Fenton v. King Hill Irr. Dist.

• Court: Idaho Supreme Court
• Writing for the Court: Holden, Justice.
• Citation: Fenton v. King Hill Irr. Dist., 67 Idaho 456, 186 P.2d 477 (Idaho 1947)
• Decision Date: 16 October 1947
• Docket Number: 7282
• Parties: FENTON et al. v. KING HILL IRR. DIST. et al

186 P.2d 477

67 Idaho 456

FENTON et al. v. KING HILL IRR. DIST. et al

No. 7282

Supreme Court of Idaho

October 16, 1947

Rehearing Denied Dec. 4, 1947.

Rehearing Denied December 4, 1947.

Appeal from District Court, Third Judicial District, Elmore County Charles F. Koelsch, Judge.

Affirmed.

W. H. Langroise, of Boise, for appellant Fenton.

A payment or tender of payment to a constructive trustee of amounts advanced by him for the trust property is a condition precedent to a Court's jurisdiction to declare the existence of a trust. Bechtel v. Bechtel, 162 Or. 211, 91 P.2d 529; Haime v. De Beaulieu, Cal.Sup., 122 P.2d 517.

It is error for a court to submit to a jury or attempt to determine an issue not raised by the pleadings. Miller v. Prout, 33 Idaho 709, 197 P. 1023; Angel v. Mellen, 48 Idaho 750, 285 P. 461; Nielson v. Garrett, 55 Idaho 240, 43 P.2d 380; 15 R.C.L. 604.

If a court calls a jury to answer special interrogatories in a mandamus action, the questions to be submitted must be stated in the order for trial. I.C.A. § 13-307.

A mere preponderance of the evidence is not sufficient to support a constructive trust. It must be clear and convincing before a court will enter a decree that a trust exists. Dunn v. Dunn, 59 Idaho 473, 83 P.2d 471; Rice v. Rigley, 7 Idaho 115, 61 P. 290.

Maurice H. Greene, of Boise, for appellants Buell and Fletcher.

A constructive trust can only arise where there is a confidential relationship between the parties and a subsequent abuse of that relationship by one of the parties to the injury of the other. Hanger v. Hess, 49 Idaho 325, 288 P. 160; 3 Pomeroy's Equity Jurisprudence, 3d Ed., Sec. 1053; Steinmetz v. Kern, 375 Ill. 616, 32 N.E.2d 151; Teachey v. Gurley, 214 N.C. 288, 199 S.E. 83; 26 R.C.L. 1232.

Persons who have no notice, actual or constructive, of the existence of the trust, take the title to trust property free of the trust. 4 Pomeroy's Equity Juris., 5th Ed., Sec. 1048; 65 C.J. 487; Smith v. Wallace Nat. Bank, 27 Idaho 441, 150 P. 21; 26 R.C.L., sec. 148, p. 1296; Montana-Wyoming Ass'n of Credit Men v. Commercial Nat. Bank, 80 Mont. 174, 259 P. 1060; MacDermot v. Hayes, 175 Cal. 95, 170 P. 616.

The evidence to establish a constructive trust must be clear and convincing. Dunn v. Dunn, 59 Idaho 473, 83 P.2d 471; Rice v. Rigley, 7 Idaho 115, 61 P. 290; McGuire v. Hansen, 48 Idaho 34, 279 P. 413; Rubin v. Midlinsky, 321 Ill. 436, 152 N.E. 217.

Eugene H. Anderson and Charles F. Reddoch, both of Boise, for respondents and cross-appellants.

Where a person in a fiduciary relation to another acquires property, and the acquisition or retention of the property is in violation of his duty as fiduciary, he holds it upon a constructive trust for the other. Fiduciary relations include among others the relation of principal and agent. Restatement of Restitution, sec. 190, page 780; Restatement of Agency, sec. 403, page 922; Scott on Trusts, secs. 495 and 499; Bogert on Trusts, secs. 481, 482, and 487; Am.Jur., Agency, Vol. 2, sec. 261; 3 C.J.S., Agency, § 140, page 12; McCarty v. Palmer, 110 Fla. 443, 148 So. 867; 3 C.J.S., Agency, § 144c, page 24.

If the trustee in breach of trust transfers trust property to a person who takes with notice of the breach of trust, the transferee does not hold the property free of the trust, and the interests of the beneficiaries are not cut off, although the transferee paid value for the transfer. Schofield v. Spencer, 43 Idaho 243, 253 P. 833; Scott on Trusts, Sec. 288; Restatement of Trusts, Sec. 288, page 878; Scott on Trusts, Sec. 291.

Findings of a jury in an equity case are only advisory, and may be adopted, or amended and adopted, as the Court's findings, or the Court may make its findings independent of the jury's findings. Johnson v. Nichels, 48 Idaho 654, 284 P. 840.

Error cannot be predicated upon the giving of an instruction in an equity case, where the jury acts in an advisory capacity. Hill v. Porter, 38 Idaho 574, 223 P. 538; Eastern Idaho L. & T. Co. v. Blomberg, 62 Idaho 497, 113 P.2d 406.

Holden, Justice. Budge, C. J., Miller, J., and Porter, D. J., concur. Sutton, District Judge, concurring in part and dissenting in part.

OPINION

Holden, Justice.

The King Hill Irrigation District was organized October 15, 1920, with its office at King Hill in Elmore county, Idaho. Ever since its organization it has operated and still operates irrigation canals, ditches and other structures designed for the irrigation of lands situate in Gooding, Elmore, Twin Falls and Owyhee counties in the state of Idaho. Some years after its organization judgments were rendered against the district as follows, to wit:

August 22, 1936, Barney Eckstein recovered a judgment against the District in the District Court of Elmore County, for the sum of $ 7,820.10.

April 21, 1937, the Glenns Ferry Bank, Ltd., recovered a judgment in the District Court of Elmore County against the District for the sum of $ 54,091.96.

June 10, 1940, Eckstein assigned his judgment to appellant Fred R. Fenton, for which assignment Fenton paid Eckstein the sum of $ 1,537.27.

July 10, 1940, the Glenns Ferry Bank assigned 32.529 per cent of its judgment to appellant Fenton, for which Fenton paid the sum of $ 3,085.48.

August 30, 1940, the Glenns Ferry Bank assigned 67.471 per cent of its judgment to appellants Buell and Fletcher for which they paid the sum of $ 13,000.

October 15, 1940, a duly verified petition for an alternative writ of mandate against the District and its officers and directors was filed in the District Court of Elmore County, and, on the same day, an alternative writ was issued and later served upon the officers and directors. The purpose of the petition, stated broadly, was to compel the District to levy assessments against the lands within the District sufficient to pay the above-mentioned judgments, principal and interest, and to compel the District to pay the assessments collected over to the petitioners. The alternative writ commanded that the District make the levies and pay the judgments, principal and interest, or show cause, at a time therein fixed, why it had not done so.

April 5, 1941, the defendants filed a duly verified answer and return. November 17, 1941, the defendants filed an amended answer and return to the above-mentioned petition.

The cause was tried commencing November 17, 1941, by the court sitting with a jury, on the fifth and sixth defenses pleaded by respondents, the sixth defense being later withdrawn from the consideration of the jury. The fifth defense alleged, among other things, in substance: That on or about June 1, 1937, appellant Fred R. Fenton was employed by the defendant District as its confidential fiscal agent for the purpose of liquidating the indebtedness of the District, including the judgments above mentioned; that Fenton, as such fiscal agent, was trusted with full information relative to the indebtedness of the District and the negotiations for the compromise settlement of the judgments; that the officers of the district also negotiated for a compromise of the judgments with the holders thereof; that the negotiations resulted in an agreement for the compromise of the judgments; that Fenton was informed of such compromise agreement and the amounts compromised for; that the amount agreed to be paid for the Eckstein judgment was $ 1,500 or thereabouts, and for the Glenns Ferry Bank judgment $ 12,000 or thereabouts; that Fenton, as such fiscal agent, thereupon purchased the Eckstein judgment for and in behalf of the District for the sum of $ 1,537.27, but that he took the assignment of the judgment in his own name; that Fenton also, as such fiscal agent, and while employed in such fiduciary capacity by the District, purchased 32 1/2 per cent of the Glenns Ferry Bank judgment for the approximate sum of $ 3,085.48, and induced appellants Buell and Fletcher to purchase the remaining 67 1/2 per cent of the bank judgment for approximately $ 12,000, that said purchase was made for and in behalf of the District, but that Fenton took the assignment for said 32 1/2 per cent of said judgment in his own name, and that the remaining 67 1/2 per cent of said judgment was placed in the names of appellants Buell and Fletcher.

The court submitted six interrogatories to the jury, to which the jury made the following answers, to wit:

"Question No. 1: Was Fred Fenton, on or about the 1st day of June, 1937, employed by the King Hill Irrigation District, as its fiscal agent, for the purpose of negotiating for and in behalf of said King Hill Irrigation District, a compromise settlement with the holders of the judgments against said District? Answer: Yes.

"Question No. 2: Did the said Fred R. Fenton pursuant to his said appointment, take up negotiations with the holders of the said judgments for settlement, liquidation and compromise of said judgments? Answer: Yes.

"Question No. 3: Did the officers of said District, also, at or about or during the same time, enter upon such negotiations? Answer: Yes.

"Question No. 4: Did the said negotiations, either those by the officers or those by said Fred R. Fenton, or by reason of both, result in agreements on the part of said judgment holders to accept in full payment of said judgments, the following amounts, to-wit:

For the Barney Eckstein judgment, the sum of $ 1,537.27 or thereabouts; and for the Glenns Ferry Bank judgment the sum of approximately $ 12,000.00? Answer: The negotiations of Fenton resulted in such agreement.

"Question No. 5: Did Fred R. Fenton gain knowledge while in the employ of the King Hill Irrigation District as its fiscal agent that the judgments against the District could probably be obtained or bought for reduced amounts, and did he by...