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Argument for Appellees.
Washburn v. Tisdale, 143 Mass. 376; Ex parte Belcher, 2 Deac. & Ch. 587; Ex parte Rolfe, 3 Mont. & Ayr. 305; Ex parte Geller, 2 Madd. 262; McHenry v. La Société Française, 95 U. S. 58; Dudley v. Easton, 104 U. S. 99; In re Iron Mountain Co., 9 Blatchford, 320; In re Dinard, 9 Nat. Bankr. Reg. 8, 12; Ex parte Cooper, L. R. 10 Ch. 510.
Mr. Charles B. McCoy and Mr. Charles E. Pope (with whom was Mr. Alexander McCoy on the brief) for appellees.
I. The trustee's sale, having been made after the adjudication in bankruptcy, without leave of the bankrupt court, while the equity of redemption was part of the bankrupt's estate, and before the assignee was appointed and capacitated to exercise the right of redemption, was subject to the right of the assignee, (which became vested in him, when he was appointed, as of August 31st, 1878, the date of filing of the petition in bankruptcy,) to redeem and discharge the mortgage; and the sale was void as against the assignee and his grantees, and redemption should be allowed on the application now made by the grantees of the assignee holding a conveyance of this right of redemption.
We submit that the following authorities fully sustain the foregoing proposition of law:
Yeatman v. Savings Institution, 95 U. S. 764; Conner v. Long, 10+ U. S. 228; Bank v. Sherman, 101 U. S. 403; In re Grinnell, 9 Nat. Bankr. Reg. 137 (Blatchford, J.); Foster v. Ames, 2 Nat. Bankr. Reg. 455 (Lowell, J.); In re Snedaker, 3 Nat. Bankr. Reg. 629, 636 (Hawley, J.); Davis Ass'n v. Anderson, 6 Nat. Bankr. Reg. 145 (Treat, J.); Smith Ass'n v. Kehr, 7 Nat. Bankr. Reg. 97 (Treat, J.); In re Brinkman, 7 Nat. Bankr. Reg. 421 (Blatchford, J.); Ilutchings Ass'n v. Muzzy Iron Works, 8 Nat. Bankr. Reg. 458 (Fox, J.); Whitman v. Butler, 8 Nat. Bankr. Reg. 487 (Knowles, J.); Barron v. Newberry, 1 Bissell, 149 (McLean, J., Drummond, J., concurring); Dooley v. Va. Fire Ins. Co., 2 Hughes, 482 (IIughes, J.); Ex parte Christy, 3 lIow. 292; Ilouston v. City Bank, 6 How. 486.
Opinion of the Court.
II. The appellees acquired the assignee's right to redeem. It was undoubtedly the intention of Congress, in enacting the bankrupt law, that the assignee's sale and deed to the purchaser - in a case of this kind — should transfer to him the whole title of the assignee, including all objections to the trustee's voidable sale, together with the right of redemption from the trust deed. The mere fact that he advertised to sell, subject to a prior lien, could no more waive any right which he was selling to the purchaser, than an administrator would by advertising the equity of redemption to land of his decedent, subject to a prior lien or mortgage.
III. This case was not within the terms of the statute of limitations. The limitation clause of the bankrupt act, by its terms, only applies to contests between an assignee in bankruptcy and a person claiming an interest adverse to such assignee. Bailey v. Glover, 21 Wall. 342; Sargent v. Helton, 115 U. S. 348; Bartles v. Gibson, 17 Fed. Rep. 293; Gifford v. Helms, 98 U. S. 248; Jenkins v. International Bank, 106 U. S. 571 ; Wisner v. Brown, 122 U. Ş. 214.
IV. The Trustees' sale was improper while the original bill was pending. Freedman's Saving and Trust Co. v. Earle, 110 U. S. 710; Minnesota Co. v. St. Paul Co., 2 Wall. 609; Ker. vison v. Stewart, 93 U. S. 155; Ryan v. Newcomb, 125 Illinois, 91; Miller's Heirs v. McIntyre, 6 Pet. 61; Phelps v. Illinois Central Railroad, 94 Illinois, 548; Crowl v. Nagle, 86 Illinois, 437; Dunphy v. Riddle, 85 Illinois, 22.
V. Where the interest adverse to that of the assignee has been acquired through fraud and the fraud has been concealed, the two years' statute of limitation does not commence to run until the discovery of the fraud. Bailey v. Glover, supra;
. v Upton v. McLaughlin, 105 U. S. 640; Rosenthal v. Walker. 111 U. S. 185; Traer v. Clews, 115 U. S. 528; Bartles v. Gibson, 17 Fed. Rep. 293 ; Retzer v. Wood, 109 U. S. 185; Kilbourn v. Sunderland, 130 U. S. 505; De Bussche v. Alt, 8 Ch. Div. 286.
MR. JUSTICE BLATCHFORD, after stating the case as above reported, delivered the opinion of the court.
Opinion of the Court.
The plaintiffs claim a right to redeem from the sale to Greene, made by Peabody as trustee, or from the trust deed under which that sale was made, on payment of the mortgage debt, (1) as owners of Robertson's equity of redemption by virtue of their purchase from the assignee in bankruptcy; and (2) as judgment creditors of Robertson, having a lien on the property by virtue of their judgment, prior in time to the sale by Peabody as trustee, and by their purchase of the property at the sale under the execution issued on their judgment.
They rest their claim under their purchase from the assignee in bankruptcy, first, on the ground that the sale by Peabody as trustee was made after the commencement of the proceedings in bankruptcy, and after the adjudication thereon, before an assignee was appointed, and without leave of the bankruptcy court, and was void as against such assignee and those claiming under him, that the property was still subject to the right of redemption by the assignee, and that such right has been conveyed by him to the plaintiffs; second, on the ground that there was a collusive agreement made with Robertson, by Peabody as agent for Greene, giving to Robertson the right to redeem from the sale by Peabody, and that such right of redemption passed from Robertson to his assignee in bankruptcy, and from the latter to the plaintiffs.
The claim of the plaintiffs to redeem, as judgment creditors of Robertson, is based on the allegation that they were led by the wrongful conduct of the defendants to believe that the property was subject to the deed of trust to Gallup, as well as to that to Peabody; that they were not allowed an opportunity to pay off the incumbrance before the sale by Peabody, although they were ready and willing to do so; that, by reason of the collusive agreement referred to, the sale by Peabody was part of a scheme to hinder them in collecting their judgment, by cutting off their lien on Robertson's equity of redemption, and giving the property back to him, after he should have been discharged in bankruptcy from the judgment; that the sale by Peabody was not properly advertised ; that the plaintiffs had no notice of such sale prior to its being made; that such notice was intentionally withheld from
Opinion of the Court.
them; that the sale by Peabody, with the prior incumbrance of the trust deed to Gallup apparently standing against the property, when such incumbrance had been paid, was made with a view to prevent competition in bidding at the sale ; that the property was sold in bulk, and not offered for sale in parcels; and that it was sold for an inadequate price.
But we do not find it necessary to consider any of these questions, because we are of opinion that the right of action of the plaintiffs, under their title derived from the assignee in bankruptcy, was barred by the two years' limitation enacted by the bankruptcy statute.
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 such assignee.”
It is contended for the plaintiffs that the limitation provided by section 5057 applies only to the case of a contest between an assignee in bankruptcy and a person claiming an interest adversely to such assignee, touching property of the bankrupt, in a suit to which the assignee is a party; that when the assignee transferred his rights to Pratt, who acted for the plaintiffs, on the 17th of June, 1880, under the sale to Pratt made on the 24th of April, 1880, the statute ceased to run, and the interest which thus passed from the assignee then ceased to be within the terms of the bankruptcy statute of limitation, and became subject to the ordinary statute of limitation, and that the two years' limitation had not run on the 24th of April, 1880, or on the 17th of June, 1880, the register's deed to the assignee in bankruptcy having been made on the 24th of July, 1879.
But we are of opinion that the right which passed to the assignee, to file a bill to redeem, began to exist on the 24th of July, 1879; that, as the bankruptcy statute of limitation began then to run against such right in the hands of the assignee, it continued to run after such right passed to the plaintiffs, by
Opinion of the Court.
the assignee's deed to Pratt on their behalf, of June 17, 1880, made in pursuance of the sale of April 24, 1880; that the two years' statute of limitation bars the right asserted by the plaintiffs in their bill, in like manner as it would have barred the right of the assignee to redeem, if he had never made any sale or conveyance to Pratt, and if he were now the plaintiff in this suit; that the suit cannot be regarded as having been brought against the widow, heirs and representatives of David R. Greene until the supplemental bill was filed, on the 17th of September, 1881, when, for the first time, the sale by Peabody, as trustee, to Greene, was drawn in question in this suit; and that, as more than two years elapsed between July 24, 1879, and September 17, 1881, the two years' bar of the statute is complete.
That the two years' bar of the statute applies in favor of a purchaser from an assignee in bankruptcy has been decided by this court.
In Gifford v. Helms, 98 U. S. 248, the assignee in bankruptcy was appointed in May, 1868, and sold all the assets of the bankrupt to the plaintiff in May, 1871. Afterwards the plaintiff brought suit to set aside an alleged fraudulent conveyance which had been made by the bankrupt in June, 1867. It was held that, as the right of action on the part of the assignee in bankruptcy was barred in May, 1871, it was barred as against the plaintiff. This could not have been held if the two years' statute of limitation had been regarded as one applying only in a suit brought by the assignee. It was said by the court, that if the conveyance sought to be impeached was made in fraud of creditors, the equities in controversy were vested in the assignee in bankruptcy when he was appointed, and his right of action commenced at the time the assignment was made to him, and he might have pursued such right at any time thereafter; that, as the plaintiff claimed as purchaser from the assignee, he did not acquire, under the sale made to him by the assignee, any greater rights than those possessed by the latter; that those rights were acquired by the assignee in May, 1868; that throughout the period intervening between that date and May, 1871, the equities in controversy were held