139 Minn. 174 | Minn. | 1918
To understand the transaction we must take into account some matters of family history. The business of F. H. Peavey & Company was a grain and elevator business in Minneapolis established by Frank H. Peavey. Mr. Peavey had three children. George, plaintiff’s husband, was his only son. One daughter married defendant Heffelfinger; the other, defendant Wells. In 1899 Peavey conceived the idea of taking his son and sons-in-law into the business with him by sale to each of a 1-36 interest, taking a note therefor payable out of the earnings of such share.
Seven months later Peavey made his will, and into that he carried this same idea of sale of an interest in the business to be paid for by so-called “dividend notes.” In this will he requested that' upon his death the surviving partners, that is, his son and sons-in-law, continue the business of the firm for 5 years, and he directed that at the expiration of 5 years a corporation be formed to take over the business and that the executors
When the corporation was formed George W. Peavey became president, Heffelfinger and Wells vice presidents. The business was transacted largely through a number of subsidiary corporations. The executive offices in these were about equally divided. George Peavey was also a director in the Northwestern National Bank.
Heffelfinger was then 37, Wells 33 and George 29. All had been partners in the business for more than seven years. Each was drawing a salary of $20,000 a year. Peavey did not devote himself as assiduously to business as did Heffelfinger and Wells. He was addicted to the use of liquor but never drank to such an extent as to incapacitate him for business. “It never seemed to have a hold on him” and “to an outsider it was scarcely perceptible.” In the summer of 1907 he decided to quit active business life. In September he became infatuated with a profligate woman, left his wife and went to New York, intending to sail with this woman for South America for an indefinite time. Heffelfinger and Wells became naturally alarmed. The corporation was a large borrower, notes of the corporation for hundreds of thousands of dollars were outstanding indorsed by Peavey, Heffelfinger and Wells. Heffelfinger was in Boston, Wells wired him and he went to New York.
An uncle, Peavey’s father’s brother, who lived in New York, was called in and both he and Heffelfinger tried to dissuade Peavey from his purpose. To his únele!, George said he was going “to leave Minneapolis” and
The issue is narrow. There is no claim of any misrepresentation or deceit. Plaintiff relies on what is called “constructive fraud.” The principle of law on which plaintiff relies is, that he who bargains, in a matter of advantage with a person placing trust and confidence in him, is bound to show that a reasonable use has been made of that trust and confidence. Whelan v. Whelan, 3 Cowen, 537; King v. Remington, 36 Minn. 15, 29 N. W. 352; Fischer v. Sperl, 94 Minn. 421, 103 N. W. 502; Shevlin v. Shevlin, 96 Minn. 398, 105 N. W. 257. A multitude of decisions might be cited which restate the rule in varying language. The principle is just and right. Originating in cases involving the conventional relation of trustee and cestui que trust, it has been broadened and extended to every variety of relation in which dominion may be exercised by one person over another (Huguenin v. Baseley, 14 Ves. Jr. 273), and when such a relation does exist, courts of equity will not suffer, one party,' standing in a situation of which he can avail himself against the other, to get the better of the bargain. 1 Story, Eq. (12th ed.) § 307.
It is undoubtedly true that at the time of the meeting in New York George Peavey had suffered a tremendous moral lapse. In spite of that, there is no evidence of mental incapacity or that he was anything but self-reliant. He might have consulted his uncle, whom he doubtless trusted, but he simply told him what he had decided. ‘ He was xot under the influence of liquor nor suffering from its use. The same day he signed the papers he “cut off” all relations with his paramour and asked Heffelfinger to plead for his wife’s forgiveness. Three days later he sailed for Europe alone. As soon as he took passage he commenced writing letters to his wife begging her to rejoin him. She did so. Before she did so, however, Heffelfinger and Wells explained to her the transaction, and advised her they were so vitally interested in the matter that she had better consult a disinterested lawyer. She did get the advice of a high class lawyer and told her husband so. After she joined him they spent nearly three years abroad. To the day of his death Peavey remained faithful and lived a sober life. In October, 1910, after the return from abroad, the trust agreement above mentioned was revoked. An agreement was made, signed by Peavey, Heffelfinger and Wells, reciting the sale of the stock and the giving of the note, stipulating that the note be delivered to Peavey and that all payments be made to Peavey direct, or on his order, and that the stock be held by defendant Deaver for the purpose specified in the note. Here was a direct reaffirmance of- the New York agreement. Peavey lived two and a half years 'longer. He at all times understood the nature of the transfer. He never hinted dissatisfaction. He -acted throughout with understanding and with free volition. His acts bound him. Shevlin v. Shevlin, 96 Minn. 398, 105 N. W. 257; Ludington v. Patton, 111 Wis. 208, 86 N. W. 571, were very different cases.
WTien he had once availed himself of the right to purchase this stock, he, of course, had all the legal rights which that purchase gave. Yet it probably seemed clear to all of them that it Yas the desire of Frank H. Peavey that his son and sons-in-law should continue in the business and that this option to them to purchase stock was in furtherance of that desire, that he assumed that if they availed themselves of the option they would identify themselves with the business, and that it was with these things in mind that he gave to his son this option, which he did not give to his daughters. Accordingly, when George Peavey decided to abandon the business to Heffelfinger and Wells, it is not shocking that he should transfer to them the right to acquire this stock in the same manner. This left him in the same position as his sisters, and in the position in which his father planned that he should be if he saw fit not to enter the corporation in the first instance.
We conclude that the sale of the stock was valid.
Judgment affirmed.