802

FEDERAL. REPORTER.

section of the bankrupt act. The effect of this plea is the only ques. tion to be determined. The second section of the bankrupt act (now section 5057 of the Revised Statutes) enacts that-"N 0 suit, either at law or in equity, shall be maintainable in any court between an assignee in bankruptqy and a person claiming an adverse interest, touching any property or rights of property transferaole to or vested in such assignee, unless brought within two. years from the time when the cause of action accrued for or against 8uchassignee."

It is urged that this section is applicable .only to contests between an assignee in bankruptcy and an 'adverse claimant of the title to or ownership of property transferrtld to such assignee, and hence that this case is not within its operation. There is some warrant for this contention in a few decisions by judges of the district court, and others, in the earlier existence of the bankrupt law, but it rests upon avery narr6w construction of that law. Indeed, it does not accord with either the terms or spirit of the enactment. It is not confined to contests involving the title to or ,ownership of the bankrupt's property, but, in explicit terms, it comprehends all claims of adverse inteJ'ests whicl+1 touch or relate, to any property or rights of property transferable to or vested in the assignee. The character of the present case furnishes an apt illustration of the scope of the limitation. The bill charges that the contested judgment was confessed and entered under such circumstances as make it a preference in fraud of the bankrupt law, and therefore prays that it may be decreed to be fraudulent and void. The assignee then seeks to annul this judgment, and the respondent to maintainjt. It is obvious that the parties represent and claim adverse interests, and their adversary relations grow out of the entry of the judgment, are coincident with the appointment of the assignee, and have so continued ever since. Does the respondent's claim involve property vested in the assignee? His judgment became a lien upon the bankrupt's real estate, and, thus incumbered; this real estate passed to the assignee. As an inseparable incident of the lien, the real estate bound by it might be seized in execution, sold and conveyed, and a sufficient amount of the proceeds of sale applied to the payment of the judgment. It makes no difference that the real estate has been sold by the assignee discharged of liens, because the fund thus arising is substituted for the land, and is subject to all the liens which bound the land. This fund is as clearly property vested in the assignee as

REBER

V. GUNDY.

808

was the land itself, and the contest between the parties is whether
.a portion of it, equivalent in value to the amount of the respondent's

judgment, shall be appropriated for his benefit, or shall be withdrawn from the grasp of his lien and adjudged exclusively to the complainant. Plainly, therefore, the relations of the are adversary, and the suit is one between the assignee and a person .claiming an adverse interest "touching" property' which wasvestsd iiJ the assignee, and so is within the literal import 'of the statute of limitations. But whatever differences of opinion may have existed, touching the construction of the limitation clause in question, are now concluded by the authoritative judgment of the supreme court in Jenkins v. International Bank, 106 U. S. 571; [So C. 2 Sup. Ct. Rep. I.) It was held to apply to all suits by or against an assignee which were brought moro than two years after the cause of action accrued. Mr. Justice MILLER, in behalf of the court, there said:
"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 nearly settled up, and your functions discharged, and we close the door to all litigation not commenced before it has elapsed."

It only remains to notice the suggestion in the replication to the plea that the contest before the register in bankruptcy was the com· mencement of this suit. The replication alleges that the district court, on the fifth of February, 1879, made an order of reference to the register of the district to ascertain liens and report a schedule of distribution of the funds in the hands of the assignee i.. that the judgment of the respondent was presented as a prior charge upon the fund; that the priority claimed was denied, testimony was taken, and a report made by the register of the issues raised before him to the court for its decision upon them; that thereupon, on the sixth of September, 1880, this order was revoked and a new one made to another register to "ascertain the liens, and report a schedule of distribution of the funds in the hands of the assignee arising from the sale of the bankrupt's real estate." The respondent's judgment was presented again before the register, and priority of payment out of the fund claimed. This was contested ·by the assignee, and the register finally disallowed the claim, upon the ground that the judgment was a fraudulent preference under the bankrupt law, and therefore void, and so reported to the court. The respondent excepted to this find· ing as irregular and unauthorized, and thereupon, on the eleventh of

804

FEDERAL REPORTER.

January, 1882, this bill was filed, by leave of the court, with like effect as if filed on the sixth of September, 1880. The antecederitproceedings before the register cannot be ingrafted upon this suit as an integral part of it. The formal incongruity of such an association is apparent. The relief prayed for could only be decree4, by the court in the exercise of its auxiliary equity jurisdiction, and that must be invoked by conformity to the methods pi'escribed and established as indispensable to that end, so that neither party may be deprived of his right to the correctiV3 supervision of the appellate tribunals which the law gives him. In discharging his 4uties under the order of reference, the register had no power to go behind the respondent's judgment and adjudge it to be void, and his unwarrantable assumption would furnish no ground for investing the court with power to administer such equity in such an irregular mode. Until this bill in equity was filed, no wit between the parties was begun in which the relief sought could be adjudged, and, as the bill was not filed until more than two years after the cause of action stated in it accrued to the complainant, the respondent's plea must be sustained, and the bill dismissed, with costs.

RIGGS

v.

PENNSYLVANIA

& N. E. R. Co. and others.

(Circuit Court, D. New Jersey. June 12, 1883.)
1. RAILROAD BONDs- VALIDITy-IsSUE BY TRUSTEE-PURCHASER PUT ON IN.
QUIRY.

Where the bonds of a railroad corporation, secured by mortgage, are signed and issWJd by a trustee, whose duty, it usually would be considered, was to act for the bondholders in enforcing payments to them, and to bring suit against the corporation for covenants broken, and not necessarily to include the power to place upon the market the bonds for sale, and the bonds are sold for a very small per cent. of the face value, the purchaser is put upon inquirJ' in regard to the regularity or validity of their issue.

2.

SAME-SUPPRESSION OF EvIDEKCE-EFFECT OF.

Where a minute-book, offered in evidence to prove the due organization of a corporation, and the regularit.y of an issue of its bonds, has been traced into the hands of its alleged officers, and its whereabouts thereafter unexplained, its suppression leads to a grave suspicion that it has been concealed on account of the evidence which its contents revealed of the legality of the organization and the validity of the bonds.
3.

SAME-BILL DISMISSED.

As the evidence does not establish satisfactorily the organization of the railroad corporation at the time of the issuance of the bonds, or the existence 01 the mortgage securing the same, prayed to be made a prior lien in this case on tile property of thli corporation, the relief asked must be denied.