Upton v. Laughlin, 105 U.S. 640

vo l . xv. 41 p. 642tered a judgment that the judgment of the District Court must be reversed and held for naught, and then stating, that “ the court, further proceeding to render such judgment as the said District Court ought to have rendered, find that said court had no jurisdiction of said cause,” and that it should have rendered judgment in favor of McLaughlin and against the assignee, and that judgment be rendered in favor of McLaughlin and against the assignee, and that McLaughlin recover from the assignee $59.25 costs, and that such judgment be remanded to the District Court for execution, and that a special mandate be sent to said court therefor. The assignee has brought the case into this court by a writ of error to the Supreme Court of the Territory of Wyoming.

The grounds on which the court proceeded in holding that the District Court had no jurisdiction, and in reversing the judgment of that court, are shown by its opinion, which is found in the record. The opinion proceeds upon the view that, because of the provisions of sect. 5057 of the Revised Statutes of the United States, the District Court had no jurisdiction of the suit. That section is 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 such assignee. And this provision shall not in any case revive a right of action barred at the time when an assignee is appointed.” The view taken in the opinion is, that this statute is not a statute merely limiting the remedy, but imposes an absolute limit; that, after two years, the assignee can neither sue nor be sued, but his office, for the purpose of commencing any suit, must be regarded as having expired ; that no court has power to admit him to a status within the court; and that such want of power is want of jurisdiction. The opinion delivered by Mr. Justice Miller in Bailey v. Glover (21 Wall. 342), is cited and interpreted as holding that the statute (then sect. 2 of the act of March 2, 1867, c. 176, 14 Stat. 518) is an absolute jurisdictional limitation, and thus, as an adjudication of the question, furnishing the rule which governs this case. This p. 643is an entire misconception of that decision. It established the contrary proposition. It was a suit in equity, in which the assignee, more than three years after the date of his appointment, filed a bill against three relatives of the bankrupt, to set aside conveyances made to them by the bankrupt of all his estate in fraud of his creditors. It alleged that the bankrupt and the defendants kept secret their fraudulent acts, whereby the assignee and the creditqrs were prevented from obtaining any sufficient knowledge or information thereof until within two years before the filing of the bill. The defendants demurred to the bill, on the ground that the suit was not brought within two years from the appointment of the assignee. The demurrer was sustained by the Circuit Court. The plaintiff appealed to this court. The report of the case shows that the defendants contended here that the case was not one of an ordinary statute of limitation, but that the statute was imperative and admitted of no exceptions as to any tribunal. If such contention had been regarded as correct, the decision of the Circuit Court would necessarily have been affirmed. But this court held that the statute in question was a statute of limitation, and one of such a character as not to set up an absolute bar of two years from the mere lapse of that time, but to require the application to it of the principle that where there has been no negligence or laches on the part of a plaintiff in coming to the knowledge of the fraud which is the foundation of the suit, and when the fraud has been concealed, or is of such a character as to conceal itself, the statute does not begin to run until the fraud is discovered by, or becomes known to, the party suing or those in privity with him. On this view this court reversed the decree below. This was a plain decision that the statute in question does not impose an absolute limit of two years after the appointment of the assignee, in respect to transactions which occurred before such appointment, and that there is no want of power in the court to entertain a suit after such two years have elapsed. This view was recognized and applied in Grifford v. Helms (98 U. S. 248), although there it was held that, on the facts, the assignee’s right of action commenced at the time of his appointment. It is, therefore, clear that no support for the decision p. 644below is to be drawn from Bailey v. Glover. The question is not to be treated as one of power or jurisdiction, but as one dependent on the principles applicable to statutes of limitation generally.

The petition in this case sets out facts which show that the p. 645cause of action sued on accrued to the assignee more than two years before the bringing of the suit. Assuming the suit to be such a suit as is mentioned in sect. 5057, it is held by the Supreme Court of Wyoming, in Bonnifield v. Price (1 Wy. 172), that the rule is well established in that Territory, that where from the face of the petition it is apparent, without any further showing, that the claim is barred by a statute of limitation, a defendant may take advantage of such bar by a special demurrer to the petition. The same rule prevails in Ohio, Sturges v. Burton (8 Ohio St. 215) ; McKinney v. McKinney (id. 423) ; in Kansas, Zane n . Zane (5 Kan. 134) ; and in Nebraska, Peters n . Dunnells, 5 Neb. 460. The rule is founded on the view that in such a case the petition does not state facts sufficient to constitute a cause of action. But if, in the court of original jurisdiction, the defence of a statute of limitation is not raised by either demurrer or answer, and is not brought to the attention of the court which tries the cause, by some objection taken in a proper manner, before judgment, it cannot, under sect. 87 of the Code of Wyoming, be raised for the first time in an appellate court. The effect of that section is only to permit the defendant to make the objection after demurrer or answer, and before judgment. Under such a statutory provision it has been held that at the trial, and even after the evidence is all in, the objection may first be made, Coffin v. Reynolds (37 N. Y. 640); Zane v. Zane (5 Kan. 134); and that it may be made by stating it distinctly as a ground of objection to the introduction of evidence. Zane v. Zane, ubi supra. But unless it appeared by the record which was before the Supreme Court of Wyoming in this case, that the objection had been taken in some proper manner in the District Court, the Supreme Court could not notice it. That court has power (Code, sect. 513) to reverse a judgment of the District Court for errors appearing on the record, and the petition in error (sect. 514) must set forth the errors complained of. Neither in the bill of exceptions, nor in the twenty-eight errors specified in the motion for a new trial in the District Court, nor in the thirty-two errors spe-* cified in the petition in error, is there any allusion to the statute of limitation.

The defendant contends that as the District Court sustained p. 646the demurrer to the fourth defence in the answer, and the defendant excepted to the ruling, the question as to whether the petition was sufficient as a pleading was thereby brought up, because the District Court ought to have given judgment against the party which committed the first fault in pleading. But we are of opinion that the record must show that the question as to whether it appeared by the petition that the action was barred by the statute was distinctly presented to and raised before the District Court. This does not appear, as before stated.

Note . — Upton v. Kent, error to the Supreme Court of the Territory of Wyoming, was submitted at the same time as the preceding case, and was argued by p. 647the same counsel for the plaintiff in error, and by Mr, Samuel Shellabarger and Mr. Jeremiah M. Wilson for the defendant in error.

It is made to appear, by this application, that a judgment was recovered in the Circuit Court for the Southern District of New York, in favor of the United States against Robert Boyd, the petitioner, and Francis O'Rourke, on which execution 'was issued and returned unsatisfied, except in the sum of 8200, leaving due thereon $8,128.92. It was thereupon ordered by the court, on motion of the plaintiff’s attorney, that the matter be referred to Joseph M. Deuel, Esq., a commissioner of the court, “ to examine the said Robert Boyd and Francis O’Rourke, and take answers on oath concerning their property, and to reduce such answers and examination to writing, and also to examine on oath, concerning such property, such witnesses as may be offered by the respective parties, and reduce such examination to writing, and report such answers and examination, and all his proceedings under and by virtue of this order, to this p. 648court with all convenient speed, and the said Deuel is hereby appointed a referee in this action for the purpose aforesaid. And it is further ordered that the said Robert Boyd and Francis O’Rourke do appear before the said referee at his office in the Post Office building, New York City, on the 22d of May, 1879, at eleven o’clock A. M., to answer before said referee concerning their property as aforesaid; and for that purpose to appear before the referee from time to time as he shall direct and appoint.”

“ Your petitioner is informed and believes that proceedings supplementary to execution, wherein your petitioner is restrained of his liberty, are not, by the laws of the State of New York, a remedy in common-law causes to reach the property of the judgment debtor allowed in actions at law in the courts of the United States by sect. 916 of the Revised Statutes of the United States; but, on the contrary, that these proceedings are, by the laws of the State of New York, prescribed as part of a code to abolish common-law causes, as such, and to amalgamate and indiscriminate common-law causes and suits in equity, and to confer upon the courts of that State, indifferently, in the same action powers in actions at law and in equity. Your petitioner is informed and believes that the application of this provision of that code to the courts of the United States is not authorized by any act of Congress, and is in conflict with the provisions of Article III., sect. 2, of the Constitution of the United States, which preserves and establishes the distinction between relief at law and in equity. Your petitioner, therefore, avers and charges that the said p. 649Circuit Court was and is wholly without jurisdiction1 in the premises, and that, therefore, all its proceedings therein are null and void.”

“ Sect . 297. The judge may order any property of the judgment p. 650debtor, not exempt from execution in the hands either of himself or any other person, or due to the judgment debtor, to be applied towards the satisfaction of the judgment.

The jurisdiction of the courts of chancery in New York, exercised prior to the adoption of its present code, which authorized a discovery of assets from a judgment debtor in aid of an execution, was statutory. It was conferred and defined by sects. 38 and 39 of tit. 2, art. 2, 2 Rev. Stats, of New York, 173-174. It was therein provided that “whenever an execution against the property of a defendant shall have been issued on a judgment at law, and shall have been returned unsatisfied, in whole or in part, the party suing out such execution may file a bill in chancery against such defendant, and any other person, to compel the discovery of any property or thing in action belonging to the defendant, and of any property, money, or thing in action due to him. or held in trust for him ; and to prevent the transfer of any such property, money, or thing in action, or the payment or delivery thereof to the defendant, except where such trust has been created by, or the fund so held in trust has proceeded from, some person other than the defendant himself. The court shall have power to compel such discovery and to prevent such transfer, payment, or delivery, and to decree satisfaction of the sum remaining p. 653due on such judgment out of any personal property, money, or things in action belonging to the defendant, or held in trust for him, with the exception above stated, which shall be discovered by the proceedings in chancery, whether the same were originally liable to be taken in execution at law or not.”

In Brinkerhoff v. Brown {supra'), he said that it was the settled rule in chancery that the plaintiffs must show that they have taken out execution at law and pursued it to every available extent against the property before they can resort to that court for relief; that the presumption is that the court which renders judgment is competent to enforce it; that, “ if he seeks p. 654aid as to real estate, he must show a judgment creating a lien upon such estate ; if he seeks aid in respect to personal estate, he must show an execution giving him a legal preference or lien upon the chattels.” The opinion cites the case of Taylor v. Hill (1 Eq. Cas. Abr. 132, pl. 15), before Lord King in 1705, where the bill having been filed before execution for discovery of particular specified effects of the judgment debtor in the hands of a third person, a demurrer was allowed; but the Chancellor said it would not lie against the debtor himself, nor against a third person, to have a general discovery. And in MeD ermutt v. Strong (supra), the Chancellor said: “I regard the law to be clearly settled, that before a judgment creditor can come here for aid against the goods and chattels of his debtor, or against any equitable interest which he may have therein, he must first take out execution, and cause it to be levied or returned, so as to show thereby that his remedy at law fails, and that he has also acquired by that act of diligence a legal preference to the debtor’s interest.”

In Mitchell v. Bunch (supra), Chancellor Walworth seemed to regard the jurisdiction of chancery, independent of the statute, as equally extensive, and refers to the case of Edgell v. Haywood and Dawe (3 Atk. 352), decided by Lord Chancellor Hardwicke in 1746, as a direct authority in support of the bill in the case before him, and as a decision which had never been questioned ; but the case before Lord Hardwicke was not that of a bill for general discovery, but for a discovery in respect to assets alleged to be in the hands of the co-defendant as executor, applicable to the payment of a legacy which belonged to the judgment debtor under a will, and which the complainant was entitled to have appropriated to the payment of his p. 655judgment, by virtue of the provisions of the act of 10 Geo. II. c. 26, for the relief of insolvent debtors, under which the debtor’s person had been discharged, as an insolvent, from liability to be taken in execution. The right to the remedy in equity in that case was put distinctly upon the ground that the method by which the judgment creditor might have reached the property of his debtor, by proceeding at law against his person, having been taken away by the statute, the choses in action were equitable assets which a Court of Chancery would appropriate to the benefit of his creditors.

But here we have nothing to do with any question but that of discovery. The only relief sought is, knowledge of property belonging to the debtor, applicable, either at law or in equity, to the payment of the creditor’s judgment. What shall be done, after that knowledge has been acquired, is to be p. 657determined upon the circumstances as they may then appear, and cannot now be considered. For the proceeding for discovery is distinct and entirely separable from the subsequent relief, if any shall then be sought.

vol . xv. 42 p. 658and papers, because discovery was an ancient head of equitable jurisdiction. It is the very office of the principle of equity to supply defects in the law, and it is not to be regarded as anomalous that the technical law should, in the course of its necessary development, incorporate into its own organization, improvements in procedure, first introduced as equitable remedies. It is this very capacity of parallel growth that constitutes and perpetuates the harmonious coexistence of the two departments of our jurisprudence. Its history furnishes many examples and illustrations of this tendency and of its results.