warrant of attorney, and, therefore, that the of the 4th article of the Constitution and court was without authority to enter judg-law of 1790 [Rev. Stat. § 905, U. S. Comp. ment by confession in its favor against the Stat. 1901, pp. 677 et seq.], and notwithobligor. In other words, the defendant standing the averments contained in the recWiley could show collaterally that he was ord of the judgment itself." There has been not legally before the court-as he was not, no departure in the decisions of this court in any just sense--if his appearance was en- from the doctrines announced in Thompson tered and judgment confessed by one who v. Whitman, whether the question related to had, in fact, at the time, no authority to do courts of general or to courts of limited or either; and, consequently, that the court special jurisdiction. It has been repeatedly was without jurisdiction to proceed except affirmed. Knowles v. Logansport Gaslight on legal notice to him, or without his ap- & Coke Co. 19 Wall. 58, 61, 22 L. ed. 70, 72; [269] pearance in *person or by an attorney au- Hall v. Lanning, 91 U. S. 160, 165, 23 L. thorized to represent him. If law and usage | ed. 271, 273; Pennoyer v. Neff, 95 U. S. 714, in Ohio were to the contrary, then such law 732, 24 L. ed. 565, 572; Cole v. Cunningham, and usage would be in conflict with the Con- 133 U. S. 107, 112, 33 L. ed. 538, 541, 10 stitution of the United States; for it is Sup. Ct. Rep. 269; Grover & B. Mach. Co. v. thoroughly settled that a personal judgment | Radcliffe, 137 U. S. 287, 295, 34 L. ed. 670, against one not before the court by actual 672, 11 Sup. Ct. Rep. 92; Thormann v. service of process, or who did not appear in Frame, 176 U. S. 350, 356, 44 L. ed. 500, person or by an authorized attorney, would 503, 20 Sup. Ct. Rep. 446; Bell v. Bell, 181 be invalid as not being in conformity with U. S. 175, 178, 45 L. ed. 804, 807, 21 Sup. due process of law. Ct. Rep. 551; Andrews v. Andrews, 188 U. S. 14, 34, 47 L. ed. 366, 370, 23 Sup. Ct. Rep. 237. The general jurisdiction of the Ohio court undoubtedly embraced such a cause of action as was set forth in the suit on the note. But we are of opinion that that court had no authority or jurisdiction to render judgment against the obligors if the National Exchange Bank had in fact sold the note, and ceased, before the commencement of that suit, to own it or to be entitled to receive the proceeds to its own use. It was, in such case, in legal effect, a personal judgment without service of process upon the defendants, and without their appearance in person or by an authorized attorney. The proceedings were wanting in due process of law. The obligors never consented to judg ment by confession in favor of one who was not the owner of the note or entitled to receive its proceeds, and the warrant of attorney cannot be held to have authorized such This whole subject was carefully considered in Thompson v. Whitman, 18 Wall. 457, 463, 469, 21 L. ed. 897, 899, 901. That was an action of trespass, brought in the circuit court of the United States for the southern district of New York, for taking and carrying away a certain sloop. The defendant, a New Jersey sheriff, had seized the vessel, pursuant, as he claimed, to a statute of New Jersey relating to the raking of clams, and proceeded against it before two justices of Monmouth county, New Jersey, by whom it was condemned and ordered to be sold. Those justices had no jurisdiction, under the statute, to act in the premises, unless the seizure and the offense both occurred in that county. The record of the case recited that the offense was committed and the seizure made in Monmouth county, and the contention was that the record was conclusive, both as to the jurisdiction of the | court and the merits of the case. In that a confession. case it was held to be competent for the complaining party to prove collaterally that the vessel was not seized in Monmouth county, and therefore that the facts necessary to the exercise of jurisdiction by the New Jersey justices did not exist, although their existence was recited or affirmed in the official record made by them. Speaking by Mr. Justice Bradley, this court adjudged, in the language of Story, that the Constitution "did not make the judgments of other states domestic judgments to all intents and purposes, but only gave a general validity, faith, and credit to them, as evidence;" and, upon an elaborate review of previous cases, that "the jurisdiction of the court by which a judgment is rendered in any state may be [270] questioned in a collateral *proceeding in an Perceiving no error of law in the record *JOSEPH S. KAUFMAN, Plff. in Err.,[271] v. W. T. TREDWAY, Trustee of the Estate of (See S. C. Reporter's ed. 271-276.) Error to state court-review of questions of fact bankruptcy preferences evidence of creditor's knowledge-interest on preference-set-off. 1. Whether a bankrupt was insolvent at the NOTE. On the right of a creditor of a bank other state, notwithstanding the provision' rupt to set off new credits given after receiv time of giving an alleged preference, and whether the creditor had reasonable cause to belleve that it was intended thereby to give a preference, are questions of fact, as to which ed in a judgment in favor of the trustee for $1,086.64 and interest. This judgment was affirmed on appeal by the superior court. the Supreme Court of the United States is An application for a further appeal to the concluded by the verdict of the jury in a suitsupreme court of the state was denied, and by the trustee to recover the amount of such thereupon this writ of error was sued out preference. to review the judgment of the superior court. Section 60 of the bankrupt act is as follows: 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. 3. 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.] "Section 60. (a) A person shall be deemed to have given a preference if, being insolvent, 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 *enforce-[272] ment 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, Argued October 24, 1904. Decided Novem- for property which becomes a part of the ber 28, 1904. IN 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. Reversed and remanded for further proceed ings. 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 was appointed trustee of his 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 result ing a preference-see note to Peterson v. Nash Bros. 55 L. R. A. 344. debtor's estate, the amount of such new Messrs. Joseph A. Langfitt and William Kaufman argued the cause and filed a brief for plaintiff in error. Mr. H. L. Castle argued the cause, and, with Messrs. William A. Stone and Stone & Stone, filed a brief for defendant in error. *Mr. Justice Brewer, delivered the opin-[273] ion of the court: Whether the bankrupt was insolvent on re For set-off in bankruptcy cases generallysee note to Morgan v. Wordell, 55 L. R. A. 33. & 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 allowing interest on the claim from the commencement of the action. Such commencement is itself a demand. 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 paying employees, or whether the payments, if made, were for wages earned within three months before the date of the commencement of proceedings in bankruptcy. 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 [274] claim to a set-off, as authorized by para graph c of § 60. This presents a distinct question of law. All 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; or, at least, that it was used in payment of preferred debts. In its opinion, on a motion for a new trial, it said: "Evidence that the debtor got the money for another purpose certainly is not evidence that he turned it over to the trustee. "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." 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[275] 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 proceedings have terminated, or with some 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. Requir ing 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 extended the credit, and that the money or property should have passed into, and become a part of, the debtor's estate, but that he 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 faith, 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. | 2. The validity of certain releases is res ju 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 [276]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. EMMA S. FAYERWEATHER and Mary W. Achter, Appts., v. THOMAS G. RITCH et al., Individually, 3. dicata as between the parties to a suit in which the question of their invalidity for fraud and undue influence was put in issue by the pleadings, where the decree of the trial court, which could not properly have been rendered without holding the releases valid, was followed by an affirmance on appeal, with an opinion declaring that there was no evidence in the record justifying the contention that they were obtained by fraud and undue influence, with a further affirmance in the court of last resort, whose opinion declared that, upon the state of the record, it was to be presumed that the validity of the releases had been affirmatively found and that there was sufficient evidence to sustain such a finding, followed by a refusal to frame its remittitur so as to send this question back to the trial court for consideration, although the trial judge made no findings of fact, made no mention in his memorandum of decision of the contention respecting the releases, and in his opinion failed in terms to pass upon this point. The effect as res judicata of a decree in a case in which the validity of certain releases was put in issue by the pleadings, and in which no judgment could properly have been rendered without a determination of that question, cannot be limited by the oral testimony of the trial judge, some six years after his decision, to the effect that, in deciding the case, he did not consider the validity of the releases. [Nos. 157, 158.] and as Executors, etc., and others. (No. Argued October 12, 13, 1904. Decided No 157.) JOHN B. REYNOLDS, as Sole Executor of A v. the Last Will and Codicil of Lucy Fayerweather, Deceased, Appt., THOMAS G. RITCH et al., Individually, and as Executors, etc., and others. (No. 158.) (See S. C. Reporter's ed. 276-309.) Direct appeal to Federal Supreme Courtcase involving application of Constitution-res judicata-parol testimony to limit conclusiveness of judgment. 1. The application of the due process of law clause of U. S. Const. 5th Amend. is involved so as to sustain a direct appeal to the Fed eral Supreme Court from a circuit court, NOTE.-On direct appeals to the Federal Su preme Court from district or circuit courtssee note to Gwin v. United States, 46 L. ed. U. S. 741. 195 U. S. U. S., Book 49. vember 28, 1904. PPEALS from the Circuit Court of the United States for the Southern District of New York to review a decree sustaining pleas of res judicata to, and dismissing, a bill and cross bill to set aside certain releases as fraudulently obtained. Affirmed. See same case below, 118 Fed. 943. Statement by Mr. Justice Brewer: The controlling question in these cases arises on pleas of res judicata. The essential facts are as follows: On October 6, 1884, Daniel B. Fayerweather, a citizen and resident of the state of New York, made a will, by the 9th article of which he gave to twenty colleges bequests amounting in the aggregate to $2,100,000. By the 10th article he gave the residuary estate to his executors, as trustees, directing them to divide it equally among the twenty colleges named in the 9th article. On the same day he signed the following statement: "This certifies that I have executed my will of this date, having been advised by ny counsel of the provision and restrictions of the law of this state relative to benevolent corporations. I trust my heirs will permit the provision of this my will to be carried into effect." At that time, by chap. 360, Laws of 1860, of the state of New York, a testator having husband, wife, child, or parent was forbidden to give to literary or benevolent institutions more than one half of his estate. On December 13, 1884, the testator made a first codicil to his will, by which he revoked the 10th article, and gave the residuary of his estate absolutely to his executors. In other respects the will was ratified. At or about the same time a paper, bearing date December 11, 1884, headed "Private Memorandum," was signed by him, which reads as follows: "I have made Messrs. Bulkley and Ritch my residuary legatces in the confidence that thereby my intentions as expressed in my will shall be carried into effect, and without [278] *litigations on the part of any person or persons interested. In case of my death, I trust that they will take such steps, by will or otherwise, as will protect my estate against the contingency of the death of either before my estate is settled and distributed." By subsequent codicils minor changes were made, and Henry B. Vaughan was added as executor. The testator died on November 15, 1890, leaving a widow and three nieces, his only heirs at law and next of kin. On the day of his death he executed a codicil, which was mainly a confirmation of the provisions of the will and prior codicils. Mr. Fayerweather's estate amounted at the date of the will to about three millions of dollars, and at the time of his death to from five to six millions of dollars, mainly in personal property. our determination that we will not retain for our own use any part of the residuary estate left to us by his will, and by the desire to make such disposition of his said residuary estate as in our judgment will best honor his memory, do dispose of so much of the same as shall remain after the [279] payment of all lawful fees, expenses, and charges as follows: "First, We reserve the power to make, and we retain the right to assent to, any enlargement of the $15,000 a year by the will left to Mrs. Fayerweather, which she may desire. "Second, We reserve the power to make, and we retain the right to assent to, any enlargement of the provisions made by the will for Mrs. Mary W. Achter and Mrs. Emma S. Drury, in case we shall be satisfied that such enlargement would not be against the wishes of Mr. Fayerweather. "Third, We give to Lucy J. Beardsley, wife of Morris B. Beardsley, $100,000. "We do this because of Mr. Fayerweather's letter written to Mr. Vaughan and Mr. F. B. Myrick. If accepted, this gift is in discharge of any claim under that letter." Then, after making gifts of several sums to individuals, hospitals, and colleges (some being those named in the will of Mr. Fayerweather, and others not so mentioned), the deed closes with these words: "We execute this instrument, recognizing that there is pending a contest in proceedings for the probate of Mr. Fayerweather's will, and recognizing further that if such contest shall not prevail, a question may be made about our legal rights as devisees and legatees.. Our object is each for himself to give away whatever may come to us as residuary devisees and legatees under Mr. Fayerweather's will." Subsequently, and on March 5, the executors, as residuary legatees, entered inte an agreement with the contestants by which the amounts coming to them were increased, and thereupon the contestants executed the following paper: While by the articles in the will, prior to the 9th, he had made provision for his widow and also bequests to his three nieces, yet obviously his purpose was to give the bulk of his estate to the several colleges named, and to avoid the restraining effect of the New York statute. After the death of Mr. Fayerweather the will and codicils were propounded for probate, to which the widow and nieces filed objections. A hearing was had before the surrogate, and on February 25, 1891, he entered an order admitting the will to probate, and leaving the contest of the codicils to continue. On Feb-inal will and subsequent codicils of Daniel ruary 24, 1891, the three executors, residuary legatees, made a deed of gift, which reads: "Know all men by these presents, That we, Justus L. Bulkley, Thomas G. Ritch, and Henry B. Vaughan, residuary devisees and legatees under the will, meaning thereby the original will and the subsequent codicils of Daniel B. Fayerweather, late of the city of New York, deceased, prompted by "In consideration of the instrument of even date herewith executed by Justus L. Bulkley, Thomas G. Ritch, and Henry B. Vaughan, residuary devisees and legatees under the wili, meaning thereby the orig B. Fayerweather, .. we, the undersigned, being the widow and all of the next[280] of kin of the said Daniel B. Fayerweather, do hereby severally agree for ourselves, our, and each of our heirs, executors, and administrators, as follows: "1. All objections to the probate of the will and four codicils of the late Daniel B. Fayerweather, offered for probate to the surrogate of the county of New York, are |