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"reasonable cause to believe it was intended thereby to give a preference," and liens or security given to creditors within four months are declared void (section 67c, e, f), irrespective of notice, the provision which governs this case (section 67d) makes good faith on the part of the appellant the sole test. In the bankruptcy act of 1867 no express provision appeared for this class of security, but in Tiffany v. Institution, 18 Wall. 375, 388, 21 L. Ed. 868, the doctrine applicable to security given upon a present consideration was thus stated:

"There is nothing in the bankrupt law which interdicts the lending of money to a man in Darby's condition [an insolvent], if the purpose be honest, and the object not fraudulent. And it makes no difference that the lender had good reason to believe the borrower to be insolvent, if the loan was made in good faith, and without any intention to defeat the provisions of the bankrupt act. It is not difficult to see that in a season of pressure the power to raise money may be of immense value to a man in embarrassed circumstances. With it he might be saved from bankruptcy, and without it financial ruin would be inevitable. If the struggle to continue his business be an honest one, and not for the fraudulent purpose of diminishing his assets, it is not only not forbidden, but is commendable."

And it was thereupon held, in conformity with the rule in England, "that advances may be made in good faith to a debtor to carry on his business, no matter what his condition may be, and the party making these advances can lawfully take security at the time for their repayment." See 8 Notes on U. S. Reports, 190, citing cases which follow this rule; also the same case, before Dillon, circuit judge, and Treat and Krekel, district judges, under the title of Darby v. Institution, 1 Dill. 141, Fed. Cas. No. 3,571. In accordance with the view so held, the act of 1867 was subsequently amended to provide that nothing in section 35 of the act (section 5128, Rev. St.) "shall be construed to invalidate any loan of actual value, or the security therefor, made in good faith, upon a security taken in good faith on the occasion of making such loan." 18 Stat. pt. 3, c. 390, § 11. The like rovision in the present act was obviously framed in the same view, and the rule so stated is equally applicable. In re Wolf, 98 Fed. 84, 3 Am. Bankr. R. 555; In re Davidson, 109 Fed. 882, 5 Am. Bankr. R. 528. We are of opinion, therefore, that the appellant's security is not invalid under the provisions of the bankruptcy act.

2. The contention that the mortgage is void under the law of Indiana rests upon two propositions: (1) That a general clause in the mortgage, after the schedule of machinery, tools, and fixtures, includes. as well the stock on hand and in process of manufacture, and that the proof shows an understanding outside the instrument permitting sale of such stock, in usual course, by the mortgagor for its exclusive benefit; and (2) that such an agreement is fraudulent, under the statutes of the state, and invalidates the entire mortgage. Assuming, but not deciding, the first proposition to be well founded, we are of opinion that the second is untenable, for the reason that the question. is one of local law, and the supreme court of Indiana has ruled decisively against the construction sought in this case in Davenport v. Foulke, 68 Ind. 382, 34 Am. Rep. 265, and Lockwood v. Harding, 79 Ind. 129, approving the like ruling in Barnet v. Fergus, 51 Ill. 352, 99 Am. Dec. 547. The doctrine of these cases, which governs the mort

51 C.C.A.-31

gage in question on the assumption indicated, is thus stated in Lockwood v. Harding, 79 Ind. 133:

"It is clear, therefore, that the chattel mortgage was, in any event, a valid and binding lien upon the [property not subject to such sale by the mortgagor], and that far forth it was not void in any view of the law."

The earlier cases indicating a different view are thereby overruled, and those cited in the opinion below and on the argument as holding contra-including, of course, In re Burrows, 7 Biss. 526, Fed. Cas. No. 2,204, and Stout v. Price, 24 Ind. App. 360, 55 N. E. 964, 56 N. E. 857-cannot be followed. The petition filed by the appellant claims only the property scheduled in the mortgage, comprising machinery, tools, and fixtures, whereof sale by the mortgagee is expressly prohibited by the terms of the instrument; and it is not claimed that the alleged agreement for sale applied to such property,—no lien being asserted against the stock or other personal property in the hands of the trustee, and, upon the authority of the decisions referred to, the lien so asserted must be upheld.

The decree of the district court is reversed, with direction to allow the claim of the appellant in conformity with this opinion.

(113 Fed. 810.)

THE NEW YORK.

SMITH et al. v. MCALLISTER.

(Circuit Court of Appeals, Second Circuit. January 14. 1902.)

No. 87.

ADMIRALTY PRACTICE-CLAIMANT'S BOND.

Where, on motion of a libelant in rem, the court made an order, which it had power to make, setting aside a sale of the libeled vessel under a decree entered at the same term in another suit, on the ground of fraud and collusion, unless a bond was given by the claimant, and he furnished an ordinary claimant's bond, on which the vessel was released, he cannot thereafter be heard to deny that the bond stands in the place of the vessel, and is available to libelant in case of his recovery, unaffected by the prior decree and sale.

Appeal from the District Court of the United States for the Eastern District of New York.

See 93 Fed. 495.

Nelson Zabriskie, for appellant.

James K. Symmers, for appellees.

Before WALLACE and LACOMBE, Circuit Judges, and TOWNSEND, District Judge.

WALLACE, Circuit Judge. That there was an implied warranty of the seaworthiness of the vessel, and that the libelants were entitled to enforce the maritime lien, are clear, and it is unnecessary to add anything to the opinion of the court below in respect to these questions. We entertain no doubt that the decree below is correct, unless the lien was displaced by the sale of the vessel under the decree relied upon, by the claimant, the present appellant.

The evidence shows that, immediately after the claimant became

aware that an action in rem against his vessel was to be brought to enforce the lien, he procured an action in rem to be brought against her in the United States district court for the Eastern district of New York. The nominal libelant in that action was the master of the

vessel, and the claim alleged was one for wages. Process was issued in the action, a decree taken by default, and May 14, 1896, the vessel was sold by the marshal under a writ of venditioni exponas. The claimant purchased the vessel at the sale for $160, she being of the value of upwards of $7,000 or $8,000. Shortly after the sale the libelant brought the present action in rem in the same court, and the vessel was seized upon process therein. Soon afterwards the libelants made an application to the court to vacate the default decree and the sale thereunder as fraudulent. The application was resisted by the claimant, but resulted in a decision by the court to vacate the decree and sale unless the claimant should give a bond in the present suit to release the vessel in the sum of $2,000. The bond was given and the vessel released from seizure. The decree in the suit for wages was not formally vacated. The fraudulent character of the proceedings in the suit for wages is so manifest that it would be a waste of words to discuss the evidence. If the master had an honest claim for wages he had no cause of action in rem, as he had no lien upon the vessel. The suit and the sale were collusive proceedings instituted by the claimant himself with the sole object of defeating any lien of the libelants upon the vessel. There can be no doubt of the power of a court of admiralty to vacate its own decree for fraud. Whether another court can do so consistently with the principles which govern courts of equity we need not inquire. The claimant availed himself of the benefit of the decision allowing the decree and sale to stand, and must accept its burden. He secured the release of the vessel by giving the bond as a security for the claim of the libelants. It was the plain meaning of the decision that the decree and sale should not prejudice their lien, and that a bond sufficient to secure it should be given as a condition of the release of the vessel; in other words, that to the extent the bond was a substitute for the vessel it should stand for the vessel unaffected by the decree and sale. The claimant cannot now be heard to allege the contrary. Compton v. Jesup, 167 U. S. 1, 35, 17 Sup. Ct. 795, 42 L. Ed. 55; Michels v. Olmsted, 157 U. S. 193, 15 Sup. Ct. 580, 39 L. Ed. 671; Davis v. Wakelee, 156 U. S. 630, 15 Sup. Ct. 555, 38 L. Ed. 578.

The decree is affirmed, with interest and costs.

(113 Fed. 811.)

BRADFORD BELTING CO. v. KISINGER-ISON CO.
(Circuit Court of Appeals, Sixth Circuit. February 4, 1902.)

No. 1.002.

1. EQUITY-CONSTRUCTION OF DECREE.

A decree dismissing a bill upon a general demurrer thereto must be presumed to have been passed upon the merits, and not for want of jurisdiction, in the absence of any statement therein to the contrary.

2. PATENTS-RIGHTS OF LICENSEE-EFFECT OF ASSIGNMENT BY LICENSOR. A patent was adjudged infringed by an article manufactured under a later patent, and sold by the defendant under a license from the owners of such patent, by which they also contracted to protect it and its customers in the sale and use of such article, and save it harmless from any suit for infringement. Subsequently such owners sold and assigned their patent to other parties, who thereafter assigned it to complainant in the infringement suit, which then became the owner of both patents. Held, that such assignment did not enlarge the rights of defendant in such suit as licensee, nor affect the force, between the parties, of the adjudication of infringement, and therefore afforded no ground for a bill in equity by the licensee to establish the right to continue the sale of the infringing article under its license.

3. SAME.

While an assignee of a patent takes it subject to equities existing in favor of a previous licensee, he does not, in the absence of express contract, assume any obligation to perform the contract of his assignor with the licensee, or to protect the latter in the rights which the license purports to convey.

4. SAME-LICENSE-BREACH OF WARRANTY OF VALIdity.

A decree against a licensee, adjudging that an article manufactured under a patent and sold by defendant is an infringement of a prior patent, does not constitute an adjudication that the later patent is void, so as to establish a breach of a warranty of its validity by defendant's licensor.

Appeal from the Circuit Court of the United States for the Southern District of Ohio.

The Kisinger-Ison Company, the appellee in this appeal, on February 8, 1897, being the owner of letters patent No. 428,123, issued to David B. Morrison May 20, 1890, and of letters patent No. 491,811, issued to W. S. Kisinger March 7, 1893.-both said patents being for improvements in wire couplings. -exhibited its bill in the court below against the Bradford Belting Company, the appellant herein, complaining of the infringement by the latter company of the rights secured under the patents aforesaid. The answer of the defendant to the bill averred that the alleged infringement consisted of the sale of wire couplings made under and in accordance with letters patent No. 575.641, issued to Gerard and Lawrence January 19, 1897, and denied that their sales of couplings infringed either the Morrison or the Kisinger patents. Upon the hearing of that case the circuit court decreed in favor of the defendant, dismissing the bill. Upon appeal this court reversed the decree so far as it concerned the Morrison patent, which it held valid and infringed. An injunction was ordered, and a reference to a master to take and report an account of profits and damages, was directed. In pursuance of the mandate of this court, the circuit court issued a perpetual injunction against the defendant in that suit, and also ordered a reference to the master to take the account. The master proceeded upon the reference. Thereupon the defendant in that suit filed in the same court this bill, wherein, after setting forth the proceedings in the former suit as above recited, it alleged that, prior to the making of the sales of couplings which had been adjudged in said former suit to be an infringement of the Morrison patent, it had acquired, by grant from Gerard and Lawrence, the exclusive right of sale of wire couplings made under their said patent for the full term thereof; the said Gerard and Lawrence at the time of making such grant further stipulating to deliver to it (the Bradford Belting Company), at an agreed price, such couplings as it would from time to time order, or that upon their failure to do so the said Bradford Belting Company might manufacture them for itself, and, further, that they would protect it in the sale and use of said couplings, and save it harmless from all loss and damages from any suit that might be brought for infringement on account of the sale or use thereof. It was therein further alleged that about April 1, 1897, Gerard and Lawrence assigned all their right, title, and interest in their said patent, including their

said contract with it (said Bradford Belting Company), to one Edward Case; that on the 8th of April, 1897, Case assigned one-half his interest therein to Gerard, and that Gerard and Case continued to furnish couplings to said company until about the date of the determination of this court in said former suit; and, further, that after the final decree therein, and the perpetual injunction therein ordered had been issued, Gerard and Case assigned all their right, title, and interest in said Gerard and Lawrence patent to the Kisinger-Ison Company for the expressed consideration of $150. It is charged that the Kisinger-Ison Company, at the time it took said assignment, had full knowledge of the rights of the complainant under its said grant and contract from and with Gerard and Lawrence, but that the said Kisinger-Ison Company refuses to perform the said contract. And it is complained that said Eradford Belting Company, as well as the public, are precluded from the benefits of said Gerard and Lawrence patent. The relief prayed by the bill is that the defendant, the Kisinger-Ison Company, be decreed to account for and pay over to the complainant the expenses of said former suit, as provided in the contract of the latter with Gerard and Lawrence; that the injunction in the former case be dissolved, and the complainant accorded its right as conferred by said contract with Gerard and Lawrence; that the complainant be absolved from all loss, cost, or damage arising out of said former suit; that specific performance by the defendant of the contract of Gerard and Lawrence with the complainant be decreed; and that such further relief be granted as the nature of the case requires. To this bill the defendant interposed a general demurrer. The case coming on to be heard on these pleadings, it was held and decreed "that the said demurrer be sustained, and the bill of complaint dismissed, at complainant's cost." Complainant appeals.

W. W. Wood, for appellant.

George J. Murray and Walter F. Murray, for appellee.

Before LURTON and SEVERENS, Circuit Judges, and WANTY, District Judge.

SEVERENS, Circuit Judge, having made the foregoing statement of the case, delivered the opinion of the court.

I. It is assigned as error that the court held that it had no jurisdiction over the matter complained of in the bill; but the demurrer raised no such question, nor is there anything in the record to show that the court held that it had no jurisdiction. On the contrary, the decree shows that it was passed upon the merits. If it had been dismissed for lack of jurisdiction, it should have been so stated therein. Ashley v. Board, 60 Fed. 55, 68, 8 C. C. A. 455; Terry v. Davy, 46 C. C. A. 141, 107 Fed. 50-52; Cattle Co. v. Frank, 148 U. S. 603-612, 13 Sup. Ct. 691, 37 L. Ed. 577. We ist therefore presume from the decree that the bill was not dismissed on that ground. But it seems proper to say that we see no reason to doubt that, notwithstanding there is no independent ground of jurisdiction, the matter of the bill is so related to that of the original suit that it may be regarded as a dependency thereof, and may be supported upon the jurisdiction acquired in the former suit. Krippendorf v. Hyde, 110 U. S. 276, 4 Sup. Ct. 27, 28 L. Ed. 145; Johnson v. Christian, 125 U. S. 642, 8 Sup. Ct. 1135, 31 L. Ed. 820.

2. Upon the merits the contention of the appellant is that the appellee, by taking an assignment of the legal title to the Gerard and Lawrence patent with notice of the exclusive license to the appellant to sell articles covered by that patent, and of its contract with the pat

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