Opinion of the court. the creditors by whom the drafts were taken at the time they were taken; that they were given by the bankrupt with intent to create forbidden preferences, and that they were accepted by Fox & Howard in fraud of the act. This is a transaction expressly condemned by the statute. It amounts simply to this: the debtor of the bankrupt seeks to protect himself against an admitted debt by pleading a payment or substitution which was in fraud of the Bankrupt Act, and, therefore, void. The proposition carries its refutation on its face. Fox & Howard were indebted to the bankrupt and can only discharge themselves by a payment or satisfaction which the law will sanction. A payment or transfer condemned by the express terms of the Bankrupt Act cannot protect them. It is to be observed, also, that when the bankruptcy proceedings were begun Fox & Howard had never, in fact, paid to Burrows and his associates the amount of the drafts accepted by them. They had simply promised to pay them, if there should prove upon settlement of their accounts with the bankrupt to be so much money due to him. This presents them in a still less favorable condition. They owe money to the bankrupt. They are sued for it by his assignee in bankruptcy. As a defence they allege that they have made an agreement with Burrows and others, with the assent of the bankrupt, to pay the amount of the debt to them. They allege an agreement merely. This agreement has already been shown to be illegal. The assignee, representing the creditors as well as the bankrupt, is authorized to set up such illegality. The bankrupt perhaps could take no action to avoid this agreement, but his assignee has undoubted authority to do so. When the assignee sets up this illegality and sustains it by proof of the facts referred to, the whole foundation of the defence falls. It is well settled that a debtor may pay a just debt to his creditor at any time before proceedings in bankruptcy are taken. It is also true that a valid agreement to substitute another person as creditor may be made, and may be pleaded as a discharge of the debt in the nature of payment. It is Opinion of the court. not, however, payment in fact, and is binding only when the contract is fair and honest and binding upon the first creditor. The right of an insolvent person before proceedings are commenced against him to pay a just debt, honestly to sell property for which a just equivalent is received, to borrow money and give a valid security therefor, are all recognized by the Bankrupt Act, and all depend upon the same principle. In each case the transaction must be honest, free from all intent to defraud or delay creditors, or to give a preference, or to impair the estate.* If there is fraud, trickery, or intent to delay or to prefer one creditor over others, the transaction cannot stand. It is urged that Fox & Howard are liable upon the drafts to the creditors of Young, in whose favor the acceptances were given. Should this be so it would but add another to that large class of cases in which persons endeavoring to defraud others are caught in their own devices. The law looks with no particular favor on this class of sufferers. In the present case, however, there seems to be no such difficulty. The acceptances were a part of an illegal contract, and no action will lie upon them in favor of those making claim to them. They are guilty parties to the transaction and can maintain no action to enforce it. The law leaves these parties where it finds them, giving aid to neither. The drafts cannot pass into the hands of bona fide holders, as by the terms of the acceptances they are to remain in the possession of Fox & Howard until they can be paid by authority of law. When Fox & Howard pay to the assignee the debt due from them to Young they will pay it to the party entitled to receive it and will have discharged their liability. Judgment affirmed. * See Cook v. Tullis, 18 Wallace, 332; Tiffany v. Boatman's Institution, Ib. 376. Nellis v. Clark, 20 Wendell, 24; S. C., 4 Hill, 424; Randall v. Howard. 2 Black, 585; Kennett v. Chambers, 14 Howard, 88. Statement of the case. GROSHOLZ V. NEWMAN. 1. A mere intention to make a lot adjoining one on which a man and wife have their dwelling-the two lots being separated only by a small alleya part of a homestead, and the subsequent actual building of a kitchen on such adjoining lot, will not make that lot part of the homestead, within the laws of Texas, if before the building of the kitchen, the husband, then owner of the lot, have sold and conveyed it to another person. 2. Where adverse possession is relied on to give title, and it is proved that such possession began "in the summer" of a certain year, and ended "on the " in the tenth year afterwards (ten years making the bar), the title is not made out; especially in a case where indications lead to the conclusion that it ended in the spring of the tenth year. day of 3. Where one having a title to two lots purchased from the State, but for which he has as yet no patent, makes a deed of them, in form absolute, to another, and then subsequently twice mortgages them, with a third lot, which he owns, to that other, the grantee of that other is not estopped by his grantor's acceptance of the mortgages of the three lots, to assert ownership, under the deed in form absolute, of the two. 4. Where a complainant in equity wishes to rely on the fact that a deed, in form absolute, was in reality a mortgage, which has been paid, he must allege the fact in his bill. APPEAL from the Circuit Court for the Western District of Texas. By the constitution of Texas, on the subject of "The Homestead," it is ordained that "the owner thereof, if a married man, shall not be at liberty to alienate the same unless by the consent of the wife," &c.* With the abovementioned provision of the constitution of Texas in force, one Gustavus Kirchberg, a blacksmith, and Catherine, his wife, went from Pennsylvania, A.D. 1849, to the city of Austin, Texas, and immediately bought lot 6 in block 111 in the city named. On the east or Avenue side of the lot they soon built a smith's shop, and on the extreme back or rear edge of the lot they put their dwelling-house. See the diagram on the following page. * See the whole subject presented in Paschall's Digest of Decisions, vol. 2, title "Homestead," ? 14,587, 14,538, 14,589–14,591; also in The Homestead Cases, 81 Texas, 684. Avenue. Statement of the case. In this same block 111 were lots 7 and 8; these lots being separated from lot 6 by an intervening alley 20 feet wide. 20 feet. BLOCK 111. Lot 7. Lot 8. Street. In June, 1850, Mrs. Kirchberg, writing to her sister at Philadelphia, said: “Our affairs are good, and now we are building. We have a lot in the main street in Austin, and we will buy the adjoining one for a garden. Our dwelling will be finished in four weeks. The well is also dug and there is good water. The shop has also been commenced, so we are now busily engaged until we have everything in order." In December, 1850, Kirchberg purchased from the State the two lots 7 and 8, above described; his purchase being entered upon the State records, but he getting no patent for the lots. In November, 1851, without his wife's consent, he executed to one Wahrenberger, for the consideration, as expressed, of $150, a conveyance in form absolute of these lots 7 and 8. After this deed was made, that is to say in the summer of 1852, Kirchberg and his wife erected upon the extreme rear or east end of lot 7 their kitchen, which was thereby placed just in the rear of their dwelling and with nothing but the Statement of the case. twenty feet wide alley intervening. And in 1853, a tenant of Kirchberg erected on lot 8 a house used by him as a dwelling for some months, and afterwards by Kirchberg as a brewery; he having by this time given up the trade of a blacksmith for the business of brewing. The diagram explains the matter of places. In June, 1856, the husband and wife conveyed lots 6, 7, and 8, to one Costa, in trust, to secure the payment of a promissory note of $435, of Kirchberg's, then held by the Wahrenberger above-named. And on the 1st of March, 1860, they executed another deed of the same lots to the same Costa, to secure a note of Kirchberg's then held by Wahrenberger for $496. This second trust-deed, it was not denied, was in cancellation of the debt which was secured by the former one; that of June, 1856. By the terms of both these trust-deeds, Costa had power to sell all the lots if the notes were not paid; but if they were paid the deeds were to become void. Both notes were paid. Kirchberg having died prior to 1861 without issue, all his property vested in his wife, and she having died some time in 1862 her property passed to her heirs; persons, as was alleged, named Grosholz. Wahrenberger subsequently sold the lots 7 and 8 to one Newman, and the family Grosholz alleging heirship, now, May, 1870, filed a bill againt Newman in the court below to have the deed of November, 1851 (the deed of lots 7 and 8 executed by the husband alone), set aside as having covered in terms lots 7 and 8 (which were alleged in the bill to be a part of the homestead); as having really conveyed nothing, but as being nevertheless a cloud on the true title. A patent from the State issued in 1869, "to the heirs of Gustavus Kirchberg," and on this the family Grosholz had previously brought an action at law (trespass to try title), which was determined against them, and about the identity of which with the present case some evidence was given below. |