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BANKRUPTCY.

U. S. DISTRICT COURT, VERMONT.
In re E. L. Matot et al.

Decided November 14, 1877.

If a sufficient number of creditors join in a pe

tition against a firm, it is not necessary that

they should all be firm creditors.

The taking of partnership property when the firm is insolvent, to pay a debt not the debt of the firm, although each of the partners may be liable for it, is an act of bankruptcy. There can be no legal fraud in a debtor pro

curing an adjudication in involuntary proceedings, unless it should be followed by a discharge that could not be had in voluntary proceedings.

An adjudication by default can only be opened at the instance of a party to the default. Petition brought by several creditors of the bankrupts, setting forth in substance that the adjudication, heretofore made, was upon a creditor's petition; that the petitioning creditors were not, in fact, creditors of the firm; that the requisite number and amount did not join in the petition; that the acts of bankruptcy alleged did not in fact exist; and that the petition was procured by the bankrupts themselves as an involuntary one to avoid the necessity of procuring the assent of one-fourth in number, and one-third in value of the creditors to a discharge in case of a deficiency of assets for the purposes of a discharge on a voluntary petition, and praying that the adjudication be set aside. It appeared that one of the petitioning creditors is a firm creditor to some amount, and that the other is an individual creditor, at least of one of the firm to some amount.

Ileld, That if there was a sufficient number joined, the proceeding was a proper one as to both the firm and its members, and that under it there can

Vol. 5-No. 23.

be no appropriation of firm property to the payment of any other than firm creditors. It is conceded that the lack in number was not such as that this petition should prevail on that ground alone, and the establishment of the sufficiency in number establishes the propriety of the proceeding against the firm, because they were proceeded against by at least one firm creditor. If firm property could be applied to individual debts before satisfying firm debts there would be more force to an objection that the petitioning creditors were not all firm creditors, but as such property cannot be so applied, and there is no question of distribution here now, it can have but little force.

It appeared that partnership property was taken to pay a debt, not a debt of this partnership, strictly speaking, although it may be that each of the partners was liable for it, when the firm was insolvent.

Held, That one of the acts of bankruptcy alleged did in fact exist.

Also held, That if there was the requisite number of creditors to the petition, there could be no fraud by the proceeding on the ground of the want of them in respect to procuring a discharge without the requisite amount af assets, or the assent of the requisite number of creditors to entitle the bankrupts to a discharge, although they may have been instrumental in instituting the proceedings. And as it does not appear but that there was the requisite number, the foundation on which the fraud in this respect would rest does not appear on which to grant the petition, if that would be sufficient ground for granting it.

As the Bankrupt Law contemplates

the proceedings there could be no legal fraud in procuring the adjudication unless it is followed by a discharge which could not be had on voluntary proceedings. No intimation that collusion between a debtor, and less than the requisite number of his creditors, to procure his discharge without the co-operation of the requisite number and without the necessary amount of assets, would be successful beyond remedy is intended. Perhaps his procurement of such proceedings, for such a purpose, would be good ground for refusing his discharge, which would be all he could gain, or any of his creditors, lose, beyond what he could have on his own petition.

The creditors now petitioning were secured by attachment. The adjudication was by default and the parties defaulted are satisfied.

Held, That these creditors were not parties to the default and therefore have no standing in Court to have it opened.

Petition dismissed.
Opinion by Wheeler, J.

CONTRACT. EVIDENCE. SUPREME COURT OF PENNSYLVANIA.

Greenawalt, plff. in error, v. Myers. Decided November 12, 1877. Parol evidence is admissible to show that a written contract was executed on the faith of a stipulation, condition, or parol promise made at the time of such execution, although it may vary and materially change the

terms of the written contract.

One Bingler induced plaintiff in error, his family physician, to purchase certain premises of him on the following conditions: He would sell the land for a certain sum, and if, at the end

of a year, Greenawalt did not like the place, Bingler would give him $1,000 for his bargain, and pay for all improvements which might be put on the place. If, at the end of two years, Greenawalt would say he was dissatisfied with his bargain, Bingler would give him $2,000 and pay for improvements, so convinced was he that real estate would advance in value. That he would never part ownership with any bond and mortgage which might be given on the premises, and, furthermore, would never, under any circumstances, hold Greenawalt personally liable on the bond. Greenawalt finally agreed to this arrangement. When the papers were drawn up, and before execution, Greenawalt called Bingler's attention to the fact that neither the agreement to take back the property, and pay the bonus should Greenawalt become dissatisfied, nor to exempt the latter from personal liability on the bond, and not to assign the bond and mortgage, had been inserted. Bingler assured him that it was unnecessary; that his word was as good as his bond; that he would faithfully do all that he had agreed to do; that Greenawalt had nothing to fear, and solemnly repeated the conditions of the transaction as given above. Relying on his soleinn asseverations, Greenawalt executed the bond and mortgage and accepted the deed.

Within the second year thereafter, Greenawalt notified Bingler that he wished to rescind the sale and deed back the property, in accordance with the terms of the agreement. Bingler at first evaded a direct reply, but being urged confessed that it was no longer in his power to do this, he

the terms of the will, to take it at a valuation and pay the other devises.

having previously assigned the bond and mortgage, adding, however, that he soon expected to buy them back Where a posthumous child is born within two

and make it all right.

At various intervals after this, and up to the time of Bingler's death, some time in 1874, Greenawalt endeavored to get him to take the property back, as agreed upon, and each time was told to give himself no anxiety about the matter, as he, Bingler, would soon be in a situation to fix it. This was never done.

Default having been made in the instalment of $5,000, claimed to be due on December 1st, 1875, this suit was brought on the bond.

On the trial defendant offered to prove these facts, but the Court overruled these offers and directed a verdict for plaintiff.

Held, Error. Where, at the execution of the writing, a stipulation has been entered into, a condition annexed, or a promise made by word of mouth, upon the faith of which the writing has been executed, parol evidence is admissible, though it may vary and materially change the terms of the contract. 1 Barr., 516; 10 S. & R.,

290.

months after its father's death, Held, that the father died leaving "issue then living."

The appellee in this case claimed as administrator of E. M. Johnston, a posthumous child of William R. Johnston, deceased. Eliza M. Johnston, the mother of William R., was the daughter of Francis Laird, and took under his will a share as personal estate.

Francis Laird, by his last will and testament, directed that after the death of his wife all his estate should be appraised and sold.. He further directed that if any of his sons thought proper to take the farm at the appraisement he should have the privilege of doing so, on paying the other heirs their respective shares, and that all the money arising from the sale be equally divided among his children, share and share alike. He died leaving sons and daughters.

Held, That an express and explicit direction, by the will, to sell the real estate of the testator, and divide the proceeds, works a conversion of it into personalty on his death. In this case

Judgment reversed and venire fa- there was an express direction to sell.

cias de novo awarded.

Opinion by Sharswood, J.

WILLS. POSTHUMOUS

CHILDREN.

SUPREME COURT OF PENNSYLVANIA.
Laird's appeal.

Decided November 5, 1877.
An express and explicit direction in a will to

sell the real estate and divide the proceeds

works a conversion of it into personalty; although a son of testator is permitted, by

The fact that it further permitted one of his sons, at his option, to take it at the valuation to be made, did not change the effect of the direction to sell. Whether or not a son acquired it, it was nevertheless a sale, and the one taking it became a purchaser. Until that point of time it continued personalty.

Eliza M. Johnston devised the property in question in trust for her two sons, Francis L. and William R.; but provided in case either of them died

within the period of twenty-one years from her decease, without issue then living, the whole should go to the survivor and his heirs. The will further provided that in case both of her said sons should die within twenty-one years, without issue then living, then devise over to other persons. Francis died within less than five years after the death of his mother, without issue. William R. died afterwards, but within twenty-one years after his mother's death. He left a widow, then enceinte, who in less than two months thereafter gave birth to a child.

Held, That the language "then living" manifestly refers to the time of the death of the son. Hence, it fol lows that William R. died leaving "issue then living," and the devise took full effect.

Decree affirmed.
Opinion by Mercur, J.

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TION OF STATE COURT. N. Y. SUPREME COURT. GENERAL TERM. FOURTH DEPT. Charles Burlingame, assignee, &c., respt., v. Joseph Y. Parce et al., applts.

Decided October, 1877.

An action by an assignee in bankruptcy to foreclose a mortgage given to the bankrupt is not a case arising under the laws of the United States, and is not therefore affected by or within the operation of the U. S. Statutes giving exclusive jurisdiction to the Courts of the United States.

Appeal by defendant from an order of the Monroe County Special Term appointing a receiver of the rents and profits of the premises covered by the mortgage, for the foreclosure of which

this action is brought by the assignee in bankruptcy of the mortgagee.

It is claimed by the appellant that this Court has not jurisdiction of the action, by reason of the fact that plaintiff, an assignee in bankruptcy, seeks hereby to enforce the collection of the assets of the bankrupt.

W. S. Hubbell, for applts. in person. McDonald & Noyes, for respt. Held, Under the Bankrupt Law, as it stood prior to June 22, 1874, in Claflin v. Houseman, 3 Otto, 130, it was decided by the U. S. Supreme Court that a State Court had jurisdiction of an action brought by an assignee in bankruptcy to recover for a fraudulent preference.

By the U. S. Rev. Stat. (§ 711, subd. 6) it was provided that the jurisdiction vested in the Courts of the United States should be exclusive of the Courts of the several States of all matters and proceedings in bankruptcy; that the District Courts (565, subd. 8) should have, in their respective districts, "original jurisdiction in all matters and proceedings in bankruptcy; that (§ 4972, subd. 2) such jurisdiction should extend to the collection of all the assets Circuit Court should have jurisdiction of the bankrupt; that (8 630) the in bankruptcy to be exercised within the limits and in the manner provided by law.

These provisions, whether inadvertently or not, as intimated in Claflin v. Houseman, operated to make the jurisdiction of the United States Courts exclusive of the State Courts of all cases legally within their operation. Is the present action such a case?

Olcott v. McLean (10 Hun, 277)

under the laws of the United States, and still it would not follow that where the only operation of the law was to provide for the transfer of cer

was to recover for a fraudulent preference in violation of the Bankrupt Act. The Court in that case held the State Court had not jurisdiction of the action. This same Court, in Brew-tain causes of action already existing, ers' Ins. Co. v. Davenport (10 Hun, 264), held the State Court had jurisdiction of an action brought by the debtor of the bankrupt to determine whether the assignee or an attaching creditor were entitled to certain moneys which he was ready to pay.

Goodrich v. Wilson (119 Mass., 429) holds that a State Court has jurisdiction of actions by the assignee to recover a fraudulent preference notwithstanding amendments of 1874. In this last case, the force of § 711, above referred to, does not seem to have been considered, but doubtless the proper construction in this case was given to § 2, Chap. 390, of Laws of 1874.

Olcott v. McLean was clearly a case arising under the laws of the United States, and it is so treated. Page 280.

The subject of the present action is the mortgage, and the rights conferred by and under it.

These in no sense arise under any law of the United States. The question is not whether the construction of some law of Congress may not be incidentally involved, but whether the case arises under the law. Does it there originate-have its base? That cannot be here truthfully said.

See Story on Cons., § 1646; Osborn v. U. S. Bank; 19 Wheat., 738, Bank v. Devereaux, 5 Cranch, 61.

It may be, as was said in the Osborn case, that all contracts made with an institution, chartered by the United States, would be cases arising

those causes of action, when sought to be enforced by the assignee, would all be cases arising under such law. As well might all actions of ejectment, in which the source of title was in an United States land patent, be cases arising under an U. S. Law. As well might all cases brought by a foreign born citizen, after naturalization, be such cases. Suppose the assignee of a bankrupt should assign a mortgage or any chose in action that had been previously owned by the bankrupt, and was among his assets, would it follow that suit on such assignee's claim must be brought in the United States Court? See also § 5049 of the Bankrupt Law.

Notwithstanding the above decision of the question of jurisdiction, the judgment of the Special Term was reversed upon the ground that the plaintiff, the assignee, did not establish a case showing the necessity of appointing a receiver.

Judgment reversed on this last ground.

Opinion by Merwin, J. Smith, J., concurs in the result. Talcott, P. J., concurs on the ground that this Court in Wente v. Young (ante, 295) have decided in favor of the jurisdiction of State Courts in actions by an assignee.

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