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“When we look at the situation of the parties and the character of the transaction disclosed by the facts just referred to, no difficulty is experienced in ascertaining the intent of the parties. Both were banking institutionsbanks of deposit. They were located in the same city.
It cannot be Joubted that a mere request for the loan by the Keystone Bank from the Fourth Street Bank would have been so surprising that the contract would not possibly have been made without a statement of the reason which rendered the request necessary.
The deduction arises that, as it cannot be reasonably conceived that the loan would have been made without reference to an assignment of the particular fund from which alone the hope of immediate payment was to be reasonably expected, the parties must have and did intend to create a particular appropriation, charge, or lien on the property upon the faith of which they both dealt,
It is, of course, true that the method adopted to evidence the appropriation [by the Keystone Bank] was a check drawn generally upon the Tradesmen's Bank, but, as already stated, the authorities are clear that, when it is established that it was the intention and agreement of the parties to a transaction that a check drawn generally should be paid out of a particular fund, such check, as between the parties, will be treated as though an order for payment out of a specific, designated fund."
To the same effect are the following cases: Hauselt v. Harrison, 105 U. S: 401, 26 L. Ed. 1075; Carr v. Hamilton, 129 U. S. 252, 9 Sup. Ct. 295, 32 L. Ed. 669; Duplan Silk Co. v. Spencer, 53 C. C. A. 321, 115 Fed. 689; Erie R. C. v. Dial, 72 C. C. A. 183, 140 Fed. 689; In re Cramond (D. C.) 145 Fed. 976; Reeves v. Kimball, 40 N. Y. 299.
The foregoing are sufficient to show how far the courts have gone in declaring transactions, not made strictly in the conventional language of a mortgage or pledge, to be equitable charges in the nature of such mortgage or pledge, when it is necessary to do so in order to execute the intent and purpose of the parties.
It follows that, if bankruptcy had not supervened, the railway company could have enforced its claim for advantages against the coal when mined by the coal company. Does the bankruptcy of the latter company deprive the former of the same remedy against the trustees? The administration and distribution of the property of bankrupts is a proceeding in equity (In re Rochford, 59 C. C. A. 388, 124 Fed. 182), and should be conducted on broad equitable lines, with a view of recognizing and enforcing the rights of all parties claiming an interest in the estate, whether they be legal or equitable, or both. In re Chase, 59 C. C. A. 629, 124 Fed. 753. The last cited case well expresses the broad and liberal spirit which pervades the bankruptcy act. It is there said by Circuit Judge Putnam, in delivering the unanimous opinion of the Circuit Court of Appeals of the First Circuit, as follows:
"It is settled that a trustee in bankruptcy has no equities greater than those of the bankrupt, and that he will be ordered to do full justice, even in some cases where the circumstances would give rise to no legal right, and, perhaps, not even to a right which could be enforced in a court of equity as against an ordinary litigant. Williams' Law of Bankruptcy (7th Ed.) 191. Indeed, bankruptcy proceeds on equitable principles so broad that it will order a repayment when such principles require it, notwithstanding the court or the trustee may have received the fund without such compulsion or protest as is ordinarily required for recovery in the courts either of common law or chancery."
See to the saine effect the following cases: Hutchinson v. Le Roy, 51 C. C. A. 159, 113 Fed. 202, 205; Hutchinson v. Otis, 53 C. C. A. 419, 115 Fed. 937, 940; Batchelder & Lincoln Co. v. Whitmore, 129 Fed. 355, 58 C. C. A. 517.
The trustees stand in the shoes of the bankrupt. Whatever rights a third party had against the property of a bankrupt before adjudication, that party, in the absence of fraud or fixed liens created by state statutes in favor of others, has against his estate in bankruptcy. Hewit v. Berlin Machine Works, 194 U. S. 296, 24 Sup. Ct. 690, 45 L. Ed. 986; Thompson v. Fairbanks, 196 U. S. 516, 25 Sup. Ct. 306, 49 L. Ed. 577; Humphrey v. Tatman, 198 U. S. 91, 25 Sup. Ct. 567. 49 L. Ed. 956; York Mfg. Co. v. Cassell, 201 U. S. 314, 26 Sup. Ct. 481, 50 L. Ed. 782.
In Thompson v. Fairbanks, the Supreme Court said: "Under the present bankrupt act, the trustee takes the property of the bankrupt, in cases unaffected by fraud, in the same plight and condition that the bankrupt himself held it, and subject to all the equities impressed upon it in the hands of the bankrupt, except in cases where there has been a conveyance or incumbrance of the property which is void as against the trustee by some Juositive provision of the act."
In the light of these authorities we have no hesitation in holding that the equitable charge created by the parties before the bankruptcy of the coal company should be enforced against the estate in the hands of its trustees.
Counsel for the trustees contend that no lien, equitable or otherwise, was created by the subsequent agreement, because it was not in writing and signed by the parties to be charged as required by section 3173, Gen. St. Kan. 1901, commonly known as the “statute of frauds." We find it unnecessary to consider the interesting question debated at the bar whether the oral agreement was such a substantive modification of the original one as distinguished from a change in detail of performance, as required it to be in writing to conform to the statute in question. It sufficiently appears that the railway company fully performed its part of the agreement. It advanced the money as agreed, but the coal company failed to repay it as agreed. Equity will not permit the statute of frauds to be invoked in favor of a party who has not performed his oral undertaking against one who, at his invitation and in reliance upon his promise, has expended money and changed his situation. That would make the statute an instrument of fraud rather than a means to prevent it. It cannot be so employed. Swain v. Seamens, 9 Wall. 257, 19 L. Ed. 554; Brown on Stat. of Frauds, $$ 457-460; Glass v. Hulbert, 102 Mass. 24, 36, 3 Am. Rep. 418; Suggett's Adm'r v. Carson's Adm'r, 26 Mo. 221; Winters v. Cherry, 78 Mo. 344, 349.
Another and conclusive answer to the trustees' contention in this case is found in their conduct on assuming the duties of their trust. They found an assignable executory contract in force between the bankrupt and the railway company-one that might be advantageous or disadvantageous to the estate. It was evidenced by writing, but the parties had changed its mode of performance as already pointed out, so that as between them it consisted of the original instrument and the agreed modification.
It is well settled that trustees in bankruptcy are not found to accept property or take over contracts which are onerous and unprofitable, and which would burden, rather than benefit, the estate. In the execution of their trust they are confronted at the outset with the duty of electing whether to assume an existing executory contract, continue its performance, and ultimately dispose of it for the benefit of the estate or to renounce it and leave the injured party to such legal remedies for the breach, as the case affords. American File Co. v. Garrett, 110 U. S. 288, 295, 4 Sup. Ct. 90, 28 L. Ed. 149; Sparhawk v. Yerkes, 142 U. S. 1, 13, 12 Sup. Ct. 104, 35 L. Ed. 915; Sessions v. Romadka, 145 U. S. 29, 12 Sup. Ct. 799, 36 L. Ed. 609; Dushane v. Beall, 161 U. S. 515, 16 Sup. Ct. 637, 40 L. Ed. 791; Watson v. Merrill, 69 C. C. A. 185, 136 Fed. 359, 363; In re Chambers, Calder & Co. (D. C.) 98 Fed. 865; Mercantile Trust Co. v. Farmers' Loan & Trust Co., 26 C. C. A. 383, 81 Fed. 254; Central Trust Co. v. Continental Trust Co., 30 C. C. A. 235, 86 Fed. 517.
If they elect to assume such a contract, they are required to take it cum onere, as the bankrupt enjoyed it, subject to all its provisions and conditions, “in the same plight and condition that the bankrupt held it.” York Mfg. Co. v. Cassell, supra, and cases supra.
Any valid modifications of a written contract which may have been made by the bankrupt before adjudication, whether oral or in writing, and whether known or unknown to the trustees, are binding upon them if they elect to assume and perform the contract. They take it subject to all equities between the original parties. Reeves v. Kimball, supra; Wood v. Donovan, 132 Mass. 84; Homer v. Shaw, 177 Mass. 1, 58 N. E. 160; Mangles v. Dixon, 3 House of Lords Cases, 703. The duty rests upon the trustees to make inquiry and ascertain the true nature, character, and conditions of the contract before exercising their election. When the election is made to assume it where no fraud has been practiced upon them, they stand in exactly the same situation as the bankrupt himself stood prior to the adjudication. Cases, supra.
After presumably making all the inquiries necessary to fully acquaint themselves as to the advisability of taking over the executory contract in question the trustees in this case determined to do so, assumed the contract, and entered upon its execution. They mined coal, delivered it to the railway company, and, in the language of the trial court, "performed fully all the terms of the contract as it was written," but failed to conform to the condition created by the oral agreement to deliver coal to the railway company in payment of the advances made by it to keep the mine going.
From the foregoing the conclusion follows that the learned trial court should have sustained the interveners' petition and surrendered to them the leased premises or required the trustees, upon the assumption of the lease, to perform the condition of mining and furnishing the railway company sufficient coal to cover its advances. Not having done so and the lease having expired so that it cannot now be done, the assets of the estate, consisting in part of money
received for coal delivered to the railway company, should be subjected to the payment of such advances as a preferential claim.
The decree is accordingly reversed, and the cause remanded, with instructions to proceed according to this opinion.
HOOK, Circuit Judge, dissents.
CHICAGO & N. W. RY. CO. V. O'BRIEN.
In general, in the absence of a regulating statute or ordinance, a carrier may run its trains at such a rate of speed as it deems convenient for the conduct of its business, without being guilty of negligence per se in case a derailment occurs resulting in injuries to licensees on the train.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 41, Railroads, $ 879.
Rights of licensee on train, see note to Chamberlain v. Pierson, 31 C.
C. A. 164.] 2. SAUE-QUESTION FOR JURY.
Where defendant railroad company operated a fast mall train down a descending grade of 60 feet to the mile, and at the sharpest point of a 6 degree curre at the foot of the grade, at the rate of from 70 to 75 miles per bour, without slackening speed, and the train was derailed at the curve, resulting in the death of plaintiff's intestate, an express messenger working on the train, whether defendant was guilty of negligence was for the jury.
(Ed. Note.-For cases in point, see Cent. Dig. vol. 41, Railroads, 918.) 2. TBIT OF ERROR-EXCESSIVENESS OF DAMAGES---REVIEW.
The Circuit Court of Appeals has no jurisdiction to review an objection that the damages awarded in an action for wrongful death are excessive, though it is convinced that the trial court improperly exercised its discretion in refusing to grant defendant relief on such ground on the motion for a new trial.
[Ed. Note.–For cases in point, see Cent. Dig. vol. 3, Appeal and Error,
3873.) In Error to the Circuit Court of the United States for the Northern District of Iowa.
Error to review a judgment obtained by Mary O'Brien, as administratrix of the estate of J. J. O'Brien, deceased, against the Chicago & Northwestern Railway Company.
D. E. Lyon (Lyon & Lyon, on the brief), for plaintiff in error,
R. M. Wright (Wright & Nugent and Healy & Healy, on the brief), for defendant in error.
Before SANBORN, HOOK, and ADAMS, Circuit Judges.
HOOK, Circuit Judge. This is the second appearance of this case in this court. When it was first here, a judgment in favor of the plaintiff was reversed because the trial court refused to instruct the jury that negligence could not be inferred from the fact of accident in an action for the death of one who was not a passenger, but whose relation to the defendant was analogous to that of an employé and governed by the same principles. Also it was doubted that there was sufficient evidence that the derailment of the train which resulted in the death of the deceased was due to the negligence of the defendant. The general features of the case fully appear in the report of our previous opinion. Railway Co. v. O'Brien, 67 C. C. A. 421, 132 Fed. 593.
At the second trial additional evidence of a dangerous rate of speed, in connection with the particular structure of the track at and in the vicinity of the place of wreck, was introduced, and the plaintiff again secured a verdict and judgment. The exceptions preserved at the trial and such of the assignments of error as were framed and set forth in the brief of counsel in the manner required by the rules of this court present but one question that requires our consideration : Did the trial court err in refusing the defendant's request for a directed verdict in its favor? In other words, was there sufficient evidence of the negligence of the defendant to require the submission of the case to the jury?
The train upon which the plaintiff's intestate was engaged as an express messenger and the wreck of which resulted in his death was a fast mail train running between Chicago and Omaha. Its schedule called for a speed of 15 miles per hour, though it does not follow that that speed was to be maintained over every portion of the track. The train was derailed a short distance west of Boone, Iowa, at the foot of a descending grade of 60 feet to the mile, and at the sharpest point of a 6 degree curve. There were but three curves as sharp on defendant's system in Iowa comprising more than 1,000 miles of railroad track, and it was the sharpest curve between Boone and the Missouri river. All other charges of negligence failing for lack of proof, the only claim left the plaintiff was that the accident was caused by a negligent rate of speed at which the train was being run by the engineer, considering the grade and the sharp curve at the bottom. Upon this question there was the following testimony for the plaintiff supplementing a description of the track and grade:
Lindell was a railway mail clerk upon the wrecked train. He had made the particular run about 60 times. For some minutes before the accident he was looking out of the side door of his car and observing the telegraph poles and other fixed objects along the right of way. After qualifying himself to testify upon the subject of speed, he said that the train was running from 10 to 75 miles per hour.
Sigafoos was an express messenger working in the express car under the directions of the deceased. He said that the train was going so fast over the curves near the point of derailment and the car was swaying so violently that nearly all of the piles of express packages were thrown down.
Dye showed his familiarity with railroad operations by testifying that he had been a railway telegrapher for about eight years. He saw the accident from a point about half a mile distant, and said that the engine was working steam in going down the hill, a thing which he had never observed before upon any of the 15 to 30 other occasions