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As it results that the record before us | versed and remanded for further proceeddoes not exhibit error, the judgment of the ings. Court of Appeals of the District of Colum See same case below, 21 Pa. Super. Ct. bia must be, and it is, affirmed.



Statement by Mr. Justice Brewer: (195 U. S. 271)

On August 20, 1898, Gustave Kaufman JOSEPH S. KAUFMAN, Piff. in Err., filed his petition in bankruptcy and was sub

sequently adjudged and decreed a bankrupt. W. T. TREDWAY, Trustee of the Estate of W. T. Tredway was appointed trustee of his Gustave Kaufman, Bankrupt.

estate. On July 24, 1899, the trustee com

menced suit in the court of common pleas, Appealreview of questions of fact-bank- No. 3, of Allegheny county, Pennsylvania, ruptcy-preferences--evidence of credit

to recover from Joseph S. Kaufman the sum or's knowledge-interest on preference

of $4,086.64, charged to have been given, on set-off.

August 4, 1898, by the bankrupt to the de

fendant as a preference. The trial result1. Whether a bankrupt was insolvent at the ed in a judgment in favor of the trustee for

time of giving an alleged preference, and $1,086.64 and interest. This judgment was whether the creditor had reasonable cause to affirmed on appeal by the superior court. believe that it was intended thereby to give a An application for a further appeal to the preference, are questions of fact, as to which supreme court of the state was denied, and the Supreme Court of the United States is thereupon this writ of error was sued out concluded by the verdict of the jury in a suit by the trustee to recover the amount of such to review the judgment of the superior preference.

court. Section 60 of the bankrupt act is 2. Testimony of dealings between debtor and as follows:

creditor some six or seven months prior to a “Section 60. (a) A person shall be deemed transaction alleged to constitute a preference to have given a preference if, being insolvunder the bankruptcy act of July 1, 1898 (30 Stat. at L. 544

, 562, chap. 541, U. S. Comp. ent, he has procured or suffered a judgStat. 1901, p. 3445), $ 60, is admissible on the ment to be entered against himself in favor question of knowledge, in an action by the of any person, or made a transfer of any of trustee to recover the amount of the prefer- his property, and the effect of the enforceence.

ment of such judgment or transfer will be 8. The commencement by a trustee in bank; to enable any one of his creditors to obtain

ruptcy of an action to recover a sum alleged to have been paid by the bankrupt to a cred a greater percentage of his debt than any itor as a preference is a demand which starts other of such creditors of the same class. the running of interest on the claim.

(b) If a bankrupt shall have given a 4. To secure the set-off in favor of a creditor preference within four months before the

who, after receiving a preference, in good filing of a petition, or after the filing of faith extends further credit, without security, the petition, and before the adjudication, of property which becomes part of the debtor's estate, which is allowed by the bank and the person receiving it, or to be beneruptcy act of July 1, 1898 (30 Stat. at L. 544, fited thereby, or his agent acting therein, 562, chap. 541, U. S. Comp. Stat. 1901, p. shall have had reasonable cause to believe 3445), $ 60c, to the extent of “the amount of that it was intended thereby to give a prefsuch new credit remaining unpaid at the time of the adjudication in bankruptcy," it is erence, it shall be voidable by the trustee, not necessary that such property should re and he may recover the property or its value main a part of the debtor's estate until his from such person. adjudication in bankruptcy, or that it should

"(c) If a creditor has been preferred, and be used in payment of preferred debts.

afterwards in good faith gives the debtor

further credit, without security of any kind, [No. 17.]

for property which becomes a part of the

debtor's estate, the amount of such new Argued October 24, 1904. Decided Novem- credit remaining unpaid at the time of the ber 28, 1904.

adjudication in bankruptcy may be set off

against the amount which would otherwise N ERROR to the Superior Court of the be recoverable from him.”

judg- 544, 562, chap. 541, July 1, 1898, U. S. ment which affirmed a judgment of the Comp. Stat. 1901, p. 3445. Court of Common Pleas, No. 3, of Allegheny County, in that State, in favor of a trustee

Messrs. Joseph A. Langfitt and Wil. in bankruptcy in an action to recover a sum liam Kaufman for plaintiff in error. of money alleged to have been given by the Messrs. H. L. Castle, William A. Stone, bankrupt to a creditor as a preference. Re-land Stone & Stone for defendant in error.

25 S. C.-3.


Mr. Justice Brewer, delivered the opin- or, at least, that it was used in payment ion of the court:

of preferred debts. In its opinion, on a mo Whether the bankrupt was insolvent on tion for a new trial, it said: August 4, 1898, when he paid the money to "Evidence that the debtor got the money his brother, the defendant, and whether the for another purpose certainly is not evi. latter had reasonable cause to believe that derīce that he turned it over to the trug. it was intended thereby to give a preference, tee. are questions of fact, determined by the ver- “The most that defendant can ask—and dict of the jury, and not open to re- this we would probably hold—is that money view in this court. Hedrick v. Atchison, T. shown to have been given and used to pay & S. F. R. Co. 167 U. S. 673, 677, 42 L. ed. a preferred debt would entitle the defend320, 322, 17 Sup. Ct. Rep. 922; E. Bement ant to a set-off.” & Sons v. National Harrow Co. 186 U. S. It will be noticed that the words used in 70, 83, 46 L. ed. 1058, 1064, 22 Sup. Ct. Rep. paragraph c are not “the bankrupt’s es747; Jenkins v. Neff, 186 U. S. 230, 46 L. tate,” but “the debtor's estate." "Debtor” ed. 1140, 22 Sup. Ct. Rep. 905, and cases is also found in the preceding clause as cited in opinions. It is suggested that the descriptive of the one to whom the credit trial court erred in admitting testimony of is given. While the same person is both transactions between the brothers some six debtor and bankrupt, first debtor and then or seven months prior to the payment by bankrupt, the use of the former term is sugthe bankrupt to the defendant; that such gestive of the time of the transaction as transactions were too remote from the time well as the status of the recipient of the of the preference to throw light on the ques. credit. The paragraph further provides tion of knowledge. We think that the tes that “the amount of such new credit retimony, whether of much or little value, maining unpaid at the time of the adjudicawas competent, and that it was not error tion in bankruptcy may be set off.” It for the court to admit it. Clune v. United is the nonpayment, and not the fact that States, 159 U. S. 590–592, 40 L. ed. 269, the property remains still a part of the 270, 16 Sup. Ct. Rep. 125.

debtor's estate, which entitles to a set-off. We see no reason to doubt the propriety of It would seem that if Congress intended allowing interest on the claim from the that which the trial court held to be the commencement of the action. Such com- meaning of the statute, it would have said mencement is itself a demand.

“which becomes a part of the bankrupt's The principal contention, however, is that estate” or “which becomes and remains a the state court erred in ruling that the sum part of the debtor's estate until the adof $767, loaned by the defendant to the judication in bankruptcy.bankrupt on August 8, could not be con- Further, Congress provided that the credsidered as a set-off. It appeared that four itor act in good faith. Thus it excluded any days after he had received the money paid arrangement by which the creditor, seeking to him in preference the defendant handed to escape the liability occasioned by the to the bankrupt $767, on the latter's request preference he has received, passes money or for money to pay his employees. There was property over to the debtor with a view to no testimony tending to show what became its secretion until after the bankruptcy proof this money, whether it was used in pay- ceedings have terminated, or with ing employees, or whether the payments, other wrongful purpose. It meant that the if made, were for wages earned within three creditor should not act in such a way as to months before the date of the commence- intentionally defeat the bankrupt act, but ment of proceedings in bankruptcy. All should let the debtor have the money or that appeared was the fact of the loan and property for some honest purpose. Requirthe expressed purpose thereof. Under these ing that it should become a part of the circumstances the court instructed the jury debtor's estate excluded cases in which the that the defendant had not established his creditor delivered the property to a third claim to a set-off, as authorized by para- person on the credit of the debtor, or deliv. graph c of $ 60. This presents a distinct ered it to him with instructions to pass it question of law.

on to some third party. The purpose was The trial court, and its views were ap- that the property which passed from the proved by the superior court, held that the creditor should in fact become a part of the statute required not merely that the cred- debtor's estate, and that the credit should itor in good faith gave the debtor credit be only for such property. without security, and that the money or Still again, to require that the creditor property in fact passed to the debtor, and should not only in good faith have extendbecame a part of his estate, but also that ed the credit, and that the money or proper: it remained such until the time of the bank. ty should have passed into, and become a ruptcy, and was transferred to the trustee; part of, the debtor's estate, but that he


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should also show the actual disposition plainants, opens the door to the defense of thereof made by the debtor, would, in many

laches to a suit to enforce the trust. cases, practically deny the creditor the benefit of a credit which he has extended in

[No. 23.] good faith. Suppose, three months and a half before bankruptcy, the creditor, in good argued October 25, 26, 1904. Decided Nofaith, sells and delivers a bill of goods to

vember 28, 1904. the debtor, a merchant; how difficult it would be to show what had become of each APPEAL. from the Supreme Court of the done with the money received for those that decree which affirmed a decree of the Dishad been sold; and the same when, as in trict Court for Lincoln County in that Terthis case, money was delivered to the debtor. ritory, dismissing, on the ground of laches, If Congress had intended to require such a bill to enforce a trust in certain mining proof it would seem that it would have locations. Affirmed. used language more definite and certain. See same case below (N. M.) 55 L. R. A. If the creditor has acted in good faith, ex- 658, 66 Pac. 552. tended credit without security, and the money or property has actually passed into Statement by Mr. Justice Brown: the debtor's possession, why should any Appellants C. Ewing Patterson, a resithing more be required? Has the creditor dent of New Jersey, and Henry J. Patternot been already sufficiently punished when, son, a resident of New Mexico, on April 29, having received money or property in pay- 1903, filed their bill of complaint in the ment of a just debt, he is compelled to re- district court for Lincoln county, territory fund that to the trustee because he believed, of New Mexico, against John Y. Hewitt, or had reason to believe, that the debtor, in William Watson, Mathew Hoyle, and Harpaying that debt, preferred him? Why vey B. Fergusson, residents of New Mexico, should he be punished in addition by the and the Old Abe Company, a corporation of loss of the benefit of a credit given in good the same territory, to enforce a trust which faith?

is alleged to have existed between the apWe are of opinion that the state court pellants and the defendant Hewitt, and by erred in its construction of the statute and virtue of which they sought to recover a in peremptorily denying to the creditor the one-fourth interest in two mining locations, benefit of the credit. For these reasons the made in the name of John Y. Hewitt, on the judgment of the Superior Court is reversed, 2d day of May, 1884. The bill prayed for and the case remanded to that court for an accounting of proceeds of ores taken further proceedings not inconsistent with from the mines, and a lien on the property, this opinion.

for an injunction, and the appointment of a receiver.

The facts in the case as found by the dis(195 U. S. 309)

trict court and adopted by the supreme O. EWING PATTERSON et al., Appts., court are substantially as follows:

In 1881 the property in controversy was JOHN Y. HEWITT et al.

claimed by the appellants and by Watson,

one of the defendants, under locations preLaches in suit to enforce rights to mining viously made by them. Between 1881 and location.

1883, appellants, in conjunction with the

defendant Watson, did a large amount of 1. Laches may defeat a suit in equity to en- work upon the claims, and were asserting

force rights in a mining location, although the their rights under the mining laws of the time fixed in N. M. Comp. Laws, $ 2938, for United States. During this time the same the prosecution of actions or suits "in law or equity" for any lands, tenements, or heredita. ground was also claimed by other parties, ments has not expired.

among whom was the defendant Hewitt. In 2. A delay of eight years after the right to a August, 1883, a dispute arose in regard to

deed of an interest in a mining claim has ac- this property between appellants and the crued by reason of a proportionate contribu- defendant Watson on one side and the other tion to the work and expense necessary to obtain a patent will defeat a suit to enforce parties upon the other side. such right, where complainants contributed The parties interested held a meeting in nothing further to the subsequent develop- August or September, 1883, for the purment of the mine and the consequent discov- pose of adjusting the differences then exist

ery of a rich ore deposit. 8. The refusal of a trustee to execute a deed ing between them, and to endeavor, if possi

of an Interest in a mining location in compli- ble, to arrive at an agreement whereby the ance with the trust agreement is a repudia- interests of all would be protected. The two tion of the trust, which, if known to the com-'appellants, the defendant Watson and the

defendant Hewitt, with several others who until the fall of 1892 was a nonresident of were interested, attended this meeting. The New Mexico. result was an agreement between them that From 1885 to 1890 the defendants perall the old locations then existing, whether formed a large amount of work and expendmade by the appellants or any of the defend- ed a good deal of money on the mine in ants, or conflicting claimants, should be addition to the annual assessment required from that date abandoned, surrendered, and by the government of the United States given up by all of the parties, and that the thereon; but neither of the appellants ever ground should be put in possession of contributed or offered to contribute any part Hewitt, as trustee, to hold in his own name of the expenses of said work, or perform for the benefit of all the parties then inter- any labor. ested. It was also agreed that Hewitt, as In November, 1890, the defendants discovsuch trustee, should make a deed to such ered a large body of rich ore in the mine, of the said parties holding interests therein and since that date have taken out thereas should contribute their part to the work, from gold amounting to several hundred labor, and expenses necessary to obtain a thousand dollars. In 1892, a corporation patent to the land; but there was no agree- known as the Old Abe Mining Company was ment as to what should become of the inter- organized by the defendants Hewitt, Ferests of any one who failed to contribute his gusson, Watson, and others, and the ground share of the expenses. It was also agreed in controversy, known as the old Abe that each of the appellants contributing his ground, including the interests claimed by share of the expenses should receive a one- the appellants, was turned over to the new eighth interest in the location, and that the corporation by the trustee, Hewitt, and this said Watson and Hewitt should each receive corporation is now holding title thereto. a one-eighth interest, part on account of The appellant Henry J. Patterson, through their services and part on account of their his agent, Henry Burgess, had knowledge interests in the ground, and that the re- from April, 1885, that Hewitt had refused maining shares should go to other parties to carry out said agreement, and execute who were interested therein.

the deed to him and his co-complainant, In pursuance of this agreement Hewitt and both of the appellants were again intook charge of the property, and together formed after April, 1885, that Hewitt had with the defendant Watson and one of the refused to make the said deeds or to carry appellants Patterson, superintended and out the trust agreement. directed the work upon said mine during Upon this state of facts the district court the year 1883 and part of the year 1884. In dismissed the bill upon the ground of laches. order to raise money for the working of the The supreme court of the territory affirmed mine it was agreed that a one-sixth interest its action (55 L. R. A. 658, 66 Pac. 553), should be sold to H. B. Fergusson for $500. and complainants appealed to this court.

During 1884 and 1885 a sufficient amount of work was done upon the property to ob

Messrs. W. B. Childers and F. W. Clan tain a patent, and to discover mineral there-cy for appellants. on. The appellants contributed their share Mr. H. B. Fergusson for appellees. of the work, which enabled the trustee to obtain a patent, and so far carried out their Mr. Justice Brown delivered the opinion part of the agreement as to entitle them to of the court: a deed from the trustee for their one-eighth The defense of laches, which prompted interest each, according to said agreement. the dismissal of the bill in this case, has so

In April, 1885, the appellant Henry J. often been made the subject of discussion in Patterson, in person and by his agent, de- this court that a citation of cases is quite manded a deed from Hewitt, trustee, of the unnecessary. Some degree of diligence in one-eighth interest to which he claimed to bringing suit is required under all systems be entitled; but the defendant Hewitt at of jurisprudence. In actions at law, the that time refused to make the said deed, question of diligence is determined by the and has ever since refused to execute the words of the statute. If an action be same, and has disputed his right thereto. brought the day before the statutory time

No demand for a deed appears to have expires, it will be sustained; if the day been made by C. Ewing Patterson until just after, it will be defeated. In suits in equity before the commencement of this suit, when the question is determined by the circumit was also refused.

stances of each particular case. The statute In 1883, the complainant C. Ewing Pat- of limitations consorts with the rigid printerson left New Mexico, and, up to the time ciples of the common law, but is ill adapted of the bringing of this suit, had never re- to the flexible remedies of a court of equity. turned there. The appellant Henry J. Pat. The statute frequently works great practical terson left in 1885, and from that time ' injustice,—the doctrine of laches. never. True, lapse of time is one of the chief in- But the weight of authority is the other gredients, but there are others of almost way, and we consider the better rule to be equal importance. Change in the value of that, even if the statute of limitations be the property between the time the cause of made applicable, in general terms to suits action arose and the time the bill was filed, in equity, and not to any particular defense, complainant's knowledge or ignorance of the defendant may avail himself of the the facts constituting the cause of action, laches of the complainant, notwithstanding as well as his diligence in availing himself the time fixed by the statute has not exof the means of knowledge within his con- pired. This has been expressly held in Alatrol,—are all material to be considered upon bama (Scruggs v.Decatur Mineral & Land Co. the question whether the suit was brought 86 Ala. 173, 5 So. 440), in Missouri (Bliss v. without unreasonable delay.

Prichard, 67 Mo. 181; Kline v. Vogel, 90 1. In the case under consideration the ap- Mo. 239, 1 S. W. 733, 2 S. W. 408), and in pellants claim the benefit of § 2938 of the New York (Calhoun v. Millard, 121 N. Y. Compiled Laws of New Mexico, to the fol. 69, 8 L. R. A. 248, 24 N. E. 27). In the last lowing effect:

case the question is discussed at considerable “No person or persons, nor their children length by Chief Judge Andrews, and the or heirs, shall have, sue, or maintain any conclusion reached that "the period of limiaction or suit, either in law or equity, for tation of equitable actions fixed by the statany lands, tenements, or hereditaments, but ute is not, where a purely equitable remedy within ten years next after his, her, or their is invoked, equivalent to a legislative direcright to commence, have, or maintain such tion that no period short of that time shall suit shall have come, fallen, or accrued," be a bar to relief in any case, or precludes etc.

the court from denying relief in accordance If this were an action of ejectment at with equitable principles for unreasonable law, there seems to be no question but what delay, although the full period of ten years it could be maintained, since it was brought has not elapsed since the cause of action acwithin ten years from the time the cause of crued.” action accrued; but where the statute is in Indeed, in some cases the diligence reterms applicable to suits in equity, as well quired is measured by months rather than as at law, it is ordinarily construed, in cases by years. Pollard v. Clayton, 1 Kay & J. demanding equitable relief, as fixing a time 462; Attwood v. Small, 6 Clark & F. 356. beyond which the suit will not, under any And in others a delay of two, three, or circumstances, lie; but not as precluding the four years has been held fatal. Twin-Lick defense of laches, provided there has been Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. unreasonable delay within the time limited | 329; Hayward v. Eliot Nat. Bank, 96 U. S. by the statute. In an action at law, courts 611, 24 L. ed. 855; Holgate v. Eaton, 116 are bound by the literalism of the statute; U. S. 33, 29 L. ed. 538, 6 Sup. Ct. Rep. but in equity the question of unreasonable 224; Hagerman v. Bates, 5 Colo. App. 391, delay within the statutory limitation is still 38 Pac. 1100; Graff v. Portland Town & open. Alsop v. Riker, 155 U. S. 448,460, Mineral Co. 12 Colo. App. 106, 54 Pac. 854. 39 L. ed. 218–222, 15 Sup. Ct. Rep. 162.

2. The facts in this case, so far as they If this were not so, it would seem to concern the applicability of the defense follow that in the code states, where there of laches, are that all prior locations made is but one form of action applicable both to by the claimants to this land were abanproceedings of a legal and equitable nature, doned in August, 1883, when an oral agreea statute of limitations, general in its terms, ment was entered into that Hewitt should be would apply to suits of both descriptions, appointed trustee for all concerned; that and the doctrine of the laches become practi- upon the performance of certain conditions cally obsolete. This, 'however, is far from be- by the parties interested he should make ing the case, as questions of laches are as oft- a deed to each of such parties as should conen arising and being discussed in the code tribute his part to the work and expense states as in the others. In a few cases where necessary to obtain a patent; that each of the statute of limitations is made applica- the appellants contributed his share of the ble in terms to suits in equity, it has been work in the years 1883 and 1884,-enough construed as allowing a suit to be begun to entitle each of them to a deed of his inat any time within the period limited by the terest under the agreement; that April, statute, notwithstanding the intermediate 1885, Henry J. Patterson demanded a deed laches of the complainant, although in those of Hewitt, which was refused, but that C. cases it will usually be found that the lan- Ewing Patterson did not demand his deed guage of the statute is explicit and impera- until just before the institution of this suit; tive. Hill v. Nash, 73 Miss. 849, 19 So. that the defendants and their associates, 709; Washington v. Soria, 73 Miss. 665, 55 from the year 1885 to 1890, performed a Am. St. Rep. 555, 19 So. 485.

large amount of work in developing the mine,

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