New comb et al. 2v .Brooks et al.

• Court: West Virginia Supreme Court
• Writing for the Court: GREEN, President
• Citation: New comb et al. 2v .Brooks et al., 16 W.Va. 32 (W. Va. 1879)
• Decision Date: 20 December 1879
• Parties: New comb et al. v. Brooks et al.

16 W.Va. 32

New comb et al.

v.Brooks et al.

Supreme Court of Appeals of West Virginia.

Decided December 20, 1879.

1. A person, who occupies any fiduciary relation to another, is bound not to exercise for his own benefit and to the prejudice of the party, to whom he stands in such relation, any of the powers or rights, or any knowledge or advantage of any description, which he derives from such confidential relation.

2. A purchase by a fiduciary, while actually holding a fiduciary rela-

tion, of the trust-property, either of himself or of the party to whom he holds such fiduciary relation, is voidable at the option of the party to whom he stands in such a relation, although the fiduciary may have given an adequate price for the property and gained no advantage whatever.

3. But a fiduciary may purchase trust-property, if, when he purchases

the property, he has been discharged from his character of fiduciary by the party to whom he had stood in such relation. But when he claims to have been so discharged by contract, he must satisfy the court, after it ha made a most jealous and scrupulous examination, that such a contract was made, and that in obtaining his discharge from his character of fiduciary, that he might become a purchaser, there was no fraud, no concealment, and no advantage taken by him of any information acquired by him in his character of fiduciary.

4. Quaere: Can an attorney-at-law in any case, even with the

consent of his client, purchase property sold for the benefit of his client by a judicial sale pending the suits, or on an execution after judgment?

5. Without the consent of his client he cannot purchase for his own benefit any property of the defendant sold under execution, unless he gives for it an amount equal to the f whole of is client's judg-ment; and without such consent he can not purchase for his own benefit his client's property sold at a judicial sale.

A fiduciary cannot make a valid purchase of the trust-property, though it be made at a public judicial sale under a decree made in an adverse proceeding. Any such purchase may be; avoided at his option by any party to whom he holds such fiduciaiy relation.

7. When there are several fiduciaries one can not purchase of the others, but such a purchase can be avoided at the option of the parties to whom such fiduciary relation is held; and the agent of such fiduciaiy or fiduciaries to sell the property is under a like disability to purchase. Any one of the persons, to whom such fiduciary relation is held, may avoid such a purchase so far as his interest is concerned, though all the others standing in the same relation to the fiduciaries are content that the sale shall stand.

8. If a fiduciary purchases trust-property and then re-sells it to a purchaser for valuable consideration with notice of the character of his title, the person, to whom the fiduciary occupied the fiduciary relation, may at his option avoid the sale, though the property has passed into the hands of a sub-purchaser with notice.

9 But if the sub-purchaser had no notice of the character of his vendor's title, the sale cannot be set aside, but the party can have redress against the fiduciary personally to the extent of the profit he made by the re-sale.

10. But when such sales are sought to be avoided, the suit for the purpose must be brought in a reasonable time, though the property remains in the hands of the fiduciary.

11. Where a tract of land was conveyed to a party to be held by him in trust for himself and numerous others, and be was appointed the agent of these equitable owners to manage the property-and sell it at his pleasure, and one of the equitable owners brings a suit to have this property sold and to hold the trustee to an account for his agency, and the court renders a decree to sell the property with a view to a partition of the proceeds among the several owners, at a sale made by a commissioner under such decree the attorney for the trustee in the suit can not buy the property for his own benefit either with or without the consent of his client the trustee. And if he does purchase in the name of a third party, and the sale is confirmed by the court within two days after it is made, when the cestuis que trust were ignorant that the attorney of the trustee was the real purchaser, on an original bill brought by the cestuis que trust this decree of confirmation will be set aside, because the fact was not made known to the court, when the confirmation of the sale was asked, that the attorney for the trustee was the real purchaser, and the decree was therefore fraudulently procured by the suppression of this fact. And in such case the fact that the trustee does not desire the decree of confirmation set aside will make no difference, as the cestuis que trust have a right to have it set aside without any inquiry as to the adequacy of the price.

Appeal from and supersedeas to a decree of the circuit court of Kanawha county, rendered on the 27th day of November, 1874, in a cause in said court then pending, wherein John M. Newcomb and others were plaintiffs and F. F. Brooks and others were defendants, allowed upon the petition of said plaintiffs.

Hon. J. Smith, judge of the seventh judicial circuit, rendered the decree appealed from.

GReen, President, furnishes the following statement of the case:

In 1864 A. Buchanan and C. W. West, two of the defendants in this cause, bargained for a tract of land in Kanawha county on the Kanawha river, at the mouth of Rush creek, containing three thousand five hundred and sixty-six and two thirds acres. It was purchased for themselves and twenty-four others, each of whom furnished $1,000.00. The understanding between the parties to this purchase is set forth in a written paper signed by them and dated Cincinnati, December 31, 1864, of which this is a copy: "Whereas, A. Buchanan and C. W. West have purchased (provided a perfect title can be made,) three thousand five hundred and sixty-six and two thirds acres of land bounding on the Kanawha river, about eight miles above Charleston, Virginia, for $26,000.00, for the undersigned, in the proportions set opposite our names respectively; it being understood that after the purchase is completed a majority in interest may decide as to forming a company or other mode to develope the oil properties of said land." This paper is signed by said Buchanan and by said West and by twenty-four others, and $1,000.00 is set opposite to the name of each signer. Each of these signatures is the signature of a single individual except those which are as follows: F. J. Gettier, trustee, $1,000.00; N. Har-j ris and W. Crane, $1,000.00; Wilshire & Co., $1,000.00; A. D. Bullock & Co., $1,000.00. On January 12, 1865, a deed for said land was made to said Alfred Buchanan and Charles W. West individually, the consideration named on the face of this deed is $24,000.00, though the sum of $26,000.00 is constantly spoken of as the price of this land, and that each of the parties who purchased it paid in cash his share of the purchase-money. The deed was taken in the name of Buchanan and West for convenience; and they held the legal title in trust for themselves and the other joint owners of the land, each of the signers to said agreement being entitled to one twenty-sixth part of said tract of land. At a meeting of these joint owners a few days afterwards, on January 23, 1865, they determined, if they could, to obtain thirty additional subscriptions of $1,000.00 each, and with this $30,000.00 to repay to the original owners the $20,000.00 they had paid in, and that thereafter each party who had paid in $1,000.00, including the twentysix original subscribers, should be equal owners of this land. In other words, each party who had paid $1,000.00 was to own one fifty-sixth part of this land for each $1,000.00 he had paid in. This amounted to a sale by the twenty-six original owners of this land to the new owners of it, including themselves, at $56,000.00.

The arrangement was effected speedily; and a resolution was agreed to on February 21, 1865, at a meeting of the owners of these fifty-six shares, by which they authorized said Buchanan and West to spend the surplus funds, after paying back the $26,000.00 to the twentysix original subscribers, in boring for oil on said land and in making preliminary surveys and plats. A paper was signed by nearly all the owners of this land authorizing this expenditure of their funds by Buchanan and West. The fund thus authorized to be spent was $4,000.00, the difference between the $30,000.00 paid in by the owners of the new shares and the $26,000.00 paid back to the owners of the old shares.

In the meantime these parties obtained under the laws of Ohio a charter for a company, known as the " Don-nally Trust Petroleum Company," for boring or digging for oil in the earth, for refining and purifying the same, the amount of the stock of the company to be $500,000.00, and the amount of each share to be $50.00, the principal office of the company to be in Cincinnati, and its operations to be on this tract of land in West Virginia. The owners of this land and none others, so far as the record discloses, took stock in this company. They took one thousand one hundred shares and paid in $5.00 on each share, amounting to $5,500.00 on March 6, 1865, and the company was organized by electing directors shortly thereafter. The $4,000.00 surplus paid in by the new subscriptions to the ownership of this tract of land, as well as the greater part of this $5,500.00 was spent by said Buchanan and West in purchasing an engine and machinery, in boring for oil under their direction, in taxes on the land, in attorney's fees, and in necessary expenses of the company.

The boring for oil turned out a failure; and at a meeting of the stockholders on January 1, 1866, they declined to elect directors for the next year, and the company was formally dissolved, this tract of three thousand five hundred and...