On the facts as stated in the opinion of the Court, it is
held that this suit is one between an assignee in
bankruptcy and one claiming an adverse interest touching the
property which is the subject of controversy within the meaning of
Rev.Stat. § 5057, prescribing a limitation for the
commencement of such an action.
The omission by a bankrupt to put upon his schedules, or the
omission by him or by his administrator to disclose to his assignee
in bankruptcy the existence of policies of insurance on his life
which had been taken out by him and had, before the bankruptcy,
been assigned to a trustee for the benefit of his daughters, does
not amount to a fraudulent concealment of the existence of the
policies so as to take an action against the administrator (who was
also guardian of the daughters) to recover from him the amount of
insurance paid to him as administrator out of operation of the
limitation prescribed in Rev.Stat. 5057.
Mere ignorance of the existence of a cause of action by an
assignee in bankruptcy does not remove the bar against such action
prescribed by a statute of limitation, but, in order to set aside
such bar, within the rule as announced in
Bailey v.
Glover, 21 Wall. 342, there must be no laches on
the part of the assignee in coming to the knowledge of the fraud
which is the foundation of the suit.
In the year 1867, the Connecticut Mutual Life Insurance Company
issued three policies of insurance upon the life of Matthias Ellis,
numbered, respectively, 68,428, 68,429, and 68,430, the first two
being for $10,000 each, and the last for $5,000. Each policy was
payable to the executors, administrators, and assigns of the
assured upon proof of his death.
On the 19th of May, 1877, the assured, in writing, transferred
and assigned these policies, and all profits, dividends,
nonforfeiture policies, money, or other property that might arise
from or be paid for or on account of them, to E. Rollins Morse in
trust, to pay the income, profits, or proceeds thereof to his two
daughters, Helena and Marie. This assignment was lodged with the
insurance company, though it does not clearly appear by whom, nor
when, except that it must have been prior to March 1, 1879.
Page 132 U. S. 605
Ellis filed, July 3, 1878, in the District Court of the United
States for the District of Kentucky, his petition in bankruptcy,
and, having been adjudged a bankrupt, his estate was transferred by
the register to Horace W. Bates, who acted as assignee until May,
1882. He was succeeded by the present defendant in error.
The schedules in bankruptcy made no mention of the above
policies of insurance.
On the 1st day of March, 1879, policy 68,430 was surrendered to
the company for the sum of $1,054, which amount was applied in
payment as well of the premiums due in that year on policies 68,428
and 68,429 as of future premiums, in cancellation of premium note
or credit, and in discharge of the accrued interest on that note.
The receipt showing the details of this transaction was signed by
Ellis and by Morse as trustee.
The bankrupt died November 21, 1879, and on the 31st of December
in the same year the company paid to his administrator, the
plaintiff in error (he being also the guardian of the children of
the assured), the sum of $9,390.43, the proceeds of policy 68,428,
and $258.21, the balance of the surrender value of policy
68,430.
The present action was brought September 30, 1882, by the
assignee in bankruptcy to recover from Ellis' administrator the
sums so received by the latter. It proceeds upon the ground that
the policies constituted part of the bankrupt's estate and passed
to his assignee. The declaration alleges that the existence of the
policies was concealed and withheld from the assignee, and remained
in Ellis' possession and control until his death, when they were
taken possession of by the defendant in his capacity as
administrator, except that policy No. 68,430 had been surrendered
by Ellis on or about March 2, 1879; that the assignee in bankruptcy
had no knowledge or information concerning the policies until
shortly before the commencement of this suit,
"the same being concealed by said Ellis in his lifetime, and
since his death by his administrator, and that immediately upon
being informed of the existence of said property he demanded the
same, or the proceeds thereof, from the defendant. "
Page 132 U. S. 606
The answer puts in issue the material allegations of the
declaration, and pleads specially that the cause of action did not
accrue to the assignee, nor against the defendant as administrator,
within two years before the suing out of the plaintiff's writ.
The court refused to grant any of the defendant's requests for
instructions, including one based upon the statute of limitations,
and instructed the jury that the plaintiff was entitled to recover
the two sums claimed by him, with interest on each from the date of
the writ. A verdict was thereupon returned in favor of the
plaintiff for the sum of $11,539.56, upon which judgment was
rendered.
Page 132 U. S. 607
MR. JUSTICE HARLAN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
It is provided by section 5057 of the Revised Statutes of the
United States that
"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."
14 Stat. 518, c. 176, § 2.
The court below was asked to rule that the action was
Page 132 U. S. 608
barred by this section
"unless the defendant fraudulently concealed from Bates, the
first assignee, the alleged cause of action, and that mere omission
on the part of the defendant to disclose to Bates, the assignee,
the facts, would not amount to a fraudulent concealment."
It was also asked to rule that mere ignorance upon the part of
the assignee of the cause of action would not take the case out of
the statute of limitations. If these instructions or either of them
ought to have been given, the judgment must be reversed.
The first question to be examined is whether this is a suit
"between an assignee in bankruptcy and a person claiming an adverse
interest." It is contended that section 5057 has no application to
a suit against a bankrupt, and consequently none to a suit against
his administrator, who takes no greater right in property
transferable to or vested in the assignee than the bankrupt had at
his death. Without stopping to examine the authorities bearing upon
this proposition, it is clear that the rule contended for ought not
to control the present case. More than a year prior to the
bankruptcy of Ellis, he had, by written assignment, transferred
these policies to Morse in trust to pay the income, profits, or
proceeds thereof to the two infant daughters of the assured. That
instrument was delivered to the insurance company many months
before the death of the assured. This is manifest from the receipt
taken by the company on the 1st of March, 1879, and which was
signed by the assured, and by Morse as trustee. The company must
have been aware at that time of the assignment. As it does not
appear on what day the written transfer to Morse, for the benefit
of the daughters of the assured, was delivered to the company, it
may be argued that there is an entire absence of proof showing that
Ellis had parted with his interest in the policies prior to his
bankruptcy. Still, the daughters of the assured must be held as
claiming an interest in the policies adverse to the assignee in
bankruptcy, at least from the time the written transfer to Morse,
as their trustee, was lodged with the insurance company. That must
have occurred as early as March 1, 1879, more than three years
prior to the commencement of this suit.
Page 132 U. S. 609
This conclusion is not at all affected by the fact that Morse
had no recollection, when he testified in this case, of ever having
had in his possession the written transfer to him of May 19, 1877.
His want of recollection cannot outweigh the fact that on the 1st
of March, 1879, as trustee for the daughters of Ellis, he
cooperated with the latter in surrendering policy 68,430 and in
applying the amount allowed on account of such surrender to the
payment, among other things, of the premiums due and to become due
on the other two policies. It is hardly to be supposed that he
would have assumed to act as trustee in matters of such importance
without knowing by whom and for whose benefit he was made such
trustee. Besides, the rights of the daughters under the above
written transfer did not depend upon his formal acceptance of the
trust imposed upon him. Those rights would have been protected by a
court of equity even if he had declined to act as trustee.
Nor is it a material circumstance that Morse, after the death of
Ellis, stated in his letter to the insurance company of December
29, 1879, that he could not "find" any assignment of polices 68,429
and 68,430, and did not claim any interest in them. Neither his
inability to find the assignment under which he had acted nor his
disclaimer of an interest in the policies could affect the rights
of Ellis' daughters. Further, it is quite manifest that this letter
was written merely to facilitate the collection of the proceeds of
the policies by the administrator, who was also the guardian of the
infant children of the assured. Although the present suit is
against the administrator, the latter, in respect to the policies
in question, really represents his wards, to whom, so far as we can
see from the present record, he must account for the moneys
collected from the insurance company.
For the reasons stated, we are of opinion that within the
meaning of section 5057, this is a suit between the assignee in
bankruptcy and one claiming an adverse interest. It is therefore
barred by limitation unless it can be brought within the rule
announced in
Bailey v.
Glover, 21 Wall. 342,
88 U. S. 349.
In that case, the court, construing section 5057, said:
"We hold
Page 132 U. S. 610
that when 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 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."
See also Rosenthal v. Walker, 111 U.
S. 185;
Traer v. Clews, 115 U.
S. 528.
The ground upon which the plaintiff claims exemption from the
limitation of two years is that the schedules in bankruptcy omitted
all mention of the policies in question, and that the fact that the
policies existed was "concealed and withheld" by the bankrupt in
his lifetime, and, since his death, by his administrator.
If it be assumed that Ellis had not, prior to his bankruptcy,
delivered the assignment of May 19, 1877, and that his interests
and rights in these policies were transferable to his assignee, the
mere fact that he omitted any mention of the policies in his
schedules in bankruptcy, and that neither he nor his administrator
gave information of them to the assignee, would not establish fraud
within the meaning of the rule announced in
Bailey v.
Glover. The omission from the schedules of any reference to
the policies, and the failure to call the attention of the assignee
to them, may have been caused by an honest belief upon the part of
Ellis that they belonged to his children or were not such property
as the law required to be surrendered to the assignee, and
therefore he lodged the assignment to Morse -- possibly after his
bankruptcy -- with the insurance company. Be this as it may, the
bankrupt's children are to be regarded as asserting an interest in
the policies at least from March 1, 1879, when the receipt of that
date was executed. Fraud is not imputable to them nor to the
guardian simply because neither they nor he informed the assignee
in bankruptcy of their claims. Their silence when they were not
under any legal obligation to speak and when they were unaware of
any claim being asserted by the assignee did not amount to
concealment. They did nothing to prevent him from obtaining full
information in reference to
Page 132 U. S. 611
the assets of the bankrupt. The record discloses no circumstance
tending to prove that they sought to keep their claim from the
knowledge of the assignee.
On the contrary, it appears in proof that Bates, the first
assignee, was well acquainted with Ellis, and knew that for many
years prior to the bankruptcy, he had carried a large amount of
insurance upon his life. It is true he says that he got the
impression from conversation with Ellis that many of those policies
had lapsed because of the latter's inability to pay the premiums.
But he admitted that, about the time of the bankruptcy, he "learned
indirectly that an assignment of some policy or policies had been
made to E. Rollins Morse, of Boston." He stated that his
understanding with said Ellis was,
"after learning of the assignment to E. Rollins Morse, that such
policy or policies had some time previously passed from his
control, and were not a part of his assets in bankruptcy, that from
such information as he, witness, received, he concluded there was
no value to the creditors in such policy or policies."
He acted upon this belief as to the situation, and forbore to
make such inquiries as due diligence required. He did not cease to
be assignee until May, 1882, nearly four years after his
appointment and more than three years after the written transfer to
Morse in trust for Ellis' daughters had been lodged with the
insurance company. If he did not know of such transfer, he could
easily have ascertained what policies upon the life of the assured
were in force at the time of the adjudication in bankruptcy. It is
fundamental in the rule announced in
Bailey v. Glover that
there must not be negligence or laches upon the part of the
assignee in bankruptcy in coming to the knowledge of the fraud
which is the foundation of his suit and which is relied upon to
defeat the limitation of two years. A rigid enforcement of that
condition is essential to meet the object of the statute of
limitations. That object was to secure a prompt determination of
all questions arising in bankruptcy proceedings, and a speedy
distribution of the assets of bankrupts among their creditors. A
critical examination of the evidence leaves no room to doubt that,
apart from any question as to concealment upon the part
Page 132 U. S. 612
of the bankrupt or of his administrator, the assignee did not
show such diligence as entitles him to exemption from the
limitation of two years prescribed by the statute. The court below
would not have erred if it had given a peremptory instruction to
find for the defendant upon the issue as to limitation.
The case presents another question raised by the defendants'
requests for instructions -- namely whether, in view of the
peculiar nature of contracts of life insurance, any interest which
the bankrupt had in these policies -- assuming that he had not, at
the time of his bankruptcy, effectively transferred them for the
benefit of his daughters -- passed to his assignee. The defendant
contended in the court below, and contends here, for the negative
of this proposition, and insists that if any interest passed to the
assignee, it was only such as was represented by the cash value of
the policies at the time of the bankruptcy. We do not find it
necessary to consider these questions, as what has been said will
probably result in a disposition of the whole case under the issue
as to the statute of limitations.
The judgment is reversed and the cause remanded with
directions to grant a new trial and for further proceedings
consistent with this opinion.
