Central Law Journal.

ST. LOUIS, MO., NOVEMBER 9, 1900.

The important question arose in the case of In re efore the Circuit Court of Appeals of the Ninth Circuit, whether a payment made on account by an insolvent debtor, in the ordinary course of business, within four months prior to his adjudication in bankruptcy, where it does not appear that the creditor receiving the payment had reasonable cause to believe that it was intended as a preference, constitutes a preference, under the bankruptcy act, that will prevent the allowance of the creditor's claims for the balance of the account. Section 60 of that provides:

"(a) A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class."

It was questioned whether a payment of money in the ordinary course of business can be considered a transfer of property. In section 1 of the same act, however, the word "transfer" is defined as including "the sale and every other and different mode of disposing of or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security." As the word "property" is legally understood to include every class of acquisitions which a man can own or have an interest in, it must certainly cover money; and the payment of money, therefore, by an insolvent to an unsecured creditor within the statutory period must be considered a transfer of his property, constituting a preference, under section 60a of the act of bankruptcy, the enforcement of which transfer would allow one creditor to obtain a greater percentage of his debt than any other creditors of the same class.

It was not contended that the preferred creditor believed or had any knowledge that the payment from the bankrupt was intended

But

to give them a preference. The trustee, therefore, could not recover upon the ground stated in subdivision b of the act. the bankruptcy act provides, in section 57g, that "the claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences." It appeared that appellees have not surrendered their preference, yet seek to have their claim allowed for the balance due them from the bankrupt, upon the contention that they received the payment from the bankrupt in good faith, without knowledge of its insolvency, continued to sell goods to the bankrupt firm in the usual course of business, and that the acceptance of said payment on account should not be held as a preference which would prevent the allowance of their claim.

The court, after a review of the act, and a consideration of its scope and purpose, held that it cannot be considered inequitable to require one who has received an undue portion of the estate, no matter if innocently, to surrender that advantage before participating in further distributions of the estate with those who have not received such preference.

It was urged very earnestly on behalf of the appellees, and by counsel who appeared as amici curice, that this interpretation of the act will be disastrous to credit; that it will unsettle business, and render mercantile transactions so uncertain and insecure that the country at large will suffer by it. It is further contended that congress did not intend by this act to interfere with or disturb the ordinary course of business of the country; and, in support of a construction of the statute that will avoid such supposed consequences, numerous authorities are cited, which may be summed up in the rule that "statutes will be construed in the most beneficial way which their language will permit to prevent absurdity, hardship or injustice."

"The first observation pertinent to the consideration of this rule," says United States Judge Morrow, "is that the province of construction lies wholly within the domain of ambiguity. It must therefore appear that the statute is ambiguous, and thus open to construction. The considerations of evil and hardship may properly exert an influence in giving a construction to a statute when its

language is ambiguous or uncertain and doubtful, but not when it is plain and explicit. The same may be said of the consideration of convenience, and, in fact, of any consequences. If the intention is expressed so plainly as to exclude all controversy, and is one not controlled or affected by any pro. vision of the constitution, it is the law, and courts have no concern with the effects and consequences. Their simple duty is to execute it. That the bankrupt act is ambig. uous and uncertain in many of its provisions cannot be denied, but we are of the opinion that the particular provisions under consideration are reasonably clear and certain. Section 57g provides that the claims of creditors who have received 'preferences' shall not be allowed unless such creditors shall surrender their 'preferences.' There is no ambiguity in this provision, and no uncertainty as to its purpose. When a creditor presents a bona fide claim against the bankrupt estate, the question to be determined is, has the creditor received a 'preference' in his dealings with the bankrupt? If he has, the claim cannot be allowed. If he has not, it must be allowed. Then the question arises, what is the meaning of the word 'preference?' If we turn to section 60a, we find the word 'preference' defined, and it is there declared to mean 'a transfer' by the bankrupt 'of any of bis property,'

where the effect of the enforcement of such a 'transfer' will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class. This definition fits very closely into section 57g, and points out still more distinctly the preferred claims that are disallowed. But, to understand accurately the character of the transaction that will amount to a preference, we must look for the meaning of the words 'transfer of property.' This meaning is found in paragraph 25, of section 1, of the act, where a 'payment' is explicitly made one of the methods of transferring property. With respect to the question under consideration, the statute itself has furnished us with this information: (1) That a payment of money is a transfer of property; (2) a transfer of property by an insolvent debtor, whereby his creditor obtains a greater percentage of his debt than any other creditor of his class, is a prefer

ence; (3) a claim of a creditor who has received a preference shall not be allowed, unless such creditor shall surrender his preference."

THE LAW OF SURFACE WATER AS APPLICABLE TO MISSOURI AND STATES BOUNDED BY LARGE RIVERS.

Sec. 1. Introduction.—The law of surface water deserves considerable attention in this State. It has furnished the subject of about seventy decisions in our reported cases and has been the occasion of an apparent conflict of authority in our supreme court. It is the more useful as a branch of study for the profession of Missouri because of the presence in our territory and upon our border of two of the largest rivers in the world; for, in the level and fertile bottom lands of these rivers, the question of the rights of drainage and repulsion of surface water often becomes of a practical and serious nature.

Sec. 2. Definition.-The courts have not defined surface water with exactness. The best definitions are negative in their terms and seek mainly to distinguish surface water from the waters of streams. Surface water may be said to be vagrant or wandering water lying upon or passing over the surface of land or percolating through the soil,1 and not being within a water course. It matters not from what source such waters come,whether from rains or melting ice and snow,2 or from the overflow of streams or rivers, or from underground springs, or from a water course through the interstices of the rocks,—— if they have the qualities of a casual and temporary nature, and of not being part of a natural water course, they are treated as surface waters. It follows, then, that to define surface waters we must define with particularity a natural water course.

Sec. 3. Surface Waters Distinguished from

1 Shane v. R. R., 71 Mo. 257; Pope v. Boyle, 98 Mo. 527; Doerbaum v. Fisher, 1 Mo. App. 149; Martin v. Benoist, 20 Mo. App. 262; Waterworks Co. v. Jenkins, 62 Mo. App. 74; Swett v. Cutts, 50 N. H. 439. 2 Benson v. R. R., 78 Mo. 501.

3 McCormick v. R. R., 57 Mo. 433; Shane v. R. R., 71 Mo. 287; Abbott v. R. R., 83 Mo. 271; Brink v. R. R., 17 Mo. App. 177; Schneider v. R. R., 27 Mo. App. 68; Kenny v. R. R., 74 Mo. App. 301.

4 Swett v. Cutts, 50 N. H. 439.

5 Waterworks Co. v. Jenkins, 62 Mo. App. 71.

Water Courses.-A water course is a stream of water usually flowing in a particular direction, having a well defined channel, bed and banks, and generally discharging itself into some other stream or body of water.6 The water need not flow all the time. A water course may be dry part of the year.". It does not include the water flowing in the gorges or ravines of the land from higher to lower levels after rains or melting snows, though in some States the courts seem inclined to treat these waters as natural streams when they have from time immemorial escaped through such channels regularly after the spring rains. But a water course usually must be fed from other and more permanent sources than mere surface drainage.10 Subterranean waters are subject to the same distinction between those following the course of a well defined channel and those wandering abroad or oozing through the soil. The former class is governed by rules analogous to those applicable to water courses; the latter class is treated as surface water."1 A right of water way for surface drainage may be acquired by grant or prescription,12 and thereafter this right of way will be regarded as a water course as between the parties, and its obstruction will be actionable. As soon as water enters a stream and commences to flow in its channel, it ceases to be surface water and constitutes a water course.18 But if the stream, in a low place, spreads out into a morass and lower down again resumes its course in its banks, this bog is not surface water but is still part of the water course.14 The natural overflow of streams and rivers is, as has been said, surface water. But water caused to overflow the banks of a stream by a wrongful obstruction of its channel is still a part of the water course.15 The

6 Hoyt v. City of Hudson, 27 Wis. 661, quoted in Jones v. R. R., 18 Mo. App. 74; Gray v. Schriber, 58 Mo. App. 173.

7 Rose v. St. Charles, 49 Mo. 510.

8 Hoyt v. City of Hudson, 27 Wis. 661.

9 Palmer v. Waddell, 22 Kan. 352; McClure v. City, 28 Minn. 186; Am. Law Rev. vol. xxiii, p. 876; Gould on Waters (2d Ed.), 522.

10 Jeffers v. Jeffers, 107 N. Y. 650, cited in Gray v. Schriber, 58 Mo. App. 173.

11 Waterworks Co. v. Jenkins, 62 Mo. App. 74. 12 Dunham v. Joyce, 129 Mo. 5; Vaughn v. Rupple, 69 Mo. App. 583.

13 Jones v. Hannovan, 55 Mo. 462.

14 Munkers v. R. R., 72 Mo. 514; McComber v. God

frey, 108 Mass. 219.

15 Brink v. R. R., 17 Mo. App. 177.

rule for the treatment of water courses may, for the purposes of this paper, be stated as follows: "Unless lawfully authorized no one can interfere to any material extent with the water of a running stream, and there may be recovery for damage caused thereby without proof of negligence." Such diversion is a nuisance." And where the injurious overflow is aggravated by the effects of melting snows and falling rains, it is not incumbent on either court or jury to discriminate between the damages so caused and those resulting purely from the action of the living stream.18 Of course, a municipal corporation is bound by this rule if it enters upon the construction of culverts or drains, even though it need not have undertaken the work at all. 19

Sec. 4. Sloughs, Ponds and Lakes.Some interesting questions have arisen in regard to the nature of the water contained in the sloughs or bayous so common along our great rivers. These are depressions along the banks of the stream with more or less clearly defined channels. They are sometimes filled only by the overflow of the river, sometimes by surface water; while sometimes they contain running water which empties into the main stream lower down. When such depressions are filled with overflow or drainage from rain and snow, the water has usually been considered surface water. 20 But it seems that there is a little dubiety on the point. In the important case of Shane v. R. R.,21 it is not impossible that the court really based its decision upon its belief that the slough in question should be treated as a water course.2 22 In Railroad v. Schneider, 23 the controversy was over the damming up of the "thumb," a slough extending from a water course at right angles without a cur

16 Abbott v. R. R., 83 Mo. 271. See also Rose v. St. Charles, 49 Mo. 510; Imler v. Springfield, 55 Mo. 119; Munkers v. R. R., 60 Mo. 334; Hosher v. R. R., 60 Mo. 329; Van Hoozier v. R. R., 70 Mo. 145; Mangold v. R. R., 24 Mo. App. 52.

17 Dickson v. R. R., 71 Mo. 577.

18 Bird v. R. R., 30 Mo. App. 365.

19 Young v. Kansas City, 27 Mo. App. 101; Dillon, Mun. Corp. § 777.

20 Shane v. R. R., 71 Mo. 237; Abbott v. R. R., 83 Mo. 271; Jones v. R. R., 18 Mo. App. 251; St. L. & I. M. R. R. v. Schneider, 30 Mo. App. 620.

21 71 Mo. 237.

22 See Abbott v. R. R., 83 Mo. 271, and post, sec. 11. 23 30 Mo. App. 620.

rent and having no flow except in times of freshet. Though it was held to be no water course, Judge Thompson in a dissenting opinion seemed inclined to think it should be so treated. And in Kenny v. R. R., it was held that water escaping from a creek becomes surface water as soon as it leaves the creek, but loses that character when it reaches a slough; and that whether a slough which leaves a creek and then returns to it is a water course or not is a question for the jury. Lakes and ponds having defined banks and a permanent nature are treated by the rules of water courses, even if they are filled merely by surface drainage.25 A landowner may so ditch his own land as to collect and cause to flow into a pond in a body surface water which formerly flowed into the pond through natural channels.2 Of course, he may not drain his ponds or stagnant waters upon his neighbor.27 But overflow of a pond caused merely by detrition will not be relieved against. 28 The water of bogs, swamps, fens and morasses, being of a vagrant and unconfined character, is generally classed as surface water.29

26

Sec. 5. Proprietary Rights in Surface Water. The rights of the owner of the soil over which a water course passes are merely those of the reasonable use of the water.30 He may not materially diminish, divert or obstruct the flow. But surface water is regarded for many purposes as part of the soil itself. The owner of the land owns the surface water on it or in it, and he may drain it or retain it even if he thereby cuts off the supply from his neighbor's spring, provided he does not do so maliciously or unreasonably; and it is perhaps doubtful but that he may do so even with malice.82 But inasmuch as surface water is a thing usually more to be shunned than desired, the more important questions are relative to its repulsion or ob. struction.

Sec. 6. Repulsion of Surface Water.-In

24 74 Mo. App. 301.

25 Schaefer v. Marthaler, 34 Minn. 487.

26 Hoester v. Hemsath, 16 Mo. App. 485.

27 Schneider v. R. R., 29 Mo. App. 68.

28 Hoester v. Hemsath, 16 Mo. App. 485.

29 Am. & Eng. Enc. of Law (1st Ed.), under head "Surface Waters."

30 Am. & Eng. Enc. of Law (1st Ed.), vol. 28, p. 949. 31 Waterworks Co. v. Jenkins, 62 Mo. App. 74. 32 Phelps v. Nowlen, 72 N. Y. 39; Chatfield v. Wilson, 28 Vt. 53.

regard to the repulsion of surface water and the obstruction of its flow, there is an irreconcilable conflict of authority in the decisions of the States. No less than three distinct doctrines are followed. These are known as the common law rule, the civil law rule and a modified rule. In regard to the latter, it is sufficient for our purpose to say that the courts seek to apply the rules to the circumstances of each case, allowing the obstructing proprietor the fullest control of his property consistent with the rights of others. not to be injured. This rule is followed in Arkansas and South Carolina.33

Sec. 7. Same-Statement of the Common Law and Civil Law Rules.-Perhaps the clearest statement of the two doctrines is that found in the leading case of Hoyt v. City of Hudson, cited with approval in many Missouri cases: "The doctrine of the civil law is that the owner of the upper or dom. inant estate has a natural easement or servitude in the lower or servient one, to discharge all waters falling or accumulating on his land, which is higher, upon or over the land of the servient owner, as in a state of nature; and that such natural flow or passage of the water cannot be interrupted or prevented by the servient owner to the detriment or injury of the dominant or any other proprietor. The doctrine of the common law is that there exists no such natural easement or servitude in favor of the owner of the higher grounds as to mere surface water; and that the proprietor of the inferior tenement may, if he choose, lawfully hinder or obstruct the flow of such water thereon, and in doing so may turn the same back upon or off onto or over the lands of other proprietors without liability ensuing from such obstruction or diversion." In analyzing the decisions we find that those courts which follow the civil law rule base their reasoning upon the necessity of refraining from damage in the use of one's own and also upon the natural configuration of the soil. In other words, these courts yield obedience to the maxims, "sic utere tuo ut non alienum lædas,” and “aquacurrit et debet currere.' 35 On the other

33 See Am. & Eng. Enc. of Law (1st Ed.), under head "Surface Waters;" Gould on Waters (2d Ed.), p. 528; Am. Law Rev. vol. xxiii, p. 376. 34 27 Wis. 659.

35 The leading cases on the civil law rule are Martin