When relief is asked in equity in courts of the United States on
the ground of fraud, time will not run in favor of defendant until
discovery of the fraud, or until, with reasonable diligence, it
might have been discovered, and this rule is not affected in the
New York by the provisions of § 382 of the Code of that state
as amended in 1871 insofar as they may be construed to modify
it.
A statute of a state which provides that
"The time which shall have elapsed between the death of any
person and the granting of letters testamentary or of
administration on his estate, not exceeding six months, and the
period of six months after the granting of such letters shall not
be deemed any part of flue time limited by any law for the
commencement of actions by executors or administrators"
does not give the party claiming the benefit of its provisions
both periods of six months therein mentioned, but only such time,
not exceeding six months, as elapsed after
Page 120 U. S. 131
the death of the testator or intestate, before the granting of
letters and the additional time of six months after the granting of
letters.
In a state where the statutes authorize ancillary letters to be
issued on a will proved in another state, on depositing in the
office of the probating court a certified copy of the will and its
probate, the executor cannot prevent the statute of limitations of
the state from running against him in a court of the United States
sitting in the state by an unreasonable delay in taking out
ancillary letters.
This case was heard in the court below upon demurrers to an
amended bill, and to an amended bill in the nature of a
supplemental bill. The demurrers were sustained, and the bill
dismissed, upon the ground that the suit was barred by the statute
of limitations of the State of New York.
The material facts admitted by the demurrer are as follows:
The appellant, the plaintiff below, is the executor of John T.
Alexander, who died at his domicile in the State of Illinois, on
the 21st of August, 1876. He received his letters testamentary from
the proper court in that state on the 6th of September of the same
year. On the 7th of April, 1880, ancillary letters were issued to
him by the Surrogate of the County of New York, in the State of New
York. 2 Rev.Stat. N.Y. (2d ed.) marginal page 67, § 68.
The suit was brought April 9, 1880. Its object is to obtain a
decree setting aside sundry settlements of accounts had by the firm
of J. T. & G. D. Alexander & Co. (composed of John T.
Alexander, G. D. Alexander, and William Fitch, and to be hereafter
called Alexander & Co.) with certain railroad corporations,
defendants below, in reference to various business transactions
between the parties. Those transactions arose under an agreement,
partly written and partly verbal, entered into May 28, 1870,
between those corporations and Alexander & Co., relating to the
shipment of horned cattle and hogs by the latter over the roads of
the former between designated points, and at specified rates of
freight. The agreement took effect June 10, 1870 and was to
continue in force one year, during which period Alexander & Co.
were not to ship horned cattle or hogs over any rival road between
the points named. In the event there was a reduction of rates,
Alexander & Co. were to have the benefit of the lowest rates
between those
Page 120 U. S. 132
points charged by either of the defendant corporations or by any
other rival corporation. The agreement contemplated settlements
between the parties from time to time and the payment by Alexander
& Co., on each shipment, of the rates specified in the
agreement. But the amounts so paid, when in excess of the lowest
rates charged by the defendant corporations, or either of them, or
by other rival corporations, were to be held by the defendants in
trust for the shippers, and repaid to the latter by way of
"drawbacks," on each occasion when the accounts between the parties
were stated and settled.
These settlements were had monthly or oftener. At each of them,
Vanderbilt, the testator of the individual defendants, in behalf of
the railroad corporations, claimed to have peculiar facilities for
obtaining information in reference to rates, and promised to keep
Alexander & Co. (who had no means of obtaining such
information) fully advised in the premises. In reply to specific
inquiries addressed to him on the occasion of each of such
settlements, he represented that the rates charged by his companies
to that firm were not higher than those charged by rival
corporations. Relying upon such representations, Alexander &
Co. consummated the various settlements upon the basis suggested by
Vanderbilt. They, however, subsequently ascertained that the rates
charged by the defendant corporations, as well as by rival
corporations, to shippers between the points named and during the
same period were much lower than those charged Alexander & Co.,
and that the representations to the contrary by the defendant
corporations were knowingly false, and made with the intent to
cheat and defraud said firm. The bill alleges that the truth as to
what were the current rates for the period covered by the
settlements was fraudulently concealed by the defendant
corporations from Alexander & Co., and that said frauds were
not, and could not have been, discovered by the latter until on or
about April 16, 1873.
The settlements between the parties, it may be stated, covered
more than 200 shipments of cattle and hogs, the freights upon which
aggregated nearly $350,000, or about $9,000 per week, from June 10,
1870, to March 14, 1871, when
Page 120 U. S. 133
the contract was cancelled by mutual consent. Immediately
thereafter, the partnership of Alexander & Co. was dissolved,
and its affairs adjusted.
G. D. Alexander was adjudged to be a lunatic by the proper court
in Illinois on the 3d day of April, 1872, and is still of unsound
mind. A conservator of his estate was shortly thereafter selected,
but in reference to that appointment, the bill charges that it was
a nullity, and that no valid appointment was made until July 3,
1880. As to Fitch, the remaining partner, he, on April 12, 1879,
brought an action in one of the courts of New York for the purpose
of enforcing the liability to him, individually, of the defendant
corporations and Vanderbilt, on account of the matters in this suit
set forth, but by proceedings had after the commencement of this
litigation his interest in the claim preferred in his own suit was
sold, one Taylor becoming the purchaser thereof, and subsequently
Fitch's suit was dismissed, by the procurement of the defendants,
for want of prosecution. The plaintiff states that at the time of
Taylor's purchase, Fitch, by his laches, had lost any individual
rights he might theretofore have had in said claim, and that Taylor
had not succeeded to any substantial interest capable of being
enforced herein. He also avers that both Fitch and the present
conservator of the estate of G. D. Alexander have declined, upon
request, to unite as co-plaintiffs in this suit.
It is further alleged by the plaintiff that, the receipted
freight bills having been surrendered to the defendant corporations
at the time of the settlements with them, he has no means of
ascertaining the amount justly due to said firm by way of drawbacks
except from the freight bills, checks, and vouchers in the
possession or under the control of said corporations.
The prayer of the bill is that the before-mentioned settlements
be opened and set aside; that a reaccounting be had in respect of
all of said transactions, and that, upon final hearing, the
plaintiff have a decree for the difference between the amount of
"drawbacks" repaid to Alexander & Co. at the time of the
settlements and the amounts which that firm were
Page 120 U. S. 134
entitled to receive upon each settlement, with interest thereon
from the time they were respectively payable.
MR. JUSTICE HARLAN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The case made by the plaintiff is clearly one of which a court
of equity may take cognizance. The complicated nature of the
accounts between the parties constitutes itself a sufficient ground
for going into equity. It would have been difficult if not
impossible for a jury to unravel the numerous transactions involved
in the settlements between the parties and reach a satisfactory
conclusion as to the amount of drawbacks to which Alexander &
Co. were entitled on each settlement. 1 Story Eq.Juris. § 451.
Justice could not be done except by employing the methods of
investigation peculiar to courts of equity. When to these
considerations is added the charge against the defendants of actual
concealed fraud, the right of the plaintiff to invoke the
jurisdiction of equity cannot well be doubted.
Did the circuit court err in adjudging that the suit was barred
by the statute of limitations? By the Code of Civil Procedure of
New York in force prior to September 1, 1877, the period of six
years was prescribed as the limitation for
"1. An action upon a contract, obligation, or liability, express
or implied, except a judgment or sealed instrument,"
"
* * * *"
"6. An action for relief on the ground of fraud in cases which
heretofore were solely cognizable by the court of chancery, the
cause of action in such case not to be deemed to have accrued until
the discovery by the aggrieved party of
Page 120 U. S. 135
the facts constituting the fraud."
Voorhees' Code, § 91; 4th ed. 86; 5th ed. 69-70.
The Code, which went into operation September 1, 1877,
prescribed the like limitation for actions upon contracts,
obligations, or liabilities, express or implied, other than
judgments or sealed instruments; but in place of subdivision 6 of
§ 91 of the old Code was substituted the following.
"5. An action to procure a judgment, other than for a sum of
money, on the ground of fraud, in a case which, on the thirty-first
day of December, 1846, was cognizable by the court of chancery. The
cause of action is not deemed to have accrued until the discovery,
by the plaintiff or the person under whom he claims, of the facts
constituting the fraud."
N.Y.Code as amended in 1877, § 382.
The circuit court, deeming the jurisdiction in equity and at law
to be concurrent in cases like this, was of opinion that the
question of limitation is controlled by the local statute, and,
upon the authority of
Carr v. Thompson, 87 N.Y. 160,
adjudged that this action was not, within the meaning of § 382
of the Code, one "to procure a judgment, other than for a sum of
money, on the ground of fraud," and that, consequently the cause of
action accrued upon the commission of the alleged frauds (which was
in 1871), and not at the date of their discovery, on the 16th of
April, 1873. As this view is controverted by the appellant, and is
the main ground upon which appellees rely for an affirmance of the
judgment below, it must be examined.
It is not clear that the decision in
Carr v. Thompson
goes as far as the circuit judge supposed. That was an action
against an agent to recover moneys obtained from his principals,
and converted to his own use, by means of false and fictitious
accounts, rendered from time to time, and which he represented to
be correct and just. Fraud, although charged, was not regarded by
the state court as the basis of the action. It was not deemed a
suit to recover damages for the fraud practiced, but one merely to
recover damages for the violation of the agent's contract or
obligation to account justly and honestly to his principals. The
sole question, the state court said,
Page 120 U. S. 136
presented by the complaint and answer was whether the agent
properly performed his duty. It also was careful to say:
"It is to be observed that the complaint is not framed for the
purpose of opening an account stated. It does not allege the
existence of such an account as an obstacle to a recovery which
requires the aid of equity to remove; nor, indeed, does the answer
set up any such defense."
These remarks, in connection with the further declaration that
the words "an action to procure a judgment, other than for a sum of
money, on the ground of fraud," sufficiently describe "a case in
which judgment for an accounting is sought in addition to, and as a
means of reaching, a judgment for money," lead us to doubt whether
that court would hold, in a case like the present, that the time
for commencing the action begins to run from the commission, not
from the discovery, of the fraud.
Be that as it may, it is an established rule of equity as
administered in the courts of the United States that where relief
is asked on the ground of actual fraud, especially if such fraud
has been concealed, time will not run in favor of the defendant
until the discovery of the fraud or until with reasonable diligence
it might have been discovered.
Meader v.
Norton, 11 Wall. 442,
78 U. S. 458;
Prevost v.
Gratz, 6 Wheat. 481;
Michoud v.
Girod, 4 How. 503,
45 U. S. 561;
Veazie v.
Williams, 8 How. 149, 158;
Brown v. Buena
Vista, 95 U. S. 157;
Rosenthal v. Walker, 111 U. S. 190;
2 Story Eq. § 1521a; Angell on Limitations.
In
Bailey v.
Glover, 21 Wall. 347, it was said that
"In suits in equity where relief is sought on the ground of
fraud, the authorities are without conflict in support of the
doctrine that where the ignorance of the fraud has been produced by
affirmative acts of the guilty party in concealing the facts from
the other, the statute will not bar relief provided suit is brought
within proper time after the discovery of the fraud. We also think
that in suits in equity the decided weight of authority is in favor
of the proposition that where the party injured by the fraud
remains in ignorance of it without any fault or want of diligence
or care on his part, the bar of the statute does not begin to run
until the fraud is discovered, though there be no special
Page 120 U. S. 137
circumstances or efforts on the part of the party committing the
fraud to conceal it from the knowledge of the other party."
In the same case, it was said:
"To hold that by concealing fraud or by committing a fraud in a
manner that 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."
See also Traer v. Clews, 115
U. S. 538.
These observations were made with reference to an act of
Congress prescribing a fixed time within which a suit between an
assignee in bankruptcy and persons asserting adverse rights in
property conveyed to such assignee should be brought. They are
peculiarly applicable to a local statute which, if followed, would
impair the power of the courts of the United States to enforce the
settled principles of equity in suits of which they have, by the
Constitution and the laws of the United States, full jurisdiction.
While the courts of the union are required by the statutes creating
them to accept, as rules of decision in trials at common law, the
laws of the several states, except where the Constitution, laws,
treaties, and statutes of the United States otherwise provide,
their jurisdiction in equity cannot be impaired by the local
statutes of the different states in which they sit.
In
United States v.
Howland, 4 Wheat. 108,
17 U. S. 115,
Chief Justice Marshall, speaking for the Court, said that as the
courts of the union have a chancery jurisdiction in every state,
and the Judiciary Act confers the same chancery powers on all, and
gives the same rule of decision, its jurisdiction must be the same
in all the states. The same view was expressed by Mr. Justice
Curtis in his work on the jurisdiction of the courts of the United
States (p. 13), when he observed that
"The equity practice of the courts of the United States is the
same everywhere in the United States, and they administer the same
system of equity rules and equity jurisdiction throughout the whole
of the United States, without regard to state laws."
So, in
Payne v.
Hook, 7 Wall. 430, it was said:
"We have repeatedly held"
"that the jurisdiction of the courts of the United States over
controversies between citizens of different
Page 120 U. S. 138
states cannot be impaired by the laws of the states which
prescribe the modes of redress in their courts, or which regulate
the distribution of their judicial power."
"If legal remedies are sometimes modified to suit the changes in
the laws of the states and the practice of their courts, it is not
so with equitable. The equity jurisdiction of the courts of the
United States is the same that the High Court of Chancery in
England possesses, is subject to neither limitation nor restraint
by state legislation, and is uniform throughout the different
states of the union."
See also Robinson v.
Campbell, 3 Wheat. 221,
16 U. S. 222;
Boyle v.
Zacharie, 6 Pet. 658;
Livingston v.
Story, 9 Pet. 656;
Stearns v.
Page, 7 How. 819;
Russell v.
Southard, 12 How. 147;
Neves
v. Scott, 13 How. 272;
Barber
v. Barber, 21 How. 592;
Green
v. Creighton, 23 How. 105. In view of these
authorities, it is clear that the statute of New York upon the
subject of limitation does not affect the power and duty of the
court below -- following the settled rules of equity -- to adjudge
that time did not run in favor of defendants, charged with actual
concealed fraud, until after such fraud was, or should with due
diligence have been, discovered. Upon any other theory, the equity
jurisdiction of the courts of the United States could not be
exercised according to rules and principles applicable alike in
every state. It is undoubtedly true, as announced in adjudged
cases, that courts of equity feel themselves bound, in cases of
concurrent jurisdiction, by the statutes of limitation that govern
courts of law in similar circumstances, and that sometimes they act
upon the analogy of the like limitation at law. But these general
rules must be taken subject to the qualification that the equity
jurisdiction of the courts of the United States cannot be impaired
by the laws of the respective states in which they sit. It is an
inflexible rule in those courts, when applying the general
limitation prescribed in cases like this, to regard the cause of
action as having accrued at the time the fraud was or should have
been discovered, all thus withhold from the defendant the benefit,
in the computation of time, of the period during which he concealed
the fraud.
Page 120 U. S. 139
It results that even if this be not an action "to procure a
judgment, other than for a sum of money, on the ground of fraud"
within the meaning of the New York Code of Procedure, the
limitation of six years, being applied here, does not, as adjudged
below, commence from the commission of the alleged frauds.
Can the suit be maintained if the cause of action is to be
deemed to have accrued from the discovery of the fraud? In
Burke v.
Smith, 16 Wall. 401, where the local statute
prescribed six years for the commencement of actions for fraud, the
Court, after observing that equity acts or refuses to act in
analogy to the statute, said:
"We think a court of equity will not be moved to set aside a
fraudulent transaction at the suit of one who has been quiescent
during a period longer than that fixed by the statute of
limitations, after he had knowledge of the fraud, or after he was
put upon inquiry with the means of knowledge accessible to
him."
Without inquiring whether the plaintiff was not guilty of such
gross laches, in applying for relief, as deprived him of all right
to the aid of equity, and giving him the benefit of the limitation
of six years to be computed from the discovery of the fraud, there
seems to be even then no escape from the conclusion that the suit
was not brought in time. Seven years, lacking only seven days,
elapsed after the discovery of the frauds by the plaintiff's
testator before suit was brought.
The plaintiff, however, contends that he had seven years within
which to sue. This position is supposed to be justified by the New
York statute of September 13, 1883, which declares that
"The time which shall have elapsed between the death of any
person and the granting of letters testamentary or of
administration on his estate, not exceeding six months, and the
period of six months after the granting of such letters, shall not
be deemed any part of the time limited by any law for the
commencement of actions by executors or administrators."
2 Rev.Stat.N.Y. pt. iii, c. 8, tit. 3, art. 1, § 9, 1st ed.
vol. 2, p. 448, 6th ed. 2, p. 733. [Sess.Laws, 1880, vol. 1, p.
367, c. 245.]
If this statute has any application to a case where the cause of
action accrued in the lifetime of the testator or intestate, it
Page 120 U. S. 140
cannot avail the plaintiff. It does not give the party claiming
the benefit of its provisions both of the two periods of six months
therein mentioned, but only such time, not exceeding six months, as
elapsed after the death of the testator or intestate before the
granting of letters, and the additional time of six months after
the granting of letters. Here only sixteen days intervened between
the death and the granting of letters testamentary. In computing
the time for suing, there must be excluded only these sixteen days
and the six months immediately succeeding that period. In other
words, applying the statute of 1873 to the case in hand, the
plaintiff had only six years, six months, and sixteen days after
the discovery on April 16, 1873, of the alleged frauds within which
to sue, whereas this action was not brought until seven years,
lacking only seven days, after the alleged frauds were
discovered.
We do not conceive that the time of granting the ancillary
letters testamentary in New York can affect the question. The will
having been proved in Illinois, the place of domicile, there was
nothing to prevent the immediate issue of letters upon it in New
York. By the laws of that state, no further probate was necessary.
A certified copy deposited in the office of the surrogate was all
that was required. As this was in the executor's power to have done
at any time, he can hardly claim that his own voluntary delay
should extend the period which equity considers reasonable for the
institution of a suit. 2 N.Y.Rev.Stat. (2d ed.), marg. paging 67,
§ 82; Civil Code § 2695.
The decree is affirmed.
