Kite v. Eckley

• Decision Date: 30 November 1929
• Docket Number: 4926
• Citation: 48 Idaho 454,282 P. 868
• Parties: J. L. KITE, Respondent, v. W. L. ECKLEY and J. L. HODGIN, Administrator of the Estate of W. E. ECKLEY, Appellants
• Court: Idaho Supreme Court

282 P. 868

48 Idaho 454

J. L. KITE, Respondent, v. W. L. ECKLEY and J. L. HODGIN, Administrator of the Estate of W. E. ECKLEY, Appellants

No. 4926

Supreme Court of Idaho

November 30, 1929

TRUSTS-EXPRESS TRUSTS-CREATION OF-PAROL AGREEMENT TO PROTECT MAKER OF NOTE-RECOVERY OF TRUST FUNDS BY BENEFICIARY-PRIVITY.

1. Where payee promised makers of note given without consideration that he would deposit with transferee other notes of equal value, from proceeds of which original note would be paid, such agreement held to create express trust in notes deposited with transferee for benefit of makers.

2. Express trust in personalty may be created where person has or accepts personal property with express or implied understanding that it is not to be his, but is to be applied for specific purposes for benefit of certain specified persons.

3. When maker of note is induced to execute it by representations that other notes or security will be made available to pay it, such security is impressed with trust in favor of maker of principal note.

4. Trust in personalty deposited with person for benefit of specified persons may be created orally.

5. Where payee deposited additional notes with transferee in accordance with trust agreement with makers, from proceeds of which original note was to be paid, makers as beneficiaries derived equitable title to notes deposited with trustee from payee, and not from trustee, as regards claim that judgment against trustee concluded beneficiaries.

6. Where action was against trustee in his individual capacity issues raised in subsequent action by beneficiary to recover trust fund held not adjudicated, as against beneficiary, and beneficiary was not concluded by judgment rendered therein since there was no privity between beneficiary and parties in prior action, "privity" implying derivation of title.

7. Beneficiary of trust may follow and recover trust fund as long as it can be identified either in its original or substituted form, providing it has not passed into hands of bona fide purchaser for value without notice.

8. Transferee of receipt, which provided that payment would be made when party paid promisor another note, took receipt subject to trust impressed thereon, since such receipt was non-negotiable under C. S., secs. 5868, 5871.

9. In action to recover trust fund against administrator of deceased's estate, recovery could be had, although claim had not been filed with administrator, since trust fund was not part of deceased's estate.

10. Maker who had paid entire note held subrogated to rights of comaker under trust agreement, where object of trust was extinguishment of makers' obligation on note.

APPEAL from the District Court of the Eleventh Judicial District for Twin Falls County. Hon. Wm. A. Babcock, Judge.

Action to enforce a trust. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs awarded to respondent.

Hodgin & Hodgin, for Appellants.

The plaintiff cannot recover judgment against the administrator of the Estate of W. E. Eckley, deceased, for the reason that the facts forming the cause of action litigated between J. W. Laubenheim and W. E. Eckley in the case of Eckley v. Calvin Owens, J. W. Laubenheim, Intervenor, are identical with the facts constituting the alleged cause of action between the plaintiff in this action and W. E. Eckley. The plaintiff in this action being privy to, and having derived his interest from, J. W. Laubenheim after the judgment was rendered in that case is bound by the judgment in the former case. (15 R. C. L., p. 1015, sec. 488; Hart v. Moulton, 104 Wis. 349, 76 Am. St. 881, 891, 80 N.W. 599; note to Fahey v. Esterly Machine Co., 44 Am. St. 562; Martin v. Holm, 197 Cal. 733, 242 P. 718; 15 R. C. L. 786, 787, par. 242; 23 Cyc. 1253; Smith v. Kessler, 22 Idaho 589, 127 P. 172; Jensen v. Berry & Ball Co., 37 Ida, 394, 216 P. 1033; Marshall v. Underwood, 38 Idaho 464, 221 P. 1105; Karlson v. National Park Lbr. Co., 46 Idaho 595, 269 P. 591.)

Bothwell & Chapman, for Respondent.

Where a person has or accepts the possession of promissory notes with the express or implied understanding that he is not to hold them as his own absolute property, but is to hold and apply them for certain specified purposes or for the benefit of certain specified persons, a valid and enforceable trust exists. (39 Cyc. 71.)

A cestui que trust may follow a trust fund so long as it may be identified, either in its original or substituted form. ( Martin v. Smith, 33 Idaho 692, 197 P. 823.)

Privity does not arise from the mere fact that persons as litigants in different actions are interested in proving or disproving the same facts. One whose interest is almost identical with that of a party, but who does not claim through him, is not in privity with him. (34 C. J. 1012.)

GIVENS, J. Budge, C. J., and T. Bailey Lee, Wm. E. Lee and Varian, JJ., concur.

OPINION

GIVENS, J.

Plaintiff and one Walters executed a promissory note for $ 5,000 payable to W. L. Eckley. The trial court found on supporting evidence that this note was given without consideration and upon representations, among others, that the note would not have to be paid by the makers, and that Eckley would keep on deposit with it other valuable paper, the proceeds of which would be applied in payment of plaintiff's note. The note was given for the purpose of enlarging Eckley's credit, and was immediately negotiated by him to J. W. Laubenheim. Thereafter Eckley deposited with Laubenheim as security for the principal note another note, executed by A. D. P. Keith, payable to Eckley, likewise for $ 5,000.

At the maturity of plaintiff's note, it remained unpaid. Shortly thereafter Eckley represented to the plaintiff and Laubenheim that he had sold or was about to sell the Keith note to Calvin Owens for $ 4,000, all of which would be applied on the plaintiff's note. On the strength of these representations the Keith note was surrendered to Eckley, who immediately sold it to Owens. He received in payment $ 2,000 in cash and an instrument in writing denominated a "receipt," and hereafter so referred to, acknowledging liability for the remaining $ 2,000.

Eckley applied on the plaintiff's note, out of the moneys received from Owens, $ 1600 and promised to pay $ 2,000 additional within 30 days. He failed to pay the $ 2,000. Before plaintiff learned of the existence of this receipt, Eckley disposed of it by negotiating it to his father, W. E. Eckley of Lewistown, Montana. The defendant introduced no evidence except the records of the two previous suits.

The controversy revolves around the title to this "receipt" and its proceeds and eventually three actions were brought to test the question of its ownership.

The first action was brought by Laubenheim. He sued W. L. Eckley on the note which plaintiff and Walters had executed to Eckley, and which Eckley had indorsed to Laubenheim, but failed in that action to make either the plaintiff or Walters parties. He attached the proceeds of the "receipt" in the hands of Owens but Owens declined to pay on the ground that others had asserted a right to the fund.

The second action was brought by W. E. Eckley against Owens on the "receipt" which W. L. Eckley had assigned to W. E. Eckley. Laubenheim intervened and set up his judgment which he had secured against W. L. Eckley. The First National Bank of Kimberly also intervened. Both intervenors as creditors of W. L. Eckley asserted a right to the proceeds of the "receipt" superior to the right of W. E. Eckley.

Owens filed an answer and paid the $ 2,000 in question to the clerk of the court of Twin Falls county and asked to be absolved from any further obligation.

In that action judgment was entered in favor of W. E. Eckley and he was decreed to be the owner of the fund in question.

Plaintiff then brought this action, asserting a right superior to that of W. E. Eckley, and attached the money in the hands of the clerk. Before trial, W. E. Eckley died and his administrator, J. L. Hodgin, has been substituted as party defendant. The plaintiff filed no claim with the administrator.

Since the commencement of the action plaintiff has paid to Laubenheim the amount remaining due on the note which he and Walters executed, a sum, with the interest due thereon, considerably in excess of the amount in the hands of the clerk.

The case was tried to the court, sitting without a jury. The trial judge found that W. L. Eckley had made false and fraudulent representations to the plaintiff to induce him to execute the note in question and that plaintiff had relied on these representations; that Eckley had agreed with the plaintiff at the time he deposited the Keith note with Laubenheim that its proceeds were to be applied on the note given by the plaintiff to Eckley; that when Eckley repossessed the Keith note for the purpose of negotiating it to Owens he reiterated the false and fraudulent representations and promised that its proceeds would be applied on the plaintiff's note; that in taking the "rec...