1. Where the complainants are citizens of the state in a court
whereof the suit was brought, and the defendant, who is the real
party to the controversy, and against whom relief is sought, is a
citizen of another state, his right to remove the suit to the
circuit court of the United States cannot be defeated upon the
ground that the citizenship of another defendant who is a stranger
to that controversy, and who occupies substantially the position of
a mere garnishee, is the same as that of the complainants.
2. A suit upon a contract made and to be performed in another
state or country by a person who then resided there cannot be
maintained in Virginia after the right of action thereon is barred
by the laws of such state or country.
3. In the latter part of the year 1863, at the instance of A.,
then a resident of Texas, B., a resident of Virginia, forwarded to
him money in trust to invest pursuant to specific instructions. A.
in 1865, reported that he had invested the fund in the
transportation of cotton, but did not state what profits had
accrued therefrom. No further report was made by him. In 1876, B.,
on discovering where A. was, filed a bill against him to compel a
discovery and an accounting, which, upon demurrer, was dismissed
upon the ground that the suit was barred by the statute of
limitations of both states.
Held that in view of the case
made by the bill and of the subsisting trust, the existence of
which is admitted by the demurrer, B. is entitled to a discovery of
the disposition made of the money, and that the limitation does not
commence running until the trust is closed or until A. with the
knowledge of B., disavowed the trust or held adversely to his
claim.
The case is stated in the opinion of the Court.
Page 106 U. S. 100
MR. JUSTICE HARLAN delivered the opinion of the Court.
This is a suit in equity. The complainants and appellants are
John L. Bacon and H. E. C. Baskerville, partners as Bacon &
Baskerville; John Stewart, Robert Ould, Robert H. Maury, and Isaac
H. Carrington, trustees for the benefit of the creditors of William
H. Macfarland, deceased, by virtue of a deed dated October 20,
1870; John W. Wright, Sheriff of the City of Richmond, and as such
administrator of William H. Macfarland -- all citizens of
Virginia.
The defendants are George C. Rives, a citizen of Texas, in his
own right and as administrator with the will annexed of George
Rives, deceased; J. Henry Rives, a citizen of Virginia, executor of
George Rives, deceased, and Alfred L. Rives, a citizen of Alabama,
and executor of William C. Rives, deceased.
The suit was commenced on the 22d day of July, 1875, in the
Circuit Court of Albemarle County, Virginia, and was thence
removed, upon the petition of defendant George C. Rives (in which
the defendant Alfred L. Rives, executor of William C. Rives,
united), into the Circuit Court of the United States for the
Western District of Virginia. In the latter court, a demurrer to
the bill upon the part of the principal defendant, George C. Rives,
was interposed upon the ground that the suit was barred by the
statutes of limitations both of Texas and Virginia. The demurrer
was sustained, and the bill dismissed. The case made by the bill is
substantially as follows:
In the summer of the year 1863, Bacon & Baskerville, John
Stewart, Robert H. Maury, William H. Macfarland, and William C.
Rives, uncle of the defendant George C. Rives, sent the sum of
$131,000 in "Confederate States Treasury notes" -- the currency at
that time, of Virginia, Louisiana, and Texas -- to James H.
Stevens, then in Monroe, Louisiana, with instructions to invest or
expend the same in the purchase of cotton on plantations in
Louisiana and Texas, to remain thereon until the civil war was
ended. Of that sum Bacon & Baskerville owned $48,000, Stewart
$48,000, Maury $10,000, Macfarland $5,000, and W. C. Rives $20,000.
Subsequently, however, Bacon & Baskerville became the owner of
$80,000 and Stewart $16,000 of the $131,000, the interest of the
other parties remaining the same as at the outset. The funds
were
Page 106 U. S. 101
sent to Stevens by Bacon & Baskerville, by whom all
instructions were given and negotiations conducted. The proceeds of
the investment, it was understood, were to be divided among the
parties in proportion to their respective interests.
About the 3d day of September, 1863, Stevens died in Louisiana,
en route to Texas and without having invested any of the funds
transmitted to him. Shortly thereafter complainants were notified
by the widow of Stevens that she held the $131,000 subject to their
order. The defendant George C. Rives wrote to the same effect to
his cousin, Alfred L. Rives, son and executor of W. C. Rives. Moved
by the advice and solicitation of W. C. Rives as well as by the
encouraging character of certain letters written by George C. Rives
to Alfred L. Rives (and which letters were exhibited to
complainants), and influenced especially by the declaration of the
former in his letter that if the funds were turned over to him, he
would act for the parties under their instructions, and would save
it by investing it in city property in Austin, Texas, or in
property which he represented would pay well and could be readily
sold at any time, the complainants made and appointed George C.
Rives their agent in the room and stead of Stevens. Complainants
consequently ordered and directed the funds in the hands of Mrs.
Stevens to be paid to George C. Rives, and toward the close of the
year 1863 or early in 1864, they were received by the latter.
George C. Rives received the funds as agent and for the benefit of
complainants, to be invested in conformity with specific
instructions given by Bacon & Baskerville, the managers and
business negotiators of the enterprise, with the concurrence of the
joint owners of the funds,
viz., 1. that the funds should
be invested in cotton on plantations in Texas, to remain thereon
until the war ended, that being the first and chief object of the
whole venture. If that could not be done, then 2. to invest them in
ranch property, meaning lands in Texas with cattle and horses
thereon. If that could not be done, then 3. to invest them in town
lots in Austin.
Nothing was heard from George C. Rives upon the subject of the
proposed investment until, in response to a letter from Bacon &
Baskerville under date of January 27, 1865, he wrote a letter,
under date of April 5, 1865, stating that he had invested the funds
in the transportation of cotton under articles of partnership to
continue during the war, and that the business was
Page 106 U. S. 102
under the management of an active partner, who gave his whole
time and attention to it; but he did not state who the active
partner was, nor how much of the funds he had so invested, nor what
property he had purchased therewith, nor what proceeds, if any, had
accrued to him from the investment. These departures from the
instructions given to the agent were not approved by complainants,
and they hoped, notwithstanding their orders had been disregarded,
that a fair and honest return would be made by their agent. After
the war ended and after the expiration of eighteen months without
any report or statement from their agent, Bacon & Baskerville,
in November, 1866, wrote to George C. Rives at Austin, Texas,
asking an account of his agency, to which letter no reply was made.
On the 26th day of January, 1867, they again wrote to him at Austin
asking such account, but no reply to that letter was received.
Complainants consequently "almost reached the conclusion that Rives
had either died or left the country." But in March, 1875, learning
accidentally that he was not only living, but for several years
then past had visited Virginia each summer, they again wrote to him
asking an account of his agency. No reply came to that letter. At
the same time, they wrote, as they had before done, to Alfred L.
Rives, asking information as to George C. Rives, but no reply was
received, nor were the letters written to the latter ever returned
to the writers through the dead-letter office.
As soon as possible after learning the whereabouts of George C.
Rives, complainants instituted this suit. They charge that the
retention by George C. Rives in his own possession of the whole
proceeds of the funds entrusted to him, his silence for nearly ten
years, and his failure to render any account arose from an
intention to defraud complainants out of the funds or the proceeds
of their investment.
The bill further shows that George Rives, father of George C.
Rives, died in Virginia in 1874 possessed of a large estate, real
and personal, in which, by the will of his father, he had a large
interest, and that J. Henry Rives and Charles Edward Rives
qualified as his executors. The complainants ask that the interest
of George C. Rives in that estate, in whatever form, be attached in
the hands of the executors to pay whatever may be shown to be due
them. Attachments were issued and served upon the executors, and
were levied upon that interest. It is also
Page 106 U. S. 103
averred that W. C. Rives has died and that Alfred L. Rives is
his executor; that Macfarland died in 1873, but before his death he
executed, on the 29th day of October, 1870, a deed conveying all
his property of every kind, in possession or in action, to Robert
Ould and Isaac H. Carrington, trustees for the benefit of his
creditors, and as no administration was had upon his estate, the
same was committed to the defendant Wright, Sheriff of the City of
Richmond. It may be stated in this connection that after the cause
was removed from the state court, Charles Edward Rives, an original
defendant, died, and George C. Rives became administrator
de
bonis non with the will annexed of George Rives.
The prayer of the bill is that the defendants be required to
make, upon oath, full, true, and complete answers to all the
allegations of the bill; that George C. Rives be required to render
a full and complete account of all his actings and doings as agent
of complainants, and show what disposition or investment he made of
the funds entrusted to him, and what the proceeds of such
investment have been; and, if no investment was made according to
the instructions given, nor any other investment of which
complainants may choose to avail themselves, that he be required to
pay the value of the funds entrusted to him as agent, with lawful
interest thereon.
Without waiving a full answer under oath to the bill, the
complainants ask that defendant George C. Rives be required to
answer the several special interrogatories embodied therein, the
object of which is to obtain from him information as to whether he
had received the $131,000 under an engagement, as agent, to invest
in the mode set out in the bill; whether he had so invested it or
not -- if not, why not; if so, in what kind of property he had
invested, and what disposition had been made of it or of its
proceeds, and whether, after the close of the war, he did not have
in his possession property purchased in whole or in part with the
proceeds of the investment; if so, of what did it consist, and what
has been done with it.
There was also a prayer for such other and further relief as
equity and justice required. Thus stood the suit when removed from
the state court.
Page 106 U. S. 104
J. Henry Rives, a citizen of Virginia, having been made a
defendant in his capacity as one of the executors of George Rives,
it is contended that the suit was not removable into the circuit
court of the United States. This position cannot be successfully
maintained. Without giving all of the reasons which may be assigned
in support of the right of removal, it is sufficient to say that he
and Charles Edward Rives, executors of George Rives, had no
interest in the question whether complainants have or not a cause
of action against George C. Rives on account of the matters set out
in the pleadings. They were neither necessary nor indispensable
parties to the issue between the complainants and the principal
defendant. It was of no moment to them whether the one or the other
side in that controversy succeeded. It is true that the attachment
(sued out by complainants before the removal of the suit) against
George C. Rives was served upon the executors, and was levied upon
his interest in the estate of his father. But they were made
defendants not because of any connection they had with the main
controversy, but to the end that George C. Rives' interest in his
father's estate might be reached and held subject to such final
decree as complainants might obtain against him. Though made
formally defendants, the executors of George Rives occupied
substantially the position of mere garnishees. Their citizenship
was consequently immaterial. The necessary parties, on the
respective sides of the controversy which is the foundation of the
litigation, being citizens of different states, the relation of the
executors to the suit was properly regarded as merely incidental,
arising from the necessity of preserving the means whereby
complainants might, if successful in this suit, obtain satisfaction
of their demands against George C. Rives.
The remaining question to be considered relates to the defense
of the statute of limitations presented by the demurrer to the
bill. The contention of defendant is that the cause of action, if
any, existed as far back as the close of the late civil war; that
in Virginia and Texas, the running of limitation was suspended by
statute, in the former from some time in April, 1861, until January
1, 1869, and in the latter from sometime in 1861 until March 30,
1870; that by the laws of Texas, two years was the limitation to
suits on oral, and four years to
Page 106 U. S. 105
suits on written, contracts, while the limitation in Virginia to
such suits as the present one was five years; consequently,
excluding from the computation of time the periods of the
suspension of the statute in the respective states, the plaintiffs'
cause of action was barred. The defendant further insists that the
law of Texas governs by reason of that provision in the Code of
Virginia which declares that
"Upon a contract which was made and was to be performed in
another state or country, by a person who then resided therein, no
action shall be maintained after the right of action thereon is
barred by the laws of such state or country."
Code of Va., ed. 1873, sec. 20, p. 1002.
In the view which the Court takes of the case, it is unnecessary
now to determine whether reference must be had to the law of the
state where the suit is pending or to that of the state where the
alleged contract was to be performed. We are not satisfied that the
cause of action, as set out in the bill, was at the commencement of
the suit barred by limitation as prescribed in either Texas or
Virginia. The case as now presented discloses not perhaps one of
those technical trusts of which a court of equity has peculiar and
exclusive jurisdiction, but yet a trust arising out of express
agreement under which the defendant George C. Rives received from
complainants certain funds, which he undertook to invest in
particular kinds of property in conformity with specific
instructions given by those whom he represented. His duty, under
the law, although the agreement did not in terms so declare, was
from time to time, as the circumstances required, to inform those
whom he represented of his acts, and upon completion of the trust
to render an account of all he had done in the premises, or if he
elected not to execute the trust, to surrender the property or its
proceeds. He received the funds, as has been seen, in the latter
part of the year 1863 or early in 1864. He undertook to invest
them, if practicable, in cotton on plantations in Texas, to remain
thereon until the civil war was concluded. Failing in that, he was
to invest in ranch property or lands in Texas with cattle and
horses thereon; failing in the latter, he was to invest in town
lots in Austin in that state. He gave, so the bill avers, no
information
Page 106 U. S. 106
whatever of his acts until the spring of 1865, when, in response
to a letter from his principals, he wrote that he had invested the
funds received by him in the transportation of cotton under
articles of co-partnership, to continue during the war, and that
the business was under the management of an active partner who gave
his whole time and attention to it. Whether that arrangement
involved a violation of the laws of the United States in reference
to the shipment of cotton from the insurrectionary districts does
not now appear. But he withheld the name of that partner, and did
not inform his principals of the result of that investment. From
that time forward, the defendant failed to communicate with
complainants or with any of them as to what, if anything, had been
accomplished in the execution of his trust. To letters making
inquiries and which, in the present attitude of the case, we may
assume were received, no response was made.
Taking, then, the allegations of the bill to be true, as upon
demurrer we must do, the existence of the trust is clearly
established; it is still open or not wholly executed; it has never
been disclaimed by clear and unequivocal acts or words brought to
the notice or knowledge of complainants or either of them; there
has been no adverse holding of the original fund or of its
proceeds; consequently the possession by the defendant George C.
Rives of the proceeds of the original funds, if invested at all,
may be deemed the possession of those whom he undertook to
represent. But it is suggested that while the agreement did not
prescribe any period within which he was to make the investment, it
was necessarily implied that it was to be performed within a
reasonable time; consequently, it is argued, the statute would
commence running after the lapse of such reasonable time or from
the moment when complainants were entitled to enforce force an
accounting.
Phillips v. Holman, 26 Tex. 276. To this it
may be replied that whether the trustee was derelict in duty in not
making the investment within any particular period depends upon the
special facts of the case. Having regard to all the circumstances,
particularly such as were connected with the disturbed condition of
the country for many years after the war closed, we cannot, upon
the case made by the bill, fix the date when the defendant
Page 106 U. S. 107
should with reasonable diligence have executed his trust, or say
that there has been upon the part of complainants such delay as
prevents them from applying to a court of equity for relief. Being
called upon to execute what, consistently with the facts as
disclosed in the bill, appears to be a subsisting trust or if it
has been in whole or in part executed to disclose when and how it
was so executed, he should not be permitted to take shelter behind
a demurrer which relies simply upon the statutory limitation and
confesses that he has kept his
cestuis que trust in
ignorance of what it was his duty to communicate. The complainants,
it seems to the Court, are entitled upon well established
principles of equity to a discovery as to the disposition, if any,
which has been made of their property. Inquiry in that direction
should not be cut off, since, upon the showing made, it does not
clearly appear that the suit is barred by the statutes of
limitation. Unless otherwise distinctly declared by the statute
prescribing fixed periods for the commencement of suits, the cause
of action is not ordinarily deemed to have accrued against, nor
limitation to commence running in favor of, the trustee of such a
trust as the bill describes until the trust is closed or until the
trustee, with the knowledge of the
cestuis que trust,
disavows the trust, or holds adversely to the claim of those he
represented.
And such seems to be the doctrine of the Supreme Court of Texas,
by the laws of which state, the defendants insist, this case is to
be determined as to the question of limitation.
White v.
Leavitt, 20 Tex. 705;
Grumbles v. Grumbles, 17 Tex.
477. In the first of these cases, a recovery was sought by the
plaintiff for the value of certain goods consigned for sale to the
defendants therein and which had never been accounted for. The suit
was not commenced until four years after the goods came to the
hands of the consignee for sale. It was said by the court:
"The proof shows that the goods were held and disposed of by
White & Co. in trust for Leavitt and there being no evidence
that the trust was ever repudiated, the statute of limitations (two
years) did not run upon the cause of action, as it has often been
decided by this court."
It is also suggested that the bill concedes that the
complainants were informed by defendant in the year 1865 that
Page 106 U. S. 108
he had invested the funds placed in his hands in a way not
authorized by the instructions given him, and consequently, it is
argued, the complainants had then a cause of action to recover such
damages as they had sustained by reason of the disregard of their
instructions. It may be that upon final hearing, when the facts are
fully disclosed, the court may be bound to hold the complainants
estopped to complain of the defendant's departure from the
instructions under which he received the funds in question. Even
then, so far as can be now determined from the allegations in the
bill, the defendant would be liable to account for the proceeds, if
any, of his investment "in the transportation of cotton under
articles of partnership," in the same way that he would be required
to account for the proceeds of investments made in conformity to
his instructions. It does not appear from the bill that the
defendant intended, by investing in the particular mode stated in
his letter, to assume a position of hostility to his principals or
to hold the proceeds, if any, of that investment in his own
right.
As therefore it does not clearly or distinctly appear from the
bill that the suit was barred by limitation, the demurrer should
have been overruled. The facts, when fully developed, may present
an altogether different case from that now disclosed. We can only
consider the question of limitation in the light of the facts as
alleged in the bill.
Decree reversed, and cause remanded for further proceedings
in conformity with this opinion.