Opinion ID: 1483018
Heading Depth: 1
Heading Rank: 7

Heading: Rights of Appellants.

Text: Appellants, as other individuals dealing at arm's length, of course had the right to transact business with others, honestly, and without commission of fraud by the latter, but as will be shown, appellants had other rights. Bean, as administrator, was trustee of the property of the estate, and there existed between him and the estate and the heirs, a fiduciary relationship. In re Estate of Blackinton, 29 Idaho 310, 328, 158 P. 492; Schneeberger v. Frazer, 36 Idaho 737, 747, 213 P. 568; Flynn v. Driscoll, 38 Idaho 545, 558, 223 P. 524, 34 A.L.R. 352; In re Estate of Fleshman, 51 Idaho 312, 319, 5 P.2d 727; State Insurance Fund v. Hunt, 52 Idaho 639, 645, 17 P.2d 354; Uyeda v. Diefendorf, 54 Idaho 614, 616, 34 P.2d 65. Hanson as attorney for Bean, sustains the same relation. Compare: Jackson v. Smith, 254 U.S. 586, 589, 41 S.Ct. 200, 65 L.Ed. 418; 3 Bogert, Trusts and Trustees, §§ 481, 482. Among various duties of trustees, there is a general one described in 65 C.J. 652, § 520, as follows: In administering the trust, the trustee must act for the beneficiaries, and not for himself in antagonism to the interests of the beneficiaries; he is prohibited from using the advantage of his position to gain any benefit for himself at the expense of the cestui que trustent, and from placing himself in any position where his self-interest will, or may, conflict with his duties as trustee, as a trustee is required to protect at all hazards, even to his own personal loss or disadvantage, the estate under his administration where his personal and individual interests conflict with those of the trust estate; and where a trustee uses trust property for his own personal advantage, plenary relief may be granted    One of the commonest illustrations where a conflict of interests appears, is a sale of trust property to the trustee individually. In such situations, the trustee should be attempting to sell the property for as much as possible to benefit the trust estate, while at the same time, as an individual, he probably would be attempting to buy the property for as little as possible. Regarding this situation it is said in 3 Bogert, Trust and Trustees, § 484:    In thus assuming the position of a buyer of the trust property, the trustee would be violating his duty of loyalty to his cestui. He would be injecting private interest into his management of the trust. This is an exceedingly dangerous line of conduct. Some trustees would take no advantage, or might even be so conscientious as to give themselves the worst of the bargain; but many would consciously or unconsciously manipulate the sale in such a way as to get the property for less than its actual worth. In its desire to avoid this danger to the cestui's interests and to remove this temptation from the path of the trustee, equity has forbidden such a purchase by the trustee, either directly or indirectly   The fairness or good faith of the sale by the trustee to himself is immaterial. He may have paid the full value of the property, and been guilty of no concealment, misrepresentation, or other underhanded dealing. The cestui's option to avoid or use the constructive trust remains. Equity will not inquire into the fairness of particular sales. It realizes that, if it did, in many cases the unfairness would be so hidden as to be undiscoverable. The trustee might have had secret information of values which the cestui cannot prove he had. It is deemed better to give the beneficiary the opportunity to strike down all such sales, including some which are made in entire good faith, rather than to attempt the very difficult task of separating out those which are advantageous to the cestui and fairly conducted    The rule seems to have first been announced in the Supreme Court of the United States in Michoud v. Girod, 45 U. S. 503, 4 How. 503, 552, 11 L.Ed. 1076, and that court has consistently followed it since. A particularly appropriate case is Jackson v. Smith, 254 U.S. 586, 41 S.Ct. 200, 201, 65 L.Ed. 418, where a receiver entered into an agreement with his attorney and one Wilson to the effect that Wilson should purchase property owned by the receivership estate subject to a deed of trust, at the trustee's sale. It was said that there was no evidence of any improper influence at the sale to prevent competition or to close competitive bidding or to bring about the sale to Wilson in preference to any one else. Notwithstanding that fact the court said that when the receiver entered into the agreement he placed himself in a position in which his personal interests were, or might be, antagonistic to those of his trust; that it became to his personal interest that the purchase should be made by Wilson for the lowest possible price; that the course taken was one which a fiduciary could not legally pursue. Turning now to the law of Idaho, 1 Ida.Code, Ann., 1932 § 15-745 provides: No executor or administrator must, directly or indirectly, purchase any property of the estate he represents, nor must he be interested in any sale. Regarding this statute, it was said in Re Estate of Blackinton, 29 Idaho 310, 328, 158 P. 492, 498:    The office of administrator of an estate being of a highly fiduciary nature, this statute may be considered as merely declaratory of the fundamental principle of trusteeship, which inhibits the trustee from dealing with the subject-matter of the trust in any way which may inure to his personal profit.    Thus we find that the general rules stated above are the rules in Idaho by express statute.