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this conclusion the different views expressed | der 57g depend upon the action of the by the trial court and the supreme court trustee. Counsel say: upon the finding of the jury as to the rela- “The bankrupt act, therefore, contemtion which the lumber company stood to the plates that the trustee shall exercise his bank. The jury found, in answer to ques-election as to whether or not he shall avoid tions 4 and 5, that the lumber company, a preference, and it also contemplates that acting for the bank, took the legal title for the creditor receiving such alleged preferthe benefit of the latter under an agreement ence must exercise an election as to what with Young and the bank to account to it course he shall take. Until the trustee exfor a portion of the proceeds. The trial ercises his election, no cause of action accourt said that this was not a finding "that crues.
The creditor is not called upon to the lumber company was the agent of the elect what course he shall take until the bank.” The supreme court thought that the trustee has acted. It therefore follows that jury "pretty clearly decided” that the bank the trustee should exercise his election and was a principal and the lumber company "a make his demand before commencing suit." mere agent” in the matter. It is true the And this, it is argued, is more than a supreme court immediately added: "How- mere question of state practice, and inever, the evidence seems to clearly establish volves the question whether the property that the lumber company purchased the consisting of the alleged preference is any property from Young in the regular course part of the trust estate. If it be intended of business, without any understanding with by this to assert that the action of the the defendant, other than that its interest creditor under 57g is to wait upon or dein the property as mortgagee and claimant pends upon the action of the trustee under under numerous statutory labor liens should $ 60, we do not assent, and nothing can be be recognized, and the equivalent thereof in deduced, therefore, from the supposed relamoney delivered to it out of the proceeds." tion of those sections as to the necessity of [125 Wis. 478, 104 N. W. 102.] And th
And this a demand before suit. We do not see how was deemed sufficient to accomplish the such a demand ca
the such a demand can even be an element in preference which Young intended to give the the consideration of the creditor, whether he bank. The court passed over, as not impor- will surrender the preference and prove his tant, the distinction between the notes debt. The right of surrender exists as well given by the lumber company to Young as after suit as before suit. Keppel v. Tiffin the purchase price of the lumber.
Sav. Bank, 197 U. S. 356, 49 L. ed. 790, 25 These minor matters out of the way, we Sup. Ct. Rep. 443. come to the more important contentions of Independently of such considerations, the bank. These contentions are expressed whether the election by a trustee to avoid in the form of questions, the first of which a preference should be exercised by a deis: “Can a trustee in bankruptcy, under mand before suit or can be exercised by the the provisions of the bankruptcy act, law- suit itself might be difficult to determine if fully maintain a suit to recover the value it were necessary on the record. 1 Chitty, of a voidable preference without first elect- Pl. 176, and cases cited; Shuman v. Flecking to avoid such preference by notice to enstein, 4 Sawy. 174, Fed. Cas. No. 12,826; the creditor receiving such preference, and Brooke v. McCraken Fed. Cas. No. 1,932; by demand for its return?”
Wright v. Skinner, 136 Fed. 694; Goldberg It is urged by the bank that it cannot, and v. Harlan, 33 Ind. App. 465, 67 N. E. 707. to sustain this contention, that a preference But we do not think it is open to the bank is not void, but voidable. And voidable sole- to urge the first. The bank, it is true, dely at the election of the trustee, who must murred to the complaint and urged as a indicate a purpose to do so. The argument ground of demurrer the absence of an alleis that, a preference being voidable, the cred- gation of a demand. But the bank did not itor receiving it is not in default until he stand on the demurrer. It answered, and fail to or refuse to surrender it on demand. not only traversed the allegations of the Prior to that time his possession is rightful plaintiff, but set up an independent defense, and lawful, and he is not guilty of any and showed that a demand would have been wrong, tort, or conversion. And the de- unavailing, and a demand is not necessary mand, it is further urged, must be made where it is to be presumed that it would before suit, for, it seems also to be con- have been unavailing. Davenport v. Ladd, 38 tended, that the creditor must be given an Minn. 545, 38 N. W. 622; Bogle v. Gordon, opportunity to exercise the election given 39 Kan. 31, 17 Pac. 857. Besides, it appears him by subdivision g of g 57 of the bankrupt that a demand was made before suit. In act to surrender the preference and prove his determining from what date interest should claim. We say, “seems to be contended,” be- be given the trial court said: “There is cause we are not clear that counsel for the evidence of a demand, but I think only a bank claims that the rights of a creditor un- short time elapsed until action was commenced, so that it will make little difference I obtain a greater percentage of its debt than whether interest is computed from the ume other creditors of the same class. The bank, of the demand or the commencement of the in its brief in this court, says, “certain action."
other claims were filed and allowed in the The trial court instructed the jury sub- bankruptcy proceedings as preferred claims. stantially, in the words of subdivision a of These were probably claims for wages after § 60 of the bankrupt act, as to when a the time of the transfers in question.” In debtor should be deemed to have given a the list of claims referred to some only are preference, and, in explanation of the in-marked preferred. But, granting that they tention of the debtor, said to "intend to all were, they were represented by the trusprefer would be to make a transfer for the tee. purpose of enabling the bank to obtain a The other questions propounded by the greater percentage of its debt than any bank are based on the sixth assignment of other debtors of the same class." And, de error. We will not examine the arguments fining this class of creditors, said further : of counsel for the bank in detail. Their “So far as creditors' rights are involved in fundamental contention is that the transfers this action, they are all of the same class, to the bank were not invalid as a preferby which is meant they would receive the ence if their enforcement would not operate same percentage of their claims. Claims for to give the bank a greater percentage of its taxes or wages within certain times, so as debt than other creditors of the same class to be preferred, would be of a different class. would receive. And such, it is further conBut claims of general creditors, like those tended, was not the result, and it is intiapproved in the Young bankruptcy proceed- mated that claims of possible and fictitious ings, are all of the same class.” The bank creditors were in effect considered. But this excepted, and assigned as error the charge contention encounters the facts found by that all of the creditors were of the same the jury and the trial court. We have alclass. Disposing of the assignment the su- ready seen what, in the opinion of the trial preme court said: “Whether that is right court, the evidence established as to the efor wrong does not seem to in any way con- fect of the transfers, and the jury found cern the case. This action, as we have in that Young was insolvent at the time they dictated, is simply one in trover to recover were made, and that the purpose of their the value of property which, as is alleged, execution was to give the bank a preferwas, in fraud of the bankrupt act, wrong.ence and to enable it to obtain a greater fully converted by defendant to its own percentage of its debt than other creditors use. Whether there was one or more of Young of the same class. These findings classes of creditors, and in what manner were not disturbed by the supreme court, the property sought to be recovered would, and we must accept them as stating the if the suit were successful, be administered, facts established by the evidence, although did not vary in the slightest degree the le-counsel seem to invoke an examination by gal rights of the plaintiff. If the property us of the record against them. Taking them was obtained by the defendant in fraud of as true, they show a case of preference and the bankrupt act, plaintiff was entitled to grounds to set it aside. The bank also conrecover the same, and this is the only ques- tends, in effect, that in such suit the valid. tion involved."
ity of all other claims against the bankrupt The bank contests this view, and contends can be litigated, and whether they have rethat, if accepted, "it would be impossible ceived voidable preferences and have not to ascertain whether or not the preference been required to surrender them. The broad had been received without first determining effect of the contention repels it as unthe question of whether the enforcement of sound. To yield to it would transfer the the transfer would enable the bank to re- administration of a bankrupt's estate from cover a greater percentage of its debt than the United States district court to the state other creditors of the same class."
But court. there is a question of fact to be considered. Judgment affirmed. It was a question of fact what claims were proved against the estate. At the trial the learned judge who presided described them in his instructions as claims of general cred
JOHN C. HAMMOND, Piff. in Err.
, itors. In his memorandum opinion he said
v. that, from his minutes and the statements WILLIAM W. WHITTREDGE, Trustee un. of the evidence in the briefs of counsel, he
der the Will of Solon 0. Richardson, de.
ceased, et al. was inclined to believe that the point was not well taken that the evidence did not Error to state court-Federal question. show that the effect of the enforcement of
1. A decision of a state court in a case the transfer would be to enable the bank to ' in which rights under a statute of the
United States were claimed by the defend- | rect shall revert to the said sisters surviving, ant is reviewable in the Supreme Court of to be shared equally between them. At the the United States, where that statute was decease of all my three said sisters, I referred to by the highest state court and direct that the fund from which they have was an element in its decision.*,
derived an income from my property be Limitation of actions-in bankruptcy cases, divided equally between the childrep of my
2. The two years' limitation prescribed by U. S. Rev. Stát. $ 5057 for suits between said sisters, and I direct my executors to an assignee in bankruptcy and a person pay to them each their respective part, the claiming any adverse interest touching any same to be the property of the children of property or rights of property transferable my said sisters forever. » to or vested in such assignee is not applica- The three life tenants survived the tesble to adverse claims arising out of an tator. Louisa never had any child; Martha equitable attachment and an assignment of Hutchinson had one child; Mary A. Sweetthe bankrupt's interest under a testamen
ser had one child, a son, Elbridge L. Sweettary trust, where both attachment and assignment were subsequent to the assignment in the lifetime of the testator. Mary A.
He and the child of Martha were born in bankruptcy. Bankruptcy - title of assignee - abandon- Sweetser survived her sisters, leaving her ment.
son and niece surviving her. 3. Assignees in bankruptcy cannot be This bill was brought February 1, 1901, deemed to have abandoned the interest in to determine who was entitled to receive remainder of the bankrupt under a testa Elbridge L. Sweetser's half of the fund, mentary trust because they did not sell such whether his assignees in bankruptcy, apinterest, where, apparently as soon as they pointed in proceedings instituted by him in learned of the existence of the trust fund and of the fact that creditors of the bank- / 1878, by voluntary petition in bankruptcy rupt were seeking to reach and apply this in the district court of the United States interest in satisfaction of his debts, they for the district of Massachusetts, or the brought a bill in equity in the nature of a plaintiff in error, who claims, under an eq. bill quia timet to compel the transfer to uitable attachment made in 1881, as herethem of the bankrupt's interest, and to en- after stated, and an assignment made in join the trustee from paying any part of October, 1885, to secure two debts incurred the trust fund to the bankrupt or those after Sweetser's bankruptcy. There claiming under him.
other defendants besides the plaintiff in er[No. 164.]
ror, but their rights are not before us.
The facts are stipulated, and the most Argued and submitted January 17, 1907. pertinent are the following: Decided February 25, 1907.
On February 23, 1878, Elbridge L. Sweet
ser filed a voluntary petition in bankruptcy V ERROR to the Supreme Judicial Court in the district court of the United States,
of the State of Massachusetts to review district of Massachusetts, and was, on that a decree that the interest of a cestui que day, adjudged a bankrupt. On the 16th of trust passed to his assignees in bankruptcy, March, 1878, William B. H. Dowse and entered on a bill for instructions filed by Horace P. Biddle were appointed the asthe testamentary trustee. Affirmed.
signees of his estate, and there was duly See same case below, 189 Mass. 45, 75 N. conveyed to them all the estate which the E. 222.
bankrupt owned or was entitled to on Feb
ruary 23, 1878. Statement by Mr. Justice McKenna:
During the year 1878 claims amounting The defendant in error, Whittredge, who to $13,940.47 were proved against the eswas trustee of certain property held in tate. No other claims have since been trust under the will of Solon 0. Richardson, proved. who died in 1873, filed this bill for instruc- The only assets disclosed by Sweetser in tions in the supreme judicial court of the his schedules consisted of a stock of goods state of Massachusetts.
subject to mortgage. The proceeds of these There was bequeathed by said will $35,- goods were consumed in paying the mort000, on the following trusts:
gage and certain expenses of the assignees, “The income to be paid to his three sis and the balance, of about $280, was paid to ters for life, namely Mary A. Sweetser, Mar- the assignees on account of services. tha Hutchinson, and Louisa Ricnardson; and The Florence Machine Company, in 1881, ‘at the decease of my said sisters, or either of filed a bill in equity against Elbridge L. them, my will is that the share belonging Sweetser and Solon 0. Richardson, then the to the deceased sister shall revert to her chil-sole trustee of Solon 0. Richardson, dedren, to be shared by them each and each ceased, to reach and apply in payment of alike; if either of my said sisters shall die five notes held by that company against childless, the income belonging to her I di- Sweetser, his equitable interest under the
*Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, $$ 1049, 1053.
will of said deceased. The suit was brought ton, the then trustee under the will. under the provision of General Statutes of On the same day Sweetser and his Massachusetts, chap. 113, & 2, and is called wife conveyed to
conveyed to one Sidney P. Brown equity suit No. 386. Subpæna was issued their interest under the will, subject to the November 28, 1881, and served on Sweetser mortgage, and Brown conveyed to Hannah and Richardson, trustee, November 29, 1881. Sweetser. Notice of these conveyances was Sweetser filed an answer February 1, 1882, acknowledged by said trustee, William Morin which, among other things, he denied that ton. he had any such interest under the will as On October 24, 1885, the Florence Machine could be reached and applied to the payment Company brought an action at law in the of the claim of the company, and also denied superior court of Suffolk county against the validity of the claim, but did not deny Sweetser, in which the then assignees in making the notes. On the same date Solon bankruptcy were summoned as trustees, to 0. Richardson, trustee, also filed an answer, recover the sum of $7,620.13, amount due setting up the proceedings in bankruptcy and on eight promissory notes which had been the appointment of assignees, and suggested proved in his bankruptcy proceedings, and that any interest that Sweetser had in the and also to recover upon an account based fund passed to them. The suit is still pend-on ledger entries made by the company in ing, no hearing upon the merits having ever 1881. The assignees in bankruptcy were been had.
duly served with process, but did not apIn 1882 the assignees filed a bill in equity pear, and were defaulted. against Sweetser and Solon 0. Richardson, On October 26, 1885, in equity suit No. then the sole trustee under the will of said | 386, Solon 0. Richardson, trustee, filed a Solon 0. Richardson, in the United States further answer, stating that he had resigned district court, alleging an interest in Sweet as trustee, and that William Morton had ser in the fund, that it had accrued before been appointed sole trustee, and had acthe bankruptcy, but was not set forth in his cepted the trust. schedule of property, and that they had no On June 16, 1891, on motion of W. B. H. knowledge of such interest until a few days Dowse, Warren 0. Kyle was joined with before filing the bill. The bill prayed, him as a party plaintiff in the suit of among other things, "that the said Elbridge Dibble v. Sweetser, in the United States L. Sweetser might be directed to execute district court, and Daniel G. Walton, the and deliver such instruments as would con- then trustee under the will, was summoned vey to said assignees all of his interest as as a defendant. He accepted service July legatee under the said will, and that the 30, 1891, and on November 4, 1891, filed said trustee, Solon O. Richardson, might be a general demurrer to the bill. en joined from paying to the said Elbridge On April 19, 1893, the Florence Machine L. Sweetser, or any person or persons claim Company was dissolved by an act of the ing under him, any part of the said trust legislature, chap. 215 of the Acts of 1893. fund, or the income thereof, which might ac- On August 13, 1894, the Florence Machine crue and become payable to the said Elbridge Company filed a motion in equity suit No. L. Sweetser."
386 that Daniel G. Walton, who had be. On November 15, 1882, the Florence Ma- come trustee of the trust under the will chine Company, by its attorney, Warren o. of Solon 0. Richardson, deceased, and the Kyle, filed a general replication in suit No. then assignees in bankruptcy, Dowse and 386.
Kyle, might be made parties defendant and On December 2, 1882, Sweetser and Solon summoned to answer the plaintiff's bill. 0. Richardson, trustee, filed general demur- Service was made on Walton August 18, rers to the bill. No hearing, however, has 1894, and accepted by the assignees August ever been had in the case, either upon the 30. In September, 1894, Walton's appeardemurrers or the merits, and the case is ance was entered. On May 15, 1899, Hamstill pending
mond, plaintiff in error, having become asOn October 24, 1885, Sweetser executed signee of the claim in suit, entered his apand delivered to the Monitor Oil Stove Com-pearance for the plaintiff, and also entered pany a note for $1,809 and a note to Solon his appearance pro se, and filed a motion 0. Richardson, individually, for the sum of setting forth the assignment to him of the $506.05. As a security for said notes Sweet-claim, and asking to be permitted to proseser gave a written mortgage or assignment, cute the suit in his own name. under seal, of all his interest under the will May, 1899, the assignees filed an answer, of Solon 0. Richardson, deceased, to Rich- alleging upon information and belief that ardson and the company. Sweetser's wife Sweetser had, at the time of the assignsigned the notes and mortgage as joint ment in bankruptcy, a vosted interest in the maker. Notice of the mortgage assign- trust fund under the will of Richardson, ment was acknowledged by William Mor-I and that, by the operation of the United States bankruptcy act, said interest had equitable interest either by reason of the been transferred to them.
provisions of the United States Revised On February 1, 1901, William W. Whitt- Statutes, $ 5057, or otherwise." redge, being then the sole succeeding trustee under said will, filed this suit for instruc- Mr. Hollis R. Bailey for plaintiff in error. tions. On April 22 he was summoned to ap- Messrs. Warren Ozro Kyle and Fred Joy pear as party defendant in the case of for defendants in error. Dibble v. Sweetser, in the United States district court. He accepted service and ap- Mr. Justice McKenna, after stating the peared by counsel June 12, 1901. July 1, case as above, delivered the opinion of the 1901, Hammond filed a petition in said case court: to be made a party. In the petition he A motion is made to dismiss, which, we alleged, among other things, that the as- think, should be denied. Plaintiff in ersignees were not entitled to Sweetser's in- ror sets up rights under $ 5057, which were terest as against him as assignee of the adjudged against him. The court said: Florence Machine Company; among other “The defendant Hammond admits that reasons, because such rights as said assign- when the testator died Elbridge had either ees had, if any, were barred by the statute a vested remainder in one half of the trust of limitations. U. S. Rev. Stat. § 5057. fund of $35,000, subject to the life estates Whittredge, trustee, also filed an answer, al. created by this item of the will, and subleging the pendency of the suit in equityject to the class being opened on the birth No. 386, brought by the Florence Machine of further child or children of the life tenCompany, and that his predecessor had been ants, or a vested interest in a contingent made a party therein; and also alleging remainder, and that 'in either case' his that he, Whittredge, had filed his suit for interest was 'assignable.' instructions, and also that the right of ac- "His contention, however, is that the astion of the assignees was barred by the signees are barred by U. S. Rev. Stat. $ limitations of law.
5057.” On February 10, 1904 (the said assignees The court decided against the contention, Dowse and Kyle having disputed the right and decided, besides, that "the title of the of said John C. Hammond to be subrogated assignees in bankruptcy became complete on to the rights of the Florence Machine Com- the assignment to them of this interest in pany as to the claims proved by said com- remainder,” and that "the ownership drew pany against the estate in bankruptcy of after it the possession,” which has consaid Sweetser in 1878, and having petitioned tinued ever since, “and all persons are barred to have said claims expunged), the United by U. S. Rev. Stat. § 5057, from controStates district court made a decree in favor verting it.” In other words, the court deof said Hammond.
cided that § 5057 did not preclude the asThe decree has since been affirmed by the signees from asserting rights against plainUnited States circuit court of appeals. tiff in error, but precluded him from asDowse v. Hammond, 64 C. C. A. 437, 130 serting rights against them. Defendants in Fed. 103.
error, however, urge that the court's deci. The suit in equity in the Unite:l States sion resulted from facts found or admitted district court, brought by the assignees of and from general principles of law, and Sweetser in the first bankruptcy, has been there remained in the case no question as continued from time to time at the request to any title, right, privilege, or immunity of the assignees, who have appeared for that under a statute of the United States; and purpose at the callings of the docket to that the court expressly declined to choose await the termination of the life interests 'between the opinion in Dushane v. Beall, in the trust fund.
161 U. S. 513, 40 L. ed. 791, 16 Sup. Ct. As already stated, no hearing has been Rep. 637, and the decision in Rock v. Denhad either upon the said demurrers or up- nett, 155 Mass. 500, 30 N. E. 171.'” But on the merits.
rights under a statute of the United States That part of the trust fund held by Whitt- were claimed by plaintiff in error, and that redge, as trustee, which is the subject-mat-statute was referred to by the supreme ju- · ter of this suit, consists of property worth dicial court, and was an element in its deabout $18,000.
cision. We think also that the decree renThe supreme judicial court decreed that dered was final for the purposes of this writ Sweetser's interest in the fund passed to of error. We therefore overrule the motion his assignees in bankruptcy. 189 Mass. 45, to dismiss and go to the merits. 75 N. E. 222. And it was lecreed that Ham- On the merits nine errors are assigned, mond, as assignee of the Florence Machine but plaintiff in error asserts that the quesCompany and as assignee of the Monitor tions really involved are only four, namely: Oil Stove Company, had "no rights in said I Had Sweetser such "amount of title” in the