.j ' .' ,:
YANCY, Assignee, v. COTHRAN and others. 1
N.D. Georgia. May 9, 1887.)
BANlmUPTcy-ACTION BY ASSIGNEE-LlMITATION.
The complainant,an assignee in bankruptcy, :filed a bill, the object of which was, to recover against thejeme defendant certain shares of stock alleged to h!love been transferred to. her in fraud of the rights of her husband's creditors. It aPPeared of action existed when the assignee was. appointed, and that the complainant as counsel' had reptesented one against whom the lemed,efendant had brought suit concerning this stock, and tbat in that pr.oceeding SUCh information o,f tlile transfer had been disclosed which, if diligently pursued·.wouldhave led to the discovery of all the facts constituting the fraud, ata period more than two years before the bill in this proceeding had been :filed. Held, that the suit was barred by Rev. St.U. S. § .5057, Which provides that "no suit' * * * .shall be maintainable * * * between an assignee in bankruptcy and a person claiming an adverse interest ·touching any. ,rights .of .property transferable to or vested in such assign'ee" unless brought within two years from t.he time when of action accrued" "
In Equity. On plea of stattlte of limitations. Feather8fnne, Alexander k Wright, W. W. Brooks, and Hopki1UJ.« Gkrm, for .... ...' . .. D. S. Pnnt:vp, W. H. Underwood, and Kitngo.. Spalding, for respond-ents·. NEWMAN, J. Thill is a pill filed by Yancy, as assignee in bankruptcy ·of the firm Cothran &.)"ackson,composedof H. D. Cothran aqd J. N. Jackson,againllt Mrs. Laura Cothran, her husband, H. 1>. Cothran, and others.. The:object oithe bill ill to recover frOlD Mrs. Cothran 232 shares ·of the capital stock of the East Rome Town OOmpany. The facts .upqn :Which thi!,? right to recover. is based are substantially as followll, as 1;>y th.epleadings and evidence: In April, 1874,. H. D.Cothran w,as the owner, in, his own right of stock ,in question. He },lad previously, in 1873, failed in business as a of the firm of .& Jackson. At time named, in April, 1874, Cothran transferred the .stock 4c; J"ackson, which firm it would seemwas then endeav. wind up its'old business, The was pledged by Cothran & .Jackson to the. B/l.nk of Rome as security the loan of .$3,500. In August, :note for $,3,500 was due, Q.nd the firm had not ,met it. H.D. Cothran.wRs the president and manager of the Bank of Rqme, the .stock of being all owned, or practically so, by the firm ofOgden Brower, of New this time H. D. Cothran went t9R. F. Fouche, and.lltatlild to him facts the hypothecation of the stock ; that the debt was due; and that Cothran & Jackson were unabl!l tp pay it. Hetold Fouche that he and the cashier of the bank, C. O. Stillwell, .bad tried to sell ,the.stock,but could not get an offer for. it. Stil,lwell told Fouche the same thing.; Cothran tl;1.en,asked· Fouche if he would ,give his note at ..90 days, take a transfer of the stock, agreetha.t;Mrs.
r.. E. Cothran should have the stock. Fouche agreed to do so, and gave his note in lieu of the Cothran & Jackson note, took a transfer of the stock to himself, and hypothecated the stock as collateral for his note, and signed an agreement in writing that if Mrs. Cothran would pay his note, to transfer the stock to her..,The old certificates were taken up by the East Rome Town Company, .and new ones issued to Fouche. The stock stood at the time transferred on the books of .the company in the name of H. D. Cothran. Fouche had ne commuijication with Mrs. Cothran in the transaction, and communicated only.with H. D. Cothran, Stillwell, the cashier, and, perhaps, one Adams. Fouche's wife was a '. cousin of Mrs. Cothran. About November,or December, 1874, Fouche being in the Bank of Rome on other business, Stillwell, the cashIer, handed him his note stamped"ipaid," and said the matter had been arranged. Fouche went into the back room of the bank, and transferred , the stock on the books of the company to Ogden, Brower & Co., and it appears from the certificates that about the same time it was tranSferred by Ogden, Brower & Co. to the Bank of Rome.. Fouche testifies that he did not desire or expect toputchase the stock for himself; that he' was , solvent and able to pay for the stock, and has been solvent ever since; that his principal object in,going into the matter was to help Mrs. Cothran. He says his note was a legal note; that he was liable upon it; that nothing existed that would have relieved him from its payment. He also says that when the note was handed him by Stillwell there was on it this entry: IIPaid by Mrs. L. E. Cothran." He did not observe this entry at the time, and not until long afterwards, when he attached the note to intenogatories in the case of Mrs. Cothran against Brower. The disc;ount registry of the Bank of Rome shows that after the Fouche note was taken up these 232 shares of the East Rome Town Company stock became collateral in the bank for certain notes of W. S. Cothran, Jr., who was a brother of H. D. Cothran. It continued to run thus on the books of the bank as collateral, with other stock and property, for notes of W. S. Cothran, Jr., down to September 1, 1875, at which time it stood with other stocks as collateral for $10,948.43. The notes seem to have been then extinguished: On May 8, 1876, the stock in question seems to have been transferred by the bank to Brower. In 1878, Elunder an execution in favor of Fryrsyth, Administrator, v. Cothran liott, this stock was levied on as the property of H. D. Cothran. A claim was interposed by Brower, and on the trialthere was a verdict and judgment for In August, 1880, Mrs. Cothran filed a bill in equity in Floyd superior court to recover this stock, alleging that about September 1, 1875, she owned this stock, and that it was pledged by her husband to the Bank of Rome for moneys previously advanced to him. She claimed also a large amouiit of dividends that had been paid on the stock. The case was not tried until January, 1883, when Mrs. Oothran obtained a verdict and decree in her favor for the stock, and for a large amount of dividends, subject to certain credits Of amounts for which it had been pledged in bank. It appears of record that Mr. Yancy, the complainant (as assignee) in the case, was attorney for Brower
YANCY V. COTHRAN.
in the case of Mrs. Cothran against him. His name, with other counsel, is signed to Brower's answer, which was filed December, 1880. The defendants in this case filed several pleas, and an answer. They set up, in substance, as defenses-First, the statute of limitations; aecond, that t.he facts do not make a case of fraudulent transfer of this stock as against the of Cothran. It.is unnecessary to consider or to determine whether or not the facts established in this case as to the various transfers of the stock, and the circumstances in connection therewith, are fraudulent as against the creditors of Coth):,l!:l1, so as to have authorized a recovery of the same by the assignee in bankruptcy, if it appears that the assignee knew the facts, or had such information that by the exercise of prl'per diligence he could have known .them more than two years before this suit was brought. Section 5057, Rev. St. U. S., provides: "No suit. either at law or in equity, shall be maintainable in any court be.tween in bankruptcy and a person claiming an adverse interest. touching any rights' of property transferable to or vested in such assignee· .unless brought within two years from the time the cause of action accrued for or against such assignee. It The courts have, however, ingraited on this act the recognized rule as
.to statutesoflimitation. that if the facts on which any right of action is
based have been fraudulently concealed by the parties in interest, or if the fraud is of such character as conceals itself, the statute will only commence to. run from the date of the discovery of the fraud, or of such information as, if diligently followed up. would discover it. Carr v. Hilton, 1 Curt. 390; Bailey v. Glover, 21 Wall. 342; Upton v. McLaughlin, 105 U. S. '640; Roaenthal v. Walker, 111 U. S. 185, 4 Sup. Ct. Rep. 382. This bill was filed January 22, 1885. The right ofaction now claimed, existed in 1875, when the assignee was appointed; sO that about 10 years have elapsed since the right of action accrued. Complainant says, however, that the defendants Cothran and wife fraudulently concealed from him the real facts connected with the transfer of this stock, and that the same was only discovered by him within two years before filing this bill in this court. What lire the facts as to Yancy's knowledge? It appears that in 1878 this stock was levied on by an execution in favor of one }l'orsyth, administrator, against Cothran & Elliott, and that the same was claimed by Brower. Yancy says in his testimony in this case that he attended the trial of that·claim case "for the purpose of gaining information as to the stock." This trial resulted in favor of the claimant Brower. The testimony in that case did not disclose Mrs. Cothran's connection with the stock in any way whatever; on the contrary, the testimony of Cothran and others showed transfers by hypothecation and sale, as shown on the certificates of stock. It is questionable whether the assignee in bankruptcy can be charged with any notice at that time, in view of the testimony in the case and the result. In Carr v; Hilton, 1 Curt. 39C. CURTIS, J., cites with approval the following langu.age from Kennedy \' (keen, 3 Mylne & K. 719, 721, 722: v.32F.no.11-44
"It is the well-established principle that whatever is notice enough to ex(lite attention. and put the party'upon his gUllrd,anll call for inql'liry,is notice of everything to such inquiry might lead. When a person has sufficient information to.Iead him to a fact, he shall be deemed conversant with it."
The same language is quoted with apparent approval in Wood v. carpenter, 101 U" S. 141.. Ifthisfllle be'strictly 'enforced, it may bethat proof of the fact that Yan'cy had become suspicious as to the bona fides of the transaction about the stock would of itself be sufficient; but I am hardly prepared to so htlld. The next Yancy knew .of this stock was information that on a division of the assets of the Bank of Rome it was awarded by arbitration between H. D. Cothran and Brdwer to Brower. But in August, 1880, Mrs. Cothran brought suit to recover this stock of Brower. Yancy, with other cotlnsel, was employed wrapresent Brower. They investigated the case, and in Dec61i1ber following filed Brower's answer. While that'bill and answer:do not show all the 'facts in this transaction as fully as they now appear,litdidshow enough to give anyone a pretty faiJ:'knoWfedgeof the matter. 'The)iH that Fouche held the stock for the benefit of Mrs. that the same had been held for her benefit since Fouche's transfer. It seems to me that the facts thus disclosed were to ptrt Yancy or inquiry, and that after a reasonable time for inquiry the statute would begin to run. .. . ' '. . · .' . . But it further appears that October 15, 1881, the testimony-of Mrs. Cothran was taken in her case against Brower.' Her answers, which were in writing,are in evidence . She testified thatshe became the owner of 232 shares of stock in East Rome Town Com,pany, in August, 1874. "She bought it from R. T. Fouche. Her law, W. S. Cothran, bought' it for her. That her title was' in writing. It was e:x;ecuted by R.,T. Fouche at the time mentioned. It was deliv'Bred to her, and had been in her custody ever since." It was not sho'wn .'when these interrogatories were'filed in office',' but the presuin})tion is that it was done at the next of court. It would certainly be fair 'to Yancy to say that hemust have seen them by the of 1882. On the twenty-seventh of October, 1881, R. A. Denny was appointed .auditor in that case to take account of, and report the amount' of, diyidends received on the stock; amount due on notes for which it was pledged, etc. In January, 1882,' Deriny took testimony, and' February 22, 1882, made his report. This report contained a transcript from the books of the Bank of Rome, showing W. S. Cothran's notes, ,that the stock stood on the books of the bank of Rome as collateral for their payment. So it will be seen that by the spring of 1882, at least, Mr: Yancy must have known every fiLet in connection with this matter that he knew in January, 1885, whenhe comm'enced his suit. Under all the aUthorities onthe subject I thiilkMr. Yancy'sknowledge early in 1882 Was sufficient for the period of limitation to COmmence to rUn. But it isar- . ;ued bYd'complainant's counsel that the statute did not beginto run until the verdict in -COthran v. 'Browrrr, 71' Ga. 357. They'sliy, that Yilncy ;.'
l;1ad aright wait until the termination of tlilit suit,-to wait until he could know whether or: not her claim would prevail over Brower's. I cannot'assent to this view of the matter. There isnotbing in the authorities on the subject, sO far as I have seen, that would indicate that the assignee. hlld a right to wait until it was determined in another case whether the facts shown were fraudulent or not,' and that the statutes would only. commence to run after such determination. It appears, moreover, that an amendment was filed by BrQWer while that case was being argued, denying Mrs. Cothran's right to recover the stock, because her title or interest, if she had! any, was obtained through a scheme to defraud H.. )). Cothran's creditors. And one of the special issues made thereafter in the case, and which was Wt to the jury as a question to be answered by them, was whether it was the design of H. D. Cothran, in the transaction with Fouche and Mrs. Cothran; to'hinder, delay, or defraud hiscredhors; and the jU'ry answered that question "that, it was not." So that'the result of that trial on this point was certainly not such as Mr. Yancy-with notice of fraud any further than he had already been. To take the strongest view 'df this matter in favol." of the complainant, I think itmust be held that when he had knowledge of tIre facts on which he nOW bases his claim to recover, the statute commencedw run, against him. Arid I think that the latest period at which he can be.l3aid t9i' have obtained such knowloogewould be in the early part of. 1882,.a.hd nearly thraeyears before hebrougbt this suit. I nlusttherefore sustain the plea which sets up the statute of limitations as a bar to this su.it.
UNITED STAT'Ell ". SLENKER.
Virginia. October 81, 1887.'
POST-OFFICE-MAILING OBSOENEMATTER",,-TEST Oll' OBBOENITY.
Where the writings, papers, and publications sent through the mail by the accused are of an obscene; >lewd, or lascivious character, the faat that they were, so sent in the real oraupposed interest 'of science,philollophy, or,mor, ality. is,im,l:Jlaterial.
SAME-MAILING OBSCENE MATTER-INDICTMENT-SCIENTER. Scienter IlS to the obscene. lewd, and lascivious character
of the. matter mailed ialln. essentia.l ingredient of the offense denounced by Rev. St. U. S. § 3893, use of'tb,e for the circulation of obscene matter,
'section 8893,. Re". St. U;cB.; prohibiting 'suob, publicatiotlS frolllbeing carried in the mail, see U. S. v. Wightman, 29 Fed. Rep. 636, and note. . ,."
.. lAs to what are" obscene; lewd, or lascivious" publications, within the meaning of