(District Court, W. D. PennByZfJania.
BANKRUPTCY-DISTINCT DEBT-APPROPRIATION Oll'SECURITIES OIl' BANKRUPT.
The bankrupts, who were bankers, procured B. to become surety on their bond to a depositor, and for B.'s indemnity gave him certain of their bills receiva:ble. The next day they borrowed from B. marketable securities to raise money,and delivered to him securities owned by them. In both transactions B.'s assistance was gratuitous, and to aid the bankrupts in their business at a time of general t1nancial stringency. A set-off existed against one of the bills receivable, which the bankrupts had overlooked. Held, that in the absence of any express restriction as to their use, B. had the right, as against the assignee in bankruptcy, to appropriate the second lot of securities to reimburse himself from loss occasioned by the set-oft against the t1rst lot.
2. SAME-CONTEST BY ASSIGNEE. If the assignee desired to contest B. 's right to make such approptiation, hi,
proper course was to sue him, and he CQuid not have the controversy determined collaterally and in a summary way by objecting to B. 's proof of a distinct and independent debt.
In Bankruptcy. Sur issue, certified bv register into court for determiDlttion, upon application to re-examine claim proved by D. W. C. Bidwell. S. Schoye·r, Jr., for Bidwell. . John M. Kennedy, for assignee. ACHESON, D. J. The bankrupts were bankers in the city of Pittsburgh. On September 30, 1873, they gave a bond to the commissioners of Ellsworth avenue to secure them on a deposit of $25,668.47. Bidwell was surety on this bond, and for his indemnity the bankrupts on said date gave him certain of their bills receivable, aggregating $26,000. The next day (October 1) the bankrupts bor. rowed from Bidwell available securities amounting to $28,910, which they desired to use for the purpose of negotiating a loan in the east, and delivered to him local securities to the amount of $30,400. In both these transactions Bidwell acted without pecuniary consideration or recompense, and entirely from motives of friendship to the bankrupts. The bankrupts suspended payment and closed their and on the first of December following doors on November 7, filed their petition in bankruptcy. On November 28, 1873, they reo turned to Bidwell the securities they received from him, but left in his hands their own cecurities, and Bidwell continued to hold them until after the bankruptcy. On December 2, 1873, the Ellsworth avenue commissioners entered judgment on the bond against Bid. well, who paid them in discharge thereof $26,123.35. Owing to a
set-off existing against one of the bills receivable, he realized out of the securities delivered to him on September 30th, $23,923.53, only. After the appointment of the assignee in bankruptcy, Bidwell returned to him all the securities he received from the bankrupts on October 1st, except two negotiable promissory notes which he collected, paying of the proceeds to the assignee, on January 9 and and March 4, 1874, $5,790.90, and retaining $2,389.06, which he applied to make himself whole on the Ellsworth-avenue debt. The claim proved by Bidwell is based upon a deposit account entirely separate and distinct from the transactions above stated. The proof is regular in form and correct in amount, and confessedly the debt is a just one. The only ground updn which the assignee seeks to have the proof expunged is that the securities which appertained to the transaction of October 1, 1873, retained by Bidwell, were assets belonging to the estate in bankruptcy, and that until he fully surrenders to the assignee the proceeJ.s, he has no right to prove a debt or receive dividends. The issue formed under general order No. 340, and certified by the register, presents for determination the following questions, viz.: (1) Has Bidwell the right to retain $2,389.04, of the securities he received in the transaction of October 1, 1873, to reimburse him for his loss on the securities he received in the transaction of September 30th? (2) Is the assignee entitled to a re-examination of the claim pro'i;ed by Bidwell upon his deposit account, for the purpose of expunging the same because of his detention of said money? 1. If it be conceded that the case is not strictly one of "mutual credits," within the provisions of the bankrupt law as expounded by the cases of Rose v. Hart, 8 Taunt. 499; 2 Smith, Lead. Cas. 293; Young v. Bank of Bengal, 1 Moore, C. P. 150; and Ex parte Whiting, In re Dow, 14 N. B. R. 307; still I am of opinion that the creditor here, under the special circumstances, had the right to use the securities which came into his hands on October 1st, to make good the deficiency on those he received the day previous. The two transactions were not only nearly contemporaneous, but wer,e intended to subserve a common purpose, viz., to aid the bankrupts in their busi· ness at a time of general financial stringency. In both instances Biqwell's aid was gratuitous on his part and wholly for the benefit of the bankrupts. The evidence discloses that when he signed the bond, on September 30th, the intention was to fully indemnify him, and it was then supposed the bills receivable handed him were ample for the purpose. The bankrupts seem to have overlooked the fact of the
IN BE !If'VAY.
existing set-off, and Bidwell was ignorant in respect to it. What, then, was the plain duty the bankrupts owed Bidwell? They were under. the highest moral and legal obligation to furnish him additional security to protect him against the set-off. The succeeding day the bankrupts applied to him for further assistance, and he accorded it, receiving the second batch of securities. Now, while these latter securities were not then expressly made applicable to Bidwell's indemnity in the previous transaction, it is also true that they were not in terms restricted to the second transaction. There was, indeed, at the time no express agreement on the subject. In the absence ·of an express restriction as to their use, I think it would shock the moral sense of most men to hold that the bankrupts or their' assignee could redeem the second lot of securities without indemnifying Bidwell from loss on account of the set-off which existed against the first. 2. But if I am wrong here, I am nevertheless of the opinion that the assignee has shown no good reason for expunging Bidwell's proof of claim. The proof is entirely regular, and the claim for an admitted debt, which has l}0 sort of connection with the transactions of Sep- . tember 80th and October 1, 1873, or either of them. When the bankrupts, on November 28, 1878, delivered to Bidwell his securities, they left in his hands their own. He testifies it was then expressly understood he was to hold those of October 1st for his indemnity against the Ellsworth-avenue debt, and unless this was so, it is difficult to explain the conduct of the parties. Bidwell's retention of the $2,889.04 was under a claim of right openly avowed, and his application of that fund was known to the assignee as early as March 4, 1874. If the assignee desired to contest Bjdwell's right to make that application, he could only do so by bringing a suit. He could not have the controversy determined collaterally and in a summary way by objecting to Bidwell's proof of a 'distinct and independent debt. In re Forbes, 5 Biss. 511; In '1'6 Holland, 8 N. B. R. 190, 192. Where a creditor has two disconnected claims, he may prove and receive dividends as to the one on which he has received no preference, without surrendering an illegal preference received on the other. In re Richter, 4 N. B. R. 221; In re Holland, supra. Having reached the above conclusions, it is not necessary to consider a third question which the issue presents. And now, September 9, 1882, the first and second questions certified by the register are determined in favor of D. W. C. ,Bidwell, and the application of the assignee to have said creditor's proof of claim expunged or diminished is denied.
t1.! DOMESTIC SEWING-MAOHINE
(Oircuit Court, D. New Jersey.
August 16, 1882.)
PATENT CASES-EQUITY PRACTICE-REHEARING.
After interlocutory decree and order of reference to a master for an account, rule to show caus.e why the decree should not be opened and a. reheariug ordered, granted.
SAME-GROUNDS FOR RELmF.
In order that the court may have jurisdiction in equity, the complainants not being entitled to an injunction, some other ground for' equitable relief must be disclosed in the bill besides a naked account for profits and damages.
JURISDIcTION-WANT OF-OBJECTION AT ANY STAGE OF PROCEEDINGS.
Although the question of jurisdiction was not raised in the pleadings or adverted to on the final hearing, it is never too late, during the pendency of the proceedings, for the .court to examine into its right and power to make a decree or enter a judgment in a case.
BAME- WHEN COURTS WILL DECJ,INE.
In the federal courts, especially, where jurisdiction rests solely upon the facts, which appear in the record of the suits, it has long been the practice of the jUdges, at any stage of the proceedings, aua sponte, to decline jurisdiction, and dismiss the case, when the want of authority to act becomes apparent.
Ii. REMEDms-CoNcURRENT-AT LAW AND IN EQUITY.
To entertain a suit in equity, when the party has a plain and complete remedy at law, is to deprive the defendant of his constitutional right of trial by jury. Notwithstanding section 723 of the Revised Statutes, there remains a limited range of cases in which equitable jurisdiction continues to be exercised concurrently with that at law. The remedy at Jaw, although existing, seems less practical and less efficient to the ends of justice, and its prompt administration, than the remedy in equity. But where complainants are not entitled to an injunction, having an adequate remedy at law, the "ourt in equity has no jurisdiction. Root v. Lake Slwre, etc., R. 00. 210. G. 1112, followed. 6
PATENTS-DAMAGES FOR PAST IlIfFRINGEMEN'fS-JOINT OWNERS.
Actions may be mainta.ined by joint owners of a patent, who have not transferred their claims for damages and profits, to recover past damages for infringement within the period of time of their ownership, though When the suit was instituted neither of the joint owners had any interest in the title to the patent.
SAME-WHO MAY RECOVER-INJUNCTION.
Section 4919 of the Revised Statutes includes not merely an interest in the title of a patent, but in the damages, and not as patentee only, but as assignee as well. Semble, that the assignee of a part interest in a patent and· accrued damages may, during the life of the patent, in a suit for damages brought in his own name, obtain an injunction against future infringement.
BAME-WHEN NOT GRANTED.
Where a bill for profits and damages was for a period ending in 1876, complainants were not entitled to an injunction, the bill being filed in 1879, and before the expiration of the patent.
On Application for Rehearing.