Lant v. Manley

SWAN, District Judge (after stating the facts). The first question presented for determination is that as to the jurisdiction of this court to interfere with the property in the possession of the probate court for the county of Washtenaw. The bill calls upon the court virtually to dispossess the administrators of Mrs. Morgan and the executrix of Franklin L. Parker of all control over the property committed to their charge, and to assume the administration of that property, and its distribution among the parties entitled. It prays the appointment of a receiver, and the transfer to this court of all the muniments of title, books of account, securities, documents, and papers, of every kind and nature, belonging to the estate of Elijah W. Morgan, his wife, Lucy W. S. Morgan, and the defendant Lucy D. S. Parker, and an injunction against all interference with the real and personal estate held by the defendants, as executors and administrators, and that of Lucy D. S. Parker, individually. The rule is well established that "the jurisdiction of the courts of the United States over controversies between citizens of different states cannot be impaired by the laws of the state which prescribe the modes of redress in their courts or which regulate the distribution of their judicial power”; and that "the equity jurisdiction conferred on the federal courts is the same as that the high court of chancery possesses, is subject to neither limitation or restraint by state,legislation, and is uniform throughout the different states of the Union.” Payne v. Hook, 7 Wall. 425, 430. The only qualification in the application of this principle is that the courts of the United States, in the execution of their jurisdiction over the parties, cannot seize or control property while in the custody of a court of the state. Williams v. Benedict, 8 How. 107; Yonley v. Lavender, 21 Wall. 276; Freeman v. Howe, 24 How. 450; Borer v. Chapman, 119 U. S. 600, 7 Sup. Ct. 342. These cases and many others to the same point are cited and approved in Byers v. McAuley, 149 U. S. 608, 13 Sup. Ct. 906. The consequences of this court taking to itself jurisdiction, and granting the relief prayed by complainant’s bill, would be similar in all respects to those which followed the assumption of jurisdiction in the case last cited, where the court below took full control of the administration of the estate, and the administrator appointed by the register of Alleghany county, Pa., pursuant to the statutes of that state, was subjected to the orders of both the federal and state courts. Of these consequences, the supreme court said in the case last cited that "no officer appointed by any court should be placed under the stress which rested upon this administrator, and compelled for his own protection to seek orders from two courts in respect to the administration of the two estates.” Under the decisions of the supreme court in cases where a citizen of another state has resorted to the federal tribunals for the assertion of his rights against the administrator of the decedent citizen of a state where the suit is brought, the utmost relief which he can obtain is the establishment of his debt by the judgment of the federal court against the executor or administrator. He then becomes entitled to come in under the law of the state for such payment upon his judgment as that law, marshaling the rights of cred — 13 — itors, awards to creditors of Ills class. He obtains no prior, lien upon the property, but simply Axes, by the judgment, his status as a credit or, which the administrator is legally bound to recognize in the payment of the debts. The limit to which the federal .court may go in favor of such creditor therefore stops short of any interference with the state tribunal which has acquired jurisdiction of the estates of decedents. When the estate is ready for distribution, it is hold in Byers v. McAuley, supra, that “the circuit court of the United States might entertain jurisdiction in favor of all citizens •of other states, and determine and award their shares of the estate; further than that, it was not at liberty to go.” So far, then, as the bill seeks to disturb or interfere with the property in the custody of the probate court for the county of Washtenaw, and for the administration thereof by this court, by receiver or otherwise, the relief prayed cannot be granted, and the bill cannot be sustained as against the defendants other than Lucy D. S. Barker individually. As the property attached on the plaintiff’s judgment was then admittedly in the possession of the defendants Kinne and Johnson, as administrators of Lucy W. S. Morgan, under their appointment by the proba te court for the county of Washtenaw, the attachment was a breach oC the rule of comity which protects property in the possession of a state court from process issued out of the federal court, and is invalid for the enforcement of the right claimed by the attaching creditor. Heidritter v. Oilcloth Co., 112 U. S. 294, 302, 5 Sup. Ct. 135; Shields v. Coleman, 157 U. S. 168, 15 Sup. Ct. 570. 2. As the conclusion reached upon this ground of demurrer would not authorize the dismissal of the bill as against Lucy D. S. Barker individually, it becomes necessary to pass upon the demurrer for ward, of equity. Under this demurrer, and even if it had not been pleaded, it would he competent for the court, upon its own view of the case made by the bill, to decline to enter into any inquiry into tbe mailers charged therein, admitting them to be true, which is the' effect of the demurrer, if the court ought not, upon the inherent principles of equity, to grant the relief prayed. It is not necessary that the defendants should have demurred expressly on the ground of lach.es of complainant, or -should have in terms based their defense upon ihe statute of limitations. The rule which governs courts of equity in determining the rights of parties where it is apparent that there has been long delay in; seeking the aid of the court, and no extenuating facts are set forth to account for such delay, is stated in Badger v. Badger, 2 Wall. 87-91, as follows: “In such eases courts of equity act upon ’their own inherent doctrine of discouraging, for the peace of society, antiquated demands, and, refuse to interfere where there has heen gross laches in prosecuting the claim, or long acquiescence in the assertion of adverse rights. Long acquiescence and laches by parties out of possession are productive of much hardship and in- ’ justice to others, and cannot he excused hut by showing some actual hin-j drance or impediment, caused by the fraud or concealment of the parties in possession, which will appeal to the conscience of the chancellor. The party who makes such appeal should set forth in his hill specifically what were the impediments to an earlier prosecution of his claim; how he came to be — 14 — so long Ignorant of his rights, and the means used by the respondent to fraudulently keep him in ignorance; and how and when he first came to a knowledge of the matters alleged in his bill; otherwise, the chancellor may justly refuse to consider his case, on his own showing, without inquiring whether there is a demurrer or formal plea of the statute of limitations contained in the answer.” In Wood v. Carpenter, 101 U. S. 135, the defendant was charged with fraud in the disposition of his property in a suit by a judgment creditor, who had recovered judgment in 1860, and brought suit thereon in 1872; alleging that the debtor had in 1858, in order to defraud his creditors, confessed judgments, incumbered his property, and, in 1862, conveyed his real and personal estate to sundry persons, who held the same in secret trust for him. The debtor was arrested in 1862, on final process, to compel the payment of the judgment; but deposing that he was not worth $20, and had in good faith assigned all his property to pay his creditors, he was released, pursuant to the law of the state. The creditor believing the statement of the debtor, and accepting his assurance that his son-in-law would, with his own means, purchase the judgment for 50 cents of the principal and interest, sold it, in 1864, to the debtor’s son-in-law. The creditor afterwards discovered that the money he received for the judgment belonged to the debtor, who had acquired an indefeasible title to the property. The creditor sued for the amount of which he had been defrauded by the deceit of his debtor, who pleaded the statute of limitations in defense of the suit. The court held that the statute of limitations commenced running when the fraud was perpetrated, and it was not avoided by the replication averring that the debtor had fraudulently concealed the facts stated in the declaration touching the incumbrance and conveyance of his property, its real ownership, and the confessions of judgments, and that the creditor had no knowledge of them until a short time before suit was brought. By the statute of Indiana, where the suit.was tried, actions of that nature were required to be commenced within six years after the cause of action accrued, although it was provided that, “if any person liable to an action shall conceal the fact from the person entitled thereto, the action may be commenced at any time within the period of limitation, after the discovery of the cause of action.” Rev. St. 1894, § 301.1 There was no averment in plaintiff’s pleading that, during the period over which the transactions under inquiry extended, the plaintiff ever made the slightest inquiry in relation to either of them. There, as here, the material facts were of record, and .the conveyances complained of were also recorded. The court said of these conveyances and judgments: “If they were in trust for the defendant, as alleged, proper diligence could not have failed to find a clue in every case that would have led to evidence not to be resisted. With the strongest motives to action, the plaintiff-was supine. If underlying frauds existed, as he alleges, he did nothing to unearth them. It was his duty to make the effort. * * * The discovery of the cause of action, if such it may be termed, is thus set forth: ‘And the plaintiff further avers that he had no knowledge of the facts so concealed by the defendant until the year A. D. 1872, and a few weeks only before the — 15 — bringing of this suit’ * * * In this class of cases the plaintiff is held to stringent rules of pleading and evidence, ‘and especially must there he distinct averments as to tire time when the fraud, mistake, concealment, or misrepresentation was discovered, and what the discovery is; so that the court may clearly see whether, by ordinary diligence, the discovery might not have been before made.’ Stearns v. Page, 7 How. 819-829. ‘This is necessary to enable the defendant to meet the fraud and the time of its discovery.’ Moore v. Greene, 19 How. 69-72. * * * Beaubien v. Beauhien, 23 How. 790. * * * A general allegation of ignorance at one time and of knowledge at and her are of no effect. If the ihaintiff made any particular discovery, it should he stated when it was made, what it was, how it was made, and why it had not been made sooner. Carr v. Hilton, 1 Curt. 390, Fed. Cas. No. 2.436. Tlie fraud intended by the section which shall arrest the running ox The statute of limitation must he one that is secret and concealed, and not one that is patent or known. Martin v. Smith, 1 Dill. 85, Fed. Cas. No. 9,164. ‘Whatever is notice enough to excite the attention, put the party on Ms guard, and call for inquiry, is notice of every tiling to which such inquiry might have led. * * *’ ” Mr. Justice Swayne’s opinion in this case summarizes the result of the authorities upon cases where fraudulent: concealment is tendered as an excuse for delay in bringing suit, as follows: “The fraud and deceit which enable the offender to do the wrong may precede ii.s perpetration. The length of time is not material, provided there is the relation of design and its consummation. Concealment by mere silence is not enough. There must be some trick or contrivance intended to exclude suspicion and prevent inquiry. There must be reasonable diligence; and «lie means of knowledge are the same thing in effect as knowledge itself. The circumstances of the discovery must be fully stated and proved, and the delay which has accrued must be shown 1° he consistent with the requisite diligence.” While this case was upon the law side of the court, the doctrines there declared are clearly applicable to proceedings in equity. Bank v. Carpenter, 101 U. S. 567, in which, as in the case at bar, the defendants demurred to the bill, which was founded on substantially the same facts as in the preceding case of Wood v. Carpenter. In Harwood v. Railroad Co., 17 Wall. 78, five years’ unexplained delay, although the bill contained an allegation of ignorance, in general terms, of the fraudulent acts for which redress was sought, but did not allege when complainants acquired their knowledge, or give a satisfactory reason why it was not sooner obtained, were held sufficient to bar1 relief from an alleged collusive and fraudulent decree and sale. In Godden v. Kimmell, 99 U. S. 201-211, the doctrine is again affirmed that (he party seeking relief after long delay, against an alleged concealed fraud, must plead specifically what were the impediments to an earlier prosecution of his claims, how he came to be so long ignorant of Ids alleged rights, the means used by the defendant to keep him in ignorance, and how he first came to the knowledge of the right. In that case 14 years elapsed from the execuiion of the deed sought to be avoided and the filing of the bill. In Marsh v. Whitmore, 21 Wall. 178-385, a bill was filed for an accounting for the value and proceeds of bonds less than 12 years after they had been purchased by the defendant. The plaintiff had remained inactive after their sale. His bill failed to state the impediment, if any, to prompter action, or when he first learned of his supposed wrongs. His language was — 16 — that he was not aware of the purchase by the defendant until lately. This averment the court characterizes as “language altogether too vague to invoke the action of a court of equity,” and approves the rule of pleading laid down in Badger v. Badger, 2 Wall. 87, in all its particulars. Norris v. Haggin, 136 U. S. 386, 10 Sup. Ct. 942. See, also, Sullivan v. Railroad Co., 94 U. S. 807, holding also, inter 'alia, that the defense of laches need not be pleaded to defeat a stale claim, and that each case is governed by its own circumstances, independent of the statute of limitations. ' The averments of the bill are obviously insufficient under these ■authorities. Does the case made by the bill come within the principles ruled by these authorities? Briefly summarized the com;pláinant’s case is this: In September, 1876, he acquired, “for a valuable consideration” (the amount of which is not stated), the notes given by Morgan to Hattie C. Eames, November 20, 1873,' which were payable, with the stipulated interest, IS months after date. These notes were then overdue. It does not appear for what, if any, consideration, they were given by Morgan to the payee. Complainant held these notes without, so far as appears from his 'bill, making any effort to collect them from Morgan, or even presenting them for payment, until the statute of limitations of this state (which allows six years for suit on simple contracts) had nearly run against recovery upon them. They became due May 20,1875. On the 12th.of July, 1881, just before the bar of the statute would, have been perfected against án action upon them, he recovered judgment thereon for the sum of $5,882.72. Whether his inactivity was prompted by his confidence in Morgan’s ability to pay them and his desire to continue as long as possible the investment at the ■profitable rate of 10 per cent, interest is a matter of no moment. If he knew that Morgan was disposing of his property, and did nothing to enforce his claim, he is manifestly debarred from relief on the plainest principles of equity.’ If he did not know of these conveyances, he is equally inexcusable for ignoring the information which was spread upon the public records of the county. Although he avers that, from the year 1876 until the time of filing this bill, he made diligent efforts to discover property of Morgan from which he could make the amount of his judgment, “but by reason of the fraudulent actings and doings of Elijah W. Morgan, Lucy W. S. Morgan, and Franklin L. Parker, and of their representatives since their decease/ and of defendant Lucy D. S. Parker, and by reason of their fraudulent concealment of the equitable interests, real and personal estate, goods and chattels, belonging to said Morgan and his estate, your orator has been prevented hithertofore from so obtaining satisfaction of his aforesaid debt, claim, demand, a'nd judgment; and also that your orator did not discover the facts hereinbefore stated until a few months prior to the commencement of his'Saicj. suit against said Elijah W. Morgan in said circuit court of the United States for the Eastern district of Michigan,” and, since that; time, that he has diligently sought to discover such assets applicable to the .payment of his debts,” — no affirmative acts or misleading devices are alleged. This is too vague. and general an — 17 — averment to excuse the delay of the complaint. It is not alleged in the bill that any demand was made upon Morgan for the payment of this judgment, or that the same was ever presented to Parker, his guardian, or ever to defendant Manley, Morgan’s administrator. By section 5884, p. 1537. 2 How. Ann. St. Mich., it is provided that: ‘‘When there shall he a deficiency of assets in the hands of an executor or am administrator, and when the deceased shall in his lifetime have conveyed any real estate or any right or interest therein with ihe .intent to defraud his creditors, or to avoid any right, debt, or duty of any person, or shall have so conveyed such estate that, by law, the deeds or conveyances are void as against creditors, the executor or administrator may, and it shall he his duty to commence and prosecute to final judgment, any proper action or suit, at law or in chancery, for the recovery of the same, and may recover for the benefit of the creditors all such real estate so fraudulently conveyed and may also for the benefit of the creditors, sue and recover for alt goods, chattels, rights or credits which may have been so fraudulently why eyed by the deceased in his lifetime, whatever may have been the manner of such fraudulent conveyance.” Section 5885 quail lies this duty by making its execution dependent upon the application of creditors of the deceased, and their payment, or giving such security for costs and expenses of such suit as the probate court shall judge just and equitable. The bill fails to aver that Morgan’s administrator has ever been requested by complainant to institute the action authorized by this section, or take any steps thereunder. Prom July 12, 1881, until February 2, 1891, at which last date complainant brought Suit in tliis court upon the judgment recovered against Morgan in the circuit court for the county of Washtenaw, it does not appear from the bill, otherwise than by the general statement just quoted, — of the efforts of complainant to realize his judgment,— that he took out execution in the state court, or exhausted his legal remedies therein. So far as the bill shows, he seems to have remained quiescent, although, as he avers, from the year 1873, Morgan (before that time a man of large property) had become practically insolvent, by the conveyances which are here charged to have been, frauds upon his creditors, and from which the bill seeks relief. Ho reason is shown for this inaction and the failure of complainant promptly to seek the like remedy in the state court, as a judgment creditor of Morgan, to that here sought against these; alleged fraudulent conveyances. Ho greater obstacles existed at and after the date of his judgment in the stale court, or at any time since the year 1876, to the enforcement of his claim against Morgan, than at the time the judgment at law was recovered in this court, or when this bill was filed. Accepting his statement that, in 1889, and for many years prior thereto, Morgan was mentally incompetent, and, by reason of that fact, Franklin L. Parker, now deceased, was then appointed his guardian, and acted as such until the death of Morgan, January 28, 1892, yet neither Morgan’s condition nor the fact that he was under guardianship constituted any impediment to the enforcement of the complainant’s judgment which excuses his failure to take the necessary proceedings. More than this, on the 20th of June, 1887, after complainant lias held the notes for nearly 11 — 18 — years, Lucy W. S. Morgan, the wife of Elijah W. Morgan, and his alleged co-conspirator in the so-called “fraudulent conveyances” sought to be avoided by this bill, departed this life, and any light which she could have thrown upon the transactions complained of, was forever lost. These deeds, which the bill claims were voluntary, and in fraud of his fights, and those of other creditors of Morgan, were largely made prior to the execution of the notes upon which complainant’s judgment is founded. The conveyances to Franklin L. Parker bear date January 14, 1878, over 10 months before the notes mentioned, and were recorded June 15, 1875, over-15 months before these notes were transferred by Hattie 0. Eames to the complainant. Touching these conveyances to Parker, aside from the fraudulent character imputed to them as purely voluntary, and therefore assailable by Morgan’s creditors, the "only circumstance disclosed by the bill which tends to impugn the conduct of Parker, or to lay him open to the charge of having been a participant in the supposed fraud of Morgan and his wife, is the fact that they were not recorded until two years after their execution. As Morgan is alleged to have been a man of large property, and it is not claimed that the deeds to Parker embraced all his realty, withholding them from the record was not necessarily or probably a fraud upon complainant. He had no right to complain of transactions perfected before he became Morgan’s creditor. Graham v. Railroad Co., 102 U. S. 148. With regard to the property conveyed by Morgan to his wife and to Lucy D. S. Parker, the bill does not specify the date of the conveyances, except by the general allegation that, in the years 1873 and 1874, Morgan combined and confederated with his wife, and with Franklin L. Parker and his wife, to transfer and incumber his property, and conceal the same from his creditors; and that the conveyances under which the defendants claim title to the lands which the complainant seeks to subject to the payment of his debt were made in pursuance of such combination, and for the fraudulent purpose of preventing the same from being applied to the payment of Morgan’s debt, with knowledge on the part of the grantees of Morgan’s insolvent condition and'his indebtedness. Save in this general way, there is no allegation in the bill of any concealment by Morgan or his grantees, or any other active measure taken by them, or either of them, to defeat the claims of Morgan’s creditors. It is not even charged that the conveyances were withheld from the record, and that the creditors were thereby lulled into a feeling of security, or were dissuaded from proceedings to avoid the alleged fraudulent transfers. The fair inference from the allegations of the bill relative to these conveyances is that they were seasonably recorded. It is a matter of no moment that complainant did not have actual knowledge of their execution, if, as may be fairly assumed, they were recorded in the office of the register of deeds for the county of Washtenaw. Such records afforded means of knowledge, which is equitably synonymous with knowledge itself, and leave without excuse one who so tardily seeks relief from transactions which', if he had diligently pursued his rights, he might — 19 — easily have discovered and proved at a time when the actors in them were living, and had the facts fresh in mind. Where the matters complained of as frauds are evidenced by public records, accessible to all, it is settled by the judgments of the federal and state courts alike that the party who seeks to avoid the effect of such notice must show something- more than concealment by mere silence, — some affirmative act of deception; some misleading device or contrivance on the part of the party charged with fraud intended to exclude suspicion, prevent inquiry and the institution of adequate measures of redress. New Albany v. Burke, 11 Wall. 107; Wood v. Carpenter, 101 U. S. 135; Pearsall v. Smith, 149 U. S. 231-236, 13 Sup. Ct. 833; Norris v. Haggin, 136 U. S. 386, 10 Sup. Ct. 942; Robert v. Morrin, 27 Mich. 306; Richards v. Mackall, 124 U. S. 183, 8 Sup. Ct. 437. Instead of taking such steps as the notice imparted by these conveyances should have prompted (for they informed him that Morgan was disposing of his property), and although the bill avers that he was largely indebted at this time, which seems to have been as well known to complainant then as now, complainant did nothing. If these conveyances were fraudulent, or if he had reason to believe them so, the statutes of Michigan provided an ample remedy by which he could have contested their validity. He might have filed a judgment creditors’ bill in the state court, or could have instituted-a suit in attachment at any time since 1876, the date when he acquired the notes in question, by making affidavit, pursuant to the statute, that Morgan, the debtor, had transferred, assigned, or conveyed (or was about to do so) his property with intent to defraud Ids creditors, or that he had reason to believe that his transfers and conveyances were so made and for that purpose, or he could .have called upon Morgan’s administra,tor to take the proceedings authorized by section 5884, 2 How. Ann. St. In either of these proceedings the amplest latitude of inquiry would have been allowed him, and the facts attending the transfer and the considerations and motives thereof could have been fully investigated. Ordinary diligence should have stimulated complainant to prompt action. The course he pursued was the opposite. He has delayed inquiry and pursuit with at least constructive knowledge of the acts of which he now complains, and knowing, also, that Morgan, by age and infirmity, had become incompetent, and although warned by the death of Lucy W. S. Morgan that the lapse of time was erecting the strongest equitable obstacles to Ids pretensions. Franklin L. Parker died February 20, 1894. dune 8, 1894, complainant filed this bill, after the death of all the actors in the transactions of which ho complains. Assuming that the conveyances made by Morgan were made, as charged in the bill, as early as 1874, it appears that the defendants and those whom they represent have been in possession of the lands conveyed hv Morgan for nearly 20 years. For 18 of those years, viz. since September, 1876, complainant has acquiesced in Morgan’s conveyances and defendants’ possession of the' property, until every witness to the transaction which he seeks to Investigate has passed away. — 20 — By the statute of Michigan (2 How. Ann. St. p. 2127, § 8698), it. is provided that: “After the 31st day of December, in the year of our Lord eighteen hundred and sixty-three, no person shall bring nor maintain any action for the recovery of any lands or the possession thereof, or make any entry thereupon un- • less such action is commenced or entry made within the time herein limited, therefor, after the right to make such entry or to bring such action,’ shall have first accrued to the plaintiff or to some person through whom he claims, to wit: First. Within five years where the defendants claim title to the land in question, by, or through some- deed made upon the sale thereof by an executor, administrator or guardian or by a sheriff or other proper-ministerial officer under the order, judgment, decree or process of a court or legal tribunal of competent jurisdiction within this state. Second. Within ten years where the defendant claims title under a deed made by some officer of this state or of the United States, authorized to make deeds upon the sale of lands for taxes assessed and levied within this state. Third. Within fifteen years in all other cases.” Whatever infirmity inhered in the conveyance by Morgan to the decedents, Lucy Morgan and Franklin L. Parker, the lapse of time has healed, unless the case made by the bill can be brought within the provision of section 8724. That section provides: “If any person who is liable to any of the actions mentioned in this chapter, shall fraudulently conceal the cause of such action from the knowledge of the person entitled thereto, the action may be commenced at any time within two years after the person who is entitled to bring the same shall discover that he has such cause of action,' although such action would be otherwise barred by the provisions of this chapter.” Tke conveyances complained of neither concealed themselves, nor were such affirmative acts of fraud as are excepted from the operation of the statute. For aught that appears from the bill, the facts it states as ground of relief were as well known to complainant for at least 15 years before this bill was filed as they now are. Complainant was under no disability, nor is it claimed that any affirmative acts on the part of Morgan, his wife, or Franklin L. Parker have misled him in any particular, or induced his inaction. The utmost of his charges against the defendant Lucy Parker is that she had knowledge of the object which Morgan sought to accomplish by the conveyance of his property. This charge is made upon information and belief, and it clearly appears from the bill that complainant was in possession of that information, and had the same belief which he now entertains, before it became necessary to sue upon his judgment in this court, and for over three years before the filing of this bill. The bill makes no case whatever against the defendants Kinne and Johnson, except their possession in their representative characters as executors of the estate of Lucy W. S. Morgan of the property conveyed to her by her husband, and except, also, the charge, upon information and belief, that they have in their possession books, papers, documents, etc., which would support the case of complainant. As this charge is made upon information and belief, it lacks the weight and significance which a positive averment would be entitled to receive, and, in the view we have taken of the case, is immaterial. There is no equity in complainant’s bill, and it should be dismissed, with costs.