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to the description of the fifth class of claims | appoint the assignee or assignees, but in certain entitled to priority and full payment in preference to general creditors, but the court is not able to concur in that proposition, as it is quite clear that the proceedings in bankruptcy would very much embarrass tax collectors without some saving clause in that behalf, and to that end it was provided that "nothing contained in this Act shall interfere with the assessment and collection of taxes by the authority of the United States or any State." Consequently, taxes, whether Federal or State, may be collected in the ordinary mode, but in not collected and the property of the bankrupt passes to and is administered by the assignee, the taxes are 257*] then entitled to the priority and preference provided in the same section of the Bank-itor has a mortgage or pledge of real or personal rupt Act. Nothing, therefore, can be inferred from that proviso inconsistent with the proposition that the sovereign authority is not bound by the provisions of the Bankrupt Act, unless therein named.

Confessedly the United States is not named in any of the provisions of the Act providing for the discharge of the bankrupt from his debts, nor in any of the required proceedings which lead to that result, unless it can be held that the sovereign authority, having debts against the bankrupt, is included in the words "creditor or creditors," as used many times in the several sections of the Bankrupt Act. Examples of the kind are numerous, of which the following are some of the most material:

Persons applying for the benefit of the Bankrupt Act are required to annex a schedule to the petition, verified by oath, containing a full and true statement of all their debts and, as far as possible, to whom due, with the place of residence of each creditor, if known to the debtor; and if not known the fact must be so stated, and the sum due to each, and the nature of each debt or demand, whether founded on written security, obligation, contract or otherwise, and also the true cause or consideration of such indebtedness in each case, and the place where such indebtedness accrued, and a statement of any existing mortgage, pledge, lien, judgment or collateral or other security given for the payment of the same.

Where the debts exceed $300 it is the duty of the judge to issue a warrant, directed to the marshal, authorizing him to publish notices in such newspapers as the warrant specifies, and to serve written or printed notices on all creditors whose names are included in the schedule or whose names may be given to him in addition by the debtor, and to give such personal or other notice as the directions of the warrant require. (1) That a warrant in bankruptcy has been issued against the estate of the debtor. (2) That the payment of any debts or the delivery of any property belonging to such debtor to him or the transfer of any property by him are forbidden 258] by law. (3) That a meeting of the creditors of the debtor will be held at a court of bankruptcy to be holden at the time designated in the warrant.

Due notice to the creditors in that regard is indispensable, as the provision is that if it be not given the meeting shall be adjourned and a new notice given as required. Assignees of the estate of the debtor are to be chosen by the cred itors at their first meeting. Creditors not only

cases and under certain conditions they may remove any assignee, and vacancies in certain cases may be filled by the creditors, as provided in the 18th section of the Act. Debts due and payable from the bankrupt, at the time he is adjudged as such, and all debts then existing, but not payable until a future day, a rebate of interest being made, when no interest is pay able by the terms of the contract, may be proved against the estate of the bankrupt. Contingent debts and liabilities of the bankrupt may also be claimed by creditors, and such claims may be allowed, with the right to share in the dividends, if the contingency shall happen before the order for the final dividend. When a credproperty of the bankrupt, or a lien thereon for securing the payment of a debt owing to him from the bankrupt, he shall be admitted as a creditor only for the balance of the debt. No creditor proving his debt shall be allowed to maintain any suit at law or in equity therefor against the bankrupt. Resident creditors are required to make proofs before one of the registers of the court in the district where the proceedings are pending, but all such proofs, in behalf of non-resident creditors, may be made before a commissioner or before a register in the judicial district where the creditor resides, and corporations may verify their claims by the oath or affirmation of their president, cashier or treasurer.

Claims against the estate of the bankrupt are required to be signed by the claimant and to be verified by his oath, and the requirement also is, that the assignee shall register, in a book to be kept by him for the purpose, the names of the *creditors who have proved their claims, [*259 in the order in which such proof is received, stating the time of its receipt and the amount and nature of the debt. Claimants are forbidden to accept any preference, and the provision is that if anyone does so, contrary to the prohibition of the Act, he shall not prove the debt or claim, nor shall he receive any dividend until he shall first have surrendered to the assignee all property, money, benefit or advantage received by him under such preference.

Preferences are forbidden in order that equal distribution may be effected, and the Act provides that all creditors, whose debts are duly proved and allowed, shall be entitled to share in the bankrupt's property and estate pro rata, without any priority or preference whatever, except that wages due from the bankrupt to any operative or clerk or house-servant, to an amount not exceeding $50, for labor performed within six months next preceding the adjudication of bankruptcy, shall be entitled to priority and shall be first paid in full. Annexed to that clause there is also a proviso that any debt proved by any person liable as bail, surety, guarantor, or otherwise for the bankrupt, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable.

Just and true accounts are to be kept by the assignees, and they are to make full report of the same to the creditors at a meeting to be called for the purpose, and the creditors are to determine whether any and what part of the net

proceeds of the estate shall be distributed as a dividend, and if the creditors order a dividend, it is made the duty of the assignee to prepare a list of the creditors entitled to the same, and to compute and set opposite to the name of each creditor the dividend to which he is entitled out of the net proceeds of the estate set apart for that purpose. Preparatory to the final dividend, the assignee shall submit his account to the court and file the same, and give notice to the creditors of such filing and shall also give notice that he will apply for a final settlement of his account.

260*] *Application for a discharge from his debts may be made by the bankrupt, as provided in the 29th section of the Act, and the provision is that the court shall thereupon order notice to be given to the creditors, as therein specified, to appear, on a day appointed for that purpose, and show cause why a discharge to the applicant should not be granted.

Insolvent debtors may also, in certain cases, be adjudged bankrupts on the petition of one or more of their creditors. Matters necessary to be alleged in such a petition are specifically set forth in the Bankrupt Act, which provides that if the facts alleged are found to be true, the court shall forthwith make the required adjudication and issue a warrant to take possession of the estate of the debtor, which shall be directed as in the former case, and the property of the debtor shall be taken thereon and be assigned and distributed in the same manner and with similar proceedings to those provided for taking possession, assignment and distribution of the property of the debtor upon his own pe

tition.

Sufficient appears from this summary of the proceedings required under the Bankrupt Act to establish two propositions beyond all doubt or cavil: (1) That the United States are not named in any of the provisions of the Act except the one which provides that all debts due to the United States and all taxes and assessments under the laws thereof shall be entitled to priority or preference, as heretofore fully explained. (2) That many of the provisions describing the rights, duties and obligations of creditors are in their nature inapplicable to the United States, and that if held to include the United States, could not fail to become a constant and irremediable source of public inconvenience and embarrassment.

Viewed in the light of these suggestions, and of the language employed in the Act, the court is of the opinion that the words "creditor or creditors," as used in the several provisions of the Bankrupt Act, do not include the United States.

Twice before, since the Federal Constitution 261*] was adopted, *the Congress has enacted similar laws, and it is a matter of history that the framework of those Acts, as well as much of their details, was drawn from the various Acts of Parliament upon the same subject, and the remark is equally applicable to the principal features of the Act under consideration, in respect to all the parts of the same, whose construction is involved in the case before the court. Such Acts of Parliament have never, in terms, included debts due to the sovereign of the country; and the decisions of the courts of Westminster Hall, for more than a century,

have held, without an exception, that such Acts or the proceedings under the same do not discharge debts due to the Crown.

Atty-Gen. v. Alston, 2 Mod., 248; Anonymous, supra.

Text writers also, of the highest authority, have uniformly promulgated the same rule. Speaking of the order of discharge, Deacon says, it does not release the bankrupt from a debt due to the Crown, for as the Crown is not bound by any statute unless specifically named, and Crown debts not being mentioned among those of the creditors in general, in any part of the statute relating to the proof of debts or the certificate of discharge, the Crown, of course, will not be barred of the peculiar privileges it possesses for the recovery of its own debts.

Bankr. ( 3d ed.), 784; Rex v. Pixley, supra. Nor does the Bankrupt Act impair or supersede the laws for the collection of taxes, and that rule also is founded upon the same canon of construction, to wit: that the Crown is not bound by the bankrupt laws and, therefore, says Shelford, the appointment of assignees does not relate to the act of bankruptcy as against the Crown process, but the bankrupt's personal property is bound under an extent even when tested subsequently to the appointment of the assignees. Bankr., 303. To which he adds, that the bankrupt's certificate is no discharge as against the Crown. Craufurd v. Atty-Gen., 7 Price, 5.

Such a certificate, says Robson, will not release the bankrupt from any debt or liability incurred by means of any *fraud, nor [*262 from debts due to the Crown, nor from debts with which the bankrupt stands charged at the suit of the Crown, or of any person for any of fense against a statute relating to any breach of the public revenue, or at the suit of the sheriff or other public officer, on a bail bond entered into for the appearance of any person prosecuted for any such offense. Robson, Bank. (2d ed.), 553.

With a single exception, not material in this case, the views of Cooke are the same as those expressed by Shelford. He says the Crown is not bound by the Acts relating to bankrupts, not being named in them; therefore an extent served upon the property of the bankrupt will bind it from the test of the writ and until the actual assignment of the commissioners, but the King is bound by an actual assignment, because the property is then absolutely transferred to a third person. Eden, Bank., 143.

Different explanations have been given as the reason of the rule in different adjudications, but perhaps there is none more satisfactory than the original one, that the sovereign is not bound by the Act because not named as a creditor in any of its provisions. But the reason for the rule assigned in a recent decision in the Exchequer Chamber is also entitled to much consideration as supporting the original rule. Throughout the Bankrupt Acts the word "creditor," says Mr. Justice Blackburn, is used in the sense of a person having a claim which can be proved under the bankruptcy, to which he might have added, and one not required by the Act to be paid in full in preference of all other creditors. Woods v. De Mattos, 3 Hurl. & Colt., 995.

Greater unanimity of decision in the courts

or of views among text writers can hardly be found upon any important question than exists in respect to this question in the parent country, nor is there any diversity of sentiment in our courts, federal or state, nor among the text writers of this country.

Perhaps the earliest decision in this country was that given in the case United States v. King, Wall. C. C., 18, which was made almost at the beginning of the present century. In that 263*] case *the question was directly presented and was as directly adjudicated, the court holding that debts due to the United States are not within the provisions of the Bankrupt Act. Other decisions of like character are found in the state reports.

condition for a valuation be rendered impossible by
the act of the vendee, the price of the thing sold
must be fixed by the jury on a quantum valebat.
2. Where the vendee agreed to pay for such per-
sonal property certain shares of stock, which he
failed to deliver, and is sued upon the agreement,
the value of the stock when the contract was con-
cluded is evidence of the value of the property as
agreed by the parties.
[No. 262.]

Argued Mar. 27, 30, 1874. Decided Apr. 20, 1874.

Nates for the Southern District of New

ERROR to the Circuit Court of the United

York.

the same, he had been damaged $125,000. He recovered judgment for $7,500, and appealed to this court. The portion of the charge excepted to, is as follows:

That the plaintiff was not entitled, as matter of law, to recover of the defendants the value of the remaining four hundred shares of stock mentioned in the contract between the parties.

This was an action of special assumpsit, brought in the court below by Humaston, the appellant. He set up a contract, under which It is a maxim of the common law, said Sav- he claimed that he had become entitled to four age, Ch. J., that when an Act of Parliament is hundred shares of defendant's stock, and alpassed for the public good, as for the advance-leged that, by reason of its refusal to deliver ment of religion and justice, or to prevent injury and wrong, the King shall be bound by such Act though not named, but when a statute is general and any prerogative, right, title or interest would be devested or taken from the King, in such a case he shall not be bound unless the statute is made by express words to extend to him, for which he cites both English and American authorities, and adds, that the people of the State being sovereign, have succeeded to the rights of the former sovereign, and that the people of the State are not bound by the general words in the Insolvent Law. People v. Herkimer, 4 Cow., 348; see, also, Com. v. Hutchinson, 10 Pa., 466, which is to the same effect; Hilliard, Bank. (2d ed.), 295. Sanctioned as that principle is by two express decisions of this court, it would seem that further discussion of it is unnecessary, as it has never been questioned by any well considered case, state or federal, and is founded in the presumption that the Legislature, if they intended to devest the sovereign power of any right, privilege, title or interest, would say so in express words; and where the Act contains no words to express such an intent, that it will be presumed that the intent does not exist. U. S. v. Knight, 14 Pet., 315; Bk. v. U. S., decided at the present term [ante, 80]; U. S. v. Hoar, 2 Mas., 311; Com. v. Baldwin, 1 Watts, 54.

Such a conclusion, to wit: that Congress intended that the certificate of discharge given to a bankrupt should include his liability as a surety for the faithful performance of duty by a public officer, ought not to be adopted unless such an intention is expressed in clear and unambiguous terms, as the rule, if established, 264*] would, in all probability, lead to *great loss to the public treasury and to great public embarrassment. Regina v. Edwards, 9 Exch., 50. Judgment reversed, and the cause remanded, with directions to issue a new venire.

JOHN P. HUMASTON, Plff. in Err.,

บ.

THE AMERICAN TELEGRAPH COMPANY. (See S. C., 20 Wall., 20-30.)

Also, that the plaintiff did not, as matter of law, become entitled to the said four hundred shares of stock by reason of the defendant's revocation of the powers of the referee, or other breach of contract alleged, but that the plaintiff is entitled, by and in consequence of the revocation of the powers of the arbiters or referees, in and by the instrument dated Feb. 13, 1867, and the refusal of the defendant to pay any further expenses of the referees, to bring their action and to recover the excess, if any there was, which the value of what he sold, assigned and transferred to the defendant, enhanced by the agreement of the plaintiff and Lefferts not to enter into competition with these defendants as stipulated in the contract, had, when sold and delivered, over the amount which he had already received; and this the parties agreed was one hundred shares of the defendant's stock, of the aggregate value of $10,000, with interest on such excess from the said 13th of February, 1867; but if in their judgment there was no such excess, then their verdict should be for the defendant.

The case further appears in the opinion of the court.

Messrs. Truman Smith & Cephas Brainard, for plaintiff in error.

Messrs. John K. Porter & Grosvenor P.
Lowry, for defendant in error.

the court:
Mr. Justice Davis delivered the opinion of

This is an action to obtain compensation for the breach of a contract, and the matters of difference between the parties grow out of the different views entertained by them of the obligations of the contract. Two points arise in the case; the first relates to the interpretation of the contract, and the second to the rule of damages. The contract was made in 1861, between Humaston and Marshall Lefferts, and the de

Conditional price for property-measure of fendant. The defendant agreed to buy and

damages.

1. Upon a sale of personal property, the price to be fixed by arbitrators, if the performance of the

Humaston to sell to it his inventions for electric telegraph machines and processes, and particularly his patented inventions for perforat

ing paper for the purpose of telegraphic mes sages with the secret process of preparing the chemical paper. Both Humaston and Lefferts engaged not to compete in the business of telegraphing, with the defendant, for a period of ten years. In consideration of this sale and agreement against competition, the defendant was to pay at least fifty shares of its stock, but upon the execution and delivery of such conveyances as would assure a perfect title to the patents and inventions, the defendant stipulated to issue to Humaston one hundred shares of its stock, "and a further consideration of not exceeding four hundred shares to be paid or issued to said Humaston, upon the following stipulations and conditions:" "Three disinterested referees or arbiters are to decide how much (if any) more is to be issued to said Humaston. After such arbiters shall be satisfied as to the capability and value of said patented inventions, it being understood that the aforesaid maximum amount of stock consideration, is stated under a claim by said Humaston and Lefferts that his (Humaston's) patented inventions will enable the American Telegraph Company to do by the Humaston system, and on one wire, five times as much business regularly and accurately as can be done now on one wire in the same time by any system now used by said Company; it being also understood that the Bain patents have expired and can now be used by all, and compensation is not to be al-risk something in the acquisition of these inlowed to said Humaston for what is now public, but only for what their patented improvements in telegraphy are worth more than any other of said systems." The arbiters were directed, in estimating the value of the Humaston inventions to consider the comparative reliability, accuracy, rapidity, cost, and also the expense of working and using said inventions with those now in use, and after having tried the respective instruments to determine how much (if any) stock, not exceeding four hundred shares, the defendant is to pay or issue to said Humaston, in further consideration for said invention. The Telegraph Company agreed to pay or issue to said Humaston the additional amount (if any) of stock (not exceeding the maximum number of shares) stated in the award, and if the arbitrators decided the inventions were not patentable, Humaston was, on the surrender of the patents by the Company, to transfer to them fifty shares of stock. The arbitrators were appointed and accepted the trust with which they were charged but were arrested in executing it by the defendant revoking the submission. Thereupon, this action of special assumpsit was brought, and the verdict of the jury has been substituted for the judgment of the arbitrators. The charge of the court to the jury and the exclusion of certain evidence on the trial, are assigned for error.

Whether or not the court erred in these particulars depends on the proper interpretation of the contract and the rule of damages which shall be applied in this action to the breach of it. It is insisted by the plaintiff that the defendant promised to pay him for his invention four hundred shares in addition to the one hundred shares paid on the delivery of the title, unless the arbitrators should relieve the Company by fixing some less amount, and a great deal of

learning touching the doctrine of con- [*26
ditions subsequent and precedent has been in-
voked in support of this position. But this doc-
trine has no application here, for, manifestly,
this is not an undertaking to which a condition
subsequent could be attached. It is easy to de-
termine why this contract was made, the nature
of it, and the acts to be performed by the con-
tracting parties. The American Telegraph Com-
business in some portions of the country, and
pany were engaged in carrying on the telegraph
naturally desirous of appropriating to itself
any new invention which would facilitate the
ton claimed that his system just patented would
transmission of telegraphic messages. Humas-
do five times as much business on one wire as
the ordinary systems then in use. If it could
do this with equal accuracy and reliability, and
at no greater cost, the value of it could be
hardly overestimated, but there had been no ex-
periments to test the question of whether or not
it was capable of doing these things. It might
do the work claimed for it, and yet be so un-
reliable, or the expense of working and using
it so much greater than the expense of working
and using the inventions then open to the pub-
lic or used by the Company, that its purchase
would be dear at any price. The Company,
desirous of possessing everything new and use-
ful in the line of their business, were willing to
ventions, but unwilling to pay the estimate of
value which Humaston put upon them without
trial of their utility. This estimate was $50,-
000, as the proof on the trial was that the stock
of the Company stood at par in the market at
the date of the contract. The Company said to
Humaston, We will take your patents, whether
valid or not, and pay you $5,000 for them if
you and Lefferts stipulate not to compete with
us for a period of ten years; and if they are
valid, whether useful or not, the compensation
shall be increased to $10,000. But we cannot
promise additional compensation unless, after
proper experiment, your system shall be proved
to be worth more. It may be that your claim
of rapid performance can be sustained, and yet
the system, owing to its greater cost than those
now in use, or some other controlling practical
*consideration, be of comparatively little [*27
value to us. This can only be determined, after
trial, by some impartial tribunal.
willing that this tribunal shall be referees mu-
tually selected, to whom shall be submitted the
question of whether we shall pay anything more
than the $10,000 already paid, after the merits
of your system have been tested by them and
its capability and value established. They may
reach the conclusion that you are sufficiently
compensated already and, if they do, their
award must be accepted as a final settlement of
the matters of difference between us. If they
reach a contrary conclusion they must fix the
amount of consideration which we are to pay
in addition to what you have already received;
but this must be within the limit of four hun-
dred shares of stock, equivalent to $40,000.

We are

This is a fair analysis of the provisions of the contract and of the considerations on which it was based. Instead of it binding the Company to pay four hundred shares, unless a less num

ber was fixed by the arbitrators, it left them to say whether Humaston was entitled to any more than he had already got, and if so, how much. There was no concession by the Company that the inventions were worth any more to it than the hundred shares. It might turn out on the trial that the price already paid was excessive, or, on the contrary, that it was not sufficiently remunerative. This point of value the triers were to determine, and if determined favorably to the plaintiff he would have a cause of action against the defendant. Until this determination, if there had been no interruption to the arbitration, no cause of action could arise. It was a reasonable provision that the value of these inventions should be submitted to the arbitration of practical business men, and if Humaston, instead of the Company, had refused to proceed with the arbitration he could not resort to an action, for the defendant would not have been in default, and, therefore, not liable to suit. Del. & Hud. Can. Co. v. Pa. Coal Co., 50 N. Y., 250. But the defendant broke 28*] the agreement and revoked the *submission, and Humaston asks that, in consequence of this wrongful action of the defendant, his rights may be determined by the court and jury, instead of by arbitration.

It becomes, therefore, important to determine what is the measure of liability for the breach of contract by the defendant. If we are correct in our interpretation of the contract, this action cannot be supported as an action seeking damages for breach of contract to deliver stock, for there was no engagement to deliver any, except on a condition which has not happened, and there is no proof that the arbitrators would have found that Humaston was entitled to receive more stock than he had already obtained.

(N. H.), 506; Holliday v. Marshall, 7 Johns., 213; Cowper v. Andrews, Hob., 40-43.

*Nothing is, therefore, due on this con- [*29 tract, unless the court and jury, sitting in the place of the arbitrators, shall decide that the plaintiff is entitled to recover for the sale of his inventions more than he has already received. The case was tried on this theory, and the court charged the jury that the value of a specified amount of stock was not the legal measure of the plaintiff's damages, but that he was entitled to recover the excess (if any there was) which the value of what he sold and transferred to the Company, enhanced by the agreement of the plaintiff and Lefferts not to enter into competition with the Company, as stipulated in the contract, had, when sold and delivered, over the amount which he had already received; and this the parties agreed was one hundred shares of the defendant's stock, of the aggregate value of $10,000, with interest on such excess from the date of the revocation of the powers of the arbiters. This charge is in conformity with the views we have expressed of the obligations of this contract, and of the rule of damages applicable to the breach of it.

It is urged, however, that the court erred in excluding testimony of the value of the defendant's stock both when they sold out to the Western Union Company, and when the revocation occurred.

It is not perceived how the sale to the Western Union Company changed the rights of the parties, for there is nothing to show that it hindered the defendants from acquiring in the market at any time a sufficient number of shares of its stock to comply with the award which it was expected the arbitrators would be suffered to make long after this sale took place.

If there had been an agreement to deliver a certain quantity of stock, and an action had been brought for the conversion of it, on the ground that the defendant by the sale to another company had put it out of its power to comply with the terms of its agreement, evidence of the value of the stock at the time the sale occurred would be competent. And so would evidence of its value at the date of the *revocation, if the plaintiff was in a posi- [*30 tion to support an action for damages for breach of contract to deliver stock. But as he is limited in his recovery, to the value of his inventions when sold and delivered, evidence of the value of shares of stock at all is only proper as the tending to show the estimate put upon property by the parties at the time they made their when the contract was concluded, was directly bargain. And as the value of the stock in 1861, shown, its value at any other time became unimportant. The circuit court proceeded on the theory, and we think correctly, that the defendant intended to give for and considered the plaintiff's property worth (if it performed certain conditions) the cash equivalent of five hundred shares of stock. This was $50,000, which the plaintiff must also have adopted as his estimate of the value of the property when he sold it, as he offered evidence tending to show that it was worth that sum, and claimed that the evidence proved the fact. The conflict of testimony on the worth of the Humaston in

The action can be supported for the value of the property, and this was the proper subject of inquiry at the trial. The Company covenanted to pay this value, to be ascertained in a particular mode, and as they have prevented this mode being adopted, they cannot take advantage of their own wrong and deprive the plaintiff of the opportunity of showing to the court and jury what it is. In lieu of the award of the arbitrators the verdict of the jury can be asked by the plaintiff to determine it. The ascertainment of this value was the essence of the contract, the thing on which the submission was based; and the revocation of the submission leaves the jury to settle it. Benjamin, in his Treatise on Sales, p. 430, says, if the performance of the condition for a valuation be rendered impossible by the act of the vendee the price of the thing sold must be fixed by the jury on a quantum valebat, as in Clarke v. Westrope, 18 C. B., 764, where the outgoing. tenant sold the straw on a farm to the incomer, at a valuation to be made by two indifferent persons, but, pending the valuation, the buyer consumed the straw. And the doctrine of the text is sustained by adjudged cases in this country and England. Inchbald v. Western, etc., Plantation Co. (head note), 112 Eng. C. L. (17 C. B. N. S.), 733; Hall v. Conder, 89 Eng. C. L. (2 C. B. N. S.), 53; U. S. v. Wilkins, 6 Wheat., 135, 143; Kenniston v. Ham, 9 Fost.entions was very great, for the defendant also 20 WALL.

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