out reference totheamouuHnvolved. 'The court'accordingly adheres to its f6rmerruling do this question, 'and overrules fuil! ground of demurrer with costs.
WREN 'l1· .ANNIN
et al.t
Oourt,
II.
D. New York. March 12, 1888.)
CouxTS-FEDERAL,JUXISDICTIOl'l'-:-PATENTS FOR INVENTIONS-ENFORCING AsSIGNMENT· ., '. ,
An action where the relief demanded is an assignment of letters patent. and damag:es..,andwhere all tb.e p.arties are res.idents Sl'm.e state, does not lie within the jurisdiction of the federal courts. Following 'l'rading 00. v. GlaenZ61', 'SO Fed. Rep. 887. .
In Equity. On demurter. '.' .· .' (lomplairiantWren, the patentee of 'an improvement in metallio wheelbarrows, aasigned his letters patent to.defendant, Annin, in con$ide:ration of one dollar and an agreement by Annin to money for the the wheelbarrows. The bill in this suit alleged that Annin had failed to pay the consideration, and had assigned the letters patent to the defendant, the National Barrow & Truck Company, in fraud of complainant, and therefore prayed for a decree compelling deftmdants to reassign the letters patent to complainant, and for damages. The bill wasdem.urred to Ollth'e ground that as nli the parties were residents of the state ()f New York, the jurisdiction of this aetion lay with the New York Rtate courts, and this court had no jurisdiction. I. S. ea.Uirl, for complainant. John L. Hill, for defendants. . '., .. LACOMBE; J.. I am unl,lble to distinguish this from Hartell v. U.. S. 547 ,and. Trading Co. v. Glaenwr,30 Fed. Rep. 387. Demurrer i!i sustained·
and
. GOTTLIEB 11. THATCREB.
(Circuit OotJ,rt. D. Oolorado.
21, 1BS8.) TO PRIOB GRAN'
1.
JUDGMliNT-OI'ERATION AND EFFECT-CONCLUSIVENESS TEES. .
As against a prior grantee and purcbaser at an .execution sale nnder a precedingjudgment. a subsequent judgment against the grantor and debtor is Dot conclusive, either as·tei the amount 'of the debt, or as to the circumstances e.nd character of the transaction out ofwhieh the indebtedness arose. and where made defendant to a bill by, tQe ,holder of such judgment tq set the cOllveyance aside as ill fravd of debtors. and to subject the land.s.lich prior grantee ,and purchaser may show that the debt for which the judgment was .'
lReportellJby Edward G. Benedict, Esq., of the New York bar.,
436
>
rendered lJ;ad been more thanpald when the judgment was obtaIned and that the creditor.had taken an unfair advantllge of the de1,lto1' in the matter of in.' terest. '. . to FRAUDULENT CONVEYANCES-AcTIONS TO SET ASIDE-By CREDITOR WHOSE: DEBT HAS BEEN PAID.
The keeper of a house of ill fame, haVing bought $6,000 worth of furniture, borrowed of G.· who had negotiated the sale, $2,700, to apply to the purchase money. She gave him her note for that amount, with an accommodation indorser, secured on the furniture, and, in addi'tion, on 320 acres of land belonging to the indorser. This note bore interest at5 per cent. a month. She was also charged $300 as a bonus, and gave G. her note for that amount. She paid $910 as interest on the first note, and having then defaulted, G. seized the furniture. and sold it at auction for $1,519.43. .He I\lso foreclosed on the land, and got from it $253.10. thus realizing, with inierest;$2,682.53 on a debt of $2,700 in about a year. He then sued the indorser for the full amount of the note, and, the defen4ant's attorney being drunk! at the trial, and a new man being Ii$signoliin his stead, got a judgment for When tb:is suit was 'commenced, he issued a writ of garnishment, and thus came into possession of a note for $1,350, secured on lands 'worth many thousands of dollars. This note was advertised for sale without any reference to the security, and bought in for $80 by G., who foreclos,ed, ,anli took the laJ;ld. He then filed. a bill the brother of the indorsyr, had bought in certain land' of the mdorser at an execution sale undef a judgment rendered against ,him prior to his indorsement on the $2,700 note, setting np that he had levied on the land to satisfy his jlldgment for and bought it in. 'and that the, purchase by and the deed to the brother was the result of conspiracv to' ;defraud creditors. Held, that under the Circumstances the bill should be rliemissed, the creditor baving, in equity, been more than paid in full.
In Equity. J. W. Horner and A.·T. Bentley, lor complainant. H. a. DiUon, for defendant. BREWER, J. This case is now before meon final hearing. The facts are these: On July 23, 1877, complainant recovered judgment in the district court of Arapahoe county for $2,171, against Samuel H. Thatcher, a. brother of defendant. On November 13,'1876, Samuel H. Thatcher conveyed to defl::ndant, by warranty deed, tor an expressed ()onsideration of $4,000, the jands in controversy. Complainant caused execution to issue on his judgment, levied upon the lands as the propertyof Samuel H. Thatcher, bought them in, and now seeks to have this warranty deed set aside as a cloud upon his title, and such title quieted as against all claims of defendant. He insists that that deed was fraudulent and void, be9ause mllde by Samuel H. Thatcher with intent to defraud his creditors, complainant among the number. Many questions are rais.ed and by counsel. In the view which t have taken of this case I shall have occaSIon to refer to but one or two, and, in order to ;present these, some other facts: must be stated. The judgment n,gainst Samuel a.Thatcher grew oilt of these tTlthsactions: In November, 1875, one ZeJla Glenmore,'the proprietress' of a house of Ul faIPe, purcha.sed a lot offurniture frotnRhoda Sevins, the ,proprietress' of a. like bouse. She. borrow'ed $2;700 ofcomplainantj gave her note with Samuel H. Thatcher's indorsement for that amount. This note was secured by a chattel mortgage on the furniture, which at
GO'l'TLlEB II. THATCHER.
437
the time wasWQrth $6,000; also, by ·trust deed on 320 acres of land in Douglas ,county, belonging to Thatcher. Thatcher had no interest in the transaction, and :was only an accommodation indorser. The note Iran one year, and drew 5 percent. per month interest. At the time of taking this note complainant also took a note for $300, signed by ZelIa Glenmore alone, which note was given to him" ,as he says, for his services in making the trade between the two women. According to his testimony, Zella paid six months' interest, and $100 on the seventh months' interest, Or $910 in all., Zell& testifies that she paid 11 months'interest. !troay be, however, that her testimony is not properly before the court, as, when her deposition was taken, the issues were different; and under an order made by this court after the issues were put in their present shape she was not produced for cross-examination. When the year for which the note was given expired, and in November, 1876,perhaps .on the day before the note matured,--complainant seized the furniture under his chattel mortgage, and caused it to be sold at public auction. From this, by his own testimony, he realized $1,519.43, in December, 1876. The trust deed on the county lands he also, enforced, and from that realized $253.10. Thus, according to his own testimony, he received $2,682.53 from Zella Glenmore personally, and from the mortgaged property. Nevertheless he commenced suit for the, full amount of the note against Thatcher, and recovered judgment, as has been stated, for $2,171. When the case was called for trial, Thatcher's counsel was intoxicated, and the case was continued a few hours, until new counsel could be suhstituted,-counsd who had no previous knowledge of the transactions,-and under those circumstances the case was tried. At the time of cornmencingthe suit again.st Thatcher, he garnished Gray and Eichaltz, and from them obtained possession of a note for $1,350 belonging to Thatcher, secured by deed of trust on 20 .acres of land worth more than the amount of the note. this note was thus secured, it was advertised for sale without any notice of the security, and bid in by him for $80. Thereafter he had the trust .deed foreclosed, and under that foreclosure obtained title to the lands now shown to be worth many thousand dollars. It is true that this advertisement and purchase of this note by him was not until after the purchase of the lands in controversy, but the fact that the note was thus oBecured was disclosed by the records in the case prior to its advertisement and sale. Again, on May 7, 1875, befure even the of the money by Zella Glenmore, one Samuel Kaucher had obtained judgment against Thatcher in the district court of Arapahoe county, for .$2,710.40. This judgment wastakfln on error to the supreme court of the territory,l and thence to the supreme court of the United States. and by each court affirmed,-by the latter on December 17, 1877. On this judgment execution was issued on January 29, 1878, the land bought .by defendant, and deed made to him November 15, 1878. There is a question in the Case as to whether the lien of this judgment .19 Colo.69&.
I dn not care to pUrBuean'inqulryinto that qu.' uon. RetUrning'to thefa.cts previously noticed, jtmnybe stated that thejudgmentofJuly 28,"1'877, is conclusive between complainant and Samuel H. Thatcher as to his indebtedness; but it is not conclusive upon defendant, a grantee ,from: Samuel H. Thatcher before the judgment, .either as to the amount/oe,the debt, or as to the circumstances and character of the transaction' out of which the indebtedness arose. The authorities upon this question are uniform and clear; . I cite a few of them: Hafner v.Irwin, 4 Ired. 529; OoUinaon v. JackBon, 14 Fed. Rep. 809;Oln.rk v. Anthony, 81 Ark., 549; King v. Tharp, 26 Iowa, 283; Esty v. Long, 41 N. H.l03i Bruggermam. v. Hom', 7 Minn. 337, (Gil. 264;) Sarge;ntv. Salmond, 27 Me. 539; Caswell v. Caswell, 28 Me. 233;D(fI)J'IUI v. FuUer" 2 Mete. 185; Carter '9'. Be;n'Mtt, 4 Fla. 283; HaU v. Hmntin, 2 Watte/355; Warner v. Percy, 22 Vt. '155; BoutweU v.McClure,30 Vt. 676; Ingals v. Brooks, 29 Vt. 899; Freem. Judgm. § 336;. Bump, Fraud. Cony. 558. In the case'of Inga18 v. Br{)(Jk8 the facts were as follows: Israel Brooks conveyed all his lands to his son, Clark Brooks, and as part consideration therefor said Clark BrookS agreed to pay all the debts of his said father. ' Leafy ,Brooks, who had become the wife of Ingals, presented a claim against the father, Israel ,Brooks, againstwhfch the son, Clark Brooks,ma:iiltained he had a set-oft'. They compromised; Clark Brooks released his set;.oft', and Ingalsand wife threw oft' half the amount of their claim. IllgalS then went to the tather, Israel Brooks, and got bim to'allow'judgment to go against him for the other half of the claim, of which proceeding Clark BrookE; had no notice. Ingals then levied execution'under thisjudgmentol1 the lands held by Clark Brooks, and sold the same, and in course of time 'got a sheriff's deed,' and began his action in ejectment. The court uses the following language: "The judgnient, being altogeth",r Inter alios, and in express violation of the un'derstandingof Clal'k when he surrendered thl'! claim against Leafy,one of the plaintiffs, and paid one-half the amount of the Dote in money, in agreed of the whole. would have no effect upon the defendant Clark. I:Il'lis entitled tQ.show that the note was paid before sued, or that the judgment was fQrother reasons fraudulent to him. Atkinson v:. Allen. l2 Vt. 619. This Compromise (>f thenoie, Clark was just aseffectlve a bar to the claim inl:\\v'. and just as effectiVe a'release of his undt-'rtaking to pay it at the timll of oonveyance, as if he liad paid all the money upon it. It is true. he did 'undertake or promise to payoff the debts of the grantor, his father; and he has. in fact paid tht-'m all, except the mortgage, which is not in question; and the jUdgIllt-'nt against brael;the fatht-'r, is either a sUbsequent <lebt on his promise to pay what they did not of Clark, and which in nO$llnse, undt'r the circumstances, can be regarded as forming any Cl'ark W'a,s to pay, or else the wholepfoceeding, so far part of tHe: as it is 'att,t'luptM to give it the appeal'ance of a prior claim; 'is a fraud upon:' the.llompllOmise.and st'ttlement made with Clark, and the consequent surren· der of the Dote;.alld in either case!t" will not enable the plaintiff to treat the con Ii'!l and levy upon it 88 the land of Israel Broqk!l. , JUdgment i1i'reverstldandthe case remanded." ' In the case of Boutwell v. McClure, the court used this language:
u.dnot
GOTTLIEB fl. mUOHER.
439
"The jUdgment the plaintiff's claim in this 3ctit)u, whether rendered before or after,tbe(jlaimant's appearance, COncludes nothing ontbe question. In all such cas,es tbere, is ,likely to ,exIst the form of· & contract of a. early enough to,8l!C9'llplisb its purpose, and itis not uncommon that this contract assumes'the form of such as that of a pmmissory note, or even ajudgmllDt of a court of record; but ineilher case they are of course only concl1)siv&upon the parties nnder such· contracts. Upon any question arising in regard to the creditor being bona ftde such at a ,particular date, ,and contimlipg s,nch to the present tim.e, the contract is but prima fa.()i,s evidence of the 'fact. It Ie to h;npeach the debt,eithera.s to its bona fide character. its date, or continuance. For although the debt once e:dsted,.a.nd at a date early enough to defeat the 'alleged fraudulent conveyance, yet; if it has been extbiguished by payment on the part of the debtor, it sinks at once into the common mass of his assets, and be subsequently kept on foot as the debt of a bonafide credi19r." The case 'of Warner v. Percy Was llnaction iriejectment,' and presents the identicllrl question that is involved in the case· at bar. Plaintiff claimed title under a warranty deed from Mr. Woodward, executed in February, 1842. The defendant claimed title under a deed from L.E. Pelton. executed February 8, 1847, and Pelton got title by meatiS' of a , jud/l;ment,execution, levy, sale, and sheriff's deed, and secured posses'sion of the premises.,' The plaintiff, who was grantee in the alleged fraudulent conveyance,brought his action in ejectment. The plaintiff, under objeetion from defendant, waapermittedto give evidence tending to prove thll.tat tbetinie.ofthe conveyance by Woodward. his grantor, to the' plaintiff, he, Woodward, had claims to a considerable amount {in the language' of the exceptions) against Pelton for property delivered to him, and for rendered him; "and the question;". says the -court, "is now presented for our decision, whether lIuch evidence was admissible for the purpose for which it 'was received by the county court. It wa!.\ an important point on the part of the defense to show the motive which,induced Woodward to execute the deed to the plaintiff. Was it <lone with the intention'to defraud Pelton? We agree with the county court'that ifWootlward had, or supposed that he bad legal claims against Pelton sufficient to meet whatever Pelton had against him, it has a de-cided tenden.cy to rebut any presumption of Ii fraudulent intent in Woodward to avoid therightsoiPelton. The reason must be obvious. Themutua! claims might be made the subjedtofa set-off,and by these meal1S be mutually concluded. We also agree with the county court that this was proper evidence on the question whether ,Woodward was really indebted to ,Pelton at' the time when' the plaintiff received her deed,-that is, in a sense that Woodward could ,by a. fraudulent conveyance avoid any substantial right of Pelton., The plaintiff is not concluded by the judgment against her p;rantor, especially as it is subsequent to her deed. <As between Pelton and Woodward, the judgment is conclusive so far as relates to Pelton's title under his levy·. But so far as the plaintiff is <::on-carned, how far back theindebtedl'lessextends. a.nd what was the relation, the relative state of the mutual claims of the parties to the judg',ment must be open to inquiry. We see no possible objection to.any part .of.the charge oithe court. ' Thechargegives; Pelton, the right to levy on
4.40 this propet'ty, provided the conveyance was made to the plaintiff in rraud of any ofWoodward's criiditors; and we think it is favorable tu Pelton have been.. The judgment of the court as anyone Clould claim h is This opinion was delivered by REDfIELD, O. J. . In the' case of Sal'gent v. Sa17nond, it appeared the plaintiff had taken judgment against his debtor for twice as much as he was entitled to. Upon this fact the court refused to give him any relief as against conv,eyance of his debtor,on the ground that he the in with clean hands. . . who comes in,to;-equity " In the case:' Qf Bruggermiin v. Hoerr, it appeared tha,t the judgment was. rendered u.pon a debt which was in fact void as against public policy. and for that reason the court refused to interfere with an alleged fraudulent conveynnce. ., These 'various authorities make it clear, not only that the judgment against Samuel H. rrhatcher is not conclusive upon the defendant as to the amount of ,indebtedness, but also that it is the d\lty of this court sitting as a court of equity to inquire into the circumstances out of which Buch indebtedness is claimed to have arisen, and if those circumstances do not show that the claim is one which in equity and good conscience the court will not inquire into the transaction beought to be tween the judgment debtor and the defendant, but leave the parties where theirlegal titles have placed them. Now, it is a familiar doctrine of courts of equity that where a contract appears extortionate and unconscionable, it will not be enforced; so, where a cOblplainant is seeking to obtain some unfair .audunjust advantage, or, having been fully compensated for his time and labor and money, is seeking by technical rules and legal proceedings to grasp more, and wherever generally it would be inequitable so to do, a court ofequity will refuse him any relief. See among other cases, Kelley v. Capli.ce, 23 Kan. 474, which by the way was an action at law; also, Brown. v. Hall, 14 R. 1. 249, and c,ases cited therein; Butler v. Duncan, 47 Mich. 94, 10 N. W. Rep. 123; Bime v. Norris, 8 Phila.84; EltrZ of Aylesford v. Morria, L. R. 8 Oh. 484. Now, in the first place, this land was appropriated to the payment of the Kaucher judgment, which was a prior debt of Samuel H. Thatcher. Whether the lien of that judgment was gone or not, the land. was in fact sold upon that judgment, and bid in by defendant. Whatever may have been the motives of the two brothers, or by which one in fact the· money to pay for the land was advanced, the land was sold, the money was advanced by one or the other, and the defendant became the purchaser. As the land thus went to pay II. prior debt of the judgment. .debt<>f, complainant should have a very clear case for equitable interpo'sition before it should be taken from the defendant and applied to .the· payment of another debt of his brother. , Again, 5· per :ceIit. per month is outrageous interest. It may be legal if the statute places no limitations upon the contracting powers of parties; but is it equitable? Here ZelIa Glenmore, the borrower, was a .woman so' situated that she could not go into the money market and.
STEINES'll. MANHATTAN LIFE INS. CO.
441
borrow on the same terms as others. Taking advantage of her situation, complainant exapts from her this enormous interest, besides demanding a bonus of $300 on the ground of services in enabling: her to purchase the property ,and then, as soon, if not sooner, than the debt matured, sweeps the property off to a publie auction-house, where, as everyone knows it would be, it was sold at enormous sacrifice; so that this property, which at the time the loan was made is shown to have been worth $6,000, realizes only one-fourth that sum. Before doing this he has, according to his own testimony, received about one-third of his money back, and according to hers more than one half. Not content with that, he appropriates 320 acres of the debtor's land, and then, by attachment proceedings and sale, and with a singular and suspicious omission in the advertisement, obtains the title to a note fully secured,amounting, with interest, to more than half of the original loan, and, enforcing thereafter the trust deed, is now the owner of most valuable property. Has he not been paid in full, and more than full, for his original loan, and interest reasonable and unreasonable? May not a court of equity now stay his hands, and say, "Enough?" To grant to him the relief he now asks would be putting a court of equity and good conscience in the position -of giving to him an unconscionable profit upon an extortionate contract. I do not think that should be done. I have thus far considered this case 1l0lely from the standpoint of the complainant's rights, and have not noticep. the circumstances of the transaction as between the two brothers; nor is it necessary, in view of the conclusion reached upon the former ,branch of the case, to comment on the latter. For the reasons indicated a decree must go dismissing the bill.
STEINES
et al.
'II. MANHATTAN LIFE INS.
Co.
(Oircuit Oourt, E. D. Mi8aouri, E. D. March 26, 1888.)
EQulTY-FRAUD-LACHES.
A bill in equity on a life insurance policy issued in 1854. alleging that at the time of the issuance of the policy the company agreed.to distribute the surplus every three years in interest-bearing scrip; that· in 1857 the .company fraudulently sent plaintiff a document which was simply a statement of a permanent addition to the policy, but which she, owing to her imperfect understanding of the English language, supposed to be a statement of the scrip; that she received similar documents in 1860, 1863, and 1866. tho true nature of which she has only recently learned; but which fails to set out a copy of the policy, or the alleged documents, or that she remained ignorant of the English language after 1857,-fails to show grounds for equitable interference, after the lapse of so many years, and the consequent changed condition of the parties. A bill in equity by a married woman against an insurance company, alleg· ing that when the policy was issued the company agreed to to her a portion of its dividends: that she always paid the premiums until 1866, when, on account of her sickness, her husband was sent to pay them; that the agent of the companJ" procured him to sign an application for more
".t.
SAME-LACHES 01' MARRIED WOMAN.