632

FEDERAL REPORTER.

murrer should be sustained, as. a special demurrerto that part of the bilL. The demurrers are all to the bill as awhole;'Ilot 'difucted in terms to' any part,of the bill, although there is among thegroands of demurrer set out specially the fact that this federal question is not so stated as to disclose the existence of a: federal question. Hence there would be no practical advantage in considering that matter separately. The difference .of Citizenship is stated fully and satisfactorily. In all equity cases we ought togo to the substance of things as far as possible. The demurrer will be overruled, and leave given to tHe answers.
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It.

(Oircuit Oowrt, E. D. New York. January 4, 1888.)
1.' ,EQUITY-+PtEADING-'MULTIFARIOUSNESS. . 1?Y an assignee in l;!ap!truptcy again/lt several defendants to 8!!t aSide various separate conveyances of alleged to have been made In . fraud' of 'creditors, is not :dCll111rrable' for multifariousness. 9. FRAUDULENT CONVEYANOEs":':''1'RAN81l'ER OF LEASE-!NSOLVENcy--RENEWAL OF

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The transfer of a lease in ,fraud of creqitortl by an insolvent before going into bankruptcy. is the creationdf' a trust 'in favor of tlie creditors, and may be reached by the assigneb in bankruptcy in the hands of any subsequent transfere'e,s,wlth, knowledge of the, facts, thoughthe.y: qe holding under a new lease, executed after the expiration of the bankrupt 8 term.
LUU'1'ATIONOJioAcTIONS-RRAtJl>--'PRESIDIPTION.

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On demurrer, setting up the statute of limitations, the court will not infer from the fact that the alleged fraud occurred more th,an two years prior to the commencement of, the suit that the complainant discovered the facts consti· tuting,the fraud before such period. 1 '

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4. EQUITy-LACHES. ' , A demurrer to a bill on the ground of laches will not be sustained, unless the bill QPon its face, witheut to inferen,e<es, makes a clear. case of unreasonable delay by complainaIit after his discovery of the fraud.-

In Equity. On demurrer to bill to set aside ·. ,Action by Jones, assignee, against Slauson and others, defendants, to Belt asideseveral'60nveyances of real estate alleged' to have been made in fraud of creditorS. . BenjaminG. Hitching8, fur complainant. Jame8 R. Angel, for defendaritS.
"LACOMBE, In August, the defendant, David M. Smith was declared a bankrupt, and the plaintiff was afterwards appointed his as-

lAs to'*hen the staiute commences to run against an action for fraud, see Board 00. IV. Vincent, (Mich.) 88 N. W. Rep, 44, and note; National Bank Y. Perry,(Mass.) 11 N..E. 81J and note; S¥nmons v. Baynard, BOFed. Rep. 532; Murphy v. Reedy, (MISS.) 2 Rep. 167; Piper v. Hoardt (N. Y.) 18 N, E. Rep. 682. SAs to what Is siIch lapse as Willl'reciude equitable relief" and what are cir,cumstances s\lfll,cieJ1,t to rebut the imputation of laches, see Hottert v. Miller, (Ky.) 6 S. W. Rep; 4.47, ahdnote. " " .,,,

JONES V. SLAUSON.

633

This action was.'brought by such assignee to set aside the veyance of three separate parcels of the bankrupt's property to the several defendants, with allegations as to each that it was made when Smith waf! insolvent, and was made and accepted for the purpose of putting his property beyond the reach of his creditors. These pieces ,of property prise (1) certain real estate in Brooklyn, claimed in fee by the defendant Willets; (2) a house and lot in Centre street, New York, claimed iJ1fee by the defendant RichardS. Jones; and (3) a leasehold of property at No. 70, NewChut'ch street, New York, now held and claimed by the defendants Slauson ,& Co. The original lease of the cel was acquired by Smith July 3, 1869. It was from the rector, etc., of the Protestant Episcopal Church of Jamaica, running for 21 years from May 1, 1864, and contained no covenant of renewal. Smith erected a building on the property, and has ever since occupied it as his place of business. On or about December 22, 1874, he assigned and transferred the lease to Albert Slauson; as the complaint alleges, without tion and in fraud of his creditors. Subsequently, Albert Slauson,with the consent and connivance of Smith, procured from the chUJ;ch ation a lease:of the same premises, upon the same terms and conditions, tp himself as lessee, from May 1, 1878, toAprll 27, 1885. After the expiration,ofthis lease, and on or about May 10, 1885, a new lease of said prem.iSIlS was taken from the said church corporation by the firm of A. Slauson & Co., consisting of defendants Albert Slauson, Austin H. Slauson, and Robert H. Moses, for the term of 21 years from May 1, 1885; This Was done, as complainant avers, with full knowledge on the part of the firm, and infiaud of the creditors of Smith. Upon these" facts complainant prays for a decree adjudging all Smith's conveyances aforesaid to be in fraudo! creditors; that, as to the property in New Church street, the lease taken in the name of A. Slauson & Co. may be adjudged a renewal of and impressed with the same and all rights and -equities in favor of the creditors of Smith as the original lease assigned by Smith to Albert Slauson; and that defendants A. Slauson &, Co; be decreed to assign over the same to the receiver appointed or to beappointed in the suit. The defendants A. Slauson &00. demur to the bill {I) as multifarious; (2) that it sets forth no cause of action against them, touching the new lease of May 10, 1885; (3) that the property other tban, the new lease is vested in a receiver appointed by a state court; (4) that the suit is barred by the statute of limitations, ;Rev. St. U. S. 5057; and (5) because, of complainant's delay and gross laches in bringing the suit. 1. As to multifariousness. The defendant's contention is that the sev,:, -eral conveyances of the different pieces of the bankrupt's property are separate transactions; that each defendant may fairly flay that, by their union in the same complaint, he is brought as defendant upon a record with a large portion of which, and of the case lllade by which, he has no connection whatever; that thus he may be put to unnecessary expense, and his own case be prejudiced, by being viewed through a possible nlOsphere ofJraud created by other transactions of the bankrupt with

FEDERAL:REPORTER.

which he had no connection. Whatever force there may be in this argum@nton principle, it is not bOrne out by the authorities. The propositions'that a bill may be filed, agai.nst several persons relative to matters of the same nature, forming a .connected series of acts, all intended to defraud' and, injure the plaintiffs, and in which all the defendants were more or less concerned, though not jointly, in each aot,and that unconnecUfdparties may be joined in a 'suit where there is one issue in thec(l;sl:l,--have been affirmed and reaffirmed in the coutts of this state, and' that,·ioo,in suits brought, as thi's is,_ to reach property of a debtor conveyed in fraud of his creditorS in divers ways. at different times, and, 'tosepararepaities. Brinkerhoff v.Br.own, 6 Johns. Oh. 139; Fellows v. Fell0UJ8, 4·Cow. 682; Boyd v.Hoyt, 5 Paige, 65. .The same opinion is forcibly expressed in McLean v. BanJo, 8,McLean,A15. ' In that case an assignee in :bll.nkruptcyhadfiled·' aibill similar'to the one. in this calleI' which was demurred to, as mwtifaflous. Passing upon this objection. Judge McLlllAN'says: ',' " "The complainant represents of the creditors hi this procedure. He alleges fraud in the by the defendants. Now, although, the frauds' charged consIst of various distinct transactions, yet these frauds are:of the same Character, and for tbeviolationof the same section, of the bankrupt act. every instance the ,allegation of fraud is mallet ,lis against asserted by defendants, it cOl1sists in the bankrupt the respective haying created'theliens in, contemplatJon'of bankruptcy, and to give an illegal preference to certain creditors. ,Now, these allegations are admitted by the demurrer/and, in viewaf, this:fackcanthe defendants, who' have demurred. inbelng connected with o,thers, who are complain of bardshlp and charged with similar frauds on the rights of the general creditors." ' This is genertllly accepted as the practice in the federal courts. Bunnell v. Stoddaid j 2 .A:mer. Law Reo. 145; Gainea v. Mausseaux, 1 Woods, 118; Sheldo'rl. v. Packet Co., 8 Fed.;Rep; 769; JohnMYl'bv. POUJers, 13 Fed. lWp. 315; Potts v.Hahn, 32 Fed. Rep. 660. '2. As to the new lease. The demurrer concedes the allegations of fact contained in the complaint. It therefore concedes that when Smith transferred the old lease to Albert Slauson, he did so without consideration, and in pursuance of a concerted scheme, to which both were parties, and by which Smith's, creditors 'were to be defuiuded. This being Slauson held the property impressed witha' trust in favor of these creditors, and might be required to transfer it to complainant, their representative.' What was this property? Besides the ,untlxpired term, there belonged to the tenant-independent of any covenant to renew..,an expectancy ofi'Emewal, good-will ,01' tenant-right,which is recognized as property for the purpose of- proteoting parties having legal or equitable interests' in'such renewaLM&ody v. Matthews, 7Nes. 175; Feather8fnrI,haughv. Fenwick, 17 Ves. 298a;, Phyje v. Warddl J 5 Paige, 268; 'nettv. Vaneycktl l ,4 v.· Jenkins) 3 Sandf.Oh. 134. "The good-will of a lease, which the-landlQrd is in! the habit of renewing, is propertY,ano. rights growing out of it, whether by contract or otherwise, will be'protected and enforced by a oourt of eqUity." Davia v. Gray,

V. SLAUSON.

635

16WaU..:228. Had Albert Slauson remained in possession until the expiration of, the old lease, and then taken a new. lease in his own name, he w,ould hold the new lease as a renewal of the old one,--as the fruit of the good-will or expectancy .of renewal which.he obtained from the bankrupt, -and subject precisely RS'Yas the old Jease.to the claim of Smith's creditors. Phyje v. Wardell, 5 Paige, 268; Gibbes v. Jenkins, 3 Sandf. Ch. 134; 'JliJ,chell v. Read, 84N. Y. 56.2. The substitution of a lease to of the Smith lease, certainly did not relieve Albert Slauson from the operation of these well settled rules offlqulty, nor is there any good reason, on principle or authority, for claiming that the fact that his firm took the lease in its own name-all the partners being fully informed as to th,e facts, (as by demurring they alter the-situlition. The new lease was given to a party whose to its subject-matter arose under and by virtue of the old lease, and will, therefore, be presumed to have been given because of that relationship. The defendant Smith, meanwhile, has obtained his discharge, and it was urged, on the argument, that it was "absurd to claim that the lease to Slauson and others is void because it was made for the benefit of Smith, when it is clear and not disputed that Smith himself might have taken the lease, and that his former creditors could not interfere with it." This statement is hardly correct. The lease to Slauson & 00. is not" void because it was madeforthe benefitof Smith." It is not void at all, but, being the mere outgrowth of the expectancy of renewal, which belonged to Smith's creditors, and not to Slauson, it also belongs to them and not to him. Nor is defendant's assumption either clear or undisputed. After-acquired property of Smith is, of course', free from ,the claims of his old creditors, but the theory upon which .the deciBions above cited were rendered is that the new lease is not after-acqUired property, but a mere transformation and expansion of a property right created under the old lease. If the principle of those decisions is carried to. its leg\tjrnate conclusion, Smith himself could not take the new lease, because, his relationship to the subject-matter having arisen under the old lease, it will be presumed' that the new lease was given to him because of that relationship. In Other the exp,ectancy of renewal under the old lease was held by Smith' and his transferees, be they many or few, near or remote, impressed with a trust in favor of his old creditors, and that trust attaches to the fruits of that expectancy in whoseever hands they be, provided they passed to those hands with knowledge of the facts. Could Smith, the day after his discharge, have taken his old' lease back from Albert Slauson and held it free from the trusts with. which it was charged in favor of his old creditors? Clearly not. How,. theJ:i,. can it be claimlld that he might thus receive and profit by a new lease which the decisions expressly hold to be a mere renewal of the old one? ,3. As to thli'statute of limitations. The bill avers that complainant first leamedof the fraudulent conveyances which he seeks to avoid ",ithin a month before the commencement of the suit. Even if this this demurrer could not be sustained. "The

636

FEDERAL REPORTER.

court will not, in supportofll. demurrer setting up the statute of limitations, infer from the fact that the alleged fraud occurred more than (two years) prior to the commencement of the suit that the complainants discovered the facts constituting the frauds before the period of (two) years." Sheldon v. Packet 0>., 8 ,Fed. Rep. 769, 777; Johnson v. Powers, 13 Fed. Rep. 315. ' 4. Neither will a demurrer, insisting upon a lapse of time short of the statutory period, be sustained, unless the bill upon its face, without reverting to inferences, makes a ,clear case of unreasonable delay, Upbl1 the part of the complainant, after the discovery of the fraud charged. Sheldon v. Packet Co., 8 Fed. Rep. 777 . No such case is shown by the bill, lind the demurrer on the, ground of laches must be overruled. 5. There does not seem to be in the bill any averment supporting the contention that the property is vested in a receiver appointed by a state court. The demurrer is. therefore overruled.

NEW ENGLAND MORTGAGE SECURITY CO. 'D. GAY·

. Oitrcuit OQurt, 8. D. (J-eorgia. January, 1888.) (

1.' MORTGAGES-MORTGAGE

The. system of makinK loans ,nn .farms by theNew England Mortgage Security Company and the Corbin Banking Company, through local loan agent&, developed in evidence. '

COMPANIES-Ml1:THOD Oll" BUSINESS.

2. NEGOTrABLE INSTRUMENTS'-'-AC'l'ION 'ON-DEFENSES. Where notes are given to One who is the president of acorporation.Jor mOIley loaned, by the corporation. and are by him indorsed in blank, the maker is entitled to any defense 'against the corporation that he has against the payee. ' . , , 8. USURy-WJIAT CONSTITllTES-IN'SU,RANCE ON MORTGAGED PREMISES. Where property is to SeCure a debt,a stipulation that the borrower shall in addition to legal interest pay insurance premiums thereon is not usurious. "
:4; SAME-PROOF.

Usury may not :be presumed, and,must be shown by a preponderance of evidence.· . , ' A" corrupt intent" to charge usury is an intent to get more for the use of the money than t)1e law allows;andW'here the act is unlawful, and the lender did it or is responsible for it, the corrupt intent is sufficiently shown.
INTENT

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6. 'SAME-AMObN'T OF LOAN-PRIMA FACIE RECEIPT-IMPEACHMENT. Under Code Ga. §3807, providiJig that receipts for money are only prima i, ,facie,evidellce of payment, defendant may show that he received less on certain promissory notes made by him than the receipt shows. 7. SAME-AGEj!WY IN MAll;ING .' Awritteu'ot printed contract signed by'the borrower, purporting to' stitute a loaJI agent the agent 'of the ,borrower to negotiate a loan, is not conclusive where. it is set up by phia ,that such contract was a device and· contrivance to avoid the usury law, but evidence may be heard to showthe real charakJter and purpose of the instrument. '