page_title: Beatty v. Guggenheim Exploration Co.
section_title: Judgment
hierarchical_section_title: Beatty v. Guggenheim Exploration Co. / Judgment
caption_attribution_description: English: Justice Benjamin N. Cardozo
context_page_description: Beatty v. Guggenheim Exploration Co. 225 NY 380 is a New York state law case, concerning the test for the imposition of a constructive trust. It is best known for a quote from the leading opinion by Justice Cardozo.
  The constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.
context_section_description: Cardozo J gave the following judgment.
  This case is here upon re-argument. We need not rehearse the facts. They are concisely stated in Judge Cuddeback's opinion (223 N. Y. 294). We held then that there could be no recovery by the plaintiff of compensation paid to Perry under the Perry-Guggenheim contract. That question is no longer open. We did not pass upon the Perry-Treadgold contract, but left the plaintiff's rights under that contract for adjudication on a second trial. The re-argument thereafter ordered was restricted to a single question. The question is whether plaintiff's rights under the Perry-Treadgold contract may be finally determined now.
  The defendants argue that the two contracts are inseparably united in scheme and execution. They say, therefore, that misconduct in respect of one defeats recovery under the other. But we think there is no such union as the argument assumes. The two transactions are clearly severable. The plaintiff had an interest with Perry in claims "89 to 104 below discovery at Bonanza Creek." Those claims were the subject of the Perry-Treadgold contract. The plaintiff had another interest in compensation paid to Perry for services in the Yukon district. That compensation was the subject of the Perry-Guggenheim contract. Perry had done work, and was entitled to pay. The plaintiff persuaded him to ask for more pay than would otherwise have satisfied him, in order that plaintiff might get a share of it. We held that this was a breach of the plaintiff's duty to his employer. The payment, thus unlawfully swollen, was subject to a constructive trust. Our decision went no farther. But the payment for Perry's services is quite distinct from the payment of Perry's profits in the sale of Treadgold's claims. The amount due under each head is stated in the findings. Increase of the one had no tendency to swell the measure of the other. Subsequent misconduct in another and distinct transaction does not work a forfeiture of rights already lawfully accrued.
  There remains, however, a question at once more important and more difficult. It is whether the plaintiff ever lawfully acquired a share in the profits of the Perry-Treadgold contract, considered by itself. He had agreed with his employer that he would not become directly or indirectly interested in, or connected with, any person, partnership or corporation engaged in any similar business. He had also agreed that none of the covenants or conditions of the contract should be "waived, modified, altered, or annulled" except by writing subscribed by the parties, who further covenanted that they would not "urge or claim any such waiver, alteration, modification or amendment unless the same be evidenced by such writing." The finding is that the president and the general manager of the employer knew that plaintiff was interested in the Perry- Treadgold contract and consented thereto, but no written consent was found or proved. The question, therefore, subdivides itself into two branches. One is whether the plaintiff, if he had purchased an interest in the claims without the consent of his employer, would be chargeable as a trustee. The other is whether consent not evidenced by a writing has varied the employer's rights.
  We think the situation is one where an employer, not consenting to the investment, would have the right, if he so elected, to hold the plaintiff as trustee.
  The plaintiff was sent to the Yukon to investigate mining claims which were the subject of an option. He found certain other claims which were not included in the option, but which he believed to be essential to the successful operation of those that were included. In conjunction with Perry, he purchased rights in the new claims. The two were partners in the venture. Later his employer, appreciating the importance of the claims, determined to buy them for itself. We think it had the right to say to the agent that he must renounce the profits of the transaction and transfer the claims at cost. A different situation would be presented if the claims had no relation to those which the pla
caption: Justice Cardozo.
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