*449

Without pursuing in further detail the allegations of the bill, it may be conceded that, The right of an insolvent debtor to prefer if satisfactorily sustained by evidence, they one creditor to another exists in the state of would have justified the conclusion that the Illinois to its fullest extent, and the giving transactions between C. H. Fargo & Coinof judgment notes is recognized as a legiti-pany and the defendants constituted, not an mate method of preference. Tomlinson v. agreement for the purpose of securing bona Matthews, 98 Ill. 178; Field v. Ridgely, 116 fide creditors, but a conspiracy to hinder, deIll. 424, 6 N. E. 156. lay, and defraud the unsecured creditors of C. H. Fargo & Company. But, as already stated, and as found by the master and the circuit court, these incriminating allegations were not sustained, and the conclusion of the master, of the circuit court, and of the dissenting justice of the circuit court of appeals was that no fraud upon the general creditors was intended or actually carried into effect.

452

lic records.

The device [resorted | to] accomplished for the Fargos and the favored creditors all that a secret chattel mortgage, with possession and power of sale remaining in the mortgagor, could have accomplished, and must therefore be treated in equity [upon all considerations of justice and reason] as such a mortgage would be treated. The judgment notes themselves would not have been a fraud in law; the assignment of the accounts or of the plant at Dixon would not themselves have been a fraud in law; but connected, as they were, with the other advantages obtained,-namely, deprivation of the Fargos of all further power, with permission to retain possession of the goods and reap the profits of their trade, a scheme on the whole under which a dishonest trader could effectually shelter himself, they are, in my judgment, within the plain prohibitions of the law," citing Robinson v. Elliott, 22 Wall. 513, 22 L. ed. 758.

depriving them of their interest, under the statute, in the proceeds of the property in question, or justify a decree giving a prior right to the appellee. It was not intended by the statute to give priority of right to the creditors who are not preferred. All that the appellee can claim is to participate in such proceeds upon terms of equality with other creditors."

A similar view prevailed in Streeter v. Jefferson County Nat. Bank, and it was held that where a creditor of the bankrupt caused execution to be levied, before the bankrupt cy, on goods of the bankrupt to satisfy the debt, and the levy was afterwards set aside as an illegal preference within the purview of the bankrupt act, in consequence of knowledge of the debtor's condition by the plaintiff's attorney, that the creditor was not thereby precluded from proving his debt against the bankrupt.

There is a wide difference between the case of a fraud ab initio,-such for instance, as a The decree of the circuit court, while de- scheme to enforce a false or pretended inpriving the rubber companies and the Metro-debtedness, so as to remove the assets of an politan National Bank of the prior liens cre- alleged debtor from the reach of his bona ated by the confessed judgments and assign- fide creditors, and the case of an attempt ments, placed them in the class with the oth-by bona fide creditors to secure preferences er creditors, and entitled to share ratably for themselves, but using methods forbidden in the distribution of the fund in court. by statute or by the policy of law. In the Mr. Justice Brown, in his dissenting opin- former case, undoubtedly, a court of equity ion in the circuit court of appeals, thus ex- will refuse to permit the guilty parties to pressed the same view: derive any profit or advantage from the "Upon the whole it does not seem to me fraudulent arrangement. In the latter case that such a case of fraud is made out as aua court of equity will not declare a forfeitthorizes the court to postpone the claims of ure of just debts, or, by postponing them till the preferred creditors to those of the gen- all other creditors are satisfied, practically eral creditors, and thereby practically to confiscate them, but will, while defeating the confiscate them; and that there is no sound attempt to obtain a forbidden preference, reason for departing from the general rule | leave such creditors to use and enjoy the laid down in the Supreme Court in White v. same rights and remedies possessed by other Cotzhausen, 129 U. S. 329, 32 L. ed. 677, 9 creditors. Sup. Ct. Rep. 309, and in*Streeter v. Jefferson County Nat. Bank, 147 U. S. 36, 37 L. ed. 68, 13 Sup. Ct. Rep. 236, wherein the preferred creditors were permitted, after their security had been set aside, to stand upon an equality with the general creditors."

We think the present case is one in which the fundamental rule, that equality is equity, may properly be applied, and that will result in avoiding the attempted preferences and in permitting all the creditors to share ratably in the distribution of the fund in the

The decree of the Circuit Court of Appeals is reversed, with costs, and that of the Circuit Court is affirmed.

Mr. Justice Brown did not take part in the decision of the case.

The case of White v. Cotzhausen arose un-hands of the receiver. der the voluntary assignment act of the state of Illinois, and it was held that creditors who had attempted to secure an illegal preference of their debts by means of a conveyance to them of the property of their debtor when insolvent, to the exclusion of other creditors, were not thereby debarred, under the operation of the statute, from par. ticipating in a distribution, under that act, of all the debtor's property, including that illegally conveyed to them. The circuit court held that such illegally preferred creditors should be postponed in the distribution, but this court said, per Mr. Justice Harlan:

"We are not able to assent to this determination of the rights of the parties; for the mother, sisters, and brother of Alexander White, Jr., were his creditors, and, so far as the record discloses, they only sought to obtain a preference over other creditors. But their attempts to obtain such illegal preference ought not to have the effect of

(181 U. S. 473) WILLIAM D. HALE, Piff. in Err.,

v.

LEDYARD V. LEWIS et al.

Error to state court-Federal question—other grounds broad enough to support judgment.

A decision by a state court that a corporation is estopped to set up the Invalidity of a statute, even if it is unconstitutional, by the action of its board of directors, cannot be reviewed on writ of error from the Supreme Court of the United States to the state court,

*474

shall issue its shares, receive moneys, or transact any business in this state unless such association shall have and keep on deposit with the state treasurer of Wisconsin, in trust for the benefit and security

Argued January 28, 29, 1901. Decided May of all its members in this state, the securi

Ν

13, 1901.

IN ERROR to the Supreme Court of the State of Wisconsin to review a decision affirming a judgment to compel the distribution of trust securities of a building and loan association. Dismissed.

See same case below, 98 Wis. 203, 39 L. R. A. 559, 73 N. W. 793.

*

Statement by Mr. Justice Brown:

ties of the actual cash value of $100,000 of the kind mentioned in § 2 of this act [2014b]

to be approved and accepted by said state treasurer, and held in trust as aforesaid, until all shares of such association held by residents of this state shall have been fully redeemed and paid off by such association, and until its contracts and obligations to persons and members residing in this state shall have been fully performed and discharged." San

This was a petition filed by Lewis, as sub-born & Berryman, Anno. Stat. § 2014a. scriber for five shares of stock in the Ameri-sociation had 246 shareholders in Wisconsin, At the time the complaint was filed the ascan Building & Loan Association, in the cir- of whom 162 had become such prior to the cuit court for Dane county, against the Amer

ican Savings & Loan Association, the treas-enactment of this law; and thereafter, and urer of the state of Wisconsin, and William prior to the appointment of plaintiff in erD. Hale, receiver of the association (subsequently admitted as defendant), to compel the securities of this association, held in trust by the state treasurer, to be sequestrated and distributed among the members

and stockholders who are residents of the

state of Wisconsin, and for an injunction and receiver as adjuncts to such relief.

The facts of the case as disclosed by the complaint, answer, and counterclaim are sub stantially as follows:

ror as receiver, 84 additional residents of the state became shareholders, all under a contract identical with that by which all the came shareholders in the association, and shareholders in thirty-four other states bethe rights, privileges, immunities, and liabil in Wisconsin or elsewhere, were the same. ities of every shareholder, whether residing

of them.

above law, and on May 1, 1889, the board of A few days after the enactment of the directors adopted the following resolution: The American Building & Loan Associa-consin be made a depository of the associa"Resolved, That the state treasurer of Wistion was originally incorporated under the tion for temporary convenience in complying laws of Minnesota, April 15, 1887, with its with the law of Visconsin in regard to the principal office at Minneapolis, where it continued to transact its corporate business un- solved, That the association comply with the $100,000. Also redeposit of securities, til June 26, 1892, when its name was Wisconsin law as soon as possible." Therechanged to the American Savings & Loan As- after, from time to time, without other or sociation, without in any way affecting or additional authority, mortgages taken by the altering its corporate rights. The general association from its members were delivered nature of its business was declared to be "to to the state treasurer in the aggregate face assist its members in saving and investing value of $145,234. The shareholders had no money, and in buying and improving real estate, and in procuring money for other pur- mortgages to the state treasurer, nor did knowledge whatever of the delivery of these poses, by loaning or advancing under the mutual building society plan, to such of they consent or acquiesce in that disposition them as might desire to anticipate the ultimate value of their shares, funds accumulating become insolvent, the plaintiff in error, On January 14, 1896, the association haved from the monthly contributions of its William D. Hale, was duly appointed receivstockholders, and also such other funds as may from time to time come into its hands." Minnesota, under the laws of that state. er by the district court of Hennepin county, The management of its affairs was vested in a board of seven directors, elected by the stockholders. Membership was acquired by taking stock in the company and paying an admission fee. On July 31, 1888, the association amended its articles by adding thereto that "the board of directors may sell and dispose of the mortgages held by the corporation whenever they may deem best and as provided by the by-laws." But no by-laws were ever passed upon this subject; and on July 11, 1889, the articles of incorporation were again amended by declaring that "the board of directors shall not sell or dispose of any of the mortgages held or owned by this corporation."

On April 19, 1889, the legislature of Wisconsin enacted a law which provided that"No foreign building and loan association

receiver, and on February 5, 1896, one MelSubsequent to the appointment of Hale as ville C. Clarke was appointed receiver for such association for the state of Wisconsin, by the circuit court of Dane county, and the state treasurer, who was a party to the proceeding, was ordered by the court to turn over all the mortgages in his possession as treasurer, to Clarke as receiver. This was done, and Clarke was proceeding to collect the same for the purpose of distributing the proceeds to the shareholders residing in Wisconsin.

Prior to the appointment of either of these receivers, however, Lewis filed this petition, to which Hale, the Minnesota receiver, was subsequently made a party defendant. He also filed an answer, praying that the Wisconsin

receiver, Clarke, turn over to him the mortgages held by him, to be by him, Hale, collected, and the proceeds equitably distributed to all the shareholders of the association, wheresoever they may reside.

end when said association became insolvent and incapable of carrying out its contracts and effectuating the purpose of its being."

To this answer and counterclaim Clarke, the Wisconsin receiver, as well as Lewis, the Clarke, the Wisconsin receiver, demurred plaintiff, demurred for insufficiency. The to the counterclaim set up in the answer of demurrer was sustained, and the defendant Hale, which was sustained, and an appeal Hale given leave to amend. Instead of was taken from the order sustaining such de-amending, Hale took an appeal to the sumurrer to the supreme court, which af- preme court from the orders sustaining the firmed the order of the lower court, and re- demurrer. manded the case for further proceedings. Upon this appeal the supreme court held Hale, refusing to amend his answer and coun- that the principal question presented was as terclaim, and electing to stand upon the rec- to the construction, validity, and effect of ord, judgment was rendered against him for the law of Wisconsin requiring such associa costs, and from this judgment an appeal was tions to make a deposit of securities as a contaken to the supreme court, which again af-dition to doing business, and decided, first firmed the judgment of the circuit court. Whereupon plaintiff in error sued out this writ.

Messrs. Eugene G. Hay and Charles H. Van Campen for plaintiff in error.

that the mortgages in dispute were deposited with the state treasurer by the corporation in a bona fide attempt to comply with the Wisconsin law; that it was its duty and within the power of its directors to make such deposits, as a condition precedent to the

Mr. John L. Erdall for defendants in er-right to do business in Wisconsin; that the

ror.

Mr. Justice Brown delivered the opinion of the court:

While no motion was made to dismiss this case, the question of jurisdiction arising from the alleged want of a Federal question is elaborately discussed by counsel in their briefs, and has received our attentive consideration.

recognition of the existence of a corporation by any other than the state of its creation depends purely upon the comity of such other state or states; that the power to exclude such corporations embraces the power to reg. ulate them, and that this doctrine was conclusive as to the validity of the pledge of the securities in question under the Wisconsin statute, and was also within the power of the corporation, and not in violation of The original complaint by Lewis against the trust reposed in the board of directors. the Building & Loan Association and the And, second, that whatever the view taken of state treasurer makes no reference to such the rights and relations of the entire body of question, and merely prays for relief under stockholders as between themselves and the the state statute, and for a distribution of corporation, the contract clause of the Conthe local assets among the local stockhold- stitution could not be invoked to release ers. The answer of the state treasurer ad- these securities from the operation of the mits the main allegations of the bill, and ap- statute, as the stockholders had waived their parently accedes to the position of the plain-right to insist upon the constitutional objectiff. The answer and counterclaim of Hale, tion by the voluntary act of the board of dithe Minnesota receiver, who was subsequent-rectors in making the deposit with the state ly admitted as defendant, sets up no conflict treasurer under the statute. Said the court: between the Wisconsin statute and the Fed-"Whatever the practical result of the eneral Constitution, but denies the authority forcement of the trust in favor of Wisconsin of the association to pledge, transfer, or dis-shareholders, creditors, and others sustainpose of any of its mortgages, which were de- ing contractual relations with the corporalivered to the state treasurer without author- tion defendant may be, it rests, as we think ity; asserts that the assets of the associa- and as we hold, upon the consent of the cortion, including the mortgages in the posses-poration and of its shareholders lawfully sion of Clarke, are not sufficient to pay all given, as it well might be in the present case, the shareholders in full, and that if Clarke, by and through its board of directors, for a the Wisconsin receiver, shall collect the valid consideration received by the corporamortgages in his possession, and distribute tion to the benefit and advantage of those the same to the Wisconsin shareholders, they now denying its validity." will receive their pay in full, and thereby be constituted a preferred class against equity and good conscience, and contrary to the purposes of the association as defined by its articles; and finally, "that the law under which it is alleged said mortgages were deposited was intended to protect said Wisconsin shareholders in all their rights growing out of their membership in said association, and not for the purpose of extending, alter-firmed. ing, or changing said rights; that the purpose for which any deposit made by said association with said state treasurer under said law was made terminated and was at an

The orders appealed from were affirmed, and the case sent back to the circuit court. Hale refusing to amend and electing to stand on the record, judgment went against him for costs. He appears to have carried the case again to the supreme court, and for the first time assigned as error the repugnancy of the statute to the Constitution of the United States. Judgment was again af

Passing the question whether a party who failed to set up a Federal question in his origi nal pleadings, or upon his first appeal to the supreme court, and subsequently declines to

*480

The same result must follow in this case, and the writ of error is therefore dismissed.

(181 U. S. 453)

amend, and only sets such question up in an question involved the construction of the assignment of errors on a second appeal, aft- Minnesota statute, but no Federal right. See er the question had been practically disposed also Moran v. Horsky, 178 U. S. 205, 44 L. of by the supreme court, does not lay himself ed. 1038, 20 Sup. Ct. Rep. 856, in which a deopen to the objection so often sustained by us fense under the laws of the United States that a party cannot raise a Federal question was held by the supreme court of Montana for the first time on a motion for a rehear- to have been waived by the laches of the ing. Union Mut. L. Ins. Co. v. Kirchoff, 169 plaintiff. This was also held to be a nonU. S. 103, 113, 42 L. ed. 677, 681, 18 Sup. Ct. Federal ground sufficient to support the Rep. 260; Yazoo & M. Valley R. Co. v. Adjudgment, and the writ of error was dis ams, 180 U. S. 1, ante, 240, 21 Sup. Ct. missed. Rep. 240; it is clear that the supreme court disposed of the case upon a non-Federal ground broad enough to support the judg meut. It held, in substance, that, conceding the law to be unconstitutional, the corporation is estopped to set up its invalidity, by DISTRICT OF COLUMBIA, Plff. in Err., the action of the board of directors in depositing securities with the state treasurer under the Wisconsin statute; that such action was within the power of the board; was binding upon the stockholders, and that such deposit, having been made subject to the condition that the securities shall be held "in trust for the benefit and security of all its members in this state, and held in trust as aforesaid, until all shares of such 1. association held by residents of this state shall have been fully redeemed and paid off by such association, and until its contracts and obligations to persons and members residing in this state shall have been fully performed and discharged," the stockholders as well as the corporation were estopped to claim that such condition was invalid.

v.

CAMDEN IRON WORKS.

Covenant-omission of corporate seal-sig. natures and seals of commissioners of District of Columbia-contract partly performed-waiver of further performanceintercst.

2.

3.

4.

The omission of the seal of the District of Columbia from a contract which the commissioners executed as for the corporation, with their signatures and seals, will not prevent the instruments from binding the corporation as a specialty, although the commissioners bad adopted a corporate seal which had not at that time been generally used, since they could adopt for the time being any seal they chose for the corporation, whether intended to be permanently used or not.

It is competent to show by parol that a contract was finally executed and delivered at a date subsequent to that shown on its face.

An action of covenant on a contract to recover the price of articles delivered under it may be brought, although there has not been full performance, where that which has been delivered has been accepted in part performance, and further performance has been waived.

Fines or penalties for delay or failure to deliver articles under a contract cannot be recovered if strict performance by plaintif has been prevented or waived by defendant.

The case is completely covered by that of Eustis v. Bolles, 150 U. S. 361, 37 L. ed. 1111, 14 Sup. Ct. Rep. 131. This was an action to recover the residue of a note, the holder having received one half of the amount under certain insolvency proceedings in Massachusetts. Defendants pleaded the proceedings in insolvency, an offer of composition, its acceptance by plaintiff and the receipt of the amount coming to him under the composition. Plaintiff demurred, and insisted that the statute, which has been enacted after the note has been executed, impaired the obligation of his contract. The Supreme Court held that the action of plaintiff in accepting his dividend under the in-5. solvency proceedings was a waiver of his right to object to the validity of the statute. Upon writ of error from this court, we held that, in deciding that it was competent for plaintiff to waive his legal rights, and that accepting his dividend under the insolvency proceedings was such a waiver, the court did not decide a Federal question, and the writ Submitted March 7, 1901. Decided May 13, of error was dismissed, citing Beaupré v. Noyes, 138 U. S. 397, 34 L. ed. 991, 11 Sup. Ct. Rep. 296. See also Electric Co. v. Dow, 106 L. S. 489, 41 L. ed. 1088, 17 Sup. Ct. District of Columbia to review a decision N ERROR to the Court of Appeals of the Rep. 645; Pierce v. Somerset R. Co. 171 U. affirming a judgment in an action of coveS. 641, 43 L. ed. 316, 19 Sup. Ct. Rep. 64;nant for the price of articles delivered under Seneca Nation of Indians v. Christy, 162 U. S. 283, 40 L. ed. 970, 16 Sup. Ct. Rep. 828.

Interest on the price of articles delivered in part performance of a contract, when no allowance is made for penalties or forfeitures and further performance is waived, is not to be limited to the period after suit was brought.

[No. 172.]

1901.

a contract. Affirmed.

See same case below, 15 App. D. C. 198.

The case differs from the one under consideration only in the fact that in this case Statement by Mr. Chief Justice Fuller: there was a further question whether the This was an action of covenant brought in waiver was binding not only upon the corpo- the supreme court of the District of Columbia ration, but upon its stockholders. That 'by the Camden Iron Works, a corporation cre