rule ceases, and in such case the agent would not be expected to do that which would involve the betrayal of professional confidence, and his principal ought not to be bound by his agent's secret and confidential information. Ib., 1145.

The case of The Distilled Spirits, 11 Wallace (U.S.), 356, is a leading case upon the doctrine of notice. The court will find, on examination, that this case is cited in nearly every decision of every supreme court that has had under consideration since that time the question now discussed. In that case the court says: "So that in England the doctrine seems to be established that, if the agent, at the time of effecting a purchase, has knowledge of any prior lien, trust or fraud affecting the property, no matter when he acquired such knowledge, his principal is affected thereby. If he acquired the knowledge when he effected the purchase, no question can arise as to his having it at that time. If he acquired it previous to the purchase, the presumption that he still retains it, and has it present to his mind, will depend on the lapse of time and other circumstances. Knowledge communicated to the principal himself he is bound to recollect, but he is not bound by knowledge communicated to his agent unless it is present to the agent's mind at the time of effecting the purchase. Clear and satisfactory proof that it was so present seems to be the only restriction required by the English rule as it is now understood." Further along and on page 368 the court gives its adherence to this doctrine.

In the case of Fairfields Savings Bank v. Chase, 72 Me. 276, s.c. 39 Am. Rep., 319. the court says: "Upon this question the authorities disagree (that is to say, the question of the effect of previous notice to the agent). The negative of the question has been uniformly maintained in Pennsylvania and some of the other states. In the late case of Houseman v. Building Association, 81 Pa. St., 256, it was said 'that notice to an agent twenty-four hours before the relation commences is no more notice than twenty-four hours after it has ceased would be.' But we think, all things considered, the safer and better rule to be that the knowledge of the agent obtained prior to his employment as agent, will be implied or imputed notice to the principal under certain limitations and conditions, which are these: The knowledge must be present to the mind of the agent when acting for the principal; so fully in his mind that it could not have been at the time forgotten by him; the knowledge or notice must be of a matter so material to the transaction as to make it the agent's duty to communicate the fact to his principal, and the agent must himself have no personal interest in the matter which would lead him to conceal his knowledge from his principal, but must be at liberty to communicate it."

Later along in this opinion are cited a number of English and American cases, including the Distilled Spirits case, 11 Wallace, above cited. To this case there will be found an elaborate note, citing many decisions in England and in this country.

In the case of Constant v. University of Rochester, 111 N.Y. 604, s.c. 7 Am. St. Rep., 769, the court says: "From all these various cases it will be seen that the furthest that has been gone in the way of holding a principal chargeable with knowledge of facts communicated to his agent, where the notice was not received or the knowledge obtained in the very trasaction in question, has been to hold the principal chargeable upon clear proof that the knowledge which the agent once had, and which he had obtained in another transaction and at another time and for another principal, was present to his mind at the very time of the transaction in question. Upon a careful review of the testimony in this case, we have been unable to find any such proof."

The court, in reading this case of Constant v. University of Rochester, will see that Dean was the attorney for a man by the name of Constant, and had taken a mortgage to secure a loan for Constant, which mortgage had not been recorded, but was in his (Dean's) office, and that subsequently Dean took a mortgage in favor of the University of Rochester upon the same property, which was recorded prior to Constant's mortgage. The court says as to this: "There is no proof in the case showing that Dean made any pretense of remembering at the time of the execution of the mortgage to the university that eleven months before he had taken a mortgage on the same property for the plaintiff's decedent, which was not recorded. Taking into consideration the enormous amount of business done by Dean for Constant of this same general nature, and the length of time that elapsed since the taking of the Constant mortgage by him, and the fact that it was never taken from the office by the mortgagee, and that it remained there and was found in a pigeon hole appropriated to satisfied mortgages, and that on the very statement in question, upon which the learned judge evidently based his finding, it is alluded to as satisfied, all these facts would tend to show very strongly that Dean had no recollection whatever of the existence of the Constant mortgage as an existing lien at the time he took the mortgage to the university. But the burden is upon the plaintiff to prove, clearly and beyond question, that he did, and it is not upon the defendant to show that he did not have such recollection. And we think that there is a total lack of evidence in the case which would sustain the finding that Dean had the least recollection on the subject at the time of the execution of the university mortgage. Under such circumstances, we think it impossible to impute notice to the university or knowledge in regard to a fact which is not proved to have been possessed by its agent."

In that case only eleven months had elapsed, and the unrecorded mortgage was in Dean's office. In this case nearly seven years had elapsed, and there is not a shadow of proof of any kind to show that any recollection of the Mason sale and purchase was present in Mr. Scott's mind.

Moore & Clark, for appellee.

C. T. Mason, having married the administratrix of T. W. Deason, deceased, and executed bond, became co-administrator and was trustee of the estate. Code of 1871, 1106, 1122. Marriage with an administratrix confers the same duties upon the husband as are incumbent upon the wife. Edmundson v. Boberts, 1 How. (Miss.), 329; Wren v. Gayden, 1 How. (Miss.), 376; Wood v. Stafford, 50 Miss. 370. The record shows conclusively that Mason had been scheming continually from the time of his marriage to obtain the title to the lands left by Deason in himself or for his children. His correspondence with his attorney (attached to the deposition of Josephine Reuter) shows his bad faith conclusively. The executor or administrator cannot purchase at his own sale, directly or indirectly, nor make any arrangement with the purchaser whereby the trustee will obtain the benefit to himself, or do anything whatsoever that will conflict with his duties as trustee. McGowan v. McGowan, 48 Miss. 553; Chapman v. Sims, 53 Miss. 154; Hyde v. Warren, 46 Miss. 13; 2 Jones on Mort., 1886; Brockett v. Richardson, 61 Miss. 766; Woods v. Stafford, 50 Miss. 370; Wooldrige v. Campbell, 61 Miss. 634.

The doctrine is well established that, if the trust estate becomes vested in the original party whose conscience is bound, equity will hold him accountable as trustee, even though he buys from a bona fide purchaser without notice. Price v. Martin, 46 Miss. 489, and authorities there cited; 1 Story's Eq. Jur., 401, 409, 410. This doctrine is as well settled as that the trustee cannot deal for his own benefit. Therefore, when C. T. Mason repurchased the property from W. B. Mason, it became chargeable in his hands as a trust fund for the heirs, and he was chargeable with it as trustee for them. The trustee, whether he acts...