118 Mo. 506 | Mo. | 1893
— The controversy arose over the ■disagreement of the parties as to their rights and interest in and growing out of five different pieces of of property. First. Two hundred, sixty-seven and one-half acres of laud in Clay county, Missouri, known as the Randolph tract, subject to a large incumbrance. Second. A one-tenth interest in thirty-six acres of land near the southwestern part of Kansas City, known as the Baker tract, subject to certain incumbrances. The ■owners of the land afterwards formed a corporation, known as Metropolitan Mortgage and Improvement Company, and conveyed the title to the same thereto; and stock representing the one-tenth was issued to E. E. Potts, who had bought the interest. The amount ■of the stock so issued was one hundred and eighteen shares of the par value of $100. Third. A claim for a one-fifth interest in a tract of land in Wyandotte county, Kansas known as Western Highlands, subject to incumbrances. This tract was conveyed to a corporation about March 7, 1887, known as Western Highlands Land Company, and stock to the amount of •six’ hundred shares, of the par value of $100, was issued, which was subject to incumbrances. Fourth. Certain lots of land and interests in land situated near the corner of Tenth street and Highland avenue, in .Kansas City,.being lots 16,17 and 18, and an undivided
The petition states in substance, that in the latter part of 1886 or the early part of 1887, the plaintiff and defendant M. A. Potts entered into an agreement for ¡speculating in lands about Kansas City, upon these terms, to-wit: that plaintiff should furnish money for the cash payments on purchases made under the •agreement; that Potts should take title in his own name; give notes for the deferred' payments; take care •of such notes in case they matured before the property was disposed of, and provide means for protecting the property; that upon sales of such property plaintiff ¡should be repaid the amounts advanced by him with interest at eight per cent; that after each had received in return the amounts advanced with interest at eight per cent., the balance of the proceeds should be equally •divided between them; that $33,100 were so advanced by Darling to Potts for these purposes. •
The petition also alleges ...that Darling was lead to believe that he was interested in a one-fifth interest of the Western Highlands under the agreement; that •about $14,000 was paid therefor and that plaintiff ■advanced about $9,000 of that amount; that the Western Highlands was incorporated; that five hundred ■and ninety shares of the- capital stock was issued as the •share of the joint interest; and .that said M. A. Potts “ corruptly” caused this stock to be issued to himself, and that $14,000 of this stock was afterwards transferred to the plaintiff. v
The petition further alleges that certain amounts of Darling’s money were paid on the remaining tracts, which had been conveyed to defendants Talbott and Wright, trustees. The petition then prays an accounting and other relief.
The answer of M. A. Potts is: First, a general denial, in which all the allegations in the petition contained are denied, excepting that which in the answer is afterwards specifically admitted; second, the answer-admits that in the latter part of 1886, or the early part of 1887, the defendant, M. A. Potts, and the plaintiff entered into an agreement for speculating in lands in and near Kansas City, but alleges that such investments were to be made on these terms, namely: That Darling should furnish the money therefor; that Potts should take title to all purchases in his own name, give-notes for the deferred payments, but that the deferred
The answer contains an itemized statement of all moneys invested and advanced, and the property in which same were invested. The answer alleges that Potts had raised and employed a large amount of money in the preservation of the property after the Darling fund had been exhausted. It prays that the properties be sold and the funds divided according to the awards of Karnes.
Answer of E. E. Potts admits buying the Baker tract declarations, and denies all other allegations.
“The evidence shows that the plaintiff came to Kansas City in the latter part of 1886, or the early part of 1887, a stranger, possessed of about $40,000 in cash which he was willing to invest in real estate speculations in the hope of reaping the enormous profits that such speculations at that time promised in this locality. That he had previously formed a favorable acquaintance with the defendant, M. A. Potts, with whose family his wife had been for years before upon terms of intimate friendship. That the plaintiff was induced to believe that the defendant, M. A. Potts, by reason of his having resided in Kansas City for a number of years, as well as by reason of his undoubted intelligence, was well qualified to select for purchase such tracts of land as would yield the quickest and largest profits. That plaintiff had implicit confidence in the integrity of the defendant, M. A. Potts. That the plaintiff placed in the hand of the defendant large sums of money to be expended by him in the purchase of lands in Kansas City or vicinity for the plaintiff. The defendant, M. A. Potts, received the said money for that purpose, with the understanding between them, that it was to be used in making such cash payments as might be necessary to make on the lands which he might buy, and that he, Potts, would give his notes for any deferred payments that might have to be provided for.
“That the plaintiff promised to compensate the sí lid defendant for his services. At first no definite
•“That .the defendant, M. A. Potts, during the months of January, February and April, 1887, bought with the plaintiff’s money the following lands and property, taking the title in his own name by agreement: First. The land which is known in the evidence and designated in the accounts as the ‘Randolph property,’ being 267.5 acres of land, situate in the county of Clay, and state of Missouri, and particularly described in the petition; second, the lands known in the evidence and accounts as the ‘Tenth street property,’ being lots 16, 17 and 18; and an undivided one-fourth interest in lots 1, 2 and 3, in block 4, of ‘W'ornall’s addition to Kansas City, Missouri; third, an interest in the land designated in the evidence and the accounts as the ‘Baker tract,’ the owners of which afterward incorporated under the name of Metrópoli
“The hopes of profit which the parties indulged in were not fulfilled. The purchases, taken as a whole, were followed by losses, instead of profit. The contingency of the profits which the parties had provided for in their agreement did not happen, whilst the contingency of loss which they did not provide for did happen. The properties could not be sold for a profit. They could not be sold at all, at a price that the parties were willing to take, before the deferred payments, became due, and remain yet unsold.
“That the plaintiff and the defendant, M. A. Potts, then were unable to come to an agreement as to-the disposition that had been made of the money placed in Potts’ hands by the plaintiff, and as to their relation to each other and their respective interests in the said properties. That, failing to agree as to these matters, they, by written agreement, copied in the answer of defendant, M. A. Potts, submitted them to-Mr. J. Y. C. Karnes, as an arbitrator, for his award. Mr. Karnes brought the parties before him and heard, evidence, and made findings on some of the matters, submitted to him. But it stands admitted upon the
"Much contention was had between the parties on the trial before me as to the legal effect of the purchase made by M. A. Potts nominally for his brother Fred E. Potts, through the intervention of one "W. W. Morgan, of the plaintiff’s interest in the Baker tract, under what may be denominated here a foreclosure-sale, though not strictly such. The question was, who bought at this sale, the defendant Fred E. Potts, or was it the defendant M. A. Potts. I summarily decided that question during the progress of the trial and stated to the parties that I should consider the question as if' M. A. Potts had bought for himself and taken title to himself. That this decision was correct, I have no doubt. But the more serious question now is, could M. A. Potts buy, as he did buy, and hold title against plaintiff. There is much evidence tending to show that he raised the money with which he bought by pledging the trust property, and the indirect methods he used in making the purchase open wide the eye of suspicion. If Potts had borne the relation of partner-in these speculations, or had been a joint owner simply of these properties, I am not prepared to say that I might not have found that the weight of evidence-failed to show that the funds which were used in making this purchase were raised by pledging the plaintiff’s, property. But it is quite clear to my mind that no ■ partnership relations existed between them, and that. they held no joint interest whatever in any of the properties involved in this suit. It is true that each of' them had an interest in all of the properties, but their-interests were not joint. Each had a qualified interest, that is to say, Potts was the trustee and as such held' the legal title to all .the property, both the lands and.
“I think the trustee in this case, as to the purchase of the declaration of trust in the Baker tract, has failed to sustain the burden of proof in that regard. His conduct has justly aroused suspicion and his proof has failed to allay it. I think that this pretended purchase through Morgan for his brother has no effect as a purchase; I think it should be considered simply as a payment by him of the debts for which the property was attempted to be sold, and that he should be deemed to yet hold the property in trust for the plaintiff and that he should simply be allowed credit for the money he paid as so much advanced by him to protect the trust property from sale.
“The interest which the defendant M. A. Potts thus attempted to buy at said foreclosure sale is now represented by the one hundred and eighteen shares of the stock of the Metropolitan Mortgage and Improvement Company, which were afterwards issued to M. A. Potts and which/ if my finding be correct, belong to the plaintiff. Since these one hundred and eighteen shares of stock were issued to M. A. Potts he has assigned to his brother, Ered E. Potts, seventy-seven shares to W. J. Anderson, for the defendant National Bank of Kansas City., forty shares, and still retains but one share himself. The defendant Ered. E. Potts is fairly chargeable with notice of the character of the title which the defendant M. A. Potts had to the
“The forty shares which were pledged to W. J. Anderson were assigned as collateral security for a note which the defendant M. A. Potts had previously given to the National Bank of Kansas City. If these shares had been assigned as collateral security at the time the note was made and the credit given to Potts then the bank would have been an innocent holder for value; but the note had been made sometime before and the credit already given before the stock was deposited as collateral security. There is no evidence tending to show that either Anderson or the bank knew how Potts held the stock; but the undisputed evidence is that the bank gave no valuable thing for the stock— hence this assignment as collateral was voluntary; whilst it is binding as against Potts, it is of no force against Darling.
“Grave dispute was had upon the trial as to whether M. A. Potts had bought with the plaintiff’s money merely an undivided one-tenth interest in the Western Highlands tract, or whether he had purchased for plaintiff a greater interest than that. Whilst I at first had some doubts upon this question, I am now clearly of the opinion that the evidence upon which it is safest to rely proves that the interest bought for Darling and with his' money was a tenth merely, and no more. The tenth interest is now represented by two hundred and ninety-five shares of the capital stock of the Western Highlands Company. The stock, as shown by the evidence, was worth $104.10 per share. Of these two hundred and ninety-five shares the plaintiff has received one hundred and forty shares and the defendant has appropriated and converted one hundred and
“I have stated, and do now state, the account between the plaintiff and the defendant, M. A. Potts, ■as follows:
Moneys and property received by Potts with which he should he charged.
'To cash received of Darling..........'.......................$33,100 00
To cash received of properties as rent, etc.................... 8,625 00
To 8 per cent, interest on receipts properties to Sept. 8, 1890..; 1,795 86
To value of five shares Western Highlands stock converted
March, 1888.......................................... 520 50
'To interest on same to Sept. 8, 1890......... 104 09
To value 150 shares Western Highlands stock converted July 1,
1889................................................ 15,615 00
To interest on the same to Sept. 8, 1890...................... 1,492 12
$61,252 57
Moneys paid out hy Potts for which he should have credit.
Paid on Randolph.........................................$31,398 96
Interest on part paid hy Potts.............. 2,884 22
Paid on Tenth Street..................................... 4,802 33
Interest paid on part paid hy Potts.......................... 310 20
Paid on Baker tract...................................... 4,237 83
Paid note Savings Bank same.. 1............................ 2,907 01
Paid assessments, same.................................... 884 12
Interest on part paid hy Potts.............................. 434 47
Paid for Western Highlands, one-tenth..................... 6,000 00
Paid hy Potts, March 12, 1888, same........................ 1,722 33
Interest on Potts’payment................................ 343 30
Paid personal account................................... 2,933 21
Total...........................................$58,857 98
Balance due Darling.......................... 2,394 59
“From the evidence taken as a whole, I find:
‘ ‘First. That there were no partnership relations «created or existing between the plaintiff and M. A.
“Second. I find that the defendant, M. A. Potts,, had, and has, no interest in any of the property bought by him as the agent and trustee of the plaintiff, except the right to charge the property with one-half of the-net profits of the venture and with the moneys that he may have expended from' his own funds in defraying” the costs incident upon the proper management of the property and such as he may advance towards paying-the purchase price thereof. It is quite evident that, there have been and will be no profits to divide, hence these properties will not be chargeable with anything on account of profits in Potts’ favor. I also find that. M. A. Potts has converted to his own use property belonging to the plaintiff which, together with the-amount he has secured from the rents, etc., have more than reimbursed him for all moneys that he has paid out of his own pocket on account of the properties.
“I find, therefore, that all the properties that are-now left where they can be reached, to-wit, the one-hundred and eighteen shares of the Metropolitan Mortgage and Improvement Company’s stock, and the-ten shares of the Bandolph Coal and Gas Company’s, stock; the 265.5 acres of land in Clay county and an undivided one-fourth interest in lots 1, 2 and 3 of block 4 in Wornall’s addition to Kansas City, Missouri, as; between plaintiff and M. A. Potts, belong exclusively to the plaintiff, free from any liens or charges in favor of said Potts.
“Third. I find that M. A. Potts has converted to-
“Fourth. I find that the one hundred and eighteen shares of stock in the Metropolitan Mortgage- & Investment Company belong to the plaintiff, and that the present holders thereof are not innocent-holders for value.
‘ ‘Fifth. I find that there is due from the defendant, M. A. Potts, this eighth day of September, 1890,, on account stated, the sum of $2,394.59.
“Sixth. I find that all the notes which M. A., Potts executed for the deferred payments of any of' these properties as between plaintiff and Potts are the plaintiff’s notes, and debts thereby evidenced are the-plaintiff’s debts. Of course, as between the holders of' these notes and Potts, Potts is liable, but as between, the plaintiff and Potts, the matter stands as if plaintiff" had signed the notes as principal and Potts had signed-them as security. It follows that Potts can have- no. claim against the plaintiff on account of saidi notes, until he, Potts,, shall have paid them off.
“Seventh. I find that both the plaintiff and the-defendant, M. A. Potts, are insolvent, and that there-is no immediate prospect of either of them being able to pay off any of the said notes. All of said notes,, however, except about $1,600, are secured by junior-liens on the Clay county lands. It is hoped, but it is-by no means certain, that the Clay county land will be-able to satisfy the notes which are made liens on it.
“Eighth. I find that the temporary injunction heretofore granted in this cause was properly granted, but, as it has fully served its purpose, it should now be.
“I suggest and recommend that the decree rendered by the court should, in proper terms, direct the defendants, "Wright and Talbott, to forthwith convey and assign the following properties, now in their hands, to the plaintiff, Adam Darling, to-wit: First. The 267.5 acres of land in Clay county, Missouri, specifically described in the petition, subject to the liens thereon, and that Darling, in accepting the conveyance, should be deemed to have assumed the payments of all the notes given by Potts, which are secured by liens thereon. Second. The declaration of trust representing an undivided one-fourth interest in lots one (1), two (2), and three (3), in block (4), of Wornall’s addition to Kansas City, Missouri. Third. The ten shares of stock in the Randolph Coal & Gras Company, subject to •the indebtedness for which it is now held in pledge.
“That the certificates for seventy-seven shares of stock in the Metropolitan Mortgage and Improvement Company, now held by defendant Fred E. Potts and the certificates for forty shares of same stock held by W. J. Anderson for defendant National Bank of Kansas City, and the certificates for one share of same stock held by the defendant, M. A. Potts, be all cancelled •and for naught held, and that the proper officers for the Metropolitan and Mortgage Improvement Company be ordered to issue new certificates in lieu thereof for ■one hundred and eighteen shares to the plaintiff, Adam Darling. That judgment be rendered in favor of the plaintiff against the defendant, M. A. Potts, for the balance found due on the account as stated, to-wit: for “the sum of $2,394.59, and the said Potts be adjudged to pay the costs of this suit. That a stay of execution be ordered on the judgment for the balance due Darling until' all the notes which M. A. Potts had executed,
"That some appropriate order be made looking to the payment of the costs out of the property, if possible. Whilst, as between Potts and Darling, Potts should pay the costs, yet as a payment cannot probably be realized from him now, the costs should be advanced from the property. But, as I have some interest in the costs, I deem it proper to make no suggestions as to how their payment should be enforced. The costs incurred before me consist only of the charges of the stenographer and typewriter, Mrs. Jessie Dale Alt-burger, whose bill is hereto attached, amounting to $237.62, and whatever may be taxed in favor of the referee for twenty days time spent in the hearing and consideration of this cause.
"All of which is respectfully submitted for the consideration and action of the court.
"J. MoD. Teimble, Referee.”
And thereupon the defendants, Marcus A. Potts, Ered. E. Potts, and the National Bank of Kansas City, within four days — and it being on the fifteenth day of September, 1890, filed exceptions to said report, raising many objections thereto. Those which are urged upon the attention of this court will be more specifically adverted to in the course of this opinion. Defendant Ered. E. Potts also filed exceptions to the report. The exceptions were all overruled, the report confirmed, and judgment for the plaintiff as therein recommended. Defendants Marcus A. Potts and Ered. E. Potts then filed their motions for new trial and in arrest, which' were overruled. They alone appealed.
The referee charged M. A. Potts with the value -of five shares of Western Highlands stock which he found from the evidence was converted by said defend- . ant to his own use in March, 1888, and one hundred • and fifty shares of the same stock July 1, 1889, and all found to be the property of the plaintiff. The allowance of interest on the value of this stock from the ■ time of the conversion is also complained of. If the stock was the property of the plaintiff and was converted by defendant to his own use, there was no error ■ committed in charging him with the interest from the
There were five hundred and ninety shares of the Western Highlands stock altogether, one-half of which, or two hundred and ninety-five shares, were purchased by plaintiff, of which he received one hundred and forty shares, leaving one hundred and fifty shares which belong to him, and in regard to which there is no contention. Potts had, unknown to the plaintiff, pledged three hundred shares in the lot, and left one hundred and fifty shares 'with the loan company, from which it seems that five shares of plaintiff’s stock must have been included in the three hundred shares so pledged by Potts. Potts himself testified as follows:
“Q. When did you get this one hundred and fifty shares from the treasurer? A. About the time I gave it to him. It was in the spring of 1888. * * *
Q. What did you do with the other one hundred and fifty shares? A: They were hypothecated with the National Loan and Trust Co.
Q. One hundred and fifty-five shares? A. No, sir; one hundred and fifty shares, $15,000.
Q. It wasn’t $29,500? A. Previous to that time there had been issued to me $30,000 of stock. I had
It seems from the testimony that the one hundred and fifty shares held by the loan company belonged to-plaintiff. As the testimony was somewhat conflicting’ in regard to this stock, we are inclined to defer to the-opinion of the referee in regard to the matter.
There does not seem to be any merit in the exception to the report of the referee with reference to the-credits claimed by Potts, and which were not allowed. The exception taken was because the report does not-show what items were refused, and furnishes no basis, by which the. disallowed items could be ascertained. This objection was obviated by a supplemental report made by the referee which fully set out all of the disallowed items.
The next point for consideration is the report of the referee with reference to what is known and called in the pleadings as the “Baker tract,” the owners of which incorporated under the name of Metropolitan Mortgage and Improvement Company, the interest in-, which was at that time certificates of one hundred and eighteen shares of the stock of said company.
It may be well enough to state that the matters of difference between these parties had been previously referred by agreement to Mr. J. V. C. Karnes, an arbitrator for his award, and while he heard evidence and made findings of some of the matters submitted ta-him, his award was not regarded as binding on the-parties, and that they were not estopped by reason thereof; but the findings of Mr. .Karnes and the subsequent conduct of the parties with reference thereto, are proper to be considered with the other evidence in the case in arriving at a proper determination as ta-what was the true relation of these parties to each other, and what were their respective interests and rights-
The one hundred and eighteen shares of stock were sold at what may be denominated a foreclosure sale, though not strictly such, at which defendant, M. A. Potts, became the purchaser of it in the name of his brother, Ered. E. Potts. The purchase seems to have been made through one W. W. Morgan. The referee, Trimble, found that the defendant, M. A. Potts, when buying at his sale, raised the money with which he bought by pledging the trust profits, that he was trustee for plaintiff, and that the purchase should be considered simply as a payment by him of the debt for which the property was attempted to be sold, and that he should be deemed to yet hold the property in trust for plaintiff arid that he should simply be allowed credit for the money he paid, as so much advanced by him to protect the property from sale. If the finding in this regard is supported by the evidence, and we think it is, then the law is, and the rule is well established, that in the management of trust property, the trustee cannot, without the knowledge and consent of the cestui que trust, directly or indirectly become a purchaser, and that if he does, he holds the property in trust for the beneficiary. And it makes no difference that the sale may be in every respect a fair one. 2 Pomeroy’s Equity Jurisprudence [2 Ed.], secs. 958, 1052. Moreover, it may be followed into the hands of anyone who takes it with notice of the trust relations.
The evidence requisite to establish the trust as found by the referee was clear, cogent and unequivocal, and comes clearly within the rule laid down in Johnson v. Quarles, 46 Mo. 423; Ringo v. Richardson, 53 Mo. 385; Kennedy v. Kennedy, 57 Mo. 73, and Allen v. Logan, 96 Mo. 592. It makes no difference whether plaintiff ever offered to redeem this stock before the
There are a number of objections urged against the report of the referee, which seem to be more technical than real, and are not borne out by the facts and evidence in the case; and, for that reason, we have ncjt thought it necessary to pass upon them seriatim.
The referee found in favor of the plaintiff. He had opportunities for judging of the credibility of the witnesses and their demeanor on the witness stand, which we háve not. And, as was said by this court in the case of Gimbel v. Pignero, 62 Mo. 242: “The report of a referee stands as the verdict of a jury, and where there is any evidence to sustain it, we will suppose that the whole evidence was properly weighed and the requisite effect given to it.” See, also, Benevolent Association v.Kribben, 48 Mo. 37; Franz v. Dietrick, 49 Mo. 95.
We have a right, in a case of this character, to examine and pass upon the testimony, and as the result thereof we are satisfied that the report of the referee is sustained by the evidence in every essential particular. It was full and complete and embraced within its scope every material issue tendered by the pleadings. We have been unable to see anything in it, or objection to it, that would justify us in setting it aside, or in sustaining the exceptions to any part of it. The judgment should be affirmed, and it is so ordered.