78 P. 838 | Kan. | 1904
The opinion of the court was delivered by
“This bill is filed on behalf of complainant and all other creditors likewise situated who desire to avail themselves thereof.”
It must be remembered that a final decree in the equity suit was entered on January 8,1900. On May 25, 1901, the present action was instituted. The petition avers that on March 20, 1900, when the trustee paid plaintiff $577.79 out of the proceeds of Martin-dale’s property, sold by him, she did not know of the suit of Ford Harvey against R. T. Battey, or of the fraudulent conspiracy of defendants ;■ that she learned of the same within sixty days before this action was begun.
After an exhaustive discussion of the effect of decrees and judgments on parties not actually before the court but represented by others, Pomeroy', in his work on Remedies and Remedial Rights, second edition, section 400, sums up the result of his investigation as follows :
“If, however, the prior suit has been terminated, and the question arises in a subsequent controversy, and involves the conclusive effect of the former adjudication upon the class of persons represented by the actual parties, in order that such judgment should be conclusive upon any particular person of the class, either in his favor or against him, there must have been the previous formal act on his part of applying to the court, and an order thereon making him a party to the action, so that his name should have ap*281 peared in some manner upon the record; or it must be shown that he had notice of the proceedings, and an opportunity to unite in them, of which he neglected or refused to avail himself. These views and conclusions reconcile the decisions which at first sight appear to be conflicting, and they present a practical and harmonious rule of procedure.”
Elizabeth Holderman was so far before the court in the case of Harvey against Battey that if she had neglected, after reasonable notice, to appear and establish her claim, or make demand for other desired relief, her rights might have been concluded in a subsequent action. (Stevens v. Brooks, 22 Wis. 695.) Not being a party to the suit, and wholly ignorant of its pend-ency and final disposition, it would be an unwarranted and unjust extension of the rule to say that she was represented in any way, or that her rights in this action were affected in any degree.
A reference to the averments of the petition, summarized in the statement, will disclose that Lambert and his associates, desiring to obtain the property in the trustee’s hands at a price much below its value, and for much less than it could have been sold to other purchasers, used the case of Harvey against Battey,
The alleged misconduct of Battey is abhorrent to every principle of law governing persons engaged in the administration of a trust, where good faith and scrupulous honesty are always demanded. It was his first duty to use every exertion to sell the trust property for the highest price, and to that end invite bidders to compete with one another, giving them every facility to become acquainted with the title of the real estate in his hands and to afford them ample time and opportunity to bid. This duty he not only neglected, but it is alleged that he corruptly conspired with others that they might reap a profit from the estate in his hands at the expense of the beneficiaries in the trust. Courts would justly forfeit public confidence if they should fail to exercise watchful care over the rights of confiding beneficiaries and neglected to compel unfaithful trustees to make complete reparation to those injuriously affected by their recreant acts.
Again, it is averred that Lambert and the firm of lawyers with which he was connected were attorneys
“But notwithstanding the duty of said defendant R. T. Battey faithfully and honestly to execute said trust in the manner above set forth, and to sell and dispose of said property for its full value and for the highest and best price that could be obtained for the same, and notwithstanding the duty of said defendant Isaac E. Lambert faithfully and honestly to assist said defendant Battey so to execute and discharge his trust, and to render all assistance possible to effect a sale of said property for its full and actual value and for the highest and best price that could be obtained for the same, and thus enable the creditors of said defendant Martindale, including this plaintiff, to obtain payment of their debts in full; yet the said defendants R. T. Battey and I. E. Lambert, in violation of their said duty, illegally confederated and conspired with defendants Calvin Hood and Geo. W. Newman for the purpose and object and with the intent that said Calvin Hood and Geo. W. Newman might make a purchase of all of said property from said R. T. Battey, as trustee, for a sum grossly inadequate and much less than its actual value, and for a much less sum and price than could have been obtained for said property if an honest and fair and just offer and effort had been made to sell the same to the highest and best bidder and for the highest and best price that could be obtained therefor ; and to prevent a fair and honest competition for the purchase of said property, and to enable said defendants Hood and Newman to purchase the same at a grossly inadequate price and at a sum much less than its actual value, and much less than it could have been sold for if said defendants Battey and Lambert had faithfully, honestly and intelligently performed and discharged their said respect*284 ive duties ; and in order to carry out said conspiracy and unlawful combination, they, the last-named four defendants, did do, perform, take part in and consummate the following actions.”
The specific acts of fraud set out in the statement follow. A tort-feasor is liable to an injured party if he participate in a wrong the effect of which is to damage the former; the extent of individual participation or of expected benefit is immaterial; each of several wrong-doers is liable for the entire damage.' We are clear that the allegations of a conspiracy to defraud and its consummation are sufficiently specific to constitute a cause of action against defendants.
“While the cestui qve trust has a right to follow the*285 trust property and to hold the possessor as a constructive trustee, wherever he is not a purchaser for a valuable consideration and without notice, yet he is not bound to accept that remedy. He may hold the trustee to a personal liability. Where the trustee has conveyed the property to an innocent purchaser for a valuable consideration, and has thus put it beyond the reach of the cestui que trust, his remedy is simply in an action against the trustee. It has been held that the cestui que trust may elect to hold original or substituted property, when he can identify the trust fund, either in its original or in a substituted form, or he may hold the trustee personally liable, but if he cannot identify the property, he must rely on the personal liability of the trustee. Cestui que trust, when forced to rely upon his trustee’s personal liability, occupies a position toward the estate of the trustee which is no better, but is identical with that of a simple contract creditor.”
To the same effect see Sherwood v. Saxton, 63 Mo. 78; Smith et al. v. Frost, 70 N. Y. 65; Lathrop v. Bampton, 31 Cal. 17, 89 Am. Dec. 141.
The present action does not aim at an accounting in equity between plaintiff and the trustee, or between plaintiff and the other defendants. The real estate is alleged to have been transferred to bona fide purchasers. While plaintiff might have proceeded in equity and compelled defendants to account for the value of the property, she chose a concurrent remedy, which the fraudulent acts of defendants entitled her to adopt. (Sherwood v. Saxton, supra.)
An action in tort for damages may be maintained against a trustee who has fraudulently conspired with other persons to make a sale of the trust property in his hands, at less than its value and has so sold it, to the injury of a beneficiary in the trust. All parties advising, assisting and aiding the trustee to carry out
In the bill of complaint filed by Fox’d Harvey against Battey in the federal court on December 20,1899, the allegations of which, by x'eference, are made a part of the petition in the present action, it was averred that “all the debts held by the parties to said agreement,”' the instrument creating the trust, “have not yet been established and detei'mined, but some of them are in controversy and unsettled as to amount.”
The creditors were allowed sixty days from the date-
This action was begun in May, 1901, after a lapse of more than a year and six months from the time allowed creditors to present their demands to the trustee for allowance as a matter of right, and after the expiration of fourteen months from the time the trustee received the money which he was obliged to pay out in dividends “as speedily as may be without the unnecessary sacrifice of the same.” To say that controversies between the trustee and Martindale’s creditors were pending and unsettled when this action was begun would be drawing a forced inference. The trustee, under the instrument giving him power to act, was required : First, to sell the property; second, to distribute the proceeds. There can be undone at most nothing except the payment of claims. The trust was a simple one, made so in order that the creditors might be expeditiously paid. The terms of it required a speedy sale of the property, and prompt payment thereafter of Martindale’s debts.
It is also contended that the compensation of the trustee has not been fixed or paid; that at least to that extent the trust is still open. We know of no rule of law which would permit a trustee guilty of the misconduct charged against Battey in the petition to recover any compensation for his services. The implication from the petition is that he received pay from Hood and his associates to betray his trust.
The judgment of the court below is reversed, with directions to overrule the demurrer to the petition.