Patten v. Warner , 11 App. D.C. 149 ( 1897 )

Mr. Justice Morris

delivered the opinion of the Court:

The main question in this case is one of fact rather than of law. It is whether in the purchase of property that has been mentioned, the appellee should be held to have acted on his own account or as trustee for the appellants.

It is very clear that the appellants cannot justly be held entitled to recover in the suit, except upon the theory, either that there was an express agreement between them and the appellee, whereby the latter agreed to act as their agent in the transaction out of which this controversy has arisen, or else that there was established between them such a fiduciary relation of trust and confidence as should estop and preclude the appellee from claiming to have acted in his own individual right and for his own personal benefit. The bill of complaint is based upon the first of these two alternatives, and alleges, as we have seen, an express agreement between the parties. But in the argument before us, while not wholly abandoning this ground of action, the contention for the complainants seems to be rested mainly upon the second alternative, the alleged existence of fiduciary relations between the parties.

Certainly the record fails to show the existence of any express agreement between the appellants and the appellee. That agreement is alleged in the bill, and denied in the answer; and that denial is emphasized by the appellee in his testimony when called as a witness on his own behalf. The testimony of Mr. Davis, which alone supports the contention of the appellants in that regard, shows rather a vague understanding on his part of the establishment of some agreement between himself and the appellee than the existence of any definite or positive agreement. Whether it be that the recollection of parties and of witnesses has been dimmed by lapse of time; or that the mistake was made, not entirely uncommon under such circumstances, of supposing something to have been done, which it was intended and desired to do, but which was not actually done; or that so much reliance was carelessly placed upon the sentiment of honor as that parties were induced to forego the precautions required by law for the creation or justification of contracts having reference to real estate; certain it is that the testimony falls far short of the requirements of a court of equity in the establishment of a contract or agreement denied by the answer of the appellee as defendant in the cause. The fundamental element of mutuality was wanting to establish any such contractual relation. If, after the procurement of the deed of trust to secure the note for $5,000, the appellee had resolved to go no farther, and had even informed Mr. Davis that he would go no farther in the matter, it is difficult to see how, either in law or in equity, upon the testimony contained in the record before us, the appellee could be held for a breach of contract. If, after the conveyance to him of the property for the sum of $11,000 or $11,300, or whatever he actually paid for it, the appellee, assuming that he was the agent of the appellants, had called upon them to take the property off his hands at that figure, and they had declined for the reason that they considered the price excessive, and repudiated or denied the existence of any agreement, it is difficult to see how, upon the testimony before us, a court of equity could justly have required them to take the property and to refund to the appellee the sum paid by him for it. And if, in the absence of proof of express agreement, and in the absence of any memorandum whatever in writing, and in the absence of any understanding of any kind in regard to the price and terms of purchase, the complainants would not, under such circumstances, be constrained to take the property, then most undoubtedly no converse duty to convey to them could be imposed upon the appellee.

It is a singular fact that throughout this whole transaction, so far as the record shows, there was never mention at any time of the price which the appellants were willing to pay for the property until after the appellee had procured the title for himself; nor was there even the remotest allusion to that exceedingly important circumstance. And certainly it can not be that the appellants intended to bind themselves irrevocably to pay to the appellee any sum for the property which he might consider it worth and might choose to pay for it. On the other hand, if they did not so bind themselves, there was no valid contract at all; for, as we have said, the essential element of mutuality was wanting.

It is quite evident that, in the most favorable view that -we can take of the case of the appellants, too much was left to inference, and the minds of the parties never actually met in contractual relation.

But if express contract was absent in this case, the record equally fails to disclose the existence of any such fiduciary relation between the parties as would justify the conclusion that the appellee should be held as a trustee for the appellants.

Confidence and trust are said to be synonymous; and it is claimed that one who confides in another and whose confidence is accepted by that other and acted on by him, is entitled to assume that undue advantage will not be taken of the trust so reposed. Various authorities are cited in support of this proposition. As, for instance, in the case of Coates’ Appeal, 2 Pa. St. 133, the Supreme Court of Pennsylvania said :

“ The word confidence, be it remarked, is a word peculiarly appropriate to create a trust. It is as applicable to the subject of a trust, as nearly a synonym as the English language is capable of. Trust is a confidence which one man reposes in another, and confidence is a trust.”

The same court also said in the case of Rankin v. Porter, 7 Watts, 390: “The ground of the decision is that, where-ever confidence has been reposed, justice forbids that it shall be abused; and it applies as strongly to those who have gratuitously or officiously undertaken the management of another’s property as to those who are retained and paid for it. The man who offers his services to a distant owner, who promises to examine the property and ascertain the price which can be obtained for it, and especially if he proposes to do this from friendship, must not expect to gain from imposing on the confidence he has excited.”

Perhaps the idea is still more broadly and sweepingly stated by one of the judges in the case of Smith v. Kay, 7 H. L. 779, when he said: “The principle applies to every case where influence is acquired and abused, where confidence is reposed and betrayed.”

All this is undoubtedly the dictate of honor and of true morality; and perhaps it is to be wished that courts of equity could enforce the doctrine to the extreme limit to which by a literal construction of its terms it might be held to extend. But we well know that, although a court of equity is a court of conscience, not everything binding upon the conscience, not everything binding upon the sense of honor, can be enforced in a court of equity. Not every trust and confidence is there cognizable. On the contrary, it is daily experience, especially in matters connected with dealings in real estate, that trust and confidence are often abused beyond the limits within which a court of equity can intervene. We should not seek unduly to circumscribe and limit the functions of a court of equity in such matters; it is in the interest of justice that they should be allowed the broadest possible sphere of operation. And yet we are not warranted in extending that sphere to the limit claimed in the present case.

It is the result of an examination of all the cases that the mere reposing of confidence does not of itself create a trust, or convert into a trustee the person in whom confidence has been reposed; but that the relation of trust must first, or perhaps simultaneously, be created, and thereupon the confidence reposed. Otherwise, it would be in the power of any one, by his voluntary, unsolicited, officious, and perhaps undesirable act, to convert another into a trustee for him, and thereby perhaps most unjustly to tie his hands. A confidential communication to a stranger, who occupies no fiduciary relation whatever to the person confiding in him, cannot create a trust. Neither can a trust be created by a confidential communication made to him in the hope or expectation that he will assume such fiduciary relation and he does not actually agree to assume it. The assent, express or implied, of the person sought to be placed in such fiduciary relation, or where a trust has been devolved in consequence of privity of estate or for any other reason, the assent of the person from whom such trust has been derived, would seem to be involved in all cases. (See 1 Leading Cases in Equity, p. 62, and notes.) We think that the mere reposing of confidence, without the assent, express or implied, of the person in wdiom the confidence is reposed, to act in a fiduciary capacity towards the person who confides in him, does not create a trust cognizable in equity, however dishonorable the violation of such confidence may be from the standpoint of the moralist. And if it be argued that in this case there was an agreement on the part of the appellee to hold such fiduciary relation towards the appellants, that merely brings us back again to the first question—whether there -was any agreement between the parties—a question to which the record has compelled a negative answer.

But whatever may be the substantial merits of this case, it is very clear to us that there is one consideration which must dispose of it adversely to the appellants. The suit is for an accounting. It is a case-where there is concurrent jurisdiction at common law and in equity. A plea of the statute of limitations would undoubtedly be a bar to the demand at common law. This statute must be equally held in equity as a bar to this proceeding. See Sis v. Boarman, ante, p. 116.

It is sought to escape from this conclusion by an attempt to show that the appellee’s alleged fraud upon the rights of the appellants was not discovered by the latter until September of 1893, and that they instituted their suit in due time thereafter. But they had as much accurate knowledge in 1889 or 1890 as they acquired in 1893. It is of no consequence, perhaps, that Mrs. Glover was strangely mistaken in 1893, as to the amount of money paid to her for the property by the appellee in 1889. The substantial fact which she then communicated to the appellants was, that there was a considerable difference between the amount paid to her by the appellee and the amount which the appellee demanded and received from the complainants. Their attorney had this same knowledge in 1889 or 1890; for there can be no doubt whatever that he was then informed by the appellee, that he (the appellee) had made a profit in the transaction, and he then and there offered to tell him the precise amount of his profit. Mr. Davis at the time was the general attorney of the appellants; he had been their attorney specially in this whole transaction with the appellee; he had even been specially charged by them to ascertain what profit, if any, the appellee had made; for there is testimony tending to show that very soon after the consummation of the transaction their suspicions on this point were aroused. The knowledge of Mr. Davis, under the circumstances, whether communicated to them or not, and the knowledge which he readily might have acquired from the appellee, who offered to disclose to him the amount of his profits, must be imputed to the appellants. There is no reason whatever why this bill filed in 1894 might not equally well have been filed in 1890. The luck of memory and the indistinctness of recollection which now characterizes the testimony, might then perhaps have been avoided. We are compelled to conclude that the suit now comes too late.

It follows that the decree appealed from must be affirmed, with costs. And it is so ordered.