McComb v. Frink

after stating the case, delivered the opinion of the court.

That some kind of a trust was created by this declaration of McComb appears on the face of the paper itself, and from its language, taken in connection with the correspondence which induced and accompanied it, it- is also clear that it was an absolute, unqualified, unconditional trust which was declared by McComb. "Whatever of doubt might from the mere • language of the declaration arise as to whether this trust was limited or qualified by some arrangement with Josiah Bard-well, and whatever suggestiveness there might be in such language, of a foundation for the claim now put forward, that this subscription and stock was by arrangement with Bardwell held primarily as security for advances made or to be made by McComb to him, and for the benefit of Snyder, as eestui gue trust only thereafter, and subject to this primary burden, is clearly displaced by the two letters which called for and accompanied the declaration. Bardwell’s letter to McComb is a request that he acknowledge the holding to be in trust for Snyder, and because Snyder had paid therefor its cost and interest. That clearly is a request for an absolute arid unqualified declaration of trust, and because the property had' been fully paid for by Snyder to the original eestui gue trust. That McComb intended and supposed by this declaration that he was giving the absolute declaration' of trust requested is -evident from thé letter which he wrote accompanying it, for in that he says “ if it is' not in conformity with your wishes in any manner, please return it to me with such instructions

“ Received, Boston, April 22, 1869, of J. Bardwell his three drafts of $15,000 each, 30, 40, and 50 days’ date, on Strang & Snyder, New York, being in payment for-one-fourth interest in 10,000-share transaction in the stock of the Chicago and Rock Island Railroad Co., to be 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.”

This was found among the papers of Mr. Snyder, with the following minute attached to it, signed by Mr. Snyder:

“ The three drafts mentioned in the foregoing receipt were paid by Strang & Snyder, and by them charged to my account on their books after the transaction in Chicago and Rock Island Railroad Company’s stock was closed. The whole or no part of the money or interest was returned to me, but

“ Boston, January 23, 1870. C. B. Snyder.”

McComb received and discounted these drafts, and sent the proceeds‘to Smith, Randolph & Co., which, by (heir letter of May 6, amounted to $44,709.38. On August 4,1869, McComb gave Bardwell a'draft on Smith, Randolph & Co. for $44,709, the exact amount of the deposit on May 6, the cents omitted; and on August 6 a check on the Bank of North America for $2500; and on the 15th of September wrote to Bardwell. stating, among other things, as follows:

“ 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 89

“ Shall I pay your trustee call S. R. R. A. due the 20th inst. %

“ Ever yours, H. S. McComb.”

These transactions, including the letters, show that Snyder (or the -firm of Strang & Snyder) advanced to Bardwell $45,000, and there is no testimony that it was ever repaid to Snyder, other than in this trust matter. The letter of September 15 also shows that McComb held money to the amount of $34,000 and over, subject to Bard well’s call. It appears also that Bardwell was very much embarrassed in • October,' and that this embarrassment was known to McComb:

The following is* one letter that passed between them:

“ (Personal.) Bostón,. Oct. 5, 1869.

“My Dear Friend McComb; I am in trouble, and.first to you I write. I left here Saturday night for New York, and returned Sunday; since Sunday I have not closed my eyes. I have been duped and swindled by that man Barry, and it is my own fault that makes the matter so much the worse. I had his honor pledged to me, and was credulous enough to

“Yours always, J. Bardwell.

“ Don’t say a word about this to any one.”

With knowledge of Bardwell’s condition, as shown by this letter, as well as otherwise, McComb g^ve this declaration of trust. Can it be believed that it would have been issued in that form, and sent in a letter accompanied with an implied promise to put it in any other form that might be desired, if at the time the stock was held by McComb as security for advances made, and to be made, to a man so financially embarrassed ?

Further, so far as appears from the testimony, McComb never suggested to Snyder, or, for that matter, to any one else, that this was other than an absolute and unqualified declaration of trust, until July 21, 1874, and then in this way. On June'3, 1874; Snyder wrote to McComb :

“ I have unexpectedly been called on to pay $40,000, a debt of F. Skinner. & Co. and myself, which I supposed was paid long since. Not owing anything, my means are all invested in. a way that I cannot reach them at present. I can get along with $30,000. What I want is for you to let me have in some way the above amount, ($30,000,) so that I can use it at once, and then you can reimburse yourself from the sale of consolidated bonds when they are issued.”

“I do not know how I can help you. I will do anything-I can consistently with the obligations that are already on me,, and hope to be able, at the meeting on Monday next, at New York, to suggest something that will relieve you, and not. hurt me. You can depend upon my doing everything I cart reasonably be expected to do in the matter.”

On July 16, Snyder wrote again, and urgently, saying:

“ I trust you will do me this favor, because I am really in a tight place and am borrowing the money from day to day, from my friends. I would not ask you for the favor if I could possibly get along without it. Will you help me ? Please let me know when you will be in N. Y. or where I can see you next week.”

In replying to this, on July 21,'McComb said :

“ I can send you the $30,000 Southern P. P. Ass’n .paper, and will do it if you will return me the paper I signed, giving you so much of the benefits of the stock which was in my name as trustee for Mr. Bardwell, and which I held, by agreement from him, as collateral for advances made to him and P. Skinner & Co., which advances more than cover all this, .stock.”

And this is the first intimation that the trust was not wholly for the benefit of Snyder. In addition, there is the testimony of Charles Marsh, that in the year 1873 he was in the office-of the Southern Pailroád Association, in the city of New York, at a day on which there was to be a meeting of the directors, and that while there McComb came in, and after-saying good morning and passing the time of day, said: “ Now, gentlemen, to-day I am prepared to offer you cost and interest of your stock. I had to guarantee Mr. Snyder that, before he would take his at all; but this isn’t anything you want to sell,-this stock.” And again, the testimony of Prancis C. Cross that in June, 1874, he was present at a conversation between Snjffier and McComb, which was substantially as follows:

“ Mr. Snyder asked Mr. McComb to perform his agreement. in regard to the Southern Pailroad Association stock. Mr.

Further than that, on October 25, 1873, Edmund-F. Cutter wrote to McComb:

“ Are the interests of. F. S. & C. in the Southern R. R’d Association, on which you advanced' 60 M dollars, still intact, and are they worth the loan and principal Í How does the 60 M of Mr. Snyder’s stand affected ? ”

To which McComb replied as follows:

“Wilmington, Del., October 27, 1873.

“E. F. Cutter, Esq., Boston, Mass.

“ Dear Sir : The South’n R. R. Association stands all right, and everybody’s interest stands upright and square.

“ Yours truly, H. S. McComb, Pres.”

In June, 1875, Snyder began an action against McComb, in the city of, New York. It was an action at law to recover $75,000 on account of-the alleged conversion by McComb of this trust property to his own use. Mr. McComb’s testimony was taken as follows :

“ Q. What has become of the original subscription mentioned in this letter ? A. It is still in my possession or under my control.

“ Q. In what shape is it now ? A. Stock of the company, as it was then.

“ Q. Has it stood so ever since this paper was written 1 Q. Continuously? A. Yes, sir.

“ Q. I ask you how that subscription was paid ? A. I pre sume it was paid by Mr. Bardwell to the company.”

Subsequently the action was voluntarily dismissed by plain tiff.

Putting all these things together,, there can be no reasonable doubt as to the nature of the transaction. There was an ab solute and unqualified declaration of trust given by McOoml to Snyder for the amount of this subscription so far as it hao been paid, and the Circuit Court did not err in so finding.

Again, it is insisted that the.matters in dispute between the parties have been once determined by a court of competent jurisdiction, and the principle of res fa'dicata is invoked as á defence to this saction. It appears that, after the voluntary dismissal of the action in the New York court, Snyder, in October, 1875, commenced a like action at law in the Supreme Judicial Court of Massachusetts, which was tried without a jury, and resulted in a judgment in favor of the defendant, on December 23, 1878. The original declaration was in five counts. To this the defendant filed an answer denying “ each and every allegation in each and every count of the plaintiff’s declaration,” and specifically denying any indebtedness ; and, for a further, defence, he demurred to the first four counts. Thereafter,' by leave of the court, these first four counts were stricken out, and two substituted in their place. To this amended declaration the defendant filed an answer denying the allegations in the first two counts — the new portions of the declaration; and also, as a further defence, a demurrer to the third count — that being the fifth count in the original declaration. This amended declaration, in substance, alleged that the defendant, on July 16, 1869, had in his. possession $45,000 belonging to the plaintiff; that in consideration of plaintiff permitting such sum to remain in his (defendant’s) hand, he would purchase for plaintiff stock in the Southern Railroad Association; and, further, that he would, if re

“ Bill of Particulars.

(1) To cash retained by you to be applied to pur-

chase of stock in the Southern Railroad

Association........................... $45,000 00

(2) To interest on same, July 15,1869, to October

29,1875.............................. 16,978 50

$61,978 50”'

The third count, being the fifth in the original declaration, was an allegation of the conversion of six hundred shares of stock, and in these-words :

“And the plaintiff further says that the defendant has. converted to his- own use six hundred shares of the capital stock of the Southern Railroad Association, a corporation duly established by the laws of the States of Mississippi and Tennessee, the property of the plaintiff.”

The record of the proceedings in the Supreme Court of Massachusetts fails to show any ruling of the court on the-demurrer to this third count, and one of the counsel for the plaintiff in that action testified that by mutual consent this third count was abandoned, testimony which seems to be-supported by an extract from the brief of the defendant’s counsel, in which it is stated “the count in tort has been abandoned.” On the trial of that case the plaintiff made application to amend his declaration into a bill in equity, a bill, founded upon this trust, but such application was denied by the court, such denial being, within the statutes of Massachusetts as Well as the general practice, a matter of discretion.

This mere recital of the facts concerning that action at law seems sufficient answer to the plea of res judicata, for among the essentials of an estoppel by judgment is identity of the cause of action. Atchison, Topeka &c. Railroad v. Jefferson. County, 12 Kansas, 127; 2 Bonv. Law Dic. title “ Res Judicata.” When an action at law for breach of a contract to invest in stocks fails because the testimony develops that the investment was made and a declaration of trust given in respect to the stock so purchased, it would seem strange to hold that such judgment is a bar to a suit in equity for a breach of the trust, especially when it appears from the records in the law case that an application to change the declaration info a, bill in equity in respect to the trust was denied. As was said in Cromwell v. County of Sac, 94 U. S. 351 , 353: “ 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 inquiry 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.” What might have been determined in the Massachusetts court if the amendment, of the declaration had been permitted can only be conjectured ~ what was determined was that no such contract as charged existed, or, if it existed, was broken. Copious extracts were in evidence in this case from the brief of the defendant’s counsel in the Massachusetts case, which show that the defence relied upon was that no action at’ law could be maintained in consequence of the disclosure of the trust receipt.. It is enough to quote these, which are but samples of others:

“ It is, of course, unnecessary to give any consideration to the ‘ trust receipt,’ except as it disproves the agreement alleged,, because —

“ (1.) It is not the contract alleged and declared on and for breach of which money is sought.

*****

“ It becomes wholly unnecessary, as it is entirely impracticable, to inquire, consider, or determine what anybody’s rights may be under the trust created or declared on in this transaction

“ When, if ever, a bill in equity shall be brought, and all parties in interest brought into court, that may be an interesting as it will be a necessary question. Till then it is enough that the trust created and acted upon for more than six years by all parties clearly negatives any other agreement concerning this original subscription, and necessitates a judgment for the defendant in this suit.”

Properly, therefore, the Circuit Court held against this claim of res judicata.

It is suggested that the plaintiffs have been guilty of laches; but in view of the fact that defendant, when called as a witness in the first law action, testified that the stock stood as it always had stood, and of the further fact that no breach of the trust was discovered until just before the commencement of this suit, this defence is also without merit.

The final question is as to the measure of damages. The court charged the defendant with the amount invested by plaintiff, and recognized by the declaration of trust, to wit, $42,000, and interest. Both'parties challenge the question of correctness of this amount. The plaintiffs insist that McComb sold his own stock for $125 a share, and that, therefore, in the accounting he should be charged for the 800 shares held by him in trust for Snyder at that price per share, for which, sum, together with interest to date, a decree should be passed. The defendant claims that McComb never did anything with this trust stock, other than in the fair discharge of his duties as trustee; that, owing to causes over which he had no control, and for which he was not responsible, the stock finally ceased to be of any value, and, therefore, that his estate should not be called upon to account for anything. It become^ necessary

' The stock which he sold was. his own, and the whole cash payment, $1,325,000, passed to him, and, so far as appears, was appropriated to his own uses. By means of this transfer the Pennsylvania Company obtained control of the Southern Railroad Association, as well as'of the New Orleans, Jackson and Great Northern Railroad Company. The transaction between McComb and the Pennsylvania Company is evidenced by three documents, executed on November 8, 1871, but though evidenced by these separate instruments, there was manifestly but a single transaction by which' McComb transferred to the Pennsylvania Company the control of these two corporations, accomplishing this vesting of control by the sale of his own stock, at a large price, and a transfer of this trustee and other stock, without receiving a dollar.' Obviously it was the use of this latter stock that enabled him to sell his own. If this-were all, the obligation to account would unquestionably reach to $125 per share; but the purchase of McComb’s stock was subject to an obligation tt> repurchase .at the end of

Ve think, taking all the circumstances into consideration,, that the Circuit Court reached as nearly as possible what, justice demands when it awarded a return of the amount for which McComb acknowledged himself a trustee and interest.. The decree will, therefore, be

' Affirmed. The costs of this court will be equally divided', between the parties.