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Keywords

contractplaintifftrustconstructive trust
contractbreach of contractplaintiffdiscoverytrust

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Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 122 N.E. 378

Facts

The plaintiff was involved in two contracts: the Perry-Guggenheim contract and the Perry-Treadgold contract. The plaintiff had persuaded Perry to seek a higher payment for services, which was deemed a breach of duty, leading to a constructive trust on that payment. However, the court found that the two contracts were severable and that the plaintiff's rights under the Perry-Treadgold contract remained to be determined, as the employer had orally consented to the plaintiff's investment in that contract.

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.

Issue

Whether the plaintiff's rights under the Perry-Treadgold contract may be finally determined now, given the previous misconduct related to the Perry-Guggenheim contract.

The question is whether plaintiff's rights under the Perry-Treadgold contract may be finally determined now.

Rule

The court held that an agent may be chargeable as a trustee if the employer so elects, but oral consent to an investment can protect the agent from being charged as a trustee for profits derived from that investment.

We think the situation is one where an employer, not consenting to the investment, would have the privilege, if he so elected, to hold the plaintiff as trustee.

Analysis

The court analyzed the relationship between the two contracts and the implications of the plaintiff's actions. It concluded that the employer's oral consent to the plaintiff's investment in the Perry-Treadgold contract precluded the implication of a trust, despite the covenant requiring written consent for any modifications. The court emphasized that the employer's consent allowed the plaintiff to treat the transaction as a joint venture rather than a loan, thus protecting him from being charged as a trustee.

We think therefore, that aside from the special provisions of this contract, the agent became a trustee at the election of the principal. But the contract re-enforces that conclusion.

Conclusion

The court modified the Appellate Division's judgment to limit the plaintiff's recovery to his share of the profits under the Perry-Treadgold contract, affirming the judgment as modified.

We hold, therefore, that the consent, though oral, gives protection to the agent, and acquits him of a breach of contract.

Who won?

The plaintiff prevailed in the case as the court recognized his rights to the profits from the Perry-Treadgold contract, despite the previous misconduct related to another contract.

The plaintiff was chargeable as a trustee if the employer so elected. But the Appellate Division has found upon sufficient evidence that the employer consented to the investment.

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