Bailey v. Glover - 88 U.S. 342 (1874)
U.S. Supreme Court
Bailey v. Glover, 88 U.S. 21 Wall. 342 342 (1874)
Bailey v. Glover
88 U.S. (21 Wall.) 342
1. The policy of the Bankrupt Law is speedy as well as equal distribution of the bankrupt's assets among his creditors, and the one is almost as important as the other. The delays in the inferior courts commented on.
2. Hence, the clause limiting the commencement of actions by and against the assignee to two years after the right of action accrues applies to all judicial contests between the assignee and any person whose interest is adverse to his.
3. But though this clause in terms includes all suits at law or in equity, the general principle applies here that where the action is intended to obtain redress against a fraud concealed by the party, or which from its nature remains secret, the bar does not commence to run until the fraud is discovered.
4. And this doctrine is equally applicable on principle and authority to suits at law as well as in equity.
Bailey, assignee in bankruptcy of Benjamin Glover, and appointed as such December 1, 1869, filed a bill on the 20th of January, 1873 (three years and seven weeks, therefore, after the date of his appointment) against Elenora Glover, wife of the bankrupt, Hugh Weir, his father-in-law, and Nathaniel Glover, his son, to set aside certain conveyances.
The bill alleged that Glover, the bankrupt, owed Winston & Co. $13,580, and that judgment had been obtained against him for that debt; that Glover was a man of fortune -- possessed
of at least $50,000 in different kinds of property -- and owed no debt but the one just mentioned; that being thus entirely solvent and able to pay that debt, but fraudulently intending to avoid its payment by applying for the benefit of and getting a discharge under the Bankrupt Law, he previously to applying conveyed, without any or upon grossly inadequate considerations, all his estate to the defendants, and then with fraudulent intent filed a petition in voluntary bankruptcy, setting forth that he owed the debt to Winston & Co., that this was the only debt which he did owe, and that he had no property or effects whatever except such as the law exempted from execution.
The bill further alleged that on his petition as aforesaid he was, on the 11th of April, 1870, discharged under the Bankrupt Act, Winston & Co. proving their debt as creditors, and he, the complainant, being appointed assignee in the bankruptcy.
The bill further alleged that the bankrupt and his wife, son, and father-in-law -- these being the already-named defendants in the case -- kept secret their said fraudulent acts and endeavored to conceal them from the knowledge both of the assignee and of the said Winston & Co., whereby both were prevented from obtaining any sufficient knowledge or information thereof until within the last two years, and that even up to the present time they had not been able to obtain full and particular information as to the fraudulent disposition made by the bankrupt of a large part of his property.
It also alleged that the surviving partner of Winston & Co., in December, 1871, filed a petition in the district court against the bankrupt in order to have his discharge set aside for this fraud, but before process could be served on the bankrupt, he died.
These were the material allegations of the bill, and if true they showed, of course, a very clear case of fraudulent conspiracy between the bankrupt and his family connections to defraud the only creditor named in his petition -- a scheme of gross fraud, in short -- concealed by the defendants from
the knowledge of the assignee and from Winston & Co., against whom the fraud was perpetrated.
The defendants demurred to the bill because the suit was not brought within two years from the appointment of the assignee, and their demurrer was sustained. This appeal was taken from the decree of the court dismissing the bill, and the sole question here was whether on the case made by the bill this decision of the circuit court was right.
The second section of the Bankrupt Act of 1867, under which section the case arose, reads as follows:
"The circuit court shall have concurrent jurisdiction of all suits at law or in equity brought by the assignee against any person claiming an adverse interest, or by such person against the assignee touching the property of the bankrupt transferable to or vested in the assignee; but no suit at law or in equity shall in any case be maintainable by or against such assignee, or by or against any person claiming an adverse interest, touching the property or rights of property aforesaid, in any court whatsoever, unless the same shall be brought within two years from the time of the cause of action accrued for or against such assignee. "