Opinion of the Court.

by the debtor contrary to any provisions of the act of March two, eighteen hundred and sixty-seven, chapter one hundred and seventy-six, to establish a uniform system of bankruptcy, or to any provisions of this Title, shall not prove the debt or claim on account of which the preference is made or given, nor shall he receive any dividend therefrom until he shall first surrender to the assignee all property, money, benefit or advantage received by him under such preference."

Section 5021, as amended in 1874, (act of June 22, 1874, 18 Stat. 178, 181, c. 390, § 12,) is as follows:

"Provided, That the person receiving such payment or conveyance had reasonable cause to believe that the debtor was insolvent, and knew that a fraud on this act was intended and such person, if a creditor, shall not, in cases of actual fraud on his part, be allowed to prove for more than a moiety of his debt, and this limitation on the proof of debts shall apply to cases of voluntary as well as involuntary bankruptcy."

It is contended, on behalf of the plaintiff in error, that the bank did not, within the meaning of the law, surrender its preference, and hence could not prove its claim; and that the case was one of "actual fraud on the part of the bank, which could not, therefore, in any event prove for more than a moiety of its debt.

To sustain the contention that the bank did not surrender its preference, it is urged that the bank did not at once, on demand of the assignee, turn over the goods levied on, but litigated the matter with the assignee in both the District and Circuit Courts, and that the proceeds of the executions were not relinquished until final judgment was entered against the bank.

It was the opinion of the state court that as the sheriff, having custody of the goods seized on execution was, with the consent of the bank's attorneys, appointed special receiver, and was ordered to sell the goods and pay the proceeds into court, to await the result of the litigation between the bank and the assignee in bankruptcy, and that as the proceeds were finally turned over to the assignee, and thus became subject to distribution as bankruptcy assets, the transaction amounted

Opinion of the Court.

to a surrender under section 5084. In so holding we think the state court was right.

As the bank did not, at any time, receive any money or property from the insolvent firm, but pursued only a lawful remedy in a lawful manner, it was not under any legal obligation to abandon its executions, and to turn over their fruits to the assignee immediately upon demand. We do not perceive that the course of the bank, in resisting the claim of the assignee by setting up a defence, is subject to just criticism, or thereby estopped itself from proving its claim after the assignee had prevailed in his suit.

The endeavor of the bank to maintain its executions would, if successful, have been for the benefit of the endorser, who would, in that event, have been the last to complain, and it is certainly not apparent why the endorser should be discharged from his liability by the effort of the bank to legally collect a debt in his exoneration.

The decision of the state court, that the facts did not make out a case of actual fraud on the part of the bank, so as to deprive it of a right to prove for more than a moiety of its debt, and thus relieve the endorser of liability, in whole or in part, seems to be well founded in reason. There was no actual knowledge by the bank or its officers that the insolvent firm had done anything whatever to facilitate the procurement of the judgments. There was no giving and accepting of any security. There was no finding in the District Court of the United States of actual fraud.

The state court cites with approval the case In re Riorden, 14 Nat. Bank. Reg. 332, in which it was held by Mr. Justice Blatchford, then sitting as District Judge, that a mere fraud on the bankrupt law, by the acceptance of a preference, was not, in itself, actual fraud; and, commenting on this decision, the court said: "Such conclusion seems just and equitable. The bringing of an action by a creditor in the ordinary mode of procedure in the state courts, and procuring a judgment, may be, as in this case, constructive fraud, for which the lien. will be set aside. But even that will depend upon the further fact that bankrupt proceedings shall be instituted within the

Syllabus.

limited time provided by law. If such proceedings are not so begun, the lien would be valid and effectual. How, then, can it be construed to be actual fraud to pursue a legal remedy which may be efficacious, and especially when no action of the bankrupt debtor gives the creditor the obnoxious preference?" [Record. This case is not reported. See 36 Hun, 640.]

It follows that, as the bank was not precluded from proving its claim, Streeter, the endorser, could, by paying and lifting the notes, have participated in the distribution of the bankrupt estate, and hence, has failed to show any defence to the suit of the bank. The judgment of the court below is therefore

Affirmed.

MONROE CATTLE COMPANY v. BECKER.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS.

No. 87. Submitted December 9, 1892. -Decided January 3, 1893.

During the ninety days allowed by the statutes of Texas concerning the purchase of school lands to a purchaser to make his first payment, (Laws of 1879, special session, p. 23, Laws of 1881, p, 119,) it is not competent for the surveyor to permit a person who had filed an application for a designated tract to treat the application as withdrawn and abandoned, and to make another application for the same tract in the name of a different person.

During that period of ninety days the land is in the position of reserved lands under railroad grant acts, to which it is well settled that the grant does not attach if the land is in any way segregated from the public lands.

The issue of a patent of public land to a person who is not equitably entitled to it does not preclude the owner of the equitable title from enforcing it in a court of equity against claimants under the patent. Where the defendant in a suit in equity answers under oath denying charges of fraud, and no other evidence is offered, the charges are not sustained. Charges of fraud made upon information and belief and not sustained by proof must be treated as not sustained.

Under the laws of Texas regulating the sale of the school lands, a purchaser who makes the first payment called for, who executes the obliga

Statement of the Case.

tions for subsequent payments as called for, and complies with those obligations as they mature, is protected against forfeiture.

The act of the legislature of Texas of April 14, 1883, concerning purchases of school lands, had no effect upon the vested rights of the plaintiff in this case.

It is bad pleading to describe a party by the initials only of his Christian name, but, when no advantage is taken of the defect in the court below, it will not be considered here.

THIS was a bill in equity to enjoin an action at law for the recovery of the possession of eleven sections of school lands in Shackleford County, Texas, and for the cancellation and annulment of certain patents for the same issued to the defendant Becker.

By an act of the legislature of Texas of July 8, 1879, Laws, 1879, Special Session, p. 23, as amended by a subsequent act of April 6, 1881, Gen. Laws, 1881, p. 119, provision was made for the sale of lands set apart for the benefit of the school fund, and for a method of bringing such lands into the market. This method is described in sections 6, 7, and 8 of the amended act, and sections 9, 10, and 15 of the original act, and is substantially as follows:

1. The purchaser applies to the surveyor of the county in which the land is situated, describing the land he proposes to purchase, which must not exceed seven sections, and pays the surveyor one dollar.

2. The surveyor records the application in a book kept for the purpose, and endorses such application, "recorded," giving the date, page and volume of the record, signs his name thereto, and delivers the application to the proposed purchaser.

3. The purchaser immediately forwards the application to the State Treasurer, together with one-twentieth of the appraised value of the land.

4. The treasurer enters a credit in his books for the amount received, giving a description of the land, and then issues his receipt for the money, and forwards it, with the application, to the Commissioner of the General Land Office.

5. The Commissioner of the General Land Office files the application and receipt in his office, and issues his own receipt

Statement of the Case.

in lieu thereof, setting forth the amount paid to the treasurer and the quantity and valuation of the land applied for.

6. This certificate or receipt authorizes the surveyor to survey the land embraced in the original application.

7. The surveyor is then required to enter the same on his books as sold, and is forbidden to entertain another application for such land until notified of the forfeiture.

8. The applicant is required to make his first payment of one-twentieth, or the whole, as the case may be, of the value of the land, and present the receipt of the Commissioner of the General Land Office to the surveyor within nintey days from the date of the record of his application, and, if he fail to do this, the land is again treated as for sale, and the surveyor is authorized to receive applications for its purchase.

9. No person can renew his file, nor file on the same land more than once in twelve months, nor can he renew his file in the name of any other person. All applications for the purchase of lands are required to be made in the real name of the person intending to be the actual purchaser thereof.

10. Upon the receipt of the application by the surveyor, the purchaser is required to execute his promissory note payable to the governor, for the balance of the appraised value of the land, which note is forwarded to the Commissioner of the General Land Office and registered in a book, and then delivered to the treasurer of the State to be filed in his office. Under the provisions of these acts no one person could pur

chase more than seven sections of land.

On November 25, 1882, one J. A. Rhomberg, (whose Christian name does not appear,) a resident of Iowa, but engaged in the construction and operation of a railroad in Texas, made application for the purchase of seven sections of the land in question on behalf of Maggie L. Rhomberg, and also made application for the remaining four sections on behalf of one Frank Robinson, and filed the same with the surveyor of the county pursuant to these acts. The surveyor received and recorded the applications, endorsed them as recorded, and returned them duly endorsed to Rhomberg, who was acting as agent of both of these applicants.

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