Keaton v. Greenwood

By the Court.

Warner, J.

delivering the opinion.

Two questions were made on the argument of this cause, by the plaintiff in error—

First — whether the allegations in the complainant’s bill are sufficient to give to a Court of Equity jurisdiction of the cause %

Second — whether the complainant’s right to call the defendant to account with her, concerning the money and property placed in his hands, and entrusted to his management, for her benefit, is not, according to the allegations made in her bill, barred by the Statute of Limitations?

[1.] In regard to the first objection, we are of the opinion the complainant has made, upon the record, a clear case for the jurisdiction of a Court of Equity. The bill charges, that the complainant placed a large amount of money and other property in the hands of the defendant, in the trust and confidence that he would so use it, and invest it for her benefit, as, in his discretion, should be most conducive to her interest; that he accepted the money and property, so placed in his hands and entrusted to him for the purposes stated, and has made large profits therefrom, by investing the money so placed in his hands, by the complainant, as well as the money.arising from the proceeds of the property so turned over to him, in lands, negroes, negotiable securities and other property; that the particular numbers of the land, so purchased by defendant with the funds of the complainant, as well as the names and number of the negroes, the names of the obligors of the notes, bonds and specialties, and the respective amounts thereof, the defendant has fraudulently and in bad faith, withheld from the complainant, and concealed the same under his own name.

The plaintiff in error insists, that it is not alleged in the bill, that it is necessary to search the conscience of the defendant for a discovery, to enable her to obtain a decree against him. The reply is, that the complainant has made such allegations as make it affirmatively appear, on the face of the bill, that such a discovery is necessary. The allegation of such facts, as make it appear that a discovery from the defendant is necessary to enable her to obtain a decree, will give to the Court jurisdiction, and is equally as satisfactory as if the allegation, that it was necessary, had been inserted without the facts. The very nature and history of this transaction, as disclosed by the record, necessarily gives to a Court of Equity jurisdiction. It has been earnestly insisted before us, that the claim of the complainant is, by her own showing, barred by the Statute of Limitations, and that, if in the view of the Court, the defendant shall be considered as a trustee for the complainant, still it is such a trust as against which the Statute of Limitations will run.

There are two general classes of trusts — First, express trusts, created by the act of the parties, or by the appointment of the law. Under this head may be included executors and administrators, guardians of infants, bailees, factors, agents, persons who receive money to be paid to another, or to be applied to a particular purpose, and those who fill any fiduciary situation, created either by the act of the patties, or by the appointment of the law. Every deposit, says Chancellor Kent, in Kane vs. Bloodgood, (7 Johns. Ch. R. 110,) is a direct trust.

Second, implied trusts, as where persons claiming property in their otvn right, are, by the decree of a Court of Equity, founded on fraud or the like, held to be trustees by implication of law.

Many cases have been cited at the bar in relation to the application of the Statute of Limitations to trusts and trustees. Without attempting to reconcile and harmonize the apparent conflicting decisions to be found in the books, both in England and in this country, upon this question, we will endeavor to deduce from them the following general propositions:

[2.] First, that in cases of express trusts, created either by the act of the parties, or by the appointment of the law, the Statute of Limitations does not begin to run in favor of the trustee, so long as the trust continues, and is acknowledged to be a continuing, subsisting trust, for the reason, that the possession of the trustee is the possession of the cestui que trust; but when the trust is denied by the trustee, and he claims to hold the trust funds or the trust property as his own, adversely to his cestui que trust, the latter having knowledge of that fact, the Statute will begin to run in favor of such express trustee, from the time of such adverse claim or possession. Kane vs. Bloodgood, 7 Johns. Ch. R. 123. Boone vs. Chiles, 10 Peters’ Rep. 223. Willison vs. Watkins, 3 Peters, 52. Houseal vs. Gibbs, 1 Bailey’s Eq. R. 485. Baker vs. Whiting, 3 Sumner’s Circuit Court Rep. 466.

[3.] Second, in cases of implied trusts, where the party claims title to the property in his own right, and'is sought to be converted into a trustee by operation of law, the statute begins to run in his favor from the time of his possession, in the same manner as it would do in a Court of Law, for the reason, that his possession never was the possession of the alleged cestui que trust, inasmuch as the relation of trustee and cestui que trust never, in fact, exists between them, until the decree of the Court, establishing that relation ; until that time, the alleged trustee held, and claimed, in his own right. Boone vs. Chiles, before cited, 223. Edwards vs. University, 1 Dev. Batt. Eq. Rep. 326, ’7. When the cases to be found in the books, assert-the principle that the Statute of Limitations does not run against an express trust, it must be understood, that the Statute does not run, so long as the trust continues, as an acknowledged subsisting trust; but it must also be understood with the qualification, that if the trustee disavows the trust, and claims the trust funds, or the trust property, in his own right, adversely to his cestui que trust, with the knowledge of the latter, the Statute will begin to run from the time of such adverse claim and possession; otherwise, the Statute of Limitations would fail to accomplish one great object of its enactment.

Then let us apply the facts of the case before us, to the foregoing principles, which we have asserted for its control and government.

The complainant deposited in the hands of the defendant a large amount of money and property, to be used, managed and invested for her benefit, in the trust and confidence that be would so use, manage, and invest it, as would be most conducive to her interest, and that he would account to her for the same, and the profits arising therefrom, whenever requested by her to do so. The defendant accepted the trust, by receiving the money and property, for the purposes designated, and has made large profits from the same. Independent of the alleged settlement, which we shall hereafter notice, it appears that the trust continued as a subsisting trust in the hands of the defendant, from the time he accepted it, until the first of May, 1849, when her agent called on him for an account, which he refused, and denied that he had any of her property or effects in his hands. The Statute of Limitations, then, did not begin to run in favor of the defendant, according to the allegations made in the bill, until 'May, 1849, unless the alleged settlement stated therein constitutes a starting point for the operation of the Statute. The plaintiff in error contends, that the Statute commenced running from the time of the alleged settlement. Was that settlement made, or pretended to have been made, in relation to the money and property originally deposited in the hands of the defendant by the complainant, or was it made in relation to the lands mentioned in the deed executed to the complainant by the defendant, to avoid the effect of the anticipated recovery in the crim. con. suit against the defendant 1 After stating that the defendant had erased from the deed all the numbers of the lots of land of any value, the complainant alleges that the defendant, in the month of November, 1844, called on her, and said “he wanted to settle with her in relation to said lands’’ The complainant admits she signed a receipt prepared for her by the defendant, for the purpose of discharging himself from further liability, on. account of said lands, to her. What lands % The lands mentioned in the deed executed by the defendant to the complainant, on the 12th day of September, 1839, for the purpose stated in her bill, and under which, she claims no interest in this suit. That the settlement was had in relation to the lands mentioned in that deed, and which had been erased by the defendant, is the more apparent, by reference to the receipt itself, which is attached as an exhibit, and found on the hade of that identical deed. The receipt is in the following words :

“ Georgia — Baker County.

“ This is to certify, that the within numbers in this deed, that is marked out, has been sold by B. O. Keaton for me, and the proceeds turned over to me by him, the said B. O. Keaton, this, the 2d day of November, 1844.

“E. M. M. GREENWOOD.

“ Teste : James Jeffries.”'-

From the allegations in the bill, as well as from the receipt itself on the back of the deed, we are clearly of the opinion, that the alleged settlement had reference to the lands mentioned in that deed, and not to the money and property which had been turned over to the defendant, in trust, for the benefit of the complainant.

It is, however, insisted, that at-the time of this alleged settlement, the defendant gave to the complainant a note on Dennard for $180 00, and said that was “all he had in his hands of complainants”

The argument is, that this was a denial of the defendant, that he owed the complainant any thing on account of the trust property in his hands ; that it was a disavowal of the trust on his part, and was notice to her that he was claiming the trust property as his own, adverse to her title, and therefore, the Statute commenced running in his favor,' against hen, from that time. The reply is, that the settlement was made in relation to the lands mentioned in the deed; and when the defendant said that the $180 00 was all he had in his hands óf complainant’s, he must be understood to have spoken in reference to the subject matter of the settlement — that the $180 00 was all he had in his hands belonging to the complainant, on account of the lands which he had sold, and erased from the deed, on the back of which, the receipt was entered, and not that the $180 00 was all that he had in his hands of complainant’s, on account of the trust property. If the settlement had been made in reference to the trust property, and the defendant had openly avowed that the $180 00 was all he had in his hands of that property, it might have been such a denial of the trust- — such an adverse claim on hitt part to the trust property — as would have authorized the application of the Statute. For, then, the complainant would have been notified that he claimed, in his own right, the trust funds in his hands, as against her, and refused to account for them. The evidence, however, of such adverse claim, on the part of the trustee, ought, in all cases, to be clear and satisfactory, to authorize the running of the Statute of Limitation against an express trust. But it is sufficient for the present, to say, that in our judgment, according to the case made by the complainant, the alleged settlement had no reference to the trust property, but only to the lands erased from the deed; and the declarations of the defendant at that time, must be considered as having had reference thereto.

Let the judgment of the Court below be affirmed.