Opinion
No. 31507.
January 14, 1935.
1. TRUSTS.
If trustee or other fiduciary, in violation of his duty, uses money to pay antecedent debt of his own to creditor who has notice of such breach of trust or that money is subject to trust, beneficiary may impress trust on money in hands of creditor.
2. TRUSTS.
"Constructive trust" arises where one party has obtained money which does not equitably belong to him, and which he cannot in good conscience retain or withhold from another entitled thereto; as, for example, money acquired through breach of trust or violation of fiduciary trust.
3. LANDLORD AND TENANT.
Where tenant was authorized to sell crop free from share croppers' liens and to turn buyers' checks over to landlord for collection, who was to turn back to tenants amounts due croppers to be turned over to them, croppers' liens, though waived as to buyers of crops, were not waived as to proceeds in hands of tenant or landlord (Code 1930, section 2238).
4. TRUSTS.
Where tenant was authorized to sell crop free from share croppers' liens and to turn buyers' checks over to landlord for collection, who was to turn back to tenant amounts due croppers to be turned over to them, such amounts were impressed with trust in hands of landlord, who knew funds constituted croppers' shares, and could not be applied on tenant's note notwithstanding tenant's consent thereto (Code 1930, section 2238).
APPEAL from the Chancery Court of Humphreys County.
W.D. Womack and L.R. Wadlington, both of Belzoni, for appellant.
The case of Jones et al. v. Stevens et al., 12 So. 446, it occurs to the writer, settles the question of liability on the part of the appellant, Mrs. M.E. Jackson. In that case it is held by this court "that one who merely receives on an account against the tenant money realized by him from the sale of agricultural produce on which a lien for rent existed, is not liable for such rent."
Sections 2175 and 2238, Code of 1930.
A cropper's contract gives the cropper no legal possession of the premises further than as an employee. The legal possession is in the employer; the cropper is entitled to go upon the land for the purpose of producing, harvesting the crop, but when this is done his possessory right ceases. Before the division of the crop the whole is the property of the landlord and the cropper has no legal title to any part thereof.
17 C.J., p. 382, sec. 11; Section 2238, Code of 1930; Seavey Sons v. Godbold, 99 Miss. 113, 54 So. 838; Phillips v. Thomas, 128 Miss. 729, 91 So. 420; Judd v. Delta Grocery Cotton Co., 133 Miss. 866, 98 So. 243; Tonnar v. Washington Issaquena, 140 Miss. 875, 105 So. 750; McGee v. Carver, 141 Miss. 463, 106 So. 760; Crutcher v. Commercial Bank, 146 Miss. 404, 111 So. 569; Quiver Gin Co. v. Looney, 144 Miss. 709, 111 So. 107; Williams v. Delta Grocery Co., 132 So. 732.
There was no privity of contract between the appellees and the appellant, expressly or impliedly.
The rule which prevents the agent, or trustee, from acting for himself in a matter where his interest would conflict with his duty also prevents him from acting for another whose interest is adverse to that of the principal.
21 R.C.L., p. 827, sec. 11; Wilberger v. Hartford Fire Ins. Co., 72 Miss. 338, 17 So. 282.
The writer is familiar with the rule that where a question of fact is determined by the chancery court, unless it is manifestly wrong, would not be reversed upon it alone, but it is clear and obvious that the court below manifestly erred in that its decisions were not in accordance with the pleading and the testimony in the case.
McCormick v. Bloom, 75 Miss. 81; Phillips v. Thomas, 91 So. 420; Seavey Sons v. Godbold, 99 Miss. 112, 54 So. 838; Quiver Gin Co. v. Looney, 111 So. 107. H.F. Jones, of Belzoni, for appellees.
The sharecroppers, appellees, were the tenants of W.R. Jenkins, and he their landlord. There was no relation of a general agency on the part of Jenkins for the tenants in their contract.
Tenants producing a crop are the owners thereof, and the several landlords, Jackson and Jenkins, would have a lien on crops for rent and furnish.
Bethany v. State, 124 Miss. 870, 87 So. 410; Reynolds v. Polk, 144 Miss. 223, 109 So. 698.
It seems to be the position of appellant that Jenkins was a general agent for his tenants, but this position is not supported by the evidence.
When W.R. Jenkins sold the crops of his tenants and received money in hand which was theirs it was his duty to pay it to them, and nobody else. He became thereupon a trustee for these tenants to the extent of the amount of money held by him to which they were entitled.
Newman v. Tillman, 71 Miss. 26, 13 So. 934.
If the trust property has been transferred to a bona fide purchaser for value without notice, or has lost its identity, the beneficial owner must, and under other circumstances may, resort to the personal liability of the wrongdoing trustee.
3 Pomeroy's Equity Jurisprudence, sections 1048 and 1058.
Jenkins became a trustee for the amount of money he got for their property, and in turn Mrs. Jackson, not a bona fide purchaser for value, is not in a position to avoid returning the money she received by the breach of trust of W.R. Jenkins, besides Dr. Jackson, her agent, knew how he was receiving this money, whose it was, and that it was subject to a trust, and this was determined by the court from the evidence.
3 Pomeroy's Equity Jurisprudence, sec. 1047; Bank of Hickory v. McPherson, 102 Miss. 853, 59 So. 934; Isom v. First National Bank et al., 52 Miss. 915; Armour v. Bank, 69 Miss. 705, 11 So. 29.
Under the general rule relating to the violation of a confidential or fiduciary relation, an agent undertaking any business or the performance of any services for another is disabled in equity from dealing with the subject-matter of the agency upon his own account or for his own benefit, and if he does attempt to deal in his own name he will be deemed a constructive trustee for his principal.
65 C.J. 480; 2 C.J. 884; 21 R.C.L., Principal and Agent, par. 92.
Mrs. Jackson does not occupy the position of a bona fide holder, without notice or knowledge, the knowledge of her agent being fully established to the full satisfaction of the chancellor by the evidence.
26 R.C.L., Trusts, par. 84.
Where an agent owed a debt, and undertook to pay that debt by the transfer of his principal's property, and the creditor took it with notice that it was the property of the principal, there is no rule of equity or conscience that would allow the creditor to retain such property or its proceeds against the timely claim of the principal.
Patterson v. Neal, 135 Ala. 482, 33 So. 39; Bowdon Line Works v. Moss, 14 Ala. App. 435, 70 So. 292; 21 R.C.L. 913; Dorrah v. Hill, 73 Miss. 787, 19 So. 961.
A finding by the chancellor, warranted by the evidence, will not be disturbed on appeal.
Moise v. Howie, 98 Miss. 30, 53 So. 402.
Argued orally by W.D. Womack, for appellant, and by H.F. Jones, for appellee.
Appellees, Doss Jefferson, Ellie Jefferson, Horse Gowdy, and Sam Willis, four negroes, filed their separate bills in the chancery court of Humphreys county against appellant, and her farm tenant, W.R. Jenkins, appellees being his share croppers, to recover their shares of crops produced by them during the year 1933, the proceeds of which had been sold by Jenkins, and turned over to appellant. By agreement the four cases were consolidated and tried as one. The trial was had on bills, answers, and proofs, resulting in decrees as follows: For appellee Doss Jefferson, two hundred sixty dollars and three cents; for Horse Gowdy, three hundred eighty-nine dollars and three cents; for Ellie Jefferson, one hundred seventy-eight dollars and sixty-eight cents; and for Sam Willis, two hundred and ninety-nine dollars and seventy-eight cents; with six per cent. interest on each of the amounts from January 1, 1934. From those decrees appellant prosecutes this appeal.
There is little, if any, conflict in the material evidence. Mrs. Jackson owned a farm in Humphreys county. Her husband, Dr. J.S. Jackson, had full control of it for her, and had had for twenty years or more. For about twenty years he had rented it annually to Jenkins. He rented it to Jenkins for the year 1933, at a standing rental of one thousand dollars. In addition he advanced Jenkins money with which to supply and farm the place during the year. Jenkins share-cropped to these four negroes part of the farm for that year; they made the usual share-crop contract, which was that the landlord would furnish the land, teams, plow tools, and "furnish" to make the crops; the tenants to furnish the labor therefor; the proceeds to be shared, half and half, the tenants first paying the "furnish" out of their half of the proceeds.
At the beginning of the year 1933, Jenkins was indebted to Mrs. Jackson for a past-due indebtedness, probably incurred over a period of years, in the sum of two thousand three hundred thirty-three dollars and sixty-seven cents. On the 18th day of February, 1933, he executed his note to Mrs. Jackson for the amount, and a deed of trust on all his crops and other property, to secure the same. At the time of the execution of the note and deed of trust, Jenkins had contracted with these share croppers — however, that fact is immaterial. Mrs. Jackson had no lien by operation of law on Jenkins' crops for the year 1933, to pay that indebtedness.
When the cotton crop was gathered and ready for market, Jenkins took charge of all the cotton produced by these share croppers, sold it, and turned the proceeds over to his landlord, Mrs. Jackson. This had been the custom for years. These proceeds were sufficient to pay the one thousand dollars Jenkins owed Mrs. Jackson for the rental of the place, and Mrs. Jackson's "furnish" to Jenkins, to enable him to farm the place; and, in addition, Jenkins' "furnish" to these share croppers to enable them to make and gather their crops; and there was left the amounts decreed to each of them by the court, as above set out. Instead of paying these amounts over to Jenkins, to be paid by him to the share croppers, as the evidence showed to have been the custom, Mrs. Jackson placed them as a credit on the two thousand three hundred thirty-three dollars and sixty-seven cent note due her by Jenkins. The evidence was ample to show that Mrs. Jackson at the time had notice, either actual or constructive, that these amounts represented appellees' interest in crops produced by them; that they were rightfully entitled thereto; and that Jenkins had no other means with which to pay them.
The evidence showed, without dispute, that appellees consented for Jenkins to sell the crops; but that the understanding was, if not expressed, at least tacit, that after taking out his "furnish" to them, they were to receive from him what was left of their half of the crops.
The basis of appellees' cases is that Jenkins, in selling, and receiving the proceeds of, the crops, occupied a trust relation to them, so far as their interest was concerned; that as such trustee it was his duty to receive and pay over to them such interests; that Mrs. Jackson, having actual or constructive notice of such trust, received the proceeds impressed with it, and therefore she also held them as trustee, for their benefit. The court evidently took that view, and rendered a decree against Jenkins and Mrs. Jackson for the amounts. Mrs. Jackson alone appealed, Jenkins being insolvent.
Appellant contends that the principles laid down in Williams v. Delta Grocery Cotton Co., 159 Miss. 575, 132 So. 732, are controlling in this case. In the first place, that was a suit at law, and not in equity; in the next place, the evidence showed that Williams, the plantation manager, authorized the owner of the plantation to sell the crops on which he had a lien for his services, he to look to the plantation owner alone for the amount due him for such services. There was no effort in that action at law to impress the funds in the hands of the Delta Grocery Cotton Company with a trust in favor of Williams. However, we do not mean to intimate that if there had been, the result would have been different, under the particular facts of that case. There is this difference between the present case and that: The evidence in this case showed that Jenkins was authorized to sell the crops free from the croppers' lien, and to turn the checks of the purchasers over to Mrs. Jackson for collection; and when collected, Mrs. Jackson was to turn back to Jenkins the amounts due the croppers, for the purpose of being turned over to them — that this was the practice and agreement which had theretofore been carried out. Under section 2238, Code 1930, appellees had a lien on the crops produced by them for the payment of their shares thereof, paramount to all liens and incumbrances or rights of any kind created by, or against, Jenkins, except the lien of Mrs. Jackson for her rent and supplies furnished Jenkins. It is true, this lien was waived as to the purchasers of the crops, as held in the Delta Grocery Cotton Company Case. But, under the facts here, was it waived as to the proceeds thereof in the hands of Jenkins and Mrs. Jackson? We think not. Mrs. Jackson, in crediting these amounts on the old indebtedness due her by Jenkins, parted with no present consideration; and, as above stated, she knew that Jenkins held them as trust funds. If a trustee or other fiduciary, in violation of his duty, uses money to pay an antecedent debt of his own to a creditor who has notice of such breach of trust, or that the money is subject to the trust, the beneficiary may impress a trust on money in the hands of the creditor. It is a well-settled doctrine of equity that a constructive trust arises where one party has obtained money which does not equitably belong to him, and which he cannot in good conscience retain or withhold from another entitled thereto; as, for example, money acquired through a breach of trust or violation of a fiduciary trust. Pomeroy's Equity Jurisprudence, vol. 3, secs. 1047, 1048; Bolivar County v. Bank of Cleveland (Miss.), 155 So. 176; Newman v. Tillman, 71 Miss. 26, 13 So. 934.
Mrs. Jackson knew these were trust funds; she knew that appellees looked to them alone for their shares in the crops; that they constituted the only source from which they could receive their shares. She knew that when Jenkins consented, if he did consent, for these funds to be applied to his indebtedness to her, he thereby breached his trust, and that she was participating in such breach, and a party thereto. Both the Newman and the Bolivar county cases are in point, especially the latter. In the latter case the tenant was allowed by the landlord to sell the crops. He did so; and with the proceeds paid the bank a debt he owed it; the bank was affected with notice that the rent had not been paid; the court held that the landlord's lien attached to the proceeds of the sale in the hands of the bank.
Affirmed.