Bonner v. Cross County Rice Co.

Hart, J., (after stating the facts). Counsel for plaintiff seek to uphold the decree of the chancellor upon the authority of McCulloch v. Chatfield, 67 Fed. 877. In that case, McCulloch, Chatfield, Allen and others entered into a written contract for the purchase and sale of certain lands. Under the terms of the contract, the title to the land to be purchased was placed in Chatfield, and he was to have the full and absolute control of the land and of the sale thereof, being only required to account for the proceeds of sale. After the land was sold and the expenses paid, the proceeds of sale were to be divided between the respective parties in proportion to the amounts they had paid in. The court held that the agreement contemplated that the trustee appointed in it should hold the title to such land as might be acquired under the agreement, dispose of the same to the best advantage possible, and convey the same when sold by his individual deed. The only limitation placed upon his powers was that he should not sell any of the land for less than one dollar per acre without the consent of all parties in interest. Under these circumstances, the court said that the trust created by the agreement plainly belonged to that class of trusts where the beneficiaries acquired no estate in lands held by the trustee until after they are sold, when their rights attach to the proceeds of sale; that under the terms of the agreement, the title to the land acquired was taken in the name of the trustee for the express purpose of enabling him to sell it without let or hindrance and to divide the proceeds among those who might become interested in the speculation. Therefore, the court held that McCulloch was not entitled to a decree adjudging that he was the owner of an undivided interest in the property, as a decree of that nature would very likely interfere with the dominion over the property which the trustee was entitled to exercise so long as he acted in good faith and was guilty of no dereliction of duty. It may be noted that there was no allegation that the trustee had acted fraudulently in that case. It was not even charged or proved that he had been either negligent or inefficient in the discharge of his duties. It is true in the case at bar the defendant, Bonner, did not expend any money in the purchase of the land, but only contributed his time, labor, skill and judgment in the purchase thereof. Under the terms of the agreement, the titles were all to be taken in the name of Johnson, who advanced the money to pay for the land, but hereafter the facts in the case at bar are essentially different from those in the case of McCulloch v. Chatfield, supra. In that case the duties and responsibilities of McCulloch ended when the title was taken in the name of Chatfield, and Chatfield had the absolute power to dispose of the lands in any manner, and for whatever price •he saw fit, so long as he acted in good faith. Here the contract provided that the lands were to be disposed of under the joint direction of all the parties to the contract. This gave Bonner something more than a mere interest in the profits after the lands were sold; it gave him an interest in the lands themselves. Johnson held the legal title, but he could not convey the lands without the consent of Bonner. In the case of Seymour v. Freer, 8 Wall. (U. S.) 202, the court said: “A trust is where there are rights, titles and interests in property distinct from the legal ownership. In such cases, the legal title, in the -eye of the law, carries with it, to the holder, absolute dominion; but behind it lie beneficial rights and interests in the same property belonging to another. These rights, to the extent to which they exist, are a charge upon the property, and constitute an equity which a court of equity will protect and enforce whenever its aid for that purpose is properly invoked. Interests in real estate, purely contingent, may be made the subject of contract and equitable cognizance, as between the proper parties.” We think the principles there announced control the present case. The object of the trust here was the sale of the property, and the parties to the agreement were to agree upon the manner of its disposition. This gave the parties to the agreement a joint interest in the property. Johnson held the legal title, but the rights of Bonner are as valid in equity as those of Johnson are at law. Bonner, in his cross complaint, alleges that Johnson sold the property without his consent at a'price very much less than they had been previously offered for the lands, and for a less price than the lands were worth when sold; that the plaintiff corporation was formed by persons for the express purpose of buying the lands at the same, price for which they were purchased under the agreement under consideration; that Johnson, Bolfe and the other incorporators had full knowledge of his rights and interest in the lands, and that said lands were purchased by the corporation for the express purpose of defrauding him and of depriving him of his interest in the land. Under the ¡allegations of lids 'cross-complainlt, the grantee took the title subject to the trust upon which Johnson held the property, and a court of equity will deal with it as if the title to the land still remained in Johnson. Therefore, we think the court erred in sustaining the demurrer to the defendant’s answer and cross complaint, and for that error the decree will be reversed and the cause remanded for further proceedings not inconsistent with this opinion.