furnace and the like; that no watchman was kept on the premises, as required by the terms of the policy, and perhaps Bome other things of the same character. This evidence was excluded, on the ground that Buch defense must be pleaded specially. The question has been argued on motion for new trial, and I see no reason to reverse the ruling which was malle at the trial. It is laid down in the books that it is not necessary to set forth in the complaint a condition subsequent,.and that a defendant relying upon it must plead it. This is true under systems of pleading which admit of more general defenses than ours. Under the Code of this state it is provided that the answer shall be special. No doubt is entertained that this requires a specific denial to each allegation in the complaint; and if it be said that the plaintiff has declared only generally, (there is some doubt upon that, inasmuch as he has set forth the policy in his complaint,)-if the defendant accepted that method of declaring,-he was still bound to plead his defense specially. In section 586, May, Ins., the rule is so laid down. I think there can be no doubt as to its correctness. It would be extraordinary if a plaintiff, coming into court with one of these policies of insurance, should be bound to have witnesses to everything that is set down in the policy; to prove everything which may be set up as a defense. I say that would be most remarkable, and nobody would have greater reason to complain of it than the insurance company itself, because, if plaintiff should be fortified in all points with an extraordinary number of witnesses, the cost would be very great. The rule is that in respect to all such matters the insurance company must plead its defense specially, in order that it may put the matter in issue. The motion for new trial will be denied, and judgment on the verdict.
(D£strict Court, N.
n. Now York.
BANKRUPTCy-OBJECTIONS TO DISCHARGE-FAILURE TO KEEP PROPER BOOKS -EVIDENCE-CASH -BOOK.
Where the specification filed by creditors in opposition to a. bankrupt's discharge is in the exact languaJ!:e of Rev. St. § 5110, it is too broad to sustain a finding withholding a discharge on the ground that the bankrupt's cash-book was kept upon an incorrect theory.
After issue has been joined on the specifications, and evidence taken, without an intimation that the allegations are insufficient, it is too late to permit an amendment of the specifications which would introduce an entirely new ground of objection and present a separate and distinct issue for the consideration of the court.
SAME-BoOKS, WHEN SUFFICIENT.
Where a competent person, upon examination of the books and papers kept by a merchant, would be ahle to reach a substantially correct conclusion as to the state of the merchant's affairs, such books will be held sufficient.
IN RE GRAYES.
A merchant who did a retail business of $40 to $50 per diem kept a memorandum ledger, order-book, and so-called cash-book, in which he made no entries of the goods sOid for cash during the day or any particular time, but arrived at the amount of Ilis cash sales by subtracting what money he had on hand in the morning, or at the begmning of the period, from what mOlley he had on hand at night, or at the end of the period. Held that, under the circumstances, this manner of keeping. his cash-lJook would not prevent his oLtailling his discharge as a bankrupt,
OF KEEPING CasH-BoOK.
George W. Adams, for the bankrupt. Edga,r P. Glass, for the creditors.
COXE, J. One of the specifications filed by creditors in opposition to the bankrupt's discharge, and the only one now in question, is, mutatis mutandis, in the exact language of the statute, viz,: "That being a merchant and tradesman, he has not, subsequently to the passage of the bankrupt act, and its amendments, kept proper books of account." Rev. St. § 5110. To sustain this allegation evidence was adduced, Bome being given under objection, tending to show that the bankrupt did not keep his cash-book properly. The learned register to whom it was referred found with the creditors upon this issue. The matter is now before the court upon exceptions filed to his report. The main propositions to be determined are-First, can proof of irregularities and defects in the manner and system of keeping a certain book be given under the general language uf the specifications? Second, are the irregularities disclosed by the mony of a character sufficiently grave to warrant the withholding of a discharge? The autho!'ities appear to be numerous and uniform that, under a broad, indefinite allegation, like the present, the creditor may prove that the bankrupt kept no books at all, or that he failed to keep any one of the books necessary for the transaction of the business in question. Having failed in this, however, he cannot enter into an examination of the books themselves for the purpose of showing that they were carelessly kept, or kept on a wrong principle. If such an issue is to be raised, the bankrupt must be advised of it by distinct, specific and definite statements in the pleading. In Condict's Gase, 19 N, B. R. 142, the court says:
"It has been the uniform practice under the bankrupt act to consider all specifications as too vague and general which charge the offense in the words of the act. The particUlars in which the bankrupt has offended should be so setforth that he may be apprised of the precise matters wherein h" is alleged to have transgressed."
In Frey's Gase, 9 FED REP. 376, the court says:
"The objection therefore, to the manner in which the books were kept, and to imperfections or omissions therein, general objections like those above stated are not sufficient. The particular irregularities or omissions must be pointed out in the specifications to entitle them to be considered. In 1'C Littlefield, 3 N. B. R. 57; Hammond v. Coolidge, ld. 273." See, also,
In re Smith, 16 FED. REP. 465; In re Butterfield, 14 N. B. R. 147; In re Rathbone, 2 Ben. 138; In re Eidom, 3 N. B. R. 106; In re BUl'k, Id. 296, 300; Bump, Bankr. (9th Ed.) 279.
But it is said that it is now too late to urge this objection; that the bankrupt should have demurred, or he should have moved to strike Dut, or to have the specifications made more definite and certain. 'fhe short answer is that none of those remedies would have proved availing. The specification was well drawn; under it proof could be given that no books were kept, or that no cash-book, for instance, was kept. Non constat, this was the very omission which the creditors intended to allege, and expected to prove. It is obvious that the bankrupt had no other remedy except to confine the proof to the pleadings. 'fhe regi8ter had no power to pass upon any of the objections interposed by the bankrupt, and he did not assume to do so. General Order No. 10; Bump, Bankr. (9th Ed.) 198,644; In re Levy, 1 N. B. R. 136; In re Patterson, ld. 147; In re M'llvson, ld. 265; In re Puffe1', 2 N. B. R. 43; In re Bond, 3 N. B. R. 7. The question, therefore, is now to be determined by the court; and, within the authorities cited, it must be held that the language of the specification is too broad to sllstain a finding withholding a discharge on the ground that the bankrupt's cash-book was kept upon an incorrect theory. It is suggested by the creditors that an amendment should \.'e allowed, but the court is referred to no case in which such a radical amendment has been permitted, after the cause has been argued and submitted. The specifications were filed in 1876, issue was joined, and the evidence taken, without an intimation that the allegations were insufficient, and the court, at this late day, would hardly be justified in permitting an amendment which introduces an entirely new ground of objection, and presents a separate and distinct consideration of the court. In re Smith, 16 FED. REP. issue for 465. But, upon the merits, it is thought that the discharge should not be withheld. The counsel for the creditors fairly and accurately states the matter in controversy, as follows'
"The books kept by the bankrupt :;.1 :." * were a memorandum ledger, order-book, and what he calls' a cash·boub..' That these books, if they had been properly kept, were · proper books of account,' within the meaning of the statute, I do not qnestion; but what I do urgently contend for in behalf of the opposing creditors is that the mannel' in whieh he kept his so-called · cash-book,' according to his own testimony, precludes it from being treated as a ' cash account' within the meaning of any of the decisions cited by the bankrupt's counsel, and from being considered a 'proper' book of account. The manne) ir. which the bankrupt kept his cash-book, * '" '" briefly stated, '" '" '" was by taking the' amount of cash on hand in the morning from the amount on hand at night.' In other words, he adopted no means of keeping track of how many goods he sold for cash during the day or month, or whatever time he did pretend to balance his cash account, but arrived at the amount of his cash sales by subtracting what money he had on hand in the morning, or at the beginning of the period, from what money he had on hand at night, or at the end of the period."
IN RE GRAVES.
If the bankrupt had been doing a large business, requiring the employment of an army of employes, where vast sums of money are daily received and disbursed, it may be conceded at the outset that the system above described would be wholly inadequate. But such was not the case. He was a small retail dealer, receiving between $40 and $50 per day. He employed but one clerk. The whole busi· ness was transacted directly under his eye. It was hardly possible that he could have been deceived or cheated. At the close of the day, in a business so small, his memory would doubtless have recalled all the transactions of any magnitude, for they must have been few. It is said that he should have noted every item of cash received, no matter how infinitesimal. It is not pretended that he was required to enter the name of the customer or the article sold, but simply the amounts of cash received. How such a system, in a business so modest in its dimensions, could materially aid the investigator is not explained, and it is not easy to perceive. To a dishonest man this system offered the same opportunities for fraud as the other; to an honest man itg advantages over the one adopted are not entirely obvious. It would furnish an additional check, it is true; but without it the merchant's present cor-dition could at any time be ascertained, mistakes of any magnitude corrected, and fraud discovered. It is not intended to say anything in approval of the system of keeping his cash.book adopted by this bankrupt; it may, undoubtedly, as an abstract proposition, be denounced as unwise and defective. But we are dealing here with strict statutory rights. No fraud or dishonesty is charged, and it would seem not to be the policy of the courts to keep a young man under the harrow for years, when the only accusation against him is that he failed to insert in his cash-book the items of his daily sales. Congress has not attempted to prescribe any particular or principle of book-keeping. If a competent person, upon an examination of the books and papers kept by the merchant, is able to reach a sllustantially correct conclusion as to the state of a merchant's affairs, it is enough. The accounts may, where the business is small, be found in one book or in 20 books; the system may be double entry or !:lingle entry,-the form and manner in which the books are kept is unimportant so long as the true financial condition of the merchant or tradesman is shown. In the case of In re Marsh, 19 N. B. R. 297, the specification alleged that no cash-book had been kept by the bankrupts. The court says:
"ThE' grounds are confined to whether they kE'pt proper books in respect to the rectlipt and payment of cash. What would be proper in this behalf must depend upon the nature of the business, and the mode in which it was conductoo.. Tltey boup;ht hemlock bark and lumber, each taking charge of each branch, and forwarded it to customers by public conveyance. They kept bank accounts showing what money each received, and each kept a book professing to show what amounts, and to whom, each paid. * * * The statute requires that they (the books) should be proper, that is, for their purpose. which includes being honest; but does not go so far as to require that books
shall I3how: where losses occurred, or how. The same provision was,. in the act of 1841 and in the English statutes, and was construed as requiring that the books should not, in what they showed or failed to show, be fraudulent."
In Towltsend's Case, 2
REP. 559, the court, at page 565, says:
degree of accuracy and particularity reg uired will depend, in a great degree, on the circumstances of each case. Books which show an honest attempt to throw such light on his business transactions as will make them reasonably plain of themselves, or capable of being made plain by explanation, are sufficient, within the meaning and intention of the bankrupt law."
In Antisdel's Case, 18 N. B. R. 289, it was held that"The requirement that the bankrupt shall keep proper books of account is satisfied, if his creditors can gather from them a correct understanding of his business and financial condition."
In Winsor's Case, 16 N. B. R. 152, the court held that"Keeping proper books of account, within the meaning of the bankrupt act, is the keeping of an intelligent record of the merchant's or tradesman's affairs, and with that reasonable degree of accuracy and care which is to be expected from an intelligent man in that business, and a casual mistake therein Willllot prevent a discharge."
See, also, as bearing upon the question involved, In re Frey, supra; In re Smith, supra; In reJewett, 3 FED. REP.503; In re Reed, 12 N. B. R. 390; In re Archenbrown, ld. 17; In re George, 1 Low. Dec. 409; In re Brockway, 12 FED. REP. 69; In re Solomon, 2 N. B. R.
It is thought, therefore, that the cash-book of the bankrupt, though imperfect, inartistic, and inaccurate, in a strictly commercial sense, was not, within the cases cited, so improperly kept as to j ustiiy the court in withholding the discharge. Discharge granted.
(Circuit Oourt, S. D. New York. July 10,1885.,
BANXRUPTCy-JURUlDICTION OF CmCUIT COURT-ORDER REMOVING ASSTGNRlf..
The superintendence and jurisdiction of the circuit court conferred lJy Rev. St. +4986, are revisory of cases and questions arising in the district conrt, and contemplate a review of what is presented to that court for consideration and decision; and if an order of the district court, removing an assignee, was right when made, it cannot be reversed.
On examination of the circumstances of this case, that the assignf'e was properly removed by the district conrt on aec('unt of his dilatory and unwise course, and that the order should be affirmed.
Petition for Review. W. F. Scott, for respondent. Robert Sewell, for appellant.
WALLACE, J. By an order of the district court, made on the twenty-seventh day of December, 1884, the assignee of the bankrupt was removed upon the petition of certain creditors of the estate. The case has beellt brought here by the assignee upon a petition of review, seeking a reversal of that order. The argument of counsel for the assignee has largely been addressed to the point that some of the creditors, upon whose petition the proceeding was put in motion, did not have the requisite standing in the court below to entitle them to move; one of them being a secured creditor, who had proved without relinquishing his security, and another being a creditor who had been divested of his claim by a transfer after he had proved his debt. It is conceded, however, that Schermerhorn and Cox were creditors whose debts were proved, and who were in a position to move, at the time they joined in the petition, for the removal of the assignee. It is represented, however, that since the case has been brought here for review they have withdrawn from the proceedings. Inasmuch as they were competent parties to the proceeding when the order of the district court was made, all objections which rest upon the ground that there were no competent adverse parties to the proceedings to authorize the removal of the assignee, are unavailing. The superintendence and jurisdiction of this court conferred by section 4986 are revisory of cases and questions arising in the district court, and contemplate a review of what is presented to that court for consideration and decision. Re Bininger, 7 Blatchf· .159, 164. If the order was right when it was made, it cannot be reversed now. For this reason it is not deemed necessary to consider whether the court of its own motion did not have ample power to remove the assignee, if, upon facts brought to its notice, it seemed proper that he be removed, or whether it was not the duty of the court to do so, although no creditor asl,ed for such action. The order was made upon the petition of creditors, and the answer of the assignee, without proofs in support of the petition or answer, except such exhibits as were made part of the record. Without an extended review of the facts as they appear by the petition and the answer, it is sufficient to refer to one transaction, in respect to which the inferences are so clear as abundantly to justify the order of the district court. In July, 1883, the assignee was in a position to realize over $20,000 in cash for the estate upon an adjustment with Mr. Sage, by which the latter proposed to take certain securities of the bankrupt in his hands at their fair value, and pay over the amount after deducting certain liens upon it. Mr. Sage's proposition was to allow $67,760 for the securities, deduct his own claim at $27,000, retain $20,000 to satisfy alien claimed upon the securities by Messrs. Birds. eJe, Cloyde & Bayliss, and pay the balance, $20,760, to the assignee in cash. The lien claimed by Messrs. Birdseye, Cloyde & Baylis8 was for legal services as attorneys for the bankrupt, and its validity
was disputed by the assignee. If the price offered for the securities by Mr. Sage was a fair one, the clear duty of the assignee was to apply to the court for an order authorizing him to accept it, and making provision for the alleged lien of Messrs. Birdseye, Oloyde & Bayliss. Recognizing this, the assignee petitioned the court for such an order. He represented in his petition that the bankrupt's estate was greatly involved; that it had many thousand acres of unproductive land, largely incumbered by taxes, tax titles, and adverse claims; and that he, as assignee, had no money, or means to realize money, with which to protect in any manner the interests of the estate. He further represented that the proposed settlement would supply him with ready money with which to protect the interests of the estate; that unless he could be so supplied the estate would suffer immense loss; and that there was no other source from which money could be obtained. The court referred the petition to a referee to take proofs and re- / port, and on the twenty-fourth of July, 1883, the referee reported, substantially recommending the settlement proposed. In his report the referee stated that the assignee was in urgent need of funds to enable him to protect the interests of the estate; that the price offered for the securities by Mr. Sage was the highest the assignee could procure, after diligent effort; and that it was both advisable and necessary that the securities be sold, and the proceeds, after satisfying the lien, be paid to the assignee, for the use and benefit of the estate. He recommended an order that the assignee be authorized to sell the securities at a specified sum, at public auction, at the Exchange salesroom, in the city of New York, and that in default of a bid for that amount he accept the offer of Mr. Sage; and that out of the proceeds the lien of Mr. Sage be paid, and $20,000 be deposited in the registry of the court, to await the determination of the validity of the claims of Messrs. Birdseye, Cloyde & Bayliss. It appears by this report that Mr. Sage consented to sucb a sale. The confirmation of such a report would seem to have been almost a matter of course, if the assignee had applied for it. He attempts to excuse his neglect by the statement that exceptions were filed by Messrs. Birdseye, Cloyde & Bayliss, and by another creditor whose name he does not give, and says: "He had reason to believe that before a sale could be effected considerable time, labor, and expense might have to be incurred by him." He does not state what grounds were assigned by the parties opposing a confirmation, or that he believed there were any tenable objections, or that he had any doubt of a favorable issue. In view of his urgent need of funds it is remarkable that he should lie by supinely and let this favorable opportunity slip. His conduct cannot be vindicated by such loose and meager reasons as he assigns for not attempting to obtain a confirmation of the order. If it were intimated that he contemplated some more expedient sale of the securities, or a different adjustment of the liens
IN BE PBOUTY.
claimed upon them, this might suggest a satisfactory explanation of his conduct; but his subsequent action in regard to the securities 18 utterly inconsistent with any such theory. In September, 1883, he entered into a stipulation with Messrs. Birdseye, Cloyde & Bayliss, authorizing them to pay to Mr. Sage the amount of his lien as claimed by him, and authorizing Mr. Sage to transfer the securities to Messrs. Birdseye, Cloyde & Bayliss, together with his lien upon them, and authorizing Messrs. Birdseye, Cloyde & Bayliss to hold and retaip the securities until the amount of their own lien should be determined. He consented to an entry of an order by the court, upon the :lpplication of Messrs. Birdseye, Cloyde & Bayliss, carrying out the terms of this stipulation. The result of this action upon his part was to transfer the securities to creditors whose lien upon them was contested, and to put it beyond his power to realize anything from them for an indefinite period of time. From that time until the order for the removal of the assignee was made, the securities remained in the hands of Messrs. Birdseye, Cloyde & Bayliss, and the litigation over the validity of their claim had been dragging itl:l weary length along with no prospect of a speedy conclusion. There is no aspect of this transaction which suggests a theory that is consistent with the exercise of a proper discretion on the part of the assignee. There had been no change in the pressing necessit,ies of the estate, and the assignee, in his answer, attempted to explain his failure to realize anything from the large amount of real estate which came to his possession, by the allegation that he has been without funds to clear off the liens and adjust questions affecting the title, and therefore had been unable to sell it. Seven years have elapsed since he was appointed assignee, and although a very large amount of assets came to his possession, nothing has been realized of consequence. Without impugning the intentions of the assignee to administer his trust honestly, and with reasonable diligence, it suffice.s to say that the creditors had just cause to be dissatisfied with the dilatory and unwise course he has pursued, and that the court below had sufficient grounds to consider his removal imperative in the interests of a prudent and energetic management of the estate.
(Circuit Court, S. D. New York. .Ju)y 29, 1885.)
PATENTS FOR INVENTION-COSTS-ENFORCING PAYMENT-RECEIVER.
When a bill for infringement of a patent has been dismissed, with costs to defendant, for ",hich an execution has issued and been returned wholly unsatisfied, a receiver will not be appointed, on motion of defendant, to take possession of the patents as equitable assets, to be disposed of for the satisfying of the decree.
In Equity. Josiah P. Fitch, for plaintiff. Frederic H. Betts, for defendant. WHEELER, J. The bill in this case, which is for infringement of patents, has been dismissed, with costs to the defendant, taxed at $950.92, for which execution issued and has been returned wholly unsatisfied. The defendant now moves for a receiver of the patents as equitable assets, to be disposed of for the satisfying of the decree. This decree, eo far as it is for the payment of this sum for costs, is not different from a judgment for the recovery of money. Execution issues upon it under the rule of the supreme court made pursua,nt to statute the same as upon judgments for money. Rev.St.§ 917; Equity Rule, 8. There is no connection between the decree for costs and the relief sought; neither is it of any equitable nature otherwise. The costs are recovered because the bill was not sustained, as costs are in actions at law when the suit is not maintained. The satisfying of the decree is no more equitable relief than the satisfying of any money judgment is. Courts of equity have power to aid in the satisfaction of judgments at law by reaching assets which courts of law cannot reach. This is done upon bill brought to reach particular property; and the bill is to be answered, or proceeded upon for want of answer, as in other cases; and the decree is founded upon the case made in respect to the property, although the right to proceed against the property rests upon the prior judgment. Here the defendant has got no further than to become a judgment creditor of the plaintiff. These patents, as equitable assets, cannot be taken to satisfy a money judgment except upon a decree for that purpose, which can only be had upon bill and answer, or failure to answer, in due course. The remark of the learned judge in Shainwald v. Lewis, 6 FED. REP. 779, relied upon in support of the motion, is not to the contrary of these views, as that remark is understood. Motion denied.