case that the right to take the testimony of the witnesses by deposition existed under the provisions of the laws of the United States, the motion to suppress the depositions must be granted; and it is so ordered.

BREWER and LovE, JJ., concur.

In re CLEVELAND INS. Co., Bankrupt.1

BURKE and another v. GLOBE INS. Co.1

(Circuit Court, N. D. Ohio. 1884.)

1. BANKRUPTCY-RES ADJUDICATA-DECREE OF BANKRUPTCY.

The finding, in a decree of adjudication in involuntary bankruptcy, that the petitioning creditor has a valid, provable claim to the amount of $250, is not conclusive upon the assignee and creditors, so as to dispense with proof of debt of the petitioning creditor, or to preclude questioning the right of such claim to participate in the distribution of the estate.

2. SAME-SET-OFF.

Set-off arises only between independent debts, mutually due, between the same parties.

3. SAME-COUNTER-CLAIM-REINSURANCE-OTHER LOSSES.

The C. Co. reinsured certain risks with the G. Co., (both Ohio corporations,) and losses occurred upon such risks. The former made an assignment under the state law, and, upon petition of the latter, was subsequently adjudicated a bankrupt. Between the date of the assignment and the filing of the petition in bankruptcy, the G. Co. purchased claims against the C. Co., for losses,part being covered by the G. Co.'s reinsurance, and part being for other risks,for the purpose of using such claims as offsets to its own liability. Held, that the claims so purchased for losses, which the G. Co. had reinsured, were a valid counter-claim against its indemnity of reinsurance upon such claims, and that this is not affected by the twentieth section of the bankrupt act, nor the amendment of 1874, nor by the principle of Straus v. Ins. Co. 5 Ohio St. 59. But, under the decisions of the supreme court of Ohio, claims for losses which the G. Co. had not reinsured, it could not set off against claims arising on other reinsurance; it is a debtor to the bankrupt's estate to the amount of such latter claims. The former class of claims, though, is provable in its favor as a general creditor.

Appeal in Bankruptcy from District Court.

S. Burke, for Younglove.

J. D. Cox, for Globe Ins. Co.

MATTHEWS, Justice. This is a proceeding to review and reverse a decree of the district court, sitting in bankruptcy, sustaining the exceptions of the Globe Insurance Company to a report of the register in reference to its claim as a creditor. The claim, as stated and finally allowed by the decree, is as follows:

The nature of this claim, and the questions arising upon it, will appear from the following statement of facts, which are shown in the register's report and are not in dispute:

The Cleveland Insurance Company, the bankrupt, and the Globe Insurance Company, which was the sole petitioning creditor, the proceedings being in involuntary bankruptcy, were both corporations under the laws of Ohio for the organization of fire insurance companies. In October, 1870, the Cleveland Company had outstanding fire risks in Chicago to a large amount, on which it procured from the Globe Insurance Company reinsurance amounting, upon adjustment of the losses reinsured, to $47,353.77, being the credits given by the claimant to the bankrupt in the proof; and this amount, it is admitted, is the adjusted loss, for which the Globe Insurance Company would be liable upon the reinsurance. The policy of reinsurance stipulated "that all risks reinsured by this policy are subject to such conditions, privileges, alterations, and accomodations as may be given by the Cleveland Insurance Company, and all losses payable pro rata, and at same time with said Cleveland Insurance Company." The Chicago fire occurred in October, 1871, and on November 9, 1871, the Cleveland Insurance Company, having become insolvent by reason thereof, made a general assignment of all its property, under the law of the state of Ohio, to Moses C. Younglove for the equal benefit of all its creditors. The Globe Insurance Company sought to settle with the assignee for less than the full amount of its liability, but its offers of compromise were declined. Thereupon it purchased claims against the Cleveland Insurance Company for the avowed purpose of using them as set-offs to the claim of the latter against itself. The claims thus purchased amount to $50,134.48, and constitute the amount of debits in the proof of the claim filed. These claims were purchased prior to May 2, 1872, and consist of 10 policies of insurance issued by the Cleveland Insurance Company, upon which the amount of the losses had been agreed on at the sum charged in the statement of account, and which have been assigned by the original owners to the Globe Insurance Company. Of these 10 policies so assigned, 4, in which the adjusted losses amount to $14,482.50, were reinsured for the full amount by the Globe Insurance Company. The remaining 6 covered adjusted losses amounting to $35,482.98, and on these policies there was partial reinsurance on each, amounting in all to $15,878.98, leaving $19,773 not reinsured, and the whole amount reinsured, $30,361.48. This amount, being the aggregate liability upon these 10 policies of the Globe Insurance Company on its reinsurance, constitutes that amount of credits allowed in the account; the remainder of which, $16,992.29, is made up of losses on five additional policies, which the Globe Insurance Company does not own. The other claims were assigned to it within 60 days prior to May 2, 1872, and after the assignment by the Cleveland Insurance Company to Younglove.

On that date, May 2, 1872, the Globe Insurance Company filed in the district court for the Northern district of Ohio, at Cleveland, its petition, praying that the Cleveland Insurance Company might be adjudged a bankrupt, the act of bankruptcy charged being the assignment made by that company to Younglove. The petition alleged that the petitioner was a creditor to an amount exceeding $250, provable in bankruptcy, and that its demand was as follows:

"Among other indebtedness of said Cleveland Insurance Company to the petitioner, the sum of four thousand and ninety 90-100 dollars, being the onehalf of an adjusted loss upon a policy of insurance issued by said Cleveland Insurance Company to Sweet, Dempster & Co., of Chicago, Illinois, of which the other half was reinsured to said Cleveland Insurance Company by your petitioner; and the whole of which said policy and the adjusted loss thereunder has been, since the occurrence of said loss, assigned by said Sweet, Dempster & Co., for a valuable consideration, to your petitioner; the whole of said loss, as adjusted and acknowledged by said Cleveland Insurance Company, amounting to the sum of eight thousand one hundred and eighty one 81-100 dollars."

An answer was filed denying the allegations of the petition, to which there was a reply; and, a jury being waived, the issues were submitted to the determination of the court. It was found by the court "that the respondent was indebted to the petitioner in the amount of more than $250, as set forth in the said petition;" but the court also found that the assignment by the Cleveland Insurance Company to Younglove was not an act of bankruptcy, and accordingly, on October 16, 1874, dismissed the petition. This judgment was reversed by the circuit court, June 15, 1876, for error in not holding the assignment to be an act of bankruptcy. The Cleveland Insurance Company sought to reverse this judgment of reversal by suing out a writ of error from the supreme court, but this writ was dismissed for want of jurisdiction. Cleveland Ins. Co. v. Globe Ins. Co. 98 U. S. 366. Such proceedings were thereafter had therein, in the district court, that on October 9, 1879, the Cleveland Insurance Company was finally adjudged a bankrupt for the cause aforesaid, and by proper proceedings thereunder M. C. Younglove, to whom the assignment had been made, was chosen and confirmed as assignee in bankruptcy, and accepted the trust. On January 19, 1880, the Globe Insurance Company filed with the register its claim as a creditor, with proof thereof, being for the balance of account, amounting to $2,780.71, remaining after deducting from its claim of $50,134.48 for policies of the Cleveland company, and adjusted losses thereunder assigned to it, the amount of $47,353.77, admitted by it to be due on account of reinsurance, the particulars of which have already been referred to. To the allowance of this claim, Burke, as a creditor, and Younglove, as assignee, filed exceptions. These exceptions were three in number, and as follows:

1. It is first objected that the claim of the Globe Insurance Company to extinguish its liability on account of reinsurance, by means

of claims for losses due from the Cleveland Company, is forbidden by section 20 of the bankrupt act of 1867, as amended by the act of June 22, 1874, which, it is contended, applies to this case. Section 20 of the act of 1867 is as follows:

"That in all cases of mutual debts or mutual credits between the parties the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid, but no set-off shall be allowed of a claim in its nature not provable against the estate: provided, that no set-off shall be allowed in favor of any debtor to the bankrupt of a claim purchased by or transferred to him after the filing of the petition."

The amendment of June 22, 1874, added the following:

"Or, in case of compulsory bankruptcy, after the act of bankruptcy upon or in respect of which the adjudication shall be made, and with a view of making such set-off."

The amending act also contains the following:

"Sec. 21. That all acts or parts of acts inconsistent with the provisions of this act be, and the same are hereby, repealed."

It will be observed that in the present case the claims of the Globe Insurance Company were purchased before the filing of the petition in bankruptcy; and that, although they were acquired after the act of bankruptcy upon which the adjudication was founded, and with a view of using them as set-offs, yet the amendment of June 22, 1874, did not take effect until after the petition was filed, though before the Cleveland Insurance Company was adjudged to be a bankrupt. It is accordingly contended by counsel for the petitioning creditor that this case must be governed by section 20 of the act of 1867, as it stood before the amendment.

2. It is objected to the allowance of these claims as set-offs, in the second place, that when they were acquired the title of the claim against the Globe Company, in favor of the Cleveland Company, had passed from the latter to Younglove, by virtue of its assignment to him; and that, although that assignment was adjudged to be an act of bankruptcy, it was not void and without effect, but was voidable merely, and then only at the election and suit of the assignee, and not at the instance of an individual creditor; and, if avoided, not so as to confer upon such creditors any preference to which they would not otherwise be entitled.

3. It is objected, in the third place, to the allowance of these claims, that the Globe Insurance Company was prohibited by the law of its creation from acquiring title to them for any purpose, or, at least, for the purpose of using them as set-offs to extinguish claims against itself.

On the other hand, it is contended that none of these objections to the claim of the petitioning creditor are now open, the matter of them all being res adjudicata, it having been necessarily determined by the judgment declaring the Cleveland Insurance Company a bankrupt.

But, for several reasons, it seems to me that this alleged estoppel does not arise. It cannot be admitted that the finding that the petitioning creditor has a valid provable claim to the amount of $250, which is all that is necessary as a predicate for the adjudication upon the alleged act of bankruptcy, is conclusive upon the assignee and creditors, so as to dispense with proof of the debt of the petitioning creditor upon the distribution of the estate. It is conclusive so far as necessary to uphold the adjudication of bankruptcy, but no further. It may still be questioned, in part or in whole, upon the proof subsequently required and taken, so that it might consistently happen that a claim which has been found to exist, for the purpose of adjudging bankruptcy against the defendant, might afterwards be held not to exist for the purpose of participating in the distribution of the estate. The assignee and creditors cannot be bound as to their own interests by the acts or default of the bankrupt, resulting in a judgment to which they were not and could not be parties, except so far as that judgment determines the status of the bankrupt. But, in the present case, the claim of the Globe Insurance Company, as presented to the register for allowance, was not set forth in the petition nor passed on by the court. The petition alleges that the petitioner is a creditor; that its demand exceeds $250, "and is as follows, to-wit: Among other indebtedness of said Cleveland Insurance Company to the petitioner, the sum of $4,090.90, being the onehalf of an adjusted loss upon a policy of insurance," etc., to Sweet, Dempster & Co.; but nothing whatever is said of its own indebtedness to the Cleveland Insurance Company, nor of its right to set-off against that the several claims, including that mentioned in the petition, set out in its account, its claim being for the difference in its favor. So that the finding of the court, "that the respondent was indebted to the petitioners in the amount of more than $250, as set forth in the petition," cannot be extended so as to cover the question now raised as to the right to use even the claim, specifically mentioned in the petition, as a set-off against its own admitted liability to the bankrupt's estate.

Nevertheless, in applying these objections to the claim of the Globe Insurance Company, they do not, any of them, touch so much of that claim as consists in compensating so much of the amount due on account of reinsurance, with an equal amount of the original claim of policy-holders, insured by the Cleveland Company, which were reinsured; that is, $30,361.48. The claim to extinguish that amount of liability upon the reinsurance by producing, transferred and thus canceled, the policies and losses on account and by means of which that liability has arisen, is not strictly nor properly a matter of set

That arises only between independent debts mutually due between the same parties. Here it is a matter of counter-claim arising on of the same transaction, where the party sought to be charged as liable on the reinsurance meets that liability by proof of payment, dis