IN BE SHAW.
495
it in the only way it could become beneficial to the estate,"'-by a suit to Bet aside the judgment and obtain the maney,-and the time for doing BO has lang since passed. I cannot perceive anything possibly useful to the bankrupt's estate in continuing the injunction longer, and it ought, therefore, to be solved. By the operation of the statute of limitations the questiqn of the validity of the judgment has long since passed beyond the scope of proceedings in bankruptcy; and the special interest of the' two subsequent judgment creditors, in contesting the judgment, cannot be here oonsidered, as it does not concern the general The motion should be granted·.
In re 1.
BHA wand
another, Bankrupts. October 18,1881.}
(District Oourt, S. D. New York.
ExECUTED CoMPOSITION-ATTEMPT TO SET ASIDE-SALE BY TlIlll. BANKRUl'T OF HIs STOCK-INADEQUACY OF CONSIDERATION.
In a proceeding to setaside a composition in bankruptcy after it has been fully executed, a sale of the bankrupt's stock and fixtures, made prior to the adjudication in bankruptcy, will not be disturbed on the ground of inadequacy of price in a doubtful case, nor upon other grounds known to. the. creditors. accepting the composition, although it might probably have been avoided by an assignee in bankruptcy. . 2. SAME-SAME.
A creditor, who, with full knowledge of tbe schedule estimates, voted for the composition and received payment. under it, is precluded from seeking to set aside the composition for mere inadequacy, or because it ultimately turns out that a larger amount might have been offered and paid, where the schedules show with substantial correctness the situation of the estate. 3. BAME-AssltTS-BANKRUPT'S RIGHTS WITH RESPECT THERETO.
A bankrupt from whom a composition is received is necessarily at liberty to deal with his assets as he chooses. The creditors have no concern in the matter if their composition be paid and no fraud Placticed. He may pledge or sell his stock to op.e or more of his creditors to raise money to pay the composition, where there is no concealment practiced, or unfairness to others.
In Bankruptcy.. This was a petition filed in this court on the twenty-sixth day of June, 1877, by Frederick M. Peyser, to vacate and set aside a composition made by the above-named bankrupts with their creditors, confirmed by an order of this court on the first day of December, 1875, and to .aeate and set asIde the discharge of said from their debts. The bankrupts were a firm engaged in the manufacture of blank books in the city of New York. On or about the seventh day of Aug-nst, 1875, being unable to meet the payment of all their debts. they sold all their stock ana fixtures to their clerk, Uandolph
196
FEDERAL REPORTER.
N. Smith, receiving therefor his notes and a chattel mortgage on all the sald stock and fixtures as collateral security for the payment of the notes. On the twenty-first day of August, 1875, the bankrupts filed in this court their petition in voluntary bankruptcy. All subsequent proceedings were regularly taken. The notes and mortgages were entered on the schedules as a part of the assets of the bankrupts. The petitioner herein was present at the meetings of the creditors, voted for a composition of 15 per cent. in cash, and receiyed full payment under such composition. The L. L. Brown Paper Company and the Whiting Paper Company were among the largest creditors of the bankrupts, and favored the composition. L. L. Brown and William Whiting were the active representatives of said companies, and they individually advanced the money needed to pay the debts of the bankrupts imder the composition, and received in return therefor the assets of the bankrupts. The other facts sufficiently appear in the opinion.
tN BE SHAW.
497
There is nothing, however, in the evidence, even as it now appears, so far as respects the amount of the bankrupt's estate, whioh would -vary essentially the apparent amount of assets. The sohedules showed about $70,000 estimated assets, of whioh $58,000 were notes of Smith, seoured by the mortgage, being about 30 per oent. on the entire indebtedness; and that is the amount of dividend whioh Peyser, the petitioner, testifies Shaw told him the estute would pay. Page 453. The oreditors, inoluding the petitioner, with all this in full view, nevertheless voted to aocept 15 per cent. oash, and the sition was approved by the oourt and paid. If any creditor was dissatisfied, on the ground that the estate would net a sum more nearly approaohing to wha.t the schedules showed, viz., twioe the amount offered as a oomposition, it was his right and his duty to present his objeotions at the time. Least of all oan a oreditor, who, like the petitioner, voted for the composition and reoeived payment with full knowledge of the sohedule estimates, and after being told by the bankrupts that the estate would pay 30 per cent., be now heard in seeking to set the composition aside for mere inadequacy, and beoause the amount so offered and paid was not as muoh as the schedules indicated might have been offered; and the evidenoe does not prove any better condition of the assets subtltantially than the schedules indioated, if in faot as good. In the figures exhibited as to the subsequent business, no aooount is taken of expenses. In re Herman, 17 N. B. R. 440; In re Marionneaux, 13 N. B. R. 222. The only additional ground for setting the composition aside is, as the petition alleges, that two creditors, the Whiting Paper Company and the L. L. Brown Paper Company, fraudulently represented to the petitioner that they were willing to take 15 per oent., whereas they were fraudulently conspiring to prooure the assets for their own use by paying other oreditors 15 per cent., in order to make their own debt in full. The evidenoe fl1ils to establish any suoh design or result, or any oase of fraud or conspiraoy. Mr. Whiting and Mr. Brown, the aotive representatives of those ,two oompanies, made no representations of any kind to the petitioner, nor, as appears, to any other creditor, except undertaking to see the composition paid. After the adjudication in bankruptoy, these two companies signed the paper for a voluntary compromise at 15 per oent., whioh was not acted on beoause the signatures of· some creditors, of whom the petitioner was one, could not be and were not obtained. The evidence does not show that anything more than possible prooeedings' in v.9,no.8-32
498
ruptcy were contemplated at the time of the sale to Smith. Had the plan alleged by the petitioner been in existence prior to the bank. ruptcy proceedings, viz., a plan to force a settlement at 15 per cent. for the benefit of Shaw, Whiting, and Brown, it is inconceivable that Shaw, after the ba.nkruptcy, should have told Peyser, as the latter testifies, that the assets would pay 30 per cent. Page 453. This fact proves that there was no such plan, and confirms the direct testimony that the arrangement fqr paying the composition originated after the bankruptcy, and grew naturally out of the situation. The evidence shows that these two companies found it greatly to their interest to maintain Mr. Shaw's large trade, if possible, as that was the principal outlet for the sale of their manufactures. They had aided Mr. Shaw before, and now, to keep up their business, Mr. Brown and Mr. Whiting, individually, were willing to advance 15 per cent. cash and take the assets for their indemnity. There is no of concealment, collusion, or unfair advantage on their part over other creditors. At a meeting of creditors at the Fifth Avenue Hotel this arrangement was openly discussed. Mr. Whiting and Mr. Brown were desired to name SOme sum which they would advance and take the assets, and one other creditor is speciflOd who was desired by them to join in raising the money, but declined. A bankrupt from whom a composition is received is necessarily at liberty to deal with his assets as he chooses,-that is, his means of payment; and where cash is .offered it is to be presumed that it is' done by some immediate pledge or. transfer of his assets. How or with whom this is effected is wholly immaterial to his creditors, so long as no fraud or unfairness is practiced npon them. In re Reiman, 11 N. B. R. 21, 45; In .1'e Van Auken, 14: N. B. R. 425; Ex parte Hamlin, 16 N. B. R. 320, 322. From the known fact that Shaw & Co. had no money themselves; that cash was the offered composition,-from the open talk by other creditors with Whiting and Brown in regard to their advancing the money, and the failure to examine the bankrupts in regard to their means of paying the offered composition,-it may fairly be assumed that the creditors generally either knew that Whiting and Brown were to advance the money, or else were too indifferent to make any inquiry on the subject. There being no fraud and no concealment, they are chargeable with knowledge of what they would easily have ascertained upon inquiry" And it. could not have been supposed that Whiting and Brown would advance some $30,000 to other credo
IN BE SHA.W.
499
Hors except upon some arrangement to take the assets for their indemnity. Under the circumstances of the case the assent of the creditors thereto is, I think, to be plainly inferred; and in wbat manner they afterwards dealt with the assets" whether forming a company or corporation either with or withont Mr. Shaw, is immaterial. Had Brown and Whiting individually been creditors, the case is therefore not essentially different from what an express arrangement between them and the other creditors would have been for them to advance the composition on the strength of the assets. Such an agreement is valid, although those making the advances thereby get paid in full; and such agreements are not infrequent: in the English practice. Bissell v.Jones, 19 L. T. (N. S.) 262; Exparte Niclwlsen, 22 L. T. (N. S.) 286. But Whiting and Brown were not individually creditors of the bankrupts. They stand, therefore, as respects the creditors, in the same situation inwhich any other persons not creditors would have stoodin regard to their right to treat with the bankrupts concerning an advauce of money to enable them to pay the composition offered. The assets being fully released by the ereditors to the bankrupts by force of the acceptance of the composition, the bankrupts are at perfect liberty to deal with third persons in regard thereto in any way they see fit, and the creditors have no concern in the matter if their composition be paid and no fraud practiced. All were paid promptly in this case, and I see no legal ground, therefore, for interfering with the composition which was accepted and performed. Whether Whiting and Brown eventually made any profits by means of these large advances, which, with the mortgage on the machinery paid off' by them, amounted to s,ome $50,000, does not appear, and is immaterial. It does not appear that their own companies have received even the 15 per cent. dividend. But that also is immaterial, as it is their own fault if not paid. The testimony is that during the first two years, notwithstanding their large outlays and the appraisal of the stock at $30,000, in forming the new corporation, the profits of the business were nothinf:{. That they expected to make some profits may be assumed; and that the advance which they consented to make was fixed at a percentage which they thought safe, and such as would leave a margin of profit to themselves, is also to be assumed. To fix that per centage was the very subject of arrangement with the creditors at the time of the composition. In accepting the per centage offered, tl;J.e creditors bound themselvestQ.the amount thus fixed; and, material is proved to have been kI;lOwn to some,
500
was matter of common discussion, was wlLhout concealment, and easily ascertainable by all who chose to make inquiry, the composition onght not now to be disturbed. The petition should be dismissed, with costs.
CAMPBELL
v. THE
MAYOR,
etc.,
OF
NEW
YORK.
(OZ1'cuit Court, S. D. New York.
November 9,1881.)
1.
LETTERS PATENT-STEAM .FIRE-ENGINE PUMPS.
Letters patent No. 42,920, dated :May 24, 1864, and issued to James Knibbs, assignor, for an improvement in steam fire-engine pumps, consisting in the use, in combination with the constant power of the engine to discharge a greater or less number of stl,'eams of water, and the same number through longer or shorter lengths of hose, of a passage from the discharge to the suction side of the pump, regulated by a valve, were not anticipated by the en. gines made by the Amoskeag Manufacturing Uompany, the engine made by Reaney, Neafie & Co., nor by the patents either of R. A. Wilder, of Joseph Bramah, or of Benoit DuportaiJ. 2. SUITS TO DEFEAT A PATENT-MEASURE OF PROOF'.
To defeat a patent the proof must be clear, beyond any fair and reasonable doubt. 3. PUBLIG USE OR SALE. It must be a public sale or use with the consent or allowance of the inven. tor, that will invalidate a patent.
In Equity. George H. Williams, for plaintiff. Frederic H. Betts and Wyllis C. Betts, for defendant. WHEELER, D. J. The plaintiff has title to letters patent No. 42,920, dated May 24, 1864, and issued to James Knibbs, assignor, for an improvement in steam fire-engine pumps, whereby suchan engine, having constant power for discharging several streams of water through lines of hose of various lengths, may be made to throw fewer streams, or the same number through longer lines when the resistance to discharge would be greater, without varying' the power, or causing undue strain upon the working parts or hose, by means of a passage from the discharge to the suction side of the pump, regulated by a valve, for the surplus water on the discharge side caused by the restriction upon the discharge. This suit is brought for an infringement of this patent, which is not denied, if the patent is valid. The validity of the patent is questioned upon the ground that Knibbs was not the first inventor of this improvement; that the same had been patented abroad prior to his invention; and that the same had been