charge, and release of the very obligation for which the reinsurance was an indemnity. It is true that the original insurance and the reinsurance are independent and separate contracts; that there is no privity between the insured in the original policy and the reinsurer; and that a recovery can be had against the latter, at the suit of the reinsured company or its assignee, upon proof merely of the liability of the reinsured company upon the original policy, without actual payment. But it is equally indisputable that, to such an action, it would be a good bar, and complete defense, to show that the defendant had paid, and the original party insured had accepted, satisfaction of the loss insured and reinsured against, or to produce and, prove a release from the original insured to the original insurer. This view is not inconsistent with the decision of the supreme court of Ohio in the case of Ins. Co. v. Ins. Co. 38 Ohio St. 11.

The right to make such satisfaction, if the original party chooses to accept it as payment, is not a right to set off one debt against the other, but is the right merely of the party charged with a liability to show that he has discharged it; to prove that he has performed and not broken his obligation; to plead that the plaintiff has not suffered the damage against which the defendant had given an indemnity. This right, it is clear, is not affected by the twentieth section of the bankrupt act of 1867, nor by the amendment to it of 1874, nor by the voluntary assignment to Younglove, who would be as much bound by such a defense as his assignor, nor by the principle which denies to insurance companies of Ohio corporate power to purchase the assignment of claims against those to whom they are indebted for losses to be used as set-offs, in order to satisfy and pay them.

This principle is embodied in the third objection to the allowance of the claims in question. It rests for authority upon the decision of the supreme court of Ohio in the case of Straus v. Eagle Ins. Co. 5 Ohio St. 59. In that case it was decided that a fire insurance company, under the laws of Ohio, had no corporate power to acquire title to claims against the insured for the purpose of using them as set-offs against the claims for a loss. The language of Judge RANNEY, in delivering the opinion of the court, was very strong and sweeping. He declared as the company "could not, under the power of investment, employ its credit to purchase claims for such a purpose, that it had no power to become a party to the contract of indorsement by which it obtained the notes in question, and no capacity to take or hold the legal title." The principle of this case was reaffirmed and applied in the case of White's Bank v. Toledo F. & M. Ins. Co. 12 Ohio St. 601; but some of the language used in the case of Straus v. Eagle Ins. Co., supri, was limited and qualified as follows:

"The court, indeed, say, in that case, that the contract' (i. e., the indorsement) is void and the instrument a nullity;' but while we concede that there was such an abuse of power as should prevent the relief asked, we are not prepared to hold, where the indorsement is one which, under certain cir

cumstances, the company might lawfully accept,-in other words, where there was a mere abuse, and not a total want of power,-that such indorsement would be null and void for all purposes and as against all persons."

The doctrine, as thus qualified, was again affirmed in Ehrman v. Ins. Co. 35 Ohio St. 324. This must be regarded as the settled law of Ohio; and as, in the present case, both corporations are its creatures, that law furnishes the rule of decision. Its application is not prevented by the supremacy of the bankrupt act, for that does not assume to confer upon corporate bodies of the states any powers not given to them by their charters. It simply regulates, in the matter of set-off, such rights as parties may have lawfully acquired. What those rights are in each case must depend upon the general law of the land, and, when they rest upon corporate power, that law is the law of the locality which has created it. But the principle of the case of Straus v. Eagle Ins. Co., supra, as we have seen, does not apply here so as to forbid the Globe Insurance Company from purchasing the claims of original insured parties against the Cleveland Insurance Company, so far as necessary, and with a view to make good its obligation of indemnity, and to extinguish its liability upon the reinsurance. This is no abuse of its corporate power, and it is no injury to the company reinsured. It is a legitimate exercise of its corporate power in the proper performance of its contracts, and seeks its own protection only by removing the liability of the party it reinsured, which it undertook should not result in loss. And to that extent, therefore, the position of the Globe Insurance Company is justified against all objection. But that company went further than was merely necessary to extinguish the liability of the Cleveland Company for losses which the former had reinsured. It paid in several cases where it had reinsured but one-half the risk, not merely the half it had reinsured, but purchased the entire claim for the whole loss, that it might use the half for which it was not a reinsurer as a set-off against claims arising on other reinsurances which it could not meet directly; for as to some of these, as has been stated, they did not become the owner of the claims for losses. There were five such claims, amounting to $16,992.29. No part of any of these has been paid by the Globe Insurance Company to the original owners, and the Cleveland Insurance Company is liable to them respectively for the full amount. As against this liability the Globe Insurance Company is not at liberty to set off claims upon other losses for which it was not reinsurer; for, upon the principle decided by the supreme court of Ohio, to permit this would be an abuse of its corporate power.

It may be that it became necessary, in negotiating with the original claimants, to purchase an entire claim for the whole loss under a particular policy in order to become owner of the half covered by the reinsurance. But, if so, this does not appear from the record, and cannot be assumed as a fact. If it were, it does not seem to

make any difference. If the Globe Insurance Company could not, as a matter of strict right, insist that the holder of an original policy should accept payment from it of one-half only of his loss, and he chose to make it a condition that to pay half the whole should be purchased, it is difficult to see how that could affect the rights of the Cleveland Insurance Company.

It is argued, indeed, on the part of the latter, that the Globe Insurance Company, by virtue of the decision of the supreme court of Ohio, already referred to, could not acquire the title to these claims for any purpose whatever, and cannot even prove as a creditor on their account. But, as already stated, the doctrine of that court, as finally qualified, does not go so far, but only prohibits the illegal use of such claims by way of set-off against claims for losses covered by other insurance. They remain in the hands of the Globe. Insurance Company as claims provable in its favor, as a general creditor, entitled to dividends out of the bankrupt's estate pro rata with other unpreferred creditors. It is no objection to the view taken in this opinion of the relative rights of the parties that the Globe Insurance Company, by the form of its claim, has admitted itself to be debtor to the estate of the bankrupt to the full amount of the adjusted losses under the reinsurance, and seeks to cancel that indebtedness by a technical set-off, which is denied. This is a mere matter of form, and will be disregarded. The substance of the transactions will alone be looked at, and the account recast into a different form, according to the legal rights of the parties, and so as to accomplish justice between them. This will be done by striking from the two sides of the account, as rendered, the quantities and values which the law regards as mutual compensations, leaving the Globe Insurance Company liable as debtor to pay in full all that remains due to the bankrupt's estate, and entitled as creditor to its dividends, on an equal footing with other general creditors. The conclusion of the register was that the Globe Insurance Company was not entitled to relieve itself from its liability as reinsurer to any extent by means of its claims against the bankrupt, and that, consequently, it was a debtor thereto for the full amount of $47,353.77, but entitled to prove against the estate as a general creditor for the sum of $50,134.48.

The district court, sustaining the exceptions to this report, decreed that the Globe Insurance Company was entitled to cancel its entire liability as reinsurer by crediting the amount thereof against the whole amount of its claims as holder of assigned policies and losses, and to participate in the distribution of the bankrupt's estate, as a creditor, for the balance, amounting to $2,780.71. The conclusion now reached, as a result of the views expressed in this opinion, differs from both. It is that the Globe Insurance Company is entitled to cancel $30,361.48 of its liability as reinsurer, that amount being the whole amount of the assigned claims for losses reinsured by it, leav

ing it debtor on that account still in the sum of $16,992.29, with interest, and entitled to rate as a creditor in the distribution of the bankrupt's estate for the sum of $19,773. The decree of the district court is therefore reversed, and the cause remanded, with directions to enter a decree in accordance with this opinion.

THE PENNSYLVANIA.

(District Court, S. D. New York. October 24, 1884.j

1. COLLISION-CAUSE OF Damage.

As the libelant's tug D. was lying at the end of one of the piers at Jersey City outside of two canal-boats, the steam-tug P. backed out of the slip above and was swung round with the ebb-tide so that her port quarter came along-side the D., causing the D. to roll somewhat; and, in a few moments afterwards, the D. was found leaking, with two deep cuts in her side below the water-line. Held, upon the evidence, that the leak was caused by cuts from the P.'s propeller blades, notwithstanding that the P. was constructed with widely projecting guards, expressly designed to prevent the possibility of such an accident. 2. SAME-OFFER OF SETTLEMENT-COSTS.

The owners of the P., on a claim being made against them, offered to pay the bill at once, if the owners of the D. would permit the P. to come along-side, to test whether the blade of the P.'s propeller could possibly get near the D.; and, the offer not being accepted, held, that the request was a reasonable one having reference to an immediate settlement, and, having been refused, costs were disallowed to the libelant on recovery.

In Admiralty.

J. A. Hyland, for libelants.

Beebe, Wilcox & Hobbs, for claimant.

BROWN, J. Notwithstanding the apparent improbability that the propeller of the Pennsylvania could have struck the Dickson, I feel constrained, from the testimony, to find that the propeller did cause the cuts described. The nature of the cuts, the time, the position, the examinations made by several persons within a few minutes after the contact, and the immediate leaking of the boat, seem to leave no reasonable doubt. The Pennsylvania was, however, manifestly built in a manner designed to avoid the possibility of doing such damage. No similar accident had ever occurred with her before. The discredit of the claim presented against her was, therefore, natural, and not unreasonable, on the part of her owners. The offer to pay the bill at once if the owners of the Dickson would permit the Pennsylvania to come along-side in order to test the possibility of the propeller's touching the Dickson, as alleged, was, it seems to me, a request that, under the circumstances, might reasonably have been acceded to. I cannot for a moment question that it was made in good faith; and as I find that the propeller did strike the Dickson, I think this test, if permitted, would have led to an immediate settlement of the claim; and have rendered this suit unnecessary. While I feel compelled to find in favor of the libelants, I cannot, therefore, allow costs.

CAPITAL CITY BANK OF DES MOINES v. HODGIN and others.

(Circuit Court, 8. D. Iowa, C. D. October Term, 1884.)

1. REMOVAL OF CAUSE-SEPARATE CONTROVERSY-CITIZENSHIP.

F. L. H., a citizen of Iowa, mortgaged a stock of goods to complainant, an Iowa corporation, and such goods were claimed by A. H., a citizen of Ohio, under another chattel mortgage, and removed, and complainant filed a petition in the state court alleging that the mortgage to A. H. was fraudulent, and asking for the issuance of a specific writ of attachment for seizure of the goods, and praying for a judgment against F. L. H. for the amount due from him, and that the lien of complainant's mortgage be declared paramount to that of A. H. The writ was issued, the goods seized and redelivered to A. H. on giving a forthcoming boud therefor. F. L. H. and A. H. answered, setting up that the mortgage to A. H. was valid, and a lien superior and paramount to complainant's; whereupon complainant removed the cause to the federal court on the ground that the suit involved a separate controversy between him and A. H., who was a citizen of another state. Held, that the cause was removable under section 2 of the act of 1875.

2. SAME-WHAT IS A SEPARATE CONTROVERSY.

To entitle a party to remove a cause under the second clause of the second section of the act of 1875, the case must be one capable of separation into parts, so that in one of the parts a controversy will be presented with citizens of one or more states on one side and citizens of other states on the other, which can be fully determined without the presence of the other parties to the suit as it has been begun.

Equity. Motion to remand.

E.J. Goode and W. L. Read, for complainant.

W. B. Raymond and Nourse & Kauffman, for defendants. SHIRAS, J. This suit was commenced in the circuit court of Polk county, Iowa, the petition filed therein setting forth that on the thirteenth of November, 1883, Frank L. Hodgin executed to the complainant a chattel mortgage upon a stock of goods in possession of said Hodgin, at Des Moines, Iowa, to secure payment of two promissory notes held by complainant; that the goods included in this mortgage had been removed from Des Moines without the consent of, and in fraud of the rights of, complainant; that Adaline Hodgin claimed some lien or interest in said goods through a chattel mortgage exccuted to her, but that this mortgage was invalid and void as against complainant. The petition asked the issuance of a writ of specific attachment for the seizure of the goods under the provisions of the statute of Iowa, and prayed judgment against Frank L. Hodgin for the amount due from him to complainant, and that the lien of complainant's mortgage be declared to be paramount to that of Adaline Hodgin. The writ of attachment was issued as prayed, and the goods seized thereunder, but, upon Adaline Hodgin executing a forthcoming bond therefor, the goods were returned to her. Frank L. Hodgin and Adaline Hodgin, being both named as defendants, appeared and answered the petition of complainant, setting forth the circumstances under which the mortgage to Adaline Hodgin was executed, and averring that it is a paramount and superior lien to that of complainant, v.22F,no.4-14