U.S.

Rosenthal v. Walker
111 U.S. 185 (1884) • 4 S. Ct. 382
Decided Mar 31, 1884

IN ERROR TO THE CIRCUIT COURT OF THE rule respecting the statute of limitations laid down
UNITED STATES FOR THE DISTRICT OF in Bailey v. Glover, 21 Wall. 342, and affirmed in
LOUISIANA. this case.

Argued March 21st, 1884. Decided March 31st, Mr. Shellabarger for plaintiff in error.
1884.
Mr. Chester H. Krum and Mr. E.H. Lewis for
Bankruptcy — Statute of Limitations — Evidence. defendant in error.
Where an action by an assignee in bankruptcy is
intended to obtain redress against a fraud This was an action brought by the assignee of a
concealed by the party, or which from its nature bankrupt to recover the value of property alleged
remains secret, the bar of the statute of limitations, to have been fraudulently transferred by the
Rev. Stat. § 5057, does not begin to run until the bankrupt in violation of the provisions of the
fraud is discovered. Bailey v. Glover, 21 Wall. bankrupt act. The defendant below resisted the
342, cited and affirmed. Wood v. Carpenter, 101 186 recovery *186 on the ground that the action was
U.S. 135, and National Bank v. Carpenter, 101 not brought within two years from the time when
U.S. 567, distinguished. It is competent, as the cause accrued; and also on the merits. The
tending to prove a fraudulent transfer of property plaintiff below replied as to the statute of
in contemplation of bankruptcy, to show a prior limitations that the facts were fraudulently
valid sale from the bankrupt to the same party, if it concealed, and that the suit was brought within
can be connected with evidence tending to show a two years after they came to his knowledge. Some
secret agreement by which the bankrupt acquired exceptions were taken to the rulings of the court
an interest in the goods sold. Evidence that a letter on the admission of evidence, all of which more
properly directed was put in the post office is fully appear in the opinion of the court. Verdict for
admissible to show presumptively that the letter the plaintiff. The defendant sued out this writ of
reached its destination; and if the party to whom error.
the letter was addressed denies its receipt, it is for
the jury to determine the weight of the MR. JUSTICE WOODS delivered the opinion of
presumption. Proof that a bankrupt when being the court.
examined respecting his property refuses to
answer questions on the ground that the answers This was an action at law brought December 30th,
might criminate him, as an indictment was 1879, by Preston Player, as assignee in bankruptcy
pending against him for a criminal offence, under of Thomas Carney, against the plaintiff in error,
the bankrupt laws, does not so put the assignee on Joseph Rosenthal, under section 5047 of the
inquiry as to fraudulent transfers of the bankrupt's Revised Statutes, which authorizes an assignee in
property as to deprive him of the benefit of the bankruptcy to recover by suit in his own name all
the estate, debts and effects of the bankrupt. The

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 Rosenthal v. Walker 111 U.S. 185 (1884)

suit was brought to recover from Rosenthal certain Rosenthal well knew, made to him certain
money paid and property sold to him by Carney in payments of money, amounting in the aggregate to
fraud, as was alleged, of the bankrupt act. A $30,000.
petition in involuntary bankruptcy had been filed
The petition then made the following averment:
against Carney by his creditors, October 20th,
1875. He was adjudicated a bankrupt March 18th, "The plaintiff states that both the said Carney and
1876, by the District Court for the Eastern District the defendant kept concealed from him, the said
of Missouri, and on May 1st, 1876, Player, the plaintiff, the fact of the said payment and transfer
defendant in error, was appointed assignee of the of the said aggregate sum of $30,000, hereinbefore
estate. The petition having averred the foregoing mentioned, and of all the component parts thereof;
facts, alleged that Carney, being insolvent and in and also kept concealed from him the fact of the
contemplation of insolvency, as Rosenthal had sale, transfer, and conveyance of the said goods
reasonable cause to believe, on June 22d 1875, and merchandise hereinafter set forth, and that he,
with intent to defeat the operation of the bankrupt the said plaintiff, did not obtain knowledge and
law, and to evade its provisions, as Rosenthal well information of the said matters, or either of them,
knew, sold and transferred to him five hundred until the 29th day of November, 1879, and then for
cases containing 50,000 pairs of boots and shoes the first time the said matters were disclosed to
of the value of $45,000, and that on July 20th, him and brought to his knowledge."
following, to make effectual the fraudulent
Rosenthal excepted to the petition on two grounds:
transfer, Rosenthal agreed that Carney should have
First, because as appeared on its face, the suit was
187 an equal interest with him in the goods so *187
not brought within two years from the time when
sold and transferred, and accordingly recognized
the cause of action accrued; and, second, because
and admitted such interest. The petition also
the said sale of boots and shoes, alleged to have
averred that Carney, being insolvent and in
been made by Carney to Rosenthal on June 22d
contemplation of insolvency, as Rosenthal had
188 1875, *188 was not made within three months next
reasonable cause to believe, and with intent to
before the filing of the petition in bankruptcy
hinder the operation of the bankrupt law, and
against Carney.
evade its provisions, as Rosenthal well knew, on
July 22d 1875, sold and transferred to him one The court overruled the first exception absolutely,
hundred barrels of whiskey, c., of the value of and ordered that the second exception
$9,400, and Carney also stipulated that he should
retain an interest in the whiskey equal with that of "be dismissed so as not to prejudice the right of
Rosenthal, who then and there recognized said plaintiff to prove any of the transactions alleged in
interest accordingly, and that Rosenthal, between said petition to have taken place on the 20th day of
July 20th, 1875, and March 1st, 1876, disposed of July, 1875, and within three months next before
and converted to his own use all the property so the institution of proceedings in bankruptcy
sold and transferred to him. against the bankrupt, Thomas Carney, and
maintaining said ground of exception only so far
The petition further alleged that Carney, between as relates to the transfer and sale of five hundred
July 20th, and August 23d 1875, inclusive, being cases of boots and shoes, alleged to have been
insolvent and in contemplation of insolvency, as made on the 22d day of June, 1875. But the
Rosenthal had reasonable cause to believe, and plaintiff shall have the right to prove, as by him
with the purpose of defeating the object and alleged, that subsequently to 22d June, 1875, the
hindering the operation of the bankrupt law, as bankrupt, by agreement with defendant, was

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 Rosenthal v. Walker 111 U.S. 185 (1884)

reinvested with an interest in said goods, and having died after the judgment in the Circuit
thereafter, within three months, the goods were Court, W.R. Walker was appointed assignee and
disposed of as alleged." substituted as defendant in error in his stead.

On March 3d 1880, Rosenthal filed his answer, The petition disclosed upon its face that the suit
which was a general denial of all the averments of was brought more than four years after the cause
the petition. On December 7th following, after the of action arose, and more than three years after the
trial had commenced, he filed the following plea appointment of the defendant in error as assignee.
and supplemental answer: Section 5057 of the Revised Statutes provides as
follows:
"Now comes the defendant and pleads the
prescription of two years, as provided for in the "No suit, either at law or in equity, shall be
bankruptcy act, sec. 5057, of the Revised Statutes maintainable in any court between an assignee in
of the United States, in bar of plaintiff's action. bankruptcy and a person claiming an adverse
interest touching any property or rights of property
"And for supplemental answer to petition of
transferable to or vested in such assignee, unless
plaintiff, defendant specially denies that the
brought within two years from the time when the
matters and things alleged in plaintiff's petition
cause of action accrued for or against the assignee.
were first disclosed to him on November 29th,
And this provision shall not in any case revive a
1879, as alleged; but avers that said plaintiff had
right of action barred at the time when the
full knowledge of all transactions that ever took
assignee is appointed."
place between the defendant and Carney,
bankrupt, at the time said plaintiff was elected The first question raised by the assignments of
assignee." error is, whether the averments of the petition
excuse the failure to bring the suit within two
On the motion of the plaintiff the supplemental
years after the cause of action accrued to the
answer was stricken out, and the defendant
defendant in error. These averments are in
excepted, but, as the record shows,
substance that Carney, the bankrupt, and
"During the trial of the cause no restraint was put Rosenthal, the plaintiff in error, kept concealed
upon the defendant in offering evidence as to the from the defendant in error the payments of
knowledge of plaintiff, as alleged in that part of money and transfers of property charged in the
the supplemental answer which was stricken out, petition, and that the defendant in error did not
and both sides offered evidence as to such obtain information of said matter until November
189 knowledge, *189 and the court, upon this point, 29th, 1879, when for the first time they were
left it to the jury to say whether the action was disclosed to him and brought to his knowledge.
commenced within two years from the time when
The judgment of the Circuit Court, by which it
the plaintiff knew, or by due diligence might have
190 was held *190 that these averments excused the
known, of the cause of action."
failure to bring the suit within two years after the
The pleadings having been thus made up, the cause of action accrued, is sustained by the
issues of fact were submitted to a jury, which opinion and decree of this court in the case of
returned a verdict for the plaintiff for $17,500, on Bailey v. Glover, 21 Wall. 342. That case was a
which the court rendered judgment against the bill in equity filed by the complainant as assignee
defendant. To reverse that judgment this writ of in bankruptcy of Glover, one of the defendants, to
error is prosecuted. Player, the original assignee, set aside a conveyance made by him of his
property to defraud his creditors. The suit was
brought more than two years after the appointment

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 Rosenthal v. Walker 111 U.S. 185 (1884)

of the assignee. To excuse the delay and take the doubted or qualified. Wood v. Bailey, 21 Wall.
case out of the operation of the statute, the 640; Wiswall v. Campbell, 93 U.S. 347; Gifford v.
following averment was made: the bankrupt and Helms, 98 U.S. 248; Upton v. McLaughlin, 105
the other defendants, to whom he had conveyed U.S. 640. We are of opinion, therefore, that the
his property, "kept secret their fraudulent acts and assignment of error under consideration is not well
endeavored to conceal them both from the founded.
knowledge of the assignee and his one creditor,
The next complaint of the plaintiff in error is, that
whereby both were prevented from obtaining any
after the Circuit Court had struck out of the
sufficient knowledge or information thereof until
petition the averments relating to the sale on June
within the last two years, and that even up to the
22d 1875, of 500 cases of boots and shoes, by
present time they had not been able to obtain full
Carney to the plaintiff in error, the court admitted,
and particular information as to the fraudulent
in spite of the objection of the latter, the
disposition made by the bankrupt of a large part of
depositions of Louis Temm and other witnesses,
his property." The court held that "as the bill
which related solely to that sale. The contention is
contained a distinct allegation that the defendants
that this evidence, relating as it did to a sale that
kept secret and concealed from the parties
was perfectly valid and the averments concerning
interested the fraud which was sought to be
which had been stricken from the petition, was
redressed," the case was not subject to the bar of
immaterial and tended to mislead and confuse the
the statute. The court added: "To hold that by
jury to the injury of the plaintiff in error.
concealing a fraud, or by committing a fraud in a
manner that it concealed itself until such time as The bill of exceptions shows that the court, in
the party committing the fraud could plead the overruling the objection to the admission of this
statute of limitations to protect it, is to make the evidence stated, that "the facts and circumstances
law which was designed to prevent fraud the surrounding the case should be submitted to the
means by which it is made successful and secure." jury; and the facts of the sale on June 22d 1875,
The court also declared that the exception to the and its circumstances, were allowed to be proved
bar of the statute was applicable to suits at law as on the representation of counsel that said evidence
well as in equity. was to be followed up by testimony showing a
subsequent investment of an interest in said goods
The case of Bailey v. Glover is a decision
in the bankrupt by agreement with defendant."
construing the statute which is relied on in this
case, and unless subsequently overruled by this In accordance with this representation of counsel,
court is conclusive of the point under discussion. proof tending to show that on July 1st, 1875, the
It has never been overruled. The plaintiff in error bankrupt, by a secret agreement with the plaintiff
relies on the case of Wood v. Carpenter, 101 U.S. in error, acquired title to a half interest in the
135, and National Bank v. Carpenter, Id. 567. The goods sold to the latter on June 22d preceding,
first was an action at law, the second a suit in was offered by the defendant in error and
equity. The court in both cases was called on to admitted.
191 construe a statute of limitations of the State *191
We think the court was right in admitting the
of Indiana, and it followed the adjudications of the
depositions relating to the sale of June 22d.
Supreme Court of that State upon the same statute.
Besides the charge made in the petition of the
Neither case refers to the opinion of the court in
fraudulent sale of goods on June 22d 1875, there
Bailey v. Glover, or can be held to overrule or
was an averment of another sale by the bankrupt
modify it. The case of Bailey v. Glover has been
192 to *192 Carney of other goods of the value of
often cited by this court, but has never been
$9,400 on July 22d 1875, and within three months

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 Rosenthal v. Walker 111 U.S. 185 (1884)

next before the proceedings in bankruptcy. It was Louis, and which he testified he had received
averred that this sale was made by Carney in through the mails. These letters having been
contemplation of insolvency, and that the plaintiff admitted in evidence, Carney produced certain
in error had reasonable cause to believe such to be 193 letter-press *193 copies of letters which he testified
the fact. To establish these propositions it was he had written to the plaintiff in error, and mailed
perfectly competent to show what had been the with his own hand in the post office at St. Louis,
business dealings between Carney and the plaintiff postage prepaid, directed to the plaintiff in error at
in error before the sale in question. Thus, to prove New Orleans, and to his proper address in that
that plaintiff in error had reasonable cause to city.
believe that the sale made to him by Carney on
The record also shows that in response to a
July 22d was in contemplation of insolvency, it
subpœna duces tecum the plaintiff in error swore
was competent to show that on June 22d, just one
that he never received the letters addressed to him
month before, Carney had made another sale to
by Carney.
the plaintiff in error of fifty thousand boots and
shoes worth $45,000; and then within eight days Upon this state of the evidence, the defendant in
thereafter, by a secret agreement, had reinvested error offered to read to the jury the letter-press
Carney with the ownership of one-half the copies of the letters which Carney swore he had
property so sold. mailed to the plaintiff in error. They were objected
to, but were admitted by the court in spite of the
Evidence tending to establish both these facts was
objection. This action of the court is now urged as
produced and submitted to the jury. It clearly
a ground for reversing the judgment.
tended to show that Carney was trying to cover up
his property from his creditors, and that plaintiff in We think the copies were properly admitted in
error was aiding him to do it, and that when evidence. The point in dispute between the parties
Carney made the subsequent sale to the plaintiff in was whether the original letters had been received
error on July 22d, the latter had reasonable cause by the plaintiff in error. One of the letters from the
to believe that it was made in contemplation of plaintiff in error to Carney is clearly in answer to
insolvency. The evidence objected to was, two of the letters which Carney swears he mailed
therefore, proof of one of two facts, which, taken to him, and is proof that those letters were
together, tended to establish a material and received by him. Independently of this fact, the
necessary averment of the petition, and was, proof that the letters were received by the plaintiff
therefore, properly admitted. in error was prima facie sufficient, and the court
properly allowed the copies to go to the jury,
The next assignment of error relates to the
leaving them to decide, on all the evidence,
admission in evidence by the Circuit Court of
whether the originals had been received.
certain letter-press copies of letters written by
Carney to the plaintiff in error. The rule is well settled that if a letter properly
directed is proved to have been either put into the
The record shows that Carney testified that, while
post office or delivered to the postman, it is
he was in St. Louis and the plaintiff in error in
presumed, from the known course of business in
New Orleans, they were corresponding with each
the post office department, that it reached its
other; that several letters were written by each to
destination at the regular time, and was received
the other, and were received by each from the
by the person to whom it was addressed.
other; that Carney, having so testified, produced
Saunderson v. Judge, 2 H. Bl. 509; Woodcock v.
two letters purporting to have been addressed by
Houldsworth, 16 M. W. 124; Dunlop v. Higgins, 1
the plaintiff in error, in New Orleans, to him at St.
H.L. Cas. 381; Callan v. Gaylord, 3 Watts. 321;

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 Rosenthal v. Walker 111 U.S. 185 (1884)

Starr v. Torrey, 2 Zabr. 190; Tanner v. Hughes, 53 that his answers might criminate him, as there was
Penn. St. 289; Howard v. Daly, 61 N.Y. 362; an indictment for a criminal offence under the
Huntley v. Whittier, 105 Mass. 391. As was said bankrupt laws of the United States then pending
by Gray, J., in the case last cited, "the presumption against him; that thereupon said examination
so arising is not a conclusive presumption of law, ceased, and defendant in error took no further
but a mere inference of fact founded on the steps to compel said bankrupt to answer, because
probability that the officers of the government will he thought it would be better not to press him at
do their duty and the usual course of business, that time, and the defendant in error did not again
194 *194 and when it is opposed by evidence that the examine the bankrupt until November, 1879.
letters never were received, must be weighed with
The plaintiff in error contends that upon this
all the other circumstances of the case, by the jury
195 evidence the *195 court should have charged the
in determining the question whether the letters
jury, as he requested it to do, that the knowledge,
were actually received or not."
in 1876, on the part of the assignee, that the
The presumption that a letter was received is bankrupt had refused to answer proper questions,
based on such considerations that it is perfectly relating to his property and effects, when under an
clear that it applies without regard to the contents examination authorized by law, on the ground that
of the letter. The contention, therefore, of counsel his answers might criminate him, and the
for plaintiff in error that the presumption fails knowledge of the fact that the bankrupt was under
when the contents of the letter would, if the letter indictment for an offence committed against the
were received, tend to subject the party sending it provisions of the bankrupt law, created such a
to a penalty or forfeiture, is not well founded. state of affairs as put the assignee on inquiry in
relation to the alleged fraudulent sales; that, being
The rule and the authorities cited in support of it
put on inquiry in 1876, he must be presumed to
sustain the action of the court in admitting in
have known all that he could have found out by
evidence the copies of the letters, and in
due diligence, and that it followed as matter of law
submitting to the jury the question whether the
that he had knowledge of the fraudulent sales, and
letters had been received to be decided upon all
that there was therefore no concealment, such as
the testimony bearing upon the point.
would take the case out of the bar of the statutes.
The next assignment of error relates to the charge
The question raised by the pleadings, to be
given by the court to the jury, and its refusal to
decided by the jury, was, whether the cause of
charge as requested by the plaintiff in error.
action had been fraudulently concealed from the
It appears from the record that Player, the original defendant in error. The concealment was averred
assignee in bankruptcy of Carney, was sworn on by the petition and denied by the answer. The
the trial as a witness in his own behalf. He charge which the court was asked to give the jury
testified that he was an attorney; that he had been assumed that the only evidence on this point was
one of the solicitors of the creditors of Carney in that relied on by the plaintiff in error. But this was
the proceedings to have him adjudicated a not the fact. The record shows that there was
bankrupt; that in pursuance of his rights as evidence, and persuasive evidence, tending to
assignee he had in May, 1876, subjected the prove actual concealment by the bankrupt and the
bankrupt to an examination pursuant to the plaintiff in error of the facts upon which the cause
provisions of the bankrupt act, at which said of action was founded. Besides, the bill of
bankrupt, after having testified at great length, exceptions does not profess to give all the
finally refused to answer any other questions evidence upon this question. The court was
relating to his property or affairs, on the ground therefore, in effect, asked to charge the jury to

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 Rosenthal v. Walker 111 U.S. 185 (1884)

consider the evidence on one side of a disputed error, and have required the jury to shut their eyes
issue and disregard all the evidence on the other. to all the evidence on one side of the issue to
Instead of doing this the court said to the jury: which the charges referred.

"It is for you to say whether it is a case where this But if the charges requested had been
assignee has failed to make the discovery because unobjectionable, the court, having in its own way
he did not use due diligence, or whether it is a case fairly presented the issues, was not bound by its
where, using due diligence, he failed to make the duty to give them. The Schools v. Risley, 10 Wall.
discovery because the parties to the transaction, 91.
who were already the repositories of its existence,
We are of opinion, therefore, that there was no
one or more of them, wickedly concealed it and
error in the refusal of the court to charge the jury
filed oath upon oath in effecting that concealment.
as requested by the plaintiff in error or in the
196 . . . So far as the instruction *196 asked assumes
charge given to the jury.
any fact I decline to give it, and I shall leave the
whole question of prescription or no prescription There are other assignments of error which have
to be determined by you. It is undoubtedly true not been argued by the counsel for the plaintiff in
that if he was put upon inquiry as a reasonable error. Most of them have been covered by what we
man, which he refused to follow up, and which, if have said. The others present, in our opinion, no
you found as a fact, if he had followed up would good ground for the reversal of the judgment. We
have led to a knowledge, then the statute would find no error in the record.
have been a bar. But it is for you to say whether,
The judgment of the Circuit Court is affirmed.
upon all the evidence, there has or has not been
197 *197
such concealment and so continued as would
qualify the rule as to prescription."

We are of opinion that the issue was fairly