Case Name: Elizabeth V. Lingke, Appellant, v. Lyman L. Wilkinson et al., Respondents
Court: New York Commission of Appeals
Jurisdiction: New York
Decision Date: 1874-05
Citations: 57 N.Y. 445
Docket Number: 
Parties: Elizabeth V. Lingke, Appellant, v. Lyman L. Wilkinson et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 57
Pages: 445–459

Head Matter:
Elizabeth V. Lingke, Appellant, v. Lyman L. Wilkinson et al., Respondents.
(Submitted January 15, 1874;
decided May term, 1874.)
Tlie relationship of father and son will not, of itself, invalidate a lease by "the former, as agent or trustee, to the latter, or authorize the disaffirmance of the transaction by the principal or cesiui que trust. The fact of the relationship is a material one in determining the question whether there was fraud, in fact, in the transaction, but it does not, per se, constitute fraud in law or bring the case within the rule prohibiting an agent or trustee from dealing with the subject-matter of the agency or trust for his own benefit. (Dwight and Beynolds, CO., dissenting.)
Appeal from, judgment of the General Term of the Supreme Court in the fourth judicial department, affirming a judgment in favor of defendants, entered on the decision of the court at Special Term.
The action was brought by the plaintiff, who was the owner of certain real estate in the city of Auburn, to set aside a lease thereof, executed in February, 1864, by the defendant Lyman L. Wilkinson, as her agent, acting under a power of attorney, to defendant George B. Wilkinson ; and, also, for an account and recovery of the profits derived from increased rents on relettings of the premises.
After the cause was at issue, it was referred to a referee to hear the proofs and report the facts to the court. The referee reported the facts found by him therefrom, substantially, as follows ? That such lease was made, and that the defendant George B. Wilkinson hired the premises with the intent of using them in his own proper and legitimate business; that he afterward sublet them- for a price considerably greater than he had agreed to pay for the same by the terms of the lease; that such increased price was obtained in consequence of the rise in the price of rents in the city of Auburn after the léase was given ; “ that the said lease was made without fraud or collusion by the defendants or either of them, and the same was- so leased for a fair rent, and for as much or great a sum as the premises were worth and would, at the time of said leasing, command; ” and that he was “ not able to see dr find, from the evidence given on the trial, that the defendants, or either of them, have been guilty of any fraud or collusion, or breach of trust or duty in reference to any of the matters alleged in the complaint; ” that the prices and rental of said lease was a fair and reasonable value for said premises up to about the 1st of March, 1864, after which time, and up to the time of the commencement of this action, the price and value of said premises would have been and was considerable more than the rent stipulated in said lease; that rents of similar property to that of the plaintiff .began to advance soon after the month of February, 1864, and continued to increase up to the time this suit was commenced and it so increased about fifty per cent; that the defendant, George B. Wilkinson is a son of the defendant Lyman L. Wilkinson, and, that he, at the time the lease was made, was about twenty-three years old and lived with his father, that he was in no particular business, that he was irresponsible, and that no security for the payment of the rent was required or given by him; that for some time previous to the giving of said lease, the said Lyman L. Wilkinson had tried, without success, to rent the premises, but found no tenant or tenants to whom he could rent them; that George B. Wilkinson, when he took the lease, was aware of his father’s agency, and plaintiff’s ownership of the property leased; that the intent of both father and son was, that the son should have the benefit accruing from the said lease, whether from rise of rents or advantages or benefits of the occupation of the property, but that there was no evidence showing that at that time either party anticipated any future rise in rents, or that the probability of such rise could have existed in the minds of either of them ; that no advantages had resulted from said lease to the son from the terms and conditions of the lease, except from the rise of rents and the increased demand for the rental of the property, and that the benefits and profits to him have resulted from, the rise in rents, exclusively, which were unforeseen at the time the lease was made; that, after its execution, the father acted as the agent of the son in the rental of the property covered thereby; that the plaintiff, with her husband, was absent in Europe at the time the lease was made; that Lyman L. Wilkinson, during such absence, wrote several letters to them, but he did not communicate the fact to them, or either of them, of making the lease to his son ; that they remained ignorant thereof, until their return in January, 1866, and that the plaintiff had not ratified or approved of the said lease.
The cause was afterward brought to trial at Special Term upon the pleadings and the facts found and reported by the referee (without the production of the evidence taken by him), and the court found “ that the facts contained in.the report of the referee are the established facts in the case ; and, as a conclusion of law upon the facts thus established, that the lease in question was a bona fide lease and entitled the lessee therein named to hold, use and occupy the said premises until the full end and expiration of five years from the commencement of the term thereby created, upon his performance of the terms and conditions of such lease, and that the plaintiff was not entitled to have the same assigned or canceled, or to any accounting from the defendants or either of them, and, thereupon, ordered judgment that the plaintiff’s complaint be dismissed, with costs of the action.
Judgment was entered accordingly.
Cox & Avery for the appellant.
The contract made by the father, as agent of plaintiff, with his son was unlawful and liable to be disaffirmed by the principal. (Gardner v. Ogden, 22 N. Y., 327, 348, 349, and cases cited; Hall v. Noyes, 3 Brown C. C., 483; York Bldgs. Co. v. Mackenzie, 8 Bro. P. C., 7; 3 Paton, 378; Davoue v. Fanning, 2 J. Ch., 252, 259-261; Van Epps v. Van Epps, 9 Paige, 237; Hanley v. Crane, 4 Carver, 717; Slade v. Van Vechten, 11 Paige, 21; Decaters v. Chanmount, 3 id., 178; Abbott v. Hard. R. Co., 33 Barb., 594.) It is not necessary for fraud to appear in such a contract; the law imputes fraud. (Davoue v. Fanning, 2 J. Ch., 260; Claflin v. F. and Cit. Bk., 25 N. Y., 293; F. Y. C. Ins. Co. v. Fat. Pro. Ins. Co., 14 id., 91; Case v. Carroll, 35 id., 388; Conkey v. Bond, 36 id., 429; Jewett v. Miller, 10 id., 402, 405.)
G. O. Rathbun for the respondents.

Opinion:
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 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 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 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 is no ground for the reversal of the judgment appealed from. It must, therefore, be affirmed, with costs.