McComb v. Frink - 149 U.S. 629 (1893)
U.S. Supreme Court
McComb v. Frink, 149 U.S. 629 (1893)
McComb v. Frink
Nos. 215, 216
Argued April 25, 28, 1893
Decided May 15, 1893
149 U.S. 629
M. subscribed to the capital stock of a company about to be formed a large sum on his own account, and $60,000 as trustee. B., who was the cestui que trust, subsequently asked him to acknowledge that he held it in trust for S., who had purchased it of B. M. thereupon wrote under date of November 22, 1869,
"To whom it may concern: I hereby acknowledge to hold in the Southern Railroad Association as trustee for S. under an arrangement with B. an original subscription of $60,000, on which 70 percent has been paid. This motion is in conformity with an arrangement made some two months ago between B., S. and myself. [Signed] M."
In 1875, S. commenced an action at law against M. in a state court of Massachusetts to recover on an alleged contract by M. to invest for S. the sum of $45,000 then in M.'s hands in the stock of that association, and such proceedings were had that it was finally determined there that no such contract as charged existed, or if it existed, was broken. Subsequently facts were disclosed which showed a breach of trust by M., his administrator and administratrix filed this bill.
(1) That the paper given by M. to S. in 1869 was an absolute and unqualified declaration of trust, for the amount of the subscription so far as it had been paid.
(2) That one essential to an estoppel by judgment is identity of cause of action, and that an examination of the pleadings and proceedings in the case in Massachusetts showed that the cause of action there was not identical with the cause of action here.
(3) That in view of the fact that M., when called as a witness in the action at law, testified that the stock stood as it always had stood, and of the further fact that no breach of trust was discovered until just before the commencement of this suit, the plaintiffs had not been guilty of laches.
(4) That in view of the circumstances detailed in the opinion of the court, the decree of the court below awarding a return of the amount for which M. acknowledged himself as trustee, with interest, reached as nearly as possible what justice demanded.
On June 30, 1868, the Southern Railroad Association, an unincorporated association, was organized by certain parties
for the purpose of leasing and operating the Mississippi Central Railroad, of which Henry S. McComb had previously obtained a lease for himself and his associates. The capital of this association was $1,500,000, of which Henry S. McComb subscribed $415,000 personally, and also $60,000 as trustee; Josiah Bardwell, $100,000; the balance being taken by ten associates. On January 14, 1869, this association became incorporated, under a special act of the Legislature of Tennessee, and to this corporation the voluntary association, on January 22, 1869, transferred its property. On January 21, 1869, such action was taken by this incorporated company that the capital stock named in its charter, to-wit, $2,000,000, was issued to the subscribers of the original unincorporated association in proportion to the amounts of their subscriptions. In this way, the subscription in the name of Henry S. McComb, trustee, was enlarged from $60,000 to $80,000, and represented 800 shares of stock, for which eight certificates of one hundred shares each, and numbered from 157 to 164, inclusive, were formally issued by the incorporated company on October 6, 1870, to Henry S. McComb, trustee, and so remained on the books of the company at the time of his death December 30, 1881. It is undisputed that the subscription was taken originally by McComb as trustee for Josiah Bardwell. In the fall of 1869, this correspondence took place between Bardwell and McComb:
"My Dear McComb: Will you please acknowledge that you hold in 'the Southern Ass'n,' as trustee for [the benefit] or rather for C. B. Snyder, that am't of stock wh. you held as for me, Mr. Snyder having two months since pd. me its costs and interest."
"Boston, Nov. 12, 1869"
"Office of H. S. McComb"
"Wilmington, Del., Nov. 22, 1869"
"Josiah Bardwell, Esq., care of F. Skinner & Co., Boston."
"Dear Sir: I send this [acknowledgment as trustee] the first leisure moment after the receipt of your letter, and 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 be disposed to make."
"H. S. McComb"
The following is a copy of the paper enclosed in McComb's letter:
"To whom it may concern:"
"I hereby acknowledge to hold in the Southern Railroad Association, as trustee for C. B. Snyder, under an arrangement with Josiah Bardwell, an original subscription of sixty thousand dollars, on which seventy percent has been paid. This notice is in conformity with an arrangement made some two months ago between Josiah Bardwell, C. B. Snyder, and myself."
"H. S. McComb, Trustee"
On this acknowledgment is a memorandum in Bardwell's handwriting: "Received, Nov. 23, 1869."
At the time of his death, on July 18, 1882, Snyder was still the beneficiary under this trust, and on January 30, 1883, the plaintiffs, as administrator and administratrix, commenced this suit against defendant, as executrix, etc., of Henry S. McComb, the purpose of which was to establish the trust, and compel an accounting. The pleadings having been perfected, proofs were taken, and the case submitted for final hearing, which resulted in a decree on July 3, 1889, for the sum of $42,000 principal, and $49,420 as interest, making in the aggregate $91,420. 39 F. 292. Both parties appealed to this Court.