Paulding v. Lee

CHILTON,. J. Nearly thirteen years were allowed to pass between tbe time of giving this receipt by tbe defendant, Lee, and tbe period when be was called upon judicially to account — 765 — for the claims embraced in it, and the collaterals which, it is alleged, were turned oyer to him by Ivey & Goodwin, to 'secure their payment. It is, therefore, by no means surprising, that we should find much conflict in the pleadings, as well as the proof, consequent upon the imperfect hold which the memory usually has upon facts which have transpired so many years since. While, however, this consideration should induce the court to place the most charitable construction upon the testimony, attributing any apparent conflict rather to the frailty of the memory, than to any disposition willfully to pervert-the truth; nevertheless, the burthen of making full proof, which is devolved upon the complainant, should-not be lessened because by his delay he has rendered such proof more difficult to obtain. The receipt, which is made the foundation of this suit, was sold and transferred, as appears by the written assignment endorsed upon it, by the assignee in bankruptcy, on the 14th May, 1843, and this bill was not filed until the 18th of February, 1847. The first question, therefore, which arises upon the demurrer, is, can this suit be maintained after the lapse of two years from the discharge in bankruptcy ? To this I propose first addressing myself. By the provisions of the bankrupt act of 19th August, 1841, the assignee was vested with all the rights, titles, powers, and authorities, to sell, manage, and dispose of the bankrupt’s property and rights of property, as fully, to all intents and .purposes, as if the same were vested in, or might have been exercised by the bankrupt, before or at the time of the bankruptcy. Conceding that the right to dispose of this receipt vested in tile assignee, and that the sale not only passed the receipt, but all liability which the maker of it had incurred, either by reason of collateral undertakings to secure the demands mentioned in it, or by negligence or fraud, we think it clear, that he could by his sale transfer no greater interest than could Boss, Strong & Co. before their bankruptcy. He may sell ■“ as fully,” says the act, as if the same were vested in, or might, be exercised by the bankrupt, but he can do no more. The result is, that upon this hypothesis, he may by his sale transfer an equitable title to the chose ip ficción. — a right tq — 766 — use the name of tbe assignee to recover in an action at law upon tbe receipt, for a violation of tbe contract evidenced by it, indemnifying bim against tbe cost; or, if there be a remedy also in equity, then a right to file a bill, bringing tbe legal bolder of tbe receipt before tbe court as a defendant, so as to estop bim from afterwards asserting tbe legal title to tbe annoyance of tbe defendant, Lee. We bad occasion recently to consider this question, in tbe case of Camack v. Bisqua, 18 Ala. Rep. 286, in which we arrived at tbe conclusion above attained; and a re-examination of that case has failed to satisfy us, that tbe principle asserted by it is incorrect. Tbe legal right of action, if any exists, being in tbe as-signee, could be maintain an action, after tbe expiration of tbe two years named in tbe eighth section of tbe bankrupt act ? If be could not, and tbe legal title be barred, it is very clear that tbe title to equitable relief, dependent upon it, is also barred. Angel on Lim. 25; Hovenden v. Lord Annesley, 2 Sch. & Lefr. 329; 12 Peters’ Rep. 56. Tbe eighth section of tbe bankrupt act provides, first, for conferring jurisdiction upon tbe Circuit Courts of tbe Union, concurrent with tbe District Courts in tbe same district, of all suits, both in law and in equity, which may be brought by tbe assignee of tbe bankrupt against any person or persons claiming an adverse interest, or by such person against such assignee, touching any property or rights of property of said bankrupt, transferrable to, or vested in such assignee; second, a limitation, not for tbe particular class of suits above mentioned only, but a general limitation, applicable to suits at law or in equity, in any case, and in any court whatsoever, in which such suits may be brought, either by or against tbe assignee, or by or against any person claiming an adverse' interest, touching tbe property or rights of property of tbe bankrupt. This limitation is, two years after tbe declaration and decree of bankruptcy, or after tbe cause of suit shall have first accrued. It is quite reasonable to suppose, that Congress designed to provide a short statute of limitation to litigation arising out of tbe administration of bankrupts’ estates. One object was, to speed tbe settlement of estates, all tbe proceedings in reference to which, tbe tenth section declares, — 767 — “shall be finally adjusted, settled, and brought to a close, in two years' if practicable.” Another was, to make the law a measure of relief for the country in its then embarrassed condition, which relief would hardly have been secured by a release of the unfortunate debtor from his obligations, and at the same time subjecting all those having business connections with him to the most embarrassing litigation, until it should be terminated by the statutes of limitations of the several states. These statutes are various in the different states; whereas the law, as contemplated by the constitution, was designed to operate uniformly. This uniformity could not result, in the absence of a uniform limitation, as applicable to suits to recover the bankrupt’s effects. Now, unless this limitation is found in the eighth section, above.referred to, the act contains none, except as applicable to cases where an adverse claim is set up to property or rights of property of the bankrupt. Perhaps it would be difficult to find a substantial reason for prescribing a limitation to suits for the recovery of specific property, which would not equally apply to suits for the recovery of money, or for a breach of duty. Upon the whole, I am of opinion, that the framers of the law very reasonably supposed, that the country might labor under much embarrassment, from the numerous suits and protracted litigation consequent upon the purchase, in many cases at a very trifling cost, of doubtful claims; and it was to meet this, and provide a general limitation, as applicable to suits, not only where property was claimed adversely, but in any and every case, and in every court, that this provision was inserted. This conclusion is not only sustained by reason and a just and proper analysis of the act itself, but .by the former decisions of this court. In Comegys v. McCord, 11 Ala. Rep. 932, which was an action of detinue for a receipt given to the bankrupt for notes, it does not appear what claim the defendant set up to the receipt, or whether it was adverse or otherwise. This inquiry was not deemed a matter of importance, and no point was made in the decision respecting it. The court, after referring to the latter part of the eighth section of the bankrupt — 768 — law, says: “ The limitation is general, prohibiting suits by or against the assignee in any court after the lapse of two years,” &c. In Harris, Assignee, v. Collins & Cartright, 13 Ala. Rep. 388, we held the two years limitation, applied to an action of debt, upon a lease reserving rent to the bankrupt. See also Archer v. Duval, 1 Branch’s Rep. 219. I am aware that a different construction has been placed upon this clause by the Supreme Court of Maine, in Carr v. Lord, 29 Maine, (16 Shep.) 21; but I feel satisfied that decision cannot be supported as a “correct exposition of the law upon this subject.” A similar decision has been made in Pennsylvenia, (Union Canal Company v. Woodside, 1 Jones’ Rep. 176,) cited in 10 U. S. Dig. p. 62 § 10; but I have been unable to procure the volume containing it. 2. But if the foregoing position be erroneous, it is exceedingly clear this decree must be affirmed upon another ground. In McKinley v. Irvine, 13 Ala. Rep. 693, we said; “The general rule is, that relief cannot be granted upon matters not charged in the bill, although the same may appear in evidence; for the decree must be predicated upon the allegations, as well as upon the proof.” And the reason for the rule is, that the defendant is entitled to be informed by the bill what the suggestions and allegations are, against which he is to prepare his defence. Story’s Eq. PI. § 257. The rule requires that every material allegation should be put in issue by the pleadings, so that the parties may be duly apprized of the essential inquiry, and may be enabled to collect testimony in order to meet it. James v. McKernon, 6 John. Rep. 564. See the cases referred to in McKinley v. Irvine, supra. The equity of the bill in the case before us consists, not in the right which the complainant has to proceed against Lee for a breach of his obligation, as contained in the receipt, in failing to collect, or refusing to pay over, moneys upon the demands mentioned in said receipt; for this right could have been adequately asserted in the - common law court, and constitutes no ground for a resort to a court of equity. Standifer v. McWhorter, 1 Stew. Rep. 532; Bibb v. McKinley, 9 — 769 — Por. 636; Herring v. McEldery, 5 Por. 161. Neither does the fact, that the complainant has no right to proceed at law to recover the sums which he insists are due him from the defendant except in the name.of the assignee in bankruptcy, confer jurisdiction upon the equity court. McGehee v. Dougherty, 10 Ala. Rep. 863. But the true ground, and the only one upon which the bill may be successfully defended, is, that Lee, having received and receipted for the demands of Boss, Strong & Co., agreed with that firm, through one of its members, to receive good notes and accounts on solvent individuals in the neighborhood, of value sufficient, when collected, fully to pay off and discharge said claims of B. S. & Co.; that Ivey, in conformity to said agreement, placed in Lee’s hands said notes and accounts, amounting to three thousand dollars, in trust to be collected and appropriated by said Lee to the payment of said claims to E. S. & Co., and that Lee refuses to account for these claims so received in trust. This agreement, creating a direct trust, coupled with the refusal of Lee to execute or carry it out, constitutes the gravamen of this bill. When, however, we come critically to examine the record, it is quite apparent that no such agreement or trust is shown by the proof. The answers of both Lee and Ivey deny it, and there is not a witness who proves it. John M. Ross, through whom it is alleged the agreement was made, states, that he was informed by Lee that he (Lee) had received claims from Ivey & Goodwin on different persons, sufficient to secure the amount of indebtedness of I. & G. to R. S. & Co.; but the other proof very clearly shows how these claims were deposited with Lee; and this witness states, that I. & G. had made an assignment, and proposed to their creditors to áccede to the conditions named in it by the 28th or 29th July, 1834; that on the 19th July, 1834, said witness went to Ivey & Goodwin, and proposed to them, “that he would leave his claims in the hands of Lee, and to whom they, the said I. & G., promised that if, on the termination of the assignment, (that is, the 29th July, 1834,) such assignment-should not be perfected, by the creditors of Ivey & Goodwin not agreeing to it, then the said I. & G. agreed to place .in the hands of said Lee good and solvent notes, and — 770 — accounts due from people in that county, known to said Lee to be good, sufficient to pay the indebtedness of said I. & G. to E. S. & Co.” What the conditions of this assignment were, or whether the creditors ever agreed to them, or perfected the assignment, is not shown by this witness. Indeed, he does not state that any claims were ever placed by I. & G-. in Lee’s hands under this agreement; but merely, that Lee informed him that he had claims which he had received from I. & G., sufficient to secure the amount of I & G.’s indebtedness to E. S. & GC.; but he did not state, nor does it otherwise appear, he had authority thus to appropriate them. The witness Goodwin, who was examined by the complainant, and who was a member of the firm of I. & G., says, he had ample means of knowing the situation of the firm, having access to all the books and papers of the same; and he testifies that the notes and accounts of said firm were turned over to Lee for the benefit of all the creditors, and that Lee was employed by the firm of I. & G. to obtain them a release from all their liabilities, by procuring the acceptance by the creditors of the compromise, as he calls it; that it was understood and agreed, that if no other creditors of the firm of I. & G. should come into the arrangement, than Eoss, Strong & Co., Jack F. Eoss, Turner & Lewis, Mott & Thompson, and John M. Mott, then these creditors should derive the whole benefit of the said arrangement. This witness attaches a schedule of the claims, so placed in the hands of Lee, for the benefit of the creditors of the firm, to his deposition. So that, according to the proof made by this witness, the contract under which Lee received the notes was totally different from that set out in the bill. But it is unnecessary to set out in this opinion the proof made by the several witnesses, as it would render it too prolix. It is sufficient to state, that' after a most careful examination of the several depositions taken by complainant, we find no witness who proves the agreement set up in the bill. While on the other hand, as previously observed, the answers positively deny it, and the deposition of Brown, who states he was the clerk of Ivey & Goodwin during the whole time they were engaged in the mercantile business, and had a perfect knowledge of their transactions, goes directly to — 771 — sustain tbe answer of Lee, and to prove that the latter received claims amounting to between four and six hundred dollars from I. & G., and was authorized to pay what he might collect to Turner & Lewis, Mott & Thompson, and Eoss, Strong & Co., or to Ivey & Goodwin. Although suits were brought on some of these claims in the names of Ivey & Goodwin, for the use of Boss, Strong & Co., and in some instances the money collected, yet, taken in connection with the proof in the case, this fact fails to sustain the title to relief made by the bill. There were several firms to whom Lee'was authorized to pay the money when collected, and it is not remarkable that he should have used the name of one of them, instead of cumbering the action by using the names of all. The admission contained in the previous answer of Lee, that he held these claims for the sole and exclusive use of Eoss, Strong & Co., explained, as we have said in the statement, is not sufficient to warrant the relief prayed. Lee is but the trustee of the fund, and his admissions ought not to defeat the right of the other parties who are the beneficiaries. Besides, if he had made the admission in this suit, and the fact had been positively denied by his co-defendant, as it is, such answer could not be received in evidence against his co-defendant. But the complainant’s own proof satisfies us that Lee was mistaken in his first answer, and this mistake should not in equity be visited with the consequences of an estoppel. Estop-pels are not favored in equity, and a court of chancery will never allow an innocent mistake of fact, which does not materially interfere with the rights of the opposing party, so to operate. The previous answer, in view of which this bill may have been filed, could well have been considered with reference to the cost; but it gives no title to relief, under the circumstances of this case. . In any aspect in which the proof can be viewed, it is very clear, that to afford relief upon it, the complainant would recover upon a state of case different from that he makes by his allegations, or upon an agreement materially variant from that set up by him. We have seen this is not allowable. It follows, therefore, that the Chancellor did not err in refusing the relief prayed. — 772 — This view renders it unnecessary, and perhaps improper, that we should decide the other questions raised upon the argument. The Chief Justice fully concurs with me in both of the foregoing positions; but my other brethren, fully concurring in the last position, prefer to be considered as expressing no opinion as to the construction of the eighth section of the bankrupt act. Let the decree of the Chancery Court be affirmed.