TRUSTS-FIDUCIARY\u27S DUTY OF LOYALTY

Defendant and testator were partners. Upon the death of the testator leaving a widow and children, defendant was named executor under the will with power to manage, control or sell any of the property in the estate. The testator\u27s children\u27s share vested in defendant as trustee under the will. Thereafter, defendant formed a corporation to which he transferred the partnership property. Equal amounts of stock therein were issued to himself individually, and to himself in his fiduciary capacity for the widow and children; a number of shares were issued to a third party who had a contingent interest under the old partnership agreement. Subsequently, defendant purchased most of the outstanding shares of the third party for himself individually, thus securing a majority interest in the stock of the corporation and placing the widow and children in the position of minority shareholders. The widow and children sued to establish constructive trusts in one-half the stock acquired by the defendant from the third party. Held, defendant, in purchasing for his individual advantage, shares that were so connected with the trust property and the scope of his duties as fiduciary, through knowledge that came to him in his capacity as fiduciary, failed to measure up to the high standards of conduct required of a .fiduciary. Wootten v. Wootten, ( C.C.A. 10th, 1945) 151 F. (2d) 147