HOBART V. JOHNSON.
every direction; they necessarily intersect. the common highways at numerous points. The rules of law to which I have referred, requiring equal care and caution on the part of those who run railroad trains and those who travel the highways, if obeyed, will prevent accidents. We must hold all parties to its strict observance. Because this, in my judgment, is a case in which those rules were disregarded by the plaintiff, I am constrained to hold that he recover, and therefore sustain the pending motion. I am the better satisfied with this ruling, because the case would, I presume, go to the supreme court, and upon the record made up the plaintiff can take exceptions, and have the qdestions upon which he relies fully and fairly presented to that tribunal.
Receiver, etc., v. JOHNSON.
(Circuit Court, S. D.New York. June 30,18Sl.)
1. NATIONAL BANKS-ACT OF 1864, § 12-NATURlll OF SHAREHOLDER'S LIABILITY. The liability which shareholders in national banks incur under section 12 of the act of 1864, which provides for a liability" to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares," is that of principals, not of Bureties. 2. NATURE OF LIABILITY OF SHAREHOLDERS IN NATIONAL BANKS-REv. ST. NEW JERSEY, (1874,) p. 469, § 5-MARRIED WOMEN. Such a liability is not one on a " promise to pay the debt, or answer for the default or liability, of any other person," within the meaning of the proviso to section 5 of the Revised Statutes of New Jersey of 1874, p. 469.
3. ESTOPPEL. . On the principle of estoppel, one cannot take advantage of certain statutorj" provisions without incurring thereby the attendant liabilities.
John II. Knox, for plaintiff. Joseph H. Choate, for defendant. BLATCHFORD, C. J.The complaint alleges that the First National Bank of Newark, located in Newark, New Jersey, was duly organized as a bank under the act of June 3, 1864, (13 St. at Large, 99;) that on the fourteenth of June, 1880, it became insolvent; that the plaintiff was appointed its receiver; that its Itssets were insufficient to pay its debts; that the comptroller 'of the currency, under section 12 of said act, has ordered and made an assessment on the shareholders of said' bank, "equally and ratably, to the amount of 100 per centum of the par value of the shares of the capital stock of the said associationheI'd or by them, respectively, at the time of its failur,eor suspension," and has ordered the plaintiff to institute suits to enforce
'against ':elich shareholder his personal liability, as such, to said extent; that the defel1dQ,nt was, at the time of said suspension and fajlureof said bank, a shareholder of its capital stock to the amount of 1'2 shares, of the par value of $100 per share, and held, or was entitled to hold, in her possession or control, the usual stock certificateas such shareholder; and that, therefore, the defendant is liable to the plaintiff for $1,200, with interest from July 14, 1880, the date of the order of assessment. The defendant has put in an answer to the complaint. One of the separate defences set up in the answer is that the defendant, in December, 1852, became and everaince has been, and still is, the wife of Henry W. Johnson, who, at the time of the commencement of this action, was, and still is, a resident and citizen of the state of New York; that the said 12 shares were purchased by her, through her duly-con stituted agent, in the state of Ne:w Jersey, while she was such married woman, and the certificate therefor was delivered to her said agent within that state; and that she never became or was the owner of any of ,the shares of the said bank otherwise than in the manner above TO that defence the plaintiff demurs, on the ground that it is insufficient in law: up()n the face thereof. ' It is provided bysebtion 12 of said act of 1864II That the capital stock of any association formed under this act shall be divided into shares of $100 each, and be deemed personal property and transferable on the books of the association in such manner as may be prescribed in the or articles of, association; and every person becoming a shareholder by such transfer shall, in proportion to his sharei:l, succeed to all the rights and liabilities of t)llf prior holder of such shares. * * * The !!hareholders of each association formed under the provisions of this ,act * * * shall he held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares."
It is provided. by the act of the legislature of the state of New Jersey, approved March 27, '1874, (Rev. St. New Jersey of 1874, p. 469, § 5,)t\That any married woman shall, after thfl passing of this act, have the right
to bind herself by contract in the same manner and to the same extent as
though she were unmarried, and which contracts shall be legal and obligatory, and )1lay be enforce:1,at law ot in equity by or aga,inst such married woman, in' her own name. apart from her husband: provided, that nothing herein shall sUyn married woman to become an accommodation indorser, guarantor. or snrety, nor shall she be liable on any promise to pay the'debt, or answer for the default or liability, of any other person."
HOBART V. JOHNSON.'
It is admitted that this New Jersey statute took effect before the defendant became the owner of the shareslin question, although the date when she beca!lle such ,owner is not set forth in the answer. It is contended for the defendant that the liability created by the act of, ,Qongress is in the nature of a liability of suretyship, and that' this suit is one to enforce a promise or undertaking to pay the debt of another, and is, therefore, within the proviso of the New Jersey statute, and a recovery cannot be had against the defendant on such promise. This view does not appear to be tenable. The contract made by the shareholder is entered into by the act of becoming a shareholder. Every creditor of the bank, becoming such, becomes, eo instante, a creditor of the shareholder in respect to'the liability in question. The shareholder becomes thereby a principal, debtor. The debt of the bank is his debt at the instant of itscreaiion, and ths debt of the bank is referred to only as a measure of the debt of the shareholder. It is true that the payment of the debt of the bank by the bank extinguishes the debt of the shareholder; but the idea of guaranty or suretyship, or of a promise to pay the debt or answer for the liability of is altogether destroyed. by'the fact that the debt of the bank is incurred for the benefit of the share. holders exclusively, and is thus the debt of the shareholder as a principal. The shareholder has no remedy over against the bank or against his co-stockholders. This inherent idea of guaranty or 'suretyship is wanting. As the case is not within the proviso of the New Jersey statute, that statute makes the defendant liable on tract. a Moreover, it. must be assumed, either that' the defendant separate estate, or Mntracted with a view to create, by owning 'the stock, a separate estate., In either view the contract was for 'her benefit, as the holder of a separate estate. Under such circumstances, by way of estoppel, she will not be allowed to claim and enjoy, as regards the bank and creditors, and her co-shareholders, the benefit of her position as a shareholder and theI1- repudiate the obligation attached to it. Mrs. Mathewman'8 Case, L. R. 3Eq. Cases, 781; In re The Becipro()ity Bank, 22 N. Y. 9; Nat. Bank v. Case, 99 U. S. 628. There must be judgment for the plaintiff on the demurrer.
UNITED STATES V. GRISWOLD
(Circuit Court, D. Oregon. August 12,1881.)
PRIORITY OF THE UNITED STATES
SeCtion 3466 (1 St. 515, 6761 of the Revised Statutes does not give the United States a lien upon its debtor's property, but only a right to priority of payment out of the same in certam cases, one of which is where a debtor not having sufficient property to pay all his debts makes a voluntary assignment thereof.
SAME - AsSIGNMENT.
A debtor of the United States may assign his property, within the meaning of this statute, by means of judgments confessed in favor of various personS for amounts eqnal in the aggregate to the value thereof, and the priorIty of the United States will therenp<?nattach to the property and prevail against said jildgments, bnt subject to all prior valid liens thereon.
G.. being; liable to the United Stat,es, in a sum more than equal to the value of his property, for m09-ey fraudulently obtained from the treasury, askedL. & B. to loan him $10,000 on his note and mortgage, then exhibited, which they declined, but let him have $3,500 on the same, with a credit indorsed on the'note of $6,500, and recorded the mortgage for the full amount. Held, that upon the facts the mortgagees did take the mortgage in excess of the loan for the purpose of aiding the mortgagpr to hinder, delay, or defraud the United States, and th3refore it was not fraudulent as to them.
When a conveyance about which there is a suspicion of fraud will be allowed to stand as a security for the sum actually paid or advanced upon it.
5. ATTORNEYS' FEE,
An unconditional fee of $10,000, secured by a mortgage on real property, for the services of a firm of three attorneys in defending an action in the district court involving a claim of $143,000 for damages and forfeitures under sections 3490 and 5438 of the Revised Statutes, and the character of the defendant, in which there were three jury trials concerning transactions scattered through a quarter of a century, and extending from the Atlantic to the Pacific, and one writ of error to the circuit court, and a final judgment against the defendant for $38,049, is not unreasonable, and furnishes no evidence that the mortgage was made for a sum larger than that agreed to be paid, for the purpose of hindering, delaying, or defrauding the creditors of the mortgagor, or intrust that a portion of the amount might be refunded to him.
6. PRIORITY OF THE UNITED STATES-How ASSERTED.
A sale of property of a debtor of the United States, made upon a decree or judgment given after the right of priority of the latter attached, disregarded, and the matter referred to the master to take an account of the sums due on the valid liens thereon, and sell the property free from them and distribute the proceeds accordingly.
Addison C. Gibbs, for plaintiff. C. B. Bellinger, for defendants. Walter W. Thayer, for defendants Ladd & Bush and Alberts.
UNITED STATES V. GRISWOLD.
H. Y. Thompson and GeorgeH. Durham in propria persona and for the defendant Hill. Before SAWYER, C. J., and DEADY, D. J. DEADY, D. J. On August 29,1879, the plaintiff commenced a suit against William C. and Jane O. Griswold and others, the defendants herein, which, upon a demurrer for multifariousness, was dismissed as to said Jane 0., and the plaintiff allowed to file an amended bill against the remainder of the defenda.nts, which was done on January 9, 1880. From the amended bill it appears that on and J}rior to May 27, 1877, the defendant William C. Griswold was the ownerinfEle of certain real property situated in Salem, Oregon, including block 18., known as "The Agricultural Works" and "Griswold's and lots 1, 2, 3, and 4, in block 36, with the water-power andappurtenances; lot 8, in block 10; and the west half of lots 1, 2,3, and 4, in block 73; and that on said day the plaintiff, by B. F. Dowel, informant, commenced an action in the U. S. district court for this district, under sections 3490 and 5438 of the Rev. St., against baid defendant, to recover about $17,000 wrongfully obtained by him on January 29, 1874, from the treasury of the United States, by means of false vouchers and affidavits, together with'the damages and forfeitures allowed therefor, as provided in said sections, amounting, in all, as claimed in the amended complaint, to the sum of $143,000; in which the plaintiff, on December 14,1878, had a verdict for $35,228, and on January 11, 1879, obtained a judgment thereon for that amount, and $2,400 costs. On April 22, 1879, said judgment was, on error to this court, reversed, and the cause remanded for a new trial, in which the plaintiff,on July 30,1879, had judgment again for $35,228, and $2,821.60 costs, which was on the same day duly docketed in the lien docket of this court, and became and is a lien upon the real property of said defendant in Oregon. Afterwards an execution issued to enforce said judgment, which was levied by the marshal of the district upon the real property aforesaid, and upon certain other property of the defendant Griswold situate in Salem, from the sale of which-Iast mentioned the sum of $174 was realized, and the writ returned, on November 17, 1879, "no other property found in this district," and the remainder of said judgment is still unsatisfied. On June 11, 1877, said Griswold borrowed of the defendants William S. Ladd and Asahel Bush the sum of $3,500, to secure the payment of which, with interest, he gave them a mortgage on said block 18 for the sum v.8,no.7-32
oL$10,OOO, bearing date June 4; 1877; and on June 4, 1878, said Griswold mortgaged said block 18, and said lots 1, 2, 3, a.nd 4, in block 36, with the water-power and appurtenl),nces, to the defendants W. Lair Hill, George H. Durham, and H. Y. Thompson, to the pa.yIhent to them of his note for $10,000, given as a fee for defending th'.l. action aforesaid against him. On December 18, 1878, Griswold mortgaged said lot 8, in 'block 10, to Ladd & Bush, to secure the payment to them of a debt of $306.25, with interest thereon. On January 6, 1879, Griswold voluntarily appeared and confessed judgments in the county court of Marion county in favor of Ladd & Bush for $348.82, and the defendants A. Kelly, Thomas A. Mauzy;W. G. Woodworth, William H. Watkinds, Benjamin Hayden, William H. Holmes, and James W. Nesmith for the aggregate sum of $3.223.13. On January 7, 1879, Hill, Durham, and Thomp" son commenced a suit in the circuit court for the county of .Marion to foreclose their mortgage, and made the defendant Griswold and L. & B., and the other persons to whom judgments were confessed as aforesaid, defendants; in which, on February 11, 1879, there was a decree given that L. & B. recover of the defendant Griswold the sum of $3,816.16, and H., D., and T. the sutn ·of $9,365.42, the balance due on Griswold's note, and that the premises described in the mortgages be sold to: satisfy the same and costs ;in pursuance of which they were sold by the sheriff to the defendant Hill, on March 22, 1879, for the sum of $13,500. On February 22, 1879, said lot 8 was sold to the defendant Burnett for ihesum of $368, upon an execution issued out of said county court upon the judgment therein, aforesaid, in favor of L. & B.; and afterwards said L. & B. foreclosed their mortgage upon. said lot 8, making the defendants Griswold and Burnett parties defendant to the suit therefor, and, upon process issued upon the decree therein given for said L. &B. for $374.37, saia lot 8"and the west half of said lots 1, 2, 3, and 4, in block 73, were sold to said Bush for $888.94. During the years 1878-9 Griswold purchased various "Oregon Indian war claims, and other government debts and claims, and to conceal them from the plaintiff" took the assignments thereof to his nephew, the defendant Edward Chamberlain, and the defendant J. H. Alberts, for which the latter, on November 29, 1879, gave his note to said Griswold for $1,577. The bill also alleges that .the. mortgage to L. & B. for $10,000 was given and received in 80 much a sum than the real indebtedness of Griswold to L. & B., to enable him to hinder and delay the
'UNITED STATES V. GRISWOLD.
plaintiff in the collection of its debt : that the mortgage to H., D., and T. for $10,000 was given and received in a much larger sum than was ever actually agreed to be paid sa.id H., D., and T. for th-eir legal services, or than they were worth, with the like intent, and that $3,000 was ample compensation for such services; that the judgments confessed as aforesaid by said Griswold were given and received on "fictitious and trumped-up accounts," with the like intent to hinder and delay the plaintiff; that all said mortgages, judgments, and assignments were given, confessed, taken, and received with the intent to defraud the plaintiff out of the debt for which it obtained judgment as aforesaid, and to defeat its priority, as provided for in section 3466 of the ReVised Statutes; and that Griswold was ent at the several dates thereof, and intended thereby to assign all before the plaintiff could obtain a judgmel1-t in said. his action in the district court, of which the defendants, each and all, had notice at and before the taking of said mortgages, judgments, ,and assiguments. The prayer of the bill is that the premises aforesaid be sold on the decree of this court free from the effect of said mortgages and judgments, and that an account be taken of the rents and profits thereof received by the defendants, and that the proceeds of such sale and account be first applied to the slJ,tisfaction of the plaintiff's judgment. . All the defendants except L. & R, in,whose favor judgments were confessed, as aforesaid, and also the defendant. Chamberlain, answered the bill, disclaiming any interest .or right in or .to the property in question, and consenting that it might be applied upon the plaintiff's judgment, and as to them the hill was dismissed, they paying the costs of their being made defendants. The defendant Griswold did not answer, and the bill was taken against hi,ill for cqnfessed; The defendants L. & B., Alberts, and Burnett answered on February 28, 1880, jointly, and the defendants H., D., and T. on April and the cause was heard upon the amended bill, the answers thereto,. and the replications and evidence. The defendants, by their answers, admit the fact of the making of and the confessing of the several judgments the several by Griswold, and the commencement, progress, and result of the action of the United States v. Griswold, .as alleged in the amended bill, but severally allege that the mortgages given to them were given and received in good faith for the pur.pose of securing an actual indebtedness to L. & B. of $3,500, and to H., D., and T. of ;$10,000, upon which was that the judgment
in faver of said L. & B. was obtained in good faith for money then due them; that the assigment of "Oregon Indian war claims" to the defendant Alberts was made and received in good faith, and that such claims were purchased and paid for by said Alberts for his own benefit, and without any intention to defraud the United States; and that said Griswold was not insolvent at the date of said mortgages, and the same did not amount to an assignment of his property. From the evidence it satisfactorily appears that the judgments confessed in the county court on January 6, 1879, in favor of Kelly and others, were procured and confessed by Griswold with the intent and for the purpose of delaying apc1 hindering the plaintiff in the collection of its debt or claim against Griswold, and with the intent to defeat the priority of the United States as established in section 8466 of the Revised Statutes, (1 St. 515, 676,) which reads:
"Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts of the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy. is committed."
It also appears that Griswold, on December 81, 1868, filed his petition in bankruptcy in the eastern district of New York, upon which he was adjudged a bankrupt, and on November 15, 1869, was discharged from his debts upon a settlement or compromise with his principal creditors in which he paid them about 83t per centum of his indebtedness; and that at the ']laking of the mortgages to L. & B. and R., D., and T., his property subject to execution, not including a portion of block 47, called the "Griswold Block," and block 88 in the town of Salem, and conveyed to James M. Adams by Griswold and wife on December 21, 1867, was worth not to exceed $25,000. Assuming, then, that the mortgages to the defendants L. & B. and H., D., and T. are valid, these judgments, when docketed, operated to transfer to the creditors therein substantially all the property, ostensibly owned by Griswold, remaining after their satisfaction; and if they can be considered as an "assignment," within the meaning of the statute, the priority of the plaintiff took effect from the date of such judgments, and as to all the property upon which they were a lien, subject to the prior valid liens of third persons. It is well settled that section 8466 of the Revised Statutes does noi
UNITED STATESV. GRISWOLD.
give the United States a lien, but only a priority of payment out of ' the property or assets of its insolvent debtor, after it has passed bya voluntary assignment, or by operation of law, to a third person for the benefit of creditors or with the intent to aefeat suoh priority. By the statute, this priority only takes effeot in four olasses of cases:
(1) The death of a debtor without sufficient assets to pay his debts; (2) bankruptcy or insolvency manifested by some act pursuant to law; (3) a voluntary assignment by an insolvent debtor of all his property to pay his debts; (4) the attachment of the property of an absent, concealed, or absconding debtor. U. S. v. Fisher, 2 Craneh, 390; Conrad v.Atlantic Ins. Co. 1 Pet. 438; v. F. B. 01 D.12 Pet. 133; U. S. v. McLellan, 3 Sumn. 350; U. S. v. Canal Bank. 3 Story, 81; 1 Kent, 247; Conk. 'rreat. 722.
Mere inability to pay, or a sale or a mortgage of a part of the debtor's property, is not sufficient to set the statute in motion; but the insolvency, if not established by legal prooeedings resulting in the appointment of an official assignee, must be accompanied by a voluntary assignment of substantially all the debtor's property. So long as it remains in his own hands, any partial sale, transfer, or pledge of it does Dot brinp; the oase within this statute. Nor is a sale or mortgage for a present consideration, and not on acoount of a pre-existing debt or obligation, an assignment, technically speaking, or within the spirit or meaning of the statute, which contemplates that the debtor shall thereby divest himself of his property for the benefit of one or more of his creditors. An assignment implies the relation of debtor and creditor between the assignor and those to be benefited thereby, and tha,t the consideration therefor is an existing debt or liability. Bur. on Assignm. §§ 3, 4. But an assignment may be made within the statute by one or more instruments to one or more persons at different dates, provided the circumstances warrant the conclusion that they are all the result of a pre-existing purpose to assign the insolvent's property for the benefit of his creditors. Downing v. Kintzing, 2 S. & R. 326. So far as this case is concerned, the question of Griswold's insolvency is not affected by the fact that he was adjudged a bankrupt in 1868, as the United States was not then his creditor; and even admitting, as the plaintiff claims, that his discharge was fraudulently obtained, still it is a valid and binding discharge from the debts then owing by him, until set aside or annulled in a suit brought for that purpose, in the court where it was granted, by an injured creditor or the official assignee. Section 5120, Rev. St.; Nicholas v. Murray, 5 Sawy. 323.
.. FEDERAL REPORTER.
But apart from this, when Gri,swold confessed the judgments to Kelly and others for $3,571.95; he was doubtless insolvent, and intended thereby to preven.t the United States from collecting the claim for which it had just obtained'averdict. His whole property, so far as appears, even if unencumbered, waSl10t sufficient topa1 this one debt. Nor is it material, in this conn.ection., whether such insolvency was. known or believed by third persons or not. The fact that the United States had a valid claim against Griswold for $35.228 since January 29,1874, has been con.clusiv,ely established by the judgment of the district court. But, as all claim under these judgments has been formally aban. doned by the creditors therein., except that of L. & B., it is only necessary to con.sider the effect of this con.clusion as to the latter. These judgments being in effect a voluntary assignment by an insolvent debtor, the, right of the United States to a priority of payment out of all his property, subject to all valid liens and encumbrances thereon, attached at once. Under the law of the state !t judgment, when docketed, is a lien upon the debtor's property, similar to that of a mortgage, and is in effect a convenient method of transferring such property to the judgment creditors. Catlin v. Hoffman, 2 Sawy. 491. The sale, therefore, of lot 8, in block 10, and the west half of lots 1, 2, 3, and 4, in block 73, by L. & B., upon tbeir execution to enforce said judgment and the one to enforce the personal decree in the suit to foreclose the mortgage of December 18, 1878, all said lot 8, was made subject to the prior right of the United States, and,so far as it interferes with the assertion of such right, must be set aside and the property resold upon the execution of the plaintiff, unless L. & B. account to the plaintiff for the value thereof, which the evidence tends to show is about $1,600, together with the rents and profits thertlof, less.the amount of their mortgage for $306.25, with interest. As to the mortgage of L. & B. on block 18, dated June 4, ] 877, these additional facts appear: Griswold was then insolvent, the debt which he owed the United States being greater in amount than the value of all the property claimed by him or in his name, but the although aware of the fact that the plaintiff had commenced the action against him to recover this debt, were not otherwise informed on the subject. It appears that on or about June 4, 1877, Griswold presented a note and mortgage upon block 18 for $10,000, payable, with interest atl per centum pel' month, in seven montbs, at the bank of L. & B. in Salem, and asked for a loan of
that amount on 'that security. Mr. Bush, to whom the matter was l'eferred by the cashier,declined the offer on account of the amount, but after some negotiation and delay of some days, not extending beyond June 11th, he directed the latter to'let Griswold have $3,500; and because the latter did not wish, as he said, to incur the trouble and expense of making a new note and mortgage, it was arranged between them to use the one already prepared, by indorsing on the note a credit of even date therewith of $6,500, but leaving the mortgage as it was for ,the full amount, in which condition it was recorded and remained. It is probable that Griswold intended to use the excess of thi,s mortgage over the sum really secured by it, to ward off the plaintiff's claim, which he knew to be just and then in suit; but there is no evidence to warrant the conclusion that L. & B. bad any object, in taking the note and mortgage. as they did, but to ,secure their loan in a manne\" to accommodate Gril'wold, or that they knew or had reason to belieVE! that he had any ulterior purpose in the matter. This mortgage is not affected by section 3466, 8upra, giving the United States a priority, because Griswold was not then legally a bankrupt or insolvent; and, although unable to pay his debts, and therefore in fact insolvent, the conveyance.did not amo,unt to or pretend to be a voluntary assignment of all his. property ·fortbe benefit of his creditors, but only a security for an ordinary loan that would not even constitute an act of bankruptcy under the bankrupt If it is invalid at all, it is because it is contrary to the statute of frauds, (Or. Laws, 523, § 51,) which is substantially a copy of 13 Eliz. c. 5, and provides, among other things, that every, conveyance of any estate or interest in lands, "m8Jdewith intent to hinder, delay, or defraud creditors of their lawful suits, damages, forfeitures, debts, or demands, · · · as against the person so hindered, delayed, or defrauded, shall be void." The "question of fraudulent intent" is made by the statute "a question of fact and not of law and "the fraudulent intent" of a grantor is not to affect the title of "a purchaser for a valuable con· sideration," without notice of such intent. Or. Laws, 8upr:a, §§ 54 and 55. The false statement of the consideration for the mortgage is a badge of fraud, but not conclusiva evidence of it. Bump. on F. C. 33, 42. And in this cas'e the explanation,of how it canietobe and remain in the mortgage is so far as, the mortgagees are can· .concerned; at least, we do not feel warranted in coming
elusion, from this circumstance alone, that the mortgage was understood to be fraudulent as to the excess of $3,500, so far as they are concerned. But when H., D., and T. sought to foreclose their mortgage on the same property, and made L. & B. defendants in their suit, the latter answered, setting up the lien of their judgment in the county court for $348.82, and also alleged that they had a mortgage on the property for $10,000, which was then "in full force." The bill alleges that this answer was made with intent "to defraud" the plaintiff out of its debt· by making it appear that L. & B. had a mortgage to secure ail actual indebtedness of $10,000, instead of one for only $3;500. It maybe'admitted that the allegation in the answer is literally truethat the mortgage wals "in full force"-but, nevertheless, it; was calculated to make a false impression. It may have been "in full force" as a security for $3,500, or because, it was uncancelled or not satisfied, but not otherwise;, for in fact almost two-thirds of it was ficti. tious from the beginning, and so far never had any force. But this circumstance of itself cannot impair the validity of the mortgage, if it was otherwise valid. It is only material, in this connection, as the subsequent act or conduct of one ·of the parties. to the transaction, that may serve to throw light upon the purpose and Intent with which it was originally made and received. But when it is considered that there is no other act or declaration of the mortgagees that can be construed into an assertion or cla;im that this mortgage was in "force" otherwise than as security for the amount really loaned upon it$3,500-and that in the suit in which this answer was made L. & B. only claimed and took a decree, February 11, 1879, for the sum actually due them,-$3,816.16,-wedo not think this answer is sufficient to characterize the original transaction as fraudulent on their part. But admitting that the circumstances of the false statement of the consideration in the mortgage, and the claim in the answer that it was then "in full force," are suspicious, and not satisfactorily explained by the mortgagees, still we think it a case within the rule laid down in Boyd v. Suydam, 1 John. eh. 478, in which it was held by Chancellor Kent that"When a deed is sought to be set aside as voluntary and fraudulent against creditors, and there is not sufficient evidence of fraud to induce the court to avoid it absolutely, but there are suspicious circumstances as to the adequacy of the consideration and fairness of the transaction, the court will not set aside the conveyance altogether, but permit it to stand a.'l a security for the Bum actually paid." See Bump on F. C. 288.
The mortgage "is allowed to stand as a valid lien on the property for the amount loaned thereon, with interest, less the amount paid thereon by Griswold-$325.80-and the priority of the United States must be enforced subject thereto. As to the mortgage of H., D., and T., to secure their fee of $10,000, the evidence is satisfactory that the contract was made and the mortgage taken by them in good faith for the purpose claimed. It may be that Griswold was influenced in giving the mortgage 'in this amount by the consideration that he preferred to spend the property in litigation rather than allow it to be appropriated to pay what he owed the plaintiff. But there is no evidence in the case to sustain the allegation that this contract is tainted with a secret trust in favor of Griswold or anyone else. The conversation between Griswold and Thompson, to which John Young testifies, wherein the latter said that, in some event, they would take the case up, and the former must pay them another $1,000, in addition to the $2,000 before agreed upon, is relied on as showing directly that the fee really agreed to be paid was much less than $10,000. But though it may be claimed from the general drift of the witness' testimony that this conversation occurred after the, making of this contract and mortgage, there is a circumstance stated in it which plainly shows that it took place during the first trial, and, of course, before they were made; for Young states that after this convers(l.tion he saw Griswold on the street, who then told him "that the jury had disagreed;" and as this only occurred on the first trial, and before the contrl;l.ct and mortgage were made, it follows that the conversation between Thompson and Griswold in no way conflicts with them. It is I;I.lso insisted that the fee is extravagant, and grossly in excess of the ordinary compensation allowed and paid for similar services in this state; and so much so, that the contract and mortgage ought to be considered and held fraudulent on that account for all·in excess of $3,000. But the weight of the testimony does not support this conclusion. Besides, the services of the defendants having been rendered in the United States courts, the character and extent of them are well known to us. The case was a very extraordinary one in many respects, 'involving a claim for $143,000, of which about $35,000 for damages and as much more for forfeitures was well founded in fact and law, besides very grave charges against the defendant's integrity. There were three jury trials-the first one resulting in a disagreement of the jury after being on 24: days; the second one occupied 'nine. teen days and the third one fifteen. There was a motion for a
FEDERAL REPORTER. "
trial, after whi'ch the case was takeri to t'he circuit and head there on error. The preparation and trial of,the action covered a wide field of· inquiry.and controversy, extending over a period of nearly a quarter of a century, and reaching from the Atlantic to the Pacific. The time; labor, and expense devoted to the defence of the action by alHhe members of the firm. was unusual, and nothing was spared or omitted by them to make it successfl1l. The fee is admitted to be large one-probably ·the largest unconditional and secured one then: ever paid or promised in the state. But we do not think that there is any reason on' that account to conclude that the contract is fictitious or the mortgage fraudulent. On the contrary, we think the fee, under the citeumstances, was reasonable and well earned. allegation of the bill that the property covered by these As to mortgages was purchased with the money that the defendant Gris. wold had fraudulently obtained from the treasury of the plaintiff, the evidence tends strongly to establish the truth of it; but there is no evidence that the mortgagees in either of them had notice of this fact at the date thereof. The plaintiff is entitled to relief, and, to that eud, a decree will be sale and conveyance of L. & B. of the west made to the effect that half of lots 1, 2,3, and 4, in block 73, is declared void and annulled, so that the plaintiff may sell the same, upon the execution to enforce its judgment, as though said sale and conveyance had never been made; that the sale and conveyance to him (i. e., Burnett) of lot 8 in block 10, upon the execution issued to enforce the judgment confessed by Griswold in their favor, is also declared void and annulled; that the mortgage given to said L. & B. upon said lot 8 and block 18 are declared valid as securities-the former for the sum of $306.25 and the latter for the sum of $3,500; that the mortgage to H., D., and T. upon said block 18, and lots 1, 2, 3, and 4, in blOck 36, is also declared valid as a security for $10,000; and tha:t, subject to the liens of these respective mortgages, the plaintiff is entitled to a priority of payment out of the proceeds of the sale of said lot 8, block 18, and lots 1, 2, 3, and 4, to secure which the case is referred to the master of this court to take and state an account between said mortgagecs and the plaintiff, crediting them with interest on their respective debts as per contract, j;md sums paid for taxes and repairs, if any, and charging them with the payments thereon, and the rents and profits received from the property, if any, and to sell said lots and blocks as upon execution, and apply the proceeds (1) to the payment of the expenses of the reference; (2) to the payment of the debts secured by the several
UNITED STATES V.VINSON.
mortgages thereon, according to their priority; (3) to the payment of the plaintiff's taxable costs and'expenses in this suitjand the remainder upon the judgment in the case of the United States v. G"iswold, aforesaid. No proof having been made in the allegations of the bill ing the defendant J. H. Alberts, the bill is dismissed as to him. ,
UNITED STATES V. VINSON.
(District Oourt, E. D. Michigan. May 16,1881.)
ST. f 3244-DEALER8 IN TOBACCO. Employers who· buy tobacco and deal it out to their employes at cost, charging them with its cash cost when thus delivered, are subject to the special tax required to be paid, under section 3244 of the Revised Statutes, by those u whose business it is to sell or offer for sale manufactured tobacco."
An information was filed against Vinson, charging him with selling and offering for sale manufactured tobacco without payment of the special tax required by law. Upon examination, defendant made the following statement of facts, which the district attorney accepted, and the question was submitted to the court whether, upon such state of facts, a jury would be authorized to return a verdict of guilty. The statement was that the defendant had a lumber camp in Isabella connty; that he had about a dozen men at work; that he bought tobacco and paid for it, and took it into his camp, and gave it out to his men as they wanted it, charging them with the amount of cash that the tobacco cost him when it was delivered to the men; that he charged them with cash instead of tobacco, the amount of cash charged from time to time for tobacco being the value of the tobacco delivered. BROWN, D. J. That the payment of employes in tobacco, even at cost price, is technically a sale, I have no doubt, since there is a passing of property from a vendor to a vendee for a valuable considera. tion, which is all that is necessary to constitute a sale within the meaning of the law. If the consideration were money it would be strictly a sale; if the tobacco were credited on account of labor, it would be an exchange of tobacco for labor, but a sale so far as the legal consequences of the act in this connection are concerned. Whether, however, a transaction of this kind is within the spirit of the act requiring the payment of a special tax by one "whose business