Jackson v. Smith

Supreme Court of the United States · 1921 · Corporations

254 U.S. 586 (1921)

Updated August 22, 2026

CorporationsReceiversFiduciary dutyProfits from conflicted transactionsreceiverfiduciaryconflict of interestjoint and several liability

Facts

A court-appointed receiver, Ambrose, held among the association's assets a defaulted note secured by a deed of trust on land and caused the land to be advertised for foreclosure sale. After an initial inadequate bid led to withdrawal of the property, Ambrose, Wilson, and Smith agreed that if Wilson purchased at a second sale, all three would share liability for the purchase and expenses and would share ownership of the property. Wilson bought the property at the second sale for $491 after competitive bidding, and shortly thereafter he and Smith found a buyer willing to pay $1,400; after clearing taxes, tax liens, and expenses, the remaining $743.68 was divided equally among Wilson, Smith, and Ambrose. The trust estate received nothing from the transaction because the amount needed to discharge tax liens exceeded Wilson's bid.

Issue

Whether persons who knowingly joined a receiver in an arrangement to purchase property securing an asset of the receivership and then shared in the resale profits are liable to the trust estate for those profits, and if so, in what amount. The case also presented whether liability exists even though the foreclosure sale itself was fairly conducted and the estate may not have suffered actual injury.

Rule

A receiver has an affirmative duty to realize the largest possible amount from assets of the estate and, when property securing such an asset is sold, to endeavor to have it bring the largest possible price. If the receiver joins an arrangement that gives him a personal interest in having the property purchased for the lowest possible price, he enters a position of conflict that a fiduciary may not legally pursue. If profits result, the law requires him to account to the trust estate for all profits obtained by him and his associates, even if the estate was not injured; others who knowingly join the fiduciary in the enterprise are likewise jointly and severally liable for those profits.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A court in Ohio appoints Nina Torres receiver for Lakeview Savings Group, which owns a delinquent secured note on land in Toledo. Before the foreclosure sale, Nina agrees with Owen Pike and Leah Mercer that if Owen buys the land, all three will share ownership, expenses, and any resale gain; the sale is public and competitive, and the land is later resold for a substantial profit.

If a successor receiver sues Owen and Leah for the profit, which is the strongest result?

Explanation. The majority rule is that a receiver must endeavor to realize the largest possible amount for the estate and may not place herself in a position where her personal interest favors a low purchase price. If profits result, she must account for all profits, and those who knowingly join her are jointly and severally liable for the full amount, even if the sale was fairly conducted and even without proof of injury.