defendant is concerned, to be performed in St. Louis or in New York. It was, when made, a commercial instrument, and is to be construed in accordance with the general principles of commercial law, unless there are statutes of the state of New York which control its construction. Hyde v. Goodnow, 3 N. Y. 266; Western v. Insurance Co., 12 N. Y. 258; Scudder v. Bank, 91 U. S. 406.

The defendant assigns as error the submission of Elliott & Cougle's claim to the jury, because notice of this claim was not made within 10 days after knowledge of the insolvency, in accordance with the provisions of the policy, and there was no waiver of this provision. The defendant's agreement was a bond of indemnity against loss resulting from "insolvency" of debtors, as defined in the policy. This definition is as follows:

"(11) The term 'insolvency of debtors,' whenever used in this bond, is defined to be: Where a debtor has made a general assignment for the benefit of his creditors; where an attachment for a debt for merchandise shall have been levied on his general stock in trade; where a writ of execution against him shall have been issued in favor of the indemnified, and returned unsatisfied, except where such execution has been so issued and returned after a receiver has been appointed of the property of such debtor; where a receiver of the general stock in trade of a debtor shall have been appointed, and the amount of the claim of the indemnified has been ascertained by final decree in the receivership proceedings, in which event the net loss thus ascertained shall be included in the calculation of losses under this bond."

There is no question that the loss through Elliott & Cougle resulted from their insolvency as thus defined, but the policy required an initial and prompt notification of anticipated losses, and called for a final statement of claims after the expiration of the policy and the payment of the amount due, as follows:

"(4) Notifications of claims must be delivered to this company, on the blanks furnished and in the manner prescribed by it. within ten (10) days after the indemnified shall have had information of the insolvency of any debtor, and must be received at the central office of the company at St. Louis during the term of this bond; otherwise, such claims shall be barred. The company will acknowledge such notifications when received, but the reception of acknowledg ment thereof or failure to acknowledge the same shall not be considered to be an admission of liability on the part of this company, or a waiver of any condition or provision of this bond, or of any defect in such notice."

"(12c) A final statement of all claims which have been filed in accordance with condition No. 4 shall be made by the indemnified, and forwarded to the central office of this company at St. Louis, Missouri, in the manner prescribed and upon blank forms, which will be furnished upon application. Such final statement must be received at said office within thirty days after the expiration of this bond; otherwise, all claims hereunder shall be forever barred. The adjustment of claims shall be had within sixty days after the receipt of such final statement by the company, and the amount then ascertained to be due shall at once become payable."

Elliott & Cougle confessed judgment, upon which execution was issued on December 10, 1895, in the supreme court of New York, in favor of various creditors; one of the judgments being in favor of the plaintiff, and its execution being returned unsatisfied on February 10, 1896. On December 14, 1895, the plaintiff notified the defendant of its loss by Elliott & Cougle, which notice was received and acknowledged on December 16th, and on the next day the plaintiff sent to the defendant a particular statement of its account against the debtors,

showing the date and the method of shipment of the goods which had been sold. A final statement was sent at the expiration of the policy. As the initial notices were sent on December 14th and 17th, they were sent and received prior to the return of the execution; and it is contended that no notice of loss was ever sent, in accordance with clauses 4 and 11 of the policy, within 10 days after the plaintiff had information of the "insolvency." The plaintiff, if no notice in accordance with clause 4 was sent, seeks to avoid the effect of noncompliance by an alleged waiver by the defendant of the defect. In its acknowledgment of the notice of December 14th it said: "This acknowledgment shall not be held to be a waiver by this company of any condition or provision of the bond." In its letter of December 17th, the plaintiff said: "If you require anything else in this matter, kindly let us know, and we will send it to you,"-and received no reply. In addition to the provisions in regard to waiver, which have already been quoted, a clause in the policy provided that alterations or changes in any of its conditions must be authorized by the company in writing, over the signature of its president or secretary. On July 29, 1896, the plaintiff sent to the defendant, and it received, certified copies of the plaintiff's judgment against Elliott & Cougle, of the execution issued thereon, and of the sheriff's return of nulla bona thereon, but this was long after the return of the execution.

If the terms of the policy require that notice of a loss must be made within 10 days after the insolvency, as defined in clause 11, has taken place, there was a failure to give such notice within 10 days after February 10, 1896, the previous notice was ineffectual because the loss had not occurred, and the claim was barred by the omission, unless compliance with the terms of the policy was waived. Blossom v. Insurance Co., 64 N. Y. 162; Quinlan v. Insurance Co., 133 N. Y. 356, 31 N. E. 31. The alleged waiver is founded entirely upon the silence of the defendant in not replying to the letter of December 17th. Mere silence cannot support a waiver of a positive requirement in the policy, in the face of the stringent terms of the contract, which expressly declare that silence is not a waiver of any defect in the notice of loss, and by the further provision that changes in the conditions. of the policy must be in writing, signed by the president or secretary. Walsh v. Insurance Co., 73 N. Y. 5; Baumgartel v. Insurance Co., 136 N. Y. 547, 32 N. E. 990; Moore v. Insurance Co., 141 N. Y. 219, 36 N. E. 191; Marvin v. Insurance Co., 85 N. Y. 278. There are cases in abundance which declare that the retention of defective proofs of loss, and silence in regard to the defect, constitute sufficient evidence of waiver; but these cases relate to contracts of a much less stringent character than that of this policy. Titus v. Insurance Co., 81 N. Y.

410; Gray v. Blum, 55 N. J. Eq. 553, 38 Atl. 646.

This discussion in regard to waiver is of no importance if the notice of December 14th was in accordance with the requirements of clause 4. If a construction of that clause had not been made by the defendant's continuous cotemporaneous definition of its terms, it would seem to require that notification of this claim must be made in 10 days after the return of an unsatisfied execution against Elliott & Cougle, although it is manifest that promptness for the purpose of an

investigation was the important point in the first proof of a loss which is not to be paid until the expiration of the policy. The claim, however, requires that proofs must be made upon the blanks furnished by the defendant, and they were made accordingly. The questions in those blanks ask nothing about insolvency, but ask, among other things, the date and the nature of the failure. The word "failure," when used in its commercial sense, and as employed in mercantile life, means a suspension of payment, or an enforced suspension of business, and the nature of the failure means the kind or distinguishing characteristic of the suspension, whether voluntary or enforced. To the first question the plaintiff replied, "December 11, 1895," and to the second, "Confession of judgment." In answer to other questions, the defendant was informed that levies had been made upon the stock of goods to secure the various judgments, and that the sheriff of the county was in charge of the debtor's estate. The plaintiff answered the defendant's questions as asked, which did not relate to insolvency as defined in clause 11, but to the date and kind of failure in its ordinary mercantile sense; and, inasmuch as the defendant received the notice which it required, and as it required, the importance of the def inition of insolvency with reference to the notice of loss disappears from the case.

The remaining question in regard to the amount of "initial loss" to be borne by the plaintiff was not argued by the respective counsel. The bond or policy, which was to expire on July 31, 1896, guarantied the defendant to the extent of $10,000, over and above the loss of $1,200 first to be borne by the indemnified, on total gross sales and deliveries of goods amounting to $80,000 or less, to be made between July 1, 1895, and July 31, 1896. The loss first to be borne was 13 per cent. on gross sales of $80,000, but, should they exceed that amount, the initial loss should increase in like ratio. Afterwards it was agreed that losses, occurring after the payment of the premium. on sales and shipments made from July 1, 1894, to July 1, 1895, "may be proven under this bond in accordance with its terms and conditions. and all other terms to remain in full force." The amount of the losses which were sued for included losses in both years, and the defendant claimed a deduction of initial losses on the whole business of each year. The rider was silent upon the subject of initial loss, and the question was not orally argued by counsel. We prefer not to decide this point until we may have had the benefit of a more full discussion.

The judgment is reversed, with costs.

(95 Fed. 116.)

In re KERBY-DENNIS CO.

(Circuit Court of Appeals, Seventh Circuit. June 14, 1899.)

No. 602.

1. BANKRUPTCY-PRIORITY OF LIENS-LABOR CLAIMS.

Where a statute of the state (3 How. Ann. St. Mich. §§ 8427a-8427p) creates a lien in favor of employés performing labor in the manufacture of lumber, but provides that the debt or claim shall not remain a lien on the product unless a statement thereof is filed within 30 days, and action begun within 3 months, holders of such liens, perfected according to the statute, against the estate of the employer in bankruptcy, are entitled to payment in full out of the proceeds of the property affected, in preference to claims for labor of the same kind which have not been preserved as the statute directs, although both classes of claims are equally within the description of claims for "wages," as to which the bankruptcy act declares that they shall "have priority and be paid in full out of bankrupt estates." Bankruptcy Law, § 64b.

2. SAME.

A lien for the wages of labor created by such a statute, and preserved in force according to its directions, is not dissolved by an adjudication in bankruptcy against the employer, under section 67f of the bankruptcy act (30 Stat. 564), providing that "liens obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt."

8. SAME-PRESERVATION OF LIENS-CONSTRUCTION OF BANKRUPTCY ACT. A statutory lien for the wages of labor is not dissolved or annulled by proceedings in bankruptcy against the employer, merely because such liens are not expressly preserved by the bankruptcy act. On the contrary, the intention of the bankruptcy act is to protect all liens, whether arising by contract or by statute, except only such as are expressly declared to be annulled or invalidated.

In Bankruptcy. Review of an order of the district court of the United States for the Eastern district of Wisconsin.

T. W. Spence, for petitioners.

Before BROWN, Circuit Justice, and WOODS and JENKINS, Circuit Judges.

JENKINS, Circuit Judge. The Kerby-Dennis Company, a corporation under the laws of the state of Wisconsin, and doing business at Marinette, in that state, was duly adjudged a bankrupt in the district court of the United States for the Eastern district of Wisconsin, upon a petition filed November 1, 1898, being at the time the owner of a large amount of logs, posts, ties, and shingles, upon and in the production of which labor had been performed within three months prior to the filing of the petition in bankruptcy by a number of laborers, including the petitioners. The labor claimants are divisible into two classes, the one class comprising those who on the 27th of October, 1898, filed claims for liens with the clerk of the circuit court of Alger county, in the state of Michigan, where the product was situated, for the amount of the indebtedness due them, respec

tively, for work and labor, and who thereafter prosecuted suits against the bankrupt corporation, and seized the property upon which the labor had been performed. After the appointment of a trustee in the bankruptcy proceedings, by stipulation, the property covered by the labor liens, and attached in the suits in the courts of Michigan, was turned over to the trustee in bankruptcy, without prejudice to the validity and priority of such labor lien claims, which were continued and made operative upon the proceeds of the sale of the prop erty so turned over. The other class of claimants is composed of those who had performed like services in the production of the property, but had failed to file claims for liens under the statute of the state of Michigan. That statute provides that any person performing labor or services in manufacturing lumber or shingles "shall have a lien thereon for the amount due for such labor or services, and the same shall take precedence of all other claims or liens thereon." The statute also provides that any such debt, demand, or claim shall not remain a lien on any of the mentioned products unless a statement thereof in writing, made under oath by the claimant or some one in his behalf, shall be filed in the office of the clerk of the county in which such labor or service was performed, which statement of lien shall be filed within 30 days after the completion or last day of such labor or service; and that any sale or transfer of the products upon which the lien is claimed during the time limited for the enforcement of the same shall not affect the lien, but the lien shall remain and be enforced against such products, in whosesoever possession the same shall be found. The statute also provides that the lien may be enforced by attachment against any of the products in the designated courts of the state, and that such lien claims shall cease to be a lien upon the property named in such statement unless suit be commenced within three months after the filing of the statement for lien. 3 How. Ann. St. Mich. §§ 8427a-8427p.

The referee in bankruptcy on April 25, 1899, directed the trustee to apply the fund to the payment of a pro rata dividend upon all the claims for labor and services approved and allowed by the court. entitled to priority under the provisions of subdivision 4, par. b, § 64. of the national bankruptcy act, "without distinction or preference as, to whether said labor claims had secured or attempted to secure liens upon any of the property of said bankrupt prior to the adjudication in bankruptcy, under the provisions of sections 8427a-8427p of Howell's Annotated Statutes of the State of Michigan." The district court, on the 23d day of May, 1899, reversed that order, and adjudged that the claims of those who had filed their statements of liens were entitled to priority of payment out of the proceeds of the property covered thereby, as against the claims of laborers who had no liens under any state law or otherwise upon the property, and that the proceedings in the state court to secure the liens were unaffected by the proceedings in bankruptcy, and entitled to recognition by the bankruptcy court with the same force and effect as though the same had been enforced in the courts of the state. 94 Fed. 818. Whereupon, on the 3d day of June, 1899, the claimants so postponed filed their original petition in this court, asking for a review and reversal of the order of the dis