Ricketts v. Montgomery

Eccleston, J., delivered the opinion of this court. It was conceded, in argument, by the appellants’ counsel, that in regard to the sale of the steamer Jewess, made on the 1st of March 1854, John Whittington was acting under an authority from James Montgomery, which constituted the former an agent or trustee of the latter. ⁵⁰ It is well settled, as a general rule, tliat a trustee or person acting in a fiduciary character, cannot purchase, on his own account, or acquire an interest in property, which his duty or trust requires him to sell on account of another. Although this has not been denied, we deem it proper to refer to the case of Michoud, et al., vs. Girod, et al., 4 How. S. C. Rep., 554, where numerous authorities on the subject are cited, and the rigor of the rule is very fully set forth.

And it will be seen on page 556, how carefully the rights of. the cestui que trust are to be protected, even when it has been understood between him and his trustee that the fiduciary relation shall be considered as dissolved, and a sale is then made to the trustee. On this point the court say: “We scarcely need add, that a purchase by a trustee of his cestui que trust, sui juris, provided it is deliberately agreed or understood between them tliat (he relation shall be considered as dissolved, ‘and there is a clear contract, ascertained to bo such, after a jealous and scrupulous examination of all the circumstances, and it is clear that the cestui que trust intended that the trustee should buy, and there is no fraud, no concealment, and no advantage taken by the trustee of information acquired by him as trustee,’ will be sustained by a court of equity. But it is difficult to make out such a case, where the exception is taken, especially when there is any inadequacy of price, or any inequality in the bargain.” After referring to many authorities, the court then sat^s: “And therefore, if a trustee, though strictly honest, should buy for himself an estate from his cestui que trust, and then should sell it for more, according to the rules of a court of equity, from general policy, and not from any peculiar imputation of fraud, he would be held still to remain a trustee to all intents and purposes, and not be permitted to sell to or for himself. ’ * .In addition to the above case, see 12 Md. Rep., 415, 416, 417, Keighler, et al., vs. Savage Manufacturing Co. Notwithstanding Wesley Ricketts, alone, made the bid at which the Jewess was struck off, the circumstances disclosed in evidence have induced us to believe that Whittington, the trustee of Montgomery, and partner of Ricketts, was interested. ⁵¹ iu the purchase; and that Ricketts knew Whittington was a trustee for the sale of Montgomery’s chare of the steamer. Believing, as we do, that Whittington was really, if not ostensibly, a participant in the purchase of the Jewess, at the sale on the 1st of March 1854, then, in view of the principles enunciated in 4 How. and 12 Md. Rep., the evidence in the cause is not deemed sufficient to show such a prior assent to, or subsequent acquiescence in, the sale, as should render it valid, and prevent Montgomery from having any right to insist upon its being set aside.

The obligation entered into between Hooper and Whittington, binding each to the oilier in the penalty of $1000, that the sale should be made, absolutely, on the 1st day of March 1854, at 1 o’clock, P. M., if not sooner disposed of, was a contract ill violation of Whittington’s duty as a trustee. Such iin obligation was calculated to prompt him to sell, for the purpose of avoiding the penally, when, if untrammelled by the contract, ho might believe ¡he rights ¡¡aid interests of his cestui que trust demanded a postponement. Thus, by his own act, the trustee’s interests would be in conflict with his duty. How, at ¡he time of the contract, could he have known but what the circumstances, gu the proposed day of sale, might be such as would work gross injustice to the cestui que trust) if the sale should then be made.

In Gaither vs. Myrick, 9 Md. Rep., 143 , the language of Lord Ellenborougb is quoted from 1 Camp., 527, where he says: “No man should be allowed to have an interest against his duty.” He certainly should, not, by his own act, voluntarily create such an interest. It appears that on the day of sale, at the request of Montgomery, J. M. Kane went with him to the place of sale, for the purpose of asking for a postponement. Whittington was asked to postpone the sale; he replied that he could postpone it no more, that both Mr. Hooper and himself