Amory v. Lawrence

CLIFFORD, Circuit Justice. Admitted as the matters weU pleaded in the bill of complaint are by the demurrers, the only question is as to their legal effect. Several objections are taken to the right of the com-' plainant to a decree, which will be briefly considered in the foUowing order. That the claim is within the statute of frauds, as the trust was not created or declared by an instrument in writing, signed by the party creating or declaring the same, as it is settled law in this state, that no trust can be created or declared except by such an instrument. That the claim is barred by ihe statute of limitations, which enacts that all actions of contract, founded upon any contract or liabiUty not under seal, express or implied, with certain exceptions not material to be noticed, shall be commenced within six years next after the cause of action accrues and not afterwards. Gen. St. Mass. 777. That if the claim is not barred by the statute of limitations, stiU, it is barred by the laches of [781] tlie complainant, and those through whom he claims. That the bill ot complaint fails to show that the complainant is entitled to any relief, because it is not alleged that he acquired a good title from his assignees in bankruptcy. That the cause of action is barred by the two years’ limitation in the bankrupt act, under which' the certificate of discharge was obtained. That the bill of complaint is demurrable, because the complainant attempted to deprive the respondents of their right to answer under oath contrary to the rules and practice of the court existing at the time of filing the bill. Much discussion of the first question is unnecessary, as it depends at this day entirely upon authority. Undoubtedly the objection would prevail before the supreme court of the state, but the rule in equity is different in the federal courts, as appears by numerous decided cases. Whether oral evidence is admissible for the purpose of showing that a deed, absolute on its face, was intended as a mortgage, was directly presented in the case of Wyman v. Babcock, [Case No. 18,113,] and the decision of the court was that such evidence is admissible for that purpose; and that the statute of frauds is no bar to the admission of the evidence where it is offered to show that such a deed was intended as a mortgage. Twenty years earlier Judge Story decided the question the same way in the case of Taylor v. Luther, [Case No. 13,796;] holding that there is nothing in the statute of frauds rendering parol evidence inadmissible to show that an absolute deed was intended as a mortgage, and that the defeasance had been ■omitted or destroyed by fraud or mistake, or omitted by design upon mutual confidence between the parties. He examined the question upon principle and authority, and gave his reasons for the conclusion, and ten years later in the case of Jenkins v. Eldredge, [Case No. 7,207,] he reaffirmed the same position after giving the question a very elaborate consideration. Repeated decisions of the supreme court have affirmed the same rule, and it may now be regarded as settled in all the federal courts. Conway v. Alexander, 7 Crunch, [11 U. S.] 238; Sprigg v. Mt. Pleasant Bank, 14 Pet. [39 U. S.] 201; Morris v. Nixon, 1 How. [42 U. S.] 126; Russell v. Southard. 12 How. [53 U. S.] 139; Babcock v. Wyman, 19 How. [60 U. S.] 299. Two questions are involved in the second proposition of the defence which, inasmuch as separate demurrers are filed, must be separately considered. 1. Whether the claim of the complainant against the executors of the trustee, for the income and receipts from the sale of the trust property in the lifetime of the trustee, other than the undivided parcel conveyed to the last-named respondent, is or is not barred as assumed by the executors, in their demurrer. 2. Whether the right to redeem the undivided seventh part of the property conveyed by the trustee to the last-named respondent is not also barred by lapse of time, as assumed by that respondent. Before examining those questions,, however, it becomes necessary to ascertain more definitely what was the real nature of the original transaction, and for that purpose reference need only be made to the bill of complaint, as all the well-pleaded allegations of the same are admitted by the several demurrers. Schedules of the property, as the complainant alleges, were prepared under the direction of the trustee, it being agreed that he, the complainant, should not part with any of his property until the trustee had made the arrangement to pay the $10,000 to the complainant's creditor, that he made the transfer of his entire property as agreed, it being clearly and distinctly understood between him and the trustee, that the latter was eto hold the property simply as security for the $10,000 to be advanced by the trustee, and that he, the trustee, was to account for the balance as soon as he should be repaid the amount advanced, with interest Payment was accordingly made to the creditor, the property conveyed to the person designated, and ultimately transferred to the trustee, and the whole transaction perfected as agreed between the complainant and the trustee. Viewed in the light of the decisions of the federal courts, the conveyance beyond all doubt, though absolute on its face, was a mortgage. Wyman v. Babcock, [Case No. 18,113;] Babcock v. Wyman. 19 How. [60 U. S.] 299. Assume the allegations of both to be correct, and it appears that the trustee was fully paid prior to 1860, and the complainant admits that in that year it came to his knowledge not only that the trustee was fully paid, but that he had in his hands a large balance derived from receipts for the property sold, and the rents and profits of the property which was due to the complainant Whatever that balance was beyond the sum advanced and interest was a debt or liability not under seal, for which the trustee was responsible to the complainant, and as such constituted a good cause for an action of contract or a suit in equity. Wyman v. Babcock, [Case No. 18,113;] same case, 19 How. [60 U. S.] 300. Such actions are barred by the six years’ limitation, and the court is of the opinion that the claim against the executors is barred by that limitation. Gen. St. Mass. 777. State statutes of limitation and the construction of the same as given by the courts of the state furnish the rule of decision in the federal courts in cases where they apply. Leffingwell v. Warren, 2 Black, [67 U. S.] 599. Courts of equity in this state apply the statute of limitations in such cases in suits in equity to the same effect as they are applied in actions at law. Farnam v. Brooks, 9 Pick. 212; Dodge v. Essex Ins. Co., 12 Gray, 71. Bights concealed by the trustee are not subject to such a rule of limitation; but it appears that the complainant knew what his rights were in that regard, twelve years be [782] fore the bill was filed, as well as be knew what they were when the bill was framed, and it is clear that the statute commenced to run, SO’ far as respects the balance in the hands of the trustee, arising from the sale of the property, or from the rents and profits collected beyond the amount advanced, and interest, when the party seeking relief became fully acquainted with the facts, and knew what his rights were in the premises. Perry, Trusts, § 230; Pritchard v. Chandler, [Case No. 11,436;] Ang. Tim. (2d Ed.) 176; Kane v. Bloodgood, 7 Johns. Ch. 90; Hallett v. Collins, 10 How. [51 U. S.] 174; Boone v. Chiles, 10 Pet. [35 U. S.] 177; Finney v. Cochran, 1 Watts & S. 118. Governed by these considerations, the court is of the opinion that the claim against the executors for the balance in the hands of the trustee for moneys collected in execution of the trust beyond the amount advanced, and interest, is barred by the statute of limitations, and having come to that conclusion, it follows that the claim against the devisees of the decedent trustee is without any foundation. Attempt is made to show that the limitation of six years should not be applied in this case, as the trustee died in 1862, but that suggestion cannot relieve the complainant from the bar, as the case is controlled by section 10 of the state limitation act, which in that state of the case only extends the time for bringing the action for the period of two years next after the grant of letters testamentary or of administration. Gen. St. Mass. 778. Suggestion is also made that the bill may be sustained against the executors as a mere naked bill of discovery; but the court is of a different opinion, for two reasons. 1. Because the executors in the further prosecution of the bill against the other respondent of the decree, or for the complainant, are competent witnesses for either party. 2. Because the complainant has been guilty of laches in bringing his bill which may well be taken into the account in determining that question. Besides the money demand against the executors and devisees of the trustee, the complainant also claims to redeem the mortgaged premises so far as respects the undivided seventh part of the dower estate which the trustee in his lifetime conveyed to the last-named respondent. Evidently that claim rests upon entirely different principles from the money demand against the other respondents, as the property exists in specie without change, and is held by the grantee of the trustee who made the purchase, and took the conveyance of the property with full knowledge of the trust and of the rights of the complainant under the original arrangement whereby the title of his grantor was acquired. Where an absolute deed is intended as a mortgage, a subsequent purchaser with notice stands in the place of the equitable mortgagee. Williams v. Thorn, 11 Paige, 459; Vattier v. Hinde. 7 Pet. [32 U. S.]253; Everett v. Stone, [Case No. 4,577.] Six years is no bar to a claim to redeem a mortgage, nor is the plea of laches any de-fence to the suit unless it is shown to have-extended to a period of twenty years. In the case of a mortgagor coming to redeem, courts of equity have by analogy to the statute of limitations, which takes away the-right of entry of the plaintiff after twenty years’ adverse possession, fixed upon that term as the period after forfeiture and possession taken by the mortgagee, no interest having been paid in the mean time, and no-circumstances to account for the neglect appearing, beyond which a right of redemption shall not be favored. Hughes v. Edwards, 9 Wheat [22 U. S.] 497; Wyman v. Babcock, [Case No. 18,113;] Dexter v. Arnold. [Id. 3,859;] Elmendorf v. Taylor, 10 Wheat. [23 U. S.] 168; 4 Kent, Comm. (11th Ed.) 187; Demarest v. Wynkoop, 3 Johns. Ch. 129. Twenty years without a recognition of the rights of the complainant is not shown in this case. Numerous allegations of the-bill contradict any such theory, and show that such a defence in the present state of the pleadings cannot be sustained, as the-bill .alleges that in 1847 the trustee constantly recognized the rights of the complainant, and told him in substance that it was impossible to say what the receipts would be until his share in his father’s estate was all sold, that he also recognized his right to an-account, but would not agree definitely to give it, intimating that the property would not amount to more than enough to pay him what he advanced; that in 1850 he agreed to-pay him $600 annually, which has ever since been paid; that in 1856 he paid $1,600, and $600 in 1858, which must be- understood as a sum in addition to annual payment under the prior agreement. Examined in the light of the declarations of the trustee and these-several payments, especially the payment at one time of the sum of $1,600, it is impossible to adopt the theory that the rights of the complainant were not recognized by the trustee within the period, covered by those several allegations. Sixteen years only have elapsed since the large payment of $1,600-was made by the trustee. Sufficient has already been remarked in-disposing of the second objection of the respondent to show that the third objection cannot be sustained, and it is accordingly overruled. Objection is also made that the allegations of the bill are not sufficient to show that the-complainant acquired a good title to the property from his assignees in bankruptcy. All" the bill alleges upon the subject is that he-was advised to purchase from his assignees in bankruptcy his claim against the trustee,, and that he accordingly procured an assignment Express provision was made by section 9 of the bankrupt act of the 19th of August, 1841, that all sales, transfers, and other conveyances of the assignee of the bankrupt’s property and rights of property [783] shall be made at such times and in such manner as shall be ordered and appointed by the court in bankruptcy, and the supreme court of Massachusetts decided in the case of Osborn v. Basterral, 4 Cush. 406, that the sale of a bankrupt’s real estate under an order of the district court in which no time or place of sale was fixed by the court, is irregular and yoid. In general, when a sale is made under a statute power, said Shaw, Ch. J., it must appear that the requisition of the statute as conditions precedent to the operation of the power to pass the estate, have been complied with. "When the title to real estate is solely through a power, it must, in order to be sustainable, be proved that such power was duly executed. Cleveland v. Boerum, 27 Barb. 254. Title was claimed it will be seen in both of those cases under purchases by strangers to the proceedings in bankruptcy, and consequently their claim of title rested solely upon the assumption that the power to sell was duly executed by the assignee. Unlike what occurred in those cases, the purchase in the case before the court was made by the bankrupt, whose title, in the case of onerous property, where the assignee elects not to take it into possession, is good against all the world, except the assignee or some one to whom he conveyed the property. Smith v. Gordon, [Case No. 13,052.] All the property and rights of property) belonging to the bankrupt, unquestionably pass by force of the decree of bankruptcy to the assignee by operation of law, and become vested in him as soon as he is appointed. But though the legal title passes to the assignee, he is not bound, said Judge "Ware, to take possession of all the property. Leasehold estates pass to the as-signee under the English bankrupt laws, but the assignee is not bound to take the lease and charge the estate with the payment of the rent, as the rent may be greater than the value of the lease, and thus the estate may be burdened instead of being benefited, and in such a case the claim may be abandoned by the assignee. He is not bound in such a case to take the property into his possession, and if he elects not to take the property, it remains in the bankrupt, and no one certainly, except the assignee, has a right to dispute his possession. Copeland v. Stephens, 1 Barn. & Ald. 603; Fowler v. Down, 1 Bos. & P. 44. Years have elapsed since the proceedings in bankruptcy were closed, and the irresistible conclusion from all the averments of the bill is, that the assignee never elected to take possession of this property, or made any claim whatever upon the trustee for the same. Assignees may refuse to take possession of onerous properties or such as will be a burden instead of a profit, and the clear presumption from the bill as admitted by the demurrer is that the claim against the trustee was regarded in that light by the as-signee. Robeson says it has long been a recognized principle of the bankrupt law that the assignees of a bankrupt are not bound to take property of an onerous or unprofitable character, or property which will be a burden instead of a benefit. They are on. that subject regarded as being in a very different position from that of the executors of a deceased testator, as the former take the property by operation of law, while the latter claim title through their testator, and are bound to perform his obligations to the extent of his assets. Robs. Bankr. 322. Where the assignee elects not to take the right of the bankrupt and charge the estate-with the burden of an uncertain litigation, the right, whatever it is, survives in the bankrupt, and some of the authorities hold that it may be pursued by any creditor not a party to the proceedings in bankruptcy. Smith v. Gordon, [Case No. 13,052.] Persons acting as assignees in such a case are-required to elect, within a reasonable time, and the rule is that if they refuse to elect when required to do so, it is deemed an election to reject the estate. Lawrence v. Knowles, 5 Bing. N. C. 399; Carter v. Warne, 4 Car. & P. 191; Graham v. Van Diemen’s Land Co., 11 Exch. 101; Ex parte Blandy, 1 Deac. 286; Tuck v. Fyson, 6 Bing. 321. Doubtless the complainant, in such a case» must allege or prove enough to show that the assignee is estopped to set up any right in opposition to his claim, and the court is of the opinion that enough is alleged in this case to satisfy that requirement. Reasonable pre sumptions are admitted by the demurrer as well as the matters expressly alleged. Pursuant to advice which the complainant received to purchase from his assignees his claim against the trustee, the allegation is that he procured an assignment of the same,, which must be understood in this award as a transfer of all the property and estate embraced in the claim which he was advised to purchase by an appropriate legal instrument. Suppose that is so, still the argument is that the allegation is not sufficient» because it is not alleged that the sale was. made by the order of the bankrupt court;, but the opinion of the court is that such a prior order was not necessary under the circumstances of this case, to give validity to the sule, or if it was, that the reasonable presumption from the allegation of the bill is, that the assignment was made in pursuance of such an order of court. Independent of the assignment, his title, under the circumstances of that case, was good against all the world except the assignee, as the presumption is that the property was regarded as onerous, and that the assignee elected not to take it into possession or to-prosecute the claim. The next objection is that the cause of action is barred by the two years’ limitation in the bankrupt law under which the complainant was adjudged a bankrupt. Suffice to say that the limitation does not apply to the [784] case o£ an assignee, which is all that need be said upon the subject in the present case. Banks v. Ogden, 2 Wall. [69 U. S.] 69. It is also objected that the complainant attempted to deprive the respondents of their right to an answer under oath; but the controlling answer to the objection is, that it can have no such effect, as the waiver amounts to nothing unless the respondents accept it. Heath v. Erie Ry. Co., [Case No. 6,306;] Story, Eq. PL § 874. Bill dismissed as to the executors and devisees. Decree for complainant against Thomas C. Amory.