780

REPORTED,

vol 48.

PEELER ". LATHROP.

(CirC'uU Oourt

Of Appea18,.FiJ'th. Oircuit. December T. 1891.)

L CIBc:rarr

I.

The amount in dispute or "the matter in controversy which determines the jurisdiotion of the circuit cou!,'t in suits for the recovery of money only, is the amount demanded by plaintift in good faith, aud uot the amount of recovery.

COURT!l-JURISDIOTION-AMOUNT IN CONTROVERSY.

, In anaotion to recover rents alleged to have been collected by defendant as agent, testiJ;nony of plaintifl's solicitor that he fixed the amount of the claim by question. , ingthe tenants who had paid the rents, where there is no showing to the contrary, is sufficient to show good faith. '
SAME-WABI:r..ITY OF AGENT FOB NEGLECT-ERROR NOT PREJUDICIAL. ,

PRINCIPAL AND AGENT-RECOVERY OF MONEY COLLEOTED-EvIDENCE.

B.

,

tn an action, against an a/ofent to recover for rents collected by him, and for damages for failure to collect rents, an allegation that defendant has "neglected said , business, and hence has, to collect rents that with diligence he might have collected, .. insufficient, and demurrable; but, where such charge is disregarded On the trial, the overruling of a demurrer thereto is not prejudicial.

'" TBuSTe--.-AGREEMENT TO CONVEY PROPERTY PURCHASED ON FORECLOSURE.

,a member of a firm, bansferred to :P., a,creditor thereof, as collateral security for Iiay'ment of the debt, two acceptances, secured by a deed of trust, 'on agreement by P. that on .foreclosure of the trust-deed, if P. should purchase the property, he would, on payment of .his debt, reconvey the same to B. Held, that the transaction oonstituted a trust in favor of B. foz. the two' acceptances, which extended to , the property in case of its purchase by P. on foreclosure. , A bill in equity for an accojlnting of renta, collected by defendant as agent for plaintift, ,and to avoid a settlement with defendant for misrepresentations made by cannot be sustained alone on the gro1Jnd that defendant,. when making, the settlement, falsl\ly repres,ented that he had not collected any rents from certain property. It must appear that all' the rents collected were more than sufficient to oflSElt 9-efendant's just claims against plaintift.
SAME-WEIGHT' OF OF

Ii.

BuJ:., ""

6.

,'1'6 a bill ill eq,uity to avoid a settlement fot tents collected by defendant as agent, on the grouJl,d of false representations by defendant that he had not collected any rents frOIl1 certain property, defendant answered under oath, as required by the bill. denying fully and speciAcally any false representations. Held, that such answer, was not overcome 'by the te$timony of plaintift's solicitor, corroborated only by a lJ.im sent todefepdant, which defendant did not answer, it apparently req,uirlllg no answer.
"

Appeal from the Circuit Court of the United States for the Western Division of the Southern District of Mississippi. Bill in eq13ityby Fannie E. B. Lathrop against Richard Peeler for an accounting of rents collected by defendant, and to set aside a settlement between the parties for false representations of defendant. On the death of defendant the suit was revived hi the name of Clementine G. Peeleras administratrix. Decree for plaintiff. Defendant appeals. ·Reversed.
STATEMENT OF CASE.

On December 31, 1889, appellee filed in the circuit court the following bill:
"Mrs. Fannie E. B. Lathrop, a citizen of the state of Louisiana, residing in New Orleans, exhibits this. her bill of complaint. against Richmond Peeler, a citizen of the state of residing in the western division aforesaid. Complainant shows that on the 25th day of February, 1888, and for many years prior thereto, the said Pet'ler was a mortgagee in possession of complainant's two tracts of land in Warren county. Miss., know'1 as the

PEELER'll. LATHROP.

781

upper' and · Lower Butler Places on Old River,' which are particularly de.scribed in Exhibit A hereto, to which is hereby made for a more particular description thereof;. holding tile same under an agreement that the rents of said land should be credited on the debt and on the taxes on the lands, which he, said Peeler, was to pay. That on that day they had a settlement of said matters, and said Peelel' represented that the rents of the Lower place, which he had actually received, net. after payment of all the taxes on the landfl, which he said he had paid, amounted to about enough to pay said debt, and that he had not received any rents. from the Upper place at all. Relying on the truth of said representations, complainant accepted a deed from said Peeler for said lands, a copy whereof is herewith filed as Exhibit A, and prayed to be taken as part hereof, and gave him a receipt in full. Now complainant shows that said Beeler had, in fact, as he then well knew, and as she has since discovered; collectt>d rents from said Upper place to a large amount,-the exact amount, however, she is unable to state,-and that he had negligently suffered large of said land, to-wit, lots 7 and 8, soo. 8, and lots 3 and 4, sec. 15, all in towhship 17, range 3 east, in Warren county, Miss., to be sold for the very taxes he had undertaken and waR in duty bound to pay, and which he claimed he had paid; so that complainant has lost such portions entirely. and is damaged to the full extent of their value, for which 11e should compensate her", Complainant states that said ;peeler was a trustee an the matter, intrusted with the lands for the purpose aforesaid, and bound to exercise the utmost diligence and good. faith; that he was a man of. good reputation, and she had ho reason to suspect any misrepresentation, bad faith, or deception: that she did ,riot live in this community, and knewnoth,ing about the facts. .Complainant further showed that said Peeler had' neglected said business, and heilce had not collected as much rent as said lands were reasonably worth, or as they, by the exercise of even ordinarydiligence, would really have brought, although he charged for his pretended attention to the business,. That, if he had attended to it, he would have realized a very large sum of money in excess of his debt years before the date of said settlement, and she claims that he should be held accountable for the rel}ts so lost by his fault. Complainant is informed and believes that there IS due her from :aaid defendant forty-nine hundred dollars, for which she asks a decree. The premises considered, complainant prays that. said Richmond Peeler may be required to auswer this bill on oath, and to anllwer shOWing the amollnt of ,h.is debt, with interest; the amount qf taxes paid by him, and wh"n. and On which parcels; the amount of rents actually collected by him from .and wllat rents he failed to collect as aforesaid; that an account be stated of ,such matters and of the value of the laUds which by his failure to pay the 'taxes thereon has been lost to complainant; anel that be IDay be decreed to pay the ballmceof the rents over and above Ills debt and interest and taxes, and also the-amount of damages she has sustained by the loss of said land as .aforesaid. Or. if mistaken in the relief prayed for, complainant prays for such -other furtber or general relief as Il\ay be eqUitable in the premises." No further proceeding seems to have been had in the case uutil July JoUowing, when an agreement of counsel was filed to the effect that ing an answer should' not prejudice defendant's right to file a demurrer .and have judgment thereon; and aUhe same time the death ofdefend.ant was suggested, and an order of revivor was entered against Mt:s. 'Clementine G. Peeler as administratrix. On January 3, 1891, the defendant filed a sworn answer, in substance as follows;: She admits on the '25th day of February, 1888, the- said Richwond Peeler was ill possession< of the lands mentioned in said billj;, but,ra-

FEDERAL REPORTER,

vol. 48.

spondent denies that the said R. Peeler was in possession of sidd lands as denies the lands ofsaid complainant; but, as she IS ,pformed and beheveaand states the fact to be, that some time in 1867 of thereabout one, B. Butler, whowas the father of complainant, a member ·of the firm 'of Butler, Ter,ry & Co., doing business in tbe city of New Orleans as cotton factors;! became indebted to the said Peeler, for proceeds of cottoncol1signed to bim, in a large sum, towit, 83,260, which, becotlling bankrupt, he was unable to pay. That on the 21st of April, ,1866, oneE. S. Butler executed a deed of trust conveying said lands to trustees, to secure to B.J. Butler four bills of ,exchange for $1,000 each,acceptedby Butler, Ferrell & Co. That for the non-payment of saidbiJls said deed of trust was, on the 14th day of January, 1871, foreclost3d,and atthe sale thereof the said Peeler became tbepurchaser for the,. sum of $1,800. That before said sale, to-wit, on the 19th day of February, 1870, !laid B. J. Butler assigned two of said bills of exchange. to the said Peeler, and agreed in writing that they should have priority over the other two as collateral for the payment of said debt; and it was also then agreed on the part of said Peeler as follows: .. And I agl'ee that I whpnE>ver account and interest shall fully paid transfer and. assign said. two, hills.of. exchange and of trust to Ill\id,Baxter J. or to wholll he may4irelt; or, if said land mentiuned In said deed of tl'ustshall he sold and bought by me, or in my namll, that l.wlll, upon payment uf Said account and intel"est, convey the same to,thj;i J. ,Butll'r, or to whomever he may direct." -That, ifterlhe said lands were bought by the said Peeler liS aforesaid, tne saiqiPeeler, on. the 22d of September,J873, made an agreement witJjl,q.: W. Butler, w,ife of B. J .. Butler, wherein he promised to (larry outtheagreelllellt made before then with B·. J. Butler; and, upon the paymeht Jot' said debt, to convey the lands to C. W. Butler, or to whom she further agreed that the said Peeler should g . S .h'e m.i. h,t" pay, and 'any rents re.ceived by him should b e,repa!d' 'be credIted \lpon saId dept. avers thllt agreements were the. only agreements in ,writing made ,by the said Peeler in reference to said lands; tllatat the .time they were made neither the snid B. J. Butler nor C. W. Butler werethe'dwnersof said lands, or of the equity of redemption therein. the 25th ,day of Febt1,lury, 1888, the said Peeler hud n settlel:uent and accounthlg with the complainant as stated in her bill; who then ll1aimeda right tel a conveyance of the lands; that he then conveyed the snmeto her. and she gave him thereupon a rereipt and acquittance in fullilischarge of all demands against him; but respondent deDiesthat sait}, Peeler theD; made any false statements Whlltsver as to the rents, or any·other matters in reference to said business. Respondent denies thatcomplainimt was althe time of said settlement the owner of said land, :andaver!ll that said conveyance to her was with'out any consideration, and i,s void. But, further llnllwering in reference to said settlement, this ,respondent denies, as hereinbelorestllted, that any

as

PEELER fl. LATHROP.

783

false representation was made by said Peeler to said complainant; and, on the other hand, avers that at said settlement the said Peeler informed complainant of the fact that nearly or quite all of his accounts had been destroyed by fire,-once in 1886, and once a few years before then. That from his recollection of the average amounts of rents collected and taxes and improvements paid, and the amounts paid to Mrs. C. W. Butler, he was unwilling to claim: that a balance was still due him. That the settlement was avowedly made upon his statements, based upon bis memory,.and tbereupon be executed to the said complainant a deed to said land, and in consideration of such settlement and acquittance re.ceiv.ed from her, in writing, a full discharge of ail liabilit)' in the prem· ises. Respondent denies tbat the said Peeler received in hi.!! life-time, and while in p08session of said lands, an amount for rent of the same, which, after deducting therefr9m taxes and other .lawful charges, exceeded. the -said debiand interest due him. Respondent says that she is unable to make a statement of what rents were received, because some time in 18-; and again in 18""",",:, the books and accqunts of the said destroyed by states, however,tlia:t On the 1st of January, 1876, a made by which it appears for the years 1871 and 1872 he received for rent $1,400, and for the years 1873 1874 he received $510, and paid:out for taxes, etc., SOUle $500, leaving a balance then due him in the aUlD of $2,751.72; that be expended at different times since said settlement large sums· of money in making necessary repairs, and in bunding fences, which in one year amounted to some $600, being the cost of putting a wire fence around said place; that the maintenance of a fence was costly, owing to the said overflows washing the same away. For the reason that all of said accounts were burried,respondent is unable to state dennitely the exact amount of said repairs.. She avers, however, that the said complainant, and, 'after the death of herfather, herniotrer,was constantly lldvisedof ,the extent of the income from said place. That in 1888 the said Peeler, not having his accounts, they having been burned, came toa settlement as aforesaid, based. upon his recollection that in point of fact said place had not aver· aged, after paying aUriecessary expenses, annually,a netincome exceeding $225 or $250. That for four or five years before the death of the said Mrs. 'C. W. Butler, the mother of complainant, and after the death or B. J. Butler, the said Mrs. Butler was without means and dependent, and during said years, at her request, a large portion of the rents were paid .to her by the said Peeler, and was permitted by the said Peele):' to receive .and collect rents. The amount so collected, for the rea-sons above stated, respondent cannot definitely state, but believes and -avers said sum was perhaps as much as $1,000. That during several years lhtle or no was collected, in of overflow,-said lands h.;jng low, or sUbject, more or less, to .inundation nearly every year; if an accurate account could . stated,a' balance would' be foundsti11 due upon said .debt. Nevertheless he consented to the setaforelilaid, and in consideration thel'elor,as before stated,_con-

784

FEDERAL REPORTER.

vol. 48.

'Slliid' to said complainant. And afterwards, to-wit, on the 3d day QfJanllary, 1891, the defendant filed her demurrer to complainnnt's bill herein, as follows: . "The said defenc;lant. not confessing any of the matters in said bill contained to be true in the manner and form as therein set forth, demurs thereto, and for cause of demurrer says thl\t said bill does Dot show that tbe amount or value of the property in controversy is within the jurisdiction of this court. (2) And as to so much of said bill as seeks to charge the estate of the intes· of rents lost through the failure and negligence on the part of Richmond Peeler in his life·time to collect the same, she demurs thereto, and for cause of demurrer says that the allegations of said bill in that regard are ineu1Iicient, and do no,t cOo:8titute any liability upon said estate, and are vague, indefinite, and uncertain. (3) And to so much of said bill as seeks to charge a l¥,bility for the value of certain lands alleged to be lost by reason of the nonof the taxes thereon, she also demurs thereto. because: First, said lands are not described; and, second; because such failure to pay said taxes does not raise any liability beyond the amount Of the taxes, and the acquisitionaf any tax4itle to the same by any stranger is too remote and consequential_ third. because in this regard said bill is indefinite in not stating how said lands.were 10:8t·. And to so much of said bill as seeks to charge for rent collected on the Upper Butler J?lace. because said bill in that regard does not show complainant entitled ripon the statute to any relief in relation thereto. defendant prays judgment whether she should make further aliswer. " On July 6, 1891, the complainant dismissed her bill. "in so far as it claimed damages of defendant by reaS,on of the said Richmond Peelerhaving permitted certain lands mentioned in the bill to be sold. for taxes;" andqn the 16th day ofJuly. 1891, the defendant filed a motion to dismiss complainant's bill, because it appears that the matter in dispute is less than $2,000, and this court is therefore without jurisdiction; and on the same day the cause. by agreement, was for final hearing upon the, pleadings, motion to dismiss for want of jurisdiction, and upon the depositions of certain witnesses. It was further agreed that B. J.Butler died in 1872, leaving surviving him C. W. Butler, his wife. and. one daughter, the complainant. The was to the effect that Peeler collected rents from the Upper Butler place, prior to the settlement in 188&, to the amount of 81,200; and, in addition, Mr. Marshall, a member of the bar, wh() ·represented complainant in the settlement, and who filed complainant's bill in this case, testified as follows: " "Mrs. Lathrop demanded a settlement of accounts, claiming that there was a considerable amount due her from the Lower place. She claimed that she had the right to charge him with ,reasonable rents. He refused to settle on those terms, but was Willing to settle for what he actually received; but whenbe,cllme to state that, he said that these papers had been burned in the )O$s of SOme house, I do not remember what, and that he was not able t() furnish ,any itemized account at all, but that he knew that the rents that had been recei ved would be about equal to paying the debt. Mrs. Lathrop wanted him to account for the rents of the Upper place. asking him, as she did not live here. what was its condition, and what rents hll had received from it. Mr. Peeler assured her that the Upper place was originally wild. or in the woods, which we knew to be tl'ue, and that he had never received any

PEELER V. LATHROP.

785

rents from it at all; t.hat the negroes whom he had up there were on clearing lands,-that is, clearing the land on leases for a number of years. the improvement to be in lien of rent. I had every confidence in Mr. Peeler. I thonght that. except on this question as to what rents he was chargeable for, it was open to discussion. He had acted straightforwardly about the whole thing, and I assured Mrs. Lathrop that his word waR worthy of credit; and, on the distinct understanding that he had received no rents from the Upper place at all. she settled with him. To the best of my recollection she gave b,im her.J;eceipt in full. '" * Question. 1 understand you to say that whim settlement was made and the deed executed by Mr. Peeler to Mrs. Lathrop it 'was upon his distinct representation that he had received no rents from the 'Upper place? Answer. Yes, sir; that is so. You see, 1 stated itto him Hi my letter. and he never denied it to me. Q. Do you know of any other fact of interest to either of the parties to this litigation, or material to the If so, please state them. A. Yes, sir. After the (UScoverl tpat there had been rents payable from the Upper place. 1 got all the tenants .from that place, 'and some who had been tenants in previous years, down bere, and questioned them as to the amount of rents that they collectedj'and the amount of rent as they represented it. to be, collected by Richmond ;Peeler from the Upper place. amollnted to over $3,000.-1 don't remember:the exact amount,-and that. was the reason 1 sued in the federal
!:

The circuit court found in favor of complainant in the sum of $900, and the defendant took an appeal to this court, assigning as errors: "(I} United States court for the southern district of Mississippi, westerndl+isfon, erred in overruling the demurrer of the defendant to complaina.nt's bill. (2) That said court erred in denying the motion of the defendant' to dismiss said cause for the want of jul'isdiction, the amount in controversy being less than two thousand dollars. (3) Said court erred in renderingil against said defendant for the sum of nine hundred dollars, because th ll testimony failed to establish a state of facts by reason of which there was' anllegal or equitable liability to, or on the part of defendant to plairtti1f,and .because, if any liability ever existlld, it was barred. Wherefore the said C. G. Peeler. administratrix as aforesaid, prays that said decree of said circuit court be reversed, and the bill of complaint herein be dis· missed." ., And the 'record shows the following agreement of counsel, to-wit: "It 'is agreed that the decree in the aboye case ahall be held and deemed to overrule 4efeneJant's demurrer."

L. W. Magruder, for appellant. R. V. Booth, for appellee.
Before Circuit Judge, and LoCKE and BRUCE, District Judges. PARDEE, J. Complainant in the circuit court aRked for a decree in her favor for the sum of $4,900 on three accounts: (1) For rents collected in excess of the debts and demands due Richmond Peeler j (2) for the rents Peeler failed to collect through negligence j and (3) for the value of certain lands sold for taxes. Her bill did not allege how much was due or claimed to be due on each account. When she dismissed her bill "in so far as it claimed damages by reason of the said Richmond Peeler having permitted certain lands mentioned in the bill to be

v.48F.no.l0-50

786

FEDERAL REPO&'l'ER,

vol. 48.

sold for taxes," there was lefts bill claiming a de:oreeifor $4,900 on collected arid uncollected. .... . . ' for the fail, Counsel for appellan\ claims in his hrief that the ure, to '1ollect rents was.a.bandoned, but find in the record to show this, except thlttEjuch demand doell not appear to be supported by ltI1y testimony, and is not referred to by the circuit <lourt in decid. ing the case. . 'the motion to for want of jurisdiction, made in the circuit court', the ground that, after the dlsmis'sal of the bill in so far it claime<l damages for .lands sold for taxes,," it appears that the tnatterin dispute is less than $2,000." It certainly did not appear from': the bill or any other pleading filed by complainant that the aUJ()unt'clliimed was less than $2,000. The only way it could have apall, 'was in, the testimony. That showed the .cotnplamant had only ,been able to prove up about Thl!! a etipulatton found in the. record in tQomitting the testitnony of certain witnesses from the transcript. Whether the testimany omitted from the' record tended to prove morGy'weare not informed. It is not, however, the amount a plaintiff is able to prove he is enfitleq to thatdeterPlines the amount in dillpute for the purpose of jurisdiction, for otherwise the failure of a pillintiff to thecpurt, of jurisdiction.. The amount ,in dispute, or. matter in controve'lO', jurisdiction'of the circuitcollrt, in suits for tb,erncQ¥efyof money only, is the amount demanded by the plaintiff in good.Jl1tth. See Hiltnnv;Dickins01l, 108 U. S. 165, 2 Sup. Ct. Rep. 424; Bltrty v; Edmunds, 116 U. S. 6 Sup. Ct.Rep. 501. In determining in thisC8se.whether the complainant was claiming in good faith an anlOunt the ,sum of $2,060,. exclusive of interest and the:!3vidence of the solicitor who ,drafted and filed ,the bill is of very great weight. He. testifies as follows: .. After tJie discovery that there had been rents payabte from the Upper place, I got all the tenants from that place, and some who had been tenants in years, down and questipned them/W to,.theamount of rents that they collected; and t.he amount of rent as they represented it to be. col· leded by Uichmond Peeler from the Upper place. amc:iu nted to over $3,000.I don't remember the exact amount.-and thllt was the reason I sued in the federal court." -And the recQrd to the contrary. - Appella!lt also complains that the demurrer interposed to the bill in the court below was overruled. It does not appear that any action was had in the cir<:uit court on the said demurrer. It was 'neither set down for argument nor confessed, and the court disregarded it in passing on the merits of the case. A stipulation in the record, made ,without date or filing, but apparently after appeal taken, is to the effect' that it is agreed that the decree shall be held and deemed to overrule the defendant's demurrer. The demurrer was filed with or after the answer, and was a special one, andwent to portions only of the bill, except on the ground that the bill did not show a rontroversy in amount within the

PEELER V. LATHROP.

787

jurisdiction of the court; but a short consideration tnay be necessary. The objection to the jurisdiction was not well taken, as we have hereinbefore shown. The bill was subsequently dismissed in so far as it claimed damages for lands sold for taxes, so that the third ground of demurrer need not be considered. There remains the second ground, charging that the allegations of the bill in regard to the demand for rents lost through the failure and negligence of Peeler in his life-time to collect, are insufficient, vague, indefinite, and uncertain. This ground of demurrer should have been sustained. The bill merely states in this regard" that said Peeler had neglected said business, and hence had Jailed to collent rents that, with diligence, he might have collected," and was clearly insufficient as the basis of a liability. As, however, no testimony appears to have been taken on account of failure to collect rents, and as such charge was totally disregarded in the court below by the judge deciding the case, it does not appear that the demurrer needeut much figure in the consideration of the appeal in this court. This brings us to. the main complaint of appellant, substantially that on thebBl, answer, and proof as made in the circuit court the appellee is not entitled to a decree for any sum whatever, appellant contending that under the agreements made by Peeler no trust relation was created, 80 far as the lands and the rents thereof were concerned, and that the agreement with Mrs. Butler to credit rents in the contract of 1873 was without consideration, and that claiins for rent under it are barred by the statute of limitations. The view we take of the case is this: The original transactions between B. J. Butler and Peeler created a trust in Javor of Butler for the two acceptances translerred by Butler to Peeler as collateral security for the payment of Butler, Terry & Co.'s debt to Peeler, and by the express terms of the documents in writing passed between the parties the trust and covered the mortgaged real estute when the mQrtgage securing the acceptances was foreclosed by Peeler, and he bought in the mortgaged property. From the date of purchase under the foreclosure the lands bought by Peeler thereunder took the place of the acceptances, and Peeler's title thereto was that of trustee for thesecurity of his debt against Butler, Terry & Co. He fully acknowledged the trust in the agreement entered into in 1873 with Mrs. Butler, and again when he made the settlement in 1888 with the complainant. In the agreement of 1873 his rights as trustee were more clearly defined. and his liabilities enlarged, than in the original agreement. The made in 1888 seems to have been on the basis of the agreement ofl873, and the settlement W8$ to the effect that the rents Peeler had received were sufficient to extinguish the debt due him by Butler, Terry & Co., as welll!.s the taxes paid, by him, and his outlays, charges, and expenses, in<.lluding Qompensation. No account was stated, nor vouchers exhibited; in fact, no account could have been stated, as Peeler's papers .and accounts had been destroyed by fire. The case shows that Peeler represented that he had received rent about equal to paying the debt, and