Haskell v. Patterson

• Decision Date: 23 June 1924
• Docket Number: 63
• Parties: HASKELL v. PATTERSON
• Court: Arkansas Supreme Court

262 S.W. 1002

165 Ark. 65

HASKELL v. PATTERSON

No. 63

Supreme Court of Arkansas

June 23, 1924

Appeal from Columbia Chancery Court, First Division; J. Y. Stevens Chancellor; affirmed.

Decree affirmed.

Harnwell & Young, Gibson & Hull, Henry Stevens, and McKay & Smith, for appellants.

Appellees seek to establish an implied trust, or resulting trust, under the second type, or general classification defined by Mr Pomeroy, 3 Pomeroy, Equity Jurisprudence, § 1031, and as defined by this court in United States Fid. &amp Guar. Co. v. Smith, 103 Ark. 149; but in this we think they have wholly failed. They have failed to prove that any part of the trust funds placed in Haskell's hands for investment in property of this character were invested in the properties in litigation, and the chancery court so found. For the rule applicable to resulting trusts of the type in question, see 3 Pomeroy, Eq. Jur., § 1037. The determination of the question whether a resulting trust arises depends entirely upon the intention of the parties. 101 Ark. 451. Before a resulting trust could arise in this case, Haskell must have obtained the title to this property in violation of some duty, express or implied, that he owed the syndicate; in other words, must have been guilty of fraud, either actual or constructive, before he would be regarded as holding the legal title to the property for the benefit of the syndicate. 3 Pomeroy, Eq. Jur. § 1044. It appears that the chancellor decreed title to appellees in the Wepfer and Columbia Oil & Gas Company acreage on the theory that Haskell was an agent of the syndicate to purchase acreage, and that this alone prevented him from acquiring acreage in his individual capacity. When the reason for the rule, as stated by Judge Sanborn in Trice v Comstock, 121 F. 620, ceases, the rule is impotent, and in any case the rule that an agent cannot purchase for himself is limited to the scope of his agency. Here the agency of the trustees was limited to the expenditure of funds delivered in securing a geological survey and purchasing oil and gas leases, and was not an unlimited agency to purchase. 2 C. J. 705, 59 N.Y.S. 410. No funds of the syndicate were used in the purchase of this property. If any right ever existed in appellees to impress this property with a trust, they were called upon to assert that right upon receipt of notice of the purchase thereof by Haskell for himself, and they will not be permitted to stand by in silence, until the property has largely enhanced in value by the expenditures of Haskell on his own account. They must have proceeded at least in a reasonable time to assert their adverse claim. 33 Colo. 500; 153 Ark. 432; 10 R. C. L. 964; 125 Ark. 146; 147 Ark. 555; 10 R. C. L. 769; 9 Am. Dec. 500; 91 U.S. 587; 81 N.E. 614; 14 Ky. L. Rep. 606; 75 N.J.Eq. 90.

Stone, Moon & Stewart, Noffsinger & Harris, and Joe Joiner, for appellees.

1. The development syndicate agreement created an association which has some of the elements of trust, but more of the elements of a partnership. It is not necessary to determine the precise nature of the association for which Haskell acted, since the same rules must be applied, whether he was a trustee or a partner and managing agent. If it is desirable to determine the precise nature of the association, see Sears' Trust Estates as Business Companies, pp. 91-92 and 142-152; Wrightington on Unincorporated Associations and Business Trusts, pp. 38, 45, 71, 208, 211. Here the rights of third parties not being involved, it is not necessary to determine whether the association is a partnership or a trust. 233 Mass. 321, 123 N.E. 665; 241 S.W. 122, 125; Wrightington, Unincorporated Associations, etc., 109, § 21. The same principles apply, whether partners or not. 57 Mo. 531, 545; 1 Story, Equity Jur., § 468.

2. While acting as trustee for the syndicate, Haskell could not carry on for himself any business of the same nature or in competition with that of the association, and this rule must prevail even if the court finds that the trustee used his own funds in the transaction in question. The chancellor therefore properly held that all the oil and gas leases acquired by the trustee in Southern Arkansas belonged to the syndicate. 20 R. C. L. 879, 881; 21 R. C. L. 825; Amer. Ann. Cases, 1914D, 435; 4 How. 503, 11 Law. ed., 1076, 1099; 57 Mo. 531; 150 U.S. 524, 37 Law. ed., 1175; 92 A. 1033; 1 Wallace, 518, 17 Law. ed. 646; 5 Mackay (D. C.) 304; Ann. Cases, 1914D, 434; 201 S.W. 493; 101 F. 334; 1 Bates, Partnership, § 303; 43 Am. Rep. 242; 78 P. 550; 21 N.E. 193; 13 Ark. 173; 95 Ark. 408; 88 Ark. 373; 63 Ark. 516; 125 Ark. 146, 188 S.W. 571.

3. A trustee or managing agent cannot unite his personal and representative characters in the same transaction, and this Haskell attempted to do in the acquisition of the Wepfel and Columbia Oil & Gas leases. 78 P. 550; 66 F. 104; 8 Mo.App. 408.

4. As trustee or agent of the syndicate, Haskell was bound to keep his own property and business separate from the property and affairs of the syndicate, and if, in fact, any of his own funds were used in the acquisition of the properties in controversy, such funds were so mixed in the affairs and with the property of the syndicate as to make the whole the property of the syndicate. No change in the form of trust property can divest it of the trust. Dunn, Business Trusts, § 47, p. 80; 57 Mo. 531, 546.

5. For the following additional reasons Haskell could not, while trustee or managing agent, acquire, individually, any interest in the property in controversy: (1) He did not notify the beneficiaries or certificate holders of his desire or intention to acquire such separate interest; (2) he did not inform them fully or fairly of all the material facts and circumstances; and (3) he wholly failed to secure the consent or acquiescence of the beneficiaries. 48 N.E. 128, and authorities cited below on the question of estoppel or laches.

6. The three trustees, Haskell, Evans and Miller, constituted, as it were, one collective trustee, and, as such, were under the obligation to perform their duties, even in purchases and sales, in their joint capacity. This in itself affords additional and conclusive inhibition against Haskell's effort to "allot" to the syndicate only a small interest in the valuable properties in controversy, while taking for himself and associates a large interest. Dunn's Business Trusts, 172, § 97; Sears' Trust Estates, etc., 248, § 248; Wrightington on Unincorporated Associations, etc., 247, § 46; 90 N.E. 278; 51 S.E. 439; 120 N.E. 487; 1 Perry on Trusts, 6th ed., § 411; 9 Fletcher, Cyclopedia Corporations, 10498, § 6093.

7. Appellants cannot successfully invoke the doctrine of estoppel and laches. The beneficiaries did not acquiesce in Hackell's breach of trust, and before estoppel could be invoked proof must have been made that all cestuis que trust, after being informed in the premises, fully acquiesced and concurred. 48 N.E. 128, 132; 126 Ark. 72, 189 S.W. 850; 87 A. 230, 234; 110 F. 322, 329; 10 Am. Law Rep. Ann. 378, 379; 10 R. C. L. 695, 697, 762; 153 Ark. 432, 243 S.W. 811.

OPINION

WOOD, J.

The plaintiffs below, appellees here, as trustees of the Arkansas Development Syndicate (hereafter called syndicate) instituted this action in the chancery court of Columbia County, Arkansas, against the defendants below, appellants here, to have an alleged fraudulent conveyance set aside and a trust declared in an undivided interest in oil and gas leases of land in Columbia and Nevada counties, Arkansas, which leases were taken in the name of M. G. Haskell, and the lands are described in the complaint.

The plaintiffs alleged that M. G. Haskell and O. M. Evans were first named as trustees of the syndicate in a trust instrument dated May 31, 1921, and of August 8, 1921, which is attached as an exhibit to the complaint. The syndicate first had a capital of $ 7,500, divided into units or shares of the par value of $ 100 each, but which was afterwards increased on the 8th of August, 1921, to $ 50,000, and Franklin Miller was also named as one of the trustees. It is alleged that the moneys obtained by the sale of the certificates of interest were used by the trustees for the purpose of buying oil and gas mining leases and oil and gas mining properties in the State of Arkansas, and for developing the same for the benefit of the members of the trust; that Haskell procured the leases in his own name, and, in violation of the terms of the trust instrument, with the funds of the syndicate, and was claiming the property as his own and fraudulently using and disposing of the same. The plaintiffs further alleged that the defendants, as trustees, failed to keep accounts and to make reports and to perform their duties required of them under the trust instrument; that Haskell fraudulently assigned and conveyed property belonging to the syndicate to Fred L. McDaniels, trustee, to hold for the use and benefit of Lucy Haskell, wife of M. G. Haskell. They prayed that a receiver be appointed to take charge of the trust and manage the properties for the benefit of the syndicate, and that the defendants be enjoined from disposing of the properties; that the defendants, Haskell, Evans, and Miller, be required to give a full and complete account of all their doings, and that the title to the properties be confirmed and quieted in the plaintiffs as trustees for the syndicate.

The defendants answered and admitted the execution of the trust instrument, and that Haskell was named as one of the trustees. They also admitted that Haskell obtained the properties described in the complaint in his own name, but denied that he purchased the same for the syndicate or with funds of the syndicate. They denied that, in...