39 F. 292 | Cir. Ct. Del. | 1889
Lead Opinion
(after stating the facts as above.) It is not denied that this acknowledgment by McComb, at the time it was made, created a trust of some sort in favor of Snyder, but it is claimed, on behalf of the defendant, that the right of Snyder to a beneficial interest in the trust stock was subject to prior liens or incumbrances for advances made by McComb to Bardwell which were far in excess of the value of the stock, both at and subsequent to the date of the acknowledgment; in other words, that Snyder’s interest in the stock was a contingent one, depending on the payment of certain claims held by McComb against Bardwell, who was the original cestui que trust, and that these claims have never been paid. An issue of fact is thus presented which can be determined only by a review of the evidence; but, before entering upon any discussion of disputed facts, a preliminary statement of uncontroverted matters in the cause will materially shorten such discussion, and render it more intelligible. There is no evidence that McComb ever repudiated or disclaimed this declaration of trust. He did, however, when threatened with a suit, assert that Snyder’s interest was only a qualified one, as before stated. The assessments on the subscription for the trust stock, as far as there is any evidence on that subject, were paid by Bardwell; and certificates Nos. 157 to 164, inclusive, for 800 shares, (increased from the original 600 by the increase of the capital of the association,) were issued to Henry S. McComb, trustee, October 6, 1870, and these shares stood in his name as trustee at the time of his death, December 30, 1881. On November 8, 1871, McComb sold and transferred 5,000 shares of the Southern Railroad Association, belonging to himself, to the Pennsylvania Company, at $125 per share, and on the same day transferred to the same company 5,000 other shares of the stock, including those standing in his name as trustee. Upon the face of the transaction the transfer of the second 5,000 shares was made without any money consideration, and solely for the purpose of giving to the Pennsylvania Company the controlling management of the association; but by the terms of his agreements with that company McComb parted with and surrendered the possession of the trustee stock for the time being. It was out of his possession at the time of his death, and was delivered to his executrix by the Pennsylvania Company at about the time of the beginning of this suit, ft does not appear that any dividends were declared on the trust stock,
Approaching the more debatable portion of the testimony, the first inquiry relates to the understanding, or “arrangement,” which was had among themselves, by McComb, Bardwell, and Snyder, in reference to the trust stock. McComb and Bardwell, acting independently, and sometimes jointly, were large operators in railroad stocks and other securities, and their personal relations, judging from the letters that passed between them, were intimate and cordial. In the early part of 1869 they were ■ concerned in a joint speculation in the stock of the Chicago & Rock Island Railroad Company, to which Bardwell contributed $45,000, and was to receive one-fourth of the profits after all the expenses had been deducted, as appears from the following receipt executed by McComb :
“Apl. 22,1869.
“Received, Boston, April 22, 1869, of J. Bardwell, his three drafts of $15,-000 each, 30, 40, and 50 days date, on Strang and Snyder, New York, being in payment of one-fourth interest in 10,000 share transaction * in the stock of the Chicago and Rock Island Railroad Co., to bo managed by John F. Tracy, as agreed between myself and said Tracy, through Smith, Randolph & Co., of New York, as brokers for the account of myself and Bardwell.
“H. S. McComb.”
Annexed to this paper is the following memorandum :
“The three drafts mentioned in the foregoing receipt were paid by Strang and Snyder, and by them charged to my account on their books, after the transaction in the Chicago and Roek Island Railroad Company’s stock was closed. The whole or no part of the money or interest was returned to me, but $42,000 was applied to the subscription to stock in the Southern Railroad Association, for which amount I hold H. S. McComb’s receipt, as trustee, dated Nov. 23, 1869. C. B. Snydeb.
“Boston, January 23, 1870.”
Assessments on the subscription to the trust stock were paid by Bard-well prior to MeComb’s acknowledgment, as follows:
July 8, 1868. 40 per cent, on $60,000, or - - - - $24,000
Jan. 10,1869. 10 “ “ - - - 6.000
*296 (Stock increased 33 per cent, or to $80,000.)
Jan. 2, 1869. 5 per cent. “ $80,000, “ - - - $4,000
March 2, 1869. 5 - - - 4,000
Sept. 20, 1869. 5 “ “ “ “ - - » - 4,000
This statement shows that up to November, 1869, $42,000 had been paid on the trust stock, and corresponds with the acknowledgment of trust, made by McComb. In reply to a letter dated October 25, 1873, written by E. F. Cutter to McComb, inquiring, “Are the interests of P. S. & C. in the Southern R. Rd. Association, on which you advanced 60 M., still intact, and are they worth the loan and principal? How does the 60 M. of Mr. Snyder’s stand affected?” McComb wrote, two days later: “The South’n R. R. Association stands all right, and everybody’s interest stands upright and square.” Later on, on June 3, 1874, Snyder applied to McComb for $30,000, either by way of payment, on account, for the trust stock, or as a loan, with the suggestion that McComb could reimburse himself from the sale of consolidated bonds. Bardwell urged McComb to comply with Snyder’s request, but McComb declined. It is evident, from the letters which passed between McComb and Bardwell and Snyder, at the time of this application, that both Bardwell and Snyder understood and believed that Snyder’s interest in the trust stock was represented by $42,000, and that Snyder was entitled to at least that much of its value, without making any allowance for the claims of other parties. Being further pressed for money by Snyder, McComb wrote to him on July 21, 1874, that he (McComb) held the trust stock as collateral for advances made to Bard-well and F. Skinner & Co., “which advances more than cover all this stock.” In the same letter, however, McComb offered to send Snyder $30,000 Southern Railroad Association paper, on condition that Snyder would surrender to him the written acknowledgment of the trust. Snyder replied to' this that “F. Skinner & Co. never had any interest in the money you receipted to me for as trustee; neither had Mr. Bard-well, except that I agreed to share the profits of the transaction with him after receiving the principal and interest at 8 per cent, per annum ; and it was as much to help him as myself that I asked you for an advance. I cannot entertain your offer for a moment, but I will assign my interest to parties who will take what they are entitled to; no more, no less.” The statement of Snyder’s account with P. Skinner & Co. is produced in confirmation of what Snyder had written to McComb:
“Boston, Novem. 20, 1874.
“(7. B. Snyder, Esq.—Dear Sir: On the 4th of August, 1869, we received the sum of $44,709.88, and paid as follows:
June 29, 1869,......$37,580 00
Octo. 1, “...... 2,305 44
Aug. 25,1870,...... 4,100 00
$43,985 44
*297 —and Mr. Bard well’s note, due Sept. 2, 1870, for $4,172.58, lays under protest, as far as we know. The above receipt and payments being on account of your subscription to the Southern It. ltd. Association.
“Yours, truly, Kdm’.d If. Cuttek, of if. Skinner & Co.”
Towards the close of the year, 1869, Bardwell became financially embarrassed, although as late as September 15,1869, McComb had written to him:
“The net of your account is $36,719.80, from which deduct payment of $2,500.00, leaving due you, and subject to call, $34,219.80. Shall I pay your trustee call S. R. R. A., due the 20th inst.?”
On November 18, 1869, Bardwell executed a power of attorney to transfer his own stock, 1,383 shares, in the association. The witnesses Cross and Marsh testify to conversations had at different times in the years, 1873, and 1874, between McComb and Snyder, in which McComb represented the stock of the association to be of great value, and advised Snyder not to part with his interest. Henry Muliiken, another witness for the complainants, acquired an interest in the association, in 1868, for $10,000, which eventually represented 174 shares of stock, for which McComb, in the spring of 1873, offered him $25,000, and in the autumn of the same year $17,000, both of which offers were declined.
The testimony for the complainants, of which a general outline has now been given, points to the conclusion that the acknowledgments of November, 1869, created an unqualified trust in favor of Snyder for at least the quantity of stock represented by $42,000; nor is there any evidence to the contrary, excepting the unsupported statements of McComb, which were founded on a misapprehension by him of his arrangement with Bard-well and Snyder. A court of equity would hesitate to enforce a declaration of trust, absolute on its face, if it was intended by the declarant, with the knowledge and consent of the cestui qm irrnt, that the interest of the beneficiary was a qualified one, and subject to well-understood contingencies; but here there does not appear to be a reasonable doubt that Bardwell and Snyder believed that Snyder was to be the beneficiary of the trust stock for the amount of money which he had paid Bardwell for it, without qualification, and the expressions used by McComb, in declaring the trust, import the same thing. Col. McComb was a man of superior intelligence and capacity, possessed of a large experience, acquired in the management of extensive business operations of different kinds, and was fully competent to protect his own interests on all occasions; and if he failed, in this instance, in making this declaration of trust, to guard against the loss of a collateral security, while he may have deceived himself, his fault or mistake cannot be allowed to deprive an innocent person of his rights. Bardwell requested him to “ acknowledge that you hold in the Southern Assn., as trustee for [the benefit,] or rather, for C. B. Snyder, that amt. of stock wh. you held as for me, Mr. Snyder having two months since pd. me its costs and interest.” McComb, in sending the required acknowledgment, wrote to Bardwell that “if it is not in conformity with your wishes in any manner, please return it to me with such instructions to be carried out as you shall see disposed to
“Pear General McComb: I make transcript of memorandum for Snyder’s benefit, undertaking to carry out myself the verbal agreement I made with you: 6 notes for $5,000 each, Southern Railroad Association, 4 mos., and 2 for $5,000 each, your indorsement, you to have the $42,000 Snyder’s as col. security, and I will send you the satisfactory papers. I think you will send them to my caré for Snyder * * *. Truly yours, J. B.”
This does not look as if Bardwell believed that Snyder’s interest was subject to any lien or incumbrance, or he would hardly have proposed to McComb to accept the trust stock as collateral security for furthet advances. The reading of the whole correspondence prompts several questions. Why should a capable and experienced man like Col. McComb have made a declaration of trust, for the benefit of Snyder, in property which was already held by McComb as collateral security for more than it was worth? Did McComb and Bardwell contrive to deceive Snyder, by luring him into the belief that the money which he had lent to Bard-well was safely secured by its investment in the trust stock? Or did McComb endeavor to allay all suspicion on the part of Bardwell and Snyder by writing to Bardwell that, if the form of the acknowledgment was not entirely satisfactory, he would reform it in any manner to please Bardwell? To answer these questions consistently with the theory of the defense, that Snyder’s interest was only a contingent one, would, in the light of all the testimony, reflect unfavorably on the intelligence or on the good faith of McComb. There is no impenetrable mystery about this trust. The only trouble is that all the persons who were closely connected with and interested in the business are not here to explain some of the minor details, but, looking at the facts contained in the evidence and spread on the record of the case, there is sufficient proof to establish the trust as set forth in the bill of complaint.
Having disposed of this branch of the defense, there remain to be considered the plea of the statute of limitations, and the defense of res adqudicata. It may be sufficient to say that, as between a trustee and his cestui que trust, an express trust, created by the act of the parties themselves, will not be barred by any length of time, for, in such cases there is no adverse possession, the possession of the trustee being the possession of the cestui que trust. This is elementary law, not without modifications, it is true, but none of which are applicable to the present case. Hill, Trustees, 264, and the cases there cited; Prevost v. Gratz, 6 Wheat. 497; Decouche v. Savetier, 3 Johns. Ch. 216; Goodrich v. Pendleton, Id. 390. As already seen, there never was any disclaimer of the trust by McComb. He ad
But it was urged, with much ingenuity and with an imposing array of authorities, that the matters now in dispute between the respective representatives of McComb and Snyder have already been passed upon by a court of competent jurisdiction, and are therefore res adjudicata, and are not now subject to be reviewed and decided anew by this court. To sustain this defense evidence has been introduced of two separate actions instituted by Snyder against McComb, to recover the money which Snyder advanced to Bard well, and which went into the trust stock in'the hands of McComb. The first action was brought in the supreme court of the state of Now York, June 25, 1875, and was discontinued, January 19, 1876. The second action was begun, October 26,1875, in the supreme judicial court of Massachusetts, was heard by that court without a jury, and resulted in a judgment in favor of the defendant, December 23,1878. The amended declaration in the Massachusetts action set forth that in July, 1869, the defendant having in his hands the sum of $45,000 belonging to the plaintiff, promised the plaintiff, for the consideration of leaving this money in defendant’s hands, that he would purchase therewith a number of shares in the capital stock of the Southern Railroad Association, and would cause certificates for said shares to be issued to the plaintiff and to be delivered to him, and, further, that he would at any time, when requested, take the said shares from the plaintiff and pay him the sum of $45,000, with interest at the rate of 7 per cent. The declaration further complains that, relying on the defendant’s promises, the plaintiff allowed the defendant to retain thesurn of $42,000, but that the defendant neglected to purchase the stock or to perform his promises, etc. The issues of fact tried in that case were whether the plaintiff and defendant therein made the contract declared on, and whether there was any consideration for such a contract. The defendant’s counsel negatived both these propositions, and relied on the acknowledgment of trust to disprove the contract, contending that an action at law would not lie on such a paper, because the only scope and effect of such acknowledgment were to create a trust, for the enforcement of which a remedy must be had in equity. Before judgment was rendered, a motion was made on behalf of the plaintiff to convert the declaration into a bill in equity, under the provisions of a Massachusetts statute which authorized the supreme judicial court of that state to change a suit at law into a proceeding in equity, at the discretion of the court, if such change be necessary to enable the plaintiff to sustain the action for the cause for which it was intended to be brought. The court denied the motion, presumably on the ground that the action at law had no relation to the establishment of a trust; but, whether such was the reason or not, the court exercised its discretion in refusing the motion, without prejudice to the right of the plaintiff or to his representatives to bring an independent suit in equity to enforce the trust and compel its proper execution. The opinion of the court makes no part of the record of the judgment, and it nowhere ap
“In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different- cause of action, the injury must always be as to the point or question actually litigated and determined in the original action; not what might have been litigated and determined. Only upon such matters is the judgment conclusive in.another action.”
In determining the amount for which a decree should be entered, it must be remembered that Snyder, during his life-time, never claimed more than the sum of $42,000, that also being the amount which McComb acknowledged to have been paid on the trust stock at the time he made the acknowledgment, and there is no proof that Snyder paid any assessments after that. It has not been shown that the stock had an ascertained market value, or that the holders of it received any dividends or interest. The sale- by McComb to the Pennsylvania Company was made on certain conditions, among which was one that he would, at the ■expiration of two years from the day of sale, if requested, take the stock back at an advanced price; and his statements of its value, in the presence of Snyder and others, were made rather to inflate the stock by giv
Concurrence Opinion
I concur entirely with Judge Wales in the opinion just delivered. There is no question but that McComb held the stock in trust for Snyder. The declaration of trust executed on the 2‘2d of November, 1869, is conclusive on this subject; and it is absolute, having no qualification whatever. The words are:
“I hereby acknowledge to hold in the Southern Railroad Association, as trustee for 0. B. Snyder, under an arrangement with Josiah Bardwell, an original subscription of sixty thousand dollars, on which seventy per cent, has been paid. This notice is in conformity with an arrangement made some months ago between Josiah Bardwell, 0. B. Snyder, and myself.”
Whatever may have been the conditions and qualifications of the trust existing while Bardwell had the beneficial interest, none are claimed in this declaration as between McComb and Snyder. The plea that it was to l)e held by McComb as collateral is an after-thought. No such idea was put forward until several years after the declaration of trust was executed. In all the conferences that took place between McComb and Snyder about the stock, doAvn to July, 1874, the former never suggested that he held it as collateral, or that he had any claim on it. Collateral to what? The pretense now is that it was to be collateral to the debts that Bardwell, the original cestui que trust, owed to McComb. Then why was not that condition expressed in the declaration of trust given to Snyder? No reservation of any such right was made or hinted at. Besides, what debts of Bardwell was it to be collateral for? All the debts that he might ever owe to McComb? Or only those which were due when the stock was subscribed for? The vagueness of the claim, as stated by Mo-Comb himself in his testimony, is strongly presumptive against it. What evidence is there that Bardwell owed a dollar to McComb at the time of the latter’s death? It seems to me that this claim to hold the stock as a collateral paramount to the interest of Snyder as cestui que trust is unsupported by any sufficient proof. Assuming that the trust was an absolute one, it is clear that the stock has never been accounted for to Snyder or to his estate. The transaction in Chicago & Rock Island stock, in the spring and summer of 1869, docs not affect the case in the least, except as being the occasion, perhaps, on which Snyder advanced the money to Bardwell in consideration of which the latter transferred all his interest in the trust stock to Snyder. Besides, this transaction had all passed before the declaration of trust was executed. The relation, then, of trustee, pure and simple, being established against McComb, how can his conduct be excused? In November, 1871, he sold his own stock in the Southern Railroad Association to the Pennsylvania Company for $125 per share, under agreement, it is true, to repurchase it at an advance at the end of two years, at the option of the Pennsylvania Company,—an op
I concur with Judge Wales in the opinion that the estate of McComb is liable to the complainants for the want of a full and faithful fulfillment of the trust on the part of Mr. McComb. I also agree that, in the absence of satisfactory proof of the value which the stock had during the period from 1870 to 1874, when it could have been advantageously disposed of, and when Snyder desired to dispose of it, but was-prevented from so doing by the representations of McComb, the amount paid upon it, with interest, is the most equitable and satisfactory award of compensation that can be made. It would be no relief at all to the complainants to give them a decree for the specific stock. That has long ceased to have any value. The complainants contend that they ought to be allowed the same price which McComb realized for his own stock in
Let a decree be made for the complainants against the defendant for the sum of $42,000, with interest at 6 per cent, per annum from the 23d day of November, 1869, the date of the declaration of trust.