United States v. Dunn, 268 U.S. 121 (1925)
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United States v. Dunn
No. 120
Argued March 13, 1925
Decided April 13, 1925
268 U.S. 121
APPEAL FROM THE CIRCUIT COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Syllabus
1. Parties who take a lease of a ward’s property under a secret agreement with the guardian making the lease that it shall inure in part to his personal benefit, hold the lease, and if that be transferred to a purchaser, hold the proceeds they acquire from it, as trustees ex maleficio for the ward without regard to whether the ward was actually damaged by the fraud of the guardian. P. 130.
2. In such cases, the ward may at his option, follow the fraudulently diverted trust res until it reaches the hands of a bona fide purchaser for value, or claim the proceeds of the sale or other disposition of it in the hands of the person who fraudulently acquired it from the fiduciary and in the hands of that person’s donees. P. 132.
3. A suit to establish an equitable claim to specific property may be prosecuted to subject the proceeds of that property to the trust if it develop in the course of the trial that the defendant has conveyed it away in violation of his equitable duty to the plaintiff. P. 133.
4. The guardian of an Indian leased his ward’s land partly in consideration of a secret interest for himself agreed to by his lessees, and afterwards, in a compromise between the lessees and one who had obtained a lease of the same land from the Indian’s curator, the guardian’s lease was executed by the curator also, and, having been approved by a county court and by the Secretary of the Interior, was assigned to a corporation, shares of which were issued to the respective lessees and parties claiming under them, the assignment of the lease being the sole consideration for the shares distributed to the lessees of the guardian. Held, (a) that a suit by the United States, on behalf of the Indian, to set the lease aside or for alternative relief could be prosecuted to reach the shares, or the proceeds thereof, in the hands of the fraudulent lessees and their donees, including shares bought by these lessees from the guardian, even though relief could not be had as against the corporation and bona fide purchasers for value, and (b) that an agreement by the plaintiff after defeat in the district court, not to prosecute the appeal as against the corporation and bona fide shareholders did not prevent this relief as against the others. P. 135.
5. In a suit praying relief from the execution and legal effects of a lease because it was procured by the fraud of the lessees, the lessees can not, while claiming under it and holding the benefits derived from it, deny the authority of the lessor to make it. P. 135.
6. One who claims the benefit derived from a breach of trust in which he actively participated and who shows no prejudice from a delay of six years in bringing suit to compel him to account, cannot complain of laches. P. 136.
288 F. 158 reversed in part, affirmed in part.
Appeal from a decree of the circuit court of appeals affirming a decree of the district court which dismissed a bill brought by the United States, on behalf of a full-blooded Choctaw Indian, a minor, to cancel for fraud an oil and gas lease on the Indian’s land in Oklahoma, or, in the alternative, to affix a trust on shares held by defendants in a corporation, also a defendant, to which the lease had been assigned.