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Colonial Cases

Loo Fung Kwang v. Knight and Yates, 1879

[succession - civil procedure]

Loo Fung Kwang v. Knight and Yates

United States Consular Court, Shanghai
12 May 1879
Source: The North China Herald, 20 May 1879

 

U.S. CONSULATE-GENERAL.

Shanghai, 12th May

Before D. H. BAILEY, Esq., Vice Consul-General.

LOO FUNG-KWANG v, Messrs. F. P. KNIGHT and M. T. YATES.

   Mr. WAINEWRIGHT appeared for the plaintiff.

   Mr. J. J. HENDERSON appeared for the defendants.

Petition:-

  1. - The plaintiff is a Chinese subject at present residing in Shanghai, and the defendants are respectively citizens of the United States and within the jurisdiction of this Court, the defendant Francis Parkman Knight being the receiver appointed by this Court of the estate of Edwin Maurice Smith, a citizen of the United States, late of Shanghai, deceased, which said estate is within the jurisdiction of this Court, and the defendant Matthew Tyson Yates being a missionary.
  2. - The said Edwin Maurice Smith during his lifetime invested largely in land and buildings, situated in the so-called foreign Settlements at Shanghai, and at the date of his death, which occurred on the 19th day of November, 1878, he was possessed of a large quantity of such property.
  3. - In or about the year 1862, the said Edwin Maurice Smith being in want of additional capital for the purchase of lands and the building of houses, borrowed divers sums of money, amounting in the whole to seventy-eight thousand nine hundred and forty-six taels Shanghai sycee and fifteen thousand four hundred Mexican dollars, the rate of interest paid for the same being fixed at twelve per cent per annum.
  4. The said sums of money were so as aforesaid borrowed by the said Edward Maurice Smith in the name of his compradore, one Wang Yueh-ting (who was the agent of the said Edwin Maurice Smith in the transaction), and also through the plaintiff's mother Quai Fung, who acted as a "go-between" in the matter and who was promised by the said Edwin Maurice Smith a large profit upon the transaction.  The said Edwin Maurice Smith also guaranteed the repayment by the said Wang Yueh-ting of the money so borrowed.
  5. No payment either on account of principal or on account of interest having been made to the lenders of the said sums of money, or to any of them, the said Edwin Maurice Smith being much pressed for payment in the year 1866 induced the defendant Matthew Tyson Yates to intervene in the matter, and with his assistance an arrangement and agreement was come to between Edwin Maurice Smith, Wang Yueh-ting, and the defendant Matthew Tyson Yates on the one hand, and the said lenders on the other hand, whereby the rents and profits of certain house property of the said Edwin Maurice Smith leased or agreed to be leased to the said Wang Yueh-ting were set apart for or appropriated to, or whereby it was agreed that the same rents and profits should be set apart for or appropriated to, the payment of the said sums so borrowed and of the interest thereon; and the said Edwin Maurice Smith thereupon became as well as the principal debtor or such guarantor as aforesaid, also a trustee for the said lenders, and responsible for the carrying out of the  said arrangement and agreement, and the defendant Matthew Tyson Yates thereupon also became a trustee for the said lenders and responsible for the carrying out of the said arrangement and agreement, or for the payment otherwise of the claims of the  said lenders.
  6. - The property the rents and profits whereof were so set apart and appropriated as aforesaid, consisted of several distinct pieces or parcels of land with the buildings thereon, situate in or near the several places in Shanghai called the Se-ge-ba-ka (on the West side of the Honan Road and commonly known as "Smith's Market"), and the Tong-ge-ba-ka (on the east side of the Honan Road and opposite to "Smith's Market," the Milo or Nankin Road, the Sar-loo of Fokien Road, and Lou-zar or Ningpo Road; all the said pieces or parcels of land, except the land and buildings known as "Smith's Market" still form parts of the estate of the said Edwin Maurice Smith.
  7. - In or about the month of September in the year 1869, the said Edwin Maurice Smith paid to one Chang-foo-zee as agent for the said Quai-Fung the sum of three thousand Shanghai taels, but  save as aforesaid and notwithstanding the agreement mention in the fifth paragraph of this petition and notwithstanding repeated applications for payment, no further or other parts of the monies so as aforesaid borrowed by the said Edwin Maurice Smith has been repaid by, or, on account of him, or by or on account of the defendants, or either of them, and no interest has been paid upon the whole or upon any part of the monies so borrowed.
  8. - In or about the years 1868 and 1869, the several persons by whom the said monies had been so as aforesaid lent being unable to obtain payment thereof, otherwise obliged the said Quai Fung, through whom the said monies has as hereinbefore stated been borrowed, to pay the same to them, and the said Quai Fung paid the same accordingly; and thereupon became the sole creditor of the said Edwin Maurice Smith in respect of the said loans.
  9. - The s aid Quai Fung having died in the month of October, 1871, leaving surviving her the plaintiff, her only son, and according to Chinese law the only person entitled to her personal estate.  The plaintiff was then of the age of twenty years, he having been born on or about the 277th day of April, 1851.
  10. 0.   - By reason of the youth of the plaintiff as the date of the death of his said mother, and of his ignorance of the facts upon which his present claim is based, and also by reason of his poverty, the plaintiff has been hindered and delayed in bringing forward such claim.
  11. 1.   - The plaintiff now claims payment of the principal sums of safety-five thousand nine hundred and forty six Taels Shanghai Sycee, and fifteen thousand, four hundred Mexican dollars, respectively, with interest upon the sum of seventy-eight thousand, nine hundred and forty six Tales Shanghai Sycee from the 1st day of January, 1863, to the 30th day of September, 1869, at the rate of twelve per cent per annum, and of interest upon the sum of seventy-five thousand, nine hundred and forty-six Taels Shanghai Sycee, from the 30th day of September, 1869, until payment of the principal and of interest upon fifteen thousand, four hundred Mexican dollars from the 1st day of January, 1863, until payment of the principal.

   Your Petitioner therefore prays that judgment may be given against the defendants, or one of them, accordingly, with interest and costs, and that he may have such other and further relief as to your Honorable Court may seem meet.

   The defendant, Matthew Tyson Yates, by his Counsel Mr. J. J. Henderson, demurred to the above petition on the following grounds:-

  1. - That as appears on the face of the petition the action has not been commenced within the time prescribed by law.
  2. - That the facts set forth in the petition are insufficient in law to constitute a cause of action against the defendant.

   The hearing of the demurrer came on today.

   Mr. HENDERSON, in supporting it, pointed out that the first objection in the demurrer affected both defendants, namely that the action had not been commenced within the time prescribed by law.  In the third and fourth paragraphs of the petition it was alleged that the money, in respect of which the claim was brought was borrowed by the deceased, Mr. Smith, in or about the year 1862; and the fourth paragraph also stated that the deceased became the guarantor for Wang Yung-ting, his compradore, in whose name it was alleged the money was borrowed.  The fifth paragraph attempted to show that in the year 1866 Mr. Smith also became a trustee for the lenders of the money and responsible for the carrying out of an arrangement by which it was alleged that Dr. Yates was to pay off the said loan and also become a guarantor and trustee for the lenders. The seventh paragraph stated that in or about the month of September, 1869, Mr. Smith paid to one Chan Foo-zee, as agent for the go-between, Quai-fung, the sum of Tls. 3,000; but it was nowhere alleged that this payment was on account or had anything to do with the loan. The eighth paragraph  went on to say that in or about the years 1868 or 1869 the lenders obliged Quai-fung to pay the money so borrowed; that she did pay them and thereby became the principal creditor of Mr. Smith.

   He would ask the Court to note that it was more than nine tears since the occurrence of the vent which was set up as the basis of Mr. Smith's and Dr. Yates' responsibility, and it was more than sixteen years since the money was borrowed upon which the present claim was based.

   Now, by the 83rd paragraph of the Regulation s promulgated by the Minister at Peking, under authority confirmed by Statutes of Congress, the limited time for commencing action in this Court on oral contracts or promises was two years, and on written contracts or instruments the time was limited to six years.  Since there was no allegation in the petition that there was a written contract or written promise in this case, it was to be presumed that there was no written contract.  If there was no written promise or contract then the action would be barred by the regulation two years from the time of the original contract, namely in 1864; and if there was a written contract the limited time would be four years later, 1868, which was before Quai-fung was alleged to have received the payment of Tls. 3,000; therefore this action was barred before that payment was made.

   Lest any question should be raised as to the application of this limitation of time on the ground that the Court was sitting in China and the case was one between a Chinese subject and a citizen of the united States, he remarked that it was a well-settled principle that remedies upon contracts were regulated and pursued in accordance with the lex  fori, which was the rule followed in all civilised countries.  In support of this proposition he referred to 2nd Kent, page 462; the case of Carson v. Hunter, 2 American Reports, page 529; and Story's Conflict of Laws, paragraphs 576 and 577. The object of these was to fix certain periods within which suits should be brought in the Courts of a State, whether they were brought by or against subjects, or by or against foreigners; and there could be no just reason or sound policy in allowing higher or more extensive privileges to foreigners than were granted to citizens.

   These laws were said to be founded upon the noblest policy.  They were statutes to suppress fraud and to supply the deficiency of proofs arising from the ambiguity and obscurity or the antiquity of transactions; and they proceeded on the presumption that claims were extinct, or ought to be held to be extinct, when they were not litigated in proper form within the prescribed period.  They took away grounds of complaint because they rested on the negligence or laches of the parties, and encouraged diligence by making it in some measure equivalent to right.  It was necessary then that all suits should be brought within the period prescribed by the lex  fori, and the rule was as dully recognised in foreign jurisprudence  as at Common Law.

   Why, then, had not the plaintiff brought this action sooner - why had they waited all these years?  They had not only waited for sixteen years with transactions involving over Tls. 100,000, but they had waited until Quai-fung had died and gone to that land where it was to be hoped there was no work for "go-betweens;" and they had waited also until the voice of Mr. E. M. Smith was for ever hushed in death - there was no opportunity now for him to explain these peculiar transactions, which were set forth in a very peculiar manner in the petition, and it would be difficult, he thought, to conceive a case more forcible demonstrating the utility and necessity of a law of limitation.

   In anticipation apparently of an objection of this kind, in the tenth paragraph of the petition it was alleged that owing to the youth of the plaintiff at the date of the death of his mother, he was hindered and delayed in bringing the  action.  At the same time it appeared that at the death of his mother, plaintiff was twenty years of age, and, according to Chinese law, he attained his majority at sixteen, and Chinese law regulated his personal capacity and status; still he had waited seven years  before taking these proceedings.  In the same paragraph of the petition it was stated that the plaintiff was ignorant of his rights.  This was another excuse why the action had not been brought sooner, but such a plea amounted to an ignorance of the law which was no excuse in a case of this kind.  Moreover, it was strange that his shrewd mother, capable of fulfilling the position of "go-between" in transactions involving a hundred thousand taels, should not have informed him of his rights before she passed away.

   The COURT said the Statute of Limitation would not commence so far as the plaintiff was concerned, until after he attained his majority.

   Mr. HENDERSON, admitting that might be so, and apart from the point he had raised as to the plaintiff attaining his majority at the age of sixteen according to Chinese law, pointed out that in accordance with the law of the United States plaintiff would be at age in 1872, and if they took the contract to be either a verbal or a written one the Statute of Limitation, he maintained, barred this action on the 27th April, 1878.  There could be no question, he thought, on that point. He would not have raised this plea if he did not believe it was strong evidence of the payment of the debt, and in his opinion the plea was incontrovertible.

   His second objection had reference to the action being brought against the receiver, Mr. Knight, on the ground that he was not answerable in law, and in support of this proposition he quoted Storey's Equity Jurisprudence, section 833.

   Next, he maintained that the petition was legally insufficient as against Dr. Yates, urging that there was nothing to show how he incurred any responsibility, and contending that under the circumstances he was not responsible as trustee.  He applied for Dr. Yates' name to be struck out of the care, and expressed his surprise that his learned friend Mr. Wainewright should have imagined he could rest  liability on him.  There were numerous other objections he could make, but it seemed to him he had said sufficient to show that the petition must be dismissed, and he should ask for costs.

   The COURT then adjourned.

   In the afternoon Mr. WAINEWRIGHT addressed the Court in opposition to the demurrer and Mr. Henderson, in replying, asked for an adjournment, which was granted.

   On re-assembling in the afternoon, M<r. WAINEWRIGHT addressed the court in opposition to the demurrer.  In the course of his remarks he said he was quite ready to admit, with his learned friend Mr. Henderson, that this was a very peculiar case, and he thought the more it was looked into the more peculiar it would be found to be.  It was a cased of the most peculiar complications.  The facts were to be gleaned from a great variety of documents and statements and contradictions; in fact, it was a case about which no opinion could be formed until it was thoroughly gone into.

   But as regarded the demurrers he thought he could satisfy the Court that at any rate two of them were untenable or at least premature; and the third, the technical objection to the receiver, Mr. Knight, not being liable to be sued at law hew would deal with separately.

   On the question of time his Honour would notice that in the petition both the defendants stand, one by representation and the other originally, in the capacity of trustees, and it could only be ascertained on a review of the whole circumstances of the case how far that was a fact - whether one or both of the defendants were in the position of trustee.  The defendants' Counsel had complained of the facts in the petition not disclosing the case.  It would be impossible to disclose the case, or put down the facts upon which it was based, without making a statement of the whole of the evidence.  It was not upon one document nor half a dozen documents that the claim was based, and it was quite impossible and irregular, too, to import into the petition a great number of facts which were more or less contradictory, and the information imperfect.  Of course the allegations in the petition would have to be strictly established when the hearing of the case came on.  Though there might be sufficient facts to support the allegations, still the case was not yet developed and could not be developed until it was set on foot and shaped into a petition - and the suit once instituted would develop itself as the case went on. 

   As the claim stood at present the plaintiff had filed the petition at his peril, and had said in it that both the, late E. M. Smith and Dr. Yates were trustees in the matter.  If they were trustees, and he submitted it was a fact that could only be proved at the hearing of the case, and it was a point t of legal construction, then he maintained the hard and fast rule of statutory limitation of time for the action to be brought did not apply.  It was a well-known rule of equity law, and the Court was sitting as Court of Equity as well as of Common Law, and he should ask the Court to follow the rules if equity as to time; and it was a well-known principle that in a direct trust to a trustee no length of time was a bar to a claim, and a trustee was not protected by the ordinary Statutes of Limitation.

   He submitted that the rule to which the Court's attention had been drawn, rule 83 of the Regulations, by the Minister at Peking, referred simply to the merest common law cases and ordinary claims, and that the rule could never have been intended to exclude the equitable doctrine that the liability of a trustee was not barred by the ordinary statute limitation of time.  It did not affect the principle of equity in the least, and it was a well-known rule that as between cestui que trust and trustee in the case of a direct trust no length of time was a bar, and therefore in this case the statutory limitation did not apply.  In  support of this contention he cited Lewyn on Trusts, pages 620, 627 and 628; and Storey's Equity Jurisprudence, sections 1, 520, 1, 520a, and 1, 521, which contained a summary of the law to which he had referred.  In the case of a direct trust he maintained that no time was a bar.

   The COURT asked whether Mr. Wainewright claimed that it was an express trust or an implied trust?

   Mr. WAINEWRIGHT replied that he maintained it was an express trust, falling within no hard and fast rule of statutory limitation, and could only be dealt with when the whole of the facts of the case were before the Court.  He submitted that the petition raised a presumption sufficiently strong that by excluding the plaintiffs from the benefit of a full hearing of their claim, the Court would be working an injustice.  He was quite aware that a Chinese subject coming to this Court for redress was bound by American law; but, on the other hand, where the Court was sitting to do justice and with equitable powers, he thought the Court might fairly be called upon to consider the peculiarities of the society in which we live, and give it some weight.

   In this case the Court was called upon to enforce a technical objection to bar an individual who could by no kind of presumption of law have any knowledge of his rights, and who, as it was stated in his petition, had been labouring under a certain amount of disabilities.  He had failed to follow Mr. Henderson as to the facts which made a Chinaman be at age at sixteen years.  Though it was said it was a matter of public notoriety, he had not heard of it before, and he did not think the Court could take any notice of it.  The Court could only be guided by the time American citizens arrived at their majority, and at this stage of the proceedings, on the simple statement that had been made, the Court could not regard the plaintiff as coming of age under twenty-one. 

   In the petition it was further alleged that the plaintiff had also been in ignorance of his rights and that he had been debarred by poverty from asserting them; but he did not propose to lay much stress on these points at present, because it was sufficiently shown that was a trust in the matter and consequently it was premature for the Court to sustain the demurrer and so prevent the question being tried. The question of limitation was for the consideration of the Court when all the facts of the case were before it.  It might then be a good defence to the claim, but it was not a good defence at the present state of the proceedings - it was premature.

   What had been  said by Mr. Henderson about the work of the "go-between" and the fact of her guaranteeing to pay the debts of others when it was said she was not obliged to pay, did not touch the demurrer in the least.  This was not the case of a guarantor; it was the assignee of a number of claims assigned to Quai-fung, and it was her representative who was suing and the doctrine that had been put forward as to a guarantor did not enter into the case at all. Another point by his learned friend was that the potion did not disclose how Dr. Yates was responsible, but the petition said that he was responsible under a number of documents, and it would be quite improper for them to appear in the petition - they would have to prove how Dr. Yates was responsible when the facts of the case were proved in evidence.  However, he would direct attention to the fact, as alleged in the petition, that Dr. Yates became a party to an arrangement which left him in the position of trustee, and that, he contended, was quite sufficient to make him properly a defendant in the suit - on the face of the petition there was sufficient allegation as to his liability.

   Then as to the other defendant Mr. Knight not been liable as the receiver of the estate.  It seems to him that Mr. Knight was not what would strictly be called the receiver; he thought Mr. Knight was what was called an interim administrator, acting until the appointment of a regular receiver could be made, but whether Mr. Knight was receiver or an interim administrator, the leave of the Court was necessary to enable him to defend the suit.  But it was in the knowledge of the Court that Mr. Knight had defended several suits, and he supposed the Court would have given him leave to defend this one. At all events he submitted it was not for the plaintiff to obtain the leave of the Court as he under stood the wording of the rule quoted by his learned friend, but that the application was to be made by the receiver himself.  Here was a very important and charge claim, and he took it that the Court would not defeat justice by ruling the action out of order on such ground; and if it was necessary for the plaintiff to ask the leave of the Court, he would now ask the Court to give the necessary sanction and not act differently in this case to what it had done in others.

   The COURT asked whether there was anything to show that application had been made for the payment of the money borrowed after the plaintiff attained his majority?

   Mr. WAINEWRIGHT said there was nothing in the petition showing that, but as a matter of fact he might say repeated applications for payment had been made after the plaintiff attained his majority, and if it was necessary he would apply to amend the petition; but all this would come out if the case went to a hearing.

   The COURT did not think it necessary for the petition to be amended.

   Me. HENDERSON, in replying, said he had been arguing the demurrer on the evidence before the Court, and not on facts they might hear of some time or other if the case went on.  It was not the fault of the defendants if the facts upon which the claim was based were not brought to the knowledge of the Court.  He had attempted to show that the facts as set forth in the petition were legally insufficient to constitute a cause of action against either of the two defendants, and the demurrer must be dealt with on the facts before the Court and not on evidence which might hereafter be produced.  All his learned friend had said about evidence outside the petition was wholly irrelevant and beside the point at issue.  As to what had been said as to the equitable nature of the transaction, and the Court sitting with equity powers, the Court, he believed, sat with all the powers exercised by Courts in the United States, and must take notice of all legal rights.

   The present claim, he maintained, was simply for the recovery of money loaned, and the statutory limitation must be held to apply.  It was attempted by some hook or crook to make the case out to be a trust, but it was absurd to try to give it that twist, the petition being totally insufficient to fix the responsibility of a trusteeship on either Mr. E. M. Smith or Dr. Yates. The line of argument adopted by Mr. Wainewright showed that he himself felt there was something wanting.  The petition was demurrable on the ground of limitation and incontrovertibly so, and if he had for a moment contemplated the wild shot made by his friend, as to the alleged trust and the non-application of the Statutes of Limitation, he should have been prepared with abundant authorities to disprove his argument, and he asked for an adjournment to produce these authorities.

   After some discussion, the argument was adjourned for these authorities to be produced.

14th May.

   Today the argument on the demurrer by the defendants to the plaintiff's petition was resumed.

   Mr. HENDERSON said when the Court adjourned on Monday his friend Mr. Wainewright had finished his argument in opposition to the  demurrer, and had contended - first, that the petition set up an express trust, and, second, that the Statues of Limitation  did not  bar a suit in equity.  There were substantially the two main points raised by his friend, and, in reply, he, (Mr. Henderson) first attempted to show that no case of express trust was set out in the petition, and, second, that there was no difference between law and equity so far as the Statutes of Limitation were concerned.  If this was a case in equity, how came it that the plaintiff applied for a remedy which was peculiarly and exclusively a legal remedy?  The case could not possible be construed into an equitable application by any authorities in existence.  He repeated his former argument that there was no express trust in the petition, and for a definition of a trust cited the 3rd paragraph of the first edition of Perry on Trusts; and in support of his proposition that there was no difference between actions of law and suits in equity, in respect of the application of the Statutes of Limitation, he cited Perry's second edition, section 855, and 1st Howard, page 193.

   He then went on to argue that there was no equity jurisprudence in the United States till after the rebellion, and authorities, culled from old text books and old English decisions, had no application as to the present doctrine of equity jurisprudence in the United States, the Statutes of Limitation being positively a bar to legal actions on written contract not commenced within six years and two years was a bar to oral contracts. The remedy asked for in this case was purely a legal remedy, and the remedy determined the character of the application. 

   He next proceeded to show that ignorance, poverty, hardship or mistake, was no excuse for delay, according to 2nd Perry, page 857; and then maintained that the Court should take judicial notice of the plaintiff, according to the law of his own country, attaining his majority at the age of sixteen; and concluded with a review of his previous contention as to the non-responsibility for money voluntarily paid by the "go-between."

   Mr. WAINEWRIGHT maintained that if this was really a case of trust, as he thought he had successfully shown it to be, then all the authorities Mr. Henderson had quoted were beside the pint, and he contented himself by asking the Court to read the 863 section of the 2nd edition of Perry with the other sections cited by his learned friend.

   The Court reserved its decision.

 

Source: The North China Herald, 24 June 1879

IN THE U.S. COURT FOR THE CONSULAR DISTRICT OF SHANGHAI.

Shanghai, 19th June.

Before D. H. BAILEY, Esq., Consul-General, sitting as Judge,

LOO  FONG-KWANG v.  Mr. F. P. KNIGHT and Dr. YATES.

   This case was before the Court on the  12th ultimo, when judgment was reserved.  Today, the Court delivered the following

Judgment:-

   The COURT said - This is an action by Loo Fung-kwang, a Chinese subject, against Francis Parkman Knight, receiver of the Estate of the late Edwin Maurice Smith, and Matthew Tyson Yates, citizens of the United States, for the sums of seventy-five thousand nine hundred and forty-six Shanghai sycee, and fifteen thousand four hundred Mexican dollars, with interest, making the total claimed as due at this time, and for which judgment is asked, to be $329,573.46.

   It is averred that the original transaction occurred in the year 1862, when the  said Edwin Maurice Smith borrowed, through his compradore, Wang Yueh-ting, of certain persons whose names are not given, the sums of  seventy-eight thousand nine hundred and forty-six taels Shanghai sycee, and fifteen thousand four hundred Mexican dollars, the rate of interest to be paid for the same being fixed at twelve per cent per annum; that, in the negotiations for these loans, one Quai Fung acted as a go-between; that in the year 1866, no payment of the principal or interest having been made, the said Smith, being pressed for payment, induced the defendant Yates to intervene, and "an arrangement and agreement was come to" between the said Smith, Wang Yueh-ting, Yates, and the lenders of  said sums of money, whereby the rents and profits of certain house property of the  said Smith, leased or to be leased to Wang Yueh-ting, were set apart for the purpose of paying said moneys; that, thereupon, the s aid Smith and Yates became trustees for the said lenders and responsible  for the carrying out of  said arrangement and agreement, or for the payment otherwise of the claims of  said lenders; that, in or about the month of September, 1869, the  said Smith paid one Cheng Foo-zee, the agent of the said Quai Fung, the sum of three thousand taels, but that since then, notwithstanding repeated applications for payment, no further nor other part of the moneys thus borrowed has been repaid by either of the defendants, and that no interest on the  same has been paid; that, in or about the years 1868 and 1869, the said lenders, being unable to obtain the payment of the said moneys, obliged the said Quai Fungi to pay the same to them, whereupon she became the sole creditor of  said Smith in respect of  said loans; that the  said Quai Fung   died in the month of October, 1871, leaving the plaintiff, her only son, surviving heir, who according to Chinese law, is the only person entitled to her personal estate; that the plaintiff was born on or about the 27th day of April, 1851, and that by reason of his youth, ignorance and poverty, he has been delayed in bringing this action.

   The defendant Knight demurs to the petition upon the grounds:-

1st. That the action had not been commenced within the time prescribed by law.

2nd. - That, as Receiver, he is not answerable in law for the cause alleged. 

   Defendant Yates also files a demurrer assigning:

1st. - That the action has not been commenced within the time prescribed by law.

2nd. - That the petition does not set forth facts sufficient to constitute a cause of action against the said defendant.  The demurrer raises only an issue of law.

   It is not necessary to consider at length the second ground of objection in Receiver Knight's demurrer, for it would be the duty of the Court to order, or allow, him to defend if the interest of justice required it - nor is it essential to dwell on the second objection of the defendant Yates. There is an allegation bin the petition that r. Yates became a trustee - whether express or implied - jointly with Smith for the benefit of the lenders of the money.  If, upon a trial of the merits of the case, it could be shown that he did accept a trust, he would be liable in accordance with the proof and to the extent of his trusteeship.

   The real question, then, to be considered is -  whether the plaintiff's claim is barred by the Statute of Limitations, or by lapse of time.  Section 83 of the Rules and Regulations fortunate States Consular Courts in China, framed in pursuance of the Act of Congress approved  2nd June, 1860, provides as follows: "83. - Civil actions based on written promise, contract or instrument, must be commenced within six years after the cause of action accrues; others within two." The petition avers that the money, upon which the claim is based, was borrowed in the year 1862, about 17 years ago.  The time when the money first became due does not appear in the petition, but it is averred that Smith was much pressed by the lenders for payment in the year 1866, thirteen years since, so that the right of action must then have accrued.

   But it is alleged that an arrangement and agreement was then "come to" by which Smith, Yates, and Wang Yueh-ting became trustees, whereby the money was to be repaid by the lenders.  When the money was to be repaid  does not appear; for, upon these important points, the petition is silent.  It is, however, averred in the 8th paragraph that, in or about the years 1868 and 1869, the lenders, being unable to obtain payment, obliged Quai Fung to pay them the said moneys, so that a right of action by the lenders must have accrued in or before the years 1868 or 1869, some ten or eleven years ago.

   In the 7th paragraph of the petition, it is alleged that, in or about the month of September, 1869, the said Smith paid Chang Foo-zee, as agent of Quai Fung, the sum of three thousand Shanghai taels, but that, since then, notwithstanding repeated applications for payment, no further sum has been paid.  The Statute of Limitation then commenced to run against Quai Fung in or about the month of September, 1869, something over nine and a half years before the commencement of this action.

   The petition sets up that Quai Fung  died in 1871, leaving the plaintiff, who was then a minor, twenty years of age, the sole heir of her personal estate.

   Section 84 of the Rules and Regulations, promulgated under authority of the Act of Congress, approved 22nd June, 1860, is in the nature of a saving clause to the limitations prescribed by Section 83; but infancy is not among the disabilities taken out of the Statute by that clause, so that the right of action having accrued in September, 1869, the claim was barred in September, 1875,  during the lifetime of Smith, and more than three years and a half before this action was commenced.

   When the Statute has once begun  to run, it continues to do so, notwithstanding a subsequent disability.  (Brightly's Digest, p. 554, sec. 82; 9 Am. L. R. 25; S. C. 3 Wall, Jr. C. C.; Hemp 274.)

   Even should it be admitted that the Statute did not commence to run against the plaintiff until 27th April, 1872, and that his  claim is based upon a written promise, contract, or instrument, he was barred by the Statute on the 27th day of April, 1878, nearly one year before his action was commenced; and if the claim is based upon a parol contract, it had then been barred nearly five years.  The petition does not aver whether the claim is founded upon a parol or written promise.

   The plea of ignorance and poverty s no excuse in the case of a statutory bar. (Lewin on Trusts, p. 623; 2d Perry on Trusts, par. 857.)  It would be a violent presumption to suppose that,  during all these years, the plaintiff has been ignorant of his right, if he has a right, to this large sum of money.

   But Counsel for the plaintiff contends that the petition sets up an express trust and that the Statute is not a bar to such a trust.  No doubt that is the general rule in equity with reference to direct trusts, but there are exceptions to the rule, which will be noticed hereafter.  Trusts arising by operation of law are within the statute; for, as to these, equity follows the law. (2d Perry on Trusts, pars. 865, 855'; 23 Howard 190.)

   Does the plaintiff's petition aver an express trust?  In terms, certainly not.  Express trusts are those which are created by the direct and positive acts of the parties by some writing, or deed, or will. (Storey's Equity Jurisprudence, pas. 980; Willard's Equity Jurisprudence, par. 416.) There is no averment in the petition of such a trust.  The arrangement and agreement are not alleged to be in writing, or by deed, or will.  If the petition does not aver an express trust, the Court cannot presume one.  The bill does not ask for the execution of an express trust.  If a DIRECT trust was created, why not set it up in a proceeding provided for such trusts and ask for an enforcement of the trust?  I infer that Counsel, in drawing the bill, has made it as complete as the facts will warrant.

   The only averments touching a trust are in the 5th paragraph of plaintiff's petition, where it is alleged that Smith, bring pressed in 1866 for payment of said money, induced the defendant Yates to intervene, and that, with his assistance, an arrangement and  agreement "was come to" between the said Smith and Wang Yueh-ting, Yates, and the said lenders concerning the rents and profits of certain house property of the said Smith, to be appropriated for the payment of  said moneys, and that, thereupon, Smith and Yates became trustees.  What kind of trustees?  One definition of a trustee is: - "A person in whom some state, interest, or power in or affecting property of any description is vested for the benefit of another."  Executors, administrators, guardians of infants and lunatics, assignees in insolvency and bankruptcy, bailees, factors, agents, commission merchants, and common carriers,  as well as the officers of public and private corporations, exercise the office of trustees, and may be held as such in the Common Law  courts. (Perry on Trusts, vol. 1, page 2.)  In equity, there are trustees of express, implied, resulting and constructive trusts.  To which class of these trustees are the defendants to be assigned?  The petition does not designate, nor indicate. The bill in this respect is bad for want of certainty.  Does the bill show a privity between the plaintiff and defendants such as exists in an express trust, where the possession of the trustee is the possession of the cestui que trust? Clearly, I think not.

   Upon such averments, and taking the petition as a whole, I think I should be wide of the mark if I held that the bill sets up an express trust.  The moist that can be said of plaintiff's claim, as alleged in the petition, is that, as the heir of Quai Fung, he is the assignee of a chose-in-action in respect of which there may be an implied trust.

   But suppose by a violent construction it should be held that the petition avers an express trust, even then the Statute of Limitation would apply if the trustee had disavowed his trust, and the Statute would begin to run from the time of disavowal.  Brightly's Digest, S41, sec. 67; 2 Perry on Trusts, par. 864; 3 Sumn., 486; 7 John. Ch. 90; 3 Gray,  1; 11 B. Mon., 161; 1 Ohio St., 478; 53 N.Y., 98; 10 Pet., 177; 3 How., 333.

   Again, in case of  demand and refusal in an express trust, the Statute has been held to run from the time of demand and refusal. - 5 How. 233; 19 How., 289; 2 Curt., 386. It may be, in a case of disavowal, or of demand and refusal, that the burden of proof would rest on the trustee.  The petition of plaintiff shows demand, and implies refusal nearly ten tears ago.  In equity,

"Even, in cases of express trust, if the parties have long ceased to act upon or recognize them, Courts of Chancery will not interfere to enforce them." - Story's Equity Pleadings, pa. 756A.

   There are three bars to claims or suits in equity arising  from lapse of time:-

  1. - The Statute of Limitations;
  2. I.                  - The presumption of something done, which, if done, is an answer to the plaintiff's suit;
  3. II.                - Public policy, which forbids the litigation of old and stale demands.
  • 2nd Perry on Trusts, par. 854.

   Where there is a statute bar at law, the same period, in analogy or obedience to the statute, is adopted in equity as a bar to equitable claims. - Ibid., par. 855,866. Lord Redsdale was of opinion, that the Statute virtually included Courts of Equity, that it was a mistake to say that Equity acts in analogy to the statute; it acts in obedience  to it.

   Let it be supposed that there is no Statute of Limitation in force, still Equity provides the rule that negligence or delay may extinguish or defeat the best founded claims.

   The true reason why suits and remedies are barred in Equity by length of time, is that the party has acquiesced or neglected to pursue his remedy, and the public peace, requiring an end of suits, he abandons this right by submission, or forfeits it by neglect; and a Court of Chancery, therefore, will, in many cases, refuse to give its  aid in favor of an equitable claim, though a less period than the corresponding statutory period shall have elapsed, if the length of time and circumstances of the case require the application of that principle.  Spence's Equitable Jurisprudence, vol. 2, p. 61.  Story's Equity Pleadings, par. 756a. 2nd Perry on Trusts, par. 869,1, How., p. 193 to 194.  Story's Equity Pleadings, 503a.

   Statutes of Limitation have been well denominated statutes of repose. Justice Story says:

They are to quiet titles, to suppress frauds, and to supply the deficiency of proofs, arising  from ambiguity and obscurity, or the antiquity of transactions. They proceed upon the presumption that claims are extinguished, whenever they are not litigated in the proper form, within the prescribed period.  They take away all solid grounds of complaint, because they rest on the negligence or laches of the party himself. They quicken diligence, by making it equivalent, in some measure, to right.  They discourage litigation, by burying in one common receptacle all the accumulations of past times, which are unexplained, and have now, from lapse of time, become inexplicable. It has been said by John Voet, with singular felicity, that controversies are limited to a fixed period of time, lest they should be immortal, while men are mortal.

How strongly these doctrines of law and equity apply in this case.

   To recur to the forcible language of Counsel for the plaintiff, in his argument against the demurrer, and arguments of counsel are to be considered in a case:

It was a case of most peculiar complications.  The facts were to be gleaned  from a great variety of documents and statements and contradictions; in fact, it was a case about which no opinion could be formed, until it was thoroughly gone into.

Again:-

It was not upon one document, nor half a  dozen documents, that the claim was based, and it was quite impossible and irregular, too, to import into the petition a great number of facts which were more or less contributory, and the information imperfect.

      The transactions upon which the claim is founded occurred seventeen years ago.  The trust, if any, was created, or arose, thirteen tears since.  The only payment ever made upon the claim was nearly ten years ago; and it is doubtful, taking the allegations of the petition, whether that payment was made on this claim.  The right of action first existed certainly as long ago as thirteen years.  There has been a continuing right of action since ten years, until the statutory bar became operative.

   Why, during all threes years, have the claimants failed to assert their rights in the legal tribunal provided for and open to them?  The sum claimed is very large, and it is out of the ordinary course of human action for claimants of large sums of money, to sleep upon their rights.  Smith, during all this period, had been the owner, as alleged in the petition, of a large landed property, with buildings thereon, in Shanghai, so that it was not at all improbable that a judgment for the claim could have been satisfied out of his property.

   Why, then, this unusual, not to say extraordinary,  delay?  Is it because of the "complications and contradictions," the doubtful character of the claim?  During the lifetime of Smith, the principal debtor, as alleged, no proceedings were instituted. He dies, and, almost immediately, proceedings are begun, as if his death had been waited for.  Quai Fung, at once the go-between, the active person and the volunteer in the alleged payments to the lenders, is dead.  What has become of most of the other parties to the transactions does not appear; but within 17 years many changes as to them, in the ordinary course of events, must have occurred.  The transitory character of residence in Shanghai is such that many of the important witnesses to this complicated, contradictory case, must be scattered to different parts of the earth, and, in the course of nature, no doubt are dead. The loss of documents and vouchers, and impairment of memory, naturally follow such a lapse of time.  How necessarily must all these things obscure the facts.  A Court under such circumstances, would at best be guided by dim and unsafe lights.

   I think the reasons in law for Statutes of Limitation, and in Equity for a bar against laches and negligence, and old ands stale  demands, apply with great force in this case.

   "The law helps the vigilant before those who sleep on their rights." Vigilantibus non dormientibus leges subvenient.

   The demurrer is sustained.

   I have stated the case and the law at some length, the sum involved being very large, and the plaintiff being a Chinese subject, I have wished him to know the reasons for the decision.

   Dr. YATES asked if it was competent to him to make a few remarks at this stage of the proceedings.  He was placed in a difficulty by the demurrer being sustained.    In 1866 Mr. Smith asked him to attend at his house to interpret for him, and it was at that time, to Mr. Smith's great surprise, that his compradore's creditors came to light.

   The COURT had no objection to Dr. Yates proceeding, if the Counsel for the plaintiff had none.

   Mr.  WAINEWRIGHT had no objection to offer, presuming that Dr. Yates wished merely to make a personal explanation.

   Dr. YATES said, as the demurrer had been sustained, he inferred no further proceedings could be taken.

   Mr. WAINEWRIGHT replied that he proposed to apply for leave to amend the petition.

   The COURT said if such an application were made, of course leave would be granted for the petition to be amended.  The amendments, of course, would have to be made within a reasonable time; but that was a matter which could probably be agreed upon between counsel.

   Mr. WAINEWRIGHT preferred that the Court should fix the time.

   The COURT said the ordinary time allowed in Courts at Home was twenty days, but he was willing to allow thirty days.

   Mr. WAINEWRIGHT replied that twenty says was quite sufficient for his purpose.  He could make the amendments in that time.

   The COURT requested the Clerk to make an entry in the record that twenty days were allowed the plaintiff to amend his petition.

   Dr. YATES then said - Since the Court has sustained the demurrer it places me in a difficulty in regard to certain receipts which I gave in 1866.  Mr. Smith's compradore had borrowed, on his own account, large sums of money unknown to Mr. Smith, and when this became known to Mr. Smith - he was at the time about to leave the whole of his property to his compradore - he refused to grant the lease unless the outside creditors, as he called them, would place their papers beyond their control during the time the compradore held the lease, lest they should drag him into the city and interfere with the property.  They agreed to give the papers up.  They were asked, Will you leave them with the Consul?  No, they would not do that.  Will you hand them to the bank> No.  Then will you leave them with me (Mr. Smithy)? No, but  we will leave them with Dr. Yates; we know him, and we will leave them with him. I reluctantly consented to allow them to deposit their papers in my chest for safe custody, and I gave them receipts for each paper they handed to me.

   About the same tine there was an attempt made by Mr. Smith to form a Joint Stock Company to purchase the whole of his property, and he begged me to assist him in the Chinese part of it, which I did.  As these outside creditors of Wang  Yueh-ting (his principal creditor was a local bank), were monied people, they were told that if they would take stock in this Company and use their influence to get their friends to take stock also and make it a success, Mr. Smith said he would see that Wang Yueh-ting gave them a bonus of sixteen shares, but no stock was taken.

   These papers were placed in my hands in that way, with the conditional promise that the enterprise was to be a success; and the allegation that I became a trustee for the lenders and responsible for the carrying out of the agreement as all as false as false can be, because I hold the executed lease which shows where every single dollar coming from the property was to go.  Now, these receipts I gave are still out against me, and I hold the original papers upon which the money was borrowed. They have refused to take them back and gibe me my receipts, which places me in a difficulty.  When Wang Yueh-ting failed and was taken into the city, they refused to take them, saying let them stop with you, they are all right and no use to us now.  I knew the creditors intended to wait until some complications would be brought about,  and they could get some money out of some one.

   I applied to the Consul-General here for relief in 1871.  He asked me to file an affidavit and deposit the papers in this Consulate, which I did.  That affidavit is still in existence, and those papers are still in existence.  The papers show that Wang Yueh-ting borrowed the money.  Mr. Smith's name does not appear at all.  I should like the advice of this Honorable Court, as to how I am to get back my receipts and get rid of these papers.  My so-called trusteeship consists in having these documents in my possession and having my name on the trust deed.  My name is attached to it, and the executed lease is in my possession, showing how the money can be paid. No such position as a trusteeship should have been brought against me.  I should like to know how I can get hold of my receipts.  I hold the original documents and want my receipts in return. 

   My own character has been seriously damaged by these proceedings, and I consider that somebody is responsible for it.  To sue me for Tls. 300,000 is a very small matter in this community whewre I am well known; but the Shanghai newspapers go the world over, and, as a clergyman, such charges against me are damaging, without an explanation, without an invesigatiob to reveal the truth of this thing.  As the demurrer has been sustained the damage is done and  goes unrefuted, and it is a great injustice to me.

   Mr. HENDERSON explained that the difficulty was not unapprehended when the demurrer was filed, and Dr. Yates expressed his dissatisfaction simply for the reasons that he had just now given.  It was his (Mr. Henderson's) opinion that some explanation addressed to the Chinese authorities, though this Court, might either bring the papers into Court so that they could be handed to Dr. Yates, or they might be handed to the Consul.  He suggested that such an explanation to the Chinese authorities might and ought to be made, and he had no doubt that it could be effectually put through.

   Dr. YATES  said, while speaking, he forgot to mention that there were also three forged letters in existence, purporting to have been written to the Shanghai Magistrate by him.  The true letter he w rote, or rather the answer to that letter, was on the records of the Consulate, dated, he believed, the 29th May, 1866, in which the Magistrate said that Quai Fung and others had represented to hymn that Wang Yueh-ting owned them money.  The same creditors now come forward and  say that there was a proposition to form a Joint Stock Company, and that Wang Yueh-ting, as the promoter, had promised them sixteen shares in settlement of their claim.  He was not aware who wrote the three forged letters, but it was someone who had used the influence of his name with the City Magistrate to get the compradore out of gaol; and he had no doubt that Mr. Wainewright had based much of his hopes on those forged letters.

   Mr.  WAINEWRIGHT said as they seemed to be going in strongly for explanations, he might say with regard to the documents which Dr. Yates had referred to, as being on file in the Consulate, that he had made inquiries of the Clerk of the Court, and that after a very minute search they could not be found, and to that extent he had been compelled to go on in the dark.

   Dr. YATES explained that they were filed in 1871.  But about two years ago, when Mr. Wells was making his investigation at the Consulate and had the records arranged on the floor of this room and the adjoining one he became anxious about them, and asked Mr. Lewis where they were.  Mr. Lewis told him that they were found up in a corner of the Post Office, with a lot of other papers, and he got possession of them and had them now.

   Mr. HENDERSON said he had had a certified copy of the affidavit made by Dr. Yates in his possession since this suit was instituted.

   The     COURT said there was no case before it at present, and nothing could be done until proceedings of some kind were instituted.  He was there to consider an application that came before him in the regular way, and if any application came before him he would dispose of it.

   Mr. HENDERSON asked for the costs of the demurrer to be taxed against the plaintiff, with a reasonable allowance as counsel's fee.

   The COURT said the usual costs would be taxed against the plaintiff.

 

Source: The North China Herald, 4 March 1880

IN THE U.S. COURT FOR THE CONSULAR DISTRICT OF SHANGHAI.

Shanghai, 28th February.

Before D. H. BAILEY, Esq., Consul-General, sitting as Judge.

LOO FOONG KWANG

v.

FRANCIS PARKMAN KNIGHT,

 Receiver of the Estate of EDWIN MAURICE SMITH, Deceased,

and

MATTHEW TYSON YATES, D.D.

      Mr. WAINEWRIGHT appeared for the plaintiff.

      Mr. J. J. HENDERSON appeared for the defendant.

      In this case the Court, today, entered the following

Judgment.

   The COURT said - The amended petition in this suit is in effect the same as the original petition, with the exception of certain documents which are imported into it - these are letters and a receipt alleged to have been written by the defendant Yates.  It is argued that these letters created an express trust as against Smith and Yates in favour of the lenders of certain moneys to pay Wang Yuet-ting.

   The answer denies the material part of these allegations, and the defendants plead in bar that the suit has not been commenced within the time prescribed by law.  The elect to stand on the plea in bar.

   The legal questions involved in this case were so fully considered in the judgment rendered on the 19th of June last that I do not deem it necessary to go over the same ground again, and especially as I have no hesitation, upon the most mature reflection, of re-affirming that decision.

   The only question to be considered so as to bring the case within that ruling is, does the amended petition set up an express trust?

   An express trust is a trust about which there can be no doubt - it is express, it is direct - these words relate to certainty.  It does not arise out of construction of documents, for that would be a constructive trust.  It is a trust concerning which there can be no ambiguity as to its being a trust.

   Apply tyhr accepted definition of an express trust to the documents set forth in the amended petition, and they wholly fail to come within the limitations of that definition. Their purpose is ecxteremyl bvague and uncertain.  They are called a plan or scheme for the relief of Wang Yuet-ting in paying his debts to his creditors.  The last document purports to establish a company to be called the "Hall of Public Profit."  All of these schemes were trial schemes, as is evident from the documents, to be abandoned if they did not suit the purposes of Wang Yuet-ting's creditors.  That they did not suit the purposes of these creditors, that they were not accepted by the creditors as an express trust is too manifest to be disputed, for, not relying on these documents, not accepting them as being an express trust, they abandoned the plan or scheme, wither as impracticable or an inchoate scheme, and obliged Quai Fang, the go-between, to pay their claim in full.  I do not think there is even the shadow of an express trust in these vague documents.

   If the averments could, by a forced construction, be held to set up an express trust, the petition shows adverse possession for nearly ten years, during all of which time the parties have slept on their rights.

   There is nothing in the petition to show that any trust money ever came into the hands of the defendants.

A most elaborate argument has been made by Counsel for the plaintiff, to show that constructive trusts do not fall within the bar of the Statute of Limitations.  The doctrine is too well-settled by the Courts of the United States to admit of a doubt that such trusts are barred by the statute.

   Final judgment will be entered for the defendants upon the ground that the action is barred by the statute and by lapse of time.

   Mr. WAINEWRIGHT intimated his intention to appeal.

Published by Centre for Comparative Law, History and Governance at Macquarie Law School