.':';. BOTB;CHILD ,. HOG" HENNING v. WESTERN UNION TEL. CO. (Circuit Ocurt, D. South Carolina. May 98, 1890.) RBKOV AL OIl' CAUSES-DQMICIf,B-CORPORATIONS.
97
A corporation chartered'in another state is not a resident of a state, within the sense of the removal act. of 1888, simply because it does business and has agents within such state. Following Fal& v. Railtway 00., 32 Fed. Rep. 673. (SyllabuB by the Oourt.)
At Law.
On motion to remand.
BOND, J. The petition to remand this cause is based on the grourtd that the defendant, although a corporation u.nder the law of New York, has a place of business, agents, and property in South Carolina. Being so a resident of the state of South Carolina, it is argued the cause should not have been removed from the state court under the act of congress of 1888. We follow v. Railway Co., 32 Fed. Rep. 673. and the other cases taking the same view with it. The motion to remand is refused. Sns:ONTON, J., concurring.
ROTHCHILD et al. "'. HOGE et
at PARTNERSmP8.
(Oircuit Oourt, E. D. Virginia. May 26, 1890.) i.AsSIGNMENT
Under Code Va, § 2874, providing that LO allsignment made by an insolvent special partnership for the purpose of giving preferences shall be valid, creditors who have · filed bills against a special partliership which has made such an assignment" under Code Va. § 2400, providing that suits may be brought by creditors to avoid assignments with intent to delay, hinder, and defraud creditors, prohibited by section . 2458, and :that the creditors filing such bills shall have a lien on the property of the ·; partnership from. the date the bills are filed, are not entitled to have their full · claim paid oilt of the assets of the firm aCCQrding to the dates of their bills. to the exclusion of other creditors. All creditors are entitled to share In the assets
FOR BENEFIT 01/
9.
rata.
SPECIAL PARTNERSHIP-PA.YMENT OJ!' CAPITAL IN CASH.
A check given by a special partner, as his capital in the finn. which is received ,by a bank, and without verification placed as cash to the credit of the firm, and which on presentation is paid by the bank on which it is drawn, is a sufficient compliance with a statute requiring the capital of a special partner to be paid in cash. Act Va. Feb. 29,1888, (Acts Va. c. 268,) amending Code Va. 1887, § 2871, and reqUiring the names of special partners to be posted, together with the names of the general partners, conspicuously on the front of the firm's place of business, does not apply to special partnElrships entered into before the act took elfect.
B.
SA.ME-RETROSPECTIVII LAWS.
In Equity.
Slater &- Montague, Robt. L. Montague, and Merediih &- Cocke, for comv.43F.no.2-7
Guy &: OOiam and Waller R. Staples, for defendants. , '
Martin & Powers conducted a business in notions and white goods in:,Riehmond, Va., as a special partnership, from the 6th February, 1886, till their failure, on the. 5th December, 1889. The wer(}. Saml.T.Martin and WUlliJJ:nA. Powers. The speoia.Lpatinerswere Edgar D. Taylor and Howard Swineford. The original input capital of the firrn was $12,500. Of this Taylor put in 85,000 in a check on the Planters' National Bank, ofR:ichmond; Swineford put in $5,000, partly in a check of $1,000 on I'1anters' and the rest in a check of $4,000 on the National Bartkof Virginia, at Richmond; and Martin put in tqe, remaining $2,500. Before the certificate ()f was made and sworn to, on the 6th'February, 1886,'tli-e Planters' Natronal Bank received alr the' checks making up the 812,500 of capital, (which except one were drawn on itself,) as citelh; and had enteredupon its owtibooks, and credited in' a pass-book given to the firm, a crlilditof $12:,500 as "cash" to the new ,firm of, Martiu&' Due pUblicatioDwas made on the, day" of this depOSIt, in the :e\l'etiinp; newspaper of Richmond, of the formation of the partnership, of the names of the respective partners, general and special, and of the amount of capital contributed each by the specilllpartners. ,There is no complaint that any of the requirements of the laws of Virginia respecting special partnerships were not complied with, except as will be hereafter adverted to. Among the provisions of the laws of Virginia in force on the 6th February, 1886, and ,stIlI in force, are thefollowing: What is now section 2873 of the presentCode provides that, in case of the insolvency of a special partnership,no partner shall be paid" a creditor of the firm until all its other creditors are satisfied; and is now section 287,4 ofth(} Code provides that no.assignment made by an insolvent special partnership; for the purpose of giving a.pref.erepC'e over creditors oithe firm to one,.orXQore creditors, shan be valid. In the original law of Virginia, relating to special partnerships; (section 22, c. 67,acts 1836-37,) it every lilpecial partner who shall violate the provision against naIIjed, .or shall concur'in or 114allbeUill:ileM a general partner. But.this section became obsolete after the adoption of the Code of 1849, byhavfrom , . . ,;' About the formation, of the special partnership of Martin ofVirgin.i,ap,;tssed a,i{t",l which it declared should be in force aiter' May 1,1888, amending the general law of special pal'tnerships/by the of the general and the partners spo\ildapPl:lar GorispicuouslY"upon the .front of the place of business Of everyspecialpartnershipi'alid'fuaking special liable as general partners in default of compliance with this requirement. The aGt does not refer in terms to pre-existing The evidenCe taken in HUGHES,
J..
tAct Va. Feb. 29,l&18, (Acts 1887-88, Co 268,) amending Code Va. 1887, S287L
ROTHCHILD t1. HOGE.
this cause shows that the nailies 'of the special partners, EdgarD. Tti:ylor and Howard Swineford,were not placedconspicuouElly upon the front of the place of business of Mmtin & Powers after the 1st of May, 1888. The Code of Virginia, te-enacting the statutes of 13 & 29 Eliz. on the subject, in section 2458 provides that assignments of property made with intent to delay, hinder, 'and defraud creditors shall be void as to creditors, though remaining valid as between the parties to them. In section 2459 it provides similarly as to voluntary gifts or conveyances of property. And in seotion 2460 it authorizes suits to be brought by creditors to avoid such assignments and conveyances as are described in sections 2i58 and 2459 before jUdgments obtained; and gives liens to creditors insti,tuting such suits, from the times of commencing them, and to creditors filing petitions in such suits, from the times, respectively, of filing their petitions. But the supreme court of appeals of Virginia, in numerous decisions, has held that assignments for the benefit of creditors, which give preferences to one or more creditors or class.es of creditorsover others, if otherwise free from fraud, are not void merely on account of preferences being given. The law and the facts ofthis case being as thus set forth, the twogeneral partners of the firm of Martin & Powers executed to. Howard D. Hoge,as trustee, on the 5th December, 1889,.a deed of assignment, by which they conveyed all the stock in trade, choses in action, open accounts, office furniture, and all the property, social and individual, belonging to them, to their trustee, for the benefit of the creditors of the firm; and by which, distributing their obligations to creditors into five different classes, they provided that the assets of the firm shOUld be sold, and payment of the proceeds made, to the creditors holding their obligations in the order named in the deed, paying those of the first Class in full, and so on, each successive class to receive payment in full as the fund would hold out. Except one or two banks, the names of the creditors of the firm do not appear upon the face of the deed; but it appears from the evidence taken in the cause that the two special partners', E. D. Taylor and H. Swineford, were indorsers for the firm to an aggregate amount of $15,000. It does not appear that either of the special partners had art or part, either direct or indirect, in the making of this assignment. The complainants' bill and supplemental bill assails the deed thus described, prays that it be set aside as void, and that the fund which has resulted from the sales and collections of .the trustee shall be paid, first, to V.Henry Rothchild & Co., who filed the bills of complaint, and thereby brought the fund into this court; and afterwards, in the order of the respective dates of filing their petitions, to the numerous petitioners who have filed claims in this cause as prescribed by section 2460 of the code above cited. The supplemental bill, moreover, charges that the special partners of the firm are liable as general partners for the entire indebtedness of the firm, and prays the court to enforce thatliability. r. come, therefore, to pass upon these prayers of the bills. The firm of Martin & Powers having been as to the public and its creditors a special partnership, it is clear, and indeed conceded,that the
100
FEDERAL REPORTER,
vol. 43.
eJ1l,l partner& :who executed the assignment of the 5th December, 1889, had no power to do so, and that the deed is invalid. Section 2874, which is thelaw. of special partnerships, declares that no assignment can be macle.of th<e effects of such a firm that shall give preferences between its creditors.. But it is contended by counsel for'complainants and petitioners that the making of the assignment in this case was a fraud upon this section 2874 of the code, and therefore that they are entitled to the benefit of section 2460, which gives .preferencesto yigilant creditors assailing the assignmept according t9 t.he degree of their vigilance. Accordingly they pray the court to do wha.t section 2874 forbids the partners to do. They call upon it to make a decree declaring a greater number of .preferences between the creditors of this firm than the faulty'instrument which they assail as fraudulent itself created. Logically, this would be condoning one frand upon section 2874 with another,-a lesser fraud with a greater one. .The pro rata payment of creditors is the fundamental law of special partnerships. All contracts made with special partnership firms, all credits given them, are, in contemplation of law, made and given on the faith of an equal distribution of the assets in the. event of failure, on the faith of section 2874, which forbids preferences as between creditors. To violate this rule of by preferring any creditor or class of creditors over others, would be to break faith with all. and to repudiate the flwdamental principle on whic4 the business of this firm was transacted with the public. Such a proceeding cannot be thought of. The effects.of this firm must be distributed pro rata. The statute law happily req'!1ires the court to follow .the golden rule of chancery, "equality is equity," in the distribution of this fund. Complainants and petitioners further pray the court to subject the spe<;:ial partners of this firm to liability as general partners to its cred''l,'he first ground Oil which this demand is based, is that Howard Swinefprd, one of the special partners, paid $4,000 of his in-put stipend of $5,00.0 witha check on the National Bank of Virginia, of this city. They cite decisions rendered by various courts to the effect that the cash required by statute to be paid .Il-S the capital of special partnerships must be ml:nlf:lY itself, and cannot be substituted with checks; this ruling being founded on the principle that nothing can be regarded as the capital of such a firm but· money that is placed within its absolute control. Counsel for the special partners cite other cases in which other courts have held that checks, undoubtedly good, may be received as money. It is easy to reconcile these decisions. When checks are used as substitutes. for cash, or with the intention of avoiding the immeqiate payment of money, they are held to be an evasion of the .law requiring the in-put quotas of special partners to be paid in cash, and to be an insufficient cqmpliance with the requirements of law in that regard. The check .under consideration was that of a man in the highest credit in Richmond,. drawn upon a bank but a few doors distant from the bank which received on the same street, and payable instanter. The only .person competent at the time to question its value was the bank which
itpre.
101
received it, and that bank was so confident of its value as cash that, without sending it for verification, it forthwith placed the amount of it to the credit as cash of Martin & Powers. It would offend the sentiment of the commercial and banking community to hold that such a .. check, so received, and so credited, which was duly paid, and the proceeds of it fully used by the bank receiving and the firm credited with it, was not cash; and it would inflict an injustice upon these special partners, which no court of conscience could be capable of perpetrating, to hold them responsible in thousands of dollars beyond their in-put for the general debts of this firm, on a 'pretenceso narrow and so technical. It is further insisted that, inasmuch as the provisions of the act of Assembly of February, 1888, which required the names of special partners to be posted conspicuously in front of the places of business of specia1 partnerships after the 1st May, 1888, was not complied with by the firm of Martin & Powers after that date, Mr. Taylor and Mr. Swineford became afterwards liable as general partners. It is not worth while to inquire whether this act of 1888 was a remedial law, such as must have retrospective operation; or to enter into the discussion so elaborately conducted at the bar, whether general remedial laws operate more or less universally from and after the dates when they come into effect. The contract between the partners of this firm inter se, and between each of them and the public at large and the firm's creditors, as to the liability of its special partners, was determined and defined by the laws of Virginia regulating special partnerships, which were in force when the firm of Martin & Powers was formed,-the laws as they were on the 6th February, 1886. If the special partners complied then and throughout the existence of the firm with the requirements of the law which entered into and formed the basis of their contract with the general partners and the public when the partnership was formed, they performed their whole duty. No law on the general subject of such partnerships which, amending a previous one, imposes new and additional duties upon them, can justly be held by the courts to apply to pre-existing partnerships, less the new law so declares in express terms. No one should be subject to heavy pecuniary liabilities bymere implication of law. Special partliers are very often non-residents ofthe places or the states in which the business of their firms are conducted. It is not competent for them to engage in the personal Illanagement of such business. The law expects them to hold aloof. If, after complying with all the preliminary duties required by law, with a view tq their protection as special partners, and after leaving the business of the firm to go on under the management of general partners, new laws are passed requiring additional duties to be performed; and subjecting them to liabilities in default of performance, never contemplated by them, the courts will not presume that the new legislation was intended to apply to their Ca'Be. When the new law makes ,the compliance with new requirements the ground for imposing heavy pecuniary liabilities, it is of the nature of penal legislation, and glustbe express and specific in its terms. I do not think the special partners in this, case became liable as general partners by the non-posting of their
J102 i
FEDERAL! REPORTER,
thein firm1s p8ll:13:of business, after the lsf May; 1888. I will aign,adecreedrawpin'8ooordance with the principles settled by the court of 'appeals of Virginia .inthe case of McArthurv. Oha8e, 13 Grat. , '683,60 fa.r as:itis applicab1eoo the case at bar. ..
;1:',:
BRIGGS .
i1'j1"
'
v.
"
SAMPLE
et. al.
(Oircuit
oduit, D.Kan8a8.
July
L' DBBD......VALIDITy-INDIAN Tins.' ,
'.rhe treaty with the KiokapQo Indians (18 U. S. St. provided that the land allotted to the Indians could not be sold to white rilen'without permission of the president, which permission llhould be signified bv his causing the land to be patented to ,tb,e Indians "with power of. alienation, " and that. b!lfore reoeiving patent the Indians must appear before the district oourt) make proof of their intelligence and ability, and take the oath of: allegianoe. An Indian oonveyed his land by warranty deed on the day he made suobproof, and after he had obtained his patent conveyed the land to another grantee.' Held, that the seoond grantee took the land, sinoetbe first deed, belnA' made before patent, was'1nefrectual to convey the . ,land, either directly or by el\tllppel. BAME-RECORDING-NOTZOE.
Thereoordiog' of the first'deed before the patent was granted oonatituted no ;notioe tl) the sec\lnd grantee.
.
In ,Equity. J H· ./rI. Jackson,. for plaintift. A. F. Ma1tin, for defendants. FOSTER, J ..' The complainants file their bill in equity to quiet title to 40 acres oflaI)d, in Atchison county, Kan., alleging title and possession in themselves, a.nd further alleging. that the action involves a construction of a treaty of tile United States with .the Kickapoo tribe of Indians, and that the set up SOme claim to said property which constitutes cloud upon complainants' title; and pray to have the title quieted, and for an injunction a,gainst def.endants from interfering with complainants' po,ssession. The facts are briefly these: 'I'he land was allotted to Meahem-a-wa, (Peter eadue,) a Kickapoo Indian, under the treaty with sl,lch tribe proclaimed May 28, 1863. 13 U. S. St. 624. On October 20, 1886, s/licl Indian appeared before the United States district court, and made proof as contemplated by the third article pf said treaty, and the oath ofallegiance therein provided for. On the 24th day of December, 1887, the president of the United States directed a patent to issue to said allottee, and on the 19th day of January, 1888, said patent was issued, and delivered to the,patentee; and on the 25th day of January, B.aid patentee conveyed the by wauanty deed to these complainants. The source ofthe defendants'title is a.warranty deed executed and delivered by ,aid allottee toW.:e.Oole and A.F. Martin on the 20th day of October, 1886 t being the same day he made his proof before the United States court, bqt long before the patent'was issued, and before the presi-