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ing or agreement concerning the shipment and sale of the bone by the claimant. The maritime law contemplates that seamen should be promptly paid and not required to remain on shore indefinitely for their earnings.
We agree with the court below that, the claimant not having divided the commodity, but having, instead, sent it away to market, there is an implied obligation on its part to pay the libelant his proportionate share of the value; and such was the effect of the decisions of Judge Hoffman in the cases of The Hunter (D. C.) 47 Fed. 744, and The Cape Horn Pigeon (D. C.) 49 Fed. 164.
The judgment is affirmed.
NOTE.-The following is the opinion of Hanford, District Judge, on the merits:
HANFORD. District Judge. There is no basis either in the pleadings or the evidence for the argument made in behalf of the respondent that the contract of employment upon which this suit is founded constituted a partnership. The libelant was hired as a seaman, and it was agreed that for his compensation he should receive a share of the product of the voyage. A reasonable estimate of the value of his share is $460, after making due allowance for all subtractions on account of expenses and shrinkage. As the respondent did not divide the commodity, and did send it away to market, there is an implied obligation to pay the libelant his proportionate share of the value. An agreement to accept part of a debt as payment in full is not a bar to a suit to recover the balance, because there is no consideration to support such an agreement. An attempt to extinguish a debt in that manner differs materially from an adjustment of differences and payment of the full amount which a debtor and creditor by agreement have made the true amount of the balance due from one to the other. When a sailor at the termination of a voyage or period of service signs clear of a ship upon receiving the amount of wages which at the contract rate is the true amount earned, after deducting set-offs which he has agreed to, the transaction is not subject to be impeached, except on the grounds of mutual mistake, or fraud, or duress, or legal disability of one of the parties to bind himself by a contract. There is no such a settlement between the libelant and the respondent alleged or proved in this case, and it is my opinion that there is no valid defense.
For the above reasons, I direct that a decree be entered in favor of the libelant for the difference between the amount paid him on the contract, and $460, with interest at 6 per cent. from the date of the commencement of this suit, and costs.
In re GESAS.
In re COMMERCIAL NAT. BANK OF ST. ANTHONY.
(Circuit Court of Appeals. Ninth Circuit. June 27, 1906.)
1. BANKS AND BANKING-BANKER'S LIEN-STATUTES—CONSTRUCTION.
The lien given to a banker by Rev. St. Idaho 1887, § 3448, declaring that a banker has a general lien dependent on possession on all property in his hands belonging to a customer for the balance due him from such customer in the ordinary course of business, is limited to property taken by a banker in the usual course of the banking business, such as banks are in the habit of dealing in, or in taking on deposit, or for collection, or otherwise, as notes, bonds, stocks, and other choses in action,
and does not include stocks of merchandise, etc., which cannot conveniently pass into the actual possession of the bank.
[Ed. Note.-For cases in point, see vol. 6, Cent. Dig. Banks and
Banking, $ 673.) 2. BANKRUPTCY_TRANSFERS-PREFERENCES-VALIDITY.
A bankrupt, while insolvent, and while making other like transfers of his property for a like purpose, about 10 days prior to the filing of a petition in bankruptcy by his creditors, asking that he be adjudged a bankrupt, which was done a short time after, transferred certain of his property to certain banks, without any new consideration, which operated to give them a preference over other creditors. Held, that the transfers were unenforceable.
[Ed. Note.-For cases in point, see vol. 6, Cent. Dig. Bankruptcy, 88 247–285.]
Petition for Revision of Proceedings of the District Court of the United States for the District of Idaho.
Caleb Jones, for petitioner.
and MORROW, Circuit Judges, and DE HAVEN, District Judge.
DE HAVEN, District Judge. This is a petition to revise in matter of law an order made by the United States District Court for the District of Idaho, affirming an order of the referee refusing to allow as a secured claim a certain claim filed by the petitioner herein in the matter of Harry Gesas, bankrupt. The facts, and the grounds of his cision, are fully stated in the following opinion of Beatty, District Judge, affirming the order of the referee:
“The Commercial National Bank of St. Anthony, Idaho, filed with the referee its proof for the sum of $905 as a preferred claim under the Idaho statute providing a banker's lien. The referee having refused to allow it as a preferred claim, this appeal is taken to review his order. From the record and the stipulation of facts, it appears that on May 16, 1904, the bankrupt executed to the bank his note for $1,000 for borrowed money which after deductions of payments amounted to the sum of $905 on the 11th day of March, 1905, when proof thereof was made; that on December 20, 1904, the bankrupt transferred to the bank possession of his stock of goods of over the value of $10,000, with the understanding that the bank should retain possession thereof and sell the same at retail prices, under said bankrupt's direction, until the proceeds of such sale were sufficient to pay the said indebtedness; that the bank held such possession in conjunction with the First National Bank of St. Anthony; that all the proceeds of sales were turned over to said First National Bank to apply on its claim against said bankrupt; that on the said 20th day of December said bankrupt also executed to said Commercial National Bank his chattel mortgage upon said goods to secure the bank's said claim, but that under this mortgage the bank makes no claim; that on December 31, 1904, a petition in bankruptcy was filed against said bankrupt alleging that on December 19th said bankrupt had given preferences to various parties by executing chattel mortgages on his goods, and that on January 14, 1905, he was adjudicated a bankrupt. In his answer to the petition of his creditors the bankrupt admitted that he had given preferences to some of his creditors and that under the law he was insolvent.
"The matter involved is the construction of section 3448, Rev. St. Idaho 1887, which is: 'A banker has a general lien dependent on possession, upon all property in his hands, belonging to a customer, for the balance due
to him from such customer in the course of the business.' This statute seems chiefly to be but a statement in statutory form of the law upon this subject, as generally recognized: That bankers have liens upon any security or property coming into their possession in the usual course of banking business, for the payment of any indebtedness due them from the owner or depositor of such securities. This rule is subject to modifications, which may be illustrated by quotations from Reynes v. Dumont, 130 .U. S. 354, 9 Sup. Ct. 486, 32 L. Ed. 934. Quoting from other authorities, it is said (page 390 of 130 U. S., page 495 of 9 Sup. Ct. [32 L. Ed. 934]): “A general lien does arise in favor of a bank or banker out of contract, expressed or implied, from the usage of the business, in the absence of anything to show a contrary intention. It does not arise upon securities accidentally in the possession of the bank, or not in its possession in the course of its business as such, nor where the securities are in its hands under circumstances, or where there is a particular mode of dealing, inconsistent with such general lien. * * “A banker's lien
ordinarily attaches in favor of the bank upon the securities and moneys of the customer deposited in the usual course of business, for advances which are supposed to be made upon their credit” * * “Here, then,
* * * is the true principle upon which this, as well as all other banker's liens, must be suistained, if at all. There must be a credit given upon the credit of the securities, either in possession or in expectancy."
"From the foregoing, two principles may be deduced: The securities upon which liens may be maintained must be deposited in the regular course of the banking business, in which also is implied, I think, that they must be of the character or class usually dealt in or deposited in banks in the course of their usual banking business, and the debt must have been incurred upon the faith of such securities actually delivered or promised. Those rulings are based upon the general law upon the subject or upon special statutes. It may be doubted that each of these principles is involved in the Idaho statute. It says that the lien is dependent upon possession by the banker of any of his customer's property. The debt or loan may be made without the possession or promise of possession of any of the customer's property and in no way be made upon its credit; but, when such property comes into the possession of the banker, his lien immediately attaches. An exception is when possession is given for some special purpose the property can be applied only to that purpose. Reynes v. Dumont, ante, and Armstrong v. Chemical Nat. Bank (C. c.) 41 Fed. 234, 6 L. R. A. 226. But I think this statute limits the matters referred to therein to those which occur in the usual course of banking business. While it says all property of the customer, it means all such property as in the usual course of banking business banks are in the habit of dealing in, or in taking on deposit, or for collection, or otherwise, such as notes, bonds, stocks, and other choses in action, the possession of which is consistent with the usual course of banking business and which the bank can conveniently have. I doubt that it applies to the possession of stocks of merchandise or of live stock or of other cumbersome property which cannot conveniently pass into the actual possession of the bank, or such as it does not usually deal in. It is not doubted that, independently of the statute in question, all such property may be transferred to the possession of a bank as security for its claims, when it is not in contravention of some law.
"This brings us to a consideration of the question whether the transfer of the merchandise to the bank is in violation of the statute on bankruptcy. That the chief object of the law is the disposal of the bankrupt's estate to all his creditors in like proportion is too well understood to demand discussion. With such object in view, all transfers of property made to hinder or delay creditors, or preferences made to any, and all judgments, attachments, or other liens obtained through legal proceedings, made within four months of bankruptcy, are set aside. Certain statutory liens, as mechanics' and others, are protected. So, also, is this banker's lien, as provided by said Idaho statute, protected upon whatever property the statute means to include within its terms. So, also, are conveyances and transfers made 'in
good faith and for a present fair consideration. But does the transfer in question come within the protection of the statute either as a lien or as a transfer? I have already said that I do not think that it is the kind of property which the Idaho statute contemplates in providing a banker's lien. * Having held that the bank has no lien upon this property leaves but the question whether the transfer of it was such as can be sustained. It was made when the bankrupt was in fact insolvent under the law and as he subsequently admitted. It was made at the time he was making other like transfers of his property and for a like purpose, and but about 10 days prior to the filing of a petition by his creditors asking that he be adjudicated a bankrupt, which was done in a short time after. Also this transfer was evidently made for the purpose of securing to the bank and the other bank named the payment of their debts, and thus giving these two creditors a preference over the other creditors. All these facts considered were sufficient to put the bank upon its guard and to have at least suggested to it a suspicion of the insolvency of its debtor. But, admitting that the transfer was made in good faith upon the part of the bank, it was without any present consideration whatever, and in that is obnoxious to the law."
We are satisfied with the conclusion reached by the District Court, and for the reasons stated in the foregoing opinion the order is affirmed.
WATERBURY V. MCKINNON.
(Circuit Court of Appeals, Ninth Circuit. June 18, 1906.)
That a lender of money, who was a resident of Montana, procured the note and mortgage securing the same to be executed in the name of plaintiff, who was a citizen of Canada, for the purpose of evading taxation to which the mortgage would have been subject, if executed in the name of the lender, was no defense to a suit by plaintiff to foreclose the same.
[Ed. Note.-For cases in point, see vol. 35, Cent. Dig. Mortgages, § 1211.] Appeal from the Circuit Court of the United States for the District of Montana.
For opinion below, see 136 Fed. 489.
Before GILBERT and ROSS, Circuit Judges, and HAWLEY, District Judge.
ROSS, Circuit Judge. This was an action for the foreclosure of a mortgage alleged by the complainant in the court below, appellee here, to have been given to secure the payment of a promissory note alleged to have been executed by the appellant to her. While the answer of the appellant denies that there was any consideration for the note and mortgage passing from the defendant to the complainant, and avers that the real party in interest and the person to whom the note was in fact executed, and who is now the owner there
of, is one A. C. McKinnon, who was, at the time of the execution of the note, and still is, a resident of the state of Montana—the complainant being a citizen of the Dominion of Canada—yet elsewhere in her answer the defendant to the suit in effect admits that the note and mortgages were executed by her to the complainant, for she expressly "alleges that the said A. C. McKinnon directed the said note and mortgage to be executed in the name of the said Rebecca McKinnon, a nonresident of the state of Montana, for the purpose of defrauding the revenues of the county of Deer Lodge and of the state of Montana; and, being so executed to the said Rebecca McKinnon, the said A. C. McKinnon has from the date of its execution avoided the payment of all taxes to the county of Deer Lodge and to the state of Montana upon said note and mortgage. She alleges that the name of the complainant, Rebecca McKinnon, was used in said note and mortgage solely for the purpose of enabling the said A. C. McKinnon so to defraud the revenues and escape taxation upon the note and mortgage, and that there has been no assessment upon the note and mortgage up to 1903.” The prayer of the answer is that the note and mortgage be declared null and void. Certain exceptions filed by the complainant to the answer were sustained by the court below, which action is assigned for error on this appeal. The only matter so excepted to, which by the record can be identified, is the further and affirmative defense set up in the answer, to the effect that the consideration for the note and mortgage sued on, to wit, $5,500, was the property of A. C. McKinnon, in which the complainant had no interest, and was loaned to the defendant to the suit by McKinnon for his own benefit, but that he procured the note and mortgage to be executed by the defendant in the name of the complainant, who was a nonresident of the state of Montana, for the purpose of defrauding the revenues of the county of Deer Lodge, and the revenues of the state of Montana, and to escape
escape taxation upon the note and mortgage, and thus defraud the collection of taxes thereon, by reason of which the said A. C. McKinnon has from that day until the present time avoided the payment of all taxes to the county of Deer Lodge and to the state of Montana, upon the note and mortgage in question. The answer itself shows that the appellant got $5,500 as a consideration for the execution of the note and mortgage to the complainant. There was not, therefore, any lack of consideration, as is argued for the appellant. By her note and mortgage she promised and agreed to repay the complainant the sum of money mentioned therein, with interest, etc., and pledged the property described in the mortgage as security therefor. That was her contract in writing made with the complainant, and the sole contract made between these parties. The fact pleaded by the appellant to the effect that the complainant lent herself to a fraud practiced by A. C. McKinnon upon the state of Montana and Deer Lodge county of that state, to defraud them out of taxes, while a gross fraud, and one properly punishable under the state statute upon the subject, is one collateral to the contract upon which this suit is brought, and cannot properly