An assignee in bankruptcy appeared in a suit in equity which had
been commenced by a bank against the bankrupt before his bankruptcy
to obtain a decree for the sale of securities pledged to the bank
as collateral, and defended upon the ground of usury and usurious
payments of interest. More than five years after the appointment of
the assignee, the bank filed a supplemental bill setting up a
former adjudication between the bankrupt and the bank made after
the commencement of the suit, but before the bankruptcy upon the
matter so set up in defense by the assignee.
Held that the
supplemental bill set up no new cause of action, but only matters
operating as an estoppel which were not subject to the limitation
prescribed by Rev.Stat. § 5057.
The case as stated by the Court was as follows:
This case was before the Supreme Court of Illinois at the March
term, 1881, when the decree therein, in favor of the present
defendants in error, was reversed and the cause was remanded to the
Circuit Court of Cook County, Illinois, for further proceedings.
The judgment is reported in 97 Ill. 568. The cause was reinstated
by the circuit court, and after further proceedings therein a final
decree was rendered in favor of the defendants in error, which on
appeal was affirmed in the Supreme Court of Illinois on November
17, 1884, and is reported in 111 Ill. 462. From that decree the
plaintiff has brought the present writ of error.
For the purpose of determining the only federal question arising
upon the record, the following statement of the case made by the
Supreme Court of Illinois, and prefixed to its opinion as reported
in 111 Ill. 462, is sufficient. That statement is as follows
"A bill in chancery was filed February 17, 1875, in the Cook
County Circuit Court by the International Bank against Samuel J.
Walker and other persons to foreclose and sell certain collateral
securities which had been pledged by Walker to
Page 127 U. S. 485
the bank to secure the payment of principal notes of various
dates made by Walker to the bank, some twenty-two of which were
still held by it, and about ten others transferred to the other
parties to the suit. The prayer of the bill was that a decree might
be entered fixing and establishing the amount of indebtedness due
the bank from walker, and for the sale of the collaterals so
pledged, and the application of the proceeds to the payment of such
indebtedness. Walker answered, alleging that a large amount of
usurious interest entered into and formed a part of the alleged
indebtedness and insisting that an account be taken between the
parties and that such usurious interest be applied toward the
satisfaction of such indebtedness, and that the collaterals be
surrendered. Walker also filed a cross-bill making the same
allegations and praying for an account and the application of such
usurious interest and for a surrender of the collaterals."
"July 6, 1877, the circuit court made an interlocutory decree in
the cause which denied the right to interpose the defense of usury
and directed an account to be taken of what was due on the
principal notes held by the bank, excluding the defense of usury
and of usurious payments of interest. In pursuance of an account
taken as thus directed, dated January 15, 1878, a final decree was
entered on April 25, 1878, finding the amount due the bank from
Walker on the notes held by it to be, on January 15, 1878, held by
it to be, on January 15, 1878, $172,474 and directing a sale of the
collaterals held by the bank to satisfy it. April 26, 1878, Walker
went into bankruptcy, and July 31, 1878, Jenkins, the appellant,
received the deed as his assignee in bankruptcy. The decree of
April 25, 1878, was by this court at its March term, 1881, in
Jenkins v. International Bank et al., 97 Ill. 568,
reversed on the ground that the direction to the master, in the
order of reference, not to consider the question of usurious
payments of interest upon any of the notes, was erroneous. The
collaterals so sought to be sold had been specifically pledged by
Walker to the bank, each to secure a particular note. The bank also
held an agreement from Walker that each of the collaterals, though
specifically pledged as security for a specific principal note,
should also,
Page 127 U. S. 486
after the satisfaction of such principal note, be held as
security for Walker's entire indebtedness to the bank, if any
surplus remained which could be so applied after the satisfaction
of such particular note."
"On March 11, 1874, George Wilshire and others filed their bill
of complaint against the International Bank, David Frey, Samuel J.
Walker, and others alleging that they had purchased of Walker
certain premises and setting out that Frey claimed to own a certain
mortgage upon the same, executed by Walker prior to their purchase,
which Frey obtained from the bank, but that there was nothing due
upon it, and praying that the same might be surrendered and
cancelled. Frey filed a cross-bill setting up his principal note
and the collateral note and security so executed by Walker to the
bank, alleging that he had bought said principal note of the bank
for full value and praying for the foreclosure of the mortgage and
sale of the premises. The bank also filed its cross-bill against
Wilshire, Frey, Walker, and others setting up its general
collateral agreement above referred to, alleging its right, by
virtue thereof, to any surplus that might remain after the
satisfaction of the indebtedness so due to Frey on said principal
note which had been sold by it to Frey not exceeding the amount due
on the collateral note. The said general collateral agreement
provided that the bank should have the benefit of said surplus,
though it had sold such principal note to a third party. The bank,
in its cross-bill, set up its entire indebtedness so due to it from
Walker in the same way and with the same particularity that it had
set up the same in the bill in this cause now under consideration,
alleging that the notes were due and payable and asking that it
might have any surplus applied to the payment of such indebtedness
after the satisfaction of the amount due to Frey. Walker answered
that cross-bill in the same way, and alleging the same facts that
he had alleged in answer to the bill in this cause. He also filed a
cross-bill therein setting up the same facts that he had set up in
the cross-bill filed in this cause, and prayed for an account
between himself and the bank and for the application of all
usurious interest in satisfaction of his indebtedness to the bank
and for
Page 127 U. S. 487
a return of the bank's collaterals, just as he had done in the
case by his cross-bill."
"On February 28, 1878, a decree was entered in the Wilshire suit
finding the amount due from Walker to the bank to be the sum of
$172,474. That decree stands in full force and effect, and over
five years have elapsed since the entry of the same. The case at
bar having been redocketed in the circuit court after the reversal
of the first decree, on November 26, 1883, by leave of court the
complainant, the International Bank, filed a supplemental bill
setting up the said proceedings, pleadings, and decree in the
Wilshire suit as a former adjudication and in bar to any further
proceedings b y Jenkins, assignee, for an account under his
cross-bill herein, and as a conclusive adjudication of the amount
due the bank upon the evidence of indebtedness set out in its
original bill herein. The circuit court held the said former
adjudication in the Wilshire suit a bar to any further account as
to what was then due, and found the amount due upon the principal
notes set out in the bill and offered in evidence to be the sum of
$172,474 on January 15, 1878, as determined by the decree in the
Wilshire suit. After the allowance of subsequent collections, the
court found the amount due at the time of the decree to be
$143,630.22, and rendered a decree for a sale of the collateral
securities to satisfy said sum. This decree was affirmed by the
appellate court of the first district, and the assignee appealed to
the supreme court of the state."
MR. JUSTICE MATTHEWS, after stating the facts as above,
delivered the opinion of the court.
Section 5057 of the Revised Statutes provides that
"No suit either at law or in equity shall be maintainable in any
court between an assignee in bankruptcy and a person claiming
an
Page 127 U. S. 488
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 to action accrued for or
against such assignee. And this provision shall not in any case
revive a right of action barred at the time when an assignee is
appointed."
It is contended by the plaintiff in error that the Supreme Court
of Illinois erred in giving effect, in this suit, to the decree of
February 28, 1878, in the Wilshire suit, as set up by the
International Bank in its supplemental bill filed herein November
26, 1883, more than two years after July 31, 1878, when the
assignee in bankruptcy succeeded to the title of the bankrupt,
Walker. This contention is based upon the proposition that the
filing of that supplemental bill in this proceeding was the
commencement of a new suit against the assignee in bankruptcy by a
person claiming an adverse interest touching rights of property
vested in him. This is the only federal question presented by the
record.
In support of this proposition it is argued on behalf of the
plaintiff in error that the supplemental bill set out and sought a
recovery upon a cause of action distinct from that stated in the
original bill. The original bill prayed for a decree against Walker
upon his notes held by the bank, and for the satisfaction thereof a
sale of the property held as security therefor. During the pendency
of that bill, precisely the same matters were put in issue in the
Wilshire suit between Walker and the bank, and in that suit a
decree was rendered finding the amount due. That decree in the
Wilshire suit stands unreversed, and operates as an estoppel by way
of
res adjudicata between the parties. By way of proof or
in pleading, it would be good as a bar in any subsequent suit
between the same parties upon the same issues. Having been rendered
after the institution of the present suit, it was competent for the
complainant to bring it forward by a supplemental bill as
conclusive evidence of the amount due for which it was entitled to
take a decree and as a complete answer to the defense set up by the
plaintiff in error, as the assignee of the bankrupt, to the relief
prayed for in the original bill, and to the relief
Page 127 U. S. 489
sought by the cross-bill. It was strictly new matter arising
after the filing of the bill, properly set up by way of
supplemental bill in support of the relief originally prayed for.
It can in no sense be considered as a new cause of action. It was
not a bill to enforce the decree, nor was the complainant obliged
to rely upon it as the sole ground of recovery on the ground that
the original cause of action had become merged in it. If the notes
were merged in the decree, it was simply a change in the nature of
the evidence to support the complainant's title to relief. The
indebtedness remained the same and the equity of the complainant to
a foreclosure and sale of the securities remained unchanged. The
statute of limitations, therefore, invoked by the plaintiff in
error has no application.
This being the only federal question arising upon the record,
and having, in our opinion, been decided correctly by the Supreme
Court of Illinois, it is not within our province to consider any
other question in the case.
The judgment of the Supreme Court of Illinois is therefore
affirmed.