Jenkins v. International Bank of Chicago/Opinion of the Court

This is a writ of error to the supreme court of Illinois. In the course of a complicated litigation between Samuel J. Walker and his creditors, it became a question whether the International Bank, which was a party to the litigation, had a just and paramount right to certain securities held by it as collateral to debts due by him to the bank. These were promissory notes, secured by mortgage on real estate. In the progress of the case the bank filed its cross-bill, alleging that they held the notes and mortgage not only as security for the specific loan made on them at the time they were received, but for a large balance due to the bank from Walker, and praying for a decree for this balance. Walker denied this, and asserted that by reason of usury he had overpaid the bank, which was indebted to him. The result was a decree in favor of the bank, finding the amount due on the collateral notes to be $23,116.66; amount due on Walker's three principal notes to the bank, $17,092.86; and the amount due on the entire indebtedness of Walker to the bank, $172,474; and that the sum to be realized from the collaterals should be first applied on the three notes aforesaid, amounting to $17,092.76, and the remainder on the general balance due the bank.

This decree was rendered on the twenty-fifth day of April, 1878. Shortly afterwards Walker was adjudged to be a bankrupt, and Robert E. Jenkins, the plaintiff in error here, became his assignee. On March 5, 1881, he sued out a writ of error from the court of appeals for the first district of Illinois, on which this decree was reversed, and the bank having removed the case to the supreme court of the state, the decree of the court of appeals was reversed, on the ground that Jenkins, the assignee, had not brought his writ within the two years allowed to him by the bankrupt law. He brings the case to this court by writ of error to the supreme court of Illinois, in which the only question that we can consider is the correctness of the ruling of that court on that point.

Without searching the record for the precise date at which Jenkins became assignee of Walker, and as such had authority to assert his rights, it is conceded that it was more than two years prior to any movement of his to bring the decree of the circuit court of Cook county before the appellate court. The question was raised in the argument of the case, in the supreme court of Illinois whether the writ of error sued out by Jenkins from the court of appeals was the beginning of a suit, or was so far a mere continuance of the former suit that the language of the act of congress did not apply. That court held, in accordance with its own previous decisions, that a writ of error was the beginning of a new suit, and as this was a question concerning the nature and effect of a writ error in their own courts, it would seem that it is not reviewable here, or, if so, we should follow the decisions of that court on the subject. We are, however, satisfied that, within the meaning of the limitation clause of the bankrupt law, this first appearance of the assignee, more than two years after the decree of the court, and the termination of the litigation between Walker and the bank, is a suit brought by him after that time.

There remains, however, the question, mainly argued before us, whether the suit thus commenced between the assignee of Walker and the bank was one involving an adverse interest touching any property or rights of property transferable to or vested in the assignee. We can see but little reason to doubt that, so far as the controversy related to the right to the collateral securities resting on the mortgage, it was a suit touching adverse interests to property; the property being the notes, and the equitable interests in the real estate mortgaged to secure them, and the adverse claims being that coming to Jenkins as assignee of Walker, and the claim of the bank. But in that decree there was an adjudication against Walker of a debt to the bank of more than $150,000 after these collaterals had been applied in payment of the debt thus established, and this decree would be evidence, whether conclusive or not, of the right of the bank to share in the dividends of the bankrupt's estate. So that, apart from the collaterals, here was a decree for money which the assignee was interested in reversing if he came in time. We must, therefore, inquire whether, as to this personal judgment, the assignee is barred by the limitation of the bankrupt law. This question is one which has received the consideration of many of the courts of bankruptcy in this country, but with no unanimity in the result, and its solution depends upon the construction of section 5057 of Revised Statutes. It reads thus:

'No suit, either at law or in equity, shall be maintainable     in any court between an assignee in bankruptcy and a person      claiming an 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      of action accrued for or against such assignee. And this     provision shall not in any case revive a right of action      barred at the time an assignee is appointed.'

It is asserted by appellants that this limitation can have no application to a case where an assignee is suing to recover on a simple debt or other money obligation, and as the sentence stands in this section there is plausibility in the argument.

It is, however, true, in one sense, that debts are property, and this sense of the word is coming more into use in legislation every day. If it be permissible to hold that it was so used in this act, then the interest of the assignee in the debts due to the bankrupt is an interest adverse to the parties who have to be sued on them before they will pay, and the debts claimed to be due by the bankrupt are matters in which the interest and the duty of the assignee, when they come into contest, are adverse to the creditor. If a debt secured by a mortgage raises, as it unquestionably does when a suit is brought to foreclose it, an interest adverse to the mortgagor, or to some purchaser from him of the equity of redemption, it would be a strange construction which requires the assignee to bring his foreclosure suit to enforce a debt, well secured, within the two years, while as to a simple note, unsecured, he can sue at any time, unless barred by the statute of the state. No reason can be seen for such a discrimination.

Assuming that there is some ambiguity in section 5057, as we find it in the Revised Statutes, we may be permitted to examine the connection in which it stood in the original bankrupt act. On reference to that it will be found that it was a part of the second section of that act-the one which conferred upon and defined the jurisdiction of the circuit courts in bankruptcy cases. The part of the section pertinent to the matter in hand is this:

'Said circuit courts shall also have concurrent jurisdiction     with the district courts of the same district of all suits,      at law or in equity, which may or shall be brought by the      assignee in bankruptcy, claiming an adverse interest, or by      such person against said assignee, touching any property or      rights of property of said bankrupt transferable to or vested      in such 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      after the cause of action shall have accrued for or against such assignee:      provided, that nothing herein contained shall revive a right      of action barred at the time such assignee is appointed.'

We are not aware that it has ever been held that this section did not confer upon the assignee the right to bring a suit, whether it was at law or in equity, to recover a debt or other moneyed obligation in the circuit court of the district. If any such doubt was ever entertained, it was put at rest by the third section of the act of June 22, 1874, which was an act amending the bankrupt law of 1867 in many particulars. This section declares that after the words 'adverse interests,' in line 12 of the section we have quoted, should be inserted, 'or owing any debt to such bankrupt,' thereby making it clear that the jurisdiction did extend to the collection of debts owing to the bankrupt. The limitation clause of the section, however, needed no amendment, for it applied to all suits brought in any court, federal or state, by or against the assignee; and using the word 'or' distributively, it applied to all suits touching an interest in property transferable to the assignee, no difference who was the suitor. The reason of this is that there might be suits brought concerning property or rights of property vested in the assignee, in which he was not a necessary party, as ejectment against his tenant, or foreclosure of liens paramount to his, to which the plaintiff did not choose to make him a party. It was intended to say that in any such case, in any court where the suit touched property or rights to property of the bankrupt passing to the assignee, it would be a good defense that it was not brought within two years after the right of action accrued. This construction is consistent with the language of the original statute, and with the policy of it as declared by this court in Glover v. Bailey, 21 Wall. 342, and repeated in numerous cases since.

'It is obviously one of the purposes of the bankrupt law,'     says the court, that there should be a speedy disposition of      the bankrupt's assets. This is only second in importance to     securing equality of distribution. The act is filled with     provisions for quick and summary disposal of questions      arising in the progress of the case, without regard to usual modes of      trial attended by some necessary delay. Appeals in some     instances must be taken within 10 days.'

To prevent the estate being wasted in litigation and delay, 'congress has said to the assignee, you shall begin no suit two years after the cause of action has accrued to you, nor shall you be harassed by suits when the cause of action has accrued more than two years against you. Within that time the estate ought to be settled up and your functions discharged, and we close the door to all litigation not commenced before it has elapsed.'

The language of the Revision in section 5057, though slightly varied from that of the original act, was not intended to give a different meaning. As it is susceptible of the interpretation that no suit shall be brought by or against the assignee, or by or against any person, touching an adverse interest in property transferred to him by the assignment, which is clearly the meaning of the original act, this latter construction must be given to the section under consideration.

The judgment of the supreme court of Illinois is affirmed in this case, and also in the three other cases between Jenkins and the bank and other parties, which depend on the same question.