Snyder's Adm'rs v. McComb's Ex'x

• Decision Date: 03 July 1889
• Citation: 39 F. 292
• Parties: SNYDER'S ADM'RS v. McCOMB'S EX'S. [1]
• Court: U.S. District Court — District of Delaware

39 F. 292

SNYDER'S ADM'RS v. McCOMB'S EX'S. ^[1]

United States Circuit Court, D. Delaware.

July 3, 1889

On the 30th of June, 1868, an unincorporated company, called the 'Southern Railroad Association,' was formed by McComb and others, with a capital of $1,500,000. Among the subscribers to this capital were Henry S. McComb, for $415,000, Josiah Bardwell, for $100,000, and Henry S. McComb trustee, for $60,000. The capital was soon afterwards increased to $2,000,000, and on January 14, 1869, the company was incorporated under its original name by an act of the legislature of Tennessee, and was organized under its charter on the 21st of the same month, with McComb as president. The following correspondence between Bardwell and McComb relates directly to, and contains the first acknowledgment of, the trust in favor of Snyder:

'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 cost and interest.

'Yours truly,

J BARDWELL.

'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 see disposed to make.

'Yours, truly,

H. S. McCOMB. M.'

The following is a copy of the paper inclosed 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 per cent. 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.'

George Gray, Wm. C. Spruance, and Wm. G. Wilson, for complainants.

Bates & Harrington and Wayne McVeagh, for defendant.

Before BRADLEY, Justice. and WALES, J.

WALES J.,

(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 Synder'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, 1879, 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. It does not appear that any dividends were declared on the trust stock, or that McComb derived any profit from its transfer to the company except that such transfer may have directly or indirectly enhanced the price he received for his own stock. The Southern Railroad Association was afterwards merged by consolidation in another company, ceased to have an independent existence after July 1, 1874, and thenceforward its stock had a nominal value only. The consolidated lines went into the hands of a receiver, and were sold by virtue of foreclosure proceedings on a mortgage. The original object of the association was to obtain, by lease or purchase, certain main lines of railroad between Chicago and New Orleans, and thus control a large, if not the principal, share of the business of transporting passengers and freight between those important cities, as well as between intermediate points. The scheme appeared to be feasible and attractive to the enterprising minds which conceived it, and to the men who united in its execution, but it failed by reason of causes not necessary here and now to relate.

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 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.'

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 Rock 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. SNYDER.

'Boston, January 23, 1870.'

Assessments on the subscription to the trust stock were paid by Bardwell prior to McComb's acknowledgment, as follows:

July 8, 1868. 40 per cent. on $60,000, or ..	$24,000
Jan. 10, 1869. 10 per cent. on $60,000, or ....	6,000

(Stock increased 33 per cent. or to $80,000.)

Jan. 2, 1869. 5 per cent. on $80,000, or	$4,000
March 2, 1869. 5 per cent. on $80,000, or ....	4,000
Sept. 20, 1869. 5 per cent. on $80,000, or ....	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 F.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 than 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 Bardwell 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

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