Beatty v. Guggenheim Exploration Co. 225 N.Y. 380 (1919) is a New York state law case, concerning the test for the imposition of a constructive trust.

We held then that there could be no recovery by the plaintiff of compensation paid to Perry under the Perry-Guggenheim contract.

The defendants argue that the two contracts are inseparably united in scheme and execution.

The plaintiff had an interest with Perry in claims "89 to 104 below discovery at Bonanza Creek."

Subsequent misconduct in another and distinct transaction does not work a forfeiture of rights already lawfully accrued.

It is whether the plaintiff ever lawfully acquired a share in the profits of the Perry-Treadgold contract, considered by itself.

He had also agreed that none of the covenants or conditions of the contract should be "waived, modified, altered, or annulled" except by writing subscribed by the parties, who further covenanted that they would not "urge or claim any such waiver, alteration, modification or amendment unless the same be evidenced by such writing."

One is whether the plaintiff, if he had purchased an interest in the claims without the consent of his employer, would be chargeable as a trustee.

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

We think it had the right to say to the agent that he must renounce the profits of the transaction and transfer the claims at cost.

No one, we think, would say that he could have retained them against his employer, and held out for an extravagant price, as, of course, he could have done if the purchase was not affected by a trust.

He might have kept out of it altogether, but if he went in, he could not withhold from his employer the benefit of the bargain (Trice v. Comstock, 121 Fed.

Rep. 620; Felix v. Patrick, 145 U. S. 317, 327; Massie v. Watts, 6 Cranch, 148; Ringo v. Binns, 10 Pet.

It is true that an agent or a partner who breaks a covenant not to engage in some other business does not, as a matter of course, become chargeable as a trustee for the profits of the forbidden venture (Dean v. MacDowell, L. R. 8 Ch.

It is sometimes said that the profits of the forbidden venture must have been diverted from the business of the principal or the partnership (See cases, supra).

When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee (Moore v. Crawford, 130 U. S. 122, 128; Pomeroy Eq.

If the agent must account as a trustee, the price which the employer pays is to that extent diminished.

But the Appellate Division has found upon sufficient evidence that the employer consented to the investment.

The contract was that if the president or the general manager disapproved of his investment, then the payment which he had made, instead of being a purchase of a share in a joint enterprise, should be a loan to Perry personally.

The president and the general manager, with knowledge that the plaintiff had reserved this privilege of withdrawal, consented that the investment be retained.

The question is whether the employer may now have the aid of a court of equity to impress upon the investment the quality of a constructive trust.

The plaintiff had reserved the right to withdraw from the joint enterprise if his employer disapproved of it, and in that event to treat his advances as a loan.

It is too late, years afterwards, for the employer to cancel the consent, and insist that the purchase be turned back into a loan.

There has been no attempt to discharge the agent, to terminate his contract, or to hold him liable for damages.

To use it for that purpose is not to waive or change a provision of the contract, and so the covenant does not apply, even if it could ever be effective.

The oral consent may not have created an estoppel, nor modified a contract, and yet it may have established an election.

Admit for the purpose of the argument that the plaintiff broke his contract when he took an interest in a mine.

After an election so decisive, announced while there was still an opportunity to withdraw, good conscience no longer demands that the agent be charged as a trustee.

A court of equity in decreeing a constructive trust is bound by no unyielding formula.

Our conclusion, therefore, is that the judgment of the Appellate Division should be modified so that the award made to the plaintiff shall be limited to his share of the profits under the so-called Perry-Treadgold contract, to wit: $27,300 in cash with interest from April 1, 1908, and 5,460 shares of the capital stock of the Yukon Gold Company of the par value of $27,300 with any dividends declared thereon since April 1, 1908; that in the event of any dispute between the parties as to the correctness of the aforesaid computation of profits either party shall be at liberty to apply to the Special Term of the Supreme Court at the foot of the judgment herein for further directions with reference thereto; that they may also make like application for further directions in respect of the enforcement of the judgment if such directions become necessary; and that as so modified, the judgment of the Appellate Division be affirmed, without costs to either party in any court.Hiscock Ch J, Chase J, Collin J and Crane J concurred.