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As it results that the record before us | versed and remanded for further proceeddoes not exhibit error, the judgment of the ings. Court of Appeals of the District of Columbia must be, and it is, affirmed.

(195 U. S. 271)

JOSEPH S. KAUFMAN, Plff. in Err.,

v.

See same case below, 21 Pa. Super. Ct. 256.

Statement by Mr. Justice Brewer:

On August 20, 1898, Gustave Kaufman filed his petition in bankruptcy and was subsequently adjudged and decreed a bankrupt.

W. T. TREDWAY, Trustee of the Estate of W. T. Tredway was appointed trustee of his

Gustave Kaufman, Bankrupt.

Appeal-review of questions of fact-bankruptcy-preferences-evidence of creditor's knowledge-interest on preferenceset-off.

1. Whether a bankrupt was insolvent at the time of giving an alleged preference, and whether the creditor had reasonable cause to believe that it was intended thereby to give a preference, are questions of fact, as to which the Supreme Court of the United States is

concluded by the verdict of the jury in a suit by the trustee to recover the amount of such preference.

2. Testimony of dealings between debtor and creditor some six or seven months prior to a transaction alleged to constitute a preference under the bankruptcy act of July 1, 1898 (30

Stat. at L. 544, 562, chap. 541, U. S. Comp. Stat. 1901, p. 3445), § 60, is admissible on the question of knowledge, in an action by the trustee to recover the amount of the prefer

ence.

8. The commencement by a trustee in bankruptcy of an action to recover a sum alleged

to have been paid by the bankrupt to a creditor as a preference is a demand which starts the running of interest on the claim. 4. To secure the set-off in favor of a creditor who, after receiving a preference, in good faith extends further credit, without security,

of property which becomes part of the debtor's estate, which is allowed by the bankruptcy act of July 1, 1898 (30 Stat. at L. 544, 562, chap. 541, U. S. Comp. Stat. 1901, p. 3445), § 60c, to the extent of "the amount of such new credit remaining unpaid at the time of the adjudication in bankruptcy," it is not necessary that such property should remain a part of the debtor's estate until his adjudication in bankruptcy, or that it should be used in payment of preferred debts.

[No. 17.]

Argued October 24, 1904. Decided ber 28, 1904.

IN

estate. On July 24, 1899, the trustee commenced suit in the court of common pleas, No. 3, of Allegheny county, Pennsylvania, to recover from Joseph S. Kaufman the sum of $4,086.64, charged to have been given, on August 4, 1898, by the bankrupt to the defendant as a preference. The trial resulted in a judgment in favor of the trustee for $1,086.64 and interest. This judgment was affirmed on appeal by the superior court. An application for a further appeal to the supreme court of the state was denied, and thereupon this writ of error was sued out to review the judgment of the superior court. Section 60 of the bankrupt act is as follows:

"Section 60. (a) A person shall be deemed to have given a preference if, being insolv ent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.

"(b) If a bankrupt shall have given a preference within four months before the filing of a petition, or after the filing of the petition, and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.

"(c) If a creditor has been preferred, and afterwards in good faith gives the debtor further credit, without security of any kind, for property which becomes a part of the debtor's estate, the amount of such new Novem-credit remaining unpaid at the time of the

N ERROR to the Superior Court of the State of Pennsylvania to review a judgment which affirmed a judgment of the Court of Common Pleas, No. 3, of Allegheny County, in that State, in favor of a trustee in bankruptcy in an action to recover a sum of money alleged to have been given by the bankrupt to a creditor as a preference. Re25 S. C.-3.

adjudication in bankruptcy may be set off against the amount which would otherwise be recoverable from him." 30 Stat. at L. 544, 562, chap. 541, July 1, 1898, U. S. Comp. Stat. 1901, p. 3445.

Messrs. Joseph A. Langfitt and William Kaufman for plaintiff in error. Messrs. H. L. Castle, William A. Stone, and Stone & Stone for defendant in error.

Mr. Justice Brewer, delivered the opin- | or, at least, that it was used in payment ion of the court: of preferred debts. In its opinion, on a motion for a new trial, it said:

Whether the bankrupt was insolvent on August 4, 1898, when he paid the money to his brother, the defendant, and whether the latter had reasonable cause to believe that it was intended thereby to give a preference, are questions of fact, determined by the verdict of the jury, and not open to review in this court. Hedrick v. Atchison, T. & S. F. R. Co. 167 U. S. 673, 677, 42 L. ed. 320, 322, 17 Sup. Ct. Rep. 922; E. Bement & Sons v. National Harrow Co. 186 U. S. 70, 83, 46 L. ed. 1058, 1064, 22 Sup. Ct. Rep. 747; Jenkins v. Neff, 186 U. S. 230, 46 L. ed. 1140, 22 Sup. Ct. Rep. 905, and cases cited in opinions. It is suggested that the trial court erred in admitting testimony of transactions between the brothers some six or seven months prior to the payment by the bankrupt to the defendant; that such transactions were too remote from the time of the preference to throw light on the question of knowledge. We think that the testimony, whether of much or little value, was competent, and that it was not error for the court to admit it. Clune v. United States, 159 U. S. 590-592, 40 L. ed. 269, 270, 16 Sup. Ct. Rep. 125.

We see no reason to doubt the propriety of llowing interest on the claim from the commencement of the action. Such commencement is itself a demand.

"Evidence that the debtor got the money for another purpose certainly is not evidence that he turned it over to the trus tee.

"The most that defendant can ask-and this we would probably hold-is that money shown to have been given and used to pay a preferred debt would entitle the defendant to a set-off."

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It will be noticed that the words used in paragraph c are not "the bankrupt's estate," but "the debtor's estate." "Debtor" is also found in the preceding clause as descriptive of the one to whom the credit is given. While the same person is both debtor and bankrupt, first debtor and then bankrupt, the use of the former term is suggestive of the time of the transaction as well as the status of the recipient of the credit. The paragraph further provides that "the amount of such new credit remaining unpaid at the time of the adjudication in bankruptcy may be set off." It is the nonpayment, and not the fact that the property remains still a part of the debtor's estate, which entitles to a set-off. It would seem that if Congress intended that which the trial court held to be the meaning of the statute, it would have said "which becomes a part of the bankrupt's estate" or "which becomes and remains a part of the debtor's estate until the adjudication in bankruptcy."

Further, Congress provided that the creditor act in good faith. Thus it excluded any arrangement by which the creditor, seeking to escape the liability occasioned by the preference he has received, passes money or property over to the debtor with a view to its secretion until after the bankruptcy pro

The principal contention, however, is that the state court erred in ruling that the sum of $767, loaned by the defendant to the bankrupt on August 8, could not be considered as a set-off. It appeared that four days after he had received the money paid to him in preference the defendant handed to the bankrupt $767, on the latter's request for money to pay his employees. There was no testimony tending to show what became of this money, whether it was used in pay-ceedings have terminated, or with some ing employees, or whether the payments, if made, were for wages earned within three months before the date of the commencement of proceedings in bankruptcy. All that appeared was the fact of the loan and the expressed purpose thereof. Under these circumstances the court instructed the jury that the defendant had not established his claim to a set-off, as authorized by paragraph c of § 60. This presents a distinct question of law.

The trial court, and its views were approved by the superior court, held that the statute required not merely that the creditor in good faith gave the debtor credit without security, and that the money or property in fact passed to the debtor, and became a part of his estate, but also that it remained such until the time of the bankruptcy, and was transferred to the trustee;

other wrongful purpose. It meant that the creditor should not act in such a way as to intentionally defeat the bankrupt act, but should let the debtor have the money or property for some honest purpose. Requiring that it should become a part of the debtor's estate excluded cases in which the creditor delivered the property to a third person on the credit of the debtor, or delivered it to him with instructions to pass it on to some third party. The purpose was that the property which passed from the creditor should in fact become a part of the debtor's estate, and that the credit should be only for such property.

Still again, to require that the creditor should not only in good faith have extend. ed the credit, and that the money or property should have passed into, and become a part of, the debtor's estate, but that he

plainants, opens the door to the defense of laches to a suit to enforce the trust.

[No. 23.]

should also show the actual disposition thereof made by the debtor, would, in many cases, practically deny the creditor the benefit of a credit which he has extended in good faith. Suppose, three months and a half before bankruptcy, the creditor, in good Argued October 25, 26, 1904. Decided Nofaith, sells and delivers a bill of goods to the debtor, a merchant; how difficult it

would be to show what had become of each

particular article on that bill, or what was done with the money received for those that had been sold; and the same when, as in this case, money was delivered to the debtor. If Congress had intended to require such proof it would seem that it would have used language more definite and certain. If the creditor has acted in good faith, extended credit without security, and the money or property has actually passed into the debtor's possession, why should anything more be required? Has the creditor not been already sufficiently punished when, having received money or property in payment of a just debt, he is compelled to refund that to the trustee because he believed, or had reason to believe, that the debtor, in paying that debt, preferred him? Why should he be punished in addition by the loss of the benefit of a credit given in good faith?

We are of opinion that the state court erred in its construction of the statute and in peremptorily denying to the creditor the benefit of the credit. For these reasons the judgment of the Superior Court is reversed, and the case remanded to that court for further proceedings not inconsistent with this opinion.

(195 U. S. 309)

C. EWING PATTERSON et al., Appts.,

v.

JOHN Y. HEWITT et al.

vember 28, 1904.

APPEAL from the Supreme Court of the

Territory of New Mexico to review a decree which affirmed a decree of the District Court for Lincoln County in that Territory, dismissing, on the ground of laches, a bill to enforce a trust in certain mining locations. Affirmed.

See same case below (N. M.) 55 L. R. A. 658, 66 Pac. 552.

Statement by Mr. Justice Brown:

Appellants C. Ewing Patterson, a resident of New Jersey, and Henry J. Patterson, a resident of New Mexico, on April 29, 1903, filed their bill of complaint in the district court for Lincoln county, territory of New Mexico, against John Y. Hewitt, William Watson, Mathew Hoyle, and Harvey B. Fergusson, residents of New Mexico, and the Old Abe Company, a corporation of the same territory, to enforce a trust which is alleged to have existed between the appellants and the defendant Hewitt, and by virtue of which they sought to recover a one-fourth interest in two mining locations, made in the name of John Y. Hewitt, on the 2d day of May, 1884. The bill prayed for an accounting of proceeds of ores taken from the mines, and a lien on the property, for an injunction, and the appointment of a receiver.

The facts in the case as found by the district court and adopted by the supreme court are substantially as follows:

In 1881 the property in controversy was claimed by the appellants and by Watson, one of the defendants, under locations pre

Laches in suit to enforce rights to mining viously made by them. Between 1881 and

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1883, appellants, in conjunction with the defendant Watson, did a large amount of work upon the claims, and were asserting their rights under the mining laws of the United States. During this time the same ground was also claimed by other parties, among whom was the defendant Hewitt. In August, 1883, a dispute arose in regard to this property between appellants and the defendant Watson on one side and the other parties upon the other side.

A delay of eight years after the right to a deed of an interest in a mining claim has accrued by reason of a proportionate contribution to the work and expense necessary to obtain a patent will defeat a suit to enforce such right, where complainants contributed The parties interested held a meeting in nothing further to the subsequent develop-August or September, 1883, for the purment of the mine and the consequent discov-pose of adjusting the differences then existery of a rich ore deposit. 8. The refusal of a trustee to execute a deeding between them, and to endeavor, if possi8. The refusal of a trustee to execute a deed of an interest in a mining location in compli- interests of all would be protected. The two of an interest in a mining location in compli- ble, to arrive at an agreement whereby the

ance with the trust agreement is a repudia

tion of the trust, which, if known to the com- appellants, the defendant Watson and the

From 1885 to 1890 the defendants performed a large amount of work and expended a good deal of money on the mine in addition to the annual assessment required by the government of the United States thereon; but neither of the appellants ever contributed or offered to contribute any part of the expenses of said work, or perform any labor.

defendant Hewitt, with several others who | until the fall of 1892 was a nonresident of were interested, attended this meeting. The New Mexico. result was an agreement between them that all the old locations then existing, whether made by the appellants or any of the defendants, or conflicting claimants, should be from that date abandoned, surrendered, and given up by all of the parties, and that the ground should be put in possession of Hewitt, as trustee, to hold in his own name for the benefit of all the parties then interested. It was also agreed that Hewitt, as such trustee, should make a deed to such of the said parties holding interests therein as should contribute their part to the work, labor, and expenses necessary to obtain a patent to the land; but there was no agreement as to what should become of the inter-organized by the defendants Hewitt, Ferests of any one who failed to contribute his share of the expenses. It was also agreed that each of the appellants contributing his share of the expenses should receive a oneeighth interest in the location, and that the said Watson and Hewitt should each receive a one-eighth interest, part on account of their services and part on account of their interests in the ground, and that the remaining shares should go to other parties who were interested therein.

In pursuance of this agreement Hewitt took charge of the property, and together with the defendant Watson and one of the appellants Patterson, superintended and directed the work upon said mine during the year 1883 and part of the year 1884. In order to raise money for the working of the mine it was agreed that a one-sixth interest should be sold to H. B. Fergusson for $500.

During 1884 and 1885 a sufficient amount of work was done upon the property to obtain a patent, and to discover mineral thereon. The appellants contributed their share of the work, which enabled the trustee to obtain a patent, and so far carried out their part of the agreement as to entitle them to a deed from the trustee for their one-eighth interest each, according to said agreement. In April, 1885, the appellant Henry J. Patterson, in person and by his agent, demanded a deed from Hewitt, trustee, of the one-eighth interest to which he claimed to be entitled; but the defendant Hewitt at that time refused to make the said deed, and has ever since refused to execute the same, and has disputed his right thereto.

No demand for a deed appears to have been made by C. Ewing Patterson until just before the commencement of this suit, when it was also refused.

In November, 1890, the defendants discovered a large body of rich ore in the mine, and since that date have taken out therefrom gold amounting to several hundred thousand dollars. In 1892, a corporation known as the Old Abe Mining Company was

gusson, Watson, and others, and the ground in controversy, known as the Old Abe ground, including the interests claimed by the appellants, was turned over to the new corporation by the trustee, Hewitt, and this corporation is now holding title thereto.

The appellant Henry J. Patterson, through his agent, Henry Burgess, had knowledge from April, 1885, that Hewitt had refused to carry out said agreement, and execute the deed to him and his co-complainant, and both of the appellants were again informed after April, 1885, that Hewitt had refused to make the said deeds or to carry out the trust agreement.

Upon this state of facts the district court dismissed the bill upon the ground of laches. The supreme court of the territory affirmed its action (55 L. R. A. 658, 66 Pac. 553), and complainants appealed to this court.

Messrs. W. B. Childers and F. W. Clancy for appellants.

Mr. H. B. Fergusson for appellees.

Mr. Justice Brown delivered the opinion of the court:

The defense of laches, which prompted the dismissal of the bill in this case, has so often been made the subject of discussion in this court that a citation of cases is quite unnecessary. Some degree of diligence in bringing suit is required under all systems of jurisprudence. In actions at law, the question of diligence is determined by the words of the statute. statute. If an action be brought the day before the statutory time expires, it will be sustained; if the day after, it will be defeated. In suits in equity the question is determined by the circumstances of each particular case. The statute of limitations consorts with the rigid principles of the common law, but is ill adapted

In 1883, the complainant C. Ewing Patterson left New Mexico, and, up to the time of the bringing of this suit, had never re-to the flexible remedies of a court of equity. turned there. The appellant Henry J. Patterson left in 1885, and from that time

The statute frequently works great practical injustice, the doctrine of laches. never.

True, lapse of time is one of the chief ingredients, but there are others of almost equal importance. Change in the value of the property between the time the cause of action arose and the time the bill was filed, complainant's knowledge or ignorance of the facts constituting the cause of action, as well as his diligence in availing himself of the means of knowledge within his control,—are all material to be considered upon the question whether the suit was brought without unreasonable delay.

But the weight of authority is the other way, and we consider the better rule to be that, even if the statute of limitations be made applicable, in general terms to suits in equity, and not to any particular defense, the defendant may avail himself of the laches of the complainant, notwithstanding the time fixed by the statute has not expired. This has been expressly held in Alabama (Scruggs v. Decatur Mineral & Land Co. 86 Ala. 173, 5 So. 440), in Missouri (Bliss v. Prichard, 67 Mo. 181; Kline v. Vogel, 90

1. In the case under consideration the ap-Mo. 239, 1 S. W. 733, 2 S. W. 408), and in pellants claim the benefit of § 2938 of the Compiled Laws of New Mexico, to the following effect:

"No person or persons, nor their children or heirs, shall have, sue, or maintain any action or suit, either in law or equity, for any lands, tenements, or hereditaments, but within ten years next after his, her, or their right to commence, have, or maintain such suit shall have come, fallen, or accrued," etc.

If this were an action of ejectment at law, there seems to be no question but what it could be maintained, since it was brought within ten years from the time the cause of action accrued; but where the statute is in terms applicable to suits in equity, as well as at law, it is ordinarily construed, in cases demanding equitable relief, as fixing a time beyond which the suit will not, under any circumstances, lie; but not as precluding the defense of laches, provided there has been unreasonable delay within the time limited by the statute. In an action at law, courts are bound by the literalism of the statute; but in equity the question of unreasonable delay within the statutory limitation is still open. Alsop v. Riker, 155 U. S. 448-460, 39 L. ed. 218-222, 15 Sup. Ct. Rep. 162.

If this were not so, it would seem to follow that in the code states, where there is but one form of action applicable both to proceedings of a legal and equitable nature, a statute of limitations, general in its terms, would apply to suits of both descriptions, and the doctrine of the laches become practically obsolete. This, however, is far from being the case, as questions of laches are as often arising and being discussed in the code states as in the others. In a few cases where the statute of limitations is made applicable in terms to suits in equity, it has been construed as allowing a suit to be begun at any time within the period limited by the statute, notwithstanding the intermediate laches of the complainant, although in those cases it will usually be found that the language of the statute is explicit and imperative. Hill v. Nash, 73 Miss. 849, 19 So. 709; Washington v. Soria, 73 Miss. 665, 55 Am. St. Rep. 555, 19 So. 485.

New York (Calhoun v. Millard, 121 N. Y. 69, 8 L. R. A. 248, 24 N. E. 27). In the last case the question is discussed at considerable length by Chief Judge Andrews, and the conclusion reached that "the period of limitation of equitable actions fixed by the statute is not, where a purely equitable remedy is invoked, equivalent to a legislative direction that no period short of that time shall be a bar to relief in any case, or precludes the court from denying relief in accordance with equitable principles for unreasonable delay, although the full period of ten years has not elapsed since the cause of action accrued."

Indeed, in some cases the diligence required is measured by months rather than by years. Pollard v. Clayton, 1 Kay & J. 462; Attwood v. Small, 6 Clark & F. 356.

And in others a delay of two, three, or four years has been held fatal. Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. 329; Hayward v. Eliot Nat. Bank, 96 U. S. 611, 24 L. ed. 855; Holgate v. Eaton, 116 U. S. 33, 29 L. ed. 538, 6 Sup. Ct. Rep. 224; Hagerman v. Bates, 5 Colo. App. 391, 38 Pac. 1100; Graff v. Portland Town & Mineral Co. 12 Colo. App. 106, 54 Pac. 854. 2. The facts in this case, so far as they concern the applicability of the defense of laches, are that all prior locations made by the claimants to this land were abandoned in August, 1883, when an oral agreement was entered into that Hewitt should be appointed trustee for all concerned; that upoh the performance of certain conditions by the parties interested he should make a deed to each of such parties as should contribute his part to the work and expense necessary to obtain a patent; that each of the appellants contributed his share of the work in the years 1883 and 1884,-enough to entitle each of them to a deed of his interest under the agreement; that April, 1885, Henry J. Patterson demanded a deed of Hewitt, which was refused, but that C. Ewing Patterson did not demand his deed until just before the institution of this suit; that the defendants and their associates, from the year 1885 to 1890, performed a large amount of work in developing the mine,

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