PHELPS fl. ELLIOTT.
455
Manory. It will be observed that the deeds from Baker to Everett were recorded in McKean county on February 12, 1881,and the suit of Hilton & Waugh was not commenced until more than three months later. The suit was for the recovery of a money demand against Baker, and was against him alone. The attachment was of Baker's right, title, and interest in the lands. Now, as Mrs. Malone is not claiming under any subsequent alienation or transfer by Baker, and had no dealings at all with him, the doctrine of lis pendens nas no application whatever to the case. DOt'ey'8 Appeal, 97 Pa. St. ·153. To affect with constructive from the denotice even a subsequent purchaser of attached real fendant in a foreign attachment, it is necessary that a timely entry should be made on the judgment docket of the names of tbe parties, etc. 1 Purd. Dig. p. 825, pI. 16; Ridgway's Appeal, 15 Pa. St. 177. Here the proper entry was made (but not until May 22, 1881) in the name of George A.Baker. But this foreign attachment proceeding was not in the channel of Everett's title, nor connected with it; therefore a purchaser froIn Everett had no concern with it. A purchaser is not affected with constructive notice of anything which does not lie ill the lineofthe title. WoodS v. Fa1"me'fe, 7 Watts, 382; Hetherington v. Clark, 30 Pa.St. 393; Maul v. Rider, 59 Pa. 8t.167. In McLanahan v. Reeside, 9 Watts, 510, it was said by the court that a creditor, in the examination of a title, would of course stop at a conveyance absolute on its face, Bnd referring to nothing beyond. "He would have no reason to suspect that further search would lead to a defeasance, of which, not lying ill the channel of the title, he would not, though actually recorded, beboilnd to take notice." ld. So here Mrs. Malone, finding on record absolute deeds from Baker to Everett, was not bound to prosecute a later search. It follows then that constructive notice of the attachment is not to be imputed to her. And now it only remains for me to declare as the judgment oftha court, based upon a most careful consideration of the proofs, that in no view of the. case pennissible under the evidence is the plaintiff entitled to any relief. .. Let a decree be drawn dismissing the bill, with costs·
.. PHELPS fl. ELLIOT'r
et al. July 10, 1888.
(Circuit Oourt, 8. D. N61JJ York.
1,
VENDOR AND VENDEE-PURCHASE PENDING ApPEAL-MERCANTILE TIEs-BoNDS·.
SECURI-
Where bonds held by a receiver. in a suit to adjudicate the ownership of the fund evid/'lnced by them, are, On dismissal of the complaint, turned onr by him, under order of court. to the defendant, who sells the same to a purchaser having knowledge of the fact that. an appeal has been taken, but without a ,uper,edeas, such purchaser takes subject to the determination of the cause on the appeal.thoughthebond& are of the nature of mercantil!J securities. .
456 2. FRAUD-PLEADING.
FEDE:aAL REPORTER.
a.
Plaintiff, as assignee in bankruptcy of one M., brou,e:ht suit against M. and W. to recover as assets money collected by them on a claim against the United States, alleged to have been fraudulently concealed and transferred to W. for M,'s use. 'The fund was placed with a receiver, and invested in bonds. The complaint was afterwards dismissed on demurrer. and an appeal taken with· out aauperaedeaa. By order of the court, the bonds wete turned over to M.· who sold them to thepresent defendants, who had knowledg-e of all the circumstances. On the' appeal, order dismissing the complaint was reversed. without passing on the merits. The complaint In the present action alleges that the title to the fund was adjudged by tho appellate court to be in plaintiff, and omitted to oharge the grounds of fraud ou the part of M. as set up in the original action. Held, that the adjudication did not have the effeot alleged, ltnd that the oomplaint is defective for want of sufficient allegations of fraud.
LIMITATION 011' ACTIONS-RuNNIN<:l
. Where. in a suit to adjudioate a olaim to a certain fund, the bill was dismissed on det;llurrer. and an appeal was taken. but there being no supersedeas the bonds evidencing the fund were turned over by the receiver under order of court to the defendant therein, who fraudulently. as alleged, sold the same to the present rlefendants, a bill to recover the bonds not brought within six years (the limitation prescribed in such cases by local statute) from the time plaintiff first had knowledge of the sale will be dismissed. though six years had not yet elapsed since the reversal on the appeal of the order in the original cause. A sU,it in equity by an assignee in bankruptcy to recover certain bonds against parties to whom, as alleged, they had been fraudulently transferred by the bankrupt, must, under Rev. St. U. S. § 505'7, be brought within two y:ears from the time of the discovery of the alleged fraudulent transfer. and If it is necessary to raise such a defense by plea it is sufficiently raised by a plea of the 'ordinary bar of six years; that period necessarily including the shorter.
OF
STATUTE·
'" SAME-PLEADING-PLEA OF LON<:lER INCLUDES SHORTER STATUTORY BAR.
In Equity. H. B. Titt/,s, for complainant. WiUiam G. Choate and John Selden, for defendants. WALJ,ACE, J. This cause has been argued for the complainant upon the theory that the bill of complaint sufficiently avers that he, as the assignee in bankruptcy of one McDonald, became entitled to a claim against the United States for cotton destroyed during the war of the Rebellion; that, by fraudulellt concealment and misrepresentation of McDonald, the claim was included among the supposed worthless assets of the bankrupt's estate, and sold as such at a public sale, made by order of the bankrupt court, and was bought by one White for the sum of $20 for McDonald himself, and with money furnished by McDonald; that McDonald obtained an award against the United States for the sum of $197,· 191 in gold, which award he assigned to White; that in September, 1874, the complainant brought an action in the supreme court of the District of Columbia against White and McDonald to restrain them from receiving the sum to be paid upon the award, ,and to ohtain a decree that the fund arising therefrom be adjudged to belong to him; that by certain interlocutory orders or decrees made in the progress of cause one Riggs was appointed a receiver, and came into the possession of 3107,012, part of said fund, and was directed to invest the same in bonds of the District of Columbia, and to hold the fund thus invested subject
457
to the rights of the complainant during the pendency of the suit; that Riggs, as receiver, did invest the sum in such bonds; that the supreme court of the District of Columbia decided the cause adversely to the complainant, but on appeal from the decree to the supreme court of the United States the latter court reversed the decree, and adjudged that the title to the said claim and award was vested in the complainant, (99 U. S. 298;) that during the pendency of the suit McDonald, in fraud of the . rights of the complainant, obtained possession of the bonds from the receiver, and sold and delivered them to the defendant; and that the defendant, at the time of purchasing the bonds, had full ,knowledge of the complainant's rights, of the pendency of the suit, and that the sale to them by McDonald was made with intent to defeat the complainant's rights. The prayer of the bill is, in substance, that it be adjudged that the defendants acquired no title to the bonds, and be required to delivElr them over to complainant, or account for their value. The defendant is one of the surviving members of the banking firm of Rigg$ & Co. Riggs, who was a member, died in 1881. Originally Kieckhoefer, another of the survi\'ing members of that firm, was a party defendant; but he demurred to the bill, the demurrer was sustained, and as to him the bill has been dismissed. The suit was commenced as to the present defendant August 20, 1884. The proofs show. that McDonald was adjudged a bankrupt. by the district court of the United States for the Southern district of Ohio December 10, 1868; that the complainant was appointed assignee, and received, February 12, 1869; an assignment in due form of all the bankrupt's estate; that McDonald, who was a British subject, had at the time a claim against the United States for cotton destroyed by the army, which he was aware was one of strong equity and in respect to which he entertained a hope of ohtaining relief and compensation; that he described it so vaguely in his schedule of assets in the bankruptcy proceeding as to concealits real character from the complainant; that in September, 1869, the complainant petitioned for and obtained an order from the court in bankruptcy to sell all the uncollected accounts belonging to the estate of the bankrupt at public sale, and on or about September 27th sold .them at such sale to one \-Vhite for the sum of $20; that this purchase was made for McDonald; that McDonald was enabled to and did prosecute his claim against the United States before the joint British and American commission· organized under the treaty of May 8, 1871, between the United and Great Britain, as though he had never been divested .of it; that the claim was adjudged to be valid, and the commission awarded him the sum 0[$197,190. to be paid in gold by the government or the United States; that upon learninp; of the award the complainant brought a suit in the supreme court of the District of Columbia against McDonald and White to recover the amount, and to restrain them from collecting it; that one Riggs, a member of the banking firm of Riggs & Co., was appointed a receiver. in that suit, and as such receiver wasdirected to invest $107,012, part of the award which came to his hands, in District of Columbia bonds, and to hold the same thus invested sub-
458
F.EDEllAL, REPORTER.
ject to the 'rights of the parties in the suit; that the receiver did invest in the bonds as directed; that'McDonald and White demurred to the bill filed by the complainant, and the court sustained the demurrer, and dismissed the complainant's bill; and by its decree dirE'cLed that the bonds -"the funds belonging to the oause"-be delivered by the receiver to McDonald and White; that the complainant caused an appeal to be entered in the 'cause, but did not give security or obtain any order suscalled upon the receiver and de·, pending its operation; that manded the bonds; that the receitel' was aware that the appeal had been entered, and being in doubt as' to his duty went to the judge who decided the cause for instructions, ltnd was instructed that his functions were at ltn end, and that it was his duty to deliver the bonds to MeDonaId; that the receiver delivered the bonds, and thereupon McDonald applied to Riggs & Co. to purchase them; that Riggs & Co. were informed of what had taken place in reference to the decree, the appeal, the in-, structions by the judge to the receiver, and, after consulting with the receiver, concluded that McDonald could rightfully sell the bonds, and thereupon, June 28,1875, bought them, paying the full market price ,at which they Were then selling; that the complainant, by hisattomey, had full knowledge of the transaction at the time it took place; that subsequently the appeal taken in the cause was heard by the supreme court of the United States, and that oourt, in May, 1879, ordered by its mandate that {he decree of the court below be reversed, and the cause beremanded for further proceedings iathe court below"in conformity with the opinionj" that afterwards, the complainant filed a supplemental bill in the cause'in the supreme court of the District of Columbia, setting of the bonds by the receiver and the payment of the proforth the thet'oof to 'McDonald and White, and praying for a money decree .against McDonald atld White for the sum received by them; that subse'<luently McDonald was adjudged in contempt for not restoring the fund to thebourt, and a decree pro C(YfIfesso upon the original and supplemental bill was ordered, and July 8, 1880, a final decree was entered in the cause adjudging that MoDonald and White pay the complainant the sum of$58,735.:·, ' The proofs suffioiently show that the purchase by McDonald, in the name of White, 'at the assignee's sale of the claim against the United 'States, and: his subsequent prosecution of the claitn to an award, were acts in consummation of an original fraudulent design to conceal the real character of the claim from the complainant, and appropriate the fruits to himself in fraud of the creditors represented by the oomplainant.The documentary evidence exhibits substantially every fact averred in the bill which was considered. by the supreme court of the .united States upon the demurrer; and as that court held the facts alleged sufficient to establish prima facie the fraudulent character of McDonald's acts, that'charactermust be attributed to them now upon the documentaryevidence. The bill, however, contained aHegations which are not in the present bill, and which were doubtless considered by the court as sufficiently averring a concealment by McDonald of the true value and
PHELPS f1.,
c.
459.
character of pisclairnagairwt the United States from his. assigneein bankruptcy which 'was constructively if not actually fraudulent. It detailed the particulars of the transaction out of which the claim arOlle, and set out-literally the description of the claim as it was inserted by McDonald in his schedule in the bankruptcy proceedings, and thus,by contrasting the real character with the described character of the claim, enabled the court to see that McDonald had not only omitted to give such a description of it as it was his duty to giv\:l his trustee, but had given one which was misleading. In the present bill there is no avermeht of any fraudulent suppression of the character or value of the claim by McDonald which led or was intended to lead the complainant as assignee in bankruptcy to believe that the claim was worthless or of little value, or of any fact from which a fraudulent intention to conceal the real character or value of the claim from the assignee on tbe part of McDonald can be implied. The averment is that the" claim was imperfectly described by said bankrupt in his scheduleof,assets and designated as worthless," without more. There is no averment of lent purchase of the claim by him, or that the title to the claim did not. pass by the sale made by the assignee; nor is there any averment which by any implication is inconsistent with the theory that McDonald purchased the claim, through the instrumentality of White, at the sale of tPe assets, believing it to be one of little or no value, or which suggests any bad faith in the transactiollupon his part. There is no averment that the complainant was misled or deceived by the acts of is nothing in the bill which amounts to a direct assertion tbat the com-. plainant ever had any equitabletitle to theawardexcepttheallegations respecting the adjudication of the supreme court of the United States. The averment in the bill that the supreme cOlirt of the United .states "adjudged that the title to the said claim arid award became vested in the plaintiff as assignee in bankruptcy" is not established. Wha,t was adjudj.!;ed by-that court on appeal from the decree of the court below is found in the mandate of that court. 'fhe mandate remanding the cause for further proceedings in the court below in conformity with the opjnioll is ill the usual fOrm of the adjudications of that court upon the reversal of a: judgment. The opinion contains no directions to the court below to enter an absolute or final decree for the complainant. It instructs the court below that the fucts alleged in the bill, and admitted by the. demurrer, were sufficient to entitle the complainant to the relief sought by his bill. Not oIlly is there nothing in it, direc,Uy or by implication, to preclude the court below from allowing the defendants to answer the bill in conformity with the practice prescribed by the thirty-fourth. equity rule,butit distinctly states that the facts of the case as presented by the demurrer" may come again before the lower cOlIft, and perhaps before this court, upon the answers of the appellees and the t(lstimony adduced by the parties," and that it is the porpose of the court.to.leave both courts free to decide the case upon the merits "unfettered by anything contained in thi", opinion." The court merely adjudged that 'the demurrer of the defendants was bad in law·. Its judgme,nt w8.sip no
460
FEDERAL REPORTER.
sense an adjudication upon the merits that the complainant ever was the equitable owner of the award. If. when Riggs & Co. purchased the bonds in suit, the was the equitable owner of the award, and as such had an equitable title :1ted to the bonds which were in the hands of the receiver, and repres the fUnd in litigation between the complainant and McDonald and White, it is plain that their purchase could not divest his title. There is no evidence that either member of the firm had any notice of the supposed equities of the bomplainant Qeyond the fact that he had brought the suit which had been decided against him, and except as they are afJected by the consequences of this information they acted in entire good faith in purchasing the bonds. But they had sufficient notice to put them upon inquiry as to his rights; and, consequently, knowledge is to be imputed to them of all the facts to which such inquiry might have led. They doubtless believed that the decree of the supreme court of the invalidity of the complainant's the District of Columbia claim to the fund, but they WElre not justified in reposing upon that belief, especially when they knew that an appeal had been taken from the decree. No decree that is not final between the parties is a protection to one purchasing with notice of the pendency of the suit, unless perhaps in cases where a sufficient interval has elapsed since its rendition to justify the belief that the successful party has abandoned his claim, or does not mean to press it further. The general principle that a purchaser under a decree is unaffected by error in the decree, and has a right to presume that the court has properly investigated and adjudged the rights of the parties, is well settled; and although the judgment or decree may be reversed, yet all the rights acquired at a judicial sale, while it was in full force, and which it authorized, will be protected. Voorhees v. Bank, 10 Pet. 449; Grignon's Lessee v. Astor, 2 How. 319; Gray v. Brignardello, 1 Wall. 634; McGoon v. Scales, 9 Wall. 23; Davis v. Gaines, lCi4 U. S. 386. But this principle only applies to sales made under and by the decree. Ludlow v. Kidd, 3 Ohio, 5'50. Except as to such purcl18sers the rule is that all.persons who rely on appealable decisions must take the risk of the ultimate decision. Thomas v. Town oj Lansing, 14 Fed. Rep. 627; Debell v. Foxworthy, 9 B. Mon. 228; Watson v. Wilson. 2 Dana, 406; Norton v. Birge, 35 Conn. 261; Gilman v. Ham-. ilton, 16 Ill. 225. could Riggs & Co. acquire any title by their pur-· chase as against the equities of the complainant by reason of the circumet.ance that their purchase was of securities having the character of commercial paper. Their liabiiity does not rest merely upon the doctrine of liB pendens: That doctrine is one branch of the law of constructive n'otice, and is fqunded upon the theory that it is necessary to the administration of justice that the purchaser of a title (luring tpe prosecution of a suit to enforce an adverse title be charged with notice, although he has no actual notice of its pendency. Murray v. Ballou, 1 Johns. Ch. 566; Murray v. FiMter, 2 Johns. Ch. 155; Heatley v.Finster, rd. 158; Bellamy v. Sabine, 1 De Gex & J. 566. If Riggs & Co. had been merely pllrchasers pendimte lite they could invoke the authorities which hold that
PHEr,ps tI. ELLIOTT.
461
the doctrine of lis pendens cannot be extended to a purchase of commercial paper not due. County of Warren v. Marcy, 97 D.. S. 96. But as they had actual notice of facts which impeached the validity of their purqhase, their rights as purchasers of commercial paper before maturity would be subordinate to the complainant's equities. Scotland Co. v. Hill, 112 D. S. 185, 5 Sup. Ct. Rep. 93; Jeffres v. Cochrane, 48 N. Y. 671. More imperative notice could not be established than is shown by their knowlerlge of the pending suit to recover the fund represented by the bonds. Nor can Riggs & Co. justify their purchase of the bonds upon the theory thatthe receiver who delivered them to McDonald pursuant to the decree directing him to do so was justified in that act. It was the duty of the receiver to obey the decree of the court and deliver over the bonds to McDonald and White, notwithstanding he was aware that an appeal had been taken from the decree. This was determined in Heney v.Mc,D'op,ald, 109 D. S. 150, 3 Sup. Ct. Rep. 136, where it was held that, under the rules and practice of the supreme court of the District of Columbia 1 the force of the decree was not affected by the appeal, no supersedea8 or order suspending its efJect having been obtained, and that it wasthecluty of the receiver to deliver over the fund. This decision, however,does not countenance the position that Riggs & Co., or the receiver himself, could rightfully acquire a title to the bonds as against the complainant by a purchase from the person to whom they had been delivered. . Although the facts proved establish the complainant's equitable title to the bonds at the time when they were purchased by Riggs & Co., it is doubtful whether under his bill of complaint he can avail himself of these facts. The bill proceeds upon the theory that his title inures by the adjudication of the supreme court of the United States that the title to the award was vested in him. As has been stated, that court did not make any such adjudication, and it follows, now that the averment of the hill is shown to be untrue, that the case must be treated as though that averment was not in the bill. There is no 6ther averment of title, and no facts are set fort,h from which an equitable title can be deduced. The rule is fundamental in equity pleading that every fact essential to. the complainant's title to maintain the bill and obtain the relief must be stated in the bill, otherwise the defect will be fatal. In the llinguage of the court, in Harrison v. Nixon, 9 Pet. 483, 503, "every bill must contain in itself sufficient matter of fact, per 8e, to maintain the case of the plaintiff. The proofs must be according to the allegations of the parties; and if the proofs go to matters not within the the court cannot judicially act upon them as a ground for decision, for the pleadings do not put them in contestation." The aUegatta and the probata, 111Ust reciprocally meet and conform to each other. A party can no more succeed upon a case proved but not alleged than upon a case alleged but not proved. F08ter V. Goddard, 1 Black, 518; Boone v. Chif.e8, 10 Pet. 177. A decree must be sustained by the allegations of the parties as well as the proofs in the cause, and cannot be founded on a fad not put in issue in the pleadings. Carneal v. Bank8, 10 Wheat. 18i. If this difficulty in the way of the complainant's case can he met,
FEpERM REPORTER.
there Which are insuperable. The defendant relies upon the statute 'Of liniibitions, and has set up ,this defense inhis answer. By the statutes of this' state, actions like tne present are barred if not brought within a period of six years arterthe cause of action matures, but the cause of action is not to be dee,ni¢d to have accrued until the discovery by the aggrieved party of the' facts constituting the fraud. The complainant's callse of action accrued in June, 1875. He was cognizant at that time of all the facts respJecting ,the purchase of the bonds by Riggs & Co. The acquired at the time by his attorney is to be imputed to hill'1.. He aid not bring this suit until,June, 1884. Although local statutes limitil1g the time fqr the commencement of suits cannot ex proprio Vigore Qontrol the decisions of the federal courts when exercising equitable jurisdictiqn, they furnish a guide and rule by which these courts may deterinine whether a party has exercised proper diligence in pmsecuting his cause of action. Courts of equity apply such statutes by fl,118J.ogy, arid aaopt the time prescribed by them as a fit and just period for a bar in equity of analogous .claims. In Burke v. Smith, 16 Wall. 401, where the state statute barred actions for fraud alter six years, thecolirt said: . ,"We think a court of equity will not be moved to set aside a fraudulent transaction at the suit of one who.hasbeen quiescent during the period longer than that fixed by the statute of liinitaUons after he has knowle(!ge of the fr;\l1d. or after he is put upon inquiry with the means of knowledge accessible to him."
It is complainant was ,not in a position to assert his cause of action successfully against the defendant until May, 1879, when ihe decree of the supreme court of the District of Columbia was reversed; but his millfor,tune ought not to deprive the defendant of the right to insist that the validity of his purchase, if assailed, be assailed within the time for bringing such transactions in question by statordinarily utes. of limitation and prescribed by the statute of the state in which he issued. Especially is this so in view of the fact that in 1881 the firm Qf Riggs & Co. was dissolved by the death of Riggs, and before the suit was brougM the assets were fully collected and distributed among the coand. By the bankrupt act (Rev. St. U.,S. § 5057) it was the duty of the comvlaipantto bring his a9tion within two years after his causeof action accrued. It }Vas held in Bailey v. Glover, 21 Wa.ll. 342, that the bar by statute does not begin to run in cases of fraud until the discovery J.)f the fraud. To quote the language of the court in that case: hlU!l said to tl:Je assignee. You shall commence no 8uititwo years after the caus.e of action has accrued. to YOIl. nor shall you be harassed by suit when the cause of acthm hilS accrued more than two years against you. Within that time the estate ought to be nearl,\' settled up and. functions discha.·ged, and we close the door to 1111 litigations not commenced before it has elapsed; .. . . The position has delayed more five years after he was in a ass.ert his claim against the defendant before at-
. SOWLES 'V. WITTERS.
tempting to do so, and in the mean time one of the members of the finn of Riggs & Co. has died. This statute is by its terms obligatory upon courts of equity. Its language is: "No suit at law or in equity shall be maintainable in allY court .. * * * unless brought within two years," etc. It is not altogether clear that a court of equity, when the proofs show that the action has not been brought within the time prescribed by a statute which is addressed· to the court, ought not to dismiss the bill, although the defense has not been taken in the pleadings. In Bailey v. Glover, the defense was raised by demurrer, and the court treated the question as properly raised in that way. The defendant has not set up in terms the two-year limitation by plea or answer, but his answer al.leges that the complainant had full knowledge of the purchase. of the bonds by Riggs & Co. at the time they were purchased, and thatthe caUSe of action did not accrue within six years prior to the commencement of . the sliit. Upon the authority of Bogardus v. Ohurch,4 Paige, 178, and Van Hook v. Whitlock, 7 Paige, 37.3, the answer is sufficient to enable the defendant to avail himself of the statute. In the latter case Chancellor WALwonTH said: "The allegation in the answerthat the complainant's right of action, if any, had not accrued within six years, necessarily covered the shorter period of three years limited by this clause of the 6th section of the statute." So, here, the allegation that the cause of action did not accrue withi'n six years necessarily includes the statement that it did not accrue within two years. . As the pleadings put in contestation every fact necessary to enable the court to decide whether the action was brought within the 'propertirlie, there seemsilp be no reason why the defense should not be .considered. That the statute ·applies to a:case like the present 'Was decidedbythis'eourt when this cause was here on the demurrer of KieckThe bill hoefer, (29 Fed. Rep. 53,) and is plliin upon the is dismissed.
SOWLES
et 01. '11.
WrrrERS.
(Oirc'Uit Oo'Urt,D. Vermont. EvroJllNCE.....CONCLUSIVENEss-TBUIlTS.
July 9,1888.)
In an. actipn,against the receiver oJ a bank, for d.ivldends upon a debt for a deposit in tbe nanle of "S., trustee." the mere general statement of S. that the . ·money depollited was his daughter's, in connection with evidence tbat she owned propel,'ty of. which he had the .management, and from which deposited might have been derived, it not being shown that it was derived therefroM, is not sufficient to enable the daughtel,'to recover.
E. A. Sowles, for orators. O. w. Witter8, for defendant· . LACO"tllBE,
St. Albans.
J. The defendant is receiver of the First National Bank of When that institution closed its doors
on April 8, 1884,