text:
    Jane Veitch v. James Clark, John Bove and Frederick Brandt, partners, &c., et al.
    [Filed July 9th, 1904.]
    A building contract provided for payment of the contractor in four installments, the third “when the trim is on. and the doors hung.” The ■architect gave his certificate and the third payment was made, in good faith, before all the doors and trim were on, the work necessary to put them on being worth $70; but other work, worth $250, not necessary to 'be done before that payment was due, had been done. The architect, however, 'testified that in practice those words were not construed strictly, but indicated a certain stage of the work; that such stage had been reached, and that the doors and trim then off were ordinarily kept off till the last of the work, so as not to interfere with other work and to prevent their being marred. — Held, that there was no advance payment, within Mechanics’ Lien law (P. L. of 7S9S p. 5S9 § 5), providing that if the ■owner of a building liable to mechanics’ liens shall, in advance of the terms of a building contract, make a payment thereon, and the amount thereafter due thereon is insufficient to satisfy notices served according to the act, lie shall be liable as though such payment had not been made.

      On final hearing on bill, answer and proofs.

      Messrs. McEwan & McEwan, for the complainant.

      Mr. William Ilacheit, for J. Gahagan’s Sons, defendants.

      Mr. Augustus A. Rich, for other defendants.
   Pitney, V. C.

(orally).

In this case Mrs. Yeitch, having a contract to build a house, entered into between her and a Mr. Clark, a builder, has paid into court a sum of money, about $128, which she says is all that she owes Mr. Clark, and for which there are several claimants.

It is a bill of interpleader. There is no dispute between the claimants. The dispute is between them and Mrs. Yeitch as to-the amount which she ought to pay into court.

.Her bill was filed for the purpose of being relieved and al so-to enjoin certain actions at law brought against her under the stop notices which were served by the three defendants, who-are here acting in concert to defeat her claim.

The only question presented is as to whether she was justified in making the third payment under the contract of $1,000. The contract provided for four payments. Three of them were made in strict accordance with the certificate of the architect. Shortly after the making of the third payment ($1,000) the-contractor threw up his hands and abandoned the job, and Mrs. Veitch, acting under a provision in the contract, finished the-building at an expense of some six or seven hundred dollars, leaving in her hands, according to her account, the sum of money which she has paid into court.

The last payment provided for is $850, and it is out of that payment which she finished the building at an expense of between $600 and $700.

The contention of the defendants' is that at the time the third payment of $1,000 was made it was not due under the terms of the contract, and hence that it was an "advance payment,” and. that under the fifth section of the Mechanics’ Lien law she is liable to pay whatever is due these three persons who have made claims. Their claims exceed the amount of $128, which she paid into court, by $100 or $200. How much is it?

Mr. MeEwen — By $1,000.

Mr. Rich — We only claim she is liable for a thousand, which •we claim she prematurely paid, and the balance of the fourth payment.

The Court — They claim that the $1,000 payment, known as the third payment, was nugatory and that she must pay it over ' again so far as was necessary to- pay their claims, and they claim under the fifth section.

Row, it requires no argumentation to show that the statute-in question may be penal in its effect. The payment may have been made in perfectly good faith. If the law requires her to pay it over again, it has a penal effect, for anything that makes a person pay money which he does not owe is in its nature penal. That leads one to be careful how he applies the terms of that fifth section.

“5. If the owner or owners of any building or other property which by this act is made tho subject of liens for or toward the construction, altering. repair or improvement of which labor or services-have been performed or materials furnished by contract, duly filed, shall, for the purpose of avoiding the provisions of this act, or in advance of the terms of such contract, pay any money or other valuable thing on such contract, and the amount still due to the contractor, after such payment has been made, shall be insufficient to satisfy the notices served in- conformity with the provisions of this act, such owner or owners shall be liable in the same manner as if no such payment had been made.”

It is what is called the advance payment section. And the-question is whether Mrs. Veitch has made a payment in advance of the terms of such contract. If she has, and made it in good faith, and has not paid Mr. Clark any more money than he has earned for her, and has to pay it over again, that is penal, in my judgment. And hence the court, in considering this statute, ought to be careful how they carry it to a point where its application will be penal. It was carried to that point in the case of Smith v. Dodge-Bliss Company, 59 N. J. Eq. (14 Dick.) 584, and it was carried there because Mrs. Smith had gone security for one of the contractors to the materialmen, Burns ■& Company — when you come to look at that, it takes the edge ■off of the penal aspect of the tiring.

In the case of Binns v. Slingerland, 56 N. J. Eq. (11 Dick.) 413, the party had accepted a draft in advance, which was in effect also going security for the contractor, and, while a very respectable minority, and I am not sure it was not a majority •of the law judges of the court of appeals, agreed with my vie'w below, the majority took the other view.

Now let us see, in the first place, whether Mrs. Veitch paid .any money that had not been honestly earned by Mr. Clark.

It may be admitted that the precise terms of the contract, to the ordinary reader, had not been complied with. Those terms are: “When trim is on and doors hung.” Evidently a provision which must have a liberal construction, because it would be quite impossible, without using a great deal of language for which no provision is made in the blanks in these contracts, to ■describe precisely by language which is not open to any room for construction or implication, just what the condition must be. But the language is general, and it is brief. “When the trim is on and the doors hung.” Now, that means, in strict language, when all the trim is on and all the doors are hung. So far the contention of the defendants is right.

But against that comes the undisputed evidence of the architect, who has favored me with his evidence in this case, and I must say that it is very clear and frank and satisfactory, tha,t in practice those words are not construed strictly; they indicate a certain stage of the work; they indicate the fact that the builder has got to a-certain point; he has earned a certain proportion of the whole job; and a payment made under the cir•cumstances intended to be described by that language is not payment to him before he has earned his money. lie has put that much money’s worth in the job; that is what the architect ■says. He says that it is practically impossible; that it would increase the cost unreasonably to hold that in every case the precise terms of the contract should be complied with; that different persons are working at tire same time on the building always, and that is common knowledge. The work is classified and divided among different sub-contractors or sub-superintendents, whatever you choose to call them. There is a mason;, there is a carpenter; there is a painter; there is a plumber;, all usually have to be working together and interlacing and interlocking with each other. And it is apparently impossible-in practice to carry forward the work in the precise order in which a contract may classify it. Circumstances may intervene-to compel- — make it convenient for the contractor to do some work that is not called for for the purpose of payments before-that time has arrived, and it may be very convenient for him, and in the advance of his work, to leave out some little matter. Therefore, the architect says it is not the intention of this-language to state precisely the point to which the work has-advanced. It is a matter of substance, and not of technical, language. That is what the architect says, I think, although perhaps he expressed it better than I have now.

He says that he did certify, on the 19th of September, to Mr-Clark, that he was entitled to- the sum of $1,000, being the-amount of third payment due, as per contract. He says all the doors were not then hung, nor all of the trim on, but he says-that a certain part of it was left off which is usual to be left off-The particular parts were the front and rear doors, through which material is to be carried, and that if the doors were on. they are in the way — they are liable to be scratched — and particularly with regard to the trim in the vestibule, and the tiling,, if there is any. It is always left until the very last.

And he says there were, besides, one or two little doors, of trifling value, which could not be made at that time because the-precise size of the casing to hold those doors could not be determined at that moment in time to keep up with the rest of the-work. They were what are called odd doors, I think. Then he says there may have been a door left off in the bathroom, in-order to get the bathtub in, and a variety of those things which are a mere matter of accommodation for the progress of the-work.

He estimates that the amount of that work that was not done was something much less than $70.

How, he says that the contractor at that time had done $250 worth of work, at least, more than was required in order to entitle him to his third payment. How, there is no dispute .about this.

How, he says further, that the amount of variation of which I have spoken is usual — that it is usual to leave the doors off of the front and rear hall and bathroom, and leave oil some trim where the plumbers’ work is to come in. It is the usual thing that would deceive nobody who is accustomed to being around buildings in course of construction. It would not deceive one of these gentlemen who were entitled to serve notices — the stair-maker, for instance, and the others. They could not be deceived .about it, because they would see that was the usual thing to do, and common thing to do.

How, then, I come to two conclusions — first, that this gentleman (Mr. Clark) had earned his money, and I hold there was •no advance payment — there was no intentional advance payment, there was no conscious advance payment. He had earned that much, and if Mrs. Yeitch had said to Mr. Clark, or her agent, the architect, had said, “How, Clark, do not put on this; do not hang this front door; do not hang the vestibule door; do not hang the rear door; do not hang the bathroom door, because you know they will get scratched up; in place of that, go on and do this other work,” and by a little contract between them, not to remit anything to Mr. Clark, but to substitute a little work for present convenience, and Mr. Clark had sued Mrs. Yeitch for •the third payment, there is no doubt he could recover according to law.

But it is said by the counsel that it is not the law. Here is ■the strict letter of the law — that the payment must be due by the' terms of the contract, because the other materialmen and laborers are entitled to go and look at that contract on file, and the specifications on file, and determine just when the thing is •due; and if they go in the building and see that it is not due, they are justified in holding off their notices. I believe I am putting Mr. Bich’s argument as strong as it can be put ?

Mr. Bieli — Yes, sir.

The Court — And the answer to that, I think, is twofold— first, what Mr. Dixon sajrs is the custom of the trade, known to everybody; and second> that these gentlemen, who are accustomed to going around buildings and seeing how things are getting along and watching the time to put in their notices, could not have been deceived by it, if Mr. Dixon’s evidence is reliable, .and I think it is decidedly reliable.

Then, in considering this, I must bear in mind, as I said before, that to make this lady pay it over again when she has paid it once in good faith, and when Mr. Clark was entitled to it, in justice and equity as between them — to make her do that ■over again to these people is highly penal. I cannot take any other vievr of it.

Mow, I think that is all the case. I think I have met every point made with great ability and proper industry by my friend, Mr. Eich, and 1 think the law is against him. I think it would be a reproach to the administration of justice if the law were otherwise. I think the merit of the case, in every aspect, is all with the complainant. Mo dispute, no complaint, is made of the •cost of finishing this — that there was any looseness on the part of Mr. Dixon. He had but $850 to do with to start out, and he did it as cheap as he could. He cut it down to $677, I believe, and as far as he did, he did it to the best advantage. The lady acted in perfect good faith, the architect acted in good faith; there isn’t the least reason to believe that he was “laying in,” so to speak, with Mr. Clark, to enable him to cheat these people. There is not a particle or glimpse of fraud in the case or of underhanded work, or tickling, as you might say. There isn’t anything to lead us to believe that Mr. Dixon did not act in perfectly good faith in giving that certificate. He says he went there to the house and saw it — made a careful inspection — and in his judgment, according to his interpretation as an architect— in his own language, “according to this contract”- — the man was entitled to his $1,000, and what was left out undone was not only what was usually left out undone for the purpose of practically finishing the building without injury to- the parts as they went, in together, but because he had done $250 worth of work that-he need not yet have done.

Now, Mrs. Yeitch acted by her architect. She signed the certificate after her architect signed it — no, she did not, in this case, either; she did the other- — yes, she did sign it on the back,, because her architect said so. Of course, I do not suppose Mr. Dixon thought he was swearing Avith a rope around his neck, but if he had misled Mrs. Yeitch into endorsing a certificate to be; paid by her mortgagee when he ought not to, I don’t know where he stands. I don’t suppose he thought of it himself; I 'don’t, believe he did; but it only shows what traps are laid by a very strict construction of a statute of that kind — a construction that ■ I am unwilling to give it when the parties have acted in perfect good faith. The man that got the money had earned every bit of it — and more, too — and nothing was there on the ground to-mislead any one of these materialmen and dealers, who are dealing with these plans and specifications and contracts all the time.

I therefore pronounce in favor of the complainant, and that she is entitled to be discharged, this money having been paid into-court. And I suppose, too, I must hold she is entitled to take her costs out, and, if Mr. McEwan asks it, a small counsel fee— $25 counsel fee.


source: Caselaw Access Project

author: Pitney, V. C.

license: Public Domain

text:
    Samuel L. Lederer v. John Yule, Sr., et al., surviving executors and trustees under the will of David L. Lederer, deceased, et al.
    [Decided January 28th, 1904.
    Filed July 9th, 1904.]
    1. A misrepresentation by a seller of a patent right will not entitle the purchaser to rescind unless it amounts to an untrue statement of some present fact, and a mere promise or prediction is not sufficient.
    2. In a suit by the purchaser of a patent right to a burglar alarm to set aside the sale on the ground of misrepresentation, evidence considered, and hold sufficient to show that the seller had falsely represented that a device equally reliable with the sample exhibited by him could be made for a certain price, on which representation the purchaser relied.
    3. Plaintiff purchased of defendant a patent right, and at the same time assigned it to defendant as part security for a loan, the same being also-secured by a mortgage and a life policy on plaintiff’s life. By arrangement with the insurance agent, plaintiff was to have a cash rebate on the first premium on the- policy, and by arrangement between the parties the rebate was to come to him through defendant. — Held, that plaintiff’s subsequent insistence on payment to him of the rebate by defendant did not amount to an affirmance of the contract of sale, which, as a matter of fact, had been induced by false representations of the seller.
    4. Where one who had purchased a patent right, in reliance on false representations of the seller, sought, about a month later, to induce him to take back the patent, but he refused to do so, in a subsequent suit by the purchaser for rescission plaintiff should not be compelled to make any compensation for depreciation in the value of the patent owing to lapse of time.
    On final hearing on bill, answer and proofs.

      Mr. William J. Bñody and Mr. William B. Gourley, for the complainant.

      Mr. Jacob W. Be Yoe, Mr. Gustav A. Hunziker and Mr. Miller (of the Pennsylvania bar), for the defendants.
   Pitney, V. C.

(orally).

This cause was argued the day before yesterday, and I have since read the evidence, and I think that I can dispose of it now as well as to hold it.

I do not think there can be any serious dispute about the law applicable to it, and the facts, I think, are sufficiently clear, so that I shall be no more liable to fall into error by deciding it now than I would if I should hold it.

The suit is brought by Samuel L. Lederer, a resident of Paterson, this state, against the trustees of his father’s will and against Fellie McCrea.

The contest is between the complainant and Fellie McCrea, who lives with her father, John McCrea, at Chestnut Hill, a suburb of the city of Philadelphia. The real defendant is the father, John McCrea.

The contract which is called in question by the bill was made with John McCrea, and while the obligation from which the complainant seeks to be relieved was made nominally to Fellie McCrea, yet she took it with notice of and is chargeable with every equity complainant has against it, if any. There is no dispute but that the case must be decided according to the merits as they stood and stand between the complainant and John McCrea.

’The particular obligation from which the complainant seeks toibe relieved is a promissory note (in the shap>e of a judgment noté);■"dated December 20th, 1900, executed by him to Fellie McCripj'TtY <j>9,000, payable in three years, and secured by a nioy'fcggga.pn,, tjhe complainant’s interest in his father’s estate, which is a life interest merely, and the effect of the mortgage was to assign in advance his annual income under his father’s will arising from ,the< corpus of his father’s estate.

As additional security for that obligation the complainant procured.-td be issued .a life 'insurance policy for $10,000 on his life, payable to Fellie McCrea. He also assigned to her the certain letters-patent which had been at the same time assigned to him by.JohiaAMfiCl'ea. ¡ ,-u 'J

The consideration■ óf .the<.judgmentmp;tfe/.was $3,000 in cash, advanced by John McCrea to him at the date of the obligation and the assignment to him of the lettors-patent just mentioned.

The allegation of the complainant is that the letters-patent were assigned to him by John McCrea tinder such circumstances as that he has a right to rescind the contract and to be relieved ■of his obligation upon equitable terms.

Those equitable terms are, he says, that he should reassign the patent; that he should pay back to John McCrea, or Nellie McCrea, the $3,000 which he borrowed, and which he received, with interest, and that having done this he should have delivered up to be canceled the mortgage and have the policy of insurance so framed as to inure to his own benefit.

The contest, then, is over the validity of the deal or contract by which the complainant agreed to purchase from Mr. John McCrea the letters-patent in question.

Now, the allegation of the complainant is that that sale by McCrea to him of the letters-patent was. procured by misrepresentations of fact; also, as he alleges, by misrepresentations of the value and the prospective profit to be derived from the ownership of the letters.

Now, the law on that subject is, I think, as I remarked at the start, thoroughly settled.

There must be proof that the vendor made some untrue representation of a matter of fact — present fact. The cases cited by counsel of complainant of transfers of patents indicate a disposition on the part of the courts to include in the classification of misrepresentation of present facts many matters which can hardly be brought strictly within that category, and the tempta-. tion to judges to do that is very great, and they sometimes call a misrepresentation of present fact what is nothing more than a promise of what will occur hereafter, a prediction in the nature of a speculation. But I take the law to be as I have stated it. There must be a misrepresentation of a present fact, or of a fact' which though not immediately present will be in the future, and the principal matter dealt with in such cases is the cost of the patented article — what it will cost to manufacture it — which is what may be termed a continuing fact, and not a mere prediction of results.

I say the disposition of courts is in that direction, because, as everybody knows, the putting on the market and sale of patent rights is one of the means by which persons of not over good sense of right and wrong have heretofore in many cases deluded persons of weaker mind out of a good deal of money; they have made rosy predictions as to what could be done with the patent; that it would do this, and that and the other, and have deluded people in that way, so that the selling of patent rights, at one time, was a notorious branch of the business of getting money without giving an equivalent for it.

But, as I said, I think the law in New Jersey, as it stands, must be confined to this — there must be a misrepresentation of a present continuing fact as distinguished from a mere prediction of speculative results.

Now, applying that law to the facts, we come to this:

Mr. John McCrea, in the month of October, 1900, was the owner of a patent for the manufacture and sale of what is called a burglar alarm and door check. Samples of the device have been handed up and were carefully examined during the production of the evidence to the court, and I have two or three of them in my hands at this moment. The article is somewhat of the character of a gun lock — is of a wedge-shape — so that when placed just before a door or behind it — I do not know which is the proper expression — in such position that when the door is opened the bottom of it will slide up- on the inclined plane and will spring a lock, or the catch of a lock, which will act like a trigger and release the hammer, which in turn strikes against the end of a blank cartridge and creates a slight explosion, which is supposed to alarm the people in the house, and also, perhaps, scare the proposed burglar.

I say that Mr. McOrea was the owner of this patent. It was a recent affair, and he had procured to have made up two different working models or actual productions of the patent — that is, two kinds- — one made of cast-iron, which is called throughout the •case the cast-iron model, and the other made of sheet-steel. The one is cast in a mould — the greater part of it — the springs being made, of course, by a different process, and after being cast in a mould is smoothed off and partly burnished with nickel- — ■ I think nickel-plated.

The other is made of sheet-steel, the parts being stamped out by a stamp and fastened together with rivets and screws — mainly rivets, I believe; there are one or two screws in it. The two products are in appearance very much alike, but when you come to examine them carefully they are quite different in some very material respects, as I think, and found when under examination during the production of the evidence.

McCrea found the cost of manufacturing the cast-iron alarm considerably greater than that of manufacturing it out of sheet-steel, and it is an admitted fact in the case. He applied to a manufacturing concern called the Woodbine Company, located at Woodbine, New Jersey, to see at what price they would manufacture a lot of these sheet-steel ones. He had also, however, had a good many manufactured in Philadelphia — some three hundred, I think, in round figures — of the cast-iron, and a less number of the sheet-steel.

How, I notice, in reading the evidence, a little confusion on that subject. At one place it seemed to be admitted that the number of the sheet-steel which he had manufactured at the time mentioned was greater than those of the cast-iron. But the contrary is the fact.

In October, 1900, that was the situation of affairs. He had put a few of the cast-iron ones on the market and had a lot of them ready for the market, and a few of the steel ones. I do not recollect that the evidence shows that he had put any of the steel ones on the market.

Mr. McCrea had a friend in New York — a Mr. Lodge — an elderly gentleman, who was in the same business, so to speak, with McCrea, but was really nothing but’ a broker, and Mr. McCrea wrote him a letter, on the 17th of October, 19.00, in which he informs liim that he owns this patent. He says: “L send you by mail a sample of a burglar alarm and door check that I own the patent on, which has considerable merit.” Then lie goes on to suggest that Mr. Lodge should assist.to put it on the market — to make a sale of the whole thing. The material point in that is that he says he sent the article as a model or a “sample” — that is the word he uses — of the article of which he holds the patent. The sample actually sent was of cast-iron. He also says that they can be manufactured from sheet-steel. “The one I send you is cast-iron and it only weighs four ounces,. I can have them made in large numbers for nine cents each.” Now, I am not quite sure whether, by a correct construction of his language, he referred to the cast-iron or the sheet-steel, but he sajrs he can have them made for nine cents each. I think somewhere else he says in the correspondence that the cast-iron ones cost twenty-live cents. But he says that they could be sold to agents at twenty-five cents, who would in turn retail them at fifty cents. Here he undoubtedly referred to a cost of nine cents. He proceeds:

“Suppose there were agencies opened in all the large cities of the country, simply places where agents could be supplied in that way, one thousand canvassers could be selling; and suppose each would only sell five a day, that would .be five thousand, at a profit of sixteen cents each, or a net profit of nine hundred dollars per day.”

That profit is to the owner, but if the agent sold them at fifty cents, and made twenty-five cents, it would be $1.35 a day to the agent.

Then he goes on (in the letter of October 17th) to say he will sell the whole thing, with the tools and all, for $5,000, and he says he will allow Mr. Lodge twelve and one-half per cent, commission — that would be $635.

Now, two or three days later he wrote Mr. Lodge again, and there is no date on that letter, but it acknowledges one of the 19 th from Lodge. In it he says he-will send him two more of the alarm's, and it is admitted he did send one more, and the clear weight of the evidence is that such second shipment was also a cast-iron one. My. Lodge’s evidence is clear on the subject, and I read Mr. McCrea’s evidence on the subject carefully, and he does not say that he has any confidence in the idea that the next one he sent him was a steel sample. He then also states that he thinks he can have them made for eight cents each, and in both the letters he praises it np highly — tells what great profits there is to anybody who owns it.

How, about that time Mr. Lodge came in contact with the complainant herein. The complainant had borrowed on his interest in his father’s estate a sum of $600 or $800 from a Philadelphia gentleman by the name of Deacon through the brokerage of a. Mr. Paul Smith of New York City, a broker who had an office in the same building with Mr. Lodge, and he called to see Mr. Smith about getting more money. Mr. Lederer was a gentleman who seemed to be in a chronic state of impecuniosity. The income of his father’s estate was not sufficient for him, and he was doing what, I suppose, his father, if he had anticipated he could do, would have prevented him from doing, by putting in his will a clause against anticipation of the income of his estate — Mr. Lederer was trying to borrow more money through Mr. Smith, and there he accidentally met Mr. Lodge. Mr. Lodge says, “Here, don’t you want to buy this patent?” He submitted to him one of these cast-iron samples. '“Ho,” Mr. Lederer says, he didn’t want that; he wanted to borrow more money. “Well, perhaps I can help you,” Mr. Lodge says, and negotiations were entered into between them which finally led to the contract in question.

How, on the 22d of October Mr. McCrea received from the Woodbine Company, of which a Mr. Bayard was president, a letter in which they give him prices on the door check and burglar alarm “according to the sample furnished us,” and they are willing to sell in lots of five thousand at seven and one-quarter, ten thousand at six and three-quarters, twenty-five thousand at six and two-fifths; fifty thousand, six; one hundred thousand at five and four-fifths cents each; the man who orders to keep in order the dies from which they were cut out. The sample shown the Woodbine Company was admitted to be tire sheet-steel sample which Mr. McCrea had had made in Philadelphia. And I may as well say here that Mr. McCrea says (and I do not doubt its truth) that he himself invented a little addition to this burglar alarm in the shape of an attachment which would- enable it to be attached to the casing of a window, so that when the window was raised it would have the same effect on the alarm as it would- if the door was opened on it. I stop to say that I think that shows good sense on the part of Mr. McCrea, because a burglar alarm on a door does not amount to much. Burglars do not generally get in that way. It is easy enough to bolt a door so a burglar would not go in through it, but the window is the point of attack.

This sample given to the Woodbine Company was, as I understand it, one with this window attachment on one side. I will say something about that window attachment further on.

Now, going back. Having received this letter from Woodbine, Mr. McCrea immediately mailed it to New York, to Mr. Lodge, in a letter which is here before me:

“I have yours of yesterday. No doubt this young man’s estate [that is, Mr. Lederer — showing how far the thing is advanced] is worth all you say. * * * I wrote you I could have these alarms made for nine cents, but you see by the enclosed letters they can be made for less than six cents, or a third less, which makes the alarm worth a third more; but inasmuch as I named the price for it before I knew this, I won’t increase it; but if your client wants to buy he will have to move quickly, for be sure anything showing the profits this does won’t be for sale very long at this price. Why, look at it. It is a patent article, controlled absolutely by the owner; can be had by no one else, can be sold for cash; therefore, no capital is required. You can sell to the canvassers for cash [he did not interpolate, if they would buy]. Go on and get this, and suppose you sold ten thousand a day, that would be $1,900; and if it is pushed this can be done without doubt in sales to agents and to the hardware and novelty stores.”

Now, those are the letters. And another one, of October 25th, in which he goes on to state:

“The nicest part of the burglar alarm business is it practically takes no money to run it. You get thirty days’ time from the manufacturer, and long before that time is up you have them sold and have received not only the six cents they cost, but nineteen cents profit besides. Just let a live man go out with one of these to solicit orders of from twenty to a hundred — from hardware stores, novelty stores, house-furnishing stores, and I believe segar stores and news stands would sell them, and let him use Mank cartridges liberally to illustrate wliat he has for sale — he won’t be much of a salesman if he don’t sell 1,000 a day. A few men could be used ■disposing of them in a wholesale waj' like this, while thousands could be ■employed as canvassers.”

Mow, the cast-iron samples and the parts of those letters which were pertinent to advance the sale, together with this letter from Woodbine, were shown by Lodge to Mr. Lederer. Mr. Lodge swears that he showed Lederer such or so much of the letters as was prudent — I forget the language he uses — used proper discrimination, according to the circumstances. And this, with the cast-iron sample, was all displayed to Mr. Lederer, and it docs not appear at all that he knew anything about those made of steel plates, or that he considered the difference in the probable working of them.

I stop here to say that the sample of the steel plates which was handed to the Woodbine Company — that is, one of a few that Mr. McCrea had made - in Philadelphia — was an article which on a slight inspection you would not notice was in anywise different from the east-iron one, except in the attachment for the use on the window.

Mow, these are the representations that were made to Mr. 'Lederer as to the cost of these machines. And the first question, and perhaps the only question, is whether Lederer had a right to believe from these representations that the cost of some six to nine cents each which is stated by Mr. McCrea in these letters, and which representation in the letters were communi■eatecl to him by Mr. Lodge, referred to the cost of the cast-iron ■one: or, even if he knew that it referred to the cost of the sheet-steel one, of which I find no proof, whether it did not amount to an assertion that the sheet-steel ones were just as good as the sample — just as workable in practice. That question was argued, and it was strongly argued, before me on both sides, and perhaps the conclusion I come to on that single question settles this case.

Mow, I am of the opinion, after reading the correspondence, after hearing the evidence of Mr. Lodge, that Mr. Lederer was justified in understanding that the cost mentioned did apply to the cast-iron sample, and that the sheet-steel product was equally valuable, equally durable — equally reliable is the better word — reliable in daily use with the cast-iron samples. No distinction is made by Mr. McCrea in his letters. He does not say a word to indicate that the sheet-steel one would not be as good as the east-iron in every respect. He puts the cast-iron one forward as a sample. Now, he says in effect to Mr. Lederer: “Try that and see how it works; examine it; put it out; go around and canvass with it. I can get sheet-steel ones made for six cents.” Admit now that the assertion as to cost was confined to the sheet-steel article. Yet, is not that tantamount to saying in so many words that the sheet-steel is just as reliable — • it will snap every time, it will explode the cartridge, and all that? Does it lie in liis mouth to say, “Why, I told you the letters show that those that could be bought for six cents each are sheet-steel,” and at the same time say, and be allowed to say, that he did not mean to have Mr. Lederer understand that they were equal in all respects to the cast-iron sample which he sent him? Now, I think it would be a reproach to the administration of justice to say that Mr. McCrea could put himself in that position.

I feel constrained to say that the net result of the representation made to Mr. Lederer through Mr. Lodge was this: that even if his attention was called to. tire fact, and I doubt it very much, but assume that Mr. Lederer’s attention was called to the fact that the article, which was to be made for from six to-nine cents, was a sheet-steel article, yet that -that representation assumed, and must be held in law and morals to assume, and in fact did assume, that the sheet-steel article was precisely as-reliable and valuable an article as the east-iron one.

Now, Mr. McCrea swears, and it is true, that in the course of his negotiations Mr. Lederer came to Philadelphia on the 3d of December, 1900, and that they had a personal interview; and that is the first personal interview that they had; and that at that interview he showed Lederer a sheet-steel sample and explained to him that. Now, if I recollect right, Mr. Ledérer denies that his attention was called to any sheet-steel alarm at all. I do not think it at all important to settle that question. The fact is that Mr. Lederer’s attention was not engaged in that direction at that time. He did not go to Philadelphia for that purpose. He went there — although he does not directly admit it — he went there, as McCrea swears, and as is the truth, for the purpose of being examined for a life insurance policy, to be taken out to go as additional security for this $9,000 note, and he was there subjected to the plausible and insinuating talk of Mr. McCrea; who was anxious to hold him to the verbal bargain already made between him and Mr. Lodge for the contract which was finally consummated on the 20th of December.

•Mr. McCrea was anxious to hold Mr. Lederer up and not have him fly his bargain.

Mr. Lederer swears that McCrea told him at that interview that he would find and furnish a man who would sell a hundred thousand of these alarms in I don’t know how short a time. Now, Mr. McCrea denies that assertion, but he admits distinctly in his evidence that he did tell him that he knew of a man — I think that is the language — some man whom he mentioned that could do it. The only difference between him and Lederer is that Mr. Lederer thinks he agreed to furnish him, and Mr. McCrea says he only told him there was such a man to be had.

Now, the difference, so far as that goes, is very trifling, and, as I remarked during the argument, it is very plain from Mr. MeCrea’s own evidence that he was doing everything he could to put this thing to Mr. Lederer in the most rosy light, with all sorts of rose-colored predictions as to the great fortune he was going to make out of it, and was practicing all the arts of a patent seller on him at that time. And if he showed him the' sheet-steel one, I must presume that he showed it to him as an article that was equal to the original sample he had sent to New York to sell by, and Mr. Lederer, I repeat, had a right to say, “Here is the sample; I want this or something just equally good.”

Therefore, I decide against the defendant on that point. I find as a fact that the representation was that an article, the same precisely as the original sample, or one entirely equal to it— equally reliable — could be manufactured from six to nine cents, according to the number ordered. And the only effect I give to •the rosy predictions oí Mr. McCrea is that Mr. Lederer was the kind of man who was liable to have his mind diverted from the real matter to which he ought to have directed it by these blandishments, I call them, of an adroit seller. And Mr. McCrea was not in the business of giving Mr. Lederer much time for cool thought, even if Mr. Lederer had been capable of it. And I may repeat here what I said in the argument, and I say it with great respect to Mr. Lederer, since I have to deal with the facts, that it was perfectly evident that his father, when he tied his property up, knew what he was about. He is improvident— honest and sober; I don’t see any signs of spendthrift — but he is actually defective in business qualifications. His correspondence shows it. He needs a guardian all the time — that is the fact of the matter — to take care of him in pecuniary matters.

Now, that is the representation on which this sale was made, and that the cast-iron alarms cannot be made for the sum named is an admitted fact in the case. The experts vary in their estimates from twelve and a half to twenty cents in large quantities.

Let us go a little further with the history of the case. The preliminaries in regard to arranging — ascertaining on the part of Mr. McCrea the value of the estate of the elder Lederer, and its present situation, construction of the will, the rights of Mr. Lederer under the will, and procuring the policy of life insurance, and all that — was attended with a great deal of detail and with great care on the part of Mr. McCrea. He lost no point there. And, of course, that I do not remark as anything against him.

The parties came together on the 20th of December, 1900, at Paterson. The assignment of the patent to Mr. Lederer was executed by McCrea; then an assignment of the patent from Lederer to Miss McCrea — absolute assignment — with defeasance, so he had no present actual control over it. The assignment by way of mortgage of the interest in the estate was executed and the judgment note for $9,000 was executed and delivered to Mr. McCrea for his daughter, and I think there was a contract ■entered into — I don’t think it cuts much figure here — by which Mr. Lederer should not only pay the interest on this $9,000, but should pay $100 royalty every year to Miss McOrea, as if she were the owner of the patent and it had not been sold to him —something of that kind.

Mr. Lederer was attended by Mr. Wood McKee as his counsel, who saw that the affair was put through according to his previous contract; but Mr. Lederer was foolish enough to go into this affair without taking the advice of any man of any business sense, and I cannot help but think and believe that Mr. McOrea knew that any man that would believe all the praises and air-castles' of money-making that he put forward on the strength of this patent was wliat we call an “easy mark.” Immediately after the thing was through, Mr. McOrea informed Mr. Lederer that he had entered into a contract with the Woodbine Company to manufacture ten thousand or more of these articles, and that he would turn that contract over to him. Mr. Lederer, with juvenile enthusiasm, made his way down to Woodbine and saw Mr. Bayard, the German president and manager of this concern,, and found he had a few alarms stamped out, but none of them put together, so he could not judge of their character from seeing the parts; but he agreed to take the contract off McCrea’shands, and told Bayard, “Mow, you send me some as soon as you can.” That was somewhere the latter part of December or first of January. At the same time Lederer purchased of Mc-Cj'ea the stock of manufactured articles he had on hand, and he showed considerable capacity — Jewish capacity — in that respect, because McOrea had no right to sell them, but he had them on hand and Lederer bought them of him at seven cents each, and there were about three or four hundred of them altogether, and two-thirds of them were cast-iron and about one-third of them steel.

Mow, Mr. Lederer at once set himself about selling these affairs, I think, with proper industry. He advertised the alarms and soon got correspondents who asked for samples, and he sent to them, in every instance, the east-iron ones. He had them in greater number, and I do not know but that he began to suspect that the east-iron ones were the best ones to put forward. But finally, in the latter part of January, came a consignment from Woodbine of twelve of the sheet-steel ones, and he had- before .seventy-nine from Me Crea. He sent out the cast-iron ones for samples and when the order came for a lot to try them, sent out the sheet-steel ones. Now that, I think, was right, because if he was expecting to sell sheet-steel ones he ought to do it at the start, and he had ordered I don’t know how many thousand from the Woodbine Company. He could not supply any great quantity of these cast-iron ones; he only had two or three hundred of them. He could supply any quantity of the steel ones as fast .as he could get them.

But he says — I don’t know whether he went to Woodbine twice or not — but he swears — and-1 think it must be held to be undisputed in this ease, because it was not disputed by Mr. Bayard — that at one of the interviews with Mr. Bayard at Woodbine, which occurred at or about that time — perhaps it was the only interview he had — he asked Bayard whether he •could not manufacture these cast-iron ones, and Bayard said no. Of course, Bayard could not make them for any six to nine •cents apiece; but Mr. Lederer interpreted, and I think he was justified in interpreting his language, and it must stand as an established fact in the case, because not disputed by Mr. Bayard, that Bayard declined to undertake the manufacture of the cast-iron ones on any terms — it amounts to that — any terms that Mr. Lederer would be apt to accept.

Now, Bayard undoubtedly knew, because Lederer told him that he had gotten an assignment of the contract from Mr. Mc-Crea, and he Imew what terms it was on — here is his letter — and Bayard knew he could not manufacture these cast-iron ones for any such sum of money as that, so Mr. Lederer was justified in thinking and believing that he could not get the east-iron ones made. He sent out for actual use the best steel ones; the first ones undoubtedly which he sent out. According to the correspondence — I am not going into the details, but I looked that over carefully, and if you look at it you will find that he must have sent out a lot of the sheet-steel articles before he got any considerable quantity from Woodbine. The correspondence shows that, and the letters he received in reply show that they ■could not have been, manufactured at Woodbine, for, as I say, he only got about a dozen of them in the latter part of the month of January — the others came later; he sent out all of those out of the Philadelphia made ones, and they came back ■on him immediately, the purchasers saying they were not the same thing as the east-iron ones.

And he tried them all over Passaic county and its neighborhood — himself and brother. They went to stores, went from house to house and traveled around there and tried to introduce them; they found these steel ones would not work, a good many times they would not explode — did not work at all — they could not sell them.

Then it is very evident that he went to Mr. Lodge — he naturally went to Mr. Lodge. Mr. Lodge was the gentleman who had induced him to go into the bargain. I will stop right here now to say — which I omitted at the proper place, but it is very proper to bring it in here — Mr. Lodge had the right to sell that patent for Mr. McCrea at $5,000 and have a twelve and a half per cent, commission. He actually sold it to Mr. Lederer for $6,000, and he was interested in the success of the enterprise to the tune of $1,625; and the extra $1,000, he says it was understood from the start, he was not to have unless Mr. Lederer succeeded. And I will stop here to say that Mr. Lodge is the ■one truthful witness in this case that I can rely on absolutely for two reasons — first, I think he is thoroughly honest, and second, he is sufficiently intelligent to know what he is swearing to, and I think he is swearing apparently against his own interest.

How, Mr. Lodge swears that he took pains to assist Mr. Lederer in exploiting this thing, and helped him all he could, for he was interested in so doing. But he soon found what the trouble was; he found it was twofold — first, defect in the instrument itself, and second, defect in Mr. Lederer’s business capacity; and that defect in Mr. Lederer’s capacity, I repeat, was just what Mr. McCrea ought to have expected in a man that would take in all the foolish predictions that he made •about this contrivance, and act on them, and buy this thing under the circumstances. Mr. McCrea ought to have known Lederer was not a man who had wits enough to put a thing of this kind on the market.

Eow, Mr. Lodge writes to his friend, Mr. McCrea, on the 26th of January, 1901, that Lederer was after more money. The $3,000 which he had got had been spent- — first, in paying the $600 or $S00 he already owed by a previous mortgage to Mr.' Deacon, of Philadelphia; second, in paying debts that he had incurred; that is clearly stated by Mr. Lodge that that was the understanding; and he wants more money to push the thing. Mr. McCrea’s rosy statement how it co-uld be done without any capital — that I think really goes to the extent of being amusing — the statement how it could be done without any capital did not realize, and Lederer says, “I must have more mone3r,” and he was talking to Lodge about more money, and Lodge had been writing, I think, to Mr. McCrea about it, but this is-what he says January 26th, 1901:

“I am anxious about the matter which X wrote you in the Lederer matter. I saw my party to-day, whom I can arrange to loan Lederer the money, provided you are satisfied and want to close the matter out.”

That was the proposition, to buy McCrea off. The letter proceeds:

“I-Ie received a shipment of twelve alarms from the Woodbine people as samples. They are not right; fom• are so weak that they will not fire off, and the others are so arranged they go off too easy. Lederer thinks-he will have them made at home, although they will cost more. To tell you the truth, I am afraid, for want of a little money, he can’t do much business; it is not in him to do business on a large scale. Anything I can do for you, all you have to do is to mention it.”

Then another matter in the letter is about Lederer finding fault with McCrea for holding back some money on the insurance matter. And I must stop here to sayr just what that was, because I do not think it cuts any figure in this case at all-— I have nothing to do with it. The agent in Philadelphia who-negotiated this life insurance was entitled to- a certain percentage — pretty large and liberal percentage — from the Mutual Life of Eew York, and he agreed to divide that with Lederer in some way, so that Lederer had, after paying the whole money, a right to a rebate in cash, but that rebate was to come through McCrea, and Lederer was constantly pressing for it. Now, I stop to say that Lederer’s demand for that money was no affirmation of this contract, and any pushing by him to get that money had nothing to do with this contract; that insurance, although issued to Nellie McCrea, belonged to Lederer in equity, and the money he got back was such that he was entitled to it absolutely, whether this contract about the burglar alarm went through or not— whether it was completed or not — and his pushing his claim for that rebate was no affirmance of the contract.

Then, in the same letter I have quoted from- — -January 26th— in the latter part, Mr. Lodge goes on to say:

“He [that is, Lederer] says everything seems to go back on him, and he finds the alarms won’t sell fast. If he was any kind of a hustler he could make a nice living out of it, but for making much money, it is not in. him. I am very much disappointed. If he would only attend to matters and do as I want, I could have sold the N. Y. rights which I wrote you about, lut he must have them made perfect, then there is a possibility of me doing something. Wishing your recovery, I am, yours, &e.”

There he complains that the samples that Lederer had got were imperfect, would not sell, would not work, would not go off — some too quick and some not at all — finding fault generally.

Now, that is a very important letter. It was put in by the defendant, and it is a very important element in the disposition of this case. That is January 26th.

On January 30th, 1901, Mr. Lederer writes to McCrea, and after dunning him for the insurance rebate, says: “I am thoroughly disgusted with my bargain about the alarms, and find it is impossible for me to introduce them, as I cannot get them made right.” Now, put that alongside of Mr. Lodge’s letter, in which he says he cannot sell anything until he gets a perfect machine, and we see that they correspond, and we see that — take the two together — that they were a notice to Mr. McCrea of the deficiency of the article, and were substantially an asking for rescission.

Now, Mr. Lederer (March 6th) writes again to MeCrea, and asks for an interview, saying:

“I have written to Mr. Lodge, and he told me you'had gone out of the city. Will you please let me know if you will be in town on Monday or Tuesday of the coming week, as I wish to have a talk to you and see you in some matters about the alarm?”

Now, Mr. MeCrea knew what that meant. He had had a letter from Mr. Lodge — which was a very plain one — and he had a previous letter from Mr. Lederer in the same line, and he wrote, on March 7th — this is a very important letter, because it accounts for subsequent conduct — to Mr. Lederer :

“In reply to your favor of the Oth inst., would say, I will be at my office in this city on Monday, lltli inst., up to two o’clock p. si., at which hour I return to Atlantic City, and will be pleased to see you from 0 :30 up to that hour. Lest you should be put to unnecessary trouble and expense in coming to urge what Mr. Lodge suggested in his letter [now, 1 don’t know what letter that refers to, but there was undoubtedly a letter from Mr. Lodge to Mr. MeCrea suggesting a settlement], namely, that I take back my patent. * * * Let me say to you that owing to my impaired health I would be unable to put this invention on the market and gi/oe it the attention it ought to have; therefore I would entertain no proposition whatever of that kind. Of course I would accept at any time the amount of your note.”

Now, there is ail absolute refusal to treat for a settlement of this thing by rescission of the contract on any terms. There are other letters from Mr. Lodge, hut I have not referred to them this morning; I only referred to the fact of the defect in the machines. The defect in the sheet-steel ones ivas pointed out io Mr. MeCrea by both Lodge and by Lederer, and in the face of that he refused, positively, to come to any accommodation.

Now, as I have said, the defect must have been developed, first, not in those made by the Woodbine Company, but in the seventy or eighty that had been made by Mr. MeCrea, and one of which was sent to the Woodbine people as a sample, and those were made undoubtedly with great care, and you can see a plain difference in them. The original sample of the sheet-steel one was examined by me carefully. I have it here in my hand now. I compared it in all its details with the cast-iron one, as you recollect, when the case was in progress, and I recorded my opinion of them. I read it last night, and I have not changed it — the cast-iron one is decidedly the superior article in all its details. Next in order of merit comes one of the original lot— seventy-eight or seventy-nine manufactured by some concern in Philadelphia for Mr. McCrea before he sold this- patent. And next in order of merit comes those manufactured by the Woodbine Company — part of the ten thousand contract.

Now, I want to repeat that those sent out for use and sale by Mr. Lederer were part, undoubtedly, of the seventy-eight received by him from Mr. McCrea, and were the best samples that could be made of sheet-steel, and they failed to work, and anybody looking at those can see — anybody with a half me-, chanical eye — can see that they could not be made of sheet-steel to be equal to that cast-iron sample. And, further, I read the evidence last night with care of one of the Paterson experts. The stenographer took all he could of it, but there was a running conversation between me and the expert as to the difficulty, and the reasons why the one made of sheet-steel could not be made equal to that of cast-iron, and I think that such was decidedly the opinion of the expert, and it was my opinion as a juryman and something of a mechanic.

Now, one word with regard to the window casing attachment found in the articles made of sheet-steel.

In order to prevent the article from slipping before the movement of the door, it is provided with two sharp prongs or teeth placed on the bottom, the office of which is to penetrate through the carpet into the door and hold it in its position.

The window attachment is a little projection on the side of the affair which, when placed and held in position by these two teeth to the window casing, would be struck by the rising window and produce an explosion precisely as would the door when placed on the floor.

The intrinsic difficulty with this operation is that a very little play in the sliding space of the window would enable it to slip past the projections, and the same result would follow a slight lack of a sharp angle on the top of the -window. Then the attaching of the alarm by its teeth to the window casing would mar the latter precisely as if a nail were driven therein, and that marring would be duplicated as often as the article was removed in order to raise the window.

My examination of the attachment led me to the conclusion that it added nothing to the value of the article.

How, I come back to tire situation after Mr. McCrea positively declined to treat for a settlement. What did Mr. Lederer do? A quarterly or semi-annual payment of interest was due from his trustees on the 1st of April, which would come to Miss McCrea under the assignment. It does not appear positively in the case, but you can read between the lines that Lederer notified his trustees not to pay her. He — foolishly, perhaps — thought he could defeat McCrea in that way, or drive him into some kind of a settlement. How, I think that he had the right then, and in one sense it was his duty, to have filed a bill immediately; but Mr. Lederer was willing to see what he could do with the affair— see whether he could put the patent off on somebody else; see how he could extricate himself. He was not a man, as I say, with any business qualifications whatever, and it does not appear that he had any good friend with good business sense behind him to taire care of him. He requested his trustees to refuse to pay. They refused to pajq and an angry meeting took place between Lederer and McCrea, in New York, in the month of April.

'But I ought to stop here to say what my conclusion is as to one or two disputed matter’s of fact in the case, which I think are of no consequence whatever, however. One is the allegation by Mr. Lederer and Mr. Lodge that between the 3d of December, which was the day of Mr. Lederer’s interview with Mr. McCrea in Philadelphia, and the 20th of December, when the affair was closed in Paterson, there was an interview between McCrea and Lederer in New York City. I think the clear weight of the evidence is that there was such an interview. Against it is put in a running fire of correspondence between the parties, and that, of course, is a circumstance; but it is a circumstance of more or less weight, according to the other circumstances. We all know that letters go back and forth between parties, and the parties go at the same time — change their mind after they have written a letter. We have it in every-day experience. It happens every day that letters go at the same time the individual goes. I do not think it is of any consequence. It is only a question whether or not, before this affair was closed— the 20th of December — Mr. McCrea made any false assertions -of fact to Mr. Lederer. Lederer swears that he made all sorts of statements, and McCrea denies them. And the truth is that Mr. McCrea did make all sorts of rosy promises and predictions as to what this alarm would do, and no doubt stated orally what was written in regard to the cost of them, although that is not' emphasized' much by Mr. Lederer. According to what Mr. Lederer says, McCrea promised to find a man to put money in the enterprise and promised to find a man to sell a hundred thousand a year. I think the truth is that McCrea said: “You -can get all the money you want, and you don’t want any money at all, and you can find a man who will canvass for you,” and all that sort of thing — building air-castles more airy and unsubstantial than those they have in Spain.

One other matter in dispute was this:

Mr. Lodge swore, in substance, that he had never seen a sheet-steel alarm until after the completion of the sale, December 20th.

Mr. McCrea, on the. contrary. swore that he showed a steel .alarm to Mr. Lodge in October, at the house of the latter’s daughter in Philadelphia. Mr. Lodge admits the interview, but .says that it was in cold winter weather and after December 20th.

I think Mr. Lodge is the more reliable witness. But I also think that it is a matter of no consequence to this cause which is the more accurate in his statement, since it docs not appear that Mr. Lodge took a steel sample to New York with him, or that if he did that he showed it to Mr. Lederer.

Now, I come back, then, to the conduct.of the parties at and after April 1st, 1901. They had an angry interview in New York, which led to nothing. The suit was brought; it was defended; it was brought to trial, and many of Mr. Lederer’s letters and papers, which were handed over to Mr. Emley, the counsel for the trustees in that ease, were destroyed by the-Paterson fire, so I do not think that Mr. Lederer has a single letter here from Mr. MeCrea. But the letters- — the correspondence with Mr. Lodge — was not destroyed, but has been saved.

The suit went on with unvarying results. It was decided against the trustees1 at the circuit. They took it to the court of errors and appeals, and it was there affirmed. That occupied, a matter of a year or so — the precise dates are unimportant.. Finally judgment was rendered against the trustees .on the first suit, and no leviable property, of course, was found, and they were hauled up on supplementary proceedings. Then things looked serious, and this bill was filed.

In the meantime there was- a great deal of correspondence-about settlement, and propositions to take more money or less money — or something of that kind — and Mr. Lederer seems to have thought if he could have got about $5,000 more he might accomplish something, but the fact was it was a desperate thing. If he had got the $5,000, it would have been the end of his-interest in his father’s estate; there would not have been anything left; he never could have extricated himself. Fortunately it was not accepted. He tried to drag in Mr. MeCrea in various-ways, but he failed, as one might expect.

Well, this bill was filed. I see nothing in the way of Mr. Lederer’s equity. I think Ms allegation of misrepresentation, as a matter of fact, is established. It is not necessary to show any fraud whatever. It is a question whether or not Mr. MeCrea made a statement of fact that was not true and upon which Mr. Lederer relied.

Now, it is impossible to think that Mr. Lederer did not rely on the representation that these little affairs could be made at from six to nine cents each. It is palpable; it was the whole basis of Mr. McCrea’s argumentation by which he induced him to purchase it. He says you can sell these things for fifty cents. Give the canvassers one-half, have them made for six cents, and you have got nineteen cents left for yourself. There it is, all in black and white; it was all laid before Mr. Lederer — a most rosy view. I think he has not lost his right by any delay to a greater extent than can be saved on the terms imposed upon him. He must pay back the $3,000; he must pay the interest on it, of course.

Then, with regard to the depreciation in the value of the patent during the two years and two months. But there is just a. single circumstance, in the case that I think is a complete answer to that, and that is the letter of March ?th, written by Mr. McOrea to Mr. Lederer, in which he positively declines any kind of settlement based on the return of the patent. If he had done what equity required him to do, then he would have exchanged and got his patent back; and he would have been out of pocket just its depreciation in two months, or less than two months. He did not do it, but refused, and Mr. Lederer ought not to be compelled to make any compensation for the depreciation, if any, in the value of the patent due to the lapse of time. I do not- want to say anything to injure the value of this patent. Mr. McCrea says it is a very valuable thing; he thought so then, and he thinks so now — worth now as much as it ever was. The depreciation, I repeat, of the value by that lapse is Mr. MeCrea’s own loss, and he must father it.

How, just one other thing as to the terms, and that is the cost of the judgment and proceedings thereunder, which was recovered against the trustees. That, I think, Mr. Lederer must bear, and for the simple reason that I stated awhile ago — that lie ought to have filed his bill at once, instead of putting up his trustees to fight. I won’t say that there are not two sides even to that question, because Mr. Lederer was trying to find some plan by which he could dispose of the patent without loss, and he was entitled to a reasonable time for that. But I do not think that is sufficient to overcome the other consideration. The taxed costs of the judgment against the trustees, I think, he must pay, and I come to that conclusion with some regret, but still I think he must pay them. The defendant must pay. the costs of this suit and a reasonable counsel fee, and that must come out of the $3,000 and interest which he must pay back.

I think the defence was entirely unjustified, but whether it was or not, tlie decision is in favor of the complainant, and the statute entitles him to counsel fee, to be fixed by the court, and I think he is entitled to it.

Mr. De Yoe — Mr. McCrea paid out insurance money to keep up this policy.

The Court — He must have that back. The decree must provide not only for the cancellation of the mortgage, but .Miss McCrea must do all acts necessary to have that policy vested in the name of Mr. Lederer. I do not suppose there will be any trouble with the insurance company. Whatever formalities Miss McCrea must perform in that regard she must perform.


text:
    Empire State Trust Company v. William F. Fisher Company et al.
    [Submitted December 2d, 1903.
    Decided February 20th, 1904.
    Filed July 9th, 1904.]
    1. A company was indebted in the sum of $81,200. It owned a brick-producing plant appraised at $100,000, and was capable of earning on the amount at which it was capitalized ($185,000) a fair profit. The plant had cost over $200,000, and could not be replaced for $250,000. The company had on hand a quantity of unburned bricks, later sold for $15,000. It also- owned village lots worth $25,000. On its failure to- pay a creditor it executed a mortgage to secure him. This creditor, before becoming' such, investigated the affairs of the company and believed that the company was solvent. About a month after the execution of the mortgage the company was adjudged a bankrupt, and the trustees could secure only $75,000 for the property. — Beld, that the company, at the time of executing the mortgage, was not insolvent, within Bankrupt act of July 1st, 1898, chapter 541, section 1, paragraph 15 (ü. S. Clomp. 8tat. 1901 p. 3419), providing that a person shall be deemed insolvent when the aggregate of his property shall not, at a-fair valuation, bo sufficient to pay his debts.

      , 2. A solvent debtor giving a mortgage to secure a creditor does not give -a preference, within Bankrupt act of July 1st, 1898, chapter 541, section ■60 (SO Stat. p. 562; XJ. 8. Comp. Stat. 1901 p. Sl;l;5), specifying when a person, “on being insolvent,” shall be deemed to give a preference.
    3. The taking of security by a creditor for money presently or previously loaned is not evidence that the creditor believes that the debtor is insolvent.
    4. The words “for. a present consideration,” in Bankrupt act of July 1st, 1898, chapter 541, section 67 (SO Stat. p. 561;; XJ. S. Comp. Stat. 1901 p. 31;J;9), providing that liens given or accepted in good faith, and mot in contemplation of or in fraud on the act, “and for a present con.■sideration,” shall not be affected by the act, do not render invalid a mort_gage to secure a pre-existing debt.
    On final hearing on bill, answer and proofs.
    The complainant filed a bill to foreclose a mortgage given to it b}r the William F. Eisher Company, a corporation, upon property in Middlesex county. It made several holders of subsequent encumbrances parties thereto. Among them, and next in order of priority, was the Broadway Trust Company, which held, and holds, a mortgage for $15,000. Next below -that mortgage are two to William E. Eisher and one to Frieda Hart.
    Subsequently to the giving of these mortgages the Fisher ■company was thrown into involuntary bankruptcy, and Messrs. Samuel F. Wylie and Frederick Weigel were appointed trustees.
    The Broadway Trust Company filed no answer at first, but gave notice under the rule that it desired to have its mortgage reported1 upon. Subsequent to this Wylie and Weigel, the trustees, applied for and obtained leave to appear as parties defendant and to answer.
    ■ By their answer they attacked the validity of all the mortgages above mentioned, on the ground that they were given under circumstances which rendered them voidable at the instance of the trustees.
    The issue between the trustees and the complainant as to its mortgage was brought to a hearing and determined in favor of complainant shortly before June 18th, 1903, and decree made Jor foreclosure and sale.

      The execution on that decree was sta3^ed by order of the federal court. In the meantime the Broadway Trust Company filed its answer to the bill of complaint, which answer included an answer to so much of the answer of the trustees as attacked its mortgage.
    An issue in this irregular manner was made up between the Broadway Trust Company and the trustees in bankruptcy and brought to a hearing November 17th and December 2d, 1903.

      Mr. Sherrerd Depue and Mr. Ira Leo Bamberger (of New York), for the Broadway Trust Company.

      Mr. Robert Adrain, for the trustees.
   Pitney, V. C.

The mortgage of the Broadway Trust Company was made- and executed September 10th, 1902, and recorded September 13th, of that 3rear, to secure the sum of $15,000, with interest, in three months from that date.

Three da3^s later the Fisher company executed three other mortgages: one to Fisher, its president, to secure an amount not exceeding $10,000; another to Frieda Hart, to secure an amount not exceeding $10,000; and a third to Fisher, to secure-an amount not exceeding $20,000.

On October 4th, 1902, two small judgments were docketed against the Fisher company in the Middlesex common pleas.

Shortly after that a creditor took proceedings in bankruptcy against the said company in the federal court with the result that on October 27th, 1902, it was duly adjuged a bankrupt.

I shall first state the facts as I find them bearing on the question of the validity of the mortgage here in question.

The William F. Fisher Company was the owner of a valuable tract of clay land, of which two hundred and fifty acres were practically available for making brick, situate at and near the-village of Sayreville, on the south side of the Raritan river, between New Brunswick and South Amboy. It also owned a proper proportion of sand-bank land, producing sand fit for use-in moulding bricks. It also owned a large and complete brick manufacturing plant, furnished with the best 'modern machinery, located on the banks of the river, with wharfing which enabled it to float its bricks to all the water-front towns and cities in the neighborhood.

Its plant was capable of producing over thirty million bricks a year. Besides, it had the reputation of making a superior article of common building brick, known as “Adamantine Brick,” which enabled it to find a ready market.

This plant had cost over $203,000 and could not be replaced for $250,000. The average profit on the bricks manufactured and sold was $1 per thousand, and it had been manufacturing and selling from twenty mil] ion to thirty million a year. It was capitalized at $185,000, of which $156,000 were owned by William F. Eisher and the balance by friends and relatives of his; and of that balance he controlled a considerable portion by having advanced money upon it.

The only encumbrance upon this property was a mortgage for $24,000 to one of the New Brunswick banks.

The president of the company, Mr. William F. Fisher, was-himself the owner of considerable real estate in New Brunswick and elsewhere in Middlesex and Monmouth counties, most of it unincumbered, and he was reputed to be a man of wealth.

Some time previous to May, 1902, he had been drawn into-some outside speculative operations, ajDparently through the influence of one Max Hart, and although he was receiving, and was credited on the books of the company, with a large salary — for the last year or two, $10,000 — ho had, at the date of the mortgage here in question, overdrawn his account to the extent of about $60,000. There was also a debit account on tire books of the company against Max Hart to the extent of $25,000.

All tire foregoing appears by the evidence of Mr. Wylie, one-of the trustees, who had been for years a trusted and trustworthy employe of the company and thoroughly familiar with its affairs.

In May, 1902, Mr. Fisher and Mr. Hart being, as I have said, engaged heavily in transactions outside the brick business, applied to Mr. Morris May, president of the Broadway Trust Company, for a loan. Mr. Hart had been introduced some two or three years previously to Mr. May by a responsible business acquaintance of Mr. May as a wealthy and entirely reliable contractor in New York City, and Mr. May knew nothing to the contrary of the truth of his friend’s statement at the time Mr. Hart called with and introduced Mr. Fisher in May, 1902.

Before making any loan, Mr. May made the usual inquiries •as to the standing of Mr. Fisher and the Fisher companjq for which the loan was asked. He inquired of their standing of the mercantile agencies and found them rated very high. He also required the usual statements of the financial standing of both the company and its president, and they were furnished.

In the statement of the company its real estate was estimated ■at $150,000; the plant and movables at $55,000; the outstanding accounts at $12,000, making $217,000.

The liabilities were stated as a mortgage, held by the New Brunswick bank, $24,000; notes, $7,000, and open accounts, $3,000, making a total indebtedness of $34,000, and leaving a net value of over $180,000. A certificate was also given that the company had no other debts or liabilities of any kind.

Mr. Fisher’s personal statement gave a list of his real estate .and stock in the Fisher company, &c., and states himself to be worth $250,000.

Fisher and Hart, at the same time, also presented to Mr. May .a letter, purporting to be written by Mr. Parker, cashier of the New Brunswick bank, addressed to. Mr. May, as follows:

“National Bank oe New Jersey.
“New Brunswick, N. J., May 20, 1902.
“V. M. W. Suyclam, President. I-I. G. Parker, Cashier.
“Moms May, Esq., President Broadieay Trust Company, Eeio York City:
“Dear Sir — W. F. Fisher & Company have carried their banking account at this institution for some twenty years and conducted the same in a manner entirely satisfactory to the. bank. From time to time they have borrowed large sums of money from us, and at the present we have a loan with them, but cannot increase it if we would, because of the limitation put upon us by the National Bank act.
“Mr. Fisher advises me that he expects to open an account at your 'Trust Company. You may rest assured that any statement that he may 'make to you is correct, and you can rely upon the same.
“W. E. Fisher & Company plant is a very valuable one, worth over $100,000.
“Mr. Fisher individually owns considerable property, which he can explain to you more fully than I.
“Wishing that you and Mr. Fisher may come to some arrangement mutually satisfactory, I am,
“Very truly yours,
“H. G. Paekee, OasMer.
“Ex ABD, Nov. 3/03.”

To direct or positive proof of the genuineness of that letter was introduced, but I have no doubt that it was a genuine letter. It certainly had every appearance of being genuine, and Mr. May had every reason to believe, and did, in fact, believe it was-genuine.

On the strength of those representations Mr. May discounted for the Eisher company two notes of $7,500 each, dated May 20th, 1902, one at three months and the other at four months.

The first note being unpaid at maturity, August 20th, 1902, action was immediately commenced thereon by the Broadway Trust Company against the Eisher company.

Immediately after the service of process negotiations for a settlement were entered into, excuse was made for the- non-payment, on the ground of Mr. Eisher’s personal illness, and on September 12th the mortgage here in question was given to- secure as well the $7,500 which was past due as the $7,500 note, which would come due September 20th.

Mr. May and the officers of the Broadway Trust Company had no notice or information as to the financial condition of the Eisher company besides what has already been stated, except that its counsel learned that another mortgage, one to the Empire Trust Company, had been put on the property.

Let us see what was the exact financial condition of the company as disclosed by a careful examination of its affairs made by Mr. Wylie.

It was indebted to the Tew Brunswick bank $24,000; to the Empire Trust Company $15,000; and to the Broadway Trust Company $15,000, making $54,000. It was indebted to the laborers, who are preferred by our laws, in the sum of about $7,000. Besides that it was indebted to divers other indi.viduals about $20,000, most of which represented the ordinary indebtedness of a going concern, in all $81,200.

These last figures were ascertained by me at the hearing, and their substantial accuracy was-admitted by Mr. "Wylie and the ■counsel- of tlie trustees. They do not disclose any indebtedness to Mr. Eishex, and it is proper to say that since the hearing the contest between the trustees and Mr. Fisher as to the validity ■of his two mortgages, or either of them, has been judicially heard 'and determined against Mr. Fisher, not only on the ground that the mortgages were valueless under the sixty-fourth section of our Corporation act, but also on the ground that nothing was due him.

How with regard to what might be called the available or quick assets of tire company.

It had on hand about ten million moulded but unburned bricks, which were afterwards burned and marketed by Mr. "Wylie under disadvantageous circumstances and produced $15,000, net; thereby discharging the laborers’ preferred claims and leaving a balance in the hands of the trustees.

It is proper for me to say that the evidence satisfies me that if the moneys borrowed from the Empire Trust Company and from the Broadway Trust Company had not been diverted by the president to outside purposes and had been devoted, even partially, to the conduct of the regular business of the company under the supervision of Mr. Wylie, there would have been no interruption of the business of the company. I doubt if even tire imposition of the mortgage to the Broadway Trust Company would have alarmed creditors and induced .bankruptcy proceedings had it not been for the two mortgages to himself and tire one to Frieda Hart, which Mr. Fisher was induced by the ill advice of New York counsel to put upon the premises.

But, besides the unburned brick just mentioned, Mr. Wylie swears that the company owned a large number of building lots facing on the main street of the village, much in demand and readily salable, and for which $25,000 could have been easily realized in a short time.

The sale of these lots would not have affected in the least the value of the property as a brick-producing plant.

Now as to the value of the property in the latter aspect.

It was appraised by the trustees, as stated by counsel, at over $100,000, and it was capable, with ordinarily good business management, of earning a fair dividend on the amount at which it was capitalized. The difficulty was that Mr. Fisher, the president and largest stockholder, had been, for a year or two, induced by bad business advice to neglect the business for which he was competent and go into outside speculation.

However, notwithstanding that the property was located in the midst of the brick-producing region of New Jersey, and had the very best natural advantages for being profitably worked, Mr. Wylie says that the best offer that the trustees had been able to secure for it was $75,000. But for the accumulation of interest on the indebtedness and the cost of the judicial administration, that sum would pay all the debts remaining, after applying thereto the proceeds of the burning and sale of the ten millions of bricks.

I have not dealt, in the above, with the mortgage from the company to Mrs. Hart. The question of indebtedness to her is under consideration and is strenuously denied by the trustees. I shall treat it, for present purposes, as representing no indebtedness.

But it must he borne in mind that this offer of $75,000 was made after the business of the company had come to a standstill, as it did immediately after the imposition of the mortgages to Mr. Fisher and Mrs. Hart, and the company was in the hands of the bankrupt court. It is common knowledge that such a condition has at once a depressing effect upon the market value of such a property.

Now, on these facts, the question is whether the mortgage here in question is a valid lion against the .trustees in bankruptcy. That depends upon the construction of a few sections in the federal Bankrupt act.

The first to which I refer is paragraph 15, chapter 1, section 1, of “Definitions

“(15) A person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed or removed, or permitted to be concealed or removed, with intent to defraud, hinder or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts.”

I come to the conclusion/oil the facts, that at the time this-mortgage was given the Eisher company was not insolvent, within that definition. I think that “at a fair valuation” the-aggregate of.its property was sufficient in amount to pay its debts.

The authorities seem to hold the reasonable rule that the assets of the debtor must, for the purposes of this section, be-valued as those of a going concern, if that be the actual condition, and that subsequent actual insolvency is not the true and only test.

I also find as a fact that at that date the company had not conveyed, transferred, concealed or removed any of its property, with'intent to defraud, hinder or delay its creditors, nor had it permitted any such action.

. The next clause'to which I refer is chapter 3, under the title “Bankrupts

“Acts of bankruptcy by a person shall consist of his having (1) conveyed, transferred, concealed or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay or defraud his creditors, or any of them ; or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors.”

Now, I do not find that the corporation, at the date of this mortgage, had committed any act of bankruptcy as therein stated,' or as stated in any of the subsequent sections.

I think that the intention was to secure the Broadway Trust Company, but I'am far from being satisfied that Mr. Eisher did not fully believe, when he executed the mortgage in question, that his property was amply sufficient to pay all his debts. I think he was ill advised, three days later, to execute the mortgages to himself.

But, it is argued by counsel for the Broadway Trust Company, admitting that the Eisher company did intend to prefer the Broadway Trust Company, such, intention on his part does not injure the security unless the Broadway Trust Company or its officers were aware that such was the intention of the Eisher company.

It must be observed here that the giving of the present mortgage was not a voluntary act on the part of the Eisher company, such as characterizes the giving of a security to a favored creditor. The parties were at arms’ length. The trust company was suing for its debt and hastening judgment as rapidly as possible. It is to be presumed that its counsel knew that the judgment would be of little value, unless promptly paid, if the company were thrown into bankruptcy within four months after its recovery.

This indicates that they did not fear bankruptcy, but went about collecting their debt in the usual way.

Mr. Eisher, plainly, then yielded to pressure, and gave the mortgage as the best, and, under the circumstances, the only thing he could do, and the trust company accepted it in the ordinary way that any creditor would accept security for a debt.

I can see no difference in the giving of this mortgage and the giving of that to the Empire Trust Company, except that in one case the money was paid and advanced at the time of the giving of the mortgage, and in the other it had been advanced previously.

On this topic another section of the Bankrupt act is subsection a, of section 60, of chapter 6, in which the question of preferred creditors is treated :

“A person shall be deemed to have given, a preference if, being insolvent, he has, within, four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class.”

Tow, it is to be observed that a necessary element in the preference there defined is that the debtor shall be insolvent-As I have already determined that as a matter of fact there was no insolvenejq as defined by the same act, at the date of the giving of this mortgage, there was therefore no preference under that section.

The next subsection states the effect of such preference:

“If a bankrupt shall have given a preference, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable eatise to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person.”

I find that as a matter of fact, as already stated, the trust company had no reason to believe that it -was being preferred by this mortgage. It was simply having its debt secured, not necessarily to secure the trust company against present insolvency, but naturally and properly and lawfully, under the Bankrupt act, to secure it against possible or probable future insolvency.

No doubt the officers of the trust company felt that the business methods of Mr. Fisher were not good, and that he was going behind, and that ordinary prudence required that they should have security.

. The talcing of security by a money-lender for money loaned, either presently or previously, is not, I repeat, evidence that the lender believes that the borrower is insolvent.

We have two elements lacking, both of which are necessary in order to bring the present case within that section, viz., actual insolvency and belief in such insolvency by the creditor.

Another clause of the Bankrupt act which may be supposed to have some bearing upon the present case is subsection c of section 67, chapter 7, which is as follows:

“A lien created by or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy by or against such person, shall be dissolved by the adjudication of such person tó be a bankrupt if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy, or (3) that such lien was sought and permitted in fraud of the provisions of this act.”

I do not find the present case within either the letter or the equity of that subsection.

Then we have subsections d and e of that section:

■ “Liens given or accepted in good faith and not in contemplation of or in fraud upon, this act, and for a present consideration, which have been recorded according' to law, if record thereof was necessary in order to impart notice, shall not be affected by this act.”

Subsection e deals with conveyances which are void at common law because made for the purpose of hindering, delaying or defrauding creditors.

As I have stated above, I find no such element in this case.

It will he observed that the language used in indicating the state of mind of the grantee or mortgagee whose security is declared voidable is that he had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy; and, in another place, that he had reasonable cause to believe that the grantor or mortgagor intended to give a preference.

This language, “had reasonable cause to believe ” was dealt with by the supreme court of the United States, in Grant v. Bank, 97 U. S. 80, in an opinion by Mr. Justice Bradley. He there shows a clear distinction between suspecting the person to be insolvent and believing him to be insolvent. He uses this language:. “Dicta are not wanting which assume that it has the same meaning as if it had read ‘having reasonable cause to suspect such a person is insolvent.5 But the two phrases are distinct in meaning and effect. It is not enough that a creditor has some cause to suspect the insolvency of his debtor, but he must have such a knowledge of facts as to induce a reasonable belief of his debtor’s insolvency, in ofder to invalidate a security taken for his debt. To make more suspicion a ground of nullity in such a case, would render the business transactions of the community altogether too insecure. It was never the intention of the framers of the act to establish any such rule. A man may have many grounds of suspicion that his debtor is in failing circumstances, and yet have no cause for a well-grounded belief of the fact. He may be unwilling to trust him further; he may feel anxious about his claim, and have a strong desire to secure it, and yet such belief as the act requires may be wanting. Obtaining additional security, or receiving payment of a debt, under such circumstances, is not prohibited by the law.”

Further on he speaks of the policy of the law in this connection.

On this topic we have the lieadnote of the case of Tiffany v. Lucas, 15 Wall. 410, which, in the following language, indicates the scope of the o]3inion: “A sale by a person in fact insolvent, and made within six months of a bankruptcy subsequently decreed, is not necessarily and without regard to its character void, under the thirty-fifth section of the Bankrupt act.

“If it was made in good faith, for the honest purpose of discharging debt, and in the confident expectation that by so doing the person could continue his business, it will be upheld. On the contrary, if he made it to evade the provisions of the Bankrupt act, and to withdraw his property from its control, and the vendee either knew or had reasonable cause to believe that the vendor’s intention was of this character, it will be avoided.

“Thus two things must concur to avoid the sale — the fraudulent design of the bankrupt and the knowledge of it on the part of the vendee, or reasonable cause to believe it existed.”

Those cases dealt with the language and provisions in the old Bankrupt act similar to that of our present act.

Some of the provisions of the present act were brought under consideration by the supreme court of the United States in the case of Pirie v. Chicago Title and Trust Co., 182 U. S. 438.

There merchants, being quite conscious that they were insolvent, made a payment to a creditor on account of his debt within four months of their bankruptcy, which payment created a preference, to its extent, to those creditors. The latter had no reasonable cause to believe that their debtors were insolvent. It was held that the creditors were entitled to retain the payment so made, but were precluded from receiving a dividend on the balance of their claim.

The force and effect of subsection d of section 67 of the act above quoted must necessarily have been drawn into consideration by Vice-Chancellor Emery in Congleton v. Schreihofer, 54 Atl. Rep. 144.

There a conveyance was made by the bankrupt to his sister of land in payment of a long pre-existing debt and the conveyance was sustained, and it was distinctly held that the fact that it was given for a pre-existing debt was no reason why it should be declared void in favor of the creditors under the Bankrupt law. He also holds that such a conveyance could not be considered void because made for the purpose of hindering, delaying and defrauding his creditors generally.

No authority was cited to -me for the position that the fact that the consideration for the mortgage here in question was money previously advanced, could have the effect of invalidating it. The words “for a present consideration,” found in subsection d of section 67, would seem to include a past consideration existing at the present time, and the section would seem to be aimed at a mortgage or conveyance given to secure a consideration afterwards to be advanced.

From among the numerous other cases cited to me by counsel, I select the following as bearing upon the subject:

Crawford v. Taylor, 6 Gill & J. 323; 26 Am. Dec. 579, was, like the present, a.suit by a trustee in insolvency (not bankruptcy) to set aside a transfer of property by the insolvent, and the points decided by the supreme court of Maryland are set forth in the headnote, thus:

“A voluntary assignment, or an assignment with an intent to give an undue preference to a creditor by a debtor in contemplation of bankruptcy, is void. An assignment is not voluntary when made under the urgent demands of the creditors.

“That the claim is not due for the security of which the assignment was made, does not vitiate it.”

The insolvent laws of Maryland, like the bankrupt laws of the United States, provided that any deed of assignment, &c., to a creditor by any person with a mew, or under an expectation, of being or becoming an insolvent debtor, and with an intent thereby to give an undue and improper preference to such creditor, is void. And it was admitted in the case that the property of the debtor, at the time he made the transfer above in question, was insufficient to pay his debts, but the court held that the assignment was not voluntary because it was produced by the urgent pressure of the creditors.

The case of Chicago Title and Trust Company v. John A. Roebling’s Sons’ Co. et al., 107 Fed. Rep. 71, deals with the question of what is a fair valuation of property under the section above cited.

That was an action by a trustee in bankruptcy to recover from the Roebling sons the amount which they had realized under a judgment and execution against a manufacturing company at Peoria, Illinois. The judgment was entered by confession in less than four months before the bankruptcy, and it was held that as at a fair valuation of the bankrupt’s property at the time the judgment was entered the concern was not insolvent, the preference was not unlawful, because, under the proper construction of the Bankrupt act he was not insolvent at the time the judgment was entered.

In re Eggert, in the circuit court of appeals, the seventh circuit (1900), 102 Fed. Rep. 735; 43 C. C. A. 1, the question of what was the state of mind of the creditor, who obtains security from an insolvent debtor, was discussed, and apparently all the cases up to- that date were dealt with, and the headnote shows the conclusion as follows:

“In determining whether the taking of security by a creditor constitutes an illegal preference, under Bankrupt act of 1898, section 60&, the creditor is not to be charged with- knowledge of his debtor’s financial condition from mere non-payment of his debt, or from circumstances which give rise to mere suspicion in his mind of possible insolvency. On the other hand, it is not essential that the creditor should have actual knowledge of or belief in his debtor’s insolvenc}^ but it is sufficient if he has reasonable cause to believe him insolvent. If facts and circumstances with respect to the debtor’s financial condition are brought home to him such as would put an ordinarily prudent man upon inquiry, the creditor is chargeable with knowledge of the facts which such inquiry should reasonably be expected to disclose.”

In the same line is In re Chappell, 113 Fed. Rep. 545, the second headnote of which' is as follows:

“A merchant, seven months before filing his petition in bankruptcy, sent a creditor a post-dated check and a note for the balance of his debt, and afterwards renewed the note, paying it a little less than four months before the petition was filed.— Held, that such acts, while showing that he was not in possession of ready money to meet this particular debt, were not evidence that he was insolvent, within the meaning of the Bankrupt act, section 1, subdivision 15, providing that a person shall be deemed insolvent whenever the aggregate of his property, exclusive of any which he may have fraudulently concealed or conveyed, shall not, at a fair valuation, be sufficient in amount to pay his debts.” My conclusion is that the Broadway Trust Company’s mortgage is a valid lien on the premises.

I will advise a decree accordingly.