Rosenthal v. Walker

• Citation: 4 S.Ct. 382,28 L.Ed. 395,111 U.S. 185
• Parties: ROSENTHAL v. WALKER, Assignee, etc
• Decision Date: 31 March 1884
• Court: United States Supreme Court

111 U.S. 185

4 S.Ct. 382

28 L.Ed. 395

ROSENTHAL v. WALKER, Assignee, etc.

March 31, 1884.

S. Shellabarger and J. M. Wilson, for plaintiff in error.

Chester H. Krum and Eugene H. Lewis, for defendant in error.

WOODS, J.

This was an action at law, brought December 30, 1879, by Preston Player, as assignee in bankruptcy of Thomas Carney, against the plaintiff in error, Joseph Rosenthal, under section 5047 of the Revised Statutes, which authorizes an assignee in bankruptcy to recover by suit, in his own name, all the estate, debts, and effects of the bankrupt. The suit was brought to recover from Rosenthal certain money paid and property sold to him by Carney in fraud, as was alleged, of the bankrupt act. A petition in involuntary bankruptcy had been filed against Carney by his creditors October 20, 1875. He was adjudicated a bankrupt March 18, 1876, by the district court for the Eastern district of Missouri, and on May 1, 1876, Player, the defendant in error, was appointed assignee of the estate. The petition, having averred the foregoing facts, alleged that Carney, being insolvent and in contemplation of insolvency, as Rosenthal had reasonable cause to believe, on June 22, 1875, with intent to defeat the operation of the bankrupt law, and to evade its provisions, as Rosenthal well knew, sold and transferred to him 500 cases, containing 50,000 pairs of boots and shoes, of the value of $45,000, and that on July 20th following, to make effectual the fraudulent transfer, Rosenthal agreed that Carney should have an equal interest with him in the goods so sold and transferred, and accordingly recognized and admitted such interest. The petition also averred that Carney, being insolvent and in contemplation of insolvency, as Rosenthal had reasonable cause to believe, and with intent to hinder the operation of the bankrupt law, and evade its provisions, as Rosenthal well knew, on July 22, 1875, sold and transferred to him 100 barrels of whisky, etc., of the value of $9,400, and Carney also stipulated that he should retain an interest in the whisky equal with that of Rosenthal, who then and there recognized said interest accordingly, and that Rosenthal, between July 20, 1875, and March 1, 1876, disposed of and converted to his own use all the property so sold and transferred to him.

The petition further alleged that Carney, between July 20 and August 23, 1875, inclusive, being insolvent and in contemplation of insolvency, as Rosenthal had reasonable cause to believe, and with the purpose of defeating the object and hindering the operation of the bankrupt law, as Rosenthal well knew, made to him certain payments of money, amounting in the aggregate to $30,000. The petition then made the following averment: 'The plaintiff states that both the said Carney and the defendant kept concealed from him, the said plaintiff, the fact of the said payment and transfer of the said aggregate sum of $30,000, hereinbefore mentioned, and of all the component parts thereof; and also kept concealed from him the fact of the sale, transfer, and conveyance of the said goods and merchandise hereinafter set forth, and that he, the said plaintiff, did not obtain knowledge and information of the said matters, or either of them, until the twenty-ninth day of November, 1879, and then for the first time the said matters were disclosed to him and brought to his knowledge.'

Rosenthal excepted to the petition on two grounds,—First, because, as appeared on its face, the suit was not brought within two years from the time when the cause of action accrued; and, second, because the said sale of boots and shoes, alleged to have been made by Carney to Rosenthal on June 22, 1875 was not made within three months next before the filing of the petition in bankruptcy against Carney. The court overruled the first exception absolutely, and ordered that the second exception 'be dismissed so as not to prejudice the right of plaintiff to prove any of the transactions alleged in said petition to have taken place on the twentieth day of July, 1875, and within three months next before the institutions of proceedings in bankruptcy against the bankrupt, Thomas Carney, and maintaining said ground of exception only so far as relates to the transfer and sale of five hundred cases of boots and shoes, alleged to have been made on the twenty-second day of June, 1875. But the plaintiff shall have the right to prove, as by him alleged, that subsequently to June 22, 1875, the bankrupt, by agreement with defendant, was reinvested with an interest in said goods, and thereafter, within three months, the goods were disposed of as alleged.'

On March 3, 1880, Rosenthal filed his answer, which was a general denial of all the averments of the petition. On December 7th following, after the trial had commenced, he filed the following plea and supplemental answer:

'Now comes the defendant and pleads the prescription of two years, as provided for in the bankruptcy act, sec. 5057, of the Revised Statutes of the United States, in bar of plaintiff's action. And for supplemental answer to petition of plaintiff, defendant specially denies that the matters and things alleged in plaintiff's petition were first disclosed to him on November 29, 1879, as alleged; but avers that said plaintiff had full knowledge of all transactions that ever took place between the defendant and Carney, bankrupt, at the time said plaintiff was elected assignee.'

On the motion of the plaintiff the supplemental answer was stricken out, and the defendant excepted, but, as the record shows,

'during the trial of the cause no restraint was put upon the defendant in offering evidence as to the knowledge of plaintiff, as alleged in that part of the supplemental answer which was stricken out, and both sides offered evidence as to such knowledge and the court, upon this point, left it to the jury to say whether the action was commenced within two years from the time when the plaintiff knew, or by due diligence might have known, of the cause of action.' The pleadings having been thus made up, the issues of fact were submitted to a jury, which returned a verdict for the plaintiff for $17,500, on which the court rendered judgment against the defendant. To reverse that judgment this writ of error is prosecuted. Player, the original assignee, having died after the judgment in the circuit court, W. R. Walker was appointed assignee and substituted as defendant in error in his stead.

The petition disclosed upon its face that the suit was brought more than four years after the cause of action arose, and more than three years after the appointment of the defendant in error as assignee. Section 5057 of the Revised Statutes provides as follows:

'No suit, either at law or in equity, shall be maintainable in any court between an assignee in bankruptcy and a person claiming an adverse interest touching any property or rights of property transferable to or vested in such assignee, unless brought within two years from the time when the cause of action accrued for or against the assignee. And this provision shall not in any case revive a right of action barred at the time when the assignee is appointed.'

The first question raised by the assignments of error is whether the averments of the petition excuse the failure to bring the suit within two years after the cause of action accrued to the defendant in error. These averments are in substance that Carney, the bankrupt, and Rosenthal, the plaintiff in error, kept concealed from the defendant in error the payments of money and transfers of property charged in the petition, and that the defendant in error did not obtain information of said matter until November 29, 1879, when, for the first time, they were disclosed to him and brought to his knowledge. The judgment of the circuit court, by which it was held that these averments excused the failure to bring the suit within two years after the cause of action accrued, is sustained by the opinion and decree of this court in the case of Bailey v. Glover, 21 Wall. 342. That case was a bill in equity filed by the complainant as assignee in bankruptcy of Glover, one of the defendants, to set aside a conveyance made by him of his property to defraud his creditors. The suit was brought more than two years after the appointment of the assignee. To excuse the delay and take the case out of the operation of the statute, the following averment was made: The bankrupt and the other defendants to whom he had conveyed his property 'kept secret their fraudulent acts and endeavored to conceal them both from the knowledge of the assignee and his one creditor, whereby both were prevented from obtaining any sufficient knowledge or information thereof until within the last two years, and that, even up to the present time, they had not been able to obtain full and particular information as to the fraudulent disposition made by the bankrupt of a large part of his property.' The court held that, 'as the bill contained a distinct allegation that the defendants kept secret and concealed from the parties interested the fraud which was sought to be redressed,' the case was not subject to the bar of the statute. The court added: 'To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law which was designed to prevent fraud the means by which it is made successful and secure.' The court also declared that the exception to the bar of the statute was applicable to suits at law as well as in equity.

The case of Bailey v. Glover is a decision construing the statute which is relied on in this case, and, unless subsequently overruled...