Lingke v. . Wilkinson

Lott, Ch. C. The findings of fact hy the judge at Special Term, having been affirmed by the General Term, are conclusive on us. It appears that the evidence taken by the referee, on which he found and reported those facts under the order of reference to him, was not presented to the judge on the trial of the issues, and he consequently assumed, as he was bound to do, that those facts were established. They show that the defendant Lyman L. Wilkinson, in the exercise of the power conferred on him by the plaintiff, after an unsuccessful effort for some time to rent the premises in question to other parties, leased the same to his son (the co-defendant) at a fair and full rent therefor at the time the lease was given, without any anticipation or expectation or ground for the belief, by either of them, that there would be an increase of' rents for property of that description in the city of Auburn, where it was situated (although they did, in fact, subsequently increase), with the intention that the son alone should have the benefits accruing from the lease; that the son subsequently fitted up a portion of the premises at his own expense and in it carried on the auction and commission business for a short time, but that it proved unsuccessful,_ resulting in his failure and a loss of the capital invested . therein, which had been advanced by his father, amounting to $1,000. They showed, further, that such lease was made without any fraud or collusion by the defendants, or either of-them, and that the increase of rents, for which the premises were afterward sublet, was owing to the rise of rents and an increased demand for the rental of that class or kind of property, and that all benefits and profits- to- the son from the *449 lease had resulted from the rise in rents exclusively, and were unforeseen at the time it was given. The material facts found tending to impeach the transaction, irrespective of the increase of rents, were, that the son was at the time living with his father; that he was about twenty-three years of age, and not engaged in any particular business; that he was irresponsible; that no security for the payment of the rent was required or given by him, and that the father acted as the agent of the son in the rental of the property covered by the lease after its execution. These latter circumstances were shown not to have operated to the prejudice of the plaintiff, inasmuch as it appeared that the rents payable to her had been fully paid, and that all the terms and conditions of the lease (which were found to have been of no peculiar advantage to him) had been fulfilled by the son. They were, however, very proper and important matters to be considered by the referee, in connection with the other facts found, in determining the fact whether the transaction was bona fide or fraudulent, and required him to scrutinize the dealing between the parties with extreme vigilance, and to examine all the evidence bearing on the question with great care and deliberation. It must be assumed, in the absence of the evidence before him, that he did so. We, at all events, cannot say that there was no proof to establish and justify the facts found by him and adopted by the judge at Special Term; and as it is specially found that the lease was for the use and benefit of the son only, and that the defendants had, neither of them, been guilty of any fraud or collusion, or breach of trust or duty in reference to any of the matters alleged in the complaint, the judge did not err in his conclusion of law, upon the facts thus found and established, that the lease in question was a valid bona fide lease entitling the lessee to all the benefits thereof on his performance of its terms and conditions on his part, and, consequently, that the plaintiff’s complaint should be dismissed. That conclusion was based on the assumption that the transaction was sought to be impeached as fraudulent in fact. Such, evidently, was the object of the complaint. It *450 charges that Lyman L. Wilkinson executed the lease to his son with a view of profiting himself at the plaintiff’s expense by speculating with the subject of his trust; that the son acted „in collusion with his father, and that the property was subsequently managed and controlled by the father. The facts, as found by the referee and adopted by the court, as has already been stated, failed to establish the fraud alleged, and the claim for relief on that ground was not sustained by the Supreme Court. It is now, however, claimed that the relationship between the father and son incapacitated them from a dealing with each other in reference to the property intrusted to the care of the father, and that the transaction operated as a fraud, in law, against the plaintiff. That view of the case does not appear to have been presented in the courts below. There is no allusion to the question in the opinion of the judge who tried the issues at Special Term; and there is nothing in the case to show that it was urged or considered at the General Term. Assuming, however, that it was, the claim is not tenable. The naked fact of such relationship did not create any duty or obligation by the son to the plaintiff, nor give him any information affecting the property or the nature of the business which enabled him to obtain undue advantage of her in the transaction. It is a rule and principle well established in equity, that no person standing in the relation of a trustee or agent to another, can, directly or indirectly, purchase or acquire any interest in the subject of the trust, or secure an advantage to himself from such relation; and it extends to all persons having such connection with the trustee or agent, as partner, clerk, or otherwise, so as to raise the presumption that they have thereby, or by means thereof, acquired such a knowledge of the property and business of the principal, which would not otherwise have been obtained, as to secure them an advantage over other parties. It is based and founded on the ground that, if persons having a confidential character were permitted to avail themselves of any knowledge in that capacity, they might be induced to conceal their information, and not to exercise it *451 for the benefit of the persons who relied on their integrity or judgment in the execution of the trust committed to them. The duties of a trustee or agent to his cestixi que trust or principal are inconsistent with a dealing on his own private and individual account and benefit with the subject of the trust or agency. This question was fully discussed and considered in Gardner v. Ogden (22 N. Y., 327, etc.), and it was there held that a clerk of a broker, employed to make a sale of land, who had access to the correspondence between the broker and his principal, stood in such relation of confidence to the latter as to charge him, on becoming a purchaser of property, as trustee for the vendor. The rule applies where there is a confidential relation between parties, creating or tending to produce a conflict of duty and interest by a trustee or agent, in dealings or transactions relative to the subject-matter of his trust or agency. (See, also, Case v. Carroll, 35 N. Y., 385.) The relationship between a father and son does not, of itself, create any connection or relation between the son and the cestui que trust or principal of the father, to make the rule applicable. It is a material circumstance, pertinent to the question of fraud in fact, to be determined by a court or jury, in reference to any dealings between them, but it is not, per se, a fraud in law. The peculiar nature of the relationship between a husband and wife has been held to invalidate transactions resulting in the transfer of property, held in trust, to or for the benefit of the wife, and to prevent dealings between them affecting the subject of the trust. (See Davoue v. Fanning, 2 John. Ch., 252; Dundas’ Appeal, 64 Penn. St., 325.) Such transactions are properly treated as made by the trustee with himself. We have not been referred to any case, nor am I aware of any, where any other relationship has, of itself, been held to be within the principle of the rule referred to; and we do not think that public policy requires it to be extended to that of father and son. Our conclusion upon the whole case, therefore, is, that there *452 is no ground for the reversal of the judgment appealed from. It must, therefore, be affirmed, with costs.