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.
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
(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
Page 149 U. S. 630
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.,
"Dear Sir: I send this [acknowledgment as trustee] the first
leisure moment after the receipt of your letter, and if it
Page 149 U. S. 631
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
"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.
Page 149 U. S. 633
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, 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 Bardwell, 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 cestui que
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 and unqualified declaration of
trust, and because the property had been fully paid for by Snyder
to the original cestui que trust.
That McComb intended and
supposed by this declaration that he was giving the absolute
declaration of trust requested is evident from the 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
Page 149 U. S. 634
to be carried out as you shall be disposed to make."
In other words, the transaction is this: Bardwell writes asking
for an absolute declaration of trust in behalf of Snyder; McComb
sends this declaration, accompanying it with a letter saying that,
"if this does not comply with your wishes, send it back with such
changes as you desire." Evidently the reference to an arrangement
in the declaration was for the purpose of identifying the stock and
subscription, and that there might not arise any pretense that any
part of the subscription and stock standing in his own name was
held in trust for Snyder. He simply meant to identify the trust
property as that which all along had stood in his name as trustee,
and to guard against the assertion of a trust in some other portion
of the stock. If we go outside of the papers themselves, the
testimony tends strongly to uphold the claim of plaintiffs that
this was an absolute and unconditional trust. Bardwell did get from
Snyder $45,000, as shown, in this way. On April 22, 1869, Bardwell
drew three drafts on Strang & Snyder in favor of McComb for
$15,000 each. On the same day, this receipt was given by
"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
"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
Page 149 U. S. 635
$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 November 23, 1869."
"Boston, January 23, 1870 C. B. Snyder"
McComb received and discounted these drafts, and sent the
proceeds to Smith, Randolph & Co., which, by their 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 $2,500, 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. . . $34,219.80
"Shall I pay your trustee call S. R. Co. A. due the 20th inst.?
"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
Bardwell's call. It appears also that Bardwell was very much
embarrassed in October, and that this embarrassment was known to
The following is one letter that passed between them:
"(Personal) Boston, 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
Page 149 U. S. 636
believe. Since Sept. 23, I have paid $260,000 for him. From a
sick bed he came to see me in New York Sunday when my worst fears
were realized, and he owned that he had lost $120,000 in stocks.
After talking with him six hours, I left, feeling disgusted and
tired. I only fear now that I do not know the worst. He owes me
$700,000, and I fear he has misapplied or used some $150,000 of
acceptances. He said he had them on hand unused, but I have reason
to think otherwise, when he told me that there were no more drafts
on us, and that as it stood Friday, so it was and no more. I came
home to find his drafts for $350,000 drawn on Saturday. These of
mine have gone back. The sufferings of hell cannot compare but
unfavorably with mine, but I won't write more."
"Don't say a word about this to anyone."
With knowledge of Bardwell's condition, as shown by this letter,
as well as otherwise, McComb gave 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 anyone 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.
Page 149 U. S. 637
To which, on June 15, McComb replied as follows:
"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 can reasonably be expected to do in the
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 reply to this, on July 21, McComb said:
"I can send you the $30,000 Southern R. Co. 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 F. 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 Railroad 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, today I am prepared to offer you cost and
interest of your stock. I had to guaranty Mr. Snyder that before he
would take his at all, but this isn't anything you want to sell,
And again the testimony of Francis C. Cross that in June, 1874,
he was present at a conversation between Snyder and McComb which
was substantially as follows:
"Mr. Snyder asked Mr. McComb to perform his agreement in regard
to the Southern Railroad Association stock. Mr.
Page 149 U. S. 638
McComb replied to Mr. Snyder that he had better keep it and do
as the other gentlemen were about to do, put in some more money;
that it was a good thing, and was worth two for one. Mr. Snyder
told him that he wished the money, as he desired to foster other
interests that were pressing him. Mr. McComb said that he had no
money, but he would let him have some notes to the extent of
$30,000, and Mr. Snyder replied that he would. If the notes were
good, he would use them and would carry the balance for a time. No
time was stated, however. Mr. McComb told Mr. Snyder to come down
to a meeting that was to be held -- as to the time of the meeting I
have no recollection; if he would come there, he would fix it up
Further than that, on October 25, 1873, Edmund F. Cutter wrote
"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? 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."
"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:
"Question. What has become of the original subscription
mentioned in this letter?"
"Answer. 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. "
Page 149 U. S. 639
"Q. In what name does it stand?"
"A. H. S. McComb, trustee."
"Q. Has it stood so ever since this paper was written?
"A. Yes, sir."
"Q. I ask you how that subscription was paid?"
"A. I presume it was paid by Mr. Bardwell to the company."
Subsequently the action was voluntarily dismissed by
Putting all these things together, there can be no reasonable
doubt as to the nature of the transaction. T here was an absolute
and unqualified declaration of trust given by McComb to Snyder for
the amount of this subscription so far as it had 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 judicata
as a defense to this action. 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, 1888. 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 defense, 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 defense, 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's
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 requested,
Page 149 U. S. 640
take the said shares of stock from plaintiff and pay him
$45,000, with interest; that, relying upon such promise and
agreement, the plaintiff left the sum of $45,000 with defendant,
but that he failed to purchase stock in the association, and that
he, plaintiff, thereupon demanded payment of the sum of $45,000 and
interest, which was refused. The second count was "for money had
and received," the bill of particulars attached being as
Bill of Particulars
(1) To cash retained by you to be
applied to purchase 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
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
Page 149 U. S. 641
So that the case, as finally determined, was simply one at law
for breach of a contract to invest in the stock of the Southern
This mere recital of the facts concerning that action at law
seems sufficient answer to the plea of res judicata,
among the essentials of an estoppel by judgment is identity of the
cause of action. Atchison, Topeka &c. Railroad v. Jefferson
12 Kan. 127; 2 Bouv.Law Dict. 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 into a bill in equity in respect to the
trust was denied. As was said in Cromwell v. County of
Sac, 94 U. S. 351
94 U. S.
"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 defense
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,
"(1) It is not the contract alleged and declared on, and for
breach of which money is sought. "
Page 149 U. S. 642
"(2) Because its only scope and effect is to create a trust, for
the enforcement of which no action of law can be brought, but only
a remedy sought in equity."
"* * * *"
"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
defense 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 becomes necessary
Page 149 U. S. 643
to see exactly what McComb did with this stock. The Southern
Railroad Association was the lessee of the Mississippi Central
Railroad Company, and was incorporated for the purpose of taking a
lease of and operating said road. This road extended from Jackson,
Tennessee, to Canton, Mississippi; there it connected with the New
Orleans, Jackson and Great Northern railroad, running from that
place to New Orleans, Louisiana. McComb was a large holder of stock
in that company. On November 8, 1871, he made an arrangement by
which he sold to the Pennsylvania Company 14,000 shares in the New
Orleans, Jackson and Great Northern Railroad Company at $50 per
share, and 5,000 shares in the Southern Railroad Association at
$125 a share. At the same time he transferred to the Pennsylvania
Company an additional 14,000 shares in the New Orleans, Jackson and
Great Northern railroad, and 5,000 shares in the Southern Railroad
Association. Included in this last 5,000 shares was the 800 shares
standing in the name of McComb as trustee, which were transferred
by an endorsement on the certificates, vesting apparently an
absolute title in the Pennsylvania Company.
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 to
repurchase at the end of
Page 149 U. S. 644
two years at the same price and thirty percent advance, less
dividends received by the company. This condition may well be
deemed to have entered largely into the fixing of the price, and
prevents that price from being a fair test of the value. Neither
should one or two extravagant statements made by McComb, apparently
to quiet any fears on the part of Snyder as to his investment and
to continue his confidence therein, be considered sufficient to
justify placing any such valuation on the stock. On the other hand,
it is quite clear that the stock was worth at least what it had
cost at the time of the trust declaration. Indeed, we do not think
this is seriously questioned by the defendant. Little need be said
with respect to the contention of defendant that McComb did no more
with this stock than a trustee might rightfully do, and that he
used it simply to induce the Pennsylvania Company to take hold of
this association and manage it for the best interests of all the
stockholders. On the contrary, it is more correct to say that he
used this stock to induce the Pennsylvania Company to buy his own,
or at least to increase the price at which it bought. Evidently the
Pennsylvania Company wanted the control, and for that end a
majority of the shares. It might not have been willing to pay $125
a share if it had been compelled to buy the 10,000 shares, but
would naturally be willing to pay a larger price for half if the
other half could be placed in its hands without cost, and thus the
control obtained. Very likely the cestui que trust
have preferred $125 in cash to the promise of even the Pennsylvania
Company to manage the interests of the association for the benefit
of all stockholders.
We 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
Affirmed. The costs in this Court will be equally divided
between the parties.