United States were claimed by the defend- | rect shall revert to the said sisters surviving, ant is reviewable in the Supreme Court of the United States, where that statute was referred to by the highest state court and was an element in its decision.*, Limitation of actions-in bankruptcy cases. ment. 3. Assignees in bankruptcy cannot be deemed to have abandoned the interest in remainder of the bankrupt under a testamentary trust because they did not sell such interest, where, apparently as soon as they learned of the existence of the trust fund and of the fact that creditors of the bankrupt were seeking to reach and apply this interest in satisfaction of his debts, they brought a bill in equity in the nature of a bill quia timet to compel the transfer to them of the bankrupt's interest, and to enjoin the trustee from paying any part of the trust fund to the bankrupt or those claiming under him. [No. 164.] to be shared equally between them. At the decease of all my three said sisters, I direct that the fund from which they have derived an income from my property be divided equally between the children of my said sisters, and I direct my executors to pay to them each their respective part, the same to be the property of the children of my said sisters forever."" The three life tenants survived the testator. Louisa never had any child; Martha Hutchinson had one child; Mary A. Sweetser had one child, a son, Elbridge L. SweetHe and the child of Martha were born ser. in the lifetime of the testator. Mary A. Sweetser survived her sisters, leaving her son and niece surviving her. This bill was brought February 1, 1901, Argued and submitted January 17, 1907. pertinent are the following: IN N ERROR to the Supreme Judicial Court of the State of Massachusetts to review a decree that the interest of a cestui que trust passed to his assignees in bankruptcy, entered on a bill for instructions filed by the testamentary trustee. Affirmed. are On February 23, 1878, Elbridge L. Sweetser filed a voluntary petition in bankruptcy in the district court of the United States, district of Massachusetts, and was, on that day, adjudged a bankrupt. On the 16th of March, 1878, William B. H. Dowse and Horace P. Biddle were appointed the assignees of his estate, and there was duly See same case below, 189 Mass. 45, 75 N. conveyed to them all the estate which the E. 222. Statement by Mr. Justice McKenna: The defendant in error, Whittredge, who was trustee of certain property held in trust under the will of Solon O. Richardson, who died in 1873, filed this bill for instructions in the supreme judicial court of the state of Massachusetts. There was bequeathed by said will $35,000, on the following trusts: "The income to be paid to his three sisters for life, namely Mary A. Sweetser, Martha Hutchinson, and Louisa Ricnardson; and 'at the decease of my said sisters, or either of them, my will is that the share belonging | to the deceased sister shall revert to her children, to be shared by them each and each alike; if either of my said sisters shall die childless, the income belonging to her I di Ed. Note.-For cases in point, see vol. 13, Cent. bankrupt owned or was entitled to on February 23, 1878. During the year 1878 claims amounting to $13,940.47 were proved against the estate. No other claims have since been proved. The only assets disclosed by Sweetser in his schedules consisted of a stock of goods subject to mortgage. The proceeds of these goods were consumed in paying the mortgage and certain expenses of the assignees, and the balance, of about $280, was paid to the assignees on account of services. The Florence Machine Company, in 1881, filed a bill in equity against Elbridge L. Sweetser and Solon O. Richardson, then the sole trustee of Solon O. Richardson, deceased, to reach and apply in payment of five notes held by that company against Sweetser, his equitable interest under the Dig. Courts, § 1049, 1053 68. *541 will of said deceased. The suit was brought ton, the then trustee under the will. under the provision of General Statutes of On the same day Sweetser and his Massachusetts, chap. 113, § 2, and is called wife conveyed to one Sidney P. Brown equity suit No. 386. Subpoena was issued their interest under the will, subject to the November 28, 1881, and served on Sweetser mortgage, and Brown conveyed to Hannah and Richardson, trustee, November 29, 1881. Sweetser. Notice of these conveyances was Sweetser filed an answer February 1, 1882, acknowledged by said trustee, William Morin which, among other things, he denied that ton. he had any such interest under the will as could be reached and applied to the payment of the claim of the company, and also denied the validity of the claim, but did not deny making the notes. On the same date Solon O. Richardson, trustee, also filed an answer, setting up the proceedings in bankruptcy and the appointment of assignees, and suggested | that any interest that Sweetser had in the fund passed to them. The suit is still pending, no hearing upon the merits having ever been had. In 1882 the assignees filed a bill in equity against Sweetser and Solon O. Richardson, then the sole trustee under the will of said Solon O. Richardson, in the United States district court, alleging an interest in Sweetser in the fund, that it had accrued before the bankruptcy, but was not set forth in his schedule of property, and that they had no knowledge of such interest until a few days before filing the bill. The bill prayed, among other things, "that the said Elbridge L. Sweetser might be directed to execute and deliver such instruments as would convey to said assignees all of his interest as legatee under the said will, and that the said trustee, Solon O. Richardson, might be enjoined from paying to the said Elbridge L. Sweetser, or any person or persons claiming under him, any part of the said trust fund, or the income thereof, which might accrue and become payable to the said Elbridge L. Sweetser." On November 15, 1882, the Florence Machine Company, by its attorney, Warren O. Kyle, filed a general replication in suit No. 386. On December 2, 1882, Sweetser and Solon O. Richardson, trustee, filed general demurrers to the bill. No hearing, however, has ever been had in the case, either upon the demurrers or the merits, and the case is still pending. On October 24, 1885, Sweetser executed and delivered to the Monitor Oil Stove Company a note for $1,809 and a note to Solon O. Richardson, individually, for the sum of $506.05. As a security for said notes Sweetser gave a written mortgage or assignment, under seal, of all his interest under the will of Solon O. Richardson, deceased, to Richardson and the company. Sweetser's wife signed the notes and mortgage as joint maker. Notice of the mortgage assignment was acknowledged by William Mor On October 24, 1885, the Florence Machine Company brought an action at law in the superior court of Suffolk county against Sweetser, in which the then assignees in (*bankruptcy were summoned as trustees, to recover the sum of $7,620.13, amount due on eight promissory notes which had been proved in his bankruptcy proceedings, and and also to recover upon an account based on ledger entries made by the company in 1881. The assignees in bankruptcy were duly served with process, but did not appear, and were defaulted. On October 26, 1885, in equity suit No. 386, Solon O. Richardson, trustee, filed a further answer, stating that he had resigned as trustee, and that William Morton had been appointed sole trustee, and had accepted the trust. On June 16, 1891, on motion of W. B. H. Dowse, Warren O. Kyle was joined with him as a party plaintiff in the suit of Dibble v. Sweetser, in the United States district court, and Daniel G. Walton, the then trustee under the will, was summoned as a defendant. He accepted service July 30, 1891, and on November 4, 1891, filed a general demurrer to the bill. On April 19, 1893, the Florence Machine Company was dissolved by an act of the legislature, chap. 215 of the Acts of 1893. On August 13, 1894, the Florence Machine Company filed a motion in equity suit No. 386 that Daniel G. Walton, who had be come trustee of the trust under the will of Solon O. Richardson, deceased, and the then assignees in bankruptcy, Dowse and Kyle, might be made parties defendant and summoned to answer the plaintiff's bill. Service was made on Walton August 18, 1894, and accepted by the assignees August 30. In September, 1894, Walton's appearance was entered. On May 15, 1899, Hammond, plaintiff in error, having become assignee of the claim in suit, entered his appearance for the plaintiff, and also entered his appearance pro se, and filed a motion setting forth the assignment to him of the claim, and asking to be permitted to prosecute the suit in his own name. May, 1899, the assignees filed an answer, alleging upon information and belief that Sweetser had, at the time of the assignment in bankruptcy, a vested interest in the trust fund under the will of Richardson, and that, by the operation of the United *544 States bankruptcy act, said interest had | equitable interest either by reason of the been transferred to them. On February 1, 1901, William W. Whittredge, being then the sole succeeding trustee under said will, filed this suit for instructions. On April 22 he was summoned to appear as party defendant in the case of Dibble v. Sweetser, in the United States district court. He accepted service and appeared by counsel June 12, 1901. July 1, 1901, Hammond filed a petition in said case to be made a party. In the petition he alleged, among other things, that the assignees were not entitled to Sweetser's interest as against him as assignee of the Florence Machine Company; among other reasons, because such rights as said assignees had, if any, were barred by the statute of limitations. U. S. Rev. Stat. § 5057. Whittredge, trustee, also filed an answer, alleging the pendency of the suit in equity No. 386, brought by the Florence Machine Company, and that his predecessor had been made a party therein; and also alleging that he, Whittredge, had filed his suit for instructions, and also that the right of action of the assignees was barred by the limitations of law. On February 10, 1904 (the said assignees Dowse and Kyle having disputed the right of said John C. Hammond to be subrogated to the rights of the Florence Machine Company as to the claims proved by said company against the estate in bankruptcy of said Sweetser in 1878, and having petitioned to have said claims expunged), the United States district court made a decree in favor of said Hammond. The decree has since been affirmed by the United States circuit court of appeals. Dowse v. Hammond, 64 C. C. A. 437, 130 Fed. 103. The suit in equity in the United States district court, brought by the assignees of Sweetser in the first bankruptcy, has been continued from time to time at the request of the assignees, who have appeared for that purpose at the callings of the docket to await the termination of the life interests in the trust fund. As already stated, no hearing has been had either upon the said demurrers or upon the merits. That part of the trust fund held by Whittredge, as trustee, which is the subject-matter of this suit, consists of property worth about $18.000. The supreme judicial court decreed that Sweetser's interest in the fund passed to his assignees in bankruptcy. 189 Mass. 45, 75 N. E. 222. And it was decreed that Hammond, as assignee of the Florence Machine Company and as assignee of the Monitor Oil Stove Company, had "no rights in said provisions of the United States Revised Statutes, § 5057, or otherwise." Mr. Hollis R. Bailey for plaintiff in error. Messrs. Warren Ozro Kyle and Fred Joy for defendants in error. Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court: A motion is made to dismiss, which, we think, should be denied. Plaintiff in error sets up rights under § 5057, which were adjudged against him. The court said: "The defendant Hammond admits that when the testator died Elbridge had either a vested remainder in one half of the trust fund of $35,000, subject to the life estates created by this item of the will, and subject to the class being opened on the birth of further child or children of the life tenants, or a vested interest in a contingent remainder, and that 'in either case' his interest was 'assignable.' "His contention, however, is that the assignees are barred by U. S. Rev. Stat. 5057." The court decided against the contention, and decided, besides, that "the title of the assignees in bankruptcy became complete on the assignment to them of this interest in remainder," and that "the ownership drew after it the possession," which has continued ever since, "and all persons are barred by U. S. Rev. Stat. § 5057, from controverting it." In other words, the court decided that 5057 did not preclude the assignees from asserting rights against plaintiff in error, but precluded him from asserting rights against them. Defendants in error, however, urge that the court's decision resulted from facts found or admitted and from general principles of law, and "there remained in the case no question as to any title, right, privilege, or immunity under a statute of the United States; and that the court expressly declined to choose 'between the opinion in Dushane v. Beall, 161 U. S. 513, 40 L. ed. 791, 16 Sup. Ct. Rep. 637, and the decision in Rock v. Dennett, 155 Mass. 500, 30 N. E. 171.'” But rights under a statute of the United States were claimed by plaintiff in error, and that statute was referred to by the supreme judicial court, and was an element in its decision. We think also that the decree rendered was final for the purposes of this writ of error. We therefore overrule the motion to dismiss and go to the merits. On the merits nine errors are assigned, but plaintiff in error asserts that the questions really involved are only four, namely: Had Sweetser such "amount of title" in the *547 *549 trust fund that the Florence Machine Com- | of an interest in the property held in trust pany could make an equitable attachment? by them. Thayer v. Daniels, 113 Mass. 129, Did 5057 render it necessary for the as- and cases there cited. See also Putnam v. signees to intervene and contest the attach- Story, 132 Mass. 205; Butterfield v. Reed, ment within two years? If not within two 160 Mass. 362, 35 N. E. 1128. By virtue of years, then within a reasonable time? Was the assignment in bankruptcy, the complete the machine company, in November, 1881, ownership in this incorporeal interest in barred by 5057 from bringing the attach- this personal property became vested in the ment suit? assignees, and the ownership drew after it possession, so far as the interest here in question (an incorporeal interest, because an interest in remainder) is capable of possession. This result is not affected by the fact that the assignees were for a time ignorant of the existence of this property of the bankrupt. This ownership and possession in the assignees has continued ever since, and all persons are barred by U. S. Rev. Stat. § 5057, from controverting it. The contention that one in possession of property is barred from exercising the rights which that ownership confers on the owner, by not having brought an action, is ground Section 5044 of the Revised Statutes required the register in bankruptcy to transfer by instruments under his hand all of the estate of the bankrupt. The assignment related back to the commencement of the proceedings, and operated to vest the title in the assignee. Section 5046, in most comprehensive terms, vested in the assignees all rights in equity and choses in action which the bankrupt had, and 5047, all of his remedies. Section 5057 reads as follows: "No suit, either at law or in equity, shall be maintainable in any court between an assignee in bankruptcy and a person claiming any adverse interest touching any prop-less. erty or rights of property transferable to or vested in such assignee, unless brought within two years from the time when the cause of action accrued for or against such assignee." Under these provisions the contention of plaintiff in error is, that, notwithstanding the bankruptcy and the broad language of the sections referred to, Sweetser had an interest in the trust fund that could be assigned or attached, and in such way a title could be acquired good against all the world except the assignees, and good against the assignees by their inaction within the time prescribed by 5057 or by their abandonment. Applying this principle plaintiff in error contends that "three years having elapsed without anything having been done by the assignees in the way of disposing of this equitable asset, the bankrupt, in November, 1881, had such an amount of title that he could have brought a suit against the trustees under the will to obtain his share, assuming that the contingency had then happened upon which the right to a distribution depended." And that Sweetser, having such title, it followed, it is contended, that the Florence Machine Company, a subsequent creditor, could make an equitable attachment and make it incumbent upon the assignees to assert their rights within two years, in accordance with § 5057. The supreme judicial court met this contention by the effect of the local law. The court said: "The title of the assignees in bankruptcy became complete on the assignment to them of this interest in remainder. In this commonwealth notice to the trustees is not necessary to complete the title of an assignee Under these circumstances we have not found it necessary to choose between the opinion in Dushane v. Beall, supra, and the decision in Rock v. Dennett, supra." The cases referred to are antagonistic in their construction of § 5057. In Rock v. Dennett, it was held that the limitations expressed by that section applied to adverse claims arising after the assignment in respect to property vested in the assignee. In Dushane v. Beall the court said: "That. limitation [§ 5057] is applicable only to suits growing out of disputes in respect of property and of rights of property of the bankrupt which came to the hands of the assignee to which adverse claims existed while in the hands of the bankrupt, and before assignment." Plaintiff in error contends for the construction expressed in Rock v. Dennett against that expressed in Dushane v. Beall, and insists that the latter case does not overrule prior cases upon which Rock v. Dennett was based. We will not stop to reconcile Dushane v. Beall with prior cases. It is a later utterance by this court, and disposes of the contention of plaintiff in error based on § 5057. The supreme judicial court also found adversely to plaintiff in error's contention that the assignees had abandoned the property. The court said: "The only other contention made by the defendant, Hammond, is equally groundless; to wit, that the assignees abandoned this property. The contention is put on the ground that they did not sell their interest in remainder in this fund. Were that all that appeared the argument would be without merit. But that is not all." And, referring to the suit brought by the assignees in the district court in 1882, *550 552 said further: "This bill apparently was plaintiff in error and the Southern Railway brought by the assignees as soon as they Company, for damages alleged to have been learned of the existence of the fund and of received by the defendant in error to certhe fact that creditors of Elbridge were tain car loads of corn shipped over the seeking to reach and apply this interest Southern Railway Company from certain of Elbridge in satisfaction of the debt due points in Tennessee, to be delivered to defrom him to them. The bringing of this fendant in error or its order at Birmingham, bill (which seems to have been a bill in the Alabama. nature of a bill quia timet) disposes of the contention that it was in fact the intention of the assignees to abandon this property." We think that the record sustains the conclusion of the court. The bill alleged that at the time of the shipments the two railway companies were common carriers of goods and chattels, the Southern Railway being the receiving and initial carrier, and the one with which the These views dispose of all the questions contracts were made, and the plaintiff in in the case. error being the connecting and ultimate carrier, and, as such, bound by said contracts and the law relative to common carriers to receive said cars of corn, and to forward and deliver them to destination whereunto consigned, in good order and in a reasonable time. It was alleged that one of said companies "breached the said several contracts," whereby the damage complained of accrued. The companies filed separate answers. That of the Southern Railway Company we need not set out. Plaintiff in error, in its answer, neither admitted nor denied certain of the allegations of the bill, and expressed want of knowledge as to others. Touching the allegation of the bill, that it was a common carrier, it admitted that it was such in certain states and portions of the country where it operated lines of roads, but denied "that it was the connecting and ultimate carrier of the car loads of corn alleged to have been delivered to the Southern Railway Company," denied that it made the contracts or was liable under them, or "that it was bound by law to receive said alleged car loads of corn and forward and deliver them to their ultimate destination in good order and in reasonable time." The chancellor adjudged that there was no liability on the part of plaintiff in error, Argued and submitted January 31, 1907. and dismissed the bill as to it. He held Decided February 25, 1907. IN the Southern Railway Company liable for not delivering the cars, according to its contracts, within a reasonable time, and, after report by a master, to whom the cause was referred, decreed that complainant have and recover the sum of $1,015.69. The case was taken to the court of chancery appeals, both by defendant in error and the Southern Railway Company. And that court ad N ERROR to the Supreme Court of the State of Tennessee to review a decree which affirmed a decree of the Chancery Court of Appeals of that state, reversing the decree of the Chancery Court for the County of Jefferson, and adjudging that a railway company was liable as a connecting and ultimate carrier for failure to re-judged that the court of chancery erred (1) ceive an interstate shipment and forward in adjudging that the Southern Railway and deliver it to its ultimate destination. Dismissed for want of jurisdiction. Statement by Mr. Justice McKenna: Company was liable for any part of the damages to the corn which accrued after its arrival upon the delivery tracks of the company in Birmingham, and after notice to the consignees of its arrival; (2) in adjudging that plaintiff in error was not liable for the damages suffered by the corn after Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, 1088, 27 S. C.-26. |