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Beatty v Guggenheim Exploration Co. 225 NY 380 (1919)

Trusts Law – US – Constructive Trust – Equity – Good Faith – Duty to Employer

Facts

The defendants, Guggenheim Exploration Company, acquired and developed mining properties and the complainant, Beatty, worked for the company. There was a dispute over payment and shares of stock, which the complainant believed was compensation for his services. On the other hand, the defendant claims that this should be recoverable from the complainant. In addition, there was a dispute regarding a share of commission with Perry over a contract.

Issues

The issue in this appeal case was whether the complainant was entitled to compensation for his services or if the defendant was entitled to profits obtained as a breach of duty.

Held

It was held that the complainant could only recover the compensation that was agreed by his contract of employment. There could be no recovery for the compensation received from the agreement with Perry; he had done the work for this contract and was therefore entitled to his compensation for his services. The complainant had asked Perry to inflate the price in order to gain a share. This was a breach of duty to his employer and this money would be subject to a constructive trust. The court stated that constructive trusts could arise when property was ‘acquired through duress, fraud, undue influence or mistake, or through a breach of fiduciary duty’ [442]. The conduct of Beatty was not in utmost good faith and benefitted him, which was viewed as fraud on his employer. The court stated that a constructive trust is ‘the formula through which the conscience of equity finds expression’ [386].


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