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the operation of a discharge in bankruptcy. The statute excepts from the operation of a discharge any "debt created by the fraud or embezzlement of the bankrupt, or by defalcation as a public officer, or while acting in a fiduciary capacity; but the debt may be proved, and the dividend thereon shall be a payment on account of such debt." Rev. St. § 5117. To this action, brought by appellees against appellants upon a cause of action accruing prior to July 3, 1875, the latter made defense, in part, upon the ground that their respective discharges in bankruptcy relieved them from all liability to plaintiffs. In the supreme court of New York there was a verdict and judgment in favor of the plaintiffs for the sum of $17,517.86. That judgment having been affirmed in the court of appeals, the question to be determined upon this writ of error is whether the claim or demand of the plaintiffs is one from which they were relieved by their discharges in bankruptcy. If the debt was of that character, the judgment below must be reversed; otherwise, affirmed.
The evidence before the jury tended to establish the following facts: That for some years prior to June, 1875, the plaintiffs were doing business in the city of Rochester, New York, as partners, under the style of Lowery & Bradner, while, during the same period, the defendants were engaged in business in the city of New York, under the style of Strang & Holland Bros.; that the special business of plaintiffs was the purchase of wool, which they forwarded to the defendants, as commission merchants, to sell on account; that plaintiffs, for the accommodation of defendants, often furnished them with promissory notes, for the purpose of enabling them to carry on business; that the defendants took care of these notes, paying the same at maturity out of the proceeds of the property consigned, and with money remitted by the plaintiffs; that in the transactions between the parties the plaintiffs were credited with those notes, with the proceeds of property sold on their account, and with money remitted by them, and were charged with the amounts paid to take up the notes; that on or about March 1, 1875, the defendants requested the plaintiffs to furnish them with four promissory notes, of about $4,000 each, to enable them to raise money thereon, and to be credited to plaintiffs on their account, in accordance with the course of business existing between the parties, such notes to be of odd amounts, and made as of different dates, before the time they were transmitted to the defendants, so that they might appear to be given for real indebtedness; that, pursuant to that request, the plaintiffs made and transmitted to defendants their four promissory notes, for $4,325.50, $4,326.25, $4,327.13, and $4.327.15 each, at four months, dated, respectively, on the first, ninth, fifteenth, and twentieth days of February, 1875, and each payable to the plaintiffs at the office of the defendants, in the city of New York, and indorsed by the plaintiffs; and that, on or about April 4, 1875, Strang represented to plaintiffs that his firm had not used, nor been able to use, those notes, because they were made payable at their office, and requested plaintiffs to lend them four other notes of the same amount, payable at the Metropolitan National Bank, in New York city, to be used in the place of those dated in February.
There was also evidence tending to prove that the plaintiffs, relying upon the representation that the February notes had not been used, and that the defendants desired other notes to be used in their place, executed and delivered to the latter four other promissory notes, each at four months, for $4,850, $4,951.25, $4,860.30, and $4,970, respectively, dated thirteenth, fourteenth, sixteenth, and twentieth of March, 1875, payable four months after date to their own order at the Metropolitan National Bank, New York, and by them indorsed; that, at the time defendants requested to be furnished with the notes last described, they had, in fact, discounted and put in circulation the February notes, whereby the plaintiffs, as makers and indorsers, were compelled to pay the same to the holders; that when Strang applied for the
March notes, the defendants knew that they were insolvent, but that fact was not known to plaintiffs; that he made such representations and procured said notes with the intent to defraud the plaintiffs; and that the latter was compelled to pay such part of the March notes as amounted, principal and interest, to the sum for which they obtained judgment below. In the misrepresentations made by Strang to Lowery & Bradner there was no active participation by his partners, the Messrs. Holland. But it was proven that the proceeds of the notes last obtained from plaintiffs, as well as the proceeds of the February notes, all went into the business of Strang & Holland Bros.
The present suit, brought to recover a judgment for the*amount plaintiffs were compelled to pay to bona fide holders of the March notes, proceeds upon the ground that the appellees have sustained damages by reason of the false and fraudulent representations made by Strang, on behalf of his firm, whereby the appellees were induced to execute and deliver to that firm the four notes dated in March, 1875. Is that claim for damages of the class from which the bankrupts were relieved by their respective discharges in bankruptcy?
In Neal v. Clark, 95 U.S. 709, it was held that, looking to the object of congress in enacting a general law by which the honest citizen might be relieved from the burden of hopeless insolvency, the term "fraud," in the clause defining the debts from which a bankrupt is not relieved by a discharge under the bankrupt act, should be construed to mean positive fraud, or fraud in fact, involving moral turpitude or intentional wrong, and not implied fraud or fraud in law, which may exist without the imputation of bad faith or immorality. This principle was affirmed in the recent case of Hennequin v. Clews, 111 U. S. 682, S. C. 4 SUP. CT. REP. 576, where will be found a reference to the leading cases in this country and in England. Under this rule it is impossible to avoid the conclusion that the debt in question was created by positive fraud upon the part of Strang, representing his firm, if it be trueand the jury proceeded upon the ground that such was the fact that he procured the notes, dated in March, by representing that the February notes had not been, and could not be, used by his firm, and that they desired other notes, so drawn as to be readily negotiated, to take their place, when, in fact, the February notes had been previously put into circulation by the firm, and had then become obligations upon which the appellees were liable to the holders. There is no pretense in the evidence that the course of business between Strang & Holland Bros. and the plaintiffs would have entitled the former to obtain the March notes, so long as those dated in February were outstanding obligations against the latter. Hence the necessity of deluding the plaintiffs by the false representation that the February notes had not been negotiated at the time the notes in question were obtained. That representation-as the jury, in effect, found-was made with the intent to deceive the plaintiffs in reference to the actual state of things, and to induce them to do what defendants knew they would not otherwise have done, or been asked to do. If Strang's conduct does not constitute positive fraud, or fraud in fact, involving intentional wrong, it is difficult to conceive what circumstances would have amounted to fraud of that character.
It is contended, however, that as Strang & Holland Bros. were under a legal obligation, apart from any responsibility for the alleged fraudulent representations by Strang, to protect the plaintiffs against liability on the notes dated in March, the latter could have made a claim against the estates of the several bankrupts, for such amounts as they were compelled to pay on account of their being accommodation makers and indorsers; consequently, it is argued, the defendants are released, by their respective discharges in bankruptcy, from the present claim for damages. To this proposition there are two answers: (1) While the plaintiffs might have based their claim entirely upon the legal obligation of defendants to take up the notes at their respective maturities, they were not bound to waive their right to proceed against
the defendants for damages on account of fraud in procuring their execution. This action is brought to recover damages for the deceit practiced upon plaintiffs. The claim here asserted is not one from which the bankrupts are protected by their discharges; for it is not a claim provable against their estates in bankruptcy. Rev. St. §§ 5067-5072, inclusive; Id. §§ 5117, 5119. (2) But had the plaintiffs waived their right to claim damages specifically for the deceit practiced upon them, and made a claim against the estate of the bankrupts, based wholly upon their legal obligation to save plaintiffs harmless on account of their being the makers and indorsers of the notes in question, or if the present action had been based upon that obligation, and not upon the fraud committed by defendants, it would not follow that the defendants would be protected by their discharges in bankruptcy; for the statute ex-, pressly declares that a discharge is subject, even in respect of claims provable in bankruptcy, to the limitation that no debt created by the fraud of the bankrupt shall be discharged by the proceedings in bankruptcy, and that a debt so created may be proved, and the dividend thereon shall be a payment on account of such debt. Rev. St. §§ 5117, 5119. It is therefore clear that, whether the claim asserted by plaintiffs is regarded as one arising out of the deceit or fraud of the defendants, or as a debt created by their fraud, the discharges in bankruptcy do not constitute a defense.
The only other question to be determined is whether the defendants John B. Holland and Joseph Holland can be held liable for the false and fraudulent representations of their partner, it being conceded that they were not made by their direction nor with their knowledge. Whether this action be regarded as one to recover damages for the deceit practiced upon the plaintiffs, or as one to recover the amount of a debt created by fraud upon the part of Strang, we are of opinion that his fraud is to be imputed, for the purposes of the action, to all the members of his firm. The transaction between him and the plaintiffs is to be deemed a partnership transaction, because, in addition to his representation that the notes were for the benefit of his firm, he had, by virtue of his agency for the partnership, and as between the firm and those dealing with it in good faith, authority to negotiate for promissory notes and other securities for its use. Each partner was the agent and representative of the firm with reference to all business within the scope of the partnership. And if, in the conduct of partnership business, and with reference thereto, one partner makes false or fraudulent misrepresentations of fact to the injury of innocent persons who deal with him as representing the firm, and without notice of any limitations upon his general authority, his partners cannot escape pecuniary responsibility therefor upon the ground that such misrepresentations were made without their knowledge. This is especially so when, as in the case before us, the partners, who were not themselves guilty of wrong, received and appropriated the fruits of the fraudulent conduct of their associate in business. Stockwell v. U. S. 13 Wall. 547, 548; Story, Partn. §§ 1,, 102, 103, 107, 108, 166, 168; Chester v. Dickerson, 54 N. Y. 1; Locke v. Stearns, *1 Metc. 560; Lothrop v. Adams, 133 Mass. 481; Blight's Heirs v. Tobin, 7 T. B. Mon. 617; Durant v. Rogers, 87 Ill. 508; Colly. Partn. (Wood's Ed.) §§ 446, 449, 450; Lindl. Partn. (Ewell's Ed.) § 302.
The judgment is affirmed.
(114 U. S. 1)
THOMPSON, Trustee, etc., and others v. BOISSELIER and another. (Two Cases.) Appeals from the Circuit Court of the United States for the Eastern District of Missouri.
MCNAB & HARLAN MANUF'G Co. and another v. SAME.1 Appeal from the Circuit Court of the United States for the Southern District of New York.
EATON and others v. SAME.1
Appeal from the Circuit Court of the United States for the Southern District of New York.
(March 30, 1885.)
1. PATENTS FOR INVENTIONS-CARR WATER-CLOSET-REISSUE No. 978.
The third claim of reissued letters patent No. 978, granted to William 8. Carr, June 12, 1860, for "improvements in water-closets," (the original patent having been granted to him August 5, 1856, and, as reissued, extended, July 23, 1870, for 7 years from August 5, 1870,) namely," In a valve for water-closets, a cup-leather for controlling the motion of said valve in closing gradually, substantially as specified, said cup-leather moving freely in one direction, and closing against the containing cylinder in the other direction, and the leakage of water in said cylinder allowing the movement of said cup-leather, as set forth," construed, and the operation of the device explained.
2. SAME STATE OF THE ART.
The state of the art as to prior devices, and the construction and operation of the defendants' device, set forth.
In view of the state of the art, held, that, for the purpose of securing the free passage of water in one direction, and preventing its escape in the other direction otherwise than gradually, the defendants had used nothing which they did not have a right to use, and had not appropriated any patentable invention which Carr had a right to cover, as against the defendants' structure, by the third claim of his reissue.
4. SAME-WHAT EFFECTED BY CARR'S INVENTION.
All that Carr did, if anything, was to add his form of orifice to the valve and cupleather of an existing pump-plunger.
5. SAME-THIRD CLAIM OF CARR REISSUE.
The third claim of the Carr reissue involves, as an element in it, the means of leakage set forth.
The only point of invention, if it could be dignified by that name, was the special means of leakage shown by Carr, but which the defendants did not use.
7. SAME-WHAT PATENTABLE.
To be patentable, a thing must not only be new and useful, but must amount to an invention or discovery.
REVIEW OF RECENT DECISIONS.
Recent decisions of this court on the subject of what constitutes a patentable invention cited and applied.
9. SAME-VALIDITY OF THIRD CLAIM OF CARR REISSUE-INFRINGEMENT.
Under them, claim 3 of the Carr reissue must, in view of the state of the art, either be held not to involve a patentable invention, or, if it does, not to have been infringed.
10. SAME-BARTHOLOMEW WATER-CLOSET-INFRINGEMENT.
The first claim of letters patent No. 21,734, granted to Frederick H. Bartholomew, October 12, 1858, for an "improved water-closet," and extended, October 2, 1872, for seven years from October 12, 1872, namely, "The use of a drip-box or leakchamber, arranged above the closet, and below and around the supply-cock, substantially as described," must, in view of the state of the art, be limited to a dripbox arranged above or on top of the closet, and is not infringed by a structure in which the drip-box is cast on the side of the trunk, near the top, but below it, and not on top of it.
1S. C. 7 Fed. Rep. 821.
Edmund Wetmore and G. G. Frelinghuysen, for Thompson, Trustee, etc., and others. L. Deane, for appellees in Missouri cases, and appellants in New York cases.
BLATCHFORD, J. These are four suits in equity. The first one was brought in February, 1877, in the circuit court of the United States for the Eastern district of Missouri, by Charles F. Blake, as trustee of William S. Carr and Frederick H. Bartholomew, against Elizabeth E. Boisselier and John C. Kupferle, for the infringement of reissued letters patent, No. 978, granted to William S. Carr, June 12, 1860, for "improvements in water-closets," the original patent having been granted to him August 5, 1856, and, as reissued, extended, July 23, 1870, for seven years from August 5, 1870. The second suit was brought in February, 1879, in the same court, by Charles F. Blake, as trustee of Sarah Bartholomew, against the same defendants, for the infringement of letters patent, No. 21,734, granted to Frederick H. Bartholomew, October 12, 1858, for an "improved water-closet," and extended, October 2, 1872, for seven years from October 12, 1872. The third and fourth suits were brought in July, 1879, in the circuit court of the United States for the Southern district of New York, by Charles F. Blake, as trustee, etc., and William S. Carr and Sarah M. Bartholomew-one against the McNab & Harlan Manufacturing Company and John Harlan, and the other against John Eaton and others--each for the infringement of the said Carr patent, as reissued and extended, and of the said Bartholomew patent, as extended. In each of the two suits in Missouri a decree was made in May, 1880, adjudging that the patent sued on was not good and valid in law, and dismissing the bill. In each of the two suits in New York, a decision was made in February, 1881, (19 Blatchf. C. C. 73, S. C. 7 Fed. Rep. 821,) adjudging that the two patents were good and valid in law, and that the third claim of the Carr reissue, and the first claim of the Bartholomew patent, had been infringed, and awarding an account of profits and damages; and in January, 1882, a final decree was made in one suit for $1,200 damages and $118.74 costs, and in the other for $415 damages and $101.24 costs. The plaintiffs in interest in each of the Missouri suits, and the defendants in each of the New York suits, have appealed to this court. The questions are the same in all of the suits and arise on the same proofs.
The third claim of the Carr reissue is the only claim of that patent which is alleged to have been infringed. So much of the specification of that reissue as relates to that claim is as follows: "Fig. 1 is an elevation of my closet as in place for use; Fig. 2 is a plan of the cock and part of the plan of said closet; and Fig. 3 is a vertical section of my cock made use of in letting the water into and shutting the same off from said closet. Similar marks of reference indicate the same parts in all the figures. The nature of my said invention consists in a peculiar construction of cock, which is opened by the motion of the seat of the water-closet, and allows but little water to run into the pan of the closet until the weight is removed from the seat, when the cock, gradually closing of itself, allows the water to run for a limited and regulated time, sufficient to wash out the basin. * * * In the drawing, a is the trunk on the upper end of the soil-pipe, b, fitted with the pan, r, on the shaft or spindle, q, and c is the basin setting on to the trunk, a. These parts, thus far, are to be of any usual or desired character; d is a pipe supplying water from any suitable head, and said pipe is attached to the coupling 1, that screws on to the body, e, of the cock, and f is a pipe and coupling passing water (when admitted as hereafter detailed) to the basin, c, where it is to be fitted with the deflector, as usual. The cock, e, that supplies water to the basin, is constructed with a stem, h, passing nearly or quite air-tight through the leather washer, 4, beneath the cap, n, and the lower end of said stem, h, is formed with a valve, g, and with a cylindrical part, 3, fitting water-tight, or nearly so; the opening of the washer, 2, between the coupling, 1, of the